Document:

10. 77 - Ethanol Marketing Agreement

CERTAIN INFORMATION INDICATED BY [***] HAS BEEN DELETED FROM THIS EXHIBIT AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT UNDER RULE 24b-2.

ETHANOL MARKETING AGREEMENT

THIS ETHANOL MARKETING AGREEMENT (this “Agreement”), dated as of September 17, 2013 (the “Execution Date”), is entered into by and between Eco-Energy, LLC, a Tennessee limited liability company with its registered office at 725 Cool Springs Boulevard, Suite 500, Franklin, Tennessee 37067 (“Eco”), and Heron Lake Bio Energy, LLC, a Minnesota limited liability company, with its principal office located at 91246 390th Avenue, Heron Lake, Minnesota (“Heron”).

RECITALS

A.    HLBE operates an ethanol production facility located at Heron Lake, Minnesota (the “Plant”) that is capable of producing up to approximately 60 million gallons per year of commercially marketable ethanol (the “Output”) and desires to enter into a marketing agreement for the Output.

B.    Eco is an ethanol marketer and is experienced in the marketing, selling and transportation of ethanol, and is willing to purchase and market the entire Output of the Plant and to supply to the Plant the Railcars to be used in transporting the Output.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, IT IS AGREED BETWEEN THE PARTIES:

1.    Exclusivity:

(a)    HLBE shall sell exclusively to Eco, and Eco shall purchase from HLBE, the entire Output during the Term (as defined in Section 21(a)), on the terms set forth in this Agreement.

(b)    [***].

(c)    Eco may purchase and otherwise market and sell ethanol and other products for Eco’s own use or account, and Eco may also market and sell ethanol and other products of other persons (including affiliates or related parties of Eco) as well as provide services to other persons, on such terms and conditions as are determined by Eco from time to time.

2.    Purchase and Sale:

(a)    Eco shall use commercially reasonable efforts to solicit competitive market offers for the ethanol purchased from HLBE.  Eco shall use reasonable efforts to optimize freight, fuel characteristics, and other marketing tools to provide competitive market pricing for HLBE’s ethanol production.  Eco’s efforts shall include working with current, developing, and emerging markets to provide favorable ethanol pricing back to HLBE when compared with market alternatives.  When commercially reasonable, Eco shall assist HLBE in determining if offers are competitive with alternative markets by providing market insight as part of the purchase offers or contracts.

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(b)    Eco shall use its commercially reasonable efforts to, from time to time, submit purchase orders or purchase contracts similar to Exhibit B (each, a “Purchase Order”) to HLBE for purchases of ethanol produced at the Plant, all upon and subject to the terms and conditions of this Agreement.  Eco may place a Purchase Order with HLBE orally, by email or by a written Purchase Order in a form mutually acceptable to HLBE and Eco.  The terms of any Purchase Order shall specify a purchase price F.O.B. the Plant (the “Purchase Price”) and shall specify the method of transport of the ethanol (i.e., via truck, rail or some combination thereof) and include a request for the sale and delivery of ethanol on a one-time basis or on a daily, weekly, monthly or other periodic basis.  Any Purchase Order may be cancelled by Eco at any time, prior to the earlier of:  (i) the time at which such Purchase Order becomes an Accepted Purchase Order (as that term is defined in Section 2(c) below) or (ii) prior to the time that HLBE has entered into a legally binding commitment based upon the Purchase Order.

(c)    HLBE may accept or reject each Purchase Order in whole but not in part.  HLBE shall notify Eco of HLBE’s acceptance or rejection of each particular Purchase Order within the time period specified in such Purchase Order, or if no time period is specified in such Purchase Order, within twenty-four (24) hours of HLBE’s receipt of such Purchase Order (in either case, the “Acceptance Period), and if HLBE fails to notify Eco within the Acceptance Period, HLBE shall be deemed to have rejected such Purchase Order.  HLBE may accept or reject any Purchase Order orally, by e-mail or by written notice, provided, however, that Eco reserves the right to require HLBE to accept or reject any particular Purchase Order or Purchase Orders only in writing.  Any Purchase Order that is accepted by HLBE is referred to in this Agreement as an “Accepted Purchase Order” and is binding on both parties and becomes incorporated into this Agreement.  Thus, each Accepted Purchase Order becomes assimilated into this Agreement for purposes of determining the parties’ rights, duties, and/or liabilities.  Notwithstanding any other term or condition of this Agreement or any Accepted Purchase Order, in the event of any inconsistency between the terms and conditions of this Agreement and any Accepted Purchase Order, this Agreement shall govern unless such Accepted Purchase Order expressly states its intent to supersede this Agreement and is in writing and signed by both Eco and HLBE.  Eco shall summarize the terms of the Accepted Purchase Order in the form of a Purchase Contract (“Purchase Contract”).

(d)    Each party shall designate one or more persons (each a “Representative”) who shall be authorized and directed to deal with the other party hereunder and to make all sales decisions on behalf of such party.  All directions, transactions and authorizations given by such Representative(s) whether orally, electronically (including, without limitation, by email), by facsimile or in writing shall be binding upon the party that appointed the Representative.  Both parties shall be entitled to rely on the authorization of the other party’s Representative(s) until it receives written notification from the other party that such authorization has been revoked and the name and contact information of the replacement representative(s).

3.    Lease of Railcars:

(a)    Eco hereby leases to HLBE railcars (the “Railcars”), and HLBE hereby
accepts the lease of the Railcars.

(b)    The lease payment for each Railcar equals (collectively, the “Lease Fee”):

(i)    $750 per Railcar per month for 20 Railcars, and

(c)    Eco and HLBE will work together to determine the number of Railcars needed by HLBE pursuant to this Agreement, which amount shall be agreed upon by each of Eco and HLBE.  If additional Railcars are determined to be necessary Eco shall provide such Railcars to HLBE at a market price.

(d)    If this agreement is terminated, HLBE will be responsible to take over all rail leases assigned to HLBE, if so determined by Eco.

4.    Purchase Price and Fees:

(a)    The amount payable by Eco to HLBE for ethanol that is purchased by Eco pursuant to this Agreement shall be [***].

(b)    The amount Payable by HLBE to Eco for services to be provided by Eco under this Agreement (the “Marketing Fee”) shall be [***].

(c)    [***].

5.    Payment:

(a)    Subject to the term and conditions set forth in this Agreement, upon Eco’s receipt from HLBE of an invoice, bill of lading, return bill of lading, and certificate of analysis, Eco will pay to HLBE by wire transfer within 10 calendar days of each unit (i.e., truck or railcar) being shipped from the HLBE facility.  If HLBE desires to receive payment more expeditiously than the aforementioned 10 day payment term, Eco will act in good faith to accommodate the request; however, the expedited payment to GFE will be charged an additional daily interest expense equal to the Wall Street Journal Prime Rate plus 2.75% based on the number of days each payment is expedited.

(b)    Eco shall deliver to HLBE a bill of lading that identifies the ethanol for which payment is being made, the Purchase Contract that is the subject of the payment, the Purchase Price, and the final amount being paid.

(c)    Subject to the term and conditions set forth in this Agreement, upon HLBE’s receipt from Eco of an invoice, HLBE will pay to Eco by wire transfer within ten (10) days of receipt of the invoice, as reflected in the invoice:

(i)    the Marketing Fee; and

(ii)    the Lease Fee.

(d)    Eco will negotiate all freight fees regarding the shipment of ethanol from the Plant.  Eco will be responsible for remitting payment directly to all truck and rail carriers for all outbound shipments.

6.    Renewable Identification Numbers:  HLBE shall accurately and timely assign Renewable Identification Numbers (singly, a “RIN” and, collectively, “RINs”) for all ethanol delivered hereunder with the equivalency value of 1.0 for corn ethanol.  Such RINs shall comply with the rules and regulations promulgated by the Environmental Protection Agency pursuant to the Renewable Fuels Standard (as it may hereafter be amended, restated or modified).  Simultaneously with the transfer of title to any ethanol from HLBE to Eco hereunder (on invoice), HLBE shall accurately assign and transfer the RIN or RINs for such ethanol to Eco.  Alternatively, if it is later determined feasible, HLBE shall permit Eco to generate, assign and transfer the RIN or RINs for such ethanol, acting as an Agent on behalf of HLBE, including, without limitation, the creation and delivery of all necessary product transfer documents as required under applicable federal laws and regulations through the EPA EMTS.  Upon request, Eco shall provide HLBE with a transaction summary of all quarterly transactions; however, HLBE shall remain responsible and accountable for the correct report submission of such required reports to the EPA.  If the opportunity is available to create a value from buying or selling RINs that were generated by HLBE and transferred to Eco, (i) Eco will advise HLBE of such opportunity and (ii) Eco and HLBE will strategize together how to optimize the opportunity, then (iii) any profit generated from such activity will be shared equally by both parties.  Eco is obligated to provide HLBE with undenatured export offers on a continuous basis during the Term in an effort to assist HLBE in managing its Renewable Identification Number (RIN) regulatory requirements.

7.    Production and Loading Reports and Schedules:

(a)    HLBE shall provide to Eco production forecasts, as well as daily plant inventory balances.  The aforementioned information should include at a minimum the following:

(i)    quarterly production schedules that accurately specify to the greatest extent possible the ethanol production schedule at the Plant for the following six calendar months; and

(ii)    a daily status report by 1000 A.M. (CST) that provides:

(1)    that day’s ethanol inventory, prior day’s production, that day’s production schedule for the Plant and the estimated production for the succeeding day;

(2)    the volume of ethanol then stored at the Facility;

(3)    the number of Railcars at the Facility on such day that have not yet left the Facility and are:

a.    empty; or

b.    loaded with ethanol; and

(4)    such other increased or changed information as the parties may agree.

(b)    Eco shall schedule the loading and shipment of all ethanol at the Plant, and shall provide to HLBE no later than 3 p.m. on Wednesday of each week during the term of this Agreement:

(i)    a loading schedule for the following week specifying the total loads to be shipped for the week, loads to be shipped for each Accepted Purchase Order, quantities of ethanol to be removed from the Plant each day and the method of transportation from the Plant (i.e. by truck or rail); and

(ii)    rolling monthly estimates for the following month specifying the total loads to be shipped for the month, loads to be shipped for each Accepted Purchase Order, quantities of ethanol to be removed from the Plant each day, and method of transportation from the Plant (i.e. by truck or rail).

(c)    On Monday and Wednesday of each week, Eco shall notify HLBE of the then current estimate of the dates and times that railcars and trucks that Eco has scheduled to arrive at the Facility to take delivery of Ethanol

(d)    No later than 5 p.m. each Friday (or such other day and time as Eco and HLBE mutually agree) and such other times as HLBE may reasonably request, Eco shall deliver a report listing each outstanding Accepted Purchase Order, which shall include:

(i)    the Accepted Purchase Order number;

(ii)    the amount of ethanol of such Accepted Purchase Order previously filled and the dates on which such portion or portions were filled and the remaining volumes of ethanol to be delivered in connection such Accepted Purchase Order; and

(iii)    the scheduled delivery dates for each outstanding Accepted Purchase Order.

(e)    Eco and HLBE shall cooperate in coordinating production and loading schedules, including by promptly notifying the other of any changes in any production or loading reports or schedules delivered hereunder; provided, however, that Eco shall be entitled to act and rely upon the production forecasts provided to Eco by HLBE as described in Section 7 of this Agreement.

(f)    No later than the fifth day of each calendar month during the Term, HLBE shall provide Eco a report specifying the number of gallons of ethanol produced by the Plant in the immediately preceding calendar month.

(g)    In order to assist HLBE with analyzing the market and market opportunities, from time to time, as reasonably requested by HLBE, Eco shall deliver to HLBE a market insight report that provides indication key marked drivers, stocks and production reports.  Eco agrees to make generally available to HLBE all market insight, analysis and recommendations it derives from its involvement with and knowledge of ethanol production, supplies, trading and logistics.

(h)    Eco assumes responsibility for logistics, railcar, and truck schedule management through a combination of the above activities partnered with active analysis of railcar fleet traces and projections of turn times, car movements, etc.

8.    Delivery, Storage, Loading, Title:

(a)    The place of delivery by HLBE and pick-up by Eco for all ethanol purchased by Eco under this Agreement shall be F.O.B. the loading flange at the truck/rail load out of the Plant.  HLBE shall grant and allow Eco and its agents (including, without limitation, all truck and rail carriers) reasonable access to the Plant in the manner and at the times requested by Eco in order to allow Eco to take delivery of ethanol in accordance with the loading schedules provided by Eco pursuant to Section 7.

(b)    HLBE shall confirm, no later than the next day, meter or weight certificates, bills of lading and certificates of quality analysis for the previous day’s deliveries of ethanol to Eco.

