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EXHIBIT 10.14
DISTILLER'S GRAINS MARKETING AGREEMENT*
THIS AGREEMENT (this "Agreement"), made and entered into this 12th of
November, 2004, by and between East Kansas Agri-Energy, LLC, a Kansas limited
liability company ("EKAE"), and United Bio Energy Ingredients, LLC, a Kansas
limited liability company ("UBEI").
W I T N E S S E T H :
WHEREAS, EKAE intends to construct and own an ethanol plant, located in
Garnett, Kansas (the "Plant");
WHEREAS, EKAE desires to sell and UBEI desires to buy all the dried
distiller's grains ("DDG") and wet distiller's grains ("WDG") produced at the
Plant (collectively the "Distiller's Grains");
WHEREAS, the parties desire to purchase and sell the Distiller's Grains,
and receive and provide such services, in accordance with the fees, price
formula, payment, delivery and other terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and conditions herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
both parties, it is hereby agreed:
1. TERM. The initial term of this Agreement shall be for five (5) years.
The parties shall execute a memorandum setting forth the actual date of
commencement of the term, which shall be approximately 6 months before
substantial completion of the Plant. Unless earlier terminated in accordance
with this Agreement, this Agreement shall be automatically renewed for
successive one (1) year terms thereafter unless either party gives written
notice to the other party of its election not to renew not later than ninety
(90) days prior to the expiration of the then current term.
2. PRICE AND PAYMENT.
A. PRICE. UBEI agrees to pay EKAE for all DDG removed by UBEI from
the Plant, a price equal to [*] ([*]) of the FOB Plant price actually charged by
UBEI to its customers. For purposes of this provision, the FOB Plant price shall
be the actual sale price, less all reasonable freight costs incurred by UBEI in
delivering the Distiller's Grains to its customers. UBEI also agrees to pay EKAE
for all WDG removed by UBEI from the Plant, a price equal to [*] ([*]) of the
FOB Plant price actually charged by UBEI to its customers. If EKAE desires the
additional services of a distiller's marketer on-site at the Plant, and employed
by UBEI, then UBEI agrees to pay EKAE for all WDG a price equal to [*] ([*]) of
the FOB Plant price actually charged by UBEI.
B. PAYMENT. On a daily basis, Weekends and Holidays excluded, EKAE
*Portion omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission.
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shall provide UBEI with certified weight certificates for the previous day's
shipments of Distiller's Grains. UBEI shall pay EKAE the F.O.B. Plant Price
defined in paragraph 2.A. above, for all properly documented shipments. UBEI
shall deliver to EKAE payment for such shipments on or before the second
following Friday of each one week shipment period (Sunday through Saturday).
UBEI agrees to maintain accurate sales and expense records and to provide such
records to EKAE upon request. EKAE shall also have the right to inspect, copy
and audit UBEI's sales invoices and expense records at any time during normal
business hours at the corporate office of UBEI. If any such inspection or audit
shall reveal a deficiency in a payment due to EKAE, UBEI shall immediately pay
EKAE the amount of the deficiency together with interest from the date that such
payment should have been made at the prime rate in effect on the date of the
underpayment as reported in the Wall Street Journal. The expense of any such
inspection or audit shall be borne by EKAE unless a material deficiency in
payment is revealed, then, in such case, the reasonable expense of such
inspection or audit shall be borne by UBEI.
C. BEST EFFORTS. UBEI agrees to use its best efforts to achieve the
highest resale price of Distiller's Grains available under prevailing market
conditions.
D. COLLECTION. UBEI shall be responsible for all customer billing
and account servicing, including, but not limited to, the collection of amounts
owed UBEI by its customers, shall bear all costs associated with such billing
and collection activities, and shall assume all losses due to failure of its
customers to pay their account.
