Document:

Exhibit 10.38

 

TRINITY
INDUSTRIES LEASING COMPANY

RAILROAD
CAR LEASE AGREEMENT

 

This Agreement, made this 21st
day of February, 2008, between Trinity Industries Leasing Company,  a Delaware
corporation, with its principal office at 2525 Stemmons Freeway, Dallas, Texas
75207, (hereinafter called “Lessor”) and Otter Tail Ag Enterprises, LLC,  a Minnesota
limited liability company, with its principal office at 24096 170th
Avenue, Fergus Falls, Minnesota 56537 (hereinafter called “Lessee”).

 

In
consideration of the mutual terms and conditions hereinafter set forth, the
parties hereto hereby agree as follows:

 

ARTICLE 1: LEASE
AGREEMENT

 

Lessor
agrees to lease to Lessee, and Lessee agrees to lease from Lessor, the cars
shown on each Rider hereto and such additional Riders as may be added from time
to time (each such Rider and together with this Agreement shall be collectively
referred to as the “Lease”) by agreement of the parties and signed by their
duly authorized representative (all such cars being hereinafter referred to as
the “cars”). Each Rider shall set forth a brief description of the car or cars
covered thereby, including such facts as the number of cars, the AAR or DOT
specifications, rental charges, term throughout which the car or cars shall
remain in Lessee’s service and such other information as may be desired by both
parties. Lessor and Lessee agree that each Rider hereto shall constitute a
separate Lease which incorporates the terms of this Agreement. Each Rider shall
be severable from any other cars or riders relating to this Agreement and shall
become a separate lease which is separately transferable for all purposes. It
is the intent of all parties to this Agreement to characterize this Agreement
as a true lease.

 

ARTICLE 2: DELIVERY

 

Lessor
agrees to deliver each car to Lessee, freight charges collect, in the yard of
the delivering line at the point specified by the Lessee, and Lessee agrees to
accept such delivery. The obligations of the Lessor to deliver the cars shall
be excused, and Lessor shall not be liable, for any causes beyond the
reasonable control of Lessor (including, but not limited to, delays caused by
fire, labor difficulties, delays of carriers and materials suppliers,
governmental authority, late delivery by the manufacturer of the cars or late
delivery by a prior lessee) and, in the event of a delay in such delivery,
Lessor shall deliver the cars to Lessee as soon as reasonably possible
thereafter.

 

ARTICLE 3: CONDITION
OF CARS - ACCEPTANCE

 

All
cars delivered under this Lease shall be in satisfactory condition for movement
in the normal interchange of rail traffic and shall otherwise comply with the
description and specifications contained in the applicable Rider; but Lessee
shall be solely responsible for determining that cars are in proper condition
for loading and shipment, except for those responsibilities which, under
applicable law, have been assumed by the railroads. Lessee shall inspect the
cars promptly after they are delivered and shall notify Lessor in writing
within five days after delivery of its rejection of any car, and the specific
reasons for such rejection. Failure by the Lessee to inspect the cars within
five days after delivery, and/or the successful loading of any car by Lessee,
shall constitute acceptance of such car or cars, as the case may be, by Lessee
and shall be conclusive evidence of the fit and suitable condition of such car
or cars. At Lessor’s request, Lessee shall deliver to Lessor an executed
Certificate of Acceptance in the form of Exhibit A with respect to all
cars.

 

If
Lessee rejects any car, Lessor shall have the right to have the rejected car
inspected by an inspector acceptable to both Lessor and Lessee. The cost of
such inspection will be paid by Lessor if the cause for rejection is affirmed
by the inspector, otherwise such cost will be borne by Lessee. The Lessee shall
be deemed to have accepted any car for which the inspector determines that good
cause for rejection did not exist. The decision of the inspector shall be final
and binding upon the parties.

 

Lessee’s
acceptance, however affected, shall be deemed effective as of the delivery date
and the monthly rentals as hereinafter set forth shall accrue from the delivery
date. Such acceptance shall conclusively establish that such cars conform to the
applicable standards set forth in the Rider(s) and the Interchange Rules.

 

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ARTICLE 4: RENTALS

 

Lessee
agrees to pay to Lessor for the use of each car the monthly rental set forth in
the Rider applicable to such car from the date such car is delivered to Lessee
until such car is returned to Lessor, as hereinafter provided in Article 18.
The rental shall be payable in U.S. Dollars and in advance on or before the
first day of each calendar month (provided, however, that the rental for each
car for the month in which it is delivered shall be prorated for the number of
days, including the day of delivery, remaining in such month at a daily rate
based upon a 365 day year and shall be payable on or before the first day of
the next succeeding month) to Lessor by electronic funds transfer to Trinity
Leasing Customer Payment Account, Wilmington Trust Company, ABA # 031-100-092,
Account # 2860-4998,  or at such other address as Lessor may specify by notice to Lessee.
Except as set forth in this Lease (including without limitation, the provisions
of Article 11) rental shall be paid without deduction, set-off or
counterclaim.

 

ARTICLE 5: MILEAGE ALLOWANCE

 

Lessor
shall collect all mileage earned by the cars during the lease term and shall
credit to the rental of Lessee, such mileage earned by the cars while in the
service of Lessee, as and when received from the railroads according to, and
subject to, all rules of the tariffs of the railroads, but only to the
extent of the aggregate rental charges payable for the duration of the lease
term.

 

ARTICLE 6: TERM

 

This
Lease shall be effective as dated and will expire upon the completion of the
leasing arrangement shown on the attached Riders of the last car or cars
covered hereunder. The Lease term, with respect to all cars covered by a
particular Rider, shall commence on the average date of delivery of the cars
covered by such Rider; and shall terminate as specified in such Rider, unless
sooner terminated in accordance with provisions of this Lease.

 

ARTICLE 7: USE AND POSSESSION

 

Throughout
the continuance of this Lease so long as Lessee is not in default under this
Lease, Lessee shall be entitled to possession of each car from the date the
lease becomes effective as to such car; and shall use such car only in the
manner for which it was designed and intended, and so as to subject it only to
normal wear and tear, and on its own property or lines in the usual interchange
of traffic; provided, however, that Lessee agrees that the cars shall at all
times be used: (a) in conformity with all Interchange Rules; (b) in
compliance with the terms and conditions of this Lease; (c) predominantly
in the continental limits of the United States, provided however, in no event
shall more than forty percent (40%) of the cars (as determined by mileage
records and measured annually on a calendar year basis) be used outside of the
contiguous United States at the same time.

 

In
the event any car is used outside of the continental United States, for any
reason whatsoever, Lessee shall assume full responsibility for all costs,
taxes, duties or other charges incidental to such use including costs incurred
in returning car to the continental United States.

 

ARTICLE 8: EMPTY MILEAGE INDEMNIFICATION

 

Lessee
agrees that it will use its best efforts to so use the cars that their total
mileage under load will equal or exceed their mileage empty on each railroad
over which the cars move. Should the empty mileage exceed the loaded mileage,
Lessee shall pay to Lessor for such excess at the rate and at the time
established by the tariff of the railroad on which such excess of empty miles
has accrued. For the purpose of this paragraph, the railroad mileage reports
received by Lessor shall be prima facie evidence of the facts reported therein.