(c)    Eco shall arrange for all trucks and rail cars as needed to take delivery of all ethanol.  Eco shall use its commercially reasonable efforts to manage the arrival of trucks and rail cars to be at the Plant for pick-up of ethanol in accordance with Eco’s loading schedules as provided to HLBE pursuant to Section 7, or as otherwise mutually agreed by Eco and HLBE.

(d)    HLBE shall provide and supply, without charge to Eco, all facilities, equipment and labor necessary to load the ethanol into trucks and rail cars (as applicable) at the Plant.  HLBE shall maintain all loading facilities and equipment at the Plant in accordance with industry standards and in good and safe operating condition and repair, subject to ordinary wear and tear.  Without limiting the preceding sentence, HLBE shall ensure (i) all trucks and rail cars shall be loaded to their full legal capacity (except as otherwise requested by Eco), and (ii) all trucks and rail cars shall be loaded without delay as quickly as is reasonably possible.  HLBE will not pay demurrage charges for instances where truck loading is delayed due to multiple trucks arriving for loadout within the same general timeframe.  In the event foreign matter or a foreign substance is discovered in any load of ethanol delivered hereunder, HLBE shall take all action (at its cost and expense) to cooperate with Eco to determine such foreign matter or foreign substance and its content.  HLBE shall handle all ethanol during the loading process in a good and workmanlike manner and in accordance with Eco’s reasonable requirements and customary industry practices.

(e)    Subject to Sections 10(b) and 11, title and risk of loss for ethanol shall pass from HLBE to Eco after the loading of the ethanol into trucks and rail cars at the loading flange between the Plant and the transportation vehicle.

(f)    HLBE shall provide storage space equal to 1.0M gallons at the Plant, and such storage space shall be continuously available for Eco’s use for storage of HLBE’s ethanol, without charge to Eco.

9.    Quantity of Ethanol; Production:

(a)    The quantity of ethanol delivered to Eco under this Agreement and loaded by truck and rail shall be definitively established by outbound meter and weight certificates obtained from meters and scales of HLBE that are properly certified as of the time of loading in accordance with any requirements imposed by any governmental or regulatory authorities and that otherwise comply in all material respects with all reasonable commercial standards and applicable laws, rules and regulations.  HLBE agrees to maintain at the Plant, in good and safe operating condition and repair and in accordance in all material respects with all applicable laws, rules and regulations, truck scales or metered pumps suitable for weighing/measuring ethanol.  All costs and expenses incurred in connection with obtaining such certificates, and maintaining such truck weights, shall be borne by HLBE.

(b)    If HLBE determines to expand the capacity of the Plant beyond 115% of its current Annual Production Capacity, HLBE shall give Eco written notice of such expansion and of the estimated monthly production of ethanol at the Plant after such expansion, as soon as reasonably possible.  Eco shall then have the first option to purchase all or any portion of the additional ethanol to be produced, under the same terms as this Agreement, as a result of such expansion if the product is not directly marketed as E85 or direct marketed product.

10.    Quality of Ethanol:

(a)    All ethanol sold to Eco hereunder shall meet all of the following specifications (the “Specifications”):  (i) it shall be fuel grade, of consistent quality and composition, (ii) it shall meet the minimum quality standards set forth in Exhibit A, (iii) it shall be of merchantable quality, stable and unadulterated, (iv) it shall be suitable for lawful introduction into commerce under the laws of the United States of America and any other nation to which the ethanol is shipped, and (v) it shall not change composition during or after loading.

(b)    Notwithstanding any other term or condition of this Agreement, HLBE agrees and acknowledges that it will be solely responsible for the quality of the ethanol produced at the Plant while it is within HLBE’s control.

11.    Rejection of Ethanol by Eco:  Eco may reject, before or after delivery to Eco, any ethanol that fails to conform to or satisfy the requirements of Section 10.  Eco shall provide HLBE written notice as soon as possible of any such rejection of ethanol.

If any ethanol is properly rejected by Eco (the “Rejected Ethanol”), Eco will, in its discretion:

(a)    Offer HLBE a reasonable opportunity to examine and take possession of the Rejected Ethanol, at HLBE’s cost and expense, if Eco reasonably determines that the condition of the Rejected Ethanol permits such examination and delivery prior to disposal;

(b)    Dispose of the Rejected Ethanol in the manner as directed by HLBE, and at HLBE’s cost and expense, subject to the requirements of applicable laws, rules and regulations and any third-party rights; or

(c)    If Eco has no reasonably available means of disposing of the Rejected Ethanol, and if HLBE fails to direct Eco to dispose of the Rejected Ethanol or directs Eco to dispose of the Rejected Ethanol in a manner inconsistent with applicable laws, rules or regulations or any third-party rights, then Eco may return the Rejected Ethanol to HLBE, at HLBE’s cost and expense.

Eco’s obligation with respect to any Rejected Ethanol shall be fulfilled upon HLBE taking possession of the Rejected Ethanol, the disposal of the Rejected Ethanol or the return of the Rejected Ethanol to HLBE, as the case may be, in accordance with subparagraphs (a), (b) or (c) above.

HLBE shall reimburse Eco for all costs and expenses incurred by Eco for storing, transporting, returning, disposing of or otherwise handling Rejected Ethanol, and Eco shall provide HLBE with reasonable substantiating documentation for all such costs and expenses.  HLBE shall also refund any amounts paid by Eco to HLBE for Rejected Ethanol within ten (10) days of the date of HLBE’s receipt of Eco’s written notice of the rejection.  Eco shall have no obligation to pay HLBE for Rejected Ethanol, and after written approval from HLBE Eco may deduct from payments otherwise due from Eco to HLBE under this Agreement the amount of any reimbursable costs or any required refund by HLBE as described above.

If any ethanol is rejected following the transfer of title and risk of loss to Eco under Section 8(e), title and risk of loss to the Rejected Ethanol shall automatically revert to HLBE effective upon the rejection of the ethanol.

12.    Testing and Samples:  If HLBE knows or has reason to believe that any ethanol sold hereunder does not conform to or satisfy the requirements of Section 10 or may be subject to rejection under Section 11, HLBE shall promptly notify Eco so that such ethanol can be tested before entering the stream of commerce.  If Eco knows or has reason to believe that any ethanol does not conform to or satisfy the requirements of Section 10 or may be subject to rejection under Section 11, then Eco may obtain independent laboratory tests of such ethanol.  If a test is initiated by Eco pursuant to the preceding sentence and the ethanol is tested and found to comply with Section 10 and to not be subject to rejection, then Eco shall be responsible for the costs of testing such ethanol.  HLBE shall be responsible for all testing costs in all other circumstances.

HLBE will take an origin sample of ethanol representative of every truck and rail car loaded at the Plant, using sampling methodology that is consistent with industry standards.  HLBE will label the samples to indicate the date of testing and keep records identifying specific units that were loaded 

from such sample.  The samples and identifying records will be retained by HLBE for sixty (60) days.  Testing of sulfate levels shall be done on all ethanol produced at this Plant.

Upon written request of Eco HLBE shall deliver to Eco a composite analysis of all ethanol produced at the Plant on a monthly basis, and also at such other times and for such production periods as are reasonably requested by Eco from time to time.  The composite analysis shall be in a format reasonably acceptable to Eco and HLBE.

13.    Other Expenses:  HLBE shall be responsible for paying all sales taxes, fees and charges assessed or imposed by any governmental authority or industry organization with respect to the export, sale and delivery of ethanol to Eco as contemplated by this Agreement, including, without limitation, taxes, fees and charges for export, import, ad valorem, value added, assessment, sales, inspection or otherwise.  HLBE shall also be responsible for paying any and all local, state and federal tax liabilities.  If any such taxes, fees and charges of HLBE are paid by Eco, HLBE shall promptly reimburse Eco for such fees and charges or Eco shall have a right to offset such taxes, fees and charges against amounts determined to be owed to Eco by HLBE, pursuant to Section 30.  Eco shall be responsible for any and all taxes or fees directly attributable to it after title transfer.

14.    Duties of HLBE:  HLBE agrees as follows:

(a)    HLBE shall cooperate with Eco in the performance of the services to be provided by Eco under this Agreement in a commercially reasonable manner, including by providing Eco, in a timely manner, any records or information that Eco may reasonably request from time to time as part of Eco’s marketing of ethanol.

(b)    HLBE shall use commercially reasonable efforts to (i) operate the Plant for the production of ethanol in compliance with this Agreement, and (ii) maintain the Plant in good and safe operating repair and condition, subject to ordinary wear and tear.  However, nothing herein shall be deemed to require HLBE to produce any minimum amount of ethanol and, subject to any Purchase Orders accepted by HLBE pursuant and subject to Sections 2(b) and 7(0 of this Agreement, HLBE may reduce or eliminate its ethanol production for any reason without such reduction constituting a breach of this Agreement.

(c)    HLBE shall promptly notify and advise Eco of any laws, rules, regulations, court orders, requirements and standards, taxes, fees or charges of any governmental authority or industry organization (or any changes thereof) which could materially impact the ethanol sold hereunder or the sale or resale thereof, or any other transactions contemplated by this Agreement.

(d)    HLBE shall perform its duties and obligations under this Agreement in a commercially reasonable manner and in compliance in all material respects with all governmental laws, rules and regulations that are applicable to HLBE’s duties and obligations under this Agreement.

(e)    HLBE shall advise Eco of any problems that come to its attention with respect to any ethanol sold hereunder.

(f)    HLBE shall advise Eco of any matter regarding any ethanol sold hereunder that raises an issue of compliance of such ethanol with applicable governmental laws, rules or regulations or industry standards known to HLBE.

(g)    HLBE shall use commercially reasonable efforts to obtain and continuously maintain in effect any and all material governmental and other consents, approvals, authorizations, registrations, licenses and permits that are necessary or appropriate for HLBE to fully and timely perform all of its duties and obligations under this Agreement, including, without limitation, all licenses, permits and other approvals that are necessary or appropriate to market and sell the ethanol sold hereunder as contemplated herein.

(h)    All ethanol shall be delivered and sold to Eco by HLBE free and clear of all liens, restrictions on transferability, reservations, security interests, financing statements, licenses, mortgages, tax liens, charges, contracts of sale, mechanics’ and statutory liens and all other liens, claims, demands, restrictions and encumbrances whatsoever (collectively, “Encumbrances”).

(i)    HLBE will establish and maintain at all times true and accurate books, records, documents, contracts, accounts and electronic data in accordance with generally accepted accounting principles (GAAP) applied consistently from year to year consistent with good industry practices, distinguishable from all other books and records, in respect of all transactions undertaken by such party pursuant to this Agreement.

15.    Duties of Eco:  Eco agrees as follows:

(a)    Eco shall perform its duties and obligations under this Agreement in a commercially reasonable manner and in compliance in all material respects with all governmental laws, rules and regulations that are applicable to its performance under this Agreement.

(b)        Eco shall be responsible for Eco’s relationship and dealings with all third-party purchasers of ethanol from Eco, including with respect to and for billing, collections and account servicing and management, and, except as provided in Section 5(a), Eco shall bear all credit and collection risk with respect to Eco’s sales of ethanol to third parties.

(c)    Eco shall promptly advise HLBE of any matter regarding any ethanol sold hereunder that comes to the attention of Eco and that raises an issue of compliance of such ethanol with applicable governmental laws, rules, regulations or industry standards.

(d)    Eco will establish and maintain at all times true and accurate books, records, documents, contracts, accounts and electronic data in accordance with generally accepted accounting principles (GAAP) applied consistently from year to year consistent with good industry practices, distinguishable from all other books and records, in respect of all transactions undertaken by such party pursuant to this Agreement.

(e)    Eco shall promptly notify and advise HLBE of any laws, rules, regulations, court orders, requirements and standards, taxes, fees or charges of any governmental authority or industry organization (or any changes thereof) which could in any way impact the ethanol bought hereunder or the purchase or resale thereof, or any other transactions contemplated by this Agreement.

(f)    Eco shall use commercially reasonable efforts to obtain and continuously maintain in effect any and all governmental and other consents, approvals, authorizations, registrations, licenses and permits that are necessary or appropriate for Eco to fully and timely perform all of its duties and obligations under this Agreement, including, without limitation, all licenses, permits and other approvals that are necessary or appropriate to market and sell the ethanol sold hereunder as contemplated herein.

16.    Representations and Warranties of HLBE:  HLBE represents and warrants to Eco as follows:

(a)    HLBE is duly organized, validly existing and in good standing under the laws of the state in which HLBE was organized, and has and shall maintain all requisite power and authority to own or otherwise hold and use its property and carry on its business as now conducted and as to be conducted pursuant to this Agreement.

