Exhibit 10.2
ETHANOL MERCHANDISING AGREEMENT
BETWEEN
SOUTHWEST IOWA RENEWABLE ENERGY, LLC
AND
LANSING ETHANOL SERVICES, LLC
November 1, 2006
ETHANOL MERCHANDISING AGREEMENT
This Ethanol Merchandising Agreement is made and entered into on
November 1, ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ Renewable Energy, LLC, an Iowa limited
liability company ("Ethanol Producer"), and Lansing Ethanol Services, LLC, a
Delaware limited liability company ("Lansing"). Ethanol Producer and Lansing are
occasionally referred to hereinafter, individually, as a "Party" and,
collectively, as the "Parties."
Ethanol Producer is in the process of building a 110 million gallon
facility in Council Bluffs, Iowa to process corn into fuel ethanol (the
"Project"). Ethanol Producer desires to sell to Lansing 100% of the Ethanol
produced annually by the Project. The Ethanol shipments would begin on or
shortly after the beginning of operation of the Project.
Lansing is in the business of merchandising Ethanol into commercial
channels via cash forward obligations, and managing the risks associated with
such purchases and sales. Lansing desires to merchandise the quantity and
quality of Ethanol required by Ethanol Producer for shipment from Ethanol
Producer's Project and support Ethanol Producer in the risk management of such
Ethanol merchandising.
Therefore, the Parties agree as follows:
ARTICLE 1
DEFINITIONS; INTERPRETIVE MATTERS
1.1 AGREEMENT means this Ethanol Merchandising Agreement, as amended or
restated from time to time.
1.2 BASE ANNUAL QUANTITY means the Ethanol actually produced by the
Project, anticipated to be 110 million gallons of Ethanol per year (which is
equal to the Project builder's guarantee for the production of Ethanol) plus any
Ethanol produced above the Project builder's guarantee by the same facility by
the Ethanol Producer.
1.3 BASE MONTHLY QUANTITY means the anticipated monthly Ethanol
production by Ethanol Producer for any month, which is equal to the Base Annual
Quantity divided by 12 plus or minus 10% variance in any one month.
1.4 BUSINESS DAY means all days except Saturday or Sunday and otherwise not
a holiday for U.S. banks.
1.5 COMMENCEMENT DATE means the date of this Agreement.
1.6 DATE OF FIRST DELIVERY means the date when Ethanol Producer notifies
Lansing that Ethanol being merchandised under this Agreement is available for
delivery to Lansing from the Project.
1.7 DELIVERY POINT means the point at which title and risk of loss or
damage passes to Lansing on Ethanol Producer's Sale Contracts. This means the
point of
loading of Ethanol into trucks, railcars or barges at the Facility or
some other point specified in a Sales Contract.
1.8 DIRECTOR OF ETHANOL SERVICES is the individual named by Lansing as the
primary contact and representative of Lansing with regard to this Agreement.
1.9 ETHANOL means the clear odorless liquid produced for use as a motor
fuel additive made from fermented corn being approximately 200 proof alcohol
produced by Ethanol Producer at the Facility.
1.10 EVENT OF DEFAULT is an event of default as defined in Article 9.
1.11 FACILITY means the facility at which Ethanol Producer's Ethanol
production will occur which is to be merchandised by this Agreement.
1.12 FINANCIAL CLOSING means the date at which final documents of
commitment from the Project Lender are executed
1.13 FORCE MAJEURE has the meaning set forth in Section 10.1.
1.14 GALLON means one U.S. liquid gallon of Ethanol at 60 degrees
Fahrenheit.
1.15 INITIAL TERM has the meaning set forth in Section 4.1.
1.16 LANSING is Lansing Ethanol Services, LLC.
1.17 LANSING SERVICES are those services to be provided by Lansing
specifically mentioned in this Agreement
1.18 PRIME COMMERCIAL LENDING RATE means the rate of interest most recently
published from time to time in the Money Rate Table of The Wall Street Journal
as the prime annual rate of interest, or such other successor or alternative
publication or table as the Parties may mutually agree if this publication
ceases to exist.
1.19 PROJECT has the meaning set forth in the second introductory
paragraph.
1.20 PROJECT LENDER means any entity providing debt, sub-debt, working
capital or lease financing or other forms of secured or unsecured construction
term financing for the Project.
1.21 RISK MANAGEMENT COMMITTEE or RMC means the individual or group
specifically empowered by Ethanol Producer to evaluate pricing and risk
management factors, make decisions, and direct the merchandising activities of
Lansing.
1.22 RISK MANAGER has the meaning set forth in Section 5.3.
1.23 SALES CONTRACT(S) has the meaning set forth in Section 3.1(a).
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1.24 TRANSPORTATION COSTS means costs charged by a third party for
transportation from Delivery Point to Lansing's point of delivery to customer or
incurred in connection with maintaining a designated rail car fleet and barges,
and includes any equipment, equipment inspections, added charges for fuel,
insurance, labor or other costs associated with rail or barge transportation.
1.25 WEIGHING DEVICE is the scale approved and certified by the State of
Iowa Department of Agriculture or other approved regulatory body for use in
commerce for Ethanol delivered by Ethanol Producer to Lansing.
1.26 Certain Interpretive Matters. In construing this Agreement, it is the
intent of the Parties that:
(a) no consideration may be given to the captions of the articles,
sections or subsections, all of which are inserted for convenience in
locating the provisions of this Agreement and not as an aid in its
construction;
(b) no consideration may be given to the fact or presumption that one
party had a greater or lesser hand in drafting this Agreement;
(c) examples are not to be construed to limit, expressly or by
implication, the matter they illustrate;
(d) the word "includes" and its derivatives means "includes, but is
not limited to," and corresponding derivative expressions;
(e) a defined term has its defined meaning throughout this Agreement
and each exhibit and schedule to this Agreement, regardless of whether it
appears before or after the place where it is defined;
(f) the meanings of the defined terms are applicable to both the
singular and plural forms thereof;
(g) all references to prices, values or monetary amounts refer to
United States dollars;
(h) all references to articles, sections, paragraphs, clauses,
exhibits or schedules refer to articles, sections, paragraphs and clauses
of this Agreement, and to exhibits or schedules attached to this Agreement,
unless expressly provided otherwise;
(i) each exhibit and schedule to this Agreement is a part of this
Agreement and references to the term "Agreement" are deemed to include each
such exhibit and schedule to this Agreement except to the extent that the
context indicates otherwise, but if there is any conflict or inconsistency
between the main body of this Agreement and any exhibit or schedule, the
provisions of the main body of this Agreement will prevail;
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(j) the words "this Agreement," "herein," "hereby," "hereunder," and
words of similar import refer to this Agreement as a whole and not to any
particular article, section or other subdivision, unless expressly so
limited;
(k) the word "or" is disjunctive but not necessarily exclusive; and
(l) all references to agreements or laws are deemed to refer to such
agreements or laws as amended or as in effect at the applicable time.
ARTICLE 2
DESCRIPTION OF PROJECT; DATE OF FIRST DELIVERY
2.1 Description of Project. Ethanol Producer, with the cooperation and
assistance of Lansing (as set forth in this Agreement), will use its
commercially reasonable efforts to develop and place into operation a Ethanol
facility located in Council Bluffs, Iowa having an installed capacity of
approximately 110 million gallons per year of Ethanol. Ethanol Producer will
install and maintain Ethanol loading, weighing, and testing infrastructure at
the Facility sufficient to accommodate truck, railcar and barge loading capacity
sufficient to allow Lansing to perform Lansing Services.
2.2 Date of First Delivery Notice.
(a) Ethanol Producer will provide to Lansing, at least 180
days prior to the projected Date of First Delivery, its best
non-binding estimate of the range of potential dates for Date of First
Delivery covering a 45 day period. Ninety days prior to the anticipated
Date of First Delivery, Ethanol Producer will provide Lansing with a
best non-binding estimate of a projected Date of First Delivery
covering a range of 30 days. Forty-five days prior to the projected
Date of First Delivery, Ethanol Producer will provide Lansing with a
best estimate of a projected Date of First Delivery covering a range of
seven days. Ethanol Producer will not incur any liability (other than
for costs in anticipation of the Date of First Delivery incurred by
Lansing and approved by Ethanol Producer) for any failure of the Date
of First Delivery to occur on the projected date thereof as estimated
by Ethanol Producer in good faith. Thirty days prior to the projected
Date of First Delivery, Ethanol Producer will provide Lansing with a
final Date of First Delivery. Ethanol Producer will be responsible for
any failure of the Date of First Delivery to occur on such final Date
of First Delivery.
(b) Additionally, together with each notification described in
Section 2.2(a), Ethanol Producer will provide a best (non-binding)
estimate of production on a daily basis for the six month period
following the Date of First Delivery. After the Date of First Delivery,
Ethanol Producer will monthly provide to Lansing, by the 20th of each
month, a non-binding estimate of daily production for the following six
month period beginning with the first month following the date of the
last estimate. Ethanol Producer will promptly notify Lansing of any
adjustments to the production schedule that is then in effect.
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ARTICLE 3
PURCHASE AND SALE OF ETHANOL: MERCHANDISING
3.1 Purchase, Delivery and Merchandising Obligations.
(a) Ethanol Producer will sell and Lansing will purchase the Base
Annual Quantity of Ethanol production at the Facility. In connection
with such sales of Ethanol from Ethanol Producer to Lansing, the
Parties will negotiate and enter into sale contracts for Ethanol on
terms agreeable to both of the Parties, to be substantially in the
form set forth in Item 1 and Item 2 of Exhibit A ("Sales
Contract(s)"). The terms on each Sale Contract will supersede, to the
extent inconsistent with, the terms set forth in this Agreement.
