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COAL SUPPLY AGREEMENT
THIS IS A COAL SUPPLY AGREEMENT (THE "AGREEMENT") DATED JANUARY 1, 1996
BETWEEN LOUISVILLE GAS AND ELECTRIC COMPANY, a Kentucky corporation, ▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Buyer") and GREEN COAL COMPANY, INC.,
a Kentucky corporation, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
("Seller").
The parties hereto agree as follows:
SECTION 1. GENERAL. Seller will sell to Buyer and Buyer will buy from
Seller steam coal under all the terms and conditions of this Agreement.
SECTION 2. TERMINATION OF CURRENT AGREEMENT; TERM.
Section 2.1 CURRENT AGREEMENT. The Coal Supply Agreement dated November
1, 1994 between the parties shall be terminated effective December 31, 1995.
Section 2.2 TERM. The term of this Agreement shall commence on January 1,
1996 and shall continue through December 31, 1998.
SECTION 3. QUANTITY.
Section 3.1 INITIAL NOMINATION. Within 15 days after this Agreement is
executed by both parties, the Buyer will deliver to Seller the Buyer's
nomination of the initial quantity of coal to be delivered hereunder. Such
quantity shall be no less than 50,000 tons per month and no more than 125,000
tons per month.
Section 3.2 CHANGES IN QUANTITY. At any time during the term of this
Agreement, the Buyer shall have the right either to increase or decrease the
quantity nominated hereunder
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by up to 25% of the then current quantity. Buyer shall give notice of such
change to Seller at least three months before the effective date of such change.
Buyer may exercise this right repeatedly throughout the term of this Agreement,
except that the quantity nominated may not be either increased or decreased more
than 25% within any 90 day period and for any calendar year, the total quantity
nominated by Buyer shall not be less than 600,000 tons and shall not be more
than 2.5 million tons.
Section 3.3 DELIVERY SCHEDULE. Seller shall deliver quantities of coal in
accordance with Buyer's nominations hereunder. Time is of the essence with
respect to Seller's deliveries; and failure by Seller to deliver in a timely
manner shall constitute a material breach within the meaning of Section 16 of
this Agreement.
SECTION 4. SOURCE.
Section 4.1 SOURCE. The coal sold hereunder, including coal purchased by
Seller from third parties, shall be supplied from geological seam Kentucky #9,
▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ Mill Mines, ▇▇▇▇▇▇▇▇▇ County, Kentucky (the "Coal
Property").
Section 4.2 ASSURANCE OF OPERATION AND RESERVES. Seller represents and
warrants that the Coal Property contains economically recoverable coal of a
quality and in quantities which will be sufficient to satisfy all the
requirements of this Agreement. Seller agrees and warrants that it will have at
the Coal Property adequate machinery, equipment and other facilities to produce,
prepare and deliver coal in the quantity and of the quality required by this
Agreement. Seller further agrees to operate and maintain such machinery,
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equipment and facilities in accordance with good mining practices so as to
efficiently and economically produce, prepare and deliver such coal. Seller
agrees that Buyer is not providing any capital for the purchase of such
machinery, equipment and/or facilities and that Seller shall operate and
maintain same at its sole expense, including all required permits and licenses.
Seller hereby dedicates to this Agreement sufficient reserves of coal meeting
the quality specifications hereof and lying on or in the Coal Property so as to
fulfill the quantity requirements hereof.
Section 4.3 NON-DIVERSION OF COAL. Seller agrees and warrants that it
will not, without Buyer's express prior written consent, use or sell coal from
the Coal Property in a way that will reduce the economically recoverable balance
of coal in the Coal Property to an amount less than that required to be supplied
to Buyer hereunder.
Section 4.4 SUBSTITUTE COAL. Notwithstanding the above representations
and warranties, in the event that Seller is unable to produce or obtain coal
from the Coal Property in the quantity and of the quality required by this
Agreement, and such inability is not caused by a force majeure event as defined
in Section 10, then Buyer will have the option of requiring that Seller supply
substitute coal from other facilities and mines under all the terms and
conditions of this Agreement including, but not limited to, the price provisions
of Section 8, the quality specifications of Section 6.1, and the provisions of
Section 5 concerning reimbursement to Buyer for increased transportation costs.
Seller's delivery of coal not produced from the Coal
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Property without having received the express written consent of Buyer shall
constitute a material breach of this Agreement.
SECTION 5. DELIVERY. The coal shall be delivered to Buyer F.O.B. barge at
the Green Coal dock at mile point 11.5 on the Green River (the "Delivery
Point"). Seller may deliver the coal at a location different from the Delivery
Point, provided, however, that Seller shall reimburse Buyer for any resulting
increases in the cost of transporting the coal to Buyer's generating stations.
Any resulting savings in such transportation costs shall be retained by Buyer.
Title to and risk of loss of coal sold will pass to Buyer and the coal will
be considered to be delivered when barges containing the coal are disengaged by
Buyer's barging contractor from the loading dock. Buyer or its contractor shall
furnish suitable barges in accordance with a delivery schedule provided by Buyer
to Seller. Seller shall arrange and pay for all costs of transporting the coal
from the mines to the loading docks and loading and trimming the coal into
barges to the proper draft and the proper distribution within the barges. Buyer
shall arrange for transporting the coal by barge from the loading dock to its
generating station(s) and shall pay for the cost of such transportation. For
delays caused by Seller in handling the scheduling of shipments with Buyer's
barging contractor, Seller shall be responsible for any demurrage or other
penalties assessed by said barging contractor (or assessed by Buyer) which
accrue at the Delivery Point, including the demurrage, penalties for loading
less than the specified minimum tonnage per barge, or
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other penalties assessed for barges not loaded in conformity with applicable
requirements. Buyer shall be responsible to deliver barges in as clean and dry
condition as practicable. Seller shall require of the loading dock operator
that the barges and towboats provided by Buyer or Buyer's barging contractor be
provided convenient and safe berth free of wharfage, dockage and port charges;
that while the barges are in the care and custody of the loading dock, all U.S.