E. FUTURE SALES BY UBEI. UBEI shall not contract for the sale of
Distiller's Grains, to its customers, more than one hundred eighty (180) days in
advance, unless EKAE explicitly approves the price and terms of any such
contract and provides notice of such approval to UBEF. Upon notice of
termination, UBEF shall not contract for the sale of Distiller's Grains to its
customers more than more than ninety (90) days in advance, unless EKAE
explicitly approves the price and terms of any such contract and provides notice
of such approval to UBEI. UBEI will advise EKAE weekly and update EKAE monthly
on all outstanding contractual obligations, and the terms thereof.
3. FEES AND EXPENSES. Unless otherwise specifically provided for herein,
and to the extent not already included in the price of the Distiller's Grains,
EKAE shall be responsible for any and all fees and expenses, including but not
limited to fees assessed by any State or other regulatory agency, incurred or
assessed on any Distiller's Grains, whether for licensing, dues, branding,
packaging, inspecting, or otherwise. EKAE shall, as a result of its
responsibility for such expenses, retain all rights to any name, branding, and
packaging of the Distiller's Grains upon termination of this Agreement.
4. DELIVERY AND TITLE.
A. PLACE. The place of delivery for all Distiller's Grains purchased
by UBEI pursuant to this Agreement shall be F.O.B. Plant. UBEI and its agents
shall be given access to the Plant in a manner and at all times reasonably
necessary and convenient for UBEI to take delivery as provided herein. UBEI
shall schedule the loading and shipping of all Distiller's Grains purchased
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hereunder, whether shipped by truck or rail. All labor and equipment necessary
to load or unload trucks or rail cars shall be supplied by EKAE without charge
to UBEI. The parties agree to handle the Distiller's Grains in a good and
workmanlike manner in accordance with the other's reasonable requirements and in
accordance with normal industry practice. EKAE shall maintain the truck/rail
loading facilities in safe operating condition in accordance with normal
industry standards.
B. STORAGE. EKAE shall provide storage space or not less than ten
(10) full days combined production of WDG and DDG, based on normal operating
capacity.
C. REMOVAL. UBEI warrants and agrees to use its best efforts to
remove Distiller's Grains before the aforementioned storage limits are exceeded.
EKAE shall be responsible at all times for the quantity, quality and condition
of any Distiller's Grains in storage at the Plant.
D. LOADING AND UNLOADING SCHEDULE. UBEI shall give to EKAE a
schedule of quantities of Distiller's Grains to be removed by truck and rail
respectively with sufficient advance notice reasonably to allow EKAE to
provide the required services. EKAE shall provide the labor, equipment and
facilities necessary to meet UBEI's loading schedule and EKAE shall be
responsible for UBEI's actual costs or damages resulting from EKAE's failure
to do so. UBEI shall order and supply trucks as scheduled for truck
shipments. All freight charges shall be the responsibility of UBEI and shall
be billed directly to UBEI. Demurrage charges will be for the account of UBEI
if UBEI fails to provide railcars in accordance with the production schedule
provided to EKAE. Demurrage charges will be for the account of EKAE if EKAE
fails to load railcars in accordance with said schedule.
E. PRODUCTION SCHEDULE.
1. UBEI shall provide loading orders as necessary to permit
EKAE to maintain its usual production schedule, provided, however, that UBEI
shall not be responsible for failure to schedule removal of Distiller's Grains
unless EKAE shall have provided to UBEI production schedules as follows: At
least five (5) days prior to the beginning of each calendar month during the
term hereof, EKAE shall provide to UBEI a tentative schedule for production in
the next calendar month. On Wednesday of each week during the term of this
Agreement, EKAE shall provide to UBEI a schedule for actual production for the
following production week (Monday through Sunday). EKAE shall inform UBEI daily
of inventory and production status by 8:30 a.m. CDT.
2. NOTICE. For purposes of this paragraph 6.E, notification
will be sufficient if made by facsimile as follows:
If to UBEI for Distiller's Grain, to the attention of Randy Ives,
Facsimile number 316-796-0944, Email address:
randy.ives@unitedbioenergy.com and If to EKAE, to the attention of
_________________________________, Facsimile number _________________.
Or to such other representatives of UBEI and EKAE as they may
designate to the other in writing.
