exv10w19



 





Exhibit 10.19




DISTILLER’S GRAIN MARKETING AGREEMENT




     THIS DISTILLER’S GRAIN MARKETING AGREEMENT (the “Agreement”), is entered into effective as of
December 13, 2006, by Cardinal Ethanol LLC., an Indiana Limited Liability Company
(“Seller”), and Commodity Specialist Company, a Delaware Corporation (“Buyer”).



W I T N E S S E T H:




     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 Winchester, Indiana.



     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
Winchester Indiana. (hereinafter the “Plant”), subject to all terms and conditions set forth
in this Agreement. Buyer shall label all Product that is 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 as provided by 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 summer 2008. 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 120 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 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




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



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




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    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 (as hereafter defined) 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,
but in no event shall the fee to Buyer for DDGS and WDG be less than $1.50 per ton. The
calculation on the minimum fee shall be made with respect to each weekly payment separately.
The results of the calculation for any given week will not impact the calculation for any
other week. Buyer shall receive a fee for Solubles of $2.00 per ton. For purposes of this
provision, the FOB Plant price shall be the actual sale price received by Buyer from its
customers, less all 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. In the event that Buyer has to incur out-of-pocket costs in order to sell High
Moisture Product, and the fee to be paid to Buyer is less than such out-of-pocket costs,
Seller shall pay Buyer an amount which is sufficient, when added to the fee earned by Buyer,
to repay Buyer for all of its reasonable out-of-pocket costs. Such payment shall be made
with 30 days from receipt of documentation evidencing the expenses.




    C. Within ten (10) 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 from Buyer to Seller,
Buyer shall immediately pay Seller the amount of deficiency plus interest calculated from
the date such payment should have been made at the prime rate then in effect as published in
the Wall Street Journal.




    D. Within five (5) business days following the 15th and last day of each
month,



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Buyer shall pay Seller the full price, determined as provided for above, for all WDG
and Solubles shipments made in the first 15 days of the month and the balance of the month,
as the case may be. Weights shall be determined by on-site certified scales. 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 from Buyer to Seller, Buyer shall immediately pay Seller the
amount of deficiency plus interest calculated from the date such payment should have been
made at the prime rate then in effect as published 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.




    B. The quantity of Products delivered to Buyer from Seller’s Plant shall be
established by weight certificates obtained from 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	 	 	 	 	 	 	 	3	 
	 






The standard for DDGS and WDG will be determined on an as is basis rather than a
dryweight basis. Minimum quality standards for Solubles shall be agreed upon by the



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parties, in writing, 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, 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 deviate 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



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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.




    E. Notwithstanding anything in this Agreement to the contrary, Buyer acknowledges and
agrees that Seller’s warranty set out in Section 8 (C) only apply to Product at the time it
is delivered to Buyer and Buyer agrees that Seller is not responsible for Product which at
some time after time of delivery becomes adulterated or misbranded.




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.




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 Automobile Liability insurance on Buyer owned and Buyer
leased trucks and vehicles operating on Seller’s property with minimum limits of liability
of $5,000,000 combined single limit for each occurrence. These limits can also be attained
through the use of an excess or umbrella policy. Upon request, Buyer shall provide
certificate of insurance to Seller to establish the coverage maintained by Buyer. Buyer
will monitor and require proper trucking insurance certificates for outside trucking
carriers contracted by Buyer.




    D. Notwithstanding the foregoing, nothing herein shall be construed to constitute



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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
damage 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.




12. EVENTS OF DEFAULT. The occurrence of any of the following shall be an event of
default (“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 an 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) immediately to terminate this
Agreement effective upon receipt by the party in default of the notice of termination,
provided, however, the parties shall be allowed 10 days from the date of receipt of notice
of default for to cure any default. 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,



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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 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 take positions by selling Product 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 positions taken by Buyer 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 or purchase of product
taken 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 position taken by
Buyer for delivery more than 90 days from the date of entering into a sale without the
consent of Seller.




The indemnifications in this Section 15 shall survive termination of this Agreement.




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



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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.




    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 Indiana.




    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.



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	 	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:
	 	Cardinal Ethanol, LLC
	 

	 	 	 	2 OMCO Square
	 

	 	 	 	Suite 201
	 

	 	 	 	Winchester, IN 47394
	 
	 	 	 	 
	 

	 	Copy To:
	 	Miranda L. Hughes
	 

	 	 	 	BrownWinick
	 

	 	 	 	666 Grand Avenue
	 

	 	 	 	Suite 2000
	 

	 	 	 	Des Moines, IA 50309






     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 Lindau
 	 
	 	Title  	                              Co-President
 	 
	 	 	 	 
	 	 	 	 
	 
	 	Cardinal Ethanol LLC

 	 
	 	By  	/s/ Troy Prescott
 	 
	 	Title  	                              President
 	 
	 	 	 	 
	 	 	 	 
	 




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