-----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, Q4GpGUuvOI86R2MoXZwg2WW8k5wNItIzDlMyVDo1obLT0O1KyvEMdxB102UbG22z j+Yv5Sra0rhFigQLZ1u4EQ== 0000950134-03-007757.txt : 20030513 0000950134-03-007757.hdr.sgml : 20030513 20030513161802 ACCESSION NUMBER: 0000950134-03-007757 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20030331 FILED AS OF DATE: 20030513 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: 03695809 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 c77011e10vq.txt FORM 10-Q UNITED STATES 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, 2003 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 Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). [X] Yes [ ] No Number of shares outstanding of each of the Registrant's classes of Common Stock, as of April 30, 2003: Common Stock, par value $0.01 per share, 52,477,020 shares outstanding. INDEX
Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Unaudited Condensed Consolidated Statements of Operations for the Quarters Ended March 31, 2003 and 2002...................................................... 2 Condensed Consolidated Balance Sheets as of March 31, 2003 (unaudited) and December 31, 2002.................................................................. 3 Unaudited Condensed Consolidated Statements of Cash Flows for the Quarters Ended March 31, 2003 and 2002...................................................... 4 Notes to Unaudited Condensed Consolidated Financial Statements..................... 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations......................................................................... 20 Item 3. Quantitative and Qualitative Disclosures About Market Risk......................... 24 Item 4. Controls and Procedures............................................................ 25 PART II. OTHER INFORMATION Item 1. Legal Proceedings.................................................................. 25 Item 6. Exhibits and Reports on Form 8-K................................................... 25
PART I - FINANCIAL INFORMATION Item 1. Financial Statements. PEABODY ENERGY CORPORATION UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share and per share information)
Quarter Ended March 31, 2003 2002 ------------ ------------ REVENUES Sales $ 657,829 $ 652,283 Other revenues 23,465 23,483 ------------ ------------ Total revenues 681,294 675,766 COSTS AND EXPENSES Operating costs and expenses 566,620 536,161 Depreciation, depletion and amortization 56,047 58,677 Asset retirement obligation expense 6,490 - Selling and administrative expenses 25,324 26,283 Net gain on property and equipment disposals (7,718) (305) ------------ ------------ OPERATING PROFIT 34,531 54,950 Interest expense 26,152 24,903 Early debt extinguishment costs 21,184 - Interest income (672) (519) ------------ ------------ INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTERESTS (12,133) 30,566 Income tax provision (benefit) (12,246) 4,585 Minority interests 1,050 3,666 ------------ ------------ INCOME (LOSS) BEFORE ACCOUNTING CHANGES (937) 22,315 Cumulative effect of accounting changes, net of taxes (10,144) - ------------ ------------ NET INCOME (LOSS) $ (11,081) $ 22,315 ============ ============ BASIC EARNINGS PER COMMON SHARE: Income (loss) before accounting changes $ (0.02) $ 0.43 Cumulative effect of accounting changes, net of taxes (0.19) - ------------ ------------ Net income (loss) $ (0.21) $ 0.43 ============ ============ WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 52,414,041 52,018,238 ============ ============ DILUTED EARNINGS PER COMMON SHARE: Income (loss) before accounting changes $ (0.02) $ 0.42 Cumulative effect of accounting changes, net of taxes (0.19) - ------------ ------------ Net income (loss) $ (0.21) $ 0.42 ============ ============ WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 52,414,041 53,731,426 ============ ============ DIVIDENDS DECLARED PER SHARE $ 0.10 $ 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, 2003 December 31, 2002 -------------- ----------------- ASSETS Current assets Cash and cash equivalents $ 71,718 $ 71,210 Restricted cash 509,592 - Accounts receivable, less allowance for doubtful accounts of $1,309 at March 31, 2003 and $1,331 at December 31, 2002 249,612 153,212 Materials and supplies 41,623 39,416 Coal inventory 206,351 190,272 Assets from coal and emission allowance trading activities 42,272 69,898 Deferred income taxes 10,380 10,361 Other current assets 16,477 15,554 ----------- ----------- Total current assets 1,148,025 549,923 Property, plant, equipment and mine development, net of accumulated depreciation, depletion and amortization of $898,510 at March 31, 2003 and $858,187 at December 31, 2002 4,303,150 4,273,042 Investments and other assets 332,689 317,212 ----------- ----------- Total assets $ 5,783,864 $ 5,140,177 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Short-term borrowings and current maturities of long-term debt $ 21,522 $ 47,515 Notes called for redemption 465,004 - Liabilities from coal and emission allowance trading activities 31,012 37,008 Accounts payable and accrued expenses 590,155 547,013 ----------- ----------- Total current liabilities 1,107,693 631,536 Long-term debt, less current maturities 1,173,057 981,696 Deferred income taxes 479,661 499,310 Asset retirement obligations 392,205 386,777 Workers' compensation obligations 214,702 209,798 Accrued postretirement benefit costs 963,469 959,599 Obligation to industry fund 47,814 49,760 Other noncurrent liabilities 302,462 303,442 ----------- ----------- Total liabilities 4,681,063 4,021,918 Minority interests 36,821 37,121 Stockholders' equity Preferred Stock - $0.01 per share par value; 10,000,000 shares authorized, no shares issued or outstanding as of March 31, 2003 or December 31, 2002 - - Series Common Stock - $0.01 per share par value; 40,000,000 shares authorized, no shares issued or outstanding as of March 31, 2003 or December 31, 2002 - - Common Stock - $0.01 per share par value; 150,000,000 shares authorized, 52,440,718 shares issued and 52,423,513 shares outstanding as of March 31, 2003 and 150,000,000 shares authorized, 52,417,483 shares issued and 52,400,278 shares outstanding as of December 31, 2002 524 524 Additional paid-in capital 958,993 958,567 Retained earnings 184,536 200,859 Employee stock loans (407) (1,142) Accumulated other comprehensive loss (77,623) (77,627) Treasury shares, at cost: 17,205 shares as of March 31, 2003 and December 31, 2002, respectively (43) (43) ----------- ----------- Total stockholders' equity 1,065,980 1,081,138 ----------- ----------- Total liabilities and stockholders' equity $ 5,783,864 $ 5,140,177 =========== ===========
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, ------------------------------ 2003 2002 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ (11,081) $ 22,315 Cumulative effect of accounting changes, net of taxes 10,144 - --------- --------- Income (loss) before accounting changes (937) 22,315 Adjustments to reconcile income (loss) before accounting changes to net cash provided by operating activities: Depreciation, depletion and amortization 56,047 58,677 Deferred income taxes (13,112) 4,585 Early debt extinguishment costs 21,184 - Amortization of debt discount and debt issuance costs 2,289 2,859 Net gain on property and equipment disposals (7,718) (305) Minority interests 1,050 3,666 Changes in current assets and liabilities: Accounts receivable (12,500) (14,648) Materials and supplies (2,207) (1,687) Coal inventory (16,079) (21,833) Net assets from coal and emission allowance trading activities (12,014) (9,137) Other current assets (659) (4,185) Accounts payable and accrued expenses 43,142 (17,851) Asset retirement obligations (2,237) (265) Workers' compensation obligations 4,904 1,362 Accrued postretirement benefit costs 5,363 477 Obligation to industry fund (1,946) (761) Other, net (7,019) (1,854) --------- --------- Net cash provided by operating activities 57,551 21,415 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Additions to property, plant, equipment and mine development (58,844) (47,064) Additions to advance mining royalties (2,354) (2,104) Investment in joint venture - (475) Proceeds from property and equipment disposals 8,139 833 --------- --------- Net cash used in investing activities (53,059) (48,810) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Net change in revolving lines of credit (121,584) 25,000 Proceeds from long-term debt, net of restricted cash proceeds 591,311 2,375 Payments of long-term debt (361,915) (14,687) Reduction of securitized interests in accounts receivable (83,900) - Payment of debt issuance costs (22,687) - Distributions to minority interests (1,350) (2,825) Dividend paid (5,242) (5,202) Other 1,014 227 --------- --------- Net cash provided by (used in) financing activities (4,353) 4,888 --------- --------- Effect of exchange rate changes on cash and cash equivalents 369 - Net increase (decrease) in cash and cash equivalents 508 (22,507) Cash and cash equivalents at beginning of year 71,210 38,622 --------- --------- Cash and cash equivalents at end of period $ 71,718 $ 16,115 ========= =========
See accompanying notes to unaudited condensed consolidated financial statements. 4 PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2003 (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. Certain prior year amounts have been reclassified to conform with the current year presentation. The accompanying condensed consolidated financial statements as of March 31, 2003 and for the quarters ended March 31, 2003 and 2002, and the notes thereto, are unaudited. However, in the opinion of management, these financial statements reflect all normal, recurring adjustments necessary for a fair presentation of the results of the periods presented. The balance sheet information as of December 31, 2002 has been derived from the Company's audited consolidated balance sheet. The results of operations for the quarter ended March 31, 2003 are not necessarily indicative of the results to be expected for the year ending December 31, 2003. (2) DEBT REFINANCING During March 2003, the Company entered into a series of transactions, discussed in detail below, to refinance a substantial portion of its outstanding indebtedness. The refinancing expanded the Company's revolving line of credit capacity and will lower its overall borrowing costs. The Company's total indebtedness (in thousands) consisted of the following at:
March 31, 2003 December 31, 2002 -------------- ----------------- Term Loan under Senior Secured Credit Facility $ 450,000 $ - 6.875% Senior Notes due 2013 650,000 - 9.625% Senior Subordinated Notes to be redeemed May 15, 2003 257,553 391,490 8.875% Senior Notes to be redeemed May 15, 2003 207,451 316,498 5.0% Subordinated Note 76,207 85,055 Senior unsecured notes under various agreements - 58,214 Unsecured revolving credit agreement - 116,584 Other 18,372 61,370 ---------- --------- $1,659,583 $1,029,211 ========== ==========
The following table shows the sources and uses (in thousands), through March 31, 2003, of cash related to the refinancing transactions: SOURCES: Revolving Credit Facility $ - Term Loan under Senior Secured Credit Facility 450,000 6.875% Senior Notes due 2013 650,000 ---------- Total $1,100,000 ========== USES: Repayment of 9.625% Senior Subordinated Notes $ 133,964 Repayment of 8.875% Senior Notes 109,082 Repayment of Black Beauty indebtedness 203,215 Fees and prepayment premiums paid in connection with refinancing 41,023 Cash restricted for notes to be redeemed May 15, 2003 509,592 Cash 103,124 ---------- Total $1,100,000 ==========
5 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued Use of Proceeds The Company has used and will use the $1.1 billion of proceeds from the $450.0 million term loan under its Senior Secured Credit Facility and the $650.0 million in 6.875 % Senior Notes to repay and retire the following indebtedness: - All of its 9.625% Senior Subordinated Notes - All of its 8.875% Senior Notes - Substantially all of Black Beauty's indebtedness During March 2003, the Company completed a tender offer to retire $134.0 million of its 9.625% Senior Subordinated Notes and $109.1 million of its 8.875% Senior Notes. In addition, $203.2 million of Black Beauty indebtedness was retired. The Company also incurred cash expenses related to the refinancing and prepayment premiums related to the early extinguishment of debt totaling $41.0 million during the quarter. The remaining 9.625% Senior Subordinated Notes and 8.875% Senior Notes have been called for redemption and will be redeemed on May 15, 2003. The Company's balance sheet at March 31, 2003 reflects $509.6 million in restricted cash that will be used to pay prepayment premiums, accrued interest and the remaining principal balance of $465.0 million of the 9.625% Senior Subordinated Notes and 8.875% Senior Notes (classified on the March 31, 2003 balance sheet as "Notes called for redemption"). The remaining cash proceeds of $103.1 million were temporarily used to reduce the Company's $140.0 million accounts receivable securitization by $83.9 million and for investments in cash equivalents. The reduction in securitized interests in accounts receivable resulted in an $83.9 million increase in accounts receivable as of March 31, 2003. On April 7, 2003, the securitization returned to near its total capacity of $140.0 million as the Company used $90.0 million to acquire the remaining 18.3% of Black Beauty. This acquisition is discussed in Note 10 to the unaudited condensed consolidated financial statements. The Company's new debt instruments are described in greater detail below. Senior Secured Credit Facility On March 21, 2003, the Company entered into a new Senior Secured Credit Facility that consists of a $600.0 million revolving credit facility and a $450.0 million term loan. The new revolving credit facility, which currently bears interest at LIBOR plus 2.0% and expires in March 2008, provides for maximum borrowings and/or letters of credit of $600.0 million. The Company had letters of credit outstanding under the facility of $231.2 million at March 31, 2003, leaving $368.8 million available for borrowing. The new $450.0 million term loan, which is due in March 2010, currently bears interest at LIBOR plus 2.5%. The facility is secured by the capital stock and certain assets of the Company's "restricted subsidiaries" (as defined in the facility). These restricted subsidiaries are guarantors of the facility. Under the facility, the Company must comply with certain financial covenants on a quarterly basis. These covenants include a minimum EBITDA (as defined in the facility) interest coverage ratio, a maximum "total obligations" (as defined in the facility) to EBITDA ratio and a maximum senior secured debt to EBITDA ratio. The Company was in compliance with these covenants as of March 31, 2003. 6.875% Senior Notes due 2013 On March 21, 2003, the Company issued $650.0 million in senior notes, which bear interest at 6.875% and are due in March 2013. The notes were sold in accordance with Securities and Exchange Commission Rule 144A, and the Company intends to file a registration statement with the Securities and Exchange Commission that will enable the holders of these notes to exchange them for publicly registered notes with substantially the same terms. The notes, which are unsecured, are guaranteed by the Company's "restricted subsidiaries" as defined in the note indenture. The note indenture contains covenants which, among other things, limit the Company's ability to incur additional indebtedness and issue preferred stock, pay dividends or make other distributions, make other restricted payments and investments, create liens, sell assets and merge or consolidate with other entities. The notes are redeemable prior to March 15, 2008 at a redemption price equal to 100% of the principal amount plus a make-whole premium (as defined in the indenture) and on or after March 15, 2008 at fixed redemption prices as set forth in the indenture. 6 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued Early Debt Extinguishment Costs In connection with the refinancing, the Company incurred early debt extinguishment costs of $21.2 million during the quarter ended March 31, 2003. These costs are comprised of the following: - Payment of prepayment premiums and tender fees totaling $18.9 million; - A non-cash charge to write-off debt issuance costs associated with the debt extinguished of $8.1 million; and - A $5.8 million gain related to the termination and monetization of interest rate swaps associated with the debt extinguished. As a result of the adoption on January 1, 2003 of Statement of Financial Accounting Standards ("SFAS") No. 145 "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections," gains or losses on debt extinguishment previously reported as extraordinary items are presented as a component of results from continuing operations unless the extinguishment meets the criteria for classification as an extraordinary item in Accounting Principles Board Opinion No. 30. The effect of the adoption and application of this new standard in 2003 was to decrease income before accounting changes for the quarter by $21.2 million, before taxes. Prior year results of operations included no debt extinguishment costs. Upon the redemption and repayment of the remaining 9.625% Senior Subordinated Notes and 8.875% Senior Notes on May 15, 2003, the Company will incur early debt extinguishment costs of approximately $31.1 million, consisting of $21.7 million of prepayment premiums and a non-cash charge to write-off $9.4 million of debt issuance costs associated with the debt to be retired. (3) CUMULATIVE EFFECT OF ACCOUNTING CHANGES On January 1, 2003, the Company adopted SFAS No. 143, "Accounting for Asset Retirement Obligations," which addresses accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. For the Company, asset retirement obligation expense represents the systematic accretion and depreciation of future mine reclamation costs, which includes the costs to reclaim the land disturbed during the mining process and the removal of mine plant, equipment, transportation and other support facilities. SFAS No. 143 requires the fair value of a liability for an asset's retirement obligation to be recorded in the period in which it is incurred if a reasonable estimate of fair value can be made, and that the corresponding cost is capitalized as part of the carrying amount of the related long-lived asset. The liability is accreted to its then present value each period, and the capitalized cost is depreciated over the useful life of the related asset. If the liability is settled for an amount other than the recorded amount, a gain or loss is recognized. Under its previous accounting method, the Company accrued the estimated future costs to reclaim the land as the acreage was disturbed at surface mine operations and the estimated costs to reclaim support acreage and to perform other related functions at both surface and underground mines ratably over the lives of the mines. Pursuant to the January 1, 2003 adoption of SFAS No. 143, the Company: - recognized a credit to income during the first quarter of 2003 of $9.1 million, net of tax, for the cumulative effect of the accounting change; - increased total liabilities by $0.5 million to record the asset retirement obligations; - increased assets by $18.6 million to add the asset retirement costs to the carrying amount of our mine properties and reflect the incremental amount of reclamation obligations recoverable from third parties; and - increased accumulated depreciation, depletion and amortization by $2.9 million for the amount of expense previously recognized. Adopting SFAS No. 143 had no impact on the Company's reported cash flows. The Company's reclamation liabilities are unfunded. 