Exhibit 10.1

 

RISK MANAGEMENT CONTRACT

 

THIS AGREEMENT is entered into on the 28 ^th day of November, 2005, by and among FCStone, LLC (“FCStone”), an Iowa limited liability company with its main office at 2829 Westown Parkway, West Des Monies, Iowa 50266, and Dakota Ethanol, L.L.C., a South Dakota limited liability company (Client) with its main office located at P.O. Box 100, Wentworth, South Dakota 57075,

 

RECITALS:

 

A.            Client operates an ethanol plant facility located in Wentworth South Dakota, (the “Plant”) and desires to establish an input origination and marketing risk management plan.

 

B.             FCStone, which is experienced in commodity transactions and related risk management, is willing to provide such assistance on the terms hereby stated.

 

NOW, THEREFORE, IT IS AGREED AS FOLLOWS BETWEEN THE PARTIES:

 

1.              FCStone .  FCStone shall, during the term hereof, provide services to Client in the implementation of a full service price risk management program and grain procurement program for Client (the “FCStone Program”). The services to be provided by FCStone hereunder are set forth in Exhibit A attached hereto.

 

2.              Fees .

 

(a)           Client shall pay a fee for services and materials provided by FCStone to Client hereunder of $0.001 per gallon of ethanol produced (assumed to be 40 million gallons) during the Term.  Such fees shall be payable to FCStone monthly in advance on the first business day of each month during the term hereof.  The monthly payment shall be $3333.33 per month,

 

(b)           In addition to such fees, Client shall also pay to FCStone any transaction commissions, fees, services charges or mark-ups arising from options, futures or other risk management or cash commodity transactions executed or brokered through FCStone, its affiliates, or others in accordance with their applicable schedules of rates, except that FCStone guarantees that the rate for exchange-traded futures and options contracts shall not be more than $12.50 per round turn, plus all applicable exchange fees, during the initial term hereof.  Any OTC (over-the-counter) transactions will be $10.00 per round turn, plus any applicable fees, during the initial term hereof.

 

 

3.              Client Representative . Client shall designate one or more persons who shall be authorized and directed to receive services hereunder and to make all hedging and merchandising and purchasing and sales decisions for Client.  All directions, transactions and authorizations given by such representative to FCStone shall be binding upon Client.  FCStone shall be entitled to rely on the authorization of such persons until it receives written notification from Client that such authorization has been revoked.

 

4.              Transactions with FCStone and FCStone Affiliates . Client understands, approves, authorizes, and agrees that FCStone as an advisor may recommend that Client enter into transactions where FCStone will act as a broker or futures commission merchant or where Client may enter into transactions with one or more companies which are under common ownership or control with FCStone, including, but not limited to, FCStone Trading, L.L.C. with respect to physical energy products and over the counter swaps and options and FGDT, L.L.C. with respect to cash grain. FCStone may also participate on Client’s behalf in negotiations with one or more elevators, which are members of FCStone’s parent company.  All futures, swap or cash commodity transactions involving Client, FCStone and its affiliates shall be subject to, and shall be governed by, the applicable customer agreements, master agreements, confirmations, and other documentation thereof.

 

5.              FCStone Limitations .

 

(a)           To the extent and if any brokerage services are provided by FCStone it will be to find suppliers or purchasers for Client. FCStone will not purchase or sell grain, nor will it be directly involved in the purchase of the grain involving Client. FCStone may give merchandising, purchasing and hedging advice to Client, but all decisions on purchasing, merchandising and hedging strategy will be made by Client. All hedging positions will be the responsibility of Client, in Client’s account with FCStone or other relevant party.  All positions shall be for the purpose of hedging against price risks associated with the Client’s operations.

 

(b)           FCStone assumes no responsibility for the completion or performance of any contracts between Client and Client’s customers and suppliers, and Client agrees that it shall not bring any action or make any claim against FCStone based on any act, omission or claim of any of Client’s customers or suppliers.

 

(c)           To the extent FCStone provides services relating to accounting systems, sole responsibility for the accuracy and completeness of Client’s books and

 

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financial statements shall remain with Client.  FCStone shall not be deemed to attest in any way to the accuracy of such books and financial statements.

 

(d)           FCStone assumes no responsibility for tax advice, tax planning, or tax returns or tax reporting.

 

6.              Confidentiality Agreement. The parties have previously executed a Confidentiality and Nondisclosure Agreement. Such agreement shall remain in full force and effect and shall apply and govern all disclosure and use of confidential information hereunder.

 

7.              Public Disclosure . Any public announcements concerning the transaction contemplated by this letter shall be approved in advance by FCStone and Client, except for disclosures required by law, in which case the disclosing party shall provide a copy of the disclosure to the other party prior to its public release.

 

8.              Terms and Termination .

 

(a)           The initial term of this Agreement shall commence on the Effective Date hereof and shall continue until October 31, 2006. This contract will automatically renew for an additional term of one (1) year unless Client gives notice of non-renewal in writing to FCStone at least four (4) months prior to the end of the initial term.  The “Effective Date” shall be November 10, 2005.

 

(b)           This Agreement may be terminated by Client as to FCStone in the event of material breach of any of the material terms hereof by such other party, by written notice specifying the breach, which notice shall be effective fifteen (15) days after it is given unless the receiving party cures the breach within such time.  This Agreement may be terminated by FCStone as to Client in the event of material breach of any of the material terms hereof by Client, by written notice specifying the breach, which notice shall be effective fifteen (15) days after it is given unless the receiving party cures the breach within such time.  This Agreement may be terminated immediately without notice at the election of any party in the event of bankruptcy, or any other receivership or insolvency proceeding is filed by or against another party.

 

(c)           This Agreement may also be terminated by the mutual consent of the parties on such terms as the parties may agree.

 

(d)           In addition to any other method of terminating this Agreement, either party may unilaterally terminate this Agreement at any time if such termination shall be required by any regulatory authority, and such termination shall be

 

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effective on the 30 ^th day following the giving of notice of intent to terminate.

 

9.              Licenses, Bonds, and Insurance .  Each party represents that it now has and will maintain in full force and effect during the term of this Agreement, at its sole cost, all necessary state and federal licenses, bonds and insurance in accordance with applicable state or federal laws and regulations.

 

10.            Limitation of Liability .  EACH PARTY UNDERSTANDS THAT NO OTHER PARTY MAKES ANY GUARANTEE, EXPRESS OR IMPLIED, TO ANY OTHER OF PROFIT, OR OF ANY PARTICULAR ECONOMIC RESULTS FROM TRANSACTIONS HEREUNDER. IN NO EVENT SHALL ANY PARTY BE LIABLE FOR SPECIAL, COLLATERAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES FOR ANY ACT OR OMISSION COMING WITHIN THE SCOPE OF THIS AGREEMENT OR FOR BREACH OF ANY OF THE PROVISIONS OF THIS AGREEMENT, EVEN IF IT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.  SUCH EXCLUDED DAMAGES INCLUDE, BUT ARE NOT LIMITED TO, LOSS OF GOODWILL, LOSS OF PROFITS, LOSS OF USE AND INTERRUPTION OF BUSINESS.

 

11.            Disclaimer . Client understands and agrees that FCStone makes no warranty respecting legal or regulatory requirements and risks. Client shall obtain such legal and regulatory advice from third parties as it may deem necessary respecting the applicability of legal and regulatory requirements applicable to Client’s business.

