10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2010

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to ______________

Commission File Number: 000-51764

LINCOLNWAY ENERGY, LLC

(Exact name of registrant as specified in its charter)

Iowa	20-1118105
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)

59511 W. Lincoln Highway, Nevada, Iowa	50201
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code: (515) 232-1010

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:  Limited Liability Company Units

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes   ¨      No        R

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.          Yes    ¨      No        R

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.               Yes     R     No     ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      ¨      No          ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.           R

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act:

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	R	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).         Yes      ¨      No      R

The aggregate market value of the units held by non-affiliates of the registrant was $50,083,020 as of March 31, 2010. The units are not listed on an exchange or otherwise publicly traded.  The value of the units for this purpose has been based upon the $1,259 book value per-unit as of March 31, 2010.  In determining this value, the registrant has assumed that all of its directors and its president and its chief financial officer are affiliates, but this assumption shall not apply to or be conclusive for any other purpose.

The number of units outstanding as of November 30, 2010 was 42,049.

DOCUMENTS INCORPORATED BY REFERENCE:  Portions of the registrant's definitive proxy statement to be filed with the Securities and Exchange Commission with respect to the 2011 annual meeting of the members of the registrant are incorporated by reference into Item 11 of Part III of this Form 10-K.

 

LINCOLNWAY ENERGY, LLC

FORM 10-K

For the Fiscal Year Ended September 30, 2010

INDEX

Part I.			1
	Item 1.	Business.	1
	Item 1A.	Risk Factors.	12
	Item 1B.	Unresolved Staff Comments.	30
	Item 2.	Properties.	30
	Item 3.	Legal Proceedings.	31
Part II.			32
	Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.	32
	Item 6.	Selected Financial Data.	36
	Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	37
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk.	53
	Item 8.	Financial Statements and Supplementary Data.	56
	Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.	75
	Item 9A.	Controls and Procedures.	75
	Item 9B.	Other Information.	76
Part III.			76
	Item 10.	Directors, Executive Officers and Corporate Governance.	76
	Item 11.	Executive Compensation.	83
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	83
	Item 13.	Certain Relationships and Related Transactions, and Director Independence.	85
	Item 14.	Principal Accounting Fees and Services.	86
Part IV.			87
	Item 15.	Exhibits and Financial Statement Schedules.	87
SIGNATURES

Restatement of the Certificate of Organization

Second Amended and Restated Operating Agreement

Certification of President and CEO

Certification of Chief Financial Officer

Section 1350 Certification of President and CEO

Section 1350 Certification of Chief Financial Officer

CAUTIONARY STATEMENT ON FORWARD LOOKING STATEMENTS

AND INDUSTRY AND MARKET DATA

Various discussions and statements in this annual report are or contain forward looking statements that express Lincolnway Energy's current beliefs, forecasts, projections and predictions about future events.  All statements other than statements of historical fact are forward looking statements, and include statements with respect to financial results and condition; anticipated trends in business, revenues, net income, net profits or net losses; projections concerning operations, capital needs and cash flow; investment, business, growth, expansion, acquisition and divestiture opportunities and strategies; management's plans or intentions for the future; competitive position or circumstances; and other forecasts, projections and statements of expectation.  Words such as "expects," "anticipates," "estimates," "plans," "may," "will," "contemplates," "forecasts," "strategy," "future," "potential," "predicts," "projects," "prospects," "possible," "continue," "hopes," "intends," "believes," "seeks," "should," "could," "thinks," "objectives" and other similar expressions or variations of those words or those types of words help identify forward looking statements.

Forward looking statements involve and are subject to various material risks, uncertainties and assumptions.  Forward looking statements are necessarily subjective and are made based on numerous and varied estimates, projections, views, beliefs, strategies and assumptions made or existing at the time of such statements and are not guarantees of future results or performance.  Forecasts and projections are also in all events likely to be inaccurate, at least to some degree, and especially over long periods of time, and in particular in a still developing industry such as the ethanol industry.  Forecasts and projections are also currently difficult to make with any degree of reliability or certainty given the difficult and uncertain credit, market and other economic circumstances and uncertainties in existence at the time of the preparation of this annual report, both generally and with respect to the ethanol industry.  Lincolnway Energy disclaims any obligation to update or revise any forward looking statements based on the occurrence of future events, the receipt of new information, or otherwise.  Lincolnway Energy cannot guarantee Lincolnway Energy's future results, performance or business conditions, and strong or undue reliance must not be placed on any forward looking statements.

Actual future performance, outcomes and results may differ materially from those suggested by or expressed in forward looking statements as a result of numerous and varied factors, risks and uncertainties, some that are known and some that are not, and many of which are beyond the control of Lincolnway Energy and Lincolnway Energy's management.  It is not possible to predict or identify all of those factors, risks and uncertainties, but they include inaccurate assumptions or predictions by management, the accuracy and completeness of the publicly available information upon which part of Lincolnway Energy's business strategy is based and all of the various factors, risks and uncertainties discussed in this annual report, and in particular in Items 1, 1A, 7 and 7A of this annual report.

(i)

Lincolnway Energy may have obtained industry, market, competitive position and other data used in this annual report or in Lincolnway Energy's general business plan from Lincolnway Energy's own research or internal surveys, studies conducted by other persons and/or trade or industry associations or general publications and other publicly available information.  Lincolnway Energy attempts to utilize third party sources of information that Lincolnway Energy believes to be materially complete, accurate, balanced and reliable, but there is no assurance of the accuracy, completeness or reliability of any third party information.  For example, a trade or industry association for the ethanol industry may present information in a manner that is more favorable to the ethanol industry than would be presented by an independent source.  Industry publications and surveys and other publicly available information also generally state that they have obtained information from sources believed to be reliable, but do not guarantee the accuracy and completeness of any information.

[THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

(ii)

PART I

Item 1. Business.

General Overview

Lincolnway Energy, LLC is an Iowa limited liability company that operates a dry mill, coal fired ethanol plant located in Story County, Iowa, near Nevada, Iowa.  Lincolnway Energy has been processing corn into fuel grade ethanol and distiller's grains at the ethanol plant since May 22, 2006.  The first full month of production at full capacity was July of 2006.

The ethanol plant has a nameplate production capacity of 50,000,000 gallons of ethanol per year, which, at that capacity, would also generate approximately 136,000 tons of distiller's grains per year.

Lincolnway Energy began extracting corn oil from the syrup which is generated in the production of ethanol in April, 2008.  Lincolnway Energy estimates that it will produce approximately 3,000 tons of corn oil per year at the plant.

Lincolnway Energy entered into an agreement with EPCO Carbon Dioxide Products, Inc. on April 16, 2010 pursuant to which EPCO constructed a plant on Lincolnway Energy's site to collect the carbon dioxide that is produced as part of the ethanol production process and to convert that raw carbon dioxide into liquid carbon dioxide.  The EPCO plant became fully operational in August 2010.  EPCO also markets and sells the liquid carbon dioxide.  Lincolnway Energy estimates that it will produce approximately 105,000 tons of carbon dioxide per year.  Lincolnway Energy had not captured or marketed the carbon dioxide which is produced as part of the ethanol production process prior to entering into the agreement with EPCO.

Lincolnway Energy does not anticipate that sales of corn oil or carbon dioxide will be material sources of revenue for Lincolnway Energy, but Lincolnway Energy was able to implement the processes to collect corn oil and carbon dioxide on an economical basis and Lincolnway Energy does not have significant operating or other costs related to those processes.

Financial Information

Financial statements for Lincolnway Energy are included in Item 8 of this annual report.  The financial statements include information regarding Lincolnway Energy's revenues, profits or losses and total assets.  Item 6 of this annual report includes summary selected financial data.

Lincolnway Energy did not derive any revenue during the fiscal year ended September 30, 2010 from any customers located in any foreign country, and Lincolnway Energy did not have any assets located in a foreign country during that fiscal year.

1

Principal Products and Their Markets

Lincolnway Energy's principal products are fuel grade ethanol and distiller's grains.

Ethanol

Lincolnway Energy produces ethanol from corn.  The ethanol produced by Lincolnway Energy is fuel grade ethanol, which can be used as a blend component/fuel additive in gasoline.  Ethanol increases the octane rating of gasoline and reduces vehicle emissions, primarily carbon monoxide.  The use of ethanol is currently heavily supported by various governmental incentives and programs.  The loss of one or more of those incentives or programs could be highly detrimental to the ethanol industry.

All of Lincolnway Energy's ethanol production was sold to RPMG, Inc. until September 30, 2009, when Lincolnway Energy entered into an ethanol marketing agreement with Green Plains Trade Group LLC, as is discussed below.  Under the agreement with RPMG, Inc., Lincolnway Energy's ethanol was pooled with the ethanol of other ethanol producers whose ethanol was marketed by RPMG, Inc.  Lincolnway Energy paid RPMG, Inc. a pooling fee of $.01 per gallon of ethanol, and RPMG, Inc. paid Lincolnway Energy a netback price per gallon that was based upon the difference between the pooled average delivered ethanol selling price and the pooled average distribution expense.  The averages were calculated based upon each pool participant's selling price and expense averaged in direct proportion to the volume of ethanol supplied by each pool participant.  The agreement was terminated effective as of October 1, 2009 by mutual agreement of Lincolnway Energy and RPMG, Inc., but any outstanding purchase orders between Lincolnway Energy and RPMG, Inc. under the agreement were finalized and closed out pursuant to the agreement.

Lincolnway Energy entered into an ethanol marketing agreement with Green Plains Trade Group LLC effective as of September 25, 2009.  Under the agreement, Green Plains Trade Group LLC has the exclusive right to market all of the ethanol which is produced by Lincolnway Energy, except that the agreement permitted Lincolnway Energy to close out any outstanding purchase orders under Lincolnway Energy's agreement with RPMG, Inc. and that Lincolnway Energy may market some of its ethanol in certain limited circumstances, such as ethanol which is the subject of any purchase order which was submitted by Green Plains Trade Group LLC but was rejected by Lincolnway Energy.  Lincolnway Energy may reject any purchase orders submitted by Green Plains Trade Group LLC, in Lincolnway Energy's sole discretion.  The purchase price payable to Lincolnway Energy under the agreement is Green Plains Trade Group LLC's contract selling price for the ethanol in question, less various costs and a fee to Green Plains Trade Group LLC, but the agreement includes a minimum purchase price.  Lincolnway Energy is dependent upon its agreement with Green Plains Trade Group LLC for the marketing and sale of Lincolnway Energy's ethanol, and Lincolnway Energy's loss of the agreement, or Lincolnway Energy's inability to negotiate a new agreement with Green Plains Trade Group LLC or another marketer before the expiration or termination of the agreement, could have material adverse effects on Lincolnway Energy.

2

The primary purchasers of ethanol are refiners, blenders or wholesale marketers of gasoline.  Lincolnway Energy anticipates that its ethanol production will be sold in various regional markets given the availability of rail service at Lincolnway Energy's ethanol plant and local markets that will be shipped by truck, but Green Plains Trade Group LLC controls the marketing of all of Lincolnway Energy's ethanol output.

Lincolnway Energy’s primary means of shipping and distributing ethanol will be by rail and truck.

The nameplate production capacity of Lincolnway Energy's ethanol plant is 50,000,000 gallons of ethanol per year, or approximately 4,167,000 gallons per month.  The ethanol plant exceeded the nameplate production capacity for the fiscal year ended September 30, 2010, however, by approximately 10%, with 55,121,401 gallons of ethanol produced during that period, and with an average daily production of 158,881 gallons.

Lincolnway Energy anticipates that the ethanol plant will produce ethanol at a similar rate or higher during the fiscal year ending September 30, 2011.

Lincolnway Energy's revenues from the sale of ethanol during the fiscal years ended September 30, 2008, September 30, 2009 and September 30, 2010 accounted for approximately 83%, 80% and 83%, respectively, of Lincolnway Energy's total revenues during those periods.  Lincolnway Energy estimates that its revenues from the sale of ethanol for the fiscal year ending September 30, 2011 will account for approximately 80% of Lincolnway Energy's total revenues for that fiscal year.

Distiller's Grains

Lincolnway Energy's other primary product is distiller's grains, which is a byproduct of the ethanol production process.  Distiller's grains are, in general, the solids which are left after the processing and fermentation of corn into ethanol.  Distiller's grains are a high protein feed supplement that are marketed primarily in the swine, dairy and beef industries.  Distiller's grains can also be used in poultry and other livestock feed.

A dry mill ethanol process such as that utilized by Lincolnway Energy can produce wet distiller's grains and dried distiller's grains.  Wet distiller's grain contains approximately 60% moisture, and has a shelf life of approximately ten days.  Wet distiller's grains can therefore only be sold to users located within relatively close proximity to the ethanol plant.  Dried distiller's grain is wet distiller's grain that has been dried to 10% to 12% moisture.  Dried distiller's grain has an extended shelf life and may be sold and shipped to any market.

Lincolnway Energy's output of distiller's grains is sold to Hawkeye Gold, LLC under a Distiller's Grains Marketing Agreement that became effective on October 1, 2007.  Lincolnway Energy pays Hawkeye Gold, LLC a marketing fee for dried distiller's grains equal to the greater of 2% of the FOB plant price for the dried distiller's grains or a per-ton fee of $1.30 for the dried distiller's grains.  The marketing fee for wet distiller's grains is the greater of 3% of the FOB plant price for the wet distiller's grains or a per-ton fee of $1.00 for the wet distiller's grains.  The Distiller's Grains Marketing Agreement can be terminated by Lincolnway Energy or Hawkeye Gold, LLC on 90 days written notice.  Lincolnway Energy is dependent upon its agreement with Hawkeye Gold, LLC for the marketing and sale of Lincolnway Energy's distiller's grains, and Lincolnway Energy's loss of the agreement, or Lincolnway Energy's inability to negotiate a new agreement with Hawkeye Gold or another marketer before the expiration or termination of the agreement, could have material adverse effects on Lincolnway Energy.

3

The primary purchasers of distiller's grains are individuals or companies involved in dairy, beef or other livestock production.  Lincolnway Energy anticipates that approximately 7% of its distiller's grains will be locally marketed to nearby livestock producers, but Hawkeye Gold, LLC controls the marketing of all of Lincolnway Energy's distiller's grains.

Lincolnway Energy's primary means of shipping and distributing distiller's grain will be by rail and truck.  Local livestock producers are also able to pick up distiller's grains directly from the ethanol plant.

Lincolnway Energy produced 149,850 tons of distiller's grains during the fiscal year ended September 30, 2010, or approximately 12,488 tons of distiller's grains per month.  The composition of the distiller's grains was approximately 13% wet distiller's grains and 87% dried distiller's grains.

Lincolnway Energy anticipates processing approximately 150,000 tons of distiller's grains during the fiscal year ending September 30, 2011.

Lincolnway Energy's revenues from the sale of distiller's grains during the fiscal years ended September 30, 2008, September 30, 2009 and September 30, 2010 accounted for approximately 17%, 19% and 17%, respectively, of Lincolnway Energy's total revenues during those periods.  Lincolnway Energy estimates that its revenues from the sale of distiller's grains for the fiscal year ending September 30, 2011 will account for approximately 19% of Lincolnway Energy's total revenues for that fiscal year.

Other Byproducts

There are other potential byproducts from the production of ethanol at a dry mill plant, primarily corn oil and carbon dioxide.

Corn Oil

A corn oil extraction system that Lincolnway Energy purchased from FEC Solutions, L.L.C. was put into operation in April, 2008.  The system extracts corn oil from the syrup which is generated in the production of ethanol.  Lincolnway Energy entered into an agreement with FEC Solutions, L.L.C. on October 13, 2008 under which FEC Solutions, L.L.C. purchases all of Lincolnway Energy's output of corn oil for resale by FEC Solutions, L.L.C.  Lincolnway Energy pays FEC Solutions, L.L.C. a marketing and technical assistance fee of 5% of the FOB sales price of the corn oil.  The agreement has an initial term of 36 months commencing from October 13, 2008, and will renew for successive 36 month terms unless Lincolnway Energy or FEC Solutions, L.L.C. elect to terminate the agreement at the end of the then current 36 month term.

Lincolnway Energy's primary means of shipping and distributing corn oil will be by truck.

4

Lincolnway Energy anticipates that FEC Solutions, L.L.C. will sell the corn oil in the biodiesel, livestock feed and industrial industry, but FEC Solutions, L.L.C. controls the marketing of all of Lincolnway Energy's output of corn oil.

Lincolnway Energy estimates that it will produce approximately 3,000 tons of corn oil per year at the plant.  Lincolnway Energy does not, however, anticipate that corn oil will be a material product of Lincolnway Energy because Lincolnway Energy’s corn oil sales were approximately $1,200,000 and $1,500,000, respectively, for the fiscal years ended September 30, 2009 and September 30, 2010, which represented approximately only 1%, of Lincolnway Energy's total revenues for those respective fiscal years.  Lincolnway Energy does not, however, have any significant operating costs or expenses related to the capture of corn oil.

Carbon Dioxide

Lincolnway Energy entered into a Carbon Dioxide Purchase and Sale Agreement and a related Non-Exclusive CO2 Facility Site Lease Agreement with EPCO Carbon Dioxide Products, Inc. on April 16, 2010.  Under those agreements, EPCO constructed a plant on Lincolnway Energy's site to collect the carbon dioxide which is produced as part of the ethanol production process and to convert that raw carbon dioxide into liquid carbon dioxide.  The EPCO plant became fully operational in August of 2010.

EPCO also markets and sells the liquid carbon dioxide gas under those agreements.  The purchase price payable by EPCO for the raw carbon dioxide provided by Lincolnway Energy is based upon EPCO's shipped tons of liquid carbon dioxide.  The agreement also includes a "take or pay" term which requires EPCO to purchase, during each contract year, the greater of 180 shipped tons per day or 70% of the annual liquid carbon dioxide production capacity of the EPCO plant at full capacity.  The annual liquid carbon dioxide production capacity of the EPCO plant will be determined based upon the capacity run procedures as set out in the agreement.  The take or pay obligation is trued up at the end of each contract year, and the purchase price for any "take or pay" tons will be the average per shipped ton purchase price paid by EPCO during the contract year.

EPCO is responsible for the shipment of all liquid carbon dioxide, which Lincolnway Energy contemplates, will be by truck.

Lincolnway Energy does not anticipate that revenues from the sale of carbon dioxide to EPCO will be a material product of Lincolnway Energy.

Sources and Availability of Raw Materials

Corn and coal are the primary raw materials that are utilized by Lincolnway Energy in the production of ethanol.  Corn is used to produce the ethanol, and coal is Lincolnway Energy's primary energy source for its ethanol plant.

5

Corn

Lincolnway Energy estimates that it will utilize approximately 21,200,000 bushels of corn per year at its ethanol plant, or approximately 1,767,000 bushels per month, assuming production at a capacity of approximately 59,000,000 gallons of ethanol per year.

Lincolnway Energy's ethanol plant is located in Story County, Iowa, near Nevada, Iowa.  Although Lincolnway Energy anticipates purchasing corn from various sources and areas, Lincolnway Energy believes that Story County will produce a sufficient supply of corn, assuming normal growing conditions, to generate the necessary annual requirements of corn for the ethanol plant.  There is not, however, any assurance that Lincolnway Energy will be able to purchase sufficient corn supplies from Story County or regarding the supply or availability of corn given the numerous factors which affect the supply and price for corn.

Lincolnway Energy has an agreement with Heart of Iowa Cooperative, dba Key Cooperative pursuant to which Lincolnway Energy can obtain up to 50% of its corn needs from Key Cooperative's facility located adjacent to Lincolnway Energy's ethanol plant, with the remaining 50% to be obtained from other Key Cooperative facilities or other licensed grain dealers. The 50% limitation for Key Cooperative's Nevada, Iowa location was imposed by the Iowa Department of Natural Resources, as part of the air permitting process.  Key Cooperative is a licensed grain dealer and has locations throughout central Iowa.  Key Cooperative is also a member of Lincolnway Energy.

Lincolnway Energy's agreement with Key Cooperative will terminate by its terms on May 22, 2026.  The agreement may also be terminated, however, at any time upon six months notice and the payment of a termination fee by the terminating party.  The termination fee starts at $2,000,000, and is reduced by $50,000 for each completed year of the agreement.  The term of the agreement commenced on May 22, 2006.

Lincolnway Energy purchased 19,884,281 bushels of corn for $71,804,446 from Key Cooperative during the fiscal year ended September 30, 2010, and 18,797,250 bushels of corn for $69,259,682 during the fiscal year ended September 30, 2009.

Corn is delivered to Lincolnway Energy's ethanol plant by truck.

Lincolnway Energy has corn storage capabilities for approximately 10 days of continuous ethanol production.

Coal

Lincolnway Energy's ethanol plant is a coal fired plant.  Lincolnway Energy's ethanol plant will utilize approximately 300 tons of coal per day, assuming production at a capacity of 59,000,000 gallons of ethanol per year.

Lincolnway Energy purchased approximately 99,000 tons of coal for $6.0 million during the fiscal year ended September 30, 2010, and approximately 95,000 tons of coal for $5.6 million during the fiscal year ended September 30, 2009.

6

Lincolnway Energy currently obtains all of its coal pursuant to an agreement between Lincolnway Energy and Williams Bulk Transfer.  The agreement allows Lincolnway Energy to purchase up to 220,000 tons of coal per year at a per ton price equal to the sum of the coal price and the transportation price, as those terms are defined in the agreement.  The coal price and the transportation price are subject to adjustment in various circumstances and based on various factors.  For example, the transportation price is subject to quarterly adjustment, upward or downward (but never below the initial transportation price stated in the agreement), by 100% of the quarterly percentage change in the All Inclusive Index—Less Fuel, and to a monthly adjustment, upward but not downward, through the addition of a fuel surcharge determined by the amount by which the average Retail On-Highway Diesel Fuel Price of the U.S. exceeds a specified amount per gallon.  The transportation price will also be increased on the scheduled adjustment dates set out in the agreement.  The coal price adjustments are based upon, in general, any increased costs as a result of any changes in laws, changes in inflation as determined by designated indices, and the quality of the coal.  Lincolnway Energy is required to pay a penalty of $16.00 per ton multiplied by the difference of the minimum requirement and actual quantity purchased, if Lincolnway Energy fails to purchase a minimum of 80,000 tons of coal in any calendar year.  The $16.00 per ton penalty amount is subject to adjustment as provided in the agreement.  Lincolnway Energy's agreement with Williams Bulk Transfer will expire by its terms on January 1, 2013.

Lincolnway Energy is dependent upon its agreement with Williams Bulk Transfer for the supply of all of Lincolnway Energy's coal needs.  Lincolnway Energy's loss of its contract with Williams Bulk Transfer, or Lincolnway Energy's inability to negotiate a new contract with Williams Bulk Transfer or another supplier on favorable terms before the expiration or termination of the agreement, would have material adverse effects on Lincolnway Energy.

All of the coal utilized by Lincolnway Energy is delivered by truck.  Lincolnway Energy has coal storage for approximately 6 days of continuous ethanol production.

Other Raw Materials

Lincolnway Energy's ethanol plant also requires a significant amount of electricity and significant supplies of water.

Lincolnway Energy's electricity needs are currently met by Alliant Energy.  Lincolnway Energy pays the general service rates for its electricity.

Lincolnway Energy utilizes approximately two gallons of water to produce a gallon of ethanol, which results in the use of approximately 325,000 gallons of water per day.  Lincolnway Energy discharges 275,000 gallons of water per day that has been treated by a reverse osmosis system. Lincolnway Energy's water needs are currently met by the City of Nevada.

7

Rail Access

Rail access is critical to the operation of Lincolnway Energy's ethanol plant because rail is used for the shipment and distribution of ethanol and distiller's grains.  Lincolnway Energy utilizes rail track owned by Lincolnway Energy, as well as tracks owned by the Union Pacific and Key Cooperative.  Lincolnway Energy has agreements with the Union Pacific and Key Cooperative regarding the use of their tracks.

Lincolnway Energy owns approximately 25 acres of real estate which is to the west of Lincolnway Energy's existing real estate and which is adjacent to the Union Pacific railroad tracks near Nevada, Iowa.  The real estate was acquired primarily for potential future use in the construction of additional railroad spur tracks. On October 15, 2010, Lincolnway Energy entered into an agreement with JB Holland Construction, Inc. to perform the dirt work for the additional rail spur to be added to the track.  This will allow Lincolnway Energy to ship unit trains on the Union Pacific mainline. Lincolnway Energy anticipates entering into an agreement for the construction of the rail spur in the spring of 2011.

Expansion Plans

Lincolnway Energy currently has no definite plans to expand its ethanol plant or to construct or acquire any additional ethanol plants.  Lincolnway Energy will, however, consider those matters as part of its ongoing operations and analysis of its business and the ethanol industry in general.

Technology Changes

Lincolnway Energy continues to monitor and evaluate any opportunities that may arise with respect to possible technological improvements and alternative energy sources for Lincolnway Energy's ethanol plant.  For example, Lincolnway Energy is considering switching the fuel source for its plant from coal to biomass.  Lincolnway Energy also continues to monitor technological developments in the industry, such as those purported to increase operating or production efficiencies or to generate energy or other savings in ethanol or distillers' grains production.

Research and Development Activities

Lincolnway Energy is not currently engaged in any significant research or development activities.

Competition

The ethanol industry and markets remain highly competitive even though new construction and expansion of ethanol plants slowed significantly during the last three to four years, due to unfavorable credit and market conditions. Recent installed US ethanol capacity is cited at 14.25 billion gallons per year.  Recent annualized production amounts show that the industry as a whole is producing at a rate of approximately 13.3 billion gallons per year. According to the Renewable Fuels Association, Iowa has 42 ethanol refineries in production, producing 3.6 billion gallons of ethanol.  The U.S. became the world's largest producer of ethanol in 2006, surpassing Brazil.  World production also reached an all time high of approximately 19.5 billion gallons in 2009, as compared to approximately 17.3 billion gallons in 2008, according to the Renewable Fuels Association, and representing nearly 400% growth since 2000. Over 40 countries are now producing ethanol, including Brazil, Canada, China, India, Thailand, Columbia, Australia, Turkey, Pakistan, Argentina and various other countries in the European Union and Central America.  Many of those countries have also enacted renewable fuel use requirements.

8

The general economic and ethanol industry circumstances have, however, been difficult and adverse over the past two to three years, with various ethanol plants having been closed or having cut production and some openings or construction or expansions of plants having been cancelled or postponed.  The past projections for the growth of the ethanol industry may, therefore, no longer be accurate.  Many plants did, however, return to some level of profitability in the second half of 2009 and into the start of 2010, and some idle ethanol plants have resumed operations.  The industry has, however, continued to be somewhat volatile.

Given that the Energy Independence and Security Act of 2007 increased the renewable fuels standard to 36 billion gallons of annual renewable fuel use by 2022 (up from the prior mandate of 7.5 billion gallons of annual use by 2012), it is likely that there will continue to be some growth in the ethanol industry, both domestically and internationally, over the longer term.

Lincolnway Energy's competitors in the U.S. include not only regional farmer-owned entities, but also the major oil companies and other large companies.

The competition in the ethanol industry has increased during the past three years, with declining ethanol prices, excess supplies of ethanol and higher and volatile corn prices.

The ethanol industry will also continue to face increasing competition from international suppliers of ethanol.  International suppliers produce ethanol primarily from inputs other than corn, such as sugar cane, and have cost structures that may be substantially lower than Lincolnway Energy's and other U.S. based ethanol producers.  Ethanol imports equivalent to up to approximately 7% of total U.S. production in any given year from various countries were exempted from the tariff under the Caribbean Basin Initiative to spur economic development in Central America and the Caribbean.  Foreign suppliers of ethanol may significantly increase their imports into the U.S.  Also, Canada may import ethanol duty free, and Mexico may import ethanol under a duty rate of $.10 per gallon.  Some of the larger competitors in the ethanol industry may construct or establish ethanol plants in Central America or the Caribbean.  Also, the $.54 per gallon tariff on most foreign produced ethanol will expire on December 31, 2010, and as of the date of this annual report it did not appear that the tariff would be extended or reenacted at any time in the near future, or perhaps at all.

Smaller competitors also pose a threat.  Farmer-owned cooperatives and independent companies consisting of groups of individual farmers and investors have been able to compete successfully in the ethanol industry; although Lincolnway Energy believes that smaller ethanol plants will have increasing difficulty in competing with larger plants if the current market conditions continue.  These smaller competitors operate smaller facilities which do not affect the local price of corn grown in the proximity to the facility as much as larger facilities do, and some of the smaller competitors are farmer-owned and the farmer-owners either commit, or are incented by their ownership in the facility, to sell corn to the facility.

9

The continuing increase in domestic or foreign competition could cause Lincolnway Energy to have to reduce its prices and take other steps to compete effectively, which could adversely affect Lincolnway Energy's results of operations and financial position.

Many competitors will have greater production capacity, greater experience, more access to information and/or greater capital or other financial resources, any of which will make it difficult for Lincolnway Energy to compete with those competitors.  For example, greater ethanol production may allow a competitor to market its ethanol or distiller's grains at lower prices than Lincolnway Energy.  Lincolnway Energy believes there may be acquisitions and consolidations in the ethanol industry in 2011, and if those acquisitions and consolidations occur, they could lead to additional competitors with greater advantages over Lincolnway Energy.  A competitor may also offer other products or services that are not offered by Lincolnway Energy, which may give the competitor an additional advantage over Lincolnway Energy.

An ethanol plant utilizing corn to produce ethanol may also experience competition in the form of other plants which produce ethanol from other products.  For example, ethanol can be produced from corn stover, corn fiber, wheat straw, barley straw, switchgrass, miscanthus, trees, grasses. woodwastes, vegetative wastes and other wastes.  Lincolnway Energy's ethanol plant is designed to produce ethanol only from corn.

The Energy Independence and Security Act of 2007 requires that 21 billion gallons of the new 36 billion gallon renewable fuels standard must come from advanced biofuels, with 16 billion gallons of that amount required to come from cellulosic ethanol by 2022.  Research will therefore continue regarding cellulosic ethanol, and it is likely that processes will be developed in the near future which will make the production of ethanol from these types of sources economical.  According to the Renewable Fuels Association, there were 28 companies with cellulosic ethanol projects under development or construction or in operation in 23 states as of January, 2010.  Some of those projects are properly categorized as "pilot" or "test:" plants, but others are at a larger production level.  For example, Poet plans to open a 25,000,000 gallon per year cellulosic ethanol plant in Iowa in 2011, with the plant to produce ethanol from corn cobs. DuPont Danisco also has plans to open a 50,000,000 gallon per year cellulosic ethanol plant in the 1st quarter of 2013, with the plant to produce ethanol from corn stover.  The location for this plant has not yet been decided.  Some of the cellulosic ethanol plants are working with the U.S. Department of Energy, and have received grant funds.

It is also possible that one or more of the other sources for producing ethanol may have greater advantages than corn, which would adversely affect an ethanol plant that produces ethanol solely from corn.  For example, a plant using one of those sources may be able to produce ethanol on a more economical basis or on a more efficient or greater scale.

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The increased production of ethanol from other sources could also adversely affect the price for ethanol generally.

Some competitors operate their ethanol plant and produce ethanol using different sources of energy than coal, or using various other sources of energy.  The other sources of energy include natural gas and various forms of waste type products, such as woodwaste, tires, construction waste and other waste products.  Those competitors may have lower production and input costs and/or higher operating efficiencies than Lincolnway Energy, which would allow them to produce and market their ethanol at lower prices than Lincolnway Energy.

Competition from newly developed fuel additives would also reduce the use of ethanol and Lincolnway Energy's profitability.  Although it is difficult to predict if any new fuel additives will be developed, it likely will occur at some point, and it could be in the near future.

Research is also continually being conducted for alternatives to petroleum based fuel products and for additional renewable fuel products.  For example, research is ongoing regarding the use of hydrogen, electric or solar powered vehicles and fuel cells.  A breakthrough or discovery in any research could conceivably occur at any time, and could have the effect of greatly reducing the use of ethanol or of even making the use of ethanol obsolete at some point.  There will be increased incentives to develop alternatives to petroleum based fuel products given the higher gasoline prices that began in 2008 and the continuing security and other concerns with the Middle East and certain other major oil producing nations.

Ethanol is a commodity and is priced on a very competitive basis.  Lincolnway Energy believes that its ability to compete successfully in the ethanol industry will depend upon its ability to price its ethanol competitively, which in turn will depend on many factors, many of which are beyond the control of Lincolnway Energy and its management.  As indicated above, one of those factors is that Lincolnway Energy is subject to material and substantial competition, including from competitors who will be able to produce or market significantly higher volumes of ethanol and at lower prices.

Lincolnway Energy believes that the principal competitive factors with respect to distiller's grains are price, proximity to purchasers and product quality.

Government Oversight and Regulation

Lincolnway Energy's business is subject to substantial governmental oversight and regulation, including relating to the discharge of materials into the air, water and soil; the generation, storage, handling, use, transportation and disposal of hazardous materials; and the health and safety of Lincolnway Energy's employees.

Lincolnway Energy needs to maintain various permits to be able to maintain and continue its operations. The permits include water and air permits from the Iowa Department of Natural Resources.

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As part of the process of settling allegations of the Iowa Environmental Protection Commission regarding emissions limit exceedences (which were settled in April, 2010) and to otherwise comply with air emissions requirements, Lincolnway Energy filed an application with the Iowa Department of Natural Resources on August 28, 2008 for Lincolnway Energy to obtain a new air quality permit under the 250 ton rules which were adopted in late 2007. Lincolnway Energy believes that its current levels of emissions would comply with the conditions of that air quality permit, but Lincolnway Energy may also be subject to higher ongoing compliance and operating costs under the new air quality permit. Due to the progress made by the Iowa Department of Natural Resources on the new permit and the modeling required, the Iowa Department of Natural Resources has issued a variance to Lincolnway Energy’s present operating permit to allow Lincolnway Energy to operate at the higher production level requested in the new permit.

The principal risks associated with the substantial governmental oversight and regulation of Lincolnway Energy and its business are discussed in Item 1A of this annual report, at "Lincolnway Energy's Operations Are Subject To Substantial and Extensive Governmental Laws and Regulations Which Restrict and Increase the Cost of Lincolnway Energy's Business".

The ethanol industry is also substantially supported by and dependent upon various federal and state programs, including various subsidies, tax exemptions and other forms of financial incentives. Some of those programs and the principal risks associated with the governmental support of the ethanol industry are discussed in Item 1A of this annual report, under "Loss of Current Governmental Support and Incentives for Ethanol Could Reduce the Use of Ethanol and Materially and Adversely Affect Lincolnway Energy's Results of Operations and Financial Position".

Employees

As of December 15, 2010, Lincolnway Energy had 46 employees.

Item 1A. Risk Factors.

Any of the following risks could significantly and adversely affect Lincolnway Energy's prospects, business, results of operation and financial condition.  The following risks are not the only risks Lincolnway Energy is subject to or may face, and they are not intended to be set forth in order of materiality or significance.

Risks Relating to Lincolnway Energy and Its Business

The Economy And The Ethanol Industry Continue To Be Subject To Generally Difficult Market, Credit And Other Circumstances  The United States and virtually all international economies are still widely viewed as facing difficult and uncertain economic circumstances that may continue well into 2011, and perhaps longer.  The United States and nearly all international economic circumstances include a lack of available loans and credit to nearly all types of industries, significant unemployment, falling profits or losses in many industries, volatile stock and other investment markets, individual and business failures and bankruptcies, significant deficit spending and "bailout" programs by governments, and uncertain business and consumer confidence.

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The ethanol industry has been similarly affected.  For example, lenders and the credit markets have been generally unfavorable to the ethanol industry during the last two to three years, and the lack of available credit has caused the proposed construction or expansion of some ethanol plants to be cancelled or indefinitely delayed.  The ethanol industry also experienced decreasing profits over that time period, and many ethanol plants experienced losses over most or some of that time period, although most ethanol plants did return to some level of profitability in late 2009 to early 2010.  The ethanol industry has also struggled with volatile corn prices, and record high corn prices, during parts of the last three years.  The record high corn prices, coupled with declining ethanol prices, negatively impacted profits, and caused some ethanol companies to declare bankruptcy or to halt construction or expansion projects and/or to delay the opening of recently completed ethanol plants.

There is also uncertainty in the economy arising from continuing terrorism concerns, both in the United States and internationally, and the uncertainties and difficulties in Pakistan, Afghanistan, Iraq, Iran and other parts of the Middle East.

Lincolnway Energy is therefore still operating in an uncertain and volatile economic and industry environment.

Lincolnway Energy Is Heavily Dependent On A Management Team And Certain Suppliers And Service Providers, But Could Lose Any Of Their Services At Any Time.  Lincolnway Energy is heavily dependent upon its core management team of its president and chief executive officer, chief financial officer, plant manager, commodities manager and controller, as well as on the companies which provide coal and corn to Lincolnway Energy and the companies which market Lincolnway Energy's ethanol and distiller's grains.  If any of those management team members or companies terminate their services or for any reason cease to provide services to Lincolnway Energy, Lincolnway Energy's business and operations could be adversely affected in a sudden and material way.  The services could be lost for reasons outside of anyone's control, such as death or disability.  The marketing companies may also be heavily dependent upon one or more key employees or other relationships, and the loss of any of those employees or relationships by a company could adversely affect the company's ability to continue to provide timely and quality services to Lincolnway Energy.

Lincolnway Energy Is Subject To Risk Because Its Ethanol Plant Utilizes Coal.  The primary energy source for Lincolnway Energy's ethanol plant is coal.  The use of coal is subject to numerous federal and state regulations, including regarding permissible emissions levels.

Lincolnway Energy's ability to comply with the emissions and other requirements arising from its use of coal will depend to a degree on the type and quality of coal that is provided to Lincolnway Energy by its coal supplier.  If the coal does not meet the content and quality standards anticipated by Lincolnway Energy, Lincolnway Energy may not be able to meet its emissions and other regulatory and permit conditions and requirements.

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As global warming and climate change issues become more prevalent and accepted, there will likely be increased governmental and public sentiment for more regulation of the use of coal as a source of energy.  Coal is generally viewed unfavorably in any "carbon footprint" type analysis in any event, but may be viewed even more unfavorably when used by an ethanol plant because some experts and federal and state regulatory agencies are taking the position that the ethanol industry in general also performs poorly in any carbon footprint and/or land use type analysis.  One result of those types of analysis will likely be stricter emissions requirements, which could lead to the need for capital expenditures in order to meet those requirements and higher ongoing compliance and operating costs.  Those expenditures and costs could be material, and adversely affect Lincolnway Energy's results of operation and business.

Lincolnway Energy believes there will be increased regulatory requirements for coal at some point in the future.

The use, storage and handling of coal also creates risks related to dust explosions and fire.  Although Lincolnway Energy will take precautions to try to avoid those types of incidents, there is no assurance that those precautions will be successful in every circumstance.

The use of coal also generates fly ash, and Lincolnway Energy may face economic, logistic and environmental issues and difficulties in disposing of its fly ash.

Lincolnway Energy currently obtains all of its coal from one coal supplier.  If the agreement is terminated or if that supplier fails to perform for any reason, Lincolnway Energy might face an interruption in the supply of coal and have to seek an alternate supply source.  Lincolnway Energy does not have any agreement with any alternative suppliers at this time. As with natural gas and other energy sources, coal supplies can be subject to interruption by weather, strikes, transportation, and production problems that can cause supply interruptions or shortages.  Lincolnway Energy has coal storage for approximately 6 days of continuous ethanol production, and an interruption in the supply of coal beyond that period could cause Lincolnway Energy to temporarily halt or discontinue the production of ethanol.

Lincolnway Energy May Not Be Successful In Converting To Another Fuel Source For Its Plant, And Even If It Is Successful, There Will Be Other Risks Associated With Other Fuel Sources.  Lincolnway Energy is considering the possibility of changing the energy source for its plant from coal to another source or sources, such as wood waste, agricultural residues  and/or construction and demolition waste.  There is not, however, any assurance that Lincolnway Energy will be successful in converting its plant from coal to another energy source because the conversion involves various material considerations and issues, including regulatory, technological and financial considerations and issues.  You therefore should not assume that Lincolnway Energy will be able to convert its plant to another energy source, or on economical terms.

Even if Lincolnway Energy determines that it is technologically and economically feasible to convert its plant to another energy source, and is able to successfully implement the conversion, Lincolnway Energy will still face regulatory and other risks related to another energy source.  For example, there will still be air permit and emission limits requirements and issues that will need to be met by Lincolnway Energy.  As another example, Lincolnway Energy will need to be able to secure adequate sources of supply of the other energy source at an economical price, and from reputable third parties.  Some of the other possible energy sources, such as woodwastes, may vary in availability from time to time due to various factors, such as the economic circumstances of the industry in question.  For example, the availability of woodwaste from the construction industry will decline when the construction industry is struggling, such as was the case at the time of the preparation of this annual report.  Some of these other risks are not as equally applicable to coal.

