Exhibit 10.12
COKE PURCHASE AGREEMENT
By and Between
Haverhill North Coke Company,
and
WCI Steel, Inc.
DATED NOVEMBER 21, 2006
COKE PURCHASE AGREEMENT
THIS COKE PURCHASE AGREEMENT dated as of November 21, 2006 (the "Effective
Date"), is made by and between Haverhill North Coke Company, a Delaware
corporation ("Seller"), and WCI Steel, Inc., a Delaware corporation
("Purchaser").
For good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the Parties, intending to be legally bound, agree as
follows:
ARTICLE I
Definitions; Coke Plants; Seller's Notice
1.1 Definitions. The definitions of certain capitalized terms used in this
Agreement are contained in the attached Appendix A.
1.2 Phase I and Phase II Plants.
(a) Seller has constructed a one hundred oven metallurgical coke making
plant and related facilities and equipment located at Haverhill (Franklin
Furnace), Ohio (the "Site") owned and operated by Seller based upon heat
recovery technology that is proprietary to Seller and its Affiliates
(hereinafter referred to as the "Phase I Plant"). The Phase I Plant is designed
to produce approximately 550,000 Tons of blast furnace coke per year based upon
the processing of the Base Case Coal Blend into blast furnace coke. The Phase I
Plant does not produce electrical power.
(b) Seller is to develop an additional one hundred oven metallurgical coke
making plant (the "Phase II Plant") and an associated Cogeneration Plant at the
Site utilizing such proprietary technology. The Phase II Plant is designed to
produce approximately 550,000 Tons of blast furnace coke per year based upon the
processing of the Base Case Coal Blend into blast furnace coke, and will produce
electrical power by utilizing the flue gas generated from the coke plant portion
of the Phase II Plant.
1.3 Seller's Notice. Within three (3) business days following the commencement
of the construction of physical improvements in respect of the Phase II Plant,
Seller will provide Purchaser with Written notice thereof. Thereafter, Seller
will provide Purchaser with Written reports in respect of the progress of the
construction of the Phase II Plant not less than once per quarter through the
commencement of the Initial Operating Period.
ARTICLE II
Term
The term of this Agreement ("Term") shall commence on the Effective Date and,
subject to earlier termination in accordance with this Agreement, shall continue
in effect for fifteen (15) Contract Years. Upon the conclusion of such fifteen
(15) Contract Years, this Agreement shall expire automatically.
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ARTICLE III
Contract Price and Payment Terms
3.1 Contract Price. During the Initial Operating Period, and for the balance of
the Initial Year, the "Contract Price" means the sum of (x) the Fixed Price
Component, (y) the Initial O&M Component, and (z) the Coal Cost Component.
During each Contract Year, the "Contract Price" means the sum of (A) the Fixed
Price Component, (B) subject to Sections 3.3(c) and 3.3(e), the Forecasted O&M
Component, and (C) the Coal Cost Component.
3.2 Fixed Price Component. The "Fixed Price Component" is $[*****](1) per Ton of
Coke.
3.3 O&M Component.
(a) During the Initial Year, the O&M Component is $[*****] per Ton of Coke
(the "Initial O&M Component"). Provided, however, if the Initial Year expires as
of December 31, 2008, then notwithstanding Section 3.3(b), the O&M Component in
respect of the first Contract Year (namely, from January 1, 2009 through
December 31, 2009) will be $[*****] per Ton of Coke (the "Guaranteed O&M
Component").
(b) Subject to the Guaranteed O&M Component, at least sixty (60) calendar
days prior to the commencement of each Contract Year following the Initial Year,
Seller will prepare a good faith forecast (the "Forecast") that sets forth in
reasonable detail the O&M Expenses in respect of the Coke Plants and the
Cogeneration Plant for the next ensuing Contract Year. Such Forecast shall be
based upon (i) historic operations and maintenance history at other domestic
coke making facilities that utilize Sun Coke Company's proprietary heat recovery
coke making technology; (ii) historic operations and maintenance history at the
Coke Plants and the Cogeneration Plant; (iii) subject to Article VIII,
compliance with Governmental Requirements in respect of the Coke Plants and the
Cogeneration Plant, including (without limitation) Government Mandated
Additional Expenses; (iv) property taxes in respect of the Coke Plants; (v) the
Coke Plants Targeted Coke Production in respect of the Coal Blend(s) to be
utilized during such Contract Year; (vi) labor expenses in respect of the Coke
Plants and the Cogeneration Plant; (vii) Prudent Operating and Maintenance
Practices; (viii) commercially reasonable insurance coverages, premiums and
deductibles; and (ix) other reasonable conditions specific to the Coke Plants
and the Cogeneration Plant, and Seller's performance hereunder (collectively,
the "Guidelines"). Provided, however, such reasonable conditions shall not
include fines or penalties in respect of violations of Governmental Requirements
including, without limitation, Governmental Requirements pertaining to the
environment and employee health and safety. The Forecast shall be delivered to
Purchaser for approval by it, which approval shall not be unreasonably withheld.
(c) Within fifteen (15) calendar days following Seller's delivery of each
Forecast to Purchaser, the Parties shall confer in good faith for the purpose of
reviewing and approving such Forecast. If, within thirty (30) days thereafter,
the Parties do not agree upon such Forecast in respect of either the Coke Plants
or the Cogeneration Plant, then Purchaser shall promptly deliver to Seller (no
later than ten (10) calendar days following the expiration of such thirty (30)
day
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(1) CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSION.
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period) Written notice of its disapproval of such Forecast that sets forth the
specific grounds therefore including, without limitation, any alleged
inconsistency thereof with the Guidelines. The Parties may thereafter submit
such dispute to arbitration in accordance with Section 10.2. Pending such
resolution, the O&M Expenses in respect of the preceding Contract Year for, as
applicable, the Coke Plants and the Cogeneration Plant, as adjusted in
accordance with the Index Formula (the "Presumed O&M Expenses"), shall be the
basis for determining the Presumed O&M Component for the period during which
such dispute is pending (the "Dispute Period"). The Presumed O&M Component shall
be determined in accordance with the following formula:
Presumed O&M Component = [Presumed O&M Expenses in respect of the Coke
Plants / Coke Plants Targeted Coke Production in respect of the Coal
Blend(s) to be utilized during such Contract Year] + [Presumed O&M
Expenses in respect of the Cogeneration Plant / fifty percent (50%) of
the Coke Plants Targeted Coke Production in respect of the Coal
Blend(s) to be utilized during such Contract Year].
Provided, however, during the first Contract Year, the Presumed O&M Component in
respect of such Contract Year pending that resolution shall be the Initial O&M
Component as adjusted in accordance with the Index Formula.
(d) In the event of any such arbitration, the arbitrator shall determine
the appropriate O&M Expenses in respect of the Forecast for, as applicable, the
Coke Plants and/or the Cogeneration Plant. Such Forecast shall be utilized to
determine the Forecasted O&M Component as set forth in Section 3.3(g). The
arbitrator shall also determine the prevailing Party in respect of any such
arbitration, and shall award to such prevailing Party its costs, including
reasonable attorney's fees.
(e) If, following any such arbitration, the arbitrator determines that the
difference between such Forecasted O&M Component and the Presumed O&M Component
is (i) a positive amount, then Purchaser shall pay to Seller the product of such
amount multiplied by the Coke Tonnage purchased by Purchaser from Seller
hereunder during the Dispute Period, plus interest in respect of such product
accrued at the Interest Rate; or (ii) a negative amount, then Seller shall
credit Purchaser the product of such amount multiplied by the Coke Tonnage
purchased by Purchaser from Seller hereunder during the Dispute Period, plus
interest in respect of such product accrued at the Interest Rate. Such payment
or credit shall be, as applicable, added to or credited against the amount
otherwise payable by Purchaser to Seller in accordance with Monthly invoice
immediately following any such award.
(f) If Purchaser and the Non-Affiliated Phase II Purchaser do not approve
such Forecast, then the Non-Affiliated Phase II Purchaser shall participate in
the dispute resolution procedures enumerated in Article X in respect of such
dispute, and Purchaser consents to such participation by the Non-Affiliated
Phase II Purchaser.
(g) The Forecasted O&M Component for each Contract Year will be determined
in accordance with the Forecasted O&M Allocation Formula. The "Forecasted O&M
Allocation Formula" is:
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Forecasted O&M Component = [Approved O&M Expenses in respect of the
Coke Plants set forth in the approved Forecast for the applicable
Contract Year / Coke Plants Targeted Coke Production in respect of the
Coal Blend(s) to be utilized during such Contract Year] + [Approved
O&M Expenses in respect of the Cogeneration Plant set forth in the
approved Forecast for the applicable Contract Year / fifty percent
(50%) of the Coke Plants Targeted Coke Production in respect of the
Coal Blend(s) to be utilized during such Contract Year].
As used herein, the phrase "Approved O&M Expenses" refers to O&M Expenses (i)
that are approved by Purchaser pursuant to Section 3.3(c), or, as applicable,
(ii) that are authorized by an arbitrator pursuant to Section 3.3(e).
(h) Seller shall endeavor, in good faith and in accordance with Prudent
Operating and Maintenance Practices, to operate and maintain the Coke Plants and
the Cogeneration Plant in accordance with the Forecasted O&M Component for the
applicable Contract Year. Subject to the foregoing, within thirty (30) calendar
days following the conclusion of each Contract Year, Seller will submit to
Purchaser a Written report that summarizes the actual O&M Component for such
Contract Year (the "Actual O&M Component") as determined in accordance with the
following formula:
Actual O&M Component = actual O&M Expenses in respect of the Coke
Plants for the applicable Contract Year / actual Coke Tonnage produced
at the Coke Plants during such Contract Year (including Nonconforming
Coke Tonnage rejected by Purchaser) + [actual O&M Expenses in respect
of the Cogeneration Plant for the applicable Contract Year / fifty
percent (50%) of the actual Coke Tonnage produced at the Coke Plants
during such Contract Year (including Nonconforming Coke Tonnage
rejected by Purchaser)].
In no event shall the actual Coke Tonnage amount utilized in the preceding
formula be less than [*****] of the Coke Plants Targeted Coke Production for the
applicable Coke Year.
(i) Where applicable, Purchaser shall pay Seller an amount equal to [*****]
of the product of (i) any positive difference between the (y) Actual O&M
Component for the applicable Contract Year minus (z) the Forecasted O&M
Component for such Contract Year, multiplied by (ii) the actual Coke Tonnage
delivered to Purchaser during such Contract Year. Where applicable, Seller shall
credit Purchaser an amount equal to [*****] of the product of (i) any negative
difference between the (y) Actual O&M Component for the applicable Contract Year
minus (z) the Forecasted O&M Component for the applicable Contract Year,
multiplied by (ii) the actual Coke Tonnage delivered to Purchaser during such
Contract Year. Such payment or credit shall, as applicable, be added to or
deducted from the amounts otherwise payable in accordance with the Monthly
invoice in respect of the Month during which such credit or payment is
determined, and shall be subject to reasonable verification by Purchaser.
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3.4 Coal Cost Component.
