AMENDMENT NUMBER ONE TO COAL SUPPLY AGREEMENT
Exhibit
10.9.1
AMENDMENT
NUMBER ONE TO
This
Amendment Number One to COAL SUPPLY AGREEMENT, made and entered into this
1st
day of
October 2007, is by and between Xxxxxxxx
Bulk Transfer Inc., with
offices in Williams, Iowa ("WBT");
and
Lincolnway
Energy, LLC,
with
offices in Nevada, Iowa ("LWE").
WITNESSETH:
WHEREAS,
WBT and LWE are parties to a Coal Supply Agreement dated July 14, 2005,
and
WHEREAS,
WBT and LWE desire to amend that Coal Supply Agreement,
THEREFORE,
in consideration of the covenants hereinafter contained, it is mutually agreed
by and between the parties that the Coal Supply Agreement shall be amended
on
the day first signed above as follows:
|
1)
|
SECTION
1. TERM
shall be deleted in its entirety and replaced with the
following:
|
This
Agreement shall commence on the day first signed above and expire as of January
1, 2013 ("Term").
|
2)
|
SECTION
2. QUANTITY
shall be deleted in its entirety and replaced with the
following:
|
LWE
shall
purchase one hundred percent (100%) of the Plant's coal via this Agreement.
WBT
shall provide to LWE up to 220,000 Tons of Coal per year at a per Ton price
equal to the sum of the Coal Price and the Transportation Price for Coal (as
defined in Sections 5 and 8) plus any subsequent price adjustments (defined
in
Sections 6 and 9) for the Term of this Agreement.
WBT
shall
make best efforts to maintain at all times a minimum of a twenty (20) day supply
inventory of Coal at its terminal strictly for the benefit of LWE.
If
LWE
fails to purchase a minimum of 80,000 Tons of Coal from WBT in any calendar
year
("Minimum Quantity Requirement"), LWE shall pay WBT (i) $16.00 per Ton of Coal
(adjusted as provided in Section 6A) multiplied by the difference between the
Minimum Quantity Requirement and the actual Tons of Coal purchased by LWE for
the respective calendar year, less (ii) any amounts that WBT recovers by
mitigating its damages.
*Portion
omitted pursuant to request for confidential treatment filed separately with
the
Securities and Exchange Commission.
E-26
For
purposes of this Agreement, "Ton" shall mean 2,000 pounds
avoirdupois.
|
3)
|
SECTION
5. TRANSPORTATION PRICE
shall be deleted in its entirety and replaced with the
following:
|
|
"Transportation
Price" shall consist of the following components: (i) the cost of
transloading Coal at WBT; (ii) the cost of transporting Coal from
the
Source to WBT via BNSF Railway ("BNSF") and CN Railroad ("CN"); and
(iii)
the cost of transporting the Coal from WBT to the Plant in bottom-dump
trailers via motor transportation. On March 1, 2007, LWE's Transportation
Price for Coal was $* per Ton, subject to the Transportation Price
Adjustments as set forth in Section 6
below.
|
Effective
January 2, 2008, $* per Ton shall be added to LWE's then current Transportation
Price for Coal. On January 2, 2011, an additional $* per Ton shall be added
to
LWE's then current Transportation Price for Coal. In both cases the
Transportation Price adjustments set forth in Section 6 shall then continue
in
full force and effect for the remainder of the Term of this
Agreement.
|
4)
|
SECTION
6. TRANSPORTATION PRICE ADJUSTMENTS
shall be deleted in its entirety and replaced with the
following:
|
|
A.
|
Beginning
April 1, 2007 and each, July1, October 1, January 1 and April 1 thereafter
the Transportation Rate shall be adjusted quarterly, upward or downward,
by 100% of the quarterly percentage change in the All Inclusive Index
-
Less Fuel (AII-LF); provided, however, that in no case shall a
Transportation Price adjusted below the initial Transportation Price
stated herein. For each adjustment, the AII-LF for the current quarter
will be divided by the AII-LF for the previous quarter. Initially
the
Transportation Price herein and subsequently the previous quarter's
Transportation Price will be multiplied by the resulting factor to
produce
the adjusted transportation rates for the current quarter. Once the
adjusted transportation rates have been calculated, any fraction
less than
one-half cent shall be dropped and any fraction equal to or greater
than
one-half cent shall be increased to the next whole cent. This adjustment
shall also apply to short-fall amount of $16.00 stated in Section
2 of
this Agreement.
|
*Portion
omitted pursuant to request for confidential treatment filed separately
with the
Securities and Exchange Commission.
