Exhibit 10.11
ETHANOL MARKETING
AGREEMENT
BETWEEN
AVENTINE RENEWABLE ENERGY,
INC.
A Delaware
corporation
AND
PANDA HEREFORD ETHANOL,
L.P.
A Delaware limited
partnership
Dated as of October 13,
2005
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED BY
PANDA ETHANOL, INC. FOR CERTAIN PORTIONS OF THIS DOCUMENT.
CONFIDENTIAL PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. OMITTED PORTIONS ARE INDICATED
IN THIS AGREEMENT WITH “*****”.
ETHANOL MARKETING
AGREEMENT
THIS AGREEMENT (the
“Agreement”) is entered into as of this 13th day of
October, 2005 (the “Effective Date”) by and between
Panda Hereford Ethanol, LP, a Delaware limited partnership
(“Panda”) and Aventine Renewable Energy, Inc., a
Delaware corporation (“ARE”). Both Panda and ARE are
herein individually referred to as “Party” and
collectively as “Parties”.
RECITALS:
WHEREAS, Panda is currently
developing a facility in Hereford, Texas (the Hereford Facility)
that contemplates the production of ethanol and other co-products
(the “Project”);
WHEREAS, ARE has knowledge of the
ethanol industry in the United States and has experience related to
ethanol marketing, sales and distribution; and
WHEREAS, Panda desires to sell all
of the ethanol produced at the Hereford Facility exclusively to ARE
and ARE desires to purchase all of such ethanol under the terms and
conditions set forth in this Agreement.
AGREEMENT:
For and in consideration of the
mutual promises, covenants, obligations and benefits described in
this Agreement, and other good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged, the
Parties, intending to be legally bound, do hereby agree as
follows:
ARTICLE I
DEFINED TERMS AND
INTERPRETATION
1.1 Defined Terms . As used
in this Agreement, including the Exhibits and other attachments
hereto, each term with its initial letter capitalized and not
otherwise defined shall have the meaning assigned to such term as
set forth below:
(a) “Affiliate” shall
mean, in relation to any Person, any Person: (i) which
directly or indirectly controls, or is controlled by, or is under
common control with, such other Person; or (ii) which directly
or indirectly beneficially owns or holds fifty percent
(50%) or more of any class of voting stock of such other
Person; or (iii) which has fifty percent (50%) or more of
any class of voting stock that is directly or indirectly
beneficially owned or held by such other Person; or (iv) who
either holds a general partnership interest in such other Person or
such other Person holds a general partnership interest in the
Person.
(b) “Adjusted Net Panda
Proceeds” shall mean the Adjusted Net Pool Price multiplied
by the Panda Delivered Volumes for the Month (as reflected in the
Monthly Delivered Volumes Report for the corresponding
Month).
(c) “Adjusted Net Pool
Price” shall mean the Adjusted Net Pool Proceeds divided by
the Pool Delivered Volumes.
(d) “Adjusted Net Pool
Proceeds” shall mean the Net Pool Proceeds plus Inventory
Volume Adjustment plus Inventory Mark to Market Adjustment minus
Inventory Carrying Cost.
(e) “Approvals” shall
mean any and all permits, clearances, licenses, visas,
authorizations, consents, decrees, waivers, privileges, filings,
exemptions or approvals of any Person or any federal, state, city,
county, local or regional authorities, departments, bodies,
commissions, corporations, branches, agencies, courts, tribunals,
judicial authorities, legislative bodies, administrative bodies or
regulatory bodies.
(f) “Aventine Gross
Proceeds” shall mean for each Month the total revenue
received by ARE for any fuel grade ethanol sold by ARE including
for Purchase Resale Transactions, excluding any ARE fuel market
hedging (as such revenue is reflected in the Monthly Pool Sales
Report for the corresponding Month).
(g) “Aventine Sales
Volumes” shall mean, for each Month, the total number of
Gallons of fuel grade ethanol sold (as reflected in the Monthly
Pool Sales Report) net of Terminalized Volume Gain or
Loss.
(h) “Barrel” shall mean
a volumetric unit of measure equivalent to 42 U.S.
Gallons.
(i) “Business Day” shall
mean any day except Saturday, Sunday or Federal Reserve Bank
holidays.
