EXHIBIT 10.14


 


RPMG


Renewable Products Marketing Group


 


ETHANOL FUEL


MARKETING AGREEMENT


 





















 


ETHANOL FUEL MARKETING AGREEMENT


 


THIS AGREEMENT,
entered into this 7th day of August, 2006, by and between RENEWABLE PRODUCTS
MARKETING GROUP, L.L.C., hereinafter referred to as “RENEWABLE PRODUCTS”; and
HERON LAKE BIOENERGY, LLC, a Minnesota Limited Liability Company, hereinafter
referred to as “HERON LAKE BIOENERGY.”


 


WITNESSETH:


 


WHEREAS, Renewable
Products is a limited liability company formed for the purpose of marketing
ethanol for its members and others, and,


 


WHEREAS, HERON LAKE
BIOENERGY is an L.L.C., intending to construct a plant in Heron Lake, Minnesota
for the production of fuel grade ethanol, and,


 


WHEREAS, the parties
have agreed that, for the duration of this marketing agreement, the sale and
marketing of all of the ethanol produced by HERON LAKE BIOENERGY should be
undertaken by Renewable Products.


 


NOW, THEREFORE, In
consideration of the mutual covenants and promises herein contained, the
parties hereto agree as follows:


 


1.                                      Exclusive
Marketing Representative.  That if
HERON LAKE BIOENERGY constructs a facility for the production of fuel grade
ethanol, Renewable Products shall be the sole marketing representative for the
entire production of said facility subject to all the terms and conditions of
this agreement.


 


2.                                      Plant
Construction/Ethanol Specifications. 
That HERON LAKE BIOENERGY promises and agrees to proceed, with due
diligence, toward the planning, financing and construction of a facility for
the production of fuel grade ethanol with a capacity of approximately 50
million gallons per year, which fuel grade ethanol will be at least 199.50
proof (undenatured anhydrous), and conform to the specifications described in
A.S.T.M. 4806 and such other specifications that may be, from time-to-time,
promulgated by the industry for E-Grade denatured fuel ethanol.  HERON LAKE BIOENERGY contemplates that said
facility is 


 


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anticipated to be in production by May 2007, and will make every
good faith effort to begin production by that time.


 


3.                                      Rail and Truck
Loading Facilities.  That the
facility to be constructed and operated by HERON LAKE BIOENERGY, as aforesaid,
shall include reasonable and convenient railcar and tank truck access at the
facility of a size and design appropriate to handle production of approximately
50 million gallons of ethanol per year. 
All such railcar and tank truck loading facilities shall meet all
industry and governmental safety standards and shall be capable of delivering a
minimum of 800 gallons of product per minute to railcars and/or tank
trucks.  HERON LAKE BIOENERGY will be
solely responsible for all demurrage charges for railcars in service for its
use.  HERON LAKE BIOENERGY shall provide
personnel reasonably needed to load trucks or rail cars at its facility in a
timely manner.


 


4.                                      Storage
Capacity.  That the facility to be
constructed and operated by HERON LAKE BIOENERGY as aforesaid shall have
sufficient storage capacity for not less than 10 days ethanol production.


 


5.                                      Best Efforts
to Market.  That since Renewable
Products shall have the exclusive right to market all the fuel grade ethanol
produced by HERON LAKE BIOENERGY during the term of this agreement, Renewable
Products promises and agrees to use its best good faith efforts to market all
such fuel grade ethanol; provided, however, that Renewable Products’ obligation
hereunder shall be excused in case of fire, flood, other natural calamity,
labor dispute or any adverse governmental statute, regulations or decree
(including any court order or decree).


 


6.                                      Risk of Loss.  That Renewable Products will be responsible
for the marketing (subject to the terms of this agreement) of all such fuel
grade ethanol produced by HERON LAKE BIOENERGY, from the time the common
carrier accepts responsibility for the product at HERON LAKE BIOENERGY’s
facility in either a railcar and/or tank truck. 
In addition, Renewable Products shall bear the risk of loss for all such
product that has been accepted for shipment by the common carrier and, in the
event of a loss, shall pay HERON LAKE BIOENERGY for all such product in
accordance with the terms of this agreement as if the product had been received
and accepted by the buyer.


