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URETHANE SOY SYSTEMS COMPANY, INC. AND
SOUTH DAKOTA SOYBEAN PROCESSORS, INC.
VEGETABLE OIL SUPPLY AGREEMENT
This VEGETABLE OIL SUPPLY AGREEMENT ("Agreement") is effective the 2nd day
of August, 1999 by and between Urethane Soy Systems Company, Inc. ("USS"), an
Illinois corporation and South Dakota Soybean Processors, Inc. ("SDSP"), a South
Dakota corporation.
USS is a newly formed corporation established in 1998 for the development
and delivery of vegetable oil based products to the urethane and plastics
industry. SDSP is in the process of planning, designing, constructing, and
developing market strategies and agreements for a Soy Oyl Production Facility
(hereinafter referred to as "Facility(s)") to serve as USS's exclusive supplier
of vegetable oils. USS is developing a new and emerging market. USS and SDSP
will endeavor to manage growth in this industry while providing a delicate
balance between growth in USS's demand for their products and SDSP's growth in
production capacity and marketing.
USS AND SDSP AGREE AS FOLLOWS:
1. APPOINTMENT OF SDSP AS EXCLUSIVE SUPPLIER OF USS'S VEGETABLE OIL
1.1. USS hereby appoints SDSP as USS's exclusive supplier of vegetable
oil during the term of this Agreement. SDSP accepts such appointment
and agrees to supply USS's vegetable oil needs in accordance with
the terms of this Agreement.
1.2. SDSP, under this Agreement, will supply vegetable oil for use in the
plastics and urethane industry for products under patent (pending)
by USS solely to USS.
2. CONTRACTING VOLUME, DELIVERY, PRICE
2.1. SDSP's oil sales to USS will be governed by the terms and conditions
of SDSP's Sales Contract as found in Addendum "A" of this Agreement.
2.2. USS will submit requests to SDSP for USS's volume requirements (in
pounds) and required shipment dates.
2.3. Pricing options are Basis Fixed contract, Basis Fixed contract with
Maximum Guaranteed Price, Basis Fixed contract with Maximum/Minimum
Guaranteed Price or Fixed Price and/or a combination thereof, for
the term of this Agreement.
DEFINITIONS
BASIS FIXED CONTRACT: Price based upon the Chicago Board of Trade ("CBOT")
soybean oil futures plus an established processing fee. Under contract
terms, volume and delivery dates are established at the beginning of the
contract. USS selects when to fix the price on a given volume prior to the
established pricing date.
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BASIS FIXED CONTRACT WITH MAXIMUM GUARANTEED PRICE: Price based upon the
CBOT soybean oil futures plus an established processing fee plus option
premiums (based on market conditions and maximum price selected by USS).
Contracts extending beyond actively trading CBOT soybean oil options will
also be subject to a market risk premium agreed upon between USS and SDSP.
Under contract terms, volume, delivery dates and maximum prices are
established at the beginning of the contract. USS selects when to fix the
price on a given volume prior to the established pricing date.
BASIS FIXED CONTRACT WITH MAXIMUM/MINIMUM GUARANTEED PRICE: Price based
upon the CBOT soybean oil futures plus an established processing fee plus
option premiums (based on market conditions and the maximum/minimum price
selected by USS). Contracts extending beyond actively trading CBOT soybean
oil options will also be subject to a market risk premium agreed upon
between USS and SDSP. Under contract terms, volume, delivery dates and
maximum/minimum price are established at the beginning of the contract.
USS selects when to fix pricing on a given volume prior to the established
pricing date.
FIXED PRICE CONTRACT: Contract terms of volume, delivery dates and price
are established at the beginning of the contract. USS may fix the price of
vegetable oil for up to three years. Price will be established upon the
weighted average of active CBOT soybean oil futures and full carry from
the last active trading month until the end of the contract plus
established processing fee.
2.4. Processing fees will be established for each quality specification
and each Facility(s). See Addendum "B".
2.5. Payment terms are net 30 days of shipment.
3. QUALITY AND SPECIFICATIONS
3.1. Quality specifications for each contract will be mutually agreed
upon by USS and SDSP. USS and SDSP realize the market will be
evolving with new applications. As specifications are mutually
agreed upon they will be added to Addendum "C" of this Agreement.
