Exhibit 10.5
GRAIN ORIGINATION AND CONSULTING AGREEMENT
NORTHWEST ETHANOL, L.L.C. AND THE ANDERSONS AGRICULTURE GROUP, L.P.
This Grain Origination and Consulting Agreement ("Agreement") is made and
entered into this 7TH day of FEBRUARY, 2002, between Northwest Ethanol L.L.C.,
an Ohio limited liability company, X.X. Xxx 0000, Xxxxxxxx, Xxxx 00000, ("NWE")
and The Andersons Agriculture Group, L.P., an Ohio limited partnership, 000 Xxxx
Xxxxxx Xxxxx, Xxxxxx, Xxxx 00000 ("Andersons").
WHEREAS, NWE is in the business of processing corn into fuel ethanol, and
must purchase and handle 11,300,000 bushels of corn annually for this purpose,
and;
WHEREAS, Andersons is in the business of purchasing and selling corn into
commercial channels, and can originate the quantity and quality of corn required
by NWE for delivery to NWE's Hicksville, Ohio facility, ("Plant");
NOW, THEREFORE, the parties agree as follows:
(1) SUMMARY OF SERVICES: Andersons shall provide six basic services for NWE.
These services include grain origination, corn price-risk management, operations
support and trucklot management, corn management consulting, working capital (by
means of managing the hedge risk of cash grain contracts), and transportation
administration and rail management.
(2) QUANTITY AND QUALITY: Andersons shall sell to NWE, Eleven Million
Three-Hundred Thousand, (11,300,000), bushels of corn, plus or minus 10%
annually by entering into cash grain forward contracts, ("Contracts") with NWE
for delivery to Plant. Andersons makes no express warranty or implied warranty
of merchantability or of fitness for particular purpose for corn delivered on
Contracts. NWE acknowledges that it shall assess the quality of corn upon
delivery to Plant. NWE acknowledges that if corn does not meet NWE's quality
standards pursuant to the terms of this Agreement and associated Contract, NWE
may reject the corn, or may accept the corn with applicable quality discounts.
NWE further agrees that if it accepts the corn, then it acknowledges that the
corn meets quality standards of the associated Contract. NWE acknowledges that
it shall indemnify and hold Andersons harmless for any claims related to corn
quality pursuant to the provisions of paragraph 14 of this agreement.
(3) CORN BASIS PRICING: Andersons shall purchase corn from producers and/or
others at the lowest basis value F.O.B. Plant. Basis price for corn sold by
Andersons to NWE under Contracts shall be established at identical basis values,
time and quantities as corn purchased by Andersons from producers, and/or
others, resulting in "pass-through" basis pricing.
(4) TERM: The initial term of this Agreement shall be for four (4) years
commencing from the date of this Agreement. ("Initial Term") This Agreement
shall renew for an additional period of three (3) years after the Initial Term,
("Renewal Term"), unless either party sends written notice to the other party
that it wishes to terminate the Agreement no later than 90 days prior to the
last day of the Initial Term.
(5) SERVICE FEE: Andersons shall provide all services covered in Item (1) above,
and Items 8,9,10,11,12 and 13 for a monthly fee of Sixty-Eight Thousand Dollars,
($68,000). Five-Thousand Dollars, ($5,000), shall be payable on the date of
signing of the Agreement, with Sixty-Three Thousand Dollars ($63,000), to be
paid upon closing of the Initial Public Offering. Thereafter, Sixty-Eight
Thousand Dollars ($68,000), shall be due and payable on the first day that corn
is delivered to the Plant, and thence each month thereafter from the date of the
first delivery of corn.
(6) RISK MANAGEMENT COMMITTEE AND DIRECTION: NWE shall nominate and empower a
Risk Management Committee, ("Committee"), to be accountable for assessing risk
and providing corn pricing and other directions to Andersons' designated
representative. Andersons' representative will report to, and
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take direction from Committee. Andersons representative will be the designated
Manager of Ethanol Services.
