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EXHIBIT 10.39
COAL SUPPLY AGREEMENT
BETWEEN
ANKER ENERGY CORPORATION
AS SELLER
AND
KEYSTONE ENERGY SERVICE COMPANY, L.P.
AS PURCHASER.
DATED APRIL 1, 1992
COGENERATION FACILITY
▇▇▇▇▇ TOWNSHIP, NEW JERSEY
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COAL SUPPLY AGREEMENT
This COAL SUPPLY AGREEMENT (the "Agreement"), entered into this 1st day
of April, 1992, is by and between ANKER ENERGY CORPORATION, a Delaware
corporation referred to herein as "Seller" and KEYSTONE ENERGY SERVICE COMPANY,
L.P., a Delaware limited partnership referred to herein as "Keystone."
RECITALS
WHEREAS, Keystone intends to cause a cogeneration facility to be
financed, designed, constructed, owned, operated, maintained and to be located
on a site owned by Keystone in ▇▇▇▇▇ Township, New Jersey (the "Facility");
WHEREAS, it is contemplated that the Facility will produce steam and
electricity and will burn coal with the specifications set forth in this
Agreement as a source of fuel;
WHEREAS, Seller and its affiliates are engaged in the mining and
selling of coal for use as fuel in boilers to produce steam;
WHEREAS, Keystone desires to purchase 100% of the coal requirements of
the Facility from Seller, and Seller desires to supply, sell, and deliver 100%
of the Facility's coal requirements for testing, start-up and operation on the
terms and conditions set forth herein;
WHEREAS, Keystone will sell electricity generated at the Facility to
Atlantic City Electric Company ("Atlantic Electric") under an Agreement for
Purchase of Electric Power dated as of August 25, 1988, as amended, and Keystone
will sell steam and
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electricity produced at the Facility to Monsanto Chemical Company ("Monsanto")
under a Steam Supply Agreement dated as of November 22, 1988 and an Electric
Power Sales Agreement dated as of November 22, 1988, and the coal requirements
will depend upon the quantity of steam and electricity purchased pursuant to
those agreements; and
WHEREAS, Seller will contract for necessary rail and waterborne
transportation of the coal from the Mines (as defined in Section 3.1) to the
Point of Delivery at the Facility.
NOW, THEREFORE, in consideration of the mutual covenants and promises
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, Seller and Keystone hereby agree as follows:
ARTICLE I
DEFINED TERMS
Some of the terms used in this Agreement are defined in this Article I.
Other terms are defined in the opening paragraph and in the recitals. Additional
terms are defined at the points where such terms are first used. Except for the
defined terms set forth in Sections 1.1 and 1.4 below, the first letter of a
defined term is capitalized.
1.1 Calendar Periods. The terms "day", "week", "month", and "quarter"
shall mean, respectively, a period of 24 hours commencing at 12:01 a.m. local
time, a period of seven days beginning at 12:01 a.m. on Sunday, a calendar
month, a calendar quarter. The term "year" shall mean a period of 365 days,
except that if February has 29 days during any such period, the term "year"
shall mean a period of 366 days.
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1.2 Singular and Plural. The singular of a defined term shall include
the plural and the plural shall include the singular as the context requires.
1.3 Sections of the Agreement. The term "Section" when used in
combination with a section number refers to that Section of this Agreement.
Numbered Sections of this Agreement do not include the word "Section"
immediately prior to such number.
1.4 Terms of Art. Certain terms used in this Agreement are terms of art
in the coal and electronic generation industries and have commonly understood
meanings. Examples include, but are not limited to, terms such as "Btu," "as
received," "steam," "ash" and other terms of this nature. The parties hereto
agree that such terms shall have such commonly understood meanings and that it
is not necessary to define such terms.
1.5 Certain Defined Terms: "Applicable Law" means any valid law, rule,
regulation, ordinance, order, statute, code, judgment, directive, decree,
injunction, Permit or similar norm of decision of any Federal, state or local
government, authority, agency, court or other body having jurisdiction over the
matter in question including interpretation or enforcement thereof.
"Affiliate", as applied to any entity, means any other entity directly
or indirectly controlling, controlled by, or under common control with, that
entity.
"ASTM" means the American Society for Testing Materials.
"Commercial Operation Date" means the date which is the initial date of
commercial operation of the Facility.
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"Facility" means the cogeneration facility described in Exhibit A
attached hereto, including all additions, replacements and substitutions
thereto, which Keystone shall cause to be built and operated on the Site.
"Financial Closing Date" means the date on which Keystone first has
access, but for conditions to continued funding contained in the Financing
Documents, to funds provided by the Financing Parties sufficient for the purpose
of constructing and completing the Facility.
"Financing Documents" means any and all loan agreements, notes,
indentures, security agreements, subordination agreements, mortgages,
partnership agreements, subscription agreements, participation agreements and
other documents relating to the construction, interim and long-term financing
(both debt and equity) of the Facility and any refinancing of the Facility
(including a leveraged lease), including any and all modifications, extensions,
renewals and replacements of any such financing or refinancing.
"Financing Parties" means any and all equity participants (other than
Keystone and its affiliates), lenders and lessors providing funds for the
construction, interim or long-term financing (including any refinancing thereof,
including a leveraged lease) of the Facility, and any trustee or agent acting on
their behalf.
"GDP Deflator" means the preliminary (i.e., second published) Gross
Domestic Product Implicit Price Deflator for a calendar quarter as currently
published in the United States Department of Commerce, Bureau of Economic
Analysis publication entitled Survey of Current Business. Adjustments to rates,
fees, prices, premiums and penalties which are to be made annually based on the
GDP Deflator shall be calculated as follows:
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The existing rate, fee, price premium or penalty shall be increased or decreased
as of January 1 of each year of the Term hereof commencing on January 1, 1994 by
the percentage change in the index number of the GDP Deflator for the calendar
quarter immediately preceding such January 1 from the index number of the GDP
Deflator for the fourth quarter of the preceding calendar year. If the GDP
Deflator ceases to exist or becomes unavailable, the parties shall agree to a
substitute index that reasonably measures inflation for all goods and services
within the United States.
"Independent Laboratory" shall mean Commercial Testing and Engineering
Company.
"Operating Year" shall mean the period beginning with the Commercial
Operation Date and ending one year thereafter, and thereafter shall mean each
one-year period beginning with each anniversary of the Commercial Operation
Date.
"Permit" means any valid waiver, exemption, variance, franchise,
permit, authorization, license or similar order of or from any Federal, state or
local government, authority, agency, court or other body having jurisdiction
over the matter in question, as in effect from time to time.
"Preliminary Operation Date" means the date that the Facility commences
preliminary operations for testing.
"Shipment" shall mean a quantity of not less than 7,000 Tons nor more
than 7,500 Tons of coal delivered to Keystone, as described in Section 5.2.
"Site" means the tract of land owned by Keystone on which the Facility
will be constructed.
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"Term means the Initial Term and any Extended Terms.
"Ton" means a short Ton of 2,000 pounds avoirdupois weight.
ARTICLE II
TERM AND COMMENCEMENT OF DELIVERIES
2.1 Initial Term. This Agreement shall be effective from the date
hereof (the "Effective Date") and, unless earlier terminated in accordance with
the provisions hereof, shall continue for an initial term which shall end 20
Operating Years after the Commercial Operation Date (the "Initial Term").
2.2 Extension of Term. Upon the expiration of the Initial Term and, if
applicable, any Extended Term, this Agreement shall automatically extend for a
term of [*](1) (an "Extended Term") unless, at least eighteen months prior to
such expiration, either party shall have given notice to the other party that it
desires to renegotiate or terminate the Agreement. Negotiations for an Extended
Term will be limited to the following subjects: (i) price to be paid for the
coal; (ii) changes in the Base Escalator or "bituminous coal" (as defined in
Section 7.5) to reflect changes in market prices for coal of the quality
specified in Sections 6.1 and 6.2; and (iii) such other subjects as either party
shall have given notice to the other party prior to the commencement of such
negotiations that it desires to include in such negotiations. Except as
otherwise mutually agreed, all other terms and provisions of this Agreement
shall remain in effect during any such Extended Term. Unless otherwise mutually
agreed, if no agreement is reached by
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(1) Portions of this exhibit have been omitted pursuant to a request for
confidential treatment filed with the Securities and Exchange Commission (the
"Commission"). The omitted portions, marked by "[*]", have been filed separately
with the Commission.
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the beginning of the ninth month prior to the expiration of the Term, or if a
party has given notice that it desires to terminate, this Agreement shall
terminate at the expiration of the Term.
2.3 Commencement of Deliveries. (a) Seller shall commence deliveries of
coal hereunder pursuant to the first monthly Order of Keystone sent to Seller
pursuant to Section 4.3 in order to meet the anticipated testing coal and
stockpile needs and in order to meet the anticipated Preliminary Operation Date
during the first calendar quarter of 1994. Seller shall subsequently commence
deliveries of coal hereunder pursuant to the monthly Orders of Keystone sent to
Seller pursuant to Section 4.3 in order to meet the anticipated Commercial
Operation Date during the last calendar quarter of 1994. Keystone agrees to
provide notices to Seller at least quarterly beginning as of the first day of
the first calendar quarter beginning after the Financial Closing Date, as to the
statuts of the construction of the Facility and promptly to provide notices to
Seller of the estimated specific dates of, and any changes in, either the
anticipated Preliminary Operation Date or the anticipated Commercial Operation
Date. Keystone shall notify Seller of the Preliminary Operation Date and the
Commercial Operation Date immediately upon the determinations of such dates.
(b) In the event that delivery of the first Shipment of coal shall not
have occurred by July 1, 1994, then upon the written request of Seller to
Keystone, Sections 7.1, 7.4 and 8.4 shall be renegotiated by Seller and Keystone
in good faith to reflect any cost increases to Seller as a result of such delay.
If, after 30 days of negotiations the parties are unable to agree, Seller shall
be entitled to submit the dispute to arbitration pursuant to Article XVIII. In
the event that the Commercial Operation Date shall not
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have occurred by January 1, 1996, Seller or Keystone may terminate this
Agreement upon notice to the other party, and neither party shall have any
further obligation to the other party pursuant to this Agreement, except
obligations to make payments of money already due to the other party.
2.4 Conditions Precedent. The obligations of Keystone under this
Agreement are subject to the following conditions precedent:
(a) Keystone's obtaining of all Permits deemed necessary or
desirable by Keystone on terms satisfactory to Keystone;
(b) Keystone's obtaining binding commitments from the Financing
Parties for financing for the construction and operation of the Facility on
terms satisfactory to Keystone. In this connection, Seller will provide such
financial information as the Financing Parties may reasonable request concerning
Seller's financial condition and its ability to perform its obligations under
this Agreement;
(c) The final execution of all agreements, leases, licenses and
other undertakings of any kind between Keystone and third parties deemed
necessary or desirable by Keystone on terms satisfactory to Keystone.
