<PAGE> 1
FORM 8-K
Securities and Exchange Commission
Washington, D.C. 20549
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
July 22, 1996
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(Date of Report, date of earliest event reported.)
Zeigler Coal Holding Company
----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S><C>
Delaware 1-13298 36-3344449
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(State or other jurisdiction of incorporation) (Commission File Number) (I.R.S. Employer Identification No.)
</TABLE>
50 Jerome Lane, Fairview Heights, Illinois 62208
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(Address of principal executive offices) (Zip Code)
(618) 394-2400
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name or address, if changed since last report)
<PAGE> 2
ITEM 5. OTHER EVENTS.
On July 22, 1996 the registrant issued the press release filed as
Exhibit 99.1 to this Form 8-K.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits
Exhibit 10.1 - Amended and Restated Agreement for Sale and
Purchase of Coal dated as of July 1, 1996, by
and between Carolina Power & Light Company, as
buyer, and Mountaineer Coal Development
Company, d/b/a Marrowbone Development Company,
and Bluegrass Coal Development Company, as
sellers.*
Exhibit 99.1 - Press Release Dated July 22, 1996.
_____________________________________
* Contains material for which confidential treatment has been requested
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934,
as amended. This material has been filed separately with the
Securities and Exchange Commission pursuant to the application for
confidential treatment.
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Zeigler Coal Holding Company
---------------------------------
(Registrant)
/s/ Brent L. Motchan
---------------------------------
Brent L. Motchan, Vice President
Dated: August 6, 1996 and General Counsel
(Duly Authorized Officer)
<PAGE> 1
CONFIDENTIAL TREATMENT REQUESTED* EXHIBIT 10.1
AMENDED AND RESTATED
AGREEMENT FOR SALE AND PURCHASE OF COAL
This Amended and Restated Agreement dated as of the first day of July,
1996 ("Agreement") sets forth an agreement for the sale and purchase of coal
as of the first day of October, 1976, as combined and restated in a Coal Supply
Agreement dated January 1, 1985, as amended by a First Amendment dated as of
the first day of January, 1987, as amended by an Assignment Agreement dated as
of the first day of May, 1988, further amended by an Assignment Agreement dated
as of December 22, 1988, further amended by a Second Amendment dated as of the
first day of January, 1989, further amended by a Third Amendment dated as of
the first day of January, 1991, by and between Carolina Power & Light Company
("Buyer") and Mountaineer Coal Development Company, d/b/a Marrowbone
Development Company and Bluegrass Coal Development Company ("Sellers").
WHEREAS, the parties wish to further amend the Agreement, and to
settle certain disputes between the parties;
WHEREAS, Buyer and Sellers are of the opinion that it would be
mutually beneficial to combine the original Agreement and all amendments into
one document for clarity and ease of administration; and
WHEREAS, Sellers agree to sell and Buyer agrees to purchase coal upon
terms and conditions as follows:
NOW, THEREFORE, in consideration of the mutual benefits to be derived,
as of July 1, 1996, Buyer and Sellers do hereby amend and combine the original
Agreement and all amendments into this document.
1.0 Description. The description of the coal to be sold and
delivered under this Agreement for use at Buyer's Roxboro 4
and/or Mayo 1 Units is made part of the basis of the bargain of
the Agreement. Conformity to the description also requires that
the coal be substantially free from impurities. The said coal
shall not be larger than 2 inches in diameter, but may be of
smaller size provided such smaller size does not cause Buyer
unusual difficulties in handling and utilization. The said coal
shall conform to the following quality characteristics:
________________________
* This Exhibit contains material for which confidential treatment has
been requested pursuant to Rule 24b-2 under the Securities Exchange
Act of 1934, as amended. This material has been filed separately
with the Securities and Exchange Commission pursuant to the
application for confidential treatment.
** Represents information for which confidential treatment has been
requested.
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<TABLE>
<CAPTION>
MONTHLY
PURCHASE ORDER
WEIGHTED TRAINLOAD
AVERAGE SHIPMENT
------- --------
<S> <C> <C>
Moisture Content, % 8.5 max. 9.0 max.
Ash Content, % 13.2 max. 14.0 max.
Calorific Content, Btu/lb. 12,000 avg. (5)
Sulfur Content, lbs. SO /mmBtu(1) 1.2 max. 1.2 max.
2
Volatile Matter %(2)(3) (6) 25.0 min.
Grindability (HGI) 39 min. 38 min.
Ash Fusion Temp.(H=W, Reducing) degrees F(2)(4) (6) 2400 min.
</TABLE>
(1) Pounds of SO /mmBtu are predicated on the conversion of 100
2
percent of available sulfur to sulfur dioxide.
(2) The specifications for Volatile Matter and Ash Fusion
Temperature apply to deliveries from sources other
than Marrowbone mines producing in the Coalburg,
Clarion, and/or 5-Block seams.
(3) The minimum trainload specification for Volatile Matter shall
be increased to 30.0% effective January 1, 2000.
(4) No coal shall be shipped from a seam or source with an Ash
Fusion Temperature below 2400 degreees F (H=W, Reducing).
(5) No trainload maximum or minimum identified for this
characteristic.
(6) No monthly purchase order weighted average identified for
Volatile Matter or Ash Fusion Temperature.
