Exhibit 10.2

 

MANAGEMENT AGREEMENT

 

THIS MANAGEMENT AGREEMENT is made and entered into this 20th day of April, 2005,
by and between Northern Lights Ethanol, LLC, a South Dakota limited liability
company, (the “Company”) and Broin Management, LLC, a Minnesota limited
liability company (“Broin Management”).

 

RECITALS

 

A.                                   Company owns and operates an ethanol
production facility for the production and marketing of ethanol and ethanol
co-products near Big Stone City, South Dakota.

 

B.                                     Broin Management is in the business of
managing and operating ethanol production facilities and currently manages the
Company’s Ethanol Plant pursuant to that certain Management Agreement dated
November 2, 2000, originally executed by Northern Growers Cooperative and Broin
Management, which agreement was later assigned to the Company.

 

C.                                     The term of the November 2, 2000,
Management Agreement expires effective as of June 30, 2005.

 

D.                                    Company desires to engage the services of
Broin Management to continue managing the Company’s operations, including the
Ethanol Plant, and Broin Management desires to provide such services, all in
accordance with the provisions of this Agreement.

 

NOW, THEREFORE, in consideration of the terms and conditions set forth in this
Agreement, Company and Broin Management agree as follows:

 

SECTION 1 DEFINITIONS

 

1.1                                 “Additional Services” means the additional
services described in Section 6.3.

 

1.2                                 “Affiliate” means Broin and
Associates, Inc., Broin Enterprises, Inc., Ethanol Products, LLC, Jeffrey S.
Broin, Robert L. Broin, Todd R. Broin, or any other present or future company of
which 10% or more of the outstanding securities are owned or controlled by Broin
Management or one or more Affiliates.

 

1.3                                 “Board” means the Board of Managers elected
by the Company’s owners to

 

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manage Company pursuant to Company’s organization documents.

 

1.4                                 “Commencement Date” means July 1, 2005.

 

1.5                                 “Confidentiality Agreement” means the
Confidentiality and Nondisclosure Agreement dated April 20, 2005, between
Company and Broin and Associates, Inc., and/or any amendment, modification or
replacement agreement between Company and Broin and Associates, Inc., with
respect to the protection and disclosure of Confidential Information.

 

1.6                                 “Confidential Information” means the
Confidential Information as defined in the Confidentiality Agreement. 
Confidential Information does not include the Company’s financial information to
the extent that it is required to be disclosed pursuant to federal securities
laws, rules, regulations and orders, and membership information.

 

1.7                                 “Dakota Gold Marketing Agreement” means the
DDGS Marketing and Services Agreement dated March 8, 2002, between Company and
Broin Enterprises, Inc., d/b/a Dakota Commodities, n/k/a Dakota Gold Marketing,
as amended and/or replaced from time to time by Company and Broin
Enterprises, Inc., d/b/a Dakota Gold Marketing.

 

1.8                                 “Effective Date” means July 1, 2005.

 

1.9                                 “Ethanol Marketing and Services Agreement”
means the Ethanol Marketing and Services Agreement dated March 5, 2002, between
Company and Ethanol Products, LLC, as amended and/or replaced from time to time
by Company and Ethanol Products, LLC.

 

1.10                           “Ethanol Plant” means the ethanol production
facility owned and operated by Company at 48416 - 144th Street, Big Stone City,
South Dakota.

 

1.11                           “License Agreement” means the Licensing Agreement
dated November 2, 2000, originally executed by Broin and Associates, Inc. and
Northern Growers Cooperative, which was assigned to Company, as amended and/or
replaced from time to time by Company and Broin and Associates, Inc.

 

1.12                           “Incentive Management Bonus” means an incentive
management bonus to be paid by Company to Broin Management in an amount equal to
five percent (5%) of Company’s Net Income, as described in Section 5.2.

 

1.13                           “Management Fee” means the management fee to be
paid by Company to Broin Management in the sum of $450,000.00 per year, as
adjusted annually pursuant to Section 5.1.

 

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1.14                           “Net Income” means Company’s net income as
determined under Generally Accepted Accounting Principles applied on a
consistent basis, but determined before any expense is recorded for the
Incentive Management Bonus, and income taxes paid or to be paid by Company to
the United States of America or any State thereof.

