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 23rd
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, CO2, 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


 


2





















 


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


 


3





















 


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, within sixty (60) days after receiving the
Certification, does not respond in writing to CVP detailing in what respect, in
BSE’S opinion, such Process Guarantee has not been met.  If BSE notifies CVP that the Process
Guarantee, in BSE’s reasonable judgment, has not been met, then CVP, at its
cost and expense, shall make such corrections as are reasonably necessary to
ensure that the Plant complies with the Process Guarantee.


 


(6.6)                         BSE
shall furnish, at no cost to CVP, fresh substrate charge, yeast culture,
enzymes, chemicals, utilities, operating and maintenance personnel, minor
(nonmaterial) maintenance materials and necessary services, such as adequate
laboratory inspection and minor (nonmaterial) operating supplies as are
required for the operation of the Plant in order to meet the Process Guarantee
as herein made. BSE shall be responsible to process fresh substrate charge at a
rate as reasonably required by CVP during the Performance Test, provided that
such rate shall not exceed 100% of daily capacity (calculated at 52 million
gallons of ethanol per year).


 


(6.7)                         Notwithstanding
any other provision of the Core Agreements, CVP covenants and agrees that the
Plant shall be fully upgraded and operational, having successfully passed its
Performance Test in accordance with the Master Schedule approved by BSE,
unless otherwise extended by mutual written agreement of BSE and CVP.


 


ARTICLE 7                                Modifications


 


(7.1)                         Prior to
meeting the Process Guarantee, CVP shall have the right to make such reasonable
changes, at its own cost and expense, to the Project as are required to meet
the Process Guarantee with the prior written consent of BSE (which consent
shall not be unreasonably withheld, conditioned or delayed).  CVP represents that it has the authority to
make such changes and that such changes shall be
subject to all representations and warranties stated in the Core
Agreements.  CVP will furnish the
necessary design engineering documentation showing such changes at no charge to
BSE.


 


(7.2)                         In
order to enable CVP to determine, prior to making such modifications to the
Plant, the nature of the defects in the Plant, if any, BSE shall, upon
reasonable notice and request by CVP, operate the Plant under commercially
reasonable and safe operating conditions as may be reasonably specified by CVP
from time to time during the Performance Test.


 


(7.3)                         In
the event BSE fails to operate and maintain the Plant in substantial accordance
with the operation manual provided by CVP, CVP shall provide written notice of
such failure to BSE and BSE shall cure such failure.  Notwithstanding the above, if the reason that
BSE failed


 


4





















 


to operate and
maintain the Plant in material accordance with the operation manual provided by
CVP is because such operation and maintenance would result in a material
adverse effect on the Plant, then CVP shall modify said operation manual so
that compliance with the operation manual will not result in a material adverse
effect on the Plant.


 


(7.4)                         Except as may otherwise be provided herein, BSE shall assume
all expenses of operation of the Plant, and shall have complete control of the
Plant at all times.


 


ARTICLE 8                                Guarantee


 


(8.1)                         Subject to the limitations in Section 8.2
below, CVP hereby guarantees the prompt, full and faithful discharge of
each and every obligation, term, condition and agreement of CVP in the Core
Agreements.


 


(8.2)                         Notwithstanding
any other provision of the Transaction Documents, including without limitation,
the License, in no event shall CVP’s aggregate liability under the Transaction
Documents exceed[********].  In no event shall CVP be responsible for any
punitive, incidental, consequential, exemplary or lost profits damages.


 


ARTICLE 9                                Security


 


In order to
secure CVP’s obligations under this Agreement, CVP agrees as follows:


 


(9.1)                         Notwithstanding
anything to the contrary in the License, BSE may withhold five percent (5%) of
each payment due under the Technical Information Fee, said retainage to be paid
to CVP immediately upon completion of the Performance Test to the reasonable
satisfaction of BSE.


 


(9.2)                         CVP shall
cause Centrisys Corporation, AMG, Inc. and QTI to execute separate limited
guarantees in favor of BSE, guaranteeing CVP’s payment obligations under this
Agreement, said limited guarantees to be limited to no more than [********]
each.  Each of said limited guarantees
shall be terminated immediately upon completion of the Performance Test to the
reasonable satisfaction of BSE.


 


ARTICLE 10                         Insurance


 


(10.1)                   CVP agrees, at
its expense, to maintain in full force and effect during the entire time any
work is performed at the Plant by CVP or the employees, agents or
subcontractors of either, a policy or policies of public liability and property
damage insurance under which BSE are named as additional insured.  The policy shall provide that BSE will
receive 30 day written notice of any material change in policy conditions,
non-refundable or cancellation.  The
minimum limits of coverage of such policies in the aggregate shall be Two
Million and no/100 Dollars ($2,000,000.00) for injury or death to any one
person, and One Million and no/100 Dollars ($1,000,000.00) with respect to
damage to property.


 










[********] Material has been omitted pursuant to request for
confidential treatment and such material has been filed separately with the
Securities and Exchange Commission.


