Document:

EXHIBIT 10.17

 

CERTAIN INFORMATION INDICATED BY
[***] HAS BEEN DELETED FROM THIS EXHIBIT AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT UNDER RULE 24b-2.  

 

COAL TRANSLOADING AGREEMENT

 

THIS COAL TRANSLOADING AGREEMENT
(this “Agreement”) is entered into and made effective as of the 1st
day of June, 2007 (the “Effective Date”), by and between SOUTHERN
MINNESOTA BEET SUGAR COOPERATIVE, a Minnesota cooperative
association (“SMBSC”), and HERON LAKE BIOENERGY, LLC
a Minnesota limited liability company (“HLBE”)(SMBSC and HLBE are also referred
to herein individually as a “Party” and collectively as the “Parties”).

 

RECITALS

 

A.                                   SMBSC
has an existing sugar beet processing plant located in Renville County,
Minnesota which currently utilizes coal as the primary source of energy for the
operation of the plant (the “SMBSC Plant”).

 

B.                                     HLBE
is currently constructing a 50 million gallon per year ethanol product plant in
Jackson County, Minnesota which will utilize approximately 100,000 tons per
year of coal as the primary source of energy for the operation of the Plant
(the “HLBE Plant”).

 

C.                                     The
Parties both intend to purchase their coal from a mine operated by Rio Tinto
Energy America (“RTEA”) in the State of Montana (the “Mine”), pursuant to
separate coal purchase agreements which will be the separate contract and
liability of each Party.

 

D.                                    The
Parties both intend to separately contract for and pay the cost of transporting
their coal from the Mine to Renville County, Minnesota pursuant to separate
coal transportation agreements which will be the separate contract and
liability of each Party.

 

E.                                      The
Parties believe that certain cost savings can be realized by delivering their
separately purchased and transported coal to a single transloading facility in
Renville County, Minnesota to be owned and operated by SMBSC (the “Facility”)
until the coal can be further transferred to the SMBSC Plant and the HLBE
Plant.

 

AGREEMENT

 

NOW THEREFORE, for and in
consideration of the premises, the mutual covenants and promises set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are acknowledged by the Parties, and in reliance upon the
recitals, representations, warranties, covenants, terms and conditions set
forth herein, the Parties agree as follows:

 

 

ARTICLE 1. — TERM

 

1.1                                 Term. The term of this Agreement
(the “Term”) shall commence on the Effective Date and end on May 31, 2012
(the “Expiration Date”).

 

1.2                                 Commencement of Deliveries. Deliveries of coal to the
Facility by HLBE shall commence not earlier than June 15, 2007.

 

ARTICLE 2. - COAL QUANTITY; SOURCE

 

2.1                                 Source of Coal. During the Term of this
Agreement, the Parties shall both source their coal from the Mine operated by
RTEA. Because the coal will be intermingled, the quality of the coal shall meet
the specifications set forth in Exhibit A and the source of the coal may
only be changed by the mutual written agreement of the Parties.

 

2.2                                 Ratable Delivery and Use. HLBE agrees that the quantity
of coal that it will require to be delivered to the Facility is not expected to
exceed 12,500 tons per month, unless otherwise mutually agreed to by SMBSC and
HLBE in order to optimize the use of the dedicated train set and railroad
delivery schedules. HLBE further agrees that its re- loading and removal of
coal from the Facility will be reasonably consistent with HLBE’s average
monthly consumption of coal at the HLBE Plant and that HLBE will not stockpile
coal in quantities that exceed the reasonable storage capacity of the Facility,
as determined by SMBSC, which is expected to be sufficient to accommodate
HLBE’s requirements.

 

ARTICLE 3. - SMBSC OBLIGATIONS

 

3.1                                 General Duties. During the Term of this
Agreement, SMBSC will:

 

3.1.1                        Provide sufficient personnel and
equipment to properly man and operate the Facility in accordance herewith;

 

3.1.2                        Unload railcars and store the
coal in accordance with sound and customary practice in the industry;

 

3.1.3                        Operate the Facility so that
each unit train is unloaded during the allowable free time, unless exempted by
Force Majeure;

 

3.1.4                        Operate the Facility so that
HLBE may pick up its coal at the Facility within reasonable business hours
established by SMBSC;

 

3.1.5                        SMBSC shall exclusively
coordinate, schedule, and direct movement of all railcars to the Facility; and

 

3.1.6                        Maintain insurance on the
Facility and on coal owned by SMBSC.

 

3.2                                 Limits of Liability. Notwithstanding any other
provisions hereof, SMBSC shall not be liable or deemed in default hereunder
with respect to any of the following matters:

 

2

 

3.2.1                        Any operating or other problems,
delays, costs or expenses incurred by HLBE due to Force Majeure;

 

3.2.2                        Any deliveries of coal by HLBE
to the Facility that are not in compliance with Section 3.1.5;

 

3.2.3                        Any loss, cost, expense or
damage arising out of or attributable to operational requests or directives of
HLBE or of any railroad serving the Facility other than as contemplated hereby;

 

3.2.4                        Any loss, cost, expense or
damage to any property of HLBE except (i) to the extent such loss, cost,
expense or damage is covered by insurance obtained by SMBSC, and (ii) those
matters as to which SMBSC has indemnified HLBE pursuant to Section 9.3
hereof;

 

3.2.5                        Any incidental, punitive,
exemplary, business interruption, special or consequential damages, including
lost profits, of any nature whatsoever, whether in tort or in contract,
incurred by HLBE or any other person or entity;

 

3.2.6                        Inventory losses due to acts of
God;

 

3.2.7                        Any damage to any railcar owned
or leased by HLBE while at the Facility unless such damage is the result of the
gross negligence of SMBSC or its employees; and

 

3.2.8                        Demurrage, delay charges, or any
consequential costs associated with transportation delays.

 

ARTICLE 4. — HLBE OBLIGATIONS

 

4.1                                 General Duties. During the Term of this
Agreement, HLBE will cooperate with SMBSC in the performance of its duties
under this Agreement, and in any event shall:

 

4.1.1                        On a monthly basis, provide
SMBSC with a rolling estimate of HLBE’s anticipated use of coal for the ensuing
90 days;

 

4.1.2                        Make the payments in the manner
required by Article 6.2 hereof;

 

4.1.3                        Re-load and remove coal from the
Facility as provided for in Section 2.2;

 

4.1.4                        Not store any vehicles, trucks,
or equipment at the Facility that pose a safety hazard or which interfere with
the reasonable operation of the Facility;

 

4.1.5                        Maintain insurance on any coal
owned by HLBE that is stored at the Facility; and

 

4.1.6                        Provide certified weights of
each train of coal delivered to the Facility.

 

3

 

ARTICLE 5. - QUANTITIES AND SHRINK

 

5.1                                 Quantities. The volume of product sold to
HLBE by RTEA shall be determined by an official copy of the bill of lading
and/or the mine manifest (“Shipping Documents”) for each unit train or partial
unit train shipped by RTEA for the account of HLBE. HLBE agrees to instruct
RTEA to supply SMBSC with a copy of all Shipping Documents necessary to verify
the quantity of coal shipped to the Facility on behalf of HLBE, subject to the
redaction of pricing information as deemed necessary by HLBE.

 

5.2                                 Shrink. In order to account for
shrinkage, the amount of coal that HLBE shall be entitled to remove from the
Facility shall be reduced by a quantity equal to one percent (1%) of the total
quantity of HLBE’s coal listed on the Shipping Documents for each unit train.

 

ARTICLE 6. — PAYMENT; FEES

 

6.1                                 Fees. HLBE shall pay SMBSC a
handling fee of [***] for each net ton (2,000 pounds) of coal that is re-loaded
by HLBE at the Facility. For the purpose of calculating the handling fee, all
weights shall be as determined by the scale at the Facility.

 

6.2                                 Invoices; Payments. Not later than the 10th
Day of each Month commencing in July 2007, SMBSC shall deliver to HLBE an
invoice for coal picked up by HLBE the previous month. HLBE shall remit payment
to SMBSC not later than 10 calendar days after the date of each Invoice.
Payment of any invoice without providing a written notice of dispute as
provided for in this Section shall be deemed final payment and a waiver of
any dispute regarding the services provided pursuant to the invoice. In the
event of a dispute regarding any amounts shown on any Invoice that the Parties
have been unable to resolve by the date payment is due, the Party challenging
any such amounts shall pay all undisputed amounts when due. Such payment of all
undisputed amounts shall be accompanied by a statement setting forth in
reasonable detail all amounts disputed, the reason for the dispute, and a
request for any additional documentation believed to be necessary to support
the disputed amounts or to resolve the dispute. If the Parties are thereafter
unable to resolve the dispute either through the exchange of additional
documentation or good faith business negotiations prior to the due date for
payment of the next Invoice, either Party may submit the matter to arbitration
in accordance with Section 10.1

 

6.3                                 Interest on Late Payments. Late payments shall bear
interest from the date past due until paid at the rate of 18% per annum.

 

ARTICLE 7. -DEFAULT; REMEDIES

 

7.1                                 Event of Default. An “Event of Default” shall
mean any of the actions set forth below in this Section:

 

7.1.1                        The failure by SMBSC to perform
any covenant set forth in this Agreement (other than the events that are
otherwise specifically covered in this Section as a separate Event of
Default), and such failure is not excused by SMBSC’s failure to perform its
obligations under this Agreement or by Force Majeure or cured within 30 Days
after written notice thereof from HLBE;

 

4

 

7.1.2                        Any material adverse change in
the ability of HLBE to perform its obligations under this Agreement;

 

7.1.3                        Failure of the HLBE Plant to transload
[***] tons of coal per year through the facility (each year will begin on June
1st), or

 

7.1.4                        HBLE shall fail to pay any
undisputed invoice within 15 Days after notice of such failure by SMBSC.

