COAL SUPPLY AGREEMENT
THIS AGREEMENT is made and entered into this 25th day of August, 1995, by
and between Kennecott Energy Company, a Delaware corporation, with offices in
Gillette, Wyoming, for and on behalf of Spring Creek Coal Company, a Montana
corporation (hereinafter together called "Seller"), and American Crystal
Sugar Company, a Minnesota cooperative with offices at 101 North Third
Street, Moorhead, Minnesota 56560 ("Buyer").
RECITALS
1. Spring Creek Coal Company and Buyer entered into a Coal Supply
Agreement dated August 1, 1986 ("the 1986 Coal Supply Agreement") relating to
the supply of coal to July 31, 1995.
2. Buyer desires to secure a continued coal supply for use in the
operation of its sugar factories in East Grand Forks, Moorhead and Crookston,
Minnesota, and in Drayton and Hillsboro North Dakota, and, at its option, at
the ProGold Limited Liability Company ("Progold LLC") (a 46% owned affiliate of
Buyer) Wahpeton, North Dakota corn processing factory referred to collectively
as the "Sugar Factories" or individually as a "Sugar Factory," from 1995 for a
period of ten (10) years.
3. Seller desires to continue to sell to Buyer coal to be mined from its
Spring Creek Mine (the "Mine") near Decker, Montana.
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties set forth below, Seller agrees to sell and deliver, and Buyer agrees
to purchase and accept, coal of the quantity and quality specified below, at the
price and on the terms and conditions stated in this Agreement.
SECTION 1. TERM; CAMPAIGN SEASONS.
1.01 TERM. The term of this Agreement shall commence on August 1, 1994
("the Effective Date") and shall continue up to July 31, 2005.
1.02 CAMPAIGN SEASONS. Shipments to all sugar factories except ProGold LLC
under this Agreement are to be divided into periods of approximately ten months
commencing on or about. August 15 and continuing until about May 31 of the
following calendar year, with the last such period running from about August 15,
2004, to about May 31, 2005. These ten-month periods of coal deliveries shall
be referred to as "Campaign Seasons." Shipments to ProGold LLC may occur
year-round.
SECTION 2. COAL SOURCE.
The coal sold under this Agreement shall be from Seller's
Spring Creek Mine located near Decker, Montana. If an event of
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force majeure, as defined in Section 8, prevents delivery of coal at the Spring
Creek Mine, Seller may, but shall not be required to, supply coal from sources
other than the Spring Creek Mine ("Substitute Coal"), provided that the price
for Substitute Coal shall be adjusted as necessary so that the total delivered
cost per million Btu for Substitute Coal delivered to the Sugar Factories,
taking into account Buyer's actual transportation costs, equals the delivered
cost per million Btu for coal from the Mine, subject to any price adjustments
pursuant to Sections 4.02 and 6.01. Seller's right to furnish Substitute Coal
shall not affect its right to claim a force majeure or to claim excuse from
performance pursuant to Section 8 below. Buyer may, but shall not be required
to, accept Substitute Coal with field averages different than Spring Creek Mine
field averages specified in Section 4.01 (a) of this Agreement.
SECTION 3. COAL QUANTITY; SHIPMENT SCHEDULE.
3.01 QUANTITY. Seller agrees to sell and Buyer agrees to
purchase all of the coal (other than up to 6,500 tons of Buyer's total coal
requirement in each Campaign Season, which amount Buyer may utilize for test
coal burns) that Buyer requires to operate its Sugar Factories during the
term of this Agreement, which Buyer in good faith estimates to be 500,000
tons per
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Campaign Season. The term "ton" shall mean 2,000 pounds of coal, weighed as
provided in Section 5.04(b) below.
3.02 ESTIMATES.
(a) CAMPAIGN SEASON ESTIMATES. Upon execution of
this Agreement and by August 1 of each subsequent year, Buyer shall furnish
Seller with a written estimate of the quantity of coal to be delivered FOB
Seller's Mine during the Campaign Season beginning in that year.
(b) CHANGES TO ESTIMATES. If Buyer desires to alter the quantity of
coal to be delivered FOB Seller's Mine during a Campaign Season, Buyer may
notify Seller by mail or by telephone, telegraph or other electronic means.
