Document:

Peabody

COALSALES Company

Contract

#LGE02011

Amendment

No.1

 

EXHIBIT

10.71

 

AMENDMENT

NO. 1 TO COAL SUPPLY AGREEMENT 

 

 

 

THIS AMENDMENT NO. 1 TO COAL SUPPLY AGREEMENT (“Amendment

No. 1”) is entered into effective as of June 1, 2002, by and between LOUISVILLE

GAS AND ELECTRIC COMPANY, a Kentucky corporation, 220 West Main Street,

Louisville, Kentucky 40202 (Buyer”), and PEABODY COALSALES COMPANY, a Delaware

corporation, 701 Market Street, Suite 830, St. Louis, Missouri 63101-1826

(“Seller”).  In consideration of the

agreements herein contained, the parties hereto agree as follows.

 

 

1.0                               AMENDMENTS

 

The Agreement heretofore

entered into by the parties, dated effective January 1, 2002 and identified by

the Contract Number set forth above, (hereinafter referred to as “Agreement”)

is hereby amended as follows:

 

 

2.0                               QUANTITY

 

2.1                                 Section

3.1 Base

Quantity, is deleted in its entirety and replaced with the

following:

 

 

	

  YEAR

  	

   

  	

  BASE

  QUANTITY (TONS)

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  2002

  	

   

  	

  600,000

  	

   

  
	

  2003

  	

   

  	

  750,000

  	

   

  
	

  2004

  	

   

  	

  600,000

  	

   

  

 

* Parties shall

begin discussions on and after June 1, 2002 to negotiate pricing for an

additional 250,000 tons of coal per year to be supplied during calendar year

2003.  If the parties do not agree upon

pricing for such additional tons by September 1, 2002, then Buyer shall not be

required to purchase such additional tons, and the tonnage to be delivered

during calendar year 2003 shall be the Base Quantity as defined above.  The parties shall also meet starting June 1,

2003 to negotiate pricing for an additional 250,000 tons of coal to be supplied

during calendar year 2004.  If the

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

2003, then Buyer shall not be required to purchase such additional tons and the

tonnage to be delivered during calendar year 2004 shall be the Base Quantity as

defined above.

 

1

 

 

3.0          PRICE

 

3.1           Section

8.1 Base

Price is deleted and replaced with the following:

 

 “The base price (“Base Price”) of the coal to

be sold hereunder will be firm and will be determined by the criteria set forth

in Section 5 in accordance with the following schedule:

 

	

  Year

  	

   

  	

  Base Price

  (F.O.B. Barge)

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  2002

  	

   

  	

  $

  	

  1.1224 per MMBtu

  	

   

  	

  $

  	

  25.59 per ton

  	

   

  	 

	

  2003

  	

   

  	

  $

  	

  1.1224 per MMBtu

  	

   

  	

  $

  	

  25.59 per ton *

  	

   

  	 

	

  2003

  	

   

  	

  $

  	

  1.1351 per MMBtu

  	

   

  	

  $

  	

  25.88 per ton **

  	

   

  	 

	

  2004

  	

   

  	

  $

  	

  1.1680 per MMBtu

  	

   

  	

  $

  	

  26.63 per ton

  	

   

  	 

													

 

* The Base Price for the

first 150,000 tons delivered in 2003

** The Base Price for the

remainder of the tons delivered in 2003

 

 

IN WITNESS WHEREOF,

the parties hereto have executed this Amendment No. 1 on the day and year below

written, but effective as of the day and year first set forth above.

 

	

   

  	

   

  	

   

  
	

  LOUISVILLE GAS AND ELECTRIC

  COMPANY

  	

   

  	

  PEABODY COALSALES COMPANY

  
	

   

  	

   

  	

   

  
	

  BY: 

  	

   

  	

   

  	

  BY:

  	

   

  
	

   

  	

  SVP - Energy Services

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  TITLE:

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  DATE: 

  	

   

  	

   

  	

  DATE: 

  	

   

  

 

2Peabody

COALSALES Company

Contract

#LGE 02011

Amendment

No. 2

 

EXHIBIT 10.72

 

 

AMENDMENT NO. 2 TO

COAL SUPPLY AGREEMENT 

 

 

THIS AMENDMENT NO. 2 TO COAL SUPPLY AGREEMENT (“Amendment No. 2”) is entered into

effective as of January 1, 2003, by and between LOUISVILLE GAS AND ELECTRIC

COMPANY, a Kentucky corporation, 220 West Main Street, Louisville, Kentucky

40202 (Buyer”), and PEABODY COALSALES COMPANY, a Delaware corporation, 701

Market Street, Suite 830, St. Louis, Missouri 63101-1826 (“Seller”).  In consideration of the agreements herein

contained, the parties hereto agree as follows.

 

 

1.0                               AMENDMENTS

 

The Agreement heretofore

entered into by the parties, dated effective January 1, 2002 and identified by

the Contract Number set forth above, as amended by Amendment No. 1 dated

effective June 1, 2002 is hereby further amended as follows the January 2, 2002

Agreement, as amended by Amendment No. 1 and Amendment No. 2, is hereafter

referred to as the “Agreement”:

 

 

2.0                               GENERAL

 

2.1           Section

1 General

is deleted in its entirety and is replaced with the following:

 

2.1           SECTION 1.  General

and Producer’s Certificates

 

1.1                                 General.  Seller shall

sell and deliver and Buyer shall purchase and accept delivery of steam coal

under all the terms and conditions of this Agreement.

 

1.2           Producer’s Certificates.

 

Seller hereby represents

and warrants that it has obtained or will obtain the agreement of Patriot Coal

Company, LP, a Delaware limited partnership; Peabody Coal Company, a Delaware

corporation; Ohio County Coal Company, L.P., a Kentucky corporation; and

Highland Mining Company, a Delaware corporation (collectively “Producer”), as

indicated by each Producer’s signature on the Producer’s Certificates attached

hereto as Exhibit B-1 and Exhibit B-2 and made a part hereof, and has delivered

or will deliver the  originals of such

Producer’s Certificates to Buyer.  This

obligation of Seller is a material inducement for Buyer’s entering into this

Agreement.  If

 

 

Seller fails to deliver

Producer’s Certificate(s) in the form of Exhibit B-1 and Exhibit B-2 for each

Producer to Buyer with five (5) days after execution of this Agreement, then

Buyer may declare this Agreement null and void, and neither party shall have

any further obligations hereunder, except to the extent of deliveries then in

route.  Seller acknowledges and agrees

that Buyer is the third-party beneficiary of the agreements between Producer

and Seller (the “Coal Marketing and Sales Agreement”) and as such Buyer shall

be entitled to enforce its rights thereunder, in addition to exercising its

rights and remedies hereunder.