 

12.            Indemnity.   Subject to the limitations set forth in Section 10, the parties agree to indemnify each other as follows:

 

(a)           Client shall indemnify FCStone and their brokers, officers, agents and employees and hold them harmless from and against any claims, demands, liability or expense, including attorney’s fees and other litigation expenses, arising out of claims by Client’s customers or suppliers, or also arising out of a breach by Client of any covenant, representation or warranty herein, or any negligence, fraud or misrepresentation of Client, except to the extent such losses or damages are caused by the negligence, fraud, willful injury or willful violation of law by the FCStone, or its officers, directors, employees and agents or by the reckless disregard of its duties hereunder by any such person.

 

(b)           FCStone shall indemnify, defend Client, and its officers, directors, employees and agents and hold them harmless from and against any claims, demands, liability or expense, including attorneys’ fees and other litigation expenses arising out of a breach by FCStone of any covenant, representation

 

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or warranty herein, or any negligence, fraud or misrepresentation of FCStone, except to the extent such losses or damages are caused by the negligence, fraud, willful injury or willful violation of law by the Client, or its officers, directors, employees and agents or by the reckless disregard of its duties hereunder by any such person.

 

13.            Notices . Any notices permitted or required hereunder shall be in writing, signed by an officer duly authorized of the party giving such notice, and shall either be hand delivered or mailed.  If mailed, notice shall be sent by certified, first class, return receipt requested, mail to the address shown above, or any other address subsequently specified by notice from one party to the other.

 

14.            General.

 

(a)           This Agreement is the entire understanding of the parties concerning the subject matter hereof and it may be modified only in writing signed by the parties.  All commodities, futures, options, and swap transactions shall be subject to the customer or master agreements between Client and FCStone, its affiliates, or others. The parties may enter into other agreements in writing, including but not limited to service agreements, customer agreements and master agreements with respect to commodity futures options and swaps.

 

(b)             If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

 

(c)             No party shall be liable for any failure to perform any or all of the provisions of this Agreement if and to the extent that performance has been delayed or prevented by reason of any cause beyond the reasonable control of such party.  The expression “cause beyond the reasonable control” shall be deemed to include, but not be limited to: acts, regulations, laws, or restraints imposed by any governmental body; wars, hostilities, sabotage, riots, or commotions; acts of God; or fires, frost, storms, or lightning.

 

(d)             This Agreement is not intended to, and does not, create or give rise to any fiduciary duty on the part of any party to any other.

 

(e)             No action, regardless of its nature or form, arising from or in relation to this Agreement may be brought by either party more than two (2) years after the cause of action has arisen, or, in the case of an action for nonpayment, more than two (2) years from the date the last payment was due.  Venue for any action arising from or in relation to this Agreement shall be in State or

 

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Federal court in Lake or Minnehaha Counties, South Dakota.

 

(f)              This Agreement is governed by and shall be construed under the laws of the State of South Dakota.

 

(g)             This Agreement shall be binding upon and inure to the benefit of the parties and the successors and assigns of the entire business and goodwill of FCStone and Client, but shall not be otherwise assignable without the express consent of the other parties.

 

Dated and executed as of the day and year first written above.

 

 

Dakota Ethanol
BY:			Brian Woldt
		Its Chairman, Board of Managers
FCSTONE, LLC
BY:			Jason Sagebiel
	Its: Risk Management Consultant

 

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EXHIBIT A

 

FCStone Services

 

FCStone will provide the following services based on sound risk management principles, using FCStone’s Basis Trading experience today with the futures and options markets to reduce Client’s exposure to commodity price changes.

 

I.            General Scope.   FCStone will provide advice, assistance and risk management with respect to Client’s grain original, energy and transportation, procurement and output sales.

 

II.           Consulting Services and Program: FCStone services to Client shall follow:

 

1)       FCStone shall provide Client with price risk management evaluation, review and advice in relation to use of Corn and/or any other grain products as they relate to the day-to-day operations of the plant on both cash grain and futures/options and OTC products.

 

Such services to be summarized monthly/annually in a detailed report prepared by FCStone for the Client staff/board, and accordingly to their satisfaction in terms of content and accountability.

 

III.         Internal Risk Management Procedures:

 

A.        Risk management guidelines and controls.  Risk management recommendations regarding position limits, strategies, credit exposure and volumes will be presented for management and board approval.

 

B.        Establish Corporate Risk Policy — Assess Risk Profile — Define Hedge Objective.

 

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Exhibit 10.2

 

DISTILLER’S GRAIN MARKETING AGREEMENT

 

THIS DISTILLER’S GRAIN MARKETING AGREEMENT (the “Agreement”), is entered into as of this 28th day of November, 2005, by Dakota Ethanol LLC, a South Dakota limited liability company (“Seller”), and Commodity Specialists Company, a Delaware Corporation (“Buyer”).

 

W I T N E S S E T H:

 

WHEREAS, Seller desires to sell and Buyer desires to purchase the Distiller’s Dried Grains with Solubles (sometimes referred to as “Product(s)” or “DDGS”) output of the ethanol production plant which Seller owns in Wentworth, South Dakota (the “Plant”); and

 

WHEREAS, Seller and Buyer wish to agree in advance of such sale and purchase to the price formula, payment, delivery and other terms thereof as set forth herein;

 

NOW, THEREFORE, in consideration of the promises and the mutual covenants and conditions herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by both parties, it is hereby agreed:

 

1.              BUYER PERFORMANCE .  Buyer agrees to perform the services that it provides for Seller in a professional and competent manner.

 

2.              PURCHASE AND SALE . Seller agrees to sell to Buyer and Buyer agrees to purchase from Seller the entire bulk feed grade DDGS output from Seller’s plant at Wentworth, South Dakota, subject to all terms and conditions set forth in this Agreement.  Buyer shall label all product that is sold by Buyer and shall register all labels with the states where the DDGS is sold.

 

3.              TRADE RULES .  All purchases and sales made hereunder shall be governed by the Feed Trade Rules of the National Grain and Feed Association unless otherwise specified.  Said Trade Rules, a copy of which is appended hereto as Exhibit A, shall, to the extent applicable, be a part of this Agreement as if fully set forth herein.

 

4.              TERM .

 

A.             The initial term of this Agreement shall be for one (1) year commencing December 1, 2005 (the “Effective Date”).

 

B.             In the event that during the first year of this Agreement Seller materially changes the quality of the DDGS produced at the Plant through the application of new technology and equipment, either Seller or Buyer shall have the right to terminate this Agreement upon 120 days notice. Notwithstanding such termination, Seller shall remain

 

 

liable to provide DDGS to Buyer in sufficient quantities, either through the Plant or buying such product, to honor any sales contract that Buyer may have to which Seller has consented.

 

C.             This Agreement shall automatically renew for an additional term of one (1) year unless Seller or Buyer gives notice of non-renewal in writing to the other party at least one hundred twenty (120) days prior to the end of the initial term.  The aforementioned renewal provision shall apply in the same manner for all subsequent expiring renewal terms, and the Agreement shall be automatically renewed for subsequent one (1) year terms unless written notice of nonrenewal is provided in the manner provided above.