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If Lincolnway Energy Ever Expands Or Attempts To Convert Its Plant To Another Fuel or Cellulosic Source, It Will Be Subject To The Risks Inherent In The Development And Construction Process.  If Lincolnway Energy ever determines to expand its existing ethanol plant or to pursue the construction of an additional ethanol plant, or to convert its plant to a fuel source other than coal or to convert from corn to a cellulosic source, Lincolnway Energy will be subject to the numerous material risks and uncertainties inherent in the development and construction process.  For example, it may be difficult to identify a suitable location for another ethanol plant because many favorable locations have already been acquired by other ethanol plants or ethanol plant developers.  Lincolnway Energy also believes that it could be difficult to obtain the necessary financing, at least at this time, given the generally unfavorable debt and equity financing market for the ethanol industry at the time of the preparation of this annual report.  Any expansion of Lincolnway Energy's plant or conversion of the plant to another fuel or cellulosic source may also involve some down time for the plant, which would in turn result in decreased ethanol and distiller's grain production.

Lincolnway Energy May Make Other Investments Or Engage In Other Business.  Lincolnway Energy's board has the authority to cause Lincolnway Energy to construct or acquire or to invest in other ethanol plants or to make other investments or to engage in other businesses.  The scope and nature of Lincolnway Energy's business could therefore change significantly, which could expose Lincolnway Energy to numerous other risks and uncertainties.  Lincolnway Energy's business may not always be limited only to owning and operating its current ethanol plant.

Lincolnway Energy Is Leveraged And Has Debt And Debt Service Requirements.  Lincolnway Energy financed the construction and start-up of its ethanol plant with significant debt, and Lincolnway Energy will have loans outstanding from time to time under its operating and working lines of credit.  Lincolnway Energy has, however, lowered its outstanding debt since it commenced ethanol production in 2006 from $34,612,543 to $9,486,084 as of September 30, 2010.  Lincolnway Energy therefore does not believe that it was substantially leveraged at the time of the preparation of this annual report.

Lincolnway Energy may, however, increase its debt in the future, and the use of leverage creates risks.  For example, if Lincolnway Energy ever became unable to generate profits and cash flow to service its debt and its ongoing operations and working capital needs, Lincolnway Energy could be forced to reduce or delay capital expenditures or any expansion plans, sell assets or operations, obtain additional loans or capital or attempt to restructure its loans and other debt.  Lincolnway Energy also may not be able to renew, extend or replace any existing loans or financing arrangements Lincolnway Energy may have in place from time to time.  If any of those events occur, Lincolnway Energy will need to attempt to obtain additional financing through the sale of additional units or debt in Lincolnway Energy or through additional loans from other lenders, but there is no assurance that any of those steps would be successful.

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Lincolnway Energy will also need to comply with the various restrictions and covenants that will be included as part of Lincolnway Energy's credit and loan agreements.  The restrictions and covenants will likely include prohibitions or restrictions on incurring additional debt, granting additional security interests or liens, acquiring additional assets, mergers, the issuance of additional units, and making distributions to Lincolnway Energy's members.  The credit and loan agreements will also likely require Lincolnway Energy to maintain various financial ratios and other similar financial covenants.  Those restrictions and requirements may limit Lincolnway Energy's flexibility in planning for, or reacting to, competition or changes in the ethanol industry and Lincolnway Energy's ability to pursue other perceived business opportunities.

Lincolnway Energy's loans are secured by liens on all of Lincolnway Energy's assets, and if Lincolnway Energy breaches any of its agreements with its lenders, the lenders will be able to foreclose on Lincolnway Energy's assets.

Lincolnway Energy's debt and leverage could at some point place it at a competitive disadvantage with competitors which have less debt or greater financial resources, and may also increase Lincolnway Energy's vulnerability to adverse economic or industry conditions or occurrences.

Lincolnway Energy's Financing Costs Will Rise If Interest Rates Increase.  Lincolnway Energy will be adversely affected by any increase in interest rates or other lending costs because Lincolnway Energy will likely generally have some outstanding loans or debt, which at times might be substantial.  Although difficult to predict and outside of Lincolnway Energy's control, it is possible that there may be increases in interest rates, at least over the longer term.

Lincolnway Energy's Potential Success Is Almost Exclusively Dependent On Ethanol Sales, And The Price Of Ethanol And Gasoline Can Vary Greatly And Are Beyond Lincolnway Energy's Control.  Although Lincolnway Energy's ethanol plant produces distiller's grains, corn oil and carbon dioxide, ethanol is the primary and material source of revenue for Lincolnway Energy, having generated approximately 83%, 80% and 83% of Lincolnway Energy's total revenues for the fiscal years ended September 30, 2008, 2009 and 2010, respectively.

Ethanol prices can vary significantly over both short and long term periods, and it is difficult to accurately predict changes in ethanol prices or in ethanol trends.  For example, the Chicago Board of Trade price of ethanol reached $2.365 on November 9, 2010, but was at $1.495 on July 28, 2010.

The price of gasoline also varies significantly over both short and long term periods.  The price for ethanol has generally had some correlation to the price of gasoline, so low gasoline prices or reductions in gasoline prices will also generally reduce ethanol prices and profitability.

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The recent record prices for gasoline were causing businesses and consumers to actively seek ways to lower or reduce their gasoline consumption.  For example, there is increased attention to requiring the auto industry to produce cars with higher fuel efficiency.  Higher gasoline prices also increase the focus and attention on the research and development of alternative energy options, such as fuel cells.  The existence of higher gasoline prices can therefore also adversely affect gasoline and ethanol prices and the profitability of ethanol plants.

Lincolnway Energy's inability to foresee or accurately predict changes in the supply or prices of ethanol or gasoline will adversely affect Lincolnway Energy's business.

If ethanol prices decline to the point where it is unprofitable to produce ethanol and remain at that level, Lincolnway Energy could be required to suspend operations until the price increases to the level where it is once again economical or profitable to produce and market the ethanol.  Any suspension of operations would have a material adverse effect on Lincolnway Energy's business, results of operations and financial condition.  Some ethanol plants have delayed opening or have curtailed production due to the unfavorable market conditions which were in existence over the two to three year period preceding the date of this annual report.

Even if ethanol prices are generally favorable, Lincolnway Energy still may not be able to sell all of its ethanol, or at favorable prices.

Increases In Supplies Of Ethanol May Adversely Affect Ethanol And Ethanol Byproduct Prices.  Lincolnway Energy anticipates that there will continue to be increases in ethanol production over the long term, both in the United States and internationally.  For example, there will need to be increased ethanol production in order to meet the renewable fuels standards that were part of the Energy Independence and Security Act of 2007.

The existing renewable fuels standard requirements may at least provide some indirect price support as ethanol production increases to meet those standards, but it is possible that increasing ethanol production may at times lead or contribute to lower ethanol prices.  For example, at least currently, the demand for ethanol is primarily driven by the renewable fuels standard requirements, as opposed to general consumer demand, so if ethanol production exceeds the amounts required to meet the renewable fuels standard, there could be excess ethanol available, which would lower ethanol prices.

Excess ethanol production capacity could also result from decreases in demand for ethanol, which could result from a number of factors, such as regulatory developments at the federal or state level, reduced gasoline consumption in the United States or advancements in alternatives to gasoline or in other gasoline additives.

Any increase in ethanol production will also lead to increases in distillers' grains and corn oil production, and increased supplies of those products could also lead to lower prices for those products.

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Continued Growth In The Ethanol Industry Depends On Use Of Increased Ethanol Blends And Related Expansion Of Infrastructure, Change In Public Views And Regulatory Support, Which May Not Occur On A Timely Basis, If At All.  Most experts believe that for ethanol use to grow significantly over both the near and longer term, there must be increased use of ethanol blends in excess of 10%, such as E20, E30 and, in particular, E85.  There are various areas that need development and expansion in order for that to occur, including expanded production of flex fuel vehicles and the expanded use of pumps that can utilize higher ethanol blends, such as blender pumps.  A blender pump allows a driver to fill his or her vehicle with any blend of ethanol from 0% to 85% depending on the type of vehicle they drive.  There will also need to be changes in the public's views and perceptions of ethanol in order for there to be increased use of higher blends of ethanol, as well as regulatory developments at both the federal and state level which allow the use of, and promote the use of, higher ethanol blends and the use of blender pumps and flex fuel vehicles.

Lincolnway Energy's Results Of Operations, Financial Position And Business Outlook Will Likely Fluctuate Substantially Because Lincolnway Energy's Business Is Highly Dependent On Commodity Prices, Which Are Subject To Significant Volatility And Uncertainty, And On The Availability Of Raw Materials Supplies.  Lincolnway Energy's results of operations will be substantially dependent on commodity prices, especially prices for corn, coal, ethanol and unleaded gasoline.  The prices of these commodities are volatile and beyond Lincolnway Energy's control.

Lincolnway Energy estimates that corn costs will, on the average, make up approximately 69% of Lincolnway Energy's total annual operating costs, but the percentage could be higher dependent on the price of corn from time to time.  Accordingly, rising corn prices will lower profit margins, and, at certain levels, corn prices would make ethanol uneconomical to produce and to use in the fuel markets.  For example, corn prices began to rise significantly in approximately July, 2006 (when the cash corn price in Lincolnway Energy's local market area was approximately $2.09 per bushel) and generally continued to rise until mid-year 2008 (when the cash corn price in Lincolnway Energy's local market area reached approximately $7.15 per bushel).  The cash corn price in Lincolnway Energy's local market area was approximately $5.32 per bushel as of November 30, 2010.  The corn price on the Chicago Board of Trade daily futures ranged from a low of $3.25 per bushel to a high of $5.29 per bushel during Lincolnway Energy's fiscal year ended September 30, 2010.

The supply and price of corn are influenced by many factors, including drought, hail and other adverse weather conditions; insects or disease; farmer planting decisions; imports; government policies and subsidies with respect to agriculture and international trade; and global and local demand and supply.  The price for corn in the market area encompassing Lincolnway Energy's ethanol plant could be higher than the corn price payable in other markets.  Lincolnway Energy will also compete for corn with the livestock producers and elevators located within Lincolnway Energy's market area.

There is also uncertainty regarding climate change, and any climate changes could adversely affect corn production in Lincolnway Energy's primary market area or other corn production areas in the United States and elsewhere, and thereby both the supply and price of corn.

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Lincolnway Energy's gross margin will depend significantly on the spread between ethanol and corn prices, and in particular the spread (sometimes referred to as the crush spread) between the price of a gallon of ethanol and the price for the amount of corn required to produce a gallon of ethanol.  The price of ethanol and corn fluctuates frequently and widely, however, so any favorable spread between ethanol and corn prices which may exist from time to time cannot be relied upon as indicative of the future.  It is possible for the circumstance to arise where corn costs increase and ethanol prices decrease to the point where Lincolnway Energy could be required to suspend operations, as some other ethanol plants did during 2008 and parts of 2009.  Any suspension of operations could have a material adverse effect on Lincolnway Energy's business, results of operations and financial condition.

The supply and cost of other inputs needed by Lincolnway Energy can also vary greatly, such as coal, electric and other energy costs.  Lincolnway Energy's ethanol plant utilizes coal as its primary energy source, and Lincolnway Energy estimates that coal costs will, on average, make up approximately 5% of Lincolnway Energy's annual total operating costs.  The prices for and availability of coal are subject to numerous market conditions and factors which are beyond Lincolnway Energy's control.  Significant disruptions in the supply of coal would impair Lincolnway Energy's ability to produce ethanol, and increases in coal prices or changes in Lincolnway Energy's coal costs relative to the costs paid by Lincolnway Energy's competitors would adversely affect Lincolnway Energy's competitiveness and results of operation and financial position.

Lincolnway Energy may attempt to offset a portion of the effects of such fluctuations by entering into forward contracts to supply ethanol or to purchase corn, coal or other items or by engaging in hedging and other futures related activities, but those activities also involve substantial risks and may be ineffective to mitigate price fluctuations and may in fact lead to substantial losses.

Transportation costs can also be a factor in the price for ethanol because ethanol is currently shipped by truck or by rail, and not by pipeline, and because ethanol generally needs to be shipped relatively long distances to a terminal where the ethanol can be blended with gasoline.

Lincolnway Energy's inability to foresee or accurately predict changes in the supply or prices of ethanol or of corn, coal and other inputs will adversely affect Lincolnway Energy's business, results of operation and financial position.  Also, as a result of the volatility of the prices for these commodities, Lincolnway Energy's results will likely fluctuate substantially over time.  Lincolnway Energy will experience periods during which the prices for ethanol and distiller's grains decline and the costs of Lincolnway Energy's raw materials increase, which will result in lower profits or operating losses and which will adversely affect Lincolnway Energy's financial condition.

There Are Many Factors Important To The Success Of An Ethanol Plant That Are Beyond The Control Of Lincolnway Energy.  Lincolnway Energy's ability to successfully operate its ethanol plant and to market the ethanol, distillers grains and corn oil produced at the plant are subject to numerous factors and risks.

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Some of those factors and risks relate directly to Lincolnway Energy, such as Lincolnway Energy's ability to retain qualified employees and other personnel, and on favorable terms, labor disputes or other employee issues, and unforeseen accidents at, or damages to, Lincolnway Energy's plant or other facilities.

Some of the factors and risks relate to the fact that the agricultural economy and the economy in general, and market prices and futures prices for oil, gasoline, ethanol, distiller's grains, corn oil, corn, coal and other inputs needed for Lincolnway Energy's ethanol operation, are all highly volatile and are influenced by many varying factors.  It is not possible to identify all possibly relevant factors, but some of the factors include the following and rumors or speculation about the following:

· Changing supply and demand relationships and trade deficit issues;

· Weather and other environmental conditions;

· Acts of God, including drought and storms;

· Agricultural, fiscal, monetary, economic, trade and exchange control programs and policies of governments;

· International, national, regional and local political and economic events and policies;

· Changes in fuel and energy costs or in interest rates or rates of inflation;

· Controversies or disputes about the use of biotechnology in crops, or errors or adverse reactions caused by the use of biotechnology in crops;

· Infestations or diseases in crops;

· Acts of terrorism or war, both nationally and internationally;

· Railcar or truck shortages or strikes within those industries;

· Environmental and other regulations which impact both the demand for ethanol and the cost of operation of an ethanol plant;

· Governmental incentives related to ethanol;

· Illegal or improper activities or scandals by participants in the markets, such as those that have previously occurred in the accounting industry, the stock and mutual fund industry and the insurance industry; and

· The general emotions and psychology of businesses, consumers and of the market place in general, which at times can be totally unrelated to actual economic or market conditions or other more tangible factors.

The internet, e-mail, television and other forms of communication allow rumors and speculation to be quickly and widely circulated, which can have immediate and substantial effects on the markets, even if the rumor or speculation is later found to be incorrect or unjustified.

It is very likely that there will be further acts of terrorism in the United States and abroad, including the possibility of acts aimed at disrupting the economy or the markets or various industries or sectors within the markets.  For example, there has been speculation about possible acts of terrorism aimed at the energy, agricultural and food industries.  Any speculation or rumors about, or actual acts of, terrorism could cause immediate and substantial reactions in a wide range of the markets and industries and in the economy in general.  The continued uncertainty in Afghanistan, Pakistan and the Middle East also continues to create uncertainties and could cause adverse reactions in the oil and energy markets and in the markets and economy in general.

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Most of the above factors or occurrences cannot be controlled by Lincolnway Energy, and it will be impossible to always accurately predict or identify which factors are relevant or are likely to occur.

Also, even if Lincolnway Energy were somehow able to have fully current and correct information as to all factors, prices would still not always react as predicted or as would seem likely given the information.  For example, there have been many occasions where the movements of the futures markets have seemed totally unrelated to actual supply and demand and other more tangible factors.  The latter fact may be caused, in part, because of the substantial speculative trading that occurs in the futures markets.

The Use Of The Futures Markets By Lincolnway Energy Could Be Unsuccessful And Result In Substantial Losses.  Lincolnway Energy will likely attempt to minimize the effects of the volatility of corn, coal, ethanol, distiller's grains and other prices by entering into forward pricing contracts and taking positions in the futures markets.  The primary intent of those positions will be to attempt to protect the supply of, and the price at which Lincolnway Energy can buy, corn, coal or other inputs and the price at which Lincolnway Energy can sell its ethanol, but not all of the positions may be able to be properly categorized as being for hedging purposes.  Any attempt by Lincolnway Energy to use the futures markets, whether in the form of hedging strategies or for more speculative trading purposes, may be unsuccessful, and in fact could result in substantial losses because price movements in futures contracts and options are highly volatile and speculative, and are influenced by many factors which are beyond the control of anyone.  Some of those factors include those noted above in "There Are Many Factors Important To The Success Of An Ethanol Plant That Are Beyond The Control Of Lincolnway Energy."  Lincolnway Energy will likely vary the amount of forward pricing, hedging and other risk mitigation strategies Lincolnway Energy may undertake, and Lincolnway Energy may at times choose not to engage in any such transactions.  As a result, Lincolnway Energy's results of operations and financial position may be adversely affected by increases in the price of corn or coal or decreases in the price of ethanol or unleaded gasoline.

Futures markets will also sometimes be illiquid, and Lincolnway Energy may not be able to execute a buy or sell order at the desired price, or to close out an open position in a timely manner.  The inability to close out an open position in a timely manner may result in substantial losses to Lincolnway Energy.  Lincolnway Energy's potential losses and liabilities for any futures or options positions are not limited to margin amounts or to the amount held in or the value of Lincolnway Energy's trading account, and in the event of a deficiency in Lincolnway Energy's trading account due to a margin call made to the trading account, a loss exceeding the value of the trading account, or otherwise, Lincolnway Energy will be responsible for the full amount of the deficiency.  Given the volatility of futures trading, margin calls can occur frequently and the amount of a margin call can be significant.

Losses from trades in the futures markets, coupled with the volatility in the corn markets and record high corn prices, are factors that have caused some ethanol companies to incur significant losses and, in some cases, to seek bankruptcy protection.

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Lincolnway Energy's Operations Are Subject To Substantial And Extensive Governmental Laws And Regulations Which Restrict And Increase The Costs Of Lincolnway Energy's Business.  Lincolnway Energy's ethanol operations are subject to substantial and extensive governmental laws and regulations, including those relating to the discharge of materials into the air, water or ground, and the generation, storage, handling, use, transportation and disposal of hazardous materials.  Some of those laws and regulations require Lincolnway Energy to maintain various permits and other approvals in order to continue ongoing operations.  Lincolnway Energy will need to meet the various requirements and conditions necessary to the issuance and maintenance of those permits and approvals.  The requirements and conditions may include that the ethanol plant facilities and operations meet various specifications regarding air quality, discharge, water and waste treatment, and various other operational matters.  Lincolnway Energy's compliance with all necessary permits, approvals and laws and regulations will increase Lincolnway Energy's costs and expenses.  Lincolnway Energy's failure to comply with those requirements or to maintain those permits and approvals may result in fines or penalties, the loss of the right to continue operations or claims by third parties.

Lincolnway Energy also anticipates that there will be changes in the approval requirements and other laws and regulations over time, and that those changes will increase the regulatory oversight and costs and expenses of Lincolnway Energy.  For example, the regulation of the environment, including the use of water, wastewater, storm water and air emissions, is a constantly changing area of the law, and it is likely that more stringent federal or state environmental laws, rules or regulations, or interpretation or enforcement of existing laws, rules or regulations, could be adopted which would require Lincolnway Energy to make substantial capital expenditures and/or increase Lincolnway Energy's operating costs and expenses.  New laws, rules and regulations may be advanced based upon claims related to global warming and climate change.  It is also possible that federal or state environmental laws, rules or regulations could be adopted which have an adverse effect on the use of ethanol, such as changes in the regulations regarding the required oxygen content of automobile fumes.  The new laws, rules or regulations could also arise or become necessary because of currently unknown conditions or problems arising from the production or use of ethanol, similar to what have occurred with methyl tertiary-butyl ether (MTBE) because of the adverse environmental and health issues now known to be caused by MTBE.

Lincolnway Energy believes that increased regulation of plants powered by coal, such as Lincolnway Energy's ethanol plant, is particularly likely.  Lincolnway Energy also foresees the possibility of increased regulation of ethanol plants arising from carbon footprint and life cycle and indirect land use change type analysis by regulators.

For example, in 2009, the State of California adopted a state low carbon fuels standard, which requires that renewable fuels used in California must accomplish certain reductions in greenhouse gases which are measured using a life cycle analysis that includes indirect land use change considerations.  The current predominant views on how to apply a life cycle and indirect land use change analysis (including those of the United States EPA) generally lead to results that are not favorable to coal or to ethanol, and that is the case for California.  The practical effect of California's low carbon fuel standard is that it precludes grain-based ethanol from outside California.

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The Renewable Fuels Association, together with other parties, have filed a lawsuit challenging California's low carbon fuel standard on the grounds that it violates both the supremacy clause and the commerce clause of the U.S. Constitution.  California represents a significant ethanol market, and if corn based ethanol cannot be utilized in California, it could significantly reduce demand for corn-based ethanol such as that produced by Lincolnway Energy.  Various other states are also looking at implementing low carbon fuel standard requirements for their states, so the outcome of the California lawsuit could have significant effects on the ethanol industry.

Lincolnway Energy May Become Subject To Various Environmental And Health And Safety And Property Damage Type Claims And Liabilities.  The nature of Lincolnway Energy's operations will expose it to the risk of environmental and health and safety claims and property damage claims.  For example, if any of Lincolnway Energy's operations are found to have polluted the air or surface water or ground water, such as through an ethanol spill, Lincolnway Energy could become liable for substantial investigation, clean-up and remediation costs, both for its own property and for the property of others which may have been affected by the pollution or spill.  Those types of claims could also be made against Lincolnway Energy based upon the acts or omissions of other persons, including persons transporting or handling ethanol.  Environmental and property damages claims and issues can also arise due to spills, losses or other occurrences arising from events outside of Lincolnway Energy's control and which are possible in Lincolnway Energy's business, such as fire, explosions or blowouts.  A serious environmental violation or repeated environmental violation could result in Lincolnway Energy being unable to construct or operate any additional ethanol plants and the loss of defenses to nuisance suits.  Lincolnway Energy may also be unable to obtain financing or necessary permits if Lincolnway Energy is subject to any pending administrative or legal action regarding environmental matters.  Any of those types of events could have a material adverse effect on Lincolnway Energy's financial condition and future prospects.

There Is Continuing Negative Press And Public Sentiment Against The Ethanol Industry Which Could Lead To Reduced Governmental And Public Support For The Use Of Ethanol.  There continues to be negative press and public sentiment against the ethanol industry based upon claims that the use of corn to produce ethanol drives up grain prices, which hurts livestock farmers and also consumers due to increased food prices.  The claims also include environmental type allegations, including that increased corn acreage and ethanol production could strain water supplies and worsen pollution in rivers and streams.  The criticisms also include that ethanol production is leading to land use changes, including the clearing of rain forests and other native lands for purposes of growing corn or other crops to be used for the production of ethanol or to replace land which is now used to produce crops for ethanol, which in turn releases carbon into the atmosphere that has been stored in the soil and otherwise has negative environmental impacts.  The continuing and growing criticism has come from, among others, environmental groups, the National Academy of Sciences, the American Lung Association and through the United Nations.

The criticism of the ethanol industry could lead to reduced governmental supports for the industry and reduced public support and use of ethanol.  The current criticisms are based primarily on the production of ethanol from corn, and could accelerate the development of other economical sources for the production of ethanol.  Lincolnway Energy's plant can only produce ethanol from corn.

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Loss Of Current Governmental Support And Incentives For Ethanol Could Reduce The Use Of Ethanol And Materially And Adversely Affect Lincolnway Energy's Results Of Operations And Financial Position.  There are various federal and state laws and regulations and programs which have lead to the increasing use of ethanol, including various subsidies, tax exemptions and other forms of financial incentives.  Some of the laws provide economic incentives to produce or use ethanol and some of the laws mandate the use of ethanol.  No guarantee can be given that any of those laws, regulations or programs will be continued, and the revocation or amendment of any one or more of those laws, regulations or programs could adversely affect the future use and price of ethanol in a material way.  Governmental support of the ethanol industry may decrease due to governmental budget issues.  The current governmental support of the ethanol industry may also decrease as the ethanol industry matures and advances, or in the event of any adverse environmental or other occurrences in the ethanol industry.

As noted above, the biofuels industry has received substantial negative press as of late regarding the possible negative effects and side effects of ethanol production.  Any negative public sentiment could lead to decreases in governmental support of the ethanol industry.

Another continuing regulatory or governmental support issue for the ethanol industry is the fact that current law and infrastructure effectively preclude the use of greater than 10% ethanol blends in conventional automobiles, sometimes referred to as the "blend wall."  Advocates have been lobbying the EPA and Congress to increase the permitted percentage for all vehicles from anywhere to 12% to 20%.  The EPA did act in October of 2010 to raise the permitted ethanol blend from 10% to 15% in vehicles produced in 2007 or later, but that action was not viewed as significant to the ethanol industry because of the limitation to vehicles made in 2007 or later and also because many retailers do not have the pumping equipment needed in order to offer E15.  As of the preparation of this annual report, the EPA was considering the use of E15 in vehicles built from 2001 to 2006, but no decision had been announced by the EPA at the time of the preparation of this annual report.

One key component of the federal government's support for the ethanol industry is the renewable fuels standard that arose out of the Energy Independence and Security Act of 2007.  Under that legislation, the renewable fuels mandate was increased to 36 billion gallons by 2022, with that requirement broken down among conventional biofuel, which includes ethanol derived from corn starch, advanced biofuels and cellulosic biofuels.  There continue to be, however, difficulties in developing cellulosic biofuel technologies, and in the practicalities of harvesting, moving and storing some of the fuel stocks which could be utilized to meet the cellulosic renewable fuels standard (such as cornstalks and stover), as well as difficulties in obtaining the capital needed to fully commercialize those technologies.  The EPA therefore has reduced the target for cellulosic biofuels for the renewable fuels standard for 2011, with the total RFS2 requirement for 2011 remaining at 13.95 billion gallons, but with 12.6 billion gallons being from starch-based ethanol and the remaining 1.35 billion gallons being a combination of biodiesel and other advanced biofuels, including a 6.6 million gallon requirement specifically for cellulosic biofuels.  It is unclear how any continuing inability to meet the renewable fuels standard, whether due to technology or financing issues, would affect governmental or public views of the ethanol industry or the existing renewable fuels standard.

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Some other key areas of legislative interest in the ethanol industry are increasing the required use of flexible fuel vehicles, particularly E85 vehicles, and blender pumps, and providing incentives to develop and utilize blender pumps.

The actions of states are also important to the ethanol industry, and some states, such as Iowa and Minnesota, have various requirements which support the ethanol industry.  A key state, however, California, has passed a low carbon fuel standard which will effectively shut out grain-based ethanol from outside California in the coming years.  As noted elsewhere, a lawsuit has been brought challenging California's low carbon fuel standard, and the outcome of that litigation could have significant effects on the ethanol industry, in particular if California's legislation is allowed to stand, and other states adopt similar legislation.  The legislation adopted by California, and any other similar legislation that would be adopted by any other states, could make it difficult to timely meet the renewable fuels standard.

Interruptions In The Supply Of Water, Electricity, Coal Or Other Energy Sources Or Other Interruptions In Production Would Have An Adverse Effect On Lincolnway Energy's Ethanol Plant.  Interruptions in the supply of water, electricity, coal or other energy sources at Lincolnway Energy's ethanol plant would have a material adverse impact on operations, and could require Lincolnway Energy to halt production at the ethanol plant.

Interruptions in or the loss of the supply of water, electricity, coal or other energy sources could occur, for example, because of software or other computer problems at the ethanol plant or at the plants of the suppliers of the water, electricity, coal or other energy.  Lincolnway Energy's and any suppliers' use of its software and other computer systems will be subject to attack by computer hackers, and to failure or interruption through equipment failures, viruses, acts of God and other events beyond the control of Lincolnway Energy or a supplier.

Lincolnway Energy's operations are also subject to significant interruption if its ethanol plant experiences a major accident or is damaged by severe weather or other natural disasters.  Lincolnway Energy's operations are also subject to labor disruptions and unscheduled down time, and other operational hazards inherent in the ethanol industry, such as equipment failures, fires, explosions, abnormal pressures, blowouts, pipeline ruptures, transportation accidents and natural disasters.  Some of these operational hazards may cause personal injury or loss of life, severe damage to or destruction of property and equipment or environmental damage, and may result in suspension of operations and the imposition of civil or criminal penalties against Lincolnway Energy.

Lincolnway Energy's business is dependent upon the continuing availability of railroads, railcars, truck fleets and other infrastructure necessary for the production, transportation and use of ethanol.  Any disruptions or interruptions in that infrastructure could have a material adverse effect on Lincolnway Energy.

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Lincolnway Energy may not have insurance covering any of these types of matters or occurrences.  Any insurance Lincolnway Energy may have in place may not be adequate to fully cover the potential losses and hazards, and Lincolnway Energy may not be able to renew the insurance on commercially reasonable terms or at all.

Competition From Other Ethanol Producers Or Energy Sources Could Adversely Affect Lincolnway Energy And Could Reduce Lincolnway Energy's Profitability.  The ethanol industry is competitive and will likely become increasingly more competitive.  The competitors include both regional farmer-owned entities, and also the major oil companies and other large companies.  The U.S. ethanol industry may also face increasing competition from international suppliers of ethanol.

Any increase in domestic or foreign competition could cause Lincolnway Energy to have to reduce its prices and take other steps to compete effectively, which could adversely affect Lincolnway Energy's results of operations and financial position.

Many competitors will have greater production capacity and/or greater capital or other financial resources, any of which may make it difficult for Lincolnway Energy to compete with the competitor.  A competitor may also offer other products or services that are not offered by Lincolnway Energy, which may give the competitor an additional advantage over Lincolnway Energy.

An ethanol plant utilizing corn to produce ethanol will also experience competition from other plants which produce ethanol from other products.   For example, ethanol can be produced from corn stover, rice straw, wheat, cheese whey, potatoes, wheat, oats, barley straw, milo, sorghum, sugar bogasse, rice hulls, various wastes (such as wood and vegetation) and cellulose based biomass.  Various federal incentives have been enacted to encourage and support the development of cellulosic based ethanol production, and the Energy Independence and Security Act of 2007 provides that 16 billion gallons of the 36 billion gallon renewable fuels mandate for 2022 must come from cellulosic biofuel.  Approximately 25 companies were developing cellulosic based ethanol plants as of January 2010.  Cellulosic and other ethanol technologies are viewed by many as the "next generation" ethanol technologies.

Although Lincolnway Energy believes there will continue to be a place for corn based ethanol production within the ethanol industry, it is possible that at some point in the future governmental and public support of the ethanol industry may be focused primarily upon, and provide significant advantages or benefits to, cellulosic and other developing ethanol technologies, which could have adverse effects on Lincolnway Energy and corn based ethanol production in general.  The requirements for the use of cellulosic and other advanced biofuels in the 2007 energy act are evidence of the government's support of, and trending to, those types of biofuels.  The public may also eventually support cellulosic and other advanced biofuels because of the perception that those types of biofuels do not have some of the perceived negative effects of corn based ethanol, such as the food versus fuel debate, given that cellulosic and other advanced biofuels are not made from products otherwise used in the food chain and are in some cases produced from "waste" products.

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It is also possible that one or more of the other sources of products for ethanol production may from time to time have greater advantages than corn, which would adversely affect an ethanol plant that produces ethanol solely from corn.  For example, a plant using one of those sources may be able to produce ethanol on a more economical basis or on a more efficient or greater scale.  The increased production of ethanol from any of those sources could also adversely affect the price for ethanol generally.  Lincolnway Energy's ethanol plant is designed to produce ethanol only from corn.

Some competitors operate their ethanol plant and produce ethanol using different sources of energy than coal, or using various other sources of energy.  The other sources of energy include natural gas and various forms of waste type products such as wood, tires, construction waste and manure.  Those competitors may have lower production and input costs and/or higher operating efficiencies than Lincolnway Energy, which would allow them to produce and market their ethanol at lower prices than Lincolnway Energy.

Competition from newly developed fuel additives would also reduce the use of ethanol and Lincolnway Energy's profitability.  Although it is difficult to predict if any new fuel additives will be developed, it will likely occur at some point, and it could be in the near future.

Research is also continually being conducted for alternatives to petroleum based fuel products and for additional renewable fuel products.  For example, research is ongoing regarding the use of hydrogen, electric or solar powered vehicles and fuel cells.  A breakthrough or discovery in any research could conceivably occur at any time, and will occur at some point, and could have the effect of greatly reducing the use of ethanol or of even making the use of ethanol obsolete over time.  There will be increased incentives to develop alternatives to petroleum based fuel products given the recent high gasoline prices and uncertainty in the Middle East.  It is also commonly agreed that the dependence of the U.S. on foreign oil places the U.S. in difficult political and economic circumstances, and the federal government will likely assist in the development of alternatives to petroleum based fuel products given the issues that arise from the dependence of the U.S. on foreign oil.

Technological Advances Could Make Lincolnway Energy's Ethanol Plant Less Competitive.  Technological advances in the processes and procedures for producing ethanol and in the efficiency of ethanol plants are continually occurring, and further ongoing advances should be expected.  It is possible that those advances could make the processes and procedures that are utilized at Lincolnway Energy's ethanol plant or the ethanol and/or other by-products produced at the ethanol plant less competitive when compared to other producers.  Any modifications or changes to Lincolnway Energy's ethanol plant to utilize any new technology could be technologically or cost prohibitive, and could, at least initially, reduce Lincolnway Energy's profitability.

There Are Potential Conflicts Of Interest In The Structure And Operation Of Lincolnway Energy.  Although Lincolnway Energy does not believe any conflict of interest exists which in practice will be detrimental to Lincolnway Energy, potential conflicts of interest do exist in the structure and operation of Lincolnway Energy and its business.    For example, the directors and officers of Lincolnway Energy are not required to devote their full time or attention to Lincolnway Energy, and they are all involved in other full time businesses and may provide services to others.  Some of the directors or officers might be owners or otherwise interested in other ethanol plants.  The directors and the officers will experience conflicts of interest in allocating their time and services between Lincolnway Energy and their other businesses and interests.

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The various companies that provide marketing and other services to Lincolnway Energy are also not required to devote their full time or attention to those services, and they will very likely be involved in other ethanol plants and ethanol related businesses and possibly other businesses or ventures, including having ownership or other interests in other ethanol plants.  The companies will therefore experience conflicts of interest in allocating their time and services between Lincolnway Energy and their various other ethanol plants or business ventures.  The companies providing ethanol and distiller's grains marketing services to Lincolnway Energy will be providing those same services to other ethanol plants, and may experience conflicts of interest in allocating favorable sales and sales when the supply of ethanol or distiller's grains exceeds the demand.

Risks Relating To Lincolnway Energy's Units.

Lincolnway Energy's Units Are Not A Liquid Investment.  No market exists for Lincolnway Energy's units.  A market will not develop for the units because the units are not freely transferable and can only be sold, assigned or otherwise transferred in compliance with the federal and applicable state securities laws and the terms and conditions of the second amended and restated operating agreement and unit assignment policy of Lincolnway Energy, which require the prior approval of the board for all sales and assignments of any units.  The restrictions set out in the securities laws, the second amended and restated operating agreement and the unit assignment policy may at times preclude the transfer of a unit.  The units are therefore not a liquid investment.

There Is No Guarantee Of Any Distributions From Lincolnway Energy.  Lincolnway Energy is not required to make any distributions to its members.  Lincolnway Energy could also be prohibited, or at least limited or restricted, from making any distributions under the terms of Lincolnway Energy's credit and loan agreements.  Lincolnway Energy's financial situation may also not allow it to make any distributions to its members in any event.  The payment of distributions will also always be at the discretion of the board of Lincolnway Energy and will depend on, among other things, the board's analysis of Lincolnway Energy's earnings, financial condition, capital requirements, level of indebtedness, statutory and contractual restrictions regarding the payment of distributions and any other considerations that the board deems relevant.  There is therefore no assurance of regular distributions, or any distributions at all, to Lincolnway Energy's members.

The Staggered Terms Of Lincolnway Energy's Board May Delay Or Prevent Lincolnway Energy's Acquisition By A Third Party.  Lincolnway Energy's second amended and restated operating agreement provides for three classes of directors, based upon the term of office, with each director holding a three year term.  Some view that type of provision as making more difficult, or as deterring, a merger, tender offer or acquisition involving Lincolnway Energy that might result in the members receiving a premium for their units.

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Taxation And Other Risks.

Members Will Owe Taxes On Lincolnway Energy's Profits But May Never Receive Any Distributions From Lincolnway Energy.  Lincolnway Energy is not required to make any distributions, and it is possible that no distributions will be made by Lincolnway Energy, even if Lincolnway Energy has profits.

Any Lincolnway Energy profits will be taxable to its members in accordance with the members' respective percentage ownership of the units, whether or not the profits have been distributed.  Even if distributions are made, the distributions may not equal the taxes payable by a member on the member's share of Lincolnway Energy's profits.

Lincolnway Energy could also sustain losses offsetting the profits of a prior tax period, so a member might never receive a distribution or be able to sell the member's units for an amount equal to the taxes which have already been paid by the member.

The Internal Revenue Service Could Challenge Allocations And Audit Lincolnway Energy's Tax Returns.  The second amended and restated operating agreement of Lincolnway Energy provides for the allocation of profits, losses and credits among the members.  The Internal Revenue Service might challenge those allocations and reallocate various items in a manner which reduces deductions or increases income to the members, both of which would result in additional tax liability for members.

The Internal Revenue Service might also audit Lincolnway Energy's returns, and adjustments might be required as a result of an audit.  If an audit results in an adjustment, members could be required to file amended returns and to pay back taxes, plus interest and possibly penalties.  The members' tax returns might also be audited.

The Tax Laws May Change To The Detriment Of Lincolnway Energy And Its Members.  It is possible that the current federal and/or state tax treatment given to an investment in the units or to Lincolnway Energy may be changed by subsequent legislative, administrative or judicial action.  Any such changes could significantly alter the tax consequences and decrease the after tax rate of return on investment in the units.

For example, although Lincolnway Energy anticipates being treated as a partnership for tax purposes, if for some reason Lincolnway Energy was classified or treated as a corporation, or Lincolnway Energy's board determined that it would be beneficial for Lincolnway Energy and its members for Lincolnway Energy to become taxed as a corporation, Lincolnway Energy would pay corporate income tax and no profits or losses would flow through to the members.  The payment of taxes by Lincolnway Energy would lower the cash available for distribution to the members, and any distributions would be taxed to the members as dividends.

Software Problems And Computer Viruses May Have A Materially Adverse Effect Upon Lincolnway Energy.  Lincolnway Energy will utilize various software applications in connection with its ethanol operation.  There is no assurance that the operation of any software or other computer systems will be uninterrupted or error free or will otherwise be successful.  There is also no assurance or guarantee that the software will continue to be available to Lincolnway Energy or that the software will be able to be maintained and updated as necessary from time to time.

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Lincolnway Energy 's use of its software and other computer systems will be subject to attack by computer hackers and to failure or interruption through viruses or acts of God or other occurrences beyond the control of Lincolnway Energy, such as computer failure, communications line failure, power failure, mechanical failure, equipment malfunction or failure, and lightning.

The refiners, suppliers and other persons who Lincolnway Energy has business relationships with are also subject to the same software and computer system risks, and may affect their ability to do business with Lincolnway Energy.

Any problems with any software or other computer systems might have material adverse effects on Lincolnway Energy.

Item 1B. Unresolved Staff Comments.

This Item is not applicable to Lincolnway Energy because Lincolnway Energy is not an accelerated filer, a large accelerated filer or a well-known seasoned issuer, as those terms are defined in the rules of the Securities and Exchange Commission.

Item 2. Properties.

Lincolnway Energy's office and its ethanol plant are located on approximately 160 acres in Story County, Iowa, near Nevada. Iowa.  Lincolnway Energy owns the real estate and its office and ethanol plant, but all of those properties are subject to a first mortgage and security interest held by Lincolnway Energy's primary lender, CoBank, and to other mortgages and security interests held by the Iowa Department of Economic Development, the Iowa Department of Transportation, and Fagen, Inc.

Lincolnway Energy's office building has approximately 1,400 square feet.  Lincolnway Energy utilizes the office building for office space for Lincolnway Energy's management and other staff.  Lincolnway Energy was utilizing approximately 90% of the available office space as of the date of this annual report, with the remaining 10% being available to accommodate any expansion of Lincolnway Energy's staff.  The office building also includes grain receiving facilities.

