<PAGE>   1



                                                                  EXHIBIT 10.7.1




                        TRANSPORTATION SERVICES AGREEMENT

                               DATED JULY 1, 1998

                                 BY AND BETWEEN

                           U. S. STEEL MINING CO., LLC

                                       AND

                                 TRANSTAR, INC.









<PAGE>   2



                        TRANSPORTATION SERVICES AGREEMENT
                       BETWEEN U. S. STEEL MINING CO., LLC
                                       AND
                                 TRANSTAR, INC.
                                      INDEX

<TABLE>
<CAPTION>
Section                                          Title                                             Page
-------                                          -----                                             ----
<S>               <C>                                                                              <C>
1                 SCOPE                                                                              2

2                 TERM                                                                               2

3                 ADDITIONAL TERM                                                                    3

4                 INTENT OF AGREEMENT                                                                4

5                 EXISTING CONTRACTS                                                                 5

6                 RATES, TERMS AND/OR CONDITIONS FOR SERVICE                                         5

6(a)              Birmingham Southern Service                                                        5

6(b)              Fairfield Southern Transportation                                                  6

6(c)              Miscellaneous Fairfield Southern Service                                           7

6(d)              WGN                                                                                7

6(e)              Adjustments to Initial Base Rates, Terms and Conditions and Base Rates,           10
                  Terms and Conditions to Birmingham Southern Single-Line Rates and Fairfield
                  Southern Rates

6(f)              Adjustments to Joint-Line Rates                                                   13

6(g)              Car Hire Adjustments to Birmingham Southern Earnings                              16

6(h)              Regulatory Change                                                                 16

6(i)              Drafting                                                                          17

6(j)              Determination of Competitive Rates Under Certain Circumstances                    17

7                 TRANSPORTATION COMMITMENTS                                                        18

7(a)              Birmingham Southern Rail Service                                                  18

7(b)              Fairfield Southern Transportation Service                                         18

7(c)              Miscellaneous Fairfield Southern Services                                         18

7(d)              WGN                                                                               18
</TABLE>


<PAGE>   3

<TABLE>
<CAPTION>
Section                                          Title                                             Page
-------                                          -----                                             ----
<S>               <C>                                                                              <C>
7(e)              Bid Terms                                                                         19

8                 SERVICE LEVELS                                                                    20

9                 MAINTENANCE OF TRANSPORTATION ASSETS                                              20

10                MAINTENANCE OF INTERCHANGES                                                       21

11                AUDIT                                                                             21

12                LIQUIDATED DAMAGES                                                                22

13                SEVERABILITY                                                                      23

14                INEQUITIES                                                                        24

15                MEDIATION                                                                         24

16                ARBITRATION                                                                       26

17                ASSIGNMENT                                                                        28

18                NOTICES                                                                           28

19                LAW GOVERNING                                                                     29

20                RELATIONSHIP OF PARTIES                                                           29

21                INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES                                        30

22                ENTIRETY OF AGREEMENT; AMENDMENTS                                                 30

23                MUTUAL RELEASE                                                                    30

24                FORCE MAJEURE                                                                     30
</TABLE>

<PAGE>   4



                        TRANSPORTATION SERVICES AGREEMENT


         This Agreement, made and concluded this 21st day of December, 1998, but
effective the 1st day of July 1998, by and between U. S. STEEL MINING CO., LLC
(hereinafter "USM"), a Delaware Limited Liability Company with offices at 600
Grant Street, Pittsburgh, Pennsylvania 15219-2749, and TRANSTAR, INC.
(hereinafter "Transtar"), a Delaware corporation with offices at 135 Jamison
Lane, Monroeville, Pennsylvania 15146.

                              W I T N E S S E T H:
         
         WHEREAS, Transtar is the shareholder of certain transportation
operating companies including Birmingham Southern Railroad Company (hereinafter
"Birmingham Southern") and its subsidiary Fairfield Southern Company, Inc.
(hereinafter "Fairfield Southern"), and Warrior and Gulf Navigation Company
(hereinafter "WGN") and its subsidiary Mobile River Terminal Company
(hereinafter "Mobile River" and collectively the "Transtar Units"); and

         WHEREAS, USM and Transtar are parties to a Transportation Services
Agreement dated December 28, 1988 (hereinafter the "1988 TSA"); and

         WHEREAS, USM and Transtar desire to enter into a new Transportation
Services Agreement to set forth the terms of a commercial business relationship
between USM and the Transtar Units and to replace the 1988 TSA;


                                       1
<PAGE>   5





         NOW, THEREFORE, the parties hereto, intending to be legally bound, and
in consideration of the mutual agreements herein contained, hereby agree as
follows:

         1. SCOPE. This Agreement sets forth the understanding of the parties
concerning transportation and transportation-related services to be provided to
USM by Transtar Units. More specific transportation contracts, tariffs, purchase
orders or other agreements may be executed, issued and/or published by USM and
the individual Transtar Units in order to implement this Agreement. To the
extent required by law, such individual agreements shall be filed with the
Surface Transportation Board ("STB") and/or the appropriate state agency.

