<PAGE>

                                                       CONTRACT NO.: 96-063-026


                              COAL SUPPLY AGREEMENT


     This is a coal supply agreement (the "Agreement") dated January 1, 1996
between LOUISVILLE GAS AND ELECTRIC COMPANY, a Kentucky corporation, 220 West
Main Street, Louisville, Kentucky 40202 ("Buyer") and PEABODY COALSALES COMPANY,
a Delaware corporation, 1951 Barrett Court, P.O. Box 1996, Henderson, Kentucky
42420 ("Seller").

                                   AGREEMENTS

     The parties hereto agree as follows:

     SECTION 1.  GENERAL

     Section 1.1  TERMINATION OF CURRENT AGREEMENT.  The Coal Supply Agreement
dated January 1, 1994 between Seller and Buyer is hereby terminated as of
December 31, 1995.  Such current agreement shall apply to coal delivered by
December 31, 1995.

     Section 1.2  NEW AGREEMENT.  Effective January 1, 1996, Seller will sell to
Buyer and Buyer will buy from Seller, steam coal under all the terms and
conditions of this Agreement.  This Agreement shall apply to coal delivered on
January 1, 1996 and thereafter.

     SECTION 2.  TERM  Subject to Section 8.2, the term of this Agreement shall
commence on the effective date set forth in Section 1.2 and shall continue
through December 31, 1999.  Buyer shall have the right, but not the obligation,
to renew this Agreement for up to five (5) additional one year periods, such
right to be exercised by notice in writing to Seller no later than forty-five
(45) days prior to the beginning of the year in question.  Buyer's right to
renew this Agreement is subject to the parties' reaching an agreement on the
Base Price for the renewal period.

<PAGE>

                                                       CONTRACT NO.: 96-063-026
     SECTION 3.  QUANTITY

     Section 3.1  ANNUAL QUANTITY.  Seller shall sell and deliver and Buyer
shall purchase and accept delivery of the following annual quantity of coal
("Annual Quantity"):

<TABLE>
<CAPTION>
          YEAR           ANNUAL QUANTITY (TONS)
         ------         ------------------------
         <S>            <C>
          1996                1,000,000

          1997                1,000,000

          1998                1,000,000

          1999                1,000,000
</TABLE>

     Section 3.2  DELIVERY SCHEDULE.  Except as provided in the last sentence of
this Section 3.2, by December 1 of each year, Buyer shall specify in writing to
Seller a reasonable schedule which shows the quantities to be delivered in each
month of the following year.  Subject to Section 3.3, such quantities shall be
shipped in accordance with such schedule.  Time is of the essence with respect
to the schedule so established; and failure by Seller to deliver in a timely
fashion shall constitute a material breach within the meaning of Section 17 of
this Agreement.  This Section 3.2 applies to 1996 deliveries which occur after
the execution of this Agreement except that Buyer shall have until ten (10)
business days after this Agreement becomes fully executed to so specify such
monthly delivery schedule for 1996.

     Section 3.3  ADJUSTMENTS.  Buyer may change the quantity to be delivered
during each calendar month pursuant to the monthly delivery schedule by giving
written notice to Seller 75 days before the beginning of said month, subject to
Seller's written consent which shall not be unreasonably


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                                                       CONTRACT NO.: 96-063-026

withheld or delayed.  However, the total quantity for each calendar year shall
be as set forth in Section 3.1.

     SECTION 4.  SOURCE

     Section 4.1  SOURCE.  Subject to Section 4.4 hereof, the coal sold
hereunder shall be supplied from Peabody Coal Company's Lynnville Mine, #5, #6,
and #7 seams, Warrick and Spencer Counties, Indiana (the "Coal Property").

     Section 4.2  ASSURANCE OF OPERATION AND RESERVES.  Seller represents and
warrants that the Coal Property contains economically recoverable coal of a
quality and in quantities which will be sufficient to satisfy all the
requirements of this Agreement.  Seller agrees and warrants that it will cause
to have at the Coal Property adequate machinery, equipment and other facilities
to produce, prepare and deliver coal in the quantity and of the quality required
by this Agreement.  Seller further agrees that it will cause the operation and
maintenance of such machinery, equipment and facilities in accordance with good
mining practices so as to efficiently and economically produce, prepare and
deliver such coal.  Seller agrees that Buyer is not providing any capital for
the purchase of such machinery, equipment and/or facilities and that Seller
shall operate and maintain same at its sole expense, including all required
permits and licenses.  Seller hereby allocates to this Agreement sufficient
reserves of coal meeting the quality specifications hereof and lying on or in
the Coal Property so as to fulfill the quantity requirements hereof.

     Section 4.3  NON-DIVERSION OF COAL.  Seller agrees and warrants that it
will not, without Buyer's express prior written consent, use or sell coal from
the Coal Property in a way that will reduce


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                                                       CONTRACT NO.: 96-063-026

the economically recoverable balance of coal in the Coal Property to an amount
less than that required to be supplied to Buyer hereunder.

     Section 4.4  SUBSTITUTE COAL.  Notwithstanding the above representations
and warranties, in the event that Seller is unable to produce or obtain coal
from the Coal Property in the quantity and of the quality required by this
Agreement, and such inability is not caused by a force majeure event as defined
in Section 11, then Buyer will have the right to require that Seller supply
substitute coal from other facilities and mines.  Seller shall also have the
right to supply substitute coal after having received Buyer's prior written
consent (which shall not be unreasononably withheld).  Such substitute coal
shall be provided under all the terms and conditions of this Agreement
including, but not limited to, the price provisions of Section 8, the quality
specifications of Section 6.1, and the provisions of Section 5 concerning
reimbursement to Buyer for increased transportation costs.  Seller's delivery of
coal not produced from the Coal  Property without having received the express
written consent of Buyer shall constitute a material breach of this Agreement.

