exv10w2



 



EXHIBIT 10.2



PRE-CLOSING MEMORANDUM


     The undersigned, being the signatories to a Declaration of Restrictions
and Covenants and to a Corn Storage and Delivery Agreement both of which are
attached hereto and made a part hereof, do by their execution hereof supplement
and/or modify the terms and conditions of the same as follows:


	1.	 	The parties agree that their obligations under the attached
Declaration of Restrictions and Covenants and attached Corn Storage
and Delivery Agreement and documents, agreements and/or instruments
referred to therein shall be subject to and conditioned upon final
approval by the lendors of the respective parties; and final
financial close of the public offering made in connection with the
project represented thereby and as determined solely by the Board of
Governors for the Granite Fall Community Ethanol Plant, LLC.



	2.	 	In addition, the parties agree that upon lender approval and
financial close, that they will also thereupon complete and append
to the Declaration of Restrictions and Covenants a completed form of
Exhibits A, B, C and D as referred to in said Declaration.



	3.	 	In addition, by its execution hereof, Farmers Cooperative
Elevator Company does agree that it shall execute a Subscription
Agreement in connection with the above referenced public offering
and that the minimum subscribed amount and contribution with respect
to the project represented thereby shall be no less than
$500,000.00.



	4.	 	Any dispute arising hereform, shall be subject to dispute
resolutions provided in Article 21 of the Declaration of
Restrictions and Covenants.



     IN WITNESS WHEREOF, the parties have executed this Pre-Closing Memorandum
to be effective on this 6th day of October, 2003.



	 	 	 	 	 	 	 
	 	 	GRANITE FALLS COMMUNITY ETHANOL PLANT, LLC
	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Julie Oftedahl-Volstad
	 	 	 	 	

	 	 	 	 	Its:
	 	Secretary/Treasurer



	 	 	 	 	 	 	 
	 	 	FARMERS COOPERATIVE ELEVATOR COMPANY
	 	 	 	 	 	 	 
	 	 	By:	 	/s/ James Hoepner
	 	 	 	 	

	 	 	 	 	Its:
	 	President



















 



CORN STORAGE AND DELIVERY AGREEMENT


     This Corn Storage and Delivery Agreement (“Agreement”) is made this 6th
day of October, 2003 by and between Granite Falls Community Ethanol Plant,
LLC, a Minnesota limited liability company (“GFCEP”) and Farmers Cooperative
Elevator Co., a Minnesota cooperative association (“FCE”) and is as follows:


RECITALS


     1. GFCEP has contemporaneously recorded a Declaration of Restrictions and
Covenants as to property to be conveyed to FCE and upon which FCE will
construct and operate grain storage and handling facilities to service GFCEP’s
adjoining corn dry milling ethanol plant (“Mill”).


     2. In addition to the foregoing, the parties wish to enter into additional
agreements necessary to further define FCE’s obligations with respect to grain
storage and handling; and to make certain additional agreements with respect to
purchase of corn required for Mill operations.


     3. The parties have reached agreement and wish to reduce the same to
writing.


     NOW, THEREFORE, in consideration of the terms set forth herein, the
parties agree:


     1. CONDITIONS.


	a.	 	Conditions Precedent. Conditions precedent to
GFCEP’s obligations hereunder shall be:



	i.	 	Execution and recording of a
Declaration of Restrictions and Covenants
(“Declaration”) as to the property conveyed by GFCEP to
FCE, of even date herewith, containing terms and
conditions acceptable to GFCEP, and to which FCE
consents.



	ii.	 	Construction of the Improvements by
FCE, as defined in the Declaration, in accordance with
the specifications and timelines as set forth therein.



	iii.	 	That FCE shall be a member in good
standing of GFCEP. FCE shall perform all other
obligations as set forth in any written agreements,
existing now or in the future, between GFCEP and FCE,
which agreements presently include this Corn Storage and
Delivery Agreement, the Declaration, an Operating
Agreement dated    , and a Subscription Agreement
dated 9-5-03.



	b.	 	Conditions Subsequent. Conditions subsequent
required of FCE, in addition to the other terms and conditions
stated herein, shall be:



 







 


	i.	 	That at all times, FCE shall be in
material compliance with the Declaration as referred to
above.



	ii.	 	That at all times, FCE shall be in
compliance with matters described at Section 1(a)(iii)
above.



	iii.	 	That at all times, FCE’s performance
of this Agreement shall be consistent with the terms and
conditions hereof and with the requirements of GFCEP’s
with respect to its Mill.



