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EXHIBIT 10.36
COAL SALES AGREEMENT
THIS AGREEMENT ("Agreement"), entered into on October 22, 1999, by and
between Anker Energy Corporation, a Delaware corporation ("Seller") and AK Steel
Corporation, a Delaware corporation ("Buyer").
WITNESSETH:
WHEREAS, Buyer desires to purchase from Seller 100% of Buyer's
requirements for low volatile coal for its coke requirements at its Middletown,
Ohio Coke Plant (the "Middletown Plant") and its Ashland, Kentucky Coke Plant
(the "Ashland Plant") (the Middletown Plant and the Ashland Plant are
collectively referred to as the "Plants"), and Seller desires to sell such Coal
to Buyer.
NOW THEREFORE, in consideration of the foregoing premise and the mutual
covenants and agreements contained herein and intending to be legally bound, the
parties hereto agree as follows:
ARTICLE I
SOURCES
1.1 COAL SOURCES
The coal to be bought and sold pursuant to this Agreement ("Coal") is low
volatile metallurgical grade coal (i) solely sourced from the Baylor
underground coal mine near Beckley, West Virginia (the "Mine") and (ii)
meeting the specifications set forth in Exhibit 1 hereto.
ARTICLE II
TERM
2.1 EFFECTIVE DATE
This Agreement shall be effective as of October 1, 1999 and shall expire on
December 31, 2001, unless earlier terminated in accordance with the express
provisions of this Agreement; provided, however, deliveries of Coal for the
Middletown Plant shall not begin before December 1, 1999 and, provided
further, that Buyer shall only be required to purchase one trainload of
Coal for the Middletown Plant in December, 1999.
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2.2 CERTAIN TERMINATION RIGHTS OF SELLER
So long as Seller or any of its affiliates does not (i) sell or otherwise
transfer in the aggregate more than 12,000 tons of Coal per month from the
Mine in Calendar Year 2000 to persons or entities other than Buyer; and
(ii) enter into any arrangement for the sale of Coal with a person or
entity other than Buyer in Calendar Year 2001 without the prior written
consent of Buyer, Seller shall have the right to terminate this Agreement
at any time in the event that (y) Seller determines in its sole reasonable
opinion that all of the economically minable Coal has been mined and
removed from the Mine; and (z) Anker West Virginia Mining Co. terminates
mining operations at the Mine.
ARTICLE III
QUANTITY
3.1 ANNUAL QUANTITY
(a) In accordance with this Agreement, Seller shall sell and deliver, and
Buyer shall accept and purchase, Buyer's requirements for Coal used in
the coke ovens at the Plants during the term of this Agreement.
3.2 SUBSTITUTE COAL PURCHASES
(a) Except in the event of force majeure as set forth in Article IX of the
Agreement, in the event the Coal supplied by Seller from the Mine, is
less than that required by Buyer and Buyer must purchase substitute
Coal, Seller shall reimburse Buyer the excess, if any, of the price
for the substitute Coal plus applicable transportation cost paid by
Buyer for such substitute Coal over the Base Price for Coal hereunder
plus the cost which Buyer would have paid for transportation of Coal
hereunder. Such payment shall be made by Seller upon receipt of
Buyer's invoice together with satisfactory documentation of the total
delivered cost of such substitute Coal.
3.3 Buyer shall provide Seller by the 15th day of the month preceding the
month in which Coal is to be delivered a good faith forecast of its
requirements for the month for each of the Plants.
ARTICLE IV
DELIVERY
4.1 POINT OF DELIVERY
The point of delivery for all Coal hereunder shall be railcars at the Mine.
Buyer shall be responsible for arranging for and paying for transportation
of the Coal to the Plants and obtaining insurance during transit. Shipment
shall be by unit trains with minimum of both seventy (70) railcars and
7,000
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net tons ("Trainloads") unless otherwise specified by Buyer in writing.
Seller must tender Trainload shipments to CSXT from the Mine within
twenty-four (24) hours after the last empty car is placed at the Mine for
loading.
4.2 TITLE AND RISK OF LOSS
Title to, and risk of loss of, all Coal shall pass to Buyer upon loading
into railcars.