Coast Guard regulations and other applicable laws, ordinances, rulings, and
regulations shall be complied with, including adequate mooring and display of
warning lights; that any water in the cargo boxes of the barges be pumped out by
the loading dock operator prior to loading; that the loading operations be
performed in a workmanlike manner and in accordance with the reasonable loading
requirements of Buyer and Buyer's barging contractor; and that the loading dock
operator carry landing owners or wharfinger's insurance with basic coverage of
not less than $300,000.00 and total of basic coverage and excess liability
coverage of not less than $1,000,000.00, and provide evidence thereof to Buyer
in the form of a certificate of insurance from the insurance carrier or an
acceptable certificate of self-insurance with requirement for 30 days advance
notification of Buyer in the event of termination of or material reduction in
coverage under the insurance.
SECTION 6. QUALITY.
Section 6.1 SPECIFICATIONS. (a) The coal delivered hereunder shall
conform to the following specifications on an "as received" basis:
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WASHED COAL
Guaranteed Monthly Rejection Limits
Specifications Weighted Average (per shipment)
-------------------------------------------------------------------------------------
BTU/LB. min. 11,000 LESS THAN 10,500
MOISTURE max. 12.3 lbs/MMBTU GREATER THAN 14.5 lbs/MMBTU
ASH max. 9.6 lbs/MMBTU GREATER THAN 14.5 lbs/MMBTU
SULFUR max. 2.6 lbs/MMBTU GREATER THAN 3.4 lbs/MMBTU
SULFUR min. 1.8 lbs/MMBTU LESS THAN 1.8 lbs/MMBTU
CHLORINE max. .1 lbs/MMBTU GREATER THAN .2 lbs/MMBTU
FLUORINE max. .004 lbs/MMBTU GREATER THAN .01 lbs/MMBTU
NITROGEN max. 1.3 lbs/MMBTU GREATER THAN 1.5 lbs/MMBTU
ASH/SULFUR RATIO min. 5 LESS THAN 2.5
Size (3" x 0"):
Top size (inches)* max. 3" x 0 " GREATER THAN 3" x 0"
Fines (% by wgt)
Passing 1/4" screen max. 45% GREATER THAN 50%
% BY WEIGHT:
VOLATILE max. 37 GREATER THAN 38
VOLATILE min. 34 LESS THAN 29
FIXED CARBON max. 46 GREATER THAN 48
FIXED CARBON min. 30 LESS THAN 30
GRINDABILITY (HGI) min. 55 LESS THAN 50
BASE ACID RATIO (B/A) max. .466 GREATER THAN .8
SLAGGING FACTOR** max. 1.5 GREATER THAN 2.0
FOULING FACTOR*** max. .32 GREATER THAN 1.0
ASH FUSION TEMPERATURE (DEG.F) (ASTM D1857)
REDUCING ATMOSPHERE
Initial Deformation min. 2000 min. 1900
Softening (H=W) min. 2050 min. 1975
Softening (H=1/2W) min. 2100 min. 2000
Fluid min. 2200 min. 2100
OXIDIZING ATMOSPHERE
Initial Deformation min. 2400 min. 2200
Softening (H=W) min. 2400 min. 2280
Softening (H=1/2W) min. 2425 min. 2300
Fluid min. 2500 min. 2375
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BLEND COAL
Guaranteed Monthly Rejection Limits
Specifications Weighted Average (per shipment)
-------------------------------------------------------------------------------------
BTU/LB. min. 10,600 LESS THAN 10,000
MOISTURE max. 12.7 lbs/MMBTU GREATER THAN 14.5 lbs/MMBTU
ASH max. 13.2 lbs/MMBTU GREATER THAN 15 lbs/MMBTU
SULFUR max. 3.4 lbs/MMBTU GREATER THAN 3.5 lbs/MMBTU
SULFUR min. 1.8 lbs/MMBTU LESS THAN 1.8 lbs/MMBTU
CHLORINE max. .15 lbs/MMBTU GREATER THAN .2 lbs/MMBTU
FLUORINE max. .006 lbs/MMBTU GREATER THAN .01 lbs/MMBTU
NITROGEN max. 1.2 lbs/MMBTU GREATER THAN 1.5 lbs/MMBTU
ASH/SULFUR RATIO min. 4.8 LESS THAN 2.5
Size (3" x 0"):
Top size (inches)* max. 3" x 0" GREATER THAN 3" x 0"
Fines (% by wgt)
Passing 1/4" screen max. 45% GREATER THAN 50%
% BY WEIGHT:
VOLATILE max. 36 GREATER THAN 37
VOLATILE min. 30 LESS THAN 29
FIXED CARBON max. 44 GREATER THAN 46
FIXED CARBON min. 35 LESS THAN 30
GRINDABILITY (HGI) min. 55 LESS THAN 50
BASE ACID RATIO (B/A) max. .54 GREATER THAN .8
SLAGGING FACTOR** max. 1.9 GREATER THAN 2.0
FOULING FACTOR*** max. .4 GREATER THAN 1.0
ASH FUSION TEMPERATURE (DEG.F) (ASTM D1857)
REDUCING ATMOSPHERE
Initial Deformation min. 1940 min. 1900
Softening (H=W) min. 2050 min. 1975
Softening (H=1/2W) min. 2100 min. 2000
Fluid min. 2200 min. 2100
OXIDIZING ATMOSPHERE
Initial Deformation min. 2400 min. 2200
Softening (H=W) min. 2400 min. 2280
Softening (H=1/2W) min. 2425 min. 2300
Fluid min. 2500 min. 2375
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RAW COAL
Guaranteed Monthly Rejection Limits
Specifications Weighted Average (per shipment)
--------------------------------------------------------------------------------
