exv10w40








Exhibit 10.40




FUEL PURCHASE ORDER: J10007




	 	 	 

	Buyer:

	 	Louisville Gas and Electric Company (“LG&E”), or 

Kentucky Utilities Company (“KU”), individually as Buyer,

as applicable
220 West Main Street
P.O. Box 32010
Louisville, Kentucky 40232-2010

Attn: Mike Dotson

Phone: 502-627-2322

Fax: 502-627-3243
	 
	 	 
	 

	 	LG&E and KU shall be severally but not jointly liable for
obligations of Buyer hereunder, and shall be liable only for such
obligations that pertain to a particular party constituting Buyer
	 
	 	 
	Seller:

	 	Armstrong Coal Company

407 Brown Road

Madisonville, Kentucky 42431
	 
	 	 
	Fuel Purchase Order Number:

	 	Jl0007
	 
	 	 
	Effective Date:

	 	January 1, 2010
	 
	 	 
	Shipping Destination:

	 	Mill Creek, Trimble County, Cane Run, and Ghent Generating
Stations, as designated from time to time by Buyer
	 
	 	 
	Commodity:

	 	Crushed, bituminous coal reasonably free from any extraneous
material, and of reasonably uniform size and consistency and other
wise meeting the specifications of this Fuel Purchase Order.
	 
	 	 
	Producer:

	 	Armstrong Coal Company
	 
	 	 
	Mine:

	 	Any of Seller’s Mines located in Ohio County and Muhlenberg County,
Kentucky 

Type of Mining: Underground and Surface

Seam: Kentucky #9 and #11
	 
	 	 
	 

	 	Producer represents and warrants that the Source is sufficient to
supply the quantity and quality of coal required hereunder.
	 
	 	 
	Base Price:

	 	Price: - $41.00 per net ton at 11,000 BTU/lb, FOB Railcar at the
rail loading facility at Midway Unit Train Facility near McHenry,
Kentucky on the Paducah and Louisville Railroad or FOB barge at
Armstrong Dock located at MP 76.6 on the Green River. Price
includes without limitation, the transloading of the coal into
barges, all switching, fleeting, shifting, monitoring of barges
and all other harbor charges. The barges shall be free of
wharfage, dockage and other port charges.
	 
	 	 
	 

	 	Price will remain firm during the Term hereof, except for
variations in quality as provided in Section 5 — Quality Price
Adjustment.
	 
	 	 
	Quantity:

	 	The total quantity of coal supplied under this Fuel Purchase Order
will be 600,000 tons during the term set forth below. The parties
acknowledge that the actual total quantity supplied may be
slightly more or less than the amount set forth in the preceding
sentence due to the logistics of supplying bulk materials.






 









 







	 	 	 

	Term:

	 	January 1, 2010 through December 31, 2010
	 
	 	 
	Delivery Point:

	 	Rail Delivery: Midway Unit Train Facility near McHenry, Kentucky
Barge Delivery: Armstrong Dock located at MP 76.6 on the Green
River
	 
	 	 
	Destination Points:

	 	Mill Creek, Trimble County, Cane Run and Ghent Generating Stations
	 
	 	 
	Quality Specifications:

	 	The fuel shipped hereunder shall be of reasonably uniform quality
and shall conform (calculated on a monthly weighted average
basis) to the specifications set forth below under the heading of
Guaranteed Monthly Weighted Average (the “Guaranteed Monthly
Weighted Average”):





Quality:




	 	 	 	 	 	 	 	 	 	 	 	 	 
	Guaranteed Monthly Weighted	 	Individual Shipment	 	 	Monthly Discount	 	 	 	 
	Average (As Received Basis)	 	Rejection Limits	 	 	Points	 	 	Monthly Discount Values	 
	Moisture- 12.00 Ibs./MMBtu
	 	> 13.50 Ibs/MMBtu	 	12.75 Ibs./MMBtu	 	$0.0016/Ib/MMBtu
	Ash- 12.00 Ibs./MMBtu
	 	> 13.50 Ibs./MMBtu	 	12.80 Ibs./MMBtu	 	$0.0083/Ib/MMBtu
	BTU 11,000
	 	 	< 10,800	 	 	 	10,900	 	 	$0.2604/Ib/MMBtu
	Sulfur- 3.00 lbs./MMBtu
	 	> 3.25Ibs.IMMBtu	 	3.10 Ibs./MMBtu	 	$0.1232/1b/MMBtu
	Sizing 3” x 0”
	 	 	 	 	 	 	 	 	 	 	 	 
	Fines- 45.0%
	 	 	N/A	 	 	 	 	 	 	 	 	 
	Volatile- 33.0%
	 	 	< 30	 	 	 	 	 	 	 	 	 
	Ash Fusion (H=W Reducing) 2030 F	 	 	< 2020	 	 	 	 	 	 	 	 	 
	Fixed Carbon- 44
	 	 	<41	 	 	 	 	 	 	 	 	 
	Grindability- 55
	 	 	< 50	 	 	 	 	 	 	 	 	 







As used herein, a “shipment” shall mean one (1) train load of fuel for rail delivery or one
(1) barge load or a barge lot load of fuel for barge delivery in accordance with Buyer’s
sampling and analyzing practices.




