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EXHIBIT 10.26
COAL SALES AGREEMENT
THIS COAL SALES AGREEMENT (this "Agreement"), dated as of
June 30, 1997, is by and between PONTIKI COAL CORPORATION, a
corporation organized and existing under the laws of the State of
Delaware ("Seller"); and COGENTRIX OF NORTH CAROLINA, INC., a
corporation organized and existing under the laws of the State of
North Carolina ("Buyer").
RECITALS:
A. Seller is engaged in the business of producing
bituminous coal at facilities it owns and operates in ▇▇▇▇▇▇
County, Kentucky.
B. Seller hereby appoints the MAPCO Coal Sales division of
MAPCO COAL INC., a Delaware corporation, with offices at ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("MAPCO"), as
Seller's agent for the administration of this Agreement.
C. Buyer owns or leases generating stations and is
authorized to purchase bituminous coal on behalf of the
generating station identified in Exhibit I hereto (the
"Station").
D. Buyer is desirous of purchasing from Seller the
Station's entire requirements of bituminous coal during the term
of this Agreement, and Seller is desirous of selling such coal to
Buyer, subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
SALE AND PURCHASE OF COAL; TERM OF AGREEMENT; QUANTITIES
Section 1.01 Sale and Purchase. Buyer agrees to purchase
bituminous coal conforming to the characteristics set forth in
Section 2.01 hereof in the quantities specified in Section 1.03
hereof, and Seller agrees to sell such coal to Buyer, all subject
to the terms and conditions of this Agreement.
Section 1.02 Term. The term of this Agreement shall
commence on January 1, 1998 and shall expire on December 15,
2002, unless sooner terminated as provided herein.
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Section 1.03 Quantities. Subject to Section 2.08 hereof,
Buyer agrees to purchase from Seller, and Seller agrees to sell
to Buyer, 100% of the Station's requirements for coal during the
term of this Agreement, as determined in the sole discretion of
Buyer. In no event shall Seller be obligated to supply coal
hereunder in excess of 235,000 tons per calendar year. As used
in this Agreement, ton means 2,000 pounds.
Section 1.04 Orders for Coal; Requirements Forecasts.
Buyer shall place orders for coal hereunder on a monthly basis by
submitting written notice to Seller as soon as reasonably
practicable in each month, but in any event on or before the
twentieth (20th) day of each month, of the Station's requirements
of coal for the following month. In addition, in order to assist
Seller to plan for and anticipate the Station's periodic
requirements of coal, Buyer agrees to deliver to Seller, together
with each such order, a forecast of the Station's estimated
requirements of coal for the following two (2) months. Seller
acknowledges and agrees that such forecasts shall consist merely
of estimates and shall not form the basis for any order for coal
or for any obligation or liability on the part of Buyer to
actually purchase the amounts of coal set forth in such
forecasts. Subject to the terms of this Section 1.04 and Section
1.05, Buyer presently anticipates that the Station's initial
monthly requirements for coal shall be between 1,000 and 3,000
tons.
Section 1.05 No Minimum Purchase Obligation.
Notwithstanding anything contained in this Agreement to the
contrary, Seller hereby acknowledges and agrees that Buyer shall
not be obligated to purchase any minimum quantity of coal during
the term of this Agreement. Seller further acknowledges and
agrees that, due to a variety of factors, the Station's
requirements for coal may vary substantially from the initial
estimates contained in Section 1.04 hereof and from the estimates
contained in the periodic forecasts delivered to Seller pursuant
to Section 1.04 hereof, and may vary substantially from month to
month or from year to year. By way of illustration of such
factors and not by way of limitation, Seller acknowledges that
(i) the Station may be dispatched to varying levels of operation
ranging from 0% to 100% of design capacity from time to time by
Carolina Power & Light Company ("CP&L"), and (ii) Buyer may use
alternative fuels (including, without limitation, tire derived
fuel and natural gas) to power the Station either in conjunction
with or in lieu of coal, in either case reducing or eliminating
entirely the Station's requirements for coal.
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ARTICLE II
DESCRIPTION, SAMPLING, AND TESTING OF COAL
Section 2.01 Description of Coal. Seller guarantees that
the coal sold hereunder shall reasonably conform to the following
characteristics, on a monthly weighted average "as received"
basis, when tested at the source mine (as defined in Section
3.02) in accordance with the method described in Section 2.03 or
such other method as may be reasonably agreed to between the
parties from time to time.
(a) Content and Characteristics. The coal sold
hereunder shall have the following characteristics (as
received at the source mine) (all percentages are by
weight):
Average
Moisture content 6.0%
Ash content 8.5%
Sulfur content 0.90%
Calorific Value (BTU/LB.) 12,700
Ash softening Temp. 2,700 degrees Fahrenheit
Volatile matter content 34%
(b) Size and Condition. The coal sold hereunder shall
be 1-1/4" x 1/4" , with 20% maximum of minus 1/4" with the fines
incorporated in such a manner as to form a homogeneous
blend. Additionally, the coal shall be free from impurities
that can be removed through the exercise of reasonable care
during mining, preparation and loading. Seller expects (but
does not warrant) that the coal shall be free flowing and
will not cause Buyer abnormal handling, unloading, dusting,
sampling or utilization difficulty.
(c) Washed Coal. Unless otherwise agreed by the
parties hereto, all coal purchased by Buyer pursuant to the
terms of this Agreement shall be washed coal. Seller shall
obtain the written consent of Buyer prior to the shipment of
any coal pursuant to the terms hereof which is not washed
coal. Buyer agrees to grant such consent subject to the
continued compliance of any such unwashed coal with all
specifications and requirements for coal as set forth in
this Agreement.
(d) Freeze Proofing. Seller agrees to treat the coal
and/or the railcars from time to time as requested by Buyer
with a freezeproofing agent designed to prevent the coal
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from becoming non-dischargeable from the railroad car. In
consideration of such service, Buyer shall pay Seller an
amount equal to Seller's cost of the freezeproofing agent
plus ten percent (10%). The per ton charge shall be
determined based upon the pint per ton application rate
requested by Buyer.
