|   | **EXHIBIT 10.73**         |
|--------|---------------------------|
|   | A.T. MASSEY COAL  COMPANY |
|   | KU Contract # KUF02850    |
|        |                           |  |

 

 

**COALSUPPLY AGREEMENT**

 

This is a coal supplyagreement (the “Agreement”) dated January 1, 2002 between KENTUCKY UTILITIESCOMPANY, a Kentucky corporation, whose address is 220 West Main Street,Louisville, Kentucky 40202 (“Buyer”), and MASSEY COAL SALES COMPANY, INC. aVirginia corporation, whose address is P.O. Box 26765, Richmond, Virginia 23261(“Seller”).

 

The parties hereto agreeas follows:

 

**SECTION 1. GENERAL**.  Seller will sell to Buyer and Buyer will buyfrom Seller steam coal under all the terms and conditions of this Agreement.

 

**SECTION 2.  TERM.** The term of this Agreement shall commence on April 1, 2002 and shallcontinue through March 31, 2004.

 

**SECTION 3.  QUANTITY.**

 

§ 3.1  Base Quantity**.**  Subject to the price review set forth in § 8.1, Seller shall selland deliver, and Buyer shall purchase and accept delivery of the followingannual base quantity of coal (“Base Quantity”):

 

| **YEAR**       |   | **BASE  QUANTITY (TONS)** |   |
|----------------|--------|---------------------------|--------|
|           |   |                      |   |
| 4/1/02-3/31/03 |   | 800,000                   |   |
|           |   |                      |   |
| 4/1/03-3-31-04 |   | 800,000                   |   |

 

The Base Quantity will bedelivered in approximately equal monthly quantities and in accordance with amutually agreed-upon schedule.

 

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**SECTION 4.  SOURCE.**

 

§ 4.1 Source.  The coal sold hereunder, shall be suppliedprimarily from Seller’s Elk Run, Progress, Black Castle and Bandmill Mines,located in Boone and Logan Counties, West Virginia (the “Coal Property”).

 

§ 4.2 Assurance ofOperation and Reserves.  Sellerrepresents and warrants that the Coal Property contains economicallyrecoverable coal of a quality and in quantities which will be sufficient tosatisfy all the requirements of this Agreement.  Further, Seller has adequate machinery, equipment and other facilitiesto produce, prepare and deliver coal in the quantity and of the qualityrequired by this Agreement.  Seller willoperate and maintain such machinery, equipment and facilities in accordancewith good mining practices so as to efficiently and economically produce,prepare and deliver such coal.  Selleragrees that Buyer is not providing any capital for the purchase of suchmachinery, equipment and/or facilities and that Seller shall operate andmaintain same at its sole expense, including all required permits andlicenses.  Seller hereby allocates tothis Agreement sufficient reserves of coal meeting the quality specificationshereof so as to fulfill the quantity requirements hereof.

 

§ 4.3  Seller’s Preparation of Mining Plan.  If Seller claims force majeure or fails todeliver the required quantity hereunder for any other reason, Seller shall,upon request, promptly deliver to Buyer mining and production historiescovering relevant time periods and plans for the Coal Property and suchreasonably related supporting data as Buyer shall request.  Seller shall,

 

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upon Buyer’s requestduring Coal Property Inspections, if any (made pursuant to § 19), provideinformation to Buyer of its mining plan which shall include (but not be limitedto) the following information: (i) reserves from which the coal will beproduced during the term hereof and the mining sequence, by year (or such othertime intervals as mutually agreed) during the term of this Agreement, fromwhich coal will be mined; (ii) methods of mining such coal; (iii) methods oftransporting and, in the event a preparation plant is utilized by Seller, themethods of washing coal to insure compliance with the quantity and qualityrequirements of this Agreement including a description and flow sheet of thepreparation plant; (iv) quality data plotted on the maps depicting data pointsand isolines by ash, sulfur, and Btu; (v) quality control plans includingsampling and analysis procedures to insure individual shipments meet qualityspecifications; and (vi) Seller’s aggregate commitments to others to sell coalfrom the Coal Property during the term of this Agreement.

 

Buyer’s receipt ofinformation or data furnished by Seller (the “Mining Information”) shall not inany manner relieve Seller of any of Seller’s obligations or responsibilitiesunder this Agreement; nor shall such review be construed as constituting anapproval of Seller’s proposed mining plan as prudent mining practices, suchreview by Buyer being limited solely to a determination, for Buyer’s purposesonly, of Seller’s capability to supply coal to fulfill Buyer’s requirements ofa dependable coal supply.

 

§ 4.4 Substitute Coal.  Notwithstanding the above, in the event thatSeller is unable to produce or obtain coal from the Coal Property in thequantity and of the quality required by this Agreement, and such inability isnot caused by a force majeure event as defined in § 10, Seller shall have theright to supply substitute coal after having received Buyer’s prior writtenconsent

 

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(which shall not beunreasonably withheld).  Such substitutecoal shall be provided under all the terms and conditions of this Agreementincluding, but not limited to, the price provisions of §8, the qualityspecifications of § 6.1, and the provisions of § 5 concerning reimbursement toBuyer for increased transportation costs.

 

**SECTION 5.  DELIVERY.**

 

§ 5.1 Barge Delivery.  The coal shall be delivered to Buyer F.O.B.barge at the following points (each a “Delivery Point”): for Elk Run, Progress,Black Castle and Bandmill Mines, the KRT-Ceredo Dock at mile point 314.5 on theOhio River.  Seller may deliver the coalat a location different from the Delivery Point, provided, however, that Sellershall reimburse Buyer for any resulting increases in the cost of transportingthe coal to Buyer’s generating stations. Buyer shall retain any resultingsavings in such transportation costs.

 

Title to and risk of lossof coal sold will pass to Buyer and the coal will be considered to be deliveredwhen barges containing the coal are disengaged by Buyer’s barging contractorfrom the loading dock.  Buyer or itscontractor shall furnish suitable barges in load ready condition in accordancewith a delivery schedule provided by Buyer to Seller.  Seller shall arrange and pay for all costs of transporting thecoal from the mines to the loading docks and loading and trimming the coal intobarges to the proper draft and the proper distribution within the barges.  Buyer shall arrange and pay for all costs oftransporting the coal by barge from the Delivery Point to its generatingstation(s).  For delays caused by Sellerin handling the scheduling of shipments with Buyer’s barging contractor, Sellershall be responsible for any demurrage or other penalties assessed by saidbarging contractor to Buyer which accrue at the Delivery Point, including the 

 

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demurrage, penalties forloading less than the minimum of 1,500 tons per barge, or other penaltiesassessed for barges not loaded in conformity with applicable requirements.  Buyer shall be responsible to deliver bargesin as clean and dry condition as practicable. Seller or its affiliate shall require of the loading dock operator thatthe barges and towboats provided by Buyer or Buyer’s barging contractor beprovided convenient and safe berth free of wharfage, dockage, fleeting,switching and other harbor and port charges; that while the barges are in thecare and custody of the loading dock, all U.S. Coast Guard regulations andother applicable laws, ordinances, rulings, and regulations shall be compliedwith, including adequate mooring and display of warning lights; that any waterin the cargo boxes of the barges, be pumped out by the loading dock operatorprior to loading; and that the loading operations be performed in a workmanlikemanner and in accordance with the reasonable loading requirements of Buyer andBuyer’s barging contractor.  Seller willuse commercially reasonable efforts to provide to Buyer evidence that itsloading dock operator carries adequate landing owner’s or wharfinger’sinsurance with basic coverage of not less than $300,000, and total of basiccoverage and excess liability coverage of not less than $1,000,000, suchevidence to be in the form of a certificate of insurance from the insurancecarrier or an acceptable certificate of self-insurance with requirement for 30days advance notification of Buyer in the event of termination of or materialreduction in coverage under the insurance.

