Document:

Exhibit 10.19

 

July 13, 2006

FEEDSTOCK AGREEMENT

BETWEEN

NOVA BIOFUELS OKLAHOMA LLC

AND

CONAGRA TRADE GROUP, INC.

This
Feedstock Agreement (the “Agreement”) is dated as of the 26 day of July, 2006,
by and between NOVA BIOFUELS OKLAHOMA LLC,
a Delaware Limited Liability Company having its offices at 2777 Allen Parkway,
Suite 800, Houston, TX 77019, (“Buyer”), and CONAGRA
TRADE GROUP, INC., a Delaware corporation having its offices at
Eleven ConAgra Drive, Omaha, Nebraska (“CTG”) (each of Buyer and CTG is a “Party”
and together they are collectively referred to as the “Parties”).

RECITALS

WHEREAS, Buyer desires to have CTG
originate and supply certain feedstock required for biodiesel production at
Buyer’s plant to be located in Oklahoma (the “Plant”), and to provide related
services to Buyer; and

WHEREAS, CTG desires to enter into an
agreement with Buyer to originate and supply such products and provide the
related services for Buyer;

NOW
THEREFORE, in consideration of these premises and the mutual
promises and covenants set forth herein, CTG and Buyer mutually agree as
follows:

ARTICLE 1

DEFINITIONS

As used in this Agreement, the following terms have
the following meanings:

1.1                                 “Agreement” means this
Feedstock Supply Agreement.

1.2                                 “AFOA” means the
American Fats and Oils Association.

1.3                                 “Alternate Feedstock
Losses” has the meaning given in Exhibit “D”.

1.4                                 “Alternate
Specifications” has the meaning given in Section 5.1.

1.5                                 “Benchmark Price” has the meaning given in Section 3.3.1. 

1.6                                 “Claims” has the meaning given in Section
10.2.

1.7                                 “Confidential Information” has the meaning given in
Section 9.1.

1.8                                 “Confirmed Order” has the meaning given in Section
3.2.

 

 

1.9                                 “Constructively
Placed” or “Constructive Placement” means, with respect to a shipment of
Feedstock by railcar, that such railcar has been deemed constructively placed
by the applicable railroad.

1.10                           “Contract
Quarter” means each of the four consecutive 3-month periods within a Contract
Year.

1.11                           “Contract
Year” means each consecutive 1-year period during the Term, commencing on the
date of initial production of biodiesel at the Plant.

1.12                           “COPA” means the Canadian Oilseed Processors
Association.

1.13                           “CTG Incentive” means the incentive as provided for
in Section 3.4.

1.14                           “Delivered Feedstock Price” means the price in
$/pounds for the applicable Feedstock as established in the applicable
Confirmed Order.

1.15                           “Delivery” has the meaning given in Section 12.1.

1.16                           “Delivery Point” means the locations at the Plant
where shipments of Feedstock are physically received from barges or trucks,
respectively.

1.17                           “Demurrage” means all costs, damages, penalties and
charges resulting from any delay in loading and/or unloading of Feedstock
shipments, including, without limitation, any delay related to any
truck, rail car, or barge, as applicable: (i) being incapable of timely
offloading any shipment of Feedstock due
to mechanical failure or for other reasons, and (ii) delivering any shipment of
Feedstock to an incorrect location.

1.18                            “Feedstock” means animal fats, vegetable oils,
and/or their derivatives as they are found to be acceptable for biodiesel
production by both Parties.

1.19                           “FOSFA” means the Federation
of Oils, Seeds and Fats Associations.

1.20                           “Force Majeure” has the meaning given in Section 11.2.

1.21                           “Francis-Mustoe & Company Daily Market Sheet” means a published sheet
daily on www.francis-mustoe.com under “daily
markets”.

1.22                           “Holiday” means a day on
which the majority of national banks in Oklahoma are not open for business.

1.23                           “Indemnitee Group” has the
meaning given in Section 10.2.

1.24                           “Indemnitor” has the meaning
given in Section 10.2.

1.25                           “Initial Term” has the meaning given in Section 2.1.

1.26                           “Jacobsen” means the published sheet found at www.thejacobsen.com (select, “Market News, Animal, Fats & Oils
Bulletin”).

1.27                           “Master Agreement” means the Master Netting, Setoff, Credit and Security
Agreement of even date herewith between Buyer and CTG.

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1.28          “Minimum Purchase
Obligation” has the meaning given in Section 3.6

1.29                           “MT” means metric tonnes.

1.30                           “Normal Operating Hours” has
the meaning given in Section 6.2.

1.31                           “NOPA” means the National Oilseed Processors Association.

1.32                           “Order Month” means the calendar month in which a
shipment of Feedstock is ordered for delivery. 
For example, for May delivery, May shall be the Order Month.

1.33                           “Plant” has the meaning given in the first recital.

1.34                           “PORAM” means the Palm Oil Refiners Association of
Malaysia.

1.35                           “Renewal Terms” has the meaning given in Section 2.2.

1.36                           “Representatives” has the meaning given in Section
9.2.

1.37                           “Service Fee” has the meaning given in Section 3.5.

1.38                           “Start-up
Period” means the period beginning on the date the Plant commences biodiesel
production and ending at the end of the first month in which (a) the Plant has
produced biodiesel in excess of eighty percent (80%) of its design capacity, or
(b) the six-month anniversary of the first date on which biodiesel production
began, whichever comes first.

1.39                           “Trade Rules” means the applicable trade rules of
AFOA, COPA, FAMNI, FOSFA, NOPA, PCOPA, and PORAM, all as set forth in greater
detail at Exhibit “E”, which trade rules shall apply only to the limited
extent expressly provided herein, but not otherwise.

1.40                           “USDA” means the United States Department of
Agriculture.

1.41                           “USDA Bluesheet” is a published sheet found daily and
updated daily by 3:30CST at http://www.am.usda.gov/mnreports/NW_LS442.TXT.

1.42                           Industry Usage.  Any
word, phrase or expression that is not defined in this Agreement and that has a
generally accepted meaning in the custom and usage in the Feedstock industry
shall have that meaning in this Agreement.

1.43                           Currency.  All
references to “dollars” or “$” in this Agreement shall be references to amounts
expressed in United States currency.  All
calculations of monetary sums shall be made in U.S. currency.

ARTICLE 2

TERM

2.1                                 Initial Term. This Agreement shall become effective as of the
date signed by Buyer and CTG and shall extend until the later of (a) ten (10)
years from the date of Buyer’s first purchase of Feedstock from CTG; or (b) May
1, 2018 unless extended either by mutual
agreement of the Parties or due to Force Majeure pursuant to Section 11.1 (the “Initial
Term”). Either Party shall have the right on fifteen (15) days prior written
notice to the

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other
Party to terminate this Agreement if production of biodiesel does not commence
at the Plant by May 1, 2008 unless such date is extended by mutual agreement of
the Parties or due to Force Majeure pursuant to Section 11.1.  Upon any such termination no Party shall have
any liability to the other Party with respect to this Agreement or the
transactions contemplated hereby, except in respect to confidentiality
obligations under Article 9.

 

2.2                                 Renewal Terms. The Parties may, by written mutual agreement,
extend this Agreement for successive five (5) year terms (each a “Renewal Term”),
provided, however, that such extension agreement shall have been
executed by the Parties no later than six (6) months prior to the end of the
then-current term.

ARTICLE 3

FEEDSTOCK SUPPLY
TERMS

3.1                                 Supply of Feedstock; Plant Location. Except as otherwise provided in this Agreement, Buyer
agrees to purchase one-hundred percent (100%) of Buyer’s Feedstock requirements
for biodiesel production at the Plant from CTG, and CTG agrees to supply such
Feedstock to Buyer, at the Delivered Feedstock Price.  CTG may deliver the Feedstock via rail cars,
tanker trucks, or barge with such shipments not to exceed size units as
mutually agreed.  Both Parties agree to
discuss the Feedstock availability options, delivery options, and agree to
reach a mutually agreeable delivery schedule as set forth in Exhibit “A”.

Should Buyer subsequently plan to
increase biodiesel production at the Plant in excess of the current maximum
production quantity, whether via expansion or otherwise, Buyer will first offer
to CTG the opportunity to supply, by amendment to this Agreement, the Feedstock
needed for such increased production. 
Such offer will be in writing, setting out the proposed production
changes, timing and other relevant details. 
If CTG does not accept such offer, or if the parties are unable to
otherwise negotiate an acceptable amendment to this Agreement to supply the
additional Feedstock, within thirty (30) days of Buyer’s written offer, then
Buyer may offer such additional supply to a third party on terms no less
favorable to Buyer than those last offered by CTG.

The Parties agree that the Plant
shall be located at either Catoosa, Muskogee or Oklahoma City, Oklahoma.  Buyer has the right to select among these
three locations; however, Buyer covenants that the Plant shall accommodate, at
a minimum, truck and railcar traffic (both receiving and loading) to support
the supply requirements herein and in that certain Biodiesel Sale and Purchase
Agreement of even date herewith.

3.2                                 Delivered Feedstock Price.  The
Delivered Feedstock Price to Buyer will be established through an “offer” and “confirmation”
process between both Parties.  CTG will
offer delivered Feedstock prices to Buyer and Buyer shall timely confirm the
offered price volume and delivery period to establish each “Confirmed Order”,
all as set forth in Exhibit ”A”. 
Should Buyer reject, or fail to confirm, the Feedstock offers on a
timely basis, CTG will be relieved of any obligation to deliver any such
Feedstock and to procure any substitute Feedstock should Buyer’s inventory be
depleted in the absence of the declined Feedstock  or otherwise as a result of Buyer’s failure
to order.

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3.3           Benchmark Prices.

 

3.3.1        Source of Benchmark Pricing.  The “Benchmark
Price” for each Feedstock is based on the relevant published market price,
subject to certain freight and other cost adjustments, all as set forth in Exhibit
“B”.  The Parties agree to utilize
these sources for the applicable Feedstock market price.

3.3.2        Changes to Benchmark Pricing.  Neither the formula for calculating the
Benchmark Price, nor the source of published market prices in respect of any
Feedstock, shall be changed without the written consent of the Parties.  In the event that (a) Buyer may require the
addition of a Feedstock, which is not materially represented in Exhibit ”B”,
(b) new improved sources for market quotations become available, (c) any of the
sources for the published market prices set forth in Exhibit “B” becomes
temporarily or permanently unavailable, (d) CTG receives new adjustment value
data, (e) adjustments arising from changes in published market freight, railcar
costs and/or fuel surcharges, or (f) changes occur in industry regulations,
either Party may propose changes to the applicable portions of Exhibit “B”.  Upon approval of both Parties the contents of
Exhibit ”B” may be formally amended.  If following a review of any such events, the
Parties are unable to agree to any revisions to Exhibit “B”, then the
matter shall be resolved according to the provisions of Section 14.4.

3.4                                 CTG Incentive.  Buyer
shall pay CTG an incentive (the “CTG Incentive”) on all applicable shipments of
Feedstock in accordance with Exhibit “C”.

3.5                                 CTG Service Fee. 
Buyer shall pay CTG a “Service Fee” of [*] for
every pound [*] of Feedstock supplied by
CTG and accepted and received at the Plant by Buyer (or for the Minimum
Purchase Obligation, whichever is greater); provided, however, that CTG shall
promptly refund to Buyer any Service Fees received from Buyer in connection
with any volumes which are subsequently determined to be nonconforming and
rejected in accordance with the provisions of Section 5.3.  Such Service Fee payable hereunder shall be
increased to [*] pound [*] of substitute Feedstock that (i) meets Alternate
Specifications and (ii) is available at a price of at least [*]/lb. below
then-current market price for the Feedstock to be replaced.  CTG will invoice and identify this charge as
a “Service Fee” along with the Feedstock product invoice and CTG
Incentive.  Unless this Agreement is
terminated by both parties pursuant to Section 8.1 or by Buyer under Section
8.2, Buyer shall in all other termination events be obligated to pay the
Service Fee, based on the Minimum Purchase Obligation, that would have
otherwise been owed had the Agreement continued for the lesser of (x) one (1)
year, or (y) the balance of the Initial Term.

*       Portions
omitted pursuant to a request for confidential treatment and filed separately
with the Securities and Exchange Commission.

 

3.6                                 Buyer’s Minimum Purchase Obligation.  Except
as otherwise provided in this Agreement, Buyer shall purchase from CTG no less
than 73.5 million pounds of Feedstock
per each Contract Quarter of this Agreement (the “Minimum Purchase Obligation”).  Each month during the Start-up Period, the
Minimum Purchase Obligation shall be reduced prorata based on the amount that
the actual monthly Plant production bears to the monthly design capacity for
the Plant.  Should a shortfall in
Feedstock purchases exist at the end of any Contract Quarter, Buyer shall then
be obligated to pay the Service Fee on such shortfall pursuant to Section 3.5
and the Master Agreement.  If all or part
of such shortfall is made up in a subsequent Contract Quarter within a given
Contract Year (after satisfying the obligation for that subsequent Contract
Quarter), the amount paid for the shortfall under this Section shall be repaid
to Buyer to the extent the shortfall has been made up.  Feedstock purchases in excess of the annual
Minimum Purchase Obligation shall not be carried forward from one Contract Year
to the next.

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3.7                                 Buyer’s Failure to Purchase.  In
the event that CTG is prepared to deliver the Feedstock per the relevant Confirmed Order, and Buyer fails
to take delivery of any such tonnage and CTG, after using commercially
reasonable efforts, sells such Feedstock to a substitute buyer, then Buyer
shall reimburse CTG for the amount, if any, by which the Delivered Feedstock
Price exceeds the price paid by the substitute buyer, plus reasonable
additional costs incurred by CTG due to such substitute sale, including,
without limitation, additional leased car costs, dead mileage costs for leased
cars, and out-of-pocket costs of selling Feedstock.  If CTG is unable to sell the Feedstock to a
substitute buyer then Buyer shall reimburse CTG for the entire purchase price
plus reasonable additional costs, and CTG shall redeliver such Feedstock to
Buyer (at Buyer’s expense).  CTG shall in
any event be entitled to the Service Fee on Feedstock sales under this
Section.  Payment shall be made according
to the terms set forth in Section 4 upon Buyer’s receipt of appropriate documentation
from CTG, including, without limitation, invoices and receipts related to such
sale of Feedstock.  All such additional
costs incurred by CTG, if any, shall be fully documented by CTG and submitted
to Buyer as a condition to Buyer’s reimbursement hereunder.

3.8                                 CTG Delivery Obligation. 
Except as otherwise provided in this Agreement, and subject to
sufficient orders being accepted by Buyer, CTG shall deliver one hundred
percent (100%) of Buyer’s requirements of Feedstock at the Plant per each
Contract Year of this Agreement in accordance with the applicable Delivery Schedule.  In the event that CTG is unable to deliver such
quantities of Feedstock as are provided in the applicable Delivery
Schedule, CTG shall promptly notify Buyer and
work together with Buyer to agree on a written mitigation plan, the
purpose of which will be to identify alternative Feedstock supplies and
establish a delivery schedule therefor.  In the event that the Parties are
unable to reach agreement on a mitigation plan the provisions of
Section 14.4 shall apply.  In the
event CTG does not deliver the quantities according to the applicable Confirmed
Orders, then the provisions of Exhibit “D” shall apply.  The remedies set forth in Exhibit “D”
shall be Buyer’s sole and exclusive remedy in the event of CTG’s failure to
deliver pursuant to Confirmed Orders.

3.9                                 CTG Responsibilities.  In addition
to, and without limiting CTG’s other obligations hereunder, CTG shall:

(a)                                  Establish, monitor and communicate logistics to
ensure the Feedstock is shipped in accordance with the applicable Delivery
Schedule.

(b)                                 Be responsible for all inbound shipment logistics
including the management of tank rail cars and barge shipments, and truck
transportation.

(c)                                  Manage
all claims by CTG vendors under, and be responsible for such vendors’
compliance with shipments governed by, the various Trade Rules (see Exhibit ”E”).

(d)                                 Exercise the same degree of effort and care in
sourcing Feedstock at market prices favorable to Buyer (subject to Buyer’s
credit limitations) that it does in sourcing commodity products for its own
account.

3.10                           Buyer Responsibilities. 
In addition to, and without limiting
Buyer’s other obligations hereunder, Buyer shall:

(a)                                  Advise CTG of Buyer’s annual Feedstock requirements
plan.

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(b)                                 Provide CTG with timely and accurate forecasts of the
amount of Feedstock needed, including monthly and quarterly forecast estimates
pursuant to Exhibit ”A”.

(c)                                  Provide CTG with timely and accurate forecasts of the
type or grade of Feedstock needed pursuant to Exhibit “A”.

(d)                                 Inform CTG of all scheduled Plant shutdowns at least
45 days prior to the beginning of each fiscal year of Buyer, and within 48
hours after Buyer becomes aware of the occurrence of any event that may result
in an unscheduled Plant shutdown.

(e)                                  Provide a designated individual for daily operational
and logistic issues and provide a designated individual for pricing and other
contractual issues.

(f)                                    Submit to CTG by 9:00 A.M. each day an inventory
report reflecting total Feedstock inventory or give CTG secure internet access
to the Buyer’s computer-based inventory management system.

3.11                           Trade Rules.  The Parties
agree that they are subject to the Trade Rules for purposes of this Agreement;
however, the terms of this Agreement shall govern in the event of a conflict
with the applicable Trade Rules.  CTG
is responsible for the administration and execution of Trade Rules with respect
to suppliers of Feedstock.  Buyer agrees
to comply with the Trade Rules to the extent applicable to Feedstock
specifications, analysis and discounts, unless otherwise stated herein.

