EXHIBIT 10.7(a)
January 7, 1998
Xx. Xxxx Xxxxxx
Vice President, Crops Division
Southern States Cooperative, Inc.
P. O. Box 26234
Richmond, Virginia 23260
Subject: MEMBER PRODUCT PURCHASE AGREEMENT
Schedules of Product Purchases
Contract Year 2001-2002
Dear Xxxx:
As is required by the Member Product Purchase Agreement (Section III, Paragraph
3.2) we are enclosing Schedules of Product Purchases for designation of your
company's product requirements.
The foundation of that Agreement is the execution of a mutually agreeable
schedule of purchases for the next five (5) years. Because the Member Product
Agreement is an integral part of the CF Industries, Inc. long-term financing, it
is essential that designations thereunder be kept current.
In accordance with the provisions of the Agreement, at the end of each year a
mutually agreeable supplement to the Schedules of Product Purchases covering the
fifth (5th) year hence is to be executed by each Member and by CF.
It is imperative that supplements to the Schedules of Product Purchases for
contract year 2001-2002 be executed formally by each Member and by CF. To allow
both the Members and CF, respectively, adequate time to prepare and analyze
these product requirements, the timetable on the following page is suggested.
Xx. Xxxx Xxxxxx
Vice President, Crops Division
Southern States Cooperative, Inc.
January 7, 1998
Page 2
February 16, 1998 - Member product requirements for contract year
2001-2002 should be submitted to CF, in
duplicate, both copies to be signed and dated
by an appropriate officer of the Member.
February 27, 1998 - CF and the Members are to agree mutually to
product requirements for contract year 2001-
2002.
March 9, 1998 - All Schedules of Product Purchases are to be
executed by appropriate officers of both CF
and the Member, and one (1) copy is to be
returned to Member.
We recognize that a substantial amount of effort will be needed by Members to
prepare these forecast product requirements. To assist Members in this regard,
if we are so requested CF will be pleased to make available assistance from our
Marketing and Member Services personnel.
We look forward to working with you to make the Member Product Purchase
Agreement a successful tool for Members and CF to meet the plant food
requirements of your farmer patrons.
Sincerely yours,
/s/ Xxxx X. Xxxxxxxxxx
Xxxx X. Xxxxxxxxxx
Senior Vice President
Marketing and Sales
JHS:DJB
Attachments
cc: X.X. Xxxxx
CF INDUSTRIES, INC.
MEMBER PRODUCT PURCHASE AGREEMENT
October 18, 1974
CF INDUSTRIES, INC.
-------------------
MEMBER PRODUCT PURCHASE AGREEMENT
---------------------------------
Contents
--------
Section Page
------- ----
I Nature of Agreement 2
II Definitions 2
III Term 3
IV Price and Patronage 4
V Payments 6
VI Taxes 6
VII Specifications 7
VIII Quantity 7
IX Damages 10
X Allocation 12
XI Delivery 15
XII Force Majeure 15
XIII Default and Waiver 17
XIV Assignment 18
XV Warranties 18
XVI Modifications 19
XVII Cooperation 20
XVIII Disputes 20
XIX Notices 21
XX Law 21
MEMBER PRODUCT PURCHASE AGREEMENT
---------------------------------
This Agreement made and entered into by and between CF INDUSTRIES, INC., an
agricultural cooperative association organized under the laws of the State of
Illinois ("Co-op"), and ________________________________________, an
agricultural cooperative association organized under the laws of
______________________________________________ ("Member"),
WITNESSETH
----------
WHEREAS, Co-op has undertaken at the instance and request of its
members to develop and operate plants and equipment for the production and
distribution of fertilizer materials for the benefit of its members; and
WHEREAS, Co-op has committed a substantial financial investment in
production and distribution facilities for the benefit of its members and in
reliance on the Agreement will commit additional funds for expansion of such
facilities to meet the requirements of its members; and
WHEREAS, Member wishes to participate in the benefits of a dependable
long-term supply of fertilizers and to cooperate with other members of Co-op in
the development and operation of production and distribution facilities by the
execution of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained it is hereby agreed as follows:
I
NATURE OF AGREEMENT
-------------------
Nature of 1.1 This Agreement is generally intended to provide for the
Agreement sale and purchase by Member of fertilizer materials produced,
purchased and distributed by Co-op.