2.5 Satisfaction of Conditions Precedent. Keystone shall provide Seller
notice of satisfaction of the conditions precedent specified in Section 2.4 (a),
(b) and (c) within 5 days of the Financial Closing Date. Failure to satisfy any
condition precedent shall be grounds for termination of this Agreement by
Keystone.
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ARTICLE III
SOURCE OF COAL
3.1 Source. Subject to Seller's right of substitution pursuant to
Section 3.4, the coal to be supplied hereunder shall be processed and delivered
from Seller's affiliates' Sentinel and Patriot mine complexes (the "Mines")
located in ▇▇▇▇▇▇▇ County, West Virginia and Preston County, West Virginia,
respectively, which coal shall meet the quality specifications of this
Agreement. Attached as Exhibit B is a description of the Mines listed above by
name.
3.2 Dedication of Coal. Seller represents and warrants that it will
own, lease or otherwise control a sufficient number of Tons of recoverable coal
from the Mines or other mines reasonably acceptable to Keystone, (the "Coal
Reserves") to supply coal in accordance with the provisions of this Agreement.
Seller covenants that it will not lease, convey, assign, sell, transfer or
otherwise dispose of or agree to dispose of any of its interests in the Coal
Reserves in any quantity which would jeopardize Seller's ability to perform
under this Agreement; provided that Seller and its affiliates may grant a
security interest in the Coal Reserves to any parties which provide financing to
Seller or any parent, subsidiary or affiliate of Seller, upon notice to but
without further consent of Keystone. Prior to the Financial Closing Date, and
during the Term of this Agreement, Seller agrees to provide such information as
Keystone may reasonably request, and, upon reasonable prior notice, to permit
Keystone, its consultants, or representatives of any Financing Parties to
inspect the Mines, to verify the representations and warranties contained in
this Section 3.2. Any such inspection of the Mines shall be at the risk of
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the parties performing such inspection and shall be conducted under the
supervision and authority of representatives of the Seller.
3.3 Substitution. Seller shall have the right to deliver coal to
Keystone under this Agreement from another source or sources if the following
two conditions are met: (i) the coal shall meet the quality specifications set
forth in this Agreement, and (ii) either (A) Keystone shall have given its
written consent to such substitution which consent shall not be unreasonably
withheld, or (B) Keystone shall have previously given its written consent and,
thereafter confirmed its approval of substitution from such source. Deliveries
of coal hereunder from any source other than the Mines shall comply with and be
subject to all terms and conditions of this Agreement.
ARTICLE IV
QUANTITY, ESTIMATES AND ORDERS
4.1 Coal Requirements. Seller agrees to sell and deliver coal to
Keystone, pursuant to Orders sent by Keystone to Seller in accordance with
Section 4.3, and Keystone agrees to purchase from Seller, 100% of the coal
requirements of the Facility for the production of steam and generation of
electricity including sufficient quantities for testing, start-up and stockpile
purposes on the terms and conditions set forth in this Agreement.
4.2 Estimates of Requirements. For Seller's planning purposes, Keystone
estimates the Facility will require approximately 450,000 to 650,000 Tons of
coal of the quality specified herein per Operating Year. Keystone has no
obligation hereunder to purchase any minimum quantity. Such requirements will
vary by seasons and may
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change over time. At least 60 days prior to the beginning of each Operating
Year, Keystone will provide Seller with a non-binding estimate of the quantity
of coal to be delivered by Seller hereunder during each month of the ensuing
Operating Year. Keystone will promptly provide Seller with a revised non-binding
forecast for the balance of any Operating Year if Keystone becomes aware of
material changes in its pre-Operating Year forecast previously given to Seller.
At least 20 days prior to each calendar quarter beginning with the calendar
quarter in which the first delivery of coal is required hereunder, Keystone will
provide Seller with a non-binding estimate of the delivery dates for all
Shipments of coal which Keystone expects to Order during such calendar quarter.
Keystone will provide Seller with a non-binding estimate of the quantity of coal
required during each month of the period between the first delivery of coal
hereunder and the Commercial Operation Date at least three months prior to the
date when the first delivery of coal is required hereunder.
4.3 Monthly Orders. On or before the 15th day of each month beginning
with the month preceding the month when the first delivery of coal is required
hereunder, Keystone shall give to Seller an order ("Order") setting forth (i)
the number of Shipments of coal to be delivered by Seller during each week which
begins during the following month, not to exceed two Shipments in any week and
(ii) the specific dates for delivery of such Shipments which shall be spaced at
least 60 hours apart. Keystone may increase by one Shipment, and decrease
without limitation, the number of Shipments of coal to be delivered during any
week by notifying Seller at least seven days in advance of the beginning of such
week, but the total number of Shipments during any week shall not exceed two
unless mutually agreed to by the parties. Subject to seasonal variations in
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fuel requirements of the Facility, Keystone will submit Orders for Shipments of
coal in substantially equal numbers of Shipments each month.
4.4 First Delivery of Coal. Keystone may submit an Order for the first
delivery of coal hereunder and subsequent monthly Orders prior to the first
Operating Year for the purpose of the stockpiles described in Section 4.5
hereof, and for testing and startup purposes.
4.5 Stockpiles. Keystone expects to establish a dead storage stockpile
of approximately 50,000 Tons of coal (in addition to a live storage stockpile of
approximately 10,000 Tons of coal) at the Facility. Keystone shall have the
right to purchase, and upon request Seller agrees to deliver, approximately
50,000 Tons of coal for the dead storage stockpile pursuant to monthly Orders of
Keystone pursuant to Section 4.3.
4.6 Coordination of Maintenance Periods. Keystone and Seller
acknowledge that the barge arranged for by Seller will not be available for coal
deliveries hereunder for up to four weeks during each Operating Year for
routine, annual maintenance and repair. Seller agrees to coordinate such
maintenance of the barge with the planned outages of the Facility. To facilitate
such coordination, Keystone agrees that each calendar year it will provide the
following periods of planned outages of the Facility for such maintenance: (i)
one period of not less than two consecutive weeks (a "Two-Week Outage") and (ii)
two additional periods of not less than one week (each a "One-Week Outage")
which need not be consecutive weeks. Keystone agrees to provide Seller with at
least six months' prior written notice of the specific dates of each Two-Week
Outage and at least 60 days' prior written notice of the specific dates of each
One-Week Outage. Keystone
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and Seller agree that Seller shall have no obligation to supply coal hereunder
during any Two-Week Outage or any One-Week Outage. Seller agrees, however, to
use its best efforts to supply coal to the Facility during such periods if
requested by Keystone, and Keystone agrees to pay any incremental costs of
supplying such coal (including, but not limited to, the incremental costs
associated with hiring a substitute barge to deliver such coal).
4.7 Testing Quantities and Burn Tests. Keystone shall have the right to
purchase between the Effective Date of this Agreement and the date upon which
the delivery of coal for Commercial Operation of the Facility actually
commences, and upon request Seller shall supply, up to 150,000 Tons of coal as
testing coal pursuant to monthly Orders of Keystone pursuant to Section 4.3.
Seller shall provide Keystone, without charge, up to fifty Tons of coal of the
quality to be supplied by Seller hereunder, delivered by truck within 300 miles
of the Mines, for Keystone to conduct burn tests.
ARTICLE V
POINT OF DELIVERY; METHOD OF DELIVERY
5.1 Point of Delivery. The Point of Delivery shall be in barge or
vessel safely moored at Keystone's pier located in the Delaware River, available
for unloading. Title to the coal shall pass to Keystone immediately at the Point
of Delivery, and risk of loss shall follow passage of title.
5.2 Method of Delivery. The coal shall be delivered to the Point of
Delivery by barge or vessel not to exceed 10,000 dead weight Tons in capacity
and a deepest draft of 20 feet, and compatible with Keystone's berthing and
unloading facilities as such
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facilities are represented and warranted by Keystone pursuant to Section
13.2(d). Seller and its subcontractors shall be responsible for arranging for
all transportation from the mine mouth to the Point of Delivery, shall pay all
freight charges incurred and shall assume all liability in connection with such
transportation and delivery. Keystone will be responsible for providing a safe
berth and mooring equipment in accordance with normal standards of the marine
industry. Receiving and unloading facilities at the Site shall be in accordance
with the representations and warranties of Keystone pursuant to Section 13.2(d).
Keystone will be responsible for unloading the coal pursuant to a discharge plan
to be provided by the barge owner and subject to the reasonable approval of
Keystone.
5.3 Lay Time. Seller shall allow Keystone Lay Time of one hour for each
500 Tons of coal delivered. Lay Time shall commence upon the earlier of (i) when
Seller's barge or vessel is safely moored at Keystone's berth and the barge
operator gives notice of readiness to Keystone for unloading or (ii) when
Seller's barge or vessel has arrived in the vicinity of Keystone's berth, and
the barge operator has given notice of readiness to Keystone, but is unable to
safely moor due to an obstruction at Keystone's berth not caused by Seller or
its subcontractors. Lay Time shall and when Keystone has (i) unloaded Seller's
barge or vessel so that no more coal, practicably recoverable by "bobcat" type
unloading machinery typically used for this purpose, remains in such barge or
vessel; and (ii) cleaned any spillage of coal on the exterior of such barge or
vessel which occurred during the unloading operations; and (iii) notified the
representative of the barge or vessel owner that the unloading operation is
complete.
5.4 Demurrage. Demurrage at the rate of $360.71 per hour (as of January
1, 1993) shall accrue for all time that exceeds the allowable Lay Time as
provided herein.
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The demurrage rate shall be reduced by 50 percent for that period of time when a
tug is not accompanying Seller's barge or vessel during unloading operations;
provided that if (a) Keystone has given notice to the barge owner of the time
when the barge will be unloaded, (b) the tug is ordered to sail the barge from
the Facility and (c) Keystone has not unloaded the barge by the later of (i) the
time stated in Keystone's notice to the barge owner and (ii) the time that the
tug arrives at the Facility, then full demurrage shall apply unless Keystone
shall have given Seller notice to cancel the tug at least 24 hours prior to the
tug's original sailing orders. The demurrage rate shall be escalated each
calendar year commencing January 1, 1994, by the GDP Deflator provided however,
that such escalation shall not be more than 5% per year and any excess shall not
be reflected in the price adjustment in any succeeding year.
5.5 Tie-Up Time. Keystone shall provide Seller's barge or vessel
additional tie-up time at the pier on a "mutually convenient" basis. Such
additional tie-up time shall not impede or make unsafe other dockside
activities. Seller shall be responsible for any additional costs and liabilities
as a result of the actions of Seller's employees, agents or subcontractors
associated with such additional tie-up time.
5.6 Time of Delivery. Keystone will make its delivery facilities
available for off loading of coal 24 hours per day, 7 days per week.
5.7 Docking and Undocking. Keystone's personnel shall not be required
to board the barge or vessel at any time during docking or undocking of the
barge or vessel, however, Keystone's personnel or its agent will handle mooring
lines on dockside, under the direction of the tug's personnel, for Seller's
barge or vessel. Seller shall be liable for any damages to Keystone's property
as a result of the actions of Seller's employees,
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agents or subcontractors and Keystone shall be liable for any damages to the
barge or vessel as a result of the actions of its employees, agents or
subcontractors.