2.0 Quantity and Delivery.
(a) Except as provided in Paragraph 8.0, Force Majeure, deliveries
of coal under this Agreement commencing on July 1, 1996 and
thereafter shall be as follows:
YEAR TOTAL TONNAGE
---- -------------
July thru December, 1996 1,375,000 tons
1997 and thereafter through 2006 2,750,000 tons per year
TOTAL 28,875,000 tons
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Buyer and Sellers understand and agree that the tonnages set
forth above are annual commitments and that Buyer and Sellers
shall schedule, ship and accept shipments each calendar month as
necessary to insure that such annual contract commitments are
satisfied each calendar year, subject to the provisions of
Paragraph 8.0, Force Majeure. Monthly shipping schedules will,
where possible, be adjusted to reflect Sellers' planned vacation
period and Buyer's planned maintenance outages.
(1) On or prior to December 1 of each calendar year
during the term hereof, Sellers shall provide Buyer with a
tentative schedule of monthly coal shipments during the
ensuing calendar year. Buyer shall promptly review this
schedule and notify Sellers of any modifications within ten
(10) business days of receipt. Buyer and Sellers shall then
agree on the tentative monthly shipping schedule for the
ensuing calendar year on or prior to December 20.
(2) Buyer shall specify to Sellers on or prior to the
twenty-fifth day of each calendar month during the term
hereof the dates and destinations for shipments to be made
hereunder in the next succeeding calendar month; provided,
however, that Buyer reserves the right to change the
destination of such shipments at any time.
(b) The term "ton" as used herein shall mean a net ton of two
thousand pounds, avoirdupois weight.
(c) Sellers will load coal sold hereunder pursuant to trainload or
other applicable tariffs (and supplements) established by the
railroad that will haul the coal, and such other tariffs as may
evolve that are mutually acceptable to Buyer, Sellers, and the
railroad. Loading of trains at the rate of at least 10,000 tons
in a 4-hour period will be performed by Sellers, exclusive of
holidays, in accordance with the provisions of applicable
freight tariffs.
(d) Buyer and Sellers shall mutually arrange for the necessary rail
cars to make the specified deliveries and Sellers shall cause
the coal to be loaded in a manner that will assure reasonably
uniform consistency as to size and quality. Sellers shall cause
each rail car to be loaded to full visible capacity, and shall
reimburse Buyer for any penalty and freight charges resulting
from deficits in carload minimum weight. Sellers shall pay any
costs of demurrage or storage at the shipping points not caused by
Buyer.
(e) The coal shipped hereunder shall be supplied from the loadout
facilities of Marrowbone or, at Sellers' sole discretion, any
other source, provided that:
(1) With respect to shipments from Marrowbone, Sellers shall
have the right, at their sole discretion, to purchase
and/or process coals produced by other coal producers
(whether affiliated with Sellers or
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not) and to ship such coal to Buyer, provided
that the coal shipped to Buyer satisfies the
quality characteristics specified in Paragraph
1.0, Description.
(2) The f.o.b. mine prices set forth in Paragraph
5.0, Price are based on shipment from the
Marrowbone loadout facility at Naugatuck, West
Virginia. In the event Sellers elect to ship
coal from any origin other than the Marrowbone
loadout at Naugatuck, West Virginia, the f.o.b.
mine price for such shipments shall be adjusted
to result in the same delivered cost to Buyer,
calculated in cents per million Btu, as the cost
which would have resulted if such shipments had
originated from Marrowbone.
(3) With the exception of purchases of replacement
coal for non-shipment arising out of force
majeure events (as provided in Paragraph 8.0,
Force Majeure), if Sellers elect to supply coal
to Buyer from sources other than Marrowbone,
such coal shall be purchased by Sellers under a
contract with a coal producer with a term of at
least sixty (60) days. Sellers shall notify
Buyer before shipping any coal to Buyer from a
source or seam other than those from which coal
has been shipped to Buyer in the past hereunder.
2.1 Weights.
(a) In the event that coal is delivered from the Marrowbone
loadout at Naugatuck, West Virginia, Sellers
will determine the weight of coal delivered under this
Agreement by means of electronic belt scales located at
the mine site, provided and operated by Sellers and
approved by the railroad. The loaded weight will be
determined for each train for each loading and such
weight shall be the basis for payment by Buyer.
Sellers shall test and calibrate such scales at thirty
(30) day intervals to maintain them at a trainload
accuracy within plus or minus 0.5 percent through the
use of calibration techniques acceptable to Sellers,
Buyer, and the railroad. Testing, calibration, and
certification of the scales will be under the
jurisdiction of the railroad and the applicable state
agency. Sellers shall promptly provide Buyer with a
copy of the results of all scale testing, calibrations,
and certifications.
(b) Sellers shall give immediate notice by telephone or
facsimile, and confirm such notice in writing to both
Buyer and the railroad, if and when Sellers discover
that the weighing facilities have become inoperable or
are discovered to be in error beyond the limits
mentioned above. During any period when such weighing
facilities are inoperable or in error, determination of
the quantities of coal delivered shall be made by a
procedure to be established by Buyer, Sellers, and the
railroad.
(c) Buyer shall have the right to have a representative
present at any and all times to observe the
determination of weights. If Buyer should at any
time question
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CONFIDENTIAL TREATMENT REQUESTED
the accuracy of the weights thus determined, Buyer shall so
advise Sellers, and confirm such advice in writing, and Sellers
shall arrange to test the weighing devices or methods. If
such tests show the weighing devices to be in error, they shall
be adjusted to the required accuracy as mutually agreed upon by
Buyer and Sellers, in accordance with generally accepted
calibration techniques used in the coal and railroad
industries.