 

3.0                               QUANTITY

 

3.1                                 Section 3.1 Base Quantity, is

deleted in its entirety and replaced with the following:

 

3.1                                 Quantity.  Seller shall

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

annual quantities of coal:

 

	

  YEAR

  	

   

  	

  BASE QUANTITY (TONS)

  
	

   

  	

   

  	

   

  
	

  2002

  	

   

  	

  600,000

  
	

  2003

  	

   

  	

  750,000 – Quality A

  
	

   

  	

   

  	

  250,000 – Quality B

  
	

  2004

  	

   

  	

  600,000 – Quality A

  
	

   

  	

   

  	

  250,000 – Quality B

  

 

4.0          SOURCE

 

4.1                                 Section 4.1 Source, is deleted in

its entirety and replaced with the following:

 

4.1                                 Source.    The coal

sold hereunder, including coal purchased by Seller from third  parties, shall be supplied from the geological

seams known as the Western Kentucky #9 and #11 seams.  Coal designated as Quality A, as defined below, shall be supplied

from the mining complex in Union County, Kentucky which is owned and operated

by Seller’s affiliated company, Highland Mining Company (“Highland”).  Coal designated as Quality B, as defined

below, shall be supplied from: (i) the “Patriot Mining Complex” in Henderson

County which consists of the Patriot Mine (a surface mining operation which is

owned and operated by Seller’s affiliated company, Patriot Coal Company, LP

(“Patriot”)) and the “Freedom Mine” (which is operated by Seller’s affiliated

company, Ohio County Coal Company (“Ohio County”)); (ii) the Camp Complex in

Henderson County, or (iii) the Gibraltar Mine in Muhlenberg County.  The Camp Complex and the Gibraltar Mine are

both owned and operated by Seller’s affiliated company, Peabody Coal Company

(“Peabody Coal”).  All of the

 

2

 

foregoing sources of coal

are hereinafter referred to as the “Coal Properties”.  Highland, Patriot, Ohio County and Peabody shall be referred to

collectively herein as “Producer.”

 

4.2           Section 4.7 Relationship of the Parties

is added and reads as follows:

 

                                                Seller

agrees that it is not and will not hold itself out as a partner, employee,

agent or representative of or joint venturer with Buyer.  Nothing herein contained shall be construed

as creating a single enterprise, joint venture, agency, partnership, joint  employer, owner-contractor, or lessor-lessee

relationship between Buyer and Seller or between Buyer and Producer.

 

                                                Seller

and Producer shall each have sole and exclusive authority to direct and control

its respective activities and operations, and those of any subcontractors,

undertaken in the performance of Seller’s obligations under this

Agreement.  Seller and Producer shall

each exercise full and complete control over its respective work force and

labor relations policies.  Buyer shall

have no authority or control over either Seller’s or Producer’s operations or

work force.

 

5.0          DELIVERY

 

5.1           Section 5.1 Barge Delivery, is

modified to make the first literary paragraph read:

 

                                                The coal shall be delivered to Buyer

F.O.B. barge at the Camp Complex, Mile Point 841.6 on the Ohio River, or at

Seller’s option as a substitute at the Gibralter Dock at Mile Point 85.9 on the

Green River.  By advance agreement

between Buyer and Seller, Seller may also deliver the coal to Buyer at Demao

Dock (Patriot Coal) at             Mile

Point 31.5 on the Green River.  The Camp

Complex, Gibralter Dock and Demao Dock are all “Delivery Points”.

 

6.0          QUALITY

 

6.1           Section 6.1 Specifications is deleted and replaced

with the following provision:

 

6.1.1                        Quality A.    The coal

delivered hereunder which is designated as Quality A shall conform to the

following specifications on an “as received” basis:

 

 

3

 

QUALITY A

 

	

  Specifications

  	

   

  	

  Guaranteed

  Monthly

  Weighted Average (1)

  	

   

  	

  Rejection

  Limits

  (per shipment)

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  BTU/LB.

  	

   

  	

  min. 

  	

   

  	

  11,400

  	

   

  	

  < 

  	

   

  	

  10,800

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  LBS/MMBTU:

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  MOISTURE

  	

   

  	

  max. 

  	

   

  	

  10.53 

  	

   

  	

  >

  	

   

  	

  12.00

  	

   

  
	

  ASH

  	

   

  	

  max.

  	

   

  	

  8.33

  	

   

  	

  >

  	

   

  	

  9.00

  	

   

  
	

  SULFUR

  	

   

  	

  max.

  	

   

  	

  2.89

  	

   

  	

  >

  	

   

  	

  3.10

  	

   

  
	

  SULFUR

  	

   

  	

  min.

  	

   

  	

  2.30

  	

   

  	

  <

  	

   

  	

  2.00

  	

   

  
	

  CHLORINE

  	

   

  	

  max.

  	

   

  	

  0.009

  	

   

  	

  >

  	

   

  	

  .015

  	

   

  
	

  FLUORINE

  	

   

  	

  max.

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  NITROGEN

  	

   

  	

  max.

  	

   

  	

  1.32

  	

   

  	

  >

  	

   

  	

  1.70

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  ASH/SULFER RATIO

  	

   

  	

  min.

  	

   

  	

  3.22:1

  	

   

  	

  >

  	

   

  	

  3:1

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  SIZE (3” x 0”):

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Top size

  (inches)*

  	

   

  	

  max.

  	

   

  	

  3x0

  	

   

  	

  >

  	

   

  	

  4x0

  	

   

  
	

  Fines (% by wgt)

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Passing 1/4”

  screen

  	

   

  	

  max. 