BTU/LB. min. 10,300 LESS THAN 10,000
MOISTURE max. 13.4 lbs/MMBTU GREATER THAN 14.0 lbs/MMBTU
ASH max. 14.25 lbs/MMBTU GREATER THAN 15.5 lbs/MMBTU
SULFUR max. 4.0 lbs/MMBTU GREATER THAN 4.2 lbs/MMBTU
SULFUR min. 1.8 lbs/MMBTU LESS THAN 1.8 lbs/MMBTU
CHLORINE max. .15 lbs/MMBTU GREATER THAN .2 lbs/MMBTU
FLUORINE max. .006 lbs/MMBTU GREATER THAN .01 lbs/MMBTU
NITROGEN max. 1.2 lbs/MMBTU GREATER THAN 1.5 lbs/MMBTU
ASH/SULFUR RATIO min. 4.8 LESS THAN 2.5
Size (3" x 0"):
Top size (inches)* max. 3" x 0" GREATER THAN 3" x 0"
Fines (% by wgt)
Passing 1/4" screen max. 45% GREATER THAN 50%
% BY WEIGHT:
VOLATILE max. 36 GREATER THAN 37
VOLATILE min. 30 LESS THAN 29
FIXED CARBON max. 44 GREATER THAN 46
FIXED CARBON min. 35 LESS THAN 30
GRINDABILITY (HGI) min. 55 LESS THAN 50
BASE ACID RATIO (B/A) max. .54 GREATER THAN .8
SLAGGING FACTOR** max. 1.9 GREATER THAN 2.0
FOULING FACTOR*** max. .4 GREATER THAN 1.0
ASH FUSION TEMPERATURE (DEG. F) (ASTM D1857)
REDUCING ATMOSPHERE
Initial Deformation min. 1940 min. 1900
Softening (H=W) min. 2050 min. 1975
Softening (H=1/2W) min. 2100 min. 2000
Fluid min. 2200 min. 2100
OXIDIZING ATMOSPHERE
Initial Deformation min. 2400 min. 2200
Softening (H=W) min. 2400 min. 2280
Softening (H=1/2W) min. 2425 min. 2300
Fluid min. 2500 min. 2375
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* All the coal will be of such size that it will pass through a screen
having circular perforations three (3) inches in diameter, but shall not contain
more than forty-five per cent (45%) by weight of coal that will pass through a
screen having circular perforations one-quarter (1/4) of an inch in diameter.
** Slagging Factor (R(s))=(B/A) x (Percent Sulfur by Weight(Dry))
*** Fouling Factor (R(f))=(B/A) x (Percent Na(2)0 by Weight(Dry))
The Base Acid Ratio (B/A) is herein defined as:
BASE ACID RATIO (B/A) = (FE(2)0(3) + CA0 + MG0 + NA(2)0 + K(2)0)
------------------------------------------------
(Si0(2) + A1(2)0(3) + T10(2))
Note: As used herein GREATER THAN means greater than:
LESS THAN means less than.
(b) Seller shall deliver either all Blend Coal, all Raw Coal, or Washed
Coal, Blend Coal and Raw Coal in any ratio Buyer desires hereunder at Buyer's
option, subject to the pricing provision set forth in Section 8.1 and subject to
the limitations that Washed Coal shall not constitute more than twenty percent
(20%) of the total quantity to be delivered hereunder during any one month and
Seller shall not be obligated to deliver more than 20,000 tons of Washed Coal in
any one month. Buyer may change such nomination or such ratio at any time by
giving Seller thirty days prior written notice of such change.
Section 6.2 DEFINITION OF "SHIPMENT". As used herein, a "shipment" shall
mean one barge load or a barge lot load in accordance with Buyer's sampling and
analyzing practices.
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Section 6.3 REJECTION.
Buyer has the right, but not the obligation, to reject any shipment which
fail(s) to conform to the Rejection Limits set forth in Section 6.1 or contains
extraneous materials. Buyer must reject such coal within seventy-two (72) hours
of receipt of the coal analysis provided for in Section 7.2 or such right to
reject is waived. In the event Buyer rejects such non-conforming coal, Buyer
shall return the coal to Seller or, at Seller's request, divert such coal to
Seller's designee, all at Seller's cost. Seller shall replace the rejected coal
within five (5) working days from notice of rejection with coal conforming to
the Rejection Limits set forth in Section 6.1. If Seller fails to replace the
rejected coal within such five (5) working day period or the replacement coal is
rightfully rejected, Buyer may purchase coal from another source in order to
replace the rejected coal. Seller shall reimburse Buyer for (i) any amount by
which the actual price plus transportation costs to Buyer of such coal purchased
from another source exceed the price of such coal under this Agreement plus
transportation costs to Buyer from the Delivery Point; and (ii) any and all
transportation, storage, handling, or other expenses that have been incurred by
Buyer for rightfully rejected coal. This remedy is in addition to all of
Buyer's other remedies under this Agreement and under applicable law and in
equity for Seller's breach.
