Exhibit 10.40
“[*]” =
confidential portions of this document that have been omitted and
have been separately
filed with the Securities and
Exchange Commission pursuant to an application for
confidential
treatment under Rule 24b-2
under the Securities Exchange Act of 1934, as
amended.
(Pages 7, 12 and
13)
DISTRIBUTION
AGREEMENT
This DISTRIBUTION AGREEMENT (the
“Agreement”) dated
between ROYSTER-CLARK RESOURCES LLC, a limited liability company
organized and existing under the laws of the State of Delaware and
having its principal office at 999 Waterside Drive, Suite 800,
Norfolk, VA 23510 (“RCR”); and RENTECH DEVELOPMENT
CORPORATION, a Colorado corporation (“RDC”), a wholly
owned subsidiary of Rentech, Inc., a Colorado corporation
(“Rentech”), having its principal office at 1331
17 th Street, Suite 720, Denver, CO 80202.
RDC and RCR are from time to time hereafter referred to
individually as a “Party” and collectively as the
“Parties.”
W I T N E S
S E T H :
WHEREAS, RCR’s parent company,
Royster-Clark, Inc. (“RCI”), formerly owned and
operated, through its ownership of Royster-Clark Nitrogen, Inc., a
facility (the “Facility”) located in East Dubuque,
Illinois at which it manufactured anhydrous ammonia, granular urea,
nitric acid, UAN solutions and carbon dioxide
(“Products”) for sale to its industrial and
agri-business customers; and
WHEREAS, on the date hereof, RDC
acquired the Facility, through its purchase of Royster-Clark
Nitrogen, Inc. from RCI, with a view to converting the Facility
over a period of
approximately three (3) years to utilize
alternative feedstock and to co-produce synthetic fuels with
ammonia; and
WHEREAS, RDC wishes to sell
anhydrous ammonia, granular urea, UAN solutions and nitric acid and
related nitrogen-based products (“Facility Products”)
manufactured at the Facility to RCR and to engage RCR as its
exclusive distributor of the Facility Products for agricultural and
industrial use within the United States; and
WHEREAS, RCR wishes to purchase the
Facility Products and to act as RDC’s exclusive distributor
of the Facility Products under the terms and conditions set forth
herein; and
WHEREAS, RCR is a major distributor
of nitrogen products and has historically sourced up to 25% of its
need from the Facility.
NOW, THEREFORE, in consideration of
the premises and of the mutual covenants and obligations contained
herein, and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the Parties agree
as follows:
ARTICLE I
APPOINTMENT AND TERMS OF
DISTRIBUTORSHIP
1.1 Appointment . RDC hereby
appoints RCR as its exclusive distributor for the sale, purchase
and resale of the Facility Products for agricultural and industrial
use throughout the United States subject to the terms and
conditions of this Agreement.
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1.2 Relationship of the
Parties . The relationship between RDC and RCR is that of
independent contractors and not that of employer-employee or
principal-agent. RCR shall not be the agent or legal representative
of RDC, nor shall RDC be the agent or legal representative of RCR.
Neither RDC nor RCR shall have the right, power or authority to
assume or undertake any obligation whatsoever or make any
representation on behalf of the other unless authorized to do so in
writing.
1.3 Commercially Reasonable
Efforts .
Subject to the terms and conditions
of this Agreement (including, without limitation, Sections 1.4, 1.5
and 2.1), (i) RCR agrees to use its commercially reasonable
efforts to promote the sale of, and to solicit and secure orders
for the Facility Products from its customers, particularly its
customers within the “truck market” area around the
Facility, and to purchase from RDC all Facility Products
manufactured at the Facility, and (ii) RDC agrees to sell to
RCR all of its requirements of the Facility Products.
Notwithstanding the foregoing, in no event shall RDC be required to
manufacture and deliver to RCR more than that amount of Facility
Product that RDC and RCR have agreed that RCR shall purchase from
RDC pursuant to Section 2.1. It is expressly understood and
agreed that RCR may purchase Facility Products hereunder for its
own account as well as for resale to its customers. In addition,
RCR may accept deliveries of Facility Products from RDC on
consignment in RCR’s terminals upon such terms and conditions
as the Parties may agree.