7 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued On October 25, 2002, the Emerging Issues Task Force (EITF) rescinded EITF Issue No. 98-10 "Accounting for Contracts Involved in Energy Trading and Risk Management Activities." As a result of the rescission, trading contracts entered into prior to October 25, 2002 that did not meet the definition of a derivative under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" (as amended) were no longer accounted for on a fair value basis, effective January 1, 2003. The Company recorded a cumulative effect charge in the statement of operations of $20.2 million, net of income taxes, to reverse the unrealized gains and losses on non-derivative energy trading contracts recorded prior to December 31, 2002. Effective January 1, 2003, the Company changed its method of amortizing actuarial gains and losses related to net periodic postretirement benefit costs. The Company previously amortized actuarial gains and losses using a 5% corridor with an amortization period of three years. Under the new method, the corridor has been eliminated and all actuarial gains and losses are now amortized over the average remaining service period of active plan participants, which is currently estimated at 9.5 years. The Company considers this method preferable in that the elimination of the corridor allows a closer approximation of the fair value of the liability for postretirement benefit costs, and the amortization of actuarial gains and losses over the average remaining service period provides a better matching of the cost of the associated liability over the working life of the active plan participants. As a result of this change, the Company recognized a $0.9 million cumulative effect gain in the quarter ended March 31, 2003. The effect of the changes for the quarter ended March 31, 2003 was to increase income before accounting changes by $5.5 million, or $0.11 per share, net of taxes. The cumulative effect charge of $10.1 million (net of income tax benefit of $6.8 million) to apply retroactively the new methods described above is included in results of operations for the quarter ended March 31, 2003. Below are pro forma net income and earnings per share results for the Company assuming the new methods had been retroactively applied (dollars in thousands, except per share data):
Quarter Ended March 31, --------------------------- 2003 2002 ------------ ------------ Net income (loss): As reported $ (11,081) $ 22,315 Pro forma (937) 18,314 Basic earnings (loss) per share: As reported $ (0.21) $ 0.43 Pro forma (0.02) 0.35 Diluted earnings (loss) per share: As reported $ (0.21) $ 0.42 Pro forma (0.02) 0.34
(4) COAL INVENTORY Inventories consisted of the following (dollars in thousands) at:
March 31, December 31, 2003 2002 ------------ ------------ Raw coal $ 17,965 $ 18,076 Work in process 147,068 143,963 Saleable coal 41,318 28,233 ------------ ------------ Total $ 206,351 $ 190,272 ============ ============
8 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued (5) ASSETS AND LIABILITIES FROM COAL AND EMISSION ALLOWANCE TRADING ACTIVITIES On October 25, 2002, the EITF rescinded EITF Issue No. 98-10 "Accounting for Contracts Involved in Energy Trading and Risk Management Activities." As a result of the rescission, trading contracts entered into prior to October 25, 2002 that did not meet the definition of a derivative under SFAS No. 133 (as amended) were no longer accounted for on a fair value basis effective January 1, 2003. The Company recorded a cumulative effect charge of $20.2 million, net of income taxes, in the quarter ended March 31, 2003 to reverse the net unrealized gains on non-derivative energy trading contracts recorded prior to December 31, 2002. Substantially all of these non-derivative energy trading contracts will settle in 2003 and 2004. The fair value of coal trading derivatives as of March 31, 2003, are set forth below (dollars in thousands):
Fair Value --------------------------- Assets Liabilities ------------ ------------ Forward contracts $ 39,265 $ 29,608 Option contracts 3,007 1,404 ------------ ------------ Total $ 42,272 $ 31,012 ============ ============
All of the contracts in the Company's trading portfolio as of March 31, 2003 were valued utilizing prices from over-the-counter market sources, adjusted for contract duration and coal quality. As of March 31, 2003, the timing of the estimated future realization of the value of the Company's trading portfolio was as follows:
Year of Percentage Expiration of Portfolio - ---------- ------------ 2003 34% 2004 63% 2005 2% 2006 1% --- 100% ===
At March 31, 2003, 44% of the Company's credit exposure related to coal and emission allowance trading activities was with counterparties that are investment grade. Where practical, the Company takes steps to reduce its credit exposure to customers or counterparties whose credit has deteriorated and who may pose a higher risk, as determined by the Company's credit management function, of failure to perform under their contractual obligations. These steps include obtaining letters of credit or cash collateral, requiring prepayments for shipments or the creation of customer trust accounts held for the Company's benefit to fund the payments required under existing contracts. To further reduce credit exposure in its trading business, the Company also seeks to enter into netting agreements with counterparties that permit the Company to offset receivables and payables with such counterparties. The Company's coal trading operations traded 16.6 million tons and 28.2 million tons for the quarters ended March 31, 2003 and 2002, respectively. (6) EARNINGS PER SHARE A reconciliation of weighted average shares outstanding follows:
Quarter Ended March 31, ------------------------- 2003 2002 ---------- ---------- Weighted average shares outstanding - basic 52,414,041 52,018,238 Dilutive impact of stock options - 1,713,188 ---------- ---------- Weighted average shares outstanding - diluted 52,414,041 53,731,426 ========== ==========
9 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued Stock Compensation The Company applies Accounting Principles Board ("APB") Opinion No. 25 and related interpretations in accounting for its equity incentive plans. The Company recorded $0.1 million of compensation expense for granted stock options during each of the quarters ended March 31, 2003 and 2002. The following table reflects pro forma net income (loss) and basic and diluted earnings (loss) per share had compensation cost been determined for the Company's non-qualified and incentive stock options based on the fair value at the grant dates consistent with the methodology set forth under SFAS No. 123, "Accounting for Stock-Based Compensation"(dollars in thousands, except per share data):
Quarter Ended March 31, --------------------------- 2003 2002 ------------ ------------ Net income (loss): As reported $ (11,081) $ 22,315 Pro forma (12,613) 21,104 Basic earnings (loss) per share: As reported $ (0.21) $ 0.43 Pro forma (0.24) 0.41 Diluted earnings (loss) per share: As reported $ (0.21) $ 0.42 Pro forma (0.24) 0.39
(7) COMPREHENSIVE INCOME The following table sets forth the components of comprehensive income (loss) for the quarters ended March 31, 2003 and 2002 (dollars in thousands):
Quarter Ended March 31, --------------------------- 2003 2002 ------------ ------------ Net income (loss) $ (11,081) $ 22,315 Foreign currency translation adjustment 4 - ------------ ------------ Comprehensive income (loss) $ (11,077) $ 22,315 ============ ============
(8) SEGMENT INFORMATION The Company reports its operations primarily through the following reportable operating segments: "U.S. Mining," "Trading and Brokerage," and "Australian Mining Operations." 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. The Australian Mining Operations segment consists of the operations of Allied Queensland Coalfields Party Limited. This segment's principal business is the same as the U.S. Mining Segment. "Corporate and Other" consists primarily of corporate overhead not directly attributable to the U.S. Mining or Trading and Brokerage operating segments, and resource management activities. In some cases, the Company's brokerage operation acts as the sales agent for the U.S. and Australian Mining Operations. For purposes of the presentation below, intercompany sales between the mining operations and Trading and Brokerage Operations have been eliminated, and the third party sales are reflected in the mining operations' revenues. The U.S. Mining segment results below also include costs related to past mining activities and a portion of consolidated net gains on property disposals. Past mining activities and net gains on property disposals are discussed separately from U.S. Mining results in "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations." 10 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued Operating segment results for the quarters ended March 31, 2003 and 2002 are as follows (dollars in thousands):
Quarter Ended March 31, --------------------------- 2003 2002 ------------ ------------ Revenues: U.S. Mining $ 570,489 $ 614,491 Trading and Brokerage 100,777 54,551 Australian Mining Operations 6,362 - Corporate and Other 3,666 6,724 ------------ ------------ Total $ 681,294 $ 675,766 ============ ============ Operating Profit: U.S. Mining $ 30,802 $ 68,120 Trading and Brokerage 16,966 11,247 Australian Mining Operations 1,712 - Corporate and Other (14,949) (24,417) ------------ ------------ Total $ 34,531 $ 54,950 ============ ============
A reconciliation of segment operating profit to consolidated income (loss) before income taxes follows (dollars in thousands):
Quarter Ended March 31, --------------------------- 2003 2002 ------------ ------------ Total segment operating profit $ 34,531 $ 54,950 Interest expense 26,152 24,903 Early debt extinguishment costs 21,184 - Interest income (672) (519) Minority interests 1,050 3,666 ------------ ------------ Income (loss) before income taxes $ (13,183) $ 26,900 ============ ============
(9) COMMITMENTS AND CONTINGENCIES Environmental Environmental claims have been asserted against a subsidiary of the Company at 22 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 11 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued undiscounted liabilities for environmental cleanup-related costs recorded as part of "Accrued reclamation and other environmental liabilities" were $40.3 million and $42.1 million at March 31, 2003 and December 31, 2002, respectively. These amounts represent 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 ("Peabody Western"), 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's two coal leases for the Kayenta and Black Mesa mines have terminated due to Peabody Western's breach of these leases and a reformation of the two coal leases to adjust the royalty rate to 20%. On March 15, 2001, the court allowed the Hopi Tribe to intervene in this lawsuit. The Hopi Tribe has asserted seven claims including fraud and is seeking various remedies including unspecified actual damages, punitive damages and reformation of its coal lease. 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 pursuant to the April 1, 1998 Arbitration Agreement with the Navajo Nation. On January 14, 2003, the Arizona District Court dismissed the lawsuit. Our subsidiaries have filed an appeal of this decision with the Ninth Circuit Court of Appeals. On February 22, 2002, the Company's subsidiaries filed in the U.S. District Court 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. The District of Columbia District Court denied the Company's subsidiaries' motion for a stay and the subsidiaries appealed that ruling to the District of Columbia Court of Appeals. On April 23, 2003, the appellate court denied the appeal. On March 4, 2003, the U.S. Supreme Court issued a ruling in a companion lawsuit involving the Navajo Nation and the United States. The Court rejected the Navajo Nation's allegation that the U.S. breached its trust responsibilities to the Tribe in approving the coal lease amendments and was liable for money damages. On May 2, 2003, the Company's subsidiaries filed a renewed motion to dismiss the Navajo Nation's lawsuit against them based on the Supreme Court's decision. While the outcome of litigation is subject to uncertainties, based on the Company's preliminary evaluation of the issues and their potential impact on the Company, the Company believes this matter will be resolved without a material adverse effect on the Company's financial condition, results of operations or cash flows. Mohave Generating Station Peabody Western has a long-term coal supply agreement with the owners of the Mohave Generating Station that expires on December 31, 2005. There is a dispute with the Hopi Tribe regarding the use of groundwater in the transportation of the coal by pipeline to the Mohave plant. Also, Southern California Edison (the majority owner and operator of the plant) is involved in a California Public Utilities Commission proceeding related to recovery of future capital expenditures for new pollution abatement equipment for the station. The operator has stated that it expects to idle the plant for at least 12 to 18 months beginning in 2006. The Company is in active discussions to resolve the complex issues critical to the continuation of the operation of the Mohave Generating Station and the renewal of the coal supply agreement after December 31, 2005. There is no assurance that the issues critical to the continued operation of the Mohave plant will be resolved. If these issues are not resolved in a timely manner, the operation of the Mohave plant will cease or be suspended on December 31, 2005. The Mohave plant is the sole customer of the Black Mesa Mine, which sold 4.6 million tons of coal in 2002. 12 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued Citizens Power In connection with the August 2000 sale of the Company's former subsidiary, Citizens Power LLC, the Company has indemnified the buyer, Edison Mission Energy, from certain losses resulting from specified power contracts and guarantees. Should a party to one of these agreements fail to perform, the Company would be required to reimburse the buyer for any losses incurred as a result of any non-performance that meets the requirements set forth in the indemnity. During the period that Citizens Power was owned by the Company, Citizens Power guaranteed the obligations of two affiliates to make payments to third parties for power delivered under fixed-priced power sales agreements with terms that extend through 2008. Edison Mission Energy has stated and the Company believes there will be sufficient cash flow to pay the power suppliers assuming timely payment by the power purchasers. The power purchasers have made timely payments to the Citizens Power affiliates and Edison Mission Energy has not made a claim against the Company under the indemnity. Also during the ownership period, Citizens Power indemnified a utility against decreases in the value of power deliveries as a result of the implementation of a location-based pricing system in the New England Power Pool in connection with a power supply agreement that runs through 2016. Citizens Power's successor, an Edison Mission Energy subsidiary, is negotiating with the utility a methodology to calculate decreases in value and the Company is in agreement with the mitigation approach being negotiated by the successor. Edison Mission Energy has not made a claim against the Company under the indemnity. Due to the length and specific requirements of the contracts covered by the indemnity, the Company cannot reasonably estimate its future exposure, if any, under the indemnity. Other 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, 2003, purchase commitments for capital expenditures were approximately $73.9 million. (10) SUBSEQUENT EVENTS On April 7, 2003, the Company purchased the remaining 18.3% of Black Beauty Coal Company and affiliated entities for $90.0 million and contingent consideration. The additional consideration is contingent on Black Beauty's achievement of certain levels of operating profit in 2003 and 2004, as set forth in the purchase and sale agreement. As a result of the acquisition, the Company now owns 100% of Black Beauty Coal Company. The acquisition will be accounted for as a purchase. On May 7, 2003, certain shareholders of the Company, including the Company's largest shareholder, Lehman Brothers Merchant Banking Partners II L.P. and affiliates (collectively "Lehman Brothers") sold 5,750,000 shares of common stock, including an over-allotment option of 750,000 shares. The selling shareholders received all net proceeds. The Company did not sell any shares through the offering. Lehman Brothers sold, in the aggregate, 5,617,825 shares in the offering, and their beneficial ownership of the Company declined from 41% to 30%. (11) RELATED PARTY TRANSACTIONS As discussed in note 2 to the unaudited condensed consolidated financial statements, the Company refinanced a substantial portion of its indebtedness by entering into a new Senior Secured Credit Facility and issuing new Senior Notes. Based upon a competitive bidding process conducted by members of management and reviewed by members of the Company's Board of Directors not affiliated with Lehman Brothers, the Company appointed Wachovia Securities, Inc., Fleet Securities, Inc. and Lehman Brothers as lead arrangers for the Senior Secured Credit Facility, and Lehman Brothers and Morgan Stanley as joint book running managers for the Senior Notes. Lehman Brothers received total fees of $7.4 million for their services in connection with the refinancing; such fees were consistent with the fees paid to other parties to the transaction for their respective services. 13 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued In May 2003, Lehman Brothers served as the lead underwriter in connection with the secondary offering discussed in Note 10 above, and Lehman Brothers' fees for their services were paid by the selling shareholders and not by the Company. The Company paid incidental expenses customarily incurred by a registering company in connection with the secondary offering. (12) SUPPLEMENTAL GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION In accordance with the indentures governing the 6.875% Senior Notes, 8.875% Senior Notes and 9.625% 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. Black Beauty is included in these supplemental financial statements as a Non-Guarantor subsidiary. After the Company's acquisition on April 7, 2003 of the remaining 18.3% of Black Beauty, this subsidiary will become a Guarantor subsidiary of all of the indebtedness listed above. Black Beauty represents a significant portion of the Non-Guarantor results of operations, financial position and cash flows presented below. PEABODY ENERGY CORPORATION UNAUDITED SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS QUARTER ENDED MARCH 31, 2003 (In thousands)
