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DISTILLERS GRAINS MARKETING AGREEMENT

Advertising or Marketing Agreement

DISTILLERS GRAINS MARKETING AGREEMENT | Document Parties: GRANITE FALLS ENERGY, LLC | RPMG, INC You are currently viewing:
This Advertising or Marketing Agreement involves

GRANITE FALLS ENERGY, LLC | RPMG, INC

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Title: DISTILLERS GRAINS MARKETING AGREEMENT
Governing Law: Minnesota     Date: 1/26/2011

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Exhibit 10.31

 

Confidential Treatment Requested.  Confidential portions of this document have been redacted and have been separately filed with the Commission.

 

DISTILLERS GRAINS MARKETING AGREEMENT

 

THIS DISTILLERS GRAINS MARKETING AGREEMENT (the “ Agreement ”) is made and entered into as of the  10th day of December , 2010 (the “ Effective Date ”) by and between RPMG, INC., a Minnesota corporation (“ RPMG ”) and Granite Falls Energy, LLC, a Minnesota limited liability company (“ Producer ”), collectively referred to hereinafter as “Parties” or individually as a “Party”.

 

RECITALS

 

A.             RPMG markets DG (as hereinafter defined).

 

B.             Producer produces DG at Producer’s ethanol production facility located at Granite Falls, Minnesota (the “ Ethanol Facility ”).

 

C.             The Parties do desire that RPMG shall market the DG produced at the Ethanol Facility.

 

NOW, THEREFORE, in consideration of the foregoing, the mutual promises herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows.

 

AGREEMENT

 

1.              Marketing of Distilled Grains.  Beginning as of February 1, 2011, Producer shall sell to RPMG, and RPMG shall purchase and market, all of Producer’s production, excluding such production Producer sells directly to the entities set forth on Schedule 1 attached hereto, of distiller’s dried grains (“ DDG ”), modified distiller’s dried grains, (“ MDDG ”), distiller’s dried grains with solubles (“ DDGS ”), distiller’s wet grains (“ DWG ”), modified distiller’s wet grains (“ MDWG ”), and condensed distiller’s solubles (“ CDG ”) produced from corn (collectively, “ DG ”) produced at the Ethanol Facility, including any expansion or increase in capacity at the Ethanol Facility.  RPMG shall be the exclusive marketer of DG, and Producer shall not, either itself (except as set forth in the foregoing sentence) or through any affiliate or any third party, market any DG during the term of this Agreement.  Except as otherwise provided in this Agreement, RPMG shall provide management resources to market and sell DG, including the management of logistics and collection.

 

2.              Payments to Producer; Commissions; Audit Rights

 

(a)            Payments to Producer .  Subject to the other terms of this Agreement, RPMG shall pay Producer for its DG in accordance with the terms set forth in Exhibit A .  RPMG shall use commercially reasonable efforts to make such payments to Producer net ten (10) days.  RPMG’s payment obligations shall not be conditioned on collection of receivables from the End Customer (as defined below).

 

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*** Confidential material redacted and filed separately with the Commission.

 

(b)            RPMG Commission .  Producer shall pay RPMG commissions as follows: *** for DDG or DDGS sold to third party end purchasers (each, an “ End Customer ”) and *** for each ton of MDDG, DWG, or MDWG sold to End Customers.  Parties shall from time to time, or upon the reasonable request of RPMG, negotiate in good faith adjustments to the foregoing commissions to reflect prevailing commissions being paid to marketers of DG produced by third parties in the United States.

 

(c)            Accessorial Charges .  As set forth on Exhibit A , RPMG shall be responsible for payment of Accessorial Charges (as defined in Exhibit A ) to third parties; provided, however, that Producer agrees (i) to promptly reimburse RPMG for such Accessorial Charges upon submission to Producer of an invoice itemizing such Accessorial Charges, and (ii) that RPMG may deduct and setoff the Accessorial Charges from and against payments due to Producer by RPMG.

 

(d)            Late Payments .  Overdue amounts not disputed in good faith payable to either Party shall be subject to late payment fees equal to interest accrued on such amounts at the maximum rate permitted by applicable law.

 

(e)            No Warranty as to Prices .  RPMG shall market Producer’s DG using commercially reasonable efforts and the same standards it uses to market the DG production of third parties for whom RPMG provides DG marketing services.  RPMG shall endeavor to (i) maximize the DG price and minimize freight and other costs relevant to DG sales and (ii) achieve the best available return to Producer, subject to relevant market conditions.  PRODUCER ACKNOWLEDGES THAT RPMG MAKES NO REPRESENTATIONS, GUARANTEES OR WARRANTIES OF ANY NATURE WHATSOEVER AS TO THE PRICES AT WHICH IT SHALL BE ABLE TO SELL PRODUCER’S DG TO END CUSTOMERS.

