EX-10.55 12 a2073034zex-10_55.txt EXHIBIT 10.55 Exhibit 10.55 COAL SUPPLY AGREEMENT This is a coal supply agreement (the "Agreement") dated August 12, 2001 between KENTUCKY UTILITIES COMPANY, a Kentucky corporation, 220 West Main Street, Louisville, Kentucky 40202 ("Buyer"), and ARCH COAL SALES COMPANY, INC., a Delaware corporation, agent for the independent operating subsidiaries of ARCH COAL, INC., a Delaware corporation (collectively "Seller"), whose address is CityPlace One, Suite 300, St. Louis, Missouri 63141. The parties hereto agree as follows: SECTION 1. GENERAL. Seller will sell to Buyer and Buyer will buy from Seller steam coal under all the terms and conditions of this Agreement. SECTION 2. TERM. The term of this Agreement shall commence on January 1, 2002 and shall continue through December 31, 2005, subject to early termination pursuant to the terms of Sections 6.4, 8.1, 10.2, 15 and 20.7. SECTION 3. QUANTITY. Section 3.1 BASE QUANTITY. Subject to the price review set forth in Section 8.1, Seller shall sell and deliver, and Buyer shall purchase and accept delivery of the following annual base quantity of coal ("Base Quantity"): ARCH COAL SALES CO., INC. KU Contract # KUF02848 PRB
YEAR BASE QUANTITY (TONS) ---- -------------------- 2002 1,000,000 2003 1,000,000 2004 1,000,000 2005 1,000,000
The Base Quantity will be delivered in approximately equal monthly quantities and in accordance with a mutually agreed upon schedule, assuming adjustments in scheduling for maintenance outages. In the event Buyer fails to take delivery of the Base Quantity in any calendar year for reasons other than an event of Force Majeure under Section 10, delivery of non-conforming coal, failure by Seller to deliver coal in accordance with the terms of this Agreement, or any other reasons excused hereunder, any deficiency in deliveries shall be made up or carried over to subsequent year(s) only upon mutual written agreement of both Buyer and Seller. SECTION 4. SOURCE. Section 4.1 SOURCE. The coal sold hereunder, shall be supplied primarily from the Black Thunder Mine located in Campbell County, Wyoming (the "Coal Property"). Section 4.2 ASSURANCE OF OPERATION AND RESERVES. Seller represents and warrants that the Coal Property contains economically recoverable coal of a quality and in quantities which will be sufficient to satisfy all the requirements of this Agreement, subject to Seller obtaining issuance of necessary permits. Seller agrees and warrants that it will have at the Coal Property adequate machinery, equipment and other facilities to produce, prepare and deliver coal in the quantity and of the quality required by this Agreement. Seller further agrees to operate and maintain such 2 ARCH COAL SALES CO., INC. KU Contract # KUF02848 PRB machinery, equipment and facilities in accordance with good mining practices so as to efficiently and economically produce, prepare and deliver such coal. Seller agrees that Buyer is not providing any capital for the purchase of such machinery, equipment and/or facilities and that Seller shall operate and maintain same at its sole expense, including all required permits and licenses. Seller hereby allocates to this Agreement sufficient reserves of coal meeting the quality specifications hereof and lying on or in the Coal Property so as to fulfill the quantity requirements hereof. Section 4.3 NON-DIVERSION OF COAL. Seller agrees and warrants that it will not, without Buyer's express prior written consent, use or sell coal from the Coal Property in a way that will reduce the economically recoverable balance of coal in the Coal Property to an amount less than that required to be supplied to Buyer hereunder. Section 4.4 SELLER'S PREPARATION OF MINING PLAN. Seller shall have prepared a complete mining plan for the Coal Property with adequate supporting data to demonstrate Seller's capability to have coal produced from the Coal Property which meets the quantity and quality specifications of this Agreement. Seller shall, upon Buyer's request during Coal Property Inspections, if any (made pursuant to Section 19), provide information to Buyer of such mining plan which shall contain maps and a narrative depicting areas and seams of coal to be mined and shall include (but not be limited to) the following information: (i) reserves from which the coal will be produced during the term hereof and the mining sequence, by year (or such other time intervals as mutually agreed) during the term of this Agreement, from which coal will be mined; (ii) methods of mining such coal; (iii) methods of transporting and, in the event a preparation plant is utilized by 3 ARCH COAL SALES CO., INC. KU Contract # KUF02848 PRB Seller, the methods of washing coal to insure compliance with the quantity and quality requirements of this Agreement including a description and flow sheet of the preparation plant; (iv) quality data plotted on the maps depicting data points and isolines by ash, sulfur, and Btu; (v) quality control plans including sampling and analysis procedures to insure individual shipments meet quality specifications; and (vi) Seller's aggregate commitments to others to sell coal from the Coal Property during the term of this Agreement. Buyer's receipt of information or data furnished by Seller (the "Mining Information") shall not in any manner relieve Seller of any of Seller's obligations or responsibilities under this Agreement; nor shall such review be construed as constituting an approval of Seller's proposed mining plan as prudent mining practices, such review by Buyer being limited solely to a determination, for Buyer's purposes only, of Seller's capability to supply coal to fulfill Buyer's requirements of a dependable coal supply. Section 4.5 SUBSTITUTE COAL. Notwithstanding the above representations and warranties, in the event that Seller is unable to produce or obtain coal from the Coal Property in the quantity and of the quality required by this Agreement, and such inability is not caused by a force majeure event as defined in Section 10, then Buyer will have the option of requiring that Seller supply coal from Seller's other facilities and mines or Seller shall also have the right to supply substitute coal from sources not owned or controlled by Seller after having received Buyer's prior written consent (which shall not be unreasonably withheld). Such substitute coal shall be provided under all the terms and conditions of this Agreement including, but not limited to, the price provisions of Section 8, the quality specifications of Section 6.1, and the provisions of Section 5 concerning reimbursement to Buyer 4 ARCH COAL SALES CO., INC. KU Contract # KUF02848 PRB for increased transportation costs. Seller's delivery of coal not produced from the Coal Property without having received the express written consent of Buyer shall constitute a material breach of this Agreement. SECTION 5. DELIVERY. Section 5.1 RAIL DELIVERY. The coal shall be delivered to Buyer F.O.B. railcar at the rail loading facility located at Black Thunder Mine near Wright, Wyoming (the "Delivery Point"). Seller may deliver the coal at a location different from the Delivery Point, provided, however, that Seller shall reimburse Buyer for any resulting increases in the cost of transporting the coal to Buyer's generating stations. Buyer shall retain any resulting savings in such transportation costs. Title to and risk of loss of coal sold will pass to Buyer and the coal will be considered to