4.3 RATE OF DELIVERIES
Coal shall be delivered hereunder in shipments distributed as evenly as
practical throughout each month and throughout the calendar year. Seller
shall communicate to Buyer any impact to its production schedule caused by,
but not limited to, break down, scheduled maintenance, labor disputes,
miner's vacation and geological changes in the seam. Seller shall use
reasonable efforts to adjust shipping schedules to reduce any negative
impact to Buyer.
4.4 NOTICE OF SHIPMENT
Seller shall FAX, on the day of shipment, the shipping date, Trainload
number, car numbers and estimated total weight of shipment. This FAX will
be sent to:
Middletown Shipments: Ashland Shipments:
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AK Steel Corporation AK Steel Corporation
Middletown Coke Plant Ashland Coke Plant
Attn: Bill Weber at Fax: 513-425-5423 Attn: Bill Weber at Fax: 513-425-5423
& Dave Chmielewski at Fax: 513-425-6262 & Dan Howell at Fax: 606-329-7947
ARTICLE V
SPECIFICATIONS, QUALITY AND WEIGHTS
5.1 SPECIFICATIONS
Coal delivered hereunder shall conform to the specifications in Exhibit I,
on a Trainload basis except as otherwise noted.
5.2 QUALITY REMEDIES
In the event shipments of less than 7,000 net tons are tendered, such
shipments may be combined with the next shipment(s) from that Mine to that
Plant up to a maximum of 10,000 tons. In which case such combined tonnages
of Coal shall be considered a Trainload. The weighted average analysis of
the combined tonnages of those shipments shall be considered the analysis
for that Trainload.
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(a) Buyer may reject any Trainload of Coal which fails to conform to the
rejection limits as set forth in Exhibit I. Only if Seller is in
compliance with Section 5.3(d), Buyer shall have twenty-four (24)
hours from receipt of analysis indicating the Coal is subject to
rejection to notify Seller of its intent to reject. If Seller is not
in compliance with Section 5.3(d), Buyer shall have a reasonable time
to notify Seller of its intent to reject. Failure by Buyer to notify
Seller constitutes acceptance. Upon Buyer's rejection, title and all
risk of loss of such Coal shall immediately revert back to Seller and
Seller shall be responsible for all reasonable costs associated with
such reject Coal.
(b) In the event, on a plant by plant basis, any single specifications
parameter of the Coal from three consecutive Trainloads does not meet
the tolerance levels set forth in Exhibit I, but is not subject to
rejection, Buyer by notice to Seller may suspend the deliveries of
Coal.
(c) In the event any single specification parameter of the Coal, on a
plant by plant basis, in the Monthly Analysis ("Monthly Analysis"
shall mean the specification obtained by taking the weighted average
of all Coal in a given month) fails to conform to the tolerance levels
set forth in Exhibit "I" hereto, but is not subject to rejection, and
such condition persists for three consecutive months, Buyer by notice
to Seller may suspend deliveries of Coal.
(d) Upon receipt of notice of suspension, Seller shall use reasonable
efforts to correct the condition(s) causing the Coal to deviate from
such specification(s). The suspensions outlined above in 5.2(b) and
5.2(c) and 5.2(e) below shall continue until Seller provides Buyer
reasonable assurances of correction of such condition(s). During the
period of any suspension of deliveries pursuant to Section 5.2(b),
5.2(c) or 5.2(e), Buyer and Seller will work together in good faith to
select Substitute Coal sources in accordance with Section 3.2.
(e) If two consecutive shipments to the same Plant display more than 8%
SHO Expansion, Buyer may suspend deliveries.
5.3 SAMPLING AND ANALYSIS
(a) Seller shall cause each Trainload of Coal to be sampled by an
independent laboratory mutually agreeable to Buyer and Seller in 10
car lots and in accordance with the standards of the American Society
for Testing and Materials ("ASTM"), or with other methods mutually
agreeable to Seller and Buyer. A composite sample of each 10 car lot
shall be divided into two (2) equal parts. One part shall be retained
as a referee sample, and one shall be used by Seller for quality
determination.
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(b) Methods and procedures for conducting tests and analyses shall be in
accordance with ASTM standards, or with other methods and procedures
mutually agreeable to Seller and Buyer. All such tests and analysis
shall be performed by an independent laboratory mutually agreeable to
Buyer and Seller.