 

**SECTION 6. QUALITY.**

 

§ 6.1                       Specifications.  The coal delivered hereunder shall conformto the following specifications on an “as received” basis:

 

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| **Specifications** |   | **Guaranteed Monthly  Weighted Average(1)** |   | **Rejection Limits  (per shipment)** |   |
|--------------------|--------|---------------------------------------------|--------|--------------------------------------|--------|
|               |   |                                        |   |                                 |   |   |   |   |   |
| BTU/LB.            |   | min.                                        |   | 12,000                               |   | < |   | 11,800 |   |
|               |   |                                        |   |                                 |   |   |   |   |   |
| LBS/MMBTU:         |   |                                        |   |                                 |   |   |   |   |   |
| MOISTURE           |   | max.                                        |   | 6.67                                 |   | > |   | 8.33 |   |
| ASH                |   | max.                                        |   | 10.83                                |   | > |   | 10.83 |   |
| SULFUR             |   | max.                                        |   | 0.60                                 | *      | > |   | 0.60 |   |
| SULFUR             |   | min.                                        |   | NA                                   |   | < |   | NA |   |
| CHLORINE           |   | max.                                        |   | 0.18                                 |   | > |   | 0.18 |   |
| NITROGEN           |   | max.                                        |   | 1.30                                 |   | > |   | 1.30 |   |

 

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* Individual shipmentlimit of 1.20 lbs. SO2/MMBTU

 
| SIZE  (2” x 0”):                     |   |   |   |        |   |   |   |   |   |
|------------------------------------------------|--------|--------|--------|-------------|--------|--------|--------|--------|--------|
| Top  size (inches)**                           |   | max.   |   | 2x0         |   | >   |   | 2x0    |   |
| Fines  (% by wgt)                              |   |   |   |        |   |   |   |   |   |
| Passing  1/4” screen                      |   | max.   |   | 50          |   | >   |   | 50     |   |
|                                           |   |   |   |        |   |   |   |   |   |
| %  BY WEIGHT:                                  |   |   |   |        |   |   |   |   |   |
| VOLATILE                                       |   | min.   |   | 34          |   | <   |   | 32     |   |
| FIXED  CARBON                                  |   | min.   |   | 46          |   | <   |   | 42     |   |
| GRINDABILITY  (HGI)                            |   | min.   |   | 45          |   | <   |   | 42     |   |
|                                           |   |   |   |        |   |   |   |   |   |
| ASH  FUSION TEMPERATURE (°F) (ASTM D1857) |   |   |   |        |   |   |   |   |   |
|                                           |   |   |   |        |   |   |   |   |   |
| REDUCING  ATMOSPHERE                           |   |   |   |        |   |   |   |   |   |
| Initial  Deformation                           |   | min.   |   |  +2550 |   | min.   |   | +2450  |   |
| Softening  (H=W)                               |   | min.   |   |  +2610 |   | min.   |   | +2500  |   |
| Softening  (H=1/2W)                            |   | min.   |   |  +2640 |   | min.   |   | +2550  |   |
| Fluid                                          |   | min.   |   |  +2670 |   | min.   |   | +2575  |   |
|                                           |   |   |   |        |   |   |   |   |   |
| OXIDIZING  ATMOSPHERE                          |   |   |   |        |   |   |   |   |   |
| Initial  Deformation                           |   | min.   |   |  +2610 |   | min.   |   | +2500  |   |
| Softening  (H=W)                               |   | min.   |   |  +2660 |   | min.   |   | +2550  |   |
| Softening  (H=1/2W)                            |   | min.   |   |  +2690 |   | min.   |   | +2570  |   |
| Fluid                                          |   | min.   |   |  +2700 |   | min.   |   | +2590  |   |

 

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(1) An actual MonthlyWeighted Average will be calculated for each specification for coal deliveredto the Kentucky Utilities Ghent generating station.

 

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| Note:  | As used herein |   | >   |   | means greater than: |
|--------|----------------|--------|--------|--------|---------------------|
|   |           |   |   |   |                |
|   |           |   | <   |   | means less than.    |

 

§ 6.2                       Definitionof “Shipment”.  As used herein, a“shipment” shall mean the quantity of coal actually loaded into one barge.

 

§ 6.3                       Rejection.

 

Buyer has the right, butnot the obligation, upon written notification to Seller to reject any shipmentwhich exceeds the Rejection Limits set forth in § 6.1, such written notice tobe provided to Seller within forty-eight (48) hours after receipt of the coalanalysis provided for in § 7.2 or such right to reject is waived.  In the event Buyer rejects suchnon-conforming coal as provided herein, title to and risk of loss of the coalshall be considered to have never passed to Buyer and Buyer shall return thecoal to Seller or, at Seller’s request, divert such coal to Seller’s designee,all at Seller’s cost and risk.  Sellershall replace the rejected coal within five (5) working days from notice ofrejection with coal conforming to the Rejection Limits set forth in § 6.1.  If Seller fails to replace the rejected coalwithin such five (5) working day period or the replacement coal is rightfullyrejected, Buyer may purchase coal from another source in order to replace therejected coal.  Seller shall reimburseBuyer for (i) any amount by which the actual price plus transportation costs toBuyer of such coal purchased from another source exceed the price of such coalunder this Agreement plus transportation costs to Buyer from the DeliveryPoint; and (ii) any and all transportation, storage, handling, or otherexpenses that have been incurred by Buyer for rightfully rejected coal.  This remedy is in addition to all of Buyer’sother remedies under this Agreement and under applicable law and in equity forSeller’s breach.

 

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If Buyer fails to rejecta shipment of non-conforming coal which it had the right to reject for failureto meet any or all of the Rejection Limits set forth in §6.1, or because suchshipment contained a material amount of extraneous materials, then suchnon-conforming coal shall be deemed accepted by Buyer.  Further, for shipments containing extraneousmaterials, which include, but are not limited to, slate, rock, wood, cornhusks, mining materials, metal, steel, etc., the estimated weight of suchmaterials shall be deducted from the weight of that shipment.

 

§ 6.4                       Suspensionand Termination.