II
DEFINITIONS
-----------
Definitions As used in this Agreement the following terms shall have the
following respective meanings:
2.1 "Facilities" shall mean the plants and equipment
operated by Co-op for the manufacture, storage and distribution
of fertilizer materials.
2.2 "Ton" shall mean two thousand pounds avoirdupois.
2.3 "Year" shall mean a fiscal year of twelve (12)
consecutive months commencing July 1st and ending June 30th.
2.4 "Month" shall mean a calendar month.
2.5 "Product" shall mean any fertilizer materials (in dry,
liquid or gaseous form) sold and purchased or to be sold and
purchased hereunder.
2.6 "Nutrient" shall mean the nitrogen, phophorous or
potassium content of Product, expressed as N, P/2/O/5/ and K/2/O
respectively.
2.7 "Available Supply" shall mean the quantity of all
Product or Nutrient secured by Co-op for distribution to its
members from assured
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sources, whether by manufacture, or (except for "spot purchases")
by purchase or barter, during each Year; it shall not mean
Product processed or exchanged with or sold to other persons in
connection with contracts with non-members for the general
benefit of all members.
2.8 "Shipping Point" shall mean the place designated by Co-
op for the delivery of Product within the relevant market area.
III
TEAM
----
Term 3.1 The term of this Agreement shall be as follows:
(a) Base Period - The Base Period of this Agreement
shall be a term of ten Years commencing on the first day of July,
1975.
(b) Evergreen Period - After the expiration of the
Base Period this Agreement shall remain in force for an
indefinite term until the Product sales and purchases provided in
the Schedule of Product Purchases and all supplements thereto
have been completed as required by this Agreement.
3.2 At the end of the first Year of this Agreement and each
Year thereafter, the parties shall execute a mutually agreeable
supplement to the schedule of Product Purchases covering the
fifth Year hence, as further provided in Section 8.5. The parties
agree that the supplements to the Schedule of Product Purchases
for the sixth through tenth Years of the Base Period shall
provide for the sale and purchase of Product in an aggregate
quantity not less than the aggregate quantity to be sold and
purchased during the first through fifth years of the Base
Period.
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IV
PRICE AND PATRONAGE
-------------------
Price and 4.1 The parties to this Agreement have intentionally left
Patronage the purchase price to be paid by Member to Co-op for Product open
for later determination. It is the intention of the parties that
they be bound by this Agreement from the date of signing of the
Agreement, even though the price is not determined at that time.
Each Year pricing policies of Co-op shall be reviewed and
established by its Board of Directors at the time of adoption of
the annual budget.
4.2 The price applicable to each shipment of Product shall
be generally competitive with fair market prices in effect for
sales to independent purchasers by producers of like Products of
the same grade and quality (excluding prices for spot sales on an
isolated or irregular basis) for shipment to the same class of
trade, or absent such market, the price to dealers with
appropriate discounts, the same date, after appropriate
adjustment for the allowances and discounts customarily granted
for freight (as appropriate to Co-op's established distribution
system in the relevant market) and for prompt payment.
4.3 Co-op shall from time to time publish effective prices
for each type of Product.
4.4 Co-op may from time to time offer as an allowance to
induce Member to accept delivery of certain Product during each
Year in substantially equal quantities each Month an amount
representative of the cost savings realized by Co-op as a
consequence of such uniform delivery (as compared with normal
seasonal delivery patterns which would be expected to occur in a
free market in a period of adequate supply).
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4.5 Subject to the Articles of Incorporation and Bylaws of
Co-op, each Year Co-op shall distribute to Member on a fair and
equitable basis that part of the net earnings remaining after
setting aside reasonable and adequate reserves recognized from
business transacted with all members of Co-op during such Year as
patronage dividends in the form of cash, shares of stock,
certificates of interest, or such other notification of patronage
participation as Co-op shall determine; and Member hereby
consents and agrees to include in the gross income of Member all
patronage dividends in the taxable year received.
