Agreement for Sale and Purchase of Coal - Carolina Power & Light Co., Mountaineer Coal Development Co. d/b/a Marrowbone Development Co. and Bluegrass Coal Development Co.
AMENDED AND RESTATED
AGREEMENT FOR SALE AND PURCHASE OF COAL
This Amended and Restated Agreement dated as of the first day of July,
1996 ("Agreement") sets forth an agreement for the sale and purchase of coal as
of the first day of October, 1976, as combined and restated in a Coal Supply
Agreement dated January 1, 1985, as amended by a First Amendment dated as of the
first day of January, 1987, as amended by an Assignment Agreement dated as of
the first day of May, 1988, further amended by an Assignment Agreement dated as
of December 22, 1988, further amended by a Second Amendment dated as of the
first day of January, 1989, further amended by a Third Amendment dated as of the
first day of January, 1991, by and between Carolina Power & Light Company
("Buyer") and Mountaineer Coal Development Company, d/b/a Marrowbone Development
Company and Bluegrass Coal Development Company ("Sellers").
WHEREAS, the parties wish to further amend the Agreement, and to settle
certain disputes between the parties;
WHEREAS, Buyer and Sellers are of the opinion that it would be mutually
beneficial to combine the original Agreement and all amendments into one
document for clarity and ease of administration; and
WHEREAS, Sellers agree to sell and Buyer agrees to purchase coal upon
terms and conditions as follows:
NOW, THEREFORE, in consideration of the mutual benefits to be derived, as
of July 1, 1996, Buyer and Sellers do hereby amend and combine the original
Agreement and all amendments into this document.
1.0 Description. The description of the coal to be sold and delivered
under this Agreement for use at Buyer's Roxboro 4 and/or Mayo 1
Units is made part of the basis of the bargain of the Agreement.
Conformity to the description also requires that the coal be
substantially free from impurities. The said coal shall not be
larger than 2 inches in diameter, but may be of smaller size
provided such smaller size does not cause Buyer unusual difficulties
in handling and utilization. The said coal shall conform to the
following quality characteristics:
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MONTHLY PURCHASE
ORDER WEIGHTED TRAINLOAD
AVERAGE SHIPMENT
------- --------
Moisture Content, % 8.5 max. 9.0 max.
Ash Content, % 13.2 max. 14.0 max.
Calorific Content, Btu/lb. 12,000 avg. (5)
Sulfur Content, lbs. SO(2)/mm Btu(1) 1.2 max. 1.2 max.
Volatile Matter %(2)(3) (6) 25.0 min.
Grindability (HGI) 39 min. 38 min.
Ash Fusion Temp. (H=W, Reducing)(degree)F(2)(4) (6) 2400 Min.
(1) Pounds of SO(2)/mmBtu are predicated on the conversion of 100
percent of available sulfur to sulfur dioxide.
(2) The specifications for Volatile Matter and Ash Fusion
Temperature apply to deliveries from sources other than
Marrowbone mines producing in the Coalburg, Clarion, and/or
5-Block seams.
(3) The minimum trainload specification for Volatile Matter shall
be increased to 30.0% effective January 1, 2000.
(4) No coal shall be shipped from a seam or source with an Ash
Fusion Temperature below 2400(degree)F (H=W, Reducing).
(5) No trainload maximum or minimum identified for this
characteristic.
(6) No monthly purchase order weighted average identified for
Volatile Matter or Ash Fusion Temperature.
2.0 Quantity and Delivery.
(a) Except as provided in Paragraph 8.0, Force Majeure, deliveries
of coal under this Agreement commencing on July 1, 1996 and
thereafter shall be as follows:
YEAR TOTAL TONNAGE
---- -------------
July thru December, 1996 1,375,000 tons
1997 and thereafter through 2006 2,750,000 tons per year
TOTAL 28,875,000 tons
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Buyer and Sellers understand and agree that the tonnages set
forth above are annual commitments and that Buyer and Sellers
shall schedule, ship and accept shipments each calendar month
as necessary to insure that such annual contract commitments
are satisfied each calendar year, subject to the provisions of
Paragraph 8.0, Force Majeure. Monthly shipping schedules will,
where possible, be adjusted to reflect Sellers' planned
vacation period and Buyer's planned maintenance outages.
(1) On or prior to December 1 of each calendar year during
the term hereof, Sellers shall provide Buyer with a
tentative schedule of monthly coal shipments during the
ensuing calendar year. Buyer shall promptly review this
schedule and notify Sellers of any modifications within
ten (10) business days of receipt. Buyer and Sellers
shall then agree on the tentative monthly shipping
schedule for the ensuing calendar year on or prior to
December 20.
(2) Buyer shall specify to Sellers on or prior to the
twenty-fifth day of each calendar month during the term
hereof the dates and destinations for shipments to be
made hereunder in the next succeeding calendar month;
provided, however, that Buyer reserves the right to
change the destination of such shipments at any time.
(b) The term "ton" as used herein shall mean a net ton of two
thousand pounds, avoirdupois weight.
(c) Sellers will load coal sold hereunder pursuant to trainload or
other applicable tariffs (and supplements) established by the
railroad that will haul the coal, and such other tariffs as
may evolve that are mutually acceptable to Buyer, Sellers, and
the railroad. Loading of trains at the rate of at least 10,000
tons in a 4-hour period will be performed by Sellers,
exclusive of holidays, in accordance with the provisions of
applicable freight tariffs.
(d) Buyer and Sellers shall mutually arrange for the necessary
rail cars to make the specified deliveries and Sellers shall
cause the coal to be loaded in a manner that will assure
reasonably uniform consistency as to size and quality. Sellers
shall cause each rail car to be loaded to full visible
capacity, and shall reimburse Buyer for any penalty and
freight charges resulting from deficits in carload minimum
weight. Sellers shall pay any costs of demurrage or storage at
the shipping points not caused by Buyer.
(e) The coal shipped hereunder shall be supplied from the loadout
facilities of Marrowbone or, at Sellers' sole discretion, any
other source, provided that:
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(1) With respect to shipments from Marrowbone, Sellers shall
have the right, at their sole discretion, to purchase
and/or process coals produced by other coal producers
(whether affiliated with Sellers or not) and to ship
such coal to Buyer, provided that the coal shipped to
Buyer satisfies the quality characteristics specified in
Paragraph 1.0, Description.
(2) The f.o.b. mine prices set forth in Paragraph 5.0, Price
are based on shipment from the Marrowbone loadout
facility at Naugatuck, West Virginia. In the event
Sellers elect to ship coal from any origin other than
the Marrowbone loadout at Naugatuck, West Virginia, the
f.o.b. mine place for such shipments shall be adjusted
to result in the same delivered cost to Buyer,
calculated in cents per million Btu, as the cost which
would have resulted if such shipments had originated
from Marrowbone.
(3) With the exception of purchases of replacement coal for
non-shipment arising out of force majeure events (as
provided in Paragraph 8.0, Force Majeure), if Sellers
elect to supply coal to Buyer from sources other than
Marrowbone, such coal shall be purchased by Sellers
under a contract with a coal producer with a term of at
least sixty (60) days. Sellers shall notify Buyer before
shipping any coal to Buyer from a source or seam other
than those from which coal has been shipped to Buyer in
the past hereunder.
2.1 Weights.
(a) In the event that coal is delivered from the Marrowbone
loadout at Naugatuck, West Virginia, Sellers will determine
the weight of coal delivered under this Agreement by means of
electronic belt scales located at the mine site, provided and
operated by Sellers and approved by the railroad. The loaded
weight will be determined for each train for each loading and
such weight shall be the basis for payment by Buyers. Sellers
shall test and calibrate such scales at thirty (30) day
intervals to maintain them at a trainload accuracy within plus
or minus 0.5 percent through the use of calibration techniques
acceptable to Sellers, Buyer, and the railroad. Testing,
calibration, and certification of the scales will be under the
jurisdiction of the railroad and the applicable state agency.
Sellers shall promptly provide Buyer with a copy of the
results of all scale testing, calibrations, and
certifications.
(b) Sellers shall give immediate notice by telephone or facsimile,
and confirm such notice in writing to both Buyer and the
railroad, if and when Sellers discover that the weighing
facilities have become inoperable or are discovered to be in
error beyond the limits mentioned above. During any period
when such weighing facilities are inoperable or in error,
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determination of the quantities of coal delivered shall be
made by a procedure to be established by Buyer, Sellers, and
the railroad.
