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BULK REFINED AND BLEACHED
SOYBEAN OIL SUPPLY AGREEMENT
This BULK REFINED AND BLEACHED SOYBEAN OIL SUPPLY AGREEMENT (this
"AGREEMENT"), dated as of January 15, 2002, by and between South Dakota
Soybean Processors, 100 Caspian Ave., Volga, South Dakota 57071, a South
Dakota co-operative association (hereinafter referred to as "SELLER") and ACH
Food Companies, Inc., 7171 Goodlett Farms Parkway, Cordova, Tennessee 38018,
a Delaware corporation (hereinafter referred to as "BUYER").
WITNESSETH:
WHEREAS, BUYER desires to obtain from SELLER a continuing supply of
refined, bleached soybean oil (the "Product" or "Products") as more
particularly described in the attached Exhibit A to this Agreement during the
period hereinafter described, and SELLER desires to sell the Product to the
BUYER on the terms hereafter provided.
NOW THEREFORE, in consideration of the above premises and the mutual
covenants herein contained, the parties agree as follows:
1. PRODUCTS
(A) Subject to the terms and conditions of this Agreement, SELLER
shall sell the Products to BUYER, and BUYER shall purchase the Products from
SELLER. It is the intent of the parties that the Products will be produced by
SELLER at the Facility (as defined in Section 3(A) hereof); however, if the
SELLER is unable to meet its requirements under this Agreement, SELLER shall
obtain the Products from another source acceptable to BUYER, which acceptance
shall not be unreasonably withheld, and all other terms and provisions of
this Agreement including pricing and delivery shall remain the same.
(B) All items as detailed in Exhibit A "Specifications for Products"
are "At Time of Delivery" or at "Time of Shipment" as noted in Exhibit A.
Specifications may be amended at any time by mutual consent of BUYER and
SELLER following a documented change to Exhibit A.
(C) SELLER certifies that the Products meet Circle U Kosher
certification requirements and shall provide all paperwork reasonably
required by BUYER.
(D) BUYER will accept Products on the basis of accompanying
Certificate of Analysis after running basic analysis on Products, such as
Peroxide Value, Free Fatty Acid, Color and Iodine Value. It is understood
that BUYER will immediately use the Products in further processing or
shipments to its customers.
(E) In consideration of this Agreement and the sale of the Equipment
(as defined in the Purchase Agreement), SELLER agrees that during the Term,
the BUYER shall be the sole and exclusive buyer of the Product from the
SELLER for use in food application. SELLER may from
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time to time sell excess crude or crude de-gummed soybean oil to persons
other than BUYER, provided that the SELLER meets its obligation to provide
Product to the Buyer in the volumes provided in this Agreement.
2. VOLUMES
(A) During the Term, BUYER will purchase from SELLER, and SELLER
will sell to BUYER, no less than 290 million pounds of the Product during
each Agreement Year (the "Minimum"). The term "Agreement Year", as used in
this Agreement, shall mean the 12-month period commencing on the First
Shipment Date (as defined in Section 8(A) hereof), and each 12-month period
thereafter during the Term. During the term of the first year the SELLER's
sales minimum of 290 million pounds will be adjusted to reflect actual
shipments made during the first three months after the First Shipment Date.
(B) BUYER will provide SELLER with anticipated annual demands for
the Product as set forth in Exhibit B. SELLER agrees that it shall be able to
supply up to FIVE MILLION FIVE HUNDRED AND SEVENTY THOUSAND (5,570,000)
pounds of the Product per week (or TWO HUNDRED NINETY MILLION (290,000,000)
pounds of the Product per Agreement Year) should BUYER order such volumes.
BUYER agrees to provide SELLER with at least fourteen (14) days prior written
notice of a Purchase Order in excess of FOUR MILLION (4,000,000) pounds of
the Product in any week.
(C) If during any Agreement Year BUYER does not purchase (as defined
in section 4A hereof) at least 270 million pounds of Product, BUYER shall pay
to SELLER, within thirty (30) days after expiration of such Agreement Year,
an amount equal to the product of $0.0023 multiplied by the positive
difference remaining after subtracting from 270 million pounds the amount of
Product purchased by BUYER for such Agreement Year.
(D) If during any calendar month the BUYER does not purchase at
least 22.5 million pounds of the Product, the SELLER may sell refined and
bleached soybean oil in a volume equivalent to the volume of the Unpurchased
Product upon a five (5) day written notice to BUYER. Within such five (5) day
period, BUYER may, upon written notice to SELLER, elect to purchase any of
the Unpurchased Product. SELLER shall sell the Unpurchased Product at its
market price. If the Unpurchased Product is sold for less than the purchase
price for the Product as set forth in Exhibit B, BUYER shall pay SELLER the
shortfall within twenty-five (25) days from the date of SELLER's invoice
therefor. "Unpurchased Product" means refined and bleached soybean oil in an
amount (expressed in pounds) equal to the positive difference remaining after
subtracting from 22.5 million pounds the number of pounds of Product
purchased by BUYER during the calendar month in question.
3. PRODUCTION FACILITY
(A) SELLER intends to fulfill its obligations under this Agreement
by refining and bleaching soybean oil in a facility (the "Facility") to be
constructed and owned by SELLER and to be located in Volga, South Dakota.
SELLER shall commence construction of the Facility promptly after execution
and delivery of this Agreement by BUYER and shall achieve Substantial
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Completion of the Facility (as hereinafter defined) no later than September
1, 2002 (the "Completion Date"). "Substantial Completion of the Facility
means (i) completion of the construction of the Facility (including without
limitation installation of all trade fixtures and equipment, including
without limitation the Equipment, as defined in Section 3(B) hereof)
substantially in accordance all applicable laws and ordinances, such that
SELLER is capable of operating an RB soybean oil refinery at the Facility for
production of the Product in the volumes required by this Agreement, and (ii)
the issuance by the governmental authority having jurisdiction of a
certificate of occupancy or similar certificate or permit for the Facility.