Lincolnway Energy's ethanol plant and related facilities include the following material buildings and related fixtures and equipment:

· process building containing lab, offices and control room;

· maintenance building containing offices, storage and a welding shop;

· administration building containing furniture and fixtures, office equipment, computers, telephone system, board room and grain receiving; and

· rail spur, paved access roads, dryers, evaporators, fermenters, grain bins and storage facilities for ethanol and distiller's grains.

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Lincolnway Energy's ethanol plant has a nameplate capacity of 50,000,000 gallons of ethanol per year, and at that capacity will generate approximately 136,000 tons of distiller's grains per year.  The ethanol plant became operational in May 2006, and the first full month of production at full capacity was July of 2006.  Lincolnway Energy has attempted to operate the plant at full capacity since that time, subject to normal shutdown and other maintenance related days and matters.

Lincolnway Energy also owns approximately 112 acres of real estate which is adjacent to the 160 acre parcel noted above.  Lincolnway Energy purchased this real estate primarily for possible use in the construction of additional railroad spur tracks, but the real estate could also be used as part of any future expansion of Lincolnway Energy's business.  Except as noted in the following paragraph, Lincolnway Energy does not, however, have any definite plans for the use of the real estate in Lincolnway Energy's ethanol operations, and most of the real estate will likely be custom farmed during 2011.

In October, 2010, Lincolnway Energy entered into an agreement with JB Holland Construction, Inc. to perform the dirt work for the additional rail spur to be added to the existing track.  Lincolnway Energy anticipates signing the agreement for the construction of the rail spur in the spring of 2011.

Lincolnway Energy leases 90 rail cars which are used for transporting distiller's grains.  The lease has a five year term which is scheduled to expire on March 25, 2011.  Lincolnway Energy also leases 130 tank rail cars that are used for transporting ethanol.  The scheduled term of leases goes to February 2011 for 30 cars and September 2016 for 100 cars.

Lincolnway Energy also leases various miscellaneous office equipment and equipment utilized in the operation of the ethanol plant.

Item 3. Legal Proceedings.

Except as noted in the following paragraph, as of the date of this annual report, Lincolnway Energy was not aware of any material pending legal proceeding to which Lincolnway Energy was a party or of which any of Lincolnway Energy's property was the subject, other than ordinary routine litigation, if any, that was incidental to Lincolnway Energy's business. As of the date of this annual report, Lincolnway Energy was not aware that any governmental authority was contemplating any material proceeding against Lincolnway Energy or any of Lincolnway Energy's property.

A Complaint for Patent Infringement was filed against Lincolnway Energy and certain other parties on May 3, 2010 by GS CleanTech Corporation, a wholly owned subsidiary of Green Shift Corporation.  The Complaint was filed in the United States District Court for the Northern District of Iowa, Western Division, as Case No. 5:10-cv-04036.  The Complaint alleges, in general, that the corn oil extraction equipment and related processes used by Lincolnway Energy and the other parties infringes upon one or more of the claims under certain patents held by GS CleanTech Corporation.  The Complaint seeks injunctive relief, an award of damages with interest, and any other remedies available under certain patent statutes or otherwise under law.  The Complaint claims damages of at least a reasonable royalty rate and lost profits.  The Complaint also alleges that the alleged infringing conduct by Lincolnway Energy is willful, resulting in the right to recover treble damages and attorney fees pursuant to 35 U.S.C. §284.  The case has been transferred to the United States District Court for the Southern District of Indiana pursuant to Multi-District Litigation proceedings.  No initial disclosures have yet been exchanged and no discovery has yet been completed.  Lincolnway Energy is therefore unable to determine at this time if the Complaint will have a material adverse effect on Lincolnway Energy.

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PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Lincolnway Energy is authorized to issue an unlimited number of units, but member approval is required in order to issue more than 45,608 units.  Lincolnway Energy had 42,049 outstanding units as of November 30, 2010, which were held of record by 977 different members.  The determination of the number of members is based upon the number of record holders of the units as reflected in Lincolnway Energy's internal unit records.

Lincolnway Energy did not issue any units during the fiscal year ended September 30, 2010.

Lincolnway Energy's units are not listed on any exchange, and there is no public trading market for Lincolnway Energy's units.  An investment in Lincolnway Energy's units is not a liquid investment because the second amended and restated operating agreement of Lincolnway Energy establishes various conditions on the issuance of additional units and various restrictions on the sale, assignment or other transfer of units.

The second amended and restated operating agreement of Lincolnway Energy provides that the board of Lincolnway Energy may not issue any units for a consideration or value of less than $500 per unit or issue more than an aggregate of 45,608 units, without the vote of the members, except that the directors of Lincolnway Energy may effectuate a split of the outstanding units into a lesser or greater number of units, based upon a uniform multiple, without the vote of the members.  In that event, the $500 amount and the 45,608 amount shall also be increased or decreased in accordance with the multiple that was utilized in the split of the units.  The second amended and restated operating agreement also provides that Lincolnway Energy may not issue any units to any director or officer of Lincolnway Energy in their capacity as such, without the vote of the members.  The necessary vote in any of the circumstances described in this paragraph is the vote of the members holding at least a majority of the outstanding units represented at a meeting at which a quorum of the members is present.  The members holding at least 25% of the outstanding units constitute a quorum at any meeting of the members.

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The second amended and restated operating agreement of Lincolnway Energy also provides that no member shall, directly or indirectly, own, hold or control more than 49% of the outstanding units at any time, unless the member exceeds that percentage by reason of Lincolnway Energy purchasing units.  The second amended and restated operating agreement provides that for this purpose a member will be deemed to indirectly own, hold and control all units which are owned by the member's spouse or any of the member's parents or minor children and by any entity of which any one or more of the member or any of those relatives owns at least 10% of the outstanding voting equity of the entity.

The second amended and restated operating agreement of Lincolnway Energy also establishes restrictions on the sale, assignment or other transfer of units.

The second amended and restated operating agreement provides that a member may not sell, transfer, assign or otherwise dispose of or convey any units, whether voluntarily or involuntarily, or grant a security interest in any units, except in compliance with the second amended and restated operating agreement and also only with the prior written approval of the board of Lincolnway Energy and in compliance and accordance with the policies and procedures as may be adopted from time to time by the board.  The board is authorized to adopt and implement those policies and procedures for any reasonable purpose, as determined by the board.  A reasonable purpose includes prohibiting, restricting, limiting, delaying or placing conditions on any assignment of units which, alone or together with any other past or anticipated assignments, would or might reasonably be determined to:

· Violate or cause Lincolnway Energy to violate or to otherwise be in noncompliance with any law, rule, regulation or order, including any securities law, rule, regulation or order;

· Cause Lincolnway Energy to be taxed as a corporation for tax purposes, including by reason of Section 7704 of the Internal Revenue Code of 1986;

· Result in the termination of Lincolnway Energy or Lincolnway Energy's tax year for tax purposes, including under Section 708 of the Internal Revenue Code of 1986, or cause the application to Lincolnway Energy of Sections 168(g)(1)(B) or 168(h) of the Internal Revenue Code of 1986 or similar or analogous rules;

· Violate any term or condition of the second amended and restated operating agreement, including the 49% ownership limitation noted above;

· Violate or cause Lincolnway Energy to violate or to otherwise be in noncompliance with any law, rule, regulation or order applicable to Lincolnway Energy's selection or use of its then current fiscal year, including Section 444 of the Internal Revenue Code of 1986;

· Require Lincolnway Energy to become licensed, registered or regulated as an investment company, a broker-dealer or any other form of regulated entity under any law, rule, regulation or order; or

· Create or result in any fractional units.

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The policies and procedures adopted by the board regarding the assignment of units are referred to as the unit assignment policy.  Lincolnway Energy's current unit assignment policy mirrors the terms of the second amended and restated operating agreement and provides that all assignments require the prior approval of the board, and that the board may prohibit, restrict, limit, delay or place conditions on any assignment which might have any of the effects described in the preceding subparagraphs.  Several of those potential effects could be applicable to Lincolnway Energy at any given time.

One example that will be applicable to Lincolnway Energy on an ongoing basis arises from the fact that Lincolnway Energy is taxable as a partnership for income tax purposes.  There are various statutes and regulations that Lincolnway Energy must comply with in order to maintain that tax classification.  One applicable statute and related regulation is Section 7704 of the Internal Revenue Code of 1986 and Section 1.7704-1 of the Treasury Regulations.  Section 7704 provides, in general, that a partnership which becomes a publicly traded partnership under Section 7704 will be taxed as a corporation.  Section 7704 provides that a publicly traded partnership is a partnership whose interests either are traded on an established securities market or are readily tradable on a secondary market or the substantial equivalent.  Section 1.7704-1 sets forth some rules for making a determination of whether a partnership is readily tradable on a secondary market or the substantial equivalent for that purpose, and establishes some specified processes and procedures as "safe harbors" under the publicly traded partnership rules.  The safe harbors include a limited matching service and a limited repurchase option.

The general rule under the publicly traded partnership rules is that no more than 2% of a partnership's outstanding units may be transferred during any taxable year, unless the partnership has established one of the safe harbors that are available under the publicly traded partnership rules.  As noted above, the safe harbors include a limited matching service and a limited repurchase option.  If one or both of those processes have been established, a partnership may permit the transfer of up to an aggregate of 10% of the partnership's outstanding units during any taxable year, so long as no more than 2% of the transfers occur outside of the matching service or the repurchase option and all of the other transfers are made in accordance with the terms of the matching service or the repurchase option.

Lincolnway Energy has established a qualified matching service on Lincolnway Energy's website, and the second amended and restated operating agreement of Lincolnway Energy includes a repurchase provision which complies with the safe harbor for a repurchase option under the publicly traded partnership rules.  There are numerous conditions and requirements in both the qualified matching service and the repurchase option, so neither provides any significant liquidity for Lincolnway Energy's units.  Also, Lincolnway Energy has no obligation to purchase any units under the repurchase provisions in the second amended and restated operating agreement.

Lincolnway Energy has not made any repurchases of its units pursuant to the repurchase provisions set forth in the second amended and restated operating agreement.

There have been some sales of units pursuant to Lincolnway Energy's qualified matching service.  The purchase price and other terms of any transactions pursuant to Lincolnway Energy's qualified matching service are negotiated and established solely by the seller and the buyer.  Lincolnway Energy does not endorse or recommend any sale of units and is not responsible for the fairness of the purchase price paid in any transactions made pursuant to the qualified matching service, or for the payment or other terms of any transaction.  Lincolnway Energy therefore does not represent or guarantee in any way that any of the prices paid pursuant to the qualified matching service are fair or accurately reflect the value of Lincolnway Energy's units, and Lincolnway Energy does not endorse or recommend any sales of units at any of the prices listed by a member in the qualified matching service or on the same or similar terms.

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The publicly traded partnership rules exclude some types of transfers from the 2% and 10% limitations.  As an example, a gift of units by a member to certain family members of the member is not counted towards the 2% and 10% limitations.

Another example of a transfer limitation that currently will be applicable to Lincolnway Energy on an ongoing basis arises from the fact that Lincolnway Energy has elected to utilize a September 30 fiscal year end.  Given that fact, no more than 5% of Lincolnway Energy's units can be owned by pass-through type entities, such as Subchapter S corporations, limited liability companies or partnerships.  At the time of the preparation of this annual report, Lincolnway Energy was at the 5% maximum amount, so no transfers of any units to a pass-through type entity were permitted.

The second amended and restated operating agreement and the unit assignment policy both contemplate that a member desiring to assign any units must present Lincolnway Energy with a unit assignment application and any other information requested by the board.  The board is not required to act on a unit assignment application until the next regularly scheduled meeting of the board which follows the date on which Lincolnway Energy receives the completed and executed unit assignment application.

An assignment of a unit which is approved by the board will be effective for all purposes, including for purposes of allocations and distributions, only as of the date determined by the board, but the date must be within 32 days of the date of the approval of the assignment by the board.  Lincolnway Energy believes that approach is necessary in order to provide a uniform effective date for assignments of units.

The unit assignment policy also provides that Lincolnway Energy may require the assigning member or the assignee to provide a legal opinion to Lincolnway Energy regarding the assignment, and that Lincolnway Energy may require that Lincolnway Energy be paid or reimbursed for all of its fees, costs and expenses incurred in connection with any assignment, including legal and accounting fees.

As of the date of this annual report, Lincolnway Energy did not have any equity compensation plans (including any individual equity compensation arrangements) in place for any directors, officers, employees or other persons.

As of the date of this annual report, Lincolnway Energy had no plans to, and had not agreed to register any of its units under any federal or state securities laws.

There were no outstanding warrants, options or other rights to purchase any units of Lincolnway Energy as of the date of this annual report, and there were no outstanding securities which were convertible or exchangeable into or for any units of Lincolnway Energy.  Lincolnway Energy's units are not convertible into any other securities.

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The payment of distributions to members by Lincolnway Energy is within the discretion of the board of Lincolnway Energy, and there is no assurance of any distributions from Lincolnway Energy.  The payment of distributions is also subject to Lincolnway Energy's compliance with the various covenants and requirements of Lincolnway Energy's credit and loan agreements, and it is possible that those covenants and requirements will at times prevent Lincolnway Energy from paying a distribution to its members.

Lincolnway Energy has declared five distributions since Lincolnway Energy was organized in May 2004.  The first distribution was declared in November 2006 and was in the amount of $150 per unit, resulting in an aggregate distribution of $6,428,850.  The second distribution was declared in May 2007, and was in the amount of $200 per unit, resulting in an aggregate distribution of $8,409,800.  The third distribution was declared in November 2007, and was in the amount of $125 per unit, resulting in an aggregate distribution of $5,256,125.  The fourth distribution was declared in May 2008, and was in the amount of $75 per unit, resulting in an aggregate distribution of $3,153,675.  The fifth distribution was declared in February 2010, and was in the amount of $50 per unit, resulting in an aggregate distribution of $2,102,450.

Lincolnway Energy does not contemplate being able to establish a definite or regular distribution policy or history because the determination of whether a distribution can or should be made by Lincolnway Energy will need to be made by the board of Lincolnway Energy based upon the then existing facts and circumstances of Lincolnway Energy, which could change materially from time to time.  For example, although a distribution was declared in November of both 2006 and 2007 and in May of both 2007 and 2008, the board of Lincolnway Energy determined that no distribution should be made by Lincolnway Energy during November 2008, May 2009 or in November 2009, given the generally unfavorable economic outlook and the prevailing conditions in the ethanol industry.  As noted above, Lincolnway Energy did declare a distribution in February of 2010, but it was at a lower per unit amount than the prior distributions by Lincolnway Energy.  Although no firm decision has been made, it is possible that no, or perhaps reduced, distributions will be declared and paid by Lincolnway Energy during the fiscal year ending September 30, 2011.

None of Lincolnway Energy's units were purchased by or on behalf of Lincolnway Energy or any affiliated purchaser (as defined in Rule 10b-18(a)(3) of the Securities Exchange Act of 1934) of Lincolnway Energy during the period of July 1, 2010 to September 30, 2010.  As of the date of this annual report, Lincolnway Energy did not have any publicly announced plans or programs with respect to purchases of its units.

Item 6. Selected Financial Data.

The following information is summary selected financial data for Lincolnway Energy for the fiscal years ended September 30, 2010, 2009, 2008, 2007 and 2006 with respect to the statements of operations data, and as of September 30, 2010, 2009, 2008, 2007 and 2006 with respect to the balance sheet data.  The data is qualified by, and must be read in conjunction with, Item 1A of this annual report, "Risk Factors", Item 7 of this annual report, "Management's Discussion and Analysis of Financial Condition and Results of Operations", and with the financial statements and supplementary data included in Item 8 of this annual report.

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Statements of Operations Data:	2010			2009			2008			2007			2006
Revenues	$	114,373,268		$	110,223,531		$	147,040,911		$	118,783,540		$	44,883,457
Cost of goods sold		106,744,081			113,576,938			138,309,541			94,233,456			25,886,144
Gross profit(loss)		7,629,187			(3,353,407	)		8,731,370			24,550,084			18,997,313
General and administrative expense		2,440,390			2,366,638			2,647,368			2,903,436			2,082,597
Operating income (loss)		5,188,797			(5,720,045	)		6,084,002			21,646,648			16,914,716
Interest expense		(851,358	)		(860,303	)		(1,430,469	)		(2,228,179	)		(1,281,287	)
Other income-interest and grant		25,019			165,007			181,895			536,897			274,292
Net income (loss)	$	4,362,458		$	(6,415,341	)	$	4,835,428		$	19,955,366		$	15,907,721
Weighted average units outstanding		42,049			42,049			42,049			42,519			42,293
Net income (loss) per unit - basic and diluted	$	103.75		$	(152.57	)	$	115.00		$	469.33		$	376.13
Cash distributions per unit	$	50.00		$	-		$	200.00		$	350.00		$	-

	2010		2009		2008		2007		2006
Working Capital	$	11,493,635	$	6,670,560	$	10,216,873 $		11,845,308	$	6,548,336
Net Property Plant & Equipment	$	49,821,446	$	57,293,563		65,010,487		71,617,762		78,170,697
Total Assets	$	65,898,900	$	71,092,101		90,516,722		88,820,957		93,027,237
Long-Term Obligations	$	9,859,711	$	14,938,584		19,998,369		24,743,372		29,548,706
Members' Equity	$	52,239,260	$	49,979,252		56,394,593		59,968,965		55,662,249
Book Value per Member Unit	$	1,242	$	1,189		1,341		1,426		1,299

Lincolnway Energy's ethanol plant became operational during May 2006.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Except for the historical information, the following discussion contains forward-looking statements that are subject to risks and uncertainties, and which speak only as of the date of this annual report.  No one should place strong or undue reliance on any forward looking statements.  Lincolnway Energy's actual results or actions may differ materially from these forward-looking statements for many reasons, including the risks described in Item 1A and elsewhere in this annual report.  This Item should be read in conjunction with the financial statements and related notes and with the understanding that Lincolnway Energy's actual future results may be materially different from what is currently expected or projected by Lincolnway Energy.

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Overview

Lincolnway Energy is an Iowa limited liability company that was formed on May 19, 2004 for the purpose of constructing and operating a dry mill, coal fired ethanol plant. Lincolnway Energy has been engaged in the production of ethanol and distillers grains since May 22, 2006, and the plant became fully operational on June 22, 2006.  The ethanol plant produced 55,233,754 gallons of ethanol during the fiscal year ended September 30, 2010.  Lincolnway Energy had a planned shut down during the months of October 2009 and May 2010 to complete routine maintenance work.

Lincolnway Energy's revenues for the fiscal year ended September 30, 2010 were derived from the sale of Lincolnway Energy's ethanol to Green Plains Trading Group, LLC. (GPTG), the sale of its distiller's grains to Hawkeye Gold, LLC, the sale of its corn oil to FEC Solutions, LLC (FECS), and the sale of its carbon dioxide (C02) to EPCO Carbon Dioxide Products, Inc.

Lincolnway Energy's ethanol was sold pursuant to an ethanol marketing agreement between Lincolnway Energy and GPTG. This agreement became effective on October 1, 2009.  Prior to that Lincolnway Energy had a marketing agreement with RPMG.  The purchase price payable to Lincolnway Energy is GPTG’s contract selling price for the ethanol in question, less various costs and a fee to GPTG.  The ethanol marketing agreement includes a minimum purchase price.  Title and all risk of loss and damage to all ethanol commences at the time the ethanol passes across the inlet flange into the rail cars or tank cars of the GPTG carrier at the Lincolnway Energy plant.

Lincolnway Energy's output of distiller's grains is sold to Hawkeye Gold, LLC under a Distiller's Grains Marketing Agreement that became effective on October 1, 2007.  Lincolnway Energy pays Hawkeye Gold, LLC a marketing fee for dried distiller's grains equal to the greater of 2% of the FOB plant price for the dried distiller's grains in question or a per-ton fee of $1.30 for the dried distiller's grains.  The marketing fee for wet distiller's grains is the greater of 3% of the FOB plant price for the wet distiller's grains in question or a per-ton fee of $1.00 for the wet distiller's grains.  The Distiller's Grains Marketing Agreement can be terminated by Lincolnway Energy or Hawkeye Gold, LLC on 90 days written notice.

Lincolnway Energy purchased a corn extraction oil system from FECS, which was put into operation in April, 2008.  The system extracts corn oil from the syrup which is generated in the production of ethanol.  Lincolnway Energy produced corn oil on a trial basis from April, 2008 until approximately September, 2008, and FECS purchased all of the corn oil produced by Lincolnway Energy during that time period.  Lincolnway Energy entered into an agreement with FECS on October 13, 2008 under which FECS purchases all of Lincolnway Energy's output of corn oil for resale by FECS.  Lincolnway Energy pays FECS a marketing and technical assistance fee of 5% of the FOB sales price of the corn oil.  The agreement has an initial term of 36 months, commencing from October 13, 2008, and can renew for successive 36 month terms unless Lincolnway Energy or FECS elects to terminate the agreement at the end of the then current 36 month term.

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Lincolnway Energy entered into agreements on April 16, 2010 with EPCO Carbon Dioxide Products, Inc. pursuant to which EPCO will construct a plant on Lincolnway Energy’s site to collect the carbon dioxide which is produced as part of the ethanol process, convert that raw carbon dioxide into liquid carbon dioxide gas, and market the liquid carbon dioxide.  The EPCO plant became fully operational in August 2010.  Lincolnway Energy entered into a site lease agreement with EPCO and shall continue until the agreement is terminated by either party due to breach or nonfulfillment.  Lincolnway Energy also entered into a purchase and sale agreement with EPCO.  The purchase price payable to Lincolnway Energy for the C02 gas provided shall be a price per ton based off of EPCO’s shipped tons.  EPCO has agreed to a take or pay obligation for each contract year the greater of 180 shipped tons per day or 70% of the annual liquid CO2 liquid production capacity of the EPCO plant at full capacity.

Air Quality Permit Application

Lincolnway Energy submitted an application for a 250 ton per year air quality permit to the Iowa Department of Natural Resources (IDNR) on August 28, 2008. The IDNR is currently in the process of reviewing the application. The review process is very thorough and often times can take in excess of a year.

Lincolnway Energy believes that its current levels of emissions will comply with the conditions that need to be met in order to comply with the new permit conditions.  Due to the progress made by the IDNR on the new permit and the modeling required, the IDNR has issued a variance to Lincolnway Energy’s present operating permit to allow Lincolnway Energy to operate at the higher production level requested in the new permit.   Once the new permit is issued, Lincolnway Energy may be subject to higher ongoing compliance testing and operating costs under the new air quality permit.

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Comparison of Fiscal Years Ended September 30, 2010 and 2009

Statements of Operations Data:	2010						2009
	Amount			%			Amount			%
Revenues	$	114,373,268			100.0		$	110,223,531			100.0
Cost of goods sold		106,744,081			93.3			113,576,938			103.0
Gross profit(loss)		7,629,187			6.7			(3,353,407	)		(3.0	)
General and administrative expense		2,440,390			2.1			2,366,638			2.1
Operating income(loss)		5,188,797			4.6			(5,720,045	)		(5.1	)
Interest expense		(851,358	)		(0.7	)		(860,303	)		(0.8	)
Other income-interest		25,019			-			165,007			0.1
Net income(loss)	$	4,362,458			3.9		$	(6,415,341	)		(5.8	)

Revenues from operations for the fiscal year ended September 30, 2010 were approximately $114.4 million, consisting of $93.2 million of ethanol sales (net of hedging activity) (81%), $19.4 million in distiller's grains sales (17%) and $1.7 million of corn oil, syrup and CO2 sales (2%).  Revenues increased in fiscal year 2010 by approximately 4%, when compared to the fiscal year 2009. Lincolnway Energy sold approximately 55.1 million gallons of ethanol at an average gross price of $1.72 per gallon, 129,958 tons of dried distillers grains at an average gross price of $145.38 per ton, and 19,892 tons of wet distillers grains at an average gross price of $27.19 per ton during the fiscal year ended September 30, 2010.  Lincolnway Energy also sold approximately 2,913 tons of corn oil at an average gross price of $508.00 per ton during the 2010 fiscal year.  The increase in revenues for the fiscal year ended September 30, 2010 resulted from a 4.4% increase in ethanol sales volume and a 3.0% increase in price for ethanol as compared to the previous fiscal year. The increase in sales volume is due to a maintenance shutdown that lasted longer than expected in the previous fiscal year and also plant improvements that were made in fiscal year ended September 30, 2010 that increased the production rate throughout the fiscal year.  The revenues for the year ended September 30, 2010 include a combined unrealized and realized net loss on derivative ethanol contracts of $1.4 million compared to a $10,440 gain for the year ended September 30, 2009.

Management believes that the ethanol industry has reacted to the oversupply by curtailing production and this has allowed for the price of ethanol to begin to recover for Lincolnway Energy’s fiscal year 2010.  However, much of this idled capacity could come back into production within the first calendar quarter of 2011, which could negatively impact ethanol prices. Management believes that the ethanol industry must continue to grow demand in order to increase or sustain current ethanol prices. See additional market information below in the Risks, Trends and Factors that May Affect Future Operating Results section of this Item.

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The average price Lincolnway Energy received for its dried distiller's grains decreased to $145.38 per ton in fiscal year 2010, from $154.74 per ton in fiscal year 2009.    Management believes the decrease in the price for distiller's grains is a result of the decrease in the price of corn because decreased corn prices affects the price of distiller's grains because animal feeding operations substitute distiller's grains as animal feed in place of corn.  Management expects that distiller's grains prices could decrease slightly in the foreseeable future as the supply of distiller's grains increases as a result of increased ethanol production.

Lincolnway Energy anticipates that its results of operations for the remainder of calendar year 2010 and for 2011 will continue to be affected by a surplus of ethanol and volatility in the commodity markets.

Lincolnway Energy's cost of goods sold for the fiscal year ended September 30, 2010 totaled approximately $106.7 million, which was a decrease of 6% when compared to fiscal year 2009.  The decrease in cost of goods sold for the 2010 fiscal year is primarily due to a 3% decrease in the average cost of corn per bushel for fiscal year 2010.   Cost of goods sold major components are: corn costs, energy costs, ingredient costs, production labor, repairs and maintenance, process depreciation, and ethanol and distiller's grain freight expense and marketing fees.

Corn costs excluding hedging activity for the fiscal year ended September 30, 2010 totaled approximately $70.4 million, compared to $70.4 million for fiscal year 2009. Approximately 19.7 million bushels of corn was ground during fiscal year 2010 at an average cost of $3.59 per bushel, compared to 18.8 million bushels at an average cost of $3.70 for fiscal year 2009. The increase in bushels ground was due to an increase in production during fiscal year 2010. Corn hedging activity includes a combined unrealized and realized net gain of $1.5 million from derivative instruments compared to a $3.9 million combined unrealized and realized net loss for fiscal year 2009.  Corn costs, including the combined unrealized and realized net loss from derivative instruments, represented 64.9% of cost of goods sold for the fiscal year ended September 30, 2010, compared to 64.6% of costs of goods sold for fiscal year 2009.

Lincolnway Energy anticipates continued volatility in Lincolnway Energy's corn costs due to the timing of the change in value of the derivative instruments relative to the cost and use of the corn being hedged.

Energy costs for the fiscal year ended September 30, 2010 totaled approximately $8.8 million or 8% of cost of goods sold, compared to $8.1 million, or 7% of cost of goods sold, for the 2009 fiscal year.  Energy costs consist of coal costs, electricity and propane costs.  For the fiscal year ended September 30, 2010, Lincolnway Energy purchased approximately 98,500 tons of coal at an approximate total cost of $6.0 million compared to approximately 95,000 tons at an approximate cost of $5.6 million for fiscal year 2009. Electricity and propane costs amounted to approximately $2.6 million, an increase of $.3 million from fiscal year 2009 and approximately $.3 million of sodium bicarbonate, sand and lime cost for fiscal year 2010 that is added to the combustor with the coal. The increase in energy cost is due to a price increase for coal and electricity and the increase in production gallons for the fiscal year 2010.

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Ingredient costs for the fiscal year ended September 30, 2010 totaled approximately $5.0 million or 5% of cost of goods sold, compared to $5.3 million, or 5% of cost of goods sold, for the 2009 fiscal year.  Ingredient costs consist of denaturant, enzymes and process chemicals. Denaturant costs (natural gasoline) increased $.5 million for the fiscal year ended September 30, 2010 compared to fiscal year 2009.  Denaturant cost have increased significantly from an average cost per gallon of $1.38 for the 2009 period, compared to $1.87 for the 2010 period. The increase was offset by a decrease in process chemical costs of $.8 million for the 2010 period. The decrease is a result of chemical improvements that required less usage of process chemicals and also the price of a few process chemicals were lower for the fiscal year 2010 compared to fiscal year 2009.

Production labor, repairs and maintenance and other plant costs totaled approximately $5.3 million, or 4.9% of cost of goods sold, for the fiscal year ended September 30, 2010, compared to $4.8 million, or 4.2% of cost of goods sold, for fiscal year 2009. The increase in cost is due to increased labor costs and higher repair and maintenance and plant cost due to increased production and the wear and tear on the plant.

Depreciation totaled approximately $7.6 million, or 7% of cost of goods sold, for the fiscal year ended September 30, 2010, compared to $7.7 million, or 7% of cost of goods sold, for fiscal year 2009.

Ethanol, distiller's grain and corn oil freight expense and marketing fees totaled approximately $10.4 million, or 9.8% of cost of goods sold, during the fiscal year ended September 30, 2010, compared to $13.8 million, or 12% of cost of goods sold, for fiscal year 2009.  The decrease is in part due to changing ethanol marketers in the 2010 fiscal year.  The current ethanol marketer prices a majority of the ethanol contracts at an FOB price to Nevada, Iowa.  The freight is built into the price of ethanol rather than broken out as a separate cost.  The prior ethanol marketer sold a large percentage of ethanol on a delivered basis and the freight cost was separate.

General and administrative expenses totaled approximately $2.4 million during the fiscal year ended September 30, 2010, compared to $2.4 million for fiscal year 2009.

Other income and expense totaled approximately $.8 million net expense during the fiscal year ended September 30, 2010, compared to $.7 million net expense for fiscal year 2009. The increase in net expense is due to a decrease in other income for the 2010 fiscal year.

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Comparison of Fiscal Years Ended September 30, 2009 and 2008

Statements of Operations Data:	2009						2008
	Amount			%			Amount			%
Revenues	$	110,223,531			100.0		$	147,040,911			100.0
Cost of goods sold		113,576,938			103.0			138,309,541			94.1
Gross profit(loss)		(3,353,407	)		(3.0	)		8,731,370			5.9
General and administrative expense		2,366,638			2.1			2,647,368			1.8
Operating income(loss)		(5,720,045	)		(5.1	)		6,084,002			4.1
Interest expense		(860,303	)		(0.8	)		(1,430,469	)		(0.9	)
Other income-interest and grant		165,007			0.1			181,895			0.1
Net income(loss)	$	(6,415,341	)		(5.8	)	$	4,835,428			3.3

Revenues from operations for the fiscal year ended September 30, 2009 were approximately $110.0 million, consisting of $88.2 million of ethanol sales (80%), $20.7 million in distiller's grains sales (19%) and $1.2 million of corn oil sales (1%).  Revenues decreased in fiscal year 2009 by approximately 25%, when compared to the fiscal year 2008. Lincolnway Energy sold approximately 52.8 million gallons of ethanol at an average gross price of $1.67 per gallon, 128,771 tons of dried distillers grains at an average gross price of $155.00 per ton, and 17,279 tons of wet distillers grains at an average gross price of $47.00 per ton during the fiscal year ended September 30, 2009.  Lincolnway Energy also sold approximately 3,139 tons of corn oil at an average gross price of $387.00 per ton during the 2009 fiscal year.  The decrease in revenues for the fiscal year ended September 30, 2009 resulted from a 2.8% decrease in sales volume and a 26% decrease in price for ethanol, and a 2% decrease in the sales volume and a 15.3% decrease in sales price for  dried distiller's grains, all as compared to the previous fiscal year. The decrease in sales volume is due to a maintenance shutdown that lasted longer than expected, in May 2009.  When the plant was shut down in May 2009, a thorough inspection revealed that the combustion chamber of the boiler required extensive repair work to the cement refractory surface inside the combustor.  Because the combustor repair work required the plant to be shut down for longer than planned, maintenance was able to complete additional unplanned repairs.  The revenues for the year ended September 30, 2009 include a combined unrealized and realized net gain on derivative ethanol contracts of $10,440, compared to a $2.2 million loss for the year ended September 30, 2008.

Management believed that the decrease in the price of ethanol was due to surplus supply of ethanol in fiscal year 2009. The ethanol industry has reacted to the oversupply by curtailing production and this has allowed for the price of ethanol to begin to recover near the end of Lincolnway Energy’s fiscal year 2009.

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The average price Lincolnway Energy received for its dried distiller's grains decreased to $155.00 per ton in fiscal year 2009, from $183.00 per ton in fiscal year 2008.    Management believes the decrease in the price for distiller's grains is a result of the decrease in the price of corn because decreased corn prices affects the price of distiller's grains because animal feeding operations substitute distiller's grains as animal feed in place of corn.  Management expects that distiller's grains prices could decrease slightly in the foreseeable future as the supply of distiller's grains increases as a result of increased ethanol production.

Lincolnway Energy's cost of goods sold for the fiscal year ended September 30, 2009 totaled approximately $113.6 million, which was a decrease of 18% when compared to fiscal year 2008.  The decrease in cost of goods sold for the 2009 fiscal year is primarily due to a 3% decrease in ethanol production and a 26% decrease in the average cost of corn per bushel for fiscal year 2009.   Cost of goods sold major components are: corn costs, energy costs, ingredient costs, production labor, repairs and maintenance, process depreciation, and ethanol and distiller's grain freight expense and marketing fees.  Cost of goods sold for fiscal year 2009 also includes a combined unrealized and realized net loss of $3.9 million from derivative instruments, which is recognized in corn costs, compared to a $3.4 million combined unrealized and realized net gain for fiscal year 2008.

Corn costs for the fiscal year ended September 30, 2009 totaled approximately $70.4 million, compared to $98.0 million for fiscal year 2008. Approximately 18.8 million bushels of corn was ground during fiscal year 2009 at an average cost of $3.70 per bushel, compared to 19.5 million bushels at an average cost of $4.99 for fiscal year 2008. The decrease in bushels ground was due to a decrease in production during fiscal year 2009.  Corn costs, including the combined unrealized and realized net loss from derivative instruments, represented 64.6% of cost of goods sold for the fiscal year ended September 30, 2009, compared to 69.4% of costs of goods sold for fiscal year 2008.

Lincolnway Energy enters into future purchase contracts for corn and these contracts are evaluated for potential losses.  As of September 30, 2008, Lincolnway Energy had various corn fixed and basis contracts for approximately 3,564,000 bushels.  Due to rapidly falling corn prices, at September 30, 2008, Lincolnway Energy recorded a loss  of approximately $.72 on 1,413,571 bushels of fixed price contracts and $.06 on 2,150,000 bushels of basis contracts, totaling approximately a $1.1 million unrealized loss.  As of September 30, 2009, there were no losses to record as the outstanding contracts were at or below market.

Energy costs for the fiscal year ended September 30, 2009 totaled approximately $8.1 million or 7% of cost of goods sold, compared to $8.2 million, or 6% of cost of goods sold, for the 2008 fiscal year.  Energy costs consist of coal costs, electricity and propane costs.  For the fiscal year ended September 30, 2009, Lincolnway Energy purchased approximately 95,000 tons of coal at an approximate total cost of $5.6 million.  Electricity and propane costs amounted to approximately $2.3 million and $.2 million of sand and lime cost to add to the combustor with the coal.

Ingredient costs for the fiscal year ended September 30, 2009 totaled approximately $5.3 million or 5% of cost of goods sold, compared to $6.8 million, or 5% of cost of goods sold, for the 2008 fiscal year.  Ingredient costs were lower for the fiscal year 2009 due to a decrease in ethanol production from the previous fiscal year.   Ingredient costs consist of denaturant, enzymes and process chemicals.

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Production labor, repairs and maintenance and other plant costs totaled approximately $4.8 million, or 4.2% of cost of goods sold, for the fiscal year ended September 30, 2009, compared to $5.3 million, or 3.8% of cost of goods sold, for fiscal year 2008.

Depreciation totaled approximately $7.7 million, or 7% of cost of goods sold, for the fiscal year ended September 30, 2009, compared to $7.4 million, or 5% of cost of goods sold, for fiscal year 2008.

Ethanol and distiller's grain freight expense and marketing fees totaled approximately $13.8 million, or 12% of cost of goods sold, during the fiscal year ended September 30, 2009, compared to $14.2 million, or 10% of cost of goods sold, for fiscal year 2008.  A decrease in sales for the 2009 fiscal year drove these costs down for the 2009 fiscal year.

General and administrative expenses totaled approximately $2.4 million during the fiscal year ended September 30, 2009, compared to $2.6 million for fiscal year 2008. The decrease of $.2 million is due to a reduction of professional fees and business promotions.

Other income and expense totaled approximately $.7 million net expense during the fiscal year ended September 30, 2009, compared to $1.2 million net expense for fiscal year 2008. The decrease in net expense is due to a decrease in interest expense for the fiscal year ended September 30, 2009. Long-term debt and interest rates decreased for fiscal year 2009 compared to fiscal year 2008.

Risks, Trends and Factors that May Affect Future Operating Results

The operations and profitability of Lincolnway Energy are highly dependent on the prices of the key commodities utilized and sold as part of the production process.  These include corn, ethanol, and distillers’ grain co-products.  Since the correlation of prices between these commodities is not always perfectly correlated, and is often very volatile, Lincolnway Energy is at risk of diminishing returns in periods of rising corn prices and decreasing ethanol prices.  The prices of these commodities is determined by a variety of factors, including growing season weather, governmental policies, political change, international trade, and macroeconomic trends.  Lincolnway Energy attempts to mitigate or hedge some of these risks through the use of various pricing mechanisms including cash contracts, futures contracts, options on futures, and derivative instruments.

Corn

Corn values were relatively stable through most of the 2010 fiscal year, with cash corn in Lincolnway Energy’s geography generally worth $3.10 to $4.00 per bushel through most of the production year.  However, in July 2010 the supply and demand balance sheet began to appear tighter than was previously expected in the marketplace due to decreasing crop yield expectations in the US, decreasing feed wheat expectations in the Black Sea region, and increasing import potential by China.  The corn balance sheet for the new crop has since reduced expected corn excess supply from 1.5 billion bushels to 827 million bushels, the lowest excess supply number in recent history.  As such, corn values have increased by over $2.00 per bushel and returned to an increasingly volatile atmosphere.

45

Ethanol

Ethanol demand and production continue to incrementally increase in accordance with the RFS2 (Renewable Fuels Standard) requirements. Recent installed US ethanol capacity is cited at 14.25 billion gallons per year. Recent annualized production amounts show that the industry as a whole is producing at a rate of approximately 13.3 billion gallons per year. Demand for ethanol is slightly less than recent production rates. Annualized domestic demand has been 12.6 billion gallons and export demand has been 520 million gallons for a total annualized demand of approximately 13.12 billion gallons per year. Ethanol demand is limited recently by overall gasoline demand. With the functional ethanol inclusion rate for non-flex fuel vehicles at 10%, demand has reached 9.2% of the total US gasoline usage pool. This leaves little room for continued growth, assuming flat overall domestic gasoline usage. Recently a waiver to allow blends of E15 on 2007 and newer vehicles was approved by EPA, but faces many logistical, legal, and regulatory hurdles before an affect can be felt on ethanol demand.

Other/Regulatory/Governmental

In addition to RFS2 which included greenhouse gas reduction requirements, in 2009, California passed a Low Carbon Fuels Standard (LCFS). The California LCFS requires that renewable fuels used in California must accomplish certain reductions in greenhouse gases which is measured using a lifecycle analysis, similar to RFS2.  Management believes that this lifecycle analysis is based on unsound scientific principles that unfairly disadvantages corn based ethanol.  Management believes that these new regulations will preclude corn based ethanol from being used in California.  California represents a significant ethanol demand market.  If Lincolnway Energy is unable to supply ethanol to California, it could significantly reduce demand for the ethanol Lincolnway Energy produces.  Several lawsuits have been filed challenging the California LCFS. The California LCFS goes into effect January 1, 2011.

Ethanol production in the United States is benefited by various tax incentives.  The most significant of these tax incentives is the federal Volumetric Ethanol Excise Tax Credit (VEETC).  VEETC provides a volumetric ethanol excise tax credit of 45¢ per gallon of ethanol blended with gasoline.  VEETC is scheduled to expire on December 31, 2010.  On December 17, 2010, a bill was signed to extend the VEETC for one year through 2011.

