Exhibit 10.3
GRAIN BROKERAGE AGREEMENT
This Grain Brokerage Agreement (“Agreement”) is made and entered into as of this
15th day of December, 2009, by and between Southwest Georgia Ethanol, LLC, a
Georgia limited liability company (“SWGE”), and PALMETTO GRAIN BROKERAGE, LLC, a
South Carolina limited liability corporation (“Palmetto”) (each a “Party”, and
collectively the “Parties”).
RECITALS:
WHEREAS, SWGE wants to ensure an adequate supply of grain at the most
advantageous prices available; and
WHEREAS, SWGE requires a continuous and predictable flow of grain to its
facility in Camilla, Georgia to ensure that required raw materials for its
manufacturing process are always available and to prevent demurrage; and
WHEREAS, SWGE desires market development services be supplied to grain producers
and potential grain producers in SWGE’s local grain market; and
WHEREAS, Palmetto desires to expand its presence in the rail grain market in the
state of Georgia; and
WHEREAS, Palmetto desires to expand its marketing services program to grain
producers and potential grain producers in the state of Georgia; and
WHEREAS, SWGE wants to insure an adequate demand for its dried distillers
grains;
and
WHEREAS, SWGE requires a continuous and predictable removal of dried distillers
grains from its facility in Camilla, Georgia; and
WHEREAS, Palmetto desires to expand its presence in the rail dried distillers
grains market in the south-eastern United States;
NOW THEREFORE, in consideration of the mutual terms and conditions contained
herein, the Parties agree as follows:
ARTICLE 1
DEFINITIONS

1.1  
“Agreement”—means this grain brokerage agreement between Palmetto and SWGE.
  1.2  
“Camilla Grain Storage Space”—as defined in Section 5.2.
  1.3  
“DDG”—means dried distillers grain.
  1.4  
“DDG Sales Contract”—means a contract between SWGE and a Third Party Purchaser
for the sale of DDGs to the Third Party Purchaser.

1.5  
“DDG Sales Opportunity”—means a Third Party Purchaser willing to purchase DDGs
from SWGE on commercially favorable terms and at a commercially favorable price.

 

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1.6  
“Force Majeure”—means strikes, lockouts, or industrial disturbances; riots or
civil disturbances; interference by civil or military authorities; wars,
blockades, insurrection, or acts of other public enemy or acts of terrorism;
epidemics, landslides, lightning, earthquakes, fires, storms, floods, washouts,
or other acts of God; arrests or restraints of governments and people;
compliance with federal, state, or local laws, rules, or regulations, acts,
orders, directives, requisitions or requests of any official or agency of
federal, state or local governments; fires, explosions, freezing, failures,
disruptions, breakdowns or accidents to transportation equipment or facilities;
prorationing by transporters; the necessity of testing, making repairs,
alterations or enlargements to transportation equipment or facilities;
embargoes, priorities, expropriation or condemnation by government or
governmental authorities; and any other cause which is not reasonably within the
control of the Party claiming suspension.
  1.7  
“Grain Purchase Contract”—means a contract between SWGE and a Third Party
Supplier for the sale of grain required by SWGE for its manufacturing process.
  1.8  
“Grain Purchase Opportunity”—means a Third Party Supplier willing to sell grain
to SWGE on commercially favorable terms and at a commercially favorable price.
  1.9  
“Introducing Broker”—means Palmetto, when it seeks out a Third Party Supplier
who is willing to sell grain on commercially favorable terms and at a
commercially favorable price and introduces this Third Party Supplier to SWGE.
  1.10  
“Introducing Broker Fee”—means the fee charged by Palmetto to Third Party
Suppliers for introducing that Third Party Supplier to a purchaser of the Third
Party Supplier’s grain.
  1.11  
“Local Grain Market”—means the aggregate grain producers and potential grain
producers located in reasonably close proximity to the SWGE manufacturing
facility.
  1.12  
“Long-Term Grain Forecast”—as defined in Section 5.1.
  1.13  
“Market Analysis”—means a report of various relevant information needed by SWGE
to make a commercially reasonable decision on when, where, and from whom to
purchase grain and sell DDGs. Information in the Market Analysis includes but is
not limited to: supply and demand reports, planting intention reports, weather
and crop condition reports, current and historical basis information, grain
storage availability, railroad car availability, government price support
levels, farmer selling attitude, grain market predictions, and grain basis price
prospects.
  1.14  
“Midwest Grain Storage Space”—as defined in Section 5.2.
  1.15  
“Midwest Rail Grain Market”—means the aggregate Third Party Suppliers ‘Dented in
the middle-western portion of the United States, who are willing and able to
ship grain by use of the railroad system.
  1.16  
“Non-Broker Transaction”—as defined in Section 3.7.
  1.17  
“Non-Participating Broker Fee”—as defined in Section 3.7.
  1.18  
“Pinnacle Marketing Program”—means a program designed and run by Palmetto that
seeks to develop the Local Grain Market.