The Completion Date shall be extended one day for each day Substantial
Completion of the Facility is delayed by an Excusable Cause or a Labor Cause,
(as defined in Section 14(N) hereof), provided that in no event shall the
Completion Date be extended for any reason beyond October 1, 2002. If SELLER
fails to achieve Substantial Completion of the Facility on the Completion
Date, as the same may be extended in accordance with the foregoing
provisions, BUYER may thereafter terminate this Agreement effective thirty
(30) days after the Completion Date by giving written notice thereof to
SELLER within such thirty (30) day period. If BUYER so terminates this
Agreement, then within fifteen (15) days after the effective date of such
termination, SELLER shall pay BUYER an amount equal to the Fair Market Value
(as defined in Section 17 hereof) of the Equipment. If BUYER does not so
terminate this Agreement, then until such time as SELLER achieves Substantial
Completion of the Development (the "Delay Period"), SELLER shall be
responsible for BUYER's Cost to Cover (as defined in Section 6(D) hereof)
with respect to the Product that BUYER would have ordered from SELLER during
the Delay Period.
(B) BUYER is the owner of certain soybean oil refining equipment and
related fixtures located at BUYER's facility in Columbus, Ohio (the "Ohio
Facility"), as more fully described in Exhibit C attached hereto and made a
part hereof (the "Equipment"). Upon execution and delivery by SELLER and
BUYER, BUYER shall sell the Equipment to SELLER, and SELLER and BUYER shall
execute and deliver to each other counterpart copies of the Purchase
Agreement in the form attached hereto as Exhibit D. SELLER shall provide
BUYER no less than fifteen (15) days' prior written notice (the "Equipment
Removal Notice") of SELLER's desire to remove the Equipment from its current
location and install the Equipment at the Facility. BUYER shall allow SELLER
such access as SELLER shall reasonably require to remove the Equipment.
Notwithstanding the foregoing, if BUYER sells the Ohio Facility prior to
BUYER's receipt of the Equipment Removal Notice, SELLER shall be obligated to
remove the Equipment from the Ohio Facility no later than thirty (30) days
after receipt of written notice from BUYER of such sale.
4. PRODUCT SCHEDULING
(A) On each Wednesday during the term of this Agreement, BUYER shall
deliver to SELLER BUYER's standard form of purchase order ("Purchase Order")
for the shipment week commencing on the following Monday, and a good faith
forecast of BUYER'S purchases of Product for the following three weeks. Each
Purchase Order will specify the quantity for the following week. BUYER may
designate delivery destinations other than those listed in Exhibit B only by
mutual written consent of the parties and only after appropriate freight
adjustments have been agreed upon by both parties. For all purposes under
this Agreement, BUYER shall be deemed to "purchase" the Product upon delivery
of a Purchase Order as provided in this paragraph.
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(B) Not less than once every three months during the term of this
Agreement, BUYER shall furnish SELLER a good faith forecast of its Product
requirements for the next six (6) months. Such forecasts and the estimates
given with the Purchase Orders are not firm commitments of BUYER to order or
purchase Products, but are provided only as a guide to assist SELLER in
scheduling production.
5. WARRANTIES REGARDING PRODUCTS
(A) LIMITED WARRANTIES. SELLER warrants that the Products sold under
this Agreement shall conform in all material respects to each of the
following: (i) the specifications attached hereto as Exhibit A, as amended
from time to time by agreement of the parties; (ii) all current good
manufacturing practices; and (iii) the Food and Drug Guarantee attached
hereto as Exhibit E.
(B) CERTIFICATION OF ANALYSIS. Certificates of Analysis will be
faxed to BUYER's facilities prior to the shipment of rail car and shall
specify values for the first ten tests contained in the specifications. All
tests shall be run according to Association of Oil Chemists Society ("AOCS")
methods unless otherwise agreed to in writing by both parties. A referee
laboratory agreed to by both parties shall settle discrepancies in Product
quality results.
(C) COMPLIANCE WITH LAWS. SELLER warrants that it shall comply at
all times with all federal, state and local laws, rules, regulations,
ordinances codes, and orders applicable to SELLER's performance of its
obligations hereunder, as well as with other legal obligations set forth in
this Agreement.
6. SHIPPING
(A) SELLER shall be responsible for tracking, managing and paying
for freight from time of shipment to delivery to the applicable BUYER's
facility. Shipment of the Product will be within one day of the date
specified on the Purchase Order. All freight shall be prepaid F.O.B. BUYER's
facility with title and risk of loss transferred to BUYER upon BUYER's
receipt of the Product. SELLER will deliver the Product to the BUYER's
facility in its own rail cars; however, if conditions warrant, upon mutual
agreement alternate transportation methods will be allowed.
(B) DEFECTIVE PRODUCTS. If any Products shipped to a BUYER facility
fail to comply with the provisions of Section 5(A) ("Defective Product"), the
BUYER facility may refuse to accept delivery of such Defective Product and
such Defective Product shall be set aside for inspection by SELLER and SELLER
agrees to promptly replace any Defective Product. Each BUYER facility shall
handle such Defective Products in accordance with SELLER's reasonable
instructions so as to minimize the extent of any such costs. If, upon
reinspection of such Product, it is determined that such Product was not
Defective Product, BUYER shall reimburse SELLER for all reasonable costs
incurred by SELLER in replacing such Product, including without limitation,
shipping and handling costs.
(C) NORMAL SHIPMENT TIMES. Each Purchase Order shall specify the
shipment date and the desired delivery date (hereinafter referred to as
"DDD"). SELLER shall ensure that the Product arrives at BUYER facilities on
the DDD and shall be liable to BUYER for any Cost of Cover (as
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defined in Section 6(D) below) BUYER incurs as a result of SELLER's failure
to ship the Product according to the Purchase Order. In the event SELLER does
not ship at designated times (using shipment to arrive beyond DDD), SELLER
shall be responsible for substituting truck deliveries at SELLER's expense.
In the event the railroad fails to deliver a railroad car to BUYER and
shipments were made on time in accordance with BUYER's Purchase Order, SELLER
shall work with BUYER to arrange for timely truck deliveries to alleviate
BUYER inventory shortfall. BUYER shall be responsible for truck freight
differentials.
