Exhibit 10.17


 


AGREEMENT REGARDING CORN PROCUREMENT


 


THIS
AGREEMENT REGARDING CORN PROCUREMENT (this “Agreement”) is made effective as of
February 1, 2007, (the “Effective Date”) by and between CHS Inc., with
offices at 5500 Cenex Drive, Inver Grove Heights, MN 55077 (“CHS”), and Otter
Tail Ag Enterprises, LLC, whose address for purposes of notice is P.O. Box
492, Fergus Falls, MN 56538-0492 (“Customer”). Any reference herein to a “Party”
shall refer to CHS or Customer individually, and any reference herein to “Parties”
shall refer to both CHS and Customer.


 


RECITALS


 


WHEREAS,
Customer plans to construct an ethanol production facility near Fergus Falls,
Minnesota (the “Facility”) and Customer desires to secure a source supply of
corn for use in production at the Facility (the “Corn”); and


 


WHEREAS,
CHS is willing to sell the Corn to Customer, and Customer is willing to
purchase the Corn from CHS, for the Facility pursuant to the terms of this
Agreement.


 


AGREEMENT


 


NOW,
THEREFORE, in consideration of the foregoing, and all of the representations,
warranties, undertakings, covenants, promises and agreements set forth herein,
which Customer and CHS each acknowledge are adequate and sufficient, Customer
and CHS do hereby agree as follows:


 


I.             TERM OF AGREEMENT: TERMINATION.


 


A.          Term. This Agreement shall be effective and
binding as of the Effective Date; provided, however, that the obligations of
CHS under this Agreement, and the obligations of Customer under this Agreement,
shall commence on the day that Customer notifies CHS that the Facility is ready
for operation or the day on which Customer notifies CHS that Customer is ready
to begin Corn procurement,.which day shall be no sooner than six (6) months
prior to the date the Facility will accept Corn, whichever date is earlier (the
“Commencement Date”) and shall continue for an initial term of five (5) years
from the Commencement Date (the “Initial Term”). After the expiration of the
Initial Term, this Agreement shall automatically renew for consecutive terms of
one (1) year each, unless terminated by CHS or Customer effective as of
the end of the Initial Term, or the then existing one (1) year term, upon
at least ninety (90) days’ prior written notice. Notwithstanding anything to
the contrary in this Section I.A.: (i) either party hereto may terminate
this Agreement upon thirty (30) days’ written notice if Customer has not
delivered a certificate from an authorized officer of Customer notifying CHS on
or before September 30, 2006, that all the conditions to the closing of the
construction financing for the Facility have been satisfied or waived, and (ii) this
Agreement may be terminated as provided in Sections I.B. and/or I.C. below. Any
obligations of the parties incurred prior to the date of termination of this Agreement,
including without limitation arising under any Sales Contracts entered into
prior to termination, shall survive termination of this Agreement.


 


B.           Early
Termination by Customer as a Result of CHS’ Breach. In the event that CHS fails or refuses to comply
with any material provision of this Agreement, then Customer shall have the right
to elect to terminate this Agreement by giving CHS at least thirty (30)
calendar days’ written notice prior to the effective date of termination,
setting forth the reason(s) for termination. CHS shall have the right to
cure the breach within such thirty (30) day period. If said breach is cured within
such time period, the notice of termination to CHS shall be void. However, if
the breach is not cured within such time period, the termination shall be
effected. The exercise by Customer of


 

















 


any rights reserved under this Section shall
be without prejudice to any claim for damages or for any other right under this
Agreement or applicable law.


 


C.           Early
Termination by CHS as a Result of Customer’s Breach. In the event that Customer fails or refuses
to comply with any material provision of this Agreement, then CHS shall have
the right to elect to terminate this Agreement by giving Customer at least
thirty (30) calendar days’ written notice prior to the effective date of
termination, setting forth the reason(s) for termination. Customer shall have
the right to cure the breach within such thirty (30) day period. If said breach
is cured within such time period, the notice of termination to Customer shall
be void. However, if the breach is not cured within such time period, the
termination shall be effected. The exercise by CHS of any rights reserved under
this subsection shall be without prejudice to any claim for damages or any other
right under this Agreement or applicable law.


 


D.           Survival. All obligations, promises and agreements of
both Customer and CHS that expressly, or by their nature, survive the
expiration or termination of this Agreement including, but not limited to, each
of the Party’s monetary obligations and indemnification obligations herein,
shall continue in full force and effect subsequent to, and notwithstanding,
expiration or termination of this Agreement until they are satisfied, or by
their nature expire.


 


II.            ACQUISITION OF THE CORN.


 


A.          Quantity. Subject to the provisions of this
Agreement, Customer hereby agrees to purchase from CHS, and CHS hereby agrees
to sell to Customer, all of Customer’s requirements of the Corn for the
Facility. The approximate annual purchase and sale amounts of the Corn under
this Agreement shall be 20,000,000 bushels. The actual quantity of the Corn
purchased shall be determined by Customer, in its sole discretion, based upon
specifications and the market price of the Corn available at the time of the
Corn purchases. It is anticipated that the Corn to be sold by CHS to Customer
will ordinarily be originated within a radius of eighty (80) miles of the Facility
(the “Facility Area”). If, because of factors beyond the reasonable control of
CHS, sufficient Corn to fill Sales Contracts is not available in the Facility
Area, CHS may cancel such Sales Contracts. In such event, CHS will use
commercially reasonable efforts procure Corn from outside the Facility Area at
prices within Customer’s parameters based upon the area from which the Corn may
be originated.