Section 2.02 Disclaimer of Warranties. Buyer agrees that
no affirmation of fact, description of the coal to be delivered
or coal samples provided to Buyer, shall constitute a warranty or
any part of the basis of this Agreement, unless the word
"guarantee" is used in connection therewith.
EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, SELLER
MAKES NO WARRANTIES, EXPRESS OR IMPLIED, WHETHER OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, QUALITY,
QUANTITY, ARISING FROM A COURSE OF DEALING OR TRADE USAGE OR
OTHERWISE.
Section 2.03 Sampling and Analyses. A mutually acceptable
independent laboratory will collect and analyze samples of each
shipment of coal sold hereunder at the source mine in accordance
with applicable standard procedures and methods of the American
Society for Testing and Materials ("ASTM") in effect as of the
date of sampling. Buyer shall have the option of having a
representative present during any sampling and during the
analysis hereinafter described. Buyer shall further have the
option of collecting and analyzing its own sample at such time.
Sampling and analysis costs shall be divided equally between
Buyer and Seller. The ASTM analyses shall establish the
characteristics of the coal for purposes of determining
compliance with the specifications set forth in Sections 2.01 and
2.05 hereof, and for determining the price adjustments provided
for in Section 2.04 hereof.
All samples collected by the laboratory shall be divided
into two parts. One part shall be retained by the laboratory for
a period of at least thirty (30) days to be analyzed if a dispute
arises between Buyer and Seller, and a second part shall be
analyzed in accordance with this Section 2.03. The laboratory
will analyze the samples in accordance with ASTM procedures and
promptly submit the written results of such analysis to Buyer and
Seller. If a dispute arises between Buyer and Seller over the
result or method of such analyses, and the parties cannot
mutually resolve such dispute, a further analysis of the retained
sample shall be made in accordance with this Section 2.03 by a
mutually agreeable independent laboratory and the results of such
further analysis shall be binding upon the parties. Notice of
objection to analyses shall be given within fifteen (15) days of
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receipt of such analyses. Otherwise the analyses shall
conclusively establish the characteristics of the coal. All
analytical charges associated with a disputed analysis shall be
(i) paid by the party that requested the further analysis if the
original analysis proves to have been correct; or (ii) shared by
the Buyer and Seller equally if the original analysis proves to
have been incorrect.
Having regard to the fact that the result of sampling and
testing may not necessarily be available to the parties prior to
the completion of loading, Buyer shall accept coal as loaded;
provided, however, that price adjustments and remedies for
deficiencies in coal specifications shall be based on sampling
and analysis of the coal as provided in this Section 2.03.
Section 2.04 Price Adjustments for Variance in Average as
Received Coal Characteristics. Buyer shall pay Seller a premium
whenever the monthly weighted average calorific value "as
received" of coal delivered during any calendar month exceeds
12,800 BTU per pound. Seller shall pay Buyer a penalty whenever
the weighted average calorific value "as received" of coal
delivered during any calendar month, is less than 12,600 BTU per
pound. The amount of such premium or penalty per ton of coal
shipped during any calendar month shall be calculated in
accordance with the formulas set forth in Exhibit II hereto.
Notwithstanding the foregoing, the amount of the premium payable
by Buyer during any given period shall be limited to a maximum
amount based upon a deemed maximum monthly weighted average of
13,300 BTU per pound. Accordingly, in the event the monthly
weighted average is actually greater than 13,300 BTU per pound,
the amount of 13,300 BTU shall nonetheless be used for purposes
of calculating the amount of the premium in accordance with the
formula for calculating such premium set forth in Exhibit II.
Section 2.05 Suspension, Rejection of Shipments. In the
event Seller shall deliver coal over any two consecutive calendar
months (including shipments that are subsequently rejected as
provided below) for which the analysis, on a monthly weighted
average basis, delivered in accordance with this Article II,
indicates any one of the following:
(a) BTU content: less than 12,300 BTU per pound;
(b) Ash content: greater than 9.5%
(c) Sulfur content: greater than .95%
(d) An ash softening temperature of less than 2,500 degrees
Fahrenheit; or
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(e) Volatile matter of less than 30%
then, in addition to obtaining price adjustments for such coal as
provided in Section 2.04 hereof, Buyer may deliver to Seller
written notice ("Buyer's Notice of Suspension") to suspend
further deliveries of coal until Seller can provide Buyer with
adequate assurances that coal conforming to the specification
limitations set forth in this Section 2.05 will be delivered.
Notwithstanding anything contained herein to the contrary,
Buyer may reject any individual shipment of coal under any of the
following circumstances: (i) if the sulfur content of such
shipment (as disclosed by the analysis referred to in Section
2.03 hereof) is in excess of 0.95%; or (ii) if the ash content
thereof is in excess of 10%; or (iii) with respect to the size of
the coal contained in such shipment, if the percent minus 1/4" is
in excess of 25%.
If Buyer rejects any individual shipment of coal in
accordance with the provisions of the preceding paragraph, Seller
shall promptly remove such rejected shipment at its expense, cure
any deficiency in supply caused thereby and reimburse Buyer for
all transportation, demurrage and handling expenses incurred by
Buyer as a result of such rejection.
If, after thirty (30) days from Buyer's Notice of
Suspension, Seller is unable to deliver coal to Buyer in the
requisite amount which meets the specification limitations set
forth in this Section 2.05, then Buyer shall have the option, at
its sole discretion, to terminate this Agreement by written
notice to Seller not later than ninety (90) days from Buyer's
Notice of Suspension, and in such event the parties hereto shall
have no further obligations or liabilities under this Agreement,
other than with respect to performance required hereunder prior
to such termination.
