Exhibit 10.19


 


ELECTRIC
SERVICE AGREEMENT


 


This AGREEMENT is made by and between Lake Region Electric Cooperative
of Pelican Rapids, Minnesota (hereinafter called LREC))  and Otter Tail Ag Enterprises, LLC
of Fergus Falls, Minnesota (hereinafter called OTAE).


 


OTAE is to be the
owner and operator of an ethanol manufacturing facility outside of the
municipal limits of the City of Fergus Falls, located in Section 20,
Fergus Falls Township, Otter Tail County, Minnesota.


 


The OTAE owners and developers of the Plant
desire to contract for the entire electrical service for its Plant at a
capacity level of approximately 7800 kW.


 


LREC is willing to render such
service to OTAE’s  Plant in
accordance with the terms and conditions of this Agreement.


 


1.0          Agreement
to Sell and Purchase


 


LREC hereby agrees
to sell and deliver to OTAE and OTAE agrees to purchase and receive from LREC all of the electric service needed at
the SITE for or by OTAE or its
successors based on the current electrical power transmission and distribution
system. In the event that changes in technology in manufacturing processes or
alternative energy sources cause a material change to OTAE’s  need to purchase power from LREC through the current electrical power
transmission and distribution system, LREC and
OTAE agree to re-negotiate this
Agreement in good faith consistent with those changed circumstances and the
then prevailing electric market.


 


2.0          Service Characteristics


 


Service hereunder shall be three phase (30) 60 Hz,
at 480 and 4160 nominal service voltage. All energy shall be primary metered at
a single point at 12,500 volts. LREC will
furnish the necessary equipment and facilities to serve the electrical load.


 


3.0          Service Conditions and Requirements


 


3.1                                   Cooperative
Responsibility.  LREC will
furnish, install and maintain the electrical facilities necessary to properly
and adequately deliver to OTAE all
of the electric power and energy as stipulated under the terms and conditions
of this Agreement and to accurately meter the same.


 


3.2                                  Location of
Cooperative Facilities.  OTAE will
provide and maintain a suitable location for the installation of LREC’s facilities on or immediately
adjacent to the property of OTAE, where
and as may reasonably be required to deliver the power, hereunder, as close as
practicable to the point of OTAE’s use.


 


3.3                                   Cooperative
Facility Ownership. Electric service equipment furnished, installed,
operated and maintained according to standard industry practices by LREC on the


 


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property of OTAE shall remain the property of LREC and may be removed upon termination
of this Agreement.


 


3.4                                   Points of
Delivery. The electric service provided for under this
Agreement shall be delivered by LREC and
received by OTAE at the points of
connection between OTAEs and LREC’s  equipment, being
either the electrical transition cabinets furnished by OTAE or the secondary voltage side of the
distribution transformers furnished by LREC,
as determined by LREC’s requirements.
All electrical equipment furnished by LREC at
the points of delivery shall be suitable for the purposes set forth in this
Agreement, and shall be installed and maintained by LREC in conformity with the requirements of the National
Electric Safety Code.


 


3.5                                   No Resale.  OTAE agrees not to resell any electric
capacity and energy furnished under this Agreement.


 


3.6                                   Accessibility. Duly
authorized representatives of LREC shall
be permitted to enter OTAE’s premises
at all reasonable times, with the approval of OTAE
personnel, in order to carry out the provisions hereof.


 


3.7                                   Power Quality.  OTAE shall, at its own risk and expense,
furnish, install, and keep in good and safe condition all electric lines,
machinery and apparatus which may be required for receiving electric capacity
and energy from LREC at the
points of delivery, and for distributing and utilizing such capacity and
energy. This will include, but not limited to, protective equipment to
adequately protect OTAE’s equipment
from overload, single phasing and improper rotation.


 


All electrical equipment on the premises of OTAE or connecting OTAE’s premises with LREC service, furnished by OTAE, shall be suitable for the purpose
set forth in this Agreement, and shall be installed and maintained by OTAE at all times in conformity with the
requirements of the National Electric Safety Code, the National Electrical
Code, the properly constituted local authorities.