 

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ARTICLE 9: ADDITIONAL
CHARGES BY RAILROADS

 

Lessee
agrees to use the cars, upon each railroad over which cars shall move, in
accordance with the then prevailing tariffs to which each railroad shall be a
party; and if the operation or movements of any of the cars during the term
hereof shall result in any charges being made against Lessor by any such
railroad, Lessee shall pay to Lessor the amount of such charges within the period
prescribed by and at the rate and under the conditions of the then prevailing
tariffs. Lessee agrees to indemnify Lessor against any such charges, and shall
be liable for any switching, demurrage, track storage, detention or special
handling charges imposed on any car during the term hereof.

 

ARTICLE 10: LESSEE’S
RIGHT TO TRANSFER OR SUBLEASE

 

Lessee
shall not transfer, sublease or assign any car or its interests and obligations
pursuant to the Lease, nor shall a transfer, sublease or assignment by operation
of the law or otherwise of Lessee’s interest in the cars or this Lease be
effective against Lessor without Lessor’s prior written consent, which shall
not be unreasonably withheld or denied. No transfer, sublease or assignment of
the Lease, or of any car, shall relieve Lessee from any of its obligations to
Lessor under this Lease.

 

Notwithstanding
the foregoing paragraph, Lessee shall have the right to sublease any of the
cars for single trips to its customers or suppliers, and to cause each car so
subleased to be boarded or placarded with the name of the sublessee in
accordance with the provisions of the demurrage tariffs lawfully in effect,
where the sole purpose of such subleasing is to obtain an exemption from
demurrage for said cars so subleased; provided, however, that notwithstanding
any such sublease, Lessee shall continue to remain liable to Lessor for the
fulfillment of Lessee’s obligations under this Lease; and
providing further, that Lessor shall have the right, at any time, to withdraw the
privilege of subleasing hereinabove granted to Lessee.

 

ARTICLE 11: MAINTENANCE
RESPONSIBILITY

 

Lessor
agrees to maintain the cars in good condition and repair according to the
Interchange Rules of the Association of American Railroads (AAR). Lessee
agrees to notify Lessor promptly when any car is damaged or in need of repair,
and to forward such cars and any other cars subject to this Lease to shops as
directed by Lessor for repairs and/or periodic maintenance and inspections. No
repairs to any of the cars shall be made by Lessee without Lessor’s prior
written consent, except that Lessee shall, at its expense, replace any
removable part (dome covers, hatch covers, outlet caps, etc.) if lost or
broken. Replacement or repair by Lessee of any parts, equipment and/or
accessories on any of the cars shall be with parts, equipment and/or
accessories that are of like kind and of at least equal quality to those being
replaced or repaired, unless otherwise agreed in writing by Lessor.

 

On
tank cars, Lessee agrees that it will assume the responsibility for the
maintenance and replacement of angle valves and check valves and, if such cars
are so equipped, thermometer wells, gauging devices, regulator valves, safety
heads and top unloading valves.

 

On
hopper cars, Lessee will be responsible for inspection and cleaning of the
operating mechanisms of the outlets, hatches and special fittings on such cars
leased herein. Further, any damage to such outlets, hatches, special fittings
or the operating mechanisms will be repaired for the account of the Lessee.

 

For
all cars requiring maintenance or repair, Lessee shall be solely responsible
for all costs associated with the removal, disposal and cleaning of commodities
from the cars.

 

When
a car is placed in a private shop for maintenance or repair, the rental charges
shall cease on date of arrival in the shop, except in the case where a car
arrives without advance notice of defects from Lessee, in which case rental
charges will cease on communication of such notice of defects to Lessor from
Lessee, and shall be reinstated on the date that the car is forwarded from
the shop or on the date that the car is ready to leave, awaiting disposition
instructions from Lessee. If any repairs are required as a result of the misuse
by or negligence of Lessee or its consignee, agent or sublessee or while on a
railroad that does not subscribe to, or fails to meet its responsibility under
the Interchange Rules of the AAR, or while on any private siding or track or any
private or industrial railroad, the rental charges shall continue during the
repair period, and Lessee agrees to pay Lessor for the cost of such repairs.

 

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ARTICLE 12: LOSS OR DESTRUCTION

 

If
any of the cars shall be completely destroyed, or if the physical condition of
any car shall become such that the car cannot be operated in railroad service,
as determined by the parties, then Lessor may, at its option, cancel this Lease
as to such car as of the date on which such event occurred, or may substitute
another car within a reasonable period of time. Lessee shall notify Lessor of
the occurrence of any such event within two (2) days of such event. In the
event of such substitution, the substituted car shall be held pursuant to all
the terms and conditions of this Lease. Lessee agrees that if a car is lost or
destroyed or is in such physical condition that it cannot be operated in
railroad service by reason of misuse or negligence of Lessee or its consignee,
agent or sublessee or while on a railroad that does not subscribe to the AAR
Interchange Rules or while on any private siding or track or any private
or industrial railroad, Lessee will pay Lessor, in cash, the settlement value
of such car as determined by Rule #107 of the AAR Interchange Rules within
ten (10) days following a request by Lessor for such payment. Lessor and
Lessee shall cooperate with and assist each other in any reasonable manner
requested, but without affecting their respective obligations under this Article or
Article 22, to establish proper claims against parties responsible for the
loss, destruction of or damage to, the cars.

 

ARTICLE 13: LOSS OF COMMODITY

 

Lessor
shall not be liable for any loss of, or damage to, commodities, or any part
thereof, loaded or shipped in the cars however such loss or damage shall be
caused or shall result. Lessee agrees to assume responsibility for, to
indemnify Lessor against, and to save it harmless from any such loss or damage
or claim therefor.

 

ARTICLE 14: DAMAGE TO CAR BY COMMODITY

 

Notwithstanding
the exception for normal wear and tear in Article 18, if during the term
of any Rider any of the Cars or any components or appurtenances thereto shall
be unduly and materially damaged, destroyed or depreciated in value or
condition due to the corrosive or other damaging effect of any substance
carried therein or thereon (whether or not such damage was foreseeable), Lessee
will reimburse Lessor promptly for such damage, loss or expense suffered by
Lessor as a consequence thereof.

 

ARTICLE 15: ALTERATION AND LETTERING

 

Lessee
will preserve the cars in good condition and will not in any way alter the
physical structure of the cars without the advance approval, in writing, of the
Lessor. Lessee shall place no lettering or marking of any kind upon the cars
without Lessor’s prior written consent, provided however, that Lessee may cause
said cars to be stenciled, boarded, or placarded with letters not to
exceed two inches (2”) in height to indicate to whom the cars are leased and
with commodity stencils per AAR or DOT specifications.

 

ARTICLE 16: LININGS AND COATINGS

 

The
application, maintenance and removal of interior protective linings and
coatings in cars so equipped is to be at the expense of the Lessee unless
otherwise specified on the Rider. Commodity or mechanical damage to such
linings or coatings shall be for the account of the Lessee.

