SOP Exhibits

Title:

Contract of Palay Milling

SOP Number :

ANNEX A

CONTRACT OF PALAY MILLING

KNOW ALL MEN BY THESE PRESENTS:

This Contract, made and entered into this ________day of ________________________
19____ at ______________, Philippines, by and between:

The NATIONAL FOOD AUTHORITY (NFA), an agency of the government created by virtue
of Presidential Decree No. 4 as amended by PD Nos. 699, 1485 and 1770 with principal office and place of business at 101 E. Rodriguez Sr. Avenue, Quezon City, Philippines, represented
hereinafter referred to as NFA;

- and -
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________


hereinafter referred to as CONTRACTOR.

WITNESSETH

WHEREAS, the NFA has palay intended for milling;

WHEREAS, the CONTRACTOR is the rightful owner of a ricemill licensed by NFA known as ______________________________________________________________

Ricemill located at _______________________________________________________

WHEREAS, the NFA is desirous of engaging the services of the CONTRACTOR to mill NFA palay into mill rice to which the latter is agreeable;

NOW, THEREFORE, for and in consideration of the foregoing premises and the terms and conditions herein set forth, the parties here to have agreed, as they do hereby mutually agree, as follows:

I. SUBJECT MATTER:

Milling of palay consisting of fifty (50) kilograms per bag more or less to be issued in batches, and in accordance with the following specifications:

1. Palay input and expected milled rice output;

INPUT OUTPUT

XQP WMO/RMO
PA7 WM1/RMI
PA1 WM2/RM2
PA2, PA3, PA4 WM3/RM3

2. Guaranteed Milling Recovery (GMR)

GMR which should be at least 65% for RMR and 63% for WMR shall be based on the average results of actual test milling which shall be further verified by laboratory test milling. Deviations of the actual test milling from the laboratory test milling shall be within - 2.0%.
G M R
REGULAR WELL
OUTPUT MILLED MILLED

A. PIK Scheme ________ ________% ______%
B. SMF Scheme ________ ________% ______%
By-Products
DKA ________% ______%
DKB ________% ______%
DKC ________% ______%
MTN ________% ______%
BIN ________% ______%

3. Percentage headrice and broken shall be based on the average results of laboratory analysis of the actual test milling samples. Deviations of percentage headrice and brokens of the actual test milling samples from that of the laboratory test milling shall be within - 5%.

OUTPUT HEADRICE BROKENS
_______ _______ % _______ %

4. Quality Parameters

YELLOW and CHALKY and
DAMAGED IMMATURE R ED
OUTPUT KERNELS KERNELS KERNELS

WMO/RMO 3% max 10% max 1% max
WM1/RM1 3.1-7% max 25% max 5% max
WM2/RM2 7.1-15% max 25% max 5% max
WM3/RM3 above 15% max 25% max 5% max

5. Impurities shall not be more than 0.5% with only a trace of inorganic foreign matter e.g. bits of stones.

6. The moisture content of milled rice shall not exceed 14% on "as received" basis.

7. Milled rice shall be practically free from objectionable odor and insect infestation.

IMPORTANT: All spaces to be filled up. Cancel the inappropriate paragraph by putting (x)
strike-overs in all blank spaces provided.

II. DUTIES AND RESPONSIBILITIES OF NFA:

1. NFA shall initially issue two (2) batches of palay, each batch to be equivalent to the three (3) day milling capacity of the mill on a 12-hour operation. In this case, each batch shall be equivalent to ____ bags of fifty (50) kilograms more or less per bag of palay. A succeeding batch shall be issued only after the submission of a Milling Report together with relevant documents.

For the purpose of issuance of stocks to the CONTRACTOR, one Authority to Issue (AI) shall cover only one batch.
Under no circumstance shall NFA have stocks with the CONTRACTOR in excess of the 6-day milling capacity of the mill on a 12-hour operation at any open time. Neither shall NFA issue palay of a different variety code and/or requiring different output unless the two batches of stocks previously issued has been fully liquidated by NFA Management.

