1993
AMENDED AND RESTATED
COAL SUPPLY AGREEMENT
This 1993 Amended and Restated Coal Supply Agreement is made
and entered into this 31st day of March, 1993, by and among Amax
Coal West, Inc., a Delaware corporation ("Seller"), and Western
Resources, Inc., a Kansas corporation (WRI); Kansas Gas and
Electric Company, a Kansas corporation; Missouri Public Service,
a division of UtiliCorp United Inc., a Delaware corporation; and
WestPlains Energy, a division of UtiliCorp United Inc., a
Delaware corporation, (collectively referred to herein as
"Buyers")
WITNESSETH:
WHEREAS, Buyers are public utilities that render electric
utility service to certain areas within the States of Kansas,
Missouri, and Colorado; and
WHEREAS, Seller and WRI (formerly known as The Kansas Power
and Light Company) entered into a Coal Supply Agreement for the
sale and purchase of coal dated July 1, 1973, as such has been
amended from time to time; and
WHEREAS, Buyers desire to secure a supply of coal in the
quantity and of the quality hereinafter specified, suitable for
use in Units 1, 2, and 3, and, upon construction and commencement
of operation, in unit 4 of the Jeffrey Energy Center situated in
Pottawatomie County, Kansas (the "Energy Center") and deliveries
thereof for said Units as hereinafter set forth; and
WHEREAS, Seller has represented to Buyers that it is
experienced in the commercial production of coal and that it now
owns, has leased or controls by location (as such phrase is
commonly used in the coal industry) certain coal reserves that
are assigned to its present surface mining operation located near
Gillette, Wyoming and known as the Eagle Butte Mine (hereinafter
referred to as the "Mine") as shown on Exhibit A attached hereto
and hereby made a part hereof and that said reserves of coal have
the quantity, quality and characteristics hereinafter specified;
and
WHEREAS, Seller desires to mine coal from the Mine and sell
the same to Buyers for utilization in the Energy Center, and
Buyers desire to buy such coal from Seller; and
WHEREAS, the parties hereto desire to set forth their mutual
understandings and covenants with regard to the aforesaid coal
supply arrangements.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and undertakings of the parties herein
contained, Seller agrees to sell and deliver to Buyers, and
Buyers agree to buy and accept delivery of coal from Seller
subject to the following terms, conditions and provisions:
Section 1. Definitions.
For purposes of this Agreement:
(a) "Additional Charge" shall apply only to Coal requested
by Buyers pursuant to Section 5(b) hereof and shall be an amount
equal to $0.0150 per MMBtu effective January 1, 1993, as adjusted
pursuant to Section 8(d) hereof.
(b) "Adjustment Quarter" is defined in regard to
adjustments and calculations made hereunder as the Quarter for
which such adjustments or calculations are being made.
(c) "Agent/Operator" is defined as Western Resources,
Inc., a Kansas corporation, formerly known as The Kansas Power
and Light Company, which is the operator of the Energy Center
for Buyers and shall serve as agent for Buyers under this
Agreement.
(d) "Agreement" is defined as this 1993 Amended and
Restated Coal Supply Agreement.
(e) "Alternate Source Coal" shall have the meaning ascribed
to it in Section 5(c) hereof.
(f) "Alternate Source Mine" shall have the meaning ascribed
to it in Section 5(c) hereof.
(g) "Amax Land Royalties" is defined as all Royalties
except those Royalties set out in section l(rr)(i) hereof.
(h) "Annual Base Quantity" is defined as the minimum number
of Btu's to be sold, purchased and delivered under this Agreement
for each Contract Year during the Term pursuant to the provisions
of Section 3(b) hereof.
(i) "as received basis" shall have the meaning ascribed to
it in ASTM Standard D-3180.
(j) "ASTM" means the American Society for Testing and
Materials.
(k) "Basic Source Coal" means coal shipped from the Mine or
Belle Ayr Mine.
(l) "Btu's" are defined as British thermal units.
(m) "Business Day" means any calendar day other than a
Saturday, Sunday or legal holiday recognized and observed by the
Federal Government.
(n) "Buyers" shall have the meaning ascribed to it in the
preamble hereof.
(o) "Coal" means coal to be delivered by Seller and
purchased by Buyers pursuant hereto.
(p) "Competitive Offer" shall have the meaning ascribed to
it in Section 3(c) hereof.
(q) "Consultant" shall mean an employee or person otherwise
affiliated with one of the entities listed in Exhibit K, attached
hereto and hereby made a part hereof, as the same may be amended
from time to time.
(r) "Contract Year" means a calendar year.
(s) "Current Index" is defined:
(i) for published indices determined on a monthly basis, as
the arithmetic mean of the available monthly index values
for the second and third Quarters preceding an Adjustment
Quarter; provided, if less than three monthly index values
are available for any such two-Quarter period, then the
provisions of Section 8(e) hereof shall apply; and
(ii) for published indices determined on a Quarterly basis,
as the arithmetic mean of the available Quarterly index
values for the second and third Quarters preceding an
Adjustment Quarter; provided, if less than two Quarterly
index values are available for any such two-Quarter period,
then the provisions of Section 8(e) hereof shall apply.
(t) "Deficient Quantity" is defined as the difference, but
not less than zero, obtained by subtracting the total quantity of
Btu's purchased under this Agreement in a Contract Year from the
Annual Base Quantity (less any adjustments allowed pursuant to
the terms of this Agreement) Buyers are required to purchase
during such Contract Year pursuant to Section 3(b) hereof.
(u) "Deficient Quantity Charge" shall be an amount equal to
$0.3163/MMBtu effective for Contract Year 1993, and shall
thereafter be calculated pursuant to Section 4(a) hereof.
(v) "Dispute" shall have the meaning ascribed to it in
Section 16 hereof.
(w) "Energy Center" shall have the meaning ascribed to it
in the preamble hereof.
(x) "Force Majeure" shall have the meaning ascribed to it
in Section 13 hereof.
(y) "IC" (Indexed Component) is defined as that component
of the Price which shall be adjusted pursuant to Section 8(a)(ii)
or Section 8(c) hereof.
(z) "ICIP" (Indexed Component of Incremental Price) is
defined as that component of the Incremental Price which shall be
adjusted pursuant to Section 8(b)(ii) or Section 8(c), or
redetermined pursuant to Section 8(b)(iii) hereof.
(aa) "Incremental Price" (IP) is defined as the dollars per
MMBtu to be paid by Buyers to Seller pursuant to Section 7
hereof, as adjusted pursuant to Section 8(b) or Section 8(c), or
redetermined pursuant to Section 8(b)(iii) hereof, for all
Incremental Quantity Coal, except for Off-Specification Coal
which shall be priced pursuant to Section 6(b) hereof.
(bb) "Incremental Quantity Coal" is defined as all quantity
of Coal delivered hereunder during any Contract Year in excess of
the Annual Base Quantity for that Contract Year.
(cc) "Invoiced Items" shall have the meaning ascribed to it
in Section 12(d) hereof.
(dd) "Market Price" shall mean those determinations made by
Consultants pursuant to Section 8(b)(iii) hereof.
(ee) "Mine" shall have the meaning ascribed to it in the
preamble hereof.
(ff) "MMBtu" is defined as one million Btu's.
(gg) "Monthly Base Quantity" shall have the meaning ascribed
to it in Section 9(b) hereof.
(hh) "New Law" is defined as the enactment, repeal or
amendment of any federal, state or local law, ordinance,
regulation or rule or any judicial, legislative or executive
change in the wording, interpretation or enforcement of any
federal, state or local law, ordinance, regulation or rule or any
mandate, guideline or policy issued pursuant thereto, which
affects Seller's cost of mining, producing, processing, hauling
or loading Coal at the Mine after December 31, 1992.
(ii) "Off-Specification Coal" is defined as Coal delivered
hereunder which (on an "as received basis") on a monthly weighted
average basis, when sampled and analyzed pursuant to Section 11
hereof, has any one of the following specifications:
Coal Characteristics Off-Specifications
Moisture - exceeding 32.1%
Ash - exceeding 7.0 lbs./MMBtu
Volatile Matter - less than 27.8%
Fixed Carbon - less than 26.3%
Sulfur - exceeding 0.55 lbs./MMBtu
Calorific Value - less than 8150 Btu's/lb.
Ash Fusion (Reducing Atmosphere)
Initial Deformation - less than 2020 degrees F
Softening (H=W) less than 2055 degrees F
Softening (H=1/2W) less than 2120 degrees F
Fluid - less than 2130 degrees F
Grindability (Hardgrove Index)-less than 52 (at 20%
moisture)
(jj) "Other Producer" shall have the meaning ascribed to it
in Section 3(c)(i) hereof.
(kk) "Price" is defined as the dollars per MMBtu to be paid
by Buyers to Seller pursuant to Section 7 hereof, as calculated
pursuant to Section 8(a) and Section 8(c) hereof, for all Annual
Base Quantity Coal delivered and accepted hereunder, except for
Off-Specification Coal which shall be priced pursuant to Section
6(b) hereof.
(ll) "Prior Index" is defined:
(i) for the April 1, 1993, Adjustment Quarter:
(A) for published indices determined on a monthly basis, as
the arithmetic mean of the available monthly index
values for the second and third Quarters of 1992;
provided, if less than three monthly index values are
available for this two-Quarter period, then the
provisions of Section 8(e) hereof shall apply; and
(B) for published indices determined on a Quarterly basis,
as the arithmetic mean of the available Quarterly index
values for the second and third Quarters of 1992;
provided, if less than two Quarterly index values are
available for this two-Quarter period, then the
provisions of Section 8(e) hereof shall apply; and
(ii) after the April 1, 1993, Adjustment Quarter, as the
Current Index from the previous Adjustment Quarter.
(mm) "Quarter" is defined as the three-month period of time
beginning Quarterly.
(nn) "Quarterly" is defined as occurring each January 1,
April 1, July 1 and October 1.
(oo) "Quarterly Adjustment Ratio" is defined as the sum of
the weighted changes of the item indices, described in Columns
(I) and (II) of the PRICE ADJUSTMENT INDEX SOURCES AND WEIGHTS
TABLE below, calculated as follows:
For each item index divide the Current Index by the Prior
Index and multiply the result by the fixed percentage weight
(changed to a decimal) listed under Column (III) of the
PRICE ADJUSTMENT INDEX SOURCES AND WEIGHTS TABLE below. The
result of such multiplication for each item index shall then
be added to obtain the sum of the weighted changes.
The value for each index shall be the value as first
published in the respective publication listed in the PRICE
ADJUSTMENT INDEX SOURCES AND WEIGHTS TABLE below. All
calculations to determine the weighted change for each index
shall be rounded to four decimal places. The Quarterly
Adjustment Ratio shall be calculated to four decimal places. An
example of these calculations is shown on Exhibit D attached
hereto and hereby made a part hereof.
PRICE ADJUSTMENT INDEX SOURCES AND WEIGHTS TABLE
ITEM SOURCE WEIGHT
(I) (II) (III)
1. Labor
a. Average hourly earnings per worker, not
seasonally adjusted, Private nonfarm
payrolls, Mining (1) 10.0%
b. Average hourly earnings, Wyoming, not
seasonally adjusted (2) 10.0%
2. Materials & Supplies
a. Industrial Commodities (3) 10.0%
b. Intermediate materials, supplies and
components (4) 15.0%
c. Mining machinery parts, excluding
drills Commodity Code 1192-5301 (3) 10.0%
3. Other
a. Gross private domestic investment, Fixed
investments, Nonresidential, Implicit
price deflator (5) 20.0%
b. Gross domestic product, Business, Nonfarm
less housing (6) 5.0%
c. Bituminous coal, Spot sales of prepared
bituminous coal, Steam electric utilities
Commodity Code 0512-0209 (3) 20.0%
4. Total 100%
(1) Listed under the "Hourly and Weekly Earnings" subsection
of "5. Labor Force, Employment and Earnings: of "Current
Business Statistics" section of Survey of Current
Business published monthly by the Bureau of Economic
Analysis of the U. S. Department of Commerce.
