Exhibit 10.8
CONFIDENTIAL TREATMENT REQUESTED
CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND HAVE BEEN
SEPARATELY FILED WITH THE COMMISSION.
FUEL SUPPLY AGREEMENT #141944
BETWEEN
SOUTH CAROLINA PUBLIC SERVICE AUTHORITY
AND
XXXXX RIVER COAL COMPANY
TABLE OF CONTENTS
ARTICLES AND SECTIONS HEADINGS
ARTICLE 1 DEFINITIONS AND TERM
Section 1.1 Definitions
Section 1.2 Term
ARTICLE 2 GENERAL PROVISIONS
Section 2.1 Mutual Obligations
Section 2.2 Prior Agreements
ARTICLE 3 SALE, PURCHASE AND
TRANSPORTATION OF COAL
Section 3.1 Quantity
Section 3.2 Source and Substitute Coal
Section 3.3 Transportation
Section 3.4 Time of Shipments
Section 3.5 Title and Risk of Loss
Section 3.6 Diversion of Shipments
Section 3.7 Reserves
ARTICLE 4 QUALITY
Section 4.1 Coal Specifications
Section 4.2 Analysis
Section 4.3 Adjustments for Quality Variation
Section 4.4 Suspension of Shipments for Coal Quality
Deficiencies
Section 4.5 Termination of Agreement for Coal Quality
Deficiencies
Section 4.6 Rejection of Coal for Coal Quality Deficiencies
Section 4.7 Suspension and Termination of Agreement for
Operational Considerations
ARTICLE 5 MEASUREMENT OF COAL RECEIVED
ARTICLE 6 PAYMENT AND RECORDS
Section 6.1 Payment
Section 6.2 Records
ARTICLE 7 PRICE
Section 7.1 Base Price
Section 7.2 Price
Section 7.3 Market Price Reopener
Section 7.4 Adjustment for Changes in Government Imposition
ARTICLE 8 RIGHT TO VISIT
ARTICLE 9 FORCE MAJEURE, ENVIRONMENTAL REQUIREMENTS,
TERMINATION AND SYSTEMWIDE REDUCTION
Section 9.1 Force Majeure
Section 9.2 Changes in Environmental Related Requirements
Section 9.3 Unilateral Termination Right
Section 9.4 Systemwide Reduction
ARTICLE 10 REMEDIES AND WAIVER
Section 10.1 Remedies
Section 10.2 Waiver
ARTICLE 11 GOVERNMENTAL AUTHORITY
Section 11.1 Compliance with Laws and Regulations
Section 11.2 Equal Employment Opportunity
Section 11.3 Permits and Licenses
ARTICLE 12 MISCELLANEOUS
Section 12.1 Assignment and Subcontractors
Section 12.2 Independent Contractor
Section 12.3 Succession
Section 12.4 Survival of Obligations
Section 12.5 Governing Law
Section 12.6 Severability
Section 12.7 Confidentiality
Section 12.8 Headings
Section 12.9 Joint and Several Liability
Section 12.10 Material Safety Data Sheet (MSDS)
Section 12.11 Drug Free Workplace Certification
Section 12.12 Safety
ARTICLE 13 NOTICES
ARTICLE 14 NON-COLLUSION
ARTICLE 15 AMENDMENTS
ARTICLE 16 ENTIRE AGREEMENT
ANNEXES
A Description of Dedicated Reserves
B Calculations for Quality Adjustments
C Railroad Provisions
D Buyer's Force Majeure of Sampling Equipment
E Sampling and Analysis
F Receiving Report and Coal Sample Data
Attachment 1 Drug Free Workplace Certification
THIS AGREEMENT, is entered into as of March 1, 2004 (Effective Date),
by and between the SOUTH CAROLINA PUBLIC SERVICE AUTHORITY, a body corporate and
politic owned by and operating under the laws of the State of South Carolina and
a generation, transmission and distribution public electric utility (hereinafter
referred to as "Buyer"), and Xxxxx River Coal Company ("JRCC"), a Virginia
corporation with its principal office located in Richmond, Virginia and Xxxxx
River Coal Sales, Inc. ("JRCS"), a Delaware corporation with its principal
office located in Richmond, Virginia, (hereinafter collectively referred to as
"Seller"). Both Buyer and Seller are herein individually referred to as "party"
and collectively referred to as "parties."
R E C I T A L S
WHEREAS, The Parties previously entered into those certain COAL SUPPLY
AGREEMENTS, No's C-07612-92 and C-07613-92, effective January 1, 1993, as
amended ("Prior Agreements"), which provided for Seller to supply, certain
quantities of coal to Buyer for use in operating Buyer's electric-generating
plants ("Stations"); and
WHEREAS, as a result of subsequent events and negotiations, the Parties
now wish to replace the Prior Agreements with this Agreement as hereinafter
provided;
NOW THEREFORE, in consideration of the covenants and premises herein
set forth, Seller agrees to sell and deliver and Buyer agrees to purchase,
accept and pay for coal in the quantity, of the quality, during the period, at
the price and upon the other terms and conditions set forth herein.
ARTICLE 1 - DEFINITIONS AND TERM
1.1 DEFINITIONS
Wherever the following terms appear in this Agreement, they shall have
the meaning stated below:
(a) ADJUSTED BASE PRICE - Base Price adjusted in accordance with
Article 6 hereof.
(b) ASH FUSION TEMPERATURE - Temperature of initial deformation of ash
fusion samples measured in a reducing atmosphere.
(c) AS-RECEIVED BASIS - Analysis data calculated to the moisture
condition of the sample as it arrived at a Station's laboratory
and before any sample processing or conditioning.
(d) BTU - British thermal unit of Heating Value.
(e) BASE PRICE - The Price established in accordance with Section 7.1
hereof.
(f) BUSINESS DAY - Monday through Friday excluding legal holidays and
holidays recognized by Buyer or Seller.
(g) CALENDAR DAY OR DAY - A Calendar Day shall be the 24 hour period
beginning and ending at 12:00 midnight Eastern Standard Time (or
Eastern Daylight Savings Time, as applicable). The terms Day and
Calendar Day may be used interchangeably and shall have the same
definition.
(h) CALENDAR MONTH OR MONTH - A Calendar Month shall begin at 12:00
midnight Eastern Standard
-2-
Time (or Eastern Daylight Savings Time, as applicable) on the last
Day of the preceding Month and shall end at 12:00 midnight Eastern
Standard Time (or Eastern Daylight Savings Time, as applicable) on
the last Day of the current Month. The terms Month and Calendar
Month may be used interchangeably and shall have the same
definition.
(i) CALENDAR YEAR OR YEAR - A Calendar Year shall be the 12 Month
period beginning at 12:00 midnight Eastern Standard Time (or
Eastern Daylight Savings Time, as applicable) on December 31 and
ending at 12:00 midnight Eastern Standard Time (or Eastern
Daylight Savings Time, as applicable) on December 31. The terms
Year and Calendar Year may be used interchangeably and shall have
the same definition.
(j) DELIVERED COST - The sum of the Price plus the normal cost of
transporting the coal supplied hereunder from the Shipping Point
(as defined in Section 3.2 to the Stations exclusive of extra
costs related to transportation incurred by either party due to
circumstances such as demurrage, substitution of sources or
diversion of Shipments.
(k) DRY BASIS - Analysis data calculated to a theoretical base of no
moisture associated with the sample.
(l) GRINDABILITY TEST - Determination of the relative ease of
pulverization of coal samples, using the Xxxxxxxxx index, pursuant
to ASTM test number D-409.
(m) HEATING VALUE - The gross or high Heating Value of coal expressed
in Btu per pound.
(n) MINE - The mining operation, identified by name in Section 3.2,
from which coal is supplied hereunder.
(o) PRICE - The Price to be paid by Buyer for coal received hereunder,
calculated in accordance with Article 7 of this Agreement.
(p) PROXIMATE ANALYSIS - Determination of moisture, volatile matter,
ash, and fixed carbon. In addition, for purposes of this Agreement
the Proximate Analysis shall include determination of total sulfur
and Heating Value.
(q) RECEIPT - Receipt of coal supplied under this Agreement shall
occur when the delivering rail carrier places railcars at the
Stations or at other destinations
-3-
specified by Buyer for unloading and Shipment conforms to the
requirements of this Agreement.
(r) SHIPMENT - A Shipment of coal supplied under this Agreement shall
be a trainload or Unit Train of coal loaded by Seller and received
by Buyer. All cars included in a xxxx of lading or individual mine
cards/tags for delivery to the same destination shall be
considered part of the same Shipment.