Quality: The Seller has sole responsibility for quality control of the fuel and
shall forward its as loaded quality to the Buyer as soon as possible. Each shipment hereunder shall
also be of uniform quality. All Shipments shall be sampled and analyzed by Seller prior to shipment
to determine loading quality. Seller shall provide the results of such sampling and analysis to the
recipients designated by Buyer and in the format specified by Buyer as soon as possible after the
Shipment is loaded. Two (2) trains or six (6) barges in a thirty (30) consecutive day period not
conforming (i.e. exceeding any maximums or falling below any minimums) with one or more Rejection
Limits set forth above (the “Rejection Limits”) shall be considered an Event of Default and may, if
Seller does not give adequate assurances of future compliance or otherwise cure, result in
suspension or rejection as provided herein and/or may result in the exercise of other legal and
equitable remedies at Buyer’s option.




In the event of a conflict between the terms and conditions contained in this document and those
contained in any exhibits or attachments attached hereto the terms and conditions contained in this
document shall govern.



	 	 	 	 

	BUYER

	SELLER
	 
	 	 	 
	LOUISVILLE GAS and ELECTRIC CO.

KENTUCKY UTILITlES COMPANY

	     ARMSTRONG COAL COMPANY
	 
	 	 	 
	By:  	/s/ David S. Sinclair

	By:  	/s/ Martin Wilson
	 	Name: David S. Sinclair

Title: Vice President — Energy Marketing

Date: December l8, 2009

	 	Name: Martin Wilson

Title: President

Date: December 22, 2009






 









 






LOUISVILLE GAS AND ELECTRIC COMPANY/KENTUCKY UTILITIES COMPANY

FUEL PURCHASE ORDER TERMS AND CONDITIONS




			
	ARMSTRONG COAL COMPANY
	 	P.O. # J10007







	1.	 	SCHEDULING & DELIVERY






Seller shall cause fuel sold hereunder to be properly loaded into barges and/or railcars for
delivery to Buyer. Buyer or its contractor shall furnish suitable railcars or suitable barges, as
the case may be, and Seller shall have no obligation to load coal into a railcar or barge that,
in Seller’s good faith determination, is not suitable. Shipments are to be made on a ratable
basis as adjusted from time to time during the year to reflect Buyer’s outages; provided,
however, without the express written mutual agreement of the parties, such shipments will not
exceed 60,000 tons in any given thirty (30) day period.




	2.	 	TITLE AND RISK OF LOSS; WARRANTY






Title to and risk of loss of fuel conforming to this Purchase Order shall pass to Buyer as follows:




	 	a)	 	For rail deliveries, as the coal is loaded into railcars at the Delivery Point.
	 
	 	b)	 	For barge deliveries, as the loaded barges are pulled from the Delivery Point.
	 
	 	c)	 	For all Non-Conforming Shipments (as hereinafter defined) title to and risk of loss of fuel shall revert back to Seller immediately upon any rejection or non-acceptance by Buyer as
provided elsewhere in this Purchase Order.










Seller and Buyer shall each indemnify, defend, and save harmless the other party, its affiliates
and their respective officers, directors, agents, representatives and employees from and against
any liabilities, losses, claim, damages, penalties, causes of action, or suits (collectively
“Claims”) arising out of, in connection with or related to the ownership, operation, storage,
processing, handling and transportation of the fuel by the indemnifying party during the
Applicable Period. For purposes of this paragraph, “Applicable Period” shall mean (i) with
respect to the Seller, the period of time prior to title to and risk of loss of the fuel passing to
Buyer hereunder, and (ii) with respect to the Buyer, the period of time from and after title to
and risk of loss of the fuel passing to Buyer hereunder. Seller represents and warrants that it
has title to, and the right to sell, all fuel sold hereunder and the same is shipped free and
clear of all liens, encumbrances, and claims of all third parties.




