Item 1.01 Entry into a Material Definitive Agreement.
On February 28, 2013, Mississippi Lignite Mining Company ("MLMC"), an indirect subsidiary of NACCO Industries, Inc. (the "Company"), entered into a Lignite Sales Agreement (the "Agreement") with KMRC RH, LLC ("KMRC"). Under the Agreement, MLMC will sell lignite from its Red Hills Mine to KMRC as an exclusive supplier. KMRC will refine the lignite and sell the refined product to Choctaw Generation Limited Partnership ("CGLP") for use as the exclusive fuel for the Red Hills Generating Station located in Choctaw County, Mississippi (the "Plant") operated by CGLP. MLMC will supply lignite to KMRC effective immediately through December 31, 2021 (the "Term").
During the Term, the Lignite Sales Agreement, dated April 1, 1998, by and between MLMC and CGLP, as amended (the "1998 LSA"), including the all requirements provisions and the take-or-pay provisions, remains in effect. MLMC and CGLP have agreed that MLMC's obligation to supply certain quantities of lignite to CGLP pursuant to the terms of the 1998 LSA will be offset by CGLP's purchase of refined lignite from KMRC, provided that such refined lignite is produced exclusively from lignite sold to KMRC by MLMC. In addition, MLMC and CGLP have agreed that CGLP's obligations to (a) purchase all lignite required for operation of the Plant from MLMC, and (b) pay for certain minimum quantities of lignite from MLMC regardless of whether CGLP takes delivery, each pursuant to the terms of the 1998 LSA, will be offset by purchases of refined lignite from KMRC, again, provided that such refined lignite is produced exclusively from lignite sold to KMRC by MLMC. Pricing under the Agreement is based on pricing under the 1998 LSA. Upon expiration of the Term or termination of the Agreement, MLMC will resume sales of lignite to CGLP pursuant to the terms of the 1998 LSA.