EXECUTION COPY
RISK MANAGEMENT SERVICES AGREEMENT
THIS RISK MANAGEMENT SERVICES AGREEMENT (this "Agreement") is made and
entered into as of December 15, 2008 by and between Southwest Iowa Renewable
Energy, LLC, an Iowa limited liability company ("Producer"), and Bunge North
America, Inc., a New York corporation ("Bunge") (each of Producer and Bunge, a
"Party" and collectively, the "Parties").
RECITALS
A. Producer is constructing and owns an ethanol plant located near Council
Bluffs, Iowa (the "Facility").
B. As of the date of this Agreement, Bunge is a Member of Producer pursuant
to the Amended and Restated Operating Agreement of Producer dated March 7, 2008
("Operating Agreement").
C. Producer's operations at the Facility involve: (1) the use of corn as
feedstock for the Facility ("Corn"), (2) the production and sale of ethanol
("Ethanol"), (3) the production and sale of distiller's grains with solubles
("DGS"), including wet distillers grains and modified wet distillers grains (
"WDGS") and dry distiller's grains with solubles ("DDGS"), and (4) the use of
natural gas as fuel for the Facility ("Natural Gas," and collectively with the
Corn, Ethanol and DGS, the "Commodities," and each a "Commodity").
D. Producer desires to engage Bunge as the exclusive provider of risk management
services with respect to the Commodities for the Facility on the terms and
conditions set forth herein, and Bunge is willing to accept such appointment.
AGREEMENT
Therefore, the Parties agree:
1. Services Provided By Bunge.
1.1 Exclusive Provider. Producer hereby engages and appoints Bunge as the
exclusive provider of the Services (as hereinafter defined) on the terms and
conditions set forth in this Agreement. Bunge hereby accepts such appointment
and agrees to perform the Services in accordance with the terms and conditions
of this Agreement.
1.2 Services. Bunge shall perform or cause to be performed on behalf of
Producer the following services on an exclusive basis (the "Services"):
(a) provide advice and oversight of the activities of Producer at the
Facility to manage price risks relating to the purchase of Corn and Natural
Gas and the sale of Ethanol and DGS though the development of a risk
management policy ("Policy") to be submitted for approval by Producer;
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(b) update and amend the Policy as reasonably requested by Producer;
(c) appoint a commodity manager to interact with and provide advise to
Producer in the execution of transactions in Commodities within the limits
of the Policy (the "Commodity Risk Manager"); and
(d) coordinate and interact with the party appointed by Producer to
procure corn for the Facility (the "Corn Procurement Agent") and the party
or parties appointed by Producer to market or sell Ethanol and DGS for the
Facility (each, a "Commodity Marketer") to facilitate implementation of the
Policy; and
(e) advise Producer with respect to account hedging transactions in
accordance with the Policy.
1.3 Policy. The Policy would address Producer's activities at the Facility
related to Commodity price risk management, including, without limitation: (a)
the sale of Ethanol and DGS, including derivatives and physical sales, (b) the
purchase of Corn, including the pricing components of basis and futures on the
Chicago Board of Trade (or other applicable exchange), and (c) the purchase of
Natural Gas, including the pricing components of basis and futures on the New
York Mercantile Exchange (or other applicable exchange). With respect to Corn,
the Policy shall set forth: (i) Producer's obligations to deliver written
estimates of the Facility's Corn requirements to the Corn Procurement Agent a
reasonable period of time prior to such requirement, (ii) the allowable range of
prices and guidelines for the establishment of daily bids, credit limits,
quality standards, a price discount schedule and other daily operating
parameters to be followed by the Corn Procurement Agent, and (iii) how far in
advance Corn sales contracts may provide for the sale of Corn, referred to as
forward contracting limits. With respect to Ethanol and DGS, the Policy shall
set forth: (i) Producer's obligations to deliver written estimates of Ethanol
and DGS production at the Facility to the applicable Commodity Marketer a
reasonable period of time prior to such production, (ii) the budgeted mix of
DDGS and WDGS, and (iii) forward contracting limits for Ethanol and DGS sales
contracts.
