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BLACKHAWK BIOFUELS, LLC

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Title: Supply Agreement-BLACKHAWK BIOFUELS, LLC TOLL PROCESSING AGREEMENT
Governing Law: Iowa     Date: 10/6/2009

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Exhibit 10.1

 

Confidential Treatment Requested.  Confidential portions of this document have been redacted and have been separately filed with the Commission.

 

BLACKHAWK BIOFUELS, LLC TOLL PROCESSING AGREEMENT

 

This Blackhawk Biofuels, LLC Toll Processing Agreement (the “Agreement”) is made and entered into effective October 1, 2009, by and between Blackhawk Biofuels, LLC a limited liability company organized and existing under the laws of the state of Delaware, with offices at 22 South Chicago Avenue, Freeport, Illinois 61032 (“Blackhawk Biofuels”). and REG Marketing & Logistics Group, LLC, an Iowa limited liability company (“REG Marketing”), of 416 S. Bell Avenue, PO Box 888, Ames, Iowa 50010 (each a “Party,” and collectively the “Parties”).

 

Recitals

 

A.                                    Blackhawk Biofuels is in the business of manufacturing and processing biodiesel from feedstock at its biodiesel processing facility located at Danville, IL (the “Facility”).

 

B.                                      REG Marketing desires to arrange for the purchase and delivery of animal fats and other feedstocks (as specified by the provisions of Section 7 hereafter, herein “Feedstocks”) to Blackhawk Biofuels for processing into biodiesel meeting the specifications set out in Section 8 hereafter (herein “Biodiesel”) and Crude Glycerin, Fatty Acids and Soapstock (“Co-products”) pursuant to a toll processing arrangement.  Blackhawk Biofuels desires that REG Marketing arrange for the delivery of Feedstocks for processing at the Facility.

 

The Agreement

 

In consideration of the mutual benefits and obligations herein provided and other good and valuable consideration, Blackhawk Biofuels and REG Marketing agree as follows:

 

1.                                        Offers to Deliver Feedstocks for Processing .  REG Marketing may offer to deliver Feedstocks to Blackhawk Biofuels’s Facility at Danville, IL, during the term of this Agreement.

 

(a)                                   Orders within Facility Commitment .  REG Marketing shall order the processing of 11.0 million pounds of Feedstocks at the Facility (“Facility Commitment”). Any such order shall set out the type and quantity of Feedstocks, and the Production Week for which such Feedstocks are intended for processing (“Order”).  If such Order is timely made, then unless otherwise agreed by the Parties REG Marketing shall deliver the Feedstocks to Blackhawk Biofuels in time for production of the Biodiesel, Blackhawk Biofuels shall process the Feedstocks and test and certify the Biodiesel as meeting the agreed upon specifications under the applicable Order during such Production Week, and REG Marketing shall arrange to pick up the resulting Biodiesel during the two weeks immediately following such Production Week.  Blackhawk Biofuels agrees to provide written acknowledgment of all Orders placed by REG Marketing.  For purposes of this Agreement, a “Production Week” shall mean a calendar week beginning at 8:00 a.m. on Monday and ending at 7:59 a.m. on the following Monday, with weeks designated for pick up of Biodiesel measured in similar fashion.

 

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As an example, for the Production Week commencing January 19, 2009, REG Marketing would need to have delivered its Order for such Production Week on or before 5:00 p.m. on Monday, January 5, 2009.  If such Order has been timely delivered to Blackhawk Biofuels, REG Marketing would then deliver in the Feedstocks required for such Production Week both before and during the production week.  Blackhawk Biofuels would then have the Production Week of January 19 through January 26, 2009, to complete production, test and certify the Biodiesel meets the agreed upon specifications under the applicable Order.  REG Marketing would then have from January 26 through 7:59 a.m. on February 9, 2009, to pick up the Biodiesel produced for such Production Week.  REG Marketing shall develop a sample “Order/Nomination” form to be used by the Parties, which shall be attached as Exhibit A hereto.

 

Any Feedstocks purchased by Bunge North America, Inc. (“Bunge”) pursuant to the terms of a Feedstock Purchase and Sale Agreement dated June 30, 2009 (the “Feedstock Agreement”) by and between Blackhawk Biofuels, REG Marketing and Bunge shall be included in determining whether the Facility Commitment has been met.  Any purchase of Feedstocks by Bunge, however, shall be governed exclusively by the terms of the Feedstock Agreement and such purchases shall not be subject to the terms of this Agreement.