(d) If the weighing devices are determined to be in error
beyond the limits as set forth in Paragraph 2.1 (a),
an appropriate adjustment shall be made in weights
and related payments; provided, however, that no such
adjustment shall be retroactive for a period in
excess of thirty (30) days prior to the date that
Buyer first questioned Sellers about the accuracy of
the weighing devices or methods, or thirty (30) days
prior to the discovery of the inaccuracy of the
weighing devices if the inaccuracy is discovered upon
a regularly scheduled testing.
(e) In the event Sellers elect to supply coal to Buyer
from sources other than Marrowbone, the weight of
coal in each shipment shall be determined in
accordance with Buyer's transportation contract with
the railroad, any amendments thereto, or any new
agreements between Buyer and the railroad for the
transportation of coal hereunder. Sellers shall have
the right, but not the obligation, to weigh such coal
at Seller's loading facilities as long as such
weights are determined by scales and in accordance
with policies and procedures approved by the
railroad. Sellers shall reimburse Buyer for any and
all costs associated with the weighing of such coal
charged by the railroad to Buyer. Weights so
determined shall be accepted by the parties for
purposes of payment hereunder.
3.0 Term of Agreement. The term of this Agreement shall be for
the period beginning October 1, 1976 and ending December 31,
2006.
4.0 Payment. Buyer shall make payments in accordance with the
following schedule:
(a) For coal received at Buyer's plants from the first
day of the month through the fifteenth day of the
month, payment will be made on or before the tenth day
of the following month.
(b) For coal received at Buyer's plants from the
sixteenth day of the month through the last day of
the month, payment will be made on or before the
twenty-fifth day of the following month.
(c) [**]
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CONFIDENTIAL TREATMENT REQUESTED
All payments shall be made by wire or electronic transfer of
immediately available funds on the dates indicated, and shall
be paid to Sellers at:
Mountaineer Coal Development Company
d/b/a Marrowbone Development Company
c/o Bank of America
231 S. LaSalle Street
Chicago, IL 60697
Account #78-20151
ABA #071000039
5.0 Price.
5.1 The price per ton f.o.b. mine for all tons shipped
on or after July 1, 1996 shall be as follows:
<TABLE>
<CAPTION>
CALENDAR YEAR ANNUAL PRICE
------------- ------------
<S> <C>
1996 (effective 7/1) [**]
1997 [**]
1998 [**]
1999 [**]
2000 [**]
2001 [**]
2002 [**]
2003 [**]
2004 [**]
2005 [**]
2006 [**]
</TABLE>
5.2 Buyer and Sellers recognize that the prices set forth
in Paragraph 5.1 may require adjustment, either
increase or decrease, because of the imposition of
federal or state legislation or regulation after July
1, 1996, or any changes in the interpretation and
enforcement of existing federal or state requirements
after July 1, 1996, that impose or change a tax,
assessment or other governmental charge based on the
volume of tons produced or the price of coal sold by
Sellers under this Agreement. In the event of such an
imposition, either party may submit to the other party
detailed documentation of the proposed price
adjustment, and Sellers and Buyer shall meet to
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CONFIDENTIAL TREATMENT REQUESTED
discuss and attempt to agree upon an adjustment to reflect the
actual change in Sellers' costs.
In the event that Sellers elect to supply coal from sources other
than Marrowbone, the provisions of this Paragraph 5.2 shall only
apply to the price of coal from such sources if (i) Sellers
purchase such coal for resale to Buyer under a contract with a
term of at least one (1) year, and (ii) the contract between
Sellers and the supplier of such coal provides for the payment by
Sellers to the supplier of the types of costs described in this
Paragraph 5.2, including any such costs in effect at the time
Sellers execute a contract for the purchase of coal from such
sources.
In the event that Sellers elect to blend coal subject to price
adjustments pursuant to this Paragraph 5.2 with other coals, only
the price for the percentage of such coal supplied to
Sellers that is subject to this Paragraph 5.2 shall be adjusted.
In the event Sellers and Buyer are unable to agree as to the
amount the price per ton should be increased or decreased, then
the matter shall be submitted to an independent third party
experienced in the matters in question that is acceptable to both
Sellers and Buyer. The cost of such third party shall be borne
equally by Buyer and Sellers. The price increase or decrease per
ton, as determined by the independent third party, shall be
binding on both Sellers and Buyer; provided, however, that any
increase shall not exceed the amount previously proposed by
Sellers, and any decrease shall not exceed the amount previously
proposed by Buyer. In the event a third party cannot be agreed
upon, the provisions of Paragraph 18.0, Third Party Selection
shall apply.
5.3 On the day of execution of this Agreement, Buyer shall [**] to
Sellers.
[**]
6.0 Remedies for Quality Deviations. The following are
Buyer's sole and exclusive remedies for coal quality deviations
from the quality characteristics specified in Paragraph 1.0,
Description:
(a) A price adjustment shall be applied to Sellers'
account when there is a difference between the as-received
Btu per pound and 12,000 Btu per pound.