 

7.2                                 SMBSC’s Right of Offset Upon an
Event of Default; Liquidated Damages. If, during the Term, HLBE fails to make any undisputed
payment within 15 calendar days of written notice of such failure by SMBSC, or
any disputed payment within 3 business days of any final determination under Section 10.1
hereof: (i) SMBSC shall have the right to offset the value of HLBE’s
unsatisfied obligation against SMBSC’s then remaining obligation to deliver
coal under this Agreement by an amount of tonnage having an equivalent value to
HLBE’s unsatisfied obligation calculated at the rate of $45 per ton of coal;
and (ii) if the amount of HLBE’s unsatisfied obligation cannot be fully
offset in the manner provided in the immediately preceding clause or HLBE
cannot provide reasonable assurances that it can pay for invoices when due,
SMBSC shall have the additional right to terminate this Agreement for cause by
providing written notice to HLBE of such termination (“Early Termination”). In
the event that SMBSC invokes Early Termination, HLBE shall pay to SMBSC, as
liquidated damages and not as a penalty, the sum of $10,000 per month for each
remaining month of the Term. The total amount of such liquidated damages shall
be paid by HLBE to SMBSC within five Business Days of Notice of such amount by
SMBSC.

 

ARTICLE 8. — FORCE MAJEURE

 

8.1                                 Force Majeure. “Force Majeure” shall mean an
event not anticipated as of the Effective Date which is not within the
reasonable control of the Party claiming suspension (the “Claiming Party”), and
which by the exercise of due diligence the Claiming Party is unable to overcome
or to obtain, or cause to be obtained, a commercially reasonable substitute
therefor, and may include, but is not restricted to acts of God; act of public
enemy; war; lightning; fire; violent storm; explosion; civil disturbance;
public riot; labor dispute; environmental catastrophe; inability to obtain
government permits or utility services or similar events or occurrences; labor
or material shortage; sabotage; and action or restraint by public or
governmental authority, and other events which wholly or partially prevent the
mining or transportation of coal purchased by either Party, or the receiving,
unloading, storing, or loading coal purchased by either Party. Force Majeure
shall not include economic hardship or any curtailment in operations of the
SMBSC Plant or the HLBE Plant so as to reduce or eliminate the need for coal.

 

8.2                                 Notice. Any Party affected by Force
Majeure shall give prompt written Notice to the other Party of such condition.
If either Party is prevented, in whole or in part, from performing any of its
obligations due to Force Majeure, such obligations (other than the obligation
to make monetary payments as required under this Agreement) shall be suspended
during the pendency of such Force Majeure. The Claiming Party shall initiate
and continue economically reasonable good faith efforts to remedy any Force
Majeure (except that labor issue resolutions shall be totally within the
discretion of the Claiming Party).

 

5

 

ARTICLE 9. - RISK OF LOSS; INDEMNITY

 

9.1                                 TITLE. TITLE TO THE COAL PURCHASED BY
EACH PARTY AND RISK OF LOSS THEREOF SHALL REMAIN WITH EACH PARTY AT ALL TIMES,
WHETHER OR NOT THE COAL IS LOCATED AT THE FACILTY. EACH PARTY AGREES TO SEPARATELY
INSURE THE RISK OF LOSS TO ITS COAL. HLBE EXPRESSLY ACKNOWLEDGES AND AGREES
THAT SMSBC SHALL ONLY BE LIABLE FOR ANY LOSS TO HLBE’S COAL THAT RESULTS FROM
SMBSC’S GROSS NEGLIGENCE OR INTENTIONAL MISCONDUCT.

 

9.2                                 HLBE’s Indemnification of SMBSC. SMBSC shall not be liable for
and HLBE shall indemnify and hold harmless SMBSC, and its directors, officers,
employees, subcontractors, and agents, from and against any and all claims,
damages, fines, penalties or causes of action and defense thereof arising from or
related to the performance of this Agreement, caused or arising from the act or
omission, whether or not due to fault, of HLBE or resulting from any breach of
this Agreement by HLBE, including as a result of:

 

9.2.1                        Any injury, damages, or loss of
life to any employee or agent of HLBE present at the Facility, including but
not limited to any injury, damages, or loss of life that arise out of the
loading of coal by HLBE at the Facility, unless such injury, damages, or loss
of life is the result of the gross negligence or intentional misconduct of
SMBSC or one of its employees.

 

9.2.2                        All disputes with HLBE’s rail
carrier that do not arise out of the negligence or intentional misconduct of
SMBSC or its employees;

 

9.2.3                        Any delay in the delivery of
HLBE’s coal to the Facility; or

 

9.2.4                        The failure of HLBE’s coal to
meet the Specifications attached hereto as Exhibit A.

 

9.3                                 SMBSC’s Indemnification of HLBE. SMBSC shall indemnify and hold
harmless HLBE and its respective directors, officers, employees, subcontractors,
and agents, from and against any and all Claims, damages, fines, penalties or
causes of action and defense thereof arising from or related to any breach of
this Agreement by SMBSC.

 

ARTICLE 10. — DISPUTE RESOLUTION; ARBITRATION; GOVNERNING LAW

 

10.1                           Arbitration. ANY DISPUTE ARISING OUT OF
THIS AGREEMENT SHALL BE SUBMITTED TO BINDING ARBITRATION PURSUANT TO THE
COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION (THE “AAA”)
WITH THE ARBITRATION HEARING TO BE HELD IN MINNEAPOLIS, MINNESOTA.

 

10.2                           Governing Law. This Agreement and the rights
and duties of the parties hereunder shall be governed by and construed,
enforced and performed in accordance with the laws of the state of Minnesota,
without giving effect to principles of conflicts of laws.

 

6

 

ARTICLE 11. — NOTICES

 

11.1                           All notices, requests, Invoices
or statements required under this Agreement to be in writing (each a “Notice”)
shall be delivered by letter, facsimile or other documentary form. Notice by
facsimile or hand delivery shall be deemed to have been received by the close
of the Business Day on which it was transmitted or hand delivered (unless
transmitted or hand delivered after close in which case it shall be deemed received
at the close of the next Business Day). Notice by overnight mail or courier
shall be deemed to have been received two Business Days after it was sent. A
Party may change its address by providing Notice of same in accordance with
this Article 10. The initial addresses for the Parties to which Notice may
be given are:

 

	
  11.2

  	
  HLBE:

  	
   

  	
  Attn: Board
  President

  
	
   

  	
   

  	
   

  	
  Heron Lake
  BioEnergy, LLC 

  
	
   

  	
   

  	
   

  	
  91246 390th
  Avenue 

  
	
   

  	
   

  	
   

  	
  Heron Lake, MN
  56137-0198

  
	
   

  	
   

  	
   

  	
   

  
	
  11.3

  	
  SMBSC:

  	
   

  	
  Attn: Director of
  Transportation 

  
	
   

  	
   

  	
   

  	
  Southern Minnesota
  Beet Sugar Cooperative 

  
	
   

  	
   

  	
   

  	
  83550 County Road
  21

  
	
   

  	
   

  	
   

  	
  Renville, MN
  56284-0500

  

 

ARTICLE 12. — MISCELLANEOUS

 

12.1                           Entire Agreement. This Agreement, including the
Exhibits hereto, constitutes the entire agreement between the Parties. There
are no prior or contemporaneous agreements or representations affecting the
same subject matter other than those expressly stated in this Agreement. Except
for any matters which, in accordance with the express provisions of this
Agreement, may be resolved by verbal agreement between the Parties, no
amendment, modification or change herein shall be enforceable unless reduced to
writing and executed by both Parties.

 

12.2                           Assignment. Neither party shall sell,
assign or grant a security interest in any of its rights or obligations under
this Agreement without the prior written consent of the other Party, which may
be withheld or granted at the sole discretion of the Party whose consent is
required, provided however, that such consent will not be unreasonably withheld.

 

12.3                           Severability. Except as otherwise stated
herein, any provision or article declared or rendered unlawful by any
applicable court of law or regulatory agency, or deemed unlawful because of a
statutory change, will not otherwise affect the lawful obligations that arise
under this Agreement.

 

12.4                           Captions and Exhibits. The headings used for the
sections and articles herein are for convenience and reference purposes only
and shall in no way affect the meaning or interpretation of the provisions of
this Agreement. Any and all Exhibits referred to in this Agreement are, by such
reference, incorporated herein.

 

7

 

12.5                           Confidentiality. Each Party agrees that the
terms of this Agreement, are intended to be confidential and are not to be
discussed with or disclosed to any third party, except: (i) with the
express prior written consent of the other Party hereto; (ii) as may be
required or appropriate in response to any summons, subpoena, or discovery
order or to comply with any applicable law, order, regulation, or ruling; or (iii) to
the Parties’ affiliates and the directors, employees, advisors, lenders, and
representatives of the Parties and their affiliates solely for the purpose of
evaluating, negotiating, and consummating the transactions contemplated by the
Parties under this Agreement and who agree to maintain the confidentiality
hereof.

 

12.6                           Counterparts. This Agreement may be executed
in separate counterparts, each of which shall constitute one Agreement binding
on the Parties, notwithstanding that both Parties are not signatory to the same
counterpart. This Agreement shall be deemed executed when each Party has
received a copy of the signature page, including any electronically transmitted
facsimile, bearing the signature of the other Party.

 

12.7                           Interpretation. The provisions of this
Agreement have been mutually negotiated by the Parties and should not be
interpreted for or against any Party by reason of the fact that such Party may
have drafted any provision in this Agreement.

 

IN WITNESS WHEREOF, the Parties
have entered into this Agreement as of the Effective Date first set forth
above.

