Fiber Supply Agreement – Del-Tin Fiber LLC and Deltic Farm & Timber Co. Inc.
FIBER SUPPLY AGREEMENT
THIS FIBER SUPPLY AGREEMENT is entered into as of February
21, 1995, between Del-Tin Fiber L.L.C., an Arkansas limited liability
company ('Del-Tin'), and Deltic Farm & Timber Co., Inc., an Arkansas
corporation ('Deltic').
A. Del-Tin plans to construct, own and operate a facility (the 'Facility')
to manufacture medium density fiberboard ('MDF').
B. Deltic owns a fifty percent membership interest in Del-Tin. Deltic has
approximately 313,000 acres of timberland in Arkansas, and produces
sawdust, shavings and chips (collectively, 'Wood Fiber') from two
sawmills and a chipping facility.
C. It is projected that the Facility will require approximately 450,000
tons of Wood Fiber per year when it is operating at full capacity.
D. It is projected that Deltic will produce approximately 200,000 tons of
residue chips per year from its sawmill in Waldo, Arkansas (the 'Waldo
Residue Chips'), after addition of second shift at the Waldo sawmill.
E. Del-Tin desires to secure a supply of Wood Fiber for the Facility, and
Deltic desires to supply Wood Fiber to Del-Tin.
In consideration of the mutual covenants and agreements set
forth herein, the parties agree as follows:
1. Fiber Supply.
1.1 Preferred Supplier. Deltic shall be the preferred supplier of
Wood Fiber to Del-Tin. Del-Tin shall purchase residue chips from
third parties only to the extent Del-Tin's residue chip
requirements exceed the quantity of Waldo Residue Chips made
available to Del-Tin in accordance with the terms of this
Agreement.
1.2 Residue Chips from Waldo Sawmill. Deltic agrees to sell to
Del-Tin, and Del-Tin agrees to purchase from Deltic, all Waldo
Residue Chips. Notwithstanding the foregoing, Deltic may, at its
option, withhold up to 10% of the Waldo Residue Chips. The
delivered price (F.O.B. Del-Tin's facility) for Waldo Residue
Chips shall approximate the weighted average delivered price of
like-kind residue chips available to Del-Tin from third parties
located within a 70 mile radius of the facility. Prior to the
Commencement Date, and prior to the commencement of each calendar
year thereafter, Deltic and Del-Tin shall agree upon the delivered
price for Waldo Residue Chips. The agreed price shall be firm
until the beginning of the next calendar year.
1.3 Secondary Fiber. Del-Tin shall have first call on Wood Fiber from
the following Deltic secondary sources (collectively, 'Secondary
Fiber'):
(a) residue chips produced at Deltic's sawmill in Ola, Arkansas;
(b) roundwood chips produced at Deltic's chipping facility in
Waldo, Arkansas; and
(c) shavings and/or sawdust produced at Deltic's sawmill in
Waldo, Arkansas.
Any Secondary Fiber so called by Del-Tin shall be sold at market
prices F.O.B. Deltic's facilities. Deltic shall not be required
to breach any contract or agreement to accommodate a call for
Secondary Fiber by Del-Tin.
1.4 Displacement by Deltic. At any time on ten days' notice, Deltic
may displace any or all Wood Fiber being acquired by Del-Tin from
third parties ('Third Party Fiber') with a like volume of like
kind Secondary Fiber; provided, however, that Del-Tin shall not be
required to breach any contract or agreement to accommodate such
displacement. Any Secondary Fiber so put by Deltic shall be at
the same total cost to Del-Tin (inclusive of transportation) as
the Third Party Fiber being displaced.
2. Term.
2.1 Definitions. The following terms shall have the meanings
indicated:
2.1.1 'Start-Up Date' means the first day of production of
MDF at the Facility.
2.1.2 'Commencement Date' means a date approximately 60
days prior to the Start-Up Date. The
Commencement Date shall be set by agreement
between Del-Tin and Deltic.
2.1.3 'Ramp-Up Period' means the period from the
Commencement Date to the Start-Up Date, and
continuing for so long thereafter as may be
necessary to allow the Facility to reach full
production.
2.2 Term; Renewal; Termination. The Initial term of this
Agreement shall commence on the Commencement Date and shall
continue for a period of five years from the Start-Up Date.
The term of this Agreement shall be automatically extended
for successive five year periods unless either party
notifies the other in writing at least 180 days prior to the
effective date of such extension of its desire not to extend
the term of this Agreement. Notwithstanding the foregoing,
this Agreement may be terminated by either party on 60 days'
notice to the other if Deltic ceases to own at least a 50
percent membership interest in Del-Tin.