5.8 Notices of Shipments. (a) On or before the 25th day of each month
beginning with the month preceding the month when the first delivery of coal is
required hereunder, Seller shall give to Keystone a schedule (a "Seller Loading
Notice") setting forth the dates for loading into rail cars each Shipment of
coal to be shipped to Keystone during such month (the "Load Dates"). At least 24
hours prior to each Load Date, Keystone may send to Seller a notice instructing
Seller either to proceed or not to proceed with the scheduled loading of such
Shipment (a "Keystone Loading Notice"). In the event that (i) Keystone shall
fail to deliver in a timely manner a Keystone Loading Notice which instructs
Seller not to proceed with a Shipment and (ii) an event of Force Majeure shall
delay the unloading of such Shipment by Keystone, then Keystone shall be liable
to Seller for all demurrage attributable to such delay, as determined pursuant
to Section 5.4. In the event that (i) Keystone shall fail to deliver in a timely
manner a Keystone Loading Notice which instructs Seller not to proceed with a
Shipment and (ii) an event of Force Majeure shall prevent the unloading of such
Shipment by Keystone, then Keystone may cancel such Shipment and shall reimburse
Seller for all costs incurred by Seller in the transportation and discharge of
such Shipment, including but not limited to any rail or barge demurrage charges.
If within 72 hours of the arrival of a Shipment at the Facility, the unloading
of such Shipment by Keystone has not commenced or has commenced but has ceased
before completion due to Force Majeure at the Facility and Keystone has not
cancelled such Shipment, then Keystone shall advise Seller of its intended
disposition of such Shipment. If Keystone fails to notify Seller of such
disposition within 72 hours of
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the arrival of such shipment at the Facility, the Shipment shall be deemed to
have been cancelled by Keystone. If Keystone shall cancel any Shipment pursuant
to this Section 5.8(a), Seller shall cooperate with Keystone and use all due
diligence to mitigate costs of disposition of such Shipment.
(b) For each Shipment, Seller shall send Keystone a shipping notice
within 36 hours following loading thereof into rail cars at the Mines. The
shipping notice shall include the identification number, mine from which
supplied, estimated tonnage shipped, shipping date, scheduled date of delivery,
Rail Sample analysis pursuant to Section 10.3(a), and other information
reasonably required by Keystone. Bills of Lading shall include name of Seller,
contract number, identification number, date loaded and Seller's shipped
weights.
(c) All notices pursuant to this Section 5.8 shall be sent by
telecopy or by other mutually agreed upon means.
5.9 Notice of Insurance. Prior to commencing the first delivery of
coal, Seller shall provide Keystone with appropriate certificates of insurance
evidencing that Seller has obtained the insurance required pursuant to Section
17.1 hereunder, and that such insurance remains in effect. Prior to submitting
the first Order for delivery of coal, Keystone shall provide Seller with
appropriate certificates of insurance evidencing that Keystone has obtained the
insurance required pursuant to Section 17.4 hereunder, and that such insurance
remains in effect.
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ARTICLE VI
QUALITY
6.1 General Quality Provisions. Seller shall cause the mining and
loading of the coal to be conducted so that all coal loaded into rail cars at
the Mines shall be substantially free from impurities and extraneous materials
related to the mining and processing of coal. Seller represents and warrants
that the quality of each Shipment of coal hereunder shall satisfy each Mine
Mouth Rejection Specification set forth in Section 6.2 and that the weighted
average quality of all coal delivered during any month hereunder shall satisfy
each Semi-Monthly Average Contract Specification set forth in Section 6.2.
6.2 Rejection, Suspension and Contract Specifications. The "as
received" Mine Mouth Rejection Specifications, Semi-Monthly Average Suspension
Specifications, and Semi-Monthly Average Contract Specifications for coal
delivered hereunder shall be as follows:
Semi- Semi-
Mine Monthly Monthly
Mouth Average Average
Rejection Suspension Contract
Characteristic Specs Specs Specs
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Calorific Value Btu/lb (HHV) Less than N/A [*](2)
[*](2)
Sulfur (% wt.) No greater No greater No greater
Than [*](2) than [*](2) than [*](2)
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(2) Portions of this exhibit have been omitted pursuant to a request for
confidential treatment filed with the Securities and Exchange Commission (the
"Commission"). The omitted portions, marked by "[*]", have been filed separately
with the Commission.
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Ash (% wt.) No greater No greater [*](3)
than[*](3) than [*](3)
Moisture (% wt.) No greater No greater [*](3)
Than [*](3) than [*](3)
Volatile Matter (% wt.) N/A Not less [*](3)
than [*](3)
Suspension Specifications for additional characteristics are set forth
in Section 6.6(a). A non-binding example of the typical specification of the
coal to be delivered under this Agreement is set forth in Exhibit C. The typical
coal specification set forth in Exhibit C has been established for the purpose
of determining the performance of the Facility.
6.3 Rejection of Coal. Any Shipment of coal which does not conform to
each Mine Mouth Rejection Specification as set forth in Section 6.2 shall be
deemed to be Rejection Point Coal. Seller shall take all practical precautions
to prevent delivering Rejection Point Coal to Keystone and shall not knowingly
deliver Rejection Point Coal to Keystone unless Keystone consents thereto on
terms mutually agreeable. Keystone may reject any Shipment of coal which is
Rejection Point Coal by notice to Seller by telephone, confirmed in writing. Any
such notice of rejection shall be given within 24 hours after receipt of the
Independent Laboratory's Rail Sample
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(3) Portions of this exhibit have been omitted pursuant to a request for
confidential treatment filed with the Securities and Exchange Commission (the
"Commission"). The omitted portions, marked by "[*]", have been filed separately
with the Commission.
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analysis of the Shipment of coal in question pursuant to Section 10.3(a). In the
event of a delay in the delivery of the Independent Laboratory's Rail Sample
analysis of a Shipment, Seller may elect to proceed with the delivery of such
Shipment on the basis of Seller's Rail Sample analysis pursuant to Section
10.3(a); provided that the Independent Laboratory's Rail Sample analysis of such
Shipment shall be determinative of Keystone's right to reject such Shipment.
Keystone is not obligated to unload a Shipment of coal until either (I) Keystone
has received the Independent Laboratory's Rail Sample analysis and such analysis
satisfies the Rejection Specifications set forth in Section 6.2, or (ii)
Keystone has accepted such Shipment. Keystone may not reject any Shipment of
coal after it has accepted or unloaded such Shipment. If a Shipment of Rejection
Point Coal has reached the Point of Delivery and has not been accepted or
unloaded by Keystone, then Seller shall cause such Shipment of Rejection Point
Coal to be removed from the Point of Delivery within three days after notice of
such rejection, and Seller shall be responsible for all costs of removal. If a
Shipment of Rejection Point Coal is rejected by Keystone, then Seller shall use
its reasonable best efforts to deliver a replacement Shipment of coal within
seven days and be responsible for all costs of delivery.
6.4 Suspension of Shipments. If the weighted semi-monthly average
quality analysis of all coal delivered during any month hereunder, as reported
by Seller to Keystone pursuant to Section 10.3(b), fails to conform to each
Semi-Monthly Average Suspension Specification as set forth in Section 6.2,
Keystone may suspend further Shipments by notice to Seller given within ten days
following receipt of Seller's report on quality pursuant to Section 10.3(b).
Such suspension shall apply to all Shipments not in transit on the date of the
notice of suspension and shall continue until Seller provides adequate
assurances that future Shipments will conform to the quality specifications set
forth in Section 6.2. If Seller has not provided such adequate assurances within
90 days after receiving notice from Keystone of the suspension of Shipments,
then Seller shall have committed an Event of Default as specified in Section
12.1(d) hereof.
--------------------------------------------------------------------------------
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6.5 Replacement Coal. Keystone may purchase replacement coal in
reasonable purchase quantities to cover suspended or rejected Shipments under
the following circumstances, and in each case, Seller shall reimburse Keystone
for the excess of the costs reasonably incurred by Keystone in connection with
the purchase of replacement coal over the costs that otherwise would have been
incurred in connection with the purchase of coal under the terms of this
Agreement: (a) Seller fails to replace a Shipment of coal which has been
rejected by Keystone pursuant to Section 6.3 because it is Rejection Point Coal,
(b) Keystone has suspended further shipments by Seller pursuant to Section 6.4
or 6.6(a), or (c) Seller fails to deliver any Shipment of coal for reasons other
than Force Majeure within three days of the delivery date specified for such
Shipment pursuant to Section 4.3, provided that if Seller notifies Keystone of
its intent to provide a replacement shipment of coal pursuant to Section 6.3,
such failure period shall be 7 days.
6.6 Coal Handling or Operating Problems. (a) If Keystone experiences
any coal handling or operating problem at the Facility which Keystone reasonably
concludes is the result of Seller's delivering coal hereunder which has any of
the following characteristics: (i) [*](4)% or more of coal delivered has a top
size greater than [*](4) inches, (ii) contains, on a semi-monthly average basis,
in excess of [*](4)% coal of less than [*](4), (iii) a minimum grindability
(HGI) of [*](4), or (iv) a minimum ash fusion temperature of [*](4) (degrees) F
(I.D. - Reducing), then Keystone may notify Seller of the nature of such problem
and the particular specification(s) which Keystone reasonably concludes to be
causing
----------------------
(4) Portions of this exhibit have been omitted pursuant to a request for
confidential treatment filed with the Securities and Exchange Commission (the
"Commission"). The omitted portions, marked by "[*]", have been filed separately
with the Commission.
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such problem. Unless Seller has provided adequate assurances to Keystone within
30 days following receipt of such notice that future deliveries hereunder will
conform to the specifications set forth in this Section 6.6(a), Keystone may,
immediately upon a second notice to Seller, suspend further Shipments including
those in transit until Seller can provide such adequate assurances. If Shipments
are suspended, Seller shall advise Keystone weekly of progress made toward
correcting the deficiency. If Seller has not provided such adequate assurances
to Keystone within 60 days following receipt of such notice of suspension of
Shipments, then Seller shall have committed an Event of Default as specified in
Section 12.1(d).
(b) If Seller provides coal in compliance with this Agreement, and such
coal causes operating, mechanical or handling problems in the Facility, Keystone
and Seller agree to work together in good faith to resolve such problems.
Keystone shall notify Seller of the specific nature of such problems. Seller
agrees to provide advice and consultation on solutions for such problems to the
extent it can do so. Keystone agrees to make modifications to the material
handling or feed system of the Facility to minimize or eliminate such problems
to the extent it can do so at reasonable cost. In the event that Keystone is
unable to make reasonable cost modifications to the Facility to resolve such
problems, Seller agrees to modify the coal supplied hereunder to minimize or
eliminate such problems to the extent it can do so. If such problems cannot be
resolved to the reasonable satisfaction of Keystone within 150 days of
Keystone's notice to Seller concerning such problems, either party shall have
the right to terminate this Agreement upon 30 days' prior written notice of
termination to the other party.