(c) Buyer, at its own risk and expense, may observe the sampling and
analysis performed by or on behalf of Seller and conduct periodic
inspections of equipment and facilities used in the sampling and
analysis.
(d) Seller shall cause each 10 car composite sample to be analyzed, with
respect to moisture, ash, sulfur and volatile matter. Geiseler
plastometer, alkalies, reflectance, total inerts, SHO Expansion, Arnu
dilatometer and size analysis shall be performed on each Trainload of
Coal delivered to Buyer, unless this frequency is modified by mutual
agreement. The analysis for each Trainload with respect to moisture,
ash, volatile matter and sulfur shall be obtained by calculating the
weighted average of the results from the 10 car composite analyses.
Seller's conclusions as to the quality of the coal with respect to
moisture, ash, sulfur and volatile matter analysis shall be provided
to Buyer no later than one day following the date of shipment and with
respect to Geiseler plastometer, Arnu dilatometer and size analysis,
shall be provided no later than four (4) days following the date of
shipment and, unless a referee analysis as hereinafter provided for is
performed, shall be conclusive and binding. Referee samples of
sufficient quantity to run all analysis of each Trainload shall be
retained for a period of 30 days following the receipt of its quality
conclusions relative to such shipment to Buyer. By notice to Seller
within 20 days following the receipt of Seller's conclusions, Buyer
may request that such referee samples be analyzed by an independent
company agreeable to Seller. In such event, the results of such
referee analysis, if different from Seller's analysis by more than the
applicable ASTM tolerances, shall supersede Seller's quality
conclusions and shall be conclusive and binding. If the referee
analysis differs from Seller's analysis by more than the applicable
ASTM tolerances, Seller shall pay for the referee analysis; otherwise,
the referee analysis shall be at Buyer's expense. Seller shall be
responsible for all costs, including demurrage, incurred by Buyer
which results from Seller's failure to provide the analysis within the
time periods set forth above.
(e) Seller shall fax the analysis to:
Middletown Shipments: Ashland Shipments:
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AK Steel Corporation AK Steel Corporation
Middletown Coke Plant Ashland Coke Plant
1801 Crawford Street Route 23
Middletown, Ohio 45043 Ashland, Kentucky 41105
Attn: Dave Chmielewski Attn: Dan Howell
FAX: 513-425-6262 FAX: 606-329-7947
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5.4 WEIGHTS
The weights of Coal delivered and accepted hereunder shall be determined by
certified railroad weights.
5.5 QUARTERLY MEETING
Buyer and Seller shall meet once per quarter or at a mutually agreed
frequency to review past performance and future projections.
ARTICLE VI
PRICE
6.1 PRICE
The Base Price for the coal shall be [*](1) per net ton delivered to the
railcars at the Mine. Except as expressly set forth in this Agreement, the
Base Price shall be fixed and not subject to increase or decrease during
the term of the Agreement.
6.2 FREEZE PROTECTION
At Buyer's request, freeze conditioning agents of a quality, type, source
and quantity acceptable to the Buyer shall be applied to minimize the
freezing of Coal during periods of cold weather. Buyer shall reimburse
Seller for all of Seller's actual and necessary costs in applying such
freeze conditioning agents upon proper documentation to Buyer. Such costs
shall be competitive in the industry. Buyer will specify the date to begin
and end freeze conditioning each year.
ARTICLE VII
ADJUSTMENTS FOR QUALITY
7.1 GENERAL
The Base Price shall be adjusted to reflect the quality of Coal delivered
hereunder as specified in Article VII.
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(1) Portions of this exhibit have been omitted pursuant to a request for
confidential treatment filed with the Securities and Exchange Commission (the
"Commission"). The omitted portions, marked by "[*]," have been filed separately
with the Commission.
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7.2 MOISTURE PENALTY
The Base Price for any Trainload of Coal containing in excess of [*](2)
moisture shall be reduced by [*](2) per ton for each [*](2) moisture in
excess of [*],(2) fractions pro rata.
7.3 ASH PENALTY
The Base Price for any Trainload of Coal containing in excess of [*](2) ash
(dry) shall be reduced by [*](2) per ton, for each [*](2) ash in excess of
[*](2) (dry), fractions pro rate.