 

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1.19  
“Railroad Service Contracts”—as defined in Section 5.4.
  1.20  
“Selling Broker”—means Palmetto, when it is searching for potential purchasers
of excess grain and DDGs that SWGE has available.
  1.21  
“Short-Term Grain Forecast”—as defined in Section 5.1.
  1.22  
“Third Party Purchaser”—means a third party, not a Party to this contract, that
purchases grains or DDGs from SWGE.
  1.23  
“Third Party Supplier”—means a third party, not a Party to this contract, that
has grain for sale that is appropriate for use as a raw material in SWGE’s
manufacturing process.

ARTICLE 2
TERM AND RENEWAL

2.1  
Term: The term of this Agreement shall commence on the date hereof and shall
continue for a primary term of 1 year, from January 1, 2010 through December 31,
2010. This Agreement shall automatically renew for successive one (1) year
terms, unless terminated on the expiration date, or on the expiration date of
any subsequent one (1) year renewal term. In each case, termination requires at
least six (6) months written notice by either Party prior to the expiration of
the primary term or any renewal term.

2.2  
Termination: Notwithstanding anything contained herein, either Party may
terminate this Agreement upon written notice to the other Party in the event
that (1) such other party commits a material breach (other than a breach which
in all the circumstances is insignificant or involves payment of money) of any
provision of this Agreement and fails to cure said breach within thirty
(30) days following receipt of written notice of such material breach; (2) a
payment that such other party is required to make is overdue for more than ten
(10) days following written notice of the overdue payment; (3) such other party
becomes the subject of any bankruptcy, insolvency or similar proceedings; or
(4) any legislation, regulation, or decision of a Federal, state or municipal
government or of any agency thereof is implemented, repealed or altered in such
a way as to significantly prevent either party from lawfully exercising or
performing its obligations hereunder.

ARTICLE 3
GRAIN BROKERAGE

3.1  
Introducing Brokerage: Palmetto shall be the exclusive Introducing Broker to
SWGE. Palmetto shall research, on a daily basis, the Midwest Rail Grain Market,
as well as all other available grain markets, and shall use its best commercial
efforts to discover and present to SWGE the most favorable Grain Purchase
Opportunities available in the market. Palmetto shall present to SWGE the first
opportunity to pursue Grain Purchase Opportunities that Palmetto discovers.
Palmetto shall actively advise SWGE on a daily basis of Palmettos findings
concerning Grain Purchase Opportunities. Palmetto shall act as an Introducing
Broker between SWGE and Third Party Suppliers and shall use reasonable
commercial means to facilitate Grain Purchase Contracts between SWGE and the
Third Party Suppliers. Palmetto shall use its best commercial efforts to assist
SWGE in obtaining grain at the lowest possible price available in the market.

 

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3.2  
Extent of Relationship: Palmetto shall not be a party to any contract between
SWGE and any Third Party Suppliers. SWGE shall have the exclusive power to enter
into all negotiations and Grain Purchase Contracts with such Third Party
Suppliers on terms and conditions negotiated by SWGE and such Third Party
Suppliers.

3.3  
Introducing Broker Fees: The Third Party Suppliers shall be responsible to
Palmetto for any Introducing Broker Fees. Palmetto shall not charge the Third
Party Suppliers Introducing Broker Fees in excess of the fees Palmetto normally
charges other Third Party Suppliers for similar services. SWGE shall not be
responsible for any Introducing Broker Fees due to Palmetto.

3.4  
Market Analysis: Palmetto shall provide to SWGE its Market Analysis and any
third party’s Market Analysis available to Palmetto which Palmetto reasonably
believes would assist SWGE in negotiating Grain Purchase Contracts. Palmetto
shall use its best commercial efforts to provide these Market Analyses as soon
as the information becomes available to Palmetto.

