Exhibit 10.8
E XECUTION C OPY
FORM OF ETHANOL MARKETING
AGREEMENT
THIS FORM OF ETHANOL MARKETING
AGREEMENT (the “ Agreement ”) is made and
entered into as of the
day of
2006, by and between CARGILL, INCORPORATED, a Delaware corporation,
acting through its Sweeteners North America business unit (“
Cargill ”) and
, a Delaware limited liability company (“ Producer
”), collectively referred to hereinafter as
“Parties” or individually as a
“Party.”
RECITALS
A. Cargill markets Ethanol (as
defined below).
B. Producer will produce Ethanol
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 Ethanol.
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 denatured
fuel-grade ethanol produced at the Ethanol Facility, including any
ethanol that results from the future expansion of the Ethanol
Facility (together, the “ Ethanol ”). Producer
agrees that Cargill will be the exclusive marketer of
Producer’s Ethanol and that Producer will not, either itself
or through any affiliate, market any Ethanol 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 Ethanol 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 Ethanol produced by or stored at the Ethanol
Facility, but only so long as such Force Majeure continues to
prevent Cargill from marketing such Ethanol.
(b) Marketing Objectives .
Cargill and Producer shall consult regularly with respect to
Cargill’s marketing efforts and strategies for
Producer’s Ethanol 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.
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.
3. PAYMENT.
Producer shall invoice Cargill for
the Ethanol Volume shipped to Cargill at the Title Transfer Point
within one Cargill Working Day of such shipment. Cargill shall
invoice each customer within one Cargill Working Day of its receipt
of such invoice. Cargill shall pay Producer for Ethanol invoiced by
Producer to Cargill, in accordance with the formula set forth in
Exhibit A or Exhibit B, depending upon which formula is applicable,
not later than 10 (ten) Cargill Working Days from the date Producer
invoiced Cargill. “ Cargill Working Day ” means
Monday, Tuesday, Wednesday, Thursday or Friday except for Cargill
Holidays. “ Cargill Holidays ” means New Years
Day, Presidents Day, Good Friday, Memorial Day, July 4
th
, Labor Day,
Thanksgiving Day, the day after Thanksgiving Day, Christmas Eve Day
and Christmas Day.
Producer acknowledges that Cargill
may place its Ethanol in storage rather than selling it to
customers due to market conditions. As a result, Cargill may not
pay Producer in a given month for all of the Ethanol that Producer
delivers to Cargill in such month. If Cargill places any Ethanol
from participants in the Marketing Pool Program (as described in
Section 9 below) into storage in a given month (including
Producer’s Ethanol production in such month pursuant to
Producer’s election to participate in the Marketing Pool
Program), a pro-rata share of Producer’s Ethanol will be
considered to be placed in storage for purposes of calculating
Cargill’s payment to Producer for such month. For example,
assume that (a) participants in the Marketing Pool Program
deliver 10 million gallons of Ethanol to Cargill’s
Marketing Pool Program in a month, (b) Cargill places
2 million gallons of such Ethanol into storage, and
(c) Producer delivered 1 million gallons of Ethanol to
Cargill in such month. Cargill would pay Producer for 800,000
gallons of Ethanol in such month and Cargill would pay Producer for
the remaining 200,000 at a later date when Cargill invoiced such
Ethanol to its customers. Notwithstanding the foregoing, if,
following consultation with Cargill in accordance with
Section 1(b), Producer desires that the Ethanol be sold to
customers rather than placed in storage, Cargill, at its option,
shall (i) sell such Ethanol to its customers rather than
placing it in storage, or (ii) place such Ethanol in storage,
in which case Section 5.3 shall not be applicable to such
Ethanol and Cargill shall pay to Producer the current fair market
value of such Ethanol as determined by the Parties, which value
shall be deemed to be the “Delivered Price” (for
purposes of Exhibit A) for such Ethanol.
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4. COSTS, TITLE AND RISK OF
LOSS. Except as otherwise
provided in this Agreement, Cargill will bear all sales, marketing,
logistics services/management costs and collection costs after the
Ethanol produced at the Ethanol Facility passes across the inlet
flange into rail cars or tank trucks at the Ethanol Facility
(“ Title Transfer Point ”). Title and risk of
loss to the Ethanol shall transfer from Producer 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 in the Ethanol. Cargill shall also assume responsibility for
payment of Accessorial Charges (as defined in Exhibit A or Exhibit
B, depending on which formula is applicable) 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 the Net Price, as further
described in Exhibit A or Exhibit B, depending upon which formula
is applicable.
5. LOGISTICS AND TRANSPORTATION;
STORAGE.
5.1 Logistics and
Transportation . Cargill shall perform the logistics functions
to include scheduled maintenance and necessary repairs on railcars
for Producer except as noted in this Section. Transportation by
truck may be provided at Cargill’s discretion. Cargill shall
determine the method of transporting the Ethanol to third parties.
Notwithstanding anything to the contrary herein, Producer shall be
solely responsible for any damage to any trucks, rail cars,
equipment, or vessels caused by its acts or omissions. Cargill will
use commercially reasonable efforts to furnish railcars to service
Producer and charge Producer the Railcar Costs (as defined in
Exhibit A or Exhibit B, depending upon which formula is
applicable). 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 Railcar Costs upon submission to
Producer of an invoice itemizing such Railcar Costs; (ii) that
this payment obligation will commence on the date Cargill begins to
incur such Railcar Costs and shall survive the expiration or
earlier termination of this Agreement or the Master Agreement; and
(iii) Cargill may deduct and setoff the Railcar Costs from and
against the Net Price, as further described in Exhibit A or Exhibit
B, depending upon which formula is applicable. 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 Railcar Costs. 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) or a component of Net Price (as defined
in Exhibit B). If at any time Producer no longer has existing or
currently contemplated contractual restrictions with 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. Producer shall use the following product description
for Department of Transportation Hazardous Materials shipments:
“Alcohols, n.o.s., (Ethanol, gasoline) 3, UN1987,
PGII”. Producer shall provide such information on each bill
of
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lading. Each bill of lading will also state that
the Ethanol contains an approved corrosion inhibitor.