  	

   

  	

  60  

  	

   

  	

  >

  	

   

  	

  65

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  % BY WEIGHT:

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  VOLATILE

  	

   

  	

  max.

  	

   

  	

  30

  	

   

  	

  >

  	

   

  	

  29

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  FIXED CARBON

  	

   

  	

  max.

  	

   

  	

  43

  	

   

  	

  > 

  	

   

  	

  40

  	

   

  
	

  GRINDABILITY

  (HGI)

  	

   

  	

  min.  

  	

   

  	

  50 

  	

   

  	

  <

  	

   

  	

  48

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  BASE ACID RATIO

  (B/A)

  	

   

  	

   

  	

   

  	

  0.40

  	

   

  	

   

  	

   

  	

  0.50

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  SLAGGING

  FACTOR**

  	

   

  	

  max. 

  	

   

  	

  1.32 

  	

   

  	

  >

  	

   

  	

  1.80

  	

   

  
	

  FOULING

  FACTOR***

  	

   

  	

  max.

  	

   

  	

  0.32

  	

   

  	

  >

  	

   

  	

  0.40

  	

   

  

 

	

  ASH FUSION TEMPERATURE (°F) (ASTM

  D1857)

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  REDUCING

  ATMOSPHERE

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Initial

  Deformation

  	

   

  	

  min.

  	

   

  	

  1990 

  	

   

  	

  min.

  	

   

  	

  1990

  	

   

  
	

  Softening (H=W)

  	

   

  	

  min. 

  	

   

  	

  2065

  	

   

  	

  min. 

  	

   

  	

  2050

  	

   

  
	

  Softening

  (H=1/2W)

  	

   

  	

  min.

  	

   

  	

  2105

  	

   

  	

  min. 

  	

   

  	

  2075

  	

   

  
	

  Fluid

  	

   

  	

  min.

  	

   

  	

  2225

  	

   

  	

  min. 

  	

   

  	

  2200

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  OXIDIZING

  ATMOSPHERE

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Initial

  Deformation

  	

   

  	

  min. 

  	

   

  	

  2330

  	

   

  	

  min. 

  	

   

  	

  2300

  	

   

  
	

  Softening (H=W)

  	

   

  	

  min. 

  	

   

  	

  2355

  	

   

  	

  min. 

  	

   

  	

  2325

  	

   

  
	

  Softening

  (H=1/2W)

  	

   

  	

  min. 

  	

   

  	

  2400

  	

   

  	

  min. 

  	

   

  	

  2370

  	

   

  
	

  Fluid

  	

   

  	

  min. 

  	

   

  	

  2480

  	

   

  	

  min. 

  	

   

  	

  2400

  	

   

  

 

(1) An actual

Monthly Weighted Average will be calculated for each specification for coal

delivered to the Buyer’s generating stations.

 

* All the coal

will be of such size that it will pass through a screen having circular

perforations three (3) inches in diameter, but shall not contain more than

fifty (50) per cent (50%) by weight of coal that will pass through a screen

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

 

**           Slagging Factor (Rs)=(B/A)

x (Percent Sulfur by WeightDry)

 

***         Fouling Factor (Rf)=(B/A) x

(Percent Na20 by WeightDry)

 

The Base Acid

Ratio (B/A) is herein defined as:

 

	

  BASE ACID RATIO (B/A) =

  	

   

  	

  (Fe203  + 

  Ca0  +  Mg0 

  +  Na20  + 

  K20)

  
	

   

  	

   

  	

  (Si02  + 

  A1203 

  +  T102)

  

 

	

  Note: As used herein

  	

  >

  	

  means greater than:

  
	

   

  	

   

  	

   

  	

  <

  	

  means less than.

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  

 

 

4

 

6.1.2       Quality B. 

The coal delivered hereunder which is designated as Quality B shall

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

 

	

  QUALITY  B

  	

   

  
	

  Specifications

  	

   

  	

  Guaranteed

  Monthly
Weighted Average (1)

  	

   

  	

  Rejection

  Limits
(per shipment)

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  BTU/LB.

  	

   

  	

  min.

  	

   

  	

  10,850

  	

   

  	

  <

  	

   

  	

   10,600

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  LBS/MMBTU:

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  MOISTURE

  	

   

  	

  max.

  	

   

  	

  12.9

  	

   

  	

  >

  	

   

  	

  15.0

  	

   

  
	

  ASH

  	

   

  	

  max.

  	

   

  	

  10.8

  	

   

  	

  >

  	

   

  	

  12.5

  	

   

  
	

  SULFUR

  	

   

  	

  max.

  	

   

  	

  3.00

  	

   

  	

  >

  	

   

  	

  3.40

  	

   

  
	

  SULFUR

  	

   

  	

  min. 

  	

   

  	

  2.75 

  	

   

  	

  <

  	

   

  	

  2.55

  	

   

  
	

  CHLORINE

  	

   

  	

  max. 

  	

   

  	

  0.05

  	

   

  	

  >

  	

   

  	

  0.06

  	

   

  
	

  FLUORINE

  	

   

  	

  max. 

  	

   

  	

  0.01

  	

   

  	

  > 

  	

   

  	

  0.015

  	

   

  
	

  NITROGEN

  	

   

  	

  max. 

  	

   

  	

  1.35

  	

   

  	

  > 

  	

   

  	

  1.45

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  SIZE (3” x 0”):

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Top size

  (inches)*

  	

   

  	

  max.

  	

   

  	

  3

  	

   

  	

  >

  	

   

  	

  3

  	

   

  
	

  Fines (% by wgt)

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Passing 1/4”

  screen

  	

   

  	

  max.

  	

   

  	

  50

  	

   

  	

  > 

  	

   

  	

  55

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  % BY WEIGHT:

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  VOLATILE

  	

   

  	

  max.

  	

   

  	

  31

  	

   

  	

  > 

  	

   

  	

  29

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  FIXED CARBON

  	

   

  	

  max.

  	

   

  	

  38

  	

   

  	

  >

  	

   

  	

  30

  	

   

  
	

  GRINDABILITY

  (HGI)

  	

   

  	

  min. 