3.5  
Selling Brokerage: SWGE from time to time shall use Palmetto as a Selling
Broker. Palmetto shall use its best commercial efforts to secure Third Party
Purchasers for SWGE’s excess grain and generally act as a Selling Broker to
facilitate the sale of SWGE’s excess grain.

3.6  
Selling Broker Fees: Palmetto shall be reimbursed at a rate of one quarter of
one cent ($0.0025) per bushel of western rail grain and $0.01 per bushels on any
local bushels sold to Third Party Purchasers when Palmetto is acting as a
Selling Broker on behalf of SWGE. We understand SWGE is a end user of corn but
if they elect to “sell out” any purchased bushels, which is usually a rare
occasion, brokerage will be at these rates.

3.7  
Non-Broker Transaction: SWGE shall have the right to purchase grain in
situations where Palmetto is not involved in the transaction and Palmetto cannot
charge a Brokerage Fee under this Agreement (“Non-Broker Transaction”). In
Non-Broker Transactions, SWGE does not owe Palmetto Grain Brokerage a brokerage
fee for any grain that SWGE buys direct.

3.8  
Quantity and Quality: Palmetto shall secure sufficient Grain Purchase
Opportunities to meet SWGE’s total currently anticipated grain usage of
thirty-six million (36,000,000) bushels of grain per year. Reasonable deviation
flow this anticipated grain usage shall not be a breach of this Agreement The
Grain Purchase Opportunities must be for grain of a quality that reasonably
meets SWGE’s grain needs for ethanol manufacturing.

ARTICLE 4
DDG BROKERAGE

4.1  
DDG Selling Brokerage: SWGE will bring all DDG sales in house. Palmetto Grain
Brokerage will still assist SWGE on DDG sales on a normal brokerage type
arrangement.

4.2  
Extent of Relationship: Palmetto shall not be a party to any DDG Sales Contract
between SWGE and any Third Party Purchaser. SWGE shall have the exclusive power
to enter into all negotiations and DDG Sales Contracts with such Third Party
Purchasers on terms and conditions negotiated by SWGE and such Third Party
Purchasers.

4.3  
DDG Selling Broker Fees: SWGE shall pay to Palmetto one dollar ($1.00) per ton
for all DDGs sold through the efforts of Palmetto acting as Selling Broker.

 

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ARTICLE 5
GRAIN LOGISTICS

5.1  
Grain Use Forecasts: SWGE shall provide to Palmetto, on a bimonthly basis, an
estimate of the amount of grain it will need for the next two weeks (“Short-Term
Grain Forecast”). The Short-Term Grain Forecast shall indicate the amount of
grain SWGE expects to use over the next two week period and the anticipated
train schedule. SWGE shall amend this forecast as it reasonably deems necessary.
SWGE shall provide to Palmetto on a monthly basis a forecast detailing the
amount of grain SWGE will require for a period of one year horn the date of the
forecast (“Long-Tern Grain Forecast”). The Long-Term Grain Forecast shall
indicate the amount of grain SWGE shall require in one-half month increments.
SWGE is free to amend this Long-Term Grain Forecast as it reasonably deems
necessary. These forecasts shall not be binding orders by SWGE and shall simply
be estimates to assist Palmetto in meeting SWGE’s grain wails in an efficient
and timely fashion.

5.2  
Intentionally left blank.

5.3  
Leased Railroad Cars: Palmetto shall use its best efforts to assist SWGE in the
acquisition of a suitable leased rail hopper feet to service its corn logistics
needs.

5.4  
Railroad Service Contacts: Palmetto shall use its best commercial effort to
assist SWGE in negotiating contracts with third patty railroad companies to ship
grain to SWGE’s manufacturing facility (“Railroad Service Contracts”). Palmetto
shall abide and be bound by any terms and conditions required by any such third
party railroad company in the negotiation of such Railroad Service Contracts
including but not limited to confidentiality agreements. Palmetto shall execute
and deliver any documents required by such third party railroad in order to
facilitate Palmetto’s involvement in the negotiation of such Railroad Service
Contracts.

