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EXHIBIT 10.1
ETHANOL MARKETING AGREEMENT
BY AND BETWEEN
FRONT RANGE ENERGY, LLC
AND
KINERGY MARKETING, LLC
DATED AS OF AUGUST 19TH, 2005
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TABLE OF CONTENTS
PAGE
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ARTICLE I DEFINITIONS;
INTERPRETATION..........................................1
1.1
Definitions..................................................1
1.2
Interpretation...............................................4
ARTICLE II MARKETING
ACTIVITIES................................................5
2.1 Bilateral
Transactions.......................................5
2.2
Storage......................................................6
2.3
Obligations of the Project Company...........................6
2.4
Transaction Reports..........................................7
2.5
Back-to-Back Transactions....................................7
2.6
Netting......................................................8
2.7 Title;
Delivery Point; Nominations; Measurement..............8
ARTICLE III
PAYMENTS...........................................................9
3.1 Fees and
Payments............................................9
3.2 Overdue
Payments; Indemnity Payments.........................9
3.3 Billing
Dispute..............................................9
3.4
Audit.......................................................10
ARTICLE IV TERM;
TERMINATION..................................................10
4.1
Term........................................................10
4.2
Termination by Kinergy......................................10
4.3
Termination by the Project Company..........................11
4.4 Change of
Control...........................................11
4.5 Effect of
Termination.......................................12
ARTICLE V LIMITATIONS ON
LIABILITY............................................12
5.1 Maximum
Liability of Kinergy................................12
5.2 No
Consequential or Punitive Damages........................12
ARTICLE VI
INDEMNIFICATION....................................................13
6.1 The
Project Company's Indemnity.............................13
6.2 Kinergy's
Indemnity.........................................13
ARTICLE VII REPRESENTATIONS AND
WARRANTIES....................................13
7.1 Kinergy's
Representations and Warranties....................13
7.2 The
Project Company's Representations and Warranties........14
ARTICLE VIII FORCE
MAJEURE....................................................15
8.1
Definition..................................................15
8.2
Effect......................................................15
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8.3
Limitations.................................................16
ARTICLE IX DISPUTE
RESOLUTION.................................................16
9.1 Attempts
to Settle..........................................16
9.2 Resolution
by Expert........................................16
9.3
Arbitration.................................................17
9.4
Consequential and Punitive Damages..........................17
9.5 Finality
and Enforcement of Decision........................17
9.6
Costs.......................................................17
9.7 Continuing
Performance Obligations..........................17
ARTICLE X
CONFIDENTIALITY.....................................................18
ARTICLE XI ASSIGNMENT AND
TRANSFER............................................18
ARTICLE XII FURTHER ASSURANCES; REQUESTS OF
FINANCING PARTIES.................18
12.1
Further Assurances..........................................18
12.2
Requests of Financing Parties...............................18
ARTICLE XIII
MISCELLANEOUS....................................................19
13.1
Entire Agreement............................................19
13.2
Counterparts................................................19
13.3
Survival....................................................19
13.4
Severability................................................19
13.5
Governing Law...............................................19
13.6
Binding Effect..............................................19
13.7
Notices.....................................................20
13.8
Amendment...................................................20
13.9
No Implied Waiver...........................................20
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ETHANOL MARKETING AGREEMENT
This ETHANOL
MARKETING AGREEMENT ("Agreement") is entered into by and
between FRONT RANGE ENERGY, LLC, a Colorado
limited liability company (the
"Project Company"), and KINERGY MARKETING,
LLC, an Oregon limited liability
company ("Kinergy"), as of this [31] day of
August, 2005. The Project Company
and Kinergy are each individually referred
to herein as a "Party", and
collectively are referred to herein as the
"Parties".
RECITALS
A. The Project
Company is developing an approximately [40] million
gallon-per-year denatured fuel ethanol
production facility in Windsor, Colorado
(the "Facility") and the Project Company
has requested that Kinergy provide
denatured fuel ethanol marketing services
for the Facility.
B. Kinergy
desires to provide such marketing services in accordance with
and subject to the terms and conditions of
this Agreement.