 


7.                                      Specific
Marketing Tasks.  Renewable Products
shall be solely responsible for the marketing, sale and delivery of all the
production from HERON 


 


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LAKE BIOENERGY’s facility during the term of this agreement, including,
but not limited to:


 


·                  Scheduling all
shipments of ethanol produced at the Heron Lake facility;


·                  Related freight
and transportation services, as may be needed for shipment of said production
on a timely basis;


·                  Obtaining
sufficient railcar, tank trucks and other transport as may be needed to handle
said production;


·                  Negotiating the
rates and tariffs to be charged for delivery of such production to the
customer;


·                  Promoting and
advertising the sale of fuel grade ethanol as appropriate;


·                  Ascertaining
that such production is delivered where contracted and intended;


·                  Handling all
purchase agreements with consumers and any complaints in connection therewith;
and


·                  Collecting all
accounts and undertaking any legal collection procedures as may be necessary.


·                  Invoicing all
ethanol marketed, receiving payments from customers, paying all transportation
charges when necessary;


·                  Implementing and
monitoring on-going program to conduct carrier audits and handling carrier
selection and dispatching, freight rate bundling and distribution optimization,
and all insurance matters relating to product that is shipped from the Heron
Lake facility to the customer; and


·                  All transaction
processing including all ethanol licensing, monitoring and state compliance
reporting, state surety bonding, tax collection, remittance and reporting,
purchase and sales acknowledgements, late payment collections, and electronic
funds transfer services.


 


8.                                      Negotiation of
Ethanol Price.  That Renewable
Products will use reasonable efforts to obtain the best price for all fuel
grade ethanol sold by it pursuant to the terms of this agreement.


 


9.                                      Compensation/Pooling.
HERON LAKE BIOENERGY will pay Renewable Products $.01 (one cent) per gallon for
each gallon of ethanol sold by Renewable Products for the account 


 


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of HERON LAKE BIOENERGY. 
Renewable Products shall have the right to deduct this fee from payments
due HERON LAKE BIOENERGY as described in paragraph 10.  The members of Renewable Products market
their ethanol as a pool.  It is the
intent of Renewable Products to treat the production of HERON LAKE BIOENERGY in
a similar manner in the future.  The
parties hereto agree that, upon request in writing, either party may require
the other to make available its books and records, at reasonable intervals, in
order to audit those books and records and to account for all dealings,
transactions and sums relevant to this Agreement.


 


10.                               Accounts
Receivable/Rail Car Leases/Termination of Contract.  It will be the responsibility of Renewable
Products to do all billing in regard to the sale of ethanol, to collect all
receivables and to be responsible for any bad accounts.  RENEWABLE PRODUCTS shall make payment to
HERON LAKE BIOENERGY within 10 days after taking delivery of product into
common carrier truck or into railcar. 
All risks associated with accounts receivables shall be borne by
Renewable Products.  Renewable Products
will lease approximately 125 railcars to be used by HERON LAKE BIOENERGY.  A separate payment for leased railcars is not
applicable as HERON LAKE BIOENERGY’s production of fuel grade is part of the
RENEWABLE PRODUCTS marketing pool.  If
this contract is terminated, by non-renewal or otherwise, the lease for the
rail cars leased by Renewable Products for the transport of HERON LAKE
BIOENERGY’s ethanol will be assigned to HERON LAKE BIOENERGY, who will be
obligated to the terms and conditions of said lease.  Renewable Products shall provide HERON LAKE
BIOENERGY the opportunity to review and approve of the terms and conditions of
any such rail car lease before Renewable Products first executes the same.  The parties understand that the assignment of
the lease is subject to the approval of the lessor of the rail cars.


 


11.                               No “Take or Pay.”  The parties agree that this is not a “take or
pay contract” and that Renewable Products’ liability is limited to ethanol
passing custody at HERON LAKE BIOENERGY’s facility.


 


12.                               Term.  The term of this agreement shall commence on
the first day of the month that HERON LAKE BIOENERGY initially ships ethanol
and shall continue for a period of at least 24 months, but will terminate at
the end of the first traditional ethanol marketing contract period; end of March or
end of September which ever occurs first after the 24 month period.  This
Agreement shall be automatically extended for an additional one (1) year
term following the end of the 


 


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initial
term unless either party gives written notice of non-extension not less than
ninety (90) days before the end of the current expiration date.


 


13.                               Licenses and Permits.  At all times from the commencement of this
contract, HERON LAKE BIOENERGY will have all of the licenses and permits
necessary to operate its production facilities.


 


14.                               Expected Volume.  During the term of this agreement, or any
renewals thereof, HERON LAKE BIOENERGY agrees to have Renewable Products market
all of the ethanol produced by HERON LAKE BIOENERGY it at its production
facility.  The average monthly volume of
ethanol produced by HERON LAKE BIOENERGY is estimated to be approximately
4,166,666 gallons.


