Document:

exv10w11

 

Exhibit 10.11

ETHANOL MARKETING
AGREEMENT

This Ethanol Marketing Agreement (“Agreement”) is made and entered into as of the 31st day of
August, 2004 by and between Granite Falls Energy, LLC a Minnesota limited liability company (“GFE”)
and AVENTINE RENEWABLE ENERGY, INC., a Delaware corporation (“ARE”) (each a “Party”, and
collectively the “Parties”).

In consideration of the mutual terms and conditions contained herein, the Parties agree as
follows:

	1.  	Term and Termination: The term of this Agreement shall commence on the date hereof
and shall continue for a primary term of two (2) years from the first day of the first month
commencing after the date of the first Bill of Lading delivered hereunder and thereafter;
automatically renewing for successive one (1) year terms, unless terminated on the expiration
date of the two (2) year primary term, or on the expiration date of any subsequent one (1)
year renewal term, in each case by either Party with at least one (1) year written notice
prior to such expiration date.

	2.  	ARE Investment in GFE: ARE has purchased an equity interest in GFE at a cost of $500,000
(such initial equity interest in GFE and any subsequent equity or other investment by ARE in
GFE and/or any of its direct or indirect subsidiaries (if any) is herein referred to as the
“Investment”). In the event this Agreement is terminated for any reason, including without
limitation by either Party pursuant to Section 1. Term and Termination, then
ARE shall have the option, to be exercised in ARE’s sole discretion concurrent with or at any
time after ARE receives or delivers written notice of such termination, or if no such written
notice is provided with or at any time after such termination, to cause GFE to purchase the
Investment. ARE shall exercise such option by providing written notice to GFE specifying (i)
the date on which such purchase is to occur, which shall be no sooner than ten (10) days after
ARE provides such written notice to GFE and (ii) the purchase price for the Investment, which
shall be the actual cost ARE originally paid for such Investment (the “Cost”). On the date
specified in such written notice (i) GFE shall pay to ARE, in immediately available funds, the
Cost of the Investment and (ii) upon receipt of such amount, ARE shall transfer and assign to
GFE the Investment. GFE shall be responsible for obtaining any member approval and/or any
other approvals which may be required, if any, of such transfer of the Investment to GFE, and
ARE shall cooperate in obtaining such approvals. If GFE fails to purchase the Investment on
the specified date in accordance with the foregoing, ARE shall have the right to set off any
amounts owed by ARE to GFE under this or any other agreement with GFE, against the amount owed
by GFE for the purchase of the Investment from ARE (i.e. the Cost). Upon receipt of such Cost
by ARE, whether through such set off of otherwise, ARE shall, subject to receiving any
necessary approvals, transfer and assign the

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	   	Investment to GFE. The provisions of this section
shall survive termination of this Agreement.

	3.  	Quantity and Quality

	 	A.  	GFE shall sell exclusively to ARE the total output of fuel grade ethanol
(“Ethanol”) produced at GFE’s Granite Falls, MN facility (“Plant”), currently
anticipated to be forty (40) million gallons per year. Ethanol shall be delivered FOB
the Plant, and title shall pass on the date of the Bill of Lading. Ethanol produced for
the intended use as an alternative or racing fuel shall not be excluded from this
agreement.
	 
	 	B.  	Such Ethanol shall meet or exceed all industry standards or any
specifications so required by the customer. ARE shall have the right to reject any
Ethanol which does meet such standards and such standards are subject to change by ARE.

	4.  	ARE shall:

	 	A.  	Market all of the Ethanol produced by GFE at the Plant, at the price outlined in
Section 6;
	 
	 	B.  	Remit payment to GFE for the Ethanol as provided in Section 6; and
	 
	 	C.  	Be responsible for scheduling all shipments of Ethanol with GFE.

	5.  	GFE shall:

A. Provide to ARE on a timely basis annual production forecasts, monthly updates to the
rolling twelve month production forecasts, monthly updates, daily plant inventory balances
and shipment information, and other information reasonably requested by ARE; GFE shall use
its reasonable best efforts to meet the monthly production targets reflected in the
then-current annual production forecast;

B. Notify ARE promptly of any material unscheduled shut-down, suspension or significant
decrease in production at the Plant that was not reported in the rolling twelve month
production forecasts or monthly updates provided under Section 5.A. above;

C. Provide to ARE specifications and certificates of analysis of the Ethanol sold to ARE
that are consistent with the specifications referred to in Section 3.B. above; GFE shall, at
its expense, provide or cause to be provided all testing and related test equipment at or in
the vicinity of the Plant to determine compliance with such specifications and

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ARE or its
representative shall, at ARE’S expense, have the right to perform periodic tests to
determine compliance with such specifications.

D. Be responsible for compliance with all federal, state and local rules, regulations and
requirements regarding the shipment of Ethanol from the Plant, including but not limited
to, all U.S. Department of Transportation (“DOT”) requirements relating to shipment of
hazardous materials (e.g. proper paperwork, railcars meeting DOT requirements, etc.).

	 	E.  	Provide for a minimum of eight days storage on GFE’s premises at GFE’s cost;
	 
	 	F.  	For all gallons sold to ARE, use certified meters or weight-scales that provide
both gross and net 60° Fahrenheit temperature compensated gallons; and
	 
	 	G.  	Provide any of the information to be provided by GFE pursuant to this Section 5
to ARE electronically in data form, if such information is available in such form.

	6.  	Pricing and Commission

A. Sales Price. The per gallon sale price GFE shall receive for the Ethanol sold to
ARE under this Agreement shall be based on the Alliance Net Pool Price, as defined below,
which shall be adjusted to reflect the Pooled Volume Adjustment and/or Pooled Volume
True-Up, as applicable. An illustrative example of the calculation of Alliance Net Pool
Price is attached as Exhibit A hereto.