Section 2.06 Exclusive Remedies. Except as otherwise
provided in Sections 2.07 and 2.08 hereof, the price adjustments
prescribed by Section 2.04 and the suspension of shipments and/or
the termination of this Agreement as contemplated in Section 2.05
shall constitute Buyer's sole and exclusive remedies for coal
which deviates from the specifications set forth in Section 2.01
hereof.
Section 2.07 Optional Remedy. Notwithstanding Section
2.06, in lieu of termination pursuant to Section 2.05, Buyer may
give written notice to Seller not later than ninety (90) days
from Buyer's Notice of Suspension that Buyer elects to exercise
the Optional Remedy prescribed by this Section 2.07. In such
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case, Seller will resume shipments and if Seller fails to deliver
coal in the requisite amount that conforms to all the
specification limitations set forth in Section 2.05 for at least
two (2) consecutive calendar months of the six (6) complete
calendar months following the month in which Buyer gives notice
of its option to exercise the Optional Remedy prescribed by this
Section 2.07 (the "Probation Period"), Seller shall be in default
under the terms of this Agreement and Buyer may terminate this
Agreement and exercise its remedies with respect to such default
pursuant to Section 9.06 hereof. In addition, Buyer shall have
the right during the Probation Period to reject individual
shipments of coal that do not conform to any individual
specification limitation in Section 2.05, and Seller shall
promptly remove any such rejected shipments at its own expense,
cure any deficiency in supply caused thereby and reimburse Buyer
for all transportation, demurrage and handling expenses incurred
by Buyer as a result of such rejection. If Seller delivers coal
in the requisite amount during any two (2) consecutive calendar
months of the Probation Period that meets the monthly
specification limitations set forth in Section 2.05, then the
Probation Period shall end on the last day of such second
calendar month, Seller shall not be in default under the terms
hereof, and Buyer's remedies will thereafter be limited to those
set forth in Sections 2.04, 2.05 and 2.08; provided, however,
that Buyer may, at its option and in accordance with the
procedures of this Section 2.07, elect to exercise the Optional
Remedy prescribed by this Section 2.07 following any subsequent
Buyer's Notice of Suspension pursuant to Section 2.05. As used
herein, the term "requisite amount" shall mean, with respect to
any calendar month, the amount of coal ordered by Buyer for
delivery during such month.
Section 2.08 Substitute Performance. Notwithstanding
anything contained herein to the contrary, in the event that (i)
Buyer directs Seller to suspend shipments pursuant to Section
2.05, or (ii) Buyer rejects any shipment pursuant to Section 2.05
or 2.07, then Buyer shall have the right to purchase replacement
coal ("Replacement Coal") from alternative sources if the Seller
does not provide to Buyer Replacement Coal having the
characteristics provided in Section 2.01 within a time period
which is reasonably acceptable to Buyer based on Buyer's then
current coal requirements. In the event Buyer purchases
Replacement Coal pursuant to this Section 2.08 (whether from
Seller or a third party), then Seller shall reimburse Buyer for
the difference between the cost of the delivered Replacement Coal
(including transportation costs) and the payments that Buyer
would otherwise have made to Seller and the transportation
carrier for the deliveries of such coal hereunder, and Seller
shall make such payment within thirty (30) days of receipt from
Buyer of an invoice specifying such excess costs.
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ARTICLE III
SUPPLY SOURCES
Section 3.01 Identification of Supply Source. The
principal source of the coal to be purchased and sold hereunder
shall be mining facilities owned by the Seller in ▇▇▇▇▇▇ County,
Kentucky (the "Mine"), which is located in the "Kenova" rail
transportation rate district. Seller agrees to produce coal at
the Mine for delivery to Buyer hereunder. Seller represents and
warrants that it owns, leases or otherwise has the legal right to
mine and sell a sufficient number of tons of recoverable coal
from the Mine to supply coal to Buyer in accordance with this
Agreement. The provisions of this Section 3.01 shall, however,
not prevent Seller from claiming a force majeure event and in the
event of force majeure, Seller may prorate its available coal to
its then existing customers with prior commitments for coal.
Section 3.02 Seller's Right of Substitution. From time to
time, Seller may (but shall not be required to) deliver coal
produced from a source or sources other than the Mine (such coal
shall be referred to as "Substitute Coal"), provided that at
least fifteen (15) days prior to any such delivery, Seller shall
give Buyer notice thereof, and provided further that such
Substitute Coal conforms to the requirements of Section 2.01. If
Seller elects to deliver Substitute Coal and such delivery or
deliveries result in a net increase in the total cost to Buyer of
transporting the coal purchased hereunder to the Station
(exclusive of demurrage and other similar charges assessed
against Buyer for failure to load or unload coal in accordance
with the requirements of applicable railroad tariffs or
contracts), then Seller shall reimburse Buyer for such additional
transportation costs. Buyer shall submit a request for
reimbursement of any such additional transportation cost, and
such request shall document the actual cost of transporting the
Substitute Coal delivered to the Station during the period
covered by such request as well as the transportation cost that
would have been incurred had all the coal been delivered at the
Mine. At Buyer's option, Seller shall either (i) reimburse Buyer
for any such additional transportation costs within thirty (30)
days after receipt of Buyer's request for payment, or (ii) credit
the amount of any such additional transportation costs against
amounts then owed to Seller from Buyer for purchases of coal
hereunder, provided such increased costs are documented as
required by the preceding sentence. This section shall not be
deemed to require Seller to deliver coal produced from any source
other than the Mine and shall not affect the right of the Seller
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to claim force majeure as a result of events occurring in
connection with the Mine. References herein to "source mine"
shall include the Mine and any substitute supply source or
sources, as the case may be, from which coal is supplied by
Seller to Buyer hereunder.
ARTICLE IV
PRICE, BILLINGS, AND PAYMENT
Section 4.01 Contract Price. The "Contract Price" per ton
of coal supplied hereunder (F.O.B. railroad cars at the source
mine) for any given year during the term of this Agreement shall
be the Annual Base Price (defined in Section 4.02) for such year
as set forth in Section 4.02 below. The Annual Base Prices set
forth in Section 4.02 include a cost pass through amount for
Governmental Impositions (as defined in Section 6.01 hereof). Of
the Contract Price for any given year, $[xxx] per ton represents
the initial Governmental Imposition cost pass through portion.