(s) SHIPPING POINT - The loading point, identified by name in Section
3.2, from which the Seller ships the coal supplied hereunder.
(t) TON - A short Ton of two thousand (2,000) pounds (avoirdupois).
(u) UNIT TRAIN - A trainload of at least 9,450 net tons (approximately
90 cars) or 10,545 net tons (approximately 95 cars) of -coal
billed on one day, from Seller to Buyer for one delivery at one
destination and necessary locomotive used in transporting Buyer's
coal from origin to destination pursuant to this Agreement.
1.2 TERM
The term of this Agreement shall be for the period beginning March 1,
2004, and continuing through December 31, 2008, unless earlier terminated as
provided in this Agreement.
ARTICLE 2 - GENERAL PROVISIONS
2.1 MUTUAL OBLIGATIONS
Seller shall mine coal from Seller's reserves and sell such coal to
Buyer, and Buyer shall buy such coal from Seller, on the terms and conditions
set forth in this Agreement.
2.2 PRIOR AGREEMENTS
This Agreement shall supersede and replace the Prior Agreements as of
the Effective Date; and the terms and conditions of the Prior Agreements shall
have no force and effect after
-4-
such time, except with respect to shipments made prior to such time. The Parties
acknowledge and agree that as of the Effective Date, all pending issues related
to the Prior Agreements (other than amounts owed for Shipments made prior to
such time) shall have been finally settled and resolved.
ARTICLE 3 - SALE, PURCHASE AND TRANSPORTATION OF COAL
3.1 QUANTITY
The quantity of coal to be sold and purchased hereunder each Calendar
Year during 2004 through 2008 shall be 1,600,000 Tons ("Base Annual Tonnage
Obligation"). Notwithstanding, the Base Annual Tonnage Obligation for Year 2004
will be prorated based on the effective date of this Agreement and Years 2006
through 2008 may be decreased as indicated in the table below and pursuant to
the Market Price Reopener, Section 7.3.
* * *(1)
Buyer shall receive one-twelfth of the applicable Base Annual Tonnage
Obligation during each Calendar Month. Buyer shall not be required to accept any
quantity of coal shipped during a Calendar Month in excess of the total monthly
amount ordered by Buyer, but if Buyer accepts any excess quantity of coal, Buyer
may, upon notice to Seller, require that such excess amount be deducted from the
total monthly quantity to be shipped during any of the three (3) Calendar Months
immediately following the Month in which the coal is shipped. This Agreement is
not and shall not be construed as a contract for all of Buyer's coal
requirements for the Station.
Seller agrees to the assignment of a portion of the Base Annual Tonnage
Obligation to be used as feedstock for the production of synfuel by DTE Clover,
LLC. It will be the Buyer's responsibility to negotiate with DTE Clover, LLC
concerning the amount of synfuel tonnage.
----------
1 Confidential material redacted and filed separately with the Commission.
-5-
Such feedstock tonnage will count towards Seller's Base Annual Tonnage
Obligation under this Agreement; however, payment to the Seller for such
feedstock tonnage shall be made by DTE Clover, LLC pursuant to a separate
agreement between DTE Clover, LLC and Seller.
3.2 SOURCE AND SUBSTITUTE COAL
The coal sold and purchased hereunder shall be produced from Seller's
reserves located in Bell, Leslie, Harlan, Perry, Knott, Letcher, and Pike
Counties, Kentucky more specifically described in Annex A, hereinafter known as
the Mine, and, shipped from Hignite, Clover, Buckeye, Leatherwood, Burke, or
Xxxxxxx Branch loading facilities (CSX numbers 43363, 42880, 42985, 84200,
84190). Seller shall not produce coal for Shipment to Buyer from any source
other than the Mine nor load coal for Shipment to Buyer at any location other
than the Shipping Point unless Buyer shall have given its prior written consent.
If Seller proposes to supply coal hereafter from a source other than the Mine
and/or Shipping Point specified herein ("Substitute Source"), such proposal
shall be given to Buyer in writing and signed by all parties who are named as
Seller in this Agreement. Buyer shall have no obligation to accept any Shipment
of coal from a Substitute Source and may reject any offer of a Substitute Source
for any reason. Seller shall limit Shipments from * * *(2) to a combined maximum
of * * *(3) per Calendar Year.
3.3 TRANSPORTATION
Except as otherwise expressly provided herein, Seller shall load and
ship coal sold and purchased hereunder in accordance with this Section 3.3;
Section 3.4 below, and such applicable tariff(s) and/or agreement(s) between
Buyer and the delivering carrier(s) as Buyer may specify from time to time (the
"railroad provisions"). Applicable railroad provisions as of the Effective
----------
2 Confidential material redacted and filed separately with the Commission.
3 Confidential material redacted and filed separately with the Commission.
-6-
Date of this Agreement are specified in Annex C - RAILROAD PROVISIONS, attached
hereto. In the event of a conflict between published tariff(s) and the railroad
provisions, the railroad provisions shall control. Buyer shall pay normal
freight costs directly to the delivering carrier.
Seller shall load coal, at its expense, in accordance with the loading
and tonnage requirements of the railroad provisions. Seller warrants that it is
able to comply with the railroad provisions specified in Annex C attached
hereto. In addition, Seller warrants that its loading facilities at the Shipping
Point include track capacity for 100 loaded and 100 empty railcars, and a
loading capability of 90 railcars in 4 hours. Seller warrants that it will
maintain facilities with the capabilities described above for so long as this
Agreement shall remain in effect.
Buyer shall have the right, at its sole discretion, to specify that
coal be loaded in private rail cars owned or leased by Buyer provided that
Seller's loading capabilities permit loading of such cars.
Seller shall make timely arrangements with carrier for ordering and
placement of suitable, fit, and clean railcars preferably with a minimum nominal
capacity of 100 net Tons per railcar. Seller shall inspect all empty railcars to
see that they are suitable and fit for loading to Buyer's destinations. Such
inspection shall consist of, but not be limited to, examination of railcars to
see that pocket doors are fully operable and door locking mechanisms are in
proper working condition; that the railcar is free of snow, ice, debris, foreign
objects, or other materials. Failure of Seller to make such an inspection and
refuse inappropriate equipment or to comply with any of the provisions of Annex
C attached hereto may result in Buyer's rejection of the railcar(s) at
destination. Seller shall reimburse Buyer for any demurrage, diversion, or
related or similar charges assessed against Buyer as a result of Seller's
failure to load and ship coal in accordance with Sections 3.3, 3.4, and Annex C
attached hereto.
-7-
3.4 TIME OF SHIPMENTS
Unless another Shipment schedule is mutually agreed upon or unless a
change in railroad provisions requires a change in the Shipment schedule, coal
sold and purchased hereunder shall be shipped by Seller throughout the Month in
accordance with a monthly schedule established by Buyer based on quantities
specified pursuant to 3.1.
Buyer, at its sole option and upon reasonable notice, may delay
previously scheduled Shipments to initiate preventative maintenance outages for
coal handling equipment in order to insure efficient operation of such
equipment. Such Shipments will be made up on a mutually agreed upon schedule.
Each Day coal is shipped; Seller shall notify Buyer ("Shipping Notice")
as soon as possible, but no later than 5 business hours after trainload departs
from Shipping Point. The Shipping Notice shall conform to the terms and
conditions as specified in Annex C attached hereto.
3.5 TITLE AND RISK OF LOSS
Seller warrants that title to all coal received by Buyer hereunder
shall be good, and its transfer rightful, and that such coal shall be free of
any lien, claim, demand, security interest, or other encumbrance. Seller shall
indemnify and hold Buyer harmless from any and all expenses (including
reasonable attorneys' fees), losses, damages, and liabilities of every kind
resulting from or arising out of any breach of this warranty.
Title and risk of loss to the coal shall pass from Seller to Buyer upon
placement of coal into railroad cars at Shipping Point.
3.6 DIVERSION OF SHIPMENTS
Buyer shall have the right, from time to time and at its sole
discretion, to divert any Shipment or portion of a Shipment of coal, hereunder,
or a trainload of coal in transit, to a
-8-
destination other than the original designated Station. All terms and conditions
of this Agreement shall apply to any Shipment or a trainload of coal in transit
so diverted. Buyer shall be responsible for any demurrage or similar charges or
costs incurred due to the diversion of any Shipment or portion of a Shipment or
a trainload of coal in transit other than such charges caused by Seller's
failure to ship as provided in Sections 3.3, 3.4, and Annex C attached hereto.
