Document:

exv10w29

Exhibit 10.29

Tennessee Valley Authority

Coal Supply & Origination

1101 Market Street, MR 2A

Chattanooga, Tennessee 37402-2801

CONTRACT SUPPLEMENT

	 	 	 	 	 	 	 

	TO: Armstrong Coal Company, Inc.

	 	Supplement No.
	 	5	 	 
	       7701
Forsyth Boulevard - 10th Floor

	 	Date
	 	December 28, 2011

	       St.
Louis, Missouri 63105

	 	Group-Contract No.
	 	635-40685

	 

	 	Plant
	 	Various

Attention: Mr. Martin Wilson

This confirms the discussion between Bill McNally, TVA, and Adam Anderson, Armstrong Coal
Company, Inc., “(Armstrong) to amend Contract 635-40685 (the “Contract”) as set forth below.

1. The effective date of this Supplement is December 28, 2011 (the “Effective Date”).

2. As of the Effective Date, TVA is exercising its right under the Contract’s Subsection 2.1.1.
as revised by Supplement No. 4 to decrease the Contract Year #4 (2012) Base Tonnage by ten
percent (10%). For the sake of clarity, TVA’s Base Tonnage for Contract Year #4 (2012) will be
reduced by 100,000 tons.

	 	 	 	 	 
	Year	 	Existing Commitment	 	New Commitment Under this Supplement
	2012

	 	1,000,000 tons
	 	900,000 tons

All other terms and conditions of the contract remain unchanged.

	 	 	 	 	 

	 

	Tennessee Valley Authority	 	 
	 
	 	 	 	 
	 

	By 	/s/ Connie S. Gazaway
 

	 	 
	 

	 	Connie S. Gazaway	 	 
	 

	 	Asset Management Specialist	 	 
	 
	 	 	 	 
	 

	 	/s/ Ray W. Popoynak
 

	 	 
	 

	 	Ray W. Popoynak	 	 
	 

	 	Manager, Coal Acquisition	 	 

TVA RESTRICATED INFORMATIONexv10w30

Exhibit 10.30

	 	 	 	 	 

ARMSTRONG COAL COMPANY, INC.

LG&E/KU Contract No. J07032

COAL SUPPLY AGREEMENT

BETWEEN

ARMSTRONG COAL COMPANY, INC.

AND

LOUISVILLE GAS & ELECTRIC COMPANY

and

KENTUCKY UTILTIES COMPANY

Effective

January 1, 2008

 

 

ARMSTRONG COAL COMPANY, INC.

LG&E/KU Contract No. J07032

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	PAGE	 
	Recitals
	 	 	2	 
	Section 1. General
	 	 	3	 
	Section 2. Term
	 	 	3	 
	Section 3. Quantity
	 	 	3	 
	3.1 Base Quantity
	 	 	3	 
	3.2 Delivery Schedule
	 	 	7	 
	Section 4. Source
	 	 	7	 
	4.1 Source
	 	 	7	 
	4.2 Assurance of Operation and Quantity
	 	 	7	 
	4.3 Non-Diversion of Coal
	 	 	8	 
	4.4 Seller’s Preparation of Mining Plan
	 	 	8	 
	4.5 Substitute Coal
	 	 	9	 
	4.6 Relationship of the Parties
	 	 	10	 
	Section 5. Delivery
	 	 	10	 
	5.1 Barge Delivery
	 	 	10	 
	5.2 Rail Delivery
	 	 	12	 
	5.2.1 Freeze Conditioning
	 	 	13	 
	Section 6. Quality
	 	 	14	 
	6.1 Specifications
	 	 	14	 
	6.2 Definition of “Shipment”
	 	 	16	 
	6.3 Rejection
	 	 	16	 
	6.4 Suspension and Termination
	 	 	18	 
	Section 7. Weights, Sampling and Analysis
	 	 	19	 
	7.1 Weights
	 	 	19	 
	7.2 Sampling and Analysis
	 	 	19	 
	Section 8. Price
	 	 	21	 
	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
	 	 	34	 