be delivered as the coal is progressively loaded into railcars at the Delivery Point. Buyer or its contractor shall furnish suitable railcars in accordance with a delivery schedule provided by Buyer to Seller. Seller shall comply with the applicable provisions of Buyer's rail contractor's tariff provided that such provisions shall first be provided by Buyer for review by Seller. Buyer shall arrange and pay for all costs of transporting the coal from the Delivery Point to Buyer's generating station. For delays caused by Seller in handling the scheduling of shipments with Buyer's rail contractor, Seller shall be responsible for any demurrage, penalties, damages or charges assessed by said rail contractor (or assessed by Buyer) which accrue at the Delivery Point, including the demurrage, penalties for loading less than the minimum of 15,000 tons per 5 ARCH COAL SALES CO., INC. KU Contract # KUF02848 PRB train shipment, or other penalties, damages or charges assessed for railcars not loaded in conformity with applicable requirements. Section 5.2 SIDE RELEASE TREATMENT. At Buyer's request, Seller shall treat (or have treated) any railcars specified by Buyer with a side release agent approved by Buyer. The price for each such requested side chemical treatment shall be an amount, equal to Seller's cost of material applied, for each application. The cost of the side release treatment shall be established for each spray season by Seller prior to October of that season. The spray season is approximately October through March. Seller shall invoice Buyer for all such treatments, which occurred in a calendar month by the fifteenth of the following month; and payment shall be wired by the 25th of such following month. Section 5.3 SODIUM CONDITIONING. At Buyer's request, Seller shall treat (or have treated) any shipment of coal hereunder with soda ash in order to maintain approximately 2% sodium content. The price for soda ash applied shall be on a $0.08 per pound (lb.) basis for each application of soda ash. Seller shall invoice Buyer for all such treatments, which occurred in a calendar month by the fifteenth of the following month; and payment shall be wired by the 25th of such following month. SECTION 6. QUALITY. Section 6.1 SPECIFICATIONS. The coal delivered hereunder shall conform to the following specifications on an "as received" basis: 6 ARCH COAL SALES CO., INC. KU Contract # KUF02848 PRB
Guaranteed Monthly Rejection Limits Specifications Weighted Average(1) (per shipment) -------------------------------------------------------------------------------------------- BTU/LB. min. 8,800 < 8,500 ------ ------ LBS/MMBTU: MOISTURE max. 30.68 > 35.29 ------ ------ ASH max. 6.82 > 10.59 ------ ------ SULFUR max. 0.40 * > 0.60 ------ ------ SULFUR min. NA < NA ------ ------ CHLORINE max. 0.01 > 0.02 ------ ------ NITROGEN max. 0.95 > 1.00 ------ ------ * Individual shipment limit of 1.20 lbs. SO(2)/MMBTU SIZE (3" X 0"): Top size (inches)** max. 3X0 > 3X0 ------ ------ Fines (% by wgt) Passing 1/4" screen max. 35 > 40 ------ ------ % BY WEIGHT: VOLATILE min. 32 < 30 ------ ------ FIXED CARBON min. 36 < 31 ------ ------ GRINDABILITY (HGI) min. 52 < 44 ------ ------ ASH FUSION TEMPERATURE (DEG.F) (ASTM D1857) REDUCING ATMOSPHERE Initial Deformation min. +2135 min. +2050 ------ ------ Softening (H=W) min. +2160 min. +2060 ------ ------ Softening (H=1/2W) min. +2175 min. +2070 ------ ------ Fluid min. +2240 min. +2100 ------ ------ OXIDIZING ATMOSPHERE Initial Deformation min. +2220 min. +2100 ------ ------ Softening (H=W) min. +2230 min. +2100 ------ ------ Softening (H=1/2W) min. +2250 min. +2120 ------ ------ Fluid min. +2300 min. +2140 ------ ------
7 ARCH COAL SALES CO., INC. KU Contract # KUF02848 PRB (1) An actual Monthly Weighted Average will be calculated for each specification for coal delivered for the Kentucky Utilities Ghent generating station at the Delivery Point. Note: As used herein > means greater than: < means less than. Section 6.2 DEFINITION OF "SHIPMENT". As used herein, a "shipment" shall mean one unit trainload that is loaded at the Delivery Point. Section 6.3 BUYER AGREES THAT SELLER MAKES NO EXPRESS WARRANTIES OTHER THAN THOSE SET FORTH IN THIS AGREEMENT. SELLER MAKES NO WARRANTY CONCERNING THE SUITABILITY OF COAL DELIVERED HEREUNDER FOR USE IN BUYER'S PLANT, OR OTHER ELECTRIC GENERATION STATION. ALL WARRANTIES OF MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE OR ARISING FROM A COURSE OF DEALING OR USAGE OF TRADE ARE SPECIFICALLY EXCLUDED. Section 6.4 REJECTION. Buyer has the right, but not the obligation, to reject any shipment which fail(s) to conform to the Rejection Limits set forth in Section 6.1 or contains extraneous materials that in the reasonable judgement of Buyer could interfere with the Buyer's operation. Buyer must reject such coal within seventy-two (72) hours of receipt of the coal analysis provided for in Section 7.2 or such right to reject is waived. In the event Buyer rejects such non-conforming coal, title to and risk of loss of the coal shall be considered to have never passed to Buyer and Buyer shall return the coal to Seller or, at Seller's request, divert such coal to Seller's designee, all at Seller's cost and risk. Seller shall replace the rejected coal within ten (10) working days from notice of rejection with coal conforming to the Rejection Limits set forth in Section 6.1. If Seller fails to replace the rejected 8 ARCH COAL SALES CO., INC. KU Contract # KUF02848 PRB coal within such ten (10) working day period or the replacement coal is rightfully rejected, Buyer may purchase coal from another source in order to replace the rejected coal. Seller shall reimburse Buyer for (i) any amount by which the actual price plus transportation costs to Buyer of such coal purchased from another source exceed the price of such coal under this Agreement plus transportation costs to Buyer from the Delivery Point; and (ii) any and all transportation, storage, handling, or other expenses that have been incurred by Buyer for rightfully rejected coal. This remedy is in addition to all of Buyer's other remedies under this Agreement and under applicable law and in equity for Seller's breach. If Buyer fails to reject a shipment of non-conforming coal which it had the right to reject for failure to meet any or all of the Rejection Limits set forth in Section 6.1 or because such shipment contained extraneous materials, then such non-conforming coal shall be deemed accepted by Buyer; however, the quantity Seller is obligated to sell to Buyer under the Agreement may or may not be reduced by the amount of each such non-conforming shipment at Buyer's sole option and the shipment shall nevertheless be considered "rejectable" under Section 6.4. Further, for shipments containing extraneous materials, which include, but are not limited to, slate, rock, wood, mining materials, metal, steel, etc., the estimated weight of such materials shall be deducted from the weight of that shipment. Section 6.5 SUSPENSION AND TERMINATION. If the coal sold hereunder fails to meet one or more of the Guaranteed Monthly Weighted Averages set forth in Section 6.1 for any two (2) months in a six (6) month period, then Buyer may upon notice confirmed in writing and sent to Seller by certified mail, suspend future shipments except 9 ARCH COAL SALES CO., INC. KU Contract # KUF02848 PRB shipments already loaded into railcars. Seller shall, within 10 days of receipt of Buyer's