Document:

Exhibit 10.3

 

NATURAL GAS SERVICES AGREEMENT

 

This
Natural Gas Services Agreement (“Agreement”) is made and entered into with
effect as of the 23rd day of May, 2006 by and between BP Canada Energy
Marketing Corp., (“BP”) and Otter Tail Ag Enterprises, LLC (“Customer”). BP and
Customer are also referred to individually as “Party” and collectively as “Parties”.

 

WHEREAS:

 

Customer
is in the process of developing an ethanol plant near the City of Fergus Falls,
Minnesota, that, when constructed, will be an end user of natural gas behind
the citygate of Great Plains Natural Gas Company (the “Local Distribution
Company” or “LDC”) receiving deliveries through the pipeline system of Viking
Gas Transmission Company and/or such other pipeline that is capable of delivering
gas to the citygate (the “Delivery Pipeline”);

 

Customer may from time to
time contract for firm transportation capacity on the Delivery Pipeline, (“Customer
Transportation Capacity”), such capacity contracted for will be set out in
Schedule A, as such Schedule is amended from time to time by the parties;

 

Customer wishes BP to manage
the procurement of a reliable, competitively priced supply of natural gas
delivered to the appropriate Delivery Pipeline receipt point and/or citygate;

 

BP and Customer have entered
into a Base Contract for Short-Term Sale and Purchase of Natural Gas between BP
and Customer, dated May 1st, 2006, (a copy of which is attached hereto as Exhibit A)
pursuant to which BP delivers and sells, or may deliver and sell, gas to Customer
and in accordance with the terms more particularly set out therein (“Gas
Purchase and Sale Agreement”);

 

BP has the capability and
resources to provide natural gas supply, transportation management, and other
related services to Customer as contemplated herein.

 

NOW THEREFORE, in consideration of the premises and mutual covenants and conditions
contained in this Agreement, the parties agree as follows:

 

Management
Services

 

1.             BP shall provide Customer with management
services (“Management Services”) that shall consist of:

 

	
  (i)

  	
  Upon Customer’s request, assisting Customer in its
  request for proposal (“RFP”) processes for natural gas for its ethanol
  plant(s) which utilizes natural gas. In the event Customer submits
  written request(s) for assistance with more than two (2) RFP
  processes during any

  

 

1

 

	
   

  	
   

  
	
   

  	
  calendar month, Customer
  shall provide BP a written prioritization of such requests and BP shall use
  reasonable commercial efforts to comply with such requests. The parties agree
  that a customary process through which BP may support Customer pursuant to
  this RFP service is as follows:

  
	
   

  	
   

  
	
   

  	
  (A)

  	
  BP shall assist Customer
  in the preparation of the RFP and supporting data for distribution to
  potential suppliers.

  
	
   

  	
   

  	
   

  
	
   

  	
  (B)

  	
  Customer shall mail the
  RFP to potential suppliers using Customer letterhead and shall request that
  responses to the RFP be sent directly to Customer.

  
	
   

  	
   

  	
   

  
	
   

  	
  (C)

  	
  Customer shall review the
  RFP responses independently and make the final decisions on the
  winner(s) of the RFP, subject to BP’s right to match any bid pursuant to
  the right to match provided to BP pursuant to Section 2 of this
  Agreement.

  
	
   

  	
   

  	
   

  
	
   

  	
  (D)

  	
  All agreements for third
  party gas supply shall be entered into under contracts that are in place
  between Customer and such third party supplier.

  
	
   

  	
   

  	
   

  
	
   

  	
  In assisting Customer with
  its RFP processes, BP does not and shall not guarantee or make any
  representation that gas supply is or shall be obtainable under any
  circumstances, that any gas supply may be obtained at any price, or that any
  gas supply is for the best available pricing or other terms of service.
  Customer represents and warrants to BP that, in selecting any third party bid
  through an RFP process, and entering into any contract or transaction with
  such a third party, that it is acting for its own account, after having made
  its own independent decisions with respect to such selection or agreement,
  and that it is capable of understanding and assuming, and understands and
  assumes, the obligations and risks associated with such selection and
  transaction.

  
	
   

  	
   

  
	
  (ii)

  	
  assisting Customer in
  researching, identifying, and evaluating appropriate transportation routings
  with respect to Customer’s gas supply and plant. Customer acknowledges that
  BP does not and shall not guarantee or make any representation that
  transportation of any Customer gas is or shall be obtainable under any
  circumstances, that any such service may be obtained at any price, or that
  any such transportation is for the best available pricing or other terms of
  service. Customer represents and warrants to BP that, in making any decisions
  with respect to transportation routings or entering into any agreement with a
  third party for transportation or storage service, that it is acting for its
  own account, after having made its own independent decisions with respect to
  such routings and agreement, and that it is capable of understanding and
  assuming, and understands and assumes, the obligations and risks associated
  with such agreements.