In the event that BUYER desires to make a change to the shipment
date, DDD, or other requirements of the Purchase Order on less than seven (7)
days notice to SELLER, SELLER shall use diligent efforts to accommodate such
change provided that BUYER shall reimburse SELLER for any additional costs
incurred by SELLER as a result of such accommodation. SELLER shall advise
BUYER whether or not it can meet the revised ship date. If it advises that it
can meet the ship date and then fails to do so, it shall reimburse BUYER for
any Cost to Cover as referenced in Section D below. If SELLER advises it
cannot meet the revised ship date, then BUYER shall be free to cancel such
order and purchase the Product elsewhere, and SELLER shall not be responsible
for BUYER's Cost to Cover.
(D) If SELLER notifies BUYER that it is unable to deliver Product on
the DDD Specified in the Purchase Order, and such notice does not include
SELLER's undertaking to ship such Products by an alternate method with
reasonably acceptable delivery date, BUYER shall be free to cancel such order
(either by written notice to SELLER or by prior oral notice to SELLER
followed by written confirmation of same) and purchase such Product (the
"Covered Product") from any other reasonable source. In such event, SELLER
shall pay to BUYER, upon receipt of BUYER'S invoice therefor, an amount equal
to the excess of the price to BUYER of such Covered Product over the price
which BUYER would have paid had it purchased the Covered Product from SELLER
pursuant to this Agreement (the "Cost to Cover") plus reasonable, documented
out-of pocket costs incurred by BUYER as a result of SELLER's failure to
deliver Product such as:
(i) any BUYER customer charges for: (a) downtime due to
late/short shipments; (b) packaging line downtime; (c) overtime; and
(ii) BUYER's packaging line downtime; overtime; and customer
charges for late/short shipments; and
(iii) LTL freight charges and additional freight charges.
(E) DEMURRAGE. SELLER has the right to charge demurrage br those
rail cars unreasonably held beyond five (5) days at the rate of $30 per rail
car per day beginning on day six (6), provided rail cars arrive on a
scattered basis as shipped. BUYER shall not be responsible for, and SELLER
shall pay when due, all demurrage and other charges resulting from "slamming"
by the carrier.
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7. PRODUCT PRICING AND PAYMENT TERMS
(A) PRICING FOR PRODUCTS. Refining Premiums as shown in Exhibit B
(attached hereto and incorporated herein by reference) are guaranteed for a
period of five (5) years from First Shipment Date (as defined in Section 8(A)
hereof. For the final three (3) years of the Initial Term (as defined in
Section 8(A) hereof), Refining Premiums shall be determined in accordance
with Section 8(A) as if such final three (3) years were a Renewal Term,
provided that negotiations with respect to Refining Premiums shall commence
no later than six (6) months prior to the end of the first five (5) year
period of the Initial Term. SELLER has the right to request an increase in
Refining Premiums for the final three (3) years of the Initial Term, and such
a request shall be made no later than six (6) months prior to the end of the
first five (5) year period of the Initial Term. BUYER and SELLER will enter
into good faith negotiations and any such increase shall only be applicable
to substantiated increases in operating costs, such as costs of labor,
energy, supplies and material, safety and environmental, or landfill, or a
difference in the value of refined bleached byproducts (such as lecithin and
soapstock). In the event the parties are unable to agree on any price
increases prior to the end of the first five (5) year period of the Initial
Term, then the price in effect for the Products in the preceding year will
continue in effect for the succeeding year, at the end of which this
Agreement shall automatically terminate.
(B) PAYMENT TERMS. SELLER shall invoice BUYER for Products upon
shipment thereof, and such invoice shall be due and payable twenty-five (25)
days from the date of the invoice.
8. TERM, EVENTS OF DEFAULT AND TERMINATION
(A) LENGTH OF TERM. The term of this Agreement (the "Initial Term")
shall commence on the date of signature of this Agreement by both parties,
and shall expire eight (8) years after the date of the first shipment of
Product ("First Shipment Date"), unless terminated earlier in accordance with
the provisions of this Agreement, and shall be renewable by BUYER for five
(5) subsequent periods of three (3) years each. SELLER will confirm the First
Shipment Date in writing within fifteen (15) days after the date of such
first shipment. BUYER may renew this Agreement by giving SELLER no less than
eighteen (18) months prior written notice. Upon SELLER's receipt of such
notice, SELLER and BUYER shall begin to negotiate in good faith with respect
to the applicable three-year renewal period ("Renewal Term"). Such
negotiations shall continue for a period of not less than six (6) months,
unless the parties reach agreement prior to the expiration of such six (6)
month period. The Initial Term, as the same may be extended by one or more of
the Renewal Terms, is referred to herein as the "Term." In the event the
parties are unable to reach agreement at the end of such six (6) month
period, then the price in effect in the preceding year will continue in
effect for the succeeding year, at the end of which, this Agreement shall
automatically terminate.
(B) EVENTS OF DEFAULT. Each of the following shall constitute an
Event of Default hereunder:
(i) A material breach by the other party of any of the terms
or conditions of this Agreement which (a) is not corrected within
thirty (30) days after receipt of written
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notification thereof, if correctable within such thirty (30) days;
or (b) if it is not correctable within such thirty (30) days, the
correction of which is not initiated within such thirty (30) day
period and thereafter diligently pursued until completed.
(ii) BUYER'S failure to pay any amount due SELLER, and the
continuance of such failure for thirty (30) days after written notice
to BUYER.
(iii) The entry of an "Order for Relief" naming the other
party as a "Debtor" under Title 11 of the United States Code or upon
the entry of a decree or order by a court having competent
jurisdiction in respect to any petition filed or action respecting a
party directly involved in a reorganization, arrangement, creditors
composition, readjustment, liquidation, dissolution, bankruptcy, or
similar relief under any other present or future United States or
other statute, law or regulation, whether or not resulting in the
appointment of a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official, any such decree or order is
in effect for a period of forty-five (45) consecutive days; or
insolvency, or similar laws affecting the enforcement of creditors'
rights generally and subject to general principles of equity.
(iv) The making by the other party of an assignment for the
benefit of creditors, or the admission by such party in writing of its
inability to pay its debts generally as they become due, or the taking
of action by a party in furtherance of any such action.