All the above changes in governmental policy and supply and demand factors are an ongoing risk factor for the ethanol industry and for Lincolnway Energy.

46

Critical Accounting Estimates and Accounting Policies

Lincolnway Energy's financial statements are prepared in conformity with accounting principles generally accepted in the United States of America and follow general practices within the industries in which Lincolnway Energy operates.  This preparation requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes.  These estimates, assumptions and judgments are based on information available as of the date of the financial statements; accordingly, as this information changes, actual results could differ from the estimates, assumptions, and judgments reflected in the financial statements.  Certain policies inherently have a greater reliance on the use of estimates, assumptions, and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported.  Management believes the following policies are both important to the portrayal of Lincolnway Energy's financial condition and results of operations and require subjective or complex judgments; therefore, management considers the following to be critical accounting policies.

Off-Balance Sheet Arrangements

Lincolnway Energy currently does not have any off-balance sheet arrangements.

Revenue Recognition

Revenue from the sale of Lincolnway Energy's ethanol and distiller's grains is recognized at the time title and all risks of ownership transfer to the customers.  This generally occurs upon the loading of the product.  For ethanol, title passes from Lincolnway Energy at the time the product crosses the loading flange in either a railcar or truck. For distiller's grains, title passes upon the loading of distiller's grains into trucks.  For railcar shipments, this takes place when the railcar is filled and the marketer receives written notice that the railcars have been loaded and are available for billing.  Shipping and handling costs incurred by Lincolnway Energy for the sale of ethanol and distiller's grain are included in costs of goods sold.

Lincolnway Energy's ethanol was sold pursuant to an ethanol marketing agreement between Lincolnway Energy and RPMG until approximately September 30, 2009, at which time Lincolnway Energy began selling its ethanol production to Green Plains Trade Group LLC, as is discussed above in the "Overview" section of this Item.  The purchase price payable to Lincolnway Energy under its agreement with Green Plains is Green Plains' contract selling price for the ethanol in question, less various costs and a fee to Green Plains, but the agreement includes a minimum purchase price.

Lincolnway Energy's distiller's grain production is sold to Hawkeye Gold, LLC.  Lincolnway Energy pays Hawkeye Gold, LLC a marketing fee for dried distiller's grains equal to the greater of 2% of the FOB plant price for the dried distiller's grain or a per-ton fee of $1.30 for the dried distiller's grain.  The marketing fee for wet distiller's grains is the greater of 3% of the FOB plant price for the wet distiller's grains or a per-ton fee of $1.00 for the wet distiller's grains.

Lincolnway Energy's corn oil production is sold to FEC Solutions, LLC. For corn oil, title passes upon the loading of the corn oil into the trucks. The purchase price payable by FECS for each shipment of corn oil is the FOB sales price less a marketing and technical assistance fee in an amount equal to 5% of the FOB sales price.

47

Lincolnway Energy's CO2 production is sold to EPCO Carbon Dioxide Products, Inc. For CO2, title passes at the point at which the carbon dioxide pipe from Lincolnway Energy's plant joins the corresponding pipe from the EPCO plant.  The purchase price payable by EPCO for the carbon dioxide provided by Lincolnway Energy during each calendar month is based upon EPCO's shipped tons of liquid carbon dioxide.  Under the agreement, EPCO agrees to purchase, during each contract year, a minimum of the greater of 180 shipped tons per day or 70% of the annual liquid carbon dioxide production capacity of the EPCO plant at full capacity, with that capacity to be determined in accordance with the testing processes set out in the agreement.  The "take or pay" obligation is trued up at the end of each contract year, and the purchase price for any "take or pay" tons will be the average per shipped ton purchase price paid by EPCO during the contract year.  Lincolnway Energy began selling CO2 to EPCO in August 1, 2010.

Derivative Instruments

Lincolnway Energy enters into derivative contracts to hedge its exposure to price risk related to forecasted corn needs, forward corn purchase contracts and ethanol sales.   Lincolnway Energy does not typically enter into derivative instruments other than for hedging purposes.  All the derivative contracts are recognized on the September 30, 2010, 2009 and 2008 balance sheets at fair value.  Although Lincolnway Energy believes Lincolnway Energy's derivative positions are economic hedges, none has been designated as a hedge for accounting purposes.  Accordingly, any realized or unrealized gain or loss related to these derivative instruments is recorded in the statement of operations as a component of cost of goods sold in the case of corn contracts and as a component of revenue in the case of ethanol sales.

The effects on operating income from derivatives is as follows for the years ending September 30, 2010, 2009 and 2008:

	2010			2009			2008
Increase (decrease) in revenue due to derivatives
related to ethanol sales:
Realized	$	45,434		$	10,440		$	(2,174,662	)
Unrealized		(1,483,997	)		-			(28,492	)
Total effect on revenue		(1,438,563	)		10,440			(2,203,154	)
(Increase) decrease in cost of goods sold due to
derivates related to corn costs:
Realized		604,475			(3,783,088	)		6,280,771
Unrealized		849,475			(72,350	)		(2,836,100	)
Total effect on cost of goods sold		1,453,950			(3,855,438	)		3,444,671
Total (decrease) increase to operating income due to derivative activities	$	15,387		$	(3,844,998	)	$	1,241,517

Unrealized gains and losses on forward contracts, in which delivery has not occurred, are deemed "normal purchases and normal sales", and therefore are not marked to market in Lincolnway Energy's financial statements, but are subject to a lower of cost or market assessment.

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Liquidity and Capital Resources

On September 30, 2010, Lincolnway Energy had $2.9 million in cash and equivalents and $10.0 million available under a committed loan agreement.  Lincolnway Energy’s business is highly impacted by commodity prices, including prices for corn, ethanol and distillers grains.  There are times that Lincolnway Energy may operate at negative operating margins.

The following table shows cash flows for the fiscal years ended September 30, 2010 and 2009:

	Year ended September 30,
	2010			2009
Net cash provided by operating activities	$	8,811,200		$	1,695,816
Net cash (used in) investing activities		(847,730	)		(755,053	)
Net cash (used in) financing activities		(10,930,307	)		(3,826,864	)

For the fiscal year ended September 30, 2010, cash provided by operating activities was $8.8 million, compared to cash provided by operating activities of $1.7 million for the fiscal year ended September 30, 2009. The $7.1 million increase is primarily due to an increase in net income for fiscal year 2010 of $10.8 million offset by $3.8 million resulting from a net increase in working capital components for the fiscal year ended September 30, 2010.

Cash flows from investing activities reflect the impact of property and equipment acquired for the ethanol plant.  Net cash used in investing activities increased by $.1 million for the fiscal year ended September 30, 2010, when compared to the fiscal year ended September 30, 2009.  The increase is primarily due to an increase of capital expenditures for the fiscal year 2010.

Cash flows from financing activities include transactions and events whereby cash is obtained or paid back to or from depositors, creditors or investors.  Net cash used in financing activities increased by $7.1 million for the fiscal year ended September 30, 2010, when compared to the fiscal year ended September 30, 2009.  The increase is due to an increase in distribution payments of $2.1 million to the members and an increase of $5.0 million of additional payments made on long-term borrowing compared to the 2009 fiscal year.

Management believes that margins will stay stable for the first quarter in fiscal year 2011, and if demand for ethanol continues to grow and corn prices stay stable, Lincolnway Energy could see improved margins throughout the fiscal year.  Lincolnway Energy anticipates keeping cash balances at a low but acceptable level that will meet covenants.  If Lincolnway Energy should get in a negative cash position, Lincolnway Energy will having access to its $10 million line of credit.

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As of September 30, 2010, Lincolnway Energy was in compliance with all covenants in its loan agreements with Co-Bank.

The following table shows cash flows for the fiscal years ended September 30, 2009 and 2008:

	Year ended September 30,
	2009			2008
Net cash provided by operating activities	$	1,695,816		$	14,190,197
Net cash (used in) investing activities		(755,053	)		(1,100,344	)
Net cash (used in) financing activities		(3,826,864	)		(12,235,713	)

For the fiscal year ended September 30, 2009, cash provided by operating activities was $1.7 million, compared to cash provided by operating activities of $14.2 million for the fiscal year ended September 30, 2008. The $12.5 million decrease is primarily due to a decrease in net income for fiscal year 2009 of $11.3 million.  This decrease in net income is primarily the result of a 26% decrease in ethanol prices, a 15.3% decrease in dried distillers grain price, and other negative market factors that the ethanol industry experienced in the fiscal year 2009.

Cash flows from investing activities reflect the impact of property and equipment acquired for the ethanol plant.  Net cash used in investing activities decreased by $.3 million for the fiscal year ended September 30, 2009, when compared to the fiscal year ended September 30, 2008.  The decrease is primarily due to a reduction of capital expenditures for the fiscal year 2009.

Cash flows from financing activities include transactions and events whereby cash is obtained or paid back to or from depositors, creditors or investors.  Net cash used in financing activities decreased by $8.4 million for the fiscal year ended September 30, 2009, when compared to the fiscal year ended September 30, 2008.  The decrease is due to a decrease in distribution payments to the members for the 2009 fiscal year.

Loans and Agreements

Lincolnway Energy has a construction and term loan with Co-Bank.  The interest rate under the term loan is a variable interest rate based on the one-month LIBOR index rate plus 3.30%. The interest rate will be reset automatically without notice to Lincolnway Energy, on the first "US Banking Day" of each succeeding week, and each change shall be applicable to all outstanding balances as of that date.  The loan requires 30 principal payments of $1,250,000 per quarter.  The quarterly payments commenced in December 2006 and will continue through March 2013.  In order to alleviate some of the interest rate risk, on July 25, 2008 Lincolnway Energy fixed $7,750,000 of the $19,000,000 loan outstanding at an interest rate of 6.62%, through July 2011.  Upon maturity the fixed portion of the loan will revert back to a variable rate, and the same payment amortization schedule will apply.  The borrowings under the loan are collateralized by substantially all of Lincolnway Energy's assets.

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The loan requires the maintenance of certain financial and nonfinancial covenants.  As of September 30, 2010, Lincolnway Energy was in compliance with all loan covenants.

As of September 30, 2010, Lincolnway Energy has made principal payments of $32,500,000 since the inception of the loan, which under the terms of the agreement have been applied to scheduled payments in order of their maturity. Lincolnway Energy’s next scheduled payment under this agreement is due in December 2011.

Lincolnway Energy also has a $10,000,000 construction/revolving term credit facility with Co-Bank.  The interest rate under the term loan is a variable interest rate based on the one-month LIBOR index rate plus 3.30%. The interest rate will be reset automatically without notice to Lincolnway Energy, on the first "US Banking Day" of each succeeding week, and each change shall be applicable to all outstanding balances as of that date.  Borrowings are subject to borrowing base restrictions as defined in the agreement.  The credit facility requires the maintenance of certain financial and nonfinancial covenants.  The borrowings under the agreement are collateralized by substantially all of Lincolnway Energy's assets.  The construction/revolving term credit facility has a commitment fee on the average daily unused portion of the commitment at a rate of ½ of 1% per annum, payable monthly.  The agreement also includes certain prepayment penalties.  There was no balance outstanding on this credit facility as of September 30, 2010.

Lincolnway Energy executed a mortgage and security interest in favor of Co-Bank creating a first lien on substantially all of its assets, including the real estate and ethanol plant and all personal property located on its property for the loan and credit agreements discussed above.

Lincolnway Energy also has subordinated debt financing which includes a subordinated note of $1,250,000 payable to Fagen, Inc., with an interest rate of 4%, and a $1,216,781 note payable to Fagen, Inc., with an interest rate of 5% per annum.  Principal is due in full under both of those notes at maturity on May 22, 2021 and November 17, 2014, respectively.

Lincolnway Energy also entered into a $500,000 loan agreement with the Iowa Department of Transportation in February 2005.  Under the agreement, the loan proceeds were disbursed upon submission of paid invoices and interest at 2.11% per annum began to accrue on January 1, 2007.  Payments began on July 1, 2007.  Lincolnway Energy also has a $300,000 loan agreement and a $100,000 forgivable loan agreement with the Iowa Department of Economic Development.  The $300,000 loan does not impose any interest, and the $100,000 loan is forgivable upon the completion of Lincolnway Energy's ethanol plant and the production of at least 50 million gallons of ethanol before the project completion date of October 31, 2008.  The Iowa Department of Economic Development determined those conditions to forgiveness of the $100,000 loan were met, and the loan was forgiven on January 22, 2009.  As of December 15, 2010, Lincolnway Energy had made payments totaling $122,500 on the Iowa Department of Economic Development $300,000 loan agreement and $163,197 on the Iowa Department of Transportation agreement.

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Lincolnway Energy entered into an agreement with First Union Rail on March 3, 2007 to lease 90 hopper rail cars for the purpose of transporting distiller’s grain.  The 5 year term of the agreement will end in March 2011. The lease calls for monthly payments of $58,500 plus applicable taxes.  There is also an additional usage rental of 2.5 cents per mile for each car that exceeds 30,000 miles. The agreement required a $351,000 letter of credit facility as partial security for Lincolnway Energy's obligations under the agreement.  The letter of credit facility was initially funded through a $4,000,000 revolving credit agreement with Co-Bank.  On April 11, 2008, the $4,000,000 revolving credit agreement was reduced to $351,000, the amount of the above mentioned letter of credit.  The $351,000 revolving credit agreement was cancelled on July 3, 2007, because an amendment was made to the railcar lease agreement on June 19, 2007 that allowed Lincolnway Energy to purchase a certificate of deposit for $351,000 in lieu of the letter of credit. The certificate of deposit will mature on January 20, 2010 and will be automatically renewed.  Interest is paid to Lincolnway Energy on the certificate of deposit on a quarterly basis.

Lincolnway Energy terminated its ethanol marketing agreement with RPMG, Inc. effective October 1, 2009, and as part of that process, Lincolnway Energy was assigned a railcar lease between RPMG, Inc. and Trinity Industries Leasing Company.  The lease includes 100 tank rail cars used for transporting ethanol.  The lease calls for monthly payments of $52,500 plus applicable taxes, beginning October 1, 2009.  There is also an additional usage rental of 3 cents per mile for each car that exceeds 35,000 miles.  The lease has a scheduled maturity date of September 2016.

On February 2, 2010, Lincolnway Energy entered into a lease agreement with Trinity Industries Leasing Company to lease an additional 30 ethanol tank rail cars.  The one-year term of the lease will end February 2011.  The lease calls for monthly payments of $15,000 plus applicable taxes.  There is also an additional usage rental of 3.0 cents per mile for each car that exceeds 35,000 miles.

On October 15, 2010, Lincolnway Energy entered into an agreement with JB Holland Construction, Inc. to perform the dirt work for the additional rail spur that Lincolnway Energy is going to add to the existing track.  This will allow Lincolnway Energy to ship unit trains on the Union Pacific mainline.  The total base bid is $1,494,607.  Approximately 25% of the dirt work has been completed as of December 15, 2010.  No agreement has been signed for the construction of the rail spur as of December 15, 2010.  Management is estimating that portion of the project will cost approximately $1.3 million.

Contractual Obligations Table

In addition to long-term debt obligations, Lincolnway Energy has certain other contractual cash obligations and commitments.  The following tables provide information regarding Lincolnway Energy's contractual obligations and commitments as of September 30, 2010:

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					Payment Due By Period
			Less than		Two to		Four to		More than
Contractual Obligations	Total		One Year		Three Years		Five Years		Five Years
Long-Term Debt Obligations	$	9,486,084	$	76,373	$	6,755,877	$	1,321,983	$	1,331,851
Interest Obligation of Long-Term Debt 1		1,415,467		526,124		425,897		177,379		286,067
Operating Lease Obligations		4,275,000		1,041,000		1,338,000		1,266,000		630,000
Purchase Obligations
Coal Supplier Commitment		10,636,925		5,465,725		5,171,200		-		-
Corn Supplier Commitment		17,465,619		17,465,619		-		-		-
Denaturant Commitment		519,345		519,345		-		-		-
Total	$	43,798,440	$	25,094,186	$	13,690,974	$	2,765,362	$	2,247,918

1 Co-Bank interestrate is fixed through July 2011 at 6.62% . For the remainder of the Co-Bank loanthe variable rate assumption used was 4.00%.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

In addition to risks inherent in Lincolnway Energy's operation, Lincolnway Energy is exposed to various market risks.  The primary market risks arise as a result of possible changes in interest rates and certain commodity prices.

Interest Rate Risk

Lincolnway Energy has various outstanding loan agreements and promissory notes which expose Lincolnway Energy to market risk related to changes in the interest rate imposed under those loan agreements and promissory notes.

Lincolnway Energy has loan agreements and/or promissory notes with the following entities, and with the principal balance and interest rates indicated:

	Principal Balance
Lender	As of September 30, 2010		Rate
Co-Bank	$	6,500,000		6.62	%
IA Department Economic Development		182,500		0.00	%
IA Department of Transportation		336,803		2.11	%
Fagen, Inc		1,216,781		5.00	%
Fagen, Inc		1,250,000		4.00	%
	$	9,486,084

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The interest rate under all of the loan agreements and promissory notes are fixed at the interest rates specified above.  The Co-Bank interest rate is fixed through July 2011.  After July 2011 the loan reverts back to a variable interest rate loan which will be based on the one-month LIBOR index rate plus 3.30%.

Commodity Price Risk

Lincolnway Energy is also exposed to market risk with respect to the price of ethanol, Lincolnway Energy's principal product, and the price and availability of corn, the principal commodity used by Lincolnway Energy to produce ethanol.  The other primary product of Lincolnway Energy is distiller's grains, and Lincolnway Energy is also subject to market risk with respect to the price for distillers grains.

In general, rising ethanol and distillers grains prices result in higher profit margins, and therefore represent favorable market conditions.  Ethanol and distillers grains prices are, however, influenced by various factors beyond the control of Lincolnway Energy's management, including the supply and demand for gasoline, the availability of substitutes and the effect of laws and regulations.

In general, rising corn prices result in lower profit margins and, accordingly, represent unfavorable market conditions.  Lincolnway Energy will generally not be able to pass along increased corn costs to its ethanol customers.  The availability and price of corn is subject to wide fluctuations due to various unpredictable factors which are beyond the control of Lincolnway Energy's management, including weather conditions, farmer planting decisions, governmental policies with respect to agriculture and local, regional, national and international trade, demand and supply. For example, if corn costs were to increase $.10 cents per bushel from one year to the next, the impact on cost of goods sold would be approximately $1.98 million for the year.  Lincolnway Energy's average corn costs for the fiscal years ended September 30, 2010, 2009 and 2008 were, respectively, approximately $3.59 per bushel, $3.70 per bushel and $4.99 per bushel.

Although Lincolnway Energy believes that its futures and option positions accomplish an economic hedge against Lincolnway Energy's future purchases of corn or future sales of ethanol, Lincolnway Energy has chosen not to use hedge accounting for those positions, which would match the gain or loss on the positions to the specific commodity purchase being hedged.  Lincolnway Energy is instead using fair value accounting for the positions, which generally means that as the current market price of the positions changes, the realized or unrealized gains and losses are immediately recognized in Lincolnway Energy's costs of goods sold in the statement of operations for corn positions or as a component of revenue in the statement of operations for ethanol positions.  The immediate recognition of gains and losses on those positions can cause net income to be volatile from quarter to quarter due to the timing of the change in value of the positions relative to the cost and use of the commodity being hedged.  For example, Lincolnway Energy's corn position gain and (loss) that was included in its earnings for the fiscal year ended September 30, 2010 was a gain of $1,453,950, as opposed to a loss of $3,855,438 for the fiscal year ended September 30, 2009, and as opposed to a gain of $3,444,671 for the fiscal year ended September 30, 2008.

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Another important raw material for the production of Lincolnway Energy's ethanol is coal.  Lincolnway Energy's cost per ton for coal under its current coal supply agreement is subject to various fixed and periodic adjustments based on factors which are outside of the control of Lincolnway Energy's management, including based upon changes in certain inflation type indices, increases in transportation costs and the quality of the coal.  Lincolnway Energy's coal costs will therefore vary, and the variations could be material.  Coal costs represented approximately 6% of Lincolnway Energy's total cost of goods sold for the fiscal year ended September 30, 2010, compared to, respectively, 5% and 4% for the 2009 and 2008 fiscal years.

The extent to which Lincolnway Energy may enter into arrangements with respect to its ethanol or corn during the year may vary substantially from time to time based on a number of factors, including supply and demand factors affecting the needs of customers or suppliers to purchase ethanol or sell Lincolnway Energy raw materials on a fixed basis, Lincolnway Energy's views as to future market trends, seasonable factors and the cost of futures contracts.

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Item 8.            Financial Statements and Supplementary Data.

Contents

Report of Independent Registered Public Accounting Firm	57
Financial Statements
Balance Sheets	58-59
Statements of Operations	60
Statements of Members’ Equity	61
Statements of Cash Flows	62-63
Notes to Financial Statements	64-74

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Members

Lincolnway Energy, LLC

We have audited the accompanying balance sheets of Lincolnway Energy, LLC as of September 30, 2010 and 2009, and the related statements of operations, members' equity, and cash flows for each of the three years in the period ended September 30, 2010.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the  financial statements referred to above present fairly, in all material respects, the financial position of Lincolnway Energy, LLC as of September 30 , 2010 and 2009, and the results of its operations and its cash flows for each of the three years in the period ended September 30 , 2010, in conformity with U.S. generally accepted accounting principles.

 We were not engaged to examine management's assessment of the effectiveness of Lincolnway Energy, LLC's internal control over financial reporting as of September 30, 2010 included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting and, accordingly, we do not express an opinion thereon.

/s/ McGladrey & Pullen, LLP

Des Moines, Iowa

December 21, 2010

57

Lincolnway Energy, LLC

Balance Sheets

September 30, 2010 and 2009

	2010			2009
ASSETS (Note 4)
CURRENT ASSETS
Cash and cash equivalents	$	2,858,110		$	5,824,947
Due from broker		2,305,695			565,276
Trade and other accounts receivable (Note 7)		5,880,043			3,772,183
Inventories (Note 3)		3,951,079			2,485,372
Prepaid expenses and other		298,637			197,047
Total current assets		15,293,564			12,844,825
PROPERTY AND EQUIPMENT
Land and land improvements		7,580,868			7,580,868
Buildings and improvements		1,604,305			1,604,305
Plant and process equipment		75,463,973			74,853,995
Construction in progress		191,764			-
Office furniture and equipment		411,177			355,654
		85,252,087			84,394,822
Accumulated depreciation		(35,430,641	)		(27,101,259	)
		49,821,446			57,293,563
OTHER ASSETS
Restricted cash (Note 5)		351,000			351,000
Financing costs, net of amortization of  $209,165 and $166,260		262,797			305,702
Deposit		-			151,036
Investments		170,093			145,975
		783,890			953,713
	$	65,898,900		$	71,092,101

See Notes to Financial Statements.

58

	2010		2009
LIABILITIES AND MEMBERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	1,088,299	$	877,216
Accounts payable, related party (Note 6)		460,958		298,533
Current maturities of long-term debt (Note 4)		76,373		3,825,357
Accrued expenses		982,432		948,309
Derivative financial instruments (Notes 8 and 9)		1,191,867		224,850
Total current liabilities		3,799,929		6,174,265
NONCURRENT LIABILITIES
Long-term debt, less current maturities (Note 4)		9,409,711		14,488,584
Other		450,000		450,000
Total noncurrent liabilities		9,859,711		14,938,584
COMMITMENTS AND CONTINGENCY (Notes 5, 7 and 11)
MEMBERS’ EQUITY
Member contributions,  42,049
units issued and outstanding		38,990,105		38,990,105
Retained earnings		13,249,155		10,989,147
		52,239,260		49,979,252
	$	65,898,900	$	71,092,101

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Lincolnway Energy, LLC

Statements of Operations

Years Ended September 30, 2010, 2009 and 2008

	2010			2009			2008
Revenues (Note 7)	$	114,373,268		$	110,223,531		$	147,040,911
Cost of goods sold (Notes 6 and 7)		106,744,081			113,576,938			138,309,541
Gross profit (loss)		7,629,187			(3,353,407	)		8,731,370
General and administrative expenses		2,440,390			2,366,638			2,647,368
Operating income (loss)		5,188,797			(5,720,045	)		6,084,002
Other income (expense):
Interest income		25,019			39,743			181,895
Interest expense		(851,358	)		(860,303	)		(1,430,469	)
Other		-			125,264			-
		(826,339	)		(695,296	)		(1,248,574	)
Net income (loss)	$	4,362,458		$	(6,415,341	)	$	4,835,428
Weighted average units outstanding		42,049			42,049			42,049
Net income (loss)  per unit - basic and diluted	$	103.75		$	(152.57	)	$	115.00

See Notes to Financial Statements.

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Lincolnway Energy, LLC

Statements of Members' Equity

Years Ended September 30, 2010, 2009 and 2008

	Member		Retained
	Contributions		Earnings			Total
Balance, September 30, 2007	$	38,990,105	$	20,978,860		$	59,968,965
Distributions  ($200 per unit)		-		(8,409,800	)		(8,409,800	)
Net income		-		4,835,428			4,835,428
Balance, September 30, 2008		38,990,105		17,404,488			56,394,593
Net loss		-		(6,415,341	)		(6,415,341	)
Balance, September 30, 2009		38,990,105		10,989,147			49,979,252
Distributions  ($50 per unit)		-		(2,102,450	)		(2,102,450	)
Net income		-		4,362,458			4,362,458
Balance, September 30, 2010	$	38,990,105	$	13,249,155		$	52,239,260

See Notes to Financial Statements.

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Lincolnway Energy, LLC

Statements of Cash Flows

Years Ended September 30, 2010, 2009 and 2008

	2010			2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES
Net income  (loss)	$	4,362,458		$	(6,415,341	)	$	4,835,428
Adjustments to reconcile net income (loss)  to net cash provided by
operating activities:
Depreciation and amortization		8,378,554			8,367,309			8,151,084
Loss on disposal of property and equipment		573			3,599			27,491
Forgiven loan		-			(100,000	)		-
Changes in working capital components:
Due from broker		(1,740,419	)		7,360,928			(7,081,035	)
Trade and other accounts receivable		(2,107,860	)		(146,589	)		(1,150,001	)
Inventories		(1,465,707	)		1,508,650			(322,493	)
Prepaid expenses and other		(101,590	)		(113,282	)		78,450
Deposits		151,036			312,958			40,759
Accounts payable		173,278			(1,254,071	)		358,584
Accounts payable, related party		162,425			(811,079	)		940,524
Accrued expenses		31,435			370,316			(148,015	)
Accrued loss on firm commitments		-			(1,065,000	)		1,065,000
Derivative financial instruments		967,017			(6,440,655	)		7,062,494
Noncurrent other liabilities		-			118,073			331,927
Net cash provided by  operating  activities		8,811,200			1,695,816			14,190,197
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment		(823,612	)		(611,078	)		(1,530,183	)
Purchase of investments		(24,118	)		(143,975	)
Proceeds from redemption of certificate of deposit		-			-			428,050
Proceeds from sale of equipment		-			-			1,789
Net cash (used in) investing activities		(847,730	)		(755,053	)		(1,100,344	)
CASH FLOWS FROM FINANCING ACTIVITIES
Member distributions		(2,102,450	)		-			(8,409,800	)
Payments on long-term borrowings		(8,827,857	)		(3,826,864	)		(3,825,913	)
Net cash (used in) financing activities		(10,930,307	)		(3,826,864	)		(12,235,713	)
Net (decrease) increase in cash and cash equivalents		(2,966,837	)		(2,886,101	)		854,140
CASH AND CASH EQUIVALENTS
Beginning		5,824,947			8,711,048			7,856,908
Ending	$	2,858,110		$	5,824,947		$	8,711,048
(Continued)

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Lincolnway Energy, LLC

Statements of Cash Flows (Continued)

Years Ended September 30, 2010, 2009 and 2008

	2010		2009		2008
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION, cash paid for interest	$	838,191	$	1,052,559	$	1,534,197
SUPPLEMENTAL DISCLOSURES OF NONCASH ,
INVESTING AND FINANCING ACTIVITIES
Construction in progress included in accounts payable	$	37,805	$	-	$	-
Construction in progress included in accrued expenses	$	2,688	$	-	$	-

See Notes to  Financial Statements.

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Lincolnway Energy, LLC

Notes to Financial Statements

Note 1. Nature of Business and Significant Accounting Policies

Principal business activity:  Lincolnway Energy, LLC (the Company), located in Nevada, Iowa, was formed in May 2004 to pool investors to build a 50 million gallon annual production dry mill corn-based ethanol plant.  The Company began making sales on May 30, 2006 and became operational during the quarter ended June 30, 2006.

A summary of significant accounting policies follows:

Use of estimates:  The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Concentration of credit risk:  The Company’s cash balances are maintained in bank deposit accounts which at times may exceed federally insured limits.  The Company has not experienced any losses in such accounts.

Cash and cash equivalents:  For the purposes of reporting the statement of cash flows, the Company includes as cash equivalents all cash accounts and highly liquid debt instruments which are not subject to withdrawal restrictions or penalties.  Certificates of deposit are considered investments as all have been purchased with maturities in excess of ninety days.  Although the Company maintains its cash accounts in one bank, the Company believes it is not exposed to any significant credit risk on cash and cash equivalents.  The Company has repurchase agreements with one bank, which totaled approximately $2,886,000 at September 30, 2010.  In accordance with the terms of the repurchase agreements, the Company does not take possession of the related securities.  The Company’s agreements also contain provisions to ensure that the market value of the underlying assets remain sufficient to protect the Company in the event of default by the banks by requiring that the underlying securities have a total market value of at least 100% of the bank’s total obligations under the agreements.

Trade accounts receivable:  Trade accounts receivable are recorded at original invoice amounts less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis.  Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering customers financial condition, credit history and current economic conditions.  Receivables are written off when deemed uncollectible.  Recoveries of receivables written off are recorded when received.  A receivable is considered past due if any portion of the receivable is outstanding more than 90 days.

Inventories:  Inventories, which consist primarily of corn, ethanol and distillers grain, are stated at the lower of cost or market using the first-in, first-out method.  In the valuation of inventories and purchase and sale commitments, market is based on current replacement values except that it does not exceed net realizable values and is not less than net realizable values reduced by allowances for approximate normal profit margin.

Financing costs:  Financing costs associated with the construction and revolving loans discussed in Note 4 are recorded at cost and include expenditures directly related to securing debt financing.  The Company is amortizing these costs using the effective interest method over the term of the agreement.  The financing costs are included in interest expense on the statement of operations.

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Lincolnway Energy, LLC

Notes to Financial Statements

Property and equipment:  Property and equipment is stated at cost.  Construction in progress is comprised of costs related to the projects that are not completed.  Depreciation is computed using the straight-line method over the following estimated useful lives:

	Years
Land improvements	20
Buildings and improvements	40
Plant and process equipment	5 – 20
Office furniture and equipment	3 – 7

Maintenance and repairs are expensed as incurred; major improvements and betterments are capitalized.  The Company has no capital leases at this time.

Investments:  The Company has investments in financial service cooperatives.  These investments are carried at cost including allocated retained earnings of the cooperatives.

Derivative financial instruments:  The Company enters into derivative contracts to hedge the Company’s exposure to price risk related to forecasted corn needs forward corn purchase contracts and ethanol sales.  The Company does not typically enter into derivative instruments other than for hedging purposes.  All the derivative contracts are recognized on the balance sheet at their fair market value.  Although the Company believes its derivative positions are economic hedges, none have been designated as a hedge for accounting purposes.   Accordingly, any realized or unrealized gain or loss related to corn derivatives is recorded in the statement of operations as a component of cost of goods sold.  Any realized or unrealized gain or loss related to ethanol derivative instruments is recorded in the statement of operations as a component of revenue.

Deposit:  The Internal Revenue Service (under Section 7519) requires partnerships that elect a fiscal year over a calendar year to make a deposit each year.  The deposit is 25% of annual taxable net income, multiplied by the tax rate of 36% for the reporting fiscal year.

Revenue Recognition:  Revenue from the sale of the Company’s ethanol and distillers grains is recognized at the time title and all risks of ownership transfer to the customers.  This generally occurs upon the loading of the product.  For ethanol, title passes at the time the product crosses the loading flange in either a railcar or truck.  For distiller’s grain, title passes upon the loading into trucks.  For railcar shipments, this takes place when the railcar is filled and the marketer receives written notice that they have been loaded and are available for billing.  Shipping and handling costs incurred by the Company for the sale of ethanol and distiller’s grain are included in costs of goods sold.

Commissions for the marketing and sale of ethanol and distiller grains are included in costs of goods sold.

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Lincolnway Energy, LLC

Notes to Financial Statements

Revenue by product is as follows:

(Excludes hedging activity)

(In thousands)	2010		2009		2008
Ethanol	$	94,612	$	88,155	$	122,253
Distiller's Grain		19,434		20,730		25,544
Other		1,766		1,328		1,447

Income taxes:  The Company is organized as a partnership for federal and state income tax purposes and generally does not incur income taxes.  Instead, the Company’s earnings and losses are included in the income tax returns of the members.  Therefore, no provision or liability for federal or state income taxes has been included in these financial statements.

Earnings per unit:  Basic and diluted earnings per unit have been computed on the basis of the weighted average number of units outstanding during each period presented.

Fair Value of financial instruments:  The carrying amounts of cash and cash equivalents, derivative financial instruments, trade accounts receivable, accounts payable and accrued expenses approximate fair value.  The carrying amount of long-term debt approximates fair value because the interest rates are based on current rates offered to the Company for debt with similar terms and maturities.

Note 2. Members’ Equity

The Company was formed on May 19, 2004.  It was initially capitalized by the issuance of 1,924 membership units totaling $962,000 to the founding members of the Company.  The Company has one class of membership units.  A majority of the Board of Directors owns a membership interest in the Company.  The Company is authorized to issue up to 45,608 membership units without member approval.

Income and losses are allocated to all members based on their pro rata ownership interest. All unit transfers are effective the last day of the month.    Units may be issued or transferred only to persons eligible to be members of the Company and only in compliance with the provisions of the operating agreement.

Note 3. Inventories

Inventories consist of the following as of September 30, 2010 and 2009:

	2010		2009
Raw materials, including corn, coal, chemicals and supplies	$	2,496,681	$	1,503,410
Work in process		796,409		567,782
Ethanol and distillers grain		657,989		414,180
Total	$	3,951,079	$	2,485,372

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Lincolnway Energy, LLC

Notes to Financial Statements

Note 4. Long-Term Debt

Long-term debt consists of the following as of September 30, 2010 and 2009:

	2010			2009
Construction term loan.  (A)	$	6,500,000		$	15,250,000
Construction/revolving term loan.  (C)		-			-
Note payable to contractor, interest-only quarterly payments at 5%
due through maturity date of November 2014, secured by real
estate and subordinate to financial institution debt commitments. (B )		1,216,781			1,216,781
Note payable to contractor, unsecured, interest-only quarterly
payments at 4% due through maturity date of May 2021.		1,250,000			1,250,000
Note payable to Iowa Department of Economic Development.  (D)		182,500			212,500
Note payable to Iowa Department of Transportation.  (E)		336,803			384,660
		9,486,084			18,313,941
Less current maturities		(76,373	)		(3,825,357	)
	$	9,409,711		$	14,488,584

Maturities of long-term debt as of September 30, 2010 are as follows:

Years ending September 30:
2011	$	76,373
2012		5,052,409
2013		1,703,468
2014		52,049
2015		1,269,934
Thereafter		1,331,851
	$	9,486,084

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Lincolnway Energy, LLC

Notes to Financial Statements

(A) The Company has a construction and term loan with a financial institution.  Borrowings under the term loan include a variable interest rate based on the one-month LIBOR index rate plus 3.30%.  The rate will be reset automatically without notice to the Company, on the first “US Banking Day” of each succeeding week, and each change shall be applicable to all outstanding balances as of that date.  The agreement requires 30 principal payments of $1,250,000 per quarter commencing in December 2006 through March 2013. In order to alleviate some of the interest rate risk, the Company on July 25, 2008, fixed a portion of the loan or $7,750,000 at an interest rate of 6.62%, through July 2011. Upon maturity the fixed portion of the loan will revert back to a variable rate.  The same payment amortization schedule will apply. As of September 30, 2010, the entire balance outstanding is at a fixed interest rate.   The agreement requires the maintenance of certain financial and nonfinancial covenants.  Borrowings under this agreement are collateralized by substantially all of the Company’s assets.  As of September 30, 2010 the Company has made principal payments of $32,500,000, since the inception of the loan, which under the terms of the agreement have been applied to scheduled payments in order of their maturity.  The Company’s next schedule payment under this agreement is due in December 2011.

(B) The Company has a $1,100,000 subordinate note payable dated November 17, 2004 to an unrelated third party.  Quarterly interest payments began on March 31, 2007.  The third party allowed the Company to include the accrued interest of $116,781 through December 2006 into the principal of the note. Principal is due in full at maturity on November 17, 2014.

(C) The Company has a $10,000,000 construction/revolving term credit facility with a financial institution which expires on September 1, 2016.  Borrowings under the credit facility agreement include a variable interest rate based on the one-month LIBOR index rate plus 3.30%.  The rate will be reset automatically without notice to the Company, on the first “US Banking Day” of each succeeding week, and each change shall be applicable to all outstanding balances as of that date.  Borrowings are subject to borrowing base restrictions as defined in the agreement.  The credit facility and revolving credit agreement require the maintenance of certain financial and nonfinancial covenants.  Borrowings under this agreement are collateralized by substantially all of the Company’s assets.  There was no balance outstanding as of September 30, 2010.

(D) The Company also has a $300,000 loan agreement with the Iowa Department of Economic Development (IDED).  The $300,000 loan is noninterest-bearing and due in monthly payments of $2,500 beginning December 2006 and a final payment of $152,500 due November 2012.  Borrowings under this agreement are collateralized by substantially all of the Company’s assets and subordinate to the above financial institution debt and construction and revolving loan/credit agreements included in (A) and (C).  On January 22, 2009, IDED forgave the $100,000 forgivable loan after closing the project of constructing the ethanol production facility and producing at least 50 million gallons of ethanol before the project completion date of October 31, 2008.

(E) The Company entered into a $500,000 loan agreement with the Iowa Department of Transportation (IDOT) in February 2005.  The proceeds were disbursed upon submission of paid invoices.  Interest at 2.11% began accruing on January 1, 2007.  Principal payments will be due semiannually through July 2016.  The loan is secured by all rail track material constructed as part of the plan construction.  The debt is subordinate to the above $39,000,000 financial institution debt and construction and revolving loan/credit agreements included in (A) and (C).

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Lincolnway Energy, LLC

Notes to Financial Statements

Note 5. Lease Commitments

The Company entered into a lease agreement with an unrelated third party to lease 90 hopper rail cars for the purpose of transporting distiller’s grain.  The five-year term of the lease commenced March 2006 and will end March 2011.  The lease calls for monthly payments of $58,500 plus applicable taxes.  There is also an additional usage rental of 2.5 cents per mile for each car that exceeds 30,000 miles.  The amendment that was made to the lease agreement on June 19, 2007, allowed the Company to purchase a certificate of deposit for $351,000 in lieu of the letter of credit that was required as partial security for the Company’s obligation under the lease.  The Company has classified this certificate of deposit as restricted cash in other assets.

In conjunction with a change in the Company’s ethanol marketer, on September 21, 2009, the Company was assigned a lease that was previously between the Company’s previous ethanol marketer and an unrelated third party.  The lease includes 100 tank rail cars for the purpose of transporting ethanol.  The lease calls for monthly payments of $52,500 plus applicable taxes, beginning October 1, 2009.  There is also an additional usage rental of 3 cents per mile for each car that exceeds 35,000 miles.  The lease has a scheduled maturity date of September 2016.

On February 2, 2010, the Company entered into a lease agreement with an unrelated third party to lease an additional 30 ethanol tank rail cars.  The one-year term of the lease will end February 2011.  The lease calls for monthly payments of $15,000 plus applicable taxes.  There is also an additional usage rental of 3.0 cents per mile for each car that exceeds 35,000 miles.

The Company leases office equipment and other equipment under operating leases that will expire at various dates through March 2015.

Approximate minimum lease payments under these operating leases for future years are as follows:

Years ending Sept 30:
2011	$	1,041,000
2012		670,000
2013		668,000
2014		635,000
2015		631,000
Other		630,000
	$	4,275,000

Rent expense under the above operating leases totaled approximately, $1,597,000, $741,000 and $738,000 for the years ended September 30, 2010, 2009 and 2008, respectively.

