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EXHIBIT 10.38
COAL SALES AGREEMENT
This COAL SALES AGREEMENT (the "Agreement"), is made and entered into as
of the 15th day of September, 1989, by and between Anker Energy Corporation, a
Delaware corporation, having its principal place of business at Route 12, Box
245, Morgantown, West Virginia 26505 ("Seller"), and Morgantown Energy
Associates, a West Virginia general partnership consisting of MidAtlantic Energy
Co., Dominion Cogen WV, Inc. and Hickory Power Corporation, having its principal
place of business at 256 Russell Avenue, New Martinsville, West Virginia 26155
("Buyer").
WITNESSETH:
WHEREAS, Seller and its affiliates produce and have available for sale
coal of the quality and quantities hereinafter set forth; and
WHEREAS, Buyer desires to purchase such coal from Seller, from sources
located in West Virginia, for use at its Morgantown cogeneration facility, an
approximately fifty (50) MW net capacity coal and coal-waste fired generating
plant that Buyer is causing to be developed (the "Facility"), and Seller desires
to sell such coal to Buyer; and
WHEREAS, the Facility will supply steam to West Virginia University
("WVU") and West Virginia University Hospitals, Inc. (the "Hospital") and
electricity to Monongahela Power Company, an Ohio corporation having its
principal place of business at 1310 Fairmont Avenue, Fairmont, West Virginia
26554 ("Mon Power"); and
WHEREAS, Buyer and Seller acknowledge the need to maintain a reliable and
adequate supply of steam to the interfaces between the Facility and WVU's and
the Hospital's existing steam distribution systems; and
WHEREAS, Buyer and Seller acknowledge the need to maintain reliable
deliveries of electricity to Mon Power;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
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ARTICLE I
DEFINITIONS
As used herein, the following terms shall have the meanings set forth
below:
"Actual Commencement Date" means the actual date on which the Facility
comes into commercial service notice of which shall be given by Buyer to Seller
within thirty (30) days following such date. The Actual Commencement Date may
fall on a day prior or subsequent to the Preliminary Commencement Date.
"Adjusted Base Price" has the meaning specified in Article IX.
"Adjustment Date" has the meaning specified in Article IX.
"APS System Coal Price Base Index" means [*].(1)
"APS System Coal Price Index" means [*].(1)
"Average Quality Characteristics" means the quality characteristics of
coal to be supplied under this Agreement, set forth in Section 6.1(a), as
calculated on a monthly average basis.
"Base Price" has the meaning specified in Article VIII.
"Business Day" means any day other than a Saturday, Sunday, or other day
on which banks in either Morgantown, West Virginia or New York, New York are
authorized to be closed.
"Coal Reserves" has the meaning specified in Article II.
"Contract Year" means the twelve (12) month period beginning on the
Actual Commencement Date and on each anniversary of the Actual Commencement
Date.
"Delivery Point" means the location or locations at the Facility selected
by the Buyer for the unloading of truck-loads of coal delivered by Seller to
Buyer under this Agreement.
"Financial Closing" means the closing of the initial construction
financing for the Facility and related facilitities.
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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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"Mine" means the mine(s) owned or leased by the Seller or its affiliates
in West Virginia.
"Operations" means the coal mining operations of Seller or its affiliates
owned or under contract to Seller or its affiliates in West Virginia, including
the Mine, related equipment and facilities.
"Preliminary Commencement Date" means the date, specified by Buyer to the
Seller, by which Buyer believes that the Facility will have received all
necessary licenses and permits (other than any that are routine in nature and
that cannot be obtained, or are not normally applied for, prior to the time they
are required and that Buyer reasonably expects to obtain in due course), will be
mechanically complete and will have passed Buyer's testing requirements for
commercial service. Buyer, within twelve (12) months of the execution of this
Agreement, shall specify a Preliminary Commencement Date. Buyer shall revise the
Preliminary Commencement Date as necessary during the Testing and Start-up
period such that the Seller shall have at least ninety (90) days notice of the
date anticipated for the Actual Commencement Date of the Facility. As of the
date of execution of this Agreement, Buyer estimates that the Preliminary
Commencement Date will be March 1, 1992, but reserves the right to revise this
estimate and specify the Preliminary Commencement Date at a later date in
accordance with this paragraph.
"Preliminary Supply Date" means the date, twelve (12) months prior to the
Preliminary Commencement Date, at which the Seller shall have any and all
permits necessary to permit Buyer to have coal supplied from the Operations and
shall have made all necessary arrangements, including the purchase and/or lease
of equipment and hiring of personnel, and is prepared to commence the supply of
coal to the Facility, pursuant to the terms and conditions therein.
"Project Lender" means Swiss Bank Corporation, New York Branch, and the
several other parties participating in the financing of the Facility.
"Records" has the meaning specified in Article XI.
"Referee Laboratory" has the meaning specified in Section (d) of Exhibit
A.
"Reserve Inventory" means a seventeen (17) day supply of solid fuel for
the Facility, on an equivalent Btu basis, which has been sampled and analyzed
pursuant to Section 6.3 hereof and which meets the Average Quality
Characteristics of Section 6.1 (b) hereof. Such Reserve Inventory must be
located within five (5) miles of the Facility, on Seller's or Buyer's property,
at such one or more locations as Seller shall from time to time specify in
writing to Buyer, and Seller shall protect the Reserve Inventory from weather in
a manner which is acceptable to Buyer and is approved by Buyer in writing.
"Selling Price" has the meaning specified in Article VII.
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"SWDA" means the Solid Waste Disposal Agreement executed by and between
Buyer and Anker Energy Corporation, of even date herewith.
"Term" has the meaning specified in Article III.
"Testing and Start-up" means a period of twelve (12) months prior to the
Preliminary Commencement Date during which the Facility is undergoing testing.
