Exhibit 10.31

 

Confidential Treatment Requested.  Confidential portions of this document have
been redacted and have been separately filed with the Commission.

 

DISTILLERS GRAINS MARKETING AGREEMENT

 

THIS DISTILLERS GRAINS MARKETING AGREEMENT (the “Agreement”) is made and entered
into as of the  10th day of December, 2010 (the “Effective Date”) by and between
RPMG, INC., a Minnesota corporation (“RPMG”) and Granite Falls Energy, LLC, a
Minnesota limited liability company (“Producer”), collectively referred to
hereinafter as “Parties” or individually as a “Party”.

 

RECITALS

 

A.            RPMG markets DG (as hereinafter defined).

 

B.            Producer produces DG at Producer’s ethanol production facility
located at Granite Falls, Minnesota (the “Ethanol Facility”).

 

C.            The Parties do desire that RPMG shall market the DG produced at
the Ethanol Facility.

 

NOW, THEREFORE, in consideration of the foregoing, the mutual promises herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Parties agree as follows.

 

AGREEMENT

 

1.             Marketing of Distilled Grains.  Beginning as of February 1, 2011,
Producer shall sell to RPMG, and RPMG shall purchase and market, all of
Producer’s production, excluding such production Producer sells directly to the
entities set forth on Schedule 1 attached hereto, of distiller’s dried grains
(“DDG”), modified distiller’s dried grains, (“MDDG”), distiller’s dried grains
with solubles (“DDGS”), distiller’s wet grains (“DWG”), modified distiller’s wet
grains (“MDWG”), and condensed distiller’s solubles (“CDG”) produced from corn
(collectively, “DG”) produced at the Ethanol Facility, including any expansion
or increase in capacity at the Ethanol Facility.  RPMG shall be the exclusive
marketer of DG, and Producer shall not, either itself (except as set forth in
the foregoing sentence) or through any affiliate or any third party, market any
DG during the term of this Agreement.  Except as otherwise provided in this
Agreement, RPMG shall provide management resources to market and sell DG,
including the management of logistics and collection.

 

2.             Payments to Producer; Commissions; Audit Rights

 

(a)           Payments to Producer.  Subject to the other terms of this
Agreement, RPMG shall pay Producer for its DG in accordance with the terms set
forth in Exhibit A.  RPMG shall use commercially reasonable efforts to make such
payments to Producer net ten (10) days.  RPMG’s payment obligations shall not be
conditioned on collection of receivables from the End Customer (as defined
below).

 

1

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

*** Confidential material redacted and filed separately with the Commission.

 

(b)           RPMG Commission.  Producer shall pay RPMG commissions as follows:
*** for DDG or DDGS sold to third party end purchasers (each, an “End Customer”)
and *** for each ton of MDDG, DWG, or MDWG sold to End Customers.  Parties shall
from time to time, or upon the reasonable request of RPMG, negotiate in good
faith adjustments to the foregoing commissions to reflect prevailing commissions
being paid to marketers of DG produced by third parties in the United States.

 

(c)           Accessorial Charges.  As set forth on Exhibit A, RPMG shall be
responsible for payment of Accessorial Charges (as defined in Exhibit A) to
third parties; provided, however, that Producer agrees (i) to promptly reimburse
RPMG for such Accessorial Charges upon submission to Producer of an invoice
itemizing such Accessorial Charges, and (ii) that RPMG may deduct and setoff the
Accessorial Charges from and against payments due to Producer by RPMG.

 

(d)           Late Payments.  Overdue amounts not disputed in good faith payable
to either Party shall be subject to late payment fees equal to interest accrued
on such amounts at the maximum rate permitted by applicable law.

 

(e)           No Warranty as to Prices.  RPMG shall market Producer’s DG using
commercially reasonable efforts and the same standards it uses to market the DG
production of third parties for whom RPMG provides DG marketing services.  RPMG
shall endeavor to (i) maximize the DG price and minimize freight and other costs
relevant to DG sales and (ii) achieve the best available return to Producer,
subject to relevant market conditions.  PRODUCER ACKNOWLEDGES THAT RPMG MAKES NO
REPRESENTATIONS, GUARANTEES OR WARRANTIES OF ANY NATURE WHATSOEVER AS TO THE
PRICES AT WHICH IT SHALL BE ABLE TO SELL PRODUCER’S DG TO END CUSTOMERS.

