Document:

CoalSupplyAgreement Exhibit 10.20

EXHIBIT 10.20

COAL SUPPLY AGREEMENT
BETWEEN
WILLIAMS BULK TRANSFER INC. ("WBT")
AND
LINCOLNWAY ENERGY, LLC ("LWE")

This Coal Supply Agreement ("Agreement"), made and entered into this _1st__ day of January, 2013, is by and between Williams Bulk Transfer, Inc., with offices in Williams, Iowa ("WBT"), and Lincolnway Energy, LLC, with offices in Nevada, Iowa ("LWE").

IN CONSIDERATION OF the following terms and mutual promises set forth herein, WBT agrees to deliver Coal (defined in Section 3) to LWE's ethanol production facility near Nevada, Iowa ("Plant"), and LWE agrees to purchase and accept delivery of such Coal at the price and on the terms and conditions stated in this Agreement.

		
	1.
	TERM 

This Agreement shall commence January 1, 2013 and expire after December 31, 2014 ("Term").

2.     QUANTITY

WBT shall provide LWE with up to 105,000 Tons of Coal in 2013, and 80,000 Tons of Coal in 2014 at a price equal to the Coal and Transportation Price for Coal and any subsequent price adjustments (see Sections 5, 6 and 7) for the Term of this Agreement. 

If LWE fails to purchase at least 28,000 Tons of Coal in calendar year 2013 or at least 28,000 Tons of Coal for calendar year 2014 ("Minimum Quantity Requirements"), LWE shall pay WBT (i) 40% of the then current delivered cost per Ton of Coal 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 WBT recovers by mitigating its damages. Such payment shall be due to WBT no later thirty (30) days of the applicable calendar year ending.

		
	3.
	SOURCE AND COAL 

"Coal" shall mean a Sub-bituminous coal with a Standard Transportation Commodity Code (STCC) as published in STCC-6001 (series), starting with the digits 11-21 (series). Coal shall not include beneficiated, enhanced, or synthetic coal; provided, however, coal treated with additives used exclusively for dust control or to reduce freezing shall not be considered "enhanced".      

"Source" shall mean the Powder River Coal Company's North Antelope/Rochelle complex located in Campbell or Converse County, Wyoming.  Source Coal shall comply with the specifications set forth in Section 9 herein.  

4.    TRANSPORTATION PRICE

"Transportation Price" shall consist of the following components: (i) the cost of transloading Coal at WBT (ii) the cost of transporting the Coal from the Source to WBT via Burlington Northern Santa Fe Railroad ("BNSF") and Canadian National Railroad ("CN") (iii) the cost of transporting the Coal from WBT to the Plant via motor transportation. On January 1, 2013, LWE's Transportation Price for Coal shall be $* per Ton. This Transportation Price is subject to various price adjustments as contained in Section 5 ("Transportation Price Adjustments").

*Portion omitted pursuant to request for confidential treatment filed separately with the Securities and Exchange Commission.
E-2

5.     TRANSPORTATION PRICE ADJUSTMENTS

		
	A.
	Beginning April 1, 2013, and each July 1, October 1, January 1 and April 1 thereafter, the Transportation Price will be adjusted by 100% of the percentage change since the previous adjustment in the Rail Cost Adjustment Factor, Unadjusted for Productivity ("RCAFU"), as approved by the Surface Transportation Board pursuant to Ex Parte No.290 (Sub-No.5) ("Adjusted Rates" or "Adjusted Charges").  In no case shall the Adjusted Rates or Adjusted Charges fall below the level of the initial Transportation Price.

		
	B.
	A "Fuel Surcharge" shall apply to the Transportation Price. For every * per gallon above $* per gallon the published average price of diesel fuel is, the Transportation Price in this Agreement shall be increased by * cents per ton. The Transportation Price shall be adjusted once each month for fuel. 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 information is available by calling the Energy Information Administration's Diesel Fuel Motor & Gasoline Hotline at (202) 568-6966 or the Administration's web page at www.eia.doe.gov.

The Transportation Price shall be adjusted each month for fuel. The Fuel Surcharge for a given month will be determined on the first of the prior month using the average weekly price of Retail On-Highway Diesel Fuel for the second month prior. The surcharge amount shall be rounded to the nearest whole cent. For example, if the average published price per gallon in September is $*, the November Price in this Agreement shall increase to $* per ton.

$* - $* = $* and $* x *= $* 

This Fuel Surcharge program is based, in part, on the mileage based coal fuel surcharge program used by BNSF Railway as of October 1, 2012, as seen in BNSF Rules Book 6100-series, Item 3383.