	 	   	“Alliance Net Pool Price” shall mean, with respect to any month, (i) the
weighted average gross price per gallon received by ARE for all fuel grade Ethanol
that was (A) supplied by an alliance partner or produced by ARE and (B) sold during
such
month by ARE, minus (ii) all costs (on a per gallon basis) incurred by ARE in
conjunction with the handling, movement and sale of such Ethanol, including but not
limited to terminal lease charges, throughput charges, terminal shrinkage costs,
freight charges, tariffs, costs of leasing railcars, trucks, river barges and ocean
going vessels, government taxes and assessments, insurance, inspection fees,
administrative costs, working capital carrying costs, bad debt expense, costs of
purchasing and delivering replacement ethanol due to lost or interrupted Ethanol
production and other costs, but excluding direct marketing costs incurred in
marketing such Ethanol. ARE shall use commercially reasonable efforts to contain
the costs described in clause (ii) above so as to maximize the Alliance Net Pool
Price.
	 
	 	   	If ARE’s pooled volume of fuel grade Ethanol at the end of a month is higher than
its pooled volume at the end of the immediately preceding month because pooled sales
volumes were less than the aggregate volume supplied by the alliance partners or
produced by ARE during such month, the Alliance Net Pool Price for

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	 	   	such month shall
be calculated as if the amount of such increase was included as gallons supplied by
the alliance partners and/or produced by ARE and sold by ARE during such month at a
price per gallon equal to the estimated Alliance Net Pool Price for the immediately
following month (as determined in good faith by ARE). The amount by which the
Alliance Net Pool Price for any month is increased or decreased as a result of the
foregoing sentence is the “Pooled Volume Adjustment” for such month.
	 
	 	   	In the event that the actual Alliance Net Pool Price for a month is different from
the estimated Alliance Net Pool Price used in calculating the Pooled Volume
Adjustment for the immediately preceding month, an adjustment to the Alliance Net
Pool Price in the current month shall be made by an offset which is equal to the
amount of such difference. Such adjustment is the “Pooled Volume True-Up.” Payment
shall be made in accordance with paragraph C below. A Pooled Volume True-Up shall
occur at the time of payment for the last delivery of Ethanol under this Agreement
to reflect the actual Alliance Net Pool Price for the final month of the term of
this Agreement.

B. Commission. For each gallon of Ethanol sold to ARE under this Agreement,
ARE shall deduct from the Alliance Net Pool Price a commission equal to *** of the Alliance
Net Pool Price.

*** Material has been omitted pursuant to a request for confidential treatment and such
material has been filed separately with the Securities and Exchange Commission .

C. Payment. For all quantities of Ethanol purchased by ARE from GFE and shipped
from the Plant during a one-week period beginning on Monday and ending on the following
Sunday, ARE shall pay the estimated Alliance Net Pool Price referred to in Section 6.A. less
commissions referred to in Section 6.B., to GFE by ACH or wire no later than fifteen (15)
business days following the end of said one-week period. If at calendar month’s end, the
actual Alliance Net Pool Price exceeds the estimated Alliance Net Pool Price, ARE shall pay
GFE on or before the 15th business day of the following calendar month an amount
equal to the product of (x) the difference between the actual and estimated Alliance Net
Pool Price (in each case less commissions) and (y) the aggregate quantity of Ethanol
purchased by ARE from GFE and shipped from the Plant under this Agreement during the prior
calendar month. If the actual Alliance Net Pool Price is less than the estimated Alliance
Net Pool Price, GFE shall pay ARE and ARE shall have the right to withhold and set off from
future payments to GFE, an amount equal to the product of (x) the difference between the
actual and estimated Alliance Net Pool Price (in each case less commissions) and (y) the
aggregate quantity of Ethanol purchased by ARE from GFE and shipped from the Plant under
this Agreement during such month.

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D. Supporting Records. ARE shall keep a set of books and records in accordance
with generally accepting accounting principals with respect to all sales of Ethanol
hereunder and all costs and commissions associated therewith, and shall make such books and
records reasonably available to GFE’s independent outside accounting representatives (upon
execution by such independent outside accounting representative of a mutually agreeable
confidentiality agreement) at ARE’s office at any time by appointment during normal business
hours upon at least five (5) business days prior written notice; provided that GFE shall be
entitled to no more than one (1) such visit in any year and GFE’s independent outside
accounting representatives shall be permitted to disclose to GFE only aggregate summary
information of the results of its review, and not any contract or customer specific
information. In addition, ARE shall provide GFE by e-mail or fax with supporting
documentation regarding the calculation of the estimated Alliance Net Pool Price with each
weekly payment for Ethanol.

7. Responsibility for Dedicated Railcars. GFE acknowledges that ARE will enter into leases
or other arrangements intended to secure the availability of sufficient railcars to ship the
Ethanol produced at the Plant as contemplated by this Agreement (“Dedicated Railcars”). ARE shall
promptly notify GFE of such arrangements. In the event GFE or ARE terminates this Agreement and
ARE’s commitments with respect to the Dedicated Railcars continue past the date of such
termination, GFE shall be responsible for all of ARE’s costs and expenses (including without
limitation carrying costs and finance charges) related to such Dedicated Railcars after the date of
such termination. ARE and GFE shall cooperate in good faith to minimize the amount of any such
costs and expenses, including using commercially reasonable efforts to assign ARE’s rights and
obligations with respect to the Dedicated Railcars to GFE. Without limiting the generality of the
foregoing, except as may otherwise be agreed by ARE and GFE and recognizing that ARE will make a
good faith effort to accommodate any start-up issues and schedule rail cars accordingly, in the
event that the Plant does not start up or fails to provide substantially the contemplated volumes
of Product, any costs incurred for such Dedicated Railcars not so utilized shall be for GFE’s
account.

