Document:

exv10w14

 

Exhibit 10.14

FORM OF

INDEMNIFICATION AGREEMENT

          This Indemnification Agreement, dated as of                     , 2007, is made by and between
PATRIOT COAL CORPORATION, a Delaware corporation (the “Corporation”) and                     
(the “Indemnitee”).

RECITALS

          A. The Corporation recognizes that competent and experienced persons are increasingly
reluctant to serve or to continue to serve as directors or officers of corporations unless they are
protected by comprehensive liability insurance or indemnification, or both, due to increased
exposure to litigation costs and risks resulting from their service to such corporations, and due
to the fact that the exposure frequently bears no reasonable relationship to the compensation of
such directors and officers;

          B. The statutes and judicial decisions regarding the duties of directors and officers are
often difficult to apply, ambiguous, or conflicting, and therefore fail to provide such directors
and officers with adequate, reliable knowledge of legal risks to which they are exposed or
information regarding the proper course of action to take;

          C. The Corporation and Indemnitee recognize that plaintiffs often seek damages in such large
amounts and the costs of litigation may be so enormous (whether or not the case is meritorious),
that the defense and/or settlement of such litigation is often beyond the personal resources of
directors and officers;

          D. The Corporation believes that it is unfair for its directors and officers to assume the
risk of huge judgments and other expenses which may occur in cases in which the director or officer
received no personal profit and in cases where the director or officer was not culpable;

          E. The Corporation, after reasonable investigation, has determined that the liability
insurance coverage presently available to the Corporation may be inadequate in certain
circumstances to cover all possible exposure for which Indemnitee should be protected. The
Corporation believes that the interests of the Corporation and its stockholders would best be
served by a combination of such insurance and the indemnification by the Corporation of the
directors and officers of the Corporation;

          F. The Corporation’s Amended and Restated Certificate of Incorporation (the “Certificate of
Incorporation”) and Amended and Restated By-Laws require the Corporation to indemnify its directors
and officers to the fullest extent permitted by the Delaware General Corporation Law (the “DGCL”).
The Certificate of Incorporation expressly provides that the indemnification provisions set forth
therein are not exclusive, and contemplates that contracts

 

 

may be entered into between the Corporation and its directors and officers with respect to
indemnification;

          G. Section 145 of the DGCL (“Section 145”), under which the Corporation is organized, empowers
the Corporation to indemnify its officers, directors, employees and agents by agreement and to
indemnify persons who serve, at the request of the Corporation, as the directors, officers,
employees or agents of other corporations or enterprises, and expressly provides that the
indemnification provided by Section 145 is not exclusive;

          H. The Board of Directors has determined that contractual indemnification as set forth herein
is not only reasonable and prudent but also promotes the best interests of the Corporation and its
stockholders;

          I. The Corporation desires and has requested Indemnitee to serve or continue to serve as a
director or officer of the Corporation free from undue concern for unwarranted claims for damages
arising out of or related to such services to the Corporation; and

          J. Indemnitee is willing to serve, continue to serve or to provide additional service for or
on behalf of the Corporation on the condition that he is furnished the indemnity provided for
herein.

AGREEMENT

          NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below, and
other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged,
the parties hereto, intending to be legally bound, hereby agree as follows:

     Section 1. Generally.

     To the fullest extent permitted by the laws of the State of Delaware:

          (a) The Corporation shall indemnify Indemnitee if Indemnitee was or is a party or is
threatened to be made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact that Indemnitee is
or was or has agreed to serve at the request of the Corporation as a director, officer, employee or
agent of the Corporation, or while serving as a director or officer of the Corporation, is or was
serving or has agreed to serve at the request of the Corporation as a director, officer, employee
or agent (which, for purposes hereof, shall include a trustee, partner or manager or similar
capacity) of another corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, or by reason of any action alleged to have been taken or omitted in such capacity.

          (b) The indemnification provided by this Section 1 shall be from and against expenses
(including attorneys’ fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with such action, suit or
proceeding and any appeal therefrom, but shall only be provided if Indemnitee acted in

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good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action, suit or proceeding, had no
reasonable cause to believe Indemnitee’s conduct was unlawful.

          (c) Notwithstanding the foregoing provisions of this Section 1, in the case of any threatened,
pending or completed action or suit by or in the right of the Corporation to procure a judgment in
its favor by reason of the fact that Indemnitee is or was a director, officer, employee or agent of
the Corporation, or while serving as a director or officer of the Corporation, is or was serving or
has agreed to serve at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise,
no indemnification shall be made in respect of any claim, issue or matter as to which Indemnitee
shall have been adjudged to be liable to the Corporation unless, and only to the extent that, the
Delaware Court of Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all the circumstances
of the case, Indemnitee is fairly and reasonably entitled to indemnity for such expenses which the
Delaware Court of Chancery or such other court shall deem proper.

          (d) The termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably
believed to be in or not opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that Indemnitee’s conduct was
unlawful.

          Section 2. Successful Defense; Partial Indemnification. To the extent that Indemnitee
has been successful on the merits or otherwise in defense of any action, suit or proceeding
referred to in Section 1 hereof or in defense of any claim, issue or matter therein, Indemnitee
shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred
in connection therewith. For purposes of this Agreement and without limiting the foregoing, if
any action, suit or proceeding is disposed of, on the merits or otherwise (including a disposition
without prejudice), without (i) the disposition being adverse to Indemnitee, (ii) an adjudication
that Indemnitee was liable to the Corporation, (iii) a plea of guilty or nolo contendere by
Indemnitee, (iv) an adjudication that Indemnitee did not act in good faith and in a manner
Indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation,
and (v) with respect to any criminal proceeding, an adjudication that Indemnitee had reasonable
cause to believe Indemnitee’s conduct was unlawful, Indemnitee shall be considered for the
purposes hereof to have been wholly successful with respect thereto.

          If Indemnitee is entitled under any provision of this Agreement to indemnification by the
Corporation for some or a portion of the expenses (including attorneys’ fees), judgments, fines or
amounts paid in settlement actually and reasonably incurred by Indemnitee or on Indemnitee’s
behalf in connection with any action, suit, proceeding or investigation, or in defense of any
claim, issue or matter therein, and any appeal therefrom but not, however, for the total amount
thereof, the Corporation shall nevertheless indemnify

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Indemnitee for the portion of such expenses (including attorneys’ fees), judgments, fines or
amounts paid in settlement to which Indemnitee is entitled.

     Section 3. Determination That Indemnification Is Proper. Any indemnification
hereunder shall (unless otherwise ordered by a court) be made by the Corporation unless a
determination is made that indemnification of such person is not proper in the circumstances
because he or she has not met the applicable standard of conduct set forth in Section 1(b) hereof.
Any such determination shall be made (i) by a majority vote of the directors who are not parties
to the action, suit or proceeding in question (“disinterested directors”), even if less than a
quorum, (ii) by a majority vote of a committee of disinterested directors designated by majority
vote of disinterested directors, even if less than a quorum, (iii) by a majority vote of a quorum
of the outstanding shares of stock of all classes entitled to vote on the matter, voting as a
single class, which quorum shall consist of stockholders who are not at that time parties to the
action, suit or proceeding in question, (iv) by independent legal counsel, or (v) by a court of
competent jurisdiction.

     Section 4. Advance Payment of Expenses; Notification and Defense of Claim.

          (a) Expenses (including attorneys’ fees) incurred by Indemnitee in defending a threatened or
pending civil, criminal, administrative or investigative action, suit or proceeding shall be paid
by the Corporation in advance of the final disposition of such action, suit or proceeding within
twenty (20) days after receipt by the Corporation of (i) a statement or statements from Indemnitee
requesting such advance or advances from time to time, and (ii) an undertaking by or on behalf of
Indemnitee to repay such amount or amounts, only if, and to the extent that, it shall ultimately be
determined that Indemnitee is not entitled to be indemnified by the Corporation as authorized by
this Agreement or otherwise. Such undertaking shall be accepted without reference to the financial
ability of Indemnitee to make such repayment. Advances shall be unsecured and interest-free.

          (b) Promptly after receipt by Indemnitee of notice of the commencement of any action, suit or
proceeding, Indemnitee shall, if a claim thereof is to be made against the Corporation hereunder,
notify the Corporation of the commencement thereof. The failure to promptly notify the Corporation
of the commencement of the action, suit or proceeding, or Indemnitee’s request for indemnification,
will not relieve the Corporation from any liability that it may have to Indemnitee hereunder,
except to the extent the Corporation is prejudiced in its defense of such action, suit or
proceeding as a result of such failure.

          (c) In the event the Corporation shall be obligated to pay the expenses of Indemnitee with
respect to an action, suit or proceeding, as provided in this Agreement, the Corporation, if
appropriate, shall be entitled to assume the defense of such action, suit or proceeding, with
counsel reasonably acceptable to Indemnitee, upon the delivery to Indemnitee of written notice of
its election to do so. After delivery of such notice, approval of such counsel by Indemnitee and
the retention of such counsel by the Corporation, the Corporation will not be liable to Indemnitee
under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to
the same action, suit or proceeding, provided that (1) Indemnitee shall

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have the right to employ Indemnitee’s own counsel in such action, suit or proceeding at
Indemnitee’s expense and (2) if (i) the employment of counsel by Indemnitee has been previously
authorized in writing by the Corporation, (ii) counsel to the Corporation or Indemnitee shall have
reasonably concluded that there may be a conflict of interest or position, or reasonably believes
that a conflict is likely to arise, on any significant issue between the Corporation and Indemnitee
in the conduct of any such defense or (iii) the Corporation shall not, in fact, have employed
counsel to assume the defense of such action, suit or proceeding, then the fees and expenses of
Indemnitee’s counsel shall be at the expense of the Corporation, except as otherwise expressly
provided by this Agreement. The Corporation shall not be entitled, without the consent of
Indemnitee, to assume the defense of any claim brought by or in the right of the Corporation or as
to which counsel for the Corporation shall have reasonably made the conclusion provided for in
clause (ii) above.

          (d) Notwithstanding any other provision of this Agreement to the contrary, to the extent that
Indemnitee is, by reason of Indemnitee’s corporate status with respect to the Corporation or any
corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which
Indemnitee is or was serving or has agreed to serve at the request of the Corporation, a witness or
otherwise participates in any action, suit or proceeding at a time when Indemnitee is not a party
in the action, suit or proceeding, the Corporation shall indemnify Indemnitee against all expenses
(including attorneys’ fees) actually and reasonably incurred by Indemnitee or on Indemnitee’s
behalf in connection therewith.

     Section 5. Procedure for Indemnification

          (a) To obtain indemnification, Indemnitee shall promptly submit to the Corporation a written
request, including therein or therewith such documentation and information as is reasonably
available to Indemnitee and is reasonably necessary to determine whether and to what extent
Indemnitee is entitled to indemnification. The Corporation shall, promptly upon receipt of such a
request for indemnification, advise the Board of Directors in writing that Indemnitee has requested
indemnification.

          (b) The Corporation’s determination whether to grant Indemnitee’s indemnification request
shall be made promptly, and in any event within 60 days following receipt of a request for
indemnification pursuant to Section 5(a). The right to indemnification as granted by Section 1 of
this Agreement shall be enforceable by Indemnitee in any court of competent jurisdiction if the
Corporation denies such request, in whole or in part, or fails to respond within such 60-day
period. It shall be a defense to any such action (other than an action brought to enforce a claim
for the advance of costs, charges and expenses under Section 4 hereof where the required
undertaking, if any, has been received by the Corporation) that Indemnitee has not met the standard
of conduct set forth in Section 1 hereof, but the burden of proving such defense by clear and
convincing evidence shall be on the Corporation. Neither the failure of the Corporation (including
its Board of Directors or one of its committees, its independent legal counsel, and its
stockholders) to have made a determination prior to the commencement of such action that
indemnification of Indemnitee is proper in the circumstances because Indemnitee has met the
applicable standard of conduct set forth in Section 1 hereof, nor the fact that there has

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been an actual determination by the Corporation (including its Board of Directors or one of its
committees, its independent legal counsel, and its stockholders) that Indemnitee has not met such
applicable standard of conduct, shall be a defense to the action or create a presumption that
Indemnitee has or has not met the applicable standard of conduct. The Indemnitee’s expenses
(including attorneys’ fees) incurred in connection with successfully establishing Indemnitee’s
right to indemnification, in whole or in part, in any such proceeding or otherwise shall also be
indemnified by the Corporation.

          (c) The Indemnitee shall be presumed to be entitled to indemnification under this Agreement
upon submission of a request for indemnification pursuant to this Section 5, and the Corporation
shall have the burden of proof in overcoming that presumption in reaching a determination contrary
to that presumption. Such presumption shall be used as a basis for a determination of entitlement
to indemnification unless the Corporation overcomes such presumption by clear and convincing
evidence.

     Section 6. Insurance and Subrogation.

          (a) The Corporation may purchase and maintain insurance on behalf of Indemnitee who is or was
or has agreed to serve at the request of the Corporation as a director or officer of the
Corporation, or is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise against any liability asserted against, and incurred by, Indemnitee or on
Indemnitee’s behalf in any such capacity, or arising out of Indemnitee’s status as such, whether or
not the Corporation would have the power to indemnify Indemnitee against such liability under the
provisions of this Agreement. If the Corporation has such insurance in effect at the time the
Corporation receives from Indemnitee any notice of the commencement of a proceeding, the
Corporation shall give prompt notice of the commencement of such proceeding to the insurers in
accordance with the procedures set forth in the policy. The Corporation shall thereafter take all
necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all
amounts payable as a result of such proceeding in accordance with the terms of such policy.

          (b) In the event of any payment by the Corporation under this Agreement, the Corporation shall
be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee with
respect to any insurance policy, who shall execute all papers required and take all action
necessary to secure such rights, including execution of such documents as are necessary to enable
the Corporation to bring suit to enforce such rights in accordance with the terms of such insurance
policy. The Corporation shall pay or reimburse all expenses actually and reasonably incurred by
Indemnitee in connection with such subrogation.

          (c) The Corporation shall not be liable under this Agreement to make any payment of amounts
otherwise indemnifiable hereunder (including, but not limited to, judgments, fines, ERISA excise
taxes or penalties, and amounts paid in settlement) if and to the extent that Indemnitee has
otherwise actually received such payment under this Agreement or any insurance policy, contract,
agreement or otherwise.

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     Section 7. Certain Definitions. For purposes of this Agreement, the following
definitions shall apply:

          (a) The term “action, suit or proceeding” shall be broadly construed and shall include,
without limitation, the investigation, preparation, prosecution, defense, settlement, arbitration
and appeal of, and the giving of testimony in, any threatened, pending or completed claim, action,
suit or proceeding, whether civil, criminal, administrative or investigative.

          (b) The term “by reason of the fact that Indemnitee is or was a director, officer, employee or
agent of the Corporation, or while serving as a director or officer of the Corporation, is or was
serving or has agreed to serve at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise” shall be broadly construed and shall include, without limitation, any actual or alleged
act or omission to act.

          (c) The term “expenses” shall be broadly and reasonably construed and shall include, without
limitation, all direct and indirect costs of any type or nature whatsoever (including, without
limitation, all attorneys’ fees and related disbursements, appeal bonds, other out-of-pocket costs
and reasonable compensation for time spent by Indemnitee for which Indemnitee is not otherwise
compensated by the Corporation or any third party, provided that the rate of compensation and
estimated time involved is approved by the Board, which approval shall not be unreasonably
withheld), actually and reasonably incurred by Indemnitee in connection with either the
investigation, defense or appeal of a proceeding or establishing or enforcing a right to
indemnification under this Agreement, Section 145 of the General Corporation Law of the State of
Delaware or otherwise.

          (d) The term “judgments, fines and amounts paid in settlement” shall be broadly construed and
shall include, without limitation, all direct and indirect payments of any type or nature
whatsoever (including, without limitation, all penalties and amounts required to be forfeited or
reimbursed to the Corporation, as well as any penalties or excise taxes assessed on a person with
respect to an employee benefit plan).

          (e) The term “Corporation” shall include, without limitation and in addition to the resulting
corporation, any constituent corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that any person who is
or was a director, officer, employee or agent of such constituent corporation, or is or was serving
at the request of such constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, shall
stand in the same position under the provisions of this Agreement with respect to the resulting or
surviving corporation as he or she would have with respect to such constituent corporation if its
separate existence had continued.

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          (f) The term “other enterprises” shall include, without limitation, employee benefit plans.

          (g) The term “serving at the request of the Corporation” shall include, without limitation,
any service as a director, officer, employee or agent of the Corporation which imposes duties on,
or involves services by, such director, officer, employee or agent with respect to an employee
benefit plan, its participants or beneficiaries.

          (h) A person who acted in good faith and in a manner such person reasonably believed to be in
the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to
have acted in a manner “not opposed to the best interests of the Corporation” as referred to in
this Agreement.

     Section 8. Limitation on Indemnification. Notwithstanding any other provision herein
to the contrary, the Corporation shall not be obligated pursuant to this Agreement:

          (a) Claims Initiated by Indemnitee. To indemnify or advance expenses to Indemnitee
with respect to an action, suit or proceeding (or part thereof) initiated by Indemnitee, except
with respect to an action, suit or proceeding brought to establish or enforce a right to
indemnification (which shall be governed by the provisions of Section 8(b) of this Agreement),
unless such action, suit or proceeding (or part thereof) was authorized or consented to by the
Board of Directors of the Corporation.

