Exhibit 10.9
Confidential treatment has been
requested for portions of this exhibit. The copy filed herewith
omits the information subject to the confidentiality request.
Omissions are designated as [*]. A complete version of this exhibit
has been filed separately with the Securities and Exchange
Commission.
E XECUTION C OPY
FORM OF CORN SUPPLY
AGREEMENT
This Form of Agreement (“
Agreement ”) is made this
day of
, 2006, by and between CARGILL, INCORPORATED, a Delaware
corporation (“ Cargill ”), with a place of
business at 15407 McGinty Road West, Wayzata, MN 55391, and
, a Delaware limited liability company (“ Producer
”). Cargill and Producer are each a “Party” and
collectively are the “Parties” to this
Agreement.
RECITALS
A. Producer intends to construct,
own and operate a plant at
for the production of 100 million gallons per year of
denatured fuel grade ethanol and relate products (as such plant may
be expanded or upgraded according to the terms of this Agreement,
the “ Ethanol Facility ”).
B. The Ethanol Facility will be
located immediately adjacent to Cargill’s grain handling
facility located in
(“ Grain Facility ”).
C. The Parties intend for Producer
to purchase Corn (as defined below) exclusively from Cargill for
the purpose of ethanol production at the Ethanol
Facility.
D. Corn will be delivered from
Cargill to Producer primarily via a bulk grain conveyor running
between the Ethanol Facility and the Grain Facility.
E. Producer and Cargill have
executed that certain Master Agreement of even date herewith
relating to the Ethanol Facility (the “ Master
Agreement ”).
NOW THEREFORE, in consideration of
the terms, conditions and covenants contained in this Agreement and
other good and valuable consideration, the sufficiency of which is
hereby acknowledged, the Parties agree as follows.
AGREEMENT
1. Incorporation of Master
Agreement; Definitions .
a. 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 any provision contained herein,
the provision contained herein will control.
b. Definitions . Terms
capitalized but not defined in this Agreement shall have the
meanings ascribed to them by the Master Agreement. In addition, as
used in this Agreement, the following capitalized terms have the
meanings indicated:
“ Agreement ”
means this Corn Supply Agreement as the same may be amended,
supplemented or otherwise modified according to its
terms.
“ Average Initial Basis
” has the meaning specified in Section 4(b).
“ Average Origination
Basis ” has the meaning specified in
Section 4(b).
“ Belt ” has the
meaning specified in Section 2(f).
“ Bulk Weigher ”
has the meaning specified in Section 2(f).
“ Buyer ” has the
meaning specified in Section 9(b).
“ Capacity Payment
” has the meaning specified in Section 4(e).
“ Cargill Event of
Default ” has the meaning specified in
Section 10.1.
“ Cargill Fiscal Year
” means a fiscal year of June 1 through
May 31.
“ Corn ” has the
meaning specified in Section 2(e).
“ Corn Trading P&L
” means Cargill’s corn trading margin profit and loss
statement applicable to the Grain Facility; provided ,
however , that the Corn Trading P&L shall not include
(i) the Origination Fee, (ii) the Handling Fee, or
(iii) income generated outside of corn positions, including,
but not limited to, income from mixing-blending, income from
contract marketing alternatives, or drying income.
“ Ethanol Facility
” has the meaning specified in the Recitals.
“ Event of Default
” means either a Producer Event of Default or a Cargill Event
of Default, as the context requires.
“ Forecast ” has
the meaning specified in Section 3(a).
“ Grain Facility
” has the meaning specified in the Recitals.
“ Handling Fee ”
has the meaning specified in Section 4(d).
“ Initial Basis ”
has the meaning specified in Section 4(a)(i).
“ Initial Quantity
” means the number of bushels of Corn Producer expects to
purchase for delivery on the Projected Date of First
Delivery.
“ Invoice ” has
the meaning specified in Section 5(a).