 

If the coal soldhereunder fails to meet one or more of the Guaranteed Monthly Weighted Averagesset forth in §6.1 for any two (2) months in a six (6) month period or if 20% ofthe shipments in any month are rejectable by Buyer, then Buyer may upon noticeconfirmed in writing and sent to Seller by certified mail, suspend futureshipments except shipments already loaded into barges.  Seller shall, within 15 days after writtennotice, provide Buyer with reasonable assurances that subsequent monthlydeliveries of coal shall meet or exceed the Guaranteed Monthly WeightedAverages set forth in §6.1.  If Sellerfails to provide such assurances within said 15 day period, Buyer may terminatethis Agreement by giving written notice of such termination at the end of the15 day period.  A waiver of this rightfor any one period by Buyer shall not constitute a waiver for subsequentperiods.  If Seller provides suchassurances to Buyer’s reasonable satisfaction, shipments hereunder shall resumeand any tonnage deficiencies resulting from suspension may be made up atBuyer’s sole option.  Buyer shall notunreasonably withhold its acceptance of Seller’s assurances, or delay theresumption of shipment. If Seller, after such assurances, fails to meet any ofthe Guaranteed Monthly Weighted Averages for any one (1) month within the nextsix (6) months or if three (3) barge shipments are rejectable

 

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within any one (1) monthduring such six (6) month period, then Buyer may terminate this Agreement andexercise all its other rights and remedies under applicable law and in equityfor Seller’s breach.

 

**SECTION 7.  WEIGHTS, SAMPLING AND ANALYSIS.**

 

§ 7.1  Weights. The weight of the coaldelivered hereunder shall be determined on a per shipment basis by Seller onthe basis of scale weights at the rail loading location unless another methodis mutually agreed upon by the parties. Such scales shall be duly reviewed by an appropriate testing agency andmaintained in an accurate condition. Buyer shall have the right, at Buyer’s expense and upon reasonablenotice, to have the scales checked for accuracy at any reasonable time orfrequency.  If the scales are found tobe over or under the tolerance range allowable for the scale based on industryaccepted standards, either party shall pay to the other any amounts owed due tosuch inaccuracy for a period not to exceed thirty (30) days before the time anyinaccuracy of scales is determined.

 

§ 7.2  Sampling and Analysis. The Seller hassole responsibility for quality control of the coal and shall forward itsloading quality to the Buyer as soon as possible.  The sampling and analysis of the coal loaded hereunder shall beperformed by Seller and the results thereof shall be accepted and used for thequality and characteristics of the coal delivered under this Agreement.  All analyses shall be made in Seller’slaboratory or an independent laboratory at Seller’s expense.  Samples for analyses shall be taken bySeller’s approved procedures of sampling, may be composited and shall be takenwith a frequency and regularity sufficient to provide reasonably accuraterepresentative samples of the loadings made hereunder.  Seller shall notify Buyer in writing of anysignificant changes in Seller’s sampling and analysis practices.  Any such changes

 

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in Seller’s sampling andanalysis practices shall provide for no less accuracy than the sampling andanalysis practices existing at the time of the execution of this Agreement,unless the Parties otherwise mutually agree.

 

Each sample taken bySeller shall be divided into 4 parts and put into airtight containers, properlylabeled and sealed.  One part shall beused for analysis by Seller; one part shall be used by Seller as a checksample, one part shall be retained by Seller until thirty (30) days (“DisposalDate”) after the sample is taken, and shall be delivered to Buyer for analysisif Buyer so requests before the Disposal Date; and one part (“Referee Sample”)shall be retained by Seller until the Disposal Date.  Buyer, on reasonable notice to Seller, shall have the right tohave a representative present to observe the sampling and analyses performed bySeller.  Unless Buyer requests a RefereeSample analysis before the Disposal Date, Seller’s analysis shall be used todetermine the quality of the coal loaded hereunder.  The Monthly Weighted Averages shall be determined by utilizingthe individual shipment analyses.

 

If any dispute arisesbefore the Disposal Date, the Referee Sample retained by Seller shall besubmitted for analysis to an independent commercial testing laboratory(“Independent Lab”) mutually chosen by Buyer and Seller.  All testing of any such sample by theIndependent Lab shall be at requestor’s expense unless the results differ bymore than the applicable ASTM reproducibility standards, in such case Buyerwill pay for testing.  If theIndependent Lab results differ by more than the applicable ASTM reproducibilitystandards, the Independent Lab results will govern.  The cost of the analysis made by the Independent Lab shall beborne by Buyer to the extent that Seller’s analysis prevails and by Seller to theextent that the analysis of the Independent Lab prevails.

 

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**SECTION 8.  PRICE**.

 

§  8.1 Base Price.  The base price (“Base Price”) of the coal tobe sold hereunder will be firm during the entire term of this agreement inaccordance with the following schedule, subject to adjustment only for qualityvariations pursuant to §8.2 and New Costs pursuant to §8.4:

 

**BASE PRICE**

 
| **PERIOD**        |   | **LOADING  POINT** |   | **($PER  MMBTU)**    |   | **($PER TON)** |   |
|-------------------|--------|--------------------|--------|----------------------|--------|----------------|--------|
|              |   |               |   |                 |   |           |   |
| 4/1/02  - 3/31/04 |   | KRT-Ceredo Dock    |   | 1.80625 F.O.B. barge |   | $              | 43.35  |   |
|                   |        |                    |        |                      |        |                |        |  |

 

§ 8.2                       QualityPrice Discounts.

 

(a)                                  TheBase Price is based on coal meeting or exceeding the Guaranteed MonthlyAverages specifications for the Kentucky Utilities Ghent Generating Station, asset forth in §6.1. Quality price discounts shall be applied for eachspecification, for the Kentucky Utility generating station, to reflect failuresto meet the Guaranteed Monthly Averages or Individual Shipment SO2specifications set forth in §6.1, as determined pursuant to §7.2, subject tothe provisions set forth below.  Thediscount values used are as follows:

 

MONTHLY DISCOUNTVALUES

 
|    |   | **$/MMBTU** |   |
|---------|--------|-------------|--------|
| BTU/LB. |   | 0.2604      |   |

 
|     |   | **$/LB./MMBTU** | ** ** |
|----------|--------|-----------------|------------|
| ASH      |   | 0.0083          |       |
| MOISTURE |   | 0.0016          |       |

 

## INDIVIDUAL SHIPMENT DISCOUNT VALUE

 
|   |   | **$/TON** |   |
|--------|--------|-----------|--------|
| SO2    |   | 3.00      |   |

 

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(b)                                 Notwithstandingthe foregoing, for each specification, there shall be no discount if the actualMonthly Weighted Average meets the applicable Discount Point set forth below.However, if the actual Monthly Weighted Average for the Kentucky UtilitiesGhent generating station fails to meet such applicable Discount Point, then thediscount shall apply to and shall be calculated on the basis of the differencebetween the actual Monthly Weighted Average and the Guaranteed Monthly WeightedAverage pursuant to the methodology shown in Exhibit A attached hereto.

 
|      |   | **Guaranteed  Monthly  Weighted Average** |   | **Discount  Point** |   |
|-----------|--------|-------------------------------------------|--------|---------------------|--------|
|      |   |                                      |   |                |   |
| BTU/LB    |   | Min. 12,000                               |   | 11,800              |   |
|      |   |                                      |   |                |   |
| LB/MMBTU: |   |                                      |   |                |   |
| ASH       |   | Max. 10.83                                |   | 10.83               |   |
| MOISTURE  |   | Max. 6.67                                 |   | 8.33                |   |

 
|      |   | **Guaranteed Barge  LbsSO2/Mmbtu** |   | **Discount Point** |   |
|-----------|--------|------------------------------------|--------|--------------------|--------|
| LB/MMBTU: |   |                               |   |               |   |
| SO2       |   | Max. 1.20                          |   | 1.20               |   |

 

For example, if theactual Monthly Weighted Average of ash equals 11.00 lb/MMBTU, then theapplicable discount would be (11.00 lb. – 10.83 lb.) X $.0083/lb/MMBTU =$.001411/MMBTU.