3.7 RESERVES
Seller warrants that Seller now owns, leases, or controls, and has
dedicated to the Mine a sufficient number of Tons of recoverable coal contiguous
and accessible to the Mine (the "Reserves") to enable Seller to supply coal in
the total quantity and of the quality called for by this Agreement. A
description of such Reserves is set forth in Annex A, and a map depicting such
Reserves is attached thereto. Seller warrants that these Reserves can and will
be mined economically by use of modern coal-mining and processing techniques and
that the coal from these Reserves will meet the terms and conditions of this
Agreement.
Seller covenants that it will not sell, lease, contract to sell, or
otherwise transfer or agree to transfer to others coal, or any interest therein,
from such Reserves in such quantity as to jeopardize Seller's ability to supply
the total quantity and quality of coal called for by this Agreement or as to
interrupt monthly Shipment schedules. Nothing in this Section 3.7 shall be
construed as preventing Seller from: (1) mining and selling coal from such
Reserves to others, provided Seller's ability to meet the requirements of 3.1
has not been impaired and the foregoing covenants and warranties with respect to
such Reserves are complied with, or (2) selling an interest in such Reserves
provided Seller retains sufficient reserves to enable Seller to supply coal in
the total quantity and of the quality called for by this Agreement.
-9-
ARTICLE 4 - QUALITY
4.1 COAL SPECIFICATIONS
The coal sold by Seller and purchased by Buyer hereunder shall be as
uniformly blended as possible and such blend shall be reasonably consistent from
railcar to railcar; shall be two inches and under in size (2" x 0") as defined
in the then current ASTM Designation D-431 Standard for Designating Size of Coal
and shall not contain greater than Fifty (50%) percent particles less than (1/4)
inch in size (if, in Buyer's sole judgment, coal handling problems occur at the
destination because of size consistency, Buyer shall provide Seller with
documentation of such coal handling problems and Seller agrees to take
corrective action acceptable to Buyer); shall be reasonably free of bone, shale,
rock, dirt, and clay, and free of extraneous material which term shall include,
but not be limited to plastic, rubber, iron, steel, wood and other waste
materials, and shall conform to the following analysis on an As-Received Basis,
measured on a monthly weighted average for Shipments delivered to Buyer during a
Calendar Month:
Guaranteed Suspension Rejection
SPECIFICATIONS SPECIFICATIONS LIMITS
-------------- -------------- ------
Minimum Btu/pound * * *(4) * * *(4) * * *(4)
Maximum % ash * * *(4) * * *(4) * * *(4)
Maximum % moisture * * *(4) * * *(4) * * *(4)
Maximum % sulfur * * *(4) * * *(4) * * *(4)
Maximum % sulfur (2 levels):
Xxxxx 0 * * *(4) * * *(4) * * *(4)
Level 2 * * *(4) * * *(4) * * *(4)
Minimum grindability (HGI) * * *(4) * * *(4)
Minimum % volatile matter * * *(4) * * *(4)
Minimum % fixed carbon * * *(4) * * *(4)
Maximum % nitrogen * * *(4) * * *(4)
Minimum ash fusion temp. * * *(4) * * *(4)
(initial deform. reducing)
Maximum size (inches) * * *(4) * * *(4)
Maximum fines * * *(4) * * *(4)
(less than 1/4" x 0)
----------
4 Confidential material redacted and filed separately with the Commission.
-10-
Seller shall reimburse Buyer for all damage caused to Buyer's equipment
by any extraneous material that is proven to be loaded with the coal by Seller.
4.2 ANALYSIS
Coal received hereunder shall be sampled and analyzed as follows:
(a) Coal supplied hereunder which is shipped to a Station shall be
sampled by Buyer at the Station at random and as evenly as practical throughout
the Calendar Month in accordance with the synopsis of the sampling procedures as
set forth in Annex E, or other mutually acceptable procedures as agreed to in
writing.
Buyer shall provide for sampling of at least forty percent (40%) of the
coal supplied hereunder each Month. If Buyer is unable to provide for sampling
of at least forty percent (40%) of the coal supplied hereunder each Month due to
a force majeure event declared by Buyer pursuant to Article 9 hereof and if
Buyer and Seller agree to continue shipment or if a trainload is enroute,
analysis for purposes of quality adjustments pursuant to Section 4.3 and for
suspension, cancellation, and rejection of Shipments pursuant, to Section 4.4,
4.5 and 4.6 will be calculated in accordance with the method specified in Annex
E.
Buyer shall make, or cause to be made, Proximate Analyses of samples
taken of the coal supplied hereunder. A Proximate Analysis shall be performed on
the sample taken from no less than forty percent (40%) of the railcars received
in a Shipment. One Grindability Test shall be performed on a composite of all
samples taken from railcars received per Month. If deemed necessary by Buyer,
Grindability Tests may be performed on samples taken from each Shipment. All
Proximate Analyses and Grindability Tests performed at the Station laboratory
shall be made in accordance with the synopsis of the procedures as set forth in
Annex E hereto, or other mutually acceptable procedures as agreed to in writing.
-11-
(b) Buyer shall furnish Seller with a complete, report of the results
of each Proximate Analysis and Grindability Test and, upon Seller's request,
with portions of the samples analyzed, provided that such request is made as
follows:
(1) For Proximate Analysis, requests shall be made within
sixty (60) Calendar Days from the date the coal from which the samples were
taken is received by Buyer. Portions of such samples shall be maintained by
Buyer on a 60 mesh size consist.
(2) For Grindability Test, requests shall be made within sixty
(60) Calendar Days from the date the coal from which the samples will be taken
is received by Buyer. Portions of such samples shall be maintained by Buyer on a
4 mesh size consist.
(c) Seller shall furnish a copy of all coal analysis performed by
Seller on coal shipped to Buyer by the 5th working Day of the Month following
Shipment. (d) If Seller disagrees with the results of any Proximate Analysis or
Grindability Test, Seller shall notify Buyer within ten (10). Calendar Days of
Seller's receipt of Buyer's report of the results of such Proximate Analysis and
Grindability Test and shall request that a portion of the sample analyzed be
submitted to an independent test laboratory to be selected by mutual agreement
of the parties. The analysis conducted by the independent test laboratory shall
be on an As-Received Basis. The results of the independent laboratory's analysis
shall be accepted as final and binding upon Buyer and Seller if the results of
such analysis and Buyer's analysis are not within ASTM tolerances for variations
in analyses between laboratories. If the results of the independent analysis and
Buyer's analysis are within ASTM tolerances for variations in analyses between
laboratories, Buyer's analysis shall, be final and binding upon the parties. The
costs of the independent analysis shall be borne as, follows: (1) by Seller if
the results of the independent
-12-
analysis and Buyer's analysis are within ASTM tolerances for variation in
analysis between laboratories or (2) by Buyer if the results are not within such
tolerances.
4.3 ADJUSTMENTS FOR QUALITY VARIATION
The parties recognize that the failure of Seller to meet the
specifications set forth in Section 4.1 may cause Buyer to be unable to operate
the Stations without violating certain federal, state, or local environmental
laws, rules, regulations, or ordinances, or may increase Buyer's costs of
operating the Stations. Seller shall therefore use all reasonable means to
ensure that all coal shipped hereunder meet the guaranteed specifications set
forth in Section 4.1. The Price of coal as determined under Article 7 shall be
adjusted as follows for variation in Heating Value, ash, grind, and/or sulfur
content. Such adjustments shall be cumulative and apply to each trainload or
each Shipment of coal.
(a) HEATING VALUE ADJUSTMENT. The Price shall be adjusted in the manner
set forth below to compensate for any difference between the as received monthly
weighted average Heating Value and the guaranteed Btu per pound. The adjustment
in Price is in addition to any remedies provided by the Agreement or in law or
equity. Sample calculations for Btu adjustments are provided in Annex B.
(1) For coal shipped which contains, on an as received monthly
weighted average, a Heating Value of greater than the guaranteed Btu per pound,
the Price will be adjusted as follows:
The Price then in effect will be multiplied by a fraction, the numerator of
which shall be the as received monthly weighted average Heating Value and the
denominator of which is the guaranteed Heating Value. The difference between the
product thus determined and the Price then in effect shall be the premium
applicable to the Price of such coal.
