EXCLUSIVE ETHANOL MARKETING
AGREEMENT
This
EXCLUSIVE ETHANOL MARKETING AGREEMENT (this “
Agreement ”) is made as of the date first
written above, and entered into and effective as of the Effective
Date (as hereinafter defined), by and among Hawkeye Gold, LLC, a
Delaware limited liability company (“ Gold
”), and ABE Fairmont, LLC, a Delaware limited liability
company (“ Producer ”).
WHEREAS, Producer operates an ethanol plant located in or
around Fairmont, Nebraska (as the same may be expanded from time to
time, including any conversion involving the use of new technology,
the “ Plant ”);
WHEREAS, Producer desires to sell to Gold, and Gold desires
to purchase from Producer, all of the denatured fuel grade ethanol
produced at the Plant (the “ Ethanol ”),
all upon and subject to the terms and conditions set forth in this
Agreement; and
WHEREAS, capitalized terms used in this Agreement are used
herein as defined in Section 45 hereof.
NOW, THEREFORE, in consideration of the foregoing premises
and the mutual agreements set forth in this Agreement, and for
other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Gold and Producer hereby agree as
follows:
Section 1.
Purchase Orders .
a.
Purchase Orders Generally . Gold shall use its commercially
reasonable efforts to from time to time submit purchase orders or
purchase contracts (each a “ Purchase Order
”) to Producer for purchases constituting, in the aggregate,
the entire output of Ethanol from the Plant, each such Purchase
order to be upon and subject to the terms and conditions of this
Agreement. Gold’s analysis of the commercial reasonableness
of a Purchase Order may include, among other factors, the
performance and credit risk of the proposed end customer for the
Ethanol in question.
b.
Form of Purchase Orders . Gold may place a Purchase Order
with Producer orally, by email or by a written purchase order or
contract in a form mutually acceptable to Producer and Gold. The
terms of any Purchase Order may include a request for the sale and
delivery of Ethanol on a one-time basis or on a daily, weekly,
monthly, quarterly or other periodic basis. Each Purchase Order
shall be irrevocable by Gold during the Acceptance Period (as
defined below), unless and until it becomes a Rejected Purchase
Order. A Purchase Order may take the form of (A) a Direct
Fixed
Price Purchase
Order (as defined below), (B) a Direct Index Price Purchase
Order (as defined below), (C) a Terminal Storage Purchase
Order (as defined below), or (D) a transportation swap or
similar transaction that is mutually acceptable to Producer and
Gold. Each Purchase Order shall be subject to the terms and
conditions of this Agreement except, with respect to any Purchase
Order, to the extent expressly set forth in writing in such
Purchase Order.
i. Direct Fixed
Price Purchase Orders . Gold may place a Purchase Order with
Producer for a fixed quantity of Ethanol to be sold for a fixed
price-per-gallon to an end customer of Gold (each a “
Direct Fixed Price Purchase Order ”). Delivery
Payments for Direct Fixed Price Purchase Orders will be paid by
check of Gold or by wire transfer (according to Producer’s
preference) on or before the earliest to occur of the date that is
two Business Days after Gold receives payment for the relevant
Ethanol from Gold’s customer and the first Business Day that
is at least 20 days after the date on which the relevant
Ethanol was loaded at the Plant (as evidenced by the date on which
all Payment Documents for such shipment have been
delivered).