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Lincolnway Energy, LLC

Notes to Financial Statements

Note 6. Related-Party Transactions

The Company has an agreement with the Heart of Iowa Coop (HOIC), dba Key Cooperative, a member of the Company, to provide 100% of the requirement of corn for use in the operation of the ethanol plant.  The agreement became effective when the Company began accepting corn for the use at the ethanol plant in May 2006 and will continue for a period of 20 years.  The Company pays a handling fee of $.0675 per bushel of corn.  If the Company chooses to buy corn that is not elevated by HOIC, and is inside a 60-mile radius of Nevada, Iowa, the Company will be required to pay HOIC $.04 per bushel of corn, outside a 60-mile radius, $.03 per bushel of corn.  The agreement may be terminated before the end of the term by providing six months’ notice of termination and paying the other party $2,000,000, reduced by $50,000 for each completed year of the agreement.  The amount is payable over four years with interest at the prime rate on the date of termination.  The Company purchased corn totaling $71,804,446, $69,259,682 and $97,996,197 for the years ended September 30, 2010, 2009 and 2008, respectively.  As of September 30, 2010, the Company has several corn cash contracts with HOIC amounting to 3,613,371 bushels, for a commitment of $17,465,619 and a basis contract representing 600,000 bushels of corn.  The contracts mature on various dates through December 2010.  The Company also has made some miscellaneous purchases from HOIC (fuel costs) amounting to $96,392, $84,255 and $184,062 for the years ended September 30, 2010, 2009 and 2008, respectively. As of September 30, 2010 and 2009 the amount due to HOIC is $460,226 and $257,938, respectively.

The Company is also purchasing anhydrous ammonia and propane from Prairie Land Cooperative, a member of the Company.  Total purchases for the years ended September 30, 2010, 2009 and 2008 were $21,714, $860,884 and $1,030,326, respectively. As of September 30, 2010 and 2009 the amount due to Prairie Land Cooperative is $732 and $40,595, respectively.  As of September 30, 2010, there was no purchase commitment.

Note 7. Commitments and Major Customer

The Company had an agreement with an unrelated entity and major customer for marketing, selling, and distributing all of the ethanol produced by the Company.  Under such pooling arrangements, the Company paid the entity $.01 (one cent) per gallon for each gallon of ethanol sold.    Marketing expense for the years ended September 30, 2010, 2009 and 2008 were none, $528,215 and $543,399, respectively, under this agreement. Revenues with this customer were none, $88,155,144, and $122,253,299 for the years ended September 30, 2010, 2009 and 2008, respectively.  Trade accounts receivable of none and $2,913,460 was due from the customer as of September 30, 2010 and 2009, respectively.

On September 25, 2009, the Company entered into a new agreement with an unrelated entity.  The agreement became effective on October 1, 2009.  The unrelated entity is responsible for marketing and purchasing all of the ethanol produced by the company.  For the year ended September 30, 2010, the Company has expensed $695,945, under this agreement for marketing fees.  Revenues with this customer were $94,611,865 for the year ended September 30, 2010.  Trade accounts receivable of $4,550,445 was due from the customer as of September 30, 2010.  As of September 30, 2010, the Company has ethanol sales commitments with the unrelated entity of 1,288,000 gallons for a total sales commitment of $2,288,920.

The Company had an agreement with an unrelated entity for marketing, selling and distributing all of the distiller’s grains which are by-products of the ethanol plant.   For the years ended September 30, 2010, 2009 and 2008, the Company has expensed marketing fees of none, none and $1,381, respectively, under this agreement.  Revenues with this customer were none, none and $172,899 for the years ended September 30, 2010, 2009 and 2008, respectively.  The Company has entered into an agreement with an unrelated entity for marketing, selling and distributing the distiller’s grains as of October 1, 2007.   For the years ended September 30, 2010 and 2009, the Company has expensed marketing fees of $295,353 and $337,760, respectively, under this agreement.  Revenues with this customer were $19,434,064 and $20,729,951 for the years ended September 30, 2010 and 2009.  Trade accounts receivable of $922,754 and $685,806 was due from the customer as of September 30, 2010 and 2009, respectively.  As of September 30, 2010, the Company has distiller’s grains sales commitments with the unrelated entity of 9,218 tons for a total sales commitment of $1,166,405.

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Lincolnway Energy, LLC

Notes to Financial Statements

The Company has an agreement with an unrelated party to provide the coal supply for the ethanol plant.  The agreement includes the purchase of coal at a cost per ton and a transportation cost per ton as defined in the agreement.  The cost is subject to price adjustments on a monthly basis.  If the Company fails to purchase the minimum number of tons of coal for the calendar year , the Company shall pay an amount per ton multiplied by the difference of the minimum requirement and actual quantity purchased.  That agreement expired as of January 1, 2008.   On October 1, 2007 the Company entered into an amended agreement to the original cost supply agreement.  The term of the agreement has been extended from the original expiration date to January 1, 2013.  The same minimum purchase commitment is required from the Company as the previous agreement.  The calendar years 2010, 2011, and 2012 estimated purchase commitments total $374,525, $5,091,200, $5,171,200.  For the years ended September 30, 2010, 2009 and 2008, the Company has purchased coal of $5,989,438, $5,580,495 and $5,741,047 respectively.

The Company has entered into a variable contract with a supplier of denaturant.  The variable contract is for a minimum purchase of 270,000 gallons at the average of the OPIS Conway In-Well Natural Gasoline High and Low prices on the date of loading plus $.115/usg.  The term of the contract is from October 1, 2010 through December 31, 2010.   The estimated future purchase commitment is approximately $519,345.

Note 8. Risk Management

The Company’s activities expose it to a variety of market risks, including the effects of changes in commodity prices.  These financial exposures are monitored and managed by the Company as an integral part of its overall risk management program.  The Company’s risk management program focuses on the unpredictability of commodity markets and seeks to reduce the potentially adverse effects that the volatility of these markets may have on its operating results.

The Company maintains a risk management strategy that uses derivative instruments to minimize significant, unanticipated earnings fluctuations caused by market fluctuations.  The Company’s specific goal is to protect the Company from large moves in the commodity costs.

To reduce price risk caused by market fluctuations, the Company generally follows a policy of using exchange-traded futures and options contracts to minimize its net position of merchandisable agricultural commodity inventories and forward purchases and sales contracts.  Exchange traded futures and options contracts are designated as non-hedge derivatives and are valued at market price with changes in market price recorded in operating income through cost of goods sold for corn derivatives and through revenue for ethanol derivatives.

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Lincolnway Energy, LLC

Notes to Financial Statements

The effects on operating income from derivative activities is as follows for the years ending September 30, are as follows:

	2010			2009			2008
Increase (decrease) in revenue due to derivatives related to ethanol sales:
Realized	$	45,434		$	10,440		$	(2,174,662	)
Unrealized		(1,483,997	)		-			(28,492	)
Total effect on revenue		(1,438,563	)		10,440			(2,203,154	)
(Increase) decrease in cost of goods sold due to derivates related to corn costs:
Realized		604,475			(3,783,088	)		6,280,771
Unrealized		849,475			(72,350	)		(2,836,100	)
Total effect on cost of goods sold		1,453,950			(3,855,438	)		3,444,671
Total (decrease) increase  to operating income due to derivative activities	$	15,387		$	(3,844,998	)	$	1,241,517

Unrealized gains and losses on forward contracts, in which delivery has not occurred, are deemed “normal purchases and normal sales”, and therefore are not marked to market in the Company’s financial statements, but are subject to a lower of cost or market assessment.   As of September 30, 2008 the Company recorded an unrealized loss of $1,065,000 on firm purchase commitments for corn.

Note 9. Fair Value Measurements

Effective October 1, 2008, the Company began measuring fair value of financial instruments in accordance with The Fair Value Measurements and Disclosures topic of the Accounting Standards Codification.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  In determining fair value, the Company uses various methods including market, income and cost approaches.  Based on these approaches, the Company often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique.  These inputs can be readily observable, market-corroborated, or generally unobservable inputs.  The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.  Based on the observability of the inputs used in the valuation techniques, the Company is required to provide the following information according to the fair value hierarchy.  The fair value hierarchy ranks the quality and reliability of the information used to determine fair values.  Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

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Lincolnway Energy, LLC

Notes to Financial Statements

Level 1 - Valuations for assets and liabilities traded in active markets from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2 - Valuations for assets and liabilities traded in less active dealer or broker markets.  Valuations are obtained from third-party pricing services for identical or similar assets or liabilities.

Level 3 - Valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.

A description of the valuation methodologies used for instruments measured at fair value, including the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.  These valuation methodologies were applied to all of the Company’s financial assets and financial liabilities carried at fair value.

Derivative financial instruments:  Commodity futures and exchange-traded commodity options contracts are reported at fair value utilizing Level 1 inputs.  For these contracts, the Company obtains fair value measurements from an independent pricing service.  The fair value measurements consider observable data that may include dealer quotes and live trading levels from the CBOT and NYMEX markets.  The fair value measurements consider observable data that may include dealer quotes and live trading levels from the over-the-counter markets. 

The following table summarizes the financial liabilities measured at fair value on a recurring basis as of September 30, 2010 and 2009, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

	2010
	Total		Level 1		Level 2		Level 3
Liabilities, derivative financial instruments	$	1,191,867	$	1,191,867	$	-	$	-
	2009
	Total		Level 1		Level 2		Level 3
Liabilities, derivative financial instruments	$	224,850	$	224,850	$	-	$	-

Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).  Financial assets and financial liabilities measured at fair value on a nonrecurring basis were not significant at September 30, 2010 and 2009.

Note 10. Retirement Plan

The Company adopted a 401(k) plan covering substantially all employees effective February 1, 2006.  The Company provides matching contributions of 50% for up to 6% of employee compensation.  Company contributions and plan expenses for the years ended September 30, 2010, 2009 and 2008 totaled $69,069, $68,032 and $66,795, respectively.

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Lincolnway Energy, LLC

Notes to Financial Statements

Note 11. Contingency

In May 2010, a lawsuit was filed against the Company and approximately 20 other ethanol plants by an unrelated party claiming the Company’s operation of the corn oil extraction system is a patent infringement. The plaintiff seeks injunctive relief, an award of damages with interest and any other remedies available under certain patent statutes or otherwise under law.  The Company is currently reviewing the lawsuit with legal counsel.  The Company is unable to determine at this time if the lawsuit will have a material adverse affect on the Company.

Note 12. Subsequent Events

On October 15, 2010, Lincolnway Energy entered into an agreement with unrelated entity to perform the dirt work for the additional rail spur that the Company is going to add to the existing track.  The total base bid is $1,494,607.

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Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

Lincolnway Energy has not had any change in its accountants or any disagreements with its accountants which are required to be disclosed under this Item.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Lincolnway Energy's management, with the participation of Lincolnway Energy's president and chief executive officer and chief financial  officer, have evaluated the  effectiveness of Lincolnway Energy's disclosure  controls and procedures  (as defined in Rule  13a-15(e)  under  the Securities Exchange  Act of 1934) as of the end of the  period  covered by this annual report.  As a result of such evaluation,  the president and chief executive officer and the chief financial  officer have  concluded  that such  disclosure  controls and procedures are effective to provide  reasonable  assurance that the  information required to be disclosed in the reports Lincolnway Energy  files or submits  under the Securities Exchange  Act of 1934 is (i)  recorded,  processed,  summarized  and reported within the time  periods specified  in the  Securities  and  Exchange Commission's   rules  and  forms,  and (ii)  accumulated  and  communicated  to management,  including Lincolnway Energy's  principal executive and principal financial officers or persons performing such functions,  as appropriate,  to allow timely decisions regarding  disclosure. Lincolnway Energy believes that a control system, no matter how well designed and operated,  cannot provide absolute assurance that the  objectives of the control system are met, and no evaluation of controls can provide  absolute  assurance that all control issues and instances of fraud,  if any, within a company have been detected.

Management's Annual Report on Internal Control Over Financial Reporting.

The management of Lincolnway Energy is responsible for establishing and maintaining adequate internal control over financial reporting for Lincolnway Energy.  Lincolnway Energy's internal control system was designed to, in general, provide reasonable assurance to Lincolnway Energy's management and board regarding the preparation and fair presentation of published financial statements, but because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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Lincolnway Energy's management assessed the effectiveness of Lincolnway Energy's internal control over financial reporting as of September 30, 2010.  The framework used by management in making that assessment was the criteria set forth in the document entitled "Internal Control – Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, Lincolnway Energy's management has determined that as of September 30, 2010, Lincolnway Energy's internal control over financial reporting was effective for the purposes for which it is intended.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.  As we are a non-accelerated filer, management’s report is not subject to attestation by our registered public accounting firm pursuant to Section 404(c) of the Sarbanes-Oxley Act of 2002 that permits us to provide only management’s report in this annual report.

Changes in Internal Control over Financial Reporting

No change in Lincolnway Energy's internal control over financial  reporting occurred during the fourth quarter of the fiscal year ended September 30, 2010 that has materially affected,  or is  reasonably  likely to materially  affect,  Lincolnway Energy's internal  control over  financial reporting.

Item 9B. Other Information.

Lincolnway Energy did not have any information that was required to be disclosed in a report on Form 8-K during the fourth quarter of the fiscal year ended September 30, 2010, that was not reported on a Form 8-K.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The directors and executive officers of Lincolnway Energy as of the date of this annual report were as follows:

Name	Age	Position(s)
Jeff Taylor	44	Director and Chairman
Brian Conrad	49	Director and Vice Chairman
Kurt Olson	54	Director and Secretary
Terrill Wycoff	68	Director and Treasurer
Timothy Fevold	50	Director
William Couser	56	Director
James Hill	65	Director
Rick Vaughan	51	Director
Richard Johnson	75	Director
Richard Brehm	57	President and Chief Executive Officer
Kim Supercynski	48	Chief Financial Officer

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An individual may be nominated for election as a director of Lincolnway Energy by the members of Lincolnway Energy in accordance with the procedures set out in the second amended and restated operating agreement, or by the nominating committee of the directors, with the recommendations of the nominating committee being subject to approval by the directors. The directors are elected by the members for three year terms, with the terms of the directors being staggered so that three directors are elected at each annual meeting. The vote by the members is generally done by a written ballot and without any discussion by the members.

Lincolnway Energy therefore does not know what specific experience, qualifications, attributes or skills of the current directors led any particular member or members to vote for any director. All of the current directors were, however, nominated by the nominating committee of the directors, and the nominating committee, and the directors in considering the recommendations of the nominating committee, considered the experience, qualifications, attributes or skills set out in the following paragraphs and in the following biographies of the directors in reaching the conclusion that the current directors should serve as a director and therefore be recommended to the members at the annual meetings of the members at which the directors were elected to their current respective three year terms.

One factor that was considered and that applies to each director is that each director has gained substantial experience, knowledge and background regarding Lincolnway Energy's operations and the ethanol industry in general through their service as a director of Lincolnway Energy. Seven of the current directors have served as a director since Lincolnway Energy was organized in May of 2004, and the other two directors have served since July 27, 2007.

Over that period of time, Lincolnway Energy, along with the ethanol industry in general and the economy as a whole, have experienced a wide range of political, economic and market circumstances, ranging from very favorable to very difficult circumstances. The current directors have therefore gained valuable background and experience over a diverse range of circumstances that do not always occur over just a six year period of time.

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Another factor that was considered and that applies to all of the directors is the training, educational and industry association opportunities that have been engaged in by the directors. For example the majority of directors have attended the Renewable Fuels Association annual conference and the Iowa Institute of Coops director training workshops.  Those activities have given the directors additional experience and background both with respect to the ethanol industry and serving on the board of a company.

Another factor that was considered and that applies to each director is that each director has individual experience in operating a business through their own personal business endeavors that are discussed below. Each director has also evidenced a willingness and ability in their individual businesses to consider and pursue innovative or new approaches, as well as a willingness and ability to assume leadership roles in those businesses and industries, all of which are attributes are helpful in an evolving and changing industry such as the ethanol industry.

Another practical consideration is that each director is willing to devote the time, which can be significant at times, that is necessary to serve as a director and on committees of the directors.

The following paragraphs provide some information regarding the directors and executive officers of Lincolnway Energy."

Jeff Taylor.  Mr. Taylor has been a director of Lincolnway Energy since Lincolnway Energy was organized in May, 2004.  His current term as a director will end at the annual meeting of the members which will be held in 2011.  Mr. Taylor served as the vice president/vice chairman of Lincolnway Energy from the time Lincolnway Energy was organized in May, 2004 until April, 2008.  Mr. Taylor has served as the chairman of Lincolnway Energy since May, 2008.  Mr. Taylor has been self-employed as a farmer since 1988, and he owns and operates farms in Story County, Iowa. Mr. Taylor received a Bachelor of Science degree from Iowa State University in farm operations and agricultural studies.  Mr. Taylor provides, among other things, agriculture and management background and experience to the directors.  An agricultural background provides, among other things, experience that is useful to the directors in connection with analyzing issues related to corn and distillers’ grain. Mr. Taylor also completed board member and chairman certification from the Iowa Institute of Cooperatives.

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Brian Conrad.  Brian Conrad has been a director of Lincolnway Energy since Lincolnway Energy was organized in May, 2004.  His current term as a director will end at the annual meeting of the members which will be held in 2011.  Mr. Conrad has served as the vice chairman of Lincolnway Energy since May, 2008.  Mr. Conrad has been employed with John Deere Credit since 1988, and has held various positions with John Deere Credit, including credit operations, and sales and marketing.  His current position with John Deere Credit is Business Development Manager for the Western U.S. for John Deere Wind Energy.  In that capacity, Mr. Conrad has responsibility for working with wind developers and negotiating the acquisition of wind projects. On December 10, 2010 Exelon Corporation purchased John Deere Wind Energy. Mr. Conrad will hold the same position with Exelon Corporation.  Mr. Conrad has an undergraduate degree in economics and business administration and a Masters in Business Administration. Mr. Conrad provides, among other things, background and experience in sales, financing and acquisitions to the directors.

Kurt Olson.  Kurt Olson has been a director of Lincolnway Energy since July 27, 2007, and his current term as a director will end at the annual meeting of the members which is held in 2013.  Mr. Olson has served as the secretary of Lincolnway Energy since May, 2008.  Mr. Olson graduated in 1978 from Iowa State University in ag-economics and has been actively involved in business operations and management of real estate in central Iowa for over 28 years.  Mr. Olson was employed with Litchfield Realty Company from 1987 to 2003.  He served as the president of Litchfield Realty and its subsidiaries, AgServ Company and FarmLand Real Estate and Management, LC.  The business of AgServ Company included a grain elevator, an agronomy supplier, a feed manufacturer and a soybean seed processor.  In 2003, Mr. Olson purchased Farmland Real Estate and Management, LC.  Farmland Real Estate and Management, LC markets crop insurance and manages farmland.  Mr. Olson provides, among other things, agricultural, real estate and farm management background and experience to the directors.

Terrill Wycoff.  Mr. Wycoff has been a director of Lincolnway Energy since Lincolnway Energy was organized in May, 2004.  His current term as a director will end at the annual meeting of the members which will be held in 2012.  Mr. Wycoff has also served as the treasurer of Lincolnway Energy since Lincolnway Energy was organized in May, 2004.  Mr. Wycoff has been employed by First National Bank, Ames, Iowa for approximately 49 years, and currently serves as the Executive Vice President of First National Bank.  He is also a member of the board of directors of First National Bank.  Mr. Wycoff adds, among other things, background and experience in banking and finance to the directors.

Timothy Fevold.  Mr. Fevold has been a director of Lincolnway Energy since Lincolnway Energy was organized in May, 2004.  His current term as a director will end at the annual meeting of the members which will be held in 2011.  Mr. Fevold served as the secretary of Lincolnway Energy from the time Lincolnway Energy was organized in May, 2004 until April, 2008.  Mr. Fevold has been employed by Hertz Farm Management, based in Nevada, Iowa, since 1982, and is an accredited farm manager.  He represents absentee landowners throughout Central Iowa.   Mr. Fevold has also been licensed as a real estate broker in Iowa since 1987.  Mr. Fevold brings, among other things, additional agriculture, real estate and farm management background and experience to the directors.

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William Couser.  Mr. Couser has been a director of Lincolnway Energy since Lincolnway Energy was organized in May, 2004.  His current term as a director will end at the annual meeting of the members which will be held in 2012.  Mr. Couser was the chairman of Lincolnway Energy from the time Lincolnway Energy was organized in May, 2004 until April, 2008.  He also served as the interim president and chief executive officer of Lincolnway Energy from May, 2004 until July 13, 2005.  Mr. Couser has served as a director of Iowa Renewable Fuels Association for the past six years, and is currently serving as the president of the Iowa Renewable Fuels Association. He is also serving as a director of the Iowa Cattlemen’s Association and Iowa Institute for Coops. He has served as director on those boards for the past two years.  Mr. Couser has been self-employed as a farmer since 1977.  His farming operations include row crops and cattle.  Mr. Couser brings, among other things, additional agricultural and management background and experience to the directors.  Mr. Couser also brings outside board and affiliations background and experience to the directors, including in the ethanol industry as noted above.

James Hill.  Mr. Hill has been a director of Lincolnway Energy since Lincolnway Energy was organized in May, 2004.  His current term as a director will end at the annual meeting of the members which will be held in 2013.  Mr. Hill has been self-employed as a farmer since 1972.  Following graduation from college, Mr. Hill worked in management with his farming business. While farming and feeding cattle, Mr. Hill became involved in the cattle industry organizations, and he has served as chairman of the Iowa Beef Industry Council and president of the Iowa Cattlemen's Association.  He also served as president of the board of directors of the Ellsworth-Williams Coop during its merger with Prairie Land Coop.  He has also served as an advisory council member for Farm Credit Services of America since approximately 1994.  Mr. Hill brings, among other things, additional agricultural, management and outside board and industry association background and experience to the directors.

Rick Vaughan.  Rick Vaughan has been a director of Lincolnway Energy since Lincolnway Energy was organized in May, 2004. His current term as a director will end at the annual meeting of the members which will be held in 2012.  Mr. Vaughan has been the General Manager of Prairie Land Cooperative since February 1995.  Mr. Vaughan brings, among other things, agricultural, cooperative, management and marketing experience and background to the directors.

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Richard Johnson.  Richard Johnson has been a director of Lincolnway Energy since July 27, 2007, and his current term as a director will end at the annual meeting of the members which will be held in 2013.  Mr. Johnson has been a self-employed certified public accountant since 2003.  He has served since 2006 as a director of a bank holding company, Ogden Bancshares, and as a director of its subsidiaries, Ames Community Bank and Vision Bank of Iowa.  He also has served as a director of EMC National Life Insurance Company (EMCNL) since 2003 and has been a director and treasurer of Petroleum Marketers Management Insurance Company (PMMIC) since 2000.  Mr. Johnson serves as a member of the audit committee of Ogden Bancshares and is chairman of the audit committees for EMCNL and PMMIC.  He also served as the elected auditor of the State of Iowa from 1979 to 2003.  Mr. Johnson completed a six year term on December 31, 2006 as a trustee of the Financial Accounting Foundation, which is the board that oversees and provides board member selection and funding of the national Accounting Standards Boards.  Mr. Johnson served as a member of the Iowa Accountancy Examining Board from January 2003 to May 2009.  The Accountancy Board licenses and regulates certified public accountants and accounting practitioners in the State of Iowa.  Mr. Johnson brings, among other things, financial accounting experience, including audit committee experience, and outside board and association experience to the directors.

Richard Brehm.  Mr. Brehm joined Lincolnway Energy on May 17, 2005 as the general manager and was appointed president and chief executive officer on July 13, 2005. Mr. Brehm has served in various management positions in agriculture and ethanol production since 1995, including with CHS, Hubbard Milling Company, International Ingredient Corporation and United Bio Energy. He is a graduate of Iowa State University.

Mr. Brehm served as the director of operations for United Bio Energy from January 2004 to April 2005.  In that role, Mr. Brehm served as interim general manager for Platte Valley Fuel Ethanol, in Central City, Nebraska, and later as the general manager of Big River Resources, in West Burlington, Iowa.  United Bio Energy also assigned Mr. Brehm to serve in various development and leadership roles for ethanol plants and projects in Illinois, Kansas, Iowa and Nebraska.

Kim Supercynski.  Ms. Supercynski has served as the chief financial officer of Lincolnway Energy since October 2005.  She served as the corporate controller for Garst Seed Company, located in Slater, Iowa, from approximately February 1996 to October 2005.  Her responsibilities in that capacity included overseeing the accounting department. Garst Seed Company is an affiliate of Syngenta, Inc., which is a large international company that sells, markets and produces agricultural seed. Prior to working at Garst Seed Company she was the controller for a third party administrator for employee benefit plans. She also has six years of experience working in public accounting. Ms. Supercynski is a certified public accountant and a certified treasury professional.

Number and Term of Directors and Officers

The number of directors for Lincolnway Energy was fixed at 9 as of the date of this annual report.  Each of Lincolnway Energy's directors is elected to a three year term and until his or her successor is elected.  The terms of the directors are staggered, so that three of the directors' terms expire in one year, three expire the next year, and three expire the following year.

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The officers of Lincolnway Energy are elected annually by the directors at its annual meeting, and hold office until the next annual meeting of the directors and until their respective successors are chosen.  Any officer may be removed by the directors at any time, with or without cause, subject to any employment agreement as may exist between Lincolnway Energy and any officer.  Lincolnway Energy did not have any written employment agreements with any officer as of the date of this annual report.

Significant Employees

Lincolnway Energy currently has three employees who Lincolnway Energy expects to make a significant contribution to its business, in addition to Lincolnway Energy's executive officers identified above.  Those employees are Kristine Strum, David Zimmerman and David Sommerlot.  Lincolnway Energy does not have a written employment agreement with any of those employees.

Kristine Strum.  Ms. Strum has served as the controller for Lincolnway Energy since December 12, 2005.  She was employed as a controller by Iowa Newspapers, Inc., in Ames, Iowa, from August, 1989 to December, 2005.  Iowa Newspapers, Inc. is a newspaper publishing company.  Ms. Strum is 44.

David Zimmerman.  Mr. Zimmerman has been Lincolnway Energy's commodities manager since March 5, 2007.  He was employed as a commodities analyst by RJ O'Brien and Associates in West Des Moines, Iowa from March, 2004 to March, 2007.  RJ O'Brien and Associates is a futures commission merchant.  He was employed as a commodities merchant with Agri Grain Marketing/Cargill in West Des Moines, Iowa and Eddyville, Iowa from August, 2002 to March, 2004.  Agri Grain Marketing/Cargill is a cash grain brokerage business.  Mr. Zimmerman is 38.

David Sommerlot.  Mr. Sommerlot has been Lincolnway Energy's plant manager since September 8, 2009.  He was employed by Cargill, Inc. from 1976 to July 1985, working at Cargill, Inc.'s Iowa Protein Products Soy Specialties facility in Cedar Rapids, Iowa.  He was transferred by Cargill, Inc. in July of 1985 to Bloomington, Illinois, where he served as the plant superintendent of Cargill, Inc.'s soy crushing facility.  He was transferred again in September 1994 to Des Moines, Iowa, where he served as the plant superintendent for Cargill, Inc.'s oil processing facility until March 2009.  Mr. Sommerlot is 57.

Code of Ethics

Lincolnway Energy has adopted a code of ethics that applies to Lincolnway Energy's directors, principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions for Lincolnway Energy.

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No Changes to Director Nomination Procedures

There were no material changes during the fiscal year ended September 30, 2010 to the procedures by which the members of Lincolnway Energy may recommend nominees for election as a director of Lincolnway Energy.

Audit Committee Financial Expert

Lincolnway Energy has an audit committee.  The members of the audit committee as of the date of this annual report were Richard Johnson, Tim Fevold, Brian Conrad and Rick Vaughan.

Lincolnway Energy's board has determined that Richard Johnson is an audit committee financial expert, as that term is defined in the applicable regulations of the Securities and Exchange Commission.  Lincolnway Energy's board has also determined that Richard Johnson and all of the other members of the audit committee meet the standards of independence under the Governance Guidelines and applicable NASDAQ Stock Market listing standards, including that each of the committee members are free of any relationship that would interfere with the member's individual exercise of independent judgment.

Item 11. Executive Compensation.

The information required by this Item is incorporated by reference from the "Compensation Of Executive Officers And Directors" section in Lincolnway Energy's definitive proxy statement to be filed by Lincolnway Energy with respect to the annual meeting of the members of Lincolnway Energy which will be held in 2011, which definitive proxy statement shall be filed not later than 120 days after the end of the fiscal year covered by this annual report.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

As of the date of this annual report, Lincolnway Energy was only authorized to issue units of membership interest, and Lincolnway Energy did not have any other classes or series of units.

As of the date of this annual report, Lincolnway Energy did not have any compensation plans, including any individual compensation arrangements, under which units of Lincolnway Energy are authorized for issuance.

The following table sets forth certain information regarding the beneficial ownership of units of Lincolnway Energy as of November 30, 2010 by the directors and executive officers of Lincolnway Energy.  Lincolnway Energy had 42,049 outstanding units on November 30, 2010.

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Name of Beneficial Owner	Amount and Nature Of Beneficial Ownership1			Percent of Class
William Couser, Director		413	2		.98	%
Jeff Taylor, Director and Chairman		450	2,3		1.07	%
Timothy Fevold, Director		101			.24	%
Terrill Wycoff, Director and Treasurer		225			.54	%
James Hill, Director		250			.59	%
Brian Conrad, Director and Vice Chairman		553	2		1.32	%
Rick Vaughan, Director		-0-			0	%
Richard Johnson, Director		52			.12	%
Kurt Olson, Director and Secretary		200			.48	%
Richard Brehm, President and Chief Executive Officer		-0-			0	%
Kim Supercynski, Chief Financial Officer		25	4		.06	%
David Zimmerman, Commodities Manager		-0-			0	%
David Sommerlot, Plant Manager		-0-			0	%
All directors and executive officers as a group		2,269			5.4	%

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1 Unless otherwise indicated by a footnote, all of the units are directly owned by the listed individual or jointly owned with their spouse and are not pledged as security by the listed individual.

2 All of the units are pledged as security by the listed individual.

3 Fifty of the units are held by a trust for which Jeff Taylor serves as one of the trustees.

4 All of the units are owned by the spouse of the listed individual.

To Lincolnway Energy's knowledge, as of the date of this annual report:

· No person or group was the beneficial owner of more than 5% of Lincolnway Energy's outstanding units, and no person or group held more than 5% of Lincolnway Energy's outstanding units pursuant to any voting trust or similar agreement, and

· There are no arrangements, including any pledge of units by any person, the operation of which may at a subsequent date result in a change in control of Lincolnway Energy.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Certain Relationships and Related Transactions

There were no transactions since the beginning of Lincolnway Energy's fiscal year ended September 30, 2010, and there are no currently proposed transactions, in which Lincolnway Energy was or is to be a participant where the amount involved exceeds $120,000, and in which any of the following types of persons had, or will have, a direct or indirect material interest:

· any director or executive officer of Lincolnway Energy;

· any person who is known by Lincolnway Energy to be the beneficial owner of more than 5% of Lincolnway Energy's outstanding units; or

· any immediate family member of any of the foregoing persons.

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Director Independence

The directors of Lincolnway Energy are William Couser, Jeff Taylor, Timothy Fevold, Terrill Wycoff, James Hill, Brian Conrad, Rick Vaughan, Richard Johnson and Kurt Olson.  Each of the directors meets the standards of independence under the Governance Guidelines and applicable NASDAQ Stock Market listing standards, including that each director is free of any relationship that would interfere with the director's individual exercise of independent judgment.

Item 14. Principal Accounting  Fees and Services.

The following table presents fees for professional services rendered by McGladrey & Pullen, LLP for the audit of Lincolnway Energy's annual financial statements for the fiscal years ended September 30, 2009 and 2010 and fees billed for other services rendered by McGladrey & Pullen, LLP and its affiliate RSM McGladrey, Inc. during those periods:

	Year Ended September 30,
	2009		2010
Audit Fees	$	93,600	$	96,000
Tax Fees	$	25,750	$	25,250
All Other Fees	$	2,590	$	0
Total	$	121,940	$	121,250

Audit Fees.  The audit fees were billed for the audit by McGladrey & Pullen, LLP of Lincolnway Energy's annual financial statements and review of the financial statements included in Lincolnway Energy's quarterly reports on Form 10-Q or services that are normally provided by McGladrey & Pullen, LLP in connection with statutory and regulatory filings or engagements.

Tax Fees.  The tax fees were billed for services rendered by RSM McGladrey, Inc. for tax compliance, tax advice and tax planning.  The nature of the services comprising the tax fees was for year end tax preparation of the partnership return and associated K-1's.

Lincolnway Energy's board has concluded that the provision of the non-audit services listed above is compatible with maintaining the independence of McGladrey & Pullen, LLP.

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Each specific engagement of McGladrey & Pullen, LLP and its affiliate RSM McGladrey, Inc is pre-approved by the audit committee of the board of Lincolnway Energy.

The percentage of hours expended on McGladrey & Pullen, LLP's engagement to audit Lincolnway Energy's financial statements for the fiscal year ended September 30, 2010 that were attributed to work performed by persons other than McGladrey & Pullen, LLP's  full time, permanent employees did not exceed 50%.

PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a) Financial Statements and Schedules.

The financial statements are set forth in Item 8 of this annual report.  Financial statement schedules have been omitted because they are not required or are not applicable, or the information is otherwise included in this annual report.

(b) Exhibits.

The following exhibits are filed as part of this annual report.  Exhibits previously filed are incorporated by reference, as noted.

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			Incorporated by Reference
Exhibit		Filed Herewith;		Period		Filing
Number	Exhibit Description	Page Number	Form	Ending	Exhibit	Date
3.1	Restatement of the Certificate of Organization	E-1
3.2	Second Amended and Restated Operating Agreement and Unit Assignment Policy	E-2
10.2	Master Loan Agreement Between Lincolnway Energy, LLC and Farm Credit Services of America		10		10.2	1/27/06
10.3	Construction and Term Loan Supplement Between Lincolnway Energy, LLC and FarmCredit Services of America		10		10.3	1/27/06
10.4	Construction and Revolving Term Loan Supplement Between Lincolnway Energy, LLC and Farm Credit Services of America		10		10.4	1/27/06
10.5	Loan Agreement Between Lincolnway Energy,  LLC and Iowa Department of Transportation		10		10.5	1/27/06
10.6	Ethanol Fuel Marketing Agreement Between Lincolnway Energy, LLC and Renewable Products Marketing Group.  See Exhibit 10.6.1 for an amendment to this agreement.		10		10.6	1/27/06
10.6.1	Amendment to Ethanol Fuel Marketing Agreement Between Lincolnway Energy, LLC and RPMG, Inc.		10-K		10.6.1	12/24/08
10.7	Distiller's Grain Marketing Agreement Between Lincolnway Energy, LLC and Hawkeye Gold, LLC		10-K	9/30/07	10.7	12/21/07
*10.9	Coal Supply Agreement Between Lincolnway Energy, LLC and Williams Bulk Transfer, Inc.  See Exhibit 10.9.1 for an amendment to this agreement.		10		10.9	1/27/06

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*10.9.1	Amendment Number One to Coal Supply Agreement Between Lincolnway Energy, LLC and Williams Bulk Transfer, Inc.		10-K	9/30/07	10.9.1	12/21/07
10.10	Loan Agreement Between Lincolnway Energy, LLC and Iowa Department of Economic Development		10		10.10	1/27/06
10.11	Amended and Restated Grain Handling Agreement Between Lincolnway Energy, LLC and Heart of Iowa Cooperative		10		10.11	1/27/06
10.13	Industry Track Contract Between Lincolnway Energy, LLC and Union Pacific Railroad		10-Q	6/30/06	10.13	8/14/06
*10.15	Ethanol Marketing Agreement Between Lincolnway Energy, LLC and Green Plains Trade Group LLC		10-K	9/30/09	10.15	12/22/09
14	Code of Ethics		10-K	9/30/09	14	12/22/09
31.1	Rule 13a-14(a) Certification of President and Chief Executive Officer	E-55
31.2	Rule 13a-14(a) Certification of Chief Financial Officer	E-57
32.1	Section 1350 Certification of President and Chief Executive Officer	E-59
32.2	Section 1350 Certification of Chief Financial Officer	E-60

* Material has been omitted pursuant to a request for confidential treatment and such material has been filed separately with the Securities and Exchange Commission.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	LINCOLNWAY ENERGY, LLC
Date:  December 21, 2010	By:	/s/ Richard Brehm
		Richard Brehm, President and Chief
		Executive Officer

Date:  December 21, 2010	By:	/s/ Kim Supercynski
		Kim Supercynski, Chief Financial
		Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

Date:  December 21, 2010	/s/ William Couser
	William Couser, Director
Date:  December 21, 2010	/s/ Jeff Taylor
	Jeff Taylor, Director
Date:  December 21, 2010	/s/ Timothy Fevold
	Timothy Fevold, Director
Date:  December 21, 2010	/s/ Terrill Wycoff
	Terrill Wycoff, Director
Date:  December 21, 2010	/s/ Kurt Olson
	Kurt Olson, Director
Date:  December 21, 2010	/s/ James Hill
	James Hill, Director
Date:  December 21, 2010	/s/ Brian Conrad
	Brian Conrad, Director

Date:  December 21, 2010	/s/ Richard Johnson
	Richard Johnson, Director
Date:  December 21, 2010	/s/ Rick Vaughan
	Rick Vaughan, Director
Date:  December 21, 2010	/s/ Richard Brehm
	Richard Brehm, President and
	Chief Executive Officer
Date:  December 21, 2010	/s/ Kim Supercynski
	Kim Supercynski, Chief Financial
	Officer

EXHIBIT INDEX

Exhibits Filed With Form 10-K

of Lincolnway Energy, LLC

For the Fiscal Year Ended September 30, 2010

Description of Exhibit			Page
3.	Articles of Incorporation and Bylaws
	3.1	Restatement of the Certificate of Organization	E-1
	3.2	Second Amended and Restated Operating Agreement and Unit Assignment Policy	E-2
31.	Rule 13a-14(a)/15d-14(a) Certifications
	31.1	Rule 13a-14(a) Certification of President and Chief Executive Officer	E-55
	31.2	Rule 13a-14(a) Certification of Chief Financial Officer	E-57
32.	Section 1350 Certifications
	32.1	Section 1350 Certification of President and Chief Executive Officer	E-59
	32.2	Section 1350 Certification of Chief Financial Officer	E-60

EX-3.1

EXHIBIT 3.1

RESTATEMENT OF THE CERTIFICATE OF ORGANIZATION

OF

LINCOLNWAY ENERGY, LLC

TO THE SECRETARY OF STATE

OF THE STATE OF IOWA:

The Members of Lincolnway Energy, LLC, an Iowa limited liability company, elected to have Lincolnway Energy, LLC be subject to the Iowa Revised Uniform Limited Liability Company Act (the "Act") effective as of November 10, 2010.  As part of that election, and pursuant to Section 489.202(3) of the Act, Lincolnway Energy, LLC adopts this restatement of the certificate of organization, with the articles of  restatement of Lincolnway Energy, LLC which were filed on June 29, 2007 having been amended by the Members of Lincolnway Energy, LLC by repealing the articles of restatement in their entirety and by substituting this restatement of the certificate of organization in lieu thereof.

ARTICLE I

The name of the limited liability company is Lincolnway Energy, LLC (the "Company").

ARTICLE II

The street and mailing address of the registered office of the Company is 700 Walnut, Suite 1600, Des Moines, Iowa 50309.

ARTICLE III

The name and street and mailing address of the registered agent for service of process of the Company is Wade H. Schut at 700 Walnut, Suite 1600, Des Moines, Iowa 50309.

Dated this 10th day of November, 2010.

By:	/s/ Jeff Taylor
Name:  Jeff Taylor
Title:  Manager

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EX-3.2

EXHIBIT 3.2

SECOND AMENDED AND RESTATED OPERATING AGREEMENT

OF

LINCOLNWAY ENERGY, LLC

THIS SECOND AMENDED AND RESTATED OPERATING AGREEMENT ("Agreement") is made and entered into as of the date set forth above the signatures to this Agreement, by and among the Members (as that term is defined in Section 1) of Lincolnway Energy, LLC (the "Company").

RECITALS:

A. The Members have elected to have the Company be subject to the Iowa Act (as that term is defined in Section 1).

B. As part of that election, the Members desire to enter into this Agreement to, in general, govern the relations among the Members and between the Members and the Company, the rights and duties of the Directors, the activities of the Company, and the conduct of those activities, and with this Agreement to be effective automatically upon the filing of the Restatement of the Certificate of Organization of the Company dated the same date as this Agreement with and by the Iowa Secretary of State, and to, at that time, supersede and replace in entirety the Amended and Restated Operating Agreement of the Company dated as of June 29, 2007 (the "Prior Operating Agreement").