         2. TERM. This Agreement shall become effective on July 1, 1998 and
shall remain in effect through December 31, 2004 ("Initial Term"). At the end of
the Initial Term of this Agreement or at the end of the Additional Term
established in Section 3 herein, if any of the services previously performed by
any Transtar Unit pursuant to this Agreement are subject to competitive bidding,
the Transtar Unit shall be offered an opportunity to participate in any
competitive bidding for such services.


                                       2
<PAGE>   6

         3. ADDITIONAL TERM. Following the expiration of the Initial Term of
this Agreement, all of its terms and/or conditions, insofar as they apply to the
Birmingham Southern service referenced in Sections 6(a), 6(e), 6(f) and 7(a),
shall continue to apply to Birmingham Southern. If during the Additional Term, a
non-Transtar rail carrier obtains access to the Concord Preparation Plant, USM
shall have the option of canceling this Agreement, in whole or in part, insofar
as it applies to the service referenced in Sections 6(a) and 7(a) herein which
is provided by Birmingham Southern. During the Initial Term or the Additional
Term, USM shall not take any action which would in any way, either directly or
indirectly, encourage any non-Transtar rail carrier to attempt to obtain access
to the Concord Preparation Plant or which would in any way assist and/or support
any such rail carrier in any efforts to obtain such access; provided, however,
that, during the Additional Term, USM may request non-binding mediation pursuant
to Section 15 and/or request that an arbitrator, pursuant to the provisions set
forth in Section 16 herein, determine whether it is reasonable and equitable,
under the facts, circumstances and the regulatory and competitive conditions in
effect at that time at the Concord Preparation Plant, for USM to seek
competitive access.



                                       3
<PAGE>   7




         4. INTENT OF AGREEMENT. The parties hereto intend that they shall
mutually benefit from the rates, terms, conditions and provisions of this
Agreement and that no party shall be either unreasonably enriched or
unreasonably harmed by any implementation and/or interpretation of said rates,
terms, conditions and provisions. In addition, the parties hereto agree and
intend that the rates, terms and conditions (including, but not limited to,
payment and drafting terms) in effect as of the effective date of this Agreement
shall continue in effect except as modified by this or other agreements of the
parties and that no party to this Agreement shall seek to change rates, terms
and conditions through the arbitration procedures set forth in Section 16
hereof, unless there is a material change in existing facts and circumstances
that causes the party seeking such change to suffer a gross inequity. This
Agreement, and all agreements implementing this Agreement, shall be administered
and interpreted in order to fulfill the intent stated in this Section 4. Any
arbitrator considering disputes pursuant to Section 16 hereof shall render a
decision which fulfills the intent stated in this Section 4.



                                       4
<PAGE>   8





         5. EXISTING CONTRACTS. All existing contracts, purchase orders and
other agreements between USM and the Transtar Units shall remain in effect for
the terms stated therein. To the extent that any conflict exists between
Sections 6 or 7 of this Agreement and the rates or service provisions of any
such contract, purchase order or other agreement, the terms of this Agreement
shall supersede and take precedence provided, however, that every reasonable
effort shall be made to construe such provisions consistently, and that nothing
contained in this Agreement shall be construed or implemented to shorten the
term of any such contract, purchase order or other agreement.

         6. RATES, TERMS AND/OR CONDITIONS FOR SERVICE.
 
            (a) Birmingham Southern Service. Initial Base Rates, terms and/or 
conditions for all Birmingham Southern services shall be those in effect in
contracts, tariffs or other agreements as of the effective date of this
Agreement. The rate between USM and Birmingham Southern set forth in Exhibit I
attached to this Agreement together with other rates in effect as of the
effective date of this Agreement (including single-line and joint-line line-haul
rates) shall be referred to herein as "Initial Base Rates." Any new rates
established during the term of this Agreement shall be deemed "Base Rates" as of
the date they are established.



                                       5
<PAGE>   9



                Initial Base Rates and Base Rates for single-line movements
shall be adjusted annually to be effective January 1, 1999 and each January 1
thereafter in accordance with the procedures set forth in Section 6(e) herein.
Joint-line Initial Base Rates and joint-line Base Rates shall be adjusted in
accordance with the procedures set forth in Section 6(f) herein.

            (b) Fairfield Southern Transportation. Initial Base Rates, terms
and/or conditions for all Fairfield Southern service shall be those in effect
pursuant to the Agreement, executed simultaneously herewith, between USM and
Fairfield Southern. The rates between USM and Fairfield Southern set forth in
Exhibit II together with other rates in effect as of the effective date of this
Agreement shall be referred to herein as "Initial Base Rates." Any new rates
established during the term of this Agreement shall be deemed "Base Rates" of
the date they are established. 

