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ETHANOL MARKETING AND SERVICES AGREEMENT
This Agreement is made and entered into this 31st day of October, 2001 by and
between Western Plains Energy, LLC (hereinafter referred to as Owner), and
Ethanol Products, LLC having an address of 111 S. Ellis, Wichita, Kansas 67211
(hereinafter referred to as Marketer).
RECITALS:
A) Owner would like to utilize the services of an ethanol
marketer to market fuel grade ethanol (hereinafter referred to
as Ethanol) from its plant to be sited in Western Kansas.
B) Marketer is in the business of marketing Ethanol in the United
States.
C) The parties 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 in Western
Kansas.
2. TERM OF AGREEMENT. The term of this agreement shall be five
years from the start of production of Ethanol unless
terminated by a party due to the breach of this Agreement by
the other party. This Agreement renews automatically for
additional five-year periods, at the end of the initial
five-year period and at the end of any subsequent five-year
renewal period, unless terminated by either party. Either
party may terminate this agreement at the end of the initial
five-year period or at the end of any five-year renewal period
by giving to the other party 90 days' notice of termination
prior to the end of the then current period. Within 15 days of
receipt of written notice of termination by Owner, Marketer
will provide Owner with a quantity per month of Ethanol for up
to one 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 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 effect the sale of Owner's
Ethanol with a good faith effort to achieve the best
available market prices.
b. SCHEDULING AND DISTRIBUTION. Marketer will be
responsible for scheduling all shipments of Owner's
Ethanol. Marketer will provide to Owner a shipping
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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 commercially reasonable lease and
throughput costs associated with such leases.
d. FREIGHT. When necessary to market Owner's Ethanol,
Marketer will arrange freight for shipment of Owner's
Ethanol. Owner will pay all commercially reasonable
freight 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.
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 as set forth above. Owner will
be responsible for furnishing Marketer a report by
10:00 AM each 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 Marketer will pay
Owner for all Ethanol invoiced thirteen to nineteen
(13-19) days prior to said date and that has been
paid by Owner's customers. This payment will be
adjusted for freight and storage costs as described
above in this Section and the Marketing and
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Administrative Services Fee stated in Section 5 of
this Agreement, and when applicable, an adjustment
for value-added opportunities 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.
5. MARKETING AND ADMINISTRATIVE SERVICES FEE. The Marketing and
Administrative Services Fee will be $0.01/gallon of denatured
Ethanol as produced by the Ethanol Plant.
6. MARKETER'S PURCHASE OF ETHANOL. Marketer may purchase for its
own account all or a portion of Owner's Ethanol at a price and
upon terms to be agreed upon by the parties at the time of the
purchase.
7. VALUE-ADDED OPPORTUNITIES. Marketer and Owner mutually
recognize that on occasion Marketer will be able to develop a
sale opportunity for Owner's ethanol that is above the market
value for sales typically completed on a spot market or
contract rollover basis (a "value-added transaction").
Examples of value-added transactions include the building of
new markets, time exchanges, location exchanges, rack pricing,
and negotiation of spread differentials. The parties
acknowledge that new value-added opportunities not yet known
to the parties are expected to be developed by Marketer in the
future. Owner and Marketer acknowledge that for value-added
opportunities, the Marketing Fee is insufficient to compensate
Marketer for additional income and profits generated for
Owner. Therefore, Owner and Marketer agree to share the
additional margin generated from value-added transactions at
the ratio of 50% for Owner and 50% for Marketer. The
additional margin will be calculated based on the difference
in the sales price of the value-added opportunity at Owner's
production facility (net of transportation cost)
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and the sales price of a typical market transaction (net of
transportation cost) for a similar time period. In order to
facilitate the completion of value-added opportunities, which
occur and disappear quickly within the market, Owner agrees to
identify representatives of Owner with authority to approve
value-added transactions, Marketer will upon identification of
a value-added opportunity present to any one of Owner's
representatives the value-added opportunity, including the
details of said transaction, for consideration. Owner has
complete and sole discretion to accept or reject the
value-added opportunity. If agreed upon by Owner's
representative, Marketer will confirm in writing to Owner's
representative the agreement of the parties regarding the
value-added opportunity. In this case, Marketer shall complete
the value-added transaction in accordance with the agreement
of the parties. If Owner's representative declines to
participate in the value-added opportunity, then Marketer will
not complete the value-added opportunity for Owner's account.
8. REPORTING. Marketer will provide Owner with the following
reports on a schedule described below during the term of this
Agreement:
Shipping Orders- Daily
Market Information- Weekly
Sales Summary- Monthly
Owner will provide Marketer with the following reports on a
scheduled described below during the term of this Agreement:
Daily Production- Daily
Combined Shipping Schedule- Daily
In addition to the aforementioned reports, Owner will timely
inform Marketer of daily inventories, plant shutdowns, daily
production projections, and any other information reasonably
requested by Marketer in order for Marketer to perform under
this Agreement.