     SECTION 5.  DELIVERY

     5.1   RAIL DELIVERY.  Subject to Section 9, the coal shall be delivered to
Buyer F.O.B. railcar at the Lynnville or Squaw Creek rail loading facility near
Boonville, Indiana (the "Delivery Point").  Seller may deliver the coal at a
location different from the Delivery Point, provided, however, that Seller shall
reimburse  Buyer for any resulting increases in the cost of transporting the
coal to Buyer's generating stations.  Any resulting savings in such
transportation costs shall be shared equally by Buyer and Seller.


                                        4

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                                                       CONTRACT NO.: 96-063-026

     Title to and risk of loss respecting coal will pass to Buyer and the coal
will be considered to be delivered when it is loaded into the railcars at the
rail loading facility.  Buyer or its contractor shall furnish suitable railcars
in accordance with a delivery schedule provided by Buyer to Seller.  Seller
shall be responsible for and pay the cost of repairs for any damages caused by
Seller to railcars owned or leased by Buyer while such railcars are in Seller's
control or custody.  Seller shall comply with the applicable provisions of
Buyer's rail contractor's tariff.

     Section 5.2  FREEZE CONDITIONING.  At Buyer's request, Seller shall treat
(or have treated) any shipment of coal hereunder with a freeze conditioning
agent approved by Buyer in order to maintain coal handling characteristics
during shipment.  If requested by Buyer, Seller shall also treat (or have
treated) any railcars specified by Buyer with a side release agent  approved by
Buyer.  The price for each such requested chemical treatment shall be an amount
equal to Seller's cost of materials and applications calculated on a per gallon
basis for each application of freeze conditioning agent and/or side release
agent, as the case may be.  Seller shall invoice Buyer for all such treatment
which occurred in a calendar month by the fifteenth of the following month; and
payment shall be mailed by the 25th of such following month or within ten days
after receipt of Seller's invoice, whichever is later.

     Section 5.3  BARGE DELIVERY.  At any time during the term of this
Agreement, Buyer shall have the right to change the delivery term from F.O.B.
railcar to F.O.B. barge by giving Seller ninety (90) days advance written notice
of such change.  If the Buyer so exercises its right to change to barge
deliveries, then the following provisions shall apply:


                                        5

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                                                       CONTRACT NO.: 96-063-026


          (a)  The Base Price shall be equivalent to the Base Price set forth in
Section 8.1, except that the Base Price for barge deliveries shall be increased
to reflect the difference in Seller's costs to transport coal from the mine to
the Barge Delivery Point (as defined below) and load it into barges and the
Seller's costs to transport coal from the mine to the rail Delivery Point and
load it into railcars.

          (b)  The coal shall be delivered to Buyer F.O.B. barge at whatever
dock is then available and will result in the lowest delivered cost of coal to
Buyer hereunder (the "Barge Delivery Point").

          Title to and risk of loss of coal sold will pass to Buyer and the coal
will be considered to be delivered when barges containing the coal are
disengaged by Buyer's barging contractor from the loading dock.  Buyer or its
contractor shall furnish suitable barges in accordance with a delivery schedule
provided by Buyer to Seller.  Seller shall arrange and pay for all costs of
transporting the coal from the mines to the loading docks and loading and
trimming the coal into barges to the proper draft and the proper distribution
within the barges.  Buyer shall arrange for transporting the coal by barge from
the loading dock to its generating station(s) and shall pay for the cost of such
transportation.  For delays caused by Seller in handling the scheduling of
shipments with Buyer's barging contractor, Seller shall be responsible for any
demurrage or other penalties assessed by said barging contractor (or assessed by
Buyer) which accrue at the Barge Delivery Point, including the demurrage,
penalties for loading less than the specified minimum tonnage per barge, or
other penalties assessed for barges not loaded in conformity with applicable
requirements.  Buyer shall be responsible to deliver barges in as clean


                                        6

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                                                       CONTRACT NO.: 96-063-026


and dry condition as practicable.  Seller shall require of the loading dock
operator that the barges and towboats provided by Buyer or Buyer's barging
contractor be provided convenient and safe berth free of wharfage, dockage and
port charges; that while the barges are in the care and custody of the loading
dock, all U.S. Coast Guard regulations and other applicable laws, ordinances,
rulings, and regulations shall be complied with, including adequate mooring and
display of warning lights; that any water in the cargo boxes of the barges be
pumped out by the loading dock operator prior to loading; that the loading
operations be performed in a workmanlike manner and in accordance with the
reasonable loading requirements of Buyer and Buyer's barging contractor; and
that the loading dock operator carry landing owners or wharfinger's insurance
with basic coverage of not less than $300,000.00 and total of basic coverage and
excess liability coverage of not less than $1,000,000.00, and provide evidence
thereof to Buyer in the form of a certificate of insurance from the insurance
carrier or an acceptable certificate of self-insurance with requirement for 30
days advance notification of Buyer in the event of termination of or material
reduction in coverage under the insurance.

          (c)  All other provisions of this Agreement shall remain in full force
and effect.

