Producer owns and operates an ethanol production facility (the “Facility”) located in Nevada, Iowa ; and
Producer has agreed to sell to Gavilon, and Gavilon has agreed to purchase from Producer, all distiller’s grains produced at the Facility on the terms and conditions set forth hereinafter.
Term. This Agreement shall become effective on January 1, 2014 and shall remain in effect for *. Thereafter, this Agreement shall continue until terminated by either Party upon no less than sixty (60) days prior written notice, provided that such termination shall have no effect with respect to any Confirmed Orders entered into prior to the effectiveness of such termination.
Delivery. During the Term, Producer shall sell and make available for Delivery (as defined in 5.1) to Gavilon, and Gavilon shall purchase and take Delivery of all distiller’s grains produced at the Facility including both dried distiller’s grains and wet distiller’s grains (collectively, “Product”). Product shall meet the applicable specifications set forth herein.
Price; Payment Terms. The price for Product sold hereunder (the “Price”) shall be based on market-price bids from Gavilon’s customers, less (a) Logistics Costs and (b) the applicable Service Fee. Gavilon agrees to use commercially reasonable efforts to achieve the highest Price available under prevailing market conditions. Payments on all undisputed amounts shall be made within ten (10) business days from Gavilon’s receipt of the information set forth in Section 2.4. Payments shall be made via wire to a bank account specified by the Producer.
Logistics Costs; Fees; Net Price. For purposes of this Agreement, “Logistics Costs” means the costs, without markup, for providing services related to or connected with either (i) transporting, storing, transloading, and otherwise handling (including demurrage, and shrinkage costs unless caused by the acts or omissions of Gavilon) Product after Delivery (as defined in Section 5.1) to Gavilon, or (ii) the delivery of railcars or trucks (each a “Transport Vessel” and collectively, “Transport Vessels”) to the Delivery Point (as defined in Section 5.5) for loading. The applicable Service Fee for Gavilon purchase shall be as follows:
Billing Information. For each shipment of Product to Gavilon, Producer shall furnish the following in reasonable detail: (i) an invoice giving the actual quantity and date of shipment of the Product, (ii) the applicable weight certificate(s) described in Section 3.2.
Payment Verification. Any payment made pursuant to this Section will not preclude a Party from subsequently verifying payments of the other Party as permitted in Section 14.3 of this Agreement. Each party shall use commercially reasonable efforts to resolve any disputed payment amounts within 72 hours of the time notice of such dispute was received by the non-disputing party.
Taxes. Producer shall pay or cause to be paid all valid levies, assessments, duties, rates and taxes (together “Taxes”) on Product delivered hereunder that arise prior to, or as a result of, the sale and Delivery of Product at the Delivery Point. Gavilon shall pay or cause to be paid all Taxes, including fuel or excise Taxes, on Product that arise after the sale (other than third-party sales) and Delivery of Product to Gavilon at the Delivery Point.
Delivery. Delivery and receipt of DDGs purchased hereunder shall take place at the applicable Delivery Point (as defined in Section 5.5) in accordance with the corresponding Confirmed Order. The Parties shall establish a mutually agreed Delivery Schedule as defined and described in Exhibit “A”.
Quantities. The quantity of Product delivered to Gavilon shall be established by outbound weight certificates, as evidenced by the weight documentation provided by Producer. The certificates shall be obtained daily from either scales or other metering devices which are certified as of the time of weighing and which comply with all applicable laws, rules and regulations. Gavilon shall have the right to test such scales or devices at any time provided that such testing shall not cause any unreasonable disruption to Producer’s operations at the Facility.
Standards. Producer understands that Gavilon intends to sell the Product as a primary animal feed ingredient and that such Product is subject to minimum quality standards for such use. Producer agrees and warrants that the Product shall be accepted in the feed trade under current industry standards, shall fully comply with any applicable state and federal laws governing quality of product, and shall be free and clear of liens and encumbrances.