 


LREC reserves the
right to require OTAE to
eliminate any unacceptable disruptive use of the power and energy purchased
hereunder or to pay for LREC eliminating
the disruption.


 


3.8                                   Interruption of
Power Supply. LREC may
temporarily interrupt or reduce deliveries of power and energy if LREC determines that such interruption or
reduction is necessary or desirable in case of system emergencies, or in order
to install equipment in, make replacements within, make investigations and
inspections of, or perform other maintenance work on OTAE’s facilities or the transfer system. Except in case of emergency,
in order that OTAE’s operations will
not be unreasonably interfered with, LREC shall
give 48 hours advance notice to OTAE of
any such interruption or reduction, the reason for such interruption or
reduction, and the probable duration of such interruption or reduction to the
extent of LREC’s knowledge of the
situation. To the extent possible, LREC will
coordinate any outage with OTAE. LREC shall
make available the use of temporary facilities or equipment to minimize the
effect of any such interruption or reduction to the extent reasonable and
appropriate.


 


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3.9                                   Metering.  LREC will install and maintain instruments
for the facility as follows:


A. LREC shall
furnish and install all necessary meters to measure the electricity furnished
by LREC to OTAE’s Plant.


 


B.   LREC shall be
responsible for all the repair, replacement and preventative maintenance of
meters it installs or has installed. OTAE shall
be responsible for all repair, replacement and preventative maintenance of
meters it installs, if any.


 


C.   LREC, at its expense,
shall be responsible for the testing and calibration of all meters under
paragraph A of this Section. OTAE shall
provide access to LREC personnel
during reasonable hours as necessary and required to accomplish the inspection,
testing, calibration and operation of LREC’s
metering equipment. If requested by OTAE,
LREC shall provide a minimum of one (1) week notice to OTAE of its planned tests of meters and
shall permit a representative of OTAE to
be present at all times the meters are being tested. In addition, LREC will test any or all of such meters
as may reasonably be requested by OTAE. Reasonable
costs for such required tests shall be paid by OTAE
unless any of the meters are found to be inaccurate in excess of 2%
in which case LREC shall pay for
such tests.


 


D.   Adjustments shall be made in
meter readings and billings for errors in a meter reading within six (6) months
of the discovery of an error.


 


3.10                             Compliance with
Construction and Operational Timeline. LREC agrees to install and
make operational its electric distribution system to the SITE consistent with
the plant’s construction and operational timelines. LREC agrees that it will
furnish at least four (4) MW service to OTAE’s master control centers by August 1,
2007, and the full power load will be on line by December 1,2007.


 


3.11                             LREC’s
Duties to Minimize Service Interruptions.  LREC agrees to purchase key spare
equipment, specifically one 2500 kVA-480V transformer and one 2000 kVA-4160V
transformer, and hold it in safekeeping for the purpose of replacing failed
equipment for the SITE’S electric power distribution system. Moreover, LREC agrees to implement and maintain a
written service interruption remediation plan which is acceptable to OTAE and covers communication issues
dispatching of repair technicians, and other matters relevant to the
expeditious restoration of power to OTAE and
its operations.


 


4.0          Indemnification
and Hold Harmless


 


4.1                                   OTAE
shall indemnify, defend, and save harmless LREC, its officers, directors, employees, and members from
any liability, loss, or expense arising from or growing out of injury to
persons, including death, or property damages incurred by persons other than
the parties, which may occur on the electric system of OTAE and on its side of the points of
delivery or due to any breaches of this Agreement by OTAE, unless such loss is due to the negligence of LREC, its agents, employees, or assigns.
In the event that this indemnification and hold harmless provision is not
applicable, then each party’s legal liability shall be determined by applicable
Minnesota law.


 


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4.2                                   LREC  shall
indemnify, defend and save harmless OTAE, its
officers, governors, employees, and members from any liability, loss, or
expense arising from or growing out of injury to persons, including death, or
property damages for persons other than the parties, which may occur (i) on
the electric system of LREC and
on its side of the points of delivery: (ii) due to the operating procedures
implemented by LREC on OTAE’s side of the points of delivery of
the electricity to the SITE; or (iii) due to any breaches of this
Agreement by LREC; unless such
loss is due to the negligence of OTAE, its
agents, employees, or assigns. In the event that this indemnification and hold
harmless provision is not applicable, then each party’s legal liability shall
be determined by applicable Minnesota law.