3.12                           Trading Gains/Losses. It is understood that CTG may have gains or losses
resulting from trading positions that CTG may enter into in its normal course
of business in respect to the Feedstock supplied hereunder.  Any and all such gains and losses shall be
for the account of CTG.   Buyer may,
however, be entitled to credits (or debits) based on gains (or losses) in
market prices of Feedstock covered by Confirmed Orders that CTG and Buyer agree
to cancel prior to Delivery.

ARTICLE 4

BILLING AND PAYMENT

 

4.1                                 Feedstock Billing.  CTG shall
issue to Buyer, at the time of each shipment of Feedstock, an invoice
containing the description of shipped products, estimated weight and price, date
of shipment, point of origin, and amount payable to CTG including the Service
Fee and CTG Incentive.  Each such invoice
will set forth in reasonable detail the calculation of such CTG Incentive and
be properly documented and substantiated. 
Buyer, at its discretion, will have the option of confirming the actual
weight of each shipment.  If the actual
weight as determined by Buyer and confirmed by CTG is less (or more) than the
actual weight listed on the invoice, Buyer will be entitled to a discount from (or
will pay an additional amount over) the amount otherwise payable to CTG,
equivalent to the difference in product weights multiplied by the product value
in $/lb.

4.2                                 Payment.  Subject to the receipt of the
invoice and other information required in Section 4.1, payment therefor
will be made in accordance with the Master Agreement.

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ARTICLE 5
FEEDSTOCK GRADE AND QUALITY SPECIFICATIONS

 

5.1                                 Feedstock Quality Specifications. The Feedstock supplied by CTG to Buyer pursuant to
this Agreement shall meet the specifications provided in Exhibit ”E”,
or such alternate specifications as may be agreed between the parties from time
to time (“Alternate Specifications”). 
Except as set forth in the preceding sentence and in Section 5.4, CTG makes
no warranty whether expressed, implied, statutory or otherwise, concerning the
Feedstock sold hereunder, and CTG
expressly disclaims any implied warranty of merchantability or fitness or
suitability for a particular purpose.

5.2                                 Specification Responsibilities.  CTG
shall (a) provide origin weights or first available railroad weight for all
railcar shipments and (b) allow Buyer to have the right to inspect, test,
weigh, and grade any and all Feedstock deliveries.  Should Buyer modify, alter, or unload any or
all of Feedstock from the delivery
vessel (i.e. rail car, truck, or barge), the portion of the shipment that is
modified, altered or unloaded (other than is necessary for the tests
contemplated hereunder) shall be considered accepted without rights of shipment
rejection.

5.3                                 Nonconforming Feedstock.  Feedstock
delivered to the Plant that does not meet specifications (or Alternate
Specifications, if applicable) as determined by Buyer or by an independent
laboratory as provided for within the applicable Trade Rules, prior to unloading,
will either be rejected by Buyer or discounted in accordance with the
applicable Trade Rules or in an amount otherwise mutually acceptable to the
Parties.  If such nonconforming
Feedstock is not discountable pursuant to the applicable Trade Rules, CTG may
replace the delivered Feedstock with an acceptable type and/or quality of
Feedstock within fifteen (15) days of receipt of written notice that the
delivered Feedstock is nonconforming. 
CTG will be responsible for all costs of replacing or disposing of any
such nonconforming Feedstock, including any damages and costs (subject to
Section 10.1) incurred by Buyer as a result of the nonconforming Feedstock
and/or any delay in obtaining conforming Feedstock from CTG.  Such costs may include, without limitation,
any costs reasonably incurred by Buyer to store or transfer such nonconforming
Feedstock.  In the event CTG cannot
replace the non-conforming Feedstock within the fifteen (15) day period, Buyer
may refuse to make payment for the delivered Feedstock and purchase replacement
Feedstock in accordance with the provisions of Exhibit “D”; however, if
Buyer has already paid for such nonconforming Feedstock, it shall be entitled
to a full refund of all amounts paid to CTG in respect thereto, including,
without limitation, any related Service Fee and CTG Incentive payments.

Notwithstanding the foregoing,
Buyer, at its sole discretion, may direct CTG to purchase Feedstock based on
Alternate Specifications, and the purchase and use of such alternate Feedstock
shall not affect any of the other rights Buyer may have under this Agreement
and any of the obligations CTG may have under this Agreement for other
deliveries of nonconforming Feedstock. 
CTG’s purchase of Feedstock meeting Alternate Specifications shall count
towards Buyer’s Minimum Purchase Obligation.

5.4                                 Express Warranty Against Liens.  CTG
represents and warrants that title to all Feedstock delivered and sold
hereunder will be good and marketable, free and clear of all liens, security
interests, other encumbrances, or adverse claims of any kind.

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ARTICLE 6

LOGISTICS AND DELIVERY OF FEEDSTOCK

 

6.1                                 Railroad Coordination. CTG will track the estimated time of arrival and
placement and release times at origin and destination.  CTG will also coordinate unloading schedules
to avoid or minimize Demurrage exposure.

6.2                                 Demurrage. 
Buyer will be responsible for
Demurrage: (a) in the case of railcars, ninety six (96) hours after the
time at which the railcar is Constructively Placed at the Plant; (b) in the
case of trucks, (i) two (2) hours after the time at which the truck arrives at
the Plant provided that such arrival is between the hours of 6 AM and 6 PM,
Monday through Sunday excluding Holidays (“Normal Operating Hours”); or (ii) if
the arrival is outside Normal Operating Hours, then twelve (12) hours after
arrival; and (c) in the case of barges, forty eight (48) hours after arrival of
barges at the Delivery Point or as otherwise set forth in the applicable
contract.  Thereafter Demurrage shall be
charged to Buyer per running hour, at the prevailing rate established by the
carrier, Saturdays, Sundays and Holidays included.  Free time shall be counted from the time the
barge line, or its representative, gives notice to Buyer, or Buyer’s
representative, that the barge is ready for delivery.  Demurrage will be based on then-current
market rates; however, the Demurrage rate for railcars will initially be
calculated as follows: $50 per day for the first four (4) days following the ninety
six (96) hours of free time and $70 per day for the following days.  It is understood that the foregoing Demurrage
rates may be modified from time to time in order to reflect overall market
changes in the railroad or railcar-lease industries as may be evidenced by
written agreements or other industry-specific publications.

6.3                                 Notification of Problems with Delivery.  CTG
shall inform Buyer of any problem regarding any Feedstock delivery, without
delay, by fax and telephone after CTG becomes aware of any such problem.  An example of this includes, but is not
limited to, the possible event that one or more ordered Feedstock are not
available for purchase by CTG from the market in the quantity originally
ordered per the relevant Confirmed Order. 
In a like manner, Buyer shall inform CTG of any problems in taking any
Feedstock delivery.

ARTICLE 7

RISK MANAGEMENT

7.1                                 Monitoring of Feedstock Positions.  CTG will
monitor Feedstock purchases and may, from time to time, make suggestions
concerning Buyer’s risk management program and the position of its Feedstock
purchases for future physical delivery.

7.2                                 Market Conditions.  CTG will
review with Buyer on a monthly basis market conditions relating to Feedstock,
existing Feedstock supply and ownership positions, and forward marketing
strategies in an attempt to assist Buyer in lowering its cost of
Feedstock.  It is understood by Buyer
that all risk management services must be tied to a valid written purchase
contract requiring physical delivery of Feedstock to Buyer.

7.3                                 No Liability. Buyer recognizes that CTG’s monitoring of Feedstock
positions, periodic suggestions, review of market conditions and risk
management services are informational and optional, and the final decisions
concerning purchases and risk management strategies, and the implementation of such
strategies, will be made by, and is the sole responsibility of, Buyer.  CTG is not responsible for any Buyer losses
or entitled to any Buyer gains resulting from risk management information
supplied by CTG.

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ARTICLE 8

DEFAULT AND TERMINATION

 

8.1                                 Termination by Mutual Agreement.  This
Agreement may be terminated upon mutual written agreement between the Parties.

8.2                                 Termination By Either Party.  Except as
otherwise provided in this Agreement, either Party may immediately terminate
this Agreement upon written notice to the other Party should either of the
following events of default occur:

(a)                                  The other Party defaults on any material term,
covenant or condition hereunder and fails to cure such default within sixty (60)
days after receiving written notice thereof from the non-defaulting Party; or

(b)                                 Such other Party becomes the subject of any
bankruptcy, insolvency or similar proceedings.

8.3                                 Termination for Non-Payment. 
CTG may terminate this Agreement
immediately upon written notice to Buyer should Buyer (x) fail to make payment as
required under Section 2 of the Master Agreement within ten (10) days
following Buyer’s receipt of written notice of such event of default, or (y)
otherwise fail to perform its other obligations under the Master Agreement.

8.4                                 Termination for Force Majeure. In the event that Force Majeure shall, following the
initial production of biodiesel at the Plant, continue unabated for a period of
six (6) months from the date a Party gives notice of Force Majeure in
accordance with the provisions of Article 11, either Party hereto shall
have the right to terminate this Agreement by furnishing written notice to the
other no less than thirty (30) days prior to the expiration of such six (6)
month period, with termination effective only upon the expiration date of such
six (6) month period. Upon such termination, each Party shall be relieved from
its respective obligations, except for obligations for payment of monetary sums
which arose prior to the event of Force Majeure and the confidentiality
provisions set forth in Article 9, and the rights and obligations set forth in
Article 10 and Article 14.

8.5                                 Rights and Obligations on Termination.  Any rights and
obligations of CTG or Buyer to payments accrued through termination, the
obligations of Buyer under Section 3.5, as well as obligations of the Parties
under Confirmed Orders for the supply of Feedstock to Buyer that exist at the
time of termination, shall remain in effect notwithstanding any termination of
this Agreement.  The above notwithstanding,
(a) CTG shall have no obligation to supply Feedstock to Buyer (whether pursuant
to outstanding Confirmed Orders or otherwise) upon termination pursuant to
Section 8.3; and (b) Buyer shall have no obligation, subject to Confirmed
Orders as set forth in the first sentence of this Section 8.5, to accept
or pay for shipments of Feedstock if Buyer terminates this Agreement pursuant
to Section 8.2.  Upon termination of this
Agreement for any reason, each Party shall thereafter be relieved from its
respective obligations and have no further liability hereunder, except as set
forth in this Section 8.5 and for (i) the confidentiality obligations set forth
in Article 9, (ii) the rights and obligations set forth in Section 10.2 and
Article 14, and (iii) matters involving fraud.

8.6                                 Non-Waiver of Future Default.  No waiver by either Party of any default by
the other Party in the performance of any of the provisions of this Agreement
will operate or be

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construed as a
waiver of any other or future default or defaults, whether of a like or of a
different character.

ARTICLE 9

CONFIDENTIALITY

9.1                                 Confidential Information.  For
purposes of this Agreement, the term “Confidential Information” shall mean the
pricing terms of this Agreement and any information which is not in the public
domain and is disclosed by one Party to the other pursuant to this Agreement
and which is in written, graphic, machine readable or other tangible form.  Confidential Information may also include
oral information disclosed by one Party to the other pursuant to this
Agreement, provided that such information is designated as Confidential
Information at the time of disclosure and is reduced to writing by the
disclosing Party within a reasonable time (not to exceed ten (10) days) after
its oral disclosure, and the writing is marked in a manner to indicate its
confidential nature and delivered to the receiving Party.  Nothing in this Agreement shall be
construed to prohibit or limit a receiving Party from disclosing information, (including ideas, concepts, know-how,
techniques, and methodologies) (a) previously known to it, (b) independently developed by it without use of
the disclosing Party’s Confidential Information by those employees or
representatives of the disclosing Party that have not had access to such
Confidential Information, as can be substantiated by reasonable evidence, (c)
acquired by it from a third party which was not, to the receiving Party’s
knowledge, under an obligation to the disclosing Party or any third party not
to disclose such information, (d) that is or becomes publicly available through
no breach by the receiving Party of this
Agreement, or (e) to the extent disclosure of such information is required by
law or by the rules, regulations or practices of the Securities and Exchange
Commission or any exchange or automated quotation system upon which shares of
such Party may be listed, quoted or traded. 
If a receiving Party receives a subpoena or other validly issued
administrative or judicial process demanding Confidential Information of a
disclosing Party, the receiving Party must promptly notify the disclosing Party
and tender to it the defense of such demand. 
Unless the demand has been timely limited, quashed or extended, the
receiving Party will thereafter be entitled to comply with that demand to the
extent required by law but shall exercise commercially reasonable efforts to
obtain an order or other reliable assurance that confidential treatment will be
accorded to such Confidential Information. 
If requested by the disclosing Party, the receiving Party shall
cooperate (at the expense of the disclosing Party) in the defense of such a
demand.

9.2                                 Buyer Nondisclosure.  Buyer
acknowledges that, by reason of this Agreement, Buyer and the principals
(members, managers, officers, and the like), employees, agents, advisors,
lenders, other financing sources, representatives and affiliates (collectively,
“Representatives”) of Buyer may become privy to Confidential Information
belonging to CTG. Buyer agrees that it will not, without the prior written
consent of CTG, disclose to any third parties or use for its own benefit any
such Confidential Information except in the carrying out of its obligations
under this Agreement.  Buyer shall inform
any of its Representatives to whom Buyer intends to disclose Confidential
Information of the confidential nature of such Confidential Information and
shall require such persons to be bound by the provisions of Article 9 of this
Agreement.  The confidentiality
obligations hereunder shall survive any expiration or termination of this
Agreement.

9.3                                 CTG Nondisclosure. CTG acknowledges that, by reason of this Agreement,
it and its Representatives may become privy to Confidential Information
belonging to Buyer.  CTG agrees that it
will not, without the prior written consent of Buyer, disclose to any third

 11

 

parties or use for its own benefit any such Confidential Information
except in the carrying out of its obligations under this Agreement.  CTG shall inform any of its Representatives
to whom CTG intends to disclose Confidential Information of the confidential
nature of such Confidential Information and shall require such persons to be
bound by the provisions of Article 9 of this Agreement.  The confidentiality obligations hereunder
shall survive any expiration or termination of this Agreement.

9.4                                 Announcements.  Any public
statements, press releases, and similar announcements concerning the
negotiation or consummation of the transactions contemplated hereby, including
such statements made by Representatives of the Parties, shall be jointly
planned and coordinated by the Parties. 
Neither Party shall issue any such statement absent the consent of the
other Party, which consent shall not be unreasonably withheld or delayed.

ARTICLE 10

LIMITATION OF LIABILITY; INDEMNIFICATION; INSURANCE

10.1                           Limitation of Liability.  Without
limiting any express remedies set forth in this Agreement, and except for any
acts of willful misconduct or fraud, neither Buyer nor CTG will be liable to
each other or any third party for any indirect, consequential, punitive,
exemplary or special damages, loss of business expectations, lost profits,
business or facility interruption or shut-down costs, or any damage to third
parties arising out of this Agreement or any breach of this Agreement.  Under no circumstances (other than for
willful misconduct or fraud) will either Party be liable to the other for any
damages for breach that arises under this Agreement and exceed the total amount
of $1,000,000; provided, however, that such limitation shall not apply in
respect to (a) the payment by Buyer for Feedstock received hereunder, (b) the
obligation of CTG to reimburse Buyer for payments in respect of nonconforming
or undelivered Feedstock, or (c) Claims asserted under Section 10.2.  In the event damages exceed such limitation,
the sole remedy of the damaged Party with respect to such excess damages shall
be to terminate this Agreement.

10.2                           Indemnification.  Each Party
(the “Indemnitor”) shall release, defend, indemnify and hold harmless the other
Party, its affiliates, its contractors, and their respective members,
partners, directors, officers, shareholders, managers, employees, agents,
representatives and insurers (collectively, the “Indemnitee Group”) from and
against any and all losses, damages, fines, liens, levies, penalties, claims,
demands, causes of action, suits, legal or administrative proceedings, orders,
governmental actions and judgments of every kind and character, and any and all
costs and expenses (including, without limitation, reasonable attorneys’ fees,
reasonable expert witness fees, and court costs) related thereto (collectively,
“Claims”) asserted by any person or entity against any member(s) of the
Indemnitee Group on account of, incident to, in connection with, arising out
of, resulting from or related in any way, directly or indirectly, to this
Agreement, which Claims allege bodily injury to or death of persons included
within the Indemnitee Group, or damage to or loss of property of the Indemnitee
Group, resulting from the gross negligence or willful acts or omissions of the
Indemnitor or its affiliates, its contractors, and their respective members,
partners, directors, officers, shareholders, managers, employees, agents,
representatives and insurers.

The Party
claiming indemnification shall give prompt written notice to the Indemnitor of
any matter for which the Indemnitor may become liable under this
provision.  Said notice shall contain
full details of the matter in order to provide the Indemnitor with sufficient

 12
 

 

information to
assess its potential liability and to undertake defense of the Claim.  The indemnified Party shall have the right at
all times to participate in the preparation for and conducting of any hearing,
trial or other proceeding related to the provisions of this Article, as well as
the right to appear on its own behalf at any such hearing, trial or other
proceeding.  Any such participation or
appearance by the indemnified Party shall be at its sole cost and expense.  The indemnified Party shall cooperate in all
reasonable respects with the Indemnitor and its counsel in defending any Claims
and shall not take any action that is reasonably likely to be detrimental to
such defense.  The Indemnitor shall
obtain written approval from the indemnified Party prior to any settlement that
may impose obligations or restrictions on the indemnified Party.