7.4 SULFUR PENALTY
The Base Price for any Trainload of Coal containing in excess of [*] (2)
sulfur (dry) shall be reduced by [*](2) per ton for each [*](2) sulfur in
excess of [*](2) (dry), fractions pro rata.
ARTICLE VIII
PAYMENT
8.1 TERMS
On or before the last day of each month, Seller shall invoice Buyer for all
Coal delivered during the month. Payment for Coal shall be due the 2nd day
of the second month after the date of invoice; provided, however, at the
request of Seller, Buyer may in its discretion pay Seller, within 10 days
of its receipt of an invoice, in which case Buyer shall receive a one
percent (1%) discount. All payments by Buyer shall be made by wire transfer
in immediately available Federal funds to Seller's account at a designated
bank in accordance with instructions given by Seller to Buyer from time to
time. AK Steel purchase order number is to be referenced on all invoices.
Only one invoice per month shall be submitted.
8.2 OVERPAYMENT AND UNDERPAYMENTS
Any dispute in the amount of any invoice shall not permit any delay in the
payment of any invoice; provided, however, if it is later determined that
the amount of any such payment is an overpayment, then Seller shall
promptly credit Buyer the amount of any such overpayment.
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(2) Portions of this exhibit have been omitted pursuant to a request for
confidential treatment filed with the Securities and Exchange Commission (the
"Commission"). The omitted portions, marked by "[*]," have been filed separately
with the Commission.
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ARTICLE IX
FORCE MAJEURE
9.1 DEFINITION OF FORCE MAJEURE
The term "force majeure" as used herein shall mean any event or condition
which is beyond the reasonable control of and occurs without the fault or
negligence of the party affected thereby, such as, but not limited to, acts
of God, acts of the public enemy, insurrections, riots, strikes, labor
disputes, slowdowns, labor or material shortages, fires, explosions,
floods, unforeseen conditions of, accidental damage to or failure of mines,
plants, equipment or facilities, unforeseen geologic conditions, depletion
of the reserve of Coal from the Mine unavailability of, interruptions to or
delays in transportation, embargoes, changes in or compliance with
applicable laws, rules, regulations, including, without limitation to,
environmental regulations, orders or decisions of legislatures,
governmental agencies or courts or in the interpretation or enforcement
thereof, or any other event or condition, whether of a similar or
dissimilar nature to those specifically enumerated herein and whether or
not foreseeable.
9.2 EFFECT OF FORCE MAJEURE
If, as a result of force majeure, it becomes impossible or impracticable
for either Seller or Buyer to carry out any of its obligations hereunder
(other than any obligation to pay money for Coal delivered) in whole or in
part, and if such party promptly gives notice to the other party of such
force majeure and, as soon as practicable thereafter, of the nature and
probable duration of such force majeure and of the extent of its effects on
such party's performance hereunder, then such obligations shall be excused
to the extent made necessary by such force majeure during its continuance.
Each party shall, in the event it experiences a force majeure, undertake
diligently and in good faith efforts to mitigate or eliminate the force
majeure and/or its effects on performance hereunder insofar as is
economically practical. Neither party shall be obligated to expend monies
in order to mitigate or eliminate force majeure and/or its effects, if in
such party's sole judgment, such expenditures would be economically
unjustifiable. Neither party shall be obligated to settle strikes, labor
disputes, differences with employees or unions or governmental claims on
terms which such party considers inadvisable in order to mitigate or
eliminate force majeure and/or its effects. Deliveries of Coal lost as a
result of force majeure shall not be made up except by mutual consent of
the parties.
9.3 ALLOCATION
During any period in which mining, preparing, loading, delivering and/or
selling Coal by Seller hereunder is curtailed as a result of force majeure,
Seller shall cause its supplier to allocate Coal to Buyer, in a fair and
reasonable manner but in no event less than Buyer's pro rata share of the
production of the Mine. During any period in which transporting, accepting,
unloading, reclaiming
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and/or utilizing Coal delivered hereunder by Buyer at its Plants is
curtailed as a result of force majeure, Buyer shall allocate purchases of
Coal for the Plants among its suppliers, including Seller, in a fair and
reasonable manner. Any such allocation by either party shall be subject to
reasonable audit by the other party.