(a) Subject to Section 3.4(b), Coal Costs are all costs, expenses and
expenditures, including Taxes, related to the sampling, testing, selecting,
purchasing, storing and handling of Coals, and in respect of transporting and
delivering the Coals to the Phase II Plant, but excluding overhead or
administrative costs of Seller or its Affiliates in respect thereof. Such Coal
Costs shall include the Coal transportation and Coal blending costs in respect
of Coal transportation and Coal blending agreements between Seller and Norfolk
Southern and its subsidiary railroads or, as applicable, other railroad carriers
(collectively, "Norfolk Southern"), entered into following the Effective Date
(which shall be subject to the approval of Purchaser and the Non-Affiliated
Phase II Purchaser as set forth in Section 12.7(a)(iii)), but shall not include
Coal transportation or Coal blending costs in respect of Coal transportation and
Coal blending agreements between Seller and Norfolk Southern that are in effect
as of the Effective Date.
(b) Each Coal comprising the selected Coal Blend shall be purchased by
Seller for a commercially reasonable price and in accordance with commercially
reasonable standards, terms and conditions.
(c) The Coal Cost Component is (i) the actual Monthly weighted average Coal
Cost, divided by (ii) the product of (y) the Moisture Adjusted Coal Blend
Tonnage charged to the coke ovens at the Phase II Plant set forth in each
applicable invoice, taking into account Coal Handling Losses, and (z) the
Guaranteed Coke Yield Percentage.
The Moisture Adjusted Coal Blend Tonnage is the weighted average thereof for
each applicable Month, and accounts for Coal Blend moisture on a fixed [*****]
([*****]%) basis to be determined in accordance with the following formula:
Moisture Adjusted Coal Blend Tonnage = actual Coal Blend Tonnage (as
determined in accordance with Section 3.4(d)) x [(1 - the actual
moisture content of the such Coal Blend Tonnage) / [*****]]
Such actual moisture shall be determined based on sampling of the actual Coal
Blend Tonnage immediately prior to coking thereof, and the testing and analysis
on a composite basis, all of which shall be performed in accordance with ASTM
Standards.
Coal Handling Losses shall be fixed at [*****]%, and shall be accounted in
accordance with the following formula:
Moisture Adjusted Coal Blend Tonnage for each Coke Shipment
-----------------------------------------------------------
1 - [*****]
(d) Seller's static scale shall weigh Coal Blend Tonnages immediately prior
to coking. Such scale shall have an accuracy of not less than plus or minus
(+/-) one quarter of one percent (0.25%), and shall be calibrated in accordance
with the manufacturer's instructions at Seller's sole cost and expense and in
accordance with generally accepted industry standards as an O&M Expense. Absent
Manifest Error, such weight determinations shall be conclusive and binding on
the Parties.
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(e) The Guaranteed Coke Yield Percentage is determined in accordance with
the following formula:
Blast furnace coke "dry" yield equals 100% less the sum of (i) the
percentage of dry basis volatile matter in the Coal Blend (described
as the "typical" dry basis volatile matter in the Coal contracts
pertaining to the Coal Blend); (ii) a [*****] percent ([*****]%)
allowance for Breeze; and (iii) a [*****] percent ([*****]%) allowance
for net operating losses in the coking process.
Seller will re-determine the Guaranteed Coke Yield Percentage whenever the
proportionate share of Coals within any Coal Blend is increased or decreased by
one and one half percent (1.5%) or more.
3.5 Determination of Coke Tonnage. All Coke Tonnage shall be weighed by track
scales operated by Seller. Such scales shall have an accuracy of not less than
plus or minus (+/-) one-quarter of one percent (0.25%) and shall be calibrated
by an independent third party at a minimum of once per year or as required by
Prudent Operating and Maintenance Practices as an O&M Expense. Absent Manifest
Error, such weight determinations shall be conclusive and binding on the
Parties. All Coke Tonnage shall be adjusted to the required moisture content in
accordance with the following formula:
Tons Sold = Total Tons x (1 - actual percentage moisture content)
-----------------------------------------------------
[*****]
The actual percentage moisture content of Coke shall be determined in accordance
with Section 5.1.
3.6 Taxes. Purchaser shall pay all Taxes in respect of the sale or purchase of
Coke, Third Party Supplied Coke and Nonconforming Coke Tonnage that is accepted
or commingled by Purchaser as set forth in Section 5.2(c).
3.7 Terms of Payment/Invoicing.
(a) During the Initial Year, Seller or its designee will submit to
Purchaser a Written invoice in respect of each Shipment as of the date of each
such Shipment. The invoiced amount for such Shipment shall be the sum of (i) the
product of (y) the Contract Price for such Initial Year multiplied by (z) the
Coke Tonnage in respect of such Shipment as determined in accordance with
Section 3.5 of this Agreement, plus (ii) Taxes thereon, plus or minus, as
applicable,(iii) the adjustments set forth in Section 3.7(c).
(b) During each Contract Year, Seller or its designee shall submit to
Purchaser a Written invoice in respect of each Shipment as of the date of each
such Shipment. The invoiced amount for such Shipment shall be the sum of (i) the
product of (y) the Contract Price for each such Contract Year multiplied by (z)
the Coke Tonnage in respect of such Shipment as determined in accordance with
Section 3.5 of this Agreement, plus (ii) amounts payable by Purchaser to Seller
in respect of any Third Party Supplied Coke, as set forth in Section 6.4, plus
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(iii) Taxes thereon, plus or minus, as applicable, (iv) the adjustments set
forth in Section 3.7(c) and 3.7(d).
(c) During the Initial Year and each Contract Year, amounts payable by
Purchaser to Seller pursuant to (as applicable) Sections 3.7(a) and 3.7(b) shall
be subject to the following adjustments:
(i) As applicable, amounts payable pursuant to Article VIII;
(ii) As applicable, any adjustment to the Contract Price as set forth
in Section 5.2 and Schedule 5.2; and
(iii) As applicable, the Price Discount in respect of any
Nonconforming Coke Tonnage accepted or commingled by Purchaser as set
forth in Section 5.2(c).
(d) During each Contract Year, but subject to the Guaranteed O&M Component,
amounts payable by Purchaser to Seller pursuant to Section 3.7(b) shall be
subject the following adjustments:
(i) As applicable, any credit or payment determined in accordance with
Section 3.3(e); and
(ii) As applicable, any credit or payment as determined in accordance
with Section 3.3(i).
(e) Subject to Section 3.7(f), invoiced amounts shall be due and payable on
or before the [*****] calendar day after the date on which the invoice is
delivered by Seller or its designee to Purchaser (the "Due Date").
(f) If, based upon Manifest Error, Purchaser reasonably believes that any
invoice incorporates overcharged amounts in respect of amounts properly payable
under this Agreement, then (i) it shall notify Seller in Writing of such
overcharge, including the amount and the basis of its belief, prior to the Due
Date and (ii) it shall not be obligated to pay such overcharge until the dispute
is resolved as provided herein. Subject to the foregoing, invoiced amounts shall
be paid as set forth in Section 3.7(e) without set off. In the case of Manifest
Error, the Parties shall attempt, in good faith, to agree upon such disputed
amounts within fifteen (15) calendar days after such Written notice is delivered
by Purchaser. If the Parties cannot resolve any such dispute within such fifteen
(15) calendar day period, then either Party may invoke the provisions of Section
10.2. Disputed amounts confirmed by the arbitration panel to be actually due
from Purchaser shall be payable within five (5) business days, and shall accrue
interest at the Interest Rate from the applicable Due Date.
3.8 Section 45 Credits. Provided Purchaser is not in default of this Agreement,
if any Coke qualifies for a credit under Section 45K of the Internal Revenue
Code of 1986, as amended (the "Code"), or any similar or successor provision
("Section 45 Credits"), during any Calendar Year, then Seller shall provide
Purchaser with a credit in respect of Coke Tonnage sold by Seller to Purchaser
during such Calendar Year. Such credit shall be equal to [*****] of the Realized
Value of such Section 45 Credits. Such Realized Value is the pre-tax value
realized by Sunoco
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in respect of such Section 45 Credits, which shall be determined by dividing the
amount of such Section 45 Credits by (i) one (1) minus, as applicable, the
highest marginal tax rate applicable to corporations minus (y) two (2)
percentage points in respect of Calendar Years 2007, 2008 and 2009, or (z) three
percentage points for subsequent Calendar Years. Provided, however, such
Realized Value shall also take into account any change in law, phase out, the
ability of Sunoco to utilize the Section 45 credits, or other circumstances
relevant to such Realized Value determination. (The ability of Sunoco to utilize
such Section 45 Credits shall be determined by comparing Sunoco's current
federal consolidated tax liability with and without the Section 45 credits
attributable to Coke sales in respect of such Calendar Year.) The determination
of such Realized Value in respect of each Calendar Year during which Section 45
Credits may be available shall be made on or before October 1st of the
subsequent Calendar Year and shall be credited on the invoice for such Month. If
the Realized Value of any such Section 45 Credits is thereafter reduced by the
carryback of a net operating loss, disallowance of all or a portion of the
Section 45 Credits, or the inability of Sunoco to utilize the Section 45 Credits
after final resolution of an IRS audit, then Purchaser shall pay to Seller,
within thirty (30) calendar days following Seller's Written notification to
Purchaser of such reduction, an amount equal to (i) [*****] ([*****]%) of the
Realized Value in respect of such reduction plus any fines and/or penalties
arising from such disallowance, plus (ii) interest thereon at the underpayment
rate of Section 6621 of the Code or any successor provision, computed from the
date of filing of the consolidated income tax return of Sunoco through the date
on which such amount is paid by Purchaser to Seller. If the Realized Value of
any Section 45 Credits from Coke sales is thereafter increased as a result of
the ability of Sunoco to utilize the carryover of any unused Section 45 Credits
in later taxable years, or the ability of Sunoco to utilize additional Section
45 Credits after final resolution of an IRS audit, then Seller will credit
Purchaser with an amount equal to (i) [*****] ([*****]%)of the Realized Value in
respect of such increase, plus (ii) interest thereon at the overpayment rate of
Section 6621 of the Code or the successor provision, computed from the date of
filing of the consolidated income tax return of Sunoco for the taxable year in
which the credit is utilized through the date on which such amount is credited
by Seller to Purchaser. Any such credit shall be applied to the invoice for such
Month during which such Section 45 Credits are utilized.
3.9 By-Products; Option to Purchase Breeze. Seller shall retain all By-Products
for its own account, and Seller shall retain all proceeds from the sale or other
disposition of By-Products. Provided, however, during each Calendar Year,
Purchaser may, at its option, purchase [*****] ([*****]%) of the available
Breeze for the market price therefore FOB the Coke Plants in effect as of the
date Purchaser exercises that option. In order to exercise that option,
Purchaser must notify Seller, in Writing, of its exercise thereof at least
ninety (90) calendar days prior to the commencement of the applicable Calendar
Year.