ARTICLE 6
LOCAL GRAIN PRODUCTION

6.1  
Pinnacle Marketing Program: Palmetto shall provide its Pinnacle Marketing
Program to the Local Grain Market to help establish a local grain supply that
can be utilized by SWGE to meet its grain supply needs. Palmetto shall make the
Pinnacle Marketing Program available to the Local Grain Market at a reasonable
cost to be paid by those producers that choose to participate. SWGE shall have
no liability to pay for the Pinnacle Marketing Program in addition to the fees
listed in Article 7.

ARTICLE 7
FEES AND EXCLUSIVITY

7.1  
Annual Fees: As primary consideration for the exclusivity relationship provided
in Section 72 herein and in addition to any fees SWGE is required to pay
Palmetto in Article 3, SWGE shall pay Palmetto an annual fee in two equal
payments, V2 invoiced in February 2010 and Y2 invoiced in September 2010. The
amount of the annual fee shall be as follows:

January I through December 31, 2010 $50,000.00 ( Fifty Thousand and no one
hundredths)

7.2  
Exclusive Relationship: Both Parties acknowledge that the relationship set out
in this contract provides both parties with significant business and marketing
opportunities. SWGE further contends that if Palmetto’s services were provided
to another ethanol company within the states of Georgia, Alabama, or Florida,
either in existence or built in the future, SWGE’s interests would be materially
damaged. As a -Jesuit, Palmetto shall not provide the same or similar services
as those described in this Agreement to any other ethanol manufacturing or
related company during the term of this Agreement in the following states:
Georgia (not including Sandersville, Georgia), Alabama, and Florida This
includes all existing and future ethanol manufacturing or related companies. Any
breach of this Section 72 by Palmetto shall be deemed a material breach and
shall be grounds for termination as set forth in Section 2.2 herein.

 

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ARTICLE 8
MISCELLANEOUS PROVISIONS

8.2  
Indemnity: Palmetto shall indemnify, defend, and hold SWGE and its affiliates,
subsidiaries, parents, and its and their respective directors, officers,
stockholders, members, employees, and agents harmless from and against any and
all claims, losses, awards, judgments, settlements, fines, penalties,
liabilities, damages, costs or expenses (including reasonable out-of-pocket
attorney’s fees and expenses) incurred on account of any injury or death of
persons or damages to property to the extent caused by or arising out of the
gross negligence or willful misconduct of Palmetto, its officers, employees, or
agents in performing Palmetto’s obligations under this Agreement.

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

8.3  
Force Majeure: In the event either Party is rendered unable, wholly or in part,
by Force Majeure to carry out its obligations under this Agreement, it is agreed
that on such Party’s giving notice in writing, or by telephone and confirmed in
writing, to the other Party as soon as possible after the commencement of such
Force Majeure event, the obligations of the Party giving such notice, so far as
and to the extent they are affected by such Force Majeure, shall be suspended
from the commencement of such Force Majeure and during the remaining period of
such Force Majeure, but for no longer period, and such Force Majeure shall so
far as possible be remedied with all reasonable dispatch; provided, however, the
obligation to make payments then accrued hereunder prior to the occurrence of
such Force Majeure shall not be suspended.

8.4  
Limitation of Damages: NEITHER PARTY SHALL BE LIABLE OR OTHERWISE RESPONSIBLE TO
THE OTHER PARTY HEREUNDER FOR CONSEQUENTIAL, EXEMPLARY, SPECIAL, INCIDENTAL, OR
PUNITIVE DAMAGES AS TO ANY ACTION OR OMISSION, WHETHER CHARACTERIZED AS A
CONTRACT BREACH OR TORT OR OTHERWISE THAT ARISES OUT OF OR RELATES TO THIS
AGREEMENT OR ITS PERFORMANCE EXCEPT FOR ANY SUCH AMOUNTS PAID BY A PARTY TO A
NON-AFFILIATE THIRD PARTY, WHICH WOULD THEREFORE BE CONSIDERED ACTUAL DAMAGES
INCURRED BY SUCH PARTY.

8.5  
Independent Contractor: It is expressly understood that the relationship of
Palmetto to SWGE is that of an independent contractor and nothing contained
herein shall be construed to create any partnership, agency, or
employer/employee relationship. Palmetto may freely choose the customers from
whom business shall be solicited and the time and place for solicitation.