                Initial Base Rates and Base Rates for Fairfield Southern service
shall be adjusted annually to be effective January 1, 1999 and each January 1
thereafter in accordance with the procedures set forth in Section 6(e) herein.



                                       6
<PAGE>   10

            (c) Miscellaneous Fairfield Southern Service. During the Initial
Term of this Agreement, USM shall have the option to subject all or any such
miscellaneous Fairfield Southern services except track maintenance to
competitive bidding. Track maintenance may be subjected to competitive bidding
at any time after December 31, 2001. Fairfield Southern shall be offered an
opportunity to participate in any competitive bidding for such miscellaneous and
track maintenance services and any additional transportation and
transportation-related services required by USM.

            (d) WGN. Rates between USM and WGN set forth in Exhibit III and
Exhibit IX together with other rates in effect as of the effective date of this
Agreement shall be referred to herein as "Initial Base Rates." Any new rates
established during the term of this Agreement shall be deemed "Base Rates" as of
the date they are established. Initial Base Rates and adjusted Initial Base
Rates and, unless otherwise agreed by the parties Base Rates and adjusted Base
Rates, shall be subject to the Fuel Cost Adjustment set forth in Exhibit IV.
Upon request for any new service required by USM, WGN shall offer rates, terms
and/or conditions which are competitive with the rates, terms and/or conditions
offered by viable competing water carriers or stevedores for similar services in
the same geographic area. Prior to December 1, 1999 and each



                                       7
<PAGE>   11



December 1 thereafter through December 1, 2003, USM and WGN shall in good faith
negotiate adjusted Initial Base Rates and adjusted Base Rates which shall be
competitive with rates available to USM at that time from viable competitors of
WGN capable of offering the same or substantially similar services and volumes
to USM. 

                If after good faith negotiations, the parties fail to reach
agreement on the amount of the annual adjustment to the Export Coal Initial Base
Rates set forth in Exhibit III and Exhibit IX, such Export Coal Initial Base
Rates shall be adjusted up or down by one hundred percent (100%) of the
cumulative percentage change between the October 1998 Producer Price Index All
Commodities Unadjusted ("PPI-U") and the most recent October PPI-U published
prior to the January 1 effective date of the adjusted Export Coal Initial Base
Rate, provided however, that the adjusted Export Coal Initial Base Rate shall
never fall below the originally established level.

                If after good faith negotiations, the parties fail to reach
agreement on the amount of the annual adjustment to the Export Coal Base Rates,
such Export Coal Base Rates shall be adjusted up or down by one hundred percent
(100%) of the cumulative percentage change between the PPI-U published
immediately prior to the effective date of the Export Coal Base Rate and the
most recent October PPI-U published prior to the January 1 effective date of the



                                       8
<PAGE>   12



adjusted Export Coal Base Rate, provided however, that the adjusted Export Coal
Base Rate shall never fall below the originally established level. Neither party
shall have the right to invoke the dispute resolution procedures set forth in
Sections 15 and 16 to request an appropriate rate adjustment be determined
through these procedures, unless the party is able to prove it has suffered a
gross inequity as a result of the implementation of the adjusted Export Coal
Initial Base Rate or adjusted Export Coal Base Rate. In no event shall the
dispute resolution procedures result in the adjusted Export Coal Initial Base
Rate ever falling below the Export Coal Initial Base Rate or the adjusted Export
Coal Base Rate ever falling below its original established level. 

                If after good faith negotiations the parties fail to reach
agreement on the amount of the annual adjustment to the Domestic Coal Initial
Base Rates and Domestic Coal Base Rates, either party shall have the right to
request non-binding mediation pursuant to Section 15 and invoke the arbitration
procedures set forth in Section 16 to request that an adjusted Initial Base Rate
or adjusted Base Rate be agreed upon or determined through these procedures. In
no event shall the dispute resolution procedures result in the adjusted Domestic
Coal Initial Base Rate ever falling below the Domestic Coal Initial Base Rate or
the adjusted 


                                       9
<PAGE>   13

Domestic Coal Base Rate ever falling below its original established level. Any
interim rates will be revised retroactively to whatever rates were agreed upon
through non-binding mediation or were determined through the dispute resolution
procedures set forth in Section 16.