The initial Governmental Imposition cost pass through portion of
the Contract Price includes $[xxx] per ton for the Federal Black
Lung Fee and $[xxx] per ton for the Federal Reclamation Fee. The
Governmental Imposition cost pass through portion of the Contract
Price for any given year shall be subject to adjustments for as
provided for under Section 6.01 hereof.
Section 4.02 Annual Base Prices. Subject to adjustments
for changes in the Governmental Imposition cost pass through
portion as provided in Section 6.01 hereof, the "Annual Base
Price" per ton of coal purchased hereunder shall be fixed for
each calendar year during the term of this Agreement as follows:
(a) The Annual Base Price per ton of coal purchased
during the 1998 calendar year shall be $[xxx] F.O.B.
railroad cars at the source mine.
(b) The Annual Base Price per ton of coal purchased
during the 1999 calendar year shall be $[xxx] F.O.B.
railroad cars at the source mine.
(c) The Annual Base Price per ton of coal purchased
during the 2000 calendar year shall be $[xxx] F.O.B.
railroad cars at the source mine.
(d) The Annual Base Price per ton of coal purchased
during the 2001 calendar year shall be $[xxx] F.O.B.
railroad cars at the source mine.
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[xxx] These portions of this exhibit have been omitted and filed
separately with the Commission pursuant to a request for
confidential treatment.
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(e) The Annual Base Price per ton of coal purchased
during the 2002 calendar year shall be $[xxx] F.O.B.
railroad cars at the source mine.
Section 4.03 Invoicing. For each shipment of coal
delivered to Buyer, Seller will promptly forward an invoice to
Buyer showing the rail car numbers, shipping date, source mine
name, shipping point, correct weight, and Contract Price,
including computation thereof. No later than the twentieth
(20th) working day of each calendar month, Seller shall provide
Buyer with a computation of the applicable premium or penalty for
coal delivered during the preceding month, such computation to be
performed in the manner prescribed in Section 2.04 and Exhibit
II. Such notice shall be accompanied by an invoice for the
amount of any premium due Seller or, in the event a penalty is
due Buyer, an indication of the amount of any credit to be
applied against the Contract Price of subsequent shipments. In
the event the credit amount is greater than the Contract Price
for such immediately subsequent shipment, the remaining credit
amount shall be applied in full to each successive invoice amount
until all such credits are extinguished. If all such credits are
not extinguished before the expiration or termination of this
Agreement, then the balance of such credits shall be promptly
refunded by Seller to Buyer in cash.
Section 4.04 Payment and Billing Period. Buyer shall pay
in full the amount of each invoice by wire transfer to Chemical
Bank, New York, New York (the "Bank") for deposit on behalf of
Seller, or to such other bank as Seller may designate to Buyer in
accordance with the notice provisions of Section 10.02 hereof.
Each invoice shall be due and payable thirty (30) days after
loading on railroad cars at the source mine, but in no event
shall an invoice be due and payable until fifteen (15) days after
Buyer has received such invoice. Notwithstanding the foregoing,
if the date on which a payment is due is a weekend day, or a
holiday or other day on which the Bank is closed for business,
then such payment shall be due on the next day on which the Bank
is open for business. Title and risk of loss shall pass to Buyer
upon loading on railroad cars at the source mine. Seller
acknowledges that an escrow account has been established with a
bank (or other financial institution) into which all or
substantially all revenues from the Station are deposited, and
that the escrow agreement executed in connection with such escrow
account provides that disbursements shall be made in accordance
with the terms of the escrow agreement to pay expenses of the
Station, including, without limitation, the payment of amounts
due to Seller hereunder.
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[xxx] These portions of this exhibit have been omitted and filed
separately with the Commission pursuant to a request for
confidential treatment.
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Section 4.05 Interest. The amount of any invoice not
paid, or any credit memorandum not issued, when due shall bear
interest from the date the correct invoice was due, or in the
case of the credit memorandum from the date that the credit
should have been applied, through the date that the invoice is
paid or the credit memorandum is applied, at a rate per annum
equal to the rate announced publicly from time to time by
Citibank N.A., New York, New York, as its prime rate for domestic
commercial customers, plus two per cent (2%).
If any invoice for a premium pursuant to Section 2.04 is in
dispute, Buyer shall pay the amount not in dispute pursuant to
Section 4.04 hereof. If upon resolution of the dispute by
settlement or otherwise, it is determined that Seller is due any
payment, then Buyer shall pay interest on the amount due at a
rate per annum equal to the rate calculable in accordance with
the method set forth in the preceding paragraph. If any invoice
other than a premium pursuant to Section 2.04 is in dispute,
Buyer shall pay the disputed amount pursuant to Section 4.04
hereof, and if Buyer is due any credit pursuant to the settlement
of the dispute, then interest on the credit shall be paid by
Seller at a rate calculable in accordance with the method set
forth in the preceding paragraph.
ARTICLE V
TRANSPORTATION, DELIVERY AND RISK OF LOSS
Section 5.01 Shipment; Tariffs. Pursuant to monthly
orders placed in accordance with Section 1.04 hereof, Buyer shall
specify to Seller on or before the twentieth (20th) day of each
month the tonnages and destinations of shipments to be made
pursuant to this Agreement in the next succeeding month. Coal
sold hereunder will be shipped by rail in single-car lots as
scheduled by Buyer (or such other mode or combination of modes as
Buyer and Seller may mutually designate from time to time) from
the source mine's loading facilities to the Station, or other
destinations specified by Buyer and acceptable to Seller. Coal
purchased and sold hereunder that is to be shipped by rail shall
be loaded and shipped in accordance with railroad loading and
tonnage requirements that are acceptable to Seller and Buyer.