“ Investment Grade Credit
Rating ” means a credit rating of (i) BBB- by
Standard & Poor’s, a division of the McGraw-Hill
Companies, Inc., (ii) Baa3 by Moody’s Investors Services
or (iii) BBB- by Fitch, Inc. or Fitch Ratings Ltd. (or, in
each case, from such Person’s successors or assigns or such
equivalent ratings if such ratings cease to be used by such Person,
its successor or assigns).
“ Master Agreement
” has the meaning specified in the Recitals.
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“ Maximum Amount
” means an aggregate maximum amount of $5,350,000 for the
costs (i) to acquire and install the Belt for the Ethanol
Facility, (ii) to acquire and install the Bulk Weigher for the
Ethanol Facility, and (iii) to acquire and install the Related
Equipment. The Maximum Amount under this Corn Supply Agreement
shall be reduced by any amounts paid to Cargill or on behalf of
Cargill for the costs incurred by Cargill to acquire and install
the Related Equipment.
“ Non-Defaulting Party
” has the meaning specified in
Section 10.3(a).
“ Operating Procedures
” has the meaning specified in Section 6.
“ Origination Fee
” has the meaning specified in Section 4(c).
“ Payment Deadline
” has the meaning specified in
Section 5(b)(i).
“ Producer Event of
Default ” has the meaning specified in
Section 10.2.
“ Projected Date of First
Delivery ” has the meaning specified in
Section 3(c).
“ Purchase Price
” has the meaning specified in Section 4.
“ Sales Confirmation
” has the meaning specified in Section 3(b).
“ Start-up Period
” has the meaning specified in
Section 5(b)(i).
“ Start-up Period
Invoice ” has the meaning specified in
Section 5(b)(iii).
“ Term ” has the
meaning specified in Section 11(a).
“ Threshold Amount
” means an amount equal to the product of (i) $0.05
multiplied by (ii) the number of bushels of Corn sold and
delivered by Cargill to Producer during each Cargill Fiscal
Year.
2. Corn Supply and Use of the
Grain Facility .
a. Sale and Purchase of Corn
Requirements . Except as otherwise provided in this
Section 2 or Section 14, Producer will purchase
exclusively from Cargill, and Cargill will sell and deliver to
Producer from the Grain Facility, all of Producer’s Corn
requirements for ethanol production at the Ethanol Facility,
including any Corn requirements that result from the future
expansion of the Ethanol Facility so long as such expansion does
not increase the Corn requirements to volumes in excess of
3.67 million bushels per month, subject to and in accordance
with the terms and conditions of this Agreement. It is anticipated
that Producer’s Corn requirements at the Ethanol Facility
will be approximately 3 million bushels per month.
b. Use of Grain Facility and
Other Facilities to Supply Corn . Cargill’s grain
procurement and supply obligations pursuant to this Agreement will
be performed primarily using the Grain Facility, and the Grain
Facility will be used primarily
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throughout the term of this
Agreement for the collection, handling and storage of Corn to be
supplied to the Ethanol Facility pursuant to this Agreement.
Cargill may utilize other grain handling and storage facilities
available to Cargill for purposes of procuring, handling and
storing Corn for use in the Ethanol Facility, if the Parties
determine that the use of such other facilities is economically
beneficial to the Parties, or necessary to provide for a continuing
supply of Corn to the Ethanol Facility (it is understood and
agreed, however, that if the Parties determine to use any such
arrangement, the grain receiving facilities and the Belt located at
the Grain Facility will nevertheless continue to be used for
delivery of Corn to the Ethanol Facility). Cargill may also utilize
the Grain Facility for purposes of collection, handling, and
storage of other farm products, including soybeans, or collection,
handling and storage of corn for sale to third parties, as long as
the use of the Grain Facility for such other purposes does not
disrupt the continuing supply of corn to the Ethanol Facility as
contemplated in this Agreement, and does not otherwise interfere
with the operations of the Ethanol Facility. It is understood and
agreed that (without limiting the generality of the previous
sentence) (i) such other uses may include (A) use of the
Grain Facility to collect, handle and store soybeans procured from
soybean producers who also sell corn to Cargill at the Grain
Facility (it being the Parties’ intention that storage of
soybeans will not normally result in use of more than ten percent
(10%) of the Grain Facility’s storage capacity), and
(B) use of the Grain Facility for other purposes during
periods in which the Ethanol Facility is not in operation, as a
result of planned outages, Force Majeure conditions or otherwise,
and (C) use of the Grain Facility for other purposes in the
event that and during periods in which the Ethanol Facility’s
Corn requirements are less than 2.78 million bushels per
month, but (ii) such other uses may not interfere with the use
of the Grain Facility’s grain receiving facilities or the
Belt to provide for a continuing supply of Corn to the Ethanol
Facility. Cargill shall maintain the Grain Facility in such a state
of repair so as not to interfere with Producer’s
operations.
