Document:

exv10w4

 

Exhibit 10.4

BUFFALO RIDGE ENERGY LLC

RISK MANAGEMENT AGREEMENT

FOR

GRAIN PROCUREMENT AND BYPRODUCT MARKETING

     This document is to define the agreement by which John Stewart & Associates, an 

Introducing Broker for Iowa Grain Company, will provide risk management services to
Buffalo Ridge Energy LLC

John Stewart and Associates will further be referred to as JS&A.

Risk management within a commodity based business can take as many different forms as there are
managements wishing to achieve this task. The design of which is greatly influenced by the degree
and type of risk, management is comfortable with and the amount of capital available for risk
management at a given time. For this reason the scope of this document will be to define the
responsibilities of all parties involved and to a certain degree the approach by which JS&A will
attempt to achieve this task.

It is important that it be understood that many of these parameters are in a continual state of
change and for this reason while we attempt to be fairly broad in the definition of our
responsibilities and approach this document cannot and is not intended to be all inclusive.

JS&A will provide risk management services pertaining to;

Grain Hedging

Grain Pricing Information

Aid in purchase of grain

Assistance in risk management as it pertains to Ethanol, and By-Products

JS&A will work with Buffalo Ridge Energy LLC, providing advice regarding the hedging of grains,
milling by-product owned or expected to be owned by it and Ethanol, in order to reduce the price
risk of such ownership, and provide information related to the hedged position to respond to all
management requirements.

JS&A will provide both current and future grain pricing information to Buffalo Ridge Energy LLC.
JS&A will on an ongoing basis bring recommendations, of trades to be executed, to your designated
personnel as to the cash corn and or futures and options positions to be established. Following
your approval of and agreement, JS&A will execute the necessary futures and options to the best of
our ability. We will continue to advise as to any adjustments that need to be made to this
position and execute them following your approval.

JS&A will also be available and provide the necessary counsel to your risk committee and 

or board
as to the rational for the proposed position, its risk parameters and an estimate of the capital
required.

 

 

JS&A does not view risk management in a processing environment to be a function of picking the
highs and lows of individual commodity prices at a given point in time. But rather as an ongoing
function comprised of formulating a studied opinion of price based upon historical perspectives of
the current Supply and demand factors and then employing that opinion in a system of “Asset
Management” based on processing margins and profitability.

Tools employed to accomplish this include but are not limited to our analysis and projection of
futures highs and lows, regional grain S/D’s specific to your location, regional basis histories
relating back to the S/D’s and the employment of a Risk Management Matrix that enables us to build
a history of processing margins for the
individual facility, evaluate projected forward margins by individual components: corn,
by-products, and ethanol, and also track and evaluate the corn by-product spread. This information
is employed to evaluate current margins and develop an opinion as to future margins and when to
lock margin in.

The basic tools for risk management are forward cash contracts, buying and selling futures
contracts and buying and selling put and call options. All of these can be employed.

To Recap

JS&A will provide consulting and risk management services as it pertains to Grain Hedging, Grain
Price Information, and assist in risk management as it pertains to Ethanol and By 

Products.

In addition JS&A will make available our proprietary resources for price forecasting, regional
S/D’s, basis analysis and margin management and analysis.

Additionally, we will instruct all relevant personnel as to its use.
Upon your recommendation JS&A will manage the execution of the necessary positions and continually
advise Buffalo Ridge Energy LLC management of any necessary adjustments.

It is our understanding that the primary intent of engaging our professional services is for the
benefit of the staff and management of Buffalo Ridge Energy LLC.

JS&A services commence upon execution of this agreement. In exchange for the above services a fee
of $2500.00 per month will be charged beginning when activity dictates but not to precede plant
startup more than 90 days. In addition the initial payment will not be due until the plant is in
operation. It is also understood that these services are dependant on JS&A being the clearing
broker for Buffalo Ridge Energy LLC at a rate of $15.00 per contract plus clearing and exchange
fees

This agreement does not preclude or limit JS&A from conducting their normal course of business.

 

 

Except as required by any governmental agency, court or tribunal of competent jurisdiction, JS&A
will not disclose to any third party or use for any purposes any confidential information or the
existence of any business relationship with Buffalo Ridge Energy LLC.
        .

This agreement shall remain in effect for one year and continue on a month to month basis
thereafter unless either party notifies the other in writing that it wishes to terminate this
agreement.

If the terms are in accordance with your understanding and acceptable to you please sign, date, and
return the duplicate copy of this letter.

Sincerely,

John Stewart & Associates

Thomas Tucker

	 	 	 
	Buffalo Ridge Energy LLC
	 	 
	 
	 	 
	  /s/ Greg Van Zanten
 

	 	 
	By
	 	 
	 
	 	 
	  Chairman
 

	 	 
	Title
	 	 
	 
	 	 
	  8/2/06
 

	 	 
	Dateexv10w5

 

Exhibit 10.5

July 20, 2006

Buffalo Ridge Ethanol

c/o Matt Sederstrom

Fagen Inc.

501 W. Hwy 212, PO Box 159

Granite Falls, Minnesota 56241

	RE: Ethanol Plant Design Survey
	Buffalo Ridge Ethanol

Dear Matt:

Thank you for the opportunity to submit this proposal for design survey services for the above
ethanol plant project.

It is our understanding that the exact location for the plant has not yet been determined.
However, it is to be located in either northwest Iowa or southwest Minnesota. It is further
understood that the total land parcels involved is not exactly known at this time.