 

(f)            Waiver of Certain Claims.  Producer acknowledges (i) that RPMG
shall use its reasonable judgment in making decisions related to the quantity
and price of DG marketed under this Agreement, in light of varying freight and
other costs, but shall have complete discretion to fix the price, terms and
conditions of the sale as long as the same are in accordance with this Agreement
and on commercially reasonable terms, and (ii) that RPMG may sell and market DG
of third parties into the same markets where RPMG sells Producer’s DG.  RPMG
shall communicate with Producer the terms and conditions of sales of Producer’s
DG, including, without limitation, meeting periodically with Producer to discuss
pricing and other terms and conditions of sale.  Producer waives any claim of
conflict of interest against RPMG or for failure by RPMG to maximize the
economic benefits of this Agreement for Producer in light of the foregoing.

 

(g)           Audit Rights.  Within ninety (90) days following the end of RPMG’s
fiscal year end, Producer shall have the right to inspect the books and records
of RPMG for the purpose of auditing calculations of the payments to Producer for
the preceding year made in connection with this Agreement.  Producer shall give
written notice to RPMG of its desire to conduct an audit and RPMG shall provide
reasonable access to all financial information necessary to complete such
audit.  The audit

 

2

--------------------------------------------------------------------------------

 

shall be conducted by an accounting firm agreeable to both Parties and shall be
completed within forty-five (45) days after the completion of RPMG’s annual
audit, but no later than one hundred and fifty (150) days following RPMG’s
fiscal year end.  The cost of the audit shall be the responsibility of Producer
unless the auditor determines that RPMG underpaid Producer by more than three
percent (3%) for the period audited, in which case RPMG shall pay the cost of
the audit.  If the auditor determines that RPMG underpaid Producer, RPMG shall
promptly pay such underpayment to Producer and if the auditor determines that
RPMG overpaid Producer, Producer shall promptly pay the overpayment to RPMG. 
The determination of the auditor shall be final and binding on both Parties.  If
Producer fails to exercise its right to audit as provided in this
Section 2(g) for any year, it shall be deemed to have waived any rights to
dispute payments made to Producer for that year.

 

3.             Scheduled Production

 

(a)           Notices of Scheduled Production.  Beginning on the Effective Date,
and on the 1st and 15th of each month thereafter, Producer shall provide to RPMG
a rolling best estimate of production and inventory by DG product for that month
and each of the following twelve (12) months.  Beginning on the Effective Date
and each Wednesday thereafter, Producer shall provide to RPMG a best estimate of
production and inventory by DG product for that day and the next seven days.

 

(b)           Additional Production Notices.  Producer shall notify RPMG of
anticipated production downtime or disruption in DG availability at least three
(3) months in advance of such outage.  Producer shall timely inform RPMG of
daily inventories, plant shutdowns, daily production projections, and any other
information (i) to facilitate RPMG’s performance of the Agreement or (ii) that
may have a material adverse effect on RPMG’s ability to perform the Agreement.

 

(c)           RPMG Entitled to Rely on Producer Estimates and Notices.  RPMG, in
marketing and selling Producer’s DG, is entitled to rely upon the production
estimates and other notices provided by Producer, including without limitation
those described in Sections 3(a) and (b).  Producer’s failure to provide
accurate information to facilitate RPMG’s performance of the Agreement may
negatively impact RPMG’s ability to market and sell DG at prevailing prices. 
Producer’s failure to provide accurate information to facilitate RPMG’s
performance of the Agreement may be deemed by RPMG, in its sole but reasonable
discretion, a material breach of the Agreement by Producer.

 

(d)           Sale Commitments.  From time to time during the term of this
Agreement and in order to maximize the sales price of DG, RPMG may enter sales
contracts or other agreements with End Customers for future delivery of DG.  In
the event Producer fails to produce DG in accordance with the information
provided to RPMG under Sections 3(a) or (b) above for reasons other than Force
Majeure (as defined in Section 10 herein) or terminates this Agreement other
than in accordance with the provisions of Section 6 below, and as a result RPMG
is required to purchase DG from third parties to meet previous DG sale
commitments that are based upon such information, RPMG may charge Producer

 

3

--------------------------------------------------------------------------------

 

the amount (if any) that the price of such replacement DG exceeded the price
that RPMG would have paid to Producer for the applicable DG under this
Agreement.

 

4.             Logistics and Transportation

 

(a)           No Liens, Title and Risk of Loss.  Producer warrants that DG
delivered to RPMG hereunder shall be free and clear of all liens and
encumbrances of any nature whatsoever other than liens in favor of RPMG.  Title
to and risk of loss of each load of DG shall pass to RPMG at the time such load
passes across the scale into rail cars or trucks at the Ethanol Facility (the
“Title Transfer Point”).  Until such time, Producer shall be deemed to be in
control of and in possession of the DG.

