EIGHTH AMENDMENT
TO
COAL PURCHASE AND SALES AGREEMENT
This EIGHTH AMENDMENT is made and entered into as of July 1,
1996, between ORANGE AND ROCKLAND UTILITIES, INC., a New York
corporation ("Buyer") and XXXXXX COAL SALES COMPANY, INC., a
Virginia corporation ("Seller").
RECITALS
1. Buyer and Seller, together with Xxxx Sales & Processing
Company, Inc. ("Xxxx"), an affiliate of Seller, entered into a Coal
Purchase and Sales Agreement on March 9, 1984 (the "Agreement"),
and have amended the Agreement on seven previous occasions, July
30, 1986, July 1986, September 1986, January 1987, January 1990,
July 1, 1991 and July 1, 1994.
2. Buyer and Seller are mutually interested in continuing
their relationship under the Agreement and agree to amend the
Agreement to effect the amendments herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual agreements
contained herein, and for other good and valuable consideration,
the parties hereto agree as follows:
1. Article I of the Agreement is deleted in its entirety and in
substitution thereof a new Article I is added to read as follows:
ARTICLE I
Amount of Coal - Term of Agreement
1.1 Seller agrees to sell, and Buyer agrees to purchase,
coal of the quality and in quantities hereinafter stated and
upon the terms and conditions herein set forth. Seller will
deliver such coal to Buyer (f.o.b. cars at Seller's Mines
(hereinafter defined)) for a period of twenty (20) years from
July 31, 1987, subject to earlier termination as hereinafter
provided.
1.2 The quantity of coal to be sold by Seller to Buyer and
purchased by Buyer from Seller hereunder shall be the lesser
of (i) ninety percent (90%) of the total tonnage of coal
delivered to the Xxxxxx Plant and to off-site storage during
each Contract Year or (ii) 630,000 Tons (hereinafter defined)
of coal.
Buyer shall have the option to purchase up to an additional
100,000 tons of coal per Contract Year from Seller. Buyer
must exercise its option on or before June 1st for up to
50,000 tons and on or before December 1st for up to 50,000
tons. The optional tonnage shall be shipped at the then-
current contract price.
1.3 As used in this Agreement, the following terms shall have
the meaning indicated:
(1) "Contract Year" shall mean each 12-month period beginning
on July 1, 1996, and ending on June 30, 1997, and for every
12-month period thereafter during the term of this Agreement.
(2) "F.O.B. cars" means coal free on board railroad cars at
Seller's Mines.
(3) "Price per ton FOB cars" means the price of coal as
loaded in railroad cars at Seller's Mines.
(4) "Seller's Mines" means the Xxxxxx Xxxxx, the Xxxx Mines,
the Long Fork Mines and/or any alternate source(s) qualified
pursuant to Article VI, herein.
(5) "Shipment" means a trainload of coal, shipped from
Seller's Mines in any single day.
(6) "Ton" shall mean a net weight of 2,000 pounds avoir-
dupois.
(7) "Quality A Coal" shall mean that coal which at a minimum
meets the quality specifications as stated in Article V,
herein, under the heading Quality A Coal.
(8) "Quality B Coal" shall mean that coal which at a minimum
meets the quality specifications as stated in Article V,
herein, under the heading Quality B Coal.
(9) "Quality A Initial Price" shall mean $32.00 per ton
F.O.B. cars at Seller's Mines for Quality A Coal, as set
forth in Section 3.1 herein.
(10) "Quality A Price" shall mean Quality A Initial Price as
subsequently adjusted in accordance with Article III herein
for Quality A Coal.
(11) "Quality B Initial Price" shall mean $29.25 per ton
F.O.B. cars at Seller's Mines for Quality B Coal, as set
forth in Section 3.1 herein.
(12) "Quality B Price" shall mean Quality B Initial Price as
subsequently adjusted in accordance with Article III herein
for Quality B Coal.
(14) "Long Fork Mines" shall mean the Long Fork Preparation
Plant in Belfry, Kentucky.
(15) "Xxxx Mines" shall mean the feeder mines for the Rawl
Preparation Plant in XxXxx, West Virginia as further
identified in Exhibit D hereto.
(16) "Xxxxxx Xxxxx" shall mean the feeder mines for the
Xxxxxx Preparation Plant in Xxxxxx, Kentucky as further
identified in Exhibit A hereto, and which constitute the
dedicated coal reserves underlying this Agreement.
(17) "As Received" is an analytical term referring to an
analysis of coal, including moisture content, in its natural
conditions after washing, as opposed to a "dry basis", and
has no reference to the receiving point of the coal.
1.3 Buyer and Seller agree that effective July 1, 1996 coal
supplied under this Agreement shall, at a minimum, meet the
quality specifications for Quality B Coal as specified in
Article V herein and shall be priced at the Quality B Initial
Price or Quality B Price, as applicable, according to Article
III herein. Buyer and Seller agree that Quality B Coal
supplied hereunder shall originate from Seller's Mines.
Price, as determined under Article III herein, shall be
calculated according to the quality of coal requested by
Buyer and, except as provided in Article IX herein, without
regard to whether the coal actually delivered by Seller to
Buyer exceeds the quality requested by Buyer.
1.4 Buyer and Seller agree that upon ninety (90) days
advanced written notice by Buyer to Seller, coal supplied
under this Agreement shall, at a minimum, meet the quality
specifications for Quality A Coal as specified in Article V
herein and shall be priced at the Quality A Initial Price or
Quality A Price, as applicable, according to Article III
herein. Buyer and Seller agree that Quality A Coal supplied
in accordance with Buyer's option to elect Quality A Coal at
the Quality A Initial Price or Quality A Price, as
applicable, may originate from Xxxx Mines and/or from
alternate source(s) qualified in accordance with Article VI
herein. In the event Buyer has exercised its option to
purchase Quality A Coal, Buyer shall have the right to switch
back to Quality B Coal at the Quality B Price upon one
hundred and twenty (120) days advanced written notice.
