-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MaZNTFwl9jmdnFkpO8WoXFkQZWtH5vhFpDp2EVMBcVHWf+0qKHs6Z9JNgOIHq1Ie iyq3i9TZS7ZhlHebgAEgWw== 0000950124-02-001739.txt : 20020513 0000950124-02-001739.hdr.sgml : 20020513 ACCESSION NUMBER: 0000950124-02-001739 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020513 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PEABODY ENERGY CORP CENTRAL INDEX KEY: 0001064728 STANDARD INDUSTRIAL CLASSIFICATION: BITUMINOUS COAL & LIGNITE SURFACE MINING [1221] IRS NUMBER: 134004153 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-16463 FILM NUMBER: 02644327 BUSINESS ADDRESS: STREET 1: 701 MARKET ST CITY: ST LOUIS STATE: MO ZIP: 63101-1826 BUSINESS PHONE: 3143423400 MAIL ADDRESS: STREET 1: 701 MARKET ST CITY: ST LOUIS STATE: MO ZIP: 63101-1826 FORMER COMPANY: FORMER CONFORMED NAME: P&L COAL HOLDINGS CORP DATE OF NAME CHANGE: 19980623 10-Q 1 c69447e10-q.txt QUARTERLY REPORT FOR PERIOD ENDED 3/31/02 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2002 -------------------------------------- Commission File Number 1-16463 -------------------------------------- PEABODY ENERGY CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 13-4004153 - ------------------------------- ------------------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 701 MARKET STREET, ST. LOUIS, MISSOURI 63101-1826 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (314) 342-3400 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. X Yes No Number of shares outstanding of each of the Registrant's classes of Common Stock, as of April 30, 2002: Common Stock, par value $0.01 per share, 52,115,114 shares outstanding. INDEX PART I. FINANCIAL INFORMATION
Item 1. Financial Statements Page ------- Unaudited Condensed Consolidated Statements of Operations for the Quarters Ended March 31, 2002 and 2001............................................. 2 Condensed Consolidated Balance Sheets as of March 31, 2002 (unaudited) and December 31, 2001......................................................... 3 Unaudited Condensed Consolidated Statements of Cash Flows for the Quarters Ended March 31, 2002 and 2001............................................. 4 Notes to Unaudited Condensed Consolidated Financial Statements............ 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................................................................ 17 Item 3. Quantitative and Qualitative Disclosures About Market Risk................ 21 PART II. OTHER INFORMATION Item 1. Legal Proceedings......................................................... 22 Item 6. Exhibits and Reports on Form 8-K.......................................... 22
PART I - FINANCIAL INFORMATION Item 1. Financial Statements. PEABODY ENERGY CORPORATION UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except share and per share information)
Quarter Ended March 31, ---------------------------- 2002 2001 ------------ ------------ REVENUES Sales $ 688,411 $ 660,767 Other revenues 22,218 24,232 ------------ ------------ Total revenues 710,629 684,999 COSTS AND EXPENSES Operating costs and expenses 571,024 555,427 Depreciation, depletion and amortization 58,677 60,829 Selling and administrative expenses 26,283 32,352 Gain on sale of Australian operations -- (171,735) Net gain on property and equipment disposals (305) (673) ------------ ------------ OPERATING PROFIT 54,950 208,799 Interest expense 24,903 44,240 Interest income (519) (1,748) ------------ ------------ INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS 30,566 166,307 Income tax provision 4,585 39,007 Minority interests 3,666 2,883 ------------ ------------ INCOME FROM CONTINUING OPERATIONS 22,315 124,417 Gain from disposal of discontinued operations -- (1,165) ------------ ------------ INCOME BEFORE EXTRAORDINARY ITEM 22,315 125,582 Extraordinary loss from early extinguishment of debt, net of income tax benefit of $2,480 -- 8,545 ------------ ------------ NET INCOME $ 22,315 $ 117,037 ============ ============ BASIC EARNINGS PER COMMON SHARE: Income from continuing operations $ 0.43 $ 3.60 Gain from disposal of discontinued operations -- 0.03 Extraordinary loss from early extinguishment of debt -- (0.24) ------------ ------------ Net income $ 0.43 $ 3.39 ============ ============ WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 52,018,238 27,541,242 ============ ============ DILUTED EARNINGS PER COMMON SHARE: Income from continuing operations $ 0.42 $ 3.60 Gain from disposal of discontinued operations -- 0.03 Extraordinary loss from early extinguishment of debt -- (0.24) ------------ ------------ Net income $ 0.42 $ 3.39 ============ ============ WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 53,731,426 27,541,242 ============ ============ DIVIDENDS DECLARED PER SHARE $ 0.10 $ -- ============ ============
See accompanying notes to unaudited condensed consolidated financial statements. 2 PEABODY ENERGY CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share information)
(Unaudited) March 31, 2002 December 31, 2001 -------------- ----------------- ASSETS Current assets Cash and cash equivalents $ 16,115 $ 38,622 Accounts receivable, less allowance for doubtful accounts of $1,515 at March 31, 2002 and $1,496 at December 31, 2001 192,724 178,076 Materials and supplies 40,421 38,734 Coal inventory 198,743 176,910 Assets from coal and emission allowance trading activities 75,634 60,509 Deferred income taxes 14,380 14,380 Other current assets 24,408 20,223 ----------- ----------- Total current assets 562,425 527,454 Property, plant, equipment and mine development, net of accumulated depreciation, depletion and amortization of $734,580 at March 31, 2002 and $684,707 at December 31, 2001 4,348,891 4,355,912 Investments and other assets 262,353 267,536 ----------- ----------- Total assets $ 5,173,669 $ 5,150,902 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Short-term borrowings and current maturities of long-term debt $ 72,293 $ 46,499 Liabilities from coal and emission allowance trading activities 51,679 45,691 Accounts payable and accrued expenses 574,263 592,113 ----------- ----------- Total current liabilities 698,235 684,303 Long-term debt, less current maturities 972,734 984,568 Deferred income taxes 569,348 564,764 Accrued reclamation and other environmental liabilities 434,879 438,526 Workers' compensation obligations 209,082 207,720 Accrued postretirement benefit costs 962,643 962,166 Obligation to industry fund 48,949 49,710 Other noncurrent liabilities 176,970 176,593 ----------- ----------- Total liabilities 4,072,840 4,068,350 Minority interests 47,921 47,080 Stockholders' equity Preferred Stock - $0.01 per share par value; 10,000,000 shares authorized, no shares issued or outstanding as of March 31, 2002 or December 31, 2001 -- -- Series Common Stock - $0.01 per share par value; 40,000,000 shares authorized, no shares issued or outstanding as of March 31, 2002 or December 31, 2001 -- -- Common Stock - $0.01 per share par value; 150,000,000 shares authorized, 52,037,480 shares issued and 52,020,275 shares outstanding as of March 31, 2002 and 150,000,000 shares authorized, 52,027,451 shares issued and 52,010,246 shares outstanding as of December 31, 2001 520 520 Additional paid-in capital 951,740 951,528 Retained earnings 133,316 116,203 Employee stock loans (2,280) (2,391) Accumulated other comprehensive loss (30,345) (30,345) Treasury shares, at cost: 17,205 shares as of March 31, 2002 and December 31, 2001 (43) (43) ----------- ----------- Total stockholders' equity 1,052,908 1,035,472 ----------- ----------- Total liabilities and stockholders' equity $ 5,173,669 $ 5,150,902 =========== ===========
See accompanying notes to unaudited condensed consolidated financial statements. 3 PEABODY ENERGY CORPORATION UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Quarter Ended March 31, ---------------------- 2002 2001 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 22,315 $ 117,037 Gain from disposal of discontinued operations -- (1,165) Extraordinary loss from early extinguishment of debt, net of taxes -- 8,545 --------- --------- Income from continuing operations 22,315 124,417 Adjustments to reconcile income from continuing operations to net cash provided by continuing operations: Depreciation, depletion and amortization 58,677 58,565 Deferred income taxes 4,585 41,176 Amortization of debt discount and debt issuance costs 2,859 4,264 Gain on sale of Australian operations -- (171,735) Net gain on property and equipment disposals (305) (673) Minority interests 3,666 2,883 Changes in current assets and liabilities: Sale of accounts receivable -- 15,000 Accounts receivable, net of sale (14,648) (47,550) Materials and supplies (1,687) 2,751 Coal inventory (21,833) (17,152) Net assets from coal and emission allowance trading activities (9,137) (4,918) Other current assets (4,185) 8,411 Accounts payable and accrued expenses (17,851) 58,883 Accrued reclamation and other environmental liabilities (265) (6,428) Workers' compensation obligations 1,362 (2,076) Accrued postretirement benefit costs 477 (1,395) Obligation to industry fund (761) (3,527) Other, net (1,854) (3,941) Net cash used in assets sold - Australian operations -- (4,251) --------- --------- Net cash provided by operating activities 21,415 52,704 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Additions to property, plant, equipment and mine development (47,064) (42,072) Additions to advance mining royalties (2,104) (3,341) Acquisition, net -- (7,450) Investment in joint venture (475) -- Proceeds from sale of Australian operations -- 455,000 Proceeds from property and equipment disposals 833 1,119 --------- --------- Net cash provided by (used in) continuing operations (48,810) 403,256 Net cash provided by discontinued operations -- 16,938 --------- --------- Net cash provided by (used in) investing activities (48,810) 420,194 --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Net change in short-term borrowings 25,000 -- Proceeds from long-term debt 2,375 38,382 Payments of long-term debt (14,687) (501,620) Distributions to minority interests (2,825) (485) Dividend received -- 19,916 Dividends paid (5,202) -- Other 227 538 --------- --------- Net cash provided by (used in) financing activities 4,888 (443,269) --------- --------- Net increase (decrease) in cash and cash equivalents (22,507) 29,629 Cash and cash equivalents at beginning of year 38,622 33,094 --------- --------- Cash and cash equivalents at end of period $ 16,115 $ 62,723 ========= =========
See accompanying notes to unaudited condensed consolidated financial statements. 4 PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (1) BASIS OF PRESENTATION The condensed consolidated financial statements include the accounts of Peabody Energy Corporation ("the Company") and its controlled affiliates. All significant intercompany transactions, profits and balances have been eliminated in consolidation. The consolidated statements of operations and cash flows for the quarter ended March 31, 2001 include the results of the Company's Australian operations, which were sold in January 2001. The accompanying condensed consolidated financial statements as of March 31, 2002 and for the quarters ended March 31, 2002 and 2001, and the notes thereto, are unaudited. However, in the opinion of management, these financial statements reflect all adjustments necessary for a fair presentation of the results of the periods presented. The results of operations for the quarter ended March 31, 2002 are not necessarily indicative of the results to be expected for the year ended December 31, 2002. In July 2001, the Company changed its fiscal year-end from March 31 to December 31. This change was first effective with respect to the nine months ended December 31, 2001. (2) SECONDARY OFFERING On April 5, 2002, certain shareholders of the Company, including the Company's largest shareholder, Lehman Brothers Merchant Banking Partners II L.P. and affiliates ("Lehman Brothers") sold 9,000,000 shares of common stock. Selling shareholders received all net proceeds. The Company did not sell any shares through the offering. The underwriters of the secondary offering were granted the right to purchase up to an additional 1,100,000 shares of common stock to cover over-allotments. The underwriters exercised the over-allotment option, and on May 8, 2002, purchased an additional 148,000 shares. Lehman Brothers sold, in the aggregate, 8,155,000 shares in the offering, and their beneficial ownership of the Company declined from 57% to 41%. (3) EXTRAORDINARY LOSS FROM EARLY EXTINGUISHMENT OF DEBT During the quarter ended March 31, 2001, the Company made optional prepayments on its term loans under its Senior Credit Facility, which it applied against mandatory payments in order of maturity. As a result of the prepayments, the Company recorded an extraordinary loss on debt extinguishment of $8.5 million, net of income taxes. The prepayments were made using proceeds from the sale of the Company's Australian operations. (4) ADOPTION OF NEW ACCOUNTING STANDARDS Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." The adoption of SFAS Nos. 141 and 142 did not have a material effect on the Company's financial condition or results of operations. Also effective January 1, 2002, the Company adopted SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." The provisions of this statement provide a single accounting model for measuring impairment of long-lived assets. The adoption of SFAS No. 144 did not have a material effect on the Company's financial condition or results of operations. 5 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued (5) COAL INVENTORY Inventories consist of the following (dollars in thousands):
March 31, 2002 December 31, 2001 -------------- ----------------- Raw coal $ 22,923 $ 15,979 Work in process 141,318 137,808 Saleable coal 34,502 23,123 -------- -------- Total $198,743 $176,910 ======== ========
(6) ASSETS AND LIABILITIES FROM COAL AND EMISSION ALLOWANCE TRADING ACTIVITIES The fair value of the financial instruments related to coal and emission allowance trading activities as of March 31, 2002, are set forth below (dollars in thousands):
Fair Value ---------------------- Assets Liabilities ------- ----------- Forward contracts $69,925 $48,790 Option contracts 5,709 2,889 ------- ------- Total $75,634 $51,679 ======= =======
Eighty-three percent of the contracts in the Company's trading portfolio as of March 31, 2002 were valued utilizing prices from over-the-counter market sources. The remaining 17% of our contracts were valued based on over-the-counter market source prices adjusted for differences in coal quality and content, as well as contract duration. As of March 31, 2002, the timing of the realization of the value of the Company's trading portfolio was as follows:
Year of Percentage Expiration of portfolio - ---------- ------------ 2002 47% 2003 20% 2004 27% 2005 5% 2006 1% ---- 100% ====
At March 31, 2002, 85% of the Company's credit exposure related to coal and emission allowance trading activities was with counterparties that are investment grade. The Company's coal trading operations traded 28.2 million tons and 14.3 million tons for the quarters ended March 31, 2002 and 2001, respectively. (7) EARNINGS PER SHARE Quarter Ended March 31, 2001 Prior to its initial public offering in May 2001, the Company applied the "two-class method" of computing earnings per share as prescribed in SFAS No. 128, "Earnings Per Share." In accordance with SFAS No. 128, income or loss is allocated to preferred stock, Class A common stock and Class B common stock on a pro-rata basis. Basic and diluted earnings per share is calculated by dividing income from continuing operations, gain from disposal of discontinued operations, extraordinary loss from early extinguishment of debt and net income, respectively, that is attributed to the 6 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued Company's Class A and Class B common shares by the weighted average number of common shares outstanding for each class of common stock. A reconciliation of income from continuing operations, gain from disposal of discontinued operations, extraordinary loss from early extinguishment of debt and net income follows (dollars in thousands):
