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Oil Feedstock Supply Agreement

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Sectors: Energy
Governing Law: Illinois, View Illinois State Laws
Effective Date: May 09, 2008
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NOTE: THE APPEARANCE OF "[***]" IN THIS EXHIBIT INDICATES MATERIAL WHICH HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24b-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934. A COPY OF THE EXHIBIT CONTAINING THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.



Oil Feedstock Supply Agreement



This Oil Feedstock Supply Agreement (this "Agreement") is made and entered into as of May 9, 2008 ("Effective Date"), by and between Blackhawk Biofuels, LLC, a Delaware limited liability company ("Producer"), Renewable Energy Group, Inc., a Delaware corporation ("REG") and Bunge North America, Inc., a New York corporation ("Bunge") (each of Producer and Bunge a "Contracting Party," and collectively the "Contracting Parties").



A. A biodiesel plant is currently under construction by Biofuels Company of America, LLC ("BCA") for which BCA and Bunge have entered into that certain Oil Feedstock Supply Agreement originally made and entered into as of September 5, 2006, and amended and restated as of November 3, 2006.



B. As of the Effective Date, Producer will have purchased all of the assets of BCA and will own the biodiesel plant (the "Facility") located adjacent to Bunge92s existing oil processing facility in Danville, Illinois, pursuant to that certain Asset Purchase Agreement dated as of March 14, 2008, by and between Producer, Bunge, BCA, REG, and Biodiesel Investment Group, LLC (the "Purchase Agreement").



C. The Facility will be managed and operated by REG Services Group, LLC, an Affiliate of REG.



D. Producer desires to buy, and Bunge desires to sell, all soybean oil ("Oil") feedstock required for biodiesel production at the Facility, all in accordance with the fees, payment, delivery, and other terms set forth in this Agreement.



Therefore, the Parties agree:





1. Exclusive Supplier . To the extent contemplated by this Agreement, Bunge will have the exclusive right to provide all Oil that Producer requires for biodiesel production at the Facility during the Term (as defined in Section 5.1 hereof), including the Facility as initially constructed and any modifications or expansions thereof.



1.1 Provision of Standard Monthly Amounts . In accordance with the provisions of this Agreement, each month during the Term (as defined in Section 5.1 hereof), Bunge has the exclusive right to provide, and Producer the right to purchase from Bunge, all Oil that Producer requires for biodiesel production at the Facility up to the Standard Monthly Amount (as defined in Section 1.3). It is the expectation of the Contracting Parties that the Oil to be supplied to Producer under this Agreement will be originally processed at Bunge92s oil processing facility in Danville, Illinois, except to the extent production at Bunge92s Danville facility is insufficient to meet Producer92s needs.








1.2 Overage Amounts . If Producer requires any Oil for biodiesel production at the Facility in excess of the Standard Monthly Amount for a given month, Producer may not obtain any such quantity of Oil without first complying with the following procedures:



(a) Producer must notify Bunge (an "Overage Request") with regard to a given month of the quantity of Oil in excess of the Standard Monthly Amount that Producer wishes to procure for such month.



(b) Within 24 hours after receiving an Overage Request, Bunge will notify Producer how much Oil (the "Proposed Quantity") Bunge is willing to supply to Producer in response to such Overage Request.



(c) Bunge will have the exclusive right to provide, and Producer will have the right to purchase from Bunge, the Proposed Quantity upon the terms set forth in a Specific Order (as defined in Section 2.2) negotiated by the Contracting Parties. If the Contracting Parties cannot mutually agree upon the terms of a Specific Order for such Proposed Quantity within 24 hours after Bunge92s receipt of an Overage Request, then Producer may obtain a quantity of oil equal in volume to the Proposed Quantity from any third party at any price that it negotiates; provided that such third-party price may not be equal to or higher than the last price offered by Bunge during the negotiations between the Contracting Parties.



(d) To the extent that the quantity specified by Producer in a specific Overage Request exceeds the applicable Proposed Quantity, then Producer may obtain a quantity of Oil equal to such excess amount from any third party at any price that it negotiates.