The Testing and Start-up period may be extended for an additional three (3)
months at Buyer's request.
"Truck" has the meaning specified in Section 5.1.
"Unforeseen Circumstance" means any cause or causes which the party
asserting the same is not, despite all reasonable efforts, able to prevent or
overcome, including, but not limited to, any permitting authority's denial or
failure to renew any license or permit, or compliance with any order, injunction
or judgment, by any governmental authority, change in law or regulation, acts of
God, strikes, lockouts or other labor disputes, riots, civil strife, war, acts
of a public enemy, lightning, fires, explosions, severe storms or floods. The
financial inability of either party for whatever reason to perform its
obligations hereunder shall not constitute an Unforeseen Circumstance.
"Waste Coal" shall have the same meaning as in the WSA.
"WSA" means the Waste Services Agreement executed by and between Anker
Energy Corporation and Buyer, of even date herewith.
ARTICLE II
SOURCES OF COAL
Coal delivered under this Agreement shall be a [*](2) product, with no
intermediate sizes removed, from the Operations and conforming to the
specifications, quality and weights in Article VI. Seller agrees to produce coal
from the Mine and its Operations for the delivery of coal to Buyer hereunder.
Seller represents and warrants that it or its affiliates own, lease or otherwise
have a legal right to mine and sell a sufficient number of tons of recoverable
coal from the Mine and its Operations (the "Coal Reserves") to enable Seller to
supply coal in accordance with the provisions of this Agreement for the Term of
this Agreement. Seller and such affiliates shall not sell, lease, contract to
sell or otherwise transfer or agree to transfer to others, any of its interests
in the coal from the Coal Reserves in any quantity which may jeopardize Seller's
ability to supply the total quantity and quality of coal required under this
Agreement or which may interrupt any
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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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scheduled deliveries hereunder. Seller also shall maintain the Reserve Inventory
for use as a supply of coal throughout the Term of this Agreement. Seller shall
be responsible for transportation arrangements and all transportation and other
costs associated with the loading and/or handling of coal from its Operations to
the Delivery Point at the Facility, including, without limitation, obtaining, at
is own expense, by Financial Closing, and maintaining in full force and effect,
any and all permits necessary to permit Buyer to have such coal supplied from
the Operations in accordance with the terms hereof.
Seller may supply coal from sources in West Virginia other than Seller's
Mine and Operations if coal from such sources has Average Quality
Characteristics equal to or better than the coal being derived from Seller's
Mine and Operations and if Buyer is not economically disadvantaged under this
Agreement.
ARTICLE III
TERM
Unless sooner terminated in accordance with the terms hereof, this
Agreement shall commence on the date hereof and continue in effect until fifteen
(15) years from the Actual Commencement Date, as defined herein (the "Term");
provided, however, that the Term of this Agreement as defined herein shall be
automatically extended and renewed for additional terms of [*](3) unless one
party notifies the other in writing, no less than six months prior to the last
day of the initial Term or any succeeding [*],(3)of its intent not to extend and
renew this Agreement for an additional [*].(3)
In the event the Agreement is not extended for [*],(3) the parties agree
to negotiate in good faith an agreement covering shipments during the
outstanding [*],(3) if no option periods have been exercised, or [*],(3) if one
of the option periods has been exercised. [*].(3)
ARTICLE IV
QUANTITY
4.1 Quantity After Actual Commencement Date. Seller shall sell and
deliver hereunder to Buyer and Buyer shall purchase hereunder following the
Actual Commencement Date and for the Term of this Agreement, the coal
requirements of the Facility; as long as approximately [*](3) percent of the
solid fuel on a tonnage basis used in the Facility is Waste Coal. While Buyer
anticipates the coal requirements to be [*](3) tons per year, these volumes do
not represent guaranteed minimum or maximum amounts.
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(3) 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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The Buyer shall provide written notice to Seller no later than ninety (90) days
prior to the beginning of each Contract Year indicating expected volumes for
that Contract Year. Deliveries shall be made in approximately equal monthly
quantities during each Contract Year, taking into account Buyer's planned
maintenance of the Facility. Deliveries (which may include Sunday deliveries if
necessary) shall be made as mutually agreed to by the parties hereto and the
City of Morgantown. By the 15th of each month, Buyer shall provide an update of
the coal requirements for the following month. The term "ton" as used in this
Agreement shall mean a net ton of 2,000 pounds avoirdupois weight. In the event
that the fuel requirements of the Facility change so that Waste Coal does not
account for at least approximately [*](4) percent of the solid fuel for the
Facility on a tonnage basis, Seller has the right to supply coal representing
[*](4) percent of the total solid fuel used by the Facility, determined on a
tonnage basis.
4.2 Quantity During Testing and Start-up. During Testing and Start-up and
until the Actual Commencement Date occurs, the amount and timing of the coal
supply will be established by Buyer, on the basis of a notice to the Seller
fifteen (15) months prior to the Preliminary Commencement Date or such other
date as is mutually agreed upon prior to the supply requirement. Buyer in its
sole discretion may revise the amount and timing of the supply of coal during
Testing and Start-up and until the Actual Commencement Date to meet its
requirements; provided, however, that the Seller will have at least forty (40)
days notice of Buyer's requirement for delivery of coal during Testing and
Start-up of the Facility and until the Actual Commencement Date with reasonable
updates provided by Buyer as required in connection with the Testing and
Start-up of the Facility. By the 15th of each month, Buyer shall provide an
update of the coal requirements for the following month. The Seller shall
deliver said amounts of coal to the Delivery Point up to the monthly amount
specified in the notice given to Seller hereunder, provided that such a supply
requirement occurs on or after the Preliminary Supply Date.