(7) SECURITY: As security against NWE's inability to perform on its Contracts
and other obligations with Andersons, NWE shall provide Andersons with an
Irrevocable Letter(s) of Credit, ("Letter(s) of Credit"), containing terms, and
issued by a financial institution, both acceptable to Andersons at it's sole
discretion. Further, NWE agrees to execute any documentation required by such
financial institution to allow Andersons to communicate directly with the
financial institution about NWE or the Letter(s) of Credit. The amount of the
Letter(s) of Credit will be maintained at not less than Two Million Dollars,
($2,000,000), plus the net aggregate contract equity exposure of Contracts and
unpaid corn delivered to Plant. This Letter(s) of Credit shall be in place prior
to any pricing activity on forward contracts, or the delivery of corn to Plant,
and shall remain in place for the duration of the Initial Term and any Renewal
Term(s) of this Agreement. The Letter(s) of Credit shall contain provisions
which would allow Andersons to access the funds represented by the Letter(s) of
Credit in the event that NWE fails to respond to the demand for payment by
Andersons for delivered corn; if contract positions are cancelled pursuant to
Item 19c; or in the event that net aggregate contract equity exposure of
Contracts and unpaid corn exceeds the amount of the Letter(s) of Credit plus Two
Million Dollars, ($2,000,000), as stated above.
If at any time Andersons draws on the Letter(s) of Credit for any of the above
reasons, or if NWE's open Contract positions are such that NWE is not in
compliance with the provisions of this Item, NWE agrees within 1 business day as
defined in the National Grain and Feed Association ("NGFA"), Grain Trade Rules,
("Business Day"), to restore, or put in place the Letter(s) of Credit required
by this Item, as further described in Exhibit B.
(8) GRAIN ORIGINATION: Andersons shall originate all corn for ethanol processing
by NWE. Andersons will purchase corn primarily from producers, but also from
country elevators and commercial brokers. Andersons shall determine the
appropriate basis bids and policies to be utilized to originate corn in the most
effective manner. Andersons may purchase corn for delivery to Plant by rail or
truck from commercial grain shippers located outside of the nearby trade area.
This may include corn to be shipped from a facility owned or operated by
Andersons.
Andersons' objective in entering into Contracts is to originate the required
quantity of corn for sale to NWE under Contracts with required quality and
delivery terms at the lowest-cost basis value for NWE. Andersons shall employ
its extensive experience, contacts, market information, origination tools, and
information management systems to accomplish this objective.
Andersons shall offer a full range of corn origination services to producer
customers of NWE. This includes offering producers access to an extensive line
of cash grain forward contract and risk management tools. At delivery, title to
the cash grain will pass from the customer to Andersons, and in turn, to NWE.
NWE will pay Andersons for all cash grain deliveries on the second business day
following delivery by electronic funds transfer initiated by Andersons.
Andersons shall calculate the amount of this payment. NWE shall provide the
proper bank authorization to allow Andersons to initiate and complete the
payment via electronic fund transfer. Andersons will provide full documentation
of the amount paid by NWE. Should sufficient funds not be available or provided
to Andersons for full settlement upon demand, then Andersons may draw upon the
Letter(s) of Credit.
Ultimate cash grain basis risk associated with corn delivered to Plant shall
reside with NWE. Andersons shall maintain regular communication with Committee
to keep Committee apprised of changing market conditions related to corn price,
availability, delivery timing, quality and other factors affecting basis.
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Any non-delivery risk for producer cash grain forward contracts is exclusively
for Andersons' account. For additional specificity of cash grain forward
contract features, refer to Exhibit A - Grain Origination Services.