 


5





















 


ARTICLE 11                         Assignment


 


(11.1)                   This Agreement
and the obligations of the parties hereto shall not be assignable by CVP or BSE
subject, however, to the following exceptions:


 


(11.1.1)          with the prior expressed
written consent of the other party; or


 


(11.1.2)          upon
the acquisition by a Person of all or substantially all of the equity, stock,
membership interests or partnership interests, or assets of CVP or BSE, whether
by merger, consolidation, purchase or otherwise, provided the Plant remains
located in Monroe, Wisconsin.


 


(11.2)                   Upon the occurrence of an event described in Section 11.1.2,
the assigning party shall provide prompt written notice to the other.


 


(11.3)                   All assignees
of this Agreement or successors of either party shall be bound by all the terms
and conditions of this Agreement, and shall enter into a written agreement
assuming all of the obligations of the assigning party under this Agreement.


 


(11.4)                   This Agreement
applies to the Plant.  Any other facility
constructed, owned or operated by BSE with respect to which BSE desires to use
the Licensed Process shall require a separate license from CVP prior to its use
of such Licensed Process at such facility, upon terms satisfactory to CVP.


 


ARTICLE 12                         Applicable
Law


 


(12.1)                   This Agreement
shall be construed under and governed by the laws of the State of Wisconsin
without regard to the conflict of laws principals thereof.  The parties irrevocably consent to the sole
and exclusive jurisdiction and venue in the appropriate state or federal court
in Wisconsin.


 


ARTICLE 13                         Waiver
of Default


 


(13.1)                   Waiver by
either party of any default by the other under the terms of this Agreement
shall not be deemed to be a waiver by such party of any other default by the
other, whether similar or dissimilar in nature. No modifications or waiver of
any of the provisions herein contained shall be binding unless made in writing
and signed by authorized representatives of the parties.


 


ARTICLE 14                         Severability


 


(14.1)                   In the event
that any term or provision of this Agreement is invalidated at any time by rule of
law or statutory provision, the remaining terms and provisions of this
Agreement shall remain in full force and effect and be binding upon both
parties hereto.


 


6





















 


ARTICLE 15                         Notices


 


(15.1)                   All notices
pertaining to this Agreement shall be in writing and shall be effective at the
earliest of the following: (a) when received; (b) three (3) days
after deposit in the U.S. mail, if mailed postpaid and correctly addressed; or (c) on
the date shown on the return receipt, if sent by registered or certified mail,
return receipt requested and the receipt is signed by or on behalf of the
addressee.  Such notices whether to CVP
or BSE shall be sufficient if transmitted by facsimile, delivered in person, or
sent by registered or certified mail. The parties designate the following
addresses for notice purposes:


 


	
   

  	
   

  	
  CVP, LLC

  
	
   

  	
   

  	
  9586 58th
  Place

  
	
   

  	
   

  	
  Kenosha,
  Wisconsin 53144

  
	
   

  	
   

  	
  Attn: Mr.
  Michael Kopper

  
	
   

  	
   

  	
  Facsimile:
  (262) 654-6063

  
	
   

  	
   

  	
   

  
	
  With a copy
  to:

  	
   

  	
  AMG, Inc.

  
	
   

  	
   

  	
  1497 Shoup Mill Rd.

  
	
   

  	
   

  	
  Dayton, OH 45406

  
	
   

  	
   

  	
  Attn: Mr. Alberto G. Mendez

  
	
   

  	
   

  	
  Facsimile: (937) 274-3870

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Quality Technology International, Inc.

  
	
   

  	
   

  	
  2250 Point Blvd., Suite 322

  
	
   

  	
   

  	
  Elgin, Illinois 60123

  
	
   

  	
   

  	
  Attn: Mr. David J. Hammes

  
	
   

  	
   

  	
  Facsimile: (847) 649-9300

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Centrisys Corporation

  
	
   

  	
   

  	
  9586 58th Place

  
	
   

  	
   

  	
  Kenosha, Wisconsin 53144

  
	
   

  	
   

  	
  Attn: 

  
	
   

  	
   

  	
  Facsimile: 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Badger State
  Ethanol, LLC

  
	
   

  	
   

  	
  820 W. 17th
  Street

  
	
   

  	
   

  	
  Monroe, WI
  53566-0317

  
	
   

  	
   

  	
  Attn: Dr.
  Gary Kramer

  
	
   

  	
   

  	
  Facsimile:
  (608) 329-3866

  



 


7





















 


ARTICLE 16                         Entire
Agreement; Counterparts


 


(16.1)                   This Agreement
sets forth the entire agreement of the parties with respect to the subject
matter of this Agreement, and supersedes any and all previous agreements
between the parties with respect hereto, and no written undertakings given
either previously to or simultaneously with the signing of this Agreement and
not expressly made a part hereof shall be admitted to vary or correct its
terms.  The recitals set forth at the
beginning of this License are incorporated into, and an integral part of, this
Agreement.  This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original, and all of which shall constitute one and the same document.  This Agreement may be executed by facsimile
signatures.