3.10 Audit Rights. Purchaser or its designee shall have the right, during normal
working hours of Seller, to review and inspect such books and records of Seller
and, as applicable, Sun Coke Company (an Affiliate of Seller) as Purchaser deems
reasonably necessary to verify any amounts payable by Purchaser under this
Agreement. Purchaser shall provide Seller with at least two (2) business days'
Written notice prior to its commencement of any such review and inspection. Such
review and inspection shall occur at the place in which such books and records
are customarily maintained. If it is determined by such audit that Purchaser has
overpaid Seller under this Agreement, after the resolution of any disputes with
respect to the results of such audit, then (a) Seller shall promptly reimburse
Purchaser for the full amount of such
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overpayment, with interest in respect of such overpayment accruing at the
Interest Rate from the date of such overpayment by Purchaser through the date of
reimbursement by Seller, and (b) if Purchaser has overpaid Seller by more than
five percent (5%), Seller shall pay Purchaser's costs and expenses incurred in
connection with such audit.
ARTICLE IV
Coal Blends
4.1 Selection. Seller shall be responsible for determining the Coal Blends to be
used by Seller for the production of Coke, which Coal Blends shall conform to
the Guaranteed Quality Standards.
4.2 Unsuitability or Insufficiency of Coal Blends. If any Coal Blend does not in
practice conform to the Coal Blend Standards, or if sufficient quantities
thereof become unavailable, then Seller shall promptly inform Purchaser in
Writing of such nonconformity or unavailability. If, pending selection of any
new Coal Blend, the use by Seller of the Coal Blend originally selected for use
at the Coke Plants adversely affects the Coke Plants or Seller's ability to
comply with its obligations under this Agreement, then, pending the selection of
a new Coal Blend, Seller shall have the authority to utilize another Coal Blend
that incorporates the Coals available at the Coke Plants or Coals that are
otherwise reasonably available to Seller and which, in Sellers' reasonable
judgment, meet or reasonably approximate the Coal Blend Standards. If such a
Coal Blend is not available to Seller, then Seller shall (i) promptly notify
Purchaser in Writing of such circumstance; (ii) in good faith and in accordance
with commercially reasonable standards adjust the Guaranteed Quality Standards
and, as applicable, the Coke Supply and Purchase Obligation, but only as
respects such period of unavailability; and (iii) in connection with such
adjustment(s), account for Purchaser's coke quality requirements in respect of
its blast furnace(s) located at the ▇▇▇▇▇▇ Plant; and (iv) shall exercise
commercially reasonable efforts to limit the duration of any such adjustment;
provided, however, that Purchaser shall receive a minimum of five (5) days
notice of Seller's adjusted Guaranteed Quality Standards and, as applicable, the
amount of the adjustment to the Coke Supply and Purchase Obligation.
4.3 Authority of Seller. Seller shall retain the responsibility and authority
for daily operating matters involving the Coal Blends and compliance with the
Guaranteed Quality Standards, without any requirement to consult with or obtain
the approval of Purchaser.
ARTICLE V
Guaranteed Quality Standards
5.1 Coke Sampling, Testing and Analysis.
(a) One (1) representative Coke sample increment will be taken from the
loading belt during the loading of each railcar. Each such increment will be a
complete cross section cut as taken from the loading belt by the mechanical
sampling system. All such samples shall be stored in a closed container situated
within a controlled, indoor environment prior to the testing and analysis
thereof as required in Section 5.1(c). Upon twenty-four (24) hour notice to
Seller, Purchaser shall be entitled to be present during the sampling,
preparation, analysis, and loading of Coke shipments.
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(b) Coke samples will be prepared on a daily basis by an independent
laboratory in accordance with ASTM Standards or, where no ASTM Standards apply,
in accordance with generally accepted industry standards.
(c) Moisture, size, sulfur, ash, volatile matter and stability will be
tested and analyzed on a daily basis, and the results thereof shall be
arithmetically averaged, on a Shipment basis, to determine conformity with the
Guaranteed Quality Standards applicable thereto. CSR and phosphorus shall be
determined based upon testing and analysis of Monthly composite samples. Such
testing and analysis shall be performed in accordance with ASTM Standards or
other procedures approved by the Parties in Writing, and shall govern for the
purposes of determining conformity with the Guaranteed Quality Standards. Except
for phosphorous and CSR, all daily results (prior to any averaging thereof), and
all consolidated results utilized to determine compliance with the Guaranteed
Quality Standards, will be provided by Seller to Purchaser promptly in Writing
prior to the delivery of the applicable Shipment. Purchaser shall have the right
to conduct an audit of all results of such sampling, preparation, testing and
analysis for the purpose of auditing Seller's compliance with such sampling,
preparation, testing and analysis procedures.
(d) Seller, or its designated laboratory, shall retain all samples used for
analysis procedures for not less than thirty (30) days from receipt of the
sample or for so long as Coke Tonnage to which a sample pertains is subject to
any type of dispute hereunder.
5.2 Guaranteed Quality Standards.
(a) Subject to the availability of Coals that conform to the Coal Blend
Standards, Coke shall conform to the Guaranteed Quality Standards and Seller
will implement commercially reasonable measures to achieve conformity with the
"Target" Guaranteed Quality Standards.
(b) Subject to the availability of Coals that conform to the Coal Blend
Standards and Section 5.2(c), if Coke or Third Party Supplied Coke Tonnage does
not conform to the "threshold" limits provided for in the Guaranteed Quality
Standards, then the Contract Price in respect of such Coke Tonnage will be
adjusted as set forth in Schedule 5.2. In addition, Seller will implement prompt
corrective measures to correct any such nonconformity in respect of further Coke
shipments and will promptly inform Purchaser in Writing of such corrective
measures.
(c) Subject to the availability of Coals that conform to the Coal Blend
Standards, if the quality of Coke or Third Party Supplied Coke exceeds or, as
applicable, is less than the "Reject Standards" set forth in Schedule 5.2 based
upon the sampling, preparation, testing and analysis set forth in Section 5.1
("Nonconforming Coke"), then Seller shall implement appropriate corrective
measures prior to further Coke or Third Party Supplied Coke shipments to
Purchaser, and shall promptly notify Purchaser in Writing of such corrective
measures. If Nonconforming Coke is consumed or commingled by Purchaser with any
other coke acquired by Purchaser, then Purchaser shall be obligated to pay to
Seller (i) the Contract Price in respect of such Nonconforming Coke Tonnage (as
adjusted for quality pursuant to Schedule 5.2) minus (ii) [*****] ($[*****]) per
Ton in respect of such Nonconforming Coke Tonnage (the "Price Discount").
Payment for such Nonconforming Coke shall be made in accordance with Section
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3.7. However, where Nonconforming Coke is not commingled by Purchaser with other
coke acquired by Purchaser, Purchaser may either (y) reject such Nonconforming
Coke by means of prompt Written notification thereof delivered by Purchaser to
Seller (provided such Written notice is delivered within three (3) business days
following Seller's notification to Purchaser of such Nonconforming Coke
Tonnage), or (z) purchase such Nonconforming Coke Tonnage for the Contract Price
less the Price Discount. Upon rejection of such Nonconforming Coke, title to
such Nonconforming Coke shall revert to Seller and Seller shall accept all risk
of loss, damage, or destruction therefor.
(d) Seller shall be required to remove from Purchaser's facilities any
Nonconforming Coke that is properly rejected by Purchaser. Seller will be
responsible for all removal costs. Purchaser may require Seller to make up the
corresponding shortfall pursuant to a reasonable shipment schedule to be
specified by Purchaser.
5.3 Title. Seller warrants that, at the time of delivery of Coke or Third Party
Supplied Coke to Purchaser at the Coke Delivery Point, it shall have good title
and full right and authority to transfer such Coke or Third Party Supplied Coke
to Purchaser, and the title conveyed to Purchaser shall be good and its transfer
to Purchaser shall be rightful and that such Coke or Third Party Supplied Coke
shall be delivered to Purchaser free from any security interest or other lien or
encumbrance of any kind whatsoever.
5.4 Exclusivity. THE WARRANTIES EXPRESSLY SET FORTH IN THIS AGREEMENT ARE
EXCLUSIVE AND ARE IN LIEU OF ALL OTHER WARRANTIES, WHETHER WRITTEN OR ORAL,
IMPLIED IN FACT OR IN LAW, AND WHETHER BASED ON STATUTE, CONTRACT, TORT, STRICT
LIABILITY OR OTHERWISE. THE WARRANTY OF MERCHANTABILITY AND WARRANTY OF FITNESS
FOR A PARTICULAR PURPOSE ARE EXPRESSLY EXCLUDED AND DISCLAIMED.
ARTICLE VI
Obligations Related to Coke Supply
6.1 Take or Pay Basis. Except for Nonconforming Coke, Purchaser's obligations in
respect of Section 6.2 and the Coke Supply and Purchase Obligation are to be
performed on a "take or pay" basis.
6.2 Coke Supply during the Initial Year. During the Initial Operating Period and
the Initial Year, Seller shall sell, and Purchaser shall purchase, [*****]
([*****]%) of all Coke Tonnage produced on behalf of Purchaser and the
Non-Affiliated Phase II Purchaser (after taking into account Coke produced on
behalf of Seller's existing customer pursuant to Seller's coke purchase
agreement with such customer).
6.3 Coke Supply and Purchase Obligation.
(a) Subject to the availability of Coals for use in Coal Blends that comply
with the Coal Blend Standards, for each Contract Year the Coke Supply and
Purchase Obligation is:
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(i) in respect of the Base Case Coal Blend, not less than [*****]
([*****]%)or more than [*****] of [*****] Tons of Coke or, as applicable,
Third Party Supplied Coke;
(ii) in respect of each Coal Blend that contains a volatile matter
content percentage which varies from the Base Case Coal Blend, not less
than [*****] ([*****]%) or more than [*****] ([*****]%) of the Coke and
Third Party Supplied Coke Tonnage provided for in the corresponding
volatile matter content percentage set forth in the attached and
incorporated Schedule 6.3(a).
For the avoidance of doubt, the Parties acknowledge that if the product of the
actual Coke production from the Coke Plants multiplied by [*****] ([*****]%)
(the "Purchaser Coke Production Allocation") exceeds the minimum range of the
Coke Supply and Purchase Obligation, then Seller shall be obligated to sell, and
Purchaser shall be obligated to purchase, such Purchaser Coke Production
Allocation up to the maximum range of the Coke Supply and Purchase Obligation.
(b) If Seller reasonably and in good faith determines that Coke Tonnage
will exceed [*****] ([*****]%) of the Coke Plants Targeted Coke Production
during any Contract Year, then Purchaser may, at its option, purchase [*****]
([*****]%) of such excess Coke Tonnage subject to the terms, conditions and
requirements of this Agreement including, without limitation, the Contract Price
in respect of such Coke Tonnage. In that event, Seller will provide prompt
Written notice to Purchaser of such circumstance, including its reasonable
estimate of such excess Coke production. Within twenty (20) calendar days
following the delivery of such Written notification by Seller to Purchaser,
Purchaser may exercise its option by means of its delivery to Seller of Written
notification thereof; provided, however, in that event Seller shall be obligated
to sell, and Purchaser shall be obligated to purchase, [*****] ([*****]%) of
such excess Coke Tonnage actually produced during such Contract Year.
(c) Subject to Section 7.1, Coke Shipments shall be made on a commercially
reasonable ratable basis at regular intervals that are consistent with the
requirements of the operations of the Parties in the ordinary course of
business, and the Parties shall reasonably cooperate in respect of scheduling
such Shipments in accordance with Seller's production schedule and Purchaser's
requested delivery schedule.