 

1.15                           “New Technology” means: (i) new inventions and
discoveries for the construction and operation of the Ethanol Plant, other than
those inventions and discoveries which simplify and enhance the
cook/fermentation process, the manufacture of the Licensed Products and/or the
use of the Licensed Methods;  (ii) technology in research, development, or
testing stage, and technology to be researched, developed or tested by Licensor
subsequent to the date of this Agreement, other than those which simply enhance
the cook/fermentation process; (iii) any processes, systems, diagrams,
information, balances, blueprints, configurations, manuals, videotapes or any
other proprietary rights, patents, trademarks, copyrights, trade secrets,
formulas, research data, know-how, process control systems, software
certifications and specifications and other technology that is not part of the
Technology; (iv) the raw starch technology subject to Patent Application
10/798226, filed March 10, 2004; and (v) the corn fractionation technology
subject to Patent Application 60/552108, filed March 10, 2004. New Technology
shall not include any portion of the “Licensor’s Technology” defined in, and
licensed to Company under, the License Agreement.

 

1.16                           “New Technology Services” means the management,
technical, and engineering services which may be rendered by Broin Management
and/or its Affiliates pursuant to Section 6.2 for the purpose of researching,
developing, and/or implementing New Technology.

 

1.17                           “Operational Costs” means all normal and
reasonable costs and expenses directly and indirectly associated with the
management and operation of Company, including the Ethanol Plant, determined by
using Generally Accepted Accounting Principles applied on a consistent basis. 
Operational Costs include, without limitation, administrative and general
overhead expenses, utilities, production inputs, production supplies,
transportation costs, general supplies, raw material acquisitions, insurance
premiums, marketing expenses, repair expenses, maintenance expenses, engineering
expenses, data processing expenses, legal, accounting and audit fees, billing
and collection expenses, expenses of preparing tax returns and reports, taxes,
travel expenses, telephone expenses, salaries of Ethanol Plant employees other
than the general manager and the technical manager (including Company’s share of
social security and Medicare taxes, pension or profit sharing plan
contributions, and the cost of other employee benefits), interest, lease
payments, depreciation, and other incidental business expenses incurred by
Company and by Broin Management directly on behalf of Company in connection with
Company’s business and the operation of the Ethanol Plant, but excluding the
expenses associated with the non-reimbursable services identified in

 

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Section 6.1.

 

1.18                           “Technology” means: (i) all of the “Licensor’s
Technology” defined in the License Agreement; (ii) all processes, systems,
diagrams, information, balances, blueprints, configurations, manuals,
videotapes, proprietary rights, patents, trademarks, copyrights, trade secrets,
formulas, research data, know-how, process control systems, software
configurations and specifications, and other technology required to operate the
Ethanol Plant to manufacture the Licensed Products, and/or use the Licensed
methods with a cook/fermentation process; and (iii) any of the foregoing
directed to the manufacture of the Licensed Products and/or use of the Licensed
Methods using the cook/fermentation process that Licensor may own or gain rights
to license during the term of this Agreement, but not including the New
Technology until so specified in an Addendum.

 

SECTION 2 ENGAGEMENT OF BROIN MANAGEMENT

 

2.1                                  Company’s Exclusive Manager.  On the terms
and subject to the conditions of this Agreement, Company hereby engages Broin
Management as Company’s agent and exclusive manager of Company’s operations
including the operation of the Ethanol Plant.  Broin Management hereby agrees to
perform, either directly or through its subcontractors, including its
Affiliates, the services set forth in this Agreement.

 

2.2                                  Mutual Cooperation. The parties shall
cooperate, each with the other, to maximize the long-term success and
profitability of the Company.

 

SECTION 3 BROIN MANAGEMENT’S DUTIES AND AUTHORITY

 

3.1                                 Broin Management’s Duties. Broin Management
agrees to cooperate with Company in the performance of Company’s duties and
responsibilities under this Agreement, to act in good faith, and to do all
things reasonably necessary to operate the Ethanol Plant.  To this end, Broin
Management’s officers, managers and employees agree to perform their respective
duties in a professional and competent manner.

 

3.2                                 Authority. Broin Management shall have the
day-to-day management control of Company, including the Ethanol Plant, and shall
have the power and authority, at Company’s expense, to take all actions
necessary or appropriate to operate Company’s business. Specifically, Broin
Management shall have, without limitation, the power and authority:

 

A.                                   To implement the Board’s policies and
decisions.

 

B.                                     To manage, supervise, and conduct in good
faith the Ethanol Plant’s and Company’s day-to-day affairs, operations,
communications and public relations.

 

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C.                                     To hire, train, and dismiss Company’s
employees, independent contractors, professionals, and consultants.

 

D.                                    To purchase, lease, or otherwise obtain
the right to use for Company’s benefit, land, buildings, furniture, fixtures,
equipment, computer hardware and software, and other tangible and intangible
assets. New purchases of the foregoing in amounts exceeding $100,000.00 for any
single item (or an aggregate of $250,000.00 per year) must be approved in
advance by Company’s Board, which approval shall not be unreasonably withheld.
As used in the preceding sentence, “new purchases” does not refer to land,
buildings, furniture, fixtures, equipment, computer hardware and software, and
other tangible and intangible assets associated with the initial construction of
the Ethanol Plant or associated with future expansions of the Ethanol Plant
approved by the Board. Nor does “new purchases” refer to repairs to or
replacements of the buildings, furniture, fixtures, equipment, computer hardware
and software, and other tangible and intangible assets of the Ethanol Plant.

