FERTILIZER AGENCY AGREEMENT

Exhibit 10.ii.a

 

FERTILIZER AGENCY AGREEMENT

 

This Agreement is made as of and effective the 22nd day of October, 2004 by and between:

 

CARGILL LIMITED, a Canadian corporation, with a

principal mailing address of P.O. Box 5900, Winnipeg,

Manitoba, Canada R3C 4C5 (hereinafter “CARGILL”),

 

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MOSAIC (CANADA) L.P., a Manitoba Limited Partnership

with a principal mailing address of 614 – 240 Graham Avenue,

Winnipeg, Manitoba, Canada R3C 0J7

(hereinafter “PRINCIPAL”).

 

WHEREAS, PRINCIPAL and its Affiliates are engaged in the manufacture and sale of certain fertilizers (the “Products”) more specifically set forth in Schedule “A” , as may be amended from time to time;

 

WHEREAS, PRINCIPAL does not have the sales, marketing and distribution personnel and facilities to effectively market Products to independent crop input retailers in Western Canada;

 

WHEREAS, PRINCIPAL desires to have CARGILL perform certain sales, marketing, promotion, logistic and related services necessary to market the Products to independent crop input retailers in Western Canada;

 

WHEREAS, CARGILL has the experience and resources to effectively market the Products to independent crop input retailers in Western Canada and is agreeable to performing the required sales, marketing, promotion, logistic and related services;

 

NOW, THEREFORE, for and in consideration of the foregoing and the terms and conditions contained hereinafter, the parties hereto agree as follows:

 

1.	Definitions.

 

(a)

“Affiliate” means with respect to a party hereto, a corporation, partnership or person which:

 

(i)

is directly or indirectly controlled by such party;

 

(ii)

directly or indirectly controls such party; or

 

(iii)

is directly or indirectly controlled by a corporation, partnership or person which also directly or indirectly controls such party.

 

Without limiting the generality of the foregoing, for purposes of this definition: (a) a corporation, partnership or person shall be deemed to

control a limited partnership if it is the sole general partner of that partnership, and (b) a corporation, partnership or person shall be deemed to control a corporation if securities of the corporation to which are attached more than 50% of the votes that may be cast to elect directors of the corporation are held, other than by way of security only, by or for the benefit of that corporation, partnership or person and the votes attached to those securities are sufficient, if exercised, to elect a majority of the directors of the corporation. Provided, however, PRINCIPAL shall not be considered an Affiliate of CARGILL for purposes of this Agreement.

 

(b)

“Contract Year” means the First Contract year and each subsequent twelve (12) month period during the term of this Agreement.

 

(c)

“Customers” means independent businesses in the agricultural market in Western Canada, whose primary business is retail sales of crop inputs, now existing or as may be established in the future, each consisting of one or more locations with at least one fertilizer blender on site. Without limitation, Customers shall include buying groups servicing independent dealers.

 

(d)

“$” or “Dollar” means, unless otherwise expressly stated, a dollar of the lawful money of Canada.

 

(e)

“First Contract Year” means that period of time commencing on the date of this Agreement and continuing through June 30 immediately following such date.

 

(f)

“Products” means certain fertilizers manufactured or sold by PRINCIPAL or its Affiliates in the Territory, more specifically set forth in Schedule “A” , as may be amended from time to time.

 

(g)

“Territory” means the geographic area comprising the Canadian provinces of Manitoba, Saskatchewan, Alberta and British Columbia, commonly called Western Canada.

 

2.	Objectives of the Parties.

 

The Parties acknowledge their agreement to use their best efforts to jointly maximize the financial netbacks to PRINCIPAL on sales of Products to Customers. Accordingly, the Parties agree that sales, marketing, promotional and advertising activity will ordinarily be focused in areas which will normally result in maximizing financial netbacks to PRINCIPAL.

 

The Parties further acknowledge that maximizing netbacks to PRINCIPAL requires ongoing cooperation and communication between and among the Parties with respect to Product production, Product marketing and inventory levels and promoting public recognition of the PRINCIPAL name and of any brand names by which the Products are identified.

 

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3.	Appointment as Agent.

 

The PRINCIPAL appoints CARGILL as its agent to sell Products to Customers in the Territory and to solicit orders and inquiries and generally promote the sale of the Products in accordance with the terms, provisions and conditions of this Agreement. This Agreement shall govern only those Products sold to Customers in the Territory.

 

4.	Exclusive Agent.

 

The appointment of CARGILL shall be exclusive to CARGILL in the Territory with respect to sales of Products to Customers. The PRINCIPAL shall not appoint another agent or distributor in the Territory to solicit sales of the Products to Customers on the PRINCIPAL’s behalf and CARGILL shall not promote or sell to Customers any similar products manufactured or supplied by parties other than the PRINCIPAL except by mutual agreement.

