Contract #96-412-026
AMENDED AND RESTATED COAL SUPPLY AGREEMENT
This is an amended and restated coal supply agreement (the "Agreement")
dated as of April 1, 1998 between LOUISVILLE GAS AND ELECTRIC COMPANY, a
Kentucky corporation, 220 West Main Street, Louisville, Kentucky 40202 ("Buyer")
and HOPKINS COUNTY COAL LLC ("Seller"), a Delaware limited liability company,
having an address of 1717 South Boulder Avenue, Tulsa Oklahoma 74119-4886
("Seller"), and WEBSTER COUNTY COAL CORPORATION ("Guarantor"), a Kentucky
corporation, having an address of 1717 South Boulder Avenue, Tulsa Oklahoma
74119-4886.
W I T N E S S E T H:
A. Seller's predecessor in interest, Andalex Resources, Inc. ("Andalex"),
and Buyer entered into a coal supply agreement dated April 1, 1997, as amended
by Amendment to Coal Supply Agreement ("Amendment No. 1") dated effective August
1, 1997, whereby Andalex agreed to sell and supply and Buyer agreed to purchase
steam coal under the terms and conditions set forth therein.
B. Andalex and Seller entered into an Agreement for Purchase and Sale of
Assets whereby Seller agreed to acquire certain assets of Andalex, including
mines in Andalex's Cimarron Division.
C. Pursuant to Amendment No. 2 to Coal Supply Agreement ("Amendment No.
2"), Buyer consented to Seller's assumption of all Andalex's obligations and
liabilities under the Agreement arising on and after the date of the consent, on
the condition that Seller's sole member's subsidiary guaranty the performance of
Seller's obligations and liabilities under the
Contract #96-412-026
Agreement. Hereinafter, the Agreement, as modified by Amendment No. 1 and
Amendment No. 2 shall be referred to as the "Agreement."
D. Buyer and Seller wish to amend and restate the Agreement in its
entirety pursuant to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. GENERAL
Seller will sell to Buyer and Buyer will buy from Seller steam coal under
all the terms and conditions of this Agreement.
SECTION 2. TERM
The term of this Agreement shall commence on April 1, 1997 (the
"Commencement Date") and shall continue through December 31, 2001, subject to
the price, terms and conditions review set forth in ss.8.3 (the "Term"). The
period of April 1, 1997, through March 31, 1998, shall hereinafter be referred
to as the "Initial Term"; the period of April 1, 1998, through December 31, 1999
(as it may be extended through December 31, 2001, pursuant to the price, terms
and conditions review set forth in ss. 8.3), shall be referred to as the
"Secondary Term."
SECTION 3. QUANTITY
During the period of the Commencement Date through March 31, 1998 (the
"Initial Term"), Seller shall sell and deliver and Buyer shall purchase and
accept delivery of 62,500 tons of coal per month. Such coal shall be delivered
ratably in accordance with reasonable delivery schedules to be mutually agreed
upon by Buyer and Seller.
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Subject to ss. 8.3, during the following portions of the Secondary Term,
Seller shall deliver and Buyer shall purchase and accept delivery of the
following quantities of coal:
YEAR BASE QUANTITY (TONS)
---- --------------------
April 1, 1998, through December 31, 1998 897,000 - 927,000
January 1, 1999, through December 31, 1999 1,500,000
January 1, 2000, through December 31, 2000 1,500,000
January 1, 2001 through December 31, 2001 1,500,000
Such coal shall be delivered ratably in accordance with reasonable
delivery schedules to be mutually agreed upon by Buyer and Seller.
SECTION 4. SOURCE
ss. 4.1 Source. The coal sold hereunder shall be supplied from any one of
the geological seams Western Kentucky #11, #12, and #9 (surface and
underground), of any one of the mines in Seller's Cimarron Division as of the
effective date of this Agreement (the "Coal Property"). Seller shall have the
right to add to the Coal Property mines in Seller's Cimarron Division developed
after the effective date of this Agreement with Buyer's prior written consent,
which will not be unreasonably withheld.
ss. 4.2 Assurance of Operation and Reserves. Seller represents and
warrants that the Coal Property contains economically recoverable coal of a
quality and in quantities which will be sufficient to satisfy all the
requirements of this Agreement. Seller agrees and warrants that it will have at
the Coal Property adequate machinery, equipment and other facilities to produce,
prepare and deliver coal in the quantity and of the quality required by this
Agreement. Seller further agrees to operate and maintain such machinery,
equipment and facilities in accordance with good mining practices so as to
efficiently and economically produce, prepare and deliver such coal.
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Seller agrees that Buyer is not providing any capital for the purchase of such
machinery, equipment and/or facilities and that Seller shall operate and
maintain same at its sole expense, including all required permits and licenses.
Seller hereby dedicates to this Agreement sufficient reserves of coal meeting
the quality specifications hereof and lying on or in the Coal Property so as to
fulfill the quantity requirements hereof.
ss. 4.3 Non-Diversion of Coal. Seller agrees and warrants that it will
not, without Buyer's express prior written consent, use or sell coal from the
Coal Property in a way that will reduce the economically recoverable balance of
coal in the Coal Property to an amount less than that required to be supplied to
Buyer hereunder.
"ss. 4.4 Substitute Coal. In the event Seller is unable to
produce or obtain coal from the Coal Property in the quantity and of the quality
required by this Agreement, and such inability is not caused by a force majeure
event as defined in ss. 10 of this Agreement, then Buyer will have the option of
requiring that Guarantor supply coal (the "Substitute Coal") from the Dotiki
facilities and mines owned by Guarantor.
If Seller's inability to supply coal from the Coal Property is caused by a force
majeure event as accepted by Buyer, then Buyer shall have the option of
requesting that Guarantor supply Substitute Coal and Guarantor shall have the
option of supplying Substitute Coal, but Guarantor shall have no obligation to
perform unless Guarantor has elected to exercise its option. Buyer's option to
request performance by Guarantor must be exercised in writing within ten (10)
days of Buyer's receipt of Seller's declaration of force majeure. Guarantor's
option to accept Buyer's offer must be exercised in writing within ten (10) days
of Guarantor's receipt of Buyer's notice of election.