notice, provide Buyer with reasonable assurances that subsequent monthly deliveries of coal shall meet or exceed the Guaranteed Monthly Weighted Averages set forth in Section 6.1 and that the source will exceed the Rejection Limits set forth in Section 6.1. If Seller fails to provide such assurances within said 10 day period, Buyer may terminate this Agreement by giving written notice of such termination at the end of the 10 day period. A waiver of this right for any one period by Buyer shall not constitute a waiver for subsequent periods. If Seller provides such assurances to Buyer's reasonable satisfaction, shipments hereunder shall resume and any tonnage deficiencies resulting from suspension may be made up at Buyer's sole option. Buyer shall not unreasonably withhold its acceptance of Seller's assurances, or delay the resumption of shipment. If Seller, after such assurances, fails to meet any of the Guaranteed Monthly Weighted Averages for any one (1) month within the next six (6) months, then Buyer may terminate this Agreement and exercise all its other rights and remedies under applicable law and in equity for Seller's breach. Guaranteed Monthly Weighted Averages must be based on a minimum of three (3) shipments. For any month in which there is less than three (3) shipments made, the Guaranteed Monthly Weighted Average will be based on the last one or two shipments from the previous calendar month so that three shipments are used to determine the monthly weighted average for Suspension and Termination purposes. 10 ARCH COAL SALES CO., INC. KU Contract # KUF02848 PRB SECTION 7. WEIGHTS, SAMPLING AND ANALYSIS. Section 7.1 WEIGHTS. The weight of the coal delivered hereunder shall be determined on a per shipment basis by Seller on the basis of weights generated at the Delivery Point unless another method is mutually agreed upon by the parties. Such scales shall be duly reviewed by an appropriate testing agency every six (6) months and maintained in an accurate condition. Buyer shall have the right, at Buyer's expense and upon reasonable notice, to have the scales checked for accuracy at any reasonable time or frequency. If the scales are found to be over or under the tolerance range allowable for the scale based on industry accepted standards, either party shall pay to the other any amounts owed due to such inaccuracy for a period not to exceed thirty (30) days before the time any inaccuracy of scales is determined. Section 7.2 SAMPLING AND ANALYSIS. The Seller has sole responsibility for quality control of the coal and shall forward its loading quality to the Buyer as soon as possible. The sampling and analysis of the coal loaded hereunder shall be performed by Seller and the results thereof shall be accepted and used for the quality and characteristics of the coal delivered under this Agreement. All analyses shall be done at an independent laboratory located on Seller's property and at Seller's expense. Samples for analyses shall be taken by ASTM approved procedures of sampling, may be composited and shall be taken with a frequency and regularity sufficient to provide reasonably accurate representative samples of the shipments made hereunder. Seller shall notify Buyer in writing of any significant changes in Seller's sampling and analysis practices. Any such changes in Seller's sampling and analysis practices shall provide for no less 11 ARCH COAL SALES CO., INC. KU Contract # KUF02848 PRB accuracy than the sampling and analysis practices existing at the time of the execution of this Agreement, unless the Parties otherwise mutually agree. Each sample taken by Seller shall be divided into three (3) parts and put into airtight containers, properly labeled and sealed. One part shall be used for analysis by Seller; one part shall be retained for thirty (30) days ("Retention Period") after the sample is taken, and shall be delivered to Buyer for analysis if Buyer so requests before the end of the Retention Period; and one part ("Referee Sample") shall be retained by Seller until the for thirty (30) days. Buyer, on reasonable notice to Seller shall have the right to have a representative present to observe the sampling and analyses performed by Seller. Unless Buyer requests a Referee Sample analysis, Seller's analysis shall be used to determine the quality of the coal loaded hereunder. The Monthly Weighted Averages shall be determined by utilizing the individual shipment analyses. If Buyer disputes the analysis, the Referee Sample retained by Seller shall be submitted for analysis to an independent commercial testing laboratory ("Independent Lab") mutually chosen by Buyer and Seller. All testing of any such sample by the Independent Lab shall be at requestor's expense unless the results differ by more than the applicable ASTM reproducibility standards, in such case Buyer will pay for testing. If the Independent Lab results differ by more than the applicable ASTM reproducibility standards, the Independent Lab results will govern. The cost of the analysis made by the Independent Lab shall be borne by Buyer to the extent that Seller's analysis prevails and by Seller to the extent that the analysis of the Independent Lab prevails. 12 ARCH COAL SALES CO., INC. KU Contract # KUF02848 PRB SECTION 8. PRICE. Section 8.1 BASE PRICE. The base price ("Base Price") of the coal to be sold hereunder will be firm during each time period of this Agreement in accordance with the following schedule, subject to adjustment only for quality variations pursuant to Section 8.2 and Governmental Impositions pursuant to Section 8.4. See Exhibit B for a listing of the price components. BASE PRICE
PERIOD LOADING POINT ($ PER MMBTU) ($ PER TON) ------ ------------- ------------- ----------- 1/1/02 - 12/31/03 Thunder Junction, Wyoming 0.5966 F.O.B. railcar $10.50 1/1/04 - 12/31/04 * 1/1/05 - 12/31/05 *
* Buyer and Seller will begin negotiating price and other terms and conditions for each year, 2004 and 2005, on or before July 1 of the preceding year, with the intent to reach a mutually agreed price which would begin on January 1, 2004 or January 1, 2005, as appropriate. If the parties do not reach an agreement by October 1, of either 2003 or 2004, then this Agreement will terminate as of December 31, 2003 or December 31, 2004, as appropriate, without liability due to such termination for either party, and the parties shall have no further obligations hereunder except those incurred prior to the date of termination. Section 8.2 QUALITY PRICE DISCOUNTS. (a) The Base Price is based on coal meeting or exceeding the Guaranteed Monthly Averages specifications as set forth in Section 6.1. Quality price discounts shall be applied for each 13 ARCH COAL SALES CO., INC. KU Contract # KUF02848 PRB specification to reflect failures to meet the Guaranteed Monthly Weighted Averages or Individual Shipment SO2 specifications set forth in Section6.1, as determined pursuant to Section7.2, subject to the provisions set forth below. The discount values used are as follows: MONTHLY DISCOUNT VALUES $/MMBTU BTU/LB. 0.2604 $/LB./MMBTU ASH 0.00863 MOISTURE 0.0016 INDIVIDUAL SHIPMENT DISCOUNT VALUE $/TON SO(2) 3.00 (b) Notwithstanding the foregoing, for each specification, 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 to and shall be calculated on the basis of the difference between the actual Monthly Weighted Average and the Guaranteed Monthly Weighted Average pursuant to the methodology shown in Exhibit A attached hereto.