SCHEMATIC OF CORN CONTRACT / OWNERSHIP FLOW
[GRAPHIC]
(9) CORN PRICE-RISK MANAGEMENT: Andersons shall provide information to assist
Committee in making corn pricing, inventory management and other risk-management
decisions. Andersons shall provide Contract futures reference pricing rights to
NWE, which will operate independently of pricing decisions of producers. This
unique approach is intended to provide NWE with risk-management capability
consistent with NWE's individual risk-taking ability, cash flow requirements,
ethanol and distillers grains sales, and it's margin objectives.
Contract pricing features for Contracts include, but are not limited to HTA,
max-price, max-min, and automated pricing tools. All contract-pricing features
shall be part of the formula pricing of the cash grain purchase commitment of
NWE. NWE will pay Andersons amendment fees on Contracts according to the
schedule in Exhibit A- Corn Price-Risk Management.
Andersons shall provide NWE with rights to establish cash grain contract futures
reference prices for maximum corn usage over 24-months. E.g. pricings and
amendments on open cash forward contract positions shall not exceed Twenty-Two
Million Six-Hundred Thousand, (22,600,000) bushels total at any one time,
consistent with NWE providing an acceptable Letter(s) of Credit as outlined in
Item (7) above.
It is important to note that Committee is responsible for directing Andersons
with regard to corn pricing decisions for the ethanol operation. Andersons shall
provide supply and demand information, management reports, insight and
execution, but Committee assumes final decision-making responsibility. NWE shall
have full risk and financial responsibility of corn pricing outcomes. For
additional specificity of features, refer to Exhibit A - Corn price-risk
management.
(10) OPERATIONS SUPPORT AND TRUCKLOT MANAGEMENT: Andersons shall evaluate plant
corn demand, logistics, corn quality factors and other key information provided
by NWE. Working closely with Committee and operations personnel, Andersons shall
consider the implications of this information on corn origination plans and
values, and will provide management assessment and input to Committee. The focus
shall be to assist NWE to handle corn receipts efficiently and cost effectively;
to manage inbound corn quality and storage capacity; and to provide customer
service.
Andersons shall provide the computer system software interface with specified
truck weight and data hardware and software of NWE to link with Andersons'
proprietary grain accounting system. Andersons shall process all inbound corn
receipt data from Plant. Andersons shall further manage all aspects of contract
application and customer settlement functions for Andersons' cash grain forward
contracts with producers who deliver to Plant. Andersons shall maintain its
grain data management system to interface with specified system of NWE. NWE
shall maintain all truck scales and electronic weighing and data transmission
systems to provide the required interface and truck data transmission to
Andersons.
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Andersons shall also administer the application of quality premiums and/or
discounts to the corn delivered to Plant. For additional specificity, refer to
Exhibit A - Operations Support and Trucklot Management.
(11) GRAIN MANAGEMENT CONSULTING: Andersons shall provide management reports,
input on local crop availability and price, competitive market information and
analysis, and other grain market information, analysis and evaluation as
necessary and as assigned by Committee to contribute to the optimum efficiency
and profitability of the ethanol business. This role is largely advisory, and
may include other duties as agreed to between Andersons and Committee.
In addition to contracting for delivery of corn to Plant, an objective for
Andersons is to assist in the optimal utilization of the corn storage capacity
of NWE, as well as other corn handling and customer service capabilities of NWE.
For additional specificity of features, refer to exhibit A - Corn Management
Consulting.
(12) WORKING CAPITAL: Andersons shall manage the hedge risk of the open
Contracts with NWE until delivery of the corn occurs at Plant, and payment is
made to Andersons. This approach lessens base working capital requirements of
NWE, and relieves NWE from unpredictable cash flow demand associated with hedge
risk of cash grain contracts.
(13) TRANSPORTATION ADMINISTRATION AND RAIL MANAGEMENT: Andersons shall utilize
its in-house expertise to provide transportation and rail management services to
NWE. Services shall include truck insurance certificate tracking, rail and truck
freight xxxx auditing, rail contract negotiation and rail carrier management
services. For additional specificity of features, refer to Exhibit A -
Transportation Administration and Rail Management.