     SECTION 6.  QUALITY

     Section 6.1  SPECIFICATIONS.  The coal produced from the Coal Property and
delivered hereunder shall conform to the following specifications on an "as
received" basis:


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                                                       CONTRACT NO.: 96-063-026

<TABLE>
<CAPTION>
                              Guaranteed Monthly            Rejection Limits
     Specifications           Weighted Average              (per shipment)
--------------------------------------------------------------------------------
     <S>                      <C>                           <C>
     BTU/LB.                  min. 10,950                   LESS THAN     10,750
     MOISTURE                 max. 12.91   lbs/MMBTU        GREATER THAN   14.00
     ASH                      max.  8.00   lbs/MMBTU        GREATER THAN    9.50
     SULFUR                   max.  2.95   lbs/MMBTU        GREATER THAN    3.30
     SULFUR                   min.  1.80   lbs/MMBTU        LESS THAN       1.80
     CHLORINE                 max.  0.07   lbs/MMBTU        GREATER THAN    0.08

     FLUORINE                 max.  0.013  lbs/MMBTU        GREATER THAN   0.013
     NITROGEN                 max.  1.50   lbs/MMBTU        GREATER THAN    1.60
     ASH/SULFUR RATIO         min. 2.5:1                    LESS THAN      2.5:1
     Size (3" x 0"):
          Top size (inches)   max. 3"x0"                    GREATER THAN   3"x0"
          Fines (% by wgt)
          Passing 1/4" screen max. 40%                      GREATER THAN     45%

     % BY WEIGHT:
     VOLATILE                 max. 34.5                     GREATER THAN    35.0
     VOLATILE                 min. 33.5                     LESS THAN       33.0
     FIXED CARBON             max. 44                       GREATER THAN      45
     FIXED CARBON             min. 40                       LESS THAN         40
     GRINDABILITY (HGI)       min. 53                       LESS THAN         50
     BASE ACID RATIO (B/A)
     SLAGGING FACTOR*         max. 2.0                      GREATER THAN     2.0
     FOULING FACTOR**         max. 0.5                      GREATER THAN     0.5

     ASH FUSION TEMPERATURE (DEG. F) (ASTM D1857)

     REDUCING ATMOSPHERE
     Initial Deformation           min. 1910                min. 1875
     Softening (H=W)               min. 1930                min. 1900
     Softening (H=1/2W)            min. 1975                min. 1950
     Fluid                         min. 2120                min. 2050
</TABLE>


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                                                      CONTRACT NO.: 96-063-026


     OXIDIZING ATMOSPHERE
     Initial Deformation           min. 2300                min. 2200
     Softening (H=W)               min. 2325                min. 2300
     Softening (H=1/2W)            min. 2340                min. 2350
     Fluid                         min. 2400                min. 2400

     The Base Acid Ratio (B/A) is herein defined as:

     BASE ACID RATIO (B/A) =  (Fe(2)0(3)  +  Ca0  +  Mg0  +  Na(2)0  +  K(2)0)
                              ------------------------------------------------
                                        (Si0(2)  +  A1(2)0(3)  +  T10(2))

     Note:     As used herein    GREATER THAN    means greater than:
                                 LESS THAN       means less than.

     Section 6.2  DEFINITION OF "SHIPMENT".  As used herein, a "shipment" shall
mean one barge load or a barge lot load, or one unit trainload, in accordance
with Buyer's sampling and analyzing practices.

     Section 6.3  REJECTION.   Buyer has the right, but not the obligation, to
reject any shipment which fail(s) to conform to the Rejection Limits set forth
in Section 6.1 or contains extraneous materials.  Buyer must reject such coal
within seventy-two (72) hours of receipt of the coal analysis provided for in
Section 7.2 or such right to reject is waived.  In the event Buyer rejects such
non-conforming coal, Buyer shall return the coal to Seller or, at Seller's
request, divert such coal to Seller's designee, all at Seller's cost.  Seller
shall replace the rejected coal within five (5) working days from notice of
rejection with coal conforming to the Rejection Limits set forth in Section 6.1.
If Seller fails to replace the rejected coal within such five (5) working day
period or the replacement coal is rightfully rejected, Buyer may purchase coal
from another source in order to replace the rejected coal.  Seller shall
reimburse Buyer for (i) any amount by which the actual



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                                                       CONTRACT NO.: 96-063-026


price plus transportation costs to Buyer of such coal purchased from another
source exceeds the price of such coal under this Agreement (as adjusted under
Section 8.3 for coal of the quality actually supplied by the other source) plus
transportation costs to Buyer from the Delivery Point;  and (ii) any and all
transportation, storage, handling, or other expenses that have been incurred by
Buyer for rightfully rejected coal.  This remedy is in addition to all of
Buyer's other remedies under this Agreement and under applicable law and in
equity for Seller's breach.

     If Buyer fails to reject a shipment of non-conforming coal which it had the
right to reject for failure to meet any or all of the Rejection Limits set forth
in Section 6.1 or because such shipment contained extraneous materials, then
such non-conforming coal shall be deemed accepted by Buyer; however, the price
shall be adjusted in accordance with Section 8.3 and the quantity Buyer is
obligated to purchase from Seller, at Buyer's sole option, shall be reduced by
the amount of each such non-conforming shipment.  Further, for shipments
containing extraneous materials, which include, but are not limited to, slate,
rock, wood, corn husks, mining materials, etc., the estimated weight of such
materials shall be deducted from the weight of that shipment.