 

D.             After the initial term, this Agreement may be terminated by either party at its unqualified option by providing the other party hereto not less than 120 days written notice of its election to terminate this Agreement.

 

E.              In addition to its option to terminate as provided above, Seller shall have the option to terminate this Agreement at anytime on thirty (30) days’ notice in order to join a pooled marketing arrangement (the “Pooled Marketing Arrangement”)

 

5.              DELIVERY AND TITLE .

 

A.             The place of delivery for all the DDGS sold pursuant to this Agreement shall be FOB Plant.  Buyer and Buyer’s agents shall be given access to Seller’s Plant in a manner and at all times reasonably necessary and convenient for Buyer to take delivery as provided herein.  Buyer shall schedule the loading and shipping of all outbound DDGS purchased hereunder which is shipped by truck or rail.  All labor and equipment necessary to load trucks or rail cars shall be supplied by Seller without charge to Buyer.  Seller agrees to handle the Products in a good and workmanlike manner in accordance with Buyer’s reasonable requirements and in accordance with normal industry practice.  Seller shall maintain the truck and rail loading facilities in safe operating condition in accordance with normal industry standards.

 

B.             Seller further warrants that storage space for not less than not less than seven days production of DDGS shall be reserved for Buyer’s use at the Plant and shall be continuously available for storage of DDGS purchased by Buyer hereunder at no charge to Buyer.  Seller shall be responsible at all times for the quantity, quality and condition of any the Products in storage at the Plant. Seller shall not be responsible for the quantity, quality and condition of any of the Products stored by Buyer at locations other than the Plant.

 

C.             Buyer shall give to Seller a schedule of quantities of the Products to be removed by truck and rail with sufficient advance notice reasonably to allow Seller to provide the required services.  Seller shall provide the labor, equipment and facilities necessary to meet Buyer’s loading schedule and, except for any consequential or indirect

 

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damages, shall be responsible for Buyer’s actual costs or damages resulting from Seller’s failure to do so.  Buyer shall order and supply trucks and rail cars as scheduled for truck and rail shipments.  All freight charges shall be the responsibility of Buyer and shall be billed directly to Buyer.

 

D.             Buyer shall provide loading orders as necessary to permit Seller to maintain Seller’s usual production schedule, provided, however, that Buyer shall not be responsible for failure to schedule removal of the Products unless Seller shall have provided to Buyer production schedules as follows: Five (5) days prior to the beginning of each calendar month during the term hereof, Seller shall provide to Buyer a tentative schedule for production in the next calendar month.  Seller shall inform Buyer daily of inventory and production status. For purposes of this paragraph, notification will be sufficient if made by e-mail or facsimile as follows:

 

If to Buyer, to the attention of Steve Markham, Facsimile number 612-330- 9894 or email to
smarkham@csc-world.com, and

 

If to Seller, to the attention of Scott A. Mundt, Facsimile number 605-483-2681 or email to smundt@dakotaethanol.com

 

or to such other representatives of Buyer and Seller as they may designate to the other in writing.

 

Title, risk of loss and full shipping responsibility shall pass to Buyer upon loading the Products into trucks or rail cars and delivering to Buyer of the bill of lading for each such shipment.

 

6.              PRICE AND PAYMENT .

 

A.             Buyer agrees to pay Seller for all DDGS removed by Buyer from the Plant a price equal to ninety eight (98%), with 2% to be retained by Buyer as its service fee, provided, however, that Buyer’s service fee shall not be less $1.50 per ton nor shall it exceed $2.00 per ton.  The calculation on the minimum and maximum fee payable to CSC shall be made with respect to each payment and will not be carried over to any subsequent payments. By way of illustration, if the 2% to be retained by CSC for any given week is less than $1.50 per ton, the fee to be retained by CSC shall then be $1.50 per ton.  If in subsequent weeks the 2% is greater than $1.50 but less than $2.00, the fee shall be the 2%.  Conversely, if the 2% for any period exceeds $2.00, the fee shall then be $2.00 per ton. If in subsequent weeks the 2% is less than $2.00 but greater than $1.50, the fee shall be the 2%.  For purposes of this provision, the FOB Plant price shall be the actual sale price, less all freight costs incurred by Buyer in delivering the Product to its customer.

 

B.             Buyer agrees that it shall not sell Product for delivery more than 90 days from the date of entering into a sale without the consent of Seller.  Buyer agrees to use

 

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commercially reasonable efforts to achieve the highest resale price available under prevailing market conditions. Seller’s sole and exclusive remedy for breach of Buyer’s obligations under the preceding sentence shall be to terminate this Agreement.  Buyer shall collect all applicable state tonnage taxes on Products sold by Buyer and shall remit to the appropriate governmental agency.

 

C.             Within ten (10) days following receipt of certified weight certificates, which certificates shall be presented to Buyer each Thursday for all DDGS shipments during the preceding week, Buyer shall pay Seller the full price, determined pursuant to paragraph 6A above, for all properly documented shipments.  Buyer agrees to maintain accurate sales records and to provide such records to Seller upon request.  Seller shall have the option to audit Buyer’s sales invoices at any time during normal business hours and during the term of this Agreement.

 

7.              QUANTITY AND WEIGHTS .

 

A.             It is understood that the output of the Products shall be determined by Seller’s production schedule and that no warranty or representation has been made by Seller as to the exact quantities of Products to be sold pursuant to this Agreement.

 

B.             The quantity of Products delivered to Buyer from Seller’s Plant shall be established by weight certificates obtained from scale at the Plant which is certified as of the time of weighing and which complies with all applicable laws, rules and regulations or in the event that the scale at the Plant is inoperable then at other scales which are certified as of the time of weighing and which comply with all applicable laws, rules and regulations. The outbound weight certificates shall be determinative of the quantity of the Products for which Buyer is obligated to pay pursuant to Section 5.

 

8.              QUALITY .

 

A.             Seller understands that Buyer intends to sell the Products purchased from Seller as a primary animal feed ingredient and that said Products are subject to minimum quality standards for such use.  Seller agrees and warrants that the Products produced at its plant and delivered to Buyer will comply with current industry standards in the feed trade.

 

B.             Seller warrants that all Products, unless the parties agree otherwise, sold to Buyer hereunder shall, at the time of delivery to Buyer, conform to the following minimum quality standard:

 

Protein

Fat

Fiber

Moisture

Ash

Min

Max

Min

Max

Min

Max

Min

Max

Min

Max

DDGS

25

10

15

12

6

 

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The standard for DDGS will be determined on an “as is” basis rather than a dry weight basis. Minimum quality standards for Solubles shall be agreed upon by the parties at a subsequent date.

 

C.             Payment of invoice does not waive Buyer’s rights if goods do not comply with terms or specifications of this Agreement.  Unless otherwise agreed between the parties to this Agreement, and in addition to other remedies permitted by law, the Buyer may, without obligation to pay, reject either before or after delivery, any of the Products which when inspected or used fail in a material way to conform to this Agreement.  Should any of the Products be seized or condemned by any federal or state department or agency for any reason except noncompliance by Buyer with applicable federal or state requirements, such seizure or condemnation shall operate as a rejection by Buyer of the goods seized or condemned and Buyer shall not be obligated to offer any defense in connection with the seizure or condemnation. When rejection occurs before or after delivery, at its option, Buyer may:

 

(1)            Dispose of the rejected goods after first offering Seller a reasonable opportunity of examining and taking possession thereof, if the condition of the goods reasonably appears to Buyer to permit such delay in making disposition; or

 

(2)            Dispose of the rejected goods in any manner directed by Seller which Buyer can accomplish without violation of applicable laws, rules, regulations or property rights; or

 

(3)            If Buyer has no available means of disposal of rejected goods and Seller fails to direct Buyer to dispose of it as provided herein, Buyer may return the rejected goods to Seller, upon which event Buyer’s obligations with respect to said rejected goods shall be deemed fulfilled.  Title and risk of loss shall pass to Seller promptly upon rejection by Buyer.