 

5.

Term.

 

This Agreement shall be effective as of its execution and shall terminate:

 

(a)

effective June 30, 2007 or at the end of any extension of the term of this Agreement which may be mutually agreed upon, by:

 

(i)

CARGILL or PRINCIPAL delivering notice of termination in writing to the other no less than one (1) year prior to such date; or

 

(ii)

CARGILL and PRINCIPAL failing to agree in writing to extend the term of this Agreement on mutually satisfactory terms no less than one (1) year prior to such date;

 

(b)

as provided in Paragraph 23 hereof; or

 

(c)

by mutual agreement of the parties.

 

6.	Marketing Services.

 

(a)

Except as otherwise provided herein, CARGILL agrees, as agent for PRINCIPAL and in the name of PRINCIPAL, to obtain orders from Customers acceptable to PRINCIPAL for Products.

 

(b)

CARGILL will take all necessary steps to fulfill its obligations hereunder and, without limitation, CARGILL shall:

 

(i)

discharge its duties under this Paragraph 6 in a diligent and professional manner utilizing appropriately trained and skilled personnel and the marketing and sales expertise of CARGILL;

 

(ii)

endeavor to arrange sales in order to facilitate orderly scheduling;

 

(iii)

at the request of PRINCIPAL, expeditiously resolve Product quality claims. CARGILL shall not, without the prior written consent of PRINCIPAL, bind or purport to bind PRINCIPAL to any Product claim settlement. The negotiation and resolution of any

 

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claim not settled within 120 days will become the responsibility of PRINCIPAL. CARGILL, however, shall continue to provide such assistance in such negotiations as PRINCIPAL reasonably requires;

 

(iv)

make its staff, including without limitation, territory managers, available for direct communication from PRINCIPAL.

 

Notwithstanding the foregoing, CARGILL and PRINCIPAL shall each be obligated to use reasonable efforts to mitigate any damages or other losses which might arise due to any of the foregoing circumstances, including using reasonable efforts to renegotiate contract terms and/or develop potential alternative sales arrangements for the Product(s) affected.

 

7.	Business Planning.

 

Annually, PRINCIPAL shall develop a business plan with respect to the sale of Products in the Territory to Customers. Such business plan shall include, without limitation, sales forecasts and desired sales/marketing activities (trade shows, industry events, dealer promotions/trips, etc.) to be implemented by CARGILL. CARGILL shall be invited to participate in the development of PRINCIPAL’s annual business plan for the sale of Products in the Territory to Customers and if so invited, CARGILL shall make reasonable efforts to ensure a knowledgeable and accountable employee attends.

 

If and to the extent CARGILL recommends a marketing or sales program to PRINCIPAL that involves Products or related services, CARGILL shall submit a detailed proposal, including proposed financial contributions required from each party. PRINCIPAL shall employ best efforts to review and, if thought appropriate, approve such programs, including mutually agreed upon financial contributions required from each party, in a timely fashion.

 

8.	Other Services.

 

CARGILL may assist PRINCIPAL in mitigating Product quality problems not caused by CARGILL’s fault. Such services will be performed upon the mutual agreement of the parties and at a cost to be negotiated prior to such services being performed.

 

9.	Compensation.

 

Compensation payable under this Agreement will be as follows:

 

(a)

Commissions – For the sales, marketing, promotion, advertising, and logistic and associated services set forth in Paragraph 6 hereof, PRINCIPAL will pay CARGILL a commission of six ($6.00) dollars for each metric tonne of Product sold between the date of execution of this Agreement and June 30, 2007;

 

Except as provided below, CARGILL shall be considered to have earned its commission (notwithstanding the status of customer payments) at the time the customer is invoiced, which invoicing shall occur promptly after

 

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shipment (or promptly after contracting with respect to prepayment sales) and payment of commissions shall be made on the date CARGILL remits to PRINCIPAL the customer payment for the sale of Product for which the commission is due. For greater efficiency, CARGILL shall be entitled to withhold the commission which is due to it from any customer payment remittance that would otherwise be made to the PRINCIPAL. In the event PRINCIPAL requests CARGILL to cancel a sale and buy out a contract (as opposed to customer requested cancellations) CARGILL shall be considered to have earned its commission at the time the Product would have been shipped if the sale had not been cancelled. If contract term(s) or price(s) are renegotiated, CARGILL’s commission shall be determined based on the original contract terms.