 


B.           Quality. The Corn shall meet the minimum
specifications identified in Exhibit A attached hereto and incorporated
herein (the “Minimum Specifications”) for Corn to be useable at the Facility.
The purchase price for the Corn will be based upon the actual grade and quality
of the Corn delivered and as set forth in the Sales Contracts. If CHS is unable
to meet the Minimum Specifications because of the quality of the Corn within
the Facility Area, Customer’s sole remedy shall be to cancel the Sales
Contracts. In such event, CHS will use commercially reasonable efforts procure
Corn from outside the Facility Area which meets the Minimum Specifications and
at a price within Customer’s parameters based upon the area from which the Corn
may be originated.. CHS’ obligation is to identify and offer to Customer the
necessary quantity of the Corn on a delivered basis if available based upon
Customer’s parameters. CHS will endeavor to promote high-fermentable starch
hybrid corn varieties to local producers.


 


C.           Procurement
Fee. The purchase price for
the Corn shall be the “Sales Price” (as that term is defined in Section II.D.)
plus a procurement fee in the amount of $0.05/bushel to be paid by Customer to
CHS for all purchases of the Corn from CHS. The Procurement fee shall be invoiced
by CHS to Customer on the 1st and 15th day of each month
as the Corn is delivered to Customer and will be based on the delivery weight.


 


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D.           Sales
Contracts. Purchases and
sales of the Corn shall be evidenced by separate sales contracts substantially
in the form of Exhibit B, attached hereto (the “Sales Contracts”) signed
by CHS and Customer. The Sales Contracts shall require the delivery of the Corn
to Customer at the Facility pursuant to the terms of this Agreement and shall
specify delivery locations, price (“Sales Price”), type, quality, delivery
date, schedule of discounts and certification from CHS of the state of
origination.


 


E.           Third-Party
Storage. CHS shall contract
storage capacity at facilities set forth on Exhibit D, based upon the needs of
the Customer, under the terms under the terms and conditions of one ore more
storage agreements (the “Third-Party Storage Agreements”) to be set forth as Exhibit E
(the “Third-Party Storage”). Any Third-Party Storage Agreement is subject to
the review and prior written approval of Customer. CHS will retain ownership of
all Corn through unload to and storage in the Third-Party Storage facilities,
provided, however, that Customer shall, upon transfer by CHS of a sufficient
amount of Corn into Third-Party Storage to fulfill a Sales Contract between CHS
and Customer, pay CHS $1.25 per bushel advance for such amount Corn stored in the
Third-Party Storage facilities with the balance due upon loadout of the
Third-Party Storage for delivery to the Facility. Customer shall be responsible
for any and all charges associated with handling and storage including storage
charges as set forth in Third-Party Storage Agreements approved by Customer
(including, without limitation charges for turns guaranteed by CHS in the Third-Party
Storage contract) and shrink up to 0.25%. Handling and storage charges shall be
invoiced by CHS and paid by Customer as follows: half as Corn is unloaded into
the Third-Party Storage facilities and half as Corn is loaded out of the
Third-Party Storage facilities. Customer shall also pay CHS an interest charge
on the purchase price, less the $1.25 per bushel previously paid, paid by CHS
for the Corn in storage from the date of such payment by CHS for the Corn to the
date payment is received by CHS from the Customer for the Corn. The interest
rate to be charged shall be 1% over the prime rate of interest (or similar rate)
charged by Wells Fargo Bank, NA, Minneapolis, Minnesota. Corn in Third-Party
Storage shall be sold to Customer FOB Third-Party Storage. Transfer of
ownership will take place as the Corn is loaded out of the Third-Party Storage
with payment due as set forth in Paragraph I below. Notwithstanding any other
provision of this Agreement, Customer shall provide CHS with a minimum of 48
hours advance notice of transfer of Corn from the Third-Party Storage to the
Facility.


 


F.           Notification
of Requirements. Commencing
on or before the first (1st) day of the month preceding the Commencement
Date, and continuing on or before the first (1st) and fifteenth (15th)
day of each month during the term of this Agreement, Customer shall advise CHS
of Customer’s final schedule of requirements of the Corn (including volume and
delivery date) (the “Delivery Requirements”) for the time period specified by
Customer beginning thirty (30) days after the notification of the Delivery
Requirements (the “Delivery Period”).


 


G.           Price. Customer shall advise CHS of its price
parameters for the quantity of Corn Customer wishes to own for a specific
Delivery Period. For all the Corn sold to Customer hereunder, CHS undertakes to
use commercially reasonable efforts to obtain for Customer the lowest price
within the stated price parameters for the quantity of Corn for the specific
Delivery Period. CHS shall advise Customer of the price for Corn available in
the relevant marketplace on each date on which Customer provides its price
parameters, in each case taking into account the quantity of the Corn to be
purchased, the duration of the purchase contract and the information then
available to CHS. Customer shall determine whether to accept any prices which
exceed the parameters specified by Customer. Because Customer, therefore,
controls the purchase periods, prices, Delivery Periods and the quantity, CHS
does not guarantee that a supply of Corn will be available to Customer. CHS
will use commercially reasonable efforts to procure Corn for Customer within
Customer’s parameters. CHS will have no liability to Customer for failure to supply
Corn to Customer until such time as a Sales Contract has been signed between
Customer and CHS.


 


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All correspondence between CHS and Customer related to Corn purchases
and sales and price and quantity parameters shall be in writing, preferably by
email, between designated personnel of both parties as set forth on Exhibit C.