 

§ 8.3                       PaymentCalculation Exhibit A attached hereto shows the methodology for calculatingthe coal payment and quality price discounts for the month Seller’s coal isunloaded by Buyer.  If there are anysuch discounts, Buyer shall apply credit to amounts owed Seller for the monththe coal was unloaded.

 

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§ 8.4                       NewCosts. The Base Price shall be subject to adjustment only in the event thatnew or amended applicable Federal, state or local statutes, laws, rules,regulations, orders, or other governmental impositions or a change in theinterpretation  of any such statutes,laws, rules, regulations, orders or other governmental impositions on the coalto be supplied hereunder, including but not limited to tax increases ordecreases that occur after April 1, 2002, which cause Seller’s or itsaffiliate’s cost of the mining, processing, transportation, delivery or saleof  coal to Buyer under this Agreementto increase or decrease.  Seller shallpromptly provide written notice to Buyer of any such changes and supplysufficient documentation for Buyer to verify any such change.  Either Buyer or Seller may request a BasePrice adjustment under this Section 8.4, which shall be comprised of no more thanthe reasonable costs directly associated with the effect of such change on thecoal to be supplied hereunder.  If thenon-requesting party agrees to the requested price adjustment, such adjustment,shall be made effective on the first day of the calendar month following theeffective date of any change, (except when such change is effective on thefirst day of the month in which case the adjustment shall be made as of suchdate).  If the non-requesting party rejectsthe request of the requesting party for a Base Price adjustment, the requestingparty, at its option within fifteen days thereafter, may terminate the contractwith thirty days’ written notice to the other party without liability due tosuch termination for either party.

 

**SECTION 9.  INVOICES, BILLING AND PAYMENT.**

 

§ 9.1                       Invoicing:

 

Invoices for KentuckyUtilities will be sent to the following address:

 

Kentucky UtilitiesCompany

220 West Main Street

Louisville, KY  40202

 

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Attention: Director,Corporate Fuel

Fax No.: (502) 627-3243

 

§ 9.2                       InvoiceProcedures for Coal Shipments. Seller shall invoice Buyer at the Base Priceincluding any adjustments, and reconciliations as provided herein, for all coalunloaded in a calendar month by the fifteenth (15th) of thefollowing month. In the event that any adjustment is not calculated in time forinclusion on the invoice, such adjustment(s) may be stated as a retroactiveadjustment on the invoice next following the calculation date.  A statement showing the basis for theadjustment shall accompany the invoice.

 

§ 9.3                       Paymentfor Coal Shipments.  For all coalunloaded at the Ghent Station between the first (1st) and fifteenth(15th) days of any calendar month, Buyer shall make preliminarypayment for eighty-five percent (85%) of the amount owed for the Coal (based onthe assumption that the Coal will meet all guaranteed monthly qualityparameters) by the twenty-fifth (25th) day of such month ofunloading, except that, if the 25th is not a regular work day,payment shall be made on the next regular work day.  For all Coal unloaded at the Ghent Station between the sixteenth(16th) and the last day of any calendar month, Buyer shall makepreliminary payment for eighty-five percent (85%) of the amount owed for theCoal (based on the assumption that the Coal will meet all guaranteed monthlyquality parameters) by the tenth (10th) day of the month followingthe month of unloading, except that, if the 10th is not a regularwork day, payment shall be made on the next regular work day.

 

Preliminary payment shallbe in the amount of eighty-five percent (85%) of the then current price on adollar per ton basis as calculated by the guaranteed monthly weighted averageBTU/lb. and the then current Base Price in cents per MMBTU.

 

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A reconciliation ofamounts paid and amounts owed shall occur by the twenty-fifth (25th)day of the month following the month of unloading.  (For example, Buyer will make one initial payment by August 25for eighty-five percent (85%) of Coal delivered August 1 through August 15, anda second payment by September 10 for eighty-five percent (85%) of Coaldelivered August 16 through August 31. A reconciliation will occur by September 25 for all deliveries made inAugust.)  The reconciliation shall bemade as follows: Seller shall invoice Buyer on or before the 15thday of the month following the month of delivery.  The amount due for all Coal (based on the Base Price minus anyQuality Price Discounts) delivered and unloaded and accepted by Buyer duringany calendar month shall be calculated and compared to the sum of thepreliminary payments made for Coal delivered and unloaded and accepted duringsuch month.  The difference shall bepaid by or paid to Seller, as applicable, by the twenty-fifth (25th)day of the month following the month of unloading, except, that, if the 25this not a regular work day, payment shall be made on the next regular workday.  Payment for coal unloaded in acalendar month shall by mailed or wired by the 25th of the monthfollowing the month of unloading, except that, if the 25th is aweekend or a holiday observed by the Buyer, payment shall be made on the nextbusiness day or within ten days after receipt of Seller’s invoice, whichever islater.  Buyer shall electronicallytransfer all payments to Seller’s account at:

 

MasseyCoal Sales Company, Inc.

SUNTRUST BANK, Richmond, VA.

 

AccountNo.   201367459

 

ABANo.   051000020  

 

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§ 9.4                       Withholding.  Buyer shall have the right to withhold frompayment of any billing or billings (i) any sums which are the subject of a goodfaith dispute provided, however, that Buyer shall pay all amounts then duewhich are not disputed; and (ii) any amounts owed to Buyer from Seller.  Buyer shall notify Seller promptly inwriting of any such dispute, stating the basis of its claim and the amount itintends to withhold.

 

Payment by Buyer, whetherknowing or inadvertent, of any amount in dispute shall not be deemed a waiverof any claims or rights by Buyer with respect to any disputed amounts orpayments made.

 

**SECTION 10.****                     FORCEMAJEURE.**

 

§ 10.1  General Force Majeure.  If either party hereto is delayed in orprevented from performing any of its obligations or from utilizing the coalsold under this Agreement due to acts of God, war, riots, civil insurrection,acts of the public enemy, strikes, lockouts, fires, floods or earthquakes, orany similar events which are beyond the reasonable control and without thefault or negligence of the party affected thereby, then the obligations of bothparties hereto shall be suspended to the extent made necessary by such event;provided that the affected party gives written notice to the other party asearly as practicable of the nature and probable duration of the force majeureevent.  The party declaring forcemajeure shall exercise due diligence to avoid and shorten the force majeureevent and will keep the other party advised as to the continuance of the force majeureevent.