 

	
   

  	
  SOUTHERN MINNESOTA BEET
  SUGAR

  COOPERATIVE

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ J. L Plathe

  
	
   

  	
  Title:

  	
   CFO

  
	
   

  	
  Date:

  	
   May 11, 2007

  
	
   

  	
   

  	
   

  
	
   

  	
  HERON LAKE BIOENERGY,
  LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Robert
  Ferguson

  
	
   

  	
  Title:

  	
   President HLBE

  
	
   

  	
  Date:

  	
   6/1/07

  

 

8

 

Exhibit A

 

SPRING CREEK COAL MINE

2006 QUALITY SPECIFICATIONS

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  TYPICAL

  	
   

  
	
   

  	
   

  	
  TYPICAL

  	
   

  	
  STANDARD

  	
   

  	
  TYPICAL
  95% RANGE

  	
   

  	
  TYPICAL

  	
   

  	
  MOISTURE-ASH
  FREE

  	
   

  
	
  QUALITY PARAMETER

  	
   

  	
  (MEAN VALUE)

  	
   

  	
  DEVIATION

  	
   

  	
  -2 STD DEV

  	
   

  	
  +2 STD DEV

  	
   

  	
  DRY VALUE

  	
   

  	
  VALUE

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PROXIMATE

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  % Moisture

  	
   

  	
  25.40

  	
   

  	
  0.56

  	
   

  	
  24.28

  	
   

  	
  26.52

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  % Ash

  	
   

  	
  4.12

  	
   

  	
  0.33

  	
   

  	
  3.46

  	
   

  	
  4.78

  	
   

  	
  5.52

  	
   

  	
   

  	
   

  
	
  % Volatile

  	
   

  	
  31.26

  	
   

  	
  0.81

  	
   

  	
  29.64

  	
   

  	
  32.88

  	
   

  	
  41.90

  	
   

  	
  44.35

  	
   

  
	
  % Fixed Corbon

  	
   

  	
  39.23

  	
   

  	
  0.80

  	
   

  	
  37.63

  	
   

  	
  40.83

  	
   

  	
  52.59

  	
   

  	
  55.66

  	
   

  
	
  BTU/lb

  	
   

  	
  9338

  	
   

  	
  103

  	
   

  	
  9132

  	
   

  	
  9544

  	
   

  	
  12517

  	
   

  	
  13249

  	
   

  
	
  MAFBTU

  	
   

  	
  13249

  	
   

  	
  80.08

  	
   

  	
  13089

  	
   

  	
  13409

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Dry BTU

  	
   

  	
  12517

  	
   

  	
  93.71

  	
   

  	
  12330

  	
   

  	
  12705

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  % Sulfur

  	
   

  	
  0.34

  	
   

  	
  0.07

  	
   

  	
  0.20

  	
   

  	
  0.48

  	
   

  	
  0.46

  	
   

  	
  0.48

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ULTIMATE

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  % Moisture

  	
   

  	
  25.40

  	
   

  	
  0.56

  	
   

  	
  24.28

  	
   

  	
  26.52

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  %. Carbon

  	
   

  	
  54.14

  	
   

  	
  3.28

  	
   

  	
  47.58

  	
   

  	
  60.70

  	
   

  	
  72.57

  	
   

  	
  70.82

  	
   

  
	
  % Hydrogen

  	
   

  	
  3.80

  	
   

  	
  0.23

  	
   

  	
  3.34

  	
   

  	
  4.26

  	
   

  	
  5.09

  	
   

  	
  5.39

  	
   

  
	
  % Nitrogen

  	
   

  	
  0.71

  	
   

  	
  0.09

  	
   

  	
  0.53

  	
   

  	
  0.89

  	
   

  	
  0.95

  	
   

  	
  1.01

  	
   

  
	
  % Chlorine

  	
   

  	
  0.00

  	
   

  	
  0.01

  	
   

  	
  0.00

  	
   

  	
  0.01

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  
	
  % Sulfur

  	
   

  	
  0.34

  	
   

  	
  0.07

  	
   

  	
  0.20

  	
   

  	
  0.48

  	
   

  	
  0.46

  	
   

  	
  0.48

  	
   

  
	
  % Ash

  	
   

  	
  4.12

  	
   

  	
  0.33

  	
   

  	
  3.46

  	
   

  	
  4.78

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  % Oxygen

  	
   

  	
  11.50

  	
   

  	
  0.70

  	
   

  	
  10.10

  	
   

  	
  12.90

  	
   

  	
  15.42

  	
   

  	
  16.32

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SULFUR FORMS

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pyritic Sulfur  (%)

  	
   

  	
  0.05

  	
   

  	
  0.03

  	
   

  	
  0.00

  	
   

  	
  0.11

  	
   

  	
  0.07

  	
   

  	
  0.07

  	
   

  
	
  Sulfale  Sulfur (%)

  	
   

  	
  0.01

  	
   

  	
  0.015

  	
   

  	
  0.00

  	
   

  	
  0 04

  	
   

  	
  0.01

  	
   

  	
  0.01

  	
   

  
	
  Organic Sulfur (%)

  	
   

  	
  0.28

  	
   

  	
  0.06

  	
   

  	
  0.16

  	
   

  	
  0.40

  	
   

  	
  0.38

  	
   

  	
  0.40

  	
   

  
	
  Total Sulfur (%)

  	
   

  	
  0.34

  	
   

  	
  0.07

  	
   

  	
  0.20

  	
   

  	
  0.48

  	
   

  	
  0.46

  	
   

  	
  0.48

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  MINERAL
  ANALYSIS OF ASH

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  % Silicon Dioxide
  (Silica, SiO2)

  	
   

  	
  32.52

  	
   

  	
  2.78

  	
   

  	
  26.98

  	
   

  	
  38.08

  	
   

  	
  43.59

  	
   

  	
  46.14

  	
   

  
	
  % Aluminium Oxide
  (Alumina, Al2O3)

  	
   

  	
  17.69

  	
   

  	
  1.09

  	
   

  	
  15.51

  	
   

  	
  19.87

  	
   

  	
  23.71

  	
   

  	
  25.10

  	
   

  
	
  % Titanium Dioxide
  (Titania, TiO2)

  	
   

  	
  1.13

  	
   

  	
  0.10

  	
   

  	
  0.93

  	
   

  	
  1.33

  	
   

  	
  1.51

  	
   

  	
  1.60

  	
   

  
	
  % Iron oxide
  (Ferric Oxide. Fe2O3)

  	
   

  	
  4.76

  	
   

  	
  0.47

  	
   

  	
  3.82

  	
   

  	
  5.70

  	
   

  	
  6.38

  	
   

  	
  6.75

  	
   

  
	
  % Calcium Oxide (Lime,
  CaO)

  	
   

  	
  15.36

  	
   

  	
  1.41

  	
   

  	
  12.54

  	
   

  	
  18.18

  	
   

  	
  20.59

  	
   

  	
  21.79

  	
   

  
	
  % Magnesium Oxide
  (Magnesia, MgO)

  	
   

  	
  3.69

  	
   

  	
  0.85

  	
   

  	
  1.99

  	
   

  	
  5.39

  	
   

  	
  4.95

  	
   

  	
  5.24

  	
   

  
	
  % Potassium Oxide
  (K2O)

  	
   

  	
  0.63

  	
   

  	
  0.14

  	
   

  	
  0.35

  	
   

  	
  0.91

  	
   

  	
  0.84

  	
   

  	
  0.89

  	
   

  
	
  % Sodium Oxide
  (Na2O)

  	
   

  	
  8.24

  	
   

  	
  1.00

  	
   

  	
  6.24

  	
   

  	
  10.24

  	
   

  	
  11.05

  	
   

  	
  11.69

  	
   

  
	
  %  Sulfur Trioxide (SO3)

  	
   

  	
  14.07

  	
   

  	
  2.50

  	
   

  	
  9.07

  	
   

  	
  19.07

  	
   

  	
  18.86

  	
   

  	
  19.96

  	
   

  
	
  % Phosphorous
  Pentoxide (P2O5)

  	
   

  	
  0.35

  	
   

  	
  0.06

  	
   

  	
  0.23

  	
   

  	
  0.47

  	
   

  	
  0.47

  	
   

  	
  0.50

  	
   

  
	
  % Strontium Oxide
  (SrO)

  	
   

  	
  0.37

  	
   

  	
  0.22

  	
   

  	
  0.00

  	
   

  	
  0.81

  	
   

  	
  0.50

  	
   

  	
  0.52

  	
   

  
	
  % Barium Oxide
  (BaO)

  	
   

  	
  1.19

  	
   

  	
  0.31

  	
   

  	
  0.57

  	
   

  	
  1.81

  	
   

  	
  1.60

  	
   

  	
  1.69

  	
   

  
	
  % Undetermined

  	
   

  	
  0.00

  	
   

  	
  1.00

  	
   

  	
  0.00

  	
   

  	
  2.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  
	
  Base/Acid Ratio

  	
   

  	
  0.64

  	
   

  	
  0.08

  	
   

  	
  0.48

  	
   

  	
  0.80

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Base Value

  	
   

  	
  32.68

  	
   

  	
  2.20

  	
   

  	
  28.28

  	
   

  	
  37.08

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Acid Varue

  	
   

  	
  51.34

  	
   

  	
  3.00

  	
   

  	
  45.34

  	
   

  	
  57.34

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ASH
  FUSION TEMPERATURES

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Reducing (°F)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Initial

  	
   

  	
  2106

  	
   

  	
  37

  	
   

  	
  2031

  	
   

  	
  2181

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Softening (H=W)

  	
   

  	
  2129

  	
   

  	
  36

  	
   

  	
  2056

  	
   

  	
  2202

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Hemispherical
  (H=1/2W)

  	
   

  	
  2141

  	
   

  	
  39

  	
   

  	
  2062

  	
   

  	
  2220

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Fluid

  	
   

  	
  2164

  	
   

  	
  51

  	
   

  	
  2062

  	
   

  	
  2266

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Fluid-Initial
  Temp. Difference

  	
   

  	
  58

  	
   

  	
  40

  	
   

  	
  0

  	
   

  	
  138

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Oxidizing
  (°F)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Initial

  	
   

  	
  2351

  	
   

  	
  98

  	
   

  	
  2156

  	
   

  	
  2546

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Softening (H=W)

  	
   

  	
  2366

  	
   

  	
  81

  	
   

  	
  2204

  	
   

  	
  2528

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Hemispherical
  (H=1/2W)

  	
   

  	
  2391

  	
   

  	
  73

  	
   

  	
  2245

  	
   

  	
  2537

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Fluid

  	
   

  	
  2423

  	
   

  	
  77

  	
   

