1
Exhibit 10.11a
COAL SUPPLY AGREEMENT
THIS COAL SUPPLY AGREEMENT ("Agreement") is made and entered
into as of this 12th day of January, 1998 by and between NEW YORK STATE ELECTRIC
& GAS CORPORATION ("Buyer"), Corporate Drive, Kirkwood Industrial Park,
Binghamton, New York 13902-5224 and UNITED EASTERN COAL SALES CORPORATION, as
agent for Eighty-Four Mining Company ("Seller"), X.X. Xxx 000, Xxxxxxx, XX
00000.
WITNESSETH:
WHEREAS, Seller agrees to sell and tender delivery of, and
Buyer agrees to purchase and accept delivery of, washed coal of the quality and
quantity as described below, during the term and on the terms set forth below;
and
WHEREAS, Buyer and Seller understand and agree that Seller's
obligations hereunder to sell and deliver and Buyer's obligations to purchase
and accept coal are expressly subject to the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, Seller agrees to sell and tender delivery of, and
Buyer agrees to purchase and accept delivery of, the quantity and quality of
coal (hereinafter the "Coal") specified herein on the terms and conditions
hereinafter set forth.
2
ARTICLE 1 - TERM
Section 1.1 The term of this Agreement shall be for two (2) years
effective as of January 1, 1998 and ending December 31, 1999. No later than June
30, 1999, Buyer shall provide written notice to seller of its desire to
negotiate pricing for one (1) to three (3) additional years. In the event that
the parties are unable to establish mutually agreeable contract prices by
September 1, 1999, the parties agree that this agreement shall terminate and be
of no further force and effect as of December 31, 1999.
ARTICLE 2 - SOURCE, QUANTITY AND POINT OF DELIVERY
Section 2.1 Source. Except as otherwise expressly permitted herein the
source of the Coal to be delivered hereunder shall be Mine 84 (the "Mine").
Section 2.2 Quantity. The quantity of Coal to be delivered hereunder
shall be 250,000 net tons per contract year.
Section 2.3 Buyer has the right to increase or decrease the quantity of
Coal to be delivered hereunder by 50,000 net tons per year by providing notice
by June 1 of each Contract Year (i.e., for the 1998 Contract Year, the tonnage
requirement can
2
3
be increased up to 300,000 net tons or decreased down to 200,000 net tons by
providing notice by June 1, 1998).
Section 2.4 Point of Delivery. The Point of Delivery for Coal sold
hereunder shall be F.O.B. point of shipment. Title and risk of loss shall pass
to Buyer when Coal shipment has been loaded onto rail cars at point of shipment.
Notwithstanding anything to the contrary contained herein, Seller shall be
liable for any loss or damage to the Coal at any time in the course of the
loading, transportation, and delivery of the coal caused by overloading of rail
cars. Overloading shall be determined in accordance with Association of American
Railroads standards and general trade definitions and practices.
Section 2.5 Payment for Transportation. Notwithstanding Section 2.4,
Buyer shall be responsible for the payment of all transportation costs.
Section 2.6 Cessation of Plant Operations. The parties agree that if
Buyer ceases commercial operation of Xxxxxxxx Station, and Buyer determines, in
its reasonable judgment, that it is not in Buyer's best interests to ship
tonnage requirements to other plants, then, at Buyer's election, Buyer may (i)
terminate this agreement upon thirty (30) days notice to Seller
3
4
and this agreement shall be fulfilled without additional cost or liability to
Buyer, or (ii) continue the agreement and unilaterally decrease the base
quantity of coal to be purchased for remaining Contract Year(s). If Xxxxxxxx
Station ceases to operate, then Buyer will use commercially reasonable best
efforts to utilize Seller's coal at Buyer's other operating generating
facilities in order to fulfill its contractual commitment to Seller.
ARTICLE 3 - QUALITY SPECIFICATIONS
Section 3.1 Quality Specifications. The Coal to be delivered hereunder
shall have the following quality specifications; unless otherwise expressly
noted to the contrary below, such requirements will apply on a per "payment lot"
as-received basis. A "payment lot" is defined as a shipment per station.
