Exhibit 6.5
FCSTONE, LLC
XX Xxx 0000 - Xxx Xxxxxx, XX 00000-0000 - 0000 Xxxxxxx Xxxxxxx, Xxxxx 000
Xxxx Xxx Xxxxxx, XX 00000-0000 515-223-3788 - WATS 800-422-3087
LSCP, L.P., d/b/a Little Sioux Corn Processors, L.P.
FULL SERVICE INTEGRATED RISK MANAGEMENT CONTRACT*
THIS AGREEMENT is entered into by and between FCSTONE, LLC ("FCStone"), an Iowa
limited liability company with its main office at 0000 Xxxxxxx Xxxxxxx, Xxxx Xxx
Xxxxxx, Xxxx 00000, and LSCP, L.P., d/b/a Little Sioux Corn Processors, L.P.
("LSCP") an Iowa L.P. with its main office at 0000 X Xxxxxx, Xxxxxx, Xxxx 00000.
RECITALS:
A. LSCP is an Iowa limited partnership which owns and will operate an ethanol
plant facility in Marcus, Iowa, and which desires to manage price risk of
various commodities including corn, natural gas, ethanol and co-product(s).
B. FCStone, which is experienced in commodity transactions and related risk
management, is willing to provide such assistance on the terms hereby
stated.
NOW, THEREFORE, IT IS AGREED AS FOLLOWS BETWEEN THE PARTIES:
1. FCSTONE SERVICES. FCStone shall, during the term hereof, provide
consulting services to LSCP in the implementation of a full service
price risk management program for LSCP (the "Program"). The services
to be provided are set forth in Exhibit A attached hereto.
2. FEES. LSCP shall pay FCStone a fee for services and materials provided
hereunder of $.002 per 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,
beginning with the first day of the month after ethanol production
commences. The initial estimated monthly payment shall be $6,667.00 per
month. All estimated monthly advance payments shall be credited against
the fees payable based upon actual ethanol production and the above
quoted per gallon rate. The amount of the fee shall be computed every
three (3) months after ethanol production commences and additional
payment to FCStone or credits to LSCP's account shall be made, and
*Portion omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission.
the monthly advance fee adjusted, so as to accurately reflect the actual
fees payable on the per gallon basis. In addition to such fees, LSCP shall
also pay 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 exchanged-traded futures and options
contracts shall be not more than * per round turn, plus all
applicable exchange fees, during the initial one-year term hereof. Any OTC
(over-the-counter) transactions will be * per round turn, which
includes any applicable fees, during the initial one-year term hereof.
3. LSCP REPRESENTATIVE. LSCP shall designate one representative in writing
and two alternate representatives in his or her absence who shall be
authorized and directed to receive FCStone's advice and to make all
hedging and merchandising and purchasing decisions for LSCP. All
directions, transactions and authorizations given by such
representative to FCStone shall be binding upon LSCP. FCStone shall be
entitled to rely on the authorization of such persons until it receives
written notification from LSCP that such authorization has been
revoked.
4. TRANSACTIONS WITH FCSTONE AND FCSTONE AFFILIATES. LSCP understands,
approves, authorizes, and agrees that FCStone as an advisor may
recommend that LSCP enter into transactions where FCStone will act as a
broker or futures commission merchant or where LCP 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 LSCP's behalf in
negotiations with one or more elevators, which are members of FCStone's
parent company.
5. CUSTOMER AGREEMENTS. All transactions involving LSCP, FCStone and its
affiliates shall be subject to, and shall be governed by, the
applicable customer agreements, master agreements, confirmations, and
other documentation thereof.
6. CONFIDENTIALITY AGREEMENT. The parties will execute a Confidentiality
and Nondisclosure Agreement as described in exhibit B upon signing of
this Agreement. Such agreement shall remain in full force and effect
and shall apply and govern all disclosure and use of confidential
information hereunder. Breach of the nondisclosure agreement shall also
constitute breach of this Agreement.
*Portion omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission.
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7. PUBLIC DISCLOSURE. Any public announcements concerning the transaction
contemplated by this letter shall be approved in advance by FCStone and
LSCP, 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.
8. LIMITATIONS.
(a) Brokerage services to be provided by FCStone will be to find
suppliers or purchasers for LSCP. FCStone will not purchase or sell
grain, nor will it be directly involved in the purchase of the
grain involving LSCP. FCStone shall give merchandising, purchasing
and hedging advice to LSCP, but all decisions on purchasing,
merchandising and hedging strategy will be made by LSCP. All
hedging positions will be the responsibility of LSCP, in LSCP's
account with FCStone or other relevant party. All positions shall
be for the purpose of hedging against price risks associated with
the LSCP's operations.