2. Producer's Obligations.
2.1 Risk Management Committee. Producer shall authorize and establish a
risk management committee ("Risk Management Committee"), which shall meet
monthly to review the performance and effectiveness of the Policy and the
Services and to establish strategies with respect to the Policy and Services on
a going forward basis. The Risk Management Committee would consist of at least
Producer's General Manager, Chief Financial Officer and the Commodity Risk
Manager.
2.2 Commercial Management Group. Producer shall authorize and facilitate
the formation of a commercial management group ("Commercial Management Group"),
which would meet monthly to discuss requirements to implement the risk
management strategies developed by the Risk Management Committee and to exchange
Commodity market information. The Commercial Management Group would consist of
at least the Corn Procurement Agent, the Commodity Marketer(s) for Ethanol and
DGS, Producer's General Manager and the Commodity Risk Manager.
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2.3 Position Report. Producer shall deliver by no later than noon each
business day a position report showing the volume of Commodities used and
produced at the Facility and the hedging positions and Commodity sales
commitments taken or made by Producer, the Corn Procurement Agent and Commodity
Marketers with respect to such Commodities in a format reasonably acceptable to
Bunge.
2.4 Standards for Performance of Services. Bunge shall perform the Services
in accordance with such policies and directives as may be issued from time to
time by Producer. Producer shall have final decision making authority over all
specific purchase, sale and hedging transactions. Producer's directions shall be
given by Producer's General Manager, or in the General Manager's absence,
Producer's Chief Financial Officer. The General Manager may designate in writing
one or more persons to act for Producer in the absence of both the General
Manager and Chief Financial Officer. Bunge shall perform the Services hereunder
in accordance with and in accordance with all permits and all applicable
federal, state and local laws, rules and regulations governing the Facility.
2.5 Authority of Bunge. Bunge shall have no authority to act on behalf of
Producer except as expressly provided herein or as Producer may otherwise grant
in writing. In no event shall Bunge have the power or authority to manage
Producer as an entity or to engage in policy making functions for Producer.
Notwithstanding anything contained in this Agreement to the contrary, Producer
acknowledges and agrees that whether and to what extent the Policy and the
implementation of the risk management and hedging strategies may result in
profits for Producer depends in part on market conditions outside Bunge's
control and Bunge does not guarantee any results to Producer in connection
therewith. Producer acknowledges that Bunge may, in its position as Corn
Procurement Agent or Commodity Marketer, execute hedging transactions on Bunge's
own behalf which may not be in accordance with the Policy and Producer waives
any conflict of interest claims (or similar or related claims) against Bunge in
connection therewith. Nothing in this Agreement shall constitute a waiver or
modification of any of rights or obligations of either party or the Corn
Procurement Agent under any other agreement.
2.6 Direction from Producer. At any time at Bunge's request to Producer,
Bunge may require Producer to provide specific direction or advice regarding any
action to be taken or omitted by it. Bunge shall not be liable to Producer with
respect to any action or inaction which it takes in reliance on any directions
or advice received pursuant to this Section. However, nothing in this Section
shall be construed as imposing upon Bunge any obligation to seek such direction
or advice.
3. Compensation.
3.1 Fee. In consideration of Bunge's performance of the Services hereunder,
Producer shall pay to Bunge a quarterly fee equal to $75,000 ("Quarterly Fee"),
payable in advance by wire transfer to an account designated by Bunge on the
first day of each calendar quarter. Notwithstanding the foregoing, the Quarterly
Fee shall not be due for any portion of the quarter ending on December 31, 2008.
Producer shall also pay or reimburse Bunge for all costs, if any, incurred by
Bunge which are associated with the execution of the hedging strategies set
forth in the Policy ("Expenditures") and executed in accordance with this
Agreement.
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3.2 Invoicing of Expenditures by Bunge. Bunge shall invoice Producer for
all Expenditures on a monthly basis. Producer shall reimburse Bunge by wire
transfer in the amount of its invoice within 30 days of Producer's receipt of
such invoice.
3.3 Late Payments. Interest will accrue on amounts past due at a rate per
annum equal to the lesser of (a) the prime rate, as reported from time to time
by the Wall Street Journal plus 2%, and (b) the highest rate permitted by law.