ARTICLE V
DELIVERY
5.1 Point of Delivery. The Delivery Point for all coal hereunder
shall be location(s) at the Facility designated by Buyer. Seller shall load all
coal in self-unloading trucks (the "Trucks") compatible with the design of the
Facility, notice of which design shall be provided to Seller within six (6)
months from the date of execution of this Agreement, with reasonable updates to
be provided as required by Buyer. No coal is to be transported in the Trucks
without (i) being covered in accordance with standard industry practice and
requirements of law; (ii) complying with state and local weight restrictions;
and (iii) utilizing routes through the City of Morgantown, West Virginia,
designated by local officials in accordance with law. Buyer shall have the right
to reject
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(4) 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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any coal transported in the Trucks that is not so covered, is not in compliance
with such weight restrictions or does not use such designated routes. Buyer
shall consult with Seller concerning the designation of routes by the City of
Morgantown and notify Seller of and permit Seller to participate in any meetings
with city officials of Morgantown concerning such designation. If the
designation of routes by the City of Morgantown does not permit Seller to
transport coal either across the Star City Bridge and along Monongahela
Boulevard and Beechurst Avenue or along U.S. Route 48 and along University and
Beechurst Avenue, and such designation affects Seller's costs, then such
designation shall be a Regulatory Change as defined in Section 1.5 of Exhibit C
of the WSA and the Base Price and Adjusted Base Price shall be adjusted and any
dispute resolved in accordance with the procedures therein. Notwithstanding
anything to the contrary contained in this Agreement, all coal delivered
hereunder shall be used exclusively as fuel in the Facility.
An initial schedule of delivery hours shall be established by the parties
to this Agreement no later than eighteen (18) months after the effective date of
this Agreement. Such schedule may be changed from time to time as required to
permit Buyer to operate the Facility in compliance with all laws and
regulations, including but not limited to all local and county ordinances and
regulations and to insure reliable operation of the Facility.
Seller and its contractors, if any, utilized for the purpose of
carrying-out Seller's obligations hereunder when on Buyer's property shall
observe all reasonable and appropriate work and safety rules and regulations
established by Buyer for the delivery of coal; provided, however, that Buyer's
rules, regulations or operations shall not unduly delay or interfere with the
unloading of coal at the Facility.
5.2 Title and Risk. The title to and risk of loss of all coal covered by
this Agreement shall remain with Seller as long as it remains in the Trucks. The
title to and risk of loss for each truckload of coal covered by this Agreement
shall pass to Buyer as soon as any of the coal to be delivered in that delivery
is unloaded from the Trucks at the Delivery Point.
ARTICLE VI
SPECIFICATIONS, QUALITY AND WEIGHTS
6.1 Specifications.
(a) Coal delivered hereunder shall conform, on a monthly average
basis, to the "as received" specifications indicated in the column entitled
"Average" below:
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Rejection
Average Limits
------- --------
Moisture (%) [*](5) [*](5)
Ash (%) [*](5) [*](5)
S02 1b/MMBtu [*](5) [*](5)
Sulfur (%) [*](5) [*](5)
Btu/lb. [*](5) [*](5)
Volatile (%) [*](5) [*](5)
(b) Compliance with average monthly specifications of Section 6.1
(a) shall be waived, provided that the weighted average quality of the coal
received hereunder and the Waste Coal received pursuant to the WSA meets the
"as-received" specifications on a weekly basis indicated in the column below:
Average
-------
Moisture (%) [*](5)
Ash (%) [*](5)
S02 1b/MMBtu [*](5)
Sulfur (%) [*](5)
Btu/lb. [*](5)
Size (% max less than or equal to 100 mesh) [*](5)
The S02 per MMBtu specification must be met on a daily basis.
In the event that during the 24 months following the Actual Commencement
Date, Buyer determines that an increase in the daily average S02 per MMBtu limit
of [*](5) and in the weekly average sulfur limit from [*](5) would not result in
a violation of the air quality permit for the Facility based on the actual
operating experience of the Facility, Buyer agrees to relax the daily average
S02 per MMBtu limit to [*](5) and the weekly average sulfur limit to [*].(5)
(c) In the event that the weighted average weekly quality of the
coal and the Waste Coal delivered to the Facility by Seller has a moisture, ash,
or sulfur content above or a Btu/lb content below the specifications in Section
6.1 (b) for any four weeks in any three month period, or in the event that the
weighted average daily quality of the coal and the Waste Coal delivered to the
Facility by Seller has an S02 content above the specifications in Section 6.1
(b) for any seven days in any three month period, Buyer, by notice to Seller,
may suspend further deliveries of coal hereunder. Upon receipt of such notice,
Seller shall undertake diligently and in good faith all such actions as shall be
necessary to correct the conditions causing the coal to deviate from such
specification(s)
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(5) 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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or in the event such correction cannot be accomplished, to obtain an alternate
source of coal supply at no additional cost (including, without limitation,
transportation costs) to Buyer on a delivered cents per million Btu basis.
During the period of any such suspension, Seller shall advise Buyer every
forty-eight (48) hours in writing of Seller's determinations as to the nature of
such conditions, all efforts made and/or to be made by Seller to correct such
conditions and the results of such efforts. Seller shall implement any
reasonable and economically practical corrective actions proposed in good faith
by Buyer. Such suspension shall continue until Seller provides adequate
assurances in writing to Buyer that such conditions have been corrected and
Buyer has in writing accepted Seller's assurances, which acceptance shall not be
unreasonably withheld or delayed.
(d) In the event that, despite Seller's diligent and good faith
efforts as aforesaid, Seller is unable within two months after the date of
suspension either (1) to provide coal meeting all specifications under Section
6.1 (a), or (2) to obtain an alternate source of coal supply at no additional
cost (including, without limitation, transportation costs) to Buyer on a
delivered cents per MMBtu basis, then Buyer may cancel this Agreement by notice
to Seller effective not later than six months from the date of such notice, and
recover damages as set forth in Section 16.4.
