CALDERWOOD & HARKNESS LLP Attorneys at Law
225 West Wacker Drive, Suite 4000 Chicago, Illinois 60606 Telephone: (312) 555-7800 Facsimile: (312) 555-7801 www.calderwoodharkness.com
April 11, 2022
VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED AND VIA EMAIL
Prairie Basin Grain Co.
Attention: Darren K. Musgrave, President
4520 Harvest Road Champaign, Illinois 61820
Darren K. Musgrave, individually 1188 Windermere Lane Champaign, Illinois 61822
Re: Demand for Payment Under Master Grain Purchase and Off-Take Agreement dated March 15, 2019, and Limited Personal Guaranty Calderwood & Harkness Matter No. 1020-00005
Dear Mr. Musgrave:
This firm represents Greenfield Agricultural Partners LLC ("GAP"), a Delaware limited liability company with its principal headquarters located at 1400 Grand Prairie Boulevard, Suite 800, Des Moines, Iowa 50309. We write on behalf of our client to make formal demand for payment of all amounts currently due and owing under the Master Grain Purchase and Off-Take Agreement dated March 15, 2019 (the "Off-Take Agreement"), entered into between GAP, as Seller, and Prairie Basin Grain Co. ("PBGC"), as Buyer. This letter is additionally directed to you, Darren K. Musgrave, in your individual capacity as guarantor under the Limited Personal Guaranty executed contemporaneously with the Off-Take Agreement and attached thereto as Exhibit D (the "Musgrave Guaranty"). The facts and circumstances underlying this demand are set forth below, and we urge you to give this letter your immediate and serious attention.
Background — The Off-Take Agreement
On March 15, 2019, GAP and PBGC entered into the Off-Take Agreement, a comprehensive five-year agreement governing the purchase and sale of grain commodities on a forward-contract basis. The Off-Take Agreement covers the period commencing on March 15, 2019 and continuing through March 14, 2024. Under the terms of that agreement, PBGC agreed to purchase specified quantities of #2 Yellow Corn and #1 Yellow Soybeans from GAP on a forward-contract basis, subject to the pricing, delivery, and payment terms set forth therein.
The Off-Take Agreement establishes minimum annual volume commitments, requiring PBGC to purchase no fewer than 1,200,000 bushels of #2 Yellow Corn and no fewer than 600,000 bushels of #1 Yellow Soybeans per contract year. These minimum volume commitments were a material term of the Off-Take Agreement and were central to GAP's decision to enter into the contractual relationship with PBGC.
Pursuant to the Off-Take Agreement, all grain was to be delivered by GAP to PBGC's elevator facilities located in Champaign, Macon, and Piatt Counties, Illinois. PBGC was responsible for accepting delivery at such facilities, and the risk of loss transferred to PBGC upon delivery and acceptance at the designated elevator locations, as more fully described in Section 4.2 of the Off-Take Agreement.
Pricing under the Off-Take Agreement is based on the Chicago Board of Trade ("CBOT") nearby futures price at the time of delivery, adjusted by a negotiated basis differential that is established on a quarterly basis in accordance with the methodology set forth in Exhibit B to the Off-Take Agreement. The parties negotiated these pricing mechanisms at arm's length, and the basis differentials applicable to each quarter during the relevant period were duly established and communicated in writing by the parties as required by the Off-Take Agreement.
Section 7.1 of the Off-Take Agreement provides that payment for all grain delivered and accepted is due Net 30 days from the date of delivery and acceptance at the applicable elevator facility. Section 7.3 of the Off-Take Agreement further provides that any amounts not paid when due shall bear interest at the rate of one and one-half percent (1.5%) per month, which equates to an annual rate of eighteen percent (18%), on all overdue amounts, such interest accruing from the applicable due date until the date of actual payment. This contractual interest provision was agreed upon by the parties as a reasonable estimate of the damages that would be incurred by GAP as a result of late payment.
The Off-Take Agreement is governed by the laws of the State of Illinois, and the parties agreed to exclusive jurisdiction in the courts of Cook County, Illinois, or in the United States District Court for the Northern District of Illinois, for the resolution of any disputes arising under or in connection with the Off-Take Agreement.
The Musgrave Guaranty
As a material inducement for GAP to enter into the Off-Take Agreement, and as an express condition precedent to GAP's execution thereof, Darren K. Musgrave, in his individual capacity, executed the Limited Personal Guaranty attached as Exhibit D to the Off-Take Agreement. Under the Musgrave Guaranty, Mr. Musgrave personally and unconditionally guaranteed PBGC's payment obligations under the Off-Take Agreement up to a maximum aggregate amount of Two Million Dollars ($2,000,000.00).