(j) “Capital Employed
Adjustment” shall mean (Inventory Carrying Cost less
Receivable Carrying Cost) multiplied by (Panda Delivered Volumes
divided by Pool Delivered Volumes), a sample calculation of which
is included in Exhibit D .
(k) “Commercial Operations
Date” shall mean the date on which the Hereford Facility will
begin operating and producing Ethanol, estimated to be the date
that is fourteen (14) months from Financial
Closing.
(l) “Commission Rate”
shall mean a commission equal to *****% of the Net Pool Price,
deducted by ARE, for each Gallon of Ethanol sold to ARE hereunder;
provided, however, that in the event that the Parties enter into an
agreement for the marketing of ethanol in connection with any
additional proposed ethanol project by Panda or an Affiliate of
Panda, beginning as of the date of the first delivery of ethanol
under any such agreement, ARE’s commission for each Gallon of
Ethanol sold to ARE pursuant to this Agreement shall equal *****%
of the Net Pool Price.
(m) “Delivery Period”
shall mean the period of time during which deliveries of Ethanol
are to be made which shall be agreed upon and set forth in the
Operating Procedures.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED BY
PANDA ETHANOL, INC. FOR CERTAIN PORTIONS OF THIS DOCUMENT.
CONFIDENTIAL PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. OMITTED PORTIONS ARE INDICATED
IN THIS AGREEMENT WITH “*****”.
(n) “Delivery Point(s)”
shall mean a location at the Hereford Facility which shall be
agreed upon and set forth in the Operating Procedures.
(o) “Estimated Net Pool
Price” or “ENPP” shall mean an estimate, as
reasonably determined by ARE, of what the actual weighted average
NPP will be for the month, which is reported by ARE to all Pool
members on a regular basis (as reflected in the Monthly Delivered
Volume Report).
(p) “Estimated Panda
Proceeds” shall mean, for each Month, the total of Gross
Delivery Payments (as reflected in the Monthly Delivered Volumes
Report for the corresponding Month under the heading
“Hereford”).
(q) “Financial Closing”
shall mean the date on which financing (debt and/or equity)
sufficient to complete construction of the Project has been
obtained and the first draw thereunder has been made.
(r) “Financing Persons”
shall mean the lenders, security holders, investors, equity
providers and others providing financing or refinancing to or on
behalf of Panda, for the development, construction and ownership of
the Project or any portion thereof, or any trustee or agent acting
on behalf of any of the foregoing.
(s) “Force Majeure
Events” shall mean all events and occurrences which
(i) arise after the Effective Date and, (ii) are beyond
the reasonable control of the Party claiming such event. Such
events shall include, without limitation, tornadoes, earthquakes,
fire, flood, lightning, natural disasters, governmental actions and
orders, political disturbances, and war; such events specifically
shall exclude any labor strikes, work stoppages or similar labor
action (except for labor strikes, work stoppages or similar labor
action affecting transportation of Ethanol).
(t) “Freight Costs”
shall mean the total fuel grade ethanol freight (including, without
limitation, weighing and switching) and demurrage charges as set
forth in ARE’s general ledger.
(u) “Gallons” shall mean
gallons as adjusted to net ***** degree Fahrenheit.
(v) “Gross Delivery
Payment” shall mean the ENPP multiplied by the Panda
Delivered Volumes.
(w) “Indirect Marketing
Cost” shall mean all indirect marketing costs associated with
the sale of Pool Gallons of fuel grade ethanol, including
government taxes and assessments, insurance, inspection fees,
employee compensation and other indirect marketing costs to the
extent such other indirect marketing costs are immaterial (but
excluding direct costs incurred in marketing such ethanol), as all
such costs are set forth in ARE’s general ledger.
(x) “Inventory” shall
mean all Gallons of ethanol delivered but not sold on behalf of the
Pool.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED BY
PANDA ETHANOL, INC. FOR CERTAIN PORTIONS OF THIS DOCUMENT.
CONFIDENTIAL PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. OMITTED PORTIONS ARE INDICATED
IN THIS AGREEMENT WITH “*****”.
(y) “Inventory Carrying
Cost” shall mean Pool Delivered Volumes multiplied by NPP,
multiplied by (*****), multiplied by the number of days in the
Month, a sample calculation of which is included in Exhibit
D .
(z) “Inventory Carrying Cost
Per Gallon” shall mean Inventory Carrying Cost divided by
Pool Delivered Volumes.