		
	C.
	LWE and WBT acknowledge that WBT's performance under this Agreement depends on WBT's rail carriers and trucking companies ("Subcontractors") for each of their services. WBT shall notify LWE in writing if, during the term of this Agreement, WBT's Subcontractors change their rates or ancillary charges (such as fuel surcharge tables or coal dust compliance laws), or experience an event beyond the reasonable control of WBT that increases or decreases WBT's costs of transportation and delivery pursuant to this Agreement. In that event, the Parties may either negotiate a mutually agreeable Transportation Price or WBT may terminate this Agreement with a 120 day prior written notice. If the Parties elect to negotiate a mutually agreeable Transportation Price, then both Parties agree to negotiate in good faith to increase or decrease the Transportation Price to equitably reflect the impact on WBT's underlying cost resulting solely from a change in Subcontractor's rates or ancillary charges. 

 
6.    COAL PRICE

The "Coal Price" 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 7:

2013        $* per ton
2014        $* per ton    
        
__________________________________
*Portion omitted pursuant to request for confidential treatment filed separately with the Securities and Exchange Commission.

7.    COAL PRICE ADJUSTMENTS

Coal Prices are subject to adjustments for changes in laws and regulations enacted and in force or expiring 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 Price because of changes in laws or regulations shall be added to or subtracted from the Coal Price on a direct pass-through basis. Subject to the foregoing, the Coal Prices stated in Section 6 include 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 November 11, 2012. The Coal Price shall also be subject to BTU and SO2 adjustments as set forth herein.

The federal statute (30 U.S.C. Section 1232) that provides for collection of the Federal Reclamation Fee for Abandoned Mine Lands ("AML") expired on June 30, 2005, except that portion of the statute that provided for collection of fees to be transferred to the United Mine Workers of America Combined Benefit Fund.  Notwithstanding anything contained herein to the contrary, this partial expiration of the statute and any change in regulations to implement it will have no effect on the Coal Price purchased and sold pursuant to this Agreement.  If the federal government makes additional changes in the AML fees, beyond those now scheduled to take effect, those changes shall be passed through to the Coal Price purchased and sold pursuant to this Agreement only to the extent that they cause the AML fee to exceed $0.350 per ton.  

Coal Price Adjustment.  The Coal Price set forth in Section 6 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 allocated per the index weights detailed below.  Changes shall become effective semi-annually as of January 1 and July 1 of each year, beginning July 1, 2013, 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 based on the second estimate 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:

	
				
	 
	Index Weight
	Index Base
	 

	CPI (W) Urban Wage Earners and Clerical Workers-All Items cwur0000sa0*
	30%
	228.184
	September 2012

	PPI Industrial Commodities 
- Less Fuel & Pwr
wpu03t15m05 **
	32%
	193.7
	Preliminary September 2012

	#2 Diesel Fuel 
wpu057303  **
	8%
	341.7
	Preliminary September 2012

	GDP-IPD ***
	15%
	115.860
	Q3 2012 Advance Estimate

	Prime Rate ****
	15%
	3.25
	October 15, 2012

* 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

*Portion omitted pursuant to request for confidential treatment filed separately with the Securities and Exchange Commission.

***U.S. Department of Commerce, Bureau of Economic Analysis, Price Indexes for Gross Domestic Product – Implicit Price Deflator / Table 6 / Seasonally Adjusted, 
2005 = 100% basis, second estimate release

****Prime Rate of interest as reported by the Federal Reserve Bank of St. Louis on the fifteenth (15th) day of December and June or the first business day thereafter

The impact of the semi-annual adjustments, on a net basis, as weighted above shall not impact the Coal Price until they exceed an Embedded Adjustment Deadband, on a semi-annual basis, as follows:  

EMBEDDED ADJUSTMENT DEADBAND

Adjustment Date          Quarterly        Cumulative
   Increase           Increase

Jul 1, 2013            $    *            $    *    
Jan 1, 2014            $    *            $    *
Jul 1, 2014            $    *            $    *
    
Notwithstanding anything contained herein to the contrary, in no event shall the Coal Price for a calendar year as adjusted pursuant to this Agreement at any time be less than the original Coal Price stated in Section 6, by calendar year, as set forth 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 90 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 adjustment escalation` for illustration purposes only is attached hereto as Exhibit B.

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 Section 6 and 7 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 per Section 6,

		
	AR
	=    The monthly weighted average "As-Received" Btu's per pound of the respective Coal delivered to LWE; and,

		
	BB
	=    The Base Btu's per pound of the respective Coal delivered to LWE during the month; the BB value = [8,750]

*Portion omitted pursuant to request for confidential treatment filed separately with the Securities and Exchange Commission.

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 LWE; and,

		
	BSD
	=    The Base Sulfur Dioxide per pound of the respective Coal expressed in pounds per million BTU during the month. BSD = .52

8.    COAL ANALYSIS

The Coal Analysis shall be determined by representative samples of each train which shall be taken at the Source in accordance with ASTM Standard D2234, employing increment collection method, Classification I‐B‐1.  Samples shall be analyzed in conformance with current ASTM standards by Source's independent contractor.  The contractor shall perform a short proximate and sodium analysis on one sample split from each trainload on an "as received" basis in accordance with ASTM standards.  WBT shall provide LWE with these results as reasonably requested.  