     Section 6.4  SUSPENSION AND TERMINATION.  If one or more shipments of the
coal sold hereunder fails to meet one or more of the rejection limits set forth
in Section 6.1 (i.e., are rejectable) in any 2 months in a 6 month period, or if
9 barge shipments in a 30 day period are rejectable by Buyer, or if Buyer
receives at generating station(s) 2 unapproved rail shipments which are
rejectable in any 30 day period, Buyer may upon notice confirmed in writing and
sent to Seller by certified mail, suspend future shipments except shipments
already loaded into barges and/or railcars.  Seller shall, within 10 days,
provide Buyer with  reasonable assurances that subsequent


                                       10

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                                                       CONTRACT NO.: 96-063-026


monthly deliveries of coal shall be within the rejection limits set forth in
Section 6.1.  If Seller fails to provide such assurances within said 10 day
period, Buyer may terminate this Agreement by giving written notice of such
termination at the end of the 5 day period.  A waiver of this right for any one
period by Buyer shall not constitute a waiver for subsequent periods.  If Seller
provides such assurances to Buyer's reasonable satisfaction, shipments hereunder
shall resume and any tonnage deficiencies resulting from suspension may be made
up at Buyer's sole option.  Buyer shall not unreasonably withhold its acceptance
of Seller's assurances, or delay the resumption of shipment.   If Seller, after
such assurances, fails to meet the Guaranteed Monthly Weighted Averages for 1
month within the next 6 months or if 6 individual barge shipments, 2 barge lot
loads, or 2 rail  shipments are rejectable within one month during such six
month period, then Buyer may terminate this Agreement and exercise all its other
rights and remedies under applicable law and in equity for Seller's breach.

     SECTION 7.  WEIGHTS, SAMPLING AND ANALYSIS

     Section 7.1  WEIGHTS.  The weight of the coal delivered hereunder shall be
determined on a per shipment basis by Buyer on the basis of scale weights at the
generating station(s) unless another method is mutually agreed upon by the
parties.  Such scales shall be duly certified by an appropriate testing agency
and maintained in an accurate condition.  Seller shall have the right, at
Seller's expense and upon reasonable notice, to have the scales checked for
accuracy at any


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                                                      CONTRACT NO.: 96-063-026


reasonable time or frequency.  If the scales are found to be inaccurate, over or
under the tolerance range allowable for the scale, either party shall pay to the
other any amounts owed due to such inaccuracy for a period not to exceed thirty
(30) days before the time any inaccuracy of scales is determined.

     Section 7.2  SAMPLING AND ANALYSIS.  The sampling and analysis of the coal
delivered hereunder shall be performed by Buyer and the results thereof shall be
accepted and used for the quality and characteristics of the coal delivered
under this Agreement.  All analyses shall be made in Buyer's laboratory at
Buyer's expense in accordance with A.S.T.M. specifications.  Samples for
analyses shall be taken by any reliable and industry accepted standard, mutually
acceptable to both parties, may be composited and shall be taken with a
frequency and regularity sufficient to provide reasonably accurate
representative samples of the deliveries made hereunder.  Seller represents that
it is familiar with Buyer's sampling and analysis practices, and finds them to
be acceptable.  Buyer shall notify Seller in writing of any significant changes
in Buyer's sampling and analysis practices.  Any such changes in Buyer's
sampling and analysis practices shall, except for industry accepted changes in
practices, provide for no less accuracy than the sampling and analysis practices
existing at the time of the execution of this Agreement, unless the Parties
otherwise mutually agree.

     Each sample taken by Buyer shall be divided into 4 parts and put into
airtight containers, properly labeled and sealed.  One part shall be used for
analysis by Buyer; one part shall be used by Buyer as a check sample, if Buyer
in its sole judgment determines it is necessary; one part shall be retained by
Buyer until the 25th of the month following the month of unloading (the


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                                                      CONTRACT NO.: 96-063-026


"Disposal Date") and shall be delivered to Seller for analysis if Seller so
requests before the Disposal Date; and one part ("Referee Sample") shall be
retained by Buyer until the Disposal Date.  Seller shall be given copies of all
analyses made by Buyer by the 12th day of the month following the month of
unloading.  Seller, on reasonable notice to Buyer shall have the right to have a
representative present to observe the sampling and analyses performed by Buyer.
Unless Seller requests a Referee Sample analysis before the Disposal Date,
Buyer's analysis shall be used to determine the quality  of the coal delivered
hereunder.  The Monthly Weighted Averages shall be determined by utilizing the
individual shipment analyses.

     If any dispute arises before the Disposal Date, the Referee Sample retained
by Buyer shall be submitted for analysis to an independent commercial testing
laboratory ("Independent Lab") mutually chosen by Buyer and Seller.  For each
coal quality specification in question, a dispute shall be deemed not to exist
and Buyer's analysis shall prevail and the analysis of the Independent Lab shall
be disregarded if the analysis of the Independent Lab differs from the analysis
of Buyer by an amount equal to or less than:

               (i)       0.50% moisture
               (ii)      0.50% ash on a dry basis
               (iii)     100 Btu/lb. on a dry basis
               (iv)      0.10% sulfur on a dry basis.

     For each coal quality specification in question, if the analysis of the
Independent Lab differs from the analysis of Buyer by an amount more than the
amounts listed above, then the analysis of the Independent Lab shall prevail and
Buyer's analysis shall be disregarded.  The cost


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                                                      CONTRACT NO.: 96-063-026


of the analysis made by the Independent Lab shall be borne by Seller to the
extent that Buyer's analysis prevails and by Buyer to the extent that the
analysis of the Independent Lab prevails.