 


15.                               Estimated 12-Month
Volume.  As of the effective date of
this agreement, HERON LAKE BIOENERGY will provide Renewable Products with HERON
LAKE BIOENERGY’s best estimate of its anticipated monthly ethanol production
for the next twelve (12) months, to assist Renewable Products in developing
appropriate marketing strategies for the ethanol to be produced by HERON LAKE
BIOENERGY.


 


16.                               Updated Monthly Volume
Estimates.  On or before the first
day of each month, HERON LAKE BIOENERGY will provide Renewable Products with
its updated best estimate of HERON LAKE BIOENERGY’s anticipated monthly ethanol
production for the next twelve (12) months, so that Renewable Products will
have ethanol production estimates from HERON LAKE BIOENERGY twelve (12) months
into the future during the entire time that this agreement is in effect.


 


17.                               Good and Marketable
Title.  HERON LAKE BIOENERGY
represents that it will have good and marketable title to all of the ethanol
marketed for it by Renewable Products and that said ethanol will be free and
clear of all liens and encumbrances.


 


18.                               Establishment of
Price and Other Sale Terms.  When
Renewable Products sells the ethanol marketed pursuant to the terms of this
agreement to its customers, the parties understand and agree that the ethanol
sales prices and all other terms and conditions of ethanol sales to customers
under this agreement will be established by Renewable Products.  Renewable Products may make these decisions,
without the need of obtaining consent from HERON LAKE BIOENERGY.  Notwithstanding the foregoing, Renewable
Products agrees to use 


 


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its best efforts to communicate with HERON LAKE BIOENERGY the terms and
conditions of ethanol sales.


 


19.                               Independent
Contractor.  Nothing contained in
this agreement will make Renewable Products the agent of HERON LAKE BIOENERGY
for any purpose whatsoever.  Renewable
Products and its employees shall be deemed to be independent contractors, with
full control over the manner and method of performance of the services they
will be providing on behalf of HERON LAKE BIOENERGY under this agreement.


 


20.                               Separate Entities.  The parties hereto are separate entities and
nothing in this agreement or otherwise shall be construed to create any rights
or liabilities of either party to this agreement with regard to any rights,
privileges, duties or liabilities of any other party to this agreement.


 


21.                               Working Relationship.  Because the parties hereto have not done
business together in the past in the manner described in this agreement, they
have not yet attempted to develop efficient and effective procedures related to
ordering, delivering ethanol and shipping ethanol and, therefore, agree to work
together promptly and in good faith to develop effective and efficient policies
and procedures to cover these matters.


 


22.                               Ethanol Shortage/Open
Market Purchase.  Notwithstanding any
force majeure provision herein to the contrary, if HERON LAKE BIOENERGY is
unable to deliver its estimated monthly ethanol production and if as a
consequence of the non-delivery and in order to meet its sale obligation to
third parties, Renewable Products may purchase ethanol in the market place to
meet its delivery obligations.  If it
does so, and as a result thereof incurs a financial loss, HERON LAKE BIOENERGY
will reimburse Renewable Products for any such loss.  Under such circumstances, if Renewable
Products realizes a financial gain, it will pay such gain to HERON LAKE
BIOENERGY.


 


23.                               Testing of Samples.  At the request of Renewable Products, HERON
LAKE BIOENERGY agrees to provide Renewable Products with samples of its ethanol
produced at its production facility so that it may be tested for product
quality on a regular basis.


 


24.                               Insurance.  During the entire term of this agreement,
HERON LAKE BIOENERGY will maintain insurance coverage that is standard, in the
reasonable 


 


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opinion of Renewable Products, for a company of its type and size that
is engaged in the production and selling of ethanol.  At a minimum, HERON LAKE BIOENERGY’s
insurance coverage must include:


 


a.                                       Comprehensive
general product and public liability insurance, naming Renewable Products as an
additional named insured, with liability limits of at least $5 million in the
aggregate.


 


b.                                       Property
and casualty insurance adequately insuring its production facilities and its
other assets against theft, damage and destruction on a replacement cost basis.


 


c.                                       Renewable
Products as a named insured under the comprehensive general product and public
liability insurance policy and the property and casualty insurance policy.


 


d.                                       Workers’
compensation insurance to the extent required by law.


 


HERON LAKE BIOENERGY will not change its insurance coverage during the
term of this agreement, except to increase it or enhance it, without the prior
written consent of Renewable Products.


