Document:

exv10w36

Exhibit 10.36

     ARMSTRONG COAL COMPANY, INC.

LG&E/KU Contract No. J10009

COAL SUPPLY AGREEMENT

BETWEEN

ARMSTRONG COAL COMPANY, INC.

AND

LOUISVILLE GAS & ELECTRIC COMPANY

and

KENTUCKY UTILTIES COMPANY

December ___, 2009

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	PAGE	 
	Recitals
	 	 	2	 
	Section 1. General
	 	 	3	 
	Section 2. Term
	 	 	3	 
	Section 3. Quantity
	 	 	6	 
	3.1 Base Quantity
	 	 	6	 
	3.2 Delivery Schedule
	 	 	8	 
	Section 4. Source
	 	 	8	 
	4.1 Source
	 	 	8	 
	4.2 Assurance of Operation and Quantity
	 	 	8	 
	4.3 Non-Diversion of Coal
	 	 	9	 
	4.4 Seller’s Preparation of Mining Plan
	 	 	9	 
	4.5 Substitute Coal
	 	 	11	 
	4.6 Relationship of the Parties
	 	 	11	 
	Section 5. Delivery
	 	 	12	 
	5.1 Barge Delivery
	 	 	12	 
	5.2 Rail Delivery
	 	 	14	 
	5.2.1 Freeze Conditioning
	 	 	14	 
	Section 6. Quality
	 	 	15	 
	6.1 Specifications
	 	 	15	 
	6.2 Definition of “Shipment”
	 	 	17	 
	6.3 Rejection
	 	 	17	 
	6.4 Suspension and Termination
	 	 	18	 
	Section 7. Weights, Sampling and Analysis
	 	 	19	 
	7.1 Weights
	 	 	19	 
	7.2 Sampling and Analysis
	 	 	20	 
	Section 8. Price
	 	 	22	 
	8.1 Base Price
	 	 	22	 
	8.2 Quality Price Adjustment
	 	 	23	 
	8.3 Payment Calculation
	 	 	26	 
	8.4 Diesel
Fuel Adjustment
	 	 	26	 
	8.5 New Impositions
	 	 	28	 
	Section 9. Invoices, Billing and Payment
	 	 	29	 
	9.1 Invoicing Address
	 	 	29	 
	9.2 Invoice Procedures for Coal Shipments
	 	 	29	 
	9.3 Payment Procedures for Coal Shipments
	 	 	29	 
	9.4 Withholding
	 	 	31	 
	Section 10. Force Majeure
	 	 	32	 
	10.1 General Force Majeure
	 	 	32	 
	10.2 Environmental Law Force Majeure
	 	 	33	 
	Section 11. Changes
	 	 	35	 
	Section 12. Notices
	 	 	36	 
	12.1 Form and Place of Notice
	 	 	36	 

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	 	 	PAGE	 
	12.2 Change of Person or Address
	 	 	37	 
	12.3 Electronic Data Transmittal
	 	 	37	 
	Section 13. Guarantee
	 	 	37	 
	Section 14. Right to Resell
	 	 	37	 
	Section 15. Indemnity and Insurance
	 	 	38	 
	15.1 Indemnity
	 	 	38	 
	15.2 Insurance
	 	 	38	 
	Section 16. Termination for Default
	 	 	39	 
	Section 17. Taxes, Duties and Fees
	 	 	40	 
	Section 18. Documentation and Right of Audit
	 	 	40	 
	Section 19. Equal Employment Opportunity
	 	 	40	 
	Section 20. Coal Property Inspections
	 	 	41	 
	Section 21. Miscellaneous
	 	 	42	 
	21.1 Applicable Law
	 	 	42	 
	21.2 Headings
	 	 	42	 
	21.3 Waiver
	 	 	42	 
	21.4 Remedies Cumulative
	 	 	42	 
	21.5 Severability
	 	 	42	 
	21.6 Binding Effect
	 	 	42	 
	21.7 Assignment
	 	 	42	 
	21.8 Entire Agreement
	 	 	43	 
	21.9 Amendments
	 	 	43	 
	21.10 Forward Contract
	 	 	44	 
	21.11 Joint and Several Liability
	 	 	44	 
	Signature Page
	 	 	44	 
	Exhibit A Coal Properties
	 	 	45	 
	Exhibit B Sample Coal Payment Calculations
	 	 	46	 
	Exhibit C Sample Diesel Fuel Adjustment Calculation
	 	 	48	 

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     ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

COAL SUPPLY AGREEMENT

     This is a coal supply agreement (the “Agreement”) entered into as of this _ day of December,
2009, but shall be effective upon and only if and when the Commencement Date occurs as set forth in
Section 2 below, between LOUISVILLE GAS AND ELECTRIC COMPANY (“LG&E”) and KENTUCKY UTILITIES
COMPANY (“KU”), each a Kentucky corporation, with a common address at 220 West Main Street,
Louisville, Kentucky 40202 (LG&E and KU are each individually sometimes herein called a “Buyer” as
more particularly described below) and ARMSTRONG COAL COMPANY, INC. (“Seller”) a Delaware
corporation with an address at 407 Brown Road, Madisonville, Kentucky 42431.

     The Seller acknowledges that, while there will be no effect on the Base Quantity set forth in
Section 3 below, LG&E and KU will allocate the quantity of coal to be purchased and received
hereunder among themselves and that such allocation may change from time to time, at the sole
discretion of LG&E and KU. Therefore, the term “Buyer” as used herein shall mean, (a) with respect
to any particular “shipment” (as such term is defined in Section 6.2 below) actually received by
either LG&E or KU, the party who actually received such shipment; and (b) with respect to any time
or circumstance under this Agreement that the party or parties constituting “Buyer” is not
determined pursuant to clause (a) immediately above (including, without limitation, matters
involving exercise of rights or remedies by Buyer (or enforcing obligations, duties and liability
against Buyer by Seller) not involving shipments or prior to receipt of shipments), the party or
parties (and in such percentage allocation, if applicable) as determined

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

by LG&E and KU, in their sole discretion. As provided in Section 21.11 below, Seller agrees
that the liability of each of LG&E and KU shall at all times be several and not joint, and that
each party shall have obligations, duties and liability of a Buyer hereunder only to the extent
(and in the percentage, if applicable) each such party is determined to be a “Buyer” pursuant to
this paragraph. Also, each party shall have rights and remedies of a Buyer hereunder only to the
extent (and in the percentage, if applicable) each of LG&E or KU is determined to be a “Buyer”
pursuant to this paragraph. In the event the determination of Buyer pursuant to this paragraph is
found contrary to law or unenforceable by any court of law, or cannot be reasonably made with
respect to any particular circumstance for any reason, the rights, remedies, obligations, duties
and liabilities of Buyer shall be allocated to each of LG&E and KU, severally and not jointly, 50%
to each party.

     In consideration of the agreements herein contained, the parties hereto agree as follows:

RECITALS:

          WHEREAS, LG&E and KU are electric utility companies which desire 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:

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

     SECTION 1. GENERAL.

     (a) The above recitals are true and correct and comprise a part of this Agreement.

     (b) Seller agrees to sell and deliver to Buyer, and Buyer agrees to purchase and receive
from Seller, steam coal subject to the terms and conditions set forth herein.

     (c) Each covenant, representation and warranty given by Seller herein is a material
inducement for Buyer to enter into this Agreement.

     SECTION 2. TERM. The term of this Agreement shall commence (and this Agreement shall
become effective), if at all, on the Commencement Date (as hereinafter defined) and shall continue
through December 31, 2016 subject to the reopener provisions of §8.1(b), unless terminated pursuant
to any of the terms set forth herein.

     For purposes of this Agreement, the following terms shall have the meanings set forth below:

     “Commencement Date” shall mean (a) January 1, 2011, but if and only if the Mine Permit Date occurs
on or before October 1, 2010; (b) January 1, 2012, but if and only if the Mine Permit Date occurs
after October 1, 2010, but on or before October 1, 2011; or (c) January 1, 2013, but if and only if
the Mine Permit Date occurs after October 1, 2011 and on or
before October 1, 2012.

     “Mine Permit Date” shall mean the last day of the month in which Seller has obtained the
last of all of the following permits: the surface mining permit from the Kentucky Division of

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

Mine Permits, the Section 404 permit from the Army Corps. of Engineers, the Section 401 Water
Quality Certification from the Kentucky Division of Water, the air permit to operate from the
Kentucky Division for Air Quality and other like permits, if any, necessary to commence operations
with respect to each of the following: (a) Equality Boot mine, (b) the refuse disposal facility
associated with the preparation plant located at Armstrong Dock, and (c) the barge
loading/unloading system between Equality Boot mine and Armstrong Dock. In the event the
requisite permits described above with respect to the Equality Boot mine have not been obtained,
but the requisite permits necessary to commence operations with respect to one of the other sources
listed in the Contract (other than Big Run, Midway/East Fork and Parkway) have been obtained, then
for purposes of this definition the term “Mine Permit Date” shall mean the last day of the month
in which Armstrong has obtained the last of all of the requisite permits for such other source.
Notwithstanding the foregoing, if requirements for the occurrence of the Mine Permit
Date have been met (with respect to the Equality Boot mine or one of the other sources as provided
above), but one or more of the permits necessary to commence operations, on the date which is three
months following the date such requirements have been met, has been stayed, vacated, or otherwise
rendered ineffective, or is being appealed or challenged pursuant to a formal proceeding, then the
Mine Permit Date, for purposes of determining the Section 10.2 Settlement Payment Termination Date,
shall be deemed to have not yet occurred. In such a circumstance, the Mine Permit Date
shall be deemed to have occurred on the earlier of (i) the date that any such impediments are
resolved such that Armstrong may commence operations with respect to such source, and (ii) the date
the requisite permits are obtained with respect to

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

another source listed in the Contract (other than [Big Run, Midway/East Fork and Parkway])
that
is not subject to such impediments.

     Notwithstanding any provision to the contrary herein, it shall be a condition precedent (but
shall be the only condition precedent) to the parties’ obligations, duties and rights hereunder, as
well as to the enforceability of this Agreement, that the Mine Permit Date shall have occurred on
or before October 1, 2012. Upon the mutual written agreement of the parties, such condition
precedent may be waived. Should such condition precedent not be met or waived by the aforementioned
date, this Agreement shall be deemed null and void and unenforceable ab initio, and neither party
shall have any liability to the other related to or arising from this Agreement. If the
Commencement Date is January 1, 2012, then any reference to obligations, duties and rights
hereunder for the calendar year 2011 (including, without limitation, the sale and purchase of the
Base Quantity of coal for 2011) shall not be applicable, and shall be treated as if deleted in
their entirety from this Agreement. If the Commencement Date is January 1, 2013, then any reference
to obligations, duties and rights hereunder for the calendar year 2011 and for the calendar year
2012 (including, without limitation, the sale and purchase of the Base Quantity of coal for 2011
and for 2012) shall not be applicable, and shall be treated as if deleted in their entirety from
this Agreement.

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

     SECTION 3. QUANTITY.

     §3.1 Base Quantity. Subject to the terms and conditions set forth in this Agreement,
Seller shall sell and deliver, or cause to be delivered, and Buyer shall purchase and receive, or
cause to be received, the following annual base quantity of coal (“Base Quantity”):

	 	 	 	 	 
	YEAR	 	BASE QUANTITY (TONS)	 
	2011
	 	 	1,250,000	 
	2012
	 	 	1,250,000	 
	2013
	 	 	1,250,000	 
	2014
	 	 	750,000	 
	2015
	 	 	750,000	 
	2016
	 	 	750,000	 

     The Base Quantity of coal scheduled to be delivered in a given calendar year as set forth in
the table above (as such quantity may be adjusted as provided in this §3.1) shall be delivered
during that calendar year. Not withstanding the foregoing, if Seller or Buyer does not perform with
respect to supplying or taking delivery of such Base Quantity scheduled for a particular year, for
any reason, as a result of non-performing party’s actions or inactions to perform as required by
this Agreement (except to the extent such failure to deliver is due to force majeure as provided in
Section 10 hereof), then performing party at its sole option, may elect to make up such undelivered
quantities (“Make-up Tons”) by having the non-performing party deliver or take

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

delivery to the undelivered quantities in the calendar year (the “Make-up Year”) immediately
following the calendar year in which such Make-up Tons should have been delivered. Prior to making
such election, performing party may request from non-performing party adequate assurances,
satisfactory to performing party, that non-performing party is capable and will deliver or take
delivery of, both the Base Quantity set forth for the Make-up Year and the Make-up Tons in the
Make-up Year.

     In the event performing party makes the election, the quantity of the Make-up Tons
shall be added to and shall increase the Base Quantity set forth for the Make-up Year, and
non-performing party shall deliver or take delivery of such new Base Quantity (including the Make-up
Tons) during the Make-up Year pursuant to a new mutually agreed delivery schedule incorporating the
delivery of the additional Make-up Tons. In such event, for accounting and payment
purposes, the first (1st) tons delivered in the Make-up Year shall be considered the
Make-up Tons and deliveries will not be considered a part of the original Base Quantity set forth
for the Make-up Year unless and until non-performing party has delivered or taken delivery of all
of the Make-up Tons which should have been delivered in the previous year. If the non-performing
party’s failure to deliver or take delivery of all of the Base Quantity during a particular year
constitutes a breach of or other violation under this Agreement, nothing in this §3.1 shall act as
a waiver by the performing party of such breach or violation or shall act as a limitation on
performing party’s remedies; provided however, that if performing party elects to make up the
Make-up Tons, then such election and the receipt of the Make-up Tons in the Make-up Year shall be
performing party’s sole and exclusive remedy for non-performing party’s failure

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

to deliver the Make-up Tons in that particular year; provided, further, that once
performing party elects to deliver or accept Make-up Tons and there is a failure to perform in
providing or accepting the Make-up Tons, then the performing party shall not be limited to its
choice of remedies as provided in this section, and can pursue or elect any other alternative
remedy hereunder at law or in equity.

     §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 the Commencement
Date (as defined in Section 2 above). Time is of the essence with respect to the schedule so
established.

     Except as otherwise provided herein, failure by Seller to deliver or Buyer to receive
shipments in a timely fashion shall constitute a material breach within the meaning of Section 16
of this Agreement, unless such failure to deliver or receive shipments is the result of the other
party’s action or inaction.

SECTION 4. SOURCE.

     §4.1 Source. The coal sold hereunder, including coal purchased by Seller from
third parties, shall be supplied from Seller’s mines as listed in Exhibit “A” attached hereto (the
properties listed on Exhibit “A” are collectively referred to herein 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

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

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. Seller hereby dedicates 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 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 provide Buyer with two (2) copies of such mining plan which shall contain
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

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

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 March 31 of the year of the Commencement Date (as defined
in Section 2 above), if required.

     Buyer’s receipt of the mining plan or other information or data furnished by Seller 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 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 planned
changes in mining progression, plans or procedures. The update shall be submitted annually on or
before October 1 of each year following the Commencement Date during the term of this Agreement.

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

     §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 Section 10, then Buyer will have the option of requiring that Seller supply
substitute coal from other facilities and mines under all the terms and conditions of this
Agreement including, but not limited to, the price provisions of Section 8, the quality
specifications of §6.1, and the provisions of Section 5 concerning reimbursement to Buyer for
increased transportation costs. Seller’s delivery of coal not produced from the Coal Property
without having received the express written consent of Buyer shall constitute a material breach of
this Agreement.

     §4.6 Relationship of the Parties. Seller agrees that it is not and will not hold
itself out as a partner, joint venture, employee, agent or representative of 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.

     Seller shall have sole and exclusive authority to direct and control its respective activities
and operations, and those of any subcontractors, undertaken in the performance of Seller’s
obligations under this Agreement. Seller shall exercise full and complete control over its
respective work force and labor relations policies. Buyer shall have no authority or control over
Seller’s operations or work force.

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

     SECTION 5. DELIVERY.

     §5.1 Barge Delivery. The coal shall be delivered to Buyer F.O.B. barge at the
Armstrong Dock at mile point 76.6 on the Green River near Centertown, Kentucky (the “Barge Delivery
Point”); provided however, if the Buyer or Buyer’s barging contractor is not permitted or able to
take possession and control of the barge at such dock (for example: if the dock is part of a closed
harbor), then the coal is not considered delivered hereunder unless and until the barge is placed
into a position that Buyer or Buyer’s barging contractor can take possession and control of the
barge and Buyer or Buyer’s barging contractor actually do take possession and control of such barge
(in such case, the point where Buyer or Buyer’s barging contractor actually takes possession and
control of the barge shall be considered the Barge Delivery Point hereunder). Seller may deliver
the coal at a location different from the stated Barge Delivery Point, provided, however, that
Seller shall reimburse Buyer for any resulting increases in the cost of transporting
the coal to Buyer’s generating station(s). 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 (except in the case where Buyer or Buyer’s barging contractor cannot take possession
and control of the barge at the dock, the coal will be considered to be delivered at the moment
Buyer or Buyer’s Contractor actually takes possession and control of the barge). Buyer or its
contractor shall furnish suitable barges in accordance with a delivery schedule provided by Buyer
to Seller. Seller shall load and trim the coal into barges to the proper draft and the proper

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     ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

distribution within the barges. Seller shall arrange and pay for all costs of transporting the
coal from the mines to the Barge Delivery Point (including, without limitation, all truck, rail,
barge and transloading costs, and all fleeting, switching, harbor and other port charges). Buyer
shall arrange for transporting the coal by barge from the Barge Delivery Point to its generating
station(s) and shall pay for the cost of such transportation. For delays caused by Seller in
handling the scheduling of shipments with Buyer’s barging contractor, Seller shall be responsible
for any demurrage or other penalties assessed by said barging contractor (or assessed by Buyer)
which accrue at the Barge Delivery Point, including the demurrage, penalties for loading less than
the specified minimum tonnage per barge, or other penalties assessed for barges not loaded in
conformity with applicable requirements. Buyer shall be responsible to deliver barges in as clean
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, fleeting, switching, and other harbor and port charges; that while the
barges are in the care and custody of the loading dock, all U.S. Coast Guard regulations and other
applicable laws, ordinances, rulings, and regulations shall be complied with, including adequate
mooring and display of warning lights; that any water in the cargo boxes of the barges be pumped
out by the loading dock operator prior to loading; that the loading operations be performed in a
workmanlike manner and in accordance with the reasonable loading requirements of Buyer and Buyer’s
barging contractor; and that the loading dock operator carry landing owners or wharfinger’s
insurance with basic coverage of not less than $300,000.00 and total of basic coverage and excess
liability coverage of not less than $1,000,000.00, and provide evidence

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

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.

     §5.2 Rail Delivery. For rail deliveries of coal, Seller shall deliver the coal to
Buyer F.O.B. railcar at the rail loading facility at Midway Unit Train Facility rail loadout the
(“Rail Delivery Point”), near McHenry, Kentucky on the Paducah and Louisville Railroad. Seller may
deliver the coal at a location different from the Rail 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. The Base Price outlined in §8.1.a within shall be applicable to all coal loaded at the
aforementioned Rail Delivery Point. Title to and risk of loss of coal sold will pass to Buyer and
the coal will be considered to be delivered when it is loaded into railcars at the Rail Delivery
Point. Buyer or its contractor shall furnish suitable railcars in accordance with a delivery
schedule provided by Buyer to Seller. Seller shall be responsible for and pay the cost of repairs
for any damages caused by Seller to railcars owned or leased by Buyer while such railcars are in
Seller’s control or custody. Seller shall comply with the applicable provisions of Buyer’s rail
carrier’s contract or tariff.

     §5.2.1 Freeze Conditioning. At Buyer’s request, Seller shall treat (or have treated)
any shipment of coal hereunder with a freeze conditioning agent approved by Buyer in order to
maintain coal handling characteristics during shipment. If requested by Buyer, Seller shall also
treat (or have treated) any railcars specified by Buyer with a side release agent approved by

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

Buyer. The price for such requested chemical treatment shall be an amount equal to Seller’s
cost of materials applied and associated application costs on a per gallon basis for each
application of freeze conditioning agent or side release agent, as the case may be. Seller shall
invoice Buyer for all such treatment which occurred in a calendar month by the fifteenth
(l5th) of the following month; and payment shall be electronically transferred
by the twenty-fifth (25th) of such following month, except that, if the
twenty-fifth (25th) is not a regular work day, payment shall be made on the
next business day or within ten (10) days after receipt of Seller’s invoice, whichever is later.

     SECTION 6. QUALITY.

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

	 	 	 	 	 
	 	 	Guaranteed Monthly	 	Rejection Limits
	Specifications	 	Weighted Average (1)	 	(per shipment)
	BTU/LB.

	 	min. 11,000
	 	< 10,800
	 
	LBS/MMBTU:
	 	 	 	 
	MOISTURE

	 	max. 12.00
	 	> 13.50
	ASH

	 	max. 12.00
	 	> 13.50
	SULFUR

	 	max. 3.0
	 	> 3.25
	CHLORINE

	 	max. .10
	 	>.13
	FLUORINE

	 	max. __
	 	> __
	NITROGEN

	 	max. 3.0
	 	> 3.5
	 
	 	 	 	 
	ARSENIC (parts per million)

	 	max. 15.0
	 	> 15.0
	 
	 	 	 	 
	ASH/SULFUR RATIO

	 	min. 4.05
	 	< 3.8

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. JI0009

	 	 	 

	SIZE (3” x 0”):
	 	 
	Top size (inches)*

	max. 3 X 0 	 > 3 X 0
	Fines (% by wgt)
	 	 
	Passing 1/4” screen

	max. 45  	 > 50
	 
	% BY WEIGHT:
	 	 
	 
	 	 
	VOLATILE

	min. 33	  < 30
	FIXED CARBON

	min. 44 	 < 41
	GRINDABILITY (HGI)

	min. 55	  < 50

ASH
FUSION TEMPERATURE (°F) (ASTM D1857)

	 	 	 	 	 

	REDUCING ATMOSPHERE
	 	 	 	 
	Initial Deformation

	 	min. 2030
	 	min. 2020
	Softening (H=W)

	 	min. 2100
	 	min. 2090
	Softening (H=1/2W)

	 	min. 2200
	 	min. 2150
	Fluid

	 	min. 2400
	 	min. 2350
	 
	OXIDIZING ATMOSPHERE
	 	 	 	 
	Initial Deformation

	 	min. 2470
	 	min. 2400
	Softening (H=W)

	 	min. 2500
	 	min. 2440
	Softening (H=1/2W)

	 	min. 2510
	 	min. 2460
	Fluid

	 	min. 2550
	 	min. 2500

	_(1)	 	An actual Monthly Weighted Average will be calculated for each
specification for coal delivered to Buyer’s generating station(s).

	*	 	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-five per cent (45
%) by weight of coal that will pass through a screen having circular perforations one-quarter (1/4)
of an inch in diameter.

	 	 	 	 	 

	      Note: As used herein

	 	>
	 	means greater than:
	 

	 	<
	 	means less than.

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     §6.2 Definition of “Shipment”. As used herein, a “shipment” shall mean (a) with
respect to barge deliveries, one (1) barge load or a barge lot load, or (b) with respect to rail
deliveries, one (1) unit trainload of coal, as applicable, 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. With
respect to shipment(s) which fail to conform to any or all of the Rejection Limits set forth in
§6.1, 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. With respect to shipment(s) which contain
extraneous materials, Buyer must reject coal within twenty-four (24) hours after receipt of the
shipment(s) at Buyer’s generating station(s). 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 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 rightfully rejected, Buyer may purchase coal from another source
in order to replace the rejected coal. Seller shall reimburse Buyer for (i) any amount by which the
actual 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

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(ii) any and all transportation, storage, handling, or other expenses that have been
incurred by Buyer for rightfully rejected coal. This remedy is in addition to all of Buyer’s other
remedies under this Agreement and under applicable law and in equity for
Seller’s breach.

     If Buyer fails to reject a shipment of non-conforming coal which it had the right to reject
for failure to meet any or all of the Rejection Limits set forth in §6.1 or because such shipment
contained 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, 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) months in a six (6) month period, or if five (5) barge
shipments in a thirty (30) day period are rejectable by Buyer, or two (2) rail shipments are
rejectable in any thirty (30) day period by Buyer, then Buyer may upon notice confirmed in writing
and sent to Seller by certified mail, suspend future shipments except shipments already loaded into
barges, and/or railcars. Seller shall, within 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

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rejection limits set forth in §6.1. If Seller fails to provide such assurances within said ten
(l0) 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 after providing such assurances to Buyer’s
reasonable satisfaction, shipments hereunder shall resume and any tonnage deficiencies resulting
from suspension may be made up at Buyer’s sole option. If Buyer elects to not make up the
shipments, the Base Quantity shall be reduced to reflect the tonnage deficiency resulting from
suspension. Buyer shall not unreasonably withhold its acceptance of Seller’s assurances, or delay
the resumption of shipment. If Seller, after such assurances, fails to meet any of the Guaranteed
Monthly Weighted Averages for any one (1) month within the next six (6) months or if three (3) barge
shipments or if one (1) rail shipment are rejectable within any thirty (30) day period 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

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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 using standards mutually acceptable to both parties.
Samples for analyses shall be taken by any ASTM standards or standards mutually acceptable to both
parties, and 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 mutually agreeable 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
(l) part shall be used by Buyer as a check sample, if Buyer in its sole judgment
determines it is

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

necessary; one (1) part shall be retained by Buyer (LG&E) until the twenty-fifth
(25th) of the month following the month of unloading (the “LG&E Disposal Date”)
or Buyer (KU) until thirty (30) days after the sample is taken (the “KU Disposal Date”), the LG&E
Disposal Date and the KU Disposal Date are collectively 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 tenth (10th) 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.

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     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(a). Base Price. The base price (“Base Price”) of the coal to be sold
hereunder will be firm and will be based on Dollars/Ton and will be determined by the calendar year
in which the coal is delivered to Buyer as provided in Section 5 hereto and in accordance with the
following schedule:

	 	 	 	 	 	 	 	 	 
	YEAR	 	Rail	 	 	Barge	 
	2011
	 	$	42.00	 	 	$	42.00	 
	2012
	 	$	43.50	 	 	$	43.50	 
	2013
	 	$	45.00	 	 	$	45.00	 
	2014
	 	 	*	 	 	 	*	 
	2015
	 	 	*	 	 	 	*	 
	2016
	 	 	*	 	 	 	*	 

     Not withstanding the foregoing, the base price for any Make-up Tons (as such term is
defined in §3.1 hereof) shall be the Base Price for the applicable Quantity in the calendar year in

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

which such Make-up Tons should have been delivered and not the Base Price for the applicable
Quantity in the Make-up Year (as such term is defined in §3.1 hereof).

     §8.1(b). Reopener. On or before April 1, 2013, Buyer and Seller will begin negotiations
on price and/or other terms and conditions to be effective during the years 2014 through 2016. If
the parties do not reach an agreement on new pricing and/or on other terms and conditions for tons
to be delivered in 2014 and beyond, by August 1, 2013, then this Agreement (including any rights and
obligations under this Agreement) will terminate as of December 31, 2013 without further obligation
hereunder, except for those that occurred or accrued prior to termination. This reopener provision
shall not be interpreted as a Right of First Refusal or exclusive supply agreement.

     §8.2 Quality Price Adjustment.

     (a) BTU True Up. The Base Price for coal delivered hereunder in any particular
calendar month is based on the assumption that the actual “as received” monthly weighted average
BTU/LB (the “AMWA”) for coal delivered to Buyer during that particular calendar month is equal to
the minimum Guaranteed Monthly Weighted Average BTU/LB set forth in §6.1 (“GMWA”). In
the event the AMWA varies from the GMWA for any particular calendar month, then the Base Price
applicable to such delivered coal will be adjusted for that particular calendar month to account
for such variation in BTU’s; such Base Price adjustment for BTU’s for that particular calendar
month to be determined as follows:

(i) Calculate the per ton Base Price BTU adjustment for any
particular calendar month using the following formula (where Price per Ton is the applicable Base
Price set forth in §8.1 above):

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

	 	 	 	 

	 	AMWA — GMWA

	X
	Price per Ton = Per Ton Adjustment
	 	 
GMWA
	 	 

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

     Depending on whether the AMWA is greater or less than the GMWA in any particular calendar
month, the Per Ton Adjustment (and thus the Base Price adjustment for BTU’s) for that particular
calendar month can be positive or negative. If the Base Price adjustment for BTU’s (as calculated
above) for a particular calendar month is positive, then Buyer shall be obligated to pay the amount
of such adjustment to Seller. If the Base Price adjustment for BTU’s (as calculated above) for a
particular calendar month is negative, then Seller shall be obligated to pay or credit the amount
of such adjustment to Buyer. Buyer shall be responsible for making the calculations and shall send
a written statement to Seller of the amount of such adjustment each month. Such payments shall be
due when the next payment for coal is due hereunder.

     For example, if the AMWA for a particular calendar month equals 11,200 BTU/LB, the GMWA equals
11,000 BTU/LB and the Price Per Ton equals $42.00/ton, then the Per Ton Adjustment
would be ((11,200 — 11,000) ÷ 11,000) x $42.00 = $.7636 per ton. If a total of
100,000 tons were delivered during that particular calendar month, then the Base Price adjustment
for BTU’s would equal $76,363.64 (100,000 x $.7363). Since it is positive, this amount would be due
and owing to Seller by Buyer with respect to the deliveries for that particular calendar month.

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

     (b) The Base Price is based on coal meeting or exceeding the Guaranteed Monthly Weighted
Average specifications for the Buyer’s generating stations 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.l, 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	 

     (c) Notwithstanding the foregoing, for each specification each month with respect to the
quality price discounts in §8.2(b) above, there shall be no discount if the actual Monthly Weighted
Average meets the applicable Discount Point set forth below. If the actual Monthly Weighted Average
fails to meet such applicable Discount Point, then the discount in §8.2(b) above 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 B attached
hereto.

	 	 	 	 	 	 	 	 
	 	 	 	Guaranteed Monthly	 	 
	 	 	 	Weighted
Average	 	Discount
Point
	 	BTU/LB

	 	min. 11,000
	 	10,900	 
	 	 
	 	 	 	 	 	 
	 	LB/MMBTU:
	 	 	 	 	 	 
	 	SULFUR

	 	max. 3.00
	 	3.10	 
	 	ASH

	 	max. 12.00
	 	12.80	 
	 	MOISTURE

	 	max. 12.00
	 	12.75	 

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

     §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
Diesel Fuel Adjustment, In addition to any other adjustments
provided herein, the Base Price shall also be adjusted for changes in the price of
Diesel Fuel, such adjustment to be effective on the Adjustment Date (as such term is
hereinafter defined). The first Diesel Fuel Price Adjustment calculation shall be
applied towards shipments unloaded beginning on the Commencement Date (as defined in
Section 2 above).

     The Diesel Fuel adjustment contemplated herein for any particular period shall be determined
as follows: (1) $7.00 per ton of the Base Price applicable to that particular period shall be
deemed (for purposes of this section) to be the diesel fuel component of the Base Price (herein
called the “Diesel Fuel Component”); (2) Multiply the Diesel Fuel Component by the Adjustment
Factor (as hereinafter defined; the resulting product is hereinafter called the “Diesel Fuel
Component Adjustment”); before any adjustment to the price under this Section shall occur with
respect to a particular period, the applicable PPI Factor must be greater than 1.200 or less than
0.800; (3) If the PPI Factor is greater than 1.200 or less than 0.800, then the Base Price

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

adjusted pursuant to this section (herein called the “Adjusted Base FOB Price Per Ton”) for
that particular period shall be equal to the sum of the Base Price and the Diesel Fuel Component
Adjustment (note that if the PPI Factor is less than 0.800, the Diesel Fuel Component Adjustment
will be negative, resulting in an Adjusted Base FOB Price Per Ton which is less than the Base Price
due by the amount of the Diesel Fuel Component Adjustment. An example calculation is
shown in Exhibit C.

     For purposes of this Section 8.4, the following terms shall have the meanings set forth below:

“PPI” shall mean the published PPI-Commodities #2 Diesel Fuel Index #WPU057303 found in the
Producer Price Indexes, published monthly by the U.S. Department of Labor, Bureau of Labor
Statistics.

“Adjustment Factor” shall mean (a) for a PPI Factor greater than 1.200, the difference
between the PPI Factor and 1.200, (b) for a PPI Factor less than .800, the difference
between PPI Factor and .800 (note: this calculation will result in a negative number), and
(c) for a PPI Factor between .800 and 1.200, inclusive, the Adjustment Factor shall be
deemed to be zero.

“Adjustment Date” shall mean the first day following a Calculation Period for which an
adjustment to the Base Price for changes in the price of Diesel Fuel is contemplated
hereunder, namely, January 1, April 1, July 1 or October 1, as the case may be, for each
calendar year for which this Section 8.4 applies.

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

“Calculation Period” shall mean (i) for a January 1 Adjustment Date, the three
(3) months of September, October, and November of the preceding calendar year; (ii) for an
April 1 Adjustment Date, the three (3) months of December of the preceding calendar year,
and January and February; (iii) for a July 1 Adjustment Date, the three (3) months of
March, April, and May; and (iv) for an October 1 Adjustment Date, the three (3) months of
June, July, and August.

“PPI Factor” shall mean a fraction, the denominator of which shall be the average of
the base index PPI’s for July, August and September 2009, and the numerator of which shall
be the average of the base index PPI’s of the three months published during the relevant
Calculation Period with respect to a particular Adjustment Date.

     §8.5 New Impositions. The Base Price shall be subject to adjustment pursuant to this
section only in the event that the requesting party can clearly demonstrate that new applicable
Federal or state statutes, regulations, or other governmental impositions on the coal to be
supplied hereunder, including but not limited to tax increases or decreases (other than taxes
measured by income), occur after the date of execution of this Agreement, which cause Seller’s cost
for providing coal to Buyer under this Agreement to increase or decrease by more than twenty five
cents ($.25) per ton. The affected party shall promptly notify the other party of any such changes
and supply sufficient documentation for the other party 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 adjustments, such

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

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:

E.ON
U.S. Services, Inc.

220 West Main Street

Louisville, KY 40202

Attention: Manager Fuels Accounting and Administration

     §9.2 Invoice Procedures for Coal Shipments. Seller shall invoice Buyer at the Base
Price, plus or minus any adjustment as provided herein, for all coal unloaded in a calendar month
by the tenth (10th) of the following month.

     § 9.3 Payment Procedures for Coal Shipments.

     For all coal delivered pursuant to Section 5 hereof, and unloaded at the Buyer’s generating
station(s) between the first (1st) through the fifteenth (15th) days of any calendar month, Buyer
shall make preliminary payment for one-hundred percent (100%) 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 delivery and unloading, except that, if the twenty-fifth
(25th) is not a regular work day, payment shall be made on the next regular

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

work day. All preliminary payments shall be calculated based upon the then-current price
on a dollar per ton basis as calculated on the guaranteed monthly weighted average BTU/lb and the
then-current Base Price in dollars per ton. For all coal delivered, as defined in Section 5 hereof,
and unloaded at the Buyer’s generating station(s) between the sixteenth (16th) and through the last
day of any calendar month, Buyer shall make a payment for one-hundred percent (100%) of the amount
owed for the coal by the fifteenth (15th) day of the month following the month of unloading, except
that, if the fifteenth (15th) is not a regular work day, payment shall be made on the next regular
work day. Also by the fifteenth (15th) day of the month following the month of
unloading, with respect to all coal unloaded at Buyer’s generating station(s) during the month of
unloading, a reconciliation of amounts paid and amounts owed during said month shall be made,
including, making any adjustments for any applicable discounts or other adjustments provided
herein, except that, with respect to all amounts due or owing on the fifteenth
(15th) of the month following the month of unloading, if the fifteenth
(15th) is not a regular work day, payment shall be made on the next regular
work day.

     For example, Buyer will make a preliminary payment by September 25 for coal unloaded from
September 1 through 15. By September 15, a payment for coal unloaded from August 16 through August
31 will be made which will be adjusted to include a reconciliation with respect to all coal
unloaded in August. The reconciliation shall be made as follows: Seller shall invoice Buyer on or
before the tenth (10th) day of the month following the month of unloading at Buyer’s generating
station(s) during the previous month. The amount due for all coal (based on the Base Price plus or
minus any Quality Price adjustments) unloaded and accepted by Buyer

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

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 fifteenth (l5th) day of the month following the
month of unloading or five (5) days after receipt of an invoice whichever is later, except, that,
if the fifteenth (15th) is not a regular work day, payment shall be made in the next regular work
day. Buyer shall electronically transfer funds to Seller’s Account:

Armstrong Energy, Inc.

US Bank, N.A.

Account # 152306681361

Routing # 081-000-210

     §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.

     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.

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LG&E/KU Contract No. J10009

     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 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 to produce or obtain coal from a mine other than the Coal Property will not be considered a
force majeure event hereunder.

     During any period in which Buyer’s ability to perform hereunder is affected by a force
majeure event, Buyer shall not purchase any coal from any other sellers from whom Buyer’s

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

ability to purchase is similarly affected; and further shall purchase from Seller under this
Agreement at least a pro rata portion (on a per ton basis) of its total contractual commitments
from all its sellers 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.

     Tonnage deficiencies resulting from a force majeure event shall be made up at Buyer’s sole
option on a reasonable schedule; provided, however, Buyer shall be required to provide written
notice to seller of its intent to require Seller to make up such deliveries within 90 days of the
cessation of the force majeure event.

     §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 or Seller to produce the coal which is required
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

33

 

ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

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 Seller or the effective date of such restriction, to
terminate this Agreement without further obligation hereunder on the part of either party.

     If as a result of the adoption or reinterpretation of such laws, regulations, policies, or
restrictions, or change in the interpretation or enforcement thereof, Seller decides that it will
be impossible or uneconomical for Seller to produce such coal, Seller shall so notify Buyer, and
thereupon Seller and Buyer shall promptly consider whether corrective actions can be taken in the
mining and preparation of the coal at Seller’s mine and if in Seller’s sole judgment such actions
will not, without unreasonable expense to Seller, make it possible and economical for Seller to
produce the coal which thereafter would be delivered hereunder without violating any applicable
law, regulation, policy or order, Seller shall have the right, upon the later of sixty (60) days
notice to Buyer or the effective date of such restriction, to terminate this Agreement without
further obligation hereunder on the part of either party.

     §10.3 Limitation on Environmental Force Majeure. Notwithstanding anything to the contrary set
forth in §10.2 above, a delay or other failure in the issuing of one or more permits (that are
necessary on the date hereof pursuant to an existing environmental law, regulation, policy and/or
restriction to commence operations with respect to any Coal Property) shall not be the basis, in
whole or in part, of any claim by Seller under §l0.2, whether such delay or failure
relates to the reinterpretation of existing environmental laws, regulations, policies and/or
restrictions, to a change in the interpretation, or to the enforcement thereof; provided however,

34

 

ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

this §10.3 shall not apply with respect to delays or other failures in the issuing of one
or more necessary permits to the extent such permits are new permits required pursuant to an
environmental law, regulation, restriction or policy adopted after the date of execution of this
Agreement with respect to Coal Properties or other Armstrong facilities then being utilized to
provide coal hereunder. Also, if the parties mutually agree to waive the condition precedent (as
provided in Section 2 above), such waiver, or anything in connection with the permits that are the
subject of such waiver, shall not be the basis, in whole or in part, of any claim by Seller or
Buyer under §10.2.

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

     If any such changes 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.

35

 

ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

     Any claim by the Seller for adjustment under this Section 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,
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/Kentucky Utilities Company
	 

	 	220 West Main Street
	 

	 	Louisville, Kentucky 40202
	 

	 	Attn.: Director Corporate Fuels and By Products
	 
	 If to Seller:

	 	Armstrong Coal Company, Inc.
	 

	 	407 Brown Road
	 

	 	Madisonville, Kentucky 42431
	 

	 	Attn: Mr. David R. Cobb
	     With Required Copies to:
	 

	 	Martin Wilson, President

36

 

ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

	 	 	 

	 

	 	Armstrong Coal Company, Inc.

7701 Forsyth Boulevard-10th Floor 

St. Louis, MO 63105

314-721-8211 (FAX)
	 
	 	 
	 

	 	          And;
	 
	 	 
	 

	 	Mason L. Miller 

Miller+Wells, PLLC 

300 East Main Street, Ste. 360

Lexington, KY 40507

859-281-0079 (FAX)

     §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. GUARANTEE. Armstrong Land Company, LLC shall guarantee to Buyer the
payment and performance of any and all obligations owed by Seller to Buyer pursuant to that certain
Guaranty attached hereto.

     SECTION 14. RIGHT TO RESELL. Buyer shall have the unqualified right to resell all
or any of the coal purchased under this Agreement.

37

 

ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

     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
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.

     §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) Employer’s Liability, $1,000,000 single limit liability.

          (4) In
addition, Seller shall carry excess liability insurance covering the
foregoing perils in the amount of $8,000,000 for any one occurrence.

          (5) Workers’ Compensation with statutory limits.

     If any of the above policies are written on a claims made basis, then the retroactive date of
the policy or policies will be no later than the effective date of this Agreement. Certificates of
Insurance satisfactory in form to the Buyer and signed by the Seller’s insurer shall be supplied by

38

 

ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

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.

     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 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.

39

 

ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

     SECTION 17. TAXES, DUTIES AND FEES.

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

     SECTION 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
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 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 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; Rehabilitation Act regulations set forth in 41 CFR § 60-741.4 relating to
the employment and advancement of qualified disabled employees and applicants for

40

 

ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

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 shall cooperate with such inspections at no additional cost to Buyer.
Seller shall undertake reasonable care and precautions to prevent personal injuries to any
representatives, agents or employees of Buyer (collectively, “Visitors”) who inspect the Coal
Property. Any such Visitors shall make every reasonable effort to comply with Seller’s regulations
and rules regarding conduct on the work site, made known to Visitors prior to entry, as well as
safety measures mandated by state or federal rules, regulations and laws. Buyer understands that
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 Seller of any of its responsibilities nor be deemed to be a waiver of any of Buyer’s
rights hereunder.

41

 

ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

     SECTION 21. 
MISCELLANEOUS.

     §21.l 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.

     
§2l.2 Headings. The paragraph headings appearing in this Agreement are
for convenience only and shall not affect the meaning or interpretation of this Agreement.

     §2l.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.

     
§2l.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 shall not be

42

 

ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

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.

     §2l.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.

43

 

ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

     §21.10 Forward Contracts. Buyer and Seller shall acknowledge that it is a
“forward contract merchant” and that all transactions pursuant to this Contract constitute “forward
contracts” within the meaning of the United States Bankruptcy Code.

     §21.11 Joint and Several Liability. LG&E and KU shall be severally but not jointly
liable for obligations of Buyer hereunder, and shall be liable only for such obligations that
pertain to a particular party constituting Buyer.

     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

	 	ARMSTRONG COAL COMPANY, INC.
	 
	By:

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

	 	Name: 	 Martin Wilson
	Title:	 VP Energy Marketing

	 	Title:	 President
	 	 
	 	 	 
	KENTUCKY UTILITES COMPANY
	 	 	 
	 
	By:	/s/ David S. Sinclair
	 	 	 
	Name: 	David S. Sinclair
	 	 	 
	Title: 	VP Energy Marketing
	 	 	 

44

 

ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

EXHIBIT A TO COAL SUPPLY AGREEMENT

“Coal Property” means the following seams and mines owned by Seller

	 	 	 	 	 	 	 
	Mine Name	 	County	 	Type of Operation	 	Seams
	Big Run

	 	Ohio
	 	Underground
	 	#9
	West Fork

	 	Ohio
	 	Surface
	 	#9, #11, #12, #13
	Parkway

	 	Muhlenberg
	 	Underground
	 	#9
	Equality Boot

	 	Ohio
	 	Surface
	 	#11, #12, #13, #14
	Ken-Barton

	 	Ohio
	 	Surface
	 	#9, #11, #12, #13
	East Fork

	 	Ohio
	 	Surface
	 	#14
	Lewis Creek

	 	Ohio
	 	Surface/Underground
	 	#9, #14
	Sunnyside

	 	Muhlenberg
	 	Surface
	 	#11, #12, #14
	Jacobs Creek

	 	Muhlenberg
	 	Surface
	 	#9, #11, #12, #13
	Vogue/Earles

	 	Muhlenberg
	 	Surface
	 	#9, #11, #12, #14
	Game Preserve

	 	Muhlenberg
	 	Surface
	 	#9

45

 

     ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

     Exhibit B

Page l of 2

EXHIBIT B

SAMPLE COAL PAYMENT CALCULATIONS

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

	 	 	 	 	 	 
	 	 	Section I	 	Base Data — Quality 1
	1)	 	Base or Adjusted Base FOB Price Per Ton:
	 	42.00	/ton
	1 a)	 	Tons of coal delivered:
	 	 	tons
	2)	 	Guaranteed average heat content:
	 	11,000	BTU/LB.
	2a)	 	As received monthly avg. heat content:
	 	 	BTU/LB.
	2b)	 	Total BTU’s unloaded in the month:
	 	 	Millions of BTU’s
	3)	 	Guaranteed monthly avg. max. sulfur
	 	3.00	LBS. /MMBTU
	3a)	 	As received monthly avg. sulfur
	 	 	LBS. /MMBTU
	4)	 	Guaranteed monthly avg. ash
	 	12.00	LBS. /MMBTU
	4a)	 	As received monthly avg. ash
	 	 	LBS. /MMBTU
	5)	 	Guaranteed monthly avg. max. moisture
	 	12.00	LBS. /MMBTU
	5a)	 	As received monthly avg. moisture
	 	 	LBS. /MMBTU
	6)	 	BTU True Up: {[(line 2a-line 2)] ÷ line 2} x line 1
	 	 	Dollars/Ton
	6a)	 	BTU True Up Dollars (line 6 x line 1a)
	 	 	Dollars

	 	 	 	 	 	 	 
	 	 	Section II	 	Discounts
	 	 	Assign a (-) to all discounts (round to (5) decimal places)
	 	 	 	 
	7)	 	BTU/LB.: If line 2a < 10,900 BTU/LB. then:
	 	 	 	 
	 	 	{1 - {(line 2a) / (line 2)} * $0.2604/MMBTU
	 	 	 	 
	 	 	{1 - ( ) / ( )} *$0.2604 =
	 	$	 	/MMBTU
	7a)	 	SULFUR: If line 3a is greater than 3.10 LBS/MMBTU
	 	 	 	 
	 	 	[ (line 3a) — (line 3) ] * 0.1232/lb. Sulfur
	 	 	 	 
	 	 	[( )-( )] *0.1232 =
	 	$	 	/MMBTU
	7b)	 	ASH: If line 4a is greater than 12..80
	 	 	 	 
	 	 	[ (line 4a) — (line 4)] * 0.0083/MMBTU
	 	 	 	 
	 	 	[( ) - ( )] * 0.0083 =
	 	$	 	/MMBTU
	7c)	 	MOISTURE: If line 5a is greater than 12.75 LBS/MMBTU
	 	 	 	 
	 	 	[(line 5a) - (line 5)] *0.0016/MMBTU
	 	 	 	 
	 	 	[( ) - ( )] *0.0016 =
	 	$	 	/MMBTU

46

 

ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

Exhibit B

Page 2 of 2

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Total Price
	 	 	 	 	Section III	 	Adjustments
	 	 	 	 	Determine total Discounts as follows:
	 	 	 	 
	 	8	)	 	BTU/Lb Discount Dollars (line 7 x line 2b)

	 	$	 	 Dollars
	 	9	)	 	Sulfur Discount Dollars (line 7a x line 2b)

	 	$	 	 Dollars
	 	10	)	 	Ash Discount Dollars (line7b x line 2b)

	 	$	 	 Dollars
	11)
	 	Moisture Discount Dollars (line 7c x line2b)

	 	$	 	 Dollars
	 	12	)	 	Total Discount Dollars: Sum of lines 8 thru 11:

	 	$	 	 Dollars
	 	 	 	 	 
	 	 	 	 
	 	 	 	 	Total Coal Payment Calculation
	 	 	 	 
	 	 	 	 	 
	 	 	 	 
	 	13	)	 	Total coal payment for month:
	 	 	 	 
	 	 	 	 	[(line 1 x line 1a) + line 6a] - line 12

	 	$	 	 Dollars

47

 

ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

EXHIBIT C

Sample Diesel Fuel Price Adjustment Calculation

	 	 	 	 	 	 	 	 	 

	January 2011 Diesel Fuel Price Calculation (Quality 1)	 	 	 	 
	(1) Diesel Fuel Component	 	$7.00	 	Diesel Fuel Component
	(2) Calculate Diesel Fuel Component Adjustment	 	 	 	 
	 
	 	 	 	 	 	 	 	Average of hypothetical base index PPIs of the three months during relevant Calculation Period for
 January 1, 2011 Adjustment
	(a) Calculate PPI Factor	 	285.2	 	Date
	Divided by:
	 	232.5	 	Average of base index PPIs for July, August and September 2009
	 
	 	 	 	 	 	 
	PPI Factor
	 	1.227	 	 
	(b) Calculate Adjustment Factor	 	 	 	 
	     Since PPI Factor is greater than 1.200	 	1.227	 	PPI Factor
	Less:	 	1.200	 	Upper Deadband
	 
	 	 	 	 	 	 
	          Adjustment Factor	 	0.027	 	 
	(c) Calculate Diesel Fuel Component Adjustment	 	 	 	 
	 
	 	 	 	 	 	$7.00	 	Diesel Fuel Component
	Times:
	 	.027	 	Adjustment Factor
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	$.19	 	Diesel Fuel Component Adjustment
	(3) Calculate Adjusted Base FOB Price Per Ton	 	 	 	 
	 
	 	 	 	 	 	$28.21	 	Contract Base Price Per Ton
	Plus:
	 	$0.19	 	Diesel Fuel Component Adjustment
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	$28.40	 	Adjusted Base FOB Price Per [ILLEGIBLE]
	Sample PPI Data:
	 	 	 	 	 	 	 	 
	Figures are hypothetical —  for illustration purposes only.	 	 	 	 
	Sep/Oct/Nov 10/ PPI-Commodities — #2 Diesel Fuel #WPU057303	 	 	 	 
	 
	 	Sep ‘l0	 	283.0	 	 
	 
	 	Oct ‘10	 	285.2	 	 
	 
	 	Nov ‘10	 	287.4	 	 
	 
	 	 	 	 	 	 
	 
	 	Average	 	285.2	 	 
	July/Aug/Sept 2009/ PPI-Commodities — #2 Diesel Fuel #WPU057303	 	 	 	 
	 
	 	July ‘09	 	226.5	 	 
	 
	 	Aug ‘09	 	227.6	 	 
	 
	 	Sept ‘09	 	243.5	 	 
	 
	 	 	 	 	 	 
	Base Factor (Arithmetic average)	 	232.5	 	 

48

 

ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

	 	 	          This Guaranty (the “Guaranty”) is made by Armstrong Land Company, LLC (the “Guarantor”),
a Delaware limited liability company, in favor of Louisville Gas and Electric Company and Kentucky
Utilities Company (collectively the “Beneficiary”) in consideration of the Beneficiary entering
into agreement(s) with Armstrong Coal Company, Inc. (the “Counterparty”).

	1.	 	Guaranty: Guarantor does hereby unconditionally and absolutely guarantee to Beneficiary the
full and faithful (i) payment by Counterparty of any amounts due to the Beneficiary under and
pursuant to that certain Coal Supply Agreement dated on or about December __, 2009, but to be
effective, if at all, as of the Commencement Date (as defined therein) and any amendments
thereto, (the “Agreement”) to be entered into from time to time by the Counterparty with
Beneficiary related to the purchase, sale and/or exchange of coal and (ii) performance of all
obligations of Counterparty now existing or hereafter arising under the Agreement, including
obligations that would exist under the Agreement but for operation of any applicable provision
of Title 11 (bankruptcy) of the United States Code or similar laws affecting creditor rights,
or under applicable law or by agreement of Counterparty (the payment and performance
obligations described in clauses (i) and (ii) above are referred to herein collectively as the
“Guaranteed Obligations”) Notwithstanding anything herein to the contrary, Guarantor shall
have no performance obligation to sell, deliver, supply or transport coal or any other
commodity under the Agreement from any property other than the Coal Property.

This Guaranty shall replace, supercede and render null and void any existing guaranties currently
in force with respect to the Agreement.

	2.	 	Guaranty Absolute: The Guarantor guarantees that the Guaranteed Obligations will be paid or
performed strictly in accordance with the terms of the Agreement, regardless of any law,
regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms
or the rights of Beneficiary with respect thereto. The obligations of the Guarantor under this
Guaranty are independent of, but related to, the Counterparty’s obligations under the
Agreement and a separate action or actions may be brought and prosecuted against the Guarantor
to enforce this Guaranty, irrespective of whether any action is brought against one or more of
the parties constituting Counterparty or whether one or more of the parties constituting
Counterparty is joined in any such action or actions. The liability of the Guarantor under
this Guaranty shall be irrevocable, absolute and unconditional irrespective of, and the
Guarantor hereby irrevocably waives any defenses it may now or hereafter have in any way
relating to, any or all of the following:

(a) any lack of validity or enforceability of the Agreement or any agreement
or instrument relating thereto;

(b) any change in the time, manner or place of payment of, or in any other
term of, all or any of the Guaranteed Obligations under the Agreement, any
modification, extension or waiver of any of the terms of the Agreement, or any
other amendment or waiver of or any consent to departure from any term of the
Agreement;

(c) any taking, exchange, release or non-perfection or the taking or failure
to take any other action with respect to any collateral, or any taking, release or
amendment or waiver of or consent to departure from any other guaranty, for all or
any of the Guaranteed Obligations;

(d) any requirement that Beneficiary proceed against one or more of the
parties constituting Counterparty, any other person or entity, any collateral or
any manner of

49

 

ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

application of any collateral, or proceeds thereof, to all or any of the
Guaranteed Obligations, or any manner of sale or other disposition of any
collateral for all or any of the Guaranteed Obligations;

(e) any change, restructuring or termination of the corporate structure or
existence of one or more of the parties constituting Counterparty or any of its
Subsidiaries;

(f) any lack or failure of notice or any failure of Beneficiary to disclose to
one or more of the parties constituting Counterparty or the Guarantor any
information relating to the financial condition, operations, properties or
prospects of one or more of the parties constituting Counterparty or the Guarantor,
or relating to the Agreement, as the case may be, now or in the future known to
Beneficiary (the Guarantor waiving any duty on the part of Beneficiary to disclose
such information); or

(g) any other circumstance (including, without limitation, any statute of
limitations) or any existence of or reliance on any representation by Beneficiary
that might otherwise constitute a defense available to, or a discharge of, one or
more of the parties constituting Counterparty, the Guarantor or any other guarantor
or surety.

	 	 	Notwithstanding any provision to the contrary contained herein, Guarantor’s liability
hereunder shall be and is specifically limited as expressly set forth in Section 1 above. and,
except to the extent specifically provided in the Agreement, in no event shall Guarantor be
subject hereunder to consequential, exemplary, equitable, loss of profits, punitive, tort, or
any other damages, costs, or attorney’s fees.
	 
	 	 	This Guaranty shall continue to be effective or be reinstated, as the case may be, if at
any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be
returned by Beneficiary or any other Person upon the insolvency, bankruptcy or reorganization
of one or more of the parties constituting Counterparty or the Guarantor or otherwise, all as
though such payments had not been made. The obligations of the Guarantor under this Guaranty
shall at all times rank at least pari passu in right of payment with all other
unsecured and unsubordinated indebtedness (actual or contingent) of the Guarantor, except as
may be required by law. This Guaranty shall continue to be effective if one or more of the
parties constituting Counterparty merges or consolidates with or into another entity, loses its
separate legal identity or ceases to exist.
	 
	 	 	This Guaranty is a continuing guaranty of the payment (and not of collection) and of the
performance by each of the parties constituting Counterparty of its obligations under the
Agreement. In no event shall Guarantor’s liability to Beneficiary exceed Counterparty’s
liability under the Agreement, notwithstanding the effect of the insolvency, bankruptcy or
reorganization of Counterparty. The Guarantor agrees that its obligations under this Guaranty
shall not be impaired, modified, changed, released or limited in any manner whatsoever by any
impairment, modification, change, release or limitation of the liability of one or more parties
constituting Counterparty (or the estate in bankruptcy of one or more parties constituting
Counterparty) resulting from the operation of any present or future provision of the federal
bankruptcy law or other similar statute.
	 
	3.	 	Waivers and Acknowledgments: The Guarantor hereby waives presentment, protest, acceleration,
dishonor, promptness, diligence, filing of claims with a court in the event of insolvency or
bankruptcy of the one or more parties constituting Counterparty, notice of acceptance of this
Guaranty and any other notice with respect to any of the Guaranteed Obligations and this
Guaranty and any requirement

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

	 	 	that Beneficiary protect, secure, perfect or insure any lien or any property subject
thereto or exhaust any right or take any action against one or more of the parties constituting
Counterparty or any other Person or entity, or any collateral. The Guarantor hereby waives any
right to revoke this Guaranty, and acknowledges that this Guaranty is continuing in nature and
applies to all Guaranteed Obligations, whether existing now or in the future.
	 
	 	 	No delay of Beneficiary in the exercise of, or failure to exercise, any rights hereunder
shall operate as a waiver of such rights, a waiver of any other rights or a release of
Guarantor from any obligations hereunder nor shall any single or partial exercise by
Beneficiary of any right, remedy or power hereunder preclude any other or future exercise of
any right, remedy or power. Each and every right, remedy and power hereby granted to
Beneficiary or allowed it by law or other agreement shall be cumulative and not exclusive of
any other, and may be exercised by Beneficiary from time to time.
	 
	4.	 	Expenses: Guarantor agrees to pay on demand any and all out-of-pocket costs,
including reasonable legal fees and expenses, and other expenses incurred by Beneficiary
Counterparty in enforcing Guarantor’s obligations under this Guaranty.
	 
	5.	 	Subrogation: The Guarantor will not exercise any right that it may now or
hereafter acquire against Counterparty that arise from the existence, payment, performance or
enforcement of the Guarantor’s Obligations under this Guaranty, including, without limitation,
any right of subrogation, reimbursement, exoneration, contribution or indemnification and any
right to participate in any claim or remedy of Beneficiary against Counterparty or any
collateral, whether or not such claim, remedy or right arises in equity or under contract,
statute or common law, including, without limitation, the right to take or receive from
Counterparty, directly or indirectly, in cash or other property or by setoff or in any other
manner, payment or security on account of such claim, remedy or right, unless and until all of
the obligations of Counterparty under the Agreement and all other amounts payable under this
Guaranty shall have been performed or paid in full in cash (and not subject to disgorgement in
bankruptcy or otherwise). If any amount shall be paid to the Guarantor in violation of the
preceding sentence at any time prior to the later of the payment in full in cash of the
Guaranteed Obligations and all other amounts payable under this Guaranty, the Guarantor shall
hold such amount as agent for the benefit of Beneficiary, which amount shall forthwith be paid
to Beneficiary to be credited and applied to the Guaranteed Obligations and all other amounts
payable under this Guaranty, whether matured or unmatured, in accordance with the terms of the
Agreement, or to be held as collateral for any Guaranteed Obligations or other amounts payable
under this Guaranty thereafter arising. If (i) the Guarantor shall make payment to Beneficiary
of all or any part of the Guaranteed Obligations and (ii) all of the Guaranteed Obligations
and all other amounts payable under this Guaranty shall be paid in full in cash, Beneficiary
will, at the Guarantor’s request and expense, execute and deliver to the Guarantor appropriate
documents, without recourse and without representation or warranty by Beneficiary, of all of
Beneficiary’s rights and benefits under the Agreement. In the event Guarantor performs part or
all of Counterparty’s obligations, Guarantor shall be entitled to Counterparty’s rights and
benefits under the Agreement and shall be subrogated to Counterparty’s rights to Beneficiary
with respect to such of Counterparty’s obligations so performed by Guarantor.
	 
	6.	 	Reservation of Defenses: Guarantor agrees that except as expressly set forth
herein, it will remain bound upon this Guarantee notwithstanding any defenses which, pursuant
to the laws of suretyship, would otherwise relieve a guarantor of its obligations under a guaranty.
Guarantor does reserve the right to assert defenses which Counterparty may have to payment of
any Guaranteed Obligation other than defenses arising from the bankruptcy or insolvency of
Counterparty and other defenses expressly waived hereby.

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

	7.	 	Notices: All demands, notices and other communications provided for hereunder
shall, unless otherwise specifically provided herein, (a) be in writing addressed to the party
receiving the notice at the address set forth below or at such other address as may be
designated by written notice, from time to time, to the other party, and (b) be effective upon
receipt, when mailed by U.S. mail, registered or certified, return receipt requested, postage
prepaid, or personally delivered. Notices shall be sent to the following addresses:

If to Guarantor:

Armstrong Land Company, LLC

Attn: Mr. Martin D. Wilson

7701 Forsyth Boulevard, 10th Floor 

St. Louis, Missouri 63105

Phone: 314-721-8202; Fax: 314-721-8211

With Copy To:

Mason L. Miller

Miller + Wells, PLLC

300 East Main Street, Ste. 360

Lexington, Kentucky 40507

Phone: 859-281-0077; Fax: 859-281-00749

If to Beneficiary:

Louisville Gas and Electric Company

 220 West Main Street 

Louisville, Kentucky 40202

Attn: Director Corporate Fuels and By-Products

Phone: 502-627-2774; Fax: 502-627-3243

Kentucky Utilities Company 

220 West Main Street 

Louisville, Kentucky 40202

Attn: Director Corporate Fuels and By-Products

Phone: 502-627-2774; Fax: 502-627-3243

	8.	 	Demand and Payment: Any demand by Beneficiary for performance or payment hereunder
shall be in writing, signed by a duly authorized officer of Beneficiary and delivered to the
Guarantor pursuant to Section 7 hereof, and shall (a) reference this Guaranty, (b)
specifically identify Beneficiary, the Guaranteed Obligations to be performed or paid and the
amount of such Guaranteed Obligations and (c) if applicable, set forth payment instructions.
There are no other requirements of notice, presentment or demand. Guarantor shall perform or
pay, or cause to be performed or paid, such Guaranteed Obligations within thirty (30) business
days of receipt of such demand.

	9.	 	Representations and Warranties of Guarantor: Guarantor represents and warrants
that:

(a) it is a limited liability company duly organized and validly existing
under the laws of the State of Delaware and has the power and authority to execute,
deliver and carry out the terms and provisions of the Guaranty;

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

(b) no authorization, approval, consent or order of, or registration or
filing with, any court or other governmental body having jurisdiction over
Guarantor is required on the part of Guarantor for the execution and delivery of
this Guaranty; and

(c) this Guaranty constitutes a valid and legally binding Agreement of
Guarantor, except as the enforceability of this Guaranty may be limited by the
effect of any applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws effecting creditors’ rights generally and by general principles of
equity.

	10.	 	Miscellaneous:
	 
	 	 	Default. Guarantor represents and warrants that to its best information, knowledge
and belief, no default(s) of the Agreement are known to exist as of the date of this Guaranty.
In the event Counterparty defaults in the performance of any Guaranteed Obligations under the
Agreement, Beneficiary shall give written notice to Guarantor. Promptly thereafter, Guarantor
shall perform or cause to be performed such obligation of Counterparty as required by the
Agreement.
	 
	 	 	Assignment. The Guarantor shall not assign this Guaranty without the express
written consent of the Beneficiary and any purported assignment absent such consent is void.
The Beneficiary shall be entitled to assign its rights under this Agreement in its sole
discretion.
	 
	 	 	Severability. If any provision or portion of a provision of this Agreement is
declared void and/or unenforceable, such provision or portion shall be deemed severed from this
Agreement which shall otherwise remain in full force and effect.
	 
	 	 	Amendments. No amendment of this Guaranty shall be effective unless in writing and
signed by Guarantor, Counterparty and Beneficiary. No waiver of any provision of this Guaranty
nor consent to any departure by Guarantor there from shall in any event be effective unless
such waiver or consent shall be in writing and signed by Beneficiary. Any such waiver shall be
effective only in the specific instance and for the specific purpose for which it was given.
	 
	 	 	Successors and Assigns. This Guaranty shall be binding upon Guarantor, its
successors and permitted assigns and inure to the benefit of and be enforceable by Beneficiary,
its successors and assigns.
	 
	 	 	Prior Agreements. The Guaranty embodies the entire agreement and understanding
between Guarantor and Beneficiary and supercedes all prior agreements and understandings
relating to the subject matter hereof.
	 
	 	 	Headings. The headings in this Guaranty are for purposes of reference only, and
shall not effect the meaning hereof.
	 
	11.	 	Limitation by Law: All rights, remedies and powers provided in this
Guaranty may be exercised only to the extent that the exercise thereof does not violate any
applicable provision of law, and all the provisions of this Guaranty are intended to be subject to
all applicable mandatory provisions of law that may be controlling and to be limited to the extent
necessary so that they will not render this Guaranty invalid, unenforceable, in whole or in part,
or not entitled to be recorded, registered or filed under the provisions of any applicable law.

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J10009

	12.	 	Governing Law: This Guaranty shall in all respects be governed by and construed in
accordance with the laws of the State of New York, without regard to principles of conflicts of
laws.

      IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed and delivered by
its duly authorized officer effective as of this ___ day of December, 2009 (“Effective Date”).

	 	 	 	 	 
	Guarantor:   	ARMSTRONG LAND COMPANY, LLC

 	 
	 	By:  	/s/ Martin D. Wilson	 
	 	 	Name:  	Martin D. Wilson	 
	 	 	Title:  	Martin D. Wilson	 
	 

54exv10w37

Exhibit 10.37

ARMSTRONG COAL COMPANY

LG&E/KU Contract No. J12004

COAL SUPPLY AGREEMENT

BETWEEN

ARMSTRONG COAL COMPANY

AND

LOUISVILLE GAS & ELECTRIC COMPANY

and

KENTUCKY UTILTIES COMPANY

Effective

January 1, 2012

 

 

ARMSTRONG COAL COMPANY

LG&E/KU Contract No. J12004

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	PAGE	 
	Recitals
	 	 	1	 
	Section 1. General
	 	 	1	 
	Section 2. Term
	 	 	3	 
	Section 3. Quantity
	 	 	3	 
	3.1 Base Quantity
	 	 	3	 
	3.2 Make-Up Tons
	 	 	4	 
	3.3 Delivery Schedule
	 	 	5	 
	Section 4. Source
	 	 	6	 
	4.1 Source
	 	 	6	 
	4.2 Assurance of Operation and Quantity
	 	 	6	 
	4.3 Non-Diversion of Coal
	 	 	7	 
	4.4 Seller’s Preparation of Mining Plan
	 	 	7	 
	4.5 Substitute Coal
	 	 	8	 
	4.6 Authority
	 	 	9	 
	Section 5. Delivery
	 	 	9	 
	5.1 Barge Delivery Point
	 	 	9	 
	5.2 Barge Title and Risk of Loss
	 	 	10	 
	5.3 Barge Cost of Transportation
	 	 	10	 
	5.4 Barge Shipping Logistics
	 	 	11	 
	5.5 Rail Delivery Point
	 	 	12	 
	5.6 Rail Title and Risk of Loss
	 	 	12	 
	5.7 Rail Transportation Costs and Logistics
	 	 	12	 
	5.8 Rail Freeze Conditioning
	 	 	13	 
	Section 6. Quality
	 	 	13	 
	6.1 Specifications
	 	 	13	 
	6.2 Definition of “Shipment”
	 	 	15	 
	6.3 Rejection
	 	 	15	 
	6.4 Suspension and Termination
	 	 	17	 
	Section 7. Weights, Sampling and Analysis
	 	 	19	 
	7.1 Weights
	 	 	19	 
	7.2 Sampling and Analysis
	 	 	20	 
	Section 8. Price
	 	 	23	 
	8.1 Base Price
	 	 	23	 
	8.2 Quality Price Adjustments
	 	 	25	 
	8.3 Payment Calculation
	 	 	28	 
	8.4 Price Adjustments for Changes in Governmental Impositions
	 	 	28	 
	Section 9. Invoices, Billing and Payment
	 	 	30	 
	9.1 Invoicing Address
	 	 	30	 
	9.2 Invoice Procedures for Coal Shipments
	 	 	30	 

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ARMSTRONG COAL COMPANY

LG&E/KU Contract No. J12004

	 	 	 	 	 

	9.3 Payment Procedures for Coal Shipments
	 	 	31	 
	9.4 Withholding
	 	 	32	 
	9.5 Guaranty
	 	 	33	 
	Section 10. Force Majeure
	 	 	33	 
	10.1 General Force Majeure
	 	 	33	 
	10.2 Environmental Law Force Majeure
	 	 	38	 
	10.3 Limitation on Environmental Force Majeure
	 	 	40	 
	Section 11. Notices
	 	 	40	 
	11.1 Form and Place of Notice
	 	 	40	 
	11.2 Change of Person or Address
	 	 	41	 
	11.3 Electronic Data Transmittal
	 	 	42	 
	Section 12. Indemnity and Insurance
	 	 	42	 
	12.1 Indemnity
	 	 	42	 
	12.2 Insurance
	 	 	43	 
	Section 13. Termination for Default
	 	 	44	 
	Section 14. Taxes, Duties and Fees
	 	 	45	 
	Section 15. Documentation and Right of Audit
	 	 	45	 
	Section 16. Equal Employment Opportunity
	 	 	45	 
	Section 17. Coal Properties Inspections
	 	 	46	 
	Section 18. Miscellaneous
	 	 	47	 
	18.1 Applicable Law
	 	 	47	 
	18.2 Headings
	 	 	47	 
	18.3 Waiver
	 	 	47	 
	18.4 Remedies Cumulative
	 	 	47	 
	18.5 Severability
	 	 	47	 
	18.6 Binding Effect
	 	 	47	 
	18.7 Relationship of the Parties
	 	 	48	 
	18.8 Joint and Several Liability
	 	 	48	 
	18.9 Limitation of Remedies
	 	 	48	 
	18.10 Forward Contract
	 	 	49	 
	18.11 Counterparts
	 	 	49	 
	18.12 Assignment
	 	 	49	 
	18.13 Entire Agreement
	 	 	50	 
	18.14 Amendments
	 	 	50	 
	Schedule I Sample Coal Payment Calculations
	 	 	52	 
	Schedule II Sample Diesel Fuel Price Adjustment Calculation
	 	 	54	 
	Exhibit I Coal Properties Listing
	 	 	55	 
	Exhibit II Parental Guaranty
	 	 	56	 

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ARMSTRONG COAL COMPANY, INC.

LG&E/KU Contract No. J12004

COAL SUPPLY AGREEMENT

     This is a coal supply
agreement (the “Agreement”) dated January 1, 2012 between LOUISVILLE GAS
AND ELECTRIC COMPANY (“LG&E”) and KENTUCKY UTILITIES COMPANY (“KU”), each a Kentucky corporation,
with a common address at 220 West Main Street, Louisville, Kentucky 40202 (LG&E and KU are each
individually sometimes herein called a “Buyer” as more particularly described below) and ARMSTRONG
COAL COMPANY, INC., a Delaware corporation, with an address at 407 Brown Road, Madisonville,
Kentucky 42431 (herein called the “Seller”).

WITNESSETH:

     WHEREAS, LG&E and KU are electric utility companies which desire 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.

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ARMSTRONG COAL COMPANY, INC.

LG&E/KU Contract No. J12004

     (b) The Seller acknowledges that, while there will be no effect on the Base Quantity set
forth in Section 3 below, LG&E and KU will allocate the quantity of coal to be purchased and
received hereunder between themselves and that such allocation may change from time to time, at the
sole discretion of LG&E and KU. Therefore, the term “Buyer” as used herein shall mean: (a) with
respect to any particular “Shipment” (as such term is defined in §Section 6.2 below) actually
received by either LG&E or KU, the party who actually received such shipment; and (b) as may be
determined by LG&E and KU, in their sole discretion with respect to any time or circumstance under
this Agreement that the party or parties constituting “Buyer” is not determined pursuant to clause
(a) immediately above (including, without limitation, matters involving exercise of rights or
remedies by Buyer or enforcing obligations, duties and liability against Buyer by Seller not
involving Shipments or prior to receipt of Shipments), the party or parties (and in such percentage
allocation, if applicable). As provided in §18.8 below, Seller agrees that the liability of each of
LG&E and KU shall at all times be several and not joint. Each party shall have the obligations,
duties and liability of a Buyer hereunder only to the extent (and in the percentage, if applicable)
that each such party is determined to be a “Buyer” pursuant to this paragraph. Also LG&E and KU
each shall have the rights and remedies of a Buyer hereunder only to the extent (and in the
percentage, if applicable) that each of them is determined to be a “Buyer” pursuant to this
paragraph. In the event the determination of the “Buyer” pursuant to this paragraph is found
contrary to law or unenforceable by any court of law, or cannot be reasonably made with respect to
any particular circumstance for any reason, the rights,

2

 

ARMSTRONG COAL COMPANY, INC.

LG&E/KU Contract No. J12004

remedies, obligations, duties and liabilities of Buyer shall be allocated to each of LG&E and
KU, severally and not jointly, 50% to each party.

     (c) Seller will sell and deliver to Buyer, and Buyer agrees to purchase and receive from
Seller, steam coal subject to the terms and conditions set forth herein.

     (d) Each covenant, representation and warranty given by Seller herein is a material inducement
for Buyer to enter into this Agreement.

     SECTION 2. TERM. The term of this Agreement shall commence on January 1, 2012 and
shall continue through December 31, 2015, unless sooner terminated pursuant to any of the terms set
forth herein.

     SECTION 3. QUANTITY.

     §3.1 Base Quantity. Subject to the terms and conditions set forth in this Agreement,
Seller shall sell and deliver, or cause to be delivered and Buyer shall purchase and receive, or
cause to be received, the following annual base quantity of coal (“Base Quantity”):

	 	 	 	 	 
	YEAR	 	BASE QUANTITY (TONS)	 
	2012
	 	 	500,000	 
	2013
	 	 	500,000	 
	2014
	 	 	1,000,000	 
	2015
	 	 	1,000,000	 

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ARMSTRONG COAL COMPANY, INC.

LG&E/KU Contract No. J12004

     The Base Quantity of coal scheduled to be delivered in a given calendar year as set forth
in the table above (as such quantity may be adjusted as provided in this Agreement) shall be
delivered during that calendar year.

     §3.2 Make-Up Tons. Notwithstanding the provisions of §3.1 above, if Seller or Buyer
fails to supply to or to take delivery of (as applicable) the entire Base Quantity scheduled for a
particular year for any reason other than a Force Majeure Event (as provided in Section 10 hereof),
then the non-defaulting party, may, at its sole option and without any obligation to do so, elect
to make up such undelivered or unreceived quantities (“Make-Up Tons”) by having the defaulting
party deliver or take delivery of the Make-Up Tons during the calendar year immediately following
the calendar year in which such Make-Up Tons should have been delivered (the “Make-Up Year”). If
necessary, the term of this Agreement will be automatically extended to include the Make-Up Year.
Prior to making such election, the non-defaulting party may request from the defaulting party
adequate assurances, satisfactory to non-defaulting party, that the defaulting party is capable of
delivering or receiving, and will deliver or receive (i) the Base Quantity established for the
Make-Up Year by this Agreement and (ii) the Make-Up Tons during the Make-Up Year.

     In the event the non-defaulting party makes the election to deliver or receive Make-Up Tons,
as applicable, the defaulting party shall deliver or receive both the Base Quantity, and the
Make-Up Tons during the Make-Up Year pursuant to a new, mutually-agreed delivery schedule
incorporating the delivery of the additional Make-Up Tons. In such event, for accounting and

4

 

ARMSTRONG COAL COMPANY, INC.

LG&E/KU Contract No. J12004

payment purposes, the first tons delivered in the Make-Up Year shall be considered to be the
Make-Up Tons, and deliveries of Make-Up Tons will not be considered a part of the Base Quantity
established for the Make-Up Year.

