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 “*****”.

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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).

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(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 “*****”.

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(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 “*****”.

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(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 “*****”.

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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).

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(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 “*****”.

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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 “*****”.

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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 will deliver Ethanol to ARE in accordance with the Plant Shipment
Schedule, an example of which is referenced as Example #6 of Exhibit C, which
will be supplied once a week by ARE to Panda; provided, however, that ARE shall
accept delivery of all amounts of Ethanol, if any, for such week, whether such
amounts conform to amounts listed on the Plant Shipment Schedule for that week,
subject to Section 3.1 above.

4.2 Invoicing. Immediately following the passage of title as described in
Section 5.4 below, Panda will deliver a bill of lading to ARE, which will
reflect the total Gross Delivery Payment for that particular delivery of
Ethanol.

4.3 Payment. Immediately upon receipt of the bill of lading, ARE will issue a
Shipment Confirmation Report to Panda, an example of which is referenced as
Example #7 of Exhibit C. ARE will have ***** Business Days from receipt of the
bill of lading in which to make a payment to Panda which payment shall be equal
to the Net Delivery Payment.

 

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 “*****”.

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4.4 Monthly True-Up. Within the first seven (7) Business Days of every month,
ARE will calculate the Adjusted Net Pool Price for the prior month. An example
of the calculation of the Adjusted Net Pool Price can be found in Exhibit B,
attached hereto. If the Adjusted Net Pool Price results in a positive True-Up
Settlement Payment, ARE shall pay to Panda on or before the fifteenth
(15th) Business Day of the current Month, an amount equal to the True-Up
Settlement Payment. If the True-Up Settlement Payment is negative, Panda shall,
at Panda’s option, either (i) pay ARE an amount equal to the True-Up Settlement
Payment by the fifteenth (15th) Business Day of the current Month or
(ii) instruct ARE to withhold and set off equally from the next two (2) payments
to Panda, an amount equal to the True-Up Settlement Payment. An example of the
True-Up Settlement Payment calculation can be found in Exhibit B.

4.5 Reporting Requirements. In addition to providing the Adjusted Net Pool Price
and the True-Up Settlement Payment calculations on a monthly basis, as reflected
in Exhibit B, ARE shall also provide Panda with the additional information
listed in Exhibit C in accordance with the frequency that is designated for
each. The information provided should contain substantially the same information
that is reflected in the examples in Exhibit C, as applicable.

4.6 Audit Rights. Panda has the right, at all times, to request and receive
documentation to support all Operating Expenses, as well as expenses related to
the Purchase Resale Cost Absorption. In addition, upon reasonable written notice
to ARE, Panda may request an independent audit by a mutually agreed upon outside
accounting firm to conduct an audit of all transactions related to the Pool,
including, but not limited to the calculation of the Net Pool Price, the
Inventory Volume Adjustment and the Inventory Mark to Market Adjustment, as
applicable; provided, that Panda shall only be entitled to one (1) such audit in
any twelve month period. In connection with any such audit, ARE agrees to
provide reasonable access to such independent auditor and shall supply such
auditor with all relevant information, records and documentation including all
such information provided by ARE to its outside auditors. *****

ARTICLE V

DELIVERY AND TRANSPORTATION

5.1 Development of Ordering and Transporting Procedures. The Parties agree to
develop a set of procedures related to ordering, measuring, storing, delivering,
loading and transporting of Ethanol (including, but not limited to, procedures
relating to the handling of hazardous materials by Panda employees or
contractors, as applicable) (the “Operating Procedures”), no later than the date
that is sixty (60) days prior to the Commercial Operations Date.

 

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 “*****”.

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5.2 Transportation. (a) ARE agrees to contract prior to the Commercial
Operations Date, and throughout the term of this Agreement, for railcars which
shall be dedicated exclusively to the performance of this Agreement (“Dedicated
Railcars”). The exact number of Dedicated Railcars to be contracted for by ARE
shall, subject to Section 5.3 below, be based upon Production Estimates to be
provided by Panda pursuant to Section 3.3 above. As such, the quantity of
Dedicated Railcars for which ARE will contract may vary over time. The Parties
acknowledge, however, that for ARE to contract for Dedicated Railcars, it will
require that Panda provide ARE with a written notice to proceed no later than
six months prior to the Commercial Operations Date. ARE agrees that it will not
place an order for Dedicated Railcars until Panda has delivered such notice to
proceed.

