Document:

Peabody COALSALES Company

Contract No. LGE03010

 

EXHIBIT

10.69

 

COAL SUPPLY AGREEMENT

 

 

This is a coal supply agreement (the “Agreement”)

dated January 1, 2003 between LOUISVILLE GAS AND ELECTRIC COMPANY, a Kentucky

corporation, 220 West Main Street, Louisville, Kentucky 40202 (“hereinafter

referred to as Buyer”) and PEABODY COALSALES COMPANY, a Delaware corporation,

(hereinafter referred to as “Seller”), whose address is 701 Market Street, St.

Louis, Missouri 63101-18926.

 

WITNESSETH:

 

WHEREAS, LG&E is an electric utility company which

desires to purchase steam coal; and

 

WHEREAS, Buyer and Seller desire to enter into a coal

supply agreement pursuant to which the Seller will supply coal to Buyer under

the terms as set forth herein.

 

NOW, THEREFORE, in consideration of the mutual

covenants set forth herein, and for other good and valuable consideration, the

receipt and sufficiency of which are hereby acknowledged, the parties agree as

follows:

 

SECTION 1.  GENERAL.

 

(a) The above recitals are true and correct and

comprise a part of this Agreement.

 

 

(b) Seller will sell to Buyer and Buyer will buy from

Seller steam coal under all the terms and conditions of this Agreement.

 

(c) Seller hereby represents and warrants that it has

obtained or will obtain the agreement of Patriot Coal Company, LP, a Delaware

limited partnership, and Peabody Coal Company, a Delaware corporation

(together, the “Producer”), as indicated by each Producers’ signatures on the

Producer’s Certificate attached hereto as “Exhibit A” and made a part hereof,

and has delivered or will deliver such original Producer’s Certificate to

Buyer.  This obligation of Seller is a

material inducement for Buyer’s entering into this Agreement.  If Seller fails to deliver an unrevised

Producer’s Certificate to Buyer within five (5) days after execution of this

Agreement, then Buyer may declare this Agreement null and void, and neither

party shall have any further obligations hereunder, except to the extent of

deliveries then in route.  Seller

acknowledges and agrees that Buyer is the third-party beneficiary of the

agreement between Producer and Seller (the “Coal Marketing and Sales

Agreement”) and as such shall be entitled to enforce its rights thereunder, in

addition to exercising its rights and remedies hereunder.

 

(d) Each covenant, representation and warranty given

by Seller herein or by Producer in the Producer Certificate is a material

inducement for Buyer to enter into this Agreement.

 

SECTION 2.  TERM.  The term of this Agreement shall commence on

January 1, 2003 and shall continue through December 31, 2005.

 

2

 

SECTION 3.  QUANTITY.

 

§ 3.1 Base Quantity.  Seller shall sell and deliver and Buyer shall purchase and accept

delivery of the following annual base quantity of coal (“Base Quantity”):

 

	

  YEAR

  	

   

  	

  BASE

  QUANTITY (TONS)

  	

   

  
	

  2003

  	

   

  	

  1,000,000

  	

   

  
	

  2004

  	

   

  	

  1,000,000

  	

   

  
	

  2005

  	

   

  	

  1,000,000

  	

   

  

 

§ 3.2 Delivery Schedule. Shipments are to be

made on a ratable basis as adjusted during the year to reflect Buyer’s outages.

 Initial shipments shall begin on or

about January 1, 2003.  Time is of the

essence with respect to the schedule so established.  Except as otherwise provided herein, failure by Seller to deliver

in a timely fashion shall constitute a material breach within the meaning of §

16 of this Agreement, unless such failure to deliver is the result of Buyer’s

action or inaction to perform as required by this Agreement.

 

SECTION 4.         SOURCE.

 

§ 4.1 Source. 

The coal sold hereunder, including coal purchased by Seller from third

parties, shall be supplied from Patriot Coal Company’s “Patriot Complex”,

located in Henderson County, Kentucky which consists of the “Patriot Mine” (a

surface mining operation which is owned and operated by Seller’s affiliated

company, Patriot Coal Company, L.P (“Patriot”)) and the “Freedom Mine”(which is

an underground mine operated by Seller’s affiliated company, 

 

3

 

Ohio County Coal Company (“Ohio County”)).  Seller may also provide coal supplied from Peabody Coal Company’s

Camp Complex located in Union County, Kentucky and its Gibraltar Mine located

in Muhlenberg County, Kentucky, (all of the foregoing sources hereinafter

referred to as the “Coal Property”).

 

§ 4.2 Assurance of Operation and Reserves.  Seller represents and warrants that the Coal

Property contains economically recoverable coal of a quality and in quantities

which will be sufficient to satisfy all the requirements of this Agreement.  Seller agrees and warrants that it will

cause the applicable Producer to have at the Coal Property adequate machinery,

equipment and other facilities to produce, prepare and deliver coal in the

quantity and of the quality required by this Agreement.  Seller further agrees to cause the

applicable Producer to operate and maintain such machinery, equipment and

facilities in accordance with good mining practices so as to efficiently and

economically produce, prepare and deliver such coal.  Seller agrees that Buyer is not providing any capital for the

purchase of such machinery, equipment and/or facilities and that Seller shall

cause the applicable Producer to operate and maintain same at the sole expense

of Seller and Producer, including all required permits and licenses.  Seller hereby warrants that Producer has

dedicated, or Seller will cause Producer to dedicate to this Agreement

sufficient reserves of coal meeting the quality specifications hereof and lying

on or in the Coal Property so as to fulfill the quantity requirements hereof.

 

§ 4.3 Non-Diversion of Coal.  Seller agrees and warrants that it will not,

without Buyer’s express prior written consent, use or sell coal from the Coal

Property in a way that will reduce 

 

4

 

the economically recoverable balance of coal in the Coal Property to an

amount less than that required to be supplied to Buyer hereunder.

 

§ 4.4 Seller’s Preparation of Mining Plan.  On or before January 1, 2003, Seller shall

have prepared, or obtained from Producer, and delivered to Buyer, a complete

mining plan for the Coal Property with adequate supporting data to demonstrate

Producer’s capability to have coal produced from the Coal Property which meets

the quantity and quality specifications of this Agreement.  Seller shall provide Buyer with two (2)

copies of such mining plan.  Buyer’s

receipt of any such mining plans or other information or data furnished

voluntarily by Seller (the “Mining Information”) shall not in any manner

relieve Seller of any of Seller’s obligations or responsibilities under this

Agreement.  Buyer’s receipt and review,

if any, of any Mining Information shall not be construed as constituting an

approval of Producer’s proposed mining plan or Producer’s mining practices.  The parties acknowledge that Buyer has no

right to approve, disapprove or require modification of Producer’s mining

plan.  Buyer and Seller understand and

acknowledge that a review, if any, by Buyer of the Mining Information shall be

limited solely to a determination, for Buyer’s purposes only, of Seller’s

capability to supply coal to fulfill Buyer’s requirements of a dependable coal

supply.

 

Seller shall have prepared a complete mining plan for

the Coal Property with adequate supporting data to demonstrate Seller’s

capability to have coal produced from the Coal Property which meets the

quantity and quality specifications of this Agreement.  Seller shall provide Buyer with two (2)

copies of such mining plan which shall contain maps and a narrative 

 

5

 

depicting areas and seams of coal to be mined and shall include (but

not be limited to) the following information: (i) reserves from which the coal

will be produced during the term hereof and the mining sequence, by year (or

such other time intervals as mutually agreed) during the term of this

Agreement, from which coal will be mined; (ii) methods of mining such coal;

(iii) methods of transporting and, in the event a preparation plant is

constructed at the Coal Property, methods of washing coal to insure compliance

with the quantity and quality requirements of this Agreement including a

description and flow sheet of the preparation plant; (iv) quality data plotted

on the maps depicting data points and isolines by ash, sulfur, and Btu; (v)

quality control plans including sampling and analysis procedures to insure

individual shipments meet quality specifications; and (vi) Seller’s aggregate

commitments to others to sell coal from the Coal Property during the term of

this Agreement.  Such complete mining

plan shall be delivered to Buyer on or before January 1, 2003.

 

Buyer’s receipt of the mining plan or other

information or data furnished by Seller shall not in any many relieve Seller of

any of Seller’s obligations or responsibilities under this Agreement; nor shall

such review be construed as constituting an approval of Producer’s proposed

mining plan as prudent mining practices, such review by Buyer being limited

solely to a determination, for Buyer’s purposes only, of Producer’s capability

to supply coal on a long-term basis to fulfill Buyer’s requirements of a

dependable coal supply.

 

Seller shall annually provide Buyer with a mining plan

update (“Update”) showing progress to date, conformity to original mining plan,

and then known changes in reserve data and 

 

6

 

planned changes in mining progression, plans or procedures.  The update shall be submitted annually on or

before January first (1st) of each year during the term of this

Agreement.

 

§ 4.5 Substitute Coal.  Notwithstanding the above representations

and warranties, in the event that Seller is unable to supply coal from the Coal

Property in the quantity and of the quality required by this Agreement, and

such inability is not caused by a force majeure event as defined in § 10, then

Buyer will have the option of requiring that Seller supply substitute coal from

other facilities and mines.  Seller

shall also have the right to supply substitute coal after receiving Buyer’s

written consent (which shall not be unreasonably withheld).  Such substitute coal shall be provided under

all the terms and conditions of this Agreement including, but not limited to,

the quantity provisions of § 3.1, the price provisions of § 8, the quality

specifications of § 6.1, and the provisions of § 5 concerning reimbursement to

Buyer for increased transportation costs. 

Seller’s delivery of coal not produced from the Coal Property without

having received the express written consent of Buyer shall constitute a

material breach of this Agreement.

 

§ 4.6 Relationship of the Parties.  Seller agrees that it is not and will not

hold itself out as a partner, employee, agent or representative of or joint

venturer with Buyer.  Nothing herein

contained shall be construed as creating a single enterprise, joint venture,

agency, partnership, joint employer, owner-contractor, or lessor-lessee

relationship between Buyer and Seller or between Buyer and Producer.

 

Seller and Producer shall each have sole and exclusive

authority to direct and control its respective activities and operations, and

those of any subcontractors, undertaken in the 

 

7

 

performance of Seller’s obligations under this Agreement.  Seller and Producer shall each exercise full

and complete control over its respective work force and labor relations

policies.  Buyer shall have no authority

or control over either Seller’s or Producer’s operations or work force.

 

§ 4.7 Warranties. EXCEPT AS EXPRESSLY SET FORTH

HEREIN, SELLER EXPRESSLY DISCLAIMS ANY OTHER REPRESENTATIONS OR WARRANTIES,

WRITTEN OR ORAL, EXPRESS OR IMPLIED, INCLUDING MERCHANTABLILITY OR FITNESS FOR

ANY PARTICULAR PURPOSE.

 

§4.8 Remedies.  No waiver of remedies or damages herein shall apply to claims of

anticipatory repudiation or remedies therefore provided by law except that

neither Seller nor Buyers shall be liable to the other for any punitive,

special, incidental or consequential damages (including without limitation,

loss of profits or overhead), whether by statute, in tort or in contract, under

any indemnity provision or otherwise.

 

SECTION 5.  DELIVERY.

 

§ 5.1 Barge Delivery.  The coal shall be delivered to Buyer F.O.B. barge at the

following points (the “Delivery Point”), Demao Dock (Patriot coal) at Mile

Point 31.5 on the Green River, Camp Breckinridge (Camp Mine Complex coal) at

Mile Point 842.0 on the Ohio River, or the Gibraltar Dock (Gibraltar Mine coal)

at Mile Point 85.9 on the Green River. 

With Buyer’s consent, Seller may deliver the coal at a location

different from the Delivery Point, provided, 

 

8

 

however, that Seller shall reimburse Buyer for any resulting increases

in the cost of transporting the coal to Buyer’s generating stations.  Any resulting savings in such transportation

costs shall be retained by Buyer.

 

Title to and risk of loss of coal sold will pass to

Buyer and the coal will be considered to be delivered when barges containing

the coal are disengaged by Buyer’s barging contractor from the loading

dock.  Buyer or its contractor shall

furnish suitable barges, clean and ready for loading in accordance with a

delivery schedule provided by Buyer to Seller, and in sufficient number and in

a timely manner in order for Seller to meet any previously agreed upon delivery

schedule as provided for in §3.2. 

Seller shall arrange and pay for all costs of transporting the coal from

the mines to the loading docks and loading and trimming the coal into barges to

the proper draft and the proper distribution within the barges.  Buyer shall arrange for transporting the

coal by barge from the loading dock to its generating station(s) and shall pay

for the cost of such transportation. 

For delays caused by Seller in handling the scheduling of shipments with

Buyer’s barging contractor, Seller shall be responsible for any demurrage or

other penalties assessed by said barging contractor (or assessed by Buyer)

which accrue at the Delivery Point, including the demurrage, penalties for

loading less than the specified minimum tonnage per barge, or other penalties

assessed for barges not loaded in conformity with applicable requirements.  Buyer shall be responsible to deliver barges

in as clean and dry condition as practicable. 

Seller shall require of the loading dock operator that the barges and

towboats provided by Buyer or Buyer’s barging contractor be provided convenient

and safe berth free of 

 

9

 

wharfage, dockage, fleeting, switching, and other harbor and port

charges; that while the barges are in the care and custody of the loading dock,

all applicable U.S. Coast Guard regulations and other applicable laws,

ordinances, rulings, and regulations shall be complied with, including adequate

mooring and display of warning lights; that the loading operations be performed

in a workmanlike manner and in accordance with the reasonable loading

requirements of Buyer and Buyer’s barging contractor; and that the loading dock

operator carry landing owners or wharfinger’s insurance with basic coverage of

not less than $300,000.00 and total of basic coverage and excess liability

coverage of not less than $1,000,000.00, and provide evidence thereof to Buyer

in the form of a certificate of insurance from the insurance carrier or an

acceptable certificate of self-insurance with requirement for thirty (30) days

advance notification of Buyer in the event of termination of or material

reduction in coverage under the insurance.

 

SECTION 6. QUALITY.

 

§ 6.1  Specifications.  The coal delivered hereunder shall conform

to the following specifications on an “as received” basis:

 

	

  Specifications

  	

   

  	

  Guaranteed

  Monthly

  Weighted Average (1)

  	

   

  	

  Rejection

  Limits

  (per shipment)

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  BTU/LB.

  	

   

  	

  min.

  	

   

  	

  10,850

  	

   

  	

  <

  	

   

  	

  10,600

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  LBS/MMBTU:

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  MOISTURE

  	

   

  	

  max.

  	

   

  	

  12.9

  	

   

  	

  >

  	

   

  	

  15.0

  	

   

  
	

  ASH

  	

   

  	

  max.

  	

   

  	

  10.8

  	

   

  	

  >

  	

   

  	

  12.5

  	

   

  
	

  SULFUR

  	

   

  	

  max.

  	

   

  	

   3.00

  	

   

  	

  >

  	

   

  	

  3.40

  	

   

  
	

  SULFUR

  	

   

  	

  min.

  	

   

  	

   2.75

  	

   

  	

  <

  	

   

  	

  2.55

  	

   

  
	

  CHLORINE

  	

   

  	

  max.

  	

   

  	

   0.05

  	

   

  	

  >

  	

   

  	

  0.06

  	

   

  
	

  FLUORINE

  	

   

  	

  max.

