Exhibit
10.16


RPMG


RENEWABLE PRODUCTS Marketing
Group


ETHANOL FUEL

MARKETING AGREEMENT















 


ETHANOL FUEL MARKETING AGREEMENT


THIS AGREEMENT, entered into this 28th day
of September, 2006, by and between RENEWABLE PRODUCTS MARKETING GROUP, L.L.C.,
hereinafter referred to as “RENEWABLE PRODUCTS”; and HIGHWATER ETHANOL, LLC, a
Minnesota limited liability company, hereinafter referred to as “HIGHWATER
ETHANOL.”


WITNESSETH:


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


WHEREAS, HIGHWATER ETHANOL, is intending to
construct a plant in Lamberton, 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 HIGHWATER ETHANOL 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
HIGHWATER ETHANOL 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 HIGHWATER ETHANOL promises and agrees to proceed, with due
diligence, toward the planning, financing and construction of a facility for
the production of fuel grade ethanol with a capacity of approximately 50
million gallons per year, which fuel grade ethanol will be at least 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. 
HIGHWATER ETHANOL contemplates that said facility is anticipated



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to be
in production by September, 2008, and will make every good faith effort to
begin production by that time.


3.             Rail
and Truck Loading Facilities.  That
the facility to be constructed and operated by HIGHWATER ETHANOL, as aforesaid,
shall include reasonable and convenient railcar and tank truck access at the
facility of a size and design appropriate to handle production of approximately
50 million gallons of ethanol per year.  All
such railcar and tank truck loading facilities shall meet all industry and
governmental safety standards and shall be capable of delivering a minimum of
1,200 gallons of product per minute to railcars and trucks combined.  HIGHWATER ETHANOL will be solely responsible
for all demurrage charges for railcars in service for its use.  HIGHWATER ETHANOL 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 HIGHWATER ETHANOL as aforesaid shall have
sufficient storage capacity for not less than 10 days ethanol production.


5.             Best
Efforts to Market.  That since
RENEWABLE PRODUCTS shall have the exclusive right to market all the fuel grade
ethanol produced by HIGHWATER ETHANOL 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 HIGHWATER ETHANOL, from the time the
product crosses the loading flange, and the common carrier accepts
responsibility for the product at HIGHWATER ETHANOL’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, sale and delivery of all the
production from HIGHWATER ETHANOL’s facility during the term of this agreement,
including, but not limited to:



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


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


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


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


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


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


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.


HIGHWATER ETHANOL will
pay RENEWABLE PRODUCTS 1% of the FOB netback returned each month for each
gallon of ethanol sold by RENEWABLE PRODUCTS for the account of HIGHWATER
ETHANOL.  RENEWABLE PRODUCTS shall have
the right to deduct this fee from payments due HIGHWATER ETHANOL 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 HIGHWATER ETHANOL 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
HIGHWATER ETHANOL 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
145 railcars to be used by HIGHWATER ETHANOL. 
A separate payment for leased railcars is not applicable as HIGHWATER
ETHANOL’s production of fuel grade is part of the RENEWABLE



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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 HIGHWATER ETHANOL’s ethanol will be
assigned to HIGHWATER ETHANOL, who will be obligated to the terms and
conditions of said lease.  RENEWABLE
PRODUCTS shall provide HIGHWATER ETHANOL 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 HIGHWATER ETHANOL’s
facility.


12.          Term.  The term of this agreement shall commence on
the first day of the month that HIGHWATER ETHANOL initially ships ethanol and
shall continue for a period of at least 24 months, but will terminate at the
end of the first traditional ethanol marketing contract period; end of March or
end of September which ever occurs first after the 24 month period.  This
Agreement shall be automatically extended for an additional one (1) year term
following the end of the initial term unless either party gives written notice
of non-extension not less than one hundred and eighty (180) days before the end
of the current expiration date.