(b) The Dedicated Railcars shall be used exclusively to accept delivery of the
Ethanol from the Delivery Point and to transport and deliver such Ethanol to the
markets where it is sold. Following delivery of such Ethanol to such markets,
such Dedicated Railcars will then be redelivered to the Hereford Facility for
receipt of additional Ethanol at the Delivery Point.

(c) ARE shall be responsible for the timely scheduling of the Dedicated Railcars
with the applicable railroads serving the Hereford Facility and the markets to
which the Ethanol produced from the Hereford Facility is to be delivered, in
order to accept the Ethanol produced from the Hereford Facility and have it
transported from such facility to the applicable markets, and redeliver the
Dedicated Railcars back to the Hereford Facility, all in accordance with the
Production Estimates provided by Panda pursuant to Section 3.3 above. The
parties recognize, however, that the railroads are common carriers, subject to
state and federal regulation and that their services are provided pursuant to
tariffs approved by applicable regulatory agencies. As such, there may be times
when (i) ARE timely schedules the delivery or redelivery of Dedicated Railcars
to the Hereford Facility, or the transportation of Ethanol using such Dedicated
Railcars from or to such facility, but the railroads fail to deliver or
redeliver such Dedicated Railcars to the Hereford Facility or fail to transport
the Ethanol using the Dedicated Railcars to or from such facility or (ii) ARE is
unable to timely schedule the Dedicated Railcars for delivery or redelivery
and/or transportation to or from the Hereford Facility, due to the actions or
inactions of the railroads or for other reasons beyond ARE’s control.

(d) If at any time, ARE is unable to accept and transport Ethanol from the
Hereford Facility due to either the unavailability of Dedicated Railcars or the
railroads’ failure to timely transport such Ethanol using the Dedicated
Railcars, ARE shall use commercially reasonable efforts to transport and market
Ethanol from the Delivery Point using alternate means of transportation. In
conjunction with the foregoing, (i) Panda agrees that the Hereford Facility will
be constructed to include storage facilities for at least eight (8) days of
production when the Hereford Facility is operating at capacity (“Panda
Storage”), which storage will be utilized to store Ethanol in the event of the
circumstances described in the preceding sentence and (ii) ARE agrees to install
or contract for storage in the Dallas, Texas area as set forth in Section 5.3
below, and to undertake such additional activities set forth in such
Section 5.3.

(e) All costs incurred by ARE under this Section 5.2 (including without
limitation all costs related to the Dedicated Railcars and the transportation of
such Dedicated Railcars to and from the Hereford Facility) and under Section 5.3
(including without limitation all costs related to the Storage Facility, as
defined in Section 5.3 and the transportation of Ethanol to and from such
Storage Facility) shall be included in Operating Expenses.

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(f) In the event Panda terminates this Agreement for any reason other than an
Event of Default by ARE, Panda shall, upon ARE’s written notice to Panda, be
responsible for all of ARE’s costs and expenses associated with third party
contracts (including without limitation carrying costs and finance charges)
related to the Dedicated Railcars and to the Storage Facility, after the date of
termination; provided that ARE will use its commercially reasonably efforts to
minimize any such costs and expenses, including using commercially reasonable
efforts to assign ARE’s rights and obligations relating to such third party
contracts (and attributable to the period after the termination date) to Panda,
but only as to such rights and obligations for which ARE requests Panda to be
responsible for the costs and expenses associated therewith. In addition, ARE
shall use its commercially reasonable efforts to assign all of its rights and
obligations under such third party contracts relating to the Dedicated Railcars
and the Storage Facility to Panda upon an Event of Default by ARE and upon
written notice from Panda requesting such assignment.

