Exhibit 10.1


 


RISK MANAGEMENT CONTRACT


 


THIS AGREEMENT is entered
into on the 28th day of November, 2005, by and among FCStone, LLC (“FCStone”),
an Iowa limited liability company with its main office at 2829 Westown Parkway,
West Des Monies, Iowa 50266, and Dakota Ethanol, L.L.C., a South Dakota limited
liability company (Client) with its
main office located at P.O. Box 100, Wentworth, South Dakota 57075,


 


RECITALS:


 


A.           Client operates an ethanol plant facility located in Wentworth South
Dakota, (the “Plant”) and desires to establish an input origination and
marketing risk management plan.


 


B.            FCStone, which is experienced in commodity
transactions and related risk management, is willing to provide such assistance
on the terms hereby stated.


 


NOW,
THEREFORE, IT IS AGREED AS FOLLOWS BETWEEN THE PARTIES:


 


1.             FCStone.  FCStone shall, during the term
hereof, provide services to Client in the implementation of a full service
price risk management program and grain procurement program for Client (the “FCStone
Program”). The services to be provided by FCStone hereunder are set forth in Exhibit A
attached hereto.


 


2.             Fees.


 


(a)          Client shall pay a fee for services and
materials provided by FCStone to Client hereunder of $0.001 per gallon of
ethanol produced (assumed to be 40 million gallons) during the Term.  Such fees shall be payable to FCStone monthly
in advance on the first business day of each month during the term hereof.  The monthly payment shall be $3333.33 per
month,


 


(b)          In addition to such fees, Client shall also
pay to FCStone any transaction commissions, fees, services charges or mark-ups
arising from options, futures or other risk management or cash commodity
transactions executed or brokered through FCStone, its affiliates, or others in
accordance with their applicable schedules of rates, except that FCStone
guarantees that the rate for exchange-traded futures and options contracts
shall not be more than $12.50 per round turn, plus all applicable exchange
fees, during the initial term hereof. 
Any OTC (over-the-counter)
transactions will be $10.00 per round turn, plus any applicable fees, during
the initial term hereof.


 





















 


3.             Client Representative. Client shall designate one or more persons
who shall be authorized and directed to receive services hereunder and to make
all hedging and merchandising and purchasing and sales decisions for
Client.  All directions, transactions and
authorizations given by such representative to FCStone shall be binding upon
Client.  FCStone shall be entitled to
rely on the authorization of such persons until it receives written
notification from Client that such authorization has been revoked.


 


4.             Transactions with FCStone and FCStone
Affiliates. Client
understands, approves, authorizes, and agrees that FCStone as an advisor may recommend
that Client enter into transactions where FCStone will act as a broker or
futures commission merchant or where Client may enter into transactions with
one or more companies which are under common ownership or control with FCStone,
including, but not limited to, FCStone Trading, L.L.C. with respect to physical
energy products and over the counter swaps and options and FGDT, L.L.C. with
respect to cash grain. FCStone may also participate on Client’s behalf in
negotiations with one or more elevators, which are members of FCStone’s parent
company.  All futures, swap or cash
commodity transactions involving Client, FCStone and its affiliates shall be
subject to, and shall be governed by, the applicable customer agreements,
master agreements, confirmations, and other documentation thereof.


 


5.             FCStone Limitations.


 


(a)          To the extent and if any brokerage services
are provided by FCStone it will be to find suppliers or purchasers for Client.
FCStone will not purchase or sell grain, nor will it be directly involved in
the purchase of the grain involving Client. FCStone may give merchandising,
purchasing and hedging advice to Client, but all decisions on purchasing,
merchandising and hedging strategy will be made by Client. All hedging
positions will be the responsibility of Client, in Client’s account with
FCStone or other relevant party.  All
positions shall be for the purpose of hedging against price risks associated
with the Client’s operations.


 


(b)          FCStone assumes no responsibility for the
completion or performance of any contracts between Client and Client’s
customers and suppliers, and Client agrees that it shall not bring any action
or make any claim against FCStone based on any act, omission or claim of any of
Client’s customers or suppliers.


 


(c)          To the extent FCStone provides services
relating to accounting systems, sole responsibility for the accuracy and
completeness of Client’s books and


 


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financial
statements shall remain with Client. 
FCStone shall not be deemed to attest in any way to the accuracy of such
books and financial statements.