Parent Guarantor Non-Guarantor Company Subsidiaries Subsidiaries Eliminations Consolidated --------- ------------ ------------- ------------ ------------ Total revenues $ - $ 499,727 $ 188,231 $ (6,664) $ 681,294 Costs and expenses Operating costs and expenses - 420,553 152,731 (6,664) 566,620 Depreciation, depletion and amortization - 41,354 14,693 - 56,047 Asset retirement obligation expense - 5,896 594 - 6,490 Selling and administrative expenses 165 21,900 3,259 - 25,324 Net gain on property and equipment disposals - (7,606) (112) - (7,718) Interest expense 35,274 24,882 3,224 (37,228) 26,152 Debt extinguishment costs 13,835 - 7,349 - 21,184 Interest income (17,220) (17,410) (3,270) 37,228 (672) --------- --------- --------- --------- --------- Income (loss) before income taxes and minority interests (32,054) 10,158 9,763 - (12,133) Income tax provision (benefit) (13,158) (2,009) 2,921 - (12,246) Minority interests - - 1,050 - 1,050 Cumulative effect of accounting changes, net of taxes 6,762 (13,831) (3,075) - (10,144) --------- --------- --------- --------- --------- Net income (loss) $ (12,134) $ (1,664) $ 2,717 $ - $ (11,081) ========= ========= ========= ========= =========
14 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued 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 $ - $ 523,671 $ 167,686 $ (15,591) $ 675,766 Costs and expenses Operating costs and expenses - 418,235 133,517 (15,591) 536,161 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 ========= ========= ========= ========= =========
15 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued PEABODY ENERGY CORPORATION UNAUDITED SUPPLEMENTAL CONDENSED CONSOLIDATED BALANCE SHEETS MARCH 31, 2003 (In thousands)
Parent Guarantor Non-Guarantor Company Subsidiaries Subsidiaries Eliminations Consolidated ----------- ------------ ------------- ------------ ------------ ASSETS Current assets Cash and cash equivalents $ 59,749 $ 385 $ 11,584 $ - $ 71,718 Restricted cash 509,592 - - - 509,592 Accounts receivable - 109,738 139,874 - 249,612 Inventories - 225,676 22,298 - 247,974 Assets from coal and emission allowance trading activities - 39,815 2,457 - 42,272 Deferred income taxes - 10,101 279 - 10,380 Other current assets 28 10,673 5,776 - 16,477 ----------- ----------- ----------- ----------- ----------- Total current assets 569,369 396,388 182,268 - 1,148,025 Property, plant, equipment and mine development - at cost - 4,639,997 561,663 - 5,201,660 Less accumulated depreciation, depletion and amortization - (784,177) (114,333) - (898,510) ----------- ----------- ----------- ----------- ----------- Property, plant, equipment and mine development, net - 3,855,820 447,330 - 4,303,150 Investments and other assets 3,513,454 228,025 53,698 (3,462,488) 332,689 ----------- ----------- ----------- ----------- ----------- Total assets $ 4,082,823 $ 4,480,233 $ 683,296 $(3,462,488) $ 5,783,864 =========== =========== =========== =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Short-term borrowings and current maturities of long-term debt $ 4,500 $ 10,303 $ 6,719 $ - $ 21,522 Notes called for redemption 465,004 - - - 465,004 Payables and notes payable to affiliates, net 1,353,360 (1,588,876) 235,516 - - Liabilities from coal and emission allowance trading activities - 31,012 - - 31,012 Accounts payable and accrued expenses 20,194 501,533 68,428 - 590,155 ----------- ----------- ----------- ----------- ----------- Total current liabilities 1,843,058 (1,046,028) 310,663 - 1,107,693 Long-term debt, less current maturities 1,095,500 67,098 10,459 - 1,173,057 Deferred income taxes - 475,333 4,328 - 479,661 Other noncurrent liabilities 662 1,899,212 20,778 - 1,920,652 ----------- ----------- ----------- ----------- ----------- Total liabilities 2,939,220 1,395,615 346,228 - 4,681,063 Minority interests - - 36,821 - 36,821 Stockholders' equity 1,143,603 3,084,618 300,247 (3,462,488) 1,065,980 ----------- ----------- ----------- ----------- ----------- Total liabilities and stockholders' equity $ 4,082,823 $ 4,480,233 $ 683,296 $(3,462,488) $ 5,783,864 =========== =========== =========== =========== ===========
16 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued PEABODY ENERGY CORPORATION SUPPLEMENTAL CONDENSED CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2002 (In thousands)
Parent Guarantor Non-Guarantor Company Subsidiaries Subsidiaries Eliminations Consolidated ----------- ------------ ------------- ------------ ------------ ASSETS Current assets Cash and cash equivalents $ 60,666 $ 420 $ 10,124 $ - $ 71,210 Accounts receivable 836 62,214 90,162 - 153,212 Inventories - 211,291 18,397 - 229,688 Assets from coal and emission allowance trading activities - 65,153 4,745 - 69,898 Deferred income taxes - 10,101 260 - 10,361 Other current assets 260 8,381 6,913 - 15,554 ----------- ----------- ----------- ----------- ----------- Total current assets 61,762 357,560 130,601 - 549,923 Property, plant, equipment and mine development - at cost - 4,591,811 539,418 - 5,131,229 Less accumulated depreciation, depletion and amortization - (751,627) (106,560) - (858,187) ----------- ----------- ----------- ----------- ----------- Property, plant, equipment and mine development, net - 3,840,184 432,858 - 4,273,042 Investments and other assets 3,448,319 248,778 48,273 (3,428,158) 317,212 ----------- ----------- ----------- ----------- ----------- Total assets $ 3,510,081 $ 4,446,522 $ 611,732 $(3,428,158) $ 5,140,177 =========== =========== =========== =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Short-term borrowings and current maturities of long-term debt $ - $ 10,303 $ 37,212 $ - $ 47,515 Payables and notes payable to affiliates, net 1,626,695 (1,643,593) 16,898 - - Liabilities from coal and emission allowance trading activities - 37,008 - - 37,008 Accounts payable and accrued expenses 9,427 479,441 58,145 - 547,013 ----------- ----------- ----------- ----------- ----------- Total current liabilities 1,636,122 (1,116,841) 112,255 - 631,536 Long-term debt, less current maturities 714,571 75,975 191,150 - 981,696 Deferred income taxes - 495,284 4,026 - 499,310 Other noncurrent liabilities 623 1,898,581 10,172 - 1,909,376 ----------- ----------- ----------- ----------- ----------- Total liabilities 2,351,316 1,352,999 317,603 - 4,021,918 Minority interests - - 37,121 - 37,121 Stockholders' equity 1,158,765 3,093,523 257,008 (3,428,158) 1,081,138 ----------- ----------- ----------- ----------- ----------- Total liabilities and stockholders' equity $ 3,510,081 $ 4,446,522 $ 611,732 $(3,428,158) $ 5,140,177 =========== =========== =========== =========== ===========
17 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued PEABODY ENERGY CORPORATION UNAUDITED SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS QUARTER ENDED MARCH 31, 2003 (In thousands)
Parent Guarantor Non-Guarantor Company Subsidiaries Subsidiaries Consolidated ------------ ------------ ------------- ------------ Net cash provided by (used in) operating activities $ (428) $ 71,584 $ (13,605) $ 57,551 ------------ ------------ ------------ ------------ Additions to property, plant, equipment and mine development - (39,585) (19,259) (58,844) Additions to advance mining royalties - (1,536) (818) (2,354) Proceeds from property and equipment disposals - 7,762 377 8,139 ------------ ------------ ------------ ------------ Net cash used in investing activities - (33,359) (19,700) (53,059) ------------ ------------ ------------ ------------ Net change in revolving lines of credit - - (121,584) (121,584) Proceeds from long-term debt, net of restricted cash proceeds 590,408 - 903 591,311 Payments of long-term debt (255,094) (10,356) (96,465) (361,915) Reduction of securitized interests in accounts receivable - (83,900) - (83,900) Payment of debt issuance costs (22,687) - - (22,687) Distributions to minority interests - - (1,350) (1,350) Dividends paid (5,242) - - (5,242) Transactions with affiliates, net (308,888) 55,996 252,892 - Other 1,014 - - 1,014 ------------ ------------ ------------ ------------ Net cash provided by (used in) financing activities (489) (38,260) 34,396 (4,353) ------------ ------------ ------------ ------------ Effect of exchange rate changes on cash and equivalents - - 369 369 Net increase (decrease) in cash and cash equivalents (917) (35) 1,460 508 Cash and cash equivalents at beginning of period 60,666 420 10,124 71,210 ------------ ------------ ------------ ------------ Cash and cash equivalents at end of period $ 59,749 $ 385 $ 11,584 $ 71,718 ============ ============ ============ ============
18 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 revolving line of credit 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 ============ ============ ============ ============
19 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: - growth in coal and power markets; - coal's market share of electricity generation; - the pace and extent of the economic recovery; - lower than normal heating and cooling degree days; - railroad and other transportation performance and costs; - the ability to renew sales contracts upon expiration or renegotiation; - the ability to successfully implement operating strategies; - the effectiveness of our cost-cutting measures; - regulatory and court decisions; - future legislation; - changes in postretirement benefit and pension obligations; - credit, market and performance risk associated with our customers; - modification or termination of our long-term coal supply agreements; - reductions of purchases by major customers; - risks inherent to mining, including geologic conditions or unforeseen equipment problems; - terrorist attacks or threats affecting our or our customers' operations; - replacement of recoverable reserves; - implementation of new accounting standards; - inflationary trends and interest rates; - the effects of acquisitions or divestitures; and - other factors, including those discussed in "Legal Proceedings." 20 When considering these forward-looking statements, you should keep in mind the cautionary statements in this document, the "Risks Relating to Our Company" section of Item 7 of our 2002 Annual Report on Form 10-K filed with the Securities and Exchange Commission and all documents incorporated in this quarterly report by reference. We will not update these statements unless the securities laws require us to do so. QUARTER ENDED MARCH 31, 2003 COMPARED TO QUARTER ENDED MARCH 31, 2002 Sales. Sales for the quarter ended March 31, 2003 of $657.8 million were $5.5 million above the prior year quarter, as higher pricing and higher broker sales volume overcame reduced production related to the continued soft economy and customer outages. Heavy snowfall in Appalachia and the Powder River Basin also reduced shipments and disrupted production. U.S. mining and broker operations' sales volume of 46.3 million tons for the current quarter was comparable to the 46.5 million tons for the prior year quarter. Lower volume at our U.S. mining operations was offset by higher brokerage volume. Our average sales price increased 1.2% over the prior year quarter. The pricing increase was partially mitigated by sales mix, as higher priced tons in the Appalachia and Midwest regions represented a lower percentage of overall sales in the current year compared to prior year. U.S. mining operations sales were $45.6 million below prior year quarter, primarily as a result of lower sales volumes in the Appalachian and Midwest regions. Sales in the Appalachian region were $32.5 million lower than the prior year quarter, primarily due to lower production from geologic difficulties at our Harris mine and lower shipments as a result of heavy snowfall. Midwest sales decreased $8.6 million, primarily due to lower volume as the Highland mine's production has not yet reached levels comparable with production in the prior year quarter at the predecessor Camp No. 11 mine, which ceased operations during the fourth quarter of 2002. Sales in the Southwest region decreased $2.7 million primarily due to an outage at a customer plant in the current year quarter. Sales in the Powder River Basin operations decreased $1.8 million as lower volume from decreased production as a result of heavy snowfall was mostly offset by improved pricing in the region during the current year quarter. Sales from broker operations increased $44.8 million over the prior year quarter due to higher U.S. and Australian export sales levels. Our Australian Mining Operations, which were acquired in the third quarter of 2002, had sales of $6.4 million for the current year quarter. Asset Retirement Obligation Expense. The Company recognized asset retirement obligation expense, discussed in Note 3 to the unaudited condensed consolidated financial statements, of $6.5 million during the current year quarter, comprised of the accretion of the asset retirement obligation liability and the amortization of the asset retirement obligation asset recognized in accordance with SFAS No. 143. Expense in the prior year related to reclamation activities was $4.6 million and was included in "operating costs and expenses" in the statement of operations for the quarter ended March 31, 2002. Net Gain on Property and Equipment Disposals. Net gain on property and equipment disposals related to our resource management business increased $7.4 million as a result of the sale of oil and gas rights in Appalachia in the quarter ended March 31, 2003. Operating Profit. Operating profit decreased $20.4 million to $34.5 million for the quarter ended March 31, 2003. U.S. mining operations' (excluding operating costs related to past mining activities and net gains on property disposals) operating profit decreased $20.8 million. The decrease was driven by the effects of lower production levels, heavy snowfall and geologic difficulties, discussed in more detail below. In the west, the Southwest region's operating profit decreased $3.7 million, as lower repair costs partially offset lower production due to an outage at a customer plant in the current year quarter. The Powder River Basin region's operating profit increased $3.4 million as improved prices and quality premiums offset lower sales and production due to heavy snowfall. In the east, the Appalachia region's operating profit decreased $16.5 million due to geologic difficulties and mechanical problems at the Harris Mine, reduced shipments due to heavy snowfall and lower production levels associated with the suspension of operations at the Big Mountain mine for most of the quarter ended March 31, 2003. The Big Mountain mine was reopened late in the quarter. Operating profit in the Midwest region decreased $4.0 million compared to 21 the prior year quarter due to higher fuel costs at our Black Beauty operations and lower volume due to the ramp-up of the Highland No. 9 Mine, which has not reached its full production capacity. Operating profit from trading and brokerage operations increased $5.7 million over the prior year quarter, primarily due to higher profit from brokerage activities, combined with favorable pricing movements on the trading portfolio in the current year quarter and the impact of adopting EITF Issue 02-3 "Accounting for Contracts Involved in Energy Trading and Risk Management Activities." Operating profit for the current year quarter was also effected by higher net gains on property and equipment disposals of $7.4 million discussed above, asset retirement obligation expense of $6.5 million discussed above