exv10w7



 




EXHIBIT
10.7


DISTILLER’S GRAIN MARKETING AGREEMENT




     THIS DISTILLER’S GRAIN MARKETING AGREEMENT (the “Agreement”), is entered into effective as of
December 14, 2004, by Lincolnway Energy, LLC, an
Iowa limited liability company
(“Seller”), and Commodity Specialist Company, a Delaware
corporation
(“Buyer”).



WITNESSETH:




     WHEREAS, Seller desires to sell and Buyer desires to purchase the Distiller’s Dried Grains
with Solubles (“DDGS”), Wet Distillers Grains
(“WDG”), and solubles (“Solubles”) (hereinafter DDGS, WDG and Solubles are referred to
collectively as the “Products”) output of the ethanol production plant which Seller owns in Nevada,
Iowa; and



     WHEREAS, Seller and Buyer wish to agree in advance of such sale and purchase to the price
formula, payment, delivery and other terms thereof in consideration of the mutually promised
performance of the other;



     NOW, THEREFORE, in consideration of the promises and the mutual covenants and conditions
herein contained, and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged by both parties, it is hereby agreed:



     1. BUYER PERFORMANCE. Buyer agrees to perform the services that it provides for Seller
in a professional and competent manner.



     2. PURCHASE AND SALE. Seller agrees to sell to Buyer and Buyer agrees to purchase from
Seller the entire bulk feed grade DDGS, WDG and Solubles output from Seller’s plant at Nevada, Iowa
(hereinafter the “Plant”), subject to all terms and conditions set forth in this Agreement. Buyer
shall label all Products that are sold by Buyer and shall register all labels with the states where
the Products are sold.



     3. TRADE RULES. All purchases and sales made hereunder shall be governed by the Feed
Trade Rules of the National Grain and Feed Association unless otherwise specified. Said Trade
Rules, a copy of which is appended hereto as Exhibit A, shall, to the extent applicable, be a part
of this Agreement as if fully set forth herein.



     4. TERM. Unless otherwise terminated in accordance with this agreement, the term of
this Agreement shall be for one year commencing as of completion and start-up of production of the
Plant. Start-up is anticipated to be June 1, 2006. Thereafter, this Agreement shall remain in
effect until terminated by either party at its unqualified option by providing the other party
hereto not less than 90 days written notice of its election to terminate this Agreement.



 









 





5. DELIVERY AND TITLE.




     A. The place of delivery for all the Products sold pursuant to this Agreement shall be FOB
Plant. Buyer and Buyer’s agents shall be given access to Seller’s Plant in a manner and at all
times reasonably necessary and convenient for Buyer to take delivery as provided herein. Buyer
shall schedule the loading and shipping of all outbound Products purchased hereunder which is
shipped by truck or rail. All labor and equipment necessary to load trucks or rail cars shall be
supplied by Seller without charge to Buyer. Seller agrees to handle the Products in a good and
workmanlike manner in accordance with Buyer‘s reasonable requirements and in accordance
with normal industry practice. Seller shall maintain the truck and rail loading facilities in safe
operating condition in accordance with normal industry standards.



     B. Seller further warrants that storage space for not less than not less than five days
production of DDGS shall be reserved for Buyer’s use at the Plant and shall be continuously
available for storage of DDGS purchased by Buyer hereunder at no charge to Buyer. Seller shall
also make available the necessary storage for WDG and Solubles which is adequate for Buyer to
market such products. Seller shall be responsible at all times for the quantity, quality and
condition of any the Products in storage at the Plant. Seller shall not be responsible for the
quantity, quality and condition of any of the Products stored by Buyer at locations other than the
Plant.



     C. Buyer shall give to Seller a schedule of quantities of the Products to be removed by truck
and rail with sufficient advance notice reasonably to allow Seller to provide the required
services. Seller shall provide the labor, equipment and facilities necessary to meet Buyer’s
loading schedule and, except for any consequential or indirect damages, shall be responsible for
Buyer’s actual costs or damages resulting from Seller’s failure to do so. Buyer shall order and
supply trucks and rail cars as scheduled for truck and rail shipments. All freight charges shall
be the responsibility of Buyer and shall be billed directly to Buyer.