 


H. Delivery and Title. The Corn
delivered under this Agreement shall be delivered to Customer in accordance
with the terms agreed to in the applicable Sales Contract free and clear of all
liens, charges and encumbrances. Corn shall be applied to the oldest Sales
Contracts first. Title and all risk of loss to the Corn delivered by truck
shall pass to Customer immediately after unloading and acceptance by Customer
of the Corn at the Facility in the case of Corn shipped directly to the
Facility or upon unloading from the Third-Party Storage in the case of Corn
stored in the Third-Party Storage facilities. Title and all risk of loss to the
Corn delivered by rail to the Facility shall pass to Customer upon receipt of
shipping documentation and associated payment of invoice. All charges for
demurrage subsequent to arrival, in excess of the demurrage allowance granted
by the relevant carrier, as well as any destination efficiency payments shall
be for Customer’s account.


 


I.            Weighing
and Testing. Certified
destination weights for all truck shipments will apply to the Corn sold by CHS
to Customer and Customer shall provide CHS with such weights for truck
shipments. Destination grades for each truck shipment of the Corn of a given
type and specification, as determined by Customer’s laboratory personnel or an
independent laboratory retained by Customer, shall apply for all of the Corn
delivered and Customer’s lab results shall be used for settlement. Destination
grades for truck shipments of Corn direct hauled to the Facility from elevators
or other third-parties under a Third-Party Storage Agreement will be based upon
the average grades for shipments over a 15-day period and settled on the 1st
and 15th day of each month. Samples taken by Customer shall be
retained by Customer for ten (10) days after each 15 day average period
and, upon CHS’ request, shall be provided to CHS to permit re-inspection by a
state laboratory on behalf of, and at the expense of, CHS to confirm grade test
results. Such re-inspection grades will be final. First official weights and
grades, for each rail car shipment of the Corn shall be submitted by CHS to
Customer along with shipment documents to be used for settlement.


 


CHS, at CHS expense, shall install an Agris
OneWay terminal at Customer’s Facility to facilitate the paperwork flow and settlement
of Corn deliveries, provided that Agris is compatible with Customer’s computer
and record keeping systems. Customer’s personnel will enter the delivery
information into the terminal on a daily basis and CHS will pull the
information from the terminal electronically on a daily basis.


 


J.            Payment
Terms. For all rail
shipments, Customer will pay 100% by wire transfer upon receipt of shipment
documents including, bill of lading, first official weights and grades. For all
truck shipments, Customer will submit unload information including destination
weights and grades along with 100% payment by wire transfer of the Sales Price
on the day after unload. Shipments are to be applied to the oldest Sales
Contract. Settlement for premiums or discounts on truck shipments will be
finalized on the 1st and 15th of each month.


 


K.           Customer’s
Damages. In the event CHS fails to procure and/or supply the Corn as
required under the Sales Contracts (whether or not as a result of Force
Majeure), Customer may purchase the quantities of Corn not delivered under such
Sales Contracts from other sources after providing CHS with not less than one (1) day
advance written notice of its intention to do so unless CHS delivers the Corn,
as required under the Sales Contracts, within that notice period. In such
event, (except for matters involving Force Majeure), subject to the exclusive
remedies set forth in paragraphs IIA and IIB, Customer shall be entitled to
recover, as its sole and exclusive remedy, from CHS any reasonable costs (including
any expenses or price increases) Customer


 


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incurs above the agreed upon Sales Price for
the Corn resulting from its purchase from other sources.


 


L.           CHS’
Damages. In the event
Customer fails to accept for delivery the rail Corn that has been tendered for
shipment and/or truck corn delivered to the Plant in compliance with the terms
and conditions of any Sales Contracts (whether or not as a result of Force
Majeure) and Customer fails to except such Corn not less than one (1) day
after written notice from CHS of CHS’s notice to sell to a third-party, CHS
shall be entitled to sell the quantity of the Corn not accepted under such
Sales Contracts to third parties. In such event, (except for matters involving
Force Majeure) CHS shall be entitled to recover, as its sole and exclusive
remedy, from Customer any reasonable costs (including any expenses, or
reduction in revenues due to price decreases) incurred by CHS resulting from
such third-party sales.


 


M.          Records. CHS will establish and maintain at all
times, true and accurate books, records and accounts consistent with good
industry practices distinguishable from all other books and records, in respect
of all prices paid, payments, statements, charges and computations made under
this Agreement and will preserve these books, records and accounts for a period
of at least three (3) year after their creation. During normal business
hours, Customer, at its sole cost and expense, shall have the right to inspect,
examine and audit, or cause its representatives (including without limitation a
third-party auditor) to inspect, examine and audit books and records of CHS to
the extent necessary in order to verify the accuracy of any statement, charge,
computation or demand made under or pursuant to any of the provisions of this
Agreement.


 


N.          
Financial Disclosure-Customer. Customer agrees to provide CHS with
complete and audited annual financial statements within thirty (30) days
following the receipt of audited financial results each fiscal year end plus
monthly unaudited financial statements within thirty (30) days of the close of
each month. CHS agrees to keep such financial statements and any information
contained therein confidential and to use the information only for purposes of
monitoring the financial condition of Customer.


 


III.           GENERAL PROVISIONS.


 


A.          Events
of Default. The occurrence
of any of the following shall be an event of default (each an “Event of Default’)
under this Agreement: (1) failure of either party to make payment to the
other when due; (2) default by either party in the performance of any
material covenant, obligation or agreement set forth in this Agreement; or (3) if
either party shall become insolvent, or make a general assignment for the benefit
of creditors or to an agent authorized to liquidate any substantial amount of
its assets or properties with or without consent, or should a voluntary or involuntary
petition into bankruptcy or other similar proceeding be filed by or against
such party, or should an involuntary petition into bankruptcy or other similar
proceeding be filed by or against such party and the receiver, bankruptcy or
other similar proceeding shall not in the case of

any involuntary petition or other involuntary proceeding be discharged within
sixty (60) days following appointment or commencement thereof, as the case may
be.