(b)    This Agreement has been duly authorized, executed and delivered by HLBE, and constitutes the legal, valid and binding obligation of HLBE, enforceable against HLBE in accordance with its terms.  HLBE has and shall maintain all requisite power and authority to enter into and perform this Agreement, and all necessary actions and proceedings of HLBE have been taken to authorize the execution, delivery and performance of this Agreement.

(c)    The execution and performance of this Agreement does not and will not conflict with, breach or otherwise violate any of the terms or provisions of the organizational or governing documents of HLBE or of any agreement, document or instrument to which HLBE is a party or by which HLBE or any of its assets or properties are bound.

(d)    There is no civil or criminal action or other litigation, action, suit, investigation, claim or demand pending or, to the knowledge of HLBE, threatened, against HLBE that may have a material adverse effect upon the transactions contemplated by this Agreement or HLBE’s ability to perform its duties and obligations under, or to otherwise comply with, this Agreement.

(e)    HLBE shall have good and marketable title to all ethanol to be delivered hereunder, free and clear of all Encumbrances.

(f)    HLBE is now in compliance with all applicable federal, state, local and foreign laws, ordinances, orders, rules and regulations (collectively, “Laws”), other than Laws where neither the costs or potential costs of failing to comply, nor the costs or potential costs of causing compliance, would be material to HLBE or its business or assets.  The definition of Laws set forth 

above includes, without limitation, the Toxic Substances Control Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Clean Air Act, the Federal Water Pollution Control Act of 1986, the Emergency Planning and Community Right-to-Know Act of 1986, the Occupational Safety and Health Act, the Resource Conservation and Recovery Act, any state equivalent thereof and all other laws related to the protection of the environment (“Environmental Laws”).

(g)    HLBE has not withheld from Eco any material facts relating to HLBE’s ethanol production capabilities, and/or relating to the business operations of HLBE.  Further, no representation or warranty in this Agreement, or in any letter, certificate, exhibit, schedule, statement or other document furnished pursuant to this Agreement, contains any untrue statement of a material fact.

(h)    As of the date of this Agreement, HLBE has, and will at all times during the Term continuously maintain in effect, any and all governmental and other consents, approvals, authorizations, registrations, licenses and permits that are necessary or appropriate for HLBE to fully and timely perform all of its duties and obligations under this Agreement, including, without limitation, all licenses, permits and other approvals that are necessary or appropriate to market and sell the ethanol sold hereunder as contemplated herein.

(i)    Throughout the Term, HLBE will have the technical capability to produce the quality of ethanol required under this Agreement.

17.    Representations and Warranties of Eco:  Eco represents and warrants to HLBE as follows:

(a)    Eco is a corporation duly organized, validly existing and in good standing under the laws of the State of Tennessee, and has and shall maintain all requisite power and authority to own or otherwise hold and use its property and carry on its business as now conducted and as to be conducted pursuant to this Agreement.

(b)    This Agreement has been duly authorized, executed and delivered by Eco, and constitutes the legal, valid and binding obligation of Eco, enforceable against Eco in accordance with its terms.  Eco has and shall maintain all requisite power and authority to enter into and perform this Agreement, and all necessary actions and proceedings of Eco have been taken to authorize the execution, delivery and performance of this Agreement.

(c)    The execution and performance of this Agreement do not and will not conflict with, breach or otherwise violate any of the terms or provisions of the organizational or governing documents of Eco or of any agreement, document or instrument to which Eco is a party or by which Eco or any of its assets or properties are bound.

(d)    There is no civil or criminal action or other litigation, action, suit, investigation, claim or demand pending or, to the knowledge of Eco, threatened, against Eco that 

may have a material adverse effect upon the transactions contemplated by this Agreement or Eco’s ability to perform its duties and obligations under, or to otherwise comply with, this Agreement.

(e)    Eco is now in compliance with all applicable federal, state, local and foreign laws, ordinances, orders, rules and regulations (collectively, “Laws”), other than Laws where neither the costs or potential costs of failing to comply, nor the costs or potential costs of causing compliance, would be material to Eco or its business or assets.  The definition of Laws set forth above includes, without limitation, the Toxic Substances Control Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Clean Air Act, the Federal Water Pollution Control Act of 1986, the Emergency Planning and Community Right-to-Know Act of 1986, the Occupational Safety and Health Act, the Resource Conservation and Recovery Act, any state equivalent thereof and all other laws related to the protection of the environment (“Environmental Laws”).

(f)    Eco has not withheld from HLBE any material facts relating to Eco’s ethanol marketing capabilities, and/or relating to the business operations of Eco.  Further, no representation or warranty in this Agreement, or in any letter, certificate, exhibit, schedule, statement or other document furnished pursuant to this Agreement, contains any untrue statement of a material fact.

(g)    As of the date of this Agreement, Eco has, and will at all times during the Term continuously maintain in effect, any and all governmental and other consents, approvals, authorizations, registrations, licenses and permits that are necessary or appropriate for Eco to fully and timely perform all of its duties and obligations under this Agreement, including, without limitation, all licenses, permits and other approvals that are necessary or appropriate to market and sell the ethanol sold hereunder as contemplated herein.

(h)    Throughout the Term, Eco will have the technical capability to market the quantity of ethanol required under this Agreement.

18.    Eco Limitations:

(a)    Subject to Section 29, HLBE is responsible and liable for all non-deliveries of ethanol that it is contracted to supply to Eco hereunder.  Without limiting the foregoing or HLBE’s obligations and liabilities hereunder, Eco, in conjunction with HLBE, shall reasonably assist in procuring ethanol from other suppliers to cover any such non-deliveries by HLBE; provided, however, HLBE will reimburse Eco for any losses, costs and expenses incurred by Eco relating thereto and HLBE shall remain responsible and liable for any additional expense related to any failure to supply ethanol by HLBE to Eco.  In the event Eco procures product for HLBE, Eco is obligated to act in good faith and in the best interests of HLBE, and must keep HLBE informed of such procurement to the greatest extent possible.

(b)    Eco shall reserve the right to refuse to do business with any party who it reasonably deems to be a credit or performance risk.  At HLBE’s written request, Eco will offer guidance as to why any otherwise desirable counterparty has been deemed a credit risk unsuitable to do business with.

(c)    Upon any termination of this Agreement, both parties will be responsible to take all actions reasonably necessary to complete any valid and existing Purchase Contracts.

19.    Confidentiality:

(a)    During the Term and for a period of three (3) years thereafter, the parties agree, to the extent permitted by law, to preserve and protect the confidentiality and terms of this Agreement, and to not disclose any terms hereof unless required by a court of competent jurisdiction or as agreed to by the other party.  Both parties recognize that applicable law may require the filing of this Agreement with, or the furnishing of information to, governmental authorities or regulatory agencies.  Both parties further recognize the need, from time to time, for the submission of this Agreement to affiliates, consultants or contractors performing work on, or related to, the subject matter of this Agreement.  The parties agree to allow the submission of this Agreement to affiliates, consultants and contractors only if such affiliates, consultants and contractors agree to protect the confidentiality of this Agreement.  In the event either party is of the opinion that applicable law requires it to file this Agreement with, or to disclose information related to this Agreement to, any judicial body, governmental authority or regulatory agency, that party shall so notify the other party in writing promptly upon learning of such requirement and prior to the disclosure or filing of this Agreement and, notwithstanding any other provision of this Section 19, shall disclose only those portions of this Agreement required by law and shall use its best efforts to maintain the confidentiality of the remainder.

(b)    In the event that HLBE is a reporting company pursuant to the Securities Exchange Act of 1934, as amended (the “Act”), and HLBE determines that HLBE is required to publicly disclose this Agreement or any of the terms hereof pursuant to HLBE’s obligations under the Act, then HLBE shall (i) provide prompt written notice of such determination to Eco, (ii) use its best efforts to seek the maximum level of confidential treatment of this Agreement and its terms including, specifically, seeking confidential treatment of all financial information in this Agreement, and (iii) provide Eco the opportunity to review, comment on and approve (which approval shall not be unreasonably withheld or delayed) all correspondence to and from HLBE and the Securities Exchange Commission, including requests for confidential treatment.

20.    Solicitation:  During the Term, both Parties agree not to interfere with, solicit, disrupt or attempt to disrupt any relationships, contractual or otherwise, between either Parties customers, employees or vendors.

21.    Term and Termination:

(a)    The term of this Agreement shall commence on 00:00 a.m. (CST) on November 1, 2013 and shall continue for until December 31, 2016 (the “Term”).  Upon the expiration of the Term, this Agreement will automatically renew for additional consecutive terms of three (3) years each unless either party hereto gives written notice to the other at least ninety (90) days prior to the end of the Term or the then current renewal term, in which case this Agreement shall terminate at the end of the Term or such then current renewal term.  Notwithstanding any other provision of this Agreement, this Agreement may be terminated as follows:

(i)    By HLBE in the event of a material breach of any of the terms hereof by Eco, by written notice (by certified mail, return receipt requested) specifying the breach, which notice shall be effective fifteen (15) days after it is given to Eco unless Eco cures the breach within such 15-day period, except for a breach of Section 5(a) for which notice shall not be required and Eco shall only have five (5) days to cure.

(ii)    By Eco in the event of a material breach of any of the terms hereof by HLBE, by written notice (by certified mail, return receipt requested) specifying the breach, which notice shall be effective fifteen (15) days after it is given to HLBE unless HLBE cures the breach within such fifteen (15) day period.

(iii)    By either party hereto, without cause, after twelve (12) months from the 1St day of ethanol production (the “One Year Anniversary”), provided that the terminating party provides written notice of the termination to the non-terminating party ninety (90) days prior to the One Year Anniversary.

(iv)    By the mutual consent of both parties on such terms as the parties may agree.

(v)    By either party upon the occurrence of a Change of Control of the other party.  For purposes of this section 21(a)(v), “Change of Control” shall mean (A) the acquisition by any person, not affiliated with the party, of an aggregate of more than fifty percent (50%) of the shares of voting stock of the party outstanding immediately prior to the acquisition; or (B) any sale or liquidation of all or substantially all of the assets of the party (other than to a wholly-owned subsidiary of the party), or any merger, consolidation or reorganization in which the party is not the surviving entity or the sole owner of the surviving entity.

(vi)    By either party immediately in the event that the other party is in a state of bankruptcy.  For purposes hereof, a party is in a state of bankruptcy in the event a voluntary or involuntary proceeding is commenced with respect to such party under any applicable bankruptcy laws of any jurisdiction to which such party is subject, or otherwise, for arrangement, reorganization, dissolution, liquidation, settlement of claims or winding up of affairs and, if involuntary, such proceeding is consented to by such party or remains undismissed for more than sixty (60) days.

(vii)    By written notice pursuant to the terms of Sections 29 or 31(d).

(b)    The termination of this Agreement pursuant to the terms hereof shall not act as a waiver or release of any rights or remedies available at law, in equity or otherwise that may have accrued prior to such termination.

22.    Licenses, Bonds, and Insurance:  Each party represents that it now has and will maintain in full force and effect during the Term, at its sole cost, all necessary licenses, bonds and 

insurance, including general commercial insurance, in accordance with applicable laws and regulations.  The commercial general liability insurance policy issued to HLBE shall (i) be with an insurance carrier reasonably acceptable to the other, (ii) name Eco as an additional insured, and (iii) provide for a minimum of thirty (30) days’ written notice to the Eco prior to any cancellation, termination, nonrenewal, amendment or other change of such insurance policy.  HLBE shall provide reasonable proof of such insurance to Eco upon the reasonable request of Eco from time to time.

23.    Limitation of Liability:  Each party acknowledges and agrees that the other party does not make any guarantee, express or implied, to the other of profit, or any particular results from the transactions hereunder.  In no event shall Eco be responsible for any loss or damages resulting from a mechanical, operational, accidental, or environmental event of any kind occurring prior to the ethanol being delivered to the trucks.

24.    Disclaimer:  Except as otherwise required herein, the parties to this Agreement understand and agree that neither party makes any warranty to the other respecting legal or regulatory requirements and risks of the transactions contemplated hereby.

25.    Indemnity:

(a)    HLBE shall indemnify, defend and hold Eco (and its respective officers, directors, managers, members, shareholders, agents and representatives) harmless from claims, demands and causes of action asserted against Eco by any person (including, without limitation, employees of Eco) for personal injury or death, or for loss of or damage to property resulting from the willful misconduct or negligent acts or omissions of HLBE or any of its officers, directors, managers, employees, agents or representatives.