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(c) If Seller provides coal in compliance with this Agreement, and such
coal causes Keystone to be unable to dispose of ash due to constituents in the
coal which results in the ash having constituents which exceed the permitted
levels set forth in Keystone's disposal permits, Keystone and Seller agree to
work together in good faith to resolve such problem. Keystone shall notify
Seller of the specific nature of such problem, including the relevant permitted
levels set forth in Keystone's disposal permits. Seller agrees to provide advice
and consultation on solutions for such problem to the extent it can do so.
Keystone agrees to make modifications to the Facility to resolve such problem to
the extent it can do so at reasonable cost. If such problem cannot be resolved
to the reasonable satisfaction of Keystone within 120 days of Keystone's notice
to Seller concerning such problem, either party shall have the right to
terminate this Agreement upon 30 days' prior written notice of termination to
the other party.
6.7 Adjustment of Price for New Specifications. If Seller is to provide
coal conforming to new specifications agreed to by Seller and Keystone as a
result of adjustments made pursuant to Sections 6.6(b), 6.6(c) or otherwise, the
Base Price of coal shall be negotiated by Seller and Keystone in good faith to
reflect such adjustment to the new specifications. If the parties are unable to
reach agreement on a price adjustment, either party may terminate this
Agreement.
6.8 Corrective Actions. Promptly following any suspension of deliveries
hereunder pursuant to Section 6.4 or Section 6.6(a), Seller shall undertake
corrective actions diligently and in good faith in order to provide Keystone
adequate assurances as required under such Sections. During the continuance of
any such suspension, Seller shall no less frequently than once every week advise
Keystone of Seller's determinations
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as to the nature of the conditions causing such noncompliance with such
specifications, all efforts underway by Seller to correct such conditions, and
the results of such efforts.
6.9 Change in Law. If Keystone is unable to burn the coal supplied
hereunder without significant alteration of the Facility due to a change in
Applicable Laws resulting in a Force Majeure event, the parties shall negotiate
in good faith to agree upon a solution, but if no solution can be agreed upon
within 120 days, either party shall have the right to terminate this Agreement
upon 30 days' prior written notice to the other party.
6.10 Testing of Coal with Volatility Less than 20 Percent. During the
initial twelve months of Commercial Operation, or such longer period as may be
necessary to maintain boiler warranties in effect, Seller shall supply coal to
Keystone having a volatility of not less than [*](5)%. Thereafter, the parties
agree to conduct a testing program using coal having a volatility of less than
[*](5)%, but in no event less than [*](5)%, with a view to determining whether
the boiler can be satisfactorily operated using such coal. Keystone shall
consult with Seller during such tests, and shall promptly report the results of
the tests to Seller. Keystone shall determine the lowest volatility coal (not
less than [*](5)% nor more than [*](5)%) at which the boiler can be
satisfactorily operated, and shall promptly notify Seller of its determination,
in which event the coal specification in this Agreement shall be deemed modified
to reflect the results of the tests.
6.11 EXCLUSIONS OF WARRANTIES. THE AGREEMENT AND EXPRESS WARRANTIES
CONTAINED IN SECTIONS 3.2, 6.1 AND 6.2 SHALL BE IN LIEU OF ANY OTHER WARRANTIES
BY SELLER, EXPRESS OR IMPLIED,
---------------------
(5) Portions of this exhibit have been omitted pursuant to a request for
confidential treatment filed with the Securities and Exchange Commission (the
"Commission"). The omitted portions, marked by "[*]", have been filed separately
with the Commission.
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INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE.
ARTICLE VII
PRICE
7.1 Base Price. The Base Price for coal with the quality defined as
Semi-Monthly Average Contract Specifications in Section 6.2 and delivered by
Seller to the Point of Delivery subsequent to the Commercial Operation Date is
$[*](6) per Ton, effective January 1, 1993, for annual quantities of 311,000
Tons or less, and $[*](6) per Ton, effective January 1, 1993, for annual
quantities greater than or equal to 600,000 Tons. For annual quantities between
311,000 and 400,000 Tons, the Base Price for coal shall be an amount per Ton
determined by linear interpolation between $[*](6) and $[*](6), effective
January 1, 1993. For annual quantities between 400,000 and 600,000 Tons, the
Base Price for coal shall be an amount per Ton determined by linear
interpolation between $[*](6) and $[*](6), effective January 1, 1993. The Base
Price for all coal delivered prior to the Commercial Operation Date shall be
$[*](6) per Ton, effective January 1, 1993. Commencing with the first full
Operating Year and continuing with each Operating Year thereafter, for annual
quantities less than 311,000 Tons, Keystone shall pay Seller a dedication fee
(the "Dedication Fee") for each Ton of the shortfall amount, unless such
shortfall is a result of suspension or rejection of deliveries pursuant to
Sections 6.3, 6.4 or 6.6 (a), an event of Force Majeure, or termination of this
Agreement in accordance with its terms. Effective as of January 1, 1993, the
Dedication Fee shall be $[*](6) per Ton of
---------------------
(6) Portions of this exhibit have been omitted pursuant to a request for
confidential treatment filed with the Securities and Exchange Commission (the
"Commission"). The omitted portions, marked by "[*]", have been filed separately
with the Commission.
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the shortfall amount and shall be escalated each calendar year thereafter by the
GDP Deflator, provided however, that such escalation shall not be more than
[*](7)% per year and any excess shall not be reflected in the price adjustment
in any succeeding year.
7.2 Escalation of Base Price. From January 1, 1993 through the
expiration of the Initial Term or any Extended Term of this Agreement, the Base
Price for Coal delivered by Seller to the Point of Delivery shall be adjusted on
an annual basis by the Base Escalator pursuant to Section 7.3 or, if applicable,
the New Base Escalator or other escalator determined pursuant to Section 7.6.
7.3 Base Escalator. The Base Escalator is defined in Article 5.1B(ii)
of the Agreement for Purchase of Electric Power between Atlantic Electric and
Keystone attached hereto as Exhibit D; provided that the term "bituminous coal"
referred to therein shall have the meaning set forth in Section 7.5 hereof.
Pursuant to the provisions of the Agreement for Purchase of Electric Power, the
Base Escalator will be established by Atlantic Electric and reported to Keystone
in the first quarter of each calendar year. The first Base Escalator adjustment
shall occur in 1994. The value of the Base Escalator established for a calendar
year will be applied to all coal delivered during that calendar year.
7.4 Adjustment of Price for Sulfur Content. The Base Price of coal
shall be adjusted for changes in the annual average of the sulfur content of
bituminous coal (as defined in Section 7.5) used by New Jersey utilities as
follows:
-------------------
(7) Portions of this exhibit have been omitted pursuant to a request for
confidential treatment filed with the Securities and Exchange Commission (the
"Commission"). The omitted portions, marked by "[*]", have been filed separately
with the Commission.
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Annual Average Price Price
Sulfur Content Reduction/Ton Increase/Ton
-------------- ------------- ------------
0-0.5% $[*](8) --
0.5-0.6% $[*](8) --
0.6-0.7% $[*](8) --
0.7-0.8% $[*](8) --
0.8-0.9% $[*](8) --
0.9-1.5% -- --
1.5-1.6% -- $[*](8)
1.6-1.7% -- $[*](8)
1.7-1.8% -- $[*](8)
1.8-1.9% -- $[*](8)
1.9% and greater -- $[*](8)
The Price Reduction and Price Increase rates for changes in the average annual
sulfur content in the coal shall be effective as of January 1, 1993 and shall be
adjusted each calendar year by the GDP Deflator, provided however, that such
adjustment shall not be more than 5% per year and any excess shall not be
reflected in the price adjustment in any succeeding year.
7.5 Bituminous Coal. The annual average cost of bituminous coal (for
purposes of the Base Escalator) and sulfur content (for purposes of Section 7.4)
shall be based on the Form 423 reports filed with FERC by New Jersey utilities
reporting the annual average cost of bituminous coal used by such New Jersey
utilities. For purposes of this Agreement "bituminous coal" as reported by New
Jersey utilities on FERC Form 423 shall mean bituminous coal with the following
quality specifications:
Bituminous Coal Parameter As Received Ranges
------------------------- ------------------
Heating Value, Btu/Lb [*](8)
Ash Content, % [*](8)
Sulfur Content, % [*](8)
(8) Portions of this exhibit have been omitted pursuant to a request for
confidential treatment filed with the Securities and Exchange Commission (the
"Commission"). The omitted portions, marked by "[*]", have been filed separately
with the Commission.
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7.6 New Base Escalator. (a) If during the Initial Term or any Extended
Term of this Agreement the Base Escalator as defined in Article 5.1B(ii) of the
Agreement for Purchase of Electric Power between Atlantic Electric and Keystone
is no longer effective and a new Base Escalator is established by Atlantic
Electric and agreed to by Keystone as the new Base Escalator (the "New Base
Escalator") applicable to the Agreement for Purchase of Electric Power, then,
subject to the provisions of Section 7.6(b) below, such New Base Escalator shall
apply to this Agreement for the calculation of the Base Price of coal. Subject
to Section 7.6(b) below, the New Base Escalator shall apply from the date the
existing Base Escalator is no longer effective.
(b) Keystone agrees to notify Seller promptly of the
non-effectiveness or significant risk of non-effectiveness of the existing Base
Escalator. Keystone further agrees to keep Seller informed as to the status and
content of its negotiations with Atlantic Electric to establish the New Base
Escalator. Keystone shall give good faith consideration to any suggestions or
objections raised by Seller concerning the proposed terms of the New Base
Escalator. In the event that Keystone and Atlantic Electric agree to a New Base
Escalator and Seller believes that it will suffer a gross inequity because of
the adverse effect such New Base Escalator will have on determining the
escalations of the Base Price, then, within 10 days of receipt of a written
notice from Seller, Keystone shall negotiate in good faith with Seller to
establish a basis other than the New Base Escalator for providing reasonable
escalation to the Base Price for the remaining term of this Agreement from the
date that the Base Escalator is no longer effective. The new basis for providing
a reasonable escalation to the Base Price as agreed to by the parties shall be a
100% bituminous coal (as defined in Section 7.5) based escalator. If after 30
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days of negotiations the parties are unable to agree on a new basis for
providing a reasonable escalation, Seller may submit such matter to arbitration
pursuant to Article XVIII and the arbitrator shall be directed to develop a 100%
bituminous coal (as defined in Section 7.5) based escalator comparable to such
escalators used by utilities in the New Jersey region for coal fired power
plants.
7.7 Government Imposition. If any change in any current non-federal
Applicable Law or the existence of a new non-federal Applicable Law (any such
change or new non-federal Applicable Law is referred to herein as a "Government
Imposition") shall result in an increase in the cost to Seller of the mining,
processing or transporting of coal hereunder, then Keystone shall reimburse
Seller for 50% of Seller's increased costs resulting from such Government
Imposition. Such extra costs will be billed separately and shall be accompanied
by reasonable documentary evidence supporting the extra costs.