  	
  2268

  	
   

  	
  2578

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Fluid-Initial
  Temp. Difference

  	
   

  	
  72

  	
   

  	
  60

  	
   

  	
  0

  	
   

  	
  192

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

9

 

 

	
   

  	
   

  	
  TYPICAL

  	
   

  	
  STANDARD

  	
   

  	
  TYPICAL 95% RANGE

  	
   

  
	
  QUALITY PARAMETER 

  	
   

  	
  (MEAN VALUE)

  	
   

  	
  DEVIATION

  	
   

  	
  -2 STD DEV

  	
   

  	
  +2 STD DEV

  	
   

  
	
  ADDITIONAL ANALYSES AND CALCULATED

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  VALUES

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  T250 Temperature
  (°F)

  	
   

  	
  2153

  	
   

  	
  91.88

  	
   

  	
  1969

  	
   

  	
  2337

  	
   

  
	
  HGI (at
  as-received moisture)

  	
   

  	
  60.6

  	
   

  	
  5.6

  	
   

  	
  49

  	
   

  	
  72

  	
   

  
	
  HGI % Moisture

  	
   

  	
  24.13

  	
   

  	
  3.88

  	
   

  	
  16

  	
   

  	
  32

  	
   

  
	
  Critical
  Viscosity Temperature (°F)

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  
	
  Critical
  Viscosity (Poises)

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  
	
  % Equilibrium
  Moisture

  	
   

  	
  23.93

  	
   

  	
  0.56

  	
   

  	
  22.81

  	
   

  	
  25.05

  	
   

  
	
  Specific Gravity

  	
   

  	
  1.10

  	
   

  	
  0.015

  	
   

  	
  1.07

  	
   

  	
  1.13

  	
   

  
	
  %Alkalies NA2O
  Dry (Total Alkali Content on Coal)

  	
   

  	
  0.478

  	
   

  	
  0.070

  	
   

  	
  0.34

  	
   

  	
  0.62

  	
   

  
	
  %Water Soluble
  Alk - Na2O

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  
	
  %Water Soluble
  Alk - K2O

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  
	
  %Na2O Dry Coal

  	
   

  	
  0.46

  	
   

  	
  0.03

  	
   

  	
  0.40

  	
   

  	
  0.52

  	
   

  
	
  %Na2O
  As-received Coal

  	
   

  	
  0.34

  	
   

  	
  0.02

  	
   

  	
  0.30

  	
   

  	
  0.38

  	
   

  
	
  Silica Value
  (Silica Ratio)

  	
   

  	
  57.73

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Slag Factor

  	
   

  	
  0.28

  	
   

  	
  0.14

  	
   

  	
  0.00

  	
   

  	
  0.56

  	
   

  
	
  Slag factor per
  Fusion Temperature

  	
   

  	
  2163

  	
   

  	
  85

  	
   

  	
  1993

  	
   

  	
  2333

  	
   

  
	
  Dolomite Ratio

  	
   

  	
  58.29

  	
   

  	
  3.25

  	
   

  	
  51.79

  	
   

  	
  64.79

  	
   

  
	
  Ash
  Precipitation Index

  	
   

  	
  3.97

  	
   

  	
  10.1

  	
   

  	
  0.00

  	
   

  	
  24.17

  	
   

  
	
  Silica to
  Alumina Ratio

  	
   

  	
  1.84

  	
   

  	
  0.14

  	
   

  	
  1.56

  	
   

  	
  2.12

  	
   

  
	
  Calcium to
  Silica Ratio

  	
   

  	
  0.47

  	
   

  	
  0.34

  	
   

  	
  0.00

  	
   

  	
  1.15

  	
   

  
	
  Iron to Calcium
  Ratio

  	
   

  	
  0.31

  	
   

  	
  0.07

  	
   

  	
  0.17

  	
   

  	
  0.45

  	
   

  
	
  Fouling Factor
  (Fouling Index)

  	
   

  	
  5.25

  	
   

  	
  1.41

  	
   

  	
  2.43

  	
   

  	
  8.07

  	
   

  
	
  SO2/MMBTU

  	
   

  	
  0.73

  	
   

  	
  0.075

  	
   

  	
  0.58

  	
   

  	
  0.88

  	
   

  
	
  Ibs S/MMBTU

  	
   

  	
  0.36

  	
   

  	
  0.075

  	
   

  	
  0.21

  	
   

  	
  0.51

  	
   

  
	
  Ibs Sodium/MMBTU

  	
   

  	
  0.364

  	
   

  	
  0.023

  	
   

  	
  0.32

  	
   

  	
  0.41

  	
   

  
	
  Ibs Ash/MMBTU

  	
   

  	
  4.41

  	
   

  	
  0.5

  	
   

  	
  3.41

  	
   

  	
  5.41

  	
   

  

 

TYPICAL COAL SIZE                          2
inch

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Cumulative

  	
   

  	
  Wt. Percent

  	
   

  
	
  Size Fraction

  	
   

  	
  Wt. Percent

  	
   

  	
   

  	
   

  	
  Wt. Percent

  	
   

  	
  Passing Top

  	
   

  
	
  +3” RD.

  	
   

  	
  0

  	
  %

  	
   

  	
   

  	
  0

  	
  %

  	
  100

  	
  %

  
	
  3” RD. x 2” RD.

  	
   

  	
  4

  	
  %

  	
   

  	
   

  	
  4

  	
  %

  	
  100

  	
  %

  
	
  2” RD. x 1” RD.

  	
   

  	
  20

  	
  %

  	
   

  	
   

  	
  24

  	
  %

  	
  96

  	
  %

  
	
  1” RD. x 1/2”
  RD.

  	
   

  	
  28

  	
  %

  	
   

  	
   

  	
  52

  	
  %

  	
  76

  	
  %

  
	
  1/2” RD. x 4 M

  	
   

  	
  20

  	
  %

  	
   

  	
   

  	
  71

  	
  %

  	
  48

  	
  %

  
	
  4 M x 60 M

  	
   

  	
  13

  	
  %

  	
   

  	
   

  	
  84

  	
  %

  	
  29

  	
  %

  
	
  60 M x 0

  	
   

  	
  16

  	
  %

  	
   

  	
   

  	
  100

  	
  %

  	
  16

  	
  %

  

 

TRACE ELEMENT SUMMARY

 

	
  Parts Per Million

  	
   

  	
  TYPICAL

  	
   

  	
  STANDARD

  	
   

  	
  TYPICAL 95% RANGE

  	
   

  
	
  Whole Coal, Dry Basis

  	
   

  	
  (MEAN VALUE)

  	
   

  	
  DEVIATION

  	
   

  	
  -2 STD DEV

  	
   

  	
  +2 STD DEV

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ANTIMONY (Sb)

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  
	
  ARSENIC (As)

  	
   

  	
  1.50

  	
   

  	
  1.00

  	
   

  	
  0.00

  	
   

  	
  3.50

  	
   

  
	
  BARIUM (Ba)

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  
	
  BERYLLIUM (Be)

  	
   

  	
  0.21

  	
   

  	
  0.08

  	
   

  	
  0.06

  	
   

  	
  0.36

  	
   

  
	
  BORON (B)

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  
	
  BROMIDE (Br)

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  
	
  CADMIUM (Cd)

  	
   

  	
  0.18

  	
   

  	
  0.02

  	
   

  	
  0.14

  	
   

  	
  0.22

  	
   

  
	
  CHLORINE (Cl)

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  
	
  CHROMIUM (Cr)

  	
   

  	
  2.40

  	
   

  	
  0.75

  	
   

  	
  0.90

  	
   

  	
  3.90

  	
   

  
	
  COBALT (Co)

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  
	
  COPPER (Cu)

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  
	
  FLUORINE (F)

  	
   

  	
  41.90

  	
   

  	
  11.00

  	
   

  	
  19.90

  	
   

  	
  63.90

  	
   

  
	
  LITHIUM (Li)

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  
	
  MANGANESE Mn)

  	
   

  	
  16.20

  	
   

  	
  7.90

  	
   

  	
  0.40

  	
   

  	
  32.00

  	
   

  
	
  MERCURY (Hg)

  	
   

  	
  0.07

  	
   

  	
  0.03

  	
   

  	
  0.01

  	
   

  	
  0.13

  	
   

  
	
  MOLYBDNEUM (Mo)

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  
	
  NICKEL (Ni)

  	
   

  	
  1.53

  	
   

  	
  1.00

  	
   

  	
  0.00

  	
   

  	
  3.53

  	
   

  
	
  LEAD (Pb)

  	
   

  	
  2.60

  	
   

  	
  1.00

  	
   

  	
  0.60

  	
   

  	
  4.60

  	
   

  
	
  SELENUIM (Se)

  	
   

  	
  1.20

  	
   

  	
  0.90

  	
   

  	
  0.00

  	
   

  	
  3.00

  	
   

  
	
  SILVER (Ag)

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  
	
  STRONTIUM (Sr)

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  
	
  THALLIUM (Tl)

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  
	
  THORIUM (Th)

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  
	
  TIN (Sn)

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  
	
  URANIUM (U)

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  
	
  VANADIUM (V)

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  
	
  ZIRCONIUM (Zr)

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  
	
  ZINC (Zn)

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  

 

* All negative numbers were converted to 0.00

 

10EXHIBIT 10.18

 

CERTAIN INFORMATION INDICATED BY [***] HAS BEEN DELETED FROM THIS
EXHIBIT AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT UNDER RULE 24b-2.

 

 

Master Coal Purchase and Sale Agreement 

 

between 

Northern Coal Transportation Company 

and 

Heron Lake BioEnergy, LLC

 

 

	
   

  	
  Master Coal
  Purchase and Sale Agreement Index

  
	
   

  	
   

  
	
  Article 1.

  	
  General Terms and
  Definitions

  
	
   

  	
   

  
	
  Article 2.

  	
  Term

  
	
   

  	
   

  
	
  Article 3.

  	
  Quantity

  
	
   

  	
   

  
	
  Article 4.

  	
  Delivery and Transportation

  
	
   

  	
   

  
	
  Article 5.