The obligations of Mr. Musgrave under the Musgrave Guaranty are independent of and in addition to the obligations of PBGC under the Off-Take Agreement. By the express terms of the Musgrave Guaranty, Mr. Musgrave's guarantee is unconditional and irrevocable during the entire term of the Off-Take Agreement, and Mr. Musgrave waived all defenses of suretyship, including without limitation any requirement that GAP first proceed against PBGC or exhaust any security or collateral before seeking payment from Mr. Musgrave under the Guaranty. The Musgrave Guaranty further provides that Mr. Musgrave's obligations thereunder shall not be diminished, discharged, or otherwise affected by any modification of the Off-Take Agreement, any extension of time for performance, any forbearance by GAP, or any other circumstance that might otherwise constitute a defense to a guarantor's liability.
PBGC's Breach — Unpaid Invoices
GAP has at all relevant times duly and faithfully performed its obligations under the Off-Take Agreement, including the timely delivery of grain to PBGC's designated elevator facilities. Specifically, during the period from the third quarter of 2021 through the first quarter of 2022, GAP delivered #2 Yellow Corn and #1 Yellow Soybeans to PBGC's elevator facilities in accordance with the delivery schedules, quality specifications, and all other terms and conditions of the Off-Take Agreement. In each instance, PBGC accepted delivery of the grain at its elevator facilities without objection as to quality, quantity, or any other term of delivery. PBGC's acceptance of these deliveries was documented through signed delivery receipts and elevator scale tickets, copies of which are in GAP's possession.
Despite having accepted delivery of the grain in each instance, PBGC has failed and refused to pay the following invoices, each of which is now past due in accordance with the Net 30-day payment terms of the Off-Take Agreement:
The total principal amount currently outstanding and owed by PBGC to GAP under the foregoing invoices is Four Million Eight Hundred Seventy Thousand Fifty Dollars ($4,870,050.00).
In addition to the principal amounts set forth above, PBGC owes GAP accrued interest at the contractual rate of one and one-half percent (1.5%) per month (eighteen percent (18%) per annum) on each of the foregoing invoices, calculated from the respective due date of each invoice through and including the date of actual payment. Such interest continues to accrue on a daily basis, and the aggregate interest owed as of the date of this letter is substantial and growing. GAP reserves the right to present a full and final calculation of all accrued interest at the time of payment or, if necessary, at the time of filing suit.
Prior Demands and Failed Forbearance
This formal demand letter is not the first occasion upon which PBGC has been notified of its payment default. On January 25, 2022, Caleb Jennings, GAP's Director of Grain Operations, sent a written demand to you, Darren K. Musgrave, as President of PBGC, for immediate payment of the three invoices then outstanding — Invoice Nos. GAP-2021-3187, GAP-2021-3244, and GAP-2021-3301 — which at that time totaled Three Million Fifty-Three Thousand Two Hundred Fifty Dollars ($3,053,250.00). That written demand put PBGC on clear notice of its payment default and the serious consequences of its continued non-payment.
On February 3, 2022, you responded to Mr. Jennings's demand via email, expressly acknowledging the outstanding debt owed by PBGC to GAP. In that email, you requested a ninety (90)-day forbearance period, citing ongoing negotiations for additional financing between PBGC and PBGC's lender. You represented that PBGC expected to secure sufficient financing to satisfy its obligations to GAP within that timeframe.
In reliance upon your representations and in the spirit of good faith, GAP agreed, on February 14, 2022, to a limited sixty (60)-day forbearance. That forbearance was expressly conditioned upon PBGC's payment of Invoice No. GAP-2021-3187 in the amount of $892,500.00 by no later than March 1, 2022, as a demonstration of PBGC's good faith and ability to cure its defaults. GAP communicated this condition to you in writing, and the conditional nature of the forbearance was clear and unambiguous.
PBGC failed to make the required payment of $892,500.00 by the March 1, 2022 deadline. PBGC's failure to satisfy this express condition rendered the forbearance void and of no further force or effect. GAP notified PBGC of this consequence in writing.
On March 8, 2022, GAP exercised its rights under Section 8.2 of the Off-Take Agreement, which provides that upon a default in payment by the Buyer that is not cured within the applicable notice and cure period, the Seller may demand adequate assurance of future performance and, pending receipt of such adequate assurance, may suspend further deliveries under the Agreement. GAP provided written notice of suspension to PBGC on that date. No adequate assurance of performance has been received from PBGC.
Despite GAP's multiple prior demands, its willingness to negotiate a forbearance in good faith, and its suspension of deliveries, PBGC has failed to pay any portion of the outstanding amounts owed to GAP. Moreover, neither PBGC nor you, Mr. Musgrave, have communicated any plan for payment or proposed any meaningful resolution of this matter. GAP's patience has been exhausted, and it is now compelled to pursue all available remedies.
Demand for Payment
In light of the foregoing, GAP hereby formally and unconditionally demands that Prairie Basin Grain Co. pay to GAP the total outstanding principal amount of Four Million Eight Hundred Seventy Thousand Fifty Dollars ($4,870,050.00), together with all accrued interest at the contractual rate of one and one-half percent (1.5%) per month (eighteen percent (18%) per annum), calculated from each invoice's respective due date as set forth above through and including the date of actual payment.