Bunge will provide Producer with a copy of documentation supporting the amounts
set forth in an invoice upon request.
4. Term and Termination.
4.1 Term. The initial term of this Agreement will begin upon execution of
this Agreement by both Parties and, unless earlier terminated in accordance with
the terms hereof, will expire upon the third anniversary of the Effective Date.
Unless earlier terminated in accordance with this Agreement, this Agreement will
automatically renew for successive three-year terms thereafter unless either
Party gives written notice to the other Party of its election not to renew, no
later than 180 days prior to the expiration of the initial term or the then
current renewal term, as applicable. The "Term" will be the total of the initial
term of this Agreement and any renewal terms. The "Effective Date" will be
December 15, 2008 or such other date agreed by the Parties in writing. Producer
will notify Bunge at least 30 days in advance of when Ethanol is first
anticipated to be produced.
4.2 Termination Rights.
(a) Either Party may terminate this Agreement immediately upon notice
to the other Party if such other Party has (i) materially breached any
representation, warranty, or obligation under this Agreement, and (ii)
failed to remedy such breach within 30 days after the terminating Party has
given notice of such breach, or if such breach cannot reasonably be cured
within such 30-day period, such other Party has failed to commence and
diligently pursue remedy of the breach and failed to remedy such breach not
later than 120 days after the terminating Party has given notice of such
breach.
(b) Bunge may terminate this Agreement immediately upon notice to
Producer if Producer fails to pay any amount due under this Agreement
within 15 days after Bunge gives Producer notice of such nonpayment.
(c) Bunge may terminate this Agreement immediately upon notice to
Producer: (i) if the Effective Date has not occurred on or before October
15, 2009; and/or (ii) upon the occurrence of a Dissolution Event (as
defined in Article X the Operating Agreement).
(d) Either Party may terminate this Agreement immediately upon notice
to the other Party if (i) such other Party files a petition for
adjudication as a bankrupt, for reorganization or for an arrangement under
any bankruptcy or insolvency law; (ii) an involuntary petition under such
law is filed against such other Party and is not dismissed, vacated or
stayed within 60 days thereafter; or (iii) such other Party makes an
assignment of all or substantially all of its assets for the benefit of its
creditors.
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(e) Bunge may terminate this Agreement immediately upon notice to
Producer if there is a Change in Control of Producer. A "Change of Control"
occurs upon any of: (i) a sale of all or substantially all of the assets of
Producer; (ii) a merger or consolidation involving Producer, excluding a
merger or consolidation after which 50% or more of the outstanding equity
interests of Producer continue to be held by the same holders that held 50%
of more of the outstanding equity interests of Producer immediately before
such merger or consolidation, or (iii) any issuance and/or acquisition of
equity interests of Producer that results in a person or entity holding 50%
or more of the outstanding equity interests of Producer, excluding any
persons or entities that held 50% or more of the outstanding equity
interests of Producer immediately before such acquisition and, with respect
to Producer, excluding Bunge.
(f) Producer may terminate this Agreement immediately upon notice to
Bunge if there is a Change in Control of Producer upon payment to Bunge of
an amount equal to the Quarterly Fee for one quarter.
4.3 Survival. The provisions of this Agreement which expressly or by their
nature survive expiration or termination of this Agreement, including, but not
limited to, Sections 3, 4.2, 4.3, 5, 6 and 8 will remain in effect after the
expiration or termination of this Agreement.
5. Limitation of Liability.
5.1 General Disclaimer. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT,
BUNGE MAKES NO STATUTORY, WRITTEN, ORAL, EXPRESSED OR IMPLIED WARRANTIES,
REPRESENTATIONS OR GUARANTEES OF ANY KIND CONCERNING THE SERVICES PROVIDED UNDER
THIS AGREEMENT OR THE FAILURE TO PROVIDE SERVICES UNDER THIS AGREEMENT,
INCLUDING WITHOUT LIMITATION ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR ANY
PARTICULAR PURPOSE.
5.2 IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER OR ANY OTHER
PERSON OR ENTITY FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES UNDER ANY
CIRCUMSTANCES.