Section 5.02 Freight Charges and Risk of Loss. Except as
otherwise provided in this Agreement, Buyer shall pay all freight
and other charges imposed by the applicable rail tariffs or
contracts to the destination of the shipment and shall bear the
risk of loss of such shipment after such shipment has been loaded
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into railroad cars at the source mine. Notwithstanding anything
to the contrary contained herein, Seller shall reimburse Buyer
for any charges or penalties paid by Buyer to the delivering
railroad solely as a result of Seller's failure to load coal in
accordance with any railroad loading or tonnage requirements that
are acceptable to Seller and Buyer.
Section 5.03 Shipping Notices. Promptly after loading
each shipment Seller shall mail or electronically transmit to
Buyer a notice of shipment which shall include pertinent
information about such shipment as mutually agreed to by Buyer
and Seller from time to time.
Section 5.04 Weights. The gross weight of coal shipped
hereunder shall be conclusively established by the railroad ▇▇▇▇
of lading or waybill, absent manifest error.
ARTICLE VI
GOVERNMENTAL IMPOSITIONS
Section 6.01 Price Adjustment for Changes in Governmental
Impositions. When used herein the term "Governmental Imposition"
means all costs of compliance with all applicable federal, state
and local laws and regulations as they are interpreted and
enforced with respect to coal produced at the Mine, including,
without limitation, all federal, state or local statutes, rules,
regulations or interpretations, the rate of any excise, stamp,
reclamation, severance, use, sales, license, or other tax
assessment, and any charged rates of assessment (other than taxes
measured on or by income not levied directly on the production of
coal), business and occupations taxes, and license fees or other
assessments payable on account of or for the production, mining,
removal, preparation, delivery, shipment, sale, consignment or
billing of coal or on instruments or documents evidencing the
same or on the proceeds thereof, and any law, governmental order,
rule, ordinance, regulation, stipulation, decree, or other
governmental requirement of any kind, or interpretation thereof,
which pertains to coal mining practices, health and safety of
miners, surface subsidence, land and water reclamation, coal
waste disposal and air and water quality standards.
Notwithstanding any other provision of this Article VI, there
shall be no price adjustment under this Article VI as a result of
any noncompliance as of June 1, 1997 of the Mine with any
Governmental Imposition, or any civil or criminal fines or
penalties imposed for failure to comply with any Governmental
Imposition currently existing or hereafter enacted.
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If, as and when any change in a Governmental Imposition
occurring after June 1, 1997 affects the Contract Price or the
costs of supplying coal from the Mine, the Contract Price shall
be adjusted in the same amount that the actual cost per ton of
producing, mining, removing, preparing, loading, selling,
consigning and billing coal pursuant to this Agreement is
reasonably increased as a result of Seller's compliance in a
reasonably cost effective manner with the Governmental
Imposition, including, but not limited to, any investment
required to comply with the Governmental Imposition. In any case
where a Governmental Imposition results in an investment cost,
the adjustment to the Contract Price shall be calculated in
accordance with the following formula:
IY
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TX
Y = For the year the investment is made, the portion of
such year remaining after the date of such investment
(expressed in decimal form). For each twelve-month
period thereafter, Y = 1.0.
I = The dollar cost of the investment.
T = The shortest life allowed by the Internal Revenue
Service for depreciation purposes of the investment
item, if any, or if none, the remaining life of the
Mine.
X = The total quantity of coal in tons mined at the Mine
during the year in which the investment is made.
Notwithstanding anything to the contrary contained in this
Section 6.01, there shall be no price adjustments on invoices
more than 12 months after the due date of such invoice.
Section 6.02 Notice and Substantiation of Contract Price
Adjustments. Seller shall promptly notify Buyer in writing of
the amount and effective date of any claimed adjustment to the
Contract Price pursuant to the provisions of Section 6.01 and
shall furnish Buyer with accurate and detailed computations and
data reasonably necessary to substantiate such adjustment. Buyer
shall have the right to inspect all books and records of Seller
pertaining to such adjustment. Buyer shall verify or protest
such adjustment within 60 days after receipt of such notice and
computations, or such adjustment shall be deemed conclusively
correct.
If Buyer protests any adjustment to the Contract Price
claimed under Section 6.01, then the matter shall be submitted to
arbitration in accordance with Article VII hereof.
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ARTICLE VII
ARBITRATION
Section 7.01 Limited Scope. A controversy or claim
arising out of or relating to this Agreement, except those as to
price of coal purchased and sold pursuant to this Agreement or
the validity of this Agreement, or except as otherwise expressly
excepted from arbitration pursuant to any provision hereof, shall
be submitted to arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association (the
"AAA") then in effect.
Section 7.02 Arbitration Procedures. The party desiring
to submit a matter to arbitration shall give written notice
thereof to the other party and to the AAA which notice shall set
forth the specific issues in controversy. Within thirty (30)
days after such notice, the AAA, in consultation with the parties
and in accordance with its rules shall select and appoint an
arbitrator or arbitrators to conduct the arbitration. The
decision of the AAA with respect to the selection and appointment
of the arbitrator(s) shall be final. Within thirty (30) days
after the appointment of the arbitrator(s), notice shall be given
by the arbitrator(s) to the parties regarding the time and place
of hearing which in no event shall be later than sixty (60) days
after appointment of the arbitrator(s). Unless otherwise agreed
by the Buyer, any arbitration proceeding will take place in
Charlotte, North Carolina.
Section 7.03 Post-Arbitration Award. Within thirty (30)
days after the arbitration hearing, the arbitrator(s) shall
decide the controversy and render an award in writing setting
forth the issues adjudicated, the resolution thereof, and the
reasons for the award. Payment of the expenses of arbitration,
including the fees of the arbitrator(s), shall be allocated by
the arbitrator(s). The award of the arbitrator(s) shall be
conclusive and binding upon the parties and shall be specifically
enforceable by any court having jurisdiction over either party by
the entry of judgment upon the award.