Any electronic notice shall be confirmed in writing within ten (10) days.
For purposes of this Section 3.02, the total amount of coal requested by
Buyer for a Sugar Factory during any period shall be calculated by the
following formula:
[(Lp divided by Lcs) x Ecs] + A = Coal Requested
where
Lp = Length of the actual delivery period within the Campaign Season,
in days
Lcs = Length of the Campaign Season, in days
Ecs = Estimate of coal requirements for that Sugar Factory for the
Campaign Season
A = Adjustments. The term "Adjustments" shall mean the sum of all
increases or decreases in coal
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deliveries during the given period requested by Buyer.
(c) EXTENSION OF CAMPAIGN SEASON. For all sugar factories except
ProGold LLC, Buyer may extend any Campaign Season by three months before August
15 or after May 31 of such Campaign Season upon six weeks' written notice to
Seller. Campaign season for ProGold LLC is contemplated to be year-round.
3.03 SHIPMENTS. Buyer shall use reasonable efforts to schedule arrivals of
trains at Seller's Mine such that Seller can deliver coal in approximately equal
monthly amounts during any Campaign Season; provided that deliveries in the
first months of a Campaign Season will be larger to allow Buyer to build
stockpiles at each Sugar Factory. Weekly deliveries will be in substantially
equal quantities consistent with the monthly delivery quantity. Seller shall
use reasonable efforts to deliver as much coal as Buyer desires to take in any
week. Buyer agrees to pay for and accept delivery of up to 12 percent more than
Buyer's estimated or amended coal requirements in any month, provided that Buyer
shall not be required to pay for more coal than it has requested during any
Campaign Season.
SECTION 4. QUALITY OF COAL.
4.01 QUALITY AND SIZE OF COAL.
(a) FIELD AVERAGES. Field averages for Spring Creek Coal are
as follows:
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Btu: 9,400 per pound
Sulfur: 0.33 percent
Sodium oxide: 8.39 percent
Ash: 4.00 percent
Moisture: 24.50 percent
Size: run-of-mine, sized to pass through two-inch round
screen (crushed 2" x 0)
Buyer acknowledges that actual quality of particular coal shipments will vary as
different portions of the field are mined. Buyer's exclusive remedies for
variations from field averages are those set forth in Section 4.02 below.
(b) SAMPLING. Representative samples of coal f rom each trainload
shall be taken at the loading facilities at Seller's Spring Creek Mine by agents
of an independent commercial testing organization, using methods and procedures
approved by the American Society for Testing and Materials (ASTM). The
resulting analysis shall be accepted as the quality of coal on which invoices
are to be rendered and payments made in accordance with Section 6. Any change in
the quality of coal during subsequent transportation or storage shall have no
effect on the quality of coal as shown on the invoice.
4.02 REMEDIES FOR QUALITY VARIATIONS. Buyer may not reject any
trainload of coal once the coal has commenced loading onto railcars at the Point
of Delivery as defined in Section 5.01. The following remedies shall be Buyer's
exclusive
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remedies for variations in the quality of coal delivered under this Agreement.
(a) BTU/LB. If any five consecutive trainloads of coal contain a
cumulative weighted average Btu/lb less than 9200 Btu/lb, then the Purchase
Price of the fifth and each consecutive trainload that, when averaged with the
previous four trains, maintains a weighted average Btu/lb less than 9200 Btu/lb
("low Btu coal") shall be adjusted according to the following formula:
Weighted Average Btu content per pound-9200
(for five consecutive trainloads) x Purchase
------------------------------------------ Price
9200
If any five consecutive trainloads of coal contain a cumulative weighted
average Btu/lb greater than 9600 Btu/lb, then the Purchase Price of the fifth
and each consecutive trainload that, when averaged with the previous four
trains, maintains a weighted average Btu/lb greater than 9600 Btu/lb ("high Btu
coal") shall be adjusted according to the following formula:
Weighted Average Btu content per pound - 9600
(for five consecutive trainloads) x Purchase
------------------------------------------- Price
9600
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(b)(i) SULFUR DIOXIDE. If delivered coal cannot
be burned at the Sugar Factory to which it is shipped because the cumulative
weighted average sulfur dioxide content of any five consecutive trainloads of
coal exceeds 1.2 pounds per million Btu of sulfur dioxide, Buyer shall have the
following remedies:
(aa) Buyer may, at its option, reconsign all segments of the
fifth and each consecutive trainload that maintains a cumulative weighted
average in excess of 1.2 pounds per million Btu of sulfur dioxide at Seller's
expense to a Sugar Factory that can burn such coal, or
(bb) If Seller cannot cure the problem within seven (7) days
by providing Substitute Coal or otherwise, Buyer may discontinue coal purchases
(as to any unit train that has not commenced loading) with respect to the
affected Sugar Factory. Reduction in tonnage to the affected Sugar Factory
shall be Buyer's sole remedy per this Section (b) (i) (bb), and Seller shall
not be liable for any incidental or consequential damages, including lost
profits, caused thereby.
