Exhibit 10.2


 


DISTILLER’S GRAIN
MARKETING AGREEMENT


 


THIS DISTILLER’S
GRAIN MARKETING AGREEMENT (the “Agreement”), is entered into as of this 28th
day of November, 2005, by Dakota Ethanol LLC, a South Dakota limited liability
company (“Seller”), and Commodity Specialists Company, a Delaware Corporation (“Buyer”).


 


W I T N E S S E T
H:


 


WHEREAS, Seller
desires to sell and Buyer desires to purchase the Distiller’s Dried Grains with
Solubles (sometimes referred to as “Product(s)” or “DDGS”) output of the ethanol
production plant which Seller owns in Wentworth, South Dakota (the “Plant”);
and


 


WHEREAS, Seller
and Buyer wish to agree in advance of such sale and purchase to the price
formula, payment, delivery and other terms thereof as set forth herein;


 


NOW, THEREFORE, in
consideration of the promises and the mutual covenants and conditions herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by both parties, it is hereby
agreed:


 


1.             BUYER
PERFORMANCE.  Buyer agrees to perform
the services that it provides for Seller in a professional and competent
manner.


 


2.             PURCHASE
AND SALE. Seller agrees to sell to Buyer and Buyer agrees to purchase from
Seller the entire bulk feed grade DDGS output from Seller’s plant at Wentworth,
South Dakota, subject to all terms and conditions set forth in this
Agreement.  Buyer shall label all product
that is sold by Buyer and shall register all labels with the states where the
DDGS is sold.


 


3.             TRADE
RULES.  All purchases and sales made
hereunder shall be governed by the Feed Trade Rules of the National Grain
and Feed Association unless otherwise specified.  Said Trade Rules, a copy of which is appended
hereto as Exhibit A, shall, to the extent applicable, be a part of this
Agreement as if fully set forth herein.


 


4.             TERM.


 


A.            The
initial term of this Agreement shall be for one (1) year commencing December 1,
2005 (the “Effective Date”).


 


B.            In
the event that during the first year of this Agreement Seller materially changes
the quality of the DDGS produced at the Plant through the application of new
technology and equipment, either Seller or Buyer shall have the right to
terminate this Agreement upon 120 days notice. Notwithstanding such
termination, Seller shall remain


 





















 


liable to provide
DDGS to Buyer in sufficient quantities, either through the Plant or buying such
product, to honor any sales contract that Buyer may have to which Seller has
consented.


 


C.            This
Agreement shall automatically renew for an additional term of one (1) year
unless Seller or Buyer gives notice of non-renewal in writing to the other
party at least one hundred twenty (120) days prior to the end of the initial
term.  The aforementioned renewal
provision shall apply in the same manner for all subsequent expiring renewal
terms, and the Agreement shall be automatically renewed for subsequent one (1) year
terms unless written notice of nonrenewal is provided in the manner provided
above.


 


D.            After
the initial term, this Agreement may be terminated by either party at its
unqualified option by providing the other party hereto not less than 120 days
written notice of its election to terminate this Agreement.


 


E.             In
addition to its option to terminate as provided above, Seller shall have the
option to terminate this Agreement at anytime on thirty (30) days’ notice in
order to join a pooled marketing arrangement (the “Pooled Marketing Arrangement”)


 


5.             DELIVERY
AND TITLE.


 


A.            The
place of delivery for all the DDGS sold pursuant to this Agreement shall be FOB
Plant.  Buyer and Buyer’s agents shall be
given access to Seller’s Plant in a manner and at all times reasonably
necessary and convenient for Buyer to take delivery as provided herein.  Buyer shall schedule the loading and
shipping of all outbound DDGS purchased hereunder which is shipped by truck or
rail.  All labor and equipment necessary
to load trucks or rail cars shall be supplied by Seller without charge to
Buyer.  Seller agrees to handle the
Products in a good and workmanlike manner in accordance with Buyer’s reasonable
requirements and in accordance with normal industry practice.  Seller shall maintain the truck and rail
loading facilities in safe operating condition in accordance with normal
industry standards.