10.3                           Insurance.  Each Party
shall, during the term of this Agreement, provide the insurance coverages set
forth in Exhibit “F”.

ARTICLE 11

FORCE MAJEURE

11.1                           Force Majeure.  In
the event either Party hereto is rendered unable by reason of Force Majeure, as
defined in Section 11.2, to carry out its obligations under this Agreement,
such Party shall give written notice and reasonably complete particulars of
such Force Majeure to the other Party stating the obligation(s) the
performance of which are, or are expected to be, delayed or prevented, as soon as possible after the occurrence of the
event.  The obligations of the Party
giving such notice shall be suspended during and to the extent affected by
Force Majeure and such event shall, so far as possible, be remedied with all
reasonable dispatch. In the event CTG declares Force Majeure, Buyer may
contract with other parties for the supply of Feedstock until CTG can resume
delivery.  The Initial Term shall be
extended, up to a maximum total of one (1) year (subject to Section 8.4), for
the period(s) during which a Party’s obligations are suspended hereunder by
Force Majeure.

11.2                           Definition of Force Majeure.   The
term “Force Majeure”, as used in this Agreement, shall mean any cause not
reasonably within the control of the Party claiming suspension and which, by
the exercise of due diligence, such Party is unable to prevent or
overcome.  Such term shall include, but
not be limited to:  (i) acts of God, (ii)
strikes, lockouts or acts of the public enemy, (iii) wars, blockades,
insurrections, riots, epidemics, acts of terrorism, (iv) transportation
shortages (v) landslides, lightning, earthquakes, fires, storms, floods,
washouts, (vi) civil disturbances, and (vii) explosions.  The term “Force Majeure” shall specifically
include those events affecting any transporter of Feedstock acting on behalf of
CTG hereunder, but shall in all events exclude any price fluctuations in
Feedstock or other economic or commercial changes involving the purchase and
sale of Feedstock or the production of Biodiesel therefrom. Events directly and
proximately caused by the gross negligence or willful misconduct of a Party or
its affiliates shall in no event constitute Force Majeure.

ARTICLE
12

POSSESSION AND TITLE

12.1                           Delivery; Risk of Loss. 
“Delivery” shall be deemed to occur when (i) the railcar is
Constructively Placed, or (ii) trucks and barges reach their respective
Delivery Point.  Title to and risk of
loss in the Feedstock shall only pass
from CTG to Buyer at the time the railcar is Constructively Placed or, with
respect to truck and barge deliveries, at the time the Feedstock crosses the
flange of such transport vessel. Until such time, CTG

 13
 

 

shall be
deemed to be in control of and in possession of and shall have title to and
risk of loss in the Feedstock

12.2                           Liability.  Buyer
shall have no responsibility or liability with respect to any Feedstock deliverable under this Agreement
until title and risk of loss transfer as described in Section 12.1.  Without prejudice to Section 5.3, CTG shall
have no responsibility or liability with respect to the Feedstock after title and risk of loss transfer
as described in Section 12.1 or on account of anything which may be done or
happen to arise with respect to such Feedstock
after such transfer.

ARTICLE 13

NOTICES

13.1                           Addresses.  Except as specifically otherwise
provided herein, any notice or other written matter required or permitted to be
given hereunder by one Party to the other Party shall be deemed to be
sufficiently given if delivered by hand, or by nationally-recognized overnight
courier, or sent by telecopy and confirmed by U.S. Mail (certified mail return
receipt requested), and addressed if to CTG, at:

ConAgra
Trade Group, Inc.

Eleven
ConAgra Drive

Omaha,
NE 68102-5011

Fax:         402-271-7802

Attn:       Eric Watts

With
a copy to:

ConAgra
Foods, Inc.

One
ConAgra Drive

Omaha,
NE 68102

Fax:         402-595-6149

Attn:       Capital and Contracts

And if to Buyer, at:

Nova
Energy Holding, Inc.

2777
Allen Parkway, Suite 800

Houston,
TX 77019

Fax:         (713) 583-8478

Attn:       JD McGraw 

13.2                           Change of Address.  Either Party
shall give notice within thirty (30) days to the other Party, in the manner
herein provided, of a change in its address for notice.

13.3                           Effective Date of Notice.  Any notice
or other written matter shall be deemed to have been given and received: if
delivered by hand or courier, on the date of delivery; and, if sent by
telecopy, on the business day following the sending of the notice.

 14
 

 

ARTICLE 14

MISCELLANEOUS

 

14.1                           Assignment.  Neither Party may assign this
Agreement in whole or in part or any of its rights or obligations hereunder,
without the prior written consent of the other Party, which consent may not be
unreasonably withheld or delayed, except that Buyer may assign its rights
(subject to its obligations) in this Agreement to any third party providing
primary debt or equity financing arrangements for the benefit of Buyer or its
affiliates.

14.2                           Records.  Each Party will establish and
maintain at all times, true and accurate books, records and accounts relating
to their own transactions in this Agreement in material accordance with United
States generally accepted accounting principles applied consistently from year
to year consistent with good industry practices, distinguishable from all other
books and records, in respect of all prices paid, payments, statements charges
and computations made pursuant to this Agreement.  These books, records and accounts will be
preserved by the applicable Party for a period of at least two years after the
expiration of the term of this Agreement, but in no event shall a Party be
obligated to retain records longer than seven (7) years from the date of
creation.

14.3                           Audit Rights. Upon five (5) business days notice and during normal
business hours each Party has the right to audit such books, records and
accounts of the other Party to the extent necessary in order to verify the
accuracy of any statement, charge, computation or demand made under or pursuant
to any provision of this Agreement.  If
any material error is discovered in any statement rendered hereunder, such
error will be adjusted within seven (7) days from the date of discovery, but no
adjustment will be made for errors discovered more than two years after
delivery and receipt of such statements. 
Any error or discrepancy detected which has led to an overpayment
or an underpayment between the Parties shall be corrected by a balancing
payment to the Party that received the underpayment or by a refund by the Party
that received the overpayment in each case to the extent of such underpayment
or overpayment as applicable.  Such
balancing payment or refund shall be made on the first payment date thereafter
arising under the Master Agreement.

14.4                           Dispute Resolution.  Except where a different dispute
resolution mechanism is specified herein, in the
event a dispute arises in connection with the performance or non-performance of
this Agreement, either Party has the right to notify the other Party in
writing of the substance of such dispute. 
The Party receiving such notice must respond in writing within thirty
(30) days of receipt of such notice and either (a) provide evidence that the
matter has been resolved, or (b) provide an explanation of why it believes that
its performance is in accordance with the terms of this Agreement and specify
three (3) dates, all of which must be within thirty (30) days from the date of
its response, for a meeting to resolve the dispute.  The notifying Party will then select one (1)
of the three (3) dates, and a dispute resolution meeting will be held.  If the Parties cannot, in good faith
discussions, resolve their dispute at such meeting, either Party may request
that the dispute be submitted to senior executives representing each Party who
are authorized to resolve such dispute, respectively.  If said dispute cannot be settled within
thirty (30) days after the initial request for a senior executive level
meeting, the Parties shall submit such matter
to AFOA arbitration in a neutral geographic location using AFOA Trade Rules
then in force as a guideline for negotiations, provided such matter involves
commercial aspects of the delivery of Feedstock and is accepted by the AFOA for
resolution; otherwise the Parties shall have available whatever rights or
remedies exist at law or equity. The arbitrator(s) shall have no power to award
damages inconsistent with

 15
 

 

this Agreement.  All aspects of
the arbitration shall be treated as confidential and judgment on the
arbitrator’s award may be entered in any court having jurisdiction.  The expenses of the arbitrator(s) shall be
shared equally by the Parties, and each Party shall bear its own legal costs,
unless the arbitrators determine that legal costs shall be otherwise assessed.  Nothing contained in any indemnification provision
hereunder shall be construed as having any bearing on the award of attorney’s
fees under this Section.  The foregoing
dispute-resolution process shall in no event be deemed to excuse either Party
from continuing to fulfill its respective obligations under, or to prevent or
impede either Party from exercising its rights or remedies set forth in, this
Agreement.

14.5                           Inurement. This Agreement will inure to the benefit of and be binding upon the
respective successors and permitted assigns of the Parties.

14.6                           Entire Agreement. This Agreement and the Exhibits attached hereto and
made a part hereof, together with the Master Agreement, constitute the entire
agreement between the Parties with respect to the subject matter contained
herein and any and all previous agreements, written or oral, express or
implied, between the Parties or on their behalf relating to the matters
contained herein are hereby terminated and canceled.

14.7                           Amendments.  There will be
no modification of the terms and provisions hereof except by the mutual
agreement in writing signed by the Parties.

14.8                           Governing Law; Venue. The Agreement will be interpreted, construed and
enforced in accordance with the procedural, substantive and other laws of the
State of Nebraska without giving effect to principles and provisions thereof
relating to conflict or choice of law even though one or more of the Parties is
now or may do business in or become a resident of a different state.  Subject to Section 14.4, all disputes arising out of
this Agreement shall be resolved exclusively by state or federal courts located
in Nebraska, and each of the parties waives any objection that it may have to
the bringing of an action in any such court.

14.9                           Compliance with Laws. This Agreement and the respective obligations of the
Parties hereunder are subject to present and future valid laws and valid
orders, rules and regulations of duly constituted authorities having
jurisdiction.

14.10                     Furnishing of Information. The Parties will, upon request, provide such
additional information as may be reasonably required to allow the Parties to
efficiently and effectively carry out their respective obligations hereunder
and to determine and enforce individual or collective rights under this
Agreement.

14.11                     Cumulative Remedies.  Unless
otherwise specifically provided in this Agreement, the rights, powers, and
remedies of each of the Parties provided in this Agreement are cumulative and
the exercise of any right, power or remedy under this Agreement does not affect
any other right, power or remedy that may be available to either Party under
this Agreement or otherwise at law or in equity.

14.12                     No Partnership. This Agreement shall not create or be construed to
create in any respect a partnership or any agency or joint venture relationship
between the Parties.

14.13                     Costs To Be Borne by Each Party.  Except as
otherwise provided herein, Buyer and CTG shall pay its own costs and expenses
incurred in the negotiation, preparation and execution of this Agreement and of
all documents referred to herein.

 16
 

 

14.14                     Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if Buyer and CTG had signed the same
document and all counterparts will be construed together and constituted as one
and the same instrument.

14.15                     Severability. Any provision of this Agreement which is or becomes
prohibited or unenforceable in any jurisdiction shall not invalidate or impair
the remaining provisions of this Agreement, and the remaining terms of this
Agreement shall continue in full force and effect.

14.16                     Headings; Interpretations.  The
article and section headings used herein are for convenience of reference only
and shall not affect the construction or interpretation of this Agreement.  Unless the context of this Agreement
otherwise requires, (i) words of any gender shall be deemed to include each
other gender; (ii) words using the singular or plural number shall also include
the plural or singular number, respectively; and (iii) the terms “hereof,”
“herein,” “hereby,” “hereto,” and derivative or similar words shall refer to
this entire Agreement.  This Agreement is
the product of negotiation by and among the Parties hereto.  This Agreement shall be interpreted and
constructed neutrally as to all Parties, without any Party deemed to be the
drafter of this Agreement.

14.17                     Waiver.  No delay or omission in the
exercise of any right, power, or remedy hereunder shall impair such right,
power, or remedy or be construed to be a waiver of any default or acquiescence
therein.

IN WITNESS WHEREOF the Parties have executed this Agreement by their
respective proper signing officers as of the date first above written.

	
  CONAGRA TRADE GROUP, INC.

  	
   

  	
  NOVA BIOFUELS OKLAHOMA LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ M.P. Hygin

  	
   

  	
   

  	
  By:

  	
  /s/ Kenneth T. Hern

  
	
  Title:

  	
  Executive Vice President

  	
   

  	
   

  	
  Title:

  	
  CEO

  
	
  Date:

  	
  7/22/2006

  	
   

  	
   

  	
  Date:

  	
  7/26/2006

  
										

 

 17
 

 

EXHIBIT “A”

 

PLANNING,
ORDERING, DELIVERY, AND INVENTORY MANAGEMENT OF FEEDSTOCK PROCEDURES

1.             Delivery Schedule. 
The Parties shall jointly develop a delivery schedule (the “Delivery
Schedule”) which will serve as the formal planning tool for Feedstock
requirements for each quarter and each month of the quarter.  The initial draft of each Delivery Schedule
shall be submitted by Buyer to CTG no later than ten (10) business days prior
to the end of each calendar quarter.  The
Delivery Schedule shall pertain to the second subsequent quarter of Feedstock
delivery requirements (e.g., the Delivery Schedule submitted prior to the end
of the quarter ending December 31 will cover the quarter beginning April 1 and
ending June 30).  The use of the Delivery
Schedules shall commence for the first calendar quarter in which the start-up
of the Plant and/or the first delivery of Feedstock are forecasted.  The initial draft of the Delivery Schedule
shall be a three (3) month daily forecast and shall include:

·                                          Submission Date.

·                                          Production plan with estimated consumption of
Feedstock.

·                                          Estimated start-of-quarter inventory of Feedstock
in pounds.

·                                          Comments regarding operations, scheduled shutdowns,
and other comments relating to market, logistics, and inventory management.

·                                          Should any changes be expected for the subsequent
three (3) calendar quarters, Buyer shall communicate this in text together with
the above information.  Such changes
could include: production rates per month, types and quantities of Feedstock
required for delivery, and a list of special operational and supply
considerations.

The
specific format of the Delivery Schedule will be created with mutual consent of
both Parties to accommodate the required information outlined above.

CTG shall review the
initial draft of the Delivery Schedule and advise Buyer of market conditions,
Feedstock availability of supply, inventory management, and transportation and
logistics issues within ten (10) business days. 
CTG shall amend the Delivery Schedule to include:

·                  Planned shipment
per Feedstock in pounds and the expected mode of transport of this Feedstock.

2.             Order Confirmation.

2.1           Confirmed
Orders.  It is understood
that, in all events, pricing of Feedstock shall be quoted by CTG and either
accepted or rejected by Buyer.  Price
quotations for Feedstock deliveries shall be submitted to Buyer by CTG prior to
purchases.  Buyer shall notify CTG of any
rejection or acceptance of the price quotation by the close of that same
business day (i.e., 5pm CST). Final price to be further determined by actual
movement in futures prices which will be a moving target amongst most price
quotes, until order is confirmed.  Price
quotations that are not expressly rejected by Buyer at least fifteen (15) days
prior to the first day of the month in which the applicable Feedstock delivery
is to be made shall be deemed accepted by Buyer.

 18
 

 

Such
acceptances shall constitute “Confirmed Orders” and the price in $/LB
thereunder shall be the Delivered Feedstock Price for the applicable
Feedstock.  The monthly schedules of the
Delivery Schedule shall reflect and be further governed by such Confirmed
Orders of Feedstock.  The Parties
understand and agree that telephone conversations are recorded by CTG and may
be recorded by Buyer in the ordinary course of their respective businesses for
purposes of, among other things, further documenting the quotation and
acceptance of Feedstock prices in order to establish and verify Confirmed
Orders. CTG shall be responsible for ordering, purchasing, and delivery for
each  Feedstock purchase per the
Confirmed Orders.

2.2           Delivery
Schedule Monthly Plan Deviations.  The
Parties recognize the need to maintain a degree of flexibility to accommodate
the Start-up Period of the Plant,
unexpected changes in the Plant operating capacity, and changing Feedstock
market conditions.  Upon notification by
either Party of any substantial deviations to the Delivery Schedule, the
Parties agree to work in good faith to jointly resolve any such discovered
deviations and correct such deviations within fifteen (15) days following first
notification.

2.3           Liability
Disclaimer.  Each of the
Parties understands and agrees that except for Feedstock quantity, grade, and
price quotations confirmed by the Parties in Confirmed Orders pursuant to this Exhibit
“A”, the planned production rates, estimated costs, pricing and market
information, and all other information furnished by the Parties in the
preparation of the Delivery Schedule is for planning and informational purposes
only. Neither Party shall be responsible to the other for any actions taken in
reliance on such estimates, plans and other information.

 

 19

 

Exhibit 10.18

	
  

  	
   

  	
  Purchase Order 

  

 

	
  600 Dewey Boulevard

  	
   

  	
  kgriffith@biosourcefuels.com

  	
   

  	
  Purchase Order No:

  	
   

  	
  BSA-PLANT
  

  
	
  Suite B

  	
   

  	
  Facsimile:    406-494-6645

  	
   

  	
   

  	
   

  	
  THREE
  -001 

  
	
  Butte, Montana 59701

  	
   

  	
  Telephone:    406-494-6644

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Mueller Field Operations

  	
   

  	
  Order
  Date:

  	
   

  	
  July 10th, 2006

  
	
  1600 W Phelps

  	
   

  	
  Payment
  Terms:

  	
   

  	
  Wire Transfer

  
	
  Springfield, MO 65801

  	
   

  	
   

  	
   

  	
  25% with order

  
	
   

  	
   

  	
   

  	
   

  	
  25% with shop
  drawings

  
	
  FAX:      417-575-9890

  	
   

  	
   

  	
   

  	
  Monthly Payments
  thereafter

  
	
  Phone:   800-654-8265

  	
   

  	
  F.O.B.
  Point:

  	
   

  	
  Jobsite in
  Illinois

  
	
  Attn:       Steve
  Biggers

  	
   

  	
  Freight
  Terms:

  	
   

  	
  Included in
  pricing

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Ship To:

  	
   

  	
   

  	
   

  	
  Invoice To:

  
	
  BIOSOURCE AMERICA, INC

  	
   

  	
   

  	
   

  	
  BIOSOURCE FUELS, LLC

  
	
  TBD

  	
   

  	
   

  	
   

  	
  600 Dewey Boulevard

  
	
   

  	
   

  	
   

  	
   

  	
  Suite B

  
	
   

  	
   

  	
   

  	
   

  	
  Butte, Montana 59701

  
	
  Phone: 406-494-6644

  	
   

  	
   

  	
   

  	
  Phone: 406-494-6644

  
	
  Attn:       Dick
  Talley

  	
   

  	
   

  	
   

  	
  Attn: Accounts Payable

  

 

	
  Tax ID:

  	
   

  	
   

  	
   

  	
  Ship via:

  	
   

  	
   

  	
   

  	
  Required Ship Date:

  	
   

  	
   

  	
   

  

 

	
  Item

  	
   

  	
  Quantity

  	
   

  	
  Part No.