 


ARTICLE 17
Dispute Resolution


 


(17.1)                   Mediation.  The parties shall bring any and all disputes,
controversies or claims arising under this Agreement to the attention of the
other without prejudicing their relationship and operations hereunder.  Appropriate personnel of both parties shall
be made available, either by mail, telephone or personal meeting for the prompt
and effective adjustment of any and all such differences.  In the event the parties are unable to
resolve any dispute, controversy or claim arising under this Agreement between
them, the parties shall, before commencement of arbitration submit the issue to
a neutral, qualified mediator selected by mutual agreement of the CVP and
BSE.  Such dispute shall be submitted to
mediation upon one party providing written notice to the other (“Mediation
Notice”).  Such mediation shall be held
in a neutral location between the domiciles of the respective parties as
selected by mutual agreement of the CVP and BSE, and the mediator’s fee shall
be paid in equal shares by the CVP and BSE. 
If such dispute is not be successfully resolved within 30 days of the
date of receipt of the Mediation Notice, or such longer period as mutually
agreed in writing by the CVP and BSE, then immediately at the end of such
period the parties hereto shall be entitled to resolve such dispute,
controversy or claim pursuant to Sections 17.2 through 17.5 below.


 


(17.2)                   Arbitration.  In the event that any controversy or claim
arising under this License cannot be resolved by the parties, such controversy
or claim shall be settled by binding arbitration in accordance with the
Commercial Arbitration rules of the American Arbitration Association
(except as specifically modified below), and the judgment upon the award may be
entered in any court having competent jurisdiction thereof.  The prevailing party shall be entitled to
reasonable attorney fees plus the cost and expenses incident to collection
and/or defense from the non-prevailing party. 
BSE and CVP shall mutually agree on a neutral qualified arbitrator
within thirty (30) days after the filing of any notice of arbitration by one
against the other.  If BSE and CVP are
not able to agree on a single arbitrator within such thirty (30) day period,
then BSE and CVP shall obtain a list of three (3) neutral arbitrators from
Resolute Systems, Inc. (or, if such company no longer exists, from a
similar company) located in Milwaukee, Wisconsin.  From such list, BSE and CVP shall each have
one alternating strike to determine which arbitrator of the three shall
arbitrate the matter.  The process to
narrow the list of three (3) arbitrators down to one (1) arbitrator
shall be facilitated by Resolute Systems, Inc. (or, if such company no
longer exists, from a similar company), and shall be completed no later than
fifteen (15) days after the end of the thirty (30) day period described above
(unless otherwise agreed by BSE and CVP).


 


8





















 


The arbitration shall be completed within
seventy-five (75) days from when the arbitrator is selected.”


 


(17.3)                   The arbitration shall be brought in the jurisdiction of the
party against whom relief is sought.


 


(17.4)                   The award of the Arbitrator shall be in writing and shall
set forth each issue considered and the Arbitrator’s findings of fact and
conclusions of law as to each issue considered.


 


(17.5)                   All
aspects of the arbitration, including the hearing and the record of the
proceedings, are confidential and shall not be open to the public, except as
may otherwise be appropriate in response to a governmental agency or legal
process.


 


ARTICLE 18                         Force
Majeure


 


(18.1)                   Notwithstanding
any other provisions to the contrary in this Agreement, neither party hereto shall
be responsible for a default in or breach of this Agreement which is the result
of strike, fire, war, earthquake, flood, pestilence, riot, act of God, act of
government or other cause beyond the control of the parties, unless performance
is not promptly resumed upon termination of such cause.


 


ARTICLE 19                         Attachments


 


(19.1)                   The following documents are incorporated herein by reference
and made a part hereof:


 


Schedule A                                  Definitions


Schedule B                                    Responsibility
Matrix


Schedule C                                    Process
and Product Guarantee


Schedule D                                   Specifications
of Auxiliaries, Chemical and Utilities


 


OTHER THAN ANY
WARRANTY PROVIDED FOR UNDER THE LICENSE OR THIS AGREEMENT, CVP MAKES NO OTHER
WARRANTIES, EXPRESS OR IMPLIED, AND EXPRESSLY DISCLAIMS ANY OTHER WARRANTIES,
INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.


 


9





















 


IN WITNESS WHEREOF, the parties have agreed
to the foregoing on the 23RD day of June, 2005.


 


 


	
  BADGER STATE ETHANOL, LLC 

  	
  CVP, LLC 

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Gary L.
  Kramer

  	
   

  	
  By:

  	
   

  	
  /s/ Michael
  Kopper

  	
   

  
	
   

  	
   

  
	
  Title:

  	
   

  	
  President

  	
   

  	
  Title:

  	
   

  	
  Member

  	
   

  
										



 


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SCHEDULES OMITTED


 


11