          (b) Action for Indemnification. To indemnify Indemnitee for any expenses incurred by
Indemnitee with respect to any action, suit or proceeding instituted by Indemnitee to enforce or
interpret this Agreement, unless Indemnitee is successful in establishing Indemnitee’s right to
indemnification in such action, suit or proceeding, in whole or in part, or unless and to the
extent that the court in such action, suit or proceeding shall determine that, despite Indemnitee’s
failure to establish their right to indemnification, Indemnitee is entitled to indemnity for such
expenses; provided, however, that nothing in this Section 8(b) is intended to limit the
Corporation’s obligation with respect to the advancement of expenses to Indemnitee in connection
with any such action, suit or proceeding instituted by Indemnitee to enforce or interpret this
Agreement, as provided in Section 4 hereof.

          (c) Section 16 Violations. To indemnify Indemnitee on account of any proceeding with
respect to which final judgment is rendered against Indemnitee for payment or an accounting of
profits arising from the purchase or sale by Indemnitee of securities in violation of Section 16(b)
of the Securities Exchange Act of 1934, as amended, or any similar successor statute.

          (d) Non-compete and Non-disclosure. To indemnify Indemnitee in connection with
proceedings or claims involving the enforcement of non-compete and/or non-disclosure agreements or
the non-compete and/or non-disclosure provisions of employment, consulting or similar agreements
the Indemnitee may be a party to with the Corporation, or any subsidiary of

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the Corporation or any other applicable foreign or domestic corporation, partnership, joint
venture, trust or other enterprise, if any.

     Section 9. Certain Settlement Provisions. The Corporation shall have no obligation
to indemnify Indemnitee under this Agreement for amounts paid in settlement of any action, suit or
proceeding without the Corporation’s prior written consent, which shall not be unreasonably
withheld. The Corporation shall not settle any action, suit or proceeding in any manner that would
impose any fine or other obligation on Indemnitee without Indemnitee’s prior written consent, which
shall not be unreasonably withheld.

     Section 10. Savings Clause. If any provision or provisions of this Agreement shall be
invalidated on any ground by any court of competent jurisdiction, then the Corporation shall
nevertheless indemnify Indemnitee as to costs, charges and expenses (including attorneys’ fees),
judgments, fines and amounts paid in settlement with respect to any action, suit or proceeding,
whether civil, criminal, administrative or investigative, including an action by or in the right of
the Corporation, to the full extent permitted by any applicable portion of this Agreement that
shall not have been invalidated and to the full extent permitted by applicable law.

     Section 11. Contribution. In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for herein is held by a court of competent
jurisdiction to be unavailable to Indemnitee in whole or in part, it is agreed that, in such event,
the Corporation shall, to the fullest extent permitted by law, contribute to the payment of
Indemnitee’s costs, charges and expenses (including attorneys’ fees), judgments, fines and amounts
paid in settlement with respect to any action, suit or proceeding, whether civil, criminal,
administrative or investigative, in an amount that is just and equitable in the circumstances,
taking into account, among other things, contributions by other directors and officers of the
Corporation or others pursuant to indemnification agreements or otherwise; provided, that, without
limiting the generality of the foregoing, such contribution shall not be required where such
holding by the court is due to (i) the failure of Indemnitee to meet the standard of conduct set
forth in Section 1 hereof, or (ii) any limitation on indemnification set forth in Section 6(c), 8
or 9 hereof.

     Section 12. Form and Delivery of Communications. Any notice, request or other
communication required or permitted to be given to the parties under this Agreement shall be in
writing and either delivered in person or sent by telecopy, telex, telegram, overnight mail or
courier service, or certified or registered mail, return receipt requested, postage prepaid, to
the parties at the following addresses (or at such other addresses for a party as shall be
specified by like notice):

If to the Corporation:

Patriot Coal Corporation

12312 Olive Boulevard

St. Louis, MO 63141

Attn: Senior Vice President and General Counsel

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Facsimile:                                         

If to Indemnitee:

[Name & Address]

     Section 13. Subsequent Legislation. If the General Corporation Law of Delaware is
amended after adoption of this Agreement to expand further the indemnification permitted to
directors or officers, then the Corporation shall indemnify Indemnitee to the fullest extent
permitted by the General Corporation Law of Delaware, as so amended.

     Section 14. Nonexclusivity. The provisions for indemnification and advancement of
expenses set forth in this Agreement shall not be deemed exclusive of any other rights which
Indemnitee may have under any provision of law, the Corporation’s Certificate of Incorporation or
By-Laws, in any court in which a proceeding is brought, the vote of the Corporation’s stockholders
or disinterested directors, other agreements or otherwise, and Indemnitee’s rights hereunder shall
continue after Indemnitee has ceased acting as an agent of the Corporation and shall inure to the
benefit of the heirs, executors and administrators of Indemnitee. However, no amendment or
alteration of the Corporation’s Certificate of Incorporation or By-Laws or any other agreement
shall adversely affect the rights provided to Indemnitee under this Agreement

     Section 15. Enforcement. The Corporation shall be precluded from asserting in any
judicial proceeding that the procedures and presumptions of this Agreement are not valid, binding
and enforceable. The Corporation agrees that its execution of this Agreement shall constitute a
stipulation by which it shall be irrevocably bound in any court of competent jurisdiction in which
a proceeding by Indemnitee for enforcement of his rights hereunder shall have been commenced,
continued or appealed, that its obligations set forth in this Agreement are unique and special, and
that failure of the Corporation to comply with the provisions of this Agreement will cause
irreparable and irremediable injury to Indemnitee, for which a remedy at law will be inadequate. As
a result, in addition to any other right or remedy Indemnitee may have at law or in equity with
respect to breach of this Agreement, Indemnitee shall be entitled to injunctive or mandatory relief
directing specific performance by the Corporation of its obligations under this Agreement.

     Section 16. Interpretation of Agreement. It is understood that the parties hereto
intend this Agreement to be interpreted and enforced so as to provide indemnification to Indemnitee
to the fullest extent now or hereafter permitted by law.

     Section 17. Entire Agreement. This Agreement and the documents expressly referred to
herein constitute the entire agreement between the parties hereto with respect to the matters
covered hereby, and any other prior or contemporaneous oral or written understandings or agreements
with respect to the matters covered hereby are expressly superceded by this Agreement.

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     Section 18. Modification and Waiver. No supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of
any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

     Section 19. Successor and Assigns. All of the terms and provisions of this Agreement
shall be binding upon, shall inure to the benefit of and shall be enforceable by the parties hereto
and their respective successors, assigns, heirs, executors, administrators and legal
representatives. The Corporation shall require and cause any direct or indirect successor (whether
by purchase, merger, consolidation or otherwise) to all or substantially all of the business or
assets of the Corporation, by written agreement in form and substance reasonably satisfactory to
Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the
same extent that the Corporation would be required to perform if no such succession had taken
place.

     Section 20. Service of Process and Venue. For purposes of any claims or proceedings
to enforce this agreement, the Corporation consents to the jurisdiction and venue of any federal
or state court of competent jurisdiction in the states of Delaware and Missouri, and waives and
agrees not to raise any defense that any such court is an inconvenient forum or any similar claim.

     Section 21. Governing Law. This Agreement shall be governed exclusively by and
construed according to the laws of the State of Delaware, as applied to contracts between Delaware
residents entered into and to be performed entirely within Delaware. If a court of competent
jurisdiction shall make a final determination that the provisions of the law of any state other
than Delaware govern indemnification by the Corporation of its officers and directors, then the
indemnification provided under this Agreement shall in all instances be enforceable to the fullest
extent permitted under such law, notwithstanding any provision of this Agreement to the contrary.

     Section 22. Employment Rights. Nothing in this Agreement is intended to create in
Indemnitee any right to employment or continued employment.

     Section 23. Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original and all of which together shall be deemed to be one
and the same instrument, notwithstanding that both parties are not signatories to the original or
same counterpart.

     Section 24. Headings. The section and subsection headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.

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     IN WITNESS WHEREOF, this Agreement has been duly executed and delivered to be effective as of
the date first above written.

	 	 	 	 	 	 	 
	 	 	PATRIOT COAL CORPORATION
	 
	 	 	 	 	 	 
	 

	 	By	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	INDEMNITEE:
	 
	 	 	 	 	 	 
	 

	 	By	 	 	 	 
	 

	 	 	 	 	 	 

12exv10w23

 

Exhibit 10.23

CERTAIN PORTIONS OF THIS EXHIBIT

HAVE BEEN OMITTED AND FILED

SEPARATELY WITH THE SECURITIES

AND EXCHANGE COMMISSION

PURSUANT TO A REQUEST FOR

CONFIDENTIAL TREATMENT. THE

SYMBOL “****” HAS BEEN INSERTED IN

PLACE OF THE PORTIONS SO OMITTED

FORM OF

COAL SUPPLY AGREEMENT

          This Coal Supply Agreement (this “Agreement”) is made and entered into as of [Spinoff Date]
(the “Effective Date”) by and between COALSALES, LLC, a Delaware limited liability company
(“COALSALES”), and PATRIOT COAL SALES LLC, a Delaware limited liability company (“Patriot”).

RECITALS:

	A.	 	COALSALES and **** (“End Customer”) have entered into that certain Contract for the Purchase
and Sale of Coal dated June 1, 2006 (as amended through the Effective Date and as the same may
be amended after the Effective Date, the “End Customer Contract”) pursuant to which COALSALES
supplies coal to End Customer.
	 
	B.	 	Patriot operates the Highland Mine/Reserve in Henderson, Kentucky, which is designated as an
approved source under the End Customer Contract; and such mine has supplied coal to COALSALES
to enable COALSALES to fulfill its supply obligations under the End Customer Contract.
	 
	C.	 	Immediately prior to the Effective Date, COALSALES and Patriot were both indirect
subsidiaries of Peabody Energy Corporation. Commencing on or after the Effective Date, as a
result of a spin-off transaction, Patriot will no longer be an indirect subsidiary of Peabody
Energy Corporation.
	 
	D.	 	It is the intent of the parties to allow COALSALES to continue to meet its obligations under
the End Customer Contract with respect to Quality A coal (as defined in Section 3.3) by
purchasing Quality A coal from Patriot in accordance with the terms and conditions of this
Agreement, including the Incorporated End Customer Contract (as hereinafter defined), except
where expressly provided otherwise in this Agreement.

AGREEMENT:

	 	 	NOW, THEREFORE, COALSALES and Patriot agree as follows:
	 
	1.	 	INCORPORATION OF TERMS OF END CUSTOMER CONTRACT

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	 	1.1	 	Incorporation of End Customer Contract. A copy of the End Customer Contract as
amended through the Effective Date (hereinafter, the “Incorporated End Customer
Contract”) is attached hereto as Exhibit A. It is the intent of the parties
that except where expressly provided otherwise in this Agreement, the terms and
conditions of the Incorporated End Customer Contract (including the rights, obligations
and benefits of each party thereto) shall apply to Patriot as if Patriot were named as
the “Contractor” thereunder and to COALSALES, as if COALSALES were named as “Customer”
thereunder. Accordingly, the text of the Incorporated End Customer Contract is hereby
incorporated by reference into this Agreement, with the same force and effect as if
such text were fully set forth herein, subject to the modifications thereto set forth
below.
	 
	 	1.2	 	No Assignment or Privity. For the avoidance of doubt, this Agreement does not
constitute a subcontract, delegation or assignment by COALSALES of the End Customer
Contract, and there will be no privity of contract between End Customer and Patriot
under or in respect of the End Customer Contract.
	 
	 	1.3	 	Communications For Scheduling, Transportation, and Related Activities.
COALSALES shall retain the responsibility for all communications with End Customer and
for the coordination of all deliveries under the End Customer Contract. Patriot shall
not have any communications with End Customer in regards to this Agreement and the End
Customer Contract unless COALSALES specifically authorizes such communication. To the
extent copies of any written communications under the End Customer Contract in
connection with scheduling, transportation and related activities are required by
Patriot to perform its obligations hereunder, COALSALES shall provide Patriot with
copies of such communications.
	 
	 	1.4	 	Assumption of Rights, Remedies, Responsibilities and Obligations. In
furtherance of the foregoing, Patriot hereby assumes toward COALSALES all obligations
and responsibilities with respect to Quality A coal (as hereinafter defined) that
COALSALES has under the Incorporated End Customer Contract toward End Customer; and
COALSALES will have the benefit of all rights and remedies against Patriot with respect
to Quality A coal that End Customer has against COALSALES under the Incorporated End
Customer Contract, in each case subject to the modifications set forth below. Likewise,
COALSALES hereby assumes toward Patriot all obligations and responsibilities with
respect to Quality A coal that End Customer has toward COALSALES under the Incorporated
End Customer Contract; and Patriot will have the benefit of all rights and remedies
with respect to Quality A coal against COALSALES that COALSALES has against End
Customer under the Incorporated End Customer Contract, in each case subject to the
modifications set forth below. For the sake of clarity, the terms and conditions of
the Incorporated End Customer Contract, as modified by the body of this Agreement, will
apply to Quality A coal that is resold by COALSALES to any third party. In addition,
at COALSALES request, Patriot shall continue to honor current practices at the Highland
Mine regarding the

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	 	 	 	preparation and handling of Quality A coal and reporting of coal quality for
shipments to End Customer under this Agreement.
	 
	 	1.5	 	Conflicting Terms. If there is a conflict or inconsistency between a provision
of the Incorporated End Customer Contract with respect to Quality A coal and a
provision of the body of this Agreement, the provision of the body of this Agreement
will control. If there is a conflict or inconsistency between a provision of the End
Customer Contract with respect to Quality A coal applicable to Patriot under this
Agreement and a provision of the body of this Agreement, the provision of the body of
this Agreement will control.
	 
	 	1.6	 	Legal Proceedings. In addition to all other rights and remedies available under
this Agreement, including the Incorporated End Customer Contract, the following shall
apply solely with respect to Quality A coal:

	 	(a)	 	COALSALES will use commercially reasonable efforts to defend
its rights against End Customer under the End Customer Contract and to pursue
all necessary legal action to enforce its rights against End Customer under the
End Customer Contract; provided, however, that COALSALES shall have the right,
in its sole discretion, to determine whether or not it will pursue or defend a
given legal action; and in the event COALSALES determines not to pursue or
defend a given legal action, it shall notify Patriot of such determination.
COALSALES agrees that in the course of defending or pursuing its rights against
End Customer under the End Customer Contract that it will exercise commercially
reasonable efforts to avoid taking any actions that it knows or would
reasonably be expected to know would be detrimental to Patriot without first
advising Patriot of such actions. Notwithstanding the foregoing, however,
nothing in this Section 1.6(a) will be construed to limit any right that
Patriot may have against COALSALES under this Agreement as a result of such
action by, or inaction of, COALSALES.
	 
	 	(b)	 	If the parties are co-defendants in any legal proceeding
arising out of the End Customer Contract, the parties agree to work together in
good faith and in the spirit of mutual cooperation to defend such action in a
manner beneficial to both parties, provided, that each party shall have the
right to engage counsel of its choosing, and will bear the costs of its own
legal defense.

	2.	 	GENERAL MODIFICATIONS TO INCORPORATED END CUSTOMER CONTRACT
	 
	 	 	The purpose of this Agreement is to allow COALSALES to continue to meet its obligations with
respect to Quality A coal under the End Customer Contract by purchasing coal from Patriot in
accordance with the terms and conditions agreed to hereunder. Accordingly, this Agreement
will be construed and performed in furtherance

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	 	 	 of such purpose notwithstanding that the parties may not have adequately modified the text
of the Incorporated End Customer Contract.
	 
	 	 	The following provisions of this Article 2 set forth general modifications to be made to,
and rules of construction to be applied to, the text of the Incorporated End Customer
Contract.

	 	2.1	 	Notices and Information. To the extent certain provisions of the Incorporated
End Customer Contract relating to Quality A coal require that End Customer or COALSALES
provide the other with notice within a period of two (2) business days or less, for
purposes of incorporating such requirement into this Agreement, each party hereto shall
use commercially reasonable efforts to promptly relay such notice to the other party,
taking into consideration the notice requirement under the Incorporated End Customer
Contract. In all other situations under the Incorporated End Customer Contract
requiring the End Customer to provide notice or information to COALSALES within a
period of time greater than two (2) business days, for purposes of incorporating such
requirement into this Agreement, such period of time shall be extended by two (2)
business days to account for the possibility that End Customer may not provide such
notice or information to COALSALES until the end of the specified period, provided,
however, that upon receipt of any notice given by End Customer, COALSALES will use
commercially reasonable efforts to promptly forward such notice to Patriot. Likewise,
except for any provisions under the Incorporated End Customer Contract requiring two
(2) business days’ or less notice, whenever the Incorporated End Customer Contract
requires COALSALES to provide notice or information to End Customer within a specified
period of time, for purposes of incorporating such requirement into this Agreement,
such period of time shall be shortened by two (2) business days to enable COALSALES
sufficient time to provide the same notice or information to End Customer under the End
Customer Contract.
	 
	 	2.2	 	Audit and Inspection Rights. The following shall apply solely with respect to
Quality A coal: Whenever the End Customer Contract grants End Customer the right to
conduct an audit or inspection of, or access to coal production facilities, processes,
books, records, or otherwise, End Customer will be entitled, as applicable, to enforce
or exercise such audit, inspection and/or access rights against Patriot. If COALSALES
has the right under the End Customer Contract to conduct any inspections of End
Customer’s books, records, or premises, such right does not directly pass through to
Patriot under this Agreement; however, Patriot may request such inspection rights from
COALSALES, and COALSALES shall contact End Customer and use commercially reasonable
efforts to obtain End Customer’s consent to such request. In the event End Customer
refuses Patriot’s request to inspect, COALSALES shall be obligated to promptly conduct
the inspection on Patriot’s behalf and at Patriot’s sole expense, and shall report the
results of such inspection to Patriot promptly upon completion. Notwithstanding the
foregoing, this Section 2.2 does not eliminate or modify COALSALES’ audit, inspection
or access rights under the Incorporated End

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	 	 	 	Customer Contract with respect to Patriot or Patriot’s facilities, processes, books
or records.
	 
	 	2.3	 	Amendments to End Customer Contract. For the avoidance of doubt, the parties
hereto understand and agree that COALSALES shall have the unconditional, unilateral
right, in its sole discretion, to amend the End Customer Contract in any manner
contemplated by the terms and conditions contained therein, without the prior written
consent of Patriot. However, any such amendment to the End Customer Contract will apply
only as between COALSALES and End Customer and will not amend the Incorporated End
Customer Contract without Patriot’s signed, written consent.
	 
	 	2.4	 	Assignment. Neither party shall assign this Agreement without the prior written
consent of the other party, which consent shall not be unreasonably withheld or
delayed. Notwithstanding the foregoing, either party may, without the need of consent
from the other party (and without relieving itself from liability hereunder), (a)
transfer, sell, pledge, encumber, or assign this Agreement or the account, revenues or
proceeds hereof in connection with any financing or other financial arrangement; (b)
transfer or assign this Agreement to an affiliate of such party; or (c) transfer or
assign this Agreement to any person or entity succeeding to all or substantially all of
the assets of such party by way of merger, reorganization, or otherwise, provided,
however, that in each such case, any such assignee shall agree in writing to be bound
by the terms and conditions hereof, and that no such assignment shall in any way
relieve the assignor from liability or full performance under this Agreement. The
foregoing assignment rights notwithstanding, such rights shall under no circumstances
supersede, override, or violate the assignment rights in Section 21 of the End Customer
Contract, it being understood and agreed by the parties hereto that the terms and
conditions of such Section 21 shall remain in full force and effect for so long as the
End Customer Contract is effective.
	 
	 	2.5	 	Venue and Dispute Resolution. Notwithstanding anything to the contrary set
forth in the Incorporated End Customer Contract, but subject to Article 4, venue for
the resolution of disputes between COALSALES and Patriot under this Agreement will lie
exclusively in the federal courts of jurisdiction in the Eastern District of Missouri.
	 
	 	2.6	 	Indemnification. Each party hereto (as the “Indemnifying Party”) shall
indemnify, defend and hold harmless the other party, its directors, officers,
employees, agents and affiliates (collectively, the “Indemnified Party”) from and
against any and all suits, actions, legal or administrative proceedings, claims,
demands, actual damages, fines, punitive damages, losses, costs, liabilities, interest,
and attorneys’ fees (including any such fees and expenses incurred in enforcing this
indemnity) incurred by the Indemnified Party arising from a breach by the Indemnifying
Party of its obligations to the Indemnified Party under this Agreement.

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	 	2.7	 	Liquidated Damages and Early Termination Damages. The following shall apply
solely with respect to Quality A coal: In addition to all other rights and remedies
available under the Incorporated End Customer Contract, notwithstanding anything in
Section 1.6 of this Agreement to the contrary, to the extent liquidated damages or
early termination damages are due and payable to COALSALES under the Incorporated End
Customer Contract, any such liquidated damages or early termination damages that are
actually paid to COALSALES by End Customer under the End Customer Contract shall be
transferred by COALSALES to Patriot within five (5) business days of receipt. The
foregoing shall not apply in the event that COALSALES elects to continue to purchase
the full quantity of Quality A coal under this Agreement after the occurrence of the
event triggering the payment of liquidated damages or early termination damages.
COALSALES shall use commercially reasonable efforts to pursue all such rights and
defenses on Patriot’s behalf with respect to any liquidated damages or early
termination damages that become due and owing to COALSALES by End Customer under the
End Customer Contract. If legal action is necessary for COALSALES to pursue the
foregoing rights and defenses, all legal costs and fees incurred by COALSALES in
relation thereto shall be borne by Patriot.
	 
	 	2.8	 	COALSALES’ Right To Market Coal. COALSALES shall have the right, in its sole
discretion, to resell to any third party coal purchased from Patriot under this
Agreement. It is understood and agreed that if COALSALES elects to resell such coal, it
shall have the right to claim force majeure under this Agreement with respect to such
resold coal; provided that deficiencies in Quality A coal shall be made up by
COALSALES, subject to a mutually agreed schedule. If Patriot claims a force majeure
event, then notwithstanding the terms of the Incorporated End Customer Contract,
COALSALES has the right to require that Patriot make up deficiencies in Quality A coal
deliveries due to such force majeure event, subject to a mutually agreed schedule,
regardless of whether the quantity of deficient Quality A coal is sold to End Customer
or has been resold into the market.

	3.	 	SPECIFIC MODIFICATIONS TO INCORPORATED END CUSTOMER CONTRACT
	 
	 	 	The following provisions of this Article 3 set forth specific modifications to be made to
specified provisions of the Incorporated End Customer Contract. All references to sections
or pages are to sections or pages of the Incorporated End Customer Contract, unless
specifically indicated otherwise.

	 	3.1	 	Definitions. All defined terms in the Incorporated End Customer Contract shall
have the same meanings under this Agreement; and all capitalized terms herein that are
not otherwise defined shall have the meaning ascribed to them in the Incorporated End
Customer Contract, except that the term “Contract Administrator” means COALSALES.

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	 	3.2	 	Section 1. (Contract Term). Irrespective of whether or not COALSALES and End
Customer exercise their respective options to extend the term of the End Customer
Contract under Section 1 thereof, the term of this Agreement will commence on the
Effective Date and will expire on December 31, 2011, subject to earlier termination in
accordance with this Agreement.
	 
	 	3.3	 	Section 2.a. (Quantity). For the remainder of 2007, COALSALES will purchase
from Patriot, and Patriot will sell to COALSALES, under this Agreement a total of
                     tons of Quality A coal from the Highland Mine Reserve. Furthermore, it is
intended and agreed by the parties that for each Contract Year thereafter, COALSALES
will purchase from Patriot, and Patriot will sell to COALSALES, 3,500,000 tons of
Quality A coal under this Agreement from the Highland Mine Reserve. For purposes of
this Agreement, the term “Quality A” coal means coal provided from the Highland Mine
Reserve. “Highland Mine Reserve” means the “Highland Mine/Reserve” set forth on Exhibit
I to the Incorporated End Customer Contract.
	 
	 	3.4	 	Section 2.b. (Quantity). The first and third paragraphs are modified by
deleting “five hundred thousand (500,000) tons” and replacing it with “two hundred
ninety thousand (290,000) tons” with respect to Quality A coal to be delivered under
this Agreement. The second paragraph is deleted with respect to this Agreement.
	 
	 	3.5	 	Sections 3 and 4. (Scheduling; Variations, Delays, and Interruptions in
Deliveries). In addition to, but not superseding the Incorporated End Customer
Contract, for purposes of ensuring the seamless delivery of Quality A coal, Patriot
shall comply with the Contractor (as that term is used in the Incorporated End Customer
Contract) obligations under Sections 3 and 4 of the Incorporated End Customer Contract,
including, without limitation, all requirements as to quantity, delivery,
specifications, quality, loading, transport, delivery, and establishment of a demurrage
account. All required notices and other communications related to the foregoing shall
be made directly by COALSALES within the stated notice period, and COALSALES shall use
commercially reasonable efforts to communicate same to Patriot within a reasonable time
thereafter. If End Customer reduces purchases of Quality A coal under Section 4 of the
End Customer Contract and such Section 4 has not been materially amended after the
Effective Date, COALSALES will be entitled to make a reduction of Quality A coal
required to be purchased under this Agreement.
	 
	 	3.6	 	Section 5. (Sources). It is understood and agreed by the parties hereto that
for purposes of this Agreement, Patriot shall have no right to deliver coal from any
additional area(s) or mine opening(s) that are in the Source Area but that are not an
Authorized Source (as those terms are defined in the Incorporated End Customer
Contract, but which terms, for purposes of this Agreement, refer solely to the Quality
A coal from the Highland Mine Reserve as described in Exhibit I of the Incorporated End
Customer Contract). Such rights to propose a new Authorized Source outside the Highland
Mine/Reserve Source Area, as more specifically set forth in Section 5 of the End
Customer Contract, shall apply solely

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	 	 	 	to COALSALES. The foregoing notwithstanding, Patriot may, at any time during the
course of this Agreement, propose a new Authorized Source for coal, and COALSALES
shall have the right, in its sole discretion, to grant or deny such request.
	 
	 	3.7	 	Section 5.e. (Affiliated Company). For purposes of this Agreement, the
reference to “Peabody Energy Corporation” in the definition of “affiliated company” is
changed to “Patriot Coal Corporation”. Notwithstanding such change, Patriot will not
ship coal from an affiliated company unless the same is approved in writing by End
Customer and COALSALES.
	 
	 	3.8	 	Section 6.b. (Base Price – ****). Neither Section 6.b nor any references to
**** in other sections of the Incorporated End Customer Contract will apply to this
Agreement.
	 
	 	3.9	 	Section 9.f. (Quality and Specifications). If the End Customer elects to
terminate the End Customer Contract pursuant to its rights under Section 9.f thereof,
then COALSALES shall have the right, at its sole option, to continue to purchase up to
3,500,000 tons of Quality A coal per year under this Agreement for the remainder of the
term of this Agreement or to concurrently terminate this Agreement. COALSALES will use
commercially reasonable efforts to pursue all rights and defenses it may have against
End Customer under the End Customer Contract to avoid such termination of the End
Customer Contract. COALSALES will also work with Patriot in good faith to avoid such
termination of the End Customer Contract.
	 
	 	3.10	 	Section 10. (Contract Price Adjustments). The right of Patriot to adjust prices
for Quality A coal under this Agreement shall be subject to the following:

	 	(a)	 	If Patriot desires to pass through a price increase in
accordance with the Incorporated End Customer Contract, COALSALES shall use
commercially reasonable efforts to obtain End Customer’s consent to such
adjustment. If End Customer agrees, the Base Price under the Incorporated End
Customer Contract and the Base Price hereunder shall be adjusted accordingly.
	 
	 	(b)	 	If either COALSALES or Patriot desires to exercise its rights
under the Incorporated End Customer Contract to pass through a price increase
to End Customer, and if End Customer rejects or disputes such proposed price
increase, unless otherwise mutually agreed by the parties, such price increase
shall not take effect; and, unless otherwise mutually agreed by the parties,
neither COALSALES nor Patriot shall have the right to terminate this Agreement,
nor shall COALSALES terminate the End Customer Contract for such cause.

	 	3.11	 	Section 10.d. (Contract Price Adjustments – Transportation). COALSALES will not
terminate this Agreement under Section 10.d of the Incorporated End

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	 	 	 	Customer Contract unless End Customer terminates the End Customer Contract under
Section 10.d thereof. If, however, End Customer does exercise such termination
rights, the parties shall meet in good faith and exercise all reasonable efforts in
an attempt to reach a mutually agreeable resolution to prevent End Customer from
terminating the End Customer Contract for such cause. If the parties are unable to
agree on a method for preventing the termination of the End Customer Contract and
End Customer terminates the End Customer Contract, then COALSALES shall have the
right, at its sole option, to continue to purchase Quality A coal up to 3,500,000
tons per year under this Agreement for the remainder of the term of this Agreement
or to concurrently terminate this Agreement. Neither party hereto shall have, after
the effective date of such termination, any further obligation under this Agreement
to the other, provided, however, that such termination shall not affect any rights
or obligations of each party existing under this Agreement for coal shipped or
required to be shipped prior to the effective date of said termination.
	 
	 	3.12	 	Section 12. (Notices). COALSALES’ address for notices will remain the same.
Patriot’s address for notices is as follows:

Patriot Coal Sales LLC

12312 Olive Boulevard, Suite 400

St. Louis, Missouri 63141

Fax: (          )           -               

Attention: General Counsel

	 	3.13	 	Section 13.b. (Shipping Notices – Barge Deliveries). For all barge-delivered
coal, Patriot will provide daily notifications as directed by COALSALES for coal
shipped under this Agreement at the facsimile number(s) or email address(es) provided
to Patriot by COALSALES.
	 
	 	3.14	 	Section 15. (Payments; Invoices). All invoices shall be submitted by Patriot
directly to COALSALES at the billing address(es) provided by COALSALES (e.g. mail,
facsimile and EDI as applicable), in accordance with the same procedures governing
COALSALES’ submission of invoices to End Customer. COALSALES shall remit payment to
Patriot in accordance with the same terms and conditions under the End Customer
Contract as apply to End Customer; provided, however in the event that End Customer
disputes part or all of the invoice and remits a partial payment only the remitted
partial payment shall be due to Patriot and COALSALES in accordance Section 1.6(a) will
use all commercially reasonable efforts to expeditiously resolve such disputes and
promply remit the receipt of any disputed payments. Patriot agrees that in the event of
a payment dispute between COALSALES and End Customer, it will cooperate fully with
COALSALES and will take all reasonable measures to assist COALSALES in resolving any
issues with End Customer relating to invoices, payment, and collection of all
outstanding amounts due from End Customer.

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	 	3.15	 	Section 19. (Clean Air Act). If End Customer reduces purchases of Quality A
coal under Section 19 of the End Customer Contract, COALSALES will likewise be entitled
to make a reduction of Quality A coal required to be purchased under this Agreement.
	 
	 	3.16	 	Section 20. (Unilateral Termination Right). The parties acknowledge that
pursuant to Section 20 of the Incorporated End Customer Contract, both COALSALES and
End Customer have the unilateral right to terminate the End Customer Contract. Except
as otherwise provided in this Agreement, neither COALSALES nor Patriot shall exercise
its unilateral right to terminate this Agreement under Section 20 of the Incorporated
End Customer Contract unless End Customer exercises its unilateral right to terminate
the End Customer Contract, in which event COALSALES shall have the right, at its sole
option, to continue to purchase up to 3,500,000 tons per year Quality A coal under this
Agreement for the remainder of the term of this Agreement or to concurrently terminate
this Agreement.
	 
	 	3.17	 	Exhibit 1. The line listing the Arclar Complex and all information related
thereto does not apply to this Agreement.
	 
	 	3.18	 	General Long Term Contract Conditions, Section 6 (Officials). Section 6 of the
General Long Term Contract Conditions, which is an attachment to the Incorporated End
Customer Contract, does not apply to this Agreement.

	4.	 	RESOLUTION OF DISPUTES UNDER THIS AGREEMENT.

	 	4.1	 	Notice of Dispute. Disputes arising pursuant to this Agreement shall be
resolved in accordance with this Article 4. Either party may invoke the procedures of
this Article 4 by written notice to the other party claiming the existence of a dispute
and describing the nature of that dispute (the “Dispute Notice”).
	 
	 	4.2	 	Resolution of Disputes. Any dispute between the parties arising under
this Agreement first shall be referred for resolution to a senior representative of
each party. Upon receipt of a notice describing the dispute, designating the notifying
party’s senior representative and indicating that the dispute is to be resolved by the
parties’ senior representatives under this Agreement, the other party shall promptly
designate its senior representative to the notifying party. The senior representatives
so designated shall attempt to resolve the dispute on an informal basis as promptly as
practicable. The parties agree that they shall negotiate expeditiously in good faith in
an effort to resolve any disputes arising under this Agreement. In the event a dispute
cannot be resolved by negotiation within thirty (30) days after the date that the
Dispute Notice was received by the other party, or within such other period as the
parties may jointly agree, then either party may commence an action at law or in equity
to resolve such dispute.

[REMAINDER OF PAGE INTENTIONALLY BLANK. SIGNATURES ON NEXT PAGE.]

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          IN WITNESS WHEREOF, COALSALES and Patriot have executed this Agreement as of the Effective
Date.

	 	 	 	 	 	 	 
	 	 	COALSALES, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

	 	 

	 	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 

	 	 

	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	PATRIOT COAL SALES LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

	 	 

	 	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 

	 	 

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Exhibit A

Incorporated End Customer Contract

TERM COAL CONTRACT

DATED: June 1, 2006

EFFECTIVE June 1, 2006

COALSALES, LLC

****

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TABLE OF CONTENTS

	 	 	 	 	 
	1. Contract Term
	 	 	4	 
	2. Quantity
	 	 	5	 
	3. Scheduling
	 	 	7	 
	4. Variations, Delays, and Interruptions in Deliveries
	 	 	7	 
	5. Sources
	 	 	11	 
	6. Base Price
	 	 	12	 
	7. Sampling and Analysis
	 	 	14	 
	8. Adjustments for Quality
	 	 	16	 
	9. Quality and Specifications
	 	 	17	 
	10. Contract Price Adjustments
	 	 	22	 
	11. Remedies
	 	 	25	 
	12. Notices
	 	 	28	 
	13. Shipping Notices
	 	 	28	 
	14. Transportation
	 	 	29	 
	15. Payments, Invoices
	 	 	31	 
	16. Weights
	 	 	32	 
	17. Contract Administrator/Contracting Officer
	 	 	33	 
	18. Disputes
	 	 	33	 
	19. Clean Air Act and Other Environmental Requirements
	 	 	34	 
	20. Unilateral Termination Right
	 	 	34	 
	21. Permitted Assignment
	 	 	35	 
	22. Warranties
	 	 	35	 
	23. Contract Components
	 	 	36	 

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Contract                                         

Release                                         

CONTRACT FOR PURCHASE AND SALE OF COAL

     THIS AGREEMENT, is made and entered into this 1st day of June 1, 2006, by and between
**** (hereinafter called “Customer”), and
COALSALES, LLC, a Delaware limited liability
company (hereinafter called “Contractor”).

