Rail Service and Construction Agreement Between Siouxland Ethanol, LLC and Nebraska Northeastern Railroad Company
Exhibit 10.4
Rail Service and Construction Agreement
Between Siouxland Ethanol, LLC
and
Nebraska Northeastern Railroad Company
Between Siouxland Ethanol, LLC
and
Nebraska Northeastern Railroad Company
THIS RAIL SERVICE AND CONSTRUCTION AGREEMENT (the “Agreement”) is made and entered into as of
the 11th day of November, 2005 by and between SIOUXLAND ETHANOL, LLC, a Nebraska limited
liability company with its principal offices in Jackson, Nebraska, (“Customer”), and NEBRASKA
NORTHEASTERN RAILROAD COMPANY, a Nevada corporation with its principal offices in Dallas, Texas
(“Railroad”).
W I T N E S S E T H :
WHEREAS, Siouxland Ethanol, LLC (“Customer”) has selected a site (“the Site”) in Dakota
County, Nebraska on Highway 20 as the location for a 50-million gallon dry mill corn-based ethanol
plant to produce fuel grade ethanol and distillers grains for sale, and the Site is bordered by
property and railway owned and operated by Railroad; and
WHEREAS, Customer, or its agent, shall construct or have constructed one or more railroad
tracks inside its ethanol plant (“Yard”) and Railroad shall construct or have constructed a
sidetrack, (“Sidetrack”), both as shown in red and blue on the plan dated 11-11-05, attached hereto
as Attachment A and made a part hereof, to provide rail service to the Site; and
WHEREAS, Railroad and Customer desire to enter into an agreement setting forth their rights
and obligations with respect to the construction, ownership, operation, use and maintenance of the
Yard and Sidetrack:
NOW, THEREFORE, it is mutually understood and agreed as follows:
1. Easement. Railroad hereby grants at no additional cost to Customer a lateral
easement 10-feet wide as shown in Attachment A for the installation and maintenance of utility
infrastructure for said Site including, but not limited to, gas line, electric infrastructure, and
water discharge line, so long as the aforesaid utilities’ installation and infrastructure does not
impede normal operations of the Railroad. Customer hereby agrees to indemnify, hold harmless and
defend Railroad, its officers, owners, agents and assigns from and against any and all claims or
losses arising from the construction, placement and/or operation of utilities in said easement,
whether caused by negligence or not, unless resulting from the sole negligence of Railroad.
2. Construction. Customer shall construct or have constructed a sidetrack consisting
of track structure, ballast, grading, drainage structures, turnouts and other appurtenances (“the
Sidetrack”) extending along the Railroad’s mainline at milepost 9.11 for approximately 4082 feet
and including a turnout into the Site as shown in Attachment A. Customer shall construct or have
constructed the track structure, ballast, grading, drainage structures, turnouts, bumping posts and
other appurtenances constituting the yard and the connecting track (including turnout) between the
yard and Sidetrack (the Yard Tracks). Each party shall do and perform said work in all respects in
a workmanlike manner consistent with industry standards. The parties agree to comply with all
statutes and with all regulations of any federal, state or municipal government or regulatory
agency applicable to the location, placement and construction of said Yard Tracks and Sidetrack.
Each party shall use its best reasonable efforts to avoid interference with the others construction
and operations.
3. Clearances. Customer agrees to provide and maintain: (A) the lateral clearance
requirements (at least eight feet [8’0"] from either side of the centerline of the of each track in
the Yard Tracks as increased for flat curves, super-elevated curves and approaches thereto); and
(B) the vertical clearance requirements (at least twenty-two feet [22’0"] above the top of the
rail), for the entire yard. Any clearance not in compliance with the foregoing is a “Close”
clearance. Lateral and vertical clearances for power poles and lines must also comply with the
National Electric Safety Code (NESC)
4. Ownership and Maintenance.
(a) Customer shall own the yard and that portion of the connecting track located on the Site
and shown in blue on Attachment A. Railroad shall own the Sidetrack and that portion of the
connecting track (including turnout) located on railroad’s right-of-way as shown in red on
Attachment A. Customer shall maintain the entire Sidetrack and Yard Tracks in a condition that
will safely and satisfactorily accommodate the operation of railroad equipment. In the event
Customer shall fail to so maintain, Railroad shall be under no obligation to operate, nor shall it
have any liability if it does not operate, over said portion of any track. Failure of Railroad to
notify Customer of the need of such repairs or Railroad’s continued operation over the tracks shall
not relieve Customer of its obligation to maintain it in a safe condition and shall not relieve
Customer of any responsibility for loss or damage resulting from its failure to so maintain.
