EXHIBIT 10.6
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 0000 Xxxxxxx xxxxxxx, Xxxx Xxx
Xxxxxx, Xxxx 00000, and Eco-Energy, Inc. ("Eco") a Tennessee Corporation with
its main office located at 000 Xxxx Xxxxxxx Xxxx. Xxxxx 000, Xxxxxxxx, Xxxxxxxxx
00000, and Husker Ag, LLC (HA) with its main office located at X.X. Xxx 00,
Xxxxxxxxx, XX 00000.
RECITALS:
A. HA is a Limited Liability Company, which is developing 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.
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
railrcar leases as provided in Exhibit C.
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.
[* * *] Material has been omitted pursuant to a request for confidential
treatment and such material has been filed separately with the
Securities and Exchange Commission
1
(b) In addition to such fees, HA shall also pay to FCStone any transaction
commissions, fees, services charges or xxxx-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 be not be more than [* * *] per round turn,
plus all applicable exchange fees, during the initial term hereof. Any
OTC (over -the-counter) transactions will be [* * *] 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.
(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.
[* * *] Material has been omitted pursuant to a request for confidential
treatment and such material has been filed separately with the
Securities and Exchange Commission
(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 have previously executed a
Confidentiality and Nondisclosure Agreement. Such agreement shall remain in
full force and effect and shall apply and govern all disclosure and use of
confidential information hereunder.
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 xxx f the disclosure to the other party
prior to its public release. As HA is subject to SEC filing requirements,
and SEC required filings will not be subject to advance disclosure, except
as allowed by the SEC.
13. TERMS AND TERMINATION.
(a) The initial term of this Agreement shall commence on the date hereof
and shall continue for an initial term of one year from the date that
the HA ethanol plant begins production. 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 the initial 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 be terminated 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 any tow parties by the
mutual consent of any two of the parties on such terms as the parties
may agree.
(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 sate and federal licenses, bonds and
insurance in accordance with applicable state or federal laws and
regulations.
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 and regulatory requirements
applicable to HA's business.
17. INDEMNITY. HA agrees to indemnify FCStone, Eco and their brokers, officers,
agents and employees and hold them harmless form and against any claims,
demands, liability or expense, including attorneys fees and other
litigation expenses, arising out of claims by HA's customers or suppliers.
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.
(b) 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.
(c) 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.
(d) 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.
(e) 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 Xxxxxx County, Nebraska.
(f) This agreement is governed by and shall be construed under the laws of
the State of Iowa.
(g) 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 27 DAY OF NOV, 2002.
HUSKER AG, LLC
BY: /s/ O. Xxxxx Xxxxxx
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FCSTONE, L.L.C.
BY: /s/ illegible
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ECO-ENERGY
BY: /s/ illegible, President
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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.
1) 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.
2) 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 management and board
approval.
B. Assist in Establishing Corporate Risk
Policy - Assess Risk Profile - Define
Hedge Objective.
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, Xxxx of Lading (BOL), Return Xxxx
of Lading (RBOL) and Certificate of Analysis (COA).
2. Eco will pay net 3 business days upon receipt of Invoice,
BOLLESS THAN 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 transfer as the
product passes over the destination delivery flange unless
otherwise specified. In these cases Eco is purchasing the
ethanol on a CIF delivered basis. On truck shipments title
of the ethanol will pass at the loading flange between the
plant and the truck unless otherwise specified. In these
cases 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 the appropriate member of the
board of directors.
13. Eco will procure all Natural Gasoline (denaturant) for HA if
HA so wishes otherwise HA could purchase the denaturant for
the plant themselves.
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 truck gallons on an FOB plant basis.
7. Eco will supply all trucks.
