Ethanol Marketing and Services Agreement

Exhibit 10.3

Ethanol Marketing and Services Agreement

This Agreement is made and entered into this 24th day of April, 2007, by and between Northern Lights Ethanol, LLC having an address near Big Stone City. South Dakota (hereinafter referred to as Owner), and Ethanol Products, LLC d/b/a POET Ethanol Products having an address of 9530 B. 37th Street North, Wichita, Kansas 67226 (hereinafter referred to as Marketer).

RECITALS:

A)           The Owner would like to utilize the services of a Marketer to market fuel grade ethanol (hereinafter referred to as Ethanol) from its plant sited near Big Stone City, South Dakota.

B)            Marketer is in the business of marketing Ethanol in the United States.

C)            The parities desire to enter into and execute this Agreement for the purpose of setting forth agreed upon terms and conditions.

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements set forth herein, the parties agree as follows:

1.             Marketing Rights. Owner gives Marketer exclusive rights to market all Ethanol produced from its ethanol plant near Big Stone City, South Dakota.

2.             Term of Agreement. The initial term of this agreement shall be five (5) years effective on. July 1, 2007 (the “Commencement Date”). This Agreement renews automatically for additional five (5) year periods, at the end of the initial period and at the end of any subsequent five (5) year renewal period, unless terminated by either party. Either party may terminate this agreement at the end of the initial period or at the end of any five (5) year renewal period by giving to the other party ninety (90) days written notice of termination prior to the end of the then current period. Within fifteen (15) days of receipt of written notice of termination by either party, Marketer will provide Owner with a quantity per month of Ethanol for up to one (1) year from termination that will be needed to fulfill sales contracts in existence at the time of termination and copies of said contracts. Owner agrees that all such existing contracts disclosed in the fifteen (15) day period will be fulfilled, and that the terms of this Agreement will remain in effect for all such Ethanol.

3.             Marketing Services Provided.   Marketer will provide to Owner the following marketing services:

a.             Marketing.  Marketer will use its best efforts to effect the same of Owner’s Ethanol at available market prices.

b.             Scheduling. Marketer will be responsible for scheduling all shipments of Owner’s Ethanol. Marketer will provide to Owner a shipping order, and Owner will provide a combined shipping schedule as stated in Section 8 below.

c.             Leased Storage.  If it is deemed necessary by Marketer to market Owner’s Ethanol through storage facilities, Owner will pay all lease and throughput costs associated with such leases.

d.             Freight and Transportation. When necessary to market Owner’s Ethanol, Marketer will arrange for all freight and transportation services, including rail equipment, for delivery of Owner’s Ethanol.  Owner will pay all freight, transportation service and. throughput costs.

e.             Customer Creditworthiness. Marketer will make reasonable efforts to review the creditworthiness of Owner’s Ethanol customers. As deemed necessary at Marketer’s discretion, Marketer will obtain at its expense Credit Bureau reports or Dunn and Bradstreet reports for customers of Owner. Marketer will then recommend to Owner, which, if any, accounts Marketer believes should be rejected. Owner will have the right to request and review the rejection recommendations and/or reports and notify Marketer in writing of any customers in addition to the recommendations of Marketer that should be rejected or accepted by Owner. Marketer will not sell Ethanol to any customer rejected by Owner or Marketer.

f.              Accounts Receivable. Marketer will make reasonable efforts to collect any past due accounts. However, Marketer shall not be required to initiate litigation to collect delinquent accounts.  Marketer is authorized to turn over to collection agencies a delinquent account unless Owner determines that it will assume responsibility for collecting the account. Any collection agency fees resulting from the collections process will be borne by Owner.  All accounts receivable losses arising from the marketing of Ethanol are the sole responsibility of Owner, however, there will be no marketing fee paid to Marketer on these receivable losses.

g.             Title To and Risk of Loss. Title to and risk of loss shall pass from Owner directly to Owner’s customer according to the provisions of each sales transaction.