Customer shall provide adequate drainage and keep the area along and adjacent to the Sidetrack and
Yard Tracks free and clear of all ice and snow, materials, obstacles and debris so as to provide a
safe walkway for Railroad’s employees. Any future changes in or extensions of the Yard Tracks upon
which the Railroad would be expected to operate railroad locomotives and cars shall not be made by
Customer without prior written notice to Railroad.
(b) All track and track material in the Sidetrack and in that portion of the connecting track
located on Railroad’s right-of-way and shown in red on Exhibit A including all turnouts, shall
remain the property of the Railroad.
5. Lease. Railroad hereby leases at no additional cost to Customer the Sidetrack on
the following terms:
(a) Customer shall have the non-exclusive right to use the Sidetrack for set-out and pick-up
of railcars delivered or picked up by Railroad. Railroad’s use of the Sidetrack in connection with
traffic for other shippers will not unreasonably interfere with Customer’s use of the Sidetrack.
(b) Customer shall maintain the Sidetrack, at its sole cost and expense, to normal industry
standards.
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(c) Customer shall indemnify, defend and hold harmless Railroad, its officers, owners, agents
and assigns from and against any and all claims, demands, actions or damages arising out of or
resulting from the location, condition, or operation on the Sidetracks, without regard to
negligence, unless resulting from the sole negligence of Railroad.
(d) This lease shall terminate upon termination of any or part of this Agreement.
6. Reimbursement. Railroad shall reimburse Customer its reasonable and actual cost
of constructing the Sidetrack up to a maximum of $537,000. Such reimbursement is conditional upon
Customer completing and operating a 50 million gallon dry mill corn-based ethanol plant at the
site. Payment of the reimbursement amount shall be due and payable $150,000 upon completion of 50%
of the plant structure, and the balance upon the first revenue movement of railcars into the Site.
7. Minimum Volume Guarantee. For and in consideration of Railroad’s reimbursement of
certain construction costs and the other terms and conditions of this agreement, Customer
guarantees that it in each of the first five (5) years after completion of its ethanol plant,
Customer will ship a minimum of 1500 loaded rail cars, inbound or outbound.
In the event that the number of loaded cars falls short of 1500 in any of the first five years
of plant operation (measured from the anniversary date of the first revenue carload on the
Sidetrack), Customer shall pay Railroad an amount equal to $75 for each car short of 1500.
EXAMPLE: In the third year of operation, Customer receives 800 loaded rail cars and ships out 500
loaded cars. Customer must pay Railroad $15,000 ($75 x [1500 – (800+500)]. No credit is taken for
carloads above the minimum in other years.
Payment shall be due thirty (30) days after invoice.
8. Rail Service.
8.1 Railroad agrees, pursuant to the provisions of this Agreement, its tariffs, circulars,
rules and rail transportation contracts, to operate over the Sidetrack or other track as the
parties may from time to time agree to deliver, place and pick-up railcars consigned to or ordered
by Customer, at such times established by Railroad.
8.2 Customer shall not permit the use of the Sidetrack or Yard tracks by or for the account of
third parties without the written consent of Railroad. If such use occurs without such consent,
Customer shall remain responsible for the conduct of such third parties as stated in this Agreement
as if for its own account. Railroad shall not be required to provide rail service to such third
parties.
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8.3 Railroad shall be deemed to have delivered any railcar consigned to or ordered by Customer
when such railcar has been placed on the Sidetrack, so as to allow access by Customer, and
Railroad’s locomotive has uncoupled from the railcar. At that time, Railroad shall be relieved of
all liability as a common or contract carrier or as a bailee, and possession of the railcar and its
contents shall be transferred to Customer. Similarly, any obligation of Railroad as a common or
contract carrier or as a bailee shall not begin until it has coupled its locomotive to the loaded
railcar and departed the Sidetrack.
8.4 Customer is responsible for all railcars and their contents while in Customer’s
possession, including while such cars are located on the Sidetrack, and assumes all responsibility
for payment of all damages to any railcar and/or its contents that may occur during that time, even
if caused by third parties.
8.5 If Railroad is unable to deliver a railcar on the Sidetrack for loading or unloading due
to the acts of Customer or any third party, then such railcar will be considered as constructively
placed for demurrage purposes at the time of attempted delivery.