 


B.            Seller
further warrants that storage space for not less than not less than seven days
production of DDGS shall be reserved for Buyer’s use at the Plant and shall be
continuously available for storage of DDGS purchased by Buyer hereunder at no
charge to Buyer.  Seller shall be
responsible at all times for the quantity, quality and condition of any the
Products in storage at the Plant. Seller shall not be responsible for the
quantity, quality and condition of any of the Products stored by Buyer at
locations other than the Plant.


 


C.            Buyer
shall give to Seller a schedule of quantities of the Products to be
removed by truck and rail with sufficient advance notice reasonably to allow
Seller to provide the required services. 
Seller shall provide the labor, equipment and facilities necessary to
meet Buyer’s loading schedule and, except for any consequential or
indirect


 


2





















 


damages, shall be
responsible for Buyer’s actual costs or damages resulting from Seller’s failure
to do so.  Buyer shall order and supply
trucks and rail cars as scheduled for truck and rail shipments.  All freight charges shall be the
responsibility of Buyer and shall be billed directly to Buyer.


 


D.            Buyer
shall provide loading orders as necessary to permit Seller to maintain Seller’s
usual production schedule, provided, however, that Buyer shall not be
responsible for failure to schedule removal of the Products unless Seller
shall have provided to Buyer production schedules as follows: Five (5) days
prior to the beginning of each calendar month during the term hereof, Seller
shall provide to Buyer a tentative schedule for production in the next
calendar month.  Seller shall inform
Buyer daily of inventory and production status. For purposes of this paragraph,
notification will be sufficient if made by e-mail or facsimile as follows:


 


If to Buyer, to
the attention of Steve Markham, Facsimile number 612-330-9894 or email to

smarkham@csc-world.com, and


 


If to Seller, to
the attention of Scott A. Mundt, Facsimile number 605-483-2681 or email to
smundt@dakotaethanol.com


 


or to such other
representatives of Buyer and Seller as they may designate to the other in
writing.


 


Title, risk of
loss and full shipping responsibility shall pass to Buyer upon loading the
Products into trucks or rail cars and delivering to Buyer of the bill of lading
for each such shipment.


 


6.             PRICE
AND PAYMENT.


 


A.            Buyer
agrees to pay Seller for all DDGS removed by Buyer from the Plant a price equal
to ninety eight (98%), with 2% to be retained by Buyer as its service fee,
provided, however, that Buyer’s service fee shall not be less $1.50 per ton nor
shall it exceed $2.00 per ton.  The
calculation on the minimum and maximum fee payable to CSC shall be made with
respect to each payment and will not be carried over to any subsequent
payments. By way of illustration, if the 2% to be retained by CSC for any given
week is less than $1.50 per ton, the fee to be retained by CSC shall then be
$1.50 per ton.  If in subsequent weeks the
2% is greater than $1.50 but less than $2.00, the fee shall be the 2%.  Conversely, if the 2% for any period exceeds
$2.00, the fee shall then be $2.00 per ton. If in subsequent weeks the 2% is
less than $2.00 but greater than $1.50, the fee shall be the 2%.  For purposes of this provision, the FOB Plant
price shall be the actual sale price, less all freight costs incurred by Buyer
in delivering the Product to its customer.


 


B.            Buyer
agrees that it shall not sell Product for delivery more than 90 days from the
date of entering into a sale without the consent of Seller.  Buyer agrees to use


 


3





















 


commercially
reasonable efforts to achieve the highest resale price available under
prevailing market conditions. Seller’s sole and exclusive remedy for breach of
Buyer’s obligations under the preceding sentence shall be to terminate this
Agreement.  Buyer shall collect all
applicable state tonnage taxes on Products sold by Buyer and shall remit to the
appropriate governmental agency.