(ii) In the case of shipments of coal to the East Grand
Forks Sugar Factory, Seller shall use its reasonable efforts to deliver a
cumulative weighted average sulfur dioxide content of any five consecutive
trainloads of coal not exceeding 0.65 pounds sulfur dioxide per million Btu.
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(iii) In the case of shipments of coal to the Crookston Sugar
Factory, Seller shall use its reasonable efforts to deliver a cumulative
weighted average sulfur dioxide content of any five consecutive trainloads of
coal not exceeding 0.93 pounds of sulfur dioxide per million Btu.
(c) SODIUM OXIDE, MOISTURE AND ASH. With respect to sodium oxide,
moisture and ash content, Buyer assumes the risk of all variations
from field averages.
SECTION 5. UNIT TRAINS, LOADING AND WEIGHING.
5.01 POINT OF DELIVERY. The coal for the Sugar Factories
shall be delivered FOB loaded in railcars provided by Buyer on the railroad
loading siding at the Mine or, if Substitute Coal is delivered to any Sugar
Factory, at the railroad loading siding located at the Substitute Coal Source
(the "Point of Delivery"), with freight paid by Buyer.
5.02 TITLE. Upon the completion of loading of a railcar, the
title and risk of loss for all coal in that car shall be Buyer's.
5.03 TRAINS. Buyer shall provide trains of no fewer than 55
open-top hopper or gondola railcars each. Such railcars shall be delivered to
the Point of Delivery by Buyer, ready for loading, with hopper doors closed and
cleaned of all previous commodities.
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5.04 LOADING PROCEDURE.
(a) OPERATIONS. Buyer shall be responsible for arranging all
transportation contracts and for coordinating the arrival of railroad trains for
loading at the Point of Delivery with Seller. Buyer or its designee shall use
best efforts to give Seller at least 24 hours' notice of the arrival of railcars
at the Point of Delivery for loading. Seller shall operate its railcar loading
facilities twenty-four (24) hours per day, three hundred sixty-five (365) days
per year, subject to Seller's labor agreements. Seller shall, at its expense,
load each railcar to its full visible capacity and will complete the loading of
each train, including authorization of the train's departure. Seller will hold
Buyer harmless from any damages caused by the overloading of railcars.
(b) WEIGHING. The weight of coal sold under this Agreement
shall be determined on appropriate commercial scales chosen by Seller and
installed at Seller's loading facilities at the Spring Creek Mine. Seller's
scales shall be inspected and certified by Hoke and Associates at six-month
intervals during the term of this Agreement. The weights determined at Seller's
Spring Creek Mine shall be accepted by Buyer as the quantity of coal for which
invoices are to be rendered and payments made in accordance with Section 6
below. Any change in the weight of
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coal during subsequent transportation or storage shall have no effect on the
weight of coal shown on the invoice. In the event Seller's scales are
inoperative for a period, Seller shall inform Buyer and use its best efforts to
restore operation of the scales as soon as possible. The weight of coal per
railcar delivered during such period that scales are inoperative shall be
deemed equal to the average weight per railcar for coal delivered during the
preceding month. If Seller's scales are inoperative during the first month of
this Agreement, the weight of coal delivered shall be determined by mutually
acceptable independent means.