Seller and Buyer also agree to indemnify and save harmless each other, their respective officers,
directors, employees and representatives from any responsibility and liability for any and all
third party claims, demands, losses, legal actions for personal injuries, property damage and
pollution (including reasonable inside and outside attorney’s fees) which, directly or indirectly
result from or relate to (i) any failure of the indemnifying party to comply with laws,
regulations or ordinances related to Seller’s or Buyer’s, as applicable, performance of this
Agreement; or (ii) the negligent acts or omissions of the indemnifying party in the performance
of this Agreement.




Seller agrees to carry and to cause its agent operating any facilities on its behalf to carry
insurance coverage with minimum limits as follows:




	 	(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)	 	Employer’s Liability, $1,000,000 single limit liability.
	 
	 	(4)	 	In addition, Seller and Seller’s agent shall each carry excess liability insurance
covering the foregoing perils in the amount of $5,000,000 for anyone occurrence.
	 
	 	(5)	 	Workers’ Compensation 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. Upon request by
Buyer, Certificates of Insurance satisfactory in form to the Buyer and each signed by the
Seller’s and Seller’s agent’s insurer, as applicable, shall be supplied by the Seller to the
Buyer evidencing that the above insurance is in force and that not less than thirty (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 and Seller’s agent shall each request of 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.



 









 






	3.	 	WEIGHTS


The weight of the fuel delivered hereunder shall be determined on a per shipment basis by Buyer on
the basis of certified scale weights at the Buyer’s Generating Station unless another method is
mutually agreed by the parties. Seller shall have the right, at Seller’s expense and upon
reasonable notice, to have the scales checked for accuracy at any reasonable time or frequency. If
the scales are found to be over or under the tolerance range allowable for the scale based on
industry accepted standards, 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.
	 
	4.	 	SAMPLING AND ANALYSIS


Buyer shall perform all sampling and analysis at its expense and the results of Buyer’s testing
shall be accepted and used for the quality and characteristics of the fuel delivered under this
Purchase Order. Seller may observe the unloading, sampling, sample preparation and analysis
hereunder. Buyer’s sampling and analysis practices for the fuel delivered under this Purchase Order
shall be performed in substantial compliance with ASTM standards where applicable or mutually
agreed methods.
	 
	 	 	Each fuel sample collected by the Buyer shall be properly divided into at
least four sub-samples. One part shall be analyzed by Buyer pursuant to the terms herein. One part
shall be used by Buyer as a check sample, if Seller in its sole reasonable judgment determines it
is necessary; one part shall be retained by Buyer until the twenty fifth (25th)
of the month following the month of unloading (the “Disposal Date”) after the sample is taken
and shall be delivered to Seller for analysis if Seller so requests before the Disposal Date. 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 tenth (l0th) business 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 fuel 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. All testing
of any such sample by the Independent Lab shall be at requestor’s expense unless the results differ
by more than the applicable ASTM reproducibility standards. If the Independent Lab results differ
from Buyer’s analysis by more than the applicable ASTM reproducibility standards, the Independent
Lab results will govern and the costs of the Independent Lab shall be borne by Buyer.






	5.	 	QUALITY PRICE ADJUSTMENTS






(a) BTU True Up.




The Base Price for coal delivered hereunder in any particular calendar month is based on the
assumption that the actual “as received” monthly weighted average BTU/LB (the “AMWA”) for
coal delivered to Buyer during that particular calendar month is equal to the minimum Guaranteed
Monthly Weighted Average BTU/LB (“GMWA”). In the event the AMWA varies from the GMWA for
any particular calendar month, then the Base Price applicable to such delivered coal will be
adjusted for that particular calendar month to account for such variation in BTU’s; such Base Price
adjustment for BTU’s for that particular calendar month to be determined as follows:




(i) Calculate the per ton Base Price BTU adjustment for any particular calendar month using the
following formula (where Price per Ton is the applicable Base Price):



AMWA — GMWA X Price per Ton = Per Ton Adjustment

GMWA                 
                         
                         
             






(ii) Determine the Base Price adjustment for BTU’s for that month by multiplying the Per Ton
Adjustment (as calculated in (i) above) by the total number of tons of coal actually delivered to
and unloaded by Buyer under this Agreement for that particular calendar month.




Depending on whether the AMWA is greater or less than the GMWA in any particular calendar month,
the Per Ton Adjustment (and thus the Base Price adjustment for BTU’s) for that particular calendar
month can be positive or negative. If the Base Price adjustment for BTU’s (as calculated above) for
a particular calendar month is positive, then Buyer shall be obligated to pay the amount of such
adjustment to Seller. If the Base Price adjustment for BTU’s (as calculated above) for a particular



 









 






calendar month is negative, then Seller shall be obligated to pay or credit the amount of such
adjustment to Buyer. Buyer shall be responsible for making the calculations and shall send a
written statement to Seller of the amount of such adjustment each month. Such payments shall be due
when the next payment for coal is due hereunder.