ARTICLE VIII
PREMIUMS AND PENALTIES FOR VARIATIONS IN QUALITY
8.1 Calculation and Billing of Premiums and Penalties. Premiums and
penalties shall apply to all coal delivered under this Agreement based upon the
semi-monthly average analysis of coal as determined pursuant to Section 10.3(b).
Premiums and penalties shall be calculated at the end of each Billing Period
based upon a comparison with the Semi-Monthly Average Contract Specifications
set forth in Section 6.2.
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8.2 Premiums and Penalties for Calorific Value. The Base Price is based
on coal with a calorific value of [*](9) Btu per pound. If the actual
semi-monthly average calorific value of all coal delivered in any Billing Period
is greater or less than [*](9) Btu per pound, then a premium or penalty shall be
determined in accordance with the following formulae:
Penalty = (Y-A) PxT, if Y is greater than A
-----
Y
Premium = (A-Y) PxT, if A is greater than Y
-----
Y
Where:
P is the Base Price in effect for the Billing Period, $/Ton
A is the weighted average calorific value per pound of
all coal delivered during the Billing Period (Btu/lb.
(HHV)).
Y is [*](9) Btus per pound.
T is the number of Tons of coal delivered hereunder during
the Billing Period.
8.3 Premiums and Penalties for Ash. The Base Price is based on coal
with an ash content of [*](9) %. If the actual semi-monthly average ash content
of all coal delivered in any Billing Period is greater or less than [*](9) %,
then a premium or penalty shall be determined in accordance with the following
formula:
Penalty = (A-E) ADPxT, if A is greater than E
-----
E
-------------------
(9) Portions of this exhibit have been omitted pursuant to a request for
confidential treatment filed with the Securities and Exchange Commission (the
"Commission"). The omitted portions, marked by "[*]", have been filed separately
with the Commission.
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Premium = (E-A) ADPxT, if E is greater than A
-----
E
Where:
A is the average ash content of all coal delivered
during the Billing Period (stated as a percentage by
weight).
E is contract specification of ash content of [*](10) wt.
T is the number of Tons of waste generated during the
Billing Period.
ADP is the Ash Disposal Price for the Billing Period
(stated as dollars per Ton) which shall not be less
than $[*](10) per Ton.
8.4 Premiums and Penalties for Sulfur. Seller expects to deliver coal
with a sulfur content of approximately [*](10) percent or less by weight. If the
average semi-monthly sulfur content of the delivered coal during any billing
period is less than [*](10) percent, Keystone shall pay Seller a premium of
$[*](10) per Ton for each one tenth of a percentage point that the average
semi-monthly sulfur content is below [*](10) percent during such billing period.
If the sulfur content of any delivered coal is [*](10) percent or greater,
Keystone may reject the coal in accordance with Section 6.3 of this Agreement.
The $[*](10) per Ton premium shall be effective as of January 1, 1993 and shall
be escalated each calendar year by the GDP Deflator provided however, that such
escalation shall not exceed [*](10) % per year and any excess shall not be
reflected in the price adjustment in any succeeding year. The $[*](10) per Ton
premium is based upon an estimated Ash Disposal Price of not less than $[*](10)
/Ton effective January 1, 1991. An example of the calculation used to determine
the adjustment of the premium is attached hereto as Exhibit E.
-------------------
(10) Portions of this exhibit have been omitted pursuant to a request for
confidential treatment filed with the Securities and Exchange Commission (the
"Commission"). The omitted portions, marked by "[*]", have been filed separately
with the Commission.
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ARTICLE IX
BILLING AND PAYMENT
9.1 Billing. For purposes of this Agreement, Seller shall submit
invoices for coal delivered to Keystone on the basis of a semi-monthly Billing
Period. A Billing Period shall consist of that period of days from the 1st to
the 15th of each month, or the 16th to the last day of each month. Seller shall
submit to Keystone an invoice by the 1st and 16th of each month for all coal
delivered to the Point of Delivery at the Facility and accepted by Keystone
during the preceding Billing Period. Seller may submit invoices to Keystone by
fax. Each semi-monthly invoice shall be itemized by Shipment and show (i) the
quantity of coal delivered during the Billing period, (ii) the Base Price
(including any adjustments pursuant to Sections 7.4, or 7.6), (iii) the
semi-monthly average analysis of coal delivered during the Billing Period as
determined pursuant to Section 10.3(b), (iv) premiums and penalties for
variations in quality as provided for in Article VIII, and (v) the supporting
calculations. If any revision of the Base Price is in process, invoicing shall
be made on the basis of the existing Base price, and appropriate retroactive
adjustments shall be made when the new Base Price has been calculated. For
invoicing purposes, the parties agree that the Base Price during the initial
Operating Year shall be calculated on the basis of 460,000 tons; for each
subsequent Operating Year, the Base Price shall be calculated on the basis of
the greater of an annual quantity of 400,000 tons or the previous year's
quantity until the earlier of (i) the date on which Seller shall have delivered
600,000 tons of coal in such Operating Year or (ii) the end of such Operating
Year (the earlier of such dates being the "Annual Quantity Determination Date").
As soon as practicable following the Annual Quantity Determination Date, (i)
Seller shall
--------------------------------------------------------------------------------
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credit Keystone for the aggregate amount, if any, by which the Base Price
actually invoiced by Seller during such Operating Year exceeded the correct Base
Price, or (ii) Keystone shall pay to Seller the aggregate amount, if any, by
which the correct Base Price exceeded the amount actually paid by Keystone
pursuant to invoices from Seller. An example of the calculations used for the
computation of the Base Price and any premiums or penalties is attached hereto
as Exhibit E.
9.2 Payment. Keystone shall pay Seller amounts due as shown on invoices
rendered pursuant to Section 9.1 hereof no later than 20 days after receipt of
an invoice. If the payment due date falls on a Saturday, Sunday or holiday, the
payment will be due on the preceding business day. Payments shall be made by
wire transfer in immediately available funds to Seller's account at a bank
designated by Seller. In the event part or all of a payment is not made when
due, interest shall accrue and be payable on the overdue amount at a rate equal
to the daily Prime Rate plus two percentage points, as published by the Mellon
Bank (East) in Philadelphia, for the number of days that payment is late.
9.3 Disputed Invoices. Keystone shall pay the full amount of each
invoice except for disputed amounts. Subject to Section 18.2, Keystone shall not
be obligated to pay any portion of an invoice which it, in good faith, believes
is in dispute. In such case, on or before that payment is due, Keystone shall
notify Seller in writing of its reasons for disputing an invoice amount, or its
reason for believing such portion of an invoice to be in dispute. If Keystone is
determined to be in error regarding a disputed amount, Keystone shall pay such
withheld amount immediately upon such determination, together with interest at
the rate specified in Section 9.2.
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9.4 Records of Seller. Seller shall maintain complete and accurate
records to support all invoices submitted pursuant to Section 9.1 hereof.
Keystone shall have the right, upon reasonable prior notice, to inspect and
review at Seller's offices any such records at any reasonable time for the
purpose of verifying the correctness of any invoice submitted by Seller to
Keystone, any adjustment to the Coal Price and any calculation of premiums and
penalties for variations in quality.
ARTICLE X
WEIGHING, SAMPLING AND ANALYSIS
10.1 Weighing. The weights of coal delivered hereunder shall be
determined by the use of certified scales maintained by the railroad
transporting the coal to Seller's barge or vessel loading facility. Seller shall
arrange with the transporting railroad to weigh the coal pursuant to a procedure
developed by Seller and the railroad and approved by Keystone. Seller and
Keystone may be present during such weighings, and the railroad weights shall be
final and binding on both Seller and Keystone. In the event Seller installs
certified scales which meet the railroad's requirements and the railroad no
longer weighs Seller's shipments to Keystone, the weights of coal delivered
hereunder shall be determined by the use of Seller's certified scales so long as
Seller weighs the coal pursuant to a procedure approved by Keystone which
approval shall not be unreasonably withheld. The weights that are determined in
the manner set forth above will be binding on both Keystone and Seller.
10.2 Sampling. Seller shall take a representative sample of coal
contained in each shipment at the time the coal is loaded into rail cars (the
"Rail Sample") and the Independent Laboratory shall take a representative sample
at the time the coal is
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transferred from the rail cars into the barge or vessel (the "Barge Sample").
Each Rail Sample and Barge Sample shall be taken using a mechanical sampling
system taking full stream increments. Each Rail Sample and Barge Sample for a
Shipment from the mechanical sampler shall be divided into three parts, and each
part shall be placed into an airtight container and suitably labeled. With
respect to each Rail Sample, one part shall be delivered to the Independent
Laboratory for analysis by the Independent Laboratory in accordance with ASTM
Methods D-2234 and D-2013 or such other methods as may reasonably be agreed upon
by the parties; one part shall be retained by Seller for its own analysis; and
the third part shall be delivered to and retained by the Independent Laboratory
for a period of 45 days from the date of sampling for referee analysis pursuant
to Section 10.4. With respect to each Barge Sample, one part shall be retained
by the Independent Laboratory for analysis by the Independent Laboratory in
accordance with ASTM Methods D-2234 and D-2013 or such other methods as may
reasonably be agreed upon by the parties; one part shall be retained by the
Independent Laboratory for analysis upon the request of either party at the
expense of the requesting party; and the third part shall be retained by the
Independent Laboratory for a period of 45 days from the date of sampling for
referee analysis pursuant to Section 10.4. Either party shall have the right to
have a representative present at any and all times to observe the sampling and
sample preparation hereunder and to obtain sample splits for check purposes.
10.3. Analysis. (a) The Independent Laboratory shall analyze its part
of each Rail Sample at the expense of Seller. The analysis of each Rail Sample
for moisture, ash, sulfur, volatile matter and calorific value shall be reported
by the Independent Laboratory to Keystone and Seller by telecopier within 36
hours following the loading of such
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Shipment. If Seller or Keystone disputes any Rail Sample analysis made by the
Independent Laboratory, then the Independent Laboratory shall perform a referee
analysis of such Rail Sample pursuant to Section 10.4. The Independent
Laboratory's Rail Sample analysis shall be used to determine Keystone's right to
reject coal pursuant to Section 6.3.
(b) The Independent Laboratory shall analyze its part of each Barge
Sample at the equal and shared expense of Seller and Keystone. The analysis of
such Barge Sample for moisture, ash, sulfur, volatile matter and calorific value
shall be reported by the Independent Laboratory by telecopier to Keystone and
Seller within 24 hours following the loading of such Shipment. If Seller or
Keystone disputes any Barge Sample analysis made by the Independent Laboratory,
then the Independent Laboratory shall perform a referee analysis of such Barge
Sample pursuant to Section 10.4. The Independent Laboratory's Barge Sample
analysis shall be determinative of coal quality under this Agreement and shall
govern for billing and payment purposes unless superseded pursuant to the
provisions of Section 10.4.
As soon as practicable following the end of each Billing Period, Seller
shall provide to Keystone a report of the semi-monthly average analysis of each
of the characteristics listed in Section 6.2 for all coal delivered hereunder
during each Billing Period, which analysis shall be based upon the Independent
Laboratory's Barge Sample analysis of such coal.