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J07032

	 	 	 	 	 
	 	 	PAGE	 
	Section 12. Notices
	 	 	35	 
	12.1 Form and Place of Notice
	 	 	35	 
	12.2 Change of Person or Address
	 	 	36	 
	12.3 Electronic Data Transmittal
	 	 	36	 
	Section 13. Guarantee
	 	 	36	 
	Section 14. Right to Resell
	 	 	37	 
	Section 15. Indemnity and Insurance
	 	 	37	 
	15.1 Indemnity
	 	 	37	 
	15.2 Insurance
	 	 	37	 
	Section 16. Termination for Default
	 	 	38	 
	Section 17. Taxes, Duties and Fees
	 	 	39	 
	Section 18. Documentation and Right of Audit
	 	 	39	 
	Section 19. Equal Employment Opportunity
	 	 	39	 
	Section 20. Coal Property Inspections
	 	 	40	 
	Section 21. Miscellaneous
	 	 	41	 
	21.1 Applicable Law
	 	 	41	 
	21.2 Headings
	 	 	41	 
	21.3 Waiver
	 	 	41	 
	21.4 Remedies Cumulative
	 	 	41	 
	21.5 Severability
	 	 	41	 
	21.6 Binding Effect
	 	 	41	 
	21.7 Assignment
	 	 	41	 
	21.8 Entire Agreement
	 	 	42	 
	21.9 Amendments
	 	 	42	 
	21.10 Forward Contract
	 	 	43	 
	21.11 Joint and Several Liability
	 	 	43	 
	Signature Page
	 	 	43	 
	Exhibit A Coal Properties
	 	 	44	 
	Exhibit B Sample Coal Payment Calculations
	 	 	45	 
	Exhibit C Sample Diesel Fuel Adjustment Calculation
	 	 	47	 

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J07032

COAL SUPPLY AGREEMENT

     This is a coal supply agreement (the “Agreement”) dated as of January 1, 2008 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 by LG&E and KU, in their
sole discretion. As provided in Section 21.11 below, Seller agrees that

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J07032

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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LG&E/KU Contract No. J07032

     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 on January 1, 2008 and
shall continue through December 31, 2015 subject to the provisions of §8.1, unless 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)	 
	2008
	 	 	600,000	 
	2009
	 	 	2,500,000	 
	2010
	 	 	4,000,000 	*
	2011
	 	 	4,000,000 	**
	2012
	 	 	4,000,000 	**

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J07032

	 	 	 	 	 
	YEAR	 	BASE QUANTITY (TONS)	 
	2013
	 	 	4,000,000 	**
	2014
	 	 	4,000,000 	**
	2015
	 	 	4,000,000 	**

     * - Buyer shall have the right to nominate up to 1,500,000 tons of this amount to be delivered
by rail. Buyer shall make such nomination to Seller in writing by September 1, 2009.

     ** - Buyer shall have the right to nominate up to 2,500,000 tons of this amount per year to
be delivered by rail for calendar years 2011 through the term of the Agreement. Buyer shall make
such nomination in writing to Seller by September 1 of the preceding year.

     During calendar year 2008, Buyer shall have the right to nominate up to 90,000 tons of coal to
be delivered during calendar year 2008, as Quality 2 coal (as defined in §6.1). The remaining Base
Quantity for calendar year 2008 shall be Quality 1 coal (as defined in §6.1). Buyer shall make such
quality nomination by the fifth (5th) of the month preceding the month of delivery;
provided, however, the monthly nomination of Quality 2 coal (as defined in §6.1) shall not exceed
fifty percent (50%) of the total coal nominated in a given month.

     During calendar year 2009, Buyer shall have the right to nominate up to 375,000 tons of coal
to be delivered during calendar year 2009 as Quality 2 coal (as defined in §6.1). The remaining
Base Quantity for calendar year 2009 shall be Quality 1 coal (as defined in §6.1). Buyer shall make
such quality nomination by the fifth (5th) of the month preceding the month of delivery;
provided, however, the monthly nomination of Quality 2 coal (as defined in §6.1) shall not exceed
fifty percent (50%) of the total coal nominated in a given month.