            (e) Adjustments to Initial Base Rates, Terms and Conditions and Base
Rates, Terms and Conditions to Birmingham Southern Single-Line Rates and
Fairfield Southern Rates. The Initial Base Rates and Base Rates for Birmingham
Southern single-line service and Fairfield Southern rail service shall be
adjusted annually, to be effective January 1, 1999 and each January 1
thereafter. Such adjustments, as well as any other increases, decreases,
changes, modifications, additions and/or deletions to Initial Base Rates, terms
and/or conditions and Base Rates, terms and/or conditions for any such rail
service during the Initial or any Additional Term shall be negotiated in good
faith by the parties and upon agreement implemented either through tariffs,
contracts or other agreements. If, after good faith negotiation during the
Initial Term of this Agreement the parties fail to reach agreement on the amount
of the annual adjustment to the Initial Base Rates and Base Rates, then (1) the
Initial Base Rates shall be adjusted up or down by eighty percent (80%) of the
amount of the percentage change between the 4th quarter 



                                       10
<PAGE>   14



1997 Rail Cost Adjustment Factor, unadjusted for productivity ("RCAF-U") of
1.00, as rebased by the STB and published in Ex Parte No. 290 (Sub No. 5) (98-1)
Table A decided on or about December 12, 1997 ("Base RCAF-U") and the most
recent 4th quarter RCAF-U published prior to the January 1 effective date of the
adjusted Initial Base Rate, provided however, that the adjusted Initial Base
Rate shall never fall below the Initial Base Rate and (2) the Base Rates shall
be adjusted up or down by eighty percent (80%) of the amount of the percentage
change between the most recent RCAF-U published prior to the time that the Base
Rate was established and the most recent 4th quarter RCAF-U published prior to
the January 1 effective date of the adjusted Base Rate, provided however, that
the adjusted Base Rate shall never fall below its original established level.
(See examples in Exhibits V and VI attached to this Agreement.)

                At the end of the Initial Term, Transtar shall elect whether to
apply the maximum cumulative allowable rate adjustment to any rate in effect on
December 31, 2004 to be adjusted and to become effective January 1, 2005.

                If, after good faith negotiations during the Additional Term of
this Agreement, the parties fail to reach agreement on the amount of the annual
adjustment to the Initial Base Rates and Base Rates, then (1) the Initial Base



                                       11
<PAGE>   15



Rates and adjusted Initial Base Rates in effect prior to January 1, 2005 shall
be adjusted up or down by one hundred percent (100%) of the amount of the
percentage change between the 4th quarter 2003 Rail Cost Adjustment Factor
("RCAF-U") as published by the STB ("Base RCAF-U") and the most recent 4th
quarter RCAF-U published prior to the January 1 effective date of the adjusted
Initial Base Rate, provided however, that the Initial Base Rate and adjusted
Initial Base Rate shall never fall below their January 1, 2004 level and (2) the
Base Rates and adjusted Base Rates established prior to January 1, 2005 shall be
adjusted up or down by one hundred percent (100%) of the amount of the
percentage change between the 4th Quarter 2003 RCAF-U and the most recent 4th
Quarter RCAF-U published prior to the January 1 effective date of the adjusted
Base Rate, provided however, that the Base Rate and adjusted Base Rate shall
never fall below their most recent level prior to January 1, 2005 and (3) any
Base Rates established during the Additional Term of this Agreement shall be
adjusted up or down by one hundred percent (100%) of the amount of the
percentage change between the most recent RCAF-U published prior to the time
that the Base Rate was established and the most recent 4th quarter RCAF-U
published prior to the January 1 effective date of the adjusted Base Rate,
provided, however, that the adjusted Base Rate shall never fall below its
originally



                                       12
<PAGE>   16




established level. Such adjusted Initial Base Rates and Base Rates shall be
implemented effective each January 1 for the ensuing year.

                Neither party shall have the right to invoke the dispute
resolution procedures set forth in Sections 15 and 16 to request an appropriate
rate adjustment be determined through these procedures, unless the party is able
to prove it has suffered a gross inequity as a result of the implementation of
the adjusted Initial Base Rate or adjusted Base Rate. In no event during the
Initial Term of this Agreement shall the dispute resolution procedures result in
the adjusted Initial Base Rate ever falling below the Initial Base Rate or the
adjusted Base Rate ever falling below its original established level. In no
event during the Additional Term of this Agreement shall the dispute resolution
procedures result in the Initial Base Rate and the adjusted Initial Base Rate
ever falling below the January 1, 2004 level, the Base Rate and adjusted Base
Rate in effect on January 1, 2005 ever falling below their January 1, 2005 level
and the Base Rate and adjusted Base Rate established during the Additional Term
ever falling below their originally established level.

            (f) Adjustments to Joint-Line Rates. Birmingham Southern earnings on
existing joint line rates may be adjusted up or down by an amount not to exceed
the same percentage