(b)    Eco shall indemnify, defend and hold HLBE (and its respective officers, directors, managers, members, shareholders, agents and representatives) harmless from claims, demands and causes of action asserted against HLBE by any person (including, without limitation, employees of HLBE) for personal injury or death, or for toss of or damage to property resulting from the willful misconduct or negligent acts or omissions of Eco or any of its officers, directors, managers, employees, agents or representatives.

(c)    Where personal injury, death or loss of or damage to property is the result of the joint negligence or misconduct of HLBE and Eco, the parties expressly agree to indemnify each other in proportion to their respective share of such joint negligence or misconduct.

26.    Nature of Relationship:  Each party hereto is an independent contractor providing or purchasing services or products from the other.  No employment relationship, agency, partnership or joint venture is intended, nor shall any such relationship be deemed created hereby.  Except as may be specifically set forth in this Agreement, each party shall be solely and exclusively responsible for its own expenses and costs of performance.

27.    Notices:  All notices under this Agreement shall be in writing and deemed duly given, if delivered:  (a) personally by hand or by a nationally recognized overnight courier service, when 

delivered at the address specified in this Section 27; (b) by United States certified or registered first class mail when delivered at the address specified in this Section 27, on the date appearing on the return receipt therefor; (c) by facsimile transmission, when such facsimile transmission is transmitted to the facsimile transmission number specified in this Section 27; or (d) by electronic mail when such electronic mail is transmitted to the electronic mail address specified in this Section 27:

HLBE:    Heron Lake BioEnergy, LLC
ATTENTION:    General Manager
ADDRESS:    91246 390th Avenue
Heron Lake, MN 56137
PHONE:    (507) 793-0077
FAX:
EMAIL:

Eco-Energy:    Eco-Energy, LLC
ATTENTION:    Executive Officer
ADDRESS:    725 Cool Springs Blvd, Suite 500
Franklin, TN 37067
PHONE:    (615) 778-2898
FAX:    (615) 778-2897
EMAIL:

28.    Compliance with Governmental Controls; No Breach:

(a)    To the extent applicable, the parties agree to comply with all laws, ordinances, rules, codes, regulations and lawful orders of any government authority applicable to the performance of this Agreement, including, without limitation, safety, health, social security, pension and benefits, wage hour laws, Environmental Laws, and laws regarding unemployment compensation, nondiscrimination on the basis of race, religion, color, sex or national origin and affirmative action (collectively, the “Regulations”).

(b)    The parties enter this Agreement in reliance upon the Regulations in effect on the date of the Agreement with respect to or directly or indirectly affecting the ethanol to be delivered, including without limitation, production, gathering, manufacturing, transportation, sale and delivery thereof insofar as said Regulations affect the parties and their customers.  In the event that at any time subsequent to the date of the Agreement, any of said Regulations are changed or new Regulations are promulgated whether by law, decree, interpretation or regulation, or by response to the insistence or request of any governmental authority or person purporting to act therefore, and the effect of such changed or new Regulation (i) is or will not be covered by any other provisions of the Agreement, or (ii) has or will have an adverse economic effect upon the parties to this Agreement or the suppliers or customers of said parties, the parties shall have the option to request renegotiation of the prices and other pertinent terms provided for in the Agreement and their respective effective dates.  Said option may be exercised by either party at any time after such changed or new Regulation is promulgated by giving notice of the exercise of its option to renegotiate 

prior to the time of delivery of ethanol or any part thereof.  Such notice shall contain proposed new prices and terms requested.  If the parties do not agree upon new prices and terms satisfactory to both parties within ten (10) days after such notice is given, either party shall have the right to terminate the Agreement at the end of said ten (10) day period.

29.    Force Majeure:  If any term or condition of this Agreement to be performed or observed by Eco or HLBE (other than a payment or indemnification obligation) is rendered impossible of performance or observance due to any force majeure event or any other act, omission, matter, circumstance, event or occurrence beyond the commercially reasonable control of Eco or HLBE, as the case may be (each, an “Force Majeure Event”), the affected party shall, for so long as such Force Majeure Event exists, be excused from such performance or observance, provided the affected party (i) promptly notifies the other party of the occurrence of the Force Majeure Event, (ii) takes all such steps as are reasonably necessary or appropriate to terminate, remedy or otherwise discontinue the effects of the Force Majeure Event, and (iii) recommences performance after the termination or discontinuance of the Force Majeure Event; provided, however, that if after thirty (30) days from the occurrence of the Force Majeure Event the affected party is still unable to perform its obligations under this Agreement, the other party may, in such party’s sole discretion, terminate this Agreement effective upon the giving of written notice to the affected party.  The term “Force Majeure Event” includes an actual or threatened act or acts of war or terrorism, earthquake, acts of God including persistent weather conditions that materially affect the Plant’s ability to procure feedstock, receive shipments, ship ethanol, civil disturbance, hostilities, disorders, riots, sabotage, strikes, lockouts and labor disputes; provided, however, that nothing in this Section 29 is intended or shall be interpreted to require the resolution of labor disputes by acceding to the demands of labor when such course is inadvisable in the discretion of the party subject to such dispute.  The term “Force Majeure Event” does not include (A) events affecting the performance of third-party suppliers of goods or services except to the extent caused by an event that otherwise is a Force Majeure Event; (B) changes to market conditions that affect the price of ethanol or other outputs of the Plant or corn or other feedstocks of the Plant that are not caused directly by a Force Majeure Event; (C) any obligation of either party to make payments hereunder; or (D) any event caused solely or primarily by the acts or omissions of the party claiming a Force Majeure Event.

30.    Arbitration.  Any dispute that arises pursuant to the Agreements shall be subject to this Section 30 as follows:

(a)    In the event any dispute arises from any of the Agreements, and the parties are unable to resolve such controversy, dispute or disagreement within sixty (60) days after notice thereof is first delivered, the parties agree to submit such to arbitration in accordance with the rules of the American Arbitration Association (“AAA”).  However, the parties also agree that they are not required to use the services of the AAA and may mutually agree to appoint an arbitrator to hear any dispute.

(b)    Any arbitrator selected by mutual agreement of the parties shall be experienced in the matter or action that is the subject of the arbitration.  The arbitrator so chosen shall be impartial and independent of both parties.  If the parties cannot agree to the mutual selection of an arbitrator within twenty (20) days after the end of such thirty-day period, then any party may 

in writing request AAA to select an appropriate arbitrator, and such arbitrator shall hear all arbitration matters arising under this section.

(c)    Any arbitration shall take place in the county of Williamson, state of Tennessee.  The decision of the arbitrator is binding and no suit at law or equity shall be instituted by any party to this agreement except to enforce the decision of the arbitrator.  Any award rendered by the arbitrator shall be final and judgment may be entered on it in any court having jurisdiction.

31.    General:

(a)    This Agreement is the entire understanding of the parties concerning the subject matter hereof and supersedes any and all prior agreements.  Additionally, if this Agreement expires and/or is terminated for any reason and there are existing Purchase Contracts that have yet to be completed at the time of such expiration and/or termination these Purchase Contracts remain legally enforceable between the parties.  Any amendment to this Agreement shall only be effective and binding if in writing and executed by the parties hereto.  No waiver by any party, whether by conduct or otherwise, in any one or more instances, shall be deemed or construed as a further or continuing waiver of any such term or condition.

(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)    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.

(d)    This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.

(e)    All issues, questions and disputes concerning the validity, interpretation, enforcement, performance or termination of this Agreement shall be governed by and construed in accordance with the laws of the State of Tennessee, without giving effect to any other choice of law or conflict of laws rules or provisions.  The state and county courts located in Williamson County, Tennessee, or the Federal District Court for the Middle District of Tennessee shall be the exclusive forum for the adjudication of any disputes arising under the term of this Agreement and each of the parties irrevocably consents to the personal jurisdiction and subject matter jurisdiction of such courts.

(f)    This Agreement may be executed in two counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  This Agreement may be executed by facsimile or electronic signature.

(g)    Time is of the essence in the performance by each of Eco and HLBE of their obligations pursuant to this Agreement.

(h)    Except as otherwise stated herein, each of Eco and HLBE shall have all rights and remedies available in law, equity or otherwise in the event of the breach of failure to perform by the other of any term or condition of this Agreement.

(i)    The recitals to this Agreement are an integral part hereof and are incorporated herein by reference.

[Reminder of Page Intentionally Left Blank; Signature Page Follows.]

IN WITNESS WHEREOF, the parties hereto have executed this Ethanol Marketing Agreement as of the Execution Date.

ECO ENERGY, LLC

By: /s/ Chad Martin    
Name: Chad Martin    
Its: CEO    

HLBE

By: /s/ Steve A. Christensen    
Name: Steve A. Christensen    
Its: CEO & GM    

Ethanol Marketing Agreement
Signature Page

EXHIBIT A
E GRADE DENATURED FUEL ETHANOL SPECIFICATIONS
E Grade Denature Fuel Ethanol Specifications
	
					
	Specification Points
	Test Method
	Shipments
	Deliveries

	Apparent Proof, 60° F
	Hydrometer
	Report
	 

	Or Density, 60° F
	ASTM D-4052
	Report
	 

	 
	 
	 
	 

	Water, Volume %, Maximum
	ASTM E-203 or E-1064
	1.0
	 

	 
	 
	 
	 

	Ethanol, Volume %
	ASTM D-5501
	 
	 

	Minimum
	 
	93.5
	93.0

	Methanol, Volume %, Maximum
	ASTM D-5501
	0.5
	 

	 
	 
	 
	 

	Sulfur, ppm (wt/wt), Maxium
	ASTM D5453
	10
	 

	 
	 
	 
	 

	Solvent Washed Gum,
	ASTM D-381
	 
	 

	Mg/100mL
	Air Jet Method
	 
	 

	Maximum
	 
	5
	 

	 
	 
	 
	 

	Potential Sulfate, mass ppm
	ASTM D7319
	 
	 

	Maximum
	 
	4
	 

	 
	 
	 
	 

	Chloride, mg/L
	ASTM D-512-81
	 
	 

	Maximum
	Procedure C,
	32
	 

	 
	Modified per D-4806
	 
	 

	Copper, mg/L
	ASTM D-1688
	 
	 

	Maximum
	Method A,
	0.08
	 

	 
	Modified per D-4806
	 
	 

	 
	 
	 
	 

	Acidity (as acetic acid), Mass %
	ASTM D-1613
	 
	 

	Maximum
	 
	0.007
	 

	 
	 
	 
	 

	pHe
	ASTM D-6434
	 
	 

	Minimum
	 
	6.5
	 

	Maximum
	 
	9.0
	 

	 
	 
	 
	 

	Appearance @60 F
	Visual Examination
	Visibly free of suspended or precipitated contaminants.  Must be clear and bright.

	Denaturant Content and Type
	 
	 

	Volume %
	 
	2

	 
	 
	 

	Corrosion Inhibitor Additive,
	Minimum treat rate
	Vendor
	Additive

	One of the following is
	10 lbs./1000 bbls.
	Innospec
	DCI-11 Plus

	Required:
	20 lbs./1000 bbls.
	G.E. Betz
	Endcor GCC9711

	 
	20 lbs./1000 bbls.
	Petrolite
	Tolad 3222

	 
	20 lbs./1000 bbls.
	Nalco
	5403

	 
	20 lbs./1000 bbls.
	Betz
	ACN 13

	 
	20 lbs./1000 bbls.
	Midcontinental
	MCC5011E

	 
	13 lbs./1000 bbls.
	Midcontinental
	MCC5011PHE

	 
	13 lbs./1000 bbls.
	Petrolite
	Tolad 3224

	
					
	 
	13 lbs./1000 bbls.
	US Water Services
	Corrpro 654

	 
	10 lbs./1000 bbls.
	Nalco
	5624A

	 
	10 lbs./1000 bbls.
	Nalco
	5624ATR

	 
	13 lbs./1000 bbls.
	US Water Services
	Corrpro 656

	 
	6 lbs./1000 bbls.
	Ashland
	Amergy ECI-6

	 
	3 lbs./1000 bbls.
	G.E. Power & Water
	8Q123ULS

	 
	10 lbs./1000 bbls.
	NALCO
	EC5624A Plus

	 
	6 lbs./1000 bbls.
	US Water Services
	Corrpro Pro NT

EXHIBIT B
PURCHASE ORDER
Eco-Energy, LLC
725 Cool Springs Blvd Suite 500
Franklin, TN  37067
[***]10.78 - DGS Off-Take Agreement

CERTAIN INFORMATION INDICATED BY [***] HAS BEEN DELETED FROM THIS EXHIBIT AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT UNDER RULE 24b-2.

