SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) November 22, 1994
Rochester & Pittsburgh Coal Company
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(Exact Name of Registrant as Specified in Charter)
Pennsylvania 0-7181 25-0761480
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
655 Church Street, Indiana, Pennsylvania 15701
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (412) 349-5800
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(Former Name or Former Address, if Changed Since Last Report)
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Item 5. Other Events.
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On November 22, 1994, Registrant's wholly-owned subsidiary,
Helvetia Coal Company ("Helvetia"), and the two public utilities
that own the Homer City Steam Electric Station (the "Homer City
Station") executed an amendment (the "Amendment") to a Coal Sales
Agreement dated December 22, 1966 (the "Homer City Agreement")
whereby deliveries under the Homer City Agreement will terminate at
December 31, 1994. Under provisions of the Amendment, the Homer
City Owners have agreed to fund certain costs which have been
incurred but not paid in connection with the Homer City Agreement.
Also on November 22, 1994, Helvetia and the Homer City Owners
executed a New Coal Sales Agreement (the "1995 Coal Sales
Agreement") to provide for deliveries commencing in January, 1995.
The 1995 Coal Sales Agreement provides for deliveries of
approximately 14 million tons of coal through 2003 at an initial
rate of approximately 1.8 million tons of coal per year. The price
to be paid by the Homer City Owners is a base price with escalation
and adjustments based on quality of the coal delivered. The 1995
Coal Sales Agreement also provides for early termination by either
party under hardship provisions and further allows the Homer City
Owners to terminate the Agreement for their convenience, in which
event they would have to make certain payments to Helvetia.
The Amendment and the 1995 Coal Sales Agreement are filed
herewith.
To enhance the quality of delivered coal and thereby gain the
benefit of premiums under the pricing structure of the 1995 Coal
Sales Agreement, Helvetia is constructing a new coal cleaning plant
which is scheduled to be operational in February, 1995. Also, a new
mine, Marshall Run, is scheduled to begin development production in
January, 1995, replacing the Lucerne No. 8 and No. 9 Mines whose
reserves have been exhausted.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
ROCHESTER & PITTSBURGH COAL COMPANY
Date: December 7, 1994 By: THOMAS W. GARGES. JR.
Thomas W. Garges, Jr.
President and Chief Executive Officer
AMENDMENT NO. 5 TO COAL SALES AGREEMENT
This AMENDMENT NO. 5 TO COAL SALES AGREEMENT
("Amendment"), dated this 22nd day of November, 1994, among NEW
YORK STATE ELECTRIC & GAS CORPORATION, a New York corporation,
and PENNSYLVANIA ELECTRIC COMPANY, a Pennsylvania corporation,
acting through its agent, GPU SERVICE CORPORATION, a New Jersey
corporation (New York State Electric & Gas Corporation and
Pennsylvania Electric Company being referred to herein,
collectively, as the "Buyers") and HELVETIA COAL COMPANY, a
Pennsylvania corporation ("Mining Company").
W I T N E S S E T H:
WHEREAS, Mining Company and Buyers are party to a Coal
Sales Agreement, dated December 22, 1966, as amended by Amendment
No. 1 to the Coal Sales Agreement, Amendment No. 2 to the Coal
Sales Agreement, Amendment No. 3 to the Coal Sales Agreement and
Amendment No. 4 to the Coal Sales Agreement (said Coal Sales
Agreement, as so amended, the "Coal Sales Agreement");
WHEREAS, all of the issued and outstanding stock of
Mining Company is owned by Rochester & Pittsburgh Coal Company, a
Pennsylvania corporation ("R&P");
WHEREAS, Mining Company and Buyers have entered into a
1994 Coal Sales Agreement, dated as of the date hereof (the "New
Coal Sales Agreement"); and
WHEREAS, the parties hereto desire to further amend the
Coal Sales Agreement as set forth herein.
NOW, THEREFORE, in consideration of the mutual
covenants herein contained and intending to be legally bound, the
parties hereto agree as follows:
1. DEFINITIONS. Terms defined in the Coal Sales Agreement
which are used and not otherwise defined herein shall have the
meanings assigned to them in the Coal Sales Agreement.
2. TERMINATION OF RIGHTS AND OBLIGATIONS UNDER THE COAL SALES
AGREEMENT. Except to the extent set forth in this Amendment,
neither Mining Company nor Buyers shall have any rights,
obligations or liabilities under the Coal Sales Agreement after
December 31, 1994.
3. COSTS INCURRED ON AND PRIOR TO DECEMBER 31, 1994.
(a) Buyers shall remain obligated after December 31, 1994
to pay to Mining Company:
(i) costs incurred by Mining Company on and prior to
December 31, 1994 and properly includable in actual cost of
production under the Coal Sales Agreement, as amended
hereby; and
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(ii) profit calculated in accordance with the Coal
Sales Agreement, as amended hereby, with respect to coal
delivered under the Coal Sales Agreement, as amended hereby,
on and prior to December 31, 1994.
(a) Mining Company shall deliver an invoice(s) to Buyers
for all amounts due under paragraph 3(a) and upon payment of such
invoice(s), Buyers shall have no further payment obligations or
liabilities to Mining Company under the Coal Sales Agreement, as
amended hereby, except to the extent set forth in Sections 7, 8,
9, 10, 12(g)(2), and 12(k) hereof.
4. TERMINATION OF OPTION.
(a) Buyers' right, option and privilege under the Option
Agreement ("Option"), dated as of December 22, 1966, by and among
R&P, Mining Company, Buyers and Girard Trust Bank, to which
Mellon Bank NA has succeeded, ("Mellon"), to become the assignee
of a certain lease ("Lease"), to purchase the real and personal
property described therein and to purchase all of Mining
Company's issued and outstanding stock ("Mining Company Stock")
is hereby terminated, effective as of the date hereof.
(b) Buyers shall promptly direct Mellon to (i) deliver to
Mining Company the assignment of the Lease, instruments conveying
the personal property subject to the Option and deeds conveying
the real property subject to the Option previously deposited with
Mellon as escrow agent under the Option, and (ii) deliver to R&P
the Mining Company Stock.
5. CLOSURE OF LUCERNE #8 AND LUCERNE #9.
(a) As promptly as practicable after the date hereof,
Mining Company shall commence such activities as are necessary to
close its mines known as Lucerne #8 and Lucerne #9. Mining
Company shall complete all mining in connection with the closure
of Lucerne #8 and Lucerne #9 not later than December 31, 1994.
(b) Costs incurred by Seller in calendar year 1994 in
connection with the closure of Lucerne #8 and Lucerne #9 which
would not have been incurred in 1994, but for the early closure
of those mines, shall be excluded from AMC for purposes of
calculating the profit payable to Mining Company under Section 11
of the Coal Sales Agreement.
6. DEVELOPMENT COAL. Mining Company may deliver and sell coal
to Buyers under the Coal Sales Agreement which is mined and
produced by Mining Company in connection with its development of
its Marshall Run Reserves or which is mined and produced by
affiliates of Mining Company from other sources, PROVIDED, that
such coal ("Development Coal") meets all of the requirements of
the Coal Sales Agreement other than requirements as to the
sources of coal. The delivered price of Development Coal
delivered during calendar 1994 shall be $26.50 per ton and Mining
Company's costs incurred in connection with mining and delivering
Development Coal shall be excluded from actual cost of
production.
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7. BUYER'S OBLIGATION TO PAY MINING COMPANY'S COSTS
ATTRIBUTABLE TO OPEB.
(a) For purposes hereof, "OPEB" shall mean the expected
future payments for non-pension retirement benefits including
health care and life insurance benefits for current retirees and
for future retirees attributable to service prior to January 1,
1995.
(b)(1) on and after the date hereof until December 31, 1994,
Mining Company's costs incurred and to be incurred for OPEB shall
be included in actual cost of production on the same basis as
such costs were included in actual cost of production prior to
this Amendment.
(2) Mining Company shall arrange for the estimation by a
nationally recognized actuarial firm of the present value, as of
December 31, 1994, of Mining Company's costs ("OPEB Cost")
incurred and to be incurred for OPEB which were not included in
actual cost of production, payable in connection with Mining
Company's employment of workers to perform Mining Company's
obligations under the Coal Sales Agreement (i) prior to January
1, 1995, and (ii) on and after January 1, 1995, subject to the
limitations set forth in paragraph 12(h), below. Such estimate
("OPEB Estimate") shall be completed and provided to Buyers not
later than May 1, 1995, shall be made using actuarial assumptions
consistent with those made for previous studies furnished to
Buyers by Mining Company under the Coal Sales Agreement and shall
take into account the tax consequences of the timing of payments
made and to be made by Buyers and changes in cost and interest
rate assumptions. Mining Company shall furnish, together with
such estimate, a description of the data, assumptions and
calculations on which it is based. In the event Mining Company
and Buyers are unable to agree that the estimate is accurate, the
matter shall be resolved by a process substantially similar to
the process described in paragraph 8(b), below, for resolution of
a disagreement regarding the estimate of Mining Company's costs
for Workers' Compensation Claims.
(3) Buyers shall make payments as an addition to the price
per ton of coal delivered under the New Coal Sales Agreement over
such period as Buyers shall request, not exceeding three (3)
years, the present value of which, calculated using the same
projected interest rates used by the actuarial firm referred to
in Paragraph 7(b)(2) above, as of December 31, 1994, shall be
equal to the OPEB Estimate.
(4) Buyers shall have no obligation to make payments to
Mining Company in respect of costs incurred for OPEB except to
the extent included in actual cost of production under paragraph
7(b)(1), above, and as provided in paragraph 7(b)(3) above.
(5) Additions to the price per ton of coal delivered under
the New Coal Sales Agreement made pursuant to paragraph 7(b)(3)
shall be shown as a separate line item on Mining Company's
invoices rendered under the New Coal Sales Agreement.
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(6) Upon any permanent termination of the delivery of coal
under the New Coal Sales Agreement prior to Buyers' payment in
full of the amount due Mining Company under paragraph 7(b)(3),
above, Buyers and Mining Company shall agree upon a reasonable
payment schedule which shall result in the payment in full of
such amount not later than December 31, 1997.
8. WORKERS' COMPENSATION CLAIM COSTS.
(a) On and after the date hereof until December 31, 1994,
Mining Company's costs incurred and to be incurred for claims
arising under Pennsylvania's Workers' Compensation laws
("Workers' Compensation Claims") shall be included in actual cost
of production on the same basis as such costs were included in
actual cost of production prior to this Amendment.
(b) Mining Company shall arrange for the estimation by a
nationally recognized actuarial firm of the present value, as of
December 31, 1994, of Sellers costs incurred and to be incurred
for Workers' Compensation Claims, which have not been included in
actual cost of production, payable with respect to Mining
Company's employment of workers to perform Mining Company's
obligations under the Coal Sales Agreement (i) prior to January
1, 1995, and (ii) on and after January 1, 1995, subject to the
limitations set forth in paragraph 12(h), below. Such estimation
shall be completed and provided to Buyers not later than March 1,
1997. Buyers may also arrange, at their expense, for the
estimation of such costs by a nationally recognized actuarial
firm at or about the same time. If Buyers' estimate is within 5%
of Mining Company's estimate, then Mining Company's estimate
shall govern, otherwise, the actuaries employed by each party
shall attempt to reconcile their differences. If, as a result of
such efforts, the estimates are revised such that Mining
Company's estimate does not exceed Buyers' estimate by more than
5% of Mining Company's estimate, then Mining Company's estimate
shall govern, otherwise Buyers and Mining Company shall
commission a third estimate, the cost of which shall be borne
equally by Buyers and Mining Company. If such third estimate is
between Buyers' and Mining Company's estimate, then such third
estimate shall govern, otherwise the estimate of Buyers or Mining
Company closest to such third estimate shall govern. Promptly
following determination of the final estimate, Buyers shall pay
an amount equal to such estimate to Mining Company.