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CONFIDENTIAL TREATMENT REQUESTED
If and when the results of analysis reflect that the average
Btu content of coal delivered hereunder, calculated on a per
purchase order basis, is less than 11,900 or more than 12,100
Btu per pound, a price adjustment will be made based upon the
delivered cost of coal to Buyer, including the actual freight
rate per ton, [**]
EXAMPLE
For coal delivered with a weighted average quality of 12,200
Btu per pound on a purchase order basis at a price per ton of
[**] and a freight rate of [**] per ton, an increase in the
price per ton would be calculated as follows:
<TABLE>
<S> <C>
Price [**]
Freight Rate [**]
----
Delivered Cost/Ton [**]
200 Btu/lb. Variance X [**] = [**]/ton increase in the price per ton
--------------------------
12,000 Btu/lb. Guarantee
</TABLE>
For coal delivered with a weighted average quality of 11,800
Btu per pound on a purchase order basis at a price per ton of
[**] and a freight rate of [**] per ton, a decrease in the
price per ton would be calculated as follows:
<TABLE>
<S> <C>
Sales price [**]
Freight Rate [**]
----
Delivered Cost/Ton [**]
200 Btu/lb. Variance X [**] = [**]/ton decrease in the price per ton
12,000 Btu/lb. Guarantee
</TABLE>
(b) Moisture Content
(1) If the weighted average moisture content calculated on a
per purchase order basis exceeds 8.5%, a price adjustment
of [**] per ton per percentage point (fractions pro rata)
will be credited to Buyer for all tons shipped under that
purchase order.
(2) If the moisture content of any trainload shipment of coal
exceeds 9.0%, a price adjustment of [**] per ton will be
credited to Buyer for all tons in such trainload shipment.
(c) Ash Content
(1) If the weighted average ash content calculated on a per
purchase order basis exceeds 13.2%, a price adjustment
of [**] per ton per percentage point (fractions pro rata)
will be credited to Buyer for all tons shipped under that
purchase order.
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CONFIDENTIAL TREATMENT REQUESTED
(2) If the ash content of any trainload shipment of
coal exceeds 14%, a price adjustment of [**] per ton will
be credited to Buyer for all tons in such trainload
shipment.
(d) Grindability (HGI)
(1) If the weighted average grindability calculated on a per
purchase order basis is less than 39, a price adjustment
of [**] per ton per grind point (fractions pro rata) will
be credited to Buyer for all tons shipped under that
purchase order.
(2) If the grindability of any trainload shipment of coal is
less than 38, a price adjustment of [**] per ton will be
credited to Buyer for all tons in such trainload shipment.
(e) Sellers agree to promptly supply Buyer with an analysis,
performed in accordance with ASTM standards, of the
sulfur content of each shipment of coal supplied under
this Agreement. In the event that the sulfur content of
any single trainload shipment exceeds 1.2 lbs. SO
2
/mmBtu, Buyer shall have the right to reject such
trainload shipment, and title and risk of loss shall
revert back to Sellers upon rejection. In the event that
a trainload shipment of coal is rejected by Buyer,
Sellers shall reimburse Buyer for its actual costs
incurred including transportation from the mine to
destination. Buyer shall not unload any trainload
shipment delivered hereunder until it has received
Sellers' analysis reflecting a sulfur content of 1.2
pounds SO /mmBtu or less. Sellers agree to reimburse
2
Buyer for any demurrage incurred as a result of holding
any trainload shipment while awaiting receipt of such
analysis.
(f) In the event that Sellers are supplying coal hereunder
from a source other than Marrowbone mines producing coal
in the Coalburg, Clarion and/or 5-Block seams and the
analysis of any trainload shipment containing any coal
from such source indicates an Ash Fusion Temperature (H=W,
Reducing) less than 2400 degreees F or a Volatile Matter
content of less than 25.0% (30% effective January 1,
2000), ] Buyer may suspend further shipments from such
source until Sellers give Buyer reasonable assurances that
further shipments from such source will satisfy the
requirements of Paragraph 1.0, Description. For the
purpose of this Paragraph 6.0(f), a source shall be
defined as an individual mine or a readily identifiable
seam for which quality is ascertainable, and from which
coal is produced for delivery hereunder. Any trainload
shipments containing any coal from such source that have
an Ash Fusion Temperature (H=W, Reducing) less than 2400
degrees F or a Volatile Matter content of less than 25.0%
(30% effective January 1, 2000) that have not yet been
unloaded may be rejected by Buyer, and upon rejection,
Sellers shall reimburse Buyer for its actual costs
incurred including transportation from the mine to
destination, and title and risk of loss shall revert to
Sellers.
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CONFIDENTIAL TREATMENT REQUESTED
In the event that shipments hereunder originate at any
Marrowbone mine producing coal in the Coalburg, Clarion,
and/or 5-Block seams, Buyer shall not have the right to
suspend or reject shipments based on the Ash Fusion
Temperature or Volatile Matter content of such shipments.