Amendments to quality specifications may be made to the contract
agreement if mutually agreed upon.
3.2. USS and SDSP will establish agreed upon standardized testing
procedures and a referee lab(s) to be included in this Agreement as
Addendum "D".
3.3. SDSP warrants that the vegetable oil sold hereunder shall conform to
the specifications on each individual contract. SDSP GIVES NO OTHER
WARRANTY, EXPRESSED OR IMPLIED, AS TO DESCRIPTION, QUALITY,
MERCHANTABILITY, FITNESS FOR ANY PARTICULAR PURPOSE, PRODUCTIVENESS,
OR ANY OTHER MATTER, OF ANY VEGETABLE OIL SUPPLIED BY SDSP. SDSP
SHALL IN NO WAY BE
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RESPONSIBLE FOR THE PROPER USE OF THE VEGETABLE OIL. THE SOLE AND
EXCLUSIVE LIABILITY OF SDSP AND THE SOLE EXCLUSIVE REMEDY OF USS
FOR BREACH OF ANY PROVISION OF THIS AGREEMENT BY SDSP ARE LIMITED
EXCLUSIVELY TO REPLACEMENT OF THE AFFECTED VEGETABLE OIL, OR AT
THE OPTION OF SDSP AND USS, AN AGREED UPON DISCOUNT FOR THE
AFFECTED VEGETABLE OIL. SDSP SHALL NOT BE LIABLE UNDER ANY
CIRCUMSTANCES FOR ANY INCIDENTAL, CONSEQUENTIAL OR ANY OTHER
DAMAGES. USS ASSUMES ALL RISK AND LIABILITY FOR THE RESULTS
OBTAINED BY THE USE OF THE PRODUCTS COVERED BY THIS AGREEMENT,
WHETHER USED SINGLY OR IN COMBINATION WITH OTHER PRODUCTS.
4. USS's MARKET VOLUME AND SDSP's PRODUCTION CAPACITY
4.1. USS will supply a three year market forecast updated in six month
intervals to SDSP. When USS's market forecast would require new
products or additional production capacity, SDSP will update its
market supply/production capacity plan and submit the plan to USS
within 90 days of receipt of USS's market forecast. SDSP will
include preliminary pricing information if a new Facility(s) or new
products are required to meet USS's market forecast.
4.2. SDSP agrees to meet USS's vegetable oil demand up to the design
capabilities of SDSP's Facility(s) and marketing capabilities.
4.3. SDSP's nondelivery or default as to any installment shall not be
deemed a breach of this Agreement except as to such installment.
SDSP's certified weights are to govern settlement. Such nondelivery
or default shall not relieve USS from its obligation to accept and
pay for any subsequent or prior installment. Any changes in the
selling price or other terms of this Agreement caused by a change in
government regulations shall entitle SDSP to cancel any unshipped
portion thereof.
5. CLAIMS
5.1. Should quality disputes arise that cannot be mutually resolved, the
official retained sample held by SDSP will be submitted to an
approved referree lab. Quality tests will be run in accordance to
section 3.2, Addendum "D". Referee lab results are binding upon both
parties. The party against whom the decision results will assume all
costs related to the handling and testing of the retained sample.
6. TERMS OF AGREEMENT
6.1. This Agreement shall commence on the first date set forth above and
shall continue for five (5) years unless terminated in accordance to
Sections 6 of this Agreement.
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6.2. This Agreement may be terminated by either party on or after the
fifth anniversary date of SDSP's Facility(s) becoming operational.
The terminating party must give written notice of termination to the
other party at least one (1) year prior to the proposed termination
date.
6.2.1. If, during the term of this Agreement, SDSP commits to
additional Facility(s) that USS and SDSP mutually agree to
build, each new Facility(s) will carry a minimum five (5)
year term of this Agreement starting when each new
Facility(s) becomes operational. Termination will be in
accordance with terms set forth in Section 6 of this
Agreement.
