Agreement for Purchase and Sales of Coal - Horizontal Natural Resources Sales Co. and Georgia Power Co.
[SOUTHERN COMPANY LOGO]
SOUTHERN COMPANY GENERATION
Post Office Box 2641
Birmingham, Alabama 35291
Tel 205.992.6011
April 10, 2003
Mr. Marc Merritt
President
Horizon Natural Resources Sales Company
2000 Ashland Drive
Ashland, Kentucky 41101-7058
Mr. Christopher C. Womack
Senior Vice President - Fossil & Hydro Power
Georgia Power Company
241 Ralph McGill Boulevard, N.E.
Atlanta, Georgia 30308-3374
Re: Agreement for Purchase and Sale of Coal between Horizon Natural Resources
Sales Company and Georgia Power Company
Gentlemen:
Horizon Natural Resources Sales Company, a Kentucky corporation ("Seller"), and
Georgia Power Company, a Georgia corporation ("Purchaser"), have entered into a
new agreement for the purchase and sale of coal from 2004 through 2010 ("New
Agreement"). (Seller and Purchaser are sometimes hereinafter referred to
collectively as the "Parties" or separately as a "Party.") The terms and
conditions of the New Agreement are as follows:
1. Definitions. In addition to other terms defined elsewhere in this letter
agreement, the following terms shall have the following meanings whenever
such terms are used in the New Agreement:
(a) "Coal Price" means the price for coal supplied under the New
Agreement, which shall be determined from time to time as provided in
paragraphs 6, 7, and 8 of this letter agreement.
(b) "Coal Property" means the real property, mineral interests,
preparation facilities, loading facilities, and related improvements that
are located in Knott, Perry, or Leslie Counties, Kentucky, and are owned
or controlled by Seller or its affiliates.
(c) "Contract Year" means each period of twelve calendar months beginning
on January 1 and ending on December 31 during the term of the New
Agreement. The first Contract Year shall begin on January 1, 2004, and end
on December 31, 2004.
(d) "Monthly Quantity" means the quantity of coal scheduled to be supplied
by Seller to Purchaser under the New Agreement during a calendar month.
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(e) "Semiannual Period" means each period of six calendar months during a
Contract Year. The first Semiannual Period of each Contract Year shall
begin on January 1 and end on June 30, and the second Semiannual Period of
each Contract Year shall begin on July 1 and end on December 31.
(f) "Semiannual Quantity" means the quantity of coal scheduled to be
supplied by Seller to Purchaser under the New Agreement during a
Semiannual Period.
(g) "Shipment" means one lot of coal, in sufficient quantities to fill a
unit train, loaded into railcars for delivery to Purchaser.
(h) "Ton" or "ton" means an avoirdupois weight of 2,000 pounds.
(i) "Typo Facility" means Seller's loading facility located near Hazard,
Kentucky.
2. Term. The New Agreement shall become effective as of April 1, 2003, and
shall remain in effect through December 31, 2010, unless earlier
terminated as hereinafter provided. Shipments under the New Agreement
shall begin in January, 2004.
3. General Provisions. During each Contract Year while the New Agreement
remains in effect, Seller shall sell to Purchaser, and Purchaser shall
purchase from Seller, at least 1,000,000 tons of coal produced from the
Coal Property. Seller's obligation to sell and Purchaser's obligation to
purchase such coal are subject to the termination provisions set forth in
paragraphs 7(d) and 12 of this letter agreement. The New Agreement
consists of the following documents: (i) this letter agreement; (ii) the
document entitled "Computation of SO2 Allowance Transfers," which is
attached hereto as Exhibit A and made a part of the New Agreement; (iii)
the document entitled "Changes in Environmental-Related Requirements,"
which is attached hereto as Exhibit B and made a part of the New
Agreement; and (iv) the document entitled "Terms and Conditions of Coal
Purchase," as revised February 7, 2003 (hereinafter referred to as
"Additional Terms"), which is attached hereto as Exhibit C and made a part
of the New Agreement. All references to "the Agreement" in the Additional
Terms shall be deemed to refer to the New Agreement. In the event of any
conflict between the terms of this letter agreement and the Additional
Terms, the terms of this letter agreement shall control and take
precedence over the Additional Terms.
4. Quantity. Except as otherwise provided in this letter agreement, Seller
shall supply to Purchaser 1,000,000 tons of coal during each Contract
Year, which shall be supplied at the rate of 500,000 tons during each
Semiannual Period and in approximately equal monthly Shipments during each
Semiannual Period. Notwithstanding the foregoing provisions of this
paragraph 4, Purchaser may elect, in its sole discretion, to adjust the
quantity of coal to be supplied under the New Agreement by increasing the
Semiannual Quantity as follows:
(a) For each Semiannual Period of each Contract Year, Purchaser may
increase the Semiannual Quantity to not more than 750,000 tons; provided,
however, that the total quantity of coal supplied under the New Agreement
during each Contract Year shall not be more than 1,500,000 tons. As a
result, the Monthly Quantity for each calendar month during a Semiannual
Period shall not be less than 83,333 tons and not more than 125,000 tons.
(b) If Purchaser elects to increase the Semiannual Quantity for any
Semiannual Period, Purchaser shall give Seller written notice thereof,
which shall specify (i) the Semiannual Quantity for such Semiannual Period
and (ii) the Monthly Quantity for each calendar month during such
Semiannual period. Such notice shall be given at least sixty days prior to
the beginning of the Semiannual Period to which such increase applies.
<PAGE>
5. Source of Coal. All coal supplied under the New Agreement shall be
produced from the Coal Property and shall be shipped from the Typo
Facility. In the event that Seller desires to supply coal under the New
Agreement from a source other than the Coal Property, Seller shall first
obtain Purchaser's written consent, which shall not be unreasonably
withheld, but in no event shall such consent be withheld if the following
conditions are satisfied: (i) such source is owned or controlled by Seller
or its affiliates; (ii) the quality of coal from such source shall comply
with the specifications set forth in paragraph 10 of this letter
agreement; (iii) the weighing and sampling systems associated with such
source are acceptable to Purchaser; and (iv) the delivered cost (stated in
cents/MMBtu) of coal from such source shall not exceed the then-current
delivered cost (stated in cents/MMBtu) of Shipments from the Typo
Facility.
6. Coal Price. The Coal Price for each Contract Year shall be determined as
provided in this paragraph 6 and paragraphs 7 and 8 of this letter
agreement. The Coal Price for each Contract Year shall be stated in
dollars per ton f.o.b. railcar at the Typo Facility and shall become
effective as of January 1 of such Contract Year and remain fixed through
December 31 of such Contract Year but shall be subject to adjustments for
calorific value, excess moisture, excess ash, and ash fusion temperature
as provided in Section 11 of the Additional Terms. All such adjustments
shall be calculated to six decimal places and then rounded to four decimal
places. The Coal Price for the first Contract Year shall be set forth in
each purchase order issued by Purchaser with respect to the New Agreement;
and from time to time thereafter, Purchaser shall issue change orders to
such purchase order(s) to reflect the Coal Price for each subsequent
Contract Year that occurs while the New Agreement remains in effect. Such
purchase order(s) and change orders are for administrative purposes only
and shall not constitute, nor be deemed to result in, any amendment,
change, or modification of the terms and conditions of the New Agreement.
7. Determination of Coal Price for 2004. At any time during the period
between May 1, 2003, and December 1, 2003, but not more than once during
such period, Purchaser shall determine the Coal Price for 2004 ("2004
Price") pursuant to a market price review conducted by Purchaser. The
following provisions shall apply to such review and to the determination
of the 2004 Price:
(a) Purchaser shall give Seller written notice that Purchaser intends to
conduct a market price review and shall give such notice at least
five days before soliciting bids from other suppliers.
(b) In soliciting bids from other suppliers, Purchaser shall request
offers to supply 500,000 tons of coal annually during the then-current
remaining term of the New Agreement and under terms and conditions similar
to the terms and conditions of the New Agreement (including, without
limitation, provisions related to annual market price reviews); provided,
however, that if Purchaser changes its strategy for compliance with
environmental-related requirements after May 1, 2003, Purchaser may
decide, in the exercise of its reasonable judgment, to use fuel with
specifications different from the specifications set forth in paragraph 10
of this letter agreement and may consider fuel with such different
specifications in conducting the market price review. Purchaser shall
consider only bona fide offers received from viable suppliers ("Qualifying
Offers") in evaluating bids with respect to the market price review.
(c) Based on Qualifying Offers, Purchaser shall determine the lowest
weighted average delivered cost of coal as of the date on which bids are
due ("Lowest Delivered Cost") 1,000,000 tons of coal that Purchaser could
purchase from one or more suppliers who have submitted Qualifying Offers;
and in making such determination, Purchaser shall take into account
then-current costs for transportation, taxes, sulfur dioxide allowances,
nitrogen oxide allowances, and other applicable emission allowances
related to each Qualifying Offer. After Purchaser has determined the
Lowest Delivered
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* CONFIDENTIAL MATERIAL HAS BEEN
OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE
COMMISSION. BRACKETS AND UNDERSCORES
DENOTE SUCH OMISSIONS.
Cost, Purchaser shall next calculate an equivalent price f.o.b. railcar at
the Typo Facility ("Typo Equivalent Price") based on the Lowest Delivered
Cost.
(d) Purchaser shall promptly notify Seller, by fax transmission with
written confirmation mailed immediately thereafter, of the Typo Equivalent
Price. Within fifteen days after such notice has been transmitted to
Seller by fax, Seller shall notify Purchaser, by fax transmission with
written confirmation mailed immediately thereafter, either (i) that Seller
has decided to accept the Typo Equivalent Price or (ii) that Seller has
decided to terminate the New Agreement.
(e) If Seller decides to accept the Typo Equivalent Price, it shall become
the 2004 Price; and the New Agreement shall continue in effect. If Seller
decides to terminate the New Agreement, the New Agreement shall terminate
effective as of December 31 of the Contract Year in which the market price
review is conducted and shall have no force and effect after such date.
8. Determination of Coal Price for Subsequent Years. If the New Agreement
remains in effect on January 1, 2005, Purchaser shall determine annually
thereafter a new Coal Price for the next Contract Year ("Next Year Price")
pursuant to a market price review conducted by Purchaser. The following
provisions shall apply to each such review and to the determination of
each Next Year Price:
(a) The Next Year Price shall be determined at any time during the period
between January 1 and December 1 of the Contract Year immediately prior to
the Contract Year for which the Next Year Price is determined, but not
more than once during each such period. The Parties shall comply with the
provisions set forth in paragraphs 7(a), 7(b), 7(c), and 7(d) of this
letter agreement in determining the Typo Equivalent Price for the Contract
Year involved and in giving notices with respect to such review.
(b) If Seller decides to accept the Typo Equivalent Price for the Contract
Year involved, it shall become the Next Year Price; and the New Agreement
shall continue in effect. If Seller decides to terminate the New
Agreement, the New Agreement shall terminate effective as December 31 of
the Contract Year in which the market price review is conducted and shall
have no force and effect after such date.