(c) Buyer shall have the right to have a representative present at
any and all times to observe the determination of weights. If
Buyer should at any time question the accuracy of the weights
thus determined, Buyer shall so advise Sellers, and confirm
such advice in writing, and Sellers shall arrange to test the
weighing devices or methods. If such tests show the weighing
devices to be in error, they shall be adjusted to the required
accuracy as mutually agreed upon by Buyer and Sellers, in
accordance with generally accepted calibration techniques used
in the coal and railroad industries.
(d) If the weighing devices are determined to be in error beyond
the limits as set forth in Paragraph 2.1(a), an appropriate
adjustment shall be made in weights and related payments;
provided, however, that no such adjustment shall be
retroactive for a period in excess of thirty (30) days prior
to the date that Buyer first questioned Sellers about the
accuracy of the weighing devices or methods, or thirty (30)
days prior to the discovery of the inaccuracy of the weighing
devices if the inaccuracy is discovered upon a regularly
scheduled testing.
(e) In the event Sellers elect to supply coal to Buyer from
sources other than Marrowbone, the weight of coal in each
shipment shall be determined in accordance with Buyer's
transportation contract with the railroad, any amendments
thereto, or any new agreements between Buyer and the railroad
for the transportation of coal hereunder. Sellers shall have
the right, but not the obligation, to weigh such coal at
Seller's loading facilities as long as such weights are
determined by scales and in accordance with policies and
procedures approved by the railroad. Sellers shall reimburse
Buyer for any and all costs associated with the weighing of
such coal charged by the railroad to Buyer. Weights so
determined shall be accepted by the parties for purposes of
payment hereunder
3.0 Term of Agreement. The term of this Agreement shall be for the
period beginning October 1, 1976 and ending December 31, 2006.
4.0 Payment. Buyer shall make payments in accordance with the following
schedule:
(a) For coal received at Buyer's plants from the first day of the
month through the fifteenth day of the month, payment will be
made on or before the tenth day of the following month.
(b) For coal received at Buyer's plants from the sixteenth day of
the month through the last day of the month, payment will be
made on or before the twenty-fifth day of the following month.
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(c) Payments for coal pursuant to Paragraph 5.3 will be made on or
before the dates indicated therein.
All payments shall be made by wire or electronic transfer of
immediately available funds on the dates indicated, and shall be
paid to Sellers at:
Mountaineer Coal Development Company
d/b/a Marrowbone Development Company
c/o Bank of America
231 S. LaSalle Street
Chicago, IL 60697
Account #78-20151
ABA #071000039
5.0 Price.
5.1 The price per ton f.o.b. mine for all tons shipped on or near July
1, 1996 shall be as follows:
CALENDAR YEAR ANNUAL PRICE
------------- ------------
1996 (effective 7/1) $33.00
1997 $29.50
1998 $28.00
1999 $28.50
2000 $29.00
2001 $29.58
2002 $30.06
2003 $30.67
2004 $31.28
2005 $31.91
2006 $32.55
5.2 Buyer and Sellers recognize that the prices set forth in Paragraph
5.1 may require adjustment, either increase or decrease, because of
the imposition of federal or state legislation or regulation after
July 1, 1996, or any changes in the interpretation and enforcement
of existing federal or state requirements after
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July 1, 1996, that impose or change a tax, assessment or other
governmental charge based on the volume of tons produced or the
price of coal sold by Sellers under this Agreement. In the event of
such an imposition, either party may submit to the other party
detailed documentation of the proposed price adjustment, and Sellers
and Buyer shall meet to discuss and attempt to agree upon an
adjustment to reflect the actual change in Sellers' costs.
In the event that Sellers elect to supply coal from sources other
than Marrowbone, the provisions of this Paragraph 5.2 shall only
apply to the price of coal from such sources if (i) Sellers purchase
such coal for resale to Buyer under a contract with a term of at
least one (1) year, and (ii) the contract between Sellers and the
supplier of such coal provides for the payment by Sellers to the
supplier of the types of costs described in this Paragraph 5.2,
including any such costs in effect at the time Sellers execute a
contract for the purchase of coal from such sources.
In the event that Sellers elect to blend coal subject to price
adjustments pursuant to this Paragraph 5.2 with other coals, only
the price for the percentage of such coal supplied to Sellers that
is subject to this Paragraph 5.2 shall be adjusted.
In the event Sellers and Buyer are unable to agree as to the amount
the price per ton should be increased or decreased, then the matter
shall be submitted to an independent third party experienced in the
matters in question that is acceptable to both Sellers and Buyer.
The cost of such third party shall be borne equally by Buyer and
Sellers. The price increase or decrease per ton, as determined by
the independent third party, shall be binding on both Sellers and
Buyer; provided, however, that any increase shall not exceed the
amount previously proposed by Sellers, and any decrease shall not
exceed the amount previously proposed by Buyer. In the event a third
party cannot be agreed upon, the provisions of Paragraph 18.0, Third
Party Selection shall apply.
5.3 On the day of execution of this Agreement, Buyer shall remit a
payment for coal of $3,013,000 to Sellers.
Buyer shall remit the following additional payments for coal to
Sellers on or before the dates specified:
YEAR JANUARY 1 APRIL 1 JULY 1 OCTOBER 1
---- --------- ------- ------ ---------
1996 -- -- -- $3,000,000
1997 $3,750,000 $3,750,000 $3,750,000 $3,750,000
1998 $4,625,000 $4,625,000 $4,625,000 $4,625,000
1999 $4,062,500 $4,062,500 $4,062,500 $4,062,500
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6.0 Remedies for Quality Deviations. The following are Buyer's sole and
exclusive remedies for coal quality deviations from the quality
characteristics specified in Paragraph 1.0, Description:
(a) A price adjustment shall be applied to Sellers' account when
there is a difference between the as-received Btu per pound
and 12,000 Btu per pound. If and when the results of analysis
reflect that the average Btu content of coal delivered
hereunder, calculated on a per purchase order basis, is less
than 11,900 or more than 12,100 Btu per pound, a price
adjustment will be made based upon the delivered cost of coal
to Buyer, including the actual freight rate per ton, excluding
the payment for coal pursuant to Paragraph 5.3.
EXAMPLE
For coal delivered with a weighted average quality of 12,200 Btu per
pound on a purchase order basis at a price per ton of $19.20 and a
freight rate of $4.31 per ton, an increase in the price per ton
would be calculated as follows:
Price $19.20
Freight Rate 4.3l
------
Delivered Cost/Ton $23.51
200 Btu/lb. Variance X $23.51 = $.3918/ton increase in the price per ton
------------------------
12,000 Btu/lb. Guarantee
For coal delivered with a weighted average quality of 11,800 Btu per
pound on a purchase order basis at a price per ton of $19.20 and a
freight rate of $4.31 per ton, a decrease in the price per ton would
be calculated as follows:
Price $19.20
Freight Rate 4.3l
------
Delivered Cost/Ton $23.51
200 Btu/lb. Variance X $23.51 = $.3918/ton decrease in the price per ton
------------------------
12,000 Btu/lb. Guarantee
(b) Moisture Content
(1) If the weighted average moisture content calculated on a
per purchase order basis exceeds 8.5%, a price
adjustment of $.20 per ton per percentage point
(fractions pro rata) will be credited to Buyer for all
tons shipped under that purchase order.
(2) If the moisture content of any trainload shipment of
coal exceeds 9.0%, a price adjustment of $.25 per ton
will be credited to Buyer for all tons in such trainload
shipment.
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(c) Ash Content
(1) If the weighted average ash content calculated on a per
purchase order basis exceeds 13.2%, a price adjustment
of $.30 per ton per percentage point (fractions pro
rata) will be credited to Buyer for all tons shipped
under that purchase order.
(2) If the ash content of any trainload shipment of coal
exceeds 14%, a price adjustment of $.40 per ton will be
credited to Buyer for all tons in such trainload
shipment.
(d) Grindability (HGI)
(1) If the weighted average grindability calculated on a per
purchase order basis is less than 39, a price adjustment
of $.25 per ton per grind point (fractions pro rata)
will be credited to Buyer for all tons shipped under
that purchase order.
(2) If the grindability of any trainload shipment of coal is
less than 38, a price adjustment of $.35 per ton will be
credited to Buyer for all tons in such trainload
shipment.