  	
  Coal Quality
  Specifications

  
	
   

  	
   

  
	
  Article 6.

  	
  Sampling and Analysis

  
	
   

  	
   

  
	
  Article 7.

  	
  Weighing

  
	
   

  	
   

  
	
  Article 8.

  	
  Price and Price
  Adjustments

  
	
   

  	
   

  
	
  Article 9.

  	
  Invoices, Payments,
  Netting, Set off, and Credit Ratings

  
	
   

  	
   

  
	
  Article 10.

  	
  Force Majeure

  
	
   

  	
   

  
	
  Article 11.

  	
  Records, Audits, Access

  
	
   

  	
   

  
	
  Article 12.

  	
  Default, Remedies, and
  Termination

  
	
   

  	
   

  
	
  Article 13.

  	
  Notices

  
	
   

  	
   

  
	
  Article 14.

  	
  Cooperation

  
	
   

  	
   

  
	
  Article 15.

  	
  Warranty, Limitation on
  Liability, Duty to Mitigate & Indemnification

  
	
   

  	
   

  
	
  Article 16.

  	
  Limitation on Waiver

  
	
   

  	
   

  
	
  Article 17.

  	
  Confidentiality

  
	
   

  	
   

  
	
  Article 18.

  	
  Entirety, Amendments

  
	
   

  	
   

  
	
  Article 19.

  	
  Successors and Assigns

  
	
   

  	
   

  
	
  Article 20.

  	
  Governing Laws

  
	
   

  	
   

  
	
  Article 21.

  	
  Interpretation

  
	
   

  	
   

  
	
  Article 22.

  	
  Survival

  

 

2

 

MASTER COAL PURCHASE AND SALE AGREEMENT

 

This MASTER COAL PURCHASE AND SALE AGREEMENT
(“Agreement”) is entered into and is effective as of the 1” day of June, 2007,
between Northern Coal Transportation Company, (“NCTC”), Seller and Heron Lake BioEnergy,
LLC, (“Heron Lake”), Buyer. Both NCTC and Heron Lake may be individually
referred to herein as a “Party” or collectively as “Parties”.

 

RECITALS

 

WHEREAS, each Party is engaged in the sale and/or purchase of Powder
River Basin (“PRB”) Coal or other Coal. The Parties believe it will be mutually
beneficial to set the terms and conditions under which such Coal sales and
purchases may be made between them.

 

IN CONSIDERATION of the mutual covenants and promises set forth
hereafter, the Parties to this Agreement, intending to legally bind themselves,
agree now as follows:

 

ARTICLE I.

GENERAL TERMS AND DEFINITIONS

 

1.01                        The terms of this Agreement shall govern all purchases and
sales of Coal between the Parties (hereinafter “Transactions”) or options thereon
during the term of this Agreement unless the Parties expressly indicate
otherwise. All amendments, modifications, revisions and changes to this
Agreement or any related Transaction or option must be in writing and signed by
both Parties. If the Parties enter into an option concerning the purchase
and/or sale of Coal, the terms and conditions of this Agreement and the
Confirmation Letter shall govern the Transaction once the option has been
exercised.

 

1.02                        For individual Transactions, the Parties shall enter into a
written Confirmation Letter (hereinafter “Confirmation”) that sets forth and
defines the following: the Buyer, the Seller, the price, price adjustments,
quantity, term, quality specifications, mine(s), and any other
Transaction-specific provisions mutually agreed upon by the Parties. All
Confirmations shall be in writing, signed by both Parties. The Parties intend
the provisions of each individual Confirmation and the provisions of this
Agreement be construed as one single integrated agreement and that without a
written Confirmation the Parties would not otherwise enter into a Transaction.
Any inconsistency or conflict between provisions of the individual Confirmation
and provisions of this Agreement shall be resolved in favor of any provisions
of the Confirmation.

 

1.03                        Each of the following terms when used in this Agreement will
have the meaning given to it in this section:

 

a)                                      “Actual Btu”
means the monthly ton-weighted average as-received calorific value (stated in
Btu/lb.).

 

b)                                      “Buyer”
means the Party to a Transaction who is obligated to purchase and receive Coal,
or causes Coal to be received.

 

3

 

c)                                      “Claim”
means all claims or actions threatened or filed that directly or indirectly
relate to the subject matter of this Agreement, including but not limited to
indemnity, the resulting losses, damages, expenses, reasonable attorneys’ fees
and costs.

 

d)                                      “Coal” means
any and all Coal to be sold by Seller and purchased by Buyer pursuant to the
terms and conditions of this Agreement.

 

e)                                      “Electronic”
means faxes, telegraphs, emails, and all other forms of electronic data
transfer.

 

f)                                        “Standard Btu” means the standard calorific value as set forth in a
Confirmation (stated in Btu/lb.) and is the basis for a price adjustment as
described in Section 9.03.

 

g)                                     “Seller”
means the Party to a Transaction who is obligated to sell and deliver Coal or
causes Coal to be delivered.

 

h)                                     “Ton”
means 2,000 pounds avoirdupois.

 

i)                                        “Loading Provisions” means the terms and conditions of Buyer’s transportation
contracts or excerpts thereof that Seller has reviewed and approved. The
Loading Provisions are further described in Section 4.04 and attached as Exhibit A.

 

ARTICLE II.

TERM

 

2.01                        This Agreement shall begin on the date first set forth above
and shall continue in effect until terminated by either Party upon sixty (60)
days written notice to the other Party, which right of termination shall be
each Party’s absolute right to exercise. Termination of this Agreement under
this Article shall not affect either Party’s rights and obligations with
respect to any Transactions that have been agreed to in writing in a
Confirmation prior to termination.

 

ARTICLE III.

QUANTITY

 

3.01                        Buyer shall be obligated to purchase and pay for, and Seller
shall be obligated to sell and tender for delivery, the amount of Coal agreed
to in a Confirmation, except as may be limited by Article 10 of this
Agreement.

 

ARTICLE IV.

DELIVERY AND TRANSPORTATION

 

4.01                        For each Transaction, Seller agrees to tender to Buyer and
Buyer agrees to accept from Seller the quantity of Coal as provided in the
relevant Confirmation. Seller shall tender the Coal to Buyer in accordance with
reasonable monthly delivery schedules to be submitted by Buyer in accordance with
the Agreement and the Confirmation. Schedules 

 

4

 

shall be based on a ratable monthly
basis unless otherwise agreed to by both Parties. In addition, Buyer shall
provide Seller with annual schedules. If the Seller objects to a schedule
submitted by Buyer, Seller shall notify Buyer of its objections within fifteen
(15) days of Seller’s receipt of such schedule and the Parties shall work
together in good faith to agree on a reasonable and mutually acceptable schedule.
The mine(s) used to source the Coal supplied under this Agreement shall be
any mine set forth in the Confirmation.

 

ARTICLE V.

COAL QUALITY SPECIFICATIONS; TITLE & RISK OF LOSS

 

If the Parties set forth coal quality specifications in a Confirmation,
the following Sections shall apply with respect to those specifications.

 

5.01                        At the Delivery Point, all tendered Coal shall be raw,
substantially free of magnetic material and other foreign material impurities,
and crushed to a maximum size as set forth in the Confirmation as determined in
accordance with applicable American Society of Testing and Materials (ASTM)
standards.

 

5.02                        If any Shipment of Coal triggers any of the Rejection Limits
specified in the Confirmation for a Transaction (a “Non-Conforming Shipment”),
Buyer shall have the option, within twenty-four (24) hours of Buyer’s receipt
of the quality analysis of the Coal, of either (i) rejecting such
Non-Conforming Shipment prior to unloading the Coal, or, (ii) accepting
the Non-Conforming Shipment and in addition to any quality adjustments outlined
in the Confirmation, reducing the price of Coal for such trainload by $0.50 per
ton. If Buyer fails to timely exercise its rejection rights under this Section as
to a Shipment, Buyer shall be deemed to have waived such rights to reject with
respect to that Shipment only. Buyer’s failure to timely exercise such notice
does not constitute a waiver of its right to any penalty adjustment provided
for herein or in the relevant Confirmation. If Buyer timely rejects the
Non-Conforming Shipment, Seller shall be responsible for promptly transporting
the rejected Coal to an alternative destination determined by Seller and, if
applicable, promptly unloading such Coal. Seller shall reimburse Buyer for all
reasonable costs and expenses associated with the transportation, storage,
handling and removal of the Non-Conforming Shipment. Buyer shall cooperate with
Seller in minimizing Seller’s cost of redirecting the rejected Coal. Seller
shall replace the rejected coal within a reasonable period of time

 

5.03                        The Parties recognize during the performance of a
Transaction, legislative, regulatory bodies or the courts may adopt
environmental laws, rules, and regulations that will make it impossible or
commercially impracticable for Buyer to utilize Coal purchased under this
Agreement. If, as a result of the adoption of such laws, rules, and regulations
or changes in the interpretation or enforcement thereof, Buyer, in good faith,
decides it will be impossible or commercially impracticable for Buyer to
utilize such Coal, Buyer shall promptly notify Seller in writing. After
receiving such notification, Buyer and Seller shall promptly consider whether
corrective actions can be taken in the mining and preparation of the Coal, in the
operation of Buyer’s generating station, or in Seller’s substituting different
source Coal. If in the Parties’ reasonable judgment such actions will make it 

 

5

 

impossible and commercially
impracticable for Buyer to utilize tendered Coal without violating any
applicable law, regulation, policy, or order, Buyer shall have the right, upon
sixty (60) days notice to Seller, to terminate the Transaction without further
obligation on the part of either Party. Termination shall be the sole remedy of
Buyer and Seller under this section.

 

5.04                        If during the term of this Agreement, Buyer is unable to
handle or burn the coal supplied by Seller satisfactorily, even though the coal
complies with all quality specifications set forth in this Agreement and
applicable Confirmation, and provided that Buyer’s inability to handle or burn
the coal supplied satisfactorily is not caused by any act, omission or fault
attributable to Buyer, then Buyer shall have the following rights if Buyer
provides written notice to Seller promptly upon discovering the unsatisfactory
combustion or handling condition.