 

During any period inwhich Seller’s ability to perform hereunder is affected by a force majeureevent, Seller shall not deliver any coal to any other buyers to whom Seller’sability to supply is similarly affected by such force majeure event unlesscontractually committed to do so 

 

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at the beginning of theforce majeure event; and further shall deliver to Buyer under this Agreement atleast a pro rata portion (on a per ton basis) of its total contractualcommitments to all its buyers to whom Seller’s ability to supply is similarlyaffected by such force majeure event in place at the beginning of the forcemajeure event. An event which affects the Seller’s ability to produce or obtaincoal from a mine other than the Coal Property will not be considered a forcemajeure event hereunder.

 

Tonnage deficienciesresulting from Buyer’s force majeure event shall be made up at Seller’s soleoption on a mutually agreeable schedule; tonnage deficiencies resulting fromSeller’s force majeure event shall be made up at Buyer’s sole option on amutually agreeable schedule.

 

§ 10.2  Environmental Law Force Majeure.  The parties recognize that, during thecontinuance of this Agreement, legislative or regulatory bodies or the courtsmay adopt environmental laws, regulations, policies and/or restrictions whichwill make it impossible or commercially impracticable for Buyer to utilize thisor like kind and quality coal which thereafter would be delivered hereunder.  If as a result of the adoption of such laws,regulations, policies, or restrictions, or change in the interpretation orenforcement thereof, Buyer decides that it will be impossible or commerciallyimpracticable for Buyer to utilize such coal, Buyer shall so notify Seller, andthereupon Buyer and Seller shall promptly consider whether corrective actionscan be taken in the mining and preparation of the coal at Seller’s mine and/orin the handling and utilization of the coal at Buyer’s generating station; andif in Buyer’s sole judgment such actions will not, without unreasonable expenseto either Buyer or Seller, make it possible and commercially practicable forBuyer to so utilize coal which thereafter would be delivered hereunder withoutviolating any applicable law, regulation, policy or order, Buyer shall have the

 

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right, upon the later of60 days notice to Seller or the effective date of such restriction, toterminate this Agreement without further obligation hereunder on the part ofeither party except for shipments already loaded onto barges and/or in transitto Buyer.

 

**SECTION 11.  CHANGES**.  Buyer may, by mutual agreement with Seller, at any time bywritten notice pursuant to § 12 of this Agreement, make changes within thegeneral scope of this Agreement in any one or more of the following: quality ofcoal or coal specifications, quantity of coal, method or time of shipments,place of delivery (including transfer of title and risk of loss), method(s) ofweighing, sampling or analysis and such other provision as may affect thesuitability and amount of coal for Buyer’s generating stations.

 

If any such changes makesnecessary or appropriate an increase or decrease in the then current price perton of coal, or in any other provision of this Agreement, an equitableadjustment shall be made in price, whether current or future or both, and/or insuch other provisions of this Agreement as are affected directly or indirectlyby such change, and the Agreement shall thereupon be modified in writingaccordingly.

 

Any claim by the Sellerfor adjustment under this § 11 shall be asserted within thirty (30) days afterthe date of Seller’s receipt of the written notice of the requested change, itbeing understood, however that Seller shall not be obligated to modify thisAgreement until an equitable adjustment has been agreed upon.  The parties agree to negotiate promptly andin good faith to agree upon the nature and extent of any equitable adjustment.

 

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**SECTION 12.****                     NOTICES.**

 

§ 12.1  Form and Place of Notice. Anyofficial notice, request for approval or other document required to be givenunder this Agreement shall be in writing, unless otherwise provided herein, andshall be deemed to have been sufficiently given when delivered in person,transmitted by facsimile or other electronic media (with confirmation),delivered to an established mail service for same day or overnight delivery, ordispatched in the United States mail, postage prepaid, for mailing by firstclass, certified, or registered mail, return receipt requested, and addressedas follows:

 

If to Buyer:                                                                                    KentuckyUtilities Company

220 West Main Street

Louisville, Kentucky40202

Attn.:  Director, Corporate Fuels

Fax No.: (502) 627-3243

 

If to Seller:                                                                                       MasseyCoal Sales Company, Inc.

P.O. Box  26765

Richmond, Virginia  23261

Attn: SeniorVice-President

Fax No.: (804) 788-1811

 

With a copy to:

 

A.T. Massey Coal Co.,Inc.

P.O. Box 26765

Richmond, Virginia 23261

Attn: General Counsel

Fax No.: (804) 788-1804

 

§ 12.2  Change of Person or Address.  Either party may change the person oraddress specified above upon giving written notice to the other party of suchchange.

 

§ 12.3  Electronic Data Transmittal.  Seller hereby agrees, at Seller’s cost, toelectronically transmit shipping notices and/or other data to Buyer in amutually acceptable format.

 

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**SECTION 13.****                     RIGHTTO RESELL.**  Buyer shall have theunqualified right to sell all or any of the coal purchased under thisAgreement.

 

**SECTION 14.****                     INDEMNITYAND INSURANCE.**

 

§ 14.1  Indemnity.  Both parties agree to indemnify and save harmless the other, itsofficers, directors, employees and representatives from any responsibility andliability for any and all claims, demands, losses, legal actions for personalinjuries, property damage and pollution (including reasonable inside andoutside attorney’s fees)  (i) due to anyfailure of either party to comply with laws, regulations or ordinances, or (ii)due to the acts or omissions of either party in the performance of thisAgreement.  Notwithstanding theforegoing, neither party shall be liable to the other for any consequential,incidental, special, punitive, exemplary or indirect damages, lost profits, orbusiness interruption damages, whether by statute, in tort or in contractarising out of the performance of any of the obligations under this Agreement.

 

§ 14.2  Insurance.  Seller agrees to carry insurance coverage with minimum limits asfollows:

 

(1)                         CommercialGeneral Liability, including Completed Operations and Contractual Liability,$1,000,000 single limit liability.

 

(2)                         AutomobileGeneral Liability, $1,000,000 single limit liability.

 

(3)                         Inaddition, Seller shall carry excess liability insurance covering the foregoingperils in the amount of $4,000,000 for any one occurrence.

 

(4)                         Workers’Compensation and Employer’s Liability with statutory limits.

 

If any of the abovepolicies are written on a claims made basis, then the retroactive date of thepolicy or policies will be no later than the effective date of thisAgreement.  Certificates of 

 

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Insurance satisfactory inform to the Buyer and signed by the Seller’s insurer shall be supplied by theSeller to the Buyer evidencing that the above insurance is in force and thatnot less than 30 calendar days written notice will be given to the Buyer priorto any cancellation or material reduction in coverage under the policies.  The Seller shall cause its insurer to waiveall subrogation rights against the Buyer respecting all losses or claimsarising from performance hereunder. Evidence of such waiver satisfactory in form and substance to the Buyershall be exhibited in the Certificate of Insurance mentioned above.  Seller’s liability shall not be limited toits insurance coverage.