6. Remedies.
6.1 Suspend Performance. Bunge may suspend its performance under this
Agreement until Producer has paid all amounts due under this Agreement if
Producer fails to pay any amount within 15 days after the date when such amount
is due and uncured under this Agreement.
6.2 Specific Enforcement. The Parties shall have the right and remedy to
seek to have the provisions of this Agreement specifically enforced by any court
having equity jurisdiction without the necessity of posting any bond, it being
acknowledged and agreed by the Parties that the scope of the provisions of this
Agreement are reasonable under the circumstances.
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6.3 Rights Not Exclusive. No right, power or remedy conferred by this
Agreement will be exclusive of any other right, power or remedy now or hereafter
available to a Party at law, in equity, by statute or otherwise.
7. Relationship of Parties. This Agreement creates no relationship other than
those of service provider and recipient between the Parties hereto. Except as
expressly provided herein, there is no partnership, joint venture or other joint
or mutual enterprise or undertaking created hereby and neither Party, or any of
such Party's representatives, agents or employees, will be deemed to be the
representative or employee of the other Party. Except as expressly provided
herein or as otherwise specifically agreed in writing, neither Party will have
authority to act on behalf of or bind the other Party.
8. Governing Law; Disputes.
8.1 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Iowa, excluding any applicable
conflicts-of-law rule or principle that might refer the construction or
interpretation of this Agreement to the laws of another state.
8.2 Notice of Dispute. If any dispute shall arise under or in connection
with this Agreement, the Parties hereto agree to follow the procedures set forth
in this Section 8.2 in an effort to resolve the dispute prior to the
commencement of any formal proceedings; provided, however, that either Party may
institute judicial proceedings seeking equitable relief or remedies without
following the procedures set forth herein. The Parties shall attempt in good
faith to resolve any dispute arising out of or relating to this Agreement, the
breach, termination, or validity hereof, or the transactions contemplated herein
promptly by negotiation between representatives who have authority to settle the
controversy. Any Party may give the other Party written notice that a dispute
exists (a "Notice of Dispute") setting forth a statement of such Party's
position. Within twenty (20) business days of the delivery of the Notice of
Dispute, representatives of the Parties shall meet at a mutually acceptable time
and place, and thereafter as long as they both reasonably deem necessary, to
exchange relevant information and attempt to resolve the dispute. If the matter
has not been resolved within thirty (30) days of the disputing party's
delivering its Notice of Dispute, the dispute shall be referred to the Boards of
Directors or Managers of Producer and Bunge who shall within twenty (20)
additional days meet to attempt in good faith to resolve the dispute.
8.3 Mediation. If the matter still has not been resolved within sixty (60)
days of the delivery of the Notice of Dispute, then any Party may seek to
resolve the dispute through mediation administered by the Commercial Mediation
Rules of the American Arbitration Association. If the Parties fail to resolve
the dispute within twenty-one (21) days after starting mediation, then either
Party may initiate appropriate proceedings to obtain a judicial resolution of
the dispute.
8.4 Negotiations; Jurisdictional Matters. If a representative of any Party
intends to be accompanied at a meeting by an attorney, the other negotiator
shall be given at least three (3) business days' notice of such intention and
may also be accompanied by an attorney. All negotiations pursuant to this clause
are confidential and shall be treated as compromise and settlement negotiations
for purposes of the Federal Rules of Evidence and similar state rules of
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evidence. Any proceeding initiated by either Party hereto shall be commenced and
prosecuted in the United States District Courts for the Eastern District of
Missouri or the Western District of Iowa or the state courts in St. Louis
County, Missouri or Des Moines, Iowa and any courts to which an appeal may be
taken, and each Party hereby consents to and submits to the personal
jurisdiction of each of such courts.
8.5 Waiver of Jury Trial. EACH PARTY IRREVOCABLY WAIVES ANY AND ALL RIGHTS
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
9. Notices. All notices required or permitted under this Agreement will be in
writing and will be deemed given and made: (i) if by personal delivery, on the
date of such delivery, (ii) if by facsimile, on the date sent (as evidenced by
confirmation of transmission by the transmitting equipment), (iii) if by
nationally recognized overnight courier, on the next business day following
deposit, and (iv) if by certified mail, return receipt requested, postage
prepaid, on the third business day following such mailing; in each case
addressed to the address or facsimile number shown below for such Party, or such
other address or facsimile number as such Party may give to the other Party by
notice:
If to Bunge:
Xxxxx North America, Inc.