4.6 In the event of Force Majeure, or other contingency as
provided in Article XII hereof, including, without limitation,
governmental action, resulting in a substantial increase in the
estimated costs of operation of Co-op, the minimum price for any
or all Product effected by such event shall be appropriately
increased.
V
PAYMENTS
--------
Payments 5.l Payment for Product shall be made by Member to Co-op
within thirty days after Member takes delivery of Product.
5.2 Payments shall be made in U.S. dollars.
5.3 Payment shall be made at the office of Co-op at Long
Grove, Illinois, or as otherwise specified by Co-op.
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VI
TAXES
-----
Taxes 6.1 The Price established pursuant to this Agreement shall
not include excise, transfer, sales or other taxes, or charges
payable to governments, imposed, levied, assessed or collected
for the transfer or sale, of Product. Member shall pay and be
responsible for the amount of all such taxes or other charges and
shall pay directly as due or advance the amount due to Co-op for
timely payment.
6.2 Member shall be entitled to contest the imposition of
any such taxes or charges and Co-op shall render full cooperation
to Member in this behalf.
VII
SPECIFICATIONS
--------------
Specifi- 7.1 All Products shall conform to quality specifications
cations generally accepted in the industry.
7.2 In theevent any Product delivered deviates from the
foregoing specifications, Member shall be entitled to a rice
adjustment to the extent of any loss on the resale f the Product
resulting from the granting of actual and reasonable credits or
cost reductions to purchasers; provided notice of such deviation
and adequateopportunity to inspect and to accept a return of such
Product shall have been given to Co-op prior to resale.
7.3 Member shall have the right to inspect Product either
at the time of delivery or at the time of unloading from the
carrier and within ten business days after such inspection must
give notice to Co-op of any claim
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for damages on account of condition, quality or grade of the
Product, specifying in detail the basis of such claim. The
failure of Member to comply with these conditions shall
constitute acceptance of the Product by Member, except in the
event of latent defects not readily discoverable in the ordinary
routine of business.
VIII
QUANTITY
--------
Quantity 8.1 Member shall purchase from Co-op and Co-op shall sell
to Member during each Year the quantity of nutrient (contained in
Product of various types) as set forth in the Schedule of Product
Purchases hereto attached.
8.2 Co-op reserves the right to adjust production of a
particular Product and to substitute other Product containing in
the aggregate the same Nutrient content as the curtailed Product
when appropriate to the best interests of the Product needs of
substantially all of its members after giving due consideration
to the effect of such adjustment of production upon each of its
members; provided, Co-op shall give to member reasonable notice
and opportunity to cancel its commitment for the Product to be
curtailed.
8.3 The quantity of Product delivered hereunder shall be
governed by weights and measurements taken by Co-op at the time
of delivery to carrier. Member may call for an examination of any
weighing or measuring devices to be made by an independent
qualified examiner at Member's cost. If such examination
discloses any inaccuracy in the weighing or measuring equipment
of 1% or more, the cost of examination and correction shall be
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reimbursed by Co-op to Member and all invoices for shipments of
Product during the period of such inaccuracy, but not more than
thirty days prior to the examination, shall be adjusted
appropriately.
8.4 Co-op will use its best efforts to ship and Member will
use its best efforts to accept delivery of Product in
approximately equal weekly quantities.
8.5 During each Year this Agreement is in force, and not
later than three Months prior to the end of such Year, Member
shall furnish to Co-op a proposed supplement (commonly referred
to as "intents") to the Schedule of Product Purchases setting
forth the types and quantities of Product, if any, Member desires
to purchase from Co-op during the succeeding fifth Year;
provided, however, that Member and Co-op must mutually agree on
the quantities of Nutrient to be sold and purchased pursuant to
such supplement and Co-op may decline to accept changes in
quantities of Nutrient to the extent appropriate to equitably
supply all members of Co-op. In determining whether a proposed
supplement is acceptable Coop shall consider, among other
factors, the ability of Co-op to produce, acquire and distribute
Products and Member's ability to provide storage and distribute
Products. The proposed purchases ("intents") as accepted by Co-op
shall become a permanent index for purposes of applying the
allocation formulas described in Section 10.2 hereof. Member may
make reasonable amendments to the Schedule of Product Purchases
to change the Product mix, but not to change the quantity of
Nutrient, after reasonable prior notice and within the practical
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constraints of Co-op's productive capacities and its commitments
to other members.