9. Performance Incentive. During each calendar month of each Contract Year,
Purchaser shall pay Seller [_ _ _ _]% of the Coal Price for such Contract
Year on all Shipments under the New Agreement during such calendar month
and shall withhold, as a performance incentive, [_ _ _ _]% of such Coal
Price ("Withheld Amount") for such Shipments. With respect to each
calendar month in which Seller supplies at least the Monthly Quantity for
such calendar month, Purchaser shall pay the Withheld Amount to Seller in
a lump sum promptly after the end of such calendar month. Purchaser shall
have no obligation to pay, and may retain permanently, the Withheld Amount
related to Shipments during any calendar month in which Seller fails to
supply at least the Monthly Quantity for such calendar month; provided,
however, that if such failure results from an event of force majeure under
Section 13 of the Additional Terms or from a cause or circumstance within
Purchaser's control, then Purchaser may not retain the Withheld Amount and
shall pay the Withheld Amount to Seller promptly after the end of such
calendar month.
10. Quality Requirements. Each Shipment under the New Agreement shall conform
to the requirements set forth in Section 7-A of the Additional Terms. In
addition, each Shipment shall conform to the following analysis on an "as
received" basis:
<PAGE>
* CONFIDENTIAL MATERIAL HAS BEEN
OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE
COMMISSION. BRACKETS AND UNDERSCORES
DENOTE SUCH OMISSIONS.
Requirement
Specification (per Shipment)
------------- --------------
Maximum Moisture 10.00 %
Maximum Ash 12.00 %
Maximum Sulfur 1.00 %
Minimum Volatile Matter 30.0 %
Minimum Ash Fusion Temperature
Softening (H=W Reducing Atmosphere) 2700 degrees F
Minimum Grindability (Hardgrove
Grindability Index ("HGI")) 40 HGI
Minimum Calorific Value 12,000 Btu/lb.
11. Sulfur Adjustments. Notwithstanding the provisions of Section 11.D of the
Additional Terms, excess sulfur adjustments regarding Shipments under the
New Agreement shall be determined as follows:
(a) With respect to Shipments during the first, second, third, and fourth
Contract Years (2004 through 2007), Purchaser shall furnish to Seller, at
the end of each Contract Year, a statement of the annual weighted average
SO(2) content (stated in lbs./MMBtu) of all Shipments under the New
Agreement during such Contract Year. If the annual weighted average SO(2)
content of all Shipments during a Contract Year exceeds [_ _ _ _]
lbs./MMBtu, then Seller shall provide to Purchaser, within ten working
days after Seller has received such statement, a completed EPA Allowance
Transfer Form authorizing transfer of a sufficient number of SO(2)
allowances, from Seller's EPA account to an EPA account designated by
Purchaser, to bring the actual annual weighted average SO(2) content of
such Shipments into compliance with the limit of [_ _ _ _] lbs./MMBtu. No
other remedy shall apply with respect to the annual weighted average SO(2)
content of such Shipments. The method for calculating the number of SO(2)
allowance transfers pursuant to this paragraph 11(a) is illustrated in
Exhibit A.
(b) With respect to Shipments during the fifth, sixth, and seventh
Contract Years (2008 through 2010), excess sulfur adjustments shall be
determined pursuant to Section 11.D of the Additional Terms; provided,
however, that the monetary rate used in calculating such adjustments shall
be $[_ _ _ _] per [_ _ _ _]% or portion thereof, rather than the monetary
rate stated in Section 11.D.
12. Termination. In addition to Purchaser's other rights and remedies under
the New Agreement, Purchaser may cancel the remaining Shipments to be
supplied under the New Agreement and may terminate the New Agreement under
one or more the following conditions:
(a) Purchaser may terminate the New Agreement in the event that (i) Seller
fails to supply, during a calendar month, at least the Monthly Quantity
for such calendar month and (ii) such failure does not result from an
event of force majeure under Section 13 of the Additional Terms or from a
cause or circumstance within Purchaser's control. If Purchaser elects to
terminate the New Agreement pursuant to this paragraph 12(a), Purchaser
shall give Seller written notice thereof, which shall specify the
effective date of termination and shall be given at least thirty days
prior to such date.
(b) Purchaser may terminate the New Agreement as provided in paragraphs
(e) and (f) of Exhibit B.
(c) Purchaser may terminate the New Agreement as provided in Section 12.C
of the Additional Terms.
<PAGE>
13. Access to Seller's Records. Seller shall maintain accurate records
relating to Shipments under the New Agreement in accordance with generally
accepted accounting principles and shall retain such records for at least
three years after the New Agreement is terminated or expires. Seller shall
make such records available to Purchaser, its accountants, auditors, or
other authorized representatives, who shall be given access to and be
permitted to examine such records at reasonable times. If an audit
determines that any payments previously made under the New Agreement
("Previous Payments") were not properly calculated, adjustments shall be
promptly made in amounts to be paid in the future for Shipments under the
New Agreement ("Future Payments") to reflect the proper amounts of such
adjustments; or if no Future Payments are then due, payments shall be
promptly made to reflect the difference between the Previous Payments and
the proper amounts determined by audit. The provisions of this paragraph
13 shall survive the termination or expiration of the New Agreement.
14. Access to Coal Property. Purchaser or its representative, at any time
during normal Coal Property operation, may enter upon the Coal Property,
at Purchaser's sole risk and expense, for any of the following purposes:
(i) to inspect and examine the method and manner of, and equipment used
in, mining, producing, washing, loading, unloading, transporting,
sampling, weighing, analyzing, or handling of coal to be supplied under
the New Agreement; (ii) to take samples of coal for Purchaser's analyses;
or (iii) in connection with any accounting, audit, or examination of
Seller's records. Prior to entering the Coal Property, Purchaser's
representative shall check in with appropriate personnel at the entrance
to the Coal Property. No such inspection by Purchaser shall be deemed a
waiver of any of Purchaser's rights or relieve Seller of any obligations
under the New Agreement.
15. Confidentiality. The Parties shall treat the terms and conditions of the
New Agreement and the Coal Prices determined pursuant to the New Agreement
as confidential and proprietary information. Neither Party shall disclose
any such information to any third party without the other Party's prior
written consent, which consent shall not be unreasonably withheld;
provided, however, that no such consent shall be needed where such
disclosure (i) is required by law, regulation, or regulatory agencies
having jurisdiction over one of the Parties or (ii) is made in connection
with a Party's assertion of a claim or defense in a legal proceeding, and
that in either of these events, the Party intending to make such
disclosure shall advise the other Party in advance and cooperate to
minimize the disclosure of any such information. Notwithstanding the
foregoing provisions of this paragraph 15, either Party may disclose such
information to a prospective purchaser of the stock or assets of that
Party or to a lender in connection with a financing transaction; provided,
however, that any such prospective purchaser or lender shall be bound by
the provisions of this paragraph 15. For purposes of this paragraph 15,
the term "third party" shall not include (i) a Party's parent, subsidiary,
or affiliate or (ii) the Parties' respective officers, directors,
employees, legal advisers, accountants, or consultants.
16. Revision of Additional Terms. From time to time during the term of the New
Agreement, Purchaser or its agent may revise the Additional Terms. With
respect to each revision of the Additional Terms, Purchaser shall provide
a copy of the Additional Terms, as revised, to Seller at least thirty days
before they become applicable to the New Agreement. The Additional Terms,
as revised, shall be attached to this letter agreement as Exhibit C, shall
replace the then-current version of the Additional Terms, and shall become
a part of the New Agreement; provided, however, that if Seller objects to
any provisions of the Additional Terms, as revised, Seller may terminate
the New Agreement by giving Purchaser written notice thereof, which shall
specify the effective date of termination and shall be given at least
ninety days before such date.
17. Notices. Except for shipping notices and "as loaded" coal quality analyses
(to be provided as required by the Additional Terms) and except as
otherwise provided in this letter agreement, any notice, request, consent,
demand, report, or statement (collectively, "Notice") given by one Party
to
<PAGE>
the other Party shall be in writing and shall be sent by overnight courier
(in which case the Notice shall be deemed to have been received on the
next business day after it is sent) or by certified mail (in which case
the Notice shall be deemed to have been received 72 hours after it is
sent) to the appropriate addresses listed in this paragraph 17.
(a) Each Notice to Purchaser Vice President
shall be sent to: Fuel Services 14N-8160
Southern Company Services, Inc.
P.O. Box 2641
Birmingham, Alabama 35291-8160
with a copy to: Manager, Fuel Services
Southern Company Services, Inc.
Bin 10171
241 Ralph McGill Boulevard, N.E.
Atlanta, Georgia 30308-3374
or to such other addresses as Purchaser designates by Notice to
Seller.
(b) Each Notice to Seller Vice President, Contract Administration
shall be sent to: Horizon Natural Resources Sales Company
2000 Ashland Drive
Ashland, Kentucky 41101-7058
with a copy to: Crimson Coal Corporation
166 Prosperous Place
Suite 200
Lexington, Kentucky 40509
or to such other addresses as Seller designates by Notice to
Purchaser.
18. Prior Agreements. The Parties have previously entered into the following
contracts, which are currently in effect: (i) that certain Amended and
Restated Agreement for the Sale and Purchase of Coal dated July 22, 1999
("Marrowbone Agreement"); (ii) that certain Agreement for Purchase and
Sale of Coal dated January 24, 2001 ("Pike County Agreement"); and (iii)
that certain Amended and Re-stated Agreement for Sale and Purchase of Coal
dated October 1, 2001 ("Typo Agreement"). (The Marrowbone Agreement, the
Pike County Agreement, and the Typo Agreement are hereinafter referred to
collectively as the "Prior Agreements.") Nothing contained in the New
Agreement shall affect the Parties' respective rights, duties,
obligations, and interests under the Prior Agreements, all of which shall
remain in effect, according to their respective terms, after this letter
agreement is signed by the Parties.
19. Other Provisions. The headings to paragraphs of this letter agreement and
to sections of the Additional Terms are for convenience only and shall not
be considered in determining the intent of the Parties. Time is of the
essence in the performance of the New Agreement. The New Agreement
contains the entire agreement between the Parties with respect to the
subject matter hereof; and all prior agreements, promises,
representations, understandings, negotiations, and communications, whether
oral or in writing, between the Parties with respect to the subject matter
hereof (other than the Prior Agreements) are merged into and superseded by
the New Agreement.
<PAGE>
If you concur with the provisions of this letter agreement as set forth above,
please have an authorized officer sign in the appropriate space provided on the
next page and return three counterpart originals of this letter agreement to me.
Upon execution of this letter agreement by the Parties, we will forward a fully
executed counterpart original for your files.
Sincerely,
/s/ Deborah J. Rouse by DWJ
Deborah J. Rouse
Manager, Coal and Transportation Procurement
Attachments (Exhibits A, B, and C)
<PAGE>
ACCEPTED AND AGREED TO:
HORIZON NATURAL RESOURCES GEORGIA POWER COMPANY
SALES COMPANY
By: /s/ Marc Merritt By: /s/ Christopher C. Womack
-------------------------------- ----------------------------
Its: President Its: Senior Vice President
<PAGE>
* CONFIDENTIAL MATERIAL HAS BEEN
OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE
COMMISSION. BRACKETS AND UNDERSCORES
DENOTE SUCH OMISSIONS.