E-27
|
B.
|
A
Fuel Surcharge shall apply to the Transportation Price if the monthly
average Retail On-Highway Diesel Fuel Price of the US is equal to
or
greater than $* per gallon. The governing index shall be the Energy
Information Administration's average price in cents per gallon for
Retail
On-Highway Diesel Fuel for the US Diesel price, which information
is
available by calling the Energy Information Administration's Diesel
Fuel
Motor & Gasoline Hotline at (000) 000-0000 or the Administration's web
page at xxx.xxx.xxx.xxx.
|
The
Transportation Price shall be subject to adjustment once each month for fuel.
The Fuel Surcharge for a given month will be determined based on the first
of
the prior month using the average weekly price of Retail On-Highway Diesel
Fuel
for the second month prior. The following table shall determine the Fuel
Surcharge amount:
|
$*
to
$*
|
*
|
%
|
||
|
$*
to
$*
|
*
|
%
|
||
|
$*
to
$*
|
*
|
%
|
||
|
$*
to
$*
|
*
|
%
|
||
|
$*
to
$*
|
*
|
%
|
||
|
$*
to
$*
|
*
|
%
|
||
|
$*
to
$*
|
*
|
%
|
||
|
$*
to
$*
|
*
|
%
|
||
|
$*
to
$*
|
*
|
%
|
||
|
$*
to
$*
|
*
|
%
|
||
|
$*
to
$*
|
*
|
%
|
||
|
$*
to
$*
|
*
|
%
|
||
|
$*
to
$*
|
*
|
%
|
||
|
$*
to
$*
|
*
|
%
|
*Portion
omitted pursuant to request for confidential treatment filed separately
with the
Securities and Exchange Commission.
E-28
|
$*
to
$*
|
*
|
%
|
||
|
$*
to
$*
|
*
|
%
|
||
|
$*
to
$*
|
*
|
%
|
||
|
$*
to
$*
|
*
|
%
|
||
|
$*
to
$*
|
*
|
%
|
||
|
$*
to
$*
|
*
|
%
|
||
|
$*
to
$*
|
*
|
%
|
||
|
$*
to
$*
|
*
|
%
|
||
|
$*
to
$*
|
*
|
%
|
||
|
$*
to
$*
|
*
|
%
|
||
|
$*
to
$*
|
*
|
%
|
||
|
$*
to
$*
|
*
|
%
|
||
|
$*
to
$*
|
*
|
%
|
||
|
$*
to
$*
|
*
|
%
|
||
|
$*
to
$*
|
*
|
%
|
||
|
$*
to
$*
|
*
|
%
|
||
|
$*
to
$*
|
*
|
%
|
||
|
$*
to
$*
|
*
|
%
|
||
|
$*
to
$*
|
*
|
%
|
||
|
$*
to
$*
|
*
|
%
|
*Portion
omitted pursuant to request for confidential treatment filed separately
with the
Securities and Exchange Commission.
E-29
|
$*
to
$*
|
*
|
%
|
||
|
$*
to
$*
|
*
|
%
|
||
|
$*
to
$*
|
*
|
%
|
||
|
$*
to
$*
|
*
|
%
|
||
|
$*
to
$*
|
*
|
%
|
||
|
$*
to
$*
|
*
|
%
|
||
|
$*
to
$*
|
*
|
%
|
||
|
$*
to
$*
|
*
|
%
|
||
|
$*
to
$*
|
*
|
%
|
||
|
$*
to
$*
|
*
|
%
|
||
|
$*
to
$*
|
*
|
%
|
For
each
$* per gallon increase (or fraction thereof) thereafter an additional *% will
be
applied.
WBT
will
not impose a negative fuel surcharge (or refund) if the average price falls
below $*
per
gallon.
The
surcharge amount shall be rounded to the nearest one hundredth cent. For
example, the average published price per gallon for the month of March, 2006
was
$2.478. Thus, the Fuel Surcharge amount for May, 2006 would have been *% and
the
Transportation Price would have been adjusted as follows:
$*
+
($*
x *%) =
$* or $*
This
Fuel
Surcharge is based on the percentage based coal fuel surcharge program used
by
BNSF Railway as of March 15, 2007, as seen in BNSF Rules Book 6100.
*Portion
omitted pursuant to request for confidential treatment filed separately
with the
Securities and Exchange Commission.