 


C.            Within
ten (10) days following receipt of certified weight certificates, which
certificates shall be presented to Buyer each Thursday for all DDGS shipments
during the preceding week, Buyer shall pay Seller the full price, determined
pursuant to paragraph 6A above, for all properly documented shipments.  Buyer agrees to maintain accurate sales
records and to provide such records to Seller upon request.  Seller shall have the option to audit Buyer’s
sales invoices at any time during normal business hours and during the term of
this Agreement.


 


7.             QUANTITY
AND WEIGHTS.


 


A.            It
is understood that the output of the Products shall be determined by Seller’s
production schedule and that no warranty or representation has been made
by Seller as to the exact quantities of Products to be sold pursuant to this
Agreement.


 


B.            The
quantity of Products delivered to Buyer from Seller’s Plant shall be
established by weight certificates obtained from scale at the Plant which is
certified as of the time of weighing and which complies with all applicable
laws, rules and regulations or in the event that the scale at the Plant is
inoperable then at other scales which are certified as of the time of weighing
and which comply with all applicable laws, rules and regulations. The
outbound weight certificates shall be determinative of the quantity of the
Products for which Buyer is obligated to pay pursuant to Section 5.


 


8.             QUALITY.


 


A.            Seller
understands that Buyer intends to sell the Products purchased from Seller as a
primary animal feed ingredient and that said Products are subject to minimum
quality standards for such use.  Seller
agrees and warrants that the Products produced at its plant and delivered to
Buyer will comply with current industry standards in the feed trade.


 


B.            Seller
warrants that all Products, unless the parties agree otherwise, sold to Buyer
hereunder shall, at the time of delivery to Buyer, conform to the following
minimum quality standard:


 


	
   

  	
   

  	
  Protein

  	
   

  	
  Fat

  	
   

  	
  Fiber

  	
   

  	
  Moisture

  	
   

  	
  Ash

  	
   

  
	
   

  	
   

  	
  Min

  	
   

  	
  Max

  	
   

  	
  Min

  	
   

  	
  Max

  	
   

  	
  Min

  	
   

  	
  Max

  	
   

  	
  Min

  	
   

  	
  Max

  	
   

  	
  Min

  	
   

  	
  Max

  	
   

  
	
  DDGS

  	
   

  	
  25

  	
   

  	
   

  	
   

  	
  10

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  15

  	
   

  	
   

  	
   

  	
  12

  	
   

  	
   

  	
   

  	
  6

  	
   

  



 


4





















 


The standard for DDGS
will be determined on an “as is” basis rather than a dry weight basis. Minimum
quality standards for Solubles shall be agreed upon by the parties at a
subsequent date.


 


C.            Payment
of invoice does not waive Buyer’s rights if goods do not comply with terms or
specifications of this Agreement.  Unless
otherwise agreed between the parties to this Agreement, and in addition to
other remedies permitted by law, the Buyer may, without obligation to pay,
reject either before or after delivery, any of the Products which when
inspected or used fail in a material way to conform to this Agreement.  Should any of the Products be seized or
condemned by any federal or state department or agency for any reason except
noncompliance by Buyer with applicable federal or state requirements, such
seizure or condemnation shall operate as a rejection by Buyer of the goods
seized or condemned and Buyer shall not be obligated to offer any defense in
connection with the seizure or condemnation. When rejection occurs before or
after delivery, at its option, Buyer may:


 


(1)           Dispose
of the rejected goods after first offering Seller a reasonable opportunity of
examining and taking possession thereof, if the condition of the goods
reasonably appears to Buyer to permit such delay in making disposition; or


 


(2)           Dispose
of the rejected goods in any manner directed by Seller which Buyer can
accomplish without violation of applicable laws, rules, regulations or property
rights; or


 


(3)           If
Buyer has no available means of disposal of rejected goods and Seller fails to
direct Buyer to dispose of it as provided herein, Buyer may return the rejected
goods to Seller, upon which event Buyer’s obligations with respect to said
rejected goods shall be deemed fulfilled. 
Title and risk of loss shall pass to Seller promptly upon rejection by
Buyer.