9. Hazardous Materials
9.1 The following provisions apply when the Sidetrack is used for the delivery or tender of
any dangerous, flammable, explosive or hazardous commodity (hereinafter “Hazardous Materials”), as
determined by the U.S. Department of Transportation under the Hazardous Materials Transportation
Act (49 U.S.C. §§1801, et seq.) and the Hazardous Materials Regulations (49 U.S.C. Parts 170-179)
issued thereunder, as amended from time to time.
9.2 No Hazardous Materials shall be placed: (A) on the Sidetrack (except railcar shipments);
(B) within the clearance requirements established herein; or (C) within one hundred (100) feet of
Railroad’s connecting mainline track.
9.3 Customer shall comply with all recommended practices of the Association of American
Railroads and all Governmental Requirement(s) regarding the loading, unloading, possession,
transfer and/or storage of Hazardous Materials, including but not limited to the installation and
use of pollution abatement and control structures and other equipment that is prudent or required
under such practices and/or Governmental Requirement(s).
9.4 In the event of a Hazardous Materials leak, spill, or lease, Customer shall immediately
notify the appropriate Governmental Response center and Railroad’s Operations Center and, at its
sole expense, take all appropriate steps to clean, neutralize and remove the spill.
10. SUSPENSION AND TERMINATION.
10.1 Railroad may temporarily suspend its operations over the Sidetrack and/or Yard Tracks if,
in its sole opinion, the condition of the track is unsafe or if such operations would interfere
with its common carrier duties.
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10.2 Either party may terminate this Agreement upon the material default of the other party.
The party claiming a default must provide the other party with notice. If the default is not
corrected within thirty (30) days of the date of such notice, the party claiming default may
terminate this Agreement upon written notice. Use of the Sidetrack or Yard Tracks by Railroad
during any notice period shall not be considered as a waiver of any default claimed by it.
10.3 Customer understands that it must tender and/or receive a sufficient number of railcar
shipments over the Sidetrack in order for Railroad to continue to keep Railroad’s portion of the
Sidetrack in place. After the fifth anniversary of revenue operations over the Sidetrack, if the
Railroad determines that the number of railcar shipments is insufficient, Railroad may notify
Customer and offer to continue to keep the Sidetrack in place in exchange for payment of an annual
continuation charge from Customer. The amount of the continuation charge may vary from year to
year. Customer shall have a period of thirty (30) days from the date of notice from Railroad
within which to either accept or decline payment of the continuation charge. Should Customer
decline to pay the continuation charge or not respond during the thirty (30) day period, then
Railroad shall have the right to suspend service over the Sidetrack, remove its track and turnouts,
and/or to terminate this Agreement upon notice to Customer.
10.4 This Agreement will terminate, without the necessity of further notice, upon the
abandonment of Railroad’s adjacent mainline track.
10.5. Either party may terminate this Agreement, following the five-year anniversary of
revenue operations over the Sidetrack, by extending thirty (30) days’ notice to the other party.
10.6. Upon the termination of this Agreement, each party may remove any portion of its
trackage.
11. Liability and Insurance.
11.1 Except as otherwise provided herein, any and all damages, claims, demands, causes of
action, suits, expenses (including attorney’s fees and costs), judgments and interest whatsoever
(hereinafter collectively “Losses”) in connection with injury to or death of any person or persons
whomsoever (including employees, invitees and agents of the parties hereto) or loss of or damage to
any property whatsoever arising out of or resulting directly or indirectly from the construction,
maintenance, repair, use, alteration, operation or removal of the Sidetrack and Yard Track shall be
divided between the parties as follows:
(a) Each party shall indemnify and hold the other party harmless from all Losses arising from
the indemnifying party’s willful or gross negligence, its sole negligence and/or its joint or
concurring negligence with a third party.
(b) The parties agree to jointly defend and bear equally between them all Losses arising from
their joint or concurring negligence.
(c) Notwithstanding the foregoing, and irrespective of the sole, joint or concurring
negligence of Railroad, Customer acknowledges that it is solely responsible for and agrees to
indemnify and save Railroad harmless from all Losses arising from: (i) the failure of Customer
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to properly maintain the Sidetrack and/or Yard Tracks; (ii) the construction, alteration or
removal of the tracks by Customer; (iii) the presence of a Close clearance on the tracks; or (iv)
the explosion, spillage and/or presence of Hazardous Materials on its properties, facility or on
Customer’s Segment, but only when such Losses would not have occurred but for the dangerous nature
of the Hazardous Materials.