 

(f)             Waiver of Certain Claims .  Producer acknowledges (i) that RPMG shall use its reasonable judgment in making decisions related to the quantity and price of DG marketed under this Agreement, in light of varying freight and other costs, but shall have complete discretion to fix the price, terms and conditions of the sale as long as the same are in accordance with this Agreement and on commercially reasonable terms, and (ii) that RPMG may sell and market DG of third parties into the same markets where RPMG sells Producer’s DG.  RPMG shall communicate with Producer the terms and conditions of sales of Producer’s DG, including, without limitation, meeting periodically with Producer to discuss pricing and other terms and conditions of sale.  Producer waives any claim of conflict of interest against RPMG or for failure by RPMG to maximize the economic benefits of this Agreement for Producer in light of the foregoing.

 

(g)            Audit Rights .  Within ninety (90) days following the end of RPMG’s fiscal year end, Producer shall have the right to inspect the books and records of RPMG for the purpose of auditing calculations of the payments to Producer for the preceding year made in connection with this Agreement.  Producer shall give written notice to RPMG of its desire to conduct an audit and RPMG shall provide reasonable access to all financial information necessary to complete such audit.  The audit

 

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shall be conducted by an accounting firm agreeable to both Parties and shall be completed within forty-five (45) days after the completion of RPMG’s annual audit, but no later than one hundred and fifty (150) days following RPMG’s fiscal year end.  The cost of the audit shall be the responsibility of Producer unless the auditor determines that RPMG underpaid Producer by more than three percent (3%) for the period audited, in which case RPMG shall pay the cost of the audit.  If the auditor determines that RPMG underpaid Producer, RPMG shall promptly pay such underpayment to Producer and if the auditor determines that RPMG overpaid Producer, Producer shall promptly pay the overpayment to RPMG.  The determination of the auditor shall be final and binding on both Parties.  If Producer fails to exercise its right to audit as provided in this Section 2(g) for any year, it shall be deemed to have waived any rights to dispute payments made to Producer for that year.

 

3.              Scheduled Production

 

(a)            Notices of Scheduled Production .  Beginning on the Effective Date, and on the 1 st  and 15 th  of each month thereafter, Producer shall provide to RPMG a rolling best estimate of production and inventory by DG product for that month and each of the following twelve (12) months.  Beginning on the Effective Date and each Wednesday thereafter, Producer shall provide to RPMG a best estimate of production and inventory by DG product for that day and the next seven days.

 

(b)            Additional Production Notices .  Producer shall notify RPMG of anticipated production downtime or disruption in DG availability at least three (3) months in advance of such outage.  Producer shall timely inform RPMG of daily inventories, plant shutdowns, daily production projections, and any other information (i) to facilitate RPMG’s performance of the Agreement or (ii) that may have a material adverse effect on RPMG’s ability to perform the Agreement.

 

(c)            RPMG Entitled to Rely on Producer Estimates and Notices .  RPMG, in marketing and selling Producer’s DG, is entitled to rely upon the production estimates and other notices provided by Producer, including without limitation those described in Sections 3(a) and (b).  Producer’s failure to provide accurate information to facilitate RPMG’s performance of the Agreement may negatively impact RPMG’s ability to market and sell DG at prevailing prices.  Producer’s failure to provide accurate information to facilitate RPMG’s performance of the Agreement may be deemed by RPMG, in its sole but reasonable discretion, a material breach of the Agreement by Producer.

 

(d)            Sale Commitments .  From time to time during the term of this Agreement and in order to maximize the sales price of DG, RPMG may enter sales contracts or other agreements with End Customers for future delivery of DG.  In the event Producer fails to produce DG in accordance with the information provided to RPMG under Sections 3(a) or (b) above for reasons other than Force Majeure (as defined in Section 10 herein) or terminates this Agreement other than in accordance with the provisions of Section 6 below, and as a result RPMG is required to purchase DG from third parties to meet previous DG sale commitments that are based upon such information, RPMG may charge Producer

 

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the amount (if any) that the price of such replacement DG exceeded the price that RPMG would have paid to Producer for the applicable DG under this Agreement.