and lower selling and administrative expenses of $1.0 million. Operating costs related to past mining activities were $7.2 million higher in the current quarter, primarily due to $5.6 million of higher, non-cash retiree healthcare costs, driven by lower discount rate and higher trend rate assumptions in the current year quarter. Interest Expense. Interest expense increased $1.2 million over the prior year quarter, to $26.2 million. The increase in interest expense was primarily due to higher costs in the quarter ended March 31, 2003 related to surety bonds and letters of credit used to secure our obligations for reclamation, workers' compensation and lease commitments. Early Debt Extinguishment Costs. Pursuant to our debt refinancing transactions discussed in Note 2 to the unaudited condensed consolidated financial statements, the Company incurred early debt extinguishment costs of $21.2 million during the quarter, comprised of $18.9 million of bond premiums paid to retire debt, $8.1 million of debt issuance costs that were written off in conjunction with early extinguishment of existing debt, partially offset by a gain on the termination of related interest rate swaps of approximately $5.8 million. Income Taxes. For the quarter ended March 31, 2003, there was an income tax benefit of $12.2 million on a loss before income taxes and minority interests of $12.1 million, compared to income tax expense of $4.6 million on income before income taxes and minority interests of $30.6 million in the prior year quarter. The tax benefit recorded in the first quarter of 2003 as a percentage of pre-tax income is greater than the tax expense recorded in the same quarter for the prior year primarily as a result of the magnitude of the percentage depletion deduction (which is a permanent difference) relative to pre-tax income. We are currently projecting pretax income but also an income tax benefit for the full year. The income tax benefit for the current year quarter results primarily from the magnitude of the percentage depletion deduction and is calculated on a discrete quarterly basis. Minority Interests. For the quarter ended March 31, 2003, minority interests expense decreased $2.6 million to $1.1 million. The reduction was due to the purchase of the remaining 25% of Arclar Coal Company in the third quarter of 2002 and the impact of $7.3 million of early debt extinguishment charges incurred at Black Beauty during the quarter. Cumulative Effect of Accounting Changes, Net of Taxes. For the quarter ended March 31, 2003, we recognized expense relating to the cumulative effect of accounting changes, net of income taxes, of $10.1 million. This amount represents the aggregate amount of the recognition of accounting changes pursuant to the adoption of SFAS No. 143, the change in method of amortization of actuarial gains and losses related to net periodic postretirement benefit costs and the effect of the rescission of EITF No. 98-10, as discussed in Note 3 to the unaudited condensed consolidated financial statements. LIQUIDITY AND CAPITAL RESOURCES Cash provided by operating activities was $57.6 million for the quarter ended March 31, 2003, an increase of $36.2 million from the prior year quarter. The improvement was primarily due to improved working capital cash flows in the current year quarter. The current year quarter included a net working capital usage of $0.3 million, compared to a usage of $69.3 million in the prior year quarter. The working capital change was primarily due to an increase in accounts payable and accrued expenses of $43.1 million in the current year quarter, compared to a $17.9 million decrease in the prior year quarter. The remainder of the year-over-year operating cash flow variance primarily related to lower current year income results, after excluding the effects of accounting changes, early debt extinguishment costs and deferred income taxes. Net cash used in investing activities was $53.1 million for the quarter ended March 31, 2003, $4.3 million higher than the prior year quarter. Capital expenditures increased $11.7 million, to $58.8 million, in the current year quarter. Higher than normal quarterly capital expenditures were incurred in the quarter ended March 31, 2003 related to the startup of the 22 Highland No. 9 Mine and the development of a new reserve area at our Federal Mine. Other 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 current year quarter included $7.3 million higher proceeds from property and equipment disposals as a result of the sale of oil and gas rights during the quarter, partially offsetting higher capital spending. Net cash used by financing activities was $4.4 million for the quarter ended March 31, 2003, compared with cash provided by financing activities of $4.9 million in the prior year quarter. The current year includes proceeds from long-term debt (net of restricted cash proceeds of $509.6 million) of $591.3 million. These proceeds related to the issuance of $1.1 billion of new debt in connection with the refinancing discussed in Note 2 to the unaudited condensed consolidated financial statements. The $591.3 million of net proceeds were used to repay line of credit borrowings of $121.6 million, to repay long-term debt of $361.9 million, to repurchase interests in accounts receivable previously sold under our accounts receivable securitization program of $83.9 million and to pay $22.7 million in debt issuance costs in connection with the new debt issued. Financing cash flows in both quarters reflect dividends paid of $5.2 million. The prior year also includes net borrowings of $12.7 million. As of March 31, 2003 and December 31, 2002, our total indebtedness consisted of the following (dollars in thousands):
March 31, 2003 December 31, 2002 -------------- ----------------- Term Loan under Senior Secured Credit Facility $ 450,000 $ - 6.875% Senior Notes due 2013 650,000 - 9.625% Senior Subordinated Notes to be redeemed May 15, 2003 257,553 391,490 8.875% Senior Notes to be redeemed May 15, 2003 207,451 316,498 5.0% Subordinated Note 76,207 85,055 Senior unsecured notes under various agreements - 58,214 Unsecured revolving credit agreement - 116,584 Other 18,372 61,370 ---------- ---------- $1,659,583 $1,029,211 ========== ==========
During the quarter, we completed a comprehensive debt refinancing to lower our borrowing costs, expand our borrowing capacity, extend our debt maturities and simplify our capital structure. A discussion of transactions entered into related to the refinancing and descriptions of the new debt instruments are included in Note 2 to the unaudited condensed consolidated financial statements. Our Senior Secured Credit Facility and 6.875% Senior Notes have been rated Ba1 and BB-, respectively, by Moody's Investors Service, BB+ and BB- by Standard & Poor's and BB+ and BB by Fitch. These security ratings reflect the views of the rating agencies only. An explanation of the significance of these ratings may be obtained from each rating agency. Such ratings are not a recommendation to buy, sell or hold securities, but rather an indication of creditworthiness. Any rating can be revised upward or downward or withdrawn at any time by a rating agency if it decides that the circumstances warrant the change. Each rating should be evaluated independently of any other rating. As of March 31, 2003, there were no outstanding borrowings under the new Revolving Credit Facility. We had letters of credit outstanding under the facility of $231.2 million, leaving $368.8 million available for borrowing. We were in compliance with all of the covenants of the Senior Secured Credit Facility as of March 31, 2003. We had $73.9 million of commitments for capital expenditures at March 31, 2003, that are primarily related to acquiring additional coal reserves and mining equipment. The majority of these commitments relate to spending targeted for 2003. Total capital expenditures for calendar year 2003 are expected to range from $175 million to $200 million, and have been and will be primarily used to develop existing reserves, replace or add equipment and fund cost reduction initiatives. We anticipate funding capital expenditures primarily through operating cash flow. We believe the risk of generating lower than anticipated operating cash flow in 2003 is reduced by our high level of sales commitments (approximately 98% of 2003 planned production is committed) and lower future borrowing costs as a result of our recent debt refinancing. Off-Balance Sheet Arrangements 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 our wholly-owned, bankruptcy-remote subsidiary are sold, without recourse, to a multi-seller, asset-backed commercial paper conduit ("Conduit"). Purchases by the Conduit are financed 23 with the sale of highly rated commercial paper. We used proceeds from the sale of the accounts receivable to repay long-term debt, effectively reducing our overall borrowing costs. The securitization program is currently scheduled to expire in 2007. Under the provisions of SFAS No. 140 "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," 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 was $52.5 million and $136.4 million as of March 31, 2003 and December 31, 2002, respectively. As discussed in Note 2 to the unaudited condensed consolidated financial statements, utilizing excess proceeds from the refinancing transactions, we significantly reduced outstanding securitized interests in accounts receivable as of March 31, 2003. On April 7, 2003, the securitization returned to near its total capacity of $140.0 million as we used securitization proceeds to fund the acquisition of the remaining 18.3% of Black Beauty. This acquisition is discussed in Note 10 to the unaudited condensed consolidated financial statements. There were no other material changes to our off-balance sheet arrangements during the quarter ended March 31, 2003. All off-balance sheet arrangements are discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Form 10-K for the year ended December 31, 2002. Recent Accounting Pronouncements In December 2002, the Financial Accounting Standards Board (FASB) issued SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure - - an amendment of FASB Statement No. 123." SFAS No. 148 amends SFAS No. 123, "Accounting for Stock Based Compensation" and provides alternative methods for accounting for a change by registrants to the fair value method of accounting for stock-based compensation. Additionally, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require more prominent and more frequent disclosures in financial statements about the effects of stock-based compensation. The transition guidance and annual disclosure provisions of the statement became effective as of December 31, 2002 and interim disclosure provisions are effective for interim financial reports starting in 2003 and are included in the Note 6 to the unaudited condensed consolidated financial statements included in this report. OTHER Mohave Generating Station See Note 9 to the unaudited condensed consolidated financial statements included in this report relating to the potential cessation or suspension of the operations of the Mohave Generating Station on December 31, 2005. The Mohave Generating Station is the sole customer of our Black Mesa Mine, which sold 4.6 million tons of coal in 2002. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Trading Activities We market and trade coal and emission allowances. These activities give rise to commodity price 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 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 trading derivatives under SFAS No. 133, which requires us to reflect derivatives, 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. The use of value at risk allows us to quantify in dollars, on a daily basis, the price risk inherent in our trading portfolio. 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 15-day holding period and a 95% one-tailed confidence interval. The use of value at risk allows management to aggregate pricing 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. 24 During the quarter ended March 31, 2003, the low, high and average values at risk for our coal trading portfolio were $0.7 million, $1.2 million and $1.0 million, respectively. As of March 31, 2003, 34% of the value of our trading portfolio was scheduled to be realized by the end of calendar year 2003, and 97% of the value of our trading portfolio was scheduled to be realized by the end of calendar year 2004. We also monitor other types of risk associated with our coal and emission allowance trading activities, including credit, market liquidity and counterparty nonperformance. 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. As of March 31, 2003, we had sales commitments for 98% of our planned calendar 2003 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, 2003, we had $1,204.8 million of fixed-rate borrowings and $454.8 million of variable-rate borrowings outstanding. A one percentage point increase in interest rates would result in an annualized increase to interest expense of $4.5 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 $47.9 million decrease in the fair value of these borrowings. The fixed rate borrowings of $1,204.8 million include $465.0 million of notes that will be redeemed on May 15, 2003. ITEM 4. CONTROLS AND PROCEDURES. The Chief Executive Officer and Executive Vice President and Chief Financial Officer have evaluated our disclosure controls and procedures within 90 days of the filing of this report and have concluded that there are no significant deficiencies or material weaknesses. There have been no significant changes in our internal controls or in other factors subsequent to the date of our most recent evaluation that could significantly affect these controls. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. Navajo Nation See Note 9 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 30 of this report. (b) Reports on Form 8-K On January 17, 2003, we filed a Form 8-K, under Item 5, Other Events and Regulation FD Disclosure, announcing our issuance of a press release regarding two events, an adverse U.S. Supreme Court Ruling and the recognition of certain income tax benefits, that impacted earnings for the fourth quarter of 2002. On January 31, 2003, we filed a Form 8-K, under Item 9, Regulation FD Disclosure, announcing our issuance of a press release setting forth our calendar year and fourth quarter 2002 earnings and our 2003 forecast. 25 On February 27, 2003, we filed a Form 8-K, under Item 5, Other Events and Regulation FD Disclosure, announcing our issuance of a press release stating the we had commenced an offer to purchase for cash any and all of our $317.1 million outstanding principal amount of 8 7/8% Senior Notes due 2008 and any and all of our $392.2 million outstanding principal amount of 9 5/8% Senior Subordinated Notes due 2008. On March 10, 2003, we filed a Form 8-K, under Item 5, Other Events and Regulation FD Disclosure, announcing our issuance of a press release concerning our plan to offer $500 million of Senior Notes due 2013 to certain institutional investors in a transaction that is exempt from the registration requirements of the Securities Act of 1933. On March 17, 2003, we filed a Form 8-K, under Item 5, Other Events and Regulation FD Disclosure, announcing our issuance of a press release announcing the pricing of our Senior Notes due 2013 to be sold to certain institutional investors in a transaction that is exempt from the registration requirements of the Securities Act of 1933. 26 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 9, 2003 By: /s/ RICHARD A. NAVARRE ---------------------------------------- Richard A. Navarre Executive Vice President and Chief Financial Officer (Principal Financial Officer) 27 CERTIFICATION I, Irl F. Engelhardt, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Peabody Energy Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 9, 2003 /s/ IRL F. ENGELHARDT ----------------------------- Irl F. Engelhardt, Chief Executive Officer 28 CERTIFICATION I, Richard A. Navarre, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Peabody Energy Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 9, 2003 /s/RICHARD A. NAVARRE ----------------------------- Richard A. Navarre Executive Vice President and Chief Financial Officer 29 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 Registrant (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 Registrant (Incorporated by reference to Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2002 filed on November 14, 2002. 4.26* Exchange and Registration Rights Agreement as of March 21, 2003, among the Registrant, the Subsidiaries Guarantors from time to time party hereto, and Lehman Brothers Inc. on behalf of the Initial Purchasers. 4.27* 6 7/8% Senior Notes Due 2013 Indenture dated as of March 21, 2003 among the Registrant and U.S. Bank National Association (Trustee). 10.43* Second Amended and Restated Credit Agreement, dated as of March 21, 2003, among the Registrant and Wachovia Bank, National Association and Lehman Commercial Paper, Inc. (as Syndication Agents), Fleet Securities, Inc., Wachovia Securities, Inc. and Lehman Brothers Inc., (as Arrangers), Fleet National Bank (as Administrative Agent) and Morgan Stanley Senior Funding, Inc. and U.S. Bank National Association (as Documentation Agents). 10.44* Employment Agreement between the Registrant and Fredrick D. Palmer dated as of February 12, 2001. 10.45* First Amendment to Peabody Energy Corporation Employment Agreement between the Registrant and Fredrick D. Palmer dated as of May 10, 2001. 18.1* Letter regarding change in accounting principle from Ernst & Young LLP. 99.1* Certification of the March 31, 2003 Quarterly Report on Form 10-Q, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Peabody Energy Corporation's Chief Executive Officer. 99.2* Certification of the March 31, 2003 Quarterly Report on Form 10-Q, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Peabody Energy Corporation's Executive Vice President and Chief Financial Officer.