 


25.                               Indemnifications
and Hold Harmless— HERON LAKE BIOENERGY. 
If a third party makes a claim against Renewable Products or any person
or organization related to it as the result of the actions or omissions of
HERON LAKE BIOENERGY or any person or organization related to HERON LAKE
BIOENERGY including, but not limited to, claims relating to the quality of
ethanol produced by HERON LAKE BIOENERGY, then HERON LAKE BIOENERGY agrees to
indemnify Renewable Products and its related persons and organizations and to
hold them harmless from any liabilities, damages, costs and/or expenses,
including costs of litigation and reasonable attorneys fees which they incur as
a result of any claims, arising solely from the marketing of HERON LAKE
BIOENERGY’s ethanol under this Agreement, made against them by third parties.


 


26.                               Indemnifications
and Hold Harmless—Renewable Products. 
The indemnification obligations of the parties under this agreement will
be mutual and Renewable Products, therefore, makes the same commitment to
indemnify HERON LAKE BIOENERGY and its related persons or organizations that 


 


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HERON LAKE BIOENERGY has made to Renewable Products in the preceding
paragraph.


 


27.                               Survival of
Terms/Dispute Resolution.  All
representations, warranties and agreements made in connection with this
agreement will survive the termination of this agreement.  The parties will, therefore, be able to
pursue claims related to those representations, warranties and agreements after
the termination of this agreement, unless those claims are barred by the
applicable statute of limitations. 
Similarly, any claims that the parties have against each other that
arise out of actions or omissions that take place while this agreement is in
effect will survive the termination of this agreement.  This means that the parties may pursue those
claims even after the termination of this agreement, unless applicable statutes
of limitation bar those claims.  The
parties agree that, should a dispute between them arise in connection with this
agreement, the parties will complete, in good faith, a mediation session prior
to the filing of any action in any court. 
Such mediation session shall occur at a place that is mutually
agreeable, and shall be conducted by a mediator to be selected by mutual
agreement of the parties.


 


28.                               Choice
of Law.  The parties agree that this
agreement will be governed by, interpreted under and enforced in accordance
with Minnesota law.


 


29.                               Assignment.  Neither party may assign its rights or
obligations under this agreement without the written consent of the other
party, which consent will not be unreasonably withheld.


 


30.                               Entire
Agreement.  This Agreement
constitutes the entire agreement between the parties covering everything agreed
upon or understood in the transaction. 
There are no oral promises, conditions, representations, understandings,
interpretations, or terms of any kind as conditions or inducements to the
execution hereof or in effect between Buyer and Seller, except as expressed in
this Agreement.  No change or addition
shall be made to this Agreement except by a written document signed by all
parties hereto.


 


31.                               Execution of
Counterparts.  This Agreement may be
executed by the parties on any number of separate counterparts, and by each
party on separate counterparts, each of such counterparts being deemed by the
parties to be an original instrument; and all of such counterparts, taken
together, shall be deemed to constitute one and the same instrument.


 


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32.                               Duplicate Counterpart
Includes Facsimile.  The parties
specifically agree and acknowledge that a duplicate hereof shall include, but
not be limited to, a counterpart produced by virtue of a facsimile (“fax”)
machine.


 


33.                               Binding Effect.  This Agreement shall be binding upon, and
shall inure to the benefit of, the parties hereto and there respective heirs,
personal representatives, successors and assigns.


 


34.                               Termination.  The agreement may be terminated if either
party engages in an uncured breach. 
After receiving written notice, the breaching party will have 30 days to
cure the breach.  If the breaching party
does not cure the breach in the required time, the agreement will terminate 30
days later.


 


35.       Confidential Information.  The parties acknowledge that they
will be exchanging information about their businesses under this Agreement
which is confidential and proprietary, and the parties agree to handle that
confidential and proprietary information in the manner described in this Section 35.


 


(a)                                  Definition of Confidential
Information.  For
purposes of this Agreement, the term “Confidential Information” means
information related to the business operations of HERON LAKE BIOENERGY or RENEWABLE PRODUCTS that meets all of the
following criteria:


 


(i)    
The information must not be generally known to the public, and must not be a
part of the public domain.


 


(ii)    The
information must belong to the party claiming it is confidential, and must be
in that party’s possession.


 


 (iii)   The information must have
been protected and safeguarded by the party claiming it is confidential by
measures that were reasonable under the circumstances before the information
was disclosed to the other party.


 


(iv)   
Written information must be clearly designated in writing as “Confidential
Information” by the party claiming it is confidential before it is disclosed to
the other party, except that all information about costs and 


 


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prices will always be
considered Confidential Information under this Agreement, without the need for
specifically designating it as such.


 


(v)    
Verbal Confidential Information which is disclosed to the other party must be
summarized in writing, designated in writing as “Confidential Information,” and
transmitted to the other party within ten (10) days of the verbal
disclosure.