     2. TERM.


	a.	 	Initial Term. The initial term of this Agreement
commences on    , 2003 (the “Commencement Date”) and,
unless sooner terminated by default, expires on    
(“Original Term”).



	b.	 	Extension. Provided FCE is not in default at
the expiration of the Original Term, or at the expiration of
any extension, or except as otherwise expressly provided
herein, this Agreement shall automatically extend for
additional terms of five (5) years each unless and until the
parties, by mutual agreement, terminate the Declaration
referred to above, or mutually agree to separately terminate
this Agreement.



	c.	 	Effective Date. This Agreement shall become
effective on the date determined by the GFCEP’s Board of
Governors, by resolution, as the date on which the Mill begins
operating and begins accepting corn for delivery (the
“Effective Date”). Until the Effective Date is set by the
GFCEP’s Board of Governors, in its sole discretion, the GFCEP
has no obligation to accept corn from the FCE. GFCEP shall
notify FCE in writing of the estimated Effective Date at least
twelve (12) months in advance. GFCEP shall notify FCE of the
Effective Date at least thirty (30) days in advance.



     3. STORAGE AND DELIVERY OBLIGATIONS. With respect to storage and delivery
obligations:


	a.	 	Storage Capacity. Upon the Effective Date, FCE
shall at all times make available no less than 470,000 bushels
of storage for corn to be stored on behalf of GFCEP and/or to
be purchased by GFCEP for operation of its Mill. Any proposed
increase in storage by FCE shall be subject to GFCEP’s advance
written consent. Irrespective of the amount of storage owned
by FCE pursuant to the Declaration, FCE shall at all times
make available the amount of storage as provided above, and
shall, at all times, maintain adequate facilities, either
adjoining the Mill or elsewhere, to meet all corn purchase
orders required by GFCEP (to include any increase necessitated
by any expansion of the Mill).



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	b.	 	Delivery Estimates. GFCEP agrees to provide to
FCE an estimate on or before the first day of each calendar
quarter with respect to its required deliveries of corn for
the following calendar quarter. The parties expressly
understand that GFCEP’s notice shall be a good faith estimate
and that the parties anticipate reasonable variations between
delivery forecast and actual delivery requirements. To that
end, GFCEP shall also report to FCE on or before the first
business day of each month its estimated delivery requirement
of corn for the following month.



	c.	 	Delivery Systems. With respect to delivery of
corn stored at FCE to the Mill, FCE shall at all times
maintain all delivery systems necessary to deliver corn from
FCE’s storage facilities to the Mill in good working and
operating order and shall make all deliveries to the Mill at
the time and in the amount as required by GFCEP.



	d.	 	Security. Upon GFCEP’s request, FCE shall issue
warehouse receipts for corn owned by GFCEP and stored with
FCE. In addition, upon GFCEP’s request FCE shall obtain a
warehouseman’s or other form of surety bond which shall fully
insure GFCEP for the full value of all corn owned by GFCEP and
stored with FCE. At all times, FCE shall have in effect
insurance, in the amount of full insurance value, with respect
to loss of Corn due to fire, storm or other peril for which
GFCEP is unable to obtain insurance.



     4. CORN SPECIFICATIONS. All corn delivered by FCE to GFCEP hereunder
shall:


	a.	 	Corn. Be number 2 yellow corn;



	b.	 	Grading. Be graded in accordance with state and
federal laws and in accordance with any mutually agreed upon
standards set by the parties; and the purchase price for corn
shall be subject to discounts in purchase price as set forth
on Exhibit A attached hereto and made a part hereof;



	c.	 	Merchantable and Quality. Be merchantable and
not adulterated;



	d.	 	Title Upon Delivery to GFCEP. Be free and clear
of all liens and encumbrances.



     5. ADMINISTRATION OF AGREEMENT. With respect to carrying out the terms
and conditions hereof, the parties agree:


	a.	 	Office Space. GFCEP shall make available to FCE
reasonable office space in Mill offices such that FCE
personnel may carry out their duties and obligations
hereunder.