     SECTION 8.  PRICE

     Section 8.1  PRICE.  Subject to Section 9 and Section 8.2, the base price
(the "Base Price") of the coal to be sold hereunder will be firm and will be
$.78767/MMBTU.  The Base Price is inclusive of all federal, state, municipal and
local taxes, fees and costs of any kind whether arising from government law,
rule, regulation or otherwise, including, without limitation, all costs of
conforming to federal and state mining and reclamation laws, rules and
regulations and all other and/or additional mining and operating costs and
expenses incurred during the term of this Agreement.  No price adjustment shall
be made under this Agreement for costs occasioned by changes in laws, rules,
regulation, or the like or in any taxes or other governmental imposition(s)
enacted or promulgated after the date of this Agreement.  The Base Price shall
be firm and not subject to adjustment except as provided in this Section 8 and
Section 5.

     Section 8.2  PRICE REVIEW.  The Base Price and Quality Price Adjustment
provisions in Section 8 of this Agreement shall be subject to review for any
reason at the request of either party, for revision(s) to become effective on
January 1, 1998.

     The party requesting such a review shall give written notice of its request
to the other party on or before October 1, 1997.  The parties then shall
negotiate an agreement on new Base Prices between October 1 and December 1.  If
the parties do not reach an agreement on new Base Prices by December 1, then
this Agreement will terminate as of December 31, 1997 without liability due to
such termination for either party.


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                                                      CONTRACT NO.: 96-063-026


     Section 8.3  QUALITY PRICE DISCOUNTS.

     (a)  The Base Price is based on coal meeting or exceeding the Guaranteed
Monthly Weighted Average specifications as set forth in Section 6.1.  Quality
price discounts shall be applied for each specification each month to reflect
failures to meet the Guaranteed Monthly Weighted Averages set forth in Section
6.1, as determined pursuant to Section 7.2, subject to the provisions set forth
below.  The discount values used are as follows:

                    DISCOUNT VALUES
                              $/MMBTU
                    BTU/LB.   0.2604
                              $/LB./MMBTU
                    SULFUR    0.1232
                    ASH       0.0083
                    MOISTURE  0.0016

     (b)  Notwithstanding the foregoing, for each specification each month,
there shall be no discount if the actual Monthly Weighted Average meets the
applicable Discount Point set forth below.  However, if the actual Monthly
Weighted Average fails to meet such applicable Discount Point, then the discount
shall apply and shall be calculated on the basis of the difference between the
actual Monthly Weighted Average AND THE  GUARANTEED MONTHLY WEIGHTED AVERAGE
pursuant to the methodology shown in Exhibit A attached hereto.



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<PAGE>

                                                      CONTRACT NO.: 96-063-026

<TABLE>
<CAPTION>
                             Guaranteed
                             Monthly
                             Weighted Average       Discount Point
                             ----------------       --------------
        <S>                  <C>                    <C>
        BTU/LB               min. 10,950            10,750

        LB/MMBTU:
        SULFUR               max. 2.95              3.30
        ASH                  max. 8.00              9.50
        MOISTURE             max. 12.91             14.00
</TABLE>

     For example, if the actual Monthly Weighted Average of sulfur equals 3.35
lb/MMBTU, then the applicable discount would be (3.35 lb. - 2.95 lb.) X
$.1232/lb/MMBTU = $.04928/MMBTU.

     Section 8.4  PAYMENT CALCULATION.  Exhibit A attached hereto shows the
methodology for calculating the coal payment and quality price adjustments for
the month Seller's coal was unloaded by Buyer.

     SECTION 9.  SPECIAL PRICE AND DELIVERY PROVISIONS.

     Section 9.1  JAN. 1 - FEB. 4, 1996.  Notwithstanding any other provision in
this Agreement, the following provisions shall apply for all coal delivered by
Seller between January 1, 1996 and February 4, 1996:

          (a)  The coal will be delivered to Buyer F.O.B. barge at the
Yankeetown Dock at Mile Point 772.5 on the Ohio River (the "Yankeetown Dock").

          (b)  The Base Price will be $.78767/MMBTU plus the costs actually
incurred by the Seller to transport coal from the Coal Property to the
Yankeetown Dock and load such coal


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                                                      CONTRACT NO.: 96-063-026


onto barges.  Such costs shall be calculated on a per ton basis and shall in no
event exceed $2.60 per ton.

          (c)  Except as specifically set forth in (a) and (b) above, all the
provisions of this Agreement shall apply.

     Section 9.2  FEB. 5 - FEB. 12, 1996.  Notwithstanding any other provision
in this Agreement, the following provision shall apply for all coal delivered
F.O.B. barge by Seller between February 5, 1996 and February 12, 1996:

          (a)  The coal will be delivered to Buyer F.O.B. barge at the
Yankeetown Dock.

          (b)  The Base Price will be $.78767/MMBTU plus $1.80 per ton.

          (c)  Except as specifically set forth in (a) and (b) above, all of the
provisions of this Agreement shall apply.

     SECTION 10.  INVOICES, BILLING AND PAYMENT.

     Section 10.1  INVOICING ADDRESS.  Invoices will be sent to LG&E at the
following address:

          Louisville Gas and Electric Company
          220 West Main Street
          P.O. Box 32010
          Louisville, KY 40232
          Attention: Director, Fuels Procurement and Delivery

          With a copy to:

          Louisville Gas and Electric Company
          820 West Broadway
          P. O. Box 32020
          Louisville, KY  40232
          Attention:  Manager, Accounts Payable


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                                                      CONTRACT NO.: 96-063-026


     Section 10.2  INVOICE PROCEDURES FOR COAL SHIPMENTS.  Seller shall invoice
Buyer at the Base Price, as adjusted by the quality price adjustments, for all
coal unloaded in a calendar month by the fifteenth of the following month.