 

(b)           Loading.  RPMG in agreement with Producer shall schedule the
loading and shipping of all outbound DG purchased hereunder, but all labor and
equipment necessary to load trucks and rail cars and other associated costs
shall be supplied and borne by Producer without charge to RPMG.  Producer shall
handle the DG in a good and workmanlike manner in accordance with RPMG’s written
requirements and normal industry practice.  Producer shall maintain the truck
and rail loading facilities in safe operating condition in accordance with
normal industry standards and shall visually inspect all trucks and rail cars to
assure (i) cleanliness so as to avoid contamination, and (ii) that such trucks
and railcars are in a condition suitable for transporting the DG.  RPMG and
RPMG’s agents shall be given access to the Ethanol Facility in accordance with
the terms set forth in Exhibit B, which may be amended by agreement of the
Parties in writing, from time to time.  RPMG’s employees shall follow all
reasonable safety rules and procedures promulgated by Producer and provided to
RPMG reasonably in advance and in writing.  Producer shall supply product
description tags, certificates of analysis, bills of lading and/or material
safety data sheets that are applicable to all shipments.  In the event that
Producer fails to provide the labor, equipment and facilities necessary to meet
RPMG’s loading schedule, Producer shall be responsible for all costs and
expenses, including without limitation actual demurrage and wait time, incurred
by RPMG resulting from or arising in connection with Producer’s failure to do
so.

 

(c)           Transportation and Certain Transportation Costs.  RPMG shall
perform certain logistics functions for Producer, including the arranging of
rail and truck freight, inventory management, contract management, bills of
lading, and scheduling pick-up appointments.  RPMG shall determine the method of
transporting DG to End Customers.  Notwithstanding any provision to the contrary
herein, Producer shall be solely responsible for any damage to any trucks,
railcars, equipment, or vessels caused by acts or omissions of Producer and its
consignees.  All truck freight charges and rail tariff rate charges shall be
billed directly to RPMG and, as set forth in Exhibit A, be deducted by RPMG from
the proceeds of RPMG’s sales of DG to End Customers.  To the extent, the number
of railcars utilized for railcar freight exceeds the Railcar Threshold (as
defined below), upon the request of Producer, representatives of RPMG and
Producer agree to meet to discuss the railcar requirements.  If Producer remains
unsatisfied within thirty (30) days of such meeting and the railcar requirements
still exceed the Railcar Threshold then

 

4

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

*** Confidential material redacted and filed separately with the Commission.

 

Producer shall have the right to terminate this Agreement.  Railcar Threshold
shall mean that ***.

 

(d)           Weight.  The quantity of DG delivered to RPMG at the Ethanol
Facility shall be established by weight certificates obtained from Producer’s
scales or from such other scales as the Parties shall mutually agree, which are
certified as of the time of weighing and which comply with all applicable laws,
rules and regulations; provided, however, that if the weights obtained from
Producer’s scales conflict with destination weights from certified scales at the
End Customer’s destination point, destination weights shall govern and Producer
shall be solely responsible for any shortage.  In the case of rail shipments,
the official railroad weights shall govern establishment of said quantities. 
Producer shall provide RPMG with a fax copy of the outbound weight certificates
on a daily basis and, except as otherwise expressly agreed upon, such outbound
weight certificates shall be determinative of the quantity of DG for which RPMG
is obligated to pay Producer pursuant to this Agreement.

 

(e)           DG Storage at Ethanol Facility.  The estimated storage capacity of
the Ethanol Facility, by DG product, is as follows:

 

DDGS

 

2500 tons

 

 

 

MDWG

 

500 tons

 

5.             Specifications; Quality.

 

(a)           DG Specifications.  Producer covenants that it shall produce DG
that, upon delivery to RPMG at the Ethanol Facility, meets the respective
specifications (“Specifications”) set forth in Exhibit C.  RPMG shall have the
right to test each shipment of DG to ascertain that the Specifications are being
met.  If the DG provided by Producer to RPMG is shown, by independent testing or
analysis of a representative sample or samples taken consistent with industry
standards, to not meet the Specifications through no fault of RPMG or any third
party engaged by RPMG, then RPMG may, in its sole discretion, (i) reject such DG
and require Producer to promptly replace such non-conforming DG with DG that
complies with the Specifications, or (ii) accept such DG for marketing and, if
necessary, adjust the price to reflect the inferior quality, as provided in
Exhibit A.  Payment and acceptance of delivery by RPMG shall not waive RPMG’s
rights if DG does not comply with the terms of this Agreement, including the
Specifications.

 

(b)           Feed Ingredient Standards.  Producer understands that RPMG intends
to market Producer’s DG as a primary animal feed ingredient, and that said
products are subject to minimum standards for such use.  Producer warrants that,
unless caused by the negligence or intentional misconduct of RPMG or a third
party engaged by RPMG, DG delivered by Producer to RPMG shall be acceptable in
the feed trade under current industry standards and shall be an approved feed
ingredient under applicable standards promulgated by the Association of American
Feed Control Officials Incorporated.