5.2 Ethanol Facility Storage
. Producer shall at all times provide storage at the Ethanol
Facility for Ethanol, in an amount not less than 1,500,000 gallons
at any one time, at no cost to Cargill.
5.3 Outside Storage . Subject
to Section 3, Cargill may decide to place its Ethanol in
outside storage rather than selling it to customers due to market
conditions, and in such case Cargill shall arrange for such outside
storage. The cost of transportation to and from outside storage and
the cost of maintaining such outside storage shall be considered
Accessorial Charges and Producer shall be responsible for
reimbursing Cargill for such Accessorial Charges in accordance with
Section 4 above.
6. QUALITY.
6.1 Ethanol Specifications .
Producer covenants that at all times during the term of this
Agreement it shall produce Ethanol that meets the specifications
(“ Specifications ”) set forth in Exhibit C, as
amended by Cargill from time to time based upon market requirements
and upon notice to Producer. Cargill shall have the right to test
each shipment of Ethanol to ascertain that the Specifications are
being met under the testing procedures set forth in Exhibit D.
Prior to the shipment of Ethanol to Cargill, Producer shall fax or
send by e-mail transmission a certificate of analysis to Cargill
for each shipment of Ethanol to a designated Cargill
employee.
6.2 Settlement of Specification
Claims . In the event the Ethanol does not meet the
Specifications when delivered to the Title Transfer Point, Cargill
may, in its sole discretion, (a) reject such Ethanol and
require Producer to promptly replace such non-conforming Ethanol
with Ethanol that complies with the Specifications; or
(b) accept the Ethanol for marketing and adjust the price to
reflect the inferior quality based upon market requirements. If
Cargill rejects any non-conforming Ethanol, Cargill will use
reasonable efforts to assist Producer in identifying a use or
market for the non-conforming Ethanol, which may include sale of
the non-conforming Ethanol in industrial markets or reprocessing in
the Ethanol Facility.
6.3 Samples, Preservation, and
Claims . Producer shall take original, sealed and numbered
samples of all Ethanol prior to loading at the Title Transfer
Point. Cargill shall be entitled to witness the taking of samples.
Producer will label these samples to indicate date of delivery and
the truck or rail car number. Producer will retain these samples
for six (6) months or such longer period as may be required by
applicable law, and shall send one sample to Cargill immediately
upon Cargill’s request.
6.4 Denaturants . Producer
shall use natural gasoline denaturant (or other denaturant source
mutually agreed upon by the Parties) that meets the specifications
set forth in Exhibit E.
6.5 Corrosion Inhibitor .
Producer shall use Octel-Starreon DCI-11 Corrosion Inhibitor at the
supplier’s recommended treatment rate.
6.6 Quarterly Testing
Requirements . Producer shall participate in the Magellan
Midstream Partners Pipeline Quarterly Recertification Program
administered by Magellan
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Midstream Partners Laboratory Services (or its
successor) at its sole cost and expense; provided ,
however , that if Magellan Midstream Partners Laboratory
Services is not longer the tester generally accepted in the ethanol
industry, the Parties will in good faith mutually agree to a
replacement tester that is generally accepted in the ethanol
industry. Producer will report the results of the program to
Cargill on a quarterly basis.
6.7 Customer Claims . If any
customer makes a claim against Cargill as a result of
Producer’s Ethanol failing to meet the Specifications,
Producer shall indemnify Cargill against any damages or losses that
it incurs as a result of such claim; provided ,
however , that Producer shall have no liability or
obligation to indemnify Cargill if Producer’s Ethanol met the
Specifications at the Title Transfer Point. Producer’s
liability for such customer claims shall not be subject to the
limitations set forth in Section 9(c) of the Master
Agreement.
7. QUANTITY.
7.1 Purchase of Ethanol Facility
Output . Subject to the terms and conditions in this Agreement,
Cargill shall purchase from the Producer all of the Ethanol
produced at the Ethanol Facility. Producer and Cargill acknowledge
and agree that it is expected that the Ethanol Facility will
produce approximately 8.33 million gallons of Ethanol per
month. In the event that Producer increases the capacity of the
Ethanol Facility pursuant to the installation of new or additional
equipment, upon reasonable notice to Cargill, such additional
volume shall be added to this Agreement and purchased by Cargill
pursuant to the terms of this Agreement. On the first Business Day
of each month (commencing on the month during which the Projected
Date of First Delivery is to occur). Producer shall notify Cargill
of its scheduled production, on a monthly basis, for the upcoming
three (3) month period (the amount scheduled for each month in
such production schedule notice being called the “
Scheduled Monthly Production ”). Once the Scheduled
Monthly Production has been established for a month, Producer may
not reduce the Scheduled Monthly Production for the month in a
subsequent production schedule notice unless the reduction will not
cause or result in a breach by Cargill of sales commitments it has
made with respect to the month or Cargill otherwise approves such
reduction. Producer shall notify Cargill of anticipated production
downtime or disruption in Ethanol availability at least three
(3) months in advance of such outage.
7.2 Date of First Delivery .
Producer expects to make the first delivery of Ethanol to Cargill
on 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 esti