 

**SECTION 15.****                     TERMINATIONFOR DEFAULT.**

 

Subject to § 6.4, ifeither party hereto commits a material breach of any of its obligations underthis Agreement at any time, including, but not limited to, a breach of arepresentation and warranty set forth herein, then the other party has theright to give written notice describing such breach and stating its intentionto terminate this Agreement no sooner than 30 days after the date of the notice(the “notice period”).  If such materialbreach is curable and the breaching party cures such material breach within thenotice period, then the Agreement shall not be terminated due to such materialbreach.  If such material breach is notcurable or the breaching party fails to cure such material breach within thenotice period, then this Agreement shall terminate at the end of the noticeperiod in addition to all the other rights and remedies available to the aggrievedparty under this Agreement and at law and in equity.

 

**SECTION 16.****                     TAXES,DUTIES AND FEES.**

 

Seller shall pay whendue, and the price set forth in § 8 of this Agreement shall be inclusive of,all taxes, duties, fees and other assessments of whatever nature imposed by 

 

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governmental authoritieswith respect to the transactions contemplated under this Agreement, as suchprice may be adjusted pursuant to § 8.4.

 

**SECTION 17.****                     DOCUMENTATIONAND RIGHT OF AUDIT.**

 

Seller shall maintain allrecords and accounts pertaining to payments, quantities, quality analyses, andsource for all coal supplied under this Agreement for a period lasting throughthe term of this Agreement.   Buyershall have the right, at its sole cost and expense, to audit, copy and inspectsuch records and accounts at any reasonable time upon reasonable notice duringthe term of this Agreement.

 

**SECTION 18.****                     EQUALEMPLOYMENT OPPORTUNITY**.  To theextent applicable, Seller shall comply with all of the following provisionswhich are incorporated herein by reference: Equal Opportunity regulations set forth in 41 CFR § 60-1.4(a) and(c) prohibiting discrimination against any employee or applicant for employmentbecause of race, color, religion, sex, or national origin;  Vietnam Era Veterans Readjustment AssistanceAct regulations set forth in 41 CFR § 50-250.4 relating to the employmentand advancement of disabled veterans and veterans of the Vietnam Era;Rehabilitation Act regulations set forth in 41 CFR § 60-741.4 relating to theemployment and advancement of qualified disabled employees and applicants foremployment; the clause known as “Utilization of Small Business Concerns andSmall Business Concerns Owned and Controlled by Socially and EconomicallyDisadvantaged Individuals” set forth in 15 USC § 637(d)(3); andsubcontracting plan requirements set forth in 15 USC § 637(d).

 

**SECTION 19.****                     COALPROPERTY INSPECTIONS. **Buyer andits representatives, and others as may be required by applicable laws, ordinancesand regulations shall have the right at all reasonable times and at their ownexpense upon reasonable notice to 

 

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Seller to inspect theCoal Property, including the loading facilities, scales, sampling system(s),wash plant facilities, and mining equipment for conformance with thisAgreement. Seller shall undertake reasonable care and precautions to preventpersonal injuries to any representatives, agents or employees of Buyer(collectively, “Visitors”) who inspect the Coal Property. Any such Visitorsshall make every reasonable effort to comply with Seller’s regulations andrules regarding conduct on the work site, made known to Visitors prior toentry, as well as safety measures mandated by state or federal rules,regulations and laws.  Buyer understandsthat mines and related facilities are inherently high-risk environments.  Buyer’s failure to inspect the Coal Propertyor to object to defects therein at the time Buyer inspects the same shall notrelieve Seller of any of its responsibilities nor be deemed to be a waiver ofany of Buyer’s rights hereunder.

 

**SECTION 20.****                     WARRANTIES.**  OTHER THAN THOSE EXPRESSLY PROVIDED HEREIN,SELLER MAKES NO OTHER REPRESENTATION OR WARRANTY, WRITTEN OR, EXPRESS OR IMPLIED,IN CONNECTION WITH THE SALE AND PURCHASE OF COAL HEREUNDER.  ALL WARRANTIES OF MERCHANTABILITY OF FITNESSFOR A PARTICULAR PURPOSE OR ARISING FROM A COURSE OF DEALING OR USEAGE OF TRADEARE SPECIFICALLY EXCLUDED.

 

**SECTION 21.****                     MISCELLANEOUS.**

 

§ 21.1  Applicable Law.  This Agreement shall be construed inaccordance with the laws of the Commonwealth of Kentucky, and all questions ofperformance of obligations hereunder shall be determined in accordance withsuch laws.

 

§ 21.2  Headings.  The paragraph headings appearing in this Agreement are forconvenience only and shall not affect the meaning or interpretation of thisAgreement.

 

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§ 21.3  Waiver.  The failure of either party to insist on strict performance ofany provision of this Agreement, or to take advantage of any rights hereunder,shall not be construed as a waiver of such provision or right.

 

§ 21.4  Remedies Cumulative.  Remedies provided under this Agreement shallbe cumulative and in addition to other remedies provided under this Agreementor by law or in equity.

 

§ 21.5  Severability.  If any provision of this Agreement is foundcontrary to law or unenforceable by any court of law, the remaining provisionsshall be severable and enforceable in accordance with their terms, unless suchunlawful or unenforceable provision is material to the transactionscontemplated hereby, in which case the parties shall negotiate in good faith asubstitute provision.

 

§ 21.6  Binding Effect.  This Agreement shall bind and inure to thebenefit of the parties and their successors and assigns.

 

§ 21.7  Assignment.

 

A.  Seller shall not, without Buyer’s priorwritten consent, which may be withheld in Buyer’s discretion, make anyassignment or transfer of this Agreement, by operation of law or otherwise,including without limitation any assignment or transfer as security for anyobligation, and shall not assign or transfer the performance of or right orduty to perform any obligation of Seller hereunder; provided, however, thatSeller may assign the right to receive payments for coal directly from Buyer toa lender as part of any accounts receivable financing or other revolving creditarrangement which Seller may have now or at any time during the term of thisAgreement.

 

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B.  Buyer shall not, without Seller’s priorwritten consent, which consent shall not be unreasonably withheld, assign thisAgreement or any right for the performance of or right or duty to perform anyobligation of Buyer hereunder; except that, without such consent, Buyer mayassign this Agreement in connection with a transfer by Buyer of all or a partinterest in the generating station comprising the Delivery Point, or as part ofa merger or consolidation involving Buyer, or to Buyer’s affiliate.

 

C.  In the event of an assignment or transfercontrary to the provisions of this section, the non-assigning party mayterminate this Agreement immediately.

 

§ 21.8  Entire Agreement.  This Agreement contains the entire agreementbetween the parties as to the subject matter hereof, and there are norepresentations, understandings or agreements, oral or written, which are notincluded herein.  Without limiting theforegoing (a) this Agreement shall not be construed as a requirements orsimilar agreement, and (b) this Agreement shall not be construed as affectingBuyer’s ability to negotiate with and/or acquire other sources of coal fromthird parties throughout the term hereof.

 

§ 21.9  Amendments.  Except as otherwise provided herein, this Agreement may not beamended, supplemented or otherwise modified except by written instrument signedby both parties hereto.