6.4 Third Party Supplied Coke. If, at any point during any Contract Year, Seller
has reason to believe that it will be unable to produce sufficient Coke to meet
the minimum range of the Coke Supply and Purchase Obligation (a "Production
Shortfall"), then Seller shall (a) promptly provide Written notice of same to
Purchaser, and (b) exercise commercially reasonable efforts to obtain Third
Party Supplied Coke in respect of any such Production Shortfall. The Guaranteed
Quality Standards shall apply in respect of such Third Party Supplied Coke. The
price Purchaser shall pay for such Third Party Supplied Coke shall be the lesser
of (i) the cost of such Third Party Supplied Coke (as adjusted in accordance
with Schedule 5.2) delivered to the coke unloading facility at the ▇▇▇▇▇▇ Plant,
or (ii) the sum of (y) the current Contract Price for Coke (as adjusted in
accordance with Schedule 5.2) and (z) the applicable Purchaser Freight Cost.
Seller shall arrange for the shipment and delivery of Third Party Supplied Coke
to Purchaser and shall exercise reasonable, good faith efforts to arrange for
such deliveries in accordance with Purchaser's requested delivery schedule.
Promptly following the delivery to the coke unloading
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facility located at the ▇▇▇▇▇▇ Plant of any Third Party Supplied Coke Shipment,
Seller shall deliver by facsimile transfer or electronic mail, or by such other
method agreed upon by the Parties in Writing, an invoice for each such Shipment
to the Purchaser. Payment by Purchaser to Seller for such Third Party Supplied
Coke shall be made in accordance with Section 3.7(e). Except with respect to the
occurrence of a Seller Force Majeure Event, if Seller reasonably determines that
the production capacity of the Phase II Plant is or will be less than [*****]
([*****]%) of Phase II Coke Production, and Seller is unable to establish or
restore such production capacity notwithstanding its good faith and commercially
reasonable efforts to do so, then, after Seller's Written notice thereof to
Purchaser, Seller's obligation to cover such shortfall (either in respect of
Third Party Supplied Coke or Purchaser Obtained Coke) shall not exceed [*****]
([*****]) Months in duration (the "Production Capacity Liability Limitation").
6.5 Purchaser Obtained Coke. Seller shall promptly notify Purchaser in Writing
if Seller reasonably believes that a Production Shortfall will occur and that it
will be unable to supply Third Party Supplied Coke to cover such shortfall. Such
notice shall include Seller's reasonable estimation of the corresponding
shortfall. Following Purchaser's receipt of such notice, Purchaser may make
commercially reasonable arrangements to acquire Purchaser Obtained Coke, and
Purchaser shall so notify Seller in Writing of such arrangements. Subject to the
Production Capacity Liability Limitation, and the purchase of Purchaser Obtained
Coke in a commercially reasonable manner, if the price of Purchaser Obtained
Coke plus the actual, direct costs incurred by Purchaser to deliver such
Purchaser Obtained Coke to the coke unloading facility located at the ▇▇▇▇▇▇
Plant plus its Incidental Damages is greater than the sum of (i) the current
Contract Price for Coke and (ii) the applicable Purchaser Freight Cost, then
Seller shall reimburse Purchaser for the amount of such excess. If Purchaser
secures Purchaser Obtained Coke, then it shall use commercially reasonable
efforts to limit its use of Purchaser Obtained Coke to the time period for which
Purchaser reasonably believes, based on facts and circumstances disclosed in
Writing to Purchaser by Seller, that the shortfall will not be covered by Coke
or Third Party Supplied Coke.
ARTICLE VII
Delivery of Coke and Third Party Supplied Coke
7.1 Coke Delivery Point. All Coke deliveries to Purchaser shall be FOB railcars
provided by Purchaser at the rail load out located at the Coke Plants (the "Coke
Delivery Point"). Purchaser acknowledges that deliveries of Coke into
sufficiently sized trains are necessary for Seller to deliver ratable Coke
quantities as set forth in Section 6.3(c). The Parties shall reasonably
cooperate in scheduling those deliveries. Purchaser is solely responsible for
making railcars available for the receipt of such Coke deliveries. Seller will
exercise commercially reasonable efforts to load railcars to available capacity.
Such available capacity shall be determined in a manner consistent with
generally accepted industry standards. Title and all risk of loss, damage or
destruction with respect to Coke deliveries will pass to and be assumed by
Purchaser upon the delivery of Coke to the Coke Delivery Point.
7.2 Seller's Rights When Purchaser Wrongfully Refuses Delivery of Coke. If
Purchaser refuses or fails to accept any delivery of Coke at the Coke Delivery
Point or Third Party Supplied Coke at the coke unloading facility located at the
▇▇▇▇▇▇ Plant, and such refusal or failure is a breach of Purchaser's obligations
under this Agreement, then (i) the moisture content of such Coke or Third Party
Supplied Coke shall not be required to conform to the moisture
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specification set forth in the Guaranteed Quality Standards; and (ii) the risk
of loss for such Coke or Third Party Supplied Coke shall pass to Purchaser upon
such wrongful refusal or failure. In addition, Seller may resell the same upon
Written notification by Seller to Purchaser of its intention to resell. Where
such resale is made in good faith and in a commercially reasonable manner,
Seller shall recover the difference between the resale price and the Contract
Price together with its Incidental Damages, but less expenses saved (if any) as
a consequence of Purchaser's breach. However, if (1) Purchaser subsequently
accepts such Coke or Third Party Supplied Coke for delivery prior to any resale;
or (2) Seller is unable after commercially reasonable efforts to resell such
Coke or Third Party Supplied Coke Tonnage, then Purchaser shall pay to Seller
the Contract Price for such Tonnage plus (as applicable) reasonable stocking and
de-stocking costs and expenses.
ARTICLE VIII
Changes in Governmental Requirements
8.1 Government Mandated Additional Expenditures.
(a) If, following the date of this Agreement, Seller determines that a
change in Government Requirements may materially burden its performance of its
obligations under this Agreement, then Seller shall so notify Purchaser in
Writing. Seller's performance shall be materially burdened where any such
Government Requirement has a material adverse impact on (i) the Guaranteed
Quality Standards; (ii) the Coal Blend Standards, (iii) the Guaranteed Coke
Yield Percentage; (iv) the cost of operating or maintaining the Coke Plants
(including capital costs); (v) the production capacity of the Coke Plants and
the Cogeneration Plant; or (vi) Sellers' performance obligations to third
parties related to (y) Coal purchasing, transportation, handling and blending
contracts, or (z) electricity sales from the Phase II Plant. Such notice shall
incorporate Seller's good faith proposals for complying with those changes in
Government Requirements, including the estimated cost thereof.
(b) During the sixty (60) calendar day period following delivery of any
such notice, Seller and Purchaser shall negotiate in good faith to reach
agreement as to (i) whether any such change in Government Requirements should be
challenged, including the scope and manner of such challenge; and (ii) the most
economical and commercially prudent methods for complying with such change in
Government Requirements.
(c) If such negotiations result in agreement as to whether to challenge the
change in Government Requirements or the methods for complying with the change
in Government Requirements, then Seller shall promptly implement such challenge
or methods as appropriate. The costs and charges associated with any such
challenge (including, without limitation, attorneys' and consultants' fees, and
fines and penalties) shall be borne equally by Seller and Purchaser. Provided,
however, Purchaser shall pay only its pro rata share of such costs and charges
not borne by Seller. Purchaser's pro rata share shall be a fraction (expressed
as a percentage) the (i) numerator of which is the applicable Coke Supply and
Purchase Obligation, and the (ii) denominator of which is the sum of the (x)
applicable Coke Supply and Purchase Obligation, (y) the Coke Tonnage purchase
obligation of the Non-Affiliated Phase II Purchaser in respect of the Coke
Plants, plus (z) the Coke Tonnage purchase obligation of Seller's existing
customer in respect of the Coke Plants. If no such agreement is reached or such
challenge is unsuccessful, Seller will implement commercially reasonable methods
for complying with the
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change in Government Requirements. In connection therewith, any associated
Government Mandated Additional Capital Expenditures or Government Mandated
Additional Expenses shall be made or incurred at the lowest practicable cost at
the time each such expenditure or expense is made or incurred.
8.2 Government Mandated Additional Capital Expenditures. Government Mandated
Additional Capital Expenditures shall have an assumed useful life equal to the
greater of seven (7) Contact Years or the remainder of the Term following
completion of the Government Mandated Additional Capital Expenditures and shall,
with the exception of Government Mandated Additional Capital Expenditures in
respect of the Cogeneration Plant ("Cogeneration Plant GMACE"), be allocated
fifty percent (50%) to the Phase I Plant, and fifty percent (50%) to the Phase
II Plant. Cogeneration Plant GMACE shall be allocated one hundred percent (100%)
to the Phase II Plant. As soon as the Government Mandated Additional Capital
Expenditures (including, as applicable, Cogeneration Plant GMACE) have been
completed, the Monthly amortized cost thereof for the remaining Months of the
Term will be calculated based on the applicable examples set forth in Schedule
8.2. Purchaser shall pay to Seller Purchaser's portion of such allocated Monthly
amortized cost in accordance with Section 3.7. Purchaser's portion of the
Monthly amortized cost shall be equal to [*****]% of the Phase II allocated
Monthly amortized cost. However, (i) Purchaser shall not be obligated to pay its
proportionate share of the first $[*****] expended by Seller in respect of the
aggregate amount of all Government Mandated Additional Capital Expenditures; and
(ii) if Seller incurs a Government Mandated Additional Capital Expenditure
(including, as applicable, Cogeneration Plant GMACE), and the remainder of the
Term is less than seven (7) Contract Years, then Purchaser shall not be
obligated to pay to Seller the unamortized balance of such Government Mandated
Additional Capital Expenditure as calculated in accordance with the applicable
examples set forth in Schedule 8.2.
ARTICLE IX
Force Majeure Event(s)
9.1 Seller Force Majeure Event(s).
(a) "Seller Force Majeure Event(s)" are:
(i) acts of God or the public enemy, insurrections, riots, strikes,
lockouts, boycotts, picketing or other disputes or differences with
workers, floods, interruptions to transportation, embargoes, acts of
military authorities, interruptions to power supply, or other causes of a
similar nature which wholly or partially prevent the production,
transportation or delivery of Coke or the construction of the Phase II
Plant; or
(ii) the unavailability of sufficient quantities of Coals (including
transportation therefore) utilized in any Coal Blend.
(b) Seller will provide Purchaser with prompt Written notice of the nature
and probable duration of each Seller Force Majeure Event and of the extent of
its effects on Seller's performance hereunder, including, without limitation,
its good faith estimate of the amount of Coke, if any, Seller will be able to
deliver to Purchaser during such Seller Force Majeure Event. Seller will
exercise commercially reasonable efforts to deliver to Purchaser the amount of
Coke
15
that Seller notifies Purchaser it will be able to deliver during each Seller
Force Majeure Event. In the event of a Force Majeure Event in respect of the
Coke Plants, Seller will allocate any such Coke deliveries on a reasonably
proportionate basis, such that each of Seller's customers (including Purchaser
and the Non-Affiliated Phase II Purchaser) receives a reasonably proportionate
share of available Coke Tonnage as is equitable under the circumstances.