6.2.2. USS and SDSP shall mutually agree upon the date that any new
Facility(s) becomes operational. For the purpose of this
Agreement, the Facility(s) shall be considered operational
when the Facility(s) is actually producing physical stocks of
the product for commercial sale.
6.2.3. The terminating party, acting unilaterally from the other
party, agrees not to compete against the other party during
the term of this Agreement and for a period of three (3)
years beyond the termination date.
6.3. If either party suspends its business, becomes bankrupt or
insolvent, or if a receiver or similar official is appointed for all
or substantially all of its assets, the other party may terminate
this Agreement by giving thirty (30) days' prior written notice to
such party.
6.4. This Agreement may be terminated: (a) in accordance with the
provisions in Sections 6.2 through 6.4 and/or the subsections found
in Section 6 of this Agreement, (b) by mutual written agreement of
the parties, or (c) in the event of a breach of this Agreement.
6.4.1. The non-breaching party may terminate this Agreement if the
breach continues for thirty (30) days after the non-breaching
party provides notice to the breaching party. The notice of
breach described in this Section 5.3.1 shall contain
identification of the breach and the steps the breaching
party needs to take to cure the breach. Notice is to be sent
by certified mail.
6.5. Termination of this Agreement as specified herein shall not
terminate any liability arising out of conduct prior to the actual
date of termination.
7. ASSIGNMENTS, SALES, MERGERS, CONSOLIDATIONS
7.1. Neither USS nor SDSP may transfer or assign this Agreement, or any
rights or obligations contained in this Agreement, without the prior
written consent of the other party.
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7.2. Subject to the other provisions of this Agreement, all of the terms,
convents and conditions of this Agreement shall inure to the benefit
of and shall bind the parties hereto and their successors and
permitted assigns.
7.3. Neither party shall offer or accept any offer for a "New Equity
Partner", or for the sale or other disposition, voluntarily or
involuntarily, of substantially of its assets or business without
first giving written notice to the other party of the intention to
take on a "New Equity Partner", or sell or make any other
disposition thereof, and giving the other party the right of first
refusal to match any bonafide offer.
7.3.1. Such notice shall include the name of the proposed "New
Equity Partner" purchaser or recipient, the price for the
business or portion thereof, and the terms of the proposed
"New Equity Partner", transaction, sale or other disposition
and written documentation of the bonafide offer.
7.3.2. The other party shall have ninety (90) days from the date of
the receipt of such notice to, as its option, become the "New
Equity Partner", or purchase the assets or business offered
for sale or other disposition at the same price and upon the
same terms and conditions as the bonafide offer.
7.3.3. In the event that either party fails to make such a
transaction with a "New Equity Partner" sale or other
disposition within a one hundred eighty (180) day period of
its notice to the other party, the offering party shall again
comply with the terms of section 7.3.2 of this Agreement as a
condition precedent to any subsequent transaction with a "New
Equity Partner", sale or other disposition of the assets or
business thereof.
8. FORCE MAJEURE
8.1. SDSP shall not be deemed to have defaulted or failed to perform
hereunder if SDSP's inability to perform or default is caused by an
event or events beyond the control and without the fault of SDSP,
including, without limitation, equipment failures, acts of God or
public enemy, fire, flood, explosions, or weather conditions of any
kind, strikes, labor disputes, riots, or commotion, governmental
action of any kind, or any other inability to procure necessary raw
materials, supplies, or equipment due to car vessel or truck
shortages, freight embargoes, shortage of fuel or other types of
energy, or any other causes reasonably beyond SDSP's control. In
addition, SDSP shall not be liable in any way for any failure or
delay in performance hereunder arising or resulting from a shortage
of fuel or other types of energy which may be within SDSP's control.
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9. MISCELLANEOUS
9.1. USS represents that it is not insolvent, as the term is defined
under any applicable state or federal law, and that it is able to
perform its obligations under this Agreement. In entering into this
Agreement, USS acknowledges that SDSP has expressly relied on such
representations.
9.2. The invalidity, illegality, or unenforceability of any one or more
provisions of this Agreement shall in no way affect or impair the
validity, legality, or enforceability of the remaining provisions
hereof, which shall remain in full force and effect.