9. DISCONTINUATION OF PRODUCTION. In the event that Owner wishes
to discontinue or reduce the production of Ethanol, Owner will
notify Marketer one year in advance of Owner's decision so
that all contract commitments made by Marketer for Owner may
be met. If less than one year notice of discontinuance or
reduction of production is provided to Marketer, or if
unforeseen circumstances cause Owner to cease or reduce
production at its plant, Owner grants to Marketer the power to
buy in Ethanol shortfalls for the account of the Owner on any
unfilled contracts, and any associated losses will be
reimbursed by Owner to Marketer.
10. LIABILITY. Owner recognizes that Marketer will be performing
its duties hereunder as an undisclosed agent for and on behalf
of Owner. Nevertheless, any and all liability related to the
Ethanol, including but not limited to Ethanol quality and
condition, the timely delivery of Ethanol, and the handling,
transportation, storage and release of
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Ethanol into the environment, shall remain the sole
responsibility of Owner, except to the extent provided in
Section 12.
11. INDEMNIFICATION OF MARKETER. Owner shall indemnify, hold
harmless and defend Marketer, and its officers, directors,
employees and agents from and against any and all claims,
actions, damages, liabilities and expenses, including but not
limited to attorney's and other professional fees, in
connection with loss of life, personal injury and/or damage to
property of third parties, arising from or out of Marketer's
services provided under the terms and conditions of this
Agreement, for Owner's breach of this Agreement, the quality
and condition of the Ethanol, the breach of any warranty or
representation regarding the quality and condition of the
Ethanol, the failure of the Owner to timely deliver Ethanol,
and the handling, transportation, storage and release of
Ethanol into the environment, except that Owner shall not
indemnify, hold harmless and defend Marketer from: (i) the
negligent or intentional acts of Marketer and its officers,
directors, employees and agents, (ii) any act beyond the scope
of the Marketer's services to be rendered under the terms and
conditions of this Agreement, (iii) any violation of laws,
regulations, ordinances and/or court orders by Marketer.
12. INDEMNIFICATION OF OWNER. Marketer shall indemnify, hold
harmless and defend Owner, and its officers, employees and
agents from and against any and all claims, actions, damages,
liabilities and expenses, including, but not limited to,
attorneys' and other professional fees, in connection with
Marketer's breach of this agreement and, in connection with
loss of life, personal injury and/or damage to property of
third parties arising from or out of:; (i) the negligent or
intentional acts of Marketer and its officers, directors,
employees and agents, (ii) any act beyond the scope of
Marketer's services to be rendered under the terms and
conditions of this Agreement, and (iii) any violation of laws,
regulations, ordinances and/or court orders by Marketer.
13. INSURANCE. Marketer will furnish Owner with an insurance
certificate verifying that Marketer has commercial general
liability insurance.
14. ENTIRE AGREEMENT AND AMENDMENT. This Agreement contains the
entire agreement between the parties. No oral statements,
representations or prior written matter not contained in this
Agreement shall be binding upon the parties. This Agreement
shall not be amended or modified in any manner except by a
writing executed by both parties.
15. CONFIDENTIAL NATURE OF AGREEMENT. Marketer and Owner agree to
keep all sales, prices, inventory positions, and the details
of this Agreement strictly confidential.
16. ASSIGNMENT. This Agreement shall not be assigned by either
party, except to an affiliate controlled by or in control of
said party, without the written consent of the other party.
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17. GOVERNING LAW. This Agreement shall be governed, construed and
enforced under the laws of the State of South Dakota.
18. FORCE MAJEURE. Marketer shall not be liable to Owner for its
failure to deliver services hereunder, and Owner shall not be
liable to Marketer for its failure to produce ethanol, when
such failure shall be due to the failure of processing
equipment, fires, floods, storms, weather conditions, strikes,
lock outs, other industrial disturbance, riots, legal
interference, governmental action or regulation, acts of
terrorism, acts of God or public enemy, or, without limitation
by enumeration, any other cause beyond Marketer's or Owner's
reasonable control; provided Marketer or Owner shall promptly
and diligently take such action as may be necessary and
practicable under the then existing circumstances to remove
the cause of failure and resume delivery of services or
ethanol. The party seeking to invoke this provision shall
provide notice within 48 hours or such other time as is
reasonable under the circumstances. The party shall further
notify the other party as to the time when the force majeure
condition is no longer in effect.
19. CONFLICTS OF INTEREST. Owner recognizes and acknowledges that
members with an ownership interest in Marketer or their
affiliates also hold ownership interests in other ethanol
production facilities for which Marketer provides the same and
similar services as are provided for Owner under the terms of
this Agreement. Marketer agrees that it will provide services
to Owner hereunder in the same or similar method as services
are provided to other ethanol production facilities so as not
to favor the other ethanol production facilities over Owner.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
and year first above written.
Western Plains Energy, LLC (Owner)
By /s/ Jeff Torluemke
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Its President
Ethanol Products, LLC (Marketer)
By /s/ Robert K. Casper
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Its President