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All Substitute Coal supplied hereunder shall be supplied pursuant to all
the terms and conditions of this Agreement, including, but not limited to, the
price provisions of ss. 8, the quality specifications of ss. 6.1, and the
provisions of ss. 5 concerning reimbursement to Buyer for increased
transportation costs. The determination of whether the Substitute Coal
materially meets or exceeds these parameters shall be made by Buyer in Buyer's
sole opinion. Seller's or Guarantor's delivery of coal not produced from the
Coal Property without having received the express written consent of Buyer shall
constitute a material breach of this Agreement. If Guarantor supplies Substitute
Coal with the express consent of Buyer, such coal shall be considered delivered
from the Coal Property for all purposes of this Agreement except with regard to
any increased transportation costs."
SECTION 5. DELIVERY
ss. 5.1 Buyer's Option. During the Initial Term, the Delivery Point shall
be designated as set forth in Amendment No. 1.
During the Secondary term, the Delivery Point shall be designated as
follows: the coal shall be delivered F.O.B. railcar at the Cimarron rail loading
facility near Madisonville, Kentucky on the Paducah and Louisville Railway (the
"Delivery Point"). Seller may deliver the coal at a location different from the
Delivery Point, provided, however, that Seller shall reimburse Buyer for any
resulting increases in the cost of transporting the coal to Buyer's generating
stations. Any resulting savings in such transportation costs shall be shared by
Buyer and Seller. Buyer may request to change the Delivery Point to either
F.O.B. truck or F.O.B. barge. Upon Buyer's notification to Seller of its desire
to change the Delivery Point, Buyer and Seller shall mutually agree in writing
upon the change(s) and the time frame wherein such change will take place.
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ss. 5.2 Rail or Truck Delivery. If the coal is delivered F.O.B. railcar or
F.O.B. truck, then title to and risk of loss respecting the coal will pass to
Buyer and the coal will be considered to be delivered when it is loaded into the
railcars or trucks at the rail or truck loading facility. Buyer or its
contractor shall furnish suitable railcars or trucks in accordance with a
delivery schedule provided by Buyer to Seller. Seller shall be responsible for
and pay the cost of repairs for any damages caused by Seller to railcars or
trucks owned or leased by Buyer while such railcars or trucks are in Seller's
control or custody. Seller shall comply with the applicable provisions of
Buyer's rail or truck contractor's tariff. At Buyer's request, Seller shall
treat (or have treated) any shipment of coal hereunder with a freeze
conditioning agent approved by Buyer in order to maintain coal handling
characteristics during shipment. If requested by Buyer, Seller shall also treat
(or have treated) any railcars specified by Buyer with a side release agent
approved by Buyer. The price for each such requested chemical treatment shall be
an amount equal to Seller's cost of materials applied on a per gallon basis for
each applicable of freeze conditioning agent or side release agent, as the case
may be. Seller shall invoice Buyer for all such treatment which occurred in a
calendar month by the fifteenth of the following month; and payment shall be
mailed by the 25th of such following month or within ten days after receipt of
Seller's invoice, whichever is later.
ss. 5.3. Delivery to Sebree Dock. During the Initial Term, delivery
obligations to Sebree Dock shall be governed by Amendment No. 1.
SECTION 6. QUALITY
ss. 6.1 Specifications. During the Initial Term, the coal delivered
hereunder shall conform to the following specifications on an "as received"
basis:
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Guaranteed Monthly Rejection Limits
Specifications Weighted Average (per shipment)
- --------------------------------------------------------------------------------
BTU/LB. min. 11,500 LESS THAN 11,200
LBS/MMBTU:
MOISTURE max. 10.5 GREATER THAN 12
ASH max. 10.5 GREATER THAN 13
SULFUR max. 3.0 GREATER THAN 3.3
SULFUR min. 1.8 LESS THAN 1.8
CHLORINE max. .04 GREATER THAN .05
FLUORINE max. .006 GREATER THAN .006
NITROGEN max. 1.1 GREATER THAN 1.5
ASH/SULFUR RATIO min. 2.5:1 LESS THAN 2.5:1
Size (3" x 0"):
Top size (inches)* max. 3x0 GREATER THAN 3x0
Fines (% by wgt)
Passing 1/4" screen max. 45% GREATER THAN 50%
% BY WEIGHT:
VOLATILE max. 40 GREATER THAN 41
VOLATILE min. 35 LESS THAN 33
FIXED CARBON max. 48 GREATER THAN 49
FIXED CARBON min. 44 LESS THAN 40
GRINDABILITY (HGI) min. 55 LESS THAN 52
BASE ACID RATIO (B/A) .39 .43
SLAGGING FACTOR** max. 1.6 GREATER THAN 1.9
FOULING FACTOR*** max. .2 GREATER THAN .3
ASH FUSION TEMPERATURE ((degree)F) (ASTM D1857)
REDUCING ATMOSPHERE
Initial Deformation min. 1940 min. 1900
Softening (H=W) min. 2035 min. 1975
Softening (H=1/2W) min. 2085 min. 2000
Fluid min. 2190 min. 2100
OXIDIZING ATMOSPHERE
Initial Deformation min. 2300 min. 2200
Softening (H=W) min. 2320 min. 2280
Softening (H=1/2W) min. 2425 min. 2300
Fluid min. 2490 min. 2375
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Contract #96-412-026
* All the coal will be of such size that it will pass through a screen
having circular perforations three (3) inches in diameter, but shall not contain
more than thirty-five percent (35%) by weight of coal that will pass through a
screen having circular perforations one-quarter (1/4) of an inch in diameter.
** Slagging Factor (R(s))=(B/A) x (Percent Sulfur by Weight(Dry))
*** Fouling Factor (R(f))=(B/A) x (Percent Na(2)0 by Weight(Dry))
The Base Acid Ratio (B/A) is herein defined as:
BASE ACID RATIO (B/A) = (Fe(2)0(3) + Ca0 + Mg0 + Na(2)0 + K(2)0)
----------------------------------------
(Si0(2) + Al(2)0(3) + Ti0(2))
Note: As used herein GREATER THAN means greater than:
LESS THAN means less than.