  

 

2

 

	
  (iii)

  	
  managing,
  coordinating and monitoring the day-to-day operations of the Customer
  Transportation Capacity in accordance with and subject to the posted tariffs
  of the Delivery Pipeline and the LDC, including, without limitation, managing
  daily delivery and receipt point nominations and resolving any imbalance or
  capacity curtailment issues that may arise in respect of the Customer
  Transportation Capacity;

  
	
   

  	
   

  
	
  (iv)

  	
  as necessary, coordination
  and communication of daily gas nominations between Customer and third party
  gas suppliers;

  
	
   

  	
   

  
	
  (v)

  	
  assisting
  Customer in mitigating its cost of Customer Transportation Capacity by
  identifying any such Customer Transportation Capacity not necessary to meet
  Customer’s requirements and effecting, at the direction and approval of
  Customer, for the credit of Customer and subject to applicable regulatory
  requirements, the short term or long term release of such Customer
  Transportation Capacity to secondary capacity markets, including to BP;

  
	
   

  	
   

  
	
  (vi)

  	
  as
  requested by Customer, assisting Customer in analyzing and solving problems
  relating to supply procurement, transportation, dispatching and accounting
  and in negotiations with the Delivery Pipeline and/or LDC for the purpose of
  receiving discounted pipeline transportation and/or distribution rates;

  
	
   

  	
   

  
	
  (vii)

  	
  receiving,
  confirming the accuracy of, and paying (subject to Section 5 of this
  Agreement), on behalf of Customer, all statements and invoices payable by
  Customer in respect of the Customer Transportation Capacity, and to the
  extent BP is Customer’s supplier for any portion of the gas supply being
  transported via the Customer Transportation Capacity, all LDC statements and
  invoices payable by Customer associated with such supply;

  
	
   

  	
   

  
	
  (viii)

  	
  providing Customer with
  relevant publicly available current and historical Gas industry market
  information to assist Customer in making cost effective Gas purchasing
  decisions;

  
	
   

  	
   

  
	
  (ix)

  	
  monitoring,
  reporting and communicating to Customer possible risk management
  opportunities as to the forward price of gas and, if agreed to by Customer,
  executing any hedging activities for Customer with approved counterparties;
  and,

  
	
   

  	
   

  
	
  (x)

  	
  advising Customer in a
  timely manner of any critical day events on the Delivery Pipeline or any
  other industry developments or circumstances

  

 

3

 

of
which BP has become aware that may have a material effect on the supply or
transportation of gas to Customer.

 

2.             Right to Match (“RTM”).
BP shall have the right, but not the obligation, to participate as a bidder in
any Customer RFP, provided however, that in any event, BP shall have the right
to match any bid made by any third party supplier and selected by Customer as
the potential winning bid. Customer shall present BP with the bid(s) selected
by it in the RFP process as the potential winning bid(s), and BP shall have one
Business Day from the date it is presented with the bid(s) to be
matched(the “RTM Deadline”) to notify Customer that it will match the bid(s) presented
to it as the potential winning bid(s). If BP does not notify Customer by the
RTM Deadline, then BP shall be deemed to have waived its RTM for such RFP. Any
bids that BP matches hereunder shall be effected through a gas purchase and
sale transaction(s) made and to be performed in accordance with the terms
of the Gas Purchase and Sale Agreement.

 

3.             In consideration of the Management Services,
Customer shall pay BP US $0.015 per Decatherm on all natural gas scheduled to
be delivered to Customer’s city gate by reference to all Customer’s nominations
each month during the period of May 1, 2006 through May 31, 2011 and
during each month thereafter for which this Agreement continues pursuant to Section 12.
(“Monthly Management Fee”).

 

4.             Customer shall provide BP with all agreements
undertaken by Customer for Customer Transportation Capacity, including any new
agreements that Customer may undertake from time to time and any amendments
thereto. BP shall maintain ongoing familiarity with the terms of such
agreements, including the pipeline tariffs applicable to the Customer
Transportation Capacity, and shall use all reasonable efforts to operate such
agreements so as to achieve the maximum benefit for Customer. Customer shall
also provide BP with all information required by BP in respect of third party
supply in order to provide the services set out in Section 1(iv),
including, without limitation, the name and particulars of each third party,
the third party Duns number and any applicable upstream contract numbers.

 

5.             On or before the date on which BP is required
to pay pipeline reservation charges for Customer Transportation Capacity, or
LDC charges, pursuant to Section 1(vii), Customer shall reimburse BP the
full amount of such payment. Customer’s payment to BP of such amount in
accordance with the foregoing is a condition precedent to BP’s obligation under
Section 1(vii) to pay any statements or invoices payable by Customer
in respect of Customer Transportation Capacity or LDC charges on Customer’s
behalf.

 

6.             BP and Customer shall work together to
minimize any penalties or forfeitures that may arise in respect of the Customer
Transportation Capacity or other

 

4

 

transportation
capacity that may be utilized for the purposes of this Agreement. Each Party
shall be responsible for Imbalance Charges that result from the actions, errors
or omissions of that Party. BP shall not be responsible for Imbalance Charges
to the extent that BP was acting reasonably on information provided by Customer
or on instructions from Customer. Customer shall not be liable for Imbalance
Charges incurred as a result of BP failing to nominate, schedule and/or confirm
the quantity of Scheduled Gas under Customer’s Transportation Capacity in
accordance with Customer’s instructions. In this paragraph, “Imbalance Charges”
means any fees, penalties, costs or charges (in cash or in kind), assessed by
Delivery Pipeline in accordance with its tariff, for failure to satisfy
Delivery Pipeline’s balancing, nomination or other scheduling requirements.

 

7.             Subject to Section 5, billing and
payment in respect of the Monthly Management Fee and any other amounts owing to
BP by Customer or to Customer by BP in respect of Management Services provided
hereunder [including, without limitation, any amounts owing by Customer to BP
with respect to the Customer Transportation Capacity or LDC invoices to be paid
by BP on behalf of Customer under Section 1(vii)] shall be governed by the
terms set out in Section 7 of the Gas Purchase and Sale Agreement, applied
mutatis mutandis.