During any period with respect to which an Event of Default by Lansing
exists under this Agreement, Ethanol Producer shall have the right to
sell and deliver Ethanol to third parties; provided, however, Ethanol
Producer will be obligated to either (a) deliver on all open Sales
Contracts that Lansing has entered into with Ethanol Producer prior to
the date on which an Event of Default is established, or (b) cancel
all such open Sales Contracts and pay Lansing (or credit to Lansing's
account) an amount equal to the market price for all Ethanol covered
under such Sales Contracts in accordance with Section 9.5
(b) Lansing will provide Ethanol Producer with delivery schedules
based on Sales Contracts. Ethanol Producer will handle and supervise
the loading and dispatch of Ethanol, prepare and distribute delivery
documentation and generally be responsible for all matters ancillary
to such matters.
(c) If Ethanol Producer intends to increase the production level
of the Facility through expansion of the Facility, Ethanol Producer
must give Lansing no less than six months' prior written notice of its
intention to increase production levels in excess of the existing Base
Annual Quantity by reason of such expansion. Lansing will have an
option, exercisable within one month after the date of receipt of the
notice of such intended increase of Base Annual Quantity, to contract
for the purchase of the incremental production on the same terms and
conditions as this Agreement.
3.2 Risk Management Committee; Merchandising Plan.
(a) Ethanol Producer will form a Risk Management Committee
having the duties described in Section 5.3.
(b) No later than 60 days prior to the commencement of each
calendar year, Lansing will submit to the RMC a merchandising plan for
such calendar year. The merchandising plan will include at least the
following:
i. A preliminary schedule of quantities of Ethanol purchased
by Lansing and the geographical allocation of Lansing's sale of
such Ethanol;
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ii. Projected Ethanol prices, FOB the Facility; and
iii. Projected costs for Ethanol transportation from the
Facility to each market area.
(c) Working within the framework of the RMC and notably the
pricing determination provided by Ethanol Producer as described in
Section 3.5(a), Lansing retains sole responsibility for the
merchandising of the Plant's production of Ethanol. Lansing will follow
the merchandising plan, as in effect from time to time, subject to any
specific exceptions approved by the RMC.
3.3 Quantity. The quantity of Ethanol delivered to Lansing from the
Facility will be established by outbound meter tickets or pursuant to certified
scales expressed in net temperature-corrected Gallons in accordance with
standards commonly used within the industry in the United States of America. The
meter or scale tickets will be obtained from meters or scales that are certified
as of the time of loading and that comply with all applicable laws, rules and
regulations. The outbound meter and scale tickets will be determinative in the
absence of fraud or manifest error of the quantity of Ethanol at issue.
3.4 Quality; Samples.
(a) Ethanol Producer represents and warrants to Lansing that
all Ethanol delivered by Ethanol Producer to Lansing hereunder will be
merchantable and will meet the specifications described in ASTM D 4806
(or such other standard or set of specifications as is commonly used in
the industry and agreed to by the parties in writing) at the time of
delivery of such Ethanol by Ethanol Producer to Lansing. Except as
otherwise provided herein, no other warranties, express or implied, are
made by Ethanol Producer under this Agreement. Should any government
entity require a change in the specifications described in ASTM D 4806,
such new specifications will be automatically incorporated herein as
the standard set forth in the first sentence of this Section 3.4(a).
(b) Ethanol Producer warrants that the quality of Ethanol
delivered into the transportation vehicles will, at the time it is
delivered by Ethanol Producer, meets the specifications described in
the first sentence of Section 3.4(a) (subject to the last sentence of
Section 3.4(a)); provided, however, that the parties may set forth a
different time in a Sales Contract at which the Ethanol is to be
conforming (e.g., at the time of delivery to the end destination). If
Ethanol does not meet the standards set forth in the previous sentence
at the appropriate time and quality claims arise as a result thereof,
such quality claims will be administered by Lansing upon notice to
Ethanol Producer. Ethanol Producer will only be liable for claims
settlements of which it has approved in writing. Such claims will be
solely for Ethanol Producer's account, and Lansing will not be
responsible in any manner whatsoever for such claims.
(c) Ethanol Producer agrees to maintain original sealed
numbered samples of all Ethanol after delivery into transportation
vehicles before it leaves
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the Delivery Point. Ethanol Producer will label these samples to indicate date
of shipment and the truck, railcar or barge number will be included. Ethanol
Producer will retain these samples for 30 days and will send such samples as may
be requested to Lansing immediately upon Lansing's request.
(d) Ethanol Producer will deliver Ethanol samples to Lansing
at the Facility in advance of the actual physical shipment, as may be
needed for testing purposes.
3.5 Price.
(a) For each sale of Ethanol to Lansing, the RMC reserves all
authority for finally determining Ethanol pricing and payment terms,
and shall direct Lansing with regard to executing pricing, payment
terms and amendment decisions for Sales Contracts. Lansing agrees to
use commercially reasonable best efforts to obtain the best price
available for Ethanol Producer under prevailing market conditions.
Ethanol Producer agrees to assume all risk and financial responsibility
of any market price fluctuations for Ethanol which occur from time to
time and which may impact the pricing of Ethanol sales. Each Sales
Contract will fix the price and payment terms for Lansing's purchase of
Ethanol covered by such Sales Contract. There will be no deductions or
charges against the fixed price unless specifically provided for in the
Sales Contract.
(b) Ethanol Producer will pay or cause to be paid all valid
levies, assessments, duties, rates and taxes (together "Taxes") on
Ethanol delivered to Lansing hereunder. Where any Taxes are included in
the price payable by Lansing, Lansing's purchase price hereunder will
be reduced by the amount of such Taxes.
(c) If, at any time, Ethanol Producer identifies or receives
offers from potential purchasers of Ethanol of acceptable credit
quality at more favorable pricing and terms than available through
Lansing for the same grade, quality, quantity, payment terms and
delivery period, Ethanol Producer may * to (i) *, or (ii) *, the choice
of which shall be at Lansing's sole discretion. If Ethanol Producer
makes such direction to Lansing, Lansing shall promptly * as described
in the preceding sentence, provided that with respect to such
contracts, Ethanol Producer shall indemnify Lansing from any losses
(including attorneys' fees and collection costs) resulting from the *
by Ethanol Producer.
(d) Lansing will make commercially reasonable efforts to
identify all opportunities to * Ethanol produced by Ethanol Producer
and to * opportunities with Ethanol Producer.
*OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT WHICH HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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3.6 Transportation.
(a) Lansing will diligently pursue, secure and maintain all
necessary agreements to transport the Ethanol from the Delivery Point.
Lansing will be solely responsible for the arrangement of
transportation. Lansing will use commercially reasonable efforts to
obtain the best commercially reasonable prices in respect of
transportation such that Ethanol Producer achieves the highest net
price possible after payment for any applicable Transportation Costs.
Unless specifically provided for in the Sales Contracts, Transportation
Costs are not a deduction from the price stipulated in the Sales
Contract but are the responsibility of Lansing.
(b) If the Ethanol is being transported by railcar or barge,
the cost of rail or barge transportation will include all costs of tank
car or barge leasing, repair, cleaning, storage, freight, product
inspection/analysis, demurrage, detention, fuel surcharges, if any,
excess empty mileage charges, fuel surcharges, if any, and all
ancillary or related charges, if any. Unless specifically provided for
in the Sales Contracts, such costs are not a deduction from the price
stipulated in the Sales Contract but are the responsibility of Lansing.
(c) If requested by Ethanol Producer, Lansing will assist
Ethanol Producer in negotiating the * arrangements for * to be * by
Ethanol Producer at Ethanol Producer's direction. Lansing will also
provide management services needed to keep the * in operation. Any out
of pocket costs experienced by Lansing, such as, but not limited to, *,
are the responsibility of the Ethanol Producer for any * that are * by
the Ethanol Producer.
*OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT WHICH HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
3.7 Storage.
(a) Ethanol Producer will at all times provide storage at the
Facility for Ethanol, in an amount not less than 2.8 million Gallons at
any one time, at no cost to Lansing.
(b) The parties may determine that it is in the best interest
of Ethanol Producer to maintain outside storage (i.e., outside the
Facility), and in such case, Lansing will arrange for and manage such
outside storage as well as the cost of transportation to, load in and
load out, shrink, cost of money and cost of maintaining such outside
storage. All such arrangements and costs are subject to Ethanol
Producer's advance written approval. Approved outside storage costs
will be deducted from the Ethanol sales price on Ethanol sales out of
such storage.
3.8 Purchase Price. Lansing will pay, or cause to be paid, to Ethanol
Producer, the purchase price for each Gallon of Ethanol delivered to Lansing
hereunder by direct
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wire transfer or electronic transfer to Ethanol Producer's designated bank
account. Payment terms will be negotiated as part of each Sales Contract. At the
time of each payment, Lansing will forward a statement to Ethanol Producer
setting forth in reasonable detail the quantity of Ethanol sold and prices and
Transportation Costs, Fees and other deductions therefrom. If the above payment
terms become unfair in that either Party will suffer hardship thereby as a
result of unforeseen circumstances over which such party will have no control
and that occur after the date of this Agreement (other than those that can be
imputed to the parties themselves or to companies of their respective group)
then the Party so affected will provide evidence thereof to the other Party and
will ask for and *.
*OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT WHICH HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
3.9 Interest. If either Party fails to pay all or any portion of the
amount owing by it when due, such unpaid amount will bear interest at an annual
rate equal to 100 basis points above the Prime Commercial Lending Rate
calculated daily from the date such amount is due hereunder until the date it is
actually paid. Upon failure of a Party to pay the unpaid amount, including
interest thereon within ten days after the due date, the Party to whom sums are
due may upon giving seven days' notice, suspend in whole or in part its delivery
or acceptance of Ethanol (as the case may be) hereunder until such outstanding
amount has been paid in full.
3.10 Audit. Any payment made pursuant to this Agreement will not preclude
a Party from subsequently auditing the accounts of the other Party as permitted
in this Agreement.
3.11 Billing/Payment Example. Attached as Exhibit A is an example of Sale
Contract terms, billing, transportation and payment timing and details,
including deductions, charges, the Merchandising Fee and all data contemplated
by Section 7.2, as well as the form of the Statement of Ethanol Sales.
3.12 * To the extent required by the Project Lender in order to provide
commercially reasonable advance rates against Ethanol Producer's receivables
from Lansing, or as otherwise requested by Ethanol Producer, Lansing agrees to *
mutually agreed upon by the parties, but in no event greater than * acceptable
to Ethanol Producer and the Project Lender (if applicable). Ethanol Producer
will reimburse Lansing for Lansing's actual cost for such *.
*OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT WHICH HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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ARTICLE 4
TERM
4.1 Term. The initial term of this Agreement will be from the
Commencement Date through December 31, 2010 (the "Initial Term") during which
Ethanol shipments will occur. This Agreement will automatically renew for
additional periods of one year after the last day of the Initial Term (each, a
"Renewal Term"), and after each Renewal Term, unless either Party sends written
notice to the other Party no later than 90 calendar days prior to the end of the
Initial Term or Renewal Term, as the case may be, indicating its intention to
terminate this Agreement.
4.2 Right to Terminate. Beginning with the Date of First Delivery,
Ethanol Producer has the right to terminate this Agreement, for any reason,
after giving 180 days written notice to Lansing. Each Party also has rights to
terminate this Agreement upon certain Events of Default as described elsewhere
in this Agreement.
4.3 Effect of Termination. If this Agreement is terminated, regardless
of the reason or which Party terminates this Agreement, Ethanol Producer will,
at its option, either (a) deliver on all open Sales Contracts that Lansing has
entered into with Ethanol Producer prior to the date on which the Party receives
the notification of termination from the other Party, or (b) cancel all such
open Sales Contracts and pay Lansing (or credit to Lansing's account or
otherwise offset against amounts owed by Lansing to Ethanol Producer) an amount
equal to the market price for all Ethanol covered under such Sales Contracts in
accordance with Section 9.5.
ARTICLE 5
OBLIGATIONS OF AND COOPERATION AMONG THE PARTIES
5.1 Licensing. Lansing and Ethanol Producer will each determine if
their respective businesses require any specific licensing in the State of Iowa
for the handling and merchandising of Ethanol. If such licensing is required,
each Party requiring such license will obtain and maintain such license during
the term of this Agreement. Lansing and Ethanol Producer will cooperate
regarding obtaining permits, licenses and approvals related to the merchandising
of Ethanol within the State of Iowa.
5.2 Lender. Ethanol Producer will inform Lansing of the name of the
Project Lender within 30 calendar days after the Financial Closing.
5.3 Risk Management. Ethanol Producer will nominate and empower a
manager (the "Risk Manager") who will be responsible for implementing the
policies, procedures and strategies developed and approved by the RMC and who
will be responsible for day-to-day interaction with Lansing. Lansing will
nominate a staff member as Director of Ethanol Services to take direction and
cooperate fully with the Project's Risk Manager and the RMC. Within 30 calendar
days after the Commencement Date, Ethanol Producer will establish the RMC and
Lansing and the RMC will meet to develop a risk management strategy related to
Ethanol sales.
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5.4 Access. Lansing and Ethanol Producer will have reasonable access to
the books and records of the other to the extent that such access may reasonably
be required by Lansing or Ethanol Producer in connection with matters relating
to or affected by contracting activity between the Parties described in this
Agreement. The Parties will afford such access, as the case may be, upon receipt
of reasonable advance notice and during normal business hours. Notwithstanding
the foregoing, nothing in this Section 5.4 will entitle Lansing or Ethanol
Producer to access to the other party's confidential business or financial
information.
5.5 Quantity Adjustment. Ethanol Producer may adjust the Base Monthly
Quantity pursuant to Section 2.2(b). Lansing will cooperate with Ethanol
Producer to adjust Ethanol shipments at the Facility on a day-to-day basis as
well. Should market or operational circumstances cause Ethanol Producer to
adjust the Base Monthly Quantity, Lansing will use commercially reasonable
efforts to work with Ethanol Producer to ensure the proper Ethanol shipments are
made from the Facility.
5.6 *
(a) During the term of this Agreement, Lansing will not,
directly or indirectly, without the written consent of Ethanol
Producer, enter into any formal services agreement or arrangement
relating to ethanol merchandising activities similar to those provided
under this Agreement with any ethanol producer that is located *.
(b) If a final judicial determination is made that any
provision of this Section 5.6 is an unenforceable, invalid or illegal
restriction against Lansing, then such provision will be rendered void
only in the jurisdiction and only in the manner the judicial
determination finds such provision unenforceable, invalid or illegal.
The enforceability, validity, and legality of the remainder of this
Agreement will not be affected by any such determination. Section
5.6(a) may be modified and reconstituted by a court as necessary to
render it enforceable, valid or legal.
*OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT WHICH HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
ARTICLE 6
TITLE, TAXES AND RISK OF LOSS
Lansing will be deemed to be in exclusive control of, and responsible
for any damage or injury caused by, the Ethanol delivered to it by the Facility
after delivery has occurred at the Delivery Point. Ethanol Producer will be
deemed to be in exclusive control of, and responsible for any damage or injury
caused by, the Ethanol prior to delivery at the Delivery Point. Title to and
risk of loss of the Ethanol from Ethanol Producer to Lansing will occur upon
loading the Ethanol into trucks, railcars or barges at
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the Delivery Point. Title to Ethanol transferred by Ethanol Producer to Lansing
at the Delivery Point will be good and marketable title, free and clear of any
liens and encumbrances arising from Ethanol Producer.
ARTICLE 7
▇▇▇▇▇▇▇▇
7.1 Monthly Ethanol Merchandising Fee. Ethanol Producer will pay
Lansing a per Gallon fee of * of * for each delivered Ethanol Gallon purchased
by Lansing from Ethanol Producer. All fees under this Section 7.1(a) will be
invoiced by Lansing to Ethanol Producer on a monthly basis, with net due to
Lansing within 15 days of invoice date.
*OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT WHICH HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
7.2 Statement of Ethanol Sales. Lansing will prepare and deliver a
Statement of Ethanol Sales (the "Statement") to Ethanol Producer showing Ethanol
shipped from the Facility under each Sale Contract. The Statement will show the
gross quantity of Ethanol loaded at Delivery Point, the net settlement Gallons,
the price for such Ethanol, Ethanol quality factors by delivering vehicle,
quality differentials as agreed between the Parties, and the total amount due to
Ethanol Producer from Lansing for such Ethanol. The Statement may be either
electronic or hard copy form.
7.3 Billing Disputes. With written notification, either Party may
dispute the Statement in good faith. Either Ethanol Producer or Lansing will
provide written or electronic notification of the amount and circumstances of
the dispute within three Business Days following the day such party becomes
aware of the disputed issue. Such notification will include a detailed
explanation of the nature of the dispute and the calculation of the escrowed
amount.
ARTICLE 8
INFORMATION RIGHTS
During the Initial Term and any subsequent Renewal Term, Ethanol
Producer will furnish Lansing with annual balance sheets and profit and loss
statements accompanied by the audit report of an independent certified public
accountant within 90 calendar days of its fiscal year end. Ethanol Producer will
further furnish Lansing with all other financial information and reports
reasonably requested by Lansing, including quarterly or other interim unaudited
balance sheets and profit and loss statements within a reasonable period of such
request. By providing such information Ethanol Producer represents that all
information furnished and to be furnished is, to the best of Ethanol Producer's
knowledge, accurate, and that all financial statements that it has furnished and
hereafter may furnish, including operation statements and statements of
condition, are and will be prepared in accordance with generally accepted
accounting principles consistently
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applied and reasonably reflect, and will reflect, as of their respective dates,
results of the operations and, to the best of Ethanol Producer's knowledge, the
true financial condition of Ethanol Producer.
During the Initial Term and any subsequent Renewal Term, Lansing will
furnish Ethanol Producer with annual balance sheets and profit and loss
statements accompanied by the audit report of an independent certified public
accountant within 90 calendar days of its fiscal year end. Lansing will further
furnish Ethanol Producer with all other financial information and reports
reasonably requested by Ethanol Producer or the Project Lender, including
quarterly or other interim unaudited balance sheets and profit and loss
statements within a reasonable period of such request. By providing such
information Lansing represents that all information furnished and to be
furnished is, to the best of Lansing's knowledge, accurate, and that all
financial statements that it has furnished and hereafter may furnish, including
operation statements and statements of condition, are and will be prepared in
accordance with generally accepted accounting principles consistently applied
and reasonably reflect, and will reflect, as of their respective dates, results
of the operations and, to the best of Lansing's knowledge, the true financial
condition of Lansing.
ARTICLE 9
DEFAULT AND TERMINATION
9.1 Notice of Default. If Ethanol Producer commits or omits an act or
occurrence that upon notice or the passage of time without cure may become an
Event of Default under this Agreement, then Lansing will give Ethanol Producer
written notice describing such default within five days of having become aware
of such default. If Lansing commits or omits an act or occurrence, which upon
notice or the passage of time without cure may become an Event of Default under
this Agreement, then Ethanol Producer will give Lansing written notice
describing such default, within five days of having become aware of such
default. Each party agrees to give the other prompt notice of any Event of
Default of such party under this Agreement.
9.2 Events of Default of Lansing. Unless the following acts or
occurrences are cured within 30 days (five days in the case of nonpayment
pursuant to a Sales Contract under subsection (i) below) after the date of
written notice from Ethanol Producer as provided for in Section 9.1, such acts
or occurrences will constitute Events of Default of Lansing, provided that, if
any such act or occurrence cannot be cured within 30 days of such notice with
exercise of due diligence, in accordance with prudent operating practices for
companies in this industry, and if Lansing within such period submits to Ethanol
Producer a plan reasonably designed to correct the default within a reasonable
additional period of time, then an Event of Default will not exist unless and
until Lansing fails to pursue diligently such cure or fails to cure such default
within the additional period of time specified by the plan or 90 days, whichever
occurs first, and provided further that the cure rights specified in the
foregoing clause do not apply to subsections (b), (c) or (d) below:
13
(a) Except for failures provided for in the other subsections
of this Section 9.2, Lansing's failure to perform or otherwise comply
with its material obligations under this Agreement, except to the
extent Lansing is excused pursuant to any other provision of this
Agreement;
(b) Lansing's dissolution or liquidation;
(c) Lansing's assignment of this Agreement or any of its
rights under this Agreement for the benefit of creditors, provided that
the foregoing will not be grounds for an Event of Default if, pursuant
to applicable law and with any required court approval, this Agreement
is assumed by a trustee, assignee or receiver, who promptly provides
adequate assurance and evidence reasonably satisfactory to Ethanol
Producer of the capacity to continue Lansing's obligations under this
Agreement;
(d) Lansing's filing of a petition for, or other commencement,
authorization or acquiescence in the commencement of, a proceeding or
case under any bankruptcy or similar law for the protection of
creditors.
