Exhibit 10.2
DISTILLER’S GRAIN MARKETING
AGREEMENT
THIS DISTILLER’S GRAIN
MARKETING AGREEMENT (the “Agreement”), is entered into
as of this 28th day of November, 2005, by Dakota Ethanol LLC, a
South Dakota limited liability company (“Seller”), and
Commodity Specialists Company, a Delaware Corporation
(“Buyer”).
W I T N E S S E T H:
WHEREAS, Seller desires to sell and
Buyer desires to purchase the Distiller’s Dried Grains with
Solubles (sometimes referred to as “Product(s)” or
“DDGS”) output of the ethanol production plant which
Seller owns in Wentworth, South Dakota (the “Plant”);
and
WHEREAS, Seller and Buyer wish to
agree in advance of such sale and purchase to the price formula,
payment, delivery and other terms thereof as set forth
herein;
NOW, THEREFORE, in consideration of
the promises and the mutual covenants and conditions herein
contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by both
parties, it is hereby agreed:
1.
BUYER PERFORMANCE
. Buyer agrees to perform the
services that it provides for Seller in a professional and
competent manner.
2.
PURCHASE AND SALE
. Seller agrees to sell to Buyer and
Buyer agrees to purchase from Seller the entire bulk feed grade
DDGS output from Seller’s plant at Wentworth, South Dakota,
subject to all terms and conditions set forth in this
Agreement. Buyer shall label all product that is sold by
Buyer and shall register all labels with the states where the DDGS
is sold.
3.
TRADE RULES
. All purchases and sales made
hereunder shall be governed by the Feed Trade Rules of the
National Grain and Feed Association unless otherwise
specified. Said Trade Rules, a copy of which is appended
hereto as Exhibit A, shall, to the extent applicable, be a
part of this Agreement as if fully set forth herein.
4.
TERM .
A.
The initial term of this Agreement
shall be for one (1) year commencing December 1, 2005
(the “Effective Date”).
B.
In the event that during the first
year of this Agreement Seller materially changes the quality of the
DDGS produced at the Plant through the application of new
technology and equipment, either Seller or Buyer shall have the
right to terminate this Agreement upon 120 days notice.
Notwithstanding such termination, Seller shall remain
liable to provide DDGS to Buyer in
sufficient quantities, either through the Plant or buying such
product, to honor any sales contract that Buyer may have to which
Seller has consented.
C.
This Agreement shall automatically
renew for an additional term of one (1) year unless Seller or
Buyer gives notice of non-renewal in writing to the other party at
least one hundred twenty (120) days prior to the end of the initial
term. The aforementioned renewal provision shall apply in the
same manner for all subsequent expiring renewal terms, and the
Agreement shall be automatically renewed for subsequent one
(1) year terms unless written notice of nonrenewal is provided
in the manner provided above.
D.
After the initial term, this
Agreement may be terminated by either party at its unqualified
option by providing the other party hereto not less than 120 days
written notice of its election to terminate this
Agreement.
E.
In addition to its option to
terminate as provided above, Seller shall have the option to
terminate this Agreement at anytime on thirty (30) days’
notice in order to join a pooled marketing arrangement (the
“Pooled Marketing Arrangement”)
5.
DELIVERY AND TITLE
.
A.
The place of delivery for all the
DDGS sold pursuant to this Agreement shall be FOB Plant.
Buyer and Buyer’s agents shall be given access to
Seller’s Plant in a manner and at all times reasonably
necessary and convenient for Buyer to take delivery as provided
herein. Buyer shall schedule the loading and shipping of
all outbound DDGS purchased hereunder which is shipped by truck or
rail. All labor and equipment necessary to load trucks or
rail cars shall be supplied by Seller without charge to
Buyer. Seller agrees to handle the Products in a good and
workmanlike manner in accordance with Buyer’s reasonable
requirements and in accordance with normal industry practice.
Seller shall maintain the truck and rail loading facilities in safe
operating condition in accordance with normal industry
standards.
B.
Seller further warrants that storage
space for not less than not less than seven days production of DDGS
shall be reserved for Buyer’s use at the Plant and shall be
continuously available for storage of DDGS purchased by Buyer
hereunder at no charge to Buyer. Seller shall be responsible
at all times for the quantity, quality and condition of any the
Products in storage at the Plant. Seller shall not be responsible
for the quantity, quality and condition of any of the Products
stored by Buyer at locations other than the Plant.
C.