 

(b)                                  Offers in Excess of the Facility Commitment .  REG Marketing may offer to deliver additional Feedstocks beyond the Facility Commitment, subject to Blackhawk Biofuels’s acceptance.  Any such offer (“Nomination”) shall set out the type and quantity of Feedstocks, the Production Week for which such Feedstocks are intended for production, and advise of the time period during which Blackhawk Biofuels shall be required to communicate Blackhawk Biofuels’s acceptance back to REG Marketing (“Offer Period”).  The parties agree that such Offer Period will not expire prior to 12:00 o’clock noon, local time at the Facility, on the business day following that day during which the Nomination is delivered, and provided further that (unless waived by Blackhawk Biofuels) a Nomination shall not propose a Feedstocks delivery schedule with first delivery date less than seven (7) calendar days after the end of the Offer Period.  If a Nomination is accepted by Blackhawk Biofuels (as set out hereafter), then (unless otherwise agreed by the Parties) REG Marketing agrees to deliver the Feedstocks to Blackhawk Biofuels pursuant to the terms of the Nomination prior to such Production Week to utilize in the production of the Biodiesel, Blackhawk Biofuels shall during such Production Week process the Feedstocks and test and certify the Biodiesel as meeting the agreed upon specifications under the applicable Nomination, and REG Marketing shall arrange to pick up the resulting Biodiesel during the two weeks immediately following such Production Week.  The sample “Order/Nomination” form to be used by the Parties is attached as Exhibit A hereto.

 

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*** Confidential material redacted and filed separately with the Commission.

 

2.                                        Agreement to Process Orders; Consideration of Nominations .

 

(a)                                   Orders within Facility Commitment . Blackhawk Biofuels agrees to process Feedstocks for all Orders received totaling up to 2.75 million pounds per Production Week, such processing to be within the time frame as set out in Section 1(a) above (unless otherwise agreed by the Parties).  Blackhawk and REG Marketing agree that any shortfall in biodiesel production or shipments due in the previous Agreement dated July 1st, 2009 may be made up under this Agreement without penalties.

 

(b)                                  Nominations in Excess of Facility Commitment .  In addition, should REG Marketing offer to deliver Feedstocks in excess of such Facility Commitment, Blackhawk Biofuels will consider any such Nomination received, and shall have the right (but not any obligation) to accept Nominations received from REG Marketing by notice given during the Offer Period.  If Blackhawk Biofuels gives timely acceptance of a Nomination (pursuant to the provisions set out in this Agreement, herein an “Acceptance”), then Blackhawk Biofuels agrees to process Feedstocks received pursuant to the terms of the Nomination (and such other applicable provisions as set out herein).

 

3.                                        Manner of Extending Order, Nominations, Acceptances .  Notwithstanding any provisions of Section 26(a) to the contrary, the Parties may submit Orders, Nominations and Acceptances by telephone or email, provided that any Order, Nomination or Acceptance submitted by telephone must be followed by timely confirmation by email.

 

4.                                        Toll Fees and Payment .  Blackhawk Biofuels shall be paid a toll fee of $ *** for every gallon of Biodiesel at standard temperature and pressure delivered to REG Marketing, produced at the Facility from the Feedstocks delivered by REG Marketing for all volumes shipped up to 2,500,000 gallons in a calendar month. Blackhawk Biofuels shall be paid a toll fee of $ *** for every gallon of Biodiesel at standard temperature and pressure delivered to REG Marketing, produced at the Facility from the Feedstocks delivered by REG Marketing for all volumes shipped in excess of 2,500,000 gallons in a calendar month. Payment shall be made as follows:

 

(a)                                   The toll Fee under the terms of such Orders or Nominations by wired funds to Blackhawk Biofuels on the first business day following the 15 th  for Biodiesel delivered to REG Marketing from the 1 st  to the 15 th  of the month and on the first business day following the last day of each month for Biodiesel delivered to REG Marketing on the 16 th  to the last day of the month. Delivered to REG Marketing shall mean Biodiesel meeting specifications loaded per shipping instructions FOB Danville, IL.