LWE may perform, at its discretion, its own analysis of the calorific value and sulfur dioxide content of the Coal. The Coal Analysis shall be performed and analyzed pursuant to the same procedures and standards as at the Source. If the results from LWE's testing conflict with the results provided by WBT, then LWE may require that the same analysis be performed by a third contractor the identity of which the parties shall mutually agree upon in good faith and without unreasonable delay. The third party may consider the data and conclusions from the first two analyses when reaching its own independent results. The results of the third party's analysis shall determine the quality of the subject Coal.  If the third party determines that its results are substantially similar to the results provided by WBT, then LWE shall be responsible for all costs associated with performing the third analysis.  However, if the third party determines that its results are not substantially similar to the results provided by WBT, then (i) WBT shall be responsible for all cost associated with performing the third analysis, and (ii) the Coal Price for all of the Coal delivered to LWE in the train containing the subject Coal shall be adjusted for the variations in calorific value and sulfur dioxide in accordance with Section 7 and any other significant diminutions in value.

9.    COAL QUALITY

Exhibit A, which is incorporated herein by this reference, identifies the Coal Quality Specifications 
for the Coal from the Source.  WBT represents and warrants that all Coal will meet those initial
Coal Quality Specifications.

10.       METHOD OF PAYMENT
 
WBT shall invoice LWE at the then current combined Coal Price and Transportation Price when Coal is delivered to the Plant, and calculated based on the outbound certified scale weights at WBT.  Such invoices shall occur at least twice monthly as agreed between WBT and LWE.

LWE shall pay WBT within ten (10) days after LWE's receipt of such invoices.  Late payments shall carry a delinquent charge of one and one-half percent (1.5%) of the amount invoiced per month with interest accruing the day after the due date.
*Portion omitted pursuant to request for confidential treatment filed separately with the Securities and Exchange Commission.

11.    REMEDY AND LIMITATIONS OF LIABILITY

LWE's sole and exclusive remedy for breach of the Agreement by WBT shall be damages. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR INCIDENTAL, SPECIAL, EXTRAORDINARY, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES, INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS OR REVENUE, LOSS OF USE OF POWER SYSTEM OR OTHER SYSTEMS, COST OF CAPITAL, COST OF PURCHASED OR REPLACEMENT POWER, OR FUEL COST DIFFERENTIAL.

Notwithstanding the foregoing, the sum total liability of WBT to LWE with respect to this Agreement, or anything done in connection therewith, such as the performance or breach thereof, whether in contract, in tort (including negligence) under any warranty or otherwise, shall not exceed the total amount of fees for Coal paid by LWE to WBT under this Agreement..

12.     INDEMNIFICATION

LWE agrees to assume all risk of loss and to defend, indemnify and hold WBT, its officers, directors, employees, agents and representatives harmless from and against any and all claims, liabilities, damages, losses, costs or expenses of whatever nature or character and for all injuries or damage of any type to any person or property, including, without limitation, (a) breach of this Agreement or any covenant or warranty herein; (b) violation of any, law regulation, or permit; (c) injuries or damage of third parties or employees of both parties and damages to LWE'S property, the Plant, or LWE's equipment or facilities, occasioned wholly or in part as a result of LWE's acts or omissions, negligence or willful misconduct, (or those of its employees, contractors, agents and assigns); and (d) in any way related to the burning of Coal purchased under this Agreement or relating to pollution, contamination or adverse effects on the environment, due to, but not limited to, the disposal, discharge, escape, dispersal, release or saturation of smoke, vapors, soot, fumes, acids, alkalies, toxic chemicals, liquids, gases, or hazardous substances as defined under 455B of the Code of Iowa, into the atmosphere, or on, onto, in or into the surface or subsurface soil, ground water, or surface waters; except, in each case, to the extent caused solely by any act or omission by WBT. 

13.     COMMUNICATION BETWEEN THE PARTIES

All communications related to this Agreement shall be to the persons listed below or to such other persons as the parties may specify in writing:

CEO & President            President
Lincolnway Energy, LLC            Williams Bulk Transfer, Inc.
59511 W. Lincoln Highway        2330 12th Street SW
Nevada, Iowa 50201            Cedar Rapids, Iowa 52404

Any notice, request, or demand pertaining to this Agreement shall be delivered by mail, messenger, telephone, telegraph, facsimile, electronic mail or verbally to such agent of the party being notified as may be appropriate, and if given by telephone, telegraph or through other or verbal communications, said communications shall be confirmed in writing within thirty (30) days.