  	

   

  	

  55

  	

   

  	

  <

  	

   

  	

  50

  	

   

  
	

  BASE ACID RATIO

  (B/A)

  	

   

  	

   

  	

   

  	

  0.60

  	

   

  	

   

  	

   

  	

  0.90

  	

   

  
	

  SLAGGING

  FACTOR**

  	

   

  	

  max. 

  	

   

  	

  2.0 

  	

   

  	

  >

  	

   

  	

  2.5

  	

   

  
	

  FOULING

  FACTOR***

  	

   

  	

  max.

  	

   

  	

   0.5

  	

   

  	

  >

  	

   

  	

   0.7

  	

   

  

 

	

  ASH

  FUSION TEMPERATURE (°F) (ASTM D1857)

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  REDUCING

  ATMOSPHERE

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Initial Deformation

  	

   

  	

  min. 

  	

   

  	

  1940

  	

   

  	

  min.

  	

   

  	

  1900

  	

   

  
	

  Softening (H=W)

  	

   

  	

  min. 

  	

   

  	

  2035

  	

   

  	

  min. 

  	

   

  	

  1975

  	

   

  
	

  Softening

  (H=1/2W)

  	

   

  	

  min. 

  	

   

  	

  2085

  	

   

  	

  min. 

  	

   

  	

  2000

  	

   

  
	

  Fluid

  	

   

  	

  min. 

  	

   

  	

  2190

  	

   

  	

  min. 

  	

   

  	

  2100

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  OXIDIZING

  ATMOSPHERE

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Initial

  Deformation

  	

   

  	

  min. 

  	

   

  	

  2300

  	

   

  	

  min. 

  	

   

  	

  2200

  	

   

  
	

  Softening (H=W)

  	

   

  	

  min. 

  	

   

  	

  2330

  	

   

  	

  min.

  	

   

  	

  2280

  	

   

  
	

  Softening

  (H=1/2W)

  	

   

  	

  min. 

  	

   

  	

  2425

  	

   

  	

  min.

  	

   

  	

  2300

  	

   

  
	

  Fluid

  	

   

  	

  min. 

  	

   

  	

  2490

  	

   

  	

  min. 

  	

   

  	

  2375

  	

   

  

 

(1) An actual

Monthly Weighted Average will be calculated for each specification for coal

delivered to the Buyer’s generating stations.

 

* All the coal

will be of such size that it will pass through a screen having circular

perforations three (3) inches in diameter, but shall not contain more than

fifty (50) per cent (50%) by weight of coal that will pass through a screen

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

 

**           Slagging Factor (Rs)=(B/A)

x (Percent Sulfur by WeightDry)

 

***         Fouling Factor (Rf)=(B/A) x

(Percent Na20 by WeightDry)

 

The Base Acid

Ratio (B/A) is herein defined as:

 

	

  BASE ACID RATIO (B/A) =

  	

   

  	

  (Fe203  + 

  Ca0  +  Mg0 

  +  Na20  + 

  K20)

  
	

   

  	

   

  	

  (Si02  + 

  A1203 

  +  T102)

  
	

   

  	

   

  	

   

  
	

  Note: As used herein

  	

  >

  	

   means greater than:

  
	

   

  	

  <

  	

   means less than.

  

 

5

 

7.0          PRICE

 

7.1           Section 8.1 Base Price is deleted

and replaced with the following:

 

The base price (“Base

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

the criteria set forth in Section 5 in accordance with the following schedule:

 

	

  Year

  	

   

  	

  Base Price

  Quality A (F.O.B. Barge)

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  2002

  	

   

  	

  $

  	

   1.1224 per MMBtu

  	

   

  	

  $

  	

   25.59 per ton

  	

   

  
	

  2003

  	

   

  	

  $

  	

   1.1224 per MMBtu

  	

   

  	

  $

  	

   25.59 per ton 

  	

   *

  
	

  2003

  	

   

  	

  $

  	

   1.1351 per MMBtu

  	

   

  	

  $

  	

   25.88 per ton 

  	

   **

  
	

  2004

  	

   

  	

  $

  	

   1.1680 per MMBtu

  	

   

  	

  $

  	

   26.63 per ton

  	

   

  

 

* The Base Price for the

first 150,000 tons of Quality A delivered in 2003

 

** The Base Price for the

remainder of the tons of Quality A delivered in 2003

 

	

  Year

  	

   

  	

  Base Price

  Quality B (F.O.B. Barge)

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  2003

  	

   

  	

  $

  	

  0.90 per MMBtu

  	

   

  	

  $

  	

  19.53 per ton

  	

   

  
	

  2004

  	

   

  	

  $

  	

  0.91 per MMBtu

  	

   

  	

  $

  	

  19.75 per ton

  	

   

  

 

7.2           Section 8.2(b) Quality Price Discounts,

is deleted and replaced with the following”

 

Notwithstanding

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

the actual Monthly Weighted Average meets the applicable Discount Point set

forth below.  However, if the actual

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

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

between the actual Monthly Weighted Average and the Guaranteed Monthly Weighted

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

 

	

  QUALITY A

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Guaranteed Monthly

  Weighted Average

  	

   

  	

  Discount Point

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  BTU/Lb.

  	

   

  	

  min.

  	

   

  	

  11,400

  	

   

  	

  11,200

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  LB/MMBTU:

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  SULFUR

  	

   

  	

  max.

  	

   

  	

  2.89

  	

   

  	

  2.98

  	

   

  
	

  ASH

  	

   

  	

  max.

  	

   

  	

  8.33

  	

   

  	

  8.69

  	

   

  
	

  MOISTURE

  	

   

  	

  max.

  	

   

  	

  10.53

  	

   

  	

  11.25

  	

   

  

 

	

  QUALITY B

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Guaranteed Monthly

  Weighted Average

  	

   

  	

  Discount Point

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  BTU/Lb.

  	

   

  	

  min.

  	

   

  	

  10,850

  	

   

  	

  10,650

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  LB/MMBTU:

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  SULFUR

  	

   

  	

  max.

  	

   

  	

  3.00

  	

   

  	

  3.05

  	

   

  
	

  ASH

  	

   

  	

  max.