(b) FCStone assumes no responsibility for the completion or performance
of any contracts between LSCP and LSCP's customers and suppliers,
and LSCP agrees that it shall not bring any action or make any
claim against FCStone based on any act, omission or claim of any of
LSCP's customers or suppliers.
(c) To the extent FCStone provides services relating to accounting
systems, sole responsibility for the accuracy and completeness of
LSCP's books and financial statements shall remain with LSCP.
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.
(e) Nothing contained herein shall be deemed to grant discretionary
trading authority to FCStone or to any of its agents or employees.
Any transactions shall be specifically authorized by an LSCP
Representative designated as provided in Section 3.
9. TERM AND TERMINATION.
(a) The initial term of this Agreement shall commence on the date
hereof and shall continue for one (1) year. Thereafter, the
Agreement shall continue from month to month, but may be terminated
at any time for any cause, or without cause, by either party after
the initial one-year term upon providing thirty (30) days written
notice to the other party.
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(b) This Agreement may also be terminated by either party in the event
of material breach of any of the material terms hereof by the other
party, by written notice specifying the breach, which notice shall
be effective ten (10) 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) In addition to any other method of terminating this Agreement,
either Party 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 thirtieth (30th) day
following the giving of notice of intent to terminate.
10. LICENSES, BONDS, AND INSURANCE. LSCP agrees to acquire prior to
acquisition of cash grain or production of ethanol for sale 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.
11. LIMITATION OF LIABILITY. EACH PARTY UNDERSTANDS THAT NEITHER PARTY
MAKES ANY GUARANTEE, EXPRESS OR IMPLIED, TO THE 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 POSSIBLITY 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.
12. FCSTONE'S DISCLAIMER. LSCP understands and agrees that FCStone makes no
warranty respecting legal or regulatory requirements and risks. LSCP
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 LSCP's business.
13. INDEMNITY. LSCP agrees to indemnify FCStone and its brokers, officers,
agents and employees and hold them harmless from and against any
claims, demands, liability or expense, including attorneys fees and
other litigation expenses, arising out of claims by LSCP's customers or
suppliers. The parties
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agree that the prevailing parties in any litigation between the parties
and related to this Agreement shall be entitled to collect its costs,
expenses, and reasonable attorneys' fees from the other party.
14. NATURE OF RELATIONSHIP. FCStone is an independent contractor providing
services to LSCP. 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.
15. 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.
16. 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 LSCP 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) Neither 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 either party to the
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
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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 Cherokee County, Iowa.
(f) This Agreement is governed by and shall be construed under the laws
of the State of Iowa.
(f) 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 and LSCP, but shall not be otherwise
assignable without the express consent of the other parties.
DATED AND EXECUTED AS OF THIS 16th DAY OF July, 2002.
LSCP, L.P.
BY: LITTLE SIOUX CORN PROCESSORS, L.L.C., its general partner
BY: /s/ Xxxxx X. Xxxxx
------------------------------------------
Xxxxx X. Xxxxx, President
FCSTONE, LLC
BY: /s/ Xxxxx Xxxxxxx
------------------------------------------
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EXHBIIT A
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 LSCP's exposure to commodity price changes.
I. GENERAL SCOPE. FCStone will provide advice, assistance and risk management
with respect to LSCP's grain origination, energy and transportation,
procurement and output sales.
II. CONSULTING SERVICES AND PROGRAM:
A. DETAILED OPERATIONAL REVIEW. A complete review of grain operations,
procurement procedures and energy requirements will be assembled. This
is vital to provide a baseline on which to build the marketing,
merchandising and procurement program. This analysis is also used to
understand strengths, weaknesses, market share, operational costs and
overhead. The review also looks at local seasonal cycles,
transportation options and xxxxxx customer preferences.
B. MARKETING PLAN DEVELOPMENT. Within thirty (30) days of the date hereof,
FCStone will prepare and deliver a marketing plan to LSCP, subject to
LSCP's review, designed to maximize LSCP's profit from its
manufacturing operation, procurement and merchandising functions. The
marketing plan will include historical basis analysis for both inputs
(grain) and manufactured products (energy products). Specific
recommendations regarding purchasing of inputs will be addressed as
well as strategies to lock in margins on production. Projections on
profitability will be made based on anticipated volumes and historical
analysis. Utilization of both exchange traded risk management products
and over-the-counter tools will be addressed.
C. MARKETING OVERVIEW, MONTHLY ACTIVITY, POSITION AND FINANCIAL ANALYSIS.
Upon completion of the marketing plan, it is submitted for approval by
management and LSCP's board of directors. Once approved the plan is
initiated and each activity and position is tracked for its impact and
success. Monthly reports present in detail the results of all hedged
transactions and the results of those strategies. This analysis is
completed on a monthly basis, will be accumulated on a year-to-date
basis and assembled into a year-end summary.