Quality Specifications:
Moisture (% by wt) 6.5% BTU Guarantee* (BTU/lb.) 13,100
Volatile Matter 35.0% Sulfur (%) 1.55%
Fixed Carbon 50.5% Grind (HGI) 55
Ash (% by wt) 7.0% Ash Fusion (AST Reducing OF) 2,400
Free Swelling Index 8.0
Top Size (Inches) 2"
MAF (BTU/lb.) 15,150
Quality Limits Penalties per Payment Lot
Sulfur 1.55 % Sulfur Max. per payment lot Greater than 2.0%
BTU 13,100 Minimum Less than 12,600
Quality Suspension Limits
1.9 lbs. Sulfur maximum per rolling 3 month
weighted average per station
4
5
1.7 lbs. Sulfur maximum per rolling annual
weighted average
ARTICLE 4 - PRICING
Section 4.1 The Contract Price shall be fixed at $24.00/net ton for
1998 and $24.75/net ton for 1999, except for changes in Laws hereof (Section
4.2).
The payment price to be paid by the Buyer to the Seller for the payment
lot of Coal delivered hereunder shall be the value of such Coal in dollars per
ton as determined by the following formula:
Payment Price for Coal in dollars per ton in Payment Lot = (A X B X
0.002) - C
Where A = "As Received" heating value of Coal in the payment lot
expressed in BTU's per pound
and B = Contract Price + Applicable Rail Rate at time of shipment
[ (2 x BTU Guarantee) ]
-------------------
1000
and C = The applicable rail transportation rate at the time of
shipment in dollars per ton
Section 4.2 Laws. In the event changes in federal, state or local laws
or regulations, or the official interpretations thereof, which affect the
Contract Price or the administration of this Agreement, should be enacted and/or
enforced, the Contract Price shall be adjusted to the extent of such change.
5
6
ARTICLE 5 - SPECIAL TERMS AND CONDITIONS
Section 5.1 Weights. The weight of Coal delivered hereunder by rail to
Buyer's Plant shall be determined from Buyer's Power Plant scales, which scales
shall be certified and tested in accordance with The Association of American
Railroad's ("AAR") Scale Handbook Procedures. If the AAR Procedures are
modified, the new requirements shall govern. These certifications and testing
are in addition to periodic testing and calibrating which shall be performed in
accordance with accepted industry standards. Seller shall receive a minimum of
two (2) weeks prior notice of certification and testing dates, and shall have
the right to have a representative present to observe all such tests. If Buyer's
scale is inoperative, then the weights shall be determined by using Seller's
mine weights.
Section 5.2 Sampling and Analysis. Buyer shall sample and an
independent laboratory shall analyze the Coal shipped hereunder. The analysis
shall be performed according to ASTM standards by a mutually acceptable
independent commercial testing laboratory. The results of such sampling and
analysis shall be controlling for all purposes. Seller and Buyer shall have the
right to have a representative present at any and all times to observe the
sampling and the analytical procedure by the independent laboratory. All samples
shall be divided into
6
7
three (3) parts and put in suitable airtight containers. Buyer shall have an
independent laboratory (1) analyze the contents of the first container in such a
manner that the moisture, ash and sulfur percentages and the calorific value in
BTU's per pound, are determined on an "as received" basis; and (2) compute the
pounds of sulfur as provided in Section 3.1. The results of such analysis shall,
except as hereinafter provided, be controlling for all purposes under this
Agreement. Buyer and Seller will promptly notify each other of all analyses. The
second and third containers in each case shall be held available by Buyer in a
storage room at the Plant for a period of thirty (30) days after such sample was
taken. The part in the second container shall be available to Seller. If
Seller's analysis of the part in said second container differs by more than the
allowable ASTM standards, Seller may request an analysis of the part in the
third container. The part in the third container shall be retained for such
thirty (30) day time period, properly sealed and labeled, to be analyzed if a
dispute arises due to a difference between Buyer's and Seller's analyses. The
analysis of the part in the third container of each sample, if necessary, shall
be made as soon as possible by a mutually acceptable independent commercial
testing laboratory, and the results of such analysis shall be controlling for
all purposes. The cost
7
8
of the sampling and/or analysis made by such commercial laboratory shall be
shared equally by the parties hereto. If the automatic sampler or sampling
process is inoperative, the average qualities of the last three (3) payment lots
for the station will be used as a basis for payment.
Section 5.3 Penalty for Coal Quality Deficiencies. Should the quality
of Coal delivered hereunder fail to comply with any of the specifications under
the heading "Penalties per Payment Lot" stated in Section 3.1 of this Agreement,
as determined in accordance with Section 5.2 of this Agreement, a ten (10)
percent penalty shall apply to the Contract Price as calculated in 4:1.