 


(d)          FCStone assumes no responsibility for tax
advice, tax planning, or tax returns or tax reporting.


 


6.             Confidentiality Agreement. The parties have previously executed a
Confidentiality and Nondisclosure Agreement. Such agreement shall remain in
full force and effect and shall apply and govern all disclosure and use of
confidential information hereunder.


 


7.             Public
Disclosure. Any public announcements concerning the transaction
contemplated by this letter shall be approved in advance by FCStone and Client,
except for disclosures required by law,
in which case the disclosing party shall provide a copy of the disclosure to
the other party prior to its public release.


 


8.             Terms and Termination.


 


(a)          The initial term of this Agreement shall
commence on the Effective Date hereof and shall continue until October 31,
2006. This contract will automatically renew for an additional term of one (1) year
unless Client gives notice of non-renewal in writing to FCStone at least four (4) months
prior to the end of the initial term. 
The “Effective Date” shall be November 10, 2005.


 


(b)          This Agreement may be terminated by Client as
to FCStone in the event of material breach of any of the material terms hereof
by such other party, by written notice specifying the breach, which notice
shall be effective fifteen (15) days after it is given unless the receiving
party cures the breach within such time. 
This Agreement may be terminated by FCStone as to Client in the event of
material breach of any of the material terms hereof by Client, by written
notice specifying the breach, which notice shall be effective fifteen (15) days
after it is given unless the receiving party cures the breach within such
time.  This Agreement may be terminated
immediately without notice at the election of any party in the event of
bankruptcy, or any other receivership or insolvency proceeding is filed by or
against another party.


 


(c)          This Agreement may also be terminated by the
mutual consent of the parties on such terms as the parties may agree.


 


(d)          In addition to any other method of
terminating this Agreement, either party may unilaterally terminate this
Agreement at any time if such termination shall be required by any regulatory
authority, and such termination shall be


 


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effective
on the 30th day following the giving of notice of intent to
terminate.


 


9.             Licenses, Bonds, and Insurance.  Each
party represents that it now has and will maintain in full force and effect
during the term of this Agreement, at its sole cost, all necessary state and
federal licenses, bonds and insurance in accordance with applicable state or
federal laws and regulations.


 


10.           Limitation
of Liability.  EACH PARTY UNDERSTANDS
THAT NO OTHER PARTY MAKES ANY GUARANTEE, EXPRESS OR IMPLIED, TO ANY OTHER OF PROFIT, OR OF ANY PARTICULAR ECONOMIC RESULTS
FROM TRANSACTIONS HEREUNDER. IN NO EVENT SHALL ANY PARTY BE LIABLE FOR SPECIAL,
COLLATERAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES FOR ANY ACT OR OMISSION COMING
WITHIN THE SCOPE OF THIS AGREEMENT OR FOR BREACH OF ANY OF THE PROVISIONS OF
THIS AGREEMENT, EVEN IF IT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.  SUCH EXCLUDED DAMAGES INCLUDE, BUT ARE NOT
LIMITED TO, LOSS OF GOODWILL, LOSS OF PROFITS, LOSS OF USE AND INTERRUPTION OF
BUSINESS.


 


11.           Disclaimer. Client understands and agrees that FCStone makes no warranty
respecting legal or regulatory requirements and risks. Client shall obtain such
legal and regulatory advice from third parties as it may deem necessary
respecting the applicability of legal and regulatory requirements applicable to
Client’s business.


 


12.           Indemnity.  Subject to the limitations set
forth in Section 10, the parties agree to indemnify each other as follows:


 


(a)          Client shall indemnify FCStone and their
brokers, officers, agents and employees and hold them harmless from and against
any claims, demands, liability or expense, including attorney’s fees and other
litigation expenses, arising out of claims by Client’s customers or suppliers,
or also arising out of a breach by Client of any covenant, representation or
warranty herein, or any negligence, fraud or misrepresentation of Client,
except to the extent such losses or damages are caused by the negligence,
fraud, willful injury or willful violation of law by the FCStone, or its
officers, directors, employees and agents or by the reckless disregard of its
duties hereunder by any such person.