 


B.           Remedies. Upon the occurrence of an Event of Default,
the party not in default shall have all remedies available under this Agreement
and under applicable law and equity. Without limiting the foregoing, the party
not in default shall have the following remedies whether in addition to, or as
one of, the remedies otherwise available to it: (1) to declare all amounts
owed to it hereunder immediately due and payable and (2) to terminate this
Agreement; provided, however, the defaulting party shall be allowed thirty (30)
days’ from the date of receipt of notice of default to cure any Event of
Default.


 


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C.           Force
Majeure. Neither party to
this Agreement shall be liable to the other party hereto for any loss or damage
resulting from any delay or failure to make or accept deliveries caused by or
arising out of acts of God or the elements, storms, wars, acts of terrorism,
sabotage, strikes, labor difficulties, governmental proration or regulation,
when raw materials or supplies are interrupted, unavailable, or in short
supply, and/or any other cause beyond such party’s commercially reasonable
control. In the event that a party to this Agreement gives notice and an explanation
of such force majeure event to the other party hereto within a reasonable time
after the occurrence of such force majeure event, the obligations of the
parties shall be suspended from the date of such force majeure event for the
length of time during which a party is unable to perform as a result of such
force majeure event. Nothing contained in this Section III.C. shall ever
be construed to relieve either party of its obligations to promptly pay the
other party amounts due and owing hereunder. No curtailment or suspension of
deliveries or acceptance of deliveries pursuant to this Section III.C.
shall operate to extend the term of this Agreement.


 


D.          Indemnification. Customer agrees that it shall defend,
indemnify, and hold harmless CHS, and CHS’ directors, officers, agents,
employees, insurers, successors and assigns, from and against any and all
claims, demands, damages, losses, liabilities, causes of action, judgments, fines,
assessments (including penalties and/or interest), costs and expenses of any
kind or nature, including all attorneys’ fees and all costs and expenses of
litigation and court costs (including attorneys’ fees and costs and expenses of
litigation and court costs incurred in enforcing this provision), without
regard to amount, for damages to, or loss of, property, or injury to, or death of,
any person or persons, including without limitation persons employed or engaged
by Customer, caused by or arising or resulting from, whether directly or
indirectly: (i) the negligence and/or willful misconduct of Customer,
and/or (ii) Customer’s breach  of
any of its representations, warranties, undertakings, covenants, promises and
agreements as set forth in this Agreement; and/or (iii) Customer’s failure
to comply with any and all applicable federal, state or local laws, ordinances,
orders, permits, rules and regulations with regard to Customer’s
activities relating to the operation of its business and/or the Facility. CHS
shall have the right, but not,the obligation, to participate in the defense of
any such claim with attorneys selected by CHS; provided, however, that once
Customer assumes the defense of CHS pursuant to provisions of this Section III.D.,
CHS’ participation in the defense of any such claim shall be at its own expense.


 


CHS agrees that it shall defend, indemnify,
and hold harmless Customer, and Customer’s governors, officers, agents,
employees, insurers, successors and assigns, from and against any and all
claims, demands, damages, losses, liabilities, causes of action, judgments,
fines, assessments (including penalties and/or interest), costs and expenses of
any kind or nature, including all attorneys’ fees and all costs and expenses of
litigation and court costs (including attorneys’ fees and costs and expenses of
litigation and court costs incurred in enforcing this provision), without regard
to amount, for damages to, or loss of, property, or injury to, or death of, any
person or persons, including without limitation persons employed or engaged by
Customer, caused by or arising or resulting from, whether directly or
indirectly: (i) the negligence and/or willful misconduct of CHS; and/or (ii) CHS’
breach of any of its representations, warranties, undertakings, covenants,
promises and agreements as set forth in this Agreement; and/or (iii) CHS’
failure to comply with any and all applicable federal, state or local laws,
ordinances, orders,permits, rules and regulations with regard to Customer’s
activities relating to the operation of its business. Customer shall have the
right, but not the obligation, to participate in the defense of any such claim
with attorneys selected by Customer; provided, however, that once CHS assumes the
defense of Customer pursuant to provisions of this Section III.D., Customer’s
participation in the defense of any such claim shall be at its own expense.


 


E.           Limitation
of Liability. EXCEPT AS
EXPRESSLY PROVIDED HEREIN, NEITHER PARTY HERETO SHALL BE LIABLE TO THE OTHER
PARTY FOR ANY INDIRECT,


 


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INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES UNDER THIS AGREEMENT
INCLUDING, BUT NOT LIMITED TO, LOST PROFITS, HOWEVER ARISING, EVEN IF IT HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.


 


F.           Insurance. Customer agrees to maintain at all times
during the term of this Agreement: (i) Workers’ Compensation Insurance as
prescribed by applicable laws of the state(s) with jurisdiction over each
of Customer’s employees; and (ii) Commercial General Liability Insurance with a
per-occurrence limit of not less than One Million Dollars ($1,000,000) (or
higher limits as may be required by applicable law) (which coverage can be
provided through a combination of primary and umbrella policies), which
policy(ies) shall identify CHS as an additional insured party with respect to
the operation of the Facility. As to all policies described in this Section III.F.,
Customer agrees that: (i) it will provide CHS with at least thirty (30)
days’ written notice prior to the effective date of cancellation or any
material change of any such policy(ies); and (ii) upon any request from CHS,
Customer will immediately instruct its insurer(s) to provide CHS with
certificates of insurance evidencing coverage that is required by this Section III.F.
Customer agrees that the policy limits set forth herein are minimum limits and
shall not be construed to limit Customer’s liability.