E-30
|
C.
|
LWE
and WBT acknowledge that WBT's performance under this Agreement depends
on
WBT subcontractors for coal supply, rail and trucking services. If,
during
the Term of this Agreement, the coal suppliers, rail carriers or
trucking
companies used by WBT adjust their base rates or ancillary charges
(such
as fuel surcharge tables), or WBT experiences an event beyond the
reasonable control of WBT that changes WBT's costs of transportation
and
delivery pursuant to this Agreement, WBT will provide LWE thirty
(30) days
advance written notice of such changes, and within sixty (60) days
of that
written notice the Parties may either negotiate a mutually agreeable
price
adjustment under this Agreement or terminate this Agreement; provided,
however, that it is the intent of the Parties that any and each such
price
adjustment will be handled on a direct out-of-pocket cost, pass through
basis.
|
|
5)
|
SECTION
8. COAL PRICE(S)
shall be amended by adding the following
paragraph.
|
The
"Coal
Price(s)" per calendar year shall be as follows based on a heat content of
8,750
BTU's per pound and subject to the Coal Price Adjustments in Section 9:
|
2008
|
$
|
*
|
||
|
2009
|
$
|
*
|
||
|
2010
|
$
|
*
|
||
|
2011
|
$
|
*
|
||
|
2012
|
$
|
*
|
Environmental
Force Majeure.
As of
the effective date of this Agreement, the Coal is or can currently be utilized
at LWE's Plant in material compliance with all air pollution control and
environmental laws, regulations, and requirements, as the same are currently
enacted and/or promulgated. If any new environmental law is enacted or new
regulation is promulgated and becomes effective during the Term of this
Agreement that was not known as of the effective date, or reasonably should
have
been known as of the effective date, and if such new law or regulation has
a
material adverse effect on LWE's ability to utilize the Coal sold under this
Agreement, then LWE shall promptly notify WBT in writing of the new
environmental law or regulation. LWE shall undertake commercially reasonable
efforts to change its operating procedures or equipment, or to utilize the
coal
at other affiliated facilities, in order to continue utilizing the maximum
quantity of Coal within the existing Coal quality specifications. After all
such
efforts have been made, if LWE's ability to utilize said Coal of this quality
at
its Plant is reduced, then the reduction shall be allocated pro-rata across
all
multi-year coal agreements entered into prior to this Agreement; provided,
however, that the quantity of WBT's Coal supplied to LWE shall not be reduced
when LWE is accepting coals of typical quality to LWE's plant under any Coal
agreement entered into subsequent to this Agreement.
*Portion
omitted pursuant to request for confidential treatment filed separately
with the
Securities and Exchange Commission.
E-31
If
by
using the typical quality Coal LWE cannot materially comply with the new
environmental laws and/or regulations, then LWE shall promptly notify WBT
in
writing of the new required Coal quality specifications. WBT shall consider
and
evaluate what steps can be reasonably taken in the mining and/or preparation
of
the Coal from the existing (primary) sources to meet the new Coal quality
specifications. In the event the WBT can meet the new Coal quality
specifications, WBT shall determine the increased costs, if any, anticipated
by
the WBT to be associated with meeting the new quality specifications. Based
upon
WBT's evaluation the parties shall have the following sequential options:
|
1.
|
If
WBT's increased costs are less than or equal to 15% of the base price
per
ton, then LWE shall absorb said increased costs and shipments shall
continue under the then current Agreement, as modified for the new
Coal
quality specifications, or
|
|
2.
|
If
WBT's increased costs are greater than 15% of the base price per
ton, then
LWE shall have the option to absorb said total increased costs and
shipments shall continue under the then current Agreement, as modified
for
the new Coal quality specifications,
or
|
|
3.
|
If
LWE does not agree to absorb increased costs greater than 15% of
the base
price per ton or WBT does not meet the new coal quality specifications,
then WBT has the option to provide substitute Coal meeting the revised
Coal quality specifications under said Agreement at the current equivalent
delivered price plus 15% of the base price per ton; or if WBT does
not
exercise the option to provide substitute Coal as provided, then
|
|
4.
|
WBT
shall have the right to match the product selected by LWE to replace
the
remaining Coal requirements for the remainder of the Term hereof.
|
Changes
in market conditions, commercial frustration, commercial impracticability or
the
occurrence of unforeseen events rendering performance of this Agreement
uneconomical for LWE, shall not constitute a new environmental law or
regulation.
*Portion
omitted pursuant to request for confidential treatment filed separately
with the
Securities and Exchange Commission.
E-32
|
6)
|
SECTION
9. COAL PRICE ADJUSTMENTS
shall be deleted in its entirety and replaced with the
following:
|
The
Coal
Prices are firm for the Term of this Agreement subject only to adjustments
for
changes in laws and regulations that are enacted and in force or that expire
during the Term of this Agreement that change Source's cost of producing,
selling, loading, or shipping Coal during the Term of this Agreement. Such
adjustments to the Coal Prices because of changes in laws or regulations shall
be added to or subtracted from the Coal Prices on a direct pass-through basis.