ii. Direct
Index Price Purchase Orders . Gold may place a Purchase Order
with Producer for a fixed quantity of Ethanol to be sold for based
on a formula agreed upon between Gold and an end customer which
formula takes into account standard benchmark daily prices for a
given period (for example: the average Platt’s New York
ethanol price-per-gallon for a given month), as specified in such
Purchase Order (each a “ Direct Index Price Purchase
Order ”). Gold and Gold’s end customer will
agree on a pro forma initial purchase price-per-gallon for Ethanol
delivered pursuant to a Direct Index Price Purchase Order (with
respect to such Purchase Order, the “ Pro Forma
Price ”). Delivery Payments of the applicable Pro
Forma Price for Direct Index Price Purchase Orders will be paid by
check of Gold or by wire transfer (according to Producer’s
preference) on or before the earliest to occur of the date that is
two Business Days after Gold receives payment for the relevant
Ethanol from Gold’s customer and the first Business Day that
is at least 20 days after the date on which the relevant
Ethanol was loaded at the Plant (as evidenced by the date on which
all Payment Documents for such shipment have been delivered);
provided , however , that Delivery Payments for the
sale of Terminal Storage Ethanol (as defined below) shall be paid
in accordance with Section 1(b)(iii) . For each
delivery of Ethanol made pursuant to a Direct Index Price Purchase
Order, Gold shall, no later than seven days after the end of the
applicable calendar month during which a Delivery Payment was paid
for such Ethanol, inform Producer of the Final Purchase Price. If
the Final Purchase Price is lower than the Pro Forma Price of such
Ethanol, Producer shall be liable for such difference (each, a
“ Producer True-Up Amount ”) and Gold
may, at its option, either (i)
2
invoice
Producer for such Producer True-Up Amount, in which event Producer
shall pay such Producer True-Up Amount to Gold within five days of
the date on which such invoice is delivered to Producer; or
(ii) include such Producer True-Up Amount in the Set-Off
Amount deductible from a future Delivery Payment or set off against
and withhold such Producer True-Up Amount from any Gold True-Up
Amounts then due and payable. If, however, the Final Purchase Price
is greater than the Pro Forma Price, then Gold shall, at its
option, (i) pay such difference (each, a “ Gold
True-Up Amount ”) to Producer within five days of
Gold’s determination thereof, or (ii) set off such Gold
True-Up Amount against any Set-Off Amount then due and owing to
Gold.
iii. Terminal
Storage Purchase Orders . Gold may place a Purchase Order with
Producer for a fixed quantity of Ethanol to be shipped to a
terminal location (with respect to such shipment, the “
Terminal Storage Ethanol ”) unsold to an end
customer with the intention of selling such Terminal Storage
Ethanol en route or after delivery to the terminal (“
Terminal Storage Purchase Orders ”). Gold will
determine and specify a Pro Forma Price for the Terminal Storage
Ethanol in any Terminal Storage Purchase Order, to be used for
Producer’s and Gold’s respective accounting purposes,
but such Pro Forma Price will not represent the final Delivery
Payment for such Terminal Storage Purchase Order. Gold will submit
one or more Direct Fixed Price Purchase Orders or Direct Index
Price Purchase Order for the Terminal Storage Ethanol when the
applicable shipment is en route or after delivery to the
terminal (each such Purchase Order, with respect to the Terminal
Storage Ethanol, a “ Supplemental Purchase
Order ”). Notwithstanding anything in this Agreement
to the contrary, any Delivery Payment for Terminal Storage Ethanol
will be paid by check of Gold or by wire transfer (according to
Producer’s preference) on or before the earliest to occur of
the date that is two Business Days after Gold receives payment for
the relevant Terminal Storage Ethanol from Gold’s customer;
and the first Business Day that is at least 20 days after the
date on which the relevant Terminal Storage Ethanol was actually
shipped or transferred to Gold’s end customer. Subject to
Gold’s duties pursuant to Section 16(a)(i) , in
the event that any Terminal Storage Ethanol remains unsold for more
than 30 days after delivery to the applicable storage
terminal, Gold shall have the right and authority to sell such
Terminal Storage Ethanol to such customer or customers as are
determined by Gold, and without any notice to or further approval
of Producer; provided , that upon consummation of any such
sale, Gold shall make a Delivery Payment for such Terminal Storage
Ethanol as though such sale were an Accepted Supplemental Purchase
Order.
3
Section 2.
Acceptance or Rejection of Purchase Orders . Producer
shall, in its sole discretion (based on Producer’s
commercially reasonable judgment), accept or reject each Purchase
Order, in whole, but not in part. Producer shall notify Gold of
whether Producer accepts or rejects each particular Purchase Order
within the time period specified in the Purchase Order, or if no
time period is specified in the Purchase Order, by 5:00 p.m. (Ames,
Iowa local time) on the date on which such Purchase Order is
submitted (in either case, the “ Acceptance
Period ”), and if Producer fails to notify Gold
within the Acceptance Period, Producer shall be deemed to have
rejected the Purchase Order. Gold reserves the right to require
Producer to accept or reject any particular Purchase Order in
writing. Producer hereby acknowledges that Gold will rely on
Accepted Purchase Orders in its decisions to enter into third-party
agreements for the sale of Ethanol to Gold’s end customers.