 


5.0          Payment and
Default


 


5.1            Rate Schedule
Application.  OTAE shall
pay LREC for service rendered
hereunder at the rates and upon the terms and conditions set forth in the Contract
Service Rate Schedule attached to and made part of this Agreement.


 


5.2            Bill Payment. Bills for
service hereunder shall be paid at the office of LREC or in such other manner as may be utilized by LREC. Such payment shall be due fifteen
(15) days after the bill for the preceding monthly billing for services
hereunder has been delivered to OTAE.


 


5.3            Remedies for
Default. In the event OTAE
shall fail to comply with or shall violate the provisions of this
Agreement, or if OTAE shall fail
to pay for electric service provided by LREC
pursuant to the terms of its Rules and Polices, and such
failure or violation is not remedied or prompt and full performance is not
accomplished by OTAE within
thirty (30) days after written notice of such failure or violation is given by LREC, LREC may pursue any remedies at law
and those under the policies of the cooperative including the right to
disconnect service to OTAE’s premises.


 


5.4            Late Payment
Charge.  LREC will apply and OTAE will pay a one and one-half percent
(1.5%) per month late payment charge on any balance due after the due date.


 


5.5            Recovery for
Change in Cost.  LREC may
pass through to OTAE increases in
costs incurred by LREC or its Wholesale
Power Supplier which are imposed by units or agencies of Federal or State
government, such as taxes, fees and assessments. These costs shall include
expenses incurred due to changes in applicable tax, environmental or regulatory
laws or governmental actions occurring or imposed after the date of this
Agreement, as well as changes in assessments or fees charged by the
Mid-Continent Area Power Pool (MAPP), Midwest Independent Transmission System
Operator (MISO) or its successor.


 


6.0          Term of
Agreement


 


This Agreement shall be in effect at the date of
signing. It shall be in effect for a period to coincide with the rate term
selected. The start date of the initial billing period under the terms


 


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of this agreement is expected to be December 1,
2007 and shall continue thereafter until terminated as provided herein. Either
party may terminate this Agreement (after the initial rate term or any
continuation period) upon 12 months’ written notice to the other.


 


7.0          Termination


 


7.1            Termination. In the event
of termination of this Agreement by either party, OTAE shall be obligated to
pay to LREC the following;


 


A.   The amounts due for electric service under Section 5.0
of this Agreement.


 


B.          In the event OTAE ceases to take service hereunder by
reason of insolvency or bankruptcy, LREC may
elect to terminate under this paragraph. In this event, or in the event of
termination pursuant to paragraph 5.3, above, LREC
may, at its election and in addition to any other remedies it may
have at law, set-off against any amounts owed by OTAE to LREC under
this or any other section of this Agreement any patronage capital assigned to
the account of OTAE, at such time
as retired.


 


8.0          Cooperative
Membership and Patronage Capital Credits


 


8.1            Cooperative
Membership.  OTAE shall
be a member of LREC during the
term of this agreement and be bound by such rules and regulations as may
from time-to-time be adopted or modified by LREC’s
Board of Directors.


 


8.2            Patronage
Capital Credits.  LREC, through
its Board of Directors, may make classification of its patrons and business and
allocate the total excess, if any, of revenues over expenses in any year to
patron classifications. LREC may
create a separate classification of business applicable to patrons receiving
service under the Contract Rate Schedule.


 


9.0          Force
Majeure and Forced Outage


 


In the event LREC
shall be wholly or partially prevented delivering the electric
capacity and energy contracted for herein, or in case the service of such
capacity and energy shall be interrupted, or in case OTAE shall be prevented fro receiving, using, and applying
the same, by reason of or through strikes, stoppages of labor, riots,
fire, flood, invasion, terrorism, insurrection, accident, the order of any
court judge, or civil authority, changes in federal, state, or other
governmental laws, agency orders, decrees, restraints or regulations, failure
or shortage of materials, act of God, or any cause reasonably beyond its
control and attributable to its neglect, then and in such event LREC shall not be obligated to deliver
such electric capacity, energy and service under and pursuant to this Agreement
during such period, and shall not be liable for any damage or loss resulting
from such interruption or suspension, and OTAE
shall not be obligated or liable to pay for such capacity, energy or
service not delivered, furnished, or supplied during such period.


