E.S. "Ned" Givens U.S. Generating Company
Vice President, Engineering & Construction
December 18, 1995
Mr. Eugene C. Holdaway
Costain Coal, Inc.
249 East Main Street, Suite 200
Lexington, KY 40507
Re: Amendment No. 2 - Fuel Supply and Waste Disposal Agreement
between Cedar Bay Generating Company and Costain Coal, Inc.
Dear Gene:
Enclosed are two (2) executed copies of Amendment No. 2 to the Fuel Supply and
Waste Disposal Agreement between Cedar Bay Generating Company (CBGC) and Costain
Coal, Inc. Please note that this Amendment is subject to Section 4 of the
Agreement which requires CBGC receiving approval from the financing parties.
Sincerely,
/s/ Ned
Edward S. Givens
ESG:cmb
Encls. (2)
cc: J. P. Kearney
AMENDMENT NO. 2
This AMENDMENT NO. 2 (the "Amendment"), dated as of December 19, 1995, is
entered into between CEDAR BAY GENERATING COMPANY, LIMITED PARTNERSHIP, formerly
known as AES CB Limited Partnership ("Buyer") and COSTAIN COAL INC. ("Seller").
WHEREAS, Cedar Bay Cogeneration, Inc., formerly known as AES Cedar Bay,
Inc. (the "General Partner"), and Seller have entered into a Fuel Supply and
Waste Disposal Agreement (the "Agreement"), dated as of April 21, 1989, as
subsequently assigned by the General Partner to Buyer pursuant to an Assignment
and Assumption Agreement, dated as of April 29, 1991, between Buyer and the
General Partner; and
WHEREAS, Buyer and Seller entered into Amendment No. 1 to the Agreement
dated as of March 31, 1993; and
WHEREAS, Buyer and Seller agreed by letter dated June 9, 1995 how to
implement the provision of the second sentence of Section 5.11(a) of the
Agreement; and
WHEREAS, the parties wish to amend the Agreement again as set out herein
in order to ratify and confirm certain actions of the parties with respect to
the disposal of Waste from the Facility;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
set forth below, the parties agree as follows:
SECTION 1. AMENDMENTS
1.1 The definition of Waste set forth in Section 1.1 of the Agreement is
hereby deleted and the following substituted therefore:
"Waste" means any solid fly ash and bottom ash waste, whether or not
pelletized, generated or produced by combustion of coal and Bark
with limestone at the Facility plus inert materials (i.e., sand or
other material having no active chemical or toxic properties) added
by the Buyer as necessary. Blow down water and boiler cleaning
sludge produced during boiler cleaning operations or otherwise are
specifically excluded from the definition of Waste. Waste may also
mean any short fiber reject ash produced by the addition of short
fiber rejects generated by the adjoining Stone Container Corporation
facility to the combustion of coal and Bark, provided that Seller is
able to obtain all Permits for the disposal of short fiber reject
ash at Seller's Waste Disposal Site.
-2-
1.2 The definition of Waste Disposal Site set forth in Section 1.1 of the
Agreement is hereby deleted and the following substituted therefore:
"Waste Disposal Site" means the physical location described in Annex
C attached hereto (including the Non-Pelletized Waste Facility)
generally described in Annex C attached hereto at which Seller shall
dispose of the Waste from the Facility in accordance with Article V
hereof.
1.3 The term "Non-Pelletized Waste Facility" is hereby added to Section
1.1 of the Agreement.
"Non-Pelletized Waste Facility" shall mean those facilities Seller
is required to construct at Seller's Waste Disposal Site in order to
take and process non-pelletized Waste in accordance with this
Agreement.
1.4 The first, second and third sentences of Section 5.1 of the Agreement
are hereby deleted and the following substituted therefore:
Buyer shall gather and load Waste at the Waste Acceptance
Point into trucks or railroad cars as designated by Seller. Seller
shall at its sole cost and risk, design, permit, construct, own and
operate the Non-Pelletized Waste Facility. Seller shall take (unless
Buyer exercises its option as provided in Section 5.11(a) hereof)
one-hundred percent (100%) of the pelletized and non-pelletized
Waste at the Waste Acceptance Point and transport such Waste and
dispose of such Waste at the Waste Disposal Site; provided, however,
that Seller's obligation to take such non-pelletized Waste shall not
commence until the earlier of operation of the Non-Pelletized Waste
Facility or May 1, 1996. Notwithstanding anything to the contrary in
this Agreement, if the Non-Pelletized Waste Facility is not
operating on or before May 1, 1996, Seller shall remain obligated to
take one-hundred percent (100%) of the non-pelletized Waste at the
Waste Acceptance Point and transport such waste and lawfully dispose
of such non-pelletized Waste at an alternative location, at Seller's
own cost and risk, provided that Buyer shall remain obligated to
make all payments due pursuant to Section 6.2 of this Agreement.
1.5 The third sentence of Section 5.3(c) is deleted in its entirety.
1.6 The second sentence of Section 5.6(a) is deleted in its entirety and
the following two sentences substituted therefore:
-3-
Buyer and Seller agree to cooperate in the Permit application
process to ensure that Permits for the Waste Disposal Site will
allow for the disposal of expected components of the Waste,
including by-products of the sulfur removal process, ash from the
Bark and ash from short fiber rejects generated by the adjoining
Stone Container Corporation facility. Seller represents and warrants
that it has all required Permits for disposal of the Waste, except
for ash from short fiber rejects generated by the adjoining Stone
Container Corporation facility.
1.7 The following sentence is added following the second sentence of
Section 5.11(a):
The implementation provisions with respect to the proviso of the
second sentence of Section 5.11(a) set forth in the June 9, 1995
letter between the parties captioned "Implementation of Section
5.11(a) of the Fuel Supply and Waste Disposal Agreement" are hereby
ratified, confirmed and made a part of the Agreement; provided,
however, that such implementation provisions shall apply to both
pelletized and non-pelletized Waste.
1.8 The following two sentences are added at the end of Section 5.11(a):
The Parties expressly acknowledge and agree that the ninety (90) day
notice provision does not apply to the current arrangements between
Buyer and Anker Coal Corporation with respect to the disposal by
Anker of non-pelletized Waste. Notwithstanding anything to the
contrary in this Agreement, in the event that the Non-Pelletized
Waste Facility is not operating after April 15, 1996, no fee shall
be due to Seller under this Section 5.11(a).
1.9 Section 5.11(b) of the Agreement is deleted in full.
1.10 Section 6.2 of the Agreement is hereby deleted and the following
substituted therefore:
Section 6.2. Waste Services Price. The price to be paid by
Buyer to Seller per Ton of Waste taken, transported and disposed of
by Seller pursuant to this Agreement (the "Waste Services Price") as
of the calendar quarter beginning with the first day of July, 1995
and ending with the last day of September, 1995 shall be $21.23.
Thereafter the Waste Services Price shall be calculated as of each
Quarterly Adjustment Date, beginning as of the first day of October,
1995, and shall equal:
WSP' x [1+(0.75 x PPI)]
-4-
Where:
WSP' = the Waste Services Price for the immediately preceding
calendar quarter; and
PPI has the meaning set forth in Section 6.1(b) hereof; and
PROVIDED, HOWEVER, (i) that for each Ton of Waste taken, transported
and disposed of by Seller in excess of 150,000 Tons in any calendar
year, beginning with January 1, 1996 through December 31, 1996, the
Waste Services Price otherwise determined under this Section 6.2
shall be reduced by ten and one half percent (10 1/2%); and (ii) for
each Ton of non-pelletized Waste taken, transported and disposed of
by Seller prior to April 15, 1995, Buyer shall pay an additional
$4.00 per Ton.
Changes in Applicable Laws shall result in the adjustment of the
Waste Services Price as set forth in Section 6.6 hereof.
1.11 Section 7.2 of the Agreement is hereby amended to read as follows:
Section 7.2. Payment. Buyer shall pay to Seller fifty percent
(50%) of the payment due on the basis of the invoice provided by
Seller pursuant to Section 7.1 hereof within twenty (20) days after
receipt thereof by Buyer. Buyer shall pay to Seller the remaining
fifty percent (50%) of the payment due by the end of the calendar
month within which the invoice referenced in the previous sentence
was provided by Seller pursuant to Section 7.1 hereof.
1.12 The paragraph captioned "Transportation" in Annex C, Section 1 is
hereby amended to delete the first word "Pelletized".
1.13 The paragraph captioned "Disposal Procedure" in Annex C, Section 1 is
hereby amended to delete the second word "solid".
SECTION 2. PAYMENT TO SELLER
On or before December 31, 1995, Buyer shall make a one-time payment to
Seller of Two Million Five Hundred Thousand Dollars ($2.5 million) in
consideration of this Amendment and as full satisfaction for any claims Seller
may have against Buyer under the Agreement up to and including the date hereof.
Seller hereby fully releases Buyer from any and all such claims. Buyer and
Seller expressly acknowledge and agree that the existence of such payment shall
not be admissible in any proceeding arising out of this Agreement for any
purpose whatsoever.
-5-
SECTION 3. REPRESENTATIONS AND WARRANTIES
Each party represents and warrants to the other that it is not in default
in the performance of any of its obligations under the Agreement. Each party
hereby warrants that each of its representations set forth in Section 12.1 of
the Agreement is true and complete on the date hereof as if made on and as of
the date hereof and as if the reference in said Section 12.1 to "this Agreement"
included a reference also to this Amendment and to Amendment No. 1. In addition,
Buyer warrants that its representation under Section 12.1(a) is true and
complete as of the date hereof as if the reference in said Section 12.1(a) to
"corporation" referred instead to "limited partnership" and the reference to
"incorporation" to "formation."
SECTION 4. CONDITION PRECEDENT
Neither party shall have any obligation to the other hereunder until such
time as Buyer obtains approval from the Financing Parties for its execution of
this Amendment No. 2.
SECTION 5. MISCELLANEOUS
Except as herein provided, the Agreement shall remain unchanged and in
full force and effect. This Amendment may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
amendatory instrument and any of the parties may execute this Agreement by
signing any such counterpart. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF FLORIDA.
-6-
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
as of the day and year first above written.
CEDAR BAY GENERATING COMPANY,
LIMITED PARTNERSHIP
By: /s/ M. Richard Smith
--------------------------
Name: M. Richard Smith
Title: VICE PRESIDENT
COSTAIN COAL INC.
By: /s/ Eugene C. Holdaway
--------------------------
Name: Eugene C. Holdaway
Title: Senior Vice President
Cedar Bay Generating Company
Limited Partnership
August 2, 1995
Costain Coal, Inc.
249 East Main Street, Suite 400
Lexington, Kentucky 40507
Attention:Executive Vice President
Re: Fly Ash and Bottom Ash Sales Agreement
Dear Sirs:
Pursuant to Section 5.11(a) of the Fuel Supply and Waste Disposal Services
Agreement between Cedar Bay Generating Company, L.P. ("Cedar Bay") and Costain
Coal, Inc. ("Costain"), dated April 21, 1989, as amended (the "Agreement"),
Cedar Bay hereby notifies Costain that Cedar Bay intends to enter into a Fly Ash
and Bottom Ash Sales Agreement with N-Viro International Corporation for the
sale of up to 1,000 tons per week of fly ash and/or bottom ash produced at the
Cedar Bay Generating Project. This letter also confirms my conversation with
Gene Holdaway, Vice President Sales and Marketing of Costain, on August 2, 1995,
in which Mr. Holdaway agreed that Costain would waive the requirement for ninety
days prior written notice set forth in Section 5.11(a) of the Agreement in
connection with the Fly Ash and Bottom Ash Sales Agreement being entered into
with N-Viro International Corporation. Please countersign and return to the
undersigned a copy of this letter to confirm Costain's waiver of the ninety day
notice requirement.
Very truly yours,
/s/ J. Franklin Stallwood
J. Franklin Stallwood
Project Manager
JFS/vs
cc: Mr. Eugene C. Holdaway
WAIVER CONFIRMED: cc. J. Hoehne
E. Davis
COSTAIN COAL, INC. G. Miller
By: /s/ Eugene C. Holdaway
----------------------
Name: Eugene C. Holdaway
Title: Vice President--
Sales & Marketing
P. Chrisman Iribe U.S. Generating Company
Executive Vice President
June 9, 1995
Eugene C. Holdaway
Vice President, Sales and Marketing
Costain Coal, Inc.
249 East Main Street, Suite 400
Lexington, Kentucky 40507
Re: Implementation of Section 5.11(a) of Fuel Supply and Waste Disposal
Agreement
Dear Mr. Holdaway:
This letter sets forth our understanding of how Cedar Bay Generating Company
("Cedar Bay") and Costain Coal Inc. ("Costain") will implement the proviso of
the second sentence of Section 5.11(a) of the Fuel Supply and Waste Disposal
Service Agreement, as amended, between Cedar Bay and Costain dated April 21,
1989. Such sentence, including the proviso, states:
Buyer agrees that it shall (except only to the extent of a case
described in Section 5.7 hereof) pay to Seller a fee of ten dollars
($10) for each Ton of Waste that is delivered to any third-party
waste disposer rather than to Seller pursuant to this [sic] Section
5.10(a); provided that such fee shall be payable only on the first
150,000 Tons of Waste so delivered in any calendar year less any
Tons delivered to Seller during such year.
In any calendar year, for each month that Cedar Bay ships any Waste to any
third-party waste disposer, and provided that as of the first day of that month
Cedar Bay has shipped 150,000 Tons or less of Waste to Costain, the fee to be
paid under Section 5.11(a) shall be computed as follows:
Fee = (BF) X (12,500 - TDC)
Where:
BF = The base fee of $10 as adjusted in accordance with the
fourth sentence of Section 5.11(a);
12,500 = 150,000 Tons of Waste divided equally by twelve
months; and
Eugene C. Holdaway
June 9, 1995
Page 2
TDC = Total tons of pelletized Waste shipped to Costain
during such month.
In the event the Fee is a negative number, no Fee shall be due from Cedar Bay to
Costain or from Costain to Cedar Bay. If, as of the end of the calendar year,
the total number of Tons of Waste Cedar Bay ships to Costain is 150,000 Tons or
less, a true-up will be conducted during the following January to ensure that
for the previous calendar year, Cedar Bay has paid Costain the full fee due
under Section 5.11(a) up to the 150,000 Tons of Waste maximum and that Costain
has provided Cedar Bay with credit for all pelletized Tons of Waste delivered to
Costain. In any calendar year, if at the end of a particular month during such
year the total number of Tons of Waste delivered to Costain and paid for by
Cedar Bay for that year exceeds 150,000 Tons of Waste, the true-up shall be
conducted during the following month and no further Fee shall be made to Costain
under Section 5.11(a) for that calendar year.
Please indicate your agreement with this implementation of the portion of
Section 5.11(a) referenced above by signing where indicated. Please keep one
executed original for your files and return one executed copy to my attention.
Sincerely,
CEDAR BAY GENERATING COMPANY, L.P.
/s/ P. Chrisman Iribe
P. Chrisman Iribe
Vice President
Acknowledged and Agreed:
COSTAIN COAL INC.
By: /s/Eugene C. Holdaway
---------------------------------
Name: Eugene C. Holdaway
---------------------------------
Title: Vice President-Sales & Marketing
---------------------------------
EXECUTION COPY
AMENDMENT NO. 1
This AMENDMENT NO. 1 (the "Amendment"), dated as of March 31, 1993, is
entered into between CEDAR BAY GENERATING COMPANY, LIMITED PARTNERSHIP, formerly
known as AES CB Limited Partnership ("Buyer") and Costain Coal Inc. ("Seller").
WHEREAS, Cedar Bay Cogeneration, Inc., formerly known as AES Cedar Bay,
Inc. (the "General Partner"), and Seller have entered into a Fuel Supply and
Waste Disposal Agreement (the "Agreement"), dated as of April 21,1989, as
subsequently assigned by the General Partner to Buyer pursuant to an Assignment
and Assumption Agreement, dated as of April 29, 1991, between Buyer and the
General Partner; and
WHEREAS, the parties hereto wish to amend the Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
set forth below, the parties hereto agree as follows:
SECTION 1. AMENDMENTS
1.1. Section 1.1 of the Agreement is hereby amended by deleting the
definitions "Subordinated Lender" and "Subordinated Loan Agreement" in their
entirety and by adding the following definitions:
"'Capital Recovery Payment' has the meaning set forth in Article XIX
hereof."
"'GAAP' shall mean generally accepted accounting principles as in
effect from time to time."
"'Master Agreement' means the Amended and Restated Master Agreement,
dated as of March 31,1993 among Cedar Bay Generating Company,
Limited Partnership, formerly known as AES CB Limited Partnership,
Banque Paribas, New York Branch, as issuing bank, agent and
collateral agent, and the financial institutions party thereto."
1.2. Section 2.1(b) of the Agreement is hereby deleted in its entirety.
1.3. Section 4.3(c) of the Agreement is hereby amended by (i) deleting
the phrase, "reimburses Buyer for capital costs incurred by Buyer"
and inserting in its place the phrase, "pays Buyer a fee for
providing use of improvements" and (ii) deleting the phrase "Carrier
Reimbursement Amount" and inserting in its place the word "fee".
1.4. Section 6.7 of the Agreement is hereby deleted in its entirety.
2
1.5. A new Section 9.3 is hereby added to the Agreement and shall read as
follows:
"Section 9.3 Financial Statements. Within (i) 90 days after each fiscal
year of the Buyer, and (ii) within 30 days after each fiscal quarter of
each fiscal year of the Buyer, Buyer shall deliver to Seller statements of
income, retained earnings, and cashflow for such year and such quarter,
respectively, and the balance sheets in relation thereto. Each annual
financial statement shall be accompanied by an opinion thereon of an
independent certified public accountant of recognized national standing,
which opinion shall state that said financial statements fairly present
the financial condition and results of operations of Buyer as at the end
of, and for, such fiscal year in accordance with GAAP. Each quarterly
financial statement shall be accompanied by a certificate of a senior
financial officer of Buyer, which certificate shall state that such
statements fairly present the financial condition and results of
operations of Buyer in accordance with GAAP as at the end of, and for,
such period. Any such information received by Seller pursuant to this
Section 9.3 shall be subject to the confidentiality provisions contained
in Section 17.5 hereof"
1.6 Section 10.2 of the Agreement is hereby amended by adding a sentence
following the last sentence thereof, to read as follows:
"In addition to, and without limiting the effect of, the remedies provided
in this Agreement, upon either (i) termination of this Agreement by Seller
pursuant to Section 10.2 hereof following a default of Buyer, (ii)
termination of this Agreement by Buyer (other than as a result of (A) the
occurrence and continuance of an Event of Default by Seller or (B) the
occurrence and continuance of an event of Force Majeure pursuant to
Section 8.3 hereof) or (iii) the occurrence of any event described in
clause (e) or (f) of Section 6 of the Master Agreement (each of (i), (ii)
and (iii), an "Early Payment Event"), a termination fee shall be
immediately due and payable by Buyer to Seller. Such termination fee shall
equal the sum of all unpaid Capital Recovery Payments. Upon the
termination of this Agreement other than as the result of an Early Payment
Event, Buyer shall owe Seller, in addition to and without limiting the
effect of, the remedies provided in this Agreement, a termination fee.
Such termination fee shall equal the sum of all unpaid Capital Recovery
Payments and shall be payable, at Buyer's option, either (A) in full upon
termination, or (B) in accordance with the schedule for Capital Recovery
Payments specified in Article XIX hereof."
1.7. Section 10.4 of the Agreement is hereby amended by adding in the
last sentence thereof the words "or in respect of any Capital
Recovery Payment" after the word "services".
3
1.8. A new Article XVIII is hereby added to the Agreement and shall read
as follows:
"ARTICLE XVIII
INCENTIVE ADJUSTMENT
Incentive Adjustment. As an incentive to Buyer to maximize its purchases
of Coal supply and ash waste disposal services under the Agreement, Seller
agrees to provide Buyer with a price incentive (the "Incentive
Adjustment") effective January 1, 1994, and to be applied quarterly in
accordance with Table 1.
================================================================================
TABLE 1: ANNUAL INCENTIVE PRICE ADJUSTMENT-DOLLARS PER TON
PAYMENT SHIPPED ("Adjustment Rate")
================================================================================
Year Greater Than 750,000 Less Than
Tons/Year 750,000 Tons/Year
- --------------------------------------------------------------------------------
1994* 1.00 0.85
1995 1.00 0.85
1996 1.00 0.85
1997 1.00 0.85
1998 1.00 0.85
================================================================================
At the end of each calendar quarter, Seller shall determine the actual
amount of Coal deliveries for such quarter and the Adjustment Rate
applicable to such level of Coal deliveries under Table 1 (determined on
the basis of such actual amount of deliveries as adjusted to reflect the
rate of delivery during a full calendar year), such Adjustment Rate to be
applied to the entire amount of Coal deliveries for such calendar quarter.
This calculation shall be included in the next monthly invoice to be
submitted by Seller to Buyer in accordance with Section 7.1, and the
resultant Incentive Adjustment shall be applied as a credit toward the
payment due for the Coal deliveries for the last month of the quarter
covered by the invoice. If the Incentive Adjustment for the quarter
exceeds the amount due Seller for Coal delivered during the last month of
the quarter, then the credit shall be applied to reduce the amount due
Seller to zero. Any remaining credit shall be carried over to the next and
subsequent monthly billings until the credit due is reduced to zero. The
calculations for the fourth quarter of each full calendar year shall
include an adjustment to reflect the actual level of Coal deliveries for
such year, and the Adjustment Rate shall be applied to the entire amount
of Coal deliveries for such year.
- ----------
* In the event commercial operation occurs subsequent to January 1, 1994,
the Adjustment Rate for the calendar quarter in which commercial operation
occurs and for such year shall be based on the amount of Coal actually
shipped during the applicable period, as adjusted to reflect the rate of
delivery during a full calendar quarter or calendar year, as applicable."
4
1.9. A new Article XIX is hereby added to the Agreement and shall read as
follows:
"ARTICLE XIX
CAPITAL RECOVERY PAYMENT
In addition to each obligation of Buyer to make payment to Seller
hereunder (including, without limitation, any such obligation under
Section 4.3(c)), Buyer hereby agrees to pay Seller, as compensation for
the capital expenditures and investment commitments made by Seller to
fulfill its obligations in accordance with this Agreement, a fee equal to
the sum of the Capital Recovery Payments defined below, payable in annual
installments (each such installment payment, a "Capital Recovery Payment")
during the years 2001 through 2008, calculated in accordance with the
following formula:
X(Y) = P
-------
900,000
Where P = Capital Recovery Payment
X = Annual Payment Factor specified for the
given contract year in Table 1
Y = The average annual amount of Coal actually
delivered during the first seven calendar
years of the Agreement beginning with the
first year of commercial operation
================================================================================
TABLE 1:
================================================================================
Annual Payment Factor
Year ($1,000's)
- --------------------------------------------------------------------------------
2001 900
2002 900
2003 945
2004 990
2005 1035
2006 1080
2007 1080
2008 1080
================================================================================
Payment shall be made by Buyer on a quarterly basis with the first payment
due at the end of the first calendar quarter of 2001. The quarterly
payment due Seller shall be one fourth of the annual Capital Recovery
Payment and shall be invoiced separately by Seller within 15
5
days of the end of the preceding quarter. Buyer shall pay the amount
specified in such invoice within 30 days of receipt of the invoice."
SECTION 2. REPRESENTATIONS AND WARRANTIES
Each party hereto represents and warrants to the other that it is not in
default in the performance of any of its obligations under the Agreement. Each
party hereto hereby warrants that each of its representations set forth in
Section 12.1 of the Agreement is true and complete on the date hereof as if made
on and as of the date hereof and as if the reference in said Section 12.1 to
"this Agreement" included a reference also to this Amendment. In addition, Buyer
warrants that its representation under Section 12.1(a) is true and complete as
of the date hereof as if the reference in said Section 12.1(a) to "corporation"
referred instead to "limited partnership" and the reference to "incorporation"
to "formation."
SECTION 3. AMENDMENTS TO DISBURSEMENT AGREEMENT
(a) Buyer agrees that until the Capital Recovery Payments are paid in full
to the Seller and Fuel Costs, as defined under the Master Agreement, are no
longer payable, it will not without the prior written consent of the Seller
amend or modify the priority of payment of Fuel Costs or Capital Recovery
Payments as set forth in Sections 2 and 5 of the Disbursement Agreement, as
defined under the Master Agreement, or the definition of those terms.
(b) Except as set forth above, the Seller shall not have any other rights
under or in respect of the Disbursement Agreement.
SECTION 4. MISCELLANEOUS
Except as herein provided, the Agreement shall remain unchanged and in
full force and effect. This Amendment may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
amendatory instrument and any of the parties hereto may execute this Agreement
by signing any such counterpart. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF FLORIDA.
6
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed as of the day and year first above written.
CEDAR BAY GENERATING COMPANY,
LIMITED PARTNERSHIP
By: /s/ Illegible
Name: Illegible
Title: Vice President
COSTAIN COAL INC.
By: /s/ M.E. Donohue
Name: M.E. Donohue
Title: Chief Financial Officer-
Eastern Division
ACKNOWLEDGED AND AGREED
in respect of Section 3
above:
BANQUE PARIBAS, NEW YORK
BRANCH, as Agent and
Collateral Agent
By: /s/ Dan Cozine
---------------
Name: Dan Cozine
Title: AVP
FUEL SUPPLY AND
WASTE DISPOSAL SERVICES
AGREEMENT
between
AES CEDAR BAY, INC.,
Buyer
and
COSTAIN COAL INC.,
Seller
--------------------------------
Dated as of April 21, 1989
--------------------------------
Cogeneration Facility
Jacksonville, Florida
TABLE OF CONTENTS
Page
----
ARTICLE I - DEFINITIONS
Section 1.1. Definitions ........................................ 2
ARTICLE II - TERM
Section 2.1. Term ............................................... 7
Section 2.2. No Reopeners ....................................... 8
ARTICLE III - SALE OF COAL
Section 3.1. Sale and Purchase .................................. 8
Section 3.2. Quantity ........................................... 9
Section 3.3. Quality ............................................ 10
Section 3.4. Adjustments to Specifications ...................... 12
Section 3.5. Sources and Reserves ............................... 13
ARTICLE IV - DELIVERY OF COAL
Section 4.1. Delivery ........................................... 15
Section 4.2. Delivery Schedules ................................. 15
Section 4.3. Demurrage Charges .................................. 17
Section 4.4. Measurement of Quality ............................. 17
Section 4.5. Measurement of Quantity ............................ 20
Section 4.6. Shipping Reports ................................... 21
Section 4.7. Notice of Deliveries ............................... 21
Section 4.8. Noncomplying Deliveries ............................ 21
Section 4.9. Title and Risk of Loss ............................. 24
Section 4.10. Stockpile Obligations .............................. 25
ARTICLE V - DISPOSAL OF WASTE
Section 5.1. Acceptance, Transportation and
Disposal Obligation ................................ 25
Section 5.2. Quantity ........................................... 26
Section 5.3. Method of Waste Removal ............................ 26
Section 5.4. Removal Schedules .................................. 28
Section 5.5. Notices ............................................ 29
Section 5.6. Compliance with Permits ............................ 29
Section 5.7. Damages for Failure to Take,
Transport or Dispose of Waste ...................... 30
Section 5.8. Title and Risk of Loss ............................. 31
Section 5.9. Hazardous Waste .................................... 31
Section 5.10. Noncomplying Waste Other Than
Hazardous Waste .................................... 31
Section 5.11. Arrangements Other Than With
Seller ............................................. 32
ARTICLE VI - PURCHASE PRICE FOR COAL AND
WASTE DISPOSAL SERVICES
Section 6.1. Coal Price ......................................... 33
Section 6.2. Waste Services Price ............................... 36
i
Page
----
Section 6.3. Use of Indexes ..................................... 36
Section 6.4. As-Delivered Price ................................. 36
Section 6.5. Governmental Impositions ........................... 36
Section 6.6. Changes in Applicable Laws ......................... 37
Section 6.7. Additional Fee ..................................... 38
ARTICLE VII - PAYMENT AND RECORDS
Section 7.1. Billing ............................................ 39
Section 7.2. Payment ............................................ 40
Section 7.3. Non-confidential Records ........................... 40
Section 7.4. Audit of Records ................................... 41
ARTICLE VIII - FORCE MAJEURE
Section 8.1. Definition ......................................... 42
Section 8.2. Effect of Force Majeure ............................ 42
Section 8.3. Termination Due to Force Majeure ................... 44
ARTICLE IX - ACCESS AND ASSURANCES
Section 9.1. Access ............................................. 45
Section 9.2. Assurances ......................................... 45
ARTICLE X - EVENTS OF DEFAULT AND REMEDIES
Section 10.1. Events of Default .................................. 45
Section 10.2. Remedies for Breach ................................ 47
Section 10.3. Waiver of Breach ................................... 48
Section 10.4. Rights and Obligations
of the Parties ..................................... 48
Section 10.5. Cumulative Remedies ................................ 48
ARTICLE XI - INSURANCE
Section 11.1. Insurance .......................................... 49
Section 11.2. Policies and Endorsements .......................... 49
Section 11.3. Waiver of Subrogation .............................. 50
Section 11.4. Non-limitation of Liability ........................ 50
ARTICLE XII - REPRESENTATIONS, WARRANTIES
AND COVENANTS
Section 12.1. General Representations,
Warranties and Covenants ........................... 50
Section 12.2. Compliance with Laws ............................... 51
Section 12.3. Mutual Assistance .................................. 53
ARTICLE XIII - ARBITRATION
Section 13.1. Arbitration ........................................ 53
ii
Page
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ARTICLE XIV - INDEMNIFICATION
Section 14.1. Indemnification of Seller .......................... 54
Section 14.2. Indemnification of Buyer ........................... 55
Section 14.3. Notice and Legal Defense ........................... 56
Section 14.4. Failure to Defend Action ........................... 56
Section 14.5. Indemnification Amount ............................. 57
Section 14.6. Survival ........................................... 57
ARTICLE XV - NOTICE AND SERVICE
Section 15.1. Notice ............................................. 57
Section 15.2. Service ............................................ 57
ARTICLE XVI - SUCCESSORS AND ASSIGNS
Section 16.1. Assignment by Buyer and Seller ..................... 59
Section 16.2. Binding Effect ..................................... 62
ARTICLE XVII - MISCELLANEOUS
Section 17.1. Independent Contractor ............................. 62
Section 17.2. Agents of Seller; Subcontractors ................... 62
Section 17.3. Waste Contractor ................................... 63
Section 17.4. Certain Notices .................................... 64
Section 17.5. Confidentiality .................................... 64
Section 17.6. Amendments ......................................... 64
Section 17.7. Choice of Law ...................................... 64
Section 17.8. Severability and Renegotiation ..................... 64
Section 17.9. Other Agreements ................................... 65
Section 17.10. Captions ........................................... 65
Section 17.11. Counterparts ....................................... 65
Section 17.12. Further Assurances ................................. 65
Section 17.13. No Third Party Rights .............................. 65
Section 17.14. Survival of Provisions ............................. 65
iii
ANNEXES
ANNEX A - FACILITY SITE
ANNEX B - DESCRIPTION OF LOADING FACILITY AND DEDICATED COAL RESERVES
ANNEX C - DESCRIPTION OF WASTE DISPOSAL SERVICES AND SITES
ANNEX D - CALCULATION OF INDEXES FOR COAL PRICE AND WASTE SERVICES PRICE
ANNEX E - SAMPLE CALCULATION OF MONTHLY COAL PAYMENT
ANNEX F - COMPONENTS OF PERIODIC ANALYSIS
ANNEX G - EXAMPLE OF STOCKPILE DEFICIENCY CALCULATION
iv
FUEL SUPPLY AND
WASTE DISPOSAL SERVICES
AGREEMENT
AGREEMENT dated as of April 21, 1989, between AES CEDAR BAY, INC., a
Delaware corporation ("Buyer"), and COSTAIN COAL INC., a Delaware corporation
("Seller").
W I T N E S S E T H :
WHEREAS, Buyer desires to construct and operate a nominal 225
megawatt (net) coal-fired cogeneration facility at Jacksonville, Florida for the
production and sale of steam and electricity;
WHEREAS, Buyer has entered into an agreement with Florida Power &
Light Company for the purchase and sale of electricity produced by said
cogeneration facility;
WHEREAS, Seller desires to sell and deliver coal to Buyer for use in
the production of steam and electricity at the cogeneration facility and to
take, transport and dispose of certain waste produced by said cogeneration
facility; and
WHEREAS, Buyer desires to purchase and accept such coal from Seller,
and to have Seller take, transport and dispose of such waste produced by said
cogeneration facility, all upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the agreements and covenants
hereinafter set forth, and intending to be legally bound hereby, the parties
hereto covenant and agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. Capitalized terms used in this Agreement
and not otherwise defined herein shall have the following meanings:
"AAA" means the American Arbitration Association.
"Adjustment Date" has the meaning set forth in Section 6.1 hereof.
"Agreement" means this agreement, including all appendices and all
amendments thereto that may be made from time to time.
"Applicable Laws" means valid laws, treaties, rules, regulations,
ordinances, orders, codes, judgments, decrees, injunctions, Permits or
decisions having the force of law of any federal, state or local
government, authority, agency, court or other governmental body, including
official interpretations thereof which are binding on the Parties as a
matter of law, having jurisdiction over the matter in question, as in
effect from time to time.
"As Received" means the condition of the Coal supplied hereunder at
the Coal sampling point as designated in Section 4.4(b) hereof.
"ASTM" means the American Society for Testing Materials.
"Average Specifications" means the specifications for Coal set forth
in Section 3.3(b) hereof.
"Bark" means tree bark supplied by Seminole Kraft Corporation to
Buyer which is a by-product from paper-making operations of Seminole Kraft
Corporation's paper mill adjoining the Facility Site.
"Btu" means a British thermal unit.
"Business Day" means Monday through Friday excluding federal
holidays.
"Buyer" means AES Cedar Bay, Inc., a Delaware corporation, and its
successors and permitted assigns, as buyer hereunder.
2
"Carrier" means the railroad transporting and delivering the Coal,
as designated by Seller.
"Carrier Car" means a bottom-dump, open-top hopper rail car owned by
the Carrier.
"Coal" means coal supplied or to be supplied by Seller pursuant to
this Agreement, but excluding any reclaimed Fines or materials from
tailing ponds or gob piles.
"Coal Delivery Point" means the physical point at which Coal is to
be delivered to Buyer at the Facility Site in accordance with Section 4.1
hereof.
"Coal Price" means the price for Coal as calculated pursuant to
Sections 6.1 and 3.4(c) hereof, as such may be adjusted from time to time
hereunder.
"Coal Reserves" has the meaning set forth in Section 3.5(b) hereof.
"Commercial Operation Date" means the date which Buyer designates in
writing as the initial date of commercial operation of the Facility as
specified in the Power Purchase Agreement, which date, for purposes of
this Agreement, is expected to be not later than March 31, 1993, but which
shall be designated to be a date not later than the earlier of (a) January
1, 1995 or (b) 90 days after the date on which coal shipments (other than
start-up coal shipments) begin.
"Construction Contract" means the construction contract to be
entered into between Buyer and the entity or entities chosen by Buyer and
providing for the design, engineering, construction and testing of the
Facility, including all appendices and amendments thereto that may be made
from time to time.
"Electricity Purchaser" means Florida Power & Light Company, a
Florida corporation.
"Event of Default" has the meaning set forth in Section 10.1 hereof.
"Facility" means those components comprising a 225 megawatt (net)
coal-fired cogeneration plant to be located in Jacksonville, Florida, and
related facilities located on the Facility Site, including without
limitation the appropriate transmission line, storage silos and any and
all appliances, parts, instruments,
3
appurtenances, accessories and other property that may be incorporated or
installed in or attached to or otherwise become a part of such plant, the
coal and limestone unloading and waste loading apparatus, and all
associated materials, transport systems and associated equipment to be
located at or near the Facility Site, and related facilities, including
without limitation any and all appliances, parts, instruments,
appurtenances, accessories and other property that may be incorporated or
installed in or attached to or otherwise become a part of such apparatus
and equipment.
"Facility Site" means the approximately thirty (30) contiguous acres
of real property in Jacksonville, Florida, as shown in Annex A attached
hereto, upon which certain parts of the Facility will be located.
"Financial Closing Date" means the date of the first closing of the
initial construction financing of the Facility.
"Financing Documents" means any and all loan agreements, notes,
indentures, security agreements, subordination agreements, mortgages,
partnership agreements, subscription agreements, participation agreements
and other documents relating to the construction, interim and long-term
financing (both debt and equity) of the Facility and any refinancing of
the Facility (including a leveraged lease), including any and all
modifications, extensions, renewals and replacements of any such financing
or refinancing.
"Financing Parties" means (i) any and all lenders providing the
construction, interim or long-term financing (including a leveraged lease
or any other refinancing thereof) for the Facility, and any trustee or
agent acting on their behalf, and (ii) any and all equity investors
including partners of Buyer (but excluding Buyer) providing financing or
refinancing for the Facility, and any trustee or agent acting on their
behalf.
"Fines" means Coal of a size which passes through a 28 Tyler mesh
opening.
"Force Majeure" has the meaning set forth in Section 8.1 hereof.
"Hazardous Waste" means a substance which is classified as a
hazardous waste under RCRA or similar Applicable Laws.
4
"Indemnified Party" has the meaning set forth in Section 14.3
hereof.
"Individual Specifications" means the specifications for the Coal
set forth in Section 3.3(a) hereof.
"Initial Delivery Date" means the first day upon which Seller is
scheduled to deliver Coal to Buyer pursuant to this Agreement.
"Laboratory" has the meaning set forth in Section 4.4(a) hereof.
"Letter Agreement" has the meaning set forth in Section 2.1 hereof.
"Loading Facility" has the meaning set forth in Section 3.5(a)
hereof.
"month", "day" and "year" mean the calendar month, day and year,
respectively.
"Party" means either Seller or Buyer, as the case may be, and
"Parties" means Seller and Buyer.
"Periodic Analysis" has the meaning set forth in Section 4.4(e)
hereof.
"Permit" means any valid waiver, exemption, variance, franchise,
permit, authorization, license or similar order of or from any national,
federal, state or local government, authority, agency, court or other
body, whether in the United States or outside of the United States, having
jurisdiction over the matter in question, as in effect from time to time.
"Power Purchase Agreement" means the power purchase agreement for
the sale of electricity generated by the Facility dated as of May 6, 1988
between Buyer and the Electricity Purchaser, including all appendices and
all amendments thereto that may be made from time to time.
"Price Ceiling" has the meaning set forth in Section 6.1(c) hereof.
"Price Floor" has the meaning set forth in Section 6.1(c) hereof.
5
"Prime Rate" means the interest rate (sometimes referred to as "Base
Rate") for large commercial loans to creditworthy entities published by
the Agent Bank (as defined in the Financing Documents) or its successor
bank, as such rate may be in effect from time to time.
"RCRA" means the Resource Conservation and Recovery Act of 1976, 42
U.S.C. ss.ss. 6901-6991(i), and all amendments thereto that may be made
from time to time.
"Quarterly Adjustment Date" has the meaning set forth in Section
6.1(b) hereof.
"Seller" means Costain Coal Inc., a Delaware corporation, and its
successors and permitted assigns, as seller hereunder.
"Seller Car" means a bottom-dump, open-top hopper rail car owned or
leased by the Seller.
"Shareholder's Letter Agreement" has the meaning set forth in
Section 2.1 hereof.
"Source Sample" has the meaning set forth in Section 4.4(b) hereof.
"Specifications" means any or all of the Individual Specifications,
Average Specifications, and Periodic Specifications, as appropriate.
"Subordinated Lender" means Seller or its designee approved by
Buyer.
"Subordinated Loan Agreement" has the meaning set forth in Section
2.1 hereof.
"Superfund" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund
Amendment and Reauthorization Act of 1986, 42 U.S.C. ss.ss. 9601-9675, and
all additional amendments thereto that may be made from time to time.
"Ton" means a short ton of 2,000 pounds (avoirdupois).
"Unit Train" means the train transporting and delivering Coal
hereunder, which train shall contain no more than ninety (90) rail cars,
each such car rated to a maximum capacity of approximately one-hundred
(100) Tons.
6
"Waste" means solid fly ash and bottom ash waste generated or
produced by combustion of coal and Bark with limestone at the Facility
plus inert materials (i.e., sand or other material having no active
chemical or toxic properties) added by Buyer as necessary. Blow down water
and boiler cleaning sludge produced during boiler cleaning operations or
otherwise are specifically excluded from the definition of Waste.
"Waste Acceptance Point" means the physical point at which Seller
shall take the Waste in trucks or rail cars from the Facility Site in
accordance with Article V hereof.
"Waste Disposal Site" means the physical location described in Annex
C attached hereto at which Seller shall dispose of the Waste from the
Facility in accordance with Article V hereof.
"Waste Services Price" means the price for Waste taking,
transportation and disposal services as calculated pursuant to Sections
6.2 and 6.6 hereof, as such may be adjusted from time to time hereunder.
ARTICLE II
TERM
Section 2.1. Term.
(a) Duration. This Agreement shall be effective upon execution
hereof and, unless earlier terminated in accordance with the terms hereof or
applicable law, shall continue for a period of twenty (20) years after the
Commercial Operation Date.
(b) Subordinated Debt. Within thirty (30) days after the date
hereof, Buyer and the Subordinated Lender will enter into a Letter Agreement
pursuant to which the Subordinated Lender will enter into a subordinated loan
agreement (the "Subordinated Loan Agreement") on the Financial Closing Date upon
satisfaction of specified conditions precedent. The Subordinated Loan Agreement
shall constitute one of the Financing Documents, contain terms and conditions
(other than terms relating to fees, premiums, interest rates, timing of
drawdowns and other pricing matters) substantially the same as those in the
other subordinated loan agreements included in the Financing Documents, and
shall commit the Subordinated Lender to lend
7
to Buyer up to $15,000,000. If the Parties have not entered into the Letter
Agreement by the above-specified date, then either Party may thereafter
terminate this Agreement upon ten (10) days written notice to the other. In the
event the Subordinated Lender breaches the aforementioned Letter Agreement by
not entering into the Subordinated Loan Agreement in accordance with the terms
of the Letter Agreement, Buyer may, in addition to its other rights and
remedies, terminate this Agreement without any further obligations to Seller
under this Agreement, such termination to be effected by written notice to
Seller given within thirty (30) days after the occurrence of such breach.
(c) Shareholder's Letter Agreement. Within twenty (20) days after
the date hereof, Buyer and Seller will enter into a Shareholder's Letter
Agreement (the "Shareholder's Letter Agreement") in form and substance
satisfactory to the Parties. If the Parties have not entered into the
Shareholder's Letter Agreement by the above-specified date, then either Party
may thereafter terminate this Agreement upon ten (10) days written notice to the
other.
(d) Early Termination. In the event the Financial Closing Date does
not occur by July 1, 1991, then Seller shall have the right to terminate this
Agreement upon thirty (30) days written notice to Buyer. In the event the
Financial Closing Date does not occur by January 1, 1995 and this Agreement has
not been terminated prior to such date, then this Agreement shall terminate as
of such date without any requirement for notice hereunder.
Section 2.2. No Price Reopeners. During the term of this Agreement,
there shall be no price adjustments, except as specifically set forth in
Sections 3.4(c), 4.3, 5.9, 5.10, 5.11, 6.1, 6.2, 6.5, 6.6 and 6.7 hereof.
ARTICLE III
SALE AND PURCHASE OF COAL
Section 3.1. Sale and Purchase. Seller agrees to sell and deliver to
Buyer, and Buyer agrees to purchase and accept, Coal in the quantities, of the
qualities, and upon the other terms and conditions set forth in this Agreement.
Seller shall perform its obligations under this Agreement in a good and
workmanlike manner and in accordance with the generally accepted standard of
care in the coal supply
8
industry. Buyer shall perform its obligations under this Agreement in a good and
workmanlike manner and in accordance with the generally accepted standard of
care in the power supply industry.
Section 3.2. Quantity.
(a) Requirements. During the term of this Agreement, Seller shall
sell and deliver to Buyer and Buyer shall purchase from and pay Seller for
(subject to Section 3.2(b) hereof), one-hundred percent (1O0%) of Buyer's coal
requirements for the Facility in each year, which currently are estimated to
equal approximately 80,000 Tons of coal from the Financial Closing Date until
the Commercial Operation Date and approximately 925,000 Tons of coal per year
from the Commercial Operation Date through the remaining term of this Agreement.
It is understood and acknowledged by the Parties that such estimates are for
informational purposes only, and that the actual quantity of Coal to be supplied
hereunder shall be determined by, among other things, the actual availability
and operating performance of the Facility, the demand for electricity by the
Electricity Purchaser and the quality and other characteristics of the coal used
at the Facility. Buyer and Seller acknowledge that Bark will also be used as
fuel at the Facility, in amounts not exceeding fifteen percent (15%) by heat
content of the total fuel requirements of the Facility. Buyer will use only coal
and Bark (and gas or oil for start-up purposes only) as fuel in the Facility.
Notice of estimates of quantity requirements of Coal (and estimates of Bark use)
shall be given by Buyer to Seller as specified in Section 4.2 hereof.
(b) Failure of Seller to Deliver. If at any time Seller fails for
any reason (including without limitation breach of this Agreement, Force Majeure
or the failure to perform of any third party) to deliver Coal as required under
this Agreement, Buyer shall have the right to obtain coal from any other source
as and to the extent and for the duration reasonably necessary to enable Buyer
to replace the coal not being delivered by Seller, and Buyer shall not be
considered in breach of this Agreement as a result of taking such action. Buyer
shall first provide Seller notice of Buyer's intent to order replacement Coal,
and Seller shall have three (3) days from the date of receipt of such notice to
elect to ship such replacement Coal and to provide Buyer with reasonable
assurance that such Coal will be delivered within three (3) days after the end
of such initial three (3) day period. Absent such election and provision of
assurance from Seller, Buyer may proceed to order replacement Coal.
9
Seller shall use reasonable efforts to assist Buyer in finding and acquiring
such replacement supplies. The amounts of Coal Buyer is required to purchase
from Seller pursuant to Section 3.2(a) hereof shall be reduced by any amounts
Buyer obtains from other sources pursuant to this Section 3.2(b).
(c) Damages for Failure of Seller to Deliver. Except as excused
hereunder, if Seller shall fail to deliver Coal as required under this
Agreement, Buyer shall have the right to obtain coal from any other source as
and to the extent and for the duration reasonably necessary to enable Buyer to
replace the Coal not being delivered by Seller, and Buyer shall not be
considered in breach of this Agreement as a result of taking such action,
provided that Buyer shall give Seller three days' advance notice of any such
alternative arrangements during which period Seller may identify or propose
replacement supplies, which proposal may include shipments delivered by Seller,
and which proposal shall be accompanied by reasonable assurances that the coal
will be delivered within three days after the giving of such proposal and
assurances. In the event that Buyer purchases replacement coal supplies pursuant
to this Section 3.2(c), Seller shall reimburse Buyer for the excess, if any, of
the direct, out-of-pocket costs reasonably incurred by Buyer in connection with
the purchase of replacement coal over the costs that otherwise would have been
incurred for the purchase of Coal under the terms of this Agreement.
Section 3.3. Quality. The Coal delivered by Seller to Buyer
hereunder shall have the following qualities and characteristics:
(a) Individual Specifications. Subject to Sections 4.8(a) and (b)
hereof, the following minimum and maximum specifications (the "Individual
Specifications"), shall apply to each shipment of Coal hereunder with such
compliance to be determined on the basis of the analysis of said delivery
pursuant to Section 4.4 hereof:
Total Moisture 10% maximum
Total Ash 14% maximum
Heat Content 11,500 Btu/lb
(ASTM D-2015 or D-3286) minimum
Total Sulfur 1.5% maximum
10
Fines 25% maximum
Top Size Maximum of 2% over
4 inches
Na(2)O plus K(2)O in ash 5% maximum
(b) Average Specifications. The results of the analysis of each
shipment of As-Received Coal obtained pursuant to Section 4.4 hereof
(after the first five (5) such shipments) shall be averaged on a weighted
basis with the results of the analyses of the five immediately preceding
shipments of As-Received Coal, and the average so calculated must satisfy
the following minimum and maximum specifications (the "Average
Specifications"):
Total moisture 9% maximum
Ash 12% maximum
Heat Content 12,000 Btu/lb.
(ASTM D-2015 or D-3286) minimum
Total Sulfur 1.2% maximum
Fines 15% maximum
Top Size Maximum of 2% over
4 inches
Na(2)O plus K(2)O in ash 3.4% maximum
Hardgrove grindability index 40 minimum
(c) All Coal delivered hereunder shall be substantially free of
impurities, including, but not limited to, bone, slate, earth, clay, rock,
metal objects, discrete pieces of pyrite (other than pyrite inherent in
the Coal) or wood. No oil or other material will be added to change the
natural heating value of the Coal. Seller will use reasonable efforts to
load each shipment of Coal in a manner that will reasonably ensure a
uniformity of size.
11
Section 3.4. Adjustments to Specifications.
(a) Adjustments for Test Burn. Within twenty (20) days after a
request from Buyer, Seller shall deliver to a location designated by Buyer Coal
consistent with the Specifications and in sufficient quantities (estimated to be
one-hundred (100) Tons of Coal) such that Buyer can complete, prior to the
actual performance testing of the Facility under the Construction Contract, a
test burn demonstrating the qualities of the Coal. The test burn, if any, shall
be completed within three (3) months after the Financial Closing Date and shall
include the burning of the Coal, the Bark and limestone. Seller shall be
promptly reimbursed for the cost of shipping the Coal to the test location.
Buyer agrees to deliver to Seller within thirty (30) days after such test burn a
sample of the waste resulting therefrom. If Buyer reasonably determines after
such test that changes in the Specifications may be necessary for the efficient
operation of the Facility in accordance with Applicable Laws and Permits, Buyer
shall have the right to request adjustments in the Specifications as necessary
for the Facility to operate in such manner, provided that Buyer shall first make
reasonable investigation into the practicality of making physical adjustments to
the Facility in lieu of or in addition to making such changes in the
Specifications. The response to Buyer's request shall be determined in
accordance with the procedures set forth in Section 3.4(c) hereof.
(b) Adjustments Due to Regulatory Changes. If as a result of any
change in Applicable Laws, Buyer reasonably deems it necessary (given the
then-existing physical plant of the Facility) to burn Coal having specifications
different from the then-current Specifications. Buyer shall first make
reasonable investigation into the practicality of making physical adjustment to
the Facility in lieu of or in addition to making such changes in the
Specifications, and may then request such adjustments in the Specifications from
Seller as necessary to comply with such Applicable Laws. The response to Buyer's
request shall be determined in accordance with the procedures set forth in
Section 3.4(c) hereof.
(c) Procedures for Adjusting Specifications. Within thirty (30) days
after receiving a request from Buyer pursuant to Sections 3.4(a) or (b) hereof
that the Specifications be adjusted, Seller shall notify Buyer of whether Seller
disputes Buyer's determination that such changes in the Specifications are
necessary, and, if so, the reasons for any such dispute (which may include
Seller's reasoned belief that it is more practical for Buyer to make
12
adjustments or additional adjustments to the physical plant of the Facility
rather than to adjust the Specifications). In the event of such a dispute, the
Parties shall each provide the other with all relevant information and documents
in their respective possession, and shall negotiate in good faith for a period
of thirty (30) days in an attempt to resolve such dispute, after which time
either Party may submit the dispute to arbitration pursuant to Article XIII
hereof. For assistance, the arbitration panel may consult an engineering firm
selected by the Parties (or if the Parties are unable to agree on such a firm,
then selected by the arbitration panel). The arbitration panel shall be directed
to render its decision on the dispute within thirty (30) days of its selection.
In the event that Seller does not dispute Buyer's determination that changes in
the Specifications are necessary, or in the event the arbitration panel rules
that changes in the Specifications are necessary, then, if Seller reasonably
determines that it can meet such revised Specifications, the Specifications
shall be revised accordingly, and Seller shall specify an incremental increase
in the Coal Price, which increase in price shall be sufficient to compensate
Seller for the full economic impact of making such change, and shall not be
subject to arbitration. The increased price shall thereafter be the Coal Price
hereunder (and the Ceiling Price and the Floor Price in Section 6.1(c) shall be
adjusted upward accordingly); provided that if Buyer reasonably believes such
adjusted price to be unacceptable, Buyer shall so inform Seller and the Parties
shall for a period of 30 days endeavor in good faith to agree on an adjusted
price. If the Parties then are unable to agree, Buyer shall have the right to
terminate this Agreement upon ten (10) days advance written notice to Seller
given within thirty (30) days after the end of such thirty (30) day period. If
Buyer does not thus exercise such right, the adjusted price proposed by Seller
shall be the Coal Price hereunder.
Section 3.5. Sources and Reserves.
(a) Sources. The Coal sold and purchased hereunder shall be shipped
from Seller's loading facility described in Annex B attached hereto (the
"Loading Facility"), provided that Seller shall have the right, upon prior
written approval of Buyer, not to be withheld unless Buyer reasonably determines
that it is or would be materially adversely affected thereby, to deliver Coal
meeting the Individual and Average Specifications from other sources owned by
Seller, its affiliates or third parties unaffiliated with Seller. Prior to the
initial delivery of Coal from a
13
location other than the Loading Facility, Seller shall provide to Buyer a
Periodic Analysis of such Coal for informational purposes. Deliveries of Coal
hereunder from any source other than the Loading Facility shall comply with and
be subject to all terms and conditions of this Agreement.
(b) Reserves. Seller represents and warrants that Seller now owns,
leases or otherwise has the legal right to mine and sell, and has dedicated or
will dedicate to the performance of this Agreement on or before the Financial
Closing Date, a sufficient number of Tons of recoverable Coal (the "Coal
Reserves") and productive capacity to enable Seller to supply Coal in accordance
with the provisions of this Agreement during the term hereof. Descriptions of
the Coal Reserves are set forth in Annex B hereto and maps depicting said
reserves are attached thereto, which Annex and maps are incorporated herein by
this reference. Seller warrants that the Coal from the Coal Reserves will meet
the Specifications provided for in this Agreement. From time to time, Seller may
substitute coal reserves meeting the quality specifications herein for those
reserves indicated in Annex B, subject to the approval of Buyer, which approval
shall not be unreasonably withheld. Such substituted reserves shall be subject
to the provisions of this Agreement relating to the Coal Reserves. Dedicated
Coal Reserves shall be reduced by five percent (5%) of the total Coal Reserves
each year after the Commercial Operation Date. Nothing in this Section 3.5(b)
shall limit Seller's right to deliver Coal from other sources as specified in
Section 3.5(a) hereof.
(c) Transfer of Reserves. At any time during the term of this
Agreement, Seller shall not sell, lease, contract to sell, mortgage, grant a
security interest in or otherwise transfer, encumber or permit to be sold,
leased or otherwise transferred, any interests in the Coal or in the Coal
Reserves in such quantities as to jeopardize Seller's ability to supply the
required quantities remaining to be provided hereunder from the Coal Reserves or
which may interrupt any scheduled deliveries hereunder. Notwithstanding the
foregoing, this Section 3.5(c) shall not prohibit Seller from granting a
mortgage or other security interest in the Coal Reserves pursuant to any
arm's-length transaction providing secured financing to Seller or an affiliate
of Seller on commercially reasonable terms under which the grantee of such
mortgage or security interest, and transferees of such grantee's interest, are
subject to Buyer's rights to the Coal Reserves under this Agreement (including
this Section 3.5(c)).
14
ARTICLE IV
DELIVERY OF COAL
Section 4.1. Delivery.
(a) Delivery Points. This Agreement is a "destination" contract in
which Seller agrees to deliver Coal F.O.B. the Facility at the Coal Delivery
Point. The Coal Delivery Point shall be located at the Facility Site or at such
other locations at or near the Facility Site as Buyer may designate from time to
time, provided that Buyer shall reimburse Seller for its reasonable costs
incurred due to Buyer's redesignation of the Coal Delivery Point.
(b) Delivery Arrangements. Seller shall provide, or shall enter into
with responsible carriers, such arrangements for transportation as are necessary
to ensure timely delivery of Coal to the Coal Delivery Point in accordance with
the schedules determined pursuant to Section 4.2 hereof. Within sixty (60) days
after the date hereof Seller shall provide Buyer with a plan setting forth the
manner in which Seller intends to transport and deliver Coal in accordance with
this Agreement during the term hereof. Such plan shall be accompanied by
appropriate evidence (excluding agreements subject to confidentiality
obligations) demonstrating that Seller shall be able to provide such necessary
transportation services so as to ensure delivery of Coal as required by this
Agreement. In the event that Seller shall desire to change the manner in which
it transports and delivers Coal, then Seller shall provide Buyer with updated
information and backup documentation as described in this Section 4.1(b)
regarding such revised transportation and delivery plans. Any such revision
shall be subject to Buyer's consent which shall not be withheld unless Buyer
reasonably determines that it is or would be materially adversely affected
thereby. Buyer shall be responsible for the uploading of Coal at the Coal
Delivery Point, including the supply of necessary equipment for such unloading.
Within sixty (60) days after the date hereof, Buyer shall deliver to Seller a
plan setting forth the manner in which Buyer intends to unload Coal at the
Facility Site.
Section 4.2. Delivery Schedules. At least ninety (90) days prior to
the Initial Delivery Date, Buyer shall deliver to Seller an estimate of the
tonnage of Buyer's Coal requirements for the remainder of the calendar year in
which the Initial Delivery Date occurs, and thereafter at least
15
ninety (90) days prior to the beginning of each calendar year, Buyer shall
deliver to Seller an estimate of the tonnage of Buyer's Coal requirements for
such calendar year. By the thirtieth (30th) day preceding the start of each
calendar quarter from the Initial Delivery Date and continuing during the term
of this Agreement, Buyer shall provide Seller with an updated estimate of the
amount of Coal to be delivered to Buyer during such quarter pursuant to this
Agreement. In addition, on or before the fifteenth (15th) day of each month from
the Initial Delivery Date and continuing during the term of this Agreement,
Buyer shall deliver to Seller written notice containing the amount of Coal
required by Buyer during the next succeeding month. Buyer shall use reasonable
efforts to ensure that such amounts are approximately equal from month to
month, and that any such amount is not more than eighty-thousand (80,000) Tons
per month. Upon receipt of such notice, Seller shall arrange delivery of said
quantities of Coal in accordance with Buyer's stated requirements for such
month and shall, on or before the seventh (7th) day preceding such month,
deliver to Buyer a schedule listing the days in such month on which Coal
deliveries are expected to occur and the amounts to be delivered on such days,
the aggregate of which shall equal Buyer's stated requirements, allowing for
deviation upwards or downwards only as necessary to provide for whole Unit
Train shipments. Seller shall have no liability hereunder for failure to
deliver on the specific days listed in such schedule, except to the extent
such failure results in a shortfall in deliveries as specifically provided in
Section 10.1(b) hereof. Upon Buyer's request Seller shall use reasonable
efforts to modify said schedule to the extent necessary to accommodate
changing coal requirements of Buyer. Seller shall promptly notify Buyer in the
event Seller learns of a probable interruption in a scheduled delivery of Coal.
Buyer shall promptly notify Seller in the event Buyer learns of a probable
interruption in the operation of the Facility. Buyer agrees to use reasonable
efforts to accommodate Seller's need to efficiently utilize its private
railroad equipment; provided that Buyer's obligation hereunder shall not
modify Seller's obligation to deliver Buyer's requirements for Coal as set forth
in Section 3.2(a) hereof. In the event Buyer requests delivery in any month of
Coal in amounts in excess of 80,000 Tons, Seller shall use reasonable efforts to
supply such Coal. In the event such additional delivery requires Seller to incur
additional transportation costs, Seller may condition its delivery of such
additional Coal upon the reimbursement by Buyer of such costs.
16
Section 4.3. Delivery and Detention Charges and Ash Car
Reimbursement.
(a) Side Track Agreement. It is understood by the Parties that Buyer
intends to enter into a sidetrack agreement with Carrier for receipt and
unloading of Coal and loading of pelletized Waste at the Facility Site. Seller
agrees to cooperate with Buyer in Buyer's negotiation with Carrier toward such
agreement. Seller has informed Buyer of Buyer's obligation to pay demurrage
and detention charges to the Carrier as set forth in Carrier Freight
Tariff CSXT 8200, with the exception that Buyer shall be allowed a maximum of
six (6) hours to unload instead of four (4) hours. Buyer shall promptly pay or
otherwise resolve all such charges so as not to cause any interference with
Seller's transportation services.
(b) Private Equipment Utilization. Buyer acknowledges that Seller
may purchase railroad equipment, including Seller Cars. Seller agrees that such
railroad equipment shall be capable of performing the services hereunder and
shall be kept in good working order and repair to meet the Coal supply and Waste
disposal requirements as stated herein. In order to assure Seller efficient
utilization of Seller Cars and to provide a timely supply of Coal to the
Facility, Buyer agrees to pay to Seller demurrage fees for failure to unload
each Unit Train in six (6) hours or less, and to load pelletized Waste as
described in Section 5.3(c). The demurrage fee shall be five dollars ($5.00) per
Seller Car for each full hour or fraction thereof that Buyer detains the Seller
Cars in excess of six (6) hours, payable under such terms and conditions as are
set forth in Freight Tariff CSXT 8200, as applicable, as if Seller were the
railroad under such tariff. The five dollar ($5.00) charge shall increase or
decrease at the same percentage rate change as the detention charge for Carrier
Cars under Freight Tariff CSXT 8200.
(c) Reimbursement for Capital Costs. If the Carrier reimburses Buyer
for capital costs incurred by Buyer or otherwise and Seller is required to
purchase additional rail cars to accommodate Buyer's Waste loading, then Buyer
will pay Seller up to fifty percent (50%) of such Carrier reimbursement amount,
such amount not to exceed seven hundred fifty thousand dollars ($750,000).
Section 4.4. Measurement of Quality.
(a) Laboratory; Standards. Seller's laboratory (the "Laboratory")
shall perform the analyses required under
17
Section 4.4(c) hereof. The Laboratory shall be maintained and operated in
accordance with ASTM standards. Buyer shall have the right to have a
representative present at any and all times to observe sampling and analysis
performed pursuant to this Section 4.4 and operations and maintenance of the
Laboratory. Except as the Parties may otherwise agree, the sampling and the
sample preparation pursuant to Section 4.4(b) hereof shall be performed in
accordance with ASTM Methods D-2234 and D-2013, respectively, and all analyses
performed pursuant to Sections 4.4(c), (d) and (e) hereof shall be performed in
accordance with all applicable ASTM methods.
(b) Sample. Seller shall obtain a representative sample (the "Source
Sample") of each shipment of Coal as it is loaded into rail cars for final
shipment to Buyer. Seller shall divide each Source Sample into two parts and put
each part into a suitable airtight container. One part shall be delivered to the
Laboratory and the other part shall be retained by Seller.
(c) Short Prox Analysis. At Seller's expense, the Laboratory shall
analyze its part of each Source Sample for total moisture, ash, heat content
(ASTM Method D-2015 or D-3286) and sulfur (the "Short Prox Analysis"). Seller
shall deliver the results of the Short Prox Analysis to Buyer in accordance
with Section 4.6 hereof. If Buyer does not take exception to the results of
Seller's analysis within sixty (60) days after receipt thereof, said analysis
shall be deemed conclusive and all appropriate samples and parts, including the
retained sample, may be discarded.
(d) Other Specifications. Buyer shall have the right for the sixty
(60) day time period set forth in Section 4.4(c) hereof, upon written notice to
Seller, to have the second half of the Source Sample tested at Buyer's expense
at an independent laboratory, selected by mutual agreement of the Parties, for
Na(2)O and K(2)O and for the Hardgrove Grindability Index in order to determine
Buyer's compliance with the Specifications set forth in Sections 3.3(a) and (b)
hereof. The results obtained by such independent laboratory shall be binding on
the Parties so long as all such tests are performed in accordance with ASTM
standards and a split of the sample is retained for purposes of independent
testing in accordance with Section 4.4(f)(i) hereof. Seller shall grant Buyer
access to Seller's Loading Facility (and any other sources of the Coal delivered
hereunder) to test for Fines and top size in order to determine Buyer's
compliance with the Specifications set forth in Sections 3.3(a) and (b) hereof.
18
(e) Periodic Analysis. In addition to the tests performed pursuant
to Section 4.4(c) hereof, at least once every three (3) months, Seller, at its
expense, shall perform, or cause to be performed, an ultimate, ash, and trace
element analysis of the Source Sample as set forth in Annex F attached hereto
(the "Periodic Analysis"). Seller shall deliver the results of the Periodic
Analysis to Buyer within three (3) days after receipt thereof by Seller. Buyer
shall have the right at its own expense to have the Periodic Analysis performed
more frequently in its discretion. Either Party may request that analysis of
other factors be included at its expense.
(f) Independent Test. (i) Buyer shall have the right at any time,
upon written notice to Seller, to have the second half of the Source Sample
tested at Buyer's expense at an independent laboratory selected by mutual
agreement of the Parties. In addition, in the event Buyer has elected to have
the second half of the Source Sample tested pursuant to Section 4.4(d) hereof,
Seller shall have the right at any time to have the second half of the Source
Sample tested at Seller's expense at an independent laboratory selected by
mutual agreement of the Parties. In the event the results of such independent-
laboratory analysis are outside ASTM tolerances when compared to the analysis of
the first half, the results of the independent laboratory analysis shall be
deemed conclusive and binding on the Parties, only in respect to those
Specifications outside ASTM tolerances, for all purposes hereunder.
(ii) Notwithstanding the foregoing, Buyer shall have the right at
any time to perform a bias test of Seller's sampling system and such other test
and review as reasonably necessary to confirm that such sampling system is in
accordance with ASTM Standards.
(iii) In the event, on more than three (3) occasions during a twelve
(12) month period, the results of the analysis of the second half of the Source
Sample pursuant to Section 4.4(f)(i) hereof have been outside ASTM tolerances
when compared to the analysis of the first half of the Source Sample, then upon
Buyer's request the Parties shall meet to seek to determine the reasons
therefor. Upon such event, if Buyer is not reasonably satisfied with Seller's
assurances as to the continued reliability and accuracy of the Laboratory, the
Parties shall agree upon an independent laboratory to replace the Laboratory for
all or an appropriate part of the testing under this Section 4.4, provided that
any such independent laboratory must be maintained and operated in
19
accordance with ASTM standards, must provide the Parties with access to its
facilities for observation of testing and test methods, and must be able to
fulfill the scheduling and other requirements imposed upon the Laboratory
pursuant to this Agreement.
Section 4.5. Measurement of Quantity.
(a) If Seller provides scales at designated mines which are approved
by Carrier and are used by Carrier in determining freight billings, such scales
shall be utilized to determine the weight of Coal shipments made from such
designated mines to the Facility. The weight so determined shall be used by
Seller in invoicing such Coal.
(b) In the event Seller does not provide scales pursuant to Section
4.5(a) hereof or during such periods when Seller's scales are inoperative, Buyer
shall weigh Coal at the Facility Site using its certified belt scales which
shall be tested and maintained in accordance with the then-current edition of
the American Association of Railroads Scale Handbook.
(c) If requested by either Party, the other Party shall provide
reasonable notice and adequate access so that the requesting Party has a
reasonable opportunity to witness the loading and weighing process and
procedures, as well as any equipment calibrations as performed to the weighing
facilities. Each Party shall provide a copy of all scale calibration and test
results to the other Party. At any reasonable time, Buyer or Seller may request
verification of the calibration of any weighing device used by the other Party
where such weighing device is used to determine the weight of the Coal for
determining the Coal Price hereunder. If as a result of any such verification
the weighing device is found to be in error, then the Party in control of such
weighing device shall pay for the requested verification and shall, at no
expense to the requesting Party, ensure that such weighing device is promptly
repaired and restored to a condition of accuracy. If the weighing device is
found not to be in error, the requesting Party shall pay for the requested
verification. Each Party retains the right to spot weigh any shipment of Coal at
any time using scales of its choice, provided that such weighing shall not
unreasonably interfere with or delay the delivery or unloading of Coal
hereunder.
(d) During any period that (i) either Seller has not provided scales
pursuant to Section 4.5(a) hereof or such
20
scales are inoperative, and (ii) any scales of Buyer pursuant to Section 4.5(b)
hereof are also inoperative, the weight of each shipment of Coal shall be
determined by the average of the actual weights of each car in the five (5) most
recently weighed shipments, multiplied by the actual number of unweighed cars in
the unweighed train.
Section 4.6. Shipping Reports. At least eighteen (18) hours prior to
the delivery of each shipment of Coal, Seller shall de1iver to Buyer, by
telecopy or other method specified in Article XV hereof, a shipping report
containing the following information: (a) the estimated quantity of Coal to be
delivered based on the capacity and number of rail cars, (b) the name of the
carrier, (c) the identity of the Loading Facility, or if such Coal did not
originate at the Loading Facility, then the identity of the source of the Coal
delivered, (d) the date the Coal was loaded for delivery to Buyer, (e) a
certificate of Seller stating whether the shipment meets the Individual
Specifications and (f) the results of the Short Prox Analysis. Buyer need not
accept any shipment of Coal prior to the receipt of the shipping report
containing all of the information set forth in this Section 4.6. Notwithstanding
the provisions of Article XV hereof, shipping reports sent by telecopy shall be
deemed served as of the time transmitted. In the event the telecopy machine of
either Party is inoperative, then the information contained in the shipping
report may be communicated by telephone, provided that written confirmation of
such telephonic report shall be provided as soon as reasonably possible
thereafter.
Section 4.7. Notice of Deliveries. At least four (4) hours in
advance of a delivery scheduled on a weekday and eight (8) hours in advance of a
delivery scheduled on a weekend, Seller or its designee (which may be the
Carrier) shall give notice of the time of such delivery by telephone to the
person designated in writing from time to time by Buyer to Seller.
Section 4.8. Noncomplying Deliveries. Seller recognizes that the
failure to deliver Coal in accordance with this Agreement may, among other
things (i) cause Buyer to be unable to operate the Facility without violating
Applicable Laws pertaining to environmental matters, which violation might
subject Buyer to civil and criminal penalties or injunctions preventing
operation of the Facility, (ii) damage the Facility, if the deficiencies in the
delivered Coal are not discovered before the Coal is burned in the Facility, or
(iii) prevent the Facility from operating in an efficient manner. Therefore, the
Parties agree as follows:
21
(a) If Seller notifies Buyer, whether in the shipping report
delivered pursuant to Section 4.6 hereof or otherwise, that any
shipment of Coal to be delivered hereunder does not meet the
Individual Specifications for the components tested in the Short
Prox Analysis, then Buyer shall have the right, to be exercised by
Buyer as soon as practicable but in no event later than twenty-four
(24) hours after receipt of notice of failure to meet such
Specifications, to reject such shipment of Coal, and Seller shall
not deliver such shipment to Buyer. Buyer may, at its option, accept
such shipment at a reduced price which shall take into account any
additional demurrage or retention changes incurred by Buyer as may
be agreed upon by Buyer and Seller.
(b) If Buyer accepts delivery of a shipment of Coal hereunder
on the basis of Seller's representations as contained in the
shipping report delivered pursuant to Section 4.6 hereof, and it is
subsequently determined, pursuant to the procedures set forth in
Section 4.4(e) hereof or otherwise, that such shipment does not meet
the Individual Specifications for the components tested in the Short
Prox Analysis, Buyer shall have the right to revoke acceptance of
such delivery. If Buyer has physically segregated such shipment from
other Coal at the Facility Site, then such shipment shall be deemed
not to have been delivered for purposes of this Agreement, and
Seller shall promptly remove such shipment at its own expense and
reimburse Buyer for all reasonable direct, out-of-pocket expenses
incurred by Buyer as a result of the rejection. Seller shall pay
such amounts to Buyer within thirty (30) days of receipt from Buyer
of a notice specifying the amounts for which reimbursement is
sought. If Buyer has not physically segregated such shipment from
other Coal at the Facility Site, then an equitable adjustment in the
price of such Coal shall be made, and Seller shall be liable to
Buyer for any direct, out-of-pocket damages to Buyer to the extent
resulting from the failure to meet the specifications referred to in
this paragraph.
(c) In the event Seller makes any shipment of Coal accepted by
Buyer that causes the weighted rolling-average analysis, as
calculated pursuant to Section 3.3(b) hereof (and, to the extent
actual weights are not yet available, such calculation shall be
based on Seller's estimated weights contained in the shipping report
delivered pursuant to Section 4.6 hereof), to
22
fail to meet the Average Specifications, or in the event Seller
delivers more than three (3) shipments of Coal in a three (3) month
period which fail to meet the Individual Specifications
(notwithstanding Buyer's acceptance of such Shipments pursuant to
Sections 4.8(a) or (b) hereof), Buyer may at its option (i) request
that Seller provide assurances to Buyer in accordance with Section
9.2 hereof that future shipments of Coal will comply with the terms
and conditions of this Agreement, and (ii) direct Seller to suspend
shipments of Coal, which suspension shall be deemed to be
commercially reasonable, until such satisfactory assurances are
received or this Agreement is terminated pursuant to Section 10.2
hereof.
(d) In the event Buyer rejects Coal pursuant to Sections
4.8(a) or (b) hereof or suspends shipments pursuant to Section
4.8(c) hereof and Seller fails to cure such deficiency to Buyer's
reasonable satisfaction, then Buyer shall have the right to obtain
Coal from any other source as to the extent and for the duration
necessary to enable Buyer to replace such rejected coal, and Buyer
shall not be considered in breach of this Agreement as a result of
taking such action. Seller shall use its best efforts to assist
Buyer in finding and acquiring such replacement supplies. Prior to
Buyer acquiring replacement coal pursuant to this Section 4.8(d),
Seller shall have forty-eight (48) hours from receiving notice of
such uncured rejection or suspension to identify and propose
replacement supplies, which proposal may include shipments delivered
by Seller, although Buyer shall not be obligated to accept any such
proposal unless Seller has also provided assurances satisfactory to
Buyer in accordance with Section 4.8(c) hereof. In the event that
Buyer purchases replacement coal pursuant to this Section 4.8(d),
Seller shall reimburse Buyer for the excess, if any, of the direct,
out-of-pocket costs reasonably incurred by Buyer in connection with
the purchase of replacement coal over the costs that otherwise would
have been incurred for the purchase of Coal under the terms of this
Agreement.
(e) In the event Buyer reasonably determines that the Coal
delivered by Seller hereunder shall directly and proximity cause
Buyer to violate its air quality Permits with material adverse
effect to Buyer, then Buyer and Seller shall promptly meet to
determine the cause of the Permit violation and shall cooperate in
implementing any remedy. Buyer shall first make
23
reasonable efforts to cure such situation by seeking amendment of
its Permits or otherwise. To the extent that such violations are
caused by the Coal being delivered by Seller, and if Buyer after
making reasonable efforts has been unable to amend its Permits or
otherwise cure such situation, then Seller shall take economically
reasonable steps to obtain Coal from other sources if necessary to
correct the violation, provided that if the Coal creating the Permit
violation is from a source other than the Loading Facility, and it
is determined that Coal from the Loading Facility would not cause
such Permit violation, Seller shall deliver Coal from the Loading
Facility or, at Seller's option, such other Coal which does not
cause such Permit violations. If it is determined that,
notwithstanding the above-specified efforts, Seller will not be
able to deliver Coal to Buyer which will allow Buyer to comply with
Buyer's air quality Permits, then Buyer may at its option
terminate this Agreement upon ten (10) days notice to Seller.
(f) In the event of any failure to meet specifications as
specified in 3.4(a) or (b) for Na(2)O plus K(2)0 in ash or Hardgrove
Grindability Index, there shall be no consequences or adjustment
required unless such deviation causes material adverse effects to
Buyer. In such event, Seller shall use reasonable efforts to provide
Coal meeting such specifications. In the event Seller is unable
despite reasonable efforts to provide such Coal the Parties shall
endeavor to find a mutually agreeable equitable resolution to the
problem. If they are unable to do so during a period of thirty (30)
days, then Buyer shall have the right to terminate this Agreement
upon ten (10) days advance written notice to Seller given at the end
of such thirty (30) day period. There shall be no other remedy or
liability solely for Seller's failure to meet the specifications for
Na(2)O and K(2)0 in ash or the Hardgrove Grindability Index.
(g) The remedies provided to Buyer by this Section 4.8 shall
be in addition to and shall not be in lieu of any and all other
remedies available to Buyer under this Agreement or at law or in
equity.
Section 4.9. Title and Risk of Loss. Seller warrants that title to
all Coal tendered to Buyer hereunder will be good and merchantable and its
transfer lawful, and that such Coal will be free and clear of any lien, claim,
24
demand, security interest or other encumbrance. Title to and risk of loss with
respect to the Coal purchased and sold hereunder shall pass from Seller to Buyer
upon unloading of the Coal by Buyer at the Coal Delivery Point.
Section 4.10. Stockpile Obligations. Buyer will order Coal from
Seller in amounts so that, if such amounts are delivered, Buyer will maintain a
coal stockpile of not less than 55,000 Tons. For purposes of calculating any
damages pursuant to Section 4.8(d) or otherwise for nondelivery or any breach by
Seller, the number of Tons involved in any failure or deficiency in delivery of
Coal by Seller, shall be reduced by the amount which is equal to the difference
between:
(a) the number of Tons that Seller failed to deliver on any day on
which such failure or deficiency occurred, minus
(b) the number of Tons by which Buyer's stockpile at the
beginning of such day was less than 55,000 (excluding the
number of Tons of such deficiency which are due to Seller's
previous failure to deliver Coal as ordered by Buyer pursuant
to Section 4.2 hereof and which has not been previously cured
by Buyer or Seller).
An example of the foregoing stockpile deficiency calculation is set forth in
Annex G attached hereto.
ARTICLE V
DISPOSAL OF WASTE
Section 5.1. Taking, Transportation and Disposal Obligation. Buyer
shall pelletize the Waste, and gather and load such pelletized Waste at the
Waste Acceptance Point into trucks or railroad cars as designated by Seller.
Seller shall take (unless Buyer exercises its option as provided in Section 5.11
hereof) up to one-hundred percent (100%) of the Waste at the Waste Acceptance
Point and transport such Waste to and dispose of such Waste at the Waste
Disposal Sites. Such services shall be performed in a safe manner and in
accordance with the generally accepted standard of care in the waste removal,
transportation and disposal industry. Buyer shall likewise perform its
obligations hereunder in a safe manner and in accordance with the generally
accepted
25
standard of care in the power generation industry. The Waste Acceptance Point
shall be located at the Facility Site or at such other location at or near the
Facility Site as Buyer may designate from time to time, subject to Seller's
approval, not to be unreasonably withheld, and provided that Buyer shall
reimburse Seller for its reasonable costs incurred due to Buyer's redesignation
of the Waste Acceptance Point. The Waste delivered by Buyer will be
substantially dry and free flowing.
Section 5.2. Quantity.
(a) Quantity. Seller shall take, transport and dispose of
one-hundred percent (100%) of the Waste made available at the Waste Acceptance
Point by Buyer (subject to Section 5.2(b) hereof). It is currently estimated
that the amount of Waste to be taken by Seller will equal approximately 15,000
Tons from the Financial Closing Date until the Commercial Operation Date and
approximately 150,000 Tons per year from the Commercial Operation Date through
the remaining term of this Agreement. It is understood and acknowledged by the
Parties that such estimates are for informational purposes only, and that the
actual quantities of Waste will be determined by, among other things, the actual
availability and operating performance of the Facility, the demand for
electricity by the Electricity Purchaser and the quality and other
characteristics of the coal and limestone used at the Facility.
(b) Failure of Seller to Take Waste. If at any time Seller fails for
any reason (including without limitation breach of this Agreement, Force Majeure
or the failure to perform of any third party) to take, transport and dispose of
Waste as required under this Agreement, Buyer shall have the right to obtain
(without regard to Section 5.11(a) hereof) Waste removal, transport and disposal
services from any other source as and to the extent and for the duration
reasonably necessary to enable Buyer to replace the services not provided by
Seller, and Buyer shall not be considered in breach of this Agreement as a
result of taking such action.
Section 5.3. Method of Waste Removal.
(a) Taking and Transportation Arrangements. Within ninety (90) days
after the date hereof, Seller shall provide Buyer with a plan setting forth in
detail the manner in which Seller proposes to take, transport and dispose of the
Waste in accordance with this Agreement. In addition,
26
Seller shall provide Buyer with documentation supporting such plan as it becomes
available, including the following: (i) documentation with regard to
availability, size and permitting status of the Waste Disposal Sites, (ii)
evidence demonstrating that Seller shall be able to take and dispose of the
Waste in accordance with the provisions of this Agreement, and (iii) copies of
any contracts entered into with any third parties (with the exception of those
subject to reasonable confidentiality obligations) for, and all Permits and
Permit applications required under Applicable Laws with regard to, the
acceptance, transportation or disposal of Waste. Seller's plan for waste
disposal shall be subject to Buyer's approval which shall not be unreasonably
withheld. In the event that Seller shall desire to amend such plan prior to the
Initial Delivery Date, then Seller shall provide Buyer with updated information
and backup documentation as described in this Section 5.3(a) regarding such
revised acceptance, transportation or disposal plans. Any such revision shall be
subject to Buyer's consent which shall not be unreasonably withheld. Upon
request by Seller, Buyer will provide Seller with updated reports on the
construction and start-up schedule for the Facility.
(b) Alternative Waste Disposal Methods. It is the intent of the
Parties to provide Seller with the option to dispose of the Waste in methods
different from those designated by Seller pursuant to the waste disposal plan
provided pursuant to Section 5.3(a) hereof, subject to Buyer's prior written
consent, not to be withheld unless, considering all relevant factors (including
the indemnifications set forth herein) Buyer reasonably determines that it is or
would be materially adversely affected by such alternative plan. Such
alternative methods of disposal shall include without limitation the sale of the
Waste for commercial use. Seller shall provide Buyer with a detailed plan for
any such proposed alternative disposal method for the Waste and shall provide
such additional information related to such plan as Buyer shall reasonably
request. Buyer's consent to any alternative Waste disposal arrangements entered
into by Seller shall not be construed as an acknowledgement by Buyer that such
arrangements are sufficient for Seller to meet its obligations to Buyer under
this Agreement.
(c) Removal Procedures. All activities of Seller or Seller's agent
on the Facility Site shall not interfere with the operations of Buyer at the
Facility or any other
27
operation at the Facility Site. Buyer shall use reasonable efforts to coordinate
the unloading of Coal with the loading of Waste, if necessary. Buyer agrees that
it shall maintain the capacity to stockpile at least six-thousand (6,000) Tons
of pelletized cured, ready-to-ship Waste at the Facility (excluding any capacity
of rail cars left at the Facility Site by Seller pursuant to this Section
5.3(c)). Using certified belt scales, Buyer will determine the weight of the
Waste to be taken from the Facility Site, and will deliver a statement of such
weight to Seller within five (5) days after loading of Waste. Such weights will
be used to calculate the Waste Services Price pursuant to Section 6.2 hereof.
If Seller elects to take Waste by train, not every train delivering Coal will
necessarily include rail cars for Waste transportation. Seller will designate
which trains include rail cars for transportation of Waste. The weight of any
rail cars when loaded with Waste shall not exceed 263,000 pounds or such other
weight that the Carrier permits. Upon the arrival of such designated train at
the Facility Site, a sufficient number of rail cars to contain the next
scheduled shipment of Waste, given the weight limits set forth in the preceding
sentence, shall be uncoupled from the train and shall remain at the Facility
Site for loading by Buyer. The next train designated for Waste transportation
arriving at the Facility Site shall likewise leave a sufficient number of rail
cars for transportation of Waste at the Facility Site for loading by Buyer and
shall take the rail cars loaded with Waste by Buyer during the interim period.
Section 5.4. Removal Schedules. By the thirtieth (30th) day
preceding the start of each calendar quarter from the Initial Delivery Date and
continuing during the term of this Agreement, Buyer shall provide Seller with an
estimate of the amount of Waste to be taken and disposed of during such quarter
pursuant to this Agreement. In addition, on or before the fifteenth (15th) day
of each month from the Initial Delivery Date and continuing during the term of
this Agreement, Buyer shall deliver to Seller written notice containing a final
and best estimate of the amount of Waste to be taken from the Facility during
the next succeeding month. Upon receipt of such notice, Seller shall arrange for
the taking of said quantities of Waste in accordance with Buyer's stated
requirements for such month and shall, on or before the seventh (7th) day
preceding such month, deliver to Buyer a schedule of days for such month on
which Seller expects to take Waste, and the amounts of Waste to be taken on such
days, the aggregate of which shall equal Buyer's stated requirements. Seller
shall have no liability hereunder for failure to take Waste on the specific days
listed in such schedule, except to the extent such failure
28
results in any deficiency of takings as specifically provided in Section 10.1(b)
hereof. In addition, Seller shall use its best efforts to accommodate changing
Waste acceptance and disposal requirements of Buyer as Buyer may make known to
Seller subsequent to such monthly notices. Each Party shall promptly notify the
other Party in the event it learns of a probable interruption in a scheduled
taking of Waste. Buyer agrees to use reasonable efforts to accommodate Seller's
need to efficiently utilize its private railroad equipment; provided that
Buyer's obligation hereunder shall not modify Seller's obligation to take,
transport and dispose of Buyer's required quantities of Waste as set forth in
Section 5.2(a) hereof.
Section 5.5. Notices. As soon as practicable but no less than
twenty-four(24) hours preceding any taking of Waste from the Facility, Seller
shall notify by telephone the plant manager or such other person designated in
writing by Buyer of each such taking. Seller shall (whenever it has or can
reasonably obtain the necessary information, which it will use its best efforts
to obtain) confirm the disposal of each shipment of Waste hereunder by written
notice to such person promptly following the disposal of such Waste at the Waste
Disposal Sites, and such notice shall include the bill of lading number, the
carrier, the date of disposal, the disposal site and any other information
necessary to enable Buyer to comply with Applicable Laws.
Section 5.6. Compliance with Permits.
(a) Permit for Waste Disposal Site. Buyer and Seller will cooperate
in developing the data necessary for Seller to obtain the Permits required in
connection with the removal, transportation and disposal of Waste. Buyer and
Seller agree to cooperate in the Permit application process to ensure that the
Permits for the Waste Disposal Sites will allow for the disposal of expected
components of the Waste including by-products of the sulfur removal process and
ash from the Bark. In the event the Waste is not in compliance with Seller's
Permits and such non-compliance is not the result of the quality of Coal
delivered hereunder, Seller shall not be required to take, transport or dispose
of such Waste. If as a result of foregoing, it is determined that future
shipments of Waste are likely not to comply with Seller's Permits, Buyer and
Seller will immediately undertake to obtain new Permits and to locate an
alternative disposal site as may be required under the circumstances.
29
(b) Testing by Seller. Seller shall test the performance and impact
of the Waste Disposal Sites periodically to the extent such testing is required
by Applicable Laws. Testing shall include ground water monitoring, and water
leaching tests as required by law. Seller shall provide Buyer with Seller's
testing schedule and upon written request by Buyer, Seller shall provide Buyer
with results of such tests as soon as available.
(c) Testing by Buyer. Buyer shall test the Waste and the actual
pelletized Waste at the Facility every three (3) months. Testing shall include
the EPA toxicity test and the TCLP leaching test. Buyer shall provide Seller
with Buyer's testing schedule and upon written request by Seller, Buyer shall
provide Seller with results of such tests as soon as available. Seller shall
have the right at its own expense to test the Waste more frequently if
necessary in its discretion or in order to ensure compliance with the Seller's
Permits or Applicable Laws.
Section 5.7. Damages for Failure to Take, Transport and Dispose of
Waste. Except as excused pursuant to this Agreement, if Seller shall fail to
take delivery of, transport or dispose of any Waste as required under this
Agreement, Seller shall have five (5) Business Days from the date of such
failure to cure such breach. If Seller fails to cure such breach, then Buyer
shall have the right to purchase replacement Waste taking, transportation or
disposal services from alternative sources to the extent and for the duration
reasonably necessary to enable Buyer to replace the services not provided by
Seller provided that Buyer shall first give Seller written notice of its intent
to use any such alternative arrangements, and Seller shall then have three (3)
days after receipt of such notice to propose replacement Waste Services,
including services provided by Seller. At Buyer's request Seller shall use
reasonable efforts to assist Buyer in finding and acquiring replacement
services. In the event that Buyer purchases replacement Waste taking,
transportation or disposal service pursuant to this Section 5.7, Seller shall
reimburse Buyer for (i) any fines or penalties that Buyer incurs under any
Applicable Laws as a proximate result of such breach by Seller, and (ii) the
excess, if any, of the reasonable net costs incurred by Buyer for the purchase
of such replacement services over the costs that otherwise would have been
incurred for the taking, transportation or disposal of Waste under the terms of
this Agreement. Seller shall have the right to audit and verify such costs.
Seller shall pay such amounts to Buyer within thirty (30) days of receipt from
Buyer of a notice specifying
30
amounts for which reimbursement is sought. The remedies provided to Buyer by
this Section 5.7 shall be in addition to and shall not be in lieu of any and all
other remedies available to Buyer under this Agreement or at law or in equity.
Section 5.8. Title and Risk of Loss. Title to and risk of loss with
respect to the Waste to be taken, transported and disposed of hereunder shall
pass from Buyer to Seller upon taking of such Waste from the Facility Site by
Seller.
Section 5.9 Hazardous Waste. It is agreed by the Parties that Seller
shall not be required at any time to take, transport or dispose of any Waste
hereunder which is Hazardous Waste. In the event any Waste to be taken,
transported and disposed of hereunder is redefined to be Hazardous Waste, and
Seller wishes to take, transport and dispose of such hazardous waste, Seller
shall promptly submit to Buyer a proposal containing the terms under which
Seller will take, transport and dispose of such hazardous waste, which proposal
may include an increase in the Waste Services Price based on Seller's additional
costs reasonably incurred as a result of taking, transporting and disposing of
such hazardous waste. Seller's proposal shall be accepted by Buyer unless Buyer
shall have reasonable grounds for refusing to accept such proposal. In the event
that either Seller does not wish to take, transport or dispose of such hazardous
waste or Buyer does not accept Seller's proposal, then Buyer or Seller shall
have the right upon ten (10) days notice to the other to cancel the waste
services provided by Seller pursuant to this Article V.
Section 5.10. Noncomplying Waste other than Hazardous Waste. It is
agreed by the Parties that Seller shall not be required at any time to take,
transport or dispose of any Waste hereunder which, as a result of a change in
Applicable Laws, is (because of a reclassification of the Waste to a category
similar to that of Hazardous Waste, or otherwise) prohibited from being disposed
of at the Waste Disposal Site and by means of any such alternative methods of
waste disposal as are then being used by Seller pursuant to Section 5.3(b)
hereof. If such circumstances shall occur, Seller shall promptly notify Buyer
thereof and submit to Buyer a proposal to provide alternate Waste disposal
services at an adjusted Waste Services Price therefor, increased by the amount
of all additional cost that Seller would reasonably incur in providing such
alternate waste disposal services, and thereupon such proposal and price shall
be in
31
effect hereunder and Seller shall continue to provide the Waste services
hereunder for the affected Waste and such adjusted price shall become the new
Waste Services Price. Buyer shall have the right to review at the time of such
initial adjustment Seller's data with respect to such additional costs.
Notwithstanding the foregoing, for a period of sixty (60) days after such
initial notification from Seller as set forth above, Buyer may terminate the
Waste Services hereunder upon ten (10) days notice to Seller, subject to payment
under Section 5.11(b).
Section 5.11. Arrangements Other Than With Seller.
(a) Notwithstanding the requirements specified in Section 5.1
hereof, Buyer shall have the option from time to time, upon ninety (90) days
written notice to Seller, to contract with third-party waste disposers or
purchasers for up to one-hundred percent (100%) of Buyer's Waste disposal
requirements for the Facility. Buyer agrees that it shall (except only to the
extent of a case described in Section 5.7 hereof) pay to Seller a fee of ten
dollars ($10) for each Ton of Waste that is delivered to any third-party waste
disposer rather than to Seller pursuant to this Section 5.10(a); provided that
such fee shall be payable only on the first 150,000 Tons of Waste so delivered
in any calendar year less any Tons delivered to Seller during such year. Such
fee is for the purpose of compensating Seller for its costs, including capital
expenditures and operating costs (including standby costs), incurred in
fulfillment of its Waste disposal obligations under this Agreement but is agreed
to be payable in such amount with no further investigation or revision based on
cost. Such fee shall be adjusted in accordance with the formula set forth in
Section 6.2 hereof (as if such fee were WSP' thereunder and equals ten dollars
($10) as of the first Quarterly Adjustment Date) and shall be payable in
accordance with Section 7.1 hereof. At any time during the term of this
Agreement, if Buyer's agreement with any third-party disposers or purchasers
terminates, Buyer shall notify Seller at least ninety (90) days (or such lesser
time as may be acceptable to Seller) prior to such termination and Seller shall
resume or increase, as appropriate, Waste taking, transportation and disposal
services in amounts sufficient to cover the amount of Buyer's Waste taking,
transportation and disposal requirements previously provided by such third-party
disposers or purchasers.
(b) At any time during the term of this Agreement, Buyer shall have
the right to cancel the waste services provided by Seller pursuant to this
Article V by giving Seller ninety (90) days prior written notice of such
cancellation and by paying to Seller on the specified cancellation date the
amount stipulated below:
32
$500,000 If cancellation occurs before
the Financial Closing Date (with
such payment to be made within
two months after the Financial
Closing Date);
$2,000,000 If cancellation occurs after the
Financial Closing Date and
before the date which is two
months after the Financial
Closing Date; or
$10,000,000 If cancellation occurs after the date
which is two months after the
Financial Closing Date during the
remaining term of this Agreement.
The amount specified above will be reduced by forty percent (40%) of the total
of all payments made by Buyer pursuant to Section 6.2 hereof for delivery of
Waste in excess of 100,000 Tons during any year prior to such cancellation, but
shall not be reduced (i) if the average annual amount of Waste delivered by
Buyer to Seller since the Commercial Operation Date was less than 100,000 Tons
per year or (ii) to less than $4,000,000. Upon such cancellation, Seller and
Buyer shall have no further obligations to each other with respect to waste
disposal hereunder, except for those obligations specifically designated as
surviving the termination or expiration of this Agreement.
ARTICLE VI
PURCHASE PRICE FOR COAL
AND WASTE DISPOSAL SERVICES
Section 6.1. Coal Price. The price to be paid by Buyer to Seller per
million Btu's of Coal delivered pursuant to this Agreement (the "Coal Price") is
based upon an initial price of one dollar and sixty-nine and three-tenths cents
($1.693), which is equal to ninety-nine percent (99%) of the Coal Cost; as
defined below, for November 1988. The Coal Price is divided into two components
for escalation purposes: Component A, which initially equals ninety-nine and
three-tenths cents ($0.993) and Component B, which initially equals seventy
cents ($0.70). The Coal Price shall be recalculated as of the first day of each
calendar month
33
during the term of this Agreement (the "Adjustment Date"), beginning as of the
first day of the month during which the Initial Delivery Date occurs. The Coal
Price shall be the sum of Component A and Component B, each calculated pursuant
to Sections 6.1(a) and (b) hereof, respectively, subject to the limitations in
Section 6.1(c) hereof.
(a) Component A. As of each Adjustment Date, Component A shall
equal:
A' x (1 + CC)
Where:
A' = Component A for the immediately preceding month; except that for the
first Adjustment Date, A' shall equal ninety-nine and three-tenths cents
($0.993); and
CC = The monthly percentage change, calculated in accordance with Annex D
attached hereto, in the as-burned cost of coal at the St. Johns River
Power Park (the "Coal Cost"), as such cost is reported monthly to the
Florida Public Service Commission on Schedule A-5.
(b) Component B. As of the first day of each of January, April, July
And October (the "Quarterly Adjustment Date"), beginning as of the Quarterly
Adjustment Date immediately preceding the Initial Delivery Date, Component B
shall equal:
B' x (1 + GNP + PCE + PPI)
---------------
3
Where:
B' = Component B for the immediately preceding calendar quarter; except that
for the first Quarterly Adjustment Date, B' shall equal seventy cents
($0.70);
GNP = The quarterly percentage change, calculated in accordance with Annex D
attached hereto, in the Implicit Price Deflator for Gross National
Product, Gross National Product (the "GNP Index"), as published by the
Bureau of Economic Analysis, United States Department of Commerce;
PCE = The quarterly percentage change, calculated in accordance with Annex D
attached hereto, in the Implicit Price Deflator for Gross National
Product,
34
Personal Consumption Expenditure (the "PCE Index"), as published by the
Bureau of Economic Analysis, United States Department of Commerce; and
PPI = The quarterly percentage change, calculated in accordance with Annex D
attached hereto, in the Producer Price Index for All Commodities (the "PPI
Index"), as published by the Bureau of Labor Statistics, United States
Department of Labor.
(c) Ceiling and Floor. As of any Adjustment Date, the "Price
Ceiling" shall equal one-hundred-one percent (101%) of the Coal Cost for the
third month preceding such Adjustment Date, and the "Price Floor" shall equal
ninety-seven percent (97%) of the Coal Cost for the third month preceding such
Adjustment Date. In the event, as of any Adjustment Date, the sum of Component A
and Component B (i) exceeds the Price Ceiling, then the Coal Price shall be
equal to the Price Ceiling until the next Adjustment Date or (ii) is less than
the Price Floor, then the Coal Price shall be equal to the Price Floor until the
next Adjustment Date.
(d) Sample Calculation. A sample calculation of the monthly Coal
Price payment is set forth in Annex E attached hereto.
Section 6.2. Waste Services Price. The price to be paid by Buyer to
Seller per Ton of Waste taken, transported and disposed of by Seller pursuant to
this Agreement (the "Waste Services Price") shall be calculated as of each
Quarterly Adjustment Date, beginning as of the Quarterly Adjustment Date
immediately preceding the Initial Delivery Date. The Waste Services Price shall
equal:
WSP' x [1 + (0.75 x PPI)]
Where:
WSP'= the Waste Services Price for the immediately preceding calendar
quarter, except that for the first Quarterly Adjustment Date, WSP' shall
equal twenty-four dollars ($24.00); and
PPI has the meaning set forth in Section 6.1(b) hereof.
Changes in Applicable Laws shall result in the adjustment of the Waste Services
Price as set forth in Section 6.6 hereof.
35
Section 6.3. Use of Indexes.
(a) In the event that, due to supervening events, any of the indexes
used herein is discontinued, changed, or otherwise rendered ineffective for
computing price adjustments hereunder, Buyer and Seller shall meet promptly to
consider and agree upon a substitute index or method for calculating price that
shall be as nearly as practicably equivalent to the index which was
discontinued, changed or rendered ineffective.
(b) If any of the indexes used herein are not available on the
respective applicable adjustment dates, the then-current Coal Price or Waste
Services Price, as affected, shall remain effective until all indexes are
available. Any adjustments which are then applicable shall be applied
retroactively to the date when such adjustment would have been made. Any amounts
due as a result of such retroactive adjustment shall be paid by Buyer or Seller
to the other as appropriate. The values for the GNP Index, the PCE Index and the
PPI Index shall be those first officially published, and shall not be subject to
revision for purposes of this Agreement despite any later revision by the
publishing agency.
Section 6.4. As-Delivered Price. The Coal Price is an
"as-delivered" price for the supply of Coal delivered to the Coal Delivery
Point, and the Waste Services Price is intended to be the full price for the
taking, transportation and disposal of Waste which is made available by Buyer at
the Waste Acceptance Point. Except as specifically set forth in this Agreement,
all direct and indirect costs for such supply of Coal and taking, transportation
and disposal of Waste (including without limitation all delivery costs, carrier
fees, handling costs and mining costs) which are incurred by Seller in
performing its duties hereunder shall be borne exclusively by Seller.
Section 6.5. Governmental Impositions. In the event any Federal,
state or local governmental authority having jurisdiction or regulatory or other
authority over the Waste Disposal Sites, the transportation of Waste or other
Waste services provided hereunder enacts a new, or increases or decreases any
existing fee, tax, or other similar imposition on the taking, transportation or
disposal of Waste, whether retroactive or prospective in application, then
Seller shall so notify Buyer. Fifty percent (50%) of the dollar amount, payable
as a result of any such increase shall be reimbursed by Buyer to Seller, and
fifty percent (50%) of the dollar amount payable as a result of any such
36
decrease shall be reimbursed by Seller to Buyer from the date such increase or
decrease is incurred. The amount of such reimbursements shall not affect the
Waste Services Price determined pursuant to Section 6.2 hereof, but shall be
separately stated on monthly invoices rendered under Section 7.1 hereof.
Section 6.6. Changes in Applicable Laws.
(a) After the date hereof, in the event changes in Applicable Laws
occur concerning the standards, methods and procedures required for or in the
connection with the taking, transportation or disposal of Waste, and in
complying therewith Seller is required to incur an increase in costs or is able
to decrease its costs, the Waste Services Price shall be adjusted to reflect
Seller's increased or decreased costs, provided that if the result is an
increase in costs (i) Seller shall make reasonable efforts to reduce the impact
on costs of such changes in Applicable Laws and (ii) if all or any portion of
such increase is the result of costs passed on to Seller from any of Seller's
subcontractors, Seller's share passed on to Buyer hereunder shall be no more
than Seller's fair share of such costs in proportion to other parties using such
subcontractor's services. The adjustment to be made to the Waste Services Price
shall be for an amount equal to fifty percent (50%) of Seller's increased or
decreased costs.
(b) Upon the occurrence of a change in Applicable Laws described in
Section 6.6(a) hereof, Seller shall notify Buyer and shall provide to Buyer,
within a reasonable time thereafter, Seller's determination of the amount of the
adjustment, together with supporting documentation. Seller's determination shall
allocate the amount of any increase in costs between those which are one-time
capital expenditures and those resulting from changes in operations. Within
fifteen (15) days of receipt of Seller's determination, Buyer shall notify
Seller whether it accepts or disputes the amount of such adjustment. If Buyer
disputes the amount of such adjustment, then Buyer may submit the disputed issue
to arbitration pursuant to Article XIII hereof. Pending establishment of the
amount of such adjustment, each Party shall continue to perform its obligations
under this Agreement.
(c) When the amount of the adjustment has been established, a new
Waste Services Price shall be determined as follows: (i) any amount of the
adjustment due to changes in operations shall be added or subtracted, as
appropriate,
37
to the Waste Services Price as of the date Seller first incurred the increased
or decreased costs, and the Waste Services Price for the months following such
date shall be recalculated using the adjusted figures, and (ii) any amount of
the adjustment due to capital expenditures by Seller shall not result in any
change to the Waste Services Price, but instead Seller shall be reimbursed by
Buyer within thirty (30) days after Seller has notified Buyer that Seller has
made such capital expenditures, unless the Parties agree to an alternative
method of payment, provided that in the event Seller borrows funds in order to
finance such capital expenditure, Buyer shall reimburse Seller as and to the
extent Seller makes financing payments (including interest) on such borrowed
funds. Refunds or additional payments due to retroactive adjustments as set
forth above shall be paid with interest thereon at the Prime Rate, accruing
since the date the payment originally would have been made.
(d) Notwithstanding the foregoing, if such change in Applicable Laws
causes the Waste to be reclassified as Hazardous Waste, and if Buyer accepts
Seller's proposal for disposal of Hazardous Waste pursuant to Section 5.9
hereof, then Buyer shall pay all additional costs as provided in Section 5.9,
with such costs added to the Waste Services Price in accordance with Section
6.6(c) hereof.
Section 6.7. Additional Fee. If Buyer receives funds under the
Subordinated Loan Agreement, then Buyer shall pay, in addition to the Coal Price
calculated pursuant to Sections 6.1 and 6.2 hereof, an additional fee for each
delivery of Coal hereunder, calculated as follows:
OL
---------
Fee ($) = AT x $.06 x 1,000,000
Where: "AT" = the actual tonnage of Coal delivered; and
"OL" = the daily weighted average outstanding amount of principal
and any unpaid and past due interest and fee during the month
of delivery;
provided that if at the end of any calendar quarter Buyer has not taken
delivery of at least 250,000 Tons of Coal during such calendar quarter and any
amount of the loan was outstanding during such quarter, Buyer shall pay to
Seller an additional flat fee, calculated as follows:
OL
---------
Fee ($) = (250,000 - AT) x $.06164 x 1,000,000
38
Where: "AT" = the total actual tonnage of Coal delivered during the
calendar quarter; and
"OL" = the daily weighted average outstanding amount of principal
and any unpaid and past due interest and fee during the
calendar quarter.
The fee paid by Buyer under this Section 6.7 shall be in payment to Seller for
the service of providing the loan pursuant to the Subordinated Loan Agreement
and shall not be deemed to be payment for Coal supplied hereunder. Such fee
shall be payable from time to time on each payment date for interest set forth
in the Subordinated Loan Agreement in an amount (in each case) equal to all
then-accrued and unpaid fee; and its payment by Buyer shall be subject to the
subordination provisions contained in the Subordinated Loan Agreement and, if
otherwise-due payments of principal and interest are entitled to be reduced
under the Subordinated Loan Agreement, such fee shall be paid on a proportionate
basis with payments under the Subordinated Loan Agreement. This Section 6.7
shall survive the termination or expiration of this Agreement (and shall be
unaffected by any breach or claimed breach or other nonperformance of this
Agreement by either Party) until all outstanding loan amounts, interest and fees
under the Subordinated Loan Agreement and under this Section 6.7 have been
repaid to Seller. It is expressly agreed that, except as stated with regard to
the additional fee payable under this Section 6.7, this Agreement and the
Subordinated Loan Agreement are separate and independent in all respects and
that no amounts due, payable or claimed under either such agreement may be
withheld or offset on account of amounts due, payable or claimed under the other
such agreement.
ARTICLE VII
PAYMENT AND RECORDS
Section 7.1. Billing. By the fifteenth (15th) day of each month
following the Initial Delivery Date, Seller shall deliver to Buyer an invoice
showing the payment due for the Coal delivered and the Waste taking,
transportation and disposal services rendered by Seller in the previous month
(specifying the goods delivered and the services provided in said month in
accordance with the shipping reports delivered pursuant to Section 4.6 hereof
and the notices delivered pursuant to Section 5.5 hereof) and including the
payments due, if any, under Sections 5.11(a) and 6.6 hereof. Such
39
invoice shall also include the calculations of the Coal Price and the Waste
Services Price. If Buyer disputes any portion of any invoice submitted by Seller
for payment, Buyer shall pay the undisputed portion of such invoice in
accordance with Section 7.2 hereof and the Parties shall use all reasonable
efforts to resolve the dispute as quickly as possible. In the event the Parties
are unable to resolve a dispute, such dispute shall be submitted to arbitration
in accordance with Article XIII hereof. Any amount determined to be due by one
Party to the other as a result of such dispute resolution shall be paid, with
interest at the Prime Rate accruing since the date such sums were originally
due.
Section 7.2. Payment. Buyer shall pay to Seller the payment due on
the basis of the invoice provided by Seller pursuant to Section 7.1 hereof
within twenty (20) days after receipt thereof by Buyer.
Section 7.3. Non-confidential Records. Each Party shall keep and
maintain complete and accurate records and all other data required by each of
them for the purposes of compliance with and proper administration of this
Agreement and compliance with Applicable Laws. In addition, Seller shall keep
and maintain complete and accurate records with respect to Waste taking,
transportation and disposal services, including the amounts of Waste taken,
transported and disposed of, whether by Seller or by third-party Waste
Contractors pursuant to Section 17.3 hereof, and the location of such disposal.
Seller shall make such records available to Buyer or its designees or
representatives upon request, and shall provide Buyer with access to such
personnel, all as may be reasonably requested by Buyer to determine whether all
services were provided in compliance with Applicable Laws and the terms of this
Agreement. Further, if Seller permits the disposal of any other waste or other
material in proximity to the Waste in Waste Disposal Sites owned or controlled
by Seller, Seller shall keep and maintain complete and accurate records with
respect to the location, amount, type and origin of such waste and shall make
such records available to Buyer or its designees or representatives in the event
that any claim is pending or threatened, provided that Buyer, its designees or
representatives reviewing such records shall abide by any confidentiality
obligation of Seller to third parties. To the extent such sites are not owned or
controlled by Seller, Seller shall use reasonable efforts to obtain, maintain
and make available to Buyer records as set forth in the preceding sentence. All
such records shall be maintained by Seller for five (5) years after the date of
such records. Seller shall not thereafter destroy or dispose
40
of any such records without first giving Buyer a reasonable opportunity to take
and keep such records. Either Party will have the right from time to time, upon
notice to the other, to examine, and make and retain copies of, the records and
data of the other relating to this Agreement (except for those records relating
to the financial arrangements between Seller and its suppliers and
subcontractors which are not needed to verify the calculation of any costs which
are to be borne by or shared with Buyer pursuant to the terms of this Agreement)
at any time during the period such records are required to be maintained under
this Section 7.3 during normal business hours.
Section 7.4. Audit of Records. Upon written request of either Party,
the other Party shall make available at its office at any reasonable time or
times the records described in Section 7.3 hereof for inspection or audit to the
extent such records are necessary for the purpose of verifying the calculations
of any costs which are to be borne by or shared by the requesting Party pursuant
to the terms of this Agreement, including, but not limited to, the costs
specified in Sections 5.9, 6.5 and 6.6 hereof. All prices, except to the extent
they are based on any adjustment pursuant to Sections 5.9, 6.5 and 6.6 hereof,
shall be final and subject to no change or claim after fifteen (15) months
following the date of the invoice stating such prices. Any such audit or claim
with respect to any adjustment pursuant to Sections 5.9, 6.5 and 6.6 hereof
shall be made and completed within thirty-six (36) months following the date of
the invoice covering such costs. All audits hereunder shall be at the requesting
Party's expense. Any amounts determined to be due as a result of such audit
shall be paid within thirty (30) days of the notice of the results of such
audit, unless the Party owing such amount disputes the results of the audit, in
which case either Party may submit such dispute to arbitration in accordance
with Article XIII hereof, the results of which shall be final and binding on the
Parties. Amounts ultimately determined to be due shall be paid with interest at
the Prime Rate accruing since such amounts were originally due. Information so
obtained during any audit hereunder shall be treated as confidential and neither
Party shall disclose such information to any third party without the prior
written permission of the other Party.
41
ARTICLE VIII
FORCE MAJEURE
Section 8.1. Definition. "Force Majeure" means any act or event
which wholly or partially prevents or delays the performance of obligations
arising under this Agreement, if such act or event is not reasonably within the
control of and not caused by the fault or negligence of the nonperforming Party,
including but not limited to (and whether similar or dissimilar to) an act or
event falling within one or more of the following categories: an Act of God, act
of the public enemy, nuclear emergency, fire, explosion, landslide, lightning,
flood, major equipment failure, insurrection, civil disturbance, war, labor
disputes, changes in Applicable Laws restrictions or restraints imposed by law
or by rule, interruption of transportation by reason of the occurrence of an
event which constitutes a force majeure event under the applicable tariff, and
orders or act of military or civil authority. Acts of civil authority, as that
term is herein used, shall include any act or order of any court of competent
jurisdiction and any act or failure or refusal to act of any governmental agency
or officer charged with the enforcement and/or administration of any applicable
law, rule or regulation which wholly or partially prevents or delays the
operation, in whole or in part, of the Facility, equipment or facilities related
thereto, Seller-owned rail cars and equipment, the facilities of a common
carrier, the Loading Facility or the Waste Disposal Site, but which is not a
result of the nonperforming Party's failure to perform its obligations under
this Agreement. Notwithstanding the foregoing, Buyer and Seller acknowledge that
changes in economic market conditions or the failure of this Agreement to be
economically or commercially practicable to Buyer or Seller shall not in and of
themselves constitute an event of Force Majeure for purposes hereof.
Section 8.2. Effect of Force Majeure. If either Party is rendered
wholly or partially unable to perform its obligations under this Agreement
because of a Force Majeure event, that Party shall be excused from whatever
performance is affected by the Force Majeure event to the extent so affected. It
is further agreed that:
(a) The nonperforming Party within five (5) Business Days
after its first becoming aware of its inability to perform due to a
Force Majeure event
42
provides written notice to the other Party of the particulars of
the occurrence, including an estimation of its expected duration and
probable impact on the performance of its obligations hereunder, and
continues to furnish timely regular reports with respect thereto
during the period of Force Majeure;
(b) The nonperforming Party shall use reasonable efforts to
continue to perform its obligations hereunder, to correct or cure
the event or condition excusing performance and to mitigate or limit
damages to the other Party;
(c) Seller shall use reasonable efforts to ensure that in any
future agreements with third parties, such third parties are not
granted any rights to receive Coal from the Loading Facility during
periods of force majeure under such agreements that are superior to
Buyer's rights to receive coal from the Loading Facility during
periods of Force Majeure hereunder;
(d) Seller shall not be relieved from its obligations to
supply Coal hereunder if and to the extent (i) Seller is not
prevented or delayed by the Force Majeure event from delivering Coal
from the Reserves (or other currently used sources) through the
Loading Facility or (ii) prior to the Force Majeure event Seller had
been supplying Coal from a location other than the Loading Facility
pursuant to Section 3.5(a) hereof and Seller is not prevented or
delayed by the Force Majeure event from continuing to deliver Coal
from such other location and is entitled to do so under any existing
agreement for the supply of such coal;
(e) Seller shall not be relieved from its obligations to take,
transport and dispose of Waste hereunder if and to the extent (i)
Seller is not prevented or delayed by the Force Majeure event from
taking, transporting and disposing of Waste at the Waste Disposal
Site or (ii) prior to the Force Majeure event Seller had been
disposing of Waste in a different manner than at the Waste Disposal
Site pursuant to Section 5.3(b) hereof and Seller is not prevented
or delayed by the Force Majeure event from continuing to take,
transport and dispose of Waste in such other manner and is entitled
to do so under any existing agreement for the disposal of such
Waste;
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(f) The suspension of performance shall be of no greater scope
and no longer duration than is reasonably necessitated by the Force
Majeure event;
(g) The nonperforming Party shall provide the other Party with
prompt notice of the cessation of the Force Majeure event giving
rise to the excuse from performance and shall promptly resume
performance hereunder;
(h) No obligation of either Party that arose prior to the
occurrence of the Force Majeure event shall be excused as a result
of such occurrence;
(i) The Force Majeure event shall not operate to allow Seller
to dispose of Waste in a manner other than as provided under this
Agreement or to dispose of Hazardous Waste at the Waste Disposal
Site;
(j) A change in Applicable Laws affecting Waste taking,
transportation and disposal services under this Agreement shall not
constitute a Force Majeure event if and to the extent remediable
under the provisions of Sections 6.5 or 6.6 hereof;
(k) Nothing contained in Section 8.2(b) hereof shall require
the settlement of any labor dispute, which shall be entirely within
the discretion of the Party suffering the labor dispute.
Notwithstanding the above, the Parties agree to use reasonable
efforts to continue their respective operations during strikes;
(l) Neither Party shall be excused as a result of a Force
Majeure event from paying money amounts due under this Agreement;
(m) Upon mutual agreement of the Parties, the term of this
Agreement shall be extended for a period equal to the aggregate
periods of Force Majeure or any part thereof.
Section 8.3. Termination due to Force Majeure. In the event either
Party is prevented from performing its obligations under this Agreement due to
an event of Force Majeure for more than twenty-four (24) months, the other Party
shall have the right to terminate this Agreement upon thirty (30) days' prior
written notice during which thirty (30) day period the Force Majeure event shall
not have been cured, after which neither Party shall have any obligation to
44
the other Party (except for claims in dispute, payments due and owing and
liabilities accrued hereunder prior to such termination).
ARTICLE IX
ACCESS AND ASSURANCES
Section 9.1. Access. Each Party grants to the other (including its
agents) the right to visit such Party's facilities from time to time, including
all sources and loading points for the Coal delivered to Buyer hereunder, upon
reasonable notice and subject to the applicable rules and regulations of the
facilities, to witness and review operations related to this Agreement. The
visiting Party shall be responsible for the actions of those persons
representing the visiting Party on the host Party's site and shall indemnify the
host Party for actions based on injuries to the visiting Party's representatives
or property, except to the extent such injuries were the result of the
negligence or willful misconduct of the host Party or its employees, agents or
representatives.
Section 9.2. Assurances. Without affecting or prejudicing either
Party's right to seek assurances under applicable law, it is expressly agreed
that from time to time Seller shall provide Buyer within ten (10) days of any
request by Buyer with reasonable assurances that Seller is and shall continue
for the term of this Agreement to be able to provide for either or both: (i) the
timely delivery of Coal in compliance with the terms and conditions of this
Agreement or (ii) for the taking, transportation and disposal of the Waste in
compliance with the terms and conditions of this Agreement.
ARTICLE X
EVENTS OF DEFAULT AND REMEDIES
Section 10.1. Events of Default. An event of default ("Event of
Default") under this Agreement shall be deemed to exist upon the occurrence of
any one or more of the following events:
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(a) Failure by either Party to make payment of any amount due
the other Party under this Agreement, which failure continues for a
period of twenty-two (22) days after notice of such nonpayment
(unless payment of such amount is contested or otherwise disputed in
accordance with Article XIII of this Agreement);
(b) Failure by Seller to perform as follows:
(i) Seller's unexcused failure to deliver Coal required
to be delivered hereunder such that there exists at any time a
Rolling Twelve (12) Month Delivery Deficiency of more than one
hundred thousand (100,000) Tons. For this purpose the term
"Rolling Twelve Month Delivery Deficiency" means the
difference (if any) between: (A) the aggregate number of Tons
of Coal to be delivered during any twelve (12) consecutive
calendar months pursuant to the notices and schedules
described in the third and fifth sentences of Section 4.2,
minus (B) the aggregate number of Tons of Coal that Seller
shall actually have delivered to Buyer during such twelve (12)
month period. In calculating the number of Tons referred to in
clause (A) above, the following shall not be counted: (1)
aggregate number of Tons of Coal that shall not have been
delivered during such twelve (12) month period on account of
fault or negligence of Buyer, (2) the aggregate number of Tons
of Coal that were not delivered at the end of such twelve (12)
month period due to the need to ship in Unit Train increments,
and (3) the aggregate number of Tons of Coal that were
otherwise required to be delivered on the last day of the
twelve (12) month period but were not delivered until the
first day of the following month;
(ii) Seller's unexcused failure to take Waste required
to be taken hereunder such that there exists at any time a
Rolling Twelve (12) Month Taking Deficiency of more than
fifteen thousand (15,000) Tons. For this purpose the term
"Rolling Twelve Month Taking Deficiency" means the difference
(if any) between: (A) the aggregate number of Tons of Waste to
be taken during any twelve (12) consecutive calendar months
pursuant to the notices and schedules described in Section
5.4, minus (B) the aggregate number of Tons of Waste that
Seller shall actually have taken during such
46
twelve (12) month period. In calculating the number of Tons
referred to in clause (A) above, the following shall not be
counted: (1) the aggregate number of Tons of Waste that shall
not have been taken during such twelve (12) month period on
account of fault or negligence of Buyer, and (2) the aggregate
number of Tons of Waste that were otherwise required to be
delivered on the last day of the twelve (12) month period but
were not delivered until the first day of the following month;
(c) Failure by either Party to provide the assurances referred
to in Section 9.2 hereof, where such failure continues for a period of
thirty (30) days after the due date for such assurances pursuant to
Section 9.2;
(d) If Buyer shall, knowingly and without notice to Seller,
deliver to Seller any Hazardous Waste for taking, transport and disposal
as Waste under this Agreement;
(e) Failure by either Party to perform in all material
respects any other material provision of this Agreement, and (i) such
failure continues for a period of thirty (30) days after notice of such
nonperformance or (ii) if the nonperforming Party shall commence within
such thirty (30) days and shall thereafter proceed with all due diligence
to cure such failure, such failure is not cured within such longer period
(not to exceed ninety (90) days) as shall be necessary for such Party to
cure the same with all due diligence; or
(f) Failure by either Party to comply with the terms of any
decision or order which is final and not subject to further judicial
appeal issued pursuant to Article XIII hereof, and (i) such failure shall
continue for thirty (30) days after notice of such noncompliance or (ii)
if the noncomplying Party shall commence within such thirty (30) days and
shall thereafter proceed with all due diligence to cure such failure, such
failure is not cured within such longer period (but in no event more than
ninety (90) days) as shall be reasonably necessary for such Party to cure
the same with all due diligence.
Section 10.2. Remedies for Breach. Upon the occurrence and during
the continuation of any Event of Default hereunder, the Party not in default
shall have the right, at its option, to terminate this Agreement upon ten
47
(10) days' prior written notice received by the other Party, and to pursue any
other remedies provided under this Agreement or now or hereafter existing at law
or in equity or otherwise; provided, however, that in the case of an Event of
Default by Buyer hereunder, Seller shall provide the Financing Parties and the
Electricity Purchaser with notice of such Event of Default pursuant to Article
XV hereof, and the Financing Parties and the Electricity Purchaser each shall
have the right (but not the obligation) either (a) within ninety (90) days after
such notice, to cure the Event of Default on behalf of Buyer, or (b) within
one-hundred-twenty (120) days after such notice, to assume, or cause a designee,
new lessee or purchaser of the Facility to assume, all of the rights and
obligations of Buyer under this Agreement pursuant to Section 16.1(d) or (e)
hereof.
Section 10.3. Waiver of Breach. Either Party may waive a breach by
the other Party, provided that no waiver by or on behalf of either Buyer or
Seller of any breach of any of the covenants, provisions, conditions,
restrictions or stipulations contained in this Agreement shall take effect or be
binding on Buyer or Seller unless the waiver is reduced to a formal writing
and executed by an authorized officer of such Party, and any such waiver shall
be deemed to extend only to the particular breach waived and shall not limit or
otherwise affect any rights that Buyer or Seller may have with respect to any
other or future breach.
Section 10.4 Rights and Obligations of the Parties. Notwithstanding
anything in this Article X to the contrary, unless and until this Agreement has
been terminated hereunder, Seller shall not refuse to deliver or tender for
delivery or suspend or delay any delivery or tender of delivery of Coal, or
refuse to perform or suspend or delay any Waste taking, transportation or
disposal services, as required under this Agreement as a result of any breach or
alleged breach by Buyer, nor shall Buyer refuse to take and pay for the Coal
delivered by Seller or refuse to pelletize, deliver and permit Seller to take,
transport or dispose of Waste, subject to Sections 3.2 and 5.2 hereof, as a
result of any breach or alleged breach by Seller. Notwithstanding the foregoing,
Seller may suspend delivery of Coal or the taking of Waste in the event of
non-payment by Buyer for such services where such non-payment extends beyond
the time provided in Section 10.1(a) hereof.
Section 10.5 Cumulative Remedies. None of the remedies provided in
this Agreement is intended to be exclusive, but each shall be cumulative and in
addition to
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any other remedy referred to herein or otherwise available to either party at
law or in equity. The Parties agree that consequential damages shall not be
recoverable for the breach of this Agreement.
ARTICLE XI
INSURANCE
Section 11.1. Insurance. Each Party shall, at its own expense,
secure and maintain as a minimum during the term of this Agreement the following
insurance in form and with insurance companies acceptable to the other Party,
and with such other Party named as an additional insured (other than with
respect to Worker's Compensation Insurance). Such insurance shall be written on
an occurrence basis and shall be effective on or before the Initial Delivery
Date and thereafter maintained during the term of this Agreement. Deductible
amounts shall be the responsibility of the party obtaining and maintaining such
insurance.
Type Minimum Coverage
- ---- ----------------
Worker's Compensation As required by applicable state
Insurance law (self-insurance permitted
to the extent provided under
applicable state law)
Employer's Liability $5,000,000 per occurrence
Comprehensive General $5,000,000 per occurrence
Liability, including combined single limit
personal injury and
property damage coverage
Comprehensive Automobile $5,000,000 per occurrence
Liability, including combined single limit
personal injury and
property damage
coverage, on all owned,
hired and non-owned
vehicles
Section 11.2. Policies and Endorsements. Each Party shall furnish
proof of insurance acceptable to the other Party, with sufficient detail
included in the
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documentation such that the other Party can ascertain acceptability of coverage.
Such proof shall be signed by authorized representatives of the insurers. Such
documentation shall provide that the insurance coverage thereunder shall not be
cancelled, materially changed or not renewed until the expiration of at least
twenty (20) days after written notice of such cancellation, material change or
non-renewal has been received by the other Party, the Electricity Purchaser and
the Financing Parties. Proof of new or renewal policies replacing any policies
expiring during the term of this Agreement shall be delivered prior to the
expiration of the expired policies. The policies shall be endorsed to provide
that all such insurance is primary and not excess or contributory with any
insurance Buyer may carry, and that there shall be no recourse against the other
Party or any of its agents, successors or assigns with respect to payment of
premiums.
Section 11.3. Waiver of Subrogation. All policies shall contain
endorsements that the underwriters and insurance companies issuing such policies
shall not have any right of subrogation against the other Party or any of its
respective assignees, parents, subsidiaries, affiliates, insurers and
indemnitees or the officers, directors or employees of any of them.
Section 11.4. Non-limitation of Liability. The insurance coverages
required above are minimum amounts that do not limit each Party's
indemnification obligations set forth in Article XIV hereof or any of such
Party's other obligations or liabilities hereunder.
ARTICLE XII
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 12.1. General Representations, Warranties and Covenants.
Each Party hereby represents and warrants to Buyer as follows:
(a) Such Party is a corporation duly organized, validly existing and
in good standing under the laws of its state of incorporation and is
qualified to do business and in good standing in all other places where
necessary in light of the transactions contemplated in this Agreement;
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(b) The execution, delivery and performance of this Agreement has
been duly authorized by all necessary corporate action;
(c) This Agreement constitutes the legal, valid and binding
obligation of such Party enforceable against such Party in accordance with
its terms except to the extent that its enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the rights of creditors generally and by general principles of
equity; and
(d) The execution, delivery and performance of this Agreement will
not conflict with, result in the breach of, constitute a default under or
accelerate performance required by any of the terms of the articles of
incorporation or the by-laws of such Party or any Applicable Laws or, to
the best of such Party's knowledge after conducting reasonable due
diligence, any covenant, agreement, understanding, decree or order to
which such Party is a party or by which such Party or any of its
properties or assets is bound or affected, to the extent that such
condition would materially jeopardize the such Party's ability to fulfill
its obligations under this Agreement.
Section 12.2. Compliance with Laws.
(a) Seller represents and warrants to, and covenants with, Buyer
that it has or will acquire all Permits required for performance under this
Agreement including without limitation those to be held in connection with the
Loading Facility and the Waste Disposal Sites, the mining, transportation and
delivery of Coal, and the taking, transportation and disposal of Waste, all as
contemplated by this Agreement. Seller shall hold and maintain such Permits in
full force and effect during the term of this Agreement. Seller shall comply,
and shall be responsible for the compliance of suppliers, subcontractors or
agents, with all material Applicable Laws in performing Seller's obligations
hereunder, except where failure to comply would not be detrimental in any manner
to Buyer or to Buyer's interests in this Agreement. Seller shall promptly notify
Buyer of any actual or threatened loss, revocation or termination, of any such
Permit.
(b) Buyer represents and warrants to, and covenants with, Seller
that it has or will, acquire certain Permits required for performance under this
Agreement
51
including those to be held in connection with environmental matters, power
generation, and zoning, all as contemplated by this Agreement. Buyer shall hold
and maintain such Permits in full force and effect during the term of this
Agreement. Buyer shall comply, and shall be responsible for the compliance of
suppliers, subcontractors or agents, with all material Applicable Laws in
performing Buyer's obligations hereunder, except where failure to comply would
not be detrimental in any manner to Seller or to Seller's interests in this
Agreement. Buyer shall promptly notify Seller of any actual or threatened loss,
revocation or termination, of any such Permit.
(c) Seller warrants and covenants that during the term of this
Agreement (i) it will have and maintain all necessary rights (including valid
and enforceable contract rights) to dispose of Waste as contemplated herein at
the Waste Disposal Sites, (ii) it will have and maintain all necessary rights of
access to the Waste Disposal Sites to allow Seller to transport and dispose of
the Waste to the extent, for the duration and in the manner and quantities
contemplated herein, and (iii) it will comply with Material Applicable Laws
relating to zoning and permitted use of the Waste Disposal Sites as sites for
the disposal of Waste.
(d) Buyer warrants and covenants that during the term of this
Agreement (i) it will have and maintain all necessary Facility operating permits
and licenses and environmental permits and (ii) it will comply with Material
Applicable Laws relating to zoning and permitted use of the Waste Disposal Sites
as sites for the disposal of Waste.
(e) Seller represents and warrants that to the best of its knowledge
after appropriate due diligence, no substances that are Hazardous Wastes have
been disposed of at the Waste Disposal Sites.
(f) Seller warrants and covenants that, during the term of this
Agreement and for five (5) years after its expiration or termination for any
reason, it shall not, without the express written permission of Buyer which will
not be unreasonably withheld, transport or permit the transportation to, or
dispose of or release or permit the disposal or release of any substances at the
Waste Disposal Sites other than those allowed under Seller's Permits.
52
(g) Seller shall take reasonable steps to ensure that no substances
other than those allowed under Seller's Permits are transported, disposed of or
released at the Waste Disposal Sites, including without limitation the provision
of adequate security for the Waste Disposal Sites.
(h) Buyer shall take reasonable steps to ensure that no substances
other than those allowed under Seller's Permits are delivered to Seller as Waste
hereunder.
(i) Each Party shall take all action required under all material
Applicable Laws in connection with its operations and activities under this
Agreement, including without limitation compliance with any reporting or notice
requirements under Applicable Laws relating to environmental matters.
Section 12.3. Mutual Assistance. Without limiting each Party's
obligations under Section 12.2(a), (b), (c) and (d) hereof each Party shall,
upon the reasonable request of the other Party use reasonable efforts to assist
the other Party in obtaining and maintaining any Permits required under
Applicable Laws to be maintained by the other Party with regard to Coal or Waste
or the acquisition, storage, use, taking, transportation or disposal thereof.
ARTICLE XIII
ARBITRATION
Section 13.1. Arbitration. The Parties shall negotiate in good faith
and attempt to resolve any dispute which may develop under this Agreement;
however, if the Parties are unable to resolve a dispute hereunder, either Party
may serve upon the other a demand that such matter be arbitrated (including a
brief description of said dispute or disputes), in which case the same Shall be
resolved by arbitration conducted in accordance with the rules of the AAA. In
the event of such a dispute, the Parties shall each select a single arbitrator
who shall together appoint a third arbitrator. Unless the Parties otherwise
agree, the arbitration will be held in Atlanta, Georgia. The Parties shall
proceed with the arbitration expeditiously and shall direct the arbitration
panel to take all steps reasonably necessary to conclude all proceedings
thereunder, including
53
any hearing, in order that a decision may be rendered within one-hundred-twenty
(120) days from the filing of the demand for arbitration by the initiating
Party. The award of the arbitration panel will be final and binding on both
Parties and may be enforced in any court having jurisdiction over the Party
against which enforcement is sought. Each Party shall bear its own expenses,
including but not limited to counsel fees, except that all expenses of the
arbitration shall be apportioned in the award of the arbitration panel based
upon the respective merit of the claims of the Parties. The provisions of this
Article XIII shall survive any termination or expiration of this Agreement.
ARTICLE XIV
INDEMNIFICATION
Section 14.1. Indemnification of Seller.
(a) Buyer shall indemnify and hold Seller, its parents and
subsidiaries and their successors and assigns and each of their officers and
directors harmless from and against all damages, losses and expenses, including
reasonably incurred counsel fees ("Damages"), suffered on account of claims,
demands, suits, causes of action, proceedings, judgments and liabilities to the
extent that such Damages were proximately caused by any breach by Buyer of its
warranties, representations, covenants, or agreements hereunder, except to the
extent that such Damages are the result of the negligence of, or the failure to
comply with the terms of this Agreement by, Seller, its parents and subsidiaries
and their successors and assigns and any of their officers and directors. It is
understood that the remedies provided for in this Section 14.1(a) shall be in
addition to any and all other rights and remedies available at law, in equity or
otherwise.
(b) Without limiting or duplicating the provisions of Section
14.1(a) hereof, Buyer shall indemnify and hold harmless Seller, its parents and
subsidiaries and their successors and assigns and each of their officers and
directors from and against all Damages, assessed, incurred or sustained by or
against such entity or individual under any statute, governmental regulation or
ordinance or common law theory, including any liability under Superfund, RCRA,
similar state laws or other Applicable Laws, to the extent that such Damages
arise out of environmental protection,
54
pollution control or sanitation aspects of (i) the storing, handling and loading
of Waste at the Facility Site by Buyer or its employees, contractors or agents,
or (ii) any breach by Buyer of its warranties, representations, covenants or
agreements hereunder; except that Buyer shall not be obligated to indemnify
Seller hereunder (a) to the extent that such Damages were caused by the
negligence of, violation of law by, or the failure to comply with the terms of
this Agreement by Seller or its successors or assigns, parents or subsidiaries
or any of their employees, contractors (other than Buyer), agents or
representatives; (b) to the extent that such Damages exceed the amount of
damages for which Buyer and Seller are jointly liable, in those instances in
which Buyer and Seller are determined under Applicable Laws to be jointly
liable; or (c) to the extent that such Damages were caused by changes in
Applicable Laws after the time of such storing, handling and loading of the
Waste.
Section 14.2. Indemnification of Buyer.
(a) Seller shall indemnify and hold Buyer, its parents and
subsidiaries and their successors and assigns and each of their officers and
directors harmless from and against all Damages, suffered on account of claims,
demands, suits, causes of action, proceedings, judgments and liabilities to the
extent that such Damages were proximately caused by any breach by Seller of its
warranties, representations, covenants, or agreements hereunder, except to the
extent that such Damages are the result of the negligence of, or the failure to
comply with the terms of this Agreement by, Buyer, its parents and subsidiaries
and their successors and assigns and any of their officers and directors. It is
understood that the remedies provided for in this Section 14.2(a) shall be in
addition to any and all other rights and remedies available at law, in equity or
otherwise.
(b) Without limiting or duplicating the provisions of Section
14.2(a) hereof, Seller shall indemnify and hold harmless Buyer, its parents and
subsidiaries and their successors and assigns and each of their officers and
directors from and against all Damages, assessed, incurred or sustained by or
against such entity or individual under any statute, governmental regulation or
ordinance or common law theory, including any liability under Superfund, RCRA,
similar state laws or other Applicable Laws, to the extent that such Damages
arise out of environmental protection, pollution control or sanitation aspects
of (i) the taking, transportation or disposal of Waste by Seller or its
55
employees, contractors or agents, or (ii) any breach by Seller of its
warranties, representations, covenants or agreements hereunder; except that
Seller shall not be obligated to indemnify Buyer hereunder (a) to the extent
that such Damages were caused by the negligence of, violation of law by, or the
failure to comply with the terms of this Agreement by Buyer or its successors or
assigns, parents or subsidiaries or any of their employees, contractors (other
than Seller), agents or representatives; (b) to the extent that such Damages
exceed the amount of damages for which Buyer and Seller are jointly liable, in
those instances in which Buyer and Seller are determined under Applicable Laws
to be jointly liable; or (c) to the extent that such Damages were caused by
changes in Applicable Laws after the time of such taking, transportation and
disposal of the Waste.
Section 14.3. Notice and Legal Defense. Promptly after receipt by a
party entitled to indemnification under this Article XIV (the "Indemnified
Party") of any claim or notice of the commencement of any action, administrative
or legal proceeding, or investigation as to which any indemnity provided for in
Section 14.1 or 14.2 hereof may apply, the Indemnified Party shall notify the
indemnifying Party in writing of such fact. The indemnifying Party shall assume
the defense thereof with counsel designated by such Party and satisfactory to
the Indemnified Party; provided, however, that if the defendants in any such
action include both the Indemnified Party and the indemnifying Party and the
Indemnified Party shall have reasonably concluded that there may be legal
defenses available to it which are different from or additional to, or
inconsistent with, those available to the indemnifying Party, the Indemnified
Party shall have the right to select separate counsel to participate in the
defense of such action on behalf of such Indemnified Party, at the indemnifying
Party's expense. During the pendency of any matter to which may indemnity
provided in Section 14.1 or 14.2 hereof may apply, the Indemnified Party shall
retain authority to monitor, be consulted and be kept fully informed with
respect to the matter.
Section 14.4. Failure to Defend Action. Should the Indemnified Party
be entitled to indemnification under Section 14.1 or 14.2 hereof as a result of
a claim by a third party, and the indemnifying Party fails to assume the defense
of such claim, the Indemnified Party may at the expense of the indemnifying
Party contest (or, with the prior written consent of such indemnifying Party,
settle) such claim, provided that no such contest need be made and settlement or
full payment of any such claim may be made without consent of
56
the indemnifying Party (with such indemnifying Party remaining obligated to
indemnify the Indemnified Party under Section 14.1 or 14.2 hereof) if, in the
written opinion of the Indemnified Party's counsel, such claim is meritorious.
Section 14.5. Indemnification Amount. In the event that a Party is
obligated to indemnify and hold an Indemnified Party harmless under Section 14.1
or 14.2 hereof, the amount owing to the Indemnified Party will be the amount of
such party's actual out-of-pocket loss net of any insurance or other recovery.
Section 14.6. Survival. The provisions of this Article XIV shall
survive the termination or expiration of this Agreement.
ARTICLE XV
NOTICE AND SERVICE
Section 15.1. Notice. All notices, including communications and
statements which are required or permitted under the terms of this Agreement,
shall be in writing, except as otherwise provided.
Section 15.2. Service.
(a) Service of a notice may be accomplished by personal service,
telecopy, overnight mail service or registered or certified mail. In addition,
service of notices other than pursuant to Article X hereof may be accomplished
by means other than the foregoing, provided that such notices shall be deemed
served when actually received unless on any day other than a Business Day or
after 5:00 p.m. local time of the recipient, in which case service shall instead
be deemed to occur on the following Business Day.
(b) Subject to the final two sentences of Section 4.6 hereof, if a
notice is served by telecopy, it shall be deemed served as of the time
transmitted, unless after 5:00 p.m. local time of the recipient, in which case
service shall be deemed to occur on the following Business Day. If a notice is
served by overnight mail service, it shall be deemed served on the next Business
Day, except as otherwise demonstrated by a bonafide delivery notice. If a notice
is sent by registered or certified mail, it shall be deemed
57
served within three (3) Business Days after being placed in the custody of the
U.S. mail service, except as otherwise demonstrated by a signed receipt.
(c) Where notices are required to be sent under this Agreement to
Buyer, Seller, the Financing Parties or to the Electricity Purchaser, such
notices shall be addressed as follows:
(i) Buyer:
AES Cedar Bay, Inc.
1925 North Lynn Street
Suite 1200
Arlington, Virginia 22209
Attention: President
with a copy to
AES Cedar Bay, Inc.
9469 Eastport Road
Jacksonville, Florida 32218
Attention: Plant Manager
(ii) Seller:
Costain Coal Inc.
1301 W. Long Lake Road
Troy, Michigan 48098
Attention: Executive Vice President
(iii) Financing Parties:
As provided by Buyer within fifteen (15)
days after the Financial Closing Date
(iv) The Electricity Purchaser:
Florida Power & Light Company
P.O. Box 029100
Miami, Florida 33102
Attention: Cogeneration and Small
Power Production
From time to time Buyer, Seller, the Financing Parties or the Electricity
Purchaser may designate a new address for purposes of notice by written notice
to the others duly given as provided herein.
58
ARTICLE XVI
SUCCESSORS AND ASSIGNS
Section 16.1. Assignment by Buyer and Seller.
(a) Except as provided in this Article XVI, the rights and
obligations of the Parties, including any rights to monies or payments, may not
be assigned or delegated by either Party except upon the express written consent
of the other Party, which consent shall not be unreasonably withheld.
(b) Seller shall have the right, without the consent of Buyer, (i)
to assign its payments under this Agreement to any third party, provided that
such assignment shall not be deemed to include any of Seller's obligations
hereunder and shall not confer any rights against Buyer under this Agreement to
such assignee, or (ii) to assign any or all of its rights and delegate any of
its obligations hereunder to Costain Holdings Inc., a Delaware corporation
("CHI"), or any business entity directly or indirectly owned or controlled by
CHI provided that Seller shall not be released from its obligations hereunder
without the consent of Buyer, which consent shall not be unreasonably withheld.
Seller shall have the right, but only with the consent of Buyer, which consent
may be withheld in Buyer's sole reasonable discretion, to assign all of its
rights and interests and delegate all of its obligations under this Agreement to
a third party not referred to in the first sentence of this Section 16.1(b).
(c) Buyer shall have the right to assign all of its rights and
interests and delegate all of its obligations under this Agreement to any entity
that assumes ownership or operational control of the Facility, such assignment
to be subject to the consent of Seller which shall not be unreasonably withheld.
Reasonable conditions for the grant of such consent shall include that such
proposed assignee: (i) shall be the owner, operator or lessee of the Facility,
(ii) agrees in writing to be bound by and to assume the terms and conditions of
this Agreement and any and all obligations to Seller arising or accruing
hereunder (including without limitation those theretofore accrued but
unperformed or unsatisfied (excluding from the latter, however, the obligation
to perform, but not liability for damages for the nonperformance of, acts that
can no longer be performed with the exercise of due diligence)), (iii) is
generally recognized as having the financial substance to perform
59
Buyer's obligations under this Agreement and (iv) has the operational skill and
ability to perform Buyer's obligations under this Agreement. If the interest of
Buyer in this Agreement shall be assumed, sold or transferred as hereinbefore
provided, Buyer shall be released and discharged from only those obligations to
Seller arising or accruing hereunder from and after the date of such assumption,
and, unless the Parties agree otherwise, Buyer shall not be released and
discharged from and shall remain liable for any and all obligations to Seller
arising or accruing hereunder prior to such assumption or which expressly
survive the termination or expiration of this Agreement. Upon and after the
assignment and assumption described in this Section 6.2(c), Seller shall
continue this Agreement with the assuming party as if such person had thereafter
been named as Buyer under this Agreement.
(d) Buyer shall have the right, without the consent of Seller, to
assign any or all of its rights and interests under this Agreement to the
Financing Parties as security for its obligations under the Financing Documents
and to the Electricity Purchaser as security for its obligations under the Power
Purchase Agreement; provided that Buyer shall provide Seller with notice thereof
and copies of the agreements making such assignments within twenty (20) days
thereafter. Seller acknowledges that the Financing Documents may provide that
upon an event of default by Buyer under the Financing Documents, the Financing
Parties may under certain circumstances assume the interests, rights and
obligations of Buyer thereafter arising under this Agreement. If any of the
Financing Parties or the Electricity Purchaser assumes this Agreement as
provided hereinabove, it shall not be personally liable for the performance of
such obligations hereunder except to the extent of all of its right, title and
interest in and to the Facility and any and all contracts (except the Financing
Documents) related thereto. Notwithstanding any such assumption by the Financing
Parties or the Electricity Purchaser, Buyer shall not be released and discharged
from and shall remain liable for any and all obligations to Seller arising or
accruing hereunder prior to such assumption, or after such assumption for
obligations which expressly survive the termination or expiration of this
Agreement.
(e) Seller acknowledges that the Financing Documents will provide
that upon an event of default by Buyer under the Financing Documents, the
Financing Parties may, in addition to the exercise of their rights as set forth
in Section 16.2(d) hereof, cause Buyer to sell or lease the
60
Facility and cause any new lessee or purchaser of the Facility to assume all of
the interests, rights and obligations of Buyer thereafter arising under this
Agreement. Such assignment shall be subject to the consent of Seller which shall
not be unreasonably withheld. Factors which may be considered in determining
whether consent will be given include whether such proposed assignee: (i) shall
be the owner, operator or lessee of the Facility, (ii) agrees in writing to be
bound by and to assume the terms and conditions of this Agreement and any and
all obligations to Seller arising or accruing hereunder (including without
limitation those of Buyer and the Financing Parties and those theretofore
accrued but unperformed or unsatisfied (excluding from the latter, however, the
obligation to perform, but not liability for damage for the nonperformance of,
acts that can no longer be performed with the exercise of due diligence)), (iii)
is generally recognized as having the financial substance to perform Buyer's
obligations under this Agreement (to be viewed generally in light of the
condition of Buyer immediately after the Financial Closing Date), and (iv) has
the operational skill and ability to perform Buyer's obligations under this
Agreement (to be viewed generally in light of the condition of Buyer
immediately after the Financial Closing Date). If the interest of Buyer in this
Agreement shall be assumed, sold or transferred as hereinbefore provided, Buyer
shall be released and discharged from only those obligations to Seller arising
or accruing hereunder from and after the date of such assumption, and, unless
the Parties agree otherwise, Buyer shall not be released and discharged from and
shall remain liable for any and all obligations to Seller arising or accruing
hereunder prior to such assumption or which expressly survive the termination or
expiration of this Agreement. Upon and after the assignment and assumption
described in this Section 6.2(c), Seller shall continue this Agreement with the
assuming party as if such person had thereafter been named as Buyer under this
Agreement.
(f) The provisions of Section 16.1(d) and (e) hereof are for the
benefit of the Financing Parties and the Electricity Purchaser, as well as the
Parties, and shall be enforceable by each. Seller hereby agrees that none of the
Financing Parties or the Electricity Purchaser, or any bondholder or participant
for whom they may act, shall be obligated to perform any obligation or be deemed
to incur any liability or obligation provided herein on the part of Buyer or
shall have any obligation or liability to Seller with respect to this Agreement,
except as provided in this Section 16.1.
61
Section 16.2. Binding Effect. The terms and provisions of this
Agreement, the respective rights and obligations hereunder of Buyer and Seller,
and the respective rights of the Financing Parties and the Electricity Purchaser
set forth in Sections 10.2, 16.1 shall be binding upon, and inure to the benefit
of, their respective successors and permitted assigns. Except as expressly
stated in the Shareholder's Letter Agreement dated the date hereof, each Party
acknowledges that the other has entered into this Agreement entirely on its own
behalf, and in no manner on behalf of any direct or indirect shareholder or
affiliate, and the other Party shall have no recourse hereunder against such
direct or indirect shareholder or affiliate (other than successors or permitted
assigns of Buyer or Seller) or any of their successors or assigns for any
reason.
ARTICLE XVII
MISCELLANEOUS
Section 17.1. Independent Contractor. Each Party shall at all times
act as and be deemed to be an independent contractor for all purposes of this
Agreement and neither Party nor its subcontractors nor the employees of either
shall act as or be deemed to be employees, representatives, agents or partners
of the other Party. Neither Party shall have the right to control nor any
actual, potential or other control over the methods or means by which the other
Party or any of its agents, representatives, subcontractors or employees
conducts its independent business operations. Neither Party shall perform any
act or make any representation to any party to the effect that such Party or any
of its agents, representatives, subcontractors or employees is the agent of the
other Party.
Section 17.2. Agents of Seller; Subcontractors.
(a) No designation by either Party of any agent for purposes of
submitting invoices, receiving payments or taking any other action in connection
with the performance or administration of this Agreement shall be effective or
recognized by the other Party until the designating Party has given the other
Party notice of such designation.
(b) Except as set forth in Section 17.3 hereof, Seller may from time
to time enter into arrangements with subcontractors, suppliers or agents for
services to Seller that Seller is obligated hereunder to provide to Buyer.
62
(c) Each Party shall require all subcontractors, suppliers and
agents to obtain, maintain and keep in force during the time in which they are
engaged in performing services or other work hereunder insurance coverages as
would normally be required by similar businesses under similar circumstances or
agreements.
(d) Neither Party shall be deemed by virtue of this Agreement to
have any contractual obligation to, or relationship with, any subcontractor,
supplier or agent of the other Party.
(e) Each Party shall be solely responsible for paying each
subcontractor, supplier or agent and any other person or entity to whom any
amount is due from such Party for services, equipment, material or supplies in
connection with this Agreement.
(f) Neither Party shall be excused from performing its obligations
hereunder as a result of any such subcontract or other arrangement or the
nonperformance of any of such Party's subcontractors, suppliers or agents.
Section 17.3. Waste Contractor. Seller shall not enter into any
arrangement for any third party to provide the Waste disposal services to be
provided by Seller hereunder without Buyer's prior written approval, such
approval not to be withheld unless Buyer reasonably determines that, considering
all relevant factors (including without limitation the indemnifications provided
by Seller under this Agreement) it is or would be materially adversely affected
by the use of such third party. In the event Seller desires to enter into any
such arrangement, Seller shall (i) inform Buyer of the identity of the party to
provide such services, (ii) provide to Buyer copies of all proposed agreements
between Seller and such third party (except that Seller shall not be required to
disclose the financial terms, or terms subject to confidentiality obligations of
such agreements) and (iii) provide Buyer with such other information about such
third party as Buyer may reasonably request. For purposes of this Section 17.3,
the railroad providing transportation services to Seller shall not be deemed to
be providing Waste disposal services to Buyer hereunder. The provisions of
Section 17.2 hereof shall apply with equal force and effect to such third party.
Buyer's approval of such third party shall not constitute Buyer's release of
Seller from any of its obligations hereunder or approval of the quality of such
third party's performance.
63
Section 17.4. Certain Notices. Buyer shall give Seller notice not
later than 18 months prior to Initial Delivery Date. If such notice is not given
and Seller must make shipments in Carrier rail cars, Buyer shall pay to Seller
such marginal transportation costs as are reasonably incurred due to shipping in
Carrier equipment because timely notice was not given.
Section 17.5. Confidentiality. Seller and Buyer shall retain in
confidence the contents of this Agreement and any information obtained as a
result of negotiation and performance of this Agreement, except that Buyer may
disclose such information to the Financing Parties and Seller may disclose such
information to any parties providing financing to Seller. It is understood,
however, that such information may be disclosed when and to the extent requested
by a court or government agency (provided that neither Party shall make such
disclosure without notifying and consulting the other Party before such
disclosure), and that certain cost and physical property information related to
fuel purchases and waste disposal are routinely reported to state regulatory
agencies, the Federal Energy Regulatory Commission and the Environmental
Protection Agency and are used by Buyer's consultants to make economic
forecasts. Financing Parties, parties providing financing to Seller and
consultants will likewise be required to retain such information in confidence.
Section 17.6. Amendments. No amendment or modification of the terms
of this Agreement shall be binding on either Buyer or Seller unless reduced to
writing and signed by the Party against which enforcement is sought.
Section 17.7. Choice of Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida without giving
effect to any choice of law rules thereof which may direct the application of
the laws of another jurisdiction.
Section 17.8. Severability and Renegotiation. Should any provision
of this Agreement for any reason be declared invalid or unenforceable by final
and unappealable order of any court or regulatory body having jurisdiction
thereover, such decision shall not affect the validity of the remaining
provisions, which remaining provisions shall remain in full force and effect as
if this Agreement had been executed with the invalid or unenforceable provision
thereof eliminated. In the event any such provision of this Agreement is so
declared invalid or unenforceable, the
64
Parties shall promptly renegotiate in good faith new provisions to eliminate
such invalidity or unenforceability and to restore this Agreement as near as
possible to its original intent and effect. Upon impasse, the Parties will
submit any dispute regarding the substitution of the new provision to
arbitration pursuant to Article XIII hereof.
Section 17.9. Other Agreements. This Agreement supersedes any and
all oral and written agreements and understandings heretofore made relating to
the subject matter hereof, other than the letter agreement between Buyer and
Seller dated as of the date hereof relating to financeabilty, the Letter
Agreement referred to in Section 2.1(b) hereof, and the Shareholder's Letter
Agreement dated as of the date hereof, and constitutes the entire agreement and
understanding of the Parties relating to the subject matter hereof.
Section 17.10. Captions. All indices, titles, subject headings,
section titles and similar items are provided for the purpose of reference and
convenience and are not intended to be inclusive or definitive or to affect the
meaning, content or scope of this Agreement.
Section 17.11. Counterparts. This Agreement may be executed in any
number of counterparts, and each counterpart shall have the same force and
effect as the original instrument.
Section 17.12. Further Assurances. The Parties shall execute and
deliver such additional documents and shall cause such additional action to be
taken as may be reasonably necessary to carry out the purposes and intent of
this Agreement.
Section 17.13. No Third Party Rights. This Agreement and all rights
hereunder are intended for the sole benefit of the Parties hereto and, to the
extent expressly provided, for the benefit of the Financing Parties and the
Electricity Purchaser and shall not imply or create any rights on the part of,
or obligations to, any other entity or individual.
Section 17.14. Survival of Provisions. The termination or expiration
of this Agreement shall not affect
65
any of the provisions of this Agreement which are expressly or by implication to
continue in force after such termination or expiration.
IN WITNESS WHEREOF, the Parties hereto, intending to be legally
bound, have caused this Agreement to be signed by their respective officers
thereunto duly authorized as of the day and year first set forth above.
AES CEDAR BAY, INC.
By: /s/ Jeffrey V. Swain
----------------------------
Name: Jeffrey V. Swain
Title: Vice President
COSTAIN COAL INC.
By: /s/ Anthony L. Spezia
----------------------------
Name: Anthony L. Spezia
Title: Executive Vice
President
66
Page 1 of 2
ANNEX A
FACILITY SITE
[Graphic Omitted]
67
Page 2 of 2
[Graphic Omitted]
68
ANNEX B
DESCRIPTION OF COAL LOADING FACILITY
AND DEDICATED COAL RESERVES
I. Seller's Coal Loading Facility:
Name: Transcontinental Coal Processing, Inc., a wholly owned
subsidiary of Costain Coal Inc.
Location: Ivel, Floyd County, Kentucky (CSXT Mine No. 4091)
Origin of Coal: Coal delivered to the Coal Loading Facility shall
originate from the dedicated reserves or at Seller's
option, other reserves within trucking radius of the
Coal Loading Facility.
Property is held by long-term leases which expire August 1, 2020.
Raw Coal
Facility: Phase I Phase II
------ --------
Completion Date: July 1989 as required
by Seller
Coal Loading
Rate (Tons per hour): 1,000 3,000
Unit Train
Track Capacity (Tons): 7,000 10,000
Coal A Daniels 750 Ton per hour
Preparation (raw feed), heavy media
Plant: preparation plant completed in
1981 is on the property. This
plant may be used to meet
the quality specifications required
hereunder.
II. Dedicated Coal Reserves:
Recoverable Coal
Lease Seam Reserves (1,000) Tons
- ----- ---- ---------------------
Hatcher Hatcher 100
Dinkey 700
Fireclay 3,300
Elkhorn #3 5,400
Elkhorn #2 2,400
------
11,900
69
Leslie Elkhorn #3 1,600
Harkins Fireclay 2,000
& Mayo, et al Elkhorn #3 4,000
Elkhorn #2 1,500
Elkhorn #1 3,500
------
11,000
Total Coal Reserves Dedicated: 24,500
======
A Map of the Coal Reserves is attached.
70
ANNEX C
DESCRIPTION OF WASTE
DISPOSAL SITES AND SERVICES
1. Seller's Waste Disposal Site
Name: Transcontinental Coal Processing, Inc., a wholly owned
subsidiary of Costain Coal Inc.
Location: Ivel, Floyd County, Kentucky (CSXT Mine No. 4091)
Transportation:
Pelletized Waste will be loaded into open top bottom dump cars
at AES Cedar Bay by Buyer. Loaded Waste will be transported to
Seller's Waste Sites by Seller's designated Carrier.
Disposal Procedure:
The solid Waste will be transported to the Waste disposal site
by trucks from the Seller's unloading facility. The Waste will
be unloaded and disposed of in a residual landfill meeting all
the requirements under applicable solid waste disposal laws
and regulations. Ground water at the disposal site will be
analyzed through a network of monitoring wells positioned
within analytical parameters as required by applicable law.
Testing Procedures:
All testing will be in accordance with applicable performance
standards effecting a residual landfill under 401 KAR 30:030.
The site will be inspected to ensure compliance with
environmental performance standards in 401 KAR 30:030.
Subject to Section 5.3 hereof, Seller reserves the right to dispose of Waste at
facilities other than the facility mentioned above. Seller agrees to notify
Buyer regarding a proposed change in its Waste disposal location.
71
ANNEX D
CALCULATION OF INDEXES FOR COAL PRICE
AND WASTE SERVICES PRICE
The calculation of CC, GNP, PCE and PPI, as such terms are used in
Sections 6.1 and 6.2 hereof, shall be in accordance with the following formula:
I = I^n - I^O
----------
I^O
Where:
I = CC, GNP, PCE or PPI, as the case may be, expressed as a rate (i.e.,
1%=0.01);
I^n = for CC, the Coal Cost for the third month immediately preceding the
Adjustment Date;
for GNP or PCE, the GNP Index or the PCE Index, respectively, for the
second calendar quarter immediately preceding the Quarterly Adjustment
Date; and
for PPI, the PPI Index for the second month immediately preceding the
Quarterly Adjustment Date; and
I^O = for CC, the Coal Cost for the fourth month immediately preceding the
Adjustment Date, except that for the first Adjustment Date, I^O shall
equal the Coal Cost for November, 1988 which was one-dollar and
seventy-one cents ($1.71);
for GNP or PCE, the GNP Index or the PCE Index, respectively, for the
third calendar quarter immediately preceding the Quarterly Adjustment
Date, except that for the first Quarterly Adjustment Date, I^O shall equal
the GNP Index or the PCE Index for the second quarter of 1988 which index
value was 121.0 for the GNP Index and 123.9 for the PCE Index;
for PPI, the PPI Index for the fifth month immediately preceding the
Quarterly Adjustment Date, except that for the first Quarterly Adjustment
Date, I^O shall equal the PPI Index for September, 1988 which was 108.1.
72
(i) For the Adjustment Date which is October 1, 1997 (which is also a
Quarterly Adjustment Date):
I^n = for CC, the Coal Cost for July, 1997;
= for GNP or PCE, the GNP Index or the PCE Index,
respectively, for the second quarter of 1997; and
= for PPI, the PPI Index for August, 1997; and
I^0 = for CC, the Coal Cost for June, 1997;
= for GNP or PCE, the GNP Index or the PCE Index, respectively, for the
first quarter of 1997; and
= for PPI, the PPI Index for May, 1997.
(ii) For the Adjustment Date which is May 1, 1997:
I^n = for CC, the Coal Cost for February, 1997; and
I^O = for CC, the Coal Cost for January, 1997.
73
ANNEX E
SAMPLE CALCULATION OF MONTHLY COAL PAYMENT
For the Adjustment Date which is May 1, 1997 assume:
the Coal Price was $2.127 per million Btu's and Coal was delivered during
the month of May 1997 as follows:
Coal Coal Payment
Quality Price Due for
Shipment Tons Sold (Btu/lb) per Ton Coal Sold
- -------- --------- -------- ------- ---------
a 7,500.00 12,000 $51.0480 $ 382,860.00
b 7,771.28 11,799 50.1929 390,063.08
c 8,039.28 12,011 51.0948 410,765.40
d 7,127.03 12,497 53.1622 378,888.59
e 7,455.33 11,987 50.9927 380,167.41
f 7,708.01 12,358 52.5709 405,217.02
g 8,100.27 12,416 52.8177 427,837.63
h 7,905.25 12,113 51.5287 407,347.26
i 7,597.53 12,001 51.0523 387,871.38
j 7,879.35 11,854 51.4269 397,331.19
--------- -------------
77,083.33 $3,968,348.96
========= =============
Note: Calculation does not take into account the impact, if any, of the
Price Ceiling or Price Floor
74
ANNEX F
COMPONENTS OF PERIODIC ANALYSIS
Ultimate Analysis
Carbon
Hydrogen
Nitrogen
Chlorine
Sulfur
Oxygen
Ash Analysis
SiO2
A12O3
Fe2O3
CaO
MgO
TiO2
K2O
Na2O
SO3
P2O5
Trace elements
Lead content
Beryllium content
Cobalt content
75
Barium content
Zinc content
Copper content
Fluorines content
Cadmium content
Manganese content
Magnesium content
Molybdenum content
Selenium content
Vanadium content
Chromium content
Arsenic content
Mercury content
Nickel content
Phosphorus content
76
ANNEX G
EXAMPLE OF STOCKPILE DEFICIENCY CALCULATION
EXAMPLES
-------------------------------------
1 2 3
-------- -------- -------
Stockpile level 45,000(A) 50,000(A) 60,000
Tonnage of failed
delivery 8,000 8,000 8,000
Tonnage subject to
remedy -- 3,000 8,000
(A) The difference between 55,000 Tons and the actual stockpile level is
assumed to not be due to unexcused or uncured failures to deliver.
77