DISTILLER’S GRAIN OFF-TAKE AGREEMENT 
(HERON LAKE, MINNESOTA)
THIS DISTILLER’S GRAIN OFF-TAKE AGREEMENT (“Agreement”) is dated as of September 24, 2013, by and between HERON LAKE BIOENERGY LLC a Minnesota limited liability company (“Producer”), and GAVILON INGREDIENTS, LLC, a Delaware limited liability company (“Gavilon”) (each, a “Party”, and collectively, the “Parties”).
RECITALS:
(a)Producer owns and operates an ethanol production facility (the “Facility”) located in Heron Lake, Minnesota ; and 
(b)    Producer has agreed to sell to Gavilon, and Gavilon has agreed to purchase from Producer, all distiller’s grains produced at the Facility on the terms and conditions set forth hereinafter.
AGREEMENT:
NOW THEREFORE, in consideration of these premises and for the mutual promises and covenants contained herein, the Parties agree as follows:
		
	1.1
	Term.  This Agreement shall become effective on November 1, 2013 and shall remain in effect for [***].  Thereafter, this Agreement shall continue until terminated by either Party upon no less than sixty (60) days prior written notice, provided that such termination shall have no effect with respect to any Confirmed Orders entered into prior to the effectiveness of such termination.

2.    Delivery Obligations; Price and Payment.
		
	2.1
	Delivery.  During the Term, Producer shall sell and make available for delivery to Gavilon, and Gavilon shall purchase and take delivery of all distiller’s grains produced at the Facility.  Such distiller’s grains shall meet the applicable specifications set forth herein (“Product”).

		
	2.2
	Price; Payment Terms.  The price for Product sold hereunder (the “Price”) shall be based on market-price bids from Gavilon’s customers, less (a) Logistics Costs and (b) the applicable Service Fee.  Gavilon agrees to use commercially reasonable efforts to achieve the highest Price available under prevailing market conditions.  Payments on all undisputed amounts shall be made within ten (10) business days from Gavilon’s receipt of the information set forth in Section 2.4. Payments shall be made via wire to a bank account specified by the Producer. 

		
	2.3
	Logistics Costs; Fees; Net Price.  For purposes of this Agreement, “Logistics Costs” means the costs, without markup, for providing services related to or connected with either (i) transporting, storing, transloading, and otherwise handling (including demurrage, and shrinkage costs unless caused by the acts or omissions of Gavilon) Product after delivery to Gavilon, or (ii) the delivery of Transport Vessels to the Delivery Point (as defined in Section 5.5) for loading.  The applicable Service Fee for Gavilon purchase shall be as follows:

#2419907

		
	2.3.1
	With respect to dried distillers grains, [***].  

		
	2.3.2
	With respect to wet distillers grains, [***] of wet distillers grains sold

The term “Net Price” means the delivered price of Product to the customer, less Gavilon’s Logistics’ Costs (as communicated to Producer by Gavilon at the time the Parties enter into a Confirmed Order) to deliver such Product from the Facility to the customer, expressed in dollars per ton.  Thereafter, any variance in Logistics Costs occurring with respect to each such Confirmed Order shall be for Gavilon's account.
		
	2.4
	Billing Information.  For each shipment of Product to Gavilon, Producer shall furnish the following in reasonable detail: (i) an invoice giving the actual quantity and date of shipment of the Product, (ii) the applicable weight certificate(s) described in Section 3.2.

		
	2.5
	Payment Verification.  Any payment made pursuant to this Section will not preclude a Party from subsequently verifying payments of the other Party as permitted in Section 14.3 of this Agreement.  Each party shall use commercially reasonable efforts to resolve any disputed payment amounts within 72 hours of the time notice of such dispute was received by the non-disputing party.  

		
	2.6
	Taxes.  Producer shall pay or cause to be paid all valid levies, assessments, duties, rates and taxes (together “Taxes”) on Product delivered hereunder that arise prior to, or as a result of, the sale and delivery of Product at the Delivery Point.  Gavilon shall pay or cause to be paid all Taxes, including fuel or excise Taxes, on Product that arise after the sale (other than third-party sales) and delivery of Product to Gavilon at the Delivery Point.

3.    Quantity and Quality.
		
	3.1
	Delivery.  Delivery and receipt of Product purchased hereunder shall take place at the applicable Delivery Point (as defined in Section 5.5) in accordance with the corresponding Confirmed Order.  The Parties shall establish a mutually agreed Delivery Schedule as defined and described in Exhibit “A”.

		
	3.2
	Quantities.  The quantity of Product delivered to Gavilon shall be established by outbound weight certificates, as evidenced by the weight documentation provided by Producer.  The certificates shall be obtained daily from either scales or other metering devices which are certified as of the time of weighing and which comply with all applicable laws, rules and regulations.  Gavilon shall have the right to test such scales or devices at any time provided that such testing shall not cause any unreasonable disruption to Producer’s operations at the Facility.  

		
	3.3
	Standards.  Producer understands that Gavilon intends to sell the Product as a primary animal feed ingredient and that such Product are subject to minimum quality standards for such use.  Producer agrees and warrants that the Product shall be accepted in the feed trade under current industry standards, shall fully comply with any applicable state and federal laws governing quality of product, and shall be free and clear of liens and encumbrances.

		
	3.4
	Specifications.  Producer warrants that unless otherwise mutually agreed in writing all Product sold hereunder shall, at the time of delivery to Gavilon, conform to the minimum quality requirements set forth in this Section 3.4.  The values quoted below are on an “as 

2

fed” basis.  Each shipment of Product shall include a copy of the guaranteed analysis, which shall be registered with the State of Minnesota.  Producer may modify the specifications set forth in this Section 3.4 upon no less than 60 days written notice to Gavilon, provided that the specifications of Product that is the subject of a Confirmed Order may only be modified upon mutual written agreement of Gavilon and Producer. 
	
											
	Dried Distillers Grains

	 
	Crude Protein
	Crude Fat
	Crude Fiber
	Moisture
	 

	 
	Min
	Max
	Min
	Max
	Min
	Max
	Min
	Max
	 

	 
	25
	 
	7.0
	 
	 
	15
	 
	12.5
	 

	 
	 
	 
	 
	 
	 
	 
	 
	 
	 

	Wet Distillers Grains

	 
	Crude Protein
	Crude Fat
	Crude Fiber
	Moisture
	 
	 

	 
	Min
	Max
	Min
	Max
	Min
	Max
	Min
	Max
	 

	 
	11
	 
	4.0
	 
	 
	5.5
	 
	60
	 

		
	3.5
	No Adulteration or Misbranding.  Producer warrants that at the time of loading, the Product will not be adulterated or misbranded within the meaning of the Federal Food, Drug and Cosmetic Act and that each shipment may lawfully be introduced into interstate commerce under such Act.  Payment of invoices does not waive Gavilon’s rights if the Product do not comply with terms or specifications of this Agreement.

		
	3.6
	Product Certification.  Weekly samples from Product will be sent to an outside laboratory for testing by Producer to ensure the Product conform to the specifications in Section 3.4.  The results of such test will be forwarded from Producer to Gavilon upon receipt at the Facility.  

		
	3.7
	Samples.  Producer agrees to maintain a representative daily aggregate sample for a period of three (3) months.  Producer will retain these samples and shall provide Gavilon access to such samples promptly upon request. 

		
	3.8
	Nonconforming Product. If within five (5) days after arrival at customer Product are found to be out of specification by Gavilon or by an independent laboratory using industry approved analysis and sampling methods (“Nonconforming Product”), such condition will be promptly communicated to Producer.  Gavilon will provide a copy of the certified laboratory report(s) evidencing the Nonconforming Product along with available chain of custody documentation.  Producer may, within the succeeding five (5) days of receipt of such notice, take steps to refute or verify such nonconformance, including by obtaining an independent certified lab test and by observing conditions at the customer’s site that may impact test results including chain of custody of sample.  All disputes regarding nonconforming product shall be settled pursuant to NGFA rules.  Upon verification of such nonconformance, Producer will then direct Gavilon to either (i) sell the Nonconforming Product at a discounted 

3

price, or (ii) return the Nonconforming Product to Producer.  If such Nonconforming Product are not discountable, Producer may replace the Nonconforming Product with an acceptable type and/or quality of Product within five (5) days of receipt of written notice that the delivered Product are nonconforming and that such nonconformance has been confirmed.  In the event Producer cannot replace the Nonconforming Product within the five (5) day period, Gavilon shall have the option to return the Nonconforming Product, withhold payment therefor and purchase replacement Product.  Producer will be responsible for all direct costs of replacing or disposing of any Nonconforming Product, including any costs reasonably incurred by Gavilon as a result of the Nonconforming Product and/or any unreasonable delay by Producer in obtaining conforming Product.  Such costs may include, without limitation, reasonably incurred storage costs or costs reasonably incurred by Gavilon to return such Nonconforming Product to Producer.  If such Nonconforming Product are sold by Gavilon at a discount, the Price payable by Gavilon will be calculated in the normal manner.
		
	3.9
	Quality Control Procedures.  Upon Producer’s receipt of the applicable truck or railcar, as (the “Transport Vessel”) and prior to product loading in each such Transport Vessel, Producer will visually inspect for equipment integrity, safety, and potential contamination.  Producer shall notify Gavilon immediately in the event any Transport Vessel does not meet the minimum requirements.  In the event a Transport Vessel provided by Gavilon is unsuitable for loading due to any of the aforementioned reasons, Gavilon shall arrange for a substitute Transport Vessel to arrive for loading within twenty-four (24) hours of Producer’s notification to Gavilon, or such longer period of time as may be agreed between Producer and Gavilon acting in a commercially-reasonable manner.  

4.    Third-Party Sales; Shortfalls.  
		
	4.1
	Third-Party Sales.  Section 2.1 notwithstanding, should Producer receive offers to purchase Product (i) in which delivery would occur more than fifteen (15) days forward, and (ii) at prices that would be more favorable to Producer than the gross price (exclusive of Service Fee) offered by Gavilon (but on terms that are otherwise customary and comparable to those set forth herein), Producer shall give Gavilon written notice of the delivery terms, quantity and sales price available to Producer as well as the third party offering those more favorable terms. If Gavilon does not match the third-party terms within one (1) business day of receipt of such notice, Producer may then sell Product to such third party in the quantities and prices as notified to Gavilon.  In such event, at Producer’s written request, Gavilon shall generally assist Producer with the logistics relating to third-party sales.  To the extent Producer requests Gavilon to assist with logistics of third-party sales, Producer shall pay Gavilon a service fee equal to [***].  No third-party sales shall affect any Confirmed Orders (as defined in Exhibit “A”) previously established between the Parties unless agreed upon in writing by both Parties.

		
	4.2
	Purchase Shortfall.  If Gavilon fails to purchase and take delivery of any quantities of Product specified in Confirmed Orders, and Producer after using commercially reasonable efforts to mitigate any damage, has produced and must sell such Product to a substitute purchaser at a price lower than the applicable Price, Gavilon shall pay Producer the amount by which the applicable Price exceeds the actual sales price per ton, multiplied by the number of tons sold to the substitute purchaser.  If Producer exercises commercially reasonable efforts and is still unable to sell any such Product to a substitute purchaser, then Gavilon 

4

shall pay Producer an amount equal to the Price multiplied by the entire unsold portion.  Gavilon shall remit payment within five (5) business days following the invoice date and receipt of supporting documentation.  In either case, Gavilon shall also pay any additional costs solely and directly incurred by Producer to identify a substitute purchaser, to store the Product until they can be sold or disposed of, or to dispose of the Product remedy specified in this Section 4.2 shall be Producer’s sole and exclusive remedy in the event Gavilon fails to purchase and take delivery of the Product specified in the Confirmed Order.
		
	4.3
	Delivery Shortfall.  If Producer fails to make available for purchase the quantity of Product specified in Confirmed Orders, and Gavilon, using commercially reasonable efforts to mitigate any damage, is unable to obtain a substitute supply of Product at a price equal to or less than the Price, Producer shall pay Gavilon the amount by which the Price is less than the price paid by Gavilon for substitute supply, multiplied by the delivery shortfall (Confirmed Order quantity less the amount actually delivered by Producer); plus any additional costs solely and directly incurred  by Gavilon to identify a substitute purchaser.  Such payment shall be remitted within five (5) business days following the invoice date and receipt of supporting documentation.  The remedy specified in this Section 4.3 shall be Gavilon’s sole and exclusive remedy in the event that Producer fails to supply the quantity of Product specified in the Confirmed Order.

