Exhibit 10.5
DISTILLER'S GRAIN MARKETING AGREEMENT
THIS DISTILLER'S GRAIN MARKETING AGREEMENT (the "Agreement"), is entered
into effective as of March 1, 2004, by Red Trail Energy LLC, a North Dakota
Limited Liability Company ("Seller"), and Commodity Specialist Company, a
Delaware corporation ("Buyer").
WITNESSETH:
WHEREAS, Seller desires to sell and Buyer desires to purchase the
Distiller's Dried Grains with Solubles ("DDGS"), hereinafter DDGS, output of the
ethanol production plant which Seller owns in Richardton, North Dakota; 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 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 Richardton, North Dakota. (hereinafter the "Plant"), 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 Products
are 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 apart 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
be July 1, 2005. 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 90 days written notice of its election to terminate
this Agreement.
5. DELIVERY AND TITLE.
A. The place of delivery for all the Products 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
coordinate the loading and shipping of all outbound Products purchased
hereunder which is shipped by truck or rail with Seller. 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 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 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 e-mail to smarkham@csc-world.com, and
If to Seller, to the attention of _________________________________ or e-mail to
______________________. 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 Products into trucks or rail cars and delivering to
Buyer a the bill 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%). For purposes of
this provision, the FOB
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Plant price shall be the actual sale price, less all freight costs incurred
by Buyer in delivering the Product to its customer. 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
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
Products sold by Buyer and shall remit to the appropriate governmental
agency.
B. Within three (3) business 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.
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 shall be accepted in the feed trade under current industry
standards.
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 quality standard:
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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 per original sample
rather than a dry weight basis.
C. Seller warrants that at the time of loading, the Products 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
Products which when inspected or used fail in a material way to conform
to this Agreement. Should any of the Products 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
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 Products which comply with the warranty in
Section C above but which do not meet applicable industry standards, Buyer
agrees to purchase such Products for resale but makes no representation or
warranty as to the price at which such Product can be sold. If the Products
deviate so severely from industry standard as to
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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 Products
produced at its Plant are adulterated or misbranded, or outside of industry
quality standards. Seller shall promptly so notify Buyer so that such
Product can be tested before entering interstate commerce. If Buyer knows
or reasonably suspects that any of the Products 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 Products 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.
10. INSURANCE.
A. Seller warrants to Buyer that all employees engaged in the removal
of the Products 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.
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11. REPRESENTATIONS AND WARRANTIES
A. Seller represents and warrants that all of the Products 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 Products 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.
B. Seller represents and warrants that the Products delivered to Buyer
shall be free and clear of liens and encumbrances.
12. EVENTS OF DEFAULT. The occurrence of any of the following shall be an
event of default under this Agreement ("Event of Default"): (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,
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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 of agreement of Buyer
contained herein or (ii) the Buyer's negligence or willful misconduct.
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 Products, Buyer may take positions by
selling Product in anticipation of Seller providing the Products.
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
product taken by Buyer in anticipation of Seller delivering the Products
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
Products could change as a result of various governmental programs, be they
foreign or domestic. In the event that a significant value change of the
Products as a result of any such governmental program, Buyer may request
re-negotiation of the contract price for the Products by providing written
notice to Seller. Buyer shall be required to demonstrate that the value of the
Products 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 Products. If, after a good faith effort, the parries are unable to agree on
a new price within the 90 day period immediately fallowing 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.
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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 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 Missouri.
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
310 Grain Exchange Bldg.
400 South Fourth Street,
Minneapolis, MN 55415
ATTN: Steve J. Markham
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Seller:
IN WITNESS THEREOF, the parties have caused this Agreement to be executed
the day and year first above written.
COMMODITY SPECIALISTS COMPANY
By: /s/ Philip J. Lindau
------------------------------------
Title: EVP
Philip J. Lindau
Red Trail Energy LLC
By: /s/ Ambrose R. Hoff
------------------------------------
Ambrose R. Hoff
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