Quarter Ended March 31, 2001 -------------- Income from continuing operations attributed to: Preferred stock $ 25,257 Class A common stock 95,801 Class B common stock 3,359 --------- $ 124,417 ========= Gain from disposal of discontinued operations attributed to: Preferred stock $ 236 Class A common stock 897 Class B common stock 32 --------- $ 1,165 ========= Extraordinary loss from early extinguishment of debt attributed to: Preferred stock $ (1,735) Class A common stock (6,580) Class B common stock (230) --------- $ (8,545) ========= Net income attributed to: Preferred stock $ 23,758 Class A common stock 90,118 Class B common stock 3,161 --------- $ 117,037 =========
Any potential difference between basic and diluted earnings per share is solely attributable to stock options. For the quarter ended March 31, 2001, all stock options outstanding were excluded from the diluted earnings per share calculations for the Company's Class A common stock because they were anti-dilutive. Quarter Ended March 31, 2002 In connection with the Company's initial public offering, all outstanding shares of preferred stock, Class A common stock and Class B common stock were converted into a single class of common stock on a one-for-one basis. A reconciliation of the weighted average shares outstanding as of March 31, 2002 follows:
Quarter Ended March 31, 2002 -------------- Weighted average shares outstanding - basic 52,018,238 Dilutive impact of stock options 1,713,188 ---------- Weighted average shares outstanding - diluted 53,731,426 ==========
7 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued (8) COMPREHENSIVE INCOME The following table sets forth the components of comprehensive income (dollars in thousands):
Quarter Ended March 31, ------------------------ 2002 2001 --------- --------- Net income $ 22,315 $ 117,037 Reclassification adjustment resulting from the sale of Australian operations -- 38,811 Minimum pension liability adjustment -- (862) --------- --------- Comprehensive income $ 22,315 $ 154,986 ========= =========
As a result of the sale of its Australian operations, the Company recorded a reduction of the foreign currency translation adjustment account during the quarter ended March 31, 2001. (9) SEGMENT INFORMATION The Company reports its operations through two reportable operating segments: U.S. Mining and Trading and Brokerage. The principal business of the U.S. Mining segment is mining, preparation and sale of its steam coal, sold primarily to electric utilities, and metallurgical coal, sold to steel and coke producers. The Trading and Brokerage segment's principal business is the marketing and trading of coal and emission allowances. "Other" consists primarily of corporate overhead not directly attributable to the U.S. Mining or Trading and Brokerage operating segments, and resource management activities. Operating segment results for the quarters ended March 31, 2002 and March 31, 2001 are as follows (dollars in thousands):
Quarter Ended March 31, ------------------------- 2002 2001 --------- --------- Revenues: U.S. Mining $ 614,491 $ 578,292 Trading and Brokerage 89,540 77,138 Australian Operations -- 20,529 Corporate and Other 6,598 9,040 --------- --------- Total $ 710,629 $ 684,999 ========= ========= Operating Profit: U.S. Mining $ 64,225 $ 52,582 Trading and Brokerage 11,247 6,823 Australian Operations -- 4,326 Corporate and Other (20,522) 145,068(1) --------- --------- Total $ 54,950 $ 208,799 ========= =========
(1) Includes the pretax gain on the sale of the Company's Australian operations of $171.7 million. 8 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued A reconciliation of segment operating profit to consolidated income before income taxes follows (dollars in thousands):
Quarter Ended March 31, ------------------------- 2002 2001 --------- --------- Total segment operating profit $ 54,950 $ 208,799 Interest expense 24,903 44,240 Interest income (519) (1,748) Minority interests 3,666 2,883 --------- --------- Income before income taxes $ 26,900 $ 163,424 ========= =========
(10) COMMITMENTS AND CONTINGENCIES Environmental claims have been asserted against a subsidiary of the Company at 18 sites in the United States. Some of these claims are based on the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended, and on similar state statutes. The majority of these sites are related to activities of former subsidiaries of the Company. The Company's policy is to accrue environmental cleanup-related costs of a noncapital nature when those costs are believed to be probable and can be reasonably estimated. The quantification of environmental exposures requires an assessment of many factors, including changing laws and regulations, advancements in environmental technologies, the quality of information available related to specific sites, the assessment stage of each site investigation, preliminary findings and the length of time involved in remediation or settlement. For certain sites, the Company also assesses the financial capability of other potentially responsible parties and, where allegations are based on tentative findings, the reasonableness of the Company's apportionment. The Company has not anticipated any recoveries from insurance carriers or other potentially responsible third parties in the estimation of liabilities recorded on its consolidated balance sheets. The undiscounted liabilities for environmental cleanup-related costs recorded as part of "Accrued reclamation and other environmental liabilities" were $46.1 million and $46.6 million at March 31, 2002 and December 31, 2001, respectively. This amount represents those costs that the Company believes are probable and reasonably estimable. Navajo Nation On June 18, 1999, the Navajo Nation served the Company's subsidiaries, Peabody Holding Company, Inc., Peabody Coal Company and Peabody Western Coal Company, with a complaint that had been filed in the U.S. District Court for the District of Columbia. Other defendants in the litigation are one customer, one current employee and one former employee. The Navajo Nation has alleged 16 claims, including Civil Racketeer Influenced and Corrupt Organizations Act, or RICO, violations and fraud and tortious interference with contractual relationships. The complaint alleges that the defendants jointly participated in unlawful activity to obtain favorable coal lease amendments. Plaintiff also alleges that defendants interfered with the fiduciary relationship between the United States and the Navajo Nation. The plaintiff is seeking various remedies including actual damages of at least $600 million, which could be trebled under the RICO counts, punitive damages of at least $1 billion, a determination that Peabody Western Coal Company's two coal leases for the Kayenta and Black Mesa mines have terminated due to a breach of these leases and a reformation of the two coal leases to adjust the royalty rate to 20%. All defendants have filed motions to dismiss the complaint. On March 15, 2001, the court denied the Peabody defendants' motions to dismiss. Discovery for this litigation has commenced. In March 2000, the Hopi Tribe filed a motion to intervene in this lawsuit. The Hopi Tribe has alleged seven claims, including fraud. The Hopi Tribe is seeking various remedies, including unspecified actual and punitive damages and reformation of its coal lease. On March 15, 2001, the court granted the Hopi Tribe's motion. On April 17, 2001, the Company filed a motion to dismiss the Hopi complaint. On October 31, 2001, the court denied the Company's motion to dismiss the Hopi complaint. On February 21, 2002, the Company's subsidiaries commenced a lawsuit against the Navajo Nation in the U.S. District Court for the District of Arizona seeking enforcement of an arbitration award or, alternatively, to compel arbitration 9 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued pursuant to the April 1, 1998 Arbitration Agreement with the Navajo Nation. On February 22, 2002, the Company's subsidiaries filed in the U.S. District for the District of Columbia a motion for leave to file an amended answer and conditional counterclaim. The counterclaim is conditional because the Company's subsidiaries contend that the lease provisions the Navajo Nation seeks to invalidate have previously been upheld in an arbitration proceeding and are not subject to further litigation. On March 4, 2002, the Company's subsidiaries filed in the U.S. District Court for the District of Columbia a motion to transfer that case to Arizona or, alternatively, to stay the District of Columbia litigation. On March 29, 2002, the Navajo Nation filed a motion to dismiss the Arizona litigation and an alternative motion to transfer the Arizona litigation to the District of Columbia. Salt River Project Agricultural Improvement and Power District--Price Review In May 1997, Salt River Project Agricultural Improvement and Power District, or Salt River, acting for all owners of the Navajo Generating Station, exercised their contractual option to review certain cumulative cost changes during a five-year period from 1992 to 1996. Peabody Western sells approximately 7 to 8 million tons of coal per year to the owners of the Navajo Generation Station under a long-term contract. In July 1999, Salt River notified Peabody Western that it believed the owners were entitled to a price decrease of $1.92 per ton as a result of the review. Salt River also claimed entitlement to a retroactive price adjustment to January 1997 and that an overbilling of $50.5 million had occurred during the same five-year period. In October 1999, Peabody Western notified Salt River that it believed it was entitled to a $2.00 per ton price increase as a result of the review. The parties were unable to settle the dispute and Peabody Western filed a demand for arbitration in September 2000. The arbitration hearing was held from April 8 to April 12, 2002. The parties will be filing post-hearing briefs with the arbitrators. On February 12, 2001 in a related action, Salt River, again acting for all owners of the Navajo Generating Station, filed a lawsuit against Peabody Western in the Superior Court in Maricopa County in Arizona. This lawsuit seeks to compel arbitration of issues that Peabody Western does not believe are subject to arbitration, namely, (1) the effective date of any price change resulting from the resolution of the price review arbitration discussed above and (2) the validity of Salt River's $50.5 million claim for alleged overcharges by Peabody Western for the period from 1992 through 1996 (the five-year period that was the subject of the price review). If the court declines to compel arbitration of these issues, the lawsuit alternatively requests that the court find in favor of Salt River on these issues. We have removed this matter to the U.S. District Court for the District of Arizona. On October 3, 2001, the U.S. District Court issued an order compelling arbitration with respect to the effective date of any price change and conditionally compelling arbitration with respect to the validity of Salt River's $50.5 million claim. Although we have filed an appeal of this decision with the U.S. Ninth Circuit Court of Appeals, the arbitrators received testimony on these claims during the April hearing. We expect a decision from the arbitrators during the third quarter of 2002. While the outcome of litigation is subject to uncertainties, based on the Company's preliminary evaluation of the issues and the potential impact on us, we believe this matter will be resolved without a material adverse effect on the Company's financial condition or results of operations. In addition, the Company at times becomes a party to claims, lawsuits, arbitration proceedings and administrative procedures in the ordinary course of business. Management believes that the ultimate resolution of pending or threatened proceedings will not have a material effect on the financial position, results of operations or liquidity of the Company. At March 31, 2002, purchase commitments for capital expenditures were approximately $98.4 million. 10 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued (11) SUPPLEMENTAL GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION In accordance with the indentures governing the Senior Notes and Senior Subordinated Notes, certain wholly owned U.S. subsidiaries of the Company have fully and unconditionally guaranteed the Senior Notes and Senior Subordinated Notes on a joint and several basis. Separate financial statements and other disclosures concerning the Guarantor Subsidiaries are not presented because management believes that such information is not material to the holders of the Senior Notes and Senior Subordinated Notes. The following unaudited condensed historical financial statement information is provided for such Guarantor/Non-Guarantor Subsidiaries. PEABODY ENERGY CORPORATION UNAUDITED SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS QUARTER ENDED MARCH 31, 2002 (In thousands)
Parent Guarantor Non-Guarantor Company Subsidiaries Subsidiaries Eliminations Consolidated ------- ------------ ------------ ------------ ------------ Total revenues $ -- $ 558,534 $ 167,686 $ (15,591) $ 710,629 Costs and expenses Operating costs and expenses -- 453,098 133,517 (15,591) 571,024 Depreciation, depletion and amortization -- 46,364 12,313 -- 58,677 Selling and administrative expenses 161 21,436 4,686 -- 26,283 Net gain on property and equipment disposals -- (180) (125) -- (305) Interest expense 33,862 24,525 3,821 (37,305) 24,903 Interest income (17,158) (16,870) (3,796) 37,305 (519) ---------- --------- --------- --------- --------- Income (loss) before income taxes and minority interests (16,865) 30,161 17,270 -- 30,566 Income tax provision (benefit) (2,530) 4,453 2,662 -- 4,585 Minority interests -- -- 3,666 -- 3,666 ---------- --------- --------- --------- --------- Net income (loss) $ (14,335) $ 25,708 $ 10,942 $ -- $ 22,315 ========= ========= ========= ========= =========
11 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued PEABODY ENERGY CORPORATION UNAUDITED SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS QUARTER ENDED MARCH 31, 2001 (In thousands)
Parent Guarantor Non-Guarantor Company Subsidiaries Subsidiaries Eliminations Consolidated ------- ------------ ------------ ------------ ------------ Total revenues $ -- $ 541,490 $ 168,382 $ (24,873) $ 684,999 Costs and expenses Operating costs and expenses -- 451,072 129,228 (24,873) 555,427 Depreciation, depletion and amortization -- 45,956 14,873 -- 60,829 Selling and administrative expenses 2,673 24,545 5,134 -- 32,352 Gain on sale of Australian operations -- (171,735) -- -- (171,735) Net gain on property and equipment disposals -- (163) (510) -- (673) Interest expense 36,046 26,887 6,909 (25,602) 44,240 Interest income (17,345) (6,547) (3,458) 25,602 (1,748) --------- --------- --------- --------- --------- Income (loss) before income taxes and minority interests (21,374) 171,475 16,206 -- 166,307 Income tax provision (benefit) (15,720) 47,010 7,717 -- 39,007 Minority interests -- -- 2,883 -- 2,883 --------- --------- --------- --------- --------- Income (loss) from continuing operations (5,654) 124,465 5,606 -- 124,417 Gain from disposal of discontinued operations -- (1,165) -- -- (1,165) --------- --------- --------- --------- --------- Income (loss) before extraordinary item (5,654) 125,630 5,606 -- 125,582 Extraordinary loss from early extinguishment of debt, net of income taxes 8,545 -- -- -- 8,545 --------- --------- --------- --------- --------- Net income (loss) $ (14,199) $ 125,630 $ 5,606 $ -- $ 117,037 ========= ========= ========= ========= =========
12 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued PEABODY ENERGY CORPORATION UNAUDITED SUPPLEMENTAL CONDENSED CONSOLIDATED BALANCE SHEETS MARCH 31, 2002 (In thousands)
