ETHANOL MARKETING AGREEMENTAdvertising or Marketing Agreement |
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Exhibit 10.11
ETHANOL
MARKETING AGREEMENT
This Ethanol Marketing Agreement
(“Agreement”) is made and entered into as of the 31st day of
August, 2004 by and between Granite Falls Energy, LLC a Minnesota limited
liability company (“GFE”) and AVENTINE RENEWABLE ENERGY, INC., a
Delaware corporation (“ARE”) (each a “Party”, and
collectively the “Parties”).
In consideration of the mutual terms and
conditions contained herein, the Parties agree as follows:
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1. |
Term and
Termination: The term
of this Agreement shall commence on the date hereof and shall continue for a
primary term of two (2) years from the first day of the first month
commencing after the date of the first Bill of Lading delivered hereunder and
thereafter; automatically renewing for successive one (1) year terms,
unless terminated on the expiration date of the two (2) year primary
term, or on the expiration date of any subsequent one (1) year renewal term,
in each case by either Party with at least one (1) year written notice prior
to such expiration date. |
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2. |
ARE Investment
in GFE: ARE has purchased an equity interest in GFE at a cost of $500,000
(such initial equity interest in GFE and any subsequent equity or other
investment by ARE in GFE and/or any of its direct or indirect subsidiaries (if
any) is herein referred to as the “Investment”). In the event
this Agreement is terminated for any reason, including without limitation by
either Party pursuant to Section 1. Term and Termination,
then ARE shall have the option, to be exercised in ARE’s sole
discretion concurrent with or at any time after ARE receives or delivers
written notice of such termination, or if no such written notice is provided
with or at any time after such termination, to cause GFE to purchase the
Investment. ARE shall exercise such option by providing written notice to GFE
specifying (i) the date on which such purchase is to occur, which shall be no
sooner than ten (10) days after ARE provides such written notice to GFE
and (ii) the purchase price for the Investment, which shall be the
actual cost ARE originally paid for such Investment (the “Cost”).
On the date specified in such written notice (i) GFE shall pay to ARE,
in immediately available funds, the Cost of the Investment and (ii) upon
receipt of such amount, ARE shall transfer and assign to GFE the Investment.
GFE shall be responsible for obtaining any member approval and/or any other
approvals which may be required, if any, of such transfer of the Investment
to GFE, and ARE shall cooperate in obtaining such approvals. If GFE fails to
purchase the Investment on the specified date in accordance with the
foregoing, ARE shall have the right to set off any amounts owed by ARE to GFE
under this or any other agreement with GFE, against the amount owed by GFE
for the purchase of the Investment from ARE (i.e. the Cost). Upon receipt of
such Cost by ARE, whether through such set off of otherwise, ARE shall,
subject to receiving any necessary approvals, transfer and assign the |
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Investment to
GFE. The provisions of this section shall survive termination of this
Agreement. |
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3. |
Quantity and
Quality |
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A. |
GFE shall sell
exclusively to ARE the total output of fuel grade ethanol
(“Ethanol”) produced at GFE’s Granite Falls, MN facility
(“Plant”), currently anticipated to be forty (40) million
gallons per year. Ethanol shall be delivered FOB the Plant, and title shall
pass on the date of the Bill of Lading. Ethanol produced for the intended use
as an alternative or racing fuel shall not be excluded from this agreement. |
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B. |
Such Ethanol
shall meet or exceed all industry standards or any specifications so required
by the customer. ARE shall have the right to reject any Ethanol which does
meet such standards and such standards are subject to change by ARE. |
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4. |
ARE shall: |
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A. |
Market all of
the Ethanol produced by GFE at the Plant, at the price outlined in
Section 6; |
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B. |
Remit payment
to GFE for the Ethanol as provided in Section 6; and |
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C. |
Be responsible
for scheduling all shipments of Ethanol with GFE. |
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5. |
GFE shall: |
A. Provide to ARE
on a timely basis annual production forecasts, monthly updates to the rolling
twelve month production forecasts, monthly updates, daily plant inventory
balances and shipment information, and other information reasonably requested
by ARE; GFE shall use its reasonable best efforts to meet the monthly
production targets reflected in the then-current annual production forecast;
B. Notify ARE
promptly of any material unscheduled shut-down, suspension or significant decrease
in production at the Plant that was not reported in the rolling twelve month
production forecasts or monthly updates provided under Section 5.A. above;
C. Provide to ARE
specifications and certificates of analysis of the Ethanol sold to ARE that are
consistent with the specifications referred to in Section 3.B. above; GFE
shall, at its expense, provide or cause to be provided all testing and related
test equipment at or in the vicinity of the Plant to determine compliance with
such specifications and
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ARE or its
representative shall, at ARE’S expense, have the right to perform
periodic tests to determine compliance with such specifications.