If Buyer fails to reject a shipment of non-conforming coal which it had the
right to reject for failure to meet any or all of the Rejection Limits set forth
in Section 6.1 or because such shipment contained extraneous materials, then
such non-conforming coal shall be deemed
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accepted by Buyer; however, the quantity Seller is obligated to sell to Buyer
under the Agreement may or may not be reduced by the amount of each such non-
conforming shipment at Buyer's sole option and the shipment shall nevertheless
be considered "rejectable" under Section 6.4. Further, for shipments containing
extraneous materials, which include, but are not limited to, slate, rock, wood,
corn husks, mining materials, etc., the estimated weight of such materials shall
be deducted from the weight of that shipment.
Section 6.4 SUSPENSION AND TERMINATION.
If the coal sold hereunder fails to meet one or more of the Guaranteed
Monthly Weighted Averages set forth in Section 6.1 for any two (2) months in a
six (6) month period, or if nine (9) barge shipments in a 30 day period are
rejectable by Buyer, Buyer may upon notice confirmed in writing and sent to
Seller by certified mail, suspend future shipments except shipments already
loaded into barges. Seller shall, within 10 days, provide Buyer with
reasonable assurances that subsequent monthly deliveries of coal shall meet or
exceed the Guaranteed Monthly Weighted Averages set forth in Section 6.1 and
that the source will exceed the rejection limits set forth in Section 6.1. If
Seller fails to provide such assurances within said 10 day period, Buyer may
terminate this Agreement by giving written notice of such termination at the end
of the 10 day period. A waiver of this right for any one period by Buyer shall
not constitute a waiver for subsequent periods. If Seller provides such
assurances to Buyer's reasonable satisfaction, shipments hereunder shall resume
and any tonnage deficiencies resulting from suspension may be made up at Buyer's
sole option.
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Buyer shall not unreasonably withhold its acceptance of Seller's assurances, or
delay the resumption of shipment. If Seller, after such assurances, fails to
meet any of the Guaranteed Monthly Weighted Averages for any one (1) month
within the next six (6) months or if three (3) barge shipments are rejectable
within any one (1) month during such six (6) month period, then Buyer may
terminate this Agreement and exercise all its other rights and remedies under
applicable law and in equity for Seller's breach.
SECTION 7. WEIGHTS, SAMPLING AND ANALYSIS.
Section 7.1 WEIGHTS. The weight of the coal delivered hereunder shall be
determined on a per shipment basis by Buyer on the basis of scale weights at the
generating station(s) unless another method is mutually agreed upon by the
parties. Such scales shall be duly reviewed by an appropriate testing agency
and maintained in an accurate condition. Seller shall have the right, at
Seller's expense and upon reasonable notice, to have the scales checked for
accuracy at any reasonable time or frequency. If the scales are found to be
over or under the tolerance range allowable for the scale based on industry
accepted standards, either party shall pay to the other any amounts owed due to
such inaccuracy for a period not to exceed thirty (30) days before the time any
inaccuracy of scales is determined.
Section 7.2 SAMPLING AND ANALYSIS. The sampling and analysis of the coal
delivered hereunder shall be performed by Buyer and the results thereof shall be
accepted and used for the quality and characteristics of the coal delivered
under this Agreement. All analyses shall be made in Buyer's laboratory at
Buyer's expense in accordance with industry-
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accepted standards. Samples for analyses shall be taken by any
industry-accepted standard, mutually acceptable to both parties, may be
composited and shall be taken with a frequency and regularity sufficient to
provide reasonably accurate representative samples of the deliveries made
hereunder. Seller represents that it is familiar with Buyer's sampling and
analysis practices, and finds them to be acceptable. Buyer shall notify Seller
in writing of any significant changes in Buyer's sampling and analysis
practices. Any such changes in Buyer's sampling and analysis practices shall,
except for industry accepted changes in practices, provide for no less accuracy
than the sampling and analysis practices existing at the time of the execution
of this Agreement, unless the Parties otherwise mutually agree.
Each sample taken by Buyer shall be divided into 4 parts and put into
airtight containers, properly labeled and sealed. One part shall be used for
analysis by Buyer; one part shall be used by Buyer as a check sample, if Buyer
in its sole judgment determines it is necessary; one part shall be retained by
Buyer until the 25th of the month following the month of unloading (the
"Disposal Date") and shall be delivered to Seller for analysis if Seller so
requests before the Disposal Date; and one part ("Referee Sample") shall be
retained by Buyer until the Disposal Date. Seller shall be given copies of all
analyses made by Buyer by the 12th day of the month following the month of
unloading. Seller, on reasonable notice to Buyer shall have the right to have a
representative present to observe the sampling and analyses performed by Buyer.
Unless Seller requests a Referee Sample analysis before the Disposal Date,
Buyer's analysis shall be used to determine the quality
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of the coal delivered hereunder. The Monthly Weighted Averages shall be
determined by utilizing the individual shipment analyses.