10.4 Referee Analysis. The Independent Laboratory shall perform the
referee analysis of any disputed Rail Sample analysis or Barge Sample analysis
made by the Independent Laboratory or by Seller. The parties will agree to
designate an alternate
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Independent Laboratory if for any reason the first named Independent Laboratory
is unavailable or becomes unacceptable to either party. With respect to the
characteristics of the coal in dispute, the analysis in dispute shall be deemed
to have been confirmed if the difference between the referee analysis of the
Independent Laboratory and the disputed analysis is within the tolerance as
specified within the applicable ASTM standards. If the disputed analysis is so
confirmed, then all costs of such referee analysis shall be borne by the party
initiating the referee analysis. If a disputed analysis is not so confirmed,
then such analysis shall be superseded by the referee analysis of the
Independent Laboratory, and all costs of such referee analysis shall be shared
equally by the parties.
ARTICLE XI
FORCE MAJEURE
11.1 Definition of Force Majeure. The term "Force Majeure" shall mean
any cause or event beyond the reasonable control of either party causing a
failure or delay of that party in performing any obligation hereunder, which
events shall include, but are not limited to: drought, flood, earthquake, storm,
fire or lightning; epidemic; acts or failure to act of local, state, federal or
civil government; war or its cessation; riot, disturbance or sabotage; acts of
terrorism; nuclear emergency or other cataclysmic occurrences; labor shortage,
strikes or similar labor difficulty and interruptions; area-wide rail, barge or
vessel shortage, or other interruptions to transportation (including obstruction
of the Chesapeake and Delaware Canal); authorized diversion or confiscation of
coal; accidents; breakdowns of or damage to plant, equipment or facilities;
forced outages at the Facility; failure of Atlantic City Electric Company to
perform its obligations under the Agreement
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for Purchase of Electric Power; failure of Monsanto Chemical Company to perform
its obligations under the Electric Power Sales Agreement or Steam Supply
Agreement; failure of a third party to perform under any material contract
related to the Facility and to which Keystone is a party; perils of the sea; or
other such causes, whether of like or dissimilar nature, whether or not foreseen
or foreseeable by either or both of the parties, which wholly or partially
hinders, prevents, interrupts or delays (i) the production, loading, unloading,
transportation, sampling, analysis or delivery of the coal by Seller or its
subcontractors, (ii) the receiving, unloading, storing or burning of the coal by
Keystone or its subcontractors, or (iii) otherwise prevents, interrupts, hinders
or delays the performance of a party's obligations hereunder. The term Force
Majeure shall specifically include the inability of Keystone to burn the coal
supplied hereunder in the Facility without significant alteration of the
Facility or installation of additional significant equipment in order to comply
with changes in Applicable Laws. The term Force Majeure shall not include any
market driven forces such as: scarcity of commodities; increased transportation
cost; costs of inventory; outages at Keystone's Facility resulting from economic
dispatch; or other economic factors faced by Seller or Keystone.
11.2 Consequence of Force Majeure. A party's performance of its
obligations hereunder, except obligations to make payments of money already due
to the other party hereunder prior to the occurrence of the Force Majeure event,
shall be excused to the extent prevented, interrupted, hindered or delayed by a
Force Majeure event. In case of reduction of Seller's output and consequent
inability to deliver, or reduction of Keystone's ability to accept delivery of,
or to consume coal, resulting from an event of Force
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Majeure, Seller and Keystone shall endeavor, upon request of the other, to
continue the delivery and acceptance, respectively, of substantially the same
proportion of their respective production and consumption as so reduced.
Deficiencies in the quantity of coal delivered hereunder due to a Force Majeure
event shall not be made up except by mutual agreement of Keystone and Seller.
The party claiming excuse because of a Force Majeure event shall give notice by
telephone to the other party immediately upon becoming aware of such event, with
such notice confirmed in writing as soon as practicable thereafter under the
circumstances. Such notice to the other party shall describe the circumstances
of the event or cause giving rise to the claim of Force Majeure and the
anticipated duration thereof. During the existence of any Force Majeure event
preventing delivery of coal by Seller, Keystone shall have the right to purchase
and utilize replacement coal from other suppliers in a quantity which bears a
commercially reasonable relation to the quantity which would have been delivered
to Keystone but for such Force Majeure event. Keystone, at its sole discretion,
shall give Seller the opportunity to bid on the supply of such replacement coal
and, within fifteen days, to match the terms offered by such other suppliers.
During the existence of any Force Majeure event preventing utilization of coal
by Keystone, Seller shall have the right to sell coal dedicated to Keystone to
third parties in a quantity which bears a commercially reasonable relation to
the quantity which would have been delivered to Keystone but for such Force
Majeure event.
11.3. Events Beyond Control of a Party. As used in Section 11.1, an
event shall be deemed to be beyond the control of the party claiming excuse if
such party is unable to avoid or overcome such event despite the exercise of due
diligence. A strike or other
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labor dispute shall be deemed to be beyond the control of the party whose
performance is interrupted or prevented by such strike or labor dispute, and the
settlement of such strike or labor dispute shall be at the sole discretion of
such party. Economic hardship, by itself, experienced by a party in carrying out
its obligations hereunder shall not be deemed to be an event beyond the control
of such party. Subject to the foregoing, a party claiming excuse by reason of a
Force Majeure event shall exercise commercially reasonable good faith efforts to
remedy or overcome such event as soon as practicable under all the
circumstances. In the event that the parties are unable in good faith to agree
that a Force Majeure event has occurred, the parties shall submit the dispute
for arbitration pursuant to Article XVIII, and the burden of proof as to whether
an event of Force Majeure has occurred shall be upon the party claiming an event
of Force Majeure.
11.4 Termination for Force Majeure. If either party believes an event
of Force Majeure which excuses performance of either party hereunder is likely
to be permanent (i.e., it is likely to continue for a period exceeding one
year), such party may notify the other party of such belief. Such notice shall
state the reasons for the belief that the event of Force Majeure will be
permanent and why there are no steps which can be taken at a commercially
reasonable cost to eliminate such Force Majeure event. The party receiving such
notice shall respond within ten days stating either (i) that it concurs that the
Force Majeure event is likely to be permanent, or (ii) that it disagrees that
such Force Majeure event is likely to be permanent and its reasons thereof.
Unless otherwise mutually agreed, this Agreement shall be terminated if both
parties concur that the Force Majeure event is likely to be permanent.
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ARTICLE XII
DEFAULT AND REMEDIES
12.1 Events of Default. An event of default ("Default") under this
Agreement shall be deemed to exist upon the occurrence of any one or more of the
following events:
(a) Failure by either party to make payment of any amount due the
other party under this Agreement, which failure continues for a period of five
days after receipt of written notice of such nonpayment (unless payment of such
amount is contested or otherwise disputed in accordance with the provisions of
this Agreement);
(b) Subject to the following sentence, failure by Seller to
deliver to Keystone during any month two or more Shipments of coal within five
days of the dates specified in the Order(s) for such Coal, unless excused by
Force Majeure. A Default shall be deemed to have occurred if, after a Notice of
Default, Seller has failed to deliver such coal within ten days and has failed
to provide adequate assurances to Keystone within such cure period that such
failure will not be repeated.
(c) Failure by Seller to meet Orders from Keystone aggregating
20,000 Tons or more in any one month, unless excused by Force Majeure.
(d) Failure by Seller to provide adequate assurances as required
in connection with any provision of this Agreement within ten days after notice
of such failure.
(e) Failure of either party to perform any other covenant,
agreement or undertaking provided for in this Agreement or breach of any
representation or warranty of either party which has a material adverse effect
on the other party, and (i) such failure
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or breach continues for 30 days after notice of such failure or breach or (ii)
if the nonperforming party shall commence within such 30 days and shall
thereafter proceed with all due diligence to cure such failure or breach, such
failure or breach is not cured within such longer period (not to exceed 30 days)
as shall be necessary for such party to cure the same with all due diligence.
(f) An assignment of this Agreement which is not permitted or
consented to pursuant to Section 16.1.
(g) The bankruptcy or insolvency of either party.
12.2 Remedies for Default. Upon the occurrence and during the
continuance of Default hereunder, the party not in Default shall be entitled,
without limitation, to any of the following remedies:
(a) To terminate this Agreement by written notice upon the
expiration of any applicable cure period or period prescribed for provision of
adequate assurances.
(b) Upon a showing that its remedy at law is inadequate, to obtain
an order compelling specific performance of this Agreement and injunctive relief
restraining any actual or threatened breach of any material obligation of the
other party under this Agreement without the necessity for filing any bond.
(c) To purchase replacement coal as provided in Section 6.5.
12.3 Waiver of Default. Either party may waive a Default by the other
party, provided that no such waiver shall be binding unless reduced to writing,
and any such waiver shall be deemed to extend only to the particular occurrence
of Default waived and shall not limit or otherwise affect any rights that either
party may have with respect to any prior or subsequent Default.
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12.4 Cumulative Remedies. None of the remedies provided in this
Agreement is intended to be exclusive, but each shall be cumulative and in
addition to any other remedy referred to herein or otherwise available to either
party at law or in equity.
12.5 No Consequential Damages. Notwithstanding anything in this
Agreement to the contrary, neither party shall be liable for consequential
damages by virtue of its breach of any of its obligations, representations or
warranties hereunder.
ARTICLE XIII
REPRESENTATIONS, WARRANTIES AND COVENANTS
13.1 Seller's Representations and Warranties. In addition to the
representations and warranties set forth elsewhere in this Agreement, Seller
hereby represents and warrants to Keystone as follows:
(a) Seller is a corporation duly organized and in good standing
under the laws of the State of Delaware and has been duly authorized by all
requisite corporation action to execute and deliver this Agreement. Seller
further represents that it is not involved in any litigation with any party
which would jeopardize or impair Seller's ability to perform this Agreement.
(b) The person executing and delivering this Agreement on
Seller's behalf is acting pursuant to proper authorization, and this Agreement
is the valid and binding obligation of Seller and is enforceable in accordance
with its terms except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and by general principles of equity (regardless
of whether enforcement is sought in a proceeding in equity or at law).
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(c) Neither the execution and delivery by Seller of this Agreement
nor the consummation by Seller of the transactions contemplated hereby is an
event which, of itself or with the giving of notice or the passage of time or
both, constitutes a violation of or will conflict with or result in any material
breach of or any default under the terms, conditions or provisions of any
judgment, law, rule or regulation to which Seller is subject, or of Seller's
organizational documents, or of any agreement or instrument to which Seller is a
party or by which it is bound.
13.2 Representations and Warranties of Keystone. In addition to the
representations and warranties set forth elsewhere in this Agreement, Keystone
hereby represents and warrants to Seller as follows:
(a) Keystone is a limited partnership organized, validly existing
and in good standing under the laws of Delaware with full power and authority to
enter into this Agreement. Keystone further represents that it is not involved
in any litigation with any party which would jeopardize or impair its ability to
perform this Agreement.
(b) The persons executing and delivering this Agreement on
Keystone's behalf are acting pursuant to proper authorization and this Agreement
is the valid and binding obligation of Keystone and is enforceable in accordance
with its terms.