 

ARTICLE 17: INTERIOR PREPARATION FOR COMMODITIES

 

Subsequent
to Lessee acceptance, any cleaning or special preparation of the interior of
cars to make them suitable for the shipment of commodities by or for Lessee
during the term of the lease shall be done at Lessee’s expense unless otherwise
agreed.

 

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ARTICLE 18: RETURN OF CARS - CLEANING

 

At
the expiration of the lease term as provided in the Riders, Lessee shall, at
its expense, return the cars to Lessor at the location and to the agent
selected by the Lessor empty, clean and free from residue, and in the same good
condition as the cars were in when delivered, except for normal wear and tear.
At the expiration, should car cleaning be required, the Lessee shall bear the
full cost of cleaning and the rental shall continue until the car is clean.

 

ARTICLE 19: MODIFICATIONS

 

Lessor
and Lessee agree that if, at any time after the effective date of any Rider,
changes in car design or equipment are required by the AAR, DOT, FRA or any
other governmental authority, Lessor may, at its option, perform all
modifications so ordered and that the cost of those modifications shall be
reflected in an increase in the monthly rental rate per car according to the
rental escalation formula shown on the Rider for that car.

 

ARTICLE 20: HIGH MILEAGE AND WEIGHT LIMITATION

 

Since
the rentals and other terms of this Lease are based on normal usage of cars in
non-unit train or other non-high mileage operations, Lessee agrees not to use
cars in unit train or other designated high mileage usage without prior written
consent of Lessor. Each car is limited to the number of total loaded and empty
miles per calendar year shown on the Rider and is subject to a surcharge also
shown on the Rider for all excess miles.

 

Lessee
shall not exceed the weight limitations prescribed for operation of cars in
unrestricted interchange service as set forth under Interchange Rule 70
without Lessor’s prior written consent.

 

ARTICLE 21: USE OF CARS ON CERTAIN ROADS UNDER AAR CIRCULAR OT-5

 

Lessee
is responsible for obtaining all consents or authority to use the cars on any
railroad. Upon the written request of Lessee (which request shall name the
railroads involved) Lessor shall use reasonable efforts to obtain from each
named railroad consents or authority to place the cars in service under
provisions issued by such railroad or the AAR, including, without limitation,
the provisions of AAR Circular OT-5 as promulgated by the Association of
American Railroads and all supplements thereto and reissues thereof. Lessee
shall furnish to Lessor such information as is necessary to apply for and
obtain such consents or authority. Lessor, however, shall not be liable for
failure to obtain such consents or authority for any reason whatsoever and this
Lease shall remain in full force and effect notwithstanding any failure of
Lessor or Lessee to obtain such consents or authority.

 

ARTICLE 22: INDEMNIFICATIONS

 

Lessee
shall defend (if such defense is tendered to Lessee), indemnify and hold Lessor
harmless from and against and does hereby release Lessor from all claims,
suits, liabilities, losses, damages, costs and expenses, including attorney’s
fees, in any way arising out of, or resulting from, the condition, storage,
use, loss of use, maintenance or operation of the cars, or any other cause
whatsoever except to the extent the same results from Lessor’s negligence or
except to the extent a railroad has assumed full responsibility and satisfies
such responsibility.

 

ARTICLE 23: TAXES AND LIENS

 

Lessor
shall be liable for and pay all Federal, State or other governmental property
taxes assessed or levied against the cars, except that (i) Lessee shall be
liable for and pay such taxes when cars bear reporting marks and numbers other
than Lessor’s and (ii) Lessee shall be liable at all times for and shall
pay or reimburse Lessor for the payment of any sales, use, leasing, operation,
excise, gross receipts and other taxes with respect to the cars, together with
any penalties, fines or interest thereon and (iii) all duties, imposts,
taxes, investment tax credit reductions and similar charges arising out of the
use of cars outside the continental United States.

 

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Lessee
acknowledges and agrees that by the execution of this Lease it does not obtain,
and by payments and performance hereunder it does not, and will not, have or
obtain any title to the cars or any property right or interest therein, legal
or equitable, except solely as Lessee hereunder and subject to all of the terms
hereof. Lessee shall keep the cars free from any liens or encumbrances created
by or through Lessee.

 

ARTICLE 24: DEFAULT
AND REMEDIES

 

If
Lessee defaults in the payment of any sum of money to be paid under this Lease
and such default continues for a period of ten (10) days after written
notice to Lessee of such default or if Lessee fails to perform any covenant or
condition required to be performed by Lessee, which failure shall not be
remedied within ten (10) days after notice thereof by Lessor to Lessee or
if Lessee shall dissolve, make or commit any act of bankruptcy or if any
proceeding under any bankruptcy or insolvency statute or any laws relating to
relief of debtors is commenced by Lessee or if any such proceeding is commenced
against Lessee and same shall not have been removed within thirty (30) days of
the date of the filing thereof or if a receiver, trustee or liquidator is
appointed for Lessee or for all or a substantial part of Lessee’s assets with
Lessee’s consent or, if without Lessee’s consent, the same shall not have been
removed within thirty (30) days of the date of the appointment thereof or if an
order, judgment or decree is entered by a court of competent jurisdiction and
continues unpaid and in effect for any period of thirty (30) consecutive days
without a stay of execution or if a writ of attachment or execution is levied
on any car and is not discharged within ten (10) days thereafter, Lessor
may exercise one or more of the following remedies with respect to the cars:

 

1.             Immediately
terminate this Lease and Lessee’s rights hereunder;

 

2.             Require Lessee
to return the cars to Lessor at Lessee’s expense, and if Lessee fails to so
comply, Lessor may take possession of such cars without demand or notice and
without court order or legal process. Lessee hereby waives any damages
occasioned by such taking of possession, whether or not Lessee was in default
at the time possession was taken, so long as Lessor reasonably believes that
Lessee was in default at such time. Lessee acknowledges that it may have a
right to notice of possession and the taking of possession with a court order
or other legal process. Lessee, however, knowingly waives any right to such
notice of possession and the taking of such possession without court order or
legal process;

 

3.             Lease the cars
to such persons, at such rental, and for such period of time as Lessor shall
elect. Lessor shall apply the proceeds from such leasing, less all costs and
expenses incurred in the recovery, repair, storage and renting of such cars,
toward the payment of Lessee’s obligations hereunder. Lessee shall remain
liable for any deficiency, which, at Lessor’s option, shall be paid monthly as
suffered or immediately, or at the end of the Lease term as damages for Lessee’s
default;

 

4.             Bring legal
action to recover all rent or other amounts then accrued or thereafter accruing
from Lessee to Lessor under any provision hereunder;

 

5.             Pursue any other
remedy which Lessor may have.

 

Each
remedy is cumulative and may be enforced separately or concurrently. In the
event of default, Lessee shall pay to Lessor upon demand all costs and
expenses, including reasonable attorneys’ fee expended by Lessor in the
enforcement of its rights and remedies hereunder, and Lessee shall pay interest
on any amount owing to Lessor from the time such amount becomes due hereunder
at a rate per annum equal to three percentage points above the prime rate of
Chase Manhattan Bank (or its successor), such rate to be reduced, however, to
the extent it exceeds the maximum rate permitted by applicable law. In
addition, Lessee shall, without expense to Lessor, assist Lessor in
repossessing the cars and shall, for a reasonable time, if required, furnish
suitable trackage space for the storage of the cars.