5.3 Storage Facility. *****

5.4 Passage of Title and Risk of Loss. Title and risk of loss of the Ethanol
shall occur when the Ethanol is loaded FOB onto the Dedicated Railcars, trucks,
or any other mode of transportation at the Delivery Point as evidenced by bills
of lading issued by Panda or ARE.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES

6.1 Representations and Warranties of ARE. ARE hereby represents and warrants to
Panda that the following are true, legal, and correct as of the date hereof and
as of the Commercial Operations Date:

(a) ARE is a corporation validly existing in good standing under the laws of the
State of Delaware. ARE has all requisite power and authority to conduct its
business, own its

 

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 “*****”.

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properties and execute and deliver this Agreement and perform its obligations
hereunder in accordance with the terms hereof. This Agreement has been duly
executed and delivered by a representative of ARE who has the requisite power
and authority to execute and deliver this Agreement in the name of and on behalf
of the ARE.

(b) This Agreement constitutes the legal, valid and binding obligations of ARE,
enforceable against ARE in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization or similar laws
relating to or affecting the enforcement of creditors’ rights generally, or by
general equitable principles, regardless of whether such enforceability is
considered in a proceeding in equity or in law, or by securities laws with
respect to indemnification.

(c) Neither the execution, delivery or performance of this Agreement
(i) conflicts with, or results in a violation or breach of the terms, conditions
or provisions of, or constitutes a default under, the charter documents of ARE,
or any agreement, contract, indenture or other instrument under which ARE or its
assets are bound, nor (ii) violates or conflicts with any applicable law, rule,
ordinance or regulation or any judgment, decree, order, writ, injunction or
award applicable to ARE.

(d) There is no pending legislation and no legal actions, arbitration
proceedings, administrative proceedings or investigations instituted or
threatened or adversely affecting, or that could adversely affect, (i) the
legality, validity and enforceability of this Agreement against ARE, (ii) the
performance by ARE of its obligations under this Agreement, or (iii) the
condition (financial or otherwise), business or operations of ARE, nor does ARE
know of any basis for any such action, proceeding or investigation.

6.2 Representations and Warranties of Panda. Panda hereby represents and
warrants to ARE that the following are true, legal, and correct as of the date
hereof and as of the Commercial Operations Date:

(a) Panda is a limited partnership validly existing and in good standing under
the laws of State of Delaware. Panda has all requisite power and authority to
conduct its business, own its properties and execute and deliver this Agreement
and perform its obligations hereunder in accordance with the terms hereof. This
Agreement has been duly executed and delivered by a representative of Panda who
has the requisite power and authority to execute and deliver this Agreement in
the name of and on behalf of Panda

(b) This Agreement constitutes the legal, valid and binding obligations of
Panda, enforceable against Panda in accordance with its terms except as
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws relating to or affecting the enforcement of creditors’ rights
generally, or by general equitable principles, regardless of whether such
enforceability is considered in a proceeding in equity or in law, or by
securities laws with respect to indemnification.

(c) Neither the execution, delivery or performance of this Agreement
(i) conflicts with, or results in a violation or breach of the terms, conditions
or provisions of, or constitutes a

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default under, the charter documents of Panda, or any agreement, contract,
indenture or other instrument under which Panda or its assets are bound, nor
(ii) violates or conflicts with any applicable law, rule, ordinance or
regulation or any judgment, decree, order, writ, injunction or award applicable
to Panda.

(d) There is no pending legislation and no legal actions, arbitration
proceedings, administrative proceedings or investigations instituted or
threatened or adversely affecting, or that could adversely affect, (i) the
legality, validity and enforceability of this Agreement against Panda, (ii) the
performance by Panda of its obligations under this Agreement or (iii) the
condition (financial or otherwise), business or operations of Panda, nor does
Panda know of any basis for any such action, proceeding or investigation.

ARTICLE VII

COVENANTS

7.1 Regulatory Requirements. Each Party hereby covenants to acquire and maintain
in full force and effect throughout the Term all Approvals necessary for it to
fulfill its respective obligations hereunder and to comply with all Regulatory
Requirements with respect to its obligations under this Agreement. Each Party
further agrees to use its reasonably commercial efforts to secure all
modifications to its Approvals as necessary and maintain compliance with all its
Approvals as necessary for it to fulfill its obligations hereunder in compliance
with all Regulatory Requirements.

