DISTILLER’S GRAIN MARKETING AGREEMENT
Exhibit 10.3
THIS DISTILLER’S GRAIN MARKETING AGREEMENT (the “Agreement”), is entered into effective as of
February 27, 2006, by Siouxland Ethanol LLC, a Nebraska Limited Liability Company (“Seller”), and
Commodity Specialist 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 (“DDGS”) output of the ethanol production plant which Seller owns in Jackson,
Nebraska; and
WHEREAS, Seller desires to retain all rights to independently market and sell all of its Wet
Distillers Grains (“WDG”) and solubles (“Solubles”) output of the ethanol production plant which
Seller owns in Jackson, Nebraska and Buyer does not desire to acquire any marketing, sales or other
rights relating to the WDG and Solubles produced by Seller at its Jackson, Nebraska ethanol
production facility; and
WHEREAS, Seller and Buyer wish to agree in advance of the sale and purchase of the DDGS to the
price formula, payment, delivery and other terms thereof in consideration of the mutually promised
performance of the other;
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 Jackson, Nebraska.
(hereinafter the “Plant”), subject to all terms and conditions set forth in this Agreement.
Buyer shall label all DDGS that is sold by Buyer and shall register all labels with the
states where the DDGS is sold.Notwithstanding the foregoing, Seller may sell DDGS to Xxxxxxx
Foods for their use at their facilities in Wakefield and Bloomfield, Nebraska. Such sales
shall be for Xxxxxxx Foods’s use at the specified facilities and not for resale. Seller will
notify Buyer of each shipment to Xxxxxxx Foods one week prior such shipment specifying the
quantity of such shipment.
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. The term of this Agreement shall be for one year commencing as of
completion and start-up of production of the Plant. Start-up is anticipated to occur in
2007. Thereafter this agreement shall remain in effect until 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.
5. DELIVERY AND TITLE.
A. The place of delivery for all 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 DDGS
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 five 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 DDGS in storage
at the Plant. Seller shall not be responsible for the quantity, quality and condition of any
of the DDGS stored by Buyer at locations other than the Plant.
C. Buyer shall give to Seller a schedule of quantities of the DDGS 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 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 DDGS 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:
2
If to Buyer, to the attention of Xxxxx Xxxxxxx, Facsimile number 000-000-0000 or email
to xxxxxxxx@xxx-xxxxx.xxx, and
If to Seller, to the attention of Siouxland Ethanol, Facsimile number 000-000-0000 or email
to xxxxxxxxxxxxxxx@xxxx.xxx
Or to such other representatives of Buyer and Seller as they may designate to the other in
writing.
| E. | Title, risk of loss and full shipping responsibility shall pass to Buyer upon loading the DDGS into trucks or rail cars and delivering to Buyer of the xxxx of lading for each such shipment. |
6. PRICE AND PAYMENT
A. Buyer agrees to pay Seller as follows: for all DDGS removed by Buyer from the Plant
a price equal to ninety eight (98%) of the FOB Plant price actually received by Buyer from
its customers. 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 DDGS to its customer, but
in no event shall the fee to Buyer for DDGS be less than $1.50 per ton. The calculation of
the minimum fee shall be made with respect to each weekly payment separately. The results of
the calculation for any given week will not impact the calculation for any other week.
Buyer agrees that it shall not sell DDGS for delivery more than 90 days from the date of
entering into a sale without the consent of Seller. Buyer agrees to use 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 hereunder
shall be to terminate this Agreement. Buyer shall collect all applicable state tonnage taxes
on DDGS sold by Buyer and shall remit to the appropriate governmental agency.
B. Within ten (10) days following receipt of certified weight certificates, which
certificates shall be presented to Buyer each Thursday for all 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. If any such audit reveals a deficiency in payment due Seller, Buyer shall
immediately pay Seller the amount of such deficiency plus interest calculated from the date
such payment should have been made at the prime rate then in effect as represented in the
Wall Street Journal.
7. QUANTITY AND WEIGHTS.
3
A. It is understood that the output of the DDGS 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 DDGS to be sold pursuant to this Agreement.
B. The quantity of DDGS 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 DDGS for which
Buyer is obligated to pay pursuant to Section 6.
8. QUALITY.
A. Seller understands that Buyer intends to sell the DDGS purchased from Seller as a
primary animal feed ingredient and that said DDGS is subject to minimum quality standards
for such use. Seller agrees and warrants that the DDGS produced at its plant and delivered
to Buyer shall be accepted in the feed trade under current industry standards.
B. Seller warrants that the DDGS, unless the parties agree otherwise, sold to Buyer
hereunder shall, at the time of delivery to Buyer, conform to the following minimum quality
standard:
| Protein | Fat | Fiber | Moisture | Ash | ||||||||||||||||||||||||||||||||||||
| Min | Max | Min | Max | Min | Max | Min | Max | Min | Max | |||||||||||||||||||||||||||||||
DDGS |
25 | 10 | 15 | 12 | 6 | |||||||||||||||||||||||||||||||||||
The standard for DDGS will be determined on an as is basis rather than a dry
weight basis.
C. Seller warrants that at the time of loading, the DDGS will not be adulterated or
misbranded within the meaning of the Federal Food, Drug and Cosmetic Act and that each
shipment may lawfully be introduced into interstate commerce under said Act. Payment of
invoice does not waive Buyer’s rights if goods do not comply with terms or specifications of
this Agreement. Unless otherwise agreed between the parties to this Agreement, and in
addition to other remedies permitted by law, the Buyer may, without obligation to pay,
reject either before or after delivery, any of the DDGS which when inspected or used fail in
a material way to conform to this Agreement. Should any of the DDGS be seized or condemned
by any federal or state department or agency for any reason except noncompliance by Buyer
with applicable federal or state requirements, such seizure or
4
condemnation shall operate as
a rejection by Buyer of the goods seized or condemned and Buyer shall not be obligated to
offer any defense in connection with the seizure or condemnation. When rejection occurs
before or after delivery, at its option, Buyer may:
(1) Dispose of the rejected goods after first offering Seller a reasonable opportunity
of examining and taking possession thereof, if the condition of the goods reasonably appears
to Buyer to permit such delay in making disposition; or
(2) Dispose of the rejected goods in any manner directed by Seller which Buyer can
accomplish without violation of applicable laws, rules, regulations or property rights; or
(3) If Buyer has no available means of disposal of rejected goods and Seller fails to
direct Buyer to dispose of it as provided herein, Buyer may return the rejected goods to
Seller, upon which event Buyer’s obligations with respect to said rejected goods shall be
deemed fulfilled. Title and risk of loss shall pass to Seller promptly upon rejection by
Buyer.
(4) Seller shall reimburse Buyer for all costs reasonably incurred by Buyer in storing,
transporting, returning and disposing of the rejected goods. Buyer shall have no obligation
to pay Seller for rejected goods and may deduct reasonable costs and expenses to be
reimbursed by Seller from amounts otherwise owed by Buyer to Seller.
(5) If Seller produces DDGS which comply with the warranty in Section C above but which
do not meet applicable industry standards, Buyer agrees to purchase such DDGS for resale but
makes no representation or warranty as to the price at which such DDGS can be sold. If the
DDGS deviates so severely from industry standard as to be unsalable, then it shall be
disposed of in the manner provided for rejected goods in Section C above.
D. If Seller knows or reasonably suspects that any of the DDGS produced at its Plant
are adulterated or misbranded, or outside of industry quality standards, Seller shall
promptly so notify Buyer so that such DDGS can be tested before entering interstate
commerce. If Buyer knows or reasonably suspects that any of the DDGS produced by Seller at
its Plant are adulterated, misbranded or outside of industry quality standards, then Buyer
may obtain independent laboratory tests of the affected goods. If such goods are tested and
found to comply with all warranties made by Seller herein, then Buyer shall pay all testing
costs; and if the goods are found not to comply with such warranties, Seller will pay all
testing costs.
9. RETENTION OF SAMPLES. Seller will take an origin sample of DDGS from each truck
and rail car before it leaves the Plant using standard sampling methodology. Seller will
label these samples to indicate the date of shipment and the truck or railcar number
involved. Seller will also retain the samples and labeling information for no less than one
year.
5
10. INSURANCE.
A. Seller warrants to Buyer that all employees engaged in the removal of the DDGS from
Seller’s Plant shall be covered as required by law by worker’s compensation and unemployment
compensation insurance.
B. Seller agrees to maintain throughout every term of this Agreement comprehensive
general liability insurance, including product liability coverage, with combined single
limits of not less than $2,000,000. Seller’s policies of comprehensive general liability
insurance shall be endorsed to require at least thirty (30) days advance notice to Buyer
prior to the effective date of any decrease in or cancellation of coverage. Seller shall
cause Buyer to be named as an additional insured on Seller’s insurance policy and shall
provide a certificate of insurance to Buyer to establish the coverage maintained by Seller
not later than fourteen (14) days prior to completion and start-up of production of the
Plant.
C. Buyer agrees to carry such insurance on its vehicles operating on Seller’s property
as Seller reasonably deems appropriate. The parties acknowledge that Buyer may elect to
self insure its vehicles. Upon request, Buyer shall provide certificate of insurance to
Seller to establish the coverage maintained by Buyer.
D. Notwithstanding the foregoing, nothing herein shall be construed to constitute a
waiver by either party of claims, causes of action or other rights which either party may
have or hereafter acquire against the other for damage or injury to its agents, employees,
invitees, property, equipment or inventory, or third party claims against the other for
damage or injury to other persons or the property of others.
11. REPRESENTATIONS AND WARRANTIES
A. Seller represents and warrants that all of the DDGS delivered to Buyer shall not be
adulterated or misbranded within the meaning of the Federal Food, Drug and Cosmetic Act and
may lawfully be introduced into interstate commerce pursuant to the provisions of the Act.
Seller further warrants that the DDGS shall fully comply with any applicable state laws
governing quality, naming and labeling of product. Payment of invoice shall not constitute
a waiver by Buyer of Buyer’s rights as to goods which do not comply with this Agreement or
with applicable laws and regulations. EXCEPT AS SPECIFICALLY STATED IN THIS AGREEMENT,
SELLER MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, INCLUDING WITHOUT
LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
B. Seller represents and warrants that the DDGS delivered to Buyer shall be free and
clear of liens and encumbrances.
6
12. EVENTS OF DEFAULT. The occurrence of any of the following shall be an event of
default under this Agreement: (1) failure of either party to make payment to the other when
due; (2) default by either party in the performance of the covenants and
agreements set forth in this Agreement; (3) if either party shall become insolvent, or make
a general assignment for the benefit of creditors or to an agent authorized to liquidate any
substantial amount of its assets, or be adjudicated bankrupt, or file a petition in
bankruptcy, or apply to a court for the appointment of a receiver for any of its assets or
properties with or without consent, and such receiver shall not be discharged within sixty
(60) days following appointment.
13. REMEDIES. Upon the happening of an Event of Default, the parties hereto shall
have all remedies available under applicable law with respect to an Event of Default by the
other party. Without limiting the foregoing, the parties shall have the following remedies
whether in addition to or as one of the remedies otherwise available to them; (1) to declare
all amounts owed immediately due and payable; and (2) immediately to terminate this
Agreement effective upon receipt by the party in default of the notice of termination,
provided, however, the parties shall be allowed 10 days from the date of receipt of notice
of default for to cure any default. Notwithstanding any other provision of this Agreement,
Buyer may offset against amounts otherwise owed to Seller the price of any product which
fails to conform to any requirements of this Agreement.
14. FORCE MAJEURE. Neither Seller nor Buyer will be liable to the other for any
failure or delay in the performance of any obligation under this Agreement due to events beyond its
reasonable control, including, but not limited to, fire, storm, flood, earthquake, explosion, act
of the public enemy, riots, civil disorders, sabotage, strikes, lockouts, labor disputes, labor
shortages, war stoppages or slowdowns initiated by labor, transportation embargoes, failure or
shortage of materials, acts of God, or acts or regulations or priorities of the federal, state or
local government or branches or agencies thereof.
15. INDEMNIFICATION.
A. Seller shall indemnify, defend and hold Buyer and its officers, directors, employees
and agents harmless, from any and all losses, liabilities, damages, expenses (including
reasonable attorneys’ fees), costs, claims, demands, that Buyer or its officers, directors,
employees or agents may suffer, sustain or become subject to, or as a result of (i) any
misrepresentation or breach of warranty, covenant or agreement of Seller contained herein or
(ii) the Seller’s negligence or willful misconduct.
B. Buyer shall indemnify, defend and hold Seller and its officer, directors, employees
and agents harmless, from any and all losses, liabilities, damages, expenses (including
reasonable attorneys’ fees), costs, claims, demands, that Seller or its officers, directors,
employees or agents may suffer, sustain or become subject to, or as a result of (i) any
misrepresentation or breach of warranty, covenant or agreement of Buyer contained herein or
(ii) the Buyer’s negligence or willful misconduct.
7
C. Where such personal injury, death or loss of or damage to property is the result of
negligence on the part of both Seller and Buyer, each party’s duty of indemnification shall
be in proportion to the percentage of that party’s negligence or faults.
D. Seller acknowledges that in order to maximize the total revenue to be generated
through the sale of the DDGS, Buyer may take positions by selling DDGS in anticipation of
Seller providing the GGDS. Notwithstanding the fact that Seller’s obligation is to provide
Buyer with the output of the Plant the parties acknowledge that Buyer may suffer losses as a
result of positions taken by Buyer if Seller discontinues operations for any reason
whatsoever including Force Majeure. Therefore, Seller shall indemnify, defend and hold
Buyer and its officers, directors, employees and agents harmless from any and all losses,
liabilities, damages, expenses (including reasonable attorney’s fees), costs, claims,
demands that Buyer or its officers, directors, employees, or agents may suffer, sustain or
become subject to as a result of any sale or purchase of DDGS taken by Buyer in anticipation
of Seller delivering the DDGS hereunder, provided Buyer has taken commercially reasonable
steps to avoid the loss. Seller shall not be liable for any loss resulting from Seller
discontinuing operations related to a position taken by Buyer for delivery more than 90 days
from the date of entering into a sale without the consent of Seller.
16. GOVERNMENTAL ACTION. The parties recognize that the value of the DDGS could
change as a result of various governmental programs, be they foreign or domestic. In the event
that a significant value change of the DDGS as a result of any such governmental program, Buyer may
request re-negotiation of the contract price for the DDGS by providing written notice to Seller.
Buyer shall be required to demonstrate that the value of the DDGS has significantly changed in the
market. Should such a change take place, the parties agree to negotiate, in good faith, a revised
sale price for the DDGS. If, after a good faith effort, the parties are unable to agree on a new
price within the 90 day period immediately following notice to the other party, then in such event
and notwithstanding the other provisions hereof, Buyer may terminate this Agreement upon 90 days
prior written notice.
17. RELATIONSHIP OF PARTIES. This Agreement creates no relationship other than that
of buyer and seller between the parties hereto. Specifically, there is no agency, partnership,
joint venture or other joint or mutual enterprise or undertaking created hereby. Nothing contained
in this Agreement authorizes one party to act for or on behalf of the other and neither party is
entitled to commissions from the other.
18. MISCELLANEOUS.
A. This writing is intended by the parties as a final expression of their agreement
and a complete and exclusive statement of the terms thereof.
B. No course of prior dealings between the parties and no usage of trade, except
8
where
expressly incorporated by reference, shall be relevant or admissible to supplement, explain,
or vary any of the terms of this Agreement.
C. Acceptance of, or acquiescence in, a course of performance rendered under
this or any prior agreement shall not be relevant or admissible to determine the meaning of
this Agreement even though the accepting or acquiescing party has knowledge of the nature or
the performance and an opportunity to make objection.
D. No representations, understandings or agreements have been made or relied upon in
the making of this Agreement other than as specifically set forth herein.
E. This Agreement can only be modified by a writing signed by all of the parties or
their duly authorized agents.
F. The paragraph headings herein are for reference purposes only and shall not in any
way affect the meaning or interpretation of this Agreement.
G. This Agreement shall be construed and performed in accordance with the laws of the
State of Nebraska.
H. The respective rights, obligations and liabilities of the parties under this
Agreement are not assignable or delegable without the prior written consent of the other
party.
I. Notice shall be deemed to have been given to the party to whom
it is
addressed ninety-six (96) hours after it is deposited in certified U.S. mail, postage
prepaid, return receipt requested, addressed as follows:
| Buyer:Commodity Specialist Company | ||
| 000 Xxxxx Xxxxxxxx Xxxx. | ||
| 000 Xxxxx Xxxxxx Xxxxxx | ||
| Xxxxxxxxxxx, Xxxxxxxxx 00000 | ||
| ATTN: Xxxxx X. Xxxxxxx | ||
Seller:
|
Siouxland Ethanol LLC | |
| X.X. Xxx 000 | ||
| Xxxxxxx, Xxxxxxxx 00000 | ||
Copy To:
|
Xxxxxxx X. Xxxxxxxx, Esq. | |
| Xxxxx, Winick, Graves, Gross | ||
| Xxxxxxxxxxx and Xxxxxxxxxx, PLC | ||
| Suite 2000 Ruan Center | ||
| 000 Xxxxx Xxxxxx | ||
| Xxx Xxxxxx, Xxxx 00000 |
9
IN WITNESS THEREOF, the parties have caused this Agreement to be executed the day
and year first above written.
| COMMODITY SPECIALISTS COMPANY | ||||||
| By: | /s/ Xxxx X. Xxxxxx | |||||
| Title: Co-President | ||||||
| Siouxland Ethanol LLC | ||||||
| By: | /s/ Xxx Xxxxx | |||||
| Title: President | ||||||
10