W I T N E S S E T H:

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

     Definitions: “Contract” shall mean this agreement, which shall be effective as of
June 1, 2006.

     “Contract Year” shall mean a twelve-month period beginning January 1 and ending December 31
within the term of this Contract. However, the first year of this Contract shall be the period of
June 1, 2006 – December 31, 2006.

     “Calendar Year” shall be any period beginning January 1 and ending December 31 within the term
of this Contract.

     “Contract Quarter” shall mean any of the four quarters of a Contract Year, i.e. January –
March, April – June, etc.

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

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     “Delivery Point” shall be f.o.b. loaded in barges at Uniontown Dock (Ohio River mile 842.9)
for each ton of Quality A coal, purchased and delivered under this Contract and f.o.b. loaded in
barges at **** Dock (Ohio River mile ****) for each ton of Quality B coal; or such other point as
the parties may agree upon in writing for any new Authorized Source.

     “Destination Plant(s)” shall mean Customer’s **** Plant, any other Customer fossil-fired power
plant or plants, a blending facility, if the coal is to be blended at a site remote from a Customer
plant, or such other destination as Customer may elect under Subsection 14.g. of this Contract for
which the coal is scheduled to be delivered. Coal delivered hereunder may have a Destination Plant
for blending, and one or more Destination Plants that are power plants. The Destination Plant(s)
shall be identified by Customer from time to time.

     “Shipment” shall mean for Quality A coal **** of **** barges per ****. Shipment shall mean
for Quality B coal **** barge.

     1. Contract Term:

          Deliveries shall commence on June 1, 2006 (“Delivery Commencement Date”) and shall continue
for ten (10) years and seven (7) months from said Delivery Commencement Date unless terminated
earlier by agreement or as otherwise provided for herein. Provided, however, this Contract may be
reopened by either party on or before January 1, 2011 for the purpose of renegotiating price and
other terms and conditions or for the sole purpose of terminating deliveries. The party desiring
to exercise such reopener shall give the other party written notice no later than January 1, 2011
and may, but shall not be required to, specify the purpose of such reopening. Nothing herein is
intended to require a party who has commenced renegotiations hereunder to continue such
renegotiations if, for any reason, such party determines it is not in its interests to do so. If
the reopener provision has been exercised, this Contract will terminate on December 31, 2011 unless
Customer and the Contractor have mutually agreed in writing by July 1, 2011 to continue this
Contract. Neither party shall be under any obligation or liability to continue this Contract
beyond said termination or have any liability for refusing to do so, if either party desires to
terminate deliveries in accordance herewith. The Contract Administrator’s agreement to any
modification arising out of any renegotiations (including contract extension) shall be subject to
approval by Customer’s Board of Directors and/or an authorized Customer officer or such officer’s
designee.

- 4 -

 

Contractor’s agreement to any modification arising out of any renegotiations (including
contract extension) shall be subject to approval by Contractor’s Board of Directors and/or an
authorized officer.

     2. Quantity:

          a. The quantity of coal to be sold and purchased hereunder during each Contract Year shall be
as follows:

	 	 	 	 	 	 	 	 	 
	Contract Year	 	Quality A	 	Quality B	 	Total Tons
	2006 — ****

	 	 	0	 	 	****
	 	****
	2006 — #501

	 	 	****	 	 	****
	 	****
	2006 — #505

	 	 	0	 	 	****
	 	****
	2007

	 	 	3,500,000	 	 	****
	 	****
	2008

	 	 	3,500,000	 	 	****
	 	****
	2009

	 	 	3,500,000	 	 	****
	 	****
	2010

	 	 	3,500,000	 	 	****
	 	****
	2011

	 	 	3,500,000	 	 	****
	 	****
	2012

	 	 	3,500,000	 	 	****
	 	****
	2013

	 	 	3,500,000	 	 	****
	 	****
	2014

	 	 	3,500,000	 	 	****
	 	****
	2015

	 	 	3,500,000	 	 	****
	 	****
	2016

	 	 	3,500,000	 	 	****
	 	****

Contractor at its sole election shall have the right, during Contract Year 2006 and during any
Contract Year(s) thereafter, to ship less than the stated annual tonnage of Quality A coal and to
replace such reduction in the amount of Quality A coal with a corresponding increase in the amount
of Quality B coal shipped during the Contract Year in which such reduction in Quantity A coal
occurs; provided however that a total of **** tons will be shipped in 2006 and **** tons thereafter
will be shipped annually under this Contract during Contract Years 2007 through 2016. All tons
shall be priced at the applicable Base Price outlined in Section 6, Base Price, herein. For
example, if **** tons of Quality A coal are shipped during

- 5 -

 

Contract Year 2007, the applicable Base Price for the **** tons of Quality A coal would be $****
per ton FOB Delivery Point. The remaining **** tons of Quality B coal shipped during Contract Year
2007 would be priced at $**** per ton FOB Delivery Point. Contractor shall provide Customer
written notice of Contractor’s election on or before July 1 of each year for the year commencing
the following January showing the reduction in the quantity of Quality A Coal and the corresponding
increase in the quantity of Quality B coal to be shipped during such year, however, for Contract
Year 2007, Contractor shall provide Customer written notice of Contractor’s election on or before
December 14, 2006.

     Except in the case of any failure to deliver that is excused under Section 4 herein, Customer
may exercise the remedies afforded it under Section 11, Remedies, or as otherwise provided
by law, in the event Contractor fails to deliver coal as provided in this Section 2 or Section 3,
Scheduling; provided, however, in lieu of other remedies, Customer may elect to reschedule
for delivery any deficiencies. This rescheduled coal shall be delivered in accordance with the
provisions of this contract and at the price in effect at the time during which such deficiencies
occurred.

          b. Excluding Contract Year 2006, the base tonnage of coal to be delivered each calendar month
shall be approximately **** tons, subject however, to the other provisions provided for in this
Contract and a mutually agreeable monthly delivery schedule. Such monthly delivery schedule shall
not vary by more than **** percent unless agreed to by Customer.

     This Contract supersedes Term Coal Supply Agreement effective March 3, 2000 and Amendments
(Contract No. ****) thereto between the parties. On or after June 1, 2006, neither party will have
any further liability or obligation to the other under Contract No. ****, other than obligations or
liabilities which may have accrued prior to June 1, 2006 on account of coal sold or delivered under
Contract No. ****.

     This Contract is not and shall not be construed as a “requirements contract” for all of
Customer’s coal requirements for any Destination Plant. Customer reserves the right to purchase
coal from other coal suppliers in any amount during the term of this Contract; provided, however,
such purchase(s) do not adversely impact Contractor’s right to supply approximately **** tons per
month.

     3. Scheduling:

- 6 -

 

          a. Contractor agrees to load railroad trains or barging companies’ barges at Contractor’s
loading point in accordance with the terms and conditions of Customer’s barge transportation
agreement(s). Customer shall provide the Contractor with a summary of the appropriate parts of the
rail carrier or barge transportation agreement that pertain to the responsibilities of Contractor.
Customer shall not unreasonably change such terms and conditions that materially impact
Contractor’s operations without the prior written consent of Contractor, which shall not be
unreasonably withheld or delayed. Customer shall be responsible for coordinating all deliveries
under this Contract with coal deliveries of its other contractor(s) for the purposes of
establishing a uniform delivery schedule for placement at either transloading and blending docks or
Customer plants.

          b. Whether Customer or Contractor contracts for transportation services necessary to transport
coal purchased and sold hereunder to the transloading or blending facilities or the Destination
Plants, unless otherwise agreed, it shall be Contractor’s obligation to have coal ready for loading
and Customer’s responsibility to make timely arrangements for scheduling of transportation
equipment for moving the coal at the scheduled rate of delivery. Contractor shall be responsible
for any demurrage that accrues at the loading point resulting from Contractor’s delay in loading
barges. Likewise, Customer shall be responsible for any demurrage that accrues at the blending
facilities or the Destination Plants resulting from Customer’s delay in unloading barges.

     4. Variations, Delays, and Interruptions in Deliveries:

          a. Time of delivery is of major importance to both parties. Either party shall immediately
notify the other party of any expected deviation from the delivery schedule established in
accordance with Section 2, Quantity, and Subsection 3.a. of this Contract, and of the cause and
extent of deviation, except in the case of variations in quantity from schedule of up to ****
percent (****%) per month.

          b. Subject to the conditions hereinafter stated, neither party shall be liable to the other
for failure to mine, deliver, take, or unload coal as provided for in this Contract if such failure
was due to supervening causes beyond its control and not due to its own negligence, and which
cannot reasonably be overcome by the exercise of due diligence. Such causes shall include by way
of illustration, but not

- 7 -

 

limitation: acts of God or of the public enemy; insurrection; riots; labor strike, labor
****, labor **** or other labor **** arising in connection with labor **** or **** ; nuclear
disaster; partial or total outages of coal-fired units (including consideration of **** of
Customer’s **** plant); floods; accidents; major breakdown of equipment or facilities (including
emergency outages of equipment or facilities to make repairs to avoid breakdowns thereof or damage
thereto); fires; industry-wide shortages of carriers’ equipment; embargoes; orders or acts of civil
or military authority; or industry-wide shortages of materials and supplies. Nor shall Customer be
obligated to take coal hereunder at a Destination Plant so long as such causes wholly or partially
prevent the transloading and/or blending of the coal or wholly or partially prevent the handling,
unloading, stockpiling, or burning of coal at the Destination Plant to which deliveries are
consigned at the time the cause occurs, in which case, Customer shall have the right but not the
obligation to consign deliveries to another plant or facility not affected by the excusable cause.
The refusal of either party to settle a permanent or temporary labor strike, **** or other labor
**** on terms other than it considers satisfactory, shall be considered an excusable cause under
this paragraph. **** shall have the right, but not the obligation, to **** **** to make up ****
tonnage not delivered in accordance with this section and **** shall have the right, but not the
obligation to agree to ****’s ****.

     In the event of partial failure to deliver, take, or unload which is excusable under this
subsection b, the parties shall prorate deliveries or receipts of coal in substantially the same
proportion based upon contractual commitments, (e.g. a fifty percent (50%) reduction in receiving
or production capacity would result in a fifty percent (50%) reduction in scheduled deliveries for
each supplier or consumer). Similarly, for coal delivered under this contract consigned to
multiple Destination Plants, the partial failure to take or unload coal at one of the Destination
Plants that is excusable under this subsection b shall result in a pro rata reduction in the
tonnage scheduled for such Destination Plant under this contract at the time of the commencement of
the supervening cause in substantially the same proportion as the reduction in total receipts at
such Destination Plant resulting from the supervening cause. However, the parties shall not be
obligated to prorate a reduction in receipts or deliveries under coal supply contracts not affected
by the failure because they have different modes of delivery or have substantially different
quality requirements, or because their scheduled delivery dates are not affected by the failure.
During the periods Customer may experience such failures to take or unload coal, Contractor shall
be permitted to sell such coal

- 8 -

 

normally intended for Customer. In the case of the period which Contractor may experience
such failures to deliver coal, Customer may purchase replacement coal. The disabling effects of
such failures to deliver, take, or unload coal shall be corrected by the party experiencing such
failure as soon as and to the extent reasonably practicable.

     If a party’s excused failure to deliver or receive coal in amounts substantially in
conformance with the schedule established under Section 2, Quantity, and Subsection 3.a. continues
for a period exceeding **** consecutive days, the other party may terminate this contract. In the
event of such a termination, neither party shall have any further liability to the other except for
those liabilities which may have accrued with respect to performance or defaults prior to said
termination.

          c. Customer, by providing at least **** days’ prior written notice to Contractor, shall have
the right to refuse any shipments otherwise scheduled for delivery to a Destination Plant during
extended plant maintenance or repair periods at such Destination Plant. Customer will make a good
faith effort to ensure, to the extent practicable, that any reductions in shipments by Contractor
are not unreasonably disproportionate to any reduction in shipments by other vendors supplying coal
to the Destination Plant during such period. The shipments missed during such period may, at
****’s election be made up on a delivery schedule mutually agreed to by both parties, with the base
price of such makeup deliveries being the base price in effect at the time of delivery.

          d. Any written notice and information provided by a party claiming an event of Force Majeure
to the non-claiming party under this Section 4 shall be submitted to the non-claiming party in
writing and accompanied by and attached to a Certificate of Force Majeure Information
(“Certificate”), using the format set forth below, and executed by an authorized representative of
the claiming party:

CERTIFICATE OF FORCE MAJEURE INFORMATION

CUSTOMER CONTRACT NO. [Insert Contract Number] (the “Contract”)

     I, [ insert name ], hereby certify that:

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

     (ii) to the best of my knowledge and belief, the information contained in the attached
Notice is, as of the date of this Certificate, accurate, complete, not misleading, and can
be verified

- 9 -

 

by supporting information currently in my possession or in the possession of other employees
or officers of [insert company name] and nothing has been omitted from the attached Notice
the inclusion of which is necessary for the information contained in the attached Notice to
be accurate, complete, and not misleading;

     (iii) to the best of my knowledge and belief, the failure to deliver or accept coal as
provided in the Contract is due to supervening causes beyond the control of the claiming
party (Customer or Contractor), and cannot be reasonably overcome by the exercise of due
diligence by the claiming party; and

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

For the purposes of this certification, the term “Force Majeure” refers to the conditions and
causes set forth in Subsection 4.b. of the Contract, and the term “Notice” refers to the written
notice described in Subsection 4.d. of the Contract.

	 	 	 	 
	 	 

Name
	 	 
	 	 

Title
	 	 
	 	 

Company
	 	 
	 	 

Date of Execution

          e. Failure to submit a Certificate of Force Majeure Information, failure to duly execute such
Certificate, or failure to otherwise submit such Certificate in proper form to the non-claiming
party shall be deemed a waiver by the claiming party of all rights under this Section 4 with
respect to such coal or such tonnage scheduled for delivery prior to the date such Certificate is
actually furnished or is actually furnished in proper form and duly executed.

          f. Claiming party shall notify the non-claiming party, in writing, if the claiming party
learns that any certification submitted under Subsection 4.d was erroneous when submitted or has
become erroneous by reason of changed circumstances or other cause.

- 10 -

 

          g. Claiming party shall quantify and notify the non-claiming party, in writing, within ****
days after the end of the Force Majeure event as to the impact of the Force Majeure event on future
deliveries.

     5. Sources:

          a. The source(s) of coal delivered under this Contract are of major importance to Customer.
The provisions of this Contract pertaining to coal quality and quantity requirements, price
adjustments, federal and state legislation, and other matters are directly related to the source(s)
of coal. As used in this Section 5, “Source Area” shall mean the total coal reserve areas outlined
in Exhibit I; provided, that, within the Source Area, only the area(s) for surfaced-mined coal or
mine opening(s) (for underground-mined coal) covered by the mining permit(s) listed in Exhibit I is
an “Authorized Source” of coal for delivery under this Contract. The mine area(s) and/or
opening(s) located within the Source Area shown on the Specific Location Maps(s), but not covered
by the mining permit(s) listed in Exhibit I may become an Authorized Source under the following
procedures as mining progresses and the appropriate permit(s) and license(s) are obtained.
Contractor shall notify Customer in writing at least **** days in advance of its intention to
deliver coal from any additional area(s) or mine opening(s) that is in the Source Area but which is
not then authorized. Customer may approve such proposed source, provided, in Customer’s reasonable
judgment, the proposed source is capable of meeting the requirements of this contract. Customer
reserves the right to require Contractor to furnish any information Customer deems reasonably
necessary bearing on the ability of the source(s) to meet the quality requirement(s) of this
Contract.

          b. Contractor shall as soon as reasonably possible notify Customer in writing of any events
affecting the size or location of the Authorized Source(s). All Authorized Sources under this
Contract shall substantially be in compliance with the Federal Mine Safety and Health Act of 1977,
as amended, and regulations issued under such laws and all Federal and State reclamation laws and
regulations. If Contractor fails to comply with this requirement, whether or not coal from such
Authorized Source is then being delivered hereunder, Customer may exercise its rights under Section
11, Remedies.

          c. Contractor expressly assumes the risk that the Authorized Source(s) will permit the mining
and production of coal in such quantities and of such quality as will meet the requirements of

- 11 -

 

this Contract. Coal shall not be delivered from any other source(s), or shipped from any other
origin(s), or mined by any other producer(s) or subcontractor(s), unless authorized by Customer in
writing prior to delivery.

          d. Regardless of the cause of or reason for a request by Contractor to approve a new
Authorized Source outside the Source Area, Customer shall be under no obligation to approve the
tendered source as an Authorized Source, and Customer may withhold its approval on any basis or
bases that Customer may deem appropriate, including purely economic considerations.

          e. Notwithstanding the above restrictions concerning Customer’s right to approve a proposed
new Authorized Source, with advance notice submitted in writing to Customer, the Contractor may,
from time to time, and at no additional cost or expense to Customer, ship coal from its affiliated
companies under this Contract. For purposes of this subsection 5.e., an affiliated company must be
at least **** percent (****%) owned by Peabody Energy Corporation if coal is to be shipped from its
mine(s) in order to fulfill the requirements under this Contract. Coal may be shipped from an
affiliated company in order to meet the requirements of the Contract only after Contractor notifies
Customer in writing that it intends to ship from an affiliated company and the name of the proposed
affiliated company. Coal that is shipped from affiliates must conform to the specifications in
Section 9, Quality and Specifications and the other requirements of this contract.