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J07032

     During calendar years 2010 through the remaining term of the Agreement, Buyer shall have the
right to nominate up to 600,000 tons of coal per year, to be delivered during calendar years 2010
through the term of the Agreement, as Quality 2 coal (as defined in §6.1). The remaining annual
Base Quantity for each calendar year, 2010 through the term of the Agreement, shall be Quality 1
coal (as defined in §6.1). Buyer shall make such nomination by the fifth (5th) of the
month preceding the month of delivery; provided, however, the monthly nomination of Quality 2 coal
(as defined in §6.1) shall not exceed fifty percent (50%) of the total coal nominated in a given
month.

     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 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

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J07032

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 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

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J07032

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 July 1, 2008. 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 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.

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J07032

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 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)

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J07032

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 May 31, 2008, 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 during the term of this Agreement.

     §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

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J07032

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.

     SECTION 5. DELIVERY.

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

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J07032

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
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

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J07032

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
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

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J07032

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
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 (15th) 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.

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J07032

     SECTION 6. QUALITY.

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

QUALITY 1

	 	 	 	 	 
	 	 	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
	 
	 	 	 	 
	SIZE(3“x0”):
	 	 	 	 
	Top size (inches)*
	 	max. 3X0	 	>3X0
	Fines (% by wgt)
	 	 	 	 
	Passing 1/4” screen
	 	max. 45	 	>50
	 
	 	 	 	 
	% BY WEIGHT:
	 	 	 	 
	VOLATILE
	 	min. 33	 	<30
	FIXED CARBON
	 	min. 44	 	< 41
	GRIND ABILITY (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

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LG&E/KU Contract No. J07032

	 	 	 	 	 
	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

	
QUALITY 2

	 	 	 	 	 
	 	 	Guaranteed Monthly	 	Rejection Limits
	Specifications	 	Weighted Average(1)	 	(per shipment)
	BTU/LB.
	 	min. 11.300	 	< 10.900
	 
	 	 	 	 
	LBS/MMBTU:
	 	 	 	 
	MOISTURE
	 	max. 10.44	 	> 12.50
	ASH
	 	max. 10.44	 	> 12.50
	SULFUR
	 	max. 2.75	 	> 3.10
	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. 3.8	 	< 3.6
	 
	 	 	 	 
	SIZE(3“x0”):
	 	 	 	 
	Top size (inches)*
	 	max. 3X0	 	>3X0
	Fines (%by wgt)
	 	 	 	>50
	Passing 1/4” screen
	 	max. 45	 	 
	 
	 	 	 	 
	% BY WEIGHT:
	 	 	 	 
	VOLATILE
	 	min. 33	 	<30
	FIXED CARBON
	 	min. 44	 	< 41
	GRINDABILITY (HGI)
	 	min. 55	 	<_50

ASH FUSION TEMPERATURE (°F) (ASTM D1857)

REDUCING ATMOSPHERE

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LG&E/KU Contract No. J07032

	 	 	 	 	 

	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 each
quality of 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.

     §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

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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
(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

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LG&E/KU Contract No. J07032

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 rejection limits set forth
in §6.1. If Seller fails to provide such assurances within said ten (10) day period, Buyer may
terminate this Agreement by giving written notice of such termination at the end of the ten (10)
day period. A waiver of this right for any one (1) period by Buyer shall not constitute a waiver
for subsequent periods. If Seller 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

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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 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

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LG&E/KU Contract No. J07032

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 (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 (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

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LG&E/KU Contract No. J07032

reasonable notice to Buyer shall have the right to have a representative present to observe the
sampling and analyses performed by Buyer. Unless Seller requests a Referee Sample analysis before
the Disposal Date, Buyer’s analysis shall be used to determine the quality of the coal delivered
hereunder. The Monthly Weighted Averages shall be determined by utilizing the individual shipment
analyses.

