Exhibit 10.1

 

RISK MANAGEMENT CONTRACT

 

THIS AGREEMENT is entered into on the 28th 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.

 

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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 30th 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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