(2) Listed under Table C-8 "Average houses and earnings of
production workers on manufacturing payrolls in States and
selected areas," of Employment and Earnings, published
monthly by the Bureau of Labor Statistics, U.S. Department
of Labor.
(3) Listed under Table 6 "Producer price indexes and percent
changes for commodity groupings and individual items, "of
Producer Price Indexes published monthly by the Bureau of
Labor Statistics, U.S. Department of Labor.
(4) Listed under Table 1 "Producer price indexes and percent
changes by state of processing," of Producer Price Indexes,
published monthly by the Bureau of Labor Statistics, U. S.
Department of Labor.
(5) Listed under THE NATIONAL INCOME AND PRODUCT ACCOUNTS,
selected NIPA Tables, Table 7.1 "Fixed-Weighted and
Alternative Quantity and Price Indexes for Gross Domestic
Product" of Survey of Current Business, published monthly by
the Bureau of Economic Analysis of the U. S. Department of
Commerce.
(6) Listed under THE NATIONAL INCOME AND PRODUCT ACCOUNTS,
Selected NIPA Tables, Table 7.14 "Implicit Price Deflators for
Gross Domestic Product by Section," of Survey of Current
Business, published monthly by the Bureau of Economic
Analysis of the U. S. Department of Commerce.
(pp) "Reclamation Fee is defined as costs incurred by Seller
for Abandoned Mine Land Fees as presently set forth in Part 870
of Title 30, Code of Federal Regulations (1992) and such
statutes, rules and regulations as shall be subsequently
applicable.
(qq) "Royalty" or "Royalties" is defined as an amount
payable by Seller to a third party for the right or privilege to
engage in coal mining activities at the Mine.
(rr) "RTRC" (Royalties and Tax Related Component) is defined
as that component of the Price which shall be calculated pursuant
to Section 8(a)(i) hereof and is attributable to:
(i) Royalties payable to the following third parties and
their successors in interest for Coal produced at the
Mine:
(A) the United States Department of the Interior as set
forth in Federal Coal Leases, W-0313773 and
W-78631, and any other coal leases entered into
with the United States Department of the Interior
subsequent to December 31, 1992, with respect to
coal reserves located adjacent to or near the Mine,
coal reserves located adjacent to or near the Mine,
(B) the State of Wyoming as set forth in Wyoming State
Coal Lease, 0-27078, and any other coal leases
entered into with the State of Wyoming subsequent
to December 31, 1992, with respect to coal reserves
located adjacent to or near the Mine, and
(C) John Organ as set forth in a Letter of Proposed
Settlement dated January 18, 1969 between Ayrshire
Collieries corporation and John E. Organ and Eunice
Organ.
(ii) costs incurred by Seller at the Mine for;
(A) Wyoming severance taxes as presently set forth in
Wyoming Statues Title 39, the Wyoming Constitution
Article XV and Regulations of the Wyoming
Department of Revenue and notices thereunder (1992)
and such constitutions, statutes and regulations as
shall be subsequently applicable; and
(B) Campbell County, Wyoming ad valorem taxes on
production as set forth in Article XV Section 3 of
the Constitution of the State of Wyoming;
(iii) costs incurred by Seller at the Mine for Federal Black
Lung Excise Tax as presently set forth in Section
48.4121-1, Subpart H of Part 48 of Title 26, Code of
Federal Regulations (1992) and such statutes, rules and
regulations as shall be subsequently applicable;
(iv) changes in the Federal Statutory Depletion rate from
the base rate of 10 percent as set forth in Section 613
(b) (4) of Title 26, United States Code (1984); and (v)
costs incurred by Seller for a New Law which are to be
included in the RTRC pursuant to the procedures set
forth in Section 8(c) hereof.
(ss) "RTRCIP" (Royalties and Tax Related Component of
Incremental Price) is defined as the RTRC component of the
Incremental Price which shall be calculated pursuant to Section
8(b)(i) hereof and is attributable to those items set forth in
Section l(rr)(i) through (v) hereof.
(tt) "Seller" shall have the meaning ascribed to it in the
preamble hereof.
(uu) "Seller's Law Costs" is defined as all changes in
Seller's cost of mining, producing, processing, hauling or
delivering Coal at the Mine caused by a New Law.
(vv) "Seller's Scales" means a batch load weighing system
or track scales located at the Mine, Belle Ayr Mine or an
Alternate Source Mine capable of weighing the Coal to be
delivered hereunder.
(ww) "Survey Period" is defined as the four Quarters
subsequent to the date that a New Law first affects Seller's Law
Costs.
(xx) "Term" shall have the meaning ascribed to it in
Section 2 hereof.
(yy) "Termination Charge" shall have the meaning
ascribed to it in Section 15(a) hereof.
(zz) "Utilization Cost" shall mean the net additional cost
per MMBtu reasonably expected to be incurred by Buyers with
respect to the handling and utilization of Alternate Source Coal.
Whenever used in this Agreement, the terms "cost," "costs,"
"paid," "payments," and "expenses" shall include all such items
whether actually paid by Seller or accrued on Seller's books and
records in accordance with generally accepted accounting
principles and procedures.
Section 2. Term of Agreement.
(a) Term. The term of this Agreement shall be for a period
commencing on January 1, 1993, and ending on December 31, 2020
(the "Term").
(b) Extension of Term. If Buyers wish to extend the Term
for an additional period of up to five years for the purposes of
purchasing additional coal hereunder, they shall notify Seller at
least 36 months prior to the expiration of the Term. If, within
30 days after receipt of such notice, Seller determines, in its
sole judgment, that it will have coal available for sale after
the expiration of the Term, it shall notify Buyers of the
quantity of coal which will be available. Buyers and Seller
shall, within 60 days after Buyers' receipt of such notice, meet
in order to arrive at mutually acceptable terms and conditions to
cover the sale of such coal. If no mutually acceptable terms and
conditions are reached, this Agreement shall not be extended
beyond December 31, 2020.
Section 3. Quantities of Coal.
(a) Requirements Contract. This is a requirements contract
pursuant to which Buyers shall purchase exclusively from Seller
under the terms of this Agreement all coal, except as provided in
Sections 6, 13 and 15 hereof, necessary to operate Units 1 - 3 of
the Energy Center through December 31, 2020. If Buyers construct
and commence operations of Unit 4 of the Energy Center and the
Unit utilizes coal then Buyers shall purchase exclusively from
Seller all coal to operate that Unit through December 31, 2013.
At least 30 days prior to the beginning of each Contract Year,
Agent/operator shall provide Seller with a non-binding written
forecast of Buyers' estimated Coal requirements for such Contract
Year.
(b) Annual Base Quantity. Subject to Sections 6, 13, and
15 hereof, the Annual Base Quantity of Coal for each Contract
Year, which Buyers are obligated to purchase, shall be the
minimum number of Btu's respectively set forth opposite such
Contract Year below:
Contract Year Annual Base Quantity in MMBtu
1993-2013 116,200,000
2014-2020 74,700,000
(c) Right of First Refusal - Unit 4. If Buyers, upon
construction and commencement of operations, plan to utilize coal
to operate Unit 4 between January 1, 2014 and December 31, 2020,
then Buyers shall offer Seller the opportunity to provide such
coal. Seller may, at its option, exercise the right to sell such
quantity of Coal to Buyers on the following terms and conditions:
(i) Buyers shall obtain one or more bona fide written offers
(each a "Competitive Offer") to supply coal to Unit 4
from one or more producers) not affiliated with or
controlled by Buyers (each such producer an "Other
Producer") and shall submit to Seller: (A) the price per
MMBtu F.0.B. Unit 4 from such Competitive Offer(s) ;
and, (B) a summary of the other terms and conditions of
the Competitive offer(s), including, but not limited to,
quality specifications, quantity, term, price adjustment
and payment terms, but without revealing the identity of
the Other Producer(s). Buyers shall at the same time
submit to Seller a verification from the firm of
certified public accountants then acting as
Agent/Operator's auditor of the accuracy of the price
and the summary of the Competitive Offers' terms and
conditions.
(ii) If, within 10 days after receipt of such information
from Buyers, Seller agrees to offer a price for coal to
be delivered F.O.B. Unit 4 equal to or less than the
price from one or more of the other Producer(s) and
agrees to all other reasonable terms and conditions of
the respective Competitive Offer (s) as stated in the
summary, Buyers shall purchase such quantity of coal
during such contract term from Seller at such price and
on such terms and conditions. If Seller advises Buyers
that it does not want to furnish any quantity to
Buyers, then Buyers shall have no further obligation to
Seller with respect to the purchase of coal for use at
Unit 4 during the term of Buyers' contract(s) with the
Other Producer(s); provided, Buyers shall not purchase
all of or any portion of such quantity from any entity
other than the Other Producer(s) which Buyers contracted
with; and provided further, if Buyers wish to purchase
all or any portion of such quantity from an entity other
than the Other Producer(s) which submitted the
Competitive Offer(s), it shall first afford Seller the
opportunity to furnish such quantity by following the
procedures set forth in paragraph (i) above.
(iii) Each time Buyers desire to purchase Coal for use in Unit
4 during the period January 1, 2014 through December 31,
2020, they shall follow the procedure set forth above.
Section 4. Deficient Quantity Charge and Payment.
(a) Deficient Quantity Charge. For Contract Year 1994
and each Contract Year thereafter, the Deficient Quantity Charge
shall be calculated as follows:
A = B ((AR1 + AR2 + AR3 + AR4)/4)
Where:
A=the Deficient Quantity Charge.
B=the previous Contract Year's Deficient Quantity
Charge.
AR1=the Quarterly Adjustment Ratio calculated pursuant to
Section 1(oo) hereof and in effect on January 1 of the
Contract Year during which Buyers incurred the Deficient
Quantity.
AR2=
the Quarterly Adjustment Ratio calculated pursuant to Section
1(oo) hereof and in effect on April 1 of the Contract Year
during which Buyers incurred the Deficient Quantity.
AR3=
the Quarterly Adjustment Ratio calculated pursuant to Section
1(oo) hereof and in effect on July 1 of the Contract Year
during which Buyers incurred the Deficient Quantity.
AR4=
the Quarterly Adjustment Ratio calculated pursuant to Section
1(oo) hereof and in effect on October 1 of the Contract Year
during which Buyers incurred the Deficient Quantity.
(b) Deficient Quantity Payment. If, during any Contract
Year, Buyers incur Deficient Quantity, then they shall pay Seller
an amount determined by multiplying the Deficient Quantity Charge
for such Contract Year by the Deficient Quantity. Such amount
shall be paid by Buyers in six consecutive equal monthly
installments beginning with the first such installment due and
payable on or before April 15 of the Contract Year succeeding the
Contract Year in which the Deficient Quantity is incurred.
Seller, on or before March 1 of such succeeding Contract Year,
shall furnish Buyers with an invoice showing the total and
monthly amounts due for such Deficient Quantity along with any
appropriate documentation supporting the calculation of such
amounts. Exhibit I attached hereto and hereby made a part hereof
is representative of the actual method and procedure which Buyers
and Seller have agreed shall be followed in calculating the
Deficient Quantity payment for any applicable Contract Year.
Section 5. Source and Dedication; Buyers' Request for Belle
Ayr Mine Coal; Alternate Source Coal; Loading; Deliveries; Title
and Risk of Loss.