 


(b)          FCStone shall indemnify, defend Client, and
its officers, directors, employees and agents and hold them harmless from and
against any claims, demands, liability or expense, including attorneys’ fees
and other litigation expenses arising out of a breach by FCStone of any covenant,
representation


 


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or
warranty herein, or any negligence, fraud or misrepresentation of FCStone,
except to the extent such losses or damages are caused by the negligence,
fraud, willful injury or willful violation of law by the Client, or its
officers, directors, employees and agents or by the reckless disregard of its
duties hereunder by any such person.


 


13.           Notices. Any notices permitted or required hereunder shall be in writing,
signed by an officer duly authorized of the party giving such notice, and shall
either be hand delivered or mailed.  If
mailed, notice shall be sent by certified, first class, return receipt
requested, mail to the address shown above, or any other address subsequently
specified by notice from one party to the other.


 


14.           General.


 


(a)          This Agreement is the entire understanding of
the parties concerning the subject matter hereof and it may be modified only in
writing signed by the parties.  All
commodities, futures, options, and swap transactions shall be subject to the
customer or master agreements between Client and FCStone, its affiliates, or
others. The parties may enter into other agreements in writing, including but
not limited to service agreements, customer agreements and master agreements
with respect to commodity futures options and swaps.


 


(b)            If any provision or provisions of this
Agreement shall be held to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.


 


(c)            No party shall be liable for any failure to
perform any or all of the provisions of this Agreement if and to the extent
that performance has been delayed or prevented by reason of any cause beyond
the reasonable control of such party. 
The expression “cause beyond the reasonable control” shall be deemed to
include, but not be limited to: acts, regulations, laws, or restraints imposed
by any governmental body; wars, hostilities, sabotage, riots, or commotions;
acts of God; or fires, frost, storms, or lightning.


 


(d)            This Agreement is not intended to, and does
not, create or give rise to any fiduciary duty on the part of any party to any
other.


 


(e)            No action, regardless of its nature or form,
arising from or in relation to this Agreement may be brought by either party
more than two (2) years after the cause of action has arisen, or, in the
case of an action for nonpayment, more than two (2) years from the date
the last payment was due.  Venue for any
action arising from or in relation to this Agreement shall be in State or


 


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Federal court in Lake or Minnehaha Counties, South Dakota.


 


(f)             This Agreement is governed by and shall be
construed under the laws of the State of South Dakota.


 


(g)            This Agreement shall be binding upon and
inure to the benefit of the parties and the successors and assigns of the
entire business and goodwill of FCStone and Client, but shall not be otherwise
assignable without the express consent of the other parties.


 


Dated and executed as of the
day and year first written above.


 


 


	
  Dakota
  Ethanol

  
	
   

  
	
  BY:

  	
  Brian
  Woldt

  	
   

  
	
   

  	
  Its Chairman, Board of Managers

  
	
   

  
	
  FCSTONE,
  LLC

  
	
   

  
	
  BY:

  	
  Jason
  Sagebiel

  	
   

  
	
   

  	
  Its:
  Risk Management Consultant

  
						



 


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EXHIBIT A


 


FCStone Services


 


FCStone will provide the
following services based on sound risk management principles, using FCStone’s
Basis Trading experience today with the futures and options markets to reduce
Client’s exposure to commodity price changes.


 


I.           General Scope.  FCStone will provide advice,
assistance and risk management with respect to Client’s grain original, energy
and transportation, procurement and output sales.


 


II.          Consulting Services and Program: FCStone services to Client
shall follow:


 


1)      FCStone shall provide Client with price risk
management evaluation, review and advice in relation to use of Corn and/or any
other grain products as they relate to the day-to-day operations of the plant
on both cash grain and futures/options and OTC products.


 


Such
services to be summarized monthly/annually in a detailed report prepared by
FCStone for the Client staff/board, and accordingly to their satisfaction in
terms of content and accountability.


 


III.        Internal Risk Management Procedures:


 


A.       Risk management guidelines and controls.  Risk management recommendations regarding position limits, strategies,
credit exposure and volumes will be presented for management and board
approval.


 


B.       Establish Corporate Risk Policy — Assess
Risk Profile — Define Hedge
Objective.


 


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