EX-10.68








 EXHIBIT 10.68




MEMORANDUM OF UNDERSTANDING

EFFECTUATING THE TRANSFER OF

NATURAL URANIUM HEXAFLUORIDE

FOR AFFECTED INVENTORY




This Memorandum of Understanding (“MOU”) is entered into as of this 22nd day of
October 2004 (the “MOU Effective Date”) by and between the United States Department of
Energy (“DOE”) and USEC Inc. (“USEC”), a Delaware corporation with headquarters at
6903 Rockledge Drive, Bethesda, Maryland 20817 (DOE and USEC being sometimes referred to herein
individually as a “Party” and collectively as the “Parties”).



WITNESSETH




WHEREAS, on June 17, 2002, DOE and USEC concluded an agreement (the “June 17
Agreement”) in which they agreed, among other things, on procedures for dealing with up to 9550
MTU of natural uranium hexafluoride that DOE had transferred to USEC on or about June 30, 1993,
April 20, 1998, and May 18, 1998 and that did not meet ASTM Specification C-787-90 (the
“Affected Inventory”) in exchange for USEC’s agreement to release the United States from
any and all liability and claims relating to or arising from the DOE’s transfer of the Affected
Inventory as amounts are exchanged, processed or replaced, such releases first relating to the May
18, 1998 transfer; and



WHEREAS, in accordance with Article 4.B(b) of the June 17 Agreement, DOE and USEC have agreed
to exchange 2116 Metric Tons (“MTU”) of natural uranium hexafluoride in DOE’s inventory
(the “Natural UF6”) for 2116 MTU of Affected Inventory; and



WHEREAS, as specified in the letter from Acting Under Secretary of Energy Garman to USEC
President and Chief Executive Officer Timbers, dated June 25, 2004 (the “DOE Letter”), the
exchange of 2116 MTU is conditioned upon the USEC Affected Inventory being returned to DOE “within
American National Standards Institute N14.1 – compliant cylinders with operable valves
[“Compliant Cylinders”] unless USEC takes responsibility for assuring that the material can
be shipped and treated pursuant to an agreement between USEC” and DOE; and



WHEREAS, USEC has assured DOE that, as a result of a process USEC has developed, Affected
Inventory in cylinders that do not comply with ANSI Specification N14.1 or have inoperable valves
(“Non-Compliant Cylinders”) can be shipped and treated for the purpose of transferring DOE
Affected Inventory to Compliant Cylinders; and



WHEREAS, subject to the availability of funds and legislative authority for this purpose, USEC
expects to have shipped the approximately 593 MTU of Affected inventory in Non-Compliant Cylinders
referred to in Section 1.4 below from Paducah to Portsmouth by June 30, 2005, and to have
transferred such Affected Inventory to Compliant Cylinders by September 30, 2005, thus fulfilling
the shipment requirements of the DOE Letter; and



WHEREAS, the Parties anticipate a future agreement for the continued operation of the
Portsmouth S&T Facilities for the processing of Affected Inventory in Fiscal Year 2005 and beyond
(a “Future Agreement”) pursuant to which USEC will, among other things, transfer DOE
Affected Inventory from Non-Compliant Cylinders to Compliant Cylinders, accept processed DOE
Affected Inventory for use at the Paducah Gaseous Diffusion Plant, and return to DOE natural
uranium hexafluoride that meets the ASTM Specification C-787-90 for Technetium 99 (the “ASTM
Specification”); and



WHEREAS, USEC commits that the total cost to DOE, to transfer approximately 2,077 MTU of
Affected Inventory from Non-Compliant Cylinders to Compliant Cylinders, will not exceed the sum of
(a) $9 million dollars of direct costs to be verified and agreed to by DOE prior to execution of a
Future Agreement, plus (b) the allocable indirect costs, as detailed in Appendix I to this MOU; and



WHEREAS, as a result of the foregoing, USEC expects to have transferred approximately 593 MTU
of DOE Affected Inventory from Non-Compliant to Compliant Cylinders by September 30, 2005 and to
have processed all of the 2116 MTU of Affected Inventory transferred from USEC to DOE in Compliant
and Non-Compliant Cylinders, and to have provided DOE with 2116 MTU of Natural UF6 that
meets the ASTM Specification in Compliant Cylinders by December 31, 2006;




NOW, THEREFORE, the Parties hereby agree as follows:



ARTICLE 1 – TRANSFER OF NATURAL UF6 FOR AFFECTED INVENTORY



1.1 Within five working days from the MOU Effective Date, DOE shall provide USEC with a
detailed list of the cylinders which contain approximately 2116 MTU of Natural UF6 proposed to be
transferred to USEC, which list shall become Exhibit A to this MOU.