2.3 Obligations During Ramp-Up Period. Deltic acknowledges that
Del-Tin's chip requirements during the Ramp-Up Period are
projected to be less than will be required when the Facility
reaches full production. Accordingly, during the Ramp-Up
Period, the purchase and sale obligations of Del-Tin and
Deltic, respectively, shall be reduced to the extent that
Del-Tin's chip requirements are less than Deltic's output
capabilities for Waldo Residue Chips.
3. Deltic's Obligations.
3.1 Order Acceptance. To the extent of Deltic's production
capability (subject to the above holdback provisions),
Deltic shall accept and fill on a timely basis orders from
Del-Tin for Waldo Residue Chips.
3.2 Regularity. Deltic shall endeavor to deliver Del-Tin's
orders for Wood Fiber in regular, uniform quantities unless
delivery in such a fashion is not possible due to events
beyond Deltic's reasonable control.
3.3 Transportation. Deltic agrees to make all necessary and
reasonable arrangements to provide an adequate supply of
suitably constructed and equipped trucks to transport Wood
Fiber from its facilities to Del-Tin.
4. Del-Tin's Obligations.
4.1 Wood Fiber Usage Budget. Del-Tin shall prepare and submit
to Deltic a budget containing Wood Fiber usage projections
for the Facility. The first Wood Fiber usage budget shall
be submitted to Deltic at least 30 days prior to the
estimated Start-Up Date. Thereafter, a Wood Fiber usage
budget shall be submitted to Deltic annually at least 30
days prior to the beginning of each calendar year.
4.2 Regularity. Del-Tin shall endeavor to purchase Wood Fiber
from Deltic in regular, uniform quantities unless purchases
in such a fashion are not possible due to events beyond
Del-Tin's reasonable control.
5. Payment.
5.1 Basis for Payment. The gross and tare weights of all
shipments of Wood Fiber to Del-Tin shall be determined by
means of Del-Tin's truck scales which will weigh and
automatically record on weight scale tickets the weight of
the trucks and the cargo therein. Each such weight scale
ticket shall show the date and time of delivery and
departure.
5.2 Payment Schedule. Del-Tin agrees to pay Deltic weekly for
all Wood Fiber sold and delivered to Del-Tin by Deltic.
Payments shall be calculated based upon the weight scale
tickets, and shall be due and payable on Friday of each
week, for shipments received the next preceding week.
Accompanying each payment, Del-Tin agrees to furnish Deltic
with the appropriate weight scale tickets evidencing the
quantities of Wood Fiber delivered and accepted by Del-Tin
during the next preceding calendar week.
6. Title and Risk of Loss.
Title to Wood Fiber shall pass to Del-Tin when the Wood Fiber
is unloaded at Del-Tin's facility. Responsibility for loss of,
or damage to, the Wood Fiber shall pass from Deltic to Del-Tin
upon the passage of title.
7. Insurance.
7.1 Liability Insurance. Deltic shall submit to Del-Tin
certificates evidencing that insurance of the types and the
amounts specified below has been obtained by Deltic, and
Deltic shall maintain such insurance at all times during the
term of this Agreement or any extension or renewal thereof:
(a) Statutory workers' compensation coverage, and
employers liability coverage with minimum limits of
liability of $500,000.
(b) Commercial general liability coverage with minimum
limits of $1,000,000 per occurrence bodily injury
liability and property damage liability combined and
$2,000,000 in the aggregate.
(c) Comprehensive automobile liability coverage insuring
all owned, non-owned and hired automobiles, with
minimum limits of liability of $1,000,000 per
occurrence for bodily injury and property damage
combined.
7.2 General Insurance Matters. The above policies shall be
endorsed to name Del-Tin as an additional insured. All
insurance certificates shall provide that the insurance will
not be cancelled without 30 days prior written notice to
Del-Tin. The above provisions with respect to Deltic
providing insurance are solely for the benefit of Deltic and
Del-Tin, and third parties shall have no rights under or by
reason of such provisions.
8. Force Majeure.
8.1 Defined. 'Force Majeure' means any event or condition which
wholly or partially delays or prevents such party from
performing any of its obligations hereunder and is beyond
the reasonable control of, and occurs without the fault or
negligence of, the party affected thereby including, without
limitation, acts of God, acts of the public enemy,
insurrections, riots, labor disputes, labor or material
shortages, fires, explosions, floods, breakdowns of or
damages to plants, equipment or facilities, interruptions to
transportation, embargoes, or orders or acts of any court or
government authority having jurisdiction or any military
authority.