13.          Licenses
and Permits.  At all times from the
commencement of this contract, HIGHWATER ETHANOL 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, HIGHWATER ETHANOL agrees to have RENEWABLE
PRODUCTS market all of the ethanol produced by HIGHWATER ETHANOL it at its
production facility.  The average monthly
volume of ethanol produced by HIGHWATER ETHANOL is estimated to be
approximately 4,166,667 gallons.


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



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


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


19.          Independent
Contractor.  Nothing contained in
this agreement will make RENEWABLE PRODUCTS the agent of HIGHWATER ETHANOL 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 HIGHWATER ETHANOL 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



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promptly and in
good faith to develop effective and efficient policies and procedures to cover
these matters.


22.          Ethanol
Shortage/Open Market Purchase.  If
HIGHWATER ETHANOL is unable to deliver its estimated monthly ethanol production
and if as a consequence of the non-delivery and in order to meet its sale
obligation to third parties, RENEWABLE PRODUCTS may purchase ethanol in the
market place to meet its delivery obligations. 
If it does so, and as a result thereof incurs a financial loss,
HIGHWATER ETHANOL will reimburse RENEWABLE PRODUCTS for any such loss.  Under such circumstances, if RENEWABLE
PRODUCTS realizes a financial gain, it will pay such gain to HIGHWATER ETHANOL.


23.          Testing
of Samples.  At the request of
RENEWABLE PRODUCTS, HIGHWATER ETHANOL 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,
HIGHWATER ETHANOL 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, HIGHWATER ETHANOL’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.


HIGHWATER
ETHANOL will not change its insurance coverage during the term of this
agreement, except to increase it or enhance it, without the



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prior written
consent of RENEWABLE PRODUCTS which consent will not be unreasonably withheld.


25.          
Indemnifications and Hold Harmless— HIGHWATER ETHANOL.  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 HIGHWATER ETHANOL or any person or organization
related to HIGHWATER ETHANOL including, but not limited to, claims relating to
the quality of ethanol produced by HIGHWATER ETHANOL, then HIGHWATER ETHANOL
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 HIGHWATER ETHANOL’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 HIGHWATER ETHANOL and its related persons or organizations that
HIGHWATER ETHANOL 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.



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


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


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


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


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


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


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


(a)     Definition of Confidential Information.  For
purposes of this Agreement, the term “Confidential Information” means
information



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related to the business
operations of HIGHWATER ETHANOL or RENEWABLE PRODUCTS that meets all of the following criteria:


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


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


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


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



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legal proceedings, subpoenas, civil investigative demand or similar
process, SEC filings or administrative proceedings) in connection with any
proceeding, to disclose any Confidential Information, such party will give the
disclosing party prompt written notice of such request or requirement so that
the disclosing party may seek an appropriate protective order or other remedy
and/or waive compliance with the provisions of this Agreement, and the
receiving party will cooperate with the disclosing party to obtain such
protective order.  The fees and costs of obtaining such protective order,
including payment of reasonable attorney’s fees, shall be paid for by the
disclosing party.  If such protective order or other remedy is not
obtained or the disclosing party waives compliance with the relevant provisions
of this Agreement, the receiving party (or such other persons to whom such
request is directed) will furnish only that portion of the Confidential
Information which, in the opinion of legal counsel, is legally required to be
disclosed, and upon the disclosing party’s request, use commercially reasonable
efforts to obtain 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



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acknowledges
and agrees that the disclosure of this agreement and the transactions
contemplated hereby by HIGHWATER ETHANOL (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. HIGHWATER ETHANOL 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:


TO:                            RENEWABLE
PRODUCTS MARKETING

GROUP, L.L.C.

809 East Main Street

Suite 2

Belle Plaine, MN  56011


TO:         HIGHWATER ETHANOL, LLC


Lamberton,
MN


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


	
  

  	
  RENEWABLE PRODUCTS

  MARKETING GROUP, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ C. Stephen Bleyl

  	
   

  
	
   

  	
   

  	
  Its

  	
  CEO

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  HIGHWATER ETHANOL, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Brian Kletscher

  	
   

  
	
   

  	
   

  	
  Its

  	
  President

  	
   

  
							



 



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