(aa) “Inventory Mark to Market
Adjustment” shall mean, (i) in the event that the
Inventory Volume Variance for the prior Month was positive, the
Inventory Volume Variance for the prior Month multiplied by ((the
NPP less the Inventory Carrying Cost Per Gallon) less the Inventory
Price for the prior Month); or (ii) in the event that the
Inventory Volume Variance for the prior Month was negative, no
adjustment is required.
(bb) “Inventory Price”
shall mean for each Month, (i) in the event that the Inventory
Volume Variance is positive for that Month, the ENPP for the first
day of the following Month or (ii) in the event that the
Inventory Volume Variance is negative for that Month, the NPP for
that Month minus the Inventory Carrying Cost Per Gallon.
(cc) “Inventory Volume
Adjustment” shall mean the Inventory Volume Variance
multiplied by the Inventory Price.
(dd) “Inventory Volume
Variance” shall mean for each Month the Pooled Delivered
Volumes, less the Aventine Sale Volumes, less the Purchase Resale
Volumes.
(ee) “Month” shall mean
one calendar month.
(ff) “Monthly Delivered
Volumes Report” shall mean the monthly report prepared by ARE
containing the information set forth in Example #1 of Exhibit
C hereto.
(gg) “Monthly Pool Sales
Report” shall mean the monthly report prepared by ARE
containing the information set forth in Example #3 of Exhibit
C hereto.
(hh) “Monthly Purchase Resale
Report” shall mean the monthly report prepared by ARE
containing the information set forth in Example #2 of Exhibit
C hereto.
(ii) “Net Delivery
Payment” shall mean the Gross Delivery Payment multiplied by
(1.0 minus the Commission Rate).
(jj) “Net Pool Price” or
“NPP” shall mean (i) the Net Pool Proceeds divided
by (ii) the total of Aventine Sales Volumes less the Purchase
Resale Volumes.
(kk) “Net Pool Proceeds”
shall mean the Aventine Gross Proceeds, less the Purchase Resale
Revenue, less Operating Expenses, plus the Purchase Resale Cost
Absorption.
(ll) “Operating
Expenses” shall mean, with respect to any given period, all
direct costs incurred by ARE in handling ethanol sales for the Pool
during such period, including Freight
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED BY
PANDA ETHANOL, INC. FOR CERTAIN PORTIONS OF THIS DOCUMENT.
CONFIDENTIAL PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. OMITTED PORTIONS ARE INDICATED
IN THIS AGREEMENT WITH “*****”.
Costs, Storage Cost, Rail Cost, Indirect
Marketing Cost, any Pool Shortage Cost incurred due to lost
production, and costs incurred under tariffs, but excluding direct
costs incurred in marketing such ethanol.
(mm) “Panda Delivered
Volumes” shall mean the number of Gallons of Ethanol that
have physically left the Hereford Facility via truck, train or any
other means of transportation as evidenced by bills of lading
issued by Panda or ARE (as reflected in the Monthly Delivered
Volumes Report).
(nn) “Person” shall mean
any natural person, corporation, company, partnership, limited
liability company, joint venture, trust, unincorporated
organization, organization, association, sole proprietorship,
government (or any agency, instrumentality or political subdivision
thereof, including autonomous and quasi-autonomous entities) or
other entity.
(oo) “Plant Shipment
Schedule” shall mean the monthly report prepared by ARE
containing the information set forth in Example #6 of Exhibit
C hereto.
(pp) “Pool” shall mean
all volumes of fuel grade ethanol purchased by ARE from sellers who
have agreed to receive amounts equal to the Net Pool Price for such
fuel grade ethanol with respect to any given period, along with
aggregate fuel grade ethanol volumes produced by ARE during such
period.
(qq) “Pool Delivered
Volumes” shall mean the number of Gallons of fuel grade
ethanol in the Pool that has physically left the facility of a Pool
member via truck, train or any other means of transportation (as
reflected in the Monthly Delivered Volumes Report).
(rr) “Pool Shortage
Cost” shall mean, in the event that ARE is short volumes of
ethanol from the Pool with respect to obligations under third-party
contracts, and ARE must purchase ethanol from non-Pool sources to
cover such obligations, any additional costs incurred by ARE as a
result of purchasing such ethanol.
(ss) “Prime Rate” shall
mean the prime lending rate as reflected in the Wall Street Journal
on the first day of every month.