 

E.                                      To purchase corn, other ingredients
required to produce ethanol and ethanol co-products, natural gas, electricity,
water, and other energy and utility services.

 

F.                                      To maintain Company’s records and
accounts of operations, receipts, and expenditures, and furnish Company with all
necessary tax reporting information.

 

G.                                     To recommend to the Board, from time to
time, the execution of contracts with Affiliates and other persons for the
marketing of Company’s ethanol and ethanol co-products, and for the design,
construction, repair, improvement, expansion, and operation of the Ethanol
Plant.

 

H.                                    To execute all contracts, documents and
instruments of any kind or character which Broin Management, in its reasonable
discretion, shall deem necessary or appropriate to carry out its duties and
responsibilities.

 

I.                                         To establish deposit and investment
accounts, deposit cash receipts, invest cash receipts, and disburse the same.

 

J.                                        To purchase for Company, at Company’s
expense, liability, hazard, and other insurance policies.

 

3.3                                 Powers Reserved by Company. Broin Management
shall not have the power and authority to take the following actions, which
actions are reserved to Company:

 

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A.                                   To amend or modify Company’s organizational
documents.

 

B.                                     To approve on Company’s behalf contracts
with Broin Management and/or its Affiliates.

 

C.                                     To borrow money and pledge, mortgage, or
assign, and grant security interests in, Company’s assets.

 

D.                                    To declare and make dividend, partnership,
and other distributions to Company’s owners.

 

E.                                      To approve the purchase of land,
buildings, furniture, fixtures, equipment, and other tangible and intangible
assets, except that Broin Management shall also have the power and authority to
do the foregoing to the extent set forth in Section 3.2 D.

 

F.                                      To approve such other actions as are
presented to Company for decision at the request of Broin Management.

 

3.4                                 Other Contracts with Broin Management and
Affiliates. Broin Management, its Affiliates and their respective officers,
directors, managers, members, and shareholders shall be entitled to do the
following with the Board’s approval:

 

A.                                   Contract with Company or the Ethanol Plant.

 

B.                                     Enter into transactions with Company,
including the purchase or sale of goods, supplies, equipment, or services of any
kind whatsoever.

 

C.                                     Loan money to Company.

 

SECTION 4 COMPANY’S DUTIES

 

4.1                                 Company’s Duties. Company agrees to
cooperate with Broin Management in the performance of Broin Management’s duties
and responsibilities under this Agreement, to act in good faith, and to do all
things reasonably necessary to aid Broin Management’s performance as an
independent contractor under the terms of this Agreement.  To this end,
Company’s officers, managers and employees agree to perform their respective
duties in a professional and competent manner.

 

SECTION 5 FEES, BONUSES, AND EXPENSES

 

5.1                                 Management Fee. Company shall pay to Broin
Management the Management Fee of $450,000.00 per year, as defined in
Section 1.13, payable in equal

 

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monthly installments due on the first day of each month.  The first monthly
Management Fee payment shall begin on the Commencement Date, as defined in
Section 1.4. If the Commencement Date is a date other than the first day of the
month, then the first monthly Management Fee payment shall be prorated for that
portion of the month from the Commencement Date to the last day of the month. 
Subsequent monthly Management Fee payments shall be due and payable on the first
day of each month following the Commencement Date.  The Management Fee shall be
adjusted annually for inflation on March 1st of each year based on the Consumer
Price Index, All Urban Consumers (CPIU) U.S. City Average (All Items Category)
with a standard reference base period of 1982-84 = 100, or as subsequently
updated (the “CPI”). The Management Fee shall be calculated for each subsequent
year by first determining the percentage increase in the CPI from the previous
twelve (12) month period for which the CPI information has been published.  The
percentage increase in the CPI for the previous twelve (12) month period shall
then be multiplied by the Management Fee in effect for the previous twelve (12)
month period and added to the Management Fee in effect during the previous
twelve (12) month period.  The percentage increase in the Management Fee for any
given year shall not exceed seven percent (7%).