9.3. No waiver of any provision of this Agreement on any one occasion
shall constitute a waiver of any other provision on said occasion or
on any other occasion, nor shall it constitute a waiver of the
waived provision on any other occasion. No waiver shall be
enforceable unless it is in writing and signed by the party against
whom such waiver is sought to be enforced.
9.4. This Agreement shall be binding upon and inure to the benefit of the
parties hereto, their successors and assigns.
9.5. This instrument is intended by the parties as a final expression of
their agreement and as a complete and exclusive statement of its
terms. No course of prior dealings between the parties and no usage
of trade shall be relevant or admissible to supplement, explain, or
vary any of the terms of this Agreement. No representations,
understandings, or agreements have been made or relied upon in the
making of this Agreement other than those specifically set forth
herein. This Agreement may be modified only by an instrument signed
by both parties.
9.6. Any notices required or permitted to be given under this Agreement
shall be given or made in writing and shall be delivered personally,
by mail in the United States, postage prepaid, first class mail, or
by facsimile to the parties at the following addresses:
Mr. John Wawak
Vice President & General Manager
Urethane Soy Systems Company, Inc.
P.O. Box 569
Princeton, Ill. 61356
Facsimile: 815/643-2998
Mr. Rodney Christianson
Chief Executive Officer
South Dakota Soybean Processors, Inc.
100 Caspian Ave.
P.O. Box 500
Volga, SD 57071
Facsimile: 605/627-5869
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or to such other address, telecopier number, or persons as the parties may
designate in writing. Any notice given in accordance with the provisions of this
paragraph shall be deemed to be effective, if delivered personally or
telecopied, on the date of such delivery or if mailed, upon the third day next
following the date of mailing of such notice. Each party shall give notice to
each of the other parties of a change of its address, telecopier number, or
identification of the person to whom notice is given for the purpose of giving
notice under this paragraph which thereafter, until changed by like notice,
shall be the address or identification of the person who shall receive
notification on behalf of such party for all purposes of this Agreement.
9.7. This Agreement shall be construed in accordance with the laws of the
State of South Dakota.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written:
SOUTH DAKOTA SOYBEAN PROCESSORS, INC.
By /s/ Rodney Christianson
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Its Chief Executive Officer
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URETHANE SOY SYSTEMS COMPANY, INC.
By /s/ John Wawak
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Its Vice President
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ADDENDUM TO VEGETABLE OIL SUPPLY AGREEMENT
WHEREAS Urethane Soy Systems Company, Inc. ("USS") and South Dakota
Soybean Processors, Inc. ("SDSP") have entered into a Vegetable Oil Supply
Agreement Dated August 2, 1999.
WHEREAS the terms of said agreement did not anticipate the probable long
range viability of this Vegetable Oil Supply Agreement;
WHEREAS Section 6. TERMS OF AGREEMENT provides in Subsection 6.2. that
"This Agreement may be terminated by either party on or after the fifth
anniversary date of SDSP's Facility (s) becoming operational." And said "fifth
anniversary" is too short of a time period considering all factors relating to
this Agreement.
THEREFORE, the parties agree this 10th day of January, 2001 to the
following amendments to the Agreement dated August 2, 1999:
Section 6.2. shall be revised as follows:
6.2. This Agreement may be terminated by either party on or after the
fifteenth (15th) anniversary date of SDSP's Facility(s) becoming
operational. The terminating party must give written notice of
termination to the other party at least one (1) year prior to the
proposed termination date.
Section 6.2.1. shall be revised as follows:
6.2.1. If, during the term of this Agreement, SDSP commits to additional
Facility(s) that USS and SDSP mutually agree to build, each new
Facility(s) will carry a minimum five (5) year term of this
Agreement starting when each new Facility(s) becomes operational
provided this new term extends the contract term enumerated and
set forth in Section 6.2. Termination will be in accordance with
terms set forth in Section 6 of this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written:
SOUTH DAKOTA SOYBEAN PROCESSORS, INC.
By /s/ Rodney G. Christianson
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Its CEO
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URETHANE SOY SYSTEMS COMPANY, INC.
By /s/ John Wawak
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Its Vice President
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