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F. TITLE. Title and risk of loss shall pass to UBEI at the point in
time when loading the Distiller's Grains into trucks or rail cars has been
completed.
G. RAIL CAR LEASES. UBEI shall be responsible for estimating the
number of rail car leases required to handle the transportation of the
Distiller's Grains and for negotiating the terms of and executing such rail car
leases; provided, however, that any and all rail car leases executed by UBEI
shall be in substantially the same form as a standard rail car lease previously
approved by EKAE for this purpose. Upon the termination of this Agreement, any
and all existing rail car leases for the transport of Distiller's Grains will be
assigned to EKAE, who will assume and be obligated to the terms and conditions
of said leases. EKAE shall reimburse UBEI for any expenses incurred by UBEI
associated with such rail car leases, to the extent such expenses are not
already accounted for in the price of the Distiller's Grains.
H. RAIL CONTRACTS. UBEI shall negotiate, in consultation with EKAE,
the terms of rail contracts and rates on behalf of EKAE. The rail contracts
shall be placed in the sole name of EKAE.
5. QUANTITY AND WEIGHTS.
A. PRODUCTION AMOUNT. EKAE represents and warrants that it will sell
to UBEI and UBEI represents and warrants that it will purchase from EKAE all
Distiller's Grains produced at the Plant; provided, however, that UBEI shall
locally market a portion of the Distiller's Grains produced at the Plant. Any
locally marketed Distiller's Grains shall be subject to a minimum pick-up
requirement of 5 tons per customer for wet Distiller's Grains and 2 tons per
customer for dry Distiller's Grains and shall require afternoon pickup with
forty-eight (48) hours prior notice. UBEI agrees to provide any and all
customers of locally marketed Distiller's Grains truck and/or wagon access to
the Distiller's Grains at the Plant. It is understood that total production
amount of Distiller's Grains shall be determined by EKAE's production schedule
and that no warranty or representation has been made by EKAE as to the exact
quantities or timing of Distiller's Grains to be produced pursuant to this
Agreement.
B. ESTIMATE. The estimated production of Distiller's Grains at the
Plant by EKAE, to be sold to UBEI, is approximately eight thousand five hundred
(8,500) tons of DDG per month on a dry matter basis, and EKAE shall use its best
efforts to produce such amount of Distiller's Grains.
C. SCALES. The quantity of Distiller's Grains delivered to UBEI from
the Plant shall be established by weight certificates, obtained from scales at
the Plant, which shall be maintained by EKAE as required by applicable laws,
rules and regulations. These outbound weight certificates shall be determinative
of the quantity of the Distiller's Grains for which UBEI is obligated to pay
pursuant to paragraph 2 above.
D. RAIL CARS. All rail cars for Distiller's Grains shall be grain
hopper cars. EKAE agrees that such cars for Distiller's Grains shall be loaded
to full visible capacity at the Plant. If not loaded to full visible capacity,
EKAE shall pay in full the portion of freight charges allocable to the unused
capacity of the car. It is agreed and understood that all railcars, when not
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loaded to full visible capacity, shall be defined as having a light weight.
6. QUALITY.
A. STANDARDS. EKAE understands that UBEI intends to sell the
Distiller's Grains purchased from EKAE as a primary animal feed ingredient and
that the same are subject to minimum quality standards for such use and each
shall be of merchantable quality. EKAE warrants that the Distiller's Grains
produced by the Plant and delivered to UBEI shall be acceptable under current
industry standards in the feed trade industry and that at the time of delivery,
the Distiller's Grains shall conform to the minimum quality standards outlined
in EXHIBIT A attached hereto, as may be amended from time to time.
Notwithstanding anything in this Agreement to the contrary, EKAE provides no
warranty greater than those received from ICM, Inc. pursuant to the Design-build
Contract dated August 9, 2004.