(a) Source and Dedication. Basic Source Coal to be
delivered by Seller under this Agreement shall be from the Mine;
provided, Seller shall have the right at any time, and from time
to time, to deliver Coal from Seller's Belle Ayr Mine located
near Gillette, Wyoming and shown on Exhibit A hereto to be used
by itself or blended with Coal at the Mine; and all such Coal
shall be considered to be Basic Source Coal for all purposes
hereunder; provided further, if Seller delivers any Basic Source
Coal from the Belle Ayr Mine or blends Belle Ayr Coal with Coal
at the Mine, it shall notify Agent/Operator in writing prior to
the loading of any such Coal or anytime (i) a change is made to
return Coal sourcing to the Mine or (ii) it discontinues blending
at the Mine. Seller hereby dedicates to Buyers the total
quantities of Coal from the Mine that are required, or may be
required, to be delivered to Buyers in order for Seller to
fulfill the commitments undertaken by it under this Agreement.
(b) Buyers' Request for Belle Ayr Mine Coal. Buyers shall
have the right at any time, and from time to time, to request
that Seller deliver Coal during each Contract Year from the Belle
Ayr Mine. If Seller, in its sole discretion, agrees to deliver
such requested quantity of Coal or portion thereof then the
applicable Additional Charge shall be added to the then
applicable Price or Incremental Price.
(c) Alternate Source Coal. (i) Seller, at all times during
the Term, shall have the right, but not the obligation, to
deliver to Buyers all or part of the Annual Base Quantity from
alternate sources ("Alternate Source Coal") without regard to
whether or not the source mine or mines are owned or controlled
by Seller ("Alternate Source Mines"), so long as such Alternate
Source Coal: (A) is delivered to the Energy Center at a cost per
MMBtu (defined as including cost of Alternate Source Coal,
transportation, loss in transit, any required chemical additive
and rail equipment and/or any other items required to deliver
Coal in a usable form and including the Utilization Cost) not
higher than the cost per MmBtu of Mine Coal delivered to the
Energy Center; (B) is of substantially the same or better quality
and has substantially the same or better characteristics as
required for Basic Source Coal pursuant to Section 6(a) hereof;
(C) enables Buyers, by performance or by compromise agreeable to
Buyers, Seller and Buyers' rail carrier, to comply with Buyers'
obligations under transportation agreements in existence and in
effect at the time of delivery; and (D) has been approved by
Buyers in their reasonable discretion pursuant to the procedures
set forth below.
(ii) In addition, Seller's right to supply Alternate
Source Coal is subject to the following conditions:
(A) At any time, and from time to time, Seller, if it
desires to supply Alternate Source Coal, shall request
Agent/Operator's approval for the delivery of Alternate
Source Coal. At the time of such request Seller shall
provide Agent/Operator with the proximate and ultimate
analyses of such Coal and shall make available
quantities of such Alternate Source Coal as
Agent/operator may reasonably request for purposes of
analyzing and testing, including test burns in the
Energy Center. All such test Coal shall be priced as
though it was Alternate Source Coal purchased hereunder
by Agent/Operator. Agent/Operator shall notify Seller
of its approval or disapproval of such Alternate Source
Coal within 30 days of the later of its receipt of (A)
Seller's request or (B) the last shipment of such
Alternate Source Coal for the test burn. If
Agent/Operator has notified Seller that it has approved
such Alternate Source Coal, it shall also advise Seller
in such notice of the Utilization Cost. Such Utilization
Cost shall be fixed and firm for a period of twelve
months from the date Agent/Operator so notifies Seller.
If Seller desires to deliver such Alternate Source Coal
beyond the twelve month period, it shall notify Buyers
at least 90 days prior to the expiration of such twelve
month period and Buyers, within 60 days of receipt of
such notice, shall advise Seller of the Utilization Cost
to be effective during the ensuing twelve month period.
(B) When securing an Alternate Source Coal for shipment to
Agent/Operator, Seller shall also secure for
Agent/Operator access to and the right to inspect the
mining, weighing, sampling and other applicable
operations of the Alternate Source Mine.
(C) The price payable by Buyers for Alternate Source Coal,
taking into account the Utilization Cost, shall be
calculated pursuant to the procedure set forth in
Exhibit 0 attached hereto and hereby made a part hereof;
provided, if the parties are unable to agree on the
Utilization Cost from such Alternate Source Coal and
Seller desires to deliver Alternate Source Coal as the
result of operational problems, including coal quality,
at the Mine or Belle Ayr Mine, then pending resolution
of such Utilization Cost, Buyers will take the Alternate
Source Coal for such period as long as such Coal meets
the other conditions set forth in this section 5(c);
provided further, the price for Alternate Source Coal
shall not exceed the Price less the Utilization Cost.
(d) Railcar Loading; Rail Tariff. The Coal to be sold
and delivered hereunder shall be loaded F.O.B. railcars at the
Mine, Belle Ayr Mine or Alternate Source Mine with freight
charges paid by Buyers. Coal shall be loaded into railcars
provided by Buyers in accordance with the applicable tariff
and/or contract requirements of Buyers, rail carrier(s) for
transportation by rail to the Energy Center. Seller agrees to
pay all costs, penalties, or increases in freight charges
incurred solely due to Seller's failure to comply with those
applicable tariff and/or contract requirements relative to
loading and weighing time and loaded railcar weight which
requirements (i) are set forth in Exhibit M attached hereto and
hereby made a part hereof or (ii) might be
modified or changed in the future and consented to in writing by
Seller, which consent shall not unreasonably be withheld;
provided, Seller shall not have to incur any increased cost in
order to comply with such new requirements.
(e) Title and Risk of Loss. Delivery and title to the
Coal shall pass to Buyers when a loaded unit train departs the
Mine, Belle Ayr Mine or Alternate Source Mine, if applicable, for
its ultimate destination. Risk of loss shall follow title.
(f) Regular Deliveries. Subject to other provisions of
this Agreement and taking into account the regularly scheduled
holidays and vacation periods of the employees at the Mine,
deliveries of Coal hereunder shall be made in approximately equal
weekly quantities. Such delivery schedules may be adjusted at
any time by mutual agreement between the parties.
Section 6. Quality of Coal.
(a) Coal Specifications. Except if and to the extent
that Seller and Buyers may from time to time agree in writing,
Coal to be supplied hereunder shall be:
(i) substantially free from impurities such as, but not
limited to, bone, slate, earth, rock, pyrite, wood,
tramp metal and mine debris;
(ii) sized to a top size of two inches (2"); and
(iii) of a typical weighted average quality over any monthly
period substantially equal to the following
specifications, on an "as received basis", as
established by analyses of samples taken and analyzed as
provided in Section 11 hereof, to-wit:
Coal Characteristics Specifications
Moisture 31.1%
Ash 5.85 lbs./MMBtu
Volatile Matter 31.0%
Fixed Carbon 33.0%
Sulfur 0.43 lbs./MMBtu
Calorific Value 8300 Btu's/lb.
Ash Fusion (Reducing Atmosphere)
Initial Deformation 2185 degrees F
Softening (H=W) 2225 degrees F
Softening (H=W/2 W) 2265 degrees F
Fluid 2300 degrees F
Grindability (Hardgrove Index) 58 (at 20% moisture)
Free Swelling Index 0
(b) Off-Specification Coal. Seller shall take all
reasonable necessary precautions in order to avoid delivering
Coal to Buyers that does not meet the above specifications;
however, in the event Off-Specification Coal is delivered, Buyers
shall pay for all such Off-Specification Coal at a price
equivalent to 90 percent of the Price or Incremental Price, as
the case may be. In the event the monthly weighted average
analysis shows that Off-Specification Coal has been delivered,
Buyers have the option to suspend all further shipments until
Buyers are reasonably assured by Seller that Seller will be able
to deliver Coal which will meet the specifications as set out in
Section 6(a) hereof. If Buyers suspend shipments pursuant to
this Section 6(b), then the Annual Base Quantity shall be reduced
by an amount equal to the product obtained by multiplying the
number of days of such suspension by the result obtained by
dividing the Annual Base Quantity by 365.
Section 7. Price and Incremental Price: Certain Taxes:
Economic Controls.
(a) Price and Incremental Price. Buyers shall pay to
Seller the Price for Annual Base Quantity Coal and the
Incremental Price for Incremental Quantity Coal delivered F.O.B.
railcars at the Mine, the Belle Ayr Mine or Alternate source Mine
and accepted under this Agreement. The Price shall consist of
the IC and RTRC and shall be calculated from time to time as
provided for in Section 8(a) hereof. The Incremental Price shall
consist of the ICIP and RTRCIP and shall be calculated or
redetermined from time to time as provided for in Section 8(b)
hereof.
(b) Certain Taxes. If any sales tax, excise tax, use tax
or similar taxes applicable to the sale or use of Coal are levied
at or after the point of delivery, Buyers shall either pay such
taxes directly or reimburse Seller if Seller has paid such taxes.
(c) Economic Controls. In the event the effect of any
adjustment or redetermination of the Price or Incremental Price
provided for herein is hereafter prevented, suspended or limited
by any economic controls required or established by applicable
laws, rules or regulations promulgated by federal, state, county
or local governmental bodies or agencies, then, upon and as of
the effective date of the repeal, modification or lapse thereof,
in whole or in part, the Price or Incremental Price shall be
revised to give effect to all adjustments thereto and
redeterminations thereof required or permitted under this
Agreement but not theretofore made due to such economic controls.
Such revised Price or Incremental Price shall apply (until
further adjusted or redetermined from time to time) to all
subsequent deliveries of Coal made hereunder.
Section 8. Calculation of Price and Incremental Price.
(a) Price Components. Beginning January 1, 1993, the Price
shall consist of two components: RTRC and IC and shall be an
amount equal to the sum of such components. The Price shall be
calculated from time to time to reflect the respective amounts
contained in the RTRC and IC components. Each of these
components shall be calculated pursuant to this Section 8. An
example of the operation of this Section 8 using hypothetical
numbers is set forth in Exhibits B through E and Exhibit G which
are attached hereto and hereby made a part hereof. Exhibits B
through E and Exhibit G are representative of the actual methods
and procedures which Buyers and Seller have agreed shall be
followed, except as otherwise provided for in this Agreement, in
making the calculations.
(i) Calculation of RTRC. The RTRC shall be an amount
equal to the sum of the values of the items of the
RTRC set forth in Sections 8(a)(i)(C),(D),(E),(F), and
(G) hereof and any items added pursuant to Section
8(c)(i) hereof. Such values shall be calculated
Quarterly beginning January 1, 1993, and at any other
time that a change occurs in the respective value of
any such item included in the RTRC. Calculations
shall be made using actual amounts unless such actual
amounts are not available in which case reasonable
estimated amounts shall be used. Documentation to
substantiate the use of such actual or reasonable
estimated amounts shall be provided by Seller to
Buyers at the time Seller notifies Buyers of any
change in the RTRC. If an estimated amount for any
item is used in the calculation of the RTRC, then
such amount shall be reconciled with the final actual
amount of such item as soon as such actual amount
becomes known and, if there is a difference between
the two such amounts, then an appropriate invoice
shall be issued pursuant to Section 9(a) hereof.