(tt) “Production
Estimate(s)” shall mean Panda’s best estimate of its
anticipated monthly Ethanol production for the twelve
(12) month period following the date of such estimate;
provided, that, preliminary Production Estimates provided prior to
the Commercial Operations Date shall be estimates for the twelve
(12) month period following the Commercial Operations
Date.
(uu) “Purchase Resale Cost
Absorption” shall mean, for each Month, all direct costs
incurred by ARE in handling Purchase Resale Transactions during
such Month, including but not limited to terminal lease charges,
throughput charges, terminal shrinkage costs, freight charges,
tariffs, costs of leasing railcars, barges and trucks (as reflected
in the Monthly Purchase Resale Report for the corresponding
Month).
(vv) “Purchase Resale
Revenue” shall mean for each Month, the revenue received by
ARE for all Purchase Resale Transactions (as reflected in the
Monthly Purchase Resale Report for the corresponding
Month).
(ww) “Purchase Resale
Transactions” shall mean transactions in which ARE purchases
ethanol from a third-party who is not a member of the Pool and
re-sells the Gallons of such ethanol for its own account (as
reflected in the Monthly Purchase Resale Report).
(xx) “Purchase Resale
Volumes” shall mean, for each Month, the total number of
Gallons of fuel grade ethanol sold in Purchase Resale Transactions
(as reflected in the Monthly Purchase Resale Report).
(yy) “Rail Cost” shall
mean ARE’s rail car lease costs and rail expenses for fuel
grade ethanol as set forth on ARE’s general
ledger.
(zz) “Receivable Carrying
Cost” shall mean the following formula – Part A:
(((beginning Inventory as of the first day of the Month plus
Inventory as of the last day of the Month) / 2) multiplied by NPP,
multiplied by (*****), multiplied by the number of days in the
Month) plus Part B: ((Pool Delivered Volumes less Inventory Volume
Variance (if positive)) multiplied by (NPP multiplied by (*****)
multiplied by Receivable – Payable Spread Days), an example
calculation of which is included in Exhibit D .
(aaa) “Receivable –
Payable Spread Days” shall mean the difference of ARE’s
receivable days outstanding less ARE’s payable days
outstanding, which shall be equal to *****.
(bbb) “Regulatory
Requirements” shall mean all requirements and provisions of
federal, state, city, county and local constitutions, laws,
statutes, rules, regulations and ordinances enacted or issued from
time to time, and all judicial and administrative orders, judgments
and decrees of any governmental authority having jurisdiction
concerning the matters contained herein issued from time to
time.
(ccc) “Shipment Confirmation
Report” shall mean the monthly report prepared by ARE
containing the information set forth in Example #7 of Exhibit
C hereto.
(ddd) “Storage Cost”
shall mean ARE’s total fuel grade ethanol storage, throughput
and terminal costs as set forth on ARE’s general
ledger.
(eee) “Terminalized Volume
Gain or Loss” shall equal the sum of (i) the Pool
volumes of ethanol delivered from storage and/or distribution
terminals during the prior Month (as evidenced by monthly activity
reports furnished to ARE by storage and/or distribution terminal
operators) minus the Pool volumes of ethanol delivered from storage
and/or distribution terminals during the prior Month (as evidenced
by ARE’s accounting records), (ii) the total Gallons of
ethanol in the Pool that have physically left the facilities of
Pool members and been delivered to storage and/or distribution
terminals during the prior Month (as evidenced by monthly activity
reports furnished to ARE by storage and/or distribution terminal
operators)
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED BY
PANDA ETHANOL, INC. FOR CERTAIN PORTIONS OF THIS DOCUMENT.
CONFIDENTIAL PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. OMITTED PORTIONS ARE INDICATED
IN THIS AGREEMENT WITH “*****”.
minus the total Gallons of ethanol in the Pool
that have physically left the facilities of Pool members and been
delivered to storage and/or distribution terminals during the prior
Month (as evidenced by ARE’s accounting records), plus
(iii) the total Gallons of ethanol held by storage and/or
distribution terminals at the end of the prior Month (as evidenced
by monthly activity reports furnished to ARE by storage and/or
distribution terminal operators) minus the total Gallons of ethanol
held by storage and/or distribution terminals at the end of the
prior Month (as evidenced by ARE’s accounting
records). In addition to the prior Month’s adjustment,
as calculated above, there may be additional immaterial
Terminalized Volume Gain or Loss adjustments for Months preceding
the prior Month.