     Section 10.3  PAYMENT PROCEDURES FOR COAL SHIPMENTS.  Payment for coal
unloaded in a calendar month shall be mailed by the 25th of the month following
the month of unloading or within ten days after receipt of Seller's invoice,
whichever is later.  Buyer shall mail all payments to Seller's account at
Peabody COALSALES Company, P.O. Box 503099, St. Louis, MO 63150-3099.  To make
wire transfers contact Boatman's Bank, Account ABA 081000032, wire transfer
account 100101223441.

     Section 10.4  WITHHOLDING.  Buyer shall have the right to withhold from
payment of any billing or billings (i) any sums which it is not able in good
faith to verify or which it otherwise in good faith disputes, (ii) any damages
resulting from or likely to result from any breach of this Agreement by Seller,
and (iii) any amounts owed to Buyer from Seller.  Buyer shall notify Seller
promptly in writing of any such issue, stating the basis of its claim and the
amount it intends to withhold.

     Payment by Buyer, whether knowing or inadvertent, of any amount in dispute
shall not be deemed a waiver of any claims or rights by Buyer with respect to
any disputed amounts or payments made.

     SECTION 11.  FORCE MAJEURE

     Section 11.1  GENERAL FORCE MAJEURE.  If either party hereto is delayed in
or prevented from performing any of its obligations or from utilizing the coal
sold under this Agreement due to acts


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of God, war, riots, civil insurrection, acts of the public enemy, strikes,
lockouts, fires, floods or earthquakes, which are beyond the reasonable control
and without the fault or negligence of the party affected thereby, then the
obligations of both parties hereto shall be suspended to the extent made
necessary by such event; provided that the affected party gives written notice
to the other party as early as practicable of the nature and probable duration
of the force majeure event.  The party declaring force majeure shall exercise
due diligence to avoid and shorten the force majeure event and will keep the
other party advised as to the continuance of the force majeure event.


     During any period in which Seller's ability to perform hereunder is
affected by a force majeure event, Seller shall not deliver any coal to any
other buyers to whom Seller's ability to supply is similarly affected by such
force majeure event unless contractually committed to do so at the beginning of
the force majeure event; and further shall deliver to Buyer under this Agreement
at least a pro-rata portion (on a per ton basis) of its total contractual
commitments to all its buyers to whom Seller's ability to supply is similarly
affected by such force majeure event in place at the beginning of the force
majeure event.

     During any period in which Buyer's ability to perform hereunder is affected
by a force majeure event, Buyer shall not purchase any coal from any other
sellers from whom Buyer's ability to purchase is similarly affected by such
force majeure event unless contractually committed to do so at the beginning of
the force majeure event; and further shall purchase from Seller under this
Agreement at least a pro-rata portion (on a per ton basis) of its total
contractual commitments to all sellers from whom Buyer's ability to purchase is
similarly affected by such force majeure event in place at the beginning of the
force majeure event.


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                                                      CONTRACT NO.: 96-063-026


     Tonnage deficiencies resulting from a force majeure event shall be made up
at Buyer's sole option on a reasonable schedule.

     Section 11.2  ENVIRONMENTAL LAW FORCE MAJEURE.  The parties recognize that,
during the continuance of this Agreement, legislative or regulatory bodies or
the courts may adopt environmental laws, regulations, policies and/or
restrictions which will make it impossible or commercially impracticable for
Buyer to utilize this or 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 or enforcement
thereof, Buyer decides that it will be impossible or commercially impracticable
(uneconomical) for Buyer to utilize such coal, Buyer shall so notify Seller, and
thereupon Buyer and Seller shall promptly consider whether corrective actions
can be taken in the mining and preparation of the coal at Seller's mine and/or
in the handling and utilization of the coal at Buyer's generating station; and
if in Buyer's sole judgment such actions will not, without unreasonable expense
to Buyer, make it possible and commercially practicable for Buyer to so utilize
coal which thereafter would be delivered hereunder without violating any
applicable law, regulation, policy or order, Buyer shall have the right, upon
the later of 60 days notice to Seller or the effective date of such restriction,
to terminate this Agreement without further obligation hereunder on the part of
either party.

     SECTION 12.  CHANGES.  Buyer may, by mutual agreement with Seller, at any
time by written notice pursuant to Section 13 of this Agreement, make changes
within the general scope of this Agreement in any one or more of the following:
quality of coal or coal specifications, quantity of coal, method or time of
shipments, place of delivery (including transfer


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                                                      CONTRACT NO.: 96-063-026


of title and risk of loss), method(s) of weighing, sampling or analysis and such
other provision as may affect the suitability and amount of coal for Buyer's
generating stations.

     If any such changes make necessary or appropriate an increase or decrease
in the then current Base Price per ton of coal, or in any other provision of
this Agreement, an equitable adjustment shall be made in:  Base Price, whether
current or future or both, and/or in such other provisions of this Agreement as
are affected directly or indirectly by such change, and the Agreement shall
thereupon be modified in writing accordingly.