     D. Buyer shall provide loading orders as necessary to permit Seller to maintain Seller’s
usual production schedule, provided, however, that Buyer shall not be responsible for failure to
schedule removal of the Products unless Seller shall have provided to Buyer production schedules
as follows: Five (5) days prior to the beginning of each calendar month during the term hereof,
Seller shall provide to Buyer a tentative schedule for production in the next calendar month.
Seller shall inform Buyer daily of inventory and production status. For purposes of this
paragraph, notification will be sufficient if made by e-mail or facsimile as follows:



     If to Buyer, to the attention of Steve Markham, Facsimile number 612-330-9894 or email to
smarkham@csc-world.com, and



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     If to Seller, to the attention of                                          , Facsimile number or email to


Or to such other representatives of Buyer and Seller as they may designate to the other in writing.




     E. Title, risk of loss and full shipping responsibility shall pass to Buyer upon loading the
Products into trucks or rail cars and delivering to Buyer of the bill of lading for each such
shipment.



6. PRICE AND PAYMENT.




     A. Buyer agrees to pay Seller as follows: for all DDGS removed by Buyer from the Plant a price
equal to ninety eight (98%) of the FOB Plant price actually received by Buyer from its customers;
for WDG removed by Buyer from the Plant a price equal to ninety-six (96%) of the FOB Plant price
actually received by Buyer from its customers and for Solubles a fee of $2.00 per ton. For purposes
of this provision, the FOB Plant price shall be the actual sale price, less all reasonable freight
costs incurred by Buyer in delivering the Product to its customer. Buyer agrees that it shall not
sell Product for delivery more than 90 days from the date of entering into a sale without the
consent of Seller. Buyer agrees to use commercially reasonable efforts to achieve the highest
resale price available under prevailing market conditions. Seller’s sole and exclusive remedy for
breach of Buyer’s obligations hereunder shall be to terminate this Agreement. Buyer shall collect
all applicable state tonnage taxes on Products sold by Buyer and shall remit to the appropriate
governmental agency.



     B. Within five (5) days following receipt of certified weight certificates, which certificates
shall be presented to Buyer each Thursday for all shipments during the preceding week, Buyer shall
pay Seller the full price, determined pursuant to paragraph 6A above, for all properly documented
shipments. Buyer agrees to maintain accurate sales records and to provide such records to Seller
upon request. Seller shall have the option to audit Buyer’s sales invoices at any time during
normal business hours and during the term of this Agreement. If any such audit reveals a deficiency
in payment due Seller, Buyer shall immediately pay Seller the amount of usch deficiency plus
interest calculated from the date such payment should have been made at the prime rate then in
effect as represented in the Wall Street Journal



7. QUANTITY AND WEIGHTS.




     A. It is understood that the output of the Products shall be determined by Seller’s production
schedule and that no warranty or representation has been made by Seller as to the exact quantities
of Products to be sold pursuant to this Agreement.



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     B. The quantity of Products delivered to Buyer from Seller’s Plant shall be established by
weight certificates obtained from the scale at the Plant which is certified as of the time of
weighing and which complies with all applicable laws, rules and regulations or in the event that
the scale at the Plant is inoperable then at other scales which are certified as of the time of
weighing and which comply with all applicable laws, rules and regulations. The outbound weight
certificates shall be determinative of the quantity of the Products for which Buyer is obligated to
pay pursuant to Section 6.




	 	8.	 	QUALITY.






               A. Seller understands that Buyer intends to sell the Products purchased from Seller as
a primary animal feed ingredient and that said Products are subject to minimum quality
standards for such use. Seller agrees and warrants that the Products produced at its plant
and delivered to Buyer shall be accepted in the feed trade under current industry
standards.




               B. Seller warrants that all Products, unless the parties agree otherwise, sold to
Buyer hereunder shall, at the time of delivery to Buyer, conform to the following minimum
quality standard:



	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Protein	 	Fat	 	Fiber	 	Moisture	 	Ash
	 	 	Min	 	Max	 	Min	 	Max	 	Min	 	Max	 	Min	 	Max	 	Min	 	Max
	DDGS

	 	25	 	 	 	 	 	10	 	 	 	 	 	 	 	 	15	 	 	 	 	 	12	 	 	 	 	 	6	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Wet Distillers
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Grain

	 	13	 	 	 	 	 	5	 	 	 	 	 	 	 	 	7	 	 	 	 	 	50	 	 	 	 	 	 	 







               The standard for DDGS and WDG will be determined on an as is basis rather than a dry
weight basis. Minimum quality standards for Solubles shall be agreed upon by the parties at
a subsequent date.




