AMENDMENT NUMBER THREE TO
ENGINEERING, PROCUREMENT AND CONSTRUCTION SERVICES FIXED PRICE
CONTRACT
Delta-T Corporation, a Virginia
corporation (“Delta-T”) and NEDAK Ethanol, LLC, a
Nebraska limited liability company (“NEDAK”) agree to
amend the EPC Contract (as hereinafter defined).
AMENDMENT RECITALS
A. Delta-T and NEDAK
entered into an Engineering, Procurement and Construction Services
Fixed Price Contract dated August 9, 2006, and since that time have
agreed to certain changes and amendments to such contract in
documents alternatively entitled “Amendment,”
“Contract Change Request,” “Letter of Commitment
and Intent,” “Second Letter of Commitment and
Intent,” together with other documents mutually reflecting
the parties’ agreements to make changes to the original
contract agreement. Collectively the original August 9, 2006
contract, including all agreed changes or alterations thereto as
heretofore referenced shall be referred to as the “EPC
Contract.”
B. In 2008, Bateman
and Litwin NV (“Guarantor”) executed an agreement
entitled “Guarantee” with regard to the prompt and
complete performance by Delta-T of all of the terms and conditions
of the EPC Contract.
C. Delta-T caused two
separate letters of credit to be issued. The first letter of credit
is designated #S1-1062-New York (“LOC 1062”) dated
April 10, 2008. The second letter of credit is designated
#S1-1067-New York (“LOC 1067”) originally issued May 9,
2008 in the amount of $5,500,000 million. The beneficiary of LOC
1062 was AgCountry Farm Credit Services, ACA
(“AgCountry”). The beneficiary of LOC 1067 is
NEDAK.
D. In April 2008,
NEDAK executed a promissory note in the face amount of $5,000,000
in favor of Delta-T, secured by a Deed of Trust on NEDAK real
property and improvements, which note has been amended and restated
in October, 2008, and partially paid and/or reduced in the amount
owed thereafter. Collectively such promissory note, all amendments
thereto and payments and/or credits against such note shall be
referred to as the “Promissory Note.”
E. NEDAK and Delta-T
currently have a list of “punchlist” items of work
attached hereto as Exhibit A. Certain punchlist items and work are
separated from the complete and unabridged listing of punchlist
work and shall be hereinafter referred to as “Excepted
Punchlist Work” and delineated in Exhibit B hereto, which
shall include certain presently existing urgent work, the record
documents, and all work relating or pertaining to the CO2 scrubber,
and RTO stack emissions issues.
F. In June 2009
AgCountry drew LOC 1062 and presently retains the net proceeds
therefrom, in the amount of $3,995,000 (“LOC 1062 Net
Proceeds”).
G. On June 25, 2009,
Delta-T commenced certain legal action against NEDAK and AgCountry
in the District Court of Douglas County, Nebraska (the
“Litigation”), and obtained a temporary restraining
order in which the court temporarily restrained NEDAK and AgCountry
from delivering any documents or taking other steps necessary to
draw upon LOC 1067 (the “TRO”).
H. Prior to the
events set forth in recital “G” above, NEDAK asserted
liquidated damages against Delta-T (“NEDAK Liquidated
Damages”).
I. NEDAK also
believes that it possesses numerous claims and causes of action
against Delta-T and Guarantor arising in contract, tort, and for
asserted violations of various Nebraska statutes, which have
accrued prior to the date of this Amendment No. 3 (collectively
“NEDAK Claims”).
The parties hereto hereby agree that the EPC
Contract shall be amended in the following respects, and the
Litigation shall be resolved, all as hereinafter set
forth.
(a) The plant
emissions related equipment includes a CO2 scrubber and RTO stack
(“Emissions Equipment,” see Exhibit B). The plant must
meet the state of Nebraska Department of Environmental Quality
(“NDEQ”) standards and specifications for various
emissions, and as set forth in the air permit issued by NDEQ,
including without limitation “HAP” and
“VOC” (collectively “NDEQ Standards”). The
parties agree to operate the plant in accordance with Delta-T
operational procedures during all emissions testing.
(b) Delta-T and NEDAK
shall promptly work cooperatively together to develop and implement
changes, additions and/or alterations to the Emissions Equipment
and operational procedures at the plant in order to meet the NDEQ
Standards.
(c) Upon determination
of an agreed upon plan of action, Delta-T shall promptly take any
and all action necessary to make all design changes, alterations,
modifications and/or additions to the plant Emissions Equipment in
order to assure that all of the plant operations are in complete
conformance with, and pass all NDEQ Standards and testing and meet
all other criteria identified in Exhibit C within the time schedule
set forth in Exhibit C hereto (hereinafter collectively
“Remedial Emissions Work” Exhibit C hereto). Delta T
shall be responsible for any and all costs associated with the
Remedial Emissions Work including all testing of the emission work
once it has been constructed.
