Exhibit 10.10
E XECUTION C OPY
FORM OF DISTILLERS GRAINS
MARKETING AGREEMENT
THIS FORM OF DISTILLERS GRAINS
MARKETING AGREEMENT (the “ Agreement ”) is made
and entered into as of the
day of
, 2006 by and between CARGILL, INCORPORATED, a Delaware corporation
(“ Cargill ”) and
, a Delaware limited liability company (“ Producer
”), collectively referred to hereinafter as
“Parties” or individually as a
“Party”.
RECITALS
A. Cargill markets DG (as defined
below).
B. Producer will produce DG upon
construction and startup of the denatured fuel-grade ethanol
production facility that Producer intends to build in
(the “ Ethanol Facility ”).
C. Cargill desires to market
Producer’s DG.
D. Cargill and Producer have
executed that certain Master Agreement of even date herewith (the
“ Master Agreement ”).
NOW, THEREFORE, in consideration of
the foregoing, the mutual promises herein contained and other good
and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Parties agree as follows.
AGREEMENT
1. MARKETING.
(a) Exclusivity . Producer
hereby agrees to sell to Cargill, and Cargill agrees to purchase
and market, 100% of Producer’s production of
distiller’s dried grains, distiller’s dried grains with
solubles, wet distiller’s grains, modified wet
distiller’s grains, modified dried distiller’s grains
and condensed distiller’s solubles produced from corn
(collectively, “ DG ”) produced at the Ethanol
Facility, including any expansion or increase in capacity at the
Ethanol Facility. Producer agrees that Cargill will be the
exclusive marketer of Producer’s DG and that Producer will
not, either itself or through any affiliate, market any DG during
the term of this Agreement. Notwithstanding the foregoing, in the
event Cargill delivers to Producer written notice of a Force
Majeure event as provided in Section 4(b) of the Master
Agreement, and such Force Majeure event continues to prevent
Cargill from marketing Producer’s DGs for more than seven
(7) consecutive days after delivery to Producer of such
notice, Producer may, upon delivery of written notice to Cargill
but subject to the terms of the Confidentiality Agreement, market,
either directly or indirectly, the DGs produced by or stored at the
Ethanol Facility, but only so long as such Force Majeure continues
to prevent Cargill from marketing such DGs.
(b) Marketing Objectives .
Cargill and Producer shall consult regularly with respect to
Cargill’s marketing efforts and strategies for
Producer’s DGs purchased by Cargill. Producer may at any time
and from time to time recommend changes to the marketing efforts
and
strategies being utilized by Cargill. Cargill
shall have seven (7) days to respond to Producer’s
recommendations. In the event Producer’s recommendations are
not objectionable, Cargill shall memorialize in writing such
changes and otherwise implement such recommendations. In the event
Producer’s recommendations are objectionable, or were
otherwise not accept in full by Cargill, Cargill shall negotiate
with Producer in good faith and shall use commercially reasonable
efforts to come to an agreement with respect to such
recommendations within fifteen (15) days. Cargill shall
memorialize in writing such changes as are mutually agreed to and
otherwise cause such mutually agreed to changes to be implemented;
provided , however , that Cargill shall have the
authority to make all final determinations with respect to such
decisions and strategies and Producer agrees to accept such
determinations.
2. MASTER AGREEMENT AND TRADE
RULES. The terms and
conditions of the Master Agreement are hereby incorporated herein
by reference. To the extent any provision of the Master Agreement
conflicts with a provision contained herein, the provision
contained herein will control. Terms capitalized but not defined in
this Agreement shall have the meanings ascribed to them by the
Master Agreement. This Agreement shall be governed by the
then-current Feed Trade Rules of the National Grain and Feed
Association (the “ Trade Rules ”), unless
otherwise specified. In the event the Trade Rules and the terms and
conditions of this Agreement conflict, this Agreement shall
control.
3. PRICE; COMMISSION.
Cargill shall pay Producer for its
DG in accordance with the terms set forth in Exhibit A. Producer
shall pay Cargill a commission for its DG marketing as calculated
in Exhibit A. Cargill shall deduct this commission as provided in
Exhibit A. The Parties agree that after the Ethanol Facility has
been in commercial operation for five years, the Parties shall make
reasonable efforts to determine the prevailing commission being
paid to marketers of DG produced by third parties in the United
States and agree to negotiate in good faith to make a reasonable
adjustment, if any, to the commission provided in Exhibit A. If a
prevailing commission rate cannot reasonably be determined, no
adjustment shall be made to the commission provided in Exhibit
A.