1.3 Standard Monthly Amount . The initial "Standard Monthly Amount" will be 9,333,333 pounds of Oil. Notwithstanding anything contained in this Agreement to the contrary, Bunge will have no obligation to supply any Oil pursuant to this Agreement prior to October 1, 2008, unless otherwise agreed by the Contracting Parties. After March 1, 2009, the Contracting Parties will negotiate whether to make reasonable modifications to the Standard Monthly Amount.



1.4 Alternate Feedstock . If Producer elects to utilize a vegetable oil feedstock other than Oil, Producer will provide Bunge with a fair opportunity to participate in procuring such alternate feedstock for Producer.





2. Order and Delivery .



2.1 Forecasts . At least three months prior to the beginning of each six-month period during the Term (from January 1 to June 30, and from July 1 to December 31), Producer will deliver to Bunge its best, good faith estimate (each a "Forecast") of anticipated Oil requirements during such six-month period at the Facility. The purpose of the Forecasts is to provide notice to Bunge of anticipated Oil requirements and Bunge92s actual obligation to deliver Oil to the Facility shall be governed by the other sections of this Article 2.



2.2 Specific Orders . After Producer proposes to purchase Oil, the Contracting Parties will negotiate in good faith the Basis (as defined in Schedule 4.1) and delivery date(s) for the



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applicable quantity of oil, and if agreed, will enter into a purchase agreement for such Oil in the form attached hereto as Exhibit A (a "Specific Order"), which will set forth the mutually agreed-upon Basis and delivery date(s). Subject to the other provisions of this Agreement (including Section 3.1), Bunge will deliver to Producer Oil as required by Specific Orders under this Article 2.



2.3 Amounts .



(a) Monthly Confirmations . At least 60 days before the first day of each month during the Term (the "Notice Date"), Producer will deliver to Bunge a written confirmation (each a " Monthly Confirmation") of its Oil requirements at the Facility for such month. By way of illustration, Producer will deliver a Monthly Confirmation for April of a given (non-Leap) year on or before January 31 of that year, and then deliver a Monthly Confirmation for May of that year on or before March 1 of that year. Each Monthly Confirmation will include (i) amounts under all then-existing Specific Orders for such month and (ii) any additional amounts requested by Producer for such month. If by the Notice Date for a month, the Contracting Parties have not entered into one or more Specific Orders sufficient to cover such additional amounts of Oil requested in the applicable Monthly Confirmation (i.e., not already covered by Specific Orders), then Bunge will have no obligation to enter into Specific Order(s) for any portion of such additional amounts of Oil, subject to the following sentence. Notwithstanding the foregoing sentence, until the date that is 30 days before the first day of the month for which delivery of Oil is being requested, the Contracting Parties agree that they will negotiate in good faith the Basis and delivery date(s) for, and if agreed, will enter into Specific Orders (which will set forth the mutually agreed-upon Basis and delivery date(s)) for up to five million additional pounds of Oil. In addition, Producer will give Bunge reasonable advance notice of any circumstances that would reasonably be expected to materially affect Oil requirements at the Facility. Notwithstanding anything to the contrary in this Agreement, Bunge will have no obligation to supply Producer with any Oil in a given month in excess of 105% of the quantity stated in the applicable Monthly Confirmation.



(b) Production Schedules . If the Contracting Parties have entered into Specific Orders within the time frames set out under Section 2.3(a) sufficient to cover all of the Oil requested by Producer for a month in a timely delivered Monthly Confirmation, then Bunge will provide a quantity of Oil sufficient to permit Producer to maintain its actual production schedule for the month as described in such Monthly Confirmation, subject to Sections 2.3(a) and 3.1(a) hereof. On Thursday of each week, Producer will provide Bunge notice of Producer92s best estimate (a "Weekly Estimate") of its production schedule for the following production week (Monday through Sunday).