 

a)                                      Upon receipt of Buyer’s notice, Buyer and Seller shall meet
as soon as possible in order to determine if Seller’s coal can continue to be
utilized by Buyer. Buyer and Seller shall consult with each other in a good
faith attempt to determine a mutually acceptable solution to the problem, which
solution may include, without limitation, Seller providing alternate sourced
coal or modifications to Buyer’s facilities and/or the operating procedures
required in order to burn Seller’s coal satisfactorily, provided such
modifications and/or operating procedures are physically and economically
reasonable for Buyer to undertake, in Buyer’s sole judgment.

 

b)                                      In the event Buyer and Seller do not reach a mutually
acceptable solution to the problem within sixty (60) days after receipt of
Buyer’s notice, Buyer shall have the right to terminate this Agreement upon
written notice to Seller. Upon termination of this Agreement pursuant to this Section 5.03,
neither Buyer nor Seller shall have any further obligation or liability to each
other under this Agreement, except for Buyer’s obligation to pay for prior
shipments of coal.

 

5.05                        Title to the Coal and all risk of loss shall pass to Buyer
upon unloading all railcars in each unit train at the Delivery Point

 

ARTICLE VI.

SAMPLING AND ANALYSIS

 

6.01                        Seller shall cause, at its expense, the Coal in each unit
train to be sampled and analyzed at the individual mine in accordance with
applicable ASTM standards. Buyer shall have the right, at its own risk and
expense, to have a representative present at any and all times to observe
sampling and analysis procedures. All samples shall be divided into three (3) parts
and put in suitable airtight containers. One part shall be furnished to Buyer
or its designee upon request for its analysis, one part shall be retained for
analysis by Seller or its designee (which analysis shall be the basis for
payment), and the third part shall be retained by Seller or its designee in one
of the aforesaid containers properly sealed and labeled for a period thirty
(30) days after the date of sample collection.

 

6

 

6.02                        In the event a dispute arises between Buyer and Seller
within thirty (30) days of Seller’s analysis due to a difference between Buyer
and Seller’s short proximate analyses of a sample that exceeds the ASTM
interlab repeatability limits, an independent testing laboratory, mutually
agreeable to Buyer and Seller, will be retained to analyze the third part of
such sample. The Party whose calorific value analysis and/or sulfur analysis is
closest to the independent analysis shall prevail and such Party’s calorific
value analysis and/or sulfur analysis shall govern for the trainload in
question. In such case, the cost of the analysis made by such independent
testing laboratory will be borne by the Party whose calorific value analysis
and/or sulfur analysis is furthest from the independent analysis and therefore,
not used. In the event both Parties’ calorific value analyses and/or sulfur
analyses differ from the independent testing laboratory’s result by the same
amount, the independent testing laboratory’s result shall govern for the
trainload in question and the Parties shall share equally the cost of the
independent testing.

 

ARTICLE VII.

WEIGHING

 

7.01                        Certified commercial scales at Seller’s train loading
facility at each individual mine will determine weights. Scales shall be calibrated
and tested as customary in industry practice with copies of calibration and
testing reports provided to Buyer upon request. If Seller’s scales are not
available to determine the valid net weight of all of the railcars in a unit
train but valid weights are obtained for thirty (30) or more railcars in such
train, the arithmetic average of all of the valid net weights of the thirty or
more railcars in such train shall be used as the net weight for each railcar in
such train for which a valid net weight was not determined by Seller’s scales. If
Seller’s scales are inoperative or fail to determine the valid net weight of at
least thirty (30) railcars in a unit train, the weighted arithmetic average of
the net railcar weights of the previous ten (10) unit trainloads of Coal
shipped to Buyer shall be used as the net weight for each of the unweighed
railcars in such train. The calculation of the weighted arithmetic average net
weight for the previous ten (10) unit trainloads shall exclude all
bad-order railcars, which were not loaded, and any trainload of Coal for which
the net weights were estimated on thirty (30) or more railcars. The Buyer shall
be notified electronically immediately after the above instance occurs.

 

ARTICLE VIII.

PRICE AND PRICE ADJUSTMENTS

 

8.01                        For all Coal delivered under this Agreement, Buyer shall pay
Seller the base price as set forth in the Confirmation.

 

8.02                        Seller shall be solely responsible for all assessments,
fees, costs, expenses, and taxes relating to the mining, production, sale, use,
loading and tender of Coal to Buyer or in any way accruing or levied prior to
transfer of title to the Coal to Buyer and including, without limitation,
severance taxes, royalties, ad valorem, black lung fees; reclamation fees and
other costs, charges and liabilities. The base price Includes reimbursement to
Seller of all environmental, land restoration and regulatory costs, including
without limitation any reclamation costs required under applicable federal,
state or local law as of 

 

7

 

the date of the Transaction. Buyer
shall be responsible for any sales and/or use tax unless Buyer provides Seller
an appropriate exemption certificate or similar document. The base price shall
be subject to adjustments for changes in existing laws and regulations
(including changes in levies and rates), or new laws or regulations, or changes
in interpretations thereof enacted and in force during the term of sale set
forth in the Confirmation that change Seller’s costs of producing Coal for
delivery pursuant to any Confirmation. Notwithstanding the above, no price
adjustment will occur under this Section until the cumulative effect of
all such changes equals or exceeds $0.05 per ton for any calendar year under a
Transaction. Seller shall use commercially reasonable best efforts to inform
Buyer of any such change as soon as Seller becomes aware of such change and its
effect on the base price of Coal hereunder.

 

8.03                        The base price may also include an adjustment based upon the
calorific value, sulfur content or other qualities of the Coal as the Parties
may mutually agree upon and as set forth in the Confirmation.

 

8.04                        In the event either the railroads or Buyer requires Seller
to put additives in coal, including, without limitation, any dust control
additives, treatments or processes, Seller may invoice Buyer at the reasonable
costs of providing such services, which shall include but not be limited to,
chemical costs, water costs, chemical application, application equipment maintenance
and any royalties payable on the additive application. Any additives used shall
be selected by Seller and will be industry qualified for use in the respective
application.

 

ARTICLE IX.

INVOICES, PAYMENTS, NETTING, SET OFF, AND CREDIT RATINGS

 

9.01                        Based on Seller’s weights, Seller
will invoice Buyer twice a month for all Coal delivered. Invoices for quality
adjustment, as provided in a Transaction, shall be issued monthly, based on
Seller’s analyses. Seller shall clearly indicate Buyer’s applicable purchase
order number on all invoices. Each invoice shall state for each trainload of
Coal: the quantity of Coal delivered, the Actual Btu and SO2, % Na2O in ash
(if set forth in the Confirmation) and the invoice price and any other required
quality adjustment. Invoices shall be mailed or electronically transmitted, as
applicable, to:

 

	
  Invoices to Heron Lake:

  
	
   

  
	
  Heron Lake BioEnergy,
  LLC

  
	
  Attn:Bob Ferguson

  
	
  201 10th Street

  
	
  Heron Lake, MN 56137

  

 

8

 

	
  Invoices to NCTC:

  
	
   

  
	
  Northern Coal
  Transportation Company 

  
	
  Attn: Revenue
  Accounting

  
	
  505 S. Gillette Avenue

  
	
  Gillette, WY 82716

  
	
   

  
	
  ACH/Wires to NCTC:

  
	
   

  
	
  Northern Coal
  Transportation Company/Rio Tinto Energy America Inc. 

  
	
  Account # 060-00298-13

  
	
  Wells Fargo Bank

  
	
  41 East 100 South

  
	
  Salt Lake City, UT
  84111 

  
	
  ACH ABA # 124000012 

  
	
  Wire ABA # 121000248

  
	
   

  
	
  Payment Detail:

  
	
   

  
	
  To ensure proper
  allocation of payments to appropriate invoice, e-mail invoice numbers and
  amounts to: Doreen.Heuck@riotinto.com or information may be faxed to (307)
  685-6010.

  

 

9.02                        For all invoices, payment will be made within 10 business
days of receipt of that invoice. Amounts shall be paid via electronic means
(i.e., ACH or Federal Reserve wire transfer of funds). The wire transfer of
funds shall be sent to Seller’s bank as indicated on the invoice.

 

9.03                        In the event Buyer in good faith disputes part or all of an
invoice, notice of the disputed portion, with reasons for dispute, must be
given prior to the due date of the invoice and the undisputed portion shall be
paid by the due date. If the disputed portion is determined to have been
properly due and payable, interest on that portion in dispute and which has not
been paid shall accrue from the date that portion was due and payable. If a disputed
portion is paid and is later determined not to have been properly due and
payable, interest will similarly be refunded from the date payment had been
received. Interest shall be paid at one (1) percentage point over the then
current U.S. prime rate as listed in the Money Rates section of The Wall
Street Journal. All invoices will be final and not subject to further
adjustments or correction unless objection to the accuracy thereof is made
prior to the lapse of one (1) year after the termination of the applicable
Transaction.

 

9.04                        If each Party or Party’s affiliate is required to pay an
amount to the other Party in the same invoice period, then such amounts with
respect to each Party may be aggregated and the Parties may discharge their
obligations to pay through netting; in which case, the Party owing the greater
aggregate amount shall pay to the other Party the difference between the
amounts owed.

 

9.05                        Each Party reserves to itself all rights, setoffs,
counterclaims, and other remedies and defenses to the extent not expressly
denied or waived herein which such Party has or may 

 

9

 

be entitled to arising from or out of
this Agreement. All outstanding Transactions and the obligations to make
payment in connection under this Agreement may be offset against each other,
set off, or recouped therefrom.

 

9.06                        If a Party fails to pay amounts under this Agreement within
10 business days after receipt of invoice, unless such amount is the subject of
a dispute as provided above, or is excused by Article 10, in addition to
the rights and remedies otherwise provided in this Agreement, the aggrieved
Party shall have the right to suspend performance under any or all Transactions
under this Agreement. If such failure to pay continues for an additional 5
business days, the aggrieved Party shall have the right to terminate this
Agreement and all Transactions and shall be entitled to all other rights under
this Agreement.