4. PAYMENT.
Cargill shall use commercially
reasonable efforts to invoice each customer within one Business Day
of shipment of each load of DG from the Ethanol Facility. Title to
each load of DG shall pass to Cargill at the time such load passes
across the scale into rail cars or trucks at the Ethanol Facility
(the “ Title Transfer Point ”). Cargill shall
pay Producer for all such DG within thirty (30) days of
invoicing each customer, in accordance with the terms set forth in
Exhibit A. Notwithstanding the foregoing, Producer acknowledges and
agrees that Cargill may place its DG in storage rather than selling
it to customers due to market conditions. As a result,
(i) Cargill will be unable to provide Producer with pricing
and cost information at the Title Transfer Point with respect to DG
placed in storage; and (ii) Cargill may not pay Producer in a
given month for all of the DG that Producer delivers to Cargill in
such month. Notwithstanding the foregoing, if, following
consultation with Cargill in accordance with Section 1(b),
Producer desires that the DG be sold to customers rather than
placed in storage, Cargill, at its option, shall (i) sell such
DG to its customers rather than placing it in storage, or
(ii) place such DG in storage, in which case Producer shall
not be responsible for any Accessorial Charges otherwise payable in
accordance with Section 5 with respect to such storage and
Cargill shall pay to Producer the current fair market value of such
DG as determined by the
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Parties, which value shall be deemed to be the
“F.O.B. Ethanol Facility Price” or the “Delivered
Sale Price” (as applicable, for purposes of Exhibit A) for
such DG.
5. COSTS; TITLE AND RISK OF
LOSS. Except as otherwise
provided in this Agreement, Cargill will provide management
resources to market and sell DG, including the management of
logistics and collection, after the DG produced at the Ethanol
Facility passes the Title Transfer Point. Title and risk of loss
shall transfer to Cargill at the Title Transfer Point. Until such
time, Producer shall be deemed to be in control of and in
possession of and shall have title to and risk of loss for the DG.
Cargill shall also assume responsibility for payment of Accessorial
Charges (as defined in Exhibit A) to third parties; provided
, however , that Producer agrees (i) to promptly
reimburse Cargill for such Accessorial Charges upon submission to
Producer of an invoice itemizing such Accessorial Charges; and
(ii) that Cargill may deduct and setoff the Accessorial
Charges from and against payments due to Producer by
Cargill.
6. TRANSPORTATION;
LOGISTICS.
6.1 Logistics and
Transportation . Cargill and Cargill’s agents shall be
given access to the Ethanol Facility in accordance with the terms
set forth in Exhibit B, which may be amended by agreement of the
Parties in writing, from time to time. Cargill shall perform
certain logistics functions for Producer, including the arranging
of rail and truck freight, inventory management, contract
management, bills of lading, and scheduling pick-up appointments.
Transportation by truck may be provided at Cargill’s
discretion. Cargill shall determine the method of transporting DG
to customers. Notwithstanding anything to the contrary herein,
Producer shall be solely responsible for any damage to any trucks,
railcars or equipment, or vessels caused by acts or omissions of
Producer and its consignees. Cargill will use commercially
reasonable efforts to furnish railcars to service Producer and
charge Producer the Leased Railcar Charges (as defined below).