For example, if the AMWA for a particular calendar month equals 11,250 BTU/LB, the GMWA equals
11,000 BTU/LB and the Price Per Ton equals $41.00/ton, then the Per Ton Adjustment would be
((11,250 - 11,000) ÷ 11,000) x $41.00 = $.9318 per ton. If a total of 55,000 tons
were delivered during that particular calendar month, then the Base Price adjustment for BTU’s
would equal $51,250.00 (55,000 x $.9318). Since it is positive, this amount would be due and owing
to Seller by Buyer with respect to the deliveries for that particular calendar month (but not
including any fuel rejected pursuant to Paragraph (B) below) determined in accordance with the
terms and conditions hereof.




Notwithstanding the foregoing, for each specification each month with respect to the quality price
discounts, there shall be no discount if the Actual Monthly Quality meets the applicable Discount
Point set forth in the Quality Specifications section above. However, if the Actual Monthly Quality
fails to meet such applicable Discount Point, then the discount shall apply to and shall be
calculated as
provided in Exhibit A attached hereto.




(b) If any Shipment of fuel triggers any of the Rejection Limits specified herein (a
“Non-Conforming Shipment”), Buyer shall have the option, exercisable by notice to Seller of either
(i) rejecting such Non-Conforming Shipment at the Delivery Point or en-route, but prior to
unloading from transporter’s equipment or (ii) accepting any Non-Conforming Shipment with a
mutually agreeable price reduction. Buyer must reject such coal within seventy-two (72) hours of
receipt of the coal analysis provided for in §7.2 or such right to reject is waived. In the event
Buyer rejects such non-conforming coal, title to and risk of loss of the coal shall be considered to
have never passed to Buyer and Buyer shall return the coal to Seller or, at Seller’s request,
divert such coal to Seller’s designee, all at Seller’s cost and risk. 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, then such non-conforming coal shall be deemed accepted by Buyer. Seller
shall, at Buyer’s request replace the rejected fuel as soon as reasonably possible, provided that
Buyer gives written notice to Seller of Buyer’s desire for replacement fuel within ten (10) days
after rejection of the Non-Conforming Shipment; provided, Seller shall only be required to replace
rejected fuel if it is able to do so prior to the expiration of the Term of this Agreement.




	6.	 	INVOICING AND PAYMENT






	 	(A)	 	Exhibit A attached hereto shows the methodology for calculating the fuel payment and quality
price adjustments for the month Seller’s fuel is unloaded by Buyer.






	 	(B)	 	For all fuel delivered and unloaded at the Buyer’s generating station between the first
(1st) and fifteenth (15th) days of any calendar month, Buyer shall make
preliminary payment of one-hundred percent (100%) of the amount owed for the fuel (based on the
assumption that the fuel will meet all guaranteed monthly quality parameters) by the twenty-fifth
(25th) day of such month of delivery and unloading, except that, if the twenty-fifth
(25th) is not a regular work day, payment shall be made on the next regular work day. All
preliminary payments shall be calculated based on the then-current price on a dollar per ton basis
as calculated based on the guaranteed monthly weighted average BTU/Lb. and then-current Base Price
in cents per MMBTU. For all fuel delivered and unloaded at the Buyer’s generating station(s)
between the sixteenth (16th) and the last day of any calendar month, Buyer shall make preliminary
payment for one-hundred percent (100%) of the delivered and unloaded fuel by the fifteenth (15th)
day of the month following the month of unloading except that, if the fifteenth (15th) is not a
regular work day, payment shall be made on the next regular work day. Also by the fifteenth
(15th) day of the month following the month of unloading, with respect to all fuel unloaded
at Buyer’s generating station during the month of unloading, a reconciliation of amounts paid and
amounts owed during said month shall be made, including, making any adjustments for any applicable
discounts or other adjustments provided herein, except that, with respect to all amounts due or
owing on the fifteenth (15th) of the month following the month of unloading, if the
fifteenth (15th) is not a regular work day, payment shall be made on the next regular work
day.
	 
	 	 	 	For example, Buyer shall make a preliminary payment by August 25 for fuel unloaded from August 1
through August 15. By September 15, a payment for fuel unloaded from August 16 through August 31
will be made which shall be adjusted to include a reconciliation with respect to fuel unloaded in
August. The reconciliation shall be made as follows: Seller shall invoice Buyer on or before the
tenth (10th) day of the month following the month of delivery and unloading for all fuel delivered
and




 









 






	 	 	 	unloaded at Buyer’s generating station during the previous month. The amount due for all fuel
(based on the Base Price plus or minus any Quality Price adjustments) unloaded and accepted by
Buyer during any calendar month shall be calculated and compared by Buyer to the sum of the
preliminary payments made for fuel delivered and unloaded and accepted during such month. The
difference shall be paid by or paid to Seller, as applicable, by the fifteenth (l5th) day of the
month following the month of unloading, except, that, if the fifteenth (15th) is not a regular work
day, payment shall be made in the next regular work day.
	 