(e) The filing of a case in bankruptcy or any proceeding under
any other insolvency law against Lansing as debtor, which case is not
vacated within 90 calendar days of filing, provided, however, that the
foregoing will not be grounds for default if, pursuant to applicable
law and with any required court approval, this Agreement is assumed by
an assignee who promptly provides adequate assurance and evidence
reasonably satisfactory to Ethanol Producer of the capacity to perform
Lansing's obligations under this Agreement.
(f) Lansing's assignment of this Agreement without Ethanol
Producer's consent to the extent required by this Agreement.
(g) Any representation made by Lansing under Article 11 is
false in any material respect.
(h) Failure to perform under any other agreement between the
Parties which constitutes an event of default thereunder.
(i) Failure to pay Ethanol Producer for Ethanol pursuant to
any Sales Contract.
9.3 Events of Default of Ethanol Producer. Unless the following acts or
occurrences are cured within 30 days (5 days in the case of nonpayment pursuant
to a Sales Contract under subsection (a) below) after the date of written notice
from Lansing as provided for in Section 9.1, such acts or occurrences will
constitute Events of Default of Ethanol Producer; provided that, if any such act
or occurrence cannot be cured within 30 days with exercise of due diligence, in
accordance with prudent operating practices for companies in this industry, and
if Ethanol Producer within such period submits to Lansing a plan reasonably
designed to correct the default within a reasonable additional period of time,
then an Event of Default will not exist unless and until Ethanol Producer
14
fails to pursue diligently such cure or fails to cure such default within the
additional period of time specified by the plan or 90 days, whichever occurs
first, and provided further that the cure rights specified in the foregoing
clause do not apply to subsections (a) or (b) below:
(a) Ethanol Producer's failure to make any payment of any
undisputed portion of any invoice or any other statement of amounts due
hereunder sent by Lansing within five calendar days after receipt
thereof.
(b) Ethanol Producer's general assignment of this Agreement or
any of its rights hereunder for the benefit of its creditors, provided
that, the foregoing will not be grounds for default if, pursuant to
applicable law and with any required court approval, this Agreement is
assumed by a creditworthy trustee, assignee or receiver.
(c) Ethanol Producer's entry into bankruptcy or insolvency
proceedings under any bankruptcy or insolvency law as debtor; provided
that the foregoing will not be grounds for default if, pursuant to
applicable law and with any required court approval, this Agreement is
assumed by a creditworthy assignee, receiver or trustee.
(d) Ethanol Producer's assignment of this Agreement or any of
its rights under the Agreement without obtaining Lansing's prior
written consent, not to be unreasonably withheld or delayed, to the
extent required under this Agreement; provided in no event, however,
will any re-sale or other transfer by Ethanol Producer of any or all of
the Ethanol be deemed a breach or failure of this provision.
(e) Any material representation made by Ethanol Producer
under Article 11 is false in any material respect.
(f) Except for failures provided for in the other subsections
of this Section 9.3, Ethanol Producer's failure to comply with any
material obligation of Ethanol Producer under this Agreement or any
other agreement between the Parties.
9.4 Termination. If, in the absence of a timely cure in accordance with
Section 9.2, Section 9.3, or any other provision of this Agreement, an Event of
Default arises hereunder, the non-defaulting Party may, upon written notice to
the other Party, terminate this Agreement. Lansing may not terminate this
Agreement except as provided for upon the occurrence of an Event of Default as
described above or as otherwise may be explicitly provided in this Agreement. In
addition, this Agreement may be terminated if both Parties mutually agree to do
so.
9.5 Calculation of Damages. Each Party will be entitled to all direct
damages and other rights and remedies available at law or in equity, except as
may be specifically provided or provided otherwise in this Agreement, upon the
default or other failure to perform of the other Party. Without limiting the
generality of any of the foregoing
15
provisions of this Article 9, the Parties will be entitled to receive the
specific monetary damages set forth in this Section 9.5.
(a) If Lansing fails to pay for Ethanol delivered to the
Delivery Point, Lansing will pay to Ethanol Producer, in addition to
any other direct damages incurred by Ethanol Producer as a result of
such failure, the positive difference, if any, between (i) the amounts
that Lansing would have paid Ethanol Producer had Lansing performed,
and (ii) the amounts (if any) that Ethanol Producer, acting in a
commercially reasonable manner, actually receives for the sale of the
same Ethanol equivalent at or in reasonable proximity to the Delivery
Point (net of any extra transportation, transactional or other costs
reasonably incurred and that can be documented by Ethanol Producer to
sell such Ethanol from the Delivery Point in connection with any such
sale), or at Ethanol Producer's option, the applicable market price if
a sale of the same or equivalent Ethanol at or in reasonable proximity
to the Delivery Point had taken place. Lansing assumes all financial
risk involved in the payment for Ethanol merchandised through this
Agreement, including any collection risks from buyers of Ethanol.
(b) If Ethanol Producer fails to sell and deliver the Ethanol
production of the Facility as this Agreement specifies to Lansing by:
(i) selling the Ethanol instead to any third party, unless entitled to
do so under the terms of this Agreement, or (ii) abandoning its firm
obligation to supply Ethanol to the Delivery Point in accordance with
this Agreement, or (iii) otherwise breaching or failing to perform this
Agreement, Ethanol Producer will pay to Lansing, in addition to any
other direct damages incurred by Lansing as a result of such failure,
the positive difference, if any, between (i) amounts that Lansing,
acting in a commercially reasonable manner, pays for the purchase of
the same or equivalent Ethanol at or in reasonable proximity to the
Delivery Point (inclusive of any extra transportation, transactional or
other costs reasonably incurred by Lansing, in connection with any such
purchase), or, at Lansing's option, the applicable market price if a
purchase of the same or equivalent Ethanol at or in reasonable
proximity to the Delivery Point had taken place, and (ii) the amounts
Lansing would have paid Ethanol Producer for the Ethanol if Ethanol
Producer had performed. Lansing may not suspend its performance under
this Agreement during the occurrence of any arbitration under Article
17.
(c) If the Project is shut down because of an Event of Default
by Lansing, Ethanol Producer shall be entitled to all direct damages as
a result of such shut down. In no event shall Lansing be responsible
for such damages if its Event of Default is due to failure by
railroads, trucking companies or other transportation facilities to
comply with their contractual obligations, or the occurrence of any
Force Majeure.
9.6 Lenders' Rights. Lansing will deliver to Project Lender,
simultaneously with delivery thereof to Ethanol Producer, notice of Ethanol
Producer's failure or breach. No such notice is required with respect to any
entity providing funds to Ethanol Producer that has not been identified to
Lansing as a Project Lender by appropriate prior notice to
16
Lansing from Ethanol Producer. With respect to Ethanol Producer's failures or
breaches, Project Lender will have the option to cure such failure or breach in
the time frame provided to Ethanol Producer under Section 9.3 or to cause the
Project Lender's designee to assume this Agreement, and thereafter cure the
breach or failure within the time remaining in the total cure period as
specified. If the Project Lender intends to effect a cure of any failure or
breach of Ethanol Producer as provided for in this Section 9.6, the Project
Lender must give notice of such intention to Lansing within 20 calendar days
after receipt of notice from Lansing under this Section 9.6 and upon receipt of
such notice, any right or remedy that Lansing might otherwise have with respect
to Ethanol Producer's failure or breach will be suspended until all cure periods
of Project Lender have expired without cure. No such suspension will affect
Lansing's right to a full cure of any such failure or breach, including the
payment of all direct damages incurred on account thereof.
ARTICLE 10
FORCE MAJEURE
10.1 Definition of Force Majeure. The term "Force Majeure," as used in
this Agreement, means causes or events beyond the reasonable control of, and
without the fault or negligence of, the Party claiming Force Majeure, including:
Acts of God; sudden actions of the elements such as floods, hurricanes or
tornadoes; sabotage; terrorism; war; riots; and actions by federal, state,
municipal or any other government or agency (including the adoption or change in
any rule or regulation imposed after the date of this Agreement, but only if
such actions or failures act to prevent or delay performance). Force Majeure
does not include economic hardship, changes in market conditions or strikes or
labor disputes (unless generally affecting all similar crafts or trades in the
energy sector) or typical weather conditions.
10.2 Applicability of Force Majeure. Neither Party will be responsible or
liable for any delay or failure in its performance hereunder, nor will such
Party be deemed in breach hereof, to the extent such delay, failure or breach is
due to conditions or events of Force Majeure provided that:
(a) The non-performing Party gives the other party prompt
written notice describing the particulars of the occurrence of the
Force Majeure;
(b) The suspension of performance is of no greater scope and
of no longer duration than necessitated by the Force Majeure;
(c) The non-performing Party proceeds with reasonable
diligence to remedy its inability to perform and provides weekly
progress reports to the other Party describing actions taken to end the
Force Majeure; and
(d) When the non-performing Party is able to resume
performance of its obligations under this Agreement, that Party will
give the other Party written notice to that effect.
17
10.3 Limitations on Effect of Force Majeure. The Party not claiming
Force Majeure may terminate this Agreement, without liability of either Party to
the other, except for obligations unaffected by Force Majeure and maturing prior
to termination, if the Force Majeure lasts for more than 60 days from the date
of the Notice of Force Majeure.
10.4 Exclusions. Force Majeure will not include failure caused by lack
of funds. An event of Force Majeure will not excuse either Party from their
payment obligations under this Agreement.