 


(b)     Limitations on the Use of Confidential Information.  Each
party agrees that it will not use any Confidential Information that it obtains
about the other party for any purpose, other than to perform its obligations
under this Agreement.


 


(c)     The Duty not to Disclose Confidential Information.  The
parties agree that they will not disclose any Confidential information about
each other to any person or organization, other than their respective legal
counsel and accountants, without first getting written consent to do so from
the other party.  Notwithstanding the foregoing, if a party or anyone to
whom such party transmits Confidential Information in accordance with this
Agreement is requested or required (by deposition, interrogatories, requests
for information or documents in legal proceedings, subpoenas, civil
investigative demand or similar process, SEC filings or administrative
proceedings) in connection with any proceeding, to disclose any Confidential
Information, such party will give the disclosing party prompt written notice of
such request or requirement so that the disclosing party may seek an
appropriate protective order or other remedy and/or waive compliance with the
provisions of this Agreement, and the receiving party will cooperate with the
disclosing party to obtain such protective order.  The fees and costs of
obtaining such protective order, including payment of reasonable attorney’s
fees, shall be paid for by the disclosing party.  If such protective order
or other remedy is not obtained or the disclosing party waives compliance with
the relevant provisions of this Agreement, the receiving party (or such other
persons to whom such request is directed) will furnish only that portion of the
Confidential Information which, in the opinion of legal counsel, is legally
required to be disclosed, and upon the disclosing party’s request, use
commercially reasonable efforts to obtain 


 


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assurances that the
confidential treatment will be accorded to such information.  This will be
the case both while this Agreement is in effect and for a period of five (5) years
after it has been terminated.


 


(d)     The Duty to Notify the Other Party in Cases of
Improper Use or Disclosure.  Each party agrees to
immediately notify the other party if either party becomes aware of any
improper use of or any improper disclosure of the Confidential Information of
the other party at any time while this Agreement is in effect, and for a period
of five (5) years after it has been terminated.


 


(e)     Protection of the Confidential Information.  Each
party agrees to develop effective procedures for protecting the Confidential
Information that it obtains from the other party, and to implement those
procedures with the same degree of care that it uses in protecting its own
Confidential Information.


 


(f)     Return of the Confidential Information.  Immediately
upon the termination of this Agreement, each party agrees to return to the
other party all of the other party’s Confidential Information that is in its
possession or under its control.”


 


(g)                         Disclosure in SEC Filings. Notwithstanding any other provision
contained in this agreement, RENEWABLE PRODUCTS acknowledges and agrees that the
disclosure of this agreement and the transactions contemplated hereby by HERON
LAKE BIOENERGY (i) on a Form 8-K or other report filed with the
Securities and Exchange Commission at any time after the date hereof, or (ii) in
a customary press release or on a customary analyst call, will not be violation
of this Section 35. HERON LAKE BIOENERGY will cooperate with any
reasonable requests of RENEWABLE PRODUCTS to request confidential treatment
concerning sensitive/confidential items.


 


36.                               Force
Majeure.  Neither party shall be
liable for any failure or delay by such party in performing its obligations
under this agreement if such failure or delay is due to causes beyond its
reasonable control including, without limitation, fires, floods, storms and
other acts of God, governmental acts, acts of terrorism, labor strikes,
lockouts or other 


 


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disturbances,
war, riot, failure of processing equipment, or difficulties in procuring labor
or materials.


 


37.                               Notices.  Any notice or other communication required or
permitted hereunder shall be in writing and shall be considered delivered in
all respects when it has been delivered by hand or mailed by first class mail
postage prepaid, addressed as follows:


 


	
   

  	
  TO:

  	
  Renewable Products Marketing Group, L.L.C.

  	
   

  
	
   

  	
   

  	
  809 East Main Street

  	
   

  
	
   

  	
   

  	
  Suite 2

  	
   

  
	
   

  	
   

  	
  Belle Plaine, MN 56011

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  TO:

  	
  HERON LAKE BIOENERGY, LLC

  	
   

  
	
   

  	
   

  	
  91246 390th Ave.

  	
   

  
	
   

  	
   

  	
  Heron Lake, MN 56137

  	
   

  



 


IN WITNESS WHEREOF,
the parties hereto have set their hands the day and year first written above.


 


	
   

  	
  RENEWABLE
  PRODUCTS

  MARKETING GROUP, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ C. Stephen Bleyl

  	
   

  
	
   

  	
   

  	
  Its CEO

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  HERON LAKE BIOENERGY, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Robert J. Ferguson

  	
   

  
	
   

  	
   

  	
  Its President

  	
   

  



 


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