EXHIBIT A
COMPUTATION OF SO(2) ALLOWANCE TRANSFERS
With respect to Shipments during the first, second, third, and fourth
Contract Years (2004 through 2007), a transfer of SO(2) allowances is made for
each Contract Year in which the annual weighted average SO(2) content (stated in
lbs./MMBtu) of all Shipments during such Contract Year exceeds [_ _ _ _]
lbs./MMBtu ("SO(2) Guarantee"). An example of the method of calculating the
number of SO(2) allowances to be transferred is as follows:
(a) Assume that the following Shipments are received during a Contract Year:
Total quantity of coal in all Shipments received = [_ _ _ _] tons
Weighted average calorific value of all Shipments received = [_ _ _ _] Btu/lb.
Weighted average sulfur content of all Shipments received = [_ _ _ _]%
(b) Based on the foregoing, the following calculations would be made:
Step 1: Calculate (to six decimal places) the actual weighted average
SO(2) content (stated in lbs./MMBtu) of all Shipments received
during the Contract Year:
[_ _ _ _] lbs. S 1 lb. coal [_ _ _ _] Btu
------------ x ---------- x ------------- = [_ _ _ _] lbs. S/MMBtu
[_ _ _ _] lb. coal [_ _ _ _] Btu [_ _ _] MMBtu
[_ _ _ _] lbs. S/MMBtu = [_ _ _ _] lbs. SO(2)/MMBtu
Step 2: Calculate (to six decimal places) the difference between the SO(2)
Guarantee and the actual weighted average SO(2) content of all
Shipments received during the Contract Year:
[_ _ _ _] lbs. SO(2)/MMBtu - [_ _ _ _] lbs. SO(2)/MMBtu
= [_ _ _ _] lbs. SO(2)/MMBtu
Thus, the actual weighted average SO(2) content exceeds the SO(2)
Guarantee by [_ _ _ _] lbs. SO(2)/MMBtu.
Step 3: Calculate the total amount of MMBtu's received during the
Contract Year:
[_ _ _ _] lbs [_ _ _ _] Btu 1 MMBtu
[_ _ _ _] tons x --------- x ---------- x ------------- = [_ _ _ _] MMBtu
[_ _ _] ton 1 lb. [_ _ _ _] Btu
Step 4: Calculate the amount of SO(2) (in tons) resulting from the excess
determined in Step 2 and then round to the nearest whole unit:
[_ _ _ _] lbs. SO(2) [_ _ _] ton SO(2) [_ _ _ _] tons SO(2)
[_ _ _ _] MMBtu x ------------------- x ---------------- = which is rounded to
[_ _ _ _] MMBtu [_ _ _ _] lbs. SO(2) [_ _ _ _] tons SO(2)
Because [_ _ _ _] tons SO(2) equates to [_ _ _ _] SO(2) allowances,
[_ _ _ _] is the number of SO(2) allowances to be transferred from
Seller's EPA Account to an EPA account designated by Purchaser.
<PAGE>
EXHIBIT B
CHANGES IN ENVIRONMENTAL-RELATED REQUIREMENTS
(a) The term "Environmental-Related Requirement," whether in the singular
or the plural, means the following:
(1) any environmentally related prohibition, restriction, or
limitation regarding the burning of coal at one or more of the
electric-generating plants designated by Purchaser as a
destination for Shipments under the New Agreement ("Designated
Plants");
(2) any prohibition, restriction, or limitation regarding (i) the
quality of coal that may be burned (including, without
limitation, any constituent specification) at one or more of
the Designated Plants or (ii) the type or amount of emissions
from such plant(s);
(3) any rule or requirement affecting the permissible means for
complying with any such prohibition, restriction, or
limitation; or
(4) any imposition of a cost, fee, tax, or other economic burden
on Purchaser related to (i) the production of electricity
(either generally or by means of coal-fired electric
generation), (ii) the quantity of coal purchased or burned by
Purchaser at one or more of the Designated Plants, (iii) any
constituent specification of coal purchased or burned by
Purchaser at such plant(s), (iv) the type or amount of
emissions from such plant(s), or (v) the installation of any
type of environmental-related equipment required by any
regulatory authority to which Purchaser is subject.
In addition, the term shall be deemed to include Purchaser's strategy, as
determined by Purchaser in its reasonable judgment, for compliance with
Environmental-Related Requirements.
(b) A change in Environmental-Related Requirements shall be deemed to have
occurred in any one or more of the following circumstances: (i) there is any
increase or decrease in existing Environmental-Related Requirements; (ii)
Purchaser decides, in its reasonable judgment, to change its strategy for
compliance with any existing Environmental-Related Requirements; or (iii) a new
Environmental-Related Requirement is imposed on Purchaser as a result of any
federal or state law, administrative regulation or ruling, local ordinance,
court order or decision, or any revision in the interpretation or implementation
of such law, regulation, ruling, ordinance, order, or decision. The Parties
acknowledge and agree that a change in Environmental-Related Requirements may
occur even though (i) such requirement is stated as a restriction, limitation,
or obligation imposed on Purchaser and its affiliates or some other group of
utilities or (ii) such requirement affects Purchaser in a general way and is not
directed at specific plants, fuels, fuel supplies, or other operating
conditions.
(c) The Parties acknowledge and agree that the provisions of this Exhibit
B are intended to provide rights in addition to the rights provided in the
Additional Terms and that the price, specifications, quantity, and
destination(s) of coal to be supplied under the New Agreement are predicated on
Environmental-Related Requirements that are known and in effect as of April 1,
2003. For purposes of this paragraph (c), an Environmental-Related Requirement
shall not be deemed to be "known" if it relates to any federal or state law,
administrative regulation or ruling, local ordinance, or court order or decision
or interpretation of such law, regulation, ruling, ordinance, order, or decision
(collectively, "Legal Requirements") that is being challenged in any
administrative or judicial proceeding ("Legal Proceeding") as of April 1, 2003.
Upon the final resolution of the Legal Proceeding (including any appeals related
to the Legal Proceeding), Purchaser shall determine, in its reasonable judgment,
if the
B-1
<PAGE>
Legal Requirements (whether changed or unchanged as a result of the Legal
Proceeding) constitute a change in Environmental-Related Requirements.
(d) In the event that a change in Environmental-Related Requirements
occurs after April 1, 2003, then Purchaser shall determine, in its reasonable
judgment, (i) how to comply with such change and (ii) whether such change has
had or may have an adverse impact on Purchaser's use of coal to be supplied
under the New Agreement at one or more of the Designated Plants. Any change in
Environmental-Related Requirements that has one or more of the following effects
shall be deemed to have an adverse impact on Purchaser's use of coal to be
supplied under the New Agreement at such plant(s), even though such requirements
may allow Purchaser a choice of options for complying with such requirement
(which choice may include, for example, the payment of a fee or tax in lieu of
the installation of equipment, the use of coal of different constituent
specifications, or the reduction in the overall use of coal at such plant(s)):
(1) the change imposes a cost, fee, tax, or other economic burden
on Purchaser concerning (i) the constituent specifications of
coal purchased for or burned at such plant(s) or (ii) the type
or amount of emissions from such plant(s);
(2) the change directly prevents or restricts Purchaser from using
coal to be supplied under the New Agreement at such plant(s);
(3) the change requires Purchaser to install equipment (including,
without limitation, flue gas desulfurization equipment,
selective catalytic reduction equipment, selective
non-catalytic reduction equipment, equipment for co-firing
with natural gas, or particulate removal equipment) at such
plant(s) in order to comply with such change; or
(4) the change requires or permits Purchaser to use coal of a
quality (including, without limitation, sulfur) different from
the specifications set forth in paragraph 10 of the letter
agreement.
(e) If Purchaser determines that a change in Environmental-Related
Requirements has had or may have, at a future date, an adverse impact on the use
of coal to be supplied under the New Agreement, Purchaser shall so notify Seller
in writing. Upon receipt of such notice, Seller shall have the option to
propose, within thirty days after receipt of such notice, any steps available to
Seller in its mining and processing of the coal, in the supply of substitute
coal, or other measure that would result in as low a delivered cost of fuel at
the Designated Plants as Purchaser could obtain by purchasing reasonably
available substitute fuel, taking into consideration any fees, taxes, costs, or
other economic burdens imposed on the use of coal at the Designated Plants. In
the event that Purchaser determines, in its reasonable judgment, that Seller
cannot achieve this result, then Purchaser may terminate the New Agreement by
giving Seller written notice thereof, which shall specify the effective date of
termination and shall be given at least ninety days prior to such date.
Purchaser may give such notice either before or after a change in
Environmental-Related Requirements becomes effective.
(f) If, at any time during the term of the New Agreement and regardless of
whether a change in Environmental-Related Requirements has occurred, Purchaser
determines, in its reasonable judgment, that any operational or environmental
compliance problem has resulted from the components or characteristics of
Seller's coal or the products of its combustion (including, without limitation,
nitrogen oxide emissions, mercury emissions, chlorine emissions, particulate
emissions, and carbon emissions) or any other constituent or property of the
coal not otherwise specified herein, the Parties shall immediately enter into
discussions in a good-faith effort to resolve the problem. If such discussions
fail to resolve such problem in a manner that, in Purchaser's judgment, is
reasonable and would not impose an
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unreasonable additional expense on Purchaser, then Purchaser may terminate the
New Agreement by giving Seller written notice thereof, which shall specify the
effective date of termination and shall be given at least ninety days prior to
such date. No expense contemplated by this paragraph (f) or any other provision
of this Exhibit B shall be deemed reasonable if it would result in a delivered
cost of coal under the New Agreement that exceeds the delivered cost of
competitive fuels or sources then available to Purchaser.
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REVISED 2/7/03
EXHIBIT C
TERMS AND CONDITIONS OF COAL PURCHASE
1. GOVERNING DOCUMENTS
Listed in order of governance, the Purchase Order, these Terms and
Conditions, and the executed Producer-Broker Statement (where applicable),
shall constitute the entire Agreement (hereinafter the "Agreement")
between Purchaser and Seller as to coal produced and sold under the
Purchase Order. No additional or different terms stated by Seller in an
acceptance or written confirmation of the Agreement shall be effective
unless such terms shall be specifically accepted in writing by Purchaser.
No modification of the Agreement shall be effective unless the same shall
be reduced to writing and signed by the duly authorized agents of the
parties. There are no representations, understandings, or agreements,
either oral or written, which are not included as part of the Agreement.
2. SELLER'S ACCEPTANCE
Acknowledgment of the Purchase Order or shipment of coal under the
Agreement shall constitute Seller's acknowledgment and acceptance of all
provisions herein and all provisions of the Purchase Order.
