A payment terms agreement is a legal contract between a buyer and seller that outlines how payments will be made. It can also outline what happens if the customer does not pay on time and what interest rates and late fees may apply.
This type of agreement is beneficial for both parties. Customers appreciate having clear expectations when it comes to paying invoices, while companies like to know how they will be compensated if their customers default on their bills.
Below is a list of common sections included in Payment Terms Agreements. These sections are linked to the below sample agreement for you to explore.
Confidential Treatment Requested. Confidential portions of this document have been redacted
and have been separately filed with the Commission.
EXTENDED PAYMENT TERMS AGREEMENT
This Extended Payment Terms Agreement (the “Agreement”) is dated June 29, 2009, and is between WEST CENTRAL COOPERATIVE, an Iowa cooperative association (“West Central”), and REG RALSTON, LLC, an Iowa limited liability company (“REG Ralston”).
West Central has been supplying soybean oil produced by it to REG Ralston for use in REG Ralston’s biodiesel production facility (the “Facility”) located next to West Central’s grain cooperative and soybean crushing facilities at Ralston, Iowa.
The parties may agree in the future to have West Central purchase supplies of animal fat, corn oil and other products as feedstock for resale to REG Ralston for use in the Facility (soybean oil, corn oil, animal fat and such other feedstocks are collectively referred to in this Agreement as “Feedstock”).
The parties desire to set forth their understanding as to the terms of payment that will apply for soybean oil that West Central sells to REG Ralston as well as for any other Feedstock that West Central may agree in the future to purchase and resell to REG Ralston.
Therefore, the parties agree as follows:
1. Time of Payment . All payments for Feedstock delivered by or for West Central to REG Ralston shall be paid by wire transfer to an account designated by West Central on or before the 45th day after West Central delivers an invoice for such Feedstock to REG Ralston.
2. Interest . Interest will accrue on amounts due for Feedstock beginning on the 5th day after West Central delivers an invoice for such Feedstock until paid at a rate per annum equal to the lesser of (a) a rate per annum equal to the greater of (determined monthly): (i) *** percent (***%) per annum over and above the LIBOR Rate (which rate of interest shall fluctuate monthly as provided below) or (ii) *** percent (***%) per annum, and (b) the highest rate permitted by law. Said interest shall be computed on an actual day, three hundred sixty day year basis and be payable monthly in arrears by the 15th day after the end of each month. So long as any Event of Default (as defined below) shall occur or be continuing, the interest rate shall increase to the lesser of (a) a rate per annum equal to the greater of (determined monthly): (i) *** percent (***%) per annum over and above the LIBOR Rate (which rate of interest shall fluctuate monthly as provided below) or (ii) *** percent (***%) per annum, and (b) the highest rate permitted by law. “LIBOR Rate” means the daily average of interbank offered rates for US Dollar deposits in the London market based on quotations at major banks, as published under the heading “London InterBank Offered Rates (LIBOR)” in the “Monthly Rates” column of The Wall Street Journal for the one month maturity as of the date which is two business days before the first day of the month for which interest is to be computed. The LIBOR Rate and the interest rate under this Agreement will be determined and reset for each calendar month as provided above.
3. Maximum Credit . At no time during the term of this Agreement shall the Aggregate Outstanding Amount exceed *** Dollars ($***). The term “Aggregate Outstanding Amount” shall mean the total invoice price from West Central to REG
*** Confidential material redacted and filed separately with the Commission.
Ralston of all Feedstock delivered by or for West Central to REG Ralston plus accrued interest thereon for which West Central has not received payment. If at any time during the term of this Agreement the Aggregate Outstanding Amount shall equal or exceed $***, West Central may immediately suspend deliveries of Feedstock until the Aggregate Outstanding Amount has been reduced below $***.
4. Application and Term of Agreement . The extended payment terms of this Agreement, including without limitation the due dates for payments, the accrual of and calculation of interest and maximum credit, shall apply to all Feedstock delivered by or for West Central to REG Ralston on or after February 12, 2009. Unless earlier terminated in accordance with the terms of this Agreement, West Central's agreement to provide the extended payment terms under this Agreement will expire on February 11, 2010. Notwithstanding the foregoing, West Central may terminate this Agreement at any time, with or without cause, upon at least fifteen (15) days prior written notice to REG Ralston.
5. Security . Subject to the prior written consent of CoBank, ACB, if required under the Reimbursement Agreement dated November 15, 2001, signed in connection with a letter of credit issued by CoBank, ACB for certain IDR Bonds (the “Reimbursement Agreement”), or documents related thereto, as security for all amounts due under this Agreement, REG Ralston hereby grants to West Central a security interest in all of the personal property of REG Ralston, wherever located and whether now existing or hereafter acquired, together with all accessions and additions thereto, and all products and proceeds thereof, including without limiting the generality thereof, cash, deposit accounts, inventories and accounts receivable (the “Collateral”). In addition, REG Ralston hereby grants to West Central an irrevocable power, coupled with an interest, to file any financing statement, continuation statement or amendment necessary to perfect, or maintain perfection of the security interest granted hereby. REG Ralston agrees that such security interest shall be a lien on the Collateral, subject only to the security interest given by REG Ralston to CoBank, ACB pursuant to that Security Agreement dated November 15, 2007 (the “CoBank Security Agreement”).
6. No Liens or Encumbrances . REG Ralston hereby covenants that so long as any amount is due to West Central for Feedstock, or any interest thereon, it will not create, incur, assume, or allow to exist any mortgage, deed of trust, pledge, lien (including the lien of an attachment, judgment, or execution), security interest or other encumbrance of any kind upon any of its real or personal property (including its leasehold interest where the Facility is located), except this covenant shall not apply to (i) the mortgage lien held by CoBank, ACB, as security for the Reimbursement Agreement, (ii) the security interest given by REG Ralston to CoBank, ACB pursuant to the CoBank Security Agreement, and (iii) the security interest given by REG Ralston to West Central as security for this Agreement.