2. No stocks shall be issued for milling in the absence of a bond in the amount and in the form acceptable to NFA.

3. NFA shall issue Warehouse Stock Issue (WSI) to document the palay withdrawn by the CONTRACTOR and Warehouse Stock Receipt (WSR) to document the corresponding milled rice recoveries and/or by-products from the CONTRACTOR's mill delivered to the NFA designated receiving warehouses.

4. NFA shall entrust to the CONTRACTOR empty sacks to serve as containers for the milled rice and by-products due to the NFA. The quantity of empty sacks to be issued shall in no case exceed the approximate number of bags of milled rice and/or by-products to be recovered from a particular issuance.

5. NFA shall issue Empty Sack issue (ESI) to document all issuances of empty sacks to miller-contractor and Empty Sack Receipt (ESR) to document all empty sacks returned to NFA from the CONTRACTOR's trust.

6. NFA shall shoulder all handling expenses incurred from the NFA pile up to the carrier (truck) during withdrawal of palay and empty sacks and from the carrier (truck) up to the NFA pile upon receipt of rice recoveries and/or by-products if any, and empty sacks based on the approved existing NFA handling rates.

7. It shall be the obligation of NFA to accept all deliveries of milled rice and/or by-products provided the deliveries conform with the NFA specification.

8. In case NFA receives written report from the CONTRACTOR regarding suspension or stoppage of milling operations, the NFA shall verify the same immediately and the NFA Provincial Manager shall act expeditiously. Such NFA Provincial manager may, at his discretion.

a. Withdraw the stocks and have the same milled elsewhere. Expenses for handling and withdrawal shall be equally shared by the NFA and the CONTRACTOR; OR

b. Wait for the mill to be repaired or for the mill to resume operation or the termination of the emergency/force majeure//fortuitous event, as the case may be. In this event, the counting of the delivery period shall be suspended. No suspension of the delivery period shall be allowed if the CONTRACTOR has no written notice to NFA.

c. In case milling is suspended under the circumstances provided under Par. II Sub. Par. 9 hereunder the NFA shall determine the veracity of the report and the NFA Provincial Manager shall expeditiously act on the same to prevent disruption of the NFA operations.

III. DUTIES AND RESPONSIBILITIES OF THE CONTRACTOR:

1. CONTRACTOR shall withdraw the palay from the NFA warehouse and shall, at his own expense transport the stocks and/or empty sacks to his millsite.

2. CONTRACTOR shall, personally or through his representative duly authorized, in writing, acknowledge all palay and empty sacks issued by NFA in the WSI and ESI. The contents of these documents shall be conclusive so far as the issuances of stocks/MTS are concerned. Likewise, the AI, WSI, SIA, ESI, WSR, ESR, and ATD shall be the basis for the examination of the CONTRACTOR's accountability for palay, empty sacks and recoveries.

3. CONTRACTOR shall shoulder all handling expenses incurred from the carrier (truck) up to the miller's pile during the receipt of palay/empty sack and from miller's pile up to the carrier (truck) upon deliveries of milled rice and/or by-products if any, as well as all unused empty sacks.

4. CONTRACTOR undertakes to mill the NFA stocks at its ___________________. Ricemill _____________ located _______________ at _____________________ immediately upon receipt of palay stocks at a minimum rate of _____ bags input per 12-hour operation, five days a week. CONTRACTOR shall prioritize the milling of the NFA stocks and milling shall be exclusive and continuous. In case CONTRACTOR fails to continuously and exclusively mill the NFA stocks, CONTRACTOR acknowledges NFA's right to terminate this contract with or without notice.

5. CONTRACTOR at his own account shall place the milled rice and/or by-products in the containers so provided by NFA to contain fifty (50) kilograms net weight. Moreover, NFA stocks and empty sacks and recoveries shall be segregated and/or be made identifiable from other stocks or piles. In addition, bincards shall be placed in every pile.