ARTICLE 11
REPRESENTATIONS, COVENANTS AND WARRANTIES
11.1 Ethanol Producer's Representations, Warranties and Covenants.
Ethanol Producer represents and warrants to Lansing, as of the date hereof and
covenants to Lansing at all times during the term of this Agreement, as follows
and acknowledges that Lansing is relying upon such representations, warranties
and covenants in connection with the Lansing Services hereunder:
(a) Ethanol Producer is a limited liability company duly
organized, validly existing and in good standing under the laws of the
State of Iowa and has all requisite power and authority to carry on its
business as presently conducted or proposed to be conducted. Ethanol
Producer is duly qualified to transact business and is in good standing
in each jurisdiction in which the failure so to qualify would have a
material adverse effect on Ethanol Producer.
(b) This Agreement has been duly and validly executed and
delivered by Ethanol Producer; this Agreement constitutes a legal,
valid and binding obligation of Ethanol Producer, enforceable in
accordance with its terms, except to the extent its enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the rights of creditors generally or by
general principles of equity.
(c) Ethanol Producer is not in violation or default of any
provisions of its articles of formation or operating agreement, or of
any instrument, judgment, order, writ, or decree, or under any note,
indenture, mortgage, lease, agreement, contract or purchase order to
which it is a party or by which it is bound or, of any provision of
federal or state statute, rule or regulation applicable to Ethanol
Producer. The execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby will not
result in any such violation or be in conflict with or constitute, with
or without the passage of time and giving of notice, either a default
under any such provision, instrument, judgment, order, writ, decree or
contract or an event that results in the creation of any lien, charge
or encumbrance upon any assets of the Ethanol Producer.
(d) Except to the extent identified in Phase I and Phase II
environmental reports with respect to Ethanol Producer's project site,
Ethanol
18
Producer is not in violation of any applicable law, rule or regulation,
including with respect to Hazardous Materials, that would have a material
adverse effect on Ethanol Producer. For the purposes of this Agreement,
"Hazardous Materials" means (i) materials that are listed or otherwise defined
as "hazardous" or "toxic" under any applicable local, state, federal or foreign
laws and regulations that govern the existence or remedy of contamination on
property, the protection of the environment from contamination, the control of
hazardous wastes, or other activities involving hazardous substances, including
building materials or (ii) any petroleum products or nuclear materials, but
excluding Ethanol and denaturant.
(e) Ethanol Producer will obtain and maintain in force all
licenses, consents and approvals required for its operation of the
Facility and delivery of Ethanol under this Agreement and will be
solely responsible for and indemnify Lansing against any costs,
liabilities or fines arising out of Ethanol Producer's failure to
comply with any applicable requirements of such licenses, consents and
approvals.
(f) Ethanol Producer covenants that it will maintain accurate
and complete Ethanol sales records in a prudent and businesslike manner
in accordance with sound commercial practices in respect of Ethanol
sales by Ethanol Producer hereunder.
(g) Ethanol Producer covenants that it will provide Lansing
with a minimum of at least ten calendar days prior written notice of
any anticipated production downtime or disruption to available Ethanol,
provided however that the parties recognize that unplanned outages
cannot be anticipated and that Ethanol Producer will be liable only for
Lansing's marginal cost to procure other Ethanol as described in
Section 9.5 for failure to ship Ethanol in accordance with forecasts.
Any claim by Lansing under the foregoing sentence will be supported by
commercially reasonable documentation of the marginal cost.
(h) Ethanol Producer represents it is a U.S. entity for
purposes of state and federal income and excise taxes.
11.2 Lansing Representations, Warranties and Covenants. Lansing
represents and warrants to Ethanol Producer, as of the date hereof and covenants
to Ethanol Producer at all times during the term of this Agreement, as follows
and acknowledges that Ethanol Producer is relying upon such representations,
warranties and covenants in connection with the merchandising of Ethanol
hereunder.
(a) Lansing is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of
Delaware and has all requisite power and authority to carry on its
business as presently conducted or proposed to be conducted. Lansing is
duly qualified to transact business and is in good standing in each
jurisdiction in which the failure so to qualify would have a material
adverse effect on Lansing.
19
(b) This Agreement has been duly and validly executed and
delivered by Lansing; this Agreement constitutes a legal, valid and
binding obligation of Lansing, enforceable in accordance with its
terms, except to the extent its enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the rights of creditors generally or by general
principles of equity.
(c) Lansing is not in violation or default of any provisions
of its articles of formation or operating agreement, or of any
instrument, judgment, order, writ, or decree, or under any note,
indenture, mortgage, lease, agreement, contract or purchase order to
which it is a party or by which it is bound or, of any provision of
federal or state statute, rule or regulation applicable to Lansing. The
execution, delivery and performance of the Agreement and the
consummation of the transactions contemplated hereby or thereby will
not result in any such violation or be in conflict with or constitute,
with or without the passage of time and giving of notice, either a
default under any such provision, instrument, judgment, order, writ,
decree or contract or an event which results in the creation of any
lien, charge or encumbrance upon any assets of Lansing.
(d) Lansing is not in violation of any applicable statute, law
or regulation relating to the environment or occupational health and
safety that would have a material adverse effect on Lansing or the
performance of the Lansing Services and, to its knowledge, no material
expenditures are or will be required in order to comply with any such
existing statute, law or regulation. No Hazardous Materials are used or
have been used, stored, or disposed of by Lansing or, to Lansing's
knowledge after reasonable investigation, by any other person or entity
on any property owned, leased or used by Lansing.
(e) Lansing will obtain and maintain in force all licenses,
consents and approvals required for the provision of Lansing Services
under this Agreement and will be solely responsible for and indemnify
Ethanol Producer against any costs, liabilities or fines arising out of
Lansing's failure to comply with any applicable requirements of such
licenses, consents and approvals.
(f) Lansing covenants that it will maintain or cause to be
maintained accurate and complete records, in a prudent and businesslike
manner and in accordance with sound commercial practices, of the
information described in Article 3 hereof and any other information
deemed relevant by Ethanol Producer including local and regional market
prices for Ethanol;
(g) Lansing is a U.S. pass-through entity for purposes of
state and federal income and excise taxes.
11.3 Waiver of Compliance, Consents. Any failure of Lansing or Ethanol
Producer to comply with any obligation, covenant,agreement or condition
contained herein may be waived in writing by Lansing or Ethanol Producer, as the
case may be, but such waiver or failure to insist upon strict compliance with
such obligation, covenant,
20
agreement or condition will not operate as a waiver of, or estoppel with respect
to, any other failure.
ARTICLE 12
INDEMNIFICATION
Each Party (as an "Indemnifying Party") agrees to defend, indemnify,
and hold the other Party (as an "Indemnified Party") harmless from and against
any and all liabilities, claims, losses or expenses (including reasonable
attorney's fees and collection costs, provided that the Indemnifying Party will
be entitled to handle and control defense with attorneys engaged by the
Indemnifying Party or approves the attorneys engaged by the Indemnified Party
for purposes of defense) (a) caused by or arising from any allegation by any
third party against the Indemnified Party that the use or dissemination, as
contemplated hereunder, of any intellectual property, or other proprietary or
confidential information, purportedly owned by or licensed to the Indemnifying
Party infringes upon, or otherwise damages, the rights of such third party, or
(b) caused by or arising from a breach or omission of any of the Indemnifying
Party's obligations under this Agreement, or (c) from damage caused by
negligence or intentional misconduct of the Indemnifying Party or its agents or
employees. Lansing's indemnification of Ethanol Producer hereunder includes,
without limitation, any liabilities resulting from defective rail cars or rail
cars with Hazardous Materials, other than (i) rail cars owned, operated or
controlled by Ethanol Producer (except to the extent of any liabilities
resulting from Lansing's negligent acts or omissions with respect thereto), or
(ii) liabilities arising from the negligent acts or omissions of Ethanol
Producer or its representatives.
ARTICLE 13
INSURANCE
13.1 Insurance Coverage.
(a) Each Party will maintain automobile liability insurance
with limits of not less than $1,000,000.00 CSL (Combined Single Limit).
Such insurance will name the other Party, its parents, subsidiaries and
Affiliates as additional insureds thereunder, and will be primary and
non-contributory to any other insurance available to such other Party,
its parents, subsidiaries and Affiliates as insureds or otherwise.
(b) Each Party will maintain commercial general liability and
property damage insurance with limits of not less than $1,000,000.00
per occurrence and $2,000,000.00 aggregate. Such insurance will name
the other Party, its parents, subsidiaries and Affiliates as additional
insureds there under, and will be primary and non-contributory to any
other insurance available to such other Party, its parents,
subsidiaries and Affiliates as insureds or otherwise.
(c) Each Party will maintain an excess or umbrella liability
policy with a limit of not less than $3,000,000 per occurrence and
$3,000,000 aggregate. Such excess or umbrella liability policy shall
follow form with the primary liability
21
policies, and contain a drop-down provision in case of impairment of underlying
limits.
(d) Notwithstanding the provisions of Section 13.1(b) and (c),
each Party's total coverage under both its commercial general liability
insurance in Section 13.1(b) and excess or umbrella liability policy in
Section 13.1(c) must have combined limits together totaling $5,000,000
for each occurrence and $5,000,000 aggregate.
(e) Each Party will maintain worker's compensation insurance
providing statutory benefits for injury or disease in the state(s) of
operation of the Parties, and Employer's Liability with limits of at
least $500,000 for individual injury or disease, with an aggregate of
$500,000 for disease.
13.2 Insurance Policy Requirements. All insurance policies required by this
Agreement will (a) provide coverage on an "occurrence" basis; (b) provide that
no cancellation, non-renewal or change will be effected without giving the other
Party at least thirty days' prior written notice; and (c) be valid and
enforceable policies issued by insurers of recognized responsibility, properly
licensed in the state where the Project is located, with an A.M. Best's Rating
of A- or better and Class VII or better. Such insurance policies will not
contain a cross-liability exclusion or an exclusion for punitive or exemplary
damages where insurable under law. On or before the Commencement Date and,
thereafter, within five business days of renewal, certificates and endorsements
of such insurance will be delivered to the other Party, as appropriate, as
evidence of the specified insurance coverage. From time to time, upon a Party's
request, the other Party will provide the requesting Party, within five business
days, a certified duplicate original of any policy required to be maintained
hereunder.