 

8.             Customer shall take all actions necessary to
designate BP as its agent to the extent necessary to enable BP to perform its
obligations under Sections 1(iii), 1(iv), 1(v), 1(vi) and 1(vii).

 

9.             Except for any obligation to make payment
pursuant to Sections 3, 5, and 7, if either Party is rendered unable, by reason
of an event of Force Majeure, to perform, wholly or in part, any obligation or
commitment included in or related to the Management Services then, upon such
Party giving to the other Party written notice with full particulars of the
event of Force Majeure, such obligation or commitment shall be suspended to the
extent and for the period of the Force Majeure event. The term “Force Majeure”,
as used in this Section 9, shall have the meaning set out in the Gas
Purchase and Sale Agreement.

 

Additional
Pipeline or Storage Capacity

 

10.           Subject to mutual agreement on terms in each
case, BP may, at its sole discretion, contract with Customer for Customer to
utilize BP’s transportation or storage capacity on the Delivery Pipeline.

 

11.           Any agreements reached pursuant to Section 10
of this Agreement shall be subject to all applicable laws and regulations,
including without limitation, the Federal Energy Regulatory Commission’s (FERC’S)
rules and regulations respecting capacity release.

 

5

 

Term

 

12.           This Agreement shall be in effect during the
period of May 1, 2006, through April 30, 2011, and shall continue on
a year to year basis thereafter unless terminated on not less than sixty (60)
days written notice given by one of the Parties to the other, provided that:

 

(i)            any termination shall occur at the end of a
month;

 

(ii)           any obligation to make payment hereunder
shall survive the termination of this Agreement; and,

 

(iii)          such termination shall not apply to gas purchase arrangements made and
then in effect pursuant to the Gas Purchase and Sale Agreement.

 

13.           So long as this Agreement is in effect, the
Gas Purchase and Sale Agreement may not be terminated by either Party pursuant
to Section 11 thereunder.

 

14.           If an Early Termination Date is declared
under Section 10.3 of the Gas Purchase and Sale Agreement, this Agreement
shall terminate s of such Early Termination Date, subject to Section 12(i) and
(ii).

 

15.           If an Event of Default as defined in Section 10.2
of the Gas Purchase and Sale Agreement occurs with respect to either party; or
if either party shall fail to make any payment when due under this Agreement on
or before the second Business Day following notice that such payment is due or
fail to perform any material covenant hereunder and such failure is not
remedied with 5 Business Days following notice that such failure exists, then
the other party shall, subject to Section 12(i) and (ii) have
the right to terminate this Agreement by providing at least one Business Day
written notice to the other party. For the purpose of this Agreement Business
Day shall have the meaning given to it under the Gas Purchase and Sale
Agreement.

 

16.           Termination of this Agreement under Sections
14 or 15 above shall not preclude or limit the non-defaulting party from
pursuing any other remedy available at law or in equity in respect of any breach
of this Agreement.

 

Miscellaneous

 

17.           Any notice, demand, request, or invoice or
payment required or permitted to be made hereunder shall be deemed given or
made when received by the party to whom it is addressed at the addresses set
out for the purpose in the Gas Purchase and Sale Agreement.

 

6

 

18.           If any provision in this Agreement is
determined to be invalid, void or unenforceable by any court having
jurisdiction, such determination shall not invalidate, void, or make
unenforceable any other provision, agreement or covenant of this Agreement; and
the parties agree to negotiate in good faith a replacement to such invalid,
void or unenforceable provision and/or any other amendment as may be necessary to
ensure that this Agreement as a whole reflects the original intention of the
parties.

 

19.           No waiver of any breach of this Agreement
shall be held to be a waiver of any other or subsequent breach.

 

20.           The Parties expressly acknowledge and agree
that it is neither the purpose of this Agreement nor their intent to create a
partnership, joint venture contract or company, association or trust, fiduciary
relationship or partnership between them and nothing herein shall be construed
to create any such relationship between the parties. Except as expressly
provided herein, neither Party shall have any authority to act for or assume
any obligations, or responsibilities on behalf of, the other Party and neither
shall Party shall be liable for the debts or obligations of the other. IN NO EVENT WILL EITHER PARTY BE LIABLE UNDER THIS
AGREEMENT, WHETHER IN CONTRACT, IN TORT (INCLUDING NEGLIGENCE AND STRICT
LIABILITY), OR OTHERWISE, FOR INCIDENTAL, CONSEQUENTIAL, SPECIAL, OR PUNITIVE
DAMAGES.

 

21.           This Agreement shall be binding upon and
inure to the benefit of the successors, assigns, personal representatives, and
heirs of the respective parties hereto. No assignment of this Agreement, in
whole or in part, will be made without the prior written consent of the
non-assigning party, which consent will not be unreasonably withheld or
delayed; provided, either party may transfer its interest to any parent or
affiliate by assignment, merger or otherwise without the prior approval of the
other party. Upon any transfer and assumption, the transferor shall not be
relieved of or discharged from any obligations hereunder.

 

22.           This Agreement sets forth all understandings
between the parties as of the effective date herein respecting each transaction
subject hereto and any prior contracts, understandings and representations,
whether oral or written, relating to such transactions are merged into and
superseded by this Agreement. This Agreement may be amended only by a writing
executed by both Parties.

 

23.           The interpretation and performance of this
Agreement shall be governed by the laws of Minnesota excluding, however, any
conflict of laws rule that would apply the law of another jurisdiction.