6. CONTRACTOR shall not charge storage fee while the stocks/empty sacks are in his custody.

7. CONTRACTOR shall deliver the milled rice and/or by-products and all palay empty sacks and unused rice empty sacks to the NFA designated warehouse with NFA shouldering the transportation expense based on the existing NFA approved hauling rate at the time of delivery.

8. Delivery of the milled stocks and unused empty sacks and recoveries shall start on the third day from the date of the last WSI of a particular AI (batch) and shall be completed on the 5th day from date of said last WSI. In case the CONTRACTOR fails to complete his delivery on the 5th day, he shall be given a grace period of three (3) successive days to deliver the rice, the recoveries and the unused sacks without penalty from NFA. If, after the grace period he still fails to complete the delivery of the stocks/recoveries/empty sacks, he shall be given another three (3) successive days within which to complete the delivery of the stocks and the empty sacks subject, however, to the payment of penalty provided hereunder.

9. In case the milled rice does not conform with the required milling quality/specification, the CONTRACTOR shall suspend the milling operation and shall within 24 hours, notify NFA in writing of the same. Failure of the CONTRACTOR to notify NFA in writing of the incident shall make the CONTRACTOR liable for the consequences.

10. CONTRACTOR shall secure Fire Insurance from an insurer duly registered with the Office of the Insurance Commission and acceptable to the NFA to cover fire, floods and typhoons in an amount equivalent to ONE HUNDRED PER CENT of the book value of the palay stocks and sacks issued to the CONTRACTOR equivalent to the six (6) day milling capacity of the mill on a 12-hour per day operation. Such insurance shall be effective on the date of the first issuance of stocks to the contractor.

IV. COMPENSATION:

For the services rendered under this Contract, NFA hereby agrees:

1. To pay the CONTRACTOR a Straight Milling Fee (SMF) of _________ per bag of 50 kilograms rice output. Under this scheme, all rice and by-products recoveries shall accrue to the NFA.

2. To pay the CONTRACTOR in kind (PIK). Under this scheme all rice recoveries in excess of the Guaranteed Milling Recovery (GMR) as stated in paragraph I of this Contract and all by-products shall accrue to the CONTRACTOR.

IMPORTANT: Cancel mode of payment not applicable. Only one mode of payment shall be allowed for the contract per miller.

V. BOND:

To guarantee the faithful performance of all the terms and conditions of this agreement the CONTRACT shall file a bond which shall be in the form acceptance to NFA.

Such bond shall be equivalent to one hundred percent (100%) of the book value of the 6-day palay input capacity of the CONTRACTOR's mill on a 12-hour per day operation including its containers (sacks containing the palay) and the commensurate number of empty sacks issued for rice recoveries plus 10% allowance. The bond shall answer for the shortages/losses, expenses and/or incidental differential cost that NFA may incur in the application of the provisions of this Contract, including damages, penalties, attorney's fees an cost of suit. The bond shall not be released by NFA until such time that the CONTRACTOR has been cleared by NFA management of its obligations.

VI. PROVISIONS COVERING SUBSTANDARD DELIVERIES:

1. If, through no fault of NFA the milled rice deliveries does not conform with the required milling quality/specification, NFA shall accept the deliveries but shall subject the CONTRACTOR to a penalty equivalent to NINETY CENTAVOS (P0.90) PER KILOGRAM of substandard rice delivered. HOWEVER, if from the substandard rice so delivered it is clearly apparent to NFA that the palay form was substituted with newly harvested palay or palay with inferior quality, the CONTRACTOR shall automatically be deemed in default under Paragraph VIII hereunder.

2. The CONTRACTOR shall not be subject to payment of the foregoing penalty if it is proven that the palay issued to the CONTRACTOR is of such inferior quality that the agreed specification/milling degree could not be attained and if written advise to this effect is given to NFA upon commencement of milling and duly received by NFA. Should the CONTRACTOR fail to submit the aforementioned written advise, this exemption shall not apply.