c. Disruption of Use of Grain
Facility . In the event Cargill is unable to utilize the Grain
Facility to supply Corn to the Ethanol Facility as a result of
Force Majeure, Cargill and Producer will immediately meet and
determine alternative methods under which Cargill may arrange for
the supply of Corn to the Ethanol Facility, it being expressly
understood by the Parties that this Section 2(c) shall in no
way limit Producer’s or Cargill’s rights under
Section 4 (Force Majeure) of the Master Agreement.
d. Unexcused Failure to
Supply . In the event and during any period in which Cargill
fails to supply the Corn requirements of the Ethanol Facility
(including a failure to supply Corn that complies with the
specifications set forth herein or in the applicable Sales
Confirmation and Cargill has not supplied replacement Corn within a
reasonable period of time (not to exceed 12 hours after the time
for delivery should have been completed based on normal operating
procedures) in accordance with Section 14(a)), and such
failure is not excused by the terms of this Agreement or is the
result of a Force Majeure event not affecting the operation of the
Grain Facility (i.e., the Grain Facility is operational and capable
of supplying corn to the Ethanol Facility), then, if Cargill has
not paid to Producer sufficient Damages (including lost Net
Revenues) for such unexcused failure to supply, Producer may
purchase the Corn requirements of the Ethanol Plant from any other
source available to the Producer and Cargill shall be responsible
for all
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reasonable costs of cover;
provided , however , that Cargill shall still be
entitled to a Handling Fee for all bushels of corn handled through
the Grain Facility. Producer shall promptly send an invoice
electronically to Cargill itemizing the costs of cover (along with
adequate supporting documentation) due and payable with respect to
such purchase, which amounts shall be paid by Cargill within three
(3) Business Days following Cargill’s receipt of the
invoice.
e. Corn Specifications . All
product supplied to Producer by Cargill shall meet the applicable
legal requirements for U.S. No. 2 yellow corn or better, and
shall be 15.5% or less moisture and 10 ppm or less aflatoxin
(subject to mutually agreed upon discounts or premiums) unless
otherwise agreed by the Parties as evidenced by a specific Sales
Confirmation (“ Corn ”).
f. Corn Delivery Belt . Corn
will be delivered from Cargill to Producer primarily via a bulk
grain conveyor running between the Ethanol Facility and the Grain
Facility (“ Belt ”). The Belt will be owned by
Producer but acquired and installed by Cargill not later than
thirty (30) days prior to the Testing Date pursuant to plans
and specifications mutually agreed upon by the Parties. Cargill
will be reimbursed up to the Maximum Amount for the costs incurred
by Cargill to acquire and install the Belt in a manner mutually
agreed upon by the Parties; all such costs in excess of the Maximum
Amount shall be payable by, and for the sole account of, Cargill.