(fff) “True-up Settlement
Payment” shall mean (Adjusted Net Panda Proceeds less
Estimated Panda Proceeds, plus Capital Employed Adjustment)
multiplied by (1.0 minus the Commission Rate).
ARTICLE II
TERM
2.1 Term . The term of this
Agreement shall commence as of the Effective Date and continue for
a two (2) year period from and following the Commercial
Operations Date, unless terminated earlier in accordance with this
Agreement (the “Term”).
2.2 Termination . Either
Party may terminate this Agreement effective immediately upon an
Event of Default by the other Party as described in Article
XII.
2.3 Amendment/Modification .
The Parties agree to make any necessary amendments and or
modifications to this Agreement in the event that ARE becomes a
Financing Person.
ARTICLE III
SUPPLY OF ETHANOL
3.1 Supply and Quality .
Panda hereby agrees to sell exclusively to ARE and ARE hereby
agrees to purchase all of the fuel grade ethanol produced at the
Hereford Facility by Panda (the “Ethanol”), which shall
conform to the specifications contained in Exhibit A . ARE
shall have the right to reject any Ethanol which fails to conform
to such specifications; provided, however, failure to reject any
such Ethanol shall not constitute a waiver of Panda’s
obligation to deliver any such Ethanol conforming to such
specifications; provided, however, that results of testing
conducted at the Hereford Facility shall be conclusive with respect
to whether Ethanol meets the required specifications. ARE hereby
acknowledges and agrees that its obligation pursuant to this
Section 3.1 is to purchase all such Ethanol delivered
by Panda during any given Delivery Period, if any, notwithstanding
the Production Estimates provided by Panda pursuant to
Section 3.3(b) below, and such obligation shall
commence as of the Commercial Operations Date. Notwithstanding the
foregoing, in the event that Panda produces in excess ***** Gallons
of Ethanol per day (the “Daily Production Amount”),
Panda shall have the right, upon six (6) months prior written
notice to ARE, to cap the Gallons of Ethanol sold to ARE pursuant
to this Agreement to such Daily Production Amount. Upon the date
specified in such notice, Panda shall have no obligation to sell
and ARE shall have no obligation to purchase any Gallons of Ethanol
in excess of the Daily Production Amount.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED BY
PANDA ETHANOL, INC. FOR CERTAIN PORTIONS OF THIS DOCUMENT.
CONFIDENTIAL PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. OMITTED PORTIONS ARE INDICATED
IN THIS AGREEMENT WITH “*****”.
3.2 Purchase of Ethanol Prior to Commercial
Operations Date . In addition to the obligation to purchase
Ethanol as of the Commercial Operations Date in accordance with
Section 3.1 above, ARE agrees to purchase, in
accordance with Article IV , and transport, in accordance
with Section 5.2 , any Ethanol produced at the Hereford
Facility prior to Commercial Operations Date. Panda shall provide
ARE with notice of any such production and the Parties shall agree
on a time and location for delivery.
3.3 Production Estimates .
(a) Prior to the Commercial Operations Date, Panda shall
provide ARE with the following preliminary Production Estimates:
the first preliminary Production Estimate shall be delivered no
later than ninety (90) days prior to Commercial Operations
Date; a second preliminary Production Estimate shall be delivered
no later than sixty (60) days prior to Commercial Operations
Date; and a final preliminary Production Estimate shall be
delivered no later than thirty (30) days prior to Commercial
Operations Date.
(b) On the Commercial Operations
Date and on or before the first day of each Month following the
Commercial Operations Date, Panda shall provide ARE with an updated
Production Estimate such that ARE will have an updated Production
Estimate on a rolling basis for an entire twelve (12) month
period; provided, however, that when there are less than twelve
(12) months remaining in the Term, the Production Estimate
shall only include the number of months remaining in the
Term.
3.4 Quality Control . ARE
may, at its own expense and cost and during any Delivery Period,
test the Ethanol in accordance with procedures to be reasonably
agreed upon by the Parties in order to ensure that the Ethanol
conforms to the specifications in Exhibit A .
ARTICLE IV
PRICING AND
PAYMENT
4.1 Delivery . During each
week, beginning on Monday and ending on the following Sunday, Panda
w