(e) Sellers agree to promptly supply Buyer with an analysis,
performed in accordance with ASTM standards, of the sulfur
content of each shipment of coal supplied under this
Agreement. In the event that the sulfur content of any single
trainload shipment exceeds 1.2 lbs. SO(2)/mmBtu, Buyer shall
have the right to reject such trainload shipment, and title
and risk of loss shall revert back to Sellers upon rejection.
In the event that a trainload shipment of coal is rejected by
Buyer, Sellers shall reimburse Buyer for its actual costs
incurred including transportation from the mine to
destination. Buyer shall not unload any trainload shipment
delivered hereunder until it has received Sellers' analysis
reflecting a sulfur content of 1.2 pounds SO(2)/mmBtu or less.
Sellers agree to reimburse Buyer for any demurrage incurred as
a result of holding any trainload shipment while awaiting
receipt of such analysis.
(f) In the event that Sellers are supplying coal hereunder from a
source other than Marrowbone mines producing coal in the
Coalburg, Clarion and/or 5-Block seams and the analysis of any
trainload shipment containing any coal from such source
indicates an Ash Fusion Temperature (H=W, Reducing) less than
2400(degree)F or a Volatile Matter content of less than 25.0%
(30% effective January 1, 2000), Buyer may suspend further
shipments from such source until Sellers give Buyer reasonable
assurances that further shipments from such source will
satisfy the requirements of Paragraph 1.0, Description. For
the purpose of this Paragraph 6.0(f), a source shall be
defined as an individual mine or a readily identifiable seam
for which quality is ascertainable, and from which coal is
produced for
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delivery hereunder. Any trainload shipments containing any
coal from such source that have an Ash Fusion Temperature
(H=W, Reducing) less than 2400(degree)F or a Volatile Matter
content of less than 25.0% (30% effective January l, 2000)
that have not yet been unloaded may be rejected by Buyer, and
upon rejection, Sellers shall reimburse Buyer for its actual
costs incurred including transportation from the mine to
destination, and title and risk of loss shall revert to
Sellers.
In the event that shipments hereunder originate at any
Marrowbone mine producing coal in the Coalburg, Clarion,
and/or 5-Block seams, Buyer shall not have the right to
suspend or reject shipments based on the Ash Fusion
Temperature or Volatile Matter content of such shipments.
6.1 Other Quality Parameters. In the event Buyer is unable, after
exerting reasonable efforts, to burn coal shipped hereunder from
reserves other than the Coalburg, Clarion and/or 5-Block seam
reserves controlled by Marrowbone as of July 1, 1996 because such
coal causes significant operating problems that are directly
attributable to a quality parameter other than those set forth in
Paragraph 1.0, Description, Buyer shall consult with Sellers, and
allow Sellers' combustion consultants reasonable access to Buyer's
records, facilities, and personnel, in an effort to alleviate such
problems. In the event the parties' efforts do not alleviate such
operating problems within forty-five (45) days from Buyer's
notification to Sellers of the problem, Sellers shall, at their sole
discretion, elect either (i) to change to a source that Sellers,
after reasonable consultation with Buyer, determine will alleviate
such operating problems, in which case shipments will commence as
soon as practicable from such changed source and any shipments
missed as a result of Buyer's operating problems or the change in
source shall be made up as soon as practicable, or (ii) to cease
shipments hereunder for the remaining term of the contract or
commitment for the source that Sellers and Buyer believe is causing
such operating problems. Buyer's operating problems, and Sellers'
election of either of the foregoing options, shall not excuse or
otherwise effect Buyer's obligation to make payments for coal
pursuant to Paragraph 5.3.
Upon request by Sellers, Buyer shall evaluate any source or seam of
coal to be supplied under this Agreement, and if such source or seam
is approved by Buyer, in writing, in advance of the commencement of
shipments from such source or seam, the provisions of this Paragraph
6.1 shall not apply. Such approval shall not be unreasonably
withheld, and Buyer shall not withhold such approval if it has
previously purchased coal from the source or seam in question and
burned such coal without encountering significant operating
problems. Sellers shall provide Buyer with quality information
regarding the seam or source. In the event Buyer has not burned coal
from the source or seam in question, Buyer may test burn such coal.
If Sellers request a test, Buyer shall test burn such coal unless
the quality information provided to Buyer indicates that there is a
quality characteristic inherent in the coal, other than those
specified in Paragraph 1.0, Description, which prevents the burning
of such coal at Roxboro 4 and/or Mayo 1
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Units. The coal supplied for such test will be supplied at a
mutually agreed-upon price, consistent with the spot market price
for compliance coal at the time of the shipment. The quantity of
coal supplied for the test burn shall not exceed 50,000 tons, and
such quantity will be in addition to the tonnage commitment pursuant
to Paragraph 2.0, Quantity and Delivery. Buyer shall inform Sellers
of its decision to approve or disapprove such source or seam within
ten (10) days of receipt of all necessary information and/or
completion of any test burn of the coal.
7.0 Sampling and Analysis. Sellers or their designee shall sample and
analyze each trainload shipment of coal to be delivered to Buyer to
determine the quality parameters specified in Paragraph 1.0,
Description. Such sampling and analysis shall be performed in
accordance with ASTM standards or by other mutually acceptable
methods. Sampling of the coal will be performed as the coal is
loaded into railcars. Sellers or their designee shall provide
trainload analyses to Buyer as soon as practicable after each train
is loaded.
7.1 Buyer or its representative shall have the right to inspect the
sampling system(s) and laboratory used to sample and analyze the
coal applied hereunder at any and all times that coal is loaded or
analyzed for delivery to Buyer. Should it be determined that the
sampling system(s) or laboratory are not in compliance with ASTM
standards for sampling and analyzing coal, Sellers agree to take the
necessary steps to ensure that future shipments of coal to Buyer are
sampled and analyzed in accordance with ASTM standards. Prior to or
within ten (10) days of the first shipment of coal that is sampled
or analyzed by a sampling system or laboratory that has not
previously sampled or analyzed deliveries under this Agreement,
Sellers shall provide Buyer with independent confirmation that the
sampling system and/or the laboratory are in accordance with ASTM
standards.
7.2 Should it be determined that sampling or analysis of a trainload
shipment was not performed by Sellers or their designee in
accordance with ASTM standards, the parties agree that (i) Buyer's
sampling and analysis shall govern for that shipment or (ii) if
neither party performed the sampling and analysis of that shipment
in accordance with ASTM standards, the shipment shall be deemed not
to have been sampled and analyzed for the purposes of this
Agreement. The sampling and analysis of a shipment that was
performed in accordance with ASTM standards and that was used in
calculating adjustments to monthly billings in accordance with
Paragraph 6.0, Remedies for Quality Deviations herein shall govern
for all other purposes under this Agreement.
7.3 As soon as practicable after the end of each month, the weighted
average quality of the coal delivered hereunder for the quality
parameters specified in Paragraph 1.0, Description hereof during
that month shall be determined on a purchase order basis and
provided to Buyer. The quality results thus determined shall be used
in calculating price adjustments pursuant to Paragraph 6.0, Remedies
for Quality Deviations.
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7.4 In the event that Sellers elect to ship coal from source(s) other
than Marrowbone pursuant to Paragraph 2.0(e) that will deliver coal
directly to Buyer under a purchase agreement with a term of one year
or more, or volume of 500,000 tons or more, Buyer shall promptly
review the independent confirmation that the sampling system is in
accordance with ASTM standards pursuant to Paragraph 7.1. If the
subject sampling system has been changed since its last bias test,
or has not been bias tested within the last eighteen (18) months,
and Buyer has reasonable concerns regarding possible bias of such
system, Buyer shall have the right to request a bias test of the
sampling system, to be conducted within sixty (60) days of
commencement of shipments from such source, by an independent third
party in conformance with the Rose method for bias testing. A report
of the test will be supplied to Buyer and Sellers. Should the
results of the bias test show a "statistically significant bias" in
the sampling system as determined by the third party, Sellers shall
take immediate action to eliminate such bias, and shall pay for all
costs of the bias test. If the bias test does not show a
"statistically significant bias" in the sampling system, Buyer shall
pay for all reasonable costs of the bias test. In the event the
third party called for above cannot be agreed upon, the provisions
of Paragraph 18.0, Third Party Selection shall apply.