	 	(C)	 	Payment for fuel unloaded in a calendar month will be electronically transferred to Seller’s
Account:






Armstrong Energy, Inc.

US Bank, N.A.

Account # 152306681361

Routing # 081-000-210




	 	 	 	This order is not subject to Kentucky Sales Tax.
	 
	 	 	 	If any party in good faith reasonably disputes an invoice, it shall provide a written explanation
specifying in detail the basis for the dispute and pay any undisputed portion no later than the due
date. Notwithstanding anything herein to the contrary, non-payment of disputed portions, so long as
such amounts remain disputed in good faith, shall not constitute an Event of Default hereunder. If
Buyer, in good faith, disputes an invoice, Buyer shall immediately notify Seller of the basis for
the dispute and pay the portion of such statement not in dispute no later than the due date. If any
amount withheld under dispute by Buyer is ultimately determined to be due to Seller, it shall be
paid within five (5) business day after such determination, along with interest accrued at the rate
of two (2) percent over the prime lending rate as published from time to time in the Wall Street
Journal, but in no event to exceed the maximum lawful rate (“Interest Rate”) from the original due
date until the date paid. If after such determination any party fails to pay amounts under this
Agreement when due, unless such amount is excused by Force Majeure, in addition to the rights and
remedies provided in this Agreement, the aggrieved party shall have the right to: (i) suspend
performance under this Agreement until such amounts plus interest at the Interest Rate have been
paid, and/or (ii) exercise any remedy available at law or in equity to enforce payment of such
amount plus interest at the Interest Rate. If Buyer shall fail to pay for fuel delivered in
accordance with the terms hereof, Seller shall deliver written notice to Buyer of Buyer’s failure
to pay, and if such default is still outstanding fifteen (15) days after the notice is given, then
Seller shall have the right to suspend further shipments until all previous shipments are paid for.
Overdue payments shall accrue interest from the date overdue at the rate of two (2) percent over
the prime lending rate as published from time to time in the Wall Street Journal, but in no event
to exceed the maximum lawful rate.






	 	(D)	 	Invoices shall be sent to Buyer at the following address:






E.ON U.S. Services

220 West Main Street

Louisville, Kentucky 40202

Attn: Manager Fuels Accounting and Administration




	 	7.	 	ASSIGNMENT/DELEGATION


This Purchase Order shall inure to the benefit of and be binding upon the parties and their
respective successors and permitted assigns. However, no Party shall assign this Purchase Order or
any of its rights or obligations hereunder without the prior written consent of the other party.
Notwithstanding the foregoing, any party may, without the need for consent from the other party
(and without relieving itself from liability hereunder), (a) transfer, sell, pledge, encumber or
assign this Purchase Order or the accounts, revenues or proceeds hereof or thereof in connection
with any financing or other financial arrangements or (b) transfer or assign this Purchase Order to
an affiliate of such party; provided, however, that no such assignment shall in any way
relieve the assignor from liability for full performance under this Purchase Order. Any such
assignee shall assume and agree to be bound by the terms and conditions of this Purchase Order.
	 
	 	 	 	Written consent to one or more assignments shall not be construed as waiving the necessity of
obtaining written consent to other and/or additional assignments.




 









 