(c) Buyers shall have no obligation to make payments to
Mining Company in respect of costs incurred for Workers' Compen-
sation Claims except to the extent included in actual cost of
production under paragraph 8(a), above, and as provided in
paragraph 8(b), above.
9. BLACK LUNG CLAIM COSTS.
(a) Mining Company's costs incurred and to be incurred for
black lung claims and pneumoconiosis and other respiratory
Pennsylvania Occupational Disease claims (collectively, "Black
Lung Claims") payable with respect to Mining Company's employment
of workers to perform Mining Company's obligations under the Coal
Sales Agreement (i) prior to January 1, 1995, and (ii) on and
after January 1, 1995, subject to the limitations set forth in
<PAGE>
paragraph 12(h), below, shall continue to be included in actual
cost of production until December 31, 1994 on the same basis as
such costs were included in actual cost of production prior to
this Amendment.
(b) Buyers shall have no obligation to make payments to
Mining Company in respect of costs incurred for Black Lung Claims
except to the extent included in actual cost of production under
paragraph 9(a), above, and except to the extent that such costs
increase solely as a result of the enactment after December 31,
1994 of new laws or regulations, or changes after December 31,
1994 in the interpretation or enforcement of existing laws or
regulations which are promulgated in writing by a government
agency and have general applicability. In the event Buyers
become liable for such increased costs, a plan for the payment
thereof shall be mutually agreed upon.
10. MINE CLOSING COSTS.
(a) Mining Company's Mine Closing Costs for its mines known
as Lucerne #6E, Lucerne #8 and Lucerne #9 shall continue to be
included in actual cost of production until December 31, 1994 on
the same basis as such costs were included in actual cost of
production prior to this Amendment.
(b) Buyers shall have no obligation to make payments to
Mining Company in respect of Mine Closing Costs, except to the
extent included in actual cost of production under paragraph
10(a), above, and except to the extent that such Mine Closing
Costs for Lucerne #6, Lucerne #8 and Lucerne #9 increase solely
as a result of the enactment after December 31, 1994 of new laws
or regulations, or changes after December 31, 1994 in the
interpretation or enforcement of existing laws or regulations
which are promulgated in writing by a government agency and have
general applicability. In the event Buyers become liable for
such increased costs, a plan for the payment thereof shall be
mutually agreed upon.
(c) For purposes hereof, Mine Closing Costs shall mean the
reasonable costs, paid or accrued, of closing a mine, including,
but not limited to, costs of removing and disposing of surface
facilities, materials and equipment, reclaiming and restoring the
mine premises and eliminating, limiting or protecting the
environment from emissions, discharges or releases of pollutants,
chemicals or other substances from the mine or mine premises, all
as required by applicable laws, rules and regulations.
11. INDEMNIFICATION.
(a) Except to the extent that Buyers fail to make payments
due under the Coal Sales Agreement, as amended hereby, in respect
of such liabilities, Mining Company shall indemnify, defend and
hold Buyers harmless from and against any and all liabilities and
all losses, claims, demands, suits, causes of action, damages and
expenses (including attorneys' fees) related thereto, for OPEB,
Workers' Compensation Claims, Black Lung Claims and Mine Closing
Costs arising out of or related to Mining Company's mining
operations conducted under or in connection with the Coal Sales
Agreement, as amended hereby.
<PAGE>
(b) R&P shall, upon the earliest to occur of the following
events, either (i) cause Mining Company to provide security to
Buyers for the performance of its obligations under paragraph
11(a), above, in the form of a bond or bonds in such amount or
amounts as Buyers deem adequate in their reasonable discretion,
taking into account other bonds posted by Mining Company to
secure its obligations under applicable law, or, (ii)
unconditionally guarantee Mining Company's performance of its
obligations under paragraph 11(a) above:
(i) January 1, 1998;
(ii) 180 days after Mining Company gives the notice
contemplated by Section 5.02(a) of the New Coal
Sales Agreement;
(iii) A proceeding shall have been instituted in respect
of Mining Company seeking to have an order for
relief entered in respect of Mining Company, or
seeking a declaration or entailing a finding that
Mining Company is insolvent or a similar
declaration or finding, or seeking dissolution,
winding-up, charter revocation or forfeiture,
liquidation, reorganization, arrangement,
adjustment, composition or other similar relief
with respect to Mining Company, its assets or its
debts under any law relating to bankruptcy,
insolvency, relief of debtors or protection of
creditors, termination of legal entities or any
other similar law now or hereafter in effect, or
seeking appointment of a receiver, trustee,
liquidator, assignee, sequestrator or other
custodian for Mining Company or for all or any
substantial part of its property and such
proceeding shall result in the entry, making or
grant of any such order for relief, declaration,
finding, relief or appointment, or such proceeding
shall remain undismissed and unstayed for a period
of 60 consecutive days; and
(iv) Mining Company shall become insolvent; shall fail
to pay, become unable to pay, or state that it is
or will be unable to pay, its debts as they become
due; shall voluntarily suspend transaction of its
business; shall make a general assignment for the
benefit of creditors; shall institute (or fail to
controvert in a timely and appropriate manner) a
proceeding described in clause (iii), above, or
(whether or not any such proceeding has been
instituted) shall consent to or acquiesce in any
such appointment or to the taking of possession by
any such custodian of all or any substantial part
of its property; shall dissolve, wind-up, revoke
or forfeit its charter (or other constituent
documents) or liquidate itself or any substantial
part of its property or shall take any action in
furtherance of any of the foregoing.
<PAGE>
12. MISCELLANEOUS.
(a) All "B" Seam coal shall be deleted from coal dedicated
for production under the Coal Sales Agreement.
(b) Leases between Mining Company and R&P of coal reserves
intended to be mined under the Coal Sales Agreement may be
terminated, effective as of December 31, 1994.
(c) The obligation to credit certain sums to the Cost of
Production under, and as defined in, the AGREEMENT RELATING TO
CERTAIN COAL TRACTS, etc., dated February 3, 1989, between Mining
Company and Buyers shall be waived for Development Coal.
(d) (i) Mining Company may deliver, and Buyers shall accept
and purchase if delivered, up to, but not more than, 1.84 million
tons of coal under the Coal Sales Agreement, as amended hereby,
in calendar 1994;
(ii) Mining Company shall cause its inventory of coal
stored at all inventory locations, including the Lucerne #6 clean
coal storage area, the area known as "Bowman Acres", and Lucerne
#8, to be not greater than 40,000 tons on December 15, 1994 and
to be zero on December 31, 1994; and
(iii) Mining Company's costs incurred in connection with
mining coal with respect to which title has not passed to Buyers
under the Coal Sales Agreement on or before December 31, 1994
shall be excluded from actual cost of production.
(e) Buyers agree that Seller may proceed during 1994 with
budgeted capital expenditures for the Lucerne 6E Mine including
equipment listed on Exhibit 1, attached hereto and made part
hereof, PROVIDED, HOWEVER, that the depreciation charges included
in the actual cost of production during 1994 from the equipment
listed on Exhibit 1 shall not exceed $25,910.
(f) 1. All of the following unused materials and supplies
located above ground at Lucerne #8 or Lucerne #9, the cost of
which is or has been included in the actual cost of production,
shall be inventoried promptly after December 31, 1994 and the
value thereof (determined as the lower of cost or fair market
value) shall be credited against amounts due Mining Company under
this Amendment:
(i) materials and supplies that have a unit cost of
$100 or more (such cost determined as the lower of cost or fair
market value)
(ii) all timber, roof support materials and oil.
Mining Company shall permit a representative of Buyer to observe
the taking of such inventory.
2. Mining Company covenants that the average monthly
and the average per ton materials and supplies cost included in
the actual cost of production for Lucerne 6E during the period
September-December, 1994, inclusive, shall be less than or equal
<PAGE>
to the corresponding costs included in the actual cost of
production for the period January-August, 1994, inclusive. In
the event that both such average monthly and average per ton
costs for September-December, 1994 are greater than the
corresponding costs for January-August, 1994, then the following
unused materials and supplies located above ground at Lucerne
#6E, the cost of which is or has been included in the actual cost
of production, shall be inventoried promptly after December 31,
1994 and the value thereof shall be credited against amounts due
Mining Company under this Amendment:
(i) materials and supplies, the cost of which is
included in the actual cost of production during the period
September-December, 1994 and that have a unit cost of $50 or more
(ii) all timber, roof support materials and oil.
Mining Company shall permit a representative of Buyer to observe
the taking of such inventory.
(g) 1. An amount equal to the net book value of all
Lucerne #8 and Lucerne #9 equipment, some or all of the cost of
which is or has been included in actual cost of production or is
or has been otherwise reimbursed by Buyers, and which is used by
Mining Company in connection with the performance of the New Coal
Sales Agreement or development by Mining Company of its Marshall
Run reserves or sold or transferred to any of Mining Company's
affiliates shall not be included in the amounts due Mining
Company under this Amendment.
2. Mining Company will include in its invoice for
cost of production in 1994 an amount equal to remaining net book
value of all Lucerne #8 and Lucerne #9 fixed assets excluding
equipment covered in Paragraph 12 (g)(1) above minus an assumed
salvage value on equipment that is economically reasonable to
recover. An amount equal to the aggregate difference, if any
between aggregate actual net sale value and the aggregate assumed
salvage value of such equipment, some or all of the cost of which
is or has been included in the actual cost of production or is or
has been otherwise reimbursed by Buyers, and which is sold to a
third party within 12 months shall be credited against or added
to, as the case may be, amounts due Mining Company under this
Amendment. With respect to equipment recovered from underground
and not sold or scrapped during such period or covered by
Paragraph 12 (g)(1) above, the assumed salvage value shall be
adjusted to equal the net book value and any amounts previously
paid to Mining Company for such equipment pursuant to this
paragraph shall be credited against amounts due Mining Company
under this Amendment.
(h) Buyers shall have no obligation to pay Mining Company
for costs incurred or to be incurred for or related to the
employment of workers after December 31, 1994 except to the
extent such costs are properly accrued and included in actual
cost of production on and prior to December 31, 1994 in
accordance with the Coal Sales Agreement, as amended hereby, or
are included in the amounts payable under this Amendment in
respect of OPEB, Workers' Compensation Claims or Black Lung
<PAGE>
Claims. Seller covenants it will not accrue in 1994 for the cost
of employing after December 31, 1994 more than 32 workers to
close Lucerne #8 and Lucerne #9.
(i) Mining Company shall, during normal business hours and
at Mining Company's principal place of business, make such of its
books and records available to Buyers and its representatives as
Buyers may reasonably request to verify the amounts which, from
time to time, Mining Company states are due hereunder or under
the Coal Sales Agreement.
(j) This Amendment and the interpretation and enforcement
hereof shall be governed in all respects by the laws of the
Commonwealth of Pennsylvania without giving effect to the
conflict of laws principles thereof.
(k) Buyers' obligations, if any, to make payments to Mining
company in respect of costs incurred by Mining Company other than
in respect of OPEB, workers' compensation claims, black lung
claims, and mine closing costs, shall be determined and paid in
accordance with the Coal Sales Agreement, PROVIDED, HOWEVER, that
Buyers shall have no obligations under the Coal Sales Agreement
to make any payments after 12/31/98 except as otherwise provided
in this amendment regarding OPEB, Workers' Compensation, Black
Lung and Mine Closing costs.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment by the undersigned thereunto duly authorized on the
date first written above.
HELVETIA COAL COMPANY
By: ROBERT D. ANDERSON
Name: Robert D. Anderson
Title: President
(with respect to paragraph
11(b) only)
ROCHESTER & PITTSBURGH COAL
By: GEORGE M. EVANS
Name: George M. Evans
Title: Vice President &
Treasurer
PENNSYLVANIA ELECTRIC COMPANY
By: J. G. HERBEIN
Name: J. G. Herbein
Title: V. P. - Generation
NEW YORK STATE ELECTRIC &
GAS CORPORATION
By: JACK H. ROSKOZ
Name: Jack H. Roskoz
Title: Sr. V.P.