Specifications. Producer warrants that unless otherwise mutually agreed in writing all Product sold hereunder shall, at the time of Delivery to Gavilon, conform to the applicable minimum quality requirements set forth in this Section 3.4. The values quoted below are on an “as fed” basis. Each shipment of Product shall include a copy of the guaranteed analysis, which shall be registered with the State of Iowa. Producer may modify the specifications set forth in this Section 3.4 upon no less than 60 days written notice to Gavilon, provided that the specifications of Product that is the subject of a Confirmed Order may only be modified upon mutual written agreement of Gavilon and Producer.
Dried Distiller’s Grains
Wet Distiller’s Grains
No Adulteration or Misbranding. Producer warrants that at the time of loading, the Product 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 such Act. Payment of invoices does not waive Gavilon’s rights if the Product does not comply with terms or specifications of this Agreement.
Product Certification. Weekly samples from Product will be sent to an outside laboratory of Gavilon’s choosing for testing by Producer to ensure the Product conforms to the specifications in Section 3.4. The results of such test will be forwarded from Producer to Gavilon upon receipt at the Facility.
Samples. Producer agrees to maintain a representative daily aggregate sample for a period of (3) months. Producer will retain these samples and shall provide Gavilon access to such samples promptly upon request.
Nonconforming Product. If within five (5) days after arrival at customer, Product is found to be out of specification by Gavilon or by an independent laboratory using industry approved analysis and sampling methods (“Nonconforming Product”), such condition will be promptly communicated to Producer. Gavilon will provide a copy of the certified laboratory report(s)
Quality Control Procedures. Upon Producer’s receipt of Transport Vessels and prior to Product loading in each Transport Vessel, Producer will visually inspect for equipment integrity, safety, and potential contamination. Producer shall notify Gavilon immediately in the event any Transport Vessel does not meet the minimum requirements. In the event a Transport Vessel provided by Gavilon is unsuitable for loading due to any of the aforementioned reasons, Gavilon shall arrange for a substitute Transport Vessel to arrive for loading within twenty-four (24) hours of Producer’s notification to Gavilon, or such longer period of time as may be agreed between Producer and Gavilon acting in a commercially-reasonable manner.
Third-Party Sales. Section 2.1 notwithstanding, should Producer receive offers to purchase Product (i) in which delivery would occur more than fifteen (15) days forward, and (ii) at prices that would be more favorable to Producer than the gross price (exclusive of Service Fee) offered by Gavilon (but on terms that are otherwise customary and comparable to those set forth herein), Producer shall give Gavilon written notice of the delivery terms, quantity and sales price available to Producer as well as the third party offering those more favorable terms. If Gavilon does not match the third-party terms within one (1) business day of receipt of such notice, Producer may then sell Product to such third party in the quantities and prices as notified to Gavilon. In such event, at Producer’s written request, Gavilon shall generally assist Producer with the logistics relating to third-party sales. To the extent Producer requests Gavilon to assist with logistics of third-party sales, Producer shall pay Gavilon a service fee equal to the greater of 1% of the gross sales price of all third-party sales or $1.00/ton. No third-party sales shall affect any Confirmed Orders (as defined in Exhibit “A”) previously established between the Parties unless agreed upon in writing by both Parties.
Purchase Shortfall. If Gavilon fails to purchase and take delivery of any quantities of Product specified in Confirmed Orders, and Producer after using commercially reasonable efforts to mitigate any damage, has produced and must sell such Product to a substitute purchaser at a price lower than the applicable Price, Gavilon shall pay Producer the amount by which the applicable Price exceeds the actual sales price per ton, multiplied by the number of tons sold to the substitute purchaser. If Producer exercises commercially reasonable efforts and is still unable to sell any such Product to a substitute purchaser, then Gavilon shall pay Producer an amount equal to the Price multiplied by the entire unsold portion. Gavilon shall remit payment within five (5) business days following the invoice date and receipt of supporting documentation. In either case, Gavilon shall also pay any additional costs solely and directly incurred by Producer to identify a substitute purchaser, to store the Product until they can be sold or disposed of, or to dispose of the Product. Except for remedies set forth elsewhere in this Agreement, the remedy specified in this Section 4.2 shall be Producer’s sole and exclusive remedy in the event Gavilon fails to purchase and take delivery of the Product specified in the Confirmed Order.