The Coal Prices stated in Section 8 includes reimbursement to Source of all
environmental, land restoration and regulatory costs, including without
limitation, any reclamation costs required under applicable federal, state
or
local law in effect as of March 29, 2007.
The
federal statute (30 U.S.C. Section 1232) that provides for collection of the
Federal Reclamation Fee for Abandoned Mine Lands ("AML") mandates two reductions
from the rate in effect on March 29, 2007. The reductions are scheduled to
become effective on October 1, 2007 and October 1, 2012. Notwithstanding
anything contained in this Agreement to the contrary, these scheduled reductions
in the AML fee and any change in regulations to implement them will have no
effect on the Coal Price. If the federal government makes additional changes
in
the AML fees during the term of this Agreement, beyond those now scheduled
to
take effect on October 1, 2007 and on October 1, 2012, those changes shall
be
passed through to the Coal Price in accordance with the prior provisions of
this
Section 9.
Adjustment
for Inflation. The
Coal
Price per Ton set forth in Section 8 hereinabove shall be increased or decreased
for each percentage point of change, or proportionately for fractional parts
of
a percentage point of change, to reflect changes in the following indices.
The
Coal Price will be adjusted per the indexes as weighted and detailed below.
Changes shall become effective semi-annually as of January 1 and July 1 of
each
year, beginning January 1, 2008, and shall be based upon the preliminary indices
for November of the prior year and May of the current year, respectively. The
Gross Domestic Product-Implicit Price Deflator (GDP-IPD) shall be the
preliminary indices for the third quarter of the prior year, and first quarter
of the current year, respectively. The Prime Rate index shall be based on the
Prime Rate on the 15th
day of
December and June, respectively. The index base and base amounts shall be the
following:
*Portion
omitted pursuant to request for confidential treatment filed separately
with the
Securities and Exchange Commission.
E-33
|
Index
Weight
|
Index
Base
|
|||||
|
CPI
(W) Urban Wage Earners and Clerical Workers-All Items
cwur0000sa0*
|
30%
|
198.544
|
Preliminary
February 2007
|
|||
|
PPI
Industrial Commodities - Less Fuel & Pwr**
|
32%
|
169.0
|
Preliminary
February 2007
|
|||
|
#2
Diesel Fuel wpu057303 **
|
8%
|
193.5
|
Preliminary
February 2007
|
|||
|
GDP-IPD
***
|
15%
|
116.890
|
Q4
2006 Preliminary
|
|||
|
Prime
Rate ****
|
15%
|
8.25
|
March
29, 2007
|
*
U.S.
Department of Labor, Bureau of Labor Statistics, Not Seasonally Adjusted,
1982-84 = 100% basis.
**U.S.
Department of Labor, Bureau of Labor Statistics, Not Seasonally Adjusted, 1982
=
100% basis, preliminary basis.
***U.S.
Department of Commerce, Bureau of Economic Analysis, Price Indexes for Gross
Domestic Product - Implicit Price Deflator / Table 1.1.9 / Seasonally Adjusted,
2000 = 100% basis, preliminary release.
***Prime
Rate of interest as reported in the money rates section of the Wall Street
Journal for the last business day of the quarter - as published on the
subsequent business day.
The
impact of the semi-annual escalations, on a net basis, as weighted in the table
above shall not impact the Coal Price until they exceed the Embedded Escalation
Deadband of three percent (3%) per year on a semi-annual basis as follows
(detail provided in Exhibit B-1, which is attached hereto and incorporated
by
this reference).
EMBEDDED
INFLATION ESCALATION DEADBAND, 2008-2012
|
Escalation
Date
|
Quarterly
Increase
|
Cumulative
Increase
|
|||||
|
JUL
1, 2007
|
$
|
*
|
$
|
*
|
|||
|
JAN
1, 2008
|
$
|
*
|
$
|
*
|
|||
|
JUL
1, 2008
|
$
|
*
|
$
|
*
|
|||
|
JAN
1, 2009
|
$
|
*
|
$
|
*
|
|||
|
JUL
1, 2009
|
$
|
*
|
$
|
*
|
|||
|
JAN
1, 2010
|
$
|
*
|
$
|
*
|
|||
|
JUL
1, 2010
|
$
|
*
|
$
|
*
|
|||
|
JAN
1, 2011
|
$
|
*
|
$
|
*
|
|||
|
JUL
1, 2011
|
$
|
*
|
$
|
*
|
|||
|
JAN
1, 2012
|
$
|
*
|
$
|
*
|
|||
|
JUL
1, 2012
|
$
|
*
|
$
|
*
|
|||
*Portion
omitted pursuant to request for confidential treatment filed separately
with the
Securities and Exchange Commission.
