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