(c) Seller will use commercially reasonable efforts to limit the effects
and duration of each Seller Force Majeure Event, including (as applicable)
restoring any damaged property necessary to reinstate the obligations of Seller
under this Agreement, selecting alternate Coals for a Coal Blend in accordance
with Section 4.2 hereof, and supporting Purchaser in locating alternate sources
of substitute coke Tonnage for the duration of such Seller Force Majeure Event;
provided, however, nothing in this Section shall be deemed to require Seller to
resolve any strike or other labor dispute except on terms that are satisfactory
to Seller in its sole discretion. Purchaser's obligation to purchase Coke shall
be limited to that portion of the Coke Tonnage (excluding Nonconforming Coke
Tonnage) that Seller is able to deliver to Purchaser, but in any event not in
excess of that which Seller indicated that it could supply to Purchaser in
Seller's notice of Seller Force Majeure Event provided pursuant to Section
9.1(b). Once Seller's ability to deliver Coke is no longer suspended as a result
of the applicable Seller Force Majeure Event, the obligations of Seller and
Purchaser under this Agreement will be reinstated with a prorated portion of the
remaining Coke Supply and Purchase Obligation in respect of the Contract Year
during which Seller's ability to perform hereunder is no longer suspended as a
result of such Force Majeure Event.
9.2 Purchaser Force Majeure Event(s).
(a) Purchaser Force Majeure Event(s) are acts of God or the public enemy,
insurrections, riots, strikes, lockouts, boycotts, picketing or other disputes
or differences with workers, floods, interruptions to transportation, embargoes,
acts of military authorities, interruptions to power supply to the ▇▇▇▇▇▇ Plant,
or other causes of a similar nature which wholly or partially prevent Purchaser
from being able to accept Coke from Seller.
(b) Purchaser will provide Seller with prompt Written notice of the nature
and probable duration of each Purchaser Force Majeure Event and of the extent of
its effects on Purchaser's performance hereunder. Provided, however, during such
Purchaser Force Majeure Event, Purchaser shall be obligated to purchase from
Seller, at the Contract Price, all Coke Tonnage that meets Purchaser's
requirements, for the duration of such Force Majeure Event, in respect of the
blast furnace operated by Purchaser located at the ▇▇▇▇▇▇ Plant.
(c) Purchaser will use commercially reasonable efforts to attempt to limit
the effects and duration of each Purchaser Force Majeure Event, including (as
applicable) restoring any damaged property necessary to fully reinstate the
obligations of Purchaser under this Agreement; provided, however, nothing in
this Section shall be deemed to require Purchaser to resolve any strike or other
labor dispute except on terms that are satisfactory to Purchaser in its sole
discretion. Once Purchaser's ability to perform is no longer suspended as a
result of the applicable Purchaser Force Majeure Event, the obligations of
Purchaser and Seller under this Agreement will be reinstated with a prorated
portion of the remaining Coke Supply and Purchase Obligation in respect of the
Contract Year during which Purchaser's ability to perform hereunder is no longer
suspended as a result of such Force Majeure Event.
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ARTICLE X
Dispute Resolution
10.1 Attempt at Resolution. Except for claims or causes of action in respect of
Equitable Relief, and subject to Sections 3.3(c) and 3.7(f), should any claim,
cause of action or dispute arise out of any of the provisions of this Agreement,
the Parties shall first attempt in good faith to resolve such claim, cause of
action or dispute within thirty (30) calendar days after either Party notifies
the other that a claim, cause of action or dispute exists. If the Parties can
not resolve any such claim, cause of action or dispute within such thirty (30)
calendar day period, then either Party may invoke the provisions of Section
10.2. This provision will not limit any Party from exercising any remedy it may
have under this Agreement.
10.2 Interpretation and Dispute Resolution.
(a) Except as respects the exercise or prosecution of claims or causes of
action for Equitable Relief, for which the Parties shall have the right to
proceed in any court of appropriate jurisdiction, any claim, cause of action or
dispute between the Parties arising out of or relating to this Agreement or the
breach thereof which the Parties are unable to resolve pursuant to (as
applicable) Sections 3.3(c), 3.7(f) or 10.1 shall be resolved by arbitration
pursuant to the terms of the United States Arbitration Act, whether or not
federal jurisdiction is obtained. Subject to Section 10.2(b), any and all
arbitration(s) hereunder shall be conducted in New York in accordance with the
Commercial Arbitration Rules of the American Arbitration Association.
(b) Any and all such arbitration(s) shall be conducted by a panel of three
(3) arbitrators. The Parties shall attempt to agree on the selection of the
three (3) arbitrators comprising the arbitration panel within forty-five (45)
calendar days from receipt of notice of intent to arbitrate. If the Parties
cannot agree on the arbitration panel then either Party may move to have the
panel appointed by the United States District Court for the Southern District of
New York. Time shall be of the essence in the nomination of the arbitration
panel. The arbitration award by the arbitration panel shall be final and
binding, shall include interest at the Interest Rate if determined to be
appropriate by the arbitrator panel and, unless the arbitrator panel expressly
determines them not to be appropriate, shall include costs, including reasonable
attorney's fees. A judgment to enforce the arbitration award may be entered in
any court of appropriate jurisdiction. Notwithstanding the foregoing, claims or
causes of action for Equitable Relief shall not be subject to such arbitration,
and either Party may employ or exercise freely such claims or causes of action.
(c) Upon the date of an arbitration award pursuant to this Section 10.2, if
it is determined that an amount is due from one Party to the other Party, then
such amount will be paid to the Party to whom it is due within ten (10) calendar
days from the date of the written determination of the arbitration panel.
Overdue payments shall bear interest at the Interest Rate.
17
ARTICLE XI
Mutual Undertakings; Further Acknowledgements, Representations and Warranties
11.1 Cooperation. Each Party warrants to the other Party that this Agreement is
not inconsistent with any existing respective legal or contractual obligations
of such Party, including, without limitation, any agreements between such Party
and its employees or third parties (such as any collective bargaining
agreement(s) by which such Party may be bound).
11.2 Further Assurances. From time to time after the date hereof and without
further consideration, the Parties shall take such other action, and execute
such other documents and instruments, as the Parties agree are necessary to more
effectively carry out the transactions contemplated by this Agreement.
11.3 Compliance with Laws. Each Party represents and warrants to the other Party
that no federal or state court of competent jurisdiction or any governmental
authority or agency has enacted or issued a law, rule, regulation, order, decree
or ruling, or taken any other action, which, in the reasonable opinion of
respective counsel to such Party, restrains, joins or otherwise prohibits any of
the actions contemplated hereby.
11.4 Identification of Goods. Coke shall be deemed goods identified to this
Agreement and designated as goods to which this Agreement refers for all
purposes including, without limitation, for purposes of NY UCC Section 2-501.
11.5 Seller's Representations and Acknowledgement.
(a) Seller represents and warrants that (i) the sale of the Coke by Seller
to Purchaser under the Agreement is made by Seller in the ordinary course of
Seller's business, and (ii) it is in the business of selling blast furnace coke.
(b) Seller acknowledges and agrees that Purchaser is a buyer of Coke in
good faith and in the ordinary course of Purchaser's business and, at such time
as such Coke is delivered to Purchaser, Purchaser will be a "buyer in the
ordinary course of business" as defined in NY UCC Section 1-201(9).
ARTICLE XII
Default and Remedies
12.1 Purchaser's Events of Default. Purchaser shall be in default upon the
occurrence of one or more of the following events (each a "Purchaser Default"):
(a) A Payment Default by Purchaser, which Payment Default remains uncured
for ten (10) calendar days following receipt of Written notice by Seller to
Purchaser;
(b) Purchaser becomes Bankrupt; or
(c) Except as provided in Sections 12.1(a) and (b) hereof, Purchaser
otherwise fails to perform, observe or comply with any other term, condition,
obligation, covenant or provision of this Agreement, and such breach (y) has not
been corrected, cured or remedied within sixty (60)
18
calendar days after Written notice of such breach has been delivered to
Purchaser, or (z) if such cure cannot reasonably be completed within such sixty
(60) calendar day period, then Purchaser fails to promptly commences action(s)
to effect a cure or fails to continue to prosecute such cure with reasonable
diligence thereafter; provided, however, that any cure commenced hereunder must
be completed within one hundred and eighty (180) calendar days following the
commencement of the corrective action(s).
12.2 Seller's Events of Default. Seller shall be in default upon the occurrence
of one or more of the following events (each a "Seller Default"):
(a) A Payment Default by Seller, which Payment Default remains uncured for
ten (10) calendar days following receipt of Written notice by Purchaser to
Seller;
(b) Seller does not, within ten (10) business days following Purchaser's
delivery of Written notice to Seller regarding Seller's failure to deliver Coke
or Third Party Supplied Coke as required by this Agreement, commence corrective
action to cure or remedy such failure, and prosecute such corrective action with
reasonable diligence thereafter until such failure is cured or remedied;
provided, however, any cure commenced hereunder must be completed within one
hundred and twenty (120) days following the commencement of such cure;
(c) Seller becomes Bankrupt; or
(d) Except as provided in Sections 12.2(a), (b) and (c) hereof, Seller
otherwise fails to perform, observe or comply with any other term, condition,
obligation, covenant or provision of this Agreement, and such breach (y) has not
been corrected, cured or remedied within sixty (60) calendar days after Written
notice of such breach has been delivered to Seller, or (z) if such cure cannot
reasonably be completed within such sixty (60) calendar day period, then Seller
fails to promptly commence corrective actions to effect a cure or fails to
continues to prosecute such cure with reasonable diligence thereafter; provided,
however, that any cure commenced hereunder must be completed within one hundred
and eighty (180) calendar days following the commencement of the corrective
action(s).
12.3 Pursuit of Remedies. Upon the occurrence of a Purchaser Default or a Seller
Default, the non-defaulting Party may pursue its corresponding legal remedies
through the procedures set forth in Article X.
12.4 Seller's Termination for Breach. Upon the occurrence of a Purchaser
Default, then, in addition to pursuing its remedies pursuant to Section 12.3,
Seller may terminate this Agreement effective immediately upon the delivery of
Written notice thereof to Purchaser. Upon any such termination, Seller shall be
relieved of its obligations in respect of the Coke Supply and Purchase
Obligation and Purchaser shall pay to Seller Seller's Damages, less any
Mitigation Proceeds, within thirty (30) calendar days after the date on which
Seller's Damages have been either accepted, agreed upon or determined in
accordance with the provisions of Section 12.6. The Parties acknowledge that
Seller's Damages, less Mitigation Proceeds, are a reasonable estimation of
Seller's actual damages in the event of a termination of this Agreement by
Seller pursuant to this Section 12.4.
19
12.5 Purchaser's Termination for Breach. Upon the occurrence of a Seller
Default, then, in addition to pursuing its remedies pursuant to Section 12.3,
Purchaser may terminate this Agreement effective immediately upon delivery of
Written notice thereof to Seller. Upon such termination, Purchaser shall be
relieved of its obligations in respect of the Coke Supply and Purchase
Obligation and its obligation (if any) to pay Government Mandated Additional
Expenditures and Seller shall pay to Purchaser Purchaser's Damages within thirty
(30) calendar days after the date on which such amounts have been determined in
accordance with the provisions of Section 12.6 below. The Parties acknowledge
that Purchaser's Damages are a reasonable estimation of Purchaser's actual
damages in the event of a termination of this Agreement by Purchaser pursuant to
this Section 12.5.