 

If
Lessee fails to perform any of its obligations hereunder, Lessor, at Lessee’s
expense, and without waiving any rights it may have against Lessee for such
nonperformance, may itself render such performance. Lessee shall reimburse
Lessor on demand for all sums so paid by Lessor on Lessee’s behalf, together
with interest at a rate equal to three percentage points above the prime rate
of Chase Manhattan Bank (or its successor), such rate to be reduced, however,
to the extent it exceeds the maximum rate permitted by applicable law.

 

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ARTICLE 25: LESSOR’S RIGHT TO ASSIGN, SUBORDINATION

 

All
rights of Lessor hereunder may be assigned, pledged, mortgaged, leased,
transferred or otherwise disposed of, either in whole or in part, and/or Lessor
may assign, pledge, mortgage, lease, transfer or otherwise dispose of title to
the cars, with or without notice to Lessee. As a condition to any such
assignment, pledge, mortgage, lease, transfer or other disposition, TILC (as
defined in Article 31 below) shall have entered into a management
agreement with the assignee, pledgee, mortgagee, lessor, or other holder of
legal title to or security interest in the cars for purposes of allowing such
assignee, pledgee, mortgagee, lessor or other holder of legal title to or
security interest in the cars to perform Lessor’s obligations hereunder. In the
event of any such assignment, pledge, mortgage, lease, transfer or other
disposition, this Lease and all rights of Lessee hereunder or those of any
person, firm or corporation who claims or who may hereafter claim any rights in
this Lease under or through Lessee, are hereby made subject and subordinate to
the terms, covenants and conditions of any assignment, pledge, mortgage, lease,
or other agreements covering the cars heretofore or hereafter created and
entered into by Lessor, its successors or assigns and to all of the rights of
any such assignee, pledgee, mortgagee, lessor, transferee or other holder of
legal title to or security interest in the cars. During the term of this Lease
no such assignee, pledgee, mortgagee, lessor, transferee or other holder of
legal title to or security interest in the cars shall interfere with the quiet
use, possession and enjoyment of the cars by Lessee provided that no event of
default or termination event (however described) shall have occurred under such
assignment, pledge, mortgage, lease or other agreement and provided that no
event of default or termination event (however described) has occurred under
this Lease and provided further that the exercise by assignee, pledgee,
mortgagee, lessor, transferee or other holder of legal title to or security
interest in the cars of their respective rights under or in connection with
such assignment, pledge, mortgage, lease or other agreement or this Lease shall
not constitute such an interference. Lessee hereby agrees that Lessor or such
assignee, pledgee, mortgagee, lessor, transferee or other holder of legal title
to or security interest in the cars may terminate this Lease simultaneously
with the termination of any such assignment, pledge, mortgage, lease or other
agreement and that upon such termination, Lessee shall redeliver the cars to
Lessor. Any sublease or assignment of the cars permitted by this Lease that is
entered into by Lessee or its successors or assigns shall contain language
which expressly makes such assignment or sublease subject to the subordination
contained herein. At the request of Lessor or any assignee, pledgee, mortgagee,
lessor, transferee or other holder of the legal title to or security interest
in the cars, Lessee, at Lessor’s expense, shall letter or mark the cars to
identify the legal owner of the cars and, if applicable, place on each side of
each car, in letters not less than one inch in height, the words “Ownership
Subject to a Security Lease Filed with the Surface Transportation Board” or
other appropriate words reasonably requested.

 

In
the event that Lessor assigns its interest in this Lease, Lessee, at the
request of Lessor, shall execute and deliver to Lessor an Acknowledgment of
Assignment of Lease in form satisfactory to Lessor and upon such request and
execution furnish to Lessor an opinion of counsel that such Acknowledgment has
been duly authorized, executed and delivered by Lessee and constitutes a valid,
legal and binding instrument, enforceable in accordance with its terms.

 

ARTICLE 26: DISCLAIMER OF WARRANTIES

 

LESSOR
MAKES NO WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, AS TO THE
CONDITION, MERCHANTABILITY, FITNESS FOR PARTICULAR PURPOSE OR ANY OTHER MATTER
CONCERNING THE CARS. LESSOR SHALL NOT HAVE ANY RESPONSIBILITY TO LESSEE FOR ANY
INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES OF ANY NATURE, INCLUDING BUT NOT
LIMITED TO INTERRUPTION OF SERVICE, LOSS OF BUSINESS OR ANTICIPATED PROFITS.
Lessee shall be solely responsible for determining that the specifications and
design of any car are appropriate for the commodities loaded therein. During
the period of any lease hereunder in which Lessee renders faithful performance
of its obligations, Lessor hereby assigns to Lessee any factory or dealer
warranty, whether express or implied, or other legal right Lessor may have
against the manufacturer in connection with defects in the cars covered by this
Lease.

 

ARTICLE 27: RIGHT OF INSPECTION AND NOTICES

 

Lessor,
or its assignee, shall, at any reasonable time and without interfering with
Lessee’s operations, have the right to inspect the cars by its authorized
representative wherever they may be located for the purpose of determining

 

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compliance
by Lessee with its obligations hereunder. Lessee shall use its best effort to
obtain permission, if necessary, for Lessor or its representative to enter upon
any premises where the cars may be located.

 

Lessee shall notify Lessor, in writing, within three (3) days
after any attachment, lien (including any tax and mechanics’ liens) or other
judicial process attaches to the cars.

 

ARTICLE 28: ADMINISTRATION OF LEASE

 

Lessee
agrees to make available to Lessor information concerning the movement of the
cars reasonably required for the efficient administration of this Lease.

 

Lessee
agrees to cooperate with Lessor for the purpose of complying with any
reasonable requirements of any lender, the Surface Transportation Board or the
provisions of Article 9 of the Uniform Commercial Code provided such
cooperation does not materially affect the rights or liabilities of Lessee
hereunder.

 

ARTICLE 29: FINANCIAL STATEMENTS

 

Lessee
will furnish to Lessor within one hundred twenty (120) days after the end of
each fiscal year of the Lessee a complete financial statement package of the
Lessee, for such fiscal year ended period, including but not limited to,
balance sheet, income statement, cash flow statement, and all schedules, notes,
and disclosures made a part of such financial statement package. The financial
statements shall be prepared in accordance with Generally Accepted Accounting
Principles (“GAAP”), all in reasonable detail and certified by public
accountants of recognized standing. If Lessee files a Form 10-K with the U.S.
Securities and Exchange Commission (SEC), the filing of such Form 10-K
with the SEC will satisfy the requirements set forth above.

