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. 37 th 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
2
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
3
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.
Subtr