(e) Notwithstanding any other provision of this Agreement, during
the period of any suspension of deliveries pursuant to Section 6.1 (c), Buyer
may acquire, by good faith purchases, a quantity of substitute coal (in
equivalent Btu's) reasonably similar in quality to the coal described by the
specifications in Section 6.1 (a), up to the quantity not delivered by Seller as
a result of such suspension. Unless Seller's nonperformance is excused by an
Unforeseen Circumstance, Seller shall reimburse Buyer the excess, if any, of the
total delivered cost to Buyer of such substitute coal on a cents per MMBtu basis
over the Selling Price. Seller shall make such payment within thirty (30) days
of receipt from Buyer of an invoice specifying such excess costs.
(f) Notwithstanding any other provision of the Agreement, in the
event coal delivered hereunder is equal to or exceeds [*](6) sulfur dioxide per
million Btu and/or is equal to or less than [*](6) Btu/lb in any truckload,
Buyer may reject such truckload. Buyer may "reject," for purposes of this
Agreement, any truckload of coal that does not meet the requirements set forth
in this Section 6.1 (f) at any time before or after such truckload is delivered
to the Facility. If Buyer determines, pursuant to Exhibit A, that any truckload
of coal failed to meet the Rejection Limits of Section 6.1 (a) after such coal
is no longer removable from the Facility (in Buyer's sole discretion) or has
been used in the Facility, then Seller shall be assessed liquidated damages
which reflect additional power, limestone, and waste disposal costs.
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(6) 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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Liquidated damages for S02 per ton = [*](7)
Example
[*](7)
Liquidated damages per ton = [*](7)
Liquidated damages for Btu/lb per ton = [*](7)
Example
[*]:(7)
Liquidated damages per ton = [*](7)
These liquidated damages are cumulative and in addition to any other liquidated
damages assessed pursuant to Section 10.1 hereof.
6.2 Sole and Exclusive Remedies. Except as provided in Section 6.1 (d)
Buyer's right to suspend deliveries and purchase substitute coal and the
possible resulting cancellation of this Agreement, and Buyer's right to reject
deliveries, all pursuant to Section 6.1, together with the compensation for
variations in quality provided for under Article X and Section 6.1 (f) and
Buyer's right to damages under Section 16.4, shall be Buyer's sole and exclusive
remedies for Seller's failure to deliver coal which conforms to any of the
quality specifications herein.
6.3 Sampling and Analysis. Procedures for, and the frequency of, coal
sampling and analysis shall be established in accordance with Exhibit A. For the
purpose of carrying out sampling in addition to that specified as an obligation
of the Seller pursuant to Exhibit A, Buyer may collect samples at the Operations
for analysis or establishing Seller's compliance with the terms of this
Agreement. To accomplish these tasks, Seller shall provide Buyer and/or its
contractor(s), upon reasonable advance notice, with access to the Operations at
such times as may be reasonably required by Buyer.
Buyer and its contractors, if any, utilized for the purpose of
carrying-out Buyer's obligations or exercising its rights hereunder when at the
Operations (i) shall observe all reasonable and appropriate work and safety
rules and regulations established by the Seller for its own employees and
contractors and (ii) shall not interfere with the Seller's activities at the
Operations; provided, however, that the Seller's rules, regulations or
operations shall not unduly interfere with the performance of Buyer's
obligations or exercise of its rights hereunder.
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(7) 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 VII
SELLING PRICE
The Selling Price to be paid by Buyer to Seller for each ton of coal
delivered hereunder shall be the Base Price, as stated in Article VIII (or the
Adjusted Base Price, as computed pursuant to Article IX) plus all applicable
sales and use taxes levied upon the coal delivered hereunder and not taken into
consideration in Article IX.
ARTICLE VIII
BASE PRICE
The Base Price per ton delivered at the Delivery Point shall be [*](8)
per ton, effective as of May 1, 1989.
ARTICLE IX
ADJUSTMENTS TO BASE PRICE
The Base Price shall be adjusted quarterly according to changes in the
APS System Coal Price Index. The resulting price shall be referred to as the
"Adjusted Base Price." The APS System Coal Price Base Index is [*].(8) Beginning
October 1, 1989 and each January 1, April 1, July 1, and October 1 thereafter
(the "Adjustment Date"), the Base Price shall be adjusted by determining the
percentage change [*].(8) The Adjusted Base Price is equal to the Base Price
multiplied by one plus the percentage change. (See example calculation attached
hereto as Exhibit B.) If the APS System Coal Price Index should be discontinued,
and no equivalent replacement index is specified by APS, a new index or indices
most accurately reflecting changes in the applicable cost(s) of Seller will be
substituted by mutual agreement of the parties hereto.
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(8) 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 X
COMPENSATION TO BUYER FOR VARIATIONS IN QUALITY
10.1 Compensation to Buyer. Using the analytical data obtained in
accordance with Section 6.3 hereunder and the analytical data obtained in
accordance with Section 6 of the WSA, on a monthly basis Buyer shall calculate
the weighted average "as received" Btu per pound, percent ash, and pounds of S02
per MMBtu of coal and Waste Coal delivered to the Facility by Seller during the
month. Compensation due to Buyer for variations in the calculated weighted
monthly average "as received" Btu per pound, percent ash and pounds of S02 per
MMBtu shall be in the form of a credit to be applied against the next payment
due Seller. Buyer's credits shall be determined as follows:
(a) If the weighted average Btu "as received" on a monthly
average basis is less than [*](9) Btu per pound, then the
credit due to Buyer shall be computed in accordance with
the following formula:
CB = [*](9)
(b) If the weighted average percent ash "as received" on a
monthly basis is greater than [*](9) percent, then the
credit due Buyer shall be computed in accordance with the
following formula:
CB = [*](9)
(c) If the weighted average pounds of S02 per MMBtu "as
received" on a monthly basis is [*],(9) then the credit due
Buyer shall be computed in accordance with the following
formula:
CB = [*](9)
(d) If the weighted average pounds of S02 per MMBtu "as
received" on a monthly basis is [*],(9) then the credit due
Buyer shall be computed in accordance with the following
formula:
CB = [*](9)
provided, however, that inclusion of this formula shall not
give rise to any implication that the Rejection Limits are
other than as set forth in Section 6.1.