1.2 USEC shall have the opportunity to inspect the proposed cylinders within sixty (60)
working days of the MOU Effective Date and to notify DOE in writing within this time frame of any
cylinder that is a Non-Compliant Cylinder. USEC may reject any Non-Compliant Cylinder within the
sixty-day period and, to the extent DOE has available Compliant Cylinders of Natural UF6, DOE will
provide details on a replacement cylinder within ten (10) working days and amend Exhibit A
accordingly. After the sixty-day period, the cylinders shall be deemed to be ANSI-compliant and
DOE will have no further obligation to provide Compliant Cylinders pursuant to this MOA. Once DOE
has been notified that USEC has completed its inspection of and accepts the cylinders as being
ANSI-compliant, DOE will transfer title to and custody of the 2116 MTU of Natural UF6 listed on the
Exhibit A (as amended) to USEC within ten (10) working days.



Following the transfer of title and custody of the cylinders of Natural UF6 listed on Exhibit
A, USEC will have a period of one year to inspect and either accept or, in the event the material
does not meet the ASTM Specification, reject the material, after which period of time the material
shall be deemed to meet the ASTM Specification and DOE will have no further obligation to replace
the rejected material. Should USEC provide test data verifying that the material in any cylinder
does not meet the ASTM Specification within the one year period, DOE will replace the cylinder with
a cylinder containing Natural UF6 to the extent such material is available for transfer by DOE. In
the event DOE does not have material available for transfer, USEC will adjust the release of
material provided for in Section 1.3 accordingly. In the event DOE provides a replacement cylinder,
the provisions relating to inspection, acceptance and transfer set out in this Section 1.2 apply to
the replacement of material and cylinders.



1.3 Upon the transfer to USEC by DOE of title to and custody of Natural UF6 under Section 1.2
above, USEC shall provide to DOE a notice of release from any and all liability and claims relating
to or arising from DOE’s transfer of a like amount of Affected Inventory. Such notice of release
shall relate first to the April 20, 1998 transfer and then to the June 30, 1993 transfer. The
Parties acknowledge that USEC has already released DOE from liability with respect to the May 18,
1998 transfer.



1.4 USEC shall transfer title to DOE, but not custody (until requested), of, approximately
1523 MTU of Affected Inventory in Compliant Cylinders within ten (10) working days of the execution
of this MOU and approximately 593 MTU of Affected Inventory in Non-Compliant Cylinders within ten
(10) working days after arrival in Portsmouth, the total being a like amount of material to that
which is transferred to USEC pursuant to section 1.2 above. Within five working days of the MOU
Effective Date, USEC shall provide DOE with a detailed list of the cylinders proposed to be
transferred to DOE, which shall become Exhibit B to this MOU. In no event shall USEC include under
Exhibit B Previously Processed Cylinders, (as that term is defined in the Work Authorization for
Continued Operation of the Shipping and Transfer Facilities For Processing Affected Inventory dated
April 8, 2004). DOE shall have the right, for a period of ninety (90) days from the date the title
was transferred, to notify USEC that any cylinder in the approximately 1523 MTU transfer of
Affected Inventory is a Non-Compliant Cylinder. In the event USEC receives such notification, it
shall upon receiving concurrence of DOE, either replace any such Non-Compliant Cylinder with a
Compliant Cylinder of Affected Inventory or a Compliant Cylinder containing uranium hexafluoride
which meets the ASTM Specification or process any such Non-Compliant Cylinder along with the
Non-Compliant Cylinders transferred to DOE in the approximately 593 MTU transfer of Affected
Inventory. USEC shall utilize the first resources made available from any Future Agreement to
transfer the approximately 593 MTU of Affected Inventory in Non-Compliant Cylinders to Compliant
Cylinders with the objective of completing processing at Portsmouth by September 30, 2005, followed
by implementation of the provisions of section 1.7 below.



The Parties acknowledge that a Future Agreement may be negotiated for the continued operation
of the Portsmouth S&T Facilities for the transfer of approximately 2,077 MTU of Affected Inventory
from Non-Compliant Cylinders to Compliant Cylinders and that total costs for that program will not
exceed the sum of (a) $9 million of direct costs to be verified and agreed to by DOE prior to
execution of a Future Agreement, plus (b) the allocable indirect costs. USEC agrees that it will
charge no fee in the Future Agreement for the processing of USEC or DOE Affected Inventory.
However, the agreement in the preceding sentence regarding fee shall have no precedential value in
circumstances under which USEC may provide other services to DOE while earning a fee. 