 

(4)            Seller shall reimburse Buyer for all costs reasonably incurred by Buyer in storing, transporting, returning and disposing of the rejected goods. Buyer shall have no obligation to pay Seller for rejected goods and may deduct reasonable costs and expenses to be reimbursed by Seller from amounts otherwise owed by Buyer to Seller.

 

(5)            If Seller produces Products which comply with the warranty in Section C above but which do not meet applicable industry standards, Buyer agrees to purchase such Products for resale but makes no representation or warranty as to the price at which such Product can be sold.  If the Products deviates so severely from industry standard as to be unsalable, then it shall be disposed of in the manner provided for rejected goods in Section C above.

 

D.             If Seller knows or reasonably suspects that any of the Products produced at

 

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its Plant are adulterated or misbranded, or outside of industry quality standards, Seller shall promptly so notify Buyer so that such Product can be tested before entering interstate commerce.  If Buyer knows or reasonably suspects that any of the Products produced by Seller at its Plant are adulterated, misbranded or outside of industry quality standards, then Buyer may obtain independent laboratory tests of the affected goods. If such goods are tested and found to comply with all warranties made by Seller herein, then Buyer shall pay all testing costs; and if the goods are found not to comply with such warranties, Seller will pay all testing costs.

 

9.              RETENTION OF SAMPLES .  Seller will take an origin sample of DDGS from each truck and rail car before it leaves the Plant using standard sampling methodology.  Seller will label these samples to indicate the date of shipment and the truck or railcar number involved.  Seller will also retain the samples and labeling information for no less than one year.

 

10.            INSURANCE .

 

A.             Seller warrants to Buyer that all employees engaged in the removal of the Products from Seller’s Plant shall be covered as required by law by worker’s compensation and unemployment compensation insurance.

 

B.             Seller agrees to maintain throughout every term of this Agreement comprehensive general liability insurance, including product liability coverage, with combined single limits of not less than $2,000,000.  Seller’s policies of comprehensive general liability insurance shall be endorsed to require at least thirty (30) days advance notice to Buyer prior to the effective date of any decrease in or cancellation of coverage.  Seller shall cause Buyer to be named as an additional insured on Seller’s insurance policy and shall provide a certificate of insurance to Buyer to establish the coverage maintained by Seller not later than fourteen (14) days prior to completion and start-up of production of the Plant.

 

C.             Buyer agrees to carry such insurance on its vehicles operating on Seller’s property as Seller reasonably deems appropriate.  The parties acknowledge that Buyer may elect to self insure its vehicles.  Upon request, Buyer shall provide certificate of insurance to Seller to establish the coverage maintained by Buyer.

 

D.             Notwithstanding the foregoing, nothing herein shall be construed to constitute a waiver by either party of claims, causes of action or other rights which either party may have or hereafter acquire against the other for damage or injury to its agents, employees, invitees, property, equipment or inventory, or third party claims against the other for damage or injury to other persons or the property of others.

 

11.            REPRESENTATIONS AND WARRANTIES .

 

A.             Seller represents and warrants that all of the Products delivered to Buyer

 

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shall not be adulterated or misbranded within the meaning of the Federal Food, Drug and Cosmetic Act and may lawfully be introduced into interstate commerce pursuant to the provisions of the Act.  Seller further warrants that the Products shall fully comply with any applicable state laws governing quality, naming and labeling of product.  Payment of invoice shall not constitute a waiver by Buyer of Buyer’s rights as to goods which do not comply with this Agreement or with applicable laws and regulations.

 

B.             Seller represents and warrants that the Products delivered to Buyer shall be free and clear of liens and encumbrances.

 

12.            EVENTS OF DEFAULT .  The occurrence of any of the following shall be an event of default under this Agreement: (1) failure of either party to make payment to the other when due; (2) default by either party in the performance of the covenants and agreements set forth in this Agreement; (3) if either party shall become insolvent, or make a general assignment for the benefit of creditors or to an agent authorized to liquidate any substantial amount of its assets, or be adjudicated bankrupt, or file a petition in bankruptcy, or apply to a court for the appointment of a receiver for any of its assets or properties with or without consent, and such receiver shall not be discharged within sixty (60) days following appointment.

 

13.            REMEDIES .  Upon the happening of an Event of Default, the parties hereto shall have all remedies available under applicable law with respect to a Event of Default by the other party.  Without limiting the foregoing, the parties shall have the following remedies whether in addition to or as one of the remedies otherwise available to them; (1) to declare all amounts owed immediately due and payable; and (2) immediately to terminate this Agreement effective upon receipt by the party in default of the notice of termination, provided, however, the parties shall be allowed 10 days from the date of receipt of notice of default for to cure any default. Notwithstanding any other provision of this Agreement, Buyer may offset against amounts otherwise owed to Seller the price of any product which fails to conform to any requirements of this Agreement.

 

14.            FORCE MAJEURE .  Neither Seller nor Buyer will be liable to the other for any failure or delay in the performance of any obligation under this Agreement due to events beyond its reasonable control, including, but not limited to, fire, storm, flood, earthquake, explosion, act of the public enemy, riots, civil disorders, sabotage, strikes, lockouts, labor disputes, labor shortages, war stoppages or slowdowns initiated by labor, transportation embargoes, failure or shortage of materials, acts of God, or acts or regulations or priorities of the federal, state or local government or branches or agencies thereof.

 

15.            INDEMNIFICATION .

 

A.             Seller shall indemnify, defend and hold Buyer and its officers, directors, employees and agents harmless, from any and all losses, liabilities, damages, expenses (including reasonable attorneys’ fees), costs, claims, demands, that Buyer or its officers, directors, employees or agents may suffer, sustain or become subject to, or as a result of

 

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(i) any misrepresentation or breach of warranty, covenant or agreement of Seller contained herein or (ii) the Seller’s negligence or willful misconduct.

 

B.             Buyer shall indemnify, defend and hold Seller and its officer, directors, employees and agents harmless, from any and all losses, liabilities, damages, expenses (including reasonable attorneys’ fees), costs, claims, demands, that Seller or its officers, directors, employees or agents may suffer, sustain or become subject to, or as a result of (i) any misrepresentation or breach of warranty, covenant or agreement of Buyer contained herein or (ii) the Buyer’s negligence or willful misconduct.

 

C.             Where such personal injury, death or loss of or damage to property is the result of negligence on the part of both Seller and Buyer, each party’s duty of indemnification shall be in proportion to the percentage of that party’s negligence or faults.