If any dispute arises before the Disposal Date, the Referee Sample retained
by Buyer shall be submitted for analysis to an independent commercial testing
laboratory ("Independent Lab") mutually chosen by Buyer and Seller. For each
coal quality specification in question, a dispute shall be deemed not to exist
and Buyer's analysis shall prevail and the analysis of the Independent Lab shall
be disregarded if the analysis of the Independent Lab differs from the analysis
of Buyer by an amount equal to or less than:
(i) 0.50% moisture
(ii) 0.50% ash on a dry basis
(iii) 100 Btu/lb. on a dry basis
(iv) 0.10% sulfur on a dry basis.
For each coal quality specification in question, if the analysis of the
Independent Lab differs from the analysis of Buyer by an amount more than the
amounts listed above, then the analysis of the Independent Lab shall prevail and
Buyer's analysis shall be disregarded. The cost of the analysis made by the
Independent Lab shall be borne by Seller to the extent that Buyer's analysis
prevails and by Buyer to the extent that the analysis of the Independent Lab
prevails.
SECTION 8. PRICE.
Section 8.1 BASE PRICE. The base price ("Base Price") of the coal to be
sold hereunder will be firm and will be determined by the type of coal
nominated, the quantity nominated for
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the applicable calendar year, and the year for which the coal is nominated in
accordance with the following matrix:
Raw Coal Blend Coal Washed Coal
Tonnage Per -------- ---------- -----------
Year 1996 1997/98 1996 1997/98 1996 1997/98
---- ----------------------------------------------------------
600,000-1,200,000 .70000 .68000 .73000 .72000 .77000 .76000
1,200,000-1,800,000 .68000 .65000 .70000 .69000 .74000 .72000
GREATER THAN 1,800,000 .61750 .61250 .65000 .65400 .69000 .67000
(Note: all prices in c/MMBTU).
For pricing purposes, the tonnage per year is based on tonnage nominated by
Buyer in accordance with the terms of this Agreement and is not based on actual
deliveries unless Buyer fails to accept delivery of coal tendered by Seller
without legal excuse. For example, if Buyer duly nominates 1,300,000 tons, but
Seller delivers only 1,100,000 tons for any reason other than Buyer's failure to
accept delivery in breach hereof, then the pricing will be based on 1,300,000
tons. However, if Buyer duly nominates 1,300,000 tons, but Seller delivers only
1,100,000 tons because of Buyer's failure to accept delivery in breach hereof,
the pricing will be based on 1,100,000 tons.
Section 8.2 QUALITY PRICE DISCOUNTS.
(a) The Base Price is based on coal meeting or exceeding the Guaranteed
Monthly Weighted Average specifications as set forth in Section 6.1. Quality
price discounts shall
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be applied for each specification each month to reflect failures to meet the
Guaranteed Monthly Weighted Averages set forth in Section 6.1, as determined
pursuant to Section 7.2, subject to the provisions set forth below. The
discount values used are as follows:
DISCOUNT VALUES
$/MMBTU
BTU/LB. 0.2604
$/LB./MMBTU
SULFUR 0.1232
ASH 0.0083
MOISTURE 0.0016
(b) Notwithstanding the foregoing, for the BTU/LB specification each
month, there shall be no discount if the actual Monthly Weighted Average meets
the applicable Discount Point set forth below. However, if the actual Monthly
weighted Average fails to meet such applicable Discount Point, then the discount
shall apply and shall be calculated on the basis of the difference between the
actual Monthly Weighted Average AND THE GUARANTEED MONTHLY WEIGHTED AVERAGE
pursuant to the methodology shown in Exhibit A attached hereto.
GUARANTEED
MONTHLY
WEIGHTED AVERAGE DISCOUNT POINT
-----------------------------------------------------------------------------
BTU/LB WASHED BLEND RAW WASHED BLEND RAW
-----------------------------------------------------------------------------
11,000 10,600 10,300 10,800 10,400 10,100
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For example, if the actual Monthly Weighted Average of BTU/LB for Washed
Coal equals 10,700, then the applicable discount would be [1-(10,700/11,000)] X
$.2604 MMBTU = $.00710/MMBTU.
Section 8.3 PAYMENT CALCULATION. Exhibit A attached hereto shows the
methodology for calculating the coal payment and quality price discounts for the
month Seller's coal was unloaded by Buyer. If there are any such discounts,
Buyer shall apply credit to amounts owed Seller for the month the coal was
unloaded.
SECTION 9. INVOICES, BILLING AND PAYMENT.
Section 9.1 INVOICING ADDRESS. Invoices will be sent to Buyer at the
following address:
Louisville Gas and Electric Company
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Director, Fuels Procurement and Delivery
With a copy to:
Louisville Gas and Electric Company
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Manager, Accounts Payable
Section 9.2 INVOICE AND MONTHLY PAYMENT PROCEDURES. For all coal unloaded
in any week (beginning Tuesday and ending Monday), Buyer shall make preliminary
payment by wire transfer by the Tuesday immediately succeeding such week to
National City Bank, Louisville, Kentucky, ABA #▇▇▇▇▇▇▇▇▇, Account #▇▇▇-▇▇▇▇-▇,
Attn: ▇▇▇▇ ▇▇▇▇▇.
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Preliminary payment shall be in the amount of $12 per ton unloaded during the
previous week. After the end of each calendar month, there will be a true-up as
follows. The amount due for all coal (based on the initial Base Price minus any
Quality Price Discounts) unloaded during any week (beginning Tuesday and ending
Monday) which ended during such calendar month shall be calculated and compared
to the sum of the preliminary payments made for coal unloaded during such weeks.