1.5 USEC, in accordance with all applicable regulatory requirements, and at its costs,
including, but not limited to, any costs incurred by the Department’s contractor to oversee USEC’s
movement of cylinders in DOE’s non-leased cylinder yards, shall be responsible for the movement of
all cylinders identified in Exhibits A and B to the appropriate storage yard. Provided any DOE
non-leased cylinder yard (s) can be leased to USEC on a temporary basis without creating regulatory
issues for DOE or USEC, the parties agree to process on an expedited basis a temporary lease change
to the Lease Agreement between DOE and USEC, dated July 1, 1993 in order to affect the movement of
such cylinders.



1.6 USEC shall document the transfers referred to in Section 1.2 and 1.4 on the appropriate
Nuclear Material Transaction Reports (Forms 741).



1.7 Subject to the availability of funds and legislative authority for this purpose (a) each
cylinder of DOE Affected Inventory processed by USEC that meets the ASTM Specification will be
returned to DOE custody in a Compliant Cylinder within thirty (30) days of completing processing at
the Portsmouth S&T Facilities and (b) each cylinder of DOE Affected Inventory processed by USEC
that does not meet the ASTM Specification after 1 or 2 passes will be used as feed in the Paducah
GDP cascade, and USEC will provide DOE, within thirty (30) days of such Affected Inventory being
introduced as feed in the Paducah GDP, with an equivalent quantity of natural uranium hexafluoride
that meets the ASTM Specification and is contained in a Compliant Cylinder. USEC shall introduce
such Affected Inventory as feed in the Paducah GDP as quickly as feasible, taking into account the
approximately 2450 MTU of USEC Affected Inventory currently scheduled to be introduced as feed over
the next 16 months, the rate at which the Paducah GDP can accept feed that does not meet the ASTM
Specification, USEC’s existing contractual commitments to deliver feed to customers, and USEC’s
commitment not to use DOE Inventory as USEC working inventory. Upon DOE’s request, USEC shall
provide DOE with information sufficient to verify that USEC has abided by its commitment not to use
DOE Inventory as USEC working inventory.



USEC expects to have transferred approximately 593 MTU of DOE Affected Inventory from
Non-Compliant Cylinders to Compliant Cylinders by September 30, 2005, to have processed such
Affected Inventory and returned to DOE custody an equivalent amount of approximately 593 MTU of
Natural UF6 that meets the ASTM Specification in Compliant Cylinders by June 30, 2006,
and to have returned to DOE custody the full total of approximately 2116 MTU of Natural
UF6 that meets the ASTM Specification in Compliant Cylinders by December 31, 2006.



In the event the Paducah GDP operations or feed scheduling circumstances preclude such use in
the Paducah GDP to meet the milestones described above, USEC may, upon written notification of the
circumstances made to DOE and to which DOE does not object in writing, delay the return to DOE by
up to 180 days (not to exceed 360 days from the date of processing) of an equivalent quantity of
natural uranium hexafluoride that meets the ASTM Specification contained in a Compliant Cylinder.
Delivery by USEC following processing may be made to either DOE’s Portsmouth or Paducah UF6
cylinder yards, as directed by DOE.



ARTICLE 2 – RESTRICTIONS ON USEC’S USE OF NATURAL UF6



2.1 The Parties agree that USEC received the Affected Inventory from DOE pursuant to (a) a
June 30 1993 Determination Order by the Office of Management and Budget, (b) an April 20, 1998
Memorandum of Agreement between DOE and USEC, and (c) a May 18, 1998 Amendment FY 98-1 and
accompanying Secretarial Determination. USEC represents that these documents, pursuant to which it
received the Affected Inventory, will be accurately cited in the cylinder list set forth in Exhibit
B.



2.2 The Parties further agree that the Natural UF6 being transferred to USEC by DOE pursuant
to this MOU shall be deemed for all purposes to be uranium hexafluoride transferred to DOE pursuant
to Section 3112(b)(1) of the USEC Privatization Act, 42 USC §2297h-10(b)(1). USEC shall be
entitled to sell this uranium for consumption by end users in the United States or abroad,
provided, that sales for consumption by end users in the United States shall be subject to
the use restriction set forth in Section 3112(b)(2)(D) of the USEC Privatization Act, 42 USC
§2297h-10(b)(2)(D).



ARTICLE 3 – DISPUTE RESOLUTION



If a dispute arises under this MOU, these procedures shall apply. Either Party may invoke
this dispute resolution procedure. The Parties shall make a reasonable effort to informally
resolve disputes at the lowest level prior to the issuance of a formal written statement of dispute
under the procedures set forth below:



A. INFORMAL DISPUTE



Informal dispute resolution may be invoked by either Party for any action which leads to or
generates a dispute. A Party who wishes to invoke dispute resolution shall do so by first issuing
a written statement of informal dispute resolution. The written statement of informal dispute
shall set forth the nature of the dispute, the work affected by the dispute, the disputing Party’s
position with respect to the dispute, and the information the disputing Party is relying upon to
support its position. During informal dispute, the disputing Party shall engage the other Party in
informal dispute resolution among the Technical Representatives (TRs) and/or their immediate
supervisors. During the informal dispute resolution process, the Parties shall meet as many times
as are necessary to discuss and attempt resolution of the dispute. The informal dispute resolution
period shall be limited to thirty (30) days from the date on which the disputing Party provides the
other Party with the written statement of the informal dispute resolution, unless extended by
agreement of the Parties.