-13-
(2) For coal shipped which contains, on an as received monthly
weighted average basis, a Heating Value less than or `equal to the guaranteed
Btu per pound, the Price will be adjusted as follows:
The Price then in effect will be multiplied by a fraction, the numerator of
which shall be the as received monthly weighted average Heating Value and the
denominator of which is the guaranteed Heating Value. The difference between the
product thus determined and the Price then in effect shall be the penalty
applicable to the Price of such coal.
(b) ASH ADJUSTMENT. In addition to other adjustments, the Price per Ton
to be paid by Buyer for coal shall be adjusted downward in proportion to the ash
content in excess of the guaranteed level, or upward in proportion to the amount
that the ash is than * * *(5) (the guaranteed level minus * * *(5)). Buyer and
Seller have agreed to a * * *(5) Maximum ash content with an * * *(5) to * *
*(5) deadband and Buyer will not pay a premium within said deadband. This
adjustment shall be subtracted from or added to the Price adjusted for Heating
Value as calculated under Paragraph 4.3a of coal delivered and unloaded and
shall be based upon the "as received monthly weighted average" ash content for
all coal, shipped during a month. The amount per Ton of this Ash Adjustment
shall be calculated as follows:
The downward Price adjustment shall be * * *(5) per Ton multiplied by
the percentage difference by which the "as received monthly average" ash content
for all coal shipped during the month exceeds the guaranteed level. If the "as
received monthly average" ash content is less than * * *(5) (the guaranteed
level minus * * *(5) the upward Price adjustment shall be * * *(5) for the
amount that the ash is less than * * *(5)(the guaranteed level minus * * *(5) ).
The difference in ash content shall be calculated to the nearest one-tenth of
one percent. The adjustment in Price is
----------
5 Confidential material redacted and filed separately with the Commission.
-14-
in addition to any remedies provided by the Agreement or in law or equity. Ash
Adjustment Formula:
$ Downward Adjustment/Ton* = * * *(6)
* Only applies if the as received monthly weighted average ash content
is greater than the guaranteed ash content.
$ Upward Adjustment/Ton ** = * * *(6)
** Only applies if the as received monthly weighted average ash content
is less than * * *(6) (the guaranteed ash content minus * * *(6) ).
(c) SULFUR ADJUSTMENT. For coal received which contains, on a monthly
weighted average basis, less than or greater than the guaranteed sulfur content,
the Price shall be adjusted as set forth below. This adjustment shall be
subtracted from the Price adjusted for Heating Value as calculated under
Paragraph 4.3a of coal delivered and unloaded and shall be based upon the "as
received monthly weighted average" sulfur content for all coal shipped during
the month.
The adjustment shall be * * *(6) multiplied by the percentage
difference by which the "as received monthly weighted average" sulfur content
for all coal shipped during the month exceeds the guaranteed maximum sulfur
level or is less than the guaranteed minimum sulfur level. The exceedance or
deficiency shall be calculated to each one-tenth of one percent, at a rate of *
* *(6). The adjustment in Price is in addition to any remedies provided by the
Agreement or in law or equity. Sulfur Adjustment Formula:
$ Downward Adjustment/Ton* = * * *6 (% Sulfur - % Guaranteed Maximum
Sulfur)
* Only applies if the as received monthly weighted average sulfur
content is greater than the guaranteed maximum sulfur content.
$ Downward Adjustment/Ton ** = * * *(6) (% Guaranteed Minimum Sulfur -
% Sulfur)
----------
6 Confidential material redacted and filed separately with the Commission.
-15-
** Only applies if the as received monthly weighted average sulfur
content is less than the guaranteed sulfur content.
(d) DEFICIENT GRINDABILITY ADJUSTMENT In addition to other adjustments,
the Seller shall pay Buyer a deficient grindability adjustment based on a
monthly weighted average of coal unloaded during a month. This adjustment shall
be subtracted from the Price adjusted for Heating Value as calculated under
Paragraph 4.3a of coal delivered and unloaded and shall be based upon the
monthly weighted average grindability content of coal shipped. The amount per
Ton of this grindability adjustment shall be calculated as follows:
The adjustment shall be * * * (7) multiplied by the number of Xxxxxxxxx
index points by which the monthly weighted average grindability content of coal
unloaded is more than three Xxxxxxxxx index points below the guaranteed level.
No credits shall be given if the monthly weighted average grindability content
is greater than the guaranteed level. The adjustment is in addition to any
remedies provided by the Agreement or in law or equity. Grindability Adjustment
Formula:
$ Downward Adjustment/Ton* = * * * (7) (Guaranteed HGI - 3 - Monthly
Weighted Average)
* Only applies if the as received monthly weighted average grindability
content is more than three Xxxxxxxxx index points below the guaranteed level.
(e) The adjustments provided for in Paragraphs 4.3 (a), (b), (c) and
(d) are intended to be adjustments to reflect the increase or decrease in the
value of coal supplied to Buyer according to the Heating Value, ash, grind, and
sulfur content of that, coal. They are not intended to be, nor shall they be
construed to be, either liquidated damages or penalties. Application of these
adjustments shall not be construed to allow a range of specifications
----------
7 Confidential material redacted and filed separately with the Commission.
-16-
different from those specified in Section 4.1 and shall not prevent Buyer from
exercising any other rights or remedies it may have if Seller delivers coal that
does not meet the Heating Value, ash, grind, or sulfur specifications set forth
in Section 4.1.
4.4 SUSPENSION OF SHIPMENTS FOR COAL QUALITY DEFICIENCIES
Should the coal quality of any Shipment fail to comply with any of the
suspension specifications stated in Section 4.1 of this Agreement, Buyer shall
have the right to suspend immediately all Shipments by giving notice of the
suspension to Seller. After receipt of such notice, Seller shall immediately
commence appropriate action and use its best efforts to correct the deficiency.
Seller shall furnish Buyer with such, documentation as Buyer may reasonably
require to assure Buyer of Seller's ability to perform. If Buyer is reasonably
assured that Seller can deliver coal which complies with the guaranteed
specifications of Section 4.1, then a test Shipment shall be scheduled. If
analysis by Buyer shows the test Shipment to be in compliance with the
guaranteed specifications of Section 4.1, deliveries shall be permitted to
resume. Buyer shall have the sole right to determine if Seller shall be allowed
to make up any tonnage not delivered during the suspension.
If Buyer does not receive adequate assurance of Seller's ability to
deliver coal which complies with the guaranteed specifications, within thirty
(30) days of suspension notice, or if the test delivery fails to comply with the
guaranteed specifications, Buyer shall so notify Seller of such failure, and
this Agreement may be immediately terminated, at Buyer's option.
4.5 TERMINATION OF AGREEMENT FOR COAL QUALITY DEFICIENCIES
In addition to and not as a limitation upon other rights of Buyer, if
during a sixty (60) consecutive Day period following notice to Seller of failure
to comply with Section 4.1, fifty (50%) percent of the coal shipped fails to
comply with any of the guaranteed specifications set
-17-
forth in Section 4.1, Seller shall be in material breach of this entire
Agreement and Buyer shall have the right to immediately terminate this
Agreement.
In the event Buyer terminates this Agreement under this Section 4.5, or
suspends or terminates delivery pursuant to the provisions of Section 4.4, and
in addition to other remedies provided by this Agreement or by law, Seller shall
be liable to Buyer for breach of the Agreement and shall be responsible and
shall pay Buyer for any and all costs incurred by Buyer under this Agreement and
other contracts with transportation companies which result from such termination
or suspension of Shipments hereunder and Buyer shall not be liable for any costs
incurred by the Seller. Buyer shall provide Seller with documentation of such
costs.
4.6 REJECTION OF COAL FOR COAL QUALITY DEFICIENCIES
In addition to and not a limitation upon its suspension or termination
rights, Buyer shall have the right to reject any trainload should the quality of
coal of that trainload show, by analysis, failure to comply with the rejection
limits as set forth in Section 4.1. Buyer shall also have the right to reject
any trainload based on visual inspection, if the coal is not substantially free
from impurities, such as bone, slate, scrapped iron, steel, earth, rock, pyrite,
wood, or blasting wire. Buyer shall give prompt notice to Seller of any
rejection of trainloads hereunder. After notification by Buyer of a rejected
trainload, Seller shall not resume Shipments until coal quality has been
corrected to Buyer's satisfaction. In the event that Buyer rejects any coal,
Seller shall immediately remove said coal from Buyer's facilities or from
transportation equipment at Seller's expense and shall reimburse Buyer all its
costs and expenses, including transportation cost, incurred in connection with
the coal, all of which costs Buyer may deduct from any sum owed by Buyer to
Seller. Buyer shall provide Seller with documentation of such costs.