3. BROKERS
Any Seller who does not mine or produce the coal to be delivered under the
Agreement shall be deemed a Broker. Broker shall be responsible for
providing a copy of these Terms and Conditions and the Purchase Order
(with optional deletion of price) to the Producer designated in the
Producer-Broker Statement from whom Broker purchases or acquires coal to
be delivered hereunder. Broker shall, in its agreement with Producer, bind
Producer to all of the terms of the Purchase Order and to all of these
Terms and Conditions and shall be responsible for compliance therewith by
Producer; provided, however, that failure of Producer to comply therewith
shall not relieve Broker from performance of all its obligations under the
Agreement. The liability of Producer and Broker shall be joint and
several. Any reference herein to "Seller" shall be deemed to refer to
Producer and Broker.
4. WARRANTY
Seller represents and warrants that it, or the Producer identified in the
Producer-Broker Statement, owns or controls the Coal Property described in
the Purchase Order; that all coal shipped pursuant to the Agreement is
shipped free and clear of all liens, encumbrances, and claims of all third
parties; that the Coal Property contains commercially recoverable coal of
a quality and in quantities sufficient to satisfy the requirements of the
Agreement; that coal will not be used or sold from the Coal Property so as
to result in an inability of Seller to deliver to Purchaser the coal in
the quantities and quality and at the times provided in the Agreement; and
that the coal shipped under the Agreement will be mined and produced from
the Coal Property; and that no substitute coal shall be shipped by Seller
to Purchaser under the Agreement without prior written approval of
Purchaser.
5. INSPECTION
Purchaser or its designated agent shall have the right at all reasonable
times to enter upon the Coal Property and/or other appropriate location
and to inspect and examine the method, equipment, and manner of mining,
producing, storing, washing, blending, crushing, loading, unloading,
transporting, sampling, analyzing, and other handling of coal to be sold
and delivered under the Agreement, and to take samples of coal for
Purchaser's analyses. No inspection by
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* CONFIDENTIAL MATERIAL HAS BEEN
OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE
COMMISSION. BRACKETS AND UNDERSCORES
DENOTE SUCH OMISSIONS.
Purchaser shall be deemed a waiver of any of Purchaser's rights or relieve
Seller of any obligation or duty imposed by the Agreement.
6. QUANTITY
Seller shall sell and deliver to Purchaser, and Purchaser shall purchase
and receive, the quantity of coal within the period of time specified in
the Purchase Order. All coal sold under the Agreement shall be delivered
in reasonably equal shipments and at regular intervals over the term of
the Purchase Order or in such other manner as may be specifically stated
in the Purchase Order. Unless Seller is excused from delivery by force
majeure (as hereinafter defined) and in addition to any other remedies at
law or equity, Purchaser shall have the right immediately to terminate the
Agreement should Seller at any time (a) fail to ship the quantity of coal
agreed to be shipped in any monthly period or (b) deliver more than the
monthly quantity of coal stated in the Purchase Order without prior
approval of Purchaser.
7-A. COAL SIZE AND EXTRANEOUS MATERIAL
Unless otherwise specified in the Purchase Order, all coal shipped
pursuant to the Agreement shall not exceed a maximum lump size of
[_ _ _ _] in any dimension, shall contain no more than [_ _ _ _] percent
([_ _ _ _]%) of particles less than [_ _ _ _] in size, and shall be the
whole mine product (or whole washed product) with no intermediate size
fractions added or removed. All shipments shall be free from excess
quantities of moisture, bone, fireclay, rock, loose clay, and shale and
shall not contain pond fines, washer refuse, roots, wood, debris, iron,
plastic, rubber, or other extraneous material. Purchaser may reject any
shipment which, in Purchaser's reasonable judgment, does not comply with
the aforesaid requirements, which judgment may be based upon visual
inspection.
7-B. COAL QUALITY SPECIFICATIONS
The coal specifications pertaining to the coal to be delivered shall be
stated in the Purchase Order.
7-C. SYNTHETIC FUEL
No coal shipped pursuant to the Agreement shall be treated with chemicals,
heat, binders, petroleum products or other substances, whether or not
treated with the intent to qualify the coal under the Internal Revenue
Code Section 29 (Credit for producing fuel from a non-conventional
source). Purchaser may reject any shipment that does not comply with the
aforesaid requirements and Purchaser may terminate the Agreement
immediately with no liability to Seller. Seller shall be liable for all
costs incurred as a result of shipping coal that does not comply with the
aforesaid requirements.
8. TRANSPORTATION
Purchaser at its sole discretion may direct that coal purchased under the
Agreement be delivered by the carrier to the plant or location specified
in the Purchase Order or to any other location specified by Purchaser;
provided, however, that Purchaser shall remain liable for payment of the
purchase price of the coal directed to such other location.
A. Scheduling of Shipments
Before the first shipment is scheduled and prior to the beginning of
each subsequent calendar month while the Purchase Order is in
effect, Seller shall telephone Southern Company Services' Production
Support Analyst for shipping instructions. Seller's failure to
comply with the shipping instructions may result in rejection of
shipments or other sanctions. Seller shall be responsible for all
monetary charges this rejection or other action may cause, be it
carrier imposed or otherwise.
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B. Delivery by Rail
All shipments of coal under the Agreement shall be f.o.b. railcar at
the loading point specified in the Purchase Order and the loading
facility shall be available to load shipments on a 24 hour/day
basis, seven (7) days per week. Seller agrees not to permit coal to
be loaded in railcars that contain foreign material. Seller shall
bear all expenses and costs associated with delivery of the coal
f.o.b. railcar and shall fully defend and indemnify Purchaser
against any claim made against Purchaser for any cost, expenses or
damage (either liquidated or unliquidated) which may be asserted
against Purchaser arising out of or resulting from the delivery by
Seller to Purchaser of any coal under this Agreement. In the event
Seller should fail to deliver coal in the quantity or at the rate as
provided in the Agreement, or in the event Purchaser cancels the
Agreement or suspends further shipments pursuant to the Agreement,
Seller shall pay Purchaser any freight charges (including without
limitation, demurrage, car lease costs, storage fees, etc.) incurred
by Purchaser. All coal shipped to Plants Bowen, Daniel, Miller,
Scherer, and Wansley must be loaded into electro-pneumatic Rapid
Discharge hopper cars.
1. Shipping Notice and "As Loaded" Coal Quality Analysis
A shipping notice (404 Bill of Lading) shall be electronically
transmitted, and at Purchaser's option, transmitted by telefax
to the destination plant and other locations as outlined in
the attached page entitled "Facsimile Numbers for Shipping
Notices and As Loaded Coal Quality Analysis."
Seller shall utilize Automatic Equipment Identification (AEI)
to correctly identify and list all cars in a computer system
during the loading process. The weight for each car or total
train weight shall be automatically entered into the computer
system if mine govern weights apply. Upon completion of
loading and prior to the train leaving, a 404 Bill of Lading
must be transmitted to the railroad via computer generating
Electronic Data Interchange (EDI).
The 404 Bill of Lading must provide the Carrier Name, Coal
Supplier, Loadout Name, Fuel P.O. Number, Destination, Tons
Shipped (if applicable), Number of Cars with quantity of Steel
and Aluminum, Transportation Contract, SES Train Number,
Loadout FSAC Number, Train Arrival Date/Time, Load Start
Date/Time, Load Finish Date/Time, Total Loading Time,
Bill-of-Lading (BOL) Release to Railroad Date/Time and Total
Train Consist including reporting marks and car numbers. "As
loaded" coal quality analysis of each train and such other
pertinent information about the shipment must be telefaxed or
telephoned to Purchaser within twenty-four (24) hours
following the loading of each train. Purchaser shall not be
obligated to unload any train unless the shipping notice and
"as loaded" coal quality analysis have been received. Seller
shall reimburse Purchaser for any demurrage or expenses
incurred as a result of failure to provide a shipping notice
and "as loaded" coal quality analysis to Purchaser as provided
herein. Shipping notices and "as loaded" coal quality analysis
shall be directed to the destination plant and other locations
as outlined in the attached page entitled "Facsimile Numbers
for Shipping Notices and As Loaded Coal Quality Analysis."
2. Passage of Title; Risk of Loss
Risk of loss shall pass from Seller to Purchaser when the rail
carrier accepts consignment, and passage of title shall occur
upon Purchaser's acceptance at destination plant from the rail
carrier except that Seller shall remain liable for coal bought
on a delivered basis until it is accepted at destination for
unloading.
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3. Demurrage Liability and Other Costs
Seller shall be liable for and shall defend, indemnify, and
hold harmless Purchaser from any demurrage charges, excess
freight charges, deficiency freight charges, or other
transportation costs incurred by Purchaser as a result of
Seller's failure to satisfy loading and/or shipping
requirements.
4. Overloaded Railcars
It is the sole obligation and responsibility of Seller to be
aware of and conform to all rail carrier restrictions relating
to maximum allowable gross railcar weights. If cars are found
to be overloaded, Seller shall be responsible for any
associated costs for reducing the weight of cars to comply
with the applicable rail carrier's restrictions and shall be
obligated to provide Purchaser with corrected governing weight
documentation. Seller shall be responsible for any damage
resulting from overloaded cars. Maximum weight restrictions by
carrier are provided in the attached page entitled "Railcar
Weight Matrix."
5. Underloaded Railcars
It is the sole obligation and responsibility of Seller to load
trains to the minimum train weight as directed by and in
compliance with the applicable transportation contract. It
shall be Seller's responsibility to verify minimum weight from
Purchaser's transportation coordinator before loading train.
Railcars that are loaded for movement on Norfolk Southern
Railway under the Agreement shall be loaded to not less than
94% of UMLER capacity from non-batch-weigh Origins and 97% of
UMLER capacity from batch-weigh flood-load Origins.
C. Delivery by Barge
For coal purchased f.o.b. shipping point, Seller shall provide or
designate loading points which have adequate and accessible mooring
and barge loading facilities sufficient to load the coal properly
and within the appropriate loading time. Seller shall pay all costs
of transportation of coal from the mine to the barge loading
facility, including barge-loading charges. Purchaser shall pay cost
of barge freight from the loading point to the unloading point.
Purchaser shall arrange for the necessary barges and have such
barges available at the loading point so as to permit loading by
Seller in an orderly manner. Purchaser shall coordinate the arrival
of barge at the loading point with Seller. Purchaser shall arrange
for the barge operator to give Seller reasonable notice, either
orally or in writing, of the expected arrival date of empty barges
at the loading point. Seller shall be liable for and shall pay
Purchaser for any transportation costs or demurrage charges incurred
by Purchaser which may be occasioned by the breakdown or failure of
the barge loading facilities or by the failure of Seller to furnish
and load coal at the loading point at the proper times and in the
proper quantities. Purchaser shall designate the carrier to tow the
barge to the designated delivery point.
For coal purchased f.o.b. shipping point, Seller shall bear all risk
of loss until the carrier's barges have left the loading point and
entered interstate commerce. Passage of title shall occur upon
Purchaser's acceptance at destination plant from the barge carrier.
Claims for coal lost en route shall be filed by Purchaser for the
carrier's account. For coal purchased f.o.b. destination, Seller
shall bear all risk of loss and retain title to the coal until the
coal has been received at the delivery point specified in the
purchase order.