 

ARTICLE 30: INSURANCE

 

Lessee shall maintain at all times on the cars, at
its expense, commercial general liability insurance and umbrella/excess
insurance (covering bodily injury, property damage and pollution exposures,
including, but not limited to, contractual liability and products liability)
against such risks, in such form as shall be satisfactory to Lessor and with
such insurer(s) as shall be rated A-:VII or better by A.M. Best. The
requirement for pollution liability insurance may be satisfied by scheduling a
self-insured retention to an umbrella/excess policy affording pollution
liability insurance. The commercial general liability insurance policy or
self-insured retention and umbrella or excess insurance policies shall have a
combined limit of not less than $3,000,000 per occurrence, and the policies
shall be endorsed to name Lessor, Lessor’s subsidiaries and Lessor’s assignees
as additional insureds as their interest may appear.

 

Prior
to the Delivery Date and from time to time thereafter, Lessee shall furnish to
Lessor an original certificate demonstrating that such insurance coverage is in
effect, provided, however, that Lessor shall be under no duty to ascertain the
existence or adequacy of such insurance. The insurance maintained by Lessee
shall be primary without any right of contribution from insurance which may be
maintained by Lessor. The obligations of Lessee under this Article shall
be independent of all other terms under this Lease and shall in no event
relieve Lessee from any indemnity obligation hereunder. The insurer shall give
the Lessor at least thirty (30) days prior written notice (at the address for
notice to Lessor set forth herein) of any alteration in or cancellation of the
terms of such policies.

 

ARTICLE 31: RECIPROCAL REPRESENTATIONS AND WARRANTIES

 

Lessee
hereby makes to Lessor as representations and warranties of Lessee the
statements set forth in Paragraphs 1 through 6 set forth below in this Article 31,
which representations and warranties are (i) made as of the date of this
Lease, and (ii) are made only to the actual knowledge of Lessee without
further inquiry. Lessor hereby makes to Lessee as
representations and warranties of Lessor the statements set forth in Paragraphs
1 through 6 set forth below in this Article 31, which representations and
warranties are (i) made as of the date of this Lease, and (ii) are made
only to the actual knowledge of Lessor without further inquiry. As used in such
Paragraphs 1 through 6, “it” refers to the entity making the statement in
question.

 

8

 

1.             It is a
corporation or limited liability company duly incorporated or organized,
validly existing, and in good standing under the laws of its state of
incorporation or organization as identified in the preamble of this Lease and
is either duly qualified to do business and is in good standing in such other
jurisdictions in which the business and activities of Lessee, or Lessor as the
case may be, require such qualification or its failure to so qualify in such
other jurisdiction will not have a material adverse impact on this Lease.

 

2.             It has full
corporate power to enter into this Lease.

 

3.             The Lease has
been duly authorized, executed and delivered by it and constitutes a valid,
legal and binding agreement, enforceable in accordance with the terms and
conditions set forth in the Lease, subject to bankruptcy and other creditor’s
rights laws and the principles of equity.

 

4.             It is not required
to obtain any approval from any governmental or public body or authority with
respect to the entering into or performance of this Lease, except for any
approvals that may be required in connection with the actual operation of the
cars.

 

5.             The entering
into and performance by it of this Lease will not conflict with, or result in a
breach of, the terms, conditions or provision of any law or any regulations,
order, injunction, permit, franchise or decree of any court or governmental
instrumentality by which it is bound or to which it is subject.

 

6.             The entering
into and performance by it of this Lease will not conflict with, or result in a
breach of, the terms, conditions or provisions of any indenture, agreement or
other instrument to which it is a party or by which it or any of its property
is bound.

 

ARTICLE 32: TILC CAPACITY

 

The
parties hereto acknowledge and agree that Trinity Industries Leasing Company
(in its individual capacity, “TILC”) in executing an individual Rider
incorporating the terms of this Agreement (thereby entering into an individual
and separate Lease of the subject cars as described in Article 1 above)
may execute such Rider (and, together with this Agreement, enter into such
Lease) in either of the following capacities:

 

1.               If TILC is the
owner of the subject cars at the time they are placed into service under the
Lease, TILC executes the related Rider and enters into such Lease in its
individual capacity as the car owner for its own account.

 

2.               If TILC is not
the owner of the subject cars at the time they are placed into service under
the Lease, then TILC executes the related Rider and enters into such Lease as
manager for the benefit of the relevant car owner, pursuant to contractual
authority delegated by the car owner to TILC (as manager) to encumber and bind
the subject cars and car owner under such Lease.

 

In
the event TILC enters into a Lease in the capacity of manager as aforesaid,
TILC in its individual capacity represents and warrants to the Lessee, and
agrees with the Lessee that (i) the party for whom TILC acts as manager is
contractually bound and liable as Lessor to the same extent as if it signed the
Lease directly, (ii) TILC is obligated in its capacity as manager to
perform the Lessor’s obligations to the Lessee under such Lease, and (iii) if
TILC (a) fails to perform the Lessor’s obligations while serving as
manager, or (b) is removed or terminated as manager and the car owner for
whose benefit TILC has been acting as manager breaches or otherwise fails to
perform (or cause to be performed) the Lessor’s obligations to the Lessee in
accordance with the Lease, then in either such case TILC agrees that it is
directly liable to the Lessee for any resulting damages and costs, to the same
extent that TILC would have been had TILC been the actual car owner executing
the Lease as Lessor.

 

ARTICLE 33: MISCELLANEOUS

 

This
Lease, together with any and all exhibits attached hereto, constitutes the
entire agreement between Lessor and Lessee, and it shall not be amended,
altered or changed except by written agreement signed by the parties hereto. No
waiver of any provision of this Lease or consent to any departure by Lessee
therefrom shall be effective unless the same shall be in writing, signed by
both parties and then such waiver of consent shall be effective only in the
specific instance and for the purpose for which it was given.

 

9

 

	
  1.

  	
   

  	
  Governing Law

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  This
  Lease shall be interpreted under and performance shall be governed by the
  laws of the State of Texas.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Conflict with Interchange Rules

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  In
  the event the Interchange Rules conflict with any provision of this
  Lease, this Lease shall govern.

  
	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Exhibits

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  All
  exhibits attached hereto are incorporated herein by this reference.

  
	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Payments

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  All
  payments to be made under this Lease shall be made at the addresses set forth
  in Article 4.

  
	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  Severability

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  If
  any term or provision of this Lease or the application thereof shall, to any
  extent, be invalid or unenforceable, such invalidity or unenforceability
  shall not affect or render invalid or unenforceable any other provision of
  this Lease, and this Lease shall be valid and enforced to the fullest extent
  permitted by law.

  
	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  Headings

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The
  headings that have been used to designate the various Sections and Articles
  hereof are solely for convenience in reading and ease of reference and shall
  not be construed in any event or manner as interpretative or limiting the
  interpretation of the same.

  
	
   

  	
   

  	
   

  
	
  7.

  	
   

  	
  Survival

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  All
  indemnities contained in this Lease shall survive the termination hereof. In
  addition, the obligation to pay any deficiency, as well as the obligation for
  any and all other payments by Lessee to Lessor hereunder shall survive the
  termination of this Lease or the lease contained herein.

  

 

10

 

ARTICLE 34: ADDRESSING
OF NOTICES

 

Any
notice required or permitted hereunder shall be in writing and shall be
delivered to the respective parties hereto by personal delivery thereof or by
telegram, telex, telecopier or deposit in the United States mail as a certified
or registered matter, return receipt requested, postage prepaid, and addressed
to the respective parties as follows, unless otherwise advised in writing.