12.6 Determination of Damages.
(a) Following any termination of this Agreement by Seller pursuant to
Section 12.4 or by Purchaser pursuant to Section 12.5, the terminating Party
shall provide the terminated Party with its calculation of, as applicable,
Seller's Damages or Purchaser's Damages, including (without limitation) all
facts, data, assumptions, opinions and analyses relied upon by the terminating
Party in respect of such calculation. If the terminated Party disputes such
calculation, then it shall send written notice of such dispute (the "Dispute
Notice") to the terminating Party within thirty (30) calendar days following its
receipt of the terminating Party's calculation of as applicable, Seller's
Damages or Purchaser's Damages. Such Dispute Notice shall particularly describe
the basis of such dispute, including all facts, data, assumptions, opinions and
analyses relied upon by the terminated Party in respect thereof. If the
terminated Party fails to send a Dispute Notice to the terminating Party within
such thirty (30) calendar day period, then the terminated Party will be deemed
to have accepted the calculation of as applicable, Seller's Damages or
Purchaser's Damages provided by the terminating Party.
(b) If the terminated Party timely sends a Dispute Notice to the
terminating Party, then the Parties shall attempt in good faith to resolve their
dispute regarding such calculations within the thirty (30) calendar day period
following the terminating Party's receipt of the Dispute Notice. If the Parties
are unable to resolve such dispute within such thirty (30) calendar day period,
then the dispute shall be determined by arbitration in accordance with the
provisions of Section 10.2 above. Provided, however, any amount not in dispute
in respect of, as applicable, Seller's Damages or Purchaser's Damages shall be
deemed to be accepted by the Parties, and the terminated Party shall pay such
amount to the terminating Party within ten (10) calendar days following the
expiration of such thirty (30) calendar day period.
12.7 Early Termination without Event of Default.
(a) Each Party shall have the right to terminate this Agreement without
liability of any kind to the other Party, effective immediately on delivery of
Written notice of termination to the other Party, if:
(i) by December 20, 2006, each board of directors of Sunoco, the
parent company of Purchaser, and the Non-Affiliated Phase II Purchaser, in
their respective sole discretion, do not approve this Agreement, subject to
the contingencies set forth in subsections (ii) and (iii) of this Section
12.7(a);
20
(ii) by January 31, 2007, Seller does not enter into Coal
transportation and Coal blending agreement(s) with Norfolk Southern, and
such agreement(s) are not approved in Writing by Purchaser and the
Non-Affiliated Phase II Purchaser in their sole discretion; or
(iii) by January 31, 2007, Purchaser and the Non-Affiliated Phase II
Purchaser do not enter into Coke transportation agreement(s) with Norfolk
Southern, which agreement(s) shall be acceptable to Purchaser and the
Non-Affiliated Phase II Purchaser in their sole discretion.
(b) Purchaser shall have the right to terminate this Agreement without
liability of any kind to Seller, effective immediately on delivery of Written
notice of termination to Seller, if:
(i) subject to Seller Force Majeure Event(s), by June 30, 2007, Seller
has not commenced construction of the Phase II Plant; or
(ii) subject to Seller Force Majeure Event(s), by December 31, 2008,
the Initial Operating Period has not commenced.
12.8 No Release of Accrued Obligations. No termination of this Agreement shall
release either Party from any obligations (including those arising out of a
breach of this Agreement) that may have accrued under this Agreement prior to
such termination.
ARTICLE XIII
Miscellaneous Provisions
13.1 Seller's Indemnification of Purchaser. Seller shall indemnify, defend and
hold Purchaser, its Affiliates and their successors, assigns, officers,
directors, employees and agents harmless from any and all actions, causes of
action, claims, demands, costs, liabilities, expenses and damages (including,
without limitation, reasonable attorney's fees and costs) incurred by any of
them as a result of (a) the design, construction or operation of the Coke Plants
and the Cogeneration Plant or (b) the infringement by the Phase II Plant and/or
the Cogeneration Plant in whole or in part of any copyright, patent, trade
secret or other proprietary right held by any third party.
13.2 Notices. All notices, requests and demands to or upon the Parties to be
effective shall be in Writing. Except for invoices, such communications shall be
addressed and directed to the Parties listed below as follows, or to such other
address or recipient as either Party may designate in Writing:
21
If to Seller to: If to Purchaser to:
Haverhill North Coke Company, c/o WCI Steel, Inc., c/o
Sun Coke Company WCI Steel, Inc.
Landmark Center, Suite N-600 ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Attention:
Attention: Director of Purchasing
Vice President and General Counsel
Senior Vice President - Business Development
FAX: (▇▇▇) ▇▇▇-▇▇▇▇ FAX - (▇▇▇) ▇▇▇-▇▇▇▇
Confirm: (▇▇▇) ▇▇▇-▇▇▇▇ Confirm: - (▇▇▇) ▇▇▇-▇▇▇▇
13.3 No Consequential or Exemplary Damages; Exclusive Remedies. EXCEPT AS
RESPECTS SELLER'S DAMAGES AND PURCHASER'S DAMAGES, NEITHER SELLER, PURCHASER NOR
ANY OF THEIR RESPECTIVE AFFILIATES OR ASSIGNEES SHALL BE LIABLE FOR ANY
CONSEQUENTIAL DAMAGES (INCLUDING, WITHOUT LIMITATION, DAMAGES IN RESPECT OF
EXISTING OR FUTURE LOST PROFITS) OR EXEMPLARY DAMAGES IN RESPECT OF ANY
BREACH(ES) OF THIS AGREEMENT (INCLUDING, WITHOUT LIMITATION, ANY BREACH(ES) OF
THE WARRANTIES OR GUARANTEES HEREUNDER) OR OTHERWISE. EXCEPT FOR EQUITABLE
RELIEF, THE REMEDIES OF THE PARTIES SET FORTH IN THIS AGREEMENT ARE EXCLUSIVE.
13.4 Governing Law. This Agreement shall be construed in accordance with and
governed by, the laws of the State of New York without regard to its conflicts
of law provisions, and the rights and remedies of the Parties hereunder will be
determined in accordance with such laws.
13.5 Severability. If any provision of this Agreement is found by a court of
competent jurisdiction to be prohibited or unenforceable, it shall, as to such
jurisdiction, be ineffective only to the extent of such prohibition or
unenforceability, and such prohibition or unenforceability shall not invalidate
the balance of such provision to the extent it is not prohibited or
unenforceable, nor invalidate the other provisions of this Agreement.
13.6 Entire Agreement. This Agreement, including Appendix A and the Schedules
attached hereto, constitutes the entire agreement among the Parties concerning
the subject matter hereof and supersedes and cancels any prior agreements,
representations, warranties, or communications, whether oral or written, among
the Parties regarding the transactions contemplated by, and the subject matter
of, this Agreement. The provisions of this Agreement shall not be reformed,
altered, or modified in any way by any practice or course of dealing prior to or
during the term of the Agreement, and can only be reformed, altered, or modified
by a Writing signed by authorized representatives of the Parties. The Parties
specifically acknowledge that they have not been induced to enter into this
Agreement by any representation, stipulation, warranty, agreement, or
understanding of any kind other than as expressed in this Agreement.
22
13.7 Survival. The obligations of the Parties pursuant to Article X, Sections
8.2, 11.4, 11.5, 12.3, 12.4, 12.5, 12.7, 13.1, 13.2, 13.3, 13.4, 13.5 and 13.6
shall survive the termination of this Agreement.
13.8 Captions. The captions and headings in this Agreement are for convenience
of reference purposes only and have no legal force or effect. Such captions and
headings shall not be considered a part of this Agreement for purposes of
interpreting, construing or applying this Agreement and will not define, limit,
extend, explain or describe the scope or extent of this Agreement or any of its
terms and conditions.
13.9 Construction of Agreement. This Agreement shall be construed as a contract
of purchase and sale of goods.
13.10 Independent Contractor. Neither Party is the partner, legal representative
or agent of the other Party, nor shall either Party have the right or authority
to assume, create or incur any liability or any obligation of any kind implied,
against or in the name or on behalf of the other Party.
13.11 Waivers and Remedies. The failure of either Party to insist in any one or
more instances upon strict performance of any of the provisions of this
Agreement or to take advantage of any of its rights hereunder shall not be
construed as a waiver of any such provisions or the relinquishment of any such
rights, but the same shall continue and remain in full force and effect. Except
as otherwise expressly limited in this Agreement, all remedies under this
Agreement shall be cumulative and in addition to every other remedy provided for
herein or by law.
13.12 Assignment. No Party shall assign or delegate any of its rights or
obligations under this Agreement to any Enterprise, including to any Affiliate
of a Party, or sell, lease, transfer or otherwise dispose of all or a
substantial portion of its assets without the prior Written consent of such
other Party, such consent not to be unreasonably withheld or delayed.
Notwithstanding the foregoing, Purchaser shall have the right to sell, lease,
transfer or otherwise dispose of all or a substantial portion of its assets
without the prior Written consent of Seller; provided that any such sale, lease,
transfer or other disposition shall be conditioned upon and is subject to the
full assumption by the assignee of any and all rights and obligations hereunder
of Purchaser, in which case such assignment of this Agreement shall not require
Seller's prior Written consent. The Agreement shall bind and inure to the
benefit of Purchaser and Seller and their respective permitted successors and
assigns. The Agreement shall bind and inure to the benefit of Purchaser and
Seller and their respective permitted successors and assigns.
13.13 Sale of Coke by Purchaser. Seller agrees and acknowledges that nothing in
this Agreement is intended to or shall prohibit Purchaser from re-selling to any
third party any Coke Tonnage purchased by Purchaser from Seller under this
Agreement at Purchaser's sole cost and expense.
23
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
their respective duly authorized officers as of the date first above written.
HAVERHILL NORTH COKE COMPANY WCI STEEL, INC.
By: /s/ M.H.R. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------- ------------------------------------
Name: M.H.R. ▇▇▇▇▇▇ Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title President Title: Vice President Development
24
APPENDIX A
DEFINITIONS
The definitions of certain capitalized terms are as follows:
"Actual O&M Component" has the meaning set forth in Section 3.3(h).
"Affiliate" means any Enterprise that directly or indirectly controls, or
is controlled by, or is under common control with any Party. For purposes of
this definition, "control" of an Enterprise means the power, directly or
indirectly, either (a) to vote fifty percent (50%) or more of the securities
having ordinary voting power for the election of directors of such Party or
Enterprise; or (b) to direct or cause the direction of the management and
policies of such Party or Enterprise, whether by ownership interest, contract or
otherwise.
"Agreement" is the Coke Purchase Agreement between the Parties dated
November 21, 2006, together with all Written amendments, revisions and
modifications hereof made pursuant to Section 13.6.
"Approved O&M Expenses" has the meaning set forth in Section 3.3(g).
"ASTM Standards" means procedures and standards adopted or approved by the
American Society for Testing and Materials.