               C. Seller warrants that at the time of loading, the Products will not be adulterated or
misbranded within the meaning of the Federal Food, Drug and Cosmetic Act and that each
shipment may lawfully be introduced into interstate commerce under said Act. Payment of
invoice does not waive Buyer’s rights if goods do not comply with terms or specifications of
this Agreement. Unless otherwise agreed between the parties to this Agreement, and in
addition to other remedies permitted by law, the Buyer may, without obligation to pay,
reject either before or after delivery, any of the Products which when inspected or used
fail in a material way to conform to this Agreement. Should any of the Products be seized or
condemned by any federal or state department or agency for any reason except noncompliance
by Buyer with applicable federal or state requirements, such seizure or condemnation shall
operate as a rejection by Buyer of the goods seized or condemned and Buyer shall not be
obligated to offer any defense in connection with the seizure or condemnation. When
rejection occurs before or after delivery, at its option,



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          Buyer may:




               (1) Dispose of the rejected goods after first offering Seller a reasonable opportunity
of examining and taking possession thereof, if the condition of the goods reasonably appears
to Buyer to permit such delay in making disposition; or




               (2) Dispose of the rejected goods in any manner directed by Seller which Buyer can
accomplish without violation of applicable laws, rules, regulations or property rights; or




               (3) If Buyer has no available means of disposal of rejected goods and Seller fails to
direct Buyer to dispose of it as provided herein, Buyer may return the rejected goods to
Seller, upon which event Buyer’s obligations with respect to said rejected goods shall be
deemed fulfilled. Title and risk of loss shall pass to Seller promptly upon rejection by
Buyer.




               (4) Seller shall reimburse Buyer for all costs reasonably incurred by Buyer in storing,
transporting, returning and disposing of the rejected goods. Buyer shall have no obligation
to pay Seller for rejected goods and may deduct reasonable costs and expenses to be
reimbursed by Seller from amounts otherwise owed by Buyer to Seller.




               (5) If Seller produces Products which comply with the warranty in Section C above but
which do not meet applicable industry standards, Buyer agrees to purchase such Products for
resale but makes no representation or warranty as to the price at which such Product can be
sold. If the Products deviates so severely from industry standard as to be unsalable, then
it shall be disposed of in the manner provided for rejected goods in Section C above.




          D. If Seller knows or reasonably suspects that any of the Products produced at its
Plant are adulterated or misbranded, or outside of industry quality standards, Seller shall
promptly so notify Buyer so that such Product can be tested before entering interstate
commerce. If Buyer knows or reasonably suspects that any of the Products produced by Seller
at its Plant are adulterated, misbranded or outside of industry quality standards, then
Buyer may obtain independent laboratory tests of the affected goods. If such goods are
tested and found to comply with all warranties made by Seller herein, then Buyer shall pay
all testing costs; and if the goods are found not to comply with such warranties, Seller
will pay all testing costs.



           9. RETENTION OF SAMPLES. Seller will take an origin sample of DDGS from each truck and
rail car before it leaves the Plant using standard sampling methodology. Seller will label these
samples to indicate the date of shipment and the truck or railcar number involved. Seller will also
retain the samples and labeling information for no less than one year.



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10. INSURANCE.




     A. Seller warrants to Buyer that all employees engaged in the removal of the Products from
Seller’s Plant shall be covered as required by law by worker’s compensation and
unemployment compensation insurance.



     B. Seller agrees to maintain throughout every term of this Agreement comprehensive general
liability insurance, including product liability coverage, with combined single limits of not less
than $2,000,000. Seller’s policies of comprehensive general liability insurance shall be endorsed
to require at least thirty (30) days advance notice to Buyer prior to the effective date of any
decrease in or cancellation of coverage. Seller shall cause Buyer to be named as an additional
insured on Seller’s insurance policy and shall provide a certificate of insurance to Buyer to
establish the coverage maintained by Seller not later than fourteen (14) days prior to completion
and start-up of production of the Plant.