  	
   

  	
  Description

  	
   

  	
  Unit

  	
   

  	
  Unit Price

  	
   

  	
  Total

  	
   

  
	
  1

  	
   

  	
  1

  	
   

  	
   

  	
   

  	
  Process Equipment Quote SB063006

  	
   

  	
  Lump Sum

  	
   

  	
  $    4,324,627.00

  	
   

  	
  $   4,324,627.00

  	
   

  
	
  2

  	
   

  	
  1

  	
   

  	
   

  	
   

  	
  [*] Quote SB070606

  	
   

  	
  Lump Sum

  	
   

  	
  $    1,299,327.00

  	
   

  	
  $   1,299,327.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $                    —

  	
   

  	
  $                    —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $                    —

  	
   

  	
  $                    —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $                    —

  	
   

  	
  $                    —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $                    —

  	
   

  	
  $                    —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $                    —

  	
   

  	
  $                    —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $                    —

  	
   

  	
  $                    —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $                    —

  	
   

  	
  $                    —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $                    —

  	
   

  	
  $                    —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $                    —

  	
   

  	
  $                    —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $                    —

  	
   

  	
  $                    —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $                    —

  	
   

  	
  $                    —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  TOTAL OF PURCHASE ORDER

  	
   

  	
   

  	
   

  	
  $   5,623,954.00

  	
   

  

*       Portions
omitted pursuant to a request for confidential treatment and filed separately
with the Securities and Exhange Commision.

WITH THIS PURCHASE ORDER, THE
BUYER HAS ACCEPTED THE SELLER’S ATTACHED TERMS AND CONDITIONS.

	
  /s/ Dick Talley

  	
   

  	
   

  
	
   

  	
   

  	
  7/10/06

  
	
  Dick Talley

  	
   

  	
    Date

  
	
  President - COO 

  	
   

  	
   

  
	
  Biosource America,
  Inc

  	
   

  	
   

  

 

 

 

	
  June 30, 2006

  	
  

  
	
   

  
	
  Mr. Dick Talley

  
	
  BIOSOURCE FUELS

  
	
  600 Dewey Boulevard, Suite B

  
	
  Butte, MT 59701

  
	
   

  
	
  Quotation
  Number SB063006

  

Mr.
Talley,

Mueller
Field Operations, Inc. is pleased to submit our quotation for process and
distillation area vessels as necessary to support three (3) 60 MMGPY biodiesel
plants to be located in Illinois and Oklahoma.

Our
proposal assumes the equipment quoted is identical to your previous order for
the Anamax and Scott Petroleum facilities and includes the high shear agitators
required for the Series 200 reactors.

	
  Drawings:

  	
  Due to the priority assigned to the Anamax and Scott
  Petroleum project, please allow approximately 2-6 weeks for the preparation
  and submittal of shop drawings for approval prior to fabrication. To
  facilitate the orderly delivery of equipment to the jobsite, we propose to
  prepare the drawings in a sequence identical to the one employed on the
  Anamax project.

  
	
   

  	
   

  
	
   

  	
  Our proposal has significantly reduced the
  engineering hours for all vessels as we anticipate the drawings will only
  require minor title block changes.

  
	
   

  	
   

  
	
   

  	
  Allow 2 weeks for final engineering and release to
  production

  
	
   

  	
   

  
	
  Shipping Schedule:

  	
  The Series 200, 300, 400 & 700 series vessels
  will be ready for shipment by 11/13/2006. The balance of all equipment
  included in this quotation will ship no later than 12/18/2006.

  
	
   

  	
   

  
	
  Terms:

  	
  Wire Transfer

  
	
   

  	
  25% down with order and prior to issuance of
  engineering or purchase of major material.

  
	
   

  	
  25% due upon submittal of approval drawings.

  
	
   

  	
  Monthly progress payments thereafter.

  
	
   

  	
   

  
	
  Taxes:

  	
  The above quoted prices do not include sales, use,
  state, local, or any other taxes, unless specifically itemized in the
  quotation.

  
	
   

  	
   

  
	
   

  	
  Sales Tax: If the transaction will
  be tax-exempt, please provide the name of the ship-to state and your
  sales-tax exemption certificate for that state.

  

 

MUELLER
FIELD OPERATIONS, INC.

PO
BOX 6263 / 1600 W PHELPS / SPRINGFIELD MO 65801 / TEL: 800-654-8265 / FAX:
417-575-9890

Quotation #SB35622, Revision 3

 

 

	
  Corrosion Disclaimer:

  	
  Paul Mueller Company is not responsible for
  corrosion or suitability for use of any material in any particular
  application. The corrosion resistance and suitability for use of a material
  is dependent on operating environment and conditions, cleaning practices, and
  many other factors beyond the control of the equipment fabricator. The user
  of the equipment bears total responsibility for corrosion or suitability for
  use of all materials in their particular application.

  
	
   

  	
   

  
	
  FOB:

  	
  Jobsites in Illinois and Oklahoma.

  
	
   

  	
   

  
	
  Freight:

  	
  Freight cost is included. Unloading is by others.

  
	
   

  	
   

  
	
  Note:

  	
  Due to base price and material surcharge increases
  now being levied by all stainless steel mills, the above total price includes
  current material prices. We are offering you firm pricing on labor and
  material contingent upon order placement and down payment receipt by July 7,
  2006 and release to order major materials by July 28, 2006. Additional details
  can be provided at your request.

  

 

 

SCOPE OF SUPPLY

	
  Quantity

  	
   

  	
  Tag No.

  	
   

  	
  Description

  	
   

  	
  Capacity

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  [*]

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

*       Portions
omitted pursuant to a request for confidential treatment and filed separately
with the Securities and Exhange Commision.

 

PRICING & ORDER
ACCEPTANCE

	
  Plant 3:

  	
   

  	
  $   4,324,627.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  $   4,324,627.00

  	
   

  

 

The above pricing is based upon equipment for all three
facilities being ordered at the same time.

Order Acceptance

I hereby order the goods
described, in accordance with the above described Mueller Field Operations,
Inc. proposal and additional terms and conditions of sale attached herein.

	
   

  	
  BIOSOURCE AMERICA, INC

  	
   

  
	
   

  	
  (Name of
  Purchaser)

  	
   

  
	
   

  	
   

  	
   

  
	
  By: 

  	
  /s/ Dick Talley

  	
   

  
	
   

  	
  (Signature)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  DICK TALLEY

  	
   

  
	
   

  	
  (Printed Name)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PRESIDENT &
  COO

  	
   

  
	
   

  	
  (Title)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  7-10-06

  	
   

  	
  BSA - PLANT THREE - 001

  	
   

  
	
   

  	
  (Date)

  	
   

  	
  (Purchase Order
  Number)

  	
   

  

 

Mr. Steve Biggers 

Regional Sales Manager 

Processing
Systems & Equipment

Attachments:   Additional Terms
and Conditions of Sale (PDF)

SB063006

We
do more than “tanks”...We provide Processing Solutions; offering integrated
systems, modular fabrication, field construction, plant maintenance and repair,
and complete turnkey project execution.

MUELLER IS YOUR FULL SERVICE PROVIDER.

 

 

	
  July 6, 2006

  	
  

  
	
   

  
	
  Mr. Dick Talley

  
	
  BIOSOURCE FUELS

  
	
  600 Dewey Boulevard, Suite B

  
	
  Butte, MT 59701

  
	
   

  
	
  Quotation
  Number SB070606

  

Mr.
Talley,

Mueller Field Operations, Inc. is pleased to submit our quotation for
process and distillation area heat exchangers as necessary to support three (3)
60 MMGPY biodiesel plants to be located in Illinois and Oklahoma.

Our proposal assumes the equipment quoted is identical to your previous
order for the Anamax and Scott Petroleum facilities.

	
  Drawings:

  	
  Due to the priority assigned to the Anamax and Scott
  Petroleum project, please allow approximately 2-6 weeks for the preparation
  and submittal of shop drawings for approval prior to fabrication. To
  facilitate the orderly delivery of equipment to the jobsite, we propose to
  prepare the drawings in a sequence identical to the one employed on the
  Anamax project.

  
	
   

  	
   

  
	
   

  	
  Our proposal has significantly reduced the engineering
  hours for all heat exchangers as we anticipate the drawings will only require
  minor title block changes.

  
	
   

  	
   

  
	
   

  	
  Allow 2 weeks for final engineering and release to
  production.

  
	
   

  	
   

  
	
  Shipping Schedule:

  	
  The heat exchangers included in this quotation will
  ship no later than 12/18/2006.

  
	
   

  	
   

  
	
  Terms:

  	
  Wire Transfer

  
	
   

  	
  25% down with order and prior to issuance of
  engineering or purchase of major material.

  
	
   

  	
  25% due upon submittal of approval drawings.

  
	
   

  	
  Monthly progress payments thereafter.

  
	
   

  	
   

  
	
  Taxes:

  	
  The above quoted prices do not include sales, use,
  state, local, or any other taxes, unless specifically itemized in the
  quotation.

  
	
   

  	
   

  
	
   

  	
  Sales Tax: If the transaction will
  be tax-exempt, please provide the name of the ship-to state and your
  sales-tax exemption certificate for that state.

  

 

MUELLER
FIELD OPERATIONS, INC.

PO
BOX 6263 / 1600 W PHELPS / SPRINGFIELD MO 65801 / TEL: 800-654-8265 / FAX:
417-575-9890

Quotation #SB070606

 

 

	
  Corrosion Disclaimer:

  	
  Paul Mueller Company is not responsible for corrosion
  or suitability for use of any material in any particular application. The
  corrosion resistance and suitability for use of a material is dependent on
  operating environment and conditions, cleaning practices, and many other
  factors beyond the control of the equipment fabricator. The user of the
  equipment bears total responsibility for corrosion or suitability for use of
  all materials in their particular application.

  
	
   

  	
   

  
	
  FOB:

  	
  Jobsites in Illinois and Oklahoma.

  
	
   

  	
   

  
	
  Freight:

  	
  Freight cost is included. Unloading is by others.

  
	
   

  	
   

  
	
  Note:

  	
  Due to base price and material surcharge increases
  now being levied by all stainless steel mills, the above total price includes
  current material prices. We are offering you firm pricing on labor and
  material contingent upon order placement and down payment receipt by July 13,
  2006 and release to order major materials by August 3, 2006. Additional
  details can be provided at your request.

  

 

 

SCOPE OF SUPPLY, PER PLANT

	
  Quantity

  	
   

  	
  Tag No.

  	
   

  	
  Description

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

*       Portions
omitted pursuant to a request for confidential treatment and filed separately
with the Securities and Exhange Commision.

 

PRICING & ORDER ACCEPTANCE

	
  Plant 3:

  	
   

  	
  $    1,299,327.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  $    1,299,327.00

  	
   

  

 

The above pricing is based upon equipment for all
three facilities being ordered at the same time.

Order Acceptance

I hereby order the goods
described, in accordance with the above described Mueller Field Operations,
Inc. proposal and additional terms and conditions of sale attached herein.

	
   

  	
  BIOSOURCE AMERICA, INC

  	
   

  
	
   

  	
  (Name of
  Purchaser)

  	
   

  
	
   

  	
   

  	
   

  
	
  By: 

  	
  /s/ Dick Talley

  	
   

  
	
   

  	
  (Signature)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  DICK TALLEY

  	
   

  
	
   

  	
  (Printed Name)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PRESIDENT &
  COO

  	
   

  
	
   

  	
  (Title)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  7-10-06

  	
   

  	
  BSA-PLANT THREE - 001

  	
   

  
	
   

  	
  (Date)

  	
   

  	
  (Purchase Order Number)

  	
   

  

 

Mr. Steve Biggers 

Regional Sales Manager 

Processing
Systems & Equipment

Attachments:        Additional
Terms and Conditions of Sale (PDF)

SB070606

We
do more than “tanks”...We provide Processing Solutions; offering integrated
systems, modular fabrication, field construction, plant maintenance and repair,
and complete turnkey project execution.

MUELLER
IS YOUR FULL SERVICE PROVIDER.

 

MUELLER

Field Operations Additional Terms and Conditions of Sale

1.             PURCHASE AND SALE. The goods shall be sold in accordance with
the terms and conditions on the face hereof and the following terms and
conditions, which shall constitute the entire Agreement of the parties with
respect to the sale of goods.

2.             ACCEPTANCE. This sale of goods is conditioned upon
Purchaser’s acceptance of the terms and conditions herein contained. Seller
hereby expressly rejects any and all terms in any purchase order or other
document of Purchaser which are in addition to, different from, or inconsistent
with these terms and conditions. If this is a Quotation, it is an offer to
sell, subject to final approval by Seller. The offer may be withdrawn at any
time prior to receiving Purchaser’s acceptance, and the offer shall expire automatically
if not accepted within thirty (30) days from the date on the face hereof.

3.             CREDIT APPROVAL. Payment must be made in full prior to the
commencement of any product preparation or fabrication unless alternative
payment arrangements are included within the Sales Order and subsequently
approved by Seller’s Credit Department. All alternative payment arrangements
contained in any Sales Order are strictly contigent upon final approval by
Seller’s Credit Department. Upon Purchaser’s acceptance of any Sales Order
containing alternative payment terms, Seller’s Credit Department shall have
thirty (30) days in which to accept or reject the Sales Order in its sole
discretion based on the creditworthiness of Purchaser. An evaluation of
creditworthiness shall include, but not be limited to, a review of Seller’s
records of Purchaser’s payment history. Any such Sales Order not accepted
within the thirty (30) day period shall be conclusively deemed rejected. For
alternative payment terms, Seller may require Purchaser to execute Seller’s
form of security agreement.

4.             PAYMENT. Purchaser shall make payments in accordance
with the payment arrangements approved by Seller’s Credit Department. If Seller
delays shipment as requested by Purchaser under paragraph 6 hereof, Purchaser
shall pay the full purchase price (or the final installment) within thirty (30)
days after the goods have been completed, and, in addition, shall pay a
reasonable storage charge as determined by the Seller. Any balance not paid
when due shall draw interest at the rate of 1.5% per month (18% A.P.R.) on the
average daily balance until paid or the highest rate allowed by applicable law,
whichever is less. Notwithstanding anything to the contrary in paragraph 16
hereof, the parties agree that Seller may bring suit to collect any unpaid
balance due from Purchaser (or submit such claim to arbitration in Seller’s
sole discretion), and Purchaser shall pay all attorney fees and court costs incurred
by Seller in connection with the suit to collect such unpaid balance. The
parties agree that any such suit brought by Seller shall not be stayed by
virtue of any arbitration proceeding between the parties, shall proceed to
judgment by the Court, and that all of Purchaser’s defenses, avoidances and counterclaims
(other than the defense of payment) which it might have shall be submitted to
arbitration as provided in paragraph 16. All payments shall be made in currency
of the United States.

5.             SPECIFICATIONS. If Seller submits any drawings or other
specifications to Purchaser for approval, and Purchaser does not approve or
disapprove of them within the time specified by Seller, Seller shall have the
right to ship the goods at a later date and charge a higher purchase price, as
reasonably necessitated by Purchaser’s delay.

6.             SHIPMENT. So long as Purchaser is not in default,
Seller shall ship the goods upon their completion, except that, subject to
paragraph 4 hereof, Seller shall delay shipment as requested by Purchaser in
writing. Since the goods are to be manufactured to special order, the shipment
date designated on the face hereof is estimated and not guaranteed; Seller may
ship the goods within a reasonable period either before or after the designated
shipment date. Unless otherwise provided on the face hereof, Seller may ship
the goods by any mode, and in full or partial shipments. Seller shall not be liable
for any failure or delay to manufacture or ship the goods due to causes beyond
its control, including without limitation, acts of God, wars, terrorism,
sabotage, casualties, accidents, labor disputes or shortages, governmental
laws, ordinances, rules or regulations (such as priorities, requisitions,
allocations and price adjustment restrictions), or an inability to obtain
material, equipment or transportation.

7.             TITLE, RISK OF LOSS. Unless otherwise provided on the face hereof,
the goods shall be shipped F.O.B. Seller’s plant, and title to the goods and
all risks of loss with respect to the goods shall transfer to the Purchaser
after they have been placed in the possession of a carrier, which carrier may
include Mueller Transportation, Inc. If Seller agrees to ship the goods F.O.B.
destination, Purchaser shall bear all risks of loss with respect to the goods
upon their tender to Purchaser at the point of destination.

