Exhibit 10.4
RAW MATERIAL REQUIREMENTS AGREEMENT
THIS AGREEMENT made as of June 1st, 2003, between C-E Minerals Inc., a
corporation organized and existing under the laws of the state of Delaware and
having an office at 901 East Eighth Avenue, King of Prussia, Pennsylvania 19406
(hereinafter "C-E"), and CARBO Ceramics Inc., a corporation organized and
existing under the laws of the state of Delaware and having an office at 6565
MacArthur Blvd., Suite 1050, Irving, Texas 75039-2461 (hereinafter "CARBO").
W I T N E S S E T H:
CARBO desires to purchase a supply of kaolin, a naturally occurring
mineral more particularly described (and meeting the specifications set forth)
in Appendix A hereto (the "Product", also sometimes called "clay" or "ore"), for
use in the manufacture of ceramic proppants.
C-E is able and desires to supply CARBO with such Product on the terms
and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises, the parties agree as
follows:
1. TERM
The term of this Agreement shall be seven (7) years commencing January
1, 2004 and ending December 31, 2010.
2. QUANTITY
A. During the term of this Agreement, C-E shall make available
for sale to CARBO each year and CARBO shall have the right to
purchase from C-E each year up to 200,000 net tons of the
Product.
B. In each year during the term of this Agreement, subject to
Paragraph 2.A hereof, CARBO shall be obligated to purchase
from C-E, as a minimum, seventy percent (70%) of its actual
annual requirements of the Product during such year for its
operations in Eufaula, Alabama.
C. CARBO may specify that up to 25% of the Product provided
pursuant to this Agreement come from the Andersonville local
low Alumina ores (approximately * Alumina). For the quantity
of ores provided from Andersonville from time to time C-E
shall provide sufficient quantities of ores from other
locations to enable CARBO to blend the ores to achieve the
specifications set out on Appendix A. Notwithstanding the
aforementioned ore source specifications, the ores delivered
to
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* Confidential Information in this Exhibit 10.4 has been omitted and filed
separately with the Securities and Exchange Commission.
the CARBO Eufaula Plant will meet the product specifications
(See Appendix A) on average for each 1,000 Tons delivered.
3. DELIVERY
A. CARBO shall advise C-E on or before October 1 of each year,
beginning October 1, 2003, of the tonnage of the Product it
projects to purchase during the next calendar year for use at
its Eufaula Plant. Such projections shall be estimates only
and CARBO shall not be committed to accept deliveries of such
amounts. CARBO shall use reasonable business efforts to advise
C-E promptly in the event of any change in its annual purchase
projections for any year.
B. C-E and CARBO shall communicate regularly, and C-E shall use
its best efforts to ensure the availability of Product for
sale hereunder on an "as needed" basis. CARBO shall use its
best efforts (to extent feasible) to space evenly its actual
purchase orders for Product, and C-E shall (subject to
paragraph 2.A hereof) be obligated to fill such orders. Each
such purchase order shall be subject to all of the terms and
conditions of this Agreement.
C. Delivery of the Product as supplied from Eufaula local C-E
Mines shall be F.O.B. open truck, C-E's mine stockpile in
Barbour and/or Henry Counties, Alabama ("C-E's Mines"), or
other deposits mutually agreed upon. CARBO shall be
responsible for the scheduling of and payment for transport of
Product from C-E's Local Mines (or such other deposits
mutually agreed upon). Product as supplied from C-E
Andersonville deposits shall be delivered, at C-E's expense,
by C-E arranged trucks to CARBO's Eufaula Plant ore storage
location.
D. Risk of loss and title for local C-E clays pass to CARBO upon
delivery to CARBO's designated carrier at C-E's mine, or other
deposits mutually agreed upon. Risk of loss and title for C-E
Andersonville clays pass to CARBO upon delivery and unload at
CARBO's Eufaula Plant ore storage.
E. CE agrees to continue the practice of stockpiling a "wet
weather" reserve for CARBO under the terms and at the location
described in Appendix C.
4. PRICE
A. The price for the Product purchased from C-E shall be: $ * per
net ton delivered to CARBO from C-E Andersonville deposits and
$ * per net ton F.O.B. C-E local Eufaula mines or other local
deposits as agreed upon.
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* Confidential Information in this Exhibit 10.4 has been omitted and filed
separately with the Securities and Exchange Commission.
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B. The prices shall be adjusted on January 1 of each year,
beginning January 1, 2005, using the previous September's
Producer Price Index ("PPI") for kaolin and ball clay,
published by the US Department of Labor, Bureau of Labor
Statistics. (An example of the calculation intended to be
performed by the parties is set forth in Appendix B hereto.)
If, during the term of this Agreement, the PPI should increase
or decrease by an amount in excess of 8% in any calendar year,
the parties shall meet to negotiate an equitable price
adjustment for each subsequent year during such term. In the
event the parties cannot agree on a price adjustment within
thirty (30) days after the applicable PPI change, either party
may terminate this Agreement by written notice to the other.
If the PPI is discontinued and substantially the same basic
data is used to compile a similar index, such similar index
shall be used. If the PPI is discontinued and no such similar
index shall be compiled, the parties shall negotiate in good
faith in order to agree upon another substitute index. If such
negotiations do not result in timely agreement as to a
substitute index either party may terminate this Agreement by
written notice to the other.
5. NON-COMPETE
Without intending to limit the legal rights of either party, CARBO and
C-E agree as follows: that CARBO will not enter into direct competition
with C-E in the manufacture of calcined clay for general sale to
refractory or other related industry, and that C-E will not enter into
competition with CARBO in the manufacture or sale of ceramic proppants.
This agreement will endure for 3 years after the expiration of this
contract.
6. PAYMENT
Payment for conforming Product sold and delivered hereunder shall be
net thirty (30) days from date of invoice. Invoices shall be sent on a
monthly basis. Invoices shall include a copy of the weight-ticket
covering the Product being invoiced.
7. ASCERTAINMENT OF WEIGHT
The weight of the Product delivered shall be determined by weighing on
state-certified scales acceptable to both parties. C-E and CARBO shall
maintain all required certification documentation on file at all times
at the site of such scales.
8. WARRANTY
C-E warrants that the Product when delivered will conform to the
specifications contained in Appendix A hereto for every 1,000 tons of
Product so delivered. C-E warrants that the Product delivered hereunder
shall be free of contaminants and other foreign substances rendering
the Product unsuitable for the economic use of Owner.
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9. INDEMNIFICATION
To the fullest extent permitted by law, C-E shall indemnify and hold
harmless CARBO, and agents and employees of CARBO from and against
claims, damages, losses and expenses, including but not limited to
attorneys' fees, arising out of or resulting from performance of this
Agreement, provided that such claim, damage, loss or expense is
attributable to bodily injury, sickness, disease or death, or to injury
to or destruction of tangible property (other than the Product itself)
including loss of use resulting therefrom, but only to the extent
caused in whole or in part by negligent acts or omissions or breach of
this Agreement by C-E or anyone directly or indirectly employed by C-E
or anyone for whose acts C-E may be liable, regardless of whether or
not such claim, damage, loss or expense is caused in part by the
negligence of a party indemnified hereunder.
10. INSURANCE
C-E shall purchase from and maintain in a company or companies lawfully
authorized to do business in the State of Alabama such insurance as
will protect C-E and CARBO from which may arise out of or result from
C-E's operations under this Agreement and for which C-E may be legally
liable, whether such operations be by C-E or by a subcontractor or by
anyone directly or indirectly employed by any of them, or by anyone for
whose acts any of them may be liable.
C-E shall maintain worker's compensation in at least the minimum amount
stipulated under the Alabama's worker's compensation statutes,
including Employers Liability. Such insurance policy shall include a
waiver of subrogation of the insurers thereunder against CARBO and of
any right of the insurers to any set-off or counterclaim or any other
deduction, whether by attachment of otherwise, in respect of any
liability of any person or entity insured under any such policy.
11. NOTICE
All notices under this Contract required or permitted to be given by
CARBO to C-E and all payments to be made by CARBO to C-E hereunder
shall be delivered personally to C-E or sent to C-E at the address set
out at the beginning of this Agreement, or at such other address as C-E
may hereafter furnish in the manner provided herein to CARBO.
All notices herein required or permitted to be given by C-E to CARBO
shall be sent by registered or certified United States mail, return
receipt requested, addressed to CARBO at CARBO Ceramics Inc., Attn.
Paul G. Vitek, 6565 MacArthur Boulevard, Suite 1050, Irving, TX 75039,
or at such other address as CARBO may hereafter furnish in the manner
provided herein to C-E.
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12. FORCE MAJEURE
A. The term "Force Majeure" as used herein shall mean acts of
God, natural calamities, acts of the public enemy, blockades,
insurrections, strikes, slowdowns or differences with workmen,
riots, wars, disorders, civil disturbances, fires, explosions,
storms, floods, landslides, washouts, labor or material
shortages, boycotts, breakdowns or damage to plants, equipment
or facilities, interruptions to transport, embargoes, acts of
military authorities, acts of local or federal governmental
agencies or regulatory bodies, court actions, arrests and
constraints and, without limitation by enumeration, any other
cause or causes not reasonably within the control and without
the fault or negligence of the party affected which wholly or
partly prevents the mining, processing, loading or
transportation of Product by C-E or the receiving,
transporting, accepting or using of Product by CARBO.
B. If because of Force Majeure, either party hereto is unable to
carry out its obligations under this Agreement and if such
party shall promptly give to the other notice by telex or
telephone of such Force Majeure, including a complete
description thereof, then the obligation of the party giving
such notice shall be suspended to the extent made necessary by
Force Majeure and during its continuance; provided, however,
that the party giving such notice shall use its best efforts
to eliminate such Force Majeure insofar as possible with a
minimum of delay. No event of Force Majeure shall relieve
CARBO of its obligation to make payments due for Product
delivered by C-E under this Agreement. Deficiencies in
deliveries or acceptance of Product caused by an event of
Force Majeure shall only be made up by mutual consent.
13. ENTIRE AGREEMENT
This written instrument contains the entire agreement between the
parties hereto concerning the subject matter hereof, and there are no
other understandings or agreements between said parties or either of
them in respect hereto. No change, addition to or waiver of the terms
and provision hereof shall be binding upon either party unless approved
in writing by an authorized representative of such party, and no
modifications shall be effected by the acknowledgment or acceptance of
forms containing other or different terms and conditions. This
Agreement may be executed in any number of counterparts, each of which
shall be deemed an original, but all of which together shall constitute
a single instrument.
14. ASSIGNMENT
This Agreement shall be binding on the legal successors of the parties
hereto, but shall not otherwise be assignable by either party without
the written consent of the other.
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15. APPLICABLE LAW
This Agreement and the language used herein shall be construed and
enforced in accordance with the laws of the State of Alabama.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
C-E MINERALS INC.
By /s/ Michael K. Pierce
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Name: Michael K. Pierce
Title: Vice President of Sales
CARBO CERAMICS INC.
By /s/ Mark L. Edmunds
---------------------------
Name: Mark Edmunds
Title: Vice President, Operations
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APPENDIX A
SPECIFICATIONS FOR KAOLIN
QUALITY SPECIFICATIONS (on a calcined basis)
(Average Over 1,000 T Delivered)
Al(2)O(3) Content
Weekly Average *%
Minimum Individual Sample *%
Maximum Individual Sample *%
Fe(2)O(3) Content
Maximum *%
Typical *%
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* Confidential Information in this Exhibit 10.4 has been omitted and filed
separately with the Securities and Exchange Commission.
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APPENDIX B
1. Annual Adjustment of Base Price Per Ton (example):
Base Price Per Ton $ *
Average Monthly PPI for Kaolin and Ball Clay for 2003 133.4
Average Monthly PPI for Kaolin and Ball Clay for 2004 130.3
Percentage Change (2.32%)
Revised Base Price Per Ton $ *
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* Confidential Information in this Exhibit 10.4 has been omitted and filed
separately with the Securities and Exchange Commission.
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APPENDIX C
Replacing the side agreement between Robin Dozier of CE Minerals and Tom
Palamara of CARBO Ceramics Inc.:
OBJECTIVE
To provide ore availability to CARBO Ceramics Inc. during periods of wet weather
(which can prevent hauling from the mine sites). CE Minerals will store a
mutually agreed upon tonnage of appropriate alumina content raw materials for
CARBO Ceramics Inc. at the former A.P. Green plant site.
PRICE
CE Minerals will invoice CARBO Ceramics Inc. for half of the contract price of
the ores when stockpiled, the remaining half of the contract price is to be
invoice upon delivery; plus shipping and handling cost incurred by CE Minerals
for the following:
1. Loading of ores at the various stockpile locations. ($ * per
ton)
2. Trucking of ores from the various stockpile locations to the
former A.P. Green plant site. Rates are as follows:
DISTANCE (MILES) RATE ($) PER TON
1 *
2 *
3 *
4 *
5 *
6 *
7 *
8 *
9 *
10 *
Mileage will be rounded to the nearest mile and rates interpolated
where required.
3. Weighing of the trucks on certified scales at the former A.P.
Green plant site and pushing up the piles. ($* per ton)
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* Confidential Information in this Exhibit 10.4 has been omitted and filed
separately with the Securities and Exchange Commission.
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