     6. Base Price:

          a. The Base Price shall be the FOB barge price at the Delivery Point paid by Customer to
Contractor. Calendar year pricing for both Quality A and Quality B tons are as follows or as
adjusted under the reopener provision in Section 1:

- 12 -

 

	 	 	 	 	 	 	 	 	 
	 	 	Quality A	 	Quality B
	Calendar Year	 	Base Price per Ton	 	Base Price per Ton
	2006
	 	 	 	 	 	 	 	 
	2006 - #501
	 	 	 	 	 	 	 	 
	2006 - #505
	 	 	 	 	 	 	 	 
	2007
	 	 	 	 	 	 	 	 
	2008
	 	 	 	 	 	 	 	 
	2009
	 	 	 	 	 	 	 	 
	2010
	 	****
	2011
	 	 	 	 	 	 	 	 
	2012
	 	 	 	 	 	 	 	 
	2013
	 	 	 	 	 	 	 	 
	2014
	 	 	 	 	 	 	 	 
	2015
	 	 	 	 	 	 	 	 
	2016
	 	 	 	 	 	 	 	 

The Base Price above shall be adjusted according to the price adjustment provisions in this
Agreement (rounded to the nearest hundredth) and shall be referred to herein as the “Adjusted Base
Price.”

          b. Customer agrees to enter into negotiations, in good faith, with respect to a **** agreement
to be effective June 1, 2006 which would provide for purchase and delivery to Customer of up to a
maximum **** tons in 2006 and **** tons in 2007 with **** (Collectively, the **** Seller) at $****
per ton of **** in 2006 or 2007 at substantially the same terms and conditions outlined in this
Contract. Any purchases of **** from the **** Seller shall reduce, on a ton-for-ton basis the
applicable quality of coal that Customer would otherwise be obligated to purchase under this
Contract; such **** purchases shall reduce, on a ton-for-ton basis, the quantity of coal that would
otherwise have been purchased by Customer under this Contract and normally loaded at the Delivery
Point where the **** is loaded. Under no circumstances shall Customer be required to purchase
under this Contract, in any Contract Year or Contract Years, a quantity of coal or coal and ****
which in the aggregate exceeds the total tons specified in Section 2. a, Quantity. If, for any
reason, Customer and **** Seller do not enter into such **** agreement or if Customer enters into
such agreement and subsequently reduces, suspends, or terminates its purchases of **** under the
**** agreement, and/or Customer or **** Seller terminates the agreement for any reason, there shall
be no adverse affect on this Contract and Customer and Contractor shall be obligated to fully
perform pursuant to the terms and conditions of this Contract which shall remain in full force and
effect. In no event shall the failure of Customer and **** Seller to enter into a **** agreement
or any breach, default, or non-performance between Customer and the **** Seller under any

- 13 -

 

provision of **** agreement be the basis for Contractor to claim breach, default, or
non-performance, or to claim a right of offset, counterclaim, or cancellation under this Contract,
and this Contract shall continue in full force and effect.

     7. Sampling and Analysis:

          a. ****’s samples shall be used for the quality adjustment(s) for each quarter under Section
8, Adjustments for Quality, provided all samples for such quarter meet all criteria below:

     (i) **** percent (****%) of shipments shall have been sampled and analyzed in accordance with
the methods described in the latest published edition of the Annual Book of ASTM Standards, volume
05.06. Samples must have been collected utilizing mechanical systems meeting ASTM D 7256 / D 7256
M-06 Type I, Condition B, which have been shown to be free of bias within the past year. The bias
testing procedure and precision used must be approved by (****. Systems will be subject to a
critical inspection according to ASTM D4702 prior to approval.

Analysis procedures used should be as follows unless otherwise approved in writing by ****:

	 	 	 	 	 
	 

	 	Parameter
	 	Method
	 
	 

	 	Residual Moisture
	 	ASTM D 3173 or 5142
	 
	 

	 	Ash
	 	ASTM D 3174 or 5142
	 
	 

	 	Sulfur
	 	ASTM D 4239
	 
	 

	 	Btu
	 	ASTM D 5865

Note if ASTM D 3173 is used for Residual Moisture, ASTM D 3174 must be used for Ash. Conversely,
if ASTM D 5142 is used for Residual Moisture, ASTM D 5142 must be used for Ash.

     (ii) Sample analysis and other data required by **** to match data with shipment shall be
provided to **** in a format approved by ****.

     (iii) The lot size for each sample shall be by barge for barge coal, by trainload
for rail
coal, and by daily delivery for truck coal.

     (iv) Analysis for each sample shall have been received by **** by electronic data interchange
within seven (7) days of collection of said sample.

- 14 -

 

     (v) The sampling system shall be located in an area acceptable to **** such that the sample
collected for shipment is collected only from coal that is loaded for said shipment. If **** fails
to sample **** percent (****%) and **** samples **** percent (****%) or more of the tonnage
received, and if any of ****’s samples for the affected quarter do not meet all of the above
criteria, **** samples shall be used for said quarterly adjustment(s). If **** samples less than
**** percent (****%) of the tonnage received and any of ****’s samples do not meet all of the above
criteria, no adjustment for quality will be made for said quarter.

          b. In the event ****’s mechanical sampling system is not operating due to mechanical,
electrical, or operational failure, **** shall notify **** and the parties shall agree upon an
alternative method of sampling.

          c. **** agrees to ensure that all sampling equipment is properly maintained and adjusted so
that each sample taken is proportionate and representative of the coal delivered. **** or its
designated representative may observe any sampling or sample preparation performed by ****. ****
shall furnish the results of bias tests on the sampling system, and the results must be acceptable
to ****. The sample system shall be bias tested at least every twelve (12) months.

          d. **** shall prepare the samples in accordance with ASTM D 2013 and shall divide such samples
into three splits and place in suitable airtight containers. **** will analyze the first split and
fax the results to the Contract Administrator who administers this Contract for **** and to the
Coal Records Clerk and Yard Operations Supervisor at the Destination Plant. Except as provided
below, the ****’s results obtained on this first split will be utilized by **** to determine
whether or not the coal covered by the sample will be unloaded at the Destination Plant. ****
reserves the right not to unload coal at the Destination Plant until after the appropriate analysis
is received. **** shall be responsible for any demurrage charges incurred by **** as a result of
failure to transmit the analyses when and as required. **** may reject coal based on these
analyses. Within twenty-four (24) hours of barge loading, **** shall send the second split
identified by such sample number directly to an independent laboratory (to be agreed upon by
Customer and Contractor) by expedited delivery for analysis. The analysis results obtained from
the second split shall supersede the first split sample results and will be utilized for all
contract purposes, and determining the price adjustment required to compensate for the difference

- 15 -

 

between the quality of the coal actually shipped and the contract guaranteed analysis. The third
split (“referee sample”) will be retained by **** for a minimum of sixty (60) days to be analyzed
by the second independent laboratory (to be agreed upon by Customer and Contractor) in the event of
a disagreement between the parties regarding the results obtained on either of the other two
splits. If the results of the referee analysis indicate the analysis was improperly performed or
the results of the referee analysis are not within ASTM reproducibility limits with the first
independent laboratory results, then the referee analysis result will be conclusive between the
parties in regard to the analysis of the sample in question. The cost of any such referee analysis
shall be borne by the party that requested it, provided that if adjustment is made, then the cost
of any such analysis shall be equally shared by both parties.

     8. Adjustments for Quality:

          a. As used in this Section 8, a “Quarterly Average Value” shall mean the weighted average
value of the appropriate quality component determined from all samples collected and analyzed in
accordance with Section 7 during a calendar quarter based, on the tonnage, number of railcars, or
barges represented by the samples. Quarterly Average Values and adjustments for quality will be
calculated separately for Quality A Coal and Quality B Coal.

          b. For the coal accepted in each Contract Quarter, an adjustment, calculated to the nearest
cent per ton and using the Base Price shall be applied to the contract price to account for
variations in the Quarterly Average Value for as-received Btu/lb compared to the Typical Analysis
for as-received Btu. This adjustment shall in no way be affected by contract price adjustments
under Section 10, Contract Price Adjustment hereof. (See Exhibit II for example of calculations.)

          c. For the coal accepted in each Contract Quarter, an adjustment, calculated to the nearest
tenth of a cent per ton at a rate of either (1) $**** per ton (decrease) for each
percentage point the Quarterly Average Value for ash (as-received basis) exceeds the Typical
Analysis for ash, or (2) $**** per ton (increase) for each percentage point the Quarterly
Average Value for ash (on an as-received basis) is less than the Typical Analysis for ash, shall be
applied to the contract price . The calculation shall be prorated to cover any fractional
percentage. (See Exhibit II for example of calculations.)

          d. For the coal accepted in each Contract Quarter, an adjustment, calculated to the

- 16 -

 

nearest tenth of a cent per ton a rate of either (1) $**** per ton (decrease) for each
percentage point the Quarterly Average Value of moisture exceeds the Typical Analysis for Moisture,
or (2) $**** per ton (increase) for each percentage point the Quarterly Average Value for
Moisture is less than the Typical Analysis for Moisture, shall be applied to the contract price.
The calculation shall be prorated to cover any fractional percentage. (see Exhibit II for example
of calculations.)

          e. For the coal accepted in each Contract Quarter, an adjustment, calculated to the
nearest cent per ton at a rate of either (1) $**** per ton (decrease) for each tenth (1/10)
of a pound per million BTUs the Quarterly Average Value of sulfur dioxide exceeds the Typical
Analysis for sulfur dioxide, or (2) $**** per ton (increase) for each (1/10) of a pound per
million BTUs the Quarterly Average Value for sulfur dioxide is less than the Typical Analysis for
sulfur dioxide, shall be applied to the contract price. The calculation shall be prorated to cover
any fractional amount tenth (1/10) of a pound. (See Exhibit II for example of calculations.)

          f. Within sixty (60) days after the end of each calendar quarter, Customer shall submit
to

Contractor a report showing the quarterly Average Values and any adjustments determined under this
Section 8 of the contract. The number of tons of coal received by Customer which are subject to
adjustment shall be multiplied by said adjustments, and any resulting amount shall be paid promptly
(or credited to the extent of any offsetting debit) to the party to whom it is due. The assessment
of adjustments in accordance with the foregoing does not in any way impair Customer’s rights under
the contract or at law with respect to any failure by Contractor to meet the Typical Analysis that
gives rise to such adjustments.

     9. Quality and Specifications:

          a. All Quality A coal mined and delivered under this Contract shall conform to the following
Typical Analysis for Quality A coal on a quarterly average as determined by sampling and analyses
performed in accordance with Section 7, Sampling and Analysis: (see next page)

- 17 -

 

TYPICAL ANALYSIS FOR QUALITY A COAL

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	TYPICAL	 	 	 	 	 	 	 	REJECTION/SUSPENSION	 	 	 	 
	 	 	ANALYSIS (1)	 	 	 	 	 	 	 	SPECIFICATIONS (3)	 	 	 	 
	Lbs of SO2 per million Btu (2)

	 	****
	 	lbs
	 	Not more than
	 	****
	 	lbs

	Total Moisture

	 	****
	 	 	%	 	 	Not more than
	 	****
	 	 	%	 
	Sulfur (as-received) maximum

	 	****
	 	 	%	 	 	Not more than
	 	****
	 	 	%	 
	Ash (as received)

	 	****
	 	 	%	 	 	Not more than
	 	****
	 	 	%	 
	Btu/lb (as-received)

	 	****
	 	 	 	 	 	Not less than
	 	****	 	 	 	 
	Ash fusion temperature reducing
atmosphere Initial

	 	—
	 	 	oF	 	 	Not [more/less] than
	 	—
	 	 	oF	 
	Softening (Spherical) Min.

	 	****
	 	 	oF	 	 	Not [more/less] than
	 	****
	 	 	oF	 
	Fluid

	 	—
	 	 	oF	 	 	Not [more/less] than
	 	—
	 	 	oF	 
	Volatile Matter (dry basis) Min.

	 	****
	 	 	%	 	 	Not less than
	 	****
	 	 	%	 
	Grindability

	 	****
	 	 	 	 	 	Not less than
	 	****	 	 	 	 
	(Hardgrove Index) Min.
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Chlorine (dry basis) Max.

	 	****
	 	 	%	 	 	Not more than
	 	****
	 	 	%	 

 

			
	(1)	 	The Typical Analysis shall be used for the quality adjustment
under Section 8.
	 
	(2)	 	At 97.5%
	 
	(3)	 	Failure to comply with any of these specifications on a per
Shipment basis shall be basis for rejections and suspensions or termination
pursuant to Subsection 9.c., 9.d. and 9.e.

          All Quality B coal mined and delivered under this Contract shall conform to the following
Typical Analysis for Quality B coal on a quarterly average as determined by sampling and analysis
performed in accordance with Section 7, Sampling and Analysis:

- 18 -

 

TYPICAL ANALYSIS FOR QUALITY B COAL

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	TYPICAL	 	 	 	 	 	 	 	REJECTION/SUSPENSION	 	 	 	 
	 	 	ANALYSIS (1)	 	 	 	 	 	 	 	SPECIFICATIONS (3)	 	 	 	 
	Lbs of SO2 per million Btu (2)

	 	****
	 	lbs
	 	Not more than
	 	****
	 	lbs

	Total Moisture

	 	****
	 	 	%	 	 	Not more than
	 	****
	 	 	%	 
	Sulfur (as-received) maximum

	 	****
	 	 	%	 	 	Not more than
	 	****
	 	 	%	 
	Ash (as received)

	 	****
	 	 	%	 	 	Not more than
	 	****
	 	 	%	 
	Btu/lb (as-received)

	 	****
	 	 	 	 	 	Not less than
	 	****	 	 	 	 
	Ash fusion temperature reducing
atmosphere Initial

	 	****
	 	 	oF	 	 	Not [more/less] than
	 	****
	 	 	oF	 
	Softening (Spherical) Min.

	 	****
	 	 	oF	 	 	Not [more/less] than
	 	****
	 	 	oF	 
	Fluid

	 	****
	 	 	oF	 	 	Not [more/less] than
	 	****
	 	 	oF	 
	Volatile Matter (dry basis) Min.

	 	****
	 	 	%	 	 	Not less than
	 	****
	 	 	%	 
	Grindability

	 	****
	 	 	 	 	 	Not less than
	 	****	 	 	 	 
	(Hardgrove Index) Min.
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Chlorine (dry basis) Max.

	 	****
	 	 	%	 	 	Not more than
	 	****
	 	 	%	 

 

			
	(1)	 	The Typical Analysis shall be used for the quality adjustment under Section 8.

	 
	(2)	 	At 97.5%
	 
	(3)	 	Failure to comply with any of these specifications on a per
Shipment basis shall be basis for rejections and suspensions or termination
pursuant to Subsection 9.c., 9.d. and 9.e.

          b. The coal as-received shall have a top size not greater than **** inches and not less than
**** inches, with at least **** percent (****%) of the production larger than **** inch, and with
at least **** percent (****%) of the product larger than 28 mesh (Tyler). Such sizes shall be
determined by using screens with round openings. Coal shall not exhibit a temperature in excess of
****o F, and it shall be substantially free from mining impurities and scrap such as drill bits,
pieces of scrap metal or plate, plastic, rubber, rope, cloth, wire, cable, bone, slate, earth,
rock, pyrite, wood or water, which can be kept out or removed with the exercise of reasonable care
during mining, preparation and loading. It shall be

- 19 -

 

loaded in a manner that will ensure reasonably uniform consistency as to size and quality and
shall not contain slurry pond material (washer tailings), gob pile material (mine refuse),
petroleum-coke, oxidized coal, or blends of such materials, or create excessive amounts of dust
during the unloading and transferring to storage.

          c. If any coal delivered fails to meet any of the Rejection/Suspension Specifications stated
in Subsection 9.a on the basis of visual inspection or laboratory analysis, as applicable,
Customer may reject the coal at the source, loading point, any transloading or Destination Plant.
Customer’s acceptance of any amount of coal which does not meet these requirements shall not
constitute a waiver of any right which Customer may have under this Contract or as provided by law
on account of the delivery of such coal. In case of rejection of any coal in accordance with this
section, Customer will immediately orally notify , and follow-up in writing, Contractor of the
rejection and of the cause of rejection. In case of coal rejected after loading, unless the cause
for rejection is corrected, Contractor shall promptly remove the coal from the carrier’s equipment,
the transloading or blending facility or from Customer premises, as the case may be, at
Contractor’s expense. Contractor shall reimburse Customer for any additional transportation costs,
demurrage, equipment repair costs, or handling expenses incurred by Customer in connection with any
such rejection. Customer shall not be under any obligation or liability to assist Contractor in
any corrective actions required to remedy the cause for rejection.

          d. If more than **** barges of coal within a **** day period fail to meet the
Rejection/Suspension Specifications stated in Subsection 9.a. (excluding SO2, Sulfur (as
received), Moisture and Ash Fusion), Customer shall have the right to refuse to accept further
deliveries from that mine source until Contractor provides reasonable assurance to Customer that
Contractor will comply with the Rejection/Suspension Specifications. Such assurance must be given
in writing within fourteen (14) business days after the beginning of such suspension. In the event
Contractor fails to provide such assurances or Customer has suspended Contractor’s right to make
further deliveries under this provision **** times during any **** consecutive month period of the
Contract Term, Customer shall have the immediate right, at its option, upon the **** such
violation, to terminate this Contract. In the event Customer does not terminate this Contract
upon the **** violation and accepts future deliveries, then as to the current suspension event,
Customer’s right to terminate this Contract shall be deemed waived.