E-34
Notwithstanding
anything contained herein to the contrary, in no event shall the Coal Price
as
adjusted pursuant to this Section 9 at any time be less than the Coal Price,
by
calendar year, as set forth in Section 8 above.
If
the
basis for any of the index numbers is changed, said index shall be adjusted
to
take into account such changed basis. In the event any designated index is
discontinued or altered, becomes unavailable, or is no longer applicable, the
Parties shall undertake to agree on a substitute index or a substitute method
of
cost adjustment which most closely matches the economic structure of the
discontinued or altered index. If the Parties fail to reach agreement on the
substitute index or method within ninety (90) calendar days, then the substitute
index or substitute method of cost adjustment shall be submitted to arbitration
and resolved. The values to perform the calculations set forth in this section
shall be rounded to three decimal places.
A
hypothetical Coal Price escalation for illustration purposes is attached hereto
as Exhibit B-2.
Adjustments
for BTU and Sulfur Dioxide. The
Coal
Price delivered during a calendar month shall also be adjusted for variations
in
calorific value and sulfur dioxide. Adjustments shall be added to or subtracted
from, as the case may be, the Coal Price determined in accordance with Sections
8 and 9 hereof. The adjustments shall be calculated as follows:
Btu
Adjustment Per Ton = ( P + $10.00 ) x ( AR
- BB
)
BB
Where:
P
=
The
Price
of
coal per ton delivered during the month in Section 6,
AR
=
The
monthly weighted average "As-Received"
Btu's per pound of the respective coal delivered to Buyer; and,
BB
= The
Base
Btu's
per
pound of the respective coal delivered to Buyer during
the month; the
BB value = [8,750]
*Portion
omitted pursuant to request for confidential treatment filed separately
with the
Securities and Exchange Commission.
E-35
SO2
Adjustment Per Ton= ((BSD-ARSD)* (Monthly SO2
value/2000)) * 17.6
Where:
Monthly
SO2
value
= The
simple arithmetic average of all S02
allowance prices published in Air
Daily
for the
applicable month.
| ARSD = |
The
monthly weighted average "As-Received
Sulfur
Dioxide"
expressed in pounds per million BTU of the respective coal delivered
to
Buyer; and,
|
| BSD = |
The
Base
Sulfur Dioxide per pound of the respective coal expressed in pounds
per
million BTU during the month. BSD
= .55
|
|
7)
|
SECTION
11. COAL QUALITY
shall be deleted in its entirety and replaced with the
following:
|
|
Exhibit
A, which is incorporated herein by this reference, is attached hereto
and
identifies the Coal quality specifications for the Coal from the
Source.
|
WBT
and
LWE agree that, except as specifically amended by this Amendment Number One,
all
of the other terms and provisions of the Agreement shall
remain unchanged and in full force and effect.
IN
WITNESS THEREOF, the parties intending to be legally bound have caused this
Amendment Number One to be executed by an authorized
representative.
|
By:
|
/s/
Xxxxx X. Xxxxx
|
By:
|
/s/
Xxxxxxx X. Xxxxx
|
|
|
Title:
|
Vice
President
|
Title:
|
President
|
|
*Portion
omitted pursuant to request for confidential treatment filed separately
with the
Securities and Exchange Commission.
E-36
EXHIBIT
A
October
1, 2007
TYPICAL
COAL QUALITY SPECIFICATIONS
North
Antelope Xxxxxxxx Mine ("NARM")
|
Typical Monthly Weighted Average,
As-Received
Basis, from NARM
|
||
|
Gross
Calorific Value, Btu/lb
|
8,740
|
|
|
Moisture,
%
|
27.60
|
|
|
Ash,
%
|
4.5
|
|
|
Sulfur
Dioxide, lb/MMBtu
|
0.52
|
|
|
Fines
(< ¼ inch)
|
27%
|
|
|
|
||
|
|
Reject
Quality on
a Trainload,
as-received
basis from NARM
|
|
|
Btu/lb
|
Less
than 8,500 Btu/lb
|
|
|
Moisture,
%
|
Greater
than 32%
|
|
|
Ash,
%
|
Greater
than 6.5%
|
|
|
Sulfur
Dioxide, lb/MMBtu
|
Greater
than 1.2 lb/MMBtu
|
|
|
Fines
(< ¼ inch)
|
35%
|
*Portion
omitted pursuant to request for confidential treatment filed separately
with the
Securities and Exchange Commission.
E-37