  	

   

  	

  10.80

  	

   

  	

  12.20

  	

   

  
	

  MOISTURE

  	

   

  	

  max.

  	

   

  	

  12.90

  	

   

  	

  14.46

  	

   

  

 

For example, if

the actual Monthly Weighted Average of sulfur for Quality A equals

3.00lb/MMBTU, then the applicable discount would be (3.00 lb. – 2.89 lb.) X

$.1232/lb/MMBTU = $.0136/MMBTU.

 

 

8.0          DOCUMENTATION

AND RIGHT OF AUDIT.

 

8.1          Section 18.  Documentation and Right of Audit is hereby deleted in its

entirety and replaced as follows:

 

SECTION 18.  DOCUMENTATION AND RIGHT OF AUDIT.   Seller shall maintain, and cause Producer

to maintain, all records and accounts pertaining to payments, quantities,

quality analyses, and sources for all coal supplied under this Agreement for a

period lasting through the term of this Agreement and for two years

thereafter.  Buyer or its

representatives shall have the right at no additional expense to Buyer to

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

reasonable notice during the term of this Agreement and for 2 years thereafter.

 

9.0          COAL

PROPERTY INSPECTIONS.

 

9.1          Section 20. Coal Property Inspections

is deleted in its entirety and replaced as follows:

 

6

 

SECTION 20.   COAL PROPERTY INSPECTIONS.  Buyer and its representatives, and others as

may be required by applicable laws, ordinances and regulations shall have the

right at all reasonable times and at their own expense to inspect the Coal

Property, including the loading facilities, scales, sampling system(s), wash

plant facilities, and mining equipment for conformance with this

Agreement.  Seller shall cause Producer

to allow such inspection and to undertake reasonable care and precautions to

prevent personal injuries to any representatives, agents or employees of Buyer

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

reasonable effort to comply with the regulations and rules of Seller or

Producer regarding conduct on the work site, made known to Visitors prior to

entry, as well as safety measures mandated by state or federal rules,

regulations and laws.  Buyer understands

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

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

relieve Seller or Producer of any of its responsibilities nor be deemed to be a

waiver of any of Buyer’s rights hereunder.

 

IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1

on the day and year below written, but effective as of the day and year first

set forth above.

 

	

  LOUISVILLE

  GAS AND ELECTRIC COMPANY

  	

   

  	

  PEABODY

  COALSALES COMPANY

  
	

   

  	

   

  	

   

  
	

  BY: 

  	

   

  	

   

  	

  BY: 

  	

   

  
	

   

  	

  SVP – Energy Services

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  TITLE:

  

  	

   

  
	

   

  	

   

  	

   

  
	

  DATE: 

  	

   

  	

   

  	

  DATE:

  	

   

  
						

 

7

 

EXHIBIT B-1

 

PRODUCER’S

CERTIFICATE B-1 

 

 

The undersigned, PATRIOT COAL

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

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

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

duly authorized officers, managers or general partners as an inducement to LOUISVILLE

GAS AND ELECTRIC COMPANY (“LG&E”), a Kentucky corporation

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

“Agent”), to enter into  Amendment No. 2

to a Coal Supply Agreement dated January 1, 2002 (the January 1, 2002 Coal

Supply Agreement as amended by Amendments 1 and 2 are collectively referred to

herein as “Coal Supply Agreement”) between LG&E and Agent, and as a further

inducement to Agent to enter into a Coal Marketing and Sales Agreement with

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

represent to LG&E and Agent as follows:

 

1.             Producer is a duly organized, validly existing limited

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

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

the laws of the Commonwealth of Kentucky. 

Producer has all requisite power and authority to execute this

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

including this Producer’s Certificate and the proposed Coal Marketing and Sales

Agreement between Producer and Agent.

 

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

as the officers, manager or partners of Producer, they have all the necessary

power and authority to execute and deliver this

 

8

Producer’s Certificate,

for and on behalf of Producer.

 

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

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

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

rely upon the truth of the statements made herein.

 

4.             Producer represents and warrants that the “Coal

Property” described in Exhibit “A” to the Producer’s Certificate B-1 (the “Coal

Property”) contains economically recoverable coal of a quality and in

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

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

Agreement which requirements are set forth on Exhibit “B” attached hereto.  Producer further agrees and warrants that it

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

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

quality specified in Exhibit “B” hereto. 

Producer further represents, and warrants and agrees that it will

operate and maintain such machinery, equipment, and facilities in accordance

with good mining practices so as to efficiently and economically produce,

prepare, and deliver such coal. 

Producer agrees that it shall operate and maintain the machinery, equipment

and/or facilities at its sole expense, including all required permits and

licenses.  Producer further dedicates to

the Coal Supply Agreement and the Coal Marketing and Sales Agreement sufficient

reserves of coal lying on or in the Coal Property meeting the quality

specifications specified in Exhibit “B” hereto so as to fulfill the quantity

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

Sales Agreement.

 

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

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

or sell coal from the Coal Property in a way that will reduce the economically

recoverable balance of coal in the Coal Property to an amount less than

 

9

that required to be

supplied by Producer as specified in Exhibit “B” hereto.

 

6.             Producer agrees and warrants that it shall require of

the loading dock operator that (a) the barges and towboats provided by LG&E

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

wharfage, dockage and port charges; (b) 

while the barges are in the care, custody and control of the loading

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

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

display of warning lights; (c) any water in the cargo boxes of the barges be

pumped out by the loading dock operator prior to loading; (d)  the loading operations be performed in a

workmanlike manner and in accordance with the reasonable loading requirements

of LG&E and LG&E’s barging contractor; and (e)  the loading dock operator carry landing

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

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

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

certificate of insurance from the insurance carrier or an acceptable

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

Agent in the event of termination of the insurance.

