RISK MANAGEMENT AND ETHANOL MARKETING CONTRACT
THIS
AGREEMENT is entered into by and among FCStone, LLC (“FCStone”), an Iowa limited
liability company with its main office at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇, and Eco-Energy, Inc. (“Eco”) a Tennessee Corporation with its main
office located at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇. ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
and Husker AG, LLC. (HA) with its main office located at ▇▇▇▇▇ ▇▇▇ ▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
RECITALS:
|
A.
|
HA
is a Limited Liability Company, which is operating an ethanol plant
facility located at ▇▇▇▇▇ ▇▇▇ ▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇, (the “Plant”) and which
desires to establish an input origination and marketing risk management
plan and an output-marketing
contract.
|
|
B.
|
FCStone,
which is experienced in commodity transactions and related risk
management, is willing to provide such assistance on the terms
hereby
stated.
|
|
C.
|
Eco
is a reseller in ethanol and is experienced in the marketing and
transportation of such product, and is willing to agree to purchase
the
ethanol output of the Plant.
|
NOW,
THEREFORE, IT IS AGREED AS FOLLOWS BETWEEN THE PARTIES:
|
1.
|
FCStone
and Eco Services.
FCStone shall, during the term hereof, provide services to HA in
the
implementation of a full service price risk management program
for HA (the
“FCStone Program”). HA will have a full time risk manager of FCStone from
an FCStone office to help in day-to-day grain marketing decisions.
The
FCStone services to be provided are set forth in Exhibit A attached
hereto. Eco shall, during the term hereof, purchase the entire
output of
ethanol specified herein and to provide certain transportation
services to
HA (the “Eco Program”). The Eco services to be provided are set forth in
Sections 2, 3 and 4 and the exhibits attached hereto which are
referred to
therein.
|
|
2.
|
Eco
Ethanol Output Purchases.
HA
agrees to sell to Eco, and Eco agrees to purchase from HA the entire
output of ethanol of the Plant during the term, in good faith and
at fair
market rates. The terms of such transactions shall be fixed by
agreement
of HA and Eco established in good faith from time to time consistent
with
the provisions of Exhibit B attached hereto. The price on all ethanol
shall be determined on an FOB Plainview, NE
basis.
|
|
3.
|
Eco
Denaturant Procurement.
HA
at HA’s option can purchase their entire denaturant demand from Eco during
the term or purchase the denaturant on their own. The terms of
such
transactions shall be fixed by agreement of HA and Eco established
in good
faith from time to time.
|
|
4.
|
Eco
Transportation Services.
Eco agrees to provide the transportation services set forth in
Exhibit C.
HA agrees to pay freight and assume railcar leases as provided
in Exhibit
C.
|
1
| 5. |
Fees.
|
| (a) |
HA
shall pay a fee for services of Eco and FCStone and materials provided
hereunder of $[***]
per
net gallon of ethanol produced during the Term. Such fees shall
be payable
monthly on an estimated basis on the first business day of each
month
during the term hereof, in advance to FCStone. FCStone shall remit
a share
of such fee to Eco as Eco and FCStone may agree. The initial estimated
monthly payment shall be $[***]
per month. The actual fees payable based upon actual production
and the
above quoted rate shall be computed every three (3) months and
additional
payment to FCStone or credits to HA’s account shall be made, and the
monthly fee adjusted, so as to accurately reflect the actual fees
payable.
|
| (b) |
In
addition to such fees, HA shall also pay to FCStone any transaction
commissions, fees, services charges or ▇▇▇▇-ups arising from options,
futures or other risk management or cash commodity transactions
executed
or brokered through FCStone, its affiliates, or others in accordance
with
their applicable schedules of rates, except that FCStone guarantees
that
the rate for exchange-traded futures and options contracts shall
not be
more than $10.00 per round turn, plus all applicable exchange fees,
during
the initial term hereof. Any OTC (over-the-counter) transactions
will be
$8.00 per round turn, plus any applicable fees, during the initial
term
hereof.
|
|
6.
|
HA
Representative.