* Filed herewith. 30 EX-4.26 3 c77011exv4w26.txt EXCHANGE AND REGISTRATION RIGHTS AGREEMENT EXECUTION VERSION EXHIBIT 4.26 EXCHANGE AND REGISTRATION RIGHTS AGREEMENT Dated as of March 21, 2003 among Peabody Energy Corporation, The Subsidiary Guarantors from time to time party hereto, and Lehman Brothers Inc. on behalf of the Initial Purchasers EXCHANGE AND REGISTRATION RIGHTS AGREEMENT This Exchange and Registration Rights Agreement (this "Agreement") is made and entered into as of March 21, 2003 by and among Peabody Energy Corporation, a Delaware corporation (the "Company"), the Subsidiary Guarantors (as defined herein) and Lehman Brothers Inc. on behalf of Morgan Stanley & Co. Incorporated, Wachovia Securities, Inc., Fleet Securities, Inc., BMO Nesbitt Burns Corp., Credit Lyonnais Securities (USA) Inc., PNC Capital Markets, Inc., U.S. Bancorp Piper Jaffray Inc., ABN AMRO Incorporated and Fortis Investment Services, LLC (collectively, the "Initial Purchasers"). This Agreement is made pursuant to the Purchase Agreement, dated March 14, 2003 (the "Purchase Agreement"), by and among the Company, the Existing Subsidiary Guarantors (as defined herein) and the Initial Purchasers, which provides for the sale by the Company to the Initial Purchasers of $650,000,000 aggregate principal amount of the Company's 6 7/8% Senior Notes due 2013 (the "Notes"). The Notes are, and the Exchange Notes (as defined herein) will be, guaranteed on a senior basis by the Subsidiary Guarantors (as defined herein). In order to induce the Initial Purchasers to purchase the Notes, the Company and the Existing Subsidiary Guarantors have agreed to provide the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the obligations of the Initial Purchasers set forth in Section 7 of the Purchase Agreement. The parties hereby agree as follows: SECTION 1. DEFINITIONS As used in this Agreement, the following capitalized terms shall have the following meanings: Additional Subsidiary Guarantor: Any subsidiary of the Company that executes a Guarantee under the Indenture after the date of this Agreement. Advice: As defined in Section 6(e) hereof. Blackout Period: As defined in Section 5(a) hereof. Blue Sky Application: As defined in Section 8(a) hereof. Broker-Dealer: Any broker or dealer registered under the Exchange Act. Closing Date: The date of this Agreement. Commission: The U.S. Securities and Exchange Commission. Company: As defined in the preamble hereto. 2 Consummate: A Registered Exchange Offer shall be deemed "Consummated" for purposes of this Agreement upon the occurrence of (i) the filing and effectiveness under the Securities Act of the Exchange Offer Registration Statement relating to the Exchange Notes to be issued in the Exchange Offer, (ii) the maintaining of such Registration Statement continuously effective and the keeping of the Exchange Offer open for a period not less than the minimum period required pursuant to Section 3(b) hereof, and (iii) the delivery by the Company to the Registrar under the Indenture of Exchange Notes in the same aggregate principal amount as the aggregate principal amount of Notes that were tendered by Holders thereof pursuant to the Exchange Offer. Damages Payment Date: With respect to the Notes, each Interest Payment Date. Exchange Act: The U.S. Securities Exchange Act of 1934, as amended. Exchange Notes: The Company's 6 7/8% Senior Notes due 2013 to be issued pursuant to the Indenture in the Exchange Offer, together with the related Guarantees. Exchange Offer: The registration by the Company under the Securities Act of the Exchange Notes pursuant to a Registration Statement pursuant to which the Company offers the Holders of all outstanding Transfer Restricted Securities the opportunity to exchange all such outstanding Transfer Restricted Securities held by such Holders for Exchange Notes in an aggregate principal amount equal to the aggregate principal amount of the Transfer Restricted Securities validly tendered in such exchange offer by such Holders. Exchange Offer Registration Statement: The Registration Statement relating to the Exchange Offer, including the related Prospectus. Existing Subsidiary Guarantors: The various Subsidiary Guarantors signatory to the Indenture as of the date hereof. Guarantees: Guarantees by the Subsidiary Guarantors of the Company's obligations under the Notes, the Exchange Notes and the Indenture. Holders: As defined in Section 2(b) hereof. Indenture: The Indenture, dated as of the date hereof, among the Company, the Existing Subsidiary Guarantors and US Bank National Association, as trustee (the "Trustee"), pursuant to which the Notes and the Exchange Notes are to be issued, as such Indenture may be amended or supplemented from time to time in accordance with the terms thereof. Initial Purchasers: As defined in the preamble hereto. Interest Payment Date: As defined in the Indenture and the Notes. 3 NASD: National Association of Securities Dealers, Inc. Notes: As defined in the preamble hereto. Person: An individual, partnership, corporation, limited liability company, unincorporated organization, association, joint-stock company, trust, joint venture, government or any agency or political subdivision thereof or any other entity. Prospectus: The prospectus included in a Registration Statement as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus. Purchase Agreement: As defined in the preamble hereto. Record Holder: With respect to any Damages Payment Date relating to Notes, each Person who is a Holder of Notes on the record date with respect to the Interest Payment Date on which such Damages Payment Date shall occur. Registration Default: As defined in Section 5(a) hereof. Registration Statement: Any Registration Statement of the Company relating to (a) an offering of Exchange Notes pursuant to an Exchange Offer or (b) the registration for resale of Transfer Restricted Securities pursuant to the Shelf Registration Statement, which is filed pursuant to the provisions of this Agreement, in each case including the Prospectus included therein, all amendments and supplements thereto (including post-effective amendments) and all exhibits and material incorporated by reference therein. Securities Act: The U.S. Securities Act of 1933, as amended. Shelf Filing Deadline: As defined in Section 4(a) hereof. Shelf Registration Period: As defined in Section 4(a) hereof. Shelf Registration Statement: As defined in Section 4(a) hereof. Subsidiary Guarantors: The Additional Subsidiary Guarantors and the Existing Subsidiary Guarantors. TIA: The U.S. Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of the Indenture. Transfer Restricted Securities: Each Note or Exchange Note entitled to the benefits of this Agreement (including the related Guarantees), as applicable, until the earliest to occur of (a) the date on which such Note is exchanged by a person other than a Broker-Dealer in the Exchange Offer in exchange for an Exchange Note, so long as such 4 person is not prohibited from reselling such Exchange Notes to the public without delivering a prospectus and the Prospectus in the Exchange Offer Registration Statement is not sufficient for such purpose, (b) following the exchange by a Broker-Dealer in the Exchange Offer of a Note for an Exchange Note, the date on which that Exchange Note is sold to a purchaser who receives from that Broker-Dealer on or prior to the date of such sale a copy of the Prospectus contained in the Exchange Offer Registration Statement, (c) the date on which such Note or Exchange Note has been effectively registered under the Securities Act and disposed of in accordance with a Shelf Registration Statement, and (d) the date on which such Note is sold by the Holder pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act. Underwritten Registration or Underwritten Offering: A registration in which securities of the Company are sold to an underwriter for reoffering to the public. SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT (a) Transfer Restricted Securities. The securities entitled to the benefits of this Agreement are the Transfer Restricted Securities. (b) Holders of Transfer Restricted Securities. A Person is deemed to be a holder of Transfer Restricted Securities (each, a "Holder") whenever such Person owns Transfer Restricted Securities. SECTION 3. REGISTERED EXCHANGE OFFER (a) Unless the Exchange Offer shall not be permissible under applicable law or Commission policy (after the procedures set forth in Section 6(a) below have been complied with), the Company and the Subsidiary Guarantors shall (i) file with the Commission on or prior to 90 days after the Closing Date, a Registration Statement under the Securities Act relating to the Exchange Notes and the Exchange Offer, (ii) use their reasonable best efforts to cause such Registration Statement to be declared effective on or prior to 180 days after the Closing Date, (iii) in connection with the foregoing, file (A) all pre-effective amendments to such Registration Statement as may be necessary in order to cause such Registration Statement to become effective, (B) if applicable, a post-effective amendment to such Registration Statement pursuant to Rule 430A under the Securities Act and (C) cause all necessary filings in connection with the registration and qualification of the Exchange Notes to be made under the blue sky laws of such jurisdictions as are necessary to permit Consummation of the Exchange Offer, and (iv) upon the effectiveness of such Registration Statement, commence the Exchange Offer. The Exchange Offer shall be on the appropriate form permitting registration of the Exchange Notes to be offered in exchange for the Transfer Restricted Securities and to permit resales of Exchange Notes held by Broker-Dealers as contemplated by Section 3(c) below. (b) The Company and the Subsidiary Guarantors shall use their reasonable best efforts to cause the Exchange Offer Registration Statement to be effective 5 continuously and shall keep the Exchange Offer open for a period of not less than the minimum period required under applicable U.S. federal and state securities laws to Consummate the Exchange Offer; provided, however, that in no event shall such period be less than 20 business days. The Company and the Subsidiary Guarantors shall cause the Exchange Offer to comply with all applicable U.S. federal and state securities laws. No securities other than the Exchange Notes and the Guarantees shall be included in the Exchange Offer Registration Statement. The Company and the Subsidiary Guarantors shall use their reasonable best efforts to cause the Exchange Offer to be Consummated within 30 business days after the Exchange Offer Registration Statement has become effective. (c) The Company and the Subsidiary Guarantors shall indicate in a "Plan of Distribution" section of the Prospectus contained in the Exchange Offer Registration Statement that any Broker-Dealer who holds Transfer Restricted Securities and that were acquired for its own account as a result of market-making activities or other trading activities (other than Transfer Restricted Securities acquired directly from the Company or any affiliate of the Company), may exchange such Transfer Restricted Securities pursuant to the Exchange Offer; however, such Broker-Dealer may be deemed to be an "underwriter" within the meaning of the Securities Act and must, therefore, deliver a Prospectus meeting the requirements of the Securities Act in connection with any resales of the Exchange Notes received by such Broker-Dealer in the Exchange Offer, which Prospectus delivery requirement may be satisfied by the delivery by such Broker-Dealer of the Prospectus contained in the Exchange Offer Registration Statement. Such "Plan of Distribution" section shall also contain all other information with respect to such resales by Broker-Dealers that the Commission may require in order to permit such resales pursuant thereto, but such "Plan of Distribution" shall not name any such Broker-Dealer or disclose the amount of Notes held by any such Broker-Dealer except to the extent required by the Commission. The Company and the Subsidiary Guarantors shall use their reasonable best efforts to keep the Exchange Offer Registration Statement continuously effective, supplemented and amended as required by the provisions of Section 6(c) below to the extent necessary to ensure that it is available for resales of Exchange Notes acquired by Broker-Dealers for their own accounts as a result of market-making activities or other trading activities, and to ensure that it conforms with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of at least 90 days after the Consummation of the Exchange Offer. The Company and the Subsidiary Guarantors shall provide sufficient copies of the latest version of such Prospectus to Broker-Dealers promptly upon request at any time during such 90-day period in order to facilitate such resales. 6 SECTION 4. SHELF REGISTRATION (a) Shelf Registration. If (i) the Company and the Subsidiary Guarantors are not required to file an Exchange Offer Registration Statement or cannot Consummate the Exchange Offer because the Exchange Offer is not permitted by applicable U.S. law or Commission policy (after the procedures set forth in Section 6(a) below have been complied with) or (ii) if any Holder of Transfer Restricted Securities shall notify the Company prior to the 20th day following the Consummation of the Exchange Offer that such Holder (A) is prohibited by applicable U.S. law or Commission policy from participating in the Exchange Offer, (B) may not resell the Exchange Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by such Holder, or (C) is a Broker-Dealer and holds Notes acquired directly from the Company or one of its affiliates, then the Company and the Subsidiary Guarantors shall: (x) use their reasonable best efforts to cause to be filed a Registration Statement pursuant to Rule 415 under the Securities Act, which may be an amendment to the Exchange Offer Registration Statement if permitted by the rules and regulations of the Commission (in either event, the "Shelf Registration Statement") on or prior to the earliest to occur of (1) the 60th day after the date on which the Company determines that they are not required to file the Exchange Offer Registration Statement, or permitted to Consummate the Exchange Offer and (2) the 60th day after the date on which the Company receives notice from a Holder of Transfer Restricted Securities as contemplated by clause (ii) of paragraph (a) above (such earliest date being the "Shelf Filing Deadline"), which Shelf Registration Statement shall provide for resales of all Transfer Restricted Securities by the Holders which shall have provided the information required pursuant to Section 4(b) hereof; and (y) use their reasonable best efforts to cause such Shelf Registration Statement to be declared effective by the Commission on or before the 180th day after the Shelf Filing Deadline. Subject to Section 5(b), the Company and the Subsidiary Guarantors shall use their reasonable best efforts to keep such Shelf Registration Statement continuously effective, supplemented and amended as required by the provisions of Sections 6(b) and (c) hereof to the extent necessary to ensure that it is available for resales of Notes or Exchange Notes by the Holders of Transfer Restricted Securities entitled to the benefit of this Section 4(a), and to ensure that it conforms with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the Commission as announced from time to time, until the earlier of (i) two years following the Closing Date or (ii) such shorter period that will terminate when all Notes or Exchange Notes covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement (such earliest date being the "Shelf Registration Period"). (b) Provision by Holders of Certain Information in Connection with the Shelf Registration Statement. No Holder of Transfer Restricted Securities may 7 include any of its Transfer Restricted Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such Holder furnishes to the Company in writing, within 10 days after receipt of a request therefor, such information as the Company may reasonably request for use in connection with any Shelf Registration Statement or Prospectus or preliminary Prospectus included therein and agrees to comply with Regulation M under the Exchange Act. The Company may exclude from such registration the Transfer Restricted Securities of any Holder who unreasonably fails to furnish such information. No Holder of Transfer Restricted Securities shall be entitled to Liquidated Damages pursuant to Section 5 hereof unless and until such Holder shall have used its reasonable best efforts to provide all such reasonably requested information or has so complied. Each Holder as to which any Shelf Registration Statement is being effected agrees to furnish promptly to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such Holder not materially misleading. SECTION 5. LIQUIDATED DAMAGES (a) If (i) any of the Registration Statements required by this Agreement are not filed with the Commission on or prior to the date specified for such filing in Sections 3(a) and 4(a), as applicable, (ii) any of such required Registration Statements have not been declared effective by the Commission on or prior to the date specified for such effectiveness in Sections 3(a) and 4(a), as applicable, (iii) the Exchange Offer has not been Consummated within 30 business days, or longer, if required by federal securities laws, after the Exchange Offer Registration Statement has been declared effective, or (iv) any Registration Statement required by this Agreement is filed and declared effective but shall thereafter cease to be effective or fail to be usable in connection with resales of Transfer Restricted Securities without being succeeded immediately by a post-effective amendment to such Registration Statement that cures such failure and that is itself immediately declared effective (except as permitted in paragraph (b) of this Section 5, such period of time during which any such Registration Statement is not effective or any such Registration Statement or the related Prospectus is not usable being referred to as a "Blackout Period") (each such event referred to in clauses (i) through (iv), a "Registration Default"), the Company and the Subsidiary Guarantors jointly and severally agree to pay liquidated damages ("Liquidated Damages") to each Holder of Transfer Restricted Securities adversely affected by such Registration Default, in an amount equal to $.05 per week per $1,000 principal amount of Transfer Restricted Securities held by such Holder with respect to the first 90-day period immediately following the occurrence of such Registration Default. The amount of Liquidated Damages shall increase by an additional $.05 per week per $1,000 principal amount of Transfer Restricted Securities with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of Liquidated Damages of $.50 per week per $1,000 principal amount of Transfer Restricted Securities. All accrued Liquidated Damages shall be paid to Record Holders by the Company and the Subsidiary Guarantors in the same manner as interest is paid under the Notes. Following the cure of all Registration Defaults relating to any particular Transfer 8 Restricted Securities, the accrual of Liquidated Damages with respect to such Transfer Restricted Securities will cease. Liquidated Damages shall not accrue under more than one of the Registration Defaults specified in clauses (i) through (iv) above at any one time. (b) A Registration Default referred to in Section 5(a)(iv) shall be deemed not to have occurred and be continuing in relation to a Registration Statement or the related Prospectus if (i) the Blackout Period has occurred solely as a result of (x) the filing of a post-effective amendment to such Shelf Registration Statement to incorporate annual audited financial information with respect to the Company where such post-effective amendment is not yet effective and needs to be declared effective to permit Holders to use the related Prospectus or (y) the occurrence of other material events with respect to the Company or any Subsidiary Guarantor that would need to be described in such Registration Statement or the related Prospectus and (ii) in the case of clause (y), the Company is proceeding promptly and in good faith to amend or supplement (including by way of filing documents under the Exchange Act which are incorporated by reference into the Registration Statement) such Registration Statement and the related Prospectus to describe such events; provided, however, that in any case if such Blackout Period occurs for a continuous period in excess of 45 days, a Registration Default shall be deemed to have occurred on the 46th day of such Blackout Period and Liquidated Damages shall be payable in accordance with paragraph (a) of this Section from the day such Registration Default occurs until such Registration Default is cured or until the Company is no longer required pursuant to this Agreement to keep such Registration Statement effective or such Registration Statement or the related Prospectus usable; provided, further, that in no event shall the total of all Blackout Periods exceed 60 days in the aggregate of any 12-month period. All payment obligations of the Company and the Subsidiary Guarantors set forth in this section that are outstanding with respect to any Transfer Restricted Security at the time such security ceases to be a Transfer Restricted Security shall survive until such time as all such payment obligations with respect to such security shall have been satisfied in full. SECTION 6. REGISTRATION PROCEDURES (a) Exchange Offer Registration Statement. In connection with the Exchange Offer, the Company and the Subsidiary Guarantors shall comply with all applicable provisions of Section 6(c) below, shall use their reasonable best efforts to effect such exchange to permit the sale of Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof, and shall comply with all of the following provisions: (i) As a condition to its participation in the Exchange Offer pursuant to the terms of this Agreement, each Holder of Transfer Restricted Securities shall furnish, upon the request of the Company, prior to the Consummation of the Exchange Offer, a written representation to the Company 9 and the Subsidiary Guarantors (which may be contained in the letter of transmittal contemplated by the Exchange Offer Registration Statement) to the effect that (A) it is not an affiliate of the Company, (B) it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any Person to participate in, a distribution of the Exchange Notes to be issued in the Exchange Offer, and (C) it is acquiring the Exchange Notes in its ordinary course of business. In addition, all such Holders of Transfer Restricted Securities shall otherwise cooperate in the Company's and the Subsidiary Guarantors' preparations for the Exchange Offer. Each Holder hereby acknowledges and agrees that any Broker-Dealer and any such Holder using the Exchange Offer to participate in a distribution of the securities to be acquired in the Exchange Offer (1) could not under Commission policy as in effect on the date of this Agreement rely on the position of the Commission enunciated in Exxon Capital Holdings Corporation (available May 13, 1988) and Morgan Stanley and Co., Inc. (available June 5, 1991), as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993, and similar no-action letters, and (2) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction and that such a secondary resale transaction should be covered by an effective Registration Statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K if the resales are of Exchange Notes obtained by such Holder in exchange for Notes acquired by such Holder directly from the Company; (ii) Prior to effectiveness of the Exchange Offer Registration Statement, the Company and the Subsidiary Guarantors shall state to the Commission that the Company and the Subsidiary Guarantors are registering the Exchange Offer in reliance on the position of the Commission enunciated in Exxon Capital Holdings Corporation (available May 13, 1988) and Morgan Stanley and Co., Inc. (available June 5, 1991) as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993, and shall represent to the Commission that neither the Company nor any Subsidiary Guarantor has entered into any arrangement or understanding with any Person to distribute the Exchange Notes to be received in the Exchange Offer and that, to the best of the Company's and each Subsidiary Guarantor's information and belief, each Holder participating in the Exchange Offer is acquiring the Exchange Notes in its ordinary course of business and has no arrangement or understanding with any Person to participate in the distribution of the Exchange Notes received in the Exchange Offer; and (iii) Shall issue, upon the request of any Holder of Notes covered by the Exchange Offer, Exchange Notes, having an aggregate principal amount equal to the aggregate principal amount of Notes surrendered to the Company by such Holder in exchange therefor; such Exchange Notes to be registered in the name of such Holder or in the name of the purchaser(s) of such Exchange Notes, as the case may be; in return, the Notes held by such Holder shall be surrendered to the Company for cancellation. 