EXHIBIT 10.4
[********] Material has been
omitted pursuant to request for confidential treatment and such
material has been filed separately with the Securities and Exchange
Commission.
SERVICES AND GUARANTEE
AGREEMENT
THIS SERVICES AND GUARANTEE
AGREEMENT (this “Agreement”), effective as of the 23
rd day of June, 2005, is by and between CVP, LLC, a
limited liability company organized and existing under the laws of
the State of Wisconsin, (“CVP”), and BADGER STATE
ETHANOL, LLC, a limited liability company duly organized and
existing under the laws of the State of Wisconsin
(“BSE”).
WITNESSETH
WHEREAS, simultaneously with and as
a condition hereto, the following agreements are entered into by
the parties hereto: (i) that certain License Agreement between
BSE and CVP (the “License”); (ii) an AIA Document
A141-2004 construction agreement dated the date hereof (the
“AIA Agreement”) between AMG/GCI, LLC, an Iowa limited
liability company and BSE; (iii) a Corn Germ Marketing
Agreement dated the date hereof (the “Corn Germ Marketing
Agreement”) between Quality Technology
International, Inc., (“QTI”) and BSE; and
(iv) a Corn Protein Concentrate Marketing Agreement dated the
date hereof (the “Corn Protein Concentrate Marketing
Agreement”) between QTI and BSE (collectively, with this
Agreement, the “Transaction Documents”);
WHEREAS, taken as a whole, the
Transaction Documents constitute the design and buildout of a
[********] ethanol facility at BSE’s facility in Monroe,
Wisconsin (the “Project”);
WHEREAS, in order to incentive BSE
to enter into the Transaction Documents, CVP has agreed to
guarantee the performance of the Project on the standards set forth
herein;
NOW, THEREFORE, in consideration of
the mutual promises hereinafter set forth, the parties agree as
follows:
ARTICLE 1
Definitions
(1.1)
The defined terms in the License
Agreement shall have the same meanings when used herein and shall
apply to this Agreement.
(1.2)
The terms defined in
Schedule A attached hereto shall, for all purposes of
this Agreement, have the meanings specified in said
Schedule A .
[********] Material has been omitted
pursuant to request for confidential treatment and such material
has been filed separately with the Securities and Exchange
Commission.
ARTICLE 2
Consideration and Scope of
Work
(2.1)
Consideration
. CVP hereby agrees to perform
all of its obligations required by this Agreement and the License
(collectively, the “Core Agreements”).
(2.2)
Description of
Work .
CVP shall provide the
engineering and other services required of it as set-forth and
described in the Schedules B and D attached
hereto.
ARTICLE 3
Application of Process
Guarantees
(3.l)
The Process Guarantees (as defined
in Article 4) shall apply to BSE’s Monroe, Wisconsin
facility (the “Plant”) only when the Project is
completed including without limitation, the procurement and
installation of all equipment in accordance with the engineering
design specifications and instructions.
(3.2)
When the Process Guarantees are
deemed met and satisfied as provided in Article 6 or
Schedule C, such Process Guarantees shall no longer apply to
the Plant and CVP’S obligations with respect thereto shall be
deemed satisfied in full and shall cease.
ARTICLE 4
Process
Guarantee
CVP guarantees that during the
performance test described in Article 6 (the
“Performance Test”), the Plant will process fresh
substrate charge to produce corn germ, corn fiber, corn protein
concentrate, CO 2 , and “anhydrous alcohol,”
according to the specifications set forth in Schedule C
attached hereto (the “Process Guarantee”). CVP
acknowledges that, during the initial Start-up, the Plant will
temporarily produce HI-PRO DDGS which will have similar
specifications to the DDGS being produced currently by BSE,
however, such temporary production of HI-PRO DDGS is not part of
the Process Guarantee or the Performance Test. In the event
that the Plant does not, during the Performance Test, meet or
exceed the Process Guarantee, then CVP covenants and agrees to take
any reasonable action necessary, at its own expense, to modify or
adjust the Project such that the Process Guarantee is met.