7.2 No Hedging. ARE hereby covenants that, neither ARE nor any Person or entity
acting or purporting to act on ARE’s behalf will enter into any hedging
agreement or other hedging arrangement or engage in any hedging activity, with
respect to the sale and purchase of ethanol, whether directly or indirectly, on
behalf of the Pool.

ARTICLE VIII

INDEMNIFICATION

8.1 Indemnification. Each Party agrees to indemnify and hold the other Party and
its affiliates and their respective directors, officers and employees
(collectively, the “Indemnified Parties”) harmless and defend them against all
claims, losses, liabilities, penalties, damages, fees and expenses (including
reasonable legal costs and attorneys’ fees) (collectively “Damages”) asserted
against or incurred by, as applicable, the Indemnified Parties (i) on account of
any injury to or death of persons or damages to property to the extent caused by
or arising out of the negligence or willful misconduct of the indemnifying
Party, its directors, officers, employees or agents in performing the
indemnifying Party’s obligations under this Agreement or (ii) by reason of or
resulting from its failure to perform its obligations hereunder in accordance
with the terms, conditions and specifications set forth herein; including, but
not limited to obligations of a Party that are performed by third-parties.
Notwithstanding the foregoing, any Indemnified Party shall not be entitled to
indemnification hereunder to the extent, and only to the extent, that Damages
are caused by the negligence of such Indemnified Party.

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8.2 Survival. The indemnification obligations set forth in Section 8.1 above,
shall survive termination of this Agreement.

ARTICLE IX

INSURANCE

9.1 Insurance. (a) Each Party shall maintain at all times during the Term of
this Agreement, each at its own cost and expense, with insurers authorized to
transact business in the State of Texas, insurance of the following types and
limits:

(i) General liability insurance including products liability with a combined
single limit for bodily injury and property damage of not less than $15,000,000
each occurrence and $15,000,000 in the aggregate that may be satisfied by a
combination of primary and excess liability insurance.

(ii) Employer’s liability insurance with limits of not less than $15,000,000
each accident, $15,000,000 by disease policy limit, $15,000,000 by disease each
employee that may be satisfied by a combination of primary and excess liability
insurance.

(iii) Workers compensation insurance in full compliance with any applicable
state and/or federal laws including Federal Employer’s Liability Act (“FELA”).

(iv) Commercial auto liability insurance with limits not less than $15,000,000
each accident that may be satisfied by a combination of primary and excess
liability insurance.

Each Party shall, within thirty (30) days after the Commercial Operations Date,
furnish the other Party a Certificate of Insurance evidencing the foregoing
insurance coverage and shall promptly provide the other Party with prior written
notice of any material change to, non-renewal, or cancellation of such coverage.

(b) In the event ARE has or obtains in the future any protective liability
policies with respect to local railroads, ARE shall, if requested in writing by
Panda, use commercially reasonable efforts to assist Panda in obtaining a waiver
of subrogation from any such insurance carrier with respect to such policy.

9.2 Contractors/Subcontractors. The obligations of ARE to maintain insurance
during the term hereof shall extend to and require ARE to verify like insurance
coverage maintained by any contractor or subcontractor that ARE may use with
respect to the transportation of Ethanol from the Project (other than railroads
(which are governed by tariffs)).

9.3 No Limitation on Liability. The insurance requirements set forth herein are
minimum coverage requirements and are not to be construed in any way as a
limitation on liability under this Agreement.

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ARTICLE X

ASSIGNMENT

10.1 Binding Affect. This Agreement shall be binding upon and inure to the
benefit of the Parties and the permitted successors and assigns of the Parties
and the covenants, conditions, rights and obligations of this Agreement shall
run for the full Term hereof.

10.2 Assignment by ARE. ARE shall not assign this Agreement or any portion
hereof, or any of the rights or obligations hereunder, whether by operation of
law or otherwise, without the prior written consent of Panda. In the event of a
permitted assignment, ARE shall nevertheless not be relieved from liability
hereunder accrued prior to the date of such assignment. Panda hereby consents to
the granting of a security interest in and any assignment by ARE to its lenders
of this Agreement.