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

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

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

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LG&E/KU Contract No. J07032

     §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:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	QUALITY 1	 	QUALITY 2
	YEAR	 	Barge	 	Rail	 	Barge	 	Rail
	2008

	 	$	27.31	 	 	 	n/a	 	 	$	28.30	 	 	 	n/a	 
	2009

	 	$	27.60	 	 	$	27.60	 	 	$	28.76	 	 	$	28.76	 
	2010

	 	$	28.21	 	 	$	28.21	 	 	$	29.63	 	 	$	29.63	 
	2011

	 	$	28.36	 	 	$	28.36	 	 	$	29.78	 	 	$	29.78	 
	2012

	 	$	28.51	 	 	$	28.51	 	 	$	29.93	 	 	$	29.93	 
	2013

	 	$	28.66	 	 	$	28.66	 	 	$	30.08	 	 	$	30.08	 
	2014

	 	$	28.81	 	 	$	28.81	 	 	$	30.23	 	 	$	30.23	 
	2015

	 	$	28.98	 	 	$	28.96	 	 	$	30.38	 	 	$	30.38	 

     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 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. Either party may elect at its sole option to reopen this Agreement
for negotiations with respect to price and/or other terms and conditions with respect to tons to be
delivered in 2013 and beyond. The party making the election must provide the non-electing party
written notice by April 1, 2012 of its desire to reopen negotiations for pricing and/or for other

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LG&E/KU Contract No. J07032

terms and conditions for tons to be delivered in 2013 and beyond. If the parties do not reach
an agreement on new pricing and/or on other terms and conditions for tons to be delivered in 2013
and beyond, by August 1, 2012, then this Agreement (including any rights and obligations under this
Agreement) will terminate as of December 31, 2012 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):

	 	 	AMWA - GMWA X Price per Ton = Per Ton Adjustment

           GMWA

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LG&E/KU Contract No. J07032

(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 11,375 BTU/LB, the GMWA equals
11,300 BTU/LB and the Price Per Ton equals $28.30/ton, then the Per Ton Adjustment would be
((11,375 - 11,300) ÷ 11,300) x $28.30 = $.18783 per ton. If a total of 50,000 tons were delivered
during that particular calendar month, then the Base Price adjustment for BTU’s would equal
$9,391.50 (50,000 x $.18783). 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.

     (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

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LG&E/KU Contract No. J07032

Guaranteed Monthly Weighted Averages set forth in §6.1, as determined pursuant to §7.2,
subject to the provisions set forth below. The discount values used are as follows:

	 	 	 
	DISCOUNT VALUES

	 	 	 $/MMBTU

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

     (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.

QUALITY 1

	 	 	 	 	 
	 	 	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. J07032

QUALITY 2

	 	 	 	 	 
	 	 	Guaranteed Monthly	 	 
	 	 	Weighted
Average	 	Discount Point
	BTU/LB

	 	min.  11,300
	 	  11,000
	 
	 	 	 	 
	LB/MMBTU:
	 	 	 	 
	SULFUR

	 	max. 2.75
	 	 2.90
	ASH

	 	max. 10.44
	 	 10.75
	MOISTURE

	 	max. 10.44
	 	 11.75

     For example, if the actual Monthly Weighted Average, of sulfur of Quality 1 equals 3.15
lb/MMBTU, then the applicable discount would be (3.15 lb. — 3.10
lb.) X $0.1232/lb/MMBTU =
$0.00616/MMBTU.

     §8.3 Payment Calculation. Exhibit B attached hereto shows the methodology for
calculating the coal payment and quality price discounts for the month Seller’s coal was unloaded
by Buyer. If there are any such discounts, Buyer shall apply credit to amounts owed Seller for the
month the coal was unloaded.

     §8.4
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 January 1, 2010.

     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

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LG&E/KU Contract No. J07032

(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
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.

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LG&E/KU Contract No. J07032

“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.