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B. FORMAL DISPUTE



If agreement cannot be reached on any issue during the informal dispute resolution process,
then the disputing Party shall forward, no later than fifteen (15) days after the end of the
informal dispute resolution period, a written statement of dispute to the other Party setting forth
the nature of the dispute, the work affected by the dispute, the disputing Party’s technical and
legal position regarding the dispute, and the relief requested. The written statement of dispute
shall be mailed by the Dispute Resolution Manager for the disputing Party to the Dispute Resolution
Manager for the other Party.



The Dispute Resolution Managers shall have thirty (30) working days to resolve the dispute
from the date of receipt of the written statement of dispute. The resolution of the dispute shall
be memorialized in writing. Both parties shall abide by the terms and conditions of any final
resolution of the dispute.



The Parties shall diligently perform under this Agreement pending the completion of these
dispute resolution procedures.



If the Dispute Resolution Managers are unable to resolve the dispute within thirty (30)
working days of receipt of the written statement of dispute, the Parties will elevate the matter(s)
for resolution by the Under Secretary of Energy and the President of USEC. The Under Secretary and
President of USEC shall have thirty (30) working days to resolve the dispute from the date of
forwarded by the Dispute Resolution Managers. The resolution of the dispute shall be memorialized
in writing. Both Parties shall abide by the terms and conditions of any final resolution of the
dispute.



In the event that the Under Secretary of Energy and the President of USEC do not resolve the
matter(s), the parties may pursue whatever remedies they may have at law and equity.



The time frames set forth above for reporting and resolution of disputes may be extended by
mutual agreement of the Parties, and such agreement shall be in writing.



C. IDENTIFICATION OF DISPUTE RESOLUTION PARTIES:




For purposes of this Dispute Resolution Article, the USEC Technical Representative is:



	 	 	 
	Name:

Title:

Address:

	 	Larry B. Cutlip

Technetium Program Manager

P.O. Box 628

Piketon, Ohio 45661







For purposes of this Dispute Resolution Article, the USEC Dispute Resolution Manager
is:



	 	 	 
	Name:

Title:

Address:

	 	Lindsey Krause

Director, Production Operations

USEC Inc.

6903 Rockledge Drive

Bethesda, Maryland 20817
	 
	 	 







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	For purposes of this Dispute Resolution Article, the DOE Technical Representative is:

	 
	 	 
	 

	 
	 	 
	Name:

Title:

Address:

	 	Larry W. Clark

Assistant Manager for Nuclear Fuel Supply, NS-50

United States Department of Energy — ORO








P.O. Box 2001


Oak Ridge, TN 37831



For purposes of this Dispute Resolution Article, the DOE Dispute Resolution Manager
is:



	 	 	 
	Name:

Title:

Address:

	 	Linda L. Gunter

Associate Director, Office of Nuclear Fuel Cycle Security

United States Department of Energy

1000 Independence Avenue

Washington, DC 20585







ARTICLE 4 —  POINTS OF CONTACT



The Parties agree that to facilitate the exchange of Exhibits A and B as well as other routine
communication the following points of contact should be used:




For the purposes of this Agreement the DOE point of contact is :



	 	 	 
	Name:

Title:

Address:

	 	Larry W. Clark

Assistant Manager for Nuclear Fuel Supply, NS-50

United States Department of Energy — ORO








P.O. Box 2001


Oak Ridge, TN 37831




For the purposes of this Agreement the USEC point of contact is:



	 	 	 
	Name:

Title:

Address:

	 	Larry B. Cutlip

Technetium Program Manager

P.O. Box 628

Piketon, Ohio 45661
	 
	 	 







3




IN WITNESS WHEREOF, the Parties have caused this Memorandum of Understanding to be signed in
two originals by their duly authorized representatives as of the MOU Effective Date.



UNITED STATES DEPARTMENT OF ENERGY



	 	 	 
	By:

	 	/s/ Linda L. Gunter
	 

	 	 
	
 
	 	Linda L. Gunter
	 
	 	 
	Title: Associate Director, Office of Nuclear Fuel Cycle Security

	 
	 	 
	USEC INC.

	 	

	 
	 	 
	By:

	 	/s/ Philip G. Sewell
	 

	 	 
	Title:

	 	Philip G. Sewell

Senior Vice-President
	 
	 	 








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