	 	8.	 	FORCE MAJEURE


No party shall be subject to liability to the other party for the failure to perform in conformity
with this Purchase Order where such failure results from a Force Majeure. A party affected by Force
Majeure shall notify the other party in writing as promptly as practicable of the existence of such
Force Majeure condition, and shall provide to the other party a written confirmation of such Force
Majeure condition, and its expected effect on deliveries and expected duration within seven
(7) business days following such initial notification. The party affected by the Force
Majeure shall remedy the Force Majeure, if possible, with all reasonable dispatch. In the event of
a Force Majeure, delivery of the affected quantity of fuel shall be made up in full or in part only
at the discretion of the Party not claiming Force Majeure; provided, in no event shall Seller be
required to deliver fuel beyond the end of the Term. If an event of Force Majeure persists for a
continuous period of at least sixty (60) days, then the party not claiming Force Majeure shall have
the option, upon three (3) days’ prior written notice, to terminate this Purchase Order and the
obligations of the parties hereunder shall terminate (other than obligations and liabilities for
prior performance thereunder). If Seller claims Force Majeure and is unable to meet all of its
sales obligations under this Purchase Order and any other of its fuel sales agreements involving
fuel of a similar type and quality as the fuel sold hereunder, or if Buyer claims Force Majeure and
is unable to meet all of its purchase obligations under this Purchase Order and any other of its
fuel and/or fuel purchase agreements involving fuel and/or fuel of a similar type and quality as
the fuel purchased hereunder for the same generating station, then any reductions in Seller’s
deliveries or Buyer’s purchases (as applicable) shall be allocated by the party claiming Force
Majeure on a pro rata basis among this Purchase Order and such other fuel and/or fuel purchase
agreements, involving fuel of a similar type and quality as the fuel to be sold and purchased
hereunder to the extent contractually permitted by this Purchase Order and such other agreements.
For purposes of this paragraph, the term “Force Majuere” means an event or circumstance which
prevents one (1) party from performing its obligations under this Purchase Order, which
is not within the reasonable control of, or the result of the negligence of, the party claiming
Force Majeure, and which by the exercise of due diligence, the claiming party is unable to overcome
or avoid or cause to be avoided, including, without limitation, acts of God, adverse geologic or
mining conditions, war, riots, civil insurrection, acts of the public enemy, strikes, lockouts,
natural disasters, breakdown or damage to Seller’s mining or railcar loading equipment or Buyer’s
coal unloading system, transportation delays, or other causes whether of a similar or dissimilar
nature. Force Majeure shall not be based on: (1) the loss of the Buyer’s markets; (2)
Buyer’s inability economically to use or resell the fuel purchased hereunder; (3) the Seller’s
ability to sell the fuel at a price greater than the Base Price; (4) Buyer’s ability to buy the
fuel at a price less than the Base Price; or (5) Seller’s inability to economically produce fuel
subject to this Agreement. A Force Majeure event affecting the Source shall be deemed a Force
Majeure event affecting the Seller. It is understood and agreed that significant capital
expenditures and settlement of strikes and lockouts shall be entirely within the discretion of the
party declaring Force Majeure.
	 
	 	9.	 	WAIVER


The failure of Buyer or Seller to insist in any one (1) or more instances upon strict
performance of any of the provisions of this Purchase Order or to take advantage of any of its
rights hereunder shall not be construed as a waiver of any such provisions (now or in the future)
or the relinquishment of any such rights, but the same shall continue and remain in full force and
effect for the term of this Purchase Order.
	 
	 	10.	 	This Section Intentionally Left Blank
	 
	 	11.	 	EVENT OF DEFAULT AND DAMAGES


If an Event of Default (as hereafter defined) occurs with respect to a party (the “Defaulting
Party”) at any time during the term of this Purchase Order, the other party (the “Non- Defaulting
Party”) may, in its sole discretion, do any or all of the following: (i) establish a date (which
date shall be no earlier than the date that such notice is given to the Defaulting Party) (“Early
Termination Date”) on which this Purchase Order shall terminate, (ii) withhold any payments due in
respect of this Purchase Order, (iii) suspend performance under this Purchase Order and/or (iv)
exercise such other remedies as may be provided in this Purchase Order or at law or in equity. An
event of default with respect to any party (“Event of Default”) shall mean any of the following:
(i) the failure of either party to materially comply with any or all of its other respective
obligations in good faith as herein set forth and such noncompliance is not cured within twenty
(20) business days after notice thereof to Defaulting Party; (ii) failure to provide reasonable and
adequate security for or reasonable assurances of its ability to perform its further obligations
under this Purchase Order within 5 days of a written request by the Non-Defaulting Party; or (iii)
either party (a) filing a petition in bankruptcy, (b) having such a petition filed against it, (c)
becoming otherwise insolvent or unable to pay its debts as they become due.




 









 







	 	12.	 	LIMITATION ON LIABILITY


NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, EXCEPT TO THE EXTENT COVERED BY ONE OR MORE
INSURANCE POLICIES REQUIRED TO BE MAINTAINED UNDER THIS AGREEMENT, AND EXCEPT TO THE EXTENT A
CLAIM, DEMAND, LOSS, OR LEGAL ACTION BROUGHT BY A THIRD PARTY INCLUDES ONE OR MORE SUCH ITEMS AND
FOR WHICH THERE IS AN INDEMNITY OBLIGATION UNDER THIS AGREEMENT WITH RESPECT TO SUCH CLAIM, DEMAND,
LOSS OR LEGAL ACTION, NEITHER PARTY SHALL BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE,
EXEMPLARY, SPECIAL OR INDIRECT DAMAGES, LOST REVENUES, LOST PROFITS OR OTHER BUSINESS INTERRUPTION
DAMAGES, BY STATUTE, IN TORT OR CONTRACT. EXCEPT AS EXPRESSLY SET FORTH HEREIN, SELLER EXPRESSLY
NEGATES ANY OTHER REPRESENTATION OR WARRANTY, WRITTEN OR ORAL, EXPRESS OR IMPLIED, INCLUDING ANY
REPRESENTATION OR WARRANTY WITH RESPECT TO CONFORMITY TO MODELS OR SAMPLES, MERCHANTABILITY, OR
FITNESS FOR ANY PARTICULAR PURPOSE.