The value for each item of the RTRC and the CP shall
be solved to six decimal places. The respective
values of the items of the RTRC shall be added
together and the result thereof shall be rounded to
four decimal places to determine the RTRC. Such
calculations shall be made pursuant to the following
procedures and formulas:
(A) The symbols, descriptions, units of measure and
data sources used to determine values for the items
of the RTRC calculated by equations, set forth in
Section 8(a)(i)(B) hereof, are set forth in the RTRC
EQUATION RELATED SYMBOLS TABLE below:
RTRC EQUATION RELATED SYMBOLS TABLE
Symbol Description Measure Units of Data Source
BLR Federal Black Lung percent Title 26 United
Excise Tax Rate as of States Codes Section
the date of adjustment 4121 (1992) and Title
26 Code of Federal
Regulations Section
48.4121-1 (1992)
BLT Federal Black Lung
Excise Tax MMBtu Section 8(a)(i)(G)
CDR Current Federal percent Title 26 United
Statutory Depletion States Code sections
rate as of the date of 291(a)(2) and
the adjustment 613(b)(4) (1992)
CP Calculated price MMBtu Section 8(a)(i)(6)
variable hereof
FDR Fixed Federal percent Title 26 United
Statutory Depletion States Code Section
Rate (10%) 613(b)(4) (1984)
FRT All coal produced from Tons Seller's records
Federal leases at the
Mine subject to
royalty assessment
based on percentage of
value during the three
months beginning on
the date of the
calculation
IC Indexed Component $/MMbtu Section 8(a)(ii)
hereof
MDC Total Direct Mining $ Seller's records
Costs at the Mine
related to the
adjustment period as
calculated by Seller
and accepted by the
State of Wyoming
ORG John Organ Royalty $/MMBtu Section 8(a)(i)(F)
hereof
ORR John Organ Royalty percent Letter of Proposed
rate as of the date of Settlement of
the adjustment January 18, 1969,
between John E.
Eunice Organ and
Ayrshire Collieries
Corporation
PRT Wyoming severance $/MMbtu Section 8(a)(i)(C)
taxes and Campbell hereof
County, Wyoming ad
valorem taxes on
production
PRTR Wyoming severance tax percent Wyoming Statutes
rate and the Campbell Section 39-6-302
County, Wyoming ad (1992) and the
valorem tax rate on Campbell County,
production as of the Wyoming ad valorem
date of the adjustment tax rate on
production Article XV
Section 3 of the
Constitution of
Wyoming
R Federal Royalties $/MMBtu Section
8(a)(i)(E) hereof
RR Federal Royalty rate percent Federal Coal
at the Mine as of the Leases,
date of the adjustment W-0313773
calculation
S Statutory Depletion $/MMBtu Section
8(a)(i)(D)
hereof
TDC Total Direct Costs at $ Tax returns
the Mine related to including
the adjustment period all amendments
as calculated by filed by
Seller and accepted by Seller and
the State of Wyoming accepted by the
Wyoming Department
of Revenue
TR Federal corporate percent Title 26 United
income tax rate as of States Code
the date of the Section
adjustment (34% in 11(b)(1)(c)
1992) (1992)
TT Total coal tonnage Tons Seller's records
produced at the Mine
during the three
months beginning on
the date of adjustment
(B) The equations used to determine values for items
of the RTRC calculated by equations are:
(1) BLT = (CP-BLT) (BLR/100)
but not more than the statutory maximum
per ton expressed as $/MMBtu based on
8300 Btu/lb.
(2) R + (CP) (RR) (FRT)/((TT) (100))
(3) PRT = (((CP-R-ORG-BLT-PRT) (MDC/TDC))+
ORG+BLT+PRT) (PRTR)/100
(4) ORG = (CP-BLT-PRT-
R+((.20) (FRT)/(TT)))) (ORR/100
(5) S = (CP-R-ORG) (FDR-CDR) (TR)/10,000
(6) CP = IC+R+ORG+PRT+BLT+S
These equations shall be solved and the equation
determined items of the RTRC calculated
simultaneously by direct substitution iteration
until no change is noted in the sixth decimal place
in each of the variables on both sides of the equal
sign in each equation and the resultant items of
the RTRC shall be rounded to six decimal places.
The non-variable values shall be input to four
decimal places. The above equations exclude the
Reclamation Fee (however, it is agreed that if the
current statutory amount of such Fee is changed by
a New Law, then the difference between the amount
imposed by the New Law and the current amount shall
be included in the RTRC calculations) and Amax Land
Royalties from the appropriate equations in effect
on January 1, 1993, because of their inclusion in
the IC. If, as a result of an action of a third
party, any of the above equations no longer
accurately determines the value of the applicable '
item of the RTRC, then an appropriate change in
such equations) shall be made; provided, if, in
calculating values for items (3), (4) and (5) of
the RTRC enumerated above, a third party, as of
December 31, 1992, deducted amounts for the
Reclamation Fee and/or Amax Land Royalties, then
amounts for the Reclamation Fee and/or Amax Land
Royalties shall never be used in calculating such
values hereunder and the changed equations) shall
replace the appropriate above equations). In such
event Seller shall submit revised equations to
Buyers, along with supporting documentation, for
Buyers' written approval, which shall not
unreasonably be withheld.
(C) The Wyoming severance taxes and Campbell County
(Wyoming) ad valorem taxes on production item of the
RTRC shall be calculated by the equation specified in
Section 8 (a) (i) (B) (3) hereof. An example
calculation is shown on Exhibit C hereto.
(D) The statutory depletion item of the RTRC shall be
calculated by the equation specified in Section
8(a)(i)(B)(5) hereof. An example calculation is shown
on Exhibit C hereto.
(E) The Federal Royalty item of the RTRC shall be
calculated by the equation specified in Section
8(a)(i)(B)(2) hereof. An example calculation is shown
on Exhibit C hereto.
(F) The John Organ Royalty item of the RTRC shall be
calculated by the equation specified in Section
B(a)(i)(B)(4) hereof.
An example calculation is shown on-Exhibit C hereof.
G) The Federal Black Lung Excise Tax item of the RTRC
shall be calculated by the equation specified in Section
8(a) (i) (B) (1) hereof. An example calculation is
shown on Exhibit C hereto.
(ii) Adjustment of IC. As of January 1, 1993, the IC
shall be $0.3455/MMBtu and shall thereafter be adjusted
Quarterly during each Contract Year. The IC for an
Adjustment Quarter shall be determined by multiplying
the amount of the IC for the previous Quarter by the
Quarterly Adjustment Ratio for such Adjustment Quarter.
The product of such calculation shall be rounded to four
decimal places. If any information needed for the
calculation of the Quarterly Adjustment Ratio is not
available until after the beginning of an Adjustment
Quarter, the calculation of the Quarterly Adjustment
Ratio shall be applied retroactively to the beginning of
such Adjustment Quarter. Seller shall use all
reasonable efforts to provide Buyers with documentation
to substantiate the use of all calculations, whether
based upon estimated amounts or actual amounts, together
with supporting calculations and appropriate
documentation, no later than 30 days prior to the
beginning of the Adjustment Quarter. If an estimated
amount for any item is used in the calculation of the
IC, then such amount shall be reconciled with the final
actual amount of such item as soon as such actual amount
becomes known and, if there is a difference between the
two such amounts, then an appropriate invoice shall be
issued pursuant to Section 9 (a) hereof. Example
calculations are shown on Exhibits D, E and G hereto.
(b) Incremental Price Calculation and Redetermination.
Beginning January 1, 1993, the Incremental Price shall consist of
two components: RTRCIP and ICIP and shall be an amount equal to
the sum of such components. The Incremental Price shall be
calculated from time to time to reflect the respective amounts
contained in the RTRCIP and ICIP components. Each of these
components shall be calculated pursuant to this Section 8. An -
example of the operation of this Section 8 using hypothetical
numbers is set forth in Exhibit B and Exhibits D through G
hereto. Exhibit B and Exhibits D through G are representative of
the actual methods and procedures which Buyers and Seller have
agreed shall be followed, except as otherwise provided for in
this Agreement, in making the calculations.
(i) Calculation of RTRCIP. The RTRCIP shall be an
amount equal to the sum of the values of the items of
the RTRCIP set forth in Sections 8(b) (i) (C), (D),
(E),(F) and (G) hereof and any items added pursuant to
Section 8 (c) (i) hereof. Such values shall be
calculated Quarterly beginning January 1, 1993, and at
any other time that a change occurs in the respective
amount of any item included in the RTRCIP. Calculations
shall be made using actual amounts unless such actual
amounts are not available in which case reasonable
estimated amounts shall be used. Documentation to
substantiate the use of such actual or reasonable
estimated amounts shall be provided by Seller to Buyers
at the time Seller notifies Buyers of any change in the
RTRCIP. If an estimated amount for any item is used in
the calculation of the RTRCIP, then such amount shall be
reconciled with the final actual amount of such item as
soon as such actual amount becomes known and, if there
is a difference between the two such amounts, then an
appropriate invoice shall be issued pursuant to Section
9(a)hereof. The value of each item of the RTRCIP and
the CIP shall be solved to six decimal places. The
respective values of the items of the RTRCIP shall be
added together and the result thereof, shall be rounded
to four decimal places to determine the RTRCIP. Such
calculations shall be made pursuant to the following
procedures and formulas:
(A) The symbols, descriptions, units of measure and data
sources used to determine values for the items of the
RTRCIP calculated by equations, set forth in Section
8 (b) (i) (B) hereof, are set forth in the RTRCIP
EQUATION RELATED SYMBOLS TABLE below:
RTRCIP EQUATION RELATED SYMBOLS TABLE
Symbol Description Measure Units of Data Source
BLR Federal Black Lung percent Title 26 United
Excise Tax Rate as of States Codes Section
the date of adjustment 4121 (1992) and Title
26 Code of Federal
Regulations Section
48.4121-1 (1992)
BLT Federal Black Lung
Excise Tax $/MMBtu Section 8(b)(i)(G)
CDR Current Federal percent Title 26 United
Statutory Depletion States Code sections
rate as of the date of 29(a)(2) and
the adjustment 613(b)(4) (1992)
CIP Calculated incremental $/MMBtu Section 8(b)(i)(B)(6)
price variable hereof
FDR Fixed Federal percent Title 26 United
Statutory Depletion States Code Section
Rate (10%) 613(b)(4) (1984)
FRT All coal produced from Tons Seller's records
Federal leases at the
Mine subject to
royalty assessment
based on percentage of
value during the three
months beginning on
the date of the
calculation
ICIP Indexed Component $/MMbtu Section 8(b)(ii)
hereof
MDC Total Direct Mining $ Seller's records
Costs at the Mine
related to the
adjustment period as
calculated by Seller
and accepted by the
State of Wyoming
ORG John Organ Royalty $/MMBtu Section 8(b)(i)(F)
hereof
ORR John Organ Royalty percent Letter of Proposed
rate as of the date of Settlement of
the adjustment January 18, 1969,
between John E.
Eunice Organ and
Ayrshire Collieries
Corporation
PRT Wyoming severance $/MMbtu Section 8(b)(i)(C)
taxes and Campbell hereof
County, Wyoming ad
valorem taxes on
production
PRTR Wyoming severance tax percent Wyoming Statutes
rate and the Campbell Section 39-6-302
County, Wyoming ad (1992) and the
valorem tax rate on Campbell County,
production as of the Wyoming ad valorem
date of the adjustment tax rate on
production Article XV
Section 3 of the
Constitution of
Wyoming
R Federal Royalties $/MMBtu Section
8(b)(i)(E) hereof
RR Federal Royalty rate percent Federal Coal
at the Mine as of the Leases,
date of the adjustment W-0313773
calculation
S Statutory Depletion $/MMBtu Section
8(b)(i)(D)
hereof
TDC Total Direct Costs at $ Tax returns
the Mine related to including
the adjustment period all amendments
as calculated by filed by
Seller and accepted by Seller and
the State of Wyoming accepted by the
Wyoming Department
of Revenue
TR Federal corporate percent Title 26 United
income tax rate as of States Code
the date of the Section
adjustment (34% in 11(b)(1)(c)
1992) (1992)
TT Total coal tonnage Tons Seller's records
produced at the Mine
during the three
months beginning on
the date of adjustment
(B) The equations used to determine values for items of
the RTRCIP calculated by equations are:
(1) BLT = (CIP-BLT)(BLR/100)
but not more than the statutory maximum per ton
expressed as $/MMBtu based on 8300 Btu/lb.