 

7.             Producer agrees that it will replace rejected coal

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

forth in the proposed Coal Marketing and Sales Agreement between Producer and

Agent, which rejection limits Producer understands and acknowledges are the

same rejection limits as provided in the proposed Coal Supply Agreement between

LG&E and Agent, and that should Producer either fail to replace the

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

is rightfully rejected (where such rejection is not based upon the BTU/LB

minimum or the percentage of moisture maximum being exceeded as a result of

weather conditions), and another source hasreplaced such rejected coal,

Producer agrees

 

10

 

to and shall reimburse

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

purchased from another source exceeds the then-current delivered cost of coal

sold by Agent under the Coal Supply Agreement between Agent and LG&E.  Further, Producer agrees to be responsible

to pay or reimburse Agent or LG&E as applicable, for any and all freight or

transportation expenses that have been incurred for rightfully rejected coal.

 

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

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

guarantees as set forth in the Coal Supply Agreement or the proposed Coal

Supply Agreement between Agent and LG&E, then Producer shall within ten

(10) days provide LG&E with reasonable assurances that subsequent monthly

deliveries of coal shall meet or exceed such monthly average guarantees

 

9.             Producer agrees to and shall indemnify and save harmless

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

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

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

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

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

and custody of the loading dock, or for any failure of Producer to comply with

laws, regulations or ordinances, or for any matter which arises out of the acts

or omissions of Producer in the performance of its obligations hereunder

including, but not limited to, the proper delivery of coal by Producer to

Buyer.

 

10.           Producer agrees and warrants to and

shall carry insurance coverage with minimum limits as follows:

 

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

liability.

 

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

liability.

 

11

 

C.            In addition, Producer shall carry excess liability

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

occurrence.

 

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

with statutory limits.

 

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

claims-made basis, then the retroactive date of the policy or policies will be

no later than the effective date of Amendment 2 to the Coal Supply Agreement or

the Producer’s proposed Coal Marketing and Sales Agreement with Agent whichever

is earlier.

 

11.           Producer agrees that it shall not

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

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

and LG&E , which consent shall not be unreasonably withheld.

 

IN TESTIMONY WHEREOF, the

undersigned officers and/or members of Producer have executed and delivered the

foregoing Producer’s Certificate B-1 on behalf of Producer.

 

	

  ATTEST:

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  PATRIOT

  COAL COMPANY, L.P.

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  By:

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  Its:

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  Date:

  	

   

  
										

 

12

 

	

   

  	

  OHIO

  COUNTY COAL COMPANY

  
	

  By: 

  	

   

  
	

  Its: 

  	

   

  
	

  Date: 

  	

   

  

 

	

   

  	

  PEABODY

  COAL COMPANY

  	

   

  
	

   

  
	

  By:

  	

   

  
	

  Its:

  	

   

  
	

  Date:

  	

   

  
				

 

13

 

EXHIBIT A TO PRODUCER’S CERTIFICATE

B-1

 

“Coal Property” means the following seams and mines

owned by Producer:

 

Patriot Coal Company’s (“Patriot”) Patriot Complex,

located in Henderson County, Kentucky consisting of the surface mining

operation known as the “Patriot Mine” which is owned and operated by Patriot

Coal Company and the deep mining operation known as the “Freedom Mine” which is

owned by Patriot and operated by Ohio County Coal Company; Peabody Coal

Company’s Camp Complex located in Union County, Kentucky and Gibraltar Mine

located in Muhlenberg County, Kentucky.

 

14

 

EXHIBIT B TO PRODUCER’S CERTIFICATE

B-1

Quality B Requirement

 

The quality designated as Quality B as required by the

Coal Marketing and Sales Agreement is as follows on an “as received basis”:

 

	

  Specifications

  	

   

  	

  Guaranteed

  Monthly

  Weighted Average

  	

   

  	

  Rejection

  Limits

  (per shipment)

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  BTU/LB.

  	

   

  	

  min 10,850 

  	

   

  	

  < 10,600

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Ash

  	

   

  	

  max 10.80 lbs./MMBTU

  	

   

  	

  > 12.50 lbs./MMBTU

  	

   

  
	

  Moisture

  	

   

  	

  max 12.90 lbs./MMBTU

  	

   

  	

  > 15.00 lbs./MMBTU

  	

   

  
	

  Sulfur

  	

   

  	

  max.  3.00

  lbs./MMBTU

  	

   

  	

  >3.40 lbs./MMBTU

  	

   

  
	

  Sulfur

  	

   

  	

  min. 2.75 lbs./MMBTU

  	

   

  	

  < 2.55 lbs./MMBTU

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  All Qualities:

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Chlorine

  	

   

  	

  max. 0.05 lbs./MMBTU

  	

   

  	

  > 0.06 lbs./MMBTU

  	

   

  
	

  Fluorine

  	

   

  	

  max. 0.01 lbs./MMBTU

  	

   

  	

  > 0.015 lbs./MMBTU

  	

   

  
	

  Nitrogen

  	

   

  	

  max. 1.35 lbs./MMBTU

  	

   

  	

  > 1.45 lbs./MMBTU

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  SIZE (3” x 0”):

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Top size

  (inches)*

  	

   

  	

  max.  3”x 0”

  	

   

  	

  >  3”x 0”

  	

   

  
	

  Fines (% by wgt)

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  passing 1/4”

  screen

  	

   

  	

  max. 50 %

  	

   

  	

  >  55

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  % BY WEIGHT:

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  VOLATILE

  	

   

  	

  max. 31

  	

   

  	

  > 29

  	

   

  
	

  FIXED CARBON

  	

   

  	

  min. 38

  	

   

  	

  < 30

  	

   

  
	

  GRINDABILITY

  (HGI)

  	

   

  	

  min. 55

  	

   

  	

  < 50

  	

   

  
	

  BASE ACID RATIO

  (B/A)

  	

   

  	

  .60

  	

   

  	

  > .90

  	

   

  
	

  SLAGGING FACTOR

  	

   

  	

  2.0

  	

   

  	

  2.5

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  ASH FUSION TEMPERATURE (°F) (ASTM

  D1857)

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  REDUCING

  ATMOSPHERE

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Initial

  Deformation

  	

   

  	

  min. 1940

  	

   

  	

  min. 1900

  	

   

  
	

  Softening (H=W)

  	

   

  	

  min. 2035

  	

   

  	

  min. 1975

  	

   

  
	

  Softening

  (H=1/2W)

  	

   

  	

  min. 2085

  	

   

  	

  min. 2000

  	

   

  
	

  Fluid

  	

   

  	

  min. 2190

  	

   

  	

  min. 2100

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  OXIDIZING

  ATMOSPHERE

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Initial

  Deformation

  	

   

  	

  min. 2300

  	

   

  	

  min. 2200

  	

   

  
	

  Softening (H=W)

  	

   

  	

  min. 2330

  	

   

  	

  min. 2280

  	

   

  
	

  Softening

  (H=1/2W)

  	

   

  	

  min. 2425

  	

   

  	

  min. 2300

  	

   

  
	

  Fluid

  	

   

  	

  min. 2490

  	

   

  	

  min. 2375

  	

   

  

 

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

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

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

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

in diameter.