 

5

--------------------------------------------------------------------------------

 

(c)           Trade Rules.  This Agreement shall be governed by the then-current
Feed Trade Rules of the National Grain and Feed Association (the “Trade Rules”),
unless otherwise specified.  In the event the Trade Rules and the terms and
conditions of this Agreement conflict, this Agreement shall control.

 

(d)           Compliance With FDA and Other Standards.  Producer warrants that,
unless caused by the negligence or intentional misconduct of RPMG or a third
party engaged by RPMG, DG provided by Producer to RPMG (i) shall not be
“adulterated” or “misbranded” within the meaning of the Federal Food, Drug and
Cosmetic Act (the “Act”), (ii) may lawfully be introduced into interstate
commerce under the Act, and (iii) shall comply with all state and federal laws,
rules and regulations (including without limitation the Trade Rules) including
those governing quality, naming and labeling of bulk product.  If Producer knows
or reasonably suspects that any DG produced at the Ethanol Facility is
adulterated or misbranded, or otherwise not in compliance with the terms of the
Agreement, Producer shall immediately so notify RPMG in writing.

 

(e)           Regulatory Seizure.  Should any DG provided by Producer to RPMG
hereunder be seized or condemned by any federal or state department or agency as
a result of its failure to conform to any applicable law, rule or regulation
prior to delivery to an End Customer, such seizure or condemnation shall operate
as a rejection by RPMG of the goods seized or condemned and RPMG shall not be
obligated to offer any defense in connection with such seizure or condemnation. 
When such rejection occurs, RPMG shall deliver written notice to Producer within
a reasonable time of the rejection and identify the deficiency that resulted in
such rejection.  In addition to other obligations under this Agreement or at
law, Producer shall reimburse RPMG for all out-of-pocket costs reasonably
incurred by RPMG in storing, transporting, returning and disposing of the
rejected goods in accordance with this Agreement.

 

(f)            Recalls.  Producer shall, at its sole cost and expense, comply
and cooperate with any recall of DG reasonably determined to be necessary by
RPMG.  If it is deemed necessary or appropriate by RPMG in its reasonable
discretion, either in response to government action or otherwise, to recall any
DG produced by Producer pursuant to this Agreement due to non-conformance with
the terms of this Agreement, Producer shall be responsible for all reasonable
out-of-pocket costs of such recall and recovery, including, but not limited to,
loss of products, transportation of products, notices and communications
necessary or appropriate to effecting such recall and all reasonable
out-of-pocket costs and expenses incurred in defending actions brought in
connection with such recall.

 

(g)           Sampling.  Producer shall take a minimum of one origin,
representative samples from each lot of the DG before it leaves the Ethanol
Facility.  RPMG shall be entitled to witness the taking of samples.   Producer
shall label the samples to indicate the applicable DG lot numbers, date of
shipment, and the truck or railcar number.  Producer shall send the sample to
RPMG promptly upon RPMG’s request.  Producer may request that RPMG test results
be provided to it at any time after the tests are completed.  Producer shall
also retain the samples and labeling information for no less than six (6) months
or any longer period required

 

6

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

*** Confidential material redacted and filed separately with the Commission.

 

by law.  If RPMG knows or reasonably suspects that any DG produced by Producer
at the Ethanol Facility is not in compliance with the terms of this Agreement,
then RPMG may obtain independent laboratory tests of such DG, and, if such DG is
found not to be in compliance with the terms of this Agreement, Producer shall,
in addition to its other obligations hereunder, pay all such testing costs.

 

6.             Term and Termination

 

(a)           Term.  This Agreement shall have an initial term of ***,
commencing on February 1, 2011.  Thereafter, the Agreement shall remain in
effect until terminated by either party at its unqualified option by providing
the other party hereto not less than *** written notice.

 

(b)           Producer Termination Right.  Producer may immediately terminate
this Agreement upon written notice to RPMG if RPMG fails on three (3) separate
occasions within any 12-month period to purchase DG or to market DG under
circumstances where such breach or failure is not excused by this Agreement.

 

(c)           RPMG Termination Right.  RPMG may immediately terminate this
Agreement upon written notice to Producer, if, for reasons other than a Force
Majeure (as defined in Section 10 herein) event, during any consecutive three
(3) months, Producer’s actual production or inventory of any DG product at the
Ethanol Facility varies by twenty percent (20%) or more from the monthly
production and inventory estimates provided by Producer to RPMG pursuant to
Section 3(a) hereunder.