"Bankrupt" means, with respect to any Party, or to any Enterprise to which
this Agreement is Assigned, that such Party or Enterprise:
(a) has applied for or consented to the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of itself
or of all or a substantial part of its property;
(b) has made a general assignment for the benefit of its creditors;
(c) has commenced a voluntary case under any bankruptcy code, as now or
hereafter in effect ("Bankruptcy Code");
(d) has filed a petition seeking to take advantage of any other law
relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or readjustment of debts;
(e) has taken any action for the purpose of effecting any of the
foregoing; or
(f) is a defendant, respondent or alleged debtor in, or has otherwise had
commenced against it, in any court of competent jurisdiction, a
proceeding or case under the Bankruptcy Code or a case seeking:
(i) its liquidation, reorganization, dissolution or winding-up, or the
composition or readjustment of its debts;
i
(ii) the appointment of a trustee, receiver, custodian, liquidator or
the like, of such Party or Enterprise or of all or any substantial
part of its property; or
(iii) similar relief under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts;
and such proceeding or case shall have continued undismissed, or an
order, judgment or decree approving or ordering any of the foregoing
shall have been entered and shall have continued unstayed and in
effect, for a period of sixty (60) or more calendar days; or an order
for relief against such Party or Enterprise shall have been entered in
a case under the Bankruptcy Code.
"Base Case Coal Blend" means a Coal Blend having a volatile matter content
of [*****]% and a moisture content of [*****]%.
"Breeze" means breeze and nut coke (approx. 3/4" x 0).
"By-Products" means all output of the Coke Plants excluding blast furnace
coke, but including breeze, nut coke, waste heat, steam and electricity and any
other products produced at the Coke Plants.
"Calendar Year" means a calendar year commencing on January 1st and ending
on December 31st.
"Coal(s)" are metallurgical coking coals that are reliable and readily
available for use in any actual or proposed Coal Blend.
"Coal Blend(s)" means, as applicable, each coal blend or coal blends
selected pursuant to Sections 4.1 and 4.2 and, as applicable, any coal blend or
coal blends selected by Seller pursuant to Section 4.3.
"Coal Blend Standards" are the standards for selecting the Coal Blends.
Those standards require that each Coal Blend (i) consists of not more than four
(4) Coals; (ii) consists of Coals having a minimum FSI of 6; (iii) actually
produces Coke that will reasonably conform to "target" Guaranteed Quality
Standards set forth in Schedule 5.2 or any successor standards; (iv) has a
volatile matter component of not less than [*****] ([*****]%) and not more than
[*****] ([*****]%); (v) allows for safe, reliable and efficient operation of the
Coke Plants; and (vi) allows for the operation of the Coke Plants in accordance
with Governmental Requirements.
"Coal Costs" has the meaning set forth in Section 3.4(a).
"Coal Cost Component" has the meaning set forth in Section 3.4(c).
"Coal Handling Losses" are losses associated with the storage and handling
of the Coals, shall be deemed to equal [*****]% ([*****]), and shall be
determined in the manner set forth in Section 3.4(c).
"Code" has the meaning set forth in Section 3.8.
ii
"Cogeneration Plant" means the equipment and facilities used to process
steam into electricity located downstream of the heat recovery steam generators
for the Phase II Plant.
"Cogeneration Plant GMACE" has the meaning set forth in Section 8.2.
"Coke" means blast furnace coke that is produced at the Coke Plants, and
that is delivered by Seller to Purchaser pursuant to this Agreement. Coke does
not include any Breeze.
"Coke Delivery Point" has the meaning set forth in Section 7.1.
"Coke Plants" refers, collectively, to the Phase I Plant and the Phase II
Plant.
"Coke Plants Targeted Coke Production" is the Purchaser Targeted Coke
Production multiplied by 4.4.
"Coke Supply and Purchase Obligation" is the Tonnage of Coke and (as
applicable) Third Party Supplied Coke that Seller is obligated to deliver to
Purchaser, and the Tonnage of Coke and Third Party Supplied Coke that Purchaser
is obligated to accept and purchase from Seller, as set forth in Section 6.3(a)
and Schedule 6.3(a).
"Contract Price" has the meaning set forth in Section 3.1.
"Contract Year" means each respective Calendar Year transpiring during the
Term following the Initial Year.
"CSR" means coke strength after reaction.
"Dispute Notice" has the meaning set forth in Section 12.6(a).
"Dispute Period" has the meaning set forth in Section 3.3(c).
"Due Date" has the meaning set forth in Section 3.7(e).
"Effective Date" has the meaning set forth in the introductory paragraph to
this Agreement.
"Enterprise" means individual, firm, company, partnership, limited
partnership, limited liability partnership, limited liability corporation,
corporation, association, trust, or other enterprise.
"Equitable Relief" means, in the context of the exercise or prosecution of
claims or causes of actions, any claim or cause of action for immediate relief
(such as a Seller's remedies to stop goods in transit, withhold or refuse
delivery, reclaim or replevy goods and resell goods), or in respect of equitable
relief (such as, without limitation, temporary and permanent injunctive relief,
and specific performance).
"Fixed Price Component" has the meaning set forth in Section 3.2.
iii
"Forecast" has the meaning set forth in Section 3.3(b).
"Forecasted O&M Component" has the meaning set forth in Section 3.3(g).
"Forecasted O&M Allocation Formula" has the meaning set forth in Section
3.3(g).
"Government Mandated Additional Capital Expenditures" means capital
expenditures affecting the Coke Plants and/or, as applicable, the Cogeneration
Plant for which an equally reliable and safe non-capital expenditure alternative
by itself is not reasonably available and economically feasible and which are
required due to changes in Governmental Requirements made after the date of this
Agreement (or with respect to compliance standards not reasonably ascertainable
as of the date of this Agreement).
"Government Mandated Additional Expenses" are the actual operating or
maintenance expenses affecting the Coke Plants and/or, as applicable, the
Cogeneration Plant, as well as all economic impacts other than those that
require additional capital, which are required due to changes in Governmental
Requirements made after the date of this Agreement (or with respect to
compliance standards not reasonably ascertainable as of the date of this
Agreement).
"Government Mandated Additional Expenditures" means, collectively,
Government Mandated Additional Capital Expenditures and Government Mandated
Additional Expenses.
"Governmental Authority" means any federal, state or local government, and
political subdivision thereof, and any entity exercising executive, legislative,
judicial, regulatory or administrative functions having or pertaining to
government.
"Governmental Requirements" means any applicable law, regulation and
regulatory order (and any official interpretations thereof) of any Governmental
Authority in respect of the operation of the Coke Plants and/or, as applicable,
the Cogeneration Plant, including (without limitation) any such law, regulation
or regulatory order relating to environmental compliance by Seller with respect
to the operation of the Coke Plants and/or, as applicable, the Cogeneration
Plant.
"Guaranteed Coke Yield Percentage" has the meaning set forth in Section
3.4(e).
"Guaranteed O&M Component" has the meaning set forth in Section 3.3(a).
"Guaranteed Quality Standards" are the guaranteed quality parameters for
Coke set forth in Schedule 5.2.
"Guidelines" has the meaning set forth in Section 3.3(b).
"Incidental Damages" are (in the case of Seller) incidental damages as
defined in NY UCC Section 2-710, and (in the case of Purchaser) as defined in NY
UCC Section 2-715. With respect to Seller, such damages specifically include,
without limitation, reasonable storage and re-screening costs and degradation
and handling losses incurred by Seller in connection with the stockpiling of
Coke or Third Party Supplied Coke.
iv
"Index Formula" is the percentage increase or, as applicable, decrease in
the [*****] Index - [*****] (Series Id: [*****]) published by the United States
Department of Labor, Bureau of Labor Statistics, or any inflation index that
succeeds or replaces it for the twelve (12) most recent Months of available data
preceding the commencement of the applicable Contract Year.
"Initial O&M Component" has the meaning set forth in Section 3.3(a).
"Initial Operating Period" means the period from the commencement of Coke
production at the Phase II Plant through the last day of the Month following the
date Seller notifies Purchaser in Writing that the Phase II Plant has
demonstrated the commercial capability of producing Coke at the full production
level of the capacity of the Phase II Plant.
"Initial Year" means the calendar year (namely, through December 31st)
during which the Initial Operating Period expires.
"Interest Rate" means an interest rate equal to [*****]% above the rate
announced by Chase Manhattan Bank as its [*****] at the date of accrual of the
late payment.
"IRS means the Internal Revenue Service of the United States Department of
the Treasury.
"Manifest Error" means an arithmetical or other error that is readily
apparent.
"Mitigation Proceeds" means the sum of the:
(A) Net profits, if any, arising from actual third party Coke sales as of
the effective date of termination of this Agreement by Seller pursuant to
Section 12.4, plus
(B) The present value, discounted at the rate of [*****] percent ([*****]%)
per annum, of the net profits, if any, that can be reasonably estimated in
respect of third party Coke sales from the effective date of termination of
this Agreement by Seller pursuant to Section 12.4, through the date the
Term would have expired but for the termination of this Agreement by Seller
pursuant to Section 12.4.
Such net profits are the difference, if any, between (i) sales proceeds
arising from third party Coke sales plus any costs and expenses saved by
Seller in connection therewith, minus (ii) the sum of (y) the product of
(i) the Contract Price less the Fixed Price Component of the Contract Price
multiplied by (ii) the Coke Tonnage that is sold to such third parties,
plus (z) any other Incidental Damages incurred by Seller.
"Moisture Adjusted Coal Blend Tonnage" has the meaning set forth in Section
3.4(c).
"Month(s)" or "Monthly", as applicable, refers to each calendar Month,
beginning at 12:00 midnight on the last day of the preceding Month and ending at
12:00 midnight on the last day of such calendar Month, transpiring in whole or
in part during the Term.
v
"Non-Affiliated Phase II Purchaser" is Severstal North America, Inc., or
its successor(s) in interest.
"Nonconforming Coke" has the meaning set forth in Section 5.2(c).
"Norfolk Southern" has the meaning set forth in Section 3.4(a).
"O&M Expenses" means all costs, expenses and fees incurred by Seller in
respect of operating and maintaining the Coke Plants and the Cogeneration Plant,
and in complying with the Coke delivery and supply obligations of Seller under
this Agreement, plus all Taxes in respect of all such costs, expenses, and fees,
plus property taxes in respect of the Coke Plants. O&M Expenses include, without
limitation, Government Mandated Additional Expenses.
"Parties" means Purchaser and Seller.
"Party" means either Purchaser or Seller, depending upon the context in
which the term is used.
"Payment Default" means any failure by (i) Purchaser to pay Seller in
accordance with Article III (including the payments in respect of the Contract
Price and the adjustments thereto), Section 6.3, Section, 10.2(c), or Article
VIII, or (ii) Seller to pay Purchaser in accordance with Section 3.10 or Section
10.2(c).
"Phase I Plant" has the meaning set forth in Section 1.2(a).
"Phase II Plant" has the meaning set forth in Section 1.2(b).
"Phase II Coke Production" is the Coke Supply and Purchase Obligation
multiplied by 2.2.
"Presumed O&M Component" has the meaning set forth in Section 3.3(c).
"Presumed O&M Expenses" has the meaning set forth in Section 3.3(c).
"Price Discount" has the meaning set forth in Section 5.2(c).