1. Shipping Notice and "As Loaded" Coal Quality Analysis
Seller shall utilize Automatic Equipment Identification (AEI)
to correctly identify each barge in a computer system during
the loading process. The total net weight for each
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barge shall be automatically entered into the computer system
from mine govern scales or an estimated weight if enroute or
destination weights apply. Data for each barge loaded shall be
retained in the computer system and upon completion of
loading, a computer generated shipping notice (approved by
Purchaser) shall be immediately transmitted by modem to
Purchaser.
The shipping notice must provide Shipment Number, P. O.
Number, Vendor, Dock, Carrier name, Carrier Contract Number,
Operating Company, Destination, Load to Maximum Draft, Barge
Number, Estimated or Actual Tons, Arrival Date, Arrival Time,
Load Start Date, Load Start Time, Load Finish Date, Load
Finish Time and Condition of Barge Prior to Loading.
A copy of the shipping notice shall also be telefaxed to the
destination plant and other locations as outlined in the
attached page entitled "Facsimile Numbers for Shipping Notices
and As Loaded Coal Quality Analysis."
2. Demurrage Liability
Seller shall be liable for and shall defend, indemnify, and
hold harmless Purchaser from any demurrage charges, excess
freight charges, deficiency freight charges, or other similar
transportation charges incurred by Purchaser under any
applicable transportation agreement as a result of Seller's
failure to satisfy loading and/or shipping and/or tonnage
requirements stated in the Purchaser Order. Seller shall load
barges in accord with any special loading provisions stated in
the Purchase Order and shall pay or reimburse Purchaser for
any charges incurred by Purchaser as a result of Seller's
failure to abide by such special loading provisions.
D. Delivery by Ocean Vessel
Where delivery of coal is by ocean vessel, Purchaser may elect to
deliver the coal loaded into an acceptable type vessel at a loading
port of safe berth or may elect to have coal delivered to a
discharge port to be designated by Purchaser.
Payments for coal delivered shall be made on the "as received"
calorific value expressed in Btu/lb less deduction made for quality
adjustments if applicable. Purchaser will pay 90% to Seller's
account within 15 days of unloading cargo at port of discharge.
Purchaser shall pay the balance of ten percent (10%) within 30 days,
less any cost incurred by Purchaser, i.e. demurrage liability or
other determined costs identified.
1. For coal purchased at origin
Seller shall arrange for representative samples of the coal
delivered to be taken by an independent laboratory approved by
Purchaser and analyzed in accordance with applicable
procedures or equivalent of the American Society for Testing
and Materials ("ASTM"). Such analysis shall govern for
calorific price adjustments, ash adjustments, sulfur
adjustments, and for compliance with other specifications for
coal quality set forth in the Purchase Order.
Each sample shall be divided into three parts and put into
airtight containers, properly labeled, and sealed to protect
against any change in coal characteristics.
Part #1 shall be Seller's sample for purposes of analysis.
Part #2 shall be sent to Purchaser's designated laboratory in
accordance with Purchaser's instructions. Part #3 shall be
retained for ninety (90) days as a referee sample.
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Notification of the results of Seller's analysis shall be
provided to Purchaser as soon as practical by facsimile or
other rapid communication within three (3) days after
completion of loading. Written verification of these results
shall follow as soon as possible. Purchaser may have an
authorized representative present at the taking of any
samples.
Purchaser reserves the right to question the accuracy of
Seller's analysis within thirty (30) days of receipt of
written analysis report. If such accuracy is questioned,
Purchaser shall have the right to have the Part #3 sample
(referee sample) analyzed by a mutually acceptable commercial
testing laboratory in accordance with ASTM or equivalent
procedures; and the results of such commercial laboratory's
analysis shall be accepted as determinative of the coal
quality and characteristics of such coal. The cost of this
referee analysis shall be shared equally by the Seller and
Purchaser. The results of Seller's analysis shall prevail if
the referee analysis differs by less than ASTM tolerances for
reproducibility.
Seller shall arrange for weights of the coal delivered to be
determined by an independent certified marine surveyor
acceptable to Purchaser. Notification of the results of such
determination of weights shall be communicated to Purchaser by
facsimile or other rapid communication within one (1) day of
completion of loading. The weights thus determined shall be
accepted as the quantity of coal for which payments are made.
Purchaser reserves the right to draft any vessel using a
certified marine surveyor at the discharge port. Should any
discrepancy between the loading point and the discharge port
of greater than 2.5% occur, then the average of the two draft
weights shall be used for payment. Purchaser shall have the
right to have an authorized representative present at any and
all times that measurements and calculations are made in the
drafting of a vessel.
2. For coal purchased at destination
Representative samples of coal will be taken by Purchaser from
each vessel upon delivery at the destination or other delivery
point. Such samples will be analyzed by Purchaser or its
designated lab in accordance with current ASTM procedures.
Purchaser's analyses of the samples taken at the generating
plant or other delivery point shall govern for price
adjustments for coal quality and for compliance with
specifications for coal quality. Should Purchaser not obtain a
sample for analysis of any vessel shipment, then for the
purposes of this Agreement the analysis of such shipment shall
be deemed to be the average of the analysis of all other
shipments received under the Agreement from Seller during the
preceding thirty day period.
Splits of each composite sample shall be retained for a period
of thirty (30) days for use in the event of a dispute
regarding the results of analyses. In the event Seller
disputes the accuracy of an analysis by giving written notice
to Purchaser within thirty (30) days from the date of delivery
of the coal being analyzed, that portion of the sample of such
coal retained for settlement of disputes shall be sent to a
qualified independent laboratory (selected jointly by
Purchaser and Seller) which shall conduct an analysis in
accordance with ASTM standards. The determination of such
independent laboratory shall be binding on both parties. The
cost for the analysis by such independent laboratory shall be
shared equally by the parties. The results of Purchaser's
analysis shall prevail if the referee analysis differs by less
than ASTM tolerances for reproducibility.
Weights of coal delivered hereunder shall be determined, for
all purposes, by the methods and devices employed at the
destination plant or other delivery point to which such coal
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is delivered. Should Purchaser be prevented from obtaining the
unloaded weight of any vessel of coal under the Agreement,
then the weights for such vessel shall be the "as loaded"
weight.
E. Delivery by Truck
1. Where delivery of coal is by truck, dump trucks and dump
trailers shall be used to transport the coal to the
destination specified in the Purchase Order. Such dump trucks
and dump trailers shall not have cross beams installed in the
cargo area that could damage the sampling auger. All trucks
and trailers operated on Purchaser's properties shall comply
with all applicable federal and state safety standards. If
required by Purchaser, each vehicle shall be furnished an
identification number, which must be affixed to the vehicle,
to gain admittance to the designated destination. Seller shall
employ or utilize only competent commercially licensed truck
drivers and shall be responsible for compliance by such
drivers with Purchaser's rules and requirements, including
speed limits and weight limits on roads within Purchaser's
properties. Such drivers shall comply with the requirements
for loading, transporting, weighing, sampling, and unloading
of coal delivered hereunder, in the manner and at locations on
Purchaser's properties as given by the manager of the
designated destination or his representative, and such drivers
will cooperate with Purchaser's coal-receiving employees and
other suppliers in a manner so as not to interfere with any of
Purchaser's operations. Coal may be delivered to the
designated destination according to the then-current operating
schedule for coal receipts in effect at the destination. It
shall be Seller's responsibility to determine the schedule in
effect and comply therewith in all respects.
2. The operation of vehicles that are excessively heavy in weight
has an adverse effect on roads within Purchaser's properties.
Coal shall be delivered on Purchaser's properties (state of
Alabama only) in dump trucks or dump trailers having gross
vehicle weights including cargo not exceeding 44,000 pounds
for two axles; 66,000 pounds for three axles; 82,500 pounds
for four axles; 88,000 pounds for five axles; and 92,400
pounds for six axles. Purchaser may reject any truck shipment
exceeding the applicable gross vehicle weight.
3. Seller shall bear all risk of loss and retain title to the
coal to be delivered hereunder until the coal is unloaded and
received by Purchaser at the destination specified in the
Purchase Order. Purchaser may direct delivery of coal to a
destination other than that specified therein; provided,
however, that any additional cost incurred by Seller as a
result of such direction shall be paid by Purchaser.
4. Seller shall provide properly completed shipping notices with
each truck delivery on forms furnished by Purchaser. Purchaser
shall return a copy of the shipping notice and issue a weight
ticket to the driver of the truck.
9. WEIGHING, SAMPLING AND ANALYSIS
Purchaser or its designated representative may observe any loading where
the governing weighing, sampling, or sample preparation is performed by
Seller. Purchaser's representative shall have the right to delay or stop
coal loading in the event that Seller's weighing or sampling system
malfunctions. Seller shall pay all costs or expenses incurred by Purchaser
as a result of any weighing or sampling system malfunction. Loading will
be resumed when weighing or sampling system repairs are completed or when
mutually agreed by Purchaser and Seller.
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Purchaser agrees to work in a reasonable and expeditious manner to
facilitate resumption of loading.
9-A. WEIGHING
Unless otherwise specified in the Purchase Order, weights of coal
purchased and delivered hereunder shall be determined by a certified scale
system located at the delivery point specified in the Purchase Order or
other destination to which such coal is delivered and shall be final and
not subject to dispute. In the event Purchaser's weighing system is
unavailable, the net weight for any shipment of coal shall be determined
by certified scales located at the point of origin, by certified scales
located en route, or by other methods mutually agreed to by all parties.
Any scale designated for payment purposes shall be maintained and operated
in accordance with procedures acceptable to Purchaser. Seller shall bear
the expense of weighing and all associated costs of testing and
certification for systems located at the point of origin. Purchaser shall
have the right to inspect and verify the weighing systems, procedures and
testing of any weighing system not owned or maintained by Purchaser. In
the event the weight of any shipment is unavailable from the designated
weighing system, the weight of such shipment shall be determined by mutual
agreement. No subsequent shipments shall be made, without Purchaser's
consent, when the designated weighing system is unavailable.
9-B. SAMPLING AND SAMPLE PREPARATION
a. Unless Purchaser and Seller otherwise agree, each shipment of coal
supplied under the Agreement shall be sampled by Seller and analyzed
by Purchaser's designated laboratory. Seller shall bear all costs
related to obtaining acceptable samples of shipments at each loading
facility applicable to the Agreement. Purchaser shall have the
option, at any time during the term of the Agreement, to elect to
sample, for governing purposes, at the destination plant or other
points specified by Purchaser.
b. At each loading facility applicable to the Agreement, Seller shall
provide a mechanical sampling system which shall be used to collect
a representative sample of each shipment of coal under the Agreement
at such loading facility. The following provisions shall apply to
such sampling system:
1. The design and operation of such sampling system and the
procedures used for sample preparation shall, at a minimum,
meet the requirements of ASTM D-2234 "Standard Practice for
Collection of a Gross Sample of Coal" and ASTM D-2013
"Standard Method of Preparing Coal Samples for Analysis." Such
sampling system shall be enclosed to minimize moisture loss
and shall be designed for one stage of sample crushing to the
No. 4 sieve size (as determined by Purchaser based on ASTM
D-4749 "Standard Test Method for Performing the Sieve Analysis
of Coal and Designating Coal Size"). The sample flow rates
through such sampling system shall be sufficient to minimize
moisture loss. Purchaser and Seller shall use their best
efforts to agree on modification of procedures and equipment
to meet future revisions of ASTM D-2234 and ASTM D-2013.