 

24.           This Agreement and all provisions herein will
be subject to all applicable and valid statutes, rules, orders and regulations
of any Federal, State, or local governmental authority having jurisdiction over
the parties, their facilities, or gas supply.

 

7

 

25.           Neither Party shall disclose directly or indirectly without the prior
written consent of the other Party the terms of this Agreement, any
Confidential Information (as defined herein) of a Party, or any transaction
contemplated hereunder to a third party (other than the officers, governors, directors,
employees, lenders, royalty owners, counsel, accountants and other agents of
the Party, or prospective purchasers of all or substantially all of a Party’s
assets or of any rights under this Agreement, provided such persons shall have
agreed to keep such terms confidential) except (i) in order to comply with
any applicable law, order, regulation, or exchange rule, (ii) to the
extent necessary for the enforcement of this Agreement and (iii) to the
extent necessary to implement and perform this Agreement. Each party shall
notify the other Party of any proceeding of which it is aware which may result
in disclosure of the terms of this Agreement (other than as permitted
hereunder) and use reasonable efforts to prevent or limit the disclosure.
Subject to Section 20, the Parties shall be entitled to all remedies
available at law or in equity to enforce or seek relief in connection with this
confidentiality obligation. The terms of this Agreement shall be kept
confidential by the Parties hereto for two years from the expiration or
termination of this Agreement any Confidential Information disclosed during the
term shall be kept confidential for two years from the date such information
was disclosed.

 

a.          “Confidential Information” shall mean all
trade secret, proprietary or confidential information, including, without
limitation, business plans, strategies, financial data, specifications,
production information, equipment details, process information, intellectual
property and other information of a confidential, trade secret, or proprietary
nature, received or generated during the course of the performance of this Agreement
including 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.

 

b.         Reasonable steps shall be taken and
maintained by each Party to protect the Confidential Information of the other
party.

 

c.          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, the Parties acknowledge that their representatives will form and
retain mental impressions based upon the Confidential Information disclosed to
each Party and it is not the intent of the Parties that the non-use
restrictions contained in this Agreement will prevent these representatives
from performing their other work assignments for their respective employers.

 

8

 

d.         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.

 

In
the event that disclosure is required by a governmental body or applicable law,
the Party subject to such requirement may disclose the material terms of this
Agreement to the extent so required, but shall promptly notify the other Party,
prior to disclosure, and shall cooperate (consistent with the disclosing Party’s
legal obligations) with the other Party’s efforts to obtain protective orders
or similar restraints with respect to such disclosure at the expense of the
other Party.

 

26.           Each Party to this Agreement represents and warrants that it has full
and complete authority to enter into and perform this Agreement. Each person
who executes this Agreement on behalf of either party represents and warrants
that it has full and complete authority to do so and that such Party will be
bound thereby.

 

27.           Customer acknowledges that BP is not a “utility” as such term is used
in 11 U.S.C. Section 366, and Customer agrees to waive and not to assert
the applicability of the provisions of 11 U.S.C. Section 366 in any
bankruptcy proceeding involving Customer.

 

28.           This Agreement may be executed in
counterparts, all of which together shall constitute one agreement binding on
all the Parties.

 

29.           BP will perform the services contemplated by
this Agreement in a diligent, professional and workmanlike manner and in
compliance with all applicable laws, rules and regulations.

 

INTENDING TO BE LEGALLY BOUND, the Parties have executed this Agreement
through their duly authorized representatives effective as of the date
specified above.

 

	
  BP CANADA
  ENERGY MARKETING CORP.

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ SCOTT H. SMITH

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
  SCOTT H. SMITH

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  ASS’T SECRETARY

  	
   

  

 

9

 

	
  OTTER TAIL AG ENTERPRISES, LLC

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Jerry Larson

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
  Jerry Larson

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  President

  	
   

  

 

10

 

SCHEDULE A

 

Attached to and made a part of that certain Natural Gas Services
Agreement dated May 23rd, 2006 by and between

BP Canada Energy Marketing Corp., and Otter Tail Ag Enterprises, LLC

 

Customer Transportation Capacity:

 

[None provided as of the date of this Agreement]

 

 

EXHIBIT A

 

Base Contract for
Short-Term Sale and Purchase of Natural Gas dated May 1st, 2006 by and between

BP Canada Energy Marketing Corp., and Otter Tail Ag Enterprises, LLC

 

[See Attached]Exhibit 10.4

 

EMPLOYMENT
AGREEMENT

PLANT
MANAGER

 

This Employment Agreement (“Agreement”)
is made and effective the 30th day of May, 2006, by and between Otter Tail Ag
Enterprises, LLC, a Minnesota limited liability company (“Company”), and B.
Gunner Greene, a Kentucky resident (“Greene”).

 

RECITALS

 

WHEREAS, Company is a limited
liability company organized for the purpose, among other things, of developing,
constructing, and operating an ethanol plant and associated operations, with
its principal place of business near Fergus Falls, Minnesota; and

 

WHEREAS, Greene is experienced in
operation and plant management of ethanol enterprises and seeks to be employed
by Company as Plant Manager, and Company seeks to hire Greene as Plant Manager;
and

 

WHEREAS, the Company and Greene
believe it is in their mutual best interests to enter into an agreement
regarding their mutual obligations relative to Greene’s employment with the
Company.