10 (b) Shelf Registration Statement. In connection with the Shelf Registration Statement, the Company and the Subsidiary Guarantors shall comply with all the provisions of Section 6(c) below and shall use their reasonable best efforts to effect such registration to permit the sale of the Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof, and pursuant thereto the Company and the Subsidiary Guarantors will prepare and file with the Commission a Registration Statement relating to the registration on any appropriate form under the Securities Act, which form shall be available for the sale of the Transfer Restricted Securities in accordance with the intended method or methods of distribution thereof within the time periods and otherwise in accordance with the provisions hereof. (c) General Provisions. In connection with any Registration Statement and any Prospectus required by this Agreement to permit the sale or resale of Transfer Restricted Securities (including, without limitation, any Registration Statement and the related Prospectus required to permit resales of Notes and Exchange Notes by Broker-Dealers), the Company and the Subsidiary Guarantors shall: (i) use their reasonable best efforts to keep such Registration Statement continuously effective and provide all requisite financial statements of the Company for the period specified in Sections 3 or 4 of this Agreement, as applicable; upon the occurrence of any event that would cause any such Registration Statement or the Prospectus contained therein (A) to contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements, in the light of the circumstances in which they were made, not misleading or (B) not to be effective and usable for resale of Transfer Restricted Securities during the period required by this Agreement, the Company and the Subsidiary Guarantors shall file promptly an appropriate amendment to such Registration Statement, in the case of clause (A), correcting any such misstatement or omission, and, in the case of either clause (A) or (B), use their reasonable best efforts to cause such amendment to be declared effective and such Registration Statement and the related Prospectus to become usable for their intended purpose(s) as soon as practicable thereafter. Notwithstanding the foregoing, the Company and the Subsidiary Guarantors may allow the Shelf Registration Statement to cease to become effective and usable if (x) the board of directors of the Company determines in good faith that it is in the best interests of the Company not to disclose the existence of or facts surrounding any proposed or pending material corporate transaction involving the Company or the Subsidiary Guarantors, and the Company notifies the Holders within two business days after such board of directors makes such determination or (y) the Prospectus contained in the Shelf Registration Statement contains an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading; provided that the two-year period referred to in Section 4(a) hereof during which the Shelf Registration Statement is required to be effective and usable shall be extended by the number of days during which such Registration 11 Statement was not effective or usable pursuant to the foregoing provisions; and provided further that Liquidated Damages shall accrue on the Notes as provided in Section 5 hereof; (ii) prepare and file with the Commission such amendments and post-effective amendments to the applicable Registration Statement as may be necessary to keep such Registration Statement effective for the applicable period set forth in Sections 3 or 4 hereof, as applicable; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Securities Act, and to comply fully with the applicable provisions of Rules 424 and 430A under the Securities Act in a timely manner; and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus; (iii) cooperate with the selling Holders of Transfer Restricted Securities that will result in such securities no longer being Transfer Restricted Securities and the underwriter(s), if any, to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends; and enable such Transfer Restricted Securities to be in such denominations and registered in such names as the Holders or the underwriter(s), if any, may request at least two business days prior to any sale of Transfer Restricted Securities made by such underwriter(s); (iv) use their reasonable best efforts to cause the Transfer Restricted Securities covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof or the underwriter(s), if any, to consummate the disposition of such Transfer Restricted Securities; provided, however, that the Company and the Subsidiary Guarantors shall not be obligated to qualify as a foreign corporation in any jurisdiction in which it is not now so qualified or to take any action that would subject it to general consent to service of process, other than as to matters and transactions relating to the Shelf Registration Statement, in any jurisdiction where it is not now so subject; (v) Subject to Section 6(c)(i) if any fact or event contemplated by clause (d)(i)(D) below shall exist or have occurred, prepare a supplement or post-effective amendment to the Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of Transfer Restricted Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading; 12 (vi) provide a CUSIP, CINS or ISIN number, as applicable, for all Transfer Restricted Securities not later than the effective date of the applicable Registration Statement and provide the Trustee under the Indenture with printed certificates for the Transfer Restricted Securities which are in a form eligible for deposit with the depositary; (vii) cooperate and assist in any filings required to be made with the NASD and in the performance of any due diligence investigation by any underwriter (including any "qualified independent underwriter") that is required to be retained in accordance with the rules and regulations of the NASD; (viii) otherwise use their best efforts to comply with all applicable rules and regulations of the Commission, and make generally available to its security holders, as soon as practicable, a consolidated earnings statement meeting the requirements of Rule 158 (which need not be audited) for the twelve-month period (A) commencing at the end of any fiscal quarter in which Transfer Restricted Securities are sold to underwriters in a firm or best efforts Underwritten Offering or (B) if not sold to underwriters in such an offering, beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the Registration Statement; (ix) cause the Indenture to be qualified under the TIA not later than the effective date of the first Registration Statement required by this Agreement, and, in connection therewith, cooperate with the Trustee and the Holders of Notes and Exchange Notes to effect such changes to the Indenture as may be reasonably required for such Indenture to be so qualified in accordance with the terms of the TIA; and execute, and use their best efforts to cause the Trustee to execute, all documents that may be reasonably required to effect such changes and all other forms and documents required to be filed with the Commission to enable such Indenture to be so qualified in a timely manner; and (x) provide promptly to any Holder upon such Holder's written request each document filed with the Commission pursuant to the requirements of Section 13 and Section 15 of the Exchange Act. (d) Additional Provisions Applicable to Shelf Registration Statements. In connection with each Shelf Registration Statement, during the Shelf Registration Period, the Company and the Subsidiary Guarantors shall: (i) advise the underwriter(s), if any, and selling Holders of Transfer Restricted Securities promptly and, if requested by such Persons, to confirm such advice in writing, (A) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to the Shelf Registration Statement or any post-effective amendment thereto, when the same has become effective, (B) of any request by the Commission for amendments to the Shelf Registration Statement or amendments or supplements 13 to the Prospectus or for additional information relating thereto, (C) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement under the Securities Act, of the suspension by any state securities commission of the qualification of the Transfer Restricted Securities for offering or sale in any jurisdiction or of the initiation of any proceeding for any of the preceding purposes, and (D) of the existence of any fact or the happening of any event that requires the making of any additions to or changes in the Shelf Registration Statement or the Prospectus in order that the Shelf Registration Statement and the Prospectus do not contain an untrue statement of a material fact or omit to state a material fact necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading. If at any time the Commission shall issue any stop order suspending the effectiveness of the Shelf Registration Statement, or any U.S. state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Transfer Restricted Securities under U.S. state securities or blue sky laws, the Company and the Subsidiary Guarantors shall use their reasonable best efforts to obtain the withdrawal or lifting of such order at the earliest possible time; (ii) if requested in writing, furnish to each of the selling Holders of Transfer Restricted Securities and each of the underwriter(s), if any, before filing with the Commission, copies of any Shelf Registration Statement or any Prospectus included therein or any amendments or supplements to any such Shelf Registration Statement or Prospectus (including all documents incorporated by reference after the initial filing of such Shelf Registration Statement), which documents will be subject to the review of such Holders and underwriter(s), if any, for a period of at least three business days, and the Company and the Subsidiary Guarantors will not file any such Shelf Registration Statement or Prospectus or any amendment or supplement to any such Shelf Registration Statement or Prospectus (including all such documents incorporated by reference) if a selling Holder of Transfer Restricted Securities covered by such Shelf Registration Statement or the underwriter(s), if any, shall reasonably object within three business days after the receipt thereof; such Holders and underwriter(s) shall be deemed to have reasonably objected to such filing if such Shelf Registration Statement, amendment, Prospectus or supplement, as applicable, as proposed to be filed, contains an untrue statement of a material fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or fails to comply with the applicable requirements of the Securities Act; (iii) upon request, provide copies of any document that is to be incorporated by reference into a Shelf Registration Statement or Prospectus to the selling Holders and to the underwriter(s), make the Company's and the Subsidiary Guarantors' representatives available for discussion of such document and other customary due diligence matters, and include such information in such document 14 prior to the filing thereof as such selling Holders or underwriter(s), if any, reasonably may request; (iv) make available for inspection at reasonable times at the Company's principal place of business by the Holders of Transfer Restricted Securities, any underwriter participating in any disposition pursuant to such Shelf Registration Statement, and any attorney or accountant retained by such selling Holders or any of the underwriter(s) who shall certify to the Company and the Subsidiary Guarantors that they have a current intention to sell Transfer Restricted Securities pursuant to a Shelf Registration Statement, any such relevant financial and other records and pertinent corporate documents of the Company and the Subsidiary Guarantors as reasonably requested and cause the Company's and the Subsidiary Guarantors' officers, directors and employees to respond to such inquiries as shall be reasonably necessary, in the reasonable judgment of counsel to such Holders, to conduct a reasonable investigation; provided, however, that the foregoing inspection and information gathering shall be coordinated on behalf of the selling Holders by one counsel designated by and on behalf of such Holders and, provided, further, that each such party shall be required to maintain in confidence and not disclose to any other Person any information or records reasonably designated by the Company in writing as being confidential, until such time as (A) such information becomes a matter of public record (whether by virtue of its inclusion in such Shelf Registration Statement or otherwise), (B) such Person shall be required so to disclose such information pursuant to a subpoena or order of any court or other governmental agency or body having jurisdiction over the matter (subject to the requirements of such order, and only after such Person shall have given the Company prompt prior written notice of such requirement) or (C) such information is required to be set forth in such Shelf Registration Statement or the Prospectus included therein or in an amendment to such Shelf Registration Statement or an amendment or supplement to such Prospectus in order that such Shelf Registration Statement, Prospectus, amendment or supplement, as the case may be, does not contain an untrue statement of a material fact or omit to state therein a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading; (v) if requested by any selling Holders of Transfer Restricted Securities or the underwriter(s), if any, promptly include in any Shelf Registration Statement or Prospectus pursuant to a supplement or post-effective amendment if necessary, such information as such selling Holders and underwriter(s), if any, may reasonably request to have included therein, including, without limitation, information relating to the "Plan of Distribution" of the Transfer Restricted Securities information with respect to the principal amount of Transfer Restricted Securities being sold to such underwriter(s), the purchase price being paid therefor and any other terms of the offering of the Transfer Restricted Securities to be sold in such offering; and make all required filings of such Prospectus 15 supplement or post-effective amendment as soon as practicable after the Company is notified of the matters to be included in such Prospectus supplement or post-effective amendment; provided, however, that the Company shall not be required to take any action pursuant to this Section 6(d)(v) that would, in the opinion of counsel for the Company reasonably satisfactory to the underwriters, violate applicable law; (vi) deliver to each selling Holder of Transfer Restricted Securities and each of the underwriter(s), if any, without charge, as many copies of the Prospectus (including each preliminary Prospectus) and any amendment or supplement thereto as such Persons reasonably may request; the Company and the Subsidiary Guarantors hereby consent to the use (in accordance with the law) of the Prospectus and any amendment or supplement thereto by each of the selling Holders and each of the underwriter(s), if any, in connection with the offering and the sale of the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto; (vii) furnish to each Holder whose Transfer Restricted Securities have been included in a Shelf Registration Statement in connection with such exchange or sale, without charge, at least one copy of the Registration Statement, as first filed with the Commission, and of each amendment thereto, including all documents incorporated by reference therein and all exhibits (including exhibits incorporated therein by reference); (viii) enter into an underwriting agreement on not more than one occasion in the case of an offering pursuant to a Shelf Registration, and make such representations and warranties, and take all such other reasonable actions in connection therewith in order to expedite or facilitate the disposition of the Transfer Restricted Securities pursuant to any Shelf Registration Statement contemplated by this Agreement, all to such extent as may be reasonably requested by any Holder or Holders of Transfer Restricted Securities who hold at least 25% in aggregate principal amount of such class of Transfer Restricted Securities; provided that the Company and the Subsidiary Guarantors shall not be required to enter into any such agreement more than once with respect to all of the Transfer Restricted Securities and may delay entering into such agreement if the board of directors of the Company determines in good faith that it is in the best interests of the Company and the Subsidiary Guarantors not to disclose the existence of or facts surrounding any proposed or pending material corporate transaction involving the Company and the Subsidiary Guarantors; and whether or not an underwriting agreement is entered into and whether or not the registration is an Underwritten Registration, the Company and the Subsidiary Guarantors shall: (A) furnish to the Initial Purchasers, the Holders of Transfer Restricted Securities who hold at least 25% in aggregate principal amount of such class of Transfer Restricted Securities and each underwriter, if 16 any, in such substance and scope as they may reasonably request and as are customarily made in connection with an offering of debt securities pursuant to a Shelf Registration Statement (i) upon the effective date of the Shelf Registration Statement (and if such Shelf Registration Statement contemplates an Underwritten Offering of Transfer Restricted Securities upon the date of the closing under the underwriting agreement related thereto) and (ii) upon the filing of any amendment or supplement to the Shelf Registration Statement or any other document that is incorporated in the Shelf Registration Statement by reference and includes financial data with respect to a fiscal quarter or year: (1) a certificate, dated the date of effectiveness of the Shelf Registration Statement signed by (y) the respective chief executive officer, the respective President or any Vice President and (z) the respective chief financial officer of each of the Company and each of the Subsidiary Guarantors which makes substantially similar statements with respect to the Shelf Registration statement, as of the date thereof, as the matters set forth in Section 7(m) of the Purchase Agreement and such other matters as such parties may reasonably request; (2) an opinion, dated the date of effectiveness of such Shelf Registration Statement, of counsel for the Company covering matters similar to those set forth in Section 7(d) of the Purchase Agreement and such other matters as such parties may reasonably request, and in any event including a statement to the effect that such counsel has participated in conferences with officers and other representatives of the Company, representatives of the independent public accountants for the Company, the underwriters' representatives and the underwriters' counsel in connection with the preparation of such Shelf Registration Statement and the related Prospectus although such counsel has not independently verified the accuracy, completeness or fairness of such statements in such Shelf Registration Statement; and that such counsel advises that, on the basis of the foregoing, such counsel's work in connection with this work did not disclose information that gave such counsel reason to believe that the Shelf Registration Statement, at the time such Shelf Registration Statement or any post-effective amendment thereto became effective contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus contained in such Shelf Registration Statement as of its date contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. Such counsel may state further that such counsel expresses no view with respect to, and has not independently verified, the accuracy, completeness or fairness of the financial statements, notes and schedules, the financial projections and 17 other financial, statistical and accounting data included or incorporated by reference in the Shelf Registration Statement contemplated by this Agreement or the related Prospectus; and (3) a customary comfort letter, dated as of the date of effectiveness of the Shelf Registration Statement from the Company's independent accountants, in the customary form and covering matters of the type customarily covered in comfort letters to underwriters in connection with underwritten offerings, and affirming the matters set forth in the comfort letters delivered pursuant to Sections 7(j) and 7(k) of the Purchase Agreement; (B) set forth in full or incorporate by reference in the underwriting agreement, if any, the indemnification provisions and procedures of Section 8 hereof with respect to all parties to be indemnified pursuant to said Section; and (C) deliver such other documents and certificates as may be reasonably requested by such parties to evidence compliance with clause (A) above and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company and the Subsidiary Guarantors pursuant to this clause (viii), if any. (ix) prior to any public offering of Transfer Restricted Securities cooperate with the selling Holders of Transfer Restricted Securities the underwriter(s), if any, and their respective counsel in connection with the registration and qualification of the Transfer Restricted Securities under the securities or blue sky laws of such jurisdictions as the selling Holders of Transfer Restricted Securities or underwriter(s) may reasonably request and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Transfer Restricted Securities covered by the Shelf Registration Statement filed pursuant to Section 4 hereof; provided, however, that the Company and the Subsidiary Guarantors shall not be obligated to qualify as a foreign corporation in any jurisdiction in which it is not now so qualified or to take any action that would subject it to general consent to service of process, other than as to matters and transactions relating to the Shelf Registration Statement, in any jurisdiction where it is not now so subject. (e) Each Holder agrees by acquisition of a Transfer Restricted Security that, upon receipt of any notice from the Company of the existence of any fact of the kind described in Section 6(d)(i) hereof, such Holder will forthwith discontinue disposition of Transfer Restricted Securities pursuant to the Shelf Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 6(d)(vi) hereof, or until it is advised in writing (the "Advice") by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated by reference in the 18 Prospectus. If so directed by the Company, each Holder will deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Transfer Restricted Securities that was current at the time of receipt of such notice. In the event the Company shall give any such notice, the time period regarding the effectiveness of such Shelf Registration Statement set forth in Section 4 hereof, as applicable, shall be extended by the number of days during the period from and including the date of the giving of such notice pursuant to Section 6(d)(i) hereof to and including the date when each selling Holder covered by such Shelf Registration Statement shall have received the copies of the supplemented or amended Prospectus contemplated by Section 6(d)(vi) hereof or shall have received the Advice. (f) The Company and the Subsidiary Guarantors may require each Holder of Transfer Restricted Securities as to which any registration is being effected to furnish to the Company such information regarding such Holder and such Holder's intended method of distribution of the applicable Transfer Restricted Securities as the Company may from time to time reasonably request in writing, but only to the extent that such information is required in order to comply with the Securities Act. Each such Holder agrees to notify the Company as promptly as practicable of (i) any inaccuracy or change in information previously furnished by such Holder to the Company or (ii) the occurrence of any event, in either case, as a result of which any Prospectus relating to such registration contains or would contain an untrue statement of a material fact regarding such Holder or such Holder's intended method of distribution of the applicable Transfer Restricted Securities or omits to state any material fact regarding such Holder or such Holder's intended method of distribution of the applicable Transfer Restricted Securities required to be stated therein or necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading and promptly to furnish to the Company any additional information required to correct and update any previously furnished information or required so that such Prospectus shall not contain, with respect to such Holder or the distribution of the applicable Transfer Restricted Securities an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. SECTION 7. REGISTRATION EXPENSES (a) All expenses incident to the Company's and the Subsidiary Guarantors' performance of or compliance with this Agreement will be borne by the Company regardless of whether a Registration Statement becomes effective, including without limitation and as applicable: (i) all Commission, securities exchange or NASD registration and filing fees and expenses (including filings made by any underwriters or Holder with the NASD (and, if applicable, the fees and expenses of any "qualified independent underwriter" and its counsel that may be required by the rules and regulations of the NASD)); (ii) all fees and expenses of compliance with U.S. federal securities and state blue sky or securities laws and compliance with the rules of the NASD (including reasonable fees and disbursements of one counsel for Holders in connection with blue sky and/or NASD qualification of the Exchange Notes); (iii) all 19 expenses of printing (including printing certificates for the Exchange Notes to be issued in the Exchange Offer and printing of Prospectuses), messenger and delivery services; (iv) all fees and disbursements of counsel for the Company and the Subsidiary Guarantors; and (v) all fees and disbursements of independent certified public accountants of the Company (including the expenses of any special audit and comfort letters required by or incident to such performance). The Company will, in any event, bear their and the Subsidiary Guarantors' internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by the Company or the Subsidiary Guarantors. (b) Each Holder of Transfer Restricted Securities will pay all underwriting discounts, if any, and commissions and transfer taxes, if any, relating to the disposition of such Holder's Transfer Restricted Securities. SECTION 8. INDEMNIFICATION (a) The Company and each Subsidiary Guarantor shall, jointly and severally, indemnify and hold harmless each Holder of Transfer Restricted Securities, its officers and employees and each Person, if any, who controls any such Holders, within the meaning of the Securities Act, from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof (including, but not limited to, any loss, claim, damage, liability or action relating to purchases, sales and registration of the Notes, the Guarantees and the Exchange Notes), to which that Holder, officer, employee or controlling Person may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained (A) in any Registration Statement or preliminary Prospectus or Prospectus or in any amendment or supplement thereto, (B) in any Blue Sky Application (as defined below) or other document prepared or executed by any Company or any Subsidiary Guarantor (or based upon any written information furnished by any Company or any Subsidiary Guarantor) specifically for the purpose of qualifying any or all of the Notes under the securities laws of any state or other jurisdiction (any such application, document or information being hereinafter called a "Blue Sky Application") or (C) in any materials or information provided to investors by, or with the approval of, the Company in connection with the marketing of the offering of the Exchange Notes ("Marketing Materials"), including any roadshow or investor presentations made to investors by the Company (whether in person or electronically); (ii) the omission or alleged omission to state in any Registration Statement, preliminary Prospectus or Prospectus, or in any amendment or supplement thereto, or in any Blue Sky Application or Marketing Materials any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; or (iii) any act or failure to act or any alleged act or failure to act by any Holder of Transfer Restricted Securities in connection with, or relating in any manner to, the Notes, the Guarantees or the Exchange 20 Notes or the offering contemplated by any Registration Statement, and which is included as part of or referred to in any loss, claim, damage, liability or action arising out of or based upon matters covered by clause (i) or (ii) above (provided that the Company and the Subsidiary Guarantors shall not be liable under this clause (iii) to the extent that it is determined in a final judgment by a court of competent jurisdiction that such loss, claim, damage, liability or action resulted directly from any such acts or failures to act undertaken or omitted to be taken by such Holder through its gross negligence or willful misconduct); and shall reimburse each Holder and each such officer, employee or controlling Person promptly upon demand for any legal or other expenses reasonably incurred by that Holder, officer, employee or controlling Person in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company and the Subsidiary Guarantors shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, any untrue statement or alleged untrue statement or omission or alleged omission made in any Registration Statement, preliminary Prospectus or Prospectus, or in any such amendment or supplement, or in any Blue Sky Application or Marketing Materials, in reliance upon and in conformity with written information concerning such Holder furnished to the Company by or on behalf of any Holder specifically for inclusion therein; provided, further, that with respect to any such untrue statement or omission made in any preliminary Prospectus or Prospectus, the indemnity agreement contained in this Section 8(a) shall not inure to the benefit of the Holder from whom the Person asserting any such losses, claims, damages or liabilities purchased the Notes, Guarantees or Exchange Notes concerned if, to the extent that such sale was a sale by the Holder and any such loss, claim, damage or liability of such Holder is a result of the fact that both (A) a copy of the Prospectus (or the Prospectus as then amended or supplemented) was not sent or given to such Person at or prior to written confirmation of the sale of such Notes or Exchange Notes to such Person and (B) the untrue statement or omission in the preliminary Prospectus or Prospectus was corrected in the Prospectus (or the Prospectus as then amended or supplemented) unless such failure to deliver the Prospectus was a result of noncompliance by the Company with Section 6(d)(vi) hereof. The foregoing indemnity agreement is in addition to any liability which the Company and the Subsidiary Guarantors may otherwise have to any Holder or to any officer, employee or controlling Person of that Holder. (b) Each Holder, severally and not jointly, shall indemnify and hold harmless each of the Company, each of the Subsidiary Guarantors, their respective directors, officers and employees, and each Person, if any, who controls either of the Company or any of the Subsidiary Guarantors within the meaning of the Securities Act, from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Company, the Subsidiary Guarantors or any such director, officer or controlling Person may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained (A) in any Registration Statement, preliminary Prospectus or Prospectus, or in any amendment or 21 supplement thereto or (B) in any Blue Sky Application or (ii) the omission or alleged omission to state in any Registration Statement, preliminary Prospectus or Prospectus, or in any amendment or supplement thereto, or in any Blue Sky Application any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information concerning such Holders furnished to the Company by or on behalf of that Holder specifically for inclusion therein, which information consists of the information specified in Section 8(e) of the Purchase Agreement, and shall reimburse the Company, each of the Subsidiary Guarantors and each such director, officer, employee and controlling Person for any legal or other expenses reasonably incurred by the Company, each such Subsidiary Guarantor or each such director, officer, employee or controlling Person in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability or action as such expenses are incurred. The foregoing indemnity agreement is in addition to any liability which any Holder may otherwise have to the Company, any of the Subsidiary Guarantors or any such director, officer, employee or controlling Person. (c) Promptly after receipt by an indemnified party under this Section 8 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under this Section 8, notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 8 except to the extent it has been materially prejudiced by such failure and; provided, further, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 8. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 8 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, any indemnified party shall have the right to employ separate counsel in any such action and to participate in the defense thereof but the fees and expenses of such counsel shall be at the expense of the indemnified party unless (i) the employment of such counsel has been specifically authorized by the indemnifying party in writing, or (ii) such indemnified party shall have been advised by such counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying party and in the reasonable judgment of such counsel it is advisable for such indemnified party to employ separate counsel or (iii) the indemnifying party has failed to assume the defense 22 of such action and employ counsel reasonably satisfactory to the indemnified party, in which case, if such indemnified party notifies the indemnifying party in writing that it elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not, in connection with any one such action or separate but substantially similar or related actions arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (in addition to local counsel) at any time for all such indemnified parties, which firm shall be designated in writing by (x) Lehman Brothers Inc. if the indemnified parties under this Section 8 consist of the Initial Purchasers or any of their respective officers, employees or controlling Persons or (y) by the Company, if the indemnified parties under this Section 8 consist of any of the Company, any of the Subsidiary Guarantors or any of their respective directors, officers, employees or controlling Persons. No indemnifying party shall (i) without the prior written consent of the indemnified parties (which consent shall not be unreasonably withheld), settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding or (ii) be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with the consent of the indemnifying party or if there is a final judgment of the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment. (d) If the indemnification provided for in this Section 8 shall for any reason be unavailable to or insufficient to hold harmless an indemnified party under Section 8(a) or 8(b) in respect of any loss, claim, damage or liability, or any action in respect thereof, referred to therein, then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company and the Subsidiary Guarantors, on the one hand, and the Holders on the other, from the sale of the Transfer Restricted Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and the Subsidiary Guarantors, on the one hand and the Holders on the other hand, with respect to the statements or omissions which resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative fault shall be determined by reference to whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or any of the Subsidiary Guarantors, on the one hand, or the Holders, on the other hand, the intent of the parties and their relative knowledge, access to information 23 and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the loss, claim, damage or liability referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The Company, the Subsidiary Guarantors and the Holders agree that it would not be just and equitable if contributions pursuant to this Section 8(d) were to be determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation which does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section shall be deemed to include, for purposes of this Section 8(d), any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 8(d), no Holder shall be required to contribute any amount in excess of the amount by which the net proceeds received by it in connection with its sale of Notes exceeds the amount of any damages which such Holder has otherwise paid or become liable to pay by reason of the untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. The Holders' obligations to contribute as provided in this Section 8(d) are several and not joint. SECTION 9. RULE 144A The Company and each Subsidiary Guarantor hereby agrees with each Holder of Transfer Restricted Securities, during any period in which the Company or such Subsidiary Guarantor is not subject to Section 13 or 15(d) of the Exchange Act within the two-year period following the Closing Date, to make available upon request of any Holder to such Holder or beneficial owner of Transfer Restricted Securities, in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities from such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Securities Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A. SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS No Holder may participate in any Underwritten Registration hereunder unless such Holder (a) agrees to sell such Holder's Transfer Restricted Securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all reasonable questionnaires, powers of attorney, indemnities, underwriting agreements, lock-up letters and other documents required under the terms of such underwriting arrangements. 24 SECTION 11. SELECTION OF UNDERWRITERS Subject to Section 6(d)(i), the Holders of Transfer Restricted Securities covered by the Shelf Registration Statement who desire to do so may sell such Transfer Restricted Securities in an Underwritten Offering at such Holders' expense. In any such Underwritten Offering, the investment banker or investment bankers and manager or managers that will administer the offering will be selected by the Holders of a majority in aggregate principal amount of the Transfer Restricted Securities included in such offering; provided that such investment bankers and managers must be reasonably satisfactory to the Company. SECTION 12. MISCELLANEOUS (a) Remedies. The Company and the Subsidiary Guarantors agree that monetary damages (including Liquidated Damages) would not be adequate compensation for any loss incurred by reason of a breach by it of Sections 3 and 4 of this Agreement and hereby agree to waive the defense in any action for specific performance of Sections 3 and 4 that a remedy at law would be adequate. (b) No Inconsistent Agreements. Neither the Company nor any Subsidiary Guarantor will, on or after the date of this Agreement, enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. Except as disclosed in the Offering Memorandum (as such term is defined in the Purchase Agreement), neither the Company nor any Subsidiary Guarantor has previously entered into any agreement granting any registration rights with respect to its securities to any Person. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's or any Subsidiary Guarantor's securities under any agreement in effect on the date hereof. (c) Adjustments Affecting the Notes. The Company and the Subsidiary Guarantors will not take any action, or permit any change to occur, with respect to the Notes that would materially and adversely affect the ability of the Holders to Consummate any Exchange Offer. (d) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given unless the Company have obtained the written consent of Holders of a majority of the outstanding principal amount of the Transfer Restricted Securities affected by such amendment, modification, supplement, waiver or consent. Notwithstanding the foregoing, a waiver or consent to departure from the provisions hereof that relates exclusively to the rights of Holders whose securities are being tendered pursuant to the Exchange Offer and that does not affect directly or indirectly the rights of other Holders whose securities are not being tendered pursuant to such Exchange Offer may be given by the Holders of a majority of the outstanding principal amount of Transfer Restricted Securities being tendered or registered. 25 (e) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail (registered or certified, return receipt requested), telex, facsimile or air courier guaranteeing overnight delivery: (i) if to a Holder, at the address set forth on the records of the Registrar under the Indenture, with a copy to the Registrar under the Indenture; and (ii) if to the Company or the Subsidiary Guarantors to: Peabody Energy Corporation 701 Market Street St. Louis, Missouri 63101 Attention: Chief Executive Officer Fax: (314) 342-7597 with a copy to: Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017 Attention: Rise B. Norman, Esq. Fax: (212) 455-2502 Any such notices and communications shall take effect at the time of receipt thereof. The Company shall be entitled to act and rely upon any notice or communication given or made by the Initial Purchasers. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address specified in the Indenture. (f) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders; provided, however, that this Agreement shall not inure to the benefit of or be binding upon a successor or assign of a Holder unless and to the extent such successor or assign acquired Transfer Restricted Securities in accordance with the terms of the Indenture from such Holder. (g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 26 (h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED, IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. (j) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (k) Entire Agreement. This Agreement together with the other Operative Documents (as defined in the Purchase Agreement) is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted by the Company and the Subsidiary Guarantors with respect to the Transfer Restricted Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. (Signature pages follow.) 