8.             INSPECTION. Purchaser shall inspect the goods at the time
and place of delivery and Purchaser agrees that such occasion shall constitute
a reasonable opportunity for its full inspection. The parties agree that
Purchaser’s failure to reject the goods within three (3) business days shall
constitute acceptance of the goods. After Purchaser inspects and accepts the
goods, Purchaser shall, except as provided in paragraph 10 hereof, be deemed to
have acknowledged that the goods comply with all specifications,
representations and warranties of Seller, and to have waived any claim or cause
of action against Seller with respect to the goods. Purchaser is encouraged to
visit Seller’s plant prior to shipment to inspect and, when possible, witness
testing of the goods. If return of the goods is impractical Purchaser may be
required to inspect the goods at Seller’s plant prior to shipment, which shall
be deemed to be a reasonable opportunity to inspect and, upon satisfactory
completion, shall constitute Purchaser’s acceptance of the goods.

9.             TAXES AND DUTIES. In addition to the purchase price, Purchaser
shall pay all sales, use and excise taxes, tariffs, duties and other charges imposed
by any country, state, locality or other political subdivision in connection
with the sale of the goods. For tax purposes, title to the goods shall pass
from Seller to Purchaser upon being loaded for shipment, whether by common
carrier, or Purchaser’s own trucks, or otherwise.

10.          WARRANTIES. Seller warrants to Purchaser that the goods
are free of defects in material and workmanship. THIS WARRANTY IS EXCLUSIVE AND
IN LIEU OF ANY IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, OR OTHER WARRANTY, WHETHER EXPRESSED OR IMPLIED, EXCEPT THE WARRANTY
OF TITLE AND AGAINST PATENT INFRINGEMENT. If the goods do not conform to this
warranty within one (1) year from the date of original shipment (or from the
earlier date of completion if Seller delays shipment as requested by Purchaser
under paragraph 6 hereof), Seller, at its election and expense, shall repair or
replace the goods, or refund the purchase price for such goods, but only after
receiving written notification of any defects, and substantiation that the
goods have been stored, installed, maintained and operated in accordance with
Seller’s recommendations and standard industry practice. Purchaser shall not
return goods claimed to be defective except at the direction of the Seller. All
charges for transporting such goods to Seller shall be prepaid by Purchaser,
and Seller shall return such goods to Purchaser freight collect.

If
Seller determines that it is impractical to have the goods returned, Seller may
elect (i) to repair the goods at Purchaser’s facility, using independent
contractors or Seller’s own personnel, (ii) to pay Purchaser a reasonable
allowance for repairs, but not exceeding the amount which Seller would have
paid for its own employees, or (iii) refund the purchase price for such goods.
During the course of repairs, Purchaser, without charge, shall fully cooperate
with, and make the goods and its facilities available to, Seller and Seller’s
agents and employees.

THIS
WARRANTY IS EXCLUSIVE. THE SOLE AND EXCLUSIVE OBLIGATION OF SELLER SHALL BE, AT
ITS ELECTION, TO REPAIR, REPLACE, OR REFUND THE PURCHASE PRICE OF DEFECTIVE
GOODS IN THE MANNER AND FOR THE PERIOD PROVIDED ABOVE. SELLER SHALL NOT HAVE
ANY OTHER OBLIGATION WITH RESPECT TO THE GOODS, WHETHER BASED ON CONTRACT, NEGLIGENCE,
STRICT LIABILITY, TORT OR OTHERWISE. THIS WARRANTY DOES NOT EXTEND TO PRODUCTS
NOT OF SELLER’S MANUFACTURE; AS TO SUCH PRODUCTS, SELLER CONVEYS TO PURCHASER
THE WARRANTY, IF ANY, OF SELLER’S SUPPLIER.

ORAL
STATEMENTS BY SELLER’S EMPLOYEES OR REPRESENTATIVES DO NOT CONSTITUTE
WARRANTIES, shall not be relied upon by Purchaser, and are not part of the
contract for sale. NO OTHER WARRANTIES are given beyond those set forth in this
document.

11.          LIMITATION OF LIABILITY. Purchaser’s exclusive remedy for claims
arising hereunder shall be for damages. Seller shall not under any
circumstances be liable for special or consequential damages, such as, but not
limited to, damage or loss of other property or equipment, loss of profits or
revenue, costs of capital, or claims by Purchaser’s customers. The remedies of
the Purchaser set forth herein are exclusive, and the liability of the Seller
with respect to the goods, or anything done in connection therewith, or from
the manufacture, sale, delivery, resale, installation or use of any of the
goods sold hereunder, whether arising out of contract, negligence, strict
liability, tort, or under any warranty, or otherwise, shall not exceed the
price of the goods upon which such liability is based.

SELLER
SHALL NOT BE LIABLE FOR CORROSION OR SUITABILITY OF USE OF ANY MATERIAL IN ANY
PARTICULAR APPLICATION, CORROSION RESISTANCE AND SUITABILITY FOR USE OF ANY
MATERIAL IS DEPENDENT UPON OPERATING ENVIRONMENT AND CONDITIONS, CLEANING
AGENTS AND PRACTICES, AND MANY OTHER FACTORS BEYOND THE CONTROL OF SELLER.
PURCHASER BEARS ALL RESPONSIBILITY AND RISK FOR CORROSION OR SUITABILITY FOR
USE OF ALL MATERIALS IN THEIR PARTICULAR APPLICATION.

12.          CLEANLINESS. Unless otherwise provided on the face hereof,
Seller’s obligation is to provide completed equipment to the shipping carrier
in broom-clean condition. PRIOR TO PLACING THE EQUIPMENT INTO SERVICE, THE
EQUIPMENT MAY REQUIRE CLEANING to remove road film, adhesive film from the
protective sheeting, abrasives dust, or other residues resulting from the
manufacturing process and shipment.

13.          CANCELLATION. Purchaser shall not have any right to cancel
this Agreement without Seller’s prior written consent, and without paying
Seller a cancellation charge equal to total selling price less the estimated
direct labor and materials not expended less the salvage value of materials
already purchased.

14.          REMEDIES. If Purchaser fails to make required payments
in a timely manner, or breaches any of the other terms or conditions hereof or
any other agreement with Seller, Seller shall have the right to terminate this
Agreement and withhold further shipments on this or any other order. The
remedies provided herein shall be cumulative and in addition to any other
remedies allowed by law or in equity. The failure of Seller to exercise any
remedy shall not constitute a waiver of the right to exercise that, or any other
remedy; and no waiver of any breach of any provision herein shall operate as a
waiver of any other breach of the same or any other provision.

15.          APPLICABLE LAW. This Agreement shall be governed by the laws
of the State of Missouri, without reference to its choice of law provisions.
Purchaser hereby consents to personal jurisdiction of the state and federal
courts located in Springfield, Missouri, and agrees that any suit shall be
brought solely in such courts. In the event of a suit between the parties, THE
PARTIES EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY JURY.

16.          ARBITRATION. Except as provided in paragraph 4 hereof, any
dispute, controversy or claim arising out of or relating to this Agreement or
any purchase order issued by Purchaser and accepted by Seller hereunder
(including, but not limited to, any dispute relating to the existence,
interpretation, breach or termination hereof or thereof) that cannot be
resolved by the parties involved, within ninety (90) days of notification by
either party of the dispute, shall be resolved by binding arbitration
administered by, and in accordance with the Arbitration Rules of the American
Arbitration Association. The award of the arbitrator(s) may be entered by any
court having jurisdiction thereof. The costs of the arbitration shall be shared
equally by the parties, and each party shall bear its own attorney fees and expenses.
Any arbitration proceeding shall be conducted exclusively in Springfield,
Missouri.

17.          MISCELLANEOUS. This Agreement is intended by the parties as
a complete and exclusive statement of the terms of their agreement. No course
of prior dealings between the parties and no usage of trade shall be relevant
to supplement or explain any term used herein, and no modification shall be
binding on Seller unless made in a writing signed by Seller. No claim or right
arising out of a breach of this Agreement can be discharged in whole or in part
by a waiver or renunciation of the claim or right unless the waiver or
renunciation is supported by separate consideration and is in a writing signed
by Seller. Purchaser shall not assign its rights or delegate its duties under
this Agreement. Facsimile and E-mail signatures of the parties shall constitute
original signatures for all purposes. The invalidity of any portion of this
Agreement shall not affect the validity of any remaining portions thereof.

THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH
MAY BE ENFORCED BY THE PARTIES.Exhibit
10.20

July
26, 2006

BIODIESEL SALE AND PURCHASE
AGREEMENT

This
Biodiesel Sale and Purchase Agreement (“Agreement”) dated as of the 26 day of July,
2006, is by and between NOVA BIOFUELS
OKLAHOMA LLC, a Delaware Limited Liability Company having its offices
at 2777 Allen Parkway, Suite 800, Houston, TX 77019 (hereinafter referred to as
“Seller”) and CONAGRA TRADE GROUP, INC.
a Delaware corporation having its offices at Eleven ConAgra Drive, Omaha,
Nebraska (hereinafter referred to as “Purchaser”) (each of Seller and Purchaser
is a “Party” and together they are collectively referred to as the “Parties”).

RECITALS

WHEREAS,
Seller intends to build a biodiesel production facility in Oklahoma (the “Plant”);
and

WHEREAS,
Seller has agreed to sell to Purchaser, and Purchaser has agreed to purchase
from Seller, Biodiesel produced at the Plant on the terms and conditions set
forth hereinafter.

NOW,
THEREFORE, for the mutual promises and covenants contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which
hereby is acknowledged, the parties hereto agree as follows:

ARTICLE
I

DEFINITIONS
AND INTERPRETATIONS

1.1                                 Definitions.  In this Agreement, including the recitals, the
following words and terms shall have the following meanings ascribed thereto:

a)              “Agreement”
means this Biodiesel Sale and Purchase Agreement.

b)             “Biodiesel” means products meeting the specifications
set forth on Exhibit 6.1 attached hereto.

c)              “Confidential Information” has the meaning given in
Section 19.1.

d)             “Confirmed Orders” has the meaning given in Exhibit
2.1.

e)              “Constructively Placed” or “Constructive Placement”
means, with respect to either (i) a loaded shipment of Biodiesel by either
railcars or trucks, that such railcars or trucks are located at the Delivery
Point in such condition ready for receipt by Purchaser, or (ii) receipt of
either railcars or trucks for Biodiesel loading, that such railcars or trucks
are located at the Delivery Point and within the operating hours specified, in
such condition ready for receipt by Seller.

f)                “Contract Year” means the 12 month period during the
Term starting on the Initial Supply Date and ending on the day prior to the
first anniversary of the Initial Supply Date and each successive 12 month
period during the Term starting on the anniversary of the

 

Initial
Supply Date and ending on the day prior to the next succeeding anniversary
thereof.

g)             “Delivery” means the Biodiesel has crossed the flange and
resulted in the complete loading of the Biodiesel onto the applicable Transport
Vessel (ocean-going vessel, barge, railcar, or truck).

h)             “Delivery Point” means for Transport Vessels the
locations at the Terminal where Transport Vessels are received for loading of
Biodiesel on ocean-going vessel, barge, railcars, or trucks, respectively.  The Delivery Point for rail car shipments is
the railroads’ “Constructively Placed” designation.  The Delivery Point for trucks is the arrival
of the truck at the Terminal within the loading hours specified in this
Agreement.  The Delivery Point for vessel
and barge shipments is the Terminal loading dock at the earlier of the
connection of the first hose to the vessel or six (6) hours after notice of
readiness is given at such port.  “Delivery
Point” for Biodiesel product means the locations at the Terminal where
shipments of Biodiesel are completed on ocean-going vessel, barge, railcars, or
trucks, respectively, as follows:  the
Delivery Point for rail car shipments is the railroads’ “Constructively Placed”
designation; the Delivery Point for trucks is the departure of the truck from
the Terminal loading facility; the Delivery Point for vessel and barge
shipments is the Terminal loading dock at the disconnection of the hose from
the vessel or barge.

i)                 “Demurrage” means all costs, damages, penalties and
charges resulting from any delay in loading and/or unloading of Biodiesel
shipments, including, without limitation, any delay related to any truck, rail
car, ocean-going vessel or barge, as applicable: (i) being incapable of timely
loading any shipment of Biodiesel due to mechanical failure or for other
reasons, or (ii) delivering any shipment of Biodiesel to an incorrect Delivery
Point.

j)                 “Feedstock Agreement” means the Feedstock Agreement
of even date herewith, by and between Seller and Purchaser.

k)              “Fees” means either (a) $[*] per gallon of
Biodiesel sold when the difference between the Net Price of Biodiesel
(calculated at a per gallon rate) and the Plant’s feedstock cost per gallon is
less than $[*], or (b) when the difference between the Net Price of Biodiesel
(calculated at a per gallon rate) and the Plant’s feedstock cost per gallon is
equal to or greater than $[*] per gallon, then the greater of (i) [*]% of the
Net Price, or (ii) $[*] per gallon of Biodiesel sold.

*       Portions
omitted pursuant to a request for confidential treatment and filed separately
with the Securities and Exchange Commission.

l)                 “Force Majeure” has
the meaning given in Section 13.2.

m)           “Initial Supply Date” means the first day of the calendar
month in which Seller sells and delivers to Purchaser Biodiesel, or
Nonconforming Product accepted by Purchaser which has been produced at the
Plant.

n)             “Initial Term” has the meaning given in Section 3.1.

o)             “Logistics” means activities related to or connected
with either (i) transporting, storing and otherwise handling Biodiesel after
Delivery to Purchaser hereunder, or (ii) delivery of Transport Vessels to the
Delivery Point for loading.

p)             “Logistics Costs” shall mean the costs (including any
and all duties and other customs costs), without markup, for providing
Logistics.

 2
 

 

q)             “Master Agreement” means the Master Netting, Setoff,
Credit and Security Agreement of event date herewith between Seller and
Purchaser.

r)                “Net Price” means the price per gallon of Biodiesel
invoiced by Purchaser to its unaffiliated third party customers or principals,
less applicable Logistics Costs; subject, however, to adjustment for quantity,
price and tax incentive if Biodiesel is blended prior to sale.

s)              “Nonconforming Product” means any product delivered
(or attempted to be delivered) by Seller hereunder which does not meet the
specifications set forth in Exhibit 6.1.

t)                “Normal Operating Hours” has the meaning given in
Section 8.3.

u)             “Plant” means the Biodiesel production plant to be
constructed by Seller for the production of 50 million gallons of biodiesel
product per annum (prior to any expansion thereof) and to be located at either
Catoosa, Muskogee or Oklahoma City, Oklahoma in accordance with the Feedstock
Agreement.

v)             “Price” means an amount equal to the Net Price less
Fees.

w)           “Renewal Term” has the meaning given in Section 3.2.

x)               “Representatives” has the meaning given in Section
19.2.

y)             “Start-up Period” means the period beginning on the
date the Plant commences Biodiesel production and ending at the end of the
first month in which the Plant has produced Biodiesel in excess of eighty
percent (80%) of its design capacity.

z)               “Storage Costs” means direct or indirect costs
incurred by Purchaser or charged by a third party for storing Biodiesel
together with insurance and all other charges incurred to third parties in
connection with such storage, without markup by Purchaser.

aa)        “Supplier Annual Minimum Delivery” means forty (40)
million gallons of Biodiesel in each Contract Year less adjustment for the
Start-up Period.

bb)       “Term” means the Initial Term and any Renewal Terms.

cc)        “Terminal” means the site and facilities of the applicable
Terminal operator serving the Plant operations.

dd)      “Transport Vessels” means ocean-going vessels,
barges, railcars, or tank trucks.

1.2                                 Interpretation. 
Whenever the singular or
masculine  neuter is used in this
Agreement the same shall be construed as meaning plural or feminine or body
politic or corporate and vice versa where the context or the Parties hereto so
requires.

1.3                                 Industry Usage.  Any word, phrase or expression that
is not defined in this Agreement and that has a generally accepted meaning in
the custom and usage in the biodiesel industry shall have that meaning in this
Agreement.

 3
 

 

1.4                                 Currency.  All references
to “dollars” or “$” in this Agreement shall be references to amounts expressed
in United States currency.  All
calculations of monetary sums shall be made in U.S. currency.

ARTICLE II

PLANNING

2.1                                 The planning, ordering, delivery and inventory
management procedures for Biodiesel are established in Exhibit 2.1.

ARTICLE III

TERM

3.1                                 Initial Term. This Agreement shall become effective as of the
date signed by Seller and Purchaser and shall extend until the later of (a) ten
(10) years from the Initial Supply Date, or (b) May 1, 2018, unless extended
either by mutual agreement of the Parties or due to a delay (up to a maximum of
one (1) year) caused by an event of Force Majeure (the “Initial Term”).  Either Party shall have the right on fifteen
(15) days prior written notice to the other Party to terminate this Agreement
if the Initial Supply Date has not occurred by May 1, 2008 (unless such date is
extended either by mutual agreement of the Parties or due to a delay (up to a
maximum of one (1) year) caused by an Event of Force Majeure).  Upon any such termination no Party shall have
any liability to the other Party with respect to this Agreement or the
transactions contemplated hereby except in respect to confidentiality
obligations under Article XIX.

3.2                                 Renewal Terms. The Parties may, by written mutual agreement, extend
this Agreement for successive five (5) year terms (each a “Renewal Term”),
provided, however, that such extension agreement shall have been executed by
the Parties no later than six (6) months prior to the end of the then-current
Term.

ARTICLE IV

PURCHASE, SUPPLY AND DELIVERY OBLIGATIONS

4.1                                 Delivery. Subject to Confirmed Orders and the other terms and
conditions herein, commencing on the Initial Supply Date and during each
Contract Year thereafter, Seller shall sell and make available for delivery to
Purchaser, and Purchaser shall purchase and take delivery of, all Biodiesel
produced at the Plant.