8.0 Force Majeure
8.1 Neither party shall be subject to liability to the other for failure
to perform in strict compliance with this Agreement where such
failure results from an event or occurrence beyond the control of
the party affected thereby such as, without limitation, acts of God,
war, insurrection, riots, strikes, labor disputes, labor and
material shortages, fires, explosions, floods, breakdowns or damage
to the mines, plants, equipment or facilities, interruptions to
transportation, car shortages, embargoes, orders or acts of civil or
military authority, legislation, regulation, or administrative
ruling. Normally scheduled maintenance outages, including without
limitation outages for installation of equipment (including any
outage for the installation of low NOx burners at the Roxboro 4
Unit) required to comply with regulations or legislation in effect
as of July 1, 1996, shall not constitute an event of force majeure
hereunder. Written notice including full information as to the cause
and probable extent of the event shall be furnished within ten (10)
calendar days after the failure first occurs. Failure to provide
such notice within the ten (10) calendar days specified herein shall
be deemed a waiver of all rights provided pursuant to Paragraph 8.1
with regard to the particular event or occurrence. Any interruption
in deliveries hereunder as a result of any such force majeure event
shall not terminate this Agreement and upon removal of the cause of
interruption, deliveries shall be resumed.
8.2 In the event of the enactment of any federal, state or local law,
legislation, ordinance, rule or regulation after July 1, 1996, which
prohibits the burning or use of the coal to be supplied hereunder or
has the effect of requiring Buyer to purchase coal having different
quality characteristics from those set forth in Paragraph 1.0,
Description in order to comply with such federal, state or local
law, ordinance or regulation, shipments hereunder may be terminated
by Buyer
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upon ninety (90) days advance notice to Sellers; provided, however,
that shipments under this Agreement shall not be so canceled if
Sellers elect (i) to substitute coal from other sources and such
coal has quality characteristics which enable Buyer to comply with
applicable law, or (ii) to modify the operation from which the coal
is supplied such that the quality of coal shipped shall enable Buyer
to comply with applicable law, or (iii) to take any other step that
enables Buyer to comply with applicable law. In the event that
shipments are terminated pursuant to this Paragraph 8.2, Buyer shall
remit to Sellers $3.447 per ton as liquidated damages as full and
complete settlement of all claims and not as a penalty for each ton
terminated. Such amounts shall be paid in accordance with Paragraph
4.0, Payment based upon the shipment schedule established pursuant
to Paragraph 2.0, Quantity and Delivery. Termination of shipments
pursuant to this Paragraph 8.2 shall excuse Buyer's obligation to
make payments for coal pursuant to Paragraph 5.3 with respect to
those tons terminated. To the extent that such payments for coal
have been made by Buyer with respect to terminated tons, such
amounts shall be credited against future payments for coal to be
made under Paragraph 5.3, or if no future payments for coal are to
be made, Sellers shall refund such amounts to Buyer.
8.3 In the event that (i) a force majeure event results in the physical
inability to generate electricity at the Roxboro 4 and/or Mayo 1
Unit(s), or (ii) a force majeure event that does not fall within
Paragraph 8.2 above totally prevents the generation of electricity
at Roxboro 4 and/or Mayo 1, for a period that exceeds six (6)
consecutive calendar months in duration ("Extended Force Majeure"),
Buyer's annual commitment to purchase coal under this Agreement
shall be reduced by an amount equal to the number of tons not
shipped during and as a result of the Extended Force Majaure;
provided, however, that nothing herein shall (or shall be construed
to) discharge or diminish Buyer's obligation to take reasonable
steps to avoid, cure, or otherwise mitigate the effect of such an
event of force majeure, including but not limited to acceptance of
additional quantities hereunder at the unaffected Unit. Buyer shall
not enter into any new spot or contract agreements for compliance
coal for the unaffected Unit during the term of the Extended Force
Majeure until Sellers are given the option to supply such quantities
hereunder.
Should Buyer expect that the Extended Force Majeure will exceed a
total of twelve (12) months, then after the expiration of the
initial six (6) months of the Extended Force Majeure, the parties
shall determine whether the coal to be delivered hereunder or coal
with different specifications than those in Paragraph 1.0,
Description can be supplied by Sellers and consumed at Buyer's other
coal-fired plants without causing operational problems, regulatory
compliance issues, or breach of any contract commitments to other
coal suppliers. If so, Sellers shall have the option to deliver such
coal under this Agreement, and this Agreement shall be amended to
reflect any necessary changes. If coal with different specifications
than those in Paragraph 1.0, Description is delivered hereunder, the
price for such coal shall be adjusted to reflect the difference in
the quality of the coal to be substituted and any other relevant
factors in existence at the time. Should the parties be unable to
agree upon such an adjustment, it shall
13
<PAGE>
be determined by an independent third party agreed upon by both
Buyer and Sellers. In the event a third party cannot be agreed upon,
the provisions of Paragraph 18.0, Third Party Selection shall apply.
The occurrence of an Extended Force Majeure shall not affect Buyer's
obligation to make payments for coal as set forth in Paragraph 5.3.
8.4 Coal not shipped as scheduled as a result of an event of force
majeure (excluding coal not shipped due to an Extended Force Majeure
pursuant to Paragraph 8.3) shall be rescheduled for shipment as soon
as practicable after the cessation of the force majeure event. This
revised schedule shall provide for delivery of such coal within
thirty (30) months of cessation of the force majeure event.
In the event that Sellers experience a force majeure event, the
price applicable to rescheduled shipments shall be the lesser of the
price applicable at the time such shipments were originally
scheduled for shipment or the price applicable on the date of
shipment of coal. In the event that Buyer experiences a force
majeure event, the price applicable to such rescheduled shipments
shall be the greater of the price in effect on the date of the
shipment of the coal or the price applicable at the time such
shipments were originally scheduled for shipment.
8.5 Except as provided in Paragraph 8.8, a force majeure event,
including an Extended Force Majeure event pursuant to Paragraph 8.3,
shall not affect the amount or timing of payments for coal due
pursuant to Paragraph 5.3. Such payments for coal shall be made as
if those tons not shipped as originally scheduled as a result of the
force majeure event were shipped as so scheduled; provided, however,
that if such tons are not made up pursuant to Paragraph 8.4 as a
result of Sellers' inability to supply such tons, Buyer shall
receive a credit for payments for coal made pursuant to Paragraph
5.3 with respect to any tons not shipped.
8.6 Twelve (12) months prior to any renewal of a contract between the
United Mine Workers of America ("UMWA") and the employers of
employees represented by the UMWA, or any future labor organization
representing such employees, reasonable efforts shall be made by
Buyer and Sellers to mutually agree to accelerate shipment of coal
prior to the anticipated commencement of the expiration of such
contract. Such acceleration of coal shipments (hereafter referred to
as "Accelerated Tonnage"), which shall be shipped to Buyer and shall
meet the specifications herein, is in anticipation of the
interruption of coal supplies which might result by reason of the
expiration of such contract. The price for all Accelerated Tonnage
shall be the price in effect at the time the coal was originally
scheduled to be shipped pursuant to Paragraph 5.1. Neither the
amount nor the timing of the payments for coal due under Paragraph
5.3 with respect to such tons shall be affected by such acceleration
and such payments for coal shall be made as if shipment of the
Accelerated Tonnage had not occurred.
14
<PAGE>
8.7 The parties shall mutually determine within thirty (30) days of the
end of any disruption described in Paragraph 8.6 or any disruption
resulting from a railroad labor strike, the amount of coal that
Sellers were unable to ship based upon the tons scheduled to be
shipped during the period of such disruption, less any Accelerated
Tonnage. After such determination, the parties shall mutually
schedule the shipment of such coal so that Sellers may reasonably
produce and ship same over the next succeeding thirty (30) month
period. The price for such coal shall be the price in effect at the
time of shipment.
9.0 Quality Information. On request, Sellers shall furnish to Buyer
information sufficient to show the quality of coal to be shipped
from any seam or source, including proximate analysis, mineral ash
analysis, ultimate analysis, or any other quality information
requested by Buyer with respect to coal shipped under this Agreement
that is existing and reasonably available to Sellers.
On request, Buyer shall furnish to Sellers any quality analysis
performed by it or on its behalf with respect to shipments
hereunder.
10.0 Title. The title to the coal covered by this Agreement shall pass
directly from Sellers to Buyer as soon as the coal is loaded into
railcars at the mine.