14.    NO THIRD PARTY BENEFICIARIES

Nothing in this Agreement is intended to confer, nor shall it be asserted or construed as conferring, any rights or benefits upon any other person or entity not a party to this Agreement, including, but not limited to, any such rights or benefits which may be asserted by any person or entity as a purported third party beneficiary.
*Portion omitted pursuant to request for confidential treatment filed separately with the Securities and Exchange Commission.

		
	15. 
	FORCE MAJEURE

It is understood that unavoidable delays may result from causes which are reasonably beyond the 
control of the parties, including, but not limited to, the following: acts of providence, floods, 
fortuitous events, unavoidable accidents, riots, acts of terror, strikes, lockouts, and any other unforeseen act beyond the reasonable control of either party, and not due to either party's negligence, which interferes with the production, loading, transportation, unloading, or consumption of the Coal ("Force Majeure").  Notwithstanding the foregoing, LWE understands and agrees that a Force Majeure event shall include the occurrence or declaration of force majeure under any other arrangement entered into by WBT related to the procurement, transport. Delivery, or supply of Coal, including, but not limited to an occurrence or declaration by or to the Source, Burlington Northern and Santa Fe Railway Company, Canadian National Railroad, Williams Bulk Transfer, or Ben Shinn Trucking, (as the entity transporting Coal from WBT to the Plant via motor transportation), as limited by the definition of such term under WBT's agreement with the party related to such force majeure.  Should the progress of the delivery of Coal be delayed at any time for such causes, the affected party shall at once notify the other party in writing of the occurrence. If because of Force Majeure either LWE or WBT is unable to carry out its obligations under this Agreement, except obligations to pay or expend money for Coal already delivered, then the obligations of such party shall be suspended to the extent made necessary by such Force Majeure and during its continuance, provided such Force Majeure is removed, remedied and/or damages there from mitigated through good faith and reasonable efforts insofar as possible and economically practicable with all reasonable dispatch and further provided, that such party shall not be excused from tendering partial performance if the same is possible.

Notwithstanding the foregoing, it is agreed that neither party shall be required to settle, resolve or interfere in a strike or lock-out.  Any deficiency in Coal Tonnage to be delivered under this Agreement caused by Force Majeure shall be made up by mutual consent of LWE and WBT.

		
	16. 
	ASSIGNMENT

This Agreement shall be binding upon and shall inure to the benefit of the respective successors 
and permitted assigns of the parties, but shall not be assigned without the written consent of the 
other, which consent shall not be unreasonably withheld.

		
	17. 
	INDEPENDENT TERMS

Each term and condition of this Agreement is deemed to have independent effect and the invalidity of any partial or whole paragraph or article shall not invalidate the remaining paragraphs or articles.

		
	18. 
	DISPUTES AND GOVERNING LAW

Any claims, disputes or other controversies arising out of, or relating to, this Agreement shall initially be submitted to senior officials from each LWE and WBT for resolution by mutual agreement between the parties. Any mutual determination by the senior officials shall be final and binding upon the parties.  

Should the senior officials fail to arrive at a mutual decision as to the controversy within thirty (30) calendar days, then such controversy shall be submitted to a third party mediator, such mediation to be administered in accordance with the procedures established by the American Arbitration Association ("AAA") under its Commercial Mediation Rules.  

LWE and WBT shall share equally the compensation and expenses of the mediator as well as all fees and expenses imposed associated with transcripts, hearing room rentals, filing fees and administrative costs. LWE and WBT shall be responsible for their own costs and legal fees, if any.
*Portion omitted pursuant to request for confidential treatment filed separately with the Securities and Exchange Commission.

Should mediation not resolve the matter within thirty (30) days of submission to mediation, either party may litigate the controversy in either the state or federal court located in Cedar Rapids, Iowa.  This Agreement shall be governed by the laws of the state of Iowa. 

		
	19. 
	INDEPENDENT CONTRACTOR

The relationship of LWE to the WBT shall be that of a provider of Coal acting as an independent contractor for purposes of this Agreement.

		
	20. 
	CONTRACT DOCUMENTS

This Agreement constitutes the entire understanding between the parties making all other 
representations null and void.

		
	21. 
	CONFIDENTIALITY OF AGREEMENT

LWE and WBT consider this document and its content to be proprietary.  The parties agree to exert the same efforts to prevent or limit disclosure as it would on behalf of similar proprietary information of their own. The parties agree to make reasonable efforts to prevent or limit disclosure, and, where disclosure is permitted herein or required by law, to limit the extent of inspection of this Agreement by third parties to the extent possible. The parties also agree to notify the other of any intended disclosure at the earliest opportunity. Notwithstanding the foregoing, WBT may disclose the terms of this Agreement to the Source, the Burlington Northern and Santa Fe Railway Company, Canadian National Railroad, and / or Ben Shinn Trucking or their successors and assigns and either party may disclose the terms of this Agreement in
order to comply with any applicable law, order, regulation, or rule and to the extent necessary for
the enforcement of this Agreement.