6.1 Other Quality Parameters. In the event Buyer is unable, after
exerting reasonable efforts, to burn coal shipped hereunder from
reserves other than the Coalburg, Clarion and/or 5-Block seam
reserves controlled by Marrowbone as of July 1, 1996 because such
coal causes significant operating problems that are directly
attributable to a quality parameter other than those set forth in
Paragraph 1.0, Description, Buyer shall consult with Sellers, and
allow Sellers' combustion consultants reasonable access to Buyer's
records, facilities, and personnel, in an effort to alleviate such
problems. In the event the parties' efforts do not alleviate such
operating problems within forty-five (45) days from Buyer's
notification to Sellers of the problem, Sellers shall, at their
sole discretion, elect either (i) to change to a source that
Sellers, after reasonable consultation with Buyer, determine will
alleviate such operating problems, in which case shipments will
commence as soon as practicable from such changed source and any
shipments missed as a result of Buyer's operating problems or the
change in source shall be made up as soon as practicable, or (ii)
to cease shipments hereunder for the remaining term of the
contract or commitment for the source that Sellers and Buyer
believe is causing such operating problems. Buyer's operating
problems, and Sellers' election of either of the foregoing
options, shall not excuse or otherwise affect Buyer's obligation
[**]
Upon request by Sellers, Buyer shall evaluate any source or seam
of coal to be supplied under this Agreement, and if such source or
seam is approved by Buyer, in writing, in advance of the
commencement of shipments from such source or seam, the provisions
of this Paragraph 6.1 shall not apply. Such approval shall not
be unreasonably withheld, and Buyer shall not withhold such
approval if it has previously purchased coal from the source or
seam in question and burned such coal without encountering
significant operating problems. Sellers shall provide Buyer with
quality information regarding the seam or source. In the event
Buyer has not burned coal from the source or seam in question,
Buyer may test burn such coal. If Sellers request a test, Buyer
shall test burn such coal unless the quality information provided
to Buyer indicates that there is a quality characteristic inherent
in the coal, other than those specified in Paragraph 1.0,
Description, which prevents the burning of such coal at Roxboro 4
and/or Mayo 1 Units. The coal supplied for such test will be
supplied at a mutually agreed-upon price, consistent with the spot
market price for compliance coal at the time of the shipment. The
quantity of coal supplied for the test burn shall not exceed
50,000 tons, and such quantity will be in addition to the tonnage
commitment pursuant to Paragraph 2.0, Quantity and Delivery. Buyer
shall inform Sellers of its decision to approve or disapprove such
source or seam within ten (10) days of receipt of all necessary
information and/or completion of any test burn of the coal.
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7.0 Sampling and Analysis. Sellers or their designee shall sample and
analyze each trainload shipment of coal to be delivered to Buyer
to determine the quality parameters specified in Paragraph
1.0, Description. Such sampling and analysis shall be performed
in accordance with ASTM standards or by other mutually acceptable
methods. Sampling of the coal will be performed as the coal is
loaded into railcars. Sellers or their designee shall provide
trainload analyses to Buyer as soon as practicable after eachtrain
is loaded.
7.1 Buyer or its representative shall have the right to inspect the
sampling system(s) and laboratory used to sample and analyze the
coal supplied hereunder at any and all times that coal is loaded
or analyzed for delivery to Buyer. Should it be determined
that the sampling system(s) or laboratory are not in compliance
with ASTM standards for sampling and analyzing coal, Sellers agree
to take the necessary steps to ensure that future shipments of
coal to Buyer are sampled and analyzed in accordance with ASTM
standards. Prior to or within ten (10) days of the first shipment
of coal that is sampled or analyzed by a sampling system or
laboratory that has not previously sampled or analyzed deliveries
under this Agreement, Sellers shall provide Buyer with independent
confirmation that the sampling system and/or the laboratory are in
accordance with ASTM standards.
7.2 Should it be determined that sampling or analysis of a trainload
shipment was not performed by Sellers or their designee in
accordance with ASTM standards, the parties agree that (i) Buyer's
sampling and analysis shall govern for that shipment or (ii)
if neither party performed the sampling and analysis of that
shipment in accordance with ASTM standards, the shipment shall be
deemed not to have been sampled and analyzed for the purposes of
this Agreement. The sampling and analysis of a shipment that was
performed in accordance with ASTM standards and that was used in
calculating adjustments to monthly billings in accordance with
Paragraph 6.0, Remedies for Quality Deviations herein shall govern
for all other purposes under this Agreement.
7.3 As soon as practicable after the end of each month, the weighted
average quality of the coal delivered hereunder for the quality
parameters specified in Paragraph 1.0, Description hereof during
that month shall be determined on a purchase order basis and
provided to Buyer. The quality results thus determined shall be
used in calculating price adjustments pursuant to Paragraph 6.0,
Remedies for Quality Deviations.
7.4 In the event that Sellers elect to ship coal from source(s) other
than Marrowbone pursuant to Paragraph 2.0 (e) that will deliver
coal directly to Buyer under a purchase agreement with a term of
one year or more, or volume of 500,000 tons or more, Buyer shall
promptly review the independent confirmation that the sampling
system is in accordance with ASTM standards pursuant to Paragraph
7.1. If the subject sampling system has been changed since its
last bias test, or has not been bias tested within the last
eighteen (18) months, and Buyer has reasonable concerns regarding
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<PAGE> 12
possible bias of such system, Buyer shall have the right to
request a bias test of the sampling system, to be conducted within
sixty (60) days of commencement of shipments from such source, by
an independent third party in conformance with the Rose method for
bias testing. A report of the test will be supplied to Buyer and
Sellers. Should the results of the bias test show a
"statistically significant bias" in the sampling system as
determined by the third party, Sellers shall take immediate action
to eliminate such bias, and shall pay for all costs of the bias
test. If the bias test does not show a "statistically significant
bias" in the sampling system, Buyer shall pay for all reasonable
costs of the bias test. In the event the third party called for
above cannot be agreed upon, the provisions of Paragraph 18.0,
Third Party Selection shall apply.