11.0 Consignment. The coal covered by this Agreement is intended for
consumption at Buyer's Roxboro 4 and/or Mayo 1 Units. However, at
any time and from time to time during the term of this Agreement,
Buyer shall have the right to have all or any part of the coal
covered by this Agreement consigned to any other destination,
provided that Buyer gives Sellers five (5) days written notice of
such consignment; that Buyer causes Sellers to be furnished with
railroad cars, applicable railroad tariffs, and adequate
instructions for shipment of coal so consigned; and that such
consigned shipments do not impose additional obligations on Sellers
greater than those provided for in Paragraph 2.0, Quantity and
Delivery and Paragraph 2.1, Weights.
In any case of consignment pursuant to this Paragraph, Buyer shall
remain fully liable for the obligations set forth in this Agreement,
and Buyer shall pay for such coal, including quality adjustments
pursuant to Paragraph 6.0, Remedies for Quality Deviations,
utilizing the same freight rates which would have been effective had
the shipment(s) not been reconsigned by Buyer. Sellers shall not
have any contractual responsibility to the consignee, and such
consignee shall have no rights, privileges or responsibilities
hereunder.
12.0 Access. Buyer or its designated representatives shall have access,
at reasonable times and without interfering with production, to
Marrowbone or any affiliate of Sellers producing coal covered by
this Agreement. In addition, Sellers shall exert reasonable efforts
to ensure that Buyer or its designated representatives shall have
access, at reasonable times and without interfering with production,
to mines owned by third parties producing coal covered by this
Agreement. Such access shall be for the purpose of inspecting said
mines and related facilities and
15
<PAGE>
examining the quality records. Buyer shall also have access to
Sellers' or its supplier's books and records during normal business
hours as necessary to understand and evaluate any proposed price
adjustment submitted to Buyer by Sellers in accordance with the
provisions of Paragraph 5.2. Sellers shall provide Buyer with access
to such books and records within two (2) weeks of Buyer's written
request, and shall make all such books and records available at the
mine or at Sellers' corporate offices. Sellers or their designated
representatives shall have access, at reasonable times and without
interfering with operations, to the facilities of Buyer to observe
the sampling and analysis of any coal sold hereunder.
13.0 Waiver. No waiver of any breach of this Agreement shall be held to
be a waiver of any other breach. Except with respect to remedies as
set forth in Paragraph 6.0, Remedies for Quality Deviations, all
remedies afforded under this Agreement shall be in addition to every
other remedy provided herein or by law.
14.0 Notices. Notices provided for or required herein shall be given by
facsimile and by first class mail as follows:
To Sellers:
Mountaineer Coal Development Company
d/b/a Marrowbone Development Company
1010 One Valley Square
Charleston, West Virginia 25301
Facsimile Number: (304) 340-3739
To Buyer:
Carolina Power & Light Company
Fossil Fuel Department
P. O. Box 1551
411 Fayetteville Street
Raleigh, North Carolina 27602
Facsimile Number: (919) 546-2590
15.0 Assignment. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto, their successors and assigns, provided it
shall not be assigned by Buyer or Sellers, by operation of law or otherwise,
without the prior written consent of the other party, which consent shall not be
unreasonably withheld.
16.0 Finality. This written Agreement is intended as the final, complete
and exclusive statement of the terms of this Agreement between the parties with
regard to the subject matter hereof. The parties agree that parol or extrinsic
evidence may not be used to vary or contradict the express terms of this
Agreement. This Agreement shall not be amended or modified, and no waiver of any
provision hereof shall be effective, unless set forth in a written instrument
authorized and executed with the same formality as this Agreement.
16
<PAGE>
17.0 Governing Law. This Agreement shall be construed, enforced, and
performed in accordance with the laws of the Commonwealth of Virginia.
18.0 Third Party Selection. In the event that the parties are unable to
agree upon an independent third party to resolve matters referenced in
Paragraphs 5.2, 7.4, and/or 8.3, the Center for Public Resources, New York,
shall appoint an independent third party qualified in such matters to render a
binding decision regarding any such disagreement pursuant to these three
Paragraphs.
19.0 Release. Buyer and Sellers agree to release and forever discharge
each other and their predecessors, parents, subsidiaries, officers, directors,
employees, agents, successors and assigns from any and all claims, demands,
actions or causes of action whatsoever, known or unknown, which have been or
could have been raised arising out of or in connection with the Agreement on or
before July l, 1996; provided, however, that Sellers do not release Buyer from
(i) any amounts to be paid for coal delivered in June, 1996; (ii) and
penalty/premium price adjustments due after February 1, 1996; or (iii) payments
for liquidated damages pursuant to force majeure claims at Mayo 1 and Roxboro 4
during the first half of 1996.
IN WITNESS WHEREOF, Buyer and Sellers have each caused this Agreement to
be effective as of the first day of July, 1996.
Witness: CAROLINA POWER & LIGHT COMPANY
/s/ Max F. Thompson, Jr. By: /s/ James M. Davis, Jr.
------------------------------------- --------------------------------
As to Carolina Power & Light Company
Title: SR. V.P.
Date: 7/19/96
Witness: MOUNTAINEER COAL DEVELOPMENT COMPANY
d/b/a MARROWBONE DEVELOPMENT COMPANY
/s/ Michael V. Altrudo
-------------------------------------
As to Marrowbone Development Company By: /s/ David M. Young
--------------------------------
Title: President
Date: 7-19-96
17
<PAGE>
Witness: BLUEGRASS COAL DEVELOPMENT COMPANY
/s/ Michael V. Altrudo By: /s/ C. K. Lane
------------------------------------- --------------------------------
As to Bluegrass Coal Development Company
Title: President
Date: 7-19-96
18
<PAGE>
FRANKLIN COAL SALES COMPANY subsidiary of Zeigler Coal Holding Company
ZEIGLER 50 Jerome Lane
Fairview Heights, Illinois 62208
618-394-2400
Writer's Direct Line
July 19, 1996
Mr. James M. Davis, Jr.
Senior Vice President
Carolina Power & Light Company
Post Office Box 1551
Raleigh, NC 27602
RE: Agreement for Sale and Purchase of Coal Between Carolina Power &
Light Company and Franklin Coal Sales Company Dated As of April 1,
1995 ("Agreement")
Dear Mr. Davis:
Please refer to Article XlV, Payments of the Agreement referenced above.
Confirming discussions between the parties, the last paragraph of Article XIV
shall be deleted in its entirety and replaced with the following:
"d) Such payments shall be made by Buyer to Seller via wire or
electronic transfer of immediately available funds (in United States
currency) to the following account:
Franklin Coal Sales Company
c/o Bank of America
231 S. LaSalle Street
Chicago, IL 60697
Account #78-20151
ABA #071000039"
Except as specifically provided above, all terms and conditions of the Agreement
shall remain in full force and effect, and the Agreement, as amended by this
Letter Agreement, shall continue to comprise the entire agreement between the
parties concerning the subject matter thereof.
<PAGE>
Letter to Mr. James M. Davis, Jr.
July 19, 1996
Page: 2
This amendment is entered into concurrently with the Amended and Restated
Marrowbone Agreement.
I believe the preceding accurately reflects our discussions. If you concur,
please sign both copies of this Letter Agreement in the Space provided and
return one copy to me for our files.
Sincerely,
/s/ M.V. Altrudo
M.V. Altrudo
President
AGREED TO AND ACCEPTED
This 19 day of July, 1996
CAROLINA POWER & LIGHT COMPANY
By: /s/ James M. Davis, Jr.
--------------------------------
Title: Senior Vice President
Power Operations Group
<PAGE>
MOUNTAINEER
COAL
DEVELOPMENT
COMPANY
--------------------------------------------------------------------------------
1010 One Valley Square - Charleston, West Virginia 25301 - (304) 340-3720 - Fax
(304) 340-3739
AMENDMENT 1
July 29, 1998
Mr. Kevin B. Cardwell
Director, Fossil Fuel Department
Carolina Power & Light Company
Post Office Box 1551
Raleigh, NC 27602
Mr. C. K. Lane
President
Bluegrass Coal Development Company
771 Corporate Drive, Suite 310
Lexington, KY 40503
RE: Agreement for Sale and Purchase of Coal between Carolina Power & Light
Company, Mountaineer Coal Development Company, d/b/a Marrowbone
Development Company and Bluegrass Coal Development Company Amended and
Restated as of July 1, 1996, As Amended ("Agreement")
Gentlemen:
Please refer to Paragraph 2.0, Quantity and Delivery of the Agreement referenced
above. Confirming discussions between the parties, the annual tonnage to be
shipped in Calendar Years 1998 and 1999 shall be changed from 2,750,000 tons per
year to 2,450,000 tons per year. The total tonnage is therefore changed from
28,875,000 tons to 28,275,000 tons.