- 20 -

 

          e. If more than **** barges of coal within a **** day period fail to meet the
Rejection/Suspension Specifications for SO2, Sulfur (as received), Moisture or Ash
Fusion stated in Subsection 9.a, Customer shall have the right to refuse to accept further
deliveries from that mine source until Contractor provides reasonable assurance to Customer that
Contractor will comply with the applicable Rejection/Suspension Specifications for SO2,
Sulfur (as received) Moisture or Ash Fusion as the case may be stated in Subsection 9.a. Such
assurance must be given in writing within fourteen (14) business days after the beginning of such
suspension. In the event Contractor fails to provide such assurances or Customer has suspended
Contractor’s right to make further deliveries under this provision **** times during any ****
consecutive month period of the Contract Term, Customer shall have the immediate right, at its
option, upon such failure to provide assurances or the second such violation, to refuse to accept
further deliveries from that mine source for the remainder of the term of the Contract or terminate
this Contract; provided, however, in such event Customer may waive its’ right to refuse to accept
further deliveries from that mine source or terminate the Contract under this Sub-Section 9.e. if
Contractor ships an additional **** tons of Quality B coal for the remainder of the Contract term
without further recourse or liability of Contractor to Customer under the then current suspension
event. In the event Customer does not terminate this Contract upon the **** violation and accepts
future deliveries (including the annual increase of Quality B coal described in the immediately
preceding sentence), then as to the current suspension event, Customer’s right to terminate this
Contract shall be deemed waived.

          f. If the normal operations in conformance with the design capabilities of the Destination
Plant cannot be accomplished with the coal delivered hereunder, although the coal **** with the
quality and size requirements of this Section 9, Customer may then terminate this Contract upon
thirty (30) days prior written notice to Contractor without further recourse to either party. In
the event such a termination is pending, the Contractor shall be given a reasonable opportunity to
remedy the cause for termination, which may include the offer of replacement coal. However,
Customer is **** obligated to accept offers of replacement coal for the Destination Plant. In the
case of multiple Destination Plants, a termination under this subsection f. shall be effective only
with respect to the tonnage that would have been received at the affected Destination Plant.

 - 21 - 

 

     10. Contract Price Adjustments:

          a. The prices stated in Section 6.a. may be modified under Section(s) 10.b. or 10.d. below.

          b. (1) In the event of enactment of or amendment to a federal, state, or county law,
statute, rule, or regulation after June 1, 2006, (or in the case of establishment of a new Base
Price under Subsection d., below, after the effective date of such new Base Price), that directly
affects and changes the cost of the mining or sale of coal delivered hereunder and is assessed on a
per ton basis, or changes a current assessment of a tax, fee, or other similar charge that is
assessed on a per ton basis and directly affects and changes the cost of the mining or sale of coal
delivered hereunder (collectively a “Law Change”), Contractor shall notify Customer of such Law
Change and supply from its records such reasonable information to Customer showing the effect, if
any, of the Law Change upon the cost per ton of mining or sale of coal under this contract. If a
Law Change increases Contractor’s cost of mining or sale of coal provided to Customer, a contract
price increase shall, subject to Subsection 10.c., be made by Customer for such Law Change
effective retroactive to the date of the change in Contractor’s cost of mining or sale of coal
provided to Customer that is directly attributable to such Law Change.

          If (i) a price adjustment under Subsection 10.b(1), other than one resulting from a coal
industry wide tax assessed on a per ton basis, requested by Contractor under Subsection 10.b.(1)
would result in a contract price increase exceeding **** percent (****%) of the Base Price, or (ii)
a combination of price adjustments under Subsection 10.b(1). and/or any other provision of this
contract that collectively come into effect during any one-year period would result in a contract
increase exceeding **** percent (****%) of the Base Price, then Customer may, at its sole
discretion, elect not to pay such increase and may terminate the contract upon sixty (60) days’
written notice given after such an adjustment(s) is requested by Contractor. However, in lieu of
termination, Contractor may elect to forgo the Base Price adjustment of coal to cover the increased
portion of the cost above the aforementioned limit, in which case the contract shall remain in full
force and effect.

          (2) In the event of enactment of or amendment to a federal, state, or county law, statute,
rule, or regulation after June 1, 2006, (or in the case of establishment of a new Base Price under
Subsection d., below, after the effective date of such new Base Price), that directly affects and
changes

 - 22 - 

 

the cost of the mining or sale of coal delivered hereunder and is not assessed on a per ton basis,
or changes a current assessment of a tax, fee, or other similar charge that is not assessed on a
per ton basis and directly affects and changes the cost of the mining or sale of coal delivered
hereunder (also collectively a “Law Change”), Contractor shall notify Customer of such Law Change
and supply from its records such reasonable information to Customer showing the effect, if any, of
the Law Change upon the cost per ton of mining or sale of coal under this contract. Among other
things not included in a Law Change under Subsection 10.b (1) or 10.b(2) , a Law Change does not
include: (i) a change in interpretation of an existing, new, or amended law, statute, rule or
regulation or a requirement imposed by an inspector that is not the direct result of a Law Change,
(ii) any increases in Contractor’s general or administrative overhead costs, (iii) any increase in
property tax rate or property tax assessments; and (iv) any increase in the rate or assessment of
any corporate, income, franchise, business, employment, advalorem (on real and personal property),
royalties, or license taxes applicable to Contractor.

          Customer shall have the right to **** Contractor’s requested **** under this Subsection
10.b(2) within thirty (30) days of the date of Customer’s receipt of such notice of ****. If
Customer accepts Contractor’s requested ****, the price of all tons affected by such Law Change
shall be adjusted accordingly subject to Subsection 10.c.. If Customer **** Contractor’s requested
**** under Subsection 10.b.(2), Contractor may **** this Contract without further **** to either
party hereunder or at law by giving Customer one hundred twenty (120) days’ prior written advance
notice of such ****. However, in lieu of ****, Contractor may elect to continue to ship tons at
the applicable Base Price of coal, in which case the contract shall remain in full force and
effect.

          (3) If a Law Change increases Contractor’s cost of mining coal provided to Customer, a
contract price increase may, subject to Subsection 10.c., be requested of Customer under Subsection
10.b(1) or Subsection 10.b(2) for such Law Change effective retroactive to the date of the change
in Contractor’s cost of providing coal to Customer that is directly attributable to such Law
Change. If a Law Change decreases Contractor’s Cost of mining coal to be provided to Customer, a
price decrease shall be made by Customer for such Law Change effective to the date such Law Change
could be utilized to reduce Contractor’s costs whether or not Contractor actually reduces such
costs on such date.

 - 23 - 

 

          c. The increase or decrease under each subsection shall be calculated separately to the
nearest one-tenth (1/10) cent per ton. Any changes (including a recalculation of previously
granted tentative price adjustment) considered applicable by Contractor under Subsection 10.b(1) or
Subsection 10.b(2) shall be reported to Customer by Contractor with appropriate data necessary to
verify the change. Contractor must furnish such supporting evidence as may be reasonably requested
by Customer. A request for a price adjustment considered applicable to Contractor must be
submitted to Customer with appropriate documentation within one hundred eighty (180) days of the
date Contractor first incurs such cost change, and failure to do so shall constitute a waiver of
Contractor’s right to any retroactive upward adjustment on all coal delivered prior to the
submission of a request for price adjustment with appropriate documentation.

     Contractor agrees that, in the event Customer reimburses Contractor under this Section 10 for
a cost incurred by Contractor and it is later determined that Contractor is entitled to recover
such cost from a third party, at Customer’s request Contractor shall use reasonable efforts to
recover such cost and upon such recovery shall reimburse Customer for amounts previously paid by
Customer based on said cost. Reasonable costs incurred by Contractor in pursuing such recovery at
Customer’s request shall be reimbursed by Customer; provided that where Contractor and/or other
purchasers from Contractor also receive a benefit from pursuing such recovery, the cost thereof
shall be equitably shared.

          d. In the event Customer’s **** cost for shipment of coal delivered hereunder increases during
any one-year period at a rate greater than **** percent (****%) of the **** cost in effect on June
1, 2006, Customer may **** the Contractor’s right to proceed under this contract without further
**** to either party hereunder or at law by giving Contractor sixty (60) days’ advance written
notice of such **** any time within one year after Customer begins incurring such cost ****.
Notwithstanding the previous sentence, Customer cannot give such sixty (60) days’ advance written
notice of such **** prior to January 1, ****. However, in lieu of ****, Contractor may elect to
reduce the Base Price of coal to cover the increased portion of the **** cost above the
aforementioned limit, in which case the contract shall remain in full force and effect.
Contractor’s election must be set forth in writing within thirty (30) days of Customer’s notice of
****. Such election by Contractor shall be irrevocable and binding for that **** and,

 - 24 - 

 

shall be effective as of the date of Customer’s written notification of the cost ****.
Customer may invoke the provisions of this Subsection d. each and every time its costs exceed the
limit set forth above.

          e. Contractor shall keep accurate records and books of accounts in machine readable form
supporting the cost increases claimed under this Section 10. Customer, or its agents, shall have
the right to audit without restrictions and at no additional cost to Customer, at any time during
normal working hours, all costs incurred by Contractor and billed to Customer under this Section
10 and may examine Contractor’s records specifically relating thereto. Any payments to Contractor
which are not in accordance with Contract terms or are not supported by valid evidence shall be
refunded to Customer or may be deducted by Customer from any payments otherwise due to Contractor.
If Customer makes an overpayment to Contractor as a result of Contractor overbillings or charges
not in accordance with Contract terms, Contractor shall be liable to Customer for interest on the
amount of such overpayment, to be computed (1) for the period beginning on the date the overpayment
was made to Contractor and ending on the date Contractor repays the amount of such overpayment to
Customer or, in the event Customer deducts such overpayment from any amounts otherwise due
Contractor, ending on the date Customer deducts such overpayment, and (2) at ****. Contractor
shall preserve and make available its records, both manual and those which are in machine readable
form, for a period of 3 years from the date of final payment by Customer.

     11. Remedies:

          a. This Subsection 11.a. does not apply to a situation where another Contract provision
provides a different procedure, such as Subsection 9.d. If either party in good faith believes
that the other party has failed to comply with any term or condition of this Contract, such
nonbreaching party shall give the breaching party oral notice, to be followed by written
confirmation, of any such violation. Such violation to be treated as follows:

     (i) If such breaching party fails to correct a curable contract violation within seven (7)
days of first notice, the nonbreaching party shall have the right to suspend further deliveries
until the breaching party provides adequate assurance(s) to the nonbreaching party that the
breaching party will comply with all provisions of this Contract, such assurance to be given in
writing within seven (7) days after such

 - 25 - 

 

suspension. If the breaching party fails to provide such adequate assurance(s) within the
time specified or timely provides such reasonable assurance(s) but the breaching party does not
correct the curable contract violation(s) within seven (7) days after giving such assurances, the
nonbreaching party shall have the right, but not the obligation, to terminate this Contract.

     (ii) In the case of a Contract violation by the breaching party that is not curable
(including, but not limited to, violations of Section 5, Source, of this Contract or of Section 6.
Officials Not to Benefit, of the General Long-Term Contract Conditions), upon providing notice as
described above, the nonbreaching party shall have the immediate right, but not the obligation, to
terminate or suspend for up to thirty (30) days, further deliveries under this Contract. If the
nonbreaching party suspends further deliveries, then, upon expiration of said thirty-day period,
the nonbreaching party shall either direct the nonbreaching party to continue performance of this
Contract or terminate this Contract.

          b. If this Contract is terminated or suspended by Customer, or if damages apply pursuant to
termination or suspension, except as excused by Force Majeure or as a result of Customer’s failure
to perform, if Contractor fails for any reason to deliver all or part of the quantity of coal to be
delivered hereunder, fails to meet the agreed upon delivery schedule (Section 3), or fails to
deliver coal meeting the Quality Specifications in Section 9 above and Customer rejects the coal or
suspends or terminates Contractor’s performance hereunder and the coal is not made up as mutually
agreed by Customer and Contractor, Contractor shall pay Customer for each ton of such deficiency
(the “Deficiency”) an amount equal to the positive difference, if any, obtained by subtracting the
Base Price for the Deficiency from the Replacement Price. If such difference is negative, neither
Party shall have any obligation to make any deficiency payment to the other. “Replacement Price”
means the price at which Customer, acting in a commercially reasonable manner, purchases substitute
coal for the Deficiency including liability incurred by Customer with respect to the transportation
or other handling of the replacement coal or, absent such a purchase, the market price for such
quantity of coal F.O.B. the Delivery Point, as determined by Customer in a commercially reasonable
manner. It is expressly agreed that Customer shall not be required to enter into a replacement
transaction in order to determine Replacement Price. Damages will be billed within ten (10) days
of accrual and paid fifteen (15) days after

 - 26 - 

 

receipt of billing. Customer may deduct any such excess costs from any amount otherwise due
Contractor under this Contract or otherwise.

          c. If this Agreement is terminated or suspended by Contractor, except as Customer is excused
by Force Majeure or other provisions of this contract or as a result of Contractor’s failure to
perform, if Customer fails to accept all or any part of the quantity of coal to be delivered
hereunder for any reason, or if Customer fails to meet the agreed upon delivery schedule (Section
3) and the coal is not made up as mutually agreed by Customer and Contractor, Customer shall pay
Contractor for each ton of the Deficiency an amount equal to the positive difference, if any,
obtained by subtracting the Sales Price from the Base Price. If such difference is negative,
neither Party shall have any obligation to make any deficiency payment to the other. “Sales
Price” means the price at which Contractor, acting in a commercially reasonable manner, resells (if
at all) the Deficiency or, absent such a sale, the market price for such quantity of coal F.O.B.
the Delivery Point, as determined by Contractor in a commercially reasonable manner. It is
expressly agreed that Contractor shall not be required to enter into a replacement transaction in
order to determine the Sales Price. Damages will be billed within ten (10) days of accrual and
paid fifteen (15) days after receipt of billing.

          d. Each party hereby stipulates that the payment obligations set forth in this section are
reasonable in light of the anticipated harm and the difficulty of estimation or calculation of
actual damages.

          e. Neither Contractor nor Customer shall be liable to the other for consequential, incidental,
punitive, special, exemplary or indirect damages, lost profits, or business interruption damages,
whether by statute, in tort or in contract, under any indemnity provision or otherwise. Neither
party shall be liable to the other party for losses or damages which result from the death of or
bodily injury to such other party’s employees, contractors or agents or damage to such other
party’s property due to the performance or non-performance of this Agreement, except, in each case,
to the extent such claims arising from the negligence or misconduct of such party.

          f. If either Customer or Contractor suspends or terminates the other party’s deliveries
hereunder or under any other provision of this Contract and such suspension or termination is
finally adjudicated, to have been improper, then the nonbreaching party’s sole remedy for such
improper

 - 27 - 

 

termination or suspension shall be to require rescheduling of all coal not delivered due to
such termination or suspension, such coal to be rescheduled for delivery on dates acceptable to
both parties, but in any event not later than contract expiration. The price to be paid for such
rescheduled coal shall be that in effect at the time of delivery.

     12. Notices:

          Unless otherwise provided for in the Agreement, any contractual notice required to be given to
either party shall be deemed duly given by registered, certified, or first-class mail, telecopy,
telegram or electronic mail (email) to the intended party at the following address or at such
changed address as may from time to time be designated in a notice similarly delivered or mailed.
Except as expressly provided herein, any notice shall be deemed to have been given when sent.
Communications by telecopy, telegram or email shall be confirmed within 72 hours, excluding
holidays, by depositing a copy of the same in the post office for transmission by registered,
certified, or first-class mail in an envelope properly addressed as follows:

In the case of Contractor to:

Vice President of Sales and Marketing

COALSALES, LLC

701 Market St., Ninth Floor

St. Louis, MO 63101

In the case of Customer to:

Contract Administrator

****

          Either party may, by written notice to the other, change the representative or the address to
which such notices and communications are to be sent.

     13. Shipping Notices:

          a. For all rail-delivered coal Contractor shall forward by fax to the Destination Plant
Manager(s) and Contract Administrator and Terminal Supervisor, a daily notification, as to coal
shipped. This shipping notice must include the contract number, traffic control number, railcar
numbers, origin, name of mine, size of coal, shipping date, and approximate date of arrival and
such other information as Customer from time to time may reasonably require. In addition,
Contractor must complete the bill of lading (provided by Customer), and forward this document to
the railroad and plant for proper identification. Customer shall have the right to require
Contractor to transmit all of the above-referenced

 - 28 - 

 

information via electronic data transfer direct to Customer’s computer system. Contractor is
responsible for ensuring that it’s computer system is compatible with Customer’s computer system.

          b. For all barge-delivered coal Contractor shall forward by fax to the individual named in the
consigning instructions, Destination Plant Manager(s), and Terminal Supervisor, if applicable, a
daily notification, as to coal shipped. This shipping notice must include the contract number,
barge number, origin, traffic control number, name of mine, size of coal, shipping date, and
approximate date of arrival . Customer shall have the right to require Contractor to transmit all
of the above-referenced information via electronic data transfer direct to Customer’s computer
system. Contractor is responsible for ensuring that it’s computer system is compatible with
Customer’s computer system.

          c. Contractor must take whatever stops are necessary to ensure that shipping notices are
received by the Contract Administrator and the plant or terminal prior to delivery of the coal.
The plant or terminal will not unload coal until a correct shipping notice is received and
Contractor will be responsible to a carrier or Customer for any demurrage charges resulting from
delays due to late or improper notification.

     14. Transportation:

          a. Customer reserves the right to specify reasonable limitations on the type and size of
transportation equipment, the method of transportation (including railroad carrier lots, barge load
lots where lots are necessary to provide the lowest transportation rate possible), and the exact
routing to be used whether or not transportation is provided by Customer. Customer may reject any
shipment made in disregard of such specifications. Title to the coal and risk of loss and damage
shall pass to Customer at the Delivery Point unless such coal fails to meet, on the basis of visual
inspection or laboratory analysis, any of the Rejection/Suspension Specifications set forth in
Section 9, in which case title to such coal and risk of loss or damage shall, at all times, remain
with Contractor.

          b. For all coal to be delivered hereunder, it shall be Contractor’s responsibility to load the
coal and furnish loading devices which shall be suitable and fit for the purpose contemplated in
this Contract. Contractor shall be governed by carrier’s instructions regarding the height and
distribution of the load, weight of cargo, and other instructions which carrier deems necessary for
safe transportation.

 - 29 - 

 

Contractor shall allow carrier’s inspection of loaded equipment to assure compliance with carrier’s
loading instructions.

          c. For all coal shipped, it shall be Contractor’s responsibility to visually inspect the
transportation equipment prior to each loading and ascertain that the equipment is empty and
suitable for loading. Any equipment found mechanically unsound for loading or contaminated with
material shall not be loaded. Contractor shall be responsible for all costs incurred by Customer,
including the cost of any coal lost in transit, resulting from Contractor’s failure to comply with
these requirements.

          d. For all coal purchased for delivery by rail, whether f.o.b. railcar or f.o.b. destination
fossil plant, Contractor shall be responsible for loading each car to the appropriate capacity as
required by the rail carrier. In addition, each trainload shipment tendered under this contract
shall be loaded to the minimum trainload weight as required by the rail carrier. Contractor’s
account will be charged with any charges assessed to Customer because of Contractor’s failure to
observe any minimum weight loading requirements. The gross weight of each car shall not exceed the
maximum allowed by the carrier. If cars are found to be loaded in excess of such maximum, it shall
be Contractor’s responsibility to correct the load at Contractor’s expense, including but not
limited to, Contractor’s payment to the carrier of a per car switching charge, as well as any
demurrage charges which may accrue while the car or cards await correction in load. Contractor
agrees to comply with the requirements of Customer’s coal transportation contract(s) with respect
to loading.

          e. Contractor shall be responsible for any demurrage that accrues at any loading point as a
result of Contractor or its subcontractors not being prepared to load the coal as scheduled. The
carrier shall invoice Contractor and Contractor shall pay said carrier for all origin demurrage
charges which accrue at the loading point(s).

          f. The explicit obligation of this Contract is that it will be performed in accordance with
all applicable laws. Therefore, transportation of coal by Contractor to the Destination Plant, if
applicable, shall comply with applicable highway laws and regulations governing the weight of
vehicles, vehicle safety, and the operation of vehicles on public roads. If any Contractor fails
to comply with such laws or regulations, Customer shall have the same rights provided under Section
9, Quality and Specifications, for failure to meet the requirements thereof, including but
not limited to the right to reject

 - 30 - 

 

coal delivered in overweight trucks. To ensure compliance with this provision and to help
protect the road and highways, Customer may require that Contractor furnish a copy of the
“certified” truck weight ticket for all truck delivered coal. Regardless of the actual weight of
any truck coal received, the maximum gross weight that can be recorded for a single truck will be
limited to the applicable maximum weight enforced by law. Any weight exceeding that maximum weight
may be deducted from the total weight of coal used for payment purposes.

          g. Customer reserves the right to ship to any plant or storage blending facility any coal
purchased f.o.b. any shipping point, Customer may from time to time direct deliveries to any other
plant or location. For coal purchased f.o.b. any plant, or storage blending facility, or shipping
point, and if such deliveries cause an increase or decrease in the transportation cost borne by
Contractor in performing this contract, an adjustment shall be made in the contract price to
reflect the changes in such transportation cost.

          h. When shipping F.O.B. barge, Contractor is required to leave the ends of barges open to
allow the removal of accumulate water and unloading of coal.

          i. The Base Prices per ton under this Contract are applicable for Quality A coal loaded in
barges at Uniontown, Kentucky ( Ohio River Mile 842.9) and Quality B coal loaded in barges at ****,
Illinois ( Ohio River Mile ****). In addition to these Base Price costs, Customer incurs a barging
cost to deliver this coal. In the event Contractor ships coal from any source where the coal is
not loaded in the barge at the designated Delivery Point above and Customer’s barging costs are
different to the Destination Plant to which Customer intends to ship the coal, the price of that
coal shall be adjusted, up or down, so that the delivered cost to Customer’s Destination Plant is
the same cents-per-million Btu cost as if it were loaded at the designated Delivery Point. This
subsection 14.i. is not intended to permit shipment of coal from any source other than those
identified elsewhere in this Contract.

     15. Payments, Invoices:

          Payments under this contract are subject to the provisions of the ****). Payments as are
provided for in this Contract or by law will be made by Electronic Fund Transfer (EFT). EFT’s will
be made not more than **** calendar days, after the later of: (i) receipt of a proper invoice(s)
by Customer at the Accounts Payable Department, ****; or (2) receipt and unloading of the coal at
Customer’s fossil

 - 31 - 

 

plants. In preparing invoices, Contractor shall multiply the number of tons delivered by the
Base Price applicable at the f.o.b. Delivery Point, plus or minus any adjustments that have been
made effective under Contract provisions. For purposes of this provision only, “proper
invoice” shall mean a numbered and dated invoice containing the complete name of Contractor,
agent’s name (if any), contract group number, contract number, total amount due, correct weights
(as defined below), traffic control number, shipping date, mine at which the coal was produced,
together with any documentation required to be submitted therewith by any other provision of this
Contract.

     16. Weights:

          a. Unless the parties determine circumstances require determination by other methods, all coal
shipped shall be weighed by **** at ****, on belt scales            or truck scales which are
maintained and periodically calibrated for accuracy as required herein. **** shall notify ****
immediately upon the occurrence of inaccurate weighing or absence of actual weighing. **** shall
confirm such notification in writing to **** within seven (7) working days of the date of each
occurrence. Such confirmation shall identify each affected coal shipment. ****’s account shall be
adjusted for any coal inaccurately weighed or not weighed, such adjustment to be made at whatever
time such occurrence(s) becomes known to ****.

          b. **** shall perform scale certification tests on its scales at a minimum annually, however,
in addition to the annual certification test, **** shall perform load tests on its’ scales
quarterly or more often than quarterly when requested by ****. **** shall be responsible for the
cost of additional requested tests unless the results thereof show that the scale failed to conform
to certification standards, in which event **** shall be responsible for such costs. The aggregate
weights determined during any payment period shall be acceptable as the quantity of coal sold and
purchased during such period for which invoices are to be rendered and payments to be made.

     **** shall have the right to have a representative present at any and all time during **** to
observe determination of weights. If **** should at any time question the accuracy of the weights
thus determined, **** shall so advise **** and **** shall permit ****’s representatives to test
****’s weighing devices or methods. If such tests show the weighing devices to be in error, or if
the weighing devices otherwise rare determined to be in error, the weighing devices shall be
adjusted to an accurate condition. In the event

 - 32 - 

 

Customer and Contractor are unable to agree upon such tests and adjustments, or the devices or
methods thereof, the weighing devices and methods shall be tested and adjusted to a condition of
accuracy by a qualified third party, mutually chosen by Customer and Contractor, and the cost of
the testing and adjusting by such third party shall be shared equally by Customer and Contractor.

     If ****’s weighing devices or methods are determined to be in error over ****%, an appropriate
adjustment shall be made to the affected weights and related invoices and payments. Such
adjustments shall be made retroactively to a date midway between the date on which the weighing
devices were last tested and calibrated and the date on which the inaccuracy in weighing methods or
devices was first questioned and prospectively until the date on which the weighing methods and
devices are corrected.

          c. All scales used by **** to determine the governing weight of coal shall be maintained and
operated in accordance with the National Institute of Stands and Technology Handbook 44.

     17. Contract Administrator/Contracting Officer:

          The Manager of Coal Acquisition and Supply has designated the Contract Administrator who
administers this Contract for Customer as his/her duly authorized representative to act on behalf
of Customer, for all purposes in the administration of this Contract, such designation to continue
until revoked or modified by the Manager of Coal Acquisition and Supply . The Contract
Administrator shall serve as Customer’s “Contracting Officer” with respect to matters arising under
terms of this contract that provide for action by the Contracting Officer.

     18. Disputes: 

          The parties agree that any lawsuit between them that asserts a claim or claims arising out of
or related to this contract (whether sounding in contract, tort, or otherwise) shall be filed and
litigated to conclusion only in the United States District Court for ****, and each Party hereby
consents to the jurisdiction and venue of that court for all such lawsuits. The Parties further
agree that in any such litigation (1) each will stipulate to have a United States Magistrate Judge
conduct any and all proceedings in the litigation in accordance with 28 U.S.C. S 636 (c) and
FED.R.Civ.P.73 and (2) each will waive any right it may have to a trial by jury.

 - 33 - 

 

     19. Clean Air Act and Other Environmental Requirements:

          If any new environmental law is enacted or new regulation is promulgated which becomes
effective during the term of this Agreement, Contractor shall first make all reasonable efforts to
change its operations or equipment in order to permit Customer to continue utilizing the maximum
amount of coal meeting the existing coal quality specifications under the Agreement. If after all
such reasonable efforts have been made and Customer cannot continue to utilize all of the coal to
be delivered hereunder, Customer may reduce coal shipments hereunder on a pro-rata basis with
any/all of Customer contracts utilizing similar coal.

          If as a result, Contractor’s contract tonnage is reduced hereunder, then Customer shall
promptly notify Contractor, in writing, of the new required coal quality specifications for any
replacement tonnage. Contractor shall consider and evaluate what steps can be reasonably taken to
meet the new coal quality specifications. Customer and Contractor agree to negotiate in good
faith, with neither party under any obligation, in an attempt to reach a new agreement or an
amendment of this contract that will provide for delivery of coal that will be of a quality
consistent with Customer’s requirements resulting from such environmental changes in law. If the
parties fail to reach a new agreement or an amendment of this contract, Contractor shall have the
right to match the product and price selected by the Customer to replace the remaining coal
requirements for the term of the agreement on an equivalent price per ton **** cents per ton.

     20. Unilateral Termination Right:

          In addition to any other termination rights provided in this contract or at law, both parties
expressly reserve the right, upon one hundred and fifty (150) days’ prior written notice to other
party, to unilaterally terminate this Contract; provided, however, that the terminating party shall
pay to other party an amount equal to **** percent of the Base Price, multiplied by the remaining
number of tons scheduled for delivery from the effective termination date herein through the
earliest applicable date for termination pursuant to the reopening provision under Section 1,
Contract Term; or if there is no renegotiation provision capable of effectuation after the date of
termination under this Section 20, then through the date of expiration of this Contract; provided
further, that the remaining number of tons scheduled for delivery shall be based on the remaining
monthly tonnage required to be delivered hereunder Said

 - 34 - 

 

payment by terminating party to non-terminating party shall constitute non-terminating party’s sole
remedy against terminating party for any loss, cost, or damage incurred by non-terminating party as
a result of terminating party’s termination under this section. Terminating party shall have no
further obligation or liability under the contract or at law except with respect to coal delivered
prior to said termination date as otherwise provided in Section 8, Adjustment for Quality,
Section 15, Payment, Invoices, and Section 16, Weights.

     21. Permitted Assignment:

          Except as expressly permitted by the terms of this Section 21, neither party shall have the
right or the power to assign this Contract or any of its rights under this Contract in whole or in
part without the prior written consent of the other party. Either party may assign this Contract
without written consent to its parent company, a company wholly owned by or controlled by or under
the common control with such party, to an entity acquiring all or substantially all of the assets
of that party, or for purposes of securing indebtedness, or in the case of Customer, the sale of
all or a substantial portion of its coal-fired generation assets, but no such assignment shall
release the assigning party from the obligation to perform this Contract, unless the other party
consents thereto in writing. Any such assignee shall assume and agree to be bound by the terms and
conditions of this Agreement. Any consent to an assignment under this provision shall not be
construed as a waiver of this provision with regard to any subsequent assignment.

     22. WARRANTIES:

          EXCEPT AS EXPRESSLY STATED IN THIS CONTRACT, CONTRACTOR MAKES NO WARRANTIES, WHETHER EXPRESS
OR IMPLIED, WRITTEN OR ORAL, REGARDING MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE.

 - 35 - 

 

     23. Contract Components:

          This Term Coal Contract; Exhibit I and II, General Long-Term Contract Conditions; Limitation
on Use of Outside Influence (ID-67); Coal Producer’s Statement(s); and the Subcontracting Plan (on
file with Customer), and attached maps constitute parts of this Contract.

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

	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 	 	Contractor:	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	(Signature)	 	 
	 
	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Date	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	****	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	(Signature)	 	 
	 
	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Date:	 	 	 	 
	 

	 	 	 	 	 	 

 - 36 - 

 

EXHIBIT I

Approved sources as identified in Section 5

	 	 	 	 	 	 	 	 	 
	Mine/Reserve	 	County/State	 	Owner/Operator	 	MSHA/No.	 	Permit No.
	Highland

	 	Henderson/KY
	 	Highland Mining Company, LLC
	 	*
	 	*
	****

	 	****
	 	****
	 	*
	 	*

 

			
	*	 	To be supplied by Contractor.

 - 37 - 

 

EXHIBIT II

EXAMPLE CALCULATION OF PRICE ADJUSTMENT

FOR QUALITY VARIATIONS

ON COAL

	 	 	 	 	 	 	 
	Assume:	 	Typical Analysis	 	 	Qtrly. Wtd. Avg. Analysis
	 
	 	 	 	 	 	 
	Btu/lb (as-received)
	 	 	 	 	 	 
	Ash (as received)
	 	 	 	 	 	****
	Total Moisture
	 	 	 	 	 	 
	SO2 in lbs./mmBtu at 97.5%
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Price equals $****
	 	 	 	 	 	 

Ash Adjustment Increase/Decrease is $**** per percentage point

Moisture Adjustment Increase/Decrease is $**** per percentage point

Pounds of SO2 per mmBtu Adjustment Increase/Decrease is $**** for each tenth of a

pound.

Btu example for Section 8.b.

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

	 	 	 	 	 
	Btu Adjustment = (****-****) X $****
	 	 	 	 
	****
	 	 	 	 

Btu Adjustment = $**** per ton

Ash example for Section 8.c.

Ash Adjustment = (Typical Analysis – Quarterly Average Value) X Adjustment

Ash Adjustment = (****–****) X $****

Ash Adjustment = $**** per ton

Moisture example for Section 8.d.

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

Moisture Adjustment = (****–****) X $****

Moisture Adjustment = $**** per ton

SO2
example for Section 8.e.

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

SO2 Adjustment = (((****–****) X ****) x $****)

SO2 Adjustment = $**** per ton

 - 38 - 

 

GENERAL LONG-TERM CONTRACT CONDITIONS

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	1.	 	Verification of Date, Inspection of Records and Mine Sources
	 	 	40	 
	 
	2.	 	Coal Mining Reclamation and Conservation Requirements
	 	 	40	 
	 
	3.	 	Relationship of Parties – Producer’s Statement
	 	 	42	 
	 
	4.	 	Nonassignability; Subcontracts; Designation and Termination of Agent
	 	 	42	 
	 
	5.	 	Waivers
	 	 	43	 
	 
	6.	 	Officials Not to Benefit
	 	 	43	 
	 
	7.	 	Contingent Fees
	 	 	43	 
	 
	8.	 	Convict Labor
	 	 	43	 
	 
	9.	 	Walsh-Healey Act
	 	 	43	 
	 
	10.	 	Discrimination on the Basis of Age
	 	 	43	 
	 
	11.	 	Small Business Policy
	 	 	44	 
	 
	12.	 	Liquidated Damages for Subcontracting Plans
	 	 	44	 
	 
	13.	 	Utilization of Woman-Owned Business Concerns
	 	 	45	 
	 
	14.	 	Affirmative Action and Equal Opportunity
	 	 	45	 
	 
	15.	 	Safety and Health
	 	 	45	 
	 
	16.	 	Anti-Kickback Procedures
	 	 	45	 
	 
	17.	 	Drug-Free Workplace
	 	 	46	 
	 
	18.	 	Environmentally Acceptable Facilities Clean Air and Water
	 	 	46	 

 - 39 - 

 

GENERAL LONG-TERM CONTRACT CONDITIONS

     1. Verification of Data, Inspection of Records and Mince Sources: Customer, its employees,
agents, or representatives, shall have the right, after prior notice and at a reasonable time to
inspect Contractor’s or, of applicable, its producer’s records and mines and related facilities to
verify the accuracy of the data supplied by Contractor to support its request for price adjustments
or to establish Contractor’s actual cost change under section 10, Contract Price
Adjustments, in the Base Contract and for purposes of determining Contractor’s compliance with
the provisions of this contract. Information obtained by Customer, its employees, agents, or
representatives, in examining Contractor’s or its producer’s records or inspecting Contractor’s or
its producer’s mines shall not be disclosed to third parties without the Contractor’s consent,
unless disclosure is ordered by a court of competent jurisdiction, is made for purposed of any
litigation or proceeding (judicial, administrative, or investigatory) involving this contract, or
is otherwise required by law.