13.3 Certificates of Insurance. Ethanol Producer will provide Lansing
with certificates of insurance as evidence of coverage. Such certificates will
include a statement that coverage will not be cancelled by the carrier without
first providing Lansing at least 30 calendar days written notice.
13.4 Additional Insured. Except with respect to Worker's Compensation
insurance or any other insurance precluding such additional Insureds, Lansing
will be named as an additional Insured with respect to any third-party bodily
injury or property damage claims. All such policies of insurance will contain a
waiver of subrogation against Lansing and its officers, officials, employees,
agents and representatives.
13.5 Unavailability of Coverages. If the insurance policies and the
coverages as set forth above are not available to Ethanol Producer on
commercially reasonable terms, Ethanol Producer and Lansing will negotiate in
good faith reductions or alternatives to such provisions.
13.6 Survival. The rights, obligations and protections afforded by this
Article 13 will survive for two years after the termination, expiration or
cancellation of this Agreement and will apply to the full extent permitted by
law.
22
ARTICLE 14
EXCLUSION OF CERTAIN DAMAGES
Neither Party shall be liable to the other Party for
consequential, incidental, punitive exemplary or indirect damages, lost profits
or revenues (except as a part of direct damages) or other indirect damages
claimed in contract, equity, strict liability or indemnity, by statute or
otherwise. Nothing contained herein may be deemed to limit or alter the
indemnification rights of either Party under Article 12.
ARTICLE 15
ASSIGNMENT
15.1 No Assignment Generally. Except as otherwise permitted hereunder,
neither Party may assign this Agreement, or any rights or interests hereunder,
without the prior written consent of the other Party. Nothing in this Section
15.1 will apply to the re-sale or other transfer by Lansing to any third party
of the Ethanol sold hereunder.
15.2 Exceptions. Notwithstanding the foregoing provisions of Section
15.1, no consent will be required for assignment of this Agreement:
(a) by Ethanol Producer (i) to any successor owner of the
Facility, provided that such successor owner promptly provides adequate
assurance and evidence reasonably satisfactory to Lansing of the
capacity of such successor owner to continue to perform Ethanol
Producer's obligations under this Agreement, or (ii) as a collateral
assignment of this Agreement to a Project Lender, or
(b) by Lansing to any affiliate of Lansing, provided that such
affiliate promptly provides adequate assurance and evidence reasonably
satisfactory to Ethanol Producer of the capacity of such affiliate to
continue to perform Lansing's obligations under this Agreement.
15.3 Additional Exceptions. Notwithstanding the foregoing provisions of
Section 15.1, no consent will be required for any temporary or permanent
assignment by Ethanol Producer for settlement purposes as necessary to
effectuate Ethanol Producer's Ethanol deliveries, as for example, through
tolling agreements.
15.4 Requirements for Assignment. In all such events: (i) prior notice
of any such assignment must be provided to the other Party; (ii) any assignee
must assume expressly the assignor's obligations hereunder, provided, however,
that the Project Lender under any collateral assignment for financing purposes
will not be obligated to assume Lansing's obligations except as and to the
extent specifically provided in such collateral assignment agreement; (iii) no
assignment, whether or not consented to, will relieve the assignor of its
obligations hereunder if the assignee fails to perform, unless the other Party
agrees in writing in advance to waive assignor's continuing obligations pursuant
to this Agreement, such waiver not to be unreasonably withheld, conditioned or
delayed; and (iv) no such assignment will adversely affect the credit rating or
financial security of the other Party.
23
15.5 Failure to Obtain Consent. Any assignment of any interest in this
Agreement made without fulfilling the foregoing requirements of this Article 15
will be null and void and will, after notice and passage without cure of the
applicable period for cure, constitute an Event of Default under Article 9.
ARTICLE 16
NOTICES
Any notice, request, consent or other communication hereunder (each a
"Notice") must be in writing, addressed to the receiving party's address set
forth below or to such other address as a party may designate by notice
hereunder, and either (i) hand delivered, (ii) sent by nationally recognized
overnight delivery service, (iii) mailed by registered or certified mail, or
(iv) sent by confirmed facsimile transmission.
If to Lansing
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Lansing Ethanol Services, LLC
▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to Ethanol Producer:
Southwest Iowa Renewable Energy, LLC
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: General Manager
Fax: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
24
All Notices that are mailed will be deemed to be given on the fourth
business day following the day on which they were deposited in the United States
mail, postage prepaid. All Notices that are sent by nationally recognized
overnight delivery service will be deemed to be given on the first business day
following the business day on which they are sent. All Notices that are hand
delivered will be deemed to be given upon delivery. All Notices that are given
by facsimile transmission will be deemed to be given upon receipt, it being
agreed that the burden of proving receipt will be on the sender of such Notice
and such burden will not be satisfied by a transmission report generated by the
sender's facsimile machine.
ARTICLE 17
GENERAL PROVISIONS
17.1 Governing Law. This Agreement and the rights and obligations of
the parties hereunder will be construed in accordance with and governed by the
law of the State of Iowa, without giving effect to its conflict of law
principles.
17.2 Entire Agreement; Enforcement of Rights. This Agreement sets forth
the entire agreement and understanding of the Parties relating to the subject
matter herein and merges all prior discussions between them. No modification of
or amendment to this Agreement, nor any waiver of any rights under this
Agreement, will be effective unless in writing signed by the Parties to this
Agreement. The failure by either Party to enforce any rights under this
Agreement will not be construed as a waiver of any rights of such Party.
17.3 Construction. This Agreement is the result of negotiations between
and has been reviewed by each of the Parties hereto and their respective
counsel, if any; accordingly, this Agreement will be deemed to be the product of
all of the Parties hereto, and no ambiguity will be construed in favor of or
against any one of the Parties hereto.
17.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original and all of which together
will constitute one instrument.
17.5 Successors and Assigns. Subject to the provisions of Article 15,
the rights and benefits of this Agreement will be binding upon and inure to the
benefit of the Parties' respective successors-in-interest, legal
representatives, and assigns.
17.6 Waiver. The failure of either Party to enforce or insist upon
compliance with or strict performance of any of the terms or conditions of this
Agreement, or to take advantage of any of its rights there under, will not
constitute a waiver or relinquishment of any such terms, conditions, or rights,
but the same will be and remain at all times in full force and effect.
17.7 Taxes. Ethanol Producer will be responsible for applicable
personal property taxes on Ethanol, if any, up to Delivery Point.
25
17.8 Disclaimer of Third Party Beneficiary Rights. Other than with
respect to Project Lender, nothing in this Agreement will be construed to create
any duty to, or standard of care with reference to, or any liability to, any
person not a party to this Agreement.
17.9 Relationship of the Parties.
(a) This Agreement will not be interpreted to create an
association, joint venture, or partnership between the Parties, nor to
impose any partnership obligation or liability upon either Party.
Neither Party will have any right, power, or authority to enter into
any agreement or undertaking for, or act on behalf of, or to act as an
agent or representative of, the other Party.
(b) Lansing will be solely liable for the payment of all
wages, taxes, and other costs related to the employment of persons to
perform Lansing Services, including all federal, state, and local
income, social security, payroll, and employment taxes and statutorily
mandated workers' compensation coverage. None of the persons employed
by Lansing will be considered employees of Ethanol Producer for any
purpose; nor will Lansing represent to any person that he or she is or
will become an Ethanol Producer employee. Ethanol Producer will be
solely liable for the payment of all wages, taxes, and other costs
related to the employment of persons to operate the Facility, including
all federal, state, and local income, social security, payroll, and
employment taxes and statutorily mandated workers' compensation
coverage. None of the persons employed by Ethanol Producer will be
considered employees of Lansing for any purpose; nor will Ethanol
Producer represent to any person that he or she is or will become a
Lansing employee.
17.10 Expenses and Obligations. All costs and expenses incurred in
connection with the consummation of the transactions contemplated by this
Agreement by Lansing or Ethanol Producer will be paid by Lansing or Ethanol
Producer, as the case may be.
17.11 Survival of Obligations. Cancellation, expiration, or earlier
termination of this Agreement will not relieve the Parties of obligations that
by their nature should survive such cancellation, expiration, or termination,
prior to the term of the applicable statute of limitations, including warranties
or remedies which obligations will survive for the period of the applicable
statute of limitation.
17.12 Dispute Resolution. Any and all disputes related to this
Agreement, with the exception of Contracts, that cannot be resolved amicably
will be subject to binding arbitration before a single arbitrator in the
Omaha/Council Bluffs metropolitan area, pursuant to the Commercial Arbitration
Rules of the American Arbitration Association ("AAA"). The Arbitrator will make
such procedural or discovery orders as he or she deems appropriate. The
Arbitrator may not add to or alter the terms of this Agreement. Arbitral awards
will be in writing and will be final and non-appealable to the maximum extent
permitted by law. Any judicial proceeding to review the Arbitrator's award will
be held in state courts located in the State of Iowa, and the Parties submit to
personal
26
jurisdiction of such court. Nothing in this Section 17.12, however, should be
construed to preclude either Party from seeking specific enforcement or
temporary or preliminary injunctive relief from any court of competent
jurisdiction, either to enforce this Section 17.12 or with respect to any other
matter pending arbitration thereof. Unless otherwise explicitly provided in this
Agreement, the Parties agree to continue their respective performance of this
Agreement pending the outcome of any arbitration.
17.13 Compliance with Law. The Parties will comply with, and this
Agreement and all rights and obligations of the Parties hereunder are subject
to, all applicable local, state and federal law, and all duly promulgated orders
or other duly authorized action of governmental authorities having valid
jurisdiction.
17.14 Amendment and Modification. This Agreement may be amended,
modified or supplemented only by prior mutual agreement, confirmed in writing
and signed by the Parties thereto.