In consideration of the amended tonnage commitment, commencing September 10,
1998 and on the tenth day of each calendar month thereafter through January 10,
1999, Buyer shall remit to Seller the sum of $210,000, and commencing February
10, 1999 and on the tenth day of each calendar month thereafter through January
10, 2000, Buyer shall remit to Seller the sum of $81,250. Such amount shall be
paid in addition to amounts otherwise due pursuant to the Agreement.
<PAGE>
July 29, 1998
Except as specifically provided above, all terms and conditions of the Agreement
shall remain in full force and effect, and the Agreement, as amended by this
Letter Agreement, shall continue to comprise the entire agreement between the
parties concerning the subject matter thereof.
I believe the preceding accurately reflects our agreement. If you concur, please
sign both copies of this Letter Agreement in the space provided and return one
copy to me for our files.
Sincerely,
/s/ D. M. Young
D. M. Young, President
Mountaineer Coal Development
Company, d/b/a Marrowbone Development Company
AGREED TO AND ACCEPTED
This 6th day of August, 1998
CAROLINA POWER & LIGHT COMPANY
By: /s/ Kevin B. Cardwell
-----------------------------------
Title: Director
Fossil Fuel Department
BLUEGRASS COAL DEVELOPMENT COMPANY
By: /s/ C. K. Lane
-----------------------------------
Title: President
DMY:1g
Progress Energy Service Company, LLC
P.O. Box 1551
Raleigh, NC 27602
<PAGE>
1500 NORTH BIG RUN ROAD
ASHLAND, KY 41102
PHONE: (606) 928-3433
AEI COAL SALES CO, INC.
--------------------------------------------------------------------------------
April 19, 1999
AMENDMENT 2
Mr. William R. Knight
Director, Fossil Fuel Department
Carolina Power & Light Company
Post Office Box 1551
Raleigh, NC 27602
Mr. C. K. Lane
President
Bluegrass Coal Development Company
1500 North Big Run Road
Ashland KY 41102
RE: Agreement for Sale and Purchase of Coal between Carolina Power & Light
Company ("Buyer"), Mountaineer Coal Development Company, d/b/a Marrowbone
Development Company and Bluegrass Coal Development Company ("Sellers")
Amended and Restated as of July 1, 1996, As Amended ("Agreement")
Gentlemen:
Please refer to Paragraph 2.0, Quantity and Delivery of the Agreement referenced
above. Confirming discussions between the parties, the annual tonnage to be
shipped in Calendar Year 1999 shall be changed from 2,450,000 tons per year to
2,350,000 tons per year. The total tonnage is therefore changed from 28,275,000
tons to 28,175,000 tons.
In consideration of the amended tonnage commitment, the parties have agreed to
execute a Purchase Order for the delivery of coal from Sellers' affiliate,
Franklin Coal Sales Company Inc, to Carolina Power & Light Company.
<PAGE>
Mr. William R. Knight
Mr. C. K. Lane
March 31, 1999
Except as specifically provided above, all terms and conditions of the Agreement
shall remain in full force and effect, and the Agreement, as amended by this
Letter Agreement, shall continue to comprise the entire agreement between the
parties concerning the subject matter thereof.
I believe the preceding accurately reflects our agreement. If you concur, please
sign both copies of this Letter Agreement in the space provided and return one
copy to me for our files.
Sincerely,
/s/ Wm. Haselhoff
Mountaineer Coal Development
Company, d/b/a Marrowbone Development Company
AGREED TO AND ACCEPTED
This 28th day of April, 1999
CAROLINA POWER & LIGHT COMPANY
By: /s/ W. R. Knight
-----------------------------------
Title: Director
Fossil Fuel Department
BLUEGRASS COAL DEVELOPMENT COMPANY
By: /s/ John Lynne
-----------------------------------
Title: Sec
Progress Energy Service Company, LLC
P.O. Box 1551
Raleigh, NC 27602
<PAGE>
[CP&L LOGO]
A Progress Energy Company
March 25, 2002
Mr. Marc Merritt
President
AEI Coal Sales
2000 Ashland Drive
Ashland, KY 41101
Mr. William R. Knight
Vice President
Progress Fuels-NS Coals
Post Office Box 1551
Raleigh, NC 27602
RE: Letter Agreement
Coal Supply Agreement dated July 1, 1996 (as Amended and Restated),
between Carolina Power & Light Company (Buyer) and Mountaineer Coal
Development Company, d/b/a Marrowbone Development Company and Bluegrass
Coal Development Company (Sellers). Hereafter referred to as the
Marrowbone Agreement.
&
Coal Supply Agreement dated July 1, 1996, between Carolina Power & Light
Company (Buyer) and Franklin Coal Sales Company (Seller). Hereafter
referred to as the Franklin-NS Agreement.
&
Coal Supply Agreement dated January 1, 1985 (as Amended and Restated) ,
between Carolina Power & Light Company (Buyer) and Mountaineer Coal
Development Company, d/b/a Wolf Creek Collieries Company, Kermit Coal
Company and Bluegrass Coal Development Company (Sellers). Hereafter
referred to as the Wolf Creek Agreement.
&
Coal Supply Agreement dated April 1, 1995 between Carolina Power & Light
Company (Buyer) and Franklin Coal Sales Company (Seller). Hereafter
referred to as the Franklin-CSX Agreement.
Gentlemen:
In consideration of the mutual benefits to be derived, as of March 25, 2002, the
parties do hereby amend the Agreements above as follows:
<PAGE>
1) CP&L will pay AEI four million dollars ($4,000,000) on March 25, 2002 as
consideration for a reduction of five hundred thousand (500,000) tons
under the Marrowbone, Franklin-NS, and Wolf Creek Agreements and CP&L will
be relieved from any obligation to receive these tons. The table below
shows the impact of the reduction in contract tonnage quantity for each
Agreement for 2002.
Original 2002 Decrease in 2002 Revised 2002
Agreements Tonnage Tonnage Tonnage
---------- ------- ------- -------
Marrowbone 2,750,000 315,000 2,435,000
Franklin-NS 750,000 85,000 665,000
Wolf Creek 1,500,000 100,000 1,400,000
Total Tonnage Reduction 500,000
2) AEI shall receive the prepayments that were originally scheduled for July
15, 2002, under the Franklin-CSX Agreement (Article 6, Section 1) and the
Wolf Creek Agreement (Amendment 4, Section 3), which total eleven million
dollars ($11,000,000), on April 15, 2002, or within three (3) days after
the date in which the bankruptcy confirmation is received. This April 15,
2002 payment shall satisfy the payment obligation originally scheduled
under both Agreements for July 15, 2002. See "Revised Prepayment Schedule
for Franklin-CSX for 2002" and "Revised Prepayment Schedule for Wolf Creek
for 2002" below:
REVISED PREPAYMENT SCHEDULE FOR FRANKLIN-CSX FOR 2002
Payment
---------------------------------------------
Year January 15 April 15 July 15
---- ---------- -------- -------
2002 $2,750,000 $2,750,000 $ 0
REVISED PREPAYMENT SCHEDULE FOR WOLF CREEK FOR 2002
Payment
---------------------------------------------
Year January 15 April 15 July 15
---- ---------- -------- -------
2002 $8,250,000 $8,250,000 $ 0
Progress Energy Service Company, LLC
P.O. Box 1551
Raleigh, NC 27602
<PAGE>
3) Through the remainder of March 2002, AEI may schedule and ship up to seven
(7) additional shipments ("Additional Shipments") under the Marrowbone
Agreement. The Additional Shipments loaded and shipped in March 2002 shall
reduce the number of tons scheduled in June 2002 by an equal amount. AEI
shall also be allowed to ship those tons originally scheduled in June 2002
under the Marrowbone Agreement and Franklin-NS Agreement, minus the
Additional Shipments, in May 2002. As a result, there will be no shipments
under the Marrowbone Agreement or the Franklin-NS Agreement in June 2002.