8. Indemnity: ARE shall indemnify, defend, and hold GFE and its affiliates, subsidiaries,
parents, and its and their respective directors, officers, stockholders, employees, and agents
harmless from and against any and all claims, losses, awards, judgments, settlements, fines,
penalties, liabilities, damages, costs or expenses (including reasonable out-of-pocket Attorney’s
fees and expenses) incurred on account of any injury or death of persons or damages to property to
the extent caused by or arising out of the negligence or willful misconduct of ARE, its officers,
employees, or agents in performing ARE’s obligations under this Agreement.

GFE shall indemnify, defend, and hold ARE and its affiliates, subsidiaries, parents, and its
and their respective directors, officers, stockholders, employees, and agents harmless from and
against any and all claims, losses, awards, judgments, settlements, fines, penalties, liabilities,
damages, costs or expenses (including reasonable out-of-pocket Attorney’s fees and expenses)
incurred on account of any injury to or death of persons or damages to property to the extent
caused by or arising out of the negligence or willful misconduct of GFE, its officers, employees,

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or agents in performing GFE’s obligations under this Agreement. In addition, GFE shall indemnify
and hold ARE and its affiliates, subsidiaries, parents, and its and their respective directors,
officers, stockholders, employees, and agents harmless from and against any and all claims, losses,
awards, judgments, settlements, fines, penalties, liabilities, damages, costs or expenses
(including reasonable out-of-pocket Attorney’s fees and expenses) to the extent caused by or
arising out of (i) any defects in, or otherwise relating to the quality or condition of, the
Ethanol supplied by GFE and (ii) noncompliance with applicable federal, state or local rules,
regulations or requirements regarding shipment of Ethanol from the Plant as more fully set forth in
Section 5.D above.

9. Force Majeure:

A. In the event either Party is rendered unable, wholly or in part, by Force Majeure to
carry out its obligations under this Agreement, it is agreed that on such Party’s giving
notice in writing, or by telephone and confirmed in writing, to the other Party as soon as
possible after the commencement of such Force Majeure event, the obligations of the Party
giving such notice, so far as and to the extent they are affected by such Force Majeure,
shall be suspended from the commencement of such Force Majeure and during the remaining
period of such Force Majeure, but for no longer period, and such Force Majeure shall so far
as possible remedied with all reasonable dispatch; provided,
however, the obligation to make payments then accrued hereunder prior to the occurrence of
such Force Majeure shall not be suspended.

B. The term “Force Majeure” as used in this Agreement shall mean strikes, lockouts or
industrial disturbances; riots or civil disturbances; interference by civil or military
authorities; wars, blockades, insurrection, or acts of other public enemy or acts of
terrorism; epidemics, landslides, lightning, earthquakes, fires, storms, floods, washouts or
other acts of God; arrests or restraints of governments and people; compliance with federal,
state or local laws, rules or regulations, acts, orders, directives, requisitions or
requests of any official or agency of federal, state or local governments; fires,
explosions, freezing, failures, disruptions, breakdowns or accidents to transportation
equipment or facilities; prorationing by transporters; the necessity of testing, making
repairs, alterations or enlargements to transportation equipment or facilities; embargoes,
priorities, expropriation or condemnation by government or governmental authorities; and any
other cause which is not reasonably within the control of the Party claiming suspension.

	10.  	Limitation of Damages: NEITHER PARTY SHALL BE LIABLE OR OTHERWISE RESPONSIBLE TO THE
OTHER PARTY HEREUNDER FOR CONSEQUENTIAL, EXEMPLARY, SPECIAL, INCIDENTAL OR PUNITIVE DAMAGES AS
TO ANY ACTION OR OMISSION, WHETHER CHARACTERIZED AS A CONTRACT BREACH OR TORT OR OTHERWISE
THAT ARISES OUT OF OR RELATES TO THIS AGREEMENT OR ITS PERFORMANCE EXCEPT FOR ANY SUCH AMOUNTS
PAID BY A PARTY TO A NON-AFFILIATE THIRD PARTY, WHICH

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	   	WOULD THEREFORE BE CONSIDERED ACTUAL
DAMAGES INCURRED BY SUCH PARTY.

	11.  	Independent Contractor: It is expressly understood that the relationship of ARE to
GFE is that of an independent contractor and nothing contained herein shall be construed to
create any partnership, agency, or employer/employee relationship. ARE may freely choose the
customers from whom business shall be solicited and the time and place for solicitation.

	12.  	Notices: Any notices required to be given under this Agreement shall be in writing
and be sufficiently given when delivered in person or deposited in the U.S. mail (registered
or certified), postage prepaid, addressed as follows:

	 	 	 	 	 
	

	 	GFE:
	 	Granite Falls Energy, LLC
	

	 	 	 	P.O. Box 216
	

	 	 	 	Granite Falls, MN 56241
	

	 	 	 	Attn: Thomas E. Branhan
	 
	 	 	 	 
	

	 	ARE:
	 	Aventine Renewable Energy, INC
	

	 	 	 	P. O. Box 10
	

	 	 	 	Pekin, IL 61555
	

	 	 	 	Attn: Ron Miller

	13.  	Insurance: Each Party shall maintain, at all times while this Agreement is in
effect, and each at its own sole cost and expense, comprehensive general liability insurance
with a combined single limit for bodily injury and property damage of not less than $1,000,000
for any one occurrence. Each Party shall promptly after execution of this Agreement furnish
the other Party a Certificate of Insurance evidencing the foregoing insurance coverage, and
shall promptly provide the other Party with prior written notice of any change to or
cancellation of such Certificate of Insurance or insurance coverage. The insurance
requirements set forth herein are minimum coverage requirements and are not to be construed in
any way as a limitation on liability under this Agreement.