2.
Letter of Credit #S1-1067 of $5,500,000.
(a) Delta-T
has caused the expiration date of LOC 1067 to be extended to no
earlier than September 30, 2009 and in the amount of $5,500,000.
Pursuant to this agreement, LOC 1067 shall be further extended as
provided in paragraph 2(b) hereof.
The parties have agreed on an
interim basis to extend the hearing on the TRO to September 2,
2009
(b) Upon
consummation and completion of the full execution of this
agreement, on or before September 21, 2009, Delta-T shall cause LOC
1067 to be further extended to June 30, 2010 to provide complete
security as set forth in this Amendment for timely completion of
all Delta-T obligations undertaken in this amendment, including
without limitation those relating to Emissions Work, Release of
Delta-T Lien claims, and Warranty Work which initially shall be in
the amount of $5,500,000 (“Extended LOC”). The Extended
LOC shall meet the standards enumerated in paragraph 2(g). The
failure by Delta-T to timely and fully obtain such extended LOC
shall cause this entire Amendment No. 3 to become null and void,
including without limitation that LOC 1067 shall have the same
status as it did prior to the execution of this Amendment. The
Extended LOC shall contain conditions to draw (“LOC 1067
Conditions”). The LOC 1067 Conditions shall be as hereinafter
set forth in sections (c), (d), (e), (f) and (g), and shall be
incorporated into the Extended LOC as conditions for drawing on
such LOC.
(c) (i)
The first condition under which LOC 1067 may be drawn by NEDAK is
upon presentation of a certificate to the confirming bank that
liens have been filed against the improved real property of NEDAK
by Delta-T and/or any of its subcontractors, suppliers, equipment
makers, materialmen, unions/pension trusts, professional services
providers or any other person or entity claiming to have a lien
against the property (hereinafter all collectively “Delta-T
Lien Claims”) and ten (10) business days have elapsed since
the delivery to Delta-T of notice of a Delta-T Lien Claim and
Delta-T has not caused the lien to be extinguished and released,
see subsection (d), below.
(ii) Notwithstanding subsection. (i)
above, and subsection 2(d), on or before September 2, 2009, Delta-T
shall hand deliver in recordable form an original fully executed
partial lien release in the total amount of the final contract
between Delta-T and Quality Plus Services, Inc.
(“QPS”), less no more than $1,500,000. By way of
example but not limitation, if the total Delta-T/QPS contract is
$14,000,000, then the QPS partial lien release shall be for no less
than $12,500,000 ($14,000,000 - $1,500,000 — $12,500,000).
The failure by Delta-T to timely deliver the QPS Partial Lien
Release to Delta-T shall, at NEDAK’s sole option, cause this
entire Amendment to become null and void, including without
limitation that LOC 1067 shall have the same status as it did prior
to the execution of this Amendment.
(iii) Effective commencing with the
execution of this amendment number three, and upon receipt of
recorded full and final lien releases from Delta-T, the principal
amount of the Extended LOC shall be reduced by NEDAK presenting to
the confirming bank a certificate that “full and final lien
releases” and/or recorded “full and final
satisfaction” of any existing liens have been issued to its
satisfaction, provided however, that in no event shall the face
amount of the Extended LOC be reduced to an amount less
than
$3,500,000 or in accordance with
paragraph 2(e) and Exhibit C.A.3., notwithstanding that the Delta-T
lien releases may have exceeded $2,000,000.
(d) Delta-T shall
obtain and record full and final lien releases and/or satisfaction
of any Delta-T Lien Claims within ten (10) business days of any
such lien being recorded against the NEDAK property. NEDAK shall
provide Delta-T ten (10) business days notice of any failure by
Delta-T to obtain full lien releases of any Delta-T Lien Claims,
and Delta-T shall within such time period cause the lien to be
extinguished and released. If Delta-T fails to timely obtain and
record full and final lien releases of any Delta-T Lien Claims,
NEDAK (or AgCountry as its assignee) shall be permitted to draw
upon the Extended LOC to satisfy and/or otherwise pay actual lien
claimants, upon presentation of the certificate to the confirming
bank showing the amount of such liens unsatisfied as of that date,
or a certificate stating that an action to foreclose a lien
claiming damages (including interest, costs and fees) in an amount
no less than the amount of the draw has been instituted.