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(9) 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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In the above formulas:
CB is the credit due Buyer
B is the weighted average "as received" Btu per pound for
coal and Waste Coal Delivered by Seller during the month
P is 0.35 times the Adjusted Base Price for coal shipped by
Seller during the month plus 0.65 times the Initial Amount
or Adjusted Amount for Waste Coal shipped by Seller during
the month
T is the tons of coal and Waste Coal delivered by Seller in
the month
A is the weighted average "as received" percent ash for coal
and Waste Coal delivered by Seller during the month
D is the Adjusted Disposal Fee for Conforming Waste disposed
of during the month
S is the weighted average "as received" pounds of SO2 for
coal and Waste Coal delivered by Seller during the month
An example calculation is attached hereto as Exhibit F.
10.2 Notice of Credit. As soon as practical after the end of each month,
but no later than the 25th of the following month, Buyer shall advise Seller in
writing of the average Btu per pound, the average percent ash, the average S02
per MMBtu and the total credit, if any, due Buyer.
ARTICLE XI
AUDIT
Seller and Buyer agree to maintain books, records, documents and other
evidence to such an extent and in such detail as will properly reflect all items
for which payment or adjustment in the Base Price (or Adjusted Price) is claimed
under this Agreement ("Records"). Upon the request of either party, the other
party shall make available at its offices said Records for inspection, audit or
reproduction by any authorized representative. Seller and Buyer shall preserve
all such Records relevant to each shipment of coal hereunder for a period of two
(2) years after payment of such shipment, during which period either party shall
complete any audit that may be desired. Should discrepancies or questions arise,
the relevant Records shall be preserved until resolution is reached.
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ARTICLE XII
PAYMENT
12.1 Payment Schedule. All amounts properly due and payable by Buyer to
Seller pursuant to this Agreement for coal delivered by Seller to the Facility
as measured by Buyer in accordance with the procedures set forth in Exhibit C
shall be payable (1) on the thirtieth day of the month (except that it shall be
payable on the twenty-eighth day of each February) in respect of material
supplied from the first to the fifteenth (15th) day of the month, and (2) on the
fifteenth (15th) day of the following month in respect of material supplied from
the sixteenth (16th) to the last day of the month; provided, however, that if
Project Lender becomes successor to the Buyer under this Agreement, payment for
such coal (i) delivered before or on the tenth (10th) of any month shall be
payable on the twenty-fifth (25) of the same month and (ii) delivered after the
tenth (10th) of any month shall be payable on the twenty-fifth (25) of the next
following month. No such amount shall be due and payable until Buyer is provided
quality reports for all coal shipped and a manifest indicating the source of
shipment for each truckload received during the period. Buyer (or Project Lender
in the event of such succession) shall provide with each payment a written
statement showing the calculation of such payment.
If the date on which payment is due hereunder shall not be a Business
Day, the payment otherwise due thereon shall be due and payable on the next
succeeding Business Day, with the same force and effect as if paid on the date
due hereunder.
12.2 Payment Schedule Prior to Final Completion. During Testing and
Start-up and until final completion of the Facility satisfactory to Project
Lender, all amounts properly due and payable by Buyer to Seller for coal
delivered by Seller to the Facility, as measured by Buyer in accordance with the
procedures set forth in Exhibit C, before or on the tenth (10th) of any month
shall be payable on the twenty-fifth (25th) of the same month, and amounts due
and payable for coal delivered after the tenth (10th) of any month shall be
payable on the twenty-fifth (25th) of the next following month.
12.3 Disputed Payments. In the event of a dispute in the amount of any
payment, Seller or Buyer shall promptly notify the other party as to the basis
for the dispute. Buyer and Seller shall seek to resolve the dispute as quickly
as possible. In the event that resolution has not been reached within thirty
(30) days of such notification, Buyer shall deposit the amount in dispute into
an interest-bearing escrow account. Upon resolution, each party shall receive
the amount due it in light of such resolution, plus interest earned on that
amount in the escrow account, if applicable.
12.4 Delinquent Payment. If Buyer fails to pay for all coal received
during any period for which documentation has been received by its due date,
unless there is a dispute pursuant to Section 12.2 hereof, then the portion of
the payment which is delinquent shall bear interest, at the prime rate per annum
plus one and one-half percent
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(1 1/2%) as announced from time to time by Mellon Bank, N.A. of Pittsburgh, PA
as its prime rate, from such due date until the date such delinquent payment is
made, without prejudice to any other rights or remedies available to Seller as a
result of Buyer's failure to pay such amount; provided, however, that Seller
waives the right to file, effect, enforce or otherwise assert any liens on, or
to assert any claim against, the Facility or the steam system being constructed
under the Contract for Engineering, Procurement and Construction of the Steam
Transmission Line for the Morgantown/WVU Energy Facility by and between Buyer
and Mellon Stuart Company, dated as of August 31, 1989 (the "Steam System") and
acknowledges and agrees that no claim for payment under this Agreement shall
result in any lien on, or security interest in, the Facility or the Steam
System.