In the event that Producer is unable to deliver Ethanol (due to
unforeseen production shortfalls or otherwise) pursuant to the
terms of a given Accepted Purchase Order, Gold will use its
commercially reasonable efforts to restructure the corresponding
third-party agreement or otherwise procure replacement ethanol for
delivery to its end customer. If, as a result of Producer’s
failure to deliver, Gold incurs costs in replacing such Ethanol or
terminating such third-party agreement, Producer shall pay to Gold
all such replacement or other costs incurred by Gold in fulfilling
or terminating its obligations to the respective end customer
(collectively “ Replacement Costs
”).
Section 3.
Payment Documents . As a precondition to Gold’s
obligation to make the Delivery Payment for a given shipment of
Ethanol, Gold shall have received from Producer all meter
certificates, bills of lading and certificates of analysis (each in
proper form) for such shipment (collectively, the “
Payment Documents ”). Notwithstanding anything
in this Agreement to the contrary, if Gold has not received all
Payment Documents for a given Ethanol shipment by the applicable
payment date for such shipment, the Delivery Payment for such
shipment shall instead be made on the second Business Day following
the receipt of all Payment Documents for such shipment.
Section 4.
Optional Accelerated Delivery Payments . Producer may
elect to receive Delivery Payments on a consistent weekly basis for
a given calendar quarter (or quarters) by giving advance written
notice of such election to Gold at least 14 days prior to the
start of the first calendar quarter to which such notice applies,
and specifying the quarter(s) to which such notice applies (each
such notice, a “ Payment Acceleration Notice
”). Gold shall accept or reject each Payment Acceleration
Notice within 10 days of Gold’s receipt thereof, and if
Gold fails to notify Producer within such 10 day period, Gold
shall be deemed to have accepted such Payment Acceleration Notice.
Notwithstanding anything in this Agreement to the contrary, during
any calendar quarter for which a Payment Acceleration Notice has
been properly delivered to and accepted by Gold:
a.
Gold shall make Delivery Payments each Thursday for all Direct
Shipments that were previously delivered to Gold and all Terminal
Storage Shipments that were previously shipped to Gold’s
customers, in each case for which a Delivery Payment has not
previously been made and with respect to which the
Payment
4
Documents were
received by Gold on or before 11:59 p.m. on the preceding
Sunday (each such date of payment, a “ Payment
Acceleration Date ”);
b.
the Set-Off Amount that may be deducted from any Delivery Payment
shall include an amount equal to 0.41% (such percentage, or such
other percentage of which Gold may later notify Producer upon
10 days’ advance written notice, the “
Surcharge Percentage ”) multiplied by the
amount of such Delivery Payment (such amount the “
Acceleration Surcharge Amount ”);
and
c.
upon written notice to Producer of an increase in the Surcharge
Percentage, Producer may, at its option, terminate any
then-effective Payment Acceleration Notice at any time prior to the
effective date of such increased Surcharge Percentage.
Notwithstanding
anything in this Agreement to the contrary, Gold may, (i) upon
10 days’ advance written notice, terminate
Producer’s right to submit and receive the benefits of future
Payment Acceleration Notices, in which case, upon the expiration of
any then-effective Payment Acceleration Notice(s), all Delivery
Payments will be made pursuant to Section 1 , and
(ii) upon 10 days’ advance written notice terminate
any then-effective Payment Acceleration Notice, in which case all
remaining Delivery Payments will be made during such calendar
quarter pursuant to Section 1 .
Section 5.
Production and Loading Schedules .
a.
Production Schedules . From time to time as commercially
reasonable and necessary, Producer shall provide to Gold production
schedules that will to the best of Producer’s knowledge,
accurately specify the Ethanol production schedule at the Plant for
upcoming period of production broken down by week and by calendar
month. Producer shall also provide to Gold, on a daily basis by
8:30 a.m. (Ames, Iowa local time), a status report regarding that
day’s Ethanol inventory and production schedule for the
Plant. Producer shall utilize its best efforts to produce the
amount of Ethanol set out in its previously submitted production
schedules and shall in all events fulfill each Accepted Purchase
Order.
b.