Delivery Shortfall. If Producer fails to make available for purchase the quantity of Product specified in Confirmed Orders, and Gavilon, using commercially reasonable efforts to mitigate any damage, is unable to obtain a substitute supply of Product at a price equal to or less than the Price, Producer shall pay Gavilon the amount by which the Price is less than the price paid by Gavilon for substitute supply, multiplied by the delivery shortfall (Confirmed Order quantity less the amount actually delivered by Producer); plus any additional costs solely and directly incurred by Gavilon to identify a substitute purchaser. Such payment shall be remitted within five (5) business days following the invoice date and receipt of supporting documentation. The remedy specified in this Section 4.3 shall be Gavilon’s sole and exclusive remedy in the event that Producer fails to supply the quantity of Product specified in the Confirmed Order.
Logistics Responsibilities. Gavilon shall be responsible for the management of logistics which arise prior to the Transport Vessel reaching the Delivery Point, and which arise after the DDGs are delivered completely loaded onto the Transport Vessel (“Delivery”). This responsibility will include the management of Producer’s railcar fleet as further described in Section 5.6. Producer shall be responsible for all logistics that arise once the Transport Vessel has reached the Delivery Point up through Delivery. Gavilon will be responsible for monitoring logistics while the Transport Vessel is at Destination to ensure efficient offloading. Gavilon will secure and maintain all licenses, documents and contracts necessary to transport Product following Delivery.
Hours of Operation. Producer shall use commercially reasonable efforts to keep the Facility open for truck delivery between the hours of 7:00 am to 5:00 pm Monday through Friday (“Normal Operating Hours”). Gavilon may from time to time request that the Facility be accessible during other times or days. Producer will attempt to accommodate these requests provided Gavilon pays for any associated overtime costs incurred by Producer. Producer will promptly notify Gavilon in advance of scheduled events where truck delivery will not be possible. In instances where an unscheduled event makes truck delivery impossible, Producer will immediately notify Gavilon so that Gavilon may contact the applicable carriers.
Producer’s Demurrage Obligations. Producer’s responsibility for Demurrage if actual Demurrage compensation is sought, for trucks will begin to accrue after the second (2nd) hour waiting to load at the Facility provided the truck arrived during Normal Operating Hours. For purposes of this Agreement, the term “Demurrage” includes all costs, damages, penalties and charges resulting from any delay in loading and/or unloading of Product shipments, whether due to mechanical failure or other reasons outside the course of normal operations and not including delays resulting from the occurrence of multiple trucks arriving to load within the same general time period.
Notification of Problems with Delivery. Producer shall inform Gavilon of any problem regarding any shipment of Product, without delay, by fax, telephone, or email, after Producer becomes aware of any such problem. This may include an event that could result in an unscheduled Facility shutdown, or the possible event that one or more Product orders are not available from Producer in the quantity originally set out in the Confirmed Order. Gavilon shall inform Producer of any problems in delivering Transport Vessels in accordance with the Delivery Schedule.
Delivery Point. For purposes of this Agreement, the term “Delivery Point” means, with respect to Transport Vessels, the location at the Facility where the Transport Vessel is received for loading, as follows: the Delivery Point for railcar shipments is the railroads’ “constructively placed” designation; and the Delivery Point for trucks is the arrival of the truck at the Facility within the loading hours specified in this Agreement. “Delivery Point” means, with respect to DDGs, the location at the Facility where the loading of DDGs is completed on railcars or trucks, as follows: the Delivery Point for railcar shipments is the railroads’ “constructively placed” designation and the Delivery Point for truck shipments is the departure of the loaded truck from the Facility.
Railcars. Producer will provide at its cost and expense all railcars required for Gavilon to deliver the Product sold hereunder. Consequently, railcar lease costs will not be included in Logistics Costs. In the event Producer experiences a shortage of railcars, Gavilon will sublease, on a monthly basis, such railcars as it may have available upon request by Producer. The monthly sublease charges will be based on market value (values proposed by Gavilon and accepted by Producer) lease costs and will be deducted from amounts otherwise payable by Gavilon to Producer.
Title; Risk of Loss. Title to and risk of loss in Product purchased hereunder shall pass from Producer to Gavilon upon Delivery. Until such time, Producer shall be deemed to be in control of and in possession of and shall have title to and risk of loss in the Product.