Producer acknowledges that Cargill may enter into railcar lease
agreements in reliance on the Projected Date of First Delivery (as
defined below). Producer agrees (i) to promptly reimburse
Cargill for such Leased Railcar Charges upon submission to Producer
of an invoice itemizing such leased Railcar Charges; (ii) that
this payment obligation will commence on the date Cargill begins to
incur such Leased Railcar Charges and shall survive the expiration
or earlier termination of this Agreement or the Master Agreement;
and (iii) that Cargill may deduct and setoff the Leased
Railcar Charges from and against payments due to Producer by
Cargill. Cargill agrees to use commercially reasonable efforts to
deploy railcars not needed by Producer for other uses, whether by
sublease, re-allocation or otherwise, and any revenues received by
Cargill from such deployment shall be applied to reduce the Leased
Railcar Charges. Following the execution by Cargill of any
stand-alone railcar lease agreement or a rider to an existing
master railcar lease agreement, if any, and in each case for
railcars to service Producer, Cargill shall not amend or modify, or
consent to the amendment or modification of, any such stand-alone
railcar lease agreement or rider without the prior written consent
of Producer. Cargill shall also maintain, at Producer’s
request, property damage insurance with respect to the leased
railcars reasonably satisfactory to Producer (the “
Railcar Insurance ”); provided , that the
premiums for, and any deductible paid in connection with a claim
under, such Railcar Insurance shall be Accessorial Charges (as
defined in Exhibit A). If at any time Producer no longer has
existing or currently contemplated contractual restrictions
with
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respect to its ability to enter into
railcar lease agreements directly, Producer agrees to negotiate in
good faith with Cargill the reasonableness of an assignment of any
existing Cargill railcar lease agreements to Producer.
For purposes of this Agreement,
“Leased Railcar Charges” shall mean lease railcar costs
and charges incurred by Cargill (as determined by Cargill)
multiplied by the number of railcars that Cargill allocates to
transport DG from the Ethanol Facility.
6.2 Loading . Cargill shall
schedule the loading and shipping of all outbound DG purchased
hereunder, but all labor and equipment necessary to load trucks and
rail cars and other associated costs shall be supplied and borne by
Producer without charge to Cargill. Producer agrees to handle the
DG in a good and workmanlike manner in accordance with
Cargill’s written requirements and normal industry practice.
Producer shall maintain the truck and rail loading facilities in
safe operating condition in accordance with normal industry
standards and will visually inspect all trucks and rail cars to
assure (i) cleanliness so as to avoid contamination; and
(ii) that such trucks and railcars are in a condition suitable
for transporting the DG. Cargill agrees that its employees will
follow all reasonable safety rules and procedures promulgated by
Producer and provided to Cargill in writing. Producer will supply
product description tags, certificates of analysis, bills of lading
and/or material safety data sheets that are applicable to all
shipments.
6.3 DG Storage at Ethanol
Facility . Producer shall have storage space at the Ethanol
Facility, at its sole cost, for not less than ten thousand
(10,000) tons of 11% moisture dried distillers grains with
solubles, which shall be continuously available for storage of DG
so as to provide flexibility in marketing efforts. Due to limited
storage at the Ethanol Facility, Cargill shall arrange
transportation and deliveries of Producer’s DG so that excess
inventories do not limit Producer’s ethanol production. If
Producer expands its ethanol capacity, Producer shall
correspondingly expand its DG storage capacity. Producer shall be
responsible at all times for the quality and condition of DG in
storage at the Ethanol Facility.
6.4 Notices of Scheduled
Production . Commencing on the fifteenth day of the month
preceding the Date of First Delivery (as defined in
Section 6.6), and on the first Business Day of each subsequent
month during the term of this Agreement, Producer shall notify
Cargill of its scheduled production for the upcoming three
(3) month period. On a weekly basis, Producer shall provide a
written estimate (the “ Weekly Estimate ”) to
Cargill of the volume of DG (each such amount, a “ DG
Parcel ”) to be produced and delivered by Producer at
least five (5) days prior to the beginning of the week during
which it is to be removed by Cargill, together with a notice of the
amount of DG in inventory as of the date of the notice. Regardless
of the amounts set forth in each Weekly Estimate, Cargill shall
schedule for removal by truck or rail car the actual quantity of DG
produced by Producer in the relevant week less the sum of such
amount of DG that Cargill requests Producer to store at the Ethanol
Facility, at no additional cost to Cargill, up to an aggregate of
ten thousand (10,000) tons at any time of 11% moisture dried
distillers grains with solubles (and/or an equivalent quantity of
distillers dried grains, wet distillers grains, modified wet
distillers grains, modified dried distillers grains
and/or
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condensed distillers solubles
produced from corn). In the event that Producer fails to provide
the labor, equipment and facilities necessary to meet
Cargill’s loading schedule, Producer shall be responsible for
all costs and expenses, including without limitation actual
demurrage and wait time, incurred by Cargill resulting from or
arising in connection with Producer’s failure to do so.