2. All sample increments collected at all stages of sampling in
such sampling system shall cut the full stream of coal
presented. The values of current measurements of sampling
system cutter openings, cutter velocities, and sample flow
rates shall be made available to Purchaser upon request and
shall be acceptable to Purchaser.
3. Seller shall monitor the sampling ratio of such sampling
system in a manner that is acceptable to Purchaser and shall
make sampling ratio data available to Purchaser upon request.
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4. Using bias test procedures approved by Purchaser, Seller shall
cause such sampling system to be tested periodically, at
Seller's expense, for bias against stopped-belt reference
samples. Such testing shall be scheduled such that when each
shipment of coal is sampled, the most recent bias test results
are dated by no more than two previous years. Seller shall
give Purchaser written notice of each bias test; and Purchaser
or its representative shall have the right to be present
during such test and to observe and inspect sample collection,
sample preparation, and laboratory analysis of bias test
samples. If a bias is detected by such test, Seller shall
immediately take all reasonable measures to remove the source
of such bias; and Purchaser shall have the right to suspend
shipments of coal under the Agreement until the source of such
bias is removed and such sampling system is re-tested for
bias.
5. Prior to the installation of any new sampling system or a
modification of an existing sampling system, Seller shall
submit design drawings, specifications, and sample extraction
parameters for the new or modified sampling system to
Purchaser for its approval, which shall not be unreasonably
withheld.
c. Using an enclosed riffle and following the procedures of ASTM D-2013
with respect to each shipment of coal under the Agreement, Seller
shall divide the final sample of No. 4 sieve size into at least four
laboratory sample splits, with each split weighing 4,000 grams.
Seller shall within 24 hours send one laboratory sample to
Purchaser's designated laboratory and shall promptly analyze one
laboratory sample to provide the "as loaded" coal quality analysis
as required by the Agreement. Seller shall retain the remaining two
laboratory samples for thirty days from the date of the shipment as
reserve samples.
d. Purchaser or its representative may observe any sampling or sample
preparation performed by Seller, and Seller or its representative
may observe any sampling or sample preparation performed by
Purchaser's designated laboratory. In the event that Seller's
sampling system ceases to operate properly, then Seller shall
immediately notify Purchaser or its representative to determine the
course of action to be taken concerning shipments of coal under the
Agreement. If such sampling system malfunctions during the loading
of any shipment of coal under the Agreement, Purchaser may, at its
option, use a weighted average analysis of the last two shipments
loaded prior to such malfunction to determine the analysis of the
shipment being loaded at the time of such malfunction. Purchaser's
representative shall have the right to direct Seller to delay or
stop the loading of any one or more shipments of coal under the
Agreement if such sampling system ceases to operate in accordance
with the requirements of the Agreement. After any such direction is
given, the following provisions shall apply:
1. Seller shall immediately delay or stop, as the case may be,
the loading of such shipment(s); and Seller shall pay all
resulting costs or expenses charged to or incurred by
Purchaser as a result of such delay or stoppage in the loading
of such shipment(s).
2. Seller shall repair such sampling system as soon as practical
and shipments of coal under the Agreement shall not resume
until such repair is completed.
9-C. ANALYSIS
a. Purchaser shall analyze the laboratory samples sent to Purchaser's
designated laboratory in accordance with current ASTM standards, and
the results of such analyses shall be used for the governing
purposes of the Agreement. If Purchaser elects to employ an
independent coal-testing laboratory, Seller shall not be liable for
any costs incurred by Purchaser except as otherwise provided in the
Agreement.
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* CONFIDENTIAL MATERIAL HAS BEEN
OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE
COMMISSION. BRACKETS AND UNDERSCORES
DENOTE SUCH OMISSIONS.
b. Should Seller dispute the accuracy of Purchaser's analysis of a
given shipment, Seller shall notify Purchaser in writing within
thirty (30) days following unloading of the shipment.
c. If a dispute arises between Purchaser and Seller over the results of
such analyses, one of the reserve samples shall be sent to a
qualified independent laboratory (selected jointly by Purchaser and
Seller) which shall conduct a referee analysis of such reserve
sample in accordance with current ASTM standards. The cost of any
such analysis shall be borne equally by Purchaser and Seller. With
respect to a dispute pertaining to a calorific value analysis,
Purchaser's analysis shall be deemed to have been confirmed, and no
further adjustment in billing calculations shall be made, if the dry
basis calorific value analysis by such independent laboratory
differs from Purchaser's analysis by 100 Btu/lb. With respect
to disputes involving other items of analysis, Purchaser's
analysis shall be deemed to have been confirmed if the analysis by
such independent laboratory differs from Purchaser's analysis by no
more than the applicable tolerances as follows:
Item of Analysis Tolerance
---------------- ---------
Moisture [_ _ _ _]% Moisture
Ash [_ _ _ _]% Dry Ash
Volatile Matter [_ _ _ _]% Dry Volatile Matter
Sulfur < 2.0% [_ _ _ _]% Dry Sulfur
Sulfur >= 2.0% [_ _ _ _]% Dry Sulfur
AFT (H=W Reducing) [_ _ _ _]degrees F
Grindability [_ _ _ _]HGI
10. PRICE, BILLING AND PAYMENT
The price per ton stated in the Purchase Order is fixed and is not subject
to adjustment except as provided herein or except as otherwise provided in
the Purchase Order. The price per ton paid by Purchaser for coal delivered
under the Agreement includes all sums to be borne by Seller for all
federal, state, and local taxes of every nature (but not including sales
and use taxes to be paid by Purchaser) which are assessed or may be
assessed as a result of the production, shipment, or sale of coal pursuant
to the Agreement. Seller's acceptance of the amounts paid by Purchaser for
coal delivered under the Agreement shall constitute full and final
settlement of any and all claims by Seller for costs or expenses
(including, without limitation, taxes, fees, governmental impositions,
assessments, premiums, and penalties) incurred or paid by Seller, either
while the Agreement is in effect or at any time in the future, with
respect to the production, shipment, or sale of coal pursuant to the
Agreement. Seller agrees to defend, indemnify, and hold Purchaser harmless
from and against any claim or liability for any such taxes, fees,
governmental impositions, assessments, premiums, or penalties.
Seller shall report to Purchaser all shipments of coal at the delivery
point specified in the Purchase Order. Initially, Purchaser shall pay,
normally within thirty days after shipment, at least [_ _ _ _] of the
price per ton stated in the Purchase Order if Purchaser has received the
coal, the required shipping documentation, and the samples, if required,
of coal collected by Seller. Seller shall not submit invoices for payment.
Purchaser shall pay any balance due, based upon the determination of
quality adjustments, as soon as practical after such determinations are
made for coal shipped during each month. In the event the total amount
payable resulting from these determinations is less than the amount
previously paid by Purchaser, the overpayment shall be deducted from
subsequent payments to Seller; or if no subsequent payments become due,
Seller shall reimburse Purchaser promptly upon receipt of such
overpayment. Purchaser shall have the
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* CONFIDENTIAL MATERIAL HAS BEEN
OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE
COMMISSION. BRACKETS AND UNDERSCORES
DENOTE SUCH OMISSIONS.
right to deduct or set-off against payments due Seller hereunder any sum
of money due to Purchaser from Seller, whether or not such sums are
related to the Agreement.
11. PRICE ADJUSTMENTS FOR QUALITY
A. Calorific Value Adjustment
Bituminous Coal
The Calorific Value Adjusted Price for coal received from Seller and
accepted by Purchaser for each shipment shall be calculated as
follows: The [_ _ _ _] shall be divided by the [_ _ _ _] specified
in the Purchase Order. If the resulting quotient is equal to or
greater than [_ _ _ _], the quotient shall be multiplied by the
[_ _ _ _] per ton stated in the Purchase Order. If the resulting
quotient is less than [_ _ _ _], the quotient shall be multiplied
by the total of the [_ _ _ _] and transportation charge paid by
Purchaser. The resulting product, less the price per ton stated in
the Purchase Order, shall constitute the Calorific Value Adjustment
("CVA").
EXAMPLE: $[----] f.o.b. mine @ [----] Btu/lb. and $[----] for freight
Shipment A = [----] Btu/lb. Shipment B = [----] Btu/lb.
[----] = [----] [----] = [----]
------ ------
[----] [----]
[----] > [----] [----] < [----]
therefore: therefore:
CVA = ($[----] x [----]) - $[----] CVA = ($[----] + $[----]) x [----] - ($[----] + $[----])
= + $[----]/ton = - $[----]/ton
Sub-Bituminous Coal
The Calorific Value Adjusted Price for coal received from Seller and
accepted by Purchaser for each shipment shall be calculated as
follows: The [_ _ _ _] shall be divided by the [_ _ _ _] specified
in the Purchase Order. The resulting quotient shall be multiplied
by the [_ _ _ _] to arrive at Calorific Value Adjusted Price. The
amount to be paid by Purchaser for coal purchased hereunder shall
be the Calorific Value Adjusted Price less any other price
adjustments provided for in the Agreement.
B. Excess Moisture Adjustment
The price per ton paid by Purchaser for coal delivered under the
Agreement shall be adjusted downward in proportion to the moisture
content in excess of the moisture specification stated in the
Purchase Order. This adjustment shall be subtracted from the payment
for coal delivered and unloaded and shall be based upon the "as
received" moisture content for each shipment or portion thereof. The
amount per ton for this Excess Moisture Adjustment shall be
calculated as follows:
Bituminous Coal
The adjustment shall be [_ _ _ _] per ton for each [_ _ _ _] or
portion thereof, by which the "as received" moisture content for
each coal delivery, which exceeds the moisture specification,
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* CONFIDENTIAL MATERIAL HAS BEEN
OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE
COMMISSION. BRACKETS AND UNDERSCORES
DENOTE SUCH OMISSIONS.
stated in the Purchase Order. No credits shall be given if the "as
received" moisture content is less than the moisture specification
stated in the Purchase Order.
EXAMPLE: "As received" moisture content of the shipment is 11.50%
and the moisture specification stated in the Purchase Order is Max.
10%.
Excess moisture adjustment: $[_ _ _ _] x ([_ _ _ _] - [_ _ _ _]) =
$[_ _ _ _] per ton reduction
Sub-Bituminous Coal
The adjustment shall be $[_ _ _ _] per ton for each [_ _ _ _]% or
portion thereof by which the "as received" moisture content for each
coal delivery, which exceeds the moisture specification stated in
the Purchase Order. No credits shall be given if the "as received"
moisture content is less than the moisture specification stated in
the Purchase Order.
EXAMPLE: "As received" moisture content of the shipment is 32.00%
and the moisture specification stated in the Purchase Order is 30%.