(C) EFFECT OF TERMINATION ON ACCRUED RIGHTS. Upon the occurrence of
an Event of Default, the non-defaulting party shall, subject to Section 14(M)
below, be entitled to terminate this Agreement and pursue any remedy provided
in law or equity, including injunctive relief and the right to recover any
damages it may have suffered by reason of such Event of Default.
Upon termination of this Agreement, all rights, obligations, and
causes of action accruing hereunder prior to such termination shall survive
and the provisions of this Agreement shall continue to be controlling for the
purpose of determining the rights of the parties hereto with respect to the
subject matter hereof.
(D) EVENT OF DEFAULT BY SELLER. Upon the occurrence of an Event of
Default by SELLER, an amount equal to the unamortized Fair Market Value of
the Equipment shall become immediately due and payable by SELLER to BUYER
without notice or demand. Such amount shall constitute additional purchase
price of the Equipment and shall not constitute a penalty. The unamortized
Fair Market Value of the Equipment shall be calculated as of the date of
occurrence of such Event of Default. The Fair Market Value shall be
amortized, using a straight line method, over the first five Agreement Years,
without interest.
9. REPRESENTATIONS BY SELLER
SELLER hereby represents and warrants to BUYER that:
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(A) SELLER is a co-operative association duly organized in the State
of South Dakota, and is duly qualified to transact business in South Dakota,
and is in good standing under the laws of the states in which it is currently
or hereafter required to be so qualified.
(B) This Agreement has been duly executed and delivered by SELLER
and constitutes the legal, valid, and binding obligation of SELLER,
enforceable against SELLER in accordance with its terms, except to the extent
that enforceability may be limited by applicable bankruptcy, insolvency or
similar laws affecting the enforcement of creditor's rights generally and
subject to general principles of equity.
10. REPRESENTATION OF BUYER
BUYER hereby represents and warrants to SELLER that:
(A) BUYER is a corporation duly organized, validly existing, and in
good standing under the laws of Delaware, and is duly qualified to transact
business as a foreign corporation, and is in good standing under the laws of
the states in which it is currently or hereafter required to be so qualified.
(B) This Agreement has been duly executed and delivered by BUYER and
constitutes the legal, valid, and binding obligation of BUYER enforceable
against BUYER in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, insolvency, or
similar laws affecting the enforcement of creditors' rights generally and
subject to general principles of equity.
11. RIGHT OF INSPECTION
(A) To the extent not in violation of any confidentiality agreement
to which SELLER is a party, BUYER or its authorized representatives shall
have the right to audit and inspect those portions of SELLER's facility used
to refine and bleach Products hereunder and to review SELLER's operational
records specifically pertaining to the Products and services hereunder and
only to the extent necessary to determine compliance with the terms of this
Agreement. BUYER's representative shall have access, during SELLER's normal
business hours and under reasonable circumstances, including prior notice
(which notice shall include communications with SELLER regarding BUYER's
concern), to only those portions of the storage, production, and other
facilities of SELLER which are involved in the production of Product
hereunder. At SELLER's option, BUYER's representative shall be accompanied by
a SELLER employee at all times while at or in any of SELLER's facilities. If
such inspection and or review by BUYER reveals that the processes,
procedures, practices or the like used by SELLER with respect to its services
hereunder fail to conform to appropriate procedures and processes, SELLER
shall immediately take appropriate corrective actions (which may include
suspension of SELLER'S services hereunder) for those items which represent a
public health or safety issue and shall promptly take appropriate corrective
actions (which may include suspension of SELLER'S services hereunder) for
those items which do not represent a public health or safety issue, at
BUYER's direction, until SELLER can show to BUYER's satisfaction that its
non-conforming activities have been corrected.
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(B) SANITATION AUDITS. SELLER shall make available to BUYER, at
BUYER'S request, the results of any sanitation audits of any facility used by
SELLER to process Product hereunder made by or for SELLER during the term of
this Agreement. SELLER shall notify BUYER immediately of any sanitation
audits which indicate the presence of listeria monocytogenes, salmonella, E.
Coli or other bacteriological presence in a facility used to process Product
or in any of its product during the term of this Agreement. SELLER shall also
inform BUYER promptly but in no event later than forty-eight (48) hours of
any inquiry, investigation, inspection of any facility used by SELLER to
process Product made by any federal, state, or local governmental agency that
could have an adverse effect on the ability of SELLER to perform its
obligations under this Agreement. SELLER shall provide BUYER with a summary
of each report related thereto, and SELLER shall allow BUYER and its
representatives access to such reports for visual review only.
(C) NO DUTY TO INSPECT. BUYER shall be under no obligation to
undertake such inspection and BUYER's inspection or failure to inspect the
Product or SELLER'S facilities used to process the Product shall not affect
or release SELLER from any of its obligations provided herein. None of the
obligations of SELLER with respect to the Product shall be affected or
released by BUYER's acceptance of delivery of Product or by any inspection
thereof or by payment therefore.
12. CONFIDENTIALITY
(A) SELLER'S OBLIGATIONS. SELLER shall regard as confidential and
proprietary the terms of this Agreement and all the information communicated
to it by BUYER in connection with this Agreement and clearly identified as
"Confidential and Proprietary" (which information shall at all times be the
property of BUYER). SELLER shall not, without BUYER's prior written consent,
at any time disclose any portion of such information to third parties. SELLER
shall disseminate such information to its employees, attorneys and auditors
only on a "need-to-know" basis.
Notwithstanding the foregoing, SELLER's obligations pursuant to this
Section 12(A) shall not apply to (i) information that, at the time of
disclosure, is, or after disclosure, becomes part of the public domain other
than as a consequence of SELLER's breach, (ii) information that was known or
otherwise available to SELLER prior to the disclosure by BUYER or its
subsidiaries and/or affiliates, (iii) information disclosed by a third party
(other than a subsidiary and/or affiliate of BUYER) to SELLER after the
disclosure by BUYER, if such third party's disclosure neither violates any
obligation of such third party to BUYER nor is a consequence of SELLER's
breach, (iv) information that BUYER authorized in writing for release, (v)
information which SELLER can demonstrate was independently developed by
SELLER or its employees without use of or reliance on the confidential
information disclosed by BUYER, or (vi) information required to be disclosed
by law or by any governmental authority.