2. Article III of the Agreement is deleted in its entirety and
in substitution thereof a new Article III is added to read as
follows:
ARTICLE III
Price and Price Adjustments
3.1 Unless and until it is adjusted solely in accordance with
the provisions hereinafter set forth in this Article III,
effective as of July 1, 1996, the price per ton F.O.B. cars
at Seller's Mines for all coal sold hereunder shall be $32.00
for Quality A Coal and shall hereinafter be referred to as
"Quality A Initial Price" and $29.25 for Quality B Coal and
shall hereinafter be referred to as "Quality B Initial
Price", except as provided in Section 3.3(d) herein. After
any such adjustments have been made in accordance with this
Article III, the price per ton F.O.B. cars at Seller's Mines
shall be the Quality A Initial Price or Quality B Initial
Price, as adjusted, hereinafter referred to as Quality A
Price and Quality B Price, as the case may be. The Quality A
Initial Price and Quality B Initial Price, includes all costs
associated with compliance with all Federal, State, and local
laws and regulations as of the effective date of this
Amendment as they are now interpreted and enforced in
Producing District 8, as defined in the Federal Bituminous
Coal Act of 1937, as amended. Notwithstanding the foregoing,
Buyer shall only pay the Quality A Price in the event Buyer
exercises its option to elect Quality A Coal at the Quality
A Price in accordance with Article I herein.
3.2 Seller shall give Buyer notice of any proposed adjustment
hereunder of the Quality A Initial Price, or the then
applicable Quality A Price, and Quality B Initial Price, or
the then applicable Quality B Price, within thirty (30) days
after the beginning of each calendar quarter as set forth in
Article 3.3 (a) herein, together with all documentation
required to permit Buyer to substantiate the adjustment.
3.3 Beginning October 1, 1996, the Quality A Initial Price,
or the then applicable Quality A Price, and Quality B Initial
Price, or the then applicable Quality B Price, shall be
subject to adjustment, on a quarterly basis, to reflect the
total percentage change, increase or decrease, in the
following indices, published by the U.S. Department of Labor,
Bureau of Labor Statistics and the Bureau of Economic
Analysis.
(a) The total percentage change in the indices described
below shall be multiplied by the Quality A Price and
Quality B Price for the immediately preceding quarter,
less the fixed cost portion of the price, to determine
the change in the price for the current quarter. The
fixed cost portion of the Quality A Price is $3.20 per
Ton and the fixed cost portion of the Quality B Price is
$2.92 per Ton. These fixed cost amounts shall remain
fixed during the term of this Agreement unless the
parties mutually agree otherwise.
Component Description Component Weight
* (a) Drills & Other Mining Machinery 6%
(Index Code 1192-03)
*** (b) Implicit Price Deflator - 22%
Gross Domestic Product
**** (c) Average Hourly Earnings of 33%
Bituminous Coal and Lignite
Workers (Index Code SIC 122)
* (d) Industrial Commodities of 27%
Producer Price Index
* (e) Mining Machinery Parts, 6%
Excluding Drills
(Index Code 1192-5301)
** (f) Industrial Power, Middle Atlantic 6%
500 KW (Index Code 1481-132)
* These indices shall be taken from Table 6 - Producer Price
Indexes and percent change for commodity groupings and individual
items in the Producer Price Index publication.
** This indice shall be taken from Table 5 - Producer Price Indexes
for the net output of selected industries and their products in the
Producer Price Index publication.
*** This indice shall be taken from the Economic Indicators
publication.
**** This indice shall be taken from Table B-15 Average hours and
earnings of production or nonsupervisory worker's on private
nonfarm payrolls by detailed industry in the Employment and
Earnings publication.
(1) Said quarterly price adjustments shall be made on January
1, April 1, July 1 and October 1 of each year. For those
indices defined in Component Descriptions (a), (d), (e) and
(f) described above, the dates of the indices used to make
the quarterly adjustment shall be as follows:
Adjustment Date of Publication
Date Index Date of Index
January October October
(of preceding year) (of preceding year)
April January January
July April April
October July July
The base index for the October 1, 1996 adjustment
hereunder shall be that for April, l996.
(2) The dates of the indices used to make said quarterly
price adjustments involving the Average Hourly Earnings of
Bituminous Coal and Lignite Workers (Index Code SIC 122) (as
identified in Component Description (c) above) shall be as
follows:
Adjustment Date of Publication
Date Index Date of Index
January September November
(of preceding year) (of preceding year)
April December February
(of preceding year)
July March May
October June August
The base index for the October 1, 1996 adjustment
hereunder shall be that for March, l996 published in May
1996.
(3) The dates of the indices used to make said quarterly
price adjustments involving the Implicit Price Deflator of
the United States Gross Domestic Product (as identified in
Component Description (b) above) shall be as follows:
Adjustment Date of Publication
Date Index Date of Index
January Second Quarter October
(of preceding year) (of preceding year)
April Third Quarter January
(of preceding year)
July Fourth Quarter April
(of preceding year)
October First Quarter July
The base index for the October 1, 1996 adjustment
hereunder shall be that for the fourth quarter l995 as
published in the April 1996 Economic Indicator.
(4) As an illustration of the methodology for Quality B Coal,
assume the following for October 1, 1996:
Component Percent Weight of Component Change
Change Component As Weighted
(a) 0.95% 6% 0.06%
(b) 0.31% 22% 0.07%
(c) 1.41% 33% 0.47%
(d) 1.05% 27% 0.28%
(e) 0.15% 6% 0.01%
(f) 0.47% 6% 0.03%
0.88%
The components, as weighted, increased by 0.88%. Based on
this increase, the Quality B Initial Price of $29.25 per Ton
will be increased by $0.23 to $29.48 or [{($29.25 - $2.92) x
0.88%} + $29.25].
It is understood by the parties that the quarterly percentage
change in indices mentioned above shall be calculated using
the current applicable calendar quarter and the immediately
previous calendar quarter. There shall not exist a stationary
base from which to measure any change in cost under this
Section 3.3. See Exhibit B for an illustration of these
provisions.
(5) Cost of Complying with New Federal, State or Local
Regulations
(A) In the event of the imposition on or after July
1, 1996 by Federal, State, or local legislation or
regulations, of any new requirements or change in the
interpretation and enforcement of existing requirements
that affect the cost of production of coal at Seller's
Mines, either party hereunder may propose a change in the
price of coal to be sold hereunder. Any such change shall
be applied on a prospective basis only. The party
proposing a change shall compute the change in cost per
ton of coal produced resulting therefrom. The party
proposing a change shall submit detailed documentation in
support of its request for any such change. Seller and
Buyer agree to negotiate an adjustment in the Quality A
Price and Quality B Price, as applicable, to reasonably
reflect such change in cost. Notwithstanding the
foregoing, Seller and Buyer may agree to a tentative
change in the Quality A Price and Quality B Price, as
applicable, subject to retroactive adjustment, to be
utilized until the parties agree on a reasonable final
adjustment.