Responsibility for Product. Gavilon shall have no responsibility or liability with respect to any Product until Delivery thereof pursuant to this Agreement. Without prejudice to Gavilon’s right to reject Nonconforming Product as set forth in Section 3 and without affecting Producer’s liability for the Delivery of Nonconforming Product, Producer shall have no responsibility or liability with respect to Product after its Delivery.
Producer represents and warrants that entry into this Agreement with Gavilon will not cause
Events of Default. The occurrence of any of the following shall be an “Event of Default” under this Agreement:
Breach by either Party in the performance of any material covenant or agreement set forth in this Agreement (subject to Section 8.1.3) and such breach continues uncured for more than thirty (30) days following written notice thereof from the non-defaulting Party; or
If either Party becomes insolvent or generally fails to pay its debts as they come due, or makes a general assignment for the benefit of creditors or to an agent authorized to liquidate any substantial amount of its assets, or is adjudicated bankrupt or has a receiver or custodian appointed with respect to a substantial part of its property, or files a petition in bankruptcy, or applies to a court for the appointment of a receiver for any of its assets or properties; or
If either Party fails to make payment hereunder within five (5) business days following receipt of written notice from the non-defaulting Party; or
The making of a materially incorrect or misleading representation or warranty under this Agreement.
Remedies; Termination. Upon an Event of Default, the non-defaulting Party shall notify the other Party thereof and shall have available all remedies set forth in this Agreement. Without limiting the foregoing, if an Event of Default occurs and is not waived, the non-defaulting Party may immediately terminate or suspend performance under this Agreement by promptly thereafter delivering written notice thereof to the other Party. The defaulting Party shall be responsible for any other costs and expenses (including, without limitation, reasonable attorneys’ fees and disbursements) incurred by the non-defaulting Party in connection with an Event of Default.
Right to Close Out Transactions. Upon an Event of Default, the non-defaulting Party shall (in addition to any other rights or remedies available to it, whether at law or in equity, by contract or otherwise) have the right, upon twenty four (24) hours notice to the defaulting Party to liquidate and terminate any or all transactions then outstanding between the Parties (except to the extent that in the good faith opinion of the non-defaulting Party certain of such transactions may not be closed out and liquidated under applicable law) at any time and from time to time. No such notice shall be required with respect to termination pursuant to Section 8.2. The non-defaulting Party shall then calculate, in a commercially reasonable manner, a Settlement Amount (as defined below) for each transaction as of the time of its termination or as soon thereafter as is reasonably practicable and shall net such Settlement Amounts in the manner provided for below.
Nondisclosure of Confidential Information. Each Party acknowledges that, by reason of this Agreement it and its principals, employees, advisors, lenders, and affiliates may receive confidential or proprietary information belonging to the other Party. In no event will the terms and conditions of this Agreement be disclosed except to the extent required by applicable law or as agreed upon in writing by both Parties. The confidentiality obligations hereunder shall survive any expiration or termination of this Agreement. Notwithstanding the foregoing, confidential information may be delivered to third parties for the sole purpose of calculating a published pricing index.
Announcements. Any public statements, press releases, and similar announcements concerning the negotiation or consummation of the transactions contemplated hereby, including such statements made by any representative of the Parties, shall be jointly planned and coordinated by the Parties.. Notwithstanding the preceding sentence, however, Producer may, without the consent of the other, make such disclosures and filings of this Agreement and the transactions contemplated herby as Producer determines to be necessary or appropriate under, or as may be required in connection with, (i) the federal and applicable state securities laws, rules, or regulations, including the Securities Exchange Act of 1934 and
Limitation of Liability. Without limiting any express remedies set forth in this Agreement, and except for any acts of willful misconduct or fraud, or damages arising from third-party product liability and product warranty claims, neither Producer nor Gavilon will be liable to each other or any third party for any indirect, consequential, punitive, exemplary or special damages, loss of business expectations, lost profits, or business or facility interruption or shut-down costs.