     Any claim by the Seller for adjustment under this Section 12 shall be
asserted within thirty (30) days after the date of Seller's receipt of the
written notice of change, it being understood, however that Seller shall not be
obligated to proceed under this Agreement as changed until an equitable
adjustment has been agreed upon.  The parties agree to negotiate promptly and in
good faith to agree upon the nature and extent of any equitable adjustment.  In
the event Seller and Buyer are unable to mutually agree on the changes requested
by Buyer under this Section 12, then this Agreement shall continue in full force
and effect without taking into account such requested changes.

     SECTION 13.  NOTICES

     Section 13.  FORM AND PLACE OF NOTICE.  Any official notice, request for
approval or other document required to be given under this Agreement shall be in
writing, unless otherwise provided herein, and shall be deemed to have been
sufficiently given when delivered in person, transmitted by facsimile or other
electronic media, delivered to an established mail service for same day or
overnight delivery, or dispatched in the United States mail, postage prepaid,
for


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                                                      CONTRACT NO.: 96-063-026


mailing by first class, certified, or registered mail, return receipt requested,
and addressed as follows:

     If to Buyer:        Louisville Gas and Electric Company
                         220 West Main Street
                         P.O. Box 32010
                         Louisville, Kentucky 40232
                         Attn:  Director, Fuels Procurement and Delivery

     with a copy to:     Louisville Gas and Electric Company
                         820 West Broadway
                         P.O. Box 32020
                         Louisville, Kentucky 40232
                         Attn:  Manager, Procurement Services

     If to Seller:       Peabody COALSALES Company
                         1951 Barrett Court
                         Suite 200
                         P.O. Box 1996
                         Henderson, Kentucky 42420-1996
                         Attn:  Vice-President, Sales

     Section 13.2  CHANGE OF PERSON OR ADDRESS.  Either party may change the
person or address specified above upon giving written notice to the other party
of such change.

     Section 13.3  ELECTRONIC DATA TRANSMITTAL.  Seller hereby agrees, at
Seller's cost, to electronically transmit shipping notices and/or other data to
Buyer in a format acceptable to and established by Buyer upon Buyer's request.
Buyer shall provide Seller with the appropriate format and will inform Seller as
to the electronic data requirements at the appropriate time.

     SECTION 14.  EARLY TERMINATION.  Each party hereto shall have the right of
early termination for any reason or no reason, in whole or in part, of its
rights and obligations under this Agreement as follows:  The party desiring to
exercise its right of early termination shall


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                                                      CONTRACT NO.: 96-063-026


give written notice thereof to the other party and pay the price for early
termination as described herein.  Notice may be given by either party no later
than four (4) months before the end of any calendar year; and this Agreement
will be terminated at the end of such year.  The price paid for such early
termination shall be $3.50 times the Annual Quantity remaining under this
Agreement from the effective date of the early termination until either the
effective date of the next price change which may occur pursuant to the next
price review right set forth in Section 8.2 (i.e., January 1, 1998) or the
termination of this Agreement (i.e., January 1, 2000), as applicable.  For
example, if Seller terminates this Agreement effective January 1, 1997, then
Seller would owe Buyer $3,500,000 under this Section 14.

     SECTION 15.  RIGHT TO RESELL.  Buyer shall have the unqualified right to
sell all or any of the coal purchased under this Agreement.

     SECTION 16.  INDEMNITY AND INSURANCE

     Section 16.1  INDEMNITY.  Seller agrees to indemnify and save harmless
Buyer, its officers, directors, employees and representatives from any
responsibility and liability for any and all claims, demands, losses, legal
actions for personal injuries, property damage and pollution (including
reasonable attorney's fees) (i) relating to the barges or railcars provided by
Buyer or Buyer's contractor while such barges or railcars are in the care and
custody of the loading dock or loading facility, (ii) due to any failure of
Seller to comply with laws, regulations or ordinances, or (iii) due to the acts
or omissions of Seller in the performance of this Agreement.

     Section 16.2  INSURANCE.  Seller agrees to maintain insurance coverage with
minimum limits as follows:



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                                                      CONTRACT NO.: 96-063-026


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

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

          (3)  In addition, Seller shall carry excess liability insurance
covering the foregoing perils 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 above policies are written on a claims made basis, then the
retroactive date of the policy or policies will be no later than the effective
date of this Agreement.  Certificates of Insurance satisfactory in form to the
Buyer and signed by the Seller's insurer shall be supplied by the Seller to the
Buyer evidencing that the above insurance is in force and that not less than 30
calendar days written notice will be given to the Buyer prior to any
cancellation or material reduction in coverage under the policies.  The Seller
shall cause its insurer to waive all subrogation rights against the Buyer
respecting all losses or claims arising from performance hereunder.  Evidence of
such waiver satisfactory in form and substance to the Buyer shall be exhibited
in the Certificate of Insurance mentioned above.  Seller's liability shall not
be limited to its insurance coverage.

     SECTION 17.  TERMINATION FOR DEFAULT.

     Subject to Section 6.4, if either party hereto commits a material breach of
any of its obligations under this Agreement at any time, then the other party
has the right to give written notice describing such breach and stating its
intention to terminate this Agreement no sooner than 30 days after the date of
the notice (the "notice period").  If such material breach is curable and the


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                                                      CONTRACT NO.: 96-063-026


breaching party cures such material breach within the notice period, then the
Agreement shall not be terminated due to such material breach.  If such material
breach is not curable or the breaching party fails to cure such material breach
within the notice period, then this Agreement shall terminate at the end of the
notice period in addition to all the other rights and remedies available to the
aggrieved party under this Agreement and at law and in equity.