8.6 Co-op shall use its best efforts to make available 110%
of the quantity of N and P2O5, and 100% of the quantity of K2O
agreed to be sold to Member in the form of Product needed by
Member in each Year.
IX
DAMAGES
-------
Damages 9.1 If any Nutrient Co-op agreed to sell hereunder during
each Year remains unshipped one month after the end of such Year
by reason of a breach or default of Member, Coop shall be
entitled to recover liquidated damages calculated as follows:
If the Nutrient shipped is less than the percentage in
column A but not less than the percentage in column B the
amount of such damages shall be the percentage in column C
(on a non-cumulative basis) of the highest price published
by Co-op applicable to Member for such Nutrient (determined
in proportion to the types of Product not taken) during the
Year of default for the quantity of Nutrient unshipped.
A B C
- - -
100% 90% --%
90 89 5
89 88 7.5
88 87 10
87 86 12.5
86 0 15
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9.2 If any Nutrient Member agreed to purchase hereunder
during each Year remains unshipped one Month after the end of
such Year by reason of a breach or default of Co-op, Member shall
be entitled to recover liquidated damages calculated as follows:
If the Nutrient shipped is less than the percentage in column A,
abut not less than the percentage in column B, the amount of such
damages shall be the percentage in column C (on a noncumulative
basis) of the highest price published by Co-op applicable to
Member for such Nutrient (determined in proportion to the types
of Product not shipped) during the Year of default for the
Nutrient unshipped.
A B C
- - -
100% 96% --%
96 95 5
95 94 7.5
94 93 10
93 92 12.5
92 O 15
9.3 Member may from time to time waive its rights to
purchase Nutrient in order to permit other members to purchase
said Nutrient; in such event, Member waiving rights to purchase
shall not be liable for liquidated damages if an actual sale of
such Nutrient is made to another member at the current published
price to the extent of such sale.
9.4 Upon the request of Member Co-op will act as agent for
Member and assist Member to dispose of any Nutrient which Member
agreed to purchase, but which exceeds Member's need for such
Nutrient.
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X
ALLOCATION
----------
10.1 All allocations of Product shall be determined in equivalent tons of
Nutrient (N, P2O5 or K2O); for example, the N and P2O5 content of diammonium
phosphate shall be considered separately.
10.2 In the event Co-op, for any reason, shall be unable to supply the
needs of all members as expressed in their proposals for purchases of Product
and supplements ("intents") thereto, Co-op shall allocate the Available Supply
of Product among all members on the following basis:
(a) During the Year commencing July l, 1975, Member shall be
entitled to purchase that part of the Available Supply of Nutrient
which bears the same proportion to the total Available Supply of
Nutrient as the quantity of Nutrient shipped to Member during the
prior Year bears to the total quantity of Nutrient shipped from Co-
op to all members of Co-op during the prior Year.
(b) During the Year commencing July l, 1976, Member shall be
entitled to purchase that part of the Available Supply of Nutrient
which bears the same proportion to the total Available Supply of
Nutrient as a number determined by adding three times the quantity
of Nutrient shipped to Member in the prior Year to the quantity of
Nutrient Member proposed to purchase in the current Year and
dividing the sum by four, bears to a number determined by adding
three times the total quantity of Nutrient shipped by Co-op to all
members of Coop during the prior Year to the quantity of Nutrient
all members of Co-op proposed to purchase in the current Year and
dividing the sum by four.
(c) During the Year commencing July 1, 1977, Member shall be
entitled to purchase that part of the Available Supply of Nutrient
which bears the same proportion to the total Available Supply of
Nutrient as a number determined by
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adding the quantity of Nutrient shipped to Member in the prior Year
to the quantity of Nutrient Member proposed to purchase in the
current Year and dividing the sum by two, bears to a number
determined by adding the total quantity of Nutrient shipped by Co-op
to all members of Co-op during the prior Year to the quantity of
Nutrient all members of Co-op proposed to purchase in the current
Year and dividing the sum by two.