8.2 Suspension of Obligations. If, as a result of Force
Majeure, it becomes impossible or impractical for either
party to carry out its obligations hereunder (other than any
obligation to pay money when due in accordance with the
terms of this Agreement) in whole or in part, then such
obligations shall be suspended to the extent necessary by
such Force Majeure during its continuance. The party
affected by such Force Majeure shall give prompt written
notice to the other party of the nature and probable
duration of such Force Majeure, and of the extent of its
effects on such party's performance hereunder. Each party
shall, in the event it experiences Force Majeure, use all
commercially reasonable efforts to eliminate such Force
Majeure and/or its effects on such party's performance
hereunder insofar as is practicable and with all reasonable
dispatch; provided, that neither party shall be obligated to
expend monies in order to eliminate Force Majeure and/or its
effects, if in such party's sole judgment, such expenditures
would be economically unjustifiable.
9. Defaults; Termination.
In the event either party hereto defaults in or fails to comply
with any material provision herein contained, and such default
is not the result of Force Majeure, and if, within thirty days
(or within seven days, for any obligation to pay money when due
in accordance with the terms of this Agreement) after the
nondefaulting party gives written notice of such default or
noncompliance to the defaulting party, the defaulting party
fails to remedy such default or noncompliance, the
nondefaulting party may, at its option, either suspend its
performance under this Agreement, or terminate this Agreement,
effective in either case upon giving written notice to that
effect to the defaulting party; provided, however, that any
such suspension or termination shall not affect any obligation
then existing hereunder. Such right to suspend performance or
terminate this Agreement shall not be an exclusive remedy and
shall be in addition to all other remedies provided herein or
available at law or in equity. The failure to exercise any
right or insist upon strict adherence to any term or condition
in any one or more instances shall not be construed as a waiver
of the right of strict performance for the future or as a
relinquishment of such obligations, conditions or rights.
10. Impossibility and Frustration of Purpose.
The parties' failure, after good faith efforts, to reach agreement
as to the delivered price for Waldo Residue Chips [Section 1.2]
shall be deemed a frustration of purpose and render the
performance of this Agreement impossible.
11. Indemnification.
Each party agrees to indemnify and hold harmless from all loss,
damage and expense of any nature (including reasonable attorneys'
fees) to the extent caused by the negligence or wilful misconduct
of the indemnifying party, or the indemnifying party's agents,
employees or subcontractors; provided, however, that NEITHER PARTY
SHALL BE LIABLE FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES
(INCLUDING LOSS OF SALES OR LOSS OF PROFITS) OF THE OTHER.
12. Notices.
Any notice required or permitted to be given by one party to the
other hereunder or by law shall be deemed on the first business
day after such notice is delivered by hand, courier or facsimile,
or mailed by certified mail, return receipt requested, postage
prepaid, as follows:
Deltic: Deltic Farm & Timber Co., Inc.
200 Peach Street (71730)
P.O. Box 7000
El Dorado, Arkansas 71731-7000
Facsimile No. (501) 864-6565
Attention: Ron L. Pearce
Del-Tin: Del-Tin Fiber L.L.C.
P.O. Box 1647
El Dorado, AR 71731-1647
Attention: Glenn Gray
or to such other address as may be designated by a party in accordance with
the provisions of this section.
13. Confidentiality.
In connection with this Agreement the parties may from time to
time exchange proprietary data and confidential information.
The parties agree to keep in confidence and not exploit all
such proprietary data and confidential information received in
connection with this Agreement. It is understood and agreed,
however, that such information may be disclosed when requested
by a court or government agency, or when a law or regulation
requires that it be reported to a regulatory agency. The
provisions of this Section 13 shall survive the termination or
expiration of this Agreement.
14. Miscellaneous.
14.1 No Assignment. Neither Deltic nor Del-Tin shall transfer or
assign this Agreement, or any of its rights or obligations
hereunder, in whole or in part, without the prior written
consent of the other party.
14.2 Entire Agreement. This Agreement embodies the entire
agreement and understanding between the parties with respect
to the subject matter hereof, and supersedes all prior and
contemporaneous negotiations, agreements, and understandings
between the parties.
14.3 Amendments. This Agreement shall not be amended except by a
writing, signed by both parties, containing the
restated/additional section.
14.4 Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of
Arkansas.
14.5 Independent Contractor. Each party to this Agreement is an
independent contractor and neither shall have the right to
control the methods and means by which the other party or
any of its employees, agents or subcontractors conducts its
independent business operations.
14.6 Headings for Convenience Only. The insertion of headings
are for convenience of reference only and shall not affect
the construction or interpretation of this Agreement.
14.7 Severability. In the event that any part, article, section,
paragraph or clause of this Agreement shall be held to be
indefinite, invalid or otherwise unenforceable, the entire
Agreement shall not fail on account thereof and the balance
of the Agreement shall continue in full force and effect.
DEL-TIN FIBER L.L.C.
By: /s/ Glenn R. Gray
-----------------------------------
Glenn R. Gray
General Manager
DELTIC FARM & TIMBER CO., INC.
By: /s/ Ron L. Pearce
-----------------------------------
Ron L. Pearce
President
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