 

5.2                                 Incentive Management Bonus. In addition to
the Management Fee, Company shall pay to Broin Management quarterly the
Incentive Management Bonus. The Incentive Management Bonus shall be due and
payable within forty-five (45) days of the end of each of Company’s first three
(3) fiscal quarters. Following Company’s fourth (4th) fiscal quarter, a final
payment shall be made within thirty (30) days following the completion of the
audit of Company’s financial records.  The final payment shall be adjusted such
that, when added to the Incentive Management Bonus payments made following the
first three (3) quarters, the total Incentive Management Bonus for the entire
fiscal year shall equal five percent (5%) of Company’s audited annual Net
Income. If the Incentive Management Bonus payments made following the first
three (3) fiscal quarters exceed five percent (5%) of Company’s audited annual
Net Income, Broin Management shall return to Company within thirty (30) days
following completion of the audit of Company’s financial records, the amount of
the overpayment.

 

5.3                                 Reimbursement of Operational Costs. All
expenses reasonably incurred by Broin Management on behalf of Company and the
Ethanol Plant shall constitute Operational Costs. Subject to Section 6, all
Operational Costs shall be borne by Company.  To the extent Broin Management
pays Company’s Operational Costs, Company shall reimburse Broin Management
within fifteen (15) days of receipt of an expense report from Broin Management.
All Operational Costs for which reimbursement is requested shall be reasonable
in amount and incurred in furtherance of Company’s business.

 

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SECTION 6 ADDITIONAL SERVICES

 

6.1                                 Non-Reimbursable Services. Broin Management,
either directly or through its Affiliates, shall provide to Company certain
management, technical, and engineering services to maintain the Ethanol Plant’s
operations pursuant to the License Agreement dated November 2, 2000, utilizing
the cook/fermentation process, without reimbursement for the expenses directly
incurred in connection therewith, other than travel expenses. Examples of
services to be rendered without reimbursement, except for travel expenses,
include the following:

 

A.                                   The full-time services of an ethanol plant
general manager and an ethanol plant technical manager, including their salaries
and benefits.

 

B.                                     Ongoing process consulting services by
Broin and Associates, Inc. with respect to the Technology licensed under the
License Agreement.

 

C.                                     Ongoing engineering services by Broin and
Associates, Inc. with respect to the Technology licensed under the License
Agreement.

 

D.                                    Ongoing distributive control systems
services by Broin and Associates, Inc. with respect to the Technology licensed
under the License Agreement.

 

E.                                      Ongoing operations assistance by Broin
and Associates, Inc. with respect to the Technology licensed under the License
Agreement.

 

F.                                      Ongoing microbiology consulting services
by Broin and Associates, Inc. with respect to the Technology licensed under the
License Agreement.

 

G.                                     Access to selected group pricing for
inputs to the production process if and to the extent available.

 

H.                                    Ongoing Technology enhancements and
updates by Broin and Associates, Inc., with respect to the Technology licensed
under the License Agreement.

 

I.                                         Benchmarking of the Ethanol Plant’s
performance as against the performance of other ethanol plants managed by Broin
Management in a similar market.  This information will not identify the other
plants but will indicate where the Ethanol Plant and Company stand in relation
to the other Broin Management managed plants.

 

6.2                                 New Technology Services. Broin Management
and/or its Affiliates may make available to Company from time to time, but shall
not be obligated to do so, the New Technology Services, as defined in
Section 1.16. The management, technical and

 

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engineering services described in Section 6.1 are separate and distinct from the
New Technology Services.  If Broin Management and/or its Affiliates offer to
provide to Company the New Technology Services and Company accepts such
services, the agreement of the parties, including any fees associated therewith,
shall be negotiated, reduced to writing, and confirmed in a separate Technology
and Patent Rights License Agreement (the “New Technology Agreement”) and one or
more Addendums to the New Technology Agreement to be executed by the parties.

 

6.3                                 Additional Services Under Separate
Contracts. Broin Management, for the benefit of Company, may have access to
commodity hedging services, finished product pricing services, finished product
marketing services, finished product research and development services, and
other services related to the production of ethanol and ethanol co-products (the
“Additional Services”).  Broin Management and/or its Affiliates may make
available to Company the Additional Services. If Broin Management and/or its
Affiliates offer to provide to Company the Additional Services and Company
accepts such services, the agreement of the parties, including any fees
associated therewith, shall be negotiated, reduced to writing, and confirmed in
a new contract to be executed by the parties.

 

SECTION 7 DUTIES OF GENERAL MANAGER

 

7.1                                 Initial Responsibilities. Broin Management
shall provide to Company the full-time services of an ethanol plant general
manager.  The general manager’s responsibilities shall be determined and
modified from time to time in Broin Management’s reasonable discretion and shall
initially include the following:

 

A.                                   To oversee all of Company’s business
operations, including, but not limited to, plant operations, purchasing
operations, marketing operations, personnel, and any and all other matters
relating to Company’s operations.

 

B.                                     To timely report to Broin Management and
Company on a schedule determined by the Company’s Board financial information
and operational information pursuant to policies established by Broin Management
and Company.