D. Be responsible
for compliance with all federal, state and local rules, regulations and
requirements regarding the shipment of Ethanol from the Plant, including but
not limited to, all U.S. Department of Transportation (“DOT”)
requirements relating to shipment of hazardous materials (e.g. proper
paperwork, railcars meeting DOT requirements, etc.).
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E. |
Provide for a
minimum of eight days storage on GFE’s premises at GFE’s cost; |
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F. |
For all gallons
sold to ARE, use certified meters or weight-scales that provide both gross
and net 60° Fahrenheit temperature compensated gallons; and |
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G. |
Provide any of
the information to be provided by GFE pursuant to this Section 5 to ARE
electronically in data form, if such information is available in such form. |
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6. |
Pricing and
Commission |
A. Sales Price.
The per gallon sale price GFE shall receive for the Ethanol sold to ARE under
this Agreement shall be based on the Alliance Net Pool Price, as defined below,
which shall be adjusted to reflect the Pooled Volume Adjustment and/or Pooled
Volume True-Up, as applicable. An illustrative example of the calculation of
Alliance Net Pool Price is attached as Exhibit A hereto.
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“Alliance
Net Pool Price” shall mean, with respect to any month, (i) the
weighted average gross price per gallon received by ARE for all fuel grade
Ethanol that was (A) supplied by an alliance partner or produced by ARE
and (B) sold during such month by ARE, minus (ii) all costs
(on a per gallon basis) incurred by ARE in conjunction with the handling,
movement and sale of such Ethanol, including but not limited to terminal
lease charges, throughput charges, terminal shrinkage costs, freight charges,
tariffs, costs of leasing railcars, trucks, river barges and ocean going
vessels, government taxes and assessments, insurance, inspection fees,
administrative costs, working capital carrying costs, bad debt expense, costs
of purchasing and delivering replacement ethanol due to lost or interrupted
Ethanol production and other costs, but excluding direct marketing costs
incurred in marketing such Ethanol. ARE shall use commercially reasonable
efforts to contain the costs described in clause (ii) above so as to
maximize the Alliance Net Pool Price. |
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If ARE’s
pooled volume of fuel grade Ethanol at the end of a month is higher than its
pooled volume at the end of the immediately preceding month because pooled
sales volumes were less than the aggregate volume supplied by the alliance
partners or produced by ARE during such month, the Alliance Net Pool Price
for |
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such month
shall be calculated as if the amount of such increase was included as gallons
supplied by the alliance partners and/or produced by ARE and sold by ARE
during such month at a price per gallon equal to the estimated Alliance Net
Pool Price for the immediately following month (as determined in good faith
by ARE). The amount by which the Alliance Net Pool Price for any month is
increased or decreased as a result of the foregoing sentence is the
“Pooled Volume Adjustment” for such month. |
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In the event
that the actual Alliance Net Pool Price for a month is different from the
estimated Alliance Net Pool Price used in calculating the Pooled Volume
Adjustment for the immediately preceding month, an adjustment to the Alliance
Net Pool Price in the current month shall be made by an offset which is equal
to the amount of such difference. Such adjustment is the “Pooled Volume
True-Up.” Payment shall be made in accordance with paragraph C below. A
Pooled Volume True-Up shall occur at the time of payment for the last
delivery of Ethanol under this Agreement to reflect the actual Alliance Net
Pool Price for the final month of the term of this Agreement. |
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B. Commission.