VII. DELAYED DELIVERIES:

The CONTRACTOR shall be considered in delay if, without written justification, he delivers all or a part of the milled rice, by-products, used/unused empty sacks from the 9th day to the 11th day reckoned from the date of the last WSI of a particular AI/batch under Par III sub-par 8 hereof. In this case, CONTRACTOR shall pay a penalty for delay computed at 1/10th of 1% of the book value of the undelivered stocks/sacks per day of delay.

VIII. DEFAULT:

1. THE CONTRACTOR shall be considered in default upon the occurence of any of the following incidents:

a) If the rice delivered are sub-standard and it is clearly apparent to NFA that its palay form was changed/substituted with newly harvested palay of inferior quality;

b) If there is a change in the type/condition of sacks returned;

c) If the CONTRACTOR failed to deliver the stocks within the period allowed him;

d) If on any day after the issuance of stocks, no NFA stocks are in the ricemill and the CONTRACTOR has not made any delivery in whole or in part;

e) In cases of deliveries covered by ATD, if the truck/stocks do not arrive within the agreed travel time without written advise to NFA issuing warehouse and without justifiable reasons.

2. Upon the occurrence of any of the foregoing event of default, the CONTRACTOR shall at the option of the NFA:

a) Pay the cost of the remaining undelivered recoveries and the sacks based on book value plus bank prevailing interest rate on medium and long term loans with Chattel Mortgage of 18% per annum at the time of payment; or

b) Restitute the undelivered stocks/sacks by delivering rice or palay or MTS plus pay bank prevailing interest rate on medium and long term loans with Chattel Mortgage of 18% per annum at the time of payment, such interest to be paid in kind (rice as the cases may be).

i. If restitution shall be in rice form, the rice should be in accordance with the specification required of the stocks issued him and in such quantity that should be equivalent to the recoveries of the palay issued him plus the corresponding interest.

ii. If restitution shall be in palay form, such palay should be of the same quality as that issued to him and in such quantity that should be equivalent to the quantity issued him plus the corresponding interest.

IX. PROVISIONS APPLICABLE TO DELIVERIES COVERED BY ATD:

In cases where the NFA requires the CONTRACTOR to deliver the milled rice to a warehouse outside of the region, the foregoing provisions of this Contract together with the following shall apply:

1. Should NFA operations require, CONTRACTOR agrees and shall undertake to deliver the milled rice to a warehouse outside the region. For this purpose, the NFA shall issue the ATD the contents of which with respect to the milling degree and specification, and number of bags shall be final and conclusive. Weight of the stocks shall be final at the receiving warehouse after actual weighing.

In case of discrepancy in the classification and/or milling degree of the stocks which were covered by the ATD as against the stocks received at the designated receiving warehouse, the NFA shall investigate the matter, applying the existing applicable SOP, without, however, prejudice to filing the necessary legal actions available to it to protect its interest.

2. NFA shall shoulder the hauling expenses to be incurred from the millsite to the final receiving warehouse at approved NFA rate. Prior to the departure of the truck from the point of origin, however, the NFA and the CONTRACTOR shall agree on the number of days of travel time.

3. While in transit, the provision of Par VIII Sub Par 1e hereof shall apply and all losses, damages that may be incurred on the stocks still under the custody of the CONTRACTOR shall be for his account.

4. Counting of the delivery period under Par. III Sub Par 8 hereof shall be suspended from date of ATD to date of issue of WSR by the receiving warehouse except, however, when the truck/stocks does not arrive at the receiving warehouse within a reasonable period depending upon the distance between the issuing warehouse and the receiving warehouse for no justifiable reasons and without written advise to the issuing warehouse. In this case, however, the counting of the delivery period shall not stop.