 

C.                                     To direct Company communications and
public relations, and to foster a positive Company image and relationships with
city, community, county, state, and national officials, representatives,
residents, and other persons.

 

D.                                    To adopt, implement, and administer
Company’s compensation and benefits packages in effect from time to time.

 

E.                                      To be knowledgeable of all relevant
activities of the state legislature and United States Congress, to encourage the
retention and/or expansion of current

 

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incentives available to the ethanol industry, and to promote any state or
federal legislative effort as directed by Broin Management.

 

F.                                      To purchase on Company’s behalf capital
assets and services up to the maximum limit for which the general manager has
authority to purchase as determined by Broin Management from time to time.

 

G.                                     To recommend Company’s purchase of
capital assets and services in excess of the maximum limit for which the general
manager is authorized to purchase, as determined by Broin Management from time
to time.

 

H.                                    To sign checks, withdraw funds, and
deposit funds with Company’s financial institutions.

 

I.                                         To oversee grain and other raw
materials purchases, ethanol marketing and sales activities, and ethanol
co-product marketing and sales activities.

 

J.                                        To assume those additional
responsibilities assigned by Broin Management from time to time and carry out
the directives of Broin Management, and to implement policies adopted by the
Company’s Board.

 

SECTION 8 DUTIES OF TECHNICAL MANAGER

 

8.1                                 Initial Responsibilities. Broin Management
shall provide the full-time services of an ethanol plant technical manager.  The
technical manager’s responsibilities shall be determined and modified from time
to time in Broin Management’s reasonable discretion.

 

SECTION 9 EQUIPMENT AND PROPERTY

 

9.1                                 Company-Owned Property. The ownership of all
property and equipment, and replacements thereof, purchased or paid for by
Company, shall remain with Company and shall not be removed from the Ethanol
Plant, except in the ordinary course of business, without Company’s prior
written approval.  Broin Management shall have the use of all Company-owned
property and equipment during the term of this Agreement for the purpose of
managing Company’s operations and the Ethanol Plant.

 

9.2                                 Additional Property. Broin Management and/or
its Affiliates may, from time to time, install in the Ethanol Plant such other
machinery, equipment, software, and other property owned and paid for by Broin
Management and/or its Affiliates.  The property owned by Broin Management or its
Affiliates shall be listed and such list shall be provided to the Board
annually. The Broin Management machinery, equipment, software, and other
property may be attached or affixed to Company’s property. All such

 

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machinery, equipment, software, and other property purchased by Broin Management
and/or its Affiliates and not paid for by Company shall remain the sole property
of Broin Management and/or its Affiliates.

 

Upon termination of this Agreement, Broin Management and/or its Affiliates shall
give Company the opportunity to purchase any such Broin Management machinery,
equipment, software and other property as is necessary to the normal day-to-day
operation of the Ethanol Plant. The purchase price shall be the fair market
value of the Broin Management machinery, equipment, software or other property.
The parties shall negotiate the purchase price. If they are unable to agree upon
the purchase price, the purchase price shall be determined by appraisal by an
independent appraiser with knowledge and experience in appraising the type of
property involved.  Once the purchase price is determined, Company shall either
purchase the property for cash or give Broin Management and/or its Affiliates
notice that Company declines to purchase the property.  If Company does not
purchase the property, then Broin Management and/or its Affiliates shall remove
the Broin Management machinery, equipment, software, and other property and
repair any damage caused by such removal.

 

Broin Management shall not, upon termination of this Agreement, remove any
machinery, equipment, software, or other property that would result in the
Ethanol Plant becoming non-operational.

 

SECTION 10 CONFIDENTIAL INFORMATION

 

10.1                           Confidential Information. Broin Management and
Company hereby acknowledge and agree that all written, electronic or other
documentation provided by Broin Management to Company is part of the
Confidential Information, and is subject to the terms and conditions of the
Confidentiality Agreement.  Upon termination of this Agreement, all Confidential
Information in the possession of Company shall be removed from Company’s
possession and returned to Broin Management, and Company shall retain no
written, electronic or other forms of documentation with respect to the
Confidential Information.

 

10.2                           Protection of Confidential Information. Company
agrees to protect the Confidential Information, or any part thereof, from
disclosure pursuant to the terms and conditions of the Confidentiality
Agreement.

 

10.3                           Ownership of Confidential Information. Company
agrees and acknowledges that the Confidential Information is proprietary to and
is the sole, exclusive and confidential property of Broin Management and/or its
Affiliates, and that Broin Management and/or its Affiliates expressly maintain
all rights to the Confidential Information including, but not limited to,
copyrights, patent, trademark and trade secret protection as provided in the
Confidentiality Agreement and by federal and state law.