(14) INDEMNIFICATION:
a) Except as otherwise specifically provided herein, Andersons and NWE
shall mutually indemnify and hold each other harmless from any and all claims
resulting from or arising out of either party's negligence or intentional acts
associated with this Agreement.
b) Such indemnification shall extend to any and all liabilities, expenses,
costs, damages and/or losses of any kind, including reasonable attorney's fees
and all expenses in connection with defending against any claim resulting from,
or arising out of, any and all acts or omissions in connection with the services
and activities described.
(15) INSURANCE; INDEMNITY: Each party hereby agrees:
a) To indemnify, hold harmless, and take up the defense of each party, its
agents, its employees and its agents' employees, from and against all claims,
damages, losses and expenses, including attorney fees, arising out of or
resulting from the performance of the work and/or use of each party's real or
personal property, provided that any such claim, damage, loss or expense is
attributable to bodily injury, sickness, disease or death; or to injury to, or
destruction of, tangible property, including, but not limited to, the loss of
use resulting therefrom. Each party shall indemnify the other for any and all
payments made by each party to its employee(s) as a result of a workers
compensation claim of any such employee(s) arising from any negligent or
intentional act or omission of either party.
b) In case any direct or indirect damage is done to existing roads,
underground structures, sewers, etc. or to any operating equipment or fixtures,
by or because of the work, in consequence of any act or omission on the part of
each party, its employees, subcontractors, or agents, each party at its own cost
and expense, except when specified otherwise, shall restore such property, etc.,
to a condition equal to that existing before such damage was done.
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c) To be responsible for the security of all tools, equipment, and
materials under its possession throughout the duration of the Agreement. Any
tools, equipment, and materials that are lost or stolen shall be the
responsibility of party in possession.
d) Andersons and NWE each agree to maintain, during the Initial Term and
any Renewal Term of this Contract, the following insurance coverages:
i. Commercial General Liability Insurance, on an occurrence basis,
including contractual liability insurance, with limits not less
than:
General Aggregate $1,000,000
Products/Completed Operations Aggregate $1,000,000
Occurrence Limits $1,000,000
Personal Injury Limit $1,000,000
ii. Automobile Liability with a combined single limit not less than
$1,000,000 including: Owned, Non-owned and hired car coverage.
iii. Workers' Compensation coverage as required by applicable state
laws and Employer's Liability Insurance with limits not less than
$500,000.
e) To require each of the subcontractors of any party to maintain all
coverages and limits indicated in (a) and (b) above during the life of the
subcontract. In the event any subcontractor fails to comply with this Item, that
party shall assume the workers' compensation liability of said subcontractor.
f) Prior to the commencement of work, each party will furnish the other
party, a Certificate of Insurance stipulating that:
i. Each party has in force all coverages required above, in the
limits set out above, naming the other party, its subsidiaries
and affiliated companies, its employees and its agents, as
additional insureds.
ii. Each party shall have thirty (30) days' prior written notice of
any cancellation, material change, reduction of coverage or
non-renewal of coverage.
g) Each party's General Liability Insurance and Owner's and
Contractor/Service Provider's Protective Liability Insurance, if applicable,
shall include a waiver of rights of recovery (subrogation) against the other
party.
(16) LICENSING: Andersons and NWE shall each maintain a Grain Dealers license as
required by the State of Ohio for each party's activities as described in this
Agreement.
(17) AMENDMENT AND MODIFICATION: This Agreement may be amended, modified or
supplemented only by prior mutual agreement, confirmed in writing and signed by
the parties thereto.
(18) FORCE MAJEURE: Neither party shall be liable for any failure or delay in
performance of its obligations hereunder, (other than an obligation of payment),
where such failure or delay is caused by or results from an event beyond its
reasonable control, such as Acts of God or the public enemy, acts or demands of
any Government or any Governmental agency, strikes, lockouts, labor
disturbances, equipment malfunctions or breakdowns, fires, floods, accidents or
other unforeseeable causes.