 

9.07                        Should the creditworthiness or either Party’s ability to
perform become unsatisfactory to the other Party, or if situations develop
where either Party could reasonably conclude that a credit downgrade or
protection under bankruptcy code is imminent, then the failing Party will
provide satisfactory security or assurances.

 

9.08                        If a Party’s or any of its affiliates’ credit falls below
investment grade (BBB- as defined by Standard & Poor’s, Moody’s, or
the equivalent), the failing Party shall provide the non-failing Party with a
mutually agreed upon credit enhancement in the form of, but not limited to,
letters of credit, compressed payment terms or cash on delivery. If the failing
Party does not provide an acceptable credit enhancement within 48 hours of
notice, the non-failing Party shall have the right to suspend shipments and
seek remedies as set forth in this Master Agreement.

 

ARTICLE X.

FORCE MAJEURE

 

10.01                 The term “Force Majeure” as used herein shall mean an act or
event that is not reasonably within the control and is without the fault of the
Party claiming Force Majeure including without limitation, acts of God; acts of
the public enemy; insurrections; terrorism; riots; labor disputes; boycotts;
fires; explosions; floods; breakdowns of or damage to major components or
equipment of Buyer’s generating station, Seller’s mine, or transmission systems
or Buyer’s transportation; embargoes; acts of judicial or military authorities;
acts of governmental authorities; inability to obtain necessary permits,
licenses, and governmental approvals after applying for same with reasonable
diligence; or other causes which prevent the producing, processing, and/or
loading of Coal by Seller, or the receiving, accepting, unloading and/or
utilizing of Coal by Buyer. Force Majeure includes the failure of a Party’s
contractor(s) to furnish labor, services, Coal, materials or equipment in
accordance with its contractual obligations (but solely to the extent such
failure is itself due to Force Majeure).

 

10.02                 If, because of Force Majeure, either Party fails to perform
any of its obligations under this Agreement (other than the obligation of a
Party to pay money), and if such Party shall promptly give to the other Party
written notice of such Force Majeure, then the obligation of the Party giving
such notice shall be suspended to the extent made necessary by such Force
Majeure and during its continuance; provided, the Party giving 

 

10

 

such notice shall use good faith
efforts to eliminate such Force Majeure, insofar as reasonably possible, with a
minimum of delay. Should the situation of Force Majeure exceed sixty (60)
consecutive days, the Party not affected by the Force Majeure event may, at its
option, terminate the Transaction in whole or in part and neither Party shall
have any further obligation to the other Party; however, each Party shall be
obligated to make any payments which had become due and payable prior to such
termination. Any deficiencies in deliveries of Coal caused by an event of Force
Majeure shall not be made up, except by mutual consent. The affected Party
shall provide suitable proof to the other Party to substantiate any claim made
under this Article 10.

 

10.03                 Both Parties agree significant capital expenditures and
settlement of strikes and lockouts shall be entirely within the discretion of
the Party having the difficulty. The above requirement that any Force Majeure
shall be remedied with all reasonable dispatch shall not require significant
capital expenditure or settlement of strikes and lockouts by acceding to the
demands of the opposing Party when such course is inadvisable in the discretion
of the Party having difficulty.

 

10.04                 The loss of Buyer’s markets or Buyer’s inability to
economically use or resell Coal purchased hereunder, the loss of Seller’s
supply or Seller’s ability to sell Coal to a market at a more advantageous
price, the change in the market price of Coal or price of power, or regulatory
or contractual disallowance of the pass-through of the costs of Coal or other
related costs shall not constitute events of Force Majeure.

 

ARTICLE XI.

RECORDS, AUDITS, ACCESS

 

11.01                 Seller shall maintain books and records relating to the
supply of Coal under this Agreement and the applicable Transaction for a period
of not less than two (2) years after the end of each calendar year for all
Coal tendered during such calendar year.

 

11.02                 Upon reasonable notice and during normal business hours,
Buyer and/or Buyer’s independent auditors shall have the right to inspect
Seller’s books and records relating to all provisions of this Agreement which
include Coal quality, quantity shipped, and price adjustments or as may be
necessary to satisfy inquiries from governmental or regulatory agencies, but
only to the extent necessary to verify the accuracy of any statement, charges
or computations made pursuant to this Agreement and/or a Transaction. Seller
shall make a reasonable effort to facilitate Buyer’s inspection of such records
in Seller’s possession. Buyer and its auditors, to the extent permitted by law
or regulation, shall treat all such information as confidential.

 

ARTICLE XII.

DEFAULT, REMEDIES, AND TERMINATION

 

12.01                 The remedies set forth in this Section 12.01 shall
cover the non-defaulting Party’s remedies for the defaulting Party’s failure to
perform prior to any termination for default that may occur.

 

11

 

a)             As an alternative to the damages provision below, if the
Parties mutually agree in writing, the non-performing Party may schedule
deliveries or receipts, as the case may be, pursuant to such terms as the
Parties agree in order to discharge some or all of the obligation to pay
damages. In the absence of such agreement, the damages provision of this Article shall
apply.

 

b)             Unless excused by Force Majeure, if Seller fails to deliver
the quantity of Coal in accordance with the applicable Confirmation and this
Agreement, Seller shall pay to Buyer an amount for each ton of Coal of such
deficiency equal to the differential In cost between a reasonably priced supply
of replacement Coal delivered to Buyer’s facilities and the adjusted base price
of the Coal, on an equivalent per mmBtu SO2 adjusted basis; except that if such difference
is negative, then neither Party shall have any obligation to make any
deficiency payment to the other.

 

c)             Unless excused by Force Majeure, if Buyer fails to accept
delivery of the quantity of Coal in accordance with the applicable Confirmation
and this Agreement, Buyer shall pay to Seller an amount for each ton of Coal of
such deficiency equal to (i) the base price agreed to for the specific
Transaction minus the highest reasonable market price on an equivalent per
mmBtu S02 adjusted basis at
which Seller is able, or (ii) would be able, to sell or otherwise dispose
of the Coal at the time of Buyer’s breach; except that if such difference is
negative, then neither Party shall have any obligation to make any deficiency
payment to the other.

 

d)             Buyer and Seller shall be subject to commercially reasonable
good faith obligation to mitigate any damages hereunder.

 

12.02                 The occurrence of any of the following shall constitute an “Event
of Default”;

 

a)             Failure by either Party to pay any amounts due.

 

b)             Either Party materially breaches any contractual obligation
under this Agreement.

 

c)             Either Party (i) makes any general assignment or any
general arrangement for the benefit of creditors, (ii) files a petition or
otherwise commences, authorizes or acquiesces in the commencement of a
proceeding or cause of action under any bankruptcy or similar law for the
protection of creditors or has such a petition involuntarily filed against it
and such petition is not withdrawn or dismissed within thirty (30) days after
such filing, (iii) otherwise becomes bankrupt or insolvent (however
evidenced), or (iv) is unable to pay its debts as they fall due.

 

12.03                 In addition to the non-defaulting Party’s remedies under
this Article, in the Event of Default with respect to a specific Transaction,
the non-defaulting Party shall have the same rights with respect to such
specific Transaction as it has under this Agreement in addition to the right to
exercise all other rights and remedies available under applicable law.

 

12

 

ARTICLE XIII.

NOTICES

 

13.01                 Except as expressly provided otherwise, any notice, election
or other correspondence required or permitted hereunder shall become effective
upon receipt and, except invoices and payments, shall be deemed to have been
properly given or delivered when made in writing and delivered personally to
the Party to whom directed, or when sent by United States certified mail with
all necessary postage prepaid and a return receipt requested, or by a
nationally recognized overnight delivery service with charges fully prepaid and
addressed to the Party at the below-specified address:

 

	
  Notices to NCTC:

  
	
  Northern Coal
  Transportation Company 

  
	
  c/o Rio Tinto Energy
  America Inc.

  
	
  Attn: Contract
  Administration

  
	
  8051 E. Maplewood Ave.,
  Bldg. 4 

  
	
  Greenwood Village, CO
  80111

  
	
  Phone: (303) 713-5627

  
	
  Fax: (303) 713-5772

  
	
   

  
	
  With a copy to:

  
	
  Rio Tinto Energy
  America Inc. 

  
	
  Attn: Legal Department

  
	
  505 So. Gillette Ave.

  
	
  Gillette, WY 82716

  
	
   

  
	
  Scheduling to NCTC:

  
	
  Northern Coal
  Transportation Company 

  
	
  Attn: Michael Stevermer

  
	
  8051 E. Maplewood Ave.,
  Bldg. 4 

  
	
  Phone: (303) 713-5608

  
	
  Fax: (303) 713-5772

  
	
   

  
	
  Notices to Heron Lake:

  
	
  Heron Lake BioEnergy,
  LLC 

  
	
  201 10th
  Street

  
	
  Heron Lake, MN 56137

  
	
  Attn: Bob Ferguson

  
	
  Phone: (507) 793-0077

  
	
  Fax: (507) 793-0078

  

 

The addresses may be changed upon written notice in the manner provided
above, and no amendment hereof shall be required for a change of address under
this Article 13.

 

13

 

ARTICLE XIV.

COOPERATION

 

14.01                 Each Party agrees to take all further action that may be
reasonably necessary to perform and to effectuate the purposes and intent of
the Agreement, the Confirmation, and any particular Transaction.

 

ARTICLE XV.

WARRANTY, LIMITATION ON LIABILITY, DUTY TO MITIGATE & INDEMNIFICATION

 

15.01                 In no event shall either Party be liable to the other Party
for incidental, consequential or punitive damages however and wherever arising
out of, or in connection with, this Agreement or any Transaction.