During the Secondary Term, the coal delivered hereunder shall conform to
the above specifications on an "as received" basis, with the exception of the
following different specifications:
Guaranteed Monthly Rejection Limits
Specifications Weighted Average (per shipment)
- --------------------------------------------------------------------------------
BTU/LB. min. 11,400 LESS THAN 11,100
LBS/MMBTU:
MOISTURE max. 11.5 GREATER THAN 13.5
ASH max. 11.75 GREATER THAN 13.0
SULFUR max. 3.125 GREATER THAN 3.4
Size (3" x 0"):
Top size (inches)* max. 3x0 GREATER THAN 3x0
* All the coal will be of such size that it will pass through a screen
having circular perforations three (3) inches in diameter, but shall not contain
more than fifty percent (50%) by weight of coal that will pass through a screen
having circular perforations one-quarter (1/4) of an inch in diameter.
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Contract #96-412-026
ss. 6.2 Definition of "Shipment". As used herein, a "shipment" shall mean
one (1) unit trainload or a day's loading of trucks or individual barge or barge
lot, in accordance with Buyer's actual sampling and analyzing practices.
ss. 6.3 Rejection.
Buyer has the right, but not the obligation, to reject any shipment which
fail(s) to conform to the Rejection Limits set forth in ss. 6.1 or contains
extraneous materials. Buyer must reject such coal within seventy-two (72) hours
of receipt of the coal analysis provided for in ss. 7.2 or such right to reject
is waived. In the event Buyer rejects such non-conforming coal, Buyer shall
return the coal to Seller or, at Seller's request, divert such coal to Seller's
designee, all at Seller's cost. Seller shall replace the rejected coal within
five (5) working days from notice of rejection with coal conforming to the
Rejection Limits set forth in ss. 6.1. If Seller fails to replace the rejected
coal within such five (5) working day period or the replacement coal is
rightfully rejected, Buyer may purchase coal from another source in order to
replace the rejected coal. Seller shall reimburse Buyer for (i) any amount by
which the actual price plus transportation costs to Buyer of such coal purchased
from another source exceed the price of such coal under this Agreement (as
adjusted under ss. 8.2 for coal of the quality actually supplied by the other
source) plus transportation costs to Buyer from the Delivery Point; and (ii) any
and all transportation, storage, handling, or other expenses that have been
incurred by Buyer for rightfully rejected coal. This remedy is in addition to
all of Buyer's other remedies under this Agreement and under applicable law and
in equity for Seller's breach.
If Buyer fails to reject a shipment of non-conforming coal which it had
the right to reject for failure to meet any or all of the Rejection Limits set
forth in ss.6.1 or because such shipment contained extraneous materials, then
such non-conforming coal shall be deemed accepted by
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Buyer; however, the price shall be adjusted in accordance with ss.8.2 and the
quantity Buyer is obligated to purchase from Seller, at Buyer's sole option,
shall be reduced by the amount of each such non-conforming shipment. Further,
for shipments containing extraneous materials, which include, but are not
limited to, slate, rock, wood, corn husks, mining materials, metal, steel, etc.,
the estimated weight of such materials shall be deducted from the weight of that
shipment.
ss. 6.4 Suspension and Termination.
If the coal sold hereunder fails to meet one or more of the Guaranteed
Monthly Weighted Averages set forth in ss.6.1 for any one month during the term
of this Agreement, or if two (2) truck shipments or three (3) barge shipments in
a seven-day period are rejectable by Buyer, or if Buyer receives at its
generating station two (2) rail shipments which are rejectable in any ten-day
period, Buyer may, upon notice confirmed in writing and sent to Seller by
certified mail, terminate this Agreement and exercise all its other rights and
remedies under applicable law and in equity for Seller's breach.
SECTION 7. WEIGHTS, SAMPLING AND ANALYSIS
ss. 7.1 Weights. The weight of the coal delivered hereunder shall be
determined on a per shipment basis by Buyer on the basis of scale weights at the
generating station(s) unless another method is mutually agreed upon by the
parties. Such scales shall be duly reviewed by an appropriate testing agency and
maintained in an accurate condition. Seller shall have the right, at Seller's
expense and upon reasonable notice, to have the scales checked for accuracy at
any reasonable time or frequency. If the scales are found to be inaccurate, over
or under the tolerance range allowable for the scale, either party shall pay to
the other any amounts owed due to such inaccuracy for a period not to exceed
thirty (30) days before the time any inaccuracy of scales is determined. Buyer
shall send to seller, by telecopier or electronic data transmittal, a listing of
the
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Contract #96-412-026
daily shipment weights within three (3) business days after Buyer's
determination of such weights.
ss. 7.2 Sampling and Analysis. The sampling and analysis of the coal
delivered hereunder shall be performed by Buyer and the results thereof shall be
accepted and used for the quality and characteristics of the coal delivered
under this Agreement. Buyer shall send to Seller by telecopier or electronic
data transmittal a copy of the analysis within (10) business days after sampling
the applicable shipment. All analyses shall be made in Buyer's laboratory at
Buyer's expense in accordance with reliable and industry accepted standards.
Samples for analyses shall be taken by any reliable and industry accepted
standard acceptable to both parties, may be composited, and shall be taken with
a frequency and regularity sufficient to provide reasonably accurate
representative samples of the deliveries made hereunder. Seller represents that
it is familiar with Buyer's sampling and analysis practices, and finds them to
be in accordance with reliable and industry accepted standards. Buyer shall
notify Seller in writing of any significant changes in Buyer's sampling and
analysis practices. Any such changes in Buyer's sampling and analysis practices
shall, except for industry accepted changes in practices, provide for no less
accuracy than the sampling and analysis practices existing at the time of the
execution of this Agreement, unless the Parties otherwise mutually agree.
