Exhibit 10.6


 


RPMG


 


RENEWABLE PRODUCTS Marketing Group


 


ETHANOL FUEL


MARKETING AGREEMENT


 

















 


ETHANOL FUEL MARKETING AGREEMENT


 


THIS AGREEMENT, entered into this         th
day of                             ,
2006, by and between RENEWABLE PRODUCTS MARKETING GROUP, L.L.C., hereinafter
referred to as “RENEWABLE PRODUCTS”; and OTTER TAIL AG ENTERPRISES, LLC, a
Minnesota limited liability company, hereinafter referred to as “OTTER TAIL AG.”


 


WITNESSETH:


 


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


 


WHEREAS,
OTTER TAIL AG, is intending to construct a plant in Fergus Falls, 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 OTTER TAIL AG 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 OTTER TAIL AG
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 OTTER TAIL AG
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 55 million gallons per year, which
fuel grade ethanol will be at least 200 proof (denatured), 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. OTTER TAIL AG contemplates that said facility is anticipated to be in
production by January, 2008, and will make every good faith effort to begin
production by that time.


 


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3.             Rail and Truck Loading Facilities.   That the facility to be
constructed and operated by OTTER TAIL AG, 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 55 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 829 gallons of product per minute to railcars and
280 gallons of product per minute to tank trucks. OTTER TAIL AG will be solely
responsible for all demurrage charges for railcars in service for its use. OTTER
TAIL AG 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 OTTER TAIL AG as aforesaid shall have sufficient
storage capacity for not less than 12 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 OTTER TAIL AG at this facility 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.   RENEWABLE PRODUCTS will be
responsible for the marketing (subject to the terms of this agreement) of all
such fuel grade ethanol produced by OTTER TAIL AG, from the time the product
crosses the loading flange, and the common carrier accepts responsibility for
the product at OTTER TAIL AG’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.


 


7.             Specific Marketing Tasks.   RENEWABLE PRODUCTS shall
be totally responsible for the marketing, sal e and delivery of all the
production from OTTER TAIL AG’s facility during the term of this agreement,
including, but not limited to:


 


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


 


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·      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.


 


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


 


9.             Compensation/Pooling.   OTTER TAIL AG will pay
RENEWABLE PRODUCTS $.01 (one cent) per gallon for each gallon of ethanol sold
by RENEWABLE PRODUCTS for the account of OTTER TAIL AG. RENEWABLE PRODUCTS
shall have the right to deduct this fee from payments due OTTER TAIL AG 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 OTTER TAIL AG 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 OTTER TAIL AG within 10
days after the date on which the product crosses the loading flange into common
carrier truck or into railcar. All risks associated with accounts receivables
shall be borne by RENEWABLE PRODUCTS. RENEWABLE PRODUCTS will lease
approximately 140 to 175 railcars to be used by OTTER TAIL AG. A separate
payment for leased railcars is not applicable as OTTER TAIL AG’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 OTTER TAIL AG’s ethanol will be
assigned to OTTER TAIL AG, who will be obligated to the 


 


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terms
and conditions of said lease. RENEWABLE PRODUCTS shall provide OTTER TAIL AG
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 OTTER TAIL AG’s facility.


 


12.          Term.   The term of this agreement shall commence on the
first day of the month that OTTER TAIL AG initially ships ethanol and shall
continue for a period of at least 12 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 12 month period. This
Agreement shall be automatically extended for an additional one (1) year
term following the end of the 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, OTTER TAIL AG 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, OTTER TAIL AG agrees to have RENEWABLE
PRODUCTS market all of the ethanol produced by OTTER TAIL AG it at its
production facility. The average monthly volume of ethanol produced by OTTER
TAIL AG is estimated to be approximately 4,583,333 gallons.


 


15.          Estimated 12-Month Volume.   As of the effective date
of this agreement, OTTER TAIL AG will provide RENEWABLE PRODUCTS with OTTER
TAIL AG’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 OTTER TAIL AG.


 


16.          Updated Monthly Volume Estimates.   On or before the first day
of each month, OTTER TAIL AG will provide RENEWABLE PRODUCTS with its updated
best estimate of OTTER TAIL AG’s anticipated monthly ethanol production for the
next twelve (12) months, so that RENEWABLE PRODUCTS 


 


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will
have ethanol production estimates from OTTER TAIL AG twelve (12) months into
the future during the entire time that this agreement is in effect.


 


17.          Good and Marketable Title.   OTTER TAIL AG 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 OTTER TAIL AG.
Notwithstanding the foregoing, RENEWABLE PRODUCTS agrees to use its best
efforts to communicate with OTTER TAIL AG the terms and conditions of ethanol
sales.


 


19.          Independent Contractor.   Nothing contained in this
agreement will make RENEWABLE PRODUCTS the agent of OTTER TAIL AG 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 OTTER TAIL AG
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.   If OTTER TAIL AG 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, 


 


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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,
OTTER TAIL AG will reimburse RENEWABLE PRODUCTS for any such loss. Under such
circumstances, if RENEWABLE PRODUCTS realizes a financial gain, it will pay
such gain to OTTER TAIL AG.


 


23.          Testing of Samples.   At the request of
RENEWABLE PRODUCTS, OTTER TAIL AG 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, OTTER TAIL
AG will maintain insurance coverage that is standard, in the reasonable 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, OTTER TAIL AG’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.


 


OTTER
TAIL AG 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 which consent will not be unreasonably withheld.


 


25.          Indemnifications and Hold Harmless—   OTTER TAIL AG. 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 OTTER TAIL AG or any
person or organization related to OTTER TAIL AG including, but not limited to,
claims relating to the quality of ethanol produced by OTTER TAIL AG, 


 


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then
OTTER TAIL AG 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 OTTER TAIL AG’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 OTTER
TAIL AG and its related persons or organizations that OTTER TAIL AG 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 


 


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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.


 


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 36.


 


(a)           Definition of Confidential
Information. For
purposes of this Agreement, the term “Confidential Information” means
information related to the business operations of OTTER TAIL AG 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 


 


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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 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 


 


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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 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
OTTER TAIL AG (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. OTTER TAIL AG will cooperate with any reasonable
requests of RENEWABLE PRODUCTS to request confidential treatment concerning
sensitive/confidential items.


 


36.          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:


 


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  TO:

  	
   

  	
  RENEWABLE
  PRODUCTS MARKETING

  
	
   

  	
   

  	
   

  	
   

  	
  GROUP,
  L.L.C.

  
	
   

  	
   

  	
   

  	
   

  	
  809
  East Main Street

  
	
   

  	
   

  	
   

  	
   

  	
  Suite 2

  
	
   

  	
   

  	
   

  	
   

  	
  Belle
  Plaine, MN 56011

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TO:

  	
   

  	
  OTTER
  TAIL AG ENTERPRISES, LLC

  
	
   

  	
   

  	
   

  	
   

  	
  P.O. Box
  492

  
	
   

  	
   

  	
   

  	
   

  	
  Fergus
  Falls, MN 56538-0492

  



 


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


 


	
   

  	
   

  	
  RENEWABLE
  PRODUCTS

  
	
   

  	
   

  	
  MARKETING
  GROUP, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Its

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  OTTER
  TAIL AG ENTERPRISES, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Its

  	
   

  	
   

  
							



 


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