Once a site has been determined, the scope of services typically is broken into two phases: design
survey and land survey. The design survey includes gathering detailed topographic surface and
utility features to provide the basis of design for the project. The land survey leads to the legal
documents which described the boundaries of the property. More specifically, the scope of work for
the above is as follows:

	1.	 	Design Survey

	 	•	 	Detailed survey of land surface features including roads, railroad tracks, fences,
culverts, vegetation and structures.
	 
	 	•	 	Detailed survey of utilities as located by the locating service.
	 
	 	•	 	Drafting of survey data.
	 
	 	•	 	Electronic file package to be sent to Fagen for design.

	2.	 	Land Survey

	 	•	 	Property research.
	 
	 	•	 	Determination of property boundaries.
	 
	 	•	 	Setting property pins.
	 
	 	•	 	Developing plat of survey.

All above work is performed with state of the art equipment including GPS.

	 	 	 
	YAGGY
	 	 
	COLBY
	 	 
	 

	 	 
	ASSOCIATES
	 	 
	 
	 	 
	ENGINEERS
	 	 
	 
	 	 
	ARCHITECTS
	 	 
	 
	 	 
	LANDSCAPE
	 	 
	ARCHITECTS
	 	 
	 
	 	 
	SURVEYORS
	 	 
	 
	 	 
	PLANNERS
	 	 

	 	 	 
	Mason City Office:

	 	 
	 
	 	 
	215 North Adams
	 	 
	Mason City, IA 50401
	 	 
	641-424-6344
	 	 
	641-424-0351 Fax
	 	 
	 
	 	 
	Rochester Office:
	 	 
	507-288-6464
	 	 
	 
	 	 
	Mpls/St. Paul Office:
	 	 
	651-437-2909
	 	 
	 
	 	 
	Delafield Office:
	 	 
	262-646-6855
	 	 

 

 

Buffalo Ridge Ethanol

c/o Matt Sederstrom

July 20, 2006

Page 2

Yaggy Colby Associates has performed such surveys for ethanol plants in Minnesota and Iowa. The
typical fee range can be as follows based on location and size of the property.

	1.	 	Design Survey — $8,500 — $14,000
	 
	2.	 	Land Survey — $9,500 — $15,000

This work is typically done on an hourly rate basis. For your convenience a Compensation Schedule
is enclosed.

The above fees are typically based on minimal difficulty finding section corners and access with an
ATV. Once the property has been identified, a fee estimate will be provided for your approval.

Sincerely,

	 	 	 
	YAGGY COLBY ASSOCIATES
	 	 
	 
	 	 
	/s/ Thomas K. Madden, PE
 

Thomas K. Madden, PE

Project Engineer

	 	 

enclosure

TKM/jmw

buffaloridgeethanol.doc

AUTHORIZATION

I hereby authorize Yaggy Colby Associates to proceed with the work identified herein upon
submission and approval of a specific fee estimate.

	 	 	 	 	 	 	 
	/s/ Gregory Van Zanten
 

Authorized Signature

	 	 	 	8/2/06
 

Date
	 	 

 

 

YAGGY COLBY ASSOCIATES

2006 COMPENSATION SCHEDULE

HOURLY LABOR RATES

	 	 	 	 	 
	Senior Project Engineer, Architect, Planner, Surveyor, Landscape Architect
	 	$105/hour
	 
	 	 	 	 
	Project Engineer, Architect, Planner, Surveyor, Landscape Architect
	 	$95/hour
	 
	 	 	 	 
	Design Engineer, Architect, Planner, Surveyor, Landscape Architect
	 	$85/hour
	 
	 	 	 	 
	Assistant Engineer, Architect, Planner, Surveyor, Landscape Architect
	 	$75/hour
	 
	 	 	 	 
	Intern Engineer, Planner, Surveyor
	 	$65/hour
	 
	 	 	 	 
	Senior Technician Design, Survey, Clerical
	 	$75/hour
	 
	 	 	 	 
	Technician I Design, Survey, Clerical
	 	$68/hour
	 
	 	 	 	 
	Technician II Design, Survey, Clerical
	 	$61/hour
	 
	 	 	 	 
	Technician III Design, Survey, Clerical
	 	$53/hour
	 
	 	 	 	 
	Technician IV Design, Survey, Clerical
	 	$46/hour
	 
	 	 	 	 
	Technician V Design, Survey, Clerical
	 	$39/hour
	 
	 	 	 	 
	Technician VI Design, Survey, Clerical
	 	$34/hour

REIMBURSABLE EXPENSES

	 	 	 	 	 
	Mailings, Plots, Prints, Copies
	 	Cost + 10%
	 
	 	 	 	 
	Mileage: Personal Vehicle
	 	$0.50/mile
	 
	 	 	 	 
	Survey and Inspection Vehicles
	 	$0.60/mile
	 
	 	 	 	 
	Field Equipment and Materials
	 	 	 	 
	Robotic Total Station
	 	$37.00/hour
	G.P.S. Equipment
	 	$37.00/hour
	G.P.S. Rover
	 	$25.00/hour
	Total Station/Data Collector
	 	$10.00/hour
	Stakes, Pipe, Lath, Survey Materaisl
	 	Cost + 10%
	 
	 	 	 	 
	Outside Services, Project Fees, or Permits
	 	Cost + 10%
	 
	 	 	 	 
	Additional Expenses
	 	Cost + 10%

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00117-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00117-of-00352.parquet"}]]