Each sample taken by Buyer shall be divided into 4 parts and put into
airtight containers, properly labeled and sealed. One part shall be used for
analysis by Buyer; one part shall be used by Buyer as a check sample, if Buyer
in its sole judgment determines it is necessary; one part shall be retained by
Buyer until the 25th of the month following the month of unloading (the
"Disposal Date") and shall be delivered to Seller for analysis if Seller so
requests before the Disposal Date; and one part ("Referee Sample") shall be
retained by Buyer until the Disposal
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Contract #96-412-026
Date. Seller shall be given copies of all analyses made by Buyer by the 12th day
of the month following the month of unloading. Seller, on reasonable notice to
Buyer shall have the right to have a representative present to observe the
sampling and analyses performed by Buyer. Unless Seller requests a Referee
Sample analysis before the Disposal Date, Buyer's analysis shall be used to
determine the quality of the coal delivered hereunder. The Monthly Weighted
Averages shall be determined by utilizing the individual shipment analyses.
If any dispute arises before the Disposal Date, the Referee Sample
retained by Buyer shall be submitted for analysis to an independent commercial
testing laboratory ("Independent Lab") mutually chosen by Buyer and Seller. For
each coal quality specification in question, a dispute shall be deemed not to
exist and Buyer's analysis shall prevail and the analysis of the Independent Lab
shall be disregarded if the analysis of the Independent Lab differs from the
analysis of Buyer by an amount equal to or less than:
(i) 0.50% moisture
(ii) 0.50% ash on a dry basis
(iii) 100 Btu/lb. on a dry basis
(iv) 0.10% sulfur on a dry basis.
For each coal quality specification in question, if the analysis of the
Independent Lab differs from the analysis of Buyer by an amount more than the
amounts listed above, then the analysis of the Independent Lab shall prevail and
Buyer's analysis shall be disregarded. The cost of the analysis made by the
Independent Lab shall be borne by Seller to the extent that Buyer's analysis
prevails and by Buyer to the extent that the analysis of the Independent Lab
prevails.
SECTION 8. PRICE
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ss. 8.1 Base Price. The base price (the "Base Price") of the coal to be
sold hereunder will be firm and will be determined by the year in which the coal
is delivered as defined in ss. 5 in accordance with the following schedule:
YEAR BASE PRICE ($ PER MMBTU)
---- ------------------------
(the Initial Term)
------------------
1997 $0.7800
1998 $0.7900
(the Secondary Term)
1998 $0.8285
1999 $0.8285
2000 $0.8485
2001 $0.8585
ss. 8.2 Quality Price Adjustments.
(a) The Base Price is based on coal meeting or exceeding the Guaranteed
Monthly Weighted Average specifications as set forth in ss.6.1. Quality price
discounts shall be applied for each specification each month to reflect failures
to meet the Guaranteed Monthly Weighted Averages set forth in ss.6.1, as
determined pursuant to ss.7.2, subject to the provisions set forth below. The
discount values used are as follows:
DISCOUNT VALUES
---------------
$/MMBTU
-------
BTU/LB 0.2604
$/LB./MMBTU
-----------
SULFUR 0.1232
ASH 0.0083
MOISTURE 0.0016
(b) Notwithstanding the foregoing, for each specification each month,
there shall be no discount if the actual Monthly Weighted Average meets the
applicable Discount Point set forth below. However, if the actual Monthly
Weighted Average fails to meet such applicable Discount Point, then the discount
shall be calculated on the basis of the difference between the
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actual Monthly Weighted Average and the Guaranteed Monthly Weighted Average
pursuant to the methodology shown in Exhibit A attached hereto.
During the Initial Term, the Guaranteed Monthly Weighted Average and
Discount Points shall be calculated as follows:
Guaranteed Monthly
Weighted Average Discount Point
---------------- --------------
BTU/LB min. 11,500 11,350
LB/MMBTU
- --------
SULFUR max. 3.0 3.2
ASH max. 10.5 12.0
MOISTURE max. 10.5 11.0
For example, if the actual Monthly Weighted Average of ash equals 12.5
lb/MMBTU, then the applicable discount would be (12.5 lb. - 10.5 lb.) x
$0.0083/lb./MMBTU = $.0166/MMBTU.
During the Secondary Term, the Guaranteed Monthly Weighted Average and
Discount Points shall be calculated as follows:
Guaranteed Monthly
Weighted Average Discount Point
---------------- --------------
BTU/LB min. 11,400 11,250
LB/MMBTU
- --------
SULFUR max. 3.125 3.325
ASH max. 11.75 12.50
MOISTURE max. 11.5 13.0
For example, if the actual Monthly Weighted Average of ash equals 13.5
lb/MMBTU, then the applicable discount would be (13.5 lb. - 11.75 lb.) x
$0.0083/lb./MMBTU = $.01453/MMBTU.
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Contract #96-412-026
ss. 8.3 Price, Terms and Conditions Review. The Base Price and all other
terms and conditions of this Agreement shall be subject to review for any reason
at the request of either party for revisions to become effective on January 1,
2000. The party requesting such a review shall give written notice of its
request to the other party on or before October 1, 1999. The parties then shall
negotiate an agreement on new prices and/or other terms and conditions between
October 1, 1999 and December 1, 1999. If the parties do not reach an agreement
by December 1, 1999, then this Agreement will terminate as of December 31, 1999
without liability due to such termination for either party, and the parties
shall have no further obligations hereunder except those incurred prior to the
date of termination.
ss. 8.4 Payment Calculation. Exhibit A attached hereto shows the
methodology for calculating the coal payment and quality price discounts for the
month Seller's coal was unloaded by Buyer. If there are any such discounts,
Buyer shall apply credit to amounts owed Seller for the month the coal was
unloaded.
SECTION 9. INVOICES, BILLING AND PAYMENT.
ss. 9.1 Invoicing Address. Invoices will be sent to Buyer at the following
address:
Louisville Gas and Electric Company
220 West Main Street
P.O. Box 32010
Louisville, KY 40232
Attention: Director, Fuels Management
With a copy to:
Louisville Gas and Electric Company
220 West Main Street
P.O. Box 32010
Louisville, KY 40232
Attention: Manager, Accounts Payable
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ss. 9.2 Invoice Procedures for Coal Shipments. Seller shall invoice Buyer
at the Base Price, minus any quality price discounts, for all coal unloaded in a
calendar month by the twentieth (20th) day of the following month.
ss. 9.3 Payment Procedures for Coal Shipments. For all coal delivered
pursuant to Article 5 hereof, and unloaded at the Delivery Point between the
first (1st) and fifteenth (15th) days of any calendar month. Buyer shall make
preliminary payment for seventy-five percent (75%) of the amount owed for the
coal (based on the assumption that the coal will meet all guaranteed monthly
quality parameters) by the twenty-fifth (25th) day of such month of delivery,
except that, if the 25th is not a regular work day, payment shall be made on the
next regular work day. For all coal delivered, as defined in Article 5 hereof,
and unloaded at the Delivery Point between the sixteenth (16th) and the last day
of any calendar month. Buyer shall make preliminary payment for seventy-five
percent (75%) of the delivered coal by the tenth (10th) day of the month
following the month of delivery, except that, if the 10th is not a regular work
day, payment shall be made on the next regular work day.
Preliminary payment shall be in the amount of seventy-five percent (75%)
of the then current price on a dollar per ton basis as calculated by the
guaranteed monthly weighted average BTU/lb. and the then current Base Price in
cents per MMBTU.
A reconciliation of amounts paid and amounts owed shall occur on the
twenty-fifth (25th) day of the month following the month of delivery. (For
example, Buyer will make one initial payment on September 25 for seventy-five
percent of coal delivered September 1 through 15, and another initial payment on
October 10 for seventy-five percent of coal delivered September 16 through 30. A
reconciliation will occur on October 25 for all deliveries made in September.)
The reconciliation shall be made as follows: Seller shall invoice Buyer on or
before the 20th day
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of the month following the month of delivery. The amount due for all coal (based
on the Base Price minus any Quality Price Discounts) delivered and unloaded and
accepted by Buyer during any calendar month shall be calculated and compared to
the sum of the preliminary payments made for coal delivered and unloaded and
accepted during such month. The difference shall be paid by or paid to Seller,
as applicable, by the twenty-fifth (25th) day of the month following the month
of delivery, except, that, if the 25th is not a regular work day, payment shall
be made in the next regular work day.
In the event Seller notifies Buyer that a pattern has developed whereby
payments are not being paid when due, as set forth herein, Buyer shall review
its internal approval and payment procedures and remedy such payment practices,
if any develop.
ss. 9.4 Withholding. Buyer shall have the right to withhold from payment
of any billing or billings (i) any sums which it is not able in good faith to
verify or which it otherwise in good faith disputes, (ii) any damages resulting
from or likely to result from any breach of this Agreement by Seller, and (iii)
any amounts owed to Buyer from Seller. Buyer shall notify Seller promptly in
writing of any such issue, stating the basis of its claim and the amount it
intends to withhold.
Payment by Buyer, whether knowing or inadvertent, of any amount in dispute
shall not be deemed a waiver of any claims or rights by Buyer with respect to
any disputed amounts or payments made.
SECTION 10. FORCE MAJEURE
If either party hereto is delayed in or prevented from performing any of
its obligations or from utilizing the coal sold under this Agreement due to (i)
acts of God, (ii) war, (iii) riots, (iv) civil insurrection, (v) acts of the
public enemy, (vi) strikes, (vii) lockouts, (viii) fires, (ix) floods,
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(x) earthquakes, (xi) explosions, (xii) mine accidents that are solely
responsible for delaying or preventing performance of Seller for 10 consecutive
days, (xiii) breakdown of or damage to equipment, plant, transmission systems,
or transportation providers that is solely responsible for delaying or
preventing the performance of Seller for 10 consecutive days, (xiv) unforeseen
adverse geologic conditions which were not detected despite prudent mine
planning and mining processes and which are solely responsible for delaying or
preventing the performance of Seller for 10 consecutive days, or (xv) the
inability to obtain necessary mining permit(s) after applying for such with
prudent and reasonable diligence, and such event is beyond the reasonable
control and without the fault or negligence of the party affected thereby, then
the obligations of both parties hereto shall be suspended to the extent made
necessary by such event; provided that the affected party gives written notice
to the other party as early as practicable of the nature and probable duration
of the force majeure event. The party declaring force majeure shall exercise due
diligence to avoid and shorten the force majeure event and will keep the other
party advised as to the continuance of the force majeure event.
During any period in which Seller's ability to perform hereunder is
affected by a force majeure event, Seller shall not deliver any coal to any
other buyers to whom Seller's ability to supply is similarly affected by such
force majeure event unless contractually committed to do so at the beginning of
the force majeure event; and further shall deliver to Buyer under this Agreement
at least a pro-rata portion (on a per ton basis) of its total contractual
commitments to all its buyers to whom Seller's ability to supply is similarly
affected by such force majeure event in place at the beginning of the force
majeure event. An event which affects the Seller's ability to produce or obtain
coal from a mine other than the Coal Property will not be considered a force
majeure event hereunder.
18
Contract #96-412-026
Tonnage deficiencies resulting from Seller's declared force majeure event
shall be made up at Buyer's sole option on a mutually agreed-upon schedule.
Tonnage deficiencies resulting from Buyer's declared force majeure event shall
be made up at Seller's sole option on a mutually agreed-upon schedule.
SECTION 11. NOTICES
ss. 11.1 Form and Place of Notice. Any official notice, request for
approval or other document required to be given under this Agreement shall be in
writing, unless otherwise provided herein, and shall be deemed to have been
sufficiently given when delivered in person, transmitted by facsimile or other
electronic media, delivered to an established mail service for same day or
overnight delivery, or dispatched in the United States mail, postage prepaid,
for mailing by first class, certified, or registered mail, return receipt
requested, and addressed as follows:
If to Buyer: Louisville Gas and Electric Company
220 West Main Street
P.O. Box 32010
Louisville, Kentucky 40232
Attn: Director, Fuels Management
If to Seller: Hopkins County Coal LLC
1717 S. Boulder Avenue; Sixth Floor
P.O. Box 22027
Tulsa, Oklahoma 74121-2027
Attn: Mr. Gary J. Rathburn
Senior Vice President, Marketing
With a copy to: Mapco Coal, Inc.
771 Corporate Drive, Suite 900
Lexington, Kentucky 40503
Att: James E. Plaisted,
Sales Manager, Central Region
ss. 11.2 Change of Person or Address. Either party may change the person
or address specified above upon giving written notice to the other party of such
change.
19
Contract #96-412-026
SECTION 12. RIGHT TO RESELL
Buyer shall have the unqualified right to re-sell all or any of the coal
purchased under this Agreement.
SECTION 13. INDEMNITY AND INSURANCE
ss. 13.1 Indemnity. Seller agrees to indemnify and save harmless Buyer,
its officers, directors, employees and representatives from any responsibility
and liability for any and all claims, demands, losses, legal actions for
personal injuries, property damage and pollution (including reasonable
attorney's fees) (i) relating to the barges or railcars provided by Buyer or
Buyer's contractor while such barges or railcars are in the care and custody of
the loading dock or loading facility, (ii) due to any failure of Seller to
comply with laws, regulations or ordinances, or (iii) due to the acts or
omissions of Seller in the performance of this Agreement.
ss. 13.2 Insurance. Seller agrees to carry insurance coverage with minimum
limits as follows:
(1) Commercial General Liability, including Completed Operations and
Contractual Liability, $1,000,000 single limit liability.
(2) Automobile General Liability, $1,000,000 single limit liability.
(3) In addition, Seller shall carry excess liability insurance
covering the foregoing perils in the amount of $4,000,000 for any one
occurrence.
(4) Workers' Compensation and Employer's Liability with statutory
limits.
If any of the above policies are written on a claims made basis, then the
retroactive date of the policy or policies will be no later than the effective
date of this Agreement. Certificates of
20
Contract #96-412-026
Insurance satisfactory in form to the Buyer and signed by the Seller's insurer
shall be supplied by the Seller to the Buyer evidencing that the above insurance
is in force and that not less than 30 calendar days written notice will be given
to the Buyer prior to any cancellation or material reduction in coverage under
the policies. The Seller shall cause its insurer to waive all subrogation rights
against the Buyer respecting all losses or claims arising from performance
hereunder. Evidence of such waiver satisfactory in form and substance to the
Buyer shall be exhibited in the Certificate of Insurance mentioned above.
Seller's liability shall not be limited to its insurance coverage.
SECTION 14. TERMINATION FOR DEFAULT.
If either party hereto commits a material breach of any of its obligations
under this Agreement at any time (with the exception of defaults occurring under
ss.6.4), then the other party has the right to give written notice describing
such breach and stating its intention to terminate this Agreement no sooner than
thirty (30) days after the date of the notice (the "notice period"). If such
material breach is curable and the breaching party cures such material breach
within the notice period, then the Agreement shall not be terminated due to such
material breach. If such material breach is not curable or the breaching party
fails to cure such material breach within the notice period, then this Agreement
shall terminate at the end of the notice period in addition to all the other
rights and remedies available to the aggrieved party under this Agreement and at
law and in equity.
SECTION 15. TAXES, DUTIES AND FEES
Seller shall pay when due, and the price set forth in ss. 8 of this
Agreement shall be inclusive of, all taxes, duties, fees and other assessments
of whatever nature imposed by governmental authorities with respect to the
transactions contemplated under this Agreement.
21
Contract #96-412-026
SECTION 16. DOCUMENTATION AND RIGHT OF AUDIT
Seller shall maintain all records and accounts pertaining to payments,
quantities, quality analyses and source of all coal supplied under this
Agreement for a period lasting through the term of this Agreement and for two
years thereafter. Buyer shall have the right at no additional expense to Buyer
to audit, copy and inspect such records and accounts at any reasonable time upon
reasonable notice during the term of this Agreement and for 2 years thereafter.
SECTION 17. EQUAL EMPLOYMENT OPPORTUNITY.
To the extent applicable, Seller shall comply with all of the following
provisions which are incorporated herein by reference: Equal Opportunity
regulations set forth in 41 CRF ss. 60-1.4(a) and (c) prohibiting discrimination
against any employee or applicant for employment because of race, color,
religion, sex, or national origin; Vietnam Era Veterans Readjustment Assistance
Act regulations set forth in 41 CRF ss. 50-250.4 relating to the employment and
advancement of disabled veterans and veterans of the Vietnam Era; Rehabilitation
Act regulations set forth in 41 CRF ss. 60-741.4 relating to the employment and
advancement of qualified disabled employees and applicants for employment; the
clause known as "Utilization of Small Business Concerns and Small Business
Concerns Owned and Controlled by Socially and Economically Disadvantaged
Individuals" set forth in 15 USC ss. 637(d)(3); and subcontracting plan
requirements set forth in 15 USC ss. 637(d).
SECTION 18. COAL PROPERTY INSPECTIONS
Buyer and its representatives, and others as may be required by applicable
laws, ordinances and regulations shall have the right at all reasonable times
and at their own expense to
22
Contract #96-412-026
inspect the Coal Property, including the loading facilities, scales, sampling
system(s), wash plant facilities, and mining equipment for conformance with this
Agreement. Seller shall undertake reasonable care and precautions to prevent
personal injuries to any representatives, agents or employees of Buyer
(collectively, "Visitors") who inspect the Coal Property. Any such Visitors
shall comply with Seller's regulations and rules regarding conduct on the work
site, made known to Visitors prior to entry, as well as safety measures mandated
by state or federal rules, regulations and laws. Buyer understands that
underground mines and related facilities are inherently high-risk environments.
Buyer's failure to inspect the Coal Property or to object to defects therein at
the time Buyer inspects the same shall not relieve Seller of any of its
responsibilities nor be deemed to be a waiver of any of Buyer's rights
hereunder.
SECTION 19. MISCELLANEOUS
ss. 19.1 Applicable Law. This Agreement shall be construed in accordance
with the laws of the State of Kentucky, and all questions of performance of
obligations hereunder shall be determined in accordance with such laws.
ss. 19.2 Headings. The paragraph headings appearing in this Agreement are
for convenience only and shall not affect the meaning of interpretation of this
Agreement.
ss. 19.3 Waiver. The failure of either party to insist on strict
performance of any provision of this Agreement, or to take advantage of any
rights hereunder, shall not be construed as a waiver of such provision or right.
ss. 19.4 Remedies Cumulative. Remedies provided under this Agreement shall
be cumulative and in addition to other remedies provided under this Agreement or
by law or in equity.
ss. 19.5 Severability. If any provision of this Agreement is found
contrary to law or unenforceable by any court of law, the remaining provisions
shall be severable and enforceable
23
Contract #96-412-026
in accordance with their terms, unless such unlawful or unenforceable provision
is material to the transactions contemplated hereby, in which case the parties
shall negotiate in good faith a substitute provision.
ss. 19.6 Binding Effect. This Agreement shall bind and inure to the
benefit of the parties and their successors and assigns.
ss. 19.7 Assignment. Neither party may assign this Agreement or any rights
or obligations hereunder without the prior written consent of the other party,
which consent shall not be unreasonably withheld or denied; provided, however,
that Buyer shall have the right, without consent of Seller, to assign all or any
part of this Agreement to any company, controlling, controlled by, or under
common control with Buyer.
ss. 19.8 Entire Agreement. This Agreement contains the entire agreement
between the parties as to the subject matter hereof, and there are no
representations, understandings or agreements, oral or written, which are not
included herein.
ss. 19.9 Amendments. Except as otherwise provided herein, this Agreement
may not be amended, supplemented or otherwise modified except by written
instrument signed by both parties hereto.
SECTION 20. GUARANTY OF PERFORMANCE AND GUARANTOR'S INDEMNIFICATION.
ss. 20.1 Guaranty of Performance. As a material inducement for Buyer's
giving its consent to the Assignment and Assumption, and in consideration
thereof, Guarantor hereby guarantees the full, prompt and complete performance
by Seller of all the terms and conditions of the Agreement to be performed by
Seller thereunder (the "Guaranty"). Guarantor hereby indemnifies and holds Buyer
and Buyer's successors and assigns harmless from and against all liability
24
Contract #96-412-026
and expense, including reasonable attorney's fees, sustained by Buyer by reason
of the failure of Guarantor fully to perform and comply with the terms and
obligations of the Agreement, or by reason of any misrepresentation of Guarantor
hereunder. It is understood this is a continuing, absolute and unconditional
Guaranty, co-extensive and co-terminous with the Agreement between the Seller
and Buyer, as it may be extended and amended by Buyer and Seller. Guarantor
hereby expressly waives notice of acceptance of this Guaranty, notice of the
defaults by Seller or of nonpayment or nonfulfillment of any or all of Seller's
liabilities and obligations. The delay or failure of Buyer to insist on strict
performance of any provision of this Agreement, or to take advantage of any
rights hereunder, shall not be construed as a waiver of such provision or right
or of the Guaranty.
ss.20.2 Guarantor's Consent for Amendments and Extensions. The Guarantor hereby
expressly gives the Buyer and Seller from time to time, without notice to
Guarantor, authority and consent to give and make such extensions, renewals,
settlements, and compromises at it may deem proper with respect to any of the
duties or liabilities of the Seller under this Agreement.
ss. 20.3 Buyer's Consent to Assignment and Assumption. In reliance on the
Guaranty and on the representations and warranties of Seller/Assignor, Seller
and Guarantor set forth herein, Buyer hereby consents to the Assignment and
Assumption. Buyer's consent thereto shall not be construed as a consent to any
future assignments, or as a waiver of ss. 19.7 of the Agreement, which provision
is hereby ratified and confirmed.
ss. 20.4 Guarantor's Additional Representations, Warranties and Covenants.
Guarantor hereby represents and warrants it has the power and authority, and
promptly will, take all necessary actions to enable Guarantor to supply
Substitute Coal.
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Contract #96-412-026
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
HOPKINS COUNTY COAL LLC LOUISVILLE GAS AND ELECTRIC
COMPANY
By: /s/ signed By: /s/ Wayne T. Lucas
--------------------------- -------------------------------
Wayne T. Lucas
Title: Senior Vice President - Marketing EVP - Power Generation
---------------------------------
Date: December 4, 1998 Date: December 9, 1998
----------------------------------- ------------------------------
WEBSTER COUNTY COAL CORPORATION
By: /s/ signed
--------------------------
Title: Senior Vice President - Marketing
----------------------------------
Date: December 4, 1998
-----------------------------------
26
Contract #96-412-026
Exhibit A
Page 1 of 4
EXHIBIT A - INITIAL TERM
SAMPLE COAL PAYMENT CALCULATIONS
Total Evaluated Coal Costs for Contract No. 96-412-26
- --------------------------------------------------------------------------------
For contracts supplied from multiple "origins", each "origin will be calculated
individually.
Section I Base Data
-------------------------------------- --------------
1) Base F.O.B. price per ton: $ 17.94 /ton
-------------
1a) Tons of coal delivered: tons
-------------
2) Guaranteed average heat content: 11,500 BTU/LB.
-------------
2r) As received monthly avg. heat content: BTU/LB.
-------------
2a) Energy delivered in MMBTU: MMBTU
-------------
[(Line 1a) *2,000 lb./ton*(Line 2r)] *MMBTU/1,000,000 BTU
[( ) *2,000 lb./ton*( )]*MMBTU/1,000,000 BTU
2b) Base F.O.B. price per MMBTU: $ 0.78000 MMBTU
-------------
[(Line 1)/(Line 2)] * (1 ton/2,000 lb.) * 1,000,000 BTU/MMBTU
[( /ton)/( BTU/LB)] * (1 ton/2,000 lb.) * 1,000,000 BTU/MMBTU
3) Guaranteed monthly avg. max. sulfur 3.00 LBS./MMBTU
-----------
3r) As received monthly avg. sulfur LBS./MMBTU
-----------
4) Guaranteed monthly avg. ash 10.50 LBS./MMBTU
-----------
4r) As received monthly avg. ash LBS./MMBTU
-----------
5) Guaranteed monthly avg. max. moisture 10.50 LBS./MMBTU
-----------
5r) As received monthly avg. moisture LBS./MMBTU
-----------
Section II Discounts
-------------------------------------- ------------
Assign a (-) to all discounts (round to (5) decimal places)
6d) BTU/LB.: If line 2r LESS THAN 11,350 BTU/lb. then:
{1 - (line 2r) / (line 2)} * $0.2604/MMBTU
{1 - ( ) / (11,500)} * $0.2604 = $ /MMBTU
-----------
7d) SULFUR: If line 3r is greater than 3.20 lbs./MMBTU
[ (line 3r) - (line 3) ] * 0.1232/lb. Sulfur
[ ( ) - (3.00) ] * 0.1232 = $ /MMBTU
-----------
8d) ASH: If line 4r is greater than 12.00 lbs./MMBTU
[ (line 4r) - (line 4) ] * 0.0083/MMBTU
[ ( ) - (10.50) ] * 0.0083 = $ /MMBTU
-----------
9d) MOISTURE: If line 5r is greater than 11.00 lbs./MMBTU
[ (line 5r) - (line 5) ] * 0.0016/MMBTU
[ ( ) - (10.50) ] * 0.0016 = $ /MMBTU
-----------
27
Contract #96-412-026
Exhibit A
Page 2 of 4
Total Price
Section III Adjustments
-------------------------------------- -----------
Determine total Discounts as follows:
Assign a (-) to all discounts (round to (5) decimal places)
Line 6d: $ /MMBTU
------------
Line 7d $ /MMBTU
------------
Line 8d $ /MMBTU
------------
Line 9d $ /MMBTU
------------
10) Total Discounts (-):
Algebraic sum of above: $ /MMBTU
------------
11) Total evaluated coal price = (line 2b) + (line 10)
12) Total discount price adjustment for Energy delivered:
(line 2a) * (line 10) (-)
$ /MMBTU + $ /MMBTU = $
----- ------------ ----------
13) Total base cost of coal
(line 2a) * (line 2b)
$ /MMBTU + $ /MMBTU = $
----- ------------ ----------
14) Total coal payment for month
(line 12) + (line 13)
$ /MMBTU + $ = $
----- ------------ ----------
28
Contract #96-412-026
Exibit A
Page 3 of 4
EXHIBIT A - SECONDARY TERM
SAMPLE COAL PAYMENT CALCULATIONS
Total Evaluated Coal Costs for Contract No. 96-412-26
- --------------------------------------------------------------------------------
For contracts supplied from multiple "origins", each "origin will be calculated
individually.
Section I Base Data
-------------------------------------- ---------------
1) Base F.O.B. price per ton: $ 18.89 /ton
------------
1a) Tons of coal delivered: tons
------------
2) Guaranteed average heat content: 11,400 BTU/LB.
------------
2r) As received monthly avg. heat content: BTU/LB.
------------
2a) Energy delivered in MMBTU: MMBTU
------------
[(Line 1a) *2,000 lb./ton*(Line 2r)] *MMBTU/1,000,000 BTU
[( ) *2,000 lb./ton*( )]*MMBTU/1,000,000 BTU
2b) Base F.O.B. price per MMBTU: $ 0.8285 MMBTU
------------
[ (Line 1) / (Line 2) ] * (1 ton/2,000 lb.) * 1,000,000 BTU/MMBTU
[ ( /ton) / ( BTU/LB) ] * (1 ton/2,000 lb.) * 1,000,000 BTU/MMBTU
3) Guaranteed monthly avg. max. sulfur 3.125 LBS./MMBTU
------------
3r) As received monthly avg. sulfur LBS./MMBTU
------------
4) Guaranteed monthly avg. ash 11.75 LBS./MMBTU
------------
4r) As received monthly avg. ash LBS./MMBTU
------------
5) Guaranteed monthly avg. max. moisture 11.50 LBS./MMBTU
------------
5r) As received monthly avg. moisture LBS./MMBTU
------------
Section II Discounts
-------------------------------------- --------------
Assign a (-) to all discounts (round to (5) decimal places)
6d) BTU/LB.: If line 2r LESS THAN 11,250 BTU/lb. then:
{1 - (line 2r) / (line 2)} * $0.2604/MMBTU
{1 - ( ) / (11,400)} * $0.2604 = $ /MMBTU
------------
7d) SULFUR: If line 3r is greater than 3.325 lbs./MMBTU
[ (line 3r) - (line 3) ] * 0.1232/lb. Sulfur
[ ( ) - (3.125) ] * 0.1232 = $ /MMBTU
------------
8d) ASH: If line 4r is greater than 12.50 lbs./MMBTU
[ (line 4r) - (line 4) ] * 0.0083/MMBTU
[ ( ) - (11.75) ] * 0.0083 = $ /MMBTU
------------
9d) MOISTURE: If line 5r is greater than 13.00 lbs./MMBTU
[ (line 5r) - (line 5) ] * 0.0016/MMBTU
[ ( ) - (11.50) ] * 0.0016 = $ /MMBTU
------------
29
Contract #96-412-026
Exhibit A
Page 4 of 4
Total Price
Section III Adjustments
-------------------------------------- ------------
Determine total Discounts as follows:
Assign a (-) to all discounts (round to (5) decimal places)
Line 6d: $ /MMBTU
------------
Line 7d $ /MMBTU
------------
Line 8d $ /MMBTU
------------
Line 9d $ /MMBTU
------------
10) Total Discounts (-):
Algebraic sum of above: $ /MMBTU
------------
11) Total evaluated coal price = (line 2b) + (line 10)
12) Total discount price adjustment for Energy delivered:
(line 2a) * (line 10) (-)
$ /MMBTU + $ /MMBTU = $
----- ------------ --------
13) Total base cost of coal
(line 2a) * (line 2b)
$ /MMBTU + $ /MMBTU = $
----- ----------- --------
14) Total coal payment for month
(line 12) + (line 13)
$ /MMBTU + $ = $
----- ----------- --------
30