HA
shall designate one or more persons who shall be authorized and
directed
to receive services hereunder and to make all hedging and merchandising
and purchasing and sales decisions for HA. All directions, transactions
and authorizations given by such representative to FCStone or to
Eco shall
be binding upon HA. FCStone and Eco shall each be entitled to rely
on the
authorization of such persons until it receives written notification
from
HA that such authorization has been
revoked.
|
|
7.
|
Transactions
with FCStone and FCStone Affiliates.
HA understands, approves, authorizes, and agrees that FCStone as
an
advisor may recommend that HA enter into transactions where FCStone
will
act as a broker or futures commission merchant or where HA may
enter into
transactions with one or more companies which are under common
ownership
or control with FCStone, including, but not limited to, FCStone
Trading,
L.L.C. with respect to physical energy products and over the counter
swaps
and options and FGDI, L.L.C. with respect to cash grain. FCStone
may also
participate on HA’s behalf in negotiations with one or more elevators,
which are members of FCStone’s parent company. All futures, swap or cash
commodity transactions involving HA, FCStone and its affiliates
shall be
subject to, and shall be governed by, the applicable customer agreements,
master agreements, confirmations, and other documentation
thereof.
|
| 8. |
FCStone
Limitations.
|
| (a) |
To
the extent and if any brokerage services are provided by FCStone
it will
be to find suppliers or purchasers for HA. FCStone will not purchase
or
sell grain, nor will it be directly involved in the purchase of
the grain
involving HA. FCStone may give merchandising, purchasing and hedging
advice to HA, but all decisions on purchasing, merchandising and
hedging
strategy will be made by HA. All hedging positions will be the
responsibility of HA, in HA’s account with FCStone or other relevant
party. All positions shall be for the purpose of hedging against
price
risks associated with the HA’s
operations.
|
[***]
--
Material has been omitted pursuant to a request for confidential treatment
and
such material has been filed separately with the Securities and Exchange
Commission.
2
| (b) |
FCStone
assumes no responsibility for the completion or performance of
any
contracts between HA and HA’s customers and suppliers, and HA agrees that
it shall not bring any action or make any claim against FCStone
based on
any act, omission or claim of any of HA’s customers or
suppliers.
|
| (c) |
To
the extent FCStone provides services relating to accounting systems,
sole
responsibility for the accuracy and completeness of HA’s books and
financial statements shall remain with HA. FCStone shall not be
deemed to
attest in any way to the accuracy of such books and financial
statements.
|
| (d) |
FCStone
assumes no responsibility for tax advice, tax planning, or tax
returns or
tax reporting.
|
| 9. |
Eco
Limitations.
|
| (a) |
Eco
assumes no responsibility for the completion or performance of
any
contracts between HA and HA’s customers and suppliers, and HA agrees that
it shall not bring any action or make any claim against Eco based
on any
act, omission or claim of any of HA’s customers or
suppliers.
|
| (b) |
HA
is responsible to cover all non-deliveries of any product that
is
contracted between ECO and HA in a timely manner in order to stay
within
the time parameters of the contract. ECO will assist in procuring
product
from other suppliers to cover these
non-deliveries.
|
| (c) |
If
any party terminates this agreement for any reason, all parties
will be
responsible to complete any existing
contracts.
|
|
10.
|
Separability
and Non-liability.
The services, contracts and relationship between HA and FCStone
and
between HA and Eco are independent and separable. FCStone shall
have no
liability or responsibility to HA for the performance of Eco hereunder.
Eco shall have no responsibility or liability for the performance
of
FCStone hereunder. Termination of this Agreement as between Eco
and HA
shall not impair the continuing relationship between FCStone and
HA, and
termination as between FCStone and Eco shall not impair the continuing
relationship between Eco and HA. Termination of this Agreement
as between
FCStone and HA shall not impair the continuing relationship between
ECO
and HA.
|
|
11.
|
Confidentiality
Agreement.
The parties agree, to the extent permitted by law, to preserve
and protect
the confidentiality of the Agreement. Both parties recognize that
federal
or state law may require the filing of the Agreement with, or the
furnishing of information to, governmental authorities or regulatory
agencies. Both parties further recognize the need, from time to
time, for
the submission of the Agreement to affiliates, consultants, or
contractors
performing work on, or related to, the subject matter of the Agreement.