NOW, THEREFORE, in consideration of the Recitals and the mutual agreements set forth in this Agreement, the Members agree as follows:

ARTICLE 1

DEFINITIONS

1.1          Definitions.  The following terms shall have the following meanings for purposes of this Agreement:

(a)           Additional Members.  The term "Additional Members" means, collectively, all Persons who are issued Units (as that term is defined below) and are admitted as a Member pursuant to the procedures set forth in Section 9.4.  The term "Additional Member" means any one of the Additional Members.

(b)           Adjusted Capital Account.  The term "Adjusted Capital Account" means, with respect to each Member, the Member's Capital Account (as that term is defined below) as adjusted by the items described in Sections 1.704-2(g)(1), 1.704-2(i)(5) and 1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Treasury Regulations (as that term is defined below).

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(c)           Agreement. The term "Agreement" means this Second Amended and Restated Operating Agreement, as the same may be amended or restated from time to time in accordance with this Agreement.

(d)           Assign, Assigned and Assignment.  The terms "Assign", "Assigned" and "Assignment" are defined in Section 9.1.

(e)           Capital Account.  The term "Capital Account" means, with respect to each Member, the capital account of the Member at the particular time in question, as maintained and adjusted up to the particular time in question pursuant to Section 7.3.

(f)           Certificate of Organization.  The term "Certificate of Organization" means the certificate of organization or restated certificate of organization, as the case may be, of the Company, as the same may be amended or restated from time to time in accordance with this Agreement, with the Certificate of Organization as of the date of this Agreement being the Restatement of the Certificate of Organization dated the same date as this Agreement.

(g)           Code.  The term "Code" means the United States Internal Revenue Code of 1986, as amended from time to time, or corresponding provisions of subsequent superseding United States federal revenue laws.

(h)           Contribution.  The term "Contribution" means any benefit provided by a Member to the Company in order to become a member of the Company, whether upon or after the formation of the Company, or otherwise in the Member's capacity as a member of the Company.  A Contribution may consist of tangible or intangible property or any other benefit to the Company which is acceptable to the Directors, including money, services performed, promissory notes, other agreements to contribute money or property, and contracts for services to be performed.

(i)            Director.  The term "Director" means any one of the individuals who are elected or appointed as a director from time to time in the manner provided in this Agreement.  The term "Directors" means the number of such directors as is specified or contemplated by the particular provision of this Agreement which is in question.  As provided in Section 4.17, the Directors are synonymous with, and shall be deemed for all purposes to be the same as, "managers" for purposes of the Iowa Act (as that term is defined below) and the Certificate of Organization.

(j)            Distribution.  The term "Distribution" means a transfer of money or property by the Company to a Member on account of a Unit.

(k)           Fiscal Year.  The term "Fiscal Year" means the Company's fiscal year, which shall be determined from time to time by the Directors, but which in the absence of an express determination by the Directors to the contrary, shall be from the first day of October to the last day of September.

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(l)            Iowa Act.  The term "Iowa Act" means the Revised Uniform Limited Liability Company Act, Chapter 489 of the Code of Iowa, as amended or redesignated from time to time.

(m)          Members.  The term "Members" means, collectively, the Persons who are, at the particular time in question, the record holders of the outstanding Units.  The term "Member" means any one of the Members, or, if there is only one Member, the sole Member.

(n)           Net Losses.  The term "Net Losses" means, for each Fiscal Year, the net losses and deductions of the Company determined in accordance with accounting principles and methods of accounting consistently applied from year to year as determined by the Directors.  The Directors may determine to utilize one method of accounting for tax purposes of the Company and another for financial and/or other purposes.  The determination of Net Losses shall not include any Regulatory Allocations (as that term is defined below).

(o)           Net Profits.  The term "Net Profits" means, for each Fiscal Year, the net income and gains of the Company determined in accordance with accounting principles and methods of accounting consistently applied from year to year as determined by the Directors.  The Directors may determine to utilize one method of accounting for tax purposes of the Company and another for financial and/or other purposes.  The determination of Net Profits shall not include any Regulatory Allocations.

(p)           Person.  The term "Person" means and includes an individual and any firm, partnership, limited partnership, limited liability company, limited liability limited partnership, limited liability partnership, corporation, joint venture, trust, estate, cooperative, association and any other entity of whatever nature, including public or governmental bodies, agencies or instrumentalities.

(q)           Record.  The term "Record" means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.

(r)           Regulatory Allocations.  The term "Regulatory Allocations" means the allocations pursuant to Sections 8.1(b), (c), (d) and (e).

(s)           Substitute Member.  The term "Substitute Member" means any Person who is an assignee of a Unit and who has been admitted as a Member with respect to such Unit pursuant to the procedures set forth in Section 9.2.

(t)            Treasury Regulations.  The term "Treasury Regulations" means the Income Tax Regulations, including temporary regulations, promulgated under the Code, as such regulations may be amended from time to time.

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(u)           Units.  The term "Units" means the capital units of the Company.  The term "Unit" means any one of the capital  units of the Company.

Other terms which are utilized in this Agreement may be defined in other sections of this Agreement.

ARTICLE 2

PURPOSE AND DURATION OF THE COMPANY

2.1          Purpose of the Company.  The Company may have any lawful purpose, and the Company has the authority to engage in any lawful business or activity.

2.2          Duration of the Company.  The Company has perpetual duration and shall continue until dissolved and wound up in accordance with this Agreement.

ARTICLE 3

CERTIFICATES FOR UNITS

3.1          Certificates for Units. Units may be issued with or without certificates as determined and authorized by the Directors from time to time.  Any certificates that are issued for Units shall be in such form as the Directors shall prescribe.  All Units shall in all events be issued and held upon and subject to all of the terms and conditions of this Agreement, including Sections 9.1 and 9.2, and the Directors may require that any certificates that are issued to evidence any Units shall bear a legend to such effect, in addition to the legend contemplated by Section 3.8 and any other legends as the Directors may from time to time require.

3.2          Execution of Certificates.  All certificates for Units shall be numbered in the order in which they shall be issued and shall be signed by any two Directors or by the Chairman or the President and also by the Secretary of the Company.  The signature of a Director or of the Chairman, the President or the Secretary upon a certificate may be by facsimile.  In the event any individual who has signed or whose facsimile signature has been placed upon a certificate for Units shall have ceased to be a Director or the Chairman, the President or the Secretary, as the case may be, of the Company before the certificate is issued, the certificate may be issued by the Company with the same effect as if the individual were a Director or the Chairman, the President or the Secretary, as the case may be, of the Company at the date of issue of the certificate.

3.3          Cancellation.  Every certificate surrendered to the Company for exchange or transfer shall be canceled, and no new certificate shall be issued in exchange for any existing certificate until the existing certificate shall have been so canceled, except in cases provided for in Section 3.4; provided, however, that the Directors may authorize the issuance of Units without certificates in exchange for any surrendered and canceled certificate.  Every certificate surrendered to the Company for transfer shall be properly endorsed for transfer or accompanied by another transfer document acceptable to the Directors.

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3.4          Lost, Destroyed, or Mutilated Certificates.  In the event of the loss, theft or destruction of any certificate for any Unit, another may be issued in its place pursuant to such regulations as the Directors may establish concerning proof of such loss, theft or destruction and concerning the giving of satisfactory indemnity or bonds of indemnity.

3.5          Unit Record and Ownership.   A record shall be kept by the Company of the names and addresses of all Members and the number of Units held by each Member, and if the Units are represented by certificates, the respective dates thereof, and in case of cancellation, the respective dates of cancellation.  The Person in whose name Units stand on the books of the Company shall be deemed to be the record holder and owner of such Units and the Member with respect to such Units for all purposes as regards the Company.

3.6          Assignments of Units.   Assignments of Units shall be made only on the books of the Company by the record holder of the Units in question, or by such record holder's attorney in fact who has been authorized by power of attorney duly executed by the record holder and filed with the Company, and on surrender of the certificate for such Units, if any, properly endorsed and the payment of all transfer taxes thereon, if any.  All Units shall in all events be Assigned only upon and subject to all of the terms and conditions of this Agreement, including Sections 9.1 and 9.2.

3.7          Regulations.  The Directors may make such other rules and regulations as the Directors may deem necessary or appropriate concerning the issue, Assignment and registration of Units, so long as such rules and regulations are not inconsistent with the Certificate of Organization, this Agreement or applicable law.

3.8          Article 8 Election.  All Units shall be "securities" governed by Article 8 of the Uniform Commercial Code in any jurisdiction (i) that has adopted revisions to Article 8 of the Uniform Commercial Code substantially consistent with the 1994 revisions to Article 8 adopted by the American Law Institute and the National Conference of Commissioners on Uniform State Laws, and (ii) the laws of which may be applicable, from time to time, to the issues of perfection, the effect of perfection or nonperfection and the priority of a security interest in the Units.  Any certificate evidencing Units which is issued after the date of this Agreement may bear a legend substantially to the following effect:  "THIS CERTIFICATE EVIDENCES UNITS OF MEMBERSHIP INTEREST IN LINCOLNWAY ENERGY, LLC AND SHALL BE A SECURITY FOR PURPOSES OF ARTICLE 8 OF THE UNIFORM COMMERCIAL CODE."

ARTICLE 4

RIGHTS AND DUTIES OF DIRECTORS; OFFICERS

4.1           Director-Managed Company; Qualifications and Powers of the Directors.  Subject only to Section 4.16, the business and activities of the Company shall be managed by, and under the direction of, the Directors, and any matter regarding the business or activities of the Company may be decided by the Directors.  No Director is required to be a Member, an officer or employee of the Company, or a resident of the State of Iowa, and a Director who is also a Member will not cease to be a Director by reason of such Director ceasing to be a Member.  A Director must be an individual.

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No Director may delegate to any Person the Director's rights and powers to manage and control the business and affairs of the Company, except only as provided in Sections 4.12 and 4.13 with respect to the appointment of officers for the Company and the establishment of committees, and except that the Directors may cause the Company to enter into such management, consulting, advisory, employment or other agreements as the Directors may determine from time to time, and on such terms and conditions as are determined by the Directors.

Without limiting the generality of the foregoing, but subject to Section 4.16, the Directors shall have the power and authority, on behalf of the Company, to exercise all powers of the Company, including under Section 489.105 of the Iowa Act, including:

(a)           to employ or otherwise retain the services of such agents, employees, general managers, accountants, attorneys, consultants, experts and other Persons as the Directors from time to time determine to be necessary or appropriate to carry out the business and affairs of the Company, including any Director, Member or officer of the Company or any Person who is affiliated with or related to any Director, Member or officer, all upon terms satisfactory to the Directors, and to pay such fees, salaries, wages and other compensation and benefits to such Persons from the funds of the Company as the Directors shall determine from time to time;

(b)           to pay, extend, renew, modify, adjust, contest, submit to arbitration, prosecute, defend, settle or compromise, upon such terms as the Directors may determine and upon such evidence as the Directors may deem sufficient, any obligation, suit, liability, cause of action, claim, counterclaim or other dispute, including taxes, either in favor of or against the Company;

(c)           to incur and pay any and all fees, costs, expenses and other amounts that the Directors deem necessary or appropriate to the business and affairs of the Company;

(d)           to offer and sell Units, debt or other securities of the Company, and in connection with the offer and sale of any Units, debt or other securities of the Company the Directors may (i) prepare and file, or cause to be prepared and filed, one or more offering statements or registration statements and related or other documentation, and all such amendments and supplements thereto as the Directors shall deem advisable from time to time, with the Securities and Exchange Commission, the Financial Industry Regulatory Authority and/or any other domestic or foreign authorities for the registration, offering and sale of the Units, debt or other securities in the United States or elsewhere, and along with one or more offering memorandums, offering circulars, prospectuses or other disclosure documents, and all amendments and supplements to any thereto; (ii) register or otherwise qualify the Units, debt or other securities for offering and sale under the blue sky and securities laws of such states of the United States and other domestic or foreign jurisdictions as the Directors shall deem advisable; (iii) make all such arrangements for the offering and sale of the Units, debt or other securities as the Directors shall deem appropriate, whether pursuant to a registration of the Units, debt or other securities or otherwise, and (iv) take all such action with respect to the matters described in the preceding subclauses (i) through (iii) as the Directors shall deem advisable or appropriate;

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(e)           to take all such action as the Directors deem necessary or appropriate to avoid the requirement that the Company become licensed, registered or regulated as an investment advisor, an investment company, a broker-dealer or any other form of regulated entity under any foreign, federal, state or local law, rule, regulation or order, or, if so determined by the Directors, to take all such action as the Directors deem necessary or appropriate to cause the Company to be licensed, registered or regulated under any such law, rule, regulation or order and to otherwise bring the Company in compliance with any such law, rule or regulation or order;

(f)            to conduct and direct the banking business of the Company and to invest any  funds of the Company that are not required for, or are otherwise not committed to the conduct of, the Company's business from time to time in such manner as the Directors may from time to time determine, including in certificates of deposit, commercial paper, treasury bills, sweep accounts, and other investments;

(g)           to negotiate, enter into, execute, acknowledge and deliver any and all contracts, agreements, licenses, leases, documents or instruments that the Directors from time to time determine are necessary or appropriate to the business or affairs of the Company, and with such Persons as the Directors shall from time to time determine, including any Director, Member or officer of the Company or any Person who is affiliated with or related to any Director, Member or officer, including subscription agreements for Units, debt or other securities of the Company; checks, drafts, notes and other negotiable instruments; mortgages or deeds of trust; security agreements; financing statements; documents providing for the acquisition, lease, mortgage or disposition of any or all of the Company's assets and properties; assignments; bills of sale; leases; partnership agreements; and all other contracts, agreements, instruments or documents that the Directors from time to time determine are necessary or appropriate to the business or affairs of the Company;

(h)           to pay any and all taxes, charges and assessments that may be levied, assessed or imposed upon the Company or any of the assets or properties of the Company, or to contest any such taxes, charges or assessments;

(i)            without limiting subparagraphs (j) and (k) below, to invest in and purchase stock, units or other equity interests in, or debt or other obligations of, such Persons and on such terms as are determined by the Directors from time to time, and to otherwise make any and all decisions with respect to any and all such investments, including voting the stock, units or other equity interests; exercising or refraining from exercising any exchange, conversion or other rights or options with respect to any such stock, units, equity interests, debt or other obligations; and selling or otherwise assigning, transferring or disposing of any such stock, units, equity interests, debt or other obligations;

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(j)            to acquire any assets or properties from any Person as the Directors may from time to time determine and on such terms as are determined by the Directors, and the fact that such Person is a Director, a Member or an officer of the Company or that a Director, a Member or an officer is directly or indirectly affiliated or connected with any such Person shall not prohibit the Directors from dealing with that Person;

(k)           to sell, lease, exchange or otherwise transfer or dispose of any assets or properties of the Company as the Directors shall from time to time deem appropriate and on such terms as are determined by the Directors;

(l)            to submit all applications for, and take all other actions as may be necessary or appropriate in order to obtain and maintain, any and all governmental, regulatory or other permits, licenses, consents or approvals as may be necessary or appropriate to the Company or to the conduct of its business or affairs;

(m)          to borrow money for the Company from banks, insurance companies or other financial or lending institutions, or from a Director, a Member, an officer of the Company, an affiliate of a Director, a Member or an officer or from any other Person, all on such terms as the Directors deem appropriate, and in connection therewith, to mortgage, encumber and grant mortgages and security interests in any or all of the assets and properties of the Company to secure repayment of the borrowed sums;

(n)           to purchase liability and other insurance to protect the Company's assets, property and business or any other potential obligations or liabilities of the Company, including obligations and liabilities arising under Article 12;

(o)           to hold and own any Company real estate or personal property in the name of the Company;

(p)           to conduct or operate any of the Company's business or affairs by, through or in connection with any subsidiary or affiliate of the Company, and to organize, and to make capital contributions or loans to, any such subsidiary or affiliate;

(q)           to cause the Company to, at any time and from time to time, redeem or purchase any or all of the Units of any Member or Members, on such terms and conditions as are determined by the Directors from time to time;

(r)            to establish and maintain a reserve or fund, in such amounts and at such times and for such periods of time as are determined by the Directors, for the purpose of the possible redemption or purchase of Units by the Company;

(s)           to prepare and file, if determined to be necessary by the Directors, a statement of change, an amendment to the Certificate of Organization, a statement of correction and/or a biennial report, all in accordance with the Iowa Act, including Sections 489.114, 489.202(5), 489.206 and 489.209 of the Iowa Act;

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(t)            to make all determinations and decisions which are reserved to the Directors, or which are otherwise to be made by the Company, under this Agreement, the Iowa Act or other applicable law, including the declaration and payment of Distributions to the Members pursuant to Section 8.2; and

(u)           to do and perform any and all other acts and things whatsoever as the Directors shall from time to time determine to be necessary or appropriate to carry out any of the foregoing or any other term or condition of this Agreement, the Certificate of Organization, the Iowa Act or other applicable law, or to the conduct or operation of the Company's business, affairs or activities from time to time, and not inconsistent with the Iowa Act or other applicable law, the Certificate of Organization or this Agreement.

The Directors also may, but are not obligated or required to, at any time and from time to time, prepare, execute and file or record with the Iowa Secretary of State and all such other governmental, regulatory or other authorities as are determined by the Directors from time to time, a statement or statements of authority in a form permitted by the Iowa Act; provided, however, that any such statement of authority shall only authorize one or more of the Directors or the officers of the Company (whether by position or by specific person) to execute or enter into any agreements, documents or instruments of whatever type or nature whatsoever on behalf of the Company, or to otherwise enter into transactions on behalf of, or otherwise act for or bind, the Company with respect to any matter whatsoever.  The Directors may also prepare, execute and file or record all such amendments to, or cancellations of, any such statement of authority as are determined by the Directors from time to time.

4.2          Number of and Election of Directors; Term of Office.  The number of Directors shall be not less than seven nor more than thirteen, with the exact number within such range to be determined and established from time to time by the Members.  In the absence of a specific resolution by the Members, the number of Directors shall be nine.

Subject to Section 4.10, the Directors shall be elected by the Members at the annual meeting of the Members.  Subject again to Section 4.10, each Director shall serve until the third annual meeting of the Members which follows the annual meeting at which he or she was elected and until his or her successor shall have been elected, or until his or her death or resignation or removal in accordance with, respectively, Section 4.8 or Section 4.9.

The Directors shall be divided into three classes based on their term of office, with the number of Directors in each such class to be determined by the Directors, but with each class to be as nearly equal in number as possible.  The term of each of the individuals serving in one class of the Directors shall expire each year at the annual meeting of the Members for that year, and each individual elected by the Members to succeed that class of the Directors shall be elected to serve until the third annual meeting of the Members which follows the annual meeting at which such individual was elected and until his or her successor shall have been elected, or until his or her death or resignation or removal in accordance with, respectively, Section 4.8 or Section 4.9.

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Any vacancy occurring in any Director position, for whatever reason (including by the Members increasing the number of Directors), shall be filled in the manner provided in Section 4.10.

In the event the Members decrease the number of Directors, the Directors shall designate the class of Directors from which such decrease shall occur, but with each class to be as nearly equal in number as possible following such decrease in the number of Directors.  No decrease in the number of Directors shall have the effect of terminating or shortening the term of any then incumbent Director.

4.3          Nominations for Directors.  The Directors, or a nominating committee established by the Directors, shall prepare a list of nominees for each Director position to be filled at the next  annual meeting of the Members.  The Directors may, pursuant to agreement with any Person, permit such Person to designate a nominee or nominees for election as a Director.

Any Member or Members owning at least five percent of the outstanding Units may also nominate any individual (including any such Member) for election as a Director at the next annual meeting of the Members by submitting a written nomination petition to the Company in a form provided by the Company (the "Nomination Petition") and signed by such Member or Members; provided, however, that (i) the Nomination Petition must be fully completed and received at the principal office of the Company no sooner than the October 1, but not later than the November 30, which precedes the annual meeting in question, or, if another period is expressly and affirmatively required by applicable law, rule or regulation, within the time period required by such law, rule or regulation; (ii) the nominee must submit a signed written statement in a form provided by the Company (the "Nominee Statement") wherein the nominee shall, among other things, agree that the nominee will serve as a Director if elected and will prepare, execute and/or file all such reports and documents, and provide the Company with all such information, as may be necessary or appropriate in order for the Company to comply with all applicable laws, rules and regulations, including the Securities Exchange Act of 1934 and all rules and regulations promulgated thereunder; (iii) the nominee must meet all qualification requirements for Directors as may exist at the time of the nomination and at the time of election; and (iv) the Directors shall have the right to determine the slate (if any) on which the nominee shall be placed for purposes of the vote of the Members.  The Nomination Petition and the Nominee Statement may require all such information and all such agreements and representations as are determined to be necessary or appropriate by the Directors or the President.  Any Nomination Petition or Nominee Statement which is not fully completed and properly executed, or which is not received within the time period provided above or is not true, accurate and complete in all respects, may be rejected by the Company and, if rejected, shall be returned by the Company to the Member or Members submitting the Nomination Petition or to the nominee submitting the Nominee Statement, as the case may be.

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No nominations for any Director position may be made from the floor at any meeting of the Members.

4.4          Quorum and Manner of Acting.  Subject to Section 4.10, a quorum for a meeting of the Directors shall consist of a majority of the total number of Directors established from time to time in accordance with Section 4.2. If at any meeting of the Directors there be less than a quorum present, a majority of the Directors present may adjourn the meeting from time to time until a quorum shall be present.  Notice of any adjourned meeting need not be given.

At all meetings of the Directors, a quorum being present, the act of a majority of the total number of Directors then in office shall be the act of the Directors with respect to all votes, decisions, acts or other determinations to be made or taken by the Directors, including with respect to the matters addressed in Sections 4.1, 4.2, 4.10, 4.11, 4.12, 7.1, 7.3, 7.6, 7.8, 8.1, 8.2, 9.1, 9.4, 9.5 and 9.6, except only as provided in Section 11.1(a) or unless the vote of a greater number is otherwise expressly and affirmatively required by the Iowa Act with respect to the particular matter in question and the Iowa Act expressly and affirmatively provides that such voting requirement cannot be varied, waived or altered notwithstanding the express intent, desire and agreement of the Members as expressed in this paragraph that the act of a majority of the total number of Directors then in office shall be the act of the Directors with respect to all matters presented to or otherwise determined by the Directors.

Any action required or permitted to be taken at a meeting of the Directors may be taken without a meeting and without any notice if the action is taken by at least seventy-five percent (75%) of the total number of Directors then in office and if one or more written consents or written actions describing the action so taken shall be signed by such Directors.  Any such written consent or written action shall be effective when the last such Director signs the written consent or written action, unless the written consent or written action specifies a different effective date.  Any such written consent or written action shall be placed in the minute book of the Company or otherwise retained in the records of the Company.  The Company shall give notice of the taking of action without a meeting of the Directors by less than unanimous consent of the Directors to each Director who did not execute the written consent or written action in question, and which notice may be effectuated by giving a copy of such written consent or written action to each Director who did not sign the written consent or written action.  Any written consent or written action of the Directors may be executed in counterparts, and may be given and received by the Company and any or all of the Directors by any form of electronic transmission as provided in Section 13.1.

4.5          Meetings of Directors; Place of Meetings.  The Directors shall meet within forty-five days of the date of each annual meeting of the Members for the purpose of the designation and election of officers, the establishment of any committees and the transaction of such other business as is determined by the Directors.  Notice of such annual meeting of the Directors shall be given as provided below for special meetings of the Directors.

Regular meetings of the Directors shall be held at such place and at such times as the Directors may fix and determine from time to time.  No notice shall be required for any such regular meeting of the Directors.

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Special meetings of the Directors shall be held whenever called by the Chairman, the President or by any three or more of the Directors at the time being in office.  Notice of each special meeting shall be given to each Director at least two days before the date on which the meeting is to be held.  Each notice shall state the date, time and place of the meeting.  Unless otherwise stated in the notice thereof, any and all business may be transacted at a special meeting.

At any meeting at which every Director is present, even without any notice, any business may be transacted.

A Director may waive any notice required by the Iowa Act or this Agreement if the waiver is in writing and is signed by the Director, and whether before or after the date and time stated in such notice.  A waiver of notice shall be equivalent to notice in due time as required by the Iowa Act or this Agreement.  The attendance of a Director at, or participation in, a meeting shall constitute a waiver of notice of such meeting and of objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the Director, at the beginning of the meeting or promptly upon arrival, objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting.

A Director who is present at a meeting of the Directors at which action on any matter is taken shall be presumed to have assented to the action taken unless the Director's dissent is entered in the minutes of the meeting or unless the Director files a written dissent to the action with the individual acting as the secretary of the meeting before the adjournment thereof or forwards such dissent by registered or certified mail to the Chairman, the President, the Secretary or the other Directors within one day after the date of the adjournment of the meeting.  No right to dissent shall be available, however, to a Director who voted in favor of the action in question.

The Directors may hold meetings of the Directors at such place or places, either within or without the State of Iowa, as the Directors may from time to time determine.  If no designation of the place for a meeting of the Directors is made, the place of the meeting shall be the principal office of the Company in the State of Iowa.

The Directors may hold any meeting, and a Director may participate in any meeting, by any means of communication, including telephone or video conference call or other telecommunications equipment or methods, by means of which all of the Directors participating in the meeting can simultaneously hear each other during the meeting.  A Director participating in a meeting by any such means or methods is deemed to be in attendance at, and present in person at, the meeting.

At all meetings of the Directors, the Chairman, or in the absence of the Chairman, the Vice Chairman, or in the absence of the Vice Chairman, the individual designated by the vote of a majority of the total number of Directors then in office, shall preside over and act as chairperson of the meeting.  At all meetings of the Directors, the Secretary, or in the absence of the Secretary, the individual designated by the vote of a majority of the total number of Directors then in office, shall act as secretary for the meeting.  All business to be transacted at meetings of the Directors shall be transacted in such order and with such procedures as the chairperson of the meeting shall determine.

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The Directors may adopt rules and regulations for the conduct of the meetings of the Directors and the management of the Company, so long as such rules and regulations are not inconsistent with the Certificate of Organization, this Agreement or the Iowa Act.

4.6          No Liability.  A Director does not guarantee the return of any Member's Contribution or Capital Account, any Distributions to the Members or a profit for the Members from the operations of the Company.  A Director is not personally liable for any of the acts or omissions of the Company, or for any debts, losses, liabilities, duties or obligations of the Company, whether arising in contract, tort or otherwise.

4.7          Directors Have No Exclusive Duty to Company.  Subject to Section 11.1 and except as may be provided in another agreement between the Company and the Director in question, a Director shall not be required to manage the Company as his or her sole and exclusive function, and a Director may have other business interests and may engage in other activities in addition to those relating to the Company.  Neither the Company nor any Member shall have any right by virtue of this Agreement to share or participate in any other interests or activities of any Director or to the income, proceeds or other benefits derived therefrom.

4.8          Resignation.  Any Director may resign at any time by giving written notice to the Chairman, the President, the Secretary, or any two of the other Directors.  The resignation of a Director shall be effective when the notice is received by the Chairman, the President, the Secretary or any other Director, as the case may be, or at such later time as may be specified in the notice; and, unless otherwise specified in the notice, the acceptance of a resignation shall not be necessary to make it effective.

4.9          Removal.  Any Director may be removed at any time, with or without cause, but only by the Members.

4.10        Vacancy.  Any vacancy occurring for any reason in a Director position (including through an increase in the number of Directors or the death, removal or resignation of any Director) may be filled by either the remaining Directors or by the Members, except that only the Members may fill a vacancy occurring because of the removal of a Director by the Members.  If the Directors remaining in office constitute fewer than a quorum of the Directors, the Directors may fill the vacancy by the affirmative vote of a majority of the Directors remaining in office.

In the event of a vacancy occurring by reason of an increase by the Members in the number of Directors, the Directors shall designate the class of the Directors to which such additional position shall be assigned, but with each class to be as nearly equal in number as possible following such increase in the number of the Directors.

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An individual elected by the Directors to fill a vacancy shall continue to serve as a Director only until the next annual meeting of the Members, at which time the Members shall elect an individual to such Director position, who shall serve for the remainder of the unexpired term of such Director position and until his or her successor shall have been elected, or until his or her death or resignation or removal in accordance with, respectively, Section 4.8 or Section 4.9.  An individual elected by the Members to fill a vacancy shall continue to serve as a Director for the remainder of the unexpired term of such Director position and until his or her successor shall have been elected, or until his or her death or resignation or removal in accordance with, respectively, Section 4.8 or Section 4.9.

4.11       Salary and Other Compensation.  Subject only to Section 4.16(e), the salaries, fees, benefits, reimbursements and all other compensation payable to the Directors and to the officers of the Company, in their capacity as Directors and officers, shall be fixed from time to time by the Directors, including with respect to meeting and committee fees.  No Director or officer of the Company shall be prevented from receiving any salary, fees, benefits, reimbursements or other compensation by reason of the fact, without limitation, that the Director or officer is also a Member or is affiliated with any Member.

4.12       Officers.  The officers of the Company shall be a Chairman, a Vice Chairman, a President, one or more Vice Presidents (the number thereof to be determined by the Directors), a Secretary, a Chief Financial Officer, a Treasurer and such other officers as may from time to time be designated and elected by the Directors.  One individual may hold the offices and perform the duties of any two or more of said offices.  No officer is required to be a Director, a Member, an employee of the Company or a resident of the State of Iowa.  The Directors may delegate the powers or duties of any officer to any other officer or agent, notwithstanding any provision of this Agreement, and the Directors may leave any office unfilled for any such period of time as the Directors may determine from time to time, except the offices of President, Chief Financial Officer and Secretary.

The officers of the Company shall be elected annually by the Directors at the annual meeting of the Directors.  Each officer shall hold office until the next succeeding annual meeting of the Directors and until his or her successor shall have been elected, or until his or her death or resignation or removal in accordance with this Agreement.

An officer may resign at any time by delivering written notice to the Chairman, the President, the Secretary or any two of the Directors.  The resignation of an officer shall be effective when the notice is received by the Chairman, the President, the Secretary or any Director, as the case may be, or at such later time as may be specified in the notice, and, unless otherwise specified in the notice, the acceptance of a resignation shall not be necessary to make it effective.  Any officer may be removed by the Directors at any time, with or without cause, for any reason or for no reason, but such removal shall be without prejudice to the contract rights, if any, of the individual so removed.  The election of an officer does not itself create contract rights in favor of the officer.

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The Chairman shall, if present at the meeting in question, preside over and act as chairperson of all meetings of the Members and all meetings of the Directors.  The Chairman shall have authority to sign, execute and acknowledge all contracts, checks, deeds, mortgages, bonds, leases or other obligations on behalf of the Company which shall be authorized by the Directors, and the Chairman may sign, along with the Secretary, certificates for Units.  The Chairman shall be subject to the control of the Directors and shall keep the Directors fully informed and shall freely consult with the Directors concerning the business of the Company.  The Chairman shall also perform all duties as may from time to time be assigned to the Chairman by the Directors.

The Vice Chairman shall perform the duties of the Chairman in the absence of the Chairman or in the event of the death, inability or refusal to act of the Chairman, and, when so acting, shall have all of the powers of, and shall be subject to all the restrictions upon, the Chairman.  The Vice Chairman shall also perform all duties as may from time to time be assigned to the Vice Chairman by the Chairman, the President or the Directors.

The President shall, subject to the control of the Directors, have general charge of and direct the operations of the Company and shall be the chief executive officer of the Company.  The President shall keep the Directors fully informed and shall freely consult with the Directors concerning the business of the Company in his or her charge.  The President shall have authority to sign, execute and acknowledge all contracts, checks, deeds, mortgages, bonds, leases or other obligations on behalf of the Company as the President deems necessary or appropriate to or for the course of the Company's regular business or which shall be authorized by the Directors, and the President may sign, along with the Secretary, certificates for Units.  The President may sign, in the name of the Company, all reports and all other documents or instruments which are necessary or appropriate to or for the Company's business.  The President shall also perform all duties as may from time to time be assigned to the President by the Directors.

In the absence of the President or in the event of the death, inability or refusal to act of the President, the Vice President (or in the event there is more than one Vice President, the Vice Presidents in the order designated at the time of their election, or in the absence of any designation, the senior Vice President in length of service) shall perform the duties of the President, and, when so acting, shall have all the powers of, and shall be subject to all the restrictions upon, the President.  A Vice President shall also perform all duties as may from time to time be assigned to such Vice President by the President or the Directors.

The Secretary shall (i) if present at the meeting in question, act as secretary for and keep minutes of all meetings of the Members and all meetings of the Directors; (ii) authenticate records of the Company and attend to giving and serving all notices of the Company as provided by this Agreement or as required by applicable law; (iii) be custodian of the seal, if any, of the Company and of such books, records and papers as the Directors or the Chairman or the President may direct; (iv) sign, along with the Chairman or the President, certificates for Units; (v) keep a record showing the names of all Persons who are Members, their mailing and e-mail addresses as furnished by each Member, the number of Units held by them and the certificates representing such Units; and (vi) in general, perform all duties incident to the office of Secretary and all duties as may from time to time be assigned to the Secretary by the President or the Directors.

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The Chief Financial Officer shall be the chief financial officer of the Company, and shall (i) have custody of and be responsible for all moneys and securities of the Company; (ii) keep full and accurate records and accounts in books belonging to the Company, showing the transactions of the Company, its accounts, liabilities and financial condition and shall endeavor to assure that all expenditures are duly authorized and are evidenced by proper receipts and vouchers; (iii) deposit in the name of the Company in such depository or depositories as are approved by the President or the Company, all moneys that may come into the Chief Financial Officer's hands for the Company's account; (iv) prepare or cause to be prepared such financial statements as are directed by the President or by the Directors; and (v) in general, perform all duties as may from time to time be assigned to the Chief Financial Officer by the President or the Directors.

The Treasurer shall perform the duties of the Chief Financial Officer in the absence of the Chief Financial Officer or in the event of the death, inability or refusal to act of the Chief Financial Officer, and, when so acting, shall have all the powers of, and shall be subject to all the restrictions upon, the Chief Financial Officer.  The Treasurer shall also perform all duties as may from time to time be assigned to the Treasurer by the Chief Financial Officer, the President or the Directors.

The Directors also have the power to appoint any individual to act as assistant to any officer, or to perform the duties of any officer, whenever for any reason it is impracticable for such officer to act personally, and such assistant or acting officer shall have the power to perform all the duties of the office to which he or she is so appointed to be assistant, or as to which he or she is so appointed to act, except as such power may be otherwise defined or restricted by the Directors.

4.13       Committees.   The Directors may, but are not required to, from time to time establish one or more committees, including an executive committee, an audit committee, a compensation committee and a nominations committee, with each committee to consist of two or more Directors appointed by the Directors.  Any committee shall serve at the will of the Directors.  Each committee shall have the powers and duties delegated to it by the Directors.  The Directors may appoint one or more Directors as alternative members of any committee who may take the place of any absent member or members of the committee at any meetings of the committee, upon request by the Chairman, the President or the chairperson of the committee.  Each committee may establish a charter or other rules governing the conduct of its activities, but any such charter or rules, and any amendments or other changes thereto from time to time, must be approved by the Directors.

A committee shall in no event, however, have the authority to:  (i) authorize Distributions by the Company; (ii) approve or propose to the Members any action that this Agreement requires be approved by the Members; (iii) fill vacancies in the Directors or on any of the committees established by the Directors; (iv) amend the Certificate of Organization or this Agreement; (v) authorize or approve the acquisition of any Units by the Company; or (vi) authorize or approve the issuance or sale of, or contract for the sale of, any Units or any debt or other securities of the Company.

4.14        Execution of Documents.  The Directors may authorize any one or more Directors or officers of the Company to negotiate, execute and/or deliver any agreements, documents or instruments of whatever type or nature whatsoever in the name of and on behalf of the Company, and such authority may be general or confined to specific transactions or instances.

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4.15      Right of Directors to Information.  On reasonable notice, a Director may inspect and copy during regular business hours, at a reasonable location specified by the Company, any record maintained by the Company regarding the Company's activities, financial condition, and other circumstances, to the extent the information is material to the Director's rights and duties under this Agreement or the Iowa Act.

The Company shall furnish or make available to each Director all of the following:

(a)           Without demand, any information concerning the Company's activities, financial condition, and other circumstances which the Company knows and is material to the proper exercise of the Director's rights and duties under this Agreement or the Iowa Act, except to the extent the Company can establish that the Company reasonably believes that the Director already knows the information; and

(b)           On demand, any other information concerning the Company's activities, financial condition, and other circumstances, except to the extent the demand or information demanded is unreasonable or otherwise improper under the circumstances.

The duty to furnish information under this paragraph also applies to each Director to the extent the Director knows any of the information described in this paragraph.

4.16      Member Action Required.  Notwithstanding anything in this Agreement which may appear to be to the contrary, including Section 4.1, neither the Directors nor any officer of the Company shall take, or cause to be taken, any of the following acts or matters without the vote of the Members taken or otherwise obtained in accordance with Article 6:

(a)           the sale, lease, exchange or other transfer or disposition of all or substantially all of the assets of the Company, other than by or pursuant to the granting or entering into of, or the enforcement of any rights or remedies under, any mortgage, deed of trust, pledge, security interest or other form of security or collateral agreement, document, instrument or transaction;

(b)           the merger of the Company with or into another Person under the Iowa Act, the conversion of the Company into another form of entity under the Iowa Act, or the domestication of the Company into a foreign limited liability company;

(c)           the dissolution of the Company;

(d)           the amendment or restatement of the Certificate of Organization or this Agreement, except that the Directors may amend the Certificate of Organization and this Agreement without the vote of the Members to change the name, the registered office and/or the registered agent of the Company;

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(e)           the issuance of any Units to any Director or any officer of the Company in the individual's capacity as a Director or officer;

(f)           the issuance of any Units by the Company if, after giving effect to the issuance of the Units, the Company would have more than 45,608 outstanding Units; provided, however, that the Directors may from time to time authorize, approve and effectuate a split of the outstanding Units into a lesser or greater number of Units based upon a uniform multiple (a "Unit Split"), without the vote of the Members, in which event the 45,608 amount (or the then current such amount by reason of any prior Unit Splits) shall also be decreased or increased, as the case may be, by the same multiple that was utilized in the Unit Split;

(g)           the issuance of any Units for a consideration or value of less than $500 per Unit; provided, however, that in the event of a Unit Split, the $500 amount (or the then current such amount by reason of any prior Unit Splits) shall be increased or decreased, as the case may be, proportionately in accordance with the multiple that was utilized in the Unit Split;

(h)           any act or matter for which the vote of the Members is affirmatively and expressly required by any other Section of this Agreement, including as required by Sections 4.2, 4.9, 4.10 and 10.1(b); or

(i)            any act or matter, if any, for which the vote of the Members is affirmatively and expressly required by the Iowa Act and the Iowa Act affirmatively and expressly provides that such voting requirement cannot be varied, waived or altered notwithstanding the express intent, desire and agreement of the Members that the only acts and matters upon which the Members have the right to vote, and which must be voted upon or otherwise approved by the Members, are those which are expressly required by subparagraphs (a) through (h) of this Section.

This Section supersedes and overrides any provisions of the Iowa Act that might grant the Members the right to vote on any other acts or matters or that otherwise conflict with, or are inconsistent with, this Section, including Sections 489.401(4)(c), 489.407(3)(d) and (e), 489.1003, 489.1007 and 489.1011 of the Iowa Act.

4.17      Directors are Synonymous with Managers.  The Directors are synonymous with, and shall be deemed for all purposes to be the same as, "managers" for purposes of the Iowa Act, the Certificate of Organization and this Agreement.  The Directors may sign any and all agreements, documents or instruments utilizing the title of either "Director" or "Manager".  Without limiting the generality of the foregoing, the Directors may be referred to as "directors" or "managers" in any reports or other documents required to be filed by the Company or any Director with any governmental or regulatory authority, including the Securities and Exchange Commission.

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ARTICLE 5

RIGHTS AND DUTIES OF MEMBERS

5.1        No Liability.  A Member does not guarantee the return of any Member's Contribution or Capital Account, any Distributions to the Members, or a profit for the Members from the operations of the Company.  A Member is not personally liable for any of the acts or omissions of the Company, or for any debts, losses, liabilities, duties or obligations of the Company, whether arising in contract, tort or otherwise, except only to the extent of any unpaid Contribution of the Member to the Company.

5.2        Members Have No Exclusive Duty to Company.  Except only as may be provided in another agreement between the Company and the Member in question, a Member may have other business interests and may engage in other activities in addition to those relating to the Company.  Neither the Company nor any Member shall have any right by virtue of this Agreement to share or participate in any other interests or activities of any Member or to the income, proceeds or other benefits derived therefrom.