	14.  	Entire Agreement: This Agreement contains the entire agreement between the Parties
and supersedes all previous agreements, either oral or written, between the Parties. The
language of this Agreement shall not be construed in favor
of or against either Party, but shall be construed as if, the language was drafted mutually
by both Parties. No modifications hereof shall be valid unless made in writing and signed
by both Parties.

	15.  	Waiver: The failure of either Party to enforce any of its rights hereunder on any
particular occasion shall not constitute a waiver of such rights on any subsequent occasion.

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	16.  	Assignment: This Agreement may not be assigned by either Party without the prior
written consent of the other Party, which consent shall not be unreasonably withheld.

	17.  	Headings: Any paragraph headings are used for convenience only and are not intended
and shall not be used in interpreting any provisions of this Agreement.

	18.  	No Third Party Beneficiary: Except as otherwise provided herein, nothing contained in
this Agreement shall be considered or construed as conferring any right or benefit on a person
not a Party to this Agreement and neither this Agreement nor the performance hereunder shall
be deemed to have created a joint venture or partnership between the Parties.

	19.  	Governing Law: This Agreement shall be governed by the laws of the State of New York
without regard to the conflict of laws provisions thereof.

	20.  	Arbitration: Any dispute arising out of or in connection with this Agreement shall be
submitted to arbitration. The arbitration shall be conducted according to the Commercial
Arbitration Rules of the American Arbitration Association. The place of arbitration shall be
New York, New York or such other place as may be agreed upon by the Parties. Both Parties
shall attempt to agree upon one arbitrator, but if they are unable to agree, each shall
appoint an arbitrator and these two shall appoint a third arbitrator. Expenses of the
arbitrator(s) shall be divided equally between the Parties. Judgment upon the award rendered
by the arbitrator(s) may be entered in any court having jurisdiction thereof, and shall be
enforceable against the Parties in accordance with the 1958 Convention on the Recognition and
Enforcement of Foreign Arbitral Awards, as amended.

	21.  	Severability: If any term or provision of this Agreement is held by a court of
competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms and
provisions of this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially adverse to a Party.
Upon such determination, the Parties shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the Parties as closely as possible in an acceptable manner
so that the transactions contemplated hereby be consummated as originally contemplated to the
fullest extent possible.

	22.  	Confidentiality: The terms of this Agreement and any non-public information
provided to GFE pursuant to this Agreement (including without limitation pursuant to Section
6.D. hereof) are confidential and GFE will hold, and will cause its agents, accountants and
advisors to hold, all such information in confidence, unless it is compelled to disclose such
information by judicial or administrative process or by other requirements of law.

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     In WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly executed as of
the date first written above.

	 	 	 	 	 	 	 
	Aventine Renewable Energy, INC	 	Granite Falls Energy, LLC
	 
	 	 	 	 	 	 
	By:

	 	/s/ Ronald Miller
	 	By:
	 	/s/ Thomas E. Branhan
	

	 	 
	 	 	 	 
	

	 	Ronald Miller, President
	 	 	 	Thomas E. Branhan, General Manager
	 
	 	 	 	 	 	 
	Date:

	 	August 31, 2004
	 	Date:
	 	August 31, 2004

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EXHIBIT A

ILLUSTRATIVE EXAMPLE OF CALCULATION OF

ALLIANCE NET POOL PRICE

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	$/GALLON	 
	Gross Ethanol price (alliance producers and ARE)
	 	 	 	 	 	 	1.250	 
	 
	 	 	 	 	 	 	 	 
	Less: Terminal Lease Charges, Throughput Charges,
Terminal Shrinkage Costs, Freight, Tariffs, Tank
Car, Truck, River Barge and Ocean Going Vessel
Leasing Costs, Government Taxes and Assessments,
Insurance, Inspection Fees and other costs (except
for those separately set forth below) under item
(ii) of the definition of Alliance Net Pool Price.
	 	 	 	 	 	 	0.100	 
	 
	 	 	 	 	 	 	 	 
	Working Capital including Inventory
Carrying Costs
	 	 	 	 	 	 	0.006	 
	 
	 	 	 	 	 	 	 	 
	Indirect Marketing Costs including Bad
Debt Expense
	 	 	 	 	 	 	0.001	 
	 
	 	 	 	 	 	 	 	 
	ALLIANCE POOL PRICE before POOLED VOLUME ADJUSTMENT
	 	 	 	 	 	 	1.143	 
	 
	 	 	 	 	 	 	 	 
	Pooled Volume Adjustment Plus or (Minus)
	 	 	 	 	 	 	+ 0.002	 
	 
	 	 	 	 	 	 	 	 
	ALLIANCE POOL PRICE before POOLED VOLUME TRUE-UP
	 	 	 	 	 	 	1.145	 
	 
	 	 	 	 	 	 	 	 
	Prior Month Pooled Volume True-Up Plus or (Minus)
	 	 	 	 	 	 	(0.001	)
	 
	 	 	 	 	 	 	 	 
	ALLIANCE NET POOL PRICE
	 	 	 	 	 	 	1.144	 

10exv10w13

 

Exhibit 10.13

ELECTRIC SERVICE AGREEMENT

This Agreement made and entered into August, 2004, by and between Minnesota Valley Cooperative
Light and Power Association, Montevideo, Minnesota (hereinafter called the Cooperative) and Granite
Falls Community Ethanol Plant, LLC, Granite Falls, Minnesota (hereinafter called the Customer).

