IN ACCORDANCE WITH SECTION 21.
3.
PURCHASE REQUIREMENTS.
(A)
BOTH PARTIES RECOGNIZE THAT PRODUCT(S) WILL BE SOLD UNDER
CONTRACTS THAT MAY SPAN A VARIETY OF TIME PERIODS AND MAY CONTAIN CUSTOMER
SPECIFIC DELIVERY TERMS THAT WILL REQUIRE FLEXIBILITY AND PLANNING AMONG
MANUFACTURER, MGPI, AND THE CUSTOMER.
THIS SECTION 3 IS NOT INTENDED TO
PRECLUDE ARRANGEMENTS NOT SPECIFICALLY ADDRESSED HEREIN PROVIDED THAT
MANUFACTURER AND MGPI MUTUALLY AGREE, IN WRITING, TO THOSE ARRANGEMENTS.
(B)
MGPI IN FULFILLING ITS ROLE AS MARKETER WILL SOLICIT AND IDENTIFY
MARKET OPPORTUNITIES FOR PRODUCT(S) AND WILL PRESENT EACH SUCH OPPORTUNITY,
TOGETHER WITH MGPI'S COMMERCIAL RECOMMENDATIONS, TO MANUFACTURER FOR APPROVAL.
MANUFACTURER WILL APPROVE OF, OR PROVIDE SPECIFIC GUIDELINES THAT ALLOW MGPI TO
CONCLUDE NEGOTIATIONS RELATING TO, THE APPLICABLE OPPORTUNITY.
WHEN A SALE IS
COMPLETED THAT RELATES TO PRODUCT(S) TO BE SHIPPED FROM THE PLANT, THOSE SALES
WILL BE ADDED TO THE FORWARD CONTRACT OBLIGATIONS OF THE PLANT (THE "FORWARD
CONTRACT OBLIGATIONS").
THE FORWARD CONTRACT OBLIGATIONS SHALL BE ALL COMPLETED
SALES OF PLANT PRODUCT(S)).
(C)
AS PART OF THE PROCESS FOR BOOKING FIXED PRICED FORWARD CONTRACT
OBLIGATIONS, MGPI AND MANUFACTURER WILL AGREE ON A MARGIN MANAGEMENT STRATEGY
THAT RELATES TO THAT SALE THAT WILL INCLUDE ITEMS SUCH AS RAW MATERIAL
ORIGINATION AND HEDGING STRATEGIES, PRODUCT HEDGING STRATEGIES,
INVENTORY
MANAGEMENT, FIXING/LOCKING IN TRANSFER PRICES, AND ANY OTHER ITEMS THAT THE
PARTIES NEED TO CONSIDER.
(D)
MGPI WILL MAINTAIN REGULAR COMMUNICATIONS WITH ITS CUSTOMERS TO
DETERMINE AS SOON AS POSSIBLE THE DELIVERY/SHIPPING SCHEDULE TO MEET THE FORWARD
CONTRACT OBLIGATIONS AND CUSTOMER NEEDS.
(E)
ON OR BEFORE THE 5TH OF EACH MONTH DURING THE TERM, MGPI WILL
FURNISH TO MANUFACTURER AN UPDATED THREE (3) MONTH ROLLING DELIVERY SCHEDULE
FORECAST, THAT SETS FORTH MGPI'S BEST ESTIMATION, BASED UPON FORWARD CONTRACT
OBLIGATIONS AND CUSTOMER REQUIREMENTS, FOR THE PRODUCTS BY SKU DURING FOLLOWING
THREE (3) MONTH PERIOD.
EACH ROLLING FORECAST WILL SET FORTH:
(I)
THE QUANTITY, BY SKU, AND DESIRED SHIPPING DATES FOR FORWARD
CONTRACT OBLIGATIONS WITH FIRM DELIVERY DATES.
(II)
THE QUANTITY, BY SKU, AND FORECAST DELIVERY DATES FOR FORWARD
CONTRACT OBLIGATIONS THAT REFLECTS BEST INFORMATION FROM THE CUSTOMER AS WELL AS
ANY VARIABILITY IN DELIVERIES PERMITTED IN THE CONTRACT TERMS.
(III)
A PROJECTION OF WHETHER MANUFACTURER AND MGPI WILL NOT BE ABLE TO
FULFILL ALL DELIVERIES DURING THE PERIOD AND NEED TO LIMIT ALLOCATIONS OF
PRODUCT(S) TO CUSTOMERS.
2
(IV)
PRESENT ANY VALUE CREATING ARBITRAGE OPPORTUNITIES FOR SHIFTING
DELIVERIES BETWEEN MGPI'S ATCHISON, KANSAS PLANT AND MANUFACTURER'S PLANT.
(V)
PROPOSE TO MANUFACTURER THE QUANTITY OF PRODUCT(S) MGPI SUGGESTS
MARKETING IN THE SPOT MARKET DURING THE FORECAST PERIOD.
THE FIRST MONTH OF
EACH THREE MONTH FORECAST (THE "NEARBY MONTH") WILL INCLUDE A FORECAST VOLUME BY
SKU TO BE MARKETED IN THE SPOT MARKET (THE "PROPOSED SPOT VOLUME").
PROPOSED
SPOT VOLUMES SHALL NOT EXCEED 25% OF THE NEARBY MONTH FORWARD CONTRACT
OBLIGATIONS UNLESS SPECIFICALLY AGREED BY MANUFACTURER.
(F)
MGPI WILL PROVIDE A SPECIAL QUARTERLY FORECAST 45 DAYS PRIOR TO
THE COMMENCEMENT OF EACH CALENDAR QUARTER TO ASSIST MANUFACTURER IN DETERMINING
ITS OVERALL PRODUCTION ALLOCATIONS BETWEEN