The difference shall be paid by or paid to the Seller, as applicable, by the
25th of the following month or within ten (10) days after receipt of Seller's
invoice, whichever is later.
Section 9.3 TONNAGE ESTIMATES AND TRUE-UPS. Prior to the beginning of
each calendar year, Buyer shall deliver to Seller Buyer's good faith estimate
(the "Original Estimate") of whether the total tonnage to be nominated for such
calendar year will be between 600,000 and 1,200,000 tons, between 1,200,000 tons
and 1,800,000 tons, or greater than 1,800,000 tons. The Original Estimate and
all revisions thereto shall be used only to determine the Base Price for initial
monthly payment purposes and shall not limit any of Buyer's rights hereunder,
including, but not limited to, Buyer's right to change the quantity as set forth
in Section 3.2. After the end of each calendar quarter, Buyer promptly shall
review its Original Estimate. If Buyer determines in good faith that the
Original Estimate of annual quantity is incorrect, then Buyer promptly will
deliver to Seller notice of a revision to the Original Estimate. With respect
to invoicing and monthly payments which shall have occurred prior to such notice
of revision, there will be a true-up as follows. If there shall have been
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an underpayment based on the revised estimate, Buyer shall pay to Seller the
amount of the underpayment in a lump sum. If there shall have been an
overpayment based on the revised estimate, then the Seller shall pay to the
Buyer the amount of the overpayment in a lump sum. All invoicing and payments
which occur after the notice of revision to the Original Estimate shall be based
on the revised estimate. In any case, after the end of each calendar year,
there will be a final true-up (if necessary) based on actual nominations under
which the Buyer will pay to the Seller the amount of any underpayment in a lump
sum and the Seller will pay to the Buyer the amount of any overpayment in a lump
sum.
Section 9.4 WITHHOLDING. Buyer shall have the right to withhold from
payment of any billing or ▇▇▇▇▇▇▇▇ (i) any sums which it is not able in good
faith to verify or which it otherwise in good faith disputes, (ii) any damages
resulting from or likely to result from any breach of this Agreement by Seller,
and (iii) any amounts owed to Buyer from Seller. Buyer shall notify Seller
promptly in writing of any such issue, stating the basis of its claim and the
amount it intends to withhold.
Payment by Buyer, whether knowing or inadvertent, of any amount in dispute
shall not be deemed a waiver of any claims or rights by Buyer with respect to
any disputed amounts or payments made.
SECTION 10. FORCE MAJEURE.
Section 10.1 GENERAL FORCE MAJEURE. If either party hereto is delayed in
or prevented from performing any of its obligations or from utilizing the coal
sold under this Agreement due
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to acts of God, war, riots, civil insurrection, acts of the public enemy,
strikes, lockouts, fires, floods or earthquakes, which are beyond the reasonable
control and without the fault or negligence of the party affected thereby, then
the obligations of both parties hereto shall be suspended to the extent made
necessary by such event; provided that the affected party gives written notice
to the other party as early as practicable of the nature and probable duration
of the force majeure event. The party declaring force majeure shall exercise
due diligence to avoid and shorten the force majeure event and will keep the
other party advised as to the continuance of the force majeure event. During
any period in which Seller's ability to perform hereunder is affected by a force
majeure event, Seller shall not deliver any coal to any other buyers to whom
Seller's ability to supply is similarly affected by such force majeure event
unless contractually committed to do so at the beginning of the force majeure
event; and further shall deliver to Buyer under this Agreement at least a pro
rata portion (on a per ton basis) of its total contractual commitments to all
its buyers to whom Seller's ability to supply is similarly affected by such
force majeure event in place at the beginning of the force majeure event. An
event which affects the Seller's ability to produce or obtain coal from a mine
other than the Coal Property will not be considered a force majeure event
hereunder.
Tonnage deficiencies resulting from a force majeure event shall be made up
at Buyer's sole option on a reasonable schedule.
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Section 10.2 ENVIRONMENTAL LAW FORCE MAJEURE. The parties recognize that,
during the continuance of this Agreement, legislative or regulatory bodies or
the courts may adopt environmental laws, regulations, policies and/or
restrictions which will make it impossible or commercially impracticable for
Buyer to utilize this or like kind and quality coal which thereafter would be
delivered hereunder. If as a result of the adoption of such laws, regulations,
policies, or restrictions, or change in the interpretation or enforcement
thereof, Buyer decides that it will be impossible or commercially impracticable
(uneconomical) for Buyer to utilize such coal, Buyer shall so notify Seller, and
thereupon Buyer and Seller shall promptly consider whether corrective actions
can be taken in the mining and preparation of the coal at Seller's mine and/or
in the handling and utilization of the coal at Buyer's generating station; and
if in Buyer's sole judgment such actions will not, without unreasonable expense
to Buyer, make it possible and commercially practicable for Buyer to so utilize
coal which thereafter would be delivered hereunder without violating any
applicable law, regulation, policy or order, Buyer shall have the right, upon
the later of 60 days notice to Seller or the effective date of such restriction,
to terminate this Agreement without further obligation hereunder on the part of
either party.
SECTION 11. CHANGES. Buyer may, by mutual agreement with Seller, at any
time by written notice pursuant to Section 12 of this Agreement, make changes
within the general scope of this Agreement in any one or more of the following:
quality of coal or coal specifications, quantity of coal, method or time of
shipments, place of delivery (including
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transfer of title and risk of loss), method(s) of weighing, sampling or analysis
and such other provision as may affect the suitability and amount of coal for
Buyer's generating stations.