5.    Transportation and Logistics.
		
	5.1
	Logistics Responsibilities.  Gavilon shall be responsible for the management of logistics which arise prior to the Transport Vessel reaching the Delivery Point, and which arise after the Product is completely loaded onto the Transport Vessel (“Delivery”). This responsibility will include the management of Producer’s railcar fleet as further described in Section 5.6.  Producer shall be responsible for all logistics that arise once the Transport Vessel has reached the Delivery Point up through Delivery.  Gavilon will be responsible for monitoring logistics while the Transport Vessel is at destination to ensure efficient offloading.  Gavilon will secure and maintain all licenses, documents and contracts necessary to transport Product following Delivery.

		
	5.2
	Hours of Operation.  Producer shall use commercially reasonable efforts to keep the Facility open for truck delivery between the hours of 7:00 am to 5:00 pm Monday through Friday (“Normal Operating Hours”).  Gavilon may from time to time request that the Facility be accessible during other times or days.  Producer will attempt to accommodate these requests provided Gavilon pays for any associated overtime costs incurred by Producer.  Producer will promptly notify Gavilon in advance of scheduled events where truck delivery will not be possible.  In instances where an unscheduled event makes truck delivery impossible, Producer will immediately notify Gavilon so that Gavilon may contact the applicable carriers.  

		
	5.3
	Producer’s Demurrage Obligations.  Producer’s responsibility for Demurrage if actual Demurrage compensation is sought, for trucks will begin to accrue after the second (2nd) hour waiting to load at the Facility provided the truck arrived during Normal Operating Hours.  For purposes of this Agreement, the term “Demurrage” includes all costs, damages, penalties and charges resulting from any delay in loading and/or unloading of DDG shipments, whether due to mechanical failure or other event outside the course of normal 

5

operations but not including delays resulting from the occurrence of multiple trucks arriving to load within the same general time period.
		
	5.4
	Notification of Problems with Delivery.  Producer shall inform Gavilon of any problem regarding any shipment of Product, without delay, by fax, telephone, or email, after Producer becomes aware of any such problem.  This may include an event that could result in an unscheduled Facility shutdown, or the possible event that one or more Product orders are not available from Producer in the quantity originally set out in the Confirmed Order.  Gavilon shall inform Producer of any problems in delivering Transport Vessels in accordance with the Delivery Schedule.  

		
	5.5
	Delivery Point.  For purposes of this Agreement, the term “Delivery Point” means, with respect to Transport Vessels, the location at the Facility where the Transport Vessel is received for loading, as follows: the Delivery Point for railcar shipments is the railroads’ “constructively placed” designation; and the Delivery Point for trucks is the arrival of the truck at the Facility within the loading hours specified in this Agreement.  “Delivery Point” means, with respect to Product, the location at the Facility where the loading of Product is completed on railcars or trucks, as follows: the Delivery Point for railcar shipments is the railroads’ “constructively placed” designation and the Delivery Point for truck shipments is the departure of the loaded truck from the Facility.

		
	5.6
	Railcars.  Producer will provide at its cost and expense all railcars required for Gavilon to deliver the Product sold hereunder.  Consequently, railcar lease costs will not be included in Logistics Costs.  In the event Producer experiences a shortage of railcars, Gavilon will sublease, on a monthly basis, such railcars as it may have available upon request by Producer.  The monthly sublease charges will be based on market value (values proposed by Gavilon and accepted by Producer) lease costs and will be deducted from amounts otherwise payable by Gavilon to Producer.

6.    Possession and Title.  
		
	6.1
	Title; Risk of Loss. Title to and risk of loss in Product purchased hereunder shall pass from Producer to Gavilon upon Delivery.  Until such time, Producer shall be deemed to be in control of and in possession of and shall have title to and risk of loss in the Product.

		
	6.2
	Responsibility for Product.  Gavilon shall have no responsibility or liability with respect to any Product until Delivery thereof pursuant to this Agreement.  Without prejudice to Gavilon’s right to reject Nonconforming Product as set forth in Section 3 and without affecting Producer’s liability for the Delivery of Nonconforming Product, Producer shall have no responsibility or liability with respect to Product after its Delivery.

7.    Producer Representation
		
	7.1
	Producer represents and warrants that entry into this Agreement with Gavilon will not cause and/or result in a breach of any agreement in existence between Producer and any other party and that Producer is fully able to perform the terms of this Agreement and doing so will not result in or cause a breach of any obligation and/or duty that Producer has to any other Party.

8.    Default and Termination.

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	8.1
	Events of Default.  The occurrence of any of the following shall be an “Event of Default” under this Agreement:

		
	8.1.1
	Breach by either Party in the performance of any material covenant or agreement set forth in this Agreement (subject to Section 8.1.3) and such breach continues uncured for more than thirty (30) days following written notice thereof from the non-defaulting Party; or

		
	8.1.2
	If either Party becomes insolvent or generally fails to pay its debts as they come due, or makes a general assignment for the benefit of creditors or to an agent authorized to liquidate any substantial amount of its assets, or is adjudicated bankrupt or has a receiver or custodian appointed with respect to a substantial part of its property, or files a petition in bankruptcy, or applies to a court for the appointment of a receiver for any of its assets or properties; or

		
	8.1.3
	If either Party fails to make payment hereunder within five (5) business days following receipt of written notice from the non-defaulting Party; or

		
	8.1.4
	The making of a materially incorrect or misleading representation or warranty under this Agreement; or

		
	8.2
	Remedies; Termination.  Upon an Event of Default, the non-defaulting Party shall notify the other Party thereof and shall have available all remedies set forth in this Agreement.  Without limiting the foregoing, if an Event of Default occurs and is not waived, the non-defaulting Party may immediately terminate or suspend performance under this Agreement by promptly thereafter delivering written notice thereof to the other Party.  The defaulting Party shall be responsible for any other costs and expenses (including, without limitation, reasonable attorneys’ fees and disbursements) incurred by the non-defaulting Party in connection with an Event of Default.

		
	8.3
	Right to Close Out Transactions.  Upon an Event of Default, the non-defaulting Party shall (in addition to any other rights or remedies available to it, whether at law or in equity, by contract or otherwise) have the right, upon twenty four (24) hours notice to the defaulting Party to liquidate and terminate any or all transactions then outstanding between the Parties (except to the extent that in the good faith opinion of the non-defaulting Party certain of such transactions may not be closed out and liquidated under applicable law) at any time and from time to time.  No such notice shall be required with respect to termination pursuant to Section 8.2.  The non-defaulting Party shall then calculate, in a commercially reasonable manner, a Settlement Amount (as defined below) for each transaction as of the time of its termination or as soon thereafter as is reasonably practicable and shall net such Settlement Amounts in the manner provided for below.

The Settlement Amount shall be due to or from the non-defaulting Party as appropriate.  In calculating a Settlement Amount, the non-defaulting Party shall discount to present value (in a commercially reasonable manner based on rates for the applicable period) any amount which would otherwise have been due at a later date and shall add interest (at a rate determined in the same manner) to any amount due prior to the date of the calculation.
The non-defaulting Party shall set off (i) all such Settlement Amounts that are due to the defaulting Party, plus any margin then held by the non-defaulting Party, plus (at the non-

7

defaulting Party’s election) any or all other amounts due to the defaulting Party under this Agreement, against (ii) all such Settlement Amounts that are due to the non-defaulting Party, plus (at the non-defaulting Party’s election) any or all other amounts due to the non-defaulting Party under this Agreement or otherwise, so that all such amounts shall be netted to a single liquidated amount (“Net Settlement Amount”) payable by one Party to the other.  The Party with the Net Settlement Amount shall pay such amount to the other Party within one (1) business day of demand therefor.
If an Event of Default occurs, the non-defaulting Party (at its election) may set off any or all amounts which the defaulting Party owes to it (whether under this Agreement or otherwise and whether or not then due) against any or all amounts which it owes to the defaulting Party (whether under this Agreement or otherwise and whether or not then due), provided that any amount not then due which is included in such setoff shall be discounted to present value as at the time of setoff (to take account of the period between the date of setoff and the date on which such amount would have otherwise been due).
For purposes of this Agreement, “Settlement Amount” means, with respect to each transaction arising under a Confirmed Order, the losses and costs (or gains), which the non-defaulting Party incurs as a result of a liquidation pursuant to this Section 8.3 including, but not limited to, losses and costs (or gains) based upon the then-current replacement value of such transaction (taking into account any portion of the Confirmed Order quantity already delivered as of the liquidation), together with, at the non-defaulting Party’s option but without duplication, all losses and costs which such Party incurs as a result of maintaining, terminating, obtaining, or re-establishing any hedge or related trading positions.
9.    Confidentiality.
		
	9.1
	Nondisclosure of Confidential Information.  Each Party acknowledges that, by reason of this Agreement it and its principals, employees, advisors, lenders, and affiliates may receive confidential or proprietary information belonging to the other Party.  In no event will the terms and conditions of this Agreement be disclosed except to the extent required by applicable law or as agreed upon in writing by both Parties.  The confidentiality obligations hereunder shall survive any expiration or termination of this Agreement.  Notwithstanding the foregoing, confidential information may be delivered to third parties for the sole purpose of calculating a published pricing index.

		
	9.2
	Announcements.  Any public statements, press releases, and similar announcements concerning the negotiation or consummation of the transactions contemplated hereby, including such statements made by any representative of the Parties, shall be jointly planned and coordinated by the Parties.  Neither Party shall issue any such statement without the prior review (for which the reviewing Party shall have a minimum of five (5) business days) and consent of the other Party, which consent shall not be unreasonably withheld or delayed.  In no event will the terms and conditions of this Agreement be disclosed except to the extent required by applicable law.

10.    Limitation of Liability; Indemnification; Insurance.
		
	10.1
	Limitation of Liability.  Without limiting any express remedies set forth in this Agreement, and except for any acts of willful misconduct or fraud, or damages arising from third-party product liability and product warranty claims, neither Producer nor Gavilon will be liable 

8

to each other or any third party for any indirect, consequential, punitive, exemplary or special damages, loss of business expectations, lost profits, or business or facility interruption or shut-down costs.
		
	10.2
	Indemnification.  Each Party (the “Indemnitor”) shall release, defend, indemnify and hold harmless the other party, its affiliates, its contractors, and their respective members, partners, directors, officers, shareholders, managers, employees, agents and representatives from and against any and all losses, damages, fines, liens, levies, penalties, claims, demands, causes of action, suits, legal or administrative proceedings, orders, governmental actions and judgments of every kind and character, and any and all costs and expenses (including, without limitation, reasonable attorneys’ fees, reasonable expert witness fees, and court costs) related thereto (collectively, “Claims”) which arise out of, result from or relate in any way, directly or indirectly, to (a) a breach of this Agreement by the Indemnitor, or (b) the acts or omissions hereunder of the Indemnitor or its affiliates, contractors, and their respective members, partners, directors, officers, shareholders, managers, employees, agents and representatives.

Producer shall specifically defend, indemnify and hold Gavilon (and its respective Indemnitee Group) harmless from and against any and all Claims asserted by third parties that arise from the condition or quality of the Product sold hereunder, except to the extent such Claims are the result of the acts or omissions of Gavilon, its agents or any third party following Delivery hereunder. 
The Party claiming indemnification shall give prompt written notice to the Indemnitor of any matter for which the Indemnitor may become liable under this provision.  Such notice shall contain full details of the matter in order to provide the Indemnitor with sufficient information to assess its potential liability and to undertake defense of the Claim. The indemnified Party shall have the right at all times to participate in the preparation for and conducting of any hearing, trial or other proceeding related to the provisions of this Section, as well as the right to appear on its own behalf at any such hearing, trial or other proceeding.  Any such participation or appearance by the indemnified Party shall be at its sole cost and expense.  The indemnified Party shall cooperate in all reasonable respects with the Indemnitor and its counsel in defending any Claims and shall not take any action that is reasonably likely to be detrimental to such defense.  The Indemnitor shall obtain written approval from the indemnified Party prior to any settlement that might impose obligations or restrictions on the indemnified Party.
		
	10.3
	Insurance.  Each Party shall, during the Term, provide the insurance coverages as set forth in Exhibit “B”.

11.    Force Majeure.
		
	11.1
	Force Majeure.  In the event either Party hereto is rendered unable by reason of Force Majeure, to carry out its obligations under this Agreement, such Party shall promptly give written notice and reasonably complete particulars of such Force Majeure to the other Party stating the obligation(s) the performance of which are, or are expected to be, delayed or prevented.  Notwithstanding anything herein to the contrary, the obligations of the notifying Party shall be suspended during and to the extent affected by Force Majeure and such event shall, so far as possible, be remedied with all reasonable dispatch.