Buyer and Seller agree to allow the submission of the Agreement
to
affiliates, consultants, or contractors if such affiliates, consultants,
or contractors agree to protect the confidentiality of the Agreement.
In
the event either party is of the opinion that applicable law requires
it
to file the Agreement with, or to disclose information related
to the
Agreement (other than information required by laws and regulations
in
effect as of the date hereof to be furnished in periodic reports
to
governmental authorities) to, any judicial body, governmental authority
or
regulatory agency, that party shall so notify the other party in
writing
prior to the disclosure or filing of the
Agreement.
|
3
|
12.
|
Public
Disclosure.
Any public announcements concerning the transaction contemplated
by this
agreement shall be approved in advance by FCStone, ECO, and HA,
except for
disclosures required by law, in which case the disclosing party
shall
provide a copy of the disclosure to the other party prior to its
public
release. As HA is subject to SEC filing requirements, SEC required
filings
will not be subject to advance disclosure except as allowed by
the
SEC.
|
|
13.
|
Terms
and Termination.
|
| (a) |
The
renewal term of this Agreement shall commence on the date of June
1, 2005
and shall continue until September 30, 2006. This contract will
automatically renew for an additional term of one (1) year unless
HA gives
notice of non-renewal in writing to FCStone and to Eco at least
four (4)
months prior to the end of this renewal term. At the renewal date
FCStone,
Eco and HA will discuss the fee rate and may at the agreement of
all
parties change the fee structure.
|
| (b) |
This
agreement may be terminated by HA as to either FCStone or Eco in
the event
of material breach of any of the material terms hereof by such
other
party, by written notice specifying the breach, which notice shall
be
effective fifteen (15) days after it is given unless the receiving
party
cures the breach within such time. This agreement may terminate
by either
FCStone or Eco as to HA in the event of material breach of any
of the
material terms hereof by HA, by written notice specifying the breach,
which notice shall be effective fifteen (15) days after it is given
unless
the receiving party cures the breach within such time. This agreement
may
be terminated immediately without notice at the election of any
party in
the event of bankruptcy, or any other receivership or insolvency
proceeding is filed by or against another
party.
|
| (c) |
This
Agreement may also be terminated between HA and FCStone and/or
HA and Eco
by the mutual consent of the parties on such terms as the parties
may
agree with respect to the obligations of such parties. All other
terms and
conditions of Agreement shall continue
on.
|
| (d) |
In
addition to any other method of terminating this Agreement, either
FCStone
or Eco may unilaterally terminate this Agreement at any time if
such
termination shall be required by any regulatory authority, and
such
termination shall be effective on the 30th
day following the giving of notice of intent to
terminate.
|
|
14.
|
Licenses.
Bonds, and Insurance. Each
party represents that it now has and will maintain in full force
and
effect during the term of this Agreement, at its sole cost, all
necessary
state and federal licenses, bonds and insurance in accordance with
applicable state or federal laws and
regulations.
|
4
|
15.
|
Limitation
of Liability.
EACH
PARTY UNDERSTANDS THAT NO OTHER PARTY MAKES ANY GUARANTEE, EXPRESS
OR
IMPLIED, TO ANY OTHER OF PROFIT, OR OF ANY PARTICULAR ECONOMIC
RESULTS
FROM TRANSACTIONS HEREUNDER. IN NO EVENT SHALL ANY PARTY BE LIABLE
FOR
SPECIAL, COLLATERAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES FOR ANY
ACT OR
OMISSION COMING WITHIN THE SCOPE OF THIS AGREEMENT, OR FOR BREACH
OF ANY
OF THE PROVISIONS OF THIS AGREEMENT, EVEN IF IT HAS BEEN ADVISED
OF THE
POSSIBILITY OF SUCH DAMAGES. SUCH EXCLUDED DAMAGES INCLUDE, BUT
ARE NOT
LIMITED TO, LOSS OF GOOD WILL, LOSS OF PROFITS, LOSS OF USE AND
INTERRUPTION OF BUSINESS.
|
|
16.
|
Disclaimer.