 

IN WITNESS WHEREOF, theparties hereto have caused this Agreement to be executed as of the date firstabove written.

 
| BUYER                       |   |                             | SELLER |   |
|-----------------------------|--------|----------------------------------|--------|--------|
| KENTUCKY UTILITIES  COMPANY |   | MASSEY COAL SALES  COMPANY, INC. |
|                        |   |                             |
|                        |   |                             |
| By:                         |   |                             |   | By:    |   |   |
|                             |        |                                  |        |        |  |  |  |  |

 

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|   |   | Paul W. Thompson                  |   |   |   |   |   |
|--------|--------|-----------------------------------|--------|--------|--------|--------|--------|
|   |   | Senior VP -  Energy Services |   | Its:   |   |   |   |
|   |   |                              |   |   |   |   |   |
|   |   |                              |   |   |   |   |   |
| Date:  |   |                              |   | Date:  |   |   |   |

 

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**ExhibitA**

 

**EXHIBIT A**

**SAMPLE COAL PAYMENT CALCULATIONS**

**Total Evaluated Coal Costs forContract No. KU F02850**

 

For contracts suppliedfrom multiple “origins”, each “origin will be calculated individually.

 
|                                                                     |   | **Section I**                           |   | **Base Data** |       |
|--------------------------------------------------------------------------|--------|-----------------------------------------|--------|---------------|------------|
|                                                                     |   |                                    |   |          |       |
| 1)                                                                       |   | Base F.O.B. price per  ton:             |   | $             | 43.35      | /ton |
|                                                                     |   |                                    |   |          |       |
| 1a)                                                                      |   | Tons of coal delivered:                 |   |          | tons       |
|                                                                     |   |                                    |   |          |       |
| 2)                                                                       |   | Guaranteed average heat  content:       |   | 12,000        | BTU/LB.    |
|                                                                     |   |                                    |   |          |       |
| 2r)                                                                      |   | As received monthly  avg. heat content: |   |          | BTU/LB.    |
|                                                                     |   |                                    |   |          |       |
| 2a)                                                                      |   | Energy delivered in  MMBTU:             |   |          | MMBTU      |
|                                                                     |   |                                    |   |          |       |
| [(Line  1a) *2,000 lb./ton*(Line 2r)] *MMBTU/1,000,000 BTU               |   |                                    |   |
| [(   ) *2,000 lb./ton*(   )]*MMBTU/1,000,000 BTU     |   |                                    |   |
|                                                                     |   |                                    |   |          |       |
| 2b)                                                                      |   | Base F.O.B. price per  MMBTU:           |   | $             | 1.80625    | MMBTU |
|                                                                     |   |                                    |   |          |       |
| {[(Line  1)/(Line 2)]*(1 ton/2,000 lb.)]}*1,000,000 BTU/MMBTU            |   |                                    |   |
| {[(  /ton)/(   BTU/LB)]*(1 ton/2,000 lb.)}*1,000,000 BTU/MMBTU |   |                                    |   |
|                                                                     |   |                                    |   |          |       |
| 3)                                                                       |   | Guaranteed shipment.  max. SO2          |   | 1.20          | LBS./MMBTU |
|                                                                     |   |                                    |   |          |       |
| 3r)                                                                      |   | Number of tons >  1.20 lbsSO2/Mmbtu  |   |          | TONS       |
|                                                                     |   |                                    |   |          |       |
| 4)                                                                       |   | Guaranteed monthly avg.  ash            |   | 10.83         | LBS./MMBTU |
|                                                                     |   |                                    |   |          |       |
| 4r)                                                                      |   | As received monthly  avg. ash           |   |          | LBS./MMBTU |
|                                                                     |   |                                    |   |          |       |
| 5)                                                                       |   | Guaranteed monthly avg.  max. moisture  |   | 6.67          | LBS./MMBTU |
|                                                                     |   |                                    |   |          |       |
| 5r)                                                                      |   | As received monthly  avg. moisture      |   |          | LBS./MMBTU |

 
|   |   | **Section II**                                                         |   | **Discounts** |   |
|--------|--------|------------------------------------------------------------------------|--------|---------------|--------|
|   |   | Assign  a (-) to all discounts (round to (5) decimal places)           |   |          |   |
|   |   |                                                                   |   |          |   |
| 6d)    |   | BTU/LB.:  If line 2r <11,800 BTU/lb. then:                     |   |          |   |
|   |   | {1 -  (line 2r) / (line 2)} * $0.2604/MMBTU                            |   |          |   |
|   |   | {1 -  (   ) / (   )} * $0.2604 =                   |   | $             |   |  /MMBTU |
|   |   |                                                                   |   |          |   |
| 7d)    |   | SO2:  If any individual shipment is greater than  1.20 lbs./MMBTU |   |          |   |
|   |   | [(line  3r) * $3.00 per ton] / line 2a                                 |   |          |   |
|   |   | [  (   ) * (3.00) ] / (   ) =                      |   | $             |   |  /MMBTU |
|   |   |                                                                   |   |          |   |
| 8d)    |   | ASH: If line 4r is  greater than 10.83 lbs./MMBTU                      |   |          |   |
|   |   | [  (line 4r) - (line 4) ] * 0.0083/MMBTU                               |   |          |   |
|   |   | [  (   ) - (   ) ] * 0.0083 =                      |   | $             |   |  /MMBTU |
|   |   |                                                                   |   |          |   |
| 9d)    |   | MOISTURE:  If line 5r is greater than 8.33 lbs./MMBTU             |   |          |   |
|   |   | [  (line 5r) - (line 5) ] * 0.0016/MMBTU                               |   |          |   |
|   |   | [  (   ) - (   ) ] * 0.0016 =                      |   | $             |   |  /MMBTU |

 

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|   |   | **Section  III**                                             |   | **Total  Price  Adjustments** |   |   |   |   |
|--------|--------|--------------------------------------------------------------|--------|-------------------------------|--------|--------|--------|--------|
|   |   |                                                         |   |                          |   |   |   |   |
|   |   | Determine  total Discounts as follows:                       |   |                          |   |   |   |   |
|   |   |                                                         |   |                          |   |   |   |   |
|   |   | Assign  a (-) to all discounts (round to (5) decimal places) |   |                          |   |   |   |   |
|   |   |                                                         |   |                          |   |   |   |   |
|   |   | Line  6d:                                                    |   | $                             |   | /MMBTU |   |   |   |
|   |   |                                                         |   |                          |   |   |   |   |
|   |   | Line  7d                                                     |   | $                             |   | /MMBTU |   |   |   |
|   |   |                                                         |   |                          |   |   |   |   |
|   |   | Line  8d                                                     |   | $                             |   | /MMBTU |   |   |   |
|   |   |                                                         |   |                          |   |   |   |   |
|   |   | Line  9d                                                     |   | $                             |   | /MMBTU |   |   |   |
|   |   |                                                         |   |                          |   |   |   |   |
| 10)    |   | Total Discounts (-):                                         |   |                          |   |   |   |   |
|   |   |                                                         |   |                          |   |   |   |   |
|   |   | Algebraic  sum of above:                                     |   | $                             |   | /MMBTU |   |   |   |
|   |   |                                                         |   |                          |   |   |   |   |
| 11)    |   | Total evaluated coal  price = (line 2b + (line 10)           |   |                          |   |   |   |   |
|   |   |                                                         |   |                          |   |   |   |   |
| 12)    |   | Total discount price  adjustment for Energy delivered:       |   |                          |   |   |   |   |
|   |   | (line  2a) * (line 10) (-)                                   |   |                          |   |   |   |   |
|   |   | $                                                            |   | /MMBTU                        | +      |   | $      |   | /MMBTU | = | $ |   |   |
|   |   |                                                         |   |                          |   |   |   |   |
| 13)    |   | Total base cost of coal                                      |   |                          |   |   |   |   |
|   |   | (line  2a) * (line 2b)                                       |   |                          |   |   |   |   |
|   |   | $                                                            |   | /MMBTU                        | +      |   | $      |   | /MMBTU | = | $ |   |   |
|   |   |                                                         |   |                          |   |   |   |   |
| 14)    |   | Total coal payment for  month                                |   |                          |   |   |   |   |
|   |   | (line  12) + (line 13)                                       |   |                          |   |   |   |   |
|   |   | $                                                            |   | /MMBTU                        | +      |   | $      |   |   | = | $ |   |   |