For each gallon of Ethanol sold to ARE under this Agreement, ARE shall deduct
from the Alliance Net Pool Price a commission equal to *** of the Alliance Net
Pool Price.
*** Material has
been omitted pursuant to a request for confidential treatment and such material
has been filed separately with the Securities and Exchange Commission .
C. Payment.
For all quantities of Ethanol purchased by ARE from GFE and shipped from the
Plant during a one-week period beginning on Monday and ending on the following
Sunday, ARE shall pay the estimated Alliance Net Pool Price referred to in
Section 6.A. less commissions referred to in Section 6.B., to GFE by
ACH or wire no later than fifteen (15) business days following the end of said
one-week period. If at calendar month’s end, the actual Alliance Net Pool
Price exceeds the estimated Alliance Net Pool Price, ARE shall pay GFE on or
before the 15th business day of the following calendar month an
amount equal to the product of (x) the difference between the actual and
estimated Alliance Net Pool Price (in each case less commissions) and
(y) the aggregate quantity of Ethanol purchased by ARE from GFE and shipped
from the Plant under this Agreement during the prior calendar month. If the
actual Alliance Net Pool Price is less than the estimated Alliance Net Pool
Price, GFE shall pay ARE and ARE shall have the right to withhold and set off
from future payments to GFE, an amount equal to the product of (x) the
difference between the actual and estimated Alliance Net Pool Price (in each
case less commissions) and (y) the aggregate quantity of Ethanol purchased
by ARE from GFE and shipped from the Plant under this Agreement during such
month.
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D. Supporting
Records. ARE shall keep a set of books and records in accordance with
generally accepting accounting principals with respect to all sales of Ethanol
hereunder and all costs and commissions associated therewith, and shall make
such books and records reasonably available to GFE’s independent outside
accounting representatives (upon execution by such independent outside
accounting representative of a mutually agreeable confidentiality agreement) at
ARE’s office at any time by appointment during normal business hours upon
at least five (5) business days prior written notice; provided that
GFE shall be entitled to no more than one (1) such visit in any year and
GFE’s independent outside accounting representatives shall be permitted
to disclose to GFE only aggregate summary information of the results of its
review, and not any contract or customer specific information. In addition, ARE
shall provide GFE by e-mail or fax with supporting documentation regarding the
calculation of the estimated Alliance Net Pool Price with each weekly payment
for Ethanol.
7. Responsibility for Dedicated Railcars.
GFE acknowledges that ARE will enter into leases or other arrangements intended
to secure the availability of sufficient railcars to ship the Ethanol produced
at the Plant as contemplated by this Agreement (“Dedicated
Railcars”). ARE shall promptly notify GFE of such arrangements. In the
event GFE or ARE terminates this Agreement and ARE’s commitments with
respect to the Dedicated Railcars continue past the date of such termination,
GFE shall be responsible for all of ARE’s costs and expenses (including
without limitation carrying costs and finance charges) related to such
Dedicated Railcars after the date of such termination. ARE and GFE shall
cooperate in good faith to minimize the amount of any such costs and expenses,
including using commercially reasonable efforts to assign ARE’s rights
and obligations with respect to the Dedicated Railcars to GFE. Without limiting
the generality of the foregoing, except as may otherwise be agreed by ARE and
GFE and recognizing that ARE will make a good faith effort to accommodate any
start-up issues and schedule rail cars accordingly, in the event that the Plant
does not start up or fails to provide substantially the contemplated volumes of
Product, any costs incurred for such Dedicated Railcars not so utilized shall
be for GFE’s account.