     WITNESSETH:

     WHEREAS, the Customer is constructing an ethanol plant located in the Northeast Quarter of
Section 1, Township 115 North, Range 39 West, Minnesota Falls Township, Yellow Medicine County,
Minnesota (hereinafter called the Facility); and

     WHEREAS, the Customer desires to have the Cooperative provide all of the electric power and
energy requirements of the Facility and related Facilities on the described property, and the
Cooperative is willing and able to provide these requirements.

     NOW, THEREFORE, in consideration of the mutual promises, covenants and conditions contained
herein, the Cooperative and the Customer agree as follows:

	1.  	Description of Facility.
	 
	   	The Facility shall include the Customer-owned ethanol plant and related facilities located in
the Northeast Quarter of Section 1, Township 115 North, Range 39 West, Minnesota Falls Township,
Yellow Medicine County, Minnesota.
	 
	2.  	Agreement to Sell and Purchase.
	 
	   	The Cooperative hereby agrees to sell and deliver to the Customer and the Customer agrees to
purchase and receive from the Cooperative all of the electric power and energy requirements of the
Facility upon the terms and conditions hereinafter provided.
	 
	3.  	Service Characteristics.

	 	a.  	Service Delivery. Service hereunder shall be provided at the Customer
property boundary. The Cooperative shall install or cause to be installed, operated and
maintained approximately 6.5 miles of 69 kV transmission line and a 69/12.5 kV, 14,000
kVA substation. If requested, the Cooperative will provide service to the distribution
transformers on the plant site, the terms of which will be provided under separate
agreement.
	 
	 	b.  	Capacity. Electrical service to the Facility under this Agreement
shall be limited to 4,500 kW at 95% power factor. Service to additional load above
4,500 kW shall require an amendment to this Agreement.
	 
	 	c.  	Firm Service. Service hereunder shall be firm without scheduled
interruptions. Power interruptions may occur as the result of planned and coordinated
maintenance and
circumstances beyond the control of the Cooperative as provided for in Section 4i of
this Agreement.

 

 

	4.  	Service Conditions and Requirements.

	 	a.  	Cooperative-Owned Facilities. The Cooperative will furnish or cause to
be furnished, installed and maintained all electric equipment and facilities required
to deliver electric power and energy to the Customer for the Facility to the point of
connection. The point of connection shall be the Customer property line. If electric
service is furnished beyond the property line under separate agreement, equipment
furnished, installed, operated and maintained by the Cooperative, as identified in
Section 3a, on the property of the Customer shall remain the property of the
Cooperative and may be removed upon termination of this Agreement.
	 
	 	b.  	Customer-Owned Facilities. The Customer shall be solely responsible
for the design, installation, maintenance and safety of any and all Customer supplied
electric facilities or equipment. The Customer shall provide and maintain the necessary
protection equipment to protect its own facilities from harm from any electrical cause
as well as to protect the Cooperative’s equipment and members from any damages,
interruption of service, or faulty service due to faults or operations of the
Customer’s equipment.
	 
	 	c.  	Location of Cooperative Facilities. If necessary, the Customer will
provide to the Cooperative suitable locations for the installation of electric
facilities on the property of the Customer. The Customer shall provide the Cooperative
or its power supplier, at no cost, a warranty deed for the substation property and
permanent easements for all other electric power supply facilities located on site,
including but not limited to, in and out transmission and distribution lines to permit
multiple use of said facilities, on-site distribution lines and distribution
transformer sites. The Customer will provide site grading for the substation at no cost
to the Cooperative and further will provide a concrete pad for all service transformers
in accordance with specifications provided by the Cooperative.
	 
	 	d.  	Accessibility to Cooperative Facilities. Duly authorized
representatives of the Cooperative shall be permitted to enter on the property of the
Customer to the extent necessary to maintain and service electric facilities at all
reasonable times in order to carry out the provisions of this Agreement.
	 
	 	e.  	Operation of Cooperative Equipment. The Customer will do nothing to
interfere with the operation of any Cooperative-owned electric equipment or facilities,
including any metering or signaling equipment. The Customer shall advise the
Cooperative as soon as possible if the Customer discovers any apparent problem with the
condition or functioning of the Cooperative’s equipment or facilities.
	 
	 	f.  	Operation of Customer Equipment. The Customer’s electric service,
electric facilities and load characteristics will conform to the National Electric Code
and National Electric Safety Code, IEEE/ANSI standards and Prudent Utility Practice. If
the operation of any of the Customer’s equipment causes power quality or operational
problems to the Cooperative’s electric system, the Customer shall promptly correct or
remove the cause of the problem. If the Customer does not eliminate the problem, the
Cooperative can correct or remove the problem from the electric system and the Customer
will be responsible for the costs. The Customer shall notify the Cooperative
immediately if the Customer discovers that the condition 

 

 

	 	   	or operation of any of the
Customer-supplied electric equipment or facilities may pose a risk to any persons or
property.
	 
	 	g.  	Cooperative Membership. The Customer shall be a member of the
Cooperative during the term of this Agreement.
	 
	 	h.  	Power Factor. The Customer agrees to maintain unity power factor as
nearly as practical. The demand charges shall be adjusted to correct for average power
factors less than five percent (5%) unity (lagging) or greater than five percent (5%)
unity (leading) by increasing the measured demand one percent (1%) for each one percent
(1%) by which the average power factor is less than five percent (5%) unity (lagging)
or more than five percent (5%) unity (leading).
	 