 

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Nothing contained in this Agreement shall be construed as granting or employing
any transfer to Company of any right in or to the Confidential Information
beyond the specific rights granted in the Confidentiality Agreement.

 

SECTION 11 COMMENCEMENT DATE, TERM, AND TERMINATION

 

11.1                           Commencement Date. This Agreement shall be
effective as of the Effective Date, as defined in Section 1.8. However, Broin
Management’s management and operational duties, and Company’s payment
obligations, shall not commence until the Commencement Date, as defined in
Section 1.4.

 

11.2                           Term. This Agreement shall be for a term of five
(5) years commencing July 1, 2005, and terminating June 30, 2010.

 

11.3                           Termination by Company. Except as provided in
Section 11.5, Company may terminate this Agreement only for “cause.”  “Cause”
shall be defined as (i) Broin Management’s fraud, embezzlement, or other illegal
conduct; (ii) Broin Management’s substandard performance as compared to other
similarly-sized ethanol plants in the region not managed by Broin Management
with such substandard performance lasting for a period of twelve (12)
consecutive months; and/or (iii) Broin Management’s breach of the terms and
conditions of this Agreement. In the event that Company terminates this
Agreement for “cause” as defined in subparagraph (i) above, Company shall give
Broin Management written notice of termination, and in said event this Agreement
shall terminate upon Broin Management’s receipt of said notice.  If Company
terminates this Agreement for “cause” as defined in subparagraph (ii) above,
Company shall first give Broin Management written notice that Broin Management’s
performance as compared to other similarly-sized ethanol plants in the region
not managed by Broin Management has been substandard for a period of twelve (12)
consecutive months, in which event Broin Management shall have one hundred and
eighty (180) days within which to correct its performance.  In the event that
Broin Management fails to correct its performance within the one hundred and
eighty (180) day period, this Agreement shall terminate without farther notice. 
If Company terminates this Agreement for “cause” as defined in subparagraph
(iii) above, Company shall first give Broin Management written notice that Broin
Management has breached the terms and conditions of this Agreement, stating
therein the defaults occurring, in which event Broin Management shall have
thirty (30) days within which to correct its performance.  In the event that
Broin Management fails to correct its performance within the thirty (30) day
period, this Agreement shall terminate without further notice.

 

11.4                           Termination by Broin Management. Broin Management
may terminate this Agreement only for “cause.” “Cause” shall be defined as
(i) Company’s failure to keep confidential the Confidential Information;
(ii) termination of the Ethanol Marketing Agreement and the Dakota Gold
Marketing Agreement, with cause by any party to said

 

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contract or without cause by Company, and without the replacement of the
contract with an Affiliate, or the expiration of any of the foregoing contracts
without the replacement of the contract with an Affiliate; (iii) Company’s
failure to timely pay to Broin Management all Management Fees, Incentive
Management Bonuses, and/or Operational Costs; and/or (iv) Company’s breach of
the terms and conditions of this Agreement.  If Broin Management gives notice of
termination of this Agreement for “cause” as defined in subparagraphs (i) and
(ii) above, Broin Management shall give Company written notice of termination,
in which event this Agreement shall terminate on the sixtieth (60th)  day
following the date of Company’s receipt of written notice of termination. In the
event that Broin Management terminates this Agreement for “cause” as defined in
subparagraph (iii), Broin Management shall give Company written notice of
termination, and Company shall have thirty (30) days within which to cure the
default.  If Company does not cure the default within the thirty (30) day
period, this Agreement shall terminate without further notice.

 

11.5                           Termination By Company and/or Broin Management. 
Either Company or Broin Management may terminate this Agreement upon thirty (30)
days prior written notice to the other party, upon the occurrence of any of the
following: (i) the destruction of the Ethanol Plant and Company’s decision to
not rebuild the Ethanol Plant; (ii) the issuance and enforcement by a government
agency of an order that the Ethanol Plant shall cease operations without said
order having been vacated or lifted for a period of one hundred eighty (180)
days; or (iii) the Company ceases Ethanol Plant operations for a period of one
hundred eighty (180) days based on the reasonable business determination of the
Board.

 

11.6                           Payment of Fees. In the event of termination by
either Broin Management or Company, Company shall pay to Broin Management all
Management Fees and Incentive Management Bonuses earned through the date of
termination, and shall reimburse Broin Management for all Operational Costs
reasonably incurred by Broin Management through the date of termination.