If Buyer's unloading and sampling systems are in proper working
condition and coal fines prevent unloading of a Shipment due to fugitive dust
emissions and train unloading is
-18-
delayed until weather conditions permit unloading, Seller will pay demurrage or
extra cost to return locomotives. Seller will only be responsible for these
costs if the coal fines fail to meet the suspension specification in Section
4.1.
In the event that Buyer, at its sole discretion, accepts coal in which
the "as received" analysis fails to comply with any rejection limit as set forth
in Section 4.1, the following additional Price adjustments shall apply:
Moisture Adjustment - * * * (8) for each one (1) percent or any
fraction thereof above the rejection
limit.
Ash Adjustment - * * * (8) for each one (1) percent or any
fraction thereof above the rejection
limit.
Btu Adjustment - * * * (8) for each 100 Btu's or fraction thereof
below the rejection limit.
Sulfur Adjustment - * * * (8) for each one-tenth of each one (1)
percent above or below the rejection
limit.
Buyer's election to accept coal that fails to comply with the rejection limits
and receive an adjustment will not affect any other remedy under the Agreement,
including Buyer's right to reject coal shipped thereafter which fails to comply
with the rejection limits as set forth in Section 4.1. The quality adjustments
in this paragraph are in addition to the quality adjustments set forth in
Section 4.3.
4.7 SUSPENSION AND TERMINATION OF AGREEMENT FOR OPERATIONAL CONSIDERATIONS
Buyer shall have the right to suspend deliveries hereunder if it
determines through its sole judgment that utilization of the coal results in a
degradation of Buyer's generating plant(s) operational performance. Should such
determination be made by Buyer, Buyer shall give Seller
----------
8 Confidential material redacted and filed separately with the Commission.
-19-
written notice of such determination and suspension along with documentation of
said performance degradation. Seller may, upon a suspension, propose means to
overcome the problem giving rise to such adverse effect. If within ninety (90)
Days after suspension of deliveries under this Section, Seller has been unable
to propose an acceptable means to overcome the problem, subject to Buyer's
approval which is not to be unreasonably withheld, Buyer shall have the
exclusive right to immediately terminate this Agreement.
ARTICLE 5 - MEASUREMENT OF COAL RECEIVED
Coal received at a station where Buyer has weighing devices shall be
weighed on these weighing devices. Buyer shall maintain and certify these
weighing devices in accordance with the appropriate State requirements. Seller
may, at its own expense, have a representative present to observe such
certifications.
If Buyer's weighing devices become inoperable, or if Buyer does not
have weighing devices at a station, and Seller has weighing devices that are
maintained and certified in accordance with the appropriate State requirements
and that are acceptable both to Buyer and to the appropriate rail carrier, then
Seller's weighing devices shall be used. Buyer and/or the appropriate rail
carrier may, at their own expense, inspect Seller's weighing devices and be
present at such certification. If Buyer's weighing devices become inoperable, or
if Buyer does not have weighing devices at a station, and Seller does not have
weighing devices, then the appropriate rail carrier's weighing devices shall be
used at Buyer's expense.
In the event that weighing devices owned by Buyer, Seller, or the
appropriate rail carrier are found to be in error, an equitable adjustment in
Price or settlement shall be promptly made by Buyer or Seller, as appropriate,
and, in the absence of definite information as to when such error began, the
adjustment shall be made on the basis of such error having existed for one-half
(1/2)
-20-
the time between the discovery of the error and the most recent test indicating
that the weighing devices were accurate.
If, for any reason, a Shipment of coal is not weighed using weighing
devices owned by Buyer, Seller, or the applicable rail carrier, then the average
net weight per car for each same type or size of car received for the previous
five (5) trainloads shall be used for that Shipment in lieu of weighing devices.
Weights determined in accordance with this Article 4 shall be used for
payment and for all purposes under this Agreement.
ARTICLE 6 - PAYMENT AND RECORDS
6.1 PAYMENT
(a) Within seven (7) Business Days of the Receipt of each coal Shipment
hereunder, Buyer shall forward Seller a copy of the Station's Receiving Report
and Coal Sample Data sheet ("Data Sheet") as set forth in Annex F Seller upon
receipt of Data Sheet shall prepare and issue an invoice to Fuel Accounting for
coal received in such Shipment. Payment for such coal shall be paid net thirty
(30) Days from Receipt of coal and with Seller's properly completed invoices in
duplicate received at Fuel Accounting Office. Payment shall be considered to be
made on the date of mailing by the Buyer. Each invoice shall be numbered and
include all appropriate information called for by Buyer such as shipping date,
Shipping Point at which the coal was loaded, purchase order number, number of
cars shipped, tons, F.O.B. railcar Price, Unit Train number, and total invoice
amount. Payment shall be based on the Price as determined in accordance with
Article 7, using the weights determined in accordance with Article 5 and
assuming no adjustments for variation in quality pursuant to Section 4.3.
(b) Price adjustment calculations for variations in quality shall be
calculated in accordance with Section 4.3 and forwarded for Seller by written
notice. Buyer will normally
-21-
forward said written notice to Seller within fifteen (15) Calendar Days
following the Month in which coal was shipped. Where payment is due Seller as a
result of such adjustment, Seller shall prepare and issue an invoice to Buyer.
Where Buyer is due a refund as a result of any such adjustment, Buyer shall have
the option to take credit on Seller's outstanding invoice covering payment for
coal or to require cash payment from Seller within fifteen (15) Business Days of
Seller's receipt of Buyer's written notice.
(c) Payment to Seller shall be made by check to the following address:
Xxxxx River Coal Sales, Inc.
X.X. Xxx 000000
Xxxxxxx, Xxxxxxx 00000
The above address may be changed by Seller upon thirty (30) Days written notice
to Buyer.
6.2 RECORDS
Each party shall keep complete and accurate records and all other data
required by each of them for the purposes of proper administration of this
Agreement. All such records shall be maintained for at least three (3) Years
after the expiration, termination, or cancellation of this Agreement and for any
additional length of time required by regulatory agencies with jurisdiction over
the parties.
Either party or its designated representatives shall have the right
from time to time, during regular business hours, upon written notice to the
other, to examine the records and data of the other relating to this Agreement,
including without limitation the weights and analyses of the coal supplied
hereunder, and records supporting base price components, quantity and quality of
reserves, independent audits, and reports to federal and state entities, anytime
during the period the records are required to be maintained. Seller shall supply
copies of audited annual reports to Buyer within sixty (60) Days of completion
of such audit and presentation of the report.
-22-
ARTICLE 7 - PRICE
7.1 BASE PRICE
The Base Price of coal supplied hereunder, loaded in railcars at
Shipping Point, shall be * * * (9) (U.S. dollars) per Ton, effective * * * (9).
The Base Price shall be subject to adjustment only as specifically provided
herein.
7.2 PRICE
The Base Price specified in Section 7.1 shall be the Price paid by
Buyer for all coal shipped for the last * * *9. Beginning * * *(9) and on each
January 1 thereafter, the previous Calendar Year base price, before adjustments
for quality, will be increased by * * *(9) for Base Price Tons.
7.3 MARKET PRICE REOPENER
For tonnage designated as Market Price Tons in Section 3.1, the
effective price will be determined by a mutually agreed upon figure
representative of the market for the time period in which the Market Price Tons
are to be shipped. At any time during the term of this Agreement, but no later
than three months prior to the beginning of any Calendar Year in which Market
Price Tons are scheduled in the table outlined in Section 3.1, either Buyer or
Seller will present to the other party its estimation of the market price for
coal of similar quality for the time period when Market Price Tons are
available. Promptly after Buyer has received a written notice from Seller or has
sent a written notice to Seller requesting a price review, Buyer shall conduct a
price review concerning the Market Price Tons in question by soliciting
proposals from other coal suppliers to supply the Market Price Tons for the time
period Market Price Tons are available under terms and conditions similar to the
terms and conditions of this Agreement. Buyer will calculate the f.o.b. railcar
price from the proposals received for coal shipped from Seller's
----------
9 Confidential material redacted and filed separately with the Commission.
-23-
loading facilities as of January 1 of the Year Market Price Tons are available
and give written notice to Seller no later than sixty (60) days after Buyer has
received or issued the notice requesting the price review. Seller will review
the market price provided and within fifteen (15) days notify Buyer whether
Seller is accepting or rejecting the market price provided. If the market price
is accepted, then the market price will be established on the Market Price Tons
for the time period in which the Market Price Tons are to be shipped. If the
market price is rejected and the parties cannot reach an agreeable market price,
then the parties will be relieved of their obligations related to the Market
Price Tons for the balance of the term and the Bae Annual Tonnage Obligation
will be reduced accordingly.