17.15 Confidentiality.
(a) The terms of the Confidential Disclosure Agreement between
Ethanol Producer and Lansing, dated October 23, 2006 (the
"Confidentiality Agreement"), are hereby incorporated by reference
herein for the term of this Agreement, notwithstanding the fact that
the term is longer than the term of the Parties' confidentiality
obligations set forth in the Confidentiality Agreement. For purposes of
the Confidentiality Agreement, along with confidential proprietary
information as defined in the Confidentiality Agreement, individual or
aggregate customer, transactional or financial information of Ethanol
Producer or Lansing that is provided to either in conjunction with the
terms and conditions of this Agreement will be deemed Confidential
Information of Ethanol Producer and Lansing, respectively, regardless
of whether marked as such.
(b) For the duration of the Initial Term, Renewal Terms and
for a period of three years following termination of this Agreement,
all terms of this Agreement between Ethanol Producer and Lansing will
be deemed Confidential Information of Ethanol Producer and Lansing,
respectively, regardless of whether marked as such.
(c) Notwithstanding the foregoing, Lansing acknowledges that
compliance by Ethanol Producer with its disclosure obligations under
federal and state securities laws (including providing a copy of this
Agreement as an exhibit to Ethanol Producer's publicly available
information) shall not be deemed a violation of this Agreement or the
Confidentiality Agreement.
[signature page follows]
27
The Parties have executed this Ethanol Merchandising Agreement on the
date set forth in the first introductory paragraph.
LANSING ETHANOL SERVICES, LLC
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
SOUTHWEST IOWA RENEWABLE ENERGY, LLC
By: /s/ ▇▇▇▇▇ ▇▇▇▇
--------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
Title: Chairman of the Board
28
EXHIBIT A
CONTRACT/PAYMENT EXAMPLE
Item 1: FACE OF STANDARD ETHANOL CONTRACT FORM
Item 2: ETHANOL CONTRACT GENERAL TERMS & CONDITIONS
These General Terms and Conditions between Buyer and Seller apply to
Lansing Ethanol Services, LLC ethanol contracts:
PREAMBLE
Seller sells fuel ethanol, and Buyer purchases fuel ethanol from time to
time for resale. From time to time, Buyer may elect to buy from Seller, and
Seller may elect to sell to Buyer, fuel ethanol in such quantities,
standards, pricing and delivery requirements as shall be negotiated. Any
such sale shall be confirmed by a Confirmation of Sale Agreement
(hereinafter ("Confirmation"). This Agreement sets forth the general terms
and conditions that shall apply to each sale.
1. Interpretation -If there is any conflict between any Confirmation and this
Agreement, the Confirmation will prevail with respect to the transaction
specified in such Confirmation. Headings used in this Agreement are used
for convenience of reference only and do not form a part of this Agreement.
No waiver by either party with respect to any breach of or any right under
this Agreement, and no course of dealing or performance, will be deemed to
constitute a continuing waiver of any other breach or of any right, unless
such waivers are expressed in writing executed by authorized
representatives of the parties hereto. The parties are also party to an
Ethanol Merchandising Agreement dated as of November 1, 2006, as amended
from time to time (the "Merchandising Agreement"). This Agreement, together
with the Merchandising Agreement, constitutes the entire and exclusive
agreement between the parties with respect to the transactions contemplated
herein and confirmed from time to time by written Confirmations, and all
representations, offers and undertakings of the parties made prior to the
effective date of this Agreement, whether oral or in writing, are merged in
it. Except as provided in Clause 10, each party objects to and will not be
bound by any past or future terms or conditions or representations not set
forth in this Agreement, including, without limitation, any additional or
inconsistent terms shown on the other party's shipping documents, invoices
or other records (except the Confirmation) and any additions to the
provisions of this Agreement included in those documents (other than the
Confirmation) are null and void. Any amendment of this Agreement must be in
writing executed by the authorized representatives of the parties hereto.
The terms of this Confirmation and Agreement will supersede, to the extent
inconsistent with, the terms set forth in the Merchandising Agreement.
2. Definitions - The terms set out in this section shall carry the following
meanings throughout the Agreement unless specified otherwise:
a. Agreement: this Agreement and each Confirmation, and any additional
schedules attached to any Confirmation;
b. Confirmation: a Confirmation of Sale Agreement between Buyer and
Seller, being substantially in the form of Exhibit A attached hereto,
issued by the parties and attached hereto, or which incorporates this
Agreement by reference, and any schedules thereto;
c. Contract Period: the time between the start and end dates as
specified in the Confirmation, inclusive of both dates;
d. Delivery Point: the location specified in the Confirmation for
delivery of the Product by the Seller to the Buyer Free on Board
("FOB");
e. Detention Charges: unless specifically stated as a term in the
Confirmation of a sale transaction, the Detention Charge for the first
15 days will be $50.00 US per day (or part of a day) including
Saturday's, Sunday's and Statutory Holidays. For the 16th through 25th
days, the Detention Charge will be $75.00 US per day (or part of a
day) including Saturday's, Sunday's and Statutory Holidays. After the
25th day the Detention Charge will be $100.00 USF per day (or part of
a day) including Saturday's, Sunday's and Statutory Holidays. All
Detention Charges shall be
1
invoiced no later than six months from the return of the railcar;
f. Force Majeure: events which are unforeseen or beyond a party's
reasonable control notwithstanding the exercise of due diligence,
including, but not restricted to: acts of God; war, terrorism,
accident, fire, storm, flood, earthquake, or explosion; acts of, or
compliance with requests of any level of government or any agency
thereof; strike, lock-out, disputes with workmen or labor shortages;
transportation embargoes, failures or delays which affect Seller's
normal source of supply for the Product, or delays in delivery of any
inventory or material, including, without limitation, crude oil,
natural gas, natural gasoline, supplies, raw materials and ingredients
necessary in the production of the Product; or any other cause or
causes whether or not similar to the foregoing events that are
unforeseen or beyond such party's reasonable control notwithstanding
the exercise of due diligence. A lack of funds, insolvency or delay in
plant start-up or production trouble shall in no event constitute an
event of Force Majeure;
g. General Terms and Conditions: The general terms and conditions set
forth in this Agreement for the sale of Product between Seller and
Buyer;
h. Notice: any notice required or permitted to be given under this
Agreement will be validly given if in writing and delivered, sent by
electronic facsimile transmission or other means of electronic
communication capable of producing a printed copy or sent by prepaid
registered mail, addressed to the applicable party at its address
indicated on the Confirmation or to such other address as any party
may specify by notice in writing to the other. Any notice delivered on
a business day will be deemed conclusively to have been effectively
given on the date notice was delivered and any notice given by
facsimile will be deemed conclusively to have been given on the date
of such transmission. Any notice sent by prepaid registered mail will
be deemed conclusively to have been effectively given when actually
received;
i. Performance Assurance: shall mean a standby irrevocable letter of
credit, a prepayment, a performance bond or a guarantee by an entity
acceptable to the Seller and in the absolute discretion of the Seller;
j. Product: as identified in the Confirmation;
3. Delivery Point, Title & Risk - Buyer agrees to purchase the Product
described in each Confirmation from Seller, and Seller agrees to sell and
deliver such Product to Buyer at the Delivery Point. Delivery shall be
complete and title to and risk of loss or damage to the Product shall pass
to the Buyer at the Delivery Point when: (i) Product is loaded into or
unloaded from a tank truck, at the outlet flange of the tank truck; (ii)
Product is loaded into a railcar, at the outlet flange of the railcar, or
if applicable, upon the constructive placement of the railcar by the
railroad, or upon the actual placement of the railcar for unloading if the
railcar has not been previously constructively placed; (iii) Product has
passed the outlet flange of the facility from where the Product originates
from and delivered into the delivering pipeline, or, if applicable, as the
Product is metered into connecting storage or transportation system, when
Product is delivered by pipeline; or (iv) the transfer of Product is
entered on the books of the facility, when deliveries are made within a
facility or by in-line transfer. Except as otherwise specifically provided
herein or stated in the applicable Confirmation, Seller will not be
responsible for any aspect of transportation, handling or use of the
Product beyond the Delivery Point.
4. Deliveries and Underlifting - Time is of the essence in this Agreement, and
on a commercially reasonable efforts basis all deliveries will be made in
accordance with the monthly schedule indicated in the Confirmation at
rateable quantities per day during each day of the month and during loading
hours agreeable to Seller. Where Buyer's liftings are more than 10% below
the scheduled volume in any month, Seller shall have the right to make
arrangements to mitigate its losses and this shall include, but not be
limited to, selling the underlifted volume to other parties. Buyer shall
compensate Seller for loss of revenue and all costs of mitigation incurred
by Seller.
5. Rail Car Deliveries
a) Buyer will not divert Seller's railcars or consign them to any other
routing or to any other destination than that set out in the ▇▇▇▇ of
lading instructions without obtaining prior written or faxed consent
of an authorized representative of the Seller. All diversion charges,
2
additional freight charges and any other costs or expenses incurred,
sustained or paid by Seller resulting from such diversion shall be for
the account of Buyer.
b) Unless specifically stated as a term in the Confirmation of a sale
transaction, Seller will allow Buyer a period of 5 days for offloading
those railcars commencing at: (i) 7:00 a.m., at the unloading
location, of the first morning following notification to the Buyer (or
the Buyer's consignee) by the delivering railroad that a railcar is
available for placement, or (ii) if notification is not given by the
delivering railroad, such time as the railcar is delivered to the
Buyer's (or the Buyer's consignee's) off-loading facilities. Upon
expiration of such 5 day period, the Buyer will pay the Seller a
Detention Charge until such time as the railcar has been returned to
the delivering railroad or otherwise placed in accordance with written
instruction of the Seller.
6. Product Specifications - The Product delivered under this Confirmation will
comply with Standard ASTM 4806 specification current at time of delivery
unless otherwise agreed to in writing.
7. Measurement of Product Quantity - The quantity of Product delivered will be
measured at the location where the Product is loaded into the
transportation equipment, using standard industry practice at the time of
measurement; (i) in the case of delivery into rail cars, by means of the
railcar's gauging device and applicable outage tables; (ii) in the case of
delivery into tank trucks, by means of a weigh scale or metering device at
Seller's option; and (iii) in the case of delivery into pipelines or
storage facilities, by meter or other mutually accepted method or device.