 


(4)           Seller
shall reimburse Buyer for all costs reasonably incurred by Buyer in storing,
transporting, returning and disposing of the rejected goods. Buyer shall have
no obligation to pay Seller for rejected goods and may deduct reasonable costs
and expenses to be reimbursed by Seller from amounts otherwise owed by Buyer to
Seller.


 


(5)           If
Seller produces Products which comply with the warranty in Section C above
but which do not meet applicable industry standards, Buyer agrees to purchase
such Products for resale but makes no representation or warranty as to the
price at which such Product can be sold. 
If the Products deviates so severely from industry standard as to be
unsalable, then it shall be disposed of in the manner provided for rejected
goods in Section C above.


 


D.            If
Seller knows or reasonably suspects that any of the Products produced at


 


5





















 


its Plant are
adulterated or misbranded, or outside of industry quality standards, Seller
shall promptly so notify Buyer so that such Product can be tested before
entering interstate commerce.  If Buyer
knows or reasonably suspects that any of the Products produced by Seller at its
Plant are adulterated, misbranded or outside of industry quality standards,
then Buyer may obtain independent laboratory tests of the affected goods. If
such goods are tested and found to comply with all warranties made by Seller
herein, then Buyer shall pay all testing costs; and if the goods are found not
to comply with such warranties, Seller will pay all testing costs.


 


9.             RETENTION
OF SAMPLES.  Seller will take an
origin sample of DDGS from each truck and rail car before it leaves the Plant
using standard sampling methodology. 
Seller will label these samples to indicate the date of shipment and the
truck or railcar number involved.  Seller
will also retain the samples and labeling information for no less than one
year.


 


10.           INSURANCE.


 


A.            Seller
warrants to Buyer that all employees engaged in the removal of the Products
from Seller’s Plant shall be covered as required by law by worker’s
compensation and unemployment compensation insurance.


 


B.            Seller
agrees to maintain throughout every term of this Agreement comprehensive
general liability insurance, including product liability coverage, with
combined single limits of not less than $2,000,000.  Seller’s policies of comprehensive general
liability insurance shall be endorsed to require at least thirty (30) days
advance notice to Buyer prior to the effective date of any decrease in or
cancellation of coverage.  Seller shall
cause Buyer to be named as an additional insured on Seller’s insurance policy
and shall provide a certificate of insurance to Buyer to establish the coverage
maintained by Seller not later than fourteen (14) days prior to completion and
start-up of production of the Plant.


 


C.            Buyer
agrees to carry such insurance on its vehicles operating on Seller’s property
as Seller reasonably deems appropriate. 
The parties acknowledge that Buyer may elect to self insure its
vehicles.  Upon request, Buyer shall
provide certificate of insurance to Seller to establish the coverage maintained
by Buyer.


 


D.            Notwithstanding
the foregoing, nothing herein shall be construed to constitute a waiver by
either party of claims, causes of action or other rights which either party may
have or hereafter acquire against the other for damage or injury to its agents,
employees, invitees, property, equipment or inventory, or third party claims
against the other for damage or injury to other persons or the property of
others.


 


11.           REPRESENTATIONS
AND WARRANTIES.


 


A.            Seller
represents and warrants that all of the Products delivered to Buyer


 


6





















 


shall not be
adulterated or misbranded within the meaning of the Federal Food, Drug and
Cosmetic Act and may lawfully be introduced into interstate commerce pursuant
to the provisions of the Act.  Seller
further warrants that the Products shall fully comply with any applicable state
laws governing quality, naming and labeling of product.  Payment of invoice shall not constitute a
waiver by Buyer of Buyer’s rights as to goods which do not comply with this
Agreement or with applicable laws and regulations.


 


B.            Seller
represents and warrants that the Products delivered to Buyer shall be free and
clear of liens and encumbrances.


 


12.           EVENTS
OF DEFAULT.  The occurrence of any of
the following shall be 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 the covenants and agreements set forth in
this Agreement; (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 be adjudicated bankrupt, or
file a petition in bankruptcy, or apply to a court for the appointment of a
receiver for any of its assets or properties with or without consent, and such
receiver shall not be discharged within sixty (60) days following appointment.