Loading Schedules . Gold shall schedule the loading and
shipping of Ethanol which becomes the subject of an Accepted
Purchase Order, and shall provide Producer with daily or other
periodic loading schedules (each a “ Loading
Schedule ” and, collectively, the “
Loading Schedules ”) specifying the quantities
of Ethanol to be removed from the Plant each day, and specifying
the method of removal (i.e., by truck or rail), with sufficient
advance notice so as to allow Producer, acting in a commercially
reasonable manner, to timely perform Producer’s loading and
related obligations under this Agreement. Gold shall determine
whether each shipment of Ethanol shall be shipped by truck or
rail.
c.
Cooperation . To ensure that Gold can satisfy its
contractual commitments with Gold’s customers, Producer and
Gold shall cooperate in coordinating
5
production
schedules and loading schedules, including by promptly notifying
the other of any changes in, respectively, any production schedules
or loading schedules delivered under this Section 5 ;
provided, however, that Gold shall be entitled to act and rely upon
each Accepted Purchase Order, each Eight Week Schedule provided by
Producer and each loading schedule provided by Gold.
Section 6.
Delivery, Storage, Loading, Title .
a.
Delivery . The place of delivery for all Ethanol shall be
the Plant. Producer shall grant and allow Gold and the Carriers
access to the Plant in a manner and at all times reasonably
necessary and appropriate for Gold to take delivery of Ethanol in
accordance with the Loading Schedules.
b.
Producer to Provide Trucks and Railcars . Producer shall
utilize Producer’s best efforts to obtain access to and the
use of the number of trucks and railcars, through ownership, lease
or other arrangement, as Gold, pursuant to Section 7 ,
advises Producer may be necessary from time to time for the
shipment of the Ethanol (collectively, the “
Carriers ”). All Carriers must be approved by
Gold (such approval not to be unreasonably withheld). Producer
shall make the Carriers available to Gold for the loading, shipment
and transportation of Ethanol, and Gold shall have the right to
direct the Carriers for and on behalf of Producer. Producer shall
also be responsible for negotiating the rates and other terms of
all rail and freight contracts (the “ Rail
Contracts ”).
c.
Payment of Freight Costs by Producer . Producer shall be
responsible for, and shall timely pay, all fees, costs, expenses
and other amounts incurred or payable in connection with the
pick-up, shipment, delivery or other transportation of Ethanol to
Gold’s customers, or, in the event of an Accepted Terminal
Storage Purchase Order, to the storage facility or terminal in
question, including all amounts payable under the Rail Contracts
and to the Carriers and all freight, express bills, terminal fees,
insurance, taxes and all other related or similar costs, expenses,
charges, fees and other amounts (collectively, the “
Freight Costs ”). Producer shall provide Gold
with satisfactory evidence of the Freight Costs for each shipment
of Ethanol from the Plant (each, a “ Freight Cost
Report ”). If Gold pays any Freight Costs (“
Gold Freight Costs ”), Gold may, at its option,
either (i) invoice Producer for such Gold Freight Costs, in
which event Producer shall reimburse Gold for all such Gold Freight
Costs within 5 days of Producer’s receipt of an invoice
therefor from Gold; or (ii) include such Gold Freight Costs in
the Set-Off Amount deductible from future Delivery Payments,
pursuant to the definition of “Delivery Payment,”
and/or set off against and withhold such Gold Freight Costs from
any Gold True-Up Amounts payable hereunder.
d.
Storage . Gold may store the Ethanol that is the subject of
an Accepted Storage Purchase Order on such storage terms as are
determined by Gold. Producer acknowledges that all Ethanol that is
in storage will likely be in commingled storage with ethanol of
various third parties, including ethanol that Gold has purchased
from Other Clients. Gold shall have the right and authority to
treat all ethanol that Gold has in
6
storage,
including Ethanol in storage pursuant to an Accepted Storage
Purchase Order and whether or not in commingled storage, as
fungible, and to exchange or otherwise allocate any such ethanol
between or among Producer, Other Clients and third parties as Gold
determines to be necessary or appropriate to effectuate sales of
the ethanol, to meet any inventory residence time restrictions or
requirements, or otherwise.
e.
Payment of Allocated Storage Costs by Producer . On a
monthly basis, Gold shall either (i) invoice Producer for any
or all of its Allocated Storage Costs, in which event Producer
shall pay such Allocated Storage Costs to Gold within five days of
Producer’s receipt of an invoice therefor from Gold; or
(ii) include such Allocated Storage Costs in the Set-Off
Amount deductible from future Delivery Payments, pursuant to the
definition of “Delivery Payment,” and/or set off
against and withhold such Allocated Storage Costs from any Gold
True-Up Amounts payable hereunder.
f.
