Exhibit 10(R)
COAL SALES AGREEMENT
THIS AGREEMENT, effective the 1st day of January, 2002, by and between SIERRA
PACIFIC POWER COMPANY, a Nevada Corporation, ("BUYER") with its principal place
of business at 6100 Neil Road, Reno, Nevada and ARCH COAL SALES COMPANY, INC., a
Delaware corporation, individually and as Agent for Canyon Fuel Company, LLC and
the independent operating subsidiaries of Arch Coal, Inc., a Delaware
corporation (collectively as "SELLER") with its principal place of business at
CityPlace One, Suite 350, St. Louis, Missouri.
WITNESSETH
----------
WHEREAS, BUYER is a Nevada Public Utility Corporation engaged in the generation,
transmission and distribution of electric power and owns and operates the North
Valmy Generation Station near Battle Mountain, Nevada ("Station"), with Idaho
Power Company ("IPC") owning fifty percent (50%) of the Station; and
WHEREAS, SELLER represents and warrants it is capable of supplying coal to BUYER
in accordance with the specifications and terms and conditions set forth herein
("Coal"); and
WHEREAS, the operation of the Station is subject to stringent air quality and
other regulations and BUYER and IPC desire to achieve operational efficiencies,
the Coal must meet the specifications set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein, and
intending to be legally bound hereby, BUYER and SELLER agree as follows:
I. TERM
Unless sooner terminated or canceled, the term of this Agreement ("Term") shall
be five (5) years commencing January 1, 2002 and ending December 31, 2006.
II. SOURCE MINES
A. The Coal supplied hereunder shall be produced from SELLER's Sufco, Skyline
and Dugout Canyon ("Dugout") mines located in Emery and Sevier Counties,
Utah (collectively the "Mines"). SELLER represents and warrants that it has
dedicated the Mines to the performance of this Agreement subject to ARTICLE
X. QUALITY SPECIFICATIONS, Section F below. SELLER shall have the right to
direct which of the Mines will originate shipments in accordance with
ARTICLE IV. ORDERING. SELLER shall use reasonable efforts to maximize
shipments from Sufco, and in no event, shall shipments from Sufco be less
than 350,000 tons during the period July 1, 2003 through December 31, 2003
and 700,000 tons per year in 2004 through 2006. Additionally, shipments
from Dugout shall be no more than 500,000 tons in any calendar year during
the Term of this Agreement. Currently, no shipments are anticipated to come
from Sufco during calendar year 2002.
B. SELLER represents and warrants that the Mines contain a sufficient quantity
of economically recoverable coal that meets the quality specifications and
quantity requirements of this Agreement. SELLER further warrants that the
title to all Coal delivered under this Agreement shall be good and that
such Coal shall be delivered free from any claim, lien or other
encumbrance. SELLER shall indemnify BUYER against any and all expenses,
damages, and liabilities resulting from breach of this warranty.
C. Subject to the prior written approval of BUYER, SELLER shall have the right
to supply coal from sources other than the Mines ("Substitute Coal"),
subject to all other terms and conditions of this
Agreement, provided that any Substitute Coal shall not result in a higher
delivered price to BUYER calculated in dollars per million Btu F.O.B. the
Station than the price in effect for Skyline under this Agreement at the
time of shipment of the Substitute Coal, and provided further that
Substitute Coal shipments shall not reduce coal deliveries from Sufco below
the levels set forth in ARTICLE II. SOURCE MINES, Section A.
D. BUYER shall have the right to divert shipments to the following generating
stations:
Pinon Pine, Sparks, Nevada
Reid Gardner, Moapa, Nevada
Jim Bridger, Point of Rocks, Wyoming
Boardman, Castle, Oregon
III. QUANTITY
A. The quantity of Coal to be delivered and purchased hereunder on an annual
basis shall be the base tonnage specified in the table below ("Base Tons").
At the BUYER'S sole option, the annual Base Tons may be decreased by the
amount specified in the table below ("Reduced Tonnage Option"). The BUYER'S
Reduced Tonnage Option shall only be valid with respect to the specified
calendar year and the annual Reduced Tonnage Option volumes shall not carry
over to the next calendar year.
Base Tons Reduced Tonnage
--------- ---------------
January 1 - December 31, 2002 1,030,000 0
January 1 - December 31, 2003 1,200,000 0
January 1 - December 31, 2004 1,600,000 75,000
January 1 - December 31, 2005 1,600,000 75,000
January 1 - December 31, 2006 1,600,000 75,000
B. As BUYER intends to take delivery in unit trains, actual tonnage delivered
during any calendar year may differ slightly from the Base Tons (less any
Reduced Tonnage) in order to accommodate deliveries in unit train lots.
Provided, however, that the amount of over-shipment or under-shipment in
any calendar year shall be no more than 10,000 Tons of Coal. Differences
resulting from truing up of actual deliveries (but not including variances
in deliveries due to an event of force majeure) with Base Tons (less any
Reduced Tonnage) during any calendar year will be carried over into the
following contract year such that the Base Tons for the following year
would be decreased or increased by an amount which takes these differences
into account. Additionally, BUYER and SELLER agree that up to 50,000 tons
of coal per year may be carried into the next calendar year, and shall be
delivered by SELLER to BUYER during the first calendar quarter of such
calendar year under a mutually agreeable shipment schedule and at the price
in effect for the calendar year in which the Coal was originally scheduled
for delivery. BUYER and SELLER agree that the Term of this Agreement may be
extended for up to three months to allow for the delivery of such Coal.
C. BUYER shall have the right to resell the Base Tons in any calendar year to
a third party, provided however, that SELLER shall have the right, but not
the obligation to purchase said amount of Coal from BUYER at the price
BUYER could otherwise resell the Coal to the third party. In such cases,
BUYER will notify SELLER of its intent to resell any coal sold hereunder,
specifying the price, volume, and term, and unless otherwise agreed, SELLER
shall then have three business days to exercise its right to repurchase
said Coal. BUYER agrees to identify the amount of Coal intended for resale
as part of the shipment scheduling requirements set forth in ARTICLE IV.
ORDERING, Section B. Additionally, all terms and conditions contained in
this Agreement between BUYER and SELLER shall apply to all Coal resold in
accordance with this ARTICLE III. QUANTITY, Section C.
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IV. ORDERING
A. Shipments utilizing one unit train set will be scheduled on an approximate
ratable basis. Further, the parties recognize that BUYER will schedule a
second unit train set from time to time and that the operation of the
second train set will cause total monthly shipments to be substantially in
excess of the approximate ratable basis utilizing one trainset.
B. BUYER shall notify SELLER on or before the fifteenth day of each month of
the quantity of Coal to be shipped during the following month. (ie, BUYER
will notify SELLER on or before January 15th of the amount of Coal to be
shipped during February.) In addition, BUYER shall provide SELLER with its
best estimate of the quantity of Coal to be shipped during the following
eleven months. Within five days of receipt of BUYER's notice, SELLER shall
respond in writing, or by facsimile or electronic mail, to BUYER confirming
BUYER's schedule and specifying the source of each of the following month's
shipments among Sufco, Skyline and Dugout. In addition, SELLER's response
shall also include its best estimate of the sources of the projected
quantities of Coal for the following eleven months.