GUARANTEED MONTHLY WEIGHTED AVERAGE DISCOUNT POINT BTU/LB Min. 8,800 8,600
14 ARCH COAL SALES CO., INC. KU Contract # KUF02848 PRB
GUARANTEED MONTHLY WEIGHTED AVERAGE DISCOUNT POINT ------------------ -------------- LB/MMBTU: ASH Max. 6.82 7.95 MOISTURE Max. 30.68 31.81 GUARANTEED SHIPMENT DISCOUNT POINT LBSSO(2)/MMBTU -------------- -------------- LB/MMBTU: --------- SO(2) Max. 1.20 1.20
For example, if the actual Monthly Weighted Average of ash equals 8.00 lb/MMBTU, then the applicable discount would be (8.00 lb./mmbtu - 6.82 lb./mbtu) X $.00863 lb./mmbtu = $.010183/MMBTU. Section 8.3 PAYMENT CALCULATION Exhibit A attached hereto shows the methodology for calculating the coal payment and quality price discounts for the month Seller's coal was unloaded by Buyer at the Ghent Station. If there are any such discounts, Buyer shall apply credit to amounts owed Seller for the month the coal was unloaded. Section 8.4 GOVERNMENTAL IMPOSITIONS. (a) The term "Governmental Imposition" shall mean any taxes, fees, assessments or other obligations which are imposed by any government or governmental agency pursuant to any new law, regulation or ruling, or pursuant to changes in the interpretation or application of existing laws, regulations or rulings, which cause an increase or decrease in Seller's cost for the production, mining, or preparation of coal to be supplied to Buyer hereunder. If any Governmental Imposition is adopted or becomes effective on or after January 1, 2002, Seller shall notify Buyer and shall 15 ARCH COAL SALES CO., INC. KU Contract # KUF02848 PRB demonstrate to Buyer that such Governmental Imposition has increased or decreased Seller's cost of owning or operating the coal mines designated as sources hereunder as it relates to the production, mining or preparation of coal from such mines for sale to Buyer under this Agreement. The purchase price for coal to be paid by Buyer hereunder shall then be adjusted by adding or subtracting the per ton cost of the Governmental Imposition to determine an adjusted purchase price. If the Governmental Imposition will continue for the life of this Agreement, then the purchase price for subsequent Contract Years, if any, shall also be adjusted by the per ton amount of the Governmental Imposition. (b) Seller shall submit to Buyer in writing, an analysis identifying the Governmental Imposition causing the cost impact and the extent of such cost impact on Seller's ownership or operation of the coal mines or on Seller's cost for the production, mining or preparation of coal purchased hereunder and showing the calculation of the amount of change in the purchase price. The effective date of any price increase or decrease pursuant to this section shall be the effective date of the Governmental Imposition causing the cost increase or decrease, as the case may be. SECTION 9. INVOICES, BILLING AND PAYMENT. Section 9.1 INVOICING: Invoices for Buyer will be sent to the following address: 16 ARCH COAL SALES CO., INC. KU Contract # KUF02848 PRB Kentucky Utilities Company 220 West Main Street Louisville, KY 40202 Attention: Fuels Management Department Section 9.2 INVOICE PROCEDURES FOR COAL SHIPMENTS. Seller shall invoice Buyer at the Base Price, minus any quality price discounts, for all coal unloaded in a calendar month by the fifteenth (15th) of the following month. Section 9.3 PAYMENT PROCEDURES FOR COAL SHIPMENTS. Payment for coal unloaded in a calendar month shall be mailed or wired by the 25th of the month following the month of unloading, except that, if the 25th is a weekend or a holiday observed by the Buyer, payment shall be made on the next business day or within ten days after receipt of Seller's invoice, whichever is later. Buyer shall electronically transfer all payments to Seller's account at: Arch Coal, Inc. PNC Bank - Pittsburgh, PA ABA Number: 043000096 Account Number: 1002430324 Section 9.4 WITHHOLDING. Buyer shall have the right to withhold from payment of any billing or billings (i) any sums which it is not able in good faith to verify or which it otherwise in good faith disputes, (ii) any damages resulting from any breach of this Agreement by Seller, and (iii) any amounts owed to Buyer from Seller. Buyer shall notify Seller promptly in writing of any such issues, stating the basis of its claim and the amount it intends to withhold. Payment by Buyer, whether knowing or inadvertent, of any amount in dispute shall not be deemed a waiver of any claims or rights by Buyer with respect to any disputed amounts or payments made. 17 ARCH COAL SALES CO., INC. KU Contract # KUF02848 PRB SECTION 10. FORCE MAJEURE. Section 10.1 GENERAL FORCE MAJEURE. If either party hereto is delayed in or prevented from performing any of its obligations or from utilizing the coal sold under this Agreement, in whole or in part, due to acts of God, war, riots, civil insurrection, acts of the public enemy, inability to obtain permits after applying for same with reasonable diligence, strikes, lockouts, fires, floods or earthquakes, or other causes of a similar nature, which are beyond the reasonable control and without the fault or negligence of the party affected thereby, then the obligations of both parties hereto shall be suspended to the extent made necessary by such event; provided that the affected party gives written notice to the other party as early as practicable after the occurrence of the force majeure event. Such written notice shall include the probable duration and the nature of the force majeure event. The party declaring force majeure shall exercise due diligence to avoid and shorten the force majeure event and will keep the other party advised as to the continuance of the force majeure event. During any period in which Seller's ability to perform hereunder is affected by a force majeure event, Seller shall not deliver any coal to any other buyers to whom Seller's ability to supply is similarly affected by such force majeure event unless contractually committed to do so at the beginning of the force majeure event; and further shall deliver to Buyer under this Agreement at least a pro rata portion (on a per ton basis) of its total contractual commitments to all its buyers to whom Seller's ability to supply is similarly affected by such force majeure event in place at the beginning of the force majeure event. An event which affects the Seller's ability 18 ARCH COAL SALES CO., INC. KU Contract # KUF02848 PRB to produce or obtain coal from a mine other than the Coal Property will not be considered a force majeure event hereunder. Tonnage deficiencies resulting from Seller's force majeure event shall be made up at Buyer's sole option on a mutually agreeable schedule; tonnage deficiencies resulting from Buyer's force majeure event shall be made up at Seller's sole option on a mutually agreeable schedule. Section 10.2 ENVIRONMENTAL LAW FORCE MAJEURE. The parties recognize that, during the continuance of this Agreement, legislative or regulatory bodies or the courts may adopt or reinterpret environmental laws, regulations, policies and/or restrictions which will make it impossible or commercially impracticable for Buyer to utilize this or like kind and