HA understands and agrees that FCStone and Eco make no warranty
respecting
legal or regulatory requirements and risks. HA shall obtain such
legal and
regulatory advice from third parties as it may deem necessary respecting
the applicability of legal regulatory requirements applicable to
HA’s
business.
|
|
17.
|
Indemnity.
The Parties agree that they shall absolve, release and refrain
from
seeking remedies against each other and their officers, agents,
employees,
subcontractors and insurers for any and all losses, claims, damages,
costs, suits and liabilities for damage, deterioration of quality,
shrinkage in quantity, loss of grade or loss of Ethanol resulting
from the
inherent nature of transfer operations and the inherent nature
of Ethanol
provided that this in no way shall relieve the parties for their
own
negligence, willful misconduct or theft. Each party to this contract
shall
indemnify, defend and hold the other harmless from claims, demands
and
causes of action asserted against the other by any person (including
without limitation employees of either party) for personal injury
or
death, or for loss of or damage to property resulting from the
willful or
negligent acts or omissions of the indemnifying party. Where personal
injury, death or loss of or damage to property is the result of
the joint
negligence or misconduct or the Parties hereto, the Parties expressly
agree to indemnify each other in proportion to their respective
share of
such joint negligence or
misconduct.
|
|
18.
|
Nature
of Relationship.
FCStone and Eco are independent contractors providing services
to HA. No
employment relationship, partnership or joint venture is intended,
nor
shall any such relationship be deemed created hereby. Each party
shall be
solely and exclusively responsible for its own expenses and costs
of
performance.
|
|
19.
|
Notices.
Any notices permitted or required hereunder shall be in writing,
signed by
an officer duly authorized of the party giving such notice, and
shall
either be hand delivered or mailed. If mailed, notice shall be
sent by
certified, first class, return receipt requested, mail to the address
shown above, or any other address subsequently specified by notice
from
one party to the other.
|
| 20. |
General.
|
| (a) |
This
agreement is the entire understanding of the parties concerning
the
subject matter hereof, and it may be modified only in writing signed
by
the parties. All commodities futures, options, and swap transactions
shall
be subject to the customer or master agreements between HA and
FCStone,
its affiliates, or others. The parties may enter into other agreements
in
writing, including but not limited to service agreements, customer
agreements and master agreements with respect to commodity futures
options
and swaps.
|
5
| (b) |
Upon
execution, this agreement supercedes any and all previous agreements.
|
| (c) |
If
any provision or provisions of this agreement shall be held to
be invalid,
illegal or unenforceable, the validity, legality and enforceability
of the
remaining provisions shall not in any way be affected or impaired
thereby.
|
| (d) |
No
party shall be liable for any failure to perform any or all of
the
provisions of this agreement if and to the extent that performance
has
been delayed or prevented by reason of any cause beyond the reasonable
control of such party. The expression “cause beyond the reasonable
control” shall be deemed to include, but not be limited to: acts,
regulations, laws, or restraints imposed by any governmental body;
wars,
hostilities, sabotage, riots, or commotions; acts of God; or fires,
frost,
storms, or lightning.
|
| (e) |
This
agreement is not intended to, and does not, create or give rise
to any
fiduciary duty on the part of any party to any
other.
|
| (f) |
No
action, regardless of its nature or form, arising from or in relation
to
this Agreement may be brought by either party more than two (2)
years
after the cause of action has arisen, or, in the case of an action
for
nonpayment, more than two (2) years from the date the last payment
was
due. Venue for any action arising from or in relation to this agreement
shall be in ▇▇▇▇▇▇ County,
Nebraska.
|
| (g) |
This
agreement is governed by and shall be construed under the laws
of the
State of Nebraska.
|
| (h) |
This
agreement shall be binding upon and inure to the benefit of the
parties
and the successors and assigns of the entire business and goodwill
of
FCStone, Eco or HA, but shall not be otherwise assignable without
the
express consent of the other
parties.
|
DATED
AND
EXECUTED AS OF THIS 31 DAY OF May, 2005.
HUSKER
AG, LLC.
BY:
/s/
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇
▇▇▇▇▇, L.L.C.
BY:
/s/
[Signature Illegible], VP
ECO-ENERGY,
INC.