In the event SELLER is required to estimate future Coal deliveries beyond
the twelve-month period, then the following percentage amounts shall be
used as an estimate of Coal deliveries from SELLER'S Mines, and shall
become effective in the first month following the twelve month forecast
period described hereunder:
Sufco Skyline Dugout
----- ------- ------
2003 29% 56% 15%
2004-2006 44% 46% 10%
V. DELIVERY
SELLER shall at its own expense transport to and load the Coal into rail cars
F.O.B. at the following loading facilities ("Loading Facilities"):
Sufco - Levan (Sharp), Utah
Skyline - Skyline, Utah
Dugout - Savage Coal Terminal, Wellington, Utah
VI. SHIPMENTS
A. SELLER shall load the Coal in quantities suitable for unit train loading,
consisting of approximately 85 rail cars in accordance with the provisions
of ARTICLE IX. SAMPLING AND ANALYSIS. SELLER shall load the Coal in
compliance with the rules and regulations as published in the Union Pacific
Railroad Company's Circular UP 6602, General Rules for Loading and Handling
Coal Trains Originating in Colorado and Utah ("Circular UP 6602"), as
amended from time to time, except that Free Time for loading trains at
Sharp, Utah shall be four hours. SELLER shall be liable for all demurrage
or related charges assessed due to SELLER's failure to comply with the
requirements in Circular UP 6602. BUYER shall have the right to increase
the number of rail cars in each unit train. However, in no event shall
SELLER be required to load more than 11,000 tons in three hours or load
unit trains greater than 105 railcars.
B. SELLER shall have the obligation to conform to restrictions on maximum
allowable weights as specified in Circular UP 6602, as amended from time to
time. SELLER shall be responsible for performing and bearing all costs of
removal of excess Coal and all related charges assessed by the railroad for
overloading, including but not limited to set out and storage charges.
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C. SELLER shall be liable for any incremental transportation charges assessed
to BUYER as a result of SELLER's failure to load cars to a minimum car
weight of 113 net tons for railcars in a trainload consisting of aluminum
286,000 gross net weight in pounds railcars, and 98 net tons for railcars
in a trainload consisting of steel/aluminum 263,000 gross net weight in
pounds railcars. BUYER shall have the right to specify new and revised
minimum railcar weights from time to time.
D. Rail transportation shall be ordered by BUYER and shall be paid for by
"BUYER except when shipments are rejected or acceptance of shipments is
revoked by BUYER, which, in such event rail transportation costs will be
borne by SELLER. SELLER shall make reasonable efforts to make the necessary
arrangements with the railroad for the placement of railcars at the Loading
Facility in accordance with the rail transportation arrangements made by
BUYER.
E. Upon arrival of each train at SELLER's Loading Facility and prior to
commencing loading, SELLER shall make reasonable efforts to check each car
for the presence of foreign material and check that each car door is closed
and locked.
F. Upon the loading of each train for shipment, SELLER shall promptly fax a
shipping notice to: North Valmy Generation Station; Attention: North Valmy
Plant Administration; (FAX #: 775-834-3164). The shipping notice shall
include the shipment date, shipment number, car initials and numbers,
tonnages and the trainload identification numbers.
VII. TITLE AND RISK OF LOSS
Title and risk of loss of the Coal shall pass from SELLER to BUYER as the Coal
is progressively loaded into railcars to be provided by BUYER.
VIII. WEIGHING
A. For billing and all other purposes under this Agreement, the weight of the
Coal delivered hereunder shall be determined by certified weighing systems
at the Loading Facilities when the Coal is loaded. At its expense, SELLER
shall directly (or, in the case of Savage Coal Terminal cause the Loading
Facility Operator to) inspect, test and calibrate the weighing and
measuring devices at least semiannually in accordance with accepted
methods. SELLER shall provide copies of the scale certification reports to
BUYER. SELLER shall notify BUYER at least seven days prior to such testing
and BUYER shall have the right to have a representative present to observe
such weighing inspections or tests.
B. If SELLER's scales are determined to be in error in excess of two-tenths of
one percent (.2%) as determined by such inspection and certification, an
appropriate adjustment shall be made to the Coal's weight and related
invoices and payments. Such adjustment shall be retroactive to the time of
the error if such time can be factually ascertained. If the time of error
cannot be ascertained, it will be deemed to be one-half the time between
the last certification of such scales and the time the error in weighing
was corrected.
IX. SAMPLING AND ANALYSIS
A. SELLER warrants that Coal samples will be taken in accordance with ASTM
standards at the Loading Facilities.
B. For the purposes of determining conformance of each shipment of Coal to
ARTICLE X. QUALITY SPECIFICATIONS, or any other provision of this
Agreement, a representative sample of the Coal shall be collected, as set
forth in Section C of this ARTICLE IX. SAMPLING AND ANALYSIS, below, in
accordance with ASTM standard methods at the Loading Facility as Coal is
loaded into
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each unit train. BUYER may, at its own risk and expense, have a
representative present to observe such sampling. The presence of BUYER's
representative at the time SELLER samples the Coal does not relieve the
SELLER of its obligations to sample and analyze the Coal in conformance
with the terms and conditions of this ARTICLE IX. SAMPLING AND ANALYSIS.
C. SELLER shall cause a representative sample to be taken in accordance with
ASTM standards at the Loading Facility as Coal is loaded into each unit
train. The sample shall be taken by an ASTM mechanical sampler. SELLER
shall divide each sample into three parts in accordance with ASTM standards
and shall place the parts in suitable airtight containers each of which
shall be sealed, documented and controlled for security purposes.
1. (a) SELLER shall analyze the first part ("Original Sample") on a
preliminary basis for Total Moisture, Ash, BTU/lb., and Sulfur
(Sulfur to be stated in pounds of sulfur dioxide per million Btu)
("Preliminary Analysis") in accordance with ASTM standards. If
the Preliminary Analysis shows that the Coal fails to meet any
one of the Rejection Coal Specifications as set forth in ARTICLE
X. QUALITY SPECIFICATIONS, BUYER may, at its option, exercise any
of its rights set forth in ARTICLE XI. COAL QUALITY
PENALTY/REFUSABLE COAL. SELLER shall fax a copy the Preliminary
Analysis to BUYER within twelve (12) hours of collecting the
Original Sample. BUYER shall designate an agent to receive such
results after normal business hours.
(b) In addition, SELLER shall analyze the Original Sample for Total
Moisture, Ash, BTU/lb., Ash Fusion Temperature (H=W) and Sulfur
(Sulfur to be stated in pounds of sulfur dioxide per million Btu)
in accordance with ASTM Methods ("Final Analysis"). SELLER shall
fax a copy of the Final Analysis to BUYER within 72 hours after
collecting the Original Sample.
(c) BUYER may, at its sole option and expense, require that the Final
Analysis include further testing in accordance with ASTM
standards for any or all of those characteristics in ARTICLE X.
QUALITY SPECIFICATIONS which were not described in ARTICLE IX.