(B) BUYER'S OBLIGATIONS. BUYER shall regard as confidential and
proprietary the terms of this Agreement and information obtained as a result
of BUYER's inspection of SELLER's facilities pursuant to Section 11 hereof,
and all the information communicated to it by SELLER in connection with this
Agreement and clearly identified as "Confidential and Proprietary" (which
information shall at all times by the property of SELLER). BUYER shall not,
without SELLER's
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prior written consent, at any time disclose any portion of such information
to third parties. BUYER shall disseminate such information to its employees
only on a "need-to-know" basis.
Notwithstanding the foregoing, BUYER's obligations pursuant to this
Section 12(B) shall not apply to (i) information that, at the time of
disclosure, is, or after disclosure, becomes part of, the public domain other
than as a consequence of BUYER's breach, (ii) information that was known or
otherwise available to BUYER prior to the disclosure by SELLER or its
subsidiaries and/or affiliates, (iii) information disclosed by a third party
(other than a subsidiary or affiliate of SELLER) to BUYER after the
disclosure by SELLER, if such third party's disclosure neither violates any
obligations of such third party to nor is a consequence of BUYER'S breach or
(iv) information that SELLER authorizes in writing for release, (v)
information which BUYER can demonstrate was independently developed by BUYER
or its employees without use of or reliance on the confidential information
disclosed by SELLER, or (vi) information required to be disclosed by law or
any governmental authority.
(C) PUBLIC ANNOUNCEMENTS. Both parties agree to obtain prior written
consent of the other party as it relates to any press release or public
announcements with regards to the terms of this Agreement.
13. INDEMNIFICATION
(A) INDEMNIFICATION BY SELLER. Subject to the terms of this
Agreement, SELLER shall indemnify, defend, and hold BUYER, its affiliates and
their respective employees and agents, officers and directors (the "Buyer
Indemnified Parties") harmless from and against any and all demands, claims,
actions, suits, proceedings, judgments, assessments, cost, expenses, losses,
damages, liabilities, fines, and penalties (including, without limitation,
reasonable attorney's fees) (collectively, "Damages") suffered or incurred by
any of the BUYER Indemnified Parties as a result of (i) a breach of any
representation, warranty, covenant or agreement of SELLER hereunder; provided
that in no event shall SELLER have any responsibility to BUYER for any
Damages arising because of any act of SELLER which is in compliance with
Section 4(A) or which is in compliance with written instructions or written
requests made by BUYER, and/or (ii) any act or deed, whether by way of tort
or contract, committed or omitted by SELLER, its employees or agents, in the
performance of this Agreement, except for acts or deeds committed or omitted
by SELLER in reliance on representations and warranties made to SELLER by
BUYER under this Agreement, or matters arising from the negligence or willful
misconduct of BUYER.
(B) INDEMNIFICATION BY BUYER. BUYER shall indemnify, defend, and
hold SELLER, its subsidiaries and affiliates and their respective officers,
directors, employees and agents (the "Seller Indemnified Parties") harmless
from and against any and all Damages suffered or incurred by any of the
SELLER Indemnified Parties as a result of (i) any breach of any
representation, warranty made by BUYER hereunder, or (ii) any act or deed,
whether by way of tort or contract, Agreement, except for acts or deeds
committed or omitted by BUYER in reliance on representations and warranties
made to BUYER by SELLER under this Agreement, or (iii) the use or sale of the
Products by Buyer, whether used or sold singly or in combination with other
products, provided any such Damages were not caused by SELLER's Defective
Product or by SELLER's negligence or willful misconduct.
<Page>
14. MISCELLANEOUS
(A) INDEPENDENT CONTRACTOR. This Agreement shall not constitute or
give rise to a partnership or joint venture between the parties. All
activities by SELLER under the terms of this Agreement shall be carried on by
SELLER as an independent contractor and not as an agent for or employee of
BUYER. No employee of SELLER shall be deemed to be an employee of BUYER. All
activities of BUYER under the terms of this Agreement shall be carried on by
BUYER as an independent contractor and not as an agent for or employee of
SELLER. No employee of BUYER shall be deemed to be an employee of SELLER.
(B) AGREEMENT TO GOVERN. This Agreement (including the Attachments
hereto) sets forth the entire understanding and supersedes all prior and
contemporaneous oral and written agreements between the parties relating to
the subject matter contained herein, and merges all prior and contemporaneous
discussions between them. No party shall be bound by any definition,
condition, representations, warranty, covenant, or provisions other than as
expressly stated in this Agreement including the Attachments hereto or as
subsequently shall be set forth in writing and executed by SELLER and BUYER.
(C) SEVERABILITY. The parties expressly agree that it is not the
intention of any party to violate any public policy, statutory, or common
laws, rules, regulations, treaties or decision of any government or agency
thereof. If any provision of this Agreement is judicially or administratively
interpreted or construed as being so in violation, such provision shall be
inoperative and the remainder of this Agreement shall remain binding upon the
parties hereto.
(D) NOTICES AND OTHER COMMUNICATIONS. All notices, demands, or
requests provided for or permitted to be given pursuant to this Agreement
must be in writing. All notices, demands and requests shall be given by
personal delivery, or transmitted by telecopy, or delivered to Federal
Express or other reputable overnight carrier for next business day delivery,
charges billed to or prepaid by shipper, or deposited in the United States
mail, registered or certified with return receipt requested, proper postage
prepaid, addressed as follows:
IF TO BUYER:
ACH Food Companies, Inc.
7171 Goodlett Farms Parkway
Cordova, TN 38018-3211
Attn: Rob York
Executive Vice President - Oil Products
IF TO SELLER:
South Dakota Soybean Processors
100 Caspian Ave.
Volga, SD
Attn: Rodney Christianson
Chief Executive Officer
<Page>
Each notice, demand, or request shall be effective upon personal
delivery, or upon confirmation of receipt of the applicable telecopy, or one
(1) business day after delivery to a reputable overnight carrier in
accordance with the foregoing, or three (3) business days after the date on
which the same is deposited in the United States mail in accordance with the
foregoing. Rejection or other refusal to accept or the inability to deliver
because of changed address of which no notice was given shall not adversely
impact the effectiveness of any such notice, demand or request.