10.3 Assignment by Panda. Panda shall not assign this Agreement or any portion
hereof, or any rights or obligations hereunder, whether by operation of law or
otherwise, without the prior written consent of ARE: provided, however,
(i) Panda shall be entitled to assign this Agreement and its rights herein to
any Affiliate but no such assignment shall relieve Panda of any liability
hereunder; (ii) Panda shall be entitled to assign this Agreement to any Person
(that is not an Affiliate of Panda) in conjunction with a change of ownership of
the Project and/or the Hereford Facility to such Person and be released of all
obligations hereunder which accrue after the date of the assignment, provided
such Person assumes all of Panda’s obligations hereunder, including any
financial obligations, which accrue after the date of such assignment and Panda
provides ARE with written notice of such assignment; and (iii) ARE hereby
consents to the granting of a security interest in and an assignment by Panda to
a Financing Person and its successors, assigns, and designees in connection with
any financing or refinancing related to the development, construction and
operation of the Project.

ARTICLE XI

FINANCING PERSONS’ REQUIREMENTS

11.1 Financing Persons’ Requirements. (a) ARE acknowledges that Panda or its
Affiliates will borrow funds for the development, construction, ownership and
operation of the Project, from one or more persons or entities, which may or may
not be an Affiliate of Panda that will be or become a Financing Person. Any
Financing Person, as a condition to making such loans may request due diligence
or financing documents or consents from ARE. In connection therewith, ARE agrees
to furnish, at Panda’s expense, to any Financing Person, such written
information, certificates, copies of invoices or delivery receipts, lien waivers
(upon payment), affidavits and other like documents as the Financing Person may
reasonably request.

(b) ARE shall promptly execute any additional documentation, as may be mutually
agreed on, in form and substance reasonably requested by a Financing Person,
including, but not limited to, documentation sufficient to evidence, to the
satisfaction of the Financing Person, ARE’s consent to assignment of this
Agreement as security to the Financing Person or otherwise upon the occurrence
of events specified in such documents and any reasonable mutually agreed on
modifications to this Agreement.

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ARTICLE XII

DEFAULT AND REMEDIES

12.1 Events of Default. The occurrence of any one of the following shall
constitute an Event of Default under this Agreement:

(a) the failure of either Party to perform any material covenant, condition or
obligation under this Agreement (other than ARE’s payment obligations in
Section 4.3), which failure continues for thirty (30) days after receipt of
written notice from the other Party of such failure;

(b) the failure of ARE to perform its obligations pursuant to Section 4.3 in
accordance with the time frames set forth in Section 4.3, which failure
continues for fifteen (15) days after receipt of Notice; or

(c) the breach by either Party of a material warranty or representation made by
that Party in this Agreement, which failure continues for forty-five (45) days
after receipt of Notice from the other Party of such breach; provided, however,
that if the material breach is of a nature that can not be cured, such breach
shall be deemed an Event of Default as of the date such breach.

12.2 Remedies and Waiver. Upon the occurrence of any Event of Default, the
non-defaulting party may pursue specific performance or any other available
equitable remedies, and/or terminate this Agreement as provided in Section 2.2.
The pursuit by either Party of any remedy available under this Agreement shall
not constitute an election or waiver of any other remedy available to that
Party, at equity or in law, by reason of violation or breach of any of the
terms, provisions, covenants, representations or warranties of this Agreement.
No waiver of any violation or breach shall be deemed or construed to constitute
a waiver of any other violation or breach, and forbearance to enforce one or
more of the remedies available for a violation or breach shall not be deemed to
constitute a waiver of that or any other violation or breach.

12.3 Limitation of Damages. Neither party shall be liable or otherwise
responsible to the other Party hereunder for consequential, incidental, punitive
or exemplary damages as to any action or omission that arises out of or relates
to this Agreement or its performance hereunder except for any such amounts paid
by a Party to a non-Affiliate third party, which would therefore be considered
actual damages incurred by such Party.