B. COMPLIANCE. EKAE represents and warrants that at the time of
loading, the Distiller's Grains will not be adulterated or misbranded within the
meaning of the Federal Food, Drug and Cosmetic Act and that each shipment may
lawfully be introduced into interstate commerce under said Act. Unless otherwise
agreed between the parties to this Agreement, and in addition to other remedies
permitted by law, UBEI may, without obligation to pay, reject any Distiller's
Grains before loading for the failure of the Distiller's Grains to comply with
the representations and warranties in this paragraph. Actual loading of
Distiller's Grains shall not waive UBEI's rights to reject Distiller's Grains on
the grounds of noncompliance with the representations and warranties in this
Agreement unless UBEI had actual knowledge of such noncompliance prior to
loading. Should any of the Distiller's Grains be seized or condemned by any
federal or state department or agency for any reason, except noncompliance by
UBEI with applicable federal or state requirements, such seizure or condemnation
shall operate as a rejection by UBEI of the Distiller's Grains seized or
condemned and UBEI shall not be obligated to offer any defense in connection
with the seizure or condemnation. However, UBEI agrees to cooperate with EKAE in
connection with the defense of any quality or other product claims, or any
claims involving governmental seizure or condemnation. UBEI shall be fully
responsible for, and shall indemnify EKAE against any liability for, or claims
arising from, any failure by UBEI to deliver Distiller's Grains to its
customers, except to the extent that delivery fails due to the fault of EKAE.
When rejection occurs pursuant to this paragraph, at its option, UBEI may:
(1) Dispose of the rejected Distiller's Grains after first
offering EKAE a reasonable opportunity of examining and taking possession
thereof, if the condition of the Distiller's Grains reasonably appears to UBEI
to permit such delay in making disposition;
(2) Dispose of the rejected Distiller's Grains in any manner
directed by EKAE which UBEI can accomplish without violation of applicable laws,
rules, regulations or property rights; or
(3) If any of the Distiller's Grains is seized or condemned by
any federal or state department or agency or if UBEI has no available means of
disposal of rejected Distiller's Grains and EKAE fails to direct UBEI to dispose
of it as provided herein, UBEI may return the rejected Distiller's Grains to
EKAE, upon which event UBEI's obligations with respect to said rejected
Distiller's Grains shall be deemed fulfilled. Title and risk of loss shall pass
to EKAE
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promptly upon such seizure or condemnation or rejection by UBEI.
(4) EKAE shall reimburse UBEI for all costs reasonably incurred
by UBEI in storing, transporting, returning and disposing of the rejected
Distiller's Grains. UBEI shall have no obligation to pay EKAE for rejected
Distiller's Grains and may deduct reasonable costs and expenses to be reimbursed
by EKAE from amounts otherwise owed by UBEI to EKAE.
C. NON-STANDARD PRODUCTS. If EKAE produces Distiller's Grains which
comply with the warranties in this paragraph 6.B but which do not meet
applicable industry standards, UBEI agrees to purchase such Distiller's Grains
for resale but makes no representation or warranty as to the price at which such
Distiller's Grains can be sold.
D. PRODUCT TESTING. If EKAE knows or reasonably suspects that any
Distiller's Grains produced by the Plant are adulterated or misbranded, or, are
outside of minimum quality standards set forth in EXHIBIT A, EKAE shall promptly
so notify UBEI so that such Distiller's Grains can be tested before entering
interstate commerce. If UBEI knows or reasonably suspects that any Distiller's
Grains produced by the Plant are adulterated or misbranded, or, are outside of
minimum quality standards set forth in EXHIBIT A, then UBEI may obtain
independent laboratory tests of the affected Distiller's Grains. If such
Distiller's Grains are tested and found to comply with all warranties made by
EKAE herein, then UBEI shall pay all testing costs and if the Distiller's Grains
are found not to comply with such warranties, EKAE shall pay all testing costs.
E. CHANGES IN STANDARDS. Upon notice to UBEI, said minimum quality
standards are subject to change at the discretion of EKAE. Sufficient notice of
any such change shall be deemed to be given to UBEI if EKAE gives written
notification to UBEI at least thirty (30) days prior to such change. Such
changes must be in conformance to generally acceptable industry standards.