8.0 Force Majeure
8.1 Neither party shall be subject to liability to the other for
failure to perform in strict compliance with this Agreement where
such failure results from an event or occurrence beyond the
control of the party affected thereby such as, without limitation,
acts of God, war, insurrection, riots, strikes, labor disputes,
labor and material shortages, fires, explosions, floods,
breakdowns or damage to the mines, plants, equipment or
facilities, interruptions to transportation, car shortages,
embargoes, orders or acts of civil or military authority,
legislation, regulation, or administrative ruling. Normally
scheduled maintenance outages, including without limitation
outages for installation of equipment (including any outage for
the installation of low NOx burners at the Roxboro 4 Unit)
required to comply with regulations or legislation in effect as of
July 1, 1996, shall not constitute an event of force majeure
hereunder. Written notice including full information as to the
cause and probable extent of the event shall be furnished within
ten (10) calendar days after the failure first occurs. Failure to
provide such notice within the ten (10) calendar days specified
herein shall be deemed a waiver of all rights provided pursuant
to Paragraph 8.1 with regard to the particular event or
occurrence. Any interruption in deliveries hereunder as a result
of any such force majeure event shall not terminate this
Agreement and upon removal of the cause of interruption,
deliveries shall be resumed.
8.2 In the event of the enactment of any federal, state or local
law, legislation, ordinance, rule or regulation after July 1,
1996, which prohibits the burning or use of the coal to be
supplied hereunder or has the effect of requiring Buyer to
purchase coal having different quality characteristics from those
set forth in Paragraph 1.0, Description in order to comply with
such federal, state or local law, ordinance or regulation,
shipments hereunder may be terminated by Buyer upon ninety (90)
days advance notice to Sellers; provided, however, that shipments
under this Agreement shall not be so canceled if Sellers elect (i)
to substitute coal from other sources and such coal has quality
characteristics which enable Buyer to comply with applicable law,
or (ii) to modify the operations from which the coal is supplied
such that the quality of coal shipped shall enable Buyer to comply
with applicable law, or (iii) to take any other step that enables
Buyer to comply with applicable law. In the event that shipments
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<PAGE> 13
CONFIDENTIAL TREATMENT REQUESTED
are terminated pursuant to this Paragraph 8.2, Buyer shall remit to
Sellers [**] as liquidated damages as full and complete settlement of
all claims and not as a penalty for each ton terminated. Such amounts
shall be paid in accordance with Paragraph 4.0, Payment based upon the
shipment schedule established pursuant to Paragraph 2.0, Quantity and
Delivery. Termination of shipments pursuant to this Paragraph 8.2
shall excuse Buyer's obligation [**] with respect to those tons
terminated. [**]
8.3 In the event that (i) a force majeure event results in the physical
inability to generate electricity at the Roxboro 4 and/or Mayo 1
Unit(s), or (ii) a force majeure event that does not fall within
Paragraph 8.2 above totally prevents the generation of electricity at
Roxboro 4 and/or Mayo 1, for a period that exceeds six (6)
consecutive calendar months in duration ( "Extended Force Majeure"),
Buyer's annual commitment to purchase coal under this Agreement shall
be reduced by an amount equal to the number of tons not shipped
during and as a result of the Extended Force Majeure; provided,
however, that nothing herein shall (or shall be construed to)
discharge or diminish Buyer's obligation to take reasonable steps to
avoid, cure, or otherwise mitigate the effect of such an event of
force majeure, including but not limited to acceptance of additional
quantities hereunder at the unaffected Unit. Buyer shall not enter
into any new spot or contract agreements for compliance coal for the
unaffected Unit during the term of the Extended Force Majeure until
Sellers are given the option to supply such quantities hereunder.
Should Buyer expect that the Extended Force Majeure will exceed a
total of twelve (12) months, then after the expiration of the initial
six (6) months of the Extended Force Majeure, the parties shall
determine whether the coal to be delivered hereunder or coal with
different specifications than those in Paragraph 1.0, Description can
be supplied by Sellers and consumed at Buyer's other coal-fired plants
without causing operational problems, regulatory compliance issues, or
breach of any contract commitments to other coal suppliers. If so,
Sellers shall have the option to deliver such coal under this
Agreement, and this Agreement shall be amended to reflect any
necessary changes. If coal with different specifications than those in
Paragraph 1.0, Description is delivered hereunder, the price for such
coal shall be adjusted to reflect the difference in the quality of the
coal to be substituted and any other relevant factors in existence at
the time. Should the parties be unable to agree upon such an
adjustment, it shall be determined by an independent third party
agreed upon by both Buyer and Sellers. In the event a third party
cannot be agreed upon, the provisions of Paragraph 18.0, Third Party
Selection shall apply.
The occurrence of an Extended Force Majeure shall not affect Buyer's
obligation [**]
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CONFIDENTIAL TREATMENT REQUESTED
8.4 Coal not shipped as scheduled as a result of an event of force majeure
(excluding coal not shipped due to an Extended Force Majeure pursuant
to Paragraph 8.3) shall be rescheduled for shipment as soon as
practicable after the cessation of the force majeure event. This
revised schedule shall provide for delivery of such coal within thirty
(30) months of cessation of the force majeure event.
In the event that Sellers experience a force majeure event, the price
applicable to rescheduled shipments shall be the lesser of the price
applicable at the time such shipments were originally scheduled for
shipment or the price applicable on the date of shipment of coal. In
the event that Buyer experiences a force majeure event, the price
applicable to such rescheduled shipments shall be the greater of the
price in effect on the date of the shipment of the coal or the price
applicable at the time such shipments were originally scheduled for
shipment.