 

D.             Seller acknowledges that in order to maximize the total revenue to be generated through the sale of the Products, Buyer may take positions by selling Product in anticipation of Seller providing the Products.  Notwithstanding the fact that Seller’s obligation is to provide Buyer with the output of the Plant the parties acknowledge that Buyer may suffer losses as a result of positions taken by Buyer if Seller discontinues operations for any reason whatsoever including Force Majeure.  Therefore, Seller shall indemnify, defend and hold Buyer and its officers, directors, employees and agents harmless from any and all losses, liabilities, damages, expenses (including reasonable attorney’s fees), costs, claims, demands that Buyer or its officers, directors, employees, or agents may suffer, sustain or become subject to as a result of any sale or purchase of product taken by Buyer in anticipation of Seller delivering the Products hereunder, provided Buyer has taken commercially reasonable steps to avoid the loss.  Seller shall not be liable for any loss resulting from Seller discontinuing operations related to a position taken by Buyer for delivery more than 90 days from the date of entering into a sale without the consent of Seller .

 

16.            GOVERNMENTAL ACTION .  The parties recognize that the value of the Products could change as a result of various governmental programs, be they foreign or domestic.  In the event that a significant value change of the Products as a result of any such governmental program, Buyer may request re-negotiation of the contract price for the Products by providing written notice to Seller.  Buyer shall be required to demonstrate that the value of the Products has significantly changed in the market.  Should such a change take place, the parties agree to negotiate, in good faith, a revised sale price for the Products.  If, after a good faith effort, the parties are unable to agree on a new price within the 90 day period immediately following notice to the other party, then in such event and notwithstanding the other provisions hereof, Buyer may terminate this Agreement upon 90 days prior written notice.

 

17             CAR LEASES.  Seller acknowledges that Buyer has entered into railcars leases for the purpose of shipping DDGS produced at the Plant, namely (i) the lease for 50

 

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railcars between Trinity Industries Leasing Company and Buyer dated October 13, 2005 and (ii) the lease for 50 railcars between Chicago Freight Car Leasing Co. and Buyer dated October 19, 2005 (the “Leases”).  Seller agrees that it shall fully reimburse Buyer for all payments made by Buyer under the terms of the leases and shall indemnify Buyer from any and all liability under such leases including the payment of rent or for damage to any of the cars.  Buyer does hereby assign the Leases to Seller (and Seller does hereby assume liability therefor) which assignment shall take effect upon the termination of this Agreement unless such termination is as a result of it being terminated to permit Seller to participate in the Pooled Marketing Arrangement in which case the responsibility with respect to the cars shall be governed by the Pooled Marketing Agreement.

 

18.           RELATIONSHIP OF PARTIES .  This Agreement creates no relationship other than that of buyer and seller between the parties hereto.  Specifically, there is no agency, partnership, joint venture or other joint or mutual enterprise or undertaking created hereby.  Nothing contained in this Agreement authorizes one party to act for or on behalf of the other and neither party is entitled to commissions from the other.

 

19.            MISCELLANEOUS .

 

A.             This writing is intended by the parties as a final expression of their agreement and a complete and exclusive statement of the terms thereof.

 

B.             No course of prior dealings between the parties and no usage of trade, except where expressly incorporated by reference, shall be relevant or admissible to supplement, explain, or vary any of the terms of this Agreement.

 

C.             Acceptance of, or acquiescence in, a course of performance rendered under this or any prior agreement shall not be relevant or admissible to determine the meaning of this Agreement even though the accepting or acquiescing party has knowledge of the nature or the performance and an opportunity to make objection.

 

D.             No representations, understandings or agreements have been made or relied upon in the making of this Agreement other than as specifically set forth herein.

 

E.              This Agreement can only be modified by a writing signed by all of the parties or their duly authorized agents.

 

F.              The paragraph headings herein are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.

 

G.             This Agreement shall be construed and performed in accordance with the laws of the State of South Dakota.

 

H.             The respective rights, obligations and liabilities of the parties under this Agreement are not assignable or delegable without the prior written consent of the other

 

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party.

 

I.               Notice shall be deemed to have been given to the party to whom it is addressed ninety-six (96) hours after it is deposited in certified U.S. mail, postage prepaid, return receipt requested, addressed as follows:

 

Buyer:	Commodity Specialists Company
	310 Grain Exchange Bldg.
	400 South Fourth Street
	Minneapolis, Minnesota 55415
	ATTN: Steve J. Markham
Seller:	Dakota Ethanol LLC
	P.O. Box 100
	Wentworth, SD 57075
	ATTN: Scott A. Mundt

 

IN WITNESS THEREOF, the parties have caused this Agreement to be executed the day and year first above written.

 

	COMMODITY SPECIALISTS COMPANY
	By:	Phil Lindau, Jr.
	Title: Co-President
	DAKOTA ETHANOL LLC
	By:	Brian Woldt
	Title: Chairman, Board of Managers

 

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Exhibit 10.3

 

ETHANOL FUEL MARKETING AGREEMENT

 

THIS AGREEMENT , entered into this 30th day of November, 2005, by and between RENEWABLE PRODUCTS MARKETING GROUP, L.L.C., a Minnesota limited liability company, hereinafter referred to as “RENEWABLE PRODUCTS”; and DAKOTA ETHANOL, L.L.C., a South Dakota limited liability company, hereinafter referred to as “DAKOTA ETHANOL.”

 

WITNESSETH:

 

WHEREAS, RENEWABLE PRODUCTS is a limited liability company formed for the purpose of marketing ethanol for its members and others; and

 

WHEREAS, DAKOTA ETHANOL owns a plant in Wentworth, South Dakota engaged in the production of fuel grade ethanol (the “Plant”); and

 

WHEREAS, the parties desire to enter into this Agreement to provide for RENEWABLE PRODUCTS’ marketing of fuel grade ethanol produced by the Plant, under the terms stated herein.

 

NOW, THEREFORE, in consideration of the mutual covenants and promises herein contained, the parties hereto agree as follows:

 

1.                                       Exclusive Marketing Representative .   RENEWABLE PRODUCTS shall be the sole marketing representative for all fuel grade ethanol produced at the Plant during the term hereof subject to all the terms and conditions of this Agreement.

 

2.                                       Plant Capacity/Ethanol Specifications .   The Plant has the capacity of producing approximately 45 - 50 million gallons of fuel grade ethanol per year, which fuel grade ethanol is at least 199.50 proof (undenatured anhydrous), and conforms to the specifications described in A.S.T.M. 4806 and such other specifications that may be, from time-to-time, promulgated by the industry for E-Grade denatured fuel ethanol.  DAKOTA ETHANOL contemplates that the Plant will be unencumbered to allow RENEWABLE PRODUCTS to begin marketing of the Plant’s ethanol on January 1, 2006.

 

3.                                       Rail and Truck Loading Facilities .  The Plant shall include reasonable and convenient railcar and tank truck access at the Plant of a size and design appropriate to handle production of approximately 45-50 million gallons of ethanol per year.  All such railcar and tank truck loading facilities shall meeting all industry and governmental safety standards and shall be capable of delivering a minimum of 500 gallons of product per minute to railcars and/or tank trucks.  DAKOTA ETHANOL will be solely responsible for all demurrage charges for railcars incurred on the Plant site and for demurrage charges on railcars unable to be delivered at the Plant due to insufficient railcar siding capacity.  DAKOTA ETHANOL shall provide personnel

 

 

reasonable needed to load trucks or rail cars at the Plant in a timely manner.  Demurrage charged to trucks or railcars resulting from operations beyond the control of DAKOTA ETHANOL and incurred off-site will be charged as an expense to the pool, and will not be charged directly to DAKOTA ETHANOL.