AGREEMENT
NOW, THEREFORE,
in consideration of the agreements and covenants
hereinafter set forth, and intending to be
legally bound, the Parties hereto
covenant and agree as follows:
ARTICLE I
DEFINITIONS; INTERPRETATION
1.1 Definitions.
The following terms shall have the meanings set forth
below when used in this Agreement:
"Account" has
the meaning given to such term in Section 2.1(e).
"Act of
Insolvency" means, with respect to any Person, any of the
following: (a) commencement by such Person
of a voluntary proceeding under any
jurisdiction's bankruptcy, insolvency or
reorganization law; (b) the filing of
an involuntary proceeding against such
Person under any jurisdiction's
bankruptcy, insolvency or reorganization
law which is not vacated within 60 days
after such filing; (c) the admission by
such Person of the material allegations
of any petition filed against it in any
proceeding under any jurisdiction's
bankruptcy, insolvency or reorganization
law; (d) the adjudication of such
Person as bankrupt or insolvent or the
winding up or dissolution of such Person;
(e) the making by such Person of a general
assignment for the benefit of its
creditors (assignments for a solvent
financing excluded); (f) such Person fails
or admits in writing its inability to pay
its debts generally as they become
due; (g) the appointment of a receiver or
an administrator for all or a
substantial portion of such Person's
assets, which receiver or administrator, if
appointed without the consent of such
Person, is not discharged within 60 days
after its appointment; or (h) the
occurrence of any event analogous to any of
the foregoing with respect to such Person
occurring in any jurisdiction.
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"Affiliate"
means, with respect to any Person, any other Person directly or
indirectly controlling or controlled by or
under direct or indirect common
control with such Person. For purposes of
this definition, "control", when used
with respect to any Person, means the power
to direct or cause the direction of
the management and policies of such Person,
directly or indirectly, whether
through the ownership or voting securities,
by contract or otherwise.
"Agreement" has
the meaning given to such term in the preamble hereto.
"Bilateral
Transaction" means, with respect to each sale of Ethanol
produced at the Facility by Project
Company, a transaction entered into by
Kinergy with one or more Third Parties
consisting of one or more forward sales
of Ethanol.
"Business Day"
means any day other than a Saturday, Sunday or a day on
which commercial banks in Windsor, Colorado
are required or authorized to be
closed.
"Commercial
Operations Date" means the date of "Substantial Completion"
under and as defined in the [CONSTRUCTION
AGREEMENT].
"Construction
Agreement" means the Design-Build Agreement, dated March
24th, 2005, by and between Project Company
and Contractor, including all
amendments thereto and all other agreements
by and between Project Company and
Contractor for the engineering, procurement
and construction of the Facility.
"Contractor"
means ICM, a Kansas LLC.
"Dispute" means
a dispute, controversy or claim.
"Ethanol" means
denatured fuel ethanol produced by the Facility satisfying
the American Society for Testing and
Materials (ASTM) D4806 specifications for
denatured fuel ethanol.
"Expert" means
an expert having sufficient technical expertise to address
the matter subject to a Dispute.
"Facility" has
the meaning given to such term in the recitals hereto.
"Financing
Documents" means any and all loan agreements, credit
agreements,
reimbursement agreements, notes,
indentures, bonds, security agreements, pledge
agreements, mortgages, guarantee documents,
intercreditor agreements,
subscription agreements, equity
contribution agreements and other agreements and
instruments relating to the financing (or
refinancing) of the development,
engineering, design, construction,
operation, ownership and maintenance of the
Facility.
"Financing
Parties" means the banks, lenders, noteholders and/or other
financial institutions (or an agent or
trustee thereof) party to the Financing
Documents.
"Force Majeure
Event" has the meaning set forth in Section 8.1.
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"Good Industry
Practice" means any of the practices, methods and acts
engaged in or approved by a significant
portion of the ethanol production or
marketing (as the case may be) industry
during the relevant time period, or any
of the practices, methods and acts which,
in the exercise of reasonable judgment
in light of the facts known at the time the
decision was made, could have been
expected to accomplish the desired result
at a reasonable cost consistent with
good business practices, reliability,
safety and expedition. Good Industry
Practice is not limited to a single,
optimum practice, method or act to the
exclusion of others, but rather is intended
to include acceptable practices,
methods or acts generally accepted in the
region.
"Governmental
Authority" means any United States federal, state, municipal,
local, territorial, or other governmental
department, commission, board, bureau,
agency, regulatory authority,
instrumentality, judicial or administrative body.