(e) The second
condition under which the Extended LOC may be drawn by NEDAK (or
AgCountry as its assignee) arises from the failure of Delta-T to
completely, promptly and timely perform all of its obligations
taken under paragraph 1, “Emissions Equipment” of this
amendment, and all related Exhibits thereto. NEDAK shall provide
Delta-T notice of any failure by Delta-T to perform its obligations
taken under paragraph 1. If Delta-T fails to correct such
deficiencies within ten (10) business days from the date of receipt
of such notice, NEDAK (or AgCountry as its assignee) shall have the
right to draw upon the Extended LOC to complete all such work
and/or successfully pass all such standards and tests, and the
requirements set forth in Exhibit C, upon presentation of a
certificate by NEDAK stating that Delta-T has failed to comply with
its obligations with respect to Emissions Equipment and/or the
Remedial Emissions Work, and stating the amount it reasonably
believes is required to complete such Remedial Emissions Work,
which amount shall be no less than the amount of the draw, provided
however that if the nature and extent of the Remedial Emissions
Work reasonably requires more time than ten (10) days to
accomplish, and Delta-T commences such work within such 10-day
period, then Delta-T shall have such greater time to complete the
work as is reasonably required, but in no event longer than thirty
(30) calendar days from the date of notice by NEDAK, provided
however, unless necessary equipment has been promptly ordered by
Delta-T but requires more than thirty (30) days for delivery. If,
but only if, Delta-T both finally and completely satisfies all
terms, conditions and deadlines set forth in subparagraphs (b),
(c), (d) and this subparagraph (e), then NEDAK shall submit to the
confirming bank of the Extended LOC a certificate that the face
amount of the Extended LOC shall be reduced to $500,000.
(f) (i) The third
condition under which NEDAK (or AgCountry as its assignee) may draw
on the Extended LOC concerns warranty work. If the Extended LOC is
reduced to $500,000 as provided in paragraph 2(e), the Extended LOC
shall be extended in the face amount of $500,000. The Extended LOC
shall remain in the face
amount of $500,000 through June 30, 2010. The
Extended LOC shall remain in force only through June 30, 2010 not
withstanding that some warranties may still exist after such date.
All Exhibit B designated punchlist work and Exhibit C emissions
related work has a one-year warranty period from the date of final
completion of all such work. NEDAK (or AgCountry as its assignee)
may draw upon the Extended LOC during such one-year period to pay
for the correction and/or replacement of all work and materials
supplied by Delta-T prior to June 30, 2009, after notice and
failure to cure by Delta-T in accordance with (ii) below
(“Warranty Work”). Work and materials performed by
Delta- T after June 30, 2009 shall also be included within the
definition of Warranty Work which shall extend for one year for
that specific Warranty Work from the date such work and materials
have been provided and performed at the plant, but shall not be
secured by the Extended LOC after June 30, 2010. NEDAK shall
provide Delta-T notice of any Warranty Work required to be
accomplished during such one-year periods, and Delta-T shall
promptly take any and all action to correct such Warranty Work
within ten (10) business days of receiving notice from NEDAK,
provided however that if the nature and extent of the Warranty Work
reasonably requires more time than ten (10) days to accomplish, and
Delta-T commences such work within such 10-day period, then Delta-T
shall have such greater time to complete the work as is reasonably
required. If Delta-T fails to timely and properly perform the
Warranty Work within the time period parameters after receipt of
notice, NEDAK (or AgCountry as it assignee) shall have the right to
draw upon the Extended LOC, upon the presentation of the
certificate to the confirming bank stating that the Warranty Work
has not been completed in an amount no less than the amount
drawn.
(ii) Within ten (10) business days
of the receipt of the notice set forth in subparagraph (i) above,
Delta-T may deliver to NEDAK written notice of any objection that
the NEDAK requested Warranty Work does not in fact properly
constitute Warranty Work (“Warranty Dispute”). Failure
by Delta-T to timely provide such notice shall constitute
acceptance by Delta-T that such work properly constitutes Warranty
Work. Within ten (10) business days of the Delta-T written notice
of Warranty Dispute, the parties shall submit such dispute to the
manufacturer of the equipment or parts asserted to be subject to
warranty, who shall act as the decision maker of the Warranty
Dispute (“Arbitrator”). If for any reason the
Arbitrator is unable or unwilling promptly to act to resolve the
Warranty Dispute, the Warranty Dispute shall promptly be submitted
to a large manufacturer of a substantially similar piece of
equipment or part, who shall act as Arbitrator. By way of example
but not limitation, if XYZ Pump Manufacturer supplied a pump which
was the subject of a Warranty Dispute, if XYZ Pump Manufacturer for
any reason could not promptly act as arbitrator, the Warranty
Dispute would be submitted to a large and substantial manufacturer
of a substantially