RISK MANAGEMENT CONTRACT
Exhibit 99.1
* Portions omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission.
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 First United Ethanol, LLC (Client) with its main office located at Camilla, GA.
RECITAL:
| A. |
Client 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.
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| B. |
FCStone, which is experienced in commodity
transactions and related risk management, is willing to provide such assistance
on the terms hereby stated.
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NOW, THEREFORE, 1T IS AGREED AS FOLLOWS BETWEEN THE PARTIES:
| 1. |
FCStone. FCStone shall,
during the term hereof, provide services to Client in the implementation of a
full service price risk management program and grain procurement program for
client (the “FCStone Program”). The FCStone services to be provided
are set forth in Exhibit A attached hereto.
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| 2. |
Fees.
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| (a) |
Client shall pay a fee for services to FCStone
and materials provided hereunder of [*] for Client during the Term. Such fees
shall be payable monthly on the first business day of each month during the
term hereof, in advance to FCStone. The monthly fee will be capped at [*].
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| (b) |
In addition to such fees, Client 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 [*], plus all applicable exchange fees, during the
initial term hereof. Any OTC (over-the-counter) transactions will be [*], plus
any applicable fees, during the initial term hereof.
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| 3. |
Client Representative.
Client 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 Client. All directions,
transactions and authorizations given by such representative to FCStone shall
be binding upon Client. FCStone shall be entitled to rely on the authorization
of such persons until it receives written notification from Client that such
authorization has been revoked.
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| 4. |
Transactions with FCStone and FCStone
Affiliates. Client understands, approves, authorizes, and agrees that
FCStone as an advisor may recommend that Client enter into transactions where
FCStone will act as a broker or futures commission merchant or where Client 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 Client’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 Client, FCStone and its
affiliates shall be subject to, and shall be governed by, the applicable
customer agreements, master agreements, confirmations, and other documentation
thereof.
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5. FCStone Limitations.
| (a) |
To the extent and if any brokerage services
are provided by FCStone it will be to find suppliers or purchasers for Client.
FCStone will not purchase or sell grain, nor will it be directly involved in
the purchase of the grain involving Client. FCStone may give merchandising,
purchasing and hedging advice to Client, but all decisions on purchasing,
merchandising and hedging strategy will be made by Client. All hedging
positions will be the responsibility of Client, in Client’s account with
FCStone or other relevant party. All positions shall be for the purpose of
hedging against price risks associated with the Client’s operations.
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| (b) |
FCStone assumes no responsibility for the
completion or performance of any contracts between Client and Client’s
customers and suppliers, and Client agrees that it shall not bring any action
or make any claim against FCStone based on any act, omission or claim of any of
Client’s customers or suppliers.
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| (c) |
To the extent FCStone provides services
relating to accounting systems, sole responsibility for the accuracy and
completeness of Client’s books and financial statements shall remain with
Client. FCStone shall not be deemed to attest in any way to the accuracy of
such books and financial statements.
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| (d) |
FCStone assumes no responsibility for tax
advice, tax planning, or tax returns or tax reporting.
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| 6. |
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.
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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 Client, 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.
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| 8. |
Terms and
Termination.
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| (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 Client ethanol plant begins production. This contract
will automatically renew for an additional term of one (1) year unless
Client gives notice of non-renewal in writing to FCStone at least four
(4) months prior to the end of the initial term.
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| (b) |
This agreement may terminated by Client as to
FCStone 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 terminated by
FCStone as to Client in the event of material breach of any of the material
terms hereof by Client, 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.
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| (c) |
This Agreement may also be terminated between
any two parties by the mutual consent of any two of the parties on such terms
as the parties may agree.
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| (d) |
In addition to any other method of terminating
this Agreement, FCStone 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 30t1, day following the giving
of notice of intent to terminate.
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| 9. |
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.
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| 10. |
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 TFIE
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.
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| 11. |
Disclaimer. Client
understands and agrees that FCStone makes no warranty respecting legal or
regulatory requirements and risks. Client 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 Client’s
business.
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| 12. |
Indemnity. Client agrees
to indemnify FCStone and their 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 Client’s customers or suppliers.
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| 13. |
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.
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| (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
Client 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.
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| (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.
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| (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.
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| (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.
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| (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 Polk County, Iowa.
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| (f) |
This agreement is governed by and shall be
construed under the laws of the State of Iowa.
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| (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 and Client, but shall not be otherwise
assignable without the express consent of the other parties.
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DATED AND EXECUTED AS OF THIS 9TH DAY OF JULY, 2007
Client First United Ethanol, LLC
BY: /s/ Xxxxxxx X. Xxxxx, CEO
XX XXXXX, L.L.C.
BY: /s/ Xxxxx X. Nelssler,
Jr.
VP,
Renewable Fuels Group
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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 Client’s exposure to commodity price changes.
| I. |
General Scope. FCStone will provide
advice, assistance and risk management with respect to Client’s grain
origination, energy and transportation, procurement and output sales.
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| II. |
Consulting Services and Program:
FCStone services to Client’s shall fall into two
(2) categories.
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| 1) |
FCStone shall provide Client 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.
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| 2) |
FCStone shall provide Client 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.
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Such services to be summarized monthly/annually in a detailed report prepared by FCStone for the Client 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.
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| B. |
Establish Corporate Risk Policy —
Assess Risk Profile –Define Hedge Objective.
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