Exhibit 10.16

 

* Portions omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission.

 

DISTILLER’S GRAIN MARKETING AGREEMENT

 

THIS DISTILLER’S GRAIN MARKETING AGREEMENT (the “Agreement”), is entered into
effective as of October 1, 2007, by United Wisconsin Grain Producers LLC, a
Wisconsin Limited Liability Company (“Seller”), and CHS Inc., a Minnesota
cooperative 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 Friesland, Wisconsin which is to be shipped by rail;

 

WHEREAS, Seller desires to be responsible for the sale of all Wet Distillers
Grains with solubles (“WDG”) and solubles (“Solubles”) and all DDGS that is not
to be shipped by rail: 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 DDGS produced by Seller’s plant at Friesland,
Wisconsin (hereinafter the “Plant”) that the parties agree (in their discretion)
are to be shipped by rail, subject to all terms and conditions set forth in this
Agreement.  Buyer shall label, as required by applicable law, all DDGS that are
sold by Buyer and shall register all labels with the states where the DDGS are
sold by Buyer hereunder.  Seller is under no obligation to sell DDGS to Buyer by
rail or otherwise, provided Seller shall not sell DDGS by rail to any party
other than Buyer (subject to this Agreement).  Buyer agrees to provide Seller
DDGS rail quotes on a regular basis and as requested by Seller.

 

3.             TRADE RULES.  Except as otherwise set forth in this Agreement,
all purchases and sales made hereunder shall be governed by the then current
Feed Trade Rules of the National Grain and Feed Association (the “Trade Rules”);
provided, however, that in the event of any conflict or inconsistency between
any term or provision of the Trade

 

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Rules and any term or condition of this Agreement, this Agreement shall govern
and control to the full extent of such conflict or inconsistency.

 

4.             TERM.  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 DDGS sold pursuant to this Agreement
shall be FOB the Plant.  Buyer and Buyer’s agents shall be given access to only
those areas of Seller’s Plant as are reasonably necessary for the taking of
delivery of the DDGs.  Buyer shall coordinate the delivery of rail cars to the
Plant, and the loading of all outbound DDGS purchased hereunder which are
shipped by rail by the Seller.  All labor and equipment necessary to load 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 rail loading facilities in safe operating condition in
accordance with normal industry standards.

 

B.   Seller shall be responsible at all times for the quantity, quality and
condition of the DDGS in storage at the Plant.

 

C.   Buyer shall give to Seller a schedule of quantities of the DDGS to be
removed by 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 rail cars as scheduled for 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 timely remove the
quantities of DDGS that the parties have agreed are to be shipped by rail and
that Seller has sold to Buyer in the time frames set forth in the applicable
purchase order.  Seller shall provide to Buyer an estimated production schedules
as follows:  five (5) days prior to the beginning of each calendar month during
the term hereof, Seller shall provide to Buyer an estimated schedule for
production in the next calendar month that is to shipped by rail. Seller
acknowledges that Buyer will be attempting to resell quantities of DDGS
purchased from Seller based upon the production schedule of quantities of DDGS
to be shipped by rail and Seller will use its commercially reasonable efforts to
not change the quantities available to Buyer as stated in such production
schedule without Buyer’s written consent.  For purposes of this paragraph,
notification will be sufficient if made by e-mail or facsimile as follows:

 

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If to Buyer, to the attention of Steve Markham, Facsimile number
                           or e-mail to steve.markham@chsinc.com, and

 

If to Seller, to the attention of
                                                                                          . 
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 rail cars and Buyer’s receipt of written notice (the
“Railcar Loading Notice”) from Seller that such DDGS have been loaded and are
available for billing; provided that the Railcar Loading Notice for such DDGS is
delivered to Buyer before 3:00 p.m. Central Standard Time on the day that such
DDGS is loaded  If the Railcar Loading Notice for any DDGS is delivered to Buyer
on or after 3:00 Central Standard Time on the day that such DDGS is loaded,
title, risk of loss and full shipping responsibility shall pass to Buyer as of
the commencement of the next business day.

 

6.             PRICE AND PAYMENT

 

A. [*]

 

B. [*]

 

7.             QUANTITY AND WEIGHTS.

 

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 Seller’s official railroad weights which shall be certified as of
the time of weighing and which comply with all applicable laws, rules and
regulations, or in the event that such weights are 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 this Agreement.

 

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* Portion omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission.

 

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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 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 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 per original sample
rather than a dry weight basis.

 

C.  Seller warrants that at the time of loading, the DDGS will be merchantable,
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; provided, however,
(i) that such failure shall not be caused by Buyer, its ultimate customer or
some third party after the delivery of such DDGS to Buyer, and (ii) that Buyer
provide written notice of rejection of such DDGS to Seller promptly, but in any
event within 48 hours of unloading of such DDGS by the ultimate customer or such
DDGS shall be deemed to be accepted by Buyer.