7. RETENTION OF SAMPLES.
A. SAMPLING. EKAE will take an origin sample of the Distiller's
Grains from each truck or rail car before each shipment leaves the Plant, using
industry standard sampling methodology. EKAE will label these samples to
indicate the date of shipment that the truck, rail car, or pickup number
involved. EKAE shall also retain the samples and labeling information for no
less than six (6) months for DDG samples and no less than fourteen (14) days for
WDG.
B. ANALYSIS. For the first year of operation of ethanol production
at the Plant, EKAE shall, on a weekly basis, furnish UBEI with a composite
analysis on all Distiller's Grains produced at the Plant. Thereafter, at a
minimum, a composite analysis on all Distiller's Grains produced at the Plant
shall be sent once a month to UBEI. It is understood that said analysis is a
composite and may or may not be indicative of the current analysis.
8. INSURANCE.
A. POLICIES. EKAE warrants to UBEI that all EKAE's employees engaged
in the removal of Distiller's Grains from the Plant shall be covered as required
by law by worker's
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compensation and unemployment compensation insurance.
B. COVERAGES. During the term of this Agreement, EKAE shall purchase
and maintain insurance in such amounts as it may reasonably determine. UBEI
shall be named as an additional insured on all such policies. All such policies
shall contain provisions to the effect that in the event of payment of any loss
or damage the insurers will have no rights of recovery against any of the
insureds or additional insureds thereunder. EKAE waives all rights against UBEI
and its employees and agents for all losses and damages caused by, arising out
of or resulting from any of the perils or causes of loss covered by such
policies and any other property insurance applicable to the Plant. Also during
the term of this Agreement, UBEI shall purchase and maintain commercial general
liability insurance, with combined single limits of not less than $2,000,000
which shall be endorsed to require at least thirty (30) days notice to EKAE
prior to the effective date of any termination or cancellation of coverage. EKAE
shall be named as an additional insured on all such policies and UBEI shall
provide a certificate of insurance to EKAE to establish the coverage maintained
by the commencement date of this Agreement.
C. UBEI VEHICLES. UBEI agrees to carry such insurance on its
vehicles and personnel operating on EKAE's property as UBEI reasonably deems
appropriate or as required by law. The parties acknowledge that UBEI may elect
to self insure its vehicles. Upon request, UBEI shall provide a certificate of
insurance to EKAE to establish the coverage maintained by UBEI.
D. CONSEQUENTIAL DAMAGES. EACH PARTY TO THIS AGREEMENT UNDERSTANDS
THAT NO OTHER PARTY MAKES ANY GUARANTEE, EXPRESS OR IMPLIED, TO ANY OTHER OF
PROFIT, OR OF ANY PARTICULAR ECONOMIC RESULTS FROM TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT. IN NO EVENT SHALL ANY PARTY BE LIABLE FOR SPECIAL, COLLATERAL,
INCIDENTAL, OR CONSEQUENTIAL DAMAGES FOR ANY ACT OR OMISSION COMING WITHIN THE
SCOPE OF THIS AGREEMENT, OR FOR BREACH OF ANY OF THE PROVISIONS OF THIS
AGREEMENT, EVEN IF IT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, SUCH
EXCLUDED DAMAGES INCLUDE, BUT ARE NOT LIMITED TO, LOSS OF GOOD WILL, LOSS OF
PROFITS, LOSS OF USE, AND INTERRUPTION OF BUSINESS.
E. OTHER CLAIMS. Except as provided in paragraph 8.D above, nothing
herein shall be construed as a waiver by either party against the other party of
claims, causes of action or other rights which either party may have or
hereafter acquire against the other party for damage or injury to its agents,
employees, invitees, property, equipment or inventory, or third party claims
against the other party for damage or injury to other persons or the property of
others.
9. REPRESENTATIONS AND WARRANTIES.
A. Each party represents and warrants that it is an entity in good
standing under the laws that it is organized and has all the requisite power and
authority to carry on its business as it has been and to own, lease, and operate
the properties and assets used in connection therewith.