00000 Xxxxxx Xxxxx
Xx. Xxxxx, Xxxxxxxx 00000
Attn: Senior Vice President - Bunge Grain
Facsimile: 000-000-0000
with copy to:
Xxxxx North America, Inc. 00000
Xxxxxx Xxxxx
Xx. Xxxxx, Xxxxxxxx 00000 Attn:
General Counsel Facsimile: (314)
292-2521
If to Producer:
Southwest Iowa Renewable Energy, LLC
00000 000xx Xxxxxx
Xxxxxxx Xxxxxx, Xxxx 00000
Attn: General Manager
Facsimile: (000) 000-0000
with copies to:
Xxxxx X. Xxxxxxx, Esq.
Husch Xxxxxxxxx Xxxxxxx LLP
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxx, XX 00000
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Facsimile: (000) 000-0000
10. Entire Agreement; No Third Party Beneficiaries. This Agreement constitutes
the entire agreement between the Parties with respect to the subject matter
hereof and supersedes all prior agreements and understandings, both written and
oral, between the Parties with respect to the subject matter hereof. This
Agreement does not, and is not intended to, confer any rights or remedies upon
any person other than the Parties.
11. Amendments; Waiver. The Parties may amend this Agreement only by a written
agreement of the Parties. No provision of this Agreement may be waived, except
as expressly provided herein or pursuant to a writing signed by the Party
against whom the waiver is sought to be enforced. No failure or delay in
exercising any right or remedy or requiring the satisfaction of any condition
under this Agreement, and no "course of dealing" between the Parties, operates
as a waiver or estoppel of any right, remedy or condition. A waiver made in
writing on one occasion is effective only in that instance and only for the
purpose that it is given and is not to be construed as a waiver on any future
occasion or against any other person.
12. Assignment. No Party may assign this Agreement, or assign or delegate any of
its rights, interests, or obligations under this Agreement, voluntarily or
involuntarily, whether by merger, consolidation, dissolution, operation of law,
or any other manner, without the prior written consent of the other Party, and
any purported assignment or delegation without such consent will be void.
Despite the prior sentence, Bunge may assign this Agreement, or assign or
delegate any of its rights, interests, or obligations under this Agreement, to
any of its Affiliates without Producer's prior written consent. Subject to the
preceding sentences in this Section 12, this Agreement binds and benefits the
Parties and their respective permitted successors and assigns. For purposes of
this Agreement, "Affiliate" means a person that directly, or indirectly through
one or more intermediaries, controls or is controlled by, or is under common
control with, the party specified, with "control" or "controlled" meaning the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a person, whether through the
ownership of voting securities or voting interests, by contract or otherwise.
13. Severability. If a court or arbitrator with proper jurisdiction determines
that any provision of this Agreement is illegal, invalid, or unenforceable, the
remaining provisions of this Agreement remain in full force. The Parties will
negotiate in good faith to replace such illegal, invalid, or unenforceable
provision with a legal, valid, and enforceable provision that carries out the
Parties' intentions to the greatest lawful extent under this Agreement.
14. Interpretation. Each Party has been represented by counsel during the
negotiation of this Agreement and agrees that any ambiguity in this Agreement
will not be construed against one of the Parties.
15. Further Assurances. Each Party will execute and cause to be delivered to the
other Party such instruments and other documents, and will take such other
actions, as the other Party may reasonably request for the purpose of carrying
out or evidencing any of the transactions contemplated by this Agreement.
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15. Counterparts. This Agreement may be executed by the Parties by facsimile and
in separate counterparts, each of which when so executed will be deemed to be an
original and all of which together will constitute one and the same agreement.
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
the day and year first above written.
BUNGE NORTH AMERICA, INC. SOUTHWEST IOWA RENEWABLE
ENERGY, LLC
By: By:
-------------------------------------- ----------------------------------------
Name: Name:
Title: Title:
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