Cargill will have responsibility to operate and maintain the Belt,
and all of the costs reasonably incurred by Cargill in maintenance
of the Belt will be shared fifty percent (50%) each by Cargill
and Producer. In the event the Belt becomes inoperable for any
reason, the Parties will immediately meet and determine alternative
methods for delivery of Corn to the Ethanol Facility. The Corn will
be weighed on a bulk weigher owned by Producer but acquired and
installed by Cargill on the Belt not later than thirty
(30) days prior to the Testing Date according to the plans and
specifications for the Belt (“ Bulk Weigher ”),
and Corn will be graded by Cargill before delivery to Producer
pursuant to Section 6 hereof. Cargill will be reimbursed up to
the Maximum Amount for the costs incurred by Cargill to acquire and
install the Bulk Weigher in a manner mutually agreed upon by the
Parties; all such costs in excess of the Maximum Amount shall be
payable by, and for the sole account of, Cargill. Producer’s
rights to locate the Belt and Bulk Weigher on the Grain Facility
site are set forth in the Grain Facility Lease.
g. Use of Alternative
Feedstocks . In the event, and to the extent, that Producer
determines it is beneficial for the operation of the Ethanol
Facility to use any raw commodity other than Corn as a substitute
or alternative in the production of ethanol at the Ethanol Facility
(“ Alternative Commodity ”), Producer shall
notify Cargill of such intended use as soon as practicable after
the determination is made, and Producer and Cargill shall attempt
to reach mutual agreement regarding the supply of such Alternative
Commodity by Cargill. In the event that Cargill and Producer reach
agreement regarding the supply of such Alternative Commodity by
Cargill, the parties shall negotiate in good faith the terms of
such supply agreement and/or any appropriate amendments to this
Agreement to reflect the terms thereof. In the event that Cargill
and Producer are unable to reach agreement regarding the supply of
such Alternative Commodity by Cargill, Producer may not utilize the
Alternative Commodity at the Ethanol Facility unless
Cargill
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and Producer reach mutual agreement
on amendments to this Agreement to reflect the reduction in the
anticipated volume of Corn deliveries contemplated in this
Agreement.
h. Logistics . Cargill will
have absolute discretion to manage all logistics and related
operations in connection with the origination, handling, storage,
and delivery of the Corn to Producer, subject to the parameters set
forth in this Agreement.
3. Forecasts; Orders and Sales
Confirmations; Initial Quantity of Corn .
a. Forecasts. On a monthly
basis, Producer shall provide to Cargill a written forecast
estimating Producer’s anticipated Corn requirements for the
immediately following 6 month period (“ Forecast
”) (for example, a Forecast provided in January would
estimate the Corn needs at the Ethanol Facility for the following
February through July). On a weekly basis, Producer and Cargill
will discuss Producer’s Corn volume needs for the subsequent
week. From time to time as the parties deem appropriate, Cargill
and Producer will discuss the cash corn basis price and/or basis
range that the parties believe appropriate for originating
Producer’s estimated Corn needs; provided ,
however , that Cargill will have ultimate discretion,
exercised in a commercially reasonable manner, to determine the
basis price used to originate Corn for Producer’s Corn
needs.
b. Orders and Sales
Confirmations. Cargill will sell to Producer, and Producer will
purchase from Cargill, approximately 100,000 bushels of Corn per
calendar day during the Term, commencing on the Start-Up Date, and
the Corn will be priced in accordance with Section 4 of this
Agreement. Each sale of Corn to Producer shall be evidenced by a
separate Cargill sales confirmation (“ Sales
Confirmation ”). Each Sales Confirmation at a minimum
shall specify the quantity and quality of the Corn, the delivery
date and delivery location, the purchase price (i.e., the
applicable basis and futures reference month as determined in
accordance with Section 4 below), and any applicable discount
from or premium to the purchase price, and such other information
as the Parties may agree to include. On a daily basis, Producer
shall submit to Cargill firm orders (setting forth specific bushel
requirements) in writing or via telephone and Cargill shall issue
the Sales Confirmation to Producer in writing promptly upon receipt
of such firm order. Corn shall not be transferred across the Belt
to the Ethanol Facility unless a Sales Confirmation is in place and
the Corn has been priced. To the extent that any terms of any Sales
Confirmation conflict with the terms of this Agreement, the terms
of this Agreement shall govern unless both Parties have
specifically expressed their intent in writing to supercede the
terms of this Agreement. If both parties mutually agree that a
Sales Confirmation may be cancelled, then such Sales Confirmation
will be cancelled. Cargill shall provide Producer with a daily
list, by no later than 9:00 am CST/10:00 a.m. EST, of Corn
transfers to the Ethanol Facility for the prior 24-hour period (12
midnight to 12 midnight).