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	b.	 	Non-exclusive Storage. GFCEP acknowledges that
the storage facilities owned by FCE may be used from time to
time for storage of grain delivered to FCE and unrelated to
operations of the Mill. GFCEP consents to such use provided,
however, that the same in no way materially impairs the
ability of FCE to store and/or deliver corn to the Mill in the
amount required by GFCEP at any time.



	c.	 	Purchases. The parties acknowledge and agree
that GFCEP shall purchase all of its corn requirements from
FCE and shall place all actual orders for purchase of corn to
be delivered to the Mill with FCE. At all times, FCE, either
through its own management or through lawful contracts entered
into with third parties, shall maintain or cause to be
maintained such licenses and/or authorities as may be required
to lawfully engage in the purchase and sale of corn.



	d.	 	Risk Management. Notwithstanding the foregoing,
GFCEP acknowledges that it shall separately retain appropriate
risk management services for evaluating corn pricing and
purchases and/or for making trades for price protection and
future delivery such as options, future contracts and the
like.



	e.	 	FCE Obligations. In consideration for the
payment, as set forth at Section 6(a), FCE shall perform all
work as required by GFCEP with respect to arranging for
purchase, transportation, accepting delivery, drying or
conditioning, security of, delivering to the Mill, and all
other work necessary to cause corn purchased by GFCEP to be
delivered to the Mill at the times and in the amounts required
by GFCEP.



     6. PAYMENT. With respect to payment:


	a.	 	Administrative Fee. GFCEP shall pay to FCE and
FCE shall accept from GFCEP the sum of 5.3¢ per bushel for
each bushel of corn purchased for use at the Mill and
delivered through FCE.



	b.	 	Excess Storage.



	i.	 	In the event that GFCEP requires
storage of corn at FCE, for which it has taken ownership
and actual delivery, in an amount in excess of ten (10)
days supply for the Mill (approximately 470,000 bushels)
then GFCEP shall pay to FCE an additional 2¢ per bushel
per month (or prorated portion thereof) for the use of
such additional storage.



	ii.	 	If such excess amount is stored for
the benefit of GFCEP, but if GFCEP has not yet paid for
such corn then GFCEP shall also pay to FCE a carrying
cost for such excess in an amount equal to the amount of
interest accrued by FCE (rounded up to the nearest half



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	 	 	percentage point) and attributable to FCE’s loan
obligations for such bushels of corn based upon FCE’s
then existing operating loan for grain purchases.



	c.	 	Corn Purchase Price. With respect to corn
purchases, the price paid for all such purchases shall be as
determined from time to time by FCE. GFCEP shall make all
cash purchases of corn from FCE. The purchase price (subject
to the discounts provided for herein) shall be comparable to
that paid to other buyers of corn located within a 20 mile
radius of Granite Falls, Minnesota on the day of purchase.
Even though on any given day, the board price for corn at the
FCE, Granite Falls location may not be the same as the average
board price of other grain buyers nearby, it is the intent of
the parties that over time the board price at the FCE, Granite
Falls location will be equal to or slightly greater than the
average board price for other licensed grain buyers of corn
located within a 20 mile radius of Granite Falls, Minnesota
for the same time period. FCE and GFCEP shall independently
track the board price of other licensed corn buyers within a
20 mile radius of Granite Falls and shall, from time to time,
compare the data to the board price for corn at the FCE,
Granite Falls location to verify that its board price for corn
is consistent with the intent of this Agreement.
Additionally, FCE shall offer to sell to GFCEP forward
purchases of corn as FCE’s corn position allows.



	d.	 	Payment. All payments for purchase of corn
together with the administrative fee associated with such
purchase (and as set forth at Section 6(a) above) shall be
made by GFCEP no later than Tuesday of the week following date
of purchase. All other payments required hereunder shall be
made on or before the first business day of the month
following the month in which the obligations are incurred by
GFCEP.



     7. FORCE MAJEURE. In case of fire, explosions, interruption of power,
strikes or other labor disturbances, lack of transportation facilities,
shortage of labor or supplies, floods, action of the elements, riot,
interference of civil or military authorities, enactment of legislation or any
unavoidable casualty or cause beyond the control of a party and affecting the
conduct of its business to the extent of preventing or unreasonably restricting
the receiving, handling, production, marketing, or other operations, that party
shall be excused from performance during the period that its business or
operations are so affected. However, the party not subject to the force
majeure event may, during such period, accept performance from the other party
or a third party as it may reasonably determine under the circumstances.