(d) During the Year commencing July 1, 1978, Member shall be
entitled to purchase that part of the Available Supply of Nutrient
which bears the same proportion to the total Available Supply of
Nutrient as a number determined by adding the quantity of Nutrient
shipped to Member in the prior Year to three times the quantity of
Nutrient Member proposed to purchase in the current Year and
dividing the sum by four, bears to a number determined by adding the
total quantity of Nutrient shipped by Co-op to all members of Co-op
during the prior Year to three times the quantity of Nutrient all
members of Co-op proposed to purchase in the current Year and
dividing the sum by four.
(e) During the Year commencing July 1, 1979, and each Year
thereafter, Member shall be entitled to purchase that part of the
Available Supply of Nutrient which bears the same proportion to the
total Available Supply of Nutrient as the quantity of Nutrient
Member proposed to purchase in the current Year, bears to the total
quantity of Nutrient all members of Co-op proposed to purchase from
Co-op during the current Year.
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XI
DELIVERY
--------
Delivery 11.1 All Products shall be delivered to Member and risk of
loss shall pass at the Shipping Point.
11.2 Delivery by Co-op to carrier shall constitute delivery
to Member, and if Member requires that the Product be shipped to
the order of Member or freight prepaid or allowed, after delivery
of the Product to carrier, Co-op shall be deemed to be acting for
the account and the accommodation of Member.
11.3 Co-op shall not be obligated to deliver in any Month
more than twelve percent of the annual quantity of any Product,
other than anhydrous ammonia and nitrogen solutions, to be sold
and purchased during that Year.
11.4 Delivery orders shall be placed by Member in
accordance with reasonable procedures established from time to
time by Co-op after adequate prior notice to Member.
XII
FORCE MAJEURE
-------------
Force l2.l In the event of either party being rendered unable by
Majeure Force Majeure to perform any of its obligations in receiving or
delivering Product hereunder, the obligations of such party shall
be suspended, to the extent it is unable, in whole or in part, to
receive or deliver Product by reason of Force Majeure, during the
continuance of any inability so caused and the cause of such
inability shall, so far as possible, be remedied with reasonable
diligence.
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12.2 The term "Force Majeure" as used in this Agreement
shall mean natural catastrophy, strikes, lockouts, or other
industrial disturbances, acts of the public enemy, wars, declared
or undeclared, blockades, insurrections, riots, fires, civil
disturbances, explosions, curtailment of power or natural gas,
compliance with laws, governmental regulations, orders and
requests, whether valid or not, curtailment or other inability to
obtain equipment, supplies, materials, or transportation
Facilities, breakdown of Facilities, machinery or equipment and
any other cause whether of the kinds herein enumerated or
otherwise, not within the reasonable control of the party
claiming suspension, all of which by the exercise of due
diligence such party could not have reasonably foreseen and
provided against; provided, however, that the settlement of
strikes or lockouts shall be entirely within the discretion of
the party having the difficulty.
12.3 In addition to all other contingencies, the
obligations to make future deliveries of Product hereunder are
contingent upon the construction of additional production and
distribution Facilities. If such additional Facilities are not
completed as planned for reasons beyond the reasonable control of
Co-op, then Co-op shall be excused from delivery of so much of
the Product as would have been available if the Facilities were
completed.
12.4 During any period of shortage of Product caused by any
of the foregoing causes, Co-op may prorate the Available Supply
of Product among its members and customers under this and other
agreements on a fair and equitable basis. The parties hereby
agree that in the event of a Force Majeure it may not be feasible
to implement the provisions of Article X hereof relating to
Allocations.
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12.5 It is expressly understood and agreed that in no event
shall the provisions of this Article XII be construed to excuse
or suspend the obligations of Member under this Agreement so as
to enable Member to purchase Product from other Sources at more
favorable prices, or on more favorable credit terms, or to honor
other purchase agreements or to first exhaust supplies of Product
available from productive Facilities owned, directly or
indirectly, by Member, whether now or hereafter existing.