Parent Guarantor Non-Guarantor Company Subsidiaries Subsidiaries Eliminations Consolidated ----------- ------------ ------------ ------------ ------------ ASSETS Current assets Cash and cash equivalents $ 11,448 $ 728 $ 3,939 $ -- $ 16,115 Accounts receivable 1,625 61,941 129,158 -- 192,724 Inventories -- 222,872 16,292 -- 239,164 Assets from coal and emission allowance trading activities -- 75,183 451 -- 75,634 Deferred income taxes -- 14,380 -- -- 14,380 Other current assets 1,222 15,643 7,543 -- 24,408 ----------- ----------- ----------- ----------- ----------- Total current assets 14,295 390,747 157,383 -- 562,425 Property, plant, equipment and mine development - at cost -- 4,585,012 498,459 -- 5,083,471 Less accumulated depreciation, depletion and amortization -- (645,716) (88,864) -- (734,580) ----------- ----------- ----------- ----------- ----------- Property, plant, equipment and mine development, net -- 3,939,296 409,595 -- 4,348,891 Investments and other assets 3,325,723 225,792 45,718 (3,334,880) 262,353 ----------- ----------- ----------- ----------- ----------- Total assets $ 3,340,018 $ 4,555,835 $ 612,696 $(3,334,880) $ 5,173,669 =========== =========== =========== =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Short-term borrowings and current maturities of long-term debt $ 25,000 $ 10,400 $ 36,893 $ -- $ 72,293 Payables and notes payable to affiliates, net 1,498,227 (1,512,775) 14,548 -- -- Liabilities from coal and emission allowance trading activities -- 51,679 -- -- 51,679 Accounts payable and accrued expenses 25,091 482,056 67,116 -- 574,263 ----------- ----------- ----------- ----------- ----------- Total current liabilities 1,548,318 (968,640) 118,557 -- 698,235 Long-term debt, less current maturities 702,220 72,837 197,677 -- 972,734 Deferred income taxes -- 569,348 -- -- 569,348 Other noncurrent liabilities 6,224 1,817,197 9,102 -- 1,832,523 ----------- ----------- ----------- ----------- ----------- Total liabilities 2,256,762 1,490,742 325,336 -- 4,072,840 Minority interests -- -- 47,921 -- 47,921 Stockholders' equity 1,083,256 3,065,093 239,439 (3,334,880) 1,052,908 ----------- ----------- ----------- ----------- ----------- Total liabilities and stockholders' equity $ 3,340,018 $ 4,555,835 $ 612,696 $(3,334,880) $ 5,173,669 =========== =========== =========== =========== ===========
13 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued PEABODY ENERGY CORPORATION UNAUDITED SUPPLEMENTAL CONDENSED CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2001 (In thousands)
Parent Guarantor Non-Guarantor Company Subsidiaries Subsidiaries Eliminations Consolidated ----------- ------------ ------------- ------------- ------------ ASSETS Current assets Cash and cash equivalents $ 28,121 $ 1,018 $ 9,483 $ -- $ 38,622 Accounts receivable 523 50,448 127,105 -- 178,076 Inventories -- 201,771 13,873 -- 215,644 Assets from coal and emission allowance trading activities -- 60,509 -- -- 60,509 Deferred income taxes -- 14,380 -- -- 14,380 Other current assets 1,222 10,704 8,297 -- 20,223 ----------- ----------- ----------- ----------- ----------- Total current assets 29,866 338,830 158,758 -- 527,454 Property, plant, equipment and mine development - at cost -- 4,561,680 478,939 -- 5,040,619 Less accumulated depreciation, depletion and amortization -- (604,103) (80,604) -- (684,707) ----------- ----------- ----------- ----------- ----------- Property, plant, equipment and mine development, net -- 3,957,577 398,335 -- 4,355,912 Investments and other assets 3,296,950 214,007 45,086 (3,288,507) 267,536 ----------- ----------- ----------- ----------- ----------- Total assets $ 3,326,816 $ 4,510,414 $ 602,179 $(3,288,507) $ 5,150,902 =========== =========== =========== =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Short-term borrowings and current maturities of long-term debt $ -- $ 10,400 $ 36,099 $ -- $ 46,499 Payables and notes payable to affiliates, net 1,544,519 (1,561,645) 17,126 -- -- Liabilities from coal and emission allowance trading activities -- 45,691 -- -- 45,691 Accounts payable and accrued expenses 8,676 528,157 55,280 -- 592,113 ----------- ----------- ----------- ----------- ----------- Total current liabilities 1,553,195 (977,397) 108,505 -- 684,303 Long-term debt, less current maturities 702,623 81,186 200,759 -- 984,568 Deferred income taxes -- 564,764 -- -- 564,764 Other noncurrent liabilities 5,181 1,820,580 8,954 -- 1,834,715 ----------- ----------- ----------- ----------- ----------- Total liabilities 2,260,999 1,489,133 318,218 -- 4,068,350 Minority interests -- -- 47,080 -- 47,080 Stockholders' equity 1,065,817 3,021,281 236,881 (3,288,507) 1,035,472 ----------- ----------- ----------- ----------- ----------- Total liabilities and stockholders' equity $ 3,326,816 $ 4,510,414 $ 602,179 $(3,288,507) $ 5,150,902 =========== =========== =========== =========== ===========
14 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued PEABODY ENERGY CORPORATION UNAUDITED SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS QUARTER ENDED MARCH 31, 2002 (In thousands)
Parent Guarantor Non-Guarantor Company Subsidiaries Subsidiaries Consolidated -------- ------------ ------------- ------------ Net cash provided by (used in) operating activities $ (317) $(12,954) $ 34,686 $ 21,415 -------- -------- -------- -------- Additions to property, plant, equipment and mine development -- (24,622) (22,442) (47,064) Additions to advance mining royalties -- (1,268) (836) (2,104) Investment in joint venture -- (475) -- (475) Proceeds from property and equipment disposals -- 182 651 833 -------- -------- -------- -------- Net cash used in investing activities -- (26,183) (22,627) (48,810) -------- -------- -------- -------- Net change in short-term borrowings 25,000 -- -- 25,000 Proceeds from long-term debt -- 1,153 1,222 2,375 Payments of long-term debt -- (11,177) (3,510) (14,687) Distributions to minority interests -- -- (2,825) (2,825) Dividends paid (5,202) -- -- (5,202) Transactions with affiliates, net (36,381) 48,871 (12,490) -- Other 227 -- -- 227 -------- -------- -------- -------- Net cash provided by (used in) financing activities (16,356) 38,847 (17,603) 4,888 -------- -------- -------- -------- Net decrease in cash and cash equivalents (16,673) (290) (5,544) (22,507) Cash and cash equivalents at beginning of period 28,121 1,018 9,483 38,622 -------- -------- -------- -------- Cash and cash equivalents at end of period $ 11,448 $ 728 $ 3,939 $ 16,115 ======== ======== ======== ========
15 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued PEABODY ENERGY CORPORATION UNAUDITED SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS QUARTER ENDED MARCH 31, 2001 (In thousands)
Parent Guarantor Non-Guarantor Company Subsidiaries Subsidiaries Consolidated --------- ------------ ------------- ------------ Net cash provided by (used in) operating activities $ 2,754 $ 103,196 $ (53,246) $ 52,704 --------- --------- --------- --------- Additions to property, plant, equipment and mine development -- (26,699) (15,373) (42,072) Additions to advance mining royalties -- (3,919) 578 (3,341) Acquisition, net -- (7,450) -- (7,450) Proceeds from sale of Australian operations -- 455,000 -- 455,000 Proceeds from property and equipment disposals -- 944 175 1,119 --------- --------- --------- --------- Net cash provided by (used in) continuing operations -- 417,876 (14,620) 403,256 Net cash provided by (used in) discontinued operations (384) 13,114 4,208 16,938 --------- --------- --------- --------- Net cash provided by (used in) investing activities (384) 430,990 (10,412) 420,194 --------- --------- --------- --------- Proceeds from long-term debt -- -- 38,382 38,382 Payments of long-term debt (455,000) (20,147) (26,473) (501,620) Distributions to minority interests -- -- (485) (485) Dividend received -- 19,916 -- 19,916 Transactions with affiliates, net 452,798 (504,739) 51,941 -- Other -- 538 -- 538 --------- --------- --------- --------- Net cash provided by (used in) financing activities (2,202) (504,432) 63,365 (443,269) --------- --------- --------- --------- Net increase (decrease) in cash and cash equivalents 168 29,754 (293) 29,629 Cash and cash equivalents at beginning of period 5 27,440 5,649 33,094 --------- --------- --------- --------- Cash and cash equivalents at end of period $ 173 $ 57,194 $ 5,356 $ 62,723 ========= ========= ========= =========
16 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS This quarterly report includes statements of our expectations, intentions, plans and beliefs that constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and are intended to come within the safe harbor protection provided by those sections. These statements relate to future events or our future financial performance. We use words such as "anticipate," "believe," "expect," "may," "project," "will" or other similar words to identify forward-looking statements. Without limiting the foregoing, all statements relating to our future outlook, anticipated capital expenditures, future cash flows and borrowings, and sources of funding are forward-looking statements. These forward-looking statements are based on numerous assumptions that we believe are reasonable, but they are open to a wide range of uncertainties and business risks and actual results may differ materially from those discussed in these statements. Among the factors that could cause actual results to differ materially are: o general economic conditions; o milder than normal summer weather; o credit, market and performance risk associated with our customers; o modification or termination of our long-term coal supply agreements; o reduction of purchases by major customers; o transportation performance and costs; o risks inherent to mining, including geologic conditions; o government regulation of the mining industry; o replacement of recoverable reserves; o implementation of new accounting standards; o inflationary trends and interest rates; and o other factors, including those discussed in "Legal Proceedings." When considering these forward-looking statements, you should keep in mind the cautionary statements in this document and all documents incorporated by reference. We will not update these statements unless the securities laws require us to do so. FISCAL YEAR CHANGE In July 2001, we changed our fiscal year end from March 31 to December 31. The change was first effective with respect to the nine months ended December 31, 2001. FACTORS AFFECTING COMPARABILITY Sale of Australian Operations In December 2000, we signed a share purchase agreement for the transfer of the stock in two U.K. holding companies which, in turn, owned our Australian subsidiaries, to a subsidiary of Rio Tinto Limited. Our Australian operations consisted of interests in six coal mines, as well as mining services in Brisbane, Australia. The final sale price was $446.8 million in cash, plus the assumption of all liabilities. During the quarter ended March 31, 2001, we received $455.0 million related to the sale, which closed on January 29, 2001. 17 Discontinued Operations In August 2000, we sold Citizens Power, our subsidiary that marketed and traded electric power and energy-related commodity risk management products, to Edison Mission Energy. We classified Citizens Power as a discontinued operation as of March 31, 2000, and recorded an estimated loss on the sale of $78.3 million, net of income taxes. During the year ended March 31, 2001, we reduced our loss on the sale by $12.9 million; $1.2 million of the loss reduction was recorded in the quarter ended March 31, 2001. QUARTER ENDED MARCH 31, 2002 COMPARED TO QUARTER ENDED MARCH 31, 2001 Sales. Sales for the quarter ended March 31, 2002 for the U.S. operations (which represents all of our operations, except for Australian operations sold in January 2001) increased $43.7 million, to $688.4 million, a 6.8% increase from the prior year quarter. The sales increase was driven by pricing increases in all regions, largely due to multi-year contracts signed in 2001. The U.S. operations' average sales price was 2.7% higher than the prior year quarter. The average pricing increase was slightly mitigated by sales mix, as higher priced tons in the Appalachia and Midwest regions represented a lower percentage of overall sales in the current quarter compared to the prior year quarter. Sales volume for the U.S. operations was 49.8 million tons for the current quarter, compared to 47.9 million tons for the prior quarter, an increase of 4.0%. Higher sales volume at our Powder River Basin and trading and brokerage operations led the increase, while volume at our Appalachia, Midwest, and Southwest operations was at or slightly below prior year levels. Total sales for the quarter increased $27.6 million, or 4.2%, from the prior year quarter. Sales from Australian operations included in the prior year quarter were $16.0 million, from sales volume of 1.0 million tons. Powder River Basin sales increased $42.4 million, due to improved pricing and volume from strong customer demand. Appalachian sales increased $2.3 million, as a result of improved pricing. Sales in the Southwest region were flat, as pricing improvement was offset by lower volume due to two outages of our coal transportation pipeline during the quarter that delayed customer deliveries. Midwest region sales decreased $5.8 million, as higher prices were offset by lower volume due to a delay in the startup of two new mines in the region. Finally, sales from brokerage and trading activities increased $3.6 million due to increased sales volume. Other Revenues. Other revenues for the quarter decreased $2.0 million from the prior year quarter. U.S. operations' other revenue increased $2.5 million, as $8.6 million in higher revenues from trading and brokerage operations were partially offset by lower coalbed methane and coal royalty revenues. In addition, prior year other revenues included $4.5 million of mining services revenues from our Australian operations. Depreciation, Depletion and Amortization. Total depreciation, depletion and amortization expense decreased $2.1 million to $58.7 million in the current quarter. Depreciation, depletion and amortization expense from Australian operations of $2.2 million was included in the quarter ended March 31, 2001. Selling and Administrative Expenses. Selling and administrative expenses of $26.3 million were $6.1 million lower than the prior year quarter, mainly due to stock compensation charges recorded in the prior year quarter related in part to the Company's initial public offering. In addition, selling and administrative expenses from Australian operations of $0.3 million were included in the quarter ended March 31, 2001. Gain on Sale of Australian Operations. On January 29, 2001, we sold our Australian operations to Coal & Allied, a 71%-owned subsidiary of Rio Tinto Limited. The selling price was $446.8 million, plus the assumption of all liabilities. We recorded a pre-tax gain of $171.7 million on the sale. The gain on sale was $124.2 million after taxes, or $3.59 per diluted common share. Operating Profit. Operating profit from U.S. operations increased $22.2 million, or 67.8%, for the quarter ended March 31, 2002. Overall, operating profit decreased $153.8 million compared to the prior year quarter, as the prior year quarter included operating profit of $4.3 million from Australian operations and the $171.7 million pre-tax gain on the sale of Australian operations discussed above. The increase at the U.S. operations was driven by higher operating profit of $18.9 million from mining operations (excluding operating costs related to past mining activities, which are discussed below) as a result of higher prices combined with strong cost containment efforts. 18 In the west, the Powder River Basin region's operating profit increased $9.8 million as higher volume and improved prices overcame higher royalties and taxes associated with improved prices, explosives costs, and repair and maintenance costs. The Southwest region's operating profit decreased $7.7 million. Two outages of its coal transportation pipeline contributed to decreased sales volume in the quarter, and maintenance and repairs were accelerated to coincide with the outages. In the east, the Appalachia region's operating profit increased $13.7 million due to strong sales price improvement and per ton mining costs that, excluding the effect of higher royalty and tax expenses associated with higher prices, were lower than the prior year quarter. Operating profit in the Midwest region increased $3.1 million compared to the prior year quarter, as slightly lower sales levels were more than offset by lower fuel and maintenance and repair costs. Operating profit from trading and brokerage operations increased $4.4 million over the prior year quarter, as volume nearly doubled from 14.3 million traded tons in the prior year quarter to 28.2 million in the current year quarter. Operating costs related to past mining activities were $4.7 million higher in the current quarter, primarily due to higher closed and suspended mine costs and workers' compensation charges. Lower selling and administrative costs improved operating profit by $6.6 million, as discussed above. Interest Expense. Interest expense for the quarter was $24.9 million, a $19.3 million decrease, or 43.7%, from the prior year quarter. The decrease in borrowing cost was due to the significant long-term debt repayments made since December 31, 2000. Utilizing proceeds from the sale of our Australian operations, combined with proceeds from our initial public offering in May 2001, we reduced long-term debt by $822 million from December 31, 2000 to March 31, 2002. Interest Income. Interest income decreased $1.2 million, to $0.5 million, for the quarter ended March 31, 2002. The prior year quarter included interest earned on cash received from the sale of our Australian operations in January 2001. Income Taxes. For the quarter ended March 31, 2002, income tax expense was $4.6 million on income before income taxes and minority interests of $30.6 million, compared to income tax expense of $39.0 million on income before income taxes and minority interests of $166.3 million in the prior year quarter. Our effective income tax rate was 15.0% for the quarter ended March 31, 2002. Our consolidated tax position is impacted by the percentage depletion tax deduction utilized by us and our subsidiaries that creates an alternative minimum tax situation, and in the prior year by the sale of our Australian operations. Gain from Disposal of Discontinued Operations. During the quarter ended March 31, 2001, we reduced our loss on the sale of Citizens Power by $1.2 million. Extraordinary Loss from Early Extinguishment of Debt. During the quarter ended March 31, 2001, we repaid debt using proceeds from the sale of our Australian operations. We recorded an extraordinary loss of $8.5 million, net of income taxes, which represented the excess of cash paid over the carrying value of the debt retired and the write-off of debt issuance costs associated with the debt retired. LIQUIDITY AND CAPITAL RESOURCES Cash provided by operating activities was $21.4 million for the quarter ended March 31, 2002, a decrease of $31.3 million from the prior year quarter. Current quarter income from continuing operations, excluding the after-tax effect of the gain on sale of Australian operations, was $22.1 million higher than the prior year quarter. Cash flow in the prior year quarter benefited from $15.0 million of proceeds received related to the expansion of our accounts receivable securitization program, and working capital cash flow in the prior year quarter of $0.4 million decreased to a working capital cash usage of $69.3 million in the current quarter, primarily due to a lower accounts payable position at March 31, 2002. Net cash used in investing activities was $48.8 million for the quarter ended March 31, 2002, compared to cash provided by investing activities of $420.2 million in the prior year quarter. The prior year quarter included $455.0 million of proceeds from the sale of our Australian operations, and $16.9 million of proceeds related to the sale of Citizens Power. Capital expenditures increased $5.0 million, to $47.1 million, in the current quarter. These capital expenditures were primarily for the replacement of mining equipment, the expansion of capacity at certain mines and projects to improve the efficiency of mining operations. Finally, the prior year quarter included $7.5 million in expenditures related to the acquisition of coalbed methane assets. 19 Net cash provided by financing activities was $4.9 million for the quarter ended March 31, 2002, compared with cash used in financing activities of $443.3 million in the prior year quarter. Net debt repayments were $475.9 million higher in the prior year quarter, principally as a result of the usage of proceeds received from the sale of our Australian operations. The prior year quarter also included a $19.9 million dividend received from our Australian operations. We paid dividends to our shareholders of $5.2 million in the current year quarter. As of March 31, 2002, our total indebtedness consisted of the following (dollars in thousands): 9.625% Senior Subordinated Notes ("Senior Subordinated Notes") due 2008 $ 391,415 8.875% Senior Notes ("Senior Notes") due 2008 316,434 5.0% Subordinated Note 81,708 Senior unsecured notes under various agreements 83,571 Unsecured revolving credit agreement 98,012 Revolving Credit Facility under Senior Credit Facility 25,000 Other 48,887 ---------- $1,045,027 ==========
As of March 31, 2002, our revolving credit and letter of credit borrowing facilities included the $480.0 million Revolving Credit Facility under our Senior Credit Facility and Black Beauty's $120.0 million revolving credit facility. The Revolving Credit Facility has a borrowing sub-limit of $350.0 million and a letter of credit sub-limit of $330.0 million. Together, these facilities total $600.0 million, and have a total of $470.0 million available for borrowing. As of March 31, 2002, outstanding borrowings under the Revolving Credit Facility were $25.0 million. Black Beauty's revolving credit facility borrowings totaled $98.0 million. We were in compliance with the restrictive covenants of all of our and our subsidiaries' debt agreements as of March 31, 2002. In March 2000, we established an accounts receivable securitization program. Under the program, undivided interests in a pool of eligible trade receivables that have been contributed to the Seller are sold, without recourse, to a multi-seller, asset-backed commercial paper conduit ("Conduit"). Purchases by the Conduit are financed with the sale of highly rated commercial paper. We used proceeds from the sale of its accounts receivable to repay long-term debt, effectively reducing its overall borrowing costs. The securitization program is currently scheduled to expire in 2007. Under the provisions of Statement of Financial Accounting Standards ("SFAS") No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," (as amended by SFAS No. 140) the securitization transactions have been recorded as sales, with those accounts receivable sold to the Conduit removed from the consolidated balance sheet. The amount of undivided interests in accounts receivable sold to the Conduit were $140.0 million as of March 31, 2002 and December 31, 2001. We have designated interest rate swaps with notional amounts totaling $150.0 million as a fair value hedge of our Senior Notes. Under the swaps, we pay a floating rate based upon the six-month LIBOR rate for a period of seven years ending May 15, 2008. The applicable rate was 6.03% as of March 31, 2002. We realized interest savings of $1.0 million during the quarter ended March 31, 2002. We had $98.4 million of commitments for capital expenditures at March 31, 2002, that are primarily related to acquiring additional coal reserves and mining equipment in 2002. Total capital expenditures for calendar year 2002 are expected to range from $165 million to $195 million, and have been and will be primarily used to acquire additional low sulfur coal reserves, develop existing reserves, replace or add equipment and fund cost reduction initiatives. We anticipate funding these capital expenditures primarily through operating cash flow. We believe the risk of generating lower than anticipated operating cash flow in 2002 is reduced by our high level of sales commitments (97% of 2002 planned production) and lower borrowing costs as a result of our significant debt reductions. OTHER Recent Accounting Pronouncements. In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 addresses accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This statement is effective for fiscal years beginning after June 15, 2002 (effective January 1, 2003 for the Company). We are currently assessing the impact of this new statement. 20 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Trading Activities We market and trade coal and emission allowances. These activities give rise to market risk, which represents the potential loss that can be caused by a change in the market value of a particular commitment. We actively measure, monitor and adjust traded position levels to remain within market risk limits prescribed by management. For example, we have policies in place that limit the amount of total exposure we may assume at any point in time. We account for coal and emission allowance trading using the fair value method, which requires us to reflect financial instruments with third parties, such as forwards, futures, options and swaps, at market value in the consolidated financial statements. We perform a value at risk analysis on our trading portfolio, which includes over-the-counter and brokerage trading of coal and emission allowances. Our value at risk model is based on the industry standard risk-metrics variance/co-variance approach. This captures our exposure related to both option and forward positions. Our value at risk model assumes a fifteen-day holding period and a 95% confidence interval. The use of value at risk allows management to aggregate market risks across products in the portfolio, compare risk on a consistent basis and identify the drivers of risk. Due to the subjectivity in the choice of the liquidation period, reliance on historical data to calibrate the models and the inherent limitations in the value at risk methodology, including the use of delta/gamma adjustments related to options, we perform regular stress, back testing and scenario analysis to estimate the impacts of market changes on the value of the portfolio. The results of these analyses are used to supplement the value at risk methodology and identify additional market related risks. During the quarter ended March 31, 2002, the low, high and average values at risk for our coal trading portfolio were $0.3 million, $3.9 million and $1.5 million, respectively. Our emission allowance value at risk averaged $0.1 million during the quarter ended March 31, 2002, and did not exceed $0.1 million during that period. Sixty-seven percent of the value of our trading portfolio will be realized by the end of calendar 2003. We also monitor other types of risk associated with our coal and emission allowance trading activities, including market liquidity, counterparty nonperformance and position valuation. Non-trading Activities We manage our commodity price risk for non-trading purposes through the use of long-term coal supply agreements, rather than through the use of derivative instruments. We currently have sales commitments for 97% of our planned calendar 2002 production. Some of the products used in our mining activities, such as diesel fuel, are subject to price volatility. We, through our suppliers, utilize forward contracts to manage the exposure related to this volatility. We have exposure to changes in interest rates due to our existing level of indebtedness. As of March 31, 2002, after taking into consideration the effects of interest rate swaps, we had $720.1 million of fixed-rate borrowings and $324.9 million of variable-rate borrowings outstanding. A one percentage point increase in interest rates would result in an annualized increase to interest expense of $3.2 million on our variable-rate borrowings. With respect to our fixed-rate borrowings, a one percentage point increase in interest rates would result in a $39.5 million decrease in the fair value of these borrowings. 21 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. Salt River Project Agricultural Improvement and Power District-Price Review In May 1997, Salt River Project Agricultural Improvement and Power District, or Salt River, acting for all owners of the Navajo Generating Station, exercised their contractual option to review certain cumulative cost changes during a five-year period from 1992 to 1996. Peabody Western sells approximately 7 to 8 million tons of coal per year to the owners of the Navajo Generation Station under a long-term contract. In July 1999, Salt River notified Peabody Western that it believed the owners were entitled to a price decrease of $1.92 per ton as a result of the review. Salt River also claimed entitlement to a retroactive price adjustment to January 1997 and that an overbilling of $50.5 million had occurred during the same five-year period. In October 1999, Peabody Western notified Salt River that it believed it was entitled to a $2.00 per ton price increase as a result of the review. The parties were unable to settle the dispute and Peabody Western filed a demand for arbitration in September 2000. The arbitration hearing was held from April 8 to April 12, 2002. The parties will be filing post-hearing briefs with the arbitrators. On February 12, 2001 in a related action, Salt River, again acting for all owners of the Navajo Generating Station, filed a lawsuit against Peabody Western in the Superior Court in Maricopa County in Arizona. This lawsuit seeks to compel arbitration of issues that Peabody Western does not believe are subject to arbitration, namely, (1) the effective date of any price change resulting from the resolution of the price review arbitration discussed above and (2) the validity of Salt River's $50.5 million claim for alleged overcharges by Peabody Western for the period from 1992 through 1996 (the five-year period that was the subject of the price review). If the court declines to compel arbitration of these issues, the lawsuit alternatively requests that the court find in favor of Salt River on these issues. We have removed this matter to the U.S. District Court for the District of Arizona. On October 3, 2001, the U.S. District Court issued an order compelling arbitration with respect to the effective date of any price change and conditionally compelling arbitration with respect to the validity of Salt River's $50.5 million claim. Although we have filed an appeal of this decision with the U.S. Ninth Circuit Court of Appeals, the arbitrators received testimony on these claims during the April hearing. We expect a decision from the arbitrators during the third quarter of 2002. While the outcome of arbitration and litigation is subject to uncertainties, based on our preliminary evaluation of the issues and the potential impact on us, we believe that the matter will be resolved without a material adverse effect on our financial condition or results of operations. See Note 10 to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this report relating to certain legal proceedings brought against us by the Navajo Nation and Hopi Tribe. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits See Exhibit Index at page 24 of this report. (b) Reports on Form 8-K None filed during the period covered by this report. 22 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PEABODY ENERGY CORPORATION Date: May 13, 2002 By: RICHARD A. NAVARRE -------------------------------- Richard A. Navarre Executive Vice President and Chief Financial Officer (Principal Financial Officer) 23 EXHIBIT INDEX The exhibits below are numbered in accordance with the Exhibit Table of Item 601 of Regulation S-K.
Exhibit No. Description of Exhibit - ------- ---------------------- 3.1 Third Amended and Restated Certificate of Incorporation of the Company (Incorporated by reference to Exhibit 3.1 of the Company's Form S-1 Registration Statement No. 333-55412). 3.2 Amended and restated By-Laws of the Company (Incorporated by reference to Exhibit 3.2 of the Company's Form S-1 Registration Statement No. 333-55412). 4.17 Form of Fourth Supplemental Senior Note Indenture dated as of February 16, 2000 among the Guaranteeing Subsidiary (as defined therein), the Registrant, the other Senior Note Guarantors (as defined in the Senior Note Indenture) and State Street Bank and Trust Company, as Senior Note Trustee 4.18 Form of Fourth Supplemental Senior Subordinated Note Indenture dated as of February 16, 2000 among the Guaranteeing Subsidiary (as defined therein), the Registrant, the other Senior Subordinated Note Guarantors (as defined in the Senior Subordinated Note Indenture) and State Street Bank and Trust Company, as Senior Subordinated Note Trustee 4.19 Fifth Supplemental Senior Note Indenture dated as of March 27, 2000 among the Registrant, each Senior Note Guarantor (as defined in the Senior Note Indenture) and State Street Bank and Trust Company, as Senior Note Trustee 4.20 Fifth Supplemental Senior Subordinated Note Indenture dated as of March 27, 2000 among the Registrant, each Senior Subordinated Note Guarantor (as defined in the Senior Subordinated Note Indenture) and State Street Bank and Trust Company, as Senior Subordinated Note Trustee 4.21 Form of Sixth Supplemental Senior Note Indenture dated as of February 11, 2002 among the Guaranteeing Subsidiary (as defined therein), the Registrant, the other Senior Note Guarantors (as defined in the Senior Note Indenture) and State Street Bank and Trust Company, as Senior Note Trustee 4.22 Form of Sixth Supplemental Senior Subordinated Note Indenture dated as of February 11, 2002 among the Guaranteeing Subsidiary (as defined therein), the Registrant, the other Senior Subordinated Note Guarantors (as defined in the Senior Subordinated Note Indenture) and State Street Bank and Trust Company, as Senior Subordinated Note Trustee
24 EX-4.17 3 c69447ex4-17.txt FOURTH SUPPLEMENTAL SENIOR NOTE INDENTURE EXHIBIT 4.17 FOURTH SUPPLEMENTAL SENIOR NOTE INDENTURE FOURTH SUPPLEMENTAL SENIOR NOTE INDENTURE (this "SUPPLEMENTAL SENIOR NOTE INDENTURE"), dated as of February 16, 2000 among Peabody Natural Gas, LLC, a Delaware limited liability company (the "GUARANTEEING SUBSIDIARY"), a subsidiary of Peabody Holding Company, Inc. (or its permitted successor), a New York corporation (the "COMPANY") the Company, the other Senior Note Guarantors (as defined in the Senior Note Indenture referred to herein) and State Street Bank and Trust Company, as Senior Note Trustee under the Senior Note Indenture referred to below (the "SENIOR NOTE TRUSTEE"). WHEREAS, the Company has heretofore executed and delivered to the Senior Note Trustee a Senior Note Indenture (the "SENIOR NOTE INDENTURE"), dated as of May 18, 1998 providing for the issuance of an aggregate principal amount of up to $550.0 million of 8-7/8% Senior Notes due 2008 (the "SENIOR NOTES") WHEREAS, the Senior Note Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Senior Note Trustee a supplemental Senior Note Indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally guarantee all of the Company's Obligations under the Senior Notes and the Senior Note Indenture on the terms and conditions set forth herein (the "SENIOR SUBSIDIARY GUARANTEE"); and WHEREAS, pursuant to Section 9.01 of the Senior Note Indenture, the Senior Note Trustee is authorized to execute and deliver this Supplemental Senior Note Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiary and the Senior Note Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Senior Notes as follows: 1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Note Indenture. 2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby agrees as follows: (a) Along with all Senior Note Guarantors named in the Senior Note Indenture, to jointly and severally Guarantee to each Holder of a Senior Note authenticated and delivered by the Senior Note Trustee and to the Senior Note Trustee and its successors and assigns, of the validity and enforceability of the Senior Note Indenture the Senior Notes or the obligations or the Company hereunder or thereunder that: (i) the principal of and interest on the Senior Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal and interest on the Senior Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Senior 1 Note Trustee hereunder or thereunder will be promptly paid in full or performed all in accordance with the terms hereof and thereof, and (ii) in case of any extension of time of payment or renewal of any Senior Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Senior Note Guarantors shall be jointly and severally obligated to pay the same immediately. (b) The obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Senior Notes or the Senior Note Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Senior Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Senior Note Guarantor. (c) The following is hereby waived: diligence presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever. (d) This Senior Subsidiary Guarantee shall not be discharged except by complete performance of the obligations contained in the Senior Notes and the Senior Note Indenture. (e) If any Holder or the Senior Note Trustee is required by any court or otherwise to return to the Company, the Senior Note Guarantors, or any custodian, Senior Note Trustee, liquidator or other similar official acting in relation to either the Company or the Senior Note Guarantors, any amount paid by either to the Senior Note Trustee or such Holder, this Senior Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. (f) The Guaranteeing Subsidiary shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. (g) As between the Senior Note Guarantors, on the one hand, and the Holders and the Senior Note Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 of the Senior Note Indenture for the purposes of this Senior Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibitions preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event any declaration of accelaration of such obligations as provided in Article 6 of the Senior Note Indenture, such obligations (whether or not due and payable) shall forthwith 2 become due and payable by the Senior Note Guarantors for the purpose of this Senior Subsidiary Guarantee. (h) The Senior Note Guarantors shall have the right to seek contribution from any non-paying Senior Note Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Senior Subsidiary Guarantee. (i) Pursuant to Section 10.04 of the Senior Note Indenture, after giving effect to any maximum amount and any other contingent and fixed liabilities that are relevant under any applicable Bankruptcy or fraudulent conveyance laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Senior Note Guarantor in respect of the obligations of such other Senior Note Guarantor under Article 10 of the Senior Note Indenture shall result in the obligations of such Senior Note Guarantor under its Senior Subsidiary Guarantee not constituting a fraudulent transfer or conveyance. 3. EXECUTION AND DELIVERY. Each Guaranteeing Subsidiary agrees that the Senior Subsidiary Guarantees shall remain in full force and effect notwithstanding any failure to endorse on each Senior Note a notation of such Senior Subsidiary Guarantee. 4. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS (a) The Guaranteeing Subsidiary may not consolidate with or merge with or into (whether or not such Senior Note Guarantor is the surviving Person) another corporation, Person or entity whether or not affiliated with such Senior Note Guarantor unless: (i) subject to Section 10.04 of the Senior Note Indenture, the Person formed by or surviving any such consolidation or merger (if other than a Senior Note Guarantor or the Company) unconditionally assumes all the obligations of such Senior Note Guarantor, pursuant to a supplemental Senior Note Indenture in form and substance reasonably satisfactory to the Senior Note Trustee, under the Senior Notes, the Senior Note Indenture and the Senior Subsidiary Guarantee on the terms set forth herein or therein; and (ii) immediately after giving effect to such transaction, no Default or Event of Default exists. (b) In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor corporation, by supplemental Senior Note Indenture, executed and delivered to the Senior Note Trustee and satisfactory in form to the Senior Note Trustee, of the Senior Subsidiary Guarantee endorsed upon the Senior Notes and the due and punctual performance of all of the covenants and conditions of the Senior Note Indenture to be performed by the Senior Note Guarantor, such successor corporation shall succeed to and be substituted for the Senior Note Guarantor with the same effect as if it had been named herein as a Senior Note Guarantor. Such successor corporation thereupon may cause to be signed any or all of the Senior Subsidiary Guarantees to be endorsed upon all of the Senior Notes issuable hereunder which theretofore shall not have been signed by the Company and 3 delivered to the Senior Note Trustee. All the Senior Subsidiary Guarantees so issued shall in all respects have the same legal rank and benefit under the Senior Note Indenture as the Senior Subsidiary Guarantees theretofore and thereafter issued in accordance with the terms of the Senior Note Indenture as though all of such Senior Subsidiary Guarantees had been issued at the date of the execution hereof, (c) Except as set forth in Articles 4 and 5 of the Senior Note Indenture, and notwithstanding clauses (a) and (b) above, nothing contained in the Senior Note Indenture or in any of the Senior Notes shall prevent any consolidation or merger of a Senior Note Guarantor with or into the Company or another Senior Note Guarantor, or shall prevent any sale or conveyance of the property of a Senior Note Guarantor as an entirety or substantially as an entirety to the Company or another Senior Note Guarantor. 5. RELEASES. (a) In the event of a sale or other disposition of all of the assets of any Senior Note Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all to the capital stock of any Senior Note Guarantor, then such Senior Note Guarantor (in the event of a sale or other disposition, by way of merger, consolidation or otherwise, of all of the capital stock of such Senior Note Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Senior Note Guarantor) will be released and relieved of any obligations under its Senior Subsidiary Guarantee; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the Senior Note Indenture, including without limitation Section 4.10 of the Senior Note Indenture. Upon delivery by the Company to the Senior Note Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made by the Company in accordance with the provisions of the Senior Note Indenture, including without limitation Section 4.10 of the Senior Note Indenture, the Senior Note Trustee shall execute any documents reasonably required in order to evidence the release of any Senior Note Guarantor from its obligations under its Senior Subsidiary Guarantee. (b) Any Senior Note Guarantor not released from its obligations under its Senior Subsidiary Guarantee shall remain liable for the full amount of principal of and interest on the Senior Notes and for the other obligations of any Senior Note Guarantor under the Senior Note Indenture as provided in Article 10 of the Senior Note Indenture. 6. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator, stockholder or agent of the Guaranteeing Subsidiary, as such, shall have any liability for any obligations of the Company or any Guaranteeing Subsidiary under the Senior Notes, any Senior Subsidiary Guarantees, the Senior Note Indenture or this Supplemental Senior Note Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation Each Holder of the Senior Notes by accepting a Senior Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Senior Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy. 4 7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL SENIOR NOTE INDENTURE BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 8. COUNTERPARTS. The parties may sign any number of copies of this Supplemental Senior Note Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 9. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof. 10. THE SENIOR NOTE TRUSTEE. The Senior Note Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Senior Note Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiary and the Company. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Senior Note Indenture to be duly executed and attested, all as of the date first above written PEABODY NATURAL GAS, LLC Dated: February 16, 2000 By: /S/ S. F. Schaab --------------------------------- Name: S. F. Schaab Title: Vice President & Treasurer 5 EX-4.18 4 c69447ex4-18.txt FOURTH SUPPLEMENTAL SENIOR SUBORDINATED NOTE EXHIBIT 4.18 FOURTH SUPPLEMENTAL SENIOR SUBORDINATED NOTE INDENTURE FOURTH SUPPLEMENTAL SENIOR SUBORDINATED NOTE INDENTURE (this "Supplemental Senior Subordinated Note Indenture"), dated as of February 16, 2000 among Peabody Natural Gas, LLC, a Delaware limited liability company (the "Guaranteeing Subsidiary"), 'a subsidiary of Peabody Holding Company, Inc. (or its permitted successor), a New York corporation (the "Company"), the Company, the other Senior Subordinated Note Guarantors (as defined in the Senior Subordinated Note Indenture referred to herein) and State Street Bank and Trust Company, as Senior Subordinated Note Trustee under the Senior Subordinated Note Indenture referred to below (the "Senior Subordinated Note Trustee"). WITNESSETH WHEREAS, the Company has heretofore executed and delivered to the Senior Subordinated Note Trustee a Senior Subordinated Note Indenture (the "Senior Subordinated Note Indenture"), dated as of May 18, 1998 providing for the issuance of an aggregate principal amount of up to $650.0 million of 9-5/8% Senior Subordinated Notes due 2008 (the "Senior Subordinated Notes"); WHEREAS, the Senior Subordinated Note Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Senior Subordinated Note Trustee a Supplemental Senior Subordinated Note Indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally guarantee all of the Company's Obligations under the Senior Subordinated Notes and the Senior Subordinated Note Indenture on the terms and conditions set forth herein (the "Subordinated Subsidiary Guarantee"); and WHEREAS, pursuant to Section 9.01 of the Senior Subordinated Note Indenture, the Senior Subordinated Note Trustee is authorized to execute and deliver this Supplemental Senior Subordinated Note Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiary and the Senior Subordinated Note Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Senior Subordinated Notes as follows: 1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Senior Subordinated Note Indenture. 2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby agrees as follows (a) Along with all Senior Subordinated Note Guarantors named in the Senior Subordinated Note Indenture, to jointly and severally Guarantee to each Holder of a Senior Subordinated Note authenticated and delivered by the Senior Subordinated Note Trustee and to the Senior Subordinated Note Trustee and its successors and assigns, irrespective of the validity and enforceability of the Senior Subordinated Note Indenture, the Senior Subordinated Notes or the obligations of the Company hereunder or thereunder, that: 1 (i) the principal of and interest on the Senior Subordinated Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Senior Subordinated Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Senior Subordinated Note Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof, and (ii) in case of any extension of time of payment or renewal of any Senior Subordinated Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Senior Subordinated Note Guarantors shall be jointly and severally obligated to pay the same immediately. (b) The obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Senior Subordinated Notes or the Senior Subordinated Note Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Senior Subordinated Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Senior Subordinated Note Guarantor. (c) The following is hereby waived: diligence presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever. (d) This Subordinated Subsidiary Guarantee shall not be discharged except by complete performance of the obligations contained in the Senior Subordinated Notes and the Senior Subordinated Note Indenture. (e) If any Holder or the Senior Subordinated Note Trustee is required by any court or otherwise to return to the Company, the Senior Subordinated Note Guarantors, or any custodian, Senior Subordinated Note Trustee, liquidator or other similar official acting in relation to either the Company or the Senior Subordinated Note Guarantors, any amount paid by either to the Senior Subordinated Note Trustee or such Holder, this Subordinated Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. (f) The Guaranteeing Subsidiary shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. 2 (g) As between the Senior Subordinated Note Guarantors, on the one hand, and the Holders and the Senior Subordinated Note Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 of the Senior Subordinated Note Indenture for the purposes of this Subordinated Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 of the Senior Subordinated Note Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by the Senior Subordinated Note Guarantors for the purpose of this Subordinated Subsidiary Guarantee. (h) The Senior Subordinated Note Guarantors shall have the right to seek contribution from any non-paying Senior Subordinated Note Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Subordinated Subsidiary Guarantee. (i) Pursuant to Section 11.02 of the Senior Subordinated Note Indenture, after giving effect to any maximum amount and any other contingent and fixed liabilities that are relevant under any applicable Bankruptcy or fraudulent conveyance laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Senior Subordinated Note Guarantor in respect of the obligations of such other Senior Subordinated Note Guarantor under Article 11 of the Senior Subordinated Note Indenture shall result in the obligations of such Senior Subordinated Note Guarantor under its Subordinated Subsidiary Guarantee not constituting a fraudulent transfer or conveyance. 3. EXECUTION AND DELIVERY. Each Guaranteeing Subsidiary agrees that the Subordinated Subsidiary Guarantees shall remain in full force and effect notwithstanding any failure to endorse on each Senior Subordinated Note a notation of such Subordinated Subsidiary Guarantee. 4. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS (a) The Guaranteeing Subsidiary may not consolidate with or merge with or into (whether or not such Senior Subordinated Note Guarantor is the surviving Person) another corporation, Person or entity whether or not affiliated with such Senior Subordinated Note Guarantor unless: (i) subject to Section 11.05 of the Senior Subordinated Note Indenture, the Person formed by or surviving any such consolidation or merger (if other than a Senior Subordinated Note Guarantor or the Company) unconditionally assumes all the obligations of such Senior Subordinated Note Guarantor, pursuant to a supplemental Senior Subordinated Note Indenture in form and substance reasonably satisfactory to the Senior Subordinated Note Trustee, under the Senior Subordinated Notes, the Senior Subordinated Note Indenture and the Subordinated Subsidiary Guarantee on the terms set forth herein or therein; and 3 (ii) immediately after giving effect to such transaction, no Default or Event of Default exists. (b) In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor corporation, by supplemental Senior Subordinated Note Indenture, executed and delivered to the Senior Subordinated Note Trustee and satisfactory in form to the Senior Subordinated Note Trustee, of the Subordinated Subsidiary Guarantee endorsed upon the Senior Subordinated Notes and the due and punctual performance of all of the covenants and conditions of the Senior Subordinated Note Indenture to be performed by the Senior Subordinated Note Guarantor, such successor corporation shall succeed to and be substituted for the Senior Subordinated Note Guarantor with the same effect as if it had been named herein as a Senior Subordinated Note Guarantor. Such successor corporation thereupon may cause to be signed any or all of the Subordinated Subsidiary Guarantees to be endorsed upon all of the Senior Subordinated Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Senior Subordinated Note Trustee. All the Subordinated Subsidiary Guarantees so issued shall in all respects have the same legal rank and benefit under the Senior Subordinated Note Indenture as the Subordinated Subsidiary Guarantees theretofore and thereafter issued in accordance with the terms of the Senior Subordinated Note Indenture as though all of, such Subordinated Subsidiary Guarantees had been issued at the date of the execution hereof. (c) Except as set forth in Articles 4 and 5 of the Senior Subordinated Note Indenture, and notwithstanding clauses (a) and (b) above, nothing contained in the Senior Subordinated Note Indenture or in any of the Senior Subordinated Notes shall prevent any consolidation or merger of a Senior Subordinated Note Guarantor with or into the Company or another Senior Subordinated Note Guarantor, or shall prevent any sale or conveyance of the property of a Senior Subordinated Note Guarantor as an entirety or substantially as an entirety to the Company or another Senior Subordinated Note Guarantor. 5. RELEASES. (a) In the event of a sale or other disposition of all of the' assets of any Senior Subordinated Note Guarantor, by way of merger, consolidation or other-wise, or a sale or other disposition of all to the capital stock of any Senior Subordinated Note Guarantor, then such Senior Subordinated Note Guarantor (in the event of a sale or other disposition, by way of merger, consolidation or otherwise, of all of the capital stock of such Senior Subordinated Note Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Senior Subordinated Note Guarantor) will be released and relieved of any obligations under its Subordinated Subsidiary Guarantee; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the Senior Subordinated Note Indenture, including without limitation Section 4.10 of the Senior Subordinated Note Indenture. Upon delivery by the Company to the Senior Subordinated Note Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made by the Company in accordance with the provisions of the Senior Subordinated Note Indenture, including without limitation Section 4. 10 of the Senior Subordinated Note Indenture, the Senior Subordinated Note Trustee shall execute any documents reasonably required in order to evidence the 4 release of any Senior Subordinated Note Guarantor from its obligations under its Subordinated Subsidiary Guarantee. (b) Any Senior Subordinated Note Guarantor not released from its obligations under its Subordinated Subsidiary Guarantee shall remain liable for the full amount of principal of and interest on the Senior Subordinated Notes and for the other obligations of any Senior Subordinated Note Guarantor under the Senior Subordinated Note Indenture as provided in Article I of the Senior Subordinated Note Indenture. 6. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator, stockholder or agent of the Guaranteeing Subsidiary, as such, shall have any liability for any obligations of the Company or any Guaranteeing Subsidiary under the Senior Subordinated Notes, any Subordinated Subsidiary Guarantees, the Senior Subordinated Note Indenture or this Supplemental Senior Subordinated Note Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Senior Subordinated Notes by accepting a Senior Subordinated Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Senior Subordinated Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy. 7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL SENIOR SUBORDINATED NOTE INDENTURE BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 8. COUNTERPARTS. The parties may sign any number of copies of this Supplemental Senior Subordinated Note Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 9. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof 10 THE SENIOR SUBORDINATED NOTE TRUSTEE. The Senior Subordinated Note Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Senior Subordinated Note Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiary and the Company. 5 IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Senior Subordinated Note Indenture to be duly executed and attested, all as of the date first above written. Dated: February 16, 2000 PEABODY NATURAL GAS, LLC By: /S/ S. F. Schaab ------------------------------ Name: S. F. Schaab Title: Vice President & Treasurer 6 EX-4.19 5 c69447ex4-19.txt FIFTH SUPPLEMENTAL SENIOR NOTE INDENTURE EXHIBIT 4.19 FIFTH SUPPLEMENTAL INDENTURE FIFTH SUPPLEMENTAL INDENTURE dated as of March 27, 2000 (this "SUPPLEMENTAL SENIOR NOTE INDENTURE") among P&L Coal Holdings Corporation, a Delaware corporation (the "COMPANY"), each Senior Note Guarantor (as defined in the Senior Note Indenture referred to herein) and State Street Bank and Trust Company, as Senior Note Trustee under the Senior Note Indenture referred to below (the "SENIOR NOTE TRUSTEE"). W I T N E S S E T H WHEREAS, the Company has heretofore executed and delivered to the Senior Note Trustee a Senior Note Indenture dated as of May 18, 1998 (the "SENIOR NOTE INDENTURE") providing for the issuance of an aggregate principal amount of up to $550.0 million of 8-7/8% Senior Notes due 2008 (the "SENIOR NOTES"); WHEREAS, the Company desires to clarify the definition of "Lien" in Section 1.01 of the Senior Note Indenture; WHEREAS, Section 9.01 of the Senior Note Indenture provides that the Company, the Senior Note Guarantors and the Senior Note Trustee may enter into a supplemental indenture, without the consent of any Holders, for the purpose of curing any ambiguity, defect or inconsistency or for the purpose of making any change that does not adversely affect the Holders of the Senior Notes; NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Company, the Senior Note Guarantors and the Senior Note Trustee hereby agree as follows: 1. Capitalized Terms. Capitalized terms used herein without definition shall have the meanings assigned to them in the Senior Note Indenture. 2. Amendment to Senior Note Indenture. The definition of "Lien" in Section 1.01 of the Senior Note Indenture is hereby amended by inserting the following clause at the end thereof: ", but excluding any of the foregoing arising as a result of a sale, contribution, disposition or other transfer of accounts, chattel paper, payment intangibles, promissory notes and/or related assets otherwise permitted under the terms hereof". 3. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL SENIOR NOTE INDENTURE BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 1 4. Counterparts. The parties may sign any number of copies of this Supplemental Senior Note Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 5. Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof. 6. The Senior Note Trustee. The Senior Note Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Senior Note Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Company and the Senior Note Guarantors. 2 IN WITNESS WHEREOF, the parties have caused this Supplemental Senior Note Indenture to be duly executed as of the date and year first above written P&L COAL HOLDINGS CORPORATION By: /s/ J. L. Klinger --------------------------------------- Name: J. L. Klinger Title: Vice President-Legal Services And Secretary STATE STREET BANK AND TRUST COMPANY, As Trustee By: /s/ Philip G. Kane, Jr. --------------------------------------- Name: Philip G. Kane, Jr. Title: Vice President AFFINITY MINING COMPANY By: /s/ J. C. Klingl --------------------------------------- Name: J. C. Klingl Title: Vice President ARID OPERATIONS INC. By: /s/ Steven F. Schaab --------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer BIG SKY COAL COMPANY By: /s/ J. C. Klingl --------------------------------------- Name: J. C. Klingl Title: Vice President BLACKROCK FIRST CAPITAL CORPORATION By: /s/ J. C. Sevem --------------------------------------- Name: J. C. Sevem Title: Vice President BLUEGRASS COAL COMPANY By: /s/ Steven F. Schaab --------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer 3 CABALLO COAL COMPANY By: /s/ Steven F. Schaab --------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer CHARLES COAL COMPANY By: /s/ J. C. Sevem --------------------------------------- Name: J. C. Sevem Title: Vice President COAL PROPERTIES CORP. By: /s/ Steven F. Schaab --------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer COLONY BAY COAL COMPANY By: Charles Coal Company By: /s/ J. C. Sevem --------------------------------------- Name: J. C. Sevem Title: Vice President COOK MOUNTAIN COAL COMPANY By: /s/ Steven F. Schaab --------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer COTTONWOOD LAND COMPANY By: /s/ Steven F. Schaab --------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer DARIUS GOLD MINE, INC. By: /s/ Steven F. Schaab --------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer EACC CAMPS, INC. By: /s/ J. C. Sevem --------------------------------------- Name: J. C. Sevem Title: Vice President 4 EASTERN ASSOCIATED COAL CORP. By: /s/ Steven F. Schaab --------------------------------------- Name: S. F. Schaab Title: Vice President EASTERN ROYALTY CORP. By: /s/ J. C. Sevem --------------------------------------- Name: J. C. Sevem Title: Vice President GOLDFIELDS CHILE, S.A. By: /s/ Steven F. Schaab --------------------------------------- Name: S. F. Schaab Title: Vice President GOLDFIELDS MINING CORPORATION By: /s/ Steven F. Schaab --------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer GOLDFIELDS OPERATING CO. - ORTIZ By: /s/ Steven F. Schaab --------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer GRAND EAGLE MINING, INC. By: /s/ Steven F. Schaab --------------------------------------- Name: S. F. Schaab Title: Vice President HAYDEN GULCH TERMINAL, INC. By: /s/ Steven F. Schaab --------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer HIGHLAND MINING COMPANY By: /s/ J. C. Klingl --------------------------------------- Name: J. C. Klingl Title: Vice President 5 INDEPENDENCE MATERIAL HANDLING COMPANY By: /s/ Steven F. Schaab --------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer INTERIOR HOLDING CORP. By: /s/ Steven F. Schaab --------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer JAMES RIVER COAL TERMINAL COMPANY By: /s/ Steven F. Schaab --------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer JUNIPER COAL COMPANY By: /s/ Steven F. Schaab --------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer KAYENTA MOBILE HOME PARK, INC. By: /s/ D. A. Wagner --------------------------------------- Name: Doug Wagner Title: President MARTINKA COAL COMPANY By: /s/ J. C. Klingl --------------------------------------- Name: J. C. Klingl Title: Vice President MIDCO SUPPLY AND EQUIPMENT CORPORATION By: /s/ Steven F. Schaab --------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer MOUNTAIN VIEW COAL COMPANY By: /s/ J. C. Klingl --------------------------------------- Name: J. C. Klingl Title: Vice President 6 NORTH PAGE COAL CORP. By: /s/ J. C. Sevem --------------------------------------- Name: J. C. Sevem Title: Vice President OHIO COUNTY COAL COMPANY By: /s/ Steven F. Schaab --------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer PATRIOT COAL COMPANY L.P. By: Bluegrass Coal Company By: /s/ Steven F. Schaab --------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer PEABODY AMERICA, INC. By: /s/ J. L. Klinger --------------------------------------- Name: J. L. Klinger Title: Vice President and Assistant Sec PEABODY COALSALES COMPANY By: /s/ J. C. Sevem --------------------------------------- Name: J. C. Sevem Title: Secretary PEABODY COALTRADE, INC. By: /s/ Steven F. Schaab --------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer PEABODY COAL COMPANY By: /s/ J. C. Klingl --------------------------------------- Name: J. C. Klingl Title: Vice President PEABODY DEVELOPMENT COMPANY By: /s/ Steven F. Schaab --------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer 7 PEABODY DEVELOPMENT LAND HOLDING, LLC By: /s/ Steven F. Schaab --------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer PEABODY ENERGY SOLUTIONS, INC. By: /s/ Steven F. Schaab --------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer PEABODY ENTERPRISES, INC. I By: /s/ Steven F. Schaab --------------------------------------- Name: S. F. Schaab Title: Vice President PEABODY ENTERPRISES, INC. II By: /s/ Steven F. Schaab --------------------------------------- Name: S. F. Schaab Title: Vice President PEABODY HOLDING COMPANY, INC. By: /s/ Steven F. Schaab --------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer PEABODY NATURAL GAS, LLC By: /s/ Steven F. Schaab --------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer PEABODY NATURAL RESOURCES COMPANY By: Gold Fields Mining Corporation By: /s/ Steven F. Schaab --------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer PEABODY SOUTHWESTERN COAL COMPANY By: /s/ Steven F. Schaab --------------------------------------- Name: S. F. Schaab Title: Vice President and Assistant Treasurer 8 PEABODY TERMINALS, INC. By: /s/ Steven F. Schaab --------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer PEABODY VENEZUELA COAL CORP. By: /s/ Steven F. Schaab --------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer PEABODY WESTERN COAL COMPANY By: /s/ J. C. Klingl --------------------------------------- Name: J. C. Klingl Title: Vice President PINE RIDGE COAL COMPANY By: /s/ J. C. Klingl --------------------------------------- Name: J. C. Klingl Title: Vice President PORCUPINE PRODUCTION, LLC By: /s/ Steven F. Schaab --------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer PORCUPINE TRANSPORTATION, LLC By: /s/ Steven F. Schaab --------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer POWDER RIVER COAL COMPANY By: /s/ Steven F. Schaab --------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer RIO ESCONDIDO COAL CORP. By: /s/ Steven F. Schaab --------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer 9 SENECA COAL COMPANY By: /s/ J. C. Klingl --------------------------------------- Name: J. C. Klingl Title: Vice President SENTRY MINING COMPANY By: /s/ Steven F. Schaab --------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer SNOWBERRY LAND COMPANY By: /s/ Steven F. Schaab --------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer STERLING SMOKELESS COAL COMPANY By: /s/ J. C. Klingl --------------------------------------- Name: J. C. Klingl Title: Vice President THOROUGHBRED, L.L.C. By: Peabody Holding Company, Inc. By: /s/ Steven F. Schaab --------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer 10 EX-4.20 6 c69447ex4-20.txt FIFTH SUPPLEMENTAL SENIOR SUBORDINATED NOTE EXHIBIT 4.20 FIFTH SUPPLEMENTAL INDENTURE FIFTH SUPPLEMENTAL INDENTURE dated as of March 27, 2000 (this "SUPPLEMENTAL SENIOR SUBORDINATED NOTE INDENTURE") among P&L Coal Holdings Corporation, a Delaware corporation (the "Company"), each Senior Subordinated Note Guarantor (as defined in the Senior Subordinated Note Indenture referred to herein) and State Street Bank and Trust Company, as Senior Subordinated Note Trustee under the Senior Subordinated Note Indenture referred to below (the" SENIOR NOTE TRUSTEE"). WITNESSETH WHEREAS, the Company has heretofore executed and delivered to the Senior Subordinated Note Trustee a Senior Subordinated Note Indenture dated as of May 18, 1998 (the "SENIOR SUBORDINATED NOTE INDENTURE") providing for the issuance of an aggregate principal amount of up to $650.0 million of 9-5/8% Senior Subordinated Notes due 2008 (the "Senior Subordinated Notes"); WHEREAS, the Company desires to clarify the definition of "Lien" in Section 1.01 of the Senior Subordinated Note Indenture; WHEREAS, Section 9.01 of the Senior Subordinated Note Indenture provides that the Company, the Senior Subordinated Note Guarantors and the Senior Subordinated Note Trustee may enter into a supplemental indenture, without the consent of any Holders, for the purpose of curing any ambiguity, defect or inconsistency or for the purpose of making any change that does not adversely affect the Holders of the Senior Subordinated Notes; NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Company, the Senior subordinated Note Guarantors and the Senior Subordinated Note Trustee hereby agree as follows: 1. Capitalized Terms. Capitalized terms used herein without definition shall have the meanings assigned to them in the Senior Subordinated Note Indenture. 2. Amendment to Senior Subordinated Note Indenture. The definition of "Lien" in Section 1.01 of the Senior Subordinate Note Indenture is hereby amended by inserting the following clause at the end thereof: ",but excluding any of the foregoing arising as a result of a sale, contribution, disposition or other transfer of accounts, chattel paper, payment intangibles, promissory notes and/or related assets otherwise permitted under the terms hereof'. 3. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTUE THIS SUPPLEMENTAL SENIOR SUBORDINATED NOTE INDENTURE BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 1 4. Counterparts. The parties may sign any number of copies of this supplemental Senior subordinated Note Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 5. Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof. 6. The Senior Subordinated Note Trustee. The Senior Subordinated Note Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Senior subordinated Note Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Company and the Senior Subordinated Note Guarantors. 2 IN WITNESS WHEREOF, the parties have caused this Supplemental Senior Subordinated Note Indenture to be duly executed as of the date and year first above written P&L COAL HOLDING CORPORATION By: /s/ J. L. Klinger ----------------------------------------- Name: J. L. Klinger Title: Vice President-Legal Services And Secretary STATE STREET BANK AND TRUST COMPANY, As Trustee By: /s/ Philip G. Kane, Jr. ----------------------------------------- Name: Philip G. Kane, Jr. Title: Vice President AFFINITY MINING COMPANY By: /s/ J. C. Klingl ----------------------------------------- Name: J. C. Klingl Title: Vice President ARID OPERATIONS INC. By: /s/ Steven F. Schaab ----------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer BIG SKY COAL COMPANY By: /s/ J. C. Klingl ----------------------------------------- Name: J. C. Klingl Title: Vice President BLACKROCK FIRST CAPITAL CORPORATION By: /s/ J. C. Sevem ----------------------------------------- Name: J. C. Sevem Title: Vice President BLUEGRASS COAL COMPANY By: /s/ Steven F. Schaab ----------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer 3 CABALLO COAL COMPANY By: /s/ Steven F. Schaab ----------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer CHARLES COAL COMPANY By: /s/ J. C. Sevem ----------------------------------------- Name: J. C. Sevem Title: Vice President COAL PROPERTIES CORP. By: /s/ Steven F. Schaab ----------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer COLONY BAY COAL COMPANY By: Charles Coal Company By: /s/ J. C. Sevem ----------------------------------------- Name: J. C. Sevem Title: Vice President COOK MOUNTAIN COAL COMPANY By: /s/ Steven F. Schaab ----------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer COTTONWOOD LAND COMPANY By: /s/ Steven F. Schaab ----------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer DARIUS GOLD MINE, INC. By: /s/ Steven F. Schaab ----------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer EACC CAMPS, INC. By: /s/ J. C. Sevem ----------------------------------------- Name: J. C. Sevem Title: Vice President 4 EASTERN ASSOCIATED COAL CORP. By: /s/ Steven F. Schaab ----------------------------------------- Name: S. F. Schaab Title: Vice President EASTERN ROYALTY CORP. By: /s/ J. C. Sevem ----------------------------------------- Name: J. C. Sevem Title: Vice President GOLDFIELDS CHILE, S.A. By: /s/ Steven F. Schaab ----------------------------------------- Name: S. F. Schaab Title: Vice President GOLDFIELDS MINING CORPORATION By: /s/ Steven F. Schaab ----------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer GOLDFIELDS OPERATING CO. - ORTIZ By: /s/ Steven F. Schaab ----------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer GRAND EAGLE MINING, INC. By: /s/ Steven F. Schaab ----------------------------------------- Name: S. F. Schaab Title: Vice President HAYDEN GULCH TERMINAL, INC. By: /s/ Steven F. Schaab ----------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer HIGHLAND MINING COMPANY By: /s/ J. C. Klingl ----------------------------------------- Name: J. C. Klingl Title: Vice President INDEPENDENCE MATERIAL HANDLING COMPANY 5 By: /s/ Steven F. Schaab ----------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer INTERIOR HOLDING CORP. By: /s/ Steven F. Schaab ----------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer JAMES RIVER COAL TERMINAL COMPANY By: /s/ Steven F. Schaab ----------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer JUNIPER COAL COMPANY By: /s/ Steven F. Schaab ----------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer KAYENTA MOBILE HOME PARK, INC. By: /s/ D. A. Wagner ----------------------------------------- Name: Doug Wagner Title: President MARTINKA COAL COMPANY By: /s/ J. C. Klingl ----------------------------------------- Name: J. C. Klingl Title: Vice President MIDCO SUPPLY AND EQUIPMENT CORPORATION By: /s/ Steven F. Schaab ----------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer MOUNTAIN VIEW COAL COMPANY By: /s/ J. C. Klingl ----------------------------------------- Name: J. C. Klingl Title: Vice President 6 NORTH PAGE COAL CORP. By: /s/ J. C. Sevem ----------------------------------------- Name: J. C. Sevem Title: Vice President OHIO COUNTY COAL COMPANY By: /s/ Steven F. Schaab ----------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer PATRIOT COAL COMPANY L.P. By: Bluegrass Coal Company By: /s/ Steven F. Schaab ----------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer PEABODY AMERICA, INC. By: /s/ J. L. Klinger ----------------------------------------- Name: J. L. Klinger Title: Vice President and Assistant Secretary PEABODY COALSALES COMPANY By: /s/ J. C. Sevem ------------------------------------------ Name: J. C. Sevem Title: Secretary PEABODY COALTRADE, INC. By: /s/ Steven F. Schaab ----------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer PEABODY COAL COMPANY By: /s/ J. C. Klingl ----------------------------------------- Name: J. C. Klingl Title: Vice President ` PEABODY DEVELOPMENT COMPANY By: /s/ Steven F. Schaab ----------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer PEABODY DEVELOPMENT LAND HOLDING, LLC By: /s/ Steven F. Schaab ----------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer PEABODY ENERGY SOLUTIONS, INC. 7 By: /s/ Steven F. Schaab ----------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer PEABODY ENTERPRISES, INC. I By: /s/ Steven F. Schaab ----------------------------------------- Name: S. F. Schaab Title: Vice President PEABODY ENTERPRISES, INC. II By: /s/ Steven F. Schaab ----------------------------------------- Name: S. F. Schaab Title: Vice President PEABODY HOLDING COMPANY, INC. By: /s/ Steven F. Schaab ----------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer PEABODY NATURAL GAS, LLC By: /s/ Steven F. Schaab ----------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer PEABODY NATURAL RESOURCES COMPANY By: Gold Fields Mining Corporation By: /s/ Steven F. Schaab ----------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer PEABODY SOUTHWESTERN COAL COMPANY By: /s/ Steven F. Schaab ----------------------------------------- Name: S. F. Schaab Title: Vice President and Assistant Treasurer PEABODY TERMINALS, INC. By: /s/ Steven F. Schaab ----------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer 8 PEABODY VENEZUELA COAL CORP. By: /s/ Steven F. Schaab ----------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer PEABODY WESTERN COAL COMPANY By: /s/ J. C. Klingl ----------------------------------------- Name: J. C. Klingl Title: Vice President PINE RIDGE COAL COMPANY By: /s/ J. C. Klingl ----------------------------------------- Name: J. C. Klingl Title: Vice President PORCUPINE PRODUCTION, LLC By: /s/ Steven F. Schaab ----------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer PORCUPINE TRANSPORTATION, LLC By: /s/ Steven F. Schaab ----------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer POWDER RIVER COAL COMPANY By: /s/ Steven F. Schaab ----------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer RIO ESCONDIDO COAL CORP. By: /s/ Steven F. Schaab ----------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer SENECA COAL COMPANY By: /s/ J. C. Klingl ----------------------------------------- Name: J. C. Klingl Title: Vice President SENTRY MINING COMPANY By: /s/ Steven F. Schaab ----------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer 9 SNOWBERRY LAND COMPANY By: /s/ Steven F. Schaab ----------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer STERLING SMOKELESS COAL COMPANY By: /s/ J. C. Klingl ----------------------------------------- Name: J. C. Klingl Title: Vice President THOROUGHBRED, L.L.C. By: Peabody Holding Company, Inc. By: /s/ Steven F. Schaab ----------------------------------------- Name: S. F. Schaab Title: Vice President and Treasurer 10 EX-4.21 7 c69447ex4-21.txt FORM OF SIXTH SUPPLEMENTAL SENIOR NOTE INDENTURE EXHIBIT 4.21 SIXTH SUPPLEMENTAL SENIOR NOTE INDENTURE SIXTH SUPPLEMENTAL SENIOR NOTE INDENTURE (this "Supplemental Senior Note Indenture"), dated as of February 11, 2002 among THOROUGHBRED GENERATING COMPANY, LLC, a Delaware limited liability company (the "Guaranteeing Subsidiary"), a subsidiary of Peabody Energy Corporation (formerly P&L Coal Holdings Corporation) (or its permitted successor), a Delaware corporation (the "Company") the Company, the other Senior Note Guarantors (as defined in the Senior Note Indenture referred to herein) and State Street Bank and Trust Company, as Senior Note Trustee under the Senior Note Indenture referred to below (the "Senior Note Trustee"). WITNESSETH WHEREAS, the Company has heretofore executed and delivered to the Senior Note Trustee a Senior Note Indenture (the "Senior Note Indenture"), dated as of May 18, 1998 providing for the issuance of an aggregate principal amount of up to $550.0 million of 8-7/8% Senior Notes due 2008 (the "Senior Notes"); WHEREAS, the Senior Note Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Senior Note Trustee a supplemental Senior Note Indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally guarantee all of the Company's Obligations under the Senior Notes and the Senior Note Indenture on the terms and conditions set forth herein (the "Senior Subsidiary Guarantee"); and WHEREAS, pursuant to Section 9.01 of the Senior Note Indenture, the Senior Note Trustee is authorized to execute and deliver this Supplemental Senior Note Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiary and the Senior Note Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Senior Notes as follows: 1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Senior Note Indenture. 2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby agrees as follows: (a) Along with all Senior Note Guarantors named in the Senior Note Indenture, to jointly and severally Guarantee to each Holder of a Senior Note authenticated and delivered by the Senior Note Trustee and to the Senior Note Trustee and its successors and assigns, irrespective of the validity and enforceability of the Senior 1 Note Indenture, the Senior Notes or the obligations of the Company hereunder or thereunder, that: (i) the principal of and interest on the Senior Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Senior Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Senior Note Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (ii) in case of any extension of time of payment or renewal of any Senior Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Senior Note Guarantors shall be jointly and severally obligated to pay the same immediately. (b) The obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Senior Notes or the Senior Note Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Senior Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Senior Note Guarantor. (c) The following is hereby waived: diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever. (d) This Senior Subsidiary Guarantee shall not be discharged except by complete performance of the obligations contained in the Senior Notes and the Senior Note Indenture. (e) If any Holder or the Senior Note Trustee is required by any court or otherwise to return to the Company, the Senior Note Guarantors, or any custodian, Senior Note Trustee, liquidator or other similar official acting in relation to either the Company or the Senior Note Guarantors, any amount paid by either to the Senior Note Trustee 2 or such Holder, this Senior Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. (f) The Guaranteeing Subsidiary shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. (g) As between the Senior Note Guarantors, on the one hand, and the Holders and the Senior Note Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 of the Senior Note Indenture for the purposes of this Senior Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibitions preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 of the Senior Note Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by the Senior Note Guarantors for the purpose of this Senior Subsidiary Guarantee. (h) The Senior Note Guarantors shall have the right to seek contribution from any non-paying Senior Note Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Senior Subsidiary Guarantee. (i) Pursuant to Section 10.04 of the Senior Note Indenture, after giving effect to any maximum amount and any other contingent and fixed liabilities that are relevant under any applicable Bankruptcy or fraudulent conveyance laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Senior Note Guarantor in respect of the obligations of such other Senior Note Guarantor under Article 10 of the Senior Note Indenture shall result in the obligations of such Senior Note Guarantor under its Senior Subsidiary Guarantee not constituting a fraudulent transfer or conveyance. 3. EXECUTION AND DELIVERY. Each Guaranteeing Subsidiary agrees that the Senior Subsidiary Guarantees shall remain in full force and effect notwithstanding any failure to endorse on each Senior Note a notation of such Senior Subsidiary Guarantee. 4. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. 3 (a) The Guaranteeing Subsidiary may not consolidate with or merge with or into (whether or not such Senior Note Guarantor is the surviving Person) another corporation, Person or entity whether or not affiliated with such Senior Note Guarantor unless: (i) subject to Section 10.04 of the Senior Note Indenture, the Person formed by or surviving any such consolidation or merger (if other than a Senior Note Guarantor or the Company) unconditionally assumes all the obligations of such Senior Note Guarantor, pursuant to a supplemental Senior Note Indenture in form and substance reasonably satisfactory to the Senior Note Trustee, under the Senior Notes, the Senior Note Indenture and the Senior Subsidiary Guarantee on the terms set forth herein or therein; and (ii) immediately after giving effect to such transaction, no Default or Event of Default exists. (b) In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor corporation, by supplemental Senior Note Indenture, executed and delivered to the Senior Note Trustee and satisfactory in form to the Senior Note Trustee, of the Senior Subsidiary Guarantee endorsed upon the Senior Notes and the due and punctual performance of all of the covenants and conditions of the Senior Note Indenture to be performed by the Senior Note Guarantor, such successor corporation shall succeed to and be substituted for the Senior Note Guarantor with the same effect as if it had been named herein as a Senior Note Guarantor. Such successor corporation thereupon may cause to be signed any or all of the Senior Subsidiary Guarantees to be endorsed upon all of the Senior Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Senior Note Trustee. All the Senior Subsidiary Guarantees so issued shall in all respects have the same legal rank and benefit under the Senior Note Indenture as the Senior Subsidiary Guarantees theretofore and thereafter issued in accordance with the terms of the Senior Note Indenture as though all of such Senior Subsidiary Guarantees had been issued at the date of the execution hereof. (c) Except as set forth in Articles 4 and 5 of the Senior Note Indenture, and notwithstanding clauses (a) and (b) above, nothing contained in the Senior Note Indenture or in any of the Senior Notes shall prevent any consolidation or merger of a Senior Note Guarantor with or into the Company or another Senior Note Guarantor, or shall prevent any sale or conveyance of the property of a Senior 4 Note Guarantor as an entirety or substantially as an entirety to the Company or another Senior Note Guarantor. 5. RELEASES. (a) In the event of a sale or other disposition of all of the assets of any Senior Note Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all to the capital stock of any Senior Note Guarantor, then such Senior Note Guarantor (in the event of a sale or other disposition, by way of merger, consolidation or otherwise, of all of the capital stock of such Senior Note Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Senior Note Guarantor) will be released and relieved of any obligations under its Senior Subsidiary Guarantee; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the Senior Note Indenture, including without limitation Section 4.10 of the Senior Note Indenture. Upon delivery by the Company to the Senior Note Trustee of an Officer's Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made by the Company in accordance with the provisions of the Senior Note Indenture, including without limitation Section 4.10 of the Senior Note Indenture, the Senior Note Trustee shall execute any documents reasonably required in order to evidence the release of any Senior Note Guarantor from its obligations under its Senior Subsidiary Guarantee. (b) Any Senior Note Guarantor not released from its obligations under its Senior Subsidiary Guarantee shall remain liable for the full amount of principal of and interest on the Senior Notes and for the other obligations of any Senior Note Guarantor under the Senior Note Indenture as provided in Article 10 of the Senior Note Indenture. 6. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator, stockholder or agent of the Guaranteeing Subsidiary, as such, shall have any liability for any obligations of the Company or any Guaranteeing Subsidiary under the Senior Notes, any Senior Subsidiary Guarantees, the Senior Note Indenture or this Supplemental Senior Note Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Senior Notes by accepting a Senior Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Senior Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy. 5 7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL SENIOR NOTE INDENTURE BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 8. COUNTERPARTS. The parties may sign any number of copies of this Supplemental Senior Note Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 9. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof. 10. THE SENIOR NOTE TRUSTEE. The Senior Note Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Senior Note Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiary and the Company. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Senior Note Indenture to be duly executed and attested, all as of the date first above written. THOROUGHBRED GENERATING COMPANY, LLC By: /s/ Steven F. Schaab --------------------------- Name: S. F. Schaab Title: Vice President & Treasurer 6 EX-4.22 8 c69447ex4-22.txt SIXTH SUPPLEMENTAL SENIOR SUBORIDNATED NOTE EXHIIBT 4.22 SIXTH SUPPLEMENTAL SENIOR SUBORDINATED NOTE INDENTURE SIXTH SUPPLEMENTAL SENIOR SUBORDINATED NOTE INDENTURE (this "Supplemental Senior Subordinated Note Indenture"), dated as of February 11, 2002, among THOROUGHBRED GENERATING COMPANY, LLC, a Delaware limited liability company (the "Guaranteeing Subsidiary"), a subsidiary of Peabody Energy Corporation (formerly P&L Coal Holdings Corporation) (or its permitted successor), a Delaware corporation (the "Company"), the Company, the other Senior Subordinated Note Guarantors (as defined in the Senior Subordinated Note Indenture referred to herein) and State Street Bank and Trust Company, as Senior Subordinated Note Trustee under the Senior Subordinated Note Indenture referred to below (the "Senior Subordinated Note Trustee"). WITNESSETH WHEREAS, the Company has heretofore executed and delivered to the Senior Subordinated Note Trustee a Senior Subordinated Note Indenture (the "Senior Subordinated Note Indenture"), dated as of May 18, 1998 providing for the issuance of an aggregate principal amount of up to $650.0 million of 9-5/8% Senior Subordinated Notes due 2008 (the "Senior Subordinated Notes"); WHEREAS, the Senior Subordinated Note Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Senior Subordinated Note Trustee a supplemental Senior Subordinated Note Indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally guarantee all of the Company's Obligations under the Senior Subordinated Notes and the Senior Subordinated Note Indenture on the terms and conditions set forth herein (the "Subordinated Subsidiary Guarantee"); and WHEREAS, pursuant to Section 9.01 of the Senior Subordinated Note Indenture, the Senior Subordinated Note Trustee is authorized to execute and deliver this Supplemental Senior Subordinated Note Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiary and the Senior Subordinated Note Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Senior Subordinated Notes as follows: 1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Senior Subordinated Note Indenture. 2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby agrees as follows: 1 (a) Along with all Senior Subordinated Note Guarantors named in the Senior Subordinated Note Indenture, to jointly and severally Guarantee to each Holder of a Senior Subordinated Note authenticated and delivered by the Senior Subordinated Note Trustee and to the Senior Subordinated Note Trustee and its successors and assigns, irrespective of the validity and enforceability of the Senior Subordinated Note Indenture, the Senior Subordinated Notes or the obligations of the Company hereunder or thereunder, that: (i) the principal of and interest on the Senior Subordinated Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Senior Subordinated Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Senior Subordinated Note Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (ii) in case of any extension of time of payment or renewal of any Senior Subordinated Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Senior Subordinated Note Guarantors shall be jointly and severally obligated to pay the same immediately. (b) Notwithstanding the foregoing, it is agreed and acknowledged that the Subordinated Subsidiary Guarantee hereunder is subordinated to the Senior Debt of such Subordinated Senior Note Guarantor as set forth in Article 10 and in Article 11 of the Senior Subordinated Note Indenture. (c) The obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Senior Subordinated Notes or the Senior Subordinated Note Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Senior Subordinated Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Senior Subordinated Note Guarantor. 2 (d) The following is hereby waived: diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever. (e) This Subordinated Subsidiary Guarantee shall not be discharged except by complete performance of the obligations contained in the Senior Subordinated Notes and the Senior Subordinated Note Indenture. (f) If any Holder or the Senior Subordinated Note Trustee is required by any court or otherwise to return to the Company, the Senior Subordinated Note Guarantors, or any custodian, Senior Subordinated Note Trustee, liquidator or other similar official acting in relation to either the Company or the Senior Subordinated Note Guarantors, any amount paid by either to the Senior Subordinated Note Trustee or such Holder, this Subordinated Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. (g) The Guaranteeing Subsidiary shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. (h) As between the Senior Subordinated Note Guarantors, on the one hand, and the Holders and the Senior Subordinated Note Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 of the Senior Subordinated Note Indenture for the purposes of this Subordinated Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 of the Senior Subordinated Note Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by the Senior Subordinated Note Guarantors for the purpose of this Subordinated Subsidiary Guarantee. (i) The Senior Subordinated Note Guarantors shall have the right to seek contribution from any non-paying Senior Subordinated Note Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Subordinated Subsidiary Guarantee. 3 (j) Pursuant to Section 11.02 of the Senior Subordinated Note Indenture, after giving effect to any maximum amount and any other contingent and fixed liabilities that are relevant under any applicable Bankruptcy or fraudulent conveyance laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Senior Subordinated Note Guarantor in respect of the obligations of such other Senior Subordinated Note Guarantor under Article 11 of the Senior Subordinated Note Indenture shall result in the obligations of such Senior Subordinated Note Guarantor under its Subordinated Subsidiary Guarantee not constituting a fraudulent transfer or conveyance. 3. EXECUTION AND DELIVERY. Each Guaranteeing Subsidiary agrees that the Subordinated Subsidiary Guarantees shall remain in full force and effect notwithstanding any failure to endorse on each Senior Subordinated Note a notation of such Subordinated Subsidiary Guarantee. 4. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. (a) The Guaranteeing Subsidiary may not consolidate with or merge with or into (whether or not such Senior Subordinated Note Guarantor is the surviving Person) another corporation, Person or entity whether or not affiliated with such Senior Subordinated Note Guarantor unless: (i) subject to Section 11.05 of the Senior Subordinated Note Indenture, the Person formed by or surviving any such consolidation or merger (if other than a Senior Subordinated Note Guarantor or the Company) unconditionally assumes all the obligations of such Senior Subordinated Note Guarantor, pursuant to a supplemental Senior Subordinated Note Indenture in form and substance reasonably satisfactory to the Senior Subordinated Note Trustee, under the Senior Subordinated Notes, the Senior Subordinated Note Indenture and the Subordinated Subsidiary Guarantee on the terms set forth herein or therein; and (ii) immediately after giving effect to such transaction, no Default or Event of Default exists. (b) In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor corporation, by 4 supplemental Senior Subordinated Note Indenture, executed and delivered to the Senior Subordinated Note Trustee and satisfactory in form to the Senior Subordinated Note Trustee, of the Subordinated Subsidiary Guarantee endorsed upon the Senior Subordinated Notes and the due and punctual performance of all of the covenants and conditions of the Senior Subordinated Note Indenture to be performed by the Senior Subordinated Note Guarantor, such successor corporation shall succeed to and be substituted for the Senior Subordinated Note Guarantor with the same effect as if it had been named herein as a Senior Subordinated Note Guarantor. Such successor corporation thereupon may cause to be signed any or all of the Subordinated Subsidiary Guarantees to be endorsed upon all of the Senior Subordinated Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Senior Subordinated Note Trustee. All the Subordinated Subsidiary Guarantees so issued shall in all respects have the same legal rank and benefit under the Senior Subordinated Note Indenture as the Subordinated Subsidiary Guarantees theretofore and thereafter issued in accordance with the terms of the Senior Subordinated Note Indenture as though all of such Subordinated Subsidiary Guarantees had been issued at the date of the execution hereof. (c) Except as set forth in Articles 4 and 5 of the Senior Subordinated Note Indenture, and notwithstanding clauses (a) and (b) above, nothing contained in the Senior Subordinated Note Indenture or in any of the Senior Subordinated Notes shall prevent any consolidation or merger of a Senior Subordinated Note Guarantor with or into the Company or another Senior Subordinated Note Guarantor, or shall prevent any sale or conveyance of the property of a Senior Subordinated Note Guarantor as an entirety or substantially as an entirety to the Company or another Senior Subordinated Note Guarantor. 5. RELEASES. (a) In the event of a sale or other disposition of all of the assets of any Senior Subordinated Note Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all to the capital stock of any Senior Subordinated Note Guarantor, then such Senior Subordinated Note Guarantor (in the event of a sale or other disposition, by way of merger, consolidation or otherwise, of all of the capital stock of such Senior Subordinated Note Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Senior Subordinated Note Guarantor) will be released and 5 relieved of any obligations under its Subordinated Subsidiary Guarantee; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the Senior Subordinated Note Indenture, including without limitation Section 4.10 of the Senior Subordinated Note Indenture. Upon delivery by the Company to the Senior Subordinated Note Trustee of an Officer's Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made by the Company in accordance with the provisions of the Senior Subordinated Note Indenture, including without limitation Section 4.10 of the Senior Subordinated Note Indenture, the Senior Subordinated Note Trustee shall execute any documents reasonably required in order to evidence the release of any Senior Subordinated Note Guarantor from its obligations under its Subordinated Subsidiary Guarantee. (b) Any Senior Subordinated Note Guarantor not released from its obligations under its Subordinated Subsidiary Guarantee shall remain liable for the full amount of principal of and interest on the Senior Subordinated Notes and for the other obligations of any Senior Subordinated Note Guarantor under the Senior Subordinated Note Indenture as provided in Article 11 of the Senior Subordinated Note Indenture. 6. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator, stockholder or agent of the Guaranteeing Subsidiary, as such, shall have any liability for any obligations of the Company or any Guaranteeing Subsidiary under the Senior Subordinated Notes, any Subordinated Subsidiary Guarantees, the Senior Subordinated Note Indenture or this Supplemental Senior Subordinated Note Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Senior Subordinated Notes by accepting a Senior Subordinated Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Senior Subordinated Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy. 7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL SENIOR SUBORDINATED NOTE INDENTURE BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 8. COUNTERPARTS. The parties may sign any number of copies of this Supplemental Senior Subordinated Note Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 6 9. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof. 10. THE SENIOR SUBORDINATED NOTE TRUSTEE. The Senior Subordinated Note Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Senior Subordinated Note Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiary and the Company. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Senior Subordinated Note Indenture to be duly executed and attested, all as of the date first above written. THOROUGHBRED GENERATING COMPANY, LLC By: /s/ Steven F. Schaab -------------------- Name: S. F. Schaab Title: Vice President & Treasurer 7 -----END PRIVACY-ENHANCED MESSAGE-----