 

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**GUARANTY AGREEMENT**

 

THIS GUARANTY AGREEMENT(“Guaranty”) is made and entered into this 1st day of January 2002by MASSEY ENERGY COMPANY (“Massey”), a Delaware corporation, with offices at 4North Fourth Street, Richmond, Virginia 23219, to and for the benefit ofKENTUCKY UTILITIES COMPANY (“Buyer”), a Kentucky corporation, with offices at220 West Main Street, Louisville, Kentucky 40202.

WHEREAS, Buyer and MasseyCoal Sales Company, Inc. (“Seller”), a Virginia corporation, with offices at 4North Fourth Street, Richmond, Virginia 23219, propose to enter into a CoalSupply Contract dated on or about January 1, 2002 (“Contract”) for a coalsupply from Massey’s Elk Run, Progress, Black Castle and Bandmill Mines,located in Boone and Logan Counties, West Virginia (the “Coal Property”); and

WHEREAS, Buyersperformance under the Contract will benefit Massey through the Seller, and toinduce Buyer to enter into the Contract, Massey is willing to guarantee toBuyer, its successors, representatives and assigns, Seller’s performance ofSeller’s obligations (collectively, the “Obligations”) set forth in theContract and any extension or amendment thereof.

NOW, THEREFORE, for andin consideration of the sum of Ten Dollars ($10.00) and other good and valuableconsideration, the receipt and adequacy of which are hereby acknowledged,Massey hereby agrees as follows:

1)                                      Guaranty- Massey guarantees to Buyer Seller’s performance of the Obligations and agreesthat this Guaranty shall inure to the benefit of and may be enforced by Buyer,its successors, representatives and assigns.

2)                                      Acceptanceand Amendments - Massey waives notice of acceptance of this Guaranty, andconsents to any and all waivers and extension of the time of performance and toany and all changes, modifications or amendments in the terms, covenants andconditions in the Contract hereafter made or granted.

3)                                      Buyer’sRemedies - Massey agrees that this Guaranty may be enforced by Buyerwithout first enforcing Buyer’s rights under the Contract against Seller;provided, however, that nothing herein contained shall prevent Buyer fromenforcing the Contract with or without making Massey a party to the suit.

4)                                      Massey’sDefenses - Except as otherwise provided in Section 5 of this Guaranty,Massey shall be entitled to the benefit of any defenses which Seller may haveto the enforcement by Buyer of any of the Obligations.

5)                                      Seller’sBankruptcy - Massey agrees that its obligations under this Guaranty shallnot be impaired, modified, changed, released or limited in any mannerwhatsoever by any impairment, modification, change, release or limitation ofthe liability of Seller (or Seller’s estate in bankruptcy) resulting from theoperation of any present or future provision of the federal bankruptcy law orother similar statute.

6)                                      Expenses- If any claim by Buyer is successfully prosecuted against Massey underthis Guaranty, Massey shall reimburse Buyer for all reasonable expensesincurred by Buyer in connection therewith, including reasonable attorneys’fees.

 

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7)                                      Representations- Massey represents that:

a.                                                                                       Masseyis a validly organized corporation duly existing and in good standing under thelaws of the State of Delaware.

b.                                                                                      Thegiving of this Guaranty is within Massey’s corporate powers.

c.                                                                                       Thegiving of this Guaranty has been pursuant to all necessary corporate action anddoes not contravene any law or any contractual restriction binding on Massey.

d.                                                                                      ThisGuaranty is a legal, valid and binding obligation, enforceable against Masseyin accordance with its terms.

8)                                      Waiverby Buyer - The failure of Buyer to enforce any of the provisions of thisGuaranty at any time or for any period of time shall not be construed to be awaiver of any such provision or of the right thereafter to enforce the same.

9)                                      GoverningLaw - This Guaranty shall be interpreted and enforced in accordance withthe laws of the Commonwealth of Kentucky.

10)                                Notices- Any notice, request, consent, demand, report or statement which is givento or made upon either party hereto by the other party hereto under any of theprovisions of this Guaranty shall be in writing unless otherwise providedherein and shall be treated as duly delivered when the same is received by theparty to be notified whether by personal delivery, or by the United Statesmail, as evidenced by a receipt or by telecopier and confirmed by United Statesmail, as evidenced by a receipt. Notices shall be properly addressed as follows:

 

As to Buyer:                                                                            KentuckyUtilities Company

220 West Main Street

Louisville, Kentucky  40202

Attn: Director, CorporateFuels

 

As to Seller:                                                                               MasseyCoal Sales Company, Inc.

PO Box 26765

Richmond, Virginia  23261

Attn: SeniorVice-President

 

As to Massey:                                                                 MasseyEnergy Company

PO Box 26765

Richmond, Virginia  23261

Attn: President

 

Either party hereto maychange its address or representative for the purposes of notices orcommunications hereunder by furnishing notice thereof to the other party incompliance with this provision

11)                                Assignment- Massey’s rights and obligations under this Guaranty may be assigned to theultimate parent company of an approved assignee of Seller’s rights and 

 

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obligations under theContract, provided the assignment provisions of the Contract shall control andprovided further, such that a wholly-owned subsidiary or wholly affiliatecompany of the ultimate parent takes title to the Coal Property.  If such assignee is not owned eitherdirectly or indirectly by Massey and if Buyer has agreed to release Seller fromthe Obligations, this Guaranty shall terminate and Massey shall be releasedfrom any further obligations or liabilities hereunder.  If another company with substantial assetsbecomes the new ultimate parent company of Seller, Massey may, with Buyer’swritten approval, assign its rights and obligations hereunder to such othercompany and thereafter, as to Massey, this Guaranty shall terminate, and Masseyshall be released from any further obligations or liabilities hereunder.

 

IN WITNESS WHEREOF,Massey has executed this Guaranty as of the date first written above.

 

 
|    | MASSEY ENERGY COMPANY |   |
|---------|-----------------------|--------|
|    |                  |   |
|    | By:                   |   |   |
|    | Its:             |   |   |
|    |                  |   |
| ATTEST: |                  |   |

 

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