Any addressee may change its address for notices hereunder by giving
written notice in accordance with this section.
(E) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each counterpart shall constitute an original instrument,
but all such separate counterparts shall constitute one and the same
agreement.
(F) LAW TO GOVERN. The validity, construction, and enforceability of
this Agreement shall be governed in all respects by the laws of the State of
Tennessee without regard to its conflict of laws rules. Both parties hereby
waive their respective rights to a trial by jury.
(G) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
permitted successors and assigns. Except as provided herein, neither this
Agreement nor the rights or obligations of either party hereunder may be
assigned except with the written consent of the other party which shall not
be unreasonably withheld.
(H) NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement
expressed or implied is intended to confer upon any person, other than the
parties hereto and their successors and permitted assigns, any rights or
remedies under or by reason of this Agreement.
(I) PAYMENT IN U.S. DOLLARS. All payments under this Agreement shall
be made in United States dollars.
(J) ATTACHMENTS. The Attachments referred to herein, and attached to
this Agreement, are incorporated herein by reference as if fully set forth in
the text hereof.
(K) MODIFICATION. The parties to this Agreement may, but only by
mutual written consent executed by the authorized officers of SELLER and
BUYER, modify or supplement this Agreement in such manner as may be mutually
agreed upon by them in writing.
(L) EXPENSES. Except as otherwise provided in this Agreement, each
party shall bear its own expenses incident to this Agreement and the
transactions contemplated hereby, including without limitation, all fees of
counsel, accountants, and consultants.
<Page>
(M) DAMAGES. Subject to Section 6(D) hereof, neither party shall be
liable to the other party for any special, consequential or exemplary damages
(including lost or anticipated revenues or profits relating to the same)
arising from any claim relating to this Agreement.
(N) FORCE MAJEURE. Neither party hereto shall be liable for, or
entitled to terminate this Agreement for a failure to perform or a delay in
performing hereunder for reasons not within such parties reasonable control,
including, but not limited to, acts of God, acts of a public enemy, acts of
civil or military authority, civil disturbance, embargoes, acts of any person
engaged in subversive activity or sabotage, fires, floods, explosions, or
other catastrophies, epidemics, or quarantine restrictions (each, an
"Excusable Cause"). Strikes or other labor stoppages, slowdowns or disputes
("Labor Cause") are expressly excluded from the definition of Excusable Cause
and Labor Cause shall not excuse SELLER's failure to perform or delay in
performing. If SELLER has not cured any Excusable Cause applicable to it
within sixty (60) days, BUYER may terminate this Agreement without further
liability to either party. In no event shall there be any Excusable Cause for
the failure to meet a monetary obligation. Each party shall use due diligence
and all reasonable efforts to cure any Excusable Cause preventing its
performance and to resume performance.
In the event either party reasonably believes that its performance
hereunder may be delayed, impaired, or prevented by any Excusable Cause, such
party shall (a) promptly notify the other party of the possibility of such
Excusable Cause, and (b) if the notifying party is SELLER, use its
commercially reasonable efforts to assist BUYER in procuring Products from
other sources, provided in either case that such alternative arrangements are
reasonably acceptable to BUYER. Notwithstanding anything in this Agreement to
the contrary, SELLER shall pay, and indemnify and hold BUYER harmless from
and against, the Cost to Cover incurred by BUYER in connection with the
procurement of Product from other sources.
15. INSURANCE
SELLER shall maintain, throughout the term of this Agreement, at its
expense from a carrier reasonably satisfactory to BUYER,
commercial/comprehensive general liability insurance in a minimum amount of
one million dollars ($1,000,000) combined single limit, for bodily injury and
property damage. Such insurance shall include product liability and vendors
liability insurance, and contractual liability coverage with respect to the
liability of SELLER under Sections 6(D), 13(A) and 14(N) hereof.
16. DISPUTE RESOLUTION
In the event of any dispute or disagreement between BUYER and SELLER
as to the interpretation of any provision of this Agreement (or the
performance of obligations hereunder), the matter, upon written request of
either party, shall be referred to representatives of the parties for
decision, each party being represented by a senior executive officer who has
no direct operational responsibility for the matters contemplated by this
Agreement (the "Representatives"). The Representatives shall promptly meet in
a good faith effort to resolve the dispute. If the Representatives do not
agree upon a decision within thirty (30) calendar days after reference of the
matter to them, each BUYER and SELLER shall be free to exercise the legal
remedies available to it.
<Page>
17. FAIR MARKET VALUE
"Fair Market Value" means $1,200,000.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed on its behalf by its duly authorized officer on the day and year
first written above.