 

SECTION 12 COVENANT NOT TO HIRE BROIN EMPLOYEES

 

12.1                           Prohibition Against Hiring.  Company, its
officers, directors, members, managers, subsidiaries, affiliates, successors,
assigns, agents, and contractors, including any replacement manager or
management company, shall not hire the general manager or the technical manager
provided to the Ethanol Plant by Broin Management or any other employee of Broin
Management or its Affiliates, without the express written consent of Broin
Management or the Affiliate with whom the person was employed.  This prohibition
shall begin as of the date of this Agreement and shall continue for a period of
two (2) years following the date of termination of this Agreement. This covenant
shall be expressly included as a term of any agreement executed by Company under
which Company retains a replacement manager or management company.

 

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SECTION 13 ASSIGNMENT

 

13.1                           Prohibition of Assignment. This Agreement shall
not be assignable by either party without the prior written consent of the
non-assigning party which consent shall not be unreasonably withheld.

 

SECTION 14 INDEMNIFICATION AND LIMITATION OF LIABILITY

 

14.1                           Limitation of Liability. To the fullest extent
permitted by law and except as otherwise set forth below, Broin Management shall
not be liable to Company or its members for damages arising from an act or
omission made by Broin Management in its management of Company and the Ethanol
Plant; provided, however, this Section shall not eliminate or limit the
liability of Broin Management to the extent Broin Management is found liable for
an act or omission not in good faith, that involves Broin Management’s
negligence, intentional misconduct, and/or a known violation of the law.

 

14.2                           Indemnity By Company. Company shall indemnify,
hold harmless, and defend Broin Management, and its officers, directors,
employees, and agents from and against any and all third-party claims, actions,
damages, liabilities, and expenses, attorneys’ and other professional fees, and
costs, including but not limited to any of the foregoing arising with respect to
the loss of life, personal injury, and/or damage to third parties, arising from
or out of Broin Management’s services provided under the terms and conditions of
this Agreement, except that Company shall not be obligated to indemnify, hold
harmless, and defend Broin Management from (i) negligence or willful and wanton
acts of Broin Management and its officers, directors, employees, and agents;
(ii) any acts beyond the scope of Broin Management’s services to be rendered
under the terms and conditions of this Agreement; and (iii) any violation of
law, regulation, ordinance, and/or court orders arising from the negligence or
willful and wanton acts of Broin Management and its officers, directors,
employees, and agents.

 

14.3                           Indemnity by Broin Management. Broin Management
shall indemnify, hold harmless, and defend Company, and its officers, directors,
employees, and agents from and against any and all third-party claims, actions,
damages, liabilities, expenses, attorneys’ and other professional fees, and
costs, including any of the foregoing with respect to the loss of life, personal
injury, and/or damage to property of third parties, arising from or out of
(i) the negligence or willful and wanton misconduct of Broin Management and its
officers, directors, employees, and agents; (ii) any act beyond the scope of
Broin Management’s services to be rendered under the terms and conditions of
this Agreement; and (iii) any violation of laws, regulations, ordinances, and/or
court orders arising from the negligence or willful and wanton acts of Broin
Management and its officers, directors, employees, and agents.

 

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SECTION 15 INSURANCE

 

15.1                           Company’s Insurance. Company shall carry and
maintain at its expense the following insurance policies:

 

A.                                   A general commercial liability insurance
policy to afford protection with limits of not less than $1,000,000.00 with
respect to personal injury or death of any one person, $1,000,000.00 with
respect to the personal injury or death occurring or resulting from one
occurrence, and $2,000,000.00 general aggregate.

 

B.                                     An all-risk property and casualty
insurance policy, written at full insurable value and with replacement cost
endorsement, covering Company’s buildings, improvements, equipment, and personal
property.

 

C.                                     An umbrella policy to afford protection
with a limit of not less than $5,000,000.00.

 

D.                                    Workers’ compensation insurance required
by applicable law.

 

E.                                      Business automobile liability and
collision insurance with a combined single limit of not less than $1,000,000.00.

 

15.2                           Broin Management’s Insurance. Broin Management
shall carry and maintain at its expense the following insurance policies:

 

A.                                   A commercial liability insurance policy to
afford protection with limits of not less than $1,000,000.00 with respect to
personal injury or death of any one person, $1,000,000.00 with respect to the
personal injury or death occurring or resulting from one occurrence, and
$2,000,000.00 general aggregate.

 

B.                                     In the event that property is owned by
Broin Management and/or its Affiliates and kept at the Ethanol Plant, an
all-risk property and casualty insurance policy, written at full insurable value
and with replacement cost endorsement, covering Broin Management’s and/or its
Affiliates’ property.

 

C.                                     An umbrella policy to afford protection
with a limit of not less than $5,000,000.00.

 

D.                                    Workers’ compensation insurance required
by applicable law.

 

E.                                      Business automobile liability and
collision insurance with the combined single limit of not less than
$1,000,000.00.