ARTICLE X
MISCELLANEOUS
10.1 WAIVERS AND REMEDIES
The failure of either Seller or Buyer to insist in any one or more
instances upon strict performance of any of the provisions of this
Agreement or to take advantage of any of its rights hereunder at any one
time shall not be construed as a waiver of any such provisions or the
relinquishment of any such rights at any future time or times, but the same
shall continue in full force and effect. In no event shall either party be
responsible to the other party for incidental, special or consequential
damages arising out of any default in the performance of any of its
covenants or obligations hereunder.
10.2 NOTICES
All notices under this Agreement shall be in writing and if to Buyer, shall
be sufficient in all respects if delivered in person or by facsimile and
sent by registered or certified mail or by a nationally recognized
overnight delivery service to its Vice President - Purchasing and
Transportation at 703 Curtis Street, Middletown, Ohio 45043; Fax number for
Buyer (513) 425-5562 and if to Seller, shall be sufficient in all respect
if delivered in person or by facsimile and sent by registered or certified
mail or by a nationally recognized overnight delivery service, addressed to
its Senior Vice President of Sales, 2708 Cranberry Square, Morgantown, West
Virginia 26508. Fax number for Seller - (304) 594-3695.
10.3 DEFAULT
(a) Except as provided in Section 10.3(b), no default by either party to
this Agreement in the performance of any of its covenants or
obligations hereunder which, except for this provision would be legal
basis for cancellation or termination of this Agreement by the other
party, shall give or result in such a right unless and until the party
committing such default shall fail to correct such default within 30
days after notice of claim of such default is given to such defaulting
party by the other party.
(b) In the event of Buyer's default in payment, Seller may suspend further
Coal deliveries hereunder until such default has been corrected. If
such default is not corrected in a timely manner, then Seller may
cancel this Agreement by notice to Buyer.
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10.4 ASSIGNMENT
No assignment of this Agreement shall be made by Buyer or Seller without
the prior written consent of the other party, which consent shall not be
unreasonably withheld; provided, however that Buyer may assign to any
purchaser or successor-in-interest to any of the Plants any portion of this
Agreement and upon such assignment Buyer shall have no obligation to Seller
for the portion of the Agreement so assigned to such purchaser or
successor-in-interest. No assignment by either party shall be effective
until an executed copy thereof is furnished to the other party.
10.5 CORPORATE AUTHORITY
Each party represents to the other party that it has full corporate
authority and the necessary approvals to enter into and perform this
Agreement in accordance with its terms.
10.6 HEADINGS
The headings of the Articles and Sections in this Agreement have been
inserted for the convenience of reference only and shall in no way affect
the interpretation of any of the terms or provisions hereof.
10.7 INTERPRETATION
No inference shall be drawn in favor of or against either party based on
participation in the drafting of this Agreement.
10.8 ENTIRE AGREEMENT
All prior writings, communications, negotiations, representations and
agreements by and between the parties hereto are superseded by or merged
into this Agreement, which is the full and complete expression of all
understandings between Seller and Buyer regarding the object hereof, and
this Agreement may be modified only in writing signed by both parties.
10.9 CONTROLLING LAW
The validity, construction and performance of this Agreement shall be
determined in accordance with the internal laws of the State of Ohio
applicable to agreements made and to be performed in that State.
10.10 CONFIDENTIALITY
Buyer and Seller agree that the terms of this Agreement will be kept in
strict confident and that neither party will disclose the same to any third
party, except:
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(a) to the extent necessary for the disclosing party to comply
with any applicable laws, rules, regulations, statutes or
ordinances necessary to the conduct of its business
affairs;
(b) by commission of a valid subpoena and/or order of a court
of competent jurisdiction; or
(c) to a subsidiary, parent or affiliated corporation of Buyer
or Seller.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in duplicate originals by their duly authorized
officers as of the date hereinabove set out.
ATTEST: ANKER ENERGY CORPORATION
By: : /s/ Richard B. Bolen
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Title:
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ATTEST: AK STEEL CORPORATION
By: / s/ Illegible
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Title:
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