                                       13
<PAGE>   17



increase or decrease as implemented by the trunk line for its portion of
earnings on the through rate, provided Birmingham Southern's earnings shall
never fall below its earnings under the joint-line Initial Base Rate as may be
adjusted as set forth in Section 6(g)and provided Birmingham Southern earnings
shall never fall below its earnings under the originally established joint-line
Base Rate as may be adjusted as set forth in Section 6(g). The dollar amount of
Birmingham Southern's earnings shall equal the dollar amount of its earnings
under the joint-line Initial Base Rate or the joint-line Base Rate as may be
adjusted as set forth in Section 6(g) while the adjusted Initial Base Rate is
equal to or lower than the joint-line Initial Base Rate or the adjusted Base
Rate is equal to or lower than the originally established joint-line Base Rate.
Once the adjusted Base rate exceeds the Initial Base Rate or Base Rate,
Birmingham Southern's earnings shall be the same percentage of the adjusted
joint-line Initial Base Rate or the adjusted joint-line Base Rate as Birmingham
Southern's percentage under the Initial Base Rate or the originally established
Base Rate except as may be adjusted as set forth in Section 6(g). (See examples
in Exhibits VII and VIII attached to this Agreement.) If there is more than one
other line-haul carrier included in the joint rate with Birmingham Southern,
Birmingham Southern's earnings may be




                                       14
<PAGE>   18



adjusted by an amount not to exceed the weighted average percentage of the other
participating carriers. With respect to new joint line rates, Birmingham
Southern shall not seek earnings requirements that are higher than earnings on
existing rates for movements of the commodities from the same or a comparable
junction point to the same or comparable destination in similar quantities and
equipment. USM shall have the right to audit Birmingham Southern's records to
ensure compliance with this provision, provided however, such audit shall be
conducted by an independent auditor to be nominated by USM, subject to written
approval by Birmingham Southern which approval shall not be unreasonably
withheld. The auditor shall only certify to USM whether Birmingham Southern was
in compliance and shall keep all information confidential. Birmingham Southern
shall notify USM whenever a division of a joint-line rate deviates from the
percentage division in effect at the time the Initial Base Rate or Base Rate was
established. Transtar and Birmingham Southern thereby consent to USM requesting,
and trunk line carriers advising, only whether the division has changed or
whether Birmingham Southern has priced its division on a new movement in
accordance with the existing rates for movement of commodities from the same or
a comparable junction point to the same or comparable destination in similar
quantities and



                                       15
<PAGE>   19


equipment is unreasonable. Under no circumstances do Transtar or Birmingham
Southern consent to the trunk lines disclosing the amount or the percentage of
the divisions or of USM requesting the same.

            (g) Car Hire Adjustments to Birmingham Southern Earnings. With
respect to Birmingham Southern's earnings for services specified in this
Agreement, Birmingham Southern shall have the right to make adjustments as
necessary for increases in cost of rail cars forced upon Birmingham Southern by
others pursuant to car hire deprescription or revisions to Car Hire Rules or Car
Service Regulations. Transtar shall provide USM with reasonable supporting
documentation for any adjustments pursuant to this Section at the time such
adjustments are implemented.

            (h) Regulatory Change. Any new laws and/or regulations which become
effective during the Initial Term or Additional Term of this Agreement, which
place new obligations on Transtar rail or barge carriers, including, but not
limited to, obligations with respect to competitive access and/or obligations to
quote segments of joint-line movements, and which apply to rail and/or barge
service provided to USS' competitors, shall be applicable to service provided
hereunder.


                                       16
<PAGE>   20



            (i) Drafting. Drafting procedures applicable to shipments via
Birmingham Southern and WGN to and from the Concord Preparation Plant may be
modified, as desired by USM, acting in its sole discretion, no earlier than July
1, 2002 for Birmingham Southern and July 1, 2003 for WGN.

                In those instances where drafting procedures are modified,
appropriate procedures will be put into place by the parties which provide for
payment within fifteen (15) days of receipt of billing.

            (j) Determination of Competitive Rates Under Certain Circumstances.
During the term of this Agreement, if the combined rate of WGN and BS, as
escalated (excluding any FS rate) for transportation from Concord Preparation
Plant to Mobile is not reasonably competitive with a bona fide offer for such
transportation from a viable competitor of the Transtar Units (including any
mode or any transportation group offering joint service in conjunction with a
Transtar Unit) capable of providing transportation from Concord Preparation
Plant on a sustained and continual basis, then either party may invoke the
dispute resolution procedures set forth in Sections 15 and 16 to request that a
competitive combined Transtar Unit rate be agreed upon or determined through
these procedures.


                                       17
<PAGE>   21



            7. TRANSPORTATION COMMITMENTS. (a) Birmingham Southern Rail Service.
During the Initial Term and any Additional Term of this Agreement, USM shall
ship via Birmingham Southern one hundred percent (100%) of the rail traffic
originating or terminating at the Concord Preparation Plant.

               (b) Fairfield Southern Transportation Service. During the Initial
Term of this Agreement, Fairfield Southern shall have the right to provide one
hundred percent (100%) of the rail transportation service specified in the
Agreement executed simultaneously herewith, so long as such rail transportation
services are required by USM from any source.

               (c) Miscellaneous Fairfield Southern Services. Fairfield Southern
shall be permitted to participate in bidding for miscellaneous and track
maintenance services and shall also be permitted to participate in bidding for
new or additional transportation and transportation-related services required by
USM.