5.3        Right of Members to Information.  During regular business hours and at a reasonable location specified by the Company, a Member may obtain from the Company and inspect and copy full information regarding the activities, financial condition, and other circumstances of the Company as is just and reasonable if all of the following apply:

(a)           The Member seeks the information for a purpose material to the Member's interest as a member of the Company;

(b)           The Member makes a demand in a Record that is received by the Company, describing with reasonable particularity the information sought and the purpose for seeking the information; and

(c)           The information sought is directly connected to the Member's purpose.

Within ten days after receiving a demand pursuant to the preceding paragraph, the Company shall in a Record inform the Member that made the demand of all of the following:

(a)           The information that the Company will provide in response to the demand, if any, and when and where the Company will provide the information; and

(b)           If the Company declines to provide any demanded information, the Company's reasons for declining.

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The Company shall, without demand, provide or make available to the Members all information that is known to the Company and that is material to the Members' decision on any Voting Matter (as that term is defined below), except to the extent the Company can establish that the Company reasonably believes that the Member in question or the Members as a whole already know the information.  The information shall be provided by such method or methods as are determined by the Directors, the Chairman or the President, which may include providing the information (i) along with the notice of the meeting at which the Voting Matter shall be acted upon; (ii) if the Voting Matter is to be acted upon by written consent or written action, along with such written consent or written action; (iii) at the meeting at which the Voting Matter is acted upon; or (iv) any combination of the foregoing.  For purposes of determining what information is "known" to the Company, the determination shall in all events be limited to the actual knowledge of the Directors and the Chairman, the President and the Chief Financial Officer of the Company, and shall also be further limited as the Directors may otherwise determine to be reasonable under the particular facts and circumstances in question.  The determination of what information is "material" shall in all events be considered based only upon the relevance of the particular information to, and possible effect on, the particular Voting Matter in question and from the perspective of the Company as a whole and a reasonable Person, and not based upon any particular Member or particular facts or circumstances of any Member.  The Directors may also consider any other relevant facts and circumstances regarding what information should be provided to the Members with respect to any particular Voting Matter, including any prohibitions, restrictions or conditions imposed under any confidentiality covenants or any applicable law, rule, regulation or order.  The term "Voting Matter" means any matter that is required to be submitted to the Members under Section 4.16.  This paragraph is intended to limit the Company's obligations under Section 489.410(2)(d) of the Iowa Act to providing information only with respect to Voting Matters.

On 30 days demand made in a Record received by the Company, a Person who was formerly a member of the Company (a "Former Member") may have access to information to which the Former Member was entitled while the Former Member was a member of the Company if the information pertains to the period during which the Former Member was a member of the Company, the Former Member seeks the information in good faith, and the Former Member also satisfies all of the requirements otherwise imposed on a Member pursuant to the first paragraph of, and otherwise by, this Section.  Within 20 days after receiving a demand pursuant to this paragraph, the Company shall in a Record inform the Former Member that made the demand of all of the following:

(a) The information that the Company will provide in response to the demand, if any, and when and where the Company will provide the information; and

(b) If the Company declines to provide any demanded information, the Company's reasons for declining.

A Member or Former Member may exercise the Member's or Former Member's, as the case may be, rights under this Section through an agent or, in the case of an individual under legal disability, a legal representative.  A deceased Member's or Former Member's personal representative or other legal representative may also exercise the rights of a member or former member, as the case may be, under this Section for purposes of settling the estate of the deceased Member or Former Member.  All restrictions and conditions imposed by or pursuant to this Section apply to any Member, Former Member or any agent or personal or legal representative of any Member or Former Member who is requesting any information pursuant to this Section.

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The Company may in all events charge a Member, a Former Member or other permitted Person that makes a demand under this Section the reasonable costs of copying, limited to the costs of labor and material.  A Member's and Former Member's rights under this Section shall also be subject to any reasonable restrictions and conditions on access to and use of information as the Company may have in place from time to time or as may be deemed necessary or appropriate by the Directors under the particular facts and circumstances in question, including designating information as confidential and imposing security, nondisclosure, confidentiality and safeguarding procedures and obligations on the Member, Former Member or other recipient of the information.

The Company and the Members agree that all of the terms of this Section, including all of the limitations and restrictions set forth in the third paragraph, the preceding paragraph and otherwise in this Section, are reasonable.

5.4        Communications With Directors; Advance Notice of Member Proposals for Annual Meetings.  Any Member desiring to send any communication to the Directors may do so in writing by either delivering the writing to the Company's principal office or by mailing the writing to that office, in either case, to the attention of the President.  The Company will provide a copy of each such writing to each Director.

In order for any proposal or other business to be properly brought before the annual meeting of the Members by a Member outside of the processes of Rule 14a-8 of the regulations under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (i) the Member must have given timely written notice (a "Member Proposal Notice") of the proposal or other business (the "Member Proposal") to the Secretary of the Company, and also timely provide the Company with all other information as may be requested by the Company regarding the Member Proposal, including all such information as may be necessary or appropriate in order for the Company to confirm that the Member meets the Eligibility Condition (as that term is defined below) or to comply with all applicable laws, rules and regulations, including the Exchange Act and the rules and regulations promulgated pursuant to the Exchange Act, (ii) the Member Proposal must contain all of the information set forth below, and (iii) the Member in question must have continuously held Units for at least one year by the date on which the Company receives the Member Proposal Notice and the Member must continue to hold Units through the date of the annual meeting in question (the "Eligibility Condition"), and the Member Proposal Notice must include a written statement that the Member intends to continue to hold Units through the date of the annual meeting in question.  No Member may submit more than one Member Proposal for any annual meeting of the Members.  In order for a Member Proposal Notice to be timely given by the Member, the Member Proposal Notice must be received at the principal office of the Company not less than 120 calendar days before the date on which the Company mailed or otherwise released to the Members the proxy statement for the previous year’s annual meeting of the Members; provided, however, that if the Company did not hold an annual meeting of the Members in the previous year, or if the date of the current year's annual meeting has been changed by more than 30 days from the date of the previous year's annual meeting, a Member Proposal Notice will be considered timely given by the Member if the Member Proposal Notice is received at the principal office of the Company not later than the close of business on the date which is the later of (i) 120 calendar days before the date of the current year's annual meeting, or (ii) 10 calendar days after the date on which public announcement of the date of the current year's annual meeting is first made by the Company, which may include setting forth such date in any filings made by the Company pursuant to the Exchange Act.  A Member Proposal Notice shall, at a minimum, set forth as to each Member Proposal:  (i) a description of the Member Proposal desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting; (ii) the name and address, as they appear in the Company’s books, of the Member proposing the Member Proposal; (iii) the number of Units which are beneficially owned by such Member, the period of time the Member has beneficially owned those Units, and a statement that the Member intends to continue to hold Units through the date of the annual meeting; (iv) any material interest of the Member in the Member Proposal; and (v) all other information that would be required to be provided by the Member pursuant to Regulation 14A under the Exchange Act if the Member Proposal in question was being submitted pursuant to Rule 14a-8 under the Exchange Act.  The Company does not have any obligation to include any Member Proposal in the proxy statement, proxy or ballot or other proxy materials of the Company, and, notwithstanding anything in the foregoing which may appear to be to the contrary, in order to include information with respect to a Member proposal in the Company's proxy statement and form of proxy for an annual meeting of the Members pursuant to Rule 14a-8 under the Exchange Act, a Member must provide notice as required by, and otherwise fully comply with, Rule 14a-8 and the other regulations promulgated under the Exchange Act.  The chairperson of the annual meeting of the Members shall, if the facts warrant, determine and declare at the meeting that a Member Proposal or other business was not properly brought before the meeting in accordance with the provisions of this paragraph, and if the chairperson shall so determine, the chairperson shall declare at the meeting that any such proposal or business not properly brought before the meeting shall not be transacted or otherwise presented to the Members.

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5.5        No Dissociation or Withdrawal of a Member. A Member may not and does not have the power or right to dissociate as a member of the Company or to otherwise resign or withdraw from the Company prior to the dissolution and winding up of the Company, for whatever reason, except only as may be otherwise expressly provided in, and pursuant to the procedures set forth in, Article 9.  Without limiting the foregoing, the Company and the Members acknowledge and agree that no Member has the power or right to dissociate or withdraw as a member of the Company by express will under Section 489.601 of the Iowa Act or in any of the circumstances described in Section 489.604 of the Iowa Act.

No Member shall be dissociated as a member of the Company or otherwise cease to be a Member because of the occurrence of any act or circumstance other than the Assignment of all of the Member's Units in compliance with Article 9, including because of the occurrence of any of the acts or circumstances specified in Section 489.602 or Section 489.604 of the Iowa Act, and the Company and the Members waive the applicability of Sections 489.602 and 489.604 of the Iowa Act to the Company and the Members.

5.6        Member Authority Limited.  A Member is not an agent of the Company for the purpose of the Company's business, affairs or otherwise by reason of being a Member, and unless otherwise affirmatively and expressly authorized in writing by the Directors or by a properly authorized officer of the Company, no Member has any right, power or authority to, and shall not, enter into any agreement, document, instrument or transaction of whatever type or nature for or on behalf of the Company, or otherwise obligate or bind the Company in any way or render the Company liable for any purpose.

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No Member may delegate to any Person the Member's rights and powers to manage and control the business and affairs of the Company, except only with respect to the giving of a proxy as provided in Section 6.9 and the election of the Directors as provided in this Agreement.

5.7        Limitation on Ownership of Units.  Notwithstanding any term or condition of this Agreement which may appear to be to the contrary, no Member shall, directly or indirectly, own, hold or control more than forty-nine percent (49%) of the outstanding Units at any time, unless the Member exceeds that percentage by reason of the Company redeeming or purchasing Units, but in that case, the Member shall not increase the number of Units owned, held or controlled by the Member.

For purposes of this Section, the term "control" means the right or ability to vote or direct the vote of any Units, whether pursuant to a proxy, voting agreement, voting trust, or otherwise.

For purposes of this Section, a Member shall be deemed to indirectly own, hold or control any and all Units which are owned or held by the Member's spouse or any of the Member's parents or minor children (including by adoption) (collectively, the "Relatives"), and by any entity of which any one or more of the Member or any Relative or Relatives owns or holds at least ten percent (10%) of the outstanding voting securities or equity of such entity.

The Company shall not be required to recognize or honor the ownership, holding or control of any Units which are owned, held or controlled in violation of this Section.  Each Member shall provide the Company with  all such information and documentation as is requested by the Company from time to time in order to determine whether the Member is in compliance with this Section, and each Member shall otherwise promptly and fully cooperate with the Company in this regard.

Notwithstanding the foregoing, this Section shall not be applicable to, and shall not otherwise limit or restrict, the solicitation and receipt of proxies, ballots or written consents or written actions by the Company or by any Director in the capacity as a Director.

ARTICLE 6

MEETINGS OF MEMBERS; MANNER OF ACTING OF MEMBERS

6.1        Annual and Special Meetings of the Members. An annual meeting of the Members for the election of Directors and for the transaction of such other business as may properly come before the meeting shall be held at such place, at such time and on such day in January, February, March or April of each year as the Directors shall each year fix, or at such other place, time or date as the Directors may fix and determine from time to time.

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Special meetings of the Members, for any purpose or purposes, may be called by the Directors or by the Chairman or the President, and shall be called by or at the direction of the Directors or the Chairman or the President upon the written request of any Member or Members holding at least thirty percent (30%) of the outstanding Units.

No matter shall be presented to the Members at any annual or special meeting of the Members which has not been properly brought before the meeting in accordance with this Agreement and applicable laws, rules and regulations.

6.2        Place of Meetings. The Directors, the Chairman or the President may designate any place, either within or outside the State of Iowa, as the place of meeting for the annual meeting or any special meeting of the Members.  If no designation is made by the Directors or by the Chairman or the President, the place of meeting shall be the principal office of the Company in the State of Iowa.

6.3        Notice of Meetings or of Action to be Taken Only by Ballot.  Except as provided in Sections 6.4, 6.10 and 6.12, written notice stating the place, day and hour of all meetings of the Members and the purpose or purposes for which the meeting is called, shall be given to each Member not less than five nor more than sixty days before the date of the meeting, by or at the direction of the Directors, the Chairman or the President.  The notice shall be given as provided in Section 13.1.

If the Directors determine that any matter or matters to be presented to the vote of the Members shall be done and taken only by a written ballot, without holding a meeting of the Members, notice of the matter or matters, along with the ballot, shall be given to the Members not less than five nor more than ninety days before the last date on which the Company will accept such ballot.  The notice shall be given as provided in Section 13.1.

6.4        Meeting of all Members. If all of the Members shall meet at any time and place, either within or outside of the State of Iowa, and consent to the holding of a meeting at such time and place, such meeting shall be valid without call or notice, and at such meeting lawful action may be taken.

6.5        Record Date. The record date for the purpose of determining the Members entitled to notice of or to vote at any meeting of the Members shall be the date on which notice of the meeting is given to the Members, or if no notice is required to be given of such meeting, the date of the meeting.  A determination of the Members entitled to notice of or to vote at any meeting of the Members which has been made as provided in this Section shall also apply to any adjournment of the meeting in question.  If the Directors determine that any matter or matters to be presented to the vote of the Members shall be done and taken only by a written ballot, without holding a meeting of the Members, the record date for the purpose of determining the Members entitled to notice of such matter or matters and to vote by ballot on such matter or matters shall be the date such notice and ballot are given to the Members.

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6.6        Voting Rights of Members.  The Members shall have one vote for each Unit held by them, and the Members shall be entitled to vote on the acts, matters, decisions, questions or other determinations on which the vote of the Members is expressly and affirmatively required by Section 4.16.  A Member abstaining on any vote or withholding the Member's vote shall be counted present for quorum purposes, but the Units of the Member will not be counted as votes cast for or against the act, matter, decision, question or other determination in question.

This Section is intended to supersede and override, without limitation, Sections 489.401(4)(c), 489.407(3)(d) and (e), 489.1003, 489.1007 and 489.1011 of the Iowa Act.

6.7        Quorum. The Members holding at least twenty-five percent (25%) of the outstanding Units, represented in person or by proxy or written ballot pursuant to Section 6.9, shall constitute a quorum at any meeting of the Members.  In the absence of a quorum at a meeting of the Members, the Members holding at least a majority of the outstanding Units  represented at the meeting may adjourn the meeting from time to time without further notice.  At any such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed.  The Units constituting at least twenty-five percent (25%) of the outstanding Units and which are represented by written ballots which have been timely and properly returned by the Members shall constitute a quorum of the Members for any matter or matters which are presented to the Members only by a written ballot, without a meeting of the Members.

6.8        Manner of Acting.  Except only as provided in Section 11.1(a) and in the following paragraph in this Section, the vote of the Members holding at least a majority of the outstanding Units represented at a meeting at which a quorum of the Members is present shall be the act of the Members with respect to all votes, acts, matters, decisions, questions or other determinations whatsoever to be taken or made by the Members under the Certificate of Organization, this Agreement, the Iowa Act (including Sections 489.1003, 489.1007 and 489.1011 of the Iowa Act) or other applicable law, or otherwise, including with respect to the acts and matters specified in Section 4.16, the establishment of the number of Directors pursuant to Section 4.2, the removal of a Director under Section 4.9, and the amendment or restatement of this Agreement or the Certificate of Organization.  Except only as provided in the following paragraph in this Section, if a quorum of the Members has been obtained through the written ballots returned by the Members, the vote of at least a majority of the outstanding Units which are represented by the written ballots which have been timely and properly returned by the Members shall be the act of the Members with respect to all votes, acts, matters, decisions, questions or other determinations whatsoever which are presented to the Members only by written ballot, including with respect to all of the matters listed in the preceding sentence.  The Company and the Members hereby acknowledge and agree for purposes of Section 489.1014 of the Iowa Act that this Agreement provides for approval of a merger, conversion, or domestication with the consent of fewer than all of the Members, and the Members hereby affirmatively and expressly consent to such fact and this sentence.

The Directors shall be elected by a plurality of the votes cast by the Units at a meeting of the Members at which a quorum is present, or, if the vote on the election of the Directors was taken only by a written ballot, by a plurality of the votes cast by the Units represented by the written ballots and for which at least a quorum of the Units was represented by such written ballots.  This paragraph applies to the election of Directors by the Members under both Section 4.2 and Section 4.10.

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At all meetings of the Members, the Chairman, or in the absence of the Chairman, the Vice Chairman, or in the absence of the Vice Chairman, the individual designated by the vote of the Members holding at least a majority of the outstanding Units represented at the meeting in question, shall preside over and act as chairperson of the meeting.  At all meetings of the Members, the Secretary, or in the absence of the Secretary, the individual designated by the chairperson of the meeting in question, shall act as secretary for the meeting.

The business at all meetings of the Members shall be transacted in such order and with such procedures as the chairperson may from time to time determine.

The Directors may adopt rules and regulations for the conduct of the meetings of the Members, so long as such rules and regulations are not inconsistent with the Certificate of Organization, this Agreement, the Iowa Act or other applicable law.

This Section supersedes and overrides any provisions of the Iowa Act which might establish different approval percentages for the Members or that otherwise conflict with, or are inconsistent with, this Section, including Sections 489.401(4)(c), 489.407(3)(d) and (e), 489.1003, 489.1007 and 489.1011 of the Iowa Act.

6.9        Proxies; Voting by Ballots.  At all meetings of the Members, a Member may vote in person or by proxy executed in writing by the Member or by a duly authorized attorney-in-fact of the Member.  Any such proxy must be filed with the Company before or at the time of the meeting.  No proxy shall be valid after eleven months from the date of its execution, unless otherwise expressly provided in the proxy.

The Directors may determine that the vote on any one or more matters to be voted on by the Members may be taken only by a written ballot, without a meeting of the Members, or may include the use of a written ballot as part of or in connection with a meeting of the Members. The Directors may establish the form of written ballot and all such methods, processes and procedures for the use of written ballots as the Directors determine to be appropriate from time to time, including for the return and delivery of written ballots to the Company, the opening and tabulation of the results of the voting on matters voted upon by written ballot, the revocation of a written ballot by a Member, and the period of time during which the Company will accept the return of written ballots or will allow the revocation of a written ballot.

A Member who is not present in person at a Member meeting but who has returned a written ballot with respect to any matter which is presented to the Members at such meeting shall be counted present for purposes of determining whether a quorum is present to act on the matter, but shall not be counted present for purposes of determining the presence of a quorum to transact any other business at the Member meeting in question.

If a written ballot is properly completed and timely returned, the Units represented by the written ballot will be voted in accordance with the specifications provided in the written ballot.

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No proposals may be made by any Member or any Director from the floor at any meeting of the Members with respect to any matter which was presented to the Members by written ballot pursuant to this Section, including to table any such matter.

The use of a written ballot for any matter to be voted upon by the Members shall not be deemed to be or constitute a solicitation of votes on behalf of the Directors or to otherwise be a solicitation of votes or of a proxy on behalf of any Person.

6.10      Action Without a Meeting; Telephonic Meetings. Any action required or permitted to be taken at a meeting of the Members (whether an annual or special meeting) may be taken without a meeting and without notice if (i) the action is taken by the Members holding at least seventy-five percent (75%) of the outstanding Units, and (ii) one or more written consents or written actions describing the action taken are signed by such Members.  Any such written consent or written action shall be effective when the last such Member signs the written consent or written action, unless the written consent or written action specifies a different effective date.  The record date for determining the Members entitled to take action without a meeting shall be the date the first Member signs the written consent or written action in question.  Any such written consent or written action shall be placed in the minute book of the Company or otherwise retained in the records of the Company.  The Company shall give notice of the taking of action without a meeting by the Members by less than unanimous consent of the Members to each Member who did not sign the written consent or written action in question, and which notice may be effectuated by giving a copy of such written consent or written action to each Member who did not sign the written consent or written action.  Any written consent or written action of the Members may be executed in counterparts, and may be given and received by the Company and any or all of the Members by any form of electronic transmission as provided in Section 13.1.

Any meeting of the Members may be held by, and any Member may participate in any meeting by, any means of communication, including telephone or video conference call or other telecommunications equipment or methods, by means of which all of the Members participating in the meeting can simultaneously hear each other during the meeting.  A Member participating in a meeting by any such means or methods is deemed to be in attendance at and present in person at the meeting.

6.11      Member Representative.  Any Member that is not an individual may, by giving written notice to the Company, designate and appoint one or more individuals to act as the representative of the Member for all purposes related to the Company, including for purposes of participation of the Member in all meetings of the Members, the voting of the Units of the Member, the execution of any written consent or written action evidencing action of the Members taken without a meeting, and the giving of a proxy by the Member.  A Member may change the identity of any of the Member's representatives at any time and from time to time, but shall provide written notice thereof to the Chairman, the President or the Secretary, with any such notice to only be effective upon receipt by the Chairman, the President or the Secretary.  Any action taken by any individual who has been designated by a Member pursuant to this Section shall be binding upon such Member and may be relied upon, and acted on, by the Company, the Directors and all of the Members, without inquiry to, or confirmation from, such Member or any other individual who has been designated by the Member pursuant to this Section.

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6.12      Waiver of Notice. A Member may waive any notice required by the Iowa Act or this Agreement if the waiver is in writing and is signed by the Member, and whether before or after the date and time stated in such notice.  A waiver of notice shall be equivalent to notice in due time as required by the Iowa Act or this Agreement.

The attendance of a Member (in person or by proxy or written ballot pursuant to Section 6.9) at, or participation in, a meeting shall constitute a waiver of notice of such meeting and of objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the Member, at the beginning of the meeting or promptly upon arrival, objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting.

ARTICLE 7

CONTRIBUTIONS TO THE COMPANY, UNITS AND CAPITAL ACCOUNTS

7.1        Units; Issuance of Units. Each Member's Contribution shall be represented by Units, but the Directors may determine to issue Units to a Person without the Person making a Contribution, or being obligated to make a Contribution, to the Company.

An unlimited number of Units are authorized.

The number of Units to be issued to any Additional Member and any Contribution for such Units shall be determined by the Directors as provided in Section 9.4, subject only to Sections 4.16(e), 4.16(f) and 4.16(g).

The Directors shall also determine the number of Units, if any, which shall be issued from time to time to any existing Member and any Contribution for any such Units, subject only to Sections 4.16(e), 4.16(f) and 4.16(g).

No subsequent Contributions may be required of any Member unless otherwise expressly agreed at the time of, or as imposed as a condition to, the issuance of Units to the Member in question.

No Member shall have any preemptive, preferential or other right to acquire any Units as the Directors may from time to time determine to issue to any Person.

7.2        Liability for Contributions.  Unless otherwise expressly agreed by the Company at the time of the acceptance of  a Member's offer or subscription to purchase Units or as may be otherwise expressly agreed by the Company at any time thereafter, a Member's obligation to make a Contribution to the Company is not excused by the Member's death, disability, or other inability to perform personally, and if a Member does not make a required Contribution, the Member or the Member's estate shall be obligated, at the option of the Company, to contribute money equal to the value of the part of the Contribution which has not been made.

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The Company shall also have the authority to enter into an agreement with any Member that includes specified penalties for, or specified consequences of, the failure of the Member to make a required Contribution to the Company.  The penalties or consequences may include reducing or eliminating the defaulting Member's proportionate interest in the Company, subordinating the Member's Units and related interest to those of the other Members, a forced sale of the Member's Units, forfeiture of the Member's Units, the lending by other Members of the amount necessary to meet the Member's commitment, a fixing of the value of the Member's Units by appraisal or by formula, and the redemption or sale of the Member's Units at such value.

This Section is not intended to, and does not, limit any of the rights and remedies which are available to the Company under this Agreement or at law, in equity, or otherwise, by reason of a Member's failure to timely and fully make a required Contribution to the Company.

7.3        Capital Accounts.

(a)           A separate Capital Account will be maintained for each Member.  Each Member's Capital Account will be increased by (i) the amount of money contributed by such Member to the Company; (ii) the Gross Asset Value (as defined in Section 7.6) of property contributed by such Member to the Company (net of liabilities secured by such contributed property that the Company is considered to assume or take subject to under Section 752 of the Code); and (iii) the amount of Net Profits allocated to such Member.  Each Member's Capital Account will be decreased by (i) the amount of money distributed to such Member by the Company; (ii) the Gross Asset Value of property distributed to such Member by the Company (net of liabilities secured by such distributed property that such Member is considered to assume or take subject to under Section 752 of the Code); (iii) the amount of Net Losses allocated to such Member; and (iv) the Member's share of expenditures described in Section 705(a)(2)(B) of the Code, unless such expenditures have already been deducted in determining Net Profits or Net Losses, as the case may be.

(b)           In the event of a permitted Assignment of a Unit, the Capital Account of the assignor shall become the Capital Account of the assignee to the extent the Capital Account relates to the Unit which has been Assigned, but subject to Section 9.5.

(c)           The manner in which Capital Accounts are to be maintained pursuant to this Section is intended, and shall be construed, so as to comply with the requirements of Section 704(b) of the Code and the Treasury Regulations promulgated thereunder, and in the event there exists any inconsistency, the Code and said Treasury Regulations shall control.

(d)           Upon liquidation of the Company, Distributions will be made to the Members in accordance with Section 10.2.

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7.4        No Priority on Return of Capital. No Member shall have priority over any other Member as to the return of Contributions or Capital Accounts or as to Net Profits, Net Losses or Distributions.  This Section shall not, however, apply to loans (as distinguished from Contributions) which a Member has made to the Company.

7.5        No Demand of Member Capital. A Member shall not be entitled to demand or receive from the Company the return of the Member's Contribution or Capital Account, or the liquidation of the Member's Units, until the Company is dissolved in accordance with this Agreement.

7.6        Gross Asset Value.  The term "Gross Asset Value" means, with respect to any asset, the asset's adjusted basis for federal income tax purposes, except as follows:

(a)           The initial Gross Asset Value of any asset contributed by a Member to the Company shall be the gross fair market value of such asset, as determined by the Directors.

(b)           The Gross Asset Values of all Company assets shall be adjusted to equal their respective gross fair market values, as determined by the Directors, as of the following times or such other times as permitted by the Treasury Regulations:  (i) the acquisition of a Unit or Units by any Additional Member or any existing Member in exchange for more than a de minimis Contribution; (ii) the distribution by the Company to a Member of more than a de minimis amount of property as consideration for a Unit; and (iii) the liquidation of the Company within the meaning of Section 1.704-1(b)(2)(ii)(g) of the Treasury Regulations; provided, however, that adjustments pursuant to the preceding clauses (i) and (ii) shall be made only if the Directors determine that such adjustments are necessary or appropriate to reflect the relative economic interests of the Members.

(c)           The Gross Asset Value of any Company asset distributed to any Member shall be adjusted to equal the gross fair market value of such asset on the date of Distribution, as determined by the Directors.

(d)           The Gross Asset Values of Company assets shall be increased or decreased, as the case may be, to reflect any adjustments to the adjusted basis of such assets pursuant to Section 734(b) or Section 743(b) of the Code, but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of the Treasury Regulations; provided, however, that Gross Asset Values shall not be adjusted pursuant to this subparagraph (d) to the extent that the Directors determine that an adjustment pursuant to subparagraph (b) immediately above is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this subparagraph (d).

(e)           Notwithstanding anything in this Agreement which may appear to be to the contrary, if the Gross Asset Value of any asset differs from its adjusted tax basis for federal income tax purposes at the beginning of any Fiscal Year, then the depreciation for such asset shall, for purposes of determining each Member's Capital Account, be determined in accordance with its Gross Asset Value and not its adjusted tax basis, and the Gross Asset Value of such asset shall be adjusted to account for such depreciation.

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7.7        Units May Be Referred to as Stock, Shares or Securities.  The Units may be referred to as "stock", "shares", "securities" or other terms in any reports or other documents required to be filed by the Company or any Member with any governmental or regulatory authority, including the Securities and Exchange Commission, if required by, or as may be necessary or appropriate in order to be consistent with, any such report or document or any applicable law, rule or regulation.

7.8        Fractional Units.  The Company may issue fractional Units, rounded to the extent as determined by the Directors, to reflect the Contribution in question.  If a Member holds a fractional Unit, such Member shall have a vote with respect thereto (if the right to vote with respect to the matter in question is otherwise provided for in this Agreement) equal to the amount of such fraction.

ARTICLE 8

ALLOCATIONS AND INCOME TAX; DISTRIBUTIONS

8.1        Allocations of Profits and Losses from Operations.

(a)           Except as may be otherwise required by Section 704(c) of the Code, the Net Losses and the Net Profits of the Company for each Fiscal Year shall be allocated among the Members pro rata, based upon the respective number of Units held by the Members.  Any credit available for income tax purposes shall also be allocated among the Members pro rata, based upon the respective number of Units held by the Members.

(b)           Notwithstanding subparagraph (a) immediately above, no loss shall be allocated to a Member if such allocation would cause such Member's Adjusted Capital Account to become negative or to increase the negative balance thereof.

(c)(1)      In the event any Member unexpectedly receives any adjustments, allocations or distributions described in Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) of the Treasury Regulations, items of Company income and gain shall be specially allocated to each such Member in an amount and manner sufficient to eliminate, to the extent required by the Treasury Regulations, the deficit balance of the Adjusted Capital Account of such Member as quickly as possible, provided that an allocation pursuant to this subparagraph (c)(1) shall only be made if and to the extent such Member would have a deficit balance in the Member's Adjusted Capital Account after all other allocations provided for in this Section 8.1 have been made as if this subparagraph (c)(1) were not in this Agreement.

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(2)           In the event any Member has a deficit Capital Account at the end of any Fiscal Year which is in excess of the sum of (i) the amount such Member is obligated to restore pursuant to any provision of this Agreement, if any, and (ii) the amount such Member is deemed to be obligated to restore pursuant to the penultimate sentences of subparagraphs 1.704-2(g)(1) and 1.704-2(i)(5) of the Treasury Regulations, each such Member shall be specially allocated items of Company income and gain in the amount of such excess as quickly as possible, provided that an allocation pursuant to this subparagraph (c)(2) shall be made only if and to the extent that such Member would have a deficit Capital Account in excess of such sum after all other allocations provided for in this Section 8.1 have been made as if subparagraph (c)(1) immediately above and this subparagraph (c)(2) were not in this Agreement.

(d)(1)      Except as otherwise provided in Section 1.704-2(f) of the Treasury Regulations, and notwithstanding any other provision of this Section 8.1, if there is a net decrease in partnership minimum gain during any Fiscal Year, each Member shall be specially allocated items of Company income and gain for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal to such Member's share of the net decrease in partnership minimum gain, determined in accordance with Section 1.704-2(g) of the Treasury Regulations.  Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto.  The items to be so allocated shall be determined in accordance with Section 1.704-2(f)(6) and 1.704-2(j)(2) of the Treasury Regulations.  This subparagraph (d)(1) is intended to comply with the minimum gain chargeback requirement in Section 1.704-2(f) of the Treasury Regulations and shall be interpreted consistently therewith.

(2)           Except as otherwise provided in Section 1.704-2(i)(4) of the Treasury Regulations, and notwithstanding any other provision of this Section 8.1, if there is a net decrease in partner nonrecourse debt minimum gain attributable to a partner nonrecourse debt during any Fiscal Year, each Member who has a share of the partner nonrecourse debt minimum gain attributable to such partner nonrecourse debt, determined in accordance with Section 1.704-2(i)(5) of the Treasury Regulations, shall be specially allocated items of Company income and gain for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal to such Member's share of the net decrease in partner nonrecourse debt minimum gain attributable to such partner nonrecourse debt, determined in accordance with Section 1.704-2(i)(4) of the Treasury Regulations.  Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto.  The items to be so allocated shall be determined in accordance with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the Treasury Regulations.  This subparagraph (d)(2) is intended to comply with the minimum gain chargeback requirement in Section 1.704-2(i)(4) of the Treasury Regulations and shall be interpreted consistently therewith.

(3)           Nonrecourse deductions for any Fiscal Year shall be specially allocated among the Members pro rata, based upon the respective number of Units held by the Members.

(4)           Any partner nonrecourse deductions for any Fiscal Year shall be specially allocated to the Member who bears the economic risk of loss with respect to the partner nonrecourse debt to which such partner nonrecourse deductions are attributable in accordance with Section 1.704-2(i)(1) of the Treasury Regulations.

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(e)           To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Section 734(b) or Section 743(b) of the Code is required, pursuant to Section 1.704-1(b)(2)(iv)(m) of the Treasury Regulations, to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases the basis of the asset) and such gain or loss shall be specially allocated to the Members in a manner consistent with the manner in which their Capital Accounts are required to be adjusted pursuant to such Section of the Treasury Regulations.

(f)           Notwithstanding any other provision of this Agreement, the Regulatory Allocations shall be taken into account in allocating items of income, gain, loss and deduction among the Members so that, to the extent possible, the net amount of such allocations of other items and the Regulatory Allocations to each Member shall be equal to the net amount that would have been allocated to each such Member if the Regulatory Allocations had not occurred.  For purposes of applying the foregoing sentence, allocations pursuant to this subparagraph (f) shall only be made with respect to allocations pursuant to subparagraph (e) immediately above to the extent the Directors determine that such allocations will otherwise be inconsistent with the economic agreement among the Company and the Members as set out in this Agreement.

(g)           The Directors shall have discretion, with respect to each Fiscal Year, to (i) apply the provisions of subparagraph (f) immediately above in whatever order is likely to minimize the economic distortions that might otherwise result from the Regulatory Allocations, and (ii) divide all allocations pursuant to subparagraph (f) immediately above among the Members in a manner that is likely to minimize such economic distortions.

8.2        Distributions. All Distributions of cash or other property to the Members shall be made to the Members pro rata, based upon the respective number of Units held by the Members, except for (i) Distributions to the Members upon the dissolution and winding up of the Company, which Distributions are governed by Section 10.2, and (ii) Distributions to a Member pursuant to the Company's purchase or redemption of any of the Units of such Member.  All such Distributions shall only be made in such amounts and at such times as are determined by the Directors from time to time, but subject to Section 8.3.  Without limiting the generality of the foregoing,  the Directors have the authority to make the determination of whether any Distribution that is declared by the Directors shall be made in the form of cash, debt, property or otherwise.

The record date for the determination of the Members entitled to receive a Distribution shall be the date determined by the Directors, but in the absence of the Directors specifying a record date for a Distribution, the date on which the resolution declaring the Distribution to the Members is adopted by the Directors shall be the record date for such Distribution.

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All amounts withheld pursuant to the Code or any provisions of foreign, federal, state or local tax law with respect to any payment or Distribution to any Member from the Company shall be treated as amounts distributed to the relevant Member pursuant to this Section.

Unless otherwise expressly provided by the Directors in connection with the declaration of a Distribution under this Section, (i) if a Member becomes entitled to a Distribution under this Section, the Member has the status of, and is entitled to all remedies available to, a creditor of the Company with respect to the Distribution; and (ii) the Company's indebtedness to a Member incurred by reason of a Distribution under this Section is at parity with the Company's indebtedness to the Company's general, unsecured creditors.

As provided above, this Section is not applicable to Distributions payable to the Members upon the dissolution and winding up of the Company, which distributions are governed by Section 10.2.

8.3        Limitation Upon Distributions.  A Distribution shall not be made to any Member pursuant to Section 8.2 if after  the Distribution any of the following applies:  (i) the Company would not be able to pay its debts as they become due in the ordinary course of the Company's activities, or (ii) the Company's total assets would be less than the sum of its total liabilities plus the amount that would be needed, if any, if the Company were to be dissolved, wound up and terminated at the time of the Distribution, to satisfy the preferential rights upon dissolution, winding up and termination of any Members, if any, whose preferential rights are superior to the rights of the Members receiving the Distribution.  A Distribution for purposes of this paragraph shall not include, without limitation, amounts constituting reasonable compensation for present or past services or reasonable payments made in the ordinary course of business under a bona fide retirement plan or other benefits program.

The effect of a Distribution for purposes of the preceding paragraph shall be measured and determined as of the applicable date or time specified in the Iowa Act, or if no such date or time is specified in the Iowa Act for the Distribution in question, as of the date the Distribution is declared.  The Directors may base a determination that a Distribution is not prohibited under this Section on any financial statements prepared on the basis of accounting practices and principles that are reasonable in the circumstances or on a fair valuation or other valuations or methods permitted by the Iowa Act or which are otherwise reasonable under the circumstances.

8.4        Liability for Improper Distributions.  A Director who consents to a Distribution that was made in violation of Section 8.3, and in consenting to such Distribution fails to comply with Section 11.1, shall only have liability to the Company for the amount of such Distribution that exceeds the amount that could have been distributed without the violation of Section 8.3, and only if, and then only to the extent as is, expressly and affirmatively required by the Iowa Act.  A Member that receives a Distribution with actual knowledge that the Distribution to the Member was made in violation of Section 8.3 shall only be liable to the Company for the amount of such Distribution which exceeded the amount that could have been properly paid under Section 8.3, and only if, and then only to the extent as is, expressly and affirmatively required by the Iowa Act.

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8.5        No Interest on Contributions. No Member shall be entitled to interest on the Member's Contribution.

8.6        Loans to or Other Business With the Company. Nothing in this Agreement shall prevent any Member from making secured or unsecured loans to the Company or transacting any other business with the Company.

8.7        Returns and Other Elections. The Directors shall cause the preparation and timely filing of all tax returns required to be filed by the Company pursuant to the Code and all other tax returns deemed necessary and required in each jurisdiction in which the Company does business.

All elections required or permitted to be made by the Company under federal, state or foreign tax or other laws shall be made by the Directors, including the following:

(a)           to the extent permitted by applicable law and regulations, to elect to use an accelerated depreciation method on any depreciable unit of the assets of the Company; and

(b)           in the event of an Assignment of all or part of any of the Units of any Member, to elect, pursuant to Sections 734, 743 and 754 of the Code, to adjust the basis of the assets of the Company.

8.8        Tax Matters Partner.  The Directors may designate the Tax Matters Partner of the Company for purposes of Chapter 63 of the Code and the Treasury Regulations thereunder.  The Tax Matters Partner may be changed at any time and from time to time by the Directors.

ARTICLE 9

ASSIGNMENT OF UNITS; SUBSTITUTE MEMBERS;

ADDITIONAL MEMBERS

9.1        Assignment of Units. A Member may not Assign (as that term is defined below) any or all of the Member's Units, except in compliance with this Agreement and also only with the prior written approval of the Directors and in compliance and accordance with all such other policies and procedures as may be adopted from time to time by the Directors.  The Directors may adopt and implement such policies and procedures (collectively, and as amended from time to time, the "Unit Assignment Policy") for any reasonable purpose, as determined by the Directors.  A reasonable purpose shall in all events include prohibiting, restricting, limiting, delaying or placing conditions on any Assignment of any Units which, alone or together with any previous Assignments or other Assignments that are known or intended or that may reasonably be anticipated, would or might reasonably be determined to (i) violate or cause the Company to violate or to otherwise be in noncompliance with any applicable law, rule, regulation or order, including any foreign, federal, state or local securities law, rule, regulation or order; (ii) cause the Company to be taxed as a corporation for tax purposes, including by reason of Section 7704 of the Code; (iii) result in the termination of the Company or the Company's tax year for tax purposes, including under Section 708 of the Code, or cause the application to the Company of Sections 168(g)(1)(B) or 168(h) of the Code or similar or analogous rules; (iv) violate any term or condition of this Agreement, including Section 5.7; (v) violate or cause the Company to violate or to otherwise be in noncompliance with any law, rule, regulation or order applicable to the Company's selection or use of its then current Fiscal Year, including under Section 444 of the Code; (vi) require the Company to become licensed, registered or regulated as an investment company, a broker-dealer or any other form of regulated entity under any applicable foreign, federal, state or local law, rule, regulation or order; or (vii) create or result in any fractional Units.  The Company shall make a copy of the then current Unit Assignment Policy available to each Member upon the Member's reasonable request from time to time.

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An Assignment of a Unit does not entitle the assignee to vote the Units or to otherwise participate in the management of the Company, or to become or to exercise any voting or management rights of a member of the Company, but rather only entitles the assignee to receive the allocations and Distributions to which the assignor would have otherwise been entitled to with respect to such Unit, unless and until the assignee also complies with Section 9.2.

An Assignment of a Unit does not release the assignor from any debts, liabilities or obligations of the assignor to the Company.

The Company may, in its sole discretion, require the assignee and/or the assignor in each proposed Assignment to pay directly, or to reimburse the Company for, all fees, costs and expenses paid or incurred by the Company in connection with the Assignment, including legal and accounting fees.