h.             Transaction Processing. Marketer will be responsible for invoicing all Ethanol marketed, receiving payments from customers, and paying freight and/or storage when necessary. Owner will be responsible for furnishing Marketer a report by 10:00 AM each

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workday of the previous day’s shipments. Marketer will send to the customers invoices the same day as the report is received.

i.              Remittance of Payment.  Each week a payment will be made to Owner for all Ethanol invoiced thirteen to nineteen (13-19) days prior to said date that has been paid by Owner’s customers. This payment will be adjusted for all; freight, transportation services, storage costs, throughput costs, Fees, costs incurred due to a Regulatory Change or Change in Customer Requirements, taxes, and when applicable, an adjustment for value-added as stated in Section 7 below.

4.             Administrative Services Provided. Marketer will provide to Owner the following Administrative Services:

a.             Distribution Services.  Marketer will be responsible for an on-going program to conduct carrier audits and will be responsible for carrier selection and dispatching, freight rate bundling and distribution optimization.

b.             Transaction Processing.  Marketer will be responsible for ethanol licensing, monitoring and state compliance reporting, state surety bonding, tax collection, remittance and reporting, purchase and sales acknowledgments, late payment collections and electronic funds transfer services.

c.             Inventory Management. Marketer will be responsible for monitoring future ethanol stock levels projected for Owner’s plant to facilitate the marketing program established by Marketer.

d.             Proprietary Software. Marketer will install and maintain a proprietary software system to handle linked transaction processing and necessary data access to ethanol marketing and sales information.

e.             Denaturant Supply. Marketer has the exclusive right to supply denaturant to Owner’s Ethanol plant subject to terms, conditions, and pricing as mutually agreed to by Marketer and Owner.

5.             Marketing and Administrative Service Fee.  The Marketing and Administrative Service Fee (the “Service Fee”) shall be initially $0.0085/gallon of denatured Ethanol as produced by the Ethanol Plant located near Big Stone City, South Dakota, from the Commencement Date to the fifth annual anniversary of the Commencement Date. The Service Fee shall be adjusted on the fifth anniversary of the Commencement Date and every fifth annual anniversary thereafter during any renewal period for which this Agreement remains in effect (the “Adjustment Dates”). The Service Fee shall be adjusted in accordance with the percent change in the

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Producer Price Index for “All Finished Goods” (Series ID: WPUSOP3000), not seasonally adjusted, as it appears in the periodical PPI Detailed Report as published by the U.S. Department of Labor (the “Index”). The Service Fee in effect immediately prior to an Adjustment Date shall be adjusted on the Adjustment Date, based upon the percent increase or decrease between the reference base date and the current Adjustment Date. The reference base date for the adjustment to be made on the fifth anniversary shall be the Commencement Date. The reference base date for the adjustment to be made on any subsequent five year anniversary shall be the previous Adjustment Date. Thus, the reference base date for the adjustment to be made on the tenth anniversary shall be the fifth anniversary of the Commencement Date. All calculations for the Index shall be based upon the latest version of the Index published as of the Adjustment Date. If the Index value is not available for the month of the Adjustment Date, the Index value for the immediately preceding three months, whichever is the most recent month which has a published value, shall be used as the Index value for adjusting the Service Fee. If no Index values have been published for those months, then the parties shall agree upon a substitute index.

The Service Fee to be paid to Marketer by Owner as of each Adjustment Date shall be calculated as follows:

a.             Subtract the Index value for the reference base date from the Index value as of the Adjustment Date.

b.             Divide the result of the subparagraph a calculation by the Index value for the reference base date.

c.             Multiply the result of the subparagraph b calculation times the Service Fee in effect immediately prior to the Adjustment Date.

d.             Add the result of the subparagraph e calculation to the Service Fee in effect immediately prior to the Adjustment Date.

e.             The result of the subparagraph d calculation is the Service Fee to be paid from the current Adjustment Date until the next Adjustment date.

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The following example demonstrates the elements of the above-described formula:

Adjustment Date Index value		100
Base date Index value		94
Result (a)		6.0
Divide result (a) by base date Index value		÷94
Result (b)		.064