IN WITNESS WHEREOF, the parties have executed this Agreement in their respective corporate names as of the date first above written.

WILLIAMS BULK TRANSFER INC.            LINCOLNWAY ENERGY, LLC

BY:  /s/ Kevin P. Burke                    BY: /s/ Kim Supercynski            

ITS: President                        ITS: CFO                
 

*Portion omitted pursuant to request for confidential treatment filed separately with the Securities and Exchange Commission.

EXHIBIT A

COAL QUALITY SPECIFICATIONS

North Antelope Rochelle Mine ("NARM")

	
		
	 
	Typical Monthly Weighted Average, As-Received Basis, from NARM

	Gross Calorific Value, Btu/lb
	8,750

	Moisture, %
	27.60

	Ash, %
	4.5

	Sulfur Dioxide, lb/MMBtu

	0.52

	Fines
	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 (<1/4 inch)
	Greater than 35%

*Portion omitted pursuant to request for confidential treatment filed separately with the Securities and Exchange Commission.

EXHIBIT B
HYPOTHETICAL ADJUSTMENT
January 1, 2013

Base Price            $           *
Laws Adjustment        $           *  
    Subtotal            $           *
Government Imposition(5)    $           *
    Clean Price            $           *
	
								
	

Index Utilized
	Index
Weight
	Base
Amount
	Base(1)
Index
	Revised(2)
Index
	Adjustment
Amount
	 
	Adjusted
Price

	 
	 
	 
	 
	 
	 
	 
	 

	CPI (W) Urban Wage Earners and
Clerical Workers-All Items
cwur0000sa0
	

30%
	

$      *
	

*
	

*
	

     *
	}
	 

	

Ind. Com. - less Fuel and Power -
wpu03t15m05
	

32%
	

$      *
	

*
	

*
	

     *
	 

	

#2 Diesel Fuel - wpu057303
	

8%
	

$      *
	

*
	

*
	

     *
	

$      * 

	

Gross Domestic Product - Implicit
Price Deflator (GDP - IPD)
	

15%
	

$      *
	

*
	

*
	

     *
	 

	

Prime Rate
	

15%
	

$      *
	

*
	

*
	

     *
	 

	

Embedded Inflation Deadband(3)
	 
	

______
	 
	 
	

     *
	 

	

Subtotal
	 
	

$      *
	 
	 
	

$      *(4)
	

$      *

	

Laws Adjustment
	 
	

-
	 
	 
	

-
	

-

	

Government Imposition
	 
	

$       *
	 
	 
	

$       *
	

 $        *(6)

	

Total
	 
	

$       *
	 
	 
	

$       *
	

  $        *

z(1)    Base indices as established per Coal Supply Agreement.
z(2)    Index for the date established in Coal Supply Agreement.
z(3)    Per Coal Supply Agreement and Exhibit B-1, Cumulative Embedded Inflation Deadband.
z(4)    The sum of the above adjustments or zero, whichever is greater.
		
	z(5) 
	The Government Impositions include the taxes, royalties, and fees applicable to the sale of coal from the Mine as of November 1, 2012.

		
	z(6) 
	The Government Impositions include all current taxes, royalties and fees applicable to the sale of coal from the Mine.

FOR ILLUSTRATION PURPOSES ONLY
 
*Portion omitted pursuant to request for confidential treatment filed separately with the Securities and Exchange Commission.vggl_ex1035.htm

EXHIBIT 10.35

 

LINE OF CREDIT GRID PROMISSORY NOTE

 

New York, New York

	As of February 11, 2013	 $25,000,000.00

 

1) FOR VALUE RECEIVED, on the Maturity Date, Viggle Inc., a Delaware corporation (“Viggle” or the “Borrower”), at its offices at 902 Broadway, 11th Floor, New York, New York 10010, promises to pay to the order of Sillerman Investment Company II LLC (“SIC II” or the “Lender”) at its offices, or at such other place as the Lender may designate in writing, the aggregate principal sum of Twenty Five Million Dollars ($25,000,000) or, if less, the unpaid amount of all draws, plus accrued and unpaid interest due with respect to all outstanding draws, made by the Lender hereunder.

 

2) Maturity Date.  The “Maturity Date” shall be the earlier to occur of (i) February 11, 2015 or (ii) upon a Change of Control Transaction, whichever comes first.

 

3) Interest.  (a)      Borrower will pay interest on the unpaid principal amount of all draws from time to time outstanding from the date of each draw until each such draw has been paid in full. Interest shall accrue at the simple interest rate equal to fourteen percent (14%) per annum, simple, with respect to each draw. Interest shall be compounded semi-annually.