(2) R = (CIP)(RR)(FRT)/((TT)(100))
(3) PRT = (((CIP-R-ORG-BLT-PRT) (MDC/TDC)) +ORG+ BLT+PRT)
(PRTR) /100
(4) ORG = (CIP-BLT-PRT-R+
((.20) (FRT) / (TT))) (ORR) /100
(5) S = (CIP-R-ORG)(FDR-CDR)(TR)/10,000
(6) CIP = ICIP+R+ORG+PRT+BLT+S
These equations shall be solved and the equation determined items
of the RTRCIP calculated simultaneously by direct substitution
iteration until no change is noted in the sixth decimal place in
each of the variables on both sides of the equal sign in each
equation and the resultant items of the RTRCIP shall be rounded
to six decimal places. The non-variable values shall be input to
four decimal places. The above equations exclude the Reclamation
Fee (however, it is agreed that if the current statutory amount
of such Fee is changed by a New Law, then the difference between
the amount imposed by the New Law and the current amount shall be
included in the RTRCIP calculations) and Amax Land Royalties from
the appropriate equations in effect on January 1, 1993, because
of their inclusion in the ICIP. If, as a result of an action of
a third party, any of the above equations no longer accurately
determines the value of the applicable item of the RTRCIP, then
an appropriate change in such equations) shall be made provided,
if, in calculating values for items (3), (4) and (5) of the
RTRCIP enumerated above, a third party, as of December 31, 1992,
deducted amounts for the Reclamation Fee and/or Amax Land
Royalties, then amounts for the Reclamation Fee and/or Amax Land
Royalties shall never be used in calculating such values
hereunder and the changed equations) shall replace the
appropriate above equations). In such event Seller shall submit
revised equations to Buyers, along with supporting documentation,
for Buyers' written approval, which shall not unreasonably be
withheld.
(C) The Wyoming severance taxes and Campbell County
(Wyoming) ad valorem taxes on production item of the
RTRCIP shall be calculated by the equation specified in
Section 8(b)(i)(B)(3) hereof. An example calculation is
shown on Exhibit F hereto.
(D) The statutory depletion item of the RTRCIP shall be
calculated by the equation specified in Section
8(b)(i)(B)(5) hereof. An example calculation is shown
on Exhibit F hereto.
(E) The Federal Royalty item of the RTRCIP shall be
calculated by the equation specified in Section
8(b)(i)(B)(2) hereof. An example calculation is shown
on Exhibit F hereto.
(F) The John Organ Royalty item of the RTRCIP shall be
calculated by the equation specified in Section
8(b)(i)(B)(4) hereof. An example calculation is shown
on Exhibit F hereto.
(G) The Federal Black Lung Excise Tax item of the RTRCIP
shall be calculated by the equation specified in Section
8 (b) (i) (B) (1) hereof. An example calculation is
shown on Exhibit F hereto.
(ii) Adjustment of ICIP. As of January 1, 1993, the ICIP
shall be $0.1540/MMBtu and shall thereafter be adjusted
Quarterly during each Contract Year. The ICIP for an
Adjustment Quarter shall be determined by multiplying
the amount of the ICIP for the previous Quarter by the
Quarterly Adjustment Ratio for such Adjustment Quarter.
The product of such calculation shall be rounded to four
decimal places. If any information needed for the
calculation of the Quarterly Adjustment Ratio is not
available until after the beginning of an Adjustment
Quarter, the calculation of the Quarterly Adjustment
Ratio shall be applied retroactively to the beginning of
such Adjustment Quarter. Seller shall use all
reasonable efforts to provide Buyers with documentation
to substantiate the use of all calculations, whether
based upon estimated amounts or actual amounts, together
with supporting calculations and appropriate
documentation, no later than 30 days prior to the
beginning of the Adjustment Quarter. If an estimated
amount for any item is used in the calculation of the
ICIP, then such amount shall be reconciled with the
final actual amount of such item as soon as such actual
amount becomes known and, if there is a difference
between the two such amounts, then an appropriate
invoice shall be issued pursuant to Section 9 (a)
hereof. Example calculations are shown on Exhibits D, E
and G hereto.
(iii) Market Redetermination. Notwithstanding anything
contained to the contrary in this Agreement, and in
addition to all other rights of the parties contained
herein, it is agreed that a redetermination of the
Incremental Price shall be made hereunder. The purpose
of such redetermination is to change the Incremental
Price so that it is reflective of the then current
market price for similar Powder River Basin coal sold to
utility purchasers buying coal for their own consumption
under five year coal supply agreements commencing at the
time of the redetermination for the purchase of
approximately 1,000,000 tons of coal per year and
containing terms and conditions as set forth in
Exhibit L attached hereto and hereby made a part hereof
(hereinafter such current market price referred to as
the "Market Price").
Redeterminations of the Incremental Price pursuant to
this Section 8(b)(iii) shall be effective on January 1,
1998, January 1, 2003, January 1, 2008, January 1, 2013
and January 1, 2018.
Redetermination shall be initiated by Buyers serving
written notice to Seller of the selection of their
Consultant no later than August 15 prior to the
Contract Year in which such redetermination of the
Incremental Price shall become effective. Upon receipt
of such notice, Seller, within 10 days, shall notify
Buyers of which Consultant it has chosen to determine
the Market Price.
After each party has received its Consultant's
determination of the Market Price, Agent/operator and
Seller shall compare their Consultants' Market Prices,
on or before October 5. If either one of the Market
Prices is within five percent of the simple arithmetic
average of the two Consultant's Market Prices, then the
simple arithmetic average of the two Market Prices
shall be the Incremental Price which will be effective
on such respective January 1. If neither of the
Consultant's Market Price is within five percent of the
simple arithmetic average, as shown on Exhibit J-1
hereto, then a third and fourth Consultant shall be
selected in a random drawing from the list contained on
Exhibit K hereto. The third Consultant selected shall
be contacted within 10 Business Days to ascertain if
such Consultant can determine a Market Price by December
1. If the third Consultant cannot make such a timely
determination, then the fourth Consultant shall be
contacted as soon as possible to see if it can make such
a timely determination. This process shall be repeated,
if necessary, until a Consultant is selected and if the
process is delayed beyond the applicable January 1, the
resulting Incremental Price shall be applied
retroactively to such applicable January 1. Any
communications with the third or fourth or subsequent
Consultant must be made simultaneously by both
Agent/Operator and Seller. When the Consultant has
determined the Market Price, the Incremental Price,
which will become effective on each respective
January 1, shall be the simple arithmetic average of all
three Consultant's Market Prices, as shown on
Exhibit J-2 hereto. The ICIP effective on each
respective January 1 shall be solved by using the
Incremental Price and the formulas and non-variable
inputs used to calculate each respective January 1
RTRCIP.
(c) New Laws. After December 31, 1992, Seller's
Law Costs shall be calculated by Seller and the amount
(whether an increase or decrease) of such change shall be
included in either the RTRC or the IC as an item of cost as
provided for below:
(i) Classification of Seller's Laws Cost.
(A) If an item of cost occasioned by a New Law is a
specific amount per ton or other measure and is
not then an item of the RTRC, then it shall become
an item of and be included in the RTRC on the basis
of the specific amount per ton, converted to the
equivalent dollars per MMBtu based upon 8,300 Btu's
per pound, retroactively to the date the New Law
first affected Seller's Laws Cost.
(B) If an item of cost occasioned by a New Law is
calculated as a percent of Seller's revenue from
the sale of coal from the Mine less applicable
deductions, if any, and is not then an item of the
RTRC, then it shall become an item of and be
included in the RTRC on the basis of an
amount calculated pursuant to the procedures set
forth in Section 8 (a) (i) (B) hereof
retroactively to the date the New Law first
affected Seller's Laws Cost.
(C) If an item of cost occasioned by a New Law causes
Seller's operating costs at the Mine to increase
decrease, then such cost shall become an item of
and be included in the IC on the basis of an amount
calculated pursuant to the procedures set forth in
Section 8 (c) (ii) or (iii) hereof.
(D) Any Seller's Laws Cost which can not be classified
in one of the preceding sections, shall be
classified as either an IC or RTRC cost by mutual
agreement of the parties.
(ii) IC Related Cost Reduction.
(A) If Seller's Laws Cost is classified as an IC cost
and is a reduction for an item of cost, then
Seller and Buyers shall agree on an estimated
amount of the cost reduction and the IC shall be
reduced by such amount retroactively to the date
such New Law first affected Seller's Laws Cost and
this estimated amount shall continue to be used in
calculating the IC until Buyers and Seller agree
to an amount pursuant to Section 8(c)(ii)(B)
hereof.
(B) After the IC has been reduced pursuant to Section
8(c)(ii)(A) hereof for the Survey Period, the
actual amount of reduction for such item of cost
shall be determined. Seller shall calculate and
present to Buyers, Seller's determination of the
actual amount of such cost reduction for each
Quarter of the Survey Period. Buyers or Buyers'
representative shall have the right at Buyers'
expense to review Seller's applicable records to
independently calculate and present to Seller,
Buyers' determination of the actual amount of such
cost reduction for each Quarter of the Survey
Period. Such review shall include an eight Quarter
period commencing four Quarters previous to
the first Quarter of the Survey Period. Buyers'
review shall be completed within 120 days after
Buyers or Buyers' representative has received all
necessary data and information from Seller.
Seller and Buyers shall then review the
available-data and agree on the
actual cost reduction for each Quarter of the
Survey Period.
(C) After Buyers and Seller have reached an agreement
pursuant to Section 8(c)(ii)(B) hereof, the Price
for each Quarter of the Survey Period shall be
recalculated based upon the new values of the IC
(which shall reflect the actual amount of such
cost reduction). The total amount paid by Buyers
for Coal delivered during the Survey Period shall
be compared with the total amount that would have been
paid by Buyers if the recalculated Price had been in
effect and Buyers' account shall either be credited
or debited, as the case may be, for the amount of
any difference between such total amounts.
(D) After Buyers and Seller have reached an agreement
pursuant to Section 8(c)(ii)(B) hereof, the
weighted average actual amount of such cost
reduction for such item of cost shall be calculated
for the Survey Period. For purposes of calculating
the IC pursuant to Section 8(a)(ii) hereof for all
Quarters subsequent to the Survey Period such
weighted average actual amount of such cost
reduction shall replace the estimated amount
previously included in the IC for the fourth
Quarter of the Survey Period.
(iii) IC Related Cost Increase.
(A) If Seller's Laws Cost is classified as an IC
cost and is an increase f or an item of cost, then
Seller and Buyers shall agree on an estimated
amount of the cost increase and include such
amount in the IC retroactively to the date the
New Law first affected Seller's Laws Cost and
this estimated amount shall continue to be used
in calculating the IC until Buyers and Seller
agree to an amount pursuant to Section
8(c)(iii)(B) hereof.
(B) After an item of cost has been included in the IC
pursuant to Section 8(c)(iii)(A) hereof for the
Survey Period, the actual amount of increase for
such item of cost shall be determined. Seller
shall calculate and present to Buyers, Seller's
determination of the actual amount of such cost
increase for each Quarter of the Survey Period.
Buyers or Buyers's representative shall have the
right at Buyers' expense to review Seller's
applicable records to independently
calculate and present to Seller, Buyers'
determination of the actual amount of such cost
increase for each Quarter of the survey Period.
Such review shall include an eight Quarter period
commencing four Quarters previous to the Quarter
during which the IC was first increased and shall
be completed within 120 days after Buyers or
Buyers' representative has received all necessary
data and information from Seller. Seller and
Buyers shall then review the available data and
agree on the actual cost increase for each
Quarter of the Survey Period.