Delivery of Payment and Other Documents and Information
.
i. Producer shall
provide Gold with a certificate of analysis in form and content
consistent with industry standards, legal requirements, the
reasonable requirements of Gold’s customers and otherwise
reasonably acceptable to Gold for each truck and rail car of
Ethanol which is sold to Gold pursuant to this Agreement. Producer
shall also provide Gold each day, weekends and holidays excluded,
with meter certificates and bills of lading for the previous
day’s deliveries of Ethanol to Gold. The meter certificates
and bills of lading with respect to any deliveries that are made on
a weekend or a holiday will be provided to Gold on the next
succeeding Business Day. All meter certificates and bills of lading
provided by Producer must meet and comply with industry standards,
the reasonable requirements of Gold’s customers and the
requirements of all applicable laws, rules and regulations.
Producer shall provide Gold with a Freight Cost Report for each
shipment of Ethanol as soon as it is available, but in all events
prior to the Delivery Payment for the Ethanol in
question.
ii. Producer is
responsible for complying with, and generating all reports,
documents and information required under, all federal, state or
other laws, rules or regulations in any way related to volume
accounting or the tracking, labeling or other identification of
ethanol, including the renewable identification number requirements
of the U.S. Environmental Protection Agency.
iii. Producer
shall also provide Gold, within such time period as is reasonably
specified by Gold, with all such other documentation and
information as may from time to time become necessary or
appropriate under industry standards or applicable laws, rules or
regulations.
g.
Producer Storage Space . Producer shall provide storage
space at the Plant for a minimum of 10 days of Ethanol
production at the Plant (the “
Maximum
7
Storage ”), with the number of gallons of storage
of Ethanol available at the Plant based on the current production
capacity of the Plant being set forth below Producer’s
signature to this Agreement, and such storage space shall be
continuously available for Gold’s use for storage of Ethanol,
without charge to Gold.
i. Subject to
Section 6(b) and Section 6(c) , Gold shall
arrange for trucks or railcars of the Carriers to be at the Plant
for pick-up of Ethanol in accordance with the Loading
Schedules.
ii. Producer shall
timely provide and supply, without charge to Gold, all facilities,
equipment and labor necessary to load the Ethanol into a given
Carrier’s trucks or railcars at the Plant in accordance with
the Loading Schedules. Producer shall be liable and responsible for
all demurrage and other costs and expenses arising from
Producer’s failure to timely satisfy and meet Gold’s
loading schedules. Producer agrees that all railcars shall be
loaded to full visible capacity at the Plant and shall be sealed
prior to leaving the Plant. Producer shall maintain all loading
facilities and equipment at the Plant in accordance with industry
standards and in good and safe operating condition and repair,
subject to ordinary wear and tear and depreciation.
i.
Handling of Ethanol . Producer shall handle the Ethanol
during the loading process in a good and workmanlike manner and in
accordance with industry practices and Gold’s reasonable
requirements, including with respect to shrinkage in quantity.
Producer shall visually inspect all trucks and railcars for
cleanliness in order to avoid contamination of the Ethanol and
shall assure that the trucks and railcars are not overfilled at the
Plant.
j.
Title and Risk of Loss . The title to, and all risk of loss
of, all Ethanol which is purchased by Gold (including pursuant to
an Accepted Terminal Storage Purchase Order) shall automatically
pass from Producer to Gold at the time after both (i) the
Ethanol has crossed the loading flange between the Plant and the
truck or railcar, as the case may be, of the Carrier and
(ii) the Payment Documents for the applicable shipment have
been delivered to Gold.
Section 7.
Gold Consulting Regarding Trucks and Railcars
.
a.
Gold shall consult with Producer regarding the number of trucks and
railcars that may be needed from time to time to ship the Ethanol.
Gold shall not have any liability or responsibility with respect to
or for the lease or other arrangements of Producer regarding any
trucks or railcars or otherwise for or with respect to the
Carriers, including for any acts or omissions of the
Carriers.
8
b.
Gold shall utilize commercially reasonable efforts to coordinate
the scheduling of Producer’s railcars for Producer in a cost
effective manner, but Producer acknowledges that the efficient use
of Producer’s railcars depends on
 |