All such volumetric measurements will be corrected for temperature to; (i)
60 (0)F when measured in Imperial or U.S. units; and (ii) 15(0)C when
measured in metric or Systeme Internationale units. The parties agree to
accept these measurements as correct for the purposes of this Agreement.
8. Rejection and Notice of Defects - Buyer has 30 days after receipt of the
Product to inspect and either accept or reject the Product. If Buyer
retains the Product in its possession for a period of 30 days after receipt
without rejecting it, this will be regarded as Buyer's irrevocable
acceptance of the Product. Anything herein to the contrary notwithstanding,
if Buyer commingles, stores or mixes the Products with other products, the
Buyer's right of rejection shall be terminated at the moment of such
commingling, storage or mixing. If the Product is rejected, Notice must be
given to Seller so that the Notice will arrive no later than 5 business
days after discovery of the defect or nonconformity in the Product, fully
specifying all claimed defects and nonconformities. Seller will have the
right to independently test any rejected Product before the railcar is
offloaded at which time the Seller may redirect the railcar.
9. Product Shortages - Seller agrees to reimburse Buyer for any substantiated
shortage on railcar shipment in excess of 2 % of the aggregate railcar
volume providing that authority to unload railcars with excessive shortage
is granted by Seller before unloading and a signed and notarized affidavit
from the railroad agent or other person accepted by Seller attesting to the
shortage is sent by Buyer to Seller within 30 days from the date the
railcar was inspected.
10. Terms of Payment - Payment for Product and other fees, charges and taxes
shall be made in accordance with the Payment Terms provided in the
Confirmation; provided that, Seller reserves the right, acting reasonably,
to withdraw or revise credit terms for Product not yet delivered upon prior
written notice.
a) If Seller has reasonable grounds for insecurity regarding the payment,
performance or enforceability of any of Buyer's obligations under this
Agreement, Seller may require Buyer to provide it with a Performance
Assurance. Reasonable grounds will include, but not be limited to, the
Buyer's (or Buyer's guarantor's) credit rating being below Baa2 by
▇▇▇▇▇'▇ or below BBB by Standard and Poor's, if such party has an
external credit rating.
b) If Buyer fails to pay all or any part of the invoiced amount when due,
interest shall accrue monthly and be payable on the unpaid amount
(except for any portion thereof which is subsequently determined to be
overstated) at the prime rate at Seller's bank plus 2% per annum. Any
interest which remains unpaid shall be added to the principal amount
then outstanding. If
3
Buyer fails to pay when due any amount owing as set forth in an
invoice rendered by Seller, other than such portion thereof as it in
good faith disputes in writing, or if Buyer fails to provide a
Performance Assurance when required by Seller, and if either of such
failure continues for 5 days following delivery by Seller of written
notice of such default, Seller may suspend deliveries hereunder. At
such time, in the event of a payment default, Seller may terminate
this Agreement. If a Performance Assurance was requested by Seller and
if such Performance Assurance is not provided within 10 additional
days, Seller may terminate this Agreement. Such suspension or
termination shall be without prejudice to Seller's right to claim for
damages for loss of profit which it would have obtained during the
period of suspension or to the end of the original Contract Period if
the Agreement is terminated early as above provided.
c) If Seller has not received notice of a dispute in respect of an
invoice within 90 days of the date it was rendered, then such invoice
shall be deemed for all purposes to be correct.
d) In the event either party fails to make timely payment of any monies
due to the other party hereunder, the other party may offset such
unpaid amount against monies owed to such party under this Agreement
or any other agreement.
11. Taxes - The prices mentioned in this Agreement do not include federal,
state or municipal commodity, transaction sales (prepaid or otherwise) ,
use, excise, value added, motor fuel excise, petroleum business, petroleum
testing fee or business transfer taxes chargeable in respect of the sale of
the product to Buyer. Any like tax, duty, charge, levy or fee, now or
hereafter levied on the product sold hereunder or required to be paid or
collected by Seller by reason of the delivery, sale or use of the Product,
shall be paid by Buyer at the same time and on the same conditions as
payment of any other sum pursuant to the terms of the Agreement in addition
to the prices specified herein. Buyer shall furnish Seller with
satisfactory exemption certificate where exemption is claimed. Upon
Seller's request, the Buyer must provide proof of customs import
documentation into the United States for exemption purposes from Canadian
Government Goods and Services Tax (GST). If no such proof can be provided,
the Seller may at its discretion invoice the Buyer for the applicable GST.
12. Force Majeure - The term "Force Majeure" shall have the meaning set forth
in Section 2. If either party fails to observe or perform any of the
obligations imposed upon it under this Agreement and such failure shall
have been as a consequence of Force Majeure, such failure shall not be
deemed a breach of this Agreement and the performance or observance of such
obligation will be suspended during the continuation of the Force Majeure
provided that the party claiming Force Majeure shall:
a) Give written notice to the other party specifying full
particulars of such Force Majeure as soon as is reasonable
possible.
b) As far as possible remedy Force Majeure as soon as reasonable
possible; and
c) Give written notice to the other party after the Force Majeure
has been remedied as soon as reasonable possible.
Notwithstanding any other provision of this Agreement, a claim
of Force Majeure shall not under any circumstances suspend the
obligation of the Buyer to make payment for any Product
delivered under this Agreement. If by reason of Force Majeure
Seller is unable to supply its total demand for Product in the
United States among all of Seller's other buyers located in
the United States, Seller may, at its option, allocate
equitably its available supply of Product in the United States
among all of Seller's buyers located in the United States.
Seller shall not be under any obligation to obtain Product
from any other source or to alter its production schedules or
practices. Buyer shall not be obligated to take any deliveries
as set out in the monthly schedule indicated in the
Confirmation that would otherwise have been made during the
period of the Force Majeure.
13. Material Safety Data Sheet - Seller has provided to Buyer, and by taking
delivery of Product under the terms of this Agreement Buyer acknowledges
receipt of, Seller's current Material Safety Data Sheet(s) concerning the
properties of and safe handling procedures of the Product. Buyer
acknowledges that the Product is a hazardous material and represents and
warrants that it is familiar
4
with the properties of and safe handling procedures for the storage,
handling, transportation and use of the Product. Buyer will inform its
customers of those safe-handling procedures of the Product.
14. Price Escalation - Any increase in Seller's cost of supplying the Product
caused by any level of governmental law, regulation, tax or other burden
imposed after the date of this Agreement on the ownership, storage,
processing, production, transportation, distribution, use or sale of the
Product covered by this Agreement will be added to the price under this
Agreement.
15. Governing Law - This Agreement will be interpreted and governed in
accordance with the laws of the State of Kansas, USA. Applicable herein
(excluding any conflicts of law rule or principle that would otherwise
refer construction or interpretation of the Agreement to the substantive
law of another jurisdiction), and the parties hereby irrevocably attorn to
the exclusive jurisdiction of the courts of the State of Kansas, USA.
16. Confidentiality - This Agreement will not be disclosed in whole or in part
by either the Buyer or Seller to any third party without obtaining prior
written consent of the other party, unless such disclosure is required by
law, is necessary to obtain regulatory approval or reporting, or for
obtaining any necessary financing. Buyer acknowledges and agrees that
Seller may disclose this Agreement to its investors, provided that such
investors are advised as to the confidential nature hereof.
17. Assignment - The Seller, at its own discretion, may assign this Agreement
in the event that the Buyer is in default of any payment required under
this Agreement, or any other material term of this Agreement. In all other
cases, neither party may assign this Agreement, any money due hereunder, or
any claim arising in connection herewith, without prior written consent of
the other party, which consent shall not be unreasonably withheld;
provided, however, Lansing Ethanol Services, LLC may assign this Agreement
to a an entity controlled by Lansing Ethanol Services, LLC, and provided
further that Seller may assign this Agreement as provided in Article 15 of
the Merchandising Agreement.
18. Severability - If any provision of this Agreement is held illegal, invalid
or unenforceable for any reason whatsoever, the legality, validity or
enforceability of the remaining provisions of this Agreement shall not in
any way be affected or impaired thereby.
19. Dispute Resolution. - Any controversy or claim (Claim), whether based on
contract, tort, statute, or other legal or equitable theory (including, but
not limited to, any claim of fraud, misrepresentation, or fraudulent
inducement or any question of validity or effect of this Agreement
including this clause), arising out of or related to this Agreement
(including any amendments, annexations, and extensions) or the breach
thereof shall be settled by consultation between the parties. If
consultation does not resolve the Claim within sixty days (unless otherwise
extended by mutual agreement of the parties) after receipt of the written
notice of the Claim, the Claim shall be settled by binding arbitration in
accordance with the then current CPR Institute for Dispute Resolution Rules
for Non-Administered Arbitration of Business Disputes and this provision.
The arbitration shall be governed by the United Stated Arbitration Act, 9
U.S.C. Sections 1-16, to the exclusion of any provision of the state law
inconsistent therewith or which would produce a different result. Judgment
upon the award rendered by the arbitrator may be entered by any court
having jurisdiction. The arbitration shall be held in Kansas City,
Missouri. There shall be one arbitrator. The arbitration shall determine
the Claim of the parties and render a final award in accordance with the
substantive law of the State of Kansas, without regard to any choice of law
rules. The arbitrator shall set forth the reasons for the award in writing.
The UN Convention on Contracts for the International Sale of Goods (1980)
shall not apply.
5
Item 3: ▇▇▇▇ OF LADING
Supplied by Ethanol Producer, required for payment
Item 4: CERTIFICATE OF ANALYSIS -Supplied by Ethanol Producer, required for
payment
Item 5: DAILY SETTLEMENT FOR SALE BY ETHANOL PRODUCER
Item 6: MONTHLY INVOICE FOR SERVICES FEES
Lansing Ethanol Services, LLC
▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Date:
To:
Attention:
Facsimile No:
From:
Re:
Generated By:
Phone:
Merchandising Fee:
Total Gallons purchased by LES:
Total
Payments Received:
Balance
New due Lansing within 15 days of invoice date
Wiring Instructions:
