Document:

exv10w7

Exhibit 10.7

CONTRACT

For

PURCHASE AND SALE

Of

EASTERN COAL

ARMSTRONG COAL COMPANY, INC.

 

 

TABLE OF CONTENTS

Note: Page numbers will be adjusted to match final contract configuration

	 	 	 	 	 	 	 
	SECTION
DESCRIPTION	PAGE #	 
	1.    

	 	Contract Term
	 	 	1	 
	2.

	 	Quantity
	 	 	2	 
	3.

	 	Scheduling
	 	 	3	 
	4.

	 	Variations, Delays, and Interruptions in Deliveries
	 	 	4	 
	5.

	 	Source
	 	 	6	 
	6.

	 	Price
	 	 	7	 
	7.

	 	Sampling and Analysis
	 	 	7	 
	8.

	 	Adjustment for Quality
	 	 	13	 
	9.

	 	Quality and Specifications
	 	 	14	 
	10.

	 	Contract Price Adjustments
	 	 	15	 
	11.

	 	Remedies
	 	 	17	 
	12.

	 	Notices
	 	 	18	 
	13.

	 	Shipping Notices
	 	 	19	 
	14.

	 	Transportation
	 	 	20	 
	15.

	 	Payments, Invoices
	 	 	21	 
	16.

	 	Weights
	 	 	22	 
	17.

	 	Contract Administrator/Contracting Officer
	 	 	23	 
	18.

	 	Disputes
	 	 	23	 
	19.

	 	Clean Air Act and Other Environmental Requirements
	 	 	23	 
	20.

	 	Unilateral Termination Right
	 	 	23	 
	21.

	 	Credit Evaluation and Performance Assurance
	 	 	24	 
	22.

	 	Verification of Data, Inspection or Records and Mine Sources	 	 	25	 
	23.

	 	Coal Mining and Reclamation and Conservation Requirements
	 	 	26	 
	24.

	 	Relationship of Parties — Producer’s Statement
	 	 	27	 
	25.

	 	Non-Assignability; Subcontracts; Designation and Termination of Agent
	 	 	27	 
	26.

	 	Waivers
	 	 	27	 
	27.

	 	Officials Not to Benefit
	 	 	28	 
	28.

	 	Small Business Policy
	 	 	28	 
	29.

	 	Liquidated Damages for Subcontracting Plans
	 	 	28	 
	30.

	 	Affirmative Action and Equal Opportunity
	 	 	28	 
	31.

	 	Safety and Health
	 	 	29	 
	32.

	 	Environmentally Acceptable Facilities; Clean Air and Water
	 	 	29	 
	33.

	 	Certification for Contracts, Grants, Loans, and Cooperative Agreements
	 	 	29	 
	34.

	 	Contract Components
	 	 	30	 
	 
	EXHIBIT I: Sample Calculations	 	 	31	 
	APPENDIX A: Coal Producers Statement and Specific Location Map	 	 	32	 

2

 

Contract           

CONTRACT
FOR PURCHASE AND SALE OF COAL

THIS
AGREEMENT, is made and entered into this ___ day of ___, 2007 by and between
TENNESSEE VALLEY AUTHORITY, a corporation organized and existing under an Act of Congress
(hereinafter called “TVA”), and Armstrong Coal Company, Inc. , a Delaware corporation with its
principal place of business located at 7701 Forsyth Boulevard,
10th Floor, St. Louis, Missouri
63105 (hereinafter called “Contractor”).

W I T N E S S E T H:

In consideration of the mutual covenants hereinafter stated, the parties hereto agree as follows:

DEFINITIONS.

“Contract Year” shall mean the six-month period commencing July 1, 2008, and ending December 31,
2008, and thereafter, each calendar year commencing January
1st and ending December 31st for the
Contract Term set forth below.

“Delivery Commencement Date” shall be that date set forth in Section 1 hereof for commencement of
deliveries. Such date may be changed only by a written supplement to this contract, signed by both
parties, that expressly refers to the term “Delivery Commencement Date.” The actual date of
commencement of deliveries shall not affect the Delivery Commencement Date.

“Contract Administrator” shall be that TVA representative designated to administer the contract on
behalf of TVA.

“Destination” shall have the following meaning: For (i) coal purchased F.O.B. origin and transported
by TVA or TVA’s carrier to a transloading or blending facility
or facilities and (ii) coal purchased
F.O.B. destination at such facility or facilities, each such facility shall be a “Destination.” For
all other coal, each TVA fossil-fired power plant receiving coal purchased under this contract
shall be a “Destination.” The initial Destination or Destinations is as follows: Widows Creek,
Paradise, Cumberland, and TVA may elect under Subsection 14.7 of this contract to change or add
Destinations from time to time.

“Receiving Plant” shall mean any TVA fossil-fired power plant that receives coal purchased under
this contract, whether or not such coal is transported directly to such plant or is first
transported to a transloading or blending facility. Where the coal received by a TVA fossil-fired
power plant is intended to be used only in certain generating units of the plant, because of the
particular coal quality requirements of such units, such units shall be considered the “Receiving
Plant.”

	1.0	 	CONTRACT TERM
	 
	 	 	The Delivery Commencement Date shall be July 1, 2008, and deliveries shall continue for
ten and one-half (10 1/2) years from said Delivery Commencement Date unless terminated earlier by
agreement or as otherwise provided herein. Provided, however, this contract may be reopened by
either party (9) months prior to the 66th month anniversary of the Delivery Commencement
Date for the purpose of renegotiating price and other terms and conditions or for the sole purpose
of terminating deliveries. The party desiring to exercise such reopener shall give the other party
written notice at least (9) months prior to the
66th month anniversary date and may, but shall not
be required to, specify the purpose of such reopening. Nothing herein is intended to require a
party who has commenced renegotiations hereunder to continue such renegotiations if, for any
reason, such party determines it is not in its interests to do so. If the reopener provision has
been

1

 

	 	 	exercised, this contract will terminate on the said 66th month anniversary date unless TVA and the
Contractor have mutually agreed in writing six (6) months prior to the said anniversary date to
continue this contract. Neither party shall be under any obligation or liability to continue this
contract beyond said termination or have any liability for refusing to do so, if either party
desires to terminate deliveries in accordance herewith.
	 
	2.0	 	QUANTITY
	 
	2.1.1	 	 Subject to TVA’s right to reduce or increase quantities to be delivered, as hereinafter
provided, the quantity of coal to be sold and purchased hereunder during each Contract Year shall
be as follows:

	 	 	 	 	 
	Contract Year	 	Base Tonnage	 
	2008
	 	 	500,000	 
	2009
	 	 	1,000,000	 
	2010
	 	 	1,500,000	 
	2011
	 	 	1,500,000	 
	2012
	 	 	2,000,000	 
	2013
	 	 	2,000,000	 
	2014-2018
	 	 	4,000,000	 

	 	 	Note: Except as otherwise provided below, all annual tonnages will be delivered in fifty-two (52)
equal weekly deliveries or as directed by the Contract Administrator
	 
	2.1.2	 	Commencing in Contract Year 2011, and each Contract Year thereafter, TVA may, from
time to time, decrease the scheduled quarterly deliveries by up to twenty percent (20%) of the
quarterly schedule by giving at least sixty (60) days written notice (“Nominated Quantity”).
	 
	2.1.3	 	TVA shall have no obligation to purchase or schedule for delivery at a later date
any quantity in excess of the Nominated Quantity.
	 
	2.1.4	 	TVA shall not be required to accept any quantity of coal shipped during a week that is in
excess of the Nominated Quantity, but if TVA accepts such excess quantity of coal, TVA shall, upon
15-day written notice to Contractor, require that such excess amount be deducted from the
quantities to be shipped during the following or subsequent months/week(s) in the Contract Year.
	 
	2.1.5	 	If at the expiration of the term of the contract less than the maximum tonnage has
been scheduled for delivery, the parties may by agreement extend the term of this contract for a
period sufficient to permit the delivery of tonnage in an amount up to the difference between the
maximum tonnage and the total scheduled. Neither party shall be obligated to agree to such an
extension.
	 
	2.1.6	 	This contract is not and shall not be construed as a contract for all of TVA’s coal
requirements for any plant. TVA reserves the right to purchase coal from other suppliers in any
amount during the term of this contract.
	 
	2.2.	 	Notwithstanding the provisions of Subsection 2.1.1, above, if generation of electricity at a
Receiving Plant is curtailed or interrupted for a period of one week or more as a result of the
operating requirements of TVA’s integrated electric generating system, including considerations of
economic dispatch of TVA’s generating units, TVA may, from time to time, suspend or reduce
Contractor’s deliveries under this contract by a percentage equal to the percentage reduction in
electric output of the Receiving Plant resulting from such curtailment or interruption. If there is
more than one Receiving Plant for this contract at the time of such curtailment or interruption,
the suspension or reduction in deliveries shall apply only to such coal as, but for the curtailment
or interruption, would have been received at the Receiving Plant experiencing a curtailment or
interruption. Such suspension or reduction in deliveries may continue as long as generation at such
Receiving Plant is curtailed or interrupted; provided, however, if TVA continues any such

2

 

	 	 	reduction or suspension for more than one hundred eighty (180) consecutive days, and the average
weekly reduction or suspension during said one hundred eighty (180) day period was more than fifty
percent (50%) of the average weekly quantity scheduled under this contract for delivery during such
period, Contractor may notify TVA in writing, after such one hundred eighty (180) day period, of
Contractor’s intent to terminate this contract ninety (90) days from the date of TVA’s receipt of
such written notice, and this contract shall, upon the passing of such ninety-day (90-day) period,
terminate without further cost or obligation to either party, unless TVA shall have directed the
cancellation of the suspension or reduction within forty-five (45) days of TVA’s receipt of
Contractor’s notice of termination.
	 
	2.3	 	If the coal purchased hereunder is shipped to a blending / trans-loading facility for
incorporation into a Blended Product(s) that is constituted from (i) coal purchased hereunder
and/or coal of like quality to that purchased hereunder (such coal together with coal purchased
hereunder “Contract Quality Coal”) and (ii) other coal or coals of dissimilar quality (when blended
with Contract Quality Coal, the “Blended Product(s)”), which Blended Product(s) is transported to
more than one TVA Receiving Plant (“Multiple Receiving Plants”), then the provisions of Subsection
2.2 shall be applied as follows: In the event one or more of the Multiple Receiving Plants
experiences a curtailment or interruption in generation as described above, TVA shall determine the
total reduction in weekly usage of Contract Quality Coal associated with the curtailment(s) or
interruption(s) (“Contract Quality Coal Reduction”), and TVA may adjust downward weekly deliveries
hereunder on the basis of the ratio of the Contract Quality Coal Reduction to the average total
quantity of Contract Quality Coal TVA has been receiving weekly for use in the Blended Product(s)
based on receipts during the prior 30-day period. All provisions of Subsection 2.2 not inconsistent
with this paragraph shall apply in the case of Blended Product(s) and Multiple Receiving Plants.
	 
	2.4	 	Except where Contractor has terminated this contract as provided in Subsection 2.2.,
suspensions or reductions under Subsection 2.2 or Subsection 2.3 shall not affect the
enforceability of this contract and, on termination of the suspension or reduction, shipments shall
resume pursuant to the terms and conditions of this contract. Both TVA and Contractor shall be
excused from their respective obligations hereunder with respect to deliveries suspended or reduced
pursuant to Subsection 2.2 or Subsection 2.3, and such deliveries shall not be rescheduled for
delivery except by mutual consent of the parties.
	 
	2.5.	 	Except in the case of any failure to deliver that is excused under Subsection 4.2., TVA may
exercise the remedies afforded it under Section 11, Remedies, or as otherwise provided by
law, in the event Contractor fails to deliver coal as provided in this Section 2 or Section 3,
Scheduling; provided, however, in lieu of other remedies, TVA may elect to reschedule for
delivery any deficiencies provided TVA provides written notice to Contractor of its intent to do so
within 90 days of the date such deficiency occurred and such deficiency is rescheduled for delivery
within twelve (12) months of such notice, or later as may be mutually agreed. Such rescheduled coal
shall be delivered in accordance with the provisions of this contract and at the price in effect at
the time during which such deficiencies occurred.
	 
	3.0	 	SCHEDULING
	 
	3.1	 	TVA shall provide Contractor with any changes to the quantities of coal to be
delivered to TVA consistent with the requirements of Section 2, Quantity. Contractor agrees
to load TVA’s carrier’s trains or barges on arrival at Contractor’s loading point in accordance
with the terms and conditions of TVA’s rail or barge transportation agreement(s). TVA maintains the
right to coordinate all deliveries under this contract and others for the purposes of establishing
a uniform delivery schedule for placement at Destinations and/or Receiving Plants.
	 
	3.2	 	Regardless of which party contracts for transportation necessary to transport coal
purchased and sold hereunder to the Destination, unless otherwise agreed, Contractor shall be
responsible for

3

 

	 	 	making timely arrangements for the scheduling of transportation equipment necessary to comply with
the delivery schedule established by TVA.
	 
	3.3	 	Scheduled deliveries in contract years 2008-10 shall be by rail in 90-car unit trains with a
10,350 ton per train minimum weight. Commencing in contract year 2011, TVA will schedule a minimum
of 1,500,000 tons annually by rail unless otherwise mutually agreed.
	 
	4.0	 	VARIATIONS, DELAYS AND INTERRUPTIONS IN DELIVERIES
	 
	4.1	 	Time of shipment is of major importance to TVA. Contractor shall immediately notify
TVA’s Contract Administrator of any expected deviation from the shipment schedule established in
accordance with Section 2, Quantity, and Section 3, Scheduling, of this contract
and of the cause and extent of the deviation, except in the case of variations in quantity from
schedule of up to five percent (5%).
	 
	4.2	 	Subject to the conditions hereinafter stated, neither party shall be liable to the
other for failure to deliver or accept delivery of coal as provided for in this contract if such
failure was due to supervening causes beyond its control and not due to its own negligence, and
which cannot reasonably be overcome by the exercise of due diligence. Such causes shall include by
way of illustration, but not limitation: acts of God or of the public enemy; insurrection; riots;
strikes; nuclear disaster; partial or total outages of coal-fired units; floods; accidents; major
breakdown of equipment or facilities (including, but not limited to, emergency outages of equipment
or facilities to make repairs to avoid breakdowns thereof or damage thereto), such equipment and
facilities to include, but not limited to, power generation, unloading, stock-out and preparation
plant equipment; fires; industry-wide carrier delays or shortages of carriers’ equipment;
embargoes; orders or acts of civil or military authority; or industry-wide shortages of materials
and supplies. Nor shall TVA be obligated to accept delivery of coal hereunder to the extent that
such causes wholly or partially prevent the unloading, stockpiling, preparing, or burning of coal
at a Destination or Receiving Plant that is receiving coal at the time the cause occurs, in which
case TVA shall have no obligation to consign deliveries to another destination or plant; provided,
however, that if there is more than one Destination or Receiving Plant for this contract at the
time such cause occurs, TVA shall be excused from taking delivery of only such coal as would have
been received at the Destination or Receiving Plant experiencing such cause. Nor shall the refusal
of either party to settle a strike on terms other than it considers satisfactory preclude the
strike from being considered an excusable cause. TVA shall have the right, but not the obligation,
to require Contractor to make up any tonnage not delivered in accordance with this section.
	 
	4.3	 	Contractor’s delays due to delays of its subcontractors will not be excusable under
this Section 4 unless the delay of the subcontractor was also due to causes beyond the control and
without the negligence of the Contractor or subcontractor, such as the causes listed above. The
failure by Contractor or its subcontractor to obtain and maintain all federal, state, and other
regulatory agency coal mining permits, certificates, and licenses shall not excuse Contractor from
any obligation under this contract. The provisions of Subsection 4.2. shall not excuse a party
unless such party failing to deliver or take coal shall give written notice to the other of such
failure and furnish full information as to the cause and probable extent thereof within ten (10)
calendar days after the failure first occurs. In the case of the Contractor, said ten-day (10-day)
period shall begin with the day following that on which tonnage first becomes deficient under the
established delivery schedule. In the case of TVA, this period shall begin on the day following
that on which TVA first fails to take coal duly and properly delivered. Failure to give such notice
and furnish such information within the time specified shall be deemed a waiver of all rights under
this Section 4 with respect to such coal or such tonnage scheduled for delivery prior to the date
such notice and information are actually furnished.
	 
	4.4	 	In the event of partial failure to deliver, take, or unload coal which is excusable
under this Section 4, the parties shall prorate deliveries or receipts of coal in substantially the
same proportion based upon contractual commitments, (e.g. a fifty percent (50%) reduction in
receiving or production

4

 

	 	 	capacity would result in a fifty percent (50%) reduction in scheduled deliveries for each supplier
or consumer). However, the parties shall not be obligated to prorate a reduction in receipts or
deliveries under coal supply contracts not affected by the failure because they have different
modes of delivery or have substantially different quality requirements, or because their scheduled
delivery dates are not affected by the failure. During the periods TVA may experience such failures
to take or unload coal, Contractor shall be permitted to sell such coal normally intended for TVA.
In the case of the period during which Contractor may experience such failures to deliver coal, TVA
may purchase replacement coal. The disabling effects of such failures to deliver, take, or unload
coal shall be corrected by the party experiencing such failure as soon as and to the extent
reasonably practicable.
	 
	4.5	 	If the coal purchased hereunder is shipped to a blending / trans-loading facility for
incorporation into a Blended Product(s) (as defined in Subsection 2.3 hereof), which Blended
Product(s) is transported to more than one TVA Receiving Plant (“Multiple Receiving Plants”), then
the provisions of Subsection 4.2 shall be applied as follows: In the event one or more of the
Multiple Receiving Plants experiences a failure to take, unload or burn a Blended Product due to
causes identified in Subsection 4.2, TVA shall determine the total Contract Quality Coal Reduction,
(as defined in Subsection 2.3 hereof), and TVA may adjust downward weekly deliveries hereunder on
the basis of the ratio of the Contract Quality Coal Reduction to the average total quantity of
Contract Quality Coal TVA has been receiving weekly for the Blended Product(s) based on receipts
during the prior 30-day period. All provisions of Subsection 4.2 not inconsistent with this
Subsection 4.5 shall apply in the case of Blended Product(s) and Multiple Receiving Plants. This
Subsection 4.5 shall not apply to excused failures to take coal due to events that affect
transportation, receipt, unloading, or handling of coal prior to blending.
	 
	4.6	 	TVA, by providing at least thirty (30) days’ prior written notice to Contractor, shall
have the right to refuse any shipments otherwise scheduled for delivery to a Destination or
Receiving Plant during maintenance periods at such Destination or Receiving Plant. TVA shall have
the right, but not the obligation, to require Contractor to make up at a later date any tonnage not
delivered in accordance with this section, provided, however, TVA shall be required to provide
written notice to Contractor of its intent to require Contractor to make up such deliveries within
90 days of the commencement of any such maintenance periods, and such deliveries are rescheduled
for delivery within twelve (12) months of such notice, or later as may be mutually agreed.
	 
	4.7	 	Any written notice and information provided by Contractor to TVA under this Section 4
shall be submitted to TVA in writing and accompanied by and attached to a Certificate of Force
Majeure Information (“Certificate”), using the format set forth below, and executed by an
authorized representative of Contractor.

CERTIFICATE OF FORCE MAJEURE INFORMATION

TVA CONTRACT NO. (INSERT CONTRACT NUMBER) (THE “CONTRACT”)

1. [insert name], hereby certify that:

(a) I have prepared and submitted the attached Notice of Force Majeure in good faith and
based upon facts and circumstances known personally to me;

(b) to the best of my knowledge and belief, the information contained in the attached
Notice is, as of the date of this Certificate, accurate, complete, not misleading, and can be
verified by supporting information currently in my possession or in the possession of other
employees or officers of [insert company name] (“Contractor”) and nothing has been omitted
from the attached Notice the inclusion of which is necessary for the information contained in the
attached Notice to be accurate, complete, and not misleading;

© to the best of my knowledge and belief, the failure to deliver coal as provided in the Contract
is due to supervening causes beyond the control of Contractor, is not due to Contractor’s

5

 

own negligence, and cannot be reasonably overcome by the exercise of due diligence by Contractor,
and

(d) I am duly authorized to execute and submit this Certificate and attached Notice.

For the purposes of this certification, the term “Force Majeure” refers to the conditions and
causes set forth in Subsection 4.2 of the Contract, and the term “Notice” refers to the written
notice described in Subsection 4.3 of the Contract.

	 	 	 	 	 

	 
	 

	 	Name	 	 
	 

	 	 

	 	 
	 
	 

	 	Company 

 

Title

	 	 
	 
	 

	 	
Date of Execution
	 	 
	 

	 	 

	 	 

	5.0  SOURCE

	 
	5.1	 	The source of coal delivered under this contract is of major importance to TVA. The
provisions of this contract pertaining to coal quality and quantity requirements, price
adjustments, federal and state legislation, and other matters are directly related to the source of
coal. As used in this Section 5, “Source Area” shall mean the total coal reserve areas outlined in
the Specific Location Map(s) identified in Appendix A; provided, that, within the Source Area, only
the area(s) (for surfaced-mined coal) or mine opening(s) (for underground-mined coal) covered by
the following mining permit(s) and proposed mine permit areas identified herein is an “Authorized
Source” of coal for delivery under this contract: [List permit numbers]. The mine area(s) and/or
opening(s) located within the Source Area shown on the Specific Location Map(s), but not covered by
the mining permit(s) listed above, may become an Authorized Source under the following procedures
as mining progresses and the appropriate permit(s) and license(s) are obtained. Contractor shall
notify TVA in writing at least sixty (60) days in advance of its intention to deliver coal from any
additional area(s) or mine opening(s) that is in the Source Area but which is not then authorized.
TVA shall authorize such areas if the proposed source is owned or controlled by contractor or its
affiliates and if, in TVA’s reasonable judgment, the proposed source is capable of meeting the
requirements of this contract. TVA reserves the right to require Contractor to furnish any
information and/or any guarantees TVA deems necessary bearing on the ability of any source or
proposed source to meet the requirements of this contract and to make that information and / or any
guarantees a part of this contract.
	 
	5.2	 	Contractor shall immediately notify TVA in writing of any events affecting the size or
location of the Authorized Source(s). All Authorized Sources under this contract shall be in
compliance with the Federal Mine Safety and Health Act of 1977, as amended, all state and federal
reclamation laws, including the Surface Mining Control and Reclamation Act of 1977, as amended, and
regulations issued under such laws. If Contractor fails to comply with this requirement, whether or
not coal from such Authorized Source is then being delivered hereunder, TVA may exercise its rights
under Section 11, Remedies.

6

 

	5.3	 	Contractor expressly assumes the risk that the “Source Area” and Authorized Source(s)
as scheduled by Contractor (subject to approval by TVA as set forth herein) will permit the
production of coal in such quantities and of such quality as will meet the requirements of this
contract. Coal shall not be delivered from any other source(s), or shipped from any other
origin(s), or mined by any other producer(s) unless authorized by TVA in writing prior to delivery.
	 
	5.4	 	Regardless of the cause of or reason for a request by Contractor to approve a new
Authorized Source outside the Source Area, TVA shall be under no obligation to approve the tendered
source as an Authorized Source, and TVA may withhold its approval on any basis or bases that TVA
may deem appropriate, including purely economic considerations.
	 
	 	 	Notwithstanding the above, it is understood by the parties that Contractor is a new mining entity,
and that its ability to ship the quantities set forth in Section 2.1.1 above will require
additional mines and permits from the “Source Area” and the approval of these additional mines as
“Authorized Sources” by TVA.
	 
	 	 	In the event TVA withholds approval of such additional mines or seams based on “purely economic
considerations,” the quantities set forth in Section 2.1.1 above shall be adjusted accordingly by
the parties.
	 
	6.0 	 	PRICE
	 
	6.1	 	TVA shall pay Contractor $29.93 F.O.B. railcar at Midway, Kentucky (hereinafter referred to as
the “Base Price”) for each net ton of coal purchased and delivered under this contract. Thereafter
the Base Price shall be adjusted the first day of each Contract Year as provided in Section 10.1
(as adjusted annually, hereinafter referred to as “the then current Base Price”) and otherwise as
provided in Section 8.
	 
	7.0	 	SAMPLING AND ANALYSIS
	 

	 	7.01	 	Upon the commencement of deliveries under this Contract, the following applies: (Check one box only)

	 	 	 	 	 

	o

	 	TVA Sampling/TVA Analysis
	 	Section 7.1
	þ

	 	Contractor Sampling/Contractor Analysis
	 	Section 7.2
	o

	 	Contractor Sampling/TVA Analysis
	 	Section 7.3

7.02  Regardless of which method of sampling and analysis is selected for initial
deliveries, TVA, may elect from time to time, with 30 days’ advance written notice, to switch to a
different method of sampling and/or analysis, in which event the appropriate alternative clause of
this Section 7 shall govern.

7.03   Contractor shall provide to TVA on a quarterly basis the following analysis and
testing as specified by TVA. Sample composite size of not less than 10,000 tons (unless otherwise
approved by TVA):

	 	 	 	 	 	 

	 	Size Consist

	 	Mineral Ash
	 	Ash Fusions
	 	HGl

	 	Trace Elements	 	 

	 	7.1	 	TVA Sampline/TVA Analysis

	 	7.1.1	 	The sampling location shall be the Receiving Plant unless TVA notifies Contractor in
writing that samples will be taken at other locations, including blending facilities. Contractor
may be present

7

 

	 	 	 	at the taking of samples, but TVA shall have no obligation to notify Contractor to be present. TVA
may engage the services of a third party to take its samples hereunder, rather than using its own
employees. Except as provided below, in order for TVA sampling and analysis to govern, the
following criteria shall apply:

	 	7.1.1.1	 	Sixty five percent (65%) of the shipments shall have been sampled and analyzed in
accordance with the methods described in the latest published edition of the Annual Book of ASTM
Standards. Samples must have been collected utilizing mechanical systems meeting ASTM D 2234 Type
I, Condition B, Collection of a Gross Sample of Coal, which have been shown to be free of
statistically significant bias. Systems will be subject to a critical inspection according to ASTM
D4702 annually. Analysis procedures used should be as follows:

	 	 	 
	Parameter	 	Method
	Residual Moisture

	 	ASTM D 5142
	Air Dry Moisture

	 	ASTM D 3302 Note
	Ash

	 	ASTM D 5142
	Sulfur

	 	ASTM D 4239
	Btu

	 	ASTM D 5865
	Note: Or General Industry Standards
	 	 

	 	7.1.1.2	 	The lot size for each sample shall be by barge load for barge coal, by trainload
for rail coal, and by daily truck deliveries for truck coal.
	 
	 	7.1.1.3	 	The sampling system shall be located in an area such that the sample collected to
represent the shipment is collected only from coal that is from said shipment.

	7.1.2	 	Analysis data (total moisture, ash, sulfur, and Btu) shall be promptly made
available to Contractor through access to a computer system or, at TVA’s option, may be provided by
other means. Moisture, ash, and sulfur values shall be reported to the nearest hundredth (.01) of a
percent. Heat content shall be reported to the nearest whole Btu/lb. SO2 content shall be
calculated and reported to the nearest hundredth (.01) of a pound.
	 
	7.1.3	 	All samples collected by TVA, or others at its direction, shall be properly air
dried and prepared according to ASTM D2013 & D3302 or General Industry Standards to produce a
60-mesh sample for analysis. The 60-mesh sample shall be divided into at least two parts and put in
suitable airtight containers, the first container in each case to be used by TVA, or its designated
commercial laboratory, to determine the quality of coal sold hereunder for all contract purposes,
except as specifically provided below. The second container in each case shall be held available to
TVA for a period of sixty (60) days from actual sampling date of the coal, properly sealed and
labeled, to be analyzed if a dispute arises between TVA and Contractor. If Contractor wishes to
dispute a sample or analysis, it shall notify TVA in writing within such sixty-day (60-day) period.
If Contractor fails to provide such notice of dispute within such sixty-day (60-day) period,
Contractor shall be deemed to have waived any claim or defense based on errors or omissions in the
sampling or analysis operations as to the affected samples.
	 
	7.1.4	 	Upon receipt of a notice of a dispute over the results or method of such sampling or
analysis, TVA shall review and inspect the sampling and analysis equipment and procedures and the
second sample part will be analyzed by a third-party commercial laboratory to check for
reproducibility. The third-party laboratory will follow the same ASTM analysis procedures outlined
in Subsection 7.1.1, and the reproducibility limits in those same standards will be used to judge
reproducibility. If the review of the sampling and/or analysis indicates the original sampling or
analysis was improperly performed or the results of the second analysis are not within ASTM
reproducibility limits, the original analysis report shall be declared erroneous, and the results
of the second analysis will be conclusive for both parties in regard to the analysis of the sample
in question. Otherwise, the original analysis report shall remain in full force and effect.

8

 

	7.1.5	 	Contractor shall also sample and analyze, or obtain services of a third party to
sample and analyze, all shipments of coal to TVA under this contract. These analyses shall specify,
at a minimum, the total moisture content, the ash content (as-received), the heat content Btu/lb
(as-received), the sulfur content (as-received) and S02 (as-received) and must be electronically
transmitted to the Contract Administrator and other parties designated by the Contract
Administrator in a format acceptable to TVA. These analyses are required in order to provide
information on the contents of coal received by TVA within 24 hours (including week ends and
holidays) or prior to unloading, whichever is earliest. TVA reserves the right not to unload coal
at the Destination until after the appropriate analysis is received. Contractor shall be
responsible for any demurrage charges incurred by TVA as the result of Contractor’s failure to
transmit the analyses when and as required. TVA may reject coal based on these analyses; however,
nothing in this Subsection 7.1.5 shall affect in any way TVA’s rights to appropriate contractual
actions and adjustments for quality based on samples collected and analyzed in accordance with this
Section 7.
	 
	7.1.6	 	In the event TVA does not sample at least sixty-five percent (65%) of the tonnage
received in a calendar quarter, the Contractor’s samples shall be used for the quality
adjustment(s) for such quarter under Section 8, Adjustments for Quality, provided all Contractor
samples for such quarter meet all criteria below:

	 	7.1.6.1	 	Ninety-five percent (95%) of shipments shall have been sampled and analyzed in accordance
with the methods described in the latest published edition of the Annual Book of ASTM Standards,
volume 05.05. Samples must have been collected utilizing mechanical systems meeting ASTM D 2234
Type 1, Condition B, Collection of a Gross Sample of Coal, which have been shown to be free of bias
within the past year. The bias testing procedure and precision used must be approved by TVA.
Systems will be subject to a critical inspection according to ASTM D4702 prior to approval.
Analysis procedures used should be as follows:

	 	 	 
	Parameter	 	Method
	Residual Moisture

	 	ASTM D 5142
	Air Dry Moisture

	 	ASTM D 3302
	Ash

	 	ASTM D 5142
	Sulfur

	 	ASTM D 4239
	Btu

	 	ASTM D 5865

	 	7.1.6.2	 	Sample analysis (total moisture, ash, sulfur, and Btu) and other data required by
TVA to match data with shipment shall be provided to TVA in a format approved by TVA.
	 
	 	7.1.6.3	 	The lot size for each sample shall be by barge load for barge coal, by trainload
for rail coal, and by daily truck deliveries for truck coal.
	 
	 	7.1.6.4	 	Analysis for each sample shall have been received by TVA by electronic data
interchange within seven (7) days of collection of said sample.
	 
	 	7.1.6.5	 	The sampling system shall be located in an area acceptable to TVA such that the
sample collected for shipment is collected only from coal that is loaded for said shipment.

	7.2	 	Contractor Sampling/Contractor Analysis
	 
	 	 	(Applicable if checked above or elected by TVA pursuant to this Section 7)

	 	7.2.1	 	Contractor or third party collected samples shall be used for the quality adjustment(s) for
each quarter under Section 8, Adjustments for Quality, provided all samples for such quarter meet
all criteria below:

9

 

	 	7.2.1.1	 	One hundred per cent (100%) of shipments shall have been sampled and analyzed in
accordance with the methods described in the latest published edition of the Annual Book of ASTM
Standards. Samples must have been collected utilizing mechanical systems meeting ASTM D 2234 Type
1, Condition B, Collection of a Gross Sample of Coal, which have been shown to be free of
statistically significant bias within the past year. The bias testing procedure and precision used
must be approved by TVA. Systems will be subject to a critical inspection according to ASTM D4702
prior to approval.
	 
	 	7.2.1.2	 	TVA shall have the right to approve any laboratory that performs analyses
hereunder, and the laboratory will be subject to inspection and/or audit prior to approval.
Analysis procedures used should be as follows unless otherwise approved in writing by TVA:

	 	 	 
	Parameter	 	Method
	Residual Moisture

	 	ASTM D 5142
	Air Dry Moisture

	 	ASTM D 3302
	Ash

	 	ASTM D 5142
	Sulfur

	 	ASTM D 4239
	Btu

	 	ASTM D 5865

	 	7.2.1.3	 	Sample analysis (total moisture, ash, sulfur, and Btu) and other data required by
TVA to match data with shipment shall be provided to TVA in a format approved by TVA.
	 
	 	7.2.1.4	 	The lot size for each sample shall be by bargeload for barge coal, by trainload
for rail coal, and by daily truck deliveries for truck coal.
	 
	 	7.2.1.5	 	Analysis for each sample shall have been received by TVA by electronic data
interchange within seven (7) days of collection of said sample.
	 
	 	7.2.1.6	 	The sampling system shall be located in an area acceptable to TVA such that the
sample collected for shipment is collected only from coal that is loaded for said shipment.

	7.2.2	 	If TVA samples any of the tonnage received in a calendar quarter, and if Contractor’s samples for that same tonnage during the quarter do not meet all of the above
criteria, TVA’s samples shall be used for said quarterly adjustment(s) for the tons represented by
such samples. TVA may engage the services of a third party to collect its samples hereunder, rather
than using its own employees. Contractor’s samples shall be used for the remaining tons for said
quarterly adjustment(s), provided such samples meet all of the above criteria. In the event there
are some tons not sampled by TVA and not sampled by Contractor in accordance with the above
criteria, the quality adjustment for those tons will be based on a prorated calculation of the
analyses of the TVA-sampled tons and Contractor-sampled tons.
	 
	7.2.3	 	In the event Contractor’s mechanical sampling system is not operating due to
mechanical, electrical, or operational failure, Contractor shall immediately notify TVA and accept
TVA’s (or TVA’s agent’s) samples at the Destination or Receiving Plant.
	 
	7.2.4	 	Contractor agrees to ensure that all sampling equipment is properly maintained and
adjusted so that each sample taken is proportionate and representative of the coal delivered. TVA
or its designated representative may observe any sampling or sample preparation performed by
Contractor. Contractor shall furnish the results of bias tests on the sampling system, and the
results must be acceptable to TVA. The sample system shall be bias tested (batch interval of all
system components), and shown to be free of statistically significant bias, at least every twelve
(12) months.

10

 

	 	7.2.5	 	Contractor shall prepare the samples obtained as directed by TVA and shall divide such
samples into at least three parts and place in suitable airtight containers. Contractor will
analyze the first part and electronically transmit the results to the Contract Administrator and
all other parties designated by the Contract Administrator (TVA location or otherwise) within 24
hours (including weekends and holidays) or prior to unloading at Destination, whichever is
earliest. Except as provided below, Contractor’s analysis results obtained on this first part will
be utilized by TVA to determine whether or not the coal covered by the sample will be unloaded at
the Destination. TVA reserves the right not to unload coal until after the appropriate analysis is
received. Contractor shall be responsible for any demurrage charges incurred by TVA as a result of
Contractor’s failure to transmit the analyses when and as required. TVA may reject coal based on
these analyses. Within twenty-four (24) hours of coal loading, Contractor shall have the second
part identified by such sample number analyzed by either Contractor’s approved laboratory or an
approved third-party laboratory. The analysis results obtained from the second part shall supersede
the first part sample results and will be utilized for all contract purposes, including determining
the price adjustment required to compensate for the difference between the quality of the coal
actually shipped and the contract Typical Analysis. The third part (“referee sample”) will be
retained by Contractor, for a minimum of sixty (60) days, to be analyzed by an independent
laboratory (to be agreed upon by TVA and Contractor) in the event of a disagreement between the
parties regarding the results obtained on either of the other two parts. The results of the referee
analysis will be conclusive for both parties in regard to the analysis of the sample in question.
The cost of any such referee analysis shall be borne by the party that requested it.

	7.2	 	Contractor Sampling/TVA Analysis
	 
	 	 	(Applicable if checked above or elected by TVA pursuant to this Section 7)

	 	7.3.1	 	Contractor or third party collected samples shall be used for the quality adjustment(s)
for
each quarter under Section 8, Adjustments for Quality, provided all samples for such quarter meet
all criteria below:

	 	7.3.1.1	 	Ninety-five percent (95%) of shipments shall have been sampled and analyzed in accordance
with the methods described in the latest published edition of the Annual Book of ASTM Standards,.
Samples must have been collected utilizing mechanical systems meeting ASTM D 2234 Type I, Condition
B, Collection of a Gross Sample of Coal, which have been shown to be free of statistically
significant bias within the past year. The bias testing procedure and precision used must be
approved by TVA. Systems will be subject to a critical inspection according to ASTM D4702 prior to
approval. Analysis procedures used should be as follows unless otherwise approved in writing by
TVA:

	 	 	 
	Parameter	 	Method
	Residual Moisture
	 	ASTM D 5142
	Air Dry Moisture
	 	ASTM D 3302

Note

	 	 	 

	Ash
	 	ASTM D 5142
	Sulfur
	 	ASTM D 4239
	Btu
	 	ASTM D 5865
	Note — or General Industry Standards.
	 	 

	 	7.3.1.2	 	Sample analysis (total moisture, ash, sulfur, Btu and SO2) and other data required by TVA
to match data with shipment shall be provided to TVA in a format approved by TVA.

11

 

	 	7.3.1.3	 	The lot size for each sample shall be by barge load for barge coal, by trainload
for rail coal, and by daily truck deliveries for truck coal.
	 
	 	7.3.1.4	 	Analysis for each sample shall have been received by TVA by electronic data
interchange within three (3) days of collection of said sample.
	 
	 	7.3.1.5	 	The sampling system shall be located in an area acceptable to TVA such that the
sample collected for shipment is collected only from coal that is loaded for said shipment.

	 	7.3.2	 	If TVA samples any of the tonnage received in a calendar quarter, and if
Contractor’s samples for that same tonnage during the quarter do not meet all of the above
criteria, TVA’s samples shall be used for said quarterly adjustment(s) for the tons represented by
such samples. TVA may engage the services of a third party to collect its samples hereunder, rather
than using its own employees. Contractor’s samples shall be used for the remaining tons for said
quarterly adjustment(s), provided such samples meet all of the above criteria. In the event there
are some tons not sampled by TVA and not sampled by Contractor in accordance with the above
criteria, the quality adjustment for those tons will be based on a prorated calculation of the
analyses of the TVA-sampled tons and Contractor-sampled tons.
	 
	 	7.3.3	 	In the event Contractor’s mechanical sampling system is not operating due to
mechanical, electrical, or operational failure, Contractor shall immediately notify TVA and accept
TVA’s (or TVA’s agent’s) samples at the Destination or Receiving Plant.
	 
	 	7.3.4	 	Contractor agrees to ensure that all sampling equipment is properly maintained and
adjusted so that each sample taken is proportionate and representative of the coal delivered. TVA
or its designated representative may observe any sampling or sample preparation performed by
Contractor. Contractor shall furnish the results of bias tests on the sampling system, and the
results must be acceptable to TVA. The sample system shall be bias tested (batch interval of all
system components), and shown to be free of statistically significant bias, at least every twelve
(12) months.
	 
	 	7.3.5	 	Contractor shall prepare the samples obtained as directed by TVA and shall divide
such samples into at least three parts and place in suitable airtight containers. Contractor will
analyze the first part and electronically transmit the results to the Contract Administrator and
all other parties designated by the Contract Administrator (TVA location or otherwise) within 24
hours (including weekends and holidays) or prior to unloading at Destination, whichever is
earliest. Except as provided below, Contractor’s analysis results obtained on this first part will
be utilized by TVA to determine whether or not the coal covered by the sample will be unloaded at
the Destination. TVA reserves the right not to unload coal until after the appropriate analysis is
received. Contractor shall be responsible for any demurrage charges incurred by TVA as a result of
Contractor’s failure to transmit the analyses when and as required. TVA may reject coal based on
these analyses. Within twenty-four (24) hours of coal loading, Contractor shall send the second
part identified by such sample number directly to TVA’s Central laboratory by expedited delivery
for analysis. The analysis results obtained from the second part shall supersede the first part
sample results and will be utilized for all contract purposes, including determining the price
adjustment required to compensate for the difference between the quality of the coal actually
shipped and the contract Typical Analysis. The third part (“referee sample”) will be retained by
Contractor, for a minimum of sixty (60) days, to be analyzed by an independent laboratory (to be
agreed upon by TVA and Contractor) in the event of a disagreement between the parties regarding the
results obtained on either of the other two parts. The results of the referee analysis will be
conclusive for both parties in regard to the analysis of the sample in question. The cost of any
such referee analysis shall be borne by the party that requested it.

12

 

	8.0	 	ADJUSTMENT FOR QUALITY
	 
	8.1	 	As used in this Section 8, a “Quarterly Average Value” shall mean the weighted average
value of the appropriate quality component determined from all samples of coal collected and
analyzed in accordance with Section 7 during a calendar quarter, based on the tonnage represented
by the samples collected and corresponding analysis.
	 
	8.2	 	BTU Adjustment - For the coal accepted in each calendar quarter, an adjustment,
calculated to the nearest cent per ton and using the then current Base Price, shall be applied to
the contract price to account for variations in the Quarterly Average Value for as-received Btu/lb.
compared to the Typical Analysis for as-received Btu. This adjustment shall in no way be affected
by contract price adjustments under Section 10.2 “Law Changes”. (See Exhibit I for example
of calculations.)
	 
	8.3	 	Ash Adjustment - For the coal accepted in each calendar quarter, an adjustment,
calculated to the nearest tenth of a cent per ton at a rate of either (1) $0.15 per ton (decrease)
for each percentage point the Quarterly Average Value of ash (on an as received basis) exceeds the
Typical Analysis for ash, or (2) $0.15 per ton (increase) for each percentage point the Quarterly
Average Value for ash (on an as-received basis) is less than the Typical Analysis for ash, shall be
applied to the contract price. The calculation shall be prorated to cover any fractional
percentage. (See Exhibit I for example of calculations.)
	 
	8.4	 	Moisture Adjustment - For the coal accepted in each calendar quarter, an adjustment,
calculated to the nearest tenth of a cent per ton at a rate of either (1) $0.06 per ton (decrease)
for each percentage point the Quarterly Average Value of moisture exceeds the Typical Analysis for
Moisture, or (2) $0.06 per ton (increase) for each percentage point the Quarterly Average Value
for Moisture is less than the Typical Analysis for Moisture, shall be applied to the contract
price. The calculation shall be prorated to cover any fractional percentage. (See Exhibit I for
example of calculations.)
	 
	8.5	 	Sulfur Dioxide Adjustment - For coal accepted in each calendar quarter, an adjustment,
calculated to the nearest tenth of a cent per ton at a rate of either (1) $0.25 per ton (decrease)
for each tenth (1/10) of a pound per million BTUs the Quarterly Average Value of sulfur dioxide
exceeds the Typical Analysis for sulfur dioxide, or (2) $0.25 per ton (increase) for each tenth
(1/10) of a pound per million BTUs the Quarterly Average Value for sulfur dioxide is less than the
Typical Analysis of sulfur dioxide, shall be applied to the contract price. The calculation shall
be prorated to cover any fractional amount tenth (1/10) of a pound. This adjustment shall in no way
be affected by contract price adjustments under Section 10. Contract Price Adjustments hereof.
(See Exhibit I for example of calculation).
	 
	8.6	 	As soon as practicable after the end of each calendar quarter, TVA shall submit to
Contractor a report showing the Quarterly Average Values and any per-ton adjustments determined
under this Section 8 of the contract. The number of tons of coal received by TVA during the
calendar quarter shall be multiplied by said adjustments, and any resulting amount shall be paid
promptly (or credited to the extent of any offsetting debit) to the party to whom it is due. The
assessment of adjustments in accordance with the foregoing does not in any way impair TVA’s rights
under the contract or at law with respect to any failure by Contractor to meet the Typical Analysis
that gives rise to such adjustments.

13

 

	9.0	 	QUALITY AND SPECIFICATIONS
	 
	9.1	 	All coal delivered under this contract shall conform to the following Typical Analysis
on a quarterly average as determined by sampling and analyses performed in accordance with Section
7, Sampling and Analysis:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	TYPICAL ANALYSIS1	 	 	REJECTION/SUSPENSION	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	SPECIFICATIONS3	 	 	 	 	 
	Lbs. of SO2 per million Btu2
	 	 	5.0	 	 	 	lbs.	 	 	Not more than	 	 	5.0 (P)	 	 	 	lbs.	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	5.2 (C)	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	6.0 (WC)	 	 	 	 	 
	Total Moisture
	 	 	11.0	 	 	 	%	 	 	Not more than	 	 	12.0	 	 	 	%	 
	Sulfur (a/r max)
	 	 	2.90	 	 	 	%	 	 	Not more than	 	 	3.0	 	 	 	%	 
	Ash (as received)
	 	 	9.0	 	 	 	%	 	 	Not more than	 	 	11.0	 	 	 	%	 
	Btu/lb. (a/r)
	 	 	11,400	 	 	 	 	 	 	Not less than	 	 	11,000	 	 	 	 	 
	Ash fusion temperature
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Reducing atmosphere
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Initial
	 	 	1980	 	 	 	°F	 	 	Not less than	 	 	 	 	 	 	 	 
	Softening
	 	 	2075	 	 	 	°F	 	 	Not less than	 	 	 	 	 	 	°F	 
	Hemispherical
	 	 	2135	 	 	 	°F	 	 	Not less than	 	 	 	 	 	 	°F	 
	Fluid
	 	 	 	 	 	 	°F	 	 	Not less than	 	 	 	 	 	 	°F	 
	Volatile Matter (dry basis)
	 	 	 	 	 	 	%	 	 	Not less than	 	 	 	 	 	 	%	 
	Grindability (Hardgrove Index)
	 	 	54	 	 	 	 	 	 	Not less than	 	 	 	 	 	 	 	 
	Chlorine (dry basis)
	 	 	.02	 	 	 	%	 	 	Not more than	 	 	 	 	 	 	%	 

NOTES:

 

			
	1	 	The Typical Analysis shall be used for the quality adjustments under Section 8.
	 
	2	 	Sulfur Dioxide calculated at 97.5%
	 
	3	 	Failure to comply with any of these specifications shall be a basis for rejections and
suspensions or termination pursuant to Subsections 9.3. and 9.4.
	 
	4	 	Paradise (P), Cumberland (C), Widows Creek (WC)

	9.2	 	The coal as-received shall have a top size not greater than two (2) inches
and not less than one and one-fourth (1-1/4) inches, with at least forty -five percent
(45%) of the product larger than one-fourth (1/4) inch, and with at least
eighty-five percent (85%) of the product larger than 28 mesh . Such sizes shall be
determined by using screens with square openings. Coal shall not exhibit a temperature in excess of
120° F, and it shall be substantially free from mining impurities and scrap such as drill
bits, pieces of scrap metal or plate, plastic, rubber, rope, cloth, wire, cable, bone, slate,
earth, rock, pyrite, wood, or water, that can be kept out or removed with the exercise of
reasonable care during mining, preparation and loading. Belt magnets should be employed by
Contractor for metal removal when conveyor belt load outs are employed. Coal shall be loaded in a
manner that will ensure reasonably uniform consistency as to size and quality and shall not contain
slurry pond material (washer tailings), gob pile material (mine refuse), petroleum-coke, oxidized
coal, or blends of such materials, or create excessive amounts of dust during the unloading and
transferring to storage.
	 
	9.3	 	If any coal delivered fails to meet any of the Rejection/Suspension Specifications
in Subsection 9.1. on the basis of laboratory analysis or the requirements of Subsection
9.2. on the basis of visual inspection or laboratory analysis, TVA may reject the coal at
the source, loading point, Destination, or Receiving Plant. TVA’s acceptance of any amount of coal
which does not meet these requirements shall not constitute a waiver of any right which TVA may
have under this contract or as provided by law on account of the delivery of such coal. In the
event TVA rejects any coal in accordance with this section, TVA will immediately notify Contractor
of the rejection and of the cause of rejection. In the case of coal rejected after loading, unless
the cause for rejection is corrected, Contractor shall promptly remove the coal from the carrier’s
equipment, from the transloading or blending facility, or from TVA premises, as the case may be, at
Contractor’s expense. In addition to excess costs as provided in Section 11, Remedies,
Contractor

14

 

	 	 	shall reimburse TVA for any additional transportation costs, demurrage, equipment repair or
replacement costs, or handling expenses incurred by TVA in connection with any such rejection. TVA
shall not be under any obligation or liability to assist Contractor in any corrective actions
required to remedy the cause for rejection.
	 
	9.4	 	If any coal delivered fails to meet any of the Rejection/Suspension Specifications
stated in Subsection 9.1. or the requirements of Subsection 9.2., TVA shall have the right to
refuse to accept further deliveries from any or all mine sources under the contract until
Contractor provides assurance satisfactory to TVA that Contractor will comply with the
Rejection/Suspension Specifications and the Subsection 9.2. requirements. Such assurance must be
given in writing within seven (7) days after the beginning of such suspension. If Contractor fails
to provide such satisfactory assurance within the time specified or provides such assurance but
does not correct the deficiencies that resulted in the Contractor’s failure to comply with any of
the Rejection/Suspension Specifications or the requirements of Subsection 9.2. within seven (7)
days after giving such assurance, TVA may then terminate Contractor’s right to make further
deliveries under this contract. However, if TVA has suspended Contractor’s right to make further
deliveries under the above provision two (2) times during any twelve-month period, TVA shall have
the immediate right, at its option, upon the third such violation occurring within any twelve (12)
month period following the second such violation, to terminate Contractor’s right to make further
deliveries under this contract. Contractor shall be responsible for all costs or damages incurred
by TVA resulting from Contractor’s failure to comply with the contract requirements. Damages or
excess reprocurement costs may be determined in accordance with Section 11, Remedies.
	 
	9.5	 	If the normal operations in conformance with the design capabilities of a Receiving
Plant cannot be accomplished with the coal delivered hereunder, although the coal complies with the
quality and size requirements of this Section 9, TVA may (i) if such Receiving Plant is the only
fossil plant receiving coal hereunder, then terminate Contractor’s right to make further
deliveries, and this contract shall be cancelled without further obligation or liability to either
party; or (ii) if there is more than one Receiving Plant receiving coal hereunder, then reduce the
schedule of deliveries under the contract by the amount that otherwise would have been received at
the affected Receiving Plant. In the event of such a termination or reduction in deliveries, the
Contractor may be given a reasonable opportunity to remedy the cause for termination or reduction,
which may include the offer of replacement coal. However, TVA is not obligated to accept offers of
replacement coal.
	 
	 	 	Notwithstanding the above, this subsection 9.5 shall not be invoked or applied by TVA unless and
until TVA has demonstrated that every effort has been made by its receiving plants to burn Seller’s
coal and such efforts have proven unsuccessful.
	 
	10.0	 	CONTRACT PRICE ADJUSTMENTS AND COST REIMBURSEMENTS
	 
	10.1	 	Contract Price Adjustments.
	 
	 	 	Effective the first day of the second Contract Year and the first day of each Contract Year
thereafter, the Base Price (or then current Base Price, as adjusted annually pursuant to this
Section 10.1 only) shall be increased by 2.75%.
	 
	10.2	 	Contract Cost Reimbursements,
	 
	10.2.1	 	Law Change Assessment Costs. In the event of the issuance, enactment, promulgation or
amendment, after the RFP Closing Date for the requisition under which this contract was awarded, of
a federal or state statute, regulation, ordinance, rule or other mandate, or of a final judgment,
order, or decree of a judicial or regulatory body or agency:

15

 

(i) relating specifically to coal mine safety, rescue, or emergency response (for example,
and by way of illustration only, the Mine Improvement and New Emergency Response Act of 2006), or

(ii) which assesses on a per-ton basis a tax, fee or other charge on coal (for example,
and by way of illustration only, the Federal Black Lung Excise Tax and severance tax on coal
delivered hereunder),

but excluding all sales taxes, income taxes, franchise or privilege taxes, employment taxes, ad
valorem taxes (on real and personal property), other similar taxes, and royalties (“Law Change”),
Contractor shall be entitled to a reimbursement of the actual additional costs incurred as a result
of such Law Change. Contractor shall notify TVA of such Law Change and supply from its records
information satisfactory to TVA showing the direct effect, if any, of the Law Change upon the cost
per ton of furnishing coal under this contract for which it seeks reimbursement.

	 	 	If Contractor seeks reimbursement under Subsection 10.2.1 (ii), the reimbursement shall, subject to
Subsection 10.2.2, be equal to the additional per-ton assessment referenced therein which results
from a Law Change. If Contractor seeks reimbursement under subsection 10.2.1 (i), the per ton
reimbursement shall, subject to Subsection 10.2.2, be equal to the total cost calculated on a per
ton basis attributable to such a Law Change, provided however, the cost attributed to such Law
Change shall be uniformly allocated over all coal tonnage produced by Contractor from the source
affected by such Law Change in the Contract Year such Law Change took affect (a “Law Change Cost
Reimbursement”).
	 
	 	 	If a Law Change increases Contractor’s cost of providing coal to TVA, a Law Change Cost
Reimbursement shall be paid by TVA to the extent, and only to the extent, of the increased cost
that is attributable to such Law Change effective on the later of (a) the date TVA receives
Contractor’s notice of the Law Change or (b) the date Contractor’s cost of providing coal is
increased by the Law Change. If a Law Change decreases Contractor’s cost of providing coal to TVA,
a Law Change Cost Reimbursement shall be paid to TVA to the extent, and only to the extent, of the
decreased cost that is attributable to such Law Change effective on the date such Law Change could
be utilized to reduce Contractor’s costs whether or not Contractor actually reduces such costs on
such date.
	 
	 	 	This Subsection 10.2.1 does not apply to any (i) promulgation, issuance, implementation, revision
or amendment of rules and regulations except to the extent, and only to the extent, such
promulgation, issuance, implementation, revision, or amendment results from a Law Change, or (ii)
implementation of statutes or rules or regulations that are enacted, issued or promulgated on or
before the RFP Closing Date, except for Law Changes as described above. Any reimbursement under
this Subsection 10.2.1 shall not include any portion of Contractor’s general and administrative
expenses, or other corporate and overhead expense, and shall be subject to Subsection 10.2.2.
	 
	10.2.2	 	If: (i) an individual or combination of Law Change Cost Reimbursement(s) requested by
Contractor from the RFP Closing Date through the end of the first Contract Year exceeds one dollar
and seventy cents ($1.70) on a per ton basis; or (ii) an individual or combination of Law Change
Cost Reimbursement(s) requested by Contractor in any single Contract Year thereafter exceeds one
dollar and twenty cents ($1.20) on a per ton basis, then TVA may, at its sole discretion and
without further obligation or liability to either party hereunder or at law, terminate the contract
upon sixty (60) days written notice given after such a reimbursement is requested by Contractor.
However, in lieu of termination, Contractor may elect to absorb the cost in excess of the
aforementioned limits, in which case the contract shall remain in full force and effect.
Contractor’s election must be set forth in writing within thirty (30) days of TVA’s notice of
termination. Such election by Contractor shall be irrevocable and binding for the reimbursement
sought to the extent it exceeds the aforementioned limits and shall be effective as of the
effective

16

 

	 	 	date of the Law Change. TVA may invoke the provisions of this Subsection 10.2.2 each and every time
the cost of a Law Change exceeds the per-ton cost limits set forth above.
	 
	10.2.3	 	Contractor shall submit to TVA quarterly invoices for all reimbursements sought under
Subsection 10.2.1 (ii), and all payments, including tentative payments subject to review, for
reimbursement(s) sought under Subsection 10.2.1(ii) shall be made by TVA to Contractor within
thirty (30) days of receipt of an invoice from Contractor for the same. Contractor shall submit to
TVA invoices for all reimbursements sought under Subsection 10.2.1(i) at the time such
reimbursements are requested, and all payments, including tentative payments subject to review, for
reimbursement(s) sought under Subsection 10.2.1(i) shall be made by TVA to Contractor within twelve
(12) months of receipt of an invoice from Contractor for the same.
	 
	10.3	 	The increase, decrease or reimbursement under each subsection of this Section 10
shall be calculated separately to the nearest one-tenth (1/10) cent per ton. Any changes (including
a recalculation of a previously granted tentative price adjustment or reimbursement) considered
applicable by Contractor shall be reported to TVA by Contractor with appropriate data necessary to
verify the change. Contractor must furnish such supporting evidence as may be requested by TVA. A
request for a price adjustment or reimbursement considered applicable by Contractor must be
submitted to TVA with appropriate documentation within one hundred eighty (180) days of the date
Contractor incurs a resulting cost change. Failure to do so shall constitute a waiver of
Contractor’s right to any upward adjustment or reimbursement. Any overpayment made under these
provisions may be deducted from any amounts otherwise due Contractor.
	 
	10.4	 	Contractor agrees that, in the event TVA reimburses Contractor under this Section 10
for a cost incurred by Contractor and it is later determined that Contractor is entitled to recover
such cost from a third party, at TVA’s request Contractor shall use its best efforts to recover
such cost and upon such recovery shall reimburse TVA for amounts previously paid by TVA based on
said cost. Reasonable costs incurred by Contractor in pursuing such recovery at TVA’s request shall
be reimbursed by TVA; provided that where Contractor and/or other purchasers from Contractor also
receive a benefit from pursuing such recovery, the cost thereof shall be equitably prorated.
	 
	11.0	 	REMEDIES
	 
	11.1	 	This Subsection 11.1 does not apply to a situation where another contract provision provides a
different procedure, such as Subsection 9.4. If TVA in good faith believes that Contractor has
failed to comply with any term or condition of this contract, the Contract Administrator shall give
Contractor oral notice, to be followed by written confirmation, of any such violation.

	 	11.1.1	 	If Contractor fails to correct a curable contract violation within seven (7) days
of first notice, TVA shall have the right to suspend Contractor’s right to make further deliveries
until Contractor provides adequate assurance to TVA that Contractor will comply with all provisions
of this contract, such assurance to be given in writing within seven (7) days after such
suspension. If Contractor fails to provide such adequate assurance within the time specified or
timely provides such satisfactory assurance but Contractor does not correct the curable contract
violation(s) within seven (7) days after giving such assurance, TVA shall have the right, but not
the obligation, to terminate Contractor’s right to make further deliveries under this contract.
	 
	 	11.1.2	 	In the case of a contract violation by Contractor or Contractor’s Subcontractor
that (i) is not curable (including, but not limited to, violations of Section 5, Source, of
this contract or Section 27 Officials Not to Benefit), or (ii) is a violation of any
Federal or state law or regulation or county or municipal enactment, ordinance or code, including
but not limited to laws and regulations described in Subsection 14.6, upon providing notice as
described above, TVA shall have the immediate right, but not the obligation, to terminate, or
suspend for up to thirty (30) days, Contractor’s right to make further deliveries under this

17

 

	 	 	 	contract. If TVA suspends Contractor’s right to make further deliveries, then, upon expiration of
such suspension, TVA shall either direct Contractor to continue performance of this contract or
terminate Contractor’s right to make further deliveries.

	11.2	 	Contractor shall be responsible for all costs or damages incurred by TVA resulting
from Contractor’s failure to comply with the contract requirements. TVA may, at its option,
purchase in the open market or by contract or otherwise procure coal to replace all or any part of
(i) that which was rejected by TVA or which the Contractor has failed to deliver, or (ii) that as
to which its right to deliver was terminated or suspended. Except as provided in Section 4,
Variations, Delays, and Interruptions in Deliveries, Contractor shall be liable to TVA for
the excess cost occasioned by such purchase(s) and any other loss or damage caused by Contractor’s
breach of the contract, including, but without limitation to, liability incurred by TVA with
respect to the transportation or other handling of the coal. In the alternative, TVA may, at its
election, determine the loss or damage sustained as a result of Contractor’s breach of contract by
any other commercially reasonable methods or as provided by law. In addition to all other means of
recovery, TVA may deduct any such excess costs and damages from any amount otherwise due Contractor
under this contract or otherwise.
	 
	11.3	 	TVA may, at its election, determine its excess costs resulting from any deficiency,
rejection, suspension, or termination in the following manner: (1) such part of the
highest-delivered-cost coal (of comparable quality under one or more contracts) which TVA purchases
at the next awarding of term or spot contracts for delivery to any fossil plant in the TVA system
as would be required to replace coal which was scheduled for delivery under this contract after the
date the Contractor’s right to make deliveries under this contract was terminated shall be deemed
to have been purchased as Replacement Coal for Contractor’s account; and (2) for unexcused
deficiencies occurring before termination or contract expiration, such part of the
highest-delivered-cost coal (of comparable quality under one or more contracts) which TVA receives
under term or spot contracts in the week following each such deficiency, for delivery to any plant
in the TVA system, as equals the quantity of Contractor’s deficiency shall be deemed to have been
purchased as Replacement Coal for Contractor’s account. Contractor shall be liable to TVA for the
difference between the delivered cost of such Replacement Coal and the delivered cost of coal under
this contract (not including quality adjustments under this contract). The delivered cost shall
include transportation and handling costs, as well as coal price, and shall take into account any
differences between the quality of Replacement Coal and the quality specifications of this
contract.
	 
	11.4	 	If TVA suspends or terminates Contractor’s right to make further deliveries hereunder
or under any other provision of this contract and such suspension or termination is finally
determined in accordance with Section 18, Disputes, to have been improper, then Contractor’s sole
remedy for such improper termination or suspension shall be to require TVA to reschedule all coal
Contractor was prevented from delivering due to such termination or suspension, such coal to be
rescheduled for delivery on dates acceptable to both parties, but in any event not later than
contract expiration. The price to be paid for such rescheduled coal shall be the price in effect
under the provisions of this contract at the time of delivery.
	 
	11.5	 	In addition to the specific remedies provided for herein, in the event of a breach,
TVA shall have all rights and remedies provided by law or equity.
	 
	12.0	 	NOTICES
	 
	 	 	Unless otherwise provided for in the contract, any contractual notice required to be given to
either party shall be given by registered, certified, or first-class mail, electronic facsimile, or
e-mail, to the intended party at the following address or at such changed address as may from time
to time be designated in a notice similarly delivered or mailed. Except as expressly provided
herein, any notice shall be deemed to have been given when sent. Communications by electronic
facsimile or e-mail shall be confirmed by depositing, within twenty-four (24) hours after sending
the electronic

18

 

	 	 	facsimile or e-mail, a copy of the same in the post office for transmission by registered,
certified, or first-class mail in an envelope properly addressed as follows:
     In the case of
Contractor to:

Martin Wilson, President

Armstrong Coal Company, Inc.

7701 Forsyth Boulevard — 10th Floor

St. Louis, MO 63105

314-721-8211 (FAX)

martinw@a-wllc.com

With copy to:

Tate Rich, President

Delta Coats, LLC

95 White Bridge Road, #404

Nashville,  TN 37205

(615) 352-5668 (FAX)

trichdelta@comcast.net

Mason L. Miller

Miller + Wells, PLLC

300 Lexington, KY 40507

(859) 281-0079 (FAX)

mmiller@millerwells.com

In the case of TVA to:

Ben Jones

1101 Market St., MR 2A

Chattanooga, TN 37402

423-751-8202

bajones@tva.gov

	 	 	Either party may, by written notice to the other, change the representative or the address to which
such notices and communications are to be sent.
	 
	13.0	 	SHIPPING NOTICES
	 
	13.1	 	For all coal shipped under this contract, Contractor shall forward to the Contract
Administrator and all other parties (TVA location or otherwise) as designated by the Contract
Administrator a shipping notification as to coal shipped. This shipping notice must include the
Purchase Order number, line item number, release number, traffic control numbers,
railcar/barge/truck numbers, origin, name of mine, size of coal, shipping date, and such other
relevant information as TVA may from time to time require. TVA shall have the right to require
Contractor to transmit all of the above-referenced information via electronic data transfer direct
to TVA’s computer system. Contractor is responsible for ensuring that its computer system is
compatible with TVA’s computer system.
	 
	13.2	 	Contractor must take whatever steps are necessary to ensure that shipping notices are
received by the Contract Administrator and all other parties as designated by the Contract
Administrator prior to arrival of the coal at the Destination or within 24 hours of loading,
including weekends and holidays, whichever is earliest. The Destination may not unload coal until a
correct shipping notice is received, and Contractor will be responsible to carrier or TVA for any
demurrage charges resulting from delays due to late or improper notification.

19

 

	13.3	 	In addition, on Monday of each week, Contractor must email a cumulative shipping notice to the
Contract Administrator. This shipping notice will include such items as Contract number, traffic
control number, shipping date, conveyance ID, tonnage, quality and explanation for all variances
from schedule. The format for this report will be provided by the Contract Administrator.
	 
	14.0	 	TRANSPORTATION
	 
	14.1	 	TVA reserves the right to specify reasonable limitations on the type and size of
transportation equipment, the method of transportation (including trainload lots and barge load
lots where lots are necessary to provide the lowest transportation rate possible), and the exact
routing to be used, whether or not transportation to the Destination is the responsibility of TVA.
TVA may reject any shipment made in disregard of such specifications. If the contract provides for
a price or prices that include transportation in whole or in part to the Destination (f.o.b.
destination contract), title to the coal and risk of loss and damage shall remain with Contractor
until delivery in acceptable condition by the carrier at Destination.
	 
	14.2	 	For all coal to be delivered hereunder, it shall be Contractor’s responsibility to
load the coal and furnish loading devices which shall be suitable and fit for the purpose
contemplated in this contract. Contractor shall be governed by carrier’s instructions regarding the
height and distribution of the load, weight of cargo, and other instructions which carrier deems
necessary for safe transportation. Contractor shall allow carrier’s inspection of loaded equipment
to assure compliance with carrier’s loading instructions.
	 
	14.3	 	For all coal shipped, it shall be Contractor’s responsibility to visually inspect the
transportation equipment prior to each loading and ascertain that the equipment is empty and
suitable for loading. Any equipment found mechanically unsound for loading or contaminated with
material shall not be loaded. Contractor shall not load any railcars with open doors. When loading
barges, Contractor shall leave the four corners of the barges open to allow easier removal of coal
and accumulated water. Contractor shall be responsible for all costs incurred by TVA, including the
cost of any coal lost in transit, resulting from Contractor’s failure to comply with these
requirements.
	 
	14.4	 	For all coal purchased for delivery by rail, whether f.o.b. origin or f.o.b.
Destination, Contractor shall be responsible for loading each car to the appropriate capacity as
required by the rail carrier. In addition, each trainload shipment tendered under this contract
shall be loaded to the minimum trainload weight as required by the rail carrier. Contractor’s
account will be charged with any charges assessed to TVA because of Contractor’s failure to observe
any minimum weight loading requirements. The gross weight of each car shall not exceed the maximum
allowed by the carrier. If cars are found to be loaded in excess of such maximum, it shall be
Contractor’s responsibility to correct the load at Contractor’s expense, including but not limited
to, Contractor’s payment to the carrier of switching charges, as well as any demurrage charges
which may accrue while the car or cars await correction in load.
	 
	14.5	 	Contractor shall be responsible for any demurrage that accrues at any loading point
as a result of Contractor or its subcontractors not being prepared to load the coal as scheduled.
The carrier shall invoice Contractor and Contractor shall pay said carrier for all origin demurrage
charges which accrue at the loading point(s). Contractor agrees to comply with the terms and
conditions of TVA’s rail or barge transportation agreement(s) with respect to loading.
	 
	14.6	 	The explicit obligation of this contract is that it will be performed in accordance
with all applicable Federal, state, county and municipal laws, regulations codes and ordinances,
including, but not limited to, those applicable to transportation of coal. Transportation of coal
by Contractor or by any third party transporting coal on Contractor’s behalf to rail or barge
loading facilities, or any other transportation by truck, shall comply with applicable highway laws
and regulations governing the weight of vehicles and all other highway laws promoting public
safety, health and

20

 

	 	 	welfare, including all laws governing the operation of vehicles on any road or highway. To ensure
compliance with this provision and to promote safety and compliance with laws governing vehicle
operation, TVA may, as provided in Subsection 11.1.2, terminate or suspend further deliveries under
this contract on account of violation of any motor vehicle laws or actions that, in TVA’s judgment,
constitute unlawful or unsafe motor vehicle operations occurring in connection with any delivery of
coal by truck. If any Contractor fails to comply with laws or regulations governing the weight of
vehicles, TVA shall have the same rights provided under Section 9, Quality and
Specifications, for failure to meet the requirements thereof, including but not limited to the
right to reject coal delivered in overweight trucks. To ensure compliance with this provision and
to help protect the roads and highways from overweight trucks, TVA may require that Contractor
furnish a copy of the “certified” truck weight ticket. Regardless of the actual weight of any truck
coal received, the maximum gross weight that can be recorded for a single truck will be limited to
the applicable maximum weight enforced by law. Any weight exceeding that maximum weight may be
deducted from the total weight of coal used for payment purposes.
	 
	14.7	 	TVA reserves the right to ship to any plant or other location any coal purchased F.O.B. any
location. For coal purchased F.O.B. any plant or other location, TVA may from time to time direct
deliveries to any other plant or location, and if such deliveries cause an increase or decrease in
the transportation cost borne by Contractor in performing this contract, an adjustment shall be
made in the contract price to reflect the changes in such cost. In addition, for coal purchased
F.O.B. railcar and/or barge, TVA may, by giving prior written notice to Contractor as soon as
possible but not later than thirty (30) days in advance, change the transportation mode of
delivery.
	 
	15.0	 	PAYMENTS, INVOICES
	 
	15.1	 	Payments under this contract are subject to the provisions of the Prompt Payment Act
(31 U.S.C. Sections 3901-3907). Payments as are provided for in the contract or by law will be made
by Electronic Fund Transfer (EFT). EFTs will be made not more than thirty (30) calendar days after
the later of (1) receipt of a proper invoice(s) by TVA at:

Accounts Payable Department 
P.O. Box 15500

Knoxville, Tennessee 37901-5500

Fax Number: (865) 632-6609 or (865) 632-4019

Email accountspayable@tva.gov

	 	 	or (2) receipt and unloading of the coal at the Destination. In preparing invoices, Contractor
shall multiply the number of tons delivered by the Base Price applicable at the F.O.B. point of
delivery plus or minus any adjustments that have been made effective under contract provisions.
Payments shall be made in United States funds and timely sent to Contractor via EFT transfer to the
following account:

Bank Name: US Bank N.A.

ABA Number: 081000210

Bank Account Name: Arm Strong Energy, Inc.

Bank Account Number: 152306681361

	15.2	 	For purposes of this provision only, “proper invoice” shall mean a numbered and dated
invoice containing the complete name of Contractor, agent’s name (if any), Purchase Order number,
Release number, Destination, total amount due, correct weights (as defined below), traffic control
number, shipping date, name of mine at which the coal was produced, together with any documentation
required to be submitted therewith by any other provision of the contract.
	 
	15.3	 	For freeze conditioning invoices, or invoices for anything other than the tons
delivered at the current price, the invoices should be mailed, faxed or emailed to the Contract
Administrator, using the notification information in Section 12.

21

 

	16.0	 	WEIGHTS
	 
	16.1	 	Coal will be weighed or measured by TVA, Contractor, or independent laboratory
technician (using scales or other appropriate method approved by TVA) at the location where samples
are collected for payment purposes. Except as specifically provided below, Contractor-provided
weights will be used for contract purposes where this contract provides that Contractor samples are
used for payment purposes, and TVA’s weights will be used for contract purposes when this contract
provides that TVA’s samples are used for payment purposes. When Contractor-provided weights are
used, said weights will be reported to TVA by electronic facsimile or as designated by the Contract
Administrator for each shipment of coal hereunder. TVA shall have the right to have a
representative present, at TVA’s sole risk and expense, at any and all times during TVA loadings to
observe determination of weights. Contractor shall notify TVA immediately upon the occurrence of
inaccurate weighing or absence of actual weighing. Contractor shall confirm such notification in
writing to TVA within seven (7) working days of the date of each such occurrence. Such confirmation
shall identify each affected coal shipment by Purchase Order number, line item number, shipping
point, traffic control number, shipping date, and car/barge/truck number(s). Contractor’s account
shall be adjusted for any coal inaccurately weighed, or not weighed, such adjustment to be made at
whatever time such occurrence(s) becomes known to TVA.
	 
	16.2	 	All scales and weighing devices used by Contractor to determine the governing weight
of coal shall be certified by the appropriate regulatory authority or a railroad and shall be
material tested annually by an independent third party at the Contractor’s expense and the results
of such tests provided to TVA within thirty (3) days of receipt of such test results of Contractor.
Such scales and weighing devices shall comply with the National Institute of Standards and
Technology Handbook 44 and shall be installed, maintained, and operated according to manufacturers’
recommendations.
	 
	16.3	 	If Contractor-provided weights are to be used, and Contractor fails to provide proper
weights, TVA weights will be the means by which the weight of coal sold, delivered, and purchased
hereunder shall be determined. Contractor shall reimburse TVA for any cost or expense charged to or
incurred by TVA as a result of the absence of proper weights from Contractor, and TVA may elect to
have TVA’s sampling and analysis govern for quality adjustment purposes as to any coal not properly
weighed by Contractor. While TVA may not undertake to weigh all coal received, it may at its option
check weigh any coal received. In the event invoiced weights exceed TVA weights by more than one
and one-half percent (1.5%), a full material test will be run by both parties with each party
responsible for its own cost. The weights that are determined most accurate shall govern.
	 
	16.4	 	Scale tests shall be performed more often than annually if reasonably requested by
TVA. TVA shall be responsible for the cost of additional (more than annual) requested tests unless
the results thereof show that the scale failed to conform to certification standards, in which
event the Contractor shall be responsible for such costs.
	 
	16.5	 	If Contractor’s or TVA’s weighing devices or methods are determined by said
independent third party to be in error over 0.5%, an appropriate adjustment shall be made to the
affected weights and related invoices and payments reflecting the full extent of the error. Such
adjustments shall be made retroactively to a date midway between the date on which the weighing
devices were last tested and calibrated and the date on which the inaccuracy in weighing methods or
devices was first questioned and prospectively until the date on which the weighing methods and
devices are corrected.
	 
	16.6	 	If scales at the applicable mine determine the weight for less than all of the
railcars in a single trainload lot, then the average railcar weight for the last three trainload
lots to TVA, for trains that contained railcars all of the same capacity as the unweighed cars,
shall be determined by dividing

22

 

	 	 	the trainload lots’ weight by the number of railcars in the trainload lots. The average railcar
weight shall be multiplied by the number of railcars in the unweighed or partially unweighed
trainload lot to determine the trainload lot weight.
	 
	17.0	 	CONTRACT ADMINISTRATOR/CONTRACTING OFFICER
	 
	 	 	The Manager of Coal Acquisition and Supply has designated the Contract Administrator who
administers this contract for TVA to act on behalf of TVA for all purposes in the administration of
this contract, such designation to continue until revoked or modified by the Manager of Coal
Acquisition and Supply. The Contract Administrator shall serve as TVA’s “Contracting Officer” with
respect to matters arising under terms of this contract that provide for action by the Contracting
Officer.
	 
	18.0	 	DISPUTES
	 
	 	 	The Parties agree that any lawsuit between them that asserts a claim or claims arising out of or
related to this contract (whether sounding in contract, tort, or otherwise) shall be filed and
litigated to conclusion only in the United States District Court for the Eastern District of
Tennessee at Knoxville, and each Party hereby consents to the jurisdiction and venue of that court
for all such lawsuits. The Parties further agree that in any such litigation (1) each will
stipulate to have a United States Magistrate Judge conduct any and all proceedings in the
litigation in accordance with 28 U.S.C. § 636(c) and Fed. R. Civ. P. 73, and (2) each will waive
any right it may have to a trial by jury.
	 
	19.0	 	CLEAN AIR ACT AND OTHER ENVIRONMENTAL REQUIREMENTS
	 
	 	 	In the event of enactment, implementation, amendment, or enforcement of the Clean Air Act, as
amended, or any other applicable federal, state, or local air pollution control or environmental
law, rule, or requirement which causes the continued use of the coal purchased under this contract
to be inconsistent with (i) TVA’s air pollution control strategies, as they may be modified for
meeting such air pollution control or environmental requirements, or (ii) an administrative or
judicial order, TVA may cancel this contract with no further obligation or liability hereunder or
at law by giving Contractor ninety (90) days’ advance notice of such cancellation. In the case of
inconsistency with TVA’s air pollution control strategies, the parties will attempt to renegotiate
the contract during such notice period to provide for delivery of coal that will be of a quality
consistent with TVA’s new air pollution control strategies. In the event the parties do not reach
agreement on such a renegotiated contract within the 90-day notice period, the cancellation notice
given by TVA shall remain in effect and the contract shall terminate at the end of such period. In
no event will TVA be obligated to divert deliveries from any affected Receiving Plant(s) to any
alternate fossil plant or other destination.
	 
	20.0	 	UNILATERAL TERMINATION RIGHT
	 
	 	 	Commencing no sooner than July 1, 2111, in addition to any other termination rights provided in
this contract or at law, TVA expressly reserves the right, upon 60 days’ prior written notice to
Contractor, to unilaterally terminate this contract; provided, however, that TVA shall pay to
Contractor an amount equal to ten (10) percent of the Base Price, multiplied by the remaining
number of tons scheduled for delivery from the effective termination date herein through the
earliest applicable date for termination, pursuant to the reopening provisions under Section 1,
Contract Term; provided further, that the remaining number of tons scheduled for delivery
shall be based on the minimum Nominated Quantity that may be nominated pursuant to Section 2,
Quantity. Said payment by TVA to Contractor shall constitute Contractor’s sole remedy
against

23

 

	 	 	TVA for any loss, cost, or damage incurred by Contractor as a result of TVA’s termination under
this section. TVA shall have no further obligation or liability under the contract or at law except
with respect to coal delivered prior to said termination date as otherwise provided in Section 8,
Adjustment for Quality, Section 15, Payments, Invoices, and Section 16,
Weights.
	 
	21.0	 	CREDIT EVALUATION AND PERFORMANCE ASSURANCE
	 
	21.1	 	Performance Assurance. Within one (1) day from the execution of this contract,
Contractor shall furnish performance assurance for the protection of TVA in the form of a cash
deposit in the amount of One Million Dollars ($1,000,000.00).
	 
	 	 	This deposit is for the security of TVA regarding the performance of all obligations of the
Contractor under this contract and TVA may, subject to the provisions of Section 21, reasonably
require the Contractor to adjust the amount of this deposit upward or downward. The deposit will
earn interest at TVA’s short-term interest rate.
	 
	 	 	Contractor acknowledges and agrees that any failure to establish, maintain, or adjust said deposit
shall constitute a default under this contract, subject to all applicable cure provisions.
	 
	21.2	 	Material or Adverse Change in Financial Condition. Contractor shall inform TVA, in
writing, within ten (10) business days of any Material or Adverse Change in its financial
condition. For the purposes of this contract, a Material or Adverse Change may include, but is not
limited to, any of the following:

	 	1)	 	A bankruptcy filing,
	 
	 	2)	 	Insolvency,
	 
	 	3)	 	A report of a quarterly or annual loss or a decline in earnings of twenty percent (20%)
or more compared to the prior period,
	 
	 	4)	 	A negative restatement of prior financial statements or a failure or refusal to provide
quarterly or annual financial statements to TVA as required under Subsection 21.3 below,
	 
	 	5)	 	Default under other financing agreements with third-parties in excess of Ten Million
Dollars ($10,000,000.00),
	 
	 	6)	 	Appointment of a receiver, trustee or examiner, or
	 
	 	7)	 	Entry of a judgment against Contractor in an amount that is greater than five percent (5%) of the Contractor’s net worth.

	 	 	If there is a Material or Adverse Change in Contractor’s financial condition, TVA may require
Contractor to provide additional reasonable Performance Assurance, as outlined herein, within ten
(10) business days of Contractor’s receipt of a written request from TVA for such additional
Performance Assurance, in an amount determined by TVA in a commercially reasonable manner and in a
form and from a financial institution or other guarantor reasonably acceptable to TVA. Such
additional Performance Assurance may include, but is not limited to, increasing the amount of the
deposit provided to TVA under Subsection 21.1 above, or other performance assurance as described in
Subsection 21.4. If the Contractor fails to deliver such additional Performance Assurance to TVA
with ten (10) business days of receipt of TVA’s written request for such additional Performance
Assurance, then the Contractor may be deemed by TVA to be in default under the terms of this
contract, subject to all applicable cure provisions.
	 
	21.3	 	Ongoing Credit Evaluation & Monitoring. TVA will monitor Contractor’s
creditworthiness on an ongoing basis for changes in financial condition. Contractor shall comply
with the following provisions::

	 	1)	 	Financial Statements:

	 	a)	 	Within one hundred and twenty (120) calendar days following the end of each fiscal year,
Contractor shall deliver a copy of Contractor’s annual report containing audited consolidated
financial statements for such fiscal year that include balance sheets, income statements,
statements of cash flows and notes to the financial statements.

24

 

	 	b)	 	Within sixty (60) calendar days following the end of each of the first three fiscal
quarters of each fiscal year, Contractor shall deliver a copy of Contractor’s quarterly report
containing unaudited consolidated interim financial statements for such fiscal quarter.
	 
	 	c)	 	In all cases Contractor’s financial statements shall be prepared in accordance with
generally accepted accounting principles used in the United States.
	 
	 	d)	 	In the event any annual report or quarterly interim financial statements cannot be
delivered on a timely basis due to a delay in preparation or certification, such delay in
preparation or certification, such delay shall be excused to the extent, and only to the extent,
Contractor is diligently pursuing the preparation, certification, and delivery of the statements
and has informed TVA in writing as to the cause or causes of such delay and the anticipated
duration of such delay

	 	2)	 	Within ten (10) business days of any change in majority ownership of Contractor,
Contractor shall report such change and the details thereof to TVA.
	 
	 	3)	 	Within ten (10) business days of the occurrence thereof Contractor shall disclose to
TVA any material litigation with a demand in excess of Ten Million Dollars ($10,000,000.00).

	 	 	TVA shall periodically review Contractor’s financial information to determine if, an increase or
decrease in the current level of additional Performance Assurance is required on behalf of
Contractor. If the financial condition of the Contractor has changed to a point whereby TVA
determines that further or additional Performance Assurance is not required. TVA will release the
security provided in Subsection 21.1; otherwise, the current Performance Assurance obligation will
continue.
	 
	21.4	 	Types of Acceptable Performance Assurance. The types of acceptable Performance
Assurance that TVA may require include but are not limited to:

	 	1.	 	Cash Deposit,
	 
	 	2.	 	An irrevocable standby letter of credit (including an increase or extension of an
existing letter of credit) in a form and from a financial institution reasonably acceptable to TVA,
or
	 
	 	3.	 	Various combinations of the foregoing or other credit or performance assurance
reasonably acceptable to TVA.

	21.5	 	Remedies with Respect to Performance Assurance. In addition to any other remedies
available under this contract or at law, TVA, upon or any time after the occurrence or deemed
occurrence of a default by Contractor (and provided such default) is continuing), may exercise any
and all of its rights with respect to all Performance Assurance, including but not limited to
drawing on any outstanding letter of credit issued for TVA’s benefit and liquidating all
Performance Assurance then held by or for the benefit of TVA free from any claim or right of any
nature whatsoever of Contractor. TVA shall apply the proceeds from such Performance Assurance to
reduce Contractor’s obligations under the contract, and Contractor shall remain liable for any
amounts owing to TVA after the application of such proceeds.
	 
	22.0	 	VERIFICATION OF DATA, INSPECTION OF RECORDS AND MINE SOURCES
	 
	 	 	TVA, its employees, agents, or representatives, shall have the right, after prior notice and at a
reasonable time to inspect Contractor’s or, if applicable, its producer’s records and mines and
related facilities to verify the accuracy of the data supplied by Contractor to support its request
for price adjustments or to establish Contractor’s actual cost change under section 10, Contract
Price Adjustments, and for purposes of determining Contractor’s compliance with the provisions of
this contract. Information obtained by TVA, its employees, agents, or representatives, in examining
Contractor’s or its producer’s records or inspecting Contractor’s or its producer’s mines shall not
be disclosed to third parties without the Contractor’s consent, unless disclosure is ordered by a
court of competent jurisdiction, is made for purposes of any litigation or proceeding (judicial,
administrative, or investigatory) involving this contract, or is otherwise required by law.

25

 

	23.0  COAL MINING RECLAMATION AND CONSERVATION REQUIREMENTS
	 
	 	 	The following TVA reclamation and conservation requirements are applicable to all contracts for the
purchase of coal:
	 
	23.1	 	TVA Policy On Areas From Which Coal Will Be Procured: Coal Mining — Land and Water
Resource Protection. TVA accepts no coal mined from locations in or near areas officially
designated by state or federal agencies, or identified by TVA, as wild or scenic river areas, wild,
wilderness, natural, scenic, public recreation areas or under study pursuant to legislative
authority for any such official designation, except where special circumstances exist. No coal will
be accepted from locations in or near areas designated under legislative authority as potential
sites for the above uses unless, after coordination with the appropriate agencies, TVA determines
that the coal can be mined without substantially adversely affecting the area’s potential for such
use. In such cases and also in cases involving offerings of coal from mines in or near other
visually important areas such as major highways or population centers, special provisions designed
to protect aesthetic values may be incorporated in the purchase contracts. No coal will be accepted
from areas in which, in TVA’s judgment, mining would adversely affect a public water supply and
such adverse effect cannot be avoided by proper reclamation.
	 
	23.2	 	Contractor agrees that all sources of coal delivered shall be in full compliance with
all state and federal reclamation laws, including the Surface Mining Control and Reclamation Act of
1977 and all regulations issued thereunder. A violation of any such law or regulation shall
constitute a breach of contract, entitling TVA to exercise its remedies as provided for in this
contract or by law. TVA will not accept coal mined from any source, stockpile, or otherwise during
any period when the source is subject to a cessation order issued by the Office of Surface Mining
and Reclamation (OSM) or any state reclamation enforcement agency for violation of reclamation
requirements.
	 
	23.3	 	TVA also reserves the right to either terminate this contract or suspend deliveries
under the contract from any source whatsoever when any Authorized Source is subject to a cessation
order.
	 
	23.4	 	Coal which is not delivered due to such cessation order or suspension shall not be
considered excusable, and TVA may purchase replacement coal for the Contractor’s account. If, upon
appeal by the Contractor under OSM’s or the appropriate state’s regulations, a cessation order is
held to have been improperly issued, the Contractor shall not be liable for the cost of replacement
coal, and any coal not delivered due to the order or suspension may, at Contractor’s option, be
canceled or rescheduled upon delivery terms reasonably acceptable to TVA. This constitutes
Contractor’s exclusive remedy against TVA in the event of a wrongful issuance of a cessation order
by OSM or a state agency.
	 
	23.5	 	TVA reserves the right to require and Contractor agrees to perform over and above the
requirements specified by law any special or additional reclamation work which TVA deems necessary
to ensure that the mining operation complies with TVA’s overall policy for protection and
enhancement of the environment. Any such special or additional reclamation work shall be subject to
the approval of the U.S. Office of Surface Mining, or a related agency having jurisdiction over the
matter. TVA agrees to compensate Contractor for the performance of such work in an amount to be
mutually agreed upon before the commencement of work. No work performed by Contractor shall be
deemed special or additional reclamation work for the purposes hereof unless it is so designated in
writing by the Contract Administrator.
	 
	23.6	 	TVA, its agents, and assigns shall have the right to enter upon any of the land
affected by Contractor’s mining operation, at any time and without the necessity of giving notice,
for any purpose related to enforcing these reclamation and conservation requirements or to observe
mining or reclamation completed or in progress.

26

 

	23.7	 	TVA will not accept coal from sources mined under the 16-2/3 percent exemption allowed under
P.L. 95-87, unless it can be documented that the source will be mined and reclaimed to the
performance standards established under P.L. 95-87, and furthermore, that the operation has the
concurrence of the coal mining and regulatory (primacy) authority established by this law in the
state from which the coal is to be mined.
	 
	24.0	 	RELATIONSHIP OF PARTIES — PRODUCER’S STATEMENT
	 
	24.1	 	Regardless of whether the Contractor is the producer of the coal to be furnished or
is the sales agent of one or more producer, the Contractor binds and obligates itself for the full
and faithful performance of the contract in its entirety.
	 
	24.2	 	If the Contractor is not the producer of the coal to be delivered hereunder,
Contractor represents that it has contracted directly with the producer(s) who has (have) executed
the Coal Producer’s Statement(s) for the delivery of the coal to TVA.
	 
	25.0	 	NONASSIGNABILITY; SUBCONTRACTS; DESIGNATION AND TERMINATION OF AGENT
	 
	25.1.1	 	Neither this contract nor any interest herein or any payments hereunder shall be
assigned without the prior written consent of TVA, which consent TVA may withhold in its sole
discretion. In the event TVA shall give such consent, the same shall not be construed as a waiver
of this provision with regard to any subsequent assignment.
	 
	25.1.2	 	Notwithstanding the foregoing, any party may, without the need for consent from the
other party (and without relieving itself from liability hereunder), transfer, sell, pledge,
encumber or assign this contract or the accounts, revenues or proceeds hereof or thereof in
connection with any bank financing or security arrangements, provided, however, that no such
assignment shall in any way relieve the assignor from liability for full performance under this
contract. Any such assignee shall assume and agree to be bound by the terms and conditions of this
contract. Any consent to an assignment under this provision shall not be construed as a waiver of
this provision with regard to any subsequent assignment.
	 
	25.2	 	No designation of any agent by the Contractor to submit invoices, receive payments,
or take any other action in connection with the performance or administration of this contract
shall be effective or recognized by TVA until the Contractor has given written notice of such
designation and TVA has given Contractor specific written notice of its approval thereof.
	 
	25.3	 	If Contractor notifies TVA in writing of the termination of any agent that Contractor
may have previously designated to administer this contract on its behalf, TVA may thereafter rely
on such notice of termination in all dealings with Contractor or a successor agent.
	 
	26.0	 	WAIVERS
	 
	 	 	No waiver of any breach of this contract shall be held to be a waiver of any other breach. Unless a
remedy is expressly designated as exclusive, all remedies afforded under the contract shall be in
addition to every other remedy provided herein or by law.