     2. Coal Mining Reclamation and Conservation Requirements: The following Customer reclamation
and conservation requirements are applicable to all spot contracts for the purchase of coal:

          a. Customer Policy on Areas from Which Coal will Be Procured: Coal Mining – Land and Water
Resource Protection. Customer accepts no coal mined from locations in or near areas officially
designated by state or federal agencies, or identified by Customer, as wild or scenic river areas,
wild, wilderness, natural scenic, public recreation areas or under study pursuant to legislative
authority for any such official designation, except where special circumstances exist. No coal
will be accepted from locations in or near areas designated under legislative authority as
potential sites for the above uses, unless, after coordination with the appropriate agencies,
Customer determines that the coal can be mined without substantially adversely affecting the area’s
potential for such use. In such cases and also in cases involving offerings of coal from mines in
or near other visually important areas such as major highways or population centers, special
provisions designed to protect aesthetic values may be incorporated in the purchase contracts. No
coal will be accepted from areas in which, in Customer’s judgment, mining would adversely affect a
public water supply and such adverse effect cannot be avoided by proper reclamation.

 - 40 - 

 

          b. Contractor agrees that all sources of coal delivered shall be in substantial compliance
with all state and federal reclamation laws, including the Surface Mining Control and Reclamation
Act of 1977 and all regulations issued thereunder. Violations of any such law or regulation shall
constitute a breach of contract, entitling Customer to exercise its remedies under this contract or
as provided by law. Customer will not accept coal mined from any source, stockpile, or otherwise
during any period when the source is subject to a cessation order issued by the Office of Surface
Mining and Reclamation (OSM) or any state reclamation enforcement agency for violation of
reclamation requirements. Customer also reserves the right to either terminate this contract or
suspend deliveries under the contract from any source whatsoever when any authorized source listed
in the contract, or as it may hereafter be amended, is subject to cessation order. Coal which is
not delivered due to such cessation order or suspension shall not be considered excusable, and
Customer may purchase replacement coal for the Contractor’s account. If, upon appeal the
Contractor under OSM’s or the appropriate state’s regulations, a cessation order is held to have
been improperly issued, the Contractor shall not be liable for the cost of replacement coal, and
any coal not delivered due to the order or suspension may, at Contractor’s option, be canceled or
rescheduled upon delivery terms reasonably acceptable to Customer. This constitutes Contractor’s
exclusive remedy against Customer in the event of a wrongful issuance of a cessation order by OSM
or a state agency.

          c. Customer reserves the right to require and Contractor agrees to perform over and above the
requirements specified by law any special or additional reclamation work which Customer deems
necessary to ensure that the mining operation complies with Customer’s overall policy for
protection and enhancement of the environment. Customer agrees to compensate Contractor for the
performance of such work in an amount to be mutually agreed upon before the commencement of work.
No work performed by Contractor shall be deemed special or additional reclamation work for the
purposes hereof unless it is so designated in writing the Contract Administrator.

          d. Customer, its agents, and assigns shall have the right to enter upon any of the land
affected by Contractor’s mining operation, at any time and without the necessity of giving notice,
for any purpose related to enforcing these reclamation and conservation requirement s or to observe
mining or reclamation completed or in progress.

 - 41 - 

 

          e. Customer will not accept coal from sources mined under the 16-2/3 percent exemption allowed
under P.L. 95-87, unless it can be documented that the source will be mined and reclaimed to the
performance standards established under P.L. 95-87, and furthermore, that the operation has the
concurrence of the coal mining and regulatory (primacy) authority established by this law in the
state from which the coal is to be mined.

     3. Relationship of Parties – Producer’s Statement:

          a. Regardless of whether the Contractor is the producer of the coal to be furnished or is the
sales agent of one or more producer, the Contractor binds and obligates itself for the full and
faithful performance of the contract in its entirety.

          b. If the Contractor is not the producer of the coal to be delivered hereunder, Contractor
represents that it has contracted directly with the producer(s) who has (have) executed the Coal
Producer’s Statement(s) for the delivery of the coal to Customer.

     4. Nonassignability; Subcontracts; Designation and Termination of Agent:

          a. Except as otherwise provided for in the contract, neither this contract nor any interest
herein or any payments hereunder shall be assigned without the written consent of Customer, which
consent Customer may withhold in its sole discretion. In the event Customer shall give such
consent, the same shall not be construed as a waiver of this provision with regard to any
subsequent assignment. Customer may assign its rights under this contract to any responsible
party.

          b. The Contractor shall, on request, file with Customer copies of all subcontracts and terms
of commitments with subcontractors, and Customer shall have the right to disapprove of any
subcontractor within five (5) days after receipt of such information. Peabody Coal Company, LLC,
Highland Mining Company, LLC and **** are hereby approved as subcontractors by Customer.

          c. No designation of any agent by the Contractor to submit invoices, receive payments, or take
any other action in connection with the performance or administration of this contract shall be
effective or recognized by Customer until the Contractor has given written notice of such
designation and Customer has give Contractor specific written notice of its approval thereof.

 - 42 - 

 

          d. If Contractor notifies Customer in writing of the termination of any agent that Contractor
may have therefore designated to administer this contract on its behalf, Customer may thereafter
rely on such notice of termination in all dealings wit Contractor or a successor agent.

     5. Waivers: No waiver of any breach of this contract shall be held to be a waiver of any
other breach. Unless a remedy is expressly designated as exclusive, all remedies afforded under
the contract shall be in addition to every other remedy provided herein or by law.

     6. Officials Not To Benefit: Not member of or delegate to Congress or Resident Commissioner,
or any officers, employee, special Government employee, or agent of Customer shall be admitted to
any share or part of this contract or to any benefit that may arise therefrom unless it be made
with a corporation for its general benefit; nor shall the Contractor offer or give, directly or
indirectly, to any officer, employee, special Government employee, or agent of Customer any gift,
gratuity, favor, entertainment loan, or any other thing of monetary value, except as provided in 5
C.F.R. part 2635. Breach of this provision shall constitute a material breach of this contract,
and Customer shall have the right to exercise all remedies provided in this contract or at law.

     7. Contingent Fees: The Contractor warrants that no person or selling agency has been
employed or retained to solicit or secure this contract upon an agreement or understanding for a
commission, percentage, brokerage, or contingent fee, excepting bona fide employees or bona fide
established commercial or selling agencies maintained by the Contractor for the purpose of securing
business. For breach or violation of this warranty, Customer shall have the right to terminate
this contract without liability or in its discretion to deduct from the contract price or
consideration the full amount of such commission, percentage, brokerage, or contingent fee.

     8. Convict Labor: Contractor shall not employ in the performance of this contract any person
undergoing sentence of imprisonment at hard labor.

     9. Walsh-Healey Act: All the representations and stipulations in 41 C.F.R., § 637(d) are
incorporated by reference.

     10. Discrimination on the Basis of Age: Contractor shall comply with Executive Order 11141.

 - 43 - 

 

     11. Small Business Policy: The requirements of 15 U.S.C. § 637(d) are incorporated by
reference.

     12. Liquidated Damages for Subcontracting Plans:

          a. Failure to make a good-faith effort to comply with the subcontracting plan, as used in this
clause, means a willful or intentional failure to perform in accordance with the requirement s of
the subcontracting plan approved under the section of the Request for Proposals titled SMALL
BUSINESS AND SMALL DISADVANTAGED BUSINESS SUBCONTRACTING PLAN (attached to this contract and made a
part hereof) or willful or intentional action to frustrate the plan.

          b. If, at contract completion, or in the case of a commercial products plan, at the close of
the fiscal year for which the plan is applicable, the Contractor has failed to meet its
subcontracting goals and the Contracting Officer decides in accordance with paragraph (c) of this
clause that the Contractor failed to make a good-faith effort to comply with its subcontracting
plan the Contractor shall pay Customer liquidate damages in an amount equal to the actual dollar
amount by which the Contractor failed to achieve each subcontract goal or, in the case of a
commercial products plan, that portion of the dollar amount allocable to government contracts by
which the Contractor failed to achieve each subcontract goal.

          c. Before the Contracting Officer makes a final decision that the Contractor has failed to
make such good-faith effort, the Contracting Officer shall give the Contractor written notice
specifying the failure and permitting the Contractor to demonstrate what good-faith efforts have
been made. Failure to respond to the notice may be taken as an admission that no valid explanation
exists. If, after consideration of all the pertinent data, the Contracting Officer finds that the
Contractor failed to make a good-faith effort to comply with the subcontracting plan, the
Contracting Officer shall issue a final decision to that effect and require that the Contractor pay
the government liquidated damages as provided in paragraph b. of this section.

          d. With respect to commercial products plans, i.e., company-wide or division-wide
subcontracting plans, the Contracting Officer of the agency that originally approved the plan will
exercise the functions of the Contracting Officer under this clause on behalf of all agencies that
warded contracts covered by that commercial products plan.

 - 44 - 

 

          e. The Contractor shall have the right of appeal, under the section in this contract titled
DISPUTES, from any final decision of the Contracting Officer.

          f. Liquidated damages shall be in addition to any other remedies that Customer may have.

     13. Utilization of Woman-Owned Business Concerns: It is the policy of the United States
Government that woman-owned businesses shall have the maximum practicable opportunity to
participate in the performance of contracts awards by and federal agency.

          The Contractor agrees to use its best efforts to carry out this policy in the award of
subcontracts to the fullest extent consistent with the efficient performance of this contract. As
used in this contract, a “woman-owned business” concern means a business that is at least 51% owned
by a woman or women who also control and operate it. “Control” in this context means exercising
the power to make policy decisions. “Operate” in this context means being actively involved in the
day-to-day management.

     14. Affirmative Action and Equal Opportunity: To the extent applicable, this contract
incorporates by reference the “Affirmative Action for Disabled Veterans and Veterans of the Vietnam
Era” clause 41 C.F.R. § 60-250.4; the “Affirmative Action for Handicapped Workers” clause 41 C.F.R.
§ 60-741.4; and the “Equal Opportunity” clause, 41 C.F.R. § 60-1.4. Contractor shall comply with
applicable regulatory requirements, including, information reports and affirmative action programs.

     15. Safety and Health: All sources supplying coal purchased under this contract shall be in
full compliance with the Federal Mine Safety and Health Act of 1977 and regulations issued
thereunder. Failure to comply shall constitute a breach of contract, permitting Customer to
exercise its remedies under this contract or as provided by law.

     16. Anti-Kickback Procedures: In its operations and business relationships, Contractor shall
have in place and follow reasonable procedures designed to prevent and detect possible violations
of the Anti-Kickback Act of 1986 (41 U.S.C. §§ 51-58), (Act). If Contractor believes a violation
of the Act may have occurred, it shall promptly give Customer’s Inspector General written notice.
Contractor shall cooperate fully with Customer or any other federal agency investigating a possible
violation of the act. Contractor agrees to incorporate the substance of this section, including
this sentence, in all subcontracts under this contract.

 - 45 - 

 

     17. Drug-Free Workplace: In submitting its offer, Contractor certifies it will comply with
Public Law No. 100-690, the Drug-Free Workplace Act of 1988.

     18. Environmentally Acceptable Facilities Clean Air and Water: Contractor hereby stipulates
and agrees as follows:

          (1) That Contractor included in its offer a statement listing any facility or facilities to
be utilized in performance of this contract or any subcontract enabling the performance of this
contract which have given rise to a conviction under Section 113 (c) of the Clean Air Act or
Section 309 (c) of the Federal Water Pollution Control Act. If no such list is included in
accordance with the foregoing, then submission of an offer shall constitute certification by the
offeror that no facility or facilities to be utilized in performance of this contract or any
subcontract enabling the performance of this contract have given rise to such conviction.

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

          (3) That Contractor shall notify the awarding official if any facility to be utilized for
this contract has given rise to a conviction under Section 113(c) of the Clean Air Act or Section
309 (c) of the Federal Water Pollution Control Act. Prompt notification shall be required prior to
contract award.

          (4) That Contractor will include or cause to be included the criteria and requirements in
subparagraphs (1) through (4) of this provision in all subcontracts of $100,000 or more and all
subcontracts for indefinite quantities which may be $100,000 or more in any year, and Contractor
will take such action as Customer may direct as a means of enforcing such provision. Contractor
shall not award a subcontract without the prior written approval of Customer to any subcontractor
whose performance would involve the use of any facility or facilities which has given rise to a
conviction under Section 113 (c) of the Clean Air Act or Section 309 (c) of the Federal Water
Pollution Control Act. Prompt notification shall be required prior to contract award.

 - 46 - 

 

LIMITATION ON USE OF OUTSIDE INFLUENCE

ID-67 – Lobbying. This solicitation and any resulting contract are subject to the
requirement of Public Law No. 101-121 (31 U.S.C. § 1352), which prohibits certain lobbying
activities and requires disclosure of certain others, and to Customer’s implementing regulations
published at 55 Fed. Reg. 6736 (18 C.F.R. 1315).

	A.	 	Prohibition, Certification, and Disclosures.

	 	(1)	 	Appropriated Funds. Section 319 of Public Law No. 101-121 provides
that none of the funds appropriated by any act of Congress may be expended by the
recipient of a federal contract, grant, loan, or cooperative agreement to pay any
person for influencing or attempting to influence an officer or employee of any agency,
a Member of Congress, an officer or employee of Congress, or an employee of a
cooperative agreement to pay any person for influencing or attempting to influence an
officer or employee of Congress, or an employee of a Member of Congress in connection
with: (a) the awarding of any federal contract; (b) the making of any federal grant;
(c) the making of any federal loan; (d) the entering into of any cooperative agreement;
or (e) the extension, continuation, renewal, amendment, or modification of any federal
contract, grant, loan, or cooperative agreement.
	 
	 	(2)	 	Certification. By signing the certification entitled “Certification
for Contracts, Grants, Loans, and Cooperative Agreements,” at the end of this section
(“Certification”), the offeror shall certify that it has not violated the foregoing
prohibition.
	 
	 	(3)	 	Other Than Appropriated Funds. Except as provided in subsection D,
below, if offeror has paid or will pay any funds other than federal appropriated funds
to any person for influencing or attempting to influence an officer or employee of any
agency, a Member of Congress, an officer or employee of Congress, or an employee of a
Member of Congress, in connection with this offer, the offeror shall complete and
submit to Customer Standard Form-LLL, “Disclosure of Lobbying Activities,” in
accordance with its instructions. (Copies of Standard Form-LLL may be obtained from
the Customer representative for this solicitation.) The requirements of this
subsection A(3) shall not apply to payments of reasonable compensation to regularly
employed officers or employees. The term “regularly employed,” with respect to an
officer or employee of a person requesting or receiving a contract, means an officer or
employee who is employed by such a person for at least 130 working days within one year
immediately preceding the date of the submission that initiates Customer’s
consideration of such person for receipt of such contract.

	B.	 	Updating. At the end of each calendar quarter in which there occurs any even that
materially affects the accuracy of the information contained in the Certification or, if
applicable, Standard Form-LLL, the offeror shall file with Customer an initial or new Standard
Form-LLL with such new information or modifications as are necessary to correct any
inaccuracies in the information originally declared and certified.

	C.	 	Subcontractors. In the even a contract is awarded to the offeror under this
solicitation, the successful offeror shall include or cause to be included the form of the
Certification in any subcontract exceeding $100,000 at any tier. The successful offeror shall
promptly file with Customer each Standard Form-LLL provided by a subcontractor.

	D.	 	Exceptions. The prohibition described in subsection A(1) above and the disclosure
requirements in subsection A(3) do not apply in the case of (1) a payment of reasonable
compensation made to an officer or employee of the offeror to the extent that the payment is
for agency and legislative liaison activities not directly related to a federal action
referred to in subsection A; or (2) any reasonable payment to a person, or any payment or
reasonable compensation to an officer or

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	 	 	employee of the Contractor, if the payment is for professional or technical services
rendered directly in the preparation or negotiation of this offer or any resulting contract.
	 
	E.	 	Definitions. Terms not defined herein shall have the meanings ascribed to them in
Public Law No. 101-121 and Customer’s implementing regulations.

	F.	 	Penalties. (1) Any person who makes an expenditure prohibited by Public Law No.
101-121 shall be subject to a civil penalty of not less that $10,000 and not more than $100,00
for each such expenditure; and (2) any person who fails to file or amend a certification
required under subsection A(2) above or a disclosure required to be filed or amended under
subsection A(3) above shall be subject to a civil penalty of not less that $10,000 and not
more that $100,000 and to such other remedies as may apply for each such failure.

Certification for Contract, Grants, Loans, and Cooperative Agreements

The undersigned certifies, to the best of his or her knowledge and belief, that:

	(1)	 	No federal appropriated funds have been paid or will be paid by or on behalf of the
undersigned to any person for influencing or attempting to influence an officer or employee of
any agency, a Member of Congress, an officer or employee of Congress, or an employee of a
Member of Congress in connection with the awarding of any federal contract, the making of any
federal grant, the making of any federal loan, the entering into of any cooperative agreement,
and the extension, continuation, renewal, amendment, or modification of any federal contract,
grant, loan, or cooperative agreement.

	(2)	 	If any funds or other than federal appropriated funds have been paid or will be paid to any
person for influencing or attempting to influence an officer or employee of any agency, a
Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress
in connection with this federal contract, grant, loan, or cooperative agreement, the
undersigned shall complete and submit Standard Form-LLL, “Disclosure of Lobbying Activities, “
in accordance with its instructions.

	(3)	 	The undersigned shall require that the language of this certification be included in the
award documents for all subawards at all tiers (including subcontracts, subgrants, and
contracts under grants, loans and cooperative agreement) and that all subrecipients shall
certify and disclose accordingly.

This certification is a material representation of fact upon which reliance was placed when this
transaction was made or entered into. Submission of this certification is a prerequisite for
making or entering into this transaction imposed by 31 U.S.C. 1352. Any person who fails to file
the required certification shall be subject to a civil penalty of not less than $10,000 and not
more than $100,000 for each failure.

	 	 	 	 	 	 	 
	 

	 	By:
	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 

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