1.4 Third Party Sales . In
the event that RCR and RDC are not able to reach an agreement
during the Negotiation Period (as defined below) with respect to a
transaction proposed under either of Sections 2.1(a) or 2.1(b),
then RDC shall have the right to sell to third parties the same
Facility Products that were the subject of such proposed
transaction; provided that any such sale to a third
party (each, a “Third Party Sale”) must satisfy each of
the following conditions: (a)
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such Facility Products shall only be sold and
shipped on the same timetable and in the same volume as were
included in the terms of the last proposal in writing by RDC to RCR
during the Negotiation Period with respect to such proposed
transaction and (b) such Facility Products shall only be sold
at a price (taking into account rebates and similar items, if any)
not less than the lowest price included in such proposal (the price
at which such Facility Products are actually sold to a third party
being the “Third Party Price” with respect thereto).
Notwithstanding the foregoing, RCR shall receive the Applicable
Commission based on the Third Party Price of any Third Party Sale,
except that in the case of Third Party Sales to New Customers (as
defined below) after the date that is two years after the date
hereof RCR shall not receive any commission under this
Section 1.4. “New Customers” shall mean persons to
which RCR shall not have sold any Facility Products during the five
(5) year period prior to such Third Party Sale and to which
RDC shall not have sold any Facility Products during the first two
(2) year period of this Agreement. Notwithstanding anything to
the contrary herein, RDC shall have the exclusive right to market
and sell Facility Products for agricultural or industrial end-use
outside the United States.
1.5 Inventory . Subject to
Section 2.1, no specific minimum purchase obligations on the
part of RCR shall be established in connection with its inventory
of Facility Products or otherwise, and no specific minimum
production obligations on the part of RDC with respect to the
Facility Products shall be established under this
Agreement.
1.6 Inspection . (a) RDC
shall have the right, from time to time, upon at least fourteen
(14) days’ prior written notice to RCR, to inspect,
during regular business hours, RCR’s books and records
relating to sales of Facility Products to its customers, for the
purpose of determining the accuracy of the “Applicable
Commission,” as subsequently defined in this Agreement,
provided that RDC shall use its best efforts to minimize any
disruption to RCR’s business resulting from such
inspection.
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(b) RCR shall have the right, from
time to time, upon at least fourteen (14) days’ prior
written notice to RDC, to inspect, during regular business hours,
RDC’s books and records relating to sales of Facility
Products to third parties (including with respect to rebates and
similar items, if any), for the purposes of determining whether
Third Party Sales by RDC were made in compliance with
Section 1.4 and whether the reporting thereof was
accurate.
1.7 Sales Forecasts . RCR and
RDC shall cooperate and use their commercially reasonable efforts
to prepare and mutually agree upon, on or before September 1
of each year (or, during the first year of the Term, within 30 days
after the date hereof, for the calendar year immediately following,
a 12-month forecast of RCR’s Sales of Facility Products
(“Sales Forecast”) under a format to be mutually agreed
upon by the parties. It is understood and agreed, however, that
such forecasts shall be estimates only, and shall not constitute a
commitment by RCR to purchase, nor RDC to produce, the amount of
Facility Products identified in the Sales Forecast. RCR and RDC
shall cooperate and use their commercially reasonable efforts to
mutually agree upon updates to the Sales Forecast prior to each
calendar quarter. The parties intend to cooperatively develop
marketing and promotion plans to maximize sales of the Facility
Products. RCR and RDC agree that they will in be in regular contact
with one another such that RCR shall keep RDC reasonably
well-apprised of the third-party market for Facility Products and
RDC shall keep RCR reasonably well-apprised of its levels of
production and inventory of Facility Products.
1.8 RDC Sales . RDC shall
not, directly or indirectly, sell any Facility Products for
agricultural or industrial use within the United States other than
to or through RCR or through Third Party Sales. Notwithstanding
anything herein to the contrary, RDC reserves the right to sell
carbon dioxide, fuels, electricity and sulfur and any other product
produced at the Facility other than
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Facility Products and RCR shall not be entitled
to receive any commission or other compensation on, or any other
rights in respect of, any such sales pursuant to this
Agreement.
ARTICLE II
PURCHASE ORDERS, PRICE, PAYMENT
AND DELIVERY TERMS
2.1 Placement of Orders and
Shipping . (a) To the extent RCR desires to purchase
Facility Products from RDC, RCR shall so notify RDC and include
with such notice details as to the type and quantity of Facility
Products, the timing of delivery and the pricing terms with respect
to which it desires to make such purchase.
(b) To the extent RDC desires to
sell Facility Products to RCR, RDC shall so notify RCR and include
with such notice details as to the type and quantity of Facility
Products, the timing of delivery and the pricing terms with respect
to which it desires to make such sale.