(19) TERMINATION:
a) Upon the occurrence of one or more of the following events, the parties
shall attempt to reach a mutual agreement as to continued provision of
origination and consulting services.
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i. the insolvency of the other party;
ii. the filing of a voluntary or involuntary petition by or against
the other party in bankruptcy or for reorganization or
arrangement;
iii. the appointment of a receiver or trustee for the other party;
iv. the execution by the other party of an assignment for the benefit
of creditors;
v. the dissolution of the other party;
vi. NWE's failure to maintain Letter(s) of Credit as required by Item
7.
b) Either party shall, without prejudice to any other remedies, have the
right to terminate this Agreement if the other party has breached any provision
of this Agreement, other than those set forth above in Item 19a, and has failed
to cure such breach within thirty (30) days after being requested in writing to
do so by the other party.
c) On the next Business Day after either party gives notice to the other of
the occurrence of any of the events set forth above in Item 19a or 19b, and
unless otherwise mutually agreed to by the parties, Andersons shall
xxxx-to-market, cancel and liquidate all open and/or unsettled Contracts and/or
pricing features on Contracts for which Andersons has market exposure pursuant
to the Grain Trade Rules of NGFA. Andersons or NWE shall make financial
settlement of any market differences relating to cancellations within one
Business Day of cancellation. Andersons may collect any balances owed Andersons
as a result of such Contract cancellations from NWE's Letter(s) of Credit, as
described in Item 7.
(20) WAIVER OF COMPLIANCE, CONSENTS: Any failure of Andersons or NWE to comply
with any obligation, covenant, agreement or condition contained herein may be
waived in writing by Andersons or NWE, as the case may be, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any other failure.
(21) CONFIDENTIALITY: The terms of the Confidential Disclosure Agreements
between NWE and Andersons, dated November 19, 2001 ("Confidential Agreement"),
are hereby incorporated by reference herein for the term of this Agreement,
notwithstanding the fact that the term is longer than the term of the Parties'
confidentiality obligations set forth in the Confidential Agreement. For
purposes of the Confidential Agreement, along with confidential proprietary
information as defined in the Confidentiality Agreement, individual or aggregate
customer, transactional or financial information of NWE or Andersons that is
provided to either in conjunction with the terms and conditions of this
Agreement shall be deemed Confidential Information of NWE and Andersons,
respectively, regardless of whether marked as such.
(22) FINANCIAL STATEMENTS: During the Initial Term and any subsequent Renewal
Term, NWE and Andersons shall furnish each other with annual balance sheets and
profit and loss statements accompanied by the audit report of an independent
certified public accountant acceptable to both parties within 90 days of their
respective fiscal year ends. The parties shall further furnish each other with
all other financial information and reports reasonably requested by either at
any time, including quarterly or other interim balance sheets and profit and
loss statements within 45 days of such request. The parties shall furnish such
other information as either may reasonably request at any time concerning their
respective affairs. The parties warrant that all information furnished and to be
furnished is accurate, and that all financial statements that they have
furnished and hereafter may furnish, including operation statements and
statements of condition, are and will be prepared in accordance with Generally
Accepted Accounting Principles, consistently applied, and reasonably reflect,
and will reflect, as of their respective dates, results of the operations and
the true financial condition of the supplying party.
(23) RISK DISCLOSURE: NWE acknowledges that NWE has entered into this Agreement
based upon its own knowledge and judgement. NWE acknowledges that this Agreement
involves financial risks that
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NWE has independently evaluated prior to executing this Agreement. Andersons
will provide NWE with consulting services as described in this Agreement, which
Andersons believes will assist NWE in its ethanol processing business. Andersons
makes no representation or warranty, either express or implied concerning these
services. NWE acknowledges that Andersons' services are provided without express
or implied warranties or representations, including, but not limited to any
representation that such services will be of financial benefit to NWE in its
ethanol processing business.