c. Initial Quantity of Corn.
Producer expects to purchase the Initial Quantity for delivery by
August 1, 2007 (the “ Projected Date of First
Delivery ”). Producer shall provide reasonable advance
notice to Cargill of the Initial Quantity and any revisions
to
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the Projected Date of First
Delivery, together with its anticipated need for Corn during the
first six months of operations at the Facility.
4. Purchase Price . The
purchase price (“ Purchase Price ”) for each
bushel of Corn shall be the sum of the Base Corn Price (as may be
adjusted through the monthly reconciliation process), the
Origination Fee and the Handling Fee, which are defined in Sections
4(a), 4(c) and 4(d) hereof.
a. Base Corn Price. Producer
shall pay to Cargill the Base Corn Price for Corn supplied to the
Facility. The Base Corn Price charged to Producer will be
determined as follows:
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i.
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For all Corn
delivered to Producer on a particular day, the initial corn
cash/basis bid (“ Initial Basis ”) to be applied
will be the daily posted Cargill Grain Facility cash/basis bid
(delivered Grain Facility) for U.S. No. 2 yellow corn, 15.5
moisture, 10 ppm aflatoxin for the day immediately preceding the
Sales Confirmation (i.e., the day before the Corn is delivered);
plus
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ii.
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The applicable
futures price, as determined under the Futures Advisory Agreement
between Cargill Commodity Services, Inc. and Producer; plus or
minus
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iii.
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The applicable
quality discounts or premiums as mutually agreed by the
Parties.
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b. Reconciliation .
[*]
* Certain confidential information
on this page has been omitted and filed separately with the
Securities and Exchange Commission.
7
c. Origination Fee . Producer
shall pay to Cargill a fee of [*] (USD $[*]) per bushel of Corn
delivered to the Ethanol Facility (the “ Origination
Fee ”). The Origination Fee will be adjusted in
accordance with the process set forth in
Section 4(f).
d. Handling Fee . Producer
shall pay to Cargill a fee of [*] (USD $[*]) per bushel of Corn
supplied to the Facility (the “ Handling Fee ”).
The Handling Fee will be adjusted in accordance with the process
set forth in Section 4(f).
e. Capacity Payment . In the
event the aggregate sum of the Origination Fees and the Handling
Fees paid to Cargill during any rolling twelve-month period is less
than $2,000,000, Producer shall pay to Cargill the sum of
(i) $2,000,000 minus (ii) the aggregate sum of the
Origination Fees and Handling Fees paid to Cargill during such
twelve-month period (the “ Capacity Payment ”),
so long as no Event of Default regarding Cargill occurred during
such period.
f. Origination Fee and Handling
Fee Adjustments .
i. On the fifth (5
th
) anniversary of
the date of this Agreement, upon the written request of either
Party, the Parties shall negotiate in good faith to adjust the
Origination Fee and the Handling Fee to take into account changes
in market conditions, operating conditions or costs, inflation or
other factors; provided , however , that in the event
the Parties are unable to agree to any such adjustments within
thirty (30) days following commencement of such negotiations,
the fees described in Section 4(c) and 4(d), as applicable,
shall remain unchanged and in full force and effect.
ii. On each of the tenth (10
th
) anniversary and
the fifteenth (15 th ) anniversary of the date of
this Agreement, at the written request of either Party,
t