 

NOW, THEREFORE, the parties
hereto agree as follows:

 

1.     EMPLOYMENT.

 

Company agrees to employ Greene
as its Plant Manager, commencing on January 1, 2007, or such earlier or
later date as agreed to by the parties (the “Start Date”). Greene hereby accepts
such employment commencing on the Start Date, and agrees to be employed with the
Company in accordance with the terms and conditions of this Agreement and the
terms of employment applicable to regular employees of Company, including the
terms and conditions to be set forth in the Company’s Human Resources Policy
Manual to be developed by the Company (the “Handbook”). In the event of any
conflict or ambiguity between the terms of this Agreement and terms of
employment applicable to regular employees, the terms of this Agreement shall
control.

 

Prior to the Start Date, as a
condition of employment, Greene shall complete such pre-employment
applications, screening and background checks as required by Company, with
results satisfactory to Company.

 

Prior to the Start Date,
commencing September 1, 2006, Greene and Company will enter into a
consulting services agreement under which Greene will provide consulting
services to the Company on an independent contractor basis at the rate of $6,667.00
per month, through December 31, 2006. In addition, Contractor will be
reimbursed for his COBRA costs for his individual health and hospitalization
insurance and for the cost of Worker’s Compensation equivalent coverage, during
the term of the independent contractor services agreement. Any activity by
Greene prior to September 1, 2006, will be voluntary services. The parties
will enter into the independent contractor services agreement on or before July 1,
2006.

 

 

The Company will provide a one
time relocation assistance payment to Greene. The amount of the relocation
payment will be as agreed to by the parties, it being contemplated that the
payment will not exceed $3,500.00 and is intended to assist Green with the
expense and out-of-pocket costs incurred by Green in relocating to Fergus
Falls, Minnesota area.

 

2.     DUTIES
OF GREENE.

 

The
duties of Greene shall include the performance of all of the duties typical of
the position held by Plant Manager of an ethanol plant, to be described in the
job description of Plant Manager, and such other duties and obligations as may
be assigned or directed by the Company’s Board of Governors (the “Board”) and
or the Chief Executive Officer of the Company.  Greene shall perform all his duties in a
professional, ethical and businesslike manner.

 

Greene’s primary work location
will be at the Company’s Fergus Falls Ethanol Plant, but training and other
time maybe spent at other locations, and travel may be required to fulfill the
responsibilities of the Plant Manager position. Greene’s employment is
conditioned upon Greene relocating to the Fergus Falls, Minnesota area and
having his residence within a 20-minute drive to the Company’s plant. Greene
will report to the Company’s Chief Executive Officer.

 

Greene agrees to serve the
Company faithfully and to the best of his abilities, and to devote his full
time, attention, and efforts to the business and affairs of the Company during
the term of his employment with the Company. Greene will not, during the term
of this Agreement or his employment with the Company, directly or indirectly
engage in any other part time or full time employment or business, either as an
employee, employer, consultant, principal, officer, director, advisor, or in
any other capacity, either with or without compensation, without the prior
written consent of the Board. Greene represents to the Company that he is under
no contractual commitments that are inconsistent with his obligations set forth
in this Agreement or that would preclude his employment with the Company.

 

3.     COMPENSATION.

 

Greene’s salary during the term
of his employment with the Company under this Agreement will be payable in
installments according to the Company’s regular payroll schedule. Greene’s base
salary for the following periods during the term of this Agreement shall be as
follows (for any period, the “Base Salary”):

 

Start
Date – December 31, 2007: $80,000.00

January l,
2008 - December 31, 2008: $83,000.00

 

If the Start Date does not fall
on January 1, 2007, then the Base Salary for the first annual period of
this Agreement shall be pro rated based upon actual calendar days during the
first employment period. Base Salary shall accrue and be payable on a pro rata
basis for days of service during each Base Salary period. On any renewal of
this Agreement, Greene’s Base Salary shall be evaluated and adjusted as
appropriate based upon a survey of comparable positions at comparable
companies, comparably qualified and experienced persons in the applicable job
market, as well as upon Greene’s performance as evaluated by the Board and the
Company’s CEO.

 

2

 

After the Company’s ethanol plant
is operational and meets performance guarantees, in addition to the Base
Salary, Greene shall have the opportunity to earn annual incentive compensation
awards, which shall first be considered in November, 2008. The maximum
incentive compensation payable for any one period shall not exceed 40 percent
(40%) of Greene’s Base Salary for the 2008 period in which the incentive
compensation is being considered. The incentive compensation plan will be developed
by mutual agreement of Greene and the Search Committee of the Company’s Board,
to be approved by the full Board. The incentive compensation plan will be
developed, agreed upon and set forth in a separate document in order to be put
in place and effective as of the Start Date.

 

It is contemplated that the
incentive compensation plan will establish goals in various areas of Greene’s
individual performance. There will be an annual performance review of Greene to
determine the award, conducted by the CEO and the Board of Governors, which
will consider among the specific incentive plan goals such things as employee
satisfaction, customer satisfaction, vendor relations, public relations,
positive working relationship with the Board of Governors and CEO, attitude,
creativity, achievement of short-term goals, and other contributions beyond
normal expectations. The incentive compensation plan will include a required
level of financial performance to be attained by the Company before payment
eligibility occurs. It is contemplated that the incentive compensation plan
will set forth goals to measure the Company’s plant performance, in addition to
Greene’s individual performance, based upon criteria to be mutually agreed upon
by Greene and the Company to be set forth on a Schedule A to this Agreement, to
include concepts such as:

 

Operations and efficiency

Plant safety (no loss time
accidents)

Days of production*

Process guarantees and Gallons
beyond performance guarantees

BTU/gal

KW/Gal

Yield*

Compliance with regulations,
permits, etc

SOPs (standard operating
procedures)

Retention/cross training of
employees

Maintenance/parts inventory

Plant cleanliness

Identification of new technology
and implementation

 

*Annual goals divided or measured by monthly
results

 

The incentive compensation review
will be conducted on or before November 30 for each eligibility period. In
connection with each incentive compensation review, Greene will be responsible
to submit to the Board and the CEO a summary of achievements on goals for
consideration by the Board and the CEO. The Board and the CEO will be charged
with reviewing, determining, and awarding an appropriate incentive compensation
payment.