4.2                                 Purchase Shortfall.  If Purchaser
fails to purchase and take delivery of any quantities of Biodiesel specified in
Confirmed Orders, and Seller, using commercially reasonable efforts to mitigate
any damage, has produced and must sell such Biodiesel to a substitute purchaser
at a price lower than the applicable Price, Purchaser shall pay Seller the
amount by which the Price exceeds the actual sales price per gallon, multiplied
by the number of gallons sold to the substitute purchaser.  If Seller exercises commercially
reasonable efforts and is still unable to sell any such Biodiesel to a
substitute purchaser, then Purchaser shall pay Seller an amount equal to the
Price multiplied by the entire unsold portion. 
Purchaser shall remit payment pursuant to the Master Agreement.  In either case, Purchaser shall also pay any additional costs solely and directly incurred by
Seller to identify a substitute purchaser. 
The remedy specified in this Section 4.2 shall be Seller’s sole and
exclusive remedy in the event Purchaser fails to purchase and take delivery of
the Biodiesel specified in the Confirmed Order.

 4
 

 

4.3                                 Seller Delivery Shortfall.  If Seller
fails to make available for purchase the quantity of Biodiesel specified in
Confirmed Orders under the Delivery Schedule, and Purchaser, using commercially
reasonable efforts to mitigate the damage, is unable to obtain a substitute
supply of Biodiesel at a price equal to or less than the Price, Seller shall
pay Purchaser the amount by which the Price is less than the price paid by
Purchaser for substitute supply, multiplied by the delivery shortfall
(Confirmed Order quantity less the amount actually delivered by Seller); plus
any additional costs solely and directly incurred  by Purchaser to identify a substitute
purchaser.  The remedy specified in this
Section 4.3 shall be Purchaser’s sole and exclusive remedy in the event that
Seller fails to make available for purchase the quantity of Biodiesel specified
in the Confirmed Order.

4.4                                 Seller’s Non-Delivery.  If, in any
quarter within any Contract Year following the Start-up Period, Seller fails to
make available for purchase one-fourth (1/4) of the Supplier Annual Minimum
Delivery, and if the Supplier Annual Minimum Delivery for such Contract Year
has not been exceeded, Seller shall be obligated to pay Fees on such shortfall
to Purchaser calculated on the average Net Price for the preceding three (3)
months.  Following the Start-Up Period,
unless this Agreement is terminated by Seller pursuant to Sections 12.2 or 12.3,
Seller shall in all other termination events pay the Fees that, based on the
Supplier Annual Minimum Delivery and such average Net Price, Purchaser would
have otherwise received had the Agreement continued for the lesser of (x) one
(1) year or (y) the balance of the Initial Term.

4.5                                 Quarterly Payment Reconciliation. No later than the third (3rd) business day following the end of every third month during each Contract
Year, each Party shall submit to the other an invoice and appropriate
documentation for all amounts due pursuant to Sections 4.2, 4.3 and 4.4 for the
preceding three-month period.  Within
five (5) business days thereafter, Seller and Purchaser shall reconcile amounts
due each other as provided in this Section with payment to be made pursuant to
the Master Agreement.

4.6                                 Purchaser’s Responsibilities. In addition to, and without limiting Purchaser’s
other obligations hereunder, Purchaser shall:

4.6.1                        Establish, monitor and communicate logistics to
ensure the shipment of Biodiesel in accordance with the applicable Delivery
Schedule.

4.6.2                        Be responsible for the management of railcars, vessel
and barge shipments, and truck transportation, subject to Article VIII.

4.6.3                        Provide Seller with estimated annual Biodiesel
requirements and delivery schedules to assist Seller in preparing the Delivery
Schedule.

4.7                                 Seller’s Responsibilities.  In addition
to, and without limiting Seller’s other obligations hereunder, Seller shall:

4.7.1                        Inform Purchaser of all scheduled plant shutdowns at
least forty five (45) days prior to the beginning of each fiscal year of
Seller, and within forty eight (48) hours after Seller becomes aware of the
occurrence of any event that may result in an unscheduled Plant shutdown.

4.7.2                        Provide a designated individual for daily operational
and logistic issues and provide a designated individual for pricing and other
contractual issues.

 5
 

 

4.7.3                        Handle and supervise the loading and dispatch of
Biodiesel, prepare delivery documentation and generally be responsible for all
logistics ancillary to such matters, subject to Article VIII.

ARTICLE V

QUANTITY

5.1                                 Delivery.  Following
the Initial Supply Date, delivery and receipt of Biodiesel hereunder shall take
place at the applicable Delivery Point for Biodiesel product in accordance with
the applicable Confirmed Order.

5.2                                 Quantities.  The
quantity of Biodiesel delivered to Purchaser shall be established by outbound
weight certificates.  The certificates
shall be obtained from either scales, certified metering devices, or
surveyor-gauged shore weights which are certified as of the time of weighing
and which comply with all applicable laws, rules and regulations.  The outbound weight certificates shall be
determinative in the absence of manifest error of the quantity of Biodiesel for
which Purchaser is obligated to pay pursuant to Article VII.

ARTICLE VI

QUALITY

6.1                                 Specifications.  Seller
warrants that all Biodiesel delivered by Seller to Purchaser hereunder shall
meet the specifications set forth in Exhibit 6.1 at the time of Delivery
of such Biodiesel by Seller to Purchaser. 
Seller further represents and warrants that title to all Biodiesel
delivered and sold hereunder will be good and marketable, free and clear of all
liens, security interests, other encumbrances, or adverse claims of any
kind.  Except as set forth in the
preceding sentences, Seller makes no warranty whether expressed,
implied, statutory or otherwise, concerning the Biodiesel sold hereunder, and
Seller expressly disclaims any implied warranty of merchantability or fitness
or suitability for a particular purpose.

6.2                                 Certification.  A Certificate
of Analysis will be issued by Seller to Purchaser for each shipment, confirming
that the shipment of Biodiesel conforms to the specifications in Exhibit 6.1.  Testing procedures will be certified
periodically by an independent laboratory.

6.3                                 Samples.  Seller agrees
to maintain original sealed numbered samples of all Biodiesel prior to delivery
to Transport Vessels.  Seller will label
these samples to indicate date of shipment and the identity of the Transport
Vessel.  Seller will retain these samples
for six (6) months from the date of shipment of the Biodiesel, and shall send
one such sample of each requested shipment to Purchaser or its designated
representative or agent promptly upon Purchaser’s request.

6.4                                 Nonconforming Product. If Biodiesel delivered from the Plant is found to be
out of specification by Purchaser or by an independent laboratory, after
Delivery, such condition will be immediately communicated to Seller.  Purchaser will provide a copy of the
certified laboratory report(s) evidencing the Nonconforming Product.  Seller will then direct Purchaser to either
(i) sell the Nonconforming Product at a discounted price, or (ii) return the
Nonconforming Product to Seller.  If such
Nonconforming Product is not discountable, Seller may replace the Nonconforming
Product with an acceptable type and/or quality of Biodiesel within fifteen (15)
days of receipt of written notice that the

 6
 

 

delivered Biodiesel is nonconforming
and such nonconformance has been confirmed. 
In the event Seller cannot replace the Nonconforming Product within the
fifteen (15) day period, Purchaser shall have the option to return the
Nonconforming Product, withhold payment therefor and purchase replacement
Biodiesel.  Seller will be responsible
for all costs of replacing or disposing of any such Nonconforming Product,
including any costs reasonably incurred by Purchaser as a result of the
Nonconforming Product and/or any unreasonable delay by Seller in obtaining
conforming Biodiesel.  Such costs may
include, without limitation, reasonably incurred Storage Costs or costs
reasonably incurred by Purchaser to return such Nonconforming Product to
Seller.  If such Nonconforming Product is
sold by Purchaser at a discount, the Price payable by Purchaser will be
calculated in the normal manner.

ARTICLE VII

PRICE

7.1                                 Price.  For all sales
of Biodiesel to Purchaser hereunder, Purchaser agrees to pay Seller the Price
for each gallon of Biodiesel delivered to Purchaser, such tonnage to be as
determined in accordance with Section 5.2. 
In determining the Price, it is agreed that feedstock costs shall be
calculated on a first-in, first-out basis. 
Purchaser shall furnish Seller with the applicable Net Price, and Seller
shall provide Purchaser with the Plant’s feedstock costs (on a per-gallon basis)
so that Purchaser can verify the difference between feedstock costs and the Net
Price of Biodiesel for purposes of calculating the applicable Fees.

7.2                                 Taxes.  Seller shall
pay or cause to be paid all valid levies, assessments, duties, rates and taxes
(together “Taxes”) on Biodiesel delivered hereunder that arise prior to, or as
a result of, the sale and delivery of Biodiesel at the Delivery Point.  Purchaser shall pay or cause to be paid all
Taxes, including fuel or excise Taxes, on Biodiesel arising after the sale and
delivery of Biodiesel at the Delivery Point. 
Any and all state or federal tax, production, investor, or U.S. excise
credits, any and all emissions credits, other government incentives or credits
or benefits relating to the production of Biodiesel or the sale thereof to
Purchaser, shall inure solely to the benefit of Seller.

ARTICLE VIII

TRANSPORTATION AND
LOGISTICS

8.1                                 Logistics Responsibilities.  Purchaser
agrees to secure and maintain all necessary agreements, licenses, documents and
contracts to transport the Biodiesel from the Delivery Point following Delivery
by Seller.  Purchaser shall solely be
responsible for the arrangement of Logistics which arise prior to the Transport
Vessel reaching the Delivery Point, and which arise after Delivery.  Seller shall be responsible for all logistics
which arise once the Transport Vessel has reached the Delivery Point up through
Delivery.

8.2                                 Logistics Costs.  Purchaser
will use the same general efforts to minimize Logistics Costs as it does for its
own operations.  Seller acknowledges that
the Logistics requirements hereunder may, due to the cargo involved and other
factors, be different from the Logistics needs for Purchaser’s other
operations.

8.3                 Seller’s Demurrage Obligations.  Seller’s responsibility for
Demurrage as it applies to rail car shipments begins to accrue seventy-two (72)
hours after the rail car has reached the Delivery Point provided that the
Constructive Placement occurs between the hours of

 7
 

 

7:00
a.m. and 3:00 p.m., Monday through Friday excluding holidays (“Normal Operating
Hours”), otherwise Demurrage will begin to accrue seventy-two (72) hours after
the start of Normal Operating Hours following Constructive Placement.  Seller’s responsibility for Demurrage for
tank trucks will begin to accrue (i) after the second (2nd) hour waiting to
load at the Plant provided the tank truck arrived during Normal Operating Hours
or (ii) after the twelfth (12th) hour
waiting to load at the Plant if arrival is outside the dates and times specified
in clause (i).

8.4                 Purchaser’s Demurrage Obligations.  Purchaser
will coordinate all logistics for arrival of Transport Vessels at Delivery
Points and shipment of Biodiesel
product from Delivery Points.  Purchaser
shall be responsible for Demurrage (i)
for the time period between the point of origin of Transport Vessel to the
Delivery Points, (ii) for the time period between Delivery of Biodiesel product
to the point of sales, (iii) as a result of any failure of arriving Transport
Vessels to meet Transport Vessel requirements of Exhibit 6.1,
and  in the case of barge shipments,
forty eight (48) hours after arrival of barges at the Delivery Point or as
otherwise set forth in the applicable contract.

8.5                                 Notification of Problems with
Delivery.  Seller shall inform Purchaser of any problem
regarding any shipment of Biodiesel, without delay, by fax and telephone after
Seller becomes aware of any such problem. 
An example of this includes, but is not limited to the possible event
that one or more Biodiesel orders are not available from Seller in the quantity
originally set out in the Confirmed Order. 
Purchaser shall inform Seller, without delay, by fax or telephone of any
problems in delivering Transport Vessels in accordance with the Delivery
Schedule or taking any shipment of Biodiesel under Confirmed Orders.

ARTICLE IX

BLLING AND PAYMENTS

9.1                                 Payment Terms.  For all
Biodiesel delivered hereunder, Purchaser shall, pursuant to the Master
Agreement, pay to Seller the amount calculated according to Article VII above.

9.2                                 Billing Information.  For each
shipment of Biodiesel, Seller shall furnish the following in reasonable detail:
(i) an invoice giving the actual quantity and date of shipment of the
Biodiesel, (ii) the documentation described in Section in 6.2, (iii)  a copy of the bill of lading, and (iv) the
feedstock costs as described in Section 7.1.

9.3                                 Payment Verification.  Any payment
made pursuant to this Article will not preclude a Party from subsequently
verifying payments of the other Party as permitted in Article XV of this
Agreement.

ARTICLE X

POSSESSION AND
TITLE

10.1                           Title; Risk of Loss.  Title to and
risk of loss in the Biodiesel shall pass from Seller to Purchaser upon
Delivery.  Until such time, Seller shall
be deemed to be in control of and in possession of and shall have title to and
risk of loss in the Biodiesel.

10.2                           Responsibility for Product.  Purchaser
shall have no responsibility or liability with respect to any Biodiesel
deliverable under this Agreement until Delivery.  Without prejudice to Purchaser’s right to
reject Nonconforming Product as set forth in Article VI and without

 8
 

 

affecting Seller’s liability for the
Delivery of Nonconforming Product. 
Seller shall have no responsibility or liability with respect to the
Biodiesel after its Delivery or on account of anything which may be done or
happen to arise with respect to such Biodiesel after such Delivery.

10.3                           Product Insurance.  Purchaser
shall, in respect to CIF shipments, bear the cost of insurance with respect to
the Biodiesel at and after product has crossed the flange of the Transport
Vessel at the Delivery Point.

ARTICLE XI

REPRESENTATIONS,
COVENANTS AND WARRANTIES

11.1                           Seller Representations.  Seller
represents, warrants and covenants to Purchaser, as of the date hereof and at all
times during the Term, as follows and acknowledges that Purchaser is relying
upon such representations and warranties in connection with the purchase of
Biodiesel hereunder:

a)                                      Seller is duly organized and a validly existing
corporation under the laws of the State of Delaware with full power and
authority to carry on its business, to enter into this Agreement and to fully
carry out its terms;

b)                                     The execution and delivery of this Agreement and the
completion of the transactions contemplated herein have been duly and validly
authorized by all necessary action on the part of Seller;

c)                                      There is no action, proceeding or inquiry pending or,
to Seller’s knowledge, threatened, against Seller or any of its affiliates, nor
does Seller know of or have any reason for believing there is any action,
proceeding or inquiry, in either case which may materially affect its ability
to carry out its obligations hereunder;

d)                                     Seller will have title to all Biodiesel to be
delivered hereunder, the right to sell the same to Purchaser, and the Biodiesel
delivered hereunder will be delivered free from any liens and encumbrances
other than those to a bank or other financing source;

e)                                      Seller covenants that it shall procure and maintain
in force all licenses, consents and approvals required for its operation of the
Plant and manufacture and sale to Purchaser of the Biodiesel under this
Agreement and shall be solely responsible for and indemnify Purchaser against
any costs, liabilities or fines arising out of Seller’s failure to comply with
any applicable requirements of such licenses, consents and approvals;

f)                                        Seller covenants that it will maintain accurate and
complete production and delivery records in a prudent and businesslike manner
in accordance with sound commercial practices in respect of the Biodiesel
produced by Seller hereunder;

g)                                     Seller covenants that it will promptly notify
Purchaser of any actual or anticipated production downtime or disruption to
Biodiesel availability; and

h)                                     Seller is a limited liability company in good
standing in the jurisdiction of its organization and is authorized to conduct business
in each state where the

 9
 

 

nature
of its business requires such authorization and is a U.S. entity for purposes
of state and federal income and excise taxes.

11.2                           Purchaser Representations.  Purchaser
represents, warrants and covenants to Seller, as of the date hereof and at all
times during the term of this Agreement, as follows and acknowledges that
Seller is relying upon such representations and warranties in connection with
the sale of Biodiesel hereunder:

(a)                                  Purchaser is duly incorporated and a validly existing
corporation under the laws of the State of Delaware with full power and
authority to carry on its business, to enter into this Agreement and to fully
carry out its terms;

(b)                                 The execution and delivery of this Agreement and the
completion of the transactions contemplated herein have been duly and validly
authorized by all necessary corporate action on the part of Purchaser;

(c)                                  There is no action, proceeding or inquiry pending or,
to Purchaser’s knowledge, threatened, against Purchaser or any of its
affiliates, nor does Purchaser know of or have any reason for believing there
is any action, proceeding or inquiry, in either case which may materially
affect its ability to carry out its obligations hereunder;

(d)                                 Purchaser is a corporation in good standing in the
jurisdiction of its incorporation and is authorized to conduct business and is
in good standing in each jurisdiction where the nature of its business requires
such authorization and is a U.S. entity for purposes of state and federal
income and excise taxes; and

(e)                                  Purchaser covenants that it shall procure and
maintain in force all licenses, consents and approvals required for its
purchase and export of Biodiesel hereunder and all its other obligations under
this Agreement and shall be solely responsible for and indemnify Seller against
any costs, liabilities or fines arising out of Purchaser’s failure to comply
with any applicable requirements of such licenses, consents and approvals.

ARTICLE XII

DEFAULT AND
TERMINATION

12.1                           Termination by Mutual Agreement.  This
Agreement may be terminated upon mutual written agreement between the Parties.