  	

   

  	

  0.01

  	

   

  	

  >

  	

   

  	

  0.015

  	

   

  
	

  NITROGEN

  	

   

  	

  max.

  	

   

  	

  1.35

  	

   

  	

  >

  	

   

  	

  1.45

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  SIZE (3” x 0”):

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Top size

  (inches)*

  	

   

  	

  max.

  	

   

  	

  3

  	

   

  	

  >

  	

   

  	

  3

  	

   

  
	

  Fines (% by wgt)

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Passing 1/4”

  screen

  	

   

  	

  max.

  	

   

  	

  50

  	

   

  	

  >

  	

   

  	

  55

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  % BY WEIGHT:

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  VOLATILE

  	

   

  	

  max.

  	

   

  	

  31

  	

   

  	

  >

  	

   

  	

  29

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  FIXED CARBON

  	

   

  	

  max.

  	

   

  	

  38

  	

   

  	

  >

  	

   

  	

  30

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  GRINDABILITY

  (HGI)

  	

   

  	

  min.

  	

   

  	

  55

  	

   

  	

  <

  	

   

  	

  50

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  BASE ACID RATIO

  (B/A)

  	

   

  	

   

  	

   

  	

  0.60

  	

   

  	

   

  	

   

  	

  0.90

  	

   

  
	

  SLAGGING

  FACTOR**

  	

   

  	

  max.

  	

   

  	

  2.0

  	

   

  	

  >

  	

   

  	

   2.5

  	

   

  
	

  FOULING

  FACTOR***

  	

   

  	

  max.

  	

   

  	

  0.5

  	

   

  	

  >

  	

   

  	

  0.7

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  ASH FUSION

  TEMPERATURE (°F) (ASTM D1857)

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  REDUCING

  ATMOSPHERE

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Initial

  Deformation

  	

   

  	

  min.

  	

   

  	

  1940

  	

   

  	

  min.

  	

   

  	

  1900

  	

   

  
	

  Softening (H=W)

  	

   

  	

  min.

  	

   

  	

  2035

  	

   

  	

  min.

  	

   

  	

  1975

  	

   

  
	

  Softening

  (H=1/2W)

  	

   

  	

  min.

  	

   

  	

  2085

  	

   

  	

  min.

  	

   

  	

  2000

  	

   

  
	

  Fluid

  	

   

  	

  min.

  	

   

  	

  2190

  	

   

  	

  min.

  	

   

  	

  2100

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  OXIDIZING

  ATMOSPHERE

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Initial

  Deformation

  	

   

  	

  min.

  	

   

  	

  2300

  	

   

  	

  min.

  	

   

  	

  2200

  	

   

  
	

  Softening (H=W)

  	

   

  	

  min.

  	

   

  	

  2330

  	

   

  	

  min.

  	

   

  	

  2280

  	

   

  
	

  Softening

  (H=1/2W)

  	

   

  	

  min.

  	

   

  	

  2425

  	

   

  	

  min.

  	

   

  	

  2300

  	

   

  
	

  Fluid

  	

   

  	

  min.

  	

   

  	

  2490

  	

   

  	

  min.

  	

   

  	

  2375

  	

   

  

 

10

 

(1) An actual Monthly Weighted Average will be

calculated for each specification for coal delivered to the Buyer’s generating

stations.

 

* All the coal will be of such size that it will pass

through a screen having circular perforations three (3) inches in diameter, but

shall not contain more than fifty (50) per cent (50%) by weight of coal that

will pass through a screen having circular perforations one-quarter (1/4) of an

inch in diameter.

 

**           Slagging

Factor (Rs)=(B/A) x (Percent Sulfur by WeightDry)

 

***         Fouling

Factor (Rf)=(B/A) x (Percent Na20 by WeightDry)

 

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

 

	

  BASE ACID RATIO

  (B/A) =

  	

   

  	

   

  	

   

  	

  (Fe203  + 

  Ca0  +  Mg0 

  +  Na20  + 

  K20 )

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  (Si02 

  +  A1203  + 

  T102)

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Note:As used

  herein

  	

   

  	

  >

  	

   

  	

  means greater than:

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  <

  	

   

  	

  means less than.

  	

   

  	

   

  	

   

  
											

 

§ 6.2        Definition

of “Shipment”.  As used herein, a

“shipment” shall mean one (1) barge load or a barge lot load in accordance with

Buyer’s sampling and analyzing practices.

 

§ 6.3        Rejection.

 

Buyer has the right, but not the obligation, to reject

any shipment which fail(s) to conform to any or all of the Rejection Limits set

forth in § 6.1 or contains extraneous materials.  Buyer must reject such coal within seventy-two (72) hours of

receipt of the coal analysis provided for in § 7.2 or such right to reject is

waived.  In the event Buyer rejects such

non-conforming coal, title to and risk of loss of the coal shall be considered

to have never passed to Buyer and Buyer shall return the coal to Seller or

Producer, or at Seller’s request, divert such coal to Seller’s designee, all at

Seller’s cost and risk.  Seller shall

replace the rejected coal within five (5) working days 

 

11

 

from notice of rejection with coal conforming to all of the Rejection

Limits set forth in § 6.1.  If Seller

fails to replace the rejected coal within such five (5) working day period or

the replacement coal is rejected for failure to meet the Rejection Limits (per

shipment) set forth in §6.1, Buyer may purchase coal from another source in

order to replace the rejected coal. 

Seller shall reimburse Buyer for (i) any amount by which the actual

price plus transportation costs to Buyer of such coal purchased from another

source exceed the price of such coal under this Agreement plus transportation

costs to Buyer from the Delivery Point; and (ii) any and all transportation,

storage, handling, or other expenses that have been incurred by Buyer for the

rejected coal.  This remedy is in

addition to all of Buyer’s other remedies under this Agreement.

 

If Buyer fails to reject a shipment of non-conforming

coal which it had the right to reject for failure to meet any or all of the

Rejection Limits set forth in § 6.1 or because such shipment contained a

material amount of extraneous materials, then such non-conforming coal shall be

deemed accepted by Buyer; however, the quantity Seller is obligated to sell to

Buyer under the Agreement may or may not be reduced by the amount of each such

non-conforming shipment at Buyer’s sole option and the shipment shall

nevertheless be considered “rejectable” under § 6.4.  Buyer shall notify Seller no later than thirty (30) days

following Buyer’s acceptance of such rejectable coal, of Buyer’s decision to

reduce by an amount equal to the amount of rejectable coal, the Base Quantity

which Seller is obligated to sell and deliver to Buyer.  If Buyer does not notify Seller within the

thirty (30) day time period of Buyer’s decision to reduce the Base Quantity by

the amount of rejectable coal, the Base Quantity will remain as defined in §

3.1. 

 

12

 

Further, for shipments containing extraneous materials, which include,

but are not limited to, slate, rock, wood, corn husks, mining materials, metal,

steel, etc., the estimated weight of such materials shall be deducted from the

weight of that shipment.

 

§ 6.4 Suspension and Termination.

 

If the coal sold hereunder fails to meet one (1) or

more of the Guaranteed Monthly Weighted Averages set forth in § 6.1 for any two

(2) consecutive months or a total of three (3) months in a six (6) month

period, or if six (6) barge shipments in a thirty (30) day period are

rejectable by Buyer, Buyer may upon notice confirmed in writing and sent to

Seller by certified mail, suspend future shipments except shipments already

loaded into barges.  Seller shall,

within ten (10) days, provide Buyer with reasonable assurances that subsequent

monthly deliveries of coal shall meet or exceed the Guaranteed Monthly Weighted

Averages set forth in § 6.1 and that the source will exceed the rejection

limits set forth in § 6.1.  If Seller

fails to provide such assurances within said ten (10) day period, Buyer may

terminate this Agreement by giving written notice of such termination at the

end of the ten (10) day period.  A

waiver of this right for any one (1) period by Buyer shall not constitute a

waiver for subsequent periods.  If

Seller provides such reasonable assurances to Buyer, shipments hereunder shall

resume and any tonnage deficiencies resulting from suspension may be made up at

Buyer’s sole option.  Buyer shall not

unreasonably withhold its acceptance of Seller’s assurances, or delay the resumption

of shipment(s).  If Seller, after

providing such assurances, fails to meet any of the Guaranteed Monthly Weighted

Averages for any one (1) month within the next six (6) months or if three (3) 

 

13

 

barge shipments are rejectable within any one (1) month during such six

(6) month period, then Buyer may terminate this Agreement and exercise all its

other rights and remedies under applicable law and in equity for Seller’s

breach.

 

SECTION 7.         WEIGHTS,

SAMPLING AND ANALYSIS.

 

§ 7.1  Weights.  The weight of the coal delivered hereunder

shall be determined on a per shipment basis by Buyer on the basis of scale

weights at the generating station(s) unless another method is mutually agreed

upon by the parties.  Such scales shall

be duly reviewed by an appropriate testing agency and maintained in an accurate

condition.  Seller shall have the right,

at Seller’s expense and upon reasonable notice, to have the scales checked for

accuracy at any reasonable time or frequency. 

If the scales are found to be over or under the tolerance range

allowable for the scale based on industry accepted standards, either party

shall pay to the other any amounts owed due to such inaccuracy for a period not

to exceed thirty (30) days before the time any inaccuracy of scales is

determined.

 

§ 7.2 Sampling and Analysis.  The Seller has sole responsibility for

quality control of the coal and shall forward its “as loaded” quality to the

Buyer as soon as possible.  The sampling

and analysis of the coal delivered hereunder shall be performed by Buyer and

the results thereof shall be accepted and used for the quality and

characteristics of the coal delivered under this Agreement.  All analyses shall be made in Buyer’s

laboratory at Buyer’s expense in accordance with ASTM standards where

applicable, or industry-accepted standards. 

Samples for analyses 

 

14

 

shall be taken by any industry-accepted standard, mutually acceptable

to both parties, may be composited and shall be taken with a frequency and

regularity sufficient to provide reasonably accurate representative samples of

the deliveries made hereunder.  Seller

represents that it is familiar with Buyer’s sampling and analysis practices,

and finds them to be acceptable.  Buyer

shall notify Seller in writing of any significant changes in Buyer’s sampling

and analysis practices.  Any such

changes in Buyer’s sampling and analysis practices shall, except for ASTM or

industry accepted changes in practices, provide for no less accuracy than the

sampling and analysis practices existing at the time of the execution of this

Agreement, unless the Parties otherwise mutually agree.

 

Each sample taken by Buyer shall be divided into four

(4) parts and put into airtight containers, properly labeled and sealed.  One (1) part shall be used for analysis by

Buyer; one (1) part shall be used by Buyer as a check sample, if Buyer in its

sole judgment determines it is necessary; one (1) part shall be retained by

Buyer until the twenty-fifth (25th) of the month following the month

of unloading (the “Disposal Date”) and shall be delivered to Seller for

analysis if Seller so requests before the Disposal Date; and one (1) part

(“Referee Sample”) shall be retained by Buyer until the Disposal Date.  Seller shall be given copies of all analyses

made by Buyer by the twelfth (12th) business day of the month

following the month of unloading. 

Seller, on reasonable notice to Buyer shall have the right to have a

representative present to observe the sampling and analyses performed by

Buyer.  Unless Seller requests a Referee

Sample analysis before the Disposal Date, Buyer’s analysis shall be used to

determine the quality of the coal 

 

15

 

delivered hereunder.  The

Monthly Weighted Averages shall be determined by utilizing the individual

shipment analyses.

 

If any dispute arises before the Disposal Date, the

Referee Sample retained by Buyer shall be submitted for analysis to an

independent commercial testing laboratory (“Independent Lab”) mutually chosen

by Buyer and Seller.  For each coal

quality specification in question, a dispute shall be deemed not to exist and

Buyer’s analysis shall prevail and the analysis of the Independent Lab shall be

disregarded if the analysis of the Independent Lab differs from the analysis of

Buyer by an amount equal to or less than:

 

(i)            0.50%

moisture

(ii)           0.50%

ash on a dry basis

(iii)          100

Btu/lb. on a dry basis

(iv)          0.10%

sulfur on a dry basis.

 

For each coal quality specification in question, if

the analysis of the Independent Lab differs from the analysis of Buyer by an

amount more than the amounts listed above, then the analysis of the Independent

Lab shall prevail and Buyer’s analysis shall be disregarded.  The cost of the analysis made by the

Independent Lab shall be borne by Seller to the extent that Buyer’s analysis

prevails and by Buyer to the extent that the analysis of the Independent Lab

prevails.

 

SECTION 8.         PRICE.

 

§  8.1 Base

Price.  The base price (“Base

Price”) of the coal to be sold hereunder will be firm and will be determined by

the year in which the coal is delivered as defined in § 5 in accordance with

the following schedule:

 

16

 

	

   

  	

   

  	

  BASE PRICE

  ($ PER MMBTU)

  	

   

  
	

  YEAR

  	

   

  	

  Patriot

  	

   

  	

  Camp

  	

   

  	

  Gibraltar

  	

   

  
	

  2003

  	

   

  	

  $

  	

  0.88

  	

   

  	

  $

  	

  0.8774

  	

   

  	

  $

  	

  0.8539

  	

   

  
	

  2004

  	

   

  	

  $

  	

  0.89

  	

   

  	

  $

  	

  0.8874

  	

   

  	

  $

  	

  0.8639

  	

   

  
	

  2005

  	

   

  	

  $

  	

  0.90

  	

   

  	

  $

  	

  0.8974

  	

   

  	

  $

  	

  0.8739

  	

   

  

 

§8.2         Quality

Price Discounts.

 

(a)           The

Base Price is based on coal meeting or exceeding the Guaranteed Monthly

Weighted Average specifications as set forth in § 6.1.  Quality price discounts shall be applied for

each specification each month to reflect failures to meet the Guaranteed

Monthly Weighted Averages set forth in § 6.1, as determined pursuant to § 7.2,

subject to the provisions set forth below. 

The discount values used are as follows:

 

	

  DISCOUNT

  VALUES

  	

   

  
	

   

  	

   

  	

  $ /MMBTU

  	

   

  
	

  BTU/LB. 

  	

   

  	

  0.2604

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  $ /LB./MMBTU

  	

   

  
	

  SULFUR

  	

   

  	

  0.1232

  	

   

  
	

  ASH

  	

   

  	

  0.0083

  	

   

  
	

  MOISTURE

  	

   

  	

  0.0016

  	

   

  
					

 

(b)           Notwithstanding

the foregoing, for each specification each month, there shall be no discount if

the actual Monthly Weighted Average meets the applicable Discount Point set

forth below.  However, if the actual

Monthly Weighted Average fails to meet such applicable Discount Point, then the

discount shall apply and shall be calculated on the basis of the difference 

 

17

 

 

between the actual Monthly Weighted Average and the Guaranteed Monthly

Weighted Average pursuant to the methodology shown in Exhibit B attached hereto.

 

	

   

  	

   

  	

  Guaranteed

  Monthly

  Weighted Average

  	

   

  	

  Discount

  Point

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  BTU/LB

  	

   

  	

  min.

  	

   

  	

  10,850

  	

   

  	

  10,650

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  LB/MMBTU:

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  SULFUR

  	

   

  	

  max.

  	

   

  	

  3.00

  	

   

  	

  3.05

  	

   

  
	

  ASH

  	

   

  	

  max.