 

It is contemplated that the incentive
compensation plan will include an opportunity for Greene to purchase member
units of the Company at a per-unit cost of $2.00 for up to 5,000 units.  The levels of eligibility for such member
unit purchase options granted to Greene are

 

3

 

generally described on the attached Schedule “A.”
Greene’s member unit purchase option agreement will be included within the
written incentive compensation plan for Greene. It is contemplated that Greene’s
option to purchase is conditioned upon the option being exercised within thirty
(30) days of the option period, and Greene must be employed with the Company to
exercise his options. The member unit purchase option plan will provide that
Greene’s first option to purchase will be December 1, 2008. It is
contemplated that Greene’s member unit purchase option plan will include an
option by the Company and right of first refusal to repurchase Greene’s units
at fair market value as determined by comparable sales of the Company’s units
at the time of the exercise of option, in the event Greene separates from
employment.

 

Provided Greene meets the
standard requirements of qualifying to be a member of the Company, as a
one-time signing bonus, Greene will receive a profit’s interest on 5,000 Class A
member units of the Company at a zero basis, with ownership of said units to
vest at 20% per year as follows (the “Vesting Dates”):

 

January 1, 2007 – 1,000
Units Vest

January 1, 2008 – 1,000
Units Vest

January 1, 2009 – 1,000
Units Vest

January 1, 2010 – 1,000
Units Vest

January 1, 2011 – 1,000
Units Vest

 

Vesting is contingent upon Greene
being employed with the Company on any of the Vesting Dates. Until the Vesting
Date, Greene shall be allocated all profits or losses associated with the 5,000
Class A member units of the Company. The arrangements relative to the
signing bonus units shall be set forth in a separate agreement between the
parties.

 

A precondition of any
Compensation to be paid under this Agreement is Greene’s performance of his
duties, compliance with this Agreement, and compliance with the regulations
governing plant operations.

 

4.     BENEFITS.

 

In addition to the compensation
described in Section 3 of this Agreement, Greene will be entitled to
certain additional benefits afforded to the Plant Manager position. Benefits
afforded are generally subject to being altered, modified, discontinued,
amended, or otherwise changed by the Company.

 

A.     Vacation/Sick
Leave. Greene will be entitled to paid time off and extended illness bank
benefits or vacation/sick leave benefits as will be set forth in the Handbook.
It is contemplated that Greene will be entitled to two weeks of vacation per
365 day employment period, and up to six days of sick leave per 365 day
employment period, or their equivalent in PTO/EIB.

 

B.     Health
and Hospitalisation Insurance. Greene shall be afforded health and hospitalization
insurance coverage pursuant to the Company’s plans afforded other employees, with
the Company paying health and hospitalization insurance premiums for Greene’s
Individual coverage. Depending on the health and hospitalization plan selected
by Company, family and

 

4

 

dependent coverage might be available for
Greene, with premium payments for family coverage to be determined at a later
date depending on plan selected.

 

C.     Other
Benefits. Greene shall also be afforded the right to participate in any
other benefit plans now or later available to other Company employees.

 

D.     401K.
Greene shall be entitled to participate in Company’s 401K savings plan, to be
developed, on the basis of the same availability to other Company employees.

 

E.     Expense
Reimbursement. Greene shall be entitled to reimbursement for all reasonable
expenses, including travel and entertainment, incurred by Greene in the
performance of Greene’s duties pursuant to policies adopted by the Board.
Greene will maintain records and written receipt as required by the Company
policy and reasonably requested by the Board of Governors to substantiate such
expenses.

 

F.     Miscellaneous.
Company will provide Greene with a cellular phone and service plan, personal
computer, PDA, and such other equipment and tools as are reasonably necessary for
Greene to perform Greene’s duties. Company shall reimburse Greene or pay dues
or fees incurred by Greene in ethanol industry related programs, organizations,
and education programs as the Company may, from time to time, authorize Greene
to participate in.

 

5.     TERM AND
TERMINATION.

 

A.     Term.
The term of Greene’s employment with the Company pursuant to this Agreement
shall commence on the Start Date, and it shall continue in effect for a period terminating
on December 31, 2008 (the “Termination Date”), unless earlier terminated
as provided in this Agreement. On the Termination Date, this Agreement and
Greene’s employment with the Company shall terminate without any further
action, but may be renewed or extended upon the mutual written agreement of
Greene and Company. In the ninety- (90-) day period preceding the Termination
Date, or earlier as agreed to by the parties, Company and Greene will engage in
discussions regarding extension of this Agreement and Greene’s employment with
the Company.