	 	i.  	Hold Harmless. If the supply of electric power and energy provided by
the Cooperative should fail or be interrupted, or become defective, through (a)
compliance with any law, ruling, order, regulation, requirement or instruction of any
federal, state or municipal governmental department or agency or any court of competent
jurisdiction; (b) Customer action or omissions; or (c) acts of God, fires, strikes,
embargos, wars, insurrection, riot, equipment failures, operation of protective
devices, or other causes beyond the reasonable control of the Cooperative, the
Cooperative shall not be liable for any loss or damages incurred by the Customer or be
deemed to be in breach of this Agreement. The Customer acknowledges that the delivery
of electric power and energy may at times be subject to interruption by causes beyond
the control of the Cooperative including weather conditions, vandalism, accidents and
other interruptions, and that the Customer assumes the risk of those potential
interruptions. The Cooperative will use its best efforts to return the interrupted
electric service in the shortest reasonable time under the circumstances.

	5.  	Metering.

	 	a.  	Point of Metering. Metering will measure the demand and energy of the
total Facility, and will be located at the 69/12.5 kV substation on the 7,200/12,470
volt secondary bus.
	 
	 	b.  	Metering Responsibility. All meters shall be furnished, installed,
maintained and read by the Cooperative.
	 
	 	c.  	Meter Testing Procedure. The metering shall be tested yearly for
accuracy. If any test discloses the inaccuracy of said meters to the extent of more
than two percent (2%) fast or slow, an adjustment in billing, according to the
percentage of inaccuracy found, shall be made for the period elapsed subsequent to the
date of the last preceding test.
	 
	 	d.  	Meter Failure. Should the metering equipment at any time fail to
register proper amounts or should the registration thereof be so erratic as to be
meaningless, the capacity and energy delivered shall be determined from the best
information available.

 

 

	6.  	Rates and Payment.

	 	a.  	Rate Schedule Application. The Customer shall pay the Cooperative for
service rendered hereunder at the rates and upon the terms and conditions set forth in
Rate Schedule Ethanol Plant, attached to and made a part of this Agreement and any
revisions thereto or substitutions thereof adopted by the Cooperative’s Board of
Directors.
	 
	 	b.  	Minimum Charge. Irrespective of the Customer’s requirements for kW
demand or use of kWh energy, the minimum charge for billing purposes hereunder shall
not be less than $8,000 for any billing month.
	 
	 	c.  	Future Rate Charges. The Distribution Demand Charges shall be those
provided in Rate Schedule Ethanol Plant and shall remain the same for the five years
after commencement of significant service to the Customer. The rates shown do not
include applicable state and local sales taxes. Power Supply Demand and Energy Charges
may change when Basin Electric rates change to the Cooperative.
	 
	 	   	The rate charges in Rate Schedule Ethanol Plant are for electric service taken to the
Customer’s property. Facilities beyond the property may be assessed a Facilities Charge set
forth in Part d. below.
	 
	 	   	The Parties further agree that the rate hereunder may be adjusted by the amount of any new or
increased level of income, property or other direct tax imposed on the Cooperative.
	 
	 	   	As a Cooperative member, the Customer will receive fair and equitable treatment in
the establishment of rates to be applied to this facility.
	 
	 	d.  	Facilities Charge. For the term of this Agreement, the Customer will
pay a monthly Facilities Charge in the amount set forth in Schdule Ethanol Plant. If
the Cooperative installs additional facilities that are not a part of this Agreement,
and such facilities are not paid for initially by the Customer, the Customer shall be
subject to additional Facilities Charges.
	 
	 	e.  	Payment Arrangements. All charges for service shall be paid to the
Cooperative at its Montevideo office, through the mail, or by electronic transfer. The
monthly billing periods shall be from the first day of the month through the last day
of the month. The Customer agrees to prepay the monthly bill based on the estimated
demand and energy use. Payment is due 5 days prior to the first day of the month. If
payment is not received or postmarked by the Cooperative by the first day of the month,
the Customer agrees that the Cooperative may disconnect service to the facility until
the payment is made.
	 
	 	f.  	Monthly True-up of Charges. An employee of the Cooperative will read
the meter(s) on or about the first day of each month. At the end of the billing month,
the amount of Monthly Prepayment described in Section 6.e. above, shall be subtracted
from the total amount derived from actual demand and energy values that were read and
applied to Rate Schedule Ethanol Plant. This amount will be added to the next

 

 

	 	   	month’s
prepayment. Both parties will strive to keep True-up values as close to zero as
possible by providing accurate demand and energy projections.
	 
	 	g.  	Disputed Bills. The Customer shall pay all bills for services and/or energy
timely and in accordance with billing procedures herein contained even though said
charges may be disputed. If it is determined that the Customer is entitled to a refund
or credit for a disputed bill, the Cooperative shall, in addition to the principal
amount refunded or credited, pay interest on said amount at the rate authorized for
interest on judgments in the State of Minnesota. Neither party shall be obligated to
settle disputes by arbitration or mediation without the mutual consent of the parties.