GPU SERVICE CORPORATION,
ON BEHALF OF
PENNSYLVANIA ELECTRIC COMPANY
By: CARL BROOKS
Name: Carl Brooks
Title: V.P. - Materials &
Services
1995 COAL SALES AGREEMENT
BETWEEN
NEW YORK STATE ELECTRIC & GAS CORPORATION
PENNSYLVANIA ELECTRIC COMPANY
GPU SERVICE CORPORATION
AND
HELVETIA COAL COMPANY
<PAGE>
1995 COAL SALES AGREEMENT
TABLE OF CONTENTS
ARTICLE I PURCHASE AND SALE PAGE
1.01 Purchase and Sale of Coal . . . . . . . . . . . . . 1
1.02 Amount of Coal to Be Purchased and Sold . . . . . . 1
1.03 Rates of Delivery and Acceptance of Coal. . . . .1, 2
ARTICLE II PRICE
2.01 Price . . . . . . . . . . . . . . . . . . . . . . . 3
2.02 Calculation and Adjustment of the
Base Price . . . . . . . . . . . . . . .3, 4, 5, 6
2.03 Calculation and Adjustment of the Refuse Coal
Base Price . . . . . . . . . . . . . . . . . .6, 7
2.04 Buyer's Audit Rights. . . . . . . . . . . . . . . . 7
ARTICLE III SOURCES, SPECIFICATIONS AND SAMPLING
3.01 Sources of Coal . . . . . . . . . . . . . . . . .7, 8
3.02 Coal Specifications . . . . . . . . . . . . . . . . 8
3.03 Sampling and Analysis Procedures. . . . . . .8, 9, 10
ARTICLE IV BILLING AND PAYMENT
4.01 Billing and Payment Procedures. . . . . . .10, 11, 12
ARTICLE V TERMINATION OF COAL DELIVERY
5.01 Termination of Coal Delivery. . . . . . . . . . . .12
5.02 Economic Hardship . . . . . . . . . . . . . . .12, 13
ARTICLE VI OPERATING PROCEDURES
6.01 Receiving Site; Title to and Risk of Loss of Coal .13
6.02 Meetings. . . . . . . . . . . . . . . . . . . . . .13
6.03 Scale Testing . . . . . . . . . . . . . . . . .13, 14
6.04 Site Operations . . . . . . . . . . . . . . . . . .14
6.05 Sulfur and Washability Projections. . . . . . .14, 15
ARTICLE VII FORCE MAJEURE
7.01 Application of Force Majeure. . . . . . . . . . . .15
7.02 Notification of Force Majeure . . . . . . . . .15, 16
7.03 On-going Government Action. . . . . . . . . . . . .16
7.04 Make up of Deficiency Due to Force Majeure. . . . .16
<PAGE>
ARTICLE VIII COMPLIANCE WITH LAWS, PERMITS
8.01 Seller's Compliance . . . . . . . . . . . . . .16, 17
8.02 Seller to Secure Permits. . . . . . . . . . . . . .17
ARTICLE IX TRUCKS AND TRUCK WEIGHT LIMITATIONS
9.01 Tarping and Weights . . . . . . . . . . . . . . . .17
ARTICLE X INDEMNIFICATION
10.01 Seller's Indemnification. . . . . . . . . . . .17, 18
10.02 Notice of Claims. . . . . . . . . . . . . . . . . .18
10.03 Limitation on Indemnification . . . . . . . . . . .18
10.04 Survival of Indemnification . . . . . . . . . . . .19
ARTICLE XI ASSIGNMENT/SUBCONTRACTING
11.01 Seller Not to Assign. . . . . . . . . . . . . . . .19
11.02 Buyer May Assign. . . . . . . . . . . . . . . . . .19
ARTICLE XII RELEASE OF INFORMATION
12.01 No Dissemination of Information . . . . . . . . . .19
12.02 Required Dissemination. . . . . . . . . . . . . . .20
12.03 Implication of Endorsement Prohibited . . . . . . .20
ARTICLE XIII FEDERAL ACQUISITION REGULATION CLAUSES
13.01 Application of Certain Regulations. . . . . . . . .20
13.02 Inclusion in Subcontracts . . . . . . . . . . . . .20
13.03 Conflict Between Provisions . . . . . . . . . . . .20
ARTICLE XIV TERMINATION FOR CONVENIENCE
14.01 Buyer's Right to Terminate. . . . . . . . . . . . .21
14.02 Effective Date. . . . . . . . . . . . . . . . . . .21
14.03 Effect of Termination . . . . . . . . . . . . . . .21
14.04 Seller's Termination Claim. . . . . . . . .21, 22, 23
ARTICLE XV TERMINATION FOR DEFAULT
15.01 Conditions for Termination for Default. . . . . . .24
15.02 Damages . . . . . . . . . . . . . . . . . . . . . .24
15.03 No Limitation on Buyer's Rights . . . . . . . . . .24
15.04 Consideration of "Cure" Default . . . . . . . .24, 25
15.05 Payments Reduced by Damages . . . . . . . . . . . .25
<PAGE>
ARTICLE XVI INTERPRETATION OF LANGUAGE
16.01 Rules of Interpretation . . . . . . . . . . . . . .25
ARTICLE XVII WAIVER OF RIGHTS
17.01 Waiver Not Implied for Subsequent Occurrences . . .25
ARTICLE XVIII CONFLICT OF INTEREST - GRATUITIES
18.01 Parties to Respect Other's Independence . . . . . .25
18.02 No Gratuities Allowed . . . . . . . . . . . . . . .26
18.03 Seller' Covenant. . . . . . . . . . . . . . . . . .26
ARTICLE XIX CUMULATIVE REMEDIES
19.01 Rights Are Cumulative . . . . . . . . . . . . . . .26
ARTICLE XX GOVERNING LAW
20.01 Pennsylvania Law Governs. . . . . . . . . . . . . .26
ARTICLE XXI SEVERABILITY
21.01 Provisions Independent/Exception. . . . . . . .26, 27
ARTICLE XXII DISPUTES
22.01 Claims in Writing . . . . . . . . . . . . . . . . .27
22.02 Use of ADR. . . . . . . . . . . . . . . . . . . . .27
22.03 Judicial Proceedings. . . . . . . . . . . . . . . .27
ARTICLE XXIII NON-COMPLIANT COAL
23.01 Seller's Acknowledgment . . . . . . . . . . . .27, 28
23.02 Failure to Comply With Coal Specifications. . . . .28
23.03 Suspension of Deliveries. . . . . . . . . . . . . .28
23.04 No Make-up/Exception. . . . . . . . . . . . . . . .28
23.05 Disclaimer of Seller's Warranties . . . . . . . . .28
ARTICLE XXIV AMENDMENTS AND NOTICES
24.01 Amendments to be in Writing . . . . . . . . . . . .29
24.02 Authorized Personnel. . . . . . . . . . . . . . . .29
24.03 Notices . . . . . . . . . . . . . . . . . . . .29, 30
<PAGE>
ARTICLE XXV ABANDONMENT OF STRUCTURES
25.01 Seller's Truck Dump Facility. . . . . . . . . . . .30
25.02 Seller's Insurance. . . . . . . . . . . . . . . . .30
25.03 Buyer's Right to Acquire Structures . . . . . . . .30
25.04 Waiver of Certain Mining Rights . . . . . . . .30, 31
25.05 No Surrender or Rights. . . . . . . . . . . . . . .31
25.06 Survival of Obligations . . . . . . . . . . . . . .31
ARTICLE XXVI LIMITATION OF LIABILITY
26.01 No Consequential or Special Damages/Exceptions. . .31
ARTICLE XXVII MECHANIC'S LIENS
27.01 Seller to Obtain Waivers Regarding Buyer's
Property. . . . . . . . . . . . . . . . . . .31, 32
ARTICLE XXVIII EFFECTIVE HEADINGS
28.01 Effective of Headings . . . . . . . . . . . . . . .32
SIGNATURES
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
<PAGE>
1995 COAL SALES AGREEMENT
This 1995 COAL SALES AGREEMENT ("Agreement"), dated this
22nd day of November, 1994, among NEW YORK STATE ELECTRIC & GAS
CORPORATION, ("NYSEG"), a New York corporation, and PENNSYLVANIA
ELECTRIC COMPANY, ("PENELEC"), a Pennsylvania corporation, acting
through its agent, GPU SERVICE CORPORATION, a New Jersey
corporation (New York State Electric & Gas Corporation and
Pennsylvania Electric Company being referred to herein,
collectively, as the "Buyer") and HELVETIA COAL COMPANY, a
Pennsylvania corporation ("Seller").
W I T N E S S E T H :
WHEREAS, Seller desires to produce, deliver and sell coal to
Buyer; and
WHEREAS, Buyer desires to accept and purchase coal from
Seller;
NOW THEREFORE, in consideration of the mutual covenants
herein contained and intending to be legally bound, the parties
hereto agree as follows:
ARTICLE I
PURCHASE AND SALE
1.01 PURCHASE AND SALE OF COAL. Commencing on January 2, 1995
and continuing until the Delivery Termination Date, as
hereinafter defined, Seller shall deliver and sell coal to
Buyer, and Buyer shall accept and purchase coal from Seller,
in accordance with the terms and conditions hereof.
1.02 AMOUNT OF COAL TO BE PURCHASED AND SOLD. Subject to the
provisions of this Agreement regarding adjustments to the
amount of coal to be delivered hereunder, Seller shall
deliver and sell, and Buyer shall accept and purchase, 16
million tons of coal, less the amount of coal delivered and
sold to Buyer after December 16, 1993 under the Coal Sales
Agreement among them, dated December 22, 1966, as such Coal
Sales Agreement has been amended on and prior to the date
hereof and may be amended hereafter (such Coal Sales
Agreement as amended and hereafter amended, the "Existing
CSA").
1.03 RATES OF DELIVERY AND ACCEPTANCE OF COAL.
(a) Seller shall deliver and Buyer shall accept not less
than 1.8 million tons of coal in each calendar year from and
including 1995 through and including 1999.
(b) From calendar year 2000 until the Delivery Termination
Date, Seller shall deliver and Buyer shall accept in each
calendar year the lesser of:
<PAGE>
(i) 1.8 million tons of coal; and
(ii) 65% of the amount of coal that Buyer reasonably
estimates will be burned at Units No. 1 and No. 2
of its Homer City Steam Electric Generating
Station (the "Station") during such calendar year,
if such amount of coal Buyer so estimates will be
burned is 2.8 million tons or more, otherwise 60%
of such amount of coal Buyer so estimates will be
burned.
(c) The amount of coal to be delivered and accepted in the
calendar year in which the Delivery Termination Date occurs
shall be reduced proportionately to the number of days in
such year after the Delivery Termination Date and the total
number of days in such year.
(d) Buyer shall deliver to Seller its estimate of the
amount of coal which will be burned at Units No. 1 and No. 2
of the Station with respect to each calendar year after 1999
until the Delivery Termination Date not later than June 30th
of the preceding calendar year. Buyer shall also deliver
with such estimate a description in reasonable detail of the
facts and circumstances upon which such estimate is based.
(e) The rate of delivery of coal shall be as mutually
agreed upon by Seller and Buyer from time to time, provided
however, that each shall use reasonable efforts to cause the
delivery of coal to be spread ratably by week over each
calendar year or portion thereof until the Delivery
Termination Date, taking into consideration the operating
capacity of Seller, the receiving capacity of Buyer, the
maximum safe size of Buyer's stockpile, vacation periods,
holidays and equipment outages. Each party shall promptly
notify the other of equipment outages which may or will
affect the rate at which coal will be delivered or accepted.
Except as provided in paragraph 6.03(b), Seller shall not be
required to deliver coal on Saturdays, Sundays or holidays
or during mine vacation periods. Prior to May 15 of each
year, the parties shall consult regarding the scheduling of
miners' vacations and shall take reasonable action to
minimize the impact of such vacations on the availability of
coal for the Station. Notwithstanding the foregoing, each
party shall use its best efforts to accommodate non-
recurring and compelling circumstances which may, from time
to time, affect the ability of the other party to deliver or
accept coal, as the case may be.