BY:
/s/
[Signature Illegible], President
6
EXHIBIT
A
FCStone
Services
FCStone
will provide the following services based on sound risk management principles,
using FCStone’s Basis Trading experience together with the futures and options
markets to reduce HA’s exposure to commodity price changes.
| I. |
General
Scope.
FCStone will provide advice, assistance and risk management with
respect
to HA’s grain origination, energy and transportation, procurement and
output sales.
|
| II. |
Consulting
Services and Program:
FCStone services to HA shall fall into two (2)
categories.
|
| A. |
FCStone
shall provide HA with price risk management evaluation, review
and advice
in relation to use of Corn and/or any other grain products as they
relate
to the day-to-day operations of the
plant.
|
| B. |
FCStone
shall provide HA with price risk management evaluation, review
and advice
in relation to use of Natural Gas and/or any other energy products
as they
relate to the day-to-day operation of the
plant.
|
Such
services to be summarized monthly/annually in a detailed report prepared
by
FCStone for the HA staff/board, and accordingly to their satisfaction in
terms
of content and accountability.
| III. |
Internal
Risk Management Procedures:
|
| A. |
Risk
management guidelines and controls.
Risk management recommendations regarding position limits, strategies,
credit exposure and volumes will be presented for HA
approval.
|
| B. |
Assist
in Establishing Corporate Risk Policy - Assess Risk Profile - Define
Hedge
Objective.
|
7
EXHIBIT
B
ECO
Services - Ethanol
Eco
shall
purchase the entire ethanol output of HA’s Plant on the following
terms:
| 1. |
HA
can terminate contract if Eco does not pay within net 5 business
days of
Invoice, ▇▇▇▇ of Lading (BOL), Return ▇▇▇▇ of Lading (RBOL) and
Certificate of Analysis (COA).
|
| 2. |
Eco
will pay net 3 business days upon receipt of Invoice, BOL, RBOL,
and
COA.
|
| 3. |
HA
is responsible for any and all local, state and federal tax
liabilities.
|
| 4. |
Eco
will provide scheduling and marketing for ethanol
produced.
|
| 5. |
Eco
will be responsible for receivables risk on
ethanol.
|
| 6. |
Eco
reserves the right to refuse business to anyone due to credit or
market
risk.
|
| 7. |
HA
shall meet or exceed all specifications for E-grade denatured fuel
ethanol
as well as any changes in fuel ethanol industry standards that
might occur
after the execution of this
agreement.
|
| 8. |
HA
will keep Eco informed on production forecasts as well as daily
plant
inventory balances.
|
| 9. |
On
Rail car shipments title of ethanol will pass at the loading flange
between the plant and the Rail car unless otherwise specified.
On truck
shipments title of the ethanol will pass at the loading flange
between the
plant and the truck unless otherwise specified. Eco is purchasing
the
ethanol on a FOB HA plant basis.
|
| 10. |
HA
will provide a minimum of 10 days storage on the HA
site.
|
| 11. |
HA
must have meters that measure both gross and net 60 degrees Fahrenheit
temperature corrected gallons.
|
| 12. |
Eco
shall deduct all unavoidable costs such as government tariffs or
assessment fees, sales taxes, import/export handling fees, assessments,
inspection fees, or any other that has been approved by
HA.
|
| 13. |
Eco
will procure all Natural Gasoline (denaturant) for HA if HA so
wishes
otherwise HA could purchase the denaturant for the plant
themselves.
|
8
EXHIBIT
C
Eco
Services - Transportation
| 1. |
Eco
will lease all railcars for HA. All leases will be in the name
of
Eco.
|
| 2. |
Eco
will estimate the number of railcars needed for HA. If HA chooses
to end
the contract, they will be responsible to take over all railcar
leases.
|
| 3. |
Eco
will negotiate rail rates on behalf of
HA.
|
| 4. |
All
rail contracts will be in the name of
HA.
|
| 5. |
HA
will invoice Eco for rail freight along with a copy of the actual
railroad
invoice. (This amount will be paid on a net 3 business days upon
receipt
of invoice.)
|
| 6. |
Eco
will purchase all (rail and truck) gallons on an FOB plant
basis.
|
| 7. |
Eco
will supply all trucks.
|
9