 


13.           REMEDIES.  Upon the happening of an Event of Default,
the parties hereto shall have all remedies available under applicable law with
respect to a Event of Default by the other party.  Without limiting the foregoing, the parties
shall have the following remedies whether in addition to or as one of the
remedies otherwise available to them; (1) to declare all amounts owed
immediately due and payable; and (2) immediately to terminate this
Agreement effective upon receipt by the party in default of the notice of
termination, provided, however, the parties shall be allowed 10 days from the
date of receipt of notice of default for to cure any default. Notwithstanding
any other provision of this Agreement, Buyer may offset against amounts
otherwise owed to Seller the price of any product which fails to conform to any
requirements of this Agreement.


 


14.           FORCE
MAJEURE.  Neither Seller nor Buyer
will be liable to the other for any failure or delay in the performance of any
obligation under this Agreement due to events beyond its reasonable control,
including, but not limited to, fire, storm, flood, earthquake, explosion, act
of the public enemy, riots, civil disorders, sabotage, strikes, lockouts, labor
disputes, labor shortages, war stoppages or slowdowns initiated by labor,
transportation embargoes, failure or shortage of materials, acts of God, or
acts or regulations or priorities of the federal, state or local government or
branches or agencies thereof.


 


15.           INDEMNIFICATION.


 


A.            Seller
shall indemnify, defend and hold Buyer and its officers, directors, employees
and agents harmless, from any and all losses, liabilities, damages, expenses
(including reasonable attorneys’ fees), costs, claims, demands, that Buyer or
its officers, directors, employees or agents may suffer, sustain or become
subject to, or as a result of


 


7





















 


(i) any
misrepresentation or breach of warranty, covenant or agreement of Seller
contained herein or (ii) the Seller’s negligence or willful misconduct.


 


B.            Buyer
shall indemnify, defend and hold Seller and its officer, directors, employees
and agents harmless, from any and all losses, liabilities, damages, expenses
(including reasonable attorneys’ fees), costs, claims, demands, that Seller or
its officers, directors, employees or agents may suffer, sustain or become
subject to, or as a result of (i) any misrepresentation or breach of
warranty, covenant or agreement of Buyer contained herein or (ii) the
Buyer’s negligence or willful misconduct.


 


C.            Where
such personal injury, death or loss of or damage to property is the result of
negligence on the part of both Seller and Buyer, each party’s duty of
indemnification shall be in proportion to the percentage of that party’s
negligence or faults.


 


D.            Seller
acknowledges that in order to maximize the total revenue to be generated through
the sale of the Products, Buyer may take positions by selling Product in
anticipation of Seller providing the Products. 
Notwithstanding the fact that Seller’s obligation is to provide Buyer
with the output of the Plant the parties acknowledge that Buyer may suffer
losses as a result of positions taken by Buyer if Seller discontinues
operations for any reason whatsoever including Force Majeure.  Therefore, Seller shall indemnify, defend and
hold Buyer and its officers, directors, employees and agents harmless from any
and all losses, liabilities, damages, expenses (including reasonable attorney’s
fees), costs, claims, demands that Buyer or its officers, directors, employees,
or agents may suffer, sustain or become subject to as a result of any sale or purchase
of product taken by Buyer in anticipation of Seller delivering the Products
hereunder, provided Buyer has taken commercially reasonable steps to avoid the
loss.  Seller shall not be liable for any
loss resulting from Seller discontinuing operations related to a position taken
by Buyer for delivery more than 90 days from the date of entering into a sale
without the consent of Seller .


 


16.           GOVERNMENTAL
ACTION.  The parties recognize that
the value of the Products could change as a result of various governmental
programs, be they foreign or domestic. 
In the event that a significant value change of the Products as a result
of any such governmental program, Buyer may request re-negotiation of the
contract price for the Products by providing written notice to Seller.  Buyer shall be required to demonstrate that
the value of the Products has significantly changed in the market.  Should such a change take place, the parties
agree to negotiate, in good faith, a revised sale price for the Products.  If, after a good faith effort, the parties
are unable to agree on a new price within the 90 day period immediately
following notice to the other party, then in such event and notwithstanding the
other provisions hereof, Buyer may terminate this Agreement upon 90 days prior
written notice.