(C) After Buyers and Seller have reached an agreement
pursuant to Section 8(c)(iii)(B) hereof, the
Price for each Quarter of the Survey Period shall
be recalculated based upon the new values of the
IC (which shall reflect the actual amount of such
cost increase). The total amount paid by Buyers
for Coal delivered during the Survey Period shall
be compared with the total amount that would have
been paid by Buyers if the recalculated Price had
been in effect and Buyers, account shall either
be credited or debited, as the case may be, for
the amount of any difference between such total
amounts.
(D) After Buyers and Seller have reached an agreement
pursuant to Section 8 (c) (iii) (B) hereof, the
weighted average actual amount of such cost
increase for such item of cost shall be
calculated for the Survey Period. For purposes
of calculating the IC pursuant to Section
8(A)(ii) hereof for the first Quarter after the
Survey Period, such weighted average actual
amount of such cost increase shall replace the
estimated amount previously included in the IC
for the fourth Quarter of the Survey Period.
(iv) ICIP and RTRCIP Adjustments. If a classification
of Seller's Law Costs pursuant to Section 8(c)(i) hereof
results in an adjustment in the RTRC or IC then a
similar adjustment shall be made to the RTRCIP or ICIP,
as the case may be. If adjustments to the RTRC or IC
made pursuant to Section 8 (c) hereof result in a change
in the Price, then a similar adjustment shall be made to
the Incremental Price based upon the corresponding
changes to the RTRCIP and the ICIP.
(d) Additional Charge Adjustment. As of January 1, 1993,
the Additional Charge shall be $0.0150/MMBtu and shall thereafter
be adjusted Quarterly during each Contract Year. The Additional
Charge for an Adjustment Quarter shall be determined by
multiplying the previous Quarter's Additional Charge by the
Quarterly Adjustment Ratio for such Adjustment Quarter. The
product of such calculation shall be rounded to four decimal
places. If any information needed for the calculation of the
Quarterly Adjustment Ratio is not available until after the
beginning of an Adjustment Quarter, the calculation of the
Quarterly Adjustment Ratio shall be applied retroactively to the
beginning of such Adjustment Quarter. Seller shall use all
reasonable efforts to provide Buyers with documentation to
substantiate the use of all calculations, whether
based upon estimated amounts or actual amounts, together with
supporting calculations and appropriate documentations, no later
than 30 days prior to the beginning of the Adjustment Quarter.
An example calculation is shown on Exhibit H hereto.
(e) Procedure in the Event Indices are Discontinued or
Changed. Buyers and Seller hereby agree that the indices used to
adjust the Price and Incremental Price are not intended to
reflect the changes in Seller's costs of providing Coal hereunder
or the change in the general market price for coal. The sole
purpose in using the various indices is to afford the parties a
method whereby the Price and Incremental Price can be adjusted.
If any index referred to in this Agreement is changed,
discontinued or unavailable for (i) four or more months out of
any two consecutive Quarters, if using monthly indices, or (ii)
two consecutive Quarters, if using Quarterly indices such that
the current index cannot be calculated, then the parties shall
undertake in good faith to agree upon a substitute index. If an
index is only temporarily unavailable then said index shall be
calculated as provided for in Exhibit E attached hereto and
hereby made a part hereof or some other mutually agreed to
method. If the base period of one or more of the indices used in
this Agreement changes, such indices will continue to be used,
but the index values used in the Prior Index calculation will be
changed to the index values for the new base period.
Section 9. Billing and Payment.
(a) Semi-Monthly Invoicing. Each month, Seller shall
render two invoices and Buyers shall make two payments covering
the quantity of Coal delivered during such month. Such quantity
shall
be determined using weights determined pursuant to Section 10
hereof and calorific value determined pursuant to Section 11
hereof. The first invoice shall cover Coal delivered by Seller
during the first 15 days of the month and shall be mailed to
Buyers within five Business Days thereafter. Buyers shall pay
the first invoice within nine Business Days of the date upon
which such first invoice is received. The second invoice shall
cover Coal delivered by Seller from the 16th day to the last day
of the month and shall be mailed to Buyers within five Business
Days after the last day of the month. Buyers shall pay the
second invoice within nine Business Days of the date upon which
such second invoice is received. Invoices or credit memorandums
for retroactive price adjustments and other exceptional
circumstance shall be rendered by Seller as promptly as possible.
Buyers shall make payment on such invoices within nine Business
Days of receipt of an invoice.
(b) Monthly Allocation of Annual Base Quantity and
Incremental Quantity. The Annual Base Quantity shall be
apportioned monthly by dividing the Annual Base Quantity by 365
and multiplying the result by the number of days in each month,
assuming that February always has 28 days in it. The result for
each month shall be called the Monthly Base Quantity. In any
month where the quantity of Coal shipped exceeds the Monthly Base
Quantity, the quantity of Coal which exceeds the Monthly Base
Quantity shall be deemed to be Incremental Quantity Coal.
Such Incremental Quantity Coal shall be invoiced at the
applicable Incremental Price in the second invoice of each month
as provided in Section 9 (a) hereof.
(c) Annual True-up of the Annual Base Quantity. The amount
paid by Buyers for the Annual Base Quantity shall be trued-up at
the end of each Contract Year if: (i) Buyers, during any Contract
Year, fail to take delivery of the Annual Base Quantity (less any
adjustments allowed pursuant to the terms of this Agreement) and
have been invoiced for Incremental Quantity Coal during the
Contract Year, Buyers shall pay to Seller the difference between
the Price and the Incremental Price, as the Price and Incremental
Price existed on December 31 of the Contract Year, multiplied by
the quantity of Incremental Quantity Coal invoiced by Seller
during such Contract Year pursuant to Section 9(b) above; or (ii)
Buyers, during any Contract Year, take delivery of more than the
Annual Base Quantity (less any adjustments allowed pursuant to
the terms of this Agreement) and the quantity of Coal invoiced by
Seller at the applicable Price during such Contract Year is less
than the Annual Base Quantity (less any adjustments allowed
pursuant to the terms of this Agreement), then Buyers shall pay
to Seller the difference between the Price and the Incremental
Price, as those Prices existed on December 31 of such Contract
Year, multiplied by the difference between the Annual Base
Quantity (less any adjustments allowed pursuant to the terms of
this Agreement) and the quantity of Coal invoiced by Seller at
the applicable Price during such Contract Year. Seller shall
invoice Buyers for any amount to be paid under the provisions of
this Section 9(c) within 10 Business Days after the end of the
Contract Year. Buyers shall pay such amount within 15 Business
Days after receipt of such invoice. Example calculations of the
true-up are set forth in Exhibit N hereto.
(d) Method of Payment. All payments required by this
Section 9 shall be made by electronic funds transfer via ACH in
U.S. currency for the invoiced amount to the account of Seller
numbered 72-51807 at Continental Illinois National Bank, ABA
Number 071-000039, Chicago, Illinois 60693 or any other bank and
account specified by Seller.
Section 10. Weights.
(a) Weights. The weights of the Coal delivered hereunder
shall be determined on Seller's Scales at the point of delivery.
The weights thus determined shall be accepted as the weight of
Coal for which invoices are to be rendered and payments made in
accordance with Section 9 hereof. Seller shall furnish the
railroad transporting the Coal with copies of the weights thereby
determined in accordance with the rail tariff or contract in
effect at any given time. Seller's Scales shall be inspected and
certified by the State of Wyoming or an entity mutually agreed
upon by Buyers and Seller at intervals of approximately six
months and Agent/operator shall be furnished with a copy of the
certification. Seller shall use its best efforts to notify
Agent/Operator approximately 15 Business Days prior to any scale
inspection and certification.
(b) Missed Weights. In the event that 50 percent or more
of the individual railcar weights from a unit train are available
from Seller's Scales, the average of the available railcar
weights from that unit train will be used for any unavailable
weights. In the event that less than 50 percent of the
individual railcar weights from a unit train are available from
Seller's Scales, the average railcar weights from the previous 10
unit trains comprised of similar railcars from the same Coal
source shipped to the Energy Center will be used for any
unavailable weights.
(c) Weighing Audits and Adjustments. Buyers shall have the
right to have a representative present at any and all times to
observe weighing of the Coal and inspection and certification of
Seller's Scales. If any party should at any time question the
accuracy of Seller's Scales, such party may request a prompt test
of Seller's Scales at its expense by the State of Wyoming or an
entity mutually agreed upon by Agent/Operator and Seller. If any
such test reveals an error in weight in excess of one and one-
half percent, then the weights of Coal shipped during one-half of
the period since the last preceding test shall be adjusted by the
amount of the error shown, an appropriate debit or credit
memorandum shall be furnished to Buyers by Seller and Seller's
Scales shall be promptly adjusted at Seller's expense.
Section 11. Sampling and Analysis.
(a) Sampling Procedure. Coal to be delivered hereunder
shall be sampled at the Mine, Belle Ayr Mine or Alternate Source
Mine on a continuous basis:
(i) at the batch loading sampling system or
(ii) prior to ultimate loading into railcars.
Such sampling shall be performed in accordance with methods
approved by ASTM, as the same may be supplemented or modified
from time to time, or by such other methods as may mutually be
agreed upon by Seller and Buyers. Gross samples of Coal so taken
shall represent a unit train shipment; be representative of, and
identified as to, each shipment of Coal delivered hereunder to
Buyers; and be taken by equipment and in manners that meet the
requirements of ASTM Standard D2234 (Standard Test Methods for
Collection of a Gross Sample of Coal). Sampling may also be done
by Buyers at destination. Buyers and Seller shall each have the
right to have a representative present in order to observe any
sampling and analysis done by the other and to take check samples
of the Coal. All of Seller's samples shall be divided into three
parts in the manner specified by ASTM Standard D2013 (Standard
Method of Preparing Coal Samples for Analysis) and put into
suitable airtight containers. One part shall be retained and
analyzed by Seller pursuant to applicable ASTM Standards; one
part shall be delivered to Agent/Operator or Buyers' designee by
mutually agreeable means and analyzed by Buyers pursuant to
applicable ASTM Standards; and the third part shall be retained
by Seller in one of the aforesaid containers, properly sealed and
labeled, for not less than 30 days after the last day of the
month in which the sample was taken, to be analyzed if a dispute
arises due to a difference between Buyers' and Seller's analysis.
(b) Analysis Procedures. Seller shall perform a "short
proximate" (for moisture, ash, sulfur and gross calorific value)
analysis and any other analyses mutually agreed upon for each
shipment as soon as practicable upon completion of loading and
shall notify Agent/Operator of the results thereof prior to
receipt of the Coal at the Energy Center. The analysis methods
for moisture, ash, sulfur, gross calorific value and coal size
designation shall be performed in accordance with ASTM Standards
D3302 (Standard Test Method for Total Moisture in Coal), D3174
(Standard Test Method for Ash in the Analysis Sample of Coal and
Coke from Coal), D4239 (Standard Test Methods for Sulfur in the
Analysis Sample of Coal and Coke Using High Temperature Tube
Furnace Combustion Methods), D3286 (Standard Test Method for
Gross Calorific Value of Coal and Coke by the Isoperibol Bomb
Calorimeter) and D4749 (Standard Test Method for Performing the
Sieve Analysis of Coal and Designating Coal Size). The procedure
for determining grindability shall be agreed to in writing by
Buyers and Seller. Each party hereto shall assume the cost of
all sampling and analyses performed by it. The analysis of the
third part of any sample, should its analysis be found necessary,
shall be made by an independent commercial testing laboratory
(pursuant to applicable ASTM Standards), mutually chosen, and the
results of such analysis shall be controlling. The cost of the
analysis made by such commercial laboratory shall be shared
equally by Seller and Buyers.