 


G.           Independent
Contractors. Customer and
CHS are separate legal entities, and independent contractors in respect of the
other party hereto. Nothing in this Agreement shall constitute, or ever be
construed to constitute, either party hereto as an agent, legal representative,
joint venturer,  partner, employee, or
servant of the other party hereto, for any purpose whatsoever.


 


H.          Notices. Any notice required pursuant to this
Agreement shall be in writing, and shall be deemed to be properly served on the
date deposited in the U.S. Post Office if sent by certified or registered mail,
or three (3) days after the date deposited in the U.S. Post Office if sent
by regular mail. Such notice shall be properly addressed to the other Party at
its respective address set forth in the first paragraph of this Agreement,
provided that such addresses may be changed by proper notice delivered in
accordance with the provisions of this Section. For any notice sent by mail,
the Party sending the notice shall also send a facsimile of such notice on the
same day that the notice is deposited in the U.S. Post Office. Any notice made
by a party under this Agreement by a method other than through the U.S. Postal
Service shall be in writing and shall be effective only upon actual receipt of
such notice.


 


I.            Assignment. This Agreement may not be assigned or
transferred by either party, directly or indirectly, in full or in part,
without the advance written consent of the other party hereto, which consent
shall not be unreasonably withheld, and no attempted assignment or transfer of
this Agreement by either party hereto shall be binding on the other party
hereto until it has consented in writing to such assignment. Assignments or
transfers that have not been consented to by the non-assigning party shall be
void. Any change of control of either party, whether by operation of law or
otherwise, shall be deemed an assignment or transfer for purposes of this Section III.I.The
terms and conditions of this Agreement shall inure to the benefit of, and shall
be binding upon, all respective permitted successors and assigns of the parties
hereto.


 


J.            Choice
of Law. This Agreement, and
all rights, obligations, and duties arising hereunder, and all disputes which
may arise hereunder, shall be construed in accordance with, and governed by,
laws of the state of Minnesota, without giving effect to the conflict of laws
provisions thereof.


 


K.            Modification
and Waiver. Any of the terms and conditions of this Agreement may be waived
in writing at any time by the party which is entitled to the benefit thereof;
provided, however, that the failure of any party to exercise any right, power
or option given it hereunder, or to insist on strict compliance with all of the
terms and conditions hereof, shall not constitute a waiver of any term,
condition, or right under this Agreement, unless and until that party shall


 


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have confirmed any such action or inaction to be a waiver in writing.
Any such waiver shall not act as a waiver of any other term, condition, or
right under this Agreement, or the same term, condition, or right on any other
occasion not specifically waived in writing by such party. This Agreement may
be modified, altered, or amended only by a writing signed by the party against
whom the amendment is to be enforced.


 


L.           Enforceability. Wherever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law, but in the event that a provision shall be determined by
a court of competent jurisdiction to be invalid and/or unenforceable, such
provision shall be ineffective only to the extent that it is explicitly deemed
invalid, void or unenforceable, and the remaining provisions of this Agreement
shall be valid and enforced to the fullest extent permitted by law. Upon such a
determination that a provision is invalid, illegal, void, or unenforceable, the
parties agree to negotiate in good faith to modify this Agreement so as to
effect their original intent as closely as possible.


 


M.         Entire
Agreement. This Agreement,
its exhibits, schedules and any other written agreement or contract referred to
herein, contain the entire understanding between the parties hereto and, as of
the Effective Date, they shall supersede all prior negotiations,
representations, agreements and understandings, whether oral or written,
between CHS and Customer with respect to the acquisition of Corn for use by
Customer at the Facility, affecting Customer’s operations at the Facility.


 


N.          Headings. The headings of Sections in this Agreement
are inserted for convenience only, and shall not be deemed to constitute a part
of this Agreement, or to affect interpretation of provisions hereof.


 


O.          Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall, for all purposes, be deemed to be an
original, but all of which shall constitute one and the same Agreement. 


 


P.           Confidentiality. CHS and Customer, recognizing the work in
which they will be engaged under this Agreement and information to be shared is
of a proprietary and trade secret nature, recognize that each may disclose to
the other certain proprietary business plans, strategies, financial data,
specifications, production information, equipment details, process information,
intellectual property and other information relating to this Agreement. This
information is trade secret, proprietary and confidential and will be disclosed
by one party to the other party only on the following terms and conditions:


 


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1.          “Confidential Information” shall mean all
trade secret, proprietary or confidential information received or generated
during the course of the performance of this Agreement including, without
limitation, the information described above and in the books and records of
either party. Confidential Information shall not include that which (i) is
in the public domain prior to disclosure to another party, (ii) is
lawfully in the other party’s possession, as evidenced by written records,
prior to the disclosure by a party, or (iii) becomes part of the public
domain by publication or otherwise through no unauthorized act or omission on
the part of the other party.


 


2.          Neither party shall disclose any of the
Confidential Information to any unauthorized party, unless required by law or
court order and then only after providing advance notice and an opportunity to
intervene to the other party. Proper and appropriate steps shall be taken and
maintained by each party to protect the Confidential Information of the other
party.


 


3.          Confidential Information shall be used by the
parties only in connection with their performance under this Agreement; no
other use will be made of it by either party.


 


4.          All documents containing Confidential
Information of a party shall remain the property of that party. They shall be
returned to that party or destroyed upon request.