(c) Neither the execution and delivery by Keystone of this
Agreement nor the consummation by Keystone of the transactions contemplated
hereby is an event which, of itself or with the giving of notice or the passage
of time or both, constitutes a violation of or will conflict with or result in
any material breach of or any default under the terms, conditions or provisions
of any judgment, law, rule or regulation to which
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Keystone is subject, or of Keystone's organizational documents, or of any
agreement or instrument to which Keystone is a party or by which it is bound.
(d) The berthing and unloading facilities at the Facility will not
require specially designed barges and will be located where a tug and a barge up
to 450 feet in length laden to a draft of 20 feet can approach, lie alongside
and depart always safely afloat under extreme low tide conditions or in adverse
weather. The berthing and unloading facilities will be designed and constructed
to withstand the normal forces occurring during the docking, mooring, shifting
and unloading of barges carrying no more than 10,000 short tons of coal. The
berthing and unloading facilities shall have a barge haul system of sufficient
size to move and stop barges safely beneath the unloader and controlled by
Keystone.
13.3 Special Covenants of Seller. In addition to all other covenants of
Seller made herein, Seller hereby covenants and agrees as follows:
(a) Seller covenants and agrees with Keystone that all coal sold
by Seller pursuant to this Agreement will be delivered by Seller free from all
liens (except carriers' liens) and adverse claims.
(b) Seller will own, lease or control sufficient quantities of
specified coal to meet the delivery requirements of this Agreement over the
specified Term.
(c) Seller's affiliates will obtain and maintain all Permits
necessary to mine and deliver the quantity of coal required to meet its
obligations for the Term of this Agreement.
13.4 Special Covenants of Keystone. In addition to all other covenants
of Keystone made herein, Keystone hereby covenants and agrees as follows:
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(a) Keystone will pay Seller for coal delivered and accepted and
no longer subject to dispute, before payment by Keystone on senior debt.
(b) Keystone shall obtain and have in effect all Permits necessary
for the delivery, off-loading and utilization of coal.
(c) Keystone shall give representatives of the barge owner
reasonable access to all engineering plans and drawings for the berthing and
unloading facilities at the Facility and all such plans shall be subject to the
reasonable approval of such representatives for compatibility with the barges
and the requirements of safe navigation.
(d) Keystone will maintain the berthing and unloading facilities
at the Facility as warranted in this Agreement, and will not alter such
facilities without prior notice to Seller and the barge owner.
(e) In the event that (i) Keystone shall have failed to notify
Seller prior to January 1, 1993 that Seller should direct its barge carrier not
to proceed with modifications to the barge which will transport coal to be
delivered hereunder and (ii) either the Commercial Operation Date shall not have
occurred by January 1, 1996 or Keystone shall have notified Seller to direct its
barge carrier to stop the modifications to the barge (the earlier of such dates
is referred to herein as the "Stop Date"), then Keystone shall reimburse Seller
for all costs to Seller of such barge modifications, together with the cost of
returning the barge to serviceable condition using the least expensive
alternative. If the Stop Date shall occur prior to the completion of the barge
modifications, as evidenced by the barge carrier's cancellation schedule (a copy
of which shall be delivered to Keystone prior to commencement of the barge
modifications), then Keystone's reimbursement obligation to Seller hereunder
shall be limited to the barge
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modification costs to Seller through the next cancellation date following the
Stop Date as indicated on such cancellation schedule, together with the cost of
returning the barge to serviceable condition using the least expensive
alternative. Seller shall provide Keystone with reasonable documentary evidence
of all barge modification costs for which it claims reimbursement.
ARTICLE XIV
INDEMNIFICATION
14.1 Seller Indemnity. Seller agrees to defend, indemnify and hold
harmless Keystone, its partners and affiliates and all officers, directors,
employees and agents thereof, from and against any and all liabilities
(including third party liabilities), lawsuits, claims, damages, losses, fines,
penalties and assessments by any public agency, costs and expenses (including
costs and expenses of defense, settlement and reasonable attorneys' fees), which
are incurred or brought as a result of any negligent or willful act or omission
of Seller, its agents, employees, representatives, contractors or subcontractors
associated with, or arising from, the performance by Seller of its obligations
under this Agreement, including such matters arising in connection with the
docking, unloading or undocking of the vessel.
14.2 Keystone Indemnity. Keystone agrees to defend, indemnify and hold
harmless Seller and its affiliates and all officers, directors, employees and
agents thereof, from and against any and all liabilities (including third party
liabilities), lawsuits, claims, damages, losses, property damage, fines,
penalties and assessments by any public agency, costs and expenses (including
costs and expenses of defense, settlement and reasonable attorneys' fees), which
are incurred or brought as a result of any negligent or willful act or
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omission of Keystone, its agents, employees, representatives, contractors or
subcontractors associated with, or arising from, the performance by Keystone of
its obligations under this Agreement, including such matters arising in
connection with the docking, unloading or undocking of the vessel.
14.3 Indemnity for Warranties and Other Matters. With respect to or
arising out of any breach by a party of its warranties, representations or
covenants hereunder, such party shall indemnify and hold the other party and its
successors, assigns, partners, employees, contractors, subcontractors and agents
harmless from and against all damages, losses or expenses suffered or paid as a
result of any and all claims, demands, suits, penalties, causes of action,
proceedings, judgments, administrative and judicial orders and liabilities
(including costs of defense, settlement and reasonable attorneys' fees)
assessed, incurred or sustained by or against such other party and its
successors, assigns, partners, employees, contractors, subcontractors and
agents.
14.4 Effect of Indemnification. The indemnification provided for in
this Article XIV shall not provide an alternative remedy for any deficiencies in
the quality of coal delivered hereunder or for any liabilities, damage or losses
which are expressly addressed in any other Article or Section of this Agreement;
the remedies expressly provided for in such other Article or Section of this
Agreement shall, to the extent applicable, govern the rights and obligations of
the parties instead of the remedies provided for in this Article XIV.
14.5 Notice and Legal Defense. Promptly upon receipt by a party
entitled to indemnification under this Article XIV (the "Indemnified Party") of
any claim as to which such indemnification may be applicable ("Claim"), the
Indemnified Party shall
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notify the other party (the "Indemnifying Party") of such fact in writing with
the details of such Claim. The Indemnifying Party shall assume the defense
thereof with counsel of its choice, subject to the reasonable approval of the
Indemnified Party. If the parties against whom the Claim is asserted include
both the Indemnified Party and the Indemnifying Party, and the Indemnified Party
shall have reasonably concluded that there may be legal defenses available to it
which are different from, additional to or inconsistent with, those available to
the Indemnifying Party, the Indemnified Party shall have the right to select
separate counsel to participate in the defense of such Claim on behalf of such
Indemnified Party, at the Indemnifying Party's expense. The Indemnified Party
shall retain authority, in the reasonable exercise of its discretion, to approve
any and all communications with, and to prevent the submission of any documents
to, any court or governmental authority having jurisdiction over the Claim.
14.6 Failure to Defend Claim. Should the Indemnified Party be entitled
to indemnification under this Article XIV as a result of a Claim by a third
party, and should the Indemnifying Party fail to assume the defense of such
Claim, having received notice as required by Section 14.5, the Indemnified Party
may at the expense of the Indemnifying Party contest (or, with the prior written
consent of such Indemnifying Party, not to be unreasonably withheld, settle)
such Claim; provided, that no such contest need be made, and settlement or full
payment of any such Claim may be made upon seven days' prior written notice to
but without consent of the Indemnifying Party (with such Indemnifying Party
remaining obligated to indemnify the Indemnified Party under this Article XIV)
if, in the written opinion of the Indemnified Party's counsel, such Claim is
meritorious.
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14.7 Joint Cause. If any Claims for indemnity arising out of Section
14.1 or Section 14.2 are caused by joint and concurring acts or omissions of
Seller and Keystone, the liability of Seller and Keystone therefor shall be
apportioned according to their respective degrees of fault.
14.8 Survival. The provisions of this Article XIV shall survive the
termination, cancellation or expiration of this Agreement, subject to applicable
statutes of limitation.
ARTICLE XV
NOTICES
15.1 Notices. Any notice required or permitted under this Agreement
shall be in writing, shall be deemed to have been duly given on the date of
receipt, and shall be either served personally on the party to whom notice is to
be given, delivered by any recognized courier service, sent by telecopy or fax,
or mailed to the party to whom notice is to be given, by first class registered
or certified mail, return receipt requested, postage prepaid. Notices shall be
addressed to the addressee at the address stated below, or at the most recent
address specified by written notice given to the other party in the manner
provided in this Section 15.1:
If to Keystone:
Keystone Energy Service Company, L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
Tel. 301/▇▇▇-▇▇▇▇
Fax 301/▇▇▇-▇▇▇▇
If to Seller:
Anker Energy Corporation
▇▇▇▇▇ ▇▇, ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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Attention: Vice President of Sales
Tel. (▇▇▇) ▇▇▇-▇▇▇▇
Fax (▇▇▇) ▇▇▇-▇▇▇▇
ARTICLE XVI
ASSIGNMENT
16.1 Assignment. This Agreement may be assigned by either party to a
successor to substantially all of the assets of a party hereto by way of merger,
consolidation or sale of assets, or to a parent, subsidiary or affiliate
provided that (i) unless released by the other party, the assignor shall remain
fully liable for all warranties, representations and covenants hereunder, and
(ii) the assignee shall assume in writing all warranties, representations and
covenants hereunder. Except as provided above and in Section 16.2, any transfer,
assignment, delegation, or attempted transfer, assignment or delegation under
this Agreement or of any of the rights or duties herein granted or imposed,
whether voluntary, by operation of law or otherwise, without consent of the
other party in writing, (which consent shall not be unreasonably withheld) shall
be an event of Default under this Agreement.
16.2 Assignment to Financing Parties. (a) The parties acknowledge that
Keystone intends to finance the construction of the Facility by non-recourse
"project financing," and that the Financing Parties will require such financing
to be secured by a first lien upon the Facility and other assets of Keystone,
including a collateral assignment of this Agreement and all rights and
obligations of Keystone hereunder. Accordingly, this Agreement may be assigned
as collateral by Keystone to any Financing Parties and their successors and
assigns without further consent of Seller. In order to facilitate the obtaining
of such financing, Seller hereby confirms its agreement that in the event of any
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Default on the part of Keystone of any provision of this Agreement or the
occurrence of any other event which Seller may claim as grounds for cancelling
this Agreement, Seller (having received prior written notice of the name and
address of the Financing Parties) will give written notice thereof to such
Financing Parties. The Financing Parties shall have 60 days following the
receipt of such notice within which to effect, or commence and diligently pursue
the completion of, a cure of such Default and to exercise their rights and
remedies under the Financing Documents, except that the applicable cure period
for the payment of amounts due to Seller for coal delivered hereunder shall be
30 days. Seller shall also execute such consent and agreement or similar
documents with respect to a collateral assignment hereof, as the Financing
Parties may reasonably request in connection with the Financing Documents.