	7.  	Commencement and Termination.

	 	a.  	Commencement Date. This Agreement shall be in effect as of the date
executed and the Customer’s obligation to purchase electricity hereunder shall commence
upon the startup of
the commercial operation of the Facility but no later than January 1, 2006, whichever
comes first.
	 
	 	b.  	Obligation for Reimbursement of Cooperative Investment. The Customer
is responsible for paying for the Cooperative’s cost associated with installing the
facilities required to provide electric service to the Customer’s facilities. In the
event that this Agreement is terminated and the Customer ceases to use the facilities
described in Section 3a, the Customer agrees to pay to the Cooperative 50% of the
balance of any unamortized investment less the salvage value of any removed facilities.
To secure this obligation, the Customer shall provide an irrevocable bank letter of
credit to the beneficiary of the Cooperative in the amount of $500,000 for a period of
5 years.
	 
	 	c.  	Default and Termination. The Customer shall be in default if it fails
to timely pay for service under this Agreement, if it breaches any other of its
obligations to the Cooperative, or if it becomes the subject of bankruptcy or
insolvency proceedings. If the Customer fails to cure that default within ten (10) days
after the Customer received written notice of default from the Cooperative, the
Cooperative may, at its sole option, suspend or terminate its further performance under
this Agreement, disconnect electric service to the Customer, terminate this Agreement,
or take other action to address the Customer’s default. This provision shall not limit
the Cooperative’s right to take immediate action to suspend services if the Customer’s
act or omission interferes with the safe and efficient operation of the Cooperative’s
electric system, nor shall it limit the Cooperative’s right to pursue any other or
further remedy available to it by law.

	8.  	Patronage Capital Credits.
	 
	   	Service under the rates provided for in this Agreement is subject to a special allocation of
capital credits to the Customer by the Cooperative. This allocation will take into account
the incremental cost allocation associated with the market-based rates that are included in
this Agreement. For the purpose of this Agreement, the Customer acknowledges that it is not
a natural person under Minnesota law.

 

 

	9.  	Disclaimer of Warranty and Limitation of Liability.
	 
	   	Each party shall be responsible for its own facilities and personnel provided or used in the
performance of this Agreement. Neither the Cooperative nor the Customer shall be responsible
to the other party for damage to or loss of any property, wherever located, unless the
damage or loss is caused by its own negligence or intentional conduct or by the negligence
or intentional conduct of that party’s officers, employees, or agents, in which case the
damage or loss shall be borne by the responsible party. The Cooperative shall not be
responsible or liable to the Customer or to any other party for any indirect, special or
consequential damages, or for loss of revenues from any cause.
	 
	10.  	Indemnification.
	 
	   	The Customer agrees to indemnify and holds the Cooperative harmless from and against any
liability for any claims or demands arising out of property damage, bodily injury, or
interruptions to the Customer’s electric service caused by electric equipment or facilities
owned by the Customer, or the Customer’s possession, use, or operation of electric equipment
or facilities.
	 
	11.  	General.

	 	a.  	Governing Law. This Agreement and the rights and obligations of the
parties hereunder shall be construed in accordance with and shall be governed by the
laws of the State of Minnesota.
	 
	 	b.  	Notices. All notices under this Agreement shall be given in writing
and shall be delivered personally or mailed by first class U.S. mail to the respective
parties as follows:

	 	 	 	 	 
	 	 	To Customer:
	

	 	 	 	Manager
	

	 	 	 	Granite Falls Energy, LLC
	

	 	 	 	150th Street South East and Minnesota Highway 23 North
	

	 	 	 	Granite Falls, Minnesota 57006
	 
	 	 	 	 
	 	 	To Cooperative:
	

	 	 	 	Manager/ CEO
	

	 	 	 	Minnesota Valley Cooperative Light and Power Association
	

	 	 	 	P.O. Box 717
	

	 	 	 	Montevideo, Minnesota 56265

	 	c.  	No Waiver. No course of dealing nor any failure or delay on the part
of a party in exercising any right, power or privilege under this Agreement shall
operate as a waiver of any such right, power or privilege. The rights and remedies
herein expressly provided are cumulative and not exclusive of any rights or remedies,
which a party would otherwise have.
	 
	 	d.  	Entire Agreement/ Amendment. This Agreement represents the entire
Agreement between the parties with respect to the matters addressed in this Agreement,
except as provided in the Cooperative’s bylaws, rules and regulations applicable to
similarly situated customers, which are incorporated herein. This Agreement may be
changed,

 

 

	 	   	waived, or terminated only by written agreement signed by both parties as set
forth herein.
	 
	 	e.  	Assignment. The Cooperative may assign this Agreement to an affiliate
or affiliates of the Cooperative, to a partnership(s) in which the Cooperative or an
affiliate has an interest, or to any entity which succeeds to all or substantially all
the Cooperative’s assets by sale, merger or operation of law. The Customer may not
assign this Agreement without the written consent of the Cooperative, which consent
will not be reasonably withheld.
	 
	 	f.  	Severability. Should any part, term or provision of this Agreement be,
by a court of competent jurisdiction, decided to be illegal or in conflict with any
applicable law, the validity of the remaining portions or provisions shall not be
affected thereby.
	 
	 	g.  	Temporary Service. The Cooperative will extend temporary service to the
Customer prior to Customer production for the purpose of construction of such
facilities and testing, as required. Such loading shall not be of such a nature as to
cause power quality problems for the Cooperative. The Customer and its contractors
shall coordinate with the Cooperative on any questionable load.
	 
	 	h.  	Cost of Temporary Service. The cost of such Temporary Service shall be
borne by the Customer and shall include cost of construction including materials, plus
the cost of retirement less the salvage value of such Temporary Service. Power and
energy for such services shall be provided under existing single and/or three phase
rate schedules, as appropriate.

 

 

	 	i.  	IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by
their duly authorized representatives, all as of the day and year first above written.