 


5.          No license or right is granted hereby to
either party by implication or otherwise with respect to or under any patent
application, patent, claims of patent or proprietary rights of either party
with respect to the Confidential Information.


 


THIS
AGREEMENT REGARDING CORN PROCUREMENT SHALL NOT CONSTITUTE A BINDING CONTRACT
BETWEEN THE PARTIES UNTIL IT HAS BEEN EXECUTED BY AUTHORIZED REPRESENTATIVES OF
BOTH PARTIES


 


IN
WITNESS WHEREOF, Customer and CHS have caused this Agreement to be executed to
be effective as of the Effective Date.


 


 


	
  CHS
  Inc.

  
	
   

  
	
   

  
	
  By:

  	
  John
  McEnroe

  	
   

  
	
  Its:

  	
  V.P.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Customer:

  
	
   

  
	
  Otter
  Tail Ag Enterprises, LLC

  
	
   

  
	
   

  
	
  By:

  	
  Jerry
  Larson

  	
   

  
	
  Its:

  	
  President

  	
   

  
				



 


9

















 


EXHIBIT A


 


CORN SPECIFICATIONS


 


No. 2
Yellow Corn, exact specifications to be determined prior to initial purchases


 


10

















 


Exhibit B


 


contract


 


	
   

  	
   

  	
  CONTRACT NUMBER

  	
   

  
	
  01/30/07

  	
  GRAIN SALES CONTRACT

  PRICED

  	
  P000011

  	
   

  
	
  132025

  BUYER***

  	
   

  	
  SELLER***

  
	
   

  	
   

  	
  NEW
  HORIZONS AG SERVICES - HER

  
	
   

  	
   

  	
  22327
  138TH AVENUE

  
	
   

  	
   

  	
  FERGUS
  FALLS, MN 56537

  
	
   

  	
   

  	
  218/736-2648

  



 


Buyers Contract Number:


 


	
  commodity/Grade:

  	
   

  	
  Quantity:

  	
   

  	
  Price:

  	
   

  	
  Futures:

  	
   

  	
  Basis:

  	
   

  	
  Freight:

  	
   

  
	
  CORN

  	
   

  	
  500.00BU

  	
   

  	
  $

  	
  3.33000

  	
   

  	
  3.98000

  	
   

  	
  .65000-

  	
   

  	
  .00000

  	
   

  
													



 


	
  Delivery period:

  	
   

  	
  Delivery
  Location:

  
	
  01/30/07    - 01/30/07

  	
   

  	
  FOB

  



 


other
terms and conditions to apply to this contract:


 


Printed
for example purpose only


 


THIS CONTRACT INCLUDES THE TERMS AND
CONDITIONS PRINTED ON THE REVERSE SIDE HEREOF, WHICH ARE HEREBY AGREED TO,
PLEASE SIGN AND RETURN ONE COPY WITHIN 48 HOURS.


ACCEPTED AND AGREED TO THIS       
DAY OF       20     


 


	
  BUYER

  	
   

  	
  CHS
  Inc.

  



 


BY                                                                                                   
BY                                                                                                   



 


1

















 


Exhibit C


 


	
  Jerry
  Kramer

  	
   

  	
  jerry.kramer@chsinc.com

  
	
  Rick
  Cole

  	
   

  	
  rich.cole@chsinc.com

  
	
  Kelly
  Longtin

  	
   

  	
  kelly.longtin@yahoo.com

  



 


12

















 


Exhibit D


 


3rd
Party Elevators to be determined upon mutual agreement


 


13

















 


Exhibit E


 


Third
Party Storage Agreements


 


14

















 


EXHIBIT E


CORN
HANDLING AND STORAGE AGREEMENT


 


This CORN HANDLING AND STORAGE AGREEMENT (the “Agreement”) is made this       day
of                ,
20       (the “Effective Date”), by and
between CHS Inc. (“CHS”), a Minnesota corporation, with offices located at 5500
Cenex Drive, Inver Grove Heights, Minnesota 55077 and (“Elevator”), a                                                                                                   corporation,
with an address of                                                                                                                                            .


 


RECITALS:


 


WHEREAS, CHS desires to store Corn. (the “Corn”) in elevator storage
space owned and operated by Elevator and located at                                                                               (the
“Elevator”);


 


WHEREAS, CHS will procure the Com to sell to ETHANOL PLANT (“PLANT”)
pursuant to an Agreement Regarding Corn Procurement dated of even date herewith
(the “Procurement Agreement”); and


 


WHEREAS, Elevator desires to allow CHS to use the Elevator for a
storage charge based upon every bushel of Corn handled and stored by Elevator
on behalf of CHS;


 


NOW, THEREFORE, the parties agree as follows:


 


1.             Term.


 


a.             This Agreement shall be effective and binding
as of the Effective Date; provided, however that the obligations of CHS under
this Agreement, and the obligations of Elevator under this Agreement, shall
commence on the day that CHS notifies Elevator that the PLANT facility is ready
for operation (the “Commencement Date”) and continue for an initial term of
five (5) years from the Commencement Date (“Initial Term”), subject to the
right of CHS to terminate this Agreement earlier as follows: (1) upon 15
days prior written notice in the event of a breach of this Agreement unless
such breach is cured within such 15-day period to the satisfaction of CHS; or (2) immediately
in the event Elevator voluntarily files or has involuntarily filed against it a
petition under the United States Bankruptcy Code (including Chapter 11
reorganization) or Elevator otherwise becomes insolvent or makes an assignment
for the benefit of creditors. After the expiration of the Initial Term, this
Agreement shall automatically renew for consecutive terms of one (1) year
each, unless terminated by CHS or Customer effective as of the end of the
Initial Term, or the then existing one (1) year term, upon at least ninety
(90) days’ prior written notice. Notwithstanding the foregoing, this Agreement
shall automatically terminate upon termination of the Procurement Agreement for
any reason.  Upon such termination
neither party shall have any rights or obligations to the other party except
those that have arisen prior to the date of termination.