XIII
DEFAULT AND WAIVER
------------------
Default 13.1 If either party shall fail to perform any of the and
and covenants or obligations imposed upon it in this Agreement
Waiver (except where such failure shall be excused under Article XII
hereof) , the other party shall notify the party in default in
writing of the alleged default and if the party in default shall
not undertake with all due diligence to correct the same to
comply with the obligations and covenants hereof within thirty
(30) days from and after receiving such notice, then,
notwithstanding any other provision of this Agreement, the
complaining party shall have the right to terminate this
Agreement on notice in writing to the party in default, and such
termination shall not constitute a waiver of any other remedy to
which the party not in default may be entitled for breach of the
contract.
13.2 Waiver by either party of any breach of the terms and
conditions herein contained shall not be construed as a waiver of
any subsequent breach of the same or any other provision of this
Agreement.
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XIV
ASSIGNMENT
----------
Assignment 14.1 This Agreement shall not be assignable by either party
without the prior written consent of the other party, except by
merger or consolidation of Member with agricultural cooperative
association and except that Co-op shall have full right and power
to assign the benefit of all or any part of this Agreement, and
either party shall have the right to grant a security interest
herein to any financial institution in connection with any
agreement made for the benefit of the party.
XV
WARRANTIES
----------
Warranties 15.1 Co-op makes no warranty, express or implied,
concerning any Product other than that it shall conform to the
specifications set forth in Article VII hereof. All other
warranties of any kind, express or implied in fact or by law,
including, but not limited to, implied warranties of
merchantability or fitness for any particular purpose or any
implied warranty arising from course of dealing or usage of any
trade, are expressly excluded from this warranty and from this
Agreement.
MODIFICATION
Modifica- 16.1 This Agreement constitutes the entire Agreement
tion between the parties hereto for the sale and purchase of Product
from Agreements, understandings, representations, conditions and
warranties by and between the parties.
-16-
16.2 Neither party shall be liable for any representation
or warranty of any kind, express or implied, not expressly set
forth in this Agreement.
16.3 This Agreement may not be modified or amended except
by written instrument signed by both of the parties and shall not
be modified or altered by any subsequent course of performance by
either of the parties, except as expressly otherwise herein
provided.
XVI
COOPERATION
-----------
17.1 The parties agree to cooperate fully with one another
and to carry out the intents and purposes of this Agreement and
whenever consent may be required of either party with respect
hereto such consent shall not be unreasonably withheld.
XVIII
DISPUTES
--------
Disputes 18.1 The parties agree that as a condition precedent to
commencement of any suit, all disputes and controversies of every
kind and nature between the parties hereto arising out of or in
connection with this Agreement, its construction, validity,
interpretation, performance, operation, enforcement, breach,
continuance, or termination, which is not disposed of by
agreement of the parties, shall be submitted for decision by the
full Board of Directors of Co-op by presentation of a concise
statement of the matter in controversy in sufficiently
comprehensive form to express the nature of the
-17-
controversy and the issues to be decided. The Board of Directors
shall promptly render a decision on the issues at its regular
meeting next after the submission.
18.2 If either party is not satisfied with the result of
such decision such party shall be entitled to pursue all other
available lawful remedies.
XIX
NOTICES
-------
Notices 19.1 Unless otherwise provided herein, any notice required
under the terms hereof shall be in writing and shall be deemed
delivered when deposited in the United States or Canadian mails,
postage prepaid, addressed as follows:
To Co-op CF Industries, Inc.
Salem Lake Drive
Long Grove, Illinois
To Member
or to such other address as either party may designate in
writing.
XX
LAW
---
Law 20.1 This Agreement shall be construed and governed in
accordance with the laws of the State of Illinois, U.S.A.
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IN WITNESS WHEREOF, this Agreement has been executed by the
parties pursuant to authorization of their respective Boards of
Directors this 16th day of September, 1974.
"Co-op" CF INDUSTRIES, INC,
By /s/
--------------------------
"Member"
Southern States Cooperative, Inc.
By /s/
-----------------------------
June 30, 1975
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