 

	
  Lessee
  to Lessor:

  	
  Lessor
  to Lessee:

  
	
   

  	
   

  
	
  TO:
  

  	
  Trinity
  Industries Leasing Company

  	
  Otter
  Tail Ag Enterprises, LLC

  
	
   

  	
  2525
  Stemmons Freeway

  	
  24096
  170th Avenue

  
	
   

  	
  Dallas,
  Texas 75207

  	
  Fergus
  Falls, Minnesota 56537

  
	
   

  	
   

  
	
  ATTENTION:
  Thomas C. Jardine

  	
  ATTENTION:
  Kelly Longtin

  
	
   

  	
  Vice
  President – Portfolio Management

  	
   

  
				

 

IN
WITNESS WHEREOF, the parties hereto have caused this instrument to be executed
and delivered as of the 24thday of February, 2008.

 

	
  LESSOR:  TRINITY INDUSTRIES
  LEASING COMPANY

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Thomas C. Jardine

  	
   

  	
   

  
	
   

  	
  Thomas
  C. Jardine

  	
   

  
	
   

  	
  Vice
  President, Portfolio Management

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  ATTEST:

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Paul M. Jolas

  	
   

  	
   

  
	
   

  	
  Paul
  M. Jolas, Corporate Secretary

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  LESSEE:
  OTTER TAIL AG ENTERPRISES, LLC

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Kelly Longtin

  	
   

  	
   

  
	
   

  	
  Kelly
  Longtin

  Otter Tail Ag Enterprises, LLC.

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  CEO

  	
   

  	
   

  
	
   

  	
   

  
	
  ATTEST:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  B. Gunner Greene

  	
   

  	
   

  
	
   

  	
  B.
  Gunner Greene, Plant Mg

  	
   

  
										

 

11

 

THE
STATE OF TEXAS

 

COUNTY
OF DALLAS

 

Before
me, the undersigned, a Notary Public in and for said County and State, on this
day personally appeared Thomas C. Jardine, known to me to be the person and
officer whose name is subscribed to the foregoing instrument, and acknowledged
to me that the same was the act of the said Trinity Industries Leasing Company,
a corporation, and that he executed the same as the act of such corporation for
the purposes and consideration therein expressed, and in the capacity therein
stated.

 

Given under my hand and seal of office this the 22 day of February,
2008.

 

 

	
  /s/ Danielle Henderson

  	
   

  
	
  Notary Public

  
	
   

  
	
  My Commission Expires:

  	
  6/9/08

  	
   

  
				

 

 

	
  THE
  STATE OF MINNESOTA

  	
  §

  
	
   

  	
   

  	
  §

  
	
  COUNTY
  OF 

  	
  Otter
  Tail

  	
  §

  

 

Before
me the undersigned, a Notary Public in and for said County and State, on this
day personally appeared Kelly Longtin, known to me to
be the person and officer whose name is subscribed to the foregoing instrument,
and acknowledged to me that the same was the act of the
said Otter Tail Ag Enterprises, LLC, a limited liability company, and that he
executed the same as the act of such limited liability company for the purposes
and consideration therein expressed, and in the capacity therein stated.

 

Given
under my hand and seal of office this the 26th day of February,
2008.

 

 

	
  Cheryl
  Hardyman

  	
   

  
	
  Notary
  Public

  
	
   

  
	
  My Commission Expires:

  	
  01-31-09

  	
   

  
				

 

12

 

EXHIBIT A

 

CERTIFICATE OF
ACCEPTANCE OF RAILROAD CAR

 

This Certificate relates
to the railroad cars listed below leased by Trinity Industries Leasing Company,
to Otter Tail Ag Enterprises LLC, under a Lease Agreement for 70 railroad cars
dated February 21, 2008, into which this certificate is incorporated (by Article 3
thereof).

 

Railcar Numbers

 

Lessee hereby certifies
that the railcars listed above were delivered to and received by Lessee,
inspected, determined to be acceptable under the applicable standards (set
forth in Article 3 of the Lease Agreement); and Lessee hereby certifies
its acceptance of the railcars as of               .

 

 

	
  LESSEE: 

  	
    OTTER TAIL AG ENTERPRISES, LLC

  
	
   

  
	
  BY:

  	
   

  	
   

  	
   

  
	
   

  
	
  TITLE:

  	
   

  	
   

  	
   

  

 

13

 

RIDER ONE (1) TO RAILROAD CAR LEASE AGREEMENT

 

Effective
this 21st day of February, 2008, this Rider shall become a part of
the Railroad Car Lease Agreement between Trinity
Industries Leasing Company, Lessor,
and Otter Tail Ag Enterprises, LLC, Lessee, dated February 21, 2008,
and the cars described herein shall be leased to Lessee, subject to the terms
and conditions in said Railroad Car Lease Agreement, during the term and for
the rental shown below:

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Base

  	
   

  
	
  Number

  	
   

  	
   

  	
   

  	
  Approximate

  	
   

  	
  Monthly

  	
   

  
	
  of

  	
   

  	
   

  	
   

  	
  Capacity

  	
   

  	
  Rental

  	
   

  
	
  Cars

  	
   

  	
  Type and Description

  	
   

  	
  (cubic feet)

  	
   

  	
  (Per Car)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  70

  	
   

  	
  108-ton quadruple covered hopper cars, Lessor
  shall add car mark and numbers to this Rider via amendment within thirty (30)
  days of execution.

  	
   

  	
  6,351

  	
   

  	
  $

  	
  600.00

  	
   

  

 

Delivery – FOB
Destination.

 

Impact
Damage – Damage resulting from striking the car with hammers, lances, sledges,
or other such mechanical devices shall not be considered normal wear and tear
to the extent such damage results in (a) cracks, punctures, or tears of
the steel sheet, or (b) dents to the steel sheet exceeding one inch (1”)
in depth, or (c) penetration of the exterior paint film exposing the steel
sheet to the elements; all of the preceding enumerated items shall collectively
be defined as “Lessee Responsibility Damage”. Lessee Responsibility Damage
shall be repaired at Lessee’s expense by means of straightening dents, welding
any cracks, patching punctures or tears, and spot painting any repaired or
exposed surfaces.

 

Weight
Limitation - Lessee shall not exceed the weight limitations
prescribed for operation of cars in unrestricted interchange service as set
forth under AAR Interchange Rule 70 without Lessor’s prior written
consent.

 

Escalation
of Monthly Rental Charge:

 

	
  1.

  	
  Modifications
  - In accordance with Article 19 of Railroad Car Lease Agreement, any
  change in car design required by the AAR, DOT, FRA or other governmental
  authority during the term of this lease will cause the monthly car rental to
  increase for each car on the month following its modification as follows: 

  
	
   

  
	
   

  

 

	
  A.

  	
   

  	
  For
  modification with a useful life equal to the car itself, car rental will
  increase by a monthly rate of $1.75 per car for each $100 of Lessor’s cost
  incurred in the course of making modification.