 

4.                                       Storage Capacity .  The Plant shall have sufficient storage capacity for not less than 7 days ethanol production.

 

5.                                       Best Efforts to Market .  RENEWABLE PRODUCTS shall market all fuel grade ethanol produced by the Plant; provided, however, that RENEWABLE PRODUCTS’ obligation hereunder shall be excused in case of fire, flood, other natural calamity, labor dispute or any adverse governmental statute, regulations or decree (including any court order or decree).  RENEWABLE PRODUCTS shall use commercially reasonable efforts to achieve the highest price available under prevailing market conditions at the time of the sale.

 

6.                                       Risk of Loss .  RENEWABLE PRODUCTS shall bear the risk of loss for all product to be marketed hereunder from the time the common carrier accepts the product at the Plant in either a railcar and/or tank truck for shipment by the common carrier.

 

7.                                       Specific Marketing Tasks .  RENEWABLE PRODUCTS shall be totally responsible for the marketing, sale and delivery of all the production from the Plant during the term of this Agreement, such responsibilities to include, but not limited to:

 

•                   Obtaining  sufficient railcar, tank trucks and other transport as may be needed to handle said production;

•                   Negotiating the rates and tariffs to be charged for delivery of such production to the customer;

•                   Promoting and advertising the sale of fuel grade ethanol as appropriate;

•                   Ascertaining that such production is delivered where contracted and intended;

•                   Handling all purchase agreements with consumers and any complaints in connection therewith; and

•                   Collecting all accounts and undertaking any legal collection procedures as may be necessary.

 

8.                                       Negotiation of Ethanol Price .  RENEWABLE PRODUCTS will use all reasonable efforts to obtain the best price for all fuel grade ethanol sold by it pursuant to the terms of this Agreement.

 

9.                                       Compensation; Pooling; Membership; Group Buying; Audits .

 

(a)                                   DAKOTA ETHANOL will pay RENEWABLE PRODUCTS $.01 (one cent) for each gallon of ethanol sold by RENEWABLE PRODUCTS for the account of DAKOTA ETHANOL.  RENEWABLE PRODUCTS shall have the right to deduct this fee from payments due DAKOTA ETHANOL as described in paragraph 10.

 

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(b)                                  The members of RENEWABLE PRODUCTS market their ethanol as a pool.  RENEWABLE PRODUCTS shall market the production of the Plant as part of this pooling arrangement as if DAKOTA ETHANOL were a member of RENEWABLE PRODUCTS, subject only to the commission (operating expense) differential and voting rights members enjoy as set forth in Exhibit A , the terms of which are incorporated herein by this reference.

 

(c)                                   DAKOTA ETHANOL shall be eligible to become a member/owner of RENEWABLE PRODUCTS pursuant to the terms and conditions set forth in Exhibit A .

 

(d)                                  DAKOTA ETHANOL shall be allowed to participate in the RENEWABLE PRODUCTS group buying program commencing on January 1, 2006.

 

(e)                                   The parties hereto agree that, upon request in writing, either party may require the other to make available its books and records, at reasonable intervals, in order to audit those books and records and to account for all dealings, transactions and sums relevant to this Agreement.

 

10.                                Accounts Receivable; Remittances .

 

(a)                                   It will be the responsibility of RENEWABLE PRODUCTS to do all billing in regard to the sale of ethanol, to collect all receivables and to be responsible for any uncollectible accounts.  All risks associated with accounts receivable shall be borne by RENEWABLE PRODUCTS.

 

(b)                                  RENEWABLE PRODUCTS shall remit payment to DAKOTA ETHANOL for all product shipped hereunder within 10-12 calendar days following the date the shipment loaded on the railcar and/or truck regardless of whether the shipment has been accepted by the common carrier.

 

11.                                Rail Car Leases; Assignment in Event of Termination of Contract .

 

(a)                                   RENEWABLE PRODUCTS will lease railcars to be used by DAKOTA ETHANOL, the initial number of which is 108 railcars as set forth on the lease agreements attached hereto as Exhibit B and incorporated herein by this referenced.  While DAKOTA ETHANOL is marketing its ethanol product through RENEWABLE PRODUCTS pursuant to this Agreement, the cost of such leases will be deemed an expense of the marketing pool, and shall not be charged directly to DAKOTA ETHANOL.

 

(b)                                  If this Agreement is terminated, by non-renewal or otherwise, the lease for the rail cars leased by RENEWABLE PRODUCTS for the transport of the Plant’s ethanol will be assigned to DAKOTA ETHANOL, who will be obligated to the terms and conditions of said lease.  RENEWABLE PRODUCTS shall provide DAKOTA ETHANOL the opportunity to review and approve of terms and conditions of any such rail car lease before RENEWABLE PRODUCTS first executes the same.  The parties understand that the assignment of the lease is subject to the approval of the lessor of the rail cars.

 

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12.                                No “Take or Pay .”  The parties agree that this is not a “take or pay contract” and that RENEWABLE PRODUCTS’ liability is limited to ethanol passing custody at the Plant.

 

13.                                Term; Renewals .

 

(a)                                   The initial term of this Agreement shall commence on January 1, 2006 and shall continue up to and including March 31, 2007.

 

(b)                                  This Agreement shall be automatically extended for an additional one (1) year term following the end of the end of the initial term unless either party gives written notice of nonextension not less than ninety (90) days before the end of the current expiration date.  The aforementioned renewal provision shall apply in the same manner for all subsequent expiring terms, and the Agreement shall be automatically renewed for subsequent one (1) year terms unless written notice of nonrenewal is provided in the manner provided above.

 

14.                                Licenses and Permits .  At all times from the commencement of this Agreement, DAKOTA ETHANOL will have all the licenses and permits necessary to operate the Plant.

 

15.                                Estimated 12-Month Volume .  As of the commencement of this Agreement, DAKOTA ETHANOL will provide RENEWABLE PRODUCTS with DAKOTA ETHANOL’s best estimate of its anticipated month-by-month ethanol production for the next twelve (12) months, to assist RENEWABLE PRODUCTS in developing appropriate marketing strategies for the ethanol to be produced by the Plant.

 

16.                                Updated Monthly Volume Estimates .  On or before the first day of each month, DAKOTA ETHANOL will provide RENEWABLE PRODUCTS with its updated best estimate of the Plant’s anticipated month-by-month ethanol production for the next twelve (12) months, so that RENEWABLE PRODUCTS will have ethanol production estimates from DAKOTA ETHANOL twelve (12) months into the future during the entire time that this Agreement is in effect.

 

17.                                Good and Marketable Title .  DAKOTA ETHANOL represents that it will have good and marketable title to all of the ethanol marketed for it by RENEWABLE PRODUCTS and that said ethanol will be free and clear of all liens and encumbrances.