27

 

	27.0	 	OFFICIALS NOT TO BENEFIT
	 
	 	 	No member of or delegate to Congress or Resident Commissioner, or any officers, employee, special
Government employee, or agent of TVA shall be admitted to any share or part of this contract or to
any benefit that may arise therefrom unless it be made with a corporation for its general benefit;
nor shall the Contractor offer or give, directly or indirectly, to any officer, employee, special
Government employee, or agent of TVA any gift, gratuity, favor, entertainment, loan, or any other
thing of monetary value, except as provided in 5 C.F.R. part 2635. Breach of this provision shall
constitute a material breach of this contract and TVA shall have the right to exercise all remedies
provided in this contract or at law.
	 
	28.0	 	SMALL BUSINESS POLICY
	 
	 	 	The requirements of 15 U.S.C § 637(d) are incorporated by reference.
	 
	29.0	 	LIQUIDATED DAMAGES FOR SUBCONTRACTING PLANS
	 
	29.1	 	Failure to make a good-faith effort to comply with the subcontracting plan, as used
in this clause, means a willful or intentional failure to perform in accordance with the
requirements of the subcontracting plan approved under 15 U.S.C. 637(d) or willful or intentional
action to frustrate the plan.
	 
	29.2	 	Performance shall be measured by applying the percentage goals to the total actual
subcontracting dollars or, if a commercial plan is involved, to the pro rata share of actual
subcontracting dollars attributable to Government contracts covered by the commercial plan. If, at
contract completion, or in the case of a commercial plan, at the close of the fiscal year for which
the plan is applicable, the Contractor has failed to meet its subcontracting goals and the
Contracting Officer decides in accordance with Subsection 29.3 that the Contractor failed to make a
good-faith effort to comply with its subcontracting plan, the Contractor shall pay TVA liquidated
damages in an amount equal to the actual dollar amount by which the Contractor failed to achieve
each subcontract goal.
	 
	29.3	 	Before the Contracting Officer makes a final decision that the Contractor has failed
to make such good-faith effort, the Contracting Officer shall give the Contractor written notice
specifying the failure and permitting the Contractor to demonstrate what good-faith efforts have
been made. Failure to respond to the notice may be taken as an admission that no valid explanation
exists. If, after consideration of all the pertinent data, the Contracting Officer finds that the
Contractor failed to make a good-faith effort to comply with the subcontracting plan, the
Contracting Officer shall issue a final decision to that effect and require that the Contractor pay
the government liquidated damages as provided in paragraph b. of this section.
	 
	29.4	 	With respect to commercial plans, i.e., company-wide or division-wide subcontracting
plans, the Contracting Officer of the agency that originally approved the plan will exercise the
functions of the Contracting Officer under this clause on behalf of all agencies that awarded
contracts covered by that commercial plan.
	 
	29.5	 	The Contractor shall have the right of appeal, under the section in this contract
titled DISPUTES, from any final decision of the Contracting Officer.
	 
	29.6	 	Liquidated damages shall be in addition to any other remedies that TVA may have.
	 
	30.0	 	AFFIRMATIVE ACTION AND EQUAL OPPORTUNITY

28

 

	 	 	To the extent applicable, this contract incorporates by reference the “Equal Opportunity” for
Special Disabled Veterans and Veterans of the Vietnam Era clause, 41 C.F.R. § 60-250.5; the “Equal
Opportunity for Workers with Disabilities” clause, 41 C.F.R. § 60-741.5; and the “Equal
Opportunity” clause, 41 C.F.R. § 60-1.4.
	 
	31.0	 	SAFETY AND HEALTH
	 
	 	 	All sources supplying coal purchased under this contract shall be in full compliance with the
Federal Mine Safety and Health Act of 1977 and regulations issued thereunder. Failure to comply
shall constitute a breach of contract, permitting TVA to exercise its remedies under this contract
or as provided by law.
	 
	32.0	 	ENVIRONMENTALLY ACCEPTABLE FACILITIES; CLEAN AIR AND WATER

Contractor hereby stipulates and agrees as follows:

(1) Contractor certifies that performance of this contract will not involve the use of any
facility or facilities which have given rise to a conviction under Section 113(c) of the Clean Air
Act (42 U.S.C. 7413(c)) or Section 309(c) of the Federal Water Pollution Control Act (33 U.S. C.
1319(c).

(2) Contractor will comply with all the requirements of Section 114 of the Clean Air Act
and Section 308 of the Federal Water Pollution Control Act relating to inspection, monitoring,
entry, reports, and information, as well as all other requirements specified in Section 114 and
Section 308 of the Clean Air Act and the Federal Water Pollution Control Act, respectively, and all
regulations and guidelines issued thereunder in its performance of this contract.

(3) Contractor will notify TVA of any conviction under Section 113(c) of the Clean Air Act
or Section 309(c) of the Federal Water Pollution Control Act involving a facility to be utilized
for this contract.

	33.0	 	CERTIFICATION FOR CONTRACTS, GRANTS, LOANS AND COOPERATIVE AGREEMENTS

Contractor’s representative, by signing this contract, certifies, to the best of his or her
knowledge and belief, that:

(1) No Federal appropriated funds have been paid or will be paid by or on behalf of
Contractor to any person for influencing or attempting to influence an officer or employee of any
agency, a member of Congress, an officer or employee of Congress, or an employee of a member of
Congress in connection with the awarding of this contract or the extension, continuation, renewal,
amendment, or modification of this contract.

(2) If any funds other than Federal appropriated funds have been paid or will be paid to
any person for influencing or attempting to influence an officer or employee of any agency, a
member of congress, an officer or employee of Congress, or an employee of a member of Congress in
connection with this Agreement, Contractor shall complete and submit Standard Form-LLL, “Disclosure
of Lobbying Activities,” in accordance with its instructions.

	 	 	This certification is a material representation of fact upon which reliance was placed when this
contract was made or entered into. Submission of this certification is a prerequisite for making or

29

 

	 	 	entering into this contract imposed by 31 U.S.C. 1352. Any person who makes an expenditure
prohibited under paragraph (1) of this clause or who fails to file or amend the disclosure
form required to be filed or amended by paragraph (2) of this clause shall be subject to civil
penalties as provided for by 31 U.S.C. 1352.
	 
	34.0	 	CONTRACT COMPONENTS
	 
	 	 	Appendix A (Coal Producer’s Statement(s) and Specific Location Map(s)); Exhibit I (Example
Calculation of Price Adjustment for Quality Variations); and the Subcontracting Plan are attached
hereto and made a part hereof.

IN WITNESS WHEREOF, the parties hereto have caused this agreement to be executed as of the
aforesaid date by their duly authorized representatives.

	 	 	 	 	 	 	 

	 

	 	WITNESS:
	 	 	CONTRACTOR ARMSTRONG COAL CO., INC.

	

	 	/s/ Elizabeth J. Byrne	 	 	By: 	/s/ Martin D. Wilson

	 

	 	 

	 	 	 	 

	 

	 	 	 	 	Signature
Title: President
	 

	 	 

	 	 	 	 

	 
	 

	 	WITNESS:

/s/ Thomas
A. Carnette
	 	 	TENNESSEE VALLEY AUTHORITY

By: /s/ James M. Bach Jr.
	 

	 	 

	 	 	 	 
Signature
	 

	 	 	 	 	Title: Fuel Buyer
	 

	 	 

	 	 	 	 

30

 

EXHIBIT I

EXAMPLE CALCULATION OF PRICE ADJUSTMENT

FOR QUALITY VARIATIONS

Assume:

	 	 	 	 	 	 	 	 	 
	 	 	Typical Analysis	 	 	Qtrly. Avg. Value	 
	Btu/lb. (as-received)
	 	 	12,000	 	 	 	12,125	 
	Ash (as-received)
	 	 	7.00	%	 	 	9.00	%
	Total Moisture
	 	 	12.00	%	 	 	12.25	%
	SO2 in lbs./mmBtu at 97.5%
	 	 	1.70	 	 	 	1.62	 
	 
	Total Tons Received equals 100,000
	 	 	 	 	 	 	 	 
	
Price equals $20.00
	 	 	 	 	 	 	 	 

Ash Adjustment Increase/Decrease is $0.15 per percentage point

Moisture adjustment increase/decrease is $0.06 per tenth of a percent

SO2 adjustment increase/decrease is $0.25 per tenth of a lb.

Btu example for Section 8.2.

Btu Adjustment = (Quarterly Average Value — Typical Analysis) X Price

                                                             Typical Analysis

Btu Adjustment = ( 12.125- 12,000) X $20.00

                                              12,000

Btu Adjustment = $0.21 per ton 

Ash example for Section 8.3.

Ash Adjustment decrease = (Quarterly Average Value — Typical Analysis) X Adjustment

Ash Adjustment decrease = (9.00 - 7.00) X $0.15

Ash Adjustment decrease = $0.30 per ton

Moisture example for Section 8.4.

Moisture Adjustment decrease = (Quarterly Average Value — Typical Analysis) X Adjustment

Moisture Adjustment decrease = ((12.25 - 12.00)) X $0.06

Moisture Adjustment decrease = $0.015 per ton.

SO2 example for Section 8.5 (scrubbed plants).

SO2 Adjustment increase = (Typical Analysis — Quarterly Average Value) X Adjustment

SO2 Adjustment increase = ((1.70 - 1.62) X 10) X $0.25

SO2 Adjustment increase = $0.20 per ton.

Sulfur Dioxide example for Section 8.5 non-scrubbed plants)

Cantor Fitzgerald Market Price Index

	 	 	 	 	 

	Month A Index Value
	 	$	181.00	 
	Month B Index Value
	 	$	163.00	 
	Month C Index Value
	 	$	192.00	 
	 
	 	 	 
	Average Index Value
	 	$	178.67	 

     (Typical Analysis S02 — Quarterly Average Value S02) X (Quarterly Average Value BTU) X (quarterly tonnage) X
(average index value) /

     1,000,000 = adjustment

     (0.80 — 0.95) X (13,000) X (250,000) X (179.00) / 1,000,000 = -$87,101.625

31

 

Appendix A

COAL PRODUCER’S STATEMENT AND SPECIFIC LOCATION MAP

32exv10w17

Exhibit 10.17

Tennessee Valley Authority

Coal Supply & Origination

1101 Market Street, MR 2A

Chattanooga, Tennessee 37402-2801

CONTRACT SUPPLEMENT

	 	 	 	 	 	 	 	 	 

	TO:

	 	Armstrong Coal Company, Inc.
	 	Supplement No.
	 	10	 
	 

	 	7733 Forsyth Boulevard -  Suite 1625
	 	Date
	 	September 20, 2011

	 

	 	St. Louis, Missouri 63105
	 	Group-Contract No.
	 	612-40668	 
	 

	 	 	 	Plant
	 	Widows Creek,

	 

	 	 	 	 	 	Paradise, Kingston

Attention: Mr. Martin Wilson

This confirms my August 29, 2011, agreement with Kenny Allen, representing Armstrong Coal Company,
Inc. (“Armstrong”).

	 	1.	 	Effective September 1, 2011, Armstrong’s Kronos Underground Mine (“Kronos Mine”)
shall become one of the Approved Source Mines under Section 5.1
of Group-Contract
No. 612-40668 (the “Contract”) for the remaining Contract delivery term.
	 
	 	2.	 	All 5.0# SO2 coal delivered from the Kronos Mine shall conform to the
quality
specifications set forth in Section 9.0 of the Contract.
	 
	 	3.	 	The Base Price for coal delivered from the Kronos Mine shall be the 2011 Base Price
of $40.57 and the 2012 Base Price of $41.68 per Supplement No. 7 of the Contract. The
price of the coal delivered from the Kronos Mine shall be subject to adjustment pursuant
to Section 10 of the Contract.
	 
	 	4.	 	The sampling and weighing requirements will not change.
	 
	 	5.	 	Coal delivered from the Kronos Mine under this Contract, will apply against the 2011
Annual Contract Tonnage delivery requirement of 1.0 million tons.

All other conditions of the Contract remain unchanged and in full force and effect.

Please complete the acceptance below and return the duplicate original of this contract
supplement to this office. You should keep the original for your file.

In the event Contractor fails to execute this Supplement in the acceptance space provided below or
fails to return such executed Supplement to TVA, shipment of coal to TVA following the date of
Contractor’s receipt of this Supplement shall constitute an acceptance by Contractor of all the
terms and conditions of this Supplement, unless within five (5) business days of the date of
receipt of this Supplement, Contractor notifies TVA, both orally and in writing that this
Supplement is not accepted.

	 	 	 	 	 	 	 	 

	Accepted
	 	Armstrong Coal Co.	 	Tennessee Valley Authority	 	 
	 

	 	 

                    (Company)
	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	By
	 	/s/ Martin D. Wilson	 	By 	/s/ Connie S. Gazaway	 	 
	 

	 	 

	 	 	 

	 	 
	 

	 	 	 	 	Connie S. Gazaway	 	 
	 

	 	 	 	 	Asset Management Specialist	 	 
	 
	 	 	 	 	 	 	 
	Title
	 	President	 	 	/s/	 	 
	 

	 	 

	 	 	 

Manager, Coal Acquisition
	 	 
	 
	 	 	 	 	 	 	 
	Date
	 	 	 	 	 	 	 
	 

	 	 

	 	 	 	 	 

TVA RESTRICTED INFORMATION

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00203-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00203-of-00352.parquet"}]]