     8. MODIFICATION. This Agreement may be amended on the written mutual
consent of the parties. Except as so amended, this Agreement and the
Declaration represent the entire agreement of the parties.


     9. BINDING EFFECT; ASSIGNMENT. This Agreement is binding upon and shall
inure to the benefit of GFCEP and FCE and their respective representatives,
successors and permitted assigns. Any transfer, assignment or delegation, in
whole or in part, of this Agreement



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must be consistent with the terms and conditions of the Declaration of even
date herewith and any provisions for Assignment as set forth therein.


     10. WAIVERS. No waiver of a breach of any of the agreements or provisions
contained in this Agreement shall be construed to be a waiver of any subsequent
breach of the same or of any other provision of this Agreement.


     11. NOTICES. Notices required by this Agreement shall be given in
accordance with the notice requirements of the Declaration of even date
herewith.


     12. CONSTRUCTION OF TERMS OF AGREEMENT. In the event any term, covenant
or condition herein contained is held to be invalid or void by any court of
competent jurisdiction, the invalidity of any such term, covenant or condition
shall in no way affect any other term, covenant or condition herein contained.


     13. DEFAULT. Default shall be a material breach of a term or condition of
this Agreement and/or the Declaration of even date herewith. In the event the
default is not cured to the satisfaction of the defaulting party within twenty
(20) days notice (for non-payment of money) or within thirty (30) days notice
(for all other defaults), then subject to Section 14 below, the non-defaulting
party shall be entitled to any and all remedies that exist at law or in equity.


     14. CHOICE OF LAW/DISPUTE RESOLUTION. This Agreement shall be governed in
all respects by the laws of the State of Minnesota. A default hereof shall
entitle the non-defaulting party, in addition to the option of terminating this
Agreement, to any and all remedies that may exist at law or in equity.
Notwithstanding anything herein to the contrary, the Parties hereto agree to
submit any controversy or claim regarding or relating to the interpretation,
application, or any other dispute regarding this Agreement, including any
claims for fraud in the inducement, to binding arbitration to be conducted in
accordance with the National Grain and Feed Association Arbitration Rules,
except that any such arbitration shall proceed with a panel of three
arbitrators regardless of the amount in controversy. The arbitrators shall
have jurisdiction to award damages, issue a declaratory judgment, and/or grant
appropriate injunctive relief as the case may be.


     IN WITNESS WHEREOF, the parties have executed this Corn Storage and
Delivery Agreement as of the date and year first above written.




	 	 	 	 	 	 	 
	 	 	GRANITE FALLS COMMUNITY ETHANOL PLANT, LLC
	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Julie Oftedahl-Volstad
	 	 	 	 	

	 	 	 	 	Its:
	 	Secretary/Treasurer



	 	 	 	 	 	 	 
	 	 	FARMERS COOPERATIVE ELEVATOR COMPANY
	 	 	 	 	 	 	 
	 	 	By:	 	/s/ James Hoepner
	 	 	 	 	

	 	 	 	 	Its:
	 	President










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EXHIBIT A


DISCOUNT SCHEDULE


Corn Discounts that will be charged to FCE from GFCEP:


Moisture


15.0% and under-no discount

15.1-15.5%-2 cents per bu.

15.6%-16.0%-4 cents per bu.

16.1%-16.5%-6 cents per bu.

16.6% to 17.0%-8 cents per bu.

Corn over 17.0% subject to rejection


Test Weight


54.0 lbs and over-no discount

53.0-53.9 lbs-2 cents per bu.

52.0-52.9 lbs-4 cents per bu.

Below 52.0 lbs.-additional 2 cents per lb. per bu.


Regular Damage


5.0% and under-no discount

5.1% and up-2 cents per bu. per each 1%

Over 10.0% subject to rejection


Heat Damage


.2% and under-no discount

..3% and up-1 cent per bu. per each .1%


Foreign Material


4.0% and under-no discount

4.1% and up-3 cents per bu. per each 1%


Musty/Sour-5 cents per bu.


This discount schedule is subject to change as market conditions dictate
providing both FCE and GFCEP mutually agree to any change in writing.




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