SAMPLING AND ANALYSIS, Section C.1(b). If this analysis shows
that the Coal fails to meet any one of the suspension limits set
forth in ARTICLE X. QUALITY SPECIFICATIONS, Section A, BUYER may,
at its option, exercise any of its rights set forth in ARTICLE
XII. NONCONFORMING COAL.
2. (a) The second part of the representative sample ("Duplicate Sample")
shall be held by SELLER for at least thirty (30) days. BUYER, at
its sole expense, may have the Duplicate Sample analyzed in
accordance with ASTM standards for any or all of the
characteristics in ARTICLE X. QUALITY SPECIFICATIONS ("BUYER's
Analysis"). Except as provided in ARTICLE IX. SAMPLING AND
ANALYSIS, Section 2(c) , a copy of BUYER's Analysis shall be made
available to SELLER within ten (10) days of receipt of the
results of BUYER's Analysis.
(b) If the results of BUYER'S Analysis are within the ASTM allowable
reproducibility limits from the result of SELLER's Final
Analysis, then SELLER's Final Analysis shall control for purposes
of determining compliance with ARTICLE X. QUALITY SPECIFICATIONS,
or any other term of this Agreement.
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(c) If SELLER's Final Analysis and BUYER's Analysis results vary by
more than the ASTM allowable reproducibility limits, then:
(i) A copy of BUYER's Analysis shall immediately be made
available to SELLER; and
(ii) SELLER shall cause the Referee Sample (referred to in
Sub-section (3) of this ARTICLE, below) to immediately be
analyzed as provided in Sub-section (3), below, and the
results shall immediately be made available to both SELLER
and BUYER.
3. (a) The third part of the representative sample ("Referee Sample")
shall be held by SELLER for at least forty-five (45) days for
analysis by an independent laboratory as set forth below.
(b) If SELLER's Final Analysis and BUYER's Analysis results vary by
more than the ASTM allowable reproducibility limits, then the
Referee Sample shall be analyzed in accordance with ASTM
standards by a mutually acceptable independent laboratory. The
results of the Referee Sample analysis shall be furnished to both
SELLER and BUYER and shall control for purposes of determining
compliance with ARTICLE X. QUALITY SPECIFICATIONS and any other
term of this Agreement. The cost of the Referee Sample analysis
shall be paid equally by BUYER and SELLER.
D. SELLER shall, at its own cost, cause the mechanical sampler to be
dynamically bias tested by an independent third party at least every 24
months during the Term of this Agreement. SELLER shall provide copies of
the sampler test reports to BUYER. BUYER shall have the right to have a
representative present during the sampler tests.
X. QUALITY SPECIFICATIONS
A. All Coal to be delivered under this Agreement shall substantially conform
to the following Typical Coal Specifications:
COAL SPECIFICATION
------------------
as Received
Sufco
-----
Typical Suspension Rejection
-------- ---------- ---------
Size (ASTM #D4749) 2" x 0
Total Moisture % 9.8 12.5 13.0
Ash % 8.5 12.0 13.0
Heat Content (BTU/1b) 11,400 10,950 10,500
Ash Fusion (ST H=W) 2100(0)F
Sulfur (Lbs. S02/MMBtu) 0.80 1.0 1.10
Grindability (HGI) 45
Iron Oxide % (Fe203) 5.5
Sodium Oxide % (Na20) 3.8
Fines %* 43
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Skyline
-------
Typical Suspension Rejection
------- ---------- ---------
Size (ASTM #D4749) 2" x 0
Total Moisture % 8.5 12.0 13.0
Ash % 9.0 12.0 13.0
Heat Content (BTU/lb) 11,710 11,255 10,800
Ash Fusion (ST H=W) 2150(0)F
Sulfur (Lbs. S02/NEvlBtu) 0.74 1.0 1.10
Grindability (HGI) 46
Iron Oxide % (Fe203) 6.0
Sodium Oxide % (NaZO) 1.2
Fines %* 50
Dugout
------
Typical Suspension Rejection
------- ---------- ---------
Size (ASTM #D4749) 2" x 0
Total Moisture % 6.2 10.0 11.0
Ash % 10.5 12.0 13.5
Heat Content (BTU/lb) 11,960 11,380 10,800
Ash Fusion (ST H=W) 2400(0)F
Sulfur (Lbs. S02/MMBtu 1.04 1.10 1.10
Grindability (HGI) 43
Iron Oxide % (Fe203) 3.5
Sodium Oxide % (NaiO) 0.8
Fines %* 45
* Fines in weight % measured through a 1/4 inch square screen. Wire size
for sieve as listed in ASTM Specification E-11.
B. SELLER agrees to permit and/or make all necessary arrangements for access
during normal business hours by BUYER, at BUYER's risk and expense to any
properties, equipment or facilities related to SELLER'S performance under
this Agreement.
C. The Coal shall be mixed thoroughly so that the quality thereof after being
loaded into the rail cars shall be consistent within each car of the unit
train and that the Coal shall be prepared substantially free of impurities.
D. BUYER, through its agents, representatives or employees, shall have the
right to inspect the Coal at BUYER's risk and expense at any time prior to
unloading at the Station and to inspect any properties, equipment or
facilities during normal business hours related to SELLER's performance
under this Agreement, including, but not limited to, SELLER's reserves,
mining operations, hauling operations, storage operations or loading
operations. BUYER's inspection pursuant to this ARTICLE X. QUALITY
SPECIFICATIONS, Section D, does not relieve SELLER of its obligations to
deliver Coal to BUYER in conformance with the quality specifications set
forth in this ARTICLE X. QUALITY SPECIFICATIONS.
E. BUYER shall be entitled to randomly sample the Coal using ASTM standards
during any such inspection ("Inspection Sample") and analyze the Inspection
Sample using ASTM standard methods.
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F. Because BUYER has not utilized Coal from Dugout at the Station, BUYER
requires that a test burn be conducted. The test burn will require up to
50,000 tons of representative quality Coal from Dugout and would be
conducted on a schedule mutually agreeable between BUYER and SELLER. If, as
a result of the test bum, BUYER, in its sole reasonable judgment,
determines that Coal from Dugout is not suitable for use at the Station,
BUYER shall so notify SELLER in writing no later than thirty (30) days
after completion of the test burn. SELLER agrees to terminate shipments
from Dugout upon receipt of SELLER's notice. BUYER and SELLER agree to meet
thereafter to discuss the reasons for the unsuitability and what, if
anything, can be done to make Coal from Dugout suitable. BUYER and SELLER
agree that SELLER intends to utilize Coal from Dugout to supply a portion
of the annual volumes set forth in ARTICLE III. QUANTITY, Section A. If
BUYER determines the Coal from Dugout is unsuitable, SELLER may elect to
reduce the annual volumes set forth in ARTICLE III. QUANTITY, Section A, by
15% for the remainder of 2002-2003 and by 10% for 2004-2006. SELLER shall
notify BUYER in writing of its election to reduce volumes no later than
seven days after receipt of BUYER's notice of Dugout's unsuitability for
use at the Station.
G. BUYER AGREES THAT SELLER MAKES NO EXPRESS WARRANTIES OTHER THAN THOSE SET
FORTH IN THIS AGREEMENT. SELLER MAKES NO WARRANTY CONCERNING THE
SUITABILITY OF COAL DELIVERED HEREUNDER FOR USE IN BUYER'S PLANT, OR OTHER
ELECTRIC GENERATION STATIONS. 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.