ARTICLE II
PRICE
2.01 PRICE. Buyer shall pay to Seller either:
(i) the Refuse Coal Base Price, as defined and
calculated as set forth in Section 2.03, below,
for coal delivered and accepted in accordance
herewith and produced from Seller's coal refuse
<PAGE>
pile located in Center Township, Indiana County
and operated under PaDER Permit #32743710 ("Refuse
Coal"), or
(ii) the Base Price, as defined and calculated as set
forth in Section 2.02, below, for coal delivered
and accepted in accordance herewith and produced
from sources other than Seller's coal refuse pile,
adjusted, first, proportionately to the amount by
which the monthly average calorific value of coal
delivered and accepted exceeds or is less than
11,000 BTU/lb. in accordance with the formula set
forth below, and additionally, by reducing such
price at the rate of $.01/MMBTU for each 100
BTU/lb. by which the monthly average calorific
value of coal delivered and accepted is less than
11,000 BTU/lb.
The formula referred to above is as follows:
PA = BP ABtu -1
------
11,000
Where:
PA = Price Adjustment
BP = Base Price, defined and calculated as set
forth below
ABtu= Actual monthly average calorific value of
coal delivered and accepted (Btu/lb.)
2.02 CALCULATION AND ADJUSTMENT OF THE BASE PRICE.
(a) The base price ("Base Price") shall initially be $26.75
per ton, effective January 2, 1995, and shall be such price
successively adjusted thereafter in accordance with section
2.02(b).
(b) (i) Quarterly adjustments of the Base Price ("Quarterly
Adjustments," and each, a "Quarterly Adjustment") shall be
made beginning on April 1, 1995 and on the first day of each
calendar quarter thereafter by using the third preceding
quarter as the base period ("Base Period") and the second
preceding quarter as the reference period ("Reference
Period").
(ii) For purposes of Quarterly Adjustments, the Base Price
shall first be reduced by the Government Fees portion
thereof and the Compliance Cost portion thereof. The
remaining portion of the Base Price (the "Adjustable Portion
of the Base Price") shall then be divided into a cost
component, consisting of 46% of the Adjustable Portion of
the Base Price, a market price component consisting of 46%
of the Adjustable Portion of the Base Price and a fixed
component consisting of 8% of the Adjustable Portion of the
Base Price. The cost component of the Base Price shall then
be increased or decreased by the percentage increase or
<PAGE>
decrease occurring between the respective Base Period and
Reference Period in the Cost Index, defined and described
below, the market price component of the Base Price shall
then be increased or decreased by the percentage increase or
decrease occurring between the respective Base Period and
Reference Period in the Market Price Index, defined and
described below, and the quarterly adjusted Base Price shall
be the sum of the cost component thereof, as adjusted, the
market price component thereof, as adjusted, the fixed
component thereof, the Government Fees portion thereof and
the Compliance Cost portion thereof.
(iii) The cost index ("Cost Index") shall be the weighted
average of the four indices listed in Exhibit 1 attached
hereto, weighted as set forth therein. The value of each of
the four indices for a quarter shall be the average of the
reported values of each index for each month in the quarter.
US Bureau of Labor Statistics indices used shall be the
first final published indices.
(iv) The market price index ("Market Price Index") for a
quarter shall be the weighted average delivered price per
MMBTU for coal purchased by major utilities in the
Commonwealth of Pennsylvania in all transactions occurring
in the quarter and reported on US Federal Energy Regulatory
Commission Form 423 or successor reports ("Form 423")
excluding (i) transactions to which Seller or its affiliates
is a party, (ii) transactions for coal for the Station,
(iii) transactions involving coal having a sulfur content
higher than 2.5 percent or lower than 1.5 percent, and (iv)
transactions which occurred between September 1, 1993 and
December 31, 1993 (transactions to be included in the Market
Price Index are referred to herein as "Eligible
Transaction"), PROVIDED, HOWEVER, that in the event the
Government Fees portion of the Base Price shall have been
increased, effective as of a date or dates prior to some,
but not all, of the Eligible Transactions considered when
calculating the Market Price Index, (but not when
calculating the Market Based Bogey (MBB) as defined
hereafter in Paragraph 2.02 b (viii) then a weighted
average of the increase in such fees for strip-mined coal
and deep-mined coal shall be subtracted from each Eligible
Transaction being so considered which occurred after such
effective date or dates.
(v) Notwithstanding the foregoing, no four consecutive
Quarterly Adjustments shall aggregate in excess of 5% unless
both the cost component and the market price component of
the Base Price as adjusted by such four consecutive
Quarterly Adjustments would otherwise increase more than 5%,
in which event the aggregate of such four consecutive
Quarterly Adjustments shall be limited to the lesser of the
percentage increase in the cost component or the market
price component over such four quarter period.
(vi) The Government Fees portion of the Base Price shall be
$1.24 plus the actual fees per ton of coal imposed on
Seller's production or sale of coal which are first levied
by federal, state or local governments or government
<PAGE>
agencies after May 16, 1994. Such actual fees first levied
after May 16, 1994 shall be added to the Base Price on and
after the date when they are first incurred by Seller until
they are no longer incurred by Seller, if ever, PROVIDED,
HOWEVER, that such actual fees first levied after May 16,
1994 shall not be added to the Base Price prior to April 1,
1995.
(vii) The Compliance Cost portion of the Base Price shall
consist of the actual cost per ton of coal delivered
hereunder, of Seller's compliance in producing such coal,
with laws or regulations enacted after December 31, 1994 or
changes after December 31, 1994 in the interpretation or
enforcement of existing laws or regulations promulgated in
writing by a government agency and having general
applicability. Compliance Cost shall be added to the Base
Price on and after the date when such costs are first
incurred by Seller, until they are no longer incurred by
Seller, if ever, PROVIDED, HOWEVER, that no such costs shall
be added to the Base Price prior to April 1, 1995. Seller
shall provide to Buyer such records and other documentation
as Buyer may reasonably request to verify the incurrence by
Seller of Compliance Costs, the amount thereof and the times
when such costs have been and are expected to be incurred.
(viii) The Base Price, effective as of January 1, 1998, as
adjusted in accordance with the foregoing, shall be subject
to further adjustment as follows: A Market Based Bogey
(MBB) shall be calculated by increasing or decreasing the
Base Price effective as of January 1, 1995 by the percentage
increase or decrease in the weighted average price per MMBTU
for coal delivered in Eligible Transactions which occurred
in the 12 month period ending June 30, 1994, compared with
such transactions which occurred in the twelve month period
ending June 30, 1997. In the event the Base Price,
effective as of January 1, 1998, as adjusted, is less than
95% of the MBB, it shall be increased the lesser of 5% or
the amount required to equal 95% of the MBB. In the event
the Base Price, effective January 1, 1998, as adjusted, is
greater than 105% of the MBB, it shall be reduced by the
lesser of 5% or the amount required to equal 105% of the
MBB. After January 1, 1998, the Compliance Cost, effective
as of January 1, 1998, shall be included in the Adjustable
Portion of the Base Price and accordingly, the Compliance
Cost, effective as of January 1, 1998, shall not be
subtracted from the Base Price prior to making Quarterly
Adjustments nor separately added to the Adjustable Portion
of the Base Price to compute the Base Price after January 1,
1998, and the separate Compliance Cost, effective as of
January 2, 1998, shall be reset to zero.
(ix) The Base Price effective as of January 1, 2001, as
adjusted in accordance with the foregoing, shall be subject
to further adjustment in the same manner as set forth in
section 2.02(b) (viii), above, using the percentage increase
or decrease in the weighted average price of coal in
Eligible Transactions occurring in the 12 month period
ending June 30, 1997, compared with the weighted average
price in transactions occurring in the 12 month period
<PAGE>
ending June 30, 2000, as applied to the price effective as
of January 1, 1998. After January 1, 2001, the Compliance
Cost, effective as of January 1, 2001, shall be included in
the Adjustable Portion of the Base Price and accordingly,
the Compliance Cost, effective as of January 1, 2001, shall
not be subtracted from the Base Price prior to making
Quarterly Adjustments nor separately added to the Adjustable
Portion of the Base Price to compute the Base Price after
January 1, 2001, and the separate Compliance Cost, effective
as of January 2, 2001, shall be reset to zero.
(c) In all calculations made in accordance with section
2.02(b), each number shall be rounded to three decimal
places prior to further addition, subtraction,
multiplication or division.
2.03 CALCULATION AND ADJUSTMENT OF THE REFUSE COAL BASE PRICE.
(a) The refuse coal base price ("Refuse Coal Base Price")
shall initially be $18.00 per ton, effective January 2,
1995, and shall be such price as successively adjusted
thereafter in accordance with Section 2.02(b) as if the
Refuse Coal Base Price were the Base Price referred to
therein, except as follows:
(i) any increase in the Government Fees portion of the Base
Price shall consist of only such fees imposed with respect
to Seller's production of coal from Seller's coal refuse
pile.
(ii) the MBB defined in Section 2.02(b)(viii) shall be
calculated using the Refuse Coal Base Price rather than the
Base Price;
(b) Not withstanding the foregoing, the Refuse Coal Base
Price shall not exceed 68% of the Base Price.
2.04 BUYER'S AUDIT RIGHTS. Seller shall provide to Buyer such
original documentation, or shall provide access to such
original documentation, as Buyer may reasonably require to
verify and audit Seller's costs used to calculate the Cost
Index, Compliance Cost and Government Fees.
ARTICLE III
SOURCES, SPECIFICATIONS AND SAMPLING
3.01 SOURCES OF COAL.
(a) Coal delivered hereunder shall be produced from either
(i) Seller's mine known as Lucerne #6E, Seller's
reserves known as Marshall Run or such other reserves
within the Upper Kittanning and Freeport seams which
Seller may from time to time propose and to which Buyer
consents, (which for purposes of this section, Seller
may rely on such consent as given by Penelec), such
consent not to be unreasonably withheld or delayed,
PROVIDED THAT, such other reserves are owned by or
leased to, controlled by, and the coal produced
therefrom is mined or contract mined by or for, Seller
<PAGE>
or affiliates of Seller, and PROVIDED FURTHER, that
coal produced from such other reserves, in addition to
meeting the coal specifications set forth herein, has
size, washability and ash characteristics at least as
favorable to Buyer as coal blends historically produced
by Seller for Buyer using coal from Lucerne #6E and
Seller's mines known as Lucerne #8 and Lucerne #9; or
(ii) Seller's coal refuse pile located in Center
Township, Indiana County and operated under PaDER
Permit #32743710, (Refuse Coal), PROVIDED, THAT,
x) all Refuse Coal shall be processed through
Seller's cleaning plant prior to delivery to
Buyer.
y) no more than 70,000 clean tons of Refuse Coal
shall be delivered in any calendar year.
z) no more than 200,000 clean tons of Refuse Coal
shall be delivered under this Agreement.
(b) Seller shall use its best efforts to cause not less
than 25% of the coal delivered hereunder, determined on a
daily basis, on and after June 30, 1995 until the earlier of
September 30, 2002 or the depletion of the Marshall Run
reserve, to be coal produced from Seller's Marshall Run
reserve.
3.02 COAL SPECIFICATIONS. Coal delivered hereunder shall meet
the following specifications.
Calorific Value - 11,000 BTU/lb. minimum as
received ("AR") on an annual
weighted average basis ("AWA")
10,000 BTU/lb. minimum AR on a
daily weighted average basis
("DWA"), subject to a rolling
five day average of not less
than 10,500 BTU/lb.
