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
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