7.4 ADJUSTMENT FOR CHANGES IN GOVERNMENT IMPOSITION
The term "Government Imposition," as used in this Agreement, whether in
the singular or the plural, means taxes, fees, or obligations imposed on Seller
by any government or governmental agency, and resulting costs or savings,
pursuant to a law or regulation that directly effects the production, mining or
loading of coal from the Mine. Governmental Impositions include taxes levied by
a political subdivision, severance taxes on coal, ad valorem taxes on land or
improvements, unmined mineral taxes, special fund assessments related to
worker's compensation, assessments or premiums related to employee retirement or
health benefits or similar employee welfare benefits, or sales or use taxes.
The Base Price stated in Section 7.1 includes all costs of compliance
by Seller with all Government Impositions effective as of March 1, 2004,
regardless of whether or not Seller is actually in compliance with all such
Government Impositions as of that date. It is recognized that effective, March
1, 2004 the Base Price includes the Black Lung Excise Tax, the Reclamation Fee,
and the Kentucky Severance Tax.
-24-
Price adjustments shall be made for changes in costs due to Seller's
compliance with changes In Government Impositions which shall be (1) amendments
after March 1, 2004 to Government Imposition; (2) requirements of entirely new
Government Impositions which are enacted or promulgated after March 1, 2004 or
(3) final judgments, orders or decrees issued after March 1, 2004 by any court
of law or equity, which reflect new and different interpretations of Government
Impositions where such changes in cost directly affect and are binding upon
Seller's operation hereunder. Such changes in cost shall hereinafter be called
"Changes in Costs". Changes in Costs shall not include and no Price adjustments
shall be made for costs due to compliance with (1) any Government Imposition
effective as of March 1, 2004, regardless of whether the Base Price reflects the
full costs of compliance with such Government Imposition; or (2) any civil or
criminal fine or penalty imposed as the result of failure to comply with any
statute, administrative regulation or ruling, state or local ordinance, or
judgment, order or decree of any court.
In the event and whenever after March 1, 2004, there is a Change In
Government Imposition, Seller shall give Buyer written notice within sixty (60)
Days of the date such changes were enacted or promulgated.
If the Change In Government Imposition is a tax or-fee which is
expressly imposed on a per Ton basis, Seller shall submit a claim within sixty
(60) Days of the date such changes were enacted or promulgated.
If the Change In Government Imposition results in a Change In Costs not
expressly imposed on a per Ton basis, Seller shall submit a claim which
describes the Change In Costs and which contains sufficient documentation and
data to permit Buyer to verify Seller's computation of the Change In Costs. The
documentation and data shall be based on an adequate period of
-25-
experience in compliance with such Change in Government Imposition, but in no
case, shall such adequate period exceed twelve (12) Months. In the case of a
determination of a Change In Costs which is an increase, an adjustment to the
Price shall be made for the period no more than twelve (12) Months prior to the
receipt by Buyer of Seller's claim, and during which such Change In Government
Imposition was in effect. In the case of a Change In Costs which is a decrease,
an adjustment to the Price shall be made from the date such Change In Government
Imposition was in effect. Buyer shall have the right to require Seller to
evaluate and submit such a claim if Seller fails to do so after a Change In
Government Imposition is effective.
If the cumulative effect of adjustments resulting from Changes In Costs
which would be required to meet Government Impositions would be such as to make
the Price of the coal to be sold to Buyer hereunder more than 15% higher than
the Delivered Cost of comparable coal reasonably available to Buyer on similar
terms, then Buyer shall have the right to terminate this Agreement upon six (6)
Months notice to Seller. Seller shall have the right to limit or xxxxx the
cumulative effect of adjustments resulting in Changes In Costs which would be
required to meet Government Imposition in order to preempt Buyer's right to
terminate this Agreement.
ARTICLE 8 - RIGHT TO VISIT
Each party grants to the other (including its agents) the right to
visit its facilities at reasonable times, from time to time, upon reasonable
notice and subject to the applicable rules and regulations of the facilities, in
order to witness, review and audit operations related to this Agreement,
including, but not limited to the sampling and analysis of coal and adequacy of
reserves.
-26-
ARTICLE 9 - FORCE MAJEURE, ENVIRONMENTAL REQUIREMENTS,
TERMINATIN, AND SYSTEMWIDE REDUCTION
9.1 FORCE MAJEURE
"Seller's Force Majeure" as used herein shall mean a cause reasonably
beyond the control of Seller whether foreseen or unforeseen that, wholly or in
substantial part, directly or indirectly prevents or restricts the mining,
processing,; loading, or, delivery of Seller's coal. "Buyer's Force Majeure" as
used herein, means a cause reasonably beyond the control of Buyer whether
foreseen or unforeseen that, wholly, or in substantial part, directly or
indirectly prevents or restricts the transportation, delivery, unloading, or
storing of Seller's coal by Buyer at its destination. Examples (without
limitations) of force majeure are the following: acts of God; acts of the public
enemy; insurrections; riots; strikes; labor disputes; work stoppages; fires;
explosions; floods; extraordinary unforeseeable geological conditions; electric
power failures; breakdowns of or damage to generation or preparation plants;
interruptions to or contingencies of transportation; embargoes; and orders or
acts of civil or military authority (including, without limitation, a city or
county ordinance, an act of a state legislature, or an act of the United States
Congress); provided, however, for the purposes of this Agreement, force majeure
shall not include, and no party shall be excused from performance because of,
(i) the development or existence of economic conditions which may adversely
affect the anticipated profitability of a party's activities under this
Agreement, (ii) acts or omissions of a party that constitute mismanagement,
negligence, willful misconduct, or fraud on the part of such party.
If because of Buyer's Force Majeure, Buyer is unable to carry out its
obligations under this Agreement, and if Buyer gives Seller prompt written
notice of such force majeure, the obligations of Buyer and the corresponding
obligations of Seller shall be suspended to the extent made necessary by and
during the continuance of such force majeure; provided, however, that
-27-
the disabling effects of such force majeure shall be eliminated as soon as and
to the extent commercially reasonable (except that Buyer, at its sole
discretion, may settle any of its own labor disputes, or strikes, or terminate
any of its own lockouts).
If because of Seller's Force Majeure, Seller is unable to carry out its
obligations under this Agreement, and if Seller gives Buyer prompt written.
notice, of such force majeure, the obligations of Seller and the corresponding
obligations of Buyer shall be suspended to the extent made necessary by and
during the continuance of such force majeure; provided, however, that the
disabling effects of such force majeure shall be eliminated as soon as and to
the extent commercially reasonable (except that Seller, at its sole discretion,
may settle any of its own labor disputes, or strikes, or terminate any of its
own lockouts).
After an event of force majeure has ended, the Party not claiming force
majeure shall determine whether to make up a shortfall in the quantity of coal
to be supplied under this Agreement (Tonnage Shortfall) that is caused by such
event. If the force majeure affected the Seller, and Buyer requests the Tonnage
Shortfall to be made up, such make up tonnage shall be (1) subject to
availability of additional production, and, (2) prorated among Seller's existing
commitments that were affected at the time of the force majeure. If the force
majeure affected the Buyer, and Seller requests the Tonnage Shortfall to be made
up, such make up tonnage shall be limited to (1) Buyer's requirements that
exceed existing commitments, (2) the limits of Buyer's inventory policy, and (3)
prorated among Buyer's existing commitments that were affected by the force
majeure. If the parties agree to make up the Tonnage Shortfall, the Parties
shall agree in writing to a schedule that shall allow the Tonnage Shortfall to
be supplied within a twelve-month period after the end of such event; and the
term of this Agreement may be extended to accommodate such schedule. The price
for any such make up tons shall be
-28-
determined according to the Billing Price that was in effect during the force
majeure event(s) related to such Tonnage Shortfall. The parties acknowledge and
agree that if any valid law, ordinance, or regulation or a municipality, county,
state, or United States government or any final judicial decision, judgment, or
order is adopted, passed, or issued after March 1, 2004, that either (i)
directly prohibits the mining processing, or loading of coal as contemplated
under this agreement or (ii) directly prohibits the transportation, delivery,
unloading, or storing Seller's coal by Buyer at its destination, then the
existence and implementation of such law, ordinance, regulation, decision,
judgment, or order shall constitute an event of permanent force majeure, and the
party o effected may then terminate this Agreement by giving the other party
written notice thereof, which shall specify the effective date of termination.