(c) Analysis Reports. Seller shall mail copies of each
shipment analysis and monthly analyses to Agent/Operator as
completed and, further, shall furnish a monthly report to
Agent/Operator, including a summary of the individual shipment
analyses and weights serving as the basis for invoicing.
Such analyses shall be deemed acceptable and binding unless
protested by Agent/Operator within 30 days after receipt of the
applicable monthly report.
Section 12. Records and Audits.
(a) Recordkeeping. Seller shall keep accurate and
satisfactory records and books of account in compliance with
generally accepted accounting principles showing all weights and
analyses of Coal, costs, payments, invoices, and/or revisions,
adjustments, credits, debits pertaining to Price, Incremental
Price, Deficient Quantity Charge, Additional Charge and annual
true-up of Annual Base Quantity pursuant to Section 9(c) hereof
and
all other information and data required for the purposes of this
Agreement ("Records").
(b) Records' Revisions - Calculations. Each time the
Records are revised in accordance with this Agreement and at any
other time upon 30 days' notice in writing from Buyers, Seller
shall furnish to Buyers a detailed statement showing the
revisions and/or calculations of the Records and the basis
thereof.
(c) Right to Audit. At all reasonable times,
Agent/operator shall have the right to have the applicable
Records audited at Agent/Operator's expense for the purpose of
verifying all Records. Such audit shall be mutually scheduled at
least 30 days prior to the start of the Audit.
(d) Right to Audit Invoiced Items. The Invoiced Items
shall consist of the Price, Incremental Price, Deficient Quantity
Charge, Additional Charge and any annual true-up payment.
The Invoiced Items shall be binding upon Buyers unless the audit
is completed, the written audit report is submitted to Seller,
and Buyers take exception to said Invoiced Items within one year
of the end of the Contract Year in which any change was made to
an Invoiced Item. At Agent/Operator's option any audit shall be
made:
(i) by the nationally recognized firm of certified
public accountants as shall then be
retained by Seller or Buyers or;
(ii) by Buyers' internal audit staffs.
Such audit report shall set forth, in reasonable detail, all
data necessary to verify any such adjustments of the Invoiced
Items. Any errors made by Seller in making such adjustments as
disclosed by any such audit shall be promptly corrected by making
appropriate retroactive changes, except that claimed errors
resulting from an interpretation of this Agreement by such
auditors
not agreed to by Seller's General Counsel shall be subject to
resolution pursuant to Section 16 hereof.
Section 13. Force Majeure.
(a) Defined. As used herein, the term "Force Majeure shall
mean any and all causes beyond the control and without fault or
negligence of the party affected thereby, including, without
limitation, acts of God, acts or orders of public authorities
(including civil and military authorities and courts of competent
jurisdiction) , acts of the public enemy, embargoes,
insurrections, riots, labor disputes, labor or material
shortages, fires, explosions, floods, river freeze-ups,
breakdowns of or damage to plants, equipment or facilities
(including emergency outages of equipment or facilities to make
repairs to avoid breakdowns thereof or damage thereto) which
wholly or partially prevent or interfere with the mining,
hauling, processing or loading of Coal by Seller or the
receiving, transporting and/or delivering by the carrier thereof,
or the utilizing thereof by Buyers.
(b) Effect Hereunder. If, because of Force Majeure, any
party hereto is unable to carry out any of its obligations under
this Agreement (other than the obligation of a party to pay money
in connection with the performance of this Agreement), and if
such party shall promptly give to the other parties concerned
written notice of such Force Majeure, then the obligation of the
party giving such notice shall be suspended to the extent made
necessary by such Force Majeure and during its continuance;
provided, the party giving such notice shall use its best efforts
to eliminate the cause of such Force Majeure insofar as possible
with a minimum of delay; provided further, any party shall have
the right to
settle or resolve any labor dispute with its employees in its
sole discretion. The parties receiving notice shall, within 30
days, accept or reject the claim of Force Majeure; provided, such
party shall have been afforded reasonable time and access to
appropriate personnel and records to investigate the Force
Majeure.
(c) Deficiencies in Delivery. Any deficiencies in delivery
of Coal hereunder caused by a Force Majeure which are related to
the transportation of Coal from the Mine, Belle Ayr Mine or
Alternate Source Mine to the Energy Center, except where Buyers
have received notice from the rail carrier transporting Coal that
it has incurred a Force Majeure under the rail tariff or
contract, shall be made up as soon as possible unless such Force
Majeure has a duration of 7 or more consecutive days in which
case only that part of the deficiency related to the first 7 days
of such Force Majeure will have to be made up. All other
deficiencies in deliveries of Coal hereunder caused by Force
majeure shall not be made up except by mutual consent. Any
quantity of Coal that would have been shipped during a period of
Force Majeure shall be credited against the Annual Base Quantity
of Coal (by an amount equal to the product obtained by
multiplying the number of days of such suspension by the result
obtained by dividing the Annual Base Quantity by 365). In the
event Force Majeure causes only a partial reduction in the total
quantity of Coal Seller can deliver, Seller shall deliver to
Buyers its pro rata share of the coal produced from the Mine,
Belle Ayr Mine or Alternate Source Mine, if applicable, during
the continuance of such partial reduction.
(d) Rights to Suspend and Purchase and/or Sell to Others.
Either party hereto shall have the right to elect to suspend the
purchase or sale of Coal, as the case may be, for the period of
time during which such Force Majeure may exist, and Buyers, if
they so elect, in the case of an event of Force Majeure (i)
declared by Seller without regard to duration or (ii) caused by
the inability of Buyers' contract rail carrier(s) to transport
Coal from the Mine, Belle Ayr Mine or Alternate Source Mine to
the Energy Center for a period of 14 or more consecutive days,
shall have the right during such period to purchase coal from
other sources and Seller, if it so elects, shall have the right
during such period to sell coal to others. The quantity of coal
so purchased from other sources shall be credited against the
Annual Base Quantity
If Buyers suspend shipments pursuant to this Section 13,
then the Annual Base Quantity shall be reduced by an amount equal
to the product obtained by multiplying the number of days of such
suspension by the result obtained by dividing the Annual Base
Quantity by 365.
(e) Right to Terminate Agreement. Notwithstanding the
foregoing, in the event the party which gave notice of an event
of Force Majeure which has caused such party to be unable to
comply substantially with such party's obligations hereunder has
not substantially eliminated such Force Majeure within 12 months
after so notifying the other party, such other party shall have
the right, at its option, to terminate this Agreement without any
penalty by notifying the party which gave such notice of Force
Majeure of its election to do so. Any such termination shall be
effective 30 days after the giving of such notice.
(f) Exception to Force Majeure. Notwithstanding the
foregoing provisions of this Section 13, it is expressly
understood that any prohibition to take deliveries of, or to
utilize Coal subject hereto, which is imposed upon Buyers by
means of laws, regulations or orders of a court or administrative
body, whether or not such event is beyond the control of Buyers,
shall not for the purposes herein negate the provisions set forth
in Section 15 hereof.
Section 14. Relief From Economic Hardship.
(a) Notice Required. Seller and Buyers acknowledge the
possibility of either party sustaining an economic hardship under
this Agreement because of conditions which were unforeseeable on
January 1, 1993. At any time either party believes it has
sustained an economic hardship under this Agreement and wishes to
invoke the provisions of this Section 14 to obtain relief, if
any, it shall give notice in writing to the other party setting
forth documentary proof of the following:
(i) the existence, nature, cause, extent and impact of
such economic hardship; and
(ii) the facts establishing that the conditions causing
such economic hardship were unforeseeable.
The party sending such notice shall also state the relief
which it considers reasonable and appropriate to eliminate such
economic hardship.
(b) Consideration of Request. Upon receipt of the notice
set forth above, the' party receiving such notice shall consider
the documentary proof submitted and any other relevant matters,
and if (subject to the provisions of section 14(c) hereof), it,
in its judgement, finds that the party sending such notice has
sustained an economic hardship due to the cause stated in such
notice and is entitled to relief hereunder, the party receiving
such notice shall give reasonable and appropriate relief to the
party sustaining the economic hardship. The party receiving such
notice shall not arbitrarily refuse to find that the other party
has sustained an
economic hardship nor arbitrarily deny reasonable and appropriate
relief to eliminate such hardship if found to exist.
(c) Exceptions. Economic hardship arising from any of the
following types of causes or conditions shall not be grounds for
relief hereunder:
(i) where the cause or condition is provided for in
this Agreement;
(ii) where the cause or condition results from a matter
involving the internal operations of the party
claiming that it has sustained an economic
hardship;
(iii) changes in the market for coal resulting from
competitive factors;
(iv) availability or costs of alternative fuels; or
(v) the prohibition to take deliveries of, or to
utilize the Coal subject hereto, the effect of
which is provided for in Section 15 hereof.
(d) Effect of Refusal. If the party receiving a request
referred to in Section 14(a) hereof, (i) elects to negotiate
regarding the matters set forth in such request but an
appropriate amendment of this Agreement regarding such matters
has not been fully executed within 90 days following the date of
such request, or (ii) refuses to agree to or negotiate regarding
such matters, then the party which made such request may, with
the concurrence of the other party, submit such matters to
arbitration pursuant to Section 16 hereof or, if the other party
does not agree to submit such matters to arbitration hereunder,
exercise any other right or remedies available to it at law or in
equity.
Section 15. Compliance with Anti-Pollution Laws and
Regulations, etc.
(a) Termination Charge. The parties hereto recognize that,
during the Term, legislative, administrative or regulatory bodies
or courts having competent jurisdiction over the subject matter
herein may enact laws, regulations, or issue orders such as, but
not limited to, those relating to air pollution, the effect of
which will make it impossible or impractical for Buyers to
utilize the Coal subject hereto without substantially changing or
altering its utilization, equipment or transportation to the
Energy Center. Any such laws, regulations or orders may pertain
to, but would not necessarily be limited to, sulfur content of
the Coal. If any such laws, regulations or orders are imposed
and, as a result thereof, Buyers, in their sole judgment, decide
that it will be to their best interest not to utilize the Coal
subject hereto, notwithstanding the provisions of this Agreement
to the contrary, Buyers shall have the right to terminate this
Agreement; provided, before Buyers can terminate this Agreement
pursuant to this Section 15, Buyers and Seller shall meet to
attempt to develop a plan that would allow Buyers to continue to
utilize the Coal under this Agreement. Seller shall pay all
costs to develop any plan contemplated by this Section 15,
including, but not limited to, any professional services incurred
by Buyers. The plan design and costing shall be approved by
Buyers in their sole discretion. The plan design, development
and implementation cost shall be paid by Seller, in its sole
discretion. If Seller refuses to pay the total plan design,
development and implementation cost, then Buyers may terminate
this Agreement pursuant to this Section 15; provided, Buyers
agree to pay Seller an annual termination charge
("Termination Charge") for the remaining life of this Agreement.
The Termination Charge shall be equal to $0.0120 per MMBtu
multiplied by the Annual Base Quantity. During any period in
which Buyers are obligated to pay the Termination Charge, Seller
shall use its reasonable efforts to sell the Coal which Buyers
are obligated to purchase hereunder to others.
(b) Termination Charge Reduction. After Seller has shipped
all of the coal contracted from the Mine to others in any
Contract Year, should Seller sell any of the Coal which Buyers
were obligated to purchase hereunder during said Contract Year to
others at a sales price, which is greater than the Price that
would have been in effect for such Contract Year, then, the
Termination Charge shall be reduced by an amount equal to the
product of the difference between such sales price and Price
multiplied by the quantity of such coal sold to others.
(c) Termination Charge - Effect of Other Contracts. In the
event there are other agreements for coal produced at the Mine
that contain a similar termination charge that are also
terminated, the portion of said contracted quantity that is sold
shall be prorated. Said credits are to become effective for all
coal sold over and above the total unaffected portion of the
Mine's contracted annual production. During any period in which
Buyers are obligated to pay the Termination Charge, Seller shall
use its reasonable efforts to sell the entire output of the Mine
to others.