 


In any and all such events the party suffering such
interruption or suspension shall be prompt and diligent in removing the cause
of such interruption or suspension. Either party whose plant


 


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shall suspend operation by reason of accident to its
machinery, equipment or system, shall proceed at once to repair the same within
a reasonable time, and, failing to do so, the limit or exemption from liability
as fixed in this section shall not apply, and the party so failing shall be
liable to the other as though no such limit or exemption had been fixed.


 


10.0        General


 


10.1                          Governing Law. This Agreement
and the rights and obligations of the parties hereunder shall be construed in
accordance with and shall be governed by the laws of the State of Minnesota
without giving effect to its conflict of law principles.


 


10.2                          Entire
Agreement. This Agreement supersedes all previous agreements
and amendments relating to the rendering of electric service at the SITE by LREC to OTAE.


 


10.3                          Assignment. Neither LREC nor OTAE
shall voluntarily assign its rights nor delegate its duties under
this Agreement, or any part of such rights or duties, without the written
consent of the other party. Such consent shall not unreasonably be withheld.
This Agreement shall inure to and bind the parties’ successors and assigns.


 


10.4                          Several Obligations.  LREC and OTAE
shall each be individually and severally liable for its own
obligations under this Agreement.


 


10.5                          Waiver. Any waiver at
any time by either party of its rights with respect to a default under this
Agreement, or with respect to any other matters arising in connection with this
Agreement, shall be in writing and shall not be deemed a waiver with respect to
any subsequent default or other matter.


 


10.6                          Notice. Any notice
provided for or concerning this Agreement shall be in writing and shall be
deemed sufficiently given when sent by certified or registered mail if sent to
the respective address of each party.


 


10.7                          Easement and
Access.  OTAE shall grant to LREC, during the period of this Agreement,
easements of rights-of-way for the construction, extension, maintenance, and
repair or removal of electric lines, either overhead or underground, which are
or may become necessary to provide the electric service described herein,
including the necessary fixtures and apparatus in connection therewith. Further
right-of-way, when necessary, shall be granted to LREC to place, position, and locate the butts of its main
poles, pole structures, or underground wires, over, across, or under OTAE’s property in such manner and
location as the parties may mutually agree. LREC
shall be given the right-of-way, ingress and egress, at all
reasonable times, with the approval of OTAE,
for the purpose of the right-of-way granted and shall have the right
to cut down and trim all trees as reasonable necessary to keep the wires of its
electric lines clear, so as to be maintained in accordance with LRECs standards of construction and
maintenance.


 


10.8                          Invalid
Provisions. The invalidity of any portion of this Agreement
will not and shall not be deemed to affect the validity of any other provision.
In the event that any provision of this Agreement is held to be invalid, the
parties agree that the remaining provisions shall be deemed to be in full force
and effect as if they had been executed by


 


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10.9                          Paragraph
Headings. The titles to the paragraphs of this Agreement are
solely for the convenience of the parties and shall not be used to explain,
modify, simplify, or aid in the interpretation of the provisions of this Agreement.


 


IN WITNESS WHEREOF, the parties
hereto have caused this Agreement to be executed by their duly authorized
representatives, this 18  day of
May, 2007.


 


 


	
  OTTER TAIL AG ENTERPRISES, LLC.

  	
   

  	
  LAKE REGION ELECTRIC COOPERATIVE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
  /s/
  Jerry Larson

  	
   

  	
  By

  	
   /s/ Dan Elton

  
	
   

  	
   

  	
   

  	
  Dan Elton, Interim CEO

  
	
   

  	
   

  	
   

  
	
  Print
  name

  	
  Jerry
  Larson

  	
   

  	
  Print
  name

  	
  Dan W. Elton

  
	
   

  	
   

  	
   

  
	
  Its

  	
  President

  	
   

  	
  Its

  	
  Interim CEO

  
							



 


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