9

		
	11.2
	Definition of Force Majeure.  The term “Force Majeure” shall mean any act, event or circumstance not reasonably within the control of the Party claiming suspension and which, by the exercise of due diligence, such Party is unable to prevent or overcome.  Such term shall include, but not be limited to: (i) acts of God, (ii) strikes, lockouts or other industrial acts of the public enemy, (iii) wars, blockades, insurrections, riots, epidemics, acts of terrorism, (iv) transportation shortages, (v) landslides, lightning, earthquakes, fires, storms, floods, washouts, (vi) civil disturbances, and (vii) explosions.  The term “Force Majeure” shall specifically include those events affecting any of Gavilon’s transporters of Product as well as regulatory changes which make the production and sale of Product unfeasible, but shall otherwise exclude any economic or commercial changes involving the production of Product.

12.    Risk Management; Reporting.
		
	12.1
	Monitoring of DDG Positions.  Gavilon will monitor DDG sales made hereunder and may, from time to time, make suggestions concerning Producer’s risk management program and the position of its DDG sales for future physical delivery.

		
	12.2
	Marketing Conditions.  On an as needed basis, but not less frequently than weekly, Gavilon will review with Producer market conditions relating to Product, and forward marketing strategies in an attempt to assist Producer in maximizing its revenue on DDG sales.  It is understood by Producer that all risk management services must be tied to a valid written purchase contract requiring physical delivery of Product to Gavilon.

		
	12.3
	No Liability.  Producer recognizes that Gavilon’s monitoring of DDG positions, periodic suggestions, review of market conditions and risk management services are informational and optional, and that the final decisions considering sales and risk management strategies, and the implementation of such strategies, will be made by, and is the sole responsibility of, Producer.  Gavilon is not responsible for any Producer losses or entitled to any Producer gains resulting from risk management information supplied by Gavilon.

13.    Notices.  Except as specifically otherwise provided herein, any notice or other written matter required or permitted to be given hereunder by one Party to the other Party shall be deemed to be sufficiently given if delivered by hand or by nationally-recognized overnight courier, or sent by U.S. mail (certified mail, return receipt requested), and addressed as follows: 
If to Gavilon:    Gavilon Ingredients, LLC
Eleven ConAgra Drive, STE  11-160
Omaha, NE 68102-5011 
Attn:    VP, Ingredients

With copy to:    Legal Department
Gavilon Ingredients, LLC
Eleven ConAgra Drive, STE  11-160
Omaha, NE  68102

If to Producer:                 Heron Lake BioEnergy, LLC
91246 390th Avenue
Heron Lake, MN 56137

10

Attn: Eric Baukol

    
Any notice or other written matter shall be deemed to have been given and received: if delivered by hand, on the date of delivery; and, if sent by telecopy, on the business day following the sending of the notice.
14.    Miscellaneous.
		
	14.1
	Assignment.  Neither Party may assign any of its rights or obligations under this Agreement without the prior written consent of the other Party, not to be unreasonably withheld.  A change in fifty percent (50%) or more in the ownership of a Party shall be construed to be an assignment for purposes of this Section. The above notwithstanding, either Party may, without the need for consent from the other Party: (i) transfer, sell, pledge, encumber or assign this Agreement, including the revenues or proceeds hereof, in connection with any financing arrangements; (ii) transfer or assign this Agreement to an affiliate as long as the affiliate is at least as creditworthy as the other Party; or (iii) transfer or assign this Agreement to an entity succeeding to all or substantially all of the assets of the other Party by way of merger, reorganization or otherwise.  No assignment permitted hereunder shall in any way relieve the assigning Party from liability for full performance hereunder.

		
	14.2
	Records.  Each Party will establish and maintain true and accurate books, records and accounts relating to their own transactions under this Agreement with respect to all Prices charged, payments made, and quantities of Product delivered hereunder.  These books, records and accounts will be preserved by the applicable Party for a period of at least one (1) year after the expiration of the term of this Agreement, but in no event longer than seven (7) years from the date of creation.

		
	14.3
	Audit Rights.  Upon five (5) business days notice and during normal business hours each Party has the right to audit such books, records and accounts of the other Party to the extent necessary in order to verify the accuracy of any statement, charge, computation or demand made under or pursuant to any provision of this Agreement.  If any material error is discovered in any statement rendered hereunder, such error will be adjusted within seven (7) days from the date of discovery, but no adjustment will be made for errors discovered more than two years after delivery and receipt of such statements.  Any error or discrepancy detected which has led to an overpayment or an underpayment between the Parties shall be corrected by an appropriate balancing payment to the underpaid Party or by a refund by the overpaid Party.

		
	14.4
	Inurement. This Agreement will inure to the benefit of and be binding upon the respective successors and permitted assigns of the Parties.

		
	14.5
	Entire Agreement. This Agreement and the Exhibits attached hereto constitute the entire agreement between the Parties with respect to the subject matter contained herein and any and all previous agreements, written or oral, express or implied, between the Parties or on their behalf relating to the matters contained herein are hereby terminated and canceled.  In the event of a conflict between the terms of this Agreement and any Confirmed Orders, this Agreement shall govern.

For avoidance of doubt, the Parties agree that the provisions of Sections 8, 9, 10, and 12 of the Terms and Conditions of a sales contract sent for any Confirmed Orders between Producer 

11

and Gavilon shall not apply provided that, such exclusion shall in no way render any provisions of this Agreement (including, without limitation, Section 8 of this Agreement) inapplicable.
		
	14.6
	Amendments.  There will be no modification of the term and provisions hereof except by the mutual agreement in writing signed by the Parties.

		
	14.7
	Financial Information.  If requested by a Party hereto, the other Party shall deliver within one hundred twenty (120) days following the end of each fiscal year, a copy of its audited consolidated financial statements for such fiscal year certified by independent certified public accountants.  In all cases the statements shall be for the most recent accounting period and prepared in accordance with generally accepted accounting principles, consistently applied; provided, however, should any such statements not be available timely due to a delay in preparation or certification, such delay shall not be considered a default so long as the Party providing the statements diligently pursues the preparation, certification and delivery of the statements.  Notwithstanding the foregoing, Gavilon shall not be obligated to provide such financial information until Producer signs a nondisclosure agreement, in a form acceptable to Gavilon, pertaining to such information.  

		
	14.8
	Trade Rules; Governing Law; Venue. All purchases and sales made hereunder shall be governed by the Feed Trade Rules of the National Grain and Feed Association (“NGFA”).  In the event of a conflict between the terms set forth in this Agreement and the NGFA Rules the terms set forth herein shall control.  The Agreement will otherwise be interpreted, construed and enforced in accordance with the procedural, substantive and other laws of the State of Nebraska without giving effect to principles and provisions thereof relating to conflict or choice of law even though one or more of the Parties is now or may do business in or become a resident of a different state.  All disputes arising out of this Agreement shall be submitted to binding arbitration in accordance with the NGFA Rules.  EACH PARTY HEREIN WAIVES ITS RESPECTIVE RIGHT TO ANY JURY TRIAL WITH RESPECT TO ANY LITIGATION ARISING UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY CONFIRMED ORDER. 

		
	14.9
	Cumulative Remedies.  Unless otherwise specifically provided in this Agreement, the rights, powers, and remedies of each of the Parties provided in this Agreement are cumulative and the exercise of any right, power or remedy under this Agreement does not affect any other right, power or remedy that may be available to either Party under this Agreement or otherwise at law or in equity.

		
	14.10
	No Partnership. This Agreement shall not create or be construed to create in any respect a partnership or any agency or joint venture relationship between the Parties.

		
	14.11
	Costs To Be Borne by Each Party. Producer and Gavilon shall pay its own costs and expenses incurred in the negotiation, preparation and execution of this Agreement and of all documents referred to in it.

		
	14.12
	Counterparts. This Agreement may be executed in any number of counterparts with the same effect as if Producer and Gavilon had signed the same document and all counterparts will be construed together and constituted as one and the same instrument.

12

		
	14.13
	Severability. Any provision of this Agreement, which is or becomes prohibited or unenforceable in any jurisdiction shall not invalidate or impair the remaining provisions of this Agreement, and the remaining terms of this Agreement shall continue in full force and effect.

		
	14.14
	Forward Contract/Forward Contract Merchants.  The Parties agree that each of them is a forward contract merchant as set forth in 11 U.S.C. §101 (25).  The Parties also agree that this Agreement is a forward contract as defined in 11 U.S.C. §101 (25).  The payments and transfers described herein shall constitute “Settlement Payments” or margin as set forth in 11 U.S.C. §§ 101 (51A) and (38).

		
	14.15
	Headings; Construction.  The article and section headings used herein are for convenience of reference only and shall not affect the construction or interpretation of this Agreement.  Unless the context of this Agreement otherwise requires, (i) words using the singular or plural number shall also include the plural or singular number, respectively; and (ii) the terms “hereof,” “herein,” “hereby,” “hereto,” and derivative or similar words shall refer to this entire Agreement.  The Agreement is the product of negotiation by and among the Parties hereto.  The Agreement shall be interpreted and constructed neutrally as to all Parties, without any Party deemed to be the drafter of the Agreement.  Any word, phrase or expression that is not defined in this Agreement and that has a generally accepted meaning in the custom and usage in the renewable fuels industry shall have that meaning in this Agreement.

		
	14.16
	Waiver.  No delay or omission in the exercise of any right, power, or remedy hereunder shall impair such right, power, or remedy or be construed to be a waiver of any default or acquiescence therein.

IN WITNESS WHEREOF the Parties have executed this Agreement as of the date first above written.
GAVILON INGREDIENTS, LLC            HERON LAKE BIOENERGY, LLC 

By:     /s/ Corey Dencklau                By:     /s/ Steve A. Christensen        
Name:     Corey Dencklau                    Name:     Steve A. Christensen            
Title:     VP of Ingredients                Title:         CEO & GM            

13

EXHIBIT “A”  
 
PLANNING, ORDERING AND DELIVERY OF PRODUCT 
1.    Delivery Schedule.  The parties shall jointly develop a schedule (the “Delivery Schedule”) that will serve as the formal planning tool for Product to be delivered. 
The specific format of the Delivery Schedule will be mutually created by the Parties.  Gavilon shall review the initial draft of the Delivery Schedule and advise Producer of inventory management, transportation and logistics issues upon receipt.  Gavilon shall amend the Delivery Schedule to reflect dates and quantities for each Delivery of Product under Confirmed Orders, and the expected mode of transport for these shipments.  The Delivery Schedule will be updated and submitted daily each morning to reflect prior day’s Deliveries or other operational changes.  Producer will be notified immediately when new truck orders for Delivery added during a day to be picked up that same day occur.  Producer and Gavilon will establish at the start of each week how many rail Deliveries are to be expected and which days they will occur on.  Producer will update Gavilon as needed on changes to this schedule.  
2.    Confirmed Orders.  Each purchase and sale of Product hereunder shall be consummated by conversational approval via phone, email or instant message acknowledged by Gavilon and Producer (each, a “Confirmed Order”) and  shall be evidenced by a separate sales contract, sent by Gavilon to Producer, substantially in the form of Exhibit “C” attached hereto.  Each Confirmed Order shall specify the quantity, Delivery date(s), the Price, or Price referenced to a Market Value, and any such other information as the Parties may agree to include.  Producer shall execute the applicable Confirmed Order and email the executed document to Gavilon.  Confirmed Orders may be executed in counterpart and signatures exchanged by email shall be binding to the same extent as the original, with the executing Party waiving any requirement that the receiving Party produce or otherwise evidence the existence or delivery of the original.  To the extent that any terms of any Confirmed Order conflict with the terms of this Agreement, the terms of this Agreement shall govern, unless, both Parties have specifically expressed their intent in writing to supersede the terms of this Agreement.
3.    Forward Liquidity and Market Tenor.  It is understood that the forward tenor on all bids will be based on, and limited by, market volatility and other factors including Producer’s creditworthiness.  
4.    Delivery Schedule Deviations.  The Parties recognize the need to maintain a degree of flexibility to accommodate unexpected changes in the Facility operating capacity, and changing Product market conditions.  Upon notification by either Party of any  deviations that potentially impact the normal business operations of the Producer, Gavilon or the end user to the Delivery Schedule, the Parties agree to work in good faith to jointly resolve any such discovered deviations and correct such deviations within fifteen (15) days following first notification.
5.    Liability Disclaimer.  Each of the Parties understands and agrees that except for quantity, type, quality and price quotations confirmed by the Parties in Confirmed Orders pursuant to this Exhibit “A”, the planned production rates, estimated costs, pricing and market information, and all other information furnished by the Parties in the preparation of the Delivery Schedules is for planning and informational purposes only. Neither Party shall be responsible to the other for any actions taken in reliance on such estimates, plans and other information.