quality coal which thereafter would be delivered hereunder. If as a result of the adoption or reinterpretation of such laws, regulations, policies, or restrictions, or change in the interpretation or enforcement thereof, Buyer decides that it will be impossible or commercially impracticable (uneconomical) for Buyer to utilize such coal, Buyer shall so notify Seller, and thereupon Buyer and Seller shall promptly consider whether corrective actions can be taken in the mining and preparation of the coal at Seller's mine and/or in the handling and utilization of the coal at Buyer's generating station; and if in Buyer's sole judgment such actions will not, without unreasonable expense to Buyer, make it possible and commercially practicable for Buyer to so utilize coal which thereafter would be delivered hereunder without violating any applicable law, regulation, policy or order, Buyer shall have the right, upon the later of 60 days notice to Seller or the effective date 19 ARCH COAL SALES CO., INC. KU Contract # KUF02848 PRB of such restriction, to terminate this Agreement without further obligation hereunder on the part of either party. SECTION 11. CHANGES. Buyer may, by mutual agreement with Seller, at any time by written notice pursuant to Section 12 of this Agreement, make changes within the general scope of this Agreement in any one or more of the following quality of coal or coal specifications, quantity of coal, method or time of shipments, place of delivery (including transfer of title and risk of loss), method(s) of weighing, sampling or analysis and such other provision as may affect the suitability and amount of coal for Buyer's generating stations. If any such changes makes necessary or appropriate an increase or decrease in the then current price per ton of coal, or in any other provision of this Agreement, an equitable adjustment shall be made in price, whether current or future or both, and/or in such other provisions of this Agreement as are affected directly or indirectly by such change, and the Agreement shall thereupon be modified in writing accordingly. Any claim by the Seller for adjustment under this Section 11 shall be asserted within thirty (30) days after the date of Seller's receipt of the written notice of the requested change, it being understood, however that Seller shall not be obligated to modify this Agreement until an equitable adjustment has been agreed upon. The parties agree to negotiate promptly and in good faith to agree upon the nature and extent of any equitable adjustment. SECTION 12. NOTICES. 20 ARCH COAL SALES CO., INC. KU Contract # KUF02848 PRB Section 12.1 FORM AND PLACE OF NOTICE. Any official notice, request for approval or other document required to be given under this Agreement shall be in writing, unless otherwise provided herein, and shall be deemed to have been sufficiently given when delivered in person, transmitted by facsimile or other electronic media, delivered to an established mail service for same day or overnight delivery, or dispatched in the United States mail, postage prepaid, for mailing by first class, certified, or registered mail, return receipt requested, and addressed as follows: If to Buyer: Kentucky Utilities Company 220 West Main Street Louisville, Kentucky 40202 Attn.: Director, Corporate Fuels If to Seller: Arch Coal Sales Company, Inc. CityPlace One, Suite 300 St. Louis, Missouri 63141 Attn: Regional Vice-President Sales Section 12.2 CHANGE OF PERSON OR ADDRESS. Either party may change the person or address specified above upon giving written notice to the other party of such change. Section 12.3 ELECTRONIC DATA TRANSMITTAL. Seller hereby agrees, at Seller's cost, to electronically transmit shipping notices and/or other data to Buyer in a format acceptable to and established by Buyer upon Buyer's request. Buyer shall provide Seller with the appropriate format and will inform Seller as to the electronic data requirements at the appropriate time. 21 ARCH COAL SALES CO., INC. KU Contract # KUF02848 PRB SECTION 13. RIGHT TO RESELL. Buyer shall have the unqualified right to sell all or any of the coal purchased under this Agreement. Seller makes no representations or warranties concerning any coal that Buyer resells to other parties, and Buyer shall indemnify and defend Seller against any claims arising from the sale of coal by Buyer to any such parties or the use thereof by those parties. SECTION 14. INDEMNITY AND INSURANCE. Section 14.1 INDEMNITY. Seller agrees to indemnify and save harmless Buyer, its officers, directors, employees and representatives from any responsibility and liability for any and all claims, demands, losses, legal actions for personal injuries, property damage and pollution (including reasonable inside and outside attorney's fees) (i) due to any failure of Seller to comply with laws, regulations or ordinances, or (ii) due to the acts or omissions of Seller in the performance of this Agreement. Section 14.2 INSURANCE. Seller agrees to carry insurance coverage with minimum limits as follows: (1) Commercial General Liability, including Completed Operations and Contractual Liability, $1,000,000 single limit liability. (2) Automobile General Liability, $1,000,000 single limit liability. (3) In addition, Seller shall carry excess liability insurance covering the foregoing perils in the amount of $4,000,000 for any one occurrence. (4) Workers' Compensation and Employer's Liability with statutory limits. 22 ARCH COAL SALES CO., INC. KU Contract # KUF02848 PRB If any of the above policies are written on a claim made basis, then the retroactive date of the policy or policies will be no later than the effective date of this Agreement. Certificates of Insurance satisfactory in form to the Buyer and signed by the Seller's insurer shall be supplied by the Seller to the Buyer evidencing that the above insurance is in force and that not less than 30 calendar days written notice will be given to the Buyer prior to any cancellation or material reduction in coverage under the policies. The Seller shall cause its insurer to waive all subrogation rights against the Buyer respecting all losses or claims arising from performance hereunder. Evidence of such waiver satisfactory in form and substance to the Buyer shall be exhibited in the Certificate of Insurance mentioned above. Seller's liability shall not be limited to its insurance coverage. SECTION 15. TERMINATION FOR DEFAULT. Subject to Section 6.4, if either party hereto commits a material breach of any of its obligations under this Agreement at any time, including, but not limited to, a breach of a representation and warranty set forth herein, then the other party has the right to give written notice describing such breach and stating its intention to terminate this Agreement no sooner than 30 days after the date of the notice (the "notice period"). If such material breach is curable and the breaching party cures such material breach within the notice period, then the Agreement shall not be terminated due to such material breach. If such material breach is not curable or the breaching party fails to cure such material breach within the notice period, then this