 

B.     Termination
By Company Without Cause. Notwithstanding any provision of this Agreement
or applicable law to the contrary, Greene’s employment with the Company and
this Agreement may be terminated by the Company, acting by and through the
Board, at any time prior to the Termination Date without Cause (as that term is
defined herein), in its sole discretion and at its election, effective
immediately upon written notice to Greene or such later date as determined by
the Board. In the event of such termination after January 31, 2007, the
Company shall pay to Greene $20,000.00 (the “Severance Payment”). By agreement
of the parties, in the event of such termination without Cause (as that term is
defined herein), in addition to any pro rated portion of the Base Salary then
earned, the Severance Payment shall be the sole and exclusive liability of
Company to Greene, and Greene hereby waives and releases the Company from any
further or other claims by Greene against the Company. Greene shall not be
entitled to any further or other payments from the Company, including, without
limitation, any incentive compensation payment. As a condition to receiving the
Severance Payment, Greene will execute and deliver to Company a release of all
claims against Company, its officers, governors,

 

5

 

employees, affiliates, or other agents or
representatives from any and all legal and equitable claims, of any nature
whatsoever.

 

C.     Termination
By Employee. Greene’s employment with the Company and this Agreement may be
terminated by Greene at any time prior to the Termination Date, effective upon
one hundred eighty (180) days’ prior written notice to the Company. This
Agreement and Greene’s employment with the Company will be deemed terminated by
Employee upon the occurrence of any of the following events: (i) the death
of Greene; or (ii) Greene’s inability to carry on the essential functions
of his usual and customary duties, because of illness or sickness, for a period
of an aggregate three (3) months within any one (1) year period. In
the event of termination pursuant to this section, no Severance Payment will be
payable and Company’s sole obligation will be to pay Greene’s salary at the
pro-rated Base Salary to the termination date included in Greene’s original termination
notice or the date of death or disability.

 

D.     Termination
by Company for Cause. In the event that Greene is in breach of any
obligation owed Company in this Agreement, or engages in any of the following
conduct which shall constitute “Cause,” then Company shall have the right, at
its discretion, to terminate this Agreement and Greene’s employment with the
Company upon five (5) days’ written notice to Greene.

 

Grounds for termination of this
Agreement and Greene’s employment with the Company, for Cause, includes:

 

i.        Greene habitually and willfully neglects the
duties to be performed by him;

 

ii.       Greene engages in any conduct which is
dishonest, or disloyal to Company, or materially damages the reputation or
standing of the Company;

 

iii.      Greene is convicted of any crime involving theft or dishonesty, or
comprising a felony level offense;

 

iv.     Greene violates material Company rules,
regulations, directives, or policies;

 

v.      Greene engages in conduct unbecoming a Plant
Manager which materially impairs the Company’s operations or Greene’s
effectiveness in his work;

 

vi.     Other good and sufficient grounds
constituting similar serious misconduct.

 

Except for termination on the
basis of Subdivisions D(ii), D(iii), or D(iv), Greene’s employment shall not be
terminated upon any of the above specified grounds constituting Cause, unless
he shall have failed to correct a deficiency to the satisfaction of Company, at
its discretion, after having been given written notice of the specified items
of nonperformance and a reasonable amount of time, not to exceed thirty (30)
days within which to correct the claimed failure to perform. Any recurrence of
conduct for which notice was previously given shall constitute grounds for
immediate termination.

 

6

 

In event of termination of this
Agreement pursuant to this section, Company’s sole obligation will be to pay
Greene’s then earned salary at the pro-rated Base Salary to the termination
date, and no Severance Payment will be due or owing to Greene.

 

6.     BOARD
MEETING ATTENDANCE.

 

Greene shall attend meetings of
the Board, in a non-voting capacity, as requested by the Board.

 

7.     SUCCESSOR
TRANSITION.

 

Greene shall assist Company in
transitioning to Greene’s successor to the Plant Manager position as reasonably
requested by the Company.

 

8.     CONFIDENTIAL
INFORMATION; INTELLECTUAL PROPERTY.

 

In connection with this
Agreement, and as a condition to Company agreeing to employ Greene, Greene will
execute and deliver a confidential information and intellectual property
agreement under which Greene will agree (i) during the term of his
employment with the Company and thereafter, to not use any Company information,
except for the purposes of performing his duties and services for the Company,
and never in competition with the Company; and (ii) that all developments,
know-how, research, processes, or other concepts developed by Greene during the
course and scope of his employment with Company, shall be the exclusive
property of the Company.

 

A breach of said companion
agreement will be a breach of this Agreement. The obligations of Greene under
this section shall survive termination of this Agreement.

 

9.     NON-COMPETITION;
NON-SOLICIT.

 

As a condition of Greene’s
employment by the Company, Greene agrees to execute and deliver to the Company
contemporaneously with execution and delivery of this Agreement, a
non-competition and non-solicit agreement under which Employee agrees that
during the term of this Agreement, and for so long as he is employed with the
Company, and for a period of two (2) years after the termination of this
Agreement or Greene’s employment with the Company, whichever date is later, i)
Greene will not consult for, be employed with, or otherwise perform services
for, any person or entity in the ethanol business within a geographic area as
follows: Minnesota, the northern one-half of the State of Iowa, the eastern
one-half of the State of North Dakota, and the eastern one-half of the State of
South Dakota; and ii) that Greene will not, directly or indirectly, solicit any
customer, supplier, employee, or other representative of the Company to
withdraw, curtail, or cancel its business with the Company, or leave the employ
of the Company, as the case may be.

 

A breach of said companion
agreement will be a breach of this Agreement. The obligations of Greene under
this section shall survive termination of this Agreement.

 

7

 

10.    MISCELLANEOUS.

 

A.     Notices.
Any notice required try this Agreement or given in connection with it, shall be
in writing and shall be given to the appropriate party by personal delivery, or
by certified mail, postage prepaid, and return receipt requested, or by
recognized, national overnight delivery services;

 

	
  If to
  Company:

  	
   

  	
  Otter Tail
  Ag Enterprises, LLC

  	
   

  
	
   

  	
   

  	
  1220 North
  Tower Road, Suite 201

  	
   

  
	
   

  	
   

  	
  Fergus
  Falls, MN 56537

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  If to
  Greene:

  	
   

  	
  B. Gunner
  Greene

  	
   

  
	
   

  	
   

  	
  432 Levi
  North Rd.

  	
   

  
	
   

  	
   

  	
  Crofton, Ky
  42217

  	
   

  

 

Notice given by certified mail
shall be deemed given five (5) days after the notice is deposited in the
mail. All other forms of notice shall be deemed given on the date of personal
delivery or the date of the overnight delivery. If either party desires to
change their address for notice purposes, prior notice of such address change
shall be given to the other party as set forth in this section.

 

B.     Final
Agreement. This Agreement and any other agreements referred to herein are
the entire agreement of the parties relating to the subject matter hereof, and
supersede all prior understandings or agreements on the subject matter hereof.
This Agreement may be modified, waived, amended, or altered only by a further
writing that is duly executed by both parties.

 

C.     Governing
Law And Jurisdiction. This Agreement shall be construed and enforced in
accordance with the laws of the state of Minnesota, without regard to choice of
law or conflict of law provisions. Each party consents to the state courts of
Minnesota, Otter Tail County, as exclusive jurisdiction and venue to determine
any disputes and hear any proceedings related to or arising from this Agreement
or the parties’ employer/employee relationship. The parties waive any argument
or objection to such jurisdiction and venue and agree that it is mutually
convenient.

 

D.     Headings.
Headings used in this Agreement are provided for convenience only and shall not
be used to construe meaning or intent.

 

E.     No
Assignment. This Agreement, and any companion agreement are freely assignable
by the Company. Neither this Agreement nor any or interest in this Agreement
may be assigned by Greene without the prior express written approval of
Company, which may be withheld by Company at Company’s absolute discretion.

 

F.     Severability.
If any term of this Agreement is held by a court of competent jurisdiction to
be invalid or unenforceable, then this Agreement, including all of the
remaining terms, will remain in full force and effect as if such invalid or
unenforceable term had never been included.

 

8

 

G.     Dispute
Resolution. For purposes of this provision, the term “dispute” means any
and all disputes between Company, including its officers, governors, employees,
on the one hand; and Greene, on the other hand, arising out of or relating to
the making, performance, interpretation, or application of this Agreement, or
in any way relating to, concerning, or arising from Greene’s employment with
the Company, or the termination of this Agreement or Greene’s employment with
the Company, and specifically includes, without limitation, any claim that a
termination of employment by Company was not for cause, that Greene was
constructively discharged or terminated, or otherwise.

 

If a dispute arises, the parties
agree first to try in good faith for a period of sixty (60) days to settle the
dispute by mediation under the Commercial Mediation Rules of the American
Arbitration Association, before resorting to arbitration. Thereafter, any
remaining unresolved dispute, controversy or claim shall be submitted to
binding arbitration pursuant to the Commercial Arbitration Rules of the
American Arbitration Association as modified by this Section; PROVIDED, that this
Section shall not require use of the American Arbitration Association
(only that such Rules as modified by this Section shall be followed).
The arbitration shall be conducted in the State of Minnesota. Any award
rendered shall be final and conclusive upon the parties and a judgment thereon
may be entered in any court having competent jurisdiction. The parties shall (i) agree
upon and appoint as the arbitrator a retired former trial Judge in Minnesota; (ii) direct
the arbitrator to follow substantive rules of law and the Federal Rules of
Evidence; (iii) allow for the parties to conduct discovery pursuant to the
rules then in effect under the Federal Rules of Civil Procedure for a
period not to exceed 60 days; (iv) require the testimony to be
transcribed; and (v) require the award to be accompanied by findings of fact
and a statement of reasons for the decision. The cost and expense of the
arbitrator and location costs shall be borne equally by the parties to the
dispute. All other costs and expenses, including reasonable attorney’s fees and
expert’s fees, of all parties incurred in any dispute which is determined
and/or settled by arbitration pursuant to this Section shall be borne by
the party incurring such cost and expense. Except where clearly prevented by
the area in dispute, the parties agree to continue performing their respective
obligations under this Agreement while the dispute is being resolved.

 

H.     Surrender
of Records and Property. Upon termination of employment with the Company,
Greene must deliver promptly to the Company all records, manuals, books, blank
forms, documents, letters, memoranda, notes, notebooks, reports, data, tables,
calculations or copies thereof, which are the property of the Company or which
relate in any way to the business, products, practices or techniques of the
Company, and all other property of the Company such as keys, computers, cell
phones and other tools of the trade, trade secrets and confidential information
of the Company, including, but not limited to, all documents which in whole or
in part contain any trade secrets or confidential information of the Company,
which in any of these cases are in his possession or under his control.

 

9

 

IN WITNESS WHEREOF, Greene and the Company
enter into this Agreement dated effective the 30th day of May, 2006.

 

	
   

  	
  OTTER TAIL AG ENTERPRISES, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ [ILLEGIBLE]

  
	
   

  	
  Its Board President

  
	
   

  	
  Date:

  	
  5-30-06

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ [ILLEGIBLE]

  	
   

  	
   

  	
   

  
	
  B. Gunner Greene

  	
   

  
	
  Date:

  	
  6-3-06

  	
   

  	
   

  	
   

  
							

 

10

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