(B) In the event the Quality A Price or Quality B
Price is adjusted pursuant to this Section 3.3(a)(5) by
more than a cumulative adjustment of five percent (5%) in
any one (1) Contract Year, Buyer may terminate this
Agreement; provided, however, that Buyer shall not have
the right to terminate this Agreement if Seller agrees to
limit such price adjustment under this Section 3.3(a)(5)
to the above-stated percentage increase. Seller shall
have the right to accept the maximum change in price
under the above-stated percentage limit and continue the
Agreement.
(b) Should any of the indices specified in Section 3.3(a) be
discontinued, the parties hereto mutually determine that any
of the indices have become inappropriate, or the basis of the
calculations of such indices be modified, appropriate indices
shall be substituted or adjustments made by mutual agreement
of the parties hereto.
(c) Seller agrees that the production and delivery of coal
under this Agreement shall, at all times, be conducted
efficiently and economically and in such manner that the
costs thereof will be kept to a minimum consistent with good
operating practices within the limits set by governmental
regulations and proper mining and engineering techniques.
(d)(1) The Quality A Price and Quality B Price, shall be
subject to review by Buyer and Seller as of July 1, 1998, and
every two (2) years thereafter (each such review date being
hereinafter referred to as a "Review Date"). Sixty (60) days
prior to each Review Date, Buyer and Seller shall begin
negotiations in good faith to reach agreement on a new
Quality A Price and Quality B Price effective as of the
Review Date for the next succeeding two (2) year period, as
adjusted according to the provisions of Section 3.3(a) of
this Agreement. If Buyer and Seller are unable to reach
agreement by the applicable Review Date, this Agreement shall
automatically terminate one hundred twenty (120) days after
the applicable Review Date unless Buyer and Seller agree
otherwise in writing. During such one hundred twenty (120)
day period, Seller shall deliver and Buyer shall accept the
quantity of coal provided for in this Agreement at the
Quality A Price or Quality B Price, as applicable prevailing
on the last day immediately preceding the Review Date in
question, subject to adjustment as provided for in Subsection
3.3(a) of this Agreement.
(2) Notwithstanding Section 3.3(d)(1), if Buyer is
willing to accept a ten percent (10%) increase in the Quality
A Price and Quality B Price, or Seller is willing to accept
a ten percent (10%) decrease in the Quality A Price and
Quality B Price, the Quality A Price and the Quality B Price
effective as of the applicable Review Date shall be increased
by ten percent (10%) if acceptable to Buyer or decreased by
ten percent (10%) if acceptable to Seller. The reduced or
increased Quality A Price and Quality B Price shall be
effective as of the Review Date for the next succeeding two
(2) year period, as adjusted according to the provisions of
Section 3.3(a) of this Agreement. If Buyer is limited to a
ten percent (10%) price decrease by Seller on any Review
Date, or if Seller is limited to a ten percent (10%) price
increase by Buyer on any Review Date, then the party so
limited shall not be limited in like manner on any subsequent
Review Date for the remaining term of this Agreement.
3. ARTICLE V of the Agreement is deleted in its entirety and in
substitution thereof a new Article V is added to read as follows:
ARTICLE V
Quality of Coal
5.1 The coal to be purchased and sold hereunder shall conform
to the following:
(a) Preparation and Top-Size
Said coal shall be washed coal, free of extraneous
materials, produced by surface or deep mining methods and
meeting the specifications set forth in Section 5.1(b) of
this Article V and having a maximum top-size of two
inches.
(b) Quality Specifications
(1) The "As Received" quality of the coal delivered
hereunder, determined by sampling and analysis made in
conformity with the provisions of Article VIII, shall be
as follows:
Representative Coal Specifications (As Received Basis)
Quality A Quality B
Coal Coal
Moisture 7.0% 7.0%
Fixed Carbon 52.0% 52.0%
Volatile Matter 33.0% 33.0%
Ash 8.0% 8.5%
Xxxxxxxxx Grind 46 43
Ash Softening Temp. ("AST")
(Initial Deformation 2700o F 2700o F
in Reducing Atmosphere)
Ash Fluid Temp. 2700o F 2700o F
Sulfur (SO2) 1.0 lbs. 1.0 lbs.
SO2/MMBtu max SO2/MMBtu max.
Btu/lb. 13,000 12,950
(2) The level of sulfur dioxide in the coal (lbs. SO2/MM
Btu) shall be calculated based on a 2.5% credit that
Buyer anticipates for sulfur dioxide capture in ash in
accordance with industry standards. The formula to be
used for calculating SO2 in the coal is:
Lbs. SO2/MMBtu = 19.5 x % Sulfur x 1000
----------------------
Btu/lb
5.2 (a) It is agreed that Buyer shall have the right to
reject any and all shipments which, based on the procedures
defined in Article VIII, fail to meet any of the individual
shipment rejection limits shown below:
Individual Shipment Rejection Limits (As Received)
Quality A Quality B
Coal Coal
Volatile Matter 30.0% min. 30.0% min.
AST (Initial Deformation
in Reducing Atmosphere 2500o min. 2500o min.
Sulfur (SO2) 1.0 lbs. 1.0 lbs.
SO2/MMBtu max. SO2/MMBtu max.
Moisture 8.0% max. 8.0% max.
Btu/lb 12,800 min. 12,750 min.
Xxxxxxxxx Grind See Below ___
==========================================================
Quality A
Coal
Moisture Above 7% 7% and below
(maximum 8%)
or and
Heat Content Below 13,000 Btu/lb. 13,000 Btu/lb.
(minimum 12,800 Btu/lb) and Above
then then
HGI 46 or Above 45 Minimum*
* This limit is subject to the exception that one shipment
during any 90-day period can have an HGI of 44 minimum. The
moisture associated with this shipment must be 7% or lower and the
Btu content 13,000 Btu/lb. or higher. If a shipment having a 44
HGI is delivered, another shipment of 44 HGI may not be delivered
for another 90 days.