	13.	 	REMEDIES






	 	(A)	 	Notwithstanding anything else herein to the contrary, Buyer reserves the right to reject
any fuel and/or terminate this Purchase Order on the terms permitted herein in addition to any
other legal or equitable remedies.
	 
	 	(B)	 	Buyer’s and Seller’s remedies arising from this purchase order are cumulative, and the exercise
of any one of them shall not preclude the exercise by Buyer or Seller of any other remedy which may
be allowed by law or equity.






	 	14.	 	ENTIRE AGREEMENT; MODIFICATIONS


This Purchase Order, the Fuel Purchase Order Terms and Conditions, together with any
attachments or exhibits specifically referenced herein (collectively, the “Purchase Order”),
constitutes the entire contract between the Seller and the Buyer with respect to the subject matter
hereof, supersedes all prior oral or written representations and contracts, and may be modified
only by a written amendment signed by Buyer and Seller.
	 
	 	15.	 	COMPLIANCE WITH THE LAW

Seller and Buyer shall, to the extent applicable, comply in all material respects with the
provisions of all federal, state, and other governmental laws and any applicable order and/or
regulations, or any amendments or supplements thereto, which have been, or may at any time be,
issued by a governmental agency, pertaining to performance of this Agreement, including, without
limitation:






	 	a)	 	applicable requirements of Sections 6, 7 and 12 of the Fair Labor Standards
Act of 1938, as amended, and of the regulations and orders of the U. S.
Department of Labor issued under Section 14 thereof.
	 
	 	b)	 	federal and state Occupational Safety and Health laws;
	 
	 	c)	 	regulations of the Public Service Commission of Kentucky and Virginia;
	 
	 	d)	 	the Equal Opportunity Clause in Section 202, Paragraphs 1 through 7
or Executive Order 11246, as amended, and the implementing Rules and Regulations of
the Office of Federal Contract Compliance by all of which are incorporated herein by reference; and
	 
	 	e)	 	federal and state affirmative action obligations for contractors or subcontractors for
minorities and females, handicapped workers and disabled veterans and veterans of the Vietnam Era,
and the regulations issued thereunder, as amended from time to time (applicable government
affirmative action clauses are incorporated herein by reference); and,






	16.	 	GOVERNING LAW


The rights and duties of the parties hereto shall be determined by the laws of the Commonwealth
of Kentucky and to that end this agreement shall be construed and considered as a contract made and
to be performed in the Commonwealth of Kentucky.






	17.	 	NOTICES


Unless expressly stated otherwise in this Agreement, notices provided for or required under
this Purchase Order shall be in writing and delivered by hand or electronic means or transmitted by
facsimile or sent by certified mail, postage prepaid, return receipt requested, or by overnight
mail or courier.




 









 






	 	 	Notices hand delivered or delivered by electronic means, shall be deemed delivered by the close of
the business day on which it was hand delivered or delivered by electronic means (unless hand
delivered or transmitted by electronic means after the close of the business day in which case it
shall be deemed received by the close of the next business day). Notices provided by facsimile
shall be deemed to have been received upon the sending party’s receipt of its facsimile machine’s
confirmation of a successful transmission. If the day on which such facsimile is received is not a
business day or is after five p.m. Eastern Time on a business day, then such facsimile shall be
deemed to have been received on the following business day. Notices provided by certified mail,
postage prepaid, return receipt requested, or by overnight mail or courier shall be deemed
delivered upon mailing.