Cargill shall use commercially reasonable efforts to order and
schedule trucks or rail cars for truck or rail shipments. All truck
freight charges and rail tariff rate charges shall be billed
directly to Cargill and deducted by Cargill from the proceeds of
Cargill’s DG sales to customers.
6.5 Sale Commitments . From
time to time during the term of this Agreement and in order to
maximize the sales price of DG, Cargill may enter sales contracts
or agreements in its reasonable discretion with third-party
purchasers of the DG, which contracts are dependent on the
availability of DG from Producer. Cargill will include Force
Majeure clauses in such contracts unless Producer and Cargill agree
otherwise. Cargill shall periodically consult with Producer for the
purpose of keeping Producer apprised of such agreements. In the
event Producer fails to produce DG in accordance with a written
production schedule provided to Cargill for reasons other than
Force Majeure, and as a result Cargill is required to purchase DG
from third parties to meet previous DG sale commitments that are
based upon a written schedule provided by Producer, Cargill may
charge Producer the deficiency volume multiplied by the positive
difference (if any) between the price of replacement DG and the
price that Cargill would have paid to Producer for such DG under
this Agreement.
6.6 Notice of First Delivery
. For purposes of this Agreement, “Date of First
Delivery” means the date that Producer first delivers DGs
produced at the Ethanol Facility to Cargill. Producer expects the
Date of First Delivery to occur by August 1, 2007 (“
Projected Date of First Delivery ”). Producer shall
provide reasonable advance notice to Cargill of any revisions to
the Projected Date of First Delivery. Additionally, together with
each notification listed above, Producer shall provide a best
estimate of production on a daily basis for the six (6) month
period following the Date of First Delivery.
7. SPECIFICATIONS;
QUALITY.
7.1 DG Specifications .
Producer covenants that at all times during the term of this
Agreement it shall produce DG that, upon loading at the Ethanol
Facility, meets the respective specifications (“
Specifications ”) set forth in Exhibit C. Cargill
shall have the right to test each shipment of DG to ascertain that
the Specifications are being met. In the event that upon delivery
at the customer’s destination point it is reasonably
determined by Cargill pursuant to independent testing or analysis
of a representative sample or samples taken consistent with
industry standards upon delivery that the DG failed to meet the
Specifications for any reason other than the negligence or
intentional misconduct of Cargill (or a third party with which
Cargill has a contractual relationship), Cargill may, in its sole
discretion, (a) reject such DG and require Producer to
promptly replace such non-conforming DG with DG that complies with
the Specifications, or (b) accept the DG for marketing and, if
necessary, adjust the price to reflect the inferior quality, as
provided in Exhibit A. If Cargill rejects any non-conforming DG,
Cargill will
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use reasonable efforts to assist
Producer in identifying a use or market for the non-conforming DG,
which may include sale of the non-conforming DG or reprocessing in
the Ethanol Facility.
7.2 Feed Ingredient Standards
. Producer understands that Cargill intends to market DG produced
under this Agreement as a primary animal feed ingredient, and that
said products are subject to minimum standards for such use.
Producer agrees and warrants that unless caused by the negligence
or intentional misconduct of Cargill or a third party with which
Cargill has a contractual relationship, DG, upon unload at the
customer’s destination point, shall be acceptable in the feed
trade under current industry standards and shall be an approved
feed ingredient under applicable standards promulgated by the
Association of American Feed Control Officials
Incorporated.
7.3 Compliance With FDA and Other
Standards . Producer warrants that the unless caused by the
negligence or intentional misconduct of Cargill or a third party
with which Cargill has a contractual relationship, DG, upon unload
at the customer’s destination point, will not be
“adulterated” or “misbranded” within the
meaning of the Federal Food, Drug and Cosmetic Act (the “
Act ”) and that each shipment may lawfully be
introduced into interstate commerce under the Act. Producer further
warrants that the DG, upon unload at the customer’s Ethanol
Facility, shall comply with all state and federal laws, rules and
regulations (including without limitation the Trade Rules)
including those governing quality, naming and labeling of bulk
product.
7.4 Regulatory Seizure .
Payment of invoice and acceptance of delivery shall not waive
Cargill’s rights if the DG does not comply with the terms of
this Agreement or the Specifications. Should any of the DG
delivered hereunder be seized or condemned by any federal or state
department or agency as a result of its failure to conform to this
Agreement prior to delivery, such seizure or
condemnation