Should the rolling three (3) month weighted average sulfur limit or the
rolling annual weighted average sulfur limit exceed the specifications listed
under the heading "Quality Suspension Limits" in Section 3.1 of this Agreement,
as determined in accordance with Section 5.2 of this Agreement, Buyer shall have
the right to immediately suspend further shipments by giving written notice of
the suspension to Seller. After receipt of a suspension notice, Seller shall
suspend further shipments of Coal and shall immediately commence appropriate
action and use all reasonable efforts to correct the deficiency. Seller shall
furnish Buyer with reasonable written
8
9
documentation to ensure Buyer of Seller's ability to perform. If Buyer is
reasonably assured that Seller can furnish Coal which complies with the
specifications of Section 3.1, as determined in accordance with Section 5.2 of
this Agreement (Buyer shall make such decision with reasonable commercial
expediency, considering the circumstances presented, and shall not unreasonably
withhold its concurrence with Seller's reasonable assurances), then shipments
shall immediately resume.
If the Buyer does not receive such reasonable assurances from Seller
within fifteen (15) days of Seller's receipt of suspension notice, or if after
giving Buyer such assurances, Seller's subsequent deliveries during the ensuing
month fails both to meet and bring the 3 month rolling monthly or annual
weighted average sulfur quantity within the limits of Section 3.1, as determined
in accordance with Section 5.2, Buyer shall send Seller written notice of such
failure, and this Agreement may be immediately terminated, at Buyer's sole
option. If Buyer does not exercise its suspension or termination rights within
sixty (60) days after failure occurs, Buyer shall be deemed to have waived its
suspension or termination rights, as the case may be, as to that event. Tonnage
not shipped as a result of suspension under this Section 5.3 shall be made up on
a mutually agreeable delivery schedule. The penalty provision
9
10
and the right to suspend future shipments are in addition to any other legal
rights or remedies available to NYSEG upon delivery of non-conforming goods.
Section 5.4 Freeze Protection. At Buyer's request, freeze conditioning
agents of a quality, type, source and quantity acceptable to the Buyer shall be
applied by the Seller at the mine to minimize the freezing of Coal during
periods of cold weather, provided, however, that Seller's actual cost for any
such freeze conditioning shall be for Buyer's account. Such costs shall be
competitive in the industry. Upon scheduling trains, Buyer will specify the date
to begin and end freeze conditioning each year or by shipment.
Section 5.5 Confidentiality. The terms and conditions (including
prices) set forth in this Agreement, and information exchanged during
negotiation and performance of this Agreement, are considered by both Buyer and
Seller to be confidential and proprietary. Neither Buyer nor Seller shall
disclose any of the terms and conditions hereof nor any such information to any
third party without the prior written consent of the other except when
disclosure in the sole judgment of the party making the disclosure is required
(a) by statute, (b) by regulation, order or request of a governmental agency,
(c) in connection with a judicial or administrative proceeding, (d) to Seller's
10
11
lending institutions so long as Seller's lending institutions agree in writing
to keep the contents of this Agreement confidential and use it solely in
connection with its loans to Seller or (e) to successors in interest or
potential successors in interest of Buyer, Buyer' s assets or stock in Buyer's
company.
Section 5.6 Substitution. Seller shall have the right, but not the
obligation, with Buyer's approval, which approval shall not be unreasonably
withheld, to supply coal from sources other than as specified in the Agreement,
but such substitute coal must be of a quality equal to that required under the
Agreement and the delivered price of such coal must be the same, on a per
million BTUs basis, as the delivered price in effect under the Agreement for
Coal from the source specified. Any such substituted coal described in this
Section 5.6 shall be provided in accordance with all of the other terms and
conditions contained in this Agreement.
Section 5.7 Billing and Payment. Billing and payment for each payment
lot received from Seller shall be based upon the quantity and quality of Coal as
determined hereunder.
On receipt of the "As Received" analysis from the independent
laboratory as determined under Article 5, hereunder,
11
12
of each payment lot of Coal, Buyer will prepare a "Coal Purchase Advice" which
will include Coal quality and pricing information.