               (d) WGN. During each calendar year of the Initial Term of this
Agreement, USM shall ship via WGN not less than ninety percent (90%) of USM coal
tonnage for export and originating at the Concord Preparation Plant ("Export
Coal").


                                       18
<PAGE>   22






                    During each calendar year of the Initial Term of this
Agreement, USM shall ship via WGN not less than ninety percent (90%) of USM coal
tonnage shipped by barge to domestic destinations and originating at the Concord
Preparation Plant for which USM controls the routing ("Domestic Coal"). In
addition, USM will use all reasonable efforts to control the routing thereby
maximizing the use of WGN transportation services. For the six (6) month period
July 1, 1998 through December 31, 1998, calendar year 1998 shipments will be
used to judge performance.

                    If USM ships less than ninety percent (90%) of Export Coal
or less than ninety percent (90%) of Domestic Coal shipped by barge for which it
controls routing, it shall pay WGN liquidated damages of $2.00 NT, escalated in
accordance with the provisions of Section 12 herein, for each ton less than the
minimum percentage within thirty (30) days of receipt of billing for such
liquidated damages.

               (e)  Bid Terms. From and after the effective date of this
Agreement, neither Transtar nor any of the Transtar Units shall be required to
indemnify or hold harmless any party to this Agreement as a condition to bidding
for, or being awarded the right to provide, transportation or transportation
related services, whether such services are within the scope of any
Transportation Services Agreement or otherwise, and the absence of any such
indemnity or hold



                                       19
<PAGE>   23


harmless provision in any such bid shall not be taken into consideration to
determine the competitiveness of such bid.

            8. SERVICE LEVELS. During the Initial Term and the Additional Term
of this Agreement, Transtar Units shall maintain service levels which are
reasonably required to provide service hereunder and in a manner consistent with
and competitive with other carriers in the area. When Birmingham Southern
functions as the origin carrier in a joint-line movement, it shall be
responsible for arranging for car supply consistent with the availability of
rail cars from other carriers. Birmingham Southern shall have car ownership
obligations on single-line movements. Any dispute between the parties concerning
service levels shall be referred to dispute resolution in accordance with the
provisions of Sections 15 and 16 hereof. 

            9. MAINTENANCE OF TRANSPORTATION ASSETS. Transtar Units shall
maintain in good and serviceable condition those transportation assets used to
provide service to USM pursuant to this Agreement, including, but not limited
to, way and structures, locomotives, railcars, signaling systems, tugs, barges,
and transshipment facilities. 

               Any dispute between the parties concerning maintenance of
transportation assets shall be referred to the dispute resolution procedures in
accordance with the provisions of Sections 15 and 16 hereof.


                                       20
<PAGE>   24


            10. MAINTENANCE OF INTERCHANGES. Birmingham Southern shall maintain
interchanges, gateways and/or terminals operable as of the date of this
Agreement which are reasonably required to provide service hereunder. Any
dispute between the parties concerning maintenance of interchanges, gateways
and/or terminals shall be referred to dispute resolution in accordance with the
provisions of Sections 15 and 16 hereof.

            11. AUDIT. Each party shall have the right to audit the other's
records insofar as necessary to ensure compliance with all of the terms and
conditions of this Agreement. Except as provided in Section 6(f) herein, such
audits shall be performed by an internal or external auditor, provided however,
that the party being audited shall have the right to require that any audit be
conducted by a mutually agreeable independent auditor and that the details of
the information examined in such audit be kept confidential from the party
requesting the audit, except to the extent necessary to resolve any controversy
that is pursued in good faith. The first $20,000 of cumulative total audit
expense annually incurred for audit services required by either party to be
performed by independent auditors shall be shared equally by the parties.
Thereafter, such audit expense shall be borne by the party requesting the audit.


                                       21
<PAGE>   25

            12. LIQUIDATED DAMAGES. The parties acknowledge that in light of the
nature of the investments and expenditures to be made by Transtar and WGN to
comply with obligations under this Agreement, the actual damages which will be
sustained in the event of a failure of USM to meet its obligations under Section
7(d) are uncertain and difficult to ascertain. Accordingly, the parties have
agreed to appropriate measures of liquidated damages for each ton below the
applicable minimum percentage set forth in Section 7(d).

                Liquidated damages shall be adjusted annually, to be effective
January 1, 1999 and each January 1 thereafter, up or down by 100% of the amount
of the cumulative percentage change between the October 1997 Producer Price
Index All Commodities Unadjusted ("PPI-U") and the most recent October PPI-U,
published prior to the January 1 effective date of the adjusted liquidated
damages and that the adjusted rate shall never fall below the initial liquidated
damages. The adjusted liquidated damages shall never fall below $2.00 NT.