27 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. Very truly yours, PEABODY ENERGY CORPORATION By:_________________________________________ Name: Title: AFFINITY MINING COMPANY ARID OPERATIONS INC. BEAVER DAM COAL COMPANY BIG RIDGE, INC. BIG SKY COAL COMPANY BLACK WALNUT COAL COMPANY BLUEGRASS COAL COMPANY CABALLO COAL COMPANY CHARLES COAL COMPANY CLEATON COAL COMPANY COAL PROPERTIES CORP. COOK MOUNTAIN COAL COMPANY COTTONWOOD LAND COMPANY CYPRUS CREEK LAND COMPANY CYPRUS CREEK LAND RESOURCES, LLC EACC CAMPS, INC. EASTERN ASSOCIATED COAL CORP. EASTERN ROYALTY CORP. GALLO FINANCE COMPANY GOLD FIELDS CHILE, S.A. GOLD FIELDS MINING CORPORATION GOLD FIELDS OPERATING CO.-ORTIZ GRAND EAGLE MINING, INC. HAYDEN GULCH TERMINAL, INC. HIGHLAND MINING COMPANY HILLSIDE MINING COMPANY INDEPENDENCE MATERIAL HANDLING COMPANY INTERIOR HOLDINGS CORP. JAMES RIVER COAL TERMINAL COMPANY JARRELL'S BRANCH COAL COMPANY SIGNATURE PAGES TO REGISTRATION RIGHTS AGREEMENT JUNIPER COAL COMPANY KAYENTA MOBILE HOME PARK, INC. LOGAN FORK COAL COMPANY MARTINKA COAL COMPANY MIDCO SUPPLY AND EQUIPMENT CORPORATION MOUNTAIN VIEW COAL COMPANY MUSTANG ENERGY COMPANY, L.L.C. NORTH PAGE COAL CORP. OHIO COUNTY COAL COMPANY PEABODY AMERICA, INC. PEABODY ARCHVEYOR, L.L.C. PEABODY COALSALES COMPANY PEABODY COALTRADE, INC. PEABODY COAL COMPANY PEABODY DEVELOPMENT COMPANY PEABODY DEVELOPMENT LAND HOLDINGS, LLC PEABODY ENERGY GENERATION HOLDING COMPANY PEABODY ENERGY INVESTMENTS, INC. PEABODY ENERGY SOLUTIONS, INC. PEABODY HOLDING COMPANY, INC. PEABODY NATURAL GAS, LLC PEABODY RECREATIONAL LANDS, L.L.C. PEABODY SOUTHWESTERN COAL COMPANY PEABODY TERMINALS, INC. PEABODY VENEZUELA COAL CORP. PEABODY-WATERSIDE DEVELOPMENT, L.L.C. PEABODY WESTERN COAL COMPANY PINE RIDGE COAL COMPANY POND CREEK LAND RESOURCES, LLC POND RIVER LAND COMPANY PORCUPINE PRODUCTION, LLC PORCUPINE TRANSPORTATION, LLC POWDER RIVER COAL COMPANY PRAIRIE STATE GENERATING COMPANY, LLC RIO ESCONDIDO COAL CORP. RIVER'S EDGE MINING, INC. RIVERVIEW TERMINAL COMPANY SIGNATURE PAGES TO REGISTRATION RIGHTS AGREEMENT SENECA COAL COMPANY SENTRY MINING COMPANY SNOWBERRY LAND COMPANY STAR LAKE ENERGY COMPANY, L.L.C. STERLING SMOKELESS COAL COMPANY THOROUGHBRED, L.L.C. THOROUGHBRED GENERATING COMPANY, LLC THOROUGHBRED MINING COMPANY, L.L.C. YANKEETOWN DOCK CORPORATION By:_________________________________________ Name: Steven F. Schaab Title: Vice President COLONY BAY COAL COMPANY By: Eastern Associated Coal Corp., its general partner By:________________________________ Name: Steven F. Schaab Title: Vice President By: Charles Coal Company, its general partner By:________________________________ Name: Steven F. Schaab Title: Vice President SIGNATURE PAGES TO REGISTRATION RIGHTS AGREEMENT PATRIOT COAL COMPANY, L.P. By: Bluegrass Coal Company, its managing partner By:________________________________ Name: Steven F. Schaab Title: Vice President PEABODY NATURAL RESOURCES COMPANY By: Gold Fields Mining Corporation, its general partner By:________________________________ Name: Steven F. Schaab Title: Vice President By: Peabody America, Inc., its general partner By:_________________________________________ Name: Steven F. Schaab Title: Vice President SIGNATURE PAGES TO REGISTRATION RIGHTS AGREEMENT Accepted on behalf of the Initial Purchasers: LEHMAN BROTHERS INC. By:________________________________ Name: Title: SIGNATURE PAGES TO REGISTRATION RIGHTS AGREEMENT EX-4.27 4 c77011exv4w27.txt 6 7/8% SENIOR NOTES DUE 2013 INDENTURE Execution Version ================================================================================ Exhibit 4.27 PEABODY ENERGY CORPORATION 6 7/8% SENIOR NOTES DUE 2013 INDENTURE Dated as of March 21, 2003 US BANK NATIONAL ASSOCIATION Trustee ================================================================================ INDENTURE dated as of March 21, 2003 between Peabody Energy Corporation, a Delaware corporation (the "COMPANY") and US Bank National Association, as Trustee (the "TRUSTEE"). The Company and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the 6 7/8% Senior Notes due 2013 (the "NOTES"). ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. DEFINITIONS. "144A Global Note" means a global note in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 144A. "Acquired Debt" means, with respect to any specified Person, (i) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, including, without limitation, Indebtedness incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "Additional Assets" means (i) any property or assets (other than Capital Stock, Indebtedness or rights to receive payments over a period greater than 180 days, other than with respect to coal supply contract restructurings) that is usable by the Company or a Restricted Subsidiary in a Permitted Business or (ii) the Capital Stock of a Person that is at the time, or becomes, a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Company or another Restricted Subsidiary. "Additional Notes" means an unlimited amount of Notes (other than Initial Notes or Exchange Notes) issued under this Indenture in accordance with Sections 2.02 and 4.09 hereof. "Affiliate" of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "CONTROL" (including, with correlative meanings, the terms "CONTROLLING," "CONTROLLED BY" and "UNDER COMMON CONTROL WITH"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the Voting Stock of a Person shall be deemed to be control. "Agent" means any Registrar, Paying Agent or co-Registrar. "Applicable Procedures" means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Clearstream that apply to such transfer, redemption or exchange. "Asset Sale" means (i) the sale, lease, conveyance or other disposition of any assets or rights (including, without limitation, by way of a sale and leaseback) other than sales of inventory in the ordinary course of business consistent with past practices (provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole will be governed by the provisions of Section 4.15 and/or Section 5.01 hereof and not by the provisions of Section 4.10 hereof, and (ii) the issue or sale by the Company or any of its Restricted Subsidiaries of Equity Interests of any of the Company's Restricted Subsidiaries, in the case of either clause (i) or (ii), whether in a single transaction or a series of related transactions (a) that have a fair market value in excess of $5.0 million or (b) for Net Proceeds in excess of $5.0 million. Notwithstanding the foregoing, the following items shall not be deemed to be Asset Sales: (i) a transfer of assets by the Company to a Restricted Subsidiary or by a Restricted Subsidiary to the Company or to another Restricted Subsidiary, (ii) an issuance of Equity Interests by a Restricted Subsidiary to the Company or to another Restricted Subsidiary, (iii) a Restricted Payment that is permitted by, or an Investment that is not prohibited by, Section 4.07 hereof, (iv) a disposition of Cash Equivalents or obsolete, worn out or no longer useful equipment, (v) foreclosures on assets, (vi) the sale or discount, in each case without recourse, of accounts receivable arising in the ordinary course of business, but only in connection with the compromise or collection thereof and (vii) the factoring of accounts receivable arising in the ordinary course of business pursuant to arrangements customary in the industry. "Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors. "Board of Directors" means the Board of Directors of the Company, or any authorized committee of the Board of Directors. "Black Beauty" means, collectively, Black Beauty Coal Company and its Subsidiaries, and Black Beauty Equipment Company and its Subsidiaries. "Business Day" means any day other than a Legal Holiday. 2 "Capital Lease Obligation" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP. "Capital Stock" means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "Cash Equivalents" means (a) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed or insured by the U.S. Government or any agency thereof, (b) certificates of deposit and time deposits with maturities of one year or less from the date of acquisition and overnight bank deposits of any lender under the Credit Agreement or of any commercial bank having capital and surplus in excess of $500.0 million, (c) repurchase obligations of any lender under the Credit Agreement or of any commercial bank satisfying the requirements of clause (b) of this definition, having a term of not more than 90 days with respect to securities issued or fully guaranteed or insured by the United States Government, (d) commercial paper of a domestic issuer rated at least A-2 by S&P or P-2 by Moody's, or carrying an equivalent rating by a nationally recognized rating agency if both of S&P and Moody's cease publishing ratings of investments, (e) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated at least A by S&P or A by Moody's, (f) securities with maturities of one year or less from the date of acquisition backed by standby letters of credit issued by any lender under the Credit Agreement or any commercial bank satisfying the requirements of clause (b) of this definition or (g) shares of money market mutual or similar funds, at least 95% of the assets of which invest exclusively in assets satisfying the requirements of clauses (a) through (f) of this definition. "Change of Control" means the occurrence of any of the following: (i) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole to any "PERSON" (as such term is used in Section 13(d)(3) of the Exchange Act) other than a Principal or a Related Party of a Principal (as defined below), (ii) the adoption of a plan relating to the liquidation or dissolution of the Company, (iii) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "PERSON" (as defined above), other than the Principals and their Related Parties, becomes the "BENEFICIAL OWNER" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly, of more than 50% of the Voting Stock of the 3 Company (measured by voting power rather than number of shares) or (iv) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors. "Change of Control Triggering Event" means the occurrence of both a Change of Control and a Rating Decline with respect to the Notes. "Clearstream" means Clearstream Banking S.A. and any successor thereto. "Company" means Peabody Energy Corporation, and any and all successors thereto. "Consolidated Cash Flow" means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period plus (i) provision for taxes based on income or profits of such Person and its Restricted Subsidiaries for such period, to the extent that such provision for taxes was included in computing such Consolidated Net Income, plus (ii) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs, deferred financing fees and original issue discount, noncash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations), to the extent that any such expense was deducted in computing such Consolidated Net Income, plus (iii) an amount equal to any extraordinary loss plus any net loss realized in connection with an Asset Sale (to the extent such losses were deducted in computing such Consolidated Net Income), plus (iv) depreciation, depletion, amortization (including amortization of goodwill and other intangibles) and other noncash expenses (including, without limitation, writedowns and impairment of property, plant and equipment and intangibles and other long- lived assets) (excluding any such noncash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of such Person and its Restricted Subsidiaries for such period to the extent that such depreciation, depletion, amortization and other noncash expenses were deducted in computing such Consolidated Net Income, minus (v) noncash items increasing such Consolidated Net Income for such period (other than accruals in accordance with GAAP). Notwithstanding the foregoing, the provision for taxes on the income or profits of, and the depreciation, depletion and amortization and other noncash expenses of, a Restricted Subsidiary that is not a Subsidiary Guarantor shall be added to Consolidated Net Income to compute Consolidated Cash Flow only to the extent that a corresponding amount would be permitted at the date of determination to be dividended to the Company by such Restricted Subsidiary without prior governmental approval (that has not been obtained), and without direct or indirect restriction pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Restricted Subsidiary or its stockholders. 4 "Consolidated Net Income" means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that (i) the Net Income of any Unrestricted Subsidiary, any Person that is not a Subsidiary or any Person accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the referent Person or a Restricted Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary that is not a Subsidiary Guarantor shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a transaction accounted for in a manner similar to a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded, provided, however, that such Net Income shall not be excluded for purposes of calculating the Fixed Charge Coverage Ratio, and (iv) the cumulative effect of a change in accounting principles shall be excluded. "Continuing Directors" means, as of any date of determination, any member of the Board of Directors of the Company who (i) was a member of such Board of Directors on the date hereof or (ii) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election. "Corporate Trust Office of the Trustee" shall be the address of the Trustee specified in Section 12.02 hereof or such other address as to which the Trustee may give notice to the Company. "Credit Agreement" means that certain Credit Agreement, dated as of March 21, 2003 by and among the Company, as borrower, Wachovia Securities, Inc., Fleet Securities, Inc. and Lehman Brothers Inc. as Arrangers, Wachovia Bank, National Association and Lehman Commercial Paper Inc., as the Syndication Agents, Fleet National Bank, as the Administrative Agent, Morgan Stanley Senior Funding, Inc. and US Bank National Association, as Documentation Agents, and the other lenders party thereto, including any related notes, guarantees, collateral documents, letters of credit, instruments and agreements executed in connection therewith (and any appendices, annexes, exhibits or schedules to any of the foregoing), and in each case as amended, restated, amended and restated, modified, supplemented, renewed, refunded, replaced, restructured, repaid or refinanced from time to time (whether with the original agents, arrangers and lenders or other agents, arrangers and lenders or otherwise, whether provided under the original credit agreement or other Credit Facilities or otherwise, whether for a greater or lesser principal amount, whether with greater or lesser interest and fees and whether including more or less collateral or guarantors). Indebtedness under the Credit Agreement outstanding on the date on which notes are first issued and authenticated under the indenture shall be deemed to have been incurred on such date in 5 reliance on, and to be permitted by, the exception provided by clause (i) of the definition of Permitted Indebtedness. "Credit Facilities" means, with respect to the Company or any of its Restricted Subsidiaries, one or more debt facilities (including, without limitation, the Credit Agreement) or commercial paper facilities with banks or other institutional lenders providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or letters of credit, in each case, as amended, restated, amended and restated, modified, supplemented, renewed, refunded, replaced, refinanced, repaid or restructured in whole or in part from time to time. "Custodian" means the Trustee, as custodian with respect to the Notes in global form, or any successor entity thereto. "Default" means any event that is or with the passage of time or the giving of notice or both would be an Event of Default. "Definitive Note" means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.06 hereof, in the form of Exhibit A hereto except that such Note shall not bear the Global Note Legend and shall not have the "Schedule of Exchanges of Interests in the Global Note" attached thereto. "Depositary" means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03 hereof as the Depositary with respect to the Notes, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this Indenture. "Designated Noncash Consideration" means the fair market value of noncash consideration received by the Company or one of its Restricted Subsidiaries in connection with an Asset Sale that is so designated as Designated Noncash Consideration pursuant to an Officer's Certificate, setting forth the basis of such valuation, executed by the principal executive officer and the principal financial officer of the Company, less the amount of cash or Cash Equivalents received in connection with a sale of such Designated Noncash Consideration. "Disqualified Stock" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, at the option of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the Holder thereof, in whole or in part, on or prior to the date on which the Notes mature; provided, however, that any Capital Stock that would constitute Disqualified Stock solely because the Holders thereof have the right to require the Company to repurchase such Capital Stock upon the occurrence of a Change of Control Triggering Event or an Asset Sale shall not constitute Disqualified Stock if the terms of such Capital Stock provide that the Company may not repurchase or redeem any 6 such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with Section 4.07 hereof. "Distribution Compliance Period" means the 40-day distribution compliance period as defined in Regulation S. "Domestic Subsidiary" means a Subsidiary that is (i) formed under the laws of the United States of America or a state or territory thereof or (ii) as of the date of determination, treated as a domestic entity or a partnership or a division of a domestic entity for United States federal income tax purposes. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Equity Offering" means any public or private sale of equity securities (excluding Disqualified Stock) of the Company, other than any private sales to an Affiliate of the Company. "Euroclear" means Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear system. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange Notes" means the Notes issued in the Exchange Offer pursuant to Section 2.06(f) hereof. "Exchange Offer" means the registration by the Company under the Securities Act of the Exchange Notes pursuant to a Registration Statement pursuant to which the Company offers the holders of all outstanding Transfer Restricted Securities the opportunity to exchange all such outstanding Transfer Restricted Securities held by such holders for Exchange Notes in an aggregate principal amount equal to the aggregate principal amount of the Transfer Restricted Securities validly tendered in such exchange offer by such holders. "Exchange Offer Registration Statement" means the Registration Statement relating to the Exchange Offer, including the related Prospectus. "Existing Indebtedness" means up to $1,253.0 million in aggregate principal amount of Indebtedness of the Company and its Restricted Subsidiaries (other than Indebtedness under the Credit Agreement, the Notes, the May 1998 Senior Notes, the Senior Subordinated Notes, the Subsidiary Guarantees, the May 1998 Senior Note Guarantees and the Subordinated Subsidiary Guarantees) in existence on the date hereof, until such amounts are repaid. "Fixed Charge Coverage Ratio" means with respect to any specified Person for any period, the ratio of the Consolidated Cash Flow of such Person and its 7 Restricted Subsidiaries for such period to the Fixed Charges of such Person and its Restricted Subsidiaries for such period. In the event that the specified Person or any of its Restricted Subsidiaries incurs, assumes, Guarantees, repays, repurchases or redeems any Indebtedness (other than ordinary working capital borrowings) or issues, repurchases or redeems preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated and on or prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio will be calculated giving pro forma effect to such incurrence, assumption, Guarantee, repayment, repurchase or redemption of Indebtedness, or such issuance, repurchase or redemption of preferred stock, and the use of the proceeds therefrom as if the same had occurred at the beginning of the applicable four-quarter reference period. In addition, for purposes of calculating the Fixed Charge Coverage Ratio: (1) acquisitions that have been made by the specified Person or any of its Restricted Subsidiaries, including through mergers, consolidations or otherwise (including acquisitions of assets used in a Permitted Business) and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date will be given pro forma effect as if they had occurred on the first day of the four-quarter reference period, including any pro forma expense and cost reductions and other operating improvements that have occurred or are reasonably expected to occur, in the reasonable judgment of the chief financial officer of the Company (regardless of whether those cost savings or operating improvements could then be reflected in pro forma financial statements in accordance with Regulation S-X promulgated under the Securities Act or any other regulation or policy of the SEC related thereto); (2) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, will be excluded; and (3) the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, will be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the specified Person or any of its Restricted Subsidiaries following the Calculation Date. "Fixed Charges" means, with respect to any Person for any period, the sum, without duplication, of (i) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued (including, without limitation, amortization of original issue discount, noncash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letters of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations, but excluding amortization of debt 8 issuance costs) and (ii) the consolidated interest of such Person and its Restricted Subsidiaries that was capitalized during such period, and (iii