Indemnification. Each Party (the “Indemnitor”) shall release, defend, indemnify and hold harmless the other party, its affiliates, its contractors, and their respective members, partners, directors, officers, shareholders, managers, employees, agents and representatives from and against any and all losses, damages, fines, liens, levies, penalties, claims, demands, causes of action, suits, legal or administrative proceedings, orders, governmental actions and judgments of every kind and character, and any and all costs and expenses (including, without limitation, reasonable attorneys’ fees, reasonable expert witness fees, and court costs) related thereto (collectively, “Claims”) which arise out of, result from or relate in any way, directly or indirectly, to (a) a breach of this Agreement by the Indemnitor, or (b) the acts or omissions hereunder of the Indemnitor or its affiliates, contractors, and their respective members, partners, directors, officers, shareholders, managers, employees, agents and representatives.
Insurance. Each Party shall, during the Term, provide the insurance coverages as set forth in Exhibit “B”.
Force Majeure. In the event either Party hereto is rendered unable by reason of Force Majeure, to carry out its obligations under this Agreement, such Party shall promptly give written notice and reasonably complete particulars of such Force Majeure to the other Party stating the obligation(s) the performance of which are, or are expected to be, delayed or prevented. Notwithstanding anything herein to the contrary, the obligations of the notifying Party shall be suspended during and to the extent affected by Force Majeure and such event shall, so far as possible, be remedied with all reasonable dispatch.
Definition of Force Majeure. The term “Force Majeure” shall mean any act, event or circumstance not reasonably within the control of the Party claiming suspension and which, by the exercise of due diligence, such Party is unable to prevent or overcome. Such term shall include, but not be limited to: (i) acts of God, (ii) strikes, lockouts or other industrial acts of the public enemy, (iii) wars, blockades, insurrections, riots, epidemics, acts of terrorism, (iv) transportation shortages, (v) landslides, lightning, earthquakes, fires, storms, floods, washouts, (vi) civil disturbances, and (vii) explosions. The term “Force Majeure” shall specifically include those events affecting any of Gavilon’s transporters of Product as well as regulatory changes which make the production and sale of Product unfeasible, but shall otherwise exclude any economic or commercial changes involving the production of Product.
Monitoring of Positions. Gavilon will monitor Product sales made hereunder and may, from time to time, make suggestions concerning Producer’s risk management program and the position of its Product sales for future physical delivery.
Marketing Conditions. On an as needed basis, but not less frequently than weekly, Gavilon will review with Producer market conditions relating to Product, and forward marketing strategies in an attempt to assist Producer in maximizing its revenue on Product sales. It is understood by Producer that all risk management services must be tied to a valid written purchase contract requiring physical delivery of Product to Gavilon.
No Liability. Producer recognizes that Gavilon’s monitoring of Product positions, periodic suggestions, review of market conditions and risk management services are informational and optional, and that the final decisions considering sales and risk management strategies, and the implementation of such strategies, will be made by, and is the sole responsibility of, Producer. Gavilon is not responsible for any Producer losses or entitled to any Producer gains resulting from risk management information supplied by Gavilon.
Assignment. Neither Party may assign any of its rights or obligations under this Agreement without the prior written consent of the other Party, not to be unreasonably withheld. A change in fifty percent (50%) or more in the ownership of a Party shall be construed to be an assignment for purposes of this Section. The above notwithstanding, either Party may, without the need for consent from the other Party: (i) transfer, sell, pledge, encumber or assign this Agreement, including the revenues or proceeds hereof, in connection with any financing arrangements; (ii) transfer or assign this Agreement to an affiliate as long as the affiliate is at least as creditworthy as the other Party; or (iii) transfer or assign this Agreement to an entity succeeding to all or substantially all of the assets of the other Party by way of merger, reorganization or otherwise. No assignment permitted hereunder shall in any way relieve the assigning Party from liability for full performance hereunder.
Records. Each Party will establish and maintain true and accurate books, records and accounts relating to their own transactions under this Agreement with respect to all Prices charged, payments made, and quantities of Product delivered hereunder. These books, records and accounts will be preserved by the applicable Party for a period of at least one (1) year after the expiration of the term of this Agreement, but in no event longer than seven (7) years from the date of creation.
Audit Rights. Upon five (5) business days notice and during normal business hours each Party has the right to audit such books, records and accounts of the other Party to the extent necessary in order to verify the accuracy of any statement, charge, computation or demand made under or pursuant to any provision of this Agreement. If any material error is discovered in any statement rendered hereunder, such error will be adjusted within seven (7) days from
Inurement. This Agreement will inure to the benefit of and be binding upon the respective successors and permitted assigns of the Parties.