 

5.                                        Co-Products .  REG Marketing shall also be entitled to receive at no additional cost, all glycerin and Fatty Acid produced as a result of the processing of the Feedstocks.

 

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*** Confidential material redacted and filed separately with the Commission.

 

6.                                        Methanol and Catalyst .  REG Marketing shall be responsible for the purchase and delivery of methanol and catalyst to the Facility. The maximum allowed usage of methanol shall be *** gal of methanol per gallon of biodiesel. The maximum allowed usage of catalyst shall be *** lbs per gallon of biodiesel. Blackhawk Biofuels will reimburse REG Marketing for usage of methanol and catalyst above the maximums. The reimbursement will be paid for overusage at the average price of the chemicals multiplied by the overusage amount based on the biodiesel produced on a monthly basis.  REG Marketing will invoice Blackhawk Biofuels within the first week of the following month.  Payment terms will be 7 days from receipt of invoice from REG Marketing.  If the actual positive or negative usage variance performance is greater than 10% from the values given above, the parties will use data gathered while producing under steady state conditions and adjust the maximum allowed usages with approval to not be unreasonably withheld, conditioned or delayed by either party.  Any changes will be contained in an addendum to this Agreement.

 

7.                                        Maximum Feedstock Usage and Overusage .  In consideration of the Toll Fee and handling of co-products agreed upon, Blackhawk Biofuels agrees the Maximum Feedstock Usage(MFU) per Pound of Delivered Biodiesel shall be as defined in Exhibit B for each Feedstock Type.

 

For feedstocks where a MFU value is clearly identified and not calculated, the actual overuse, if any, will be calculated as follows:

 

Overusage based on identified MCU = A – ( B x MFU)

 

Where A = Actual pounds of Feedstock delivered from aggregate BOL’s

 

B = Biodiesel produced from Feedstock in gallons at standard conditions

 

MCU = defined value for feedstock type

 

For higher FFA feedstocks or blends of feedstocks that do not have an identified MFU and require the calculation, a daily flow proportioned representative composite sample shall be tested and the resulting %FFA will be used in the calculation. for MFU for the resulting production volume.  For feedstocks where a MFU value is  calculated and not clearly identified, the actual overuse, if any, will be calculated as follows:

 

Overusage for High FFA and Blends based on MCU calculation = C – (B x MFU)

 

Where C = Actual pounds of Feedstock  delivered from aggregate BOL’s

 

B = Biodiesel produced from Feedstock in gallons at standard conditions

 

MFU = “Exhibit B calculation *1” using daily flow proportioned representative composite sample

 

The reimbursement will be paid for overusage at the average price of the feedstock multiplied by the overusage amount based on the biodiesel produced on a monthly basis.  REG Marketing will invoice Blackhawk Biofuels within the first week of the following month.  Payment terms will

 

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be 7 days from receipt of invoice from REG Marketing.  If the actual positive or negative usage variance performance is greater than 2% from the values given or calculated in Exhibit B, the parties will use data gathered while producing under steady state conditions and adjust the defined MFU  or formula “*1” with approval to not be unreasonably withheld, conditioned or delayed by either party.  Any changes will be contained in an addendum to this Agreement.

 

8.                                        Feedstocks .  The Feedstocks to be delivered to the Facility pursuant to this Agreement shall comply with the specifications set forth on Exhibit B attached hereto or the specific purchase order, whichever is the more restrictive specification.  For Example, if the tallow specification for FFA in Exhibit B was <4 and the purchase order defined FFA as less than <2, then <2 shall be the requirement.  Prior to accepting deliveries of Feedstocks, Blackhawk Biofuels shall have the right at its expense to inspect and test the tendered Feedstocks to determine if it meets the specifications required under this Agreement, and if any such Feedstocks does not meet the required specifications then Blackhawk Biofuels shall have the right to reject such Feedstocks and require REG Marketing, at its cost, to replace the same with Feedstocks that meets the required specifications.  Should REG Marketing propose any other type of Feedstocks other than identified on Exhibit B, the Parties shall agree upon the written specifications and MFU applicable to such additional feedstock, and approve and attach such specifications and MFU as an addendum to Exhibit B with approval to not be unreasonably withheld, conditioned or delayed by either party.

