Exhibit 10.1


 





 


ETHANOL MARKETING AND SERVICES AGREEMENT:

Western Plains
Energy, LLC


 


This Agreement is made
and entered into this 24th day of November, 2008, (“Effective Date”) by and between
Western Plains Energy, LLC having an
address of or near 3022 County Rd. 18, Oakley, Kansas 67748 (hereinafter
referred to as “Owner”), and Ethanol Products, LLC d/b/a
POET Ethanol Products having an address of 9530 East 37th
Street North, Wichita, Kansas 67226 (hereinafter referred to as “Marketer”).


 


RECITALS:


 


A.                                    The
Owner desires to utilize the services of a marketer to market Owner’s fuel
grade ethanol (hereinafter referred to as “Ethanol”) from its plant sited near 3022
County Rd. 18, Oakley, KS (the “Plant”).


 


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 of Owner’s Ethanol produced from its Plant.


 


2.                                       Term
of Agreement.  The initial term of
this agreement will be five (5) years beginning on February 1, 2009 (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 sales contracts.  Owner agrees that all such existing sales 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 effect the sale of Owner’s
Ethanol with a good faith effort to achieve the 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.


 


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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
and Transportation.  Marketer will
arrange for all freight and transportation services, including rail equipment,
for delivery of Owner’s Ethanol.  Except
as otherwise provided herein, Owner will reimburse Marketer for all commercially
reasonable freight, transportation services and throughput costs incurred by
Marketer.


 


e.                                       Customer
Creditworthiness.  Marketer will make
reasonable efforts to review the creditworthiness of Owner’s Ethanol customers.
Marketer will then recommend to Owner which, if any, Ethanol customers Marketer
believes should be accepted. Owner will have the right to reject sales to any Ethanol
customers.  Marketer will not sell
Ethanol to any customer rejected by Owner.


 


f.                                         Accounts
Receivable.  Owner will retain the
risk of non-payment by Owner’s Ethanol customers.  Marketer will make reasonable efforts to
collect any of Owner’s past due accounts. 
However, Marketer will not be required to initiate litigation to collect
delinquent accounts.  Upon receipt of
written consent from Owner, Marketer shall be authorized to turn over to
collection agencies a delinquent account unless Owner determines that Owner
will assume responsibility for collecting the account.  Any reasonable collection agency fees
resulting from the collection process will be borne by Owner.  All accounts receivable losses arising from
the marketing of Owner’s Ethanol are Owner’s sole responsibility.


 


g.                                      Title
and Risk of Loss.  Marketer will take
title to Owner’s Ethanol at Owner’s Plant as Ethanol passes the flange
connecting the delivering and receiving apparatus of the parties.  Notwithstanding the transfer of title as set
forth herein, and except when any of the following occurs due to Marketer’s
negligence or willful and wanton conduct, Owner agrees to defend, indemnify and
hold harmless Marketer from the risk of loss of Owner’s Ethanol, risk of
penalty due to late or non-delivery, risk of non-compliant quality and
condition of Owner’s Ethanol, and risk of non-collection with respect to the sale
of Owner’s Ethanol to Ethanol customers. 
Acceptance of Owner’s Ethanol by Ethanol Customers under applicable laws
will not occur until Owner’s Ethanol has been accepted by the Ethanol customers
at the time of delivery.


 


h.                                      Transaction
Processing.  Marketer will be
responsible for invoicing all of Owner’s 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 workday of the previous day’s
shipments.  Marketer will send to Owner’s
Ethanol customers invoices the same day as the report is received.


 


i.                                          Remittance
of Payment.  Each week a payment will
be made to Owner by Marketer 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, Services 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.  Following Owner’s receipt of five
days’ advance notice of Marketer’s intention to complete an offset against
payments due Owner, Marketer in good faith has the right to set off against
payments due Owner hereunder any and all amounts owed by Owner to Marketer for
any liabilities outside the normal course of business.  Adjustments within the normal course of
business will be adjusted without prior written notice as they occur.


 


j.                                          Insurance.  Marketer will insure Owner’s Ethanol, at
Marketer’s sole cost, upon transfer of title of Owner’s Ethanol to Marketer, as
set forth in Section 3.g.  The
insurance will be in the form of a marine cargo insurance policy that will name
Owner as an additional insured, and will provide for payment of proceeds
directly to Owner to the extent Owner still has any risk of loss.  The amount of the policy, the deductible, and
the other terms and conditions of the policy


 


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will be commercially
reasonable, but will be at an amount that covers (at a minimum) a total loss of
the Ethanol during transit to the Ethanol customers, less the deductible.  Upon issuance of such policy, Marketer will
cause Marketer’s insurance agent to issue to Owner a certificate of insurance
verifying that such insurance policy is in full force and effect.