Any failure to meet the Individual Shipment Rejection Limits
as determined by sampling and analysis made in conformity with
Article VIII shall be deemed material and shall trigger Buyer's
rejection rights.
Seller shall pay all freight, diversion, demurrage, testing
and other expenses in connection with any such rejected shipment,
or shipment found by Seller to be non-conforming unless such
shipment is accepted by Buyer. Furthermore, Seller certifies that
it will not make any shipment shown by sampling to exceed the
maximum allowable SO2 levels.
(b) In addition to the limits for individual shipments shown
above, the delivered coal must meet the following specifications
over each thirty (30) and ninety (90) day period:
30-Day Suspension Limits (As Received):
Quality A Quality B
Coal Coal
Ash 10.0% max. 10.0% max.
Volatile 30.0% min. 30.0% min.
AST 2500o min. 2500o min.
90-Day Suspension Limits (As Received):
Quality A Quality B
Coal Coal
Moisture 7.0% max. 8.0% max.
Btu/lb. 12,800 min. 12,800 min.
HGI In accordance with 43 min.
following formula:
Btu/lb. x HGI greater than or equal to 600
-------------
1000
If the coal delivered hereunder, as determined by sampling
and analysis made in conformity with Article VIII, does not meet
the Thirty (30) Day Suspension Limits on specifications on an
average for a thirty (30) day period, or does not meet the Ninety
(90) Day Suspension Limits on specifications on average for a
ninety (90) day period, Buyer shall thereupon have the right to
suspend delivery under this Agreement until Seller furnishes
reasonable assurance to Buyer in writing that the deviation from
the specifications can and will be corrected. If Seller fails to
promptly furnish reasonable assurance that such correction can and
will be made within sixty (60) days after Buyer's suspension of
deliveries (or within such longer period as shall be reasonably
requested by Seller and agreed to by Buyer), or if corrections are
not made within such sixty (60) day period (or such longer period
agreed to by Buyer), Buyer shall have the right at any time
thereafter to terminate this Agreement by giving written notice of
such termination to Seller. Upon such termination Buyer shall stand
discharged of any and all further obligations or liability under
the terms of this Agreement or as a result of such termination,
with the exception of paying for coal previously shipped and
accepted by Buyer. Termination hereunder shall not constitute a
waiver of any other rights or remedies that Buyer may have under
this Agreement. Any deviation from the 30-Day Suspension Limits
and/or the 90-Day Suspension Limits as determined by sampling and
analysis made in conformance with Article VIII shall be deemed a
material deviation from the quality specifications of the Agreement
for which Buyer shall have the rights and remedies set forth in
this section. If Buyer, after having suspended shipments for a
period of one hundred eighty (180) days, has not elected to
terminate this Agreement, then Seller shall have the option of
terminating this Agreement by giving written notice of such
termination within sixty (60) days after the expiration of such
180-day period. Nothing in this Section 5.2(b) shall be construed
to relieve Seller of its obligation to conduct its mining and coal
cleaning operations in a competent manner, consistent with good
coal industry practices, so as to produce a product which will meet
the specifications set forth in Section 5.1 above.
The Thirty (30) Day and Ninety (90) Day Suspension Limits
shall be calculated by the Buyer on a weighted average basis. In
addition, the ninety (90) day weighted averages shall be computed
on a rolling tri-monthly basis. For example, the ninety (90) day
weighted average for the month of May shall consist of the
deliveries during the months of March, April, and May. In a
similar fashion, the ninety (90) day weighted average for the month
of June shall consist of the deliveries actually completed at
Buyer's plant during the months of April, May and June. Exhibit C
sets forth illustrations of how the weighted average suspension
limits shall be calculated hereunder.
5.3 Seller shall apply material of quality, in a quantity,
and by customary method reasonably acceptable to Buyer,
without delaying loading, to inhibit the freezing of coal in
railroad cars during periods of cold weather, or for other
purposes deemed necessary by Buyer. Buyer shall provide
Seller reasonable advance notice of the dates for
commencement and termination of such application(s) during
each Contract Year. Seller shall only invoice Buyer for
Seller's actual cost of freeze-inhibiting material. Such
costs shall be accounted for separately by Seller.
4. Article VI of the Agreement is deleted in its entirety and in
substitution thereof a new Article VI is added to read as follows:
ARTICLE VI
Alternate Source
Seller shall, at its sole option, have the right, but not the
obligation, to supply all or a portion of the coal required
under Article I hereof from other mines, provided that
shipments from such mines shall (a) meet the quality
specifications of this Agreement in accordance with Buyer's
election of coal quality between Quality A Coal and Quality
B Coal under Article I; (b) meet all the other requirements
of this Agreement; (c) not result in higher cents/MMBtu delivered
cost to Buyer of coal to be delivered to Buyer under this
Agreement; (d) pass a burn test at the Xxxxxx Plant to
Buyer's reasonable satisfaction; and (e) not adversely affect
Buyer's ability to meet tonnage requirements under its then-
effective coal transportation agreements so as to increase
the delivered price per ton of coal under such agreements or
otherwise result in Buyer incurring penalties or other
additional charges under such agreements.
5. Article VIII of the Agreement is deleted in its entirety and
in substitution a new Article VIII is added to read as follows.
ARTICLE VIII
Sampling and Analysis of Coal
The Seller shall be responsible for collecting and analyzing
the source sample and, except as otherwise provided in this
Agreement, the results thereof shall be accepted and used for
the "As Received" quality and characteristics of the coal
delivered under this Agreement. The source sample is the
sample taken by an automatic sampler at the FOB loading point
at Seller's Mines, before the shipment is shipped, in
accordance with the American Society for Testing and
Materials ("ASTM") approved method or such other method
mutually agreed to by Buyer and Seller. Car top sampling
shall not be allowed, except on the occasions when the
automatic sampling equipment becomes inoperative, as
hereinafter provided for. All analyses shall be performed in
accordance with methods approved by ASTM unless otherwise
mutually agreed to by Buyer and Seller. All sampling and
analyses shall be performed at the point of delivery at
Seller's Mines at Seller's expense, except as hereinafter
provided. Buyer shall have the right to have a representative
at any and all times to observe the sampling and analysis,
and to take check samples for further analysis. Buyer may
also analyze samples taken by Seller.