Moisture Content - 6.0% maximum AR AWA
- 10.0% maximum AR DWA
Sulfur Content - 2.5% maximum AR AWA
- 2.75% maximum AR DWA
Ash Content - 24.0% maximum AR AWA
- 26.5% maximum AR DWA
Initial Deformation- 2250o minimum
in Reducing Atmosphere
Volatile Matter - 24% minimum AR AWA
- 24% minimum AR DWA
<PAGE>
Grindability - 65 points minimum AR AWA
(Hardgrove) for coal 65 points minimum AR DWA
produced from Marshall
Run, Lucerne #6E or Refuse Coal
Grindability of coal from sources other than the Marshall
Run reserves, Lucerne #6E or Refuse Coal shall be subject to
agreement among the parties at such time as Seller proposes
to deliver coal hereunder from such other sources. Seller
shall not chemically treat coal delivered hereunder without
the prior written consent of Buyer which may be withheld in
its sole and absolute discretion.
3.03 SAMPLING AND ANALYSIS PROCEDURES.
(a) (1) Coal delivered and accepted shall be weighed,
sampled and analyzed by Buyer on receipt of same at the
Station in accordance with Buyer's procedures and methods in
effect at the time of delivery. Buyer may, from time to
time, make changes to its procedures and methods for
weighing, sampling and analyzing coal, provided that the
procedures and methods, as changed, (i) with respect to
sampling, are reasonably designed to produce samples which
are an accurate representation of coal delivered (ii) with
respect to analysis, are reasonably designed to accurately
determine the quality of the coal delivered, and (iii) with
respect to weighing, are reasonably designed to accurately
determine the quantity of coal delivered. Weighing,
sampling and analysis procedures and methods which conform
with any applicable standards of the American Society of
Testing and Materials ("ASTM") or the National Institute of
Standards and Technology ("NIST") shall be conclusively
deemed to meet the foregoing criteria.
(2) The weight of coal originating from Seller's
refuse pile shall be determined from a truck count as
follows:
(i) the gross weight of trucks transporting material
from the refuse pile to Seller's processing facility
shall be reduced by the tare weight of said trucks.
Each truck shall be gross weighed and tare weighed on
Seller's scales.
(ii) the yield from the raw product will be determined
by weekly washability tests, adjusted for the
efficiency of Seller's processing facility. The yield,
expressed as a percentage, will then be applied to the
net weight of raw material calculated as provided
above.
(b) 1. Buyer's weighing, sampling and analysis procedures
and methods shall be substantially similar to those in
effect as of the date hereof which include, but are not
limited to, the following: Automatic weighing and sampling
devices are used to obtain the weight of coal delivered and
a representative sample of each day's delivery is divided
into three equal parts; Buyer's Sample, Seller's Sample and
the Neutral Sample. The weight of coal delivered is the
average reading from two (2) electronic belt conveyor scales
<PAGE>
("Belt Scales") installed in series. In the event one (1)
Belt Scale is out of service, the necessary weights are
obtained from the one (1) "in-service" Belt Scale. Such
weights and Seller's Samples are available to Seller and
must be called for by Seller not less than once a week.
Buyer determines daily the "as received" calorific value,
and other properties mutually agreed upon, of coal delivered
at Buyer's expense using Buyer's Sample.
2. The (i) means of storing Seller's Samples and the
Neutral Sample and (ii) length of time Neutral Sample shall
be retained are determined by mutual agreement. In the
event of a coal sampling equipment failure for a period
exceeding 12 hours of any 24-hour sampling period, the
average "as received" quality for the day is the monthly
average "as received" quality.
(c) Seller may request that the Neutral Sample be analyzed
by an independent laboratory if, within ten (10) calendar
days following receipt of the results of any of Buyer's
analysis in writing:
1. Seller notifies Buyer of the analysis to be
challenged; and
2. Seller provides Buyer with a copy of laboratory
analysis conducted in accordance with all
applicable ASTM standards of the relevant Seller's
Sample indicating a variance from Buyer's analysis
of the respective Buyer's Sample of:
(i) BTUs - more than (plus or minus) 100; or
(ii) Sulfur - More than (plus or minus) that
specified by ASTM D4239, Paragraph 18.4.1.2; or
(iii) Ash - More than (plus or minus) 1% absolute; or,
(iv) Volatile Matter - More than (plus or minus) 1%
absolute; or
(v) Hardgrove Index - More than (plus or minus) 3
points.
In addition, Seller shall promptly provide such further
information regarding Seller's conclusion as to the quality
of such coal as Buyer may reasonably request.
Following Seller's request, Buyer shall forward the relevant
Neutral Sample to an independent laboratory selected by
Buyer. The independent laboratory analysis of the Neutral
Sample totally replaces Buyer's analysis and shall be final,
conclusive, and binding on the parties. The cost of the
independent laboratory analysis shall be borne by Seller
unless the independent laboratory analysis differs from
Buyer's analysis for any of the parameters by more than the
variance(s) set forth above.
<PAGE>
ARTICLE IV
BILLING AND PAYMENT
4.01 BILLING AND PAYMENT PROCEDURES. (a) Buyer shall provide
Seller the final amounts and analyses of coal delivered for
any month, and Seller shall provide Buyer the final amounts
of refuse coal delivered in any month, on or about the 5th
day of the following month. Seller shall prepare and
deliver to Buyer an invoice for coal delivered and accepted
hereunder in each calendar month on or about the 10th day of
the following month. The amount of the invoice shall be
based on the amount of coal delivered, as determined by
Buyer, the amount of refuse coal delivered, as determined by
Seller, the appropriate price and on Buyer's analysis of
coal delivered as provided by Buyer to Seller. Seller shall
provide with the invoice all calculations supporting the
invoice. Seller shall submit an invoice for 50% of the
total invoice amount to each address set forth below:
Fuels Management
GPU Service Corporation ("GPUSC")
1001 Broad Street
Johnstown, PA 15907
Attn: Manager Fuels Technical Services
Manager-Homer City Operations
New York State Electric & Gas Corporation
Power Plant Road
R. R. #2, Box 2111
Homer City, PA 15748
Each such invoice shall cover all deliveries for the month
and also include as a separate line item all amounts which
become due in or with respect to such calendar month under
the Existing CSA, if any.
(b) Payment of said invoice(s) shall be made by Penelec and
NYSEG on the 22nd day of the invoice month by wire transfer
(or, on the 21st if the 22nd is a Saturday or on the 23rd if
the 22nd is a Sunday or on the next business day if the 22nd
is not a business day for Penelec or NYSEG), provided such
invoice is not in dispute. Where invoices are in dispute
only the undisputed portions shall be paid; the balance of
the invoice(s) or the disputed portion(s) shall be paid
subsequent to the resolution of the dispute. A dispute of
payments shall not excuse performance by the Seller under
this Agreement.
(c) Invoices received by the Buyer after the 10th day of a
calendar month (unless the 10th day is not a normal business
day) may be paid with a day's delay in payment for each day's
delay in the receipt of that invoice unless the delay
is due to Buyer's failure to furnish necessary information.
(d) To the extent an adjustment in an invoice is necessary
because the independent laboratory's analysis provided for
in this Agreement is used to determine the quality of coal
delivered, such adjustment shall be made in the invoice and
payment, as appropriate.
<PAGE>
(e) Each party retains the right to set off against
payments due to the other party any amounts owed to such
party by such other party.
(f) Neither Penelec nor NYSEG shall have any liability, nor
shall Seller have any claim against Penelec or NYSEG,
arising out of the failure of NYSEG or Penelec,
respectively, to pay any amount due hereunder for such other
party's 50% share of such payments.
ARTICLE V
TERMINATION OF COAL DELIVERY
5.01 TERMINATION OF COAL DELIVERY. Seller shall have no
obligation to deliver coal and Buyer shall have no
obligation to accept coal upon the earlier of (i) the
delivery and acceptance hereunder of a total of 16 million
tons of coal, subject to the provisions of this Agreement
regarding adjustments to the amount of coal to be delivered
hereunder, less the amount of coal delivered under the
Existing CSA after December 16, 1993, and (ii) the effective
date of a termination of Seller's obligation to deliver coal
or of Buyer's obligation to accept coal pursuant to Section
5.02, Article XIV or Article XV, (the "Delivery Termination
Date").
5.02 ECONOMIC HARDSHIP. (a) In the event Seller sustains a
material net loss for any calendar year attributable solely
to operations undertaken to perform its obligations
hereunder, determined in accordance with generally accepted
accounting principles and certified by an independent public
accounting firm of national standing, and Seller reasonably
expects to sustain such a material net loss in the following
calendar year, Seller may terminate its obligations
hereunder to deliver coal to Buyer by giving written notice
thereof to Buyer not later than March 31 of such following
year. Subject to verification, at Buyer's option, of
Seller's material net loss and expected net loss by an
independent public accounting firm selected by Buyer, which
firm may be the firm regularly retained by Buyer to audit
its financial statements, and receipt by Buyer of the
security or guarantee required under paragraph 11(b) of
Amendment No. 5, dated the date hereof, to the Existing Coal
Sales Agreement, Seller's obligation hereunder to deliver
coal shall thereafter terminate on the date specified in
such notice, which shall not be earlier than 12 months from
the date such notice is given.
(b) In the event that the following conditions are
satisfied and the satisfaction of such conditions is
verified by an independent accounting firm of national
standing selected by Seller, which firm may be the firm
regularly retained by Seller to audit its financial
statements, Buyer may terminate its obligation to purchase
and accept delivery of coal hereunder on not less than one
year's notice; provided, however, that such notice may not
be given prior to July 1, 1998;
<PAGE>
(i) Buyer reduces the output of electric energy
generated by Units 1 and 2 of the Station for an
extended period, and such reduction is projected to
continue, because the cost of generating such electric
energy is higher than the cost of obtaining electric
energy from other sources available to Buyer; and
(ii) the differential between the cost of generating
electric energy at the Station and obtaining electric
energy from other sources is attributable to the cost
of coal provided by Seller hereunder; and
(iii) such reduction in output of the Station has and
is reasonably expected to have a material adverse
financial impact on Buyer.
ARTICLE VI
OPERATING PROCEDURES
6.01 RECEIVING SITE; TITLE TO AND RISK OF LOSS OF COAL. All coal
delivered hereunder shall be delivered by Seller to Buyer's
conveyor located near the old Lucerne #6 mine. Title to,
and risk of loss of, coal delivered hereunder shall pass
from Seller to Buyer upon the passage of such coal over
Buyer's Belt Scales installed on Buyer's conveyor system.
6.02 MEETINGS. Seller's representatives shall meet with Buyer's
representatives at such times and at such places as may be
mutually agreed upon to discuss Seller's mining and coal
delivery plans and schedules and Buyer's coal acceptance,
coal cleaning and Station operation plans and schedules. As
of the date hereof, the parties agree that such meetings
shall be held once weekly and shall continue on that
schedule unless and until the parties agree on a different
schedule. In order for Buyer to determine the impact of
Seller's deliveries on Buyer's sulfur compliance, Seller's
representatives shall provide to Buyer its plans for the
week which shall describe the sources and locations from
which coal will be mined which will be delivered in the
following week and the quantities of coal which will be
mined from each such source and location.
6.03 SCALE TESTING.
(a) Buyer shall calibrate Belt Scales monthly following the
manufacturer's electronic calibration procedure and provide
the results thereof to Seller. In addition, Buyer shall
test the Belt Scales at least once per year in accordance
with Section 2.21 of NIST Handbook 44, 1994 Edition and
shall permit Seller to observe such tests.
(b) Seller shall cooperate with Buyer in Buyer's periodic
testing of the Belt Scales used to determine the quantity of
coal delivered hereunder. Such cooperation shall include,
but not be limited to, (i) assuring that sufficient coal has
been delivered and is stored at the Receiving Site to
conduct such testing and calibration when scheduled, (ii)
<PAGE>
assuring that an area of sufficient size and in the proper
location has been cleared to permit loading and weighing of
Buyer's trucks and unloading of weighed coal into Buyer's
receiving facilities, and (iii) providing personnel to
operate the machinery at Seller's stockpile located near the
old Lucerne #6 mine as may be required to conduct such
testing. The foregoing services to be provided in
connection with Belt Scale testing shall be provided by
Seller to Buyer at no cost to Buyer once per calendar year.