5. NFA shall not be liable for any additional fees or changes whatsoever in case the stocks could not be immediately received and documented by the receiving warehouse and the truck is thus forced to wait its turn for unloading. Such waiting time shall be for CONTRACTOR's account.

6. Upon arrival of CONTRACTOR's truck within the premises of the NFA designated receiving warehouse, the driver shall notify the NFA representative of the same. The truck driver shall not remove/transfer the truck or the stocks from the NFA premises unless and until the stocks have been duly received and documented by the receiving warehouse through the issuance of the WSR.

7. Solely for the purpose of issuance of another batch of stocks for milling the ATD shall be considered as the supporting document for the provisional liquidation of the stocks. Further, the ATD shall be without prejudice to the results of the milling report.

8. The CONTRACTOR shall submit a provisional liquidation report of all deliveries made pursuant to the ATD. Upon receipt of the provisional liquidation report, the NFA issuing warehouse may issue palay stocks for milling.

9. Under no circumstances shall NFA issue another batch of stocks if the CONTRACTOR has one batch under provisional liquidation.

X. SPECIAL PROVISIONS:

1. CONTRACTOR shall be considered as trustee of the palay and/or rice and by-products and empty sacks and shall hold the same in trust from the time the CONTRACTOR acknowledges the receipt of palay and/or rice and by-products and empty sacks until such time that all palay and/or rice and by-products and empty sacks shall have been fully delivered to and accepted by the NFA.

2. It is understood that time is of the essence of this Contract and in case of failure of the CONTRACTOR to comply with the terms and conditions set forth, CONTRACTOR shall be held liable in accordance with existing laws and decrees if the fault is attributable to him.

3. In case the CONTRACTOR has any outstanding obligations with the NFA arising from the this Contract or from any other contract or transactions, the latter shall have the right to retain 100% of the money value of whatever receivables CONTRACTOR may have from NFA and apply the same by way of compensation for the obligations.

4. In case of litigation arising from this Contract, the CONTRACTOR agrees t pay liquidated damages in the amount of not less than P10,000.00 plus attorney's fees and cost of suit.

5. The NFA does not warrant continuous milling during the effectivity of this Contract.

6. The basis for the examination of accountability of CONTRACTOR shall be the palay and empty sacks issued.

XI. VENUE:

Any action that may arise under this Contract shall be filed in the competent court of Quezon City or elsewhere at the option of NFA.

XII. DURATION CLAUSE:

This Contract shall be in full force and effect from notarization of this Contract or the date of first issuance of palay for milling to CONTRACTOR as evidenced by Warehouse Stock Issue No. _________ dated __________________ 19____, whichever comes earlier and shall expire twelve months thereafter unless sooner terminated by NFA at its option.

IN WITNESS WHEREOF, the parties hereto affix their signatures this ____ day of _________
______________19___ at _______________________, Philippines.


NATIONAL FOOD AUTHORITY (MILLING CONTRACTOR)


_______________________ _________________________
REGIONAL MANAGER PRESIDENT/GEN. MANAGER

Signed in the presence:



_____________________________ _______________________________


A C K N O W L E D G E M E N T


REPUBLIC OF THE PHILIPPINES)
Quezon City ) s.s.


BEFORE ME, Notary Public, for and in _____________________________________ _______________________________________ personally appeared this ____________ day of _________________, 19_______.

NAME RES. CERT. DATE/PLACE

__________________________ ________________ ________________________
__________________________ ________________ ________________________
__________________________ ________________ ________________________
__________________________ ________________ ________________________

known to me to be the same persons who executed the foregoing Contract of Palay Milling consisting of _________________ ( ___ ) pages including this page on which the acknowledgement is written, signed by the parties and their instrumental witness on each and every page hereof and acknowledged the same to be their free and voluntary act and deed as well as the entities represented.


NOTARY PUBLIC


Doc. No. _____________
Page No. _____________
Book No. _____________
Series of 19_____