     SECTION 18.  TAXES, DUTIES AND FEES

     Seller shall pay when due, and the price set forth in Section 8 of this
Agreement shall be inclusive of, all taxes, duties, fees and other assessments
of whatever nature imposed by governmental authorities with respect to the
transactions contemplated under this Agreement.

     SECTION 19.  DOCUMENTATION AND RIGHT OF AUDIT

     Seller shall maintain all records and accounts pertaining to payments,
quantities, quality analyses, source, and proposed revisions to the Base Price
of all coal supplied under this Agreement for a period lasting through the term
of this Agreement and for two years thereafter.  Buyer shall have the right at
no additional expense to Buyer to audit, copy and inspect such records and
accounts at any reasonable time upon reasonable notice during the term of this
Agreement and for 2 years thereafter.

     SECTION 20.  EQUAL EMPLOYMENT OPPORTUNITY.  To the extent applicable,
Seller shall comply with all of the following provisions which are incorporated
herein by reference:  Equal Opportunity regulations set forth in 41 CFR Section
60-1.4(a) and (c) prohibiting discrimination against any employee or applicant
for employment because of race, color, religion, sex, or national origin;
Vietnam Era Veterans Readjustment Assistance Act regulations set forth 


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                                                      CONTRACT NO.: 96-063-026


in 41 CFR Section 50-250.4 relating to the employment and advancement of 
disabled veterans and veterans of the Vietnam Era; Rehabilitation Act 
regulations set forth in 41 CFR Section 60-741.4 relating to the employment 
and advancement of qualified disabled employees and applicants for 
employment; the clause known as "Utilization of Small Business Concerns and 
Small Business Concerns Owned and Controlled by Socially and Economically 
Disadvantaged Individuals" set forth in 15 USC Section 637(d)(3); and 
subcontracting plan requirements set forth in 15 USC Section 637(d).

     SECTION 21.  COAL PROPERTY INSPECTIONS AND INJURIES TO
                  REPRESENTATIVES

     Buyer and its representatives, and others as may be required by applicable
laws, ordinances and regulations shall have the right at all reasonable times
and at their own expense to inspect the Coal Property, including the loading
facilities, scales, sampling system(s), wash plant facilities, and mining
equipment for conformance with this Agreement.  Seller shall undertake
reasonable care and precautions to prevent personal injuries to any
representatives, agents or employees of Buyer (collectively, "Visitors") who
inspect the Coal Property.  Any such Visitors shall make every reasonable effort
to comply with Seller's regulations and rules regarding conduct on the work
site, made known to Visitors prior to entry, as well as safety measures mandated
by state or federal rules, regulations and laws.  Buyer understands that mines
and related facilities are inherently high-risk environments.  Buyer's failure
to inspect the Coal Property or to object to defects therein at the time Buyer
inspects the same shall not relieve Seller of any of its responsibilities nor be
deemed to be a waiver of any of Buyer's rights hereunder.


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                                                      CONTRACT NO.: 96-063-026


     SECTION 22.  MISCELLANEOUS

     Section 22.1  APPLICABLE LAW.  This Agreement shall be construed in
accordance with the laws of the State of Kentucky, and all questions of
performance of obligations hereunder shall be determined in accordance with such
laws.

     Section 22.2  HEADINGS.  The paragraph headings appearing in this Agreement
are for convenience only and shall not affect the meaning of interpretation of
this Agreement.

     Section 22.3  WAIVER.  The failure of either party to insist on strict
performance of any provision of this Agreement, or to take advantage of any
rights hereunder, shall not be construed as a waiver of such provision or right.

     Section 22.4  REMEDIES CUMULATIVE.  Remedies provided under this Agreement
shall be cumulative and in addition to other remedies provided under this
Agreement or by law or in equity.

     Section 22.5  SEVERABILITY.  If any provision of this Agreement is found
contrary to law or unenforceable by any court of law, the remaining provisions
shall be severable and enforceable in accordance with their terms, unless such
unlawful or unenforceable provision is material to the transactions contemplated
hereby, in which case the parties shall negotiate in good faith a substitute
provision.


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                                                      CONTRACT NO.: 96-063-026


     Section 22.6  BINDING EFFECT.  This Agreement shall bind and inure to the
benefit of the parties and their successors and assigns.

     Section 22.7  ASSIGNMENT.  Neither party may assign this Agreement or any
rights or obligations hereunder without the prior written consent of the other
party, which consent shall not be unreasonably withheld or denied; provided,
however, that Buyer shall have the right, without consent of Seller, to assign
all or any part of this Agreement to any company, controlling, controlled by, or
under common control with Buyer.

     Section 22.8  ENTIRE AGREEMENT.  This Agreement contains the entire
agreement between the parties as to the subject matter hereof, and there are no
representations, understandings or agreements, oral or written, which are not
included herein.

     Section 22.9  AMENDMENTS.  Except as otherwise provided herein, this
Agreement may not be amended, supplemented or otherwise modified except by
written instrument signed by both parties hereto.

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

<TABLE>
<S>                                          <C>
LOUISVILLE GAS AND ELECTRIC                  PEABODY COALSALES COMPANY
 COMPANY

By:    /s/ Christopher Hermann               By:   /s/ illegible
      ----------------------------------         -----------------------------------
      Chris Hermann
      Vice President and General Manager     Title: Vice President Sales & Marketing
      Wholesale Electric Business                   --------------------------------
Date:      2/22/96                           Date:             2/21/96
      ----------------------------------            --------------------------------
</TABLE>


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