 

**           Slagging

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

 

***         Fouling

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

 

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

 

	

  BASE ACID RATIO (B/A) =

  	

   

  	

  (Fe203  + 

  Ca0  +  Mg0 

  +  Na20  + 

  K20)

  
	

   

  	

   

  	

  (Si02  + 

  A1203 

  +  T102)

  

 

	

  Note:As used herein:

  	

   

  	

  >

  	

  means greater than;

  
	

   

  	

   

  	

  .

  	

   

  	

  <

  	

  means less than

  
						

 

Quantity

Requirement

 

The quantity

required by the Coal Marketing and Sales Agreement is as follows:

 

	

  QUANTITY – QUALITY B

  
	

   

  	

   

  	

   

  
	

  Year

  	

   

  	

  Tonnage

  
	

  2003

  	

   

  	

  250,000  – Quality B

  
	

  2004

  	

   

  	

  250,000 – Quality B

  

 

 

15

 

EXHIBIT B-2

 

PRODUCER’S

CERTIFICATE – B-2

 

The undersigned, HIGHLAND

MINING COMPANY, a Delaware corporation (herein “the Producer”), by

and through its duly authorized officers as an inducement to LOUISVILLE

GAS AND ELECTRIC COMPANY (“LG&E”), a Kentucky corporation

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

“Agent”), to enter into Amendment No. 2 to a Coal Supply Agreement  dated January 1, 2002 (the January 1, 2002

Coal Supply Agreement as amended by Amendments 1 and 2 are collectively

referred to herein as “Coal Supply Agreement”) between LG&E and Agent, and

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

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

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

 

1.             Producer is a duly organized, validly existing

corporation in good standing under the laws of the Commonwealth of Kentucky,

and is fully qualified to do business under the laws of the Commonwealth of

Kentucky.  Producer has all requisite

power and authority to execute this instrument and to enter into all documents

required in connection with and including this Producer’s Certificate and the

proposed Coal Marketing and Sales Agreement between Producer and Agent.

 

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

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

execute and deliver this Producer’s Certificate B-2, for and on behalf of

Producer.

 

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

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

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

rely upon the truth of the statements made herein.

 

16

 

4.             Producer represents and warrants that the “Coal

Property” described in Exhibit “A” to this Producer’s Certificate B-2 (the

“Coal Property”) contains economically recoverable coal of a quality and in

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

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

Agreement which requirements are set forth on Exhibit “B” hereto.  Producer further agrees and warrants that it

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

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

quality specified in Exhibit “B” hereto. 

Producer further represents, warrants and agrees that it will operate

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

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

deliver such coal.  Producer agrees that

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

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

Supply Agreement and the Coal Marketing and Sales Agreement sufficient reserves

of coal lying on or in the Coal Property meeting the quality specifications

specified in Exhibit “B” hereto so as to fulfill the quantity requirements of

the Coal Supply Agreement and the proposed Coal Marketing and Sales Agreement.

 

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

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

or sell coal from the Coal Property in a way that will reduce the economically

recoverable balance of coal in the Coal Property to an amount less than that

required to be supplied by Producer as specified in Exhibit “B” hereto.

 

6.             Producer agrees and warrants that it shall require of

the loading dock operator that (a) the barges and towboats provided by LG&E

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

wharfage, dockage and port charges; (b) 

while the barges are in the care,

 

17

 

custody and control of

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

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

mooring and display of warning lights; (c) any water in the cargo boxes of the

barges be pumped out by the loading dock operator prior to loading; (d)  the loading operations be performed in a

workmanlike manner and in accordance with the reasonable loading requirements

of LG&E and LG&E’s barging contractor; and (e) the loading dock

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

not less than $300,000 and total of basic coverage and excess liability

coverage of not less than $1,000,000 and provide evidence thereof to LG&E

and Agent in the form of a certificate of insurance from the insurance carrier

or an acceptable certificate of self-insurance with requirement for

notification of LG&E and Agent in the event of termination of the

insurance.

 

7.             Producer agrees that it will replace rejected coal

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

forth in the proposed Coal Marketing and Sales Agreement between Producer and

Agent, which rejection limits Producer understands and acknowledges are the

same rejection limits as provided in the proposed Coal Supply Agreement between

LG&E and Agent, and that should Producer either fail to replace the

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

is rightfully rejected (where such rejection is not based upon the BTU/LB minimum

or the percentage of moisture maximum being exceeded as a result of weather

conditions), and another source has replaced such rejected coal, Producer

agrees to and shall reimburse LG&E for any amount that the total delivered

cost to LG&E of such coal purchased from another source exceeds the

then-current delivered cost of coal sold by Agent under the Coal Supply

Agreement  between Agent and

LG&E.  Further, Producer agrees to

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

all freight or transportation expenses

 

18

 

that have been incurred

for rightfully rejected coal.

 

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

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

guarantees as set forth in the Coal Supply Agreement or the proposed Coal

Supply Agreement between Agent and LG&E, then Producer shall within ten

(10) days provide LG&E with reasonable assurances that subsequent monthly

deliveries of coal shall meet or exceed such monthly average guarantees

 

9.             Producer agrees to and shall indemnify and save harmless

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

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

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

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

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

and custody of the loading dock, or for any failure of Producer to comply with

laws, regulations or ordinances, or for any matter which arises out of the acts

or omissions of Producer in the performance of its obligations hereunder

including, but not limited to, the proper delivery of coal by Producer to

Buyer.