H. If, at any time after the date deliveries commence under this Agreement,
BUYER reasonably and in good faith determines a material inability to burn
the Coal purchased under this Agreement, BUYER may, at its option and upon
notice confirmed in writing and sent to SELLER by certified mail,
facsimile, or other electronic methods, suspend future shipments except
shipments already loaded into railcars from the Mine(s) which produce the
unacceptable Coal. SELLER may, within thirty (30) days of receipt of
BUYER's notice, provide BUYER with reasonable assurances that subsequent
monthly deliveries of Coal shall improve the combustion characteristics of
the Coal. If SELLER fails to provide such assurances within said thirty day
period, or if SELLER provides assurance but is unable to cure BUYER's
inability to burn the Coal, BUYER may terminate shipments from the affected
Mine(s) by giving written notice of such termination within five (5) days
from the end of such thirty day period. In the event BUYER exercises its
right under this Section, and terminates deliveries from the affected
Mine(s), then SELLER shall continue to supply Coal from the unaffected
Mine(s) and the shortfall created by the unburnable Coal would be
determined in accordance with the forecast schedule set forth in ARTICLE
IV. ORDERING, Section B. Additionally, both parties shall be relieved from
any further rights, duties, obligations or liabilities under this Agreement
for that portion of deliveries that would have been delivered from the
affected Mine(s), except for payment of any sums due and owing for
deliveries made under this Agreement prior to the termination of deliveries
from the affected Mine(s).
I. In the event that certain Coal quality parameters create combustion related
problems at the Station, BUYER may, upon notice confirmed in writing and
sent to SELLER by certified mail, facsimile, or other electronic method,
suspend future shipments except shipments already loaded into railcars.
SELLER shall, within thirty (30) days of receipt of BUYER's notice, provide
BUYER with reasonable assurances that subsequent monthly deliveries of Coal
shall improve the combustion characteristics of the Coal. If SELLER fails
to provide such assurances within said thirty (30) day period, or if SELLER
provides assurance but is unable to change the certain Coal quality
parameters which created such combustion related problems, BUYER may
terminate shipments from the affected Mine by giving written notice of such
termination within five (5) days from the end of the thirty (30) day
period. Additionally, SELLER shall continue to supply Coal from the
unaffected Mines and the shortfall created by the non-conforming Coal would
be determined in accordance with the forecast
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schedule set forth in ARTICLE IV. ORDERING, Section B. A waiver of this
right for any one period by BUYER shall not constitute a waiver for
subsequent periods. If SELLER provides such assurances to BUYER, shipments
hereunder shall resume and any tonnage deficiencies resulting from
suspension may be made up subject to the mutual agreement of BUYER and
SELLER. BUYER shall not unreasonably withhold its acceptance of SELLER'S
assurances, or delay the resumption of shipments. The parties recognize
that BUYER, in accordance with ARTICLE XI. COAL QUALITY PENALTY/REFUSABLE
COAL, has the right to reject shipments that do not conform with the
rejection limits set forth in ARTICLE X. QUALITY SPECIFICATIONS, Section
A., for Total Moisture, Ash, Sulfur (Sulfur to be stated in pounds of
sulfur dioxide per million Btu), and Btu/lb. This Section I. is intended to
apply to all constituents and properties of the Coal shipped hereunder
(except for Total Moisture, Ash, Btu/1b., and Sulfur, with Sulfur to be
stated in pounds of sulfur dioxide per million Btu) that individually or in
combination cause the Coal to be unburnable as defined herein.
XI. COAL QUALITY PENALTY/REFUSABLE COAL
A. If the quality of any trainload of Coal hereunder based upon the
Preliminary Analysis authorized under ARTICLE IX. SAMPLING AND ANALYSIS
exceeds the rejection limits set forth in ARTICLE X. QUALITY
SPECIFICATIONS, Section A, by an amount that causes it to be unburnable in
the sole discretion of the BUYER, BUYER may refuse to accept delivery of
the trainload, all expenses to be paid by SELLER. BUYER may stop any train
in route all expenses to be paid by the SELLER. BUYER shall-give SELLER
such notice by telephone as soon as is reasonably possible and shall
provide written notice no more than two business days after such selection
is made by BUYER. BUYER must reject such Coal within twenty-four (24) hours
of receipt of the Preliminary Analysis or such right to reject is waived.
When a train is rejected, SELLER shall have twenty-four (24) hours from the
time BUYER notifies SELLER of the rejection to make arrangements to dispose
of the Coal. BUYER may, at its discretion, lease the train to SELLER at
prevailing lease rates in order to transport rejected Coal to a new
destination. The train will be returned to BUYER at any of SELLER's Loading
Facilities within 6 days of the rejection notice. SELLER agrees not to hold
BUYER responsible for missing any loading dates or volumes due to SELLER's
use of train for transporting rejected Coal.
B. If the quality of any trainload of Coal hereunder exceeds the reject limits
set forth in ARTICLE X. QUALITY SPECIFICATIONS, Section A, and BUYER
intends to utilize the Coal, that shipment shall be subject to a $1.00 per
ton penalty that shall be credited to BUYER. This penalty shall be in
addition to the price adjustments set forth in ARTICLE XV. HEAT CONTENT
ADJUSTMENT, and ARTICLE XVI. S02 ADJUSTMENTS.
XII. NON-CONFORMING COAL
A. Should the weighted monthly average of all shipments from each Mine based
upon the Final Analysis or Referee Sample Analysis of all monthly
shipments, fail to meet any one or more of the suspension limits (except
BTU/1b) set forth in ARTICLE X. QUALITY SPECIFICATIONS, Section A., or
should SELLER deliver three (3) trains in a six (6) month period that fail
to meet the rejection limits set forth in ARTICLE X. QUALITY
SPECIFICATIONS, Section A., BUYER may upon notice confirmed in writing and
sent to SELLER by certified mail, facsimile, or other electronic method,
suspend future shipments with the exception of any shipments already loaded
into railcars. SELLER shall, within thirty (30) days of receipt of BUYER's
notice, provide BUYER with reasonable assurances that subsequent monthly
deliveries of Coal shall meet or exceed the suspension limits (except
BTU/1b) set forth in ARTICLE X. QUALITY SPECIFICATIONS, Section A. If
SELLER fails to provide such assurances within said thirty (30) day period,
BUYER may terminate shipments
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from the affected Mine by giving written notice of such termination at the
end of the thirty (30) day period. Additionally, SELLER shall continue to
supply Coal from the unaffected Mines and the shortfall created by the
non-conforming Coal would be determined in accordance with the forecast
schedule set forth in ARTICLE IV. ORDERING, Section B. A waiver of this
right for any one period by BUYER shall not constitute a waiver for
subsequent periods. If SELLER provides such assurances to BUYER, shipments
hereunder shall resume and any tonnage deficiencies resulting from
suspension may be made up subject to the mutual agreement of BUYER and
SELLER. BUYER shall not unreasonably withhold its acceptance of SELLER'S
assurances, or delay the resumption of shipments.
B. All costs,.expenses or damages incurred by BUYER in the course of SELLER
assuring BUYER of SELLER's ability to conform to the quality
specifications, after giving notice to SELLER of SELLER's failure to meet
any one or more of such suspension limits, shall be paid to BUYER by
SELLER. Nothing herein shall limit the remedies available to BUYER under
the Uniform Commercial Code as enacted in the State of Nevada (UCC).