"Incentive Fee"
means, for each Payment Period and with respect to Kinergy,
the product of (a) 1.0% MULTIPLIED BY (b)
the difference between (i) the
aggregate amount of the Purchase Price for
such Payment Period MINUS (ii) the
aggregate amount of Transaction Costs for
such Payment Period.
"Kinergy" has
the meaning given to such term in the preamble hereto.
"Kinergy
Indemnified Person" has the meaning given to such term in
Section
6.2.
"Law" means any
law, statute, act, legislation, bill, enactment, policy,
treaty, international agreement, ordinance,
judgment, injunction, award, decree,
rule, regulation, interpretation,
determination, requirement, writ or order of
any Governmental Authority.
"Liabilities"
has the meaning given to such term in Section 6.1.
"Material
Bilateral Transaction" means any Bilateral Transaction having a
term in excess of one-year or pursuant to
which the aggregate gross payments
reasonably anticipated to be made by the
applicable Third Party to Kinergy
thereunder exceed $10,000,000 per calendar
year.
"Monthly Date"
means the last Business Day of each calendar month.
"Party" or
"Parties" has the meaning given to such term in the preamble
hereto.
"Payment Period"
has the meaning given to such term in Section 3.1(a).
"PEI" has the
meaning given to such term in the recitals hereto.
"Permits" means
all permits, authorizations, registrations, consents,
approvals, waivers, exceptions, variances,
orders, judgments, written
interpretations, decrees, licenses,
exemptions, publications, filings, notices
to and declarations of or with, or required
by, any Governmental Authority, or
required by any Law, and shall include all
environmental and operating permits
and licenses that are required for the full
use, occupancy, zoning and operation
of the Facility.
"Person" means
and includes natural persons, corporations, limited
liability companies, limited partnerships,
general partnerships, joint stock
companies, joint ventures, associations,
companies, trusts, banks, trust
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companies and other organizations, whether
or not legal entities, Governmental
Authorities and any other entity.
"Prime Rate"
means the rate per annum listed as the "Prime Rate" in the
"Money Rates" section of The Wall Street
Journal from time to time.
"Project
Company" has the meaning given to such term in the preamble
hereto.
"Project Company
Indemnified Person" has the meaning given to such term in
Section 6.1.
"Purchase Price"
means, subject to Section 3.1(a), the aggregate amount of
gross payments received (or deemed
received) by Kinergy during such Payment
Period from the applicable Third Parties in
respect of such Bilateral
Transactions.
"Third Party"
means any Person (other than PEI or a subsidiary thereof)
that enters into a Bilateral Transaction
with Kinergy.
"Transaction
Costs" means, for each Payment Period and with respect to
Kinergy, all reasonable, out-of-pocket and
documented costs and expenses (other
than taxes on net income, business taxes
paid by Kinergy, or tax on the sale of
Ethanol (such sales taxes to be paid
directly by the Project Company), but
including all other taxes and governmental
charges and assessments) incurred by
or on behalf of Kinergy in connection with
the marketing of Ethanol pursuant to
this Agreement during such Payment Period,
including truck, rail and terminal
costs for the transportation and storage of
the applicable Ethanol to the
applicable Third Party and reasonable,
documented out-of-pocket expenses
incurred in connection with the negotiation
and documentation of the applicable
sales agreement between Kinergy and the
applicable Third Party.
1.2
Interpretation. The following interpretations and rules of
construction
shall apply to this Agreement:
(a) titles and headings are for convenience only and will not
be
deemed part of this Agreement for purposes
of interpretation;
(b) unless otherwise stated, references in this Agreement to
"Sections" or "Articles" refer,
respectively, to Sections or Articles of this
Agreement;
(c) "including" means "including, but not limited to", and
"include"
or "includes" means "include, without
limitation" or "includes, without
limitation";
(d) "hereunder", "herein", "hereto" and "hereof", when used in
this
Agreement, refer to this Agreement as a
whole and not to a particular Section or
clause of this Agreement;
(e) in the case of defined terms, the singular includes the plural
and
vice versa;
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(f) unless otherwise indicated, all accounting terms not
specifically
defined shall be construed in accordance
with generally accepted accounting
practices in the United States;
(g) unless otherwise indicated, each reference to a particular Law
is
a reference to such Law as it may be
amended, modified, extended, restated or
supplemented from time to time, as well as
to any successor Law thereto;
(h) unless otherwise indicated, references to agreements shall
be
deemed to include all subsequent
amendments, supplements and other modifications
thereto; and
(i) unless otherwise indicated, each reference to any Person
shall
include such Person's successors and
permitted assigns.