(d) Termination Charge - Seller's Obligation/Buyers'
Recourse. Rejection by Seller of a bona fide offer to purchase
coal at a price at least equal to that which would then be
currently effective under this Agreement shall relieve Buyers of
their obligation to pay the Termination Charge attributable to
said
quantity. Seller shall keep Buyers informed as to offers and
sales of said coal.
Section 16. Arbitration.
(a) Pre-Arbitration Procedure. With respect to any
controversy, claim, counterclaim, dispute, difference or
misunderstanding arising out of or relating to the interpretation
or application of any term or provision of this Agreement
("Dispute") any party may provide written notice to all the other
parties by certified mail, return receipt request ("Notice") of
the existence of a Dispute. The parties shall for a period of 30
calendar days following the date of the Notice that a Dispute
exists engage in good faith discussions and negotiations in an
attempt to resolve such Dispute. If, by the end of such 30 day
period, unless such period is extended by mutual agreement of the
parties, the parties have been unable to resolve such Dispute,
they shall have a period of 15 calendar days to mutually agree to
arbitrate such Dispute pursuant to the procedure set forth below.
If, at the end of such 15 day period the parties have not
mutually agreed to arbitrate such Dispute, then such Dispute may
be resolved in any federal or state court located in the State of
Colorado or the appellate courts thereof.
(b) Arbitration Procedure. Any arbitration hereunder shall
be subject to and conducted pursuant to the procedures set forth
in the Rules for Commercial Arbitration of the American
Arbitration Association and the Federal Arbitration Act;
provided, the parties shall agree prior to arbitration as to
whether or not the arbitration award or decision shall be binding
upon the parties.
Section 17. Notices.
(a) Notices to be in writing; Exceptions; Methods of
Delivery. Any notice, request, consent, demand, report or
statement, which is given to or made upon either party hereto by
the other party hereto under any of the provisions of this
Agreement, shall be in writing unless it is otherwise
specifically provided herein, and shall be treated as duly
delivered when the same is either (i) personally delivered to the
President or a Vice President of Buyers in case of a notice to be
given Buyers, or personally delivered to the President or a Vice
President of Seller in the case of a notice to be given to
Seller, or (ii) deposited in the United States mail, registered
or certified, postage prepaid, and properly addressed as follows;
If the notice is to Buyers:
Western Resources, Inc.
P. 0. Box 889
Topeka, Kansas 66601
Attention: Executive Vice President - Electric
Production
With a copy to:
Western Resources, Inc.
P. 0. Box 889
Topeka, Kansas 66601
Attention: Director, Fuels
or to such other officer or such other address as Buyers shall
have designated by due notice to Seller; and
If the notice is to Seller;
Amax Coal West, Inc.
165 S. Union Boulevard
Suite 1000
P.O. Box 280219
Lakewood, Colorado 80228-0219
Attention: Vice President,
Law and Governmental Affairs
or to such other officer or such other address as Seller shall
have designated by due notice to Buyers.
(b) Notices as to Operating Matters. Any notice, request
or demand pertaining to matters of an operating nature may be
delivered by mail, messenger, telephone, telegraph, facsimile,
electronic communications or orally to such agent of the party
hereto being notified as may be appropriate and, if given by
telephone, telegraph or orally, shall be confirmed in writing as
soon as practicable thereafter, if the party to whom the notice
is given so requests in any particular instance.
Section 18. Efficient and Economical operations.
Seller covenants that all of its activities relating to the
production, sale and delivery of Coal subject hereto and
activities relating to a New Law in Section 8(c) hereof shall, at
all times, be conducted efficiently, economically and in such
manner to be consistent with good and standard operating
practices and procedures.
Section 19. Successors and Assigns.
This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and
assigns; provided, this Agreement may not be assigned by either
Seller or Buyers without the written consent of all other
parties, except
(i) an assignment of the Mine and Belle Ayr Mine from Seller
to another wholly-owned subsidiary of Amax Coal
Industries, Inc. or to a wholly-owned subsidiary of Amax
Energy, Inc. shall not be considered an assignment of
this Agreement and
(ii) in the following cases where no such consent will be
required:
(A) pledge, assignment or other security arrangement to
secure indebtedness incurred for the purpose of or
in connection with performance under this Agreement,
specifically including any financing arrangements
deemed advisable by Seller (such as development
carveouts and/or production payments) or any
financing arrangements deemed advisable by Buyers
(such as mortgages and deeds of trust or indentures
supplemental thereto relating to the Energy Center);
(B) assignment to a successor in interest of a part or
all of the assets of any party hereto by way of a
merger, consolidation, sale of substantially all of
the assets, divestiture pursuant to an order or
decree of a court, or similar corporate
reorganization, provided no such
assignment shall be effective unless and until such
assignee shall assume in writing the obligations of
the assignor; or
(C) assignment by any Buyer of its interest, or any part
thereof, in this Agreement pursuant to partnership,
joint ownership, joint venture or other arrangement
with a third party or parties in connection with the
ownership and/or operation of the Energy Center.
Buyers shall not unreasonably withhold their consent to
assignment of this Agreement to another company affiliated with
AMAX Inc., a New York corporation, provided that AMAX Inc. shall
guarantee performance by such affiliate of all obligations under
this Agreement.
Section 20. Several Interests, Agent/Operator and Liability
of Buyers
(a) Energy Center Owners. Buyers' respective interests
in the Energy Center are:
Western Resources, Inc. 64%
Kansas Gas and Electric Company 20%
Missouri Public Service, a division of UtiliCorp
United Inc.
8%
WestPlains Energy, a division of utilicorp United Inc.
8%
(b) Buyers' Obligations - Several. The property and
contractual interests of Buyers in, and their respective rights,
duties, obligations and liabilities under this Agreement shall be
several and not joint and shall be proportional to their
respective interest in the Energy Center. If the respective
interests of Buyers in the Energy Center change during the Term,
then their respective property and contractual interests in, and
their rights, duties, obligations and liabilities under this
Agreement shall be adjusted accordingly upon written notice by
Buyers to Seller.
(c) Agent/Operator. Agent/Operator is hereby authorized to
act on behalf of all Buyers on all matters arising under this
Agreement. In particular, Seller shall accept instructions and
commitments of Agent/Operator and such actions by Agent/Operator
shall bind all Buyers and Seller in the same manner as if the
instructions or commitments were made by each Buyer on its own
behalf. Any dispute any Buyer has with Seller shall be
prosecuted only by Agent/operator.
Section 21. Miscellaneous Provisions.
(a) Nonwaiver. The failure of any party hereto to insist
in any one or more instance upon strict performance of any
provision of this Agreement by any other party hereto, or to take
advantage of any of its rights hereunder, shall not be construed
as a waiver by it of any such provision or the relinquishment by
it of any such rights in respect of any subsequent nonperformance
of such provision, but the same shall continue and remain in full
force and effect.
(b) Remedies. Each remedy specifically provided for under
this Agreement shall be taken and construed as cumulative and in
addition to every other remedy provided for herein, by law or
inequity.
(c) Amendments. Any and all amendments, supplements
and modifications to this Agreement shall be in writing and
signed by the parties hereto.
(d) Indemnity. Each party hereby agrees to defend,
indemnify, save and hold all other parties harmless from and
against all loss, cost and expense arising out of injuries to or
death of any person or persons resulting from willful acts or
negligence of such party, its agents and employees, except that
said agreement of indemnity shall not apply to any injuries to or
the death of such party's own employees acting within the scope
of their employment, even though another party may have been
negligent in connection with the related occurrence.
(e) Headings Not to Affect Construction. The headings to
the respective sections and paragraphs of this Agreement are
inserted for convenience of reference and are neither to be taken
to be any part of the provisions herein nor to control or affect
the meaning, construction or effect of the same.
(f) Written Instrument Contains Entire Agreement.
This written instrument contains the entire agreement
between the parties hereto in respect of the subject matter, and
there are no other understandings or agreements between said
parties, or any of them, in respect thereof.
(g) Controlling Law and Consent to Jurisdiction.
This Agreement shall be governed by and construed according
to the laws of the State of Colorado. Buyers and Seller hereby
irrevocably agree any legal suit, action or proceeding (each an
"Action") arising out of or relating, directly or indirectly, to
this Agreement shall only be brought in the courts of the State
of Colorado or the United States of America for the District of
Colorado and any applicable appellate courts (collectively the
"Courts") and irrevocably consents to service of process outside
the territorial jurisdiction of the Courts. In addition, each
party, in its own behalf, irrevocably waives (i) any objection to
the laying of venue of any Action brought in the Courts, (ii) any
claim that any Action brought in any Court has been brought in an
inconvenient forum, and (iii) any objection, with respect to any
Action brought in any Court, that such Court does not have
jurisdiction over any party.
(h) Rounding of Calculations. Except as otherwise
specified in this Section 21(h) all computations under this
Agreement shall be rounded to four decimal places. All
originally published index numbers shall not be rounded. The
RTRC, IC, RTRCIP and ICIP shall be rounded to the nearest one
ten-thousandth of a dollar. Tons shall be rounded to the
nearest one-hundredth of a ton. All aggregate dollar and
Btu amounts shown on an invoice shall be rounded to the nearest
whole cent or Btu; and the Price, Incremental Price, Additional
Charge and Deficient Quantity Charge shall be rounded to the
nearest ten-thousandth of a dollar. However, if there is no
nearest one-hundredth of a cent, tenth of a cent, cent, Btu, one
ten-thousandth of a dollar or hundredth of a ton, as the case may
be, then the relevant number shall be rounded to the nearest even
fourth decimal place, one-hundredth of a cent, tenth of a cent,
cent, Btu, one ten-thousandth of a dollar or hundredth of a ton.
For example, $0.54825 would be rounded to $0.5482 and $0.54835
would be rounded to $0.5484.
provision in any other jurisdiction.
(i) Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable under federal or
Colorado law shall be ineffective to the extent of such
prohibition or enforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of
such provision in any other jurisdiction.
(j) Execution of Counterparts. This Agreement may be
simultaneously executed in any number of counterparts, and all
such counterparts shall constitute but one and the same
instrument.
(k) Confidentiality. All of the provisions hereof are
confidential and proprietary in nature and shall not be disclosed
in whole or in part by any party without the prior written
consent of all parties hereto, which consent shall not be
unreasonably withheld; except, (i) pursuant to any existing or
future order of or upon demand of regulatory bodies having
jurisdiction and their staffs, including, but not limited to
disclosure to the Kansas Corporation Commission by Buyer,
WestPlains Energy, under docket no. 106,850-U, dated April 19,
1977; outside accounting firms retained by a party for audit or
tax purposes; outside counsel retained by a party; and any
assignee or successor to the Energy Center ownership interests of
Buyers; any such disclosures shall be upon a restricted,
proprietary and confidential basis; or (ii) as required by law.
IN WITNESS WHEREOF, the parties have executed this Agreement
in their respective corporate names, as of the date first above
written.
Attest: Amax Coal West, Inc.
/s/ George Womack By: /s/
Asst. Secretary President
Attest: Western Resources, Inc.
/s/ Richard D. Terrill By: /s/ William E. Brown
Secretary
President
KPL Division
Attest: Kansas Gas and Electric Company
/s/ Richard D. Terrill By:/s/ Kent R. Brown
Secretary President
Kansas Gas and Electric
Company
Missouri Public Service, a
division of Utilicorp United,
Inc.
/s/ By:/s/
Assistant Secretary Division President
WestPlains Energy, a
division of
Utilicorp United, Inc.
/s/ By:/s/
Secretary/Assistant Division President