 

     (b)  Borrower will pay interest, calculated at the rate set forth above, upon the Maturity Date or such earlier date upon which any draw is repaid. In addition, Borrower will pay a default rate equal to two percent (2%) per annum in excess of the rate set forth herein if an Event of Default has occurred and is continuing. Notwithstanding the foregoing however, in no event shall interest exceed the maximum legal rate permitted by law. All payments, including insufficient payments, shall be credited, regardless of their designation by Borrower, first to outstanding late charges, then to interest and the remainder, if any, to principal.

 

4) Requests for Loans; Disbursement of Proceeds. Borrower may borrow, and Lender agrees to fund draws hereunder in amounts of no less than One Million Dollars ($1,000,000), upon notice of a proposed borrowing, and the requested amount thereof, to the Lender not later than 12:00 Noon (New York time) five (5) days prior to the date on which the proposed borrowing is requested to be made, subject to the satisfaction of all conditions precedent to such draw, including the delivery to the Lender of a funding memorandum substantially in the form attached hereto as Exhibit A; provided, that the aggregate principal amount of all draws outstanding at any one time shall not exceed $25,000,000.  Lender shall not be obligated to fund draws more than once per month. Each notice of borrowing shall be delivered by hand or facsimile transmission. Each such notice shall be irrevocable by and binding on Borrower. Unless otherwise directed in writing by Borrower, the Lender shall promptly disburse the proceeds of such draw made hereunder by crediting the amount thereof as instructed in the applicable Disbursement Request.

 

5) Payments and Prepayments; Use of Grid. The Lender is hereby authorized by Borrower to enter and record on the schedule attached hereto (i) the loan number, (ii) the date of each draw made under this Grid Note, (iii) the dollar amount of the draw, (iv) the applicable interest rate, (v) interest due on Maturity Date, (vi) each payment and prepayment of any draw thereon, and (vii) date of payment, without any further authorization on the part of Borrower or any endorser or guarantor of this Grid Note; provided, however, that the Lender shall promptly deliver to the Borrower a copy of this Grid Note following the entry of each draw hereunder. The entry of a draw on said schedule shall be prima facie and presumptive evidence of the entered draw and its conditions, absent manifest error. The Lender’s failure to make an entry, however, shall not limit or otherwise affect the obligations of Borrower or any endorser or guarantor of this Grid Note. Borrower may make prepayments in whole or in part hereunder at any time, provided accrued, but unpaid interest, is paid through the prepayment date. If any payment of principal or interest becomes due on a day on which the Lender is closed, such payment shall be made not later than the next succeeding Business Day (a “Business Day” shall be considered to be Monday through Friday from 9am to 5pm local time, excluding weekends and public holidays) and such extension shall be included in computing interest in connection with such payment. All payments by Borrower on account of principal, interest or fees hereunder shall be made in lawful money of the United States of America, in immediately available funds.  All net proceeds received by the Company or any of its wholly owned subsidiaries from any debt or equity offering by the Company or any of its wholly-owned subsidiaries shall first be applied toward the payment in full of all outstanding principal and accrued but unpaid interest outstanding under this Grid Note.

 

6) Use of Proceeds. The proceeds of each draw hereunder shall be used for general corporate and working capital purposes of Borrower. Borrower will not, directly or indirectly, use any proceeds of draws hereunder for the purpose of purchasing or carrying any margin stock within the meaning of Regulation X of the Board of Governors of the Federal Reserve System or to extend credit to any person for the purpose of purchasing or carrying any such margin stock, or for any purpose which violates, or is inconsistent with, Regulation X of such Board of Governors.

 

 

  

  

  

 

7) Event of Default.

 

  (a) It is expressly agreed that the whole of the indebtedness evidenced by this Grid Note shall immediately become due and payable, at the option of the Lender, on the happening of any default or event constituting an event of default hereunder (each an “Event of Default”).

 

  (b) An Event of Default shall occur on: (i) the non-payment of any of the amounts due hereunder within five (5) Business Days after the date such payment is due and payable; (ii) dissolution or liquidation, as applicable, of the Borrower; (iii) any petition in bankruptcy being filed by or against the Borrower or any proceedings in bankruptcy, or under any Acts of Congress relating to the relief of debtors, being commenced for the relief or readjustment of any indebtedness of the Borrower either through reorganization, composition, extension or otherwise; provided, however, that Borrower shall have a sixty (60) day grace period to obtain the dismissal or discharge of involuntary proceedings filed against it, it being understood that during such sixty (60) day grace period, the Lender shall not be obligated to make draws hereunder and the Lender may seek adequate protection in any bankruptcy proceeding; (iv) the making by the Borrower of an assignment for the benefit of creditors, calling a meeting of creditors for the purpose of effecting a composition or readjustment of its debts, or filing a petition seeking to take advance of any other law providing for the relief of debtors; (v) any seizure, vesting or intervention by or under authority of a government, by which the management of the Borrower, is displaced or its authority in the conduct of its business is curtailed; (vi) the appointment of any receiver of any material property of the Borrower; (vii) if any warranty, representation, statement, report or certificate made now or hereafter by Borrower to Lender pursuant hereto is untrue or incorrect in any material respect at the time made or delivered; (viii) the Borrower shall contest, dispute or challenge in any manner, whether in a judicial proceeding or otherwise, the validity or enforceability of any material provision set forth herein or any transaction contemplated in this Grid Note; or (ix) if there shall be a material adverse change in the business plan or prospects of Borrower in the reasonable opinion of Lender.