Excess moisture adjustment: $[_ _ _ _] x ([_ _ _ _] - [_ _ _ _]) =
$[_ _ _ _] per ton reduction
C. Excess Ash Adjustment
The price per ton paid by Purchaser for coal delivered under the
Agreement shall be adjusted downward in proportion to the ash
content in excess of the ash specification stated in the Purchase
Order. This adjustment shall be subtracted from the payment for coal
delivered and unloaded and shall be based upon the "as received" ash
content for each shipment or portion thereof delivered and unloaded.
The amount of this adjustment shall be calculated as follows: The
adjustment shall be [_ _ _ _] per percent or portion thereof per ton
over the ash specification in the Purchase Order. No credits shall
be given if the "as received" ash content is less than the ash
specification stated in the Purchase Order.
EXAMPLE: "As received" ash content of the shipment is 12.60% and the
ash specification stated in the Purchase Order is Max. 12%.
Excess ash adjustment: $[_ _ _ _] x ([_ _ _ _] - [_ _ _ _]) =
$[_ _ _ _] per ton reduction
D. Excess Sulfur Adjustment
The Purchase Order shall specify a maximum sulfur content for each
shipment. In the event that the monthly average sulfur content for
all shipments in any calendar month exceeds the specified maximum
sulfur content, a downward price adjustment of $[_ _ _ _] per
[_ _ _ _]% or portion thereof, above such specification shall apply.
GUARANTEE MONTHLY
MONTHLY AVERAGE AS
SULFUR RECEIVED
EXAMPLE SPECIFICATION % SULFUR ADJUSTMENT CALCULATION
------- ------------- ---------- ----------------------
A 1.00% 1.20% [_ _ _ _] - [_ _ _ _] x $[_ _ _ _]/[_ _ _ _] = [_ _ _ _] per ton reduction
B 1.20% 1.75% [_ _ _ _] - [_ _ _ _] x $[_ _ _ _]/[_ _ _ _] = [_ _ _ _] per ton reduction
Plants Daniel, Miller and Scherer are New Source Performance
Standards plants that mandate a maximum sulfur content of [_ _ _ _]
pounds sulfur per million Btu's. Purchaser shall reject any shipment
to these plants, which exceeds [_ _ _ _] pounds sulfur/million
Btu's. Seller shall be
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* CONFIDENTIAL MATERIAL HAS BEEN
OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE
COMMISSION. BRACKETS AND UNDERSCORES
DENOTE SUCH OMISSIONS.
liable for all costs incurred as a result of exceeding the [_ _ _ _]
pounds sulfur per million Btu's maximum.
For shipments intended for Plants Daniel, Miller and Scherer,
Purchaser may deduct [_ _ _ _]% from the f.o.b. mine price in
liquidation of administration costs for shipments exceeding
[_ _ _ _] pounds of sulfur per million Btu; provided, however,
Seller shall remain responsible for incidental damages arising out
of Purchaser's acceptance of shipments exceeding [_ _ _ _] pounds of
sulfur per million Btu. Such amount is a reasonable pre-loss
estimate of Purchaser's damages, which are difficult to measure; and
this provision is not intended as a penalty. Such adjustments in the
price of coal shall be made if such shipments are accepted by
Purchaser, provided, however, Purchaser shall be under no obligation
to accept such shipments.
In addition, some plants in the system, including but not limited
to, Plants Arkwright and Mitchell, shall require a minimum sulfur
specification, which shall be stated in the Purchase Order. Analysis
performed on any size sample lot which indicates an "as received"
sulfur content less than the minimum sulfur specification stated in
the Purchase Order shall result in a downward price adjustment of
$[_ _ _ _] per [_ _ _ _]% sulfur, or portion thereof, below such
specification.
E. Ash Fusion Temperature Adjustment
Bituminous Coal
Analysis performed on any size sample which indicates an ash fusion
temperature (H=W) within [_ _ _ _] degrees of the ash fusion
specification stated in the Purchase Order shall not result in any
price adjustment for ash fusion temperature. Analysis of any
shipment or portion of a shipment which falls more than [_ _ _ _]
degrees below the ash fusion temperature specification stated in the
Purchase Order shall result in a downward price adjustment based on
a ratio of [_ _ _ _] per degree below such specification.
EXAMPLE A: Ash fusion temperature is within [_ _ _ _] degree
deadband.
Ash fusion temperature specification: [_ _ _ _] degrees
Ash fusion temperature of shipment: [_ _ _ _] degrees
Ash fusion temperature adjustment: no reduction
EXAMPLE B: Ash fusion temperature is outside [_ _ _ _]-degree
deadband.
Ash fusion temperature specification: [_ _ _ _] degrees
Ash fusion temperature of shipment: [_ _ _ _] degrees
Ash fusion temperature adjustment: [_ _ _ _] - [_ _ _ _] x $ [_ _ _ _]=
$[_ _ _ _] per ton reduction
Sub-Bituminous Coal
Analysis performed on any size sample which indicates an ash fusion
temperature (H=W) within [_ _ _ _] degrees of the ash fusion
temperature specification stated in the Purchase Order shall not
result in any price adjustment for ash fusion temperature. Analysis
of any shipment or portion of a shipment which falls more than
[_ _ _ _] degrees below the ash fusion temperature specification
stated in the Purchase Order shall result in a downward price
adjustment based on a ratio of $[_ _ _ _] per degree below such
specification.
EXAMPLE A: Ash fusion temperature is within [_ _ _ _] degree
deadband.
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* CONFIDENTIAL MATERIAL HAS BEEN
OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE
COMMISSION. BRACKETS AND UNDERSCORES
DENOTE SUCH OMISSIONS.
Ash fusion temperature specification: [_ _ _ _] degrees
Ash fusion temperature of shipment: [_ _ _ _] degrees
Ash fusion temperature adjustment: no reduction
EXAMPLE B: Ash fusion temperature is outside [_ _ _ _] degree
deadband.
Ash fusion temperature specification: [_ _ _ _] degrees
Ash fusion temperature of shipment: [_ _ _ _] degrees
Ash fusion temperature adjustment: [_ _ _ _] - [_ _ _ _] x $[_ _ _ _]=
$[_ _ _ _] per ton reduction
F. Adjustments in General
The adjustments provided in this Section 11 are in addition to
Purchaser's other rights and remedies provided in Section 12, by
other provisions of the Agreement, or by law or equity. Any
adjustment pursuant to this Section 11 with respect to any shipment
of coal under the Agreement shall not waive such other rights and
remedies with respect to that shipment or any future shipment of
coal under the Agreement.
12. REJECTION, SUSPENSION, CANCELLATION
A. Rejection
Purchaser shall have the right to refuse and reject: (1) any
shipment that contains excessive amounts of extraneous material; (2)
any shipment containing coal that was mined or produced from a seam
or source other than the Coal Property without securing Purchaser's
prior written approval; (3) any shipment that does not conform to
the size specifications stated herein; (4) any shipment that is
delivered in equipment other than as specified herein; (5) any
shipment that does not conform to any of the specifications for coal
quality stated in the Purchase Order; or (6) any shipment or portion
thereof that is treated with chemicals, heat, binders, petroleum
products or other substances, whether or not treated with the intent
to qualify the coal under the Internal Revenue Code Section 29
(credit for producing fuel from a non-conventional source).
If a shipment or portion of a shipment is rejected, Purchaser shall
receive a credit from Seller for freight costs and any other costs
borne by Purchaser for such rejected shipment. If, however, for any
reason Purchaser unloads any such coal shipment, Seller shall pay
for all extra costs for the unloading and handling.
B. Suspension
In addition to the rejection rights set forth above, Purchaser shall
have the right to suspend coal shipments immediately by giving
verbal or written notice to Seller in the event that: (1) any
shipment contains excessive amounts of extraneous material; (2) any
shipment contains coal that was mined or produced from a seam or
source other than the Coal Property without securing Purchaser's
prior written approval; (3) any shipment does not conform to the
size specifications stated herein; (4) any shipment or portion
thereof fails to conform to any of the specifications for coal
quality stated in the Purchase Order; or (5) any shipment or portion
thereof is treated with chemicals, heat, binders, petroleum products
or other substances, whether or not treated with the intent to
qualify the coal under the Internal Revenue Code Section 29 (credit
for producing fuel from a non-conventional source). After receipt of
such notice, Seller shall immediately take action to correct the
deficiencies stated. After Seller has determined that coal is in
compliance with the Agreement, Seller shall so notify Purchaser; and
an inspection and/or a test shipment of coal may be scheduled or
other determination of compliance provided, at Purchaser's option.
If compliance is not demonstrated, Purchaser
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<PAGE>
shall have the option to allow further determination of compliance
or to cancel the Agreement and seek remedies as provided herein.
C. Cancellation
In addition to the rejection and suspension rights set forth above,
Purchaser shall have the right to cancel remaining coal to be
delivered under the Agreement by giving written notice to Seller in
the event that: (1) any shipment contains excessive amounts of
extraneous material; (2) any shipment contains coal that was mined
or produced from a seam or source other than the Coal Property
without securing Purchaser's prior written approval; (3) any
shipment does not conform to the specifications for coal quality
stated in the Purchase Order; (4) any coal shipment does not conform
to the size specifications stated herein; (5) Seller engages in any
fraudulent or illegal conduct in connection with its performance
under the Agreement; or (6) any shipment or portion thereof is
treated with chemicals, heat, binders, petroleum products or other
substances, whether or not treated with the intent to qualify the
coal under the Internal Revenue Code Section 29 (credit for
producing fuel from a non-conventional source). In the event
Purchaser cancels the Agreement or suspends deliveries, Seller shall
pay Purchaser any excess freight charges thereby caused under the
applicable tariff or transportation contract as a result of reduced
shipments by Seller to Purchaser during the then current term of the
applicable tariff or transportation contract. Any such payment shall
be made without prejudice to such other rights as may be provided to
either party in other portions of the Agreement and by law or
equity.
In addition to the other provisions of the Agreement, if Purchaser
experiences operational difficulties in the unloading, storage, or
burning of Seller's coal which, in Purchaser's sole judgment,
impedes the efficient utilization of Purchaser's facilities, then
Purchaser shall have the right to cancel remaining coal to be
delivered under the Agreement by giving written notice to Seller. If
cancellation of the Agreement occurs as a result of operational
problems, then Seller will not be held liable for excess freight
charges as referenced above.
13. FORCE MAJEURE
Force majeure as used herein shall mean a cause reasonably beyond the
control of Seller or Purchaser, as the case may be, which wholly or in
substantial part prevents the mining, loading, or delivery of coal at or
from the Coal Property or the transportation to or the unloading, storing,
or burning of coal by Purchaser at the destination plant or other delivery
point. Examples (without limitation) of force majeure, but only if
reasonably beyond the control of Seller or Purchaser, as the case may be,
are the following: acts of God, acts of the public enemy, insurrections,
riots, strikes, labor disputes, work stoppages, fires, explosions, floods,
electric power failures, interruptions to or contingencies of
transportation, coal frozen to railcar, embargoes, and orders or acts of
any government (including, without limitation, a city or county ordinance,
an administrative regulation or ruling, an act of a state legislature, an
act of the United States Congress, and a final judicial decision, order,
or decree based upon orders or acts of governmental authorities) or
military; provided, however, that force majeure, for the purposes of the
Agreement, shall not include the development or existence of economic
conditions which may adversely affect the anticipated profitability of the
mining activities of Seller hereunder, acts of omissions of Seller
constituting negligence or mismanagement on the part of Seller, geologic
conditions affecting mining, or reduced productivity of labor.