SECTION 6. PRICE; PRICE ADJUSTMENTS.
*CONFIDENTIAL TREATMENT REQUESTED*
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*CONFIDENTIAL TREATMENT REQUESTED*
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*CONFIDENTIAL TREATMENT REQUESTED*
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*CONFIDENTIAL TREATMENT REQUESTED*
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*CONFIDENTIAL TREATMENT REQUESTED*
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*CONFIDENTIAL TREATMENT REQUESTED*
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*CONFIDENTIAL TREATMENT REQUESTED*
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*CONFIDENTIAL TREATMENT REQUESTED*
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*CONFIDENTIAL TREATMENT REQUESTED*
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*CONFIDENTIAL TREATMENT REQUESTED*
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*CONFIDENTIAL TREATMENT REQUESTED*
SECTION 7. DISCLAIMER OF WARRANTIES, LIMITATION ON LIABILITY.
7.01 EXPRESS WARRANTIES. BUYER AGREES THAT SELLER MAKES NO
EXPRESS WARRANTIES OTHER THAN THOSE IDENTIFIED AS SUCH IN THIS AGREEMENT.
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7.02 IMPLIED WARRANTIES. ALL WARRANTIES OF MERCHANTABILITY
OR OF FITNESS FOR A PARTICULAR PURPOSE OR ARISING FROM A COURSE OF DEALING OR
USAGE OF TRADE ARE SPECIFICALLY EXCLUDED.
7.03 LIMITATION ON LIABILITY. In no event shall either party have
liability to the other party for incidental or consequential damages except as
expressly stated in this Agreement.
SECTION 8. FORCE MAJEURE.
If either party is unable to meet any of its obligation under this
Agreement as a result of flood, earthquake, storm, or other act of God, fire,
derailment, accident, strike, lockout, boycotts, picketing, shortages of or
inability to obtain electric power, raw materials, railcars or machinery,
mechanical breakdown in facilities, war, insurrection, riot, catastrophic
sugar beet or corn crop failure (as applicable), railroad line abandonment,
act of government or governmental agency, or due to any cause beyond the
reasonable control of either party, including the inability of a Sugar
Factory, the Mine and/or the rail carrier to meet its obligations for reasons
whether similar or dissimilar to the foregoing and whether foreseeable or
unforeseeable, such event will be deemed an event of force majeure. In
addition, it shall be deemed an event of force majeure in the event Buyer is
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unable to burn Seller's coal due to ash-fouling, sulfer dioxide emissions, or
other legally enforceable environmental restrictions, or either party
permanently closes or experiences partial failure or nonoperation of any of
its facilities lasting a minimum of seven (7) days as a result of reasons
beyond the control of such party. In the event of force majeure, the
obligations of the parties, other than payment for coal previously delivered,
shall be suspended for the duration of the event of force majeure, provided
that reasonable notice is given. Whenever in Seller's judgment any event of
force majeure requires restriction of deliveries, Seller reserves the right
in its discretion to allocate its available supply of coal in a fair and
equitable manner without obligation to furnish products from other sources.
No suspension or reduction for reason of force majeure shall invalidate the
remainder of this Agreement; but on removal of the cause, shipments shall
resume at the specified rate; deficiencies in shipments so caused shall not
be made up except by mutual consent. If any event of force majeure prevents
the performance of either party for a period of one year or more despite that
party's efforts to eliminate the force majeure event and to mitigate its
impact, then the party not claiming an event of force majeure may terminate
this Agreement by providing at least thirty (30) days written notice of
termination to the other
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party. The provisions of this Section shall not excuse either party from
performing unless that party gives a reasonable notice to the other party of the
occurrence of an event of force majeure.
SECTION 9. DISPUTES.
In the event any dispute arises between the parties concerning any issue of
law or fact arising out of this Agreement, it shall be settled by arbitration
pursuant to the Commercial Arbitration Rules of the American Arbitration
Association, and judgment upon the award may be entered in any court having
jurisdiction over the matter.