XIII. DEFAULT EVENTSIREMEDIES
A. A default event shall mean any of the following:
1. SELLER fails to supply Coal subject to:
(a) The quality specifications set forth under the suspension and
rejection limits of ARTICLE X. QUALITY SPECIFICATIONS, Section
A., and
(b) The quantity specifications set forth under ARTICLE III.
QUANTITY. Sections A. and B., unless otherwise excused under
ARTICLE XVIII. FORCE MAJEURE.
2. SELLER fails to provide assurances as required in ARTICLE XII.
NON-CONFORMING COAL, Section A.
3. SELLER, having given adequate assurances, fails to commence delivery
of Coal conforming to the Typical Coal Specifications set forth in
ARTICLE X. QUALITY SPECIFICATIONS, Section A., within thirty (30) days
after the date of SELLER providing assurances to BUYER as required in
ARTICLE XII. NON-CONFORMING COAL, Section A.
4. SELLER delivers within three (3) months after the date of SELLER'S
resumption of shipments under ARTICLE XII. NON-CONFORMING COAL,
Section A, three shipments of Coal which fail to meet any one or more
of the reject limits set forth in ARTICLE X. QUALITY SPECIFICATIONS,
Section A.
5. Either party commits a material breach of its obligations under this
Agreement and the breaching party fails to cure such material breach
within thirty (30) days after receipt of written notice from the
non-breaching party describing the breach.
6. BUYER or SELLER fails to pay any payment required by the Agreement
when due and such failure is not remedied within fourteen (14) days
after written notice thereof, provided however, that the payment is
not subject to ARTICLE XVII. PAYMENT.
7. BUYER or SELLER files a petition or otherwise commences, authorizes,
or acquiesces in the commencement of a proceeding or cause of action
under any bankruptcy or similar
10
law for the protection of creditors; has such petition filed or a
proceeding commenced against it, otherwise becomes bankrupt or
insolvent (however evidenced); fails or is unable generally to pay its
debts as they become due; or seeks or becomes subject to the
appointment of an administrator, provisional liquidator, conservator,
receiver, trustee, custodian or other similar official for all or
substantially all of its assets.
B. In the event either party is in default, the other party may, in addition
to and not in limitation of other rights provided for in this Agreement, do
one or more of the following:
1. Cancel this Agreement.
2. Exercise all remedies available to either BUYER or SELLER under the
entire UCC or any provision thereof.
XIV. COAL PRICE
A. The price per ton (2000 pounds) to be paid by BUYER to SELLER for the Coal
delivered hereunder shall be fixed for each calendar year for the duration
of the agreement at the prices indicated below F.O.B. rail cars at SELLER'S
Loading Facility for each Mine. This price includes all taxes, costs of
compliance with all laws and regulations, royalties and other fees
applicable to the production and sale of Coal under this Agreement, except
that State of Nevada Use Tax shall be to BUYER's account.
Sufco Skyline Dugout
------ ------- ------
Effective January 1, 2002 $18.50 $19.00 $19.30
Effective January 1, 2003 $19.05 $19.57 $19.88
Effective January 1, 2004 $19.63 $20.15 $20.48
Effective January 1, 2005 $20.22 $20.76 $21.09
Effective January 1, 2006 $20.82 $21.38 $21.72
B. SELLER represents that the cost of compliance with all governmental laws
and regulations in effect as of November 15, 2001 is included in the
initial Coal prices. Subsequent to such date new laws or regulations,
changes in the interpretation or enforcement practices concerning existing
laws as well as changes in presently existing federal, state, and local
laws, rules and regulations that impose additional costs, or reduce such
costs being imposed to mine, process, transport, or sell Coal and which
were not being incurred as of November 15, 2001, (collectively "Change in
Governmental Imposition") shall be passed through to BUYER or SELLER, as
the case may be, pursuant to Sections C through H below. SELLER and BUYER
agree that cost changes due to changes in percentage depletion allowance
shall not qualify as a Change in Governmental Imposition.
C. There are two categories of Change in Governmental Imposition:
1. Any Change in Governmental Imposition that is directly assessed
against SELLER as a dollar per ton, a dollar per million Btu or as a
percent of sales price shall be passed in its entirety to BUYER as an
adjustment to the base prices, subject to the limitations in Section E
below. Examples include, but are not limited to, regulations impacting
Btu, carbon, mercury, sodium dioxide, Federal Black Lung, Federal
Reclamation Fee, Severance Tax, and Federal Coal Royalty.
2. Any other Change in Governmental Imposition not described by ARTICLE
XIV. COAL PRICE, Section C.(1) shall be calculated as follows:
11
(a) The total Change in Governmental Imposition shall be calculated
for each Mine as each such change is incurred.
(b) The total amount calculated pursuant to Subsection (a) above
shall be divided by the total number of tons produced by the
respective Mine for the applicable time period involved to yield
the dollar per ton impact.
(c) Every Change in Governmental Imposition pursuant to this
Subsection (2) will first be rounded to the nearest thousandth of
a cent and then reduced by $0.10 per ton. If the Change in
Governmental Imposition is less than $0.10 per ton then there
shall be no change to the Coal prices.
D. The following procedure applies when SELLER claims that there has been a
Change in Governmental Imposition that is eligible to impact Coal prices,
but the cumulative Coal price increase for the life of this Agreement in
the Governmental Imposition category is less than or equal to $2.00 per ton
each in either Subsection C.(1) or Subsection C.(2).
1. SELLER shall notify BUYER within sixty days of the effective date of
any Change in Governmental Imposition. Such notification shall include
SELLER's non-binding indication of whether the Change in Governmental
Imposition is significant.
2. As soon as possible after such notification, SELLER shall provide
BUYER with written cost per ton calculations and satisfactory evidence
of the pertinent Change in Governmental Imposition. Such calculations,
together with supporting documentation and workpapers will be
sufficient to allow a knowledgeable person to determine the
reasonableness and accuracy of SELLER's calculations.
3. BUYER shall have ninety (90) days to review the materials provided by
SELLER pursuant to Subsection (2) above and provide SELLER with notice
of acceptance or dispute of such Change in Governmental Imposition and
resulting Coal price adjustments.
4. If BUYER accepts SELLER's calculation of the Change in Governmental
Imposition, the Coal prices will be adjusted retroactively for a
period beginning (i) on the effective date of such Change in
Governmental Imposition if SELLER's notice of the same was within the
sixty day deadline referenced in Subsection (1) above; or (ii) sixty
days prior to the date of SELLER's initial notification if SELLER
failed to comply with such deadline. BUYER or SELLER as the case may
be shall make payment of a Change in Governmental Imposition that is
retroactive within 20 days of SELLER's invoice or credit memorandum,
and the per ton impact shall be reflected in the revised Coal prices
for subsequent deliveries.
5. If BUYER or SELLER disputes such calculations, then BUYER and SELLER
shall have up to sixty days from the notice of dispute to resolve the
dispute. If the dispute cannot be resolved within the sixty day
period, then the dispute shall be arbitrated as set forth in ARTICLE
XXIII. DISPUTE RESOLUTION, as modified by this Subsection. The sole
questions for the arbitrator to decide will be the correct amount of
Change in Governmental Imposition and the corresponding change in Coal
prices. If BUYER or SELLER elect to arbitrate a dispute arising from a
Change in Governmental Impositions, then BUYER and SELLER agree to be
bound by the arbitrators' ruling and apply it retroactively to the
effective date of such Change in Governmental Imposition pursuant to
Paragraph 4 of this Section (D) and this Agreement shall not be
terminated as a result of the arbitrators' ruling.