D. ACCOUNTABILITY. Hedge records are provided to track each trade,
measuring each activity for its impact and overall success of the
program. Position statements are available at anytime on an ongoing
basis.
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E. RISK MANAGEMENT FOR NATURAL GAS AND OTHER ENERGY PRODUCTS. Strategies
to lock in energy costs or budgeted items are available in both
exchange-traded products and in over-the-counter instruments.
F. PRODUCER AND ORIGINATION PROGRAM. A number of alternative services and
instruments are available for your producer members. Outlook meetings
detailing with current markets are available annually. Specific
programs such as Floored Average Pricing, Enhance Minimum Price
Program, Minimum Price Plus and other producer marketing alternatives
are available. All of these programs are provided on a brokerage basis.
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. ESTABLISH CORPORATE RISK POLICY - ASSESS RISK PROFILE - DEFINE HEDGE
OBJECTIVE.
C. OBTAIN APPROVAL OF RISK POLICY, AUTHORIZE CONSULTING AGREEMENT.
D. DESIGNATE INDIVIDUAL(s) RESPONSIBLE FOR HEDGING.
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EXHIBIT B
NONDISCLOSURE AGREEMENT
This NONDISCLOSURE AGREEMENT (the "Agreement") is entered into this 16th
day of July, 2002 (the "Effective Date") by and between FCStone, L.L.C., of West
Des Moines, IA, and LSCP, L.P., d/b/a Little Sioux Corn Processors, L.P., of
Marcus, IA, (each sometimes referred to herein individually as a "party" or
collectively as the "parties").
WHEREAS, LSCP, L.P. intends to manufacture fuel ethanol, purchasing all of
the required inputs and marketing the outputs including fuel ethanol and its
byproducts,
WHEREAS, LSCP, L.P. desires to manage its price variance risk related to
the purchase of such inputs and the sale of such outputs, and
WHEREAS, FCStone, L.L.C. and its related companies have expertise in
providing various input and output price management services.
NOW THEREFORE, in consideration of the mutual promises, covenants, and
agreements contained herein, the parties hereby agree as follows:
1. In connection with discussions between the parties regarding ethanol
manufacturing plant input and output price protection, and performance
under that certain Full Service Integrated Risk Management Contract between
the parties dated July 16, 2002 (collectively the "Subject Matter"), each
party to this Agreement may wish to disclose certain non-public,
confidential or proprietary information (hereinafter "Information") to the
other party on a confidential basis. The disclosing party may consider the
Information confidential or proprietary under this Agreement either because
it has developed the Information internally, or because it has received the
Information subject to a continuing obligation to maintain the
confidentiality of the Information, or because of other reasons.
2. The term "Information" as used in this Agreement shall mean the discussions
between the parties concerning the Subject Matter, any and all written,
printed, electronic or other materials regarding the Subject Matter
provided by a party to any other party to this Agreement and the substance
and content thereof, and all information ascertained through the
discussions between Representatives (as defined in paragraph 3(b) below) of
the parties concerning the Subject Matter. Information shall include, but
not be limited to, all marketing, operational, economic or financial
knowledge, information or data of any nature whatsoever relating to the
Subject Matter which has been or may hereafter be provided or disclosed by
the parties in connection with the Subject Matter and all notes, analyses,
compilations, studies or other documents in tangible form (whether in
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written form, electronically stored or otherwise) that contain or otherwise
reflect Information prepared by or on behalf of the receiving party.
3. With respect to Information disclosed under this Agreement, the party to
whom the Information is disclosed shall:
a. Hold the Information in confidence, exercising a degree of care not
less than the care used by the disclosing party to protect its own
proprietary or confidential information that it does not wish to
disclose.
b. Restrict disclosure of the Information solely to its affiliates and its
affiliates' respective directors, officers, employees, and/or agents,
advisors or representatives (hereinafter "Representatives") with a need
to know and not disclose it to any other person.
c. Advise those persons to whom the Information was disclosed that they
shall be bound by the terms of this Agreement to the same extent as if
they were parties hereto and be responsible for any breach of this
Agreement by any of such persons.
d. Use the Information only in connection with continuing discussions by
the parties concerning the Subject Matter, except as may otherwise be
mutually agreed upon in writing.
e. Agree not to disclose that the parties hereto are having or have had
discussions concerning the Subject Matter, that it has received
Information or that it is considering a possible transaction related to
the Subject Matter.
4. The Information provided by a party shall be deemed the property of such
disclosing party and, upon request, the other party shall return all
Information received in tangible form to the disclosing party, without
retaining any copy or duplicate thereof, and shall destroy any and all
written, printed or other material or information derived from the
Information and provide the disclosing party with written certification
executed by a duly authorized officer of such document destruction. If
either party loses or makes an unauthorized disclosure of the other party's
Information, it shall notify such other party immediately and use
reasonable efforts to retrieve the lost or wrongfully disclosed
Information. Notwithstanding the return or destruction of Information, each
party will continue to be bound by the obligations of confidentiality and
other obligations hereunder.