 

9.                                        Biodiesel .  The Biodiesel to be produced pursuant to this Agreement shall comply with the specifications set forth on Exhibit C attached hereto.  At REG Marketing’s request, two (2) - one (1) litre samples of the Biodiesel to be delivered to REG Marketing by Blackhawk Biofuels shall be made available for testing at REG Marketing’s cost, prior to REG Marketing picking up such Biodiesel.  Should inspection and testing determine that any Biodiesel does not meet the required specifications (whether determined before or after such Biodiesel has been picked up by REG Marketing, and including after delivery to REG Marketing’s customers), REG Marketing shall have the right to reject such Biodiesel, and require Blackhawk Biofuels, at its cost, to replace the same with Biodiesel that meets the required specifications.

 

10.                                  Term .  The term of this Agreement shall be until September 30th, 2009 and commence upon its signature by the Parties.

 

11.                                  Title .  Except as otherwise provided herein, title to the Feedstocks delivered by REG Marketing pursuant to this Agreement and title to the contractual amount of corresponding Biodiesel and Co-products produced from such Feedstocks shall at all times be and remain with REG Marketing.  Any Feedstocks delivered by REG Marketing pursuant to the terms and conditions of the Feedstock Agreement, however, shall at all times be and remain with Bunge until such time as title to such Feedstocks passes to REG Marketing pursuant to the terms of the Feedstock Agreement.

 

12.                                  Risk of Loss; Insurance .  Risk of loss to the Feedstocks and the Biodiesel and Co-Products produced therefrom shall at all times be borne by REG Marketing, and REG Marketing will maintain such property insurance on the Feedstocks and the Biodiesel  produced therefrom as REG Marketing shall determine, in its sole discretion.

 

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Blackhawk Biofuels and REG Marketing shall each, at its own cost and expense, obtain and maintain, during the term of this Agreement, comprehensive general liability insurance, in minimum amounts of Five Million Dollars ($5,000,000) per occurrence for damage, injury and/or death to persons, and One Million Dollars ($1,000,000) per occurrence for damage and/or injury to property and Worker’s Compensation Insurance as required by law.  Such coverage shall be on a date of occurrence form, and be provided by an insurance company reasonably satisfactory to the other Party.  Blackhawk Biofuels and REG Marketing shall each provide the other with proof of such insurance coverage prior to any Feedstocks being delivered, such insurance naming the other Party as an additional insured, and providing that the coverage represented thereby shall not be canceled nor modified unless at least thirty (30) days prior written notice has been given to the additional insured.

 

13.                                  Inventory Reports .  Blackhawk Biofuels will provide REG Marketing with daily reports showing the receipt, usage and inventory of Feedstocks, methanol and catalyst, and shipments, production and inventory of Biodiesel and Co-products produced.

 

14.                                  Production Costs .  Other than for the cost of the Feedstocks, methanol, and catalyst purchased and delivered by REG Marketing, Blackhawk Biofuels shall be responsible for all costs of producing the Biodiesel required under this Agreement, including without limitation all labor costs and the cost of utilities, chemicals other than methanol and catalyst and other consumables used in such production.

 

15.                                  Testing .  Blackhawk Biofuels shall be responsible for the cost of testing to fully certify the Biodiesel meets the specifications identified in the Order or Nomination.  All sampling and testing shall be in conformance with BQ-9000 rules and regulations.

 

16.                                  Freight Costs .  REG Marketing will bear the cost of all freight charges for the Feedstocks, methanol, and catalyst purchased by REG Marketing, and Biodiesel and Co-Products to be produced therefrom, pursuant to this Agreement.

 

17.                                  Protection of REG Marketing’s Title .  In order to better evidence REG Marketing’s ownership of the Feedstocks and the Biodiesel produced therefrom, Blackhawk Biofuels hereby authorizes REG Marketing on its behalf, at any time and from time to time to file protective financing statements in any Uniform Commercial Code jurisdiction, which may include without limitation any initial financing statements and amendments thereto that (i) describe the Feedstocks, and the Biodiesel that is the subject of this Agreement, and (ii) contain any other information required or appropriate to be included pursuant to the Uniform Commercial Code of the state where filed, including that the organizational identification number of Blackhawk Biofuels is 20-2760722.  Blackhawk Biofuels agrees to furnish any such information to REG Marketing promptly upon request.  Blackhawk Biofuels will not purport to pledge, mortgage or create, or suffer to exist a security interest in the Feedstocks and the Biodiesel that is p


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