  
	
   

  	
   

  	
   

  
	
  B.

  	
   

  	
  For modification with a useful life less
  than that of the car, monthly car rental increase will equal cost of
  modification, including the implicit cost of money at 10% per annum, divided
  by the number of months of estimated remaining life of the modification.

  

 

	
  2.

  	
  High
  Mileage - In accordance with Article 20, in the event that a car travels
  more than 30,000 miles (empty and loaded) in any calendar year, the Lessee
  shall pay the Lessor $0.03 per mile for each mile over 30,000 traveled by
  such car.

  
	
   

  

 

Lessor
and Lessee agree that this Rider shall constitute a separate Lease which
incorporates the terms of the above referenced Railroad Car Lease Agreement.
This Rider shall be severable from any other cars or riders relating to the
above referenced Railroad Car Lease Agreement and shall become a separate lease
which is separately transferable for all purposes.

 

The
minimum rental period for the cars leased hereunder shall be thirty-six (36)
months, and the cars shall continue under lease thereafter for successive
one (1) month terms, at the same rate and under the same conditions,
unless notice, in writing, requesting cancellation shall be given by either
party to the other at least thirty (30) days prior to expiration of the initial
term or any successive term for cars covered by this Rider. Thereafter, this
Rider shall terminate automatically upon the date of release of the last car
covered by this Rider.

1

 

	
  TRINITY INDUSTRIES LEASING
  COMPANY

  	
  OTTER TAIL AG ENTERPRISES, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Thomas C. Jardine

  	
   

  	
  By:

  	
  /s/
  Kelly Longtin

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Vice President,
  Portfolio Management

  	
  Title:

  	
  CEO

  
						

 

2Exhibit 10.39

 

DISTILLER’S GRAIN MARKETING AGREEMENT

 

THIS
DISTILLER’S GRAIN  MARKETING AGREEMENT
(the “Agreement”), is entered into effective as of February 25 2008, by
and between Ottertail Ag Enterprises, LLC, a Minnesota limited liability
company (“Seller”) and CHS Inc., a Minnesota cooperative corporation (“Buyer”).

 

W I T N E S S E T H:

 

WHEREAS,
Seller desires to sell and Buyer desires to purchase the distiller’s dried
grains with solubles (“DDGS”) and solubles (“Solubles”) (hereinafter DDGS and
Solubles are referred to collectively as the “Products”) output from the
ethanol production plant that Seller intends to build, own and operate, in
Fergus Falls, Minnesota; and

 

WHEREAS,
Seller and Buyer wish to agree in advance of the sale and purchase of the
Products to the price formula, payment, delivery and other terms thereof in
consideration of the mutually promised performance of the other.

 

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

 

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

 

2.             PURCHASE
AND SALE. Seller agrees to sell to Buyer and Buyer agrees to purchase from
Seller the entire bulk feed grade DDGS and Solubles output from Seller’s plant
located at Fergus Falls, Minnesota (the “Plant”), subject to all terms and conditions
set forth in this Agreement. Buyer shall label all of Seller’s Products that
are marketed or sold by Buyer hereunder, and shall register all labels with the
states where such Products are sold.

 

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

 

4.             TERM.
The initial term of this Agreement shall be for three (3) years commencing
as of substantial completion and start-up of production of the Plant (the “Effective
Date”). Unless earlier terminated in accordance with this Agreement, this
Agreement shall be automatically renewed for successive one (1) year terms
thereafter unless either party gives written notice to the other party of its
election not to renew not later than one hundred twenty (120) days prior to the
expiration of the then current term.

 

1

 

5.             DELIVERY AND TITLE.

 

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

 

B.         Seller further warrants that storage space
for not less than five (5) days production of DDGS shall be reserved for
Buyer’s use at the Plant and shall be continuously available for storage of
DDGS purchased by Buyer hereunder at no charge to Buyer. Seller shall also make
available the necessary storage for Solubles which is adequate for Buyer to
market such products. Seller shall be responsible at all times for the
quantity, quality and condition of any of the Products in storage at the Plant.
Seller shall not be responsible for the quantity, quality and condition of any
of the Products stored by Buyer at locations other than the Plant.

 

C.         Buyer shall give to Seller a schedule of
quantities of the Products to be removed by truck and rail with sufficient
advance notice to reasonably allow Seller to provide the required services.
Seller shall provide the labor, equipment and facilities necessary to meet
Buyer’s loading schedule and, except for any consequential or indirect damages,
shall be responsible for Buyer’s actual costs or damages resulting from Seller’s
failure to do so. Except as otherwise set forth herein, Buyer shall order and
supply trucks and rail cars as scheduled for truck and rail shipments. All
freight charges shall be the responsibility of Buyer and shall be billed directly
to Buyer.

 

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

 

2

 

If to Buyer, to the attention of Steve Markham, Facsimile
number 651-355-6270 or email to steve.markham@chsinc.com and,

 

If to Seller, to the attention of Kelly Longtin, Facsimile
number 218-998-4302 or email to klongtin@otaellc.com

 

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

 

E.             Title, risk of loss and full shipping
responsibility shall pass to Buyer upon loading the Products into trucks or
rail cars.

 

6.             PRICE
AND PAYMENT

 

A.        Buyer agrees to pay Seller as follows: for
all DDGS removed by Buyer from the Plant a price equal to ninety eight percent
(98%) of the FOB Plant price (defined below) actually received by Buyer from
its customers. Buyer shall retain the balance of the FOB Plant price received
by Buyer from its customers (2% in the case of DDGS) as its fee for services
provided under this Agreement. In no event shall the fee for DDGS be less than
$1.70 per ton or greater than $2.80 per ton. Buyer shall also receive from
Seller a fee for Solubles of $2.00 per ton. For purposes of this provision, the “FOB Plant price” shall be the
actual sale price received by Buyer from its customers, less all customary
freight costs incurred by Buyer in delivering the Product to its customer.

 

B.         Buyer agrees that it shall not sell Product for delivery more than ninety
(90) days from the date of entering into a sale without the prior consent of
Seller. Buyer agrees to use commercially reasonable efforts to achieve the
highest sale price available under prevailing market conditions.
Seller’s sole and exclusive remedy for breach of Buyer’s obligations hereunder
shall be to terminate this Agreement. Buyer shall collect all applicable state
tonnage taxes on Products sold by Buyer and shall remit to the appropriate
governmental agency.

 

C.         Within ten (10) days following receipt of certified weight
certificates, which certificates shall be presented to Buyer each Thursday for
all shipments during the preceding week, Buyer shall pay Seller the full price,
determined pursuant to paragraph 6A above, for all properly documented
shipments. Buyer shall submit to Seller a certificate with each such payment
showing in reasonable detail the price invoiced by Buyer to the third-party
buyer, freight and commission on all Products for which payment is being made.
Buyer agrees to maintain accurate sales records and to provide such records to
Seller upon request. Seller shall have the option to audit Buyer’s sales
invoices at any time during normal business hours and during the term of this
Agreement. Any discrepancy discovered will be paid by Buyer and shall be
calculated with accrued interest from
the original due date at a rate equal to the Prime Commercial Lending Rate as
reported in the Wall Street Journal.

