Most Popular

Business Contracts
Forms
Immigration
Mock Trial

General Business Contracts

Buy Sell Agreement Database

International Coal - Georgia Buy Sell Agreement 04-10-2003

[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.

 

<PAGE>

 

(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

 

<PAGE>

* 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

 

B-2

<PAGE>

 

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.

 

B-3

<PAGE>

 

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

 

C-1

<PAGE>

* 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.

 

C-1

<PAGE>

 

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.

 

C-2

<PAGE>

 

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

 

C-3

<PAGE>

 

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.

 

C-4

<PAGE>

 

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

 

C-5

<PAGE>

 

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.

 

C-6

<PAGE>

 

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.

 

C-7

<PAGE>

 

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.

 

C-8

<PAGE>

* 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

 

C-9

<PAGE>

* 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,

 

C-10

<PAGE>

* 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

 

 

C-11

<PAGE>

* 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.

 

C-12

<PAGE>

* 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

 

C-13

<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

 

C-14

<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

 

C-15

<PAGE>

* 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

 

C-16

<PAGE>

 

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.

 

C-17

<PAGE>

 

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

 

 

C-18

<PAGE>

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

 

 

C-19

<PAGE>

 

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

 

 

C-20