                If during the Initial Term of this Agreement, USM, for any
reason other than force majeure, fails to meet any of its volume commitments set
forth in Section 7(d) hereof for any given calendar year other than the final
calendar year of the Initial Term, USM may, in lieu of paying liquidated
damages, make up the deficit volume during the immediately



                                       22
<PAGE>   26



succeeding calendar year by shipping such deficit volume plus an additional 10%
of the deficit volume over the Transtar Unit to which the volume commitment was
made, in addition to shipping its annual volume commitment for such succeeding
year. If any portion of the deficit volume plus an additional 10% of the deficit
volume has not been shipped by the end of the immediately succeeding calendar
year, USM shall pay the liquidated damages (as then escalated) for such portion
no later than thirty (30) days after billing by WGN. It is the intent of the
parties that the provisions of the final paragraph of this Section 12 shall not
apply to the volume commitment set forth in Section 7(a) and 7(b).

            13. SEVERABILITY. It is the desire of the parties hereto that this
Agreement be enforced to the fullest extent permissible under the laws and
public policies to be applied thereto. Accordingly, if any particular portion of
this Agreement shall be adjudicated to be void, invalid or unenforceable, this
Agreement shall be deemed to be amended to delete herefrom the portion thus
adjudicated to be void, invalid, or unenforceable, unless such change alters the
purpose and intent of this Agreement, in which case this Agreement shall be null
and void.


                                       23
<PAGE>   27


            14. INEQUITIES. The parties intend that they shall mutually benefit
from the terms, conditions and provisions of this Agreement. If any party
suffers a gross inequity resulting from such terms, conditions or provisions, or
from a substantial change in circumstances or conditions, the parties shall
negotiate in good faith to resolve or remove such inequity. In the event the
parties fail to reach an agreement concerning any alleged gross inequity, the
dispute shall be referred to the dispute resolution procedures of Section 15 and
16 hereof. It is mutually understood and agreed, however, that nothing herein
shall be construed to relieve any party of any of its obligations under this
Agreement or under any related transportation contract, purchase order or other
agreement. The parties further agree that, unless otherwise required by law, no
party shall assert or cause to be asserted in any suit, action, proceeding or
other adjudication that any of the terms, conditions or provisions of this
Agreement are or will be unenforceable, unjust, unreasonable, unreasonably
discriminatory, preferential or prejudicial, or otherwise in violation of any
provision of any act or statute or any rule, order or regulation thereof.

            15. MEDIATION. At any time prior to the start of sworn testimony in
arbitration provided under Section 16 of this Agreement, a party may submit a
dispute arising hereunder



                                       24
<PAGE>   28


to non-binding mediation. The mediator shall be selected by the party submitting
the dispute with or without the concurrence of the other party. Neither
submission of a dispute to mediation nor conclusion of the mediation process
shall be a condition precedent to exercise of the arbitration procedures
available to the parties under this Agreement. If a dispute is submitted to
mediation: 

     1) the parties shall mediate the dispute in good faith; 

     2) mediation shall occur in Allegheny County, Pennsylvania; 

     3) final decision makers for each party on any matter in dispute shall
personally attend all mediation sessions;

     4) the mediator shall have complete control of the mediation timing and
process, provided, however, that the mediation shall conclude no later than
fourteen (14) calendar days from the day of the initial meeting between the
mediator and the parties;

     5) all agreements reached in mediation shall be reduced to writing before
concluding the mediation process;

     6) the parties may jointly agree to have the mediator make a final and
binding decision;

     7) no discovery will be taken during the mediation process;



                                       25
<PAGE>   29


     8) the mediation process shall be confidential and each party shall have
the right to designate any information provided to the mediator as "Confidential
and Proprietary."

        16. ARBITRATION. All disputes arising under this Agreement shall be
referred to binding arbitration conducted expeditiously in accordance with
Center for Public Resources Rules for Non-Administered Arbitration of Business
Disputes ("CPR Rules") by a three-person panel of arbitrators, each party
choosing one arbitrator and the two arbitrators so chosen selecting a third,
neutral arbitrator. The failure or inability of either party to choose an
arbitrator or of the arbitrators chosen by the parties to select a third neutral
arbitrator shall be resolved in accordance with the CPR Rules. Arbitration shall
be conducted at a mutually convenient location in Allegheny County, Pennsylvania
or at such other location as the parties may agree. The award in writing signed
by any two of the arbitrators shall be final and binding. In order to resolve
any disputes hereunder, the arbitrators shall implement the specific rights and
obligations set forth in this Agreement while fulfilling the intent stated in
Section 4 hereof. Either party shall have the right to seek, and the arbitrators
shall determine, declaratory relief of the nature generally set forth in the
Uniform Declaratory Judgments Act (as in effect in the State