  	

   

  	

  10.80

  	

   

  	

  12.20

  	

   

  
	

  MOISTURE

  	

   

  	

  max.

  	

   

  	

  12.90

  	

   

  	

  14.46

  	

   

  

 

For example, if the actual Monthly Weighted Average of

sulfur equals 3.10 lb/MMBTU, then the applicable discount would be (3.1lb –

3.00 lb) X $.1232/lb/MMBTU = $.0123/MMBTU.

 

§ 8.3 Payment Calculation.  Exhibit B attached hereto shows the

methodology for calculating the coal payment and quality price discounts for

the month Seller’s coal was unloaded by Buyer. 

If there are any such discounts, Buyer shall apply credit to amounts

owed Seller for the month the coal was unloaded.

 

§ 8.4 New Impositions.  The above Base Price shall be subject to

adjustment only in the event that new applicable Federal or state statues,

regulations, or other governmental impositions on the coal to be supplied

hereunder, including but not limited to tax increases or decreases, occur after

July 1, 2002, which cause Seller’s cost for providing coal to Buyer under this

Agreement to increase or decrease by more than $.05 per ton.  Seller shall promptly notify Buyer 

 

18

 

of any such changes and supply sufficient documentation for Buyer to

verify any such change.  Either Buyer or

Seller may request a Base Price adjustment, which shall be comprised of no more

than the reasonable costs directly associated with the effect of such change on

the coal to be supplied hereunder.  If

the non-requesting party agrees to the requested price adjustment, such

adjustment shall be made effective on the first day of the calendar month

following the effective date of any change, (except when such change is

effective on the first day of the month in which case the adjustment shall be

made as of such date).  If the

non-requesting party rejects the request of the requesting party for a Base

Price adjustment, the requesting party, at its option, may terminate the

contract without liability due to such termination for either party.

 

SECTION 9.         INVOICES,

BILLING AND PAYMENT.

 

§ 9.1 Invoicing Address.  Invoices will be sent to Buyer at the

following address:

 

Louisville Gas and

Electric Company

P.O. Box 32010

Louisville, KY  40232

Attention: Manager

LG&E/KU Fuels

 

§ 9.2 Invoice Procedures for Coal Shipments.  Seller shall invoice Buyer at the Base

Price, minus any quality price discounts, for all coal unloaded in a calendar

month by the fifteenth (15th) of the following month.  Seller’s invoice shall be based upon the

monthly analysis data set forth in § 7.2.

 

19

 

§ 9.3 Payment Procedures for Coal Shipments.

For all coal unloaded at the Buyer’s generating station(s) between the first

(1st) and fifteenth (15th) days of any calendar month.  Buyer shall make a preliminary payment of

seventy-five percent (75%) of the amount owed for the coal (based on the

assumption that the coal will meet all guaranteed monthly quality parameters)

by the twenty-fifth (25th) day of such month of unloading, except that, if the

twenty-fifth (25th) is not a regular work day, payment shall be made on the

next regular work day.  For all coal

unloaded at the Buyer’s generating station(s) between the sixteenth (16th) and

the last day of any calendar month, Buyer shall make a preliminary payment of

seventy-five percent (75%) of the amount owed for the coal (based on the

assumption that the coal will meet all of the guaranteed monthly quality

parameters) by the tenth (10th) day of the month following the month of

unloading, except that, if the tenth (10th) is not a regular work

day, payment shall be made on the next regular work day.

 

All preliminary payments shall be calculated based on

the then-current price on a dollar per ton basis as calculated by the

guaranteed monthly weighted average BTU/lb. and the then-current Base Price in

cents per MMBTU and shall be equal to seventy-five percent (75%) of such

calculated amount.

 

A reconciliation of amounts paid and amounts owed

shall occur by the twenty-fifth (25th) day of the month following the month of

unloading.  (For example, Buyer will

make one preliminary payment by September 25 for all coal unloaded September 1

through 15, and another preliminary payment by October 10 for seventy-five

percent (75%) of coal unloaded September 

 

20

 

16 through 30.  A reconciliation

will occur by October 25 for all unloadings made in September.)  The reconciliation shall be made as follows:

Seller shall invoice Buyer for all coal unloaded during the preceding month on

or before the fifteenth (15th) day of the month following the month

of unloading.  The amount due for all

coal (based on the Base Price minus any Quality Price Discounts) delivered and

unloaded and accepted by Buyer during any calendar month shall be calculated

and compared to the sum of the preliminary payments made for coal delivered and

unloaded and accepted during such month. 

The difference shall be paid by or paid to Seller, as applicable, by the

twenty-fifth (25th) day of the month following the month of delivery, except,

that, if the twenty-fifth (25th) is not a regular work day, payment shall be

made in the next regular work day.  Buyer

shall electronically transfer all payments to Seller’s account at:

 

Peabody COALSALES,

St Louis

PNC Bank of N.A.

ABA # 043000096

Account #

1008971287

 

§ 9.4  Withholding.  Buyer shall have the right to withhold from

payment of any billing or billings (i) any sums which it is not able in good faith

to verify or which it otherwise in good faith disputes, (ii) any damages

resulting from or likely to result from any breach of this Agreement by Seller

or Producer, and (iii) any amounts owed to Buyer from Seller.  Buyer shall notify Seller promptly in

writing of any such issue, stating the basis of its claim and the amount it

intends to withhold.

 

21

 

Payment by Buyer, whether knowing or inadvertent, of

any amount in dispute shall not be deemed a waiver of any claims or rights by

Buyer with respect to any disputed amounts or payments made.

 

SECTION 10.       FORCE

MAJEURE.

 

§ 10.1 General Force Majeure.  If either party hereto is delayed in or

prevented from performing any of its obligations or from utilizing the coal

sold under this Agreement due to acts of God, war, riots, civil insurrection,

acts of the public enemy, strikes, lockouts, fires, floods or earthquakes,

which are beyond the reasonable control and without the fault or negligence of

the party affected thereby, then the obligations of both parties hereto shall

be suspended to the extent made necessary by such event; provided that the

affected party gives written notice to the other party as early as practicable

of the nature and probable duration of the force majeure event.  The party declaring force majeure shall

exercise due diligence to avoid and shorten the force majeure event and will

keep the other party advised as to the continuance of the force majeure

event.  During any period in which Seller’s

ability to perform hereunder is affected by Producer’s force majeure event,

Seller shall require Producer to not deliver any coal to any other buyers to

whom Producer’s ability to supply is similarly affected by such force majeure

event unless contractually committed to do so at the beginning of the force

majeure event; and further shall deliver to Buyer under this Agreement at least

a pro rata portion (on a per ton basis) of its total contractual commitments to

all its buyers to whom Seller’s ability to supply is similarly affected by such

 

22

 

force majeure event in place at the beginning of the force majeure

event.  An event which affects the

Producer’s ability to produce or obtain coal from a mine other than the Coal

Property will not be considered a force majeure event hereunder.

 

Tonnage deficiencies resulting from a force majeure

event shall be made up only upon mutual agreement of Buyer and Seller, on the

basis of a mutually agreeable shipping schedule.

 

§ 10.2 Environmental Law Force Majeure.  The parties recognize that, during the

continuance of this Agreement, legislative or regulatory bodies or the courts

may adopt or reinterpret environmental laws, regulations, policies and/or

restrictions which will make it impossible or commercially impracticable for

Buyer to utilize this or like kind and quality coal which thereafter would be

delivered hereunder.  If as a result of

the adoption or reinterpretation of such laws, regulations, policies, or restrictions,

or change in the interpretation or enforcement thereof, Buyer decides that it

will be impossible or commercially impracticable (uneconomical) for Buyer to

utilize such coal, Buyer shall so notify Seller, and thereupon Buyer and Seller

and Producer shall promptly consider whether corrective actions can be taken in

the mining and preparation of the coal at Seller’s mine and/or in the handling

and utilization of the coal at Buyer’s generating station; and if in Buyer’s

sole judgment such actions will not, without unreasonable expense to Buyer,

make it possible and commercially practicable for Buyer to so utilize coal

which thereafter would be delivered hereunder without violating any applicable

law, regulation, policy or order, Buyer shall have the right, upon the later of

sixty (60) days notice to 

 

23

 

Seller or the effective date of such restriction, to terminate this

Agreement without further obligation hereunder on the part of either party.

 

SECTION 11.  CHANGES.  Either party may, at any time by written

notice pursuant to § 12 of this Agreement, propose changes within the general

scope of this Agreement in any one or more of the following: quality of coal or

coal specifications, quantity of coal, method or time of shipments, place of

delivery (including transfer of title and risk of loss), method(s) of weighing,

sampling or analysis or any such other provision as may affect the suitability

and amount of coal to be delivered to Buyer’s generating stations. Such

proposed changes will not become binding unless and until the parties agree

thereto and this Agreement is amended in writing. If any such changes makes

necessary or appropriate an increase or decrease in the then current price per

ton of coal, or in any other provision of this Agreement, an equitable

adjustment shall be made in: price, whether current or future or both, and/or

in such other provisions of this Agreement as are affected directly or

indirectly by such change, and the Agreement shall thereupon be modified in

writing accordingly.

 

Any claim by the Seller for adjustment under this § 11

shall be asserted within thirty (30) days after the date of Seller’s receipt of

the written notice of change, it being understood, however that Seller shall

not be obligated to proceed under this Agreement as changed until an equitable

adjustment has been agreed upon.  The

parties agree to negotiate promptly and in good faith to agree upon the nature

and extent of any equitable adjustment.

 

24

 

SECTION 12.       NOTICES.

 

§ 12.1 Form and Place of Notice.  Any official notice, request for approval or

other document required to be given under this Agreement shall be in writing,

unless otherwise provided herein, and shall be deemed to have been sufficiently

given when delivered in person, transmitted by facsimile or other electronic

media, delivered to an established mail service for same day or overnight

delivery, or dispatched in the United States mail, postage prepaid, for mailing

by first class, certified, or registered mail, return receipt requested, and

addressed as follows:

 

	

  If to Buyer:

  	

   

  	

  Louisville Gas and Electric Company

  	

   

  
	

   

  	

   

  	

  P.O. Box 32010

  	

   

  
	

   

  	

   

  	

  Louisville, Kentucky 40232

  	

   

  
	

   

  	

   

  	

  Attn.: Director Corporate Fuels and By-Products

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  If to Seller:

  	

   

  	

  Peabody COALSALES Company

  	

   

  
	

   

  	

   

  	

  701 Market Street, Suite 930

  	

   

  
	

   

  	

   

  	

  St. Louis, Missouri 63101

  	

   

  
	

   

  	

   

  	

  Attn: Vice-President, Sales

  	

   

  

 

§ 12.2 Change of Person or Address.  Either party may change the person or

address specified above upon giving written notice to the other party of such

change.

 

§ 12.3 Electronic Data Transmittal.  Seller hereby agrees, at Seller’s cost, to

electronically transmit shipping notices and/or other data to Buyer in a format

acceptable to and established by Buyer upon Buyer’s request.  Buyer shall provide Seller with the

appropriate format and will inform Seller as to the electronic data

requirements at the appropriate time.

 

25

 

SECTION 13.       CREDIT

RATING.  If the

credit rating of either Buyer (if Buyer has a public rating) or Buyer’s

affiliates that have public ratings falls below investment grade (BBB - as

defined by Standard & Poor’s or the equivalent as defined by other public

ratings agencies), Buyer shall, within thirty (30) days after Seller’s written

request, provide Seller with a mutually agreed upon form of credit enhancement

(e.g., letter of credit, guaranty from an investment grade entity, etc.).  Until the mutually acceptable assurances of

good credit are received, Seller has the right to require payment in cash at

the time of delivery. Such mutually acceptable assurances of good credit shall

not be more than the average monthly outstanding net balance.

 

SECTION 14.       RIGHT

TO RESELL.  Buyer

shall have the unqualified right to resell all or any of the coal purchased

under this Agreement.

 

SECTION 15.       INDEMNITY

AND INSURANCE.

§ 15.1 Indemnity.  Seller agrees to indemnify and save harmless Buyer, its officers,

directors, employees and representatives from any responsibility and liability

for any and all claims, demands, losses, legal actions for personal injuries,

property damage and pollution (including reasonable inside and outside

attorney’s fees) (i) relating to the trucks, barges or railcars provided by

Buyer or Buyer’s contractor while such trucks, barges or railcars are in the 

 

26

 

care and custody of the loading dock or loading facility, (ii) due to

any failure of Seller or Producer to comply with laws, regulations or

ordinances, or (iii) due to the acts or omissions of Seller or Producer in the

performance of this Agreement.

 

Buyer agrees to indemnify and save harmless Seller,

its officers, directors, employees and representatives from any responsibility

and liability for any and all claims, demands, losses, legal actions for

personal injuries, property damage and pollution (including reasonable inside

and outside attorney’s fees) (i) due to any failure of Buyer to comply with

laws, regulations or ordinances, or (ii) due to the negligence of any

representatives, agents or employees of Buyer (collectively, “Visitors”) who

inspect the Coal Property; or (iii) due to the acts or omissions of Buyer in

the performance of this Agreement.

 

§ 15.2 Insurance.  Seller shall require Producer to carry insurance coverage with

minimum limits as follows:

 

(1)           Commercial

General Liability, including Completed Operations and Contractual Liability,

$5,000,000 single limit liability.

 

(2)           Automobile

General Liability, $1,000,000 single limit liability.

 

(3)           In

addition, Seller shall require Producer to carry excess liability insurance

covering the foregoing perils in the amount of $4,000,000 for any one

occurrence.

 

(4)           Workers’

Compensation and Employer’s Liability with statutory limits.

 

If any of the above policies are written on a claims

made basis, then the retroactive date of the policy or policies will be no

later than the effective date of this Agreement.  Certificates of 

 

27

 

Insurance satisfactory in form to the Buyer and signed by the

Producer’s insurer shall be supplied by the Seller to the Buyer evidencing that

the above insurance is in force and that not less than thirty (30) calendar

days written notice will be given to the Buyer prior to any cancellation or

material reduction in coverage under the policies.  The Seller shall cause the Producer’s insurer to waive all

subrogation rights against the Buyer respecting all losses or claims arising

from performance hereunder.  Evidence of

such waiver satisfactory in form and substance to the Buyer shall be exhibited

in the Certificate of Insurance mentioned above.  Seller’s and Producer’s liability shall not be limited to their

insurance coverage.

 

SECTION 16.       TERMINATION

FOR DEFAULT.

 

Subject to § 6.4, if either party hereto commits a

material breach of any of its obligations under this Agreement at any time,

including, but not limited to, a material breach of a representation and

warranty set forth herein, then the other party has the right to give written

notice describing such breach and stating its intention to terminate this

Agreement no sooner than thirty (30) days after the date of the notice (the

“notice period”).  If such material

breach is curable and the breaching party cures such material breach within the

notice period, then the Agreement shall not be terminated due to such material

breach.  If such material breach is not

curable or the breaching party fails to cure such material breach within the

notice period, then this Agreement shall terminate at the end of the notice

period in addition to all the other rights and remedies available to the

aggrieved party under this Agreement and at law and in equity.

 

28

 

SECTION 17.       TAXES,

DUTIES AND FEES.

 

Seller shall pay when due, and the price set forth in

§ 8 of this Agreement shall be inclusive of, all taxes, duties, fees and other

assessments of whatever nature imposed by governmental authorities with respect

to the transactions contemplated under this Agreement.

 

SECTION 18.       DOCUMENTATION

AND RIGHT OF AUDIT.

 

Seller and Producer shall maintain all records and

accounts pertaining to payments, quantities, quality analyses, and source for

all coal supplied under this Agreement for a period lasting through the term of

this Agreement and for two (2) years thereafter.  Buyer shall have the right at no additional expense to Buyer to

audit, copy and inspect such records and accounts at any reasonable time upon

reasonable notice during the term of this Agreement and for two (2) years

thereafter and Seller and Producer shall cooperate at no additional cost to

Buyer.

 

SECTION 19.       EQUAL

EMPLOYMENT OPPORTUNITY. 

To the extent applicable, Seller shall comply with all of the following

provisions which are incorporated herein by reference: Equal Opportunity

regulations set forth in 41 CRF § 60-1.4(a) and (c) prohibiting discrimination

against any employee or applicant for employment because of race, color,

religion, sex, or national origin; Vietnam Era Veterans Readjustment Assistance

Act regulations set forth in 41 CRF § 50-250.4 relating to the employment and

advancement of disabled veterans 

 

29

 

and veterans of the Vietnam Era; Rehabilitation Act regulations set

forth in 41 CRF § 60-741.4 relating to the employment and advancement of

qualified disabled employees and applicants for employment; the clause known as

“Utilization of Small Business Concerns and Small Business Concerns Owned and

Controlled by Socially and Economically Disadvantaged Individuals” set forth in

15 USC § 637(d)(3); and subcontracting plan requirements set forth in 15 USC §

637(d).

 

SECTION 20.       COAL

PROPERTY INSPECTIONS.  Buyer

and its representatives, and others as may be required by applicable laws,

ordinances and regulations shall have the right at all reasonable times and at

their own expense to inspect the Coal Property, including the loading

facilities, scales, sampling system(s), wash plant facilities, and mining

equipment for conformance with this Agreement. 

Seller and Producer shall cooperate with such inspections at no

additional cost to Buyer.  Seller shall

cause the Producer to undertake reasonable care and precautions to prevent

personal injuries to any representatives, agents or employees of Buyer

(collectively, “Visitors”) who inspect the Coal Property.  Any such Visitors shall make every

reasonable effort to comply with Seller’s regulations and rules regarding conduct

on the work site, made known to Visitors prior to entry, as well as safety

measures mandated by state or federal rules, regulations and laws.  Buyer understands that underground mines and

related facilities are inherently high-risk environments.  Buyer’s failure to inspect the Coal Property

or to object to defects therein at the time Buyer inspects the same shall not

relieve 

 

30

 

Seller or Producer of any of their responsibilities nor be deemed to be

a waiver of any of Buyer’s rights hereunder.

 

SECTION 21.       MISCELLANEOUS.

 

§ 21.1 Applicable Law.  This Agreement shall be construed in

accordance with the laws of the Commonwealth of Kentucky, and all questions of

performance of obligations hereunder shall be determined in accordance with

such laws.

 

§ 21.2 Headings.  The paragraph headings appearing in this Agreement are for

convenience only and shall not affect the meaning or interpretation of this

Agreement.

 

§ 21.3 Waiver. 

The failure of either party to insist on strict performance of any provision

of this Agreement, or to take advantage of any rights hereunder, shall not be

construed as a waiver of such provision or right.

 

§ 21.4 Remedies Cumulative.  Remedies provided under this Agreement shall

be cumulative and in addition to other remedies provided under this Agreement

or by law or in equity.

 

§ 21.5 Severability.  If any provision of this Agreement is found contrary to law or

unenforceable by any court of law, the remaining provisions shall be severable

and enforceable in accordance with their terms, unless such unlawful or

unenforceable provision is material to the transactions contemplated hereby, in

which case the parties shall negotiate in good faith a substitute provision.

 

31

 

§ 21.6 Binding Effect.  This Agreement shall bind and inure to the

benefit of the parties and their successors and assigns.

 

§ 21.7 Assignment.

 

A.            Seller shall not, without Buyer’s

prior written consent, which shall not be unreasonably withheld, make any

assignment or transfer of this Agreement, by operation of law or otherwise,

including without limitation any assignment, encumbrance or transfer as

security for any obligation, and shall not assign or transfer the performance

of or right or duty to perform any obligation of Seller hereunder; provided,

however, that Seller may assign the right to receive payments for coal directly

from Buyer to a lender as part of any accounts receivable financing or other

revolving credit arrangement which Seller may have now or at any time during

the term of this Agreement.

 

B.            Buyer shall not, without Seller’s

prior written consent, which may not be unreasonably withheld, assign this

Agreement or any right or duty to perform any obligation of Buyer hereunder;

except that, without such consent, Buyer may assign this Agreement in

connection with a transfer by Buyer of all or a part interest in the generating

station comprising the Delivery Point, or as part of a merger or consolidation

involving Buyer.

 

C.            In the event of an assignment or

transfer contrary to the provisions of this section, the non-assigning party

may terminate this Agreement immediately.

 

§ 21.8      Entire Agreement.  This Agreement contains the entire agreement

between the parties as to the subject matter hereof, and there are no

representations, understandings or 

 

32

 

agreements, oral or written, which are not included herein.

 

§ 21.9 Amendments.  Except as otherwise provided herein, this Agreement may not be

amended, supplemented or otherwise modified except by written instrument signed

by both parties hereto.

 

IN WITNESS WHEREOF, the parties hereto have caused

this Agreement to be executed as of the date first above written.

 

	

  LOUISVILLE GAS AND ELECTRIC COMPANY

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  PEABODY

  COALSALES COMPANY

  
	

   

  	

   

  	

   

  	

   

  
	

  By:

  	

   

  	

   

  	

  By:

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  Title:

  	

  SVP –

  Energy Services

  	

   

  	

  Title:

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  Date:

  	

   

  	

   

  	

  Date:

  	

   

  	

   

  
								

 

33

 

EXHIBIT A

 

PRODUCER’S CERTIFICATE

 

The undersigned, PATRIOT COAL

COMPANY,  L.P. a Delaware limited partnership and OHIO COUNTY

COAL COMPANY, a Kentucky corporation, and PEABODY COAL COMPANY, a

Delaware corporation (herein collectively “Producer”), by and through their

duly authorized officers, as an inducement to LOUISVILLE GAS AND ELECTRIC COMPANY

(“LG&E”), a Kentucky corporation (“Buyer”) and PEABODY

COALSALES COMPANY, a Delaware corporation (herein “Agent”), to enter

into a Coal Supply Agreement (the “Coal Supply Agreement”) between LG&E and

Agent, and as a further inducement to Agent to enter into a Coal Marketing and

Sales Agreement with Producer (“Coal Marketing and Sales Agreement”), hereby

certifies, warrants and represents to LG&E and Agent as follows:

 

1.             Producer is a duly organized, validly existing limited

partnership or corporation, as the case may be, in good standing under the laws

of the Commonwealth of Kentucky, and fully qualified to do business under the

laws of the Commonwealth of Kentucky. 

Producer has all requisite power and authority to execute this

instrument and to enter into all documents required in connection with and

including the proposed Coal Marketing and Sales Agreement between Producer and

Agent.

 

2.             By the execution hereof, the undersigned certify that,

as the officers of Producer, they have all the necessary power and authority to

execute and deliver this Producer’s Certificate, for and on behalf of Producer.

 

34

 

3.             This Certificate is given by Producer to induce LG&E

and Agent to each execute and deliver between themselves that certain proposed

Coal Supply Agreement, with the knowledge that LG&E and Agent will each

rely upon the truth of the statements made herein.

 

4.             Each Producer represents and warrants that the portion

of the “Coal Property” described in Exhibit “A” over which that Producer has

control (the “Coal Property”) contains economically recoverable coal of a

quality and in quantities which will be sufficient to satisfy all the quantity

and quality requirements of the Coal Supply Agreement and the Coal Marketing

and Sales Agreement which requirements are set forth on Exhibit “B” attached

hereto.  Producer further agrees and

warrants that it will have at the Coal Property adequate machinery, equipment

and other facilities to produce, prepare and deliver coal in the quantity and

at the quality specified in Exhibit “B”. 

Producer further represents and warrants and agrees to operate and

maintain such machinery, equipment, and facilities in accordance with good

mining practices so as to efficiently and economically produce, prepare, and

deliver such coal.  Producer agrees that

it shall operate and maintain the machinery, equipment and/or facilities at its

sole expense, including all required permits and licenses.  Producer further dedicates to the Coal

Supply Agreement and the Coal Marketing and Sales Agreement sufficient reserves

of coal meeting the quality specifications specified in Exhibit “B” and lying

on or in the Coal Property so as to fulfill the quantity requirements of the

proposed Coal Marketing and Sales Agreement.

 

5.             Producer agrees and warrants that it will not, without

obtaining the express prior written consent of both LG&E and of Agent, use

or sell coal from the Coal Property in a way that 

 

35

 

will reduce the economically recoverable balance of coal in the Coal

Property to an amount less than that required to be supplied by Producer as

specified in Exhibit “B”.

 

6.             Producer agrees and warrants that it shall require of

the loading dock operator that the barges and towboats provided by LG&E or

LG&E’s barging contractor be provided convenient and safe berth free of

wharfage, dockage and port charges; that while the barges are in the care,

custody and control of the loading dock, all U.S. Coast Guard regulations and

other applicable laws, ordinances, rulings and regulations shall be complied

with, including adequate mooring and display of warning lights; and any water

in the cargo boxes of the barges be pumped out by the loading dock operator

prior to loading; that the loading operations be performed in a workmanlike

manner and in accordance with the reasonable loading requirements of LG&E

and LG&E’s barging contractor; that the loading dock operator carry landing

owner’s or wharfinger’s insurance with basic coverage of not less than $300,000

and total of basic coverage and excess liability coverage of not less than

$1,000,000 and provide evidence thereof to LG&E and Agent in the form of a

certificate of insurance from the insurance carrier or an acceptable

certificate of self-insurance with requirement for notification of LG&E and

Agent in the event of termination of the insurance.

 

7.             Producer agrees that it will replace rejected coal

within five (5) working days with coal conforming to the rejection limits set

forth in the proposed Coal Supply Agreement and the Coal Marketing and Sales

Agreement between Producer and Agent, which rejection limits Producer

understands and acknowledges are the same rejection limits as provided in the

proposed 

 

36

 

Coal Supply Agreement between LG&E and Agent, and that should

Producer either fail to replace the rejected coal within such five (5) working

day period or the replacement coal is rightfully rejected (where such rejection

is not based upon the BTU/LB minimum or the percentage of moisture maximum

being exceeded as a result of weather conditions), and another source has

replaced such rejected coal, Producer agrees to and shall reimburse LG&E

for any amount that the total delivered cost to LG&E of such coal purchased

from another source exceeds the then current delivered cost of coal sold by

Producer under the proposed Coal Marketing and Sales Agreement between Agent

and LG&E.  Further, Producer agrees

to be responsible to pay or reimburse Agent or LG&E as applicable, for any

and all freight or transportation expenses that have been incurred for

rightfully rejected coal.

 

8.             Producer agrees that if it shall receive a notice in

writing that the coal sold fails to meet one or more of the monthly average

guarantees as set forth in the Coal Supply Agreement between Agent and

LG&E, then Producer shall within ten (10) days provide LG&E with

reasonable assurances that subsequent monthly deliveries of coal shall meet or

exceed such monthly average guarantees

 

9.             Producer agrees to and shall indemnify and save harmless

LG&E, and its respective officers, directors, employees, and

representatives from any responsibility and liability for any and all claims,

demands, losses, legal actions for personal injuries, property damage and

pollution (including reasonable attorney’s fees) relating to the barges

provided by LG&E or LG&E’s contractor while such barges are in the care

and custody of the loading dock, or for any 

 

37

 

failure of Producer to comply with laws, regulations or ordinances, or

for any matter which arises out of the acts or omissions of Producer in the

performance of its obligations hereunder including, but not limited to, the proper

delivery of coal by Producer to Buyer.

 

10.           Producer agrees and warrants to and

shall carry insurance coverage with minimum limits as follows:

 

A.            Commercial general liability, $1,000,000, single limit

liability.

 

B.            Automobile general liability, $1,000,000 single limit

liability.

 

C.            In addition, Producer shall carry excess liability

insurance covering the foregoing perils in the amount of $4,000,000 for any one

occurrence.

 

D.            Kentucky Worker’s Compensation and Employer’s Liability

with statutory limits.

 

E.             If any of the above policies are written on a claims

made basis, then the retroactive date of the policy or policies will be no

later than the effective date of Producer’s proposed Coal Marketing and Sales

Agreement with Agent.

 

11.           Producer agrees that it shall not

assign the proposed Coal Marketing and Sales Agreement between it and Agent or

any rights or obligations thereunder without the prior written consent of Agent

and Buyer which consent shall not be unreasonably withheld.

 

IN TESTIMONY WHEREOF, the

undersigned officers of Producer have executed and delivered the foregoing

Producer’s Certificate on behalf of Producer.

 

38

 

	

  ATTEST:

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  PATRIOT COAL COMPANY,

  L.P.

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  By:

  	

   

  	

   

  
	

   

  	

   

  	

  Its:

  	

   

  	

   

  
	

   

  	

   

  	

  Date:

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  OHIO COUNTY COAL

  COMPANY

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  By:

  	

   

  	

   

  
	

   

  	

   

  	

  Its:

  	

   

  	

   

  
	

   

  	

   

  	

  Date:

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  PEABODY COAL COMPANY

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  By:

  	

   

  	

   

  
	

   

  	

   

  	

  Its:

  	

   

  	

   

  
	

   

  	

   

  	

  Date:

  	

   

  	

   

  

 

39

 

EXHIBIT A TO PRODUCER’S CERTIFICATE

 

“Coal Property” means the following seams and mines

owned by Producer:

 

Patriot Coal Company’s Patriot Complex, located in

Henderson County, Kentucky; Peabody Coal Company’s Camp Complex located in

Union County, Kentucky and Gibraltar Mine located in Muhlenberg County,

Kentucky.

 

40

 

 

EXHIBIT B TO PRODUCER’S CERTIFICATE

 

Quality Requirement

 

The quality required by the Coal Marketing and Sales

Agreement is as follows:

 

	

  Specifications

  	

   

  	

  Guaranteed

  Monthly

  Weighted Average

  	

   

  	

  Rejection

  Limits

  (per shipment)

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  BTU/LB.