If because of force majeure either Purchaser or Seller is unable to carry
out its obligations under the Agreement, and if such party promptly gives
the other party written notice of the conditions giving rise to such force
majeure, the obligations and liabilities of the party giving such notice
and the corresponding obligations of the other party shall be suspended to
the extent made
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<PAGE>
necessary by and during the continuance of such force majeure; provided,
however, that the party suffering the disabling effects of such force
majeure shall make reasonable efforts to eliminate, as soon as and to the
extent possible, the events giving rise to such force majeure, except that
either party may settle any of its own labor disputes or strikes or
terminate any of its own lockouts in its sole discretion. Purchaser, in
its sole discretion, shall determine whether shipments not made because of
force majeure or suspended because of force majeure shall be canceled
without liability to either party or shall be made up; but the Agreement
shall otherwise remain in full force and effect; provided, however, that
if a condition of force majeure occurs which causes a suspension of
obligations under the Agreement for a continuous period equal to 30% or
more of the term of the Agreement, Purchaser may terminate the Agreement
by giving written notice of termination to Seller.
14. INDEPENDENT CONTRACTOR
It is understood and agreed that Seller is an independent contractor and
not an agent or employee of Purchaser. It is further agreed that Seller
shall employ, direct, control, manage, supervise, discharge, and pay its
own employees and that Purchaser shall have no control of or supervision
over any such employees.
15. INDEMNIFICATION
Seller agrees to defend, indemnify, and hold harmless Purchaser, The
Southern Company, any subsidiary of The Southern Company, and any of their
agents, employees and representatives from and against any and all
liability or alleged liability to which any of them may be subject due to
the destruction or damage to any property or due to the injury to or death
of any person, which destruction, damage, injury, or death arises out of
or is related to the performance of the Agreement by Seller, Producer, any
subcontractor of Seller or Producer, or any of their agents, employees, or
representatives.
16. APPLICABLE LAW, CHOICE OF FORUM, AND WAIVER
All questions relating to the execution, construction, performance,
non-performance, or breach of the Agreement shall be resolved under the
substantive laws of the State in which the destination power plant is
located. Any action, suit, or legal proceeding of any nature by one party
hereto against the other party shall be brought in the state or federal
courts located in such State; and the parties hereto shall submit to, and
accept the exclusive jurisdiction of, such courts for the purpose of any
such action, suit, or legal proceeding. The remedies provided under the
Agreement shall be cumulative and in addition to other remedies provided
by law or equity. Failure of Purchaser or Seller to insist upon strict
performance of any provision of the Agreement, or to take advantage of any
right under the Agreement, shall not be construed as a waiver of such
provision or right.
17. BREACH BY SELLER
At the time of Purchaser's final payment under the Agreement or in the
event of breach by Seller of any of the terms and conditions of the
Agreement, Purchaser, in addition to any other remedies provided by law or
equity, has the right immediately to cancel the Agreement, to suspend
Purchaser's performance, and to offset any and all sums owed by Seller to
Purchaser or any liquidated or unliquidated damages occasioned by the
breach and cancellation against any sums owed to Seller by Purchaser.
In the event Seller does not deliver the amount of coal required under the
Agreement, at Purchaser's option, Seller shall be liable to Purchaser for
the difference in Seller's delivered cost and the delivered cost of
replacement tons (including, without limitation, the cost of freight and
sulfur emission allowances). Purchaser, in its sole judgment, shall
determine the delivered replacement cost and apply this cost differential
to the number of tons Seller fails to deliver under
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* CONFIDENTIAL MATERIAL HAS BEEN
OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE
COMMISSION. BRACKETS AND UNDERSCORES
DENOTE SUCH OMISSIONS.
the Agreement. Purchaser shall have the right to offset any and all sums
owed to Purchaser as a result of tonnage shortfall against any sums owed
to Seller by Purchaser.
Unless Purchaser gives prior approval by a written Change Order, shipments
from an origin point other than that specified in the Purchase Order shall
constitute a breach of the Agreement, for which Purchaser may deduct from
the f.o.b. mine price for each ton of coal in such shipments the
following:
a. Any excess freight charges over those that Purchaser would have paid
if Seller had shipped from the origin point specified in the
Purchase Order; and
b. Any excess freight and handling charges over those that Purchaser
would have paid if Seller had shipped to designated plant(s) stated
in the Purchase Order; and
c. [_ _ _ _] percent [_ _ _ _]% of the f.o.b. mine price in liquidation
of administration and other incidental damages due to such
shipments.
If Seller makes shipments that are materially in excess of the tonnage
stated in the Purchase Order without Purchaser's prior approval, Purchaser
may deduct from the f.o.b. mine price, for each ton of coal in excess of
the tonnage stated in the Purchase Order, [_ _ _ _] percent [_ _ _ _]% of
the f.o.b. mine price in liquidation of administration and other
incidental damages due to such shipments.
The amounts to be paid by Seller or to be deducted from payments are
reasonable pre-loss estimates of Purchaser's damages, which are difficult
to measure; and these provisions are not intended as penalties.
18. SPECIAL TERMS AND CONDITIONS
Any special terms and conditions stated in the Purchase Order shall take
precedence when in conflict with other provisions included herein.
19. COMPLIANCE WITH LAWS
A. Purchaser is a government contractor under an Area-Wide Utilities
Service Contract with the General Services Administration of the United
States Government. Seller agrees that each of the clauses contained in the
Federal Acquisition Regulation referred to below shall, as if set forth
herein in full text, be incorporated into and form a part of this Contract
and Seller shall comply therewith, if the amount of the Contract and the
circumstances surrounding its performance require Purchaser to include
such clause in contracts between Purchaser and others: (1) 52.203-6
Restrictions on Subcontractor Sales to the Government; (2) 52.203-7
Anti-Kickback Procedures; (3) 52.219-8 Utilization of Small, Small
Disadvantaged and Women-Owned Small Business Concerns; (4) 52.219-9 Small,
Small Disadvantaged and Women-Owned Small Business Subcontracting; (5)
52.222-26 Equal Opportunity; (6) 52.223-2 Clean Air and Water; and (7)
52-223-14 Toxic Chemical Release Reporting. Upon request, Purchaser will
provide the full text of any of the above clauses incorporated herein by
reference.
B. Seller hereby warrants that Seller is not debarred, suspended or
proposed for debarment as a contractor or subcontractor to any department,
agency or other division of the U. S. Government.
20. ASSIGNMENT
The obligations to be performed by Seller under the Agreement may not be
assigned without prior written consent of Purchaser, which consent shall
not be unreasonably withheld. Failure to obtain Purchaser's written
consent prior to assignment shall result in immediate cancellation of
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the Agreement. Assignment of payments only are permitted; provided,
however, that Seller shall give Purchaser written notice of such
assignment and provided further that an additional 45-day delay in
payment, from the next normally scheduled payment date, shall be required
for verification and subsequent processing.
21. AGENCY
Purchaser hereby designates Southern Company Services, Inc. as Purchaser's
agent for receiving copies of notices required or permitted by the
Agreement and for administration of the Agreement.
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FACSIMILE NUMBERS FOR
SHIPPING NOTICES AND "AS LOADED" COAL QUALITY ANALYSIS
PLANT SCS OPERATING COMPANY
Attention: Plant Manager Attention: Production Support Attention: Fuel Services
--------------------------------------- ----------------------------- ------------------------
ALABAMA POWER
Barry (334) 829-2029
Gaston (205) 669-8084
Gadsden (205) 257-1645
Gorgas (205) 257-1165 (205) 257-7288 not applicable
Greene County (334) 289-6105
Miller (205) 257-3238
GEORGIA POWER
Arkwright (912) 757-7200
Bowen (770) 387-9800
Branch (706) 485-2391
Hammond (706) 290-6255 Fuel Services
McDonough (404) 792-5354 (205) 257-7288 (404) 506-6948
Mitchell (912) 438-3129
Scherer (912) 784-5079
Wansley (770) 854-8570
Yates (770) 252-0568
GULF POWER
Crist (904) 420-2349 Fuel & Environmental
Scholz (904) 444-6826 (205) 257-0410 (904) 444-6217
Smith (904) 420-2470
MISSISSIPPI POWER
Daniel, X5301 (228) 474-3029 (205) 257-7288 Manager, Fuels.
Watson, X5231 (228) 897-6302 (205) 257-0410 (228) 865-5286
(205) 257-7288
SAVANNAH ELECTRIC & POWER
Kraft (912) 966-3657 (205) 257-7288 Fuel Services
McIntosh (912) 754-2793 (404) 506-6948
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RAILCAR WEIGHT MATRIX
Weight limitations on railcars must meet two criteria; design limitations and
track standards. Railcars should be loaded to full visible capacity, if
possible, but must not exceed the lesser of the two criteria below:
1. - All private aluminum railcars are designed to withstand a maximum of
286,000 pounds gross weight on rail (GWR).
- All private steel railcars are designed to withstand a maximum of
272,000 pounds GWR.
- Railroad owned railcars must be loaded in accordance with stenciled
weights on railcars unless otherwise specified by Rail Carrier.
2. In addition to the general constraints of Item 1, all railcars shall be
loaded to full visible capacity but within each rail carrier's load limits
for maximum GWR. The maximum GWR for the originating rail carrier for each
of the generating plants in the Southern electric system is specified
below.
ALABAMA POWER COMPANY
Burlington Northern Norfolk Southern
Generating Plant Santa Fe (BNSF) CSXT (NS)
---------------- --------------- ---- ----
Gaston N/A 286,000 286,000
Miller 286,000 286,000 N/A
GEORGIA POWER COMPANY
Norfolk Southern Union Pacific Illinois Central
Generating Plant CSXT (NS) (UP) (IC)
---------------- ---- ---- ---- ----
Arkwright N/A 286,000 N/A N/A
Bowen 286,000 N/A N/A N/A
Branch 286,000 286,000 N/A N/A
Hammond N/A 286,000 N/A N/A
McDonough 286,000 286,000 N/A N/A
Mitchell 286,000 N/A N/A N/A
Scherer N/A 286,000 286,000 N/A
Wansley 286,000 286,000 N/A 286,000
Yates N/A 286,000 N/A N/A
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GULF POWER COMPANY
Generating Plant CSXT
---------------- ----
Scholz 286,000
MISSISSIPPI POWER COMPANY
Canadian National
Burlington Northern Illinois Central Union Pacific
Generating Plant Santa Fe (BNSF) CSXT (IC) (UP)
---------------- --------------- ---- ---- ----
Daniel 286,000 286,000 286,000 286,000
SAVANNAH ELECTRIC AND POWER COMPANY
Norfolk Southern
Generating Plant CSXT (NS)
---------------- ---- ----
Kraft N/A 286,000
McIntosh 286,000 286,000
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