Seller agrees to cooperate with Keystone in the negotiation and execution of any
reasonable amendment or addition to this Agreement required by the Financing
Parties which does not result in an adverse change in Seller's rights or
obligations hereunder in the good faith judgment of Seller.
(b) Seller may assign the right to payments under this
Agreement as collateral to any parties which provide financing to Seller or any
parent, subsidiary or affiliate of Seller ("Seller Financing Parties") and their
successors and assigns upon notice to, but without further consent of Keystone.
In order to facilitate the obtaining of any such financing, Keystone hereby
confirms its agreement that in the event of any Default on the part of Seller of
any provision of this Agreement or the occurrence of any other event which
Keystone may claim as grounds for cancelling this Agreement, Keystone (having
received prior written notice of the name and address of the Seller Financing
Parties) will give written notice thereof to such Seller Financing Parties.
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Keystone shall execute such consent and agreement or similar documents with
respect to such collateral assignment, as the Seller Financing Parties may
reasonably request. Keystone agrees to cooperate with Seller in the negotiation
and execution of any reasonable amendment or addition to this Agreement required
by the Seller Financing Parties which does not result in an adverse change in
Keystone's rights or obligations hereunder in the good faith judgment of
Keystone.
16.3 Successors and Assigns. Subject to the provisions of Sections 16.1
and 16.2 hereof, this Agreement and the respective rights and obligations of the
parties shall be binding upon and inure to the benefit of the respective
successors and permitted assigns of the parties hereto.
ARTICLE XVII
INSURANCE
17.1 Seller Coverages. Seller shall obtain and maintain, or cause to be
maintained, at its expense, and which shall name Keystone as an "Additional
Insured", the following insurance during the term of this Agreement:
(a) Comprehensive general liability insurance with bodily injury
and property damage combined single limits of at least $1,000,000 per
occurrence. Such insurance shall include, but shall not necessarily be limited
to, automobile liability, worker's compensation as necessary, specific coverage
for contractual liability encompassing the indemnification provisions in
Sections 14.1 and 14.3 hereof, broad
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form property damage liability, personal injury liability and, where applicable,
watercraft protection and indemnity liability.
(b) Umbrella, excess or other insurance policy which provides
$20,000,000 of additional coverage for any liability in excess of liability
limits provided above.
17.2 Restrictions on Seller Coverages.
(a) Seller may not materially change, cancel or allow insurance
policies required under this Agreement to lapse without giving thirty days'
written notice to Keystone.
(b) The failure to comply with the insurance provisions of this
Agreement shall not limit or relieve Seller from indemnifying and holding
harmless Keystone as provided by any provision of this Agreement.
17.3 Seller Subcontractor Coverages. Seller shall cause any
subcontractor(s) with which Seller contracts to provide barge or vessel
transportation of coal to fulfill its obligations under this Agreement to obtain
and maintain the following insurance, and which shall name Seller and Keystone
as "Additional Insured" during the term of the Agreement:
(a) Marine protection and indemnity insurance with limits of
$30,000,000 per occurrence; and
(b) Water pollution coverage insurance with limits of at least
$30,000,000 per occurrence.
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17.4 Keystone Coverages. Keystone shall obtain and maintain, or cause
to be obtained and maintained, at its expense, and which shall name Seller as an
"Additional Insured", the following insurance during the term of this Agreement:
(a) Comprehensive general liability insurance with bodily injury
and property damage combined single limits of at least $2,000,000 per
occurrence. Such insurance shall include, but shall not necessarily be limited
to, automobile liability, specific coverage for contractual liability
encompassing the indemnification provisions in Sections 14.1 and 14.3 hereof,
broad form property damage liability, worker's compensation as necessary,
personal injury liability.
(b) Umbrella, excess or other insurance policy which provides
$18,000,000 of additional coverage for any liability in excess of liability
limits provided above.
17.5 Restrictions on Keystone Coverages.
(a) Insurance policies may not be cancelled, allowed to lapse, or
materially changed without giving thirty days' written notice to Seller.
(b) The failure to comply with the insurance provisions of this
Agreement shall not limit or relieve Keystone from indemnifying and holding
harmless Seller as provided by any provision of this Agreement.
17.6 Endorsements. If either party purchases insurance to satisfy part
or all of its obligations under this Article XVII, such party shall cause its
insurers to amend its comprehensive general liability and, if applicable,
umbrella or excess liability policies and comprehensive automobile liability
insurance with an endorsement to the effect that, notwithstanding any provision
of the policy, this policy may not be cancelled, allowed to
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lapse or materially changed by the insurer without giving thirty (30) days prior
written notice to the other party.
17.7 Certificates. Each party shall provide the other party with
certificates of insurance pertaining to any insurance policies purchased to
satisfy such party's obligations under this Article XVII.
ARTICLE XVIII
ARBITRATION
18.1 Arbitration. The parties shall negotiate in good faith and attempt
to resolve any dispute which may develop under this Agreement; however, if the
parties are unable to resolve a dispute hereunder, either party may serve upon
the other a demand that such matter be arbitrated, in which case the same shall
be resolved by arbitration conducted in accordance with the rules of the
American Arbitration Association. In the event of such a dispute, the parties
shall endeavor to appoint an arbitrator agreeable to both of them, who shall be
the sole arbitrator. In the event that the parties are unable to agree upon an
arbitrator within twenty (20) days of the filing of a demand for arbitration by
the initiating party, then either party may request the American Arbitration
Association to appoint an individual in good standing of such Association's
Commercial Arbitration Panel as the sole arbitrator. Unless the parties
otherwise agree, the arbitration will be held in Washington, D.C. The parties
will proceed with the arbitration expeditiously and will conclude all
proceedings thereunder, including any hearing, in order that a decision may be
rendered within one hundred twenty (120) days from the filing of the demand for
arbitration by the initiating party. The award of the arbitrator will be final
and binding on both parties and may be enforced in any court having
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jurisdiction of the party against which enforcement is sought. Each party shall
bear its own expenses, including but not limited to counsel fees, except that
all expenses of the arbitration shall be apportioned in the award of the
arbitrator based upon the respective merit of the positions of the parties.
18.2 Price and Payment During Arbitration. Whenever a decision has not
been rendered within the 120-day period provided by Section 18.1 hereof in an
arbitration which relates to a Base Price increase proposed by Seller or to a
disputed payment withheld by Keystone, Keystone shall, upon the expiration of
such 120-day period, commence paying to Seller such proposed Base Price or pay
to Seller such withheld payment, as the case may be. Upon the rendering of the
arbitral decision, all overpayments shall be refunded and all underpayments
shall be paid, with interest thereon in each case at the rate specified in
Section 9.2.
18.3 Survival of Provisions. The provisions of this Article XVIII shall
survive the termination, cancellation or expiration of this Agreement, subject
to applicable statutes of limitations.
ARTICLE XIX
MISCELLANEOUS PROVISIONS
19.1 Rounding. For purposes of all calculations pursuant to this
Agreement, (i) amounts per Ton shall be rounded to the nearest one-tenth of one
cent, (ii) all other amounts shall be rounded to the nearest fourth place after
the decimal.
19.2 Consequences of Termination. In the event of a termination of this
Agreement pursuant to Section 2.2, Section 2.5, Section 6.6, Section 6.9,
Section 11.4 or Section 12.2, neither party shall have any further obligation to
perform hereunder, but no
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such termination shall excuse the payment of any amount due and owing by one
party to the other hereunder prior to such termination, nor shall such
termination affect the survival provisions of Section 13.4(e), Section 14.8 and
Section 18.3.
19.3 Amendments; Waiver. This Agreement may not be amended,
supplemented, or modified except by an instrument in writing signed by both of
the parties hereto. Any failure by either party to enforce any provisions hereof
shall not constitute a waiver by that party of its right subsequently to enforce
the same or any other provision hereof.
19.4 Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
19.5 Governing Law. This Agreement shall in all respects be governed
and construed in accordance with the laws of the State of New Jersey including
all matters of construction, validity and performance.
19.6 Independent Contractor; No Partnership. Seller shall be an
independent contractor with respect to the sale of the coal and to the
performance of its obligations hereunder. Nothing in this Agreement or the
arrangement for which it is written shall constitute or create a joint venture,
partnership, agency or any other similar arrangement between the parties, and
neither party is authorized to act as agent for the other party.
19.7 Captions, Exhibits and the Table of Contents. Titles or captions
of Sections contained in this Agreement are inserted only as a matter of
convenience and for
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reference, and in no way define, limit, extend, describe or otherwise affect the
scope or meaning of this Agreement or the intent of any provision hereof. All
Exhibits attached hereto shall be considered a part hereof as though fully set
forth herein.
19.8 Entire Agreement. This Agreement contains the entire agreement
between the parties with respect to the subject matter hereof. All previous and
collateral agreements, representations, warranties, promises and conditions of
sale are superseded by this Agreement. Any representation, promise or condition
not incorporated in this Agreement shall not be binding on either party.
19.9 Counterparts. The parties may execute this Agreement in two or
more counterparts, which shall, in the aggregate, be signed by both the parties;
and each counterpart shall be deemed an original instrument as against any party
who has signed it.
19.10 Confidentiality. Each party shall retain in confidence the
contents of this Agreement and any information obtained as a result of
negotiation and performance of this Agreement which either party identifies to
the other as being proprietary or confidential in nature, except that (i)
Keystone may, upon receipt of equivalent assurances of confidentiality, disclose
such information to any proposed Financing Parties, equity investors, or
operators of the Facility (if other than Keystone) and to consultants employed
by Keystone or Monsanto and (ii) Seller may, upon receipt of equivalent
assurances of confidentiality, disclose such information to any parties
proposing to provide financing to or acquire an equity interest in Seller or any
of its affiliates. Further, such information may be disclosed when requested by
a court or government agency, or to the extent required by state regulatory
agencies, the Federal
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Energy Regulatory Commission, the U.S. Environmental Protection Agency or other
Federal regulatory agencies.
19.11 Attorney Fees. The parties agree that if one party brings an
action against the other with respect to this Agreement, including the
resolution of disputes pursuant to arbitration under Article XVIII hereof, the
parties' reasonable legal fees and other related expenses will be apportioned
between the parties by the arbitrator or judge based upon the respective merits
of the parties' positions.
19.12 Right to Visit. Each party grants to the other (including its
agents) the right to visit its facilities, from time to time, upon reasonable
notice and subject to the applicable rules and regulations of the facilities, in
order to witness and review operations related to this Agreement. If Keystone
determines under Section 6.6 hereof that the coal deliveries have caused
operating problems, Keystone and Seller shall cooperate in arranging for Seller
to review the specific problem area.
19.13 Further Assurances. The parties shall execute and deliver such
additional documents and shall cause such additional action to be taken as may
be reasonably necessary to carry out the purposes and intent of this Agreement.
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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have
caused this Agreement to be executed on the date hereof by their respective
representatives heretofore duly authorized.
ANKER ENERGY CORPORATION, as
Seller
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
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President
KEYSTONE ENERGY SERVICE
COMPANY, L.P.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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