12.2                           Termination By Either Party.  Except as
otherwise provided in this Agreement, either Party may immediately terminate
this Agreement upon written notice to the other Party upon the occurrence of
either of the following events of default:

(a)                                  The other Party defaults on any material term,
covenant or condition hereunder and fails to cure such default within sixty (60)
days after receiving written notice thereof from the non-defaulting Party; or

(b)                                 Such other Party becomes the subject of any
bankruptcy, insolvency or similar proceedings.

 10
 

 

12.3                           Termination for Non-Performance.   If either
Party does not make payment as required under Section 2 of the Master
Agreement, or make delivery as required hereunder, the non-defaulting Party may
immediately terminate this Agreement if such event of default is not cured
within ten (10) days of written notice to the defaulting Party.  Either Party may immediately terminate this
Agreement in the event the other Party defaults under any of its other
obligations under the Master Agreement.

12.4                           Termination for Force Majeure. In the event that Force Majeure shall continue
unabated for a period of six (6) months from the date the Party claiming relief
under Article XIII gives the other Party notice of Force Majeure in accordance
with the provisions of Article XIII, either Party hereto shall have the right
to terminate this Agreement by furnishing written notice to the other no less
than thirty (30) days prior to the expiration of such six (6) month period,
with termination effective only upon the expiration date of such six (6) month
period.

12.5                           Rights and Obligations on
Termination.  Except as otherwise provided in this
Article XII, any rights of Purchaser or Seller to receive payments accrued
through termination, as well as obligations of the Parties under Confirmed
Orders for the delivery of Biodiesel to Purchaser that exist at the time of
such termination, shall remain in effect notwithstanding any termination of
this Agreement.  The above
notwithstanding, Seller shall have no obligation to supply Biodiesel to
Purchaser after termination, provided that such termination is due to a breach
by Purchaser of its payment obligations under this Agreement. Purchaser shall
have no obligation to order any shipments of Biodiesel after termination or,
subject to the first sentence of this Section 12.5, to accept or pay for
shipments of Biodiesel, if Purchaser terminates this Agreement pursuant to
Section 12.2 or 12.3.  Upon termination
of this Agreement, each Party shall be relieved from its respective obligations,
except (i) as set forth in this Section 12.5, (ii) for obligations for payment
of monetary sums which arose prior to termination, and (iii) for obligations
under the confidentiality provisions set forth in Article XIX and the rights
and obligations set forth in Article XIV and Article XVII.

12.6                           Non-Waiver of Future Default.  No waiver by
either Party of any default by the other Party in the performance of any of the
provisions of this Agreement will operate or be construed as a waiver of any
other or future default or defaults, whether of a like or of a different
character.

ARTICLE XIII

FORCE MAJEURE

13.1                           Force Majeure. 
In the event either Party
hereto is rendered unable by reason of Force Majeure, as defined in Section
13.2, to carry out its obligations under this Agreement, such Party shall give
written notice and reasonably complete particulars of such Force Majeure to the
other Party stating the obligation(s) the performance of which are, or
are expected to be, delayed or prevented, as
soon as possible after the occurrence of the event.  The obligations of the Party giving such
notice shall be suspended during and to the extent affected by Force Majeure
and such event shall, so far as possible, be remedied with all reasonable
dispatch.  In the event Purchaser
declares Force Majeure, Seller may contract for the sale of Biodiesel to other
parties until Purchaser can resume taking delivery.  The Initial Term shall be extended, up to a
maximum total of one (1)

 11
 

 

year (subject to Section
12.4), for the period(s) during which a Party’s obligations are suspended
hereunder by Force Majeure.

13.2                           Definition of Force Majeure.  The term “Force
Majeure”, as used in this Agreement, shall mean any cause not reasonably within
the control of the Party claiming suspension and which, by the exercise of due
diligence, such Party is unable to prevent or overcome.  Such term shall include, but not be limited
to: (i) acts of God, (ii) strikes, lockouts or other industrial acts of the
public enemy, (iii) wars, blockades, insurrections, riots, epidemics, acts of
terrorism, (iv) transportation shortages, and (v) landslides, lightning,
earthquakes, fires, storms, floods, washouts.  The term “Force Majeure” shall
specifically include those events affecting any transporter of Biodiesel acting
on behalf of Purchaser but shall in all events exclude any economic or
commercial changes involving the production of Biodiesel.  Events directly and proximately caused by the
gross negligence or willful misconduct of a Party or its affiliates shall in no
event constitute Force Majeure.

ARTICLE XIV

LIMITATION OF LIABILITY; INDEMNIFICATION

14.1                           Limitation of Liability.  Without
limiting any express remedies set forth in this Agreement, and except for any
acts of willful misconduct or fraud, or damages arising from third-party
product liability and product warranty claims, neither Seller nor Purchaser
will be liable to each other or any third party for any indirect,
consequential, punitive, exemplary or special damages, loss of business
expectations, lost profits, business interruptions, or any damage to third
parties arising out of this Agreement or any breach of this Agreement.  Under no circumstances (other than for
willful misconduct or fraud) will either Party be liable to the other for any
damages for breach that arise under this Agreement, and exceed the total amount
of $1,000,000; provided, however, that such limitation shall not apply in
respect to (a) the payment by Purchaser for Biodiesel received hereunder, (b)
the obligation of Seller to reimburse Purchaser for any payment made for
nonconforming or undelivered Biodiesel, (c) Claims asserted under
Section 14.2, or (d) damages arising from third-party product liability
and product warranty claims.  In the
event such excess damages arise, the sole remedy of the damaged Party shall be
to terminate such Agreements.

14.2                           Indemnification.  Each Party
(the “Indemnitor”) shall release, defend, indemnify and hold harmless the other
party, its affiliates, its contractors, and their respective members, partners,
directors, officers, shareholders, managers, employees, agents, representatives
and insurers (collectively, the “Indemnitee Group”) from and against any and
all losses, damages, fines, liens, levies, penalties, claims, demands, causes
of action, suits, legal or administrative proceedings, orders, governmental
actions and judgments of every kind and character, and any and all costs and
expenses (including, without limitation, reasonable attorneys’ fees, reasonable
expert witness fees, and court costs) related thereto (collectively, “Claims”)
asserted by any person or entity against any member(s) of the Indemnitee Group
on account of, incident to, in connection with, arising out of, resulting from
or related in any way, directly or indirectly, to this Agreement, which claims
allege bodily injury to or death of persons (including, but not limited to,
employees, representatives and agents of the Indemnitee Group and Indemnitor
Group) or damage to or loss of property (including, but not limited to,
property of the Indemnitee Group and the Indemnitor Group), resulting from the
negligence or willful acts or omissions of, or any breach of this Agreement by,
any member of the Indemnitor Group.  For
purposes of this Section 14.2 “Indemnitor Group” shall mean Indemnitor, its
affiliates,

 12
 

 

its contractors, and their respective members, partners,
directors, officers, shareholders, managers, employees, agents, representatives
and insurers.

Seller shall defend, indemnify and hold Purchaser (and its
respective Indemnitee Group) harmless from and against any and all Claims
asserted by third parties that arise from the condition or quality of the
Biodiesel sold hereunder, except to the extent such Claims are the result of
Purchaser’s negligence.

The
Party claiming indemnification shall give prompt written notice to the
Indemnitor of any matter for which the Indemnitor may become liable under this
provision.  Said notice shall contain
full details of the matter in order to provide the Indemnitor with sufficient
information to assess its potential liability and to undertake defense of the
Claim. The indemnified Party shall have the right at all times to participate
in the preparation for and conducting of any hearing, trial or other proceeding
related to the provisions of this Article, as well as the right to appear on
its own behalf at any such hearing, trial or other proceeding.  Any such participation or appearance by the
indemnified Party shall be at its sole cost and expense.  The indemnified Party shall cooperate in all
reasonable respects with the Indemnitor and its counsel in defending any Claims
and shall not take any action that is reasonably likely to be detrimental to
such defense.  The Indemnitor shall
obtain written approval from the indemnified Party prior to any settlement that
might impose obligations or restrictions on the indemnified Party.

ARTICLE XV

RECORDS AND
VERIFICATION

15.1                           Books and Records. Purchaser will establish and maintain at all times,
true and accurate books, records and accounts in accordance with United States
generally accepted accounting principles applied consistently from year to year
consistent with good industry practices, distinguishable from all other books
and records of Purchaser, in respect of all prices paid, payments, statements
charges and computations made pursuant to this Agreement and will preserve
these books, records and accounts for a period of at least one year after the
expiration of the Term.  Seller will
establish and maintain at all times true and accurate Biodiesel production
records, quality certificates and test records for at least one (1) year after
the expiration of the Term, but in no event shall a Party be obligated to
retain records longer than seven (7) years from the date of creation.

15.2                           Audit Rights. Upon five (5) business days notice and during normal
business hours each Party has the right to audit such books, records and
accounts of the other Party to the extent necessary in order to verify the
accuracy of any statement, charge, computation or demand made under or pursuant
to any provision of this Agreement.  If
any material error is discovered in any statement rendered hereunder, such
error will be adjusted within seven (7) days from the date of discovery, but no
adjustment will be made for errors discovered more than two years after
delivery and receipt of such statements. 
Any error or discrepancy detected which has led to an overpayment
or an underpayment between the Parties shall be corrected by a balancing
payment to the Party that received the underpayment or by a refund by the Party
that received the overpayment in each case to the extent of such underpayment
or overpayment as applicable.  Such
balancing payment or refund shall be made on the first payment date thereafter
arising under the Master Agreement.

 13

 

ARTICLE XVI

NOTICES

16.1                           Addresses.  Except as
specifically otherwise provided herein, any notice or other written matter
required or permitted to be given hereunder by one Party to the other Party
shall be deemed to be sufficiently given if delivered by hand or via
nationally-recognized overnight courier, or sent by telecopy and confirmed by
U.S. mail (certified mail, return receipt requested), and addressed as follows:

	
  If to Purchaser:

  	
  ConAgra Trade Group, Inc.

  
	
   

  	
  Eleven ConAgra Drive

  
	
   

  	
  Omaha, NE 68102-5011

  
	
   

  	
  Fax: (402) 271-7802

  
	
   

  	
  Attn:

  	
  Eric Watts

  
	
   

  	
   

  
	
  With a copy to:

  	
  ConAgra Foods, Inc.

  
	
   

  	
  One ConAgra Drive

  
	
   

  	
  Omaha, NE 68102

  
	
   

  	
  Fax: (402) 595-6149

  
	
   

  	
  Attn:

  	
  Capital and Contracts

  
	
   

  	
   

  
	
  If to Seller:

  	
  Nova Biofuels Oklahoma LLC

  
	
   

  	
  2777 Allen Parkway, Suite 800

  
	
   

  	
  Houston, TX 77019

  
	
   

  	
  Fax:

  	
  (713) 782-1965

  
	
   

  	
  Attn:

  	
  JD McGraw

  
	
   

  	
   

  
	
  With a copy to:

  	
  Nova Energy Holding, Inc.

  
	
   

  	
  2777 Allen Parkway, Suite 800

  
	
   

  	
  Houston, TX 77019

  
	
   

  	
  Fax:

  	
  (713) 782-1965

  
	
   

  	
  Attn:

  	
  JD McGraw

  

 

16.2                           Change of Address.  Each Party shall
give notice within thirty (30) days to the other Party, in the manner herein
provided, of a change in its address for notice.

16.3                           Effective Date of Notice.  Any notice
or other written matter shall be deemed to have been given and received: if
delivered by hand or courier on the date of delivery; and, if sent by telecopy,
on the business day following the sending of the notice.

 14
 

 

ARTICLE XVII

MISCELLANEOUS

17.1                           Assignment.  Neither Party
may assign this Agreement in whole or in part or any of its rights or
obligations hereunder, without the prior written consent of the other Party,
which consent may not be unreasonably withheld or delayed, except that Seller
may assign its rights (subject to its obligations) in this Agreement to any
third party providing primary debt or equity financing arrangements for the
benefit of Seller or its affiliates.

17.2                           [intentionally deleted]

17.3                           Dispute Resolution. Except where a different dispute resolution
mechanism is specified herein, in the event a dispute arises in connection with
the performance or non-performance of this Agreement, either Party has the
right to notify the other Party in writing of the substance of such
dispute.  The Party receiving such notice
must respond in writing within thirty (30) days of receipt of such notice and
either (a) provide evidence that the matter has been resolved, or (b) provide
an explanation of why it believes that its performance is in accordance with
the terms of this Agreement and specify three (3) dates, all of which must be within
thirty (30) days from the date of its response, for a meeting to resolve the
dispute.  The notifying Party will then
select one (1) of the three (3) dates, and a dispute resolution meeting will be
held.  If the Parties cannot, in good
faith discussions, resolve their dispute at such meeting, either Party may
request that the dispute be submitted to senior executives representing each
Party who are authorized to resolve such dispute, respectively.  If said dispute cannot be settled within
thirty (30) days after the initial request for a senior executive level
meeting, the Parties shall submit such matter to arbitration using a sole
arbitrator under the Commercial Arbitration Rules of the American Arbitration
Association, or using another independent arbitrator and set of rules mutually
acceptable to the parties, provided such matter involves commercial aspects of
the delivery of Biodiesel (otherwise, the Parties shall have available whatever
rights or remedies exist at law or equity). The arbitrator(s) shall have no
power to award damages inconsistent with this Agreement.  All aspects of the arbitration shall be
treated as confidential and judgment on the arbitrator’s award may be entered
in any court having jurisdiction.  The
expenses of the arbitrator(s) shall be shared equally by the Parties, and each
Party shall bear its own legal costs, unless the arbitrators determine that
legal costs shall be otherwise assessed. 
Nothing contained in any indemnification provision hereunder shall be
construed as having any bearing on the award of attorney’s fees under this
Section.  The foregoing
dispute-resolution process shall in no event be deemed to excuse either Party
from continuing to fulfill its respective obligations under, or prevent or
impede either Party from exercising its rights or remedies set forth in, this
Agreement.

17.4                           Inurement. This Agreement will inure to the benefit of and be
binding upon the respective successors and permitted assigns of the Parties.

17.5                           Entire Agreement. This Agreement and the Exhibits attached hereto and
made a part hereof, together with the Master Agreement, constitute the entire
agreement between the Parties with respect to the subject matter contained
herein and any and all previous agreements, written or oral, express or implied,
between the Parties or on their behalf relating to the matters contained herein
are hereby terminated and canceled.

17.6                           Amendments.  There will be
no modification of the term and provisions hereof except by the mutual
agreement in writing signed by the Parties.

 15
 

 

17.7                           Governing Law; Venue. The Agreement will be interpreted, construed and
enforced in accordance with the procedural, substantive and other laws of the
State of Oklahoma without giving effect to principles and provisions thereof
relating to conflict or choice of law even though one or more of the Parties is
now or may do business in or become a resident of a different state.  Subject to Section 17.3, all disputes arising
out of this Agreement shall be resolved exclusively by state or federal courts
located in Oklahoma, and each of the parties waives any objection that it may
have to the bringing of an action in any such court.

17.8                           Compliance with Laws. This Agreement and the respective obligations of the
Parties hereunder are subject to present and future valid laws and valid
orders, rules and regulations of duly constituted authorities having
jurisdiction.

17.9                           Furnishing of Information. The Parties will, upon request, provide such
additional information as may be reasonably required to allow the Parties to
efficiently and effectively carry out their respective obligations hereunder
and to determine and enforce individual or collective rights under this
Agreement.

17.10                     Cumulative Remedies.  Unless
otherwise specifically provided in this Agreement, the rights, powers, and
remedies of each of the Parties provided in this Agreement are cumulative and
the exercise of any right, power or remedy under this Agreement does not affect
any other right, power or remedy that may be available to either Party under
this Agreement or otherwise at law or in equity.

17.11                     Faithful Performance and Good Faith. The Parties shall faithfully perform and discharge
their respective obligations in this Agreement and endeavor in good faith to
negotiate and settle all matters arising during the performance of this
Agreement not specifically provided for.

17.12                     No Partnership. This Agreement shall not create or be construed to
create in any respect a partnership or any agency or joint venture relationship
between the Parties.

17.13                     Costs To Be Borne by Each Party. Seller and Purchaser shall pay its own costs and
expenses incurred in the negotiation, preparation and execution of this
Agreement and of all documents referred to in it.

17.14                     Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if Seller and Purchaser had signed the
same document and all counterparts will be construed together and constituted
as one and the same instrument.

17.15                     Severability. Any provision of this Agreement, which is or becomes
prohibited or unenforceable in any jurisdiction shall not invalidate or impair
the remaining provisions of this Agreement, and the remaining terms of this
Agreement shall continue in full force and effect.

17.16                     Setoff.  In addition
to, and without limitation of, any rights of either Party hereunder, if either
of Seller or Purchaser becomes insolvent, however evidenced, or any default
occurs and the defaulting Party has failed to cure the default within the
period specified in Section 12.2(a), then any and all amounts due to and owing
by such insolvent or defaulting Party under this Agreement may be applied by
the other Party toward the payment of amounts due and owing to such insolvent
or defaulting Party under this Agreement.

 16
 

 

17.17                     Headings.  The
article and section headings used herein are for convenience of reference only
and shall not affect the construction or interpretation of this Agreement.  Unless the context of this Agreement
otherwise requires, (i) words of any gender shall be deemed to include each
other gender; (ii) words using the singular or plural number shall also include
the plural or singular number, respectively; and (iii) the terms “hereof,” “herein,”
“hereby,” “hereto,” and derivative or similar words shall refer to this entire
Agreement.  The Agreement is the product
of negotiation by and among the Parties hereto. 
The Agreement shall be interpreted and constructed neutrally as to all
Parties, without any Party deemed to be the drafter of the Agreement.