Section 7.04 Confidentiality of Proceedings. Any
arbitration proceeding under this Agreement shall, unless
otherwise agreed by both Buyer and Seller, be held in confidence
and the arbitrator(s) selected shall agree to maintain the
confidentiality of all information submitted in the arbitration,
to the extent such information is not otherwise in the public
domain.
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ARTICLE VIII
FORCE MAJEURE
Section 8.01 Force Majeure Defined. When used herein
"force majeure" shall mean a cause beyond the reasonable control
of and not due to the fault or negligence of Buyer or Seller, as
the case may be, which wholly or partially prevents or delays the
mining, loading or delivery of coal at or from the Mine, or the
receiving, transporting, or delivery of coal by the railroads, or
the unloading, storing, or burning of coal by Buyer at the
Station. Examples (without limitation) of force majeure are the
following: acts of God, war, acts of the public enemy,
insurrections, riots, strikes, labor disputes, shortage of
materials, delays relating to engineering, design, construction
or testing of the Station, fires, explosions, floods, breakdowns
of or damage to the Station, plants, mines, equipment or
facilities, interruptions to or contingencies of transportation
or loading, fuel supplies or electrical power, including
determination of force majeure under provisions of the applicable
tariff, embargoes, boycotts, orders or acts of civil or military
authorities, legislation, regulation or administrative orders, or
any limitation or prohibition on, or inability to obtain
governmental permits or approvals required by law and necessary
to, the mining, transporting, storing, handling or burning of
coal. When applied to Seller, force majeure includes the failure
of Seller to deliver the quantities of coal set forth in Section
1.03 hereof due to the occurrence of a force majeure event with
respect to the Mine.
Notwithstanding the foregoing, force majeure, for purposes
of this Agreement, shall not include (i) the development or
existence of economic conditions which may adversely affect
Buyer's utilization of coal or Seller's mining, production,
delivery or sale of coal, or (ii) acts or omissions of Seller or
Buyer constituting negligence, or mismanagement on the part of
Seller or Buyer. If force majeure prevents the unloading,
storing or utilization of coal by Buyer at the destination or
destinations to which the coal is then being shipped, Buyer shall
consider what steps can be taken as to the transportation and
utilization of the coal so as to allow the coal to be used by
Buyer, and if such steps can be accomplished without unreasonable
expense, Buyer shall promptly take such steps.
Section 8.02 Effect of Force Majeure. If because of force
majeure either Buyer or Seller is rendered wholly or partially
unable to carry out their respective obligations under this
Agreement, and if such party promptly gives the other party
written notice of such force majeure, the obligations and
liabilities of the party giving such notice and the corresponding
obligation of the other party shall be suspended to the extent
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made necessary by and during the continuance of such force
majeure; provided, however, that the party claiming force majeure
shall use its best efforts to eliminate the cause or effect of
force majeure as soon as and to the extent possible, except that
labor disputes or strikes shall be settled at the sole discretion
of the party affected. If all the parties hereto agree,
deficiencies in the production or sale of coal hereunder caused
by force majeure may be made up by extending the term of this
Agreement for an additional period not to exceed the term of the
force majeure condition and continuing shipments until the lost
tonnage has been shipped. However, in the event the force
majeure continues unabated for a period of six (6) months or
more, then the unaffected party may, at its option, terminate
this Agreement by thirty (30) days prior written notice to the
party asserting such force majeure; provided, however, that
Seller may not terminate this Agreement pursuant to this Section
8.02 if the force majeure event has resulted in partial or total
destruction of the Station and Buyer has commenced good faith
efforts to repair the damage caused thereby.
Section 8.03 Duties of the Parties during Force Majeure.
To the extent possible, Buyer and Seller will utilize good faith
efforts to minimize the adverse effects of a force majeure. In
the event of a force majeure event which adversely affects
Seller's ability to supply coal from the Mine, Seller agrees to
equitably allocate among its then existing long-term customers,
to the extent possible, coal which can be sold or used during the
pendency of force majeure. Nothing in the preceding two (2)
sentences shall, however, obligate Buyer to find additional
markets for Seller's coal nor require Seller to supply coal
produced from a source other than the Mine.
ARTICLE IX
TERMINATION; REMEDIES
Section 9.01 Termination.
(a) Automatic Termination. Buyer and Seller acknowledge
that, pursuant to the Power Purchase Agreement between Buyer and
CP&L relating to the Station (the "PPA"), CP&L has the right to
reject this Agreement and to enter into a replacement coal
contract for the supply of coal for the Station which would
render this Agreement ineffective. Accordingly, and
notwithstanding anything contained herein to the contrary, in the
event CP&L chooses to reject this Agreement and enter into a
replacement coal contract for the supply of coal for the Station
pursuant to the PPA, this Agreement shall automatically terminate
and be of no further force and effect. Buyer agrees to notify
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Seller of CP&L's decision promptly after receipt of notice
thereof from CP&L, but in no event later than December 31, 1997.
In the event CP&L exercises its right to enter into a replacement
coal contract for the supply of coal for the Station as
contemplated above and CP&L provides to Buyer an explanation of
its reasons for doing so, Buyer agrees to promptly inform Seller
of such explanation.