     C. Buyer agrees to carry such insurance on its vehicles operating on Seller’s property as
Seller reasonably deems appropriate. The parties acknowledge that Buyer may elect to self insure
its vehicles. Upon request, Buyer shall provide certificate of insurance to Seller to establish
the coverage maintained by Buyer.



     D. Notwithstanding the foregoing, nothing herein shall be construed to constitute a waiver by
either party of claims, causes of action or other rights which either party may have or hereafter
acquire against the other for damage or injury to its agents, employees, invitees, property,
equipment or inventory, or third party claims against the other for dam-age or injury to other
persons or the property of others.



11. REPRESENTATIONS AND WARRANTIES




     A. Seller represents and warrants that all of the Products delivered to Buyer shall not be
adulterated or misbranded within the meaning of the Federal Food, Drug and Cosmetic Act and may
lawfully be introduced into interstate commerce pursuant to the provisions of the Act. Seller
further warrants that the Products shall fully comply with any applicable state laws governing
quality, naming and labeling of product. Payment of invoice shall not constitute a waiver by Buyer
of Buyer’s rights as to goods which do not comply with this Agreement or with applicable laws and
regulations. EXCEPT AS SPECIFICALLY STATED IN THIS AGREEMENT, SELLER MAKES NO WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE.



     B. Seller represents and warrants that the Products delivered to Buyer shall be free and
clear of liens and encumbrances, except for liens held by Seller’s senior secured lender.



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     12. EVENTS OF DEFAULT. The occurrence of any of the following shall be an event of
default under this Agreement: (1) failure of either party to make payment to the other when due;
(2) default by either party in the performance of the covenants and agreements set forth in this
Agreement; (3) if either party shall become insolvent, or make a general assignment for the benefit
of creditors or to an agent authorized to liquidate any substantial amount of its assets, or be
adjudicated bankrupt, or file a petition in bankruptcy, or apply to a court for the appointment of
a receiver for any of its assets or properties with or without consent, and such receiver shall not
be discharged within sixty (60) days following appointment.



     13. REMEDIES. Upon the happening of an Event of Default, the parties hereto shall have
all remedies available under applicable law with respect to a Event of Default by the other party.
Without limiting the foregoing, the parties shall have the following remedies whether in addition
to or as one of the remedies otherwise available to them; (1) to declare all amounts owed
immediately due and payable; and (2) to terminate this Agreement within ten (10) days following the
written notice of default and the opportunity to cure. Notwithstanding any other provision of this
Agreement, Buyer may offset against amounts otherwise owed to Seller the price of any product which
fails to conform to any requirements of this Agreement.



     14. FORCE MAJEURE. Neither Seller nor Buyer will be liable to the other for any
failure or delay in the performance of any obligation under this Agreement due to events beyond
its- reasonable control, including, but not limited to, fire, storm, flood, earthquake, explosion,
act of the public enemy, riots, civil disorders, sabotage, strikes, lockouts, labor disputes, labor
shortages, war stoppages or slowdowns initiated by labor, transportation embargoes, failure or
shortage of materials, acts of God, or acts or regulations or priorities of the federal, state or
local government or branches or agencies thereof.



     15. INDEMNIFICATION.




     A. Seller shall indemnify, defend and hold Buyer and its officers, directors, employees
and agents harmless, from any and all losses, liabilities, damages, expenses (including
reasonable attorneys’ fees), costs, claims, demands, that Buyer or its officers, directors,
employees or agents may suffer, sustain or become subject to, or as a result of (i) any
misrepresentation or breach of warranty, covenant or agreement of Seller contained herein or
(ii) the Seller’s negligence or willful misconduct.




     B. Buyer shall indemnify, defend and hold Seller and its officer, directors, employees
and agents harmless, from any and all losses, liabilities, damages, expenses (including
reasonable attorneys’ fees), costs, claims, demands, that Seller or its officers, directors,
employees or agents may suffer, sustain or become subject to, or as a result of (i) any
misrepresentation or breach of warranty, covenant or agreement of Buyer contained herein or
(ii) the Buyer’s negligence or willful misconduct.




     C. Where such personal injury, death or loss of or damage to property is the



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result of negligence on the part of both Seller and Buyer, each party’s duty of
indemnification shall be in proportion to the percentage of that party’s negligence or
faults.