Seller acknowledges that such testing and calibration is and
may continue to be conducted on Saturdays and at other times
when Seller would not ordinarily be delivering coal.
6.04 SITE OPERATIONS. Seller shall conduct its mining operations
so as not to unduly interfere with Buyer's operation of the
Station and its related facilities. Specifically, but
without limitation, Seller shall use reasonable efforts to
minimize coal dust emissions from its operations and to
prevent interference with Buyer's environmental monitoring
systems by coal dust emissions from Seller's mining
operations.
6.05 SULFUR AND WASHABILITY PROJECTIONS. In order to determine
the impact on Buyer's sulfur compliance:
(a) Seller shall provide to Buyer written projections
("Projections") of the raw sulfur content and washability
characteristics of the coal to be delivered hereunder, the
reserves and the locations within such reserves where Seller
expects to mine such coal and the time periods during which
Seller expects to mine coal at each such location. The
Projections shall be updated quarterly and shall cover the
six month period following each such update. The first
Projection shall be delivered to Buyer not later than April
1, 1995.
(b) Seller shall use reasonable efforts to conform the
locations where Seller mines coal and the time periods when
coal is mined at such locations to the Projections.
(c) Seller shall cooperate with Buyer and shall take
such actions as Buyer may reasonably request for the purpose
of causing the coal delivered hereunder to have such raw
sulfur content and washability characteristics as will
assist Buyer in operating the Station and its related coal
cleaning plant as efficiently as possible and in accordance
with applicable state and Federal laws, rules and
regulations regarding the emission of sulfur oxides,
PROVIDED, HOWEVER, that Seller shall have no obligation to
so cooperate or take such actions to the extent that doing
so would increase Seller's mining costs.
(d) Seller shall provide prompt notice to Buyer of
each circumstance and the occurrence of each and every event
which causes, or which Seller reasonably expects will cause,
Seller to be unable to deliver coal from Seller's Marshall
Run reserves or sources of coal approved by Buyer under
Section 3.01(a) hereof.
<PAGE>
(e) Seller shall provide to Buyer all data now held by
Seller and its affiliates regarding the raw sulfur content
and washability characteristics of the coal to be mined and
delivered hereunder, and, at no cost to Buyer, shall take
and analyze such samples, and provide the results thereof to
Buyer, as Buyer may reasonably request to allow Buyer to
estimate such raw sulfur content and washability
characteristics, such requests to be expressly authorized by
Buyer's representative designated in Paragraph 24.02.
ARTICLE VII
FORCE MAJEURE
7.01 APPLICATION OF FORCE MAJEURE. Neither Seller nor Buyer
shall be liable for failure, in whole or in part, to perform
their obligations under this Agreement if and to the extent
that their performance, or operation of the Station, is
prevented by an unforeseeable event beyond their reasonable
control, or by strike, fire, riot, war, acts of God, acts of
Government, mine or Station outage due to accident, or
requisition for national defense (collectively, "Force
Majeure").
7.02 NOTIFICATION OF FORCE MAJEURE. The party claiming Force
Majeure shall promptly notify and provide a written detailed
explanation to the other party of the cause, nature and
extent and anticipated duration of each Force Majeure, which
shall thereafter suspend such party's obligations of
performance hereunder to the extent of the Force Majeure
condition and only during the period of actual Force Majeure
condition. No Seller's Force Majeure condition shall
prevent Seller from making deliveries of coal from other
approved sources not affected by Force Majeure. The parties
reserve the right to physically inspect and audit all causes
and events necessitating a Force Majeure declaration. The
party declaring a Force Majeure shall make all reasonable
efforts to cure the same as promptly as practicable.
However, nothing herein shall require a party to settle any
dispute or compromise any claim or regulatory matter.
7.03 ON-GOING GOVERNMENT ACTION. In the event that either party
invokes acts of government as a basis of FORCE MAJEURE and
it appears that the condition will be on-going causing a
restriction on either the mining or utilization of coal to
be delivered hereunder, Buyer and Seller shall meet to
discuss what if any steps might be taken to relieve the
FORCE MAJEURE and the allocation of costs to accomplish
same. If the parties are unable to agree within a
reasonable period of time on a course of action, for
whatever reason, this agreement shall terminate without
further obligation of either party. In no event shall an
act of government constitute a Force Majeure if Seller's
cost of responding thereto is included in the Government
Fees or Compliance Cost portions of the Base Price or Refuse
Coal Base Price, as provided in Article II hereof, nor shall
this Article VII be construed to limit the applicability of,
or the obligations of the parties pursuant to, the
<PAGE>
provisions of Article II hereof regarding Compliance Cost
and Government Fees.
7.04 MAKE UP OF DEFICIENCY DUE TO FORCE MAJEURE. Any
deficiencies in deliveries of coal due to a suspension of
deliveries resulting from a condition of Force Majeure,
which suspension shall not have exceeded twenty (20)
consecutive calendar days, shall be made up on such schedule
as the parties may agree and at the Base Price or Refuse
Coal Base Price prevailing at the time of delivery and
adjusted in accordance with Paragraphs 2.01, 2.02 and 2.03
hereof. If the suspension exceeds said twenty (20) days,
then the make-up shall be on such terms as the parties may,
but are not obligated to, agree upon, PROVIDED, HOWEVER,
that if the condition of Force Majeure was claimed by the
Buyer due to the inability to accept delivery of coal, and
Seller is willing and able to make up all or part of the
deficiencies in delivery, Buyer agrees to accept such make-
up deliveries in volume no less than ratably with other term
contract deliveries and to suspend spot purchases of coal
during said period of make-up. For purposes hereof, "term
contract" shall mean an enforceable contract having a term
of not less than one (1) year. Any coal delivery not made
up under this provision shall be deducted from the amount
required under paragraph 1.02.
ARTICLE VIII
COMPLIANCE WITH LAWS, PERMITS
8.01 SELLER'S COMPLIANCE. All action taken by Seller to perform,
or in connection with the performance of, this Agreement
shall comply with all applicable federal, state, and local
laws, rules, regulations, and orders (collectively,
"Applicable Laws"), including without limitation all laws,
rules, regulations, and orders applicable with respect to
workers' compensation, occupational disease, withholding and
payment of social security and federal income taxes, health
and safety, and environmental protection.
8.02 SELLER TO SECURE PERMITS. Seller shall procure all permits
and licenses required under Applicable Laws in connection
with Seller's performance of this Agreement.
ARTICLE IX
TRUCKS AND TRUCK WEIGHT LIMITATIONS
9.01 TARPING AND WEIGHTS. Seller shall ensure that trucks
delivering coal under this Agreement are "tarped," and
conform to the State gross weight restrictions and any other
applicable State and local rules and regulations.
<PAGE>
ARTICLE X
INDEMNIFICATION
10.01 SELLER'S INDEMNIFICATION. Seller assumes the risk of, and
shall indemnify and save harmless Buyer and its officers,
directors, employees, representatives, associates, agents,
successors, and assigns ("Seller Indemnified Parties")
against, all claims and actions, losses, costs, fines,
penalties and damages to property or to the environment
and/or injury, sickness, or disease to persons (including
death) (collectively, "Liabilities") arising out of,
resulting from, or based upon the acts or omissions of
Seller or anyone acting under its direction or control or
in its behalf in connection with the performance of,
arising out of or incidental to this Agreement, and all
expenses (including reasonable legal and investigation
fees) incidental thereto. The foregoing indemnity shall
apply to all claims against Seller Indemnified Parties,
whether or not said indemnified party was or is alleged to
have been negligent, including claims for (i) personal
injuries (including death) by any person made or
threatened by, in the name, or on behalf of, Seller's
employees based on said indemnified party's negligence,
including claims for personal injuries arising in the
course of their employment; Seller hereby waiving any
defense it might otherwise have under applicable worker's
compensation laws; (ii) loss of or damage to any and all
property, including pollution or contamination of the
environment (including liability under the Comprehensive
Environmental Response, Compensation and Liability Act and
similar state laws); and (iii) damages based on violations
or alleged violations of applicable federal, state or
local laws, breaches of any representation, warranty or
promise by Seller, its agents, assignees and anyone
directly or indirectly employed by any of them in
connection with the performance of this Agreement; but
Seller Indemnified Party shall be responsible for the
percentage of any Liability (including proportionate
defense costs paid by Seller) determined in a binding
proceeding or adjudication (whether or not liability is
admitted) to be based upon acts or omissions of the Seller
Indemnified Party or anyone acting under its direction or
control or in its behalf.
Nothing herein is intended to, or shall be construed as, a
waiver by either party of any defense, except worker's
compensation; claim; or right of subrogation to the extent
of the other Party's liability, that it may have against
the other Party whether or not arising in connection with
a claim under this section.
10.02 NOTICE OF CLAIMS. If any claim is made by a person that
would give rise to a right of indemnification under this
Agreement, the Seller Indemnified Party shall promptly
give notice thereof to Seller and permit it to assume the
defense of any such claim or any litigation resulting
therefore, which it shall diligently discharge. Counsel
to conduct the defense of such claim or litigation will be
chosen by Seller (limited by any rights of selection
<PAGE>
reserved by an insurer, if applicable) subject to approval
by the Seller Indemnified Party, whose approval will not
be unreasonably withheld (and will also be subject to any
right of selection by an insurer if one is involved). The
Seller Indemnified Party may participate in such defense
at its own expense. Neither party will consent to entry
of any judgment or enter into any settlement without the
written consent of the other party, which consent will not
be unreasonably withheld. The Parties will cooperate
fully with each other and make available all pertinent
information and personnel under the Party's control.
10.03 LIMITATION OF INDEMNIFICATION. Notwithstanding the
foregoing:
Seller's obligation to indemnify the Seller Indemnified
Parties against Liabilities arising out of acts which are
determined in a binding proceeding or adjudication, to be
intentional by persons acting under Seller's direction or
control or in its behalf shall extend only to Liabilities
arising out of such intentional acts which occur on
property owned by, or which is under the control of,
Seller including but not limited to a truck dump facility
on Buyer's property or which occur in connection with the
performance of this Agreement.
10.04 SURVIVAL OF INDEMNIFICATION. The foregoing obligations of
this provision shall survive termination or expiration of
this Agreement.
ARTICLE XI
ASSIGNMENT/SUBCONTRACTING
11.01 SELLER NOT TO ASSIGN. Neither this Agreement nor any
interest herein nor claims hereunder nor the performance
of any obligation hereunder shall be assigned,
subcontracted, delegated or transferred by Seller unless
authorized in writing by Buyer, but Seller may assign this
Agreement as security for Seller's obligations in
connection with Seller's financing arrangements but any
such assignment shall not be effective as to Buyer until
receipt by Buyer in writing of assurances, reasonably
satisfactory to Buyer, that Buyer will have no liability
associated with said assignment other than the performance
of Buyer's obligations under this Agreement. The document
so assigning this Agreement shall be provided to Buyer
promptly upon its execution. Buyer's obligations
hereunder shall not be enlarged in any way, nor shall its
rights hereunder be limited or restricted, as a result of
such assignment.
11.02 BUYER MAY ASSIGN. Either Penelec or NYSEG, upon at least
60 days written notice to the Seller, may transfer all of
its rights and obligations under this agreement to a
company that will on the effective date of such transfer
succeed to all of that buyer's right, title and interest
in the Homer City Generating Station.
<PAGE>
ARTICLE XII
RELEASE OF INFORMATION
12.01 NO DISSEMINATION OF INFORMATION. Except as provided in
Paragraph 12.02 below, information, data, photographs,
sketches, advertising, etc. related to Buyer's operations
involving the delivery, stockpiling, or burning of coal
furnished under this Agreement, which the Seller desires
to release or publish, that is not normally available to
the public, shall be submitted to Buyer for approval eight
weeks prior to the desired release date. As part of the
approval request, the Seller shall identify the specific
media to be used as well as other pertinent details on the
proposed release. All releases, regardless of tier of
supplier, must have the prior approval of Buyer, which
Buyer may withhold at its sole discretion. The Seller
shall include all provisions of this article including
this sentence in all subcontracts, if any, under this
Agreement.