     Notices to should be addressed as follows:




	 	 	 	 	 

	 

	 	If to Buyer:
	 	Louisville Gas and Electric Company/Kentucky Utilities Company

220 West Main Street

P.O. Box 32010

Louisville, Kentucky 40232

Attn.: Director Corporate Fuels and By-Products
	 
	 	 	 	 
	 

	 	If to Seller:
	 	Armstrong Coal Company

407 Brown Road

Madisonville, Kentucky 42431

Attn: Mr. David Cobb
	 
	 	 	 	 
	 

	 	 	 	With Copy To:
	 
	 	 	 	 
	 

	 	 	 	Mason L. Miller

Miller + Wells, PLLC

300 East Main Street, Ste. 360

Lexington, Kentucky 40507







	18.	 	CHANGES IN LAWS


All coal delivered pursuant to this Purchase Order must meet the standards and specifications as
outlined. The specifications as written will meet all the sulfur dioxide standards (both state and
federal) that are now applicable to the Buyer’s Generating Station for which this coal is being
purchased. In the event of any material and substantial change in any applicable laws or
regulations, including but not limited to environmental laws and regulations, or in the
interpretation hereof or enforcement practices with respect hereto, Buyer may cancel, in whole or
in part, its order or orders for any coal ordered as a result of this Purchase Order and may
terminate this Purchase Order without any liability to Seller, other than those with respect to
prior performance upon sixty (60) days written notice to Buyer.




 









 











Exhibit A

Page 1 of 2




EXHIBIT A TO FUEL PURCHASE ORDER

SAMPLE COAL PAYMENT CALCULATIONS —

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




	 	 	 	 	 	 
	 	 	Section I	 	Base Data
	1)

	 	Base or Adjusted Base FOB Price Per Ton:
	 	41.00	/ton
	1 a)

	 	Tons of coal delivered:
	 	 	tons
	2)

	 	Guaranteed average heat content:
	 	11,00	BTU/LB.
	2a)

	 	As received monthly avg. heat content:
	 	 	BTU/LB.
	2b)

	 	Total BTU’s unloaded in the month:
	 	 	Millions of BTU’s
	3)

	 	Guaranteed monthly avg. max. sulfur
	 	3.00	LBS./MMBTU
	3a)

	 	As received monthly avg. sulfur
	 	 	LBS./MMBTU
	4)

	 	Guaranteed monthly avg. ash
	 	12.00	LBS./MMBTU
	4a)

	 	As received monthly avg. ash
	 	 	LBS./MMBTU
	5)

	 	Guaranteed monthly avg. max. moisture
	 	12.00	LBS./MMBTU
	5a)

	 	As received monthly avg. moisture
	 	 	LBS./MMBTU
	6)

	 	BTU True Up: {[(line 2a — line 2)] ÷ line 2} x line 1
	 	 	Dollars/Ton
	6a)

	 	BTU True Up Dollars (line 6 x line la)
	 	 	Dollars






	 	 	 	 	 
	 	 	Section II	 	Discounts
	 
	 	Assign a (-) to all discounts (round to (5) decimal places)	 	 
	7)
	 	BTU/LB.: If line 2a < 10,900 BTU/LB. then:	 	 
	 
	 	{l - {(line 2a) / (line 2)} * $0.2604/MMBTU	 	 
	 
	 	(l-( )/( )} *$0.2604=	 	$________ /MMBTU
	7a)
	 	SULFUR: If line 3a is greater than 3.10 LBS/MMBTU	 	 
	 
	 	[ (line 3a) - (line 3) ] *0.1232/1b. Sulfur	 	 
	 
	 	[( ) - ( )] * 0.1232 =	 	$________  /MMBTU
	7b)
	 	ASH: If line 4a is greater than 12.80	 	 
	 
	 	[ (line 4a) - (line 4)] * 0.0083/MMBTU	 	 
	 
	 	[( ) - ( )] * 0.0083 =	 	$________ /MMBTU
	7c)
	 	MOISTURE: If line 5a is greater than 12.75 LBS/MMBTU	 	 
	 
	 	[ (line 5a) - (line 5) ] * 0.0016/MMBTU	 	 
	 
	 	[( )-( )]*0.0016=	 	$________ /MMBTU






 









 







Exhibit A
Page 2 of 2




	 	 	 	 	 
	 	 	 	 	Total Price
	 	 	Section III	 	Adjustments
	 
	 	Determine total Discounts as follows:	 	 
	8)
	 	BTU/Lb Discount Dollars (line 7 x line 2b)	 	$             Dollars
	9)
	 	Sulfur Discount Dollars (line 7a x line 2b)	 	$             Dollars
	10)
	 	Ash Discount Dollars (line7b x line 2b)	 	$             Dollars
	11)
	 	Moisture Discount Dollars (line 7c x line 2b)	 	$             Dollars
	12)
	 	Total Discount Dollars: Sum of lines 8 thru 11:	 	$             Dollars
	 
	 	Total Coal Payment Calculation	 	 
	13)
	 	Total coal payment for month:	 	 
	 
	 	[(line 1 x line la) + line 6a] -line 12	 	$             Dollars