 

15.02                 EXCEPT AS EXPRESSLY WARRANTED HEREIN, IT IS
EXPRESSLY AGREED THAT SELLER MAKES NO WARRANTY EXPRESSED OR IMPLIED AS TO THE
QUALITY, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE COAL TO BE
DELIVERED UNDER THIS AGREEMENT OR AS TO THE RESULTS TO BE OBTAINED FROM THE USE
OF SUCH COAL. SELLER SHALL NOT BE LIABLE FOR ANY INCIDENTAL, PUNITIVE, OR
CONSEQUENTIAL DAMAGES, INCLUDING WITHOUT LIMITATION LOSS OF PROFITS OR
OVERHEAD, BY VIRTUE OF ITS BREACH OF ANY OF ITS OBLIGATIONS UNDER THE
AGREEMENT. NOTHING IN THIS ARTICLE SHALL BE CONSTRUED AS LIMITING EITHER PARTY’S
RIGHT, SUBJECT TO THE TERMS OF THIS AGREEMENT, TO SEEK DIRECT DAMAGES FOR THE
OTHER PARTY’S BREACH OF ANY OF ITS OBLIGATIONS HEREUNDER.

 

15.03                 Each Party agrees it has a duty to mitigate damages and
covenants. Each Party will use commercially reasonable efforts to minimize any
damages it may incur as a result of the other Party’s performance or
non-performance of the Agreement (except that neither Party shall be required
to enter into a replacement transaction as provided under this Agreement).

 

15.04                 Each Party shall indemnify, defend, and hold the other Party
harmless from and against any and all Claims arising out of or resulting from
the willful acts or negligence of such Party, its agents, and employees.

 

ARTICLE XVI.

LIMITATION ON WAIVER

 

16.01                 No waiver by either Party of any one or more defaults of the
other Party in the performance of this Agreement or any Transaction shall
operate or be construed as a waiver of any future default, or defaults, whether
of a like or different character.

 

14

 

ARTICLE XVII.

CONFIDENTIALITY

 

17.01                 This Agreement and any Confirmation are deemed confidential.
The Parties shall protect the confidentiality of the terms of this Agreement
and neither this Agreement or any of its terms shall be disclosed to any other
person unless such disclosure is: (i) agreed to in writing by the Parties
prior to release, (ii) required by law, (iii) required by
jurisdictional regulation pursuant to the request of any regulatory authorities
(including, without limitation, state utility commissions or boards, the
Federal Energy Regulatory Commission, the U.S. Securities and Exchange
Commission and tax authorities); to attorneys, auditors, consultants or other
outside experts of the Parties if said individuals are advised of the
confidential nature of the information and said individuals agree to maintain
the confidentiality of the information; or to generating unit co-owner(s).
Where the law requires such disclosure, notice shall be given to the other
Party, and to the extent possible, such notice shall be given in advance of
disclosure.

 

ARTICLE XVIII.

ENTIRETY, AMENDMENTS

 

18.01                 This Agreement constitutes the entire agreement between the
Parties. This Agreement may not be amended except in a written instrument
making reference hereto signed by the Parties.

 

ARTICLE XIX.

SUCCESSORS AND ASSIGNS

 

19.01                 This Agreement shall inure to the benefit of and be binding
upon the Parties hereto and their respective successors and assigns; provided,
however, this Agreement may not be assigned by either Party without the prior
written consent of the other Party, which consent shall not be unreasonably
withheld or delayed.

 

ARTICLE XX.

GOVERNING LAWS

 

20.01                 This Agreement shall be governed by and construed in accordance
with the laws in the State of Wyoming.

 

ARTICLE XXI.

INTERPRETATION

 

21.01                 The Parties acknowledge that each Party and its counsel have
reviewed this Agreement and that the rule of construction to the effect
that any ambiguities are to be resolved against the drafting Party shall not be
employed in the interpretation of this Agreement.

 

15

 

ARTICLE XXII.

SURVIVAL

 

22.01                 The provisions of Articles 12 through 21 and Article 22
shall survive the termination of this Agreement.

 

IN WITNESS WHEREOF, the Parties have executed this Agreement by their
respective, duly authorized representatives effective as of the date first
written above.

 

 

	
   

  	
   

  
	
  Northern Coal Transportation
  Company

  	
  Heron Lake BioEnergy, LLC

  
	
   

  	
   

  
	
  By:

  	
  /s/ [AUTHORIZED
  SIGNATORY]

  	
   

  	
  By:

  	
  /s/ Robert J. Ferguson

  
	
   

  	
  Jeffrey D. Price 

  	
  Title:

  	
  President Board of
  Governors

  
	
   

  	
  Vice President -
  Marketing, Government 

  Affairs & Communications

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
  3 July 2007

  	
   

  	
  Date:

  	
  13 July 2007

  

 

16

 

CONFIRMATION LETTER

 

NCTC: N0005-1283

 

	
  Seller:
  

  	
  Northern
  Coal Transportation Company 

  	
   

  	
  Buyer:

  	
  Heron
  Lake BioEnergy, LLC 

  
	
   

  	
  8051
  E. Maplewood Avenue 

  	
   

  	
   

  	
  201
  10th Street 

  
	
   

  	
  Building
  4 

  	
   

  	
   

  	
  Heron
  Lake, MN 56137 

  
	
   

  	
  Greenwood
  Village, Co 80111 

  	
   

  	
   

  
	
   

  	
   

  	
  Attn:

  	
  Bob
  Ferguson 

  
	
  Attn:

  	
  Michael
  Stevermer

  	
   

  	
  Phone:

  	
  (507)
  793-0077 

  
	
  Phone:

  	
  (303)
  713-5608

  	
   

  	
  Fax:
  (507) 793-0078

  
	
  Fax:

  	
  (303)
  713-5772

  	
   

  	
   

  
						

 

This Confirmation
Letter (“Confirmation”) shall confirm the transaction arranged December 20,
2006, between Northern Coal Transportation Company (“NCTC”) and Heron Lake
BioEnergy, LLC (“Heron Lake”) pursuant to the Master Coal Purchase and Sale
Agreement effective June 1, 2007. The terms and conditions of this
transaction are as follows:

 

NCTC to sell and
deliver and Heron Lake to purchase and receive coal from the Spring Creek Mine
located in Big Horn County, Montana. Coal purchased under this Confirmation
Letter is to be used by the Heron Lake Facility only.

 

	
  Transaction Type:

  	
   

  	
  Physical Coal

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Product:

  	
   

  	
  Sub-Bituminous coal; 9350 Btu/Lb. and 0.8 Lbs. SO2/mmBtu

  

 

	
  Base Price:

  	
   

  	
  Calendar Year

  	
   

  	
  Base Price (per ton of coal)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  June 1, 2007 thru May 31, 2008

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  June 1, 2008 thru May 31, 2009

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  June 1, 2009 thru May 31, 2010

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  June 1, 2010 thru May 31, 2011

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  June 1, 2011 thru May 31, 2012

  	
   

  	
  [***]

  

 

*All rail surcharges,
escalations or any additional charges imposed by the railroads will be passed
through to Buyer; fuel surcharges will be consistent with prevailing STB
guidance.

 

*NCTC will use best
efforts in negotiating any additional charges Imposed by the railroads.

 

Shipment
Period:                June 1, 2007 through May 31, 2012

 

Quantity:                               A minimum of [***] tons per Calendar
Year.

 

 

	
   

  	
  The
  first Calendar Year of this agreement shall be considered a “Test Year”, in
  which no minimum annual tonnage volume will be applicable. For the remaining
  Calendar Years of the Agreement, Heron Lake shall purchase a minimum of [***]
  tons per Calendar Year, with such minimum subject to adjustment based upon
  the actual amount of coal required by Heron Lake’s facility after the “Test
  Year.”

  
	
   

  	
   

  
	
   

  	
  ·
  Additional tonnage to be mutually agreed upon during the nomination process.

  
	
   

  	
   

  
	
  Delivery  Point:

  	
  FOB
  at Ruebel, Minnesota

  
	
   

  	
   

  
	
  Topsize:

  	
  2” x 0” ASTM or 3” x 0” ASTM

  
	
   

  	
   

  
	
  Quality:

  	
  Coal Quality Specifications

  

 

	
   

  	
   

  	
  Typical

  	
   

  	
  Reject

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Btu/Lb

  	
   

  	
  9,350

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Lbs. SO2/mmBtu

  	
   

  	
  0.8

  	
   

  	
  > 1.00

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Sodium

  	
   

  	
  6.5 to 8.5%

  	
   

  	
  > 8.5%

  

 

	
  Other
  Provisions:

  	
  •

  	
  Nominations for actual tons are due from Heron lake by
  September 1 of each calendar year for the following calendar years tons.

  
	
   

  	
   

  	
   

  
	
   

  	
  •

  	
  Rates are based on a maximum 4 day shipment unloading
  limit after constructive placement; if exceeded, $0.50 per ton will be added
  to the rate for the affected tonnage involved in such shipment.

  
	
   

  	
   

  	
   

  
	
   

  	
  •

  	
  Any costs incurred after constructive placement will be
  the responsibility of Buyer.

  
	
   

  	
   

  	
   

  
	
   

  	
  •

  	
  Coal price for shipments shall be adjusted for
  deviations in Btu/lb from the “typical” specifications noted herein on the
  basis equivalent dollars per million Btu; for instance, the shipment of 9,250
  Btu/lb coal in the first contract year shall result in a coal price of [***].

  

 

IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR, AND EACH
OF THE PARTIES WAIVES THE RIGHT TO SEEK INCIDENTAL, CONSEQUENTIAL, OR PUNITIVE
DAMAGES UNDER THIS AGREEMENT.

 

Please confirm that the terms and conditions stated herein accurately
reflect your understanding of our agreement by signing and returning to
Stephanie Houston at Seller’s address.

 

	
  By: 

  	
  /s/ Robert J. Ferguson

  	
   

  	
  Date: 

  	
  13 July 2007

  	
   

  
	
   

  	
  Heron Lake BioEnergy, LLC

  	
   

  
	
   

  	
   

  
	
  By: 

  	
  /s/ [AUTHORIZED SIGNATORY]

  	
   

  	
  Date: 

  	
  13 July 2007

  	
   

  
	
   

  	
  Northern Coal Transportation
  Company

  	
   

  

 

2

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