Buyer shall give to Seller a
schedule of quantities of the Products to be removed by truck
and rail with sufficient advance notice reasonably to allow Seller
to provide the required services. Seller shall provide the
labor, equipment and facilities necessary to meet Buyer’s
loading schedule and, except for any consequential or
indirect
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damages, shall be responsible for
Buyer’s actual costs or damages resulting from Seller’s
failure to do so. Buyer shall order and supply trucks and
rail cars as scheduled for truck and rail shipments. All
freight charges shall be the responsibility of Buyer and shall be
billed directly to Buyer.
D.
Buyer shall provide loading orders
as necessary to permit Seller to maintain Seller’s usual
production schedule, provided, however, that Buyer shall not be
responsible for failure to schedule removal of the Products
unless Seller shall have provided to Buyer production schedules as
follows: Five (5) days prior to the beginning of each calendar
month during the term hereof, Seller shall provide to Buyer a
tentative schedule for production in the next calendar
month. Seller shall inform Buyer daily of inventory and
production status. For purposes of this paragraph, notification
will be sufficient if made by e-mail or facsimile as
follows:
If to Buyer, to the attention of
Steve Markham, Facsimile number 612-330-9894 or email to
smarkham@csc-world.com, and
If to Seller, to the attention of
Scott A. Mundt, Facsimile number 605-483-2681 or email to
smundt@dakotaethanol.com
or to such other representatives of
Buyer and Seller as they may designate to the other in
writing.
Title, risk of loss and full
shipping responsibility shall pass to Buyer upon loading the
Products into trucks or rail cars and delivering to Buyer of the
bill of lading for each such shipment.
6.
PRICE AND PAYMENT
.
A.
Buyer agrees to pay Seller for all
DDGS removed by Buyer from the Plant a price equal to ninety eight
(98%), with 2% to be retained by Buyer as its service fee,
provided, however, that Buyer’s service fee shall not be less
$1.50 per ton nor shall it exceed $2.00 per ton. The
calculation on the minimum and maximum fee payable to CSC shall be
made with respect to each payment and will not be carried over to
any subsequent payments. By way of illustration, if the 2% to be
retained by CSC for any given week is less than $1.50 per ton, the
fee to be retained by CSC shall then be $1.50 per ton. If in
subsequent weeks the 2% is greater than $1.50 but less than $2.00,
the fee shall be the 2%. Conversely, if the 2% for any period
exceeds $2.00, the fee shall then be $2.00 per ton. If in
subsequent weeks the 2% is less than $2.00 but greater than $1.50,
the fee shall be the 2%. For purposes of this provision, the
FOB Plant price shall be the actual sale price, less all freight
costs incurred by Buyer in delivering the Product to its
customer.
B.
Buyer agrees that it shall not sell
Product for delivery more than 90 days from the date of entering
into a sale without the consent of Seller. Buyer agrees to
use
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commercially reasonable efforts to
achieve the highest resale price available under prevailing market
conditions. Seller’s sole and exclusive remedy for breach of
Buyer’s obligations under the preceding sentence shall be to
terminate this Agreement. Buyer shall collect all applicable
state tonnage taxes on Products sold by Buyer and shall remit to
the appropriate governmental agency.
C.
Within ten (10) days following
receipt of certified weight certificates, which certificates shall
be presented to Buyer each Thursday for all DDGS shipments during
the preceding week, Buyer shall pay Seller the full price,
determined pursuant to paragraph 6A above, for all properly
documented shipments. Buyer agrees to maintain accurate sales
records and to provide such records to Seller upon request.
Seller shall have the option to audit Buyer’s sales invoices
at any time during normal business hours and during the term of
this Agreement.
7.
QUANTITY AND WEIGHTS
.
A.
It is understood that the output of
the Products shall be determined by Seller’s production
schedule and that no warranty or representation has been made
by Seller as to the exact quantities of Products to be sold
pursuant to this Agreement.
B.
The quantity of Products delivered
to Buyer from Seller’s Plant shall be established by weight
certificates obtained from scale at the Plant which is certified as
of the time of weighing and which complies with all applicable
laws, rules and regulations or in the event that the scale at
the Plant is inoperable then at other scales which are certified as
of the time of weighing and which comply with all applicable laws,
rules and regulations. The outbound weight certificates shall
be determinative of the quantity of the Products for which Buyer is
obligated to pay pursuant to Section 5.
8.
QUALITY .
A.
Seller understands that Buyer
intends to sell the Products purchased from Seller as a primary
animal feed ingredient and that said Products are subject to
minimum quality standards for such use. Seller agrees and
warrants that the Products produced at its plant and delivered to
Buyer will comply with current industry standards in the feed
trade.
B.
Seller warrants that all Products,
unless the parties agree otherwise, sold to Buyer hereunder shall,
at the time of delivery to Buyer, conform to the following minimum
qual