12.02 REQUIRED DISSEMINATION. Nothing herein shall prohibit
Seller's release or publication of information or data
which, in its sole judgment, is necessary for compliance
with any governmental law, regulation or order, or in
connection with Seller's financing.
12.03 IMPLICATION OF ENDORSEMENT PROHIBITED. Seller shall not
use information, data, photographs, sketches, advertising,
etc. in such a way that would suggest an endorsement by
Buyer of any third party or such third party's products
and services.
ARTICLE XIII
FEDERAL ACQUISITION REGULATION CLAUSES
13.01 APPLICATION OF CERTAIN REGULATIONS. Based upon the
aggregate price of coal to be delivered under this
Agreement, the Federal Acquisition Regulation ("FAR"), 48
Code of Federal Regulations Chapter 1, may make applicable
one or more of the following clauses:
(1) Clean Air and Water;
(2) Contract Work Hours and Safety Standards Act-
Overtime Compensation;
(3) Equal Opportunity;
(4) Affirmative Action for Special Disabled and
Vietnam Era Veterans;
(5) Affirmative Action for Handicapped Workers;
(6) Utilization of Small Business Concerns and Small
Disadvantaged Business Concerns, and Small
Business and Small Disadvantaged Business
Subcontracting Plan.
<PAGE>
13.02 INCLUSION IN SUBCONTRACTS. To the extent any such clause
is applicable, Seller shall comply with the requirements
of such clause, and, to the extent required by the FAR,
shall include the terms or substance of such clause in its
subcontracts.
13.03 CONFLICE BETWEEN PROVISIONS. In case of a conflict
between the provisions of this article and the balance of
this Agreement, the provisions of this article shall
prevail.
ARTICLE XIV
TERMINATION FOR CONVENIENCE
14.01 BUYER'S RIGHT TO TERMINATE. After December 31, 1996,
Buyer's obligation to purchase coal hereunder may be
terminated by the Buyer for its own convenience in
accordance with this article.
14.02 EFFECTIVE DATE. Termination hereunder shall be effected
by a written 9 month notice to Seller of termination.
Such notice shall specify the date upon which such
termination becomes effective.
14.03 EFFECT OF TERMINATION. After receipt of a notice of
termination and except as otherwise directed by the Buyer,
the Seller shall:
(i) cease delivering coal on the date specified in the
notice of termination; and
(ii) except as necessary to continue delivering coal
prior to the effective date of termination, place
no further orders or issue additional subcontracts
and minimize incurrence of new liabilities or
obligations.
14.04 SELLER'S TERMINATION CLAIM.
(a) Buyer shall pay to Seller an amount equal to
Seller's Termination Claim, as defined and calculated as
set forth below, subsequent to a termination for
convenience of Buyer's obligation to purchase coal
hereunder.
(b) Seller's Termination Claim shall be equal to the
sum of the following:
(i) the difference between net book value and net
realizable value of Seller's assets used solely
in the performance of this Agreement. The
calculation of net realizable value shall be based
on the assumption of Discontinued Operations, as
defined in GAAP, that is, Seller's operations
would be discontinued and its assets used solely
in the performance of this Agreement would be
liquidated and disposed of within six months of
the Termination Date whether or not it is Seller's
intent on the Termination Date to actually
<PAGE>
discontinue operations. Such estimate of
realizable value shall be based on independent
appraisals where appropriate (i.e., the value of
property, plant, and equipment). For purposes
hereof, "assets" shall include, but not be limited
to, coal inventories and supply inventories,
prepaid expenses and other current assets, tax
receivables and deferred tax assets, noncurrent
receivables, miscellaneous other assets, and
property plant and equipment. Seller agrees to
revise its estimate of the difference between book
and net realizable value 12 months after the
Termination Date, adjusting such difference
upward or downward, as appropriate, in accordance
with actual experience subsequent to the
Termination Date;
(ii) an amount necessary to fully fund all unrecorded
liabilities of Seller arising out of or in
connection with Seller's performance of this
Agreement including, but not limited to, any
increase in recorded liabilities arising from the
exercise of Buyer's rights under this article,
including, but not limited to, black lung
benefits, workers' compensation, mine closing,
OPEB, any liabilities resulting from early
termination of equipment leases and other
contracts, and other liabilities. The recognition
of liabilities hereunder shall be based on the
assumption of Discontinued Operations.
Calculations of the amounts of such liabilities
shall use methods currently employed by Seller,
adjusted, however, for any increase required due
to the exercise of Buyer's rights under this
article. Seller agrees to revise its estimate of
the amount necessary to fully fund all unrecorded
liabilities 12 months after the Termination Date,
adjusting such amount upward or downward, as
appropriate, in accordance with actual experience
subsequent to the Termination Date, PROVISED,
HOWEVER, Seller shall not be required to secure or
utilize new actuarial studies in making any such
adjustment.
(iii) all payments due the Seller under the Existing
Coal Sales Agreement and amounts due under this
Agreement for coal delivered prior to the
Termination Date; and
(iv) an amount equal to the lesser of $7.2 million or
$1 per ton multiplied by the remaining tonnage to
be delivered under this Agreement. For purposes
hereof, the remaining tonnage shall mean, as of
the Termination Date, 16 million tons, subject to
the provisions of this Agreement regarding
adjustments to the amount of coal to be delivered
hereunder, exclusive of the adjustment resulting
<PAGE>
from termination under this Article, minus the
total tonnage sold to Buyer since December 16,
1993.
(c) Seller shall submit to Buyer an estimate of the
total amount of Seller's Termination Claim not later than
thirty (30) days prior to the Delivery Termination Date
and a final calculation not later that 90 days following
the Delivery Termination Date. Seller shall also provide
along with said final calculation an auditor's report on
the calculation prepared by an independent accounting firm
of national standing selected by Seller, which firm may be
the firm regularly retained by Seller to audit its
financial statements. Payment of 75% of the invoice for
such final calculation shall be due within thirty (30)
days, with any additional amount due upon completion of
any audit, as provided below, but not later than ninety
(90) days after said submission.
(d) Buyer may, at it's option, retain an independent
accounting firm of national standing to examine the final
calculation and the related books and records of Seller.
In the event that the final calculation includes
adjustments resulting in a write-down of income tax
assets, such firm may inspect records relating to the
consolidated tax return in which Seller is included,
PROVIDED, HOWEVER, that all information disclosed or
discovered in the course of said audit shall be treated as
confidential by said accounting firm and by Buyer and no
information not specifically relevant to the scope of the
audit authorized by this paragraph shall be disclosed by
said accounting firm to Buyer. Subject to the foregoing,
internal auditors of the Buyer may accompany such
independent accounting firm's representatives during their
examination of Seller's books and records only. An
appropriate confidentiality agreement executed by said
accounting firm and Buyer incorporating this provision
shall be a condition to Buyer's exercise of its rights
hereunder.
If the independent accounting firms of Seller and Buyer
are unable to resolve differences between them regarding the
final calculation, and if Seller and Buyer are not able to
resolve such differences, then Buyer and Seller shall
choose an independent third firm of national standing to
whom the disputed items shall be referred for resolution.
The resolution of said third firm shall be final and
binding on the parties for purposes hereof. Buyer and
Seller shall share equally the charges on said third firm.
(e) Other than payment of Seller's Termination Claim
and other amounts due hereunder for coal delivered prior to
the Termination Date, Buyer shall have no obligation to
make any payment of its obligation to purchase coal
hereunder pursuant to this article.
<PAGE>
ARTICLE XV
TERMINATION FOR DEFAULT
15.01 CONDITIONS FOR TERMINATION FOR DEFAULT. In addition to
Buyer's rights to terminate this Agreement for convenience
pursuant to Article XIV hereof, either Party may terminate
this Agreement for default, in whole, or from time to time
in part, by reasonable written notice to the other party
in the event of the occurrence of one or more of the
following events which shall constitute a material breach
of the Agreement:
(i) The other Party becomes insolvent or makes a
general assignment for the benefit of creditors,
or if a petition for protection from creditors if
filed by or against such Party under any
bankruptcy law and is not dismissed within 90
days.
(ii) The other Party consistently or intentionally
fails to comply with any covenant contained
herein, after notice from the other party,
PROVIDED, HOWEVER, that regulatory or statutory
violations which are abated within the time and
manner required by law shall not be deemed for
purposes hereof to be consistent or intentional
violations of covenants herein.
(iii) The other Party fails to perform its obligations
with respect to the delivery or acceptance of coal as
provided herein, and fails, after notice and a reasonable
period for compliance, to cure such failure and provide
adequate assurance of full performance of its obligations.
(iv) The other Party fails to perform any other
material obligation as expressly addressed
elsewhere in this Agreement.
15.02 DAMAGES. In the event of such termination, the non-
defaulting party shall be entitled to such damages as are
provided by law.
15.03 NO LIMITATION ON BUYER'S RIGHTS. Buyer's right to
terminate this Agreement in accordance with this article
applies to all deliveries, whether or not they are in
separate lots, whether or not the breach substantially
impairs the value of any installment or substantially
impairs the value of the whole agreement, and regardless
of location or passing of title with respect to any single
delivery.
15.04 CONSIDERATION OF "CURE" DEFAULT. Before taking the
termination action, either Party may in its sole
discretion review the other Party's performance to date,
ascertain the facts regarding the reason for termination,
and review any actions proposed by the other Party to
"cure" existing problems before taking the termination
action.
<PAGE>
15.05 PAYMENTS REDUCED BY DAMAGES. In the event of such
termination, no compensation shall be due the Seller
except for unpaid amounts for coal already delivered and
accepted hereunder prior to termination, provided that
such compensation shall be reduced by the amount of
damages the Buyer has or will incur as a result of such
default. Whether or not the Seller's right to proceed
with deliveries is terminated, it and its sureties, if
any, shall be liable for any damage, losses or injuries
incurred by Buyer.
ARTICLE XVI
INTERPRETATION OF LANGUAGE
16.01 RULES OF INTERPRETATION. Whenever appropriate in the
context of this Agreement, the singular shall include the
plural and the plural shall include the singular. The use
of any gender shall be applicable to all genders.
ARTICLE XVII
WAIVER OR RIGHTS
17.01 WAIVER NOT IMPLIED FOR SUBSEQUENT OCCURRENCES. A
determination by either Party at any time not to require
performance by the other Party of any provision hereof
shall in no way affect the right of either Party
thereafter to enforce the same. Nor shall the waiver by
either Party of any breach of any provision hereof be
taken or held to be a waiver of any succeeding breach of
such provision or as a waiver of the provision itself.
ARTICLE XVIII
CONFLICT OF INTEREST - GRATUITIES
18.01 PARTIES TO RESPECT OTHER'S INDEPENDENCE. The parties
value the business relationship between them and recognize
that it is based on sound ethical, commercial and business
considerations. In order to respect and preserve the
integrity of that relationship and the provisions of this
Agreement, Seller and Buyer covenant not to use, in any
way, the relationship created by this Agreement to attempt
to influence the other or any representative of the other
with respect to any matters respecting the conduct of its
business or the performance of its obligations under this
Agreement, except as specifically set forth in this
Agreement.
18.02 NO GRATUITIES ALLOWED. Furthermore, it is expressly
acknowledged that employees, agents, representatives, or
associates of Buyer or affiliates of Buyer who are in a
position to influence fuel procurement decisions are
prohibited from having any direct or indirect ties or
affiliations with Seller. Buyer and its affiliates
prohibit their employees, agents, representatives, or
associates from using their position for personal or
financial gain or from accepting any personal advantage
<PAGE>
from anyone under circumstances which might reasonably be
interpreted as an attempt to influence the recipient in
the conduct of their duties.