 

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15.3                           Policy Requirements. The company or companies
writing any insurance policies required to be carried or maintained pursuant to
this Agreement shall be with a company or companies which shall be licensed to
do business in the States in which the parties are organized or incorporated. 
The commercial general liability insurance policies of Company and Broin
Management shall name the other party as a named insured. All policies shall
contain a provision by which the insurer agrees that such policy shall not be
canceled except after thirty (30) days’ written notice to the other party.  A
certificate of insurance shall be provided to each party upon request.

 

15.4                           Waiver of Subrogation Claims.  To the extent
covered by all risk property and casualty insurance, neither Company nor Broin
Management shall be liable to the other party for any loss or damage to any
building, improvement, equipment, or other tangible property owned by the other,
including but not limited to lost rents, income, and profits, even though such
loss or damage might have been occasioned by the negligence of such party, its
employees, agents, or contractors.

 

SECTION 16 MISCELLANEOUS

 

16.1                           No Partnership or Joint Venture. Broin
Management, in the performance of its duties under this Agreement, is an
independent contractor. Nothing contained in this Agreement shall constitute or
be construed to be or create a partnership or joint venture between Company and
Broin Management, their successors, and permitted assigns.

 

16.2                           Additional Documents. Each party shall execute,
acknowledge, and/or verify and deliver to the other party any and all documents
from time to time that the parties may consider appropriate to carry out the
purposes and intent of this Agreement.

 

16.3                           Governing Law. The validity, construction,
interpretation and enforcement of this Agreement shall be governed by the laws
of the state in which the Ethanol Plant is located, without giving effect to
conflicts of laws or principles thereof.

 

16.4                           Intentionally Omitted.

 

16.5                           Severability. In the event that any term,
condition, or provision of this Agreement is held to be invalid by any court of
competent jurisdiction, such holding shall not invalidate or make unenforceable
any other term, condition, or provision of this Agreement. The remaining terms,
conditions, and provisions shall be fully severable, and shall be construed and
enforced as if such invalid term, condition, or provision had never been
inserted in this Agreement initially.

 

16.6                           Entire Agreement. This Agreement and the
Confidentiality Agreement, and any attachments thereto, constitute the entire
agreement and understanding of the parties and supercedes all prior agreements
and understandings, whether oral or written. No

 

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modifications or claimed waiver of any of the provisions of the foregoing shall
be valid unless in writing and signed by the duly authorized representative
against whom such modification or waiver is sought to be enforced.

 

16.7                           Headings. The headings used in this Agreement are
for convenience only and do not constitute matters to be construed in
interpretation of this Agreement.

 

16.8                           Waivers. No failure by any party to insist upon
strict compliance with any term of this Agreement shall constitute a waiver of
the party’s right to insist upon strict compliance with such term in the future.

 

16.9                           Taxes. Company shall be solely responsible for
all taxes and charges, now or hereafter imposed by any federal, state,
municipal, or other taxing authority, by reason of this Agreement or its
performance, including, without limitation, sales and use taxes, but excluding
income taxes imposed upon the taxable income of Broin Management. Company shall
reimburse Broin Management for any taxes and charges, other than income taxes,
imposed on Broin Management by reason of this Agreement or Broin Management’s
management of Company and the Ethanol Plant.

 

16.10                     Notices. Any notice required or permitted herein to be
given shall be given in writing and shall be delivered by United States
registered or certified mail, return receipt requested, at the addresses set
forth below or such address as the parties shall provide notice of from time to
time during the term of this Agreement:

 

To Company:

 

Northern Lights Ethanol, LLC

Post Office Box 356

Big Stone City, SD 57216

Attention: President

 

To Broin Management:

 

Broin Management, LLC

2209 East 57th Street North

Sioux Falls, SD 57104

Attention: President

 

16.11                     Acceptance. This Agreement shall be effective only
after acceptance of its terms by Broin Management at its home office in Sioux
Falls, South Dakota. No duties, liabilities, or detriment shall be incurred by
either party until the time of acceptance. Notwithstanding any negotiations,
representations, or agreements made or entered into prior or contemporaneously
with this Agreement, any variance with the terms of this

 

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Agreement, or any variance with the terms of any subsequent agreement entered
into by and between the parties, whether oral or written, shall be effective
only after acceptance of said terms as provided for in this Section 16.12.

 

16.12                     Counterparts. This Agreement may be executed in any
number of counterparts with the same effect as if all parties had signed the
same document. All counterparts shall be construed together and constitute the
same document.

 

[Signature Page Follows]

 

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COMPANY:

BROIN MANAGEMENT, LLC

 

 

NORTHERN LIGHTS ETHANOL, LLC

 

 

 

 

 

By:

/s/ Delton Strasser

 

By:

/s/ Jeff Broin

 

 

 

Its: President

Its: CEO

 

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