8.5 Except as provided in Paragraph 8.2, a force majeure event, including
an Extended Force Majeure event pursuant to Paragraph 8.3, shall not
affect [**] those tons not shipped as originally scheduled as
a result of the force majeure event were shipped as so scheduled;
provided, however, that if such tons are not made up pursuant to
Paragraph 8.4 as a result of Sellers' inability to supply such tons,
Buyer shall [**]
8.6 Twelve (12) months prior to any renewal of a contract between the
United Mine Workers of America ("UMWA") and the employers of employees
represented by the UMWA, or any future labor organization representing
such employees, reasonable efforts shall be made by Buyer and Sellers
to mutually agree to accelerate shipment of coal prior to the
anticipated commencement of the expiration of such contract. Such
acceleration of coal shipments (hereafter referred to as "Accelerated
Tonnage"), which shall be shipped to Buyer and shall meet the
specifications herein, is in anticipation of the interruption of coal
supplies which might result by reason of the expiration of such
contract. The price for all Accelerated Tonnage shall be the price in
effect at the time the coal was originally scheduled to be shipped
pursuant to Paragraph 5.1. [**]
8.7 The parties shall mutually determine within thirty (30) days of the
end of any disruption described in Paragraph 8.6 or any disruption
resulting from a railroad labor strike, the amount of coal that
Sellers were unable to ship based upon the tons scheduled to be
shipped during the period of such disruption, less any Accelerated
Tonnage. After such determination, the parties shall mutually
schedule the shipment of such coal so that Sellers may reasonably
produce and ship same over the next succeeding thirty (30) month
period. The price for such coal shall be the price in effect at the
time of shipment.
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9.0 Quality Information. On request, Sellers shall furnish to Buyer
information sufficient to show the quality of coal to be shipped from
any seam or source, including proximate analysis, mineral ash
analysis, ultimate analysis, or any other quality information
requested by Buyer with respect to coal shipped under this Agreement
that is existing and reasonably available to Sellers.
On request, Buyer shall furnish to Sellers any quality analysis
performed by it or on its behalf with respect to shipments hereunder.
10.0 Title. The title to the coal covered by this Agreement shall pass
directly from Sellers to Buyer as soon as the coal is loaded into
railcars at the mine.
11.0 Consignment. The coal covered by this Agreement is intended for
consumption at Buyer's Roxboro 4 and/or Mayo 1 Units. However, at any
time and from time to time during the term of this Agreement, Buyer
shall have the right to have all or any part of the coal covered by
this Agreement consigned to any other destination, provided that Buyer
gives Sellers five (5) days written notice of such consignment; that
Buyer causes Sellers to be furnished with railroad cars, applicable
railroad tariffs, and adequate instructions for shipment of coal so
consigned; and that such consigned shipments do not impose additional
obligations on Sellers greater than those provided for in Paragraph
2.0, Quantity and Delivery and Paragraph 2.1, Weights.
In any case of consignment pursuant to this Paragraph, Buyer shall
remain fully liable for the obligations set forth in this Agreement,
and Buyer shall pay for such coal, including quality adjustments
pursuant to Paragraph 6.0, Remedies for Quality Deviations, utilizing
the same freight rates which would have been effective had the
shipment(s) not been reconsigned by Buyer. Sellers shall not have any
contractual responsibility to the consignee, and such consignee shall
have no rights, privileges or responsibilities hereunder.
12.0 Access. Buyer or its designated representatives shall have access, at
reasonable times and without interfering with production, to
Marrowbone or any affiliate of Sellers producing coal covered by this
Agreement. In addition, Sellers shall exert reasonable efforts to
ensure that Buyer or its designated representatives shall have access,
at reasonable times and without interfering with production, to mines
owned by third parties producing coal covered by this Agreement. Such
access shall be for the purpose of inspecting said mines and related
facilities and examining the quality records. Buyer shall also have
access to Sellers' or its supplier's books and records during normal
business hours as necessary to understand and evaluate any proposed
price adjustment submitted to Buyer by Sellers in accordance with the
provisions of Paragraph 5.2. Sellers shall provide Buyer with access
to such books and records within two (2) weeks of Buyer's written
request, and shall make all such books and records available at the
mine or at Sellers' corporate offices. Sellers or their designated
representatives shall have access, at reasonable times and without
interfering with operations, to the facilities of Buyer to observe the
sampling and analysis of any coal sold hereunder.
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13.0 Waiver. No waiver of any breach of this Agreement shall be held to be
a waiver of any other breach. Except with respect to remedies as set
forth in Paragraph 6.0, Remedies for Quality Deviations, all remedies
afforded under this Agreement shall be in addition to every other
remedy provided herein or by law.
14.0 Notices. Notices provided for or required herein shall be given by
facsimile and by first class mail as follows:
To Sellers:
Mountaineer Coal Development Company
d/b/a Marrowbone Development Company
1010 One Valley Square
Charleston, West Virginia 25301
Facsimile Number: (304) 340-3739
To Buyer:
Carolina Power & Light Company
Fossil Fuel Department
P. O. Box 1551
411 Fayetteville Street
Raleigh, North Carolina 27602
Facsimile Number: (919) 546-2590
15.0 Assignment. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto, their successors and assigns,
provided it shall not be assigned by Buyer or Sellers, by operation of
law or otherwise, without the prior written consent of the other
party, which consent shall not be unreasonably withheld.