(b) Termination upon Default. Either Buyer or Seller may
terminate this Agreement, effective upon written notice of
termination to the other party, upon an occurrence of an Event of
Default as to the other party. An "Event of Default" as to
either party shall mean:
(i) Failure by such party to perform any of its
obligations under this Agreement, and such failure continues
uncorrected for thirty (30) continuous days after notice
thereof from the other party;
(ii) Dissolution of such party; or
(iii) The filing of a petition for relief as to
such party as debtor or bankrupt under the Federal
Bankruptcy Reform Act of 1978 or any similar law of any
jurisdiction (except if such petition is contested by such
party and has been dismissed within sixty (60) days);
insolvency of such party as finally determined by a court
proceeding; the filing with respect to such party of a
petition or application to accomplish the same or for the
appointment of a receiver or a trustee for such party or a
substantial part of its assets; the commencement of any
proceedings relating to such party under any other
reorganization, arrangement, insolvency, adjustment of debt
or liquidation law of any jurisdiction, whether now in
existence or hereinafter in effect, either by such party or
by another, provided that if such proceeding is commenced by
another, such party indicates its approval of such
proceeding, consents thereto or acquiesces therein, or such
proceeding is contested by such party and has not been
finally dismissed within sixty (60) days; notwithstanding
the foregoing, the events described in this Section
9.01(b)(iii) shall not constitute an Event of Default on
Buyer's part if, following the occurrence of any such event
and its continuance, Buyer, if requested by Seller, pays for
future shipments of coal tendered hereunder prior to
shipment of such coal from the source mine, such payments to
be based on Seller's good faith estimate, of the quantity of
coal to be contained in each such shipment and adjusted
promptly upon determination of the actual quantity of coal
in such shipment as determined in accordance with Section
5.04 hereof.
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Section 9.02 Effect of Termination. Except as provided in
Sections 9.05 and 9.06 hereof, upon termination of this Agreement
pursuant to Section 2.05, Section 2.07, Section 8.02 or Section
9.01, neither Buyer nor Seller (unless such termination was
because of occurrence of an Event of Default as to it) shall have
any further liability or obligation to the other parties
hereunder, except that each party shall remain liable to the
others with respect to any Event of Default as to such party
prior to such termination, and the provisions of Sections 10.05,
10.06 and 10.08 hereof shall survive termination.
Section 9.03 Nonwaiver. The specifications of remedies
herein shall not be deemed to exclude the parties from any other
legal or equitable remedies they may have with respect to this
Agreement (including, without limitation, rights to specific
performance or injunctive relief), except as provided in Sections
2.06 and 9.04 hereof. Failure on the part of any party to
exercise any remedies on default hereunder for any period or
periods shall not operate as an estoppel or as a waiver, or
prevent it at any subsequent time from electing to exercise any
rights as to any subsequent default hereunder.
Section 9.04 Disclaimer of Consequential Damages. NONE OF
THE PARTIES TO THIS AGREEMENT SHALL BE LIABLE TO THE OTHERS FOR
ANY SPECIAL, INDIRECT, OR CONSEQUENTIAL DAMAGES ARISING OUT OF
THE PERFORMANCE OR NON-PERFORMANCE OF THIS AGREEMENT, INCLUDING,
WITHOUT LIMITATION, LOSS OF PROFITS OR OVERHEAD, WHETHER BASED
UPON BREACH OF CONTRACT, NEGLIGENCE OR OTHER LEGAL THEORY.
Section 9.05 Seller's Remedy in Event of Buyer's Breach by
Failure to Take Actual Requirements. In the event Buyer breaches
this Agreement by its failure to purchase 100% of the Station's
requirements of coal as determined in accordance with Section
1.03 hereof, if such breach continues uncured for thirty (30)
days after receipt of notice thereof from Seller, Seller may
terminate this Agreement pursuant to Section 9.01(b) and Buyer
will be liable to Seller for damages computed in accordance with
N. C. Gen. Stat. Section 25-2-706 or 25-2-708 (November, 1995),
as in effect from time to time, as elected by Seller.
Section 9.06 Buyer's Remedy in Event of Seller's Breach.
In the event Seller defaults in the performance of its
obligations hereunder and Buyer exercises its right to terminate
this Agreement in accordance with Section 2.07 or 9.01(b) hereof,
Seller will be liable to Buyer for damages computed in accordance
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with either N. C. Gen. Stat. Section 25-2-712 or 25-2-713
(November, 1995), as in effect from time to time, as elected by
Buyer.
ARTICLE X
OTHER PROVISIONS
Section 10.01 Entire Agreement. This Agreement contains
the entire agreement of the parties relating to its subject
matter, and supersedes all prior and contemporaneous
negotiations, understandings and agreements, written or oral,
between the parties relating to such subject matter. This
Agreement shall not be amended or modified, and no waiver of any
provision hereof shall be effective, unless set forth in a
written instrument authorized and executed by all the parties
hereto with the same formality as this Agreement.
Section 10.02 Notices. All notices or other communications
which are required or permitted under this Agreement shall be in
writing and shall be deemed to have been duly given or made (i)
upon receipt thereof if delivered by hand or courier service with
acknowledgment of delivery, (ii) on the third business day
following the depositing thereof with the United States Postal
Service if sent by registered or certified mail, postage prepaid,
return receipt requested, or (iii) upon the receipt thereof if
transmitted by prepaid telegram or by telecopier or facsimile
transmission, in each case to the respective parties at the
addresses set forth below (or to such other address as such party
may, from time to time, notify the other party in writing):
If to Buyer:
Cogentrix of North Carolina, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
If to Seller:
Pontiki Coal Corporation
C/O MAPCO Coal Sales
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Sr. Vice President Marketing
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Section 10.03 Choice of Law. This Agreement shall be
deemed to be a contract made under, and for all purposes shall be
construed in accordance with, the internal laws and judicial
decisions of the State of North Carolina. For the purposes
hereof, Buyer and Seller hereby submit to the jurisdiction of the
state and federal courts in North Carolina.
Section 10.04 Counterparts. This Agreement may be executed
in two (2) or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument.
Section 10.05 Confidentiality. Each party shall retain all
information obtained hereunder in strict confidence and not use
it, or disclose it to any person or entity not a party hereto,
except (a) for any information which (i) is at the time of such
disclosure known to the public or thereafter becomes so known,
through no violation by such party of this Agreement, (ii) such
party can demonstrate was in its possession prior to disclosure
under this Agreement or any prior agreements or negotiations
between the parties hereto, or (iii) is required by law to be so
disclosed; and (b) that Buyer may provide a copy of this
Agreement to CP&L, the purchaser of electricity to be generated
by the Station, on a confidential basis. Notwithstanding the
foregoing, any party may provide a copy of this Agreement or
other relevant information with respect thereto to its officers,
employees, affiliates, lenders, lessors, attorneys, consultants
and other representatives to the extent necessary to evaluate the
information received, provided each of them agrees to be bound
with respect thereto in the same manner as the disclosing party.