Notwithstanding the other provisions of this Section 9.1, a party not
claiming force majeure may terminate this Agreement whenever all of the
following circumstances exist: (i) a condition of force majeure occurs that
causes the parties mutual obligations to be suspended with respect to the total
quantity of coal to be supplied under this Agreement; (ii) such condition, alone
or extended by other conditions of force majeure, continues so that the parties
mutual obligations remain suspended for a period of six consecutive months; and
(iii) at the end of such six-month period at any time thereafter during the,
continuance of such condition, such party, in the exercise of its reasonable
judgment, concludes that there is little; likelihood of ending the condition(s)
in the immediate future, such party may exercise such right of termination by
giving the other party written notice thereof at least ninety days prior to the
effective date of termination.
9.2 CHANGES IN ENVIRONMENTAL RELATED REQUIREMENTS
The term "environmental related requirements," as used in this
Agreement, means (i) any prohibition, restriction, or limitation related to the
quality of coal which Buyer may burn,
-29-
including any constituent specification, at any or all of its electric
generating plants, or to the type or amount of emissions from any or all such
plants; (ii) any rule or requirements affecting the permissible means for
complying with any such prohibition, restriction or limitation; and, (iii) any
imposition of a cost, fee, tax or other economic burden on Buyer relating to any
constituent specification of coal purchased by it, or to the type or amount of
emissions from its electric generating plants. A "change" in environmental
related requirements shall be deemed to have occurred if there is any increase
or decrease in an environmental related requirement or imposition of a new
environmental related requirement on Buyer as a result of any federal or state
statute, local ordinance, administrative regulation or ruling, court order, or
any revision in any interpretation or implementation thereof. It is recognized
that a change in environmental related requirements upon Buyer may occur even
though stated as a restriction or limitation on, or requirement of, Buyer and
its affiliates or with some other group of utilities. It is further recognized
that any change in environmental related requirements may affect Buyer in a
general way and may not be directed at specific plants, fuels, fuel supplies or
other operating conditions. In this event, Buyer shall, in its sole discretion,
determine the strategy for compliance, and whether Buyer's use of the coal to be
supplied hereunder has been adversely impacted.
The price, specifications, quantity and destination of coal purchased
hereunder is predicated on environmental related requirements in effect as of
March 1, 2004. In the event and whenever after March 1, 2004, there is a change
in environmental related requirements, Buyer shall determine whether such change
has had or may have an adverse impact on Buyer's use of the coal purchased
hereunder. It is agreed that any change in environmental related requirements
which imposes a fee, tax or other economic burden on Buyer relating to the
constituent specifications of coal purchased by it or on the type or amount of
emissions from Buyer's
-30-
electric generating plants, or prevents Buyer from utilizing the coal purchased
hereunder in its electric generating plants, or requires Buyer to install
equipment (such as flue gas desulfurization equipment or particulate removal
equipment) at one or more of its electric generating plants in order to comply
with such, change, or requires or permits Buyer to utilize coal of a quality
(including sulfur content) different from that specified in Section 4.1, shall
be deemed to have an adverse impact on Buyer's use of the coal purchased
hereunder, even though the statute, regulation, ruling or ordinance may allow
Buyer a choice of options for complying with such changed environmental related
requirements (which choice may include the payment of a fee or tax in lieu of
the installation of equipment or utilization of coal of different constituent
specifications).
If Buyer determines that a change in environmental related requirements
has had or may have an adverse impact on Buyer's use of the coal purchased
hereunder, Buyer shall so notify Seller, and Seller shall have the right, at its
option, to propose any steps available to it, within ninety (90) Days of Buyer's
notification to Seller, in, its .mining and processing of the fuel, or in the
supply of substitute fuel, or in the reduction in the price of the fuel, or
other measure which would result in a lower Delivered Cost, in cents per million
Btu, of fuel at Buyer's electric generating plant(s) as Buyer could achieve by
purchasing reasonably available substitute fuel at the same plant(s). In the
event Buyer, in its sole discretion, determines that Seller cannot achieve this
result, then Buyer may terminate this Agreement upon ninety (90) Days' written
notice given at any time after Buyer has notified Seller of the change in
environmental related requirements. Buyer or Seller shall have no further
obligation or liability under this Agreement or at law except with respect to
coal delivered prior to said termination date or as otherwise
-31-
provided. Buyer shall have the right to give such notice either before or after
the effect of a change in environmental related requirements.
9.3 UNILATERAL TERMINATION RIGHT
In addition to any other termination rights provided in this contract
or at law or in equity, Buyer expressly reserves the right, upon eighteen (18)
Months' prior written notice to Seller, to unilaterally terminate this
Agreement; provided, however, that Buyer shall pay to Seller an amount equal to
$4.00 per Ton, multiplied by the remaining number of Tons scheduled for delivery
from the effective termination date herein through the normal expiration of the
then current term. Said payment by Buyer to Seller shall constitute Seller's
sole remedy against Buyer for any loss, cost, or damage incurred by Seller as a
result of Buyer's termination under this Agreement. Buyer shall have no further
obligation or liability under this Agreement or at law except with respect to
coal delivered prior to said termination date or as otherwise provided.
9.4 SYSTEMWIDE REDUCTION
Not withstanding anything herein to the contrary, in the event of a
Systemwide reduction of more than 20% in the use of coal resulting from
diminution of demand for power by Buyer's customers, Buyer shall be relieved of
its obligation to purchase coal hereunder to the extent made necessary by such
Systemwide reduction; provided, however, that Buyer shall not make reductions in
this Agreement until its coal purchased under spot orders has been eliminated,
and this Agreement in that event shall be reduced not more than the
proportionate percentage of reduction of other existing agreements held by Buyer
for the purchase of coal.
-32-
ARTICLE 10 - REMEDIES AND WAIVER
10.1 REMEDIES
In the event either party fails to perform its, obligations hereunder
in accordance with the terms and conditions of this Agreement, the other party
may exercise all remedies available to it at law or in equity, in addition to
any other remedies provided herein.
10.2 WAIVER
Waiver by either party of any breach or failure to require strict
performance of the terms and conditions of this Agreement at any time shall in
no way affect, limit, or waive such party's right thereafter to enforce and
compel strict compliance with this Agreement and shall in no way be construed as
a consent to any continuing or subsequent breach or failure to perform in strict
compliance with this Agreement.
ARTICLE 11 -GOVERNMENTAL AUTHORITY
11.1 COMPLIANCE WITH LAWS AND REGULATIONS
In the performance of this Agreement, Buyer and Seller shall comply
with all applicable laws, rules, regulations, and ordinances of any governmental
body or authority having jurisdiction.
11.2 EQUAL EMPLOYMENT OPPORTUNITY
During the performance of this Agreement, the Seller agrees as follows:
(1) The Seller will not discriminate against any employee or
applicant for employment because of race, color, religion, sex, or national
origin. The Seller will take affirmative action to ensure that applicants are
employed, and that employees are treated during employment, without regard to
their race, color, religion, sex or national origin. Such action shall include,
but not be limited to the following: employment, upgrading, demotion, or
transfer; recruitment or recruitment advertising; layoff or termination; rates
of pay or other forms of
-33-
compensation; and selection for training, including apprenticeship. The Seller
agrees to post in conspicuous places, available to employees and applicants for
employment, notices to be provided by the contracting officer setting forth the
provisions of this nondiscrimination clause.
(2) The Seller will, in all solicitations or advertisements
for employees placed by or on behalf of the Seller, state that all qualified
applicants will receive consideration for employment without regard to race,
color, religion, sex or national origin.
(3) The Seller will send to each labor union or representative
of workers with which he has a collective bargaining agreement or other contract
or understanding, a notice, to be provided by the agency contracting officer,
advising the labor union or workers' representative of the Seller's commitments
under Section 202 of Executive Order No. 11246 of September 24, 1965, and shall
post copies of the notice in conspicuous places available to employees and
applicants for employment.
(4) The Seller will comply with all provisions of Executive
Order No. 11246 of September 24, 1965, and of the rules, regulations, and
relevant orders of the Secretary of Labor.
(5) The Seller will furnish all information and reports
required by Executive Order No. 11246 of September 24, 1965, and by the rules,
regulations, and order of the Secretary of Labor, or pursuant thereto, and will
permit access to his books, records, and accounts by the contracting agency and
the Secretary of Labor for purposes of investigation to ascertain compliance
with such rules, regulations, and orders.