12
E. When the Changes in Governmental Impositions described by ARTICLE XIV. COAL
PRICE, Section C.(I) reach a cumulative amount exceeding $2.00 per ton,
then these additional procedures will apply following the ninety day review
period referenced in Section (D)(3).
1. If BUYER accepts the validity of the charge, BUYER and SELLER agree to
meet to discuss which, if either party, agrees to absorb the amount of
the ARTICLE XIV. Section C.(1) cost that exceeds $2.00 per ton. Such
meeting shall take place within 5 days of BUYER's notice of acceptance
as provided for in this ARTICLE XIV. COAL PRICE, Section D.(3). If
either party agrees to absorb such amount, then this Agreement shall
remain in full force and effect. If neither party agrees to absorb
such amount, then this Agreement shall terminate 90 days from the
meeting date. During the final ninety day period, the Coal prices
shall be adjusted to reflect fifty percent (50%) of the subject
ARTICLE XIV. COAL PRICE, Section C.(1) charge and shall not be subject
to any other adjustments for a Change in Governmental Imposition for
as long as this Agreement remains in effect.
2. If BUYER disputes the validity of the charge, such dispute shall be
resolved pursuant to ARTICLE XIV. COAL PRICE, Section D(5).
F. When the Change in Governmental Impositions described in ARTICLE XIV. COAL
PRICE, SECTION C.(2) reach a cumulative amount exceeding $2.00 per ton,
then these additional procedures will apply following the ninety day review
period referenced in Section (D)(3).
1. If the BUYER accepts the validity of the charge, BUYER and SELLER
agree to meet to discuss which, if either party, agrees to absorb the
amount of this ARTICLE XIV. COAL PRICE, Section C.(2) cost that
exceeds $2.00 per ton. Such meeting shall take place within 5 days of
BUYER's notice of acceptance as provided for in this ARTICLE XIV. COAL
PRICE, Section D.(3). If either party agrees to absorb such amount,
then this Agreement shall remain in full force and effect. If neither
party agrees to absorb such amount, then this Agreement shall
terminate ninety (90) ~ days from the meeting date. During the final
ninety day period, the Coal prices shall be adjusted to reflect fifty
percent (50%) of the subject ARTICLE XIV. COAL PRICE(C)(2) charge and
shall not be subject to any other adjustments for a Change in
Governmental Imposition for as long as this Agreement remains in
effect.
2. If BUYER disputes the validity of the charge, such dispute shall be
resolved pursuant to this ARTICLE XIV. COAL PRICE, Section D.(5).
G. In the event that BUYER contends that SELLER has failed to claim and
calculate an available Change in Governmental Imposition, the parties agree
as follows:
1. BUYER will give SELLER notice within sixty (60) days of the effective
date that it believes that a Change in Governmental Imposition has
provided a cost saving opportunity that should be passed through
retroactively as of the effective date of such Change in Governmental
Imposition to BUYER by an adjustment to the Coal prices. If BUYER
fails to notify SELLER of a Change in Governmental Imposition within
the required sixty day period, then the effective date of the Change
in Governmental Imposition would then become sixty days prior to the
date of BUYER's initial notification, unless the discovery of a Change
in Governmental Imposition occurs during annual audit by BUYER as set
forth in ARTICLE XIX. AUDIT/INSPECTION when the effective date of any
change in Coal prices shall be the effective date of the Change in
Governmental Imposition.
13
2. SELLER will then calculate the available cost changes related to such
Change in Governmental Imposition as soon as possible and calculate
the related adjustment to the Coal prices. SELLER shall provide BUYER
with its calculations and related documentation sufficient to allow a
knowledgeable person to determine the reasonableness and accuracy of
the possible cost change on a dollar per ton basis.
3. BUYER shall have ninety (90) days after receiving such documentation,
to give SELLER notice of acceptance or dispute of such calculations.
If BUYER disputes such calculations, then such dispute will be
resolved pursuant to this ARTICLE XIV. COAL PRICE, Section D.(5).
H. BUYER and SELLER mutually agree that time is of the essence as it relates
to the obligations of the parties under this ARTICLE XIV. COAL PRICE.
XV. HEAT CONTENT ADJUSTMENT
In the event the weighted average heat content of all Coal shipped in any
calendar month is less than the guaranteed Btu/lb as specified in this ARTICLE
XV. HEAT CONTENT ADJUSTMENT, then a Heat Content Penalty in an amount determined
by the following formula, shall apply. Heat content adjustments shall be
calculated separately for each Mine from which Coal was shipped hereunder
Heat Content Penalty = Price Per Ton x Btu I- Btu2 x Tons Shipped
-----------
Btul
In the event the weighted average heat content of all Coal shipped in any
calendar month is greater than the guaranteed Btu/lb as specified in this
ARTICLE XV. HEAT CONTENT ADJUSTMENT, then a Heat Content Premium in an amount
determined by the following formula shall apply:
Heat Content Premium=Price Per Ton x Btu2- Btu 1 x Tons Shipped
-----------
Btu l
Where:
"Price Per Ton" = The price set forth in ARTICLE XIV. COAL
PRICE for the Mine in dollars per ton;
"Btu l" = The guaranteed heat content in
Btu/lb (as received basis) as
follows: Sufco - 11,400, Skyline -
11,710, Dugout -- 11,960;
"Btu2" = The weighted average as received
heat content (as determined in
accordance with ARTICLE IX. SAMPLING
AND ANALYSIS) for all Coal shipped
for the month from the Mine;
"Tons Shipped" = The total number of tons of Coal received
for the contract month.
There shall be no Heat Content Premium or Penalty for the month if the weighted
average Btu content of all Coal shipped from the Mine in that month is greater
than or equal to [Btu1 - 50 Btu/lb.], but less than or equal to [Btu1 + 50
Btu/1b.].
BUYER shall send SELLER a written calculation of the Heat Content Penalty or
Premium by Mine within thirty (30) days after the end of each month. Payment or
credit shall be made within fifteen (15) days of receipt of the written
calculation.
14
XVI. S02 ADJUSTMENTS
If the weighted average pounds of S02 per million BTU (lbs S02/MMBTU) on an as
received basis of all shipments accepted by BUYER in a calendar month from a
Mine differs from the base lbs S02/MMBTU for that Mine, then a S02 adjustment in
an amount determined by the following formula shall apply
Sulfur Adjustment = (Base S02 - Actual S02) X (BTU2) X (Value S02)
----------------------------------------------
1,000,000
Where:
"Base S02" = The specification in lbs S02/MMBTU (as received basis)
for the Mine as follows: Sufco - 0.80, Skyline - 0.74,
Dugout -1.04;
"Actual S02" = The weighted average lbs S02/MhlBTU (as received
basis) for that Mine (as determined in accordance with
ARTICLE IX. SAMPLING AND ANALYSIS) for all Coal shipped
for the month from the Mine;
"Btu2" = The weighted average as received heat content
(as determined in accordance with ARTICLE IX. SAMPLING
AND ANALYSIS) for all Coal shipped for the month from
the Mine;
"Value S02" = The average price of S02 allowances for the
month in dollars per ton of S02 determined by summing
the "Air Daily Market Price Indices" during the month
divided by the number of indices published in "Air
Daily" during the month.
Lbs S02/MMBTU shall be calculated as follows:
Lbs S02/MMBTU = % Sulfur x 20,000
-----------------
BTU/lb
BUYER shall send SELLER a written calculation of the S02 adjustment by Mine
within thirty (30) days after the end of each month. Payment shall be mailed by
SELLER within twenty (20) days of receipt of the written calculation. If an
additional payment is due SELLER, BUYER shall make payment within twenty (20)
days of SELLER's review of BUYER's written calculations.
XVII. PAYMENT
By the tenth day of the month, SELLER shall send BUYER an invoice for all Coal
received in the previous month. The invoice shall include train numbers, tonnage
per train, price per ton, Mine, and Loading Facility. Invoices should be sent
to:
Fuels Accountant, General Accounting Department
Sierra Pacific Power Company
P.O. Box 98910
Las Vegas, NV 89151
Payment for the Coal shall be made by BUYER within twenty (20) days of receipt
of the invoice.
15
XVIII. FORCE MAJEURE
A. Definition of Force Majeure. The term "force majeure" as used in this
Agreement shall mean any causes beyond the control and not caused by the
fault or negligence of the affected party that the affected party is unable
to overcome or mitigate, such as Acts of God, acts of the public enemy,
insurrections, riots, strikes, or labor disputes, power, labor or material
shortages, fires, explosions, floods, breakdowns of or damage to plants,
mines, equipment or facilities, interruptions to or contingencies of
transportation, embargoes, court or commission orders, inability to obtain
necessary permits, licenses, and governmental approvals after applying for
same with reasonable diligence, unforeseen mining conditions, unforeseen
geologic faults, or other causes of a similar nature that wholly or
partially prevent the mining, loading, and/or delivery of Coal by SELLER
from the Mines, or the receiving, unloading or consuming of Coal by BUYER
in the generation of electricity at any of units at the Station or other
generating stations then receiving Coal under this Agreement, or the
transmission of electricity; provided, however, that the excuse of force
majeure shall not be available to SELLER if the delay or failure in its
performance arises from a defect in the rights entitling SELLER to mine and
remove Coal at the Mines. Failure to prevent or settle any strike or labor
trouble shall be considered beyond the control of the party claiming such
excuse for nonperformance. The party claiming force majeure shall give
prompt notice by telephone as soon as possible after the occurrence of the
event of force majeure and shall promptly give the other party written
notice describing the nature of the occurrence and its probable duration.
B. Suspension of Obligations. Neither party shall be under any obligation nor
subject to any liability (except payment of invoices for Coal already
delivered) for failure to perform any of its obligations under this
Agreement as the result of a force majeure event, and the obligations of
the party claiming force majeure shall be suspended to the extent made
necessary by such force majeure and during its continuance. Should the
situation of a total force majeure at one or more Mine(s) exceed twelve
months, the party not claiming force majeure shall have the option to
terminate the Mine source(s) under this Agreement upon sixty days written
notice.
C. Full or Partial Force Majeure Tonnage Allocation. During the period that an
event of force majeure causes a complete reduction in the total quantity of
Coal SELLER can deliver from one or more Mines, deliveries shall cease from
the affected Mine(s) and shall continue from the unaffected Mine(s) in
accordance with the schedule set forth in ARTICLE IV. ORDERING, Section B.,
from the unaffected Mine(s). During the period that an event of force
majeure causes a partial reduction in the total quantity of Coal SELLER can
deliver from the affected Mine(s), SELLER first shall continue to deliver
Coal from the unaffected Mine(s) in accordance with the schedule set forth
in ARTICLE IV. ORDERING, Section B., and then curtail any spot deliveries
from the affected Mine(s) that SELLER is not committed to sell. If
necessary, SELLER shall apportion the Coal that it is able to deliver from
the affected Mine(s) pro rata among the BUYER and all other customers
supplied Coal from the affected Mine(s) under existing agreements. During
the period that an event of force majeure causes a partial reduction in the
total quantity of Coal that BUYER can consume at the Station , BUYER shall
apportion its Coal requirements pro rata among SELLER and any other parties
with whom BUYER has contracted to supply Coal to the Station. The party not
invoking force majeure shall have the right to require the make-up of
deliveries suspended during the force majeure, subject to a mutually
acceptable scheduling of such make-up deliveries. The price for make-up of
such force majeure tonnage shall be as follows:
. If the force majeure was declared by the SELLER, then the price shall
be the price in effect at the time the force majeure was declared by
the SELLER.
. If the force majeure was declared by the BUYER, then the price shall
be the price in effect at the time the Coal deliveries are made up.
16
XIX. AUDIT/ INSPECTION
BUYER, and its authorized agents which have signed appropriate confidentiality
agreements with SELLER, at BUYER's risk and expense, shall have the right to
make inspections of the properties and related operations of SELLER insofar as
may be reasonably required to verify SELLER'S representations and claims
relating to the performance of its obligations hereunder. In addition, BUYER or
SELLER, upon request, shall furnish the other party and its agents with all
information which may be reasonably required to verify quality specifications
and to calculate any prices hereunder including verification of any and all
passthrough costs. BUYER, upon request to SELLER, at BUYER's risk and expense,
shall have the right to verify by audit all information regarding quantity
requirements, quality specifications and prices charged hereunder. SELLER shall
maintain all such records for a period of twenty-four (24) months from the
creation of the records.
XX. NOTICES
Unless otherwise provided in this Agreement, all notices under this Agreement
shall be in writing and shall be sufficient in all respects if delivered in
person or sent by overnight mail service to:
BUYER:
Fuels Department
Sierra Pacific Power Company
P.O. Box 98910
Las Vegas, NV 89151
SELLER:
J. Thomas Dilley
Vice President Administration
Arch Coal Sales Company, Inc.
CityPlace One, Suite 350
St. Louis, MO 63141
XXI. FREEZE CONDITIONING & DUST SUPPRESSION
SELLER shall allow BUYER or its representatives to use BUYER's own equipment or
SELLER's equipment to apply freeze conditioning or dust suppressant agents to
the Coal supplied herein. The cost of the chemicals used in any such treatment
shall be borne by BUYER. At BUYER's option, SELLER shall apply a freeze
conditioning or dust suppression agent(s) at a rate (pints per ton) to be
specified by the BUYER as the Coal purchased and sold hereunder is loaded into
railcars. Such agents shall be approved by BUYER. As full compensation for
applying the agents, BUYER shall pay the direct cost of purchasing the agent
applied to the Coal purchased and sold hereunder. SELLER shall submit invoices
for the agents monthly, which shall be accompanied by documentation satisfactory
to BUYER. For billing purposes, SELLER agrees to deduct the weight of any freeze
and/or dust conditioning agent from the total weight of each Coal railcar if
these chemicals are added prior to weighing the loaded railcar. Specific
procedures for determining and administering these weight adjustments will be
coordinated among BUYER's Joint Facility Accounting Department, the freeze
and/or dust conditioning agent supplier, and SELLER. BUYER will pay invoices
within twenty (20) days of receipt of invoices.
17
XXII. CAPTIONS AND SEVERABILITY
All ARTICLE captions are inserted for convenience and shall not affect the
interpretation of this Agreement. Any provision of the Agreement which is
prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof.
XXIII. DISPUTE RESOLUTION
A. The parties will attempt in good faith to resolve any controversy or
disagreement arising out of or relating to this Agreement, including the
breach or termination thereof, (hereinafter collectively referred to as
"Dispute") promptly by negotiation between senior executives of the parties
who have authority to settle the controversy.
B. The disputing party shall give the other party written notice of the
Dispute. Within ten (10) days after receipt of said notice, the receiving
party shall submit to the other a written response. The notice and response
shall include (a) a statement of the respective position of each party and
a summary of the evidence and arguments supporting its position, and (b)
the name and title of the executive who will represent the party. The
executives shall meet at a mutually acceptable time and place within twenty
(20) days of the disputing party's notice and thereafter as often as they
reasonably deem necessary to exchange relevant information and to attempt
to resolve the Dispute.
C. If the parties are unable to resolve the Dispute through negotiation, then
the Dispute shall be subject to arbitration as hereafter set forth. This
Agreement, so to arbitrate, and any other agreement or consent to arbitrate
entered into in accordance herewith, will be specifically enforceable under
the prevailing law of any court located in Nevada having jurisdiction.
D. Notice of the demand for arbitration must be filed in writing with the
other party to the Agreement. The demand must be made within a reasonable
time, not to exceed sixty (60) days, after the Dispute has arisen.
E. Unless the parties otherwise agree in writing, all arbitrations shall be
heard by a panel of three (3) arbitrators experienced in the coal or
electric generating utilities industries. Each party shall have the right
to appoint, at its sole discretion, one arbitrator. The two party-appointed
arbitrators shall select a third arbitrator, who shall act as the
Chairperson of the Panel. In the event the party appointed arbitrators are
unable or unwilling to agree upon a third arbitrator, the Chief Judge of
the Federal District Court of the State of Nevada shall select the third
arbitrator.
F. Once the full Panel has been appointed, the parties shall be entitled to
review and copy records within the control or custody of the other party
which would be discoverable under the Federal Rules of Civil Procedure.
Depositions shall only be allowed at the discretion of two members of the
Panel.
G. The award rendered by a majority of the arbitrators will be final and
binding upon the parties. Judgment may be entered upon the arbitration
award in any court having jurisdiction thereof, and will not be subject to
modification or appeal except to the extent permitted by Sections 10 and 1
I of the Federal Arbitration Act (9 U.S.C. ss.ss.10,11).
H. Pending resolution of any dispute or disagreement between the parties under
this Agreement, both parties shall diligently proceed with their
performance under this Agreement in accordance with BUYER's interpretation
thereof, and neither BUYER's or SELLER's legal rights shall be prejudiced
because they continue to perform. BUYER shall continue to pay the price for
Coal calculated pursuant to ARTICLE XIV. COAL PRICE, as that provision and
the calculation of the price, or any damages, costs, expenses, etc., are
determined by BUYER.
18
I. Interest on any amounts not paid in full, withheld by BUYER or to be paid
by either party for any reason shall be calculated by reference to the
prime interest rate as listed in the Wall Street Journal, Money Rate
section, as of the date such amount was due or incurred.
XXIV. INDEPENDENT CONTRACTOR
This is an agreement for the purchase and sale of Coal in which the parties
recognize and agree that SELLER is not an agent or employee of BUYER but is an
independent contractor.
XXV. 1NDEMVIFICATION
SELLER indemnifies and holds BUYER harmless from and against all claims and
liabilities (including, without limitation, attorneys' fees and expenses), from
whatever source, related to or deriving from SELLER's mining, processing,
trucking, and loading activities, or its sale and delivery of Coal to BUYER.
BUYER indemnifies and holds SELLER harmless from and against all claims and
liabilities (including, without limitation, attorney's fees and expenses), from
whatever source, related to or deriving from BUYER's rail transportation, except
as otherwise provided for in this Agreement, and utilization of the Coal sold
hereunder.
XXVI. WAIVER/FAILURE TO INSIST ON STRICT COMPLIANCE
The failure of either party at any time or from time to time to insist upon
strict compliance with any provision of this Agreement, or to exercise any right
hereunder shall not be construed as a waiver of any provision or right.
XXVII. ENTIRE AGREEMENT
This Agreement contains the entire agreement between the parties and there are
no representations, understandings or agreements, oral or written which are not
included herein. This Agreement cannot be modified except in writing by duly
authorized representatives of the parties.
XXVIII. ASSIGNMENTS
The Agreement may not be assigned wholly or in part by either party without the
written consent of the other party, which consent shall not be unreasonably
withheld; provided however, that either party, without the written consent of
the other, may assign this Agreement to a successor in interest of any party by
way of a merger or consolidation, or to a company controlled by, or under common
control with SELLER or, in the case of BUYER, the sale of all or a substantial
portion of its coal-fired generation assets. Any party making an assignment
under this ARTICLE XXVIII. ASSIGNMENTS, shall give notice thereof to the other
party within a reasonable time prior to the effective date of the assignment.
The assignee shall become liable for all terms and conditions as if such party
was signatory to the Agreement. Notwithstanding the foregoing, any party may,
without the need for consent from the other party (and without relieving itself
from liability hereunder), transfer, sell, pledge, encumber or assign this
Agreement or the accounts, revenues or proceeds hereof or thereof in connection
with any bank financing or security arrangements, provided, however, that no
such assignment shall in any way relieve the assignor from liability for full
performance under this Agreement. Any such assignee shall assume and agree to be
bound by the terms and conditions of this Agreement.
19
XXIX. NON-DISCLOSURE
The Agreement, the terms and conditions (including but not limited to pricing)
set forth in this Agreement and the information exchanged during the negotiation
of this Agreement are considered by both BUYER and SELLER to be confidential and
proprietary. Neither BUYER nor SELLER shall disclose any of the terms and
conditions hereof or any such information to any third party without the prior
written consent of the other, except when such disclosure is required (a) by
statute; (b) in connection with a judicial or administrative proceeding; or (c)
by order of a government agency having jurisdiction over BUYER or SELLER or the
subject matter of this Agreement, in which the party intending to make such
disclosure shall notify the other in writing in advance and shall cooperate to
the extent practicable to minimize the disclosure of any such information. BUYER
may disclose the terms and conditions of this Agreement (including pricing) to
IPC. For the purposes of this ARTICLE XXIX. NON-DISCLOSURE, the term "third
party" shall not include a parent, subsidiary or affiliate of either party
hereto.
XXX. CHOICE OF LAW - JURISDICTION
This Agreement and any matter arising out of or related thereto shall be
governed, construed, enforced and performed in accordance with the laws of the
State of Nevada. Venue for any cause of action arising under this Agreement
shall be brought in Clark County, Nevada.
XXXI. LIMITATION OF LIABILITY
In no event shall either party have any liability to the other party for any
special, incidental or consequential damages, including lost profits, for any
reason arising out of, or in connection with this Agreement.
IN WITNESS WHEREOF, the undersigned hereby causes this Agreement to be duly
executed this 28th day of February, 2002.
BUYER: SIERRA PACIFIC POWER COMPANY
By:
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Title:
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SELLER: ARCH COAL SALES COMPANY
By:
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Title:
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