 

8) Representations:  In consideration of the commitment by SIC II to make the loan evidenced by this Grid Note, the Borrower has issued to SIC II  Five Million (5,000,000) shares of Borrower’s common stock, $0.001 par value, (the “Common Shares”) and in connection therewith SIC II and, to the extent applicable as set forth below when Borrower is named, Borrower make the following representations:

 

Organization; Authority.  SIC II is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite power and authority to enter into and to consummate the transactions contemplated hereby and otherwise to carry out its obligations hereunder.

 

No Public Sale or Distribution.  SIC II is acquiring the 5,000,000 shares of the Company’s common stock (such 5,000,000 shares are referred to herein as the “Common Shares”) for its own account and not with a view towards, or for resale in connection with, the public sale or distribution thereof in violation of applicable securities laws, except pursuant to sales registered or exempted under the Securities Act of 1933, as amended (the “1933 Act”); provided, however, by making the representations herein, SIC II does not agree, or make any representation or warranty, to hold any of the Common Shares for any minimum or other specific term and reserves the right to dispose of the Common Shares at any time in accordance with or pursuant to a registration statement or an exemption under the 1933 Act. SIC II does not have any agreement or understanding with any person or entity to distribute any of the Common Shares in violation of applicable securities laws.

 

Accredited Investor Status.  SIC II is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D.

 

Reliance on Exemptions. SIC II understands that the Common Shares are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and SIC II’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of SIC II set forth herein in order to determine the availability of such exemptions and the eligibility of SIC II to acquire the Common Shares.

 

Information. SIC II and its advisors, if any, have been furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Common Shares which have been requested by SIC II.  SIC II and its advisors, if any, have been afforded the opportunity to ask questions of the Company.  SIC II understands that its acquisition of the Common Shares involves a high degree of risk. SIC II has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Common Shares.

 

No Governmental Review.  SIC II understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Common Shares or the fairness or suitability of the acquisition of the Common Shares nor have such authorities passed upon or endorsed the merits of the offering of the Common Shares.

 

Transfer or Resale. SIC II understands that: (i) the Common Shares have not been and are not being registered under the 1933 Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder or (B) SIC II shall have delivered to the Company an opinion of counsel to SIC II, in form and substance acceptable to the Company, to the effect that the Common Shares to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration; (ii) any sale of the Common Shares made in reliance on Rule 144 promulgated under the 1933 Act (or the successor rule thereto) (“Rule 144”) may be made only in accordance with the terms of Rule 144, and further, if Rule 144 is not applicable, any resale of the Common Shares under circumstances in which the seller (or the person or entity through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the Securities and Exchange Commission promulgated thereunder; and (iii) neither the Company nor any other person or entity is under any obligation to register any of the Common Shares under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder.

 

  

  

  

 

Validity; Enforcement. This Agreement has been duly and validly authorized, executed and delivered on behalf of Viggle and SIC II and constitutes the legal, valid and binding obligations of Viggle and SIC II enforceable against the other in accordance with its terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.

 

No Conflicts. The execution, delivery and performance by Viggle and SIC II of this Agreement and the consummation of the transactions contemplated hereby will not (i) result in a violation of the organizational documents of Viggle or SIC II, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which Viggle or SIC II is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment  or decree (including federal and state securities laws) applicable to Viggle or SIC II, except in the case of clause (ii) above, for such conflicts, defaults or rights which would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of Viggle or SIC II to perform its obligations hereunder.

 

Experience. SIC II, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Common Shares, and has so evaluated the merits and risks of such investment. SIC II is able to bear the economic risk of an investment in the Common Shares and, at the present time, is able to afford a complete loss of such investment.

 

General Solicitation.  SIC II is not acquiring the Common Shares as a result of any advertisement, article, notice or other communication regarding the Common Shares published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.

 

9) Governing Law. This Grid Note shall be governed by, and construed in accordance with, the laws of the State of New York, without regard to its rules on conflicts of laws.

 

10) No Waiver. No failure or delay on the part of the Lender in exercising any right, power, or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power, or remedy preclude any other or further exercise thereof or the exercise of any other right, power, or remedy hereunder. The rights and remedies provided herein are cumulative, and are not exclusive of any other rights, powers, privileges, or remedies, now or hereafter existing, at law or in equity or otherwise.