     If the defaulting party’s failure to deliver or receive all of the Base Quantity during a
particular year constitutes a breach of or other violation under this Agreement, the existence of
this §3.2 shall not act as a waiver by the non-defaulting party of such breach or violation, nor
shall it act as a limitation on the non-defaulting party’s remedies. However, if the non-defaulting
party elects to deliver or receive the Make-Up Tons as provided in this §3.2, then such election
and the receipt or delivery of the Make-Up Tons in the Make-Up Year shall be the non-defaulting
party’s sole and exclusive remedy. Nothing in this §3.2 shall limit the remedies of the
non-defaulting party for any failure of the defaulting party to perform with regard to the delivery
or receipt of Make-Up Tons.

     §3.3 Delivery Schedule. Shipments are to be made on a ratable basis as adjusted during
the year to reflect Buyer’s outages, Seller’s annual miner’s vacation, and minor delays in
transportation. The parties will cooperate in the development of any adjustments to the delivery
schedule. Initial shipments shall begin on or about January 1, 2012. Time is of the essence with
respect to the Seller’s deliveries once a schedule is established.

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ARMSTRONG COAL COMPANY, INC.

LG&E/KU Contract No. J12004

     SECTION 4. SOURCE.

     §4.1 Source.
The coal sold hereunder, including coal purchased by Seller from third
parties, shall be supplied from Seller’s mines as listed in Exhibit I attached hereto (each
individually a “Coal Property”, and collectively the “Coal Properties”) except to the extent Seller
provides substitute coal in accordance with the terms of this Agreement. Seller represents that it
has title to or legal control over the Coal Properties and the coal located on the Coal Properties.
Seller also represents and warrants that the coal, when delivered to Buyer will be free and clear
of all liens and encumbrances created by or arising through Seller and that Buyer will have good
and marketable title to the delivered coal.

     §4.2 Assurance of Capacity, Operation and Reserves. Subject to the provisions of this
Agreement, Seller represents and warrants that the Coal Properties contain coal of such quality and
in such quantities as will be sufficient to satisfy all the requirements of this Agreement. Seller
agrees and warrants that it will have at the Coal Properties adequate machinery, equipment and
other facilities to produce, prepare and deliver coal in the quantities 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. Seller has or timely will obtain, and will maintain, all required permits
and licenses for the production and delivery of the coal as required by this

6

 

ARMSTRONG COAL COMPANY, INC.

LG&E/KU Contract No. J12004

Agreement. Seller recognizes that the process of obtaining permits may be subject to delays
and regulatory uncertainties. Seller agrees and covenants to plan its permit acquisitions so as to
use its best efforts to prevent any interruption in its planned operations. Seller represents and
warrants that it has the right and authority to, and does hereby, dedicate to this Agreement
sufficient reserves of coal meeting the quality specifications hereof and lying on or in the Coal
Properties to fulfill the Seller’s obligations hereunder.

     §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 Properties so as reduce the
economically recoverable balance of coal in the Coal Properties to an amount less than that
required to be supplied to Buyer hereunder.

     §4.4 Seller’s Preparation of Mining Plan. Seller shall prepare or have prepared a
complete mining plan for the Coal Properties with adequate supporting data to demonstrate Seller’s
capability to have coal produced from the Coal Properties which meets the quantity and quality
specifications of this Agreement. Seller shall, upon Buyer’s request, provide information to Buyer
regarding such mining plan winch shall contain maps and a narrative describing 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, (ii) methods of
mining such coal; (iii) methods of transporting and of washing the coal to insure compliance with
the quantity and quality requirements of this Agreement including a description

7

 

ARMSTRONG COAL COMPANY, INC.

LG&E/KU Contract No. J12004

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 Properties during the term of this
Agreement. Such complete mining plan shall be delivered to Buyer on or before January 1, 2012.

     Buyer’s receipt of the mining plan or other 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 Buyer’s review of the Mining Information be
construed as constituting an approval of Seller’s proposed mining plan for any purposes. Review by
Buyer of Mining Information is for Buyer’s purposes only and is to allow Buyer to evaluate Seller’s
capability to supply coal as required by this Agreement. To the extent it can legally do so, Buyer
shall maintain as confidential all Mining Information disclosed by Seller and shall not disclose or
use such Mining Information for any purposes other than to evaluate Seller’s performance and
compliance with the provisions of this Agreement.

     Upon request, Buyer shall have the right to request a mining plan update (“Update”) showing
progress to date, Seller’s conformity to original mining plan, then-known changes in reserve data,
and planned changes in mining progression, plans or procedures.

     §4.5 Substitute Coal. In the event that Seller is unable to produce or obtain coal
from the Coal Properties in the quantities and of the quality required by this Agreement, and such
inability is not caused by a Force Majeure Event as defined in Section 10, then Buyer will have

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the option of requiring that Seller supply substitute coal from other facilities and mines
under its control or the control of its affiliates in accordance with all the terms and conditions
of this Agreement including without limitation the price provisions of Section 8, the quality
specifications of §6.1, and the provisions of Section 5 concerning reimbursement to Buyer for
increased transportation costs. Seller’s delivery of coal not produced from the Coal Properties
without having received the express written consent of Buyer shall constitute a material breach of
this Agreement.

     §4.6 Authority. Seller shall each have sole and exclusive authority to direct and
control its respective activities and operations, and those of any subcontractors, undertaken in
the performance of Seller’s obligations under this Agreement. Seller 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 operations or work force.

     SECTION 5. DELIVERY.

     §5.1 Barge Delivery Point. The coal shall be delivered to Buyer F.O.B. barge at the
Armstrong dock at Mile Point 76.6 on the Green River (the “Barge Delivery Point”). Provided,
however, if the Buyer or Buyer’s barging contractor (“Contractor) is not permitted or able to take
possession and control of the barge at such dock (for example, if the dock is part of a closed
harbor), then the coal is not considered delivered hereunder unless and until Buyer or Contractor
actually takes possession and control of such barge. In such case, the point where Buyer or
Contractor actually takes possession and control of the barge shall be considered the Barge

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Delivery Point hereunder. Seller may deliver the coal at a mutually-agreeable location
different from the Barge Delivery Point. In such a case, however, Seller, upon submittal by Buyer
of appropriate documentation acceptable to Seller, whose acceptance shall not be unreasonably
withheld, shall reimburse Buyer for any resulting increases in the cost of transporting the coal to
the destination designated by Buyer. Any resulting savings in such transportation costs shall be
retained by Buyer.

     §5.2 Barge Title and Risk of Loss. 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 Contractor from the Barge Delivery Point.

     §5.3 Barge Cost of Transportation. Seller shall arrange and pay for all costs of: (i)
transporting the coal from the Coal Properties or other authorized source mines as provided herein
to the Barge Delivery Point, (including without limitation, all truck, rail, barge and transloading
costs, and all fleeting, switching, harbor and other port charges) and (ii) loading and trimming
the coal into barges to the proper draft and the proper distribution within the barges. Buyer shall
arrange and pay for transporting the coal by barge from the Barge Delivery Point to the destination
designated by Buyer. For transportation delays which are the fault of Seller with respect to the
scheduling, loading and release of barge shipments to Contractor, Seller shall be responsible for
the payment of any demurrage or other penalties assessed by Contractor or by Buyer which accrue at
the Barge Delivery Point, including the demurrage. Seller shall also be responsible for and
promptly pay all penalties for loading less than the specified minimum

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tonnage per barge, or other
penalties assessed for barges not loaded in conformity with applicable requirements.

     §5.4 Barge Shipping Logistics. Buyer shall be responsible to deliver barges in as
clean and dry condition as practicable, and shall furnish suitable barges in accordance with a
delivery schedule provided by Buyer to Seller. Seller shall require of the loading dock operator
that: (i) the barges and towboats provided by Buyer or Contractor be provided convenient and safe
berth, free of wharfage, dockage, fleeting, switching, and other harbor and port charges; (ii) that
while the barges are in the care and custody of the loading dock, all U.S. Coast Guard regulations
and other applicable laws, ordinances, rulings, and regulations shall be complied with, including
adequate mooring and display of warning lights; (iii) that any water in the cargo boxes of the
barges be pumped out by the loading dock operator prior to loading; (iv) the loading operations be
performed in a workmanlike manner and in accordance with the reasonable loading requirements of
Buyer and Contractor; and (v) that the loading dock operator carry Landing
Owners/Stevedores/Wharfinger’s Liability 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 upon
request from Buyer, provide evidence thereof to Buyer in the form of a certificate of insurance
from the insurance carrier or an acceptable certificate of self-insurance. Notwithstanding the
above, Seller shall provide thirty (30) days advance notification to Buyer in the event of a
termination or reduction in coverage under the insurance.

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     §5.5 Rail Delivery Point. For rail deliveries of coal, Seller shall deliver the
coal to Buyer F.O.B. railcar at the Midway Mine rail loading facility (the “Rail Delivery Point”)
near McHenry, Kentucky on the Paducah and Louisville Railway (the “Rail Transportation
Contractor”). Seller may deliver the coal at a mutually-agreeable location different from the Rail
Delivery Point. In such case, however, Seller, upon submission by Buyer of appropriate
documentation acceptable to Seller, whose acceptance shall not be unreasonably withheld, shall
reimburse Buyer for any resulting increases in the cost of transporting the coal to the destination
designated by Buyer. Any resulting savings in such transportation costs shall be retained by Buyer.
Seller shall carry Railroad Liability coverage equal to or greater than the Commercial General
Liability coverage amount stated in Section 12.

     §5.6 Rail Title and Risk of Loss. Title to and risk of loss of the coal will pass to
Buyer, and the coal will be considered to be delivered, when the railcars are loaded with coal at
the Rail Delivery Point, except if the cause of loss is due to negligence or willful misconduct of
Seller as property owner.

     §5.7 Rail Transportation Costs and Logistics. Buyer or its Rail Transportation
Contractor shall furnish suitable railcars in accordance with a delivery schedule provided by Buyer
to Seller. Seller shall be responsible for and pay the costs associated with any damages suffered
by railcars owned or leased by Buyer or railcars owned or leased by the Rail Transportation
Contractor, while such railcars are at the Rail Delivery Point or are in Seller’s control or
custody, except where such damages are caused by the negligence or willful

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misconduct of Buyer or its Rail Transportation Contractor. Seller shall comply with the applicable provisions of Buyer’s
Rail Transportation Contractor’s tariff.

     §5.8 Rail Freeze Conditioning. At Buyer’s request, Seller shall treat (or have
treated) any shipment of coal hereunder with a freeze conditioning agent approved by Buyer in order
to maintain coal handling characteristics during shipment. If requested by Buyer, Seller shall also
treat (or have treated) any railcars specified by Buyer with a side release agent approved by
Buyer. The price for each such requested chemical treatment shall be an amount equal to Seller’s
cost of materials applied on a per-gallon basis for each application of freeze conditioning agent
or side release agent, as the case may be. Seller shall invoice Buyer for all such treatment, and
payment for same shall be made in accordance with §9.2 and §9.3 below.

     SECTION 6. QUALITY.

     §6.1 Specifications. Except to the extent modified pursuant to §3.4 above, the coal
delivered hereunder shall conform to the following specifications on an “as received” basis:

	 	 	 	 	 	 	 	 	 
	 	 	Guaranteed Monthly	 	 	Rejection Limits	 
	Specifications	 	Weighted Average (1)	 	 	(per shipment)	 
	BTU/LB.
	 	min. 11,000	 	 	< 10,800	 
	 
	 	 	 	 	 	 	 	 
	LBS/MMBTU:
	 	 	 	 	 	 	 	 
	MOISTURE
	 	max. 12.73	 	 	> 13.60	 
	ASH
	 	max. 11.82	 	 	> 12.73	 
	SULFUR
	 	max. 3.10	 	 	>3.25	 
	CHLORINE
	 	max. 0.045	 	 	> 0.055	 

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	 	 	Guaranteed Monthly	 	 	Rejection Limits	 
	Specifications	 	Weighted Average (1)	 	 	(per shipment)	 
	FLUORINE
	 	max. 0.009	 	 	> 0.014	 
	NITROGEN
	 	max. 1.23	 	 	>  1.32	 
	ARSENIC (parts per million)
	 	max. 22	 	 	>  30	 
	ASH/SULFUR RATIO
	 	min. 3.05:1	 	 	<  4.06:1	 
	SIZE (3“x0”):
	 	 	 	 	 	 	 	 
	 
	Top size (inches)*
Fines (% by wgt)
	 	max. 3X0	 	 	> 3X0	 
	Passing 1/4” screen
	 	max. 45%	 	 	>  50%	
	 
	% BY WEIGHT:
	 	 	 	 	 	 	 	 
	VOLATILE
	 	min. 34.01	 	 	<  30.00	 
	 
	FIXED CARBON
	 	min. 43.50	 	 	<  40.00	 
	GRINDABILITY (HGI)
	 	min. 54	 	 	< 48	 
	BASE ACID RATIO (B/A)
	 	 	0.63	 	 	 	>  0.70	 
	SLAGGING FACTOR**
	 	max. 2.00	 	 	> 2.00	 
	FOULING FACTOR***
	 	max. 0.5	 	 	> 0.70	 
	 
	ASH FUSION TEMPERATURE (°F) (ASTM D1857)
	 	 	 	 	 	 	 	 
	 
	REDUCING ATMOSPHERE
	 	 	 	 	 	 	 	 
	Initial Deformation
	 	min. 2070	 	 	min.1900
	Softening (H=W)
	 	min. 2140	 	 	min. 1975
	Softening (H=1/2W)
	 	min. 2180	 	 	min. 2000
	Fluid
	 	min. 2400	 	 	min. 2100
	 
	OXIDIZING ATMOSPHERE
	 	 	 	 	 	 	 	 
	 
	Initial Deformation
	 	min. 2540	 	 	min. 2200
	Softening (H=W)
	 	min. 2550	 	 	min. 2280
	Softening (H=1/2W)
	 	min. 2570	 	 	min. 2300
	Fluid
	 	min. 2620	 	 	min.2375

	(1) 	 	An actual Monthly Weighted Average will be calculated as applicable for each specification
for coal delivered to Buyer hereunder during a calendar month.

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	*	 	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-five per cent
(45%) 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:
	 
	 	 	 	 	 	 

     Each Shipment shall have coal of substantially the same quality throughout.

     §6.2 Definition of “Shipment”. As used herein, a “Shipment” shall mean one (1) barge load, one
(1) unit trainload, or one (1) day’s truck deliveries.

     §6.3 Rejection.

     Buyer has the right, but not the obligation, to reject any Shipment which is subject to
rejection based on any or all of the Rejection Limits set forth in §6.1 or which contains
extraneous materials (“Non-Conforming Coal”). Buyer must reject Non-Conforming Coal within
seventy-two (72) hours of Buyer’s receipt of the coal analysis provided for in §7.2, or the right
to reject such Non-Conforming Coal is waived. If the Buyer rejects such Non-Conforming Coal, title
to and risk of loss of the Non-Conforming Coal shall be considered to have never

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passed to Buyer
(“Rejected Coal”), and Buyer shall return the coal to Seller, or at Seller’s request, the Buyer
shall allow Seller to receive the Non-Conforming Coal or divert such coal to Seller’s designee, all
at Seller’s sole cost and risk.

     Within five (5) business days from notice of rejection, Seller shall replace the Rejected Coal
with coal from the Coal Properties that is of a quality not subject to any of the Rejection Limits
set forth in §6.1 (“Replacement Coal”). If Seller fails to replace the Rejected Coal within the
five (5) business day period, or if the Replacement Coal is rightfully rejected, Buyer may purchase
coal from another source in order to replace the Rejected Coal (“Cover Coal”). In such a case,
Seller, upon submission by Buyer of appropriate documentation acceptable to Seller, whose
acceptance shall not be unreasonably withheld, shall reimburse Buyer for (i) any amount by Which
the actual price plus transportation costs to Buyer of Cover Coal exceeds the price Buyer would
have paid for such coal under this Agreement plus the 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 in connection with Rejected Coal. Rejected Coal tonnages shall not be
included in the calculation of the actual Monthly Weighted Average quality of the coal delivered
during the Delivery Month (as defined in Section 8.2 below) or any quality price adjustments for
the Delivery Month. Tonnages of Rejected Coal shall not be included in the total of tons delivered
under this Agreement. Tonnages of Replacement Coal and/or Cover Coal shall be included in the total
of tons delivered under this Agreement and in the calculation of the actual Monthly Weighted
Average and any quality price adjustments for the Delivery Month.

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     If Buyer fails to reject a Non-Conforming Coal which it had the right to reject, then such
Non-Conforming Coal shall be deemed accepted by Buyer, and its quality characteristics shall be
included in any quality calculations for the Delivery Month. However, Buyer shall have the option,
in its sole discretion, to exclude accepted Non-Conforming Coal from the total annual tonnage of
coal that Seller is obligated to sell to Buyer under this Agreement. Accepted Non-Conforming Coal
shall nevertheless be considered “rejectable” for purposes of §6.4. 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 the applicable Shipment.

     §6.4 Suspension and Termination.

     If (a) the coal sold hereunder during a month fails to meet one (1) or more of the Guaranteed
Monthly Weighted Average specifications set forth in §6.1 for any two (2) Delivery Months in a six
(6) month period, or (b) five (5) barge Shipments in a thirty (30) day period are rejectable by
Buyer, or (c) Buyer receives at its generating station(s) two (2) rail Shipments which are
rejectable in any thirty (30) day period, then Buyer may upon notice (which need not comply with
Section 11) confirmed in writing and sent in accordance with Section 11, suspend future Shipments
of coal hereunder, except for coal already loaded into barges and/or railcars at the time notice is
given. Seller shall, within ten (10) days of such notice, provide Buyer with reasonable assurances
that future Shipments of coal will meet or be of a quality superior to the

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Guaranteed Monthly Weighted Average specifications set forth in §6.1 and will be of a quality
superior to 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. If Seller provides such assurances to Buyer’s reasonable satisfaction, shipments
hereunder shall resume, and any tonnage deficiencies resulting from suspension may be made up at
Buyer’s sole option. Buyer shall not unreasonably withhold its acceptance of Seller’s assurances,
or delay the resumption of shipments.

     If after deliveries resume, Seller’s deliveries fail to meet any of the Guaranteed Monthly
Weighted Average specifications for any one (1) Delivery Month within the next six (6) months or if
three (3) barge shipments or one (1) rail shipment are rejectable within any one (1) Delivery Month
during such six (6) month period, then Buyer may terminate this Agreement and exercise all its
other rights and remedies available to it under applicable law and in equity for Seller’s breach.

     If Buyer refrains from terminating this Agreement as a result of one or more Non-Conforming
Shipments of coal as provided herein, Buyer shall not be deemed to have waived its right to
terminate this Agreement for any future breach of the Agreement.

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     SECTION 7. WEIGHTS, SAMPLING AND ANALYSIS.

     §7.1 Weights. Except as otherwise provided herein or if the parties agree otherwise,
the weight of each coal Shipment delivered hereunder shall be determined for payment purposes (the
“Payment Weight”) by Buyer on the basis of certified scale weights at the generating station.

     If Buyer’s belt scale is inoperable or if Buyer fails to obtain a sample of the coal for
qualitative analysis upon unloading, the Seller’s loading weight shall be used for the relevant
Shipment and the Seller’s analysis shall be the analysis used in determining the payment for the
relevant Shipment (the “Payment Analysis”). Seller will be notified as soon as possible whenever
the Buyer’s belt scale or sampling equipment is out of operation. Seller will transmit its loading
weights and qualitative analysis for the relevant Shipment to Buyer as soon as possible.

     For all coal delivered and unloaded at Buyer’s Trimble County Generating Station, the unloaded
weight for each Shipment, shall be determined using a barge lot weighing method. If more than one
(1) of Seller’s barges are unloaded sequentially, an actual unloaded weight shall be recorded, on
the basis of Buyer’s scale weights for the total of all Seller’s barges unloaded in this sequence,
The assigned unloaded weight for each such Shipment shall be proportioned based upon Seller’s load
weight for each barge and the total weight for all Seller’s barges unloaded in that sequence.

     Scales (whether Buyer’s or Seller’s) shall be operated in accordance with NIST Handbook 44.
Such scales shall be duly reviewed by an appropriate testing agency and

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maintained in an accurate
condition and certified (i.e. material tested) at least annually in accordance with NIST Handbook
44 with a third party oversight. Seller shall have the right, at Seller’s expense and upon
reasonable notice, to have the Buyer’s scales checked for accuracy at any reasonable time or
frequency.

     If the Buyer’s scales are found to be over or under the tolerance range allowable for the
scale based on industry-accepted standards, then the Buyer shall recalculate the payments for coal
weighed on those scales for the period of inaccuracy (not to exceed 30 days) based on the weights
for such coal provided by Seller. Buyer or the Seller, as applicable, shall pay to the other such
amounts owed as a result of the recalculation, and Buyer shall reimburse Seller for the expenses
incurred in checking the accuracy of said scales.

     If the Seller’s scales are used for payment purposes and are found to be over or under the
tolerance range allowable for the scale based on industry-accepted standards (the “Tolerance”),
then Buyer shall recalculate the payments for coal weighed on those scales for the period of
inaccuracy (not to exceed 30 days) based on the percentage of variance identified for the scales
from the Tolerance, plus the amount of the Tolerance. Buyer or Seller, as applicable, shall pay to
the other such amounts owed as a result of the recalculation, and Seller shall reimburse Buyer for
the expenses incurred in checking the accuracy of said scales.

     §7.2 Sampling and Analysis. The sampling and analysis of the coal delivered hereunder
shall be performed by Buyer upon delivery of the coal to Buyer’s facility, and the results thereof
shall be accepted and used as defining the quality and characteristics of the coal

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delivered under
this Agreement and as the Payment Analysis. All analyses shall be made in Buyer’s laboratory at
Buyer’s expense in accordance with ASTM standards where applicable, or industry-accepted standards
in other cases. Samples for analyses shall be taken in accordance with ASTM standards or other
methods mutually acceptable to both parties. Seller shall transmit its “as loaded” quality analysis
to Buyer as soon as possible. Seller’s “as-loaded” quality shall be the Payment Analysis only when
Buyer’s sampler and/or scales are inoperable, or if Buyer fails to obtain a sample upon unloading.

     Seller represents that it is familiar with Buyer’s sampling and analysis practices, and that
it 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 tune 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 thirty (30) days after the sample is taken
(“Disposal Date”), and shall be delivered to Seller for analysis if Seller so requests before the
Disposal Date. One (1) part (the “Referee Sample”) shall be retained by Buyer until the Disposal
Date. Seller shall be given copies of all analyses made by Buyer by the fifth (5th)
business day of

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the month following the month of unloading. In addition, Buyer shall send Seller
weekly analyses of coal unloaded at Buyer’s facilities.

     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 an analysis of the
Referee Sample before the Disposal Date, Buyer’s analysis shall be used to determine the quality of
the coal delivered hereunder and shall be the Payment Analysis. The Monthly Weighted Averages of
specifications referenced in §6.1 shall be based on the individual Shipment analyses.

     If any dispute arises with regard to the analysis of any sample before the Disposal Date for
such sample, 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, if the analysis of the Independent Lab
differs by more than the applicable ASTM reproducibility standards, the Independent Lab results
will govern, and the prior analysis shall be disregarded. All testing of the Referee Sample by the
Independent Lab shall be at requestor’s expense unless the Independent Lab results differ from the
original Payment Analysis for any specification by more than the applicable ASTM reproducibility
standards as to that specification. In such case, the cost of the analysis made by the Independent
Lab shall be borne by the party who provided the original Payment Analysis.

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     SECTION 8. PRICE.

     §8.1 Base Price.

     (a) Annual Base Price. The annual 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 (or scheduled to be
delivered) as defined in Section 5 in accordance with the following schedule:

	 	 	 	 	 
	YEAR	 	BASE PRICE ($ PER TON) — FOB Railcar Or Barge	 
	2012
	 	 	$45.00	 
	2013
	 	 	$46.00	 
	2014
	 	 	$48.00	 
	2015
	 	 	$49.00	 

     The Annual Base Price, as modified by any base price adjustment provided for in this §8.1, if
any, is hereinafter referred to as the “Base Price”.

     (b) Make-up Tons Pricing. Notwithstanding the foregoing, the Base Price for any
Make-Up Tons (as such term is defined in §3.2 hereof) shall be based on the Base Price for the
calendar year in which such Make-Up Tons should have been delivered and not the Base Price in the
Make-Up Year (as such term is defined in §3.2 hereof).

     (c) Base Price Adjustments. The Annual Base Price established above may be adjusted as
follows:

     (i)
Diesel Fuel Adjustment. In addition to any other adjustments provided herein, the
Base Price shall also be adjusted for changes in the price of Diesel Fuel, such

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adjustment to
be effective on the Adjustment Date (as such term is hereinafter defined). The first Diesel
Fuel Price Adjustment calculation shall be applied towards shipments unloaded beginning January
1, 2012.

     The Diesel Fuel adjustment contemplated herein shall be determined as follows: (1) Subtract
$11.00 (herein called the “Diesel Fuel Component”) from the Price per Ton (the resulting difference
is hereinafter called the “Mine Price per Ton”); (2) Multiply the Diesel Fuel Component by the
Adjustment Factor (as hereinafter defined; the resulting product is hereinafter called the
“Adjusted Diesel Fuel Component”); (3) Add the Adjusted Diesel Fuel Component and the Mine Price
per Ton (herein called the “Adjusted Base FOB Price Per Ton”).

For purposes of this Section 8.1(b)(i), the following terms shall have the meanings set forth
below:

“PPI” shall mean the published PPI-Commodities #2 Diesel Fuel Index #WPU057303 found in the
Producer Price Indexes, published monthly by the U.S. Department of Labor, Bureau of Labor
Statistics.

“Adjustment Factor” shall mean a fraction, the denominator of which shall be 253.6 (the
average base index PPI for October, November, and December 2010) and the numerator of which
shall be the average PPI of the last three months published during a Calculation Period
prior to an Adjustment Date.

“Adjustment Date” shall mean the first day following a Calculation Period for which an
adjustment to the Base Price for changes in the price of Diesel Fuel is contemplated

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LG&E/KU Contract No. J12004

hereunder, namely, January 1, April 1, July 1 or October 1, as the case may be, for each
calendar year for which this Section 8.1 (b)(i) applies.

“Calculation Period” shall mean (i) for a January 1 Adjustment Date, the three (3) months
of September, October, and November of the preceding calendar year; (ii) for an April 1
Adjustment Date, the three (3) months of December of the preceding calendar year, and
January and February; (iii) for a July 1 Adjustment Date, the three (3) months of March,
April, and May; and (iv) for an October 1 Adjustment Date, the three (3) months of June,
July, and August.

An example of the Diesel Fuel Adjustment is included as Schedule II.

     §8.2 Quality Price Adjustments. The price paid by the Seller for the coal
delivered hereunder will be adjusted based on the quality of the coal as follows:

(a) BTU True Up. The Base Price for coal delivered hereunder in any particular
calendar month (a “Delivery Month”) is based on the assumption that the actual “as
received” Monthly Weighted Average BTU/LB (the “BTU AMWA”) for coal delivered to Buyer
during a Delivery Month is equal to the minimum Guaranteed Monthly Weighted Average BTU/LB
set forth in §6.1 (the “BTU GMWA”). If the BTU AMWA varies from the BTU GMWA for any
Delivery Month, then the price applicable to such delivered coal will be adjusted to
account for such variation in BTU’s. The BTU adjustment for that Delivery Month will be
determined as follows:

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LG&E/KU Contract No. J12004

	 	(i)	 	Calculate the per ton BTU adjustment for a Delivery Month using the following
formula (where Price per Ton is the applicable Base Price set forth in §8.1 above):
((BTU AMWA – BTU GMWA) ÷ BTU GMWA) X Price per Ton = Per Ton Adjustment
	 
	 	(ii)	 	Determine the price adjustment for BTU’s for the Delivery Month by multiplying
the Per Ton Adjustment (as calculated in (i) above) by the total number of tons of coal
actually delivered to and unloaded by Buyer under this Agreement during the Delivery
Month.

     Depending on whether the BTU AMWA is greater than or less than the BTU GMWA in a Delivery
Month, the Per Ton BTU Adjustment for the Delivery Month can be positive or negative. If the BTU
adjustment (as calculated above) for a Delivery Month is positive, then Buyer shall pay the amount
of such BTU adjustment to Seller. If the BTU adjustment (as calculated above) for a Delivery Month
is negative, then Seller shall pay or credit the amount of such BTU adjustment to Buyer. Buyer
shall be responsible for making the BTU adjustment calculations and shall send a written statement
to Seller of the amount of the BTU adjustment for each Delivery Month. BTU adjustment payments
shall be due when the next payment for coal is due hereunder.

     For the avoidance of doubt, the parties agree to the following example. If the AMWA for a
Delivery Month equals 11,250 BTU/LB, the GMWA equals 11,000 BTU/LB and the Base Price Per Ton is
$45.00/ton, then the Per Ton BTU Adjustment would be ((11,250 – 11,000) ÷

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11,000) x $45.00 = $1.0227 per ton. If a total of 10,000 tons were delivered during the Delivery
Month, then the BTU adjustment would equal $10,227.27 (10,000 x $1.0227). Since it is positive,
this amount would be due and owing to Seller by Buyer with respect to the deliveries for that
Delivery Month.

     (b) Other Quality Price Reductions. The Base Price is based on Buyer’s receipt of coal
of a quality that is consistent with or superior to all of the GMWA specifications as set forth in
§6.1. Quality price reductions shall be applied for each specification each Delivery Month to
account for the Seller’s failure to provide coal of a quality superior to the “Discount Values” set
forth below.

DISCOUNT
VALUES

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

     For each specification during each Delivery Month with respect to the quality price discounts
listed above, there shall be no discount if the AMWA for a specification meets the applicable
Discount Point set forth below for that specification. If the AMWA fails to meet the Discount
Point, then the applicable Discount Value shall apply, and the quality price reduction shall be
calculated on the basis of the difference between the AMWA and the GMWA for such specification.

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	Guaranteed Monthly Weighted Average	 	Discount Point
	BTU	                        Min. 11,000 BTU/LB	 	10,900 BTU/LB 
	ASH	                        Max. 11.82 LB/MMBTU	 	12.75 LB/MMBTU 
	MOISTURE 	                  Max. 12.73 LB/MMBTU	 	13.10 LB/MMBTU 
	SULFUR	                     Max. 3.10 LB/MMBTU	 	3.15 LB/MMBTU

For example, if the Actual Monthly Weighted Average of sulfur equals 3.18 lb/MMBTU,
then the applicable discount would be (3.18 lb. - 3.10 lb.) X .1232/lb/MMBTU =
$0.0099/MMBTU.

     §8.3 Payment Calculation. Schedule 1 attached hereto shows the methodology for
calculating the coal payment, the BTU adjustment and quality price reductions for the Delivery
Month. If there are any such price adjustments, Buyer shall apply a credit for such adjustments to
amounts owed Seller for the month the coal was unloaded.

     §8.4 Price Adjustments for Changes in Governmental Impositions. The above Base Price
shall be subject to adjustment pursuant to this section only in the event that the requesting party
can clearly demonstrate that: (a) new Federal or state statutes, regulations or other governmental
impositions affecting the coal mining industry either on a regional, state, or national basis and
the coal to be supplied hereunder or the production thereof, including but not limited to tax
increases or decreases (other than taxes measured by income) occur after January 1, 2011; or (b)
amendments, modifications or changes to the text, interpretation, application or enforcement
(excluding changes in frequency, rigor or thoroughness of enforcement) of any existing applicable
Federal or state statutes, regulations, or other governmental impositions occur after January 1,
2011 (all collectively a “Requirement”) winch causes Seller’s direct cost of providing coal to
Buyer under this Agreement to increase or decrease (generally an “Imposition”). In the event a

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party desires to obtain a price adjustment based on an Imposition, the affected party shall notify
the other party in writing of the Requirement or potential Requirement within fifteen (15) days of
the time such party becomes aware of such Requirement and the resulting Imposition, setting forth
the Requirement, specific legal basis for the Imposition, the anticipated or actual financial
impact of the Imposition and the anticipated or actual effective date. Either Buyer or Seller may
request a Base Price adjustment, which shall be comprised of no more than the actual costs directly
associated with the effect of such change on the cost of producing the coal to be supplied
hereunder. Additionally, an Imposition adjustment shall only be made hereunder if the price
adjustment is allocated evenly to all coal produced by Seller, including all coal that is produced
from the Coal Properties, so that Buyer is allocated only its proportionate share of such
Imposition, and the Base Price shall likewise be decreased for any savings resulting from any
Requirement or Imposition. There shall be no change to the Base Price based on reductions or loss
of production or production capacity as a result of an Imposition.

     By way of example, and not of limitation, an Imposition that requires the purchase of special
or additional equipment shall be prorated over the number of years of useful life of the equipment
and over the total tons in any year during the useful life of the equipment. In such a case, the
change in the Base Price would not exceed the per-ton prorated cost of the equipment.

     After Seller has determined the actual, direct cost impact of any Imposition, winch may be
after the conclusion of the applicable calendar year, Seller shall notify Buyer in writing of the
amount and effective date of any claimed adjustment to the Base Price as a result of one or more

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Impositions and shall furnish Buyer with the specific legal basis for the Imposition, and accurate
and detailed computations and data reasonably necessary to substantiate the claimed adjustment.
Buyer shall have the right to inspect only those books and records of Seller relevant to the
claimed adjustment upon reasonable notice to Seller. Buyer shall notify Seller of any disagreement
Buyer has with the claimed adjustment within a reasonable time after receipt of such notice and
computations, taking into account any audits or requests for additional information by Buyer. It is
Seller’s obligation to ensure that Imposition decreases are given to Buyer.

     If the amount of the actual or anticipated Impositions exceeds one dollar ($1.00) per ton on a
cumulative basis for any particular calendar year, Buyer may terminate this Agreement upon not less
than thirty (30) days written notice to Seller. Alternatively, Seller may elect, by forwarding
written notice to Buyer within ten (10) days after receiving Buyer’s notice of termination, to
limit the cumulative amount of Impositions for any year to a maximum of one dollar ($1.00) per ton.
In the event Seller makes such election, the increase shall be so limited, and the remainder of
this Agreement shall continue in full force and effect.

     SECTION 9. INVOICES, BILLING AND PAYMENT.

     §9.1 Invoicing Address. Invoices will be sent electronically to Buyer at the following
address: fuels.accounting@lge-ku.com

     §9.2 Invoice Procedures for Coal Shipments. By the fifth (5th) working day
of the month following the Delivery Month (the “Payment Month”), the Buyer will provide Seller with
a

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price calculation for all coal unloaded during the Delivery Month based on the applicable Base
Price, and taking into account all quality price adjustments provided for in Section 8 (the
“Buyer’s Statement”). By the tenth (10th) day of the Payment Month the Seller will
provide Buyer with its invoice for all coal unloaded during the Delivery Month taking into account
all quality price adjustments (the “Monthly Invoice”).

     §9.3 Payment Procedures for Coal Shipments. For all coal unloaded at Buyer’s
generating station(s) between the first (1st) and fifteenth (15th) days of any Delivery Month,
Buyer shall make a “Preliminary Payment” of one-hundred percent (100%) of the Base Price for such
coal (based on the assumption that the coal will meet all GMWA parameters) by the twenty-fifth
(25th) day of such Delivery Month. All Preliminary Payments shall be calculated based solely on the
then-current Base Price on a dollar-per-ton basis. By the fifteenth (15th) day of the Payment
Month, Buyer will pay for all coal unloaded at the Buyer’s generating station(s) between the
sixteenth (16th) and the last day of any Delivery Month plus any quality adjustments for the
Delivery Month as provided in §8.2 above.

     For example, Buyer will make a Preliminary Payment by August 25 for coal unloaded between
August 1 through August 15. On or before the fifth (5th) working day of September, Buyer
will provide Seller with the Buyer’s Statement. On or before the tenth (10th) day of September, the
Seller shall provide Buyer the Monthly Invoice for all coal unloaded by Buyer in August. The
Monthly Invoice for August unloadings, to the extent it is verified by Buyer, will be paid by the
fifteenth (15th) day of September. In every case referenced in this section for

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payment, if a
specific day is not a banking day and regular work day for Buyer, payment shall be made on the next
regular work day for Buyer.

     The parties acknowledge that Buyer’s performance of its obligations in this Section 9 may be
performed by one or more agents, including without limitation LG&E and KU Services Company.

     Buyer shall electronically transfer funds to Seller’s Account:

Armstrong Energy, Inc.

Bank: US Bank, N.A.

ABA # 152306681361

Account # 081-000-210

     §9.4 Withholding. Buyer shall have the right to withhold from payment of any billing or
billings: (i) any sums winch it is not able in good faith to verify or which it otherwise in good
faith disputes, (ii) any damages resulting from any breach of this Agreement by Seller; and (iii)
any amounts owed to Buyer from Seller. Buyer shall immediately notify Seller in writing of the
basis for the dispute and pay the portion of such statement not in dispute no later than the due
date. If any amount withheld under dispute by Buyer is ultimately determined to be due Seller, it
shall be paid within (5) business days after such determination.

     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.

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     §9.5 Guaranty. Seller’s Guarantor, Armstrong Land Company, LLC, shall provide a
guarantee in form consistent with the attached Exhibit II, prior to the execution of this
Agreement.

     SECTION 10. FORCE MAJEURE.

     §10.1 General Force Majeure. If either party hereto is delayed in or prevented in
whole or part, from performing any of its obligations or from utilizing the coal sold under this
Agreement as a result of one or more events or occurrences which are both: (a) beyond the
reasonable control of the affected party, and (b) not the result of the fault or negligence of the
affected party (a “Force Majeure Event”), then the obligations of both parties hereto shall be
suspended to the extent made necessary by such Force Majeure Event; provided that the affected
party gives written notice to the other party as early as practicable of the existence, nature and
probable duration of the Force Majeure Event and makes all commercially reasonable efforts to
terminate and/or limit the effect of the Force Majeure Event. As used herein, the term Force
Majeure Event shall include but not be limited to acts of God, war, terrorism, riots, civil
insurrection, acts of the public enemy, strikes, lockouts, industry-wide labor shortages, labor
disputes which cause work stoppages, industry-wide shortages of materials and supplies, adverse
geological conditions in coal seams not discernable by prudent engineering, fires, floods or
earthquakes, and other similar or dissimilar events or occurrences that otherwise satisfy the

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definition of a Force Majeure Event herein. The party declaring force majeure shall 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 of similar specifications as set forth in §6.1
from each Coal Property to any other buyers other than “Other FM Buyers” (as herein after defined).
With respect to any given month and each particular Coal Property, “Other FM Buyers” are other
buyers to whom Seller is contractually committed to make deliveries to in that particular month
under a contract which (a) includes such Coal Property and (b) has been in place at the onset of
the Force Majeure Event (a “Permitted Contract”). Further, if Seller is delivering coal to Other FM
Buyers during the period of Force Majeure Event, Seller shall during each month deliver to Buyer
under this Agreement at least a pro rata portion of its monthly aggregate production from each Coal
Property, in accordance with the below methodology:

	 	 	 	 	 	 

	 
	 	  Required Monthly Delivery to Buyer	= 	mBQ	x STMP
	 
	 	  (During Each FM Month for Each Coal Property)	 	(ΣmOBQ) + mBQ)	 

	 	 	 	 	 

	 

	 	Where:	 	 
	 
	 	 	 	 
	 

	 	OFMB =
	 	Other Force Majeure Buyers for such Coal Property
	 
	 	 	 	 
	 

	 	PC =
	 	Permitted Contracts for such Coal Property
	 
	 	 	 	 
	 

	 	BQ =
	 	annual Base Quantity (under this Agreement)
	 
	 	 	 	 
	 

	 	mBQ =
	 	BQ/12
	 
	 	 	 	 
	 

	 	STMP =
	 	Seller’s total production of coal meeting similar specifications set forth in
§6.1 during such month from such Coal Property

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LG&E/KU Contract No. J12004

	 	 	 	 

	 	OBQ =
	 	Annualized contractual base quantities under OFMB’s PC’s at time of FM
Event
	 	 	 	 
	 	mOBQ=
	 	OBQ / 12

     For purposes of this calculation:

     In any particular monthly calculation, OBQ (and its sum ΣOBQ) shall not include (a) any base
quantities for OFMB whose PC base quantity delivery months have since expired or (b) any base
quantities for OFMB whose PC base quantity delivery months have not yet commenced. Further, for PCs
with terms of greater or less than 1 year OBQ shall use an annualized base quantity amount for such
PC.

     In any particular monthly calculation, STMP shall be the aggregate tons of coal produced by
Seller in that month from such Coal Property. The term “production” hereunder shall be defined and
calculated consistently with the use of that term in the federal Quarterly Mine Employment and Coal
Production Report (MSHA Form 7000-2) as reported to Department of Labor-Mine Safety and Health
Administration.

     In any particular monthly calculation, Seller shall not be required to deliver to Buyer an
amount in excess of the ratable annual Base Quantity hereunder (namely mBQ).

     Example: CALCULATION OF MONTHLY TONNAGE ALLOCATION DURING FORCE MAJEURE EVENT.

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LG&E/KU Contract No. J12004

If during Month 1, Coal Property Source A experiences a Force Majuere event that limits or prevents
the production of coal used to supply Contract 1 and 4, then the calculation of the monthly
allocation of coal production to Buyer under Contract 1 would be as follows:

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LG&E/KU Contract No. J12004

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Company	 	Contract #	 	 	Coal Properties	 	 	BQ	 	 	mBQ	 
	LG&E-KU
	 	 	1	 	 	 	A, B, C, D	 	 	 	400,000	 	 	 	33,333	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	OFMB	 	PC	 	 	 	 	 	 	OBQ	 	 	m OBQ	 
	x
	 	 	2	 	 	 	B, C, D	 	 	 	300,000	 	 	 	25,000	 
	y
	 	 	3	 	 	 	C, D	 	 	 	200,000	 	 	 	16,667	 
	z
	 	 	4	 	 	 	A	 	 	 	150,000	 	 	 	12,500	 

ALLOCATION OF STMP to CONTRACT # 1

	 	 	 	 	 	 	 	 	 
	Coal Properties	 	STMP	 	 	Allocation	 
	A
	 	 	0	 	 	 	0	 
	B
	 	 	30,000	 	 	 	17,143	 
	C
	 	 	10,000	 	 	 	4,444	 
	D
	 	 	15,000	 	 	 	6,667	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	28,254	 

Allocation of STMP not to exceed mBQ or mOBQ

	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 
	 

	 	(mBQ)	 x 	 STMP	 	 	 
	 

	 	 	 	 	 
	 

	 	(ΣmOBQ) + mBQ)	 	 	 	 	 

	 	 	 	 	 	 	 	 
	 

	 	Allocation of A:		 
	 

	 	33,333  	  x  	0	=	0	 
	 

	 	 	 	 	 	 	 
	 

	 	45,833 	   (Contract 1, 4)	 	 	 
	 	 	 	 	 	 	 	 
	 

	 	Allocation of B;
	 	 
	 

	 	33,333  	  x  	30,000	=	17,143	 
	 

	 	 	 	 	 	 	 
	 

	 	58,333 	   (Contract 1, 2)	 	 	 
	 	 	 	 	 	 	 	 
	 

	 	Allocation of C:
	 	 
	 

	 	33,333  	  x  	10,000	=	4,444	 
	 

	 	 	 	 	 	 	 
	 

	 	75,000 	   (Contract 1, 2, 3)	 	 	 
	 	 	 	 	 	 	 	 
	 

	 	Allocation of D:
	 	 
	 

	 	33,333  	  x  	15,000	=	6,667	 
	 

	 	 	 	 	 	 	 
	 

	 	75,000 	   (Contract 1, 2, 3)	 	 	 

     An event which affects the Seller’s ability to produce or obtain coal from a mine other than the
Coal Properties will not be considered a Force Majeure Event hereunder. In addition,

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LG&E/KU Contract No. J12004

Seller shall use its commercially-reasonable best efforts (including changes to processing,
preparation and blending) to increase its production capacity at similar unaffected properties
constituting Coal Properties to supply coal as provided herein during the Force Majeure Event.

     Changes in market conditions, commercial frustration, commercial impracticability or the
occurrence of unforeseen events rendering performance of this Agreement uneconomical for either
Party shall not constitute a Force Majeure Event. Minor transportation delays which can be resolved
by an amendment to the delivery schedule without materially disrupting future shipments will not be
considered Force Majeure Events, but shall be resolved by schedule amendments.

     Tonnage deficiencies resulting from a Force Majeure Event shall be made up at sole option of
the non-affected party and shall be treated as Make-Up Tons pursuant to §3.2 above, and to the
extent necessary, the term of this Agreement will automatically be extended for the period
necessary for the receipt or delivery of the Make-Up Tons; provided, however, the non-affected
party shall be required to provide written notice to the other party of its intent to make up such
deliveries within ninety (90) days of the cessation of the Force Majeure Event.

     If a Force Majeure Events continues for more than 180 days, the non-affected party shall have
the right to terminate this Agreement, in its sole discretion, without further obligation on the
part of either party, except for obligations incurred prior to such termination.

     §10.2 Environmental Law Force Majeure. In addition to, and not in limitation of, the
provisions of §10.1 above, if Buyer concludes that any new environmental law is enacted or new

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LG&E/KU Contract No. J12004

rule, or regulation is promulgated (including without limitation, an amendment to or a new
interpretation of an existing law, rule or regulation) after the date of execution of this
Agreement which becomes effective during the term of this Agreement, winch makes it impossible,
commercially impracticable or uneconomical for Buyer to utilize this or like kind and quality coal
which thereafter would be delivered under this Agreement, Buyer shall so notify Seller. 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. If in Buyer’s sole judgment any such actions will not, without
unreasonable expense to Buyer, make it possible, commercially practicable and economical for Buyer
to use the coal which 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 Seller or the effective date of such restriction, to terminate this Agreement without further
obligation hereunder on the part of either party except for obligations incurred prior to the time
of such termination.

     If as a result of the adoption or reinterpretation of laws, regulations, policies or
restrictions, or changes in the interpretation or enforcement thereof, Seller decides that it will
be impossible, commercially impracticable, or uneconomical for Seller to produce the coal required
hereunder, Seller shall so notify Buyer. 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.
If in Seller’s sole judgment any such actions will not, without unreasonable expense to

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LG&E/KU Contract No. J12004

Seller, make it possible, commercially impracticable or uneconomical for Seller to sell the coal
which would be delivered hereunder without violating any applicable law, regulation, policy or
order, Seller shall have the right, upon the later of sixty (60) days notice to Buyer of the
effective date of such restriction, to terminate this Agreement without further obligation
hereunder on the part of either party except for obligations incurred prior to the time of such
termination.

     §10.3 Limitation on Environmental Force Majeure. Notwithstanding anything to the contrary
set forth in §10.2 above, a delay or other failure, based solely on Seller’s gross negligence, in
the issuing of one or more permits (that are necessary on the date hereof pursuant to an existing
environmental law, regulation, policy and/or restriction to commence operations with respect to an
Coal Properties) shall not be the basis, in whole or in part, of any claim by Seller under §10.2, whether such delay or failure relates to the reinterpretation of existing environmental laws,
regulations, policies and/or restrictions, to a change in the interpretation, or to the enforcement
thereof; provided however, this §10.3 shall not apply with respect to delays or other failures in
the issuing of one or more necessary permits to the extent such permits are new permits required
pursuant to an environmental law, regulation, restriction or policy adapted after the date of
execution of this Agreement with respect to Coal Properties or other Armstrong facilities then
being utilized to provide coal hereunder.

     SECTION 11. NOTICES.

     §11.1 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

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LG&E/KU Contract No. J12004

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/Kentucky Utilities Company
	 

	 	 	 	220 West Main Street
	 

	 	 	 	Louisville, Kentucky 40202
	 

	 	 	 	Attn.: Director Corporate Fuels and By Products
	 
	 	 	 	 
	 

	 	If to Seller:
	 	Armstrong Coal Company, Inc
	 

	 	 	 	407 Brown Road
	 

	 	 	 	Madisonville, Kentucky 42431
	 

	 	 	 	Attn: Mr. David Cobb
	 
	 	 	 	 
	 

	 	With Required Copies to:

	 
	 	 	 	 
	 

	 	 	 	Adam Anderson, Director Marketing/Sales
	 

	 	 	 	Armstrong Coal Company, Inc
	 

	 	 	 	7701 Forsyth Boulevard — 10th floor
	 

	 	 	 	St. Louis, Missouri 63105
	 
	 	 	 	 
	 

	 	And:	 	 
	 
	 	 	 	 
	 

	 	 	 	Mason L. Miller
	 

	 	 	 	Miller Wells, PLLC
	 

	 	 	 	300 East Main Street, Ste. 360
	 

	 	 	 	Lexington, Kentucky 40507

Notice will be deemed received when actually received by the addressee.

     §11.2 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.

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LG&E/KU Contract No. J12004

     §11.3 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 12. INDEMNITY AND INSURANCE

     §12.1 Indemnity. Seller agrees to indemnify and save harmless Buyer, its officers,
directors, employees and representatives from any responsibility or liability for any and all third
party claims, demands, costs, charges, losses, legal actions for personal injuries, property damage
or pollution (including reasonable inside and outside attorney’s fees) (collectively “Claims”)
accruing prior to the delivery of the coal to Buyer. Seller’s indemnity shall include but not be
limited to Claims: (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
related to Seller’s production of coal and its performance under this Agreement, 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 or liability for any and all third party claims, demands,
costs, charges, losses, legal actions for personal injuries, property damage or pollution
(including reasonable inside and outside attorney’s fees) (collectively “Claims”) accruing or
resulting from occurrences subsequent to the delivery of the coal to Buyer. Buyer’s indemnity shall
include but

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LG&E/KU Contract No. J12004

not be limited to claims (i) due to any failure of Buyer to comply with laws,
regulations or ordinances related to Buyer’s performance under the Agreement, or (ii) due to the
negligence of any representatives, agents or employees of Buyer who inspect the Coal Properties; or
(iii) due to the acts or omissions of Buyer in the performance of this Agreement; and (iv) relating
to the trucks, barges or railcars actually provided by Buyer or Buyer’s contractor during the
period after title and risk of loss has passed to Buyer..

     §12.2 Insurance. In addition to any indemnity obligations, and not in lieu thereof,
Seller shall 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) Employer’s Liability, $1,000,000 single limit liability

     (4) In addition, Seller shall carry excess liability insurance covering the foregoing perils
in the amount of $9,000,000 for any one occurrence.

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

     (6) Landing Owners’s/Stevedores/Wharfinger’s Liability insurance coverage in the amount of not
less than $300,000 and total basic coverage and excess liability coverage of not less than
$1,000,000.

     If any of the above policies are written on an occurrence basis, then the retroactive date of
the policy or policies will be no later than the effective date of this Agreement. Certificates of

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LG&E/KU Contract No. J12004

Insurance satisfactory in form to the Buyer and signed by the Seller’s insurer shall be supplied by
the Seller when requested by the Buyer evidencing that the above insurance is in force.
Notwithstanding the above, Seller shall provide not less than thirty (30) calendar days written
notice to the Buyer prior to any cancellation or material reduction in coverage under the policies.
The Seller shall cause its insurer to waive all subrogation rights against the Buyer respecting all
losses or claims arising from performance hereunder. Evidence of such waiver satisfactory in form
and substance to the Buyer shall be exhibited in the Certificate of Insurance mentioned above.
Seller’s liability shall not be limited to its insurance coverage.

     SECTION 13. TERMINATION FOR DEFAULT.

     Subject to the provisions of §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 breach of a
representation and warranty set forth herein, then the other party may give written notice
describing such breach (“Notice of Default”). If such material breach is not curable or the
breaching party fails to cure such material breach within thirty (30) days following receipt of the
Notice of Default then, at the option of the non-breaching party, this Agreement shall terminate,
in addition to all the other rights and remedies available to the non-breaching party under this
Agreement and at law and in equity.

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ARMSTRONG COAL COMPANY, INC.

LG&E/KU Contract No. J12004

     SECTION 14. TAXES, DUTIES AND FEES.

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

     SECTION 15. 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
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 shall cooperate at no additional cost to Buyer. Buyer shall be responsible for all costs
associated with travel by Buyer or Buyer’s auditor.

     SECTION 16. 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

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ARMSTRONG COAL COMPANY, INC.

LG&E/KU Contract No. J12004

of the Vietnam Era;
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 17. COAL PROPERTIES INSPECTIONS. Buyer and its representatives, and others as
may be required by applicable laws, ordinances and regulations in connection with Buyer
(“Visitors”) shall have the right at all reasonable times and at their own expense to inspect the
Coal Properties, including the loading facilities, scales, sampling system(s), wash plant
facilities, and mining equipment (collectively “Facilities”) for conformance with this Agreement.
Seller shall cooperate with such inspections at no additional cost to Buyer. Seller shall undertake
reasonable care and precautions to prevent personal injuries to any Visitors who inspect the Coal
Properties or the Facilities. All Visitors shall make every reasonable effort to comply with
Seller’s regulations and rules regarding conduct on the work site (to the extent they are made
known to Visitors prior to entry), as well as safety measures mandated by state or federal rules,
regulations and laws. Buyer understands that coal mines and related facilities are inherently
high-risk environments. Buyer’s inspection (or failure to inspect) the Coal Properties or
Facilities or to object to defects therein at the time Buyer of any such inspection shall not
relieve Seller of any of its responsibilities nor be deemed to be a waiver of any of Buyer’s rights
hereunder.

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ARMSTRONG COAL COMPANY, INC.

LG&E/KU Contract No. J12004

     SECTION 18. MISCELLANEOUS.

     §18.1 Applicable Law. This Agreement shall be construed in accordance with the laws of
the Commonwealth of Kentucky without regard to any conflicts of laws that would result in the
application of the laws of any other jurisdiction, and all questions of performance of obligations
hereunder shall be determined in accordance with such laws.

     §18.2 Headings. The paragraph headings appearing in this Agreement are for convenience
only and shall not affect the meaning or interpretation of this Agreement.

     §18.3 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.

     §18.4 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.

     §18.5 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.

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

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LG&E/KU Contract No. J12004

     §18.7 Relationship of the Parties. Seller agrees that it is not and will not hold
itself out as a partner, joint venture, employee, agent or representative of 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.

     §18.8 Joint and Several Liability. LG&E and KU shall be severally but not jointly
liable for obligations of Buyer hereunder, and shall be liable only for such obligations that
pertain to a particular party constituting Buyer.

     §18.9 Limitation of Remedies. NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRACT, AND
EXCEPT TO THE EXTENT A CLAIM, DEMAND, LOSS, OR LEGAL ACTION (“CLAIM”) BROUGHT BY A THIRD PARTY
INCLUDES ONE OR MORE SUCH ITEMS FOR WHICH THERE IS AN INDEMNITY OBLIGATION UNDER THIS AGREEMENT
WITH RESPECT TO SUCH CLAIM, NEITHER PARTY SHALL BE LIABLE FOR CONSEQUENTIAL, PUNITIVE, EXEMPLARY,
SPECIAL OR INDIRECT DAMAGES, LOST REVENUES, LOST PROFITS OR OTHER BUSINESS INTERRUPTION DAMAGES.

     EXCEPT AS OTHERWISE EXPRESSLY SET FORTH HEREIN, SELLER EXPRESSLY NEGATES ANY OTHER
REPRESENTATION, WRITTEN OR ORAL, EXPRESS OR IMPLIED, INCLUDING ANY REPRESENTATION OR WARRANTY WITH
RESPECT TO MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE.

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LG&E/KU Contract No. J12004

     §18.10 Forward Contract. The parties agree that the transactions for the sale and
purchase of coal hereunder are and shall constitute “forward contracts,” and that the parties
hereto are and shall be considered “forward contract merchants” within the meaning of the United
States Bankruptcy Code.

     §18.11 Counterparts. This Agreement may be executed in counterparts, each of which
will be deemed an original, but all of which together will constitute one and the same instrument.
Delivery of the executed signature pages by facsimile transaction will constitute effective and
binding execution and delivery of this Agreement.

     §18.12 Assignment.

     A. Seller shall not, without Buyer’s prior written consent, which may be withheld in Buyer’s
sole discretion, 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 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

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LG&E/KU Contract No. J12004

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.

     §18.13 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.

     §18.14 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 executed this Agreement, intending it to be
binding as of the date(s) indicated below and to be performed as set out herein.

	 	 	 	 	 	 
	 	 	 	 	 	 
	BUYER:

	 	SELLER:	 
	LOUISVILLE GAS AND ELECTRIC COMPANY

	 	ARMSTRONG COAL COMPANY, INC.	 
	 
	 	 	 	 	 
	By:

	/s/ 	 	By:	/s/ Martin D. Wilson	 
	Title: 

	VP, Energy Marketing	 	Title: 	President	 
	Date: 

	9-19-11	 	Date: 	9/15/11	 

50

 

ARMSTRONG COAL COMPANY, INC.

LG&E/KU Contract No. J12004

	 	 	 	 	 
	KENTUCKY UTILITIES COMPANY

 	 
	By:  	/s/
 	 
	Title:  	VP,
Energy Marketing	 
	Date:  	9-19-11 	 
	 

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ARMSTRONG COAL COMPANY, INC.