ACH Food Companies, Inc., a Delaware corporation
By: /s/ Rob York
-------------------------------------------------
Name: Rob York
-----------------------------------------------
Title: Executive Vice President
----------------------------------------------
Date: January 15, 2002
-----------------------------------------------
South Dakota Soybean Processors, a South Dakota co-operative association
By: /s/ Rodney G. Christianson
-------------------------------------------------
Name: Rodney G. Christianson
-----------------------------------------------
Title: Chief Executive Officer
----------------------------------------------
Date: January 15, 2002
-----------------------------------------------
<Page>
EXHIBIT A
ACH FOOD COMPANIES
SPECIFICATIONS FOR REFINED BLEACHED SOYBEAN OIL
AT TIME OF DELIVERY AT BUYER'S FACILITY
<Table>
<Caption>
- --------------- -------------------------------- ------------------------ --------------------------------------------
TEST # TEST AOCS METHOD ACH SPECIFICATIONS
- --------------- -------------------------------- ------------------------ --------------------------------------------
01 Iodine Value CD 15-60 124-141
- --------------- -------------------------------- ------------------------ --------------------------------------------
02 % FFA (as oleic) CA 5A-40 0.10% max
- --------------- -------------------------------- ------------------------ --------------------------------------------
03 Color (lovibond red) (*A) CC 13B-45 6.0 max
- --------------- -------------------------------- ------------------------ --------------------------------------------
04 Chlorophyll 36 ppb max
(0.018 absorbance max)
- --------------- -------------------------------- ------------------------ --------------------------------------------
05 Moisture CA 2E-55 0.10% max
- --------------- -------------------------------- ------------------------ --------------------------------------------
06 Soap CC 17-79 10 ppm max
- --------------- -------------------------------- ------------------------ --------------------------------------------
07 PV (*A) CD 8-53 0.5 meq/kg
- --------------- -------------------------------- ------------------------ --------------------------------------------
08 Filterable Impurities 8 min
- --------------- -------------------------------- ------------------------ --------------------------------------------
09 Insoluble Impurities CA 3A-46 .03 max
- --------------- -------------------------------- ------------------------ --------------------------------------------
10 Loading Temp at Seller 110(Degree)F max
105(Degree)F Target
- --------------- -------------------------------- ------------------------ --------------------------------------------
11 Cold Test CC 11-53 20 hours min
- --------------- -------------------------------- ------------------------ --------------------------------------------
12 Hexane CA 3B-87 50 ppm max
- --------------- -------------------------------- ------------------------ --------------------------------------------
13 Phosphorus 1 ppm max
- --------------- -------------------------------- ------------------------ --------------------------------------------
14 Calcium 1 ppm max
- --------------- -------------------------------- ------------------------ --------------------------------------------
15 Magnesium 1 ppm max
- --------------- -------------------------------- ------------------------ --------------------------------------------
16 Iron 1 ppm max
- --------------- -------------------------------- ------------------------ --------------------------------------------
17 Heavy Metals Food Chem. Codex Standard
- --------------- -------------------------------- ------------------------ --------------------------------------------
18 Citric Acid None
- --------------- -------------------------------- ------------------------ --------------------------------------------
19 Antioxidants None
- --------------- -------------------------------- ------------------------ --------------------------------------------
20 Loading Procedure N(2) Sparged
- --------------- -------------------------------- ------------------------ --------------------------------------------
Kosher Acceptable to Circle U certification for
product and transportation
- --------------- -------------------------------- ------------------------ --------------------------------------------
Typical Fatty Acid Profile
C14:0 0.1
C16:0 10.7
C16:1 0.01
C18:0 4.8
C18:1 24.1
C18:2 52.3
C18:3 7.2
C20:0 0.4
C22:0 0.4
- --------------- -------------------------------- ------------------------ --------------------------------------------
</Table>
(*A) Test #03 Color (Lovibond Red) and Test #07 (PV) will be run on a
"Shipment from Sellers Facility" for three (3) months from first
shipment. During this time, the final specification will be developed
jointly between ACH and Seller. Once the final spec is determined, it
will be "at time of delivery to Buyers Facility."
<Page>
EXHIBIT B
PRICE AND OTHER TERMS
EXHIBIT B (2 PAGES) IS FILED SEPARATELY SUBJECT TO A REQUEST FOR CONFIDENTIAL
TREATMENT DATED MARCH 14, 2002.
<Page>
EXHIBIT C
EQUIPMENT
EXHIBIT C (6 PAGES) IS FILED SEPARATELY SUBJECT TO A REQUEST FOR CONFIDENTIAL
TREATMENT DATED MARCH 14, 2002.
<Page>
EXHIBIT D
PURCHASE AGREEMENT
This PURCHASE AGREEMENT (the "Agreement") is made as of the 15th day
of January, 2002, by and between ACH FOOD COMPANIES, INC., a Delaware
Corporation ("ACH"), having its principal place of business at 7171 Goodlett
Farms Parkway, Cordova, Tennessee 38018, and SOUTH DAKOTA SOYBEAN PROCESSORS,
a South Dakota co-operative association, having its principal place of
business at 100 Caspian Avenue, Volga, South Dakota 57071 ("SDSP").
RECITALS
A. ACH, as Buyer, and SDSP, as Seller, have entered into that
certain Bulk Refined Bleached Soybean Oil Supply Agreement effective January
15, 2002 (the "Supply Agreement"), pursuant to which SDSP shall sell to ACH,
and ACH shall purchase from SDSP, refined, bleached ("RB") soybean oils.
B. SDSP intends to fulfill its obligation under the Supply Agreement
by producing refined and bleached RB soybean oils in a facility to be
constructed and owned by SDSP in Volga, South Dakota (the "South Dakota
Facility").
C. ACH owns certain equipment used in producing and refining of RB
soybean oils as described in Exhibit A attached hereto and made a part hereof
(the "Equipment"), located at 525 West First Avenue, Columbus, Ohio (the
"Ohio Facility"). SDSP desires to purchase the Equipment from ACH, to move
the Equipment from the Ohio Facility and install the Equipment in the South
Dakota Facility.
D. ACH desires to sell the Equipment to SDSP, and SDSP desires to
purchase the Equipment from ACH, subject to the terms and conditions of this
Agreement.
AGREEMENTS
In consideration of Recitals set forth above, which by this
reference are made a part of this Agreement, the execution and delivery of
the Supply Agreement, the mutual covenants and agreements set forth below,
and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, ACH and SDSP agree as follows:
1. SALE OF EQUIPMENT. ACH does hereby sell, assign, transfer and set
over the Equipment to SDSP and SDSP does hereby purchase the Equipment from
ACH. This Agreement shall constitute a bill of sale for the Equipment.
2. REPRESENTATIONS AND WARRANTIES OF ACH. ACH hereby represents and
warrants to SDSP that (a) ACH is the absolute owner of the Equipment, (b) the
Equipment is free and clear of all liens, charges and encumbrances, and (c)
ACH has full right, power and authority to sell the Equipment to SDSP. SDSP
ACKNOWLEDGES THAT ACH HAS MADE NO OTHER
1
<Page>
REPRESENTATION OR WARRANTIES OF ANY KIND, EXPRESSED OR IMPLIED, AS TO ANY
MATTER WHATSOEVER, INCLUDING, WITHOUT LIMITATION, THE DESIGN, PERFORMANCE, OR
CONDITION OF THE EQUIPMENT, ITS MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE. ACH SHALL HAVE NO LIABILITY TO SDSP FOR ANY CLAIM, LOSS OR DAMAGE
CAUSED BY OR ARISING IN ANY WAY IN CONNECTION WITH THE EQUIPMENT, NOR SHALL
ACH BE LIABLE FOR CLAIMS ARISING OF OR IN CONNECTION WITH ANY DEFICIENCY OR
DEFECT IN THE EQUIPMENT, THE USE OR PERFORMANCE OF THE EQUIPMENT, OR ANY LOSS
OF BUSINESS OR OTHER CONSEQUENTIAL LOSS OR DAMAGE WHETHER OR NOT RESULTING
FROM ANY OF THE FOREGOING.