The parties to the arbitration shall be entitled to such discovery as would
be available to them under the Federal Rules of Civil Procedure, and the
arbitrators will have all the authority of a court under such Rules incidental
to such discovery, including but not limited to orders to produce documents or
other materials and orders to appear and submit to deposition and to impose
appropriate sanctions, including but not limited to awarding sanctions against a
party for failure to comply with any order.
The arbitration panel shall consist of three arbitrators with experience in
the coal industry, one appointed by Seller, one by Buyer and the third by the
arbitrators appointed by Seller
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and Buyer. If the party appointed arbitrators cannot agree within fifteen (15)
days after their appointment on appointment of the third arbitrator, then the
third arbitrator shall be appointed by the American Arbitration Association.
SECTION 10. GENERAL PROVISIONS.
10.01 WAIVER. Failure of either party at any time to require
performance of any provision of this Agreement shall not limit that party's
right to enforce the provisions, nor shall any waiver of any breach of any
provision be a waiver of any succeeding breach of the provision itself or of any
other provision.
10.02 HEADINGS. The headings in this Agreement are included only
for convenience and shall not control or affect the meaning or construction of
this Agreement.
10.03 ENTIRE AGREEMENT. This Agreement is the entire agreement
between the parties. There are no other provisions, representations, warranties
or understandings, express or implied. No modification, variation or amendment
of this Agreement shall be of any force or effect unless it is in writing and
signed by all the parties.
10.04 BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the parties, their respective successors and assigns.
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10.05 GOVERNING LAW. This Agreement shall be construed and
enforced in accordance with the laws of the State of Minnesota.
10.06 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original.
10.07 NOTICES. Notices under this Agreement shall be in writing
and shall be effective when actually delivered. If mailed, a notice shall be
deemed effective five (5) days after mailing as registered or certified mail,
postage prepaid, directed to the other party as set out below. If via
commercial courier or express service, a notice shall be deemed to be effective
upon its receipt, if directed to the other party as set forth below. If via
telefacsimile, a notice shall be deemed effective upon receipt of the successful
telefax transmission report, directed to the other party as set out below:
SELLER: KENNECOTT ENERGY COMPANY
Attn: Contract Administration
505 South Gillette Avenue
Gillette, Wyoming 82716
or
Caller Box 3009
Gillette, Wyoming 82717-3009
Fax No. (307) 687-6009
BUYER: AMERICAN CRYSTAL SUGAR COMPANY
Attn: Vice President, Operations
101 North Third Street
Moorhead, MN 56560
Fax No. (218) 236-4494
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The addresses and fax numbers of any party may be changed by giving notice in
writing at any time to the other party.
10.08 CONFIDENTIALITY. Any nonpublic information, oral or
written, including the contents of this Agreement and any related agreement,
disclosed by either party to the other shall be considered confidential
information, and such information shall not be disclosed to any third party
other than to Seller's parent corporation, Progold LLC, or the employees,
accountants, attorneys, and lenders of such parties, and will be kept secret and
confidential during the term of this Agreement.
10.09 EFFECT ON PRIOR AGREEMENT. This Agreement supersedes the
agreement between the parties dated August 1, 1986, as of the Effective Date of
this Agreement. The parties do not intend to waive any right to payment or
cause of action under the Agreements dated August 1, 1986, arising from facts,
acts or omissions before the Effective Date of this Agreement.
10.10 THIRD PARTY BENEFICIARY. Progold LLC shall be deemed to
be a third party beneficiary under the terms of this Agreement to the extent
that Progold LLC receives coal under this Agreement. Buyer agrees that it
shall pay for all coal delivered to Progold LLC under the terms hereof.
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IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the Effective Date.
SELLER KENNECOTT ENERGY COMPANY FOR AND ON
BEHALF OF SPRING CREEK COAL COMPANY
By /s/ ILLEGIBLE
-----------------------------
Title: V.P. Marketing & Sales
-----------------------------
BUYER AMERICAN CRYSTAL SUGAR COMPANY
By /s/ Marcus F. Richardson
-----------------------------
Title: C.O.O.
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EXHIBIT A
Estimated Pass-Through Costs
Included in Base Price
as of August 1, 1994
*CONFIDENTIAL TREATMENT REQUESTED*
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