                                       26
<PAGE>   30


of Alabama and as the same may be amended from time to time) including, but not
limited to, questions of construction of this Agreement, or a declaration of
rights, status or other legal relations hereunder. The arbitrators shall apply
the substantive statutory and common law of the State of Alabama to the dispute
and the evidentiary laws of the State of Alabama to the arbitration proceeding.
The arbitration shall be governed by the United States Arbitration Act, 9 U.S.C.
Sections 1-16, and judgment upon the award entered by the arbitrators may be
entered by any court having jurisdiction thereof. The arbitrators shall not
award damages in excess of compensatory damages. The costs and expenses of the
arbitration (other than attorneys' fees, if any) shall be borne one-half by USM
and one-half by the Transtar Unit. The arbitrators shall be permitted to review
existing documents or records of any party to the extent that, in the sole
discretion of the neutral arbitrator, such documents and/or records are deemed
to be relevant and to the extent the parties are permitted by law or by contract
to convey such documents or records to the arbitrator. Either party shall have
the right to designate any information sought in discovery or provided to the
arbitrators at their request as confidential and/or proprietary in which case
the neutral arbitrator shall determine whether the information sought


                                       27
<PAGE>   31

shall be disclosed in discovery or, if such information is provided to the
arbitrators at their request, shall not convey such information to the other
party.

            17. ASSIGNMENT. No party to this Agreement shall assign or transfer
this Agreement or any interest herein, other than to the lenders providing
financing to Transtar, Inc. (which lenders will act through a single agent)
without the prior written consent of the other party, which consent shall not be
unreasonably withheld. Subject to the provisions of this Section 17, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns to the parties. USM shall not directly or indirectly sell, transfer or
otherwise dispose of all or a substantial portion of the assets of the Concord
Preparation Plant during the term of this Agreement, unless the purchaser,
acquiror or other transferee assumes, in a writing reasonably satisfactory to
Transtar, all of the rights and obligations set forth in this Agreement.

            18. NOTICES. Unless otherwise specified herein, any and all notices
under this Agreement shall be in writing and shall be delivered to the party
entitled to receive the same: (1) by hand delivery; (2) by registered or
certified mail, return receipt requested; (3) by overnight delivery service
which provides proof of delivery; or (4) by telecopy, with a


                                       28
<PAGE>   32

duplicate copy sent via first class mail, postage pre-paid addressed as follows:

 If to USM:

         U. S. Steel Mining Co., LLC
         600 Grant Street - Room
         Pittsburgh, Pennsylvania 15219-2749
         Attention: Manager-Commercial Distribution & Traffic
         Phone: 412-433-4638
         Fax: 412-433-5839

   If to WGN:

         Warrior & Gulf Navigation
         50 Viaduct Road
         Chickasaw, Alabama 36611
         Attention: Director of Marketing
         Phone: 334-452-6019
         Fax: 334-452-6014

   If to Birmingham Southern/Fairfield Southern:

         Birmingham Southern/Fairfield Southern
         6200 E. J. Oliver Boulevard
         Fairfield,, Alabama 35064
         Attention: Director of Marketing
         Phone: 205-783-2640
         Fax: 205-783-2463

            19. LAW GOVERNING. This Agreement shall be construed in accordance
with the laws of the State of Alabama excluding its conflict of laws provision.

            20. RELATIONSHIP OF PARTIES. The relationship between USM and
Transtar Units under this Agreement shall be that of independent contractors.
Nothing in this Agreement shall be deemed to constitute a relationship of
agency, joint venture, partnership, or any relationship other than that
specified.

            21. INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES. In no event shall a
party be liable for any indirect, special or consequential damages as a result
of a breach of any provision of this Agreement.



                                       29
<PAGE>   33

            22. ENTIRETY OF AGREEMENT; AMENDMENTS. This Agreement constitutes
the entire agreement of the parties with respect to the subject matter hereof.
No change, modification, or alteration of this Agreement shall be effective
unless reduced to writing and signed by the parties. Waiver of any breach of the
Agreement by a party shall not be construed as a waiver of any other breach.

            23. MUTUAL RELEASE. The parties fully release and discharge each
other from all claims, known and unknown, arising under the 1988 Agreement which
either party may have against any other party to this Agreement. This provision
is not intended to apply to personal injury or property damage claims that
either party may have against the other.

            24. FORCE MAJEURE. The parties understand that performance by a
party may be interrupted or delayed by an occurrence outside of its control,
including but not limited to the following: an act of God, war, riot, sovereign
conduct, equipment failure, strikes, lockouts, conduct of third parties or other
similar causes beyond the reasonable control of the parties. If that should
occur, such party shall be excused from performance for as long as it is
reasonably necessary to 


                                       30
<PAGE>   34


cure the Force Majeure condition. In case of any dispute as to the
reasonableness of a resulting delay in performance, the parties shall submit the
matter to dispute resolution in accordance with the procedures set forth in
Sections 15 and 16.

            IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.


                                         U. S. STEEL MINING CO., LLC

                                         By  /s/ George T. Weber, Jr.
                                           ---------------------------------
                                         Title: President



                                         TRANSTAR, INC.


                                         By    /s/ Robert S. Rosati 
                                           ---------------------------------
                                         Title: President



                                       31