3. ADDITIONAL PURCHASE PRICE. ACH and SDSP acknowledge and agree
that under the provisions of the Supply Agreement, in certain circumstances
SDSP may be obligated to pay additional amounts to ACH as and for the
purchase price of the Equipment (the "Additional Purchase Price").
4. SALE OF EQUIPMENT. During the Term (as defined in the Supply
Agreement) SDSP shall not sell the Equipment to any party, or relocate the
Equipment to another location, without the prior written consent of ACH,
which consent ACH shall not unreasonably withhold.
5. REMOVAL AND USE OF EQUIPMENT.
a. SDSP shall be entitled, or required by ACH, to remove the
Equipment from the Ohio Facility at such time and subject to the
conditions as provided in the Supply Agreement. SDSP shall, at SDSP's
sole cost and expense, remove the Equipment from the Ohio Facility.
SDSP will take reasonable steps for the removal of the equipment from
the Ohio Facility to avoid undue damage.
b. Following removal of the Equipment by SDSP, SDSP shall
install the Equipment in the South Dakota Facility. SDSP shall pay and
hereby assumes all transportation, installation, storage, rigging, and
in-transit insurance charts with respect to the Equipment.
6. MAINTENANCE AND REPAIR. During the Term, SDSP shall, at its sole
expense, maintain the Equipment in good operating order, repair, condition
and appearance and make all necessary repairs to protect the Equipment from
deterioration, other than normal wear and tear.
7. INDEMNITY. SDSP hereby agrees to assume liability for, and does
hereby agree to indemnify, protect and hold ACH harmless from and against any
and all liabilities, obligations, losses, damages, penalties, claims,
actions, suits, costs, or expenses (including legal fees and expenses),
arising out of the use of the Equipment following its removal from the Ohio
Facility.
ACH hereby agrees to assume 1iability for, and does hereby agree to
indemnify, protect and hold SDSP harmless from and against any and all
liabilities, obligations, losses, damages, penalties, claims, actions, suits,
costs, or expenses (including legal fees and expenses), arising from personal
injury or death caused by the Equipment prior to its removal from the Ohio
Facility.
2
<Page>
8. RISK OF LOSS INSURANCE. SDSP hereby assumes and shall bear the
entire risk of loss and damage of the Equipment from any and every cause
whatsoever as of the date the Equipment is delivered to SDSP. SDSP has
obtained, and shall maintain in full force and effect during the Term, a
casualty insurance policy insuring the Equipment, with a deductible in the
amount of $250,000 or such other amount as SDSP may reasonably require.
During the Term, SDSP shall deliver to ACH proof of the existence and/or
renewal of such policy of insurance.
9. DEFAULT REMEDIES. Upon a default by SDSP under this Agreement,
ACH shall have such remedies as provided to ACH in the case of a default by
SDSP under the Supply Agreement
10. MISCELLANEOUS.
a. This Agreement has been executed and delivered in the
State of Tennessee and shall be governed and construed for all
purposes under and in accordance with the laws of such state.
b. ACH and SDSP acknowledge that there are no agreements or
understandings, written or oral, between ACH and SDSP with respect
to the Equipment, other than as set forth herein and in the Supply
Agreement.
c. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
assigns (as may be permitted hereunder).
d. All notices, consents or requests desired or required to
be given hereunder shall be in writing and shall be given in the
manner provided in the Supply Agreement.
IN WITNESS WHEREOF, the parties have executed this Purchase
Agreement on the date first written above.
SDSP: ACH:
SOUTH DAKOTA SOYBEAN ACH FOOD COMPANIES, INC.,
PROCESSORS, a South Dakota a Delaware corporation
co-operative association
By: /s/ Rodney G. Christianson By: /s/ Rob York
-------------------------------- -----------------------------
Title: Chief Executive Officer Title: Executive Vice President
----------------------------- --------------------------
3
<Page>
EXHIBIT E
CONTINUING PURE FOOD GUARANTY
In consideration of purchases from SELLER by ACH Food Companies, Inc.
("BUYER") of articles subject to the Federal Food, Drug, and Cosmetic Act,
the article comprising each shipment or other delivery hereafter made by
SELLER to or on the order of BUYER is guaranteed, as of the date of such
shipment or delivery, to be, on such date, (a) not adulterated or misbranded
within the meaning of said Federal Act; (b) not an article which may not,
under the provisions of Sections 404 and 505 of said Federal Act, be
introduced into interstate commerce; (c) not adulterated or misbranded within
the meaning of laws or ordinances of the state or city to which such article
is shipped by SELLER, the adulteration and misbranding provisions of which
are substantially the same as those found in said Federal Act; and (d) where
applicable, in compliance with the Federal Insecticide, Fungicide, and
Rodenticide Act.
This Guaranty is executed by SELLER subject to the condition that if an
article is delivered under a label designed or furnished by BUYER, SELLER's
responsibility for misbranding shall be limited to that resulting from the
failure of the article to conform to the standard, if any, for the product,
the purchase specifications or the statements contained on such label.
This Guaranty replaces any continuing guaranties described in paragraph 1
previously given by SELLER to BUYER and shall continue in effect with respect
to all articles ordered by BUYER from SELLER until such time as it is revoked
in writing by BUYER.
Dated: 1-15-02
-------
BUYER: SELLER:
ACH Food Companies, Inc. South Dakota Soybean Processors
7171 Goodlett Farms Parkway 100 Caspian Avenue
Cordova, TN 38018-4909 Volga, SD 57071
Attn: Quality Assurance/Regulatory Specialist Attn: DuWayne Bauman
1