 


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 for the sale of
Owner’s Ethanol.


 


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 right to
supply denaturant to Owner’s Ethanol Plant subject to terms, conditions, and
pricing as are mutually agreed to by Marketer and Owner.


 


5.                                       Marketing
and Administrative Service Fee.  Owner
will pay Marketer a fee for the Marketing and Administrative Services rendered
by Marketer hereunder.  The fee (the “Services
Fee”) will be one percent (1%) of the Net-back sales price per gallon of
denatured Ethanol as produced by Owner’s Plant. 
Net-back sales price is defined as the price actually paid and collected
per gallon of denatured Ethanol, minus all freight and transportation costs,
any applicable owned storage fees, leased storage fees, through-put fees, any
terminalling fees, and taxes imposed by a governmental authority, except for
sales, use of similar taxes imposed upon the net profits of marketer or the
Services Fees.


 


6.                                       Marketer’s
Purchase of Ethanol.  Marketer may
purchase for its own account all or a portion of Owner’s Ethanol at a price 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 transactions, the Services 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 transaction at
Owner’s Plant (net of transportation cost) 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 transactions, which opportunities 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 transaction 


 


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opportunity, present
to any one of Owner’s representatives the value-added transaction, including
the details of said value-added transaction, for consideration.  Owner has complete and sole discretion to
accept or reject the value-added transaction. 
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 transaction.  In this case,
Marketer will complete the value-added transaction in accordance with the
agreement of the parties.  If Owner’s
representative declines to participate in the value-added transaction, then
Marketer will not complete the value-added transaction 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 schedule 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
requested by Marketer in order for Marketer to perform Marketer’s services under
this Agreement.


 


9.                                       Discontinuation
of Production.  In the event that
Owner desires to discontinue or reduce the production of Owner’s Ethanol, Owner
will notify Marketer 180 days in advance of Owner’s decision in order that all
contract commitments made by Marketer for Owner may be met.  If less than 180 days 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 Marketer the power to buy in ethanol short falls for Owner’s account
on unfilled contracts, and any associated losses will be reimbursed by Owner to
Marketer.


 


10.                                 Liability.  Any and all liability related to Owner’s
Ethanol, including but not limited to Ethanol quality and condition, the timely
delivery of Ethanol, and the handling, transportation, storage and release of Owner’s
Ethanol into the environment, will remain Owner’s sole responsibility, except
to the extent provided in Section 12, or to the extent such liability is
to be insured against at Marketer’s expense pursuant to Section 3.j.  Owner’s Ethanol will be delivered free from
lawful security interests, liens, taxes, encumbrances and claims of third
parties.


 


11.                                 Indemnification
of Marketer.  Owner must 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, attorneys’ 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, and
the handling, transportation, storage and release of Owner’s Ethanol into the
environment, except that Owner will not indemnify, hold harmless and defend
Marketer from (i) the negligent or willful or wanton conduct 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) Marketer’s violation of laws, regulations,
ordinances and/or court orders; and (iv) any liability otherwise covered
by insurance


 


12.                                 Indemnification
of Owner.  Marketer must 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 Marketers’ breach of this Agreement and, in connection with
loss of life, personal injury and/or damage to


 


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property of third
parties arising from or out of (i) the negligent or willful or wanton
conduct 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) Marketer’s violation of laws,
regulations, ordinances and/or court orders.


 


13.                                 Insurance.  Marketer will furnish Owner with an insurance
certificate verifying that Marketer maintains commercial general liability
insurance in an amount not less than $5,000,000.


 


14.                                 Waiver
of Subrogation.  Notwithstanding any
other provision of this Agreement to the contrary, neither Owner nor Marketer
will be liable to the other for any business interruption, loss or damage to
property of the other, or injury to or death of persons arising from the
marketing, sale, storage and transportation of Owner’s Ethanol, whether or not
caused by the negligence of Owner, Marketer, or their respective employees,
agents or contractors.  This waiver will
apply only to the extent that such business interruption, loss or damage to
property, or injury to or death of persons is covered by insurance, regardless
of whether such insurance is payable to or protects Owner or Marketer, or
both.  Nothing in this Section 14
may be construed to impose any other or greater liability upon either Owner or
Marketer than would have existed in the absence of this Section 14.  Owner and Marketer shall cause each insurance
policy obtained by them in relation to the services hereunder to provide that
the insurance company waives all right of recovery by way of subrogation
against the other in connection with any damages covered by said policies.  This waiver will be in effect only so long as
the applicable insurance policies contain a clause to the effect that this
waiver will not affect the rights of the insured to recover under such policies.  Such clauses must be obtained by the parties
whenever possible.