If Buyer questions Seller's automatic sampling equipment or
procedures for sampling and/or analyzing coal as not
resulting in accurate sampling and/or analytical
determinations of coal quality at point of sampling, Buyer
shall have the right to require that such equipment and
procedures be evaluated by a competent third party mutually
chosen and paid for equally by Seller and Buyer. If
deficiencies are found by such third party, Seller shall be
required immediately to have appropriate corrections made at
Seller's cost.
In the event that the automatic sampler becomes inoperative,
and less than eighty (80) percent of the required tonnage for
a shipment is sampled utilizing the automatic sampler, Buyer
shall have the option to require Seller's laboratory to car
top sample the remainder of the shipment or Buyer may utilize
their own outside lab representative to car top sample the
remainder of the shipment. In the event Buyer exercises this
option, Seller shall bear the cost of sampling and analysis
and the sample shall be handled as if taken by Seller and
shall be accepted as the quality and characteristics of the
coal "As Received" hereunder. In the event Buyer elects not
to sample such shipment, then the weighted average coal
quality of shipments delivered during the same calendar month
(or the immediately preceding month if no shipments have been
made during the current month) as such shipment will apply
for calculation of coal quality price adjustments for such
shipment.
Seller shall, within two business days of loading Buyer's
Shipment, furnish Buyer with a facsimile report showing the
coal quality and quantity of said Shipment, railroad car
numbers and the name of the mine or mines supplying the coal.
Buyer and Seller mutually agree that it is essential to this
Agreement that representative samples and accurate analysis
of the coal be obtained. To insure this, Seller shall take at
least three increments from every car during normal loading
of cars; and from those increments there shall be made one
composite sample.
The sample taken by Seller shall be divided into three (3)
parts and put into airtight containers, properly labeled and
sealed. One part shall be used for analysis by Seller, one
part shall be immediately sent to Buyer or its designated
representative and one part ("Referee Sample") shall be
retained by Seller. All samples retained by Seller shall be
kept, under proper storage conditions, for a period of at
least sixty (60) days. The Referee Sample shall be weighed
during preparation before storage, and if later analyzed, it
shall be weighed again with any weight loss indicated in the
analysis as moisture content. Buyer shall be given timely
copies of all analyses made by Seller. Unless Seller or Buyer
requests a Referee Sample analysis, Seller's analysis shall
be used to determine the quality of the coal delivered
hereunder. If for any reason Seller fails to sample and
provide an analysis for any shipment, then Buyer's
independent sample and analysis for said Shipment shall be
deemed to have been accepted by Seller.
In the event that either Buyer or Seller questions the
correctness of Seller's analysis, than Buyer or Seller shall
have the right to have the Referee Sample analyzed by an
independent testing laboratory selected by Buyer from an
agreed-to list of such laboratories, not including a
laboratory used by either party on the original sample. Said
laboratory shall use methods approved by ASTM or such other
procedures as may be accepted in writing by Buyer and Seller.
The parameters for determining the acceptability of an
analysis and use of the Referee Sample shall be in accordance
with ASTM reproducibility standards, except for BTU and HGI
specifications. The results of duplicate determinations
carried out by different laboratories on representative
samples taken from the same bulk sample after the last stage
of reduction will be considered suspect if any of the
analytical determinations differ by more than the
reproducibility standards set by ASTM, except for BTU
specifications where if the "As Received" BTU differs between
analyses by more than 100 Btu's, the Referee Sample shall be
sent out. If the analysis obtained by the independent
laboratory selected by Buyer meets the ASTM reproducibility
standards and/or the "As Received" BTU between different
analyses is within 100 Btu's, then Seller's original analysis
shall be binding on the parties with regard to both coal
quality and rejection and suspension limits. However, in the
event that the analysis obtained by the independent
laboratory does not meet the ASTM reproducibility standards
and/or the "As Received" Btu between analyses differs by more
than 100 Btu's, then the analysis obtained by said
independent laboratory shall be binding on the parties with
regard to coal quality and rejection and suspension limits.
If the correctness of the grind (HGI) is questioned, the
Referee Sample shall be divided three (3) ways and tested by
three (3) independent laboratories to be selected from a
previously established list of mutually acceptable
laboratories. The average of the results shall govern.
No variations in the minimum specifications for grind (HGI)
are permitted due to error tolerances under the ASTM
standards or as assumed by testing laboratories. However, if
the standards used by ASTM for evaluating grind (HGI) are
changed, the parties agree that the minimum specifications
herein set forth shall be adjusted to maintain a comparable
minimum specification using the new ASTM standards.
The cost of the analysis made by the independent testing
laboratory shall be borne by the Seller unless: (a) Seller's
analysis is confirmed to meet ASTM reproducibility standards
or (b) the "As Received" Btu between different analyses is
within 100 Btu's; or (c) the grind average of the three
independent testing laboratories confirms the Seller's
analysis, in which cases Buyer shall bear the cost of the
analyses made on the Referee Sample by the independent
laboratory.
6. Article IX of the Agreement is deleted in its entirety and in
substitution a new Article IX is added to read as follows:
ARTICLE IX
Compensation for Variations in Heating and Ash Values
9.1 Compensation for variations in heating value for coal
purchased and sold hereunder shall be determined in
accordance with the following:
(a) The F.O.B. Seller's Mines price provided for in
Article III ("Price and Price Adjustment") is based on
coal with a heating value as shown in the quality
specifications of Section 5.1 (b), namely 13,000 "As
Received" Btu per pound for Quality A Coal and 12,950 "As
Received" Btu per pound for Quality B Coal. In accordance
with the sampling and analysis procedures set forth in
Article VIII ("Sampling and Analysis of Coal"), the
average "As Received" Btu per pound of coal shipped
hereunder during each calendar quarter during the term of
this Agreement shall be calculated. Compensation to
either Buyer or Seller, as the case may be, for variation
in the weighted average heating value of the coal
delivered during each calendar quarter shall be
determined as follows:
(1) If the weighted average "As Received" Btu for any
calendar quarter is greater than 13,050 Btu per pound for
Quality A Coal or for Quality B Coal, the additional
compensation to Seller shall be computed in accordance
with the following formula:
C = P x T x B - 1
S -----------------------------
(13,000 for Quality A Coal or
12,950 for Quality B Coal)
(2) If the weighted average "As Received" Btu for any
calendar quarter is less than 12,950 Btu per pound for
Quality A Coal or less than 12,850 Btu per pound for
Quality B Coal, the compensation to Buyer shall be
computed in accordance with the following formula:
C = P x T x 1 - B
B -------------------------------
(13,000 for Quality A Coal or
12,950 for Quality B Coal)
(b) In the above formula:
C = Total compensation to Seller.
