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