  	

   

  	

  min. 10,850

  	

   

  	

  < 10,600

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Ash

  	

   

  	

  max 10.80 lbs./MMBTU

  	

   

  	

  > 12.50 lbs./MMBTU

  	

   

  
	

  Moisture

  	

   

  	

  max 12.90 lbs./MMBTU

  	

   

  	

  > 15.00 lbs./MMBTU

  	

   

  
	

  Sulfur

  	

   

  	

  max.  3.00 lbs./MMBTU

  	

   

  	

  > 3.40 lbs./MMBTU

  	

   

  
	

  Sulfur

  	

   

  	

  min. 2.75 lbs./MMBTU

  	

   

  	

  < 2.55 lbs./MMBTU

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  All Qualities:

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Chlorine

  	

   

  	

  max. 0.05 lbs./MMBTU

  	

   

  	

  > 0.06 lbs./MMBTU

  	

   

  
	

  Fluorine

  	

   

  	

  max. 0.01 lbs./MMBTU

  	

   

  	

  > 0.015 lbs./MMBTU

  	

   

  
	

  Nitrogen

  	

   

  	

  max. 1.35 lbs./MMBTU

  	

   

  	

  > 1.45 lbs./MMBTU

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  SIZE (3” x 0”):

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Top size

  (inches)*

  	

   

  	

  max.  3”x 0”

  	

   

  	

  >  3”x 0”

  	

   

  
	

  Fines (% by wgt)

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  passing 1/4”

  screen

  	

   

  	

  max. 50%

  	

   

  	

  >  55

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  % BY WEIGHT:

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  VOLATILE

  	

   

  	

  max. 31

  	

   

  	

  > 29

  	

   

  
	

  FIXED CARBON

  	

   

  	

  min. 38

  	

   

  	

  < 30

  	

   

  
	

  GRINDABILITY

  (HGI)

  	

   

  	

  min. 55

  	

   

  	

  < 50

  	

   

  
	

  BASE ACID RATIO

  (B/A)

  	

   

  	

         .60

  	

   

  	

  > .90

  	

   

  
	

  SLAGGING FACTOR

  	

   

  	

         2.0

  	

   

  	

     2.5

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  ASH FUSION

  TEMPERATURE (°F) (ASTM D1857)

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  REDUCING

  ATMOSPHERE

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Initial

  Deformation

  	

   

  	

  min. 1940

  	

   

  	

  min. 1900

  	

   

  
	

  Softening (H=W)

  	

   

  	

  min. 2035

  	

   

  	

  min. 1975

  	

   

  
	

  Softening

  (H=1/2W)

  	

   

  	

  min. 2085

  	

   

  	

  min. 2000

  	

   

  
	

  Fluid

  	

   

  	

  min. 2190

  	

   

  	

  min. 2100

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  OXIDIZING

  ATMOSPHERE

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Initial

  Deformation

  	

   

  	

  min. 2300

  	

   

  	

  min. 2200

  	

   

  
	

  Softening (H=W)

  	

   

  	

  min. 2330

  	

   

  	

  min. 2280

  	

   

  
	

  Softening

  (H=1/2W)

  	

   

  	

  min. 2425

  	

   

  	

  min. 2300

  	

   

  
	

  Fluid

  	

   

  	

  min. 2490

  	

   

  	

  min. 2375

  	

   

  

 

41

 

* All the coal will be of such size that it will pass

through a screen having circular perforations three (3) inches in diameter, but

shall not contain more than forty percent (40%) by weight of coal that will

pass through a screen having circular perforations one-quarter (1/4) of an inch

in diameter.

 

**           Slagging

Factor (Rs)=(B/A) x (Percent Sulfur by WeightDry)

 

***         Fouling

Factor (Rf)=(B/A) x (Percent Na20 by WeightDry)

 

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

 

	

  BASE ACID RATIO (B/A) =

  	

   

  	

   

  	

  (Fe203  + 

  Ca0  +  Mg0 

  +  Na20  + 

  K20)

  	

   

  
	

   

  	

   

  	

   

  	

  (Si02  + 

  A1203 

  +  T102)

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Note:As used herein:

  	

   

  	

  >

  	

  means greater than;

  	

   

  
	

   

  	

   

  	

  <

  	

  means less than.

  	

   

  

 

Quantity Requirement

 

The quantity required by the Coal Marketing and Sales

Agreement is as follows:

 

	

  QUANTITY

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  Year

  	

   

  	

  Tonnage

  	

   

  
	

  2003

  	

   

  	

  1,000,000

  	

   

  
	

  2004

  	

   

  	

  1,000,000

  	

   

  
	

  2005

  	

   

  	

  1,000,000

  	

   

  

 

42

 

Exhibit

B

 

EXHIBIT B TO COAL SUPPLY AGREEMENT

SAMPLE COAL PAYMENT CALCULATIONS

For contracts supplied

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

 

	

   

  	

   

  	

  Section I

  	

   

  	

  Base Data

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  1)

  	

   

  	

  Base F.O.B. price per ton:

  	

   

  	

  $

  	

  19.10

  	

   

  	

  /ton

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  1a)

  	

   

  	

  Tons of coal delivered:

  	

   

  	

   

  	

   

  	

  tons

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  2)

  	

   

  	

  Guaranteed average heat content:

  	

   

  	

  10,850

  	

   

  	

  BTU/LB.

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  2r)

  	

   

  	

  As received monthly avg. heat content:

  	

   

  	

   

  	

   

  	

  BTU/LB.

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  2a)

  	

   

  	

  Energy delivered in MMBTU:

  	

   

  	

   

  	

   

  	

  MMBTU

  	

   

  
	

  [(Line 1a) *2,000 lb./ton*(Line 2r)] *MMBTU/1,000,000

  BTU

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  [(       ) *2,000

  lb./ton*]*MMBTU/1,000,000 BTU

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  2b)

  	

   

  	

  Base F.O.B. price per MMBTU:

  	

   

  	

  $

  	

  .880

  	

   

  	

  MMBTU

  	

   

  
	

  {[(Line 1)/(Line 2)]*(1 ton/2,000 lb.)]}*1,000,000

  BTU/MMBTU

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  {[(       /ton)/(       BTU/LB)]*(1

  ton/2,000 lb.)}*1,000,000 BTU/MMBTU

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  3)

  	

   

  	

  Guaranteed monthly avg. max. sulfur

  	

   

  	

  3.00

  	

   

  	

  LBS./MMBTU

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  3r)

  	

   

  	

  As received monthly avg. sulfur

  	

   

  	

   

  	

   

  	

  LBS./MMBTU

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  4)

  	

   

  	

  Guaranteed monthly avg. ash

  	

   

  	

  10.80

  	

   

  	

  LBS./MMBTU

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  4r)

  	

   

  	

  As received monthly avg. ash

  	

   

  	

   

  	

   

  	

  LBS./MMBTU

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  5)

  	

   

  	

  Guaranteed monthly avg. max. moisture

  	

   

  	

  12.90

  	

   

  	

  LBS./MMBTU

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  5r)

  	

   

  	

  As received monthly avg. moisture

  	

   

  	

   

  	

   

  	

  LBS./MMBTU

  	

   

  

 

	

   

  	

   

  	

  Section II

  	

   

  	

  Discounts

  	

   

  
	

   

  	

   

  	

  Assign a (-) to all discounts (round to (5) decimal

  places)

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  6d)

  	

   

  	

  BTU/LB.:  If

  line 2r < 10,650. then:

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  {1 –{(line 2r) / (line 2)} * $0.2604/MMBTU

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  {1 - (       ) /

  (       )} * $0.2604 =

  	

   

  	

  $

  	

   

  	

   

  	

  /MMBTU

  	

   

  
	

  7d)

  	

   

  	

  SULFUR:  If

  line 3r is greater than 3.05 then:

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  [ (line 3r) - (line 3) ] * 0.1232/lb. Sulfur

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  [

  (       ) -

  (       ) ] * 0.1232 =

  	

   

  	

  $

  	

   

  	

   

  	

  /MMBTU

  	

   

  
	

  8d)

  	

   

  	

  ASH: If line 4r is greater than 12.20 then:

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  [ (line 4r) -

  (line 4) ] * 0.0083/MMBTU

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  [

  (       ) -

  (       ) ] * 0.0083 =

  	

   

  	

  $

  	

   

  	

   

  	

  /MMBTU

  	

   

  
	

  9d)

  	

   

  	

  MOISTURE:  If

  line 5r is greater than 14.46then:

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  [ (line 5r) -

  (line 5) ] * 0.0016/MMBTU

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  [

  (       ) -

  (       ) ] * 0.0016 =

  	

   

  	

  $

  	

   

  	

   

  	

  /MMBTU

  	

   

  

 

 

43

 

	

   

  	

   

  	

  Section

  III

  	

   

  	

  Total Price

  Adjustments

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Determine total

  Discounts as follows:

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Assign a (-) to

  all discounts (round to (5) decimal places)

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Line 6d:

  	

   

  	

  $

  	

   

  	

   

  	

  /MMBTU

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Line 7d

  	

   

  	

  $

  	

   

  	

   

  	

  /MMBTU

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Line 8d

  	

   

  	

  $

  	

   

  	

   

  	

  /MMBTU

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Line 9d

  	

   

  	

  $

  	

   

  	

   

  	

  /MMBTU

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  10)

  	

   

  	

  Total Discounts (-):

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Algebraic sum of above:

  	

   

  	

  $

  	

   

  	

   

  	

  /MMBTU

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  11)

  	

   

  	

  Total evaluated coal price = (line 2b) + (line 10)

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  12)

  	

   

  	

  Total discount price adjustment for Energy

  delivered:

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  (line 2a) * (line 10) (-)

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  $

                       /MMBTU                            +

  	

   

  	

  $

  	

   

  	

   

  	

  /MMBTU

  	

  =

  	

  $

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  13)

  	

   

  	

  Total base cost of coal

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  (line 2a) * (line 2b)

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  $

                       /MMBTU                            +

  	

   

  	

  $

  	

   

  	

   

  	

  /MMBTU

  	

  =

  	

  $

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  14)

  	

   

  	

  Total coal payment for month

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  (line 12) +

  (line 13)

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  $

                       /MMBTU                            +

  	

   

  	

  $

  	

   

  	

   

  	

   

  	

  =

  	

  $

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  

 

44Peabody COALSALES Company

Contract No. LGE02011

 

EXHIBIT

10.70

 

COAL SUPPLY AGREEMENT

 

This is a coal supply agreement (the “Agreement”)

effective as of January 1, 2002 between LOUISVILLE GAS AND ELECTRIC COMPANY, a

Kentucky corporation, 220 West Main Street, Louisville, Kentucky 40202

(“Buyer”), and PEABODY COALSALES COMPANY, a Delaware corporation, 701 Market

Street, Suite 830, St. Louis, Missouri 63101-1826  (“Seller”).

 

The parties hereto agree as follows:

 

SECTION 1. GENERAL.  Seller shall sell and deliver and Buyer

shall purchase and accept delivery of steam coal under all the terms and

conditions of this Agreement.

 

SECTION 2.  TERM.  The term of this Agreement shall commence on

January 1, 2002 and shall continue through December 31, 2004.

 

SECTION 3.  QUANTITY.

§ 3.1  Base

Quantity.  Seller shall sell

and deliver and Buyer shall purchase and accept delivery of the following

annual base quantity of coal (“Base Quantity”):

 

	

  YEAR

  	

   

  	

  BASE

  QUANTITY (TONS)

  
	

  2002

  	

   

  	

  750,000

  
	

  2003

  	

   

  	

  600,000 *

  
	

  2004

  	

   

  	

  600,000 *

  

 

1

 

* Parties shall meet starting June 1, 2002 to

negotiate pricing for an additional 250,000 tons of coal per year to be

supplied during calendar year 2003.  If

the parties do not agree upon pricing for such additional tons by September 1,

2002, then Buyer shall not be entitled to such additional tons, and the tonnage

to be delivered during calendar year 2003 shall be the Base Quantity as defined

above.

Parties shall also meet starting June 1, 2003 to

negotiate pricing for an additional 250,000 tons of coal for 2004.  If the parties do not agree upon pricing for

such additional tons by September 1, 2003, then Buyer shall not be entitled to

such additional tons and the tonnage to be delivered during calendar year 2004

shall be the Base Quantity as defined above.

 

§ 3.2 Delivery Schedule.  Shipments are to be made on a ratable basis

as adjusted during the year to reflect outages.  Initial shipments shall begin on or about January 1, 2002.  Time is of the essence with respect to the

schedule so established; and failure by Seller to deliver in a timely fashion

shall constitute a material breach within the meaning of § 16 of this

Agreement.

 

SECTION 4.         SOURCE.

 

§ 4.1 Source. 

The coal sold hereunder, including coal purchased by Seller from third

parties, shall be supplied from geological seam Western Kentucky #9 and #11,

from Seller’s 

 

2

 

affliliated company, Highland Mining Company’s (the “Producer”)

Complex, Union County, Kentucky (the “Coal Property”).

 

§ 4.2 Assurance of Operation and Reserves.  Seller represents and warrants that the Coal

Property contains economically recoverable coal of a quality and in quantities

which will be sufficient to satisfy all the requirements of this

Agreement.  Seller agrees and warrants

that it will have at the Coal Property adequate machinery, equipment and other

facilities to produce, prepare and deliver coal in the quantity and of the

quality required by this Agreement. 

Seller further agrees to operate and maintain such machinery, equipment

and facilities in accordance with good mining practices so as to efficiently

and economically produce, prepare and deliver such coal.  Seller agrees that Buyer is not providing

any capital for the purchase of such machinery, equipment and/or facilities and

that Seller shall operate and maintain same at its sole expense, including all

required permits and licenses.

 

§ 4.3 Non-Diversion of Coal.  Seller agrees and warrants that it will not,

without Buyer’s express prior written consent, use or sell coal from the Coal

Property in a way that will reduce the economically recoverable balance of coal

in the Coal Property to an amount less than that required to be supplied to

Buyer hereunder.

 

§ 4.4  Seller’s

Preparation of Mining Plan.  Seller

shall have prepared a complete mining plan for the Coal Property with adequate

supporting data to demonstrate Seller’s capability to have coal produced from

the Coal Property which meets the quantity and quality specifications of this

Agreement.  Seller shall, upon Buyer’s

request during Coal Property Inspections, if any (made pursuant to § 20),

provide information to Buyer of such mining plan which shall contain 

 

3

 

maps and a narrative depicting areas and seams of coal to be mined and

shall include (but not be limited to) the following information: (i) reserves

from which the coal will be produced during the term hereof and the mining

sequence, by year (or such other time intervals as mutually agreed) during the

term of this Agreement, from which coal will be mined; (ii) methods of mining

such coal; (iii) methods of transporting and, in the event a preparation plant

is utilized by Seller, the methods of washing coal to insure compliance with

the quantity and quality requirements of this Agreement including a description

and flow sheet of the preparation plant; (iv) quality data plotted on the maps

depicting data points and isolines by ash, sulfur, and Btu; (v) quality control

plans including sampling and analysis procedures to insure individual shipments

meet quality specifications; and (vi) Seller’s aggregate commitments to others

to sell coal from the Coal Property during the term of this Agreement.

 

Buyer’s receipt of information or data furnished by

Seller (the “Mining Information”) shall not in any manner relieve Seller of any

of Seller’s obligations or responsibilities under this agreement; nor shall

such review be construed as constituting an approval of Seller’s proposed

mining plan as prudent mining practices, such review by Buyer being limited

solely to a determination, for Buyer’s purposes only, of Seller’s capability to

supply coal to fulfill Buyer’s requirements of a dependable coal supply.

 

§ 4.5 Substitute Coal.  Notwithstanding the above representations

and warranties, in the event that Seller is unable to produce or obtain coal

from the Coal Property in the quantity and of the quality required by this

Agreement, and such inability is not caused by a force majeure event as defined

in § 10, then Buyer will have the option of requiring that Seller supply

substitute coal 

 

4

 

from other facilities and mines. 

Seller shall also have the right to supply substitute coal after having

received Buyer’s prior written consent (which shall not be unreasonably

withheld).  Such substitute coal shall

be provided under all the terms and conditions of this Agreement including, but

not limited to, the quantity provisions of § 3.1, the price provisions of § 8,

the quality specifications of § 6.1, and the provisions of § 5 concerning

reimbursement to Buyer for increased transportation costs.  Seller’s delivery of coal not produced from

the Coal Property without having received the express written consent of Buyer

shall constitute a material breach of this Agreement.

 

§ 4.6 Implied Warranties.  EXCEPT AS EXPRESSLY SET FORTH THEREIN,

SELLER EXPRESSLY DISCLAIMS ANY OTHER REPRESENTATIONS OR WARRANTIES, WRITTEN OR

ORAL, EXPRESS OR IMPLIED, INCLUDING MECHANTABILITY, OR FITNESS FOR ANY

PARTICULAR PURPOSE.  No waiver of

remedies or damages herein shall apply to claims of anticipatory repudiation or

remedies therefor provided by law except that neither Seller nor Buyer shall be

liable to the other for consequential, incidental, punitive, exemplary or

indirect damages, lost profits, or business interruption damages, whether by

statue, in tort or in contract, under any indemnity provision or otherwise.

 

SECTION 5.  DELIVERY.

 

§ 5.1 Barge Delivery.  The coal shall be delivered to Buyer F.O.B. barge at the Camp

Complex, Mile Point 841.6 on the Ohio River, or at Seller’s option as a

substitute, the Gibraltar Dock at Mile Point 85.9 on the Green River (either the

“Delivery Point”).  Seller may deliver

the

 

5

 

coal at a location different from the Delivery Point, provided,

however, that Seller shall reimburse Buyer for any resulting increases in the

cost of transporting the coal to Buyer’s generating stations.  Any resulting savings in such transportation

costs shall be retained by Buyer.

 

Title to and risk of loss of coal sold will pass to

Buyer and the coal will be considered to be delivered when barges containing

the coal are disengaged by Buyer’s barging contractor from the loading

dock.  Buyer or its contractor shall

furnish suitable barges, clean and ready for loading, in accordance with a

delivery schedule provided by Buyer to Seller, and in sufficient number and in

a timely manner in order for Seller to meet any previously agreed upon delivery

schedule as provided for in § 3.2. 

Seller shall arrange and pay for all costs of transporting the coal from

the mines to the loading docks and loading the coal into barges.  Buyer’s barging contractor shall be

responsible for trimming the coal into barges to the proper draft and the

proper distribution within the barges, and the release and movement of the

barges during loading.  Buyer shall

arrange for transporting the coal by barge from the loading dock to its

generating station(s) and shall pay for the cost of such transportation.  For delays caused by Seller in handling the

scheduling of shipments with Buyer’s barging contractor, Seller shall be

responsible for any demurrage or other penalties assessed by said barging

contractor (or assessed by Buyer) which accrue at the Delivery Point, for

Seller’s failure to provide coal for the barges in a timely manner and in the

specified minimum tonnage, including the demurrage, or other penalties.   Buyer shall be responsible to deliver

barges in as clean and dry condition as practicable.  Seller shall require of the loading dock operator that the barges

and towboats provided by Buyer or Buyer’s barging contractor be provided convenient

and safe berth free of wharfage, dockage and 

 

6

 

port charges; that while the barges are in the care and custody of the

loading dock, all applicable U.S. Coast Guard regulations and other applicable

laws, ordinances, rulings, and regulations shall be complied with, including

adequate mooring and display of warning lights; that the loading operations be

performed in a workmanlike manner and in accordance with the reasonable loading

requirements of Buyer and Buyer’s barging contractor; and that the loading dock

operator carry landing owners or wharfinger’s insurance with basic coverage of

not less than $300,000.00 and total of basic coverage and excess liability

coverage of not less than $1,000,000.00, and provide evidence thereof to Buyer in

the form of a certificate of insurance from the insurance carrier or an

acceptable certificate of self-insurance with requirement for thirty (30) days

advance notification of Buyer in the event of termination of or material

reduction in coverage under the insurance.

 

SECTION 6. QUALITY.

 

§ 6.1  Specifications.  The coal delivered hereunder shall conform

to the following specifications on an “as received” basis:

 

 

	

  Specifications

  	

   

  	

  Guaranteed Monthly

  Weighted Average

  	

   

  	

  Rejection Limits

  (per shipment)

  	

   

  
	

  BTU/LB.

  	

   

  	

  min.

  	

   

  	

  11,400

  	

   

  	

  <

  	

   

  	

  10,800

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  LBS/MMBTU:

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  MOISTURE

  	

   

  	

  max.

  	

   

  	

  10.53

  	

   

  	

  >

  	

   

  	

  12.00

  	

   

  
	

  ASH

  	

   

  	

  max.

  	

   

  	

  8.33

  	

   

  	

  >

  	

   

  	

  9.00

  	

   

  
	

  SULFUR

  	

   

  	

  max.

  	

   

  	

  2.89

  	

   

  	

  >

  	

   

  	

  3.10

  	

   

  
	

  SULFUR

  	

   

  	

  min.

  	

   

  	

  2.30

  	

   

  	

  <

  	

   

  	

  2.00

  	

   

  
	

  CHLORINE

  	

   

  	

  max.

  	

   

  	

  0.009

  	

   

  	

  >

  	

   

  	

  .015

  	

   

  
	

  FLUORINE

  	

   

  	

  max.

  	

   

  	

   

  	

   

  	

  >

  	

   

  	

   

  	

   

  
	

  NITROGEN

  	

   

  	

  max.

  	

   

  	

  1.32

  	

   

  	

  >

  	

   

  	

  1.70

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  ASH/SULFUR RATIO

  	

   

  	

  min.

  	

   

  	

  3.22:1

  	

   

  	

  <

  	

   

  	

  3:1

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  SIZE (3” x 0”):

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Top size

  (inches)*

  	

   

  	

  max.

  	

   

  	

  3x0

  	

   

  	

  >

  	

   

  	

  4x0

  	

   

  
	

  Fines (% by wgt)

  Passing 1/4” screen

  	

   

  	

  max.

  	

   

  	

  60

  	

   

  	

  >

  	

   

  	

  65

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  % BY WEIGHT:

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  VOLATILE

  	

   

  	

  min.

  	

   

  	

  30

  	

   

  	

  <

  	

   

  	

  29

  	

   

  
	

  FIXED CARBON

  	

   

  	

  min.

  	

   

  	

  43

  	

   

  	

  <

  	

   

  	

  40

  	

   

  
	

  GRINDABILITY

  (HGI)

  	

   

  	

  min.

  	

   

  	

  50

  	

   

  	

  <

  	

   

  	

  48

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  BASE ACID RATIO

  (B/A)

  	

   

  	

   

  	

   

  	

  0.40

  	

   

  	

   

  	

   

  	

  .50

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  SLAGGING

  FACTOR**

  	

   

  	

  max.

  	

   

  	

  1.32

  	

   

  	

  >

  	

   

  	

  1.80

  	

   

  
	

  FOULING

  FACTOR***

  	

   

  	

  max.

  	

   

  	

  0.32

  	

   

  	

  >

  	

   

  	

  0.40

  	

   

  

 

7

 

	

  ASH FUSION

  TEMPERATURE (°F) (ASTM D1857)

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  REDUCING

  ATMOSPHERE

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Initial

  Deformation

  	

   

  	

  min.

  	

   

  	

  1990

  	

   

  	

  min.

  	

   

  	

  1990

  	

   

  
	

  Softening (H=W)

  	

   

  	

  min.

  	

   

  	

  2065

  	

   

  	

  min.

  	

   

  	

  2050

  	

   

  
	

  Softening

  (H=1/2W)

  	

   

  	

  min.

  	

   

  	

  2105

  	

   

  	

  min.

  	

   

  	

  2075

  	

   

  
	

  Fluid

  	

   

  	

  min.

  	

   

  	

  2225

  	

   

  	

  min.

  	

   

  	

  2200

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  OXIDIZING ATMOSPHERE

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Initial Deformation

  	

   

  	

  min.

  	

   

  	

  2330

  	

   

  	

  min.

  	

   

  	

  2300

  	

   

  
	

  Softening (H=W)

  	

   

  	

  min.

  	

   

  	

  2355

  	

   

  	

  min.

  	

   

  	

  2325

  	

   

  
	

  Softening (H=1/2W)

  	

   

  	

  min.

  	

   

  	

  2400

  	

   

  	

  min.

  	

   

  	

  2370

  	

   

  
	

  Fluid

  	

   

  	

  min.

  	

   

  	

  2480

  	

   

  	

  min.

  	

   

  	

  2400

  	

   

  

 

* All the coal will be of such size that it will pass

through a screen having circular perforations three (3) inches in diameter, but

shall not contain more than fifty per cent ( 50%) by

8

 

weight of coal that will pass through a screen having circular

perforations one-quarter (1/4) of an inch in diameter.

 

**           Slagging

Factor (Rs)=(B/A) x (Percent Sulfur by WeightDry)

 

***         Fouling

Factor (Rf)=(B/A) x (Percent Na2O by WeightDry)

 

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

 

	

  BASE ACID RATIO (B/A) =

  	

   

  	

  (Fe2O3   +  

  CaO   +   MgO  

  +   Na2O   +  

  K2O)

  
	

   

  	

   

  	

  (SiO2  + 

  A12O3 

  +  TiO2)

  	

   

  
	

   

  	

   

  	

   

  
	

  Note:   As

  used herein

  	

  >

  	

  means greater than:

  
	

   

  	

  <

  	

  means less than.

  

 

§ 6.2        Definition

of “Shipment”.  As used herein, a

“shipment” shall mean one barge load, a barge lot load, in accordance with

Buyer’s sampling and analyzing practices.

 

§ 6.3        Rejection.

 

Buyer has the right, but not the obligation, to reject

any shipment(s) which fail(s) to conform to any of the Rejection Limits set

forth in § 6.1 or contains a material amount of extraneous materials.  Buyer must reject such coal within

seventy-two (72) hours of receipt of the coal analysis provided for in § 7.2 or

such right to reject is waived.  In the

event Buyer rejects such non-conforming coal, title to and risk of loss of the

coal shall be considered to have never passed to Buyer and Buyer shall return the

coal to Seller or, at Seller’s request, divert such coal to Seller’s designee,

all at Seller’s cost and risk.  Seller

shall replace the rejected coal within five (5) working days from notice of

rejection with coal conforming to the Rejection Limits set forth in §6.1.  If Seller fails to replace the rejected coal

within such five (5) working day period or the replacement coal is rejected for

failure to meet any of the Rejection Limits (per shipment) set 

 

9

 

forth in § 6.1, Buyer may purchase coal from another source in order to

replace the rejected coal.  Seller shall

reimburse Buyer for (i) any amount by which the actual price plus

transportation costs to Buyer of such coal purchased from another source exceed

the price of such coal under this Agreement plus transportation costs to Buyer

from the Delivery Point; and (ii) any and all transportation, storage,

handling, or other expenses that have been incurred by Buyer for the rejected

coal.  This remedy is in addition to all

of Buyer’s other remedies under this Agreement.

 

If Buyer fails to reject a shipment of non-conforming

coal which it had the right to reject for failure to meet any or all of the

Rejection Limits set forth in § 6.1 or because such shipment contained a

material amount of extraneous materials, then such non-conforming coal shall be

deemed accepted by Buyer; however, the quantity Seller is obligated to sell to

Buyer under the Agreement may or may not be reduced by the amount of each such

non-conforming shipment at Buyer’s sole option and the shipment shall

nevertheless be considered “rejectable” under § 6.4.  Further, for shipments containing extraneous materials, which

include, but are not limited to, slate, rock, wood, corn husks, mining materials,

metal, steel, etc., the estimated weight of such materials shall be deducted

from the weight of that shipment.

 

§ 6.4  Suspension

and Termination.

 

If the coal sold hereunder fails to meet one or more

of the Guaranteed Monthly Weighted Averages set forth in § 6.1 for any two (2)

consecutive months or a total of three (3) months in a six (6) month period, or

if four (4) barge shipments in a thirty (30) day period are rejectable by

Buyer, Buyer may upon notice confirmed in writing and sent to Seller by

certified mail, suspend future shipments except shipments already loaded into

barges.  Seller shall, within ten (10)

days,

 

 

10

 

provide Buyer with reasonable assurances that subsequent monthly

deliveries of coal shall meet or exceed the Guaranteed Monthly Weighted

Averages set forth in § 6.1 and that the coal will conform to all of the

Rejection Limits set forth in § 6.1.  If

Seller fails to provide such assurances within said ten (10) day period, Buyer

may terminate this Agreement by giving written notice of such termination at

the end of the ten (10) day period.  A

waiver of this right for any one period by Buyer shall not constitute a waiver

for subsequent periods.  If Seller

provides such reasonable assurances to Buyer, shipments hereunder shall resume

and any tonnage deficiencies resulting from suspension may be made up at

Buyer’s sole option.  Buyer shall not

unreasonably withhold its acceptance of Seller’s assurances, or delay the

resumption of shipment(s).  If Seller,

after providing such assurances, fails to meet any of the Guaranteed Monthly

Weighted Averages for any one (1) month within the next six (6) months or if

three (3) barge shipments are rejectable within any one (1) month during such

six (6) month period, then Buyer may terminate this Agreement and exercise all

its other rights and remedies under applicable law and in equity for Seller’s

breach.

 

SECTION 7.         WEIGHTS,

SAMPLING AND ANALYSIS.

 

§ 7.1  Weights.  The weight of the coal delivered hereunder

shall be determined on a per shipment basis by Buyer on the basis of scale

weights at the generating station(s) unless another method is mutually agreed

upon by the parties.  Such scales shall

be duly reviewed by an appropriate testing agency and maintained in an accurate

condition.  Seller shall have the right,

at Seller’s expense and upon reasonable notice, to have the scales checked for

accuracy at any

 

11

 

reasonable time or frequency. 

If the scales are found to be over or under the tolerance range

allowable for the scale based on industry accepted standards, either party

shall pay to the other any amounts owed due to such inaccuracy for a period not

to exceed thirty (30) days before the time any inaccuracy of scales is

determined.

 

§ 7.2  Sampling

and Analysis.  The sampling and

analysis of the coal delivered hereunder shall be performed by Buyer and the

results thereof shall be accepted and used for the quality and characteristics

of the coal delivered under this Agreement. 

All analyses shall be made in Buyer’s laboratory at Buyer’s expense in

accordance with industry-accepted standards. 

Samples for analyses shall be taken by any industry-accepted standard,

mutually acceptable to both parties, may be composited and shall be taken with

a frequency and regularity sufficient to provide reasonably accurate

representative samples of the deliveries made hereunder.  Seller represents that it is familiar with

Buyer’s sampling and analysis practices, and finds them to be acceptable.  Buyer shall notify Seller in writing of any

significant changes in Buyer’s sampling and analysis practices.  Any such changes in Buyer’s sampling and

analysis practices shall, except for industry accepted changes in practices,

provide for no less accuracy than the sampling and analysis practices existing

at the time of the execution of this Agreement, unless the Parties otherwise

mutually agree.