(c) In each circumstance in which
Section 2.1(a) or Section 2.1(b) is implicated, RCR or
RDC, as the case may be, shall have two (2) business days to
respond to the other (the “Offer Period”). In the case
of Section 2.1(a), if RDC shall not have responded within the
Offer Period, it shall be deemed to have rejected the terms of the
purchase proposed by RCR. In the case of Section 2.1(b), if
RCR shall not have responded within the Offer Period, it shall be
deemed to have rejected the terms of the sale proposed by RDC. In
the event that RCR fails to respond during the Offer Period or
either RCR or RDC, as the case may be, responds that it will not
agree to the proposed transaction, then the two shall negotiate in
good faith, for a period not to exceed two (2) business days
(the “Negotiation Period”), seeking to reach agreement
on the terms of the proposed transaction. During the Negotiation
Period and with respect to pricing terms, the parties shall take
into consideration (among other factors) the preceding two weeks
FOB Midwest Market Prices for the particular product as published
by Fertilizer Week America (FOB Midwest) and Green
Markets
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(Mid Cornbelt). If RCR and RDC shall
agree on the terms of the proposed transaction during the Offer
Period or the Negotiation Period, the agreed price with respect to
that transaction (the “Sales Price”), less the
Applicable Commission, shall be payable with respect thereto under
Section 2.4.
(d) If RDC is unable to ship on a
timely basis the Facility Products that are required by an agreed
transaction, it will so notify RCR and inform it of the anticipated
shipping date, and if shipment is not made within five
(5) days after the shipping date specified with respect to
such agreed transaction, RCR shall have the right to cancel such
agreed transaction without prejudice to any other right or remedy
of RCR.
2.2 Delivery of Facility
Products . Delivery of the Facility Products to RCR or its
customer shall be FOB the Facility in East Dubuque, Illinois, and
title to and risk of loss of Facility Products shall pass upon
delivery to RCR or its customer when the Facility Products pass the
flange into RCR’s or its customer’s barge, truck or
railcar. RCR shall arrange and pay for shipping of Facility
Products hereunder. Collection of freight from its customers shall
be RCR’s responsibility. However, RDC acknowledges that RCR
may wish to have RDC (at RCR’s sole cost and expense) ship
Facility Products to RCR or its customers from time to
time.
2.3 Applicable Commission .
As used herein, the “Applicable Commission” shall mean
with respect to transactions for which the Sales Price or the Third
Party Price is agreed during the following periods: (a) from
the date of this Agreement until the date that is four years from
the date hereof, [*]% of the applicable Sales Price or Third Party
Price, and (b) for the fifth year of the Term, each year of
the Second Term and each subsequent one (1) year renewal
period, such percentage of the applicable Sales Price or Third
Party Price as RDC and RCR shall negotiate and agree in good faith
at least thirty (30) days before the commencement of such
twelve (12) month period. Notwithstanding the foregoing, the
maximum amount of the
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Applicable Commission payable by RDC to RCR
hereunder shall not exceed $[*] with respect to any of the four
twelve (12) month periods ending on the first four
(4) anniversaries of the date hereof.
2.4 Payment . (a) RDC
shall, on a weekly basis, deliver to RCR a written statement
(hereinafter referred to as the “Shipping Statement”)
showing all Facility Products shipped to RCR or its customers
during the preceding one week period. RCR shall remit to RDC within
thirty (30) days from the date of Shipping Statement, by wire
transfer, an amount equal to such amount indicated on the Shipping
Statement. The Shipping Statement amount will be based on the
applicable Sales Prices less the Applicable Commission. No Shipping
Statement need be delivered if during the applicable week no
Facility Products were shipped as described above.
(b) RCR shall on a weekly basis
deliver to RDC a statement (hereinafter referred to as the
“Sales Statement”) for all sales of Facility Product
that RDC has placed on consignment in RCR’s terminals for the
preceding one week period. The Sales Statement shall list all sales
based on the terms and conditions agreed to at the time Facility
Product was placed on consignment with RCR. RCR shall remit to RDC
within thirty (30) days from the date of Sales Statement, by
wire transfer, an amount equal to such amount indicated on the
Sales Statement. No Sales Statement need be delivered if during the
applicable week no Facility Products were placed on consignment as
described above.
(c) RDC shall, on a weekly basis,
deliver to RCR a written statement (hereinafter referred to as the
“Third Party Sales Statement”) showing all Facility
Products shipped through Third Party Sales during the preceding one
week period. RDC shall remit to RCR within thirty (30) days
from the date of Third Party Sales Statement, by wire transfer, an
amount equal to such amount indicated on the Third Party Sales
Statement. The Third Party Sales Statement amount will
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be the Applicable Commission based
on the applicable Third Party Prices. No Third Party Sales
Statement need be delivered if durin