11.2. Customer at its sole cost and expense shall procure and maintain in effect during the
continuance of this Agreement, a policy of Commercial General Liability Insurance (CGL), naming
Railroad as additional insured and covering liability assumed by Customer under this Agreement. A
coverage limit of not less than THREE MILLION AND 00/100 U.S. DOLLARS ($3,000,000.00) Combined
Single Limit per occurrence for bodily injury liability and property damage liability is required
to protect Customer’s assumed obligations. Coverage shall not exclude railroad risks. Evidence of
insurance coverage shall be provided to Railroad and endorsed to provide for thirty (30) days’
notice to Railroad prior to cancellation or modification of any policy and shall reflect Customer’s
assumed obligations under this Agreement.
11.3. If said CGL insurance policy(ies) do(es) not automatically cover Customer’s contractual
liability during periods of survey, installation, maintenance and continued occupation, a specific
endorsement adding such coverage shall be purchased by Customer. If said CGL policy is written on
a “claims made” basis instead of a “per occurrence” basis, Customer shall arrange for adequate time
for reporting losses. Failure to do so shall be at Customer’s sole risk.
11.4. Obtaining said insurance shall not limit Customer’s liability under this Agreement, but
shall be security therefore.
12. Customer Switching. Customer shall have the right to switch with its own
trackmobile or locomotive power over the Sidetrack under the terms hereof. However, in no event
shall Customer perform any switching service or operate over Railroad’s mainline or over any other
trackage owned by Railroad. Any device used by Customer to move railcars on the tracks (whether
trackmobile, locomotive or other) shall be disconnected from said railcars and locked and secured
by Customer when not in use. Customer shall take all necessary precautions to prevent rolling
stock from entering upon or fouling Railroad’s mainline. Customer assumes all risk of loss, damage,
cost, liability, judgment and expense (including attorneys’ fees), in connection with any personal
injury to or death of any persons, or loss of or damage to any property, whether employees of
either Customer or Railroad or third persons, or property of either Customer or Railroad or of
other persons, that may be sustained or incurred in connection with, or arising from or growing out
of, the operation of Customer’s trackmobile or locomotive power or other Customer switching
operations upon the Sidetrack. If the Customer contracts a third party for railcar movement and
switching operations over Customer’s portion of the Sidetrack, Customer shall remain liable to
Railroad for the actions and inaction of such third party.
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13. Miscellaneous.
13.1 Each provision of this Agreement is several from the other provisions. If any such
provision is ruled to be void or unenforceable, the remaining provisions will continue in full
force and effect.
13.2 Other documents may also describe and cover a portion of the rail service provided under
this Agreement. In the event of any conflict between such other documents and this Agreement, this
Agreement shall control.
13.3 The section captains in this Agreement are for the convenience of the parties and are not
substantive in nature. All words contained in this Agreement shall be construed in accordance with
their customary usage in the railroad industry.
13.4 The failure of either party to enforce any provision of this Agreement or to prosecute
any default will not be considered as a waiver of that provision or a bar to prosecution of that
default unless so indicated in writing.
13.5 All notices shall be in writing, shall be sent to the address contained in the
introductory section and shall be considered as delivered: (a) on the next business day, if sent
by telex, telecopy, telegram or overnight carrier; or (b) five days after the postmark, if sent by
first class mail.
13.6 The late payment of any charge due Railroad pursuant to this Agreement will result in the
assessment of Railroad’s then standard late fee and interest charges at the rate of eighteen
percent (18%) per annum, or at the highest lawful rate, until payment in full is received.
13.7 Upon the signature of duly authorized representatives of both parties, this Agreement
shall be a binding agreement on both parties.
13.8 This Agreement constitutes the entire understanding of the parties, is to be construed
under the laws of the state in which the Sidetrack is located, may not be modified without the
written consent of both parties, and has been executed by their duly authorized officials.
IN WITNESS WHEREOF, the parties have duly executed this RAIL SERVICE AND CONSTRUCTION
AGREEMENT as of the date first above written.
| NEBRASKA NORTHEASTERN RAILWAY COMPANY | ||
By: /s/Xxx Xxxxx
|
By: /s/Xxxxxx L> Xxxxxxx | |
Xxx Xxxxx, Its President
|
Xxxxxx X. Xxxxxxx, Its President |