The provisions of this Section 10.05 shall survive termination of
this Agreement.
Section 10.06 No Brokers. Each party hereto represents and
warrants to the others that such party has not employed or
retained any broker, agent or finder, or agreed to pay any
brokerage or similar fee to any broker, agent or finder on
account of this Agreement or the transactions contemplated
hereby. Each party shall indemnify the others and hold them
harmless against breaches of the foregoing representation and
warranty. The provisions of this Section 10.06 shall survive
termination of this Agreement.
Section 10.07 Assignment. The benefits and burdens of this
Agreement shall inure to and be binding upon the legal
representatives, successors and assigns of the Parties hereto,
except as provided in the following sentences. Any party may
assign its benefits under this Agreement to a corporation or
other entity all of the capital stock or other equity interests
in which is or are owned by the assignor or by a corporation
which owns all of the capital stock of the assignor, provided
that the assignee executes a written assumption of the
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obligations of the assignor hereunder and delivers it to the
nonassigning parties to this Agreement, and provided further,
that the assignor shall not thereby be released from its
obligations hereunder. Otherwise, no party hereto may assign all
or any part of its benefits or burdens under this Agreement, in
whole or in part, by operation of law or otherwise, except with
the prior written consent of the other party, which consent shall
not be unreasonably withheld. Notwithstanding anything to the
contrary contained herein, Buyer shall have the right to assign
this Agreement in connection with the financing arrangements
relating to the Station, either as collateral security or to
another entity created in connection with such financing, by
notifying Seller of such assignment. If requested by Buyer in
connection with such financing arrangements, Seller agrees to
execute a "Consent and Agreement" subsequent to the execution of
this Agreement in a form mutually satisfactory to the parties
hereto.
Section 10.08 Release of Prior Claims. Buyer and Martiki
Coal Corporation, a Delaware corporation and a wholly-owned
subsidiary of MAPCO ("Martiki"), are parties to that certain Coal
Sales Agreement dated as of March 11, 1986 (the "Existing
Contract") relating to the supply of coal for the Station.
Pursuant to the Existing Contract, Martiki appointed MAPCO as its
agent for the administration of the Existing Contract. The
Existing Contract is scheduled to expire on November 11, 1997.
Provided that (i) this Agreement is not automatically terminated
in accordance with Section 9.01(a) hereof, and (ii) the Coal
Sales Agreement between Buyer and MC Mining, Inc., a Delaware
corporation and an affiliate of MAPCO, relating to the supply of
coal to Buyer's cogeneration facility located in Southport, North
Carolina (the "Southport Agreement"), is not automatically
terminated in accordance with Section 9.01(a) thereof, MAPCO and
Martiki, for themselves and their respective successors and
assigns, have agreed to, and do hereby, unconditionally and
irrevocably release Buyer from and waive (and agree to cause
their affiliates to release Buyer from and waive) any and all
claims which MAPCO or Martiki (or any of their affiliates) may
have against Buyer arising from or relating to a reduction in the
Station's requirements of coal (and accordingly Buyer's purchases
of coal) under or in connection with the Existing Contract.
Seller, MAPCO and Martiki acknowledge and agree (i) that Buyer
would not have entered into this Agreement or the Southport
Agreement but for the agreement of MAPCO and Martiki to grant
such release and waiver, and (ii) that MAPCO and Martiki have
received additional valuable consideration for the release and
waiver granted pursuant to this Section 10.08. Accordingly,
Seller, MAPCO and Martiki further acknowledge and agree that the
release and waiver granted pursuant to this Section 10.08
constitutes an agreement of MAPCO and Martiki which is distinct
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and independent from the remainder of this Agreement, and that
the provisions of this Section 10.08 shall stand alone and
survive the expiration or earlier termination of this Agreement
indefinitely.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized corporate
officers as of the day and year first above written.
SELLER:
PONTIKI COAL CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
Title: President and CEO
BUYER:
COGENTRIX OF NORTH CAROLINA, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President - Fuels & Transportation
The undersigned join in this Agreement for purposes
of acknowledging and affirming their agreements and
obligations with respect to the provisions of Section 10.08
Martiki Coal Corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
President
MAPCO Coal Inc.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
President
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EXHIBIT I
IDENTIFICATION OF GENERATING STATION
STATION: Roxboro Station
LOCATION: Roxboro, North Carolina
INDUSTRIAL HOST: ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ Company
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EXHIBIT II
PREMIUMS AND PENALTIES FOR VARIATIONS IN BTU CONTENT
In accordance with Section 2.04 of this Agreement, if the
monthly weighted average calorific value "as received" of coal
delivered during any calendar month, is greater than 12,800 BTU
per pound or less than 12,600 BTU per pound, the applicable
premium or penalty shall be computed using the following
formulas:
If the monthly weighted average is less than 12,600 BTU per
pound:.
Penalty = (P) x ( 1 - BTU ) x Q
-----
12,700
If the monthly weighted average is greater than 12,800 BTU
per pound:
Premium = (P) x ( BTU - 1) x Q ;
-----
12,700
provided, however, that, in accordance with Section 2.04, the
Premium payable by Buyer hereunder for any given period shall be
limited to a maximum amount based upon a deemed maximum monthly
weighted average of 13,300 BTU per pound, such that if the
monthly weighted average is actually greater than 13,300 BTU per
pound, the "BTU" amount used for the calculation of the Premium
in the foregoing formula shall nonetheless be 13,300.
Where: P = the applicable Contract Price
determined in accordance with Section 4.01
BTU = the per pound weighted average
calorific value as received of coal delivered
hereunder during the applicable calendar
month (subject to the proviso set forth above
with respect to the deemed maximum level of
BTU content)
Q = the quantity of coal in tons
delivered hereunder during the applicable
calendar month
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