2.4 Futures Price . The "Futures Price" for any given quantity of Oil under this Agreement (whether or not identified in a Specific Order or actually delivered by Bunge) will be the Chicago Board of Trade ("CBOT") futures price set by the Contracting Parties prior to the first business day of the month in which such Oil will be delivered to Producer; provided that if the Contracting Parties have not set such CBOT futures price prior to such first business day, then the Futures Price for such quantity of Oil will be deemed to be the closing futures price on



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the CBOT for the nearby soybean oil contract on the last business day of the month just prior to the applicable delivery month.



2.5 Delivery .



(a) Delivery and Receiving .



(i) Bunge will deliver Oil sold under this Agreement to the Facility primarily via a pipeline (the "Pipeline") from Bunge92s existing storage Tank #10 at its oil processing facilities in Danville; provided that Bunge may deliver Oil to the Facility via truck if (A) the Pipeline is not operating or (B) the production of Oil from Bunge92s oil processing facilities in Danville is insufficient to meet Producer92s needs and Producer agrees to purchase Oil from Bunge from a source other than Bunge92s Danville oil processing facility, subject to Section 1.2. Producer will ensure that the Facility has the capability to receive and unload Oil delivered via the Pipeline and/or truck. All labor and equipment necessary to receive Oil will be supplied by Producer without charge to Bunge. Producer will direct the receiving of all Oil purchased hereunder in a good and workmanlike manner in accordance with Bunge92s reasonable requirements and normal industry practice. Producer will maintain (at its own expense) its receiving facilities in accordance with applicable laws and regulations and in safe operating condition in accordance with normal industry standards.



(ii) Bunge will direct the delivery of all Oil purchased hereunder in a good and workmanlike manner in accordance with Producer92s reasonable requirements and normal industry practice. All labor and equipment necessary to deliver Oil will be supplied by Bunge without charge to Producer.



(iii) Producer shall be responsible for the design and installation of the entire Pipeline, including the feedstock supply pump (noted as PME-5001 on Producer92s P&ID #450, rev.C, the "Supply Pump") to be located near Tank #10; provided that Bunge shall have the right to review and approve the design, specifications, and time for installation of any portion of the Pipeline on Bunge92s property. Producer will maintain (at its own expense) the Supply Pump and the entire Pipeline, including the portions on Bunge92s property, in accordance with applicable laws and regulations and in safe operating condition in accordance with normal industry standards. Bunge hereby grants Producer and its agents and designees all necessary rights of access across Bunge92s property in order to permit Producer to meet its obligations under this Section 2.5(a)(iii). If Producer becomes aware of any leaks in or from the Supply Pump or the Pipeline, Producer will immediately notify Bunge. If Bunge is required to deliver Oil via truck to the Facility because the Pipeline is not operating, the costs to provide such alternate delivery shall be borne by Producer.



(b) Flow Meter; Records . With regard to Oil delivered to the Facility via the Pipeline, Producer will determine the volume of delivered Oil by using a flow meter attached to the Pipeline and located on Producer92s leased property. Producer will install



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the flow meter and maintain (at its own expense) the accuracy of the flow meter and ensure that it is NTEP-approved and inspected and certified by the State of Illinois. As requested by Bunge on no more than a quarterly basis, the Contracting Parties will engage a third-party testing firm to test the accuracy of the flow meter and will share equally the costs of such testing. Producer will maintain all flow meter records of Oil deliveries for at least one year after their creation and provide copies of such records to Bunge upon request. Such flow meter records will determine the volume of Oil delivered via the Pipeline for which Producer is obligated to pay pursuant to Article 4. Producer will report to Bunge the volume of any Oil delivery via the Pipeline to the Facility at least once per day, or at such times as reasonably requested by Bunge.



(c) Origin Weights . With regard to Oil delivered to the Facility via truck, the volume of Oil delivered will be set in accordance with weights determined at the point of origin of such Oil.