     D. Seller acknowledges that in order to maximize the total revenue to be
generated through the sale of the Products, Buyer may agree to sell the Products to its
customers for delivery in anticipation of Seller providing the Products. Notwithstanding
the fact that Seller’s obligation is to provide Buyer with the output of the Plant the
parties acknowledge that Buyer may suffer losses as a result of these open contracts if
Seller discontinues operations for any reason whatsoever including Force Majeure.
Therefore, Seller shall indemnify, defend and hold Buyer and its officers, directors,
employees and agents harmless from any and all losses, liabilities, damages, expenses
(including reasonable attorney’s fees), costs, claims, demands that Buyer or its officers,
directors, employees, or agents may suffer, sustain or become subject to as a result of any
sale of Products by Buyer in anticipation of Seller delivering the Products hereunder,
provided Buyer has taken commercially reasonable steps to avoid the loss. Seller shall not
be liable for any loss resulting from Seller discontinuing operations related to a sale by
Buyer of Products for delivery more than 90 days from the date of entering into a sale
without the consent of Seller.



     16. GOVERNMENTAL ACTION. The parties recognize that the value of the Products could
change as a result of various governmental programs, be they foreign or domestic. In the event
that a significant value change of the Products as a result of any such governmental program,
Buyer may request re-negotiation of the contract price for the Products by providing written
notice to Seller. Buyer shall be required to demonstrate that the value of the Products has
significantly changed in the market. Should such a change take place, the parties agree to
negotiate, in good faith, a revised sale price for the Products. If, after a good faith effort,
the parties are unable to agree on a new price within the 90 day period immediately following
notice to the other party, then in such event and notwithstanding the other provisions hereof,
Buyer may terminate this Agreement upon 90 days prior written notice.



     17. RELATIONSHIP OF PARTIES. This Agreement creates no relationship other than that
of buyer and seller between the parties hereto. Specifically, there is no agency, partnership,
joint venture or other joint or mutual enterprise or undertaking created hereby. Nothing contained
in this Agreement authorizes one party to act for or on behalf of the other and neither party is
entitled to commissions from the other.



     18. MISCELLANEOUS.




     A. This writing is intended by the parties as a final expression of their agreement
and a complete and exclusive statement of the terms thereof.




     B. No course of prior dealings between the parties and no usage of trade, except where
expressly incorporated by reference, shall be relevant or admissible to supplement,
explain, or vary any of the terms of this Agreement.



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     C. Acceptance of, or acquiescence in, a course of performance rendered under this or
any prior agreement shall not be relevant ,or admissible to determine the meaning of this
Agreement even though the accepting or acquiescing party has knowledge of the nature or the
performance and an opportunity to make objection.




     D. No representations, understandings or agreements have been made or relied upon in
the making of this Agreement other than as specifically set forth herein.




     E. This Agreement can only be modified by a writing signed by all of the parties or
their duly authorized agents.




     F. The paragraph headings herein are for reference purposes only and shall not in any
way affect the meaning or interpretation of this Agreement.




     G. This Agreement shall be construed and performed in accordance with the laws of the
State of Iowa.




     H. The respective rights, obligations and liabilities of the parties under this
Agreement are not assignable or delegable without the prior written consent of the other
party.




     I. Notice shall be deemed to have been given to the party to whom it is addressed
ninety-six (96) hours after it is deposited in certified U.S. mail, postage prepaid, return
receipt requested, addressed as follows:



	 	 	 
	Buyer:

	 	Commodity Specialist Company
	 

	 	310 Grain Exchange Bldg. 400
	 

	 	South Fourth Street
	 

	 	Minneapolis, Minnesota 55415
	 

	 	ATTN: Steve J. Markham
	 
	 	 
	Seller:

	 	Lincolnway Energy, LLC






     IN WITNESS THEREOF, the parties have caused this Agreement to be executed the day and year
first above written.



	 	 	 	 	 
	 	 	COMMODITY SPECIALISTS COMPANY
	 
	 	 	 	 
	 

	 	By:
	 	  /s/ Philip J. Lindau
	 

	 	 	 	 
	 	 	Title:      
EVP
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	Lincolnway Energy, LLC	
	 
	 	 	 	 
	 

	 	By:
	 	  /s/ William D.
Couser
	 

	 	 	 	 
	 	 	Title:
     President of Lincoln Way Energy
	 

	 	 	 	 






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