Agreement may be terminated by the 23 ARCH COAL SALES CO., INC. KU Contract # KUF02848 PRB non-breaching party at the end of the notice period in addition to all the other rights and remedies available to the non-breaching party under this Agreement and at law and in equity. SECTION 16. TAXES, DUTIES AND FEES. Seller shall pay when due, and the price set forth in Section 8 of this Agreement shall be inclusive of, all taxes, duties, fees and other assessments of whatever nature imposed by governmental authorities with respect to the transactions contemplated under this Agreement, as such price may be adjusted pursuant to Section 8.4. SECTION 17. DOCUMENTATION AND RIGHT OF AUDIT. Seller shall maintain all records and accounts pertaining to payments, quantities, quality analyses, and source for all coal supplied under this Agreement for a period lasting through the term of this Agreement and for two years thereafter. Buyer shall have the right at no additional expense to Buyer to audit, copy and inspect such records and accounts at any reasonable time upon reasonable notice during the term of this Agreement and for 2 years thereafter. SECTION 18. EQUAL EMPLOYMENT OPPORTUNITY. To the extent applicable, Seller shall comply with all of the following provisions which are incorporated herein by reference: Equal Opportunity regulations set forth in 41 CFR Section 60-1.4(a) and (c) prohibiting discrimination against any employee or applicant for employment because of race, color, religion, sex, or national origin; Vietnam Era Veterans Readjustment Assistance Act regulations 24 ARCH COAL SALES CO., INC. KU Contract # KUF02848 PRB set forth in 41 CFR Section 50-250.4 relating to the employment and advancement of disabled veterans and veterans of the Vietnam Era; Rehabilitation Act regulations set forth in 41 CFR Section 60-741.4 relating to the employment and advancement of qualified disabled employees and applicants for employment; the clause known as "Utilization of Small Business Concerns and Small Business Concerns Owned and Controlled by Socially and Economically Disadvantaged Individuals" set forth in 15 USC Section 637(d)(3); and subcontracting plan requirements set forth in 15 USC Section 637(d). SECTION 19. 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 undertake reasonable care and precautions to prevent personal injuries to any representatives, agents or employees of Buyer (collectively, "Visitors") who inspect the Coal Property. Any such Visitors shall make every reasonable effort to comply with Seller's regulations and rules regarding conduct on the work site, made known to Visitors prior to entry, as well as safety measures mandated by state or federal rules, regulations and laws. Buyer understands that mines and related facilities are inherently high-risk environments. Buyer's failure to inspect the Coal Property or to object to defects therein at the time Buyer inspects the same shall not relieve Seller of any of its responsibilities nor be deemed to be a waiver of any of Buyer's rights hereunder. 25 ARCH COAL SALES CO., INC. KU Contract # KUF02848 PRB SECTION 20. MISCELLANEOUS. Section 20.1 APPLICABLE LAW. This Agreement shall be construed in accordance with the laws of the Commonwealth of Kentucky, and all questions of performance of obligations hereunder shall be determined in accordance with such laws. Section 20.2 HEADINGS. The paragraph headings appearing in this Agreement are for convenience only and shall not affect the meaning or interpretation of this Agreement. Section 20.3 WAIVER. The failure of either party to insist on strict performance of any provision of this Agreement, or to take advantage of any rights hereunder, shall not be construed as a waiver of such provision or right. Section 20.4 REMEDIES CUMULATIVE. Remedies provided under this Agreement shall be cumulative and in addition to other remedies provided under this Agreement or by law or in equity. Section 20.5 SEVERABILITY. If any provision of this Agreement is found contrary to law or unenforceable by any court of law, the remaining provisions shall be severable and enforceable in accordance with their terms, unless such unlawful or unenforceable provision is material to the transactions contemplated hereby, in which case the parties shall negotiate in good faith a substitute provision. Section 20.6 BINDING EFFECT. This Agreement shall bind and inure to the benefit of the parties and their successors and assigns. Section 20.7 ASSIGNMENT. 26 ARCH COAL SALES CO., INC. KU Contract # KUF02848 PRB A. Seller shall not, without Buyer's prior written consent, which consent shall not be unreasonably withheld, make any assignment or transfer of this Agreement, by operation of law or otherwise, including without limitation any assignment or transfer as security for any obligation, and shall not assign or transfer the performance of or right or duty to perform any obligation of Seller hereunder; provided, however, that Seller may assign the right to receive payments for coal directly from Buyer to a lender as part of any accounts receivable financing or other revolving credit arrangement which Seller may have now or at any time during the term of this Agreement. B. Buyer shall not, without Seller's prior written consent, which consent shall not be unreasonably withheld, assign this Agreement or any right for the performance of or right or duty to perform any obligation of Buyer hereunder; except that, without such consent, Buyer may assign this Agreement in connection with a transfer by Buyer of all or a majority interest in the Buyer's Ghent Generating Station, or as part of a merger or consolidation involving Buyer. C. In the event of an assignment or transfer contrary to the provisions of this section, the non-assigning party may terminate this Agreement immediately. Section 20.8 ENTIRE AGREEMENT. This Agreement contains the entire agreement between the parties as to the subject matter hereof, and there are no representations, understandings or agreements, oral or written, which are not included herein. Without limiting the foregoing (a) this Agreement shall not be construed as a requirements or similar agreement, and (b) this Agreement shall not be construed as affecting Buyer's ability to negotiate with and/or acquire other sources of coal from third parties throughout the term hereof. 27 ARCH COAL SALES CO., INC. KU Contract # KUF02848 PRB Section 20.9 AMENDMENTS. Except as otherwise provided herein, this Agreement may not be amended, supplemented or otherwise modified except by written instrument signed by both parties hereto. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written. BUYER SELLER KENTUCKY UTILITIES COMPANY ARCH COAL SALES COMPANY, INC. By: /s/ Paul W. Thompson By: /s/ John Eaves ------------------------------- -------------- Paul W. Thompson John Eaves - President Senior VP - Energy Services Date: 12/31/01 Date: 12/19/01 28 ARCH COAL SALES CO., INC. KU Contract # KUF02848 PRB Exhibit A Page 1 of 2 EXHIBIT A SAMPLE COAL PAYMENT CALCULATIONS Total Evaluated Coal Costs for Contract No. KU F02848 For contracts supplied from multiple "origins", each "origin will be calculated individually.