5. The party to whom Information is disclosed shall have no obligation to
preserve the proprietary nature of any Information which:
a. such party can prove was previously known to such party to be free of
any obligation to keep it confidential;
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b. is or becomes publicly available by other than unauthorized disclosure;
c. such party can prove was or is developed by or on behalf of such party
independent of any Information furnished under this Agreement; or
d. is received from a third party whose disclosure, to the best of the
party's knowledge after reasonable inquiry, does not violate any
confidentiality obligation.
6. If a party or anyone to whom such party transmits Information in accordance
with this Agreement is requested or required (by deposition,
interrogatories, requests for information or documents in legal
proceedings, subpoenas, civil investigative demand or similar process), in
connection with any proceeding, to disclose any Information, such party
will give the disclosing party prompt written notice of such request or
requirement so that the disclosing party may seek an appropriate protective
order or other remedy and/or waive compliance with the provisions of this
Agreement, and the receiving party will cooperate with the disclosing party
to obtain such protective order. If such protective order or other remedy
is not obtained or the disclosing party waives compliance with the relevant
provisions of this Agreement, the receiving party (or such other persons to
whom such request is directed) will furnish only that portion of the
Information which, in the opinion of legal counsel, is legally required to
be disclosed and, upon the disclosing party's request, use commercially
reasonable efforts to obtain assurances that confidential treatment will be
accorded to such information.
7. Each party shall have the right to determine, in its sole judgment, what
Information it shall provide to the other. It is understood and agreed that
the party disclosing Information does not make any representations or
warranties, expressed or implied, as to its accuracy, completeness or
fitness for a particular purpose thereof. It is further understood and
agreed that neither party nor its Representatives shall have any liability
or responsibility to the other party (except as pursuant to this Agreement)
or to any other person or entity resulting from the use of any Information
or any errors therein or omissions therefrom. Neither this Agreement, nor
the transfer of Information hereunder, shall be construed as granting any
license or rights to any information or data now or hereafter owned or
controlled by a party to the other party and all such Information shall
remain the property of the disclosing party.
8. Neither this Agreement, the disclosure of Information under this Agreement,
nor the ongoing discussions and correspondences between the parties, shall
constitute or imply a commitment or binding obligation between the parties
or their respective affiliated companies, if any, regarding the Subject
Matter.
9. The parties understand and agree that no failure or delay by the disclosing
party in exercising any right, power or privilege under this Agreement
shall operate as a
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waiver thereof nor shall any single or partial exercise thereof preclude
any other or further exercise of any right, power or privilege hereunder.
10. This Agreement shall inure to the benefit of and be binding upon each of
the parties hereto and their respective successors and assigns.
11. This Agreement shall be governed by and construed in accordance with the
laws of the State of Iowa without regard to choice of law principles.
12. This Agreement shall become effective as of the date set forth below
("Effective Date"). The obligations of the parties under this Agreement
shall survive and continue through the later of:
a. a date of three (3) years after the Effective Date; or
b. a date of three (3) years after the expiration of any agreement entered
into between the parties concerning the Subject Matter, including,
without limitation, that Full Service Integrated Risk Management
Contract between the parties dated July 16, 2002.
13. The parties acknowledge that, in the event of an unauthorized disclosure,
the damages incurred by a nondisclosing party may be difficult if not
impossible to ascertain, and that such nondisclosing party shall be
entitled to specific performance and injunctive or other equitable relief,
as well as monetary damages and attorneys' fees, against a party that
breaches this Agreement as a remedy for any such breach. The parties
further agree to waive and to use their best efforts to cause their
Representatives to waive, any requirement for the securing or posting of
any bond in connection with such remedy.
14. This Agreement constitutes the entire understanding between the parties
with respect to the Information provided hereunder. No amendment or
modification of this Agreement shall be valid or binding on the parties
unless made in writing and executed on behalf of each party by its duly
authorized representative.
Each party represents that it has caused this Agreement to be executed by a
representative empowered to bind that party with respect to the undertakings and
obligations contained herein.
In witness whereof the parties hereto have executed this NONDISCLOSURE
AGREEMENT effective as of the Effective Date.
FCSTONE, L.L.C. LSCP, L.P.
By: Little Sioux Corn Processors, LLC,
its General Partner
By: /s/ Xxxxx Xxxxxxx By: /s/ Xxxxx X. Xxxxx
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Its: Director, Renewable Fuels Xxxxx X. Xxxxx, President
-------------------------
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