CVP hereby represents and warrants that the Project as contemplated
by the Core Agreements shall not adversely effect the Plant’s
current operations including the production of ethanol or carbon
dioxide (including, without limitation, causing the Plant to cease
operations at any one time for more than 72 hours in
aggregate). As BSE’s sole and exclusive remedy, should
the Plant not meet the Process Guarantee at the conclusion of the
last of the Performance Tests permitted under Article 6
hereof, subject to the parameters set forth in Schedule D
hereto, due to material fault of CVP, CVP shall, within sixty (60)
days after the submission by CVP of the results of such Performance
Test as required under Article 6 hereof, pay to BSE as
liquidated damages, at the office of BSE designated on Page 1
of this Agreement, in lawful money of the United States of America,
a sum of money calculated pursuant to Schedule C.
ARTICLE 5
Start-Up Assistance;
Training
(5.1)
Start-up shall occur in accordance
with the Master Schedule approved by BSE.
“Start-up” shall mean the commencement of operations by
the Plant. CVP shall give at least thirty (30) days notice in
writing to BSE specifying the estimated date of completion of
the
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Upgrade of the Plant. CVP’S
senior technologists shall be in attendance at the Plant at least
two (2) weeks prior to Start-up, as necessary, to inspect the
Plant to determine if the Plant is ready to operate and that the
conditions as set forth in Article 3.1 have been
met.
(5.2)
CVP shall use its best efforts to
assist BSE in the start-up of the Plant in order to establish
operating conditions, and to carry out the Performance Test;
provided, however, that regardless of the effort used, the Process
Guarantee shall be absolute. CVP shall supervise and provide
technical and operational training for representatives of BSE with
respect to the operation of the Plant consistent with the Licensed
Process to ensure that such representatives of BSE are fully
trained in the operation of the Plant consistent with the Licensed
Process. CVP’S duty of supervision and training under
this Section is limited to the operation of Plant consistent
with the Licensed Process and does not include, or extend to any
other matters, including but not limited to employee safety,
employee conduct or general machine operation. CVP’S
duty to provide training and supervision shall terminate upon
completion of satisfactory training of BSE’s representatives
and the successful completion of a Performance Test, unless
otherwise extended by mutual agreement of BSE and CVP.
Notwithstanding the above, CVP shall be responsible for managing,
directing and coordinating the Performance Test.
(5.3)
As part of CVP’S training of
representatives of BSE, and prior to the commencing of Start-up
operations, CVP shall provide a Process Operation Manual, as
described in Schedule A attached hereto, that will set-forth
the proper operation and maintenance of the Plant consistent with
the Licensed Process.
ARTICLE 6
Performance
Test
(6.l)
After the Start-up described in
Article 5 and the Plant having reached nameplate capacity of
52 million gallons per year for a period of seven
(7) consecutive days (as calculated on the basis of a 365 day
year), but not later than ninety (90) days from the later of the
date of completion of the Start-up, CVP shall notify BSE in writing
that the Plant is ready for the Performance Test (the
“Performance Test Notification”).
(6.2)
Upon receipt of the Performance Test
Notification, BSE shall have the obligation of calling for the
Performance Test by setting a date for same not less than seven
(7) days nor more than thirty (30) days from the date of the
Performance Test Notification. Delays in the beginning of the
Performance Test caused by other portions of the Plant outside the
“Battery Limits” of the Licensed Process as described
on Schedule D attached hereto will not be deemed to
constitute a material cause for a delay of the Performance Test,
unless agreed to by CVP and BSE.
(6.3)
The Performance Test shall be
conducted by CVP, provided that BSE shall cause its representatives
to take all reasonable actions to assist CVP in satisfactorily
completing the Performance Test. The Performance Test shall
be deemed to have been met as soon as the Plant has satisfied the
requirements of the Process Guarantee and
Section 6.5.
(6.4)
In the event that the Plant fails a
Performance Test then CVP shall promptly take all actions
reasonably necessary to repair the deficiency which resulted in
such failure at its own
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expense. Thereafter, CVP shall
reasonably promptly conduct additional Performance Tests and make
additional repairs or modifications as reasonably necessary and at
its own expense until the Plant successfully meets the Process
Guarantee.
(6.5)
Within two (2) business days
after completion of each Performance Test, CVP shall submit to BSE
in writing the results thereof. If CVP determines that the
Process Guarantee has been met, then CVP shall certify in writing
that the Process Guarantee relating to such Performance Test has
been met in all regards (the “Certification”). Such
Process Guarantee shall be deemed to have been met if CVP provides
the Certification and if BSE,