 

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 or the failure of Buyer to comply with any term of this
Agreement (a “Governmental Seizure”), such Governmental Seizure 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. 
However, in such event, Buyer shall promptly notify Seller of the Governmental
Seizure, and in any event within 12 hours of Buyer receiving notice of the
Governmental Seizure.  Buyer shall reasonably cooperate with Seller upon
request, but at Seller’s cost and expense, in defending against or otherwise
contesting the Governmental Seizure.

 

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If any DDGS are validly rejected by Buyer in accordance with this Section (the
“Rejected Goods”), Buyer will, in the following order:

 

(1)  Offer Seller a reasonable opportunity of examining and taking possession
thereof, in Seller’s discretion and at Seller’s cost and expense, provided that
Seller takes action promptly to make such examination and take possession
thereof; 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.

 

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.

 

If Seller produces DDGS which comply with the warranty in Section 8C 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 deviate so severely from industry standard
as to be unsalable, then it shall be disposed of in the manner provided for
Rejected Goods in Section 8C above.

 

Title and risk of loss of Rejected Goods shall pass to Seller promptly upon
valid rejection by Buyer.

 

D.  If Seller knows 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  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; DISPUTES.  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

 

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information for no less than one year.

 

In the event of any dispute regarding the grade or quality of any DDGS sold by
Seller to Buyer, samples of such DDGS shall be sent to an independent third
party inspector mutually approved by Buyer and Seller.  The decision of such
third party inspector regarding such grade or quality shall be binding upon the
parties hereto.  Testing fees charged by such third party inspector shall be
paid by Seller unless it is determined that Buyer’s (or its customer’s) analysis
was not accurate and the DDGS met the grade and quality standards required
hereunder, in which case such inspection fees shall be paid by Buyer.

 

10.           INSURANCE.

 

A.  Seller warrants to Buyer that all employees engaged in the removal of the
DDGS from Seller’s plant shall be covered by worker’s compensation and
unemployment compensation insurance, to the extent required by law.  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 Seller’s insurer endeavor to
provide 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.

 

B.  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.

 

C.  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 the DDGS 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

 

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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 and rights available in applicable law, equity or
otherwise 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 Rejected Goods.

 

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.

 

C.            Notwithstanding the above, 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.

 

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16.           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 orundertaking 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.

 

17.           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 Wisconsin.

 

H.            All claims, disputes, controversies and other matters arising out
of this Agreement shall be resolved by binding arbitration in accordance with
the Arbitration Rules of the National Grain and Feed Association or such other
governing rules as may be agreed to by the parties.  The arbitration will be
conducted in St. Paul, Minnesota by an arbitrator selected by mutual agreement
of the parties.  If the parties are unable to agree upon an arbitrator, the
arbitration will be conducted by a panel of three arbitrators, one arbitrator
selected by each party and the third arbitrator selected by arbitrators chosen
by the parties hereto.  The decision of any two of the three arbitrators will be
the decision of the entire panel.  The costs of arbitration, including
reasonable attorneys’ fees, shall be borne as assessed by the arbitrators.  The
decision from the arbitration shall be reduced to writing and shall be binding
on the parties.  Judgment upon the award(s) rendered by the arbitrator(s) may be
entered and execution had in any court of competent jurisdiction or

 

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application may be made to such court for a judicial acceptance of the award and
an order of enforcement.  In arbitration, all privileges under state and federal
law, including attorney client and work product privileges, shall be preserved
and protected to the same extent that such privileges would be protected in a
federal court in the United States proceeding applying the internal law of the
State of Wisconsin (without reference to the law of conflicts of any
jurisdiction).

 

I.              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.

 

J.             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:

CHS, Inc.

 

 

Attn: Steve J. Markham

 

 

5500 Cenex Drive

 

 

Inver Grove Heights, MN 55077

 

 

 

 

Seller:

United Wisconsin Grain Producers, LLC

 

 

c/o Dan Wegner

 

 

W1231 Tessmann Drive

 

 

Friesland, WI 53935

 

 

K.            This Agreement represents the entire agreement between the parties
regarding the subject matter hereof and supersedes the previous agreement dated
              , 2004 between the parties.

 

L.             Each of the parties hereto agrees and acknowledges that time is
of the essence in the performance of their obligations hereunder.

 

[Signature Page Follows]

 

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IN WITNESS THEREOF, the parties have caused this Agreement to be executed the
day and year first above written.

 

 

CHS, Inc.

 

 

 

 

 

By

 

/s/ Steve Markham

 

Its:

 

Merchant

 

 

 

 

 

 

 

United Wisconsin Grain Producers, LLC

 

 

 

 

 

By

 

/s/ Jeff Robertson

 

Title

 

CEO

 

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