S
C = Total compensation to Buyer.
B
P = Quality A Price or Quality B Price, as
applicable, for the applicable calendar
quarter.
B = The weighted average "As Received" Btu for the
applicable calendar quarter.
T = The total tonnage shipped during the
applicable calendar quarter.
9.2 Within thirty (30) days after the end of each calendar
quarter, Seller shall calculate the three-month average "As
Received" Btu (subject to Buyer's verification) and the
compensation to Seller or Buyer, as the case may be, in
accordance with Section 9.1 and shall forward the calculation
to Buyer. Seller shall issue an invoice for payment by Buyer
if the compensation is to Seller or shall issue a credit
memorandum (or cash payments with respect to the final
quarter of this Agreement) to Buyer if the compensation is to
Buyer.
9.3 The initial price is based upon Seller supplying coal
with an ash content ("Ash Value") of eight percent (8%) by
weight of the "As Received" analysis for each shipment of
Quality A Coal and an ash content ("Ash Value") of eight and
one-half percent (8.5%) by weight of the "As Received"
analysis for each shipment of Quality B Coal. The Ash Value
of the coal sold hereunder may vary, and the Quality A Price
and Quality B Price shall be adjusted in proportion to such
variance as follows:
For coal having an Ash Value greater than eight percent
(8%) for Quality A Coal or greater than nine and one-half
percent (9.5%) for Quality B Coal, the price shall be
reduced at a rate of $0.30 per ton per one percent (1%)
in excess of eight percent (8%) for Quality A Coal and
nine and one-half percent (9.5%) for Quality B Coal.
For coal having an Ash Value less than eight percent (8%)
for Quality A Coal or less than seven and one-half
percent (7.5%) for Quality B Coal, the price shall be
increased at a rate of $0.30 per ton per one percent (1%)
below eight percent (8%) for Quality A Coal and seven and
one-half percent (7.5%) for Quality B Coal.
9.4 Within thirty (30) days after the end of each calendar
quarter, Seller shall calculate the three-month average Ash
Value (subject to Buyer's verification) and the compensation
to Seller or Buyer, as the case may be, in accordance with
Section 9.3 and shall forward the calculation to Buyer.
Seller shall issue an invoice for payment by Buyer if the
compensation is to Seller or shall issue a credit memorandum
(or cash payments with respect to the final quarter of this
Agreement) to Buyer if the compensation is to Buyer.
7. Article X of the Agreement is deleted in its entirety and in
substitution thereof a new Article X is added to read as follows:
ARTICLE X
Terms of Payment
10.1 On or before the twenty-fifth (25th) day of each month
during the term of this Agreement, Seller shall render a
statement to Buyer for the total volume of coal shipped under
this Agreement between the first (1st) day and the fifteenth
(15th) day of the current month. Buyer shall pay to Seller,
on or before the fifth (5th) day of the following month the
amount due on Seller's statement. All such payments shall be
made by wire transfer directed to a bank account designated
by Seller.
On or before the eleventh (11th) day of each month during the
term of this Agreement, Seller shall render a statement to
Buyer for the total volume of coal shipped under this
Agreement between the sixteenth (16th) day and the last day
of the preceding month. Buyer shall pay to Seller, on or
before the twenty-first (21st) day of each month the amount
due on Seller's statement. All such payments shall be made by
wire transfer directed to a bank account designated by
Seller.
10.2 If Buyer fails to pay when due the amount of any
statement rendered by Seller, interest thereon shall accrue
from the due date until the date of payment, at the then
current prime rate of interest charged by Citibank, N.A. to
its commercial and industrial borrowers. This paragraph 10.2
shall not bar either Party from asserting any other remedy it
may have at law or in equity.
10.3 If presentation of a statement by Seller is delayed
after the eleventh (11th) and/or the twenty-fifth (25th) day
of a month, then the time for payment shall be extended by
the same number of days that the statement by Seller is
delayed at no interest correspondingly, unless Buyer is
responsible for such delay.
8. Article XI of the Agreement is amended by deleting subsection
11.4 thereof in its entirety and substituting therefor new
subsection 11.4 to read as follows:
11.4 The partial or complete limitation of performance
referred to in this Article XI shall not invalidate the
remainder of the Agreement or reduce the tonnages to be
purchased and sold in subsequent periods, and upon removal of
the cause of such suspension, shipments shall be resumed at
the specified rates.
9. Article XIV of the Agreement is deleted in its entirety and
in substitution thereof a new Article XIV is added to read as
follows:
ARTICLE XIV
Reserves
14.1 The coal reserves owned by or otherwise available to
Seller, and from which the coal to be shipped hereunder is to
be produced, are located in the vicinity of Pike County,
Kentucky on the Norfolk Southern Railway and are part of the
mining properties constituting the Xxxxxx Xxxxx. The total
quantity of suitable and economically recoverable coal of the
quality required to meet Seller's minimum obligation to Buyer
under this Agreement is 6.9 million tons. Seller shall
dedicate a minimum of 6.9 million tons of its and/or its
affiliates' or subsidiaries' suitable, economically
recoverable coal reserves at Xxxxxx Xxxxx for production over
the term of, and for the purpose of meeting Seller's
obligations under this Agreement. Seller, its affiliates' or
subsidiaries' shall not enter into other agreements for the
production and sale of coal from the above reserves which
production and sale would reduce or impair the reserves
required to meet Seller's obligations under this Agreement.
14.2 The above reserves may be reduced each calendar year by
the maximum amount of coal that Seller could have been
required to deliver to Buyer during said calendar year.
14.3 Buyer shall have the right from time to time, with
reasonable frequency and upon reasonable notice, to audit at
Buyer's expense (1) said reserves owned by or otherwise
available to Seller and (2) the commitments of Seller, its
affiliates and/or subsidiaries for the purpose of determining
if Seller has sufficient reserves available to it which are
not otherwise committed to comply with the reserve
requirements of this Agreement. Buyer may at its discretion
have any such audit conducted by an independent firm or firms
reasonably acceptable to Seller.