 


15.                                 Taxes.  Owner will be solely responsible for payment
of all taxes and charges, now or hereafter imposed (whether by federal, state,
municipal or other public authority), by reason of this Agreement or its
performance, including but not limited to, sales or use taxes, but excluding
any income tax imposed upon Marketer’s net profits.  Marketer may deduct from the proceeds of
sales of Owner’s Ethanol an amount equal to any taxes imposed as set forth
herein, and Marketer will remit to the appropriate government entity the taxes
owed.  All taxes and charges paid on
Owner’s account will be disclosed to Owner.


 


16.                                 Entire
Agreement and Amendment.  This
Agreement and the sales confirmations contain 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 with respect to the subject matter hereof.  In the event of a conflict of terms between a
sales confirmation and this Agreement, the terms of this Agreement will
control.  In the event that Marketer
revises terms of the sales confirmation form which are not normally subject to
change (except the “Detail” grid), Marketer will use commercially reasonable
efforts to bring to Owner’s attention the revised terms set forth in the sales
confirmation form.  Except for the sales
confirmations, this Agreement will not be amended or modified in any manner
except by a writing executed by both parties that specifically references
amending this Agreement.


 


17.                                 Confidential
Nature of Agreement.  Marketer and
Owner agree to keep all sales, prices, inventory positions, and the details of
this Agreement, the sales confirmations, other documents and details of the
transactions strictly confidential.


 


18.                                 Assignment.  This Agreement may not be assigned by either
party, except to an affiliate controlled by or in control of said party (“Affiliate”),
without the written consent of the other party. 
To the extent this Agreement is assigned to an Affiliate, such
assignment shall only be effective if written notice of such assignment is
given to the non-assigning party within 30 days of such assignment.


 


19.                                 Governing
Law.  This Agreement will be
governed, construed and enforced under the laws of the State of Kansas.


 


20.                                 Force
Majeure.  Marketer will not be liable
to Owner for its failure to deliver services hereunder, and Owner will not be
liable to Marketer for its failure to produce Owner’s Ethanol, when such failure
is due to the failure of processing equipment, fires, floods, storms, weather
conditions, strikes, lock 


 


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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 must 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
Owner’s Ethanol.  The party seeking to
invoke this provision must provide notice within 48 hours or such other time as
is reasonable under the circumstances. 
The party must further notify the other party as to the time when the
force majeure condition is no longer in effect.


 


21.                                 Regulatory
Changes and Changes in Customer Requirements.  In the event that at any time subsequent to
the Effective Date there occurs a Regulatory Change or any Change in Customer
Requirements which increases the cost to Marketer of providing the services set
forth herein, and if Marketer so elects by notice to Owner, then Owner must
reimburse Marketer for the additional costs incurred as a result of the
Regulatory Change or Change in Customer Requirements.  A “Regulatory Change” means any change after
the Effective Date in any applicable statute, law, code, determination, rule,
regulation, decree, injunction, franchise, permit, certificate, license,
ordinance, standard or control of any governmental authority.  By way of example, a Regulatory Change would
include increased reporting requirements of government authorities for the marketing,
sale, transportation or storage of ethanol. 
A “Change in Customer Requirements” means any change after the Effective
Date in any requirement for the purchase, delivery, transportation, storage,
testing, reporting or insuring of ethanol. 
By way of example, a Change in Customer Requirements would include a
customer imposing upon Marketer a requirement that Marketer use a specific
software package in order for Marketer to market ethanol to the customer.


 


22.                                 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 or 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.


 


	
  OWNER:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  MARKETER:

  
	
  Western Plains Energy, LLC

  	
   

  	
  ETHANOL
  PRODUCTS, LLC D/B/A

  
	
   

  	
   

  	
   

  	
  POET
  ETHANOL PRODUCTS

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Steven R. McNinch

  	
   

  	
  By:

  	
  /s/ Robert K. Casper

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
  Steven R. McNinch

  	
   

  	
  Name:

  	
  Robert K. Casper

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Its:

  	
  CEO/General Manager

  	
   

  	
  Its:

  	
  President

  
						



 


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