GAP demands that full payment be received by GAP within fifteen (15) business days from the date of this letter, that is, by no later than May 2, 2022. Time is of the essence with respect to this demand.
Payment shall be made by wire transfer of immediately available funds to a bank account designated by GAP's undersigned counsel. Wiring instructions will be provided promptly upon request directed to the undersigned at the contact information set forth below.
Separately and additionally, GAP demands that Darren K. Musgrave, in his individual capacity as guarantor under the Musgrave Guaranty, immediately satisfy his obligations under the Musgrave Guaranty up to the guaranteed amount of Two Million Dollars ($2,000,000.00). Mr. Musgrave's liability under the Musgrave Guaranty is independent of and in addition to PBGC's primary obligations, and GAP is entitled to proceed against Mr. Musgrave directly, without any requirement of prior proceedings against PBGC or exhaustion of other remedies. GAP expects Mr. Musgrave to honor his personal guarantee without delay.
Reservation of Rights — Attorneys' Fees and Litigation
Please be advised that Section 12.4 of the Off-Take Agreement provides that the prevailing party in any action or proceeding to enforce the provisions of the Off-Take Agreement shall be entitled to recover its reasonable attorneys' fees and costs of litigation from the non-prevailing party. This fee-shifting provision is fully enforceable under Illinois law and will apply in any litigation commenced by GAP to enforce its rights under the Off-Take Agreement and the Musgrave Guaranty.
If PBGC and Mr. Musgrave fail to make full payment of all amounts demanded herein within the fifteen (15) business-day period specified above (i.e., by no later than May 2, 2022), GAP will commence litigation in the Circuit Court of Cook County, Illinois, or in such other court of competent jurisdiction as GAP may elect, without further notice to you, to recover the full amount of outstanding principal, all accrued and accruing interest, reasonable attorneys' fees and costs of litigation, and all other damages and relief to which GAP may be entitled.
GAP expressly reserves all rights and remedies available to it under the Off-Take Agreement, the Musgrave Guaranty, and applicable law, including but not limited to the right to seek prejudgment interest, post-judgment interest, consequential damages arising from PBGC's breach, and any and all other relief to which GAP may be entitled at law or in equity. GAP further reserves the right to seek any and all available provisional remedies, including but not limited to attachment, garnishment, and injunctive relief, as may be appropriate under the circumstances.
Nothing in this letter, and no action or forbearance taken or communication made by GAP or its counsel prior to or after the date hereof, shall be construed as a waiver of any of GAP's rights, claims, or remedies under the Off-Take Agreement, the Musgrave Guaranty, or applicable law, whether or not such rights, claims, or remedies are specifically identified herein. All such rights, claims, and remedies are expressly reserved in their entirety.
Direction Regarding Communications
Please be advised that GAP is now represented by this firm in connection with the matters referenced in this letter. Accordingly, all communications from PBGC, Mr. Musgrave, and their respective counsel regarding the matters addressed herein should be directed exclusively to the undersigned at:
Francesca Morano, Partner Calderwood & Harkness LLP 225 West Wacker Drive, Suite 4000 Chicago, Illinois 60606 Telephone: (312) 555-7814
Email: fmorano@calderwoodharkness.com
We trust that PBGC and Mr. Musgrave will give this matter the urgent attention it warrants and will act promptly to resolve the outstanding obligations without the necessity of litigation. However, should you fail to do so, GAP is fully prepared to pursue all available remedies to the fullest extent permitted by law.
Sincerely,
CALDERWOOD & HARKNESS LLP
By: ________
Francesca Morano Partner
cc: Thomas R. Greenfield, Chairman and CEO, Greenfield Agricultural Partners LLC cc: Caleb Jennings, Director of Grain Operations, Greenfield Agricultural Partners LLC cc: Samuel Eklund, Calderwood & Harkness LLP cc: Hannah Brinkley, Calderwood & Harkness LLP
Enclosures:
Copy of Invoice No. GAP-2021-3187 Copy of Invoice No. GAP-2021-3244 Copy of Invoice No. GAP-2021-3301 Copy of Invoice No. GAP-2021-3358 Copy of Invoice No. GAP-2022-0042
| Invoice No. | Invoice Date | Commodity | Bushels | Amount | Due Date |
| GAP-2021-3187 | September 28, 2021 | #2 Yellow Corn | 150,000 | $892,500.00 | October 28, 2021 |
| GAP-2021-3244 | October 15, 2021 | #1 Yellow Soybeans | 75,000 | $936,750.00 | November 14, 2021 |
| GAP-2021-3301 | November 12, 2021 | #2 Yellow Corn | 200,000 | $1,224,000.00 | December 12, 2021 |
| GAP-2021-3358 | December 8, 2021 | #2 Yellow Corn | 120,000 | $741,600.00 | January 7, 2022 |
| GAP-2022-0042 | January 19, 2022 | #1 Yellow Soybeans | 80,000 | $1,075,200.00 | February 18, 2022 |