Payment for each payment lot of Coal shall be due within 30 days after
receipt of the payment lot and shall be made by Federal Reserve Wire Transfer of
same day funds to United Eastern Coal Sales Corp., Account No. 1001150259, PNC
Bank, ABA No. 000000000 or such other account that Seller may from time-to-time
select on thirty (30) days notice to Buyer. Notwithstanding anything to the
contrary contained herein, in the event of loss, damage or delay in delivery of
coal to Buyer, Seller agrees to extend the period required for payment hereunder
until such time as Buyer has been fairly compensated by the carrier responsible
for such loss, damage or delay in delivery in accordance with Buyer's agreement
with carrier, however, such extension is not to exceed 60 days after delivery.
Section 5.8 Force Majeure.
12
13
Section 5.8.1 Definition of Force Majeure. An event of "force majeure"
shall mean an act of God or of the public enemy; strike, lockout, slowdown,
interruption, or other labor dispute, sabotage; labor shortage; fire; flood; low
water; war; riot; insurrection; explosion; accident; embargo; blockade;
unexpected mining condition which may arise; preexisting natural condition;
inability to secure supplies, fuel, power, governmental authorization or permit;
breakdown of or damage to machinery or apparatus; interruption of transportation
or shortage of transportation equipment; regulation, rule, law, order, act or
restraint of any civil or military governmental authority; or any other event,
whether of the kind enumerated herein or otherwise, and whether or not foreseen
or foreseeable by either or both of the parties, which is beyond the control of
the party claiming excuse thereby and which wholly or partially prevents,
interrupts, or delays the production, loading or delivery of the Coal by Seller,
or the acceptance, unloading, or utilization of the Coal by Buyer. An event is
beyond a party's control if it cannot be prevented or eliminated by the exercise
of due diligence or if its prevention or elimination would be commercially
impracticable. An act shall be deemed commercially impracticable when it can be
accomplished only at an excessive and unreasonable cost. Settlement of a strike,
lockout or other
13
14
labor dispute shall be deemed beyond the control of the party claiming excuse
thereby regardless of the cause of, or the ability of such party to settle, such
dispute.
Section 5.8.2 Consequence of Force Majeure. During any period in which
Buyer suffers an event of Force Majeure, Buyer shall allocate coal used at
Xxxxxxxx Station among all of the buyers contract suppliers, in a fair and
reasonable manner. If Xxxxxxxx Station is totally or partly inoperable, then
Buyer will use commercially reasonable best efforts to utilize Seller's coal at
Buyer's operating generating facilities in order to fulfill its contractual
commitment to Seller. Any allocation made by a party hereunder shall be made
subject to reasonable audit by the other. A party's performance of its
obligations hereunder, except obligations to pay money to the other party, shall
be excused to the extent prevented by a force majeure event. Deficiencies in the
quantity of Coal delivered hereunder due to a force majeure event shall not be
made up except by mutual consent of Buyer and Seller. Unless the other party is
on actual notice, the party claiming excuse because of a force majeure event
shall send written notice to the other party as soon as practicable after
learning of the existence of such event, but the right to claim force majeure
shall not be conditional upon the giving of such notice. If there is no
14
15
reasonable prospect that the force majeure event can be corrected or eliminated
within six (6) months, then either party may notify the other that the force
majeure event is "likely to be permanent." Unless the party receiving such
notice requests, within thirty (30) days of such receipt, resolution of the
matter pursuant to the Dispute Resolution provision of the Agreement, either
party shall then have the right (a) to terminate the Agreement if the force
majeure event excuses total performance of the party claiming excuse, or (b) if
only a portion of performance is excused by the force majeure event, to
terminate the Agreement with respect to that portion of performance so excused.
Section 5.9 Dispute Resolution. The parties will attempt to settle any
and all disputes arising out of or in connection with the execution,
interpretation, performance, or non-performance of this Agreement or any other
certificate, agreement, or other instrument between, involving, or affecting the
parties and their relationship hereunder by first using the dispute resolution
procedures set forth in this Article. If the Buyer and Seller are unable to
resolve a dispute after a reasonable period of time following good faith efforts
they will (A) reduce to writing the nature of the dispute, and (B) forward the
dispute to the parties' respective chief operational officers
15
16
responsible for this Agreement for resolution, hereinafter the "Principals". The
Principals will schedule a meeting as soon as possible after receipt of the
dispute where they will attempt to resolve the dispute to the parties' mutual
satisfaction. If, however, the dispute is not resolved within sixty (60) days
after referral to the Principals, then either party may pursue any legal
recourse or remedy available to that party under this Agreement or at law.
Section 5.10 Assignment. Seller without Buyer's consent may assign,
pledge or hypothecate this Agreement solely for financial purposes.