 

Each sample taken by Buyer shall be divided into 4

parts and put into airtight containers, properly labeled and sealed.  One part shall be used for analysis by

Buyer; one part shall be used by Buyer as a check sample, if Buyer in its sole

judgment determines it is necessary; one part shall be retained by Buyer until

the twenty-fifth (25th) of the month following the month of

 

12

 

unloading (the “Disposal Date”) and shall be delivered to Seller for

analysis if Seller so requests before the Disposal Date; and one part (“Referee

Sample”) shall be retained by Buyer until the Disposal Date.  Seller shall be given copies of all analyses

made by Buyer by the twelfth (12th) business day of the month following the

month of unloading.  Seller, on

reasonable notice to Buyer shall have the right to have a representative

present to observe the sampling and analyses performed by Buyer.  Unless Seller requests a Referee Sample

analysis before the Disposal Date, Buyer’s analysis shall be used to determine

the quality of the coal delivered hereunder. 

The Monthly Weighted Averages shall be determined by utilizing the

individual shipment analyses.

 

If any dispute arises before the Disposal Date, the

Referee Sample retained by Buyer shall be submitted for analysis to an

independent commercial testing laboratory (“Independent Lab”) mutually chosen

by Buyer and Seller.  For each coal

quality specification in question, a dispute shall be deemed not to exist and

Buyer’s analysis shall prevail and the analysis of the Independent Lab shall be

disregarded if the analysis of the Independent Lab differs from the analysis of

Buyer by an amount equal to or less than:

 

(i)            0.50%

moisture

(ii)           0.50%

ash on a dry basis

(iii)          100

Btu/lb. on a dry basis

(iv)          0.10%

sulfur on a dry basis.

 

For each coal quality specification in question, if

the analysis of the Independent Lab differs from the analysis of Buyer by an

amount more than the amounts listed above, then the analysis of the Independent

Lab shall prevail and Buyer’s analysis shall be disregarded.  The cost

 

13

 

of the analysis made by the Independent Lab shall be borne by Seller to

the extent that Buyer’s analysis prevails and by Buyer to the extent that the

analysis of the Independent Lab prevails.

 

SECTION 8.         PRICE.

 

§  8.1 Base

Price.  The base price (“Base

Price”) of the coal to be sold hereunder will be firm and will be determined by

the year in which the coal is delivered as defined in § 5 in accordance with

the following schedule:

 

	

  YEAR

  	

   

  	

  BASE

  QUANTITY PRICE (F.O.B. Barge)

  	

   

  	 

	

  2002

  	

   

  	

  $

  	

  1.1224 per MMBtu

  	

   

  	

  $

  	

  25.59 per ton

  	

   

  
	

  2003

  	

   

  	

  $

  	

  1.1351 per MMBtu

  	

   

  	

  $

  	

  25.88 per ton

  	

   

  
	

  2004

  	

   

  	

  $

  	

  1.1680 per MMBtu

  	

   

  	

  $

  	

  26.63 per ton

  	

   

  
									

 

§ 8.2        Quality

Price Discounts.

 

(a)           The

Base Price is based on coal meeting or exceeding the Guaranteed Monthly Weighted

Average specifications as set forth in § 6.1. 

Quality price discounts shall be applied for each specification each

month to reflect failures to meet the Guaranteed Monthly Weighted Averages set

forth in § 6.1, as determined pursuant to § 7.2, subject to the provisions set

forth below.  The discount values used

are as follows:

 

	

  DISCOUNT VALUES

  	

   

  	

   

  
	

   

  	

   

  	

  $/MMBTU

  
	

  BTU/LB.

  	

   

  	

  0.2604

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  $/LB./MMBTU

  
	

  SULFUR

  	

   

  	

  0.1232

  
	

  ASH

  	

   

  	

  0.0083

  
	

  MOISTURE

  	

   

  	

  0.0016

  

 

14

 

(b)           Notwithstanding

the foregoing, for each specification each month, there shall be no discount if

the actual Monthly Weighted Average meets the applicable Discount Point set

forth below.  However, if the actual

Monthly Weighted Average fails to meet such applicable Discount Point, then the

discount shall apply and shall be calculated on the basis of the difference

between the actual Monthly Weighted Average and the Guaranteed Monthly Weighted

Average pursuant to the methodology shown in Exhibit A attached hereto.

 

	

   

  	

   

  	

  Guaranteed Monthly

  Weighted Average

  	

   

  	

  Discount Point

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  BTU/LB

  	

   

  	

  min.

  	

  11,400

  	

   

  	

  11,200

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  LB/MMBTU:

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  SULFUR

  	

   

  	

  max.

  	

  2.89

  	

   

  	

  2.98

  	

   

  
	

  ASH

  	

   

  	

  max.

  	

  8.33

  	

   

  	

  8.69

  	

   

  
	

  MOISTURE

  	

   

  	

  max.

  	

  10.53

  	

   

  	

  11.25

  	

   

  

 

For example, if the actual Monthly Weighted Average of

sulfur equals 3.00 lb/MMBTU, then the applicable discount would be (3.00 lb. –

2.89 lb.) X $.1232/lb/MMBTU = $.0136/MMBTU.

 

§ 8.3  New

Impositions.  The above Base Price

shall be subject to adjustment only in the event that new applicable Federal or

state statues, regulations, or other governmental impositions

 

15

 

on the coal to be supplied hereunder, including but not limited to tax

increases or decreases, occur after July 31, 2001, which cause Seller’s cost

for providing coal to Buyer under this Agreement to increase or decrease by

more than $.10 per ton.  Seller shall

promptly notify Buyer of any such changes and supply sufficient documentation

for Buyer to verify any such change. 

Either Buyer or Seller may request a Base Price adjustment, which shall

be comprised of no more than the reasonable costs directly associated with the

effect of such change on the coal to be supplied hereunder.  If the non-requesting party agrees to the

requested price adjustment, such adjustment shall be made effective on the

first day of the calendar month following the effective date of any change,

(except when such change is effective on the first day of the month in which

case the adjustment shall be made as of such date).  If the non-requesting party rejects the request of the requesting

party for a Base Price adjustment, the requesting party, at its option, may

terminate the contract without liability due to such termination for either

party.

 

§ 8.4 Payment Calculation.  Exhibit A attached hereto shows the

methodology for calculating the coal payment and quality price discounts for

the month Seller’s coal was unloaded by Buyer. 

If there are any such discounts, Buyer shall apply credit to amounts

owed Seller for the month the coal was unloaded.

 

SECTION 9.         INVOICES,

BILLING AND PAYMENT.

 

§ 9.1        Invoicing

Address.  Invoices will be sent to

Buyer at the following address:

 

Louisville Gas and Electric Company

220 West Main Street

P.O. Box 32010

Louisville, KY 

40232

Attention: 

Manager LG&E/KU Fuels

 

16

 

§ 9.2  Invoice

Procedures for Coal Shipments. 

Seller shall invoice Buyer at the Base Price, minus any quality price

discounts, for all coal unloaded in a calendar month by the fifteenth  (15th) of the following month.

 

§ 9.3  Payment

Procedures for Coal Shipments.  For

all coal unloaded at the Buyer’s generating station(s) between the first (1st)

and fifteenth (15th) days of any calendar month.  Buyer shall make preliminary payment for seventy-five percent

(75%) of the amount owed for the coal (based on the assumption that the coal

will meet all guaranteed monthly quality parameters) by the twenty-fifth (25th)

day of such month of unloading, except that, if the twenty-fifth (25th) is not

a regular work day, payment shall be made on the next regular work day.  For all coal unloaded at the Buyer’s

generating station(s) between the sixteenth (16th) and the last day of any

calendar month, Buyer shall make preliminary payment for seventy-five percent

(75%) of the unloaded coal by the tenth (10th) day of the month following the

month of unloading, except that, if the tenth (10th) is not a

regular work day, payment shall be made on the next regular work day.

 

Preliminary payment shall be in the amount of

seventy-five percent (75%) of the then current price on a dollar per ton basis

as calculated by the guaranteed monthly weighted average BTU/lb. and the then

current Base Price in cents per MMBTU.

 

A reconciliation of amounts paid and amounts owed

shall occur by the twenty-fifth (25th) day of the month following the month of

unloading.  (For example, Buyer will

make one initial

 

17

 

payment by September 25 for seventy-five (75%) percent of coal unloaded

September 1 through 15, and another initial payment by October 10 for

seventy-five percent (75%) of coal unloaded September 16 through 30.  A reconciliation will occur by October 25

for all unloadings made in September.) 

The reconciliation shall be made as follows: Seller shall invoice Buyer

on or before the fifteenth (15th) day of the month following the

month of delivery.  The amount due for

all coal (based on the Base Price minus any Quality Price Discounts) delivered

and unloaded and accepted by Buyer during any calendar month shall be

calculated and compared to the sum of the preliminary payments made for coal

delivered and unloaded and accepted during such month.  The difference shall be paid by or paid to

Seller, as applicable, by the twenty-fifth (25th) day of the month following

the month of delivery, except, that, if the twenty-fifth (25th) is not a

regular work day, payment shall be made in the next regular work day.  Buyer shall electronically transfer all

payments to Seller’s account at:

 

Peabody COALSALES, St Louis

PNC Bank of N.A.

ABA # 043000096

Account # 1008971287

 

§ 9.4  Withholding.  Buyer shall have the right to withhold from

payment of any billing or billings (i) any sums which it is not able in good

faith to verify or which it otherwise in good faith disputes, (ii) any damages

resulting from or likely to result from any breach of this Agreement by Seller,

and (iii) any amounts owed to Buyer from Seller.  Buyer shall notify Seller promptly in writing of any such issue,

stating the basis of its claim and the amount it intends to withhold.

 

18

 

Payment by Buyer, whether knowing or inadvertent, of

any amount in dispute shall not be deemed a waiver of any claims or rights by

Buyer with respect to any disputed amounts or payments made.

 

SECTION 10.       FORCE

MAJEURE.

 

§ 10.1  General

Force Majeure.  If either party

hereto is delayed in or prevented from performing any of its obligations or

from utilizing the coal sold under this Agreement due to acts of God, war,

riots, civil insurrection, acts of the public enemy, strikes, lockouts, fires,

floods or earthquakes, which are beyond the reasonable control of the party

affected thereby, then the obligations of both parties hereto shall be suspended

to the extent made necessary by such event; provided that the affected party

gives written notice to the other party as early as practicable of the nature

and probable duration of the force majeure event.  The party declaring force majeure shall exercise due diligence to

avoid and shorten the force majeure event and will keep the other party advised

as to the continuance of the force majeure event.

 

During any period in which Seller’s ability to perform

hereunder is affected by a force majeure event, Seller shall not deliver any

coal to any other buyers to whom Seller’s ability to supply is similarly

affected by such force majeure event unless contractually committed to do so at

the beginning of the force majeure event; and further shall deliver to Buyer

under this Agreement at least a pro rata portion (on a per ton basis) of its

total contractual commitments to all its buyers to whom Seller’s ability to

supply is similarly affected by such force majeure event in place at the

beginning of the force majeure event. 

An event which affects the Seller’s ability 

 

19

 

to produce or obtain coal from a mine other than the Coal Property will

not be considered a force majeure event hereunder.

 

Tonnage deficiencies resulting from a force majeure

event shall be made up at Buyer’s sole option on a mutually agreeable schedule.

 

§ 10.2  Environmental

Law Force Majeure.  The parties

recognize that, during the continuance of this Agreement, legislative or

regulatory bodies or the courts may adopt or reinterpret environmental laws,

regulations, policies and/or restrictions which will make it impossible or

commercially impracticable for Buyer to utilize this or like kind and quality

coal which thereafter would be delivered hereunder.  If as a result of the adoption or reinterpretation of such laws,

regulations, policies, or restrictions, or change in the interpretation or

enforcement thereof, Buyer decides that it will be impossible or commercially

impracticable (uneconomical) for Buyer to utilize such coal, Buyer shall so

notify Seller, and thereupon Buyer and Seller shall promptly consider whether

corrective actions can be taken in the mining and preparation of the coal at

Seller’s mine and/or in the handling and utilization of the coal at Buyer’s

generating station; and if in Buyer’s sole judgment such actions will not,

without unreasonable expense to Buyer, make it possible and commercially

practicable for Buyer to so utilize coal which thereafter would be delivered hereunder

without violating any applicable law, regulation, policy or order, Buyer shall

have the right, upon the later of 60 days notice to Seller or the effective

date of such restriction, to terminate this Agreement without further

obligation hereunder on the part of either party.

 

20

 

SECTION 11.  CHANGES.  Either party may, at any time by written

notice pursuant to § 12 of this Agreement, propose changes within the general

scope of this Agreement in any one or more of the following: quality of coal or

coal specifications; quantity of coal; method or time of shipments; place of

delivery (including transfer of title and risk of loss); method(s) of weighing,

sampling or analysis; or any such other provision as may affect the suitability

and amount of coal to be delivered to Buyer’s generating stations.

 

If any such changes makes necessary or appropriate an

increase or decrease in the then current price per ton of coal, or in any other

provision of this Agreement, an equitable adjustment shall be made in:  price, whether current or future or both,

and/or in such other provisions of this Agreement as are affected directly or

indirectly by such change, and the Agreement shall thereupon be modified in

writing accordingly.

 

Any claim by the Seller for adjustment under this § 11

shall be asserted within thirty (30) days after the date of Seller’s receipt of

the written notice of change, it being understood, however that Seller shall

not be obligated to proceed under this Agreement as changed until an equitable

adjustment has been agreed upon.  The

parties agree to negotiate promptly and in good faith to agree upon the nature

and extent of any equitable adjustment.

 

SECTION 12.       NOTICES.

 

§ 12.1  Form

and Place of Notice.  Any official

notice, request for approval or other document required to be given under this

Agreement shall be in writing, unless otherwise provided herein, and shall be

deemed to have been sufficiently given when delivered in person,

 

21

 

transmitted by facsimile or other electronic media, delivered to an

established mail service for same day or overnight delivery, or dispatched in

the United States mail, postage prepaid, for mailing by first class, certified,

or registered mail, return receipt requested, and addressed as follows:

 

	

  If to Buyer:

  	

   

  	

  Louisville Gas and Electric Company

  
	

   

  	

   

  	

  P.O. Box 32010

  
	

   

  	

   

  	

  Louisville, Kentucky 40232

  
	

   

  	

   

  	

  Attn.: 

  Director Corporate Fuels and By Products

  
	

   

  	

   

  	

   

  
	

  If to Seller:

  	

   

  	

  Peabody COALSALES Company

  
	

   

  	

   

  	

  701 Market Street, Suite 930

  
	

   

  	

   

  	

  St. Louis, Missouri 63101

  
	

   

  	

   

  	

  Attn: 

  Vice-President, Sales

  
	

   

  	

   

  	

   

  

 

§ 12.2  Change

of Person or Address.  Either party

may change the person or address specified above upon giving written notice to

the other party of such change.

§ 12.3  Electronic

Data Transmittal.  Seller hereby

agrees, at Seller’s cost, to electronically transmit shipping notices and/or

other data to Buyer in a format acceptable to and established by Buyer upon

Buyer’s request.  Buyer shall provide

Seller with the appropriate format and will inform Seller as to the electronic

data requirements at the appropriate time.

 

SECTION 13.       CREDIT

RATING.  If the

credit rating of either Buyer (if Buyer has a public rating) or Buyer’s

affiliates that have public ratings falls below investment grade (BBB - as

defined by Standard & Poor’s or the equivalent as defined by other public

ratings agencies), Buyer shall, within thirty (30) days after Seller’s written

request, provide Seller with a mutually agreed upon form of credit enhancement

(e.g., letter of credit, guaranty from an

 

22

 

investment grade entity, etc.). 