 

(b)

Expenses – In addition to the commission set forth above, PRINCIPAL will reimburse CARGILL for out-of-pocket expenses, subject to prior approval by PRINCIPAL of the types of expenses to be reimbursed. Expenses for which reimbursement would be made include but are not limited to out-of-pocket advertising, promotion expenses, trade show expenses and costs agreed pursuant to Paragraph 8 hereof. If the parties develop a joint sales, marketing, promotion and advertising program or programs for the Products and related services sold by CARGILL’s internal day-to-day selling, marketing logistics and administrative expenses shall be for its own account and no third party sales commissions, brokerage charges or similar expense charges shall be made without PRINCIPAL’s prior approval.

 

10.	Warehousing.

 

Subject to mutual agreement, the parties anticipate using CARGILL’s and its Affiliates’ system of owned and/or operated non-Retail warehouses as well as third-party warehouses for the distribution of the Products. Any use of such CARGILL-owned and/or operated warehouses will be the subject of a separate agreement (or agreements) between PRINCIPAL and CARGILL (or its Affiliate(s) as appropriate).

 

CARGILL agrees to use reasonable efforts to give PRINCIPAL a right of first refusal with respect to the use of any such available warehouse space in its or its Affiliates’ non-Retail warehouse facilities at prevailing market rates and terms; provided, however neither CARGILL nor any of its Affiliates shall be required to terminate any existing warehousing arrangement or fail to renew an evergreen warehousing arrangement to accommodate PRINCIPAL’s desired warehousing plans and, provided further that PRINCIPAL shall exercise its right of first refusal promptly and in any event within thirty (30) days of the date of CARGILL’s or its Affiliate’s notice to PRINCIPAL of available warehouse space.

 

11.	Marketing and Production Forecast.

 

Quarterly, commencing December 1, 2004, CARGILL shall provide PRINCIPAL with a 12-month sales forecast, identified by each Customer as well as for each Product, in such form as may be mutually agreed upon from time to time. CARGILL shall update its forecast and assessment on a monthly basis or more frequently if required by market conditions or as requested by PRINCIPAL.

 

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It is acknowledged that representatives of CARGILL and PRINCIPAL must discuss market requirements, supply capabilities and the scheduling of shipping on a routine basis to achieve the objectives of this Agreement

 

12.	Price and Terms.

 

PRINCIPAL will establish the prices and other terms upon which CARGILL will solicit orders for the sale of the Products. Such prices and terms shall be established on a weekly basis or more frequently when required by market conditions. PRINCIPAL shall provide CARGILL with market information including supply and demand forecasts, market research reports and other general market information to assist CARGILL’s marketing, promotion and sales efforts of Products to Customers; provided, however, PRINCIPAL shall not be required to provide information or documents if doing so would violate applicable laws, rules, regulations or ordinances or third party agreements.

 

CARGILL shall provide PRINCIPAL with information regarding competitors prices, terms, conditions and programs as may become available to them; provided, however, CARGILL shall not be required to provide such information if doing so would violate laws, rules, regulations or ordinances or third party agreement.

 

If requested by PRINCIPAL for a particular Fertilizer Year on or before the commencement of such Fertilizer Year, timely grain market information, including Statscan and CARGILL seeded acre reports, soil moisture and crop reports, gross revenue by crop projections, weekly canola reports, GrainSense reports, Eye on Canola and other related information shall be made available by CARGILL for an annual fee of $36,000.00 as may be adjusted from time to time by mutual agreement, provided however CARGILL shall not be required to provide seed information if doing so would violate laws, rules, regulations or ordinances or third party agreements.

 

CARGILL shall solicit orders for the sale of the Products only in accordance with the specific prices, terms, conditions, policies, and instructions issued by PRINCIPAL.

 

13.	Sales and Other Contracts.

 

Except as otherwise agreed, all sales will be made according to the terms of standard form contract(s) which shall have been approved by PRINCIPAL from time to time. CARGILL will generate the sales contract based on the prices and other terms established from time to time by PRINCIPAL and will execute same in its capacity as agent for PRINCIPAL. All contracts, whether or not for the sale of Products shall properly reflect the agency relationship between the parties. CARGILL shall have no authority to enter into any contract or commitment on behalf of or obligate or bind PRINCIPAL except for the sale of Products in compliance with the prices and terms established by PRINCIPAL from time to time.

 

14.	Risks of Non-Payment and Non-Performance.

 

Unless otherwise agree, CARGILL will accept the risk of customer non-payment (defined below). In recognition thereof, PRINCIPAL shall have no right to force CARGILL to solicit orders from a customer whose financial condition CARGILL has not approved, unless PRINCIPAL agrees to accept the risk of non-payment with respect to such sale(s).

 

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It is understood and agreed by the parties that CARGILL is not accepting the risk of customer non-performance, other than the risk of non-payment and that PRINCIPAL accepts all such other non-performance risks; provided, however, that CARGILL shall be diligent in ensuring Customer orders reflect their ability to perform