 

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8.6  
Notices: Any notices required to be given under this Agreement shall be in
writing and be sufficiently given when delivered in person or deposited in the
U.S. mail (registered or certified), postage prepaid, addressed as follows:

         
 
  SWGE:   SOUTHWEST GEORGIA ETHANOL
 
      4433 Lewis B. Collins Road Pelham, Georgia 31779
 
      Attn: Murray Campbell, CEO
 
       
 
  PALMETTO:   PALMETTO GRAIN BROKERAGE, LLC
 
      516 Browns Cove Road, Unit J
 
      Ridgeland, SC 29936
 
      Attn: Edgar Woods, President

8.7  
Entire Agreement: This Agreement contains the entire agreement between the
Parties and supersedes all previous agreements, either oral or written, between
the Parties. The language of this Agreement shall not be construed in favor of
or against either Party, but shall be construed as if the language was drafted
mutually by both Parties. No modifications hereof shall be valid unless made in
writing and signed by both Parties.

8.8  
Waiver: The failure of either Party to enforce any of its rights hereunder on
any particular occasion shall not constitute a waiver of such rights on any
subsequent occasion.

8.9  
Assignment: This Agreement may not be assigned by either Party without the prior
written consent of the other Party, which consent shall not be unreasonably
withheld; provided, however, that either party may assign its rights and
responsibilities to a subsidiary or similarly related organization if such
assignment is part of a business restructuring and such assignment does not
materially impair or affect the rights and obligations of the other Party.

8.10  
Headings: Any paragraph headings are used for convenience only and are not
intended and shall not be used in interpreting any provisions of this Agreement.

8.11  
No Third Party Beneficiary: Except as otherwise provided herein, nothing
contained in this Agreement shall be considered or construed as conferring any
right or benefit on a person not a Party to this Agreement and neither this
Agreement nor the performance hereunder shall be deemed to have created a joint
venture or partnership between the Parties.

8.12  
Governing Law: This Agreement shall be governed by the laws of the State of
Georgia without regard to the conflict of laws provisions thereof. Each of the
parties hereto irrevocably submits to the jurisdiction of any state or federal
court sitting in the State of Georgia in any action or proceeding brought to
enforce or otherwise arising out of or relating to this Agreement.

8.13  
Arbitration: Any dispute arising out of or in connection with this Agreement
shall be submitted to arbitration. The arbitration shall be conducted according
to the Commercial Arbitration Rules of the American Arbitration Association. The
place of arbitration shall be Atlanta, Georgia or such other place as may be
agreed upon by the Parties. Both Parties shall attempt to agree upon one
arbitrator, but if they are unable to agree, each shall appoint an arbitrator
and these two shall appoint a third arbitrator. Expenses of the arbitrator(s)
shall be divided equally between the Parties. Judgment upon the award rendered
by the arbitrator(s) may be entered in any court having jurisdiction thereat and
shall be enforceable against the Parties.

 

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8.14  
Severability: If any term or provision of this Agreement is held by a court of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms and provisions of this Agreement shall remain in full force and effect
and shall in no way be affected, impaired or invalidated so long as the economic
or legal substance of the transactions contemplated hereby is not affected in
any manner materially adverse to a Party. Upon such determination, the Parties
shall negotiate in good faith to modify this Agreement so as to affect the
original intent of the Parties as closely as possible in an acceptable manner so
that the transactions contemplated hereby be consummated as originally
contemplated to the fullest extent possible.

8.15  
Confidentiality: The terms of this Agreement and any non-public information
provided to either Party pursuant to this Agreement are confidential and the
Party receiving such information will hold, and will cause its agents,
accountants and advisors to hold, all such information in confidence, unless it
is compelled to disclose such information by judicial or administrative process
or by other requirements of law. Notwithstanding any other provision contained
in this Agreement, Palmetto acknowledges and agrees that the disclosure of this
Agreement and the transactions contemplated hereby by SWGE in any report filed
with the Securities and Exchange Commission at any time after the date hereof
will not be a violation of this Section 8.15.

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

              PALMETTO GRAIN BROKERAGE, LLC   SOUTHWEST GEORGIA ETHANOL
 
           
By:
  /s/ Edgar Woods   By:   /s/ Murray Campbell
 
           
 
  Edgar Woods, President       Murray Campbell, CEO
 
            Date: 12-15-09   Date: 12/31/09

 

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