 

18.                                Establishment of Price and Other Sale Terms .  When RENEWABLE PRODUCTS sells the ethanol marketed pursuant to the terms of this Agreement to its customers, the parties understand and agree that the ethanol sales prices and all other terms and conditions of ethanol sales to customers under this Agreement will be established by RENEWABLE PRODUCTS.  RENEWABLE PRODUCTS may make these decisions, without the need of obtaining consent from DAKOTA ETHANOL.  Notwithstanding the foregoing, RENEWABLE PRODUCTS agrees to use its best efforts to promptly communicate with DAKOTA ETHANOL the terms and conditions of ethanol sales.

 

19.                                Independent Contractor .  Nothing contained in this Agreement will make RENEWABLE PRODUCTS the agent of DAKOTA ETHANOL for any purpose whatsoever.

 

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RENEWABLE PRODUCTS and its employees shall be deemed to be independent contractors, with full control over the manner and method of performance of the services they will be providing on behalf of DAKOTA ETHANOL under this Agreement.

 

20.                                Separate Entities .  The parties hereto are separate entities and nothing in this Agreement or otherwise shall be construed to create any rights and liabilities of either party to this Agreement with regard to any rights, privileges, duties or liabilities of any other party to this Agreement.

 

21.                                Working Relationship .  Because the parties hereto have not done business together in the past in the manner described in this Agreement, they have not yet attempted to develop efficient and effective procedures related to ordering, delivering ethanol and shipping ethanol and, therefore, agree to work together promptly and in good faith to develop effective and efficient policies and procedures to cover these matters.

 

22.                                Ethanol Shortage; Open Market Purchase .  If DAKOTA ETHANOL is unable to deliver its estimated monthly ethanol production (as provided to RENEWABLE PRODUCTS pursuant to paragraph 15, as updated pursuant to paragraph 16) and if as a consequence of the non-delivery and in order to meet its sale obligation to third parties, RENEWABLE PRODUCTS may purchase ethanol in the market place to meet its delivery obligations.  If RENEWABLE PRODUCTS incurs a financial loss as a result of such purchases, DAKOTA ETHANOL will reimburse RENEWABLE PRODUCTS for any such loss.  Under such circumstances, if RENEWABLE PRODUCTS realizes a financial gain, it will pay such gain to DAKOTA ETHANOL.

 

23.                                Testing of Samples .  At the request of RENEWABLE PRODUCTS, DAKOTA ETHANOL agrees to provide RENEWABLE PRODUCTS with samples of its ethanol produced at the Plant so that it may be tested for product quality on a regular basis.

 

24.                                Insurance .  During the entire term of this Agreement, DAKOTA ETHANOL will maintain insurance coverage that is standard for a company of its type and size that is engaged in the production and selling of ethanol.  At a minimum, DAKOTA ETHANOL insurance coverage must include:

 

a.                                        Comprehensive general product and public liability insurance, naming RENEWABLE PRODUCTS as an additional insured, with liability limits of at least $5 million in the aggregate.

 

b.                                       Property and casualty insurance adequately insuring its production facilities and its other assets against theft, damage and destruction on a replacement cost basis.

 

c.                                        Workers’ compensation insurance to the extent required by law.

 

DAKOTA ETHANOL will not change its insurance coverage during the term of this Agreement, except to increase it or enhance it, without the prior written consent of RENEWABLE PRODUCTS.

 

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25.                                Indemnification by DAKOTA ETHANOL .  Except as otherwise provided herein, DAKOTA ETHANOL shall indemnify, defend and hold harmless RENEWABLE PRODUCTS, and its officers, directors, employees and agents from and against all actions, causes of actions, claims, costs, expenses, damages and liabilities, including reasonable attorneys’ fees, which RENEWABLE PRODUCTS may incur with respect to or be required to pay to a third party as a result of a breach by DAKOTA ETHANOL of any covenant, representation or warranty herein, or any negligence, fraud or misrepresentation of DAKOTA ETHANOL, except to the extent such losses or damages are caused by the negligence, fraud, willful injury or willful violation of law by the RENEWABLE PRODUCTS, or its officers, directors, employees and agents or by the reckless disregard of its duties hereunder by any such person.

 

26.                                Indemnification by RENEWABLE PRODUCTS .  Except as otherwise provided herein, RENEWABLE PRODUCTS shall indemnify, defend and hold harmless DAKOTA ETHANOL, and its officers, directors, employees and agents from and against all actions, causes of actions, claims, costs, expenses, damages and liabilities, including reasonable attorneys’ fees, which DAKOTA ETHANOL may incur with respect to or be required to pay to a third party as a result of a breach by RENEWABLE PRODUCTS of any covenant, representation or warranty herein, or any negligence, fraud or misrepresentation of RENEWABLE PRODUCTS, except to the extent such losses or damages are caused by the negligence, fraud, willful injury or willful violation of law by the DAKOTA ETHANOL, or its officers, directors, employees and agents or by the reckless disregard of its duties hereunder by any such person.

 

27.                                Survival of Terms; Dispute Resolution .

 

(a)                                   All representations, warranties and covenants made in connection with this Agreement will survive the termination of this Agreement.  The parties will, therefore, be able to pursue claims related to those representations, warranties and agreements after the termination of this Agreement, unless those claims are barred by the applicable statute of limitations.  Similarly, any claims that the parties have against each other that arise out of actions or omissions that take place while this Agreement is in effect will survive the termination of this Agreement.  This means that the parties may pursue those claims even after the termination of this Agreement, unless applicable statutes of limitation bar those claims.

 

(b)                                  The parties agree that, should a dispute between them arise in connection with this Agreement, the parties will complete, in good faith, a mediation session prior to the filing of any action in any court.  Such mediation session shall occur at a place that is mutually agreeable, and shall be conducted by a mediator to be selected by mutual agreement of the parties.

 

28.                                Choice of Law; Venue .  The parties agree that this Agreement will be governed by, interpreted under and enforced in accordance with South Dakota law.

 

29.                                Assignment .  Neither party may assign its rights or obligations under this Agreement without the written consent of the other party, which consent will not be unreasonably withheld.

 

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30.                                Entire Agreement .  This Agreement constitutes the entire agreement between the parties covering everything agreed upon or understood in the transaction.  There are no oral promises, conditions, representations, understandings, interpretations, or terms of any kind as conditions or uncomments to the execution thereof or in effect between Buyer and Seller, except as expressed in this Agreement.  No change or addition shall be made to this Agreement except by a written document signed by all parties hereto.

 

31.                                Execution of Counterparts .  This Agreement may be executed by the parties on any number of separate counterparts, and by each party on separate counterparts, each of such counterparts being deemed by the parties to be an original instrument; and all of such counterparts, taken together, shall be deemed to constitute one and the same instrument.

 

32.                                Duplicate Counterpart Includes Facsimile .  The parties specifically agree and acknowledge that a duplicate original hereof shall include, but not be limited to, a counterpart produced by virtue of a facsimile (“fax”) machine.

 

33.                                Binding Effect .  This Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and there respective heirs, personal representative, successors and assigns.

 

34.                                Notices .  Any notice or other communication required or permitted hereunder shall be in writing and shall be considered delivered in any respects when it has been delivered by hand or mailed by first class mail postage prepaid, addressed as follows:

 

TO:          Renewable Products Marketing Group, L.L.C.