See "2nd Quarter Tons Schedule" below:
2ND QUARTER TONS SCHEDULE
Original Schedule for Changes to Original Schedule Revised Schedule
2nd Quarter Tons for 2nd Quarter Tons for 2nd Quarter Tons
---------------- -------------------- --------------------
Trains Approximate Tons Trains Approximate Tons Trains Approximate Tons
------ ---------------- ------ ---------------- ------ ----------------
MAR-02
Marrowbone 7 81,200 7 81,200
Franklin-NS 0 0
Wolf Creek 0 0
APR-02
Marrowbone 10 116,000 10 116,000
Franklin-NS 3 35,000 3 35,000
Wolf Creek 6 65,000 6 65,000
MAY-02
Marrowbone 12 138,000 3 34,800 15 172,800
Franklin-NS 3 35,000 3 35,000 6 70,000
Wolf Creek 8 88,000 8 88,000
JUN-02
Marrowbone 10 116,000 (10) (116,000) 0 0
Franklin-NS 3 35,000 (3) (35,000) 0 0
Wolf Creek 8 88,000 8 88,000
Totals 63 716,000 63 716,000
Note: 1st Quarter 2002 tons are scheduled in March; however these tons are not
impacted by the changes to the 2nd Quarter 2002 tonnage schedule.
All the terms and conditions of these Agreements shall remain in full
force and effect.
Progress Energy Service Company, LLC
P.O. Box 1551
Raleigh, NC 27602
<PAGE>
Witness Carolina Power & Light Company
By:
----------------------------- ------------------------------
As to Carolina Power
& Light Company Title:
------------------------------
Date:
------------------------------
Witness Mountaineer Coal Development Company
d/b/a Wolf Creek Collieries
/s/ By: /s/ Ron Mill
----------------------------- ------------------------------
As to Mountaineer Coal
Development Company Title: Secretary
Date: 4/26/2002
Witness Mountaineer Coal Development Company
d/b/a Marrowbone Development Company
/s/ By: /s/ Ron Mill
----------------------------- -------------------------------
As to Mountaineer Coal
Development Company Title: Secretary
Date: 4/26/2002
Witness Kermit Coal Company
/s/ By: Julie Hudson
----------------------------- -------------------------------
As to Kermit Coal Company
Title: Secretary
Date: 4/26/2002
Progress Energy Service Company, LLC
P.O. Box 1551
Raleigh, NC 27602
<PAGE>
Witness Bluegrass Coal Development Company
/s/ By: Julie Hudson
---------------------------- -------------------------------
As to Bluegrass Coal
Development Company Title: Secretary
Date: 4/26/2002
Witness Franklin Coal Sales Company
/s/ By: Julie Hudson
---------------------------- -------------------------------
As to Franklin Coal
Sales Company Title: Secretary
Date: 4/26/2002
Progress Energy Service Company, LLC
P.O. Box 1551
Raleigh, NC 27602
<PAGE>
[PROGRESS ENERGY LOGO]
October 14, 2002
Marc Merritt
President
Horizon Natural Resources Sales Company
2000 Ashland Drive
Ashland, KY 41101
RE: Letter Agreement for deferral of 500,000 tons from the 4th quarter 2002
and acceleration of January 15th 2003 prepayments. The Agreements impacted
are as follows:
Coal Supply Agreement dated July 1, 1996 (as Amended and Restated),
between Carolina Power & Light Company (Buyer) and Mountaineer Coal
Development Company, d/b/a Marrowbone Development Company and Bluegrass
Coal Development Company (Sellers). Hereafter referred to as the
Marrowbone Agreement.
&
Coal Supply Agreement dated January 1, 1985 (as Amended and Restated),
between Carolina Power & Light Company (Buyer) and Mountaineer Coal
Development Company, d/b/a Wolf Creek Collieries Company, Kermit Coal
Company and Bluegrass Coal Development Company (Sellers). Hereafter
referred to as the Wolf Creek Agreement.
&
Coal Supply Agreement dated April 1, 1995, between Carolina Power & Light
Company (Buyer) and Franklin Coal Sales Company (Seller). Hereafter
referred to as the Franklin-CSX Agreement.
Gentlemen:
In consideration of the mutual benefits to be derived, as of October 15, 2002,
the parties do hereby amend the Agreements above as follows:
1) Horizon Natural Resources Sales Company (Horizon) shall receive the
prepayments originally scheduled for January 15, 2003, under the
Franklin-CSX Agreement (Article 6, Section 1) and the Wolf Creek Agreement
(Amendment 4, Section 3), which total ten million five hundred thousand
dollars ($10,500,000), on October 15, 2002. This October 15, 2002 payment
shall satisfy the payment
<PAGE>
obligation originally scheduled under both Agreements for January 15,
2003. See "Revised Prepayment Schedule for Franklin-CSX for 2003" and
"Revised Prepayment Schedule for Wolf Creek for 2003" below:
REVISED PREPAYMENT SCHEDULE FOR FRANKLIN-CSX FOR 2003
Payment
Year October 15 January 15 July 15
---- ---------- ---------- -------
2002 $2,625,000
2003 $ 0 $2,625,000
REVISED PREPAYMENT SCHEDULE FOR WOLF CREEK FOR 2003
Payment
Year October 15 January 15 July 15
---- ---------- ---------- -------
2002 $7,875,000
2003 $ 0 $7,875,000
2) Horizon and CP&L agree that in consideration for the prepayments being
made October 15, 2002, two hundred thousand (200,000) tons under the
Marrowbone Agreement and three hundred thousand (300,000) tons under the
Wolf Creek Agreement (collectively the "Deferred Tons"), will be removed
from the 2002 4th quarter shipping schedule as indicated in the Tonnage
Deferral Schedule.
TONNAGE DEFERRAL SCHEDULE
AGREEMENT
MARROWBONE WOLF CREEK
---------- ----------
Oct-02 90,000 116,000
Nov-02 55,000 92,000
Dec-02 55,000 92,000
Totals 200,000 300,000
Note: The total tons received in 2002 are not to exceed the Contract
Quantity Schedule.
Progress Energy Service Company, LLC
P.O. Box 1551
Raleigh, NC 27602
<PAGE>
The Contract Quantity Schedule below shows the impact of the Deferred Tons
on the 2002 contract tonnage for each Agreement for 2002.
CONTRACT QUANTITY SCHEDULE
2002 Tonnage Prior Decrease in 2002 Tonnage due to Letter
Agreements to Letter Agreement Agreement (Deferred Tons) Revised 2002 Tonnage
---------- ------------------- -------------------------------------- --------------------
Marrowbone 2,435,000 200,000 2,235,000
Wolf Creek 1,400,000 300,000 1,100,000
Total Tonnage Deferral 500,000
3) Assuming CP&L provides notice at least 90 days prior to the 1st day of the
4th quarter of 2003 CP&L shall have the option in its sole discretion to
receive up to fifty thousand (50,000) of the Deferred Tons per month
(approximately 5 unit trains per month) during the 4th quarter 2003. The
50,000 tons may be requested in any unit train combination under the Wolf
Creek and Marrowbone Agreements (i.e. 0 Wolf Creek and 5 Marrowbone to 2
Wolf Creek and 3 Marrowbone to 5 Wolf Creek and 0 Marrowbone). The amount
of tons received under this option from each Agreement (Wolf Creek and
Marrowbone) shall reduce the Deferred Tons remaining to be received under
the corresponding Agreement (Wolf Creek and Marrowbone).
After December 31, 2003 CP&L will take delivery of the Deferred Tons
remaining over any time period or periods that it deems acceptable prior
to the expiration of the corresponding Agreement. CP&L will provide 30
days prior notice and the Deferred Tons will not exceed a total of 167,000
tons per month (maximum of 100,000 tons per month Wolf Creek and 67,000
tons per month Marrowbone).
The price for the Deferred Tons, regardless of when the tons are received,
shall be the contract price that was in effect for each Agreement at the
time of deferral, which is listed below in the Deferred Tons Pricing
Table.
DEFERRED TONS PRICING TABLE
Price of
Agreements Deferred Tons Deferred Tons
---------- ------------- -------------
Marrowbone 200,000 $30.06
Wolf Creek 300,000 $28.92
All the terms and conditions of these Agreements shall remain in full force and
effect.