(d) Standards . All Oil delivered to the Facility will meet the "Quality Standards" set forth in Exhibit B as evidenced by the sampling and quality control procedures set forth in Exhibit B. For Oil delivered via truck, Bunge will provide a Certificate of Analysis for each shipment. If Bunge delivers Oil which does not meet the Quality Standards, Producer may reject such Oil in accordance with Exhibit B and this Agreement.



(e) Testing . If Producer knows or reasonably suspects that any Oil delivered by Bunge to the Facility does not meet the Quality Standards (or permissible deviations therefrom), then Producer may obtain, at Producer92s sole cost and expense, independent laboratory tests of the affected Oil at a mutually agreed upon laboratory. Producer shall immediately notify Bunge of the testing of any Oil within 24 hours of its delivery to the Facility and Producer shall promptly complete such testing. Bunge shall have the right, upon reasonable advance notice and at Bunge92s sole cost and expense, to test Oil for which title has passed to Producer pursuant to Section 2.6.



2.6 Title . Title, risk of loss, and responsibility for the quality of Oil will pass to Producer when (a) such Oil conveyed via the Pipeline crosses the inlet valve of the Supply Pump, or (b) such Oil conveyed via truck is received by Producer. If any Oil supplied under this Agreement fails to comply with the terms of this Agreement as a result of causes or conditions proven to have existed prior to the time when title passed to Producer, then Producer92s exclusive remedy and recourse will be to reject such non-compliant Oil (and provide Bunge with written notice of such rejection) within 48 hours after the time of delivery (or have notified Bunge of the testing of such Oil under Section 2.5(d) and promptly complete such testing), in which case Bunge will replace such non-compliant Oil with a like amount of compliant Oil. In addition, Bunge shall only be obligated to replace such non-compliant Oil to the extent that Producer has not processed and has kept such non-compliant Oil segregated from other Oil at the Facility. Producer will make such non-compliant Oil available to Bunge for Bunge to remove from the Facility at Bunge92s cost. Bunge will not be responsible for any failure of Oil to comply with the terms of this Agreement which results from causes or conditions arising after the time title passes to Producer. Any failure by Producer to provide written notice of rejection as set forth in this Section 2.6 will be deemed an absolute and unconditional waiver of its rejection right and any



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claims relating to such Oil. At Bunge92s request, Producer will promptly deliver to Bunge a representative sample of any rejected Oil.



2.7 Producer Use of Oil . Producer can use the Oil that it purchases under this Agreement for any of its internal business purposes in connection with biodiesel at any location that it controls, or is owned, managed or controlled by REG or any wholly-owned subsidiary of REG ("Other REG Locations"). For the sake of clarification, (a) Producer92s internal business purposes do not include the sale of Oil to any person or entity other than to Other REG Locations, and (b) Producer or REG are solely responsible for the performance and cost of transporting any Oil from the Facility to any Other REG Location. Prior to transporting any Oil from the Facility to any Other REG Location, Producer shall notify Bunge of such plan, to give Bunge an opportunity to supply an equal amount of soybean oil to such Other REG Location from a different Bunge facility. Should Bunge desire to supply an equal quantity of soybean oil to such Other REG Location from a different Bunge facility, Producer shall have the option of purchasing the other soybean oil from Bunge, or transporting the Oil from the Facility. If Producer chooses to so purchase the other soybean oil from Bunge, such purchase of soybean oil from a different Bunge facility shall nonetheless count towards Producer92s purchases under Section 3.2(a)(i), thereby reducing the Unpurchased Amount for such month as computed under Section 3.2(a)(i).



2.8 Limits on Bunge Obligation to Flat Price Oil . Notwithstanding anything to the contrary in this Agreement, Bunge will have no obligation to price any Oil under a proposed Specific Order at any time prior to six months before the anticipated Effective Date. Further, to the extent that any Oil proposed to be priced under any Specific Order would cause the aggregate quantity of Oil that has been priced under all then-existing Specific Orders to exceed the Credit Limit (as defined below), then Bunge will have no obligation to price such excess amount Oil at any time more than five days before the first day of the month in which such excess Oil is proposed to be delivered. The "Credit Limit" will be a quantity of Oil to be set from time-to-time by Bunge; provided that Producer will be entitled at any time to require Bunge to identify the then-applicable Credit Limit. Notwithstanding any other provision in this Section 2.8, Bunge may agree to flat price in excess of the Credit Limit if it is satisfied (in its sole discretion) with credit enhancements or other protections proposed by Producer.