 

(d)           Termination for Insolvency.  Either Party may immediately
terminate the Agreement upon written notice to the other Party if the other
Party files a voluntary petition in bankruptcy, has filed against it an
involuntary petition in bankruptcy, makes an assignment for the benefit of
creditors, has a trustee or receiver appointed for any or all of its assets, is
insolvent or fails or is generally unable to pay its debts when due, in each
case where such petition, appointment or insolvency is not dismissed, discharged
or remedied, as applicable, within sixty (60) days.

 

7.             Indemnification; Limitation on Liability

 

(a)           Producer’s Indemnification Obligation.  Producer shall indemnify,
defend and hold harmless RPMG and its shareholders, directors, officers,
employees, agents and representatives, from and against any and all Damage (as
defined in Section 7(c) herein) to the extent arising out of (i) any fraud,
negligence or willful misconduct of Producer or any of its directors/governors,
officers, employees, agents, representatives or contractors or (ii) any breach
of this Agreement by Producer.  RPMG shall promptly notify Producer of any suit,
proceeding, action or claim for which Producer may have liability pursuant to
this Section 7(a).

 

(b)           RPMG’s Indemnification Obligation.  RPMG shall indemnify, defend
and hold harmless Producer and its shareholders/members, directors/governors,
officers, employees, agents and representatives from and against any and all
Damages to

 

7

--------------------------------------------------------------------------------

 

the extent arising out of (i) any fraud, negligence or willful misconduct of
RPMG or any of its directors, officers, employees, agents, representatives or
contractors or (ii) any breach of this Agreement by RPMG.  Producer shall
promptly notify RPMG of any suit, proceeding, action or claim for which Producer
may have liability pursuant to this Section 7(b).

 

(c)           Definition of Damages.  As used in this Agreement, the capitalized
term “Damages” means any and all losses, costs, damages, expenses, obligations,
injuries, liabilities, insurance deductibles and excesses, claims, proceedings,
actions, causes of action, demands, deficiencies, lawsuits, judgments or awards,
fines, penalties and interest, including reasonable attorneys’ fees, but
excluding any indirect, incidental, special, exemplary, consequential or
punitive damages.

 

(d)           Setoff Rights.  If Producer defaults on any of its obligations
hereunder or with respect to any order made pursuant to this Agreement or
breaches this Agreement, or RPMG reasonably determines that a material adverse
change has occurred with respect to Producer which may result in Producer
defaulting on any such obligations or breaching this Agreement, then (i) RPMG
may, upon delivery of written notice to Producer, hold any amounts otherwise
payable by RPMG to Producer for an additional twenty-five (25) days,
(ii) Producer shall be liable for any and all Damages (as defined in
Section 7(c) herein) incurred by RPMG in connection with such default, breach,
or material adverse change, and (iii) RPMG may, upon delivery of prior written
notice to Producer, offset the amount of such Damages against any amounts
otherwise payable by RPMG to Producer.

 

(e)           Recoupment of Overpayments.  RPMG shall have the right to recoup
the amount of any overpayments made by RPMG to Producer hereunder or with
respect to any order made pursuant to this Agreement.

 

(f)            Limitation on Liability.  NEITHER PARTY MAKES ANY GUARANTEE,
WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT TO ANY PROFIT, OR
OF ANY PARTICULAR ECONOMIC RESULTS FROM TRANSACTIONS HEREUNDER.  IN NO EVENT
SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR PUNITIVE OR EXEMPLARY
DAMAGES OR FOR INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES, PROVIDED
THAT DAMAGES SUFFERED BY RPMG RELATED TO SALE COMMITMENTS SHALL BE DEEMED DIRECT
DAMAGES. EXCEPTING FOR A BREACH OF ITS NONDISCLOSURE OBLIGATIONS OR PERFORMANCE
OF ITS INDEMNIFICATION OBLIGATIONS HEREUNDER, RPMG’S AGGREGATE LIABILITY TO
PRODUCER SHALL IN NO EVENT EXCEED THE AMOUNT PAID BY PRODUCER TO RPMG UNDER THIS
AGREEMENT.

 

8.             Insurance.  During the term of this Agreement, Producer shall
maintain insurance coverage that is standard, in the reasonable opinion of RPMG,
for a company of its type and size that is engaged in the production and selling
of DG.  At a minimum, Producer’s insurance coverage must include: 
(i) comprehensive general product and public liability insurance, with liability
limits of at least $5 million in the aggregate; (ii) property and casualty
insurance adequately insuring its production facilities and its other assets
against

 

8

--------------------------------------------------------------------------------

 

theft, damage and destruction on a replacement cost basis; (iii) RPMG added as
an additional insured under the comprehensive general product and public
liability insurance policy and the property and casualty insurance policy; and
(iv) workers’ compensation insurance to the extent required by law.  Producer
may not change its insurance coverage during the term of this Agreement, except
to increase it or enhance it, without the prior written consent of RPMG which
consent shall not be unreasonably withheld.