If any such changes makes necessary or appropriate an increase or decrease
in the then current price per ton of coal, or in any other provision of this
Agreement, an equitable adjustment shall be made in: price, whether current or
future or both, and/or in such other provisions of this Agreement as are
affected directly or indirectly by such change, and the Agreement shall
thereupon be modified in writing accordingly.
Any claim by the Seller for adjustment under this Section 11 shall be
asserted within thirty (30) days after the date of Seller's receipt of the
written notice of change, it being understood, however that Seller shall not be
obligated to proceed under this Agreement as changed until an equitable
adjustment has been agreed upon. The parties agree to negotiate promptly and in
good faith to agree upon the nature and extent of any equitable adjustment.
SECTION 12. NOTICES.
Section 12.1 FORM AND PLACE OF NOTICE. Any official notice, request for
approval or other document required to be given under this Agreement shall be in
writing, unless otherwise provided herein, and shall be deemed to have been
sufficiently given when delivered in person, transmitted by facsimile or other
electronic media, delivered to an established mail service for same day or
overnight delivery, or dispatched in the United States mail, postage
22
prepaid, for mailing by first class, certified, or registered mail, return
receipt requested, and addressed as follows:
If to Buyer: Louisville Gas and Electric Company
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn.: Director, Fuels Procurement and Delivery
with a copy to: Louisville Gas and Electric Company
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇
P.O. Box 32020
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn.: Manager, Procurement Services
If to Seller: Green Coal Company, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇
Section 12.2 CHANGE OF PERSON OR ADDRESS. Either party may change the
person or address specified above upon giving written notice to the other party
of such change.
Section 12.3 ELECTRONIC DATA TRANSMITTAL. Seller hereby agrees, at
Seller's cost, to electronically transmit shipping notices and/or other data to
Buyer in a format acceptable to and established by Buyer upon Buyer's request.
Buyer shall provide Seller with the appropriate format and will inform Seller as
to the electronic data requirements at the appropriate time.
SECTION 13. EARLY TERMINATION. Each party hereto shall have the right of
early termination for any reason or no reason of its rights and obligations
under this Agreement as follows: The party desiring to exercise its right of
early termination shall
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give written notice thereof to the other party and pay the price for early
termination as described herein. Notice may be given by either party no later
than four (4) months before the end of any calendar year; and this Agreement
will be terminated at the end of such year. The price paid for such early
termination shall be $3.50 times the quantity of coal (in tons) nominated under
this Agreement during the calendar year immediately preceding the effective date
of the early termination times the number of years remaining under this
Agreement. For example, if Seller terminates this Agreement effective December
31, 1996 and the quantity of coal nominated under this Agreement during 1996 is
700,000 tons, then Seller would owe Buyer $4,900,000 under this Section 13.
This provision is not intended to limit, liquidate, or otherwise affect in any
manner damages recoverable for breach of this Agreement.
SECTION 14. RIGHT TO RESELL. Buyer shall have the unqualified right to
sell all or any of the coal purchased under this Agreement.
SECTION 15. INDEMNITY AND INSURANCE.
Section 15.1 INDEMNITY. Seller agrees to indemnify and save harmless
Buyer, its officers, directors, employees and representatives from any
responsibility and liability for any and all claims, demands, losses, legal
actions for personal injuries, property damage and pollution (including
reasonable inside and outside attorney's fees) (i) relating to the barges
provided by Buyer or Buyer's contractor while such barges are in the care and
custody of the loading dock or loading facility, (ii) due to any failure of
Seller to comply with laws,
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regulations or ordinances, or (iii) due to the acts or omissions of Seller in
the performance of this Agreement.
Section 15.2 INSURANCE. Seller agrees to carry insurance coverage with
minimum limits as follows:
(1) Commercial General Liability, including Completed Operations and
Contractual Liability, $1,000,000 single limit liability.
(2) Automobile General Liability, $1,000,000 single limit liability.
(3) In addition, Seller shall carry excess liability insurance
covering the foregoing perils in the amount of $4,000,000 for any one
occurrence.
(4) Workers' Compensation and Employer's Liability with statutory
limits.
If any of the above policies are written on a claims made basis, then the
retroactive date of the policy or policies will be no later than the effective
date of this Agreement. Certificates of Insurance satisfactory in form to the
Buyer and signed by the Seller's insurer shall be supplied by the Seller to the
Buyer evidencing that the above insurance is in force and that not less than 30
calendar days written notice will be given to the Buyer prior to any
cancellation or material reduction in coverage under the policies. The Seller
shall cause its insurer to waive all subrogation rights against the Buyer
respecting all losses or claims arising from performance hereunder. Evidence of
such waiver satisfactory in form and substance to the Buyer shall be exhibited
in the Certificate of Insurance mentioned above. Seller's liability shall not
be limited to its insurance coverage.
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SECTION 16. TERMINATION FOR DEFAULT.
Subject to Section 6.4, if either party hereto commits a material breach of
any of its obligations under this Agreement at any time, then the other party
has the right to give written notice describing such breach and stating its
intention to terminate this Agreement no sooner than 30 days after the date of
the notice (the "notice period"). If such material breach is curable and the
breaching party cures such material breach within the notice period, then the
Agreement shall not be terminated due to such material breach. If such material
breach is not curable or the breaching party fails to cure such material breach
within the notice period, then this Agreement shall terminate at the end of the
notice period in addition to all the other rights and remedies available to the
aggrieved party under this Agreement and at law and in equity.