ARTICLE II
MARKETING ACTIVITIES
2.1 Bilateral
Transactions. (a) Subject to the terms hereof, the Project
Company hereby grants Kinergy the exclusive
right to market and sell all of the
Project Company's Ethanol (which, as of the
date hereof, is estimated to be
approximately 40 million gallons-per-year).
Kinergy shall use its reasonable
commercial efforts to solicit, negotiate
and enter into, and Kinergy shall
perform, Bilateral Transactions with Third
Parties, and such Bilateral
Transactions shall be served by the
Facility. Other than as set forth in
Sections 2.1(e) and 2.7 below, Kinergy
shall have absolute discretion in the
solicitation, negotiation, administration
(including the collection of payments)
and execution of Bilateral Transactions and
all sales of Ethanol produced by the
Facility shall be effectuated by Bilateral
Transactions. The Project Company
hereby grants Kinergy the power and
authority necessary to perform its
obligations and exercise its rights
hereunder.
(b) As further described in Sections 2.3, 2.5 and 2.7 below and
except
as otherwise provided herein, the Project
Company shall provide Ethanol to
Kinergy free and clear of all liens and
encumbrances and otherwise operate the
Facility as required to allow Kinergy to
perform such Bilateral Transactions.
(c) In the event of a breach or default by a Third Party under
any
Bilateral Transaction, Kinergy shall (i)
promptly notify the Project Company of
any such breach and default and provide the
Project Company from time to time
with reasonably detailed information in
respect of the same (including copies of
all written communications in respect
thereof) and (ii) at the Project Company's
sole cost and expense and at the direction
of the Project Company, use
reasonable commercial efforts to exercise
all rights and remedies available to
it (including the commencement of
litigation) with respect to such breach or
default.
(d) Kinergy shall perform its obligations hereunder and under
Bilateral Transactions in accordance with
this Agreement, applicable Laws,
applicable Permits and Good Industry
Practice and with the intent to maximize
the proceeds generated from the sale of
Ethanol. Each of the Parties
acknowledges that the Commercial Operations
Date has not occurred as of the date
of this Agreement and, accordingly, Kinergy
may not be able to solicit,
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negotiate and/or enter into Bilateral
Transactions until the Commercial
Operations Date has occurred or is
anticipated to occur in the then reasonable
near future.
(e) Notwithstanding anything to the contrary herein, Kinergy shall
(i)
not enter into any Bilateral Transaction
with any Third Party that is the
subject of an Act of Insolvency, (ii) not
enter into any Bilateral Transaction
that permits the applicable Third Party to
pay for the Ethanol purchased under
such Bilateral Transaction on a date which
is more than 30 days after the
Monthly Date in which such Ethanol is
delivered to such Third Party, (iii) not
enter into any Material Bilateral
Transaction without the prior consent of the
Project Company, (iv) not enter into any
Bilateral Transactions which provide
for the provision of Ethanol in excess of
the amount of Ethanol available from
the Facility (after giving effect to the
Project Company's or Kinergy's existing
contractual obligations and the scheduling
provisions set forth in Section
2.7(b) below), (v) not enter into any
Bilateral Transaction which does not
excuse Kinergy from performing its
obligations thereunder as a result of a Force
Majeure Event (vi) not enter into any
Bilateral Transaction during such time as
the Facility cannot provide Ethanol due to
a mechanical breakdown (including
forced outage of the Facility), (vii) enter
into Bilateral Transactions in its
name (and not the name of the Project
Company) and (viii) require that each
Third Party make all payments under the
applicable Bilateral Transaction to a
segregated bank-account in the name of
Kinergy (the "Account") and Kinergy shall
cause the proceeds of all such Bilateral
Transactions received by it to be
deposited into the Account.