SECTION I BASE DATA -------------------------------------------------------------- ---------------------------- 1) Base F.O.B. price per ton: $ 10.50 /ton ---------- 1a) Tons of coal delivered: ---------- tons 2) Guaranteed average heat content: 8,800 BTU/LB. ---------- 2r) As received monthly avg. heat content: ---------- BTU/LB. 2a) Energy delivered in MMBTU: ---------- MMBTU (Line 1a) *2,000 lb./ton*(Line 2r) *MMBTU/1,000,000 BTU ( ) *2,000 lb./ton*( ) *MMBTU/1,000,000 BTU 2b) Base F.O.B. price per MMBTU: $ 0.5966 MMBTU ---------- (Line 1)/(Line 2)*(1 ton/2,000 lb.)*1,000,000 BTU/MMBTU ( /ton)/( BTU/LB) *(1 ton/2,000 lb.)*1,000,000 BTU/MMBTU 3) Guaranteed shipment. max. SO2 1.20 LBS./MMBTU ---------- 3r) Number of tons > 1.20 lbs SO2/Mmbtu ---------- TONS 4) Guaranteed monthly avg. ash 6.82 LBS./MMBTU ---------- 4r) As received monthly avg. ash ---------- LBS./MMBTU 5) Guaranteed monthly avg. max. moisture 30.68 LBS./MMBTU ---------- 5r) As received monthly avg. moisture ---------- LBS./MMBTU SECTION II DISCOUNTS ---------- --------- Assign a (-) to all discounts (round to (5) decimal places) 6d) BTU/LB.: If line 2r < 8,600 BTU/lb. then: {1 - (line 2r) / (line 2)} * $0.2604/MMBTU {1 - ( ) / ( )} * $0.2604 = $ /MMBTU ---------- 7d) SO2: If any individual shipment is greater than 1.20 lbs./MMBTU (line 3r) * $3.00 per ton / line 2a ( ) * (3.00) / ( ) = $ /MMBTU ---------- 8d) ASH: If line 4r is greater than 7.95 lbs./MMBTU (line 4r) - (line 4) * 0.00863/MMBTU ( ) - ( ) * 0.00863 = $ /MMBTU ---------- 9d) MOISTURE: If line 5r is greater than 31.81 lbs./MMBTU (line 5r) - (line 5) * 0.0016/MMBTU ( ) - ( ) * 0.0016 = $ /MMBTU ----------
29 ARCH COAL SALES CO., INC. KU Contract # KUF02848 PRB Exhibit A Page 2 of 2
TOTAL PRICE SECTION III ADJUSTMENTS -------------------------------------------- ---------------- Determine total Discounts as follows: Assign a (-) to all discounts (round to (5) decimal places) Line 6d: $ /MMBTU ------------- Line 7d $ /MMBTU ------------- Line 8d $ /MMBTU ------------- Line 9d $ /MMBTU ------------- 10) Total Discounts (-): Algebraic sum of above: $ /MMBTU ------------- 11) Total evaluated coal price = (line 2b) + (line 10) 12) Total discount price adjustment for Energy delivered: (line 2a) * (line 10) (-) $ /MMBTU + $ /MMBTU = $ -------- ------------- ----------- 13) Total base cost of coal (line 2a) * (line 2b) $ /MMBTU + $ /MMBTU = $ -------- ------------- ----------- 14) Total coal payment for month (line 12) + (line 13) $ /MMBTU + $ = $ -------- ------------- -----------
30 ARCH COAL SALES CO., INC. KU Contract # KUF02848 PRB EXHIBIT B Arch Coal Sales Company, Inc. KU/LG&E Contract #KUF02848 January 1, 2002 Pricing Breakdown
$ Per MMBtu $ Per Ton 2002 & 2003 2002 & 2003 ----------------------------------------- FIXED 0.425 7.480 ROYALTY 0.0746 1.313 SEVERANCE 0.0282 0.496 AD VALOREM 0.0241 0.424 BLACK LUNG 0.0252 0.443 RECLAMATION FEE 0.0195 0.344 -------- ------- 0.5966 10.500 ======== ======= 2002 & 2003 ------------- Royalty Amount : Base Price X 12.50% = $1.313 Wyoming Severance Tax: (7.00% X 67.5%) X Base Price = $0.496 Wyoming Ad Valorem Tax: (5.9880% X 67.5%) X Base Price = $0.424 Federal Black Lung Excise Tax: 4.40% X (Base Price - Fed. Black Lung) = $0.443 Federal Coal Reclamation Fee : (1.00 - .0171 = .9829) X $.35 = $0.344 ----------- $3.020 ----------- 2000 Ad Valorem Rate 5.9880% 2000 Direct Cost Ratio 67.500%
2nd Qtr 2001 Excess Moisture 1.71% The excess moisture is fixed at 1.71% for the duration of this Agreement. The Wyoming Ad Valorem and Wyoming Severance Tax shall be adjusted only for changes in the applicable statutory rates, excluding any changes in the direct mining ratio. The direct mining ratio is fixed at 67.5% for the duration of this Agreement. Values for Govermental Impositions Cost Formulas 31 ARCH COAL SALES CO., INC. KU Contract # KUF02848 PRB
2002 & 2003 ------------ Direct Mining Cost Ratio (Assumed) 67.5000% Severance Tax Rate 7.0000% General Mill Levy Rate (1) 5.9880% Federal & State Royalty Rate 12.0000% Federal Black Lung Excise Tax Rate (2) 4.4000% Federal Coal Reclamation Fee ($/ton) (3) $0.35
(1) Source: Campbell County, Wyoming Tax Notice. The 5.9888% is the rate for Calendar Year 2000. (2) Maximum of $.55 per ton. (3) The Excess Moisture rate will be fixed at the estimated rate of 1.71%. Values for Govermental Impositions Cost Formulas BLM Royalty = (Base Price) X (Federal & State Royalty Rate) Severance Tax = (Base Price) X (Severance Tax Rate) X (Direct Mining Cost Ratio) Federal Black Lung Excise Tax = (Base Price) - (Federal Black Lung Excise Tax) X 4.4% (4) Federal Reclamation Fee =(Base Price) X ( 1 - Excess Moisture) Ad Valorem Tax = (General Mill Levy Rate) X (Direct Mining Cost Ratio) X (Base Price) (4) Effective rate (4.4%) / ( 1 + .044) = 4.2146% SECTION 4 STATES THE SOURCE OF THE COAL IN THIS AGREEMENT SHALL BE SUPPLIED PRIMARILY FROM BLACK THUNDER MINE LOCATED IN CAMPBELL COUNTY, WYOMING. THE ABOVE HAS BEEN PRICE IN ACCORDANCE WITH THE LAWS OF WYOMING. 