Progress Energy Service Company, LLC
P.O. Box 1551
Raleigh, NC 27602
<PAGE>
Witness Carolina Power & Light Company
/s/ By:
----------------------------------- ---------------------------
As to Carolina Power
& Light Company Title:
---------------------------
Date:
---------------------------
Witness Mountaineer Coal Development Company
d/b/a Wolf Creek Collieries
/s/ By: /s/ Earnie Reynolds
----------------------------------- ---------------------------
As to Mountaineer Coal
Development Company Title: Secretary
Date: 10-11-02
Witness Mountaineer Coal Development Company
d/b/a Marrowbone Development Company
/s/ By: /s/ Earnie Reynolds
----------------------------------- ---------------------------
As to Mountaineer Coal
Development Company Title: Secretary
Date: 10-11-02
Witness Kermit Coal Company
/s/ By: /s/ Julie Hudson
----------------------------------- ---------------------------
As to Kermit Coal Company
Title: Secretary
Date: 10/11/2002
Progress Energy Service Company, LLC
P.O. Box 1551
Raleigh, NC 27602
<PAGE>
Witness Bluegrass Coal Development Company
/s/ By: /s/ Julie Hudson
----------------------------------- ---------------------------
As to Bluegrass Coal Development
Company Title: Secretary
Date: 10/11/2002
Witness Franklin Coal Sales Company
/s/ By: /s/ Julie Hudson
----------------------------------- ---------------------------
As to Franklin Coal
Sales Company Title: Secretary
Date: 10/11/2002
Progress Energy Service Company, LLC
P.O. Box 1551
Raleigh, NC 27602
<PAGE>
July 28, 2003
Mr. Dwain K. Lanier
Executive Director, Fossil Fuels
Progress Energy-Carolinas, Inc.
P. O. Box 1551
PEB 8A
Raleigh, North Carolina 27602
Re: Amended and Restated Agreement for the Sale and Purchase of Coal Dated
July 1, 1996, Between CP&L and Mountaineer Coal Development Company, d/b/a
Marrowbone Development Company, and Bluegrass Coal Development Company
(the "Marrowbone Contract") and Agreement for Sale and Purchase of Coal
Dated July 1, 1996, Between CP&L and Franklin Coal Sales Company (the
"Franklin Contract")
Dear Dwain:
This letter shall confirm our agreement in principle with respect to the
Marrowbone Contract and the Franklin Contract.
We have agreed that simultaneously with the execution of this letter
agreement the parties will execute, acknowledge and deliver the attached
Amendment No. Three to the Marrowbone Contract which effectively reduces the
tonnage requirement thereunder to 1.5 million tons per year through the
remainder of the contract. In connection therewith, upon execution of the
Amendment the following actions will be taken:
1. Horizon will immediately file in its bankruptcy proceeding
appropriate Motions for the assumption of the Marrowbone Contract
and the Coal Supply Agreement, dated December 29, 2000, between
Horizon Natural Resources Sales Company, f/k/a AEI Coal Sales
Company, Inc., and Massey Coal Sales Company, Inc., d/b/a Massey
Utility Sales Company (the "Massey Contract"). In addition, Horizon
will request an expedited review and approval of this assumption of
executory contracts.
2. Horizon will immediately file a notice of rejection of the Franklin
Contract under the procedures previously adopted for rejection of
executory contracts in its bankruptcy proceeding.
At such time as a non-appealable Order approving the assumption of the
Marrowbone Contract and the Massey Contract has been entered by the Bankruptcy
Court, Horizon will execute and deliver to CP&L a letter of confirmation in the
form attached whereby Horizon (i) dedicates the coal to be received under the
assumed Massey Contract for fulfillment of its obligations under the Marrowbone
Contract, as amended and assumed; and (ii) covenants and
<PAGE>
Mr. Dwain K. Lanier
Executive Director, Fossil Fuels
Progress Energy-Carolinas, Inc.
July 28, 2003
Page 2
agrees that it will not transfer or assign the Massey Contract without the prior
written consent of CP&L.
We acknowledge and agree that nothing contained in this agreement is
intended to be a waiver or release of any outstanding claims or disputes
relating to light loading charges imposed by the Norfolk Southern Railroad and
Horizon agrees to accept such ultimate responsibility as may be determined to
exist pursuant to the terms and provisions of the Marrowbone Contract. Horizon
and CP&L shall work together in a good faith effort to determine a reasonable
light loading claim amount and resolve this matter within 90 days of the date
hereof.
If the foregoing properly reflects our agreement with respect to these
matters, please so indicate by signing and dating this letter in the space
provided below and return it together with an executed Amendment No. Three to me
at your earliest convenience. This agreement may be executed via facsimile and
in counterparts, each of which, when taken together, shall constitute an
original. We will then instruct our bankruptcy counsel to immediately implement
the actions described above.
Yours truly,
/s/ Marc Merritt
Marc Merritt
Chief Commercial Officer
MM/dgm
Accepted and agreed to this 28th day
of July, 2003.
CAROLINA POWER & LIGHT COMPANY
By: /s/ E. E. Walker for Dwain Lanier
---------------------------------------
Its: Executive Director Fossil Fuels Dept.
Progress Energy Service Company, LLC
P.O. Box 1551
Raleigh, NC 27602
<PAGE>
AMENDMENT NO. THREE TO AMENDED AND RESTATED
AGREEMENT FOR SALE AND PURCHASE OF COAL
THIS AMENDMENT NO. THREE TO AMENDED AND RESTATED AGREEMENT FOR SALE AND
PURCHASE OF COAL, (the "Amendment") is entered into and effective as of July 28,
2003, between CAROLINA POWER & LIGHT COMPANY, a North Carolina corporation
("BUYER"), and MOUNTAINEER COAL DEVELOPMENT COMPANY, D/B/A MARROWBONE
DEVELOPMENT COMPANY, a West Virginia corporation, and BLUEGRASS COAL DEVELOPMENT
COMPANY, a Delaware corporation ("SELLERS").
RECITALS:
A. BUYER and SELLERS are parties to that certain Amended and Restated
Agreement for Sale and Purchase of Coal dated July 1, 1996, which, along with
two (2) letter agreement amendments both dated July 19, 1996, sets forth an
agreement for the sale and purchase of coal as of the first day of October,
1976, as combined and restated in a Coal Supply Agreement dated January 1, 1985,
as amended by a First Amendment dated as of the first day of January, 1987, as
amended by an Assignment Agreement dated as of the first day of May, 1988,
further amended by an Assignment Agreement dated as of December 22, 1988,
further amended by a Second Amendment dated as of the first day of January,
1989, further amended by a Third Amendment dated as of the first day of January,
1991 (the "Contract"). Capitalized terms not otherwise defined herein shall have
the meanings assigned them in the Contract.
B. BUYER and SELLERS wish to amend certain provisions of the Contract, as
set forth herein.
NOW, THEREFORE, in consideration of the mutual promises hereby made, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. Amendment. Section 2.0(a) of the Contract is hereby amended to reflect
that deliveries of coal under the Agreement are reduced to 125,000 tons per
month for the period beginning on the effective date hereof and continuing
thereafter through the remaining term of the Contract. Accordingly, Section
2.0(a) is hereby amended so that the Total Tonnage amount for 2003 shall be
reduced from 2,750,000 tons to 1,400,167 tons (actual tons year to date plus
125,000 tons per month through the end of the year); the Total Tonnage for each
of calendar years 2004, 2005 and 2006 is reduced from 2,750,000 tons to
1,500,000 tons; and the Total Tonnage under the Contract shall be reduced from
28,875,000 tons to 23,775,167 tons.
2. Conflicting Language. To the extent that any language contained in the
Contract conflicts with any language contained in this Amendment, the language
contained in this Amendment shall control.
<PAGE>
3. Facsimile and Counterparts. This Amendment may be executed via
facsimile and in counterparts, each of which, when taken together, shall
constitute an original.
4. Full Force and Effect. Except as expressly amended by this Amendment,
the Contract remains unchanged and in full force and effect, and is hereby
ratified and reaffirmed.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment as of the date first set forth above.
SELLERS: MOUNTAINEER COAL DEVELOPMENT
COMPANY, D/B/A MARROWBONE
DEVELOPMENT COMPANY
By: /s/ Marc Merritt
--------------------------------------
Its:
Date: 7/28/03
BLUEGRASS COAL DEVELOPMENT COMPANY
By: /s/ Marc Merritt
--------------------------------------
Its:
Date: 7/28/03
CAROLINA POWER & LIGHT COMPANY
By: /s/ E. E. Walker for Dwain Lanier
--------------------------------------
Its: Executive Director Fossil Fuels Dept.
Date: 7/28/2003
Progress Energy Service Company, LLC
P.O. Box 1551
Raleigh, NC 27602