(f) Each of the Parties agrees that Kinergy shall not request that
the
Project Company deliver Ethanol to Kinergy
(or any Third Party designated by
Kinergy) unless, as of the scheduled date
of delivery, Kinergy has entered into
a Bilateral Transaction with respect to
such Ethanol.
2.2 Storage.
Kinergy acknowledges that the Project Company has only limited
storage capacity and Kinergy agrees that it
shall take any Ethanol requested by
Kinergy pursuant to the operating protocol
established pursuant to Section
2.7(b) within [SEVEN] days of the time that
the Project Company has made such
Ethanol available to Kinergy. In the event
that stored Ethanol exceeds storage
capacity more than two times in any 60-day
period or for longer than 24 hours at
any given time, the Project Company shall
have the right, in addition to any
other claims available to the Project
Company under applicable Laws, to
terminate for cause this Agreement. A
default under this Section shall be
communicated to Kinergy's designated
representative by facsimile or email.
2.3 Obligations
of the Project Company. (a) The Project Company shall
provide Kinergy with all information
reasonably requested by Kinergy, and the
Project Company shall assist Kinergy as
reasonably requested in the
solicitation, negotiation and performance
of Bilateral Transactions.
(b) Notwithstanding anything to the contrary herein, the
Project
Company shall not be responsible for the
delivery of any Ethanol to Kinergy
during any periods of scheduled Facility
maintenance (unless and to the extent
the applicable Ethanol is available to be
delivered to Kinergy from the Project
Company's storage facilities); provided,
that (i) Kinergy shall have received at
least ten Business Days prior notice of
such scheduled maintenance, (ii) such
maintenance shall have been scheduled in
accordance with the operating protocol
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referred to in Section 2.7(b) below and
(iii) Kinergy has not, prior to the
receipt of any such notice, entered into
binding Bilateral Transactions which
require Kinergy to supply Ethanol to Third
Parties during such scheduled
maintenance periods.
(c) If on any day, the Project Company is unable to perform its
obligations to deliver Ethanol under this
Agreement due to a mechanical
breakdown (including a forced outage of the
Facility) that is not a Force
Majeure Event and such mechanical breakdown
has continued for more than five
consecutive days, the Project Company
shall, at its option and provided that the
Project Company provides Kinergy with
prompt notice of its intent to exercise
such option, procure replacement denatured
fuel ethanol to be delivered to the
Third Party under the applicable Bilateral
Transaction. In such event, if and
only if the Parties reach agreement as to
an alternative delivery point, the
Project Company shall deliver to Kinergy
replacement denatured fuel ethanol in a
quantity sufficient to meet the contract
quantity of such Bilateral Transaction
at such alternate point (and the Project
Company shall be responsible for all
transportation costs associated therewith).
In all other instances, the Project
Company shall be responsible for any
damages incurred by Kinergy in connection
with Kinergy's failure to perform under the
applicable Bilateral Transaction as
a result of such mechanical breakdown (it
being acknowledged and agreed that
Kinergy shall use commercially reasonable
efforts to mitigate the effects of any
such mechanical breakdown and the Project
Company's resulting in ability to
deliver Ethanol including the
identification and procurement (at the Project
Company's cost) of potential replacement
denatured fuel ethanol).
2.4 Transaction
Reports. (a) Within thirty days after each Monthly Date
occurring after the Commercial Operations
Date, Kinergy shall deliver to the
Project Company a written summary of the
Bilateral Transactions which were
entered into or performed, in whole or in
part, during the month ending on such
Monthly Date. Such summary shall specify,
among other things, (i) the amount of
Ethanol sold by Kinergy under Bilateral
Transactions during such month, (ii) the
Third Parties which entered into such
Bilateral Transactions and the amount of
Ethanol purchased thereby, and (iii)
whether and to the extent any such Third
Parties or Kinergy breached its obligations
under any such Bilateral
Transactions.
(b) In addition, Kinergy shall provide to the Project Company on
a
monthly basis a customary bank account
statement with respect to the Account
(which statement shall reflect, among other
things, (i) deposits into and
withdrawals from the Account during the
applicable monthly period and (ii) the
balance of funds in the Account).
2.5 Back-to-Back
Transactions. (a) Each Bilateral Transaction undertaken by
Kinergy shall immediately and
automatically, without necessity of further
documentation or any action whatsoeve