32 ARCH COAL SALES CO., INC. KU Contract # KUF02848 PRB GUARANTY AGREEMENT THIS GUARANTY AGREEMENT ("Guaranty") is made and entered into this 1st day of January 2002 by ARCH COAL, INC. ("Arch"), a Delaware corporation, with offices at CityPlace One, Suite 300, St. Louis, Missouri 63141, to and for the benefit of KENTUCKY UTILITIES COMPANY ("Buyer"), a Kentucky corporation, with offices at 220 West Main Street, Louisville, Kentucky 40202. WHEREAS, Buyer and Arch Coal Sales Company, Inc. ("Seller"), a Delaware corporation, with offices at CityPlace One, Suite 300, St. Louis, Missouri 63141, which Seller is agent for the independent operating subsidiaries of Arch, propose to enter into a Coal Supply Contract dated on or about January 1, 2002 ("Contract") for a coal supply from the Black Thunder Mine in Campbell County, Wyoming (the "Coal Property"); and WHEREAS, Buyer's performance under the Contract will benefit Arch through the Seller, and to induce Buyer to enter into the Contract, Arch is willing to guarantee to Buyer, its successors, representatives and assigns, Seller's performance of Seller's obligations (collectively, the "Obligations") set forth in the Contract and any extension or amendment thereof executed by Buyer and Seller. NOW, THEREFORE, for and in consideration of the sum of Ten Dollars ($10.00) and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Arch hereby agrees as follows: 1) GUARANTY - Arch guarantees to Buyer Seller's performance of the Obligations and agrees that this Guaranty shall inure to the benefit of and may be enforced by Buyer, its successors, representatives and assigns. 2) ACCEPTANCE AND AMENDMENTS - Arch waives notice of acceptance of this Guaranty, and consents to any and all waivers and extension of the time of performance and to any and all changes, modifications or amendments in the terms, covenants and conditions in the Contract agreed to by Seller in accordance with the terms of the Contract. 3) BUYER'S REMEDIES - Arch agrees that this Guaranty may be enforced by Buyer without first enforcing Buyer's rights under the Contract against Seller; provided, however, that nothing herein contained shall prevent Buyer from enforcing the Contract with or without making Arch a party to the suit. 4) ARCH'S DEFENSES - Except as otherwise provided in Section 5 of this Guaranty, Arch shall be entitled to the benefit of any defenses which Seller may have to the enforcement by Buyer of any of the Obligations. 5) SELLER'S BANKRUPTCY - Arch agrees that its obligations under this Guaranty shall not be impaired, modified, changed, released or limited in any manner whatsoever by any impairment, modification, change, release or limitation of the liability of Seller (or Seller's estate in bankruptcy) resulting from the operation of any present or future provision of the federal bankruptcy law or other similar statute. 33 ARCH COAL SALES CO., INC. KU Contract # KUF02848 PRB 6) EXPENSES - If any claim by Buyer is successfully prosecuted against Arch under this Guaranty, Arch shall reimburse Buyer for all reasonable expenses incurred by Buyer in connection therewith, including reasonable attorneys' fees. 7) REPRESENTATIONS - Arch represents that: a. Arch is a validly organized corporation duly existing and in good standing under the laws of the State of Delaware. b. The giving of this Guaranty is within Arch's corporate powers. c. The giving of this Guaranty has been pursuant to all necessary corporate action, if any, and does not contravene any law or any contractual restriction binding on Arch. d. This Guaranty is a legal, valid and binding obligation, enforceable against Arch in accordance with its terms. 8) WAIVER BY BUYER - The failure of Buyer to enforce any of the provisions of this Guaranty at any time or for any period of time shall not be construed to be a waiver of any such provision or of the right thereafter to enforce the same. 9) GOVERNING LAW - This Guaranty shall be interpreted and enforced in accordance with the laws of the Commonwealth of Kentucky. 10) NOTICES - Any notice, request, consent, demand, report or statement which is given to or made upon either party hereto by the other party hereto under any of the provisions of this Guaranty shall be in writing unless otherwise provided herein and shall be treated as duly delivered when the same is received by the party to be notified whether by personal delivery, or by the United States mail, as evidenced by a receipt or by telecopier and confirmed by United States mail, as evidenced by a receipt. Notices shall be properly addressed as follows: As to Buyer: Kentucky Utilities Company 220 West Main Street Louisville, Kentucky 40202 Attn: Director, Corporate Fuels As to Seller: Arch Coal Sales Company, Inc. CityPlace One, Suite 300 St. Louis, Missouri 63141 Attn: Regional Vice-President Sales As to Arch: Arch Coal, Inc. CityPlace One Suite 300 St. Louis, Missouri 63141 Attn: General Counsel 34 ARCH COAL SALES CO., INC. KU Contract # KUF02848 PRB Either party hereto may change its address or representative for the purposes of notices or communications hereunder by furnishing notice thereof to the other party in compliance with this provision 11) ASSIGNMENT - Arch's rights and obligations under this Guaranty may be assigned to the ultimate parent company of an approved assignee of Seller's rights and obligations under the Contract, provided the assignment provisions of the Contract shall control and provided further, such that a wholly-owned subsidiary or wholly affiliate company of the ultimate parent takes title to the Coal Property. If such assignee is not owned either directly or indirectly by Arch and if Buyer has agreed to release Seller from the Obligations, this Guaranty shall terminate and Arch shall be released from any further obligations or liabilities hereunder. If another company with substantial assets becomes the new ultimate parent company of Seller, Arch may, with Buyer's written approval, assign its rights and obligations hereunder to such other company and thereafter, as to Arch, this Guaranty shall terminate, and Arch shall be released from any further obligations or liabilities hereunder. IN WITNESS WHEREOF, Arch has executed this Guaranty as of the date first written above. ARCH COAL, INC. By: ATTEST: 35