14.4 If, during the term of this Agreement, Seller, its
affiliate(s), subsidiaries and/or parent, enter into any
other agreements for the production and/or sale of coal from
the Xxxxxx Xxxxx' reserves and/or for the sale or lease of
the reserves themselves or interest(s) therein which
production, sale, and/or lease would reduce or impair the
reserves required to meet Seller's obligation under this
Agreement, in addition to any and all remedies Buyer shall
have in law or equity, Buyer shall have the right, but not
the obligation to terminate this Agreement. Notwithstanding
the foregoing, in the event Seller (i) demonstrates in
advance to the reasonable satisfaction of Buyer by acceptable
engineering data that any one or more of Seller's Mines,
other than the Xxxxxx Xxxxx, have sufficient coal reserves to
produce and deliver that amount of Quality A Coal or Quality
B Coal, as applicable, dedicated under Section 14.1, as
reduced in accordance with Section 14.2, and (ii) Seller
executes an amendment substituting such one or more of
Seller's Mines for Sidney's Mines as the dedicated reserve
under Article 14; the sale of Sidney's Mines or the interest,
if any, of Seller, its affiliates, subsidiaries or parent
therein shall not constitute a breach of this Agreement and
Seller shall have no right to terminate this Agreement.
Provided, however, nothing herein shall be construed to
prohibit Seller, its affiliate(s), subsidiaries and/or parent
from a sale of the Xxxxxx Xxxxx' reserves or Seller's, its
affiliate(s)', subsidiaries' and/or parent's interests
therein, which is accompanied by an assignment of this
Agreement in conformance with the terms and conditions of
Article XX to the purchaser of such reserves or interests
therein.
14.5 If, during the term of this Agreement, Seller enters
into an agreement with a domestic electric utility to sell
washed coal from Seller's Mines at a base price more than 10%
below the then current Quality A Price or Quality B Price as
applicable, and such agreement (a) specifies (1) the same or
higher heating value (Btu/lb.), (2) the same or lower ash
content, (3) the same or lower sulfur dioxide (SO2) content,
and (4) the same or lower moisture content than specified
under Section 5.1 (b), and (b) is on terms and conditions
comparable to the terms hereof, including a term of ten (10)
years or more and a quantity of 630,000 tons per year or
more, then Seller shall give written notice of such agreement
to Buyer within sixty (60) days of the execution thereof.
Buyer shall have the right to require Seller to decrease the
Quality A Price or Quality B Price hereunder, as applicable,
within sixty (60) days of Seller's notice, to match the base
price of the other agreement.
10. A new Article XXVI is added to the Agreement as follows:
ARTICLE XXVI
1.5 lbs. SO2/MMBtu Coal Purchase Option
26.1 Buyer and Seller agree that upon forty-five (45) days
advanced written notice, Buyer shall have the right to elect
to receive 1.5 lbs. SO2/MMBTU coal from Seller's Mines for a
period not to exceed sixty (60) days without Seller's prior
consent, provided, however, Buyer shall have the right to
elect to receive 1.5 lbs. SO2/MMBTU coal a minimum of two (2)
times per year.
26.2 Buyer and Seller agree that upon Buyer's advanced
written notice to Seller that it intends to exercise its
option to purchase 1.5 lbs. SO2/MMBTU coal, Buyer and Seller
will negotiate a mutually acceptable price to be paid for the
1.5 lbs. SO2/MMBtu coal. Any coal purchased pursuant to this
Article XXVI shall apply to Buyer's contract volume
requirement under Article I of the Agreement. Seller shall
not be required to deliver such coal in any amounts greater
than the proportionate monthly Tonnages as required for
Quality A Coal or Quality B Coal under this Agreement.
11. A new Article XXVII is added to the Agreement as follows:
ARTICLE XXVII
DEC Permit Revision
27.1 Buyer and Seller agree that during the term of this
Agreement the Buyer's New York State Department of
Environmental Conservation Operating Permit for the Xxxxxx
Plant may be changed to allow the Buyer to burn coal with a
higher sulfur content. If Buyer obtains a revised operating
permit from the New York State Department of Environmental
Conservation ("Revised Operating Permit"), then upon forty-
five (45) days advanced written notice from Buyer to Seller,
Seller agrees to supply Buyer with the higher sulfur coal
consistent with Buyer's Revised Operating Permit for the
remainder of the term of the Agreement, subject to earlier
termination as provided in this Agreement.
27.2 Buyer and Seller agree that upon Buyer's advanced
written notice to Seller that it has obtained a Revised
Operating Permit, Buyer and Seller shall negotiate a new
mutually acceptable Initial Price under Article III to be
paid for the higher sulfur coal under this Agreement,
provided; however, all other provisions of Article III herein
shall continue to apply to the new Initial Price for the
higher sulfur coal. Buyer and Seller agree to revise Article
III of this Agreement to reflect the new Initial Price and to
revise other terms and conditions of the Agreement as
necessary to reflect the higher sulfur quality specifications
of the coal and the source(s) to be used to supply such coal
hereunder.
12. The Supplemental Agreement between Buyer and Seller, dated
July 1, 1994, is cancelled effective July 1, 1996.
13. Except as amended hereby, and as previously amended, the
Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their duly authorized officers as of
the date first written above.
ORANGE AND ROCKLAND UTILITIES, INC.
(BUYER)
By ___________________________________ Date ___________
Xxxxxx X. Xxxxxx, Xx.
Division Vice-President -
Engineering & System Operations
XXXXXX COAL SALES COMPANY, INC.