 

3

 

7.             QUANTITY AND
WEIGHTS.

 

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

 

B.         The quantity of Products delivered to Buyer from Seller’s Plant shall
be established by weight certificates obtained from the scale at the Plant
which is certified as of the time of weighing and which complies with all
applicable laws, rules and regulations or in the event that the scale at
the Plant is inoperable then at other scales which are certified as of the time
of weighing and which comply with all applicable laws, rules and
regulations. The outbound weight certificates shall be determinative of the
quantity of the Products for which Buyer is obligated to pay pursuant to Section 6.

 

8.             QUALITY.

 

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

 

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

 

	
   

  	
   

  	
  Protein

  	
   

  	
  Fat

  	
   

  	
  Fiber

  	
   

  	
  Moisture

  	
   

  	
  Ash

  	
   

  
	
   

  	
   

  	
  Min

  	
   

  	
  Max

  	
   

  	
  Min

  	
   

  	
  Max

  	
   

  	
  Min

  	
   

  	
  Max

  	
   

  	
  Min

  	
   

  	
  Max

  	
   

  	
  Min

  	
   

  	
  Max

  	
   

  
	
  DDGS

  	
   

  	
  25

  	
   

  	
   

  	
   

  	
  10

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  15

  	
   

  	
   

  	
   

  	
  12

  	
   

  	
   

  	
   

  	
  6

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Solubles

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

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

 

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

 

4

 

Products
seized or condemned and Buyer shall not be obligated to offer any defense in
connection with the seizure or condemnation. When rejection occurs before or
after delivery, at its option, Buyer may:

 

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

 

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

 

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

 

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

 

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

 

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

 

5

 

9.             RETENTION
OF SAMPLES. Seller will take an origin sample of Products from each truck
and rail car before it leaves the Plant using standard sampling methodology.
Seller will label these samples to indicate the date of shipment and the truck
or railcar number involved. Seller will retain the samples and labeling
information for no less than one (1) year.

 

10.           INSURANCE.

 

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

 

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

 

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

 

D.         Buyer agrees to carry automobile liability insurance on Buyer owned,
non-owned and hired vehicles operating on Seller’s property with minimum limits
of liability of $5,000,000 combined single limit for each occurrence, listing
Seller, its employees, agents and representatives, as additional insured, and
providing them with a waiver of subrogation. These limits can also be attained
through the use of an excess or umbrella policy. Upon request, Buyer shall
provide certificates of insurance to Seller to establish the coverage
maintained by Buyer. Buyer will monitor and require proper trucking authority
and insurance certificates for freight contracted
by Buyer.

 

6

 

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

 

11.           REPRESENTATIONS AND WARRANTIES.

 

A.            Seller represents and warrants that all of
the Products delivered to Buyer shall not be adulterated or misbranded within
the meaning of the Federal Food, Drug and Cosmetic Act (the “Act”) and may
lawfully be introduced into interstate commerce pursuant to the provisions of
the Act. Seller further warrants that the Products shall fully comply with any
applicable state laws governing quality, naming and labeling of product.
Payment of invoice shall not constitute a waiver by Buyer of Buyer’s rights as
to Products which do not comply with this Agreement or with applicable laws and
regulations. Seller covenants that the Products will be merchantable as of the
time they loaded into railcars pursuant to this Agreement.

 

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

 

12.           EVENTS OF DEFAULT. The occurrence of any of the following
shall be an event of default (“Event of Default”) under this Agreement: (1) failure
of either party to make payment to the other when due; (2) default by
either party in the performance of the covenants and agreements set forth in
this Agreement; and (3) if either party shall become insolvent, or make a
general assignment for the benefit of creditors or to an agent authorized to
liquidate any substantial amount of its assets, or be adjudicated bankrupt, or
file a petition in bankruptcy, or apply to a court for the appointment of a
receiver for any of its assets or properties with or without consent, and such
receiver shall not be discharged within sixty (60) days following appointment.

 

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

 

14.           FORCE MAJEURE. Neither Seller nor Buyer will be liable to
the other for any failure or delay in
the performance of any obligation under this Agreement due to

 

7

 

events
beyond its reasonable control, including, but not limited to, fire, storm,
hurricane, tornado, flood, earthquake, explosion, act of the public enemy,
riots, civil disorders, sabotage, strikes, lockouts, labor disputes, labor
shortages, war stoppages (all strikes, lockouts, labor disputes, labor
shortages, or shutdowns shall be of a regional or national character), or
slowdowns initiated by labor, transportation embargoes, failure or shortage of
materials, acts of God, or acts or regulations or priorities of the federal,
state or local government or branches or agencies thereof. Notwithstanding the
foregoing, a party shall not be entitled to claim relief under this Section 14,
unless such party provides written notice of such force majeure event within
five (5) days of the first occurrence.

 

15.           INDEMNIFICATION.

 

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

 

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

 

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

 

D.         Seller acknowledges that in order to maximize
the total revenue to be generated through the sale of the Products, Buyer may
take positions by selling the Products in anticipation of Seller providing the
Products. Notwithstanding the fact that Seller’s obligation is to provide Buyer
with the output of the Plant, the parties acknowledge that Buyer may suffer
losses as a result of positions taken by Buyer if Seller discontinues
operations for any reason whatsoever including Force Majeure. Therefore, Seller
shall indemnify, defend and hold Buyer and its officers, directors, employees
and agents harmless from any and all losses, liabilities, damages, expenses
(including reasonable attorney’s fees), costs, claims, demands that Buyer or
its officers, directors, employees, or agents may suffer, sustain or become
subject to as a result of any sale or purchase of product taken by Buyer
in anticipation of Seller delivering the Products hereunder, provided Buyer has
taken commercially

 

8

 

reasonable
steps to avoid the loss. Seller shall not be liable for any loss resulting from
Seller discontinuing operations related to a position taken by Buyer for
delivery more than ninety (90) days from the date of entering into a sale
without the consent of Seller.

 

The
indemnification in this Section 15 shall survive the
termination of this Agreement.

 

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

 

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

 

18.           MISCELLANEOUS.

 

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

 

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

 

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

 

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

 

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

 

9

 

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

 

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

 

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

 

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

 

 

	
   

  	
  Buyer:

  	
   

  	
  CHS
  Inc.

  5500
  Cenex Drive

  Inver
  Grove Heights, MN. 55077

  ATTN:
  Steve J. Markham

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Seller:

  	
   

  	
  Otter
  Tail Ag Enterprises

  
	
   

  	
   

  	
   

  	
  24096
  170th AVE

  
	
   

  	
   

  	
   

  	
  Ferqus
  Falls, MN 56537

  
	
   

  	
   

  	
   

  	
  ATTN:

  	
   Kelly Longtin

  

 

10

 

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

 

	
   

  	
  CHS Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Steve Markham

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Steve Markham

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
  Merchant

  
	
   

  	
   

  	
   

  
	
   

  	
  Ottertail Ag Enterprises, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kelly Longtin

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Kelly Longtin

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
  CEO

  
					

 

11

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