 


17            CAR
LEASES.  Seller acknowledges that Buyer
has entered into railcars leases for the purpose of shipping DDGS produced at
the Plant, namely (i) the lease for 50


 


8





















 


railcars between
Trinity Industries Leasing Company and Buyer dated October 13, 2005 and (ii) the
lease for 50 railcars between Chicago Freight Car Leasing Co. and Buyer dated October 19,
2005 (the “Leases”).  Seller agrees that
it shall fully reimburse Buyer for all payments made by Buyer under the terms
of the leases and shall indemnify Buyer from any and all liability under such
leases including the payment of rent or for damage to any of the cars.  Buyer does hereby assign the Leases to Seller
(and Seller does hereby assume liability therefor) which assignment shall take
effect upon the termination of this Agreement unless such termination is as a
result of it being terminated to permit Seller to participate in the Pooled
Marketing Arrangement in which case the responsibility with respect to the cars
shall be governed by the Pooled Marketing Agreement.


 


18.           RELATIONSHIP
OF PARTIES.  This Agreement creates
no relationship other than that of buyer and seller between the parties
hereto.  Specifically, there is no
agency, partnership, joint venture or other joint or mutual enterprise or
undertaking created hereby.  Nothing
contained in this Agreement authorizes one party to act for or on behalf of the
other and neither party is entitled to commissions from the other.


 


19.           MISCELLANEOUS.


 


A.            This
writing is intended by the parties as a final expression of their agreement and
a complete and exclusive statement of the terms thereof.


 


B.            No
course of prior dealings between the parties and no usage of trade, except
where expressly incorporated by reference, shall be relevant or admissible to
supplement, explain, or vary any of the terms of this Agreement.


 


C.            Acceptance
of, or acquiescence in, a course of performance rendered under this or any
prior agreement shall not be relevant or admissible to determine the meaning of
this Agreement even though the accepting or acquiescing party has knowledge of
the nature or the performance and an opportunity to make objection.


 


D.            No
representations, understandings or agreements have been made or relied upon in
the making of this Agreement other than as specifically set forth herein.


 


E.             This
Agreement can only be modified by a writing signed by all of the parties or
their duly authorized agents.


 


F.             The
paragraph headings herein are for reference purposes only and shall not in any
way affect the meaning or interpretation of this Agreement.


 


G.            This
Agreement shall be construed and performed in accordance with the laws of the
State of South Dakota.


 


H.            The
respective rights, obligations and liabilities of the parties under this
Agreement are not assignable or delegable without the prior written consent of
the other


 


9





















 


party.


 


I.              Notice
shall be deemed to have been given to the party to whom it is addressed
ninety-six (96) hours after it is deposited in certified U.S. mail, postage
prepaid, return receipt requested, addressed as follows:


 


	
  Buyer:

  	
  Commodity
  Specialists Company

  
	
   

  	
  310 Grain
  Exchange Bldg.

  
	
   

  	
  400 South Fourth
  Street

  
	
   

  	
  Minneapolis,
  Minnesota 55415

  
	
   

  	
  ATTN: Steve J.
  Markham

  
	
   

  	
   

  
	
  Seller:

  	
  Dakota Ethanol
  LLC

  
	
   

  	
  P.O. Box
  100

  
	
   

  	
  Wentworth, SD
  57075

  
	
   

  	
  ATTN: Scott A.
  Mundt

  



 


IN WITNESS
THEREOF, the parties have caused this Agreement to be executed the day and year
first above written.


 


	
   

  	
  COMMODITY SPECIALISTS
  COMPANY

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Phil Lindau, Jr.

  	
   

  
	
   

  	
  Title:
  Co-President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DAKOTA ETHANOL
  LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Brian Woldt

  	
   

  
	
   

  	
  Title: Chairman,
  Board of Managers

  
					



 


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