(SELLER)
By ___________________________________ Date ___________
Xxxxxx X. XxXxxxx
Senior Vice President
EXHIBIT A
Xxxxxx Xxxxx
Pike County, Kentucky Properties
[MAP ATTACHED HERETO]
Page 1 of 2
Exhibit B
Quarterly Price Adjustment
Orange and Rockland/Xxxxxx Coal Sales
October 1, 1996
Quality A Coal
Previous Quarter Current Quarter
July 1996 October 1996
Index
Date Index Date Index
Drills & Other Mining Machinery 4/96 136.30 7/96 137.60
1192-03
Implicit Price Deflator 4th Qtr. 1995 127.90 1st Qtr. 1996 128.30
Gross Domestic Product
Average Hourly Earnings of Bituminous 3/96 18.40 6/96 18.66
Coal & Lignite Workers SIC 122
Industrial Commodities 4/96 124.00 7/96 125.30
of Producer Price Index
Mining Machinery Parts, Excluding 4/96 131.90 7/96 132.10
Drills, 1192-5301
Industrial Power, 500 KW 4/96 105.30 7/96 105.80
4981-132
Index/Cost Change Percent Weight of Component Change
Component Change Component as Weighted
PPI 1192-03 1.3000 0.0095 6% 0.0006
IPD-GDP 0.4000 0.0031 22% 0.0007
SIC 122 0.2600 0.0141 33% 0.0047
PPI-IC 1.3000 0.0105 27% 0.0028
PPI 1192-5301 0.2000 0.0015 6% 0.0001
4981-132 0.5000 0.0047 6% 0.0003
Total 0.0088
% Increase (Decrease) 0.0088
Previous Price ($32.00) less $28.80
Fixed Cost ($3.20)
Quarterly Adjustment $0.25
New Price Effective 10/1/96 $32.25
(inclusive of fixed cost)
Note: Indices shown are not actuals, used for illustration purposes only.
Page 2 of 2
Exhibit B
Quarterly Price Adjustment
Orange and Rockland/Xxxxxx Coal Sales
October 1, 1996
Quality B Coal
Previous Quarter Current Quarter
July 1996 October 1996
Index
Date Index Date Index
Drills & Other Mining Machinery 4/96 136.30 7/96 137.60
1192-03
Implicit Price Deflator 4th Qtr. 1995 127.90 1st Qtr. 1996 128.30
Gross Domestic Product
Average Hourly Earnings of Bituminous 3/96 18.40 6/96 18.66
Coal & Lignite Workers SIC 122
Industrial Commodities 4/96 124.00 7/96 125.30
of Producer Price Index
Mining Machinery Parts, Excluding 4/96 131.90 7/96 132.10
Drills, 1192-5301
Industrial Power, 500 KW 4/96 105.30 7/96 105.80
4981-132
Index/Cost Change Percent Weight of Component Change
Component Change Component as Weighted
PPI 1192-03 1.3000 0.0095 6% 0.0006
IPD-GDP 0.4000 0.0031 22% 0.0007
SIC 122 0.2600 0.0141 33% 0.0047
PPI-IC 1.3000 0.0105 27% 0.0028
PPI 1192-5301 0.2000 0.0015 6% 0.0001
4981-132 0.5000 0.0047 6% 0.0003
Total 0.0088
% Increase (Decrease) 0.0088
Previous Price ($29.25) less $26.33
Fixed Cost ($2.92)
Quarterly Adjustment $0.23
New Price Effective 10/1/96 $29.48
(inclusive of fixed cost)
Note: Indices shown are not actuals, used for illustration purposes only.
EXHIBIT C
a) Illustration of 30 Day Weighted Average Calculation
30 Day Weighted Averages
July 1996
Coal Train Arrival Ash Soft Ash Soft
Vendor Number Mine Date Tonnage Ash Ash % Volatile Volatiles % Temperature Temperature %
Xxxxxx XXX-0 Xxxx 7/02/96 9325.45 6.52 60,801.93 33.63 313,614.88 2800 26,111,260.00
UOR-4 Xxxx 7/08/96 9252.95 6.81 63,012.59 32.96 304,977.23 2800 25,908,260.00
UOR-6 Xxxx 7/12/96 9119.05 6.43 58,635.49 33.42 304,758.65 2800 25,533,340.00
UOR-8 Xxxx 7/25/96 8983.15 6.21 55,785.36 31.96 287,101.47 2800 25,152,820.00
Total 36,680.60 238,235.38 1,210,452.24 102,705,680.00
Total Weighted Average
Tonnage 36,680.60
Ash 238,235.38 6.49
Volatiles 1,210,452.24 33.00
Ash Soft Temp. 102,705,680.00 2,800.00
Note: Figures shown are not actuals; used for illustration purposes only.
b)Illustration Of 90 Day Weighted Average Calculation
90 Day Weighted Averages
July 1996- September 1996
Coal Train Arrival
Vendor Number Mine Date Tonnage Grind Grind % BTU BTU % Moisture Moisture %
Xxxxxx XXX-0 Xxxx 7/02/96 9325.45 46 428,970.70 13,002 121,249,500.90 6.85 63,879.33
UOR-4 Xxxx 7/08/96 9252.95 46 425,635.70 13,205 122,185,204.75 6.39 59,126.35
UOR-6 Xxxx 7/12/96 9119.05 47 428,595.35 13,265 120,964,198.25 6.70 61,097.64
UOR-8 Xxxx 7/25/96 8983.15 45 404,241.75 13,150 118,128,422.50 6.44 57,851.49
UOR-10 Xxxx 8/06/96 9120.25 46 419,531.50 13,158 120,004,249.50 6.38 58,187.20
UOR-12 Xxxx 8/11/96 9337.65 48 448,207.20 13,126 122,565,993.90 6.30 58,827.20
UOR-14 Xxxx 8/16/96 9102.65 48 436,927.20 13,201 120,164,082.65 6.40 58,256.96
UOR-16 Xxxx 8/22/96 8903.90 46 409,579.40 13,148 117,068,477.20 6.49 57,786.31
UOR-18 Xxxx 9/02/96 9103.65 47 427,871.55 13,267 120,778,124.55 6.51 59,264.76
UOR-20 Xxxx 9/12/96 9037.65 47 424,769.55 13,209 119,378,318.85 6.89 62,269.41
UOR-22 Xxxx 9/20/96 9138.15 46 420,354.90 13,231 120,906,862.65 6.52 59,580.74
UOR-24 Xxxx 9/30/96 9015.75 48 432,756.00 13,109 118,187,466.75 6.56 59,143.32
Total 109,440.25 5,107,440.80 1,441,580,902.45 715,270.69
Total Weighted Average
Tonnage 109,440.25
Grindability 5,107,440.80 46.67
BTU 1,441,580,902.45 13,172.31
Moisture 715,270.69 6.54
Grind Matrix 614.74
Note: Figures shown are not actuals; used for illustration purposes only.
EXHIBIT X
Xxxx Mines
Xxxxx County, West Virginia Properties
[MAP ATTACHED HERETO]