18.03 SELLER' COVENANT. Seller represents, warrants and
covenants that neither it nor any person acting on its
behalf, will offer or extend, directly or indirectly, any
gratuity, benefit, special favor, or anything of value
(except items of nominal value normally considered
advertising). Any breach of this warranty and covenant,
which is agreed to be an essential requirement of this
Agreement, shall be a material breach of this Agreement.
Seller shall include the terms of this representation and
warranty in all subcontracts, and a breach thereof by any
subcontractor shall be deemed a material breach of the
subcontractors warranty and covenant to Seller.
ARTICLE XIX
CUMULATIVE REMEDIES
19.01 RIGHTS ARE CUMULATIVE. The rights and remedies of the
parties provided in this Agreement are cumulative and are
in addition to any other rights and remedies provided by
law, equity, or otherwise.
ARTICLE XX
GOVERNING LAW
20.01 PENNSYLVANIA LAW GOVERNS. This Agreement and the
interpretation and enforcement hereof shall be governed in
all respects by the laws of the Commonwealth of
Pennsylvania without giving effect to the conflict of law
principles thereof.
ARTICLE XXI
SEVERABILITY
21.01 PROVISIONS INDEPENDENT/EXCEPTION. If any part, term, or
provision of this Agreement is held by the courts to be
illegal or in conflict with any law of the Commonwealth of
Pennsylvania, the validity of the remaining portions or
provisions shall not be affected, and the rights and
obligations of the parties shall be construed and enforced
as if the contract did not contain the particular part,
term, or provision held to be invalid, unless the
offending provision is of the essence of the contract.
ARTICLE XXII
DISPUTES
22.01 CLAIMS IN WRITING. Any claim or dispute which either
party may have against the other arising out of this
Agreement shall be promptly presented by the claimant in
writing to the other party. The claim or dispute shall
contain a concise statement of the question or dispute,
together with relevant facts and data to fully support the
claim.
<PAGE>
22.02 USE OF ADR. In the event of any such claim or dispute the
parties shall use their best efforts to resolve the claim
or dispute, initially, through good faith negotiations or
upon the failure of such negotiations, through Alternative
Dispute Resolution (ADR) in accordance with the Model
Procedure for Mediation of Business Disputes as published
by the Center for Public Resources; provided, however,
that nothing therein contained shall prohibit either party
from terminating its participation in ADR during any stage
of ADR and from proceeding in accordance with paragraph
22.03 hereof if either party believes that the dispute is
not suitable for ADR techniques or if such techniques do
not produce results satisfactory to the party. If the
parties mutually agree to submit their dispute to
arbitration, they shall be bound by the results thereof
subject to any right of appeal provided by law.
22.03 JUDICIAL PROCEEDINGS. If any claim or dispute arising
hereunder is not resolved in accordance with paragraph
22.02 above either party may, upon giving the other party
at least ten (10) days prior written notice, initiate
litigation to submit such claims or disputes for decision
by a court of competent jurisdiction of the Commonwealth
of Pennsylvania.
ARTICLE XXIII
NON-COMPLIANT COAL
23.01 SELLER'S ACKNOWLEDGMENT. Seller acknowledges that strict
compliance with the coal quality specifications set forth
herein is material to this Agreement. Failure to meet any
of the specifications and requirements of this Agreement
may: (i) result in violation of Federal and State
environmental laws, orders and rules or regulations, (ii)
cause damage to station equipment and/or injury or death
to Buyer, its agents, employees, contractors and others,
and/or (iii) cause reduced efficiency of Buyer's
generation of electric power.
23.02 FAILURE TO COMPLY WITH COAL SPECIFICATIONS. Failure to
consistently comply with the coal quality specifications
set forth in this Agreement constitutes a material breach
of this Agreement and Buyer, in addition to any other
right or remedy available to it, at law or in equity, may
at its sole option:
(1) Suspend future deliveries until the Seller has
provided an explanation for the non-compliance and
provided adequate assurances to Buyer's
satisfaction that actions have been taken to
correct the cause of the noncompliance;
(2) Withhold payment for all or any portion of the
non-compliant coal;
<PAGE>
(3) Require Seller to remove, at its expense, any non-
compliant coal from Buyer's premises, or
alternatively arrange for such removal at Seller's
expense.
23.03 SUSPENSION OF DELIVERIES. Buyer's right to suspend
deliveries of non-compliant coal applies to all
deliveries, whether or not they are in separate lots,
whether or not the noncompliance substantially impairs the
value of any installment or whether or not the non-
compliance with respect to one or more installments
substantially impairs the value of the whole agreement and
regardless of location or passing of title to the non-
compliant coal.
23.04 NO MAKE-UP. Coal not accepted from the Seller during any
period of suspension under this Article shall not be made
up at any subsequent time unless Buyer, at its sole
discretion, within sixty (60) days after such period of
suspension, requires that Seller make up the tonnage
pursuant to the terms of this Agreement.
23.05 DISCLAIMER OF SELLER'S WARRANTIES. Except as expressly
set forth herein, Seller makes no other warranties and
expressly disclaims any other warranty, of any kind,
including those of merchantability and fitness, there
being no warranties which extend beyond those expressly
set forth herein.
ARTICLE XXIV
AMENDMENTS AND NOTICES
24.01 AMENDMENTS TO BE IN WRITING. No changes or amendments to
this Agreement are authorized unless made by a person
authorized by this Agreement to bind Buyer and Seller and
substantiated by a formal written Amendment.
24.02 AUTHORIZED PERSONNEL. Persons authorized to make changes
or amendments to this Agreement for the parties are as
follows:
BUYER
1. Vice President - Materials & Services, GPU Service
Corp.
Director - Fuels Management, GPU Service Corporation
Manager - Fuels Technical Services, GPU Service
Corporation
2. Vice President - Fuel Supply & Operations Services,
NYSEG
Manager - Fuel Supply, NYSEG
<PAGE>
SELLER
President - Helvetia Coal Company
Vice President, Helvetia Coal Company
Assistant Treasurer - Helvetia Coal Company
24.03 NOTICES. All notices, unless otherwise provided, shall be
in writing and delivered in person or by certified mail to
the respective parties. Notices shall be forwarded to:
BUYER
1. Manager - Fuels Technical Services
GPU Service Corporation
1001 Broad Street
Johnstown, PA 15907
2. Manager Fuel Supply
New York State Electric & Gas Corporation
Corporate Drive
Kirkwood Industrial Park
P. O. Box 5224
Binghamton, NY 13902-5224
SELLER
President - Helvetia Coal Company
655 Church Street
Indiana, PA 15701
COPY TO:
Assistant Treasurer - Helvetia Coal Company
655 Church Street
Indiana, PA 15701
ARTICLE XXV
ABANDONMENT OF STRUCTURES
25.01 SELLER'S TRUCK DUMP FACILITY. Seller maintains a truck
dump and other facilities on a parcel of surface land in
Center Township, Indiana County. This is located on
Buyer's property. In consideration of the mutual promises
set forth in the Agreement, Buyer agrees not to interfere
with Seller's occupancy of said parcel during this
Agreement, unless there is a material and adverse effect
on Buyer's operations, and Seller agrees to defend,
indemnify and save Buyer harmless from and against any and
all claims, demands, suits, liabilities and judgments
asserted against Buyer or either of them arising out of or
related to Seller's occupancy or use of the parcel.
<PAGE>
25.02 SELLER'S INSURANCE. Seller maintains, and will continue
to maintain during the term of this Agreement,
comprehensive general and contractual liability and
comprehensive automobile liability insurance with a
reputable carrier with limits of at least $1,000,000
combined single limit per occurrence or claim covering its
operations conducted on property owned by Buyers and said
insurance shall name Buyers as Additional Insureds, with
respect to Seller's operations conducted on such premises.
25.03 BUYER'S RIGHT TO ACQUIRE STRUCTURES. In the event that
Seller should determine, in its sole discretion, at any
time to abandon the use of and to demolish any structures
owned by it and erected on property owned by Buyer, Seller
shall so notify Buyer and Buyer shall have the right,
subject to any applicable regulatory and lender approvals
and conditions, to acquire said structure from Seller at
no cost to Buyer except such conveyance costs normally
borne by a buyer in similar transactions.
25.04 WAIVER OF CERTAIN MINING RIGHTS. Effective upon the
termination or expiration of Buyer's obligation to accept
and purchase coal under this Agreement, Seller, on behalf
of itself, its successors and assigns, hereby waives and
agrees not to assert, or exercise, any right it may claim
by virtue of its mining rights to the occupancy of the
portion shaded in green of the surface of the tract
depicted on Exhibit 2 hereto (the "Site"), and agrees to
comply promptly with all applicable laws and regulations
relating to the reclamation of facilities thereon not
acquired by Buyers pursuant to Section 25.01 hereof and
not required to be operated and maintained by Seller to
meet Sellers obligation under applicable laws,
regulations, rules and permits, after the termination or
expiration of this Agreement, said reclamation to commence
within 12 months of such expiration or termination and to
be pursued diligently thereafter. This waiver does not
include and Seller expressly reserves all other rights
vested in Seller, by virtue of rights and waivers of
damages, if any, set forth in its chain of title to the
subjacent coal. The Seller shall also have the right to
occupy the Site for purposes of maintaining permanent
facilities such as treatment ponds, erosion and
sedimentation control facilities, and other such
facilities as are required to remain on the site to meet
Seller's obligations under applicable laws, regulations,
rules and permits.
25.05 NO SURRENDER OF RIGHTS. Both Seller and Buyer agree that
the use of Buyer's surface area by Seller shall not be
construed as a relinquishment, waiver or release by either
party of any rights associated therein, except as set
forth in the immediately preceding paragraph 25.02.
25.06 SURVIVAL OF OBLIGATIONS. The foregoing obligations of
this provision, other than insurance, shall survive
termination or expiration of this Agreement.
<PAGE>
ARTICLE XXVI
LIMITATION OF LIABILITY
26.01 NO CONSEQUENTIAL OR SPECIAL DAMAGES/EXCEPTIONS. Except
for claims arising out of injury to person or property
proximately resulting from any breach of this Agreement or
claims under Article X of this Agreement, neither Party
shall be liable to the other for any special, indirect or
consequential losses or damages arising from a breach of
this Agreement including, without limitation, loss or
profit, loss of operating time, loss of, use of, or
reduction in the use of, their respective assets or
increased expense of operation or maintenance or the
suitability of said assets.
ARTICLE XXVII
MECHANIC'S LIENS
27.01 SELLER TO OBTAIN WAIVERS REGARDING BUYER'S PROPERTY.
Seller shall obtain, for the benefit of Buyer, lien
waivers from all contractors and their subcontractors and
materialmen who provide labor, material and supplies to
Seller for improvements located on Buyer's property.
Seller shall indemnify, defend and hold Buyer harmless
from and against any and all claims arising out of
Seller's failure to pay for such labor, material and
supplies. If any mechanic's or other lien is filed
against property owned by Buyer arising out of
improvements constructed for Seller, Seller shall cause
such liens to be discharged or satisfied within 15 days
after filing or Seller shall post a bond sufficient under
applicable law to prevent the enforcement thereof against
Buyer's property.
ARTICLE XXVIII
HEADINGS
28.01 EFFECT OF HEADINGS. The headings, captions, titles and
subtitles to the articles and paragraphs throughout this
Agreement are provided for convenience and reference only,
and have no effect on the nature, extent, construction and
meaning of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Coal Sales Agreement on the date first written above by the
undersigned thereunto duly authorized.
GPU SERVICE CORPORATION,
ON BEHALF OF
PENNSYLVANIA ELECTRIC COMPANY
By: CARL BROOKS
Name: Carl Brooks
Title: V.P. - Materials &
Services
NEW YORK STATE ELECTRIC & GAS
CORPORATION
By: JACK H. ROSKOZ
Name: Jack H. Roskoz
Title: Sr. V.P.
HELVETIA COAL COMPANY
By: ROBERT D. ANDERSON
Name: Robert D. Anderson
Title: President
PENNSYLVANIA ELECTRIC COMPANY
By: J. G. HERBEIN
Name: J. G. Herbein
Title: V.P. Generation