(6) In the event of the Seller's noncompliance with the
nondiscrimination clauses of this contract or with any of such rules,
regulations, or orders, this contract may be cancelled, terminated or suspended
in whole or in part and the Seller may be declared ineligible
-34-
for further Government contracts in accordance with procedures authorized in
Executive Order No. 11246 of September 24, 1965, and such other sanctions may be
imposed and remedies invoked as provided in Executive Order No. 11246 of
September 24, 1965, or by rule, regulation, or order of the Secretary of Labor,
or as otherwise provided by law.
(7) The Seller will include the provisions of Paragraphs (1)
through (7) in every subcontract or purchase order unless exempted by rules,
regulations, or orders of the Secretary of Labor issued pursuant to Xxxxxxx 000
xx Xxxxxxxxx Xxxxx Xx. 00000 of September 24, 1965, so that such provisions will
be binding upon each subcontractor or vendor. The Seller will take such action
with respect to any subcontract or purchase order as the contracting agency may
direct as a means of enforcing such provisions including sanctions for
non-compliance; provided, however, that in the event the Seller becomes involved
in, or is threatened with, litigation with a subcontractor or vendor as a result
of such direction by the contracting agency, the Seller may request the United
States to enter into such litigation to protect the interests of the United
States.
11.3 PERMITS AND LICENSES
Seller and Buyer each warrants to the other that it has or will obtain
and maintain any licenses and permits which, under the laws, rules, regulations,
or ordinances of any federal, state or local government, it may be required to
hold in order to perform its obligations hereunder.
ARTICLE 12 - MISCELLANEOUS
12.1 ASSIGNMENT AND SUBCONTRACTORS
Neither this Agreement nor any of the obligations created herein or by
law may be subcontracted, assigned, or otherwise transferred by Seller without
the prior written consent of Buyer which shall not be unreasonably withheld. Any
assignment made without the express written approval of Buyer shall be null and
void. Any assignment of this Agreement so
-35-
consented to shall not relieve Seller of any responsibility for the due and full
performance hereof. Seller shall be liable for all acts and omissions of its
assignees or other transferees.
As stipulated in Section 3.1, Seller agrees to the assignment of a
portion of the Base Annual Tonnage Obligation to be used as feedstock for the
production of synfuel by DTE Clover, L.L.C.
12.2 INDEPENDENT CONTRACTOR
Seller shall at all times act as and be deemed to be an independent
contractor for all purposes of this Agreement and shall not act as nor' be
deemed to be an employee or agent of Buyer.
12.3 SUCCESSION
This Agreement and the obligations created herein shall inure to the
benefit of and be binding in all respects on the successors and assigns of each
of the parties.
12.4 SURVIVAL OF OBLIGATIONS
All remedial, indemnification, and confidentiality rights and
obligations provided in this Agreement shall survive the termination,
cancellation, or expiration of this Agreement.
12.5 GOVERNING LAW
This Letter Agreement shall be governed by and construed under the laws
of the State of South Carolina, excluding those laws governing conflicts of laws
to the extent any such rules governing conflicts would result in law other than
that of the State of South Carolina being applied as the governing law.
12.6 SEVERABILITY
In the event any of the terms or conditions of this Agreement are held
to be unenforceable because they conflict with any laws, rules, regulations, or
ordinances, the obligations of the parties hereto shall be reduced only to the
extent of such conflict.
-36-
12.7 CONFIDENTIALITY
Seller and Buyer agree to retain in confidence, to the extent permitted
by law, this Agreement and any information obtained as a result of negotiation
and performance of this Agreement which either party identifies to the other as
being proprietary in nature. It is agreed, however, that such information may be
disclosed when requested by a court or government agency, and that certain cost
and physical property information related to fuel purchases are routinely
reported to state regulatory agencies and the Federal Energy Regulatory
Commission and may be used by Buyer's consultants to make economic forecasts.
12.8 HEADINGS
Article and section headings set forth in this agreement are inserted
only for convenience and shall have no effect whatsoever on the interpretation
or construction of this Agreement.
12.9 JOINT AND SEVERAL LIABILITY
Xxxxx River Coal Company ("JRCC") and Xxxxx River Coal Sales, Inc.
("JRCS") shall be jointly and severally liable for all of Seller's duties,
obligations, and liabilities under and arising out of this Agreement.
12.10 MATERIAL SAFETY DATA SHEET (MSDS)
Seller will furnish required MSDS forms, for any material shipped to
Buyer.
12.11 DRUG FREE WORKPLACE CERTIFICATION
The State of South Carolina has amended Title 44, Code of Laws of South
Carolina, 1976, relating to health, by adding Chapter 107, so as to enact the
Drug-Free Workplace Act. The Act became effective January 1, 1991, and requires
a Certification from the Seller before an award of a contract of $50,000 or more
can be final. The successful Seller will be required to provide such
certification by signing and returning the attached "Certification Regarding
Drug-
-37-
Free Workplace Requirements" form (Attachment 1). Failure to provide
certification will constitute a rejection by the Seller of the conditions of
award and no contract will exist.
12.12 SAFETY
Seller shall take all necessary or advisable precautions for the safety
of all persons and property at, on, or near its operations. Seller shall comply
with all applicable safety standards established and promulgated under the
Federal Coal Mine Safety and Health Act (MSHA) and with all additional
applicable regulations, rules, and orders of Federal, State, County, and
Municipal government bodies and agencies who may have jurisdiction over its
operations. Seller certifies that all work and products used by it to accomplish
performance under this Agreement comply with said laws, regulations, rules and
orders. Seller further agrees to indemnify and hold Buyer harmless for any loss,
damage, fine, penalty or any expense whatsoever as a result of Seller's failure
to comply with the aforementioned.
ARTICLE 13 - NOTICES
Any notice or communication required to be in writing hereunder shall
be given by registered, certified, or first class mail, or telecopy, addressed
to the respective parties at the addresses listed below. Except as expressly
provided herein any notice shall be deemed to have been given when sent. Any
notice given by first class mail shall be considered sent at the time of
posting. Communications by telecopy shall be confirmed by depositing a copy of
the same in the post office for transmission by registered, certified, or first
class mail in an envelope properly addressed as follows:
In the case to the Seller to:
Xxxxx River Coal Sales, Inc.
000 Xxxx Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, Xxxxxxxx 00000-0000
Attn: President
-38-
In the case of Buyer to:
South Carolina Public Service Authority
Xxxx Xxxxxx Xxx 0000000
Xxxxxx Xxxxxx, XX 00000-0000
ATTN: Director, Fuel Procurement
Telecopy No: 843/761-7003
In addition, Seller shall send a duplicate copy of every such notice and
communication to Buyer's contract analyst as designed by Buyer from time to
time. Either party may, by written notice to the other, change the
representative or the address to which such notices and communications are to be
sent.
ARTICLE 14 - NON-COLLUSION
Seller hereby affirms that neither it nor any person or entity acting
or purporting to act on its behalf has entered into any combination, conspiracy,
agreement, or other form of collusive arrangement with any person, corporation,
partnership, or other entity, which directly or indirectly has to any extent
lessened competition between Seller and any other person or entity for the
supply of coal being made pursuant to this Agreement.
ARTICLE 15 - AMENDMENTS
This Agreement may be modified or amended at any time by mutual
agreement of the parties, provided that such modification or amendment shall be
in writing and executed by the duly authorized representatives of the parties.
ARTICLE 16 - ENTIRE AGREEMENT
This Agreement, Annexes A through F, and Attachment 1 attached hereto,
which are hereby incorporated by reference, embody the entire Agreement and
understanding between the parties with respect to the subject matter contained
herein, supersede any prior or contemporaneous agreements or understandings
between the parties, and may not be amended or changed except as provided
herein.
-39-
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized representatives to execute this Agreement.
Buyer: SOUTH CAROLINA PUBLIC SERVICE
AUTHORITY
By: /S/ X. X. XXXXXX
----------------------------------
Title: MANAGER, PROCUREMENT
-------------------------------
Date: 4-26-04
-------------------------------
Seller: XXXXX RIVER COAL COMPANY
By: /S/ XXXXX X. XXXXX
----------------------------------
Title: PRESIDENT & CEO
----------------------------------
Date: APRIL 22, 2004
----------------------------------
Seller: XXXXX RIVER COAL SALES, Inc.
By: /S/ XXXXXXX X. XXXXXXX
----------------------------------------------------
Title: PRESIDENT
-------------------------------------------------
Date: APRIL 22, 2004
--------------------------------------------------
-40-