17.18                     Waiver.  No delay or
omission in the exercise of any right, power, or remedy hereunder shall impair
such right, power, or remedy or be construed to be a waiver of any default or
acquiescence therein.

ARTICLE XVIII

RISK MANAGEMENT

18.1                           Monitoring of Biodiesel Positions.  Purchaser
will monitor Biodiesel sales and may, from time to time, make suggestions
concerning Seller’s risk management program and the position of its Biodiesel
sales for future physical delivery.

18.2                           Market Conditions.  Purchaser will
review with Seller on a monthly basis market conditions relating to Biodiesel
and associated feedstocks, existing Biodiesel supply and ownership positions,
and forward marketing strategies in an attempt to assist Seller in maximizing
its revenue on Biodiesel sales.  It is
understood by Seller that all risk management services must be tied to a valid
written purchase contract requiring physical delivery of Biodiesel by Seller.

18.3                           No Liability. Seller recognizes that Purchaser’s monitoring of
positions, periodic suggestions, review of market conditions and risk
management services are informational and optional, and the final decisions
concerning purchases and risk management strategies, and the implementation of
such strategies, will be made by, and is the sole responsibility of,
Seller.  Purchaser is not responsible for
any Seller losses or entitled to any Seller gains resulting from risk
management information supplied by Purchaser.

ARTICLE XIX

CONFIDENTIALITY

19.1                           Confidential Information.  For purposes
of this Agreement, the term “Confidential Information” shall mean the pricing
terms of this Agreement and any information which is not in the public domain
and is disclosed by one Party to the other pursuant to this Agreement and which
is in written, graphic, machine readable or other tangible form.  Confidential Information may also include
oral information disclosed by one Party to the other pursuant to this
Agreement, provided that such information is designated as Confidential
Information at the time of disclosure and is reduced to writing by the
disclosing Party within a reasonable time (not to exceed ten (10) days) after
its oral disclosure, and the writing is marked in a manner to indicate its
confidential nature and delivered to the receiving Party.  Nothing in this Agreement shall be
construed to prohibit

 17
 

 

or limit a receiving Party from disclosing information, (including ideas, concepts, know-how,
techniques, and methodologies) (a) previously known to it, (b) independently developed by it without use of
the disclosing Party’s Confidential Information by those employees or
representatives of the disclosing Party that have not had access to such
Confidential Information, as can be substantiated by reasonable evidence, (c)
acquired by it from a third party which was not, to the receiving Party’s
knowledge, under an obligation to the disclosing Party or any third party not
to disclose such information, (d) that is or becomes publicly available through
no breach by the receiving Party of this
Agreement , or (e) to the extent disclosure of such information is required by
law or by the rules, regulations or practices of the Securities and Exchange
Commission or any exchange or automated quotation system upon which shares of
such Party may be listed, quoted or traded. 
If a receiving Party receives a subpoena or other validly issued
administrative or judicial process demanding Confidential Information of a
disclosing Party, the receiving Party must promptly notify the disclosing Party
and tender to it the defense of such demand. 
Unless the demand has been timely limited, quashed or extended, the
receiving Party will thereafter be entitled to comply with that demand to the
extent required by law but shall exercise commercially reasonable efforts to
obtain an order or other reliable assurance that confidential treatment will be
accorded to such Confidential Information. 
If requested by the disclosing Party, the receiving Party shall
cooperate (at the expense of the disclosing Party) in the defense of such a demand.

19.2                           Seller Nondisclosure.  Seller
acknowledges that, by reason of this Agreement, it and the principals (members,
managers, officers, and the like), employees, agents, advisors, lenders, other
financing sources, representatives and affiliates (collectively, “Representatives”)
of Seller may become privy to Confidential Information belonging to
Purchaser.  Seller agrees that it will
not, without the prior written consent of Purchaser, disclose to any third
parties or use for its own benefit any such Confidential Information except in
the carrying out of its obligations under this Agreement.  Seller shall inform any of its
Representatives to whom Seller intends to disclose Confidential Information of
the confidential nature of such Confidential Information and shall require such
persons to be bound by the provisions of this Article XIX of this
Agreement.  The confidentiality
obligations hereunder shall survive any expiration or termination of this
Agreement.

19.3                           Purchaser Nondisclosure. Purchaser acknowledges that, by reason of this
Agreement, it and its Representatives may become privy to Confidential
Information belonging to Seller. 
Purchaser agrees that it will not, without the prior written consent of
Seller, disclose to any third parties or use for its own benefit any such
Confidential Information except in the carrying out of its obligations under
this Agreement.  Purchaser shall inform
any of its Representatives to whom they intend to disclose Confidential Information
of the confidential nature of such Confidential Information and shall require
such persons to be bound by the provisions of the Article XIX of this
Agreement.  The confidentiality
obligations hereunder shall survive any expiration or termination of this
Agreement.

19.4                           Injunction.  Each Party
hereto acknowledges that a violation or attempted breach of any of its
covenants and agreements in this Article XIX will cause such damage as will be
irreparable, the exact amount of which would be difficult to ascertain and for
which there will be no adequate remedy at law, and accordingly, each of the
Parties hereto agrees that in the event of a breach of this Article XIX the
non-breaching Party shall be entitled as a matter of right to an injunction
issued by any court of competent jurisdiction, restraining breaching Party or
the affiliates, principals, employees, agents or representatives of the
breaching Party from such breach or attempted violation of such covenants and
agreements.  The Parties hereto agree
that no bond or other security

 18
 

 

shall be
required in connection with such injunction. 
Any exercise by a Party hereto of such Party’s rights pursuant to this
Article XIX shall be cumulative and in addition to any other remedies to which
such Party may be entitled.

19.5                           Announcements.  Any public
statements, press releases, and similar announcements concerning the
negotiation or consummation of the transactions contemplated hereby, including
such statements made by Representatives of the Parties, shall be jointly
planned and coordinated by the Parties. 
Neither Party shall issue any such statement absent the consent of the
other Party, which consent shall not be unreasonably withheld or delayed.

ARTICLE XX

INSURANCE

20.                                 Each Party shall, during the Term, provide the
insurance coverages as set forth in Exhibit 20.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the day and year first above written.

	
  CONAGRA TRADE GROUP, INC.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  , President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  NOVA BIOFUELS OKLAHOMA LLC

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  

 19
 

 

EXHIBIT 2.1

 

PLANNING, ORDERING, DELIVERY, AND INVENTORY MANAGEMENT OF
BIODIESEL PROCEDURES

The
following procedures are set forth to clarify the planning, ordering and
delivery of Biodiesel from the Plant.

1.             Delivery Schedule.  The parties shall jointly develop a delivery
schedule (the “Delivery Schedule”) which will serve as the formal planning tool
for Biodiesel requirements for each quarter and each month of the quarter.  The initial draft of each Delivery Schedule
shall be submitted by Seller to Purchaser no later than ten (10) business days
prior to the end of each calendar quarter. 
The Delivery Schedule shall pertain to the second subsequent quarter of
Biodiesel delivery requirements (e.g., the Delivery Schedule submitted prior to
the end of the quarter ending December 31 will cover the quarter beginning
April 1 and ending June 30).  The use of
the Delivery Schedules shall commence for the first calendar quarter in which
the start-up of the Plant and/or the first shipments of Biodiesel are
forecasted.  The initial draft of the
Delivery Schedule shall be a three (3) month daily forecast and shall include:

·                                          Submission Date.

·                                          Production plan with estimated production of
Biodiesel.

·                                          Estimated start-of-quarter inventory of Biodiesel
in gallons.

·                                          Comments regarding operations, scheduled shutdowns,
and other comments relating to market, logistics, and inventory management.

·                                          Should any changes from the Delivery Schedule be
anticipated for the subsequent three (3) quarters, Seller shall communicate
this in writing together with the above information.  Such changes could include: production rates
per month, quantities of Biodiesel to be produced and a list of special
operational and delivery considerations.

The
specific format of the Delivery Schedule will be created with mutual consent of
both Parties to accommodate the required information outlined above.

Purchaser shall review
the initial draft of the Delivery Schedule and advise Seller of market
conditions, inventory management, and transportation and logistics issues
relating to the Delivery Schedule within ten (10) business days after
receipt.  Purchaser shall amend the
Delivery Schedule to include planned shipments of Biodiesel (in gallons)
purchased hereunder and the expected mode of transport for these shipments.

2.             Confirmed Orders.  It is understood that, in all events, pricing
of Biodiesel shall be bid by Purchaser and either accepted or rejected by
Seller.  Price bids for Biodiesel
shipments shall be submitted to Seller by Purchaser, and Seller shall reject or
accept the price bid by the close of that same business day or earlier if
notified by Purchaser of price changes due to specific market conditions.   Price bids that are not expressly rejected
by Seller at least fifteen (15) days prior to the first day of the month in
which the applicable Biodiesel shipment is to be made shall be deemed accepted
by Purchaser.  Such acceptances shall
constitute “Confirmed Orders” and the price in $/gallon thereunder shall be the
Price for the applicable Biodiesel.  The

 20
 

 

monthly schedules of the
Delivery Schedule shall reflect and be further governed by such Confirmed Orders
of Biodiesel.  The Parties understand and
agree that telephone conversations are recorded by Purchaser and may be
recorded by Seller in the ordinary course of their respective businesses for
purposes of, among other things, further documenting the quotation and
acceptance of Biodiesel prices in order to establish and verify Confirmed
Orders. Purchaser shall be responsible for marketing, selling, and shipment of
Biodiesel per the Confirmed Orders.

3.             Delivery Schedule Deviations.  The
Parties recognize the need to maintain a degree of flexibility to accommodate
the Start-up Period of the Plant,
unexpected changes in the Plant operating capacity, and changing Biodiesel
market conditions.  Upon notification by
either Party of any substantial deviations to the Delivery Schedule, the
Parties agree to work in good faith to jointly resolve any such discovered
deviations and correct such deviations within fifteen (15) days following first
notification.

4.             Liability Disclaimer.  Each of the Parties understands and agrees
that except for quantity, grade, and price quotations confirmed by the Parties
in Confirmed Orders pursuant to this Exhibit 2.1, the planned production
rates, estimated costs, pricing and market information, and all other
information furnished by the Parties in the preparation of the Delivery
Schedules is for planning and informational purposes only. Neither Party shall
be responsible to the other for any actions taken in reliance on such
estimates, plans and other information.

 21
 

 

EXHIBIT 6.1

 

BIODIESEL
SPECIFICATIONS

Seller, as
producer of Biodiesel product, is responsible for the compliance with the
following standard of quality, specifications, and methods of analysis and
sampling.  Seller and Purchaser agree to
the specifications and procedures set forth herein.

1.             Product Stewardship.  Purchaser and Seller will mutually establish
a Product stewardship program to assist end-use customers in the safe handling
and responsible use of Biodiesel products. 
Seller will provide to Purchaser product information and material safety
data sheets for all Biodiesel products.

2.             Industry Standards.  Purchaser shall be responsible for the administration
of and compliance with all applicable industry transportation and safety
standards for delivery of Biodiesel to customers.

3.             Standard Specifications.  Seller shall comply with the standards of
quality for Biodiesel as defined in ASTM D6751-06, by the National Biodiesel
Board.  The specifications are provided
in Table 6.1-1.  In the event changes in
ASTM D-6751 are adopted by the National Biodiesel Board, Seller shall make
every reasonable effort to upgrade the Plant or modify operations, if required,
to meet such changes in standards. 
However, failure to upgrade or modify operations will not relieve Seller
of its obligations to pay the Fees otherwise owed pursuant to Section 4.4 of
the Agreement.

4.             Sampling and Analysis Methods.  Seller shall use applicable approved ASTM
analysis methods, defined in Table 6.1-1, or certified equivalent test methods
and comply with the applicable sampling procedures, as defined in ASTM D6751.

Seller shall take
samples of Biodiesel product in storage tanks prior to loading Transport
Vessels and analyze contents per specifications.  Seller shall have responsibility for loading
Biodiesel product.  Samples will be taken
of each shipment and will be retained for six (6) months.  The quality of the Biodiesel product at the
time of Delivery shall govern in the compliance to the specifications.  Samples of product Biodiesel may be requested
by Purchaser for analysis.  Seller shall
make available product samples to Purchaser at the Plant.

5.             Quality Control Procedures.  Upon Seller’s receipt of Transport Vessels
and prior to product loading, each Transport Vessel will be visually inspected
for equipment integrity, safety, and potential contamination.  Seller has the right to reject any Transport
Vessel for loading, which does not materially comply with minimum safety
standards and/or is contaminated with products or materials.  Seller shall notify Purchaser immediately in
the event any Transport Vessel does not meet the minimum requirements.  Seller shall invoice Purchaser for all
handling costs for any rejected Transport Vessel, including all costs incurred
by Seller for placement, set-up and return of vehicle to Purchaser.  If Purchaser requests Transport Vessel
cleaning at the Plant, Purchaser shall be responsible for all associated
cleaning costs.  Seller shall provide
certified tare weights with each transportation device.  Seller shall provide certified weights for
each shipment and the certificate of analysis for each shipment along with the
invoice to Purchaser.

Purchaser and
Seller shall work together to qualify individual customers of Biodiesel prior
to sales and develop a list of qualified customers.  Seller shall provide to Purchaser samples,
analysis data, and information for use in the development of sales.  Seller shall have

 22
 

 

the
right to disqualify customers based on the customers’ safe and environmentally
responsible end-use of Biodiesel and other qualification criteria mutually
established by both Parties.

Seller and Purchaser shall jointly cooperate to
improve specifications’ requirements from customers.  Additional specifications can be added to
Table 6.1-1 or the contents of Table 6.1-1 can be amended upon mutual agreement
of Purchaser and Seller.

 23
 

 

Table 6.1-1

Biodiesel
Specifications

	
  Property

  	
   

  	
  Units

  	
   

  	
  Specifications

  	
   

  	
  Test Methods

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Flash Point
  (closed cup)

  	
   

  	
  °C

  	
   

  	
  130°
  min - U.S.

  	
   

  	
  ASTM D 93

  
	
  Water and
  Sediment

  	
   

  	
  % volume

  	
   

  	
  0.05% max

  	
   

  	
  ASTM D 2709

  
	
  Kinematic
  Viscosity at 40° C

  	
   

  	
  mm2/sec

  	
   

  	
  1.9 to 6.0 -
  U.S.

  	
   

  	
  ASTM D 445

  
	
  Sulfated Ash

  	
   

  	
  % wt

  	
   

  	
  0.02% max

  	
   

  	
  ASTM D 874

  
	
  Sulfur

  	
   

  	
  ppm

  	
   

  	
  S 15 Grade @ 15
  max

  S 500 Grade @ 500 max

  	
   

  	
  ASTM D 5453

  
	
  Copper Strip
  Corrosion

  	
   

  	
  3 hrs at 50°
  C

  	
   

  	
  No. 3 max - U.S.

  	
   

  	
  ASTM D 130

  
	
  Cetane Number

  	
   

  	
   

  	
   

  	
  47 min - U.S.

  	
   

  	
  ASTM D 613

  
	
  Cloud Point

  	
   

  	
  °C

  	
   

  	
  Report to
  Customer

  	
   

  	
  ASTM D 2500

  
	
  Carbon Residue

  100% sample

  	
   

  	
  % mass

  	
   

  	
  0.050% max

  	
   

  	
  ASTM D 4530

  
	
  Acid Number

  	
   

  	
  mg KOH/gm

  	
   

  	
  0.50 max

  	
   

  	
  ASTM D 664

  
	
  Free Glycerine

  	
   

  	
  % mass

  	
   

  	
  0.02% max

  	
   

  	
  ASTM D 6584

  
	
  Total Glycerine

  	
   

  	
  % mass

  	
   

  	
  0.24% max

  	
   

  	
  ASTM D 6584

  
	
  Phosphorous
  Content

  	
   

  	
  % mass

  	
   

  	
  0.001% max

  	
   

  	
  ASTM D 4951

  
	
  Sodium/Potassium

  	
   

  	
  ppm

  	
   

  	
  5 max combined

  	
   

  	
  UOP 391

  
	
  Distillation
  Temperature

  (Atm P, 90% Recovery)

  	
   

  	
  °C

  	
   

  	
  360°
  max

  	
   

  	
  ASTM D 1160

  

 24
 

 

EXHIBIT 20

INSURANCE COVERAGES

Each party shall be required to purchase, maintain and provide proof (via
Certificate of Insurance) of the following insurance:

Commercial General Liability Insurance - $2 Million Combined Single Limit

Policy shall include coverage for liability resulting from
Premises/Operations, Products and Completed Operations, Blanket and Contractual
Liability.

Policy shall also included coverage for Broad Form Property Damage,
including explosion, collapse and underground hazards.

Such insurance shall be on an occurrence basis.

Environmental Pollution Liability Insurance - $2 Million Combined
Single Limit

Policy shall include coverage for bodily injury or property damage arising
from the transportation, handling, storage, disposal, dumping, processing or
treatment of waste.

In addition, Purchaser shall be required to maintain the following
insurance:

Commercial Automobile Liability Insurance - $1 Million Combined Single
Limit

Policy shall include coverage for liability resulting from the operation of
all owned, non-owned and hired automobiles.

Such insurance shall be on an occurrence basis.

All required policies of insurance
shall be endorsed to provide that the insurance company shall notify the
certificate holder at least thirty (30) days prior to the effective date of any
cancellation or material change of such policies.  All insurance companies shall have an A.M.
Best rating of A- or better.

 25

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