ARTICLE XIII
INSURANCE AND INDEMNIFICATION
13.1 Insurance. Seller shall maintain or cause to be maintained for the
Term of this Agreement liability and personal injury insurance in amounts
reasonably acceptable to Buyer naming Project Lender, Mon Power and Buyer,
respectively, as additional insureds as their interests may appear. Such
insurance shall include the following:
(a) comprehensive general liability insurance for bodily injury and
property damage of at least $1,000,000 per occurrence;
(b) comprehensive automobile liability insurance for bodily injury or
property damage covering the operation of all vehicles used in
connection with the performance of any obligations under this
Agreement of at least $1,000,000 per person and $1,000,000 per
occurrence for bodily injury and $1,000,000 per occurrence for
property damage;
(c) workers' compensation and employer's liability insurance
(including coverage for claims under Section 23-4-2 of the West
Virginia Code and/or Mandolidis v. Elkins Industries, Inc., 246
S.E.2d 907 (1978)) of at least $1,000,000 or, if a limit for such
insurance is established by law, in such amount;
(d) Excess Liability Insurance on an occurrence basis, which shall
afford coverage not less than $5,000,000 per occurrence and
$5,000,000 per occurrence and $5,000,000 in the aggregate over and
above coverage provided by the policies described in paragraphs
(a), (b), and (c) above. Excess policies shall not contain
endorsements which restrict coverages as set forth in paragraphs
(a), (b), and (c).
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Buyer may also request and shall then be furnished by Seller with evidence of
such insurance maintained by Seller during the Term of this Agreement.
13.2 Indemnification. Except as expressly provided elsewhere herein,
Buyer and Seller each agree to indemnify and hold harmless the other, each
other's officers, affiliates, assigns, and employees, from and against all
liabilities and expenses (including reasonable attorneys' fees) which the other
may incur to persons or entities not parties to this Agreement for injury to or
death of persons or damage to or destruction of property in connection with the
Agreement or the coal provided hereunder, whether such liabilities arise in
contract, tort (including negligence or strict liability) or otherwise, to the
extent such liabilities arise out of the indemnifying party's negligence,
intentional acts or omissions, or the negligence, intentional acts or omissions
of the indemnifying party's agents, contractors, officers, directors, partners
or employees.
ARTICLE XIV
UNFORESEEN CIRCUMSTANCE
14.1 Effect of Unforeseen Circumstance. Neither Seller nor Buyer shall be
liable to the other for any failure or delay in performance of any obligation
under this Agreement due to the occurrence of an Unforeseen Circumstance. The
party whose performance under this Agreement has been affected by an Unforeseen
Circumstance shall provide prompt written notice of the occurrence and of the
cessation of such Unforeseen Circumstance to the other party. In each instance,
the party affected by such Unforeseen Circumstance shall exercise reasonable
diligence to resume operations hereunder; provided, however, that each party
shall have the right to settle any strikes, lockouts or industrial disputes in
its sole discretion and the aforesaid requirement of exercising reasonable
diligence to resume operations shall not require either party to accede to any
demand or position of any other party involved in such strike, lockout or
industrial dispute. Deliveries not made or not accepted due to an Unforeseen
Circumstance shall not be made up except by mutual agreement by the parties
hereto.
14.2 Allocation. During any period in which mining, preparing, loading,
delivering and/or selling coal by Seller hereunder is curtailed as a result of
an Unforeseen Circumstance and Seller cannot deliver all of the requirements of
coal under this Agreement, Seller may, as a minimum, prorate its available coal
from its Operations among all of Seller's customers of its Operations, including
Buyer, in proportion to its prior commitments to such customers. In agreements
or contracts entered into between Seller and any customer other than Buyer,
Seller has not committed and shall not commit to any such customer that it would
have first call on any coal similar in quality to the coal required to be
delivered under this Agreement during an Unforeseen Circumstance. Any such
allocation by either party shall be subject to reasonable audit by the other
party. Notwithstanding the foregoing, in the event of an Unforeseen Circumstance
that limits
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Seller's ability to deliver coal to Buyer, Seller shall allow Buyer access to
the Reserve Inventory (or another source identified by Seller) so that Buyer can
transport coal from the Reserve Inventory (or coal in the same quantity on a Btu
basis from such other source) to the Facility with its own trucks. In such
event, the Base Price or Adjusted Base Price shall be reduced by the amount of
Seller's reasonable transportation costs for transporting the coal from the
Reserve Inventory at such time, subject to verification (or for the reasonable
costs for transporting coal from such other source).
14.3 Limitation on Continuance. If any Unforeseen Circumstance affects the
performance of Seller and/or Buyer to the extent that it reduces the quantity of
coal delivered hereunder by more than [*](10)% of the scheduled quantity during
any Contract Year, and if such Unforeseen Circumstance appears to be of a
continuing nature, then either Seller or Buyer may, by notice to the other,
propose revised terms and conditions, including, without limitation,
modifications of price or pricing provisions, quality specifications and
quantities to be sold and purchased, to govern during the remainder of the Term
of this Agreement.
14.4 Sales and Purchases During Unforeseen Circumstance. During any
period in which transporting, accepting, unloading, reclaiming and/or utilizing
of coal delivered hereunder at Buyer's Facility is curtailed or suspended as a
result of an Unforeseen Circumstance, Seller may sell coal from Seller's
Operations to third parties which, but for such Unforeseen Circumstance, would
have been delivered and sold to Buyer hereunder; provided, however, that Seller
shall not sell, lease, contract to sell or otherwise transfer or agree to
transfer to others, any of its interests in the coal from the Coal Reserves in
any quantity which may jeopardize Seller's ability to supply the total quantity
and quality of coal required under this Agreement or which may interrupt any
scheduled deliveries hereunder after such Unforeseen Circumstance has ceased to
curtail or suspend the transporting, accepting, unloading, reclaiming and/or
utilizing of coal delivered hereunder by Seller is curtailed or suspended as a
result of an Unforeseen Circumstance, Buyer may purchase coal for use at Buyer's
Facility from third parties in quantities and for a term reasonably anticipated
to meet such curtailment or suspension which, but for such Unforeseen
Circumstance, would have been accepted and purchased from Seller hereunder.