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B. In addition to the representations and warranties herein
regarding the quality of Distiller's Grains, EKAE represents and warrants that
the Distiller's Grains delivered to UBEI shall be free and clear of liens and
encumbrances. Notwithstanding the foregoing, UBEI acknowledges that EKAE's
senior lender has a security interest in all of the assets of EKAE subject to
EKAE's ability to make sales in the ordinary course of business.
C. Each individual executing this Agreement in a representative
capacity, by his or her execution hereof, represents and warrants that such
person is fully authorized to do so on behalf of the respective party hereto,
and that no further action or consent on the part of the party for whom such
signatory is acting is required for the effectiveness and enforceability of this
Agreement against such party, following such execution.
D. Each party now has, or will obtain, and will have at all times
during the term of this Agreement, all of the licenses and permits necessary to
perform its obligations under this Agreement.
E. UBEI warrants that, to the best of its knowledge, all of the
Distiller's Grains produced by its other customers and sold by UBEI will be of
merchantable quality, and will be fit for its intended purpose.
F. NO ADDITIONAL WARRANTY. EXCEPT AS SPECIFICALLY STATED IN THIS
AGREEMENT, THE PARTIES MAKE NO WARRANTIES OR REPRESENTATIONS, EXPRESS OR
IMPLIED, INCLUDING WITHOUT LIMITATION, ANY WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
10. TERMINATION.
A. FOR CAUSE. Either party may terminate this Agreement without
liability for cause by providing thirty (30) days prior written notice to the
other party. For purposes of this paragraph, "cause" shall include, but not be
limited to, the happening of an event of default discussed in paragraph 11
below, or any other material breach of any provision of this Agreement, or
material violation of any applicable law, regulation or ruling.
B. WITHOUT CAUSE. Either party may terminate this Agreement without
cause by providing ninety (90) days prior written notice to the other party. If
EKAE terminates this Agreement without cause during the initial term, then EKAE
shall pay to UBEI, within thirty (30) days of termination, an amount equal to
the product of three (3) multiplied by the average monthly fee paid to UBEI,
under paragraph 2.A above, for the six (6) months prior to the termination date,
or if the fee has been paid for less than six (6) months, by the average of the
monthly fee for the number of months such monthly fee has been paid to UBEI.
11. EVENTS OF DEFAULT. The occurrence of any of the following shall be an
event of default under this Agreement: (1) failure of either party to make
payment to the other when due, if such nonpayment has not been cured within five
(5) days of written notice thereof; (2) default by either party in the
performance of any material covenant, condition or agreement imposed upon
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that party by this Agreement, if such nonperformance has not been cured within
five (5) days of written notice thereof; or (3) if either party shall become
insolvent, or make a general assignment for the benefit of creditors or to an
agent authorized to liquidate any substantial amount of its assets, or be
adjudicated bankrupt, or file a petition in bankruptcy and such petition is not
dismissed within ninety (90) days following the date of filing, or apply to a
court for the appointment of a receiver for any of its assets or properties with
or without consent, and such receiver shall not be discharged within sixty (60)
days following appointment.
12. REMEDIES. Upon the happening of an event of default under paragraph
11, the parties hereto shall have all remedies available under applicable law
with respect to an event of default by the other party, including but not
limited to the recovery of attorneys' fees and other costs and expenses. Without
limiting the foregoing, the parties shall have the following remedies whether in
addition to or as one of the remedies otherwise available to them: (1) to
declare all amounts owed immediately due and payable; and (2) to terminate this
Agreement within thirty (30) days following the giving of notice of default and
opportunity to cure. Notwithstanding any other provision of this Agreement, UBEI
may offset against amounts otherwise owed to EKAE the price of any Distiller's
Grain which fail to conform to any requirements of this Agreement.