SECTION 17. TAXES, DUTIES AND FEES.
Seller shall pay when due, and the price set forth in Section 8 of this
Agreement shall be inclusive of, all taxes, duties, fees and other assessments
of whatever nature imposed by governmental authorities with respect to the
transactions contemplated under this Agreement.
SECTION 18. DOCUMENTATION AND RIGHT OF AUDIT.
Section 18.1 COAL RECORDS. Seller shall maintain all records and accounts
pertaining to payments, quantities, quality analyses, and source for all coal
supplied under this Agreement for a period lasting through the term of this
Agreement and for two years
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thereafter. Buyer shall have the right at no additional expense to Buyer to
audit, copy and inspect such records and accounts at any reasonable time upon
reasonable notice during the term of this Agreement and for 2 years thereafter.
Section 18.2 FINANCIAL INFORMATION. Within 30 days after the date
completed, Seller shall deliver to Buyer copies of all of Seller's audited and
unaudited financial statements (including, but not limited to, balance sheets,
profit and loss statements, and cash flow statements) and supporting financing
documents and records.
SECTION 19. EQUAL EMPLOYMENT OPPORTUNITY. To the extent applicable,
Seller shall comply with all of the following provisions which are incorporated
herein by reference: Equal Opportunity regulations set forth in 41 CRF Section
60-1.4(a) and (c) prohibiting discrimination against any employee or applicant
for employment because of race, color, religion, sex, or national origin;
Vietnam Era Veterans Readjustment Assistance Act regulations set forth in 41 CRF
Section 50-250.4 relating to the employment and advancement of disabled veterans
and veterans of the Vietnam Era; Rehabilitation Act regulations set forth in 41
CRF Section 60-741.4 relating to the employment and advancement of qualified
disabled employees and applicants for employment; the clause known as
"Utilization of Small Business Concerns and Small Business Concerns Owned and
Controlled by Socially and Economically Disadvantaged Individuals" set forth in
15 USC Section 637(d)(3); and subcontracting plan requirements set forth in 15
USC Section 637(d).
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SECTION 20. COAL PROPERTY INSPECTIONS. Buyer and its representatives, and
others as may be required by applicable laws, ordinances and regulations shall
have the right at all reasonable times and at their own expense to inspect the
Coal Property, including the loading facilities, scales, sampling system(s),
wash plant facilities, and mining equipment for conformance with this Agreement.
Seller shall undertake reasonable care and precautions to prevent personal
injuries to any representatives, agents or employees of Buyer (collectively,
"Visitors") who inspect the Coal Property. Any such Visitors shall make every
reasonable effort to comply with Seller's regulations and rules regarding
conduct on the work site, made known to Visitors prior to entry, as well as
safety measures mandated by state or federal rules, regulations and laws. Buyer
understands that underground mines and related facilities are inherently
high-risk environments. Buyer's failure to inspect the Coal Property or to
object to defects therein at the time Buyer inspects the same shall not relieve
Seller of any of its responsibilities nor be deemed to be a waiver of any of
Buyer's rights hereunder.
SECTION 21. MISCELLANEOUS.
Section 21.1 APPLICABLE LAW. This Agreement shall be construed in
accordance with the laws of the State of Kentucky, and all questions of
performance of obligations hereunder shall be determined in accordance with such
laws.
Section 21.2 HEADINGS. The paragraph headings appearing in this Agreement
are for convenience only and shall not affect the meaning or interpretation of
this Agreement.
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Section 21.3 WAIVER. The failure of either party to insist on strict
performance of any provision of this Agreement, or to take advantage of any
rights hereunder, shall not be construed as a waiver of such provision or right.
Section 21.4 REMEDIES CUMULATIVE. Remedies provided under this Agreement
shall be cumulative and in addition to other remedies provided under this
Agreement or by law or in equity.
Section 21.5 SEVERABILITY. If any provision of this Agreement is found
contrary to law or unenforceable by any court of law, the remaining provisions
shall be severable and enforceable in accordance with their terms, unless such
unlawful or unenforceable provision is material to the transactions contemplated
hereby, in which case the parties shall negotiate in good faith a substitute
provision.
Section 21.6 BINDING EFFECT. This Agreement shall bind and inure to the
benefit of the parties and their successors and assigns.
Section 21.7 ASSIGNMENT. Neither party may assign this Agreement or any
rights or obligations hereunder without the prior written consent of the other
party, which consent shall not be unreasonably withheld or denied; provided,
however, that Buyer shall have the right, without consent of Seller, to assign
all or any part of this Agreement to any company, controlling, controlled by, or
under common control with Buyer; and further provided, however, that any
assignment by Seller in connection with a sale of all or substantially all the
assets of Seller shall trigger the provisions of Section 21.
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Section 21.8 ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties as to the subject matter hereof, and there are no
representations, understandings or agreements, oral or written, which are not
included herein.
Section 21.9 AMENDMENTS. Except as otherwise provided herein, this
Agreement may not be amended, supplemented or otherwise modified except by
written instrument signed by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
LOUISVILLE GAS AND ELECTRIC
COMPANY GREEN COAL COMPANY, INC.
By: By:
---------------------------- ---------------------------------
Title: Title:
---------------------------- ---------------------------------
Date: Date:
---------------------------- ---------------------------------
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