ARTICLE XIII

RESOLUTION OF DISPUTES

13.1 Friendly Consultation. In the event of any dispute, controversy or claim
between the Parties arising out of or relating to this Agreement, or the breach,
termination or invalidity thereof (collectively, a “Dispute”), the Parties shall
attempt in the first instance to resolve such Dispute through friendly
consultations between the Parties. If such consultations do not result in a
resolution of the Dispute within fifteen (15) days, then the Dispute shall be
submitted to senior

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executive officers of the Parties with authority to resolve all issues and who
shall meet within ten (10) days after the date of a written submission by either
Party, describing the Dispute. If such senior executive officers do not resolve
the Dispute within five (5) days, then the Dispute may be submitted to judicial
proceedings by either Party. The Parties agree to provide each other with
reasonable access during normal business hours to any and all non-privileged
records, information and data pertaining to any such Dispute.

ARTICLE XIV

FORCE MAJEURE

14.1 Force Majeure Event. In the event either Party is rendered unable, wholly
or in part, by a Force Majeure Event to carry out its obligations under this
Agreement, the Parties agree that on written notice by the Party claiming a
Force Majeure Event, to the other Party, the obligations of the Party giving
such notice, so far as and to the extent they are affected by such Force Majeure
Event, shall be suspended from the commencement of such Force Majeure Event and
during the remaining period of such Force Majeure Event, but for no longer
period, and such Force Majeure Event shall, so far as possible, be remedied with
all reasonable dispatch; provided, however, that the obligation to make payments
accrued hereunder whether prior to or during a Force Majeure Event, shall not be
suspended.

ARTICLE XV

CONFIDENTIALITY

15.1 Confidentiality. The Parties agree that the contents of this Agreement and
any information provided to a Party by the other Party whether of a business,
technical, engineering, economic or other nature relating to the Project or the
marketing of Ethanol from the Project or the disclosing Party and its
Affiliates, relating to the negotiations or performance of this Agreement or
otherwise provided pursuant to this Agreement (the “Confidential Information”)
shall be treated as confidential and secret and that the receiving Party,
without the prior written consent of the disclosing Party, shall not disclose
Confidential Information to any Person, except as permitted herein. Upon the
request of the disclosing Party and to the extent reasonably practicable to do
so, the receiving Party shall return all written and electronic information
containing Confidential Information of the disclosing Party. Notwithstanding the
above, the Parties acknowledge and agree that (x) Panda may disclose
Confidential Information to the Financing Parties, potential purchasers,
potential lenders or investors for the Project, contractors, Panda’s Affiliates,
agents, representatives and contractors, suppliers and manufacturers (and
potential suppliers and manufacturers) of equipment, materials or other goods
for the Hereford Facility, and other Persons as may be necessary or advisable
for Panda to obtain financing for the Project and/or otherwise construct and
operate the Hereford Facility and/or to perform its obligations under this
Agreement and the other agreements entered into in connection with the Project
or the Hereford Facility, and (y) ARE may disclose Confidential Information to
its agents, contractors and other Persons as may be necessary or advisable for
ARE to perform its obligations under this Agreement. To the extent that such
disclosures are necessary, each Party shall endeavor in disclosing Confidential
Information to seek to preserve the confidentiality of such disclosures.
Notwithstanding the foregoing, this Section 15.1 shall not prevent either Party
from disclosing any such Confidential Information, including the contents of
this Agreement, if

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and to the extent: (i) required to do so by applicable law or any court,
governmental or regulatory authority, provided that, if feasible, the disclosing
Party shall give prior notice to the other Party of such required disclosure
and, if so requested by such other Party, shall use all reasonable efforts to
oppose the requested disclosure, appropriate under the circumstances;
(ii) disclosed to the professional advisers, consultants or auditors of such
Party; (iii) disclosed to the existing or potential lenders, shareholders,
partners and equity investors of such Party; (iv) such disclosure is reasonably
deemed necessary by the disclosing Party pursuant to the rules and regulations
of any securities commission, securities exchange, securities trading market or
similar body or agency; or (v) Confidential Information has come into the public
domain (except as a result of a breach of this Section 15.1).