13. OPEN CONTRACTS. Upon the termination of this Agreement, for whatever
reason, EKAE shall assume and be responsible for delivering any remaining
quantities of Distiller's Grains required to be delivered by UBEI to its
customers pursuant to UBEI's contracts with the same, provided such contracts
are to be delivered by UBEI from the Plant. Prior to the termination of this
Agreement, UBEI shall provide EKAE with a listing of all such contracts and the
quantities of Distiller's Grains to be delivered pursuant to the same to assist
EKAE in completing deliveries under these open contracts. EKAE agrees to assist
UBEI in the collection of amounts owed to UBEI from those customers receiving
deliveries of Distiller's Grains from UBEI prior to the termination of this
Agreement.
14. FORCE MAJEURE. Neither EKAE nor UBEI will be liable to the other for
any failure or delay in the performance of any obligation under this Agreement
due to events beyond its reasonable control, including, but not limited to,
fire, storm, flood, earthquake, explosion, act of the public enemy or terrorism,
riots, civil disorders, sabotage, strikes, lockouts, labor disputes, labor
shortages, war, stoppages or slowdowns initiated by labor, transportation
embargoes, failure or shortage of materials, acts of God, or acts or regulations
or priorities of the federal, state or local government or branches or agencies
thereof.
15. INDEMNIFICATION.
A. BY EKAE. Except as otherwise provided in this Agreement, EKAE
shall indemnify, defend and hold UBEI and its officers, directors, employees and
agents harmless, from any and all losses, liabilities, damages, expenses
(including reasonable attorneys' fees), costs, claims, demands, that UBEI or its
officers, directors, employees or agents may suffer, sustain or become subject
to, or as a result of (i) any misrepresentation or breach of warranty, covenant
or agreement of EKAE contained herein or (ii) EKAE's negligence or willful
misconduct.
B. BY UBEI. Except as otherwise provided in this Agreement, UBEI
shall
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indemnify, defend and hold EKAE and its officer, directors, employees and agents
harmless, from any and all losses, liabilities, damages, expenses (including
reasonable attorneys' fees), costs, claims, demands, that EKAE or its officers,
directors, employees or agents may suffer, sustain or become subject to, or as a
result of (i) any misrepresentation or breach of warranty, covenant or agreement
of UBEI contained herein or (ii) UBEI's negligence or willful misconduct.
C. Where such personal injury or death is the result of negligence
on the part of both EKAE and UBEI, each party's duty of indemnification shall be
in proportion to the percentage of that party's negligence or faults.
16. [*]. UBEI hereby acknowledges that EKAE is entering into separate
service agreements with certain affiliates of UBEI (i.e., United Bio Energy
Trading, LLC, United Bio Energy Management, LLC, and United Bio Energy Fuels,
LLC), and that the services provided by one or more of those affiliates to EKAE
under such agreements may include acting on behalf of EKAE and/or performing
certain duties or obligations of EKAE under the terms and provisions of this
Agreement. [*]
17. RELATIONSHIP OF PARTIES. This Agreement creates no relationship other
than those of seller and buyer between the parties hereto. Specifically, there
is no agency, partnership, joint venture or other joint or mutual enterprise or
undertaking created hereby. Nothing contained in this Agreement authorizes one
party to act for or on behalf of the other and neither party is entitled to
commissions from the other.
18. TRADE RULES. As may be applicable, all purchases and sales of
Distiller's Grains made hereunder shall be governed by the Feed Trade Rules of
the National Grain and Feed Association unless otherwise specified. Said Trade
Rules, shall to the extent applicable, be a part of this Agreement as if fully
set forth herein. Notwithstanding the foregoing, the Arbitration Rules of the
National Grain and Feed Association shall not be applicable to this Agreement
and nothing herein contained shall be construed to constitute an agreement
between the parties to submit disputes arising hereunder to arbitration before
any organization or tribunal.
19. CONFIDENTIALITY. The parties agree to execute a Confidentiality and
Nondisclosure Agreement. Such Agreement shall remain in full force and effect
and shall apply and govern all disclosure and use of confidential information
hereunder, in accordance with the terms of such Agreement.