Additionally, either party may, without the consent of the other, assign or
transfer this Agreement to an Affiliated Entity, as hereinafter defined, and
thereafter to a Non-affiliated Entity or Entities, as hereinafter defined, which
become the owner or owners of the generating plant or plants to which this
contract pertains, and the obligation of Buyer under this Agreement shall be
assumed by such Affiliated Entity, and thereafter assumed by such Non-affiliated
Entity or Entities without the consent of any other party. Buyer or such
Affiliated Entity shall notify the other parties to this Agreement of any such
assignment and assumption within ninety days after the effective date thereof.
Buyer and/or its Affiliated Entity shall be released automatically from any and
16
17
all of its obligations and liabilities under this Agreement upon the effective
date of any such assignment to and assumption by a Non-affiliated Entity or
Entities. Failure to provide the notice required under this paragraph shall not
affect or invalidate Buyer's automatic release hereunder. For the purposes of
this provision, the term "Affiliated Entity" shall mean any corporation,
partnership, limited liability company, joint venture or other entity which is,
directly or indirectly, controlling, controlled by or under common control with
Buyer, and the term "Non-affiliated Entity or Entities" shall mean any and all
corporations, partnerships, limited liability companies, joint ventures or other
entities which are not, directly or indirectly, controlling, controlled by or
under common control with Buyer. No assignment for which consent is required
shall be effective until an executed copy thereof is furnished to the other
party, and such assignment shall operate to excuse such assigning party from the
performance of its obligations hereunder. This provision shall apply even if any
or all of the generating plants to which this Agreement applies are purchased by
different Non-affiliated Entities.
Section 5.11 Waivers and Defaults. The failure of a party to insist in
any one or more instances upon strict performance of a provision of the
Agreement or to take advantage of any of
17
18
its rights under the Agreement shall not be construed as a waiver of such
provision or the relinquishment of such right. Unless otherwise provided in the
Agreement, no default of a party in the performance of a covenant or obligation
under the Agreement shall result in the other party's right to cancel or
terminate the Agreement unless such defaulting party shall have failed to
correct the default within thirty (30) days after written notice of claim of
default has been given by the other party.
Section 5.12 Limitations. EXCEPT AS EXPRESSLY STATED IN THE AGREEMENT,
SELLER MAKES NO WARRANTY, WHETHER EXPRESS OR IMPLIED, WRITTEN OR ORAL, AND
WHETHER AS TO MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, ARISING FROM A
COURSE OF DEALING OR USAGE OF TRADE, QUANTITY, QUALITY, OR OTHERWISE. NEITHER
SELLER NOR BUYER SHALL BE LIABLE FOR ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL
DAMAGES, INCLUDING WITHOUT LIMITATION LOSS OF PROFITS OR OVERHEAD, BY VIRTUE OF
ITS BREACH OF ANY OF ITS OBLIGATIONS UNDER THE AGREEMENT.
Section 5.13 Notice. Notice given hereunder by one party to the other
shall be deemed sufficient if in writing, and transmitted by telex or telegraph
or dispatched in the U.S. mail, postage prepaid, for mailing by first class,
certified, or registered mail. Notice shall be forwarded to (or to such other
18
19
person or address as such party may have specified by written notice):
For Buyers: Manager - Fuel Supply
New York State Electric & Gas Corporation
Corporate Drive, P.O. Box 0000
Xxxxxxxx Xxxxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000-0000
For Seller: Vice President - United Eastern
Coal Sales Corp.
X.X. Xxx 000
Xxxxxxx, XX 00000
Section 5.14 Attorney's Fees. Each party shall be entitled to recover
reasonable attorney's fees and court costs from the other party in any
litigation arising out of the other party's breach of this Agreement; provided,
however, it is determined by a court of competent jurisdiction that such party
was in breach of this Agreement and such decision is final and binding upon the
parties.
Section 5.15 Entire Agreement. The Agreement constitutes the entire
agreement of the parties and supersedes all previous communications or
understandings between them regarding the matters contained herein. No amendment
or modification of the Agreement shall be effective unless agreed to in a
written instrument authorized and executed by the parties.
19
20
Section 5.16 Applicable Law. The Agreement shall be construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
Buyer: Seller:
NEW YORK STATE ELECTRIC & GAS UNITED EASTERN COAL SALES
CORPORATION CORPORATION
By: By:
-------------------------------- -------------------------------
Title: Title:
----------------------------- ----------------------------
20