	 	 	 	 	 	 	 
	Attest:	 	 	 	MINNESOTA VALLEY COOPERATIVE LIGHT AND

POWER ASSOCIATION
	 
	 	 	 	 	 	 
	

	 	 	 	By:
	 	/s/ Pat Carruth
	 	 	 	 	 
	 
	 	 	 	 	 	 
	Title:

	 	 
	 	Title:
	 	General Manager
	 
	 	 	 	 	 	 
	Attest:	 	 	 	GRANITE FALLS COMMUNITY
	 	 	 	 	ETHANOL PROJECT LLC
	 
	 	 	 	 	 	 
	

	 	 	 	By:
	 	/s/ Tom Branhan
	 	 	 	 	 
	 
	 	 	 	 	 	 
	Title:

	 	 
	 	Title:
	 	CEO/General Manager

 

 

	 	 	 
	Minnesota Valley Cooperative

	 	Effective Date: ___
	Light & Power Association
	 	 
	501 South 1st Street
	 	 
	Montevideo, Minnesota 56265
	 	 

SCHEDULE ETHANOL PLANT

INDUSTRIAL SERVICE

Availability

     Available to Granite Falls Community Ethanol Project (Ethanol Plant) near Granite Falls,
Minnesota.

Character of Service

     Three-Phase, 60 Hertz, at standard primary distribution voltages.

Monthly Rate

	 	 	 
	Facilities Charge:

	 	$8,000.00 per month
	Distribution Demand Charges:

	 	$2.15 per kW-Month
	Power Supply Demand Charges:

	 	$6.70 per kW-Month
	Energy Charge:

	 	$0.01964 per kWh

     The Power Supply Demand and Energy Charge may be revised any time the Basin Electric Power
Cooperative (Basin) wholesale rate to Minnesota Valley is changed.

Determination of Billing kW

     The billing kW shall be Ethanol Plant half-hour integrated metered kilowatt demand each month.
The metered kW shall be adjusted for power factor as provided hereafter.

Facilities Charge

     The Facilities Charge is a charge for use of Cooperative electric facilities used to serve the
Ethanol Plant load up to the Ethanol Plant property. Such charge includes interest, depreciation,
operation, maintenance and taxes associated with these facilities.

Distribution Demand Charge

     The Distribution Demand Charge recovers carrying cost of the facilities necessary to serve the
load and not directly assignable to the Ethanol Plant. Such charge shall remain the same for a
period of five years after commencement of the rate. Adjustments thereafter shall be made based
upon an allocation of cost for the non-directly assignable facilities.

 

 

	 	 	 
	Minnesota Valley Cooperative

	 	Effective Date: ___
	Light & Power Association
	 	 
	501 South 1st Street
	 	 
	Montevideo, Minnesota 56265
	 	 

SCHEDULE ETHANOL PLANT

INDUSTRIAL SERVICE

(Continued)

Power Supply Demand Charge

     The Power Supply Demand Charge is the actual cost of Basin Electric’s Demand Charge plus
transmission losses. This Charge may increase if Basin Electric cost increases to the Cooperative.

Power Factor Adjustment

     Ethanol Plant shall maintain unity power factor as nearly as practicable. Demand charges will
be adjusted to correct for an average monthly power factor lower than 95%. Such adjustments will be
made by increasing the measured demand 1% for each 1% by which the average power factor is less
than 95% lagging or leading.

Minimum Monthly Charge

     The minimum monthly charge under the above rates shall be $8,000.

Special Conditions of Service

     Where it is necessary to extend or reinforce existing facilities in order to provide service
under this schedule and additional investment is thereby required, such service will be rendered
only after the following conditions are met:

	1.  	Ethanol Plant will give satisfactory assurance by means of written agreement as to the
character, amount, and duration of the business offered.

	2.  	Ethanol Plant shall guarantee a minimum monthly bill for the service which will be computed
on the basis of 1/60th of the investment, which includes the cost of transformers,
meters, and all costs of additions to or alterations of lines and equipment necessary to make
the service available.

 

 

	 	 	 
	Minnesota Valley Cooperative

	 	Effective Date: ___
	Light & Power Association
	 	 
	501 South 1st Street
	 	 
	Montevideo, Minnesota 56265
	 	 

SCHEDULE ETHANOL PLANT

INDUSTRIAL SERVICE

(Continued)

	3.  	This minimum bill will be effective for a period of five (5) years from the date on which
service commences. After this period the regular monthly minimum charge will be effective.

	4.  	In no case, however, will the minimum bill under this agreement be less than the previously
specified “Minimum Monthly Charge.”

Delivery Point

     The delivery point shall be the metering point. The delivery point shall be the point of
attachment of Ethanol Plant’s primary line to the Cooperative’s substation structure. All wiring,
pole lines, and other equipment (except metering equipment) on the load side of the delivery point
may be owned and maintained by Ethanol Plant or the Cooperative.

Billing Method

	 	a.  	Payment Arrangements. All charges for service shall be paid to the
Cooperative at its Montevideo office, through the mail, or by electronic transfer. The
monthly billing periods shall be from the first day of the month through the last day
of the month. The Customer agrees to prepay the monthly bill based on the estimated
demand and energy use. Payment is due 5 days prior to the first day of the month. If
payment is not received or postmarked by the Cooperative by the first day of the month,
the Customer agrees that the Cooperative may disconnect service to the facility until
the payment is made.
	 
	 	b.  	Monthly True-up of Charges. An employee of the Cooperative will read
the meter(s) on or about the first day of each month. At the end of the billing month,
the amount of Monthly Prepayment described above, shall be subtracted from the total
amount derived from actual demand and energy values that were read and applied to Rate
Schedule Ethanol Plant. This amount will be added to the next month’s prepayment. Both
parties will strive to keep True-up values as close to zero as possible by providing
accurate demand and energy projections.

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