ARTICLE XVI

MISCELLANEOUS

16.1 Relationship of the Parties. It is expressly understood that the
relationship of ARE to Panda is that of an independent contractor and nothing
contained herein shall be construed to create any partnership, agency, or
employer/employee relationship. ARE may freely choose the customers from whom
business shall be solicited and the time and place for solicitation.
Notwithstanding the foregoing, the Parties hereby agree that time is of the
essence with respect to the performance of each Party’s respective obligations
hereunder.

16.2 Waiver and Amendment. Failure to enforce or the waiver of any provision of
this Agreement or any breach or nonperformance by Panda or ARE shall not be
deemed a waiver by ARE or Panda of the right in the future to demand strict
compliance and performance of any provision of this Agreement. No modifications
to or recision of this Agreement may be made except by a written document signed
by ARE’s and Panda’s authorized representatives.

16.3 Severability. The provisions of this Agreement are severable and if, for
any reason, any one or more of the provisions contained in the Agreement shall
be held to be invalid, illegal or unenforceable in any respect, the invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement and this Agreement shall remain in effect and be construed as if the
invalid, illegal or unenforceable provision had never been contained in the
Agreement.

16.4 No Third Party Beneficiaries. Except with respect to the rights of a
Financing Person as provided above, this Agreement does not create any
third-party benefits to any Person or entity other than the signatories hereto,
and is solely for the consideration herein expressed.

16.5 Entire Agreement. This Agreement constitutes the entire agreement and
understanding between the Parties, and supersedes all other communications with
respect to this Agreement. This document may be modified only by further written
agreement between the Parties.

16.6 Good Faith Dealing. The Parties undertake to act in good faith in relation
to the performance and implementation of this Agreement and to take such other
reasonable measures as may be necessary for the realization of its purposes and
objectives.

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16.7 Further Assurances. Each Party shall, from time to time on being requested
to do so by, and at the cost and expense of, the other Party, do all such acts
and/or execute and deliver all such instruments and assurances as are reasonably
necessary for carrying out or giving full effect to the terms of this Agreement.
The Parties agree to provide any such documentation in electronic format, if and
to the extent available.

16.8 Governing Law. This Agreement shall be construed under the laws of the
State of New York. This Agreement is not a waiver of any permit, inspection or
other legal requirements, and does not assure approval based upon any
circumstances other than compliance with the law. ARE and Panda shall materially
conform to and abide by all applicable federal, state and local laws and
regulations.

16.9 Notices. All notices and communications (“Notices”) required or allowed by
this Agreement (except as otherwise indicated herein) shall be in writing and be
given (i) by depositing the notice in the United States mail postpaid and
registered or certified, with return receipt requested, prepaid expedited or
delivery service, with return receipt requested and addressed to the Party to be
notified or (ii) by facsimile. Notice deposited in the mail in the previously
described manner shall be deemed to be effective from and after the expiration
of five (5) days after the notice is deposited in the mail and notice delivered
by facsimile shall be deemed received on the first Business Day following the
day transmitted with confirmation of receipt. Either Party may change its
address by giving written notice of the change to the other Party at least
fourteen (14) days before the change becomes effective. For purposes of notice,
the addresses of and the designated representative for receipt of notice for
each of the Parties shall be as follows:

For ARE:

Aventine Renewable Energy, Inc.

Attention: President & CEO

P.O. Box 10

Pekin, IL 61555

Fax No.: (309) 347-8541

And for Panda:

Panda Hereford Ethanol, L.P.

Attention: General Counsel

4100 Spring Valley, Suite 1001

Dallas, Texas 75244

Fax No.: (972) 980-6815

To the extent that the deadline for the delivery of any notice or communication
to be made hereunder falls on a day that is not a Business Day, such deadline
shall be automatically extended to the next following Business Day.

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16.10 Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original, and all of which together shall
constitute one and the same instrument.

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly
executed in multiple counterparts, each of which shall constitute an original,
as of the date first written above.

 

AVENTINE RENEWABLE ENERGY, INC. By:  

/s/ RONALD H. MILLER

Name:   Ronald H. Miller Title:   President & CEO PANDA HEREFORD ETHANOL, L.P.
By:   PHE I, LLC, its General Partner By:  

/s/ J.L. ADAMS, JR.

Name:   J. L. Adams, Jr. Title:   Vice President – Fuels & Commodities