 

11) Costs and Expenses. Borrower shall reimburse the Lender for all costs and expenses incurred by the Lender in connection with the enforcement of this Grid Note or any document, instrument or agreement relating thereto.

 

12) Amendments. No amendment, modification, or waiver of any provision of this Grid Note nor consent to any departure by Borrower therefrom shall be effective unless the same shall be in writing and signed by the Lender and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

 

13) Successors and Assigns. This Grid Note shall be binding upon Borrower and its heirs, legal representatives, successors and assigns and the terms hereof shall inure to the benefit of the Lender and its successors and assigns, including subsequent holders hereof.

 

14) Severability. The provisions of this Grid Note are severable, and if any provision shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall not in any manner affect such provision in any other jurisdiction or any other provision of this Grid Note in any jurisdiction.

 

15) Entire Agreement. This Grid Note sets forth the entire agreement of Borrower and the Lender with respect to this Grid Note and may be modified only by a written instrument executed by Borrower and the Lender.

 

16) Headings. The headings herein are for convenience only and shall not limit or define the meaning of the provisions of this Grid Note.

 

17) Jurisdiction; Service of Process. Borrower agrees that in any action or proceeding brought on or in connection with this Grid Note (i) any New York State or Federal court sitting in New York County, New York, shall have jurisdiction of any such action or proceeding, (ii) service of any summons and complaint or other process in any such action or proceeding may be made by the Lender upon Borrower by registered or certified mail directed to Borrower at its address referenced above, Borrower hereby waiving personal service thereof, and (iii) within thirty (30) days after such mailing Borrower shall appear or answer to any summons and complaint or other process, and should Borrower fail to appear to answer within said thirty day period, it shall be deemed in default and judgment may be entered by the Lender against Borrower for the amount as demanded in any summons or complaint or other process so served.

 

  

  

  

 

18) WAIVER OF THE RIGHT TO TRIAL BY JURY. BORROWER AND, BY ITS ACCEPTANCE HEREOF, THE LENDER, HEREBY IRREVOCABLY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM, OR COUNTERCLAIM, WHETHER IN CONTRACT OR TORT, AT LAW OR IN EQUITY, IN ANY MANNER CONNECTED WITH THIS GRID NOTE OR ANY TRANSACTIONS HEREUNDER. NO OFFICER OF THE LENDER HAS AUTHORITY TO WAIVE, CONDITION, OR MODIFY THIS PROVISION.

 

	 	 
Viggle Inc.

	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	Name: 	Mitchell J. Nelson 	 
	 	Title:	Executive Vice President 	 
	 	 	 	 

 

Representations in Section 8 are hereby confirmed and the

provisions for the advancement of draws are hereby agreed to:

SILLERMAN INVESTMENT COMPANY II, LLC

By:_____________________________

Name:  Robert FX Sillerman

Title:  Member-Manager

  

  

  

 

SCHEDULE TO LINE OF CREDIT GRID PROMISSORY NOTE

 

Borrower:  Viggle Inc.

 

 

Date:  February [__], 2013

 

	
Loan Number

	
Date of draw

	
Commitment Amount

	
Amount of draw

	
Maturity Date

	
Interest

Rate

	
Interest Due upon

Maturity Date

	
Amount Paid

	
Date Payment

	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 

 

  

  

  

 

EXHIBIT A

FUNDING MEMORANDUM

_________ __, 2013

____________________

____________________

____________________

Dear ____________________:

We hereby request that you make available in our account No. _____________ the amount of $______________, and which shall constitute a draw under the Line of Credit Grid Note made by Viggle Inc. (“Borrower”) to the order of Sillerman Investment Company II, LLC  (the “Lender”) dated as of February 11, 2013 (as amended from time to time, the “Grid Note”).

 

Under the Grid Note, the Lender is authorized to enter and record on the schedule attached thereto (i) the loan number, (ii) the date of each draw, (iii) the Commitment Amount, (iv) the dollar amount of the draw, (v) the Maturity Date of the draw, (vi) the interest rate, (vii) interest due on Maturity Date, (viii) each payment of any draw and (ix) date of payment, without any further authorization on the part of Borrower.

 

Borrower represents, warrants and certifies to Lender as follows:

 

(b) there does not exist any known deficiency in any of the documents identified in this Funding Memorandum, and Borrower agrees that any deficiencies subsequently discovered will be promptly reported to the Lender;

 

(c) both before and after funding the draw requested hereunder Borrower is not in default, no Event of Default exists, and no Event of Default shall result from the making of the draw requested hereunder;

 

(d) all of the representations and warranties of Borrower contained herein shall be true and correct in all material respects to the same extent as though made on and as of any making of the draw requested hereunder; and

 

(e) after giving effect to the amount of the requested draw, the aggregate amount of outstanding draws under the Facility shall not exceed $25,000,000.

 

Very truly yours,

Viggle Inc.

By: ________________________          

Name: ______________________                                                     

Title: _______________________

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