 

















 


b.             Post-Termination Rights. In the event of
early termination of this Agreement, CHS shall have a reasonable time within
which to remove the Corn. Elevator shall not retain any Corn following the
early termination of this Agreement or contrary to any directions of CHS or
permit the supply of any Corn to any third party without CHS’ prior written
consent. Elevator acknowledges and agrees that it will be solely responsible
for purchasing from CHS any and all Corn remaining at the end of the Term at
market price.


 


2.             Title, Storage Rights and Inspection.


 


a.             Storage Rights. CHS shall have the exclusive
right, at all times during the Term, to use                     bushels
of capacity of the Elevator owned and operated by Elevator for the storage and
handling of the Corn.


 


b.             Title. It is expressly understood and agreed
that all Corn stored pursuant to this Agreement shall at all times remain the
sole and exclusive property of CHS, and that Elevator shall neither take nor
attempt to grant any interest whatsoever, by lien or otherwise, in the Corn.
Elevator hereby waives its statutory warehouse lien and any and all other
liens, security interest or other interests that it may have in the Corn. Upon
request by CHS, Elevator shall provide negotiable warehouse receipts for the
Corn in storage.


 


c.             Elevator shall take all reasonable steps
requested by CHS to ensure that any potential creditor or lienholder is placed
on notice that CHS has title to the Corn, including without limitation
executing a UCC-1 Financing Statement or posting in plain view at the Elevator
and on all containers of Corn that CHS has title. Promptly on CHS’ request,
Elevator shall also execute any financing statements, warehouse receipts or
other documents that CHS may request to evidence its title to the Corn.
Elevator agrees that these documents may be recorded by CHS at CHS’ expense, in
any public records that CHS may deem appropriate for the purpose of evidencing
its title to the Corn.


 


d.             Risk of Loss. Elevator shall be responsible
for all direct physical loss for the Corn while it is in its possession or
control at all times under this Agreement. Elevator shall maintain insurance on
the Corn pursuant to Section 3 herein.


 


3.             Weighing and Testing. Elevator shall provide
weights and grades for all Corn delivered to the Elevator for CHS. Elevator
shall issue scale tickets and shall provide warehouse receipts to CHS for such
Corn. Samples taken by Elevator shall be retained by Elevator for ten (10) days
after inspection and, upon CHS’ request, shall be provided to CHS to permit
re-inspection by a state laboratory on behalf of, and at the expense of, CHS to
confirm grade test results. Such re-inspection grades will be final.
Destination weights, grades and discount schedules shall apply to all corn
delivered out of the Elevator on behalf of CHS to its point of destination.
Elevator shall be responsible for any loss in quantity (subject, however, to
paragraph 6) and quality in the Corn based upon such destination weights and
grades.


 


2

















 


4.             Insurance and Bond.


 


a.             At all time during the Term, Elevator shall
maintain insurance, at its own expense, with a financially sound insurance
company having an A.M. Best rating of A or better, the following insurance
coverage:


 


1.             Warehouseman’s legal liability insurance
covering Elevator’ liability for loss or destruction of or damage to the Corn
in the amount of full replacement cost. CHS shall be included as an additional
insured with a cross liability clause;


2.             All risk insurance against loss or
destruction of or damage to the Corn in the amount of its full replacement
cost. CHS shall named an additional insured with a loss payable clause in its
favor.


 


b.             If Corn cannot for any reason be replaced
with Corn of identical variety and of quality acceptable to CHS, then Elevator
(or Elevator’ insurance) shall reimburse CHS for the Corn in the amount of the
actual replacement cost to CHS, plus any incidental costs or expenses. Upon
request, CHS shall provide documentation setting forth such costs.


 


c.             All insurance by Elevator shall be primary,
and any insurance maintained by CHS shall be excess and not contributing with
Elevator’ insurance. Elevator shall arrange with its insurance companies to
endorse its policies accordingly.


 


d.             Certificates of insurance confirming
compliance with the requirements stated herein shall be provided within 10 days
from the day of Elevator’ execution of this Agreement. All such policies
obtained by Elevator shall be written so that CHS will be given at least 30
days’ prior written notice of cancellation or any restrictive amendment.


 


e.             Elevator shall also maintain in force, at all
times during the Term, a warehouseman’s bond acceptable to CHS in both
substance and form, given by a surety acceptable to CHS and obligating such
surety to pay to CHS an amount equal to the full replacement cost of any Corn
which is lost, destroyed or damaged or the condition is otherwise affected, as
a result of the breach by Elevator of any of its obligations under this
Agreement. The penal sum of the bond shall be at least the minimum required by
the laws of the state where the Elevator is located. If the Corn cannot for any
reason be replaced with Corn of identical variety and of quality acceptable to
CHS, then the bond shall obligate such surety to pay CHS for the Corn in the
amount of the actual cost to CHS, plus any incidental costs or expenses, up to
the penal sum of the bond.