3. Other Delivery Provisions .



3.1 Maximum Delivery Amounts .



(a) Except as otherwise agreed in accordance with Section 1.2 of this Agreement, Bunge will have no obligation to supply Producer with any quantity of Oil in excess of (i) during any given month of a Crop Year, the then-applicable Standard Monthly Amount (the "Maximum Monthly Amount"), or (ii) during any given Crop Year, the product of (A) the then-applicable Standard Monthly Amount, times (B) 12 (the "Maximum Aggregate Amount"). A "Crop Year" is a one-year period beginning October 1 and ending September 30 the following year.



(b) "Soybean Crop Production" is equal to the product of (i) the total number of acres in the States of Illinois and Indiana (combined) planted with soybeans multiplied



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by (ii) the bushels of soybeans yielded per acre. The "Soybean Crop Production Trend" for the Crop Year beginning October 1, 2008, will be 660 million bushels, based on an assumed yield of 46.9 bushels/acre. For all subsequent Crop Years during the Term, the Soybean Crop Production Trend will be equal to the product of (X) the prior year92s Soybean Crop Production Trend multiplied by (Y) 1 plus the percentage increase in trend yield compared to the trend yield for the prior Crop Year, as reported by the U.S. Department of Agriculture ("USDA") in the Annual Base Line Report, released at the USDA Federal Outlook Conference in February of each year.



(c) If the percentage ratio (the "Actual/Trend Ratio") of (i) the actual Soybean Crop Production projection for the given Crop Year set forth in a USDA production report during such Crop Year to (ii) the Soybean Crop Production Trend for such Crop Year results in an "Oil Reduction Percentage" in accordance with Table 3.1(c), then the Monthly Maximum Amount for all following months during such Crop Year will be reduced by a percentage amount equal to such Oil Reduction Percentage.



Table 3.1(c)





Actual/Trend Ratio Oil Reduction Percentage
Greater than 90% Zero
90% 15%
Each percentage point less than 90% An additional percentage point in addition to 15%




For example, if the actual Soybean Crop Production projection total for a Crop Year is 574.2 million bushels and the Soybean Crop Production Trend for such Crop Year was 660 million bushels, then the Actual/Trend Ratio would be 87% and the Monthly Maximum Amount for every following month during such Crop Year would be reduced by 18%.



(d) If the Monthly Maximum Amounts during a Crop Year have been reduced in accordance with Section 3.1(c), but a subsequent USDA production report for another month during such Crop Year indicates that the Actual/Trend Ratio is greater than 90%, then the Maximum Monthly Amount for the following months during such Crop Year shall be restored to the original Maximum Monthly Amount before applying any applicable Oil Reduction Percentage.



3.2 Unpurchased Amounts .



(a) Notwithstanding anything to the contrary in this Agreement, during the six-month period beginning October 1, 2008, Producer will accept delivery of, and pay Bunge for, at least 5.75 million pounds of Oil, and during all subsequent months during the Term, Producer will accept delivery of, and pay Bunge for, at least 7.0 million pounds of Oil. Producer will pay Carrying Fees and Storage Interest on a monthly basis to Bunge on any Unpurchased Amounts (as defined below) until such Unpurchased Amounts are reduced to zero in accordance with Sections 3.2(b) and 3.3.



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(i) For any month during the Term, an "Unpurchased Amount" will be determined on the last day of such month and will be equal to the number of pounds by which the amount of Oil which Producer is obligated to purchase pursuant to Section 3.2(a) exceeded the amount of Oil that Producer actually purchased during su
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