ARTICLE XV
NONDISCLOSURE
Neither party shall disclose the Selling Price, the Base Price, the
Adjusted Base Price or any component of the Base Price or Adjusted Base Price to
any third party
- -------------------------------
(10) 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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without the written consent of the other party, which consent shall not be
unreasonably withheld, unless counsel advises that such disclosure is required
by law either for regulatory purposes or for evidentiary purposes in any legal
or arbitration proceeding; provided, however, that Buyer or Seller may disclose
any of the terms of this Agreement, including its aforementioned price terms, to
any financial institution, any party having a security interest in the Facility
or any part thereof, any assignee, or any other entity as Buyer or Seller, in
its sole discretion, deems necessary.
ARTICLE XVI
TERMINATION AND CANCELLATION
16.1 Termination Upon Default.
(a) Except as provided in Section 6.1 (d) and Section 16.1 (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 a
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 receipt by such defaulting party of a written notice of claim of such
default stating that such notice is a "Notice of Default" hereunder, unless such
default could not have been corrected within such thirty (30) day notice period
and the party in default can demonstrate that steps have been taken to cure the
default within a reasonable period of time.
(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 within thirty (30) days after receipt by Buyer of
a written notice of such default, stating that such notice
is a "Notice of Default" hereunder, then Seller may cancel
this Agreement upon written notice to Buyer.
(c) Within six (6) months after the termination for
any reason of either the WSA or the SWDA, either party
(unless such termination was due to a default by such
party) under either of those agreements may cancel this
Agreement upon twelve (12) months written notice to the
other party.
16.2 Nonwaiver. The specifications of remedies herein
shall not be deemed to exclude the parties from any other
legal or equitable remedies they may have with respect to
this Agreement, except as provided in Section 6.2 and 16.3
hereof.
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16.3 Disclaimer of Consequential Damages. EXCEPT AS OTHERWISE EXPRESSLY
PROVIDED IN THIS AGREEMENT, NONE OF THE PARTIES TO THIS AGREEMENT SHALL BE
LIABLE TO THE OTHER FOR ANY SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES ARISING
OUT OF THE PERFORMANCE OF OR DEFAULT UNDER THIS AGREEMENT.
16.4 Buyer's Remedy in Event of Seller's Breach by Failure to Deliver
Contract Tonnage. In the event Buyer exercises its right to cancel this
Agreement pursuant to the terms of Section 6.1 (d), then Seller shall become
liable to Buyer for damages equal to the difference between the cost of coal
purchased in substitution for that due from Seller for the remainder of the Term
of this Agreement and the Selling Price.
At any time during the period in which Seller is liable for damages as
described above, Seller shall have the right to avoid paying further damages
under this Section 16.4 by supplying coal which Buyer determines meets the
Average Quality Characteristics. Seller shall notify Buyer in writing sixty (60)
days in advance if it intends to resume coal shipments hereunder and provide
Buyer with documentation as to the quality of coal and as to how it intends to
supply the coal through the remaining Term of the Agreement. Buyer will review
the documentation and inform Seller as to the substitute coal's acceptability
within ten (10) days, and Buyer shall not unreasonably withhold acceptance. If
Seller resumes shipment under this provision, Seller shall be under the same
obligations as if this Agreement were still in effect, and Seller shall continue
to be liable for all damages incurred by Buyer from the date of cancellation of
shipment to the Facility. Such resumption shall not affect Buyer's rights to
cancel this Agreement again under Section 6.1 (d) and seek damages under this
Section 16.4.
16.5 Termination in Certain Circumstances. Notwithstanding any other
provision in this Agreement:
(a) in the event that the Actual Commencement Date does not occur
on or before April 30, 1993, Seller may terminate this Agreement by notice to
Buyer, and in the event the Actual Commencement Date does not occur on or before
April 30, 1994, Buyer may terminate this Agreement by notice to Seller;
(b) in the event that there is a revocation, abrogation or
termination, due to any cause beyond the reasonable control of Buyer, of the
contracts pursuant to which the Facility supplies steam to WVU and the Hospital
or power to Monongahela Power Company, and if such revocation, abrogation or
termination by any party for any reason is not the result of a material default
of contract claim with merit against WVU, the Hospital or Monongahela Power
Company that would make the Buyer whole, Buyer may terminate this Agreement; or
(c) in the event that Financial Closing does not occur on or
before September 30, 1989, either Buyer or Seller may terminate this Agreement
by giving notice of such termination on or before October 15, 1989.
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ARTICLE XVII
MISCELLANEOUS
17.1 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 and remain in full force and effect.
17.2 Notices. Any notice, request, demand or other communication related
to this Agreement shall be in writing and shall be delivered by hand or
transmitted by telex, telecopier, courier, overnight delivery or certified mail,
return receipt requested, to the other party at the following numbers and
addresses and will be deemed given when actually received:
If to the Seller:
Anker Energy Corporation
Route 12, Box 245
Morgantown, West Virginia 26505
Attention: T.J. Jackson
Telecopy No: 304-291-3692
Telephone: 304-296-1616
If to the Buyer:
Morgantown Energy Associates
256 Russell Avenue
P.O. Drawer 40
New Martinsville, WV 26155
Attention: Michael H. Schwartz
Telecopy No: 412-788-1914
Telephone: 412-788-0404
or at such address or number as the party may designate by notice to the other
party in accordance with this Section.
17.3 Assignment and Successors.
(a) Buyer shall have the right to assign its interest herein or
assign or sublet its interest in the Facility to (i) any successor, affiliate,
subsidiary, partner or
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related entity, (ii) any person, corporation, bank, trust company, association
or other business entity as security in connection with obtaining or arranging
financing relating to the Facility or to any such business entity upon
enforcement of such security interest or (iii) any unrelated entity or
individual with the written approval of Seller (not to be unreasonably
withheld). No assignment of this Agreement shall relieve the Buyer of its
obligations hereunder.
(b) The Seller may assign its interest herein to any entity under
common control with the Seller or subsidiary upon written notice to Buyer.
Seller may assign its interest to others only with the express written consent
of Buyer, such consent not to be unreasonably withheld. No assignment of this
Agreement shall relieve the Seller of its obligations hereunder.
(c) This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and permitted assigns.
17.4 Independent Contractor. The Seller's relationship with Buyer under
this Agreement shall be that of an Independent Contractor. The Seller is to
exercise its own discretion on the method and manner of performing its
obligations under this Agreement, including without limitation, the selling of
coal to Buyer. Buyer will not exercise control over the Seller or its employees.
The employees, methods, equipment and facilities used by the Seller shall at all
times be under its exclusive direction and control. Nothing in this Agreement
shall be construed to designate the Seller, or any of its employees, as
employees, agents, joint venturers or partners of Buyer.
17.5 Representation and Warranties.
(a) Each party to this Agreement represents and warrants that this
Agreement has been duly authorized, executed and delivered by each such party,
respectively, and constitutes the legal, valid and binding obligation of each
such party, respectively, enforceable in accordance with its terms, except as
such enforceability and the availability of certain rights and remedies provided
for in this Agreement may be limited by bankruptcy, insolvency or other similar
laws of general application affecting the enforcement of creditors' rights or by
general principles of equity.
(b) Each party to this Agreement, respectively, represents and
warrants that neither the execution and delivery of this Agreement, the
consummation of any of the transactions contemplated hereby nor performance of
or compliance with the terms and conditions hereof will (i) result in the
violation of any present legal requirement to which each such party is subject,
the violation of which would have a material adverse effect on the ability of
each such party to perform its obligations under this Agreement or (ii) conflict
with or result in the breach of, or constitute a default under any agreement or
instrument to which each such party is a party or by which it or its properties
are bound (except any such agreement or instrument a breach of which would not
have a material adverse effect on the ability of each such party to perform its
obligations under this Agreement) or result in the creation of any lien, charge,
security interest or encumbrance
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(except such that may arise in favor of the other party in connection with this
Agreement) upon any of each such party's properties.
(c) Seller represents and warrants that all permits, approvals,
certificates, licenses and inspections required to be obtained by Seller to
permit performance of Seller's obligations hereunder shall have been obtained by
Financial Closing, and that Seller has no reason to believe that any permits,
approvals, certificates, licenses and inspections that have not been obtained
prior to such date will not be obtained by the dates by which they are required.
17.6 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.
17.7 Interpretation. No inference shall be drawn in favor of or against
either party based on participation in the drafting of this Agreement.
17.8 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 a writing signed by both parties.
17.9 Controlling Law. The validity, construction and performance of this
Agreement shall be determined in accordance with the laws of the State of West
Virginia applicable to agreements made and to be performed in that State.
17.10 Further Assurances. If either party reasonably determines that any
further instruments and assurances or any other things are necessary or
desirable to carry out the terms of this Agreement, the other party will execute
and deliver all such instruments and assurances and do all such things as the
first party reasonably deems necessary or desirable to carry out the terms of
this Agreement.
17.11 Conditions Precedent.
(a) Seller shall deliver to Buyer a certificate, signed by the
appropriate authorized official of Seller, dated as of the date of execution of
this Agreement, as to the incumbency of the persons executing and delivering
this Agreement.
(b) Seller shall deliver to Buyer a copy, dated as of a recent
date, certified by the relevant Secretary of State, of the Certificate of
Incorporation of Seller.
(c) Seller shall deliver to Buyer a certificate, dated as of a
recent date, issued by the relevant Secretary of State, as to the good standing
of Seller.
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(d) Seller shall deliver to Buyer a resolution of Seller,
certified by an authorized official of Seller as being in full force and effect
on the date of execution of this Agreement, or other evidence satisfactory to
Buyer, that the execution, delivery and performance of the Agreement and any
instrument or agreement relating to such execution, delivery and performance has
been duly authorized by Seller.
(e) Seller shall deliver to Buyer a copy, certified by the
Secretary or an assistant secretary of Seller, of Seller's bylaws.
(f) Seller shall deliver to Buyer an opinion, dated the date of
execution of this Agreement, of counsel to Seller in form and substance
satisfactory to Buyer.
17.12 Covenants.
(a) Not later than Financial Closing, Seller shall execute and
deliver a consent and agreement to the assignment of Buyer's right in this
Agreement to the Project Lender and Monongahela Power Company, for the purpose
of securing their security interests in the Facility, in substantially the same
form as Exhibit D hereto.
(b) On the date of Financial Closing, Seller shall deliver to
Buyer a certificate, dated as of such date, signed by an authorized official of
Seller, stating that each representation and warranty made in Section 17.5 of
this Agreement is true and correct as though made on and as of such date, and
that on such date, there shall exist no default hereunder or breach of any term
herein.
(c) On the date of Financial Closing, Seller shall deliver to
Buyer an opinion, dated the date of Financial Closing and addressed to Project
Lender, of counsel to Seller in substantially the same form as Exhibit E hereto.
(d) In connection with its deliveries of coal to the Delivery
Point, Seller shall not release, emit or discharge into the environment any
hazardous substances in excess of permitted concentrations, standards or
limitations under any hazardous substance laws or governmental approvals,
whether Federal, state or local.
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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.
[SEAL]
ATTEST: ANKER ENERGY CORPORATION
By: /s/ Terrence J. Jackson
---------------------------------
Its: Vice President
---------------------------------
ATTEST: MORGANTOWN ENERGY ASSOCIATES, a
West Virginia general partnership
- ----------------------- By: MidAtlantic Energy Co., a West
Virginia corporation, general partner
By: /s/ Illegible
---------------------------------
Its:
--------------------------------