 


5.             Storage and Handling Charges.


 


a.             CHS shall pay Elevator a storage and handling
charge in an amount equal to $0.       per
bushel of Corn stored by Elevator on behalf of CHS for the first


 


3

















 


turn and $0.      per bushel for each
subsequent turn with CHS guaranteeing two turns per year. All payments shall be
made by CHS to Elevator based on Elevator’ invoices, which shall include all
relevant documentation. Half of the charge shall be paid when the Corn is
unloaded into the Elevator and half of the charge shall be paid when the Corn
is loaded out of the Elevator.


 


6.             Shrinkage.


 


Elevator shall bear any shrinkage in the Corn in excess of 0.25%.
Elevator shall, at CHS’ option, either (1) replace any Corn lost by
shrinkage with Corn which is of identical variety and of quality acceptable to
CHS; or (2) if a replacement is not feasible, reimburse CHS for this
shrinkage, in an amount equal to the shrinkage amount multiplied by the actual
replacement cost to CHS for such Corn, including all incidental costs. Elevator
shall complete such replacement or settlement no later than 30 days from the
date a demand is made by CHS.


 


7.             Condition of Corn.


 


a.             Elevator shall provide at any time any
information requested by CHS relating to the condition or handling of the Corn.
Elevator shall notify CHS and receive CHS’ prior written consent prior to
taking any action which may affect the Corn’s condition.


 


b.             Elevator shall have the sole responsibility
for the condition, quality, purity of all Corn at all times from tender of
delivery to Elevator until that Corn is delivered to the destination on behalf
of CHS. Elevator shall be solely responsible at all times for any and all loss
of, damage to or deterioration of the Corn from any cause, including without
limitation, any infestation, contamination or adulteration of the Corn from any
source.


 


8.             Condition of Premises.


 


Elevator agrees to maintain the Elevator in a sanitary and mechanically
sound condition acceptable to CHS, to comply with Federal Food, Drug and
Cosmetic Act and any other laws, rules, regulations applicable to the storage
and handling of Corn or the operation of the Elevator, and to establish a
continuing program of insect and rodent control at the Elevator. CHS may make
reasonable inspections of its Corn and the Elevator, provided that a management
employee of Elevator shall accompany the CHS representative making such
inspections, and such inspections shall be in accordance with the safety rules of
the facility.


 


9.             Books and Records.


 


a.             Elevator shall keep and maintain, in
accordance with accepted Corn accounting principles and procedures, books and
records pertaining to all Corn transactions performed on behalf of CHS. CHS’
representatives shall have access during normal business hours to all books,
records correspondence and other documents


 


4

















 


relating to the Corn. Elevator shall furnish all records directly or
indirectly related to the Corn as reasonably requested by CHS.


 


b.             During the Term and for a period of 18 months
thereafter following the termination of this Agreement, Elevator shall maintain
such books and records (collectively the “Records”) as are necessary to
substantiate that (i) all invoices, sales and other charges submitted to
CHS for payment were proper, and (ii) no payments have been made, directly
or indirectly, by or on behalf of Elevator to or for the benefit of any CHS
employee or agent who may reasonably be expected to influence either CHS’
decision to enter into this Agreement or the amount to be paid by CHS hereto.
(As used in this provision, “payments” shall include money, property, services
and all other forms of consideration). All Records shall be maintained in
accordance with generally accepted accounting principles consistently applied.
CHS and its representatives shall have the right upon 24 hours notice to
examine the Records. The provisions of this Section 9 shall survive the
expiration or earlier termination of this Agreement.


 


10.           Force Majeure.


 


No party shall be liable for any failure or delay in the performance of
this Agreement for the period that such failure or delay is due to acts of God,
public enemy, war, strikes or labor disputes, or any other cause beyond the
parties’ reasonable control, it being understood that lack of financial
resources is not to be deemed a cause beyond a party’s control. Each party
shall notify the other party promptly as practicable after such cause and carry
out this Agreement and any that the existence of any such cause is terminated;
provided, however, that the existence of any such cause shall not extend the
term of this Agreement.


 


11.           Independent
Contractors.


 


The parties to this Agreement are independent contractors. Neither
party shall have the right to act for the other party or bind or commit the
other party in any way. This is an Agreement for the storage of Corn, and is
neither a lease not a license to CHS of any or all of Elevator’ storage space,
or any real or personal property whatsoever. Nothing in this Agreement shall be
deemed to create any agency, partnership, joint venture, landlord-tenant or
licensor-licensee relationship between the parties, or to grant CHS any
leasehold, license or other interest in the Elevator or any other such
property. Elevator acknowledges that CHS is not an operator of the Elevator or
facilities.


 


12.           Governing Law.


 


This Agreement shall be governed by the laws of the State of Minnesota.


 


13.           Notices.


 


All notices which are required to be in writing under this Agreement
shall be deemed to have been properly given when addressed to:


 


5

















 


	
  CHS
  Inc.

  
	
  Attn:
  Vice President, Country Operations

  
	
  P.O. Box
  64089

  
	
  Inver
  Grove Heights, Minnesota 55164-0089

  
	
  Facsimile:
  651-355-6996

  
	
   

  
	
  or
  to:

  
	
   

  
	
  Elevator

  
	
  Attn:

  
	
   

  
	
  Facsimile:

  



 


and
delivered by hand or duly transmitted by prepaid certified mail or responsible
private courier services or by confirmed facsimile to the facsimile numbers
specified above.


 


14.           Assignment.


 


This Agreement shall be binding upon and benefit the parties and their
respective successors and permitted assigns, provided that this Agreement shall
not be assigned by Elevator without the prior written consent of CHS.


 


IN WITNESS WHEREOF, the parties hereto executed this Agreement as of
the date set forth below.


 


 


	
   

  	
  CHS  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Date:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ELEVATOR

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Date:

  	
   

  	
   

  
					



 


6