 

4.              Logistics and Transportation

 

(a)            No Liens, Title and Risk of Loss .   Producer warrants that DG delivered to RPMG hereunder shall be free and clear of all liens and encumbrances of any nature whatsoever other than liens in favor of RPMG.  Title to and risk of loss of each load of DG shall pass to RPMG at the time such load passes across the scale into rail cars or trucks at the Ethanol Facility (the “ Title Transfer Point ”).  Until such time, Producer shall be deemed to be in control of and in possession of the DG.

 

(b)            Loading .  RPMG in agreement with Producer 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 RPMG.  Producer shall handle the DG in a good and workmanlike manner in accordance with RPMG’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 shall 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.  RPMG and RPMG’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.  RPMG’s employees shall follow all reasonable safety rules and procedures promulgated by Producer and provided to RPMG reasonably in advance and in writing.  Producer shall supply product description tags, certificates of analysis, bills of lading and/or material safety data sheets that are applicable to all shipments.  In the event that Producer fails to provide the labor, equipment and facilities necessary to meet RPMG’s loading schedule, Producer shall be responsible for all costs and expenses, including without limitation actual demurrage and wait time, incurred by RPMG resulting from or arising in connection with Producer’s failure to do so.

 

(c)            Transportation and Certain Transportation Costs .  RPMG 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.  RPMG shall determine the method of transporting DG to End Customers.  Notwithstanding any provision to the contrary herein, Producer shall be solely responsible for any damage to any trucks, railcars, equipment, or vessels caused by acts or omissions of Producer and its consignees.  All truck freight charges and rail tariff rate charges shall be billed directly to RPMG and, as set forth in Exhibit A , be deducted by RPMG from the proceeds of RPMG’s sales of DG to End Customers.  To the extent, the number of railcars utilized for railcar freight exceeds the Railcar Threshold (as defined below), upon the request of Producer, representatives of RPMG and Producer agree to meet to discuss the railcar requirements.  If Producer remains unsatisfied within thirty (30) days of such meeting and the railcar requirements still exceed the Railcar Threshold then

 

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*** Confidential material redacted and filed separately with the Commission.

 

Producer shall have the right to terminate this Agreement.  Railcar Threshold shall mean that ***.

 

(d)            Weight .  The quantity of DG delivered to RPMG at the Ethanol Facility shall be established by weight certificates obtained from Producer’s scales or from such other scales as the Parties shall mutually agree, which are certified as of the time of weighing and which comply with all applicable laws, rules and regulations; provided, however, that if the weights obtained from Producer’s scales conflict with destination weights from certified scales at the End Customer’s destination point, destination weights shall govern and Producer shall be solely responsible for any shortage.  In the case of rail shipments, the official railroad weights shall govern establishment of said quantities.  Producer shall provide RPMG with a fax copy of the outbound weight certificates on a daily basis and, except as otherwise expressly agreed upon, such outbound weight certificates shall be determinative of the quantity of DG for which RPMG is obligated to pay Producer pursuant to this Agreement.

 

(e)            DG Storage at Ethanol Facility .  The estimated storage capacity of the Ethanol Facility, by DG product, is as follows:

 

DDGS

 

2500 tons

 

 

 

MDWG

 

500 tons

 

5.              Specifications; Quality.

 

(a)            DG Specifications .  Producer covenants that it shall produce DG that, upon delivery to RPMG at the Ethanol Facility, meets the respective specifications (“ Specifications ”) set forth in Exhibit C .  RPMG shall have the right to test each shipment of DG to ascertain that the Specifications are being met.  If the DG provided by Producer to RPMG is shown, by independent testing or analysis of a representative sample or samples taken consistent with industry standards, to not meet the Specifications through no fault of RPMG or any third party engaged by RPMG, then RPMG may, in its sole discretion, (i) reject such DG and require Producer to promptly replace such non-conforming DG with DG that complies with the Specifications, or (ii) accept such DG for marketing and, if necessary, adjust the price to reflect the inferior quality, as provided in Exhibit A .  Payment and acceptance of delivery by RPMG shall not waive RPMG’s rights if DG does not comply with the terms of this Agreement, including the Specifications.

 

(b)            Feed Ingredient Standards .  Producer understands that RPMG intends to market Producer’s DG as a primary animal feed ingredient, and that said products are subject to minimum standards for such use.  Producer warrants that, unless caused by the negligence or intentional misconduct of RPMG or a third party engaged by RPMG, DG delivered by Producer to RPMG 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.

 

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(c)            Trade Rules .  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.

 

(d)            Compliance With FDA and Other Standards .  Producer warrants that, unless caused by the negligence or intentional misconduct of RPMG or a third party engaged by RPMG, DG provided by Producer to RPMG (i) shall not be “adulterated” or “misbranded” within the meaning of the Federal


 
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