The Directors shall not be required to act upon any proposed Assignment of any Unit until the next regularly scheduled meeting of the Directors which follows the date on which the Company receives a completed and executed unit assignment application from the assignor and the assignee and in form and content acceptable to the Directors.  An Assignment of a Unit which is approved by the Directors shall be effective for all purposes (including for purposes of allocations and Distributions) as of the date determined by the Directors, but such date must be within 32 days of the date of the approval of the Assignment by the Directors.

The term "Assignment" means any sale, gift, bequest, assignment or other conveyance, transfer or disposition whatsoever of a Unit, or any right or interest in, under or arising from a Unit (including any right to receive any allocations or Distribution arising from any Unit), whether voluntarily or involuntarily, or by operation or any act or process of law or equity, or otherwise, and including the granting of a pledge, security interest or other lien or encumbrance in, on or against a Unit or the entering of a charging order under Section 489.503 of the Iowa Act and any action to enforce or realize upon, or the exercise of any rights or remedies whatsoever under or pursuant to, any such pledge, security interest, lien, encumbrance or charging order (including any sale of the Unit or taking possession of, or any other interest in, the Unit).  The terms "Assigned", "Assign", "assignee" and "assignor" shall be interpreted and applied accordingly for purposes of this Agreement.

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Without limiting the generality of this Section, and in further confirmation thereof, a transferable interest (as that term is defined in the Iowa Act) is not transferable and may not be Assigned by any Member, except pursuant to and upon the terms and conditions of this Agreement, and an Assignment includes any transfer, whether voluntarily or involuntarily, or by operation or act or process of law or equity, or otherwise, of a transferable interest.  Any purported Assignment of a transferable interest that is not made in compliance with this Agreement shall be void and of no force or effect whatsoever.  Again without limiting the generality of this Section, and in further confirmation thereof, any purported transfer of a transferable interest shall be deemed to be an Assignment of the entire underlying Unit or Units.

Although the entering into of a charging order under Section 489.503 of the Iowa Act, and any action to foreclose or otherwise enforce or realize upon any such charging order (whether by the judgment creditor or by action of any court or other applicable authority), is an Assignment, the Company shall also have the right to pay the judgment creditor under any such charging order the full amount due under the judgment of such judgment creditor and thereby succeed to the rights of the judgment creditor, including under the charging order, as provided in Section 489.503 of the Iowa Act.

9.2        Right of Assignee to Become a Substitute Member. An assignee of a Unit pursuant to an Assignment made in accordance with Section 9.1 and the Unit Assignment Policy who is not already a Member at the effective time of the Assignment must become a Substitute Member with respect to the Unit by executing and delivering to the Company an addendum or agreement, in form and content acceptable to the Directors or the President, whereby, among such other terms as may be required by the Directors or the President, such assignee shall accept, adopt and otherwise become a party to the Certificate of Organization and this Agreement.  No vote or consent of the Directors or the Members shall be necessary in order for such an assignee to become a Substitute Member; provided, however, that the assignee shall become a Substitute Member effective as of the date determined by the Directors, but such date must be within 32 days of the date the Directors receive the addendum or agreement contemplated by this paragraph.

An assignee of a Unit pursuant to an Assignment made in accordance with Section 9.1 and the Unit Assignment Policy and who is already a Member at the effective time of the Assignment shall become a Substitute Member with respect to the Unit effective immediately upon the effective time of the Assignment, and such assignee shall be conclusively deemed to have accepted the Unit subject to and upon the terms and conditions of the Certificate of Organization and this Agreement.  The Directors or the President may, however, require such an assignee to execute and deliver to the Company an addendum or agreement, in form and content acceptable to the Directors or the President, whereby, among such other terms as may be required by the Directors or the President, such assignee confirms that the assignee has accepted, adopted and is a party to the Certificate of Organization and this Agreement.

An assignee who has become a Substitute Member has, with respect to the Units which have been Assigned to the assignee, all of the rights and powers, and is subject to all of the restrictions and liabilities, of a Member under the Certificate of Organization, this Agreement and the Iowa Act.

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In the event an assignee is a minor or is otherwise legally unable to execute the addendum or agreement contemplated by this Section, the addendum or agreement shall be executed by the assignee's conservator or other guardian or legal representative.

9.3        Assignments Not In Compliance With this Agreement.  An assignee of Units pursuant to an Assignment that was not made pursuant to and upon the terms and conditions of this Agreement and the Unit Assignment Policy shall not have any rights whatsoever as a Member (whether to receive allocations or Distributions, any notices to Members, to vote, or otherwise) unless and until such assignee has complied with the terms and conditions of this Agreement and the Unit Assignment Policy, and such Assignment shall be of no force and effect whatsoever until such compliance has been obtained and satisfied.

9.4        Admission of Additional Members.  Subject only to Sections 4.16(e), 4.16(f) and 4.16(g), the Directors may at any time and from time to time admit any Person as a Member by the sale and issuance of such number of Units to the Person and upon such other terms and conditions as are determined by the Directors, including the nature and amount of any Contribution to be made by the Person for such Units.  A Person shall be admitted as a Member with respect to the Units in question upon receipt by the Company of (i) the Person's Contribution, if any, and (ii) an executed addendum or other agreement satisfactory to the Directors or the President whereby, among such other terms as may be required by the Directors or the President, the Person accepts, adopts and otherwise becomes a party to the Certificate of Organization and this Agreement; or at such earlier or later date as may be specified by the Directors at the time of acceptance of the Person's Contribution or the issuance of the Units to the Person.  No subsequent Contributions may be required of any Member unless otherwise expressly agreed at the time of, or as imposed as a condition to, the issuance of Units to the Member in question.

9.5        Allocations to Assignees and to Additional Members. No assignee of a Unit or Additional Member shall be entitled to any retroactive allocation of losses, income or expense deductions incurred by the Company.  The Directors may, at the Directors' option, at the time an assignee or Additional Member is admitted, close the Company books (as though the Company's tax year had ended) or make pro rata allocations of loss, income and expense deductions to the assignee or Additional Member for that portion of the Company's Fiscal Year in which the assignee or Additional Member, as the case may be, was admitted, in accordance with the provisions of Section 706(d) of the Code and the Treasury Regulations promulgated thereunder.

9.6        Repurchase of Units by the Company.  Any Member may at any time, but has no obligation to, tender any or all of the Units owned by that Member to the Company for purchase by the Company in accordance with the following:

(a)           Any Member desiring to tender any of the Units owned by the Member to the Company (the "Tendering Member") must provide written notice of such desire to the Company (the "Tender Notice").  The Tender Notice must include, at a minimum, the name of the Tendering Member, the number of Units being tendered to the Company (the "Tendered Units"), and a statement that the tender is being made pursuant to this Section.  The Company may require the Tender Notice to be on a form provided by the Company.  A Tender Notice may be revoked at any time prior to the acceptance of the Tender Notice by the Company, by the Tendering Member providing written notice to that effect to the Company, but any such revocation notice shall only be deemed effective when received by the Company.  The Company will consider Tender Notices in the order in which they are received by the Company.

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(b)           Subject to the satisfaction of the UMS Condition (as that term is defined in subparagraph (g) below), the Company shall have the right and option, but shall not be obligated, to purchase all, but not less than all, of the Tendered Units at any time within 45 days after the date on which the Company receives the Tender Notice.  The Company may exercise such right and option by giving written notice thereof to the Tendering Member (the "Exercise Notice") at any time within such 45-day period.  If the Company fails to give an Exercise Notice within that 45-day period, the Company shall be deemed to have declined to exercise its right and option to purchase the Tendered Units.

(c)           If the Company elects to purchase the Tendered Units, the closing of the sale and purchase shall occur on the date specified by the Company in the Exercise Notice (the "Closing Date"); provided, however, that the Closing Date must be at least 60 calendar days after, and shall not be more than 90 calendar days after, the date on which the Company received the Tender Notice.

(d)           The per-Unit purchase price for the Tendered Units shall be the Discounted Average UMS Price (as that term is defined below) during the calendar quarter last ended before the date on which the Company received the Tender Notice.  The Discounted Average UMS Price shall accordingly only be established four times during the Company's taxable year.

(e)           The aggregate purchase price payable by the Company for the Tendered Units shall be payable by the Company in full, by check of the Company, on the Closing Date upon receipt of the certificate or certificates for the Tendered Units from the Tendering Member, duly endorsed for transfer or accompanied by separate transfer powers in form and content acceptable to the Company.

The Tendering Member shall be deemed, by submitting the Tender Notice to the Company and by surrendering the certificates for the Tendered Units to the Company, to represent and warrant to the Company that all of the Tendered Units are being sold and transferred to the Company free and clear of any and all liens, restrictions on transferability, reservations, security interests, pledge agreements, buy-sell agreements, tax liens, charges, contracts of sale, voting agreements, voting trusts, options, proxies and other claims, demands, encumbrances and restrictions whatsoever.  The Tendering Member shall defend, indemnify and hold the Company harmless from and against any suit, action, proceeding, claim, counterclaim, loss, liability, damage, amount, cost and/or expense (including court costs and attorneys' fees) in any way related to, connected with or arising or resulting from any breach of that representation and warranty by the Tendering Member.

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(f)            The term "Discounted Average UMS Price" means the amount determined by subtracting (1) the amount which is twenty percent (20%) of the UMS Average Price (as that term is defined below), from (2) the UMS Average Price.  The term "UMS Average Price" means the amount determined by dividing (1) the aggregate amount paid by all buyers of Units pursuant to the Unit Matching Service (as that term is defined below) of the Company in transactions which closed during the calendar quarter last ended before the date on which the Company received the Tender Notice, by (2) the aggregate number of Units sold to those buyers.  The term "Unit Matching Service" means the unit matching service as made available by the Company from time to time on the Company's website.  The Company has no obligation, however, to continue to maintain the Unit Matching Service.

(g)           The Company's right and option to purchase any Tendered Units pursuant to this Section is conditioned upon there having been at least two sales of Units pursuant to the Unit Matching Service which closed during the applicable calendar quarter (the "UMS Condition"), and if the UMS Condition is not satisfied and met, the Tender Notice shall be deemed to be of no force or effect and the Company shall notify the Tendering Member of such fact.

This Section is intended to constitute a redemption or repurchase agreement under Section 1.7704-1(f) of the Treasury Regulations, as amended from time to time, and is intended to, and shall be interpreted so as to, meet the requirements of Section 1.7704-1(f) of the Treasury Regulations.  Without limiting the Company's right to decline to purchase any Tendered Units, for any reason and in the Company's sole discretion, the Company may decline to purchase any Tendered Units pursuant to this Section if such purchase would cause a violation of Section 1.7704-1(f) of the Treasury Regulations.

ARTICLE 10

DISSOLUTION AND WINDING UP

10.1      Dissolution. The Company shall be dissolved, and its activities shall be wound up, upon the occurrence of any of the following events:

(a)           at the time or on the happening of an event expressly and affirmatively specified in the Iowa Act to cause dissolution, and which the Iowa Act expressly and affirmatively provides cannot be varied, waived or altered, which as of the date of this Agreement were the events specified in Sections 489.701(1)(d), 489.701(1)(e) and 489.705 of the Iowa Act, but, with respect to Section 489.705, subject to the Company's rights under Sections 489.706 and 489.707 of the Iowa Act; or

(b)           upon the affirmative vote of the Members taken or obtained in accordance with Article 6.

This paragraph supersedes and overrides in entirety Section 489.701 of the Iowa Act.

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Upon dissolution, the Company shall wind up its activities, and the Company continues after dissolution only for the purposes of winding up.  In winding up the Company's activities, the Company shall discharge the Company's debts, obligations or other liabilities, settle and close the Company's activities, and marshal and distribute the assets of the Company.  The Company may also engage in and take any or all of the actions permitted by Sections 489.702, 489.703 and 489.704 of the Iowa Act.

10.2      Distribution of Assets Upon Dissolution.  Upon the winding up of the Company, the assets of the Company shall be distributed in the following order:

(a)           to creditors, including Members who are creditors (to the extent permitted by applicable law), in satisfaction of the liabilities of the Company;

(b)           to the Members in proportion to, and to the extent of, the positive balances in their respective Capital Accounts, as determined after taking into account all Capital Account adjustments for the Company's Fiscal Year in which the dissolution occurs; and then

(c)           to the Members, pro rata based upon the respective number of Units held by the Members.

The Directors shall have the authority to make the determination of whether the distribution of assets under this Section to creditors, or any Distributions under this Section to the Members, shall be made in the form of cash, property or otherwise.

10.3      Statement of Dissolution or Termination; Post-Dissolution Statement of Authority.  When all debts, liabilities and obligations of the Company have been paid and discharged or reasonably adequate provisions therefor have been made and all of the remaining property and assets of the Company have been distributed to the Members, a statement of dissolution and/or statement of termination and any other necessary or appropriate documents, as determined by the Directors, shall be executed and filed with the Iowa Secretary of State and with such other governmental, regulatory or other authorities as are determined by the Directors.  Thereafter, the existence of the Company shall cease, except for the purpose of suits, other proceedings and appropriate action as may be expressly provided in the Iowa Act.  The Directors and the officers of the Company shall have authority to distribute any property or assets of the Company discovered after dissolution, convey real estate and take all such other action as the Directors or the officers may determine to be necessary or appropriate on behalf of and in the name of the Company.

After a statement of dissolution becomes effective, the Directors or officers of the Company may execute and file or record with the Iowa Secretary of State and all such other governmental, regulatory or other authorities as are determined by the Directors or the officer in question, a post-dissolution statement of authority in a form permitted by the Iowa Act.  The Directors or the officers of the Company may also execute and file or record such amendments to or cancellations of any such post-dissolution statement of authority as are determined by the Directors or the officers from time to time.

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10.4      Winding Up.  Upon dissolution, each Member shall look solely to the assets of the Company for the return of the Member's Capital Account or to pay any Distributions owed to the Member.  If the Company property remaining after the payment or discharge of the debts, liabilities and obligations of the Company is insufficient to return the Capital Account of a Member, or to pay any Distributions owed to the Member, such Member shall have no recourse against the Company, any Director, any officer of the Company or any other Member.  No Member shall be required to restore any deficit in the Member's Capital Account and any such deficit shall not be treated as an asset of the Company.

The winding up of the affairs of the Company and the distribution of its property and assets shall be conducted exclusively by the Directors and the officers of the Company, and the Directors and the officers of the Company are hereby authorized to take all actions necessary or appropriate to accomplish such winding up and distribution, including selling any property or assets of the Company which the Directors or any officer deem necessary or appropriate to sell and the actions permitted by Sections 489.702, 489.703 and 489.704 of the Iowa Act.

ARTICLE 11

STANDARDS OF CONDUCT FOR DIRECTORS AND MEMBERS

11.1      Standards For Directors.  The only fiduciary duties a Director owes to the Company and the Members are the duty of loyalty and the duty of care set forth in the following subparagraphs (a) and (b):

(a)           A Director's duty of loyalty to the Company and the Members is limited to the following:

(i)           To account to the Company and to hold as trustee for the Company any property, profit or benefit derived by the Director regarding any of the following:  (1) in the conduct or winding up of the Company's activities; (2)  from a use by the Director of the Company's property; or (3) from the appropriation of a Company opportunity;

(ii)          To refrain from dealing with the Company in the conduct or winding up of the Company's activities as or on behalf of a Person having an interest adverse to the Company; and

(iii)         To refrain from competing with the Company in the conduct of the Company's activities before the dissolution of the Company;

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provided, however, that (1) the Directors who are not interested in the specific act or transaction in question may, by the vote of a majority of those Directors, authorize or ratify, after full disclosure of all material facts, a specific act or transaction that would otherwise violate the above described duty of loyalty; (2) the Members who are not interested in the specific act or transaction in question may, by the vote of such Members who hold at least a majority of the outstanding Units held by such Members, authorize or ratify, after full disclosure of all material facts, a specific act or transaction that would otherwise violate the above described duty of loyalty; (3) it is a defense to a claim under subclause (ii) immediately above, and any comparable claim in equity or at common law, that the transaction was fair to the Company; and (4) the duty stated under subclause (iii) immediately above continues only until the winding up of the Company is completed.

(b)           A Director's duty of care to the Company and the Members in the conduct and winding up of the Company's activities is to act with the care that a Person in a like position would reasonably exercise under similar circumstances and in a manner the Director reasonably believes to be in the best interests of the Company.  In discharging this duty, a Director may rely in good faith upon opinions, reports, statements or other information provided by another Person that the Director reasonably believes is a competent and reliable source for the information.

In addition, a Director satisfies the above referenced duty of care if all of the following apply:  (1) the Director is not interested in the subject matter of the business judgment; (2) the Director is informed with respect to the subject of the business judgment to the extent the Director reasonably believes to be appropriate in the circumstances; and (3) the Director has a rational basis for believing that the business judgment is in the best interests of the Company.

Notwithstanding anything which may appear to be to the contrary in the foregoing, a Director's duty of loyalty and duty of care to a Member is subject to Section 489.901(2) of the Iowa Act, and a Person challenging a Director's business judgment has the burdens of proof set forth in Section 489.409(7)(b) of the Iowa Act.

A Director shall also discharge the Director's duties under the Iowa Act and this Agreement and exercise any rights consistently with the contractual obligation of good faith and fair dealing.  The determination of whether a Director has met the obligation of good faith and fair dealing with respect to any particular matter shall be determined utilizing, and based on, a subjective standard based solely upon the actual knowledge and intent of the Director in question, and not based on a reasonableness, objective or other third party or general standard.

A Director does not violate a duty or obligation under the Iowa Act or under this Agreement merely because the Director's conduct furthers the Director's own interest.

The Company and the Members expressly state and agree that any and all exclusions, restrictions and/or limitations on or of, or any eliminations of, any of the duties or obligations of the Directors as set forth in this Section are not manifestly unreasonable and are consistent with the intent and desire of the Company and the Members.

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11.2      Limitation of Liability of Directors.  In addition to the exclusions, restrictions, limitations and protections provided in Section 11.1, a Director shall not be liable to the Company or to the Members for money damages, except only for any of the following:  (i) a breach of the duty of loyalty as specified in Section 11.1(a); (ii) a financial benefit received by the Director to which the Director is not entitled; (iii) a breach of a duty under Section 489.406 of the Iowa Act; (iv) intentional infliction of harm on the Company or a Member; or (v) an intentional violation of criminal law.  If the Iowa Act or other applicable law is hereafter amended to authorize the additional or further elimination of or limitation on the liability of managers, then the liability of a Director, in addition to the elimination of and limitation on personal liability provided in this Section, shall be eliminated and limited to the extent of such amendment, automatically and without any further action, to the maximum extent permitted by law.   Any repeal or modification of this Section or the provisions of the Iowa Act with respect to this Section shall be prospective only, and shall not adversely affect any elimination of or limitation on the personal liability, or any other right or protection, of a Director with respect to any state of facts existing at or prior to the time of such repeal or modification.

11.3      Standards of Conduct for Members.  A Member shall discharge the Member's duties under the Iowa Act and this Agreement and exercise any rights consistently with the contractual obligation of good faith and fair dealing.  A Member does not, however, have any fiduciary duty to the Company or to any other Member solely by reason of being a member of the Company, and a Member may, subject to any prohibitions, restrictions or other limitations set forth in any other agreement between the Member and the Company, engage in other business and activities in addition to being a member of the Company.

ARTICLE 12

INDEMNIFICATION

The Company shall reimburse for any payment made by, and indemnify for any debt, obligation or other liability incurred by, a Director or officer of the Company in the course of the Director's or the officer's activities on behalf of the Company, and shall otherwise indemnify and advance or reimburse expenses to each Director and officer of the Company for liability incurred by them in such capacities, or arising out of their status as such, to the full and maximum extent authorized or permitted by the Iowa Act or other applicable law.  This Article does not limit or otherwise affect any provisions of this Agreement (including Sections 8.3, 8.4 and 11.1) which provide for any elimination of, or any restriction or limitation on, any duties or obligations otherwise imposed under Sections 489.405 or 489.409 of the Iowa Act.

If the Iowa Act or other applicable law is hereafter amended to authorize broader, additional or further indemnification, then the indemnification obligations of the Company shall be deemed to be amended automatically, and without any further action, to require indemnification and advancement and reimbursement of funds to pay for or reimburse expenses of the Directors and the officers of the Company to the full and maximum extent then permitted by law.  Any repeal or modification of this Article or any other applicable provision of this Agreement, the Iowa Act or other applicable law shall not limit or adversely affect any indemnification or other obligations of the Company under this Article with respect to any acts or omissions occurring, in whole or in part, on or at any time prior to, or any state of facts existing, in whole or in part, on or at or any time prior to, the time of such repeal or modification.  Each Person who is now serving or who shall hereafter serve as a Director or an officer of the Company shall be deemed to be doing so in reliance upon the rights provided for in this Article, and such rights shall continue as to a Person who has ceased to be a Director or an officer of the Company, as the case may be, and shall inure to the benefit of the heirs, executors, legal or personal representatives, administrators and successors of such Person.  If this Article or any portion of this Article shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify each Director and officer of the Company to the full and maximum extent permitted by any portion of this Article that shall not have been invalidated.

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Except only as may be limited by the express and affirmative requirements of the Iowa Act, the indemnification and advancement and reimbursement of expenses provided by or granted pursuant to this Article shall not be deemed exclusive of any other rights which a Director or an officer of the Company may have or hereafter acquire or become entitled to under any law or regulation, the Certificate of Organization, this Agreement or another agreement, vote of the Directors, vote of the Members or otherwise.

The Company may, by action of the Directors, provide indemnification to such of the Members, employees and agents of the Company, and to such extent and to such effect, as the Directors may from time to time determine to be appropriate.

The Company may purchase and maintain insurance, at its expense, to protect itself and any Person who is or was a Director, Member, officer, employee or agent of the Company, or while a Director, Member, officer, employee or agent of the Company, is or was serving at the request of the Company as a manager, member, director, officer, partner, trustee, employee or agent of a limited liability company, corporation, partnership, limited partnership, joint venture, trust, employee benefit plan or other Person, against any liability asserted against such Person or incurred by such Person in such capacity, or arising from or out of such Person's status as such, and whether or not the Company could, under the Iowa Act, eliminate or limit such Person's liability to the Company for the conduct giving rise to the liability, or would have the power to indemnify such Person against such liability under the provisions of this Article, the Iowa Act or otherwise.  The Company may create a trust fund, grant a security interest and/or use other means (including letters of credit, surety bonds and/or similar arrangements), as well as enter into contracts providing for indemnification to the maximum extent permitted by law and including as a part thereof any or all of the foregoing, to ensure the payment of such sums as may be necessary to effect full indemnification.  The Company's obligation to make indemnification and to pay expenses pursuant to this Article shall be in excess of any insurance purchased and maintained by the Company.  To the extent that indemnity or expenses of a Person entitled to indemnification and payment of expenses pursuant to this Article are paid on behalf of or to such Person by such insurance, such payments shall be deemed to be applied towards satisfaction of the Company's obligation to such Person to make indemnification and to pay expenses pursuant to this Article.

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All references to "indemnify", "indemnification" and other variations of those words in this Article are intended to include the advancement and/or reimbursement of the costs and expenses of the Director, officer or other Person in question.

ARTICLE 13

MISCELLANEOUS PROVISIONS

13.1      Notices.  Subject to the last paragraph in this Section, all notices, demands, requests and other communications desired or required to be given under this Agreement ("Notices"), shall be in writing and shall be given by: (i) hand delivery to the address for Notices; (ii) delivery by overnight courier service to the address for Notices; or (iii) sending the same by United States mail, postage prepaid, addressed to the address for Notices.

Subject to the last paragraph in this Section, all Notices shall be deemed given and effective upon the earlier to occur of: (i) the hand delivery of the Notice to the address for Notices; (ii) one business day after the deposit of the Notice with an overnight courier service by the time deadline for next day delivery addressed to the address for Notices; or (iii) three business days after depositing the Notice in the United States mail as set forth in the preceding paragraph.

Subject to the last paragraph in this Section, all Notices to a Director or a Member shall be addressed to the address of the Director or the Member, as the case may be, as it appears in the Company's records, and all Notices to the Company shall be sent to both the principal office and to the registered agent and office of the Company as set forth in the records of the Iowa Secretary of State, or to such other Persons or at such other place as the Director, the Member or the Company, as the case may be, may by Notice designate as a place for service of Notice.

Notwithstanding the foregoing or any other term or condition of this Agreement, or otherwise, which may appear to be to the contrary, any notice, demand, request or other communication desired or required to be given by the Company under this Agreement may be given by the Company to a Director or to a Member by any form of electronic transmission, and any notice given by any form of electronic transmission shall be deemed to be the equivalent of written notice for all purposes, and such electronic transmission and notice shall be deemed to be given and effective upon the Company's transmission thereof to the Director or the Member in question.  An electronic transmission may include any process of communication not involving the physical transfer of paper that is suitable for the retention, retrieval and reproduction of information by the recipient, and shall include e-mail to the last e-mail address as may from time to time be supplied to the Company by any Director or Member.  Each Director and Member shall be responsible for notifying the Company in writing of any change in the e-mail address of such Director or Member.  Notwithstanding any term or condition of this Agreement or otherwise which may appear to be to the contrary, any written consent or written action by any Director or by any Member may also be given and received by the Company and by the Director or the Member, as the case may be, by any form of electronic transmission.

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13.2      Application of Iowa Law.  This Agreement is entered into and performable in material part in Iowa, and the application and interpretation hereof shall be governed by and construed in accordance with the laws of the State of Iowa, and, subject to the following, specifically the Iowa Act, but without regard to provisions thereof relating to conflicts of law or choice of law.

Without limiting Section 13.11, any statements in this Agreement that provide that certain sentences, sections or other provisions of this Agreement supersede and override certain provisions or sections of the Iowa Act are not intended to be exclusive statements regarding that issue, and other sentences, sections and provisions of this Agreement also supersede and override various provisions or sections of the Iowa Act, with it being the intent and desire of the Company and the Members that the Certificate of Organization and this Agreement shall be the sole and exclusive statement and agreement by and among the Members and between the Members and the Company and that the Certificate of Organization and this Agreement therefore override and supersede the Iowa Act to full and maximum extent permitted by the Iowa Act.  Without limiting the generality of the foregoing, in the event of any conflict or inconsistency between any of the terms and conditions of this Agreement and the Iowa Act, the terms and conditions of this Agreement are intended by the Company and the Members to govern and control to the full extent of such conflict or inconsistency.

13.3      Execution of Additional Instruments; Power of Attorney to Directors.  Each Member agrees to execute such other and further statements of interest and holdings, designations, powers of attorney and other instruments that are necessary to comply with any laws, rules or regulations, or to evidence the authority of the Directors or the officers of the Company under this Agreement.

Without limiting the generality of the foregoing, and in addition thereto, each Member hereby constitutes and appoints each and all of the Directors, acting singly or together, as the Member's true and lawful agent and attorney in fact, with full power and authority and in such Member's name, place and stead, to make, execute, acknowledge, deliver, file and record all such documents and instruments as may be appropriate to carry out the intent and purposes of this Agreement or the business and affairs of the Company, including any amendments or restatements of this Agreement or the Certificate of Organization as may be approved or adopted by the Directors and/or the Members from time to time in accordance with this Agreement.  The foregoing power of attorney is coupled with an interest and shall be irrevocable and survive the death or incapacity of each Member, may be exercised by the Directors by a single signature of a Director acting as attorney in fact for all of the Members, and shall survive any Assignment of Units by a Member.

13.4      Construction. Words and phrases in this Agreement shall be construed as in the singular or plural number, and as masculine, feminine or neutral gender, according to the context, including all references to "Directors" or "Director" or to "Members" or "Member" during any period of time that the Company only has, respectively, one Director or one Member.  The use of the words "herein", "hereof", "hereunder" and other similar compounds of the word "here" refer to this entire Agreement and not to any particular article, section, paragraph or provision.  Any reference in this Agreement to an "Article", a "Section" or a "Schedule" is to the article, section or schedule of this Agreement, unless otherwise expressly indicated.  The words "include", "includes" and "including" are used in this Agreement in a nonexclusive manner and fashion, that is so as to include, but without limitation, the items, facts, acts or matters in question.  Any reference in this Agreement to a section of the Iowa Act, the Code, the Treasury Regulations, or the Exchange Act, or to a rule under the Exchange Act, shall, unless otherwise expressly provided in this Agreement, be a reference to such section or rule as amended from time to time and to any successor section or rule or redesignated section or rule.  This Agreement shall not be construed more strongly against the Company or any Director or Member regardless of who was more responsible for its preparation.

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13.5      Headings and Captions.  The headings, captions or titles of articles, sections and paragraphs in this Agreement are provided for convenience of reference only, and shall not be considered a part hereof for purposes of interpreting or applying this Agreement, and such titles or captions do not define, limit, extend, explain or describe the scope or extent of this Agreement or any of its terms or conditions.

13.6      No Waiver.  No failure or delay on the part of the Company, any Director, any officer of the Company or any Member in exercising any right, power or remedy under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy.  Except as may be otherwise provided in this Agreement, the remedies provided for in this Agreement are cumulative and are not exclusive of any remedies that may be available to the Company, any Director, any officer of the Company or any Member at law, in equity or otherwise.

13.7      Severability.  In the event any provision of this Agreement is held invalid, illegal or unenforceable, in whole or in part, the remaining provisions of this Agreement shall not be affected thereby and shall continue to be valid and enforceable.  In the event any provision of this Agreement is held to be invalid, illegal or unenforceable as written, but valid, legal and enforceable if modified, then such provision shall be deemed to be amended to such extent as shall be necessary for such provision to be valid, legal and enforceable and it shall be enforced to that extent.  Any finding of invalidity, illegality or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

13.8      Binding Effect on Heirs, Successors and Assigns.  This Agreement shall be binding upon and shall inure to the benefit of the Company, the Directors, the officers of the Company, the Members and their respective heirs, executors, administrators, successors, legal representatives and permitted assigns.  Nothing in this Agreement, express or implied, is intended to confer upon any Person other than the Company, the Directors, the officers of the Company, the Members, and their respective heirs, executors, administrators, successors, legal representatives and permitted assigns, any rights, remedies, liabilities or obligations under or by reason of this Agreement.

13.9      Creditors.  Without limiting Section 13.8, none of the provisions of this Agreement are for the benefit of, or are enforceable by, any creditor of the Company.

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13.10    Counterparts. This Agreement may be executed by one or more of the Members on any number of separate counterparts or addendums (including by e-mail or facsimile transmission), and said counterparts and addendums taken together shall be deemed to constitute one and the same agreement.

13.11    Entire Agreement.  Without limiting Section 13.2, the Certificate of Organization, this Agreement, the Unit Assignment Policy, any statements of authority that are executed pursuant to Sections 4.1 or 10.3  and any exhibits and schedules to this Agreement constitute the entire agreement pertaining to the subject matters of this Agreement and supersede all negotiations, preliminary agreements and all prior or contemporaneous discussions and understandings in connection with the subject matters of this Agreement.  Any exhibits and schedules are incorporated into this Agreement as if set forth in their entirety and constitute a part of this Agreement.  This Agreement supersedes and replaces in entirety the Prior Operating Agreement.

13.12    Indemnification; Specific Performance.  Each Member shall defend, indemnify and hold the Company, the Directors and each of the other Members harmless from and against any suit, proceeding, action, claim, counterclaim, loss, liability, damage, cost and/or expense (including attorneys' fees and court costs) in any way related to, connected with or arising or resulting from any misrepresentation or any breach or nonfulfillment of, or default under, any term or condition of this Agreement by the Member, including any breach or nonfulfillment of, or default under, Article 9.

Each Member respectively acknowledges and agrees that the Company shall be entitled to, and hereby instructs and directs any court or other authority to grant the Company, specific performance of the duties and obligations of the Member under Section 5.7 and Article 9.

13.13    Consent to Jurisdiction.  The Company, each Director, each officer of the Company and each Member hereby submit to the non-exclusive jurisdiction of any United States or Iowa court sitting in Story County, Iowa or Polk County, Iowa in any action or proceeding arising out of or relating to this Agreement, and the Company, each Director, each officer of the Company and each Member hereby agree that all claims in respect of any such action or proceeding may be heard and determined in any such United States or Iowa court. The Company, each Director, each officer of the Company and each Member waive any objection, including any objection to the laying of venue or based on the grounds of forum non conveniens, which they may now or hereafter have to the bringing of any such action or proceeding in any such court.  The Company, each Director, each officer of the Company and each Member consent to the service of any and all process in any such action or proceeding brought in any such court by the delivery of copies of such process to them at the address specified for Notices for them.

13.14    Waiver of Action for Partition.  Each Member unconditionally and irrevocably waives any right that the Member may have to maintain any action for partition with respect to any of the assets or properties of the Company.

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13.15    Waiver of Jury Trial.  The Company, each Director, each officer of the Company and each Member hereby waive any right to a jury trial with respect to and in any action, proceeding, suit, claim, counterclaim, demand or other matter whatsoever arising out of this Agreement.

IN WITNESS WHEREOF, this Agreement is made and entered into effective as of the 10th day of November, 2010.

MEMBERS
By:	/s/ Jeff Taylor
	Jeff Taylor, Director and
	as Attorney In Fact for the Members

[SIGNATURE PAGE TO SECOND AMENDED AND RESTATED OPERATING

AGREEMENT OF

LINCOLNWAY ENERGY, LLC DATED AS OF

NOVEMBER 10, 2010]

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LINCOLNWAY ENERGY, LLC

UNIT ASSIGNMENT POLICY

(As amended on November 10, 2010)

The Directors of Lincolnway Energy, LLC (the "LLC") have adopted the following as the Unit Assignment Policy of the LLC as contemplated by and for purposes of the Second Amended and Restated Operating Agreement of the LLC (as amended or restated from time to time, the "Operating Agreement").  Any words or terms which are used in this Unit Assignment Policy and that are defined in the Operating Agreement of the LLC shall have those same meanings as used in and for purposes of this Unit Assignment Policy, including, for example, the words "Assignment", "Assigned", "Assign", "assignee", "assignor", "Code", "Directors" and "Units".

As provided in the Operating Agreement, an Assignment includes any sale, gift, bequest, assignment or other conveyance, transfer or disposition whatsoever of a Unit, or any right or interest in, under or arising from a Unit (including any right to receive any Distribution arising from any Unit), whether voluntarily or involuntarily, or by operation or any act or process of law or equity, or otherwise, and including the granting of a pledge, security interest or other lien or encumbrance in, on or against a Unit or the entering of a charging order under Section 489.503 of the Iowa Act and any action to enforce or realize upon, or the exercise of any rights or remedies whatsoever under or pursuant to, any such pledge, security interest, lien, encumbrance or charging order (including any sale of the Unit or taking possession of, or any other interest in, the Unit).  Without limiting the generality of the foregoing, and in further confirmation thereof, any purported transfer of a transferable interest (as that term is defined in the Iowa Act) is an Assignment of the entire underlying Unit or Units.

All Assignments of any Units must be made in accordance with the Operating Agreement, and also only with the prior written approval of the Directors.  The Directors may prohibit, restrict, limit, delay or place conditions on any proposed Assignment of any Units for any reasonable purpose, as determined by the Directors.  A reasonable purpose shall in all events include, without limitation, prohibiting, restricting, limiting, delaying or placing conditions on any Assignment of any Units which, alone or together with any previous Assignments or other Assignments that are known or intended or that may reasonably be anticipated, would or might reasonably be determined to:

(a)           violate or cause the LLC to violate or to otherwise be in noncompliance with any applicable law, rule, regulation or order, including any foreign, federal, state or local securities law, rule, regulation or order;

(b)           cause the LLC to be taxed as a corporation for tax purposes, including by reason of Section 7704 of the Code;

(c)           result in the termination of the LLC or the LLC's tax year for tax purposes, including under Section 708 of the Code, or cause the application to the LLC of Sections 168(g)(1)(B) or 168(h) of the Code or similar or analogous rules;

(d)           violate any term or condition of the Operating Agreement, including Section 5.7;

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(e)           violate or cause the LLC to violate or to otherwise be in noncompliance with any law, rule, regulation or order applicable to the LLC's selection or use of its then current Fiscal Year, including under Section 444 of the Code;

(f)            require the LLC to become licensed, registered or regulated as an investment company, a broker-dealer or any other form of regulated entity under any applicable foreign, federal, state or local law, rule, regulation or order; or

(g)           create or result in any fractional Units.

The assignor and assignee in each proposed Assignment shall provide the LLC with a Unit Assignment Application in a form provided by the LLC, and with all such other documents, instruments and information as are deemed to be necessary or appropriate from time to time by the Directors, including (i) the assignee's taxpayer identification number; (ii) the information necessary to determine the assignee’s initial tax basis in the Units which were Assigned to the assignee; (iii) all information necessary or appropriate for the LLC to be able to file all required tax returns and other legally required information statements or returns; (iv) evidence that the assignee is properly authorized to acquire the Units and to become a Member and that the assignor is authorized to Assign the Units to the assignee; and (v) a copy of the agreement between the assignee and the assignor.  The agreement between the assignor and the assignee must acknowledge the requirements of the Operating Agreement and this Unit Assignment Policy.

The LLC reserves the right to require the assignor and/or the assignee in each proposed Assignment to provide the LLC with an opinion of counsel for the LLC or for the assignor and/or the assignee, in form and content acceptable to the LLC, to the effect that the proposed Assignment shall not have or cause any of the results or effects described in subparagraphs (a) through (g) above in this Unit Assignment Policy.

The LLC also reserves the right to require the assignor and/or the assignee in each proposed Assignment to pay directly or to reimburse the LLC for all fees, costs and expenses paid or incurred by the LLC in connection with the Assignment, including legal and accounting fees.

An Assignment of a Unit may be made pursuant to and upon the terms and conditions of any unit matching service as may be made available from time to time by the LLC on the website of the LLC in accordance with Section 1.7704-1(g) of the Treasury Regulations.

An Assignment of a Unit may be made to the LLC in accordance with Section 9.6 of the Operating Agreement.

The Directors are not required to act upon any proposed Assignment of any Unit until the next regularly scheduled meeting of the Directors which follows the date on which the LLC receives a completed and executed Unit Assignment Application from the assignor and the assignee in form and content acceptable to the Directors.

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An Assignment of a Unit which is approved by the Directors shall be effective for all purposes (including for purposes of allocations and Distributions) as of the date determined by the Directors, but such date must be within 32 days of the date of the approval of the Assignment by the Directors.

The effect of an Assignment which is approved by the Directors shall be governed by the Operating Agreement, and an assignee must become a Substitute Member in accordance with the terms of the Operating Agreement.

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EX-31.1

EXHIBIT 31.1

RULE 13a-14(a) CERTIFICATION

I, Richard Brehm, certify that:

1.           I have reviewed this annual report on Form 10-K of Lincolnway Energy, LLC.

2.           Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.           Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.           The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)           Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)           Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)           Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)           Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.           The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)           All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

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(b)           Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:  December 21, 2010.	/s/ Richard Brehm
	Richard Brehm, President and Chief
	Executive Officer

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EX-31.2

EXHIBIT 31.2

RULE 13a-14(a) CERTIFICATION

I, Kim Supercynski, certify that:

1.           I have reviewed this annual report on Form 10-K of Lincolnway Energy, LLC.

2.           Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.           Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.           The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)           Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)           Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)           Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)           Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.           The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)           All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

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(b)           Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:  December 21, 2010.	/s/ Kim Supercynski
	Kim Supercynski, Chief Financial Officer

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EX-32.1

EXHIBIT 32.1

SECTION 1350 CERTIFICATION

Pursuant to 18 U.S.C. Section 1350, I, Richard Brehm, President and Chief Executive Officer of Lincolnway Energy, LLC, certify that to my knowledge (i) Lincolnway Energy, LLC's Annual Report on Form 10-K for the fiscal year ended September 30, 2010 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Lincolnway Energy, LLC.

Date:  December 21, 2010

/s/ Richard Brehm

Richard Brehm, President and Chief

Executive Officer

[A signed original of this written statement has been provided to Lincolnway Energy, LLC and will be retained by Lincolnway Energy, LLC and furnished to the Securities and Exchange Commission or its staff upon request.]

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EX-32.2

EXHIBIT 32.2

SECTION 1350 CERTIFICATION

Pursuant to 18 U.S.C. Section 1350, I, Kim Supercynski, Chief Financial Officer of Lincolnway Energy, LLC, certify that to my knowledge (i) Lincolnway Energy, LLC's Annual  Report on Form 10-K for the fiscal year ended September 30, 2010 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Lincolnway Energy, LLC.

Date:  December 21, 2010

/s/ Kim Supercynski

Kim Supercynski, Chief Financial Officer

[A signed original of this written statement has been provided to Lincolnway Energy, LLC and will be retained by Lincolnway Energy, LLC and furnished to the Securities and Exchange Commission or its staff upon request.]

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