8. Indemnity: ARE shall indemnify,
defend, and hold GFE and its affiliates, subsidiaries, parents, and its and
their respective directors, officers, stockholders, employees, and agents
harmless from and against any and all claims, losses, awards, judgments,
settlements, fines, penalties, liabilities, damages, costs or expenses
(including reasonable out-of-pocket Attorney’s fees and expenses)
incurred on account of any injury or death of persons or damages to property to
the extent caused by or arising out of the negligence or willful misconduct of
ARE, its officers, employees, or agents in performing ARE’s obligations under
this Agreement.
GFE shall indemnify, defend, and hold ARE and
its affiliates, subsidiaries, parents, and its and their respective directors,
officers, stockholders, employees, and agents harmless from and against any and
all claims, losses, awards, judgments, settlements, fines, penalties,
liabilities, damages, costs or expenses (including reasonable out-of-pocket
Attorney’s fees and expenses) incurred on account of any injury to or
death of persons or damages to property to the extent caused by or arising out
of the negligence or willful misconduct of GFE, its officers, employees,
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or agents in performing GFE’s
obligations under this Agreement. In addition, GFE shall indemnify and hold ARE
and its affiliates, subsidiaries, parents, and its and their respective
directors, officers, stockholders, employees, and agents harmless from and
against any and all claims, losses, awards, judgments, settlements, fines,
penalties, liabilities, damages, costs or expenses (including reasonable
out-of-pocket Attorney’s fees and expenses) to the extent caused by or
arising out of (i) any defects in, or otherwise relating to the quality or
condition of, the Ethanol supplied by GFE and (ii) noncompliance with
applicable federal, state or local rules, regulations or requirements regarding
shipment of Ethanol from the Plant as more fully set forth in Section 5.D
above.
9. Force Majeure:
A. In the event
either Party is rendered unable, wholly or in part, by Force Majeure to carry
out its obligations under this Agreement, it is agreed that on such
Party’s giving notice in writing, or by telephone and confirmed in
writing, to the other Party as soon as possible after the commencement of such
Force Majeure event, the obligations of the Party giving such notice, so far as
and to the extent they are affected by such Force Majeure, shall be suspended
from the commencement of such Force Majeure and during the remaining period of
such Force Majeure, but for no longer period, and such Force Majeure shall so
far as possible remedied with all reasonable dispatch; provided, however, the
obligation to make payments then accrued hereunder prior to the occurrence of
such Force Majeure shall not be suspended.
B. The term
“Force Majeure” as used in this Agreement shall mean strikes, lockouts
or industrial disturbances; riots or civil disturbances; interference by civil
or military authorities; wars, blockades, insurrection, or acts of other public
enemy or acts of terrorism; epidemics, landslides, lightning, earthquakes,
fires, storms, floods, washouts or other acts of God; arrests or restraints of
governments and people; compliance with federal, state or local laws, rules or
regulations, acts, orders, directives, requisitions or requests of any official
or agency of federal, state or local governments; fires, explosions, freezing,
failures, disruptions, breakdowns or accidents to transportation equipment or
facilities; prorationing by transporters; the necessity of testing, making
repairs, alterations or enlargements to transportation equipment or facilities;
embargoes, priorities, expropriation or condemnation by government or
governmental authorities; and any other cause which is not reasonably within
the control of the Party claiming suspension.
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10. |
Limitation
of Damages: NEITHER PARTY
SHALL BE LIABLE OR OTHERWISE RESPONSIBLE TO THE OTHER PARTY HEREUNDER FOR
CONSEQUENTIAL, EXEMPLARY, SPECIAL, INCIDENTAL OR PUNITIVE DAMAGES AS TO ANY
ACTION OR OMISSION, WHETHER CHARACTERIZED AS A CONTRACT BREACH OR TORT OR
OTHERWISE THAT ARISES OUT OF OR RELATES TO THIS AGREEMENT OR ITS PERFORMANCE
EXCEPT FOR ANY SUCH AMOUNTS PAID BY A PARTY TO A NON-AFFILIATE THIRD PARTY,
WHICH |
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