"Production Capacity Liability Limitation" has the meaning set forth in
Section 6.4.
"Production Shortfall" has the meaning set forth in Section 6.4.
"Prudent Operating and Maintenance Practices" means the practices, methods,
standards and procedures generally accepted and followed by a prudent, diligent,
skilled and experienced manager and operator acting in accordance with standards
generally utilized in the United States, with respect to the management,
operation and maintenance of manufacturing facilities having similar
characteristics to the Coke Plants and the Cogeneration Plant which, at the
particular time in question, in the exercise of reasonable judgment and in light
of facts then known or that reasonably should have been known at such time,
would be expected to accomplish the desired
vi
results and goals, including such goals as efficiency, reliability, economy and
profitability, in a manner consistent with Governmental Requirements.
"Purchaser" has the meaning set forth in the introductory paragraph to this
Agreement.
"Purchaser Coke Production Allocation" has the meaning set forth in Section
6.3(a).
"Purchaser's Damages" means the sum of (i) any amounts due by Seller to
Purchaser under this Agreement as of the effective date of its termination, plus
(ii) the present value, discounted at the rate of [*****] percent ([*****]%) per
annum, of the difference (if any) between (y) the price of Purchaser Obtained
Coke f.o.b. the Coke Delivery Point, and (z) either (A) the Contract Price that
would have been payable by Purchaser to Seller for [*****] Tons of Coke for all
complete or partial Contract Years that would have remained in the Term but for
the termination of this Agreement (provided, for such Contract Years having less
than 365 days, the foregoing amount is to be multiplied by a fraction, the
numerator of which is the number of calendar days in such Contract Year, and the
denominator of which is 365); or (B) as applicable, the balance, if any, payable
by Seller to Purchaser in respect of a Production Capacity Limitation. Such
Contract Price will be determined based upon the assumed utilization of the Base
Case Coal Blend and a reasonable market value estimation of the Coal Cost
Component in respect of such Base Case Coal Blend.
"Purchaser Default" has the meaning set forth in Section 12.1.
"Purchaser Force Majeure Event(s)" has the meaning set forth in Section
9.2.
"Purchaser Freight Cost" means the freight cost in respect of such
Shipment.
"Purchaser Obtained Coke" means coke obtained by Purchaser that is required
to make up for any shortfall in Seller's delivery of Coke in respect of the
minimum range of the Coke Supply and Purchase Obligation, and in respect of
Third Party Supplied Coke.
"Purchaser Targeted Coke Production" means (i) as respects the Base Case
Coal Blend, [*****] ([*****]) Tons of Coke or, as applicable, Third Party
Supplied Coke, and (ii) as respects each Coal Blend that contains a volatile
matter content percentage which varies from the Base Case Coal Blend, the Coke
Tonnage provided for in the corresponding volatile matter content percentage set
forth in the attached and incorporated Schedule 6.3(a).
"Qualified Bank" means a financial institution having, at the time of
determination for purposes of this Agreement, a credit rating of at least "A" by
Standard & Poor's Corporation or at least "A2" by ▇▇▇▇▇'▇ Investors Service.
"Realized Value" has the meaning set forth in Section 3.8.
"Section(s)" are, unless otherwise indicated, the sections and subsections
of the Articles contained in this Agreement.
"Section 45 Credits" has the meaning set forth in Section 3.8.
vii
"Seller" has the meaning set forth in the introductory paragraph to this
Agreement.
"Seller Default" has the meaning set forth in Section 12.2.
"Seller Force Majeure Event(s)" has the meaning set forth in Section 9.1.
"Seller's Damages" include (i) any amounts due by Purchaser to Seller under
this Agreement as of the effective date of termination; (ii) the present value,
discounted at the rate of [*****] ([*****]%) per annum, of (y) the product of
(A) Fixed Price Component of the Contract Price multiplied by (B) [*****]
([*****]) for each complete or partial Contract Year that would have remained in
the Term but for the termination of this Agreement (provided, for such Contract
Years having less than 365 days, the foregoing amount is to be multiplied by a
fraction, the numerator of which is the number of calendar days in such Contract
Year, and the denominator of which is 365) plus (z) (as applicable) Taxes
thereon; and (iii) the balance of all of the remaining Government Mandated
Additional Capital Expenditures that would be payable by Purchaser but for such
termination. (If the Agreement is terminated prior to or during the Initial
Year, then the Fixed Price Component shall be multiplied by fifteen (15)
Contract Years.)
"Shipment" means the release of a full trainload of Coke or, as applicable,
Third Party Supplied Coke that is to be delivered to Purchaser at Purchaser's
coke unloading facility located at the ▇▇▇▇▇▇ Plant.
"Site" has the meaning set forth in Section 1.2(a).
"Sunoco" means Sunoco, Inc., which is the indirect parent company of
Seller.
"Taxes" means any tax imposed by any Governmental Authority in the form of
sales, use, excise, value added, environmental, gross receipts or franchise tax
(except for property taxes related to the Coke Plants or the Cogeneration Plant,
or taxes based on or measured by the net income or net worth of Seller), state
and local product tax, state and local inspection fees, or similar taxes,
assessments, or fees. If the purchase of any Coke by Purchaser is exempt from
sales or use tax, then Purchaser shall furnish Seller with a valid exemption
certificate in form and content reasonably acceptable to Seller. If any
exemption is subsequently denied by any Governmental Authority, and as a result
Seller is assessed for such sales or use tax, then Purchaser shall reimburse
Seller for such Taxes including all interest and penalties associated therewith.
"Term" has the meaning set forth in Article II.
"Third Party Supplied Coke" means coke obtained from sources other than
Seller, and includes coke obtained from Seller's Affiliates.
"Ton" or "Tonnage" means a "short" ton of two thousand (2,000) pounds of
Coal or Coke, as the case may be.
"▇▇▇▇▇▇ Plant" is Purchaser's steel plant located in Warren, Ohio.
viii
"Written" or "in Writing" means any form of written communication or a
communication by means of e-mail, telex, telecopier device, telegraph or cable,
overnight courier, or registered or certified mail (postage prepaid and return
receipt requested), and shall be deemed to have been duly given or made upon
receipt, or in the case of any electronic transmission, when confirmation of
receipt is obtained.
ix
Schedule 5.2
Guaranteed Quality Standards
Threshold for Quality Contract Price Adjustment Reject
Categories Target Adjustment (Pro-Rata) Standard
---------- ------ --------------------- ------------------------- --------
Ash (Dry Basis) 8.50% >[*****]% $[*****]/Ton for each >[*****]%
1.00% over Threshold
Volatile Matter (Dry 0.70% >[*****]% $[*****]/Ton for each >[*****]%
Basis) 0.1% over Threshold
Total Sulfur 0.75% >[*****]% $[*****]/Ton for each >[*****]%
(Dry Basis) 0.10% over Threshold
Phosphorous N/A >[*****]% $[*****]/Ton for each N/A
(Dry Basis) 0.01% over Threshold
CSR 61 N/A N/A N/A
Stability 61 <[*****]/ <[*****]%
>[*****] Refer to the Stability
Penalty and Credit
Total Moisture(%) 5.0% >[*****]% $[*****]/Ton for each >[*****]%
1.00% over Threshold
Size: Minus 3/4" 3.0% >[*****]% $[*****]/Ton for each >[*****]%
1.0% over Threshold
Stability Penalty and Credit - For each one (1) point variation in respect of
Coke Tonnage that contains less than [*****] Stability, the Contract Price will
be decreased by $[*****] for such Coke Tonnage. For each one (1) point variation
in respect of Coke Tonnage that contains more than [*****] Stability, the
Contract Price will be increased by $[*****] for such Coke Tonnage. For Coke
that measures between [*****] Stability and [*****] Stability, there shall be no
adjustment to the Contract Price.
Pro- Rata Adjustments:
For ash, volatile matter, moisture and size, any percentage over (or under, in
the case of Size:) the threshold amount shall be pro-rated for each one-one
hundredth (1/100) percentage point increment exceedance. By way of example, a
volatile matter percentage of [*****]% will result in a Contract Price decrease
of $[*****].
For sulfur and phosphorous, any percentage over the threshold amount shall be
pro-rated for each one-one thousandth (1/1000) percentage point increment. By
way of example, a phosphorus percentage of [*****]% will result in a Contract
Price decrease of $[*****].
For stability, each one-tenth (1/10) point increase in stability greater than
[*****] will result in a Contract Price increase of $[*****]; each one-tenth
(1/10) point decrease in stability less than [*****] will result in a Contract
Price decrease of $[*****].
x
Sampling:
Moisture, sulfur, ash, volatile matter and stability will be tested and analyzed
on a daily basis, and the results thereof shall be arithmetically averaged, on a
Shipment basis.
Size will be tested and analyzed based upon composite sampling of each Shipment.
CSR and phosphorus shall be determined based upon testing and analysis of
monthly composite samples.
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Schedule 6.3(a)
Coke Supply and Purchase Obligation
Coal Blend Volatile Matter [***] [***] [***] [***] [***] [***] [***] [***] [***]
Purchaser Targeted Coke
Production (Tons) [***] [***] [***] [***] [***] [***] [***] [***] [***]
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Schedule 8.2
Government Mandated Additional Capital Expenditures (Examples)
Example 1: Government Mandated Additional Capital
Expenditures, Excepting Cogeneration Plant GMACE
Commencement of first Contract Year: 01/01/09
End of Term: 12/31/24
Completion Date for Government Mandated
Additional Capital Expenditures: 4/30/18
Number of partial or complete Contract Years Remaining the Term: 6.67
Amortization Period (greater of 7 years or the
remainder of the Term): 7.00
Interest Rate (pre-tax): [*****]%
Cost of Applicable Government Mandated
Additional Capital Expenditure: $[*****](1)
Monthly Amortized Cost: $[*****]
Monthly Amortized Cost payable by Purchaser $[*****](2)
Unamortized Balance at End of Initial Term $[*****]
Example 2: Cogeneration Plant GMACE
Commencement of first Contract Year: 01/01/09
End of Term: 12/31/24
Completion Date for Government Mandated
Additional Capital Expenditures: 4/30/18
Number of partial or complete Contract YeaRemaining the Term: 6.67
----------
(1) As set forth in Section 8.2, the first $[*****] of Government Mandated
Additional Expenditures are not allocable to Purchaser. This example
assumes that the first $[*****] of Government Mandated Additional
Expenditures has already been expended.
(2) Derived from multiplying $[*****] by [*****]%.
xiii
Example 2: Cogeneration Plant GMACE (continued)
Amortization Period (greater of 7 years or the
remainder of the Term): 7.00
Interest Rate (pre-tax): [*****]%
Cost of Applicable Government Mandated
Additional Capital Expenditure: $[*****](3)
Monthly Amortized Cost: $[*****]
Monthly Amortized Cost payable by Purchaser $[*****](4)
Unamortized Balance at End of Initial Term $[*****]
----------
(3) As set forth in Section 8.2, the first $[*****] of Government Mandated
Additional Expenditures are not allocable to Purchaser. This example
assumes that the first $[*****] of Government Mandated Additional
Expenditures has already been expended.
(4) Derived from multiplying $[*****] by [*****]%.
xiv