16.0 Finality. This written Agreement is intended as the final, complete
and exclusive statement of the terms of this Agreement between the
parties with regard to the subject matter hereof. The parties agree
that parol or extrinsic evidence may not be used to vary or contradict
the express terms of this Agreement. This Agreement shall not be
amended or modified, and no waiver of any provision hereof shall be
effective, unless set forth in a written instrument authorized and
executed with the same formality as this Agreement.
17.0 Governing Law. This Agreement shall be construed, enforced, and
performed in accordance with the laws of the Commonwealth of Virginia.
18.0 Third Party Selection. In the event that the parties are unable to
agree upon an independent third party to resolve matters referenced in
Paragraphs 5.2, 7.4, and/or 8.3, the Center for Public Resources, New
York, shall appoint an independent third party qualified in such
matters to render a binding decision regarding any such disagreement
pursuant to these three Paragraphs.
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19.0 Release. Buyer and Sellers agree to release and forever
discharge each other and their predecessors, parents,
subsidiaries, officers, directors, employees, agents,
successors and assigns from any and all claims, demands,
actions or causes of action whatsoever, known or unknown,
which have been or could have been raised arising out of or
in connection with the Agreement on or before July 1, 1996;
provided, however, that Sellers do not release Buyer from (i)
any amounts to be paid for coal delivered in June, 1996;
(ii) and penalty/premium price adjustments due after February
1, 1996; or (iii) payments for liquidated damages pursuant to
force majeure claims at Mayo 1 and Roxboro 4 during the first
half of 1996.
IN WITNESS WHEREOF, Buyer and Sellers have each caused this Agreement to be
effective as of the first day of July, 1996.
Witness: CAROLINA POWER & LIGHT COMPANY
/s/ Max Thompson, Jr. By:/s/ James M. Davis, Jr.
- ---------------------------- ---------------------------------
As to Carolina Power & Light
Company Title:Sr. Vice President
------------------------------
Date:7/19/96
-------------------------------
Witness: MOUNTAINEER COAL DEVELOPMENT COMPANY
d/b/a MARROWBONE DEVELOPMENT COMPANY
/s/ Michael V. Altrudo By:/s/ David M. Young
- ---------------------------- ---------------------------------
As to Marrowbone Development
Company Title:President
------------------------------
Date:7/19/96
-------------------------------
Witness: BLUEGRASS COAL DEVELOPMENT COMPANY
/s/ Michael V. Altrudo By:/s/ C.K. Lane
- -------------------------------- ---------------------------------
As to Bluegrass Coal Development
Company Title:President
------------------------------
Date:7/19/96
-------------------------------
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<PAGE> 1
EXHIBIT 99.1
[ZIEGLER COAL HOLDING COMPANY LETTERHEAD]
CONTACT:
Vic Svec Jacqueline E. Burwitz
618-394-2430 618-394-2570
FOR IMMEDIATE RELEASE
JULY 22, 1996
ZEIGLER LAUDS NEW AGREEMENTS WITH CAROLINA POWER & LIGHT
FAIRVIEW HEIGHTS, ILL., JULY 22, 1996 - Chand B. Vyas, President and Chief
Executive Officer of ZEIGLER COAL HOLDING COMPANY (NYSE: ZEI) announced today
that Zeigler subsidiaries had forged comprehensive new coal supply agreements
with Carolina Power & Light Company (CP&L) for coal supplies relating to the
company's Marrowbone Development Company.
"I have previously stated that Zeigler's growth will come through two primary
strategies: by more greatly aligning ourselves with customers, and by accessing
key links along economic value chains," said Vyas. "Our new agreements with
CP&L greatly advances our first strategy and provides an opportunity to work
together on the second strategy. And, in addition to strategic improvements,
we foresee the potential to improve revenues, earnings and cash flows as a
result of the new agreement."
According to CP&L Senior Vice President of Power Operations James M. Davis,
Jr., "We are pleased with the innovative, proactive manner in which Zeigler
approached this effort, and with the resulting agreements. We consider Zeigler
to be an excellent supplier, and we look forward to enhancing our business
relationship with them. This is an example of how a coal company and utility
can work together in the face of a rapidly changing utility environment."
Said Vyas, "Earlier, we approached CP&L regarding our Marrowbone contract. Our
objective was to better align ourselves with CP&L and strengthen our
long-standing position as a preferred supplier. We sought to improve their
competitive position, enhance the flexibility and value of the contract to us
and build a basis upon which we could extend our business relationship. These
were admittedly lofty objectives... and yet I am pleased to report that as a
result of excellent work by CP&L and Zeigler teams the agreements accomplish
all of these."
-more-
<PAGE> 2
The revised and restated Marrowbone agreement and a new agreement resulting
from the discussions with CP&L is responsible for more than 10% of Zeigler
revenues. Both the prior and new agreements run through 2006. Major new
elements of the agreements include:
- Pricing that will allow CP&L to sell more power while letting Zeigler sell
more coal and improve the value of its business with CP&L;
- Sourcing flexibility for coal shipments;
- A problem-solving mechanism to resolve quality variations so as to greatly
reduce the likelihood of disputes; and
- Agreement to jointly pursue additional value-adding business opportunities.
The Zeigler family of companies is among the largest coal producers and
marketers in the United States, and controls more than 1.3 billion tons of
economically recoverable coal reserves, including 1 billion tons of low sulfur
coal. The Zeigler family of companies currently operates underground and
surface coal mining complexes in Illinois, Kentucky, Ohio, West Virginia and
Wyoming. In addition, the company owns and operates two East Coast
transloading terminals, a land company and a clean coal technology corporation.
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