“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 May, June and July 2007, 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 statues, 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 January 1, 2008, 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

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LG&E/KU Contract No. J07032

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 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

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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 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

30

 

ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J07032

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 minus any Quality Price Discounts) unloaded and accepted by Buyer during any calendar month
shall be calculated and compared to the sum of the preliminary payments made for coal delivered and
unloaded and accepted during such month. The difference shall be paid by or paid to Seller, as
applicable, by the fifteenth (15th) 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.

31

 

ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J07032

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

     SECTION 10. FORCE MAJEURE.

     §10.1 General Force Majeure. If either party hereto is delayed in or prevented from
performing any of its obligations or from utilizing the coal sold under this Agreement due to acts
of God, war, riots, civil insurrection, acts of the public enemy, strikes, lockouts, fires, floods
or earthquakes, which are beyond the reasonable control and without the fault or negligence of the
party affected thereby, then the obligations of both parties hereto shall be suspended to the
extent made necessary by such event; provided that the affected party gives written notice to the
other party as early as practicable of the nature and probable duration of the force majeure event.
The party declaring force majeure shall exercise due diligence to avoid and shorten the force
majeure event and will keep the other party advised as to the continuance of the force majeure
event. During any period in which Seller’s ability to perform hereunder is affected by 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

32

 

ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J07032

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

     Tonnage deficiencies resulting from a force majeure event shall be made up at Buyer’s sole
option on a 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 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

33

 

ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J07032

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.

     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

34

 

ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J07032

shall be made in: price, whether current or future or both, and/or in such other provisions of this
Agreement as are affected directly or indirectly by such change, and the Agreement shall thereupon
be modified in writing accordingly.

     Any claim by the Seller for adjustment under this 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

35

 

ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J07032

	 	 	 	 	 

	 

	 	With Required Copies to:	 	 
	 

	 	 	 	Martin Wilson, President 

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.

36

 

ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J07032

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

	 	 	SECTION 15. INDEMNITY AND INSURANCE.

     §15.1 Indemnity. Seller agrees to indemnify and save harmless Buyer, its officers, directors,
employees and representatives from any responsibility and liability for any and all claims,
demands, losses, legal actions for personal injuries, property damage and pollution (including
reasonable inside and outside attorney’s fees) (i) relating to the trucks, barges or railcars
provided by Buyer or Buyer’s contractor while such trucks, barges or railcars are in the 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.

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J07032

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

     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 

38

 

ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J07032

terminate at the end of the notice period in addition to all the other rights and remedies
available to the aggrieved party under this Agreement and at law and in equity.

     SECTION 17. TAXES, DUTIES AND FEES.

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

39

 

ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J07032

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 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.

40

 

ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J07032

     SECTION 21. MISCELLANEOUS.

     §21.1 Applicable Law. This Agreement shall be construed in accordance with
the laws of the Commonwealth of Kentucky, and all questions of performance of obligations
hereunder shall be determined in accordance with such laws.

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

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

     §21.4 Remedies Cumulative. Remedies provided under this Agreement shall be cumulative
and in addition to other remedies provided under this Agreement or by law or in equity.

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

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

     §21.7 Assignment.

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ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J07032

     A. Seller shall not, without Buyer’s prior written consent, which shall not be
unreasonably withheld, make any assignment or transfer of this Agreement, by operation of law
or otherwise, including without limitation any assignment, encumbrance or transfer as security
for any obligation, and shall not assign or transfer the performance of or right or duty to
perform any obligation of Seller hereunder; provided, however, that Seller may assign the right to
receive payments for coal directly from Buyer to a lender as part of any accounts receivable financing
or other revolving credit arrangement which Seller may have now or at any time during the term of
this Agreement.

     B. Buyer shall not, without Seller’s prior written consent, which may not be
unreasonably withheld, assign this Agreement or any right or duty to perform any obligation of
Buyer hereunder; except that, without such consent, Buyer may assign this Agreement in
connection with a transfer by Buyer of all or a part interest in the generating station
comprising the Delivery Point, or as part of a merger or consolidation involving Buyer.

     C. In the event of an assignment or transfer contrary to the provisions of this section,
the non-assigning party may terminate this Agreement immediately.

     §21.8 Entire Agreement. This Agreement contains the entire agreement between the
parties as to the subject matter hereof, and there are no representations, understandings or
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.

42

 

     ARMSTRONG COAL COMPANY, INC 

LG&E/KU Contract No. J07032

     §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/    	 	 	By:
	 	

	/s/ Martin D. Wilson  	 
	

	 	Title: SVP-Energy Marketing
	 	 	 	 	 	Title: President	 	 
	 	  Date: 12/20/07	 	 	 	 	  Date: 12/19/07	 	 

	 	 	 	 	 
	 	KENTUCKY UTILITES COMPANY

 	 
	 	By:  	/s/
 	 
	 	 	Title: SVP-Energy Marketing 	 
	 	 	Date: 12/20/07 	 
	 

43

 

ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J07032

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

44

 

ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J07032

Exhibit B 
 Page 1 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:
	 	 	27.31	 	 	/ton
	 	 	 
	 	 	 	 	 
	1a)	 	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 la)
	 	 	 	 	 	Dollars
	 	 	 
	 	 	 	 	 
	 	 	Section II
	 	 	 	 	 	Discounts
	 	 	 
	 	 	 	 	 
	 	 	Assign a (-) to all discounts (round to (5) decimal places)
	 	 	 	 	 	 
	7)	 	BTU/LB.: If line 2a < 10,900 BTU/LB. then: 

{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
	 	 	 
	 	 	 	 	 	 

45

 

ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J07032

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 line 2b)
	 	$	 	 	 	Dollars
	 	 	 	 	 
	 	 	 	 	 	 	 	 
	 	12	)	 	Total Discount Dollars: Sum of lines 8 thru 11: 

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

46

 

ARMSTRONG COAL COMPANY, INC

LG&E/KU Contract No. J07032

EXHIBIT C

Sample Diesel Fuel Price Adjustment Calculation

Effective January 1,2010

	 	 	 	 	 	 	 

	January 2010 Diesel Fuel Price Calculation (Quality 1)
	 	 	 	 	 	 
	(1) Diesel Fuel Component

	 	 	$7.00	 	 	Diesel Fuel Component
	(2) Calculate Diesel Fuel Component Adjustment
	 	 	 	 	 	 
	(a) Calculate PPI Factor

	 	 	285.2	 	 	Average of hypothetical base
index PPIs of the three months
during relevant Calculation
Period for January 1, 2010
Adjustment
Date
	Divided by:

	 	 	232.5 	 	 	Average of base index PPIs for
 May, June and July 2007
	 

	 	 	 	 	 	 
	 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 7
	Sample PPI Data:
	 	 	 	 	 	 
	Figures are hypothetical — for
illustration purposes only. 

Sep/Oct/Nov 09 / PPI-Commodities — #2 Diesel Fuel #WPU057303 
	 	 	 	 	 	 
	Sep ‘09

	 	 	283.0	 	 	 
	Oct ‘09

	 	 	285.2	 	 	 
	Nov ‘09

	 	 	287.4	 	 	 
	 

	 	 	 	 	 	 
	Average

	 	 	285.2	 	 	 
	May/June/Juy 2007/ PPI-Commodities — #2 Diesel Fuel #WPU057303
	 	 	 	 	 	 
	May ‘07

	 	 	226.5	 	 	 
	June ‘07

	 	 	227.6	 	 	 
	July ‘07

	 	 	243.5	 	 	 
	 

	 	 	 	 	 	 
	Base Factor (Arithmetic average)

	 	 	232.5	 	 	 

47

 

     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, 2008 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 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 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.

	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;

(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 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.
	 
	 	 	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 19 day of December, 2007 (“Effective
Date”).

	 	 	 	 	 
	 	Guarantor: ARMSTRONG LAND COMPANY, LLC

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

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