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6.    Contact Information.  Each Party shall appoint at least one (1) person to act as the point of contact regarding delivery coordination, preparation of Delivery Schedules, orders and order confirmation, and other technical and logistical questions relating to Product or the delivery thereof.  The respective contact persons shall, unless notified otherwise, be as follows:
                       Producer:            
                                                                        Eric Baukol
                                                                          Heron Lake BioEnergy, LLC
                                                                          91246 390th Avenue
                                                                          Heron Lake, MN 56137        
Phone:        320-564-3100
E-Mail:        ebaukol@granitefallsenergy.com

Gavilon:            Corey Dencklau 
Eleven ConAgra Drive (11-160)
Omaha, NE 68102
Phone:        (402) 889-4397
E-Mail:                Corey.Dencklau@gavilon.com
 

 

15

EXHIBIT “B”  
 
INSURANCE COVERAGES
Each Party shall purchase, maintain and provide proof (via Certificate of Insurance) of the following insurance:
A.    Commercial General Liability Insurance - $2,000,000 per occurrence and $2,000,000 aggregate.  Such Policy shall include coverage for liability resulting from Premises/Operations, Products and Completed Operations, Blanket and Contractual Liability, Products Liability, Personal Injury and Advertising Injury.  Policy shall also included coverage for Broad Form Property Damage, including explosion, collapse and underground hazards.  Such insurance shall be on an occurrence basis. 

B.    Workers’ Compensation and Employers Liability Insurance including a waiver of subrogation.  Such insurance shall include but not be limited to:

(i)  Statutory liability under the workers’ compensation laws of the state of Minnesota.
(ii)  Employers’ Liability (Part B) with limits of at least $1,000,000 each accident, $1,000,000 by disease policy limit, $1,000,000 by disease each employee.  
C.    Commercial Automobile Liability Insurance with a $1,000,000 Combined Single Limit, and including coverage for liability resulting from the operation of all owned, non-owned and hired automobiles.  Such insurance shall be on an occurrence basis.  
D.    Each Party shall also carry excess or umbrella liability insurance with limits of at least $4,000,000 per occurrence for bodily injury or property damage in excess of the limits afforded for general liability and automobile liability provided above.
Each party shall name the other as “additional insured” on policies listed in A and C above.  All required policies of insurance shall be endorsed to provide that the insurance company shall notify the certificate holder at least thirty (30) days prior to the effective date of any cancellation or material change of such policies.  All insurance companies shall have an A.M. Best rating of A- VII or better.

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EXHIBIT “C”
FORM OF SALES CONTRACT
BUYER AND SELLER HEREBY AGREE TO, AND CONFIRM, THE PURCHASE AND SALE OF THE REFERENCED COMMODITIES, SUBJECT TO THE TERMS AND CONDITIONS STATED BELOW AND ON THE REVERSE SIDE OF THIS CONFIRMATION. FAILURE TO ADVISE GAVILON VIA E-MAIL, FAX, OR OTHER WRITTEN FORM WITHIN FIVE (5) BUSINESS DAYS FOLLOWING YOUR RECEIPT OF THIS CONFIRMATION OF ANY DISCREPANCY, OBJECTION TO, OR DISAGREEMENT WITH THIS CONFIRMATION SHALL RESULT IN THIS CONFIRMATION'S AUTOMATICALLY BEING DEEMED ACCEPTED BY YOU. 
[Letterhead]
Contract of Purchase 

Seller:      Date:   _________________
[SELLER ADDRESS]    Our No:   _______________
_________________    Your No:   ______________
_________________    Broker: Broker No:  _______
_________________    Broker Cont.  ____________
Buyer: 
GAVILON INGREDIENTS, LLC-OMAHA 11 CONAGRA DRIVE OMAHA NE 68102 Ph#: (402)889-4371 
Commodity:         DISTILLER'S GRAINS 
Quantity:                                 Vomitoxin: Not to exceed 5 ppm
Shipment:                             Aflatoxin: Not to exceed 20 ppb
Price:                         
Shipping Basis:                     
Weights To Apply:                     
Terns:                         
Remarks:     
        
        
GAVILON INGREDIENTS, LLC – OMAHA    [SELLER]

By ____________________________    By:  ___________________________
NOTE: The lack of a signature shall not prevent a valid and binding agreement from being formed between the parties. 
The provisions of: (a) the Electronic Signatures in Global and National Commerce Act ("E-Sign"); (b) the Uniform Electronic Transactions Act ("UETA"); and (c) Amended Article 2 of the Uniform Commercial Code relating to electronic contracting ("Amended Article 2") shall apply to this contract. In the event of a conflict between or among the provisions of any of the foregoing, such conflict shall be resolved as follows: (y) the provisions of E-Sign shall have precedence over those of UETA; and (z) the provisions of UETA shall have precedence over those of Amended Article 2. However, all such provisions shall be reasonably interpreted so as to avoid conflicts between or among them.  Nothing in this provision shall be interpreted or deemed to be a waiver of any other rule of evidence governing the admissibility of an Imaged Document.

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Terms and Conditions 

1. Whether or not Seller is an active member of any of the following associations, and to the extent not inconsistent with the terms and conditions of this Contract, the rules, regulations and standards of the following associations (the "Associations") shall apply respectively to each of the commodities governed thereby: the National Grain and Feed Association, the American Fats and Oils Association, the National Oilseed Processors Association, the American Dehydrators Association, the Canadian Oilseed Processors Association, and the National Cottonseed Products Association. If more than one Association purports to govern a given commodity, the rules and regulations of the association appearing later in the list shall apply.
2. Buyer and Seller may be collectively referred to as "the Parties" or individually as "the Party".
3. Whether or not an active member of any of the Associations referenced in Paragraph I hereof, Seller acknowledges that it understands the provisions of the applicable Association's rules, regulations and standards, and Seller agrees to be bound thereby. The Parties agree to settle any controversies hereunder by arbitration, that the arbitration rules of the applicable Association shall be the basis of said arbitration or if the applicable Association does not have arbitration rules, then according to the rules of the American Arbitration Association, and that the decision and award determined by such arbitration shall be final and binding upon the Parties.
4. It is agreed that neither Party to this Contract shall delegate the performance of any obligation hereunder nor assign any rights arising hereunder, to any third person without the prior written consent of the other Party.
5. Seller warrants that commodities delivered under this Contract will be free and clear, from and after time of delivery, of any security interest, lien, claim or encumbrance and that Seller has good and merchantable title thereto. Seller agrees that should any lien, security interest or encumbrance be claimed against any commodity sold hereunder, Seller will immediately cause the same to be discharged and terminated; and, will hold Buyer harmless therefrom; and, indemnity Buyer from any costs or losses incurred as a result of such claim.
6. Seller expressly represents and warrants that the commodity or commodities hereby purchased are of the grade indicated, and if none is indicated, that the commodity or commodities are suitable for feeding to poultry and livestock and in no event shall have a vomitoxin content exceeding 5 parts per million or an aflatoxin content exceeding 20 parts per billion. Seller indemnifies and holds Buyer harmless against any liability, loss, cost, expense or damage related to the failure of any portion of the commodities purchased hereunder to meet Food and Drug Administration or other applicable governmental agency's rules, regulations and standards for said commodity, as well as the applicable Association's (as referenced in paragraph I hereof) rules, regulations, and standards for such commodity. Buyer's payment will not constitute acceptance of a commodity sold hereunder or serve to waive Buyer's rights to reject the commodity or recover damages should the commodity fail to comply with the terms or specifications of this Contract. Buyer specifically reserves all rights and remedies available to it under the applicable Association's (referenced in Paragraph I hereof) rules, regulations, and standards; and the Uniform Commercial Code in effect within the jurisdiction under which this Contract is governed, if any of the commodity sold hereunder fails to comply with the warranties, descriptions, and requirements set forth in this Contract, or the applicable Association's rules, regulations, and standards. In addition to and without waiving any of Buyer's other remedies hereunder, Buyer may, at its sole option, request that the Seller replace any or all portions of any shipment of commodities hereunder which fails to comply with the terms of this Contract; said replacement shipment to be at Sellers sole cost and expense and occur within seven (7)days of Sellers receipt of Buyer’s notice of the commodity's non-compliance with this Contract.
7. Buyer expressly reserves the right to cancel this Contract within the meaning of UCC section 2106 based upon the occurrence of any of the following: (a) the insolvency or financial condition of Seller; (b) the appointment for taking possession of any Seller's assets or any part thereof by any third party, including a trustee, receiver, creditor or other party; (c) the breach of any warranty; or, (d) any other defaults hereunder.
8. This Contract assumes Buyer is purchasing free-flowing commodities. In the event any commodity arrives at its destination and does not freely flow, Buyer reserves the right to reject the shipment. If Buyer rejects the shipment Seller shall be responsible for all transportation, rail, freight and delivery charges.
9. In the event Seller breaches this Contract in any manner, Seller shall be liable to Buyer for any and all damages, including consequential damages, incidental damages, and any lost profits incurred as a result thereof and shall pay Buyers reasonable attorney fees, court costs and expenses incurred in the enforcement of this Contract and any collection activities related thereto.
10. In the event that a party hereto (the "Defaulting Party") becomes insolvent, or suffers or consents to or applies for the appointment of a receiver, trustee, custodian or liquidator of itself or any obits property, or generally fails to pay its debts as they become due, or makes a general assignment for the benefit of creditors, or files a voluntary petition in bankruptcy, or seeks reorganization, in order to effect a plan or other arrangement with creditors or any other relief under the Bankruptcy Code, Title II of the United States Code, as amended or recodified from time to time, or under any state or federal law granting relief to debtors then the other party (the ''Non-defaulting Party") may (i) immediately cancel this Contract and all other Contracts between the parties hereto, (ii) liquidate such cancelled Contracts in a commercially reasonable manner, and (iii) aggregate such liquidated amounts into a single liquidated settlement amount (the "Settlement Amount") due, which shall be due and payable two (2) business days after written notice by the Non-defaulting Party. In addition, the Non-defaulting Party may set-off any amounts owed by the Defaulting Party to the Non-defaulting Party under any other agreements between the parties against any Settlement Amount owed by the Non-defaulting Party to the Defaulting Party hereunder. The parties agree that each of them is a forward contract merchant as set forth in II U.S.C. Section 101(25). The parties also agree that this Contract and any other commodity contract between the parties are all forward contracts as defined in II U.S.C. Section 101(25). The payments and transfers described herein shall constitute "Settlement Payments" or "Margin Payments" as set forth in II U.S.C. Sections 101(5IA) and (38).  
11. Railcars must be loaded to capacity as required by railroad companies. Seller to pay weighing, inspection, trackage, and interest charges, if any. reconsigned rail cars cannot be utilized on this Contract unless consented to by Buyer in writing prior to loading. Buyer reserves the right to change destination offal shipments prior to departure of the railcar from Sellers facility.
12. If confirmation calls for delivery beyond fourteen (14) days from the date of this Contract, Buyer may demand from Seller a margin deposit often percent (10%) of the gross value of this Contract to be considered as margin on equity, and Buyer may demand such further payments from Seller as may be necessary to maintain a deposit on this Contract often percent (10%) of the gross value of this Contract, plus an amount equal to the difference between the contract-price-value and the prevailing market price-value, if the market is above the Contract price. Seller agrees to pay such margin on demand and if not paid, Buyer may exercise the same rights as if Seller had defaulted on this Contract.
13. Each Party consents to the recording of all telephone conversations between its representatives and the representatives of the other Party.
14. Any provision of this Contract which is prohibited or unenforceable in any jurisdiction shall, be ineffective only to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction.
15. Seller warrants it has read this Contract in its entirety and understands its terms and legal effect. This Contract constitutes the entire understanding between the Parties hereto and no modification or amendment of this Contract shall be valid or binding unless agreed to by both Parties and confirmed by a writing signed by the party to be charged. Seller agrees that the terms hereof are acceptable and that Seller intends to be bound by the terms of this Contract even if said terms differ from or conflict with the terms or conditions contained in Sellers offer, acceptance on form of contract for such purchase.
16. Unless otherwise exempt, this Contract incorporates by reference the EEO Clause contained in 41 C.F.R. Sections 60-1.4, 60-741.5, and 60-250.5.
17. Any original contract and/or transaction confirmation relating to a transaction between the parties may be converted to and saved in electronic format (the "Imaged Document"). Each party waives any objection it may have to the admissibility of such Imaged Document in any judicial, arbitration, mediation, administrative, or other proceeding involving the parties to the extent such objection is based on any rule of evidence that: (a) requires 

18

authentication or identification of the Imaged Document; (b) requires an original document; or (c) governs the admissibility of duplicates. In addition, each party acknowledges that Imaged Documents are business records within the meaning of the business records exception to the hearsay rule.

19

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