Entire Agreement. This Agreement and the Exhibits attached hereto constitute the entire agreement between the Parties with respect to the subject matter contained herein and any and all previous agreements, written or oral, express or implied, between the Parties or on their behalf relating to the matters contained herein are hereby terminated and canceled. In the event of a conflict between the terms of this Agreement and any Confirmed Orders, this Agreement shall govern.
Amendments. There will be no modification of the term and provisions hereof except by the mutual agreement in writing signed by the Parties.
Financial Information. If requested by a Party hereto, the other Party shall deliver within one hundred twenty (120) days following the end of each fiscal year, a copy of its audited consolidated financial statements for such fiscal year certified by independent certified public accountants. In all cases the statements shall be for the most recent accounting period and prepared in accordance with generally accepted accounting principles, consistently applied; provided, however, should any such statements not be available timely due to a delay in preparation or certification, such delay shall not be considered a default so long as the Party providing the statements diligently pursues the preparation, certification and delivery of the statements.
Trade Rules; Governing Law; Venue. All purchases and sales made hereunder shall be governed by the Feed Trade Rules of the National Grain and Feed Association (“NGFA”). In the event of a conflict between the terms set forth in this Agreement and the NGFA Rules the terms set forth herein shall control. The Agreement will otherwise be interpreted, construed and enforced in accordance with the procedural, substantive and other laws of the State of Nebraska without giving effect to principles and provisions thereof relating to conflict or choice of law even though one or more of the Parties is now or may do business in or become a resident of a different state. All disputes arising out of this Agreement shall be submitted to binding arbitration in accordance with the NGFA Rules. EACH PARTY HEREIN WAIVES ITS RESPECTIVE RIGHT TO ANY JURY TRIAL WITH RESPECT TO ANY LITIGATION ARISING UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY CONFIRMED ORDER.
Cumulative Remedies. Unless otherwise specifically provided in this Agreement, the rights, powers, and remedies of each of the Parties provided in this Agreement are cumulative and the exercise of any right, power or remedy under this Agreement does not affect any other
No Partnership. This Agreement shall not create or be construed to create in any respect a partnership or any agency or joint venture relationship between the Parties.
Costs To Be Borne by Each Party. Producer and Gavilon shall pay its own costs and expenses incurred in the negotiation, preparation and execution of this Agreement and of all documents referred to in it.
Counterparts. This Agreement may be executed in any number of counterparts with the same effect as if Producer and Gavilon had signed the same document and all counterparts will be construed together and constituted as one and the same instrument.
Severability. Any provision of this Agreement, which is or becomes prohibited or unenforceable in any jurisdiction shall not invalidate or impair the remaining provisions of this Agreement, and the remaining terms of this Agreement shall continue in full force and effect.
Forward Contract/Forward Contract Merchants. The Parties agree that each of them is a forward contract merchant as set forth in 11 U.S.C. §101 (25). The Parties also agree that this Agreement is a forward contract as defined in 11 U.S.C. §101 (25). The payments and transfers described herein shall constitute “Settlement Payments” or margin as set forth in 11 U.S.C. §§ 101 (51A) and (38).
Headings; Construction. The article and section headings used herein are for convenience of reference only and shall not affect the construction or interpretation of this Agreement. Unless the context of this Agreement otherwise requires, (i) words using the singular or plural number shall also include the plural or singular number, respectively; and (ii) the terms “hereof,” “herein,” “hereby,” “hereto,” and derivative or similar words shall refer to this entire Agreement. The Agreement is the product of negotiation by and among the Parties hereto. The Agreement shall be interpreted and constructed neutrally as to all Parties, without any Party deemed to be the drafter of the Agreement. Any word, phrase or expression that is not defined in this Agreement and that has a generally accepted meaning in the custom and usage in the renewable fuels industry shall have that meaning in this Agreement.
Waiver. No delay or omission in the exercise of any right, power, or remedy hereunder shall impair such right, power, or remedy or be construed to be a waiver of any default or acquiescence therein.