LG&E/KU Contract No. J12004

SCHEDULE I

SAMPLE COAL PAYMENT CALCULATIONS

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

	 	 	 	 	 
	 	 	Section I	 	Base Data
	1)	 	Base Or Adjusted Base F.O.B. price per ton:
	 	$45.00       /ton
	la)	 	Tons of coal delivered:
	 	                    tons
	2)	 	Guaranteed average heat content:
	 	11,000       BTU/LB.
	2a)	 	As received monthly avg. heat content:
	 	                    BTU/LB.
	2b)	 	Total BTU’s unloaded in the month
	 	             Millions of BTU’s
	3)	 	Guaranteed monthly avg. max. sulfur
	 	3.10         LBS./MMBTU
	3a)	 	As received monthly avg. sulfur
	 	                    LBS./MMBTU
	4)	 	Guaranteed monthly avg. ash
	 	11.82        LBS./MMBTU
	4a)	 	As received monthly avg. ash
	 	                    LBS./MMBTU
	5)	 	Guaranteed monthly avg. max. moisture
	 	12.73        LBS./MMBTU
	5a)	 	As received monthly avg. moisture
	 	                    LBS./MMBTU
	6)	 	BTU True Up:
{[(line 2a - line 2)] ÷ line 2} x line 1
	 	                    Dollars /Ton
	6a)	 	BTU True Up
Dollars (line 6 x line 1a)
	 	                    Dollars

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

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ARMSTRONG COAL COMPANY, INC.

LG&E/KU Contract No. J12004

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

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ARMSTRONG COAL COMPANY, INC.

LG&E/KU Contract No. J12004

Schedule II

Sample Diesel Fuel Price Adjustment Calculation

January 1, 2012 Diesel Fuel Price Calculation

	 	 	 

	2012 Contract Price:	 	$45.00 Per Ton

	Less:	 	     $11.00 Diesel Fuel Component

	 	 	     $34.00 Mine Price Per Ton

	 	 	     $11.00 Diesel Fuel Component

	Times:	 	        AF    Adjustment Factor (See Below)

	 	 	     $Y.YY Adjusted Diesel Fuel Component

	 	 	     $34.00 Mine Price Per Ton

	Plus:	 	     $Y.YY Adjusted Diesel Fuel Component

	 	 	     $P.PP Adjusted Base Price FOB / ton

Sample Adjustment Factor Calculation:

For January 1, 2012 Adjustment

PPI-Commodities — #2 Diesel Fuel #WPU057303

	 	 	 

	Sept’11
	 	Sept Index
	Oct ’11
	 	Oct Index
	Nov’11
	 	Nov Index
	 
	 	Average (a)

Oct/Nov/Dec 2010/PPI — Commodities — #2 Diesel Fuel #WPU057303

	 	 	 

	Oct’10
	 	243.7
	Nov’10
	 	255.3
	Dec’10
	 	261.7
	Average
	 	253.6 (b)
	Adjustment Factor AF = (a) ÷ (b)

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ARMSTRONG COAL COMPANY, INC.

LG&E/KU Contract No. J12004

EXHIBIT I

	 	 	“Coal Properties” means the following seams and mines owned by Seller

	 	 	 	 	 	 	 
	Mine Name	 	County	 	Type of Operation	 	Seams
	Big Run
	 	Ohio	 	Underground	 	#9
	West Fork
	 	Ohio	 	Surface	 	#9, #11, #12, #13
	Parkway
	 	Muhlenberg	 	Underground	 	#9
	Equality Boot
	 	Ohio	 	Surface	 	#11, #12, #13, #14
	Ken-Barton
	 	Ohio	 	Surface	 	#9, #11, #12, #13
	East Fork
	 	Ohio	 	Surface	 	#14
	Lewis Creek
	 	Ohio	 	Surface/Underground	 	#9, #14
	Sunnyside
	 	Muhlenberg	 	Surface	 	#11, #12, #14
	Jacobs Creek
	 	Muhlenberg	 	Surface	 	#9, #11, #12, #13
	Vogue/Earles
	 	Muhlenberg	 	Surface	 	#9, #11, #12, #14
	Game Preserve
	 	Muhlenberg	 	Surface	 	#9
	Kronos
	 	Ohio	 	Underground	 	#9

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ARMSTRONG COAL COMPANY, INC.

LG&E/KU Contract No. J12004

EXHIBIT II

     This
Guaranty (the “Guaranty”) is made by Armstrong Land
Company, LLC (the “Guarantor”), a
Delaware limited liability company, in favor of Louisville Gas and Electric Company and Kentucky
Utilities Company (collectively the “Beneficiary”) in consideration of the Beneficiary entering
into agreement(s) with Armstrong Coal Company, Inc. (the “Counterparty”).

	1.	 	Guaranty: Guarantor does hereby unconditionally and absolutely guarantee to
Beneficiary the full and faithful (i) payment by Counterparty of any amounts due to the
Beneficiary under and pursuant to that certain Coal Supply Agreement dated on or about January
1, 2012 and any amendments thereto, (the “Agreement”) to be entered into from time to time by
the Counterparty with Beneficiary related to the purchase, sale and/or exchange of coal and
(ii) performance of all obligations of Counterparty now existing or hereafter arising under
the Agreement, including obligations that would exist under the Agreement but for operation of
any applicable provision of Title 11 (bankruptcy) of the United States Code or similar laws
affecting creditor rights, or under applicable law or by agreement of Counterparty (the
payment and performance obligations described in clauses (i) and (ii) above are referred to
herein collectively as the “Guaranteed Obligations”) Notwithstanding anything herein to the
contrary, Guarantor shall have no performance obligation to sell, deliver, supply or transport
coal or any other commodity under the Agreement from any property other than the Coal
Property.

This Guaranty shall replace, supercede and render null and void any existing guaranties
currently in force with respect to the Agreement.

	2.	 	Guaranty Absolute: The Guarantor guarantees that the Guaranteed Obligations will be paid or
performed strictly in accordance with the terms of the Agreement, regardless of any law,
regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms
or the rights of Beneficiary with respect thereto. The obligations of the Guarantor under this
Guaranty are independent of, but related to, the Counterparty’s obligations under the
Agreement and a separate action or actions may be brought and prosecuted against the Guarantor
to enforce this Guaranty, irrespective of whether any action is brought against one or more
of the parties constituting Counterparty or whether one or more of the parties constituting
Counterparty is joined in any such action or actions. The liability of the Guarantor under
this Guaranty shall be irrevocable, absolute and unconditional irrespective of,

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ARMSTRONG COAL COMPANY, INC.

LG&E/KU Contract No. J12004

	 	 	and the Guarantor hereby irrevocably waives any defenses it may now or hereafter have in any way
relating to, any or all of the following:

(a) any lack of validity or enforceability of the Agreement or any agreement or
instrument relating thereto;

(b) any change in the time, manner or place of payment of, or in any other term of, all
or any of the Guaranteed Obligations under the Agreement, any modification, extension or
waiver of any of the terms of the Agreement, or any other amendment or waiver of or any
consent to departure from any term of the Agreement;

(c) any taking, exchange, release or non-perfection or the taking or failure to take any
other action with respect to any collateral, or any taking, release or amendment or
waiver of or consent to departure from any other guaranty, for all or any of the
Guaranteed Obligations;

(d) any requirement that Beneficiary proceed against one or more of the parties
constituting Counterparty, any other person or entity, any collateral or any manner of
application of any collateral, or proceeds thereof, to all or any of the Guaranteed
Obligations, or any manner of sale or other disposition of any collateral for all or any
of the Guaranteed Obligations;

(e) any change, restructuring or termination of the corporate structure or existence of
one or more of the parties constituting Counterparty or any of its Subsidiaries;

(f) any lack or failure of notice or any failure of Beneficiary to disclose to one or
more of the parties constituting Counterparty or the Guarantor any information relating
to the financial condition, operations, properties or prospects of one or more of the
parties constituting Counterparty or the Guarantor, or relating to the Agreement, as the
case may be, now or in the future known to Beneficiary (the Guarantor waiving any duty
on the part of Beneficiary to disclose such information); or

(g) any other circumstance (including, without limitation, any statute of limitations)
or any existence of or reliance on any representation by Beneficiary that might
otherwise constitute a defense available to, or a

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ARMSTRONG COAL COMPANY, INC.

LG&E/KU Contract No. J12004

discharge of, one or more of the parties constituting Counterparty, the Guarantor
or any other guarantor or surety.

	 	 	Notwithstanding any provision to the contrary contained herein, Guarantor’s liability hereunder
shall be and is specifically limited as expressly set forth in
Section 1 above. and, except to
the extent specifically provided in the Agreement, in no event shall Guarantor be subject
hereunder to consequential, exemplary, equitable, loss of profits, punitive, tort, or any other
damages, costs, or attorney’s fees.

	 	 	This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any
time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned
by Beneficiary or any other Person upon the insolvency, bankruptcy or reorganization of one or
more of the parties constituting Counterparty or the Guarantor or otherwise, all as though such
payments had not been made. The obligations of the Guarantor under this Guaranty shall at all
times rank at least pari passu in right of payment with all other unsecured and unsubordinated
indebtedness (actual or contingent) of the Guarantor, except as may be required by law. This
Guaranty shall continue to be effective if one or more of the parties constituting Counterparty
merges or consolidates with or into another entity, loses its separate legal identity or ceases
to exist.

	 	 	This Guaranty is a continuing guaranty of the payment (and not of collection) and of the
performance by each of the parties constituting Counterparty of its obligations under the
Agreement. In no event shall Guarantor’s liability to Beneficiary exceed Counterparty’s
liability under the Agreement, notwithstanding
the effect of the insolvency, bankruptcy or reorganization of Counterparty. The Guarantor agrees
that its obligations under this Guaranty shall not be impaired, modified, changed, released or
limited in any manner whatsoever by any impairment, modification, change, release or limitation
of the liability of one or more parties constituting Counterparty (or the estate in bankruptcy
of one or more parties constituting Counterparty) resulting from the operation of any present or
future provision of the federal bankruptcy law or other similar statute.

	3.	 	Waivers and Acknowledgments: The Guarantor hereby waives presentment, protest, acceleration,
dishonor, promptness, diligence, filing of claims with a court in the event of insolvency or
bankruptcy of the one or more parties constituting Counterparty, notice of acceptance of this
Guaranty and any other notice with respect to any of the Guaranteed Obligations and this
Guaranty and any requirement that Beneficiary protect, secure, perfect or insure any lien or
any

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ARMSTRONG COAL COMPANY, INC.

LG&E/KU Contract No. J12004

	 	 	property subject thereto or exhaust any right or take any action against one or more of the
parties constituting Counterparty or any other Person or entity, or any collateral. The
Guarantor hereby waives any right to revoke this Guaranty, and acknowledges that this Guaranty
is continuing in nature and applies to all Guaranteed Obligations, whether existing now or in
the future.

	 	 	No delay of Beneficiary in the exercise of, or failure to exercise, any rights hereunder shall
operate as a waiver of such rights, a waiver of any other rights or a release of Guarantor from
any obligations hereunder nor shall any single or partial exercise by Beneficiary of any right,
remedy or power hereunder preclude any other or future exercise of any right, remedy or power.
Each and every right, remedy and power hereby granted to Beneficiary or allowed it by law or
other agreement shall be cumulative and not exclusive of any other, and may be exercised by
Beneficiary from time to time.

	4.	 	Expenses: Guarantor agrees to pay on demand any and all out-of-pocket costs, including
reasonable legal fees and expenses, and other expenses incurred by Beneficiary Counterparty in
enforcing Guarantor’s obligations under this Guaranty.

	5.	 	Subrogation: The Guarantor will not exercise any right that it may now or hereafter acquire
against Counterparty that arise from the existence, payment, performance or enforcement of the
Guarantor’s Obligations under this Guaranty, including, without limitation, any right of
subrogation, reimbursement, exoneration, contribution or indemnification and any right to
participate in any claim or remedy of Beneficiary against Counterparty or any collateral,
whether or not such claim, remedy or right arises in equity or under contract, statute or
common law, including, without limitation, the right to take or receive from Counterparty,
directly or indirectly, in cash or other property or by setoff or in any other manner, payment
or security on account of such claim, remedy or right, unless and until all of the obligations
of Counterparty under the Agreement and all other amounts payable under this Guaranty shall
have been performed or paid in full in cash (and not subject to disgorgement in bankruptcy or
otherwise). If any amount shall be paid to the Guarantor in violation of the preceding
sentence at any time prior to the later of the payment in full in cash of the Guaranteed
Obligations and all other amounts payable under this Guaranty, the Guarantor shall hold such
amount as agent for the benefit of Beneficiary, which amount shall forthwith be paid to
Beneficiary to be credited and applied to the Guaranteed Obligations and all other amounts
payable under this Guaranty, whether matured or unmatured, in accordance with the terms of the
Agreement, or to be held as collateral for any Guaranteed Obligations or other amounts payable
under this

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LG&E/KU Contract No. J12004

	 	 	Guaranty thereafter arising. If (i) the Guarantor shall make payment to Beneficiary of all or
any part of the Guaranteed Obligations and (ii) all of the Guaranteed Obligations and all other
amounts payable under this Guaranty shall be paid in full in cash, Beneficiary will, at the
Guarantor’s request and expense, execute and deliver to the Guarantor appropriate documents,
without recourse and without representation or warranty by Beneficiary, of all of Beneficiary’s
rights and benefits under the Agreement. In the event Guarantor performs part or all of
Counterparty’s obligations, Guarantor shall
be entitled to Counterparty’s rights and benefits under the Agreement and shall be subrogated to
Counterparty’s rights to Beneficiary with respect to such of Counterparty’s obligations so
performed by Guarantor.

	6.	 	Reservation of Defenses: Guarantor agrees that except as expressly set forth herein, it will
remain bound upon this Guarantee notwithstanding any defenses which, pursuant to the laws of
suretyship, would otherwise relieve a guarantor of its obligations under a guaranty. Guarantor
does reserve the right to assert defenses which Counterparty may have to payment of any
Guaranteed Obligation other than defenses arising from the bankruptcy or insolvency of
Counterparty and other defenses expressly waived hereby.

	7.	 	Notices: All demands, notices and other communications provided for hereunder shall, unless
otherwise specifically provided herein, (a) be in writing addressed to the party receiving the
notice at the address set forth below or at such other address as may be designated by written
notice, from time to time, to the other party, and (b) be effective upon receipt, when mailed
by U.S. mail, registered or certified, return receipt requested, postage prepaid, or
personally delivered. Notices shall be sent to the following addresses:

If to Guarantor:

                    [i]       Armstrong Land Company, LLC

Attn: Mr. Martin D. Wilson

7701 Forsyth Boulevard, 10th Floor

St. Louis, Missouri 63105

Phone: 314-721-8202; Fax: 314-721-8211

With
Copy To:

Mason L. Miller

Miller + Wells, PLLC

300 East Main Street, Ste. 360

Lexington, Kentucky 40507

Phone: 859-281-0077; Fax: 859-281-00749

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ARMSTRONG COAL COMPANY, INC.

LG&E/KU Contract No. J12004

If to Beneficiary:

Louisville Gas and Electric Company

220 West Main Street

Louisville, Kentucky 40202

Attn: Director Corporate Fuels and By-Products

Phone: 502-627-2774; Fax: 502-627-3243

Kentucky Utilities Company

220 West Main Street

Louisville, Kentucky 40202

Attn: Director Corporate Fuels and By-Products

Phone: 502-627-2774; Fax: 502-627-3243

	8.	 	Demand and Payment: Any demand by Beneficiary for performance or payment hereunder shall be
in writing, signed by a duly authorized officer of Beneficiary and delivered to the Guarantor
pursuant to Section 7 hereof, and shall (a) reference this Guaranty, (b) specifically identify Beneficiary,
the Guaranteed Obligations to be performed or paid and the amount of such Guaranteed Obligations
and (c) if applicable, set forth payment instructions. There are no other requirements of
notice, presentment or demand. Guarantor shall perform or pay, or cause to be performed or paid,
such Guaranteed Obligations within thirty (30) business days of receipt of such demand.

	9.	 	Representations and Warranties of Guarantor: Guarantor represents and warrants that:

(a) it is a limited liability company duly organized and validly existing under the
laws of the State of Delaware and has the power and authority to execute, deliver and
carry out the terms and provisions of the Guaranty;

(b) no authorization, approval, consent or order of, or registration or filing with,
any court or other governmental body having jurisdiction over Guarantor is required
on the part of Guarantor for the execution and delivery of this Guaranty; and

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(c) this Guaranty constitutes a valid and legally binding Agreement of Guarantor,
except as the enforceability of this Guaranty may be limited by the effect of any
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
effecting creditors’ rights generally and by general principles of equity.

10.    Miscellaneous:

	 	 	Default. Guarantor represents and warrants that to its best information, knowledge and
belief, no default(s) of the Agreement are known to exist as of the date of this Guaranty. In
the event Counterparty defaults in the performance of any Guaranteed Obligations under the
Agreement, Beneficiary shall give written notice to Guarantor. Promptly thereafter, Guarantor
shall perform or cause to be performed such obligation of Counterparty as required by the
Agreement.

	 	 	Assignment. The Guarantor shall not assign this Guaranty without the express written
consent of the Beneficiary and any purported assignment absent such consent is void. The
Beneficiary shall be entitled to assign its rights under this Agreement in its sole discretion.

	 	 	Severability. If any provision or portion of a provision of this Agreement is declared
void and/or unenforceable, such provision or portion shall be deemed severed from this Agreement
which shall otherwise remain in full force and effect.

	 	 	Amendments. No amendment of this Guaranty shall be effective unless in writing and
signed by Guarantor, Counterparty and Beneficiary. No waiver of any provision of this Guaranty
nor consent to any departure by Guarantor therefrom shall in any event be effective unless such
waiver or consent shall be in writing and signed by Beneficiary. Any such waiver shall be
effective only in the specific instance and for the specific purpose for which it was given.

	 	 	Successors and Assigns. This Guaranty shall be binding upon Guarantor, its successors
and permitted assigns and inure to the benefit of and be enforceable by Beneficiary, its
successors and assigns.

	 	 	Prior Agreements. The Guaranty embodies the entire agreement and understanding between
Guarantor and Beneficiary and supercedes all prior agreements and understandings relating to the
subject matter hereof.

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	 	 	Headings. The headings in this Guaranty are for purposes of reference only, and shall
not effect the meaning hereof.

	11.	 	Limitation by Law: All rights, remedies and powers provided in this Guaranty may be exercised
only to the extent that the exercise thereof does not violate any applicable provision of law,
and all the provisions of this Guaranty are intended to be subject to all applicable mandatory
provisions of law that may be controlling and to be limited to the extent necessary so that
they will not render this Guaranty invalid, unenforceable, in whole or in part, or not
entitled to be recorded, registered or filed under the provisions of any applicable law.

	12.	 	Governing Law: This Guaranty shall in all respects be governed by and construed in accordance
with the laws of the State of New York, without regard to principles of conflicts of laws.

     IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed and delivered by
its duly authorized officer effective as of this 15 day of September, 2011 (“Effective
Date”).

	 	 	 	 	 
	Guarantor: 	 ARMSTRONG LAND COMPANY, LLC

 	 
	 	By:  	/s/
Martin D. Wilson
 	 
	 	 	Name:  	Martin D. Wilson 	 
	 	 	Title:  	President 	 
	 

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