 

10.           Producer agrees and warrants to and

shall carry insurance coverage with minimum limits as follows:

 

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

liability.

 

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

 

C.            In addition, Producer shall carry excess liability

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

occurrence.

 

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

with statutory limits.

 

19

 

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

claims-made basis, then the retroactive date of the policy or policies will be

no later than the effective date of Amendment 2 to the Coal Supply Agreement or

the Producer’s proposed Coal Marketing and Sales Agreement with Agent whichever

is earlier.

 

11.           Producer agrees that it shall not

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

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

and LG&E which consent shall not be unreasonably withheld.

 

IN TESTIMONY WHEREOF, the

undersigned officers and/or members of Producer have executed and delivered the

foregoing Producer’s Certificate B-1 on behalf of Producer.

 

	

  ATTEST:

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  HIGHLAND

  MINING COMPANY

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  By:

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  Its:

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  Date:

  	

   

  
										

 

20

 

EXHIBIT A TO PRODUCER’S CERTIFICATE

B-2

 

“Coal Property” means the

following seams and mines owned by Producer:

 

Highland Mining Company’s Highland Mine, located in

Union County, Kentucky.

 

21

 

EXHIBIT B TO PRODUCER’S CERTIFICATE

B-2

Quality A Requirement

 

The quality designated as

Quality A as required by the Coal Marketing and Sales Agreement is as follows

on an “as received basis”:

 

	

  Specifications

  	

   

  	

  Guaranteed

  Monthly

  Weighted Average

  	

   

  	

  Rejection

  Limits

  (per shipment)

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  BTU/LB.

  	

   

  	

  min. 11,400

  	

   

  	

  < 10,800

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Ash

  	

   

  	

  max 8.33 lbs./MMBTU

  	

   

  	

  > 9.00 lbs./MMBTU

  	

   

  
	

  Moisture

  	

   

  	

  max 10.53 lbs./MMBTU

  	

   

  	

  > 12.00 lbs./MMBTU

  	

   

  
	

  Sulfur

  	

   

  	

  max.  2.89

  lbs./MMBTU

  	

   

  	

  >3.10 lbs./MMBTU

  	

   

  
	

  Sulfur

  	

   

  	

  min. 2.30 lbs./MMBTU

  	

   

  	

  < 2.00 lbs./MMBTU

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  All Qualities:

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Chlorine

  	

   

  	

  max. 0.009 lbs./MMBTU

  	

   

  	

  > 0.015 lbs./MMBTU

  	

   

  
	

  Fluorine

  	

   

  	

  max. lbs./MMBTU

  	

   

  	

  > lbs./MMBTU

  	

   

  
	

  Nitrogen

  	

   

  	

  max. 1.32 lbs./MMBTU

  	

   

  	

  > 1.70 lbs./MMBTU

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  ASH/SULFUR RATIO

  	

   

  	

  min.  3.22:1

  	

   

  	

  < 3:1

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  SIZE (3” x 0”):

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Top size

  (inches)*

  	

   

  	

  max.  3”x 0”

  	

   

  	

  >  4”x 0”

  	

   

  
	

  Fines (% by wgt)

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  passing 1/4”

  screen

  	

   

  	

  max. 60 %

  	

  %

  	

  >  65

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  % BY WEIGHT:

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  VOLATILE

  	

   

  	

  max. 30

  	

   

  	

  > 29

  	

   

  
	

  FIXED CARBON

  	

   

  	

  min. 43

  	

   

  	

  < 40

  	

   

  
	

  GRINDABILITY

  (HGI)

  	

   

  	

  min. 50

  	

   

  	

  < 48

  	

   

  
	

  BASE ACID RATIO

  (B/A)

  	

   

  	

  .40

  	

   

  	

  > .50

  	

   

  
	

  SLAGGING FACTOR

  	

   

  	

  1.32

  	

   

  	

  1.80

  	

   

  

 

	

  ASH FUSION TEMPERATURE (°F) (ASTM

  D1857)

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  REDUCING

  ATMOSPHERE

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Initial

  Deformation

  	

   

  	

  min. 1990

  	

   

  	

  min. 1990

  	

   

  
	

  Softening (H=W)

  	

   

  	

  min. 2065

  	

   

  	

  min. 2050

  	

   

  
	

  Softening

  (H=1/2W)

  	

   

  	

  min. 2105

  	

   

  	

  min. 2075

  	

   

  
	

  Fluid

  	

   

  	

  min. 2225

  	

   

  	

  min. 2200

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  OXIDIZING

  ATMOSPHERE

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Initial

  Deformation

  	

   

  	

  min. 2330

  	

   

  	

  min. 2300

  	

   

  
	

  Softening (H=W)

  	

   

  	

  min. 2355

  	

   

  	

  min. 2325

  	

   

  
	

  Softening

  (H=1/2W)

  	

   

  	

  min. 2400

  	

   

  	

  min. 2370

  	

   

  
	

  Fluid

  	

   

  	

  min. 2480

  	

   

  	

  min. 2400

  	

   

  

 

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

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

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

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

in diameter.

 

**           Slagging

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

 

***         Fouling

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

 

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

 

	

  BASE ACID RATIO (B/A) =

  	

   

  	

  (Fe203  + 

  Ca0  +  Mg0 

  +  Na20  + 

  K20)

  
	

   

  	

   

  	

  (Si02  + 

  A1203 

  +  T102)

  

 

 

	

  Note:

  	

   

  	

  As used herein:

  	

   

  	

  >

  	

   

  	

  means greater than;

  
	

   

  	

   

  	

   

  	

   

  	

  <

  	

   

  	

  means less than.

  

 

Quantity

Requirement

 

The quantity

required by the Coal Marketing and Sales Agreement is as follows:

 

	

  QUANTITY –

  QUALITY A

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  Year

  	

   

  	

  Tonnage

  	

   

  
	

  2002

  	

   

  	

  600,000  – Quality A

  	

   

  
	

  2003

  	

   

  	

  750,000 – Quality A

  	

   

  
	

  2004

  	

   

  	

  600,000 – Quality A

  	

   

  

 

22

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