809 East Main Street, Suite 2

 

Belle Plaine, MN 56011

Facsimile:  952-873-2427

Attn:  Steve Bleyl, CEO

 

TO:          DAKOTA ETHANOL

P.O. Box 100

Wentworth, SD 57075

Facsimile:  605-483-2681Attn:  Scott Mundt, General Manager

 

[The rest of the page intentionally left blank]

 

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IN WITNESS WHEREOF, the parties hereto have set their hands the day and year first written above.

 

	RENEWABLE PRODUCTS MARKETING
	GROUP, L.L.C.
	By :	Steve Bleyl
	Its CEO
	DAKOTA ETHANOL, L.L.C.
	By :	Brian Woldt
	Its Chairman Board of Managers

 

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EXHIBIT A

 

TERMS AND CONDITIONS OF OWNERSHIP IN RENEWABLE PRODUCTS

 

While DAKOTA ETHANOL may request to become an owner in RENEWABLE PRODUCTS at any time during the term of the Ethanol Fuel Marketing Agreement between DAKOTA ETHANOL and RENEWABLE PRODUCTS, DAKOTA ETHANOL shall not be eligible for ownership in RENEWABLE PRODUCTS until the last day of the 12th month of the initial term of this Agreement.  The ownership of DAKOTA ETHANOL in RENEWABLE PRODUCTS shall be subject to the approval of each then-current owner in RENEWABLE PRODUCTS.

 

If DAKOTA ETHANOL is accepted as an owner, DAKOTA ETHANOL shall be bound by all of the terms and conditions of the operating agreement of RENEWABLE PRODUCTS to the extent such terms and conditions do not contradict the following terms and conditions of ownership as have been specifically negotiated between DAKOTA ETHANOL and RENEWABLE PRODUCTS as of the date of this Agreement:

 

(1)                                   Upon acceptance of DAKOTA ETHANOL as an owner in of RENEWABLE PRODUCTS, DAKOTA ETHANOL shall make a capital contribution to RENEWABLE PRODUCTS consisting of the following three payments:

 

(a)                                   a lump sum payment of $105,000 shall be contributed to RENEWABLE PRODUCTS by DAKOTA ETHANOL immediately upon DAKOTA ETHANOL’s becoming an owner in RENEWABLE PRODUCTS; and

 

(b)                                  a payment of $500,000 shall be contributed to RENEWABLE PRODUCTS by DAKOTA ETHANOL, which shall be contributed by one of the following three (3) methods:

 

(i)                                      as a lump payment due on the date DAKOTA ETHANOL becomes an owner of RENEWABLE PRODUCTS;

 

(ii)                                   as a monthly offset against the aggregate pooling fee payable by DAKOTA ETHANOL to RENEWABLE PRODUCTS under this Agreement; or

 

(iii)                                as any combination of both (i) and (ii) subject to the approval of RENEWABLE PRODUCTS.

 

(c)                                   a capital contribution equal to the amount of any additional equity put into RENEWABLE PRODUCTS by the current owners at the time of joining.

 

(2)                                   If DAKOTA ETHANOL elects to contribute the $500,000 as a monthly offset pursuant to subparagraph 1(b)(ii) above, the monthly offset shall be calculated as follows:

 

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(a)                                   The parties shall determine the total gallons of ethanol produced by DAKOTA ETHANOL for the current month within 10 business days of the close of such month;

 

(b)                                  The parties shall then determine the difference between:

 

(i)                                      the per gallon pooling fee payable under Section 9 of the Agreement ($0.01); and

 

(iii)           the per gallon operating expenses of RENEWABLE PRODUCTS’ measured by the expenses incurred for the month in which production is being measured, which shall be determined within 10 business days of the close of such month;

 

(c)                                   The parties shall multiply the total monthly production of DAKOTA ETHANOL times the amount determined in subparagraph 2(b) above.

 

(d)                                  The calculation set forth in this subparagraph (2) can be illustrated by the following example:

 

Total Monthly Ethanol Production		4,000,000		gallons
Pooling Fee		$	0.01	per gallon
Operating Expenses		$	0.0025	per gallon
Difference to be multiplied times Monthly Production Amount		$	0.0075	per gallon
Offset Amount (4,000,000 x $0.0075)		$	30,000

 

(3)                                   The monthly offset shall be applied toward the $500,000 capital contribution amount and shall reduce the outstanding balance payable of same.

 

(4)                                   DAKOTA ETHANOL shall be eligible, at any time, to make lump sum payments of any amount to reduce the outstanding balance of its capital contribution.

 

[The rest of the page intentionally left blank]

 

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EXHIBIT B

 

RIDER NINE (9) TO RAILROAD CAR LEASE AGREEMENT

 

Effective this 1 ^st day of August, 2005, this Rider shall became a part of the Railroad Car Lease Agreement between Trinity Industries Leasing Company, Lessor, and Renewable Products Marketing Group, LLC, Lessee, dated April 25, 2001 and the cars described herein shall be leased to Lessee, subject to the terms and conditions in said Railroad Car Lease Agreement, during the term and for the rental shown below:

 

				Approximate		Base
Number				Capacity		Monthly
of				(gallonage or		Rental
Cars		Type and Description		cubic feet)		(Per Car)
108		DOT 111A100W1 non-coiled and non-insulated tank cars		30,145		$	570.00
		TILX 191517 through and including TILX 191539, and
		TILX 192363 through and including TILX 192412, and
		TILX 192450 through and including TILX 192469, and
		TILX 192500 through and including TILX 192504.

 

Delivery -  Notwithstanding Article 2, Lessor shall deliver each car to Lessee freight charges prepaid, in the yard or the delivering line at Lessee’s facility located at Wentworth, South Dakota.

 

Weight Limitations - Lessee shall not exceed the weight limitations prescribed for operation of cars in unrestricted interchange service as set forth under AAR Interchange Rule 91 without Lessor’s prior written consent.

 

Escalation of Monthly Rental Charge :

 

1.                                        Modifications - in accordance with Article 19 of Railroad Car Lease Agreement, any change in car design required by the AAR, DOT, FRA or other governmental authority during the term of this lease will cause the monthly car rental to increase for each car on the month following its modification as follows:

 

A.            For modification with a useful life equal to the car itself, car rental will increase by a monthly rate of $1.75 per car for each $100 of Lessor’s cost incurred in the course of making modification.

 

B.              For modification with a useful life less than that of the car, monthly car rental increase will equal cost of modification including the implicit cost of money at 10% per annum, divided by the number of months of estimated remaining life of the modification.

 

2.                                        High Mileage - in accordance with Article 20, in the event that a car travels more than 35,000 miles (empty and loaded) in any calendar year, the Lessee shall pay the Lessor $0.03 per mile for each mile over 35,000 traveled by such car.

 

The minimum rental period for the cars leased hereunder shall be one hundred twenty (120) months, and the cars shall continue under lease thereafter for successive one (1) month terms, at the same rate and under the same conditions, unless notice, in writing, requesting cancellation shall be given by either party to the other at least thirty (30) days prior to expiration of the initial term or any successive term for cars covered by this Rider.  Thereafter, this Rider shall terminate automatically upon the date of release of the last car covered by this Rider.

 

TRINITY INDUSTIRES LEADING COMPANY

 

By:	/s/ Thomas Jardin
Vice President
RENEWABLE PRODUCTS MARKETING GROUP, LLC
By:	/s/Todd Krugel
Title: Ethanol Marketing Mgr.

 

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