 

9.             Confidentiality

 

(a)           Confidential Information.  As used in this Agreement, the
capitalized term “Confidential Information” means (i) the terms and conditions
of this Agreement and (ii) any information disclosed by one Party to the other,
including, without limitation, trade secrets, strategies, marketing and/or
development plans, End Customer lists and other End Customer information,
prospective End Customer lists and other prospective End Customer information,
vendor lists and other vendor information, pricing information, financial
information, production or inventory information, and/or other information with
respect to the operation of its business and assets, in whatever form or medium
provided.

 

(b)           Nondisclosure.  Each Party shall maintain all Confidential
Information of the other in trust and confidence and shall not without the prior
written consent of the other Party:

 

(i)            disclose, disseminate or publish Confidential Information to any
person or entity without the prior written consent of the disclosing Party,
except to employees of the receiving Party who have a need to know, who have
been informed of the receiving Party’s obligations hereunder, and who have
agreed not to disclose Confidential Information or to use Confidential
Information except as permitted herein, or

 

(ii)           use Confidential Information for any purpose other than the
performance of its obligations under the Agreement.

 

(c)           Standard of Care.  The receiving Party shall protect the
Confidential Information of the disclosing Party from inadvertent disclosure
with the same level of care (but in no event less than reasonable care) with
which the receiving Party protects its own Confidential Information from
inadvertent disclosure.

 

(d)           Exceptions.  The receiving Party shall have no obligation under
this Agreement to maintain in confidence any information which it can prove:

 

(i)            is in the public domain at the time of disclosure or subsequently
becomes part of the public domain through no act or failure to act on the part
of the receiving Party or persons or entities to whom the receiving Party has
disclosed such information;

 

(ii)           is in the possession of the receiving Party prior to the time of
disclosure by the disclosing Party and is not subject to any duty of
confidentiality;

 

(iii)          the receiving Party obtains from any third party not under any
obligation to keep such information confidential; or

 

9

--------------------------------------------------------------------------------

 

(iv)          the receiving Party is compelled to disclose or deliver in
response to a law, regulation, or governmental or court order (to the least
extent necessary to comply with such order), provided that the receiving Party
notifies the disclosing Party promptly after receiving such order to give the
disclosing Party sufficient time to contest such order and/or to seek a
protective order.

 

(e)           Ownership of Confidential Information.  All Confidential
Information shall remain the exclusive property of the disclosing Party.

 

(f)            Injunctive Relief for Breach.  The receiving Party acknowledges
that monetary damages may not be a sufficient remedy for unauthorized disclosure
or use of Confidential Information, and that the disclosing Party may be
entitled, in addition to all other rights or remedies in law and equity, to
obtain injunctive or other equitable relief, without the necessity of posting
bond in connection therewith.

 

10.          Force Majeure.  In the event either Party is unable by Force
Majeure (as defined below) to carry out its obligations under this Agreement, it
is agreed that on such Party’s giving notice in writing, or by telephone and
confirmed in writing, to the other Party as soon as possible after the
commencement of such Force Majeure event, the obligations of the Party giving
such notice, so far as and to the extent they are affected by such Force
Majeure, shall be suspended from the commencement of such Force Majeure and
during the remaining period of such Force Majeure, but for no longer period, and
such Force Majeure shall so far as possible be remedied with all reasonable
dispatch; provided, however, the obligation to make payments then accrued
hereunder prior to the occurrence of such Force Majeure shall not be suspended
and Producer shall remain obligated for any loss or expense to the extent
otherwise provided in this Agreement.  The capitalized term “Force Majeure” as
used in this Agreement shall mean events beyond the reasonable control and
without the fault of the Party claiming Force Majeure, including acts of God,
war, riots, insurrections, laws, proclamations, regulations, strikes of a
regional or national nature, acts of terrorism, sabotage, floods, fires,
explosions, and acts of any government body.

 

11.          Dispute Resolution.  In the event a dispute arises under this
Agreement that cannot be resolved by those with direct responsibility for the
matter in dispute, such dispute shall be resolved by way of the following
process:

 

(a)           Senior management from Producer and from RPMG shall meet to
discuss the basis for the dispute and shall use their best efforts to reach a
reasonable resolution to the dispute.

 

(b)           If negotiations pursuant to Section 11(a) are unsuccessful, the
matter shall promptly be submitted by either Party to arbitration in accordance
with the Commercial Arbitration Rules, then in effect, of the American
Arbitration Association (“AAA”), except to the extent modified herein.  The
arbitration shall be held in a neutral location selected by the Parties. 
Judgment on the award rendered may be entered in any court having jurisdiction
thereof.  The Parties shall bear their respective costs incurred in connection
with the procedures

 

10

--------------------------------------------------------------------------------

 

described in this Section 11.  If the Parties reach agreement pertaining to any
dispute pursuant to the procedures set forth in this Section 11, such agreement
shall be reduced to writing, signed by authorized representatives of each Party,
and shall be final and binding upon the Parties.

 

12.          Miscellaneous.

 

(a)           Remedies Non-Exclusive.  Except as otherwise expressly provided in
this Agreement, any remedy provided for in this Agreement shall be cumulative
and in addition to, and not in lieu of, any other remedy set forth herein or any
other remedy otherwise available at law or in equity.

 

(b)           Successors and Assigns; Assignment.  All of the terms, covenants,
and conditions of this Agreement shall be binding upon, and inure to the benefit
of and be enforceable by the Parties and their respective successors, heirs,
executors and permitted assigns.  No Party may assign its rights, duties or
obligations under this Agreement to any other person or entity without the prior
written consent of the other Party, such consent not to be unreasonably withheld
or delayed; notwithstanding the foregoing, a Party may, without the consent of
the other Party, assign its rights and obligations under this Agreement to
(i) its parent, a subsidiary, or affiliate under common control with the Party
or (ii) a third party acquiring all or substantially all of the assets or
business of such Party.

 

(c)           Notices.  Any notice or other communication required or permitted
hereunder shall be in writing and shall be considered delivered in all respects
when delivered by hand, mailed by first class mail postage prepaid, or sent by
facsimile with delivery confirmed, addressed as follows:

 

To RPMG:             Renewable Products Marketing Group, Inc.

1157 Valley Park Drive, Suite 100

Shakopee, MN 55379

Fax: 952-465-3222

 

To Producer:         Granite Falls Energy, LLC

15045 Hwy 23 SE, PO Box 216

Granite Falls, MN  56241

Fax (320) 564-3190

 

Either Party may, from time to time, furnish, in writing, to the other Party,
notice of a change in the address and/or fax number(s) to which notices are to
be given hereunder.

 

(d)           Applicable Law.  This Agreement shall be governed in all respects
by the laws of the State of Minnesota, except with respect to its choice of law
provisions.

 

(e)           Severability.  In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, either in whole or in part, this Agreement shall continue
in full force and effect without said provision.

 

11

--------------------------------------------------------------------------------

 

(f)            No Third Party Beneficiaries.  No provision of this Agreement is
intended, or shall be construed, to be for the benefit of any third party.

 

(g)           Entire Agreement; Amendment.  This Agreement constitutes the
entire understanding and agreement between the Parties with respect to the
subject matter hereof, and supersedes all prior and contemporaneous
understandings and/or agreements, written or oral, regarding the subject matter
of this Agreement.  No amendment or modification to this Agreement shall be
binding unless in writing and signed by a duly authorized officer of both
Parties.

 

(h)           Counterparts.  This Agreement may be executed in counterparts,
including facsimile counterparts, each of which shall be deemed an original but
together shall constitute but one and the same instrument.

 

(i)            Waiver.  The failure of either Party at any time to require
performance of any provision of the Agreement or to exercise any right provided
for in the Agreement shall not be deemed a waiver of such provision or right
unless made in writing and executed by the Party waiving such performance or
right. No waiver by either Party of any breach of any provision of the Agreement
or of any right provided for in the Agreement shall be construed as a waiver of
any continuing or succeeding breach of such provision or right or a waiver of
the provision or right itself.

 

(j)            Independent Contractors.  The Parties to this Agreement are
independent contractors. There is no relationship of partnership, joint venture,
employment, franchise, or agency between the Parties, and no Party shall make
any representation to the contrary.

 

(k)           Additional Rules of Interpretation.

 

(i)            The words “include,” “includes” and “including” as used in this
Agreement shall be deemed to be followed by the phrase “without limitation” and
shall not be construed to mean that the examples given are an exclusive list of
the topics covered.

 

(ii)           The headings as to contents of particular sections of this
Agreement are inserted for convenience and shall not be construed as part of the
Agreement or as a limitation on the scope of any terms or provisions of this
Agreement.

 

(l)            Survival.  The following provisions of this Agreement shall
survive its termination: (i) to the extent of outstanding payment obligations,
Sections 2(a), 2(b), 2(c), and 2(d) and (ii) Sections 2(e), 2(f), 3(d), 7, 9,
11, and 12.

 

(m)          Delivery.  Producer is completing a contract obligation to CHS
through January 31, 2011.  Delivery of DG to RPMG shall commence on February 1,
2011.

 

12

--------------------------------------------------------------------------------

 

IN WITNESS THEREOF, each of the Parties hereto has caused this Agreement to be
executed by its respective duly authorized representative as of the day and year
first above written.

 

 

RPMG, INC.

 

 

 

 

 

 

 

By:

/s/ Steven L. Dietz

 

Name:

Steven L. Dietz

 

Its (title):

COO

 

 

 

 

 

 

 

GRANITE FALLS ENERGY, LLC

 

 

 

 

By:

/s/ Tracey L. Olson

 

Name:

Tracey L. Olson

 

Its (title):

CEO/GM

 

13

--------------------------------------------------------------------------------

 

SCHEDULE 1

 

Entities to which Producer sells DG directly:

 

--------------------------------------------------------------------------------

 

EXHIBIT  A

 

Terms Relating to Payment and Commission Calculation

 

RPMG shall pay Producer for all Standard-Grade DDG and DDGS loaded into railcars
and trucks and weighed at the Ethanol Facility for shipment to End Customers an
amount equal to the F.O.B. Ethanol Facility Price per ton, with RPMG being
entitled to retain its commission, with settlement weights as described in
Section 4(d) of the Agreement.

 

RPMG shall pay Producer for all Non-Standard-Grade DDG and DDGS loaded into
railcars and trucks and weighed at the Ethanol Facility for shipment to End
Customers an amount equal to the F.O.B. Ethanol Facility Price per ton, with
RPMG being entitled to retain its commission, with settlement weights as
described in Section 4(d) of the Agreement.

 

RPMG shall pay Producer for all Standard-Grade and Non-Standard-Grade DWG, MDWG,
MDDG, and CDS loaded into railcars and trucks and weighed at the Ethanol
Facility for shipment to End Customers an amount equal to the F.O.B. Ethanol
Facility price per ton, with RPMG being entitled to retain its commission, with
settlement weights as described in Section 4(d) of the Agreement.

 

“Accessorial Charges” shall mean charges imposed by third parties for the
off-loading, movement and storage of Producer’s DG, including without limitation
taxes, tonnage taxes, hard-to-unload truck or railcar charges/transloading
charges, railcar repair charges, fuel surcharges, storage charges, demurrage
charges, product shrinkage, detention charges, switching, and weighing charges
(but excluding Tariff Freight Costs).  Neither Party shall be responsible for
demurrage charges caused solely by the negligence or willful misconduct of the
other Party.

 

“Delivered Sale Price” shall mean sales dollars received by RPMG for Producer’s
DG, inclusive of tariff freight, as evidenced by RPMG’s invoices to End
Customers.

 

“F.O.B. Ethanol Facility Price” shall mean the F.O.B. sale price equivalent net
of applicable deductions and costs as described in this Agreement, including
without limitation Accessorial Charges and Tariff Freight Costs (or, if
applicable, the Delivered Sales Price net of applicable deductions and costs as
described in this Agreement, including without limitation Accessorial Charges
and Tariff Freight Costs) that RPMG invoices End Customers.

 

“Tariff Freight Costs” shall mean freight and related costs incurred by RPMG to
transport Producer’s DG.

 

“Standard-Grade” shall mean DG that meet the Specifications set forth in this
Agreement.

 

“Non-Standard-Grade” shall mean DG that fail to meet the Specifications set
forth in this Agreement, but which RPMG nonetheless accepts for marketing under
this Agreement.

 

--------------------------------------------------------------------------------

 

EXHIBIT B

 

Terms and Procedures Relating to Loading and Shipment

 

Except by special arrangement(s) in advance, DG shall be available for loading
and shipment eight (8) hours per day, Monday through Friday, except on scheduled
holidays.  Trailers and rail cars shall be visually inspected by Producer prior
to loading.  If unsanitary conditions exist and cannot be corrected on site, the
trailer or rail car shall be rejected by Producer and RPMG notified.

 

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

*** Confidential material redacted and filed separately with the Commission.

 

EXHIBIT C

 

DG Specifications

 

Producer covenants that all DDGS shall, upon delivery to RPMG at the Ethanol
Facility, conform to the following Specification:

 

Component

 

Maximum %

 

Minimum %

Protein

 

***

 

***

Fat

 

***

 

***

Fiber

 

***

 

***

Moisture

 

***

 

***

Ash

 

***

 

***

 

Producer covenants that all MDWG shall, upon delivery to RPMG at the Ethanol
Facility, conform to the following Specification:

 

Component

 

Maximum %

 

Minimum %

Protein

 

***

 

***

Fat

 

***

 

***

Fiber

 

***

 

***

Moisture

 

***

 

***

Ash

 

***

 

***

 

--------------------------------------------------------------------------------