(24) VALIDITY: Wherever possible, each provision herein shall be interpreted in
such manner as to be effective and valid under applicable law. In case any one
or more of the provisions contained herein shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect, such provision shall be
ineffective to the extent, but only to the extent, of such invalidity,
illegality or unenforceability without invalidating the remainder of such
invalid, illegal or unenforceable provision or provisions or any other
provisions hereof, unless such a construction would be unreasonable.
(25) EXPENSES AND OBLIGATIONS: All costs and expenses incurred in connection
with the consummation of the transactions contemplated by this Agreement by
Andersons or NWE shall be paid by Andersons or NWE, as the case may be.
(26) NOTICES: All notices and other communications hereunder shall be in
writing, and shall be deemed given upon the earlier of delivery thereof if by
hand or upon receipt if sent by mail (registered or certified, postage prepaid,
return receipt requested) or on the next business day after deposit if sent by a
recognized overnight delivery service or upon transmission if sent by facsimile
transmission (with request of assurance of receipt in a manner customary for
communication of such type) as follows:
If to NWE: If to Andersons:
Northwest Ethanol L.L.C. The Andersons Agriculture Group L.P.
X.X. Xxx 0000 000 Xxxx Xxxxxx Xxxxx
Xxxxxxxx, Xxxx 00000 P. O. Box 119
Attention: Risk Management Committee Xxxxxx, Xxxx 00000
Attention: Xxxxx XxXxxxxxxx
Fax: Fax: (000) 000-0000
With a copy to: With a copy to:
Xx. Xxx Xxxxxx, Esq. The Andersons, Inc.
000 Xxxxxxx Xx. Xxxxx 0000 000 Xxxx Xxxxxx Xx. X.X. Xxx 000
Xxxxxxxx, Xxxx 00000 Xxxxxx, Xxxx 00000
Attention: Legal Department
Fax: (000) 000-0000 Fax: (000) 000-0000
Or to such other address as such party may indicate by a notice delivered to the
other party hereto.
(27) GOVERNING LAW: This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio without regard to the
conflicts-of-laws rules thereof.
(28) COUNTERPARTS: This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same agreement, and shall become binding when one or more
counterparts have been signed by each of the parties hereto and delivered to
Andersons and NWE.
(29) HEADINGS: The article and section headings contained in this Agreement are
solely for the purpose of reference, are not part of the agreement of the
parties and shall not affect in any way the meaning or interpretation of this
Agreement.
(30) ENTIRE AGREEMENT: This Agreement embodies the entire agreement and
understanding of the parties hereto in respect of the subject matter contained
herein or therein. There are no agreements,
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representations, warranties or covenants other than those expressly set forth
herein or therein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
(31) ASSIGNMENT:
a) Neither party shall assign this Agreement without the prior written
consent of the other.
b) This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their successors and permitted assigns. Nothing is intended
or shall be construed to confer upon any person other than the parties and
successors and assigns permitted by this Section any right, remedy or claim
under or by reason of this Agreement.
c) Notwithstanding anything herein to the contrary, and unless waived in
writing by Andersons, NWE agrees that, upon any sale or transfer to a third
party or parties of the principal assets required for the conduct of its
business at the Plant, it shall be obligated as a condition of such sale or
transfer to obtain the written agreement of the party or parties to whom such
assets are being sold or transferred to accept an assignment of this Agreement
and to assume all of the obligations of NWE hereunder.
(32) DISPUTE RESOLUTION: The parties hereto agree that the sole remedy for
resolution of any and all disputes or controversies arising out of this
Agreement shall be through arbitration by NGFA, pursuant to the NGFA Arbitration
Rules. Andersons and NWE each waives any objection it may have now or hereafter
to the laying of the venue of any such action, and irrevocably submits to the
jurisdiction of the NGFA, and to confirmation of any award by the NGFA.
Judgement upon the arbitration award may be entered and enforced in any court
having jurisdiction thereof.
(33) ACCESS TO RECORDS: Andersons and NWE shall have reasonable access to all of
the books and records of the other to the extent that such access may reasonably
be required by Andersons or NWE in connection with matters relating to or
affected by this Agreement. Andersons or NWE shall afford such access, as the
case may be, upon receipt of reasonable advance notice and during normal
business hours. Notwithstanding the foregoing, nothing in this Section shall
entitle Andersons or NWE to access to the other party's confidential business
and financial information.
(34) FURTHER ASSURANCES: From time to time, during the term of this Agreement,
Andersons and NWE shall each execute and deliver, or cause to be executed and
delivered, to the other party, as the case may be, such licenses, certificates,
approvals, authorizations, agreements, contracts, leases, and other commitments
as are necessary to carry out the intent of this Agreement.
(35) ANNUAL REVIEW: Andersons and Committee shall meet annually, on or about 120
days prior to the anniversary date of this Agreement, to review ongoing
activities and results, to consider appropriate changes to day-to-day
management, and to consider any necessary amendments to the Agreement.
(36) NON-COMPETE: Andersons agrees that it shall provide no corn origination
services to entities with ethanol facilities located within a 50 mile radius of
Plant, so long as this Agreement is in effect.
(37) FINDERS FEE: Andersons agrees to pay NWE a finders fee amounting to
Twenty-five Thousand Dollars ($25,000), for assistance in securing any
additional origination agreements with ethanol plants. Such finder's fee shall
be paid to NWE in equal monthly installments, commencing with, and dependent
upon the payment of monthly fees by the other ethanol plant to Andersons.
(38) CONTINUATION: The continuation of this Agreement beyond the closing date of
the Initial Public Offering is conditional on NWE obtaining financing to
construct and operate Plant. NWE shall have the option to terminate this
Agreement if NWE fails to secure adequate financing to construct and operate the
Plant from its initial public offering. In the event NWE exercises this option,
NWE must send written
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notice, and tender the balance of $63,000 for the initial payment, described in
Item 5 to Andersons. Upon Andersons receipt of the $63,000 payment, this
Agreement shall terminate.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
NORTHWEST ETHANOL, L.L.C. THE ANDERSONS AGRICULTURE GROUP L.P.
By The Andersons, Inc.
By: /s/ Xxxxxxx X. Xxxxxxx By: /s/ Xxxxxx Xxxxxx Xxxx, Jr.
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Title: President Title: President Grain Division
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Date: February 7, 2002 Date: February 7, 2002
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EXHIBIT A
Specific functions and services to be provided to NWE by Andersons include, but
are not limited to the following:
GRAIN ORIGINATION SERVICES
- Assurred corn volume and delivery timing.
- Grain originator and General Manager of contract administration.
(Andersons employees)
- Cash market surveillance and analysis.
- Producer customer account management.
- Contract administration and settlement.
- Precision originations and sales management.
- Producer risk management and marketing education.
- Cash grain forward contracts; Delayed price; Spot pricing.
- Corn price-risk management tools for producer customers.
CORN PRICE-RISK MANAGEMENT
- Cash grain forward contracts.
- Basis and futures price analysis and information.
- Management and position reports.
- Corn price-risk management tools, including HTA, max price, max-min,
and Automated Pricing Tools.
- Contract amendment fee Schedule*: (good through first 12 months from
date of Agreement)
Basis / HTA reference roll: .7c per bushel
Max - Min 2.5c per bushel
Max Price 1.5c per bushel
Automatic Pricing 2c per bushel
*Amendment fees subject to applicable interest calculation.
*Amendment fee schedule may or may not be the same as for
other accounts of Andersons.
OPERATIONS SUPPORT AND TRUCKLOT MANAGEMENT
- Interface to electronic scale system.
- Electronic ticket processing.
- Data management and interface.
- Daily truck report and grain position report.
- Truck scale interface consulting.
- Daily receipt processing and disbursements.
- User training.
- Grain quality inspector training.
- Accounting information and support for enterprise accounting.
CORN MANAGEMENT CONSULTING
- Grain quality management consulting.
- Accounting and systems policy consulting.
- Inbound premium and discount consultation.
- Basis surveillance and risk management consultation.
- Grain quality surveillance, risk management and gross revenue
consultation.
- Grain production surveillance and consultation.
- Inbound corn scheduling, logistics and corn supply management.
- Summary annual origination reporting.
- Grain market management education.
TRANSPORTATION ADMINISTRATION AND RAIL MANAGEMENT
- Truck insurance certificate tracking.
- Freight xxxx auditing.
- Rail contract negotiation service.
- Rail carrier management services.
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EXHIBIT B
Net Aggregate Contract Equity Example
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DAY 1 -- CZ futures = $2.40 Priced position = 12,000,000 bu @ $2.40
average futures reference price.
Letter(s) of Credit Amount = $7,000,000
Net Aggregate Contract Equity = -0-
Letter(s) of Credit "draw" or required
Additional Letter(s) of Credit = -0- ($2,000,000 minimum maintained)
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DAY 50 -- CZ futures = $2.10 Priced position = 12,000,000 bu @ $2.40
average futures reference price.
Letter(s) of Credit Amount = $7,000,000
Net Aggregate Contract Equity = $3,600,000
Letter(s) of Credit "draw" or required
Additional Letter(s) of Credit = -0- ($2,000,000 minimum maintained)
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Day 100 CZ futures = $1.90 Priced position= 12,000,000 bu @ $2.40
average futures reference price.
Letter(s) of Credit Amount = $7,000,000
Aggregate Contract Equity = $6,000,000
Letter(s) of Credit "draw" or required
Additional Letter(s) of Credit = $1,000,000 ($2,000,000 needed to maintain minimum)
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11
Net Aggregate Contract Equity AND Unpaid Delivered Corn Example
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DAY 1 -- CZ futures = $2.40 Priced position = 12,000,000 bu @ $2.40
average futures reference price.
Letter(s) of Credit Amount = $7,000,000
Net Aggregate Contract Equity = -0-
Letter(s) of Credit "draw" or required
Additional Letter(s) of Credit = -0- ($2,000,000 minimum maintained)
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DAY 25 -- CZ futures = $2.20 Priced position = 12,000,000 bu @ $2.40
average futures reference price.
1,000,000 bushels of D/P corn delivered to plant
and unpaid.
Letter(s) of Credit Amount = $7,000,000
Net Aggregate Contract Equity = $2,400,000
Net Unpaid Corn Value = $2,200,000
Letter(s) of Credit "draw" or required
Additional Letter(s) of Credit = -0- ($2,000,000 minimum maintained)
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DAY 50 -- CZ futures = $2.10 Priced position = 12,000,000 bu @ $2.40
average futures reference price.
1,000,000 bushels of D/P corn delivered to plant
and unpaid.
Letter(s) of Credit Amount = $7,000,000
Net Aggregate Contract Equity = $3,600,000
Net Unpaid Corn Value = $2,100,000
Letter(s) of Credit "draw" or required
Additional Letter(s) of Credit = $700,000 ($700,000 needed to maintain minimum)
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Day 100 CZ futures = $1.90 Priced position= 12,000,000 bu @ $2.40
average futures reference price.
1,000,000 bushels of D/P corn delivered to plant
and unpaid.
Letter(s) of Credit Amount = $7,700,000
Aggregate Contract Equity = $6,000,000
Net Unpaid Corn Value = $1,900,000
Letter(s) of Credit "draw" or required
Additional Letter(s) of Credit = $2,200,000 ($2,200,000 needed to maintain minimum)
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12