20. MISCELLANEOUS.
A. This Agreement, together with any attachments or other
information which is expressly incorporated herein and made an integral part of
this Agreement, is the complete understanding of the parties to this Agreement
with respect to the subject matter of this Agreement, and no other
representations or agreements shall be binding upon the parties, or shall be
effective to interpret, change or restrict the provisions of this Agreement.
*Portion omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission.
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B. No course of prior dealings between the parties and no usage of
trade, except where expressly incorporated by reference, shall be relevant or
admissible to supplement, explain, or vary any of the terms of this Agreement.
C. Acceptance of, or acquiescence in, a course of performance
rendered under this or any prior agreement shall not be relevant or admissible
to determine the meaning of this Agreement even though the accepting or
acquiescing party has knowledge of the nature or the performance and an
opportunity to make objection.
D. This Agreement may be executed in multiple counterparts, all of
which shall constitute but one and the same instrument. Facsimile signatures
shall be deemed as originals as between the parties.
E. This Agreement can only be modified by a writing signed by all of
the parties or their duly authorized agents.
F. The paragraph headings herein are for reference purposes only and
shall not in any way affect the meaning or interpretation of this Agreement.
G. This Agreement shall be construed and performed in accordance
with the laws of the State of Kansas.
H. The respective rights, obligations and liabilities of the parties
under this Agreement are not assignable or delegable without the prior written
consent of the other party, which shall not be unreasonably withheld.
I. Time shall be of the essence in the performance of this
Agreement.
J. This Agreement shall be binding upon, and shall inure to the
benefit of the parties hereto and their respective successors and assigns.
21. NOTICES. Unless a different method of notice is provided herein,
notice shall be deemed to have been given to the party to whom it is addressed
forty-eight (48) hours after it is deposited in certified U. S. mail, postage
prepaid, return receipt requested, addressed as follows:
EKAE: East Kansas Agri-Energy, LLC
Attn: Bill Pracht
2101/2East 4th Avenue, PO Box 225
Garnett, Kansas 66032
UBEI: United Bio Energy Ingredients, LLC
Attn: Jeff Roskam
2868 North Ridge Road
Wichita, Kansas 67205
11
<Page>
Either party may change the address for notices hereunder by giving notice
change to the other party in the manner above provided.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed the
day and year first above written.
East Kansas Agri-Energy, LLC
------------------------------------
/s/ Bill Pracht
------------------------------------
By: Bill Pracht
Title: Chairman
United Bio Energy Ingredients, LLC
/s/ Jeff Roskam
------------------------------------
By: Jeff Roskam
Title: President
In consideration of EKAE entering into this Agreement and other valuable
consideration, the undersigned, being the sole owner of UBEI, hereby
unconditionally guaranties the full and prompt performance by UBEI of all of its
duties and obligations under the terms and provisions of this Agreement.
Dated this 12TH day of NOVEMBER, 2004.
United Bio Energy, LLC, a Kansas limited
liability company
By: /s/ Jeff Roskam
--------------------------------
Title: President
-----------------------------
12
<Page>
EXHIBIT A
DISTILLERS GRAIN
Minimum Quality standards by product:
<Table>
PLANT COMPONENT MINIMUM MAXIMUM
- -------------------------------------------------------------------------------------
EKAE DDGS Protein 28% --
Fat 7.5% --
Fiber -- 15%
Ash -- 5%
PLANT COMPONENT MINIMUM MAXIMUM
- -------------------------------------------------------------------------------------
EKAE WDGS Protein 10.5% --
Fat 3% --
Fiber -- 5%
Ash -- 2.5%
PLANT COMPONENT MINIMUM MAXIMUM
- -------------------------------------------------------------------------------------
Modified WDGS Protein 15.0% --
Fat 4.5% --
Fiber -- 9.0%
Ash -- 4.0%
</Table>
MINIMUM QUALITY STANDARDS FOR ALL "PRODUCTS" SHALL ALSO BE DEEMED TO BE "COOL
AND SWEET, FREE FLOWING, WITH AFLATOXIN LEVELS LESS THAN 20 PPB MAXIMUM, AND IF
FROM ALL CORN RAW GRAINS, GOLDEN."
13