Until the mutually acceptable assurances of good credit are received,

Seller has the right to require payment in cash at the time of delivery. Such

mutually acceptable assurances of good credit shall not be more than the

average monthly outstanding net balance.

 

SECTION 14.       RIGHT

TO RESELL.  Buyer

shall have the unqualified right to resell all or any of the coal purchased

under this Agreement.

 

SECTION 15.       INDEMNITY

AND INSURANCE.

 

§ 15.1  Indemnity.  Seller agrees to indemnify and save harmless

Buyer, its officers, directors, employees and representatives from any

responsibility and liability to Buyer or third parties for any and all claims,

demands, losses, legal actions for personal injuries, property damage and

pollution (including reasonable inside and outside attorney’s fees) (i)

relating to the trucks, barges or railcars provided by Buyer or Buyer’s

contractor while such trucks, barges or railcars are in the care and custody of

the loading dock or loading facility, (ii) due to any failure of Seller to

comply with laws, regulations or ordinances, or (iii) due to the acts or

omissions of Seller in the performance of this Agreement.

 

Buyer agrees to indemnify and save harmless Seller,

its officers, directors, employees and representatives from any responsibility

and liability to third parties for any and all claims, demands, losses, legal

actions for personal injuries, and property damage (including reasonable inside

and outside attorney’s fees); (i) due to any failure of Buyer to comply with

laws,

 

23

 

regulations or ordinances, or (ii) due to the negligence of any

representatives, agents or employees of Buyer (collectively, “Visitors”) who

inspect the Coal Property; or (iii) due to the acts or omissions of Buyer in

the performance of this Agreement.

 

§ 15.2  Insurance.  Seller agrees to carry insurance coverage

with minimum limits as follows:

 

(1)           Commercial

General Liability, including Completed Operations and Contractual Liability,

$1,000,000 single limit liability.

 

(2)           Automobile

General Liability, $1,000,000 single limit liability.

 

(3)           In

addition, Seller shall carry excess liability insurance covering the foregoing

perils in the amount of $4,000,000 for any one occurrence.

 

(4)           Workers’

Compensation and Employer’s Liability with statutory limits.

 

If any of the above policies are written on a claims

made basis, then the retroactive date of the policy or policies will be no

later than the effective date of this Agreement.  Certificates of Insurance satisfactory in form to the Buyer and

signed by the Seller’s insurer shall be supplied by the Seller to the Buyer

evidencing that the above insurance is in force and that not less than thirty

(30) calendar days written notice will be given to the Buyer prior to any

cancellation or material reduction in coverage under the policies.  The Seller shall cause its insurer to waive

all subrogation rights against the Buyer respecting all losses or claims

arising from performance hereunder. 

Evidence of such waiver satisfactory in form and substance to the Buyer

shall be exhibited in the Certificate of Insurance mentioned above.  Seller’s liability shall not be limited to

its insurance coverage.

 

24

 

SECTION 16.       TERMINATION

FOR DEFAULT.

 

Subject to § 6.4, if either party hereto commits a

material breach of any of its obligations under this Agreement at any time,

including, but not limited to, a material breach of a representation and

warranty set forth herein, then the other party has the right to give written

notice describing such breach and stating its intention to terminate this

Agreement no sooner than thirty (30) days after the date of the notice (the

“notice period”).  If such material

breach is curable and the breaching party cures such material breach within the

notice period, then the Agreement shall not be terminated due to such material

breach.  If such material breach is not

curable or the breaching party fails to cure such material breach within the

notice period, then this Agreement shall terminate at the end of the notice

period in addition to all the other rights and remedies available to the

aggrieved party under this Agreement and at law and in equity.

 

SECTION 17.       TAXES,

DUTIES AND FEES.

 

Seller shall pay when due, and the price set forth in

§ 8 of this Agreement shall be inclusive of, all taxes, duties, fees and other

assessments of whatever nature imposed by governmental authorities with respect

to the transactions contemplated under this Agreement.

 

SECTION 18.       DOCUMENTATION

AND RIGHT OF AUDIT.

 

Seller shall maintain all records and accounts pertaining

to payments, quantities, quality analyses, and source for all coal supplied

under this Agreement for a period lasting through the

 

25

 

term of this Agreement and for two years thereafter.  Buyer shall have the right at no additional

expense to Buyer to audit, copy and inspect such records and accounts at any

reasonable time upon reasonable notice during the term of this Agreement and

for 2 years thereafter.

 

SECTION 19.       EQUAL

EMPLOYMENT OPPORTUNITY. 

To the extent applicable, Seller shall comply with all of the following

provisions which are incorporated herein by reference: Equal Opportunity

regulations set forth in 41 CFR § 60-1.4(a) and (c) prohibiting discrimination

against any employee or applicant for employment because of race, color,

religion, sex, or national origin; Vietnam Era Veterans Readjustment Assistance

Act regulations set forth in 41 CFR § 50-250.4 relating to the employment and

advancement of disabled veterans and veterans of the Vietnam Era; and

Rehabilitation Act regulations set forth in 41 CFR § 60-741.4 relating to the

employment and advancement of qualified disabled employees and applicants for

employment; the clause known as “Utilization of Small Business Concerns and

Small Business Concerns Owned and Controlled by Socially and Economically

Disadvantaged Individuals” set forth in 15 USC § 637(d)(3); and subcontracting

plan requirements set forth in 15 USC § 637(d).

 

SECTION 20.       COAL

PROPERTY INSPECTIONS.  Buyer

and its representatives, and others as may be required by applicable laws,

ordinances and regulations shall have the right at all reasonable times and at

their own expense to inspect the Coal Property, including the loading

facilities, scales, sampling system(s), wash plant facilities, and mining

 

26

 

equipment for conformance with this Agreement.  Seller shall cause Highland Mining Company

to undertake reasonable care and precautions to prevent personal injuries to

any representatives, agents or employees of Buyer (collectively, “Visitors”)

who inspect the Coal Property.  Any such

Visitors shall make every reasonable effort to comply with Seller’s regulations

and rules regarding conduct on the work site, made known to Visitors prior to

entry, as well as safety measures mandated by state or federal rules,

regulations and laws.  Buyer understands

that mines and related facilities are inherently high-risk environments.  Buyer’s failure to inspect the Coal Property

or to object to defects therein at the time Buyer inspects the same shall not

relieve Seller of any of its responsibilities nor be deemed to be a waiver of

any of Buyer’s rights hereunder.

 

SECTION 21.       MISCELLANEOUS.

 

§ 21.1  Applicable

Law.  This Agreement shall be

construed in accordance with the laws of the Commonwealth of Kentucky, and all

questions of performance of obligations hereunder shall be determined in

accordance with such laws.

 

§ 21.2  Headings.  The paragraph headings appearing in this

Agreement are for convenience only and shall not affect the meaning or

interpretation of this Agreement.

 

§ 21.3        Waiver.  The failure of either party to insist on

strict performance of any provision of this Agreement, or to take advantage of

any rights hereunder, shall not be construed as a waiver of such provision or

right.

 

27

 

§ 21.4  Remedies

Cumulative.  Remedies provided under

this Agreement shall be cumulative and in addition to other remedies provided

under this Agreement or by law or in equity.

 

§ 21.5        Severability.  If any provision of this Agreement is found

contrary to law or unenforceable by any court of law, the remaining provisions

shall be severable and enforceable in accordance with their terms, unless such

unlawful or unenforceable provision is material to the transactions

contemplated hereby, in which case the parties shall negotiate in good faith a

substitute provision.

 

§ 21.6  Binding

Effect.  This Agreement shall bind

and inure to the benefit of the parties and their successors and assigns.

 

§ 21.7        Assignment.

 

A.  Seller

shall not, without Buyer’s prior written consent, which may be withheld in

Buyer’s discretion, make any assignment or transfer of this Agreement, by

operation of law or otherwise, including without limitation any assignment or

transfer as security for any obligation, and shall not assign or transfer the

performance of or right or duty to perform any obligation of  Seller hereunder; provided, however, that

Seller may assign the right to receive payments for coal directly from Buyer to

a lender as part of any accounts receivable financing or other revolving credit

arrangement which Seller may have now or at any time during the term of this

Agreement.

 

B.            Buyer

shall not, without Seller’s prior written consent, which may not be

unreasonably withheld, assign this Agreement or any right for the performance

of or right or duty to perform any obligation of Buyer hereunder; except that,

without such consent, Buyer may

 

28

 

assign this Agreement in connection with a transfer by Buyer of all or

a part interest in the generating station comprising the Delivery Point, or as

part of a merger or consolidation involving Buyer, or to an affiliate of Buyer.

 

C.  In the

event of an assignment or transfer contrary to the provisions of this section,

the non-assigning party may terminate this Agreement immediately.

 

§ 21.8  Entire

Agreement.  This Agreement contains

the entire agreement between the parties as to the subject matter hereof, and

there are no representations, understandings or agreements, oral or written,

which are not included herein.

 

§ 21.9  Amendments.  Except as otherwise provided herein, this

Agreement may not be amended, supplemented or otherwise modified except by

written instrument signed by both parties hereto.

 

IN WITNESS WHEREOF, the parties hereto have caused

this Agreement to be executed as of the date first above written.

 

	

  LOUISVILLE

  GAS AND ELECTRIC COMPANY

  	

   

  	

  PEABODY

  COALSALES COMPANY

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

  By:

  	

   

  	

   

  	

  By:

  	

   

  
	

   

  	

  Paul Thompson

  	

   

  	

   

  	

  Richard A. Navarre

  
	

   

  	

  SVP — Energy Services

  	

   

  	

   

  	

  President

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Date:

  	

   

  	

   

  	

  Date:

  	

   

  
						

 

29

 

Exhibit A

EXHIBIT A

SAMPLE COAL PAYMENT CALCULATIONS

Total Evaluated Coal Costs for Contract No. LGE02011

For contracts supplied

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

	

   

  	

   

  	

  Section I

  	

   

  	

  Base Data

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  1)

  	

   

  	

  Base F.O.B. price per ton:

  	

   

  	

  $

  	

  25.59

  	

   

  	

  /ton

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  1a)

  	

   

  	

  Tons of coal delivered:

  	

   

  	

   

  	

   

  	

  tons

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  2)

  	

   

  	

  Guaranteed average heat content:

  	

   

  	

  11,400

  	

   

  	

  BTU/LB.

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  2r)

  	

   

  	

  As received monthly avg. heat content:

  	

   

  	

   

  	

   

  	

  BTU/LB.

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  2a)

  	

   

  	

  Energy delivered in MMBTU:

  	

   

  	

   

  	

   

  	

  MMBTU

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  [(Line 1a) *2,000 lb./ton*(Line 2r)]

  *MMBTU/1,000,000 BTU

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  [(    ) *2,000 lb./ton*(    )]*MMBTU/1,000,000 BTU

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  2b)

  	

   

  	

  Base F.O.B. price per MMBTU:

  	

   

  	

  $

  	

  1.1224

  	

   

  	

  MMBTU

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  {[(Line 1)/(Line 2)]*(1 ton/2,000 lb.)]}*1,000,000

  BTU/MMBTU

  	

   

  
	

  {[(   

  /ton)/(    BTU/LB)]*(1

  ton/2,000 lb.)}*1,000,000 BTU/MMBTU

  	

   

  
	

  3)

  	

   

  	

  Guaranteed monthly avg. max. sulfur

  	

   

  	

  2.89

  	

   

  	

  LBS./MMBTU

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  3r)

  	

   

  	

  As received monthly avg. sulfur

  	

   

  	

   

  	

   

  	

  LBS./MMBTU

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  4)

  	

   

  	

  Guaranteed monthly avg. ash

  	

   

  	

  8.33

  	

   

  	

  LBS./MMBTU

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  4r)

  	

   

  	

  As received monthly avg. ash

  	

   

  	

   

  	

   

  	

  LBS./MMBTU

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  5)

  	

   

  	

  Guaranteed monthly avg. max. moisture

  	

   

  	

  10.53

  	

   

  	

  LBS./MMBTU

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  5r)

  	

   

  	

  As received monthly avg. moisture

  	

   

  	

   

  	

   

  	

  LBS./MMBTU

  	

   

  
										

 

	

   

  	

   

  	

  Section II

  	

   

  	

  Discounts

  	

   

  
	

   

  	

   

  	

  Assign a (-) to all discounts (round to (5) decimal

  places)

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  6d)

  	

   

  	

  BTU/LB.:  If

  line 2r <11,200BTU/lb. then:

  {1 - (line 2r) / (line 2)} * $0.2604/MMBTU

  {1 - (    ) / (    )} * $0.2604 =

  	

   

  	

  $

  	

   

  	

  /MMBTU

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  7d)

  	

   

  	

  SULFUR:  If

  line 3r is greater than 2.98 lbs./MMBTU

  [ (line 3r) - (line 3) ] * 0.1232/lb. Sulfur

  [ (    ) - (    ) ] * 0.1232 = 

  	

   

  	

  $

  	

   

  	

  /MMBTU

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  8d)

  	

   

  	

  ASH: If line 4r is greater than 8.69 lbs./MMBTU

  [ (line 4r) - (line 4) ] * 0.0083/MMBTU 

  [ (    ) - (    ) ] * 0.0083 =

  	

   

  	

  $

  	

   

  	

  /MMBTU

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  9d)

  	

   

  	

  MOISTURE:  If line 5r is greater than 11.25lbs./MMBTU

  [ (line 5r) - (line 5) ] * 0.0016/MMBTU

  [ (    ) - (    ) ] * 0.0016 =

  	

   

  	

  $

  	

   

  	

  /MMBTU

  	

   

  

 

 

30

 

Exhibit

A

 

 

	

   

  	

   

  	

   

  	

   

  	

  Total

  Price

  Adjustments

  	

   

  	

   

  
	

   

  	

   

  	

  Section III

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Determine total Discounts

  as follows:

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Assign

  a (-) to all discounts (round to (5) decimal places)

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Line 6d:

  	

   

  	

  $

  	

   

  	

   

  	

  /MMBTU

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Line 7d

  	

   

  	

  $

  	

   

  	

   

  	

  /MMBTU

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Line 8d

  	

   

  	

  $

  	

   

  	

   

  	

  /MMBTU

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Line 9d

  	

   

  	

  $

  	

   

  	

   

  	

  MMBTU

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  10)

  	

   

  	

  Total Discounts (-):

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Algebraic sum of above:

  	

   

  	

  $

  	

   

  	

   

  	

  /MMBTU

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  11)

  	

   

  	

  Total evaluated coal price

  = (line 2b) + (line 10)

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  12)

  	

   

  	

  Total discount price

  adjustment for Energy delivered:

  (line 2a) * (line 10 (-)

  $/MMBTU                                                          +

  	

   

  	

  $

  	

   

  	

   

  	

  /MMBTU  =

  	

   

  	

  $

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  13)

  	

   

  	

  Total base cost of coal 

  (line 2a) * (line 2b)

  $/MMBTU                                                          +

  	

   

  	

  $

  	

   

  	

   

  	

  /MMBTU  =

  	

   

  	

  $

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  14)

  	

   

  	

  Total coal payment for

  month 

  (line 12) + (line 13)

  $/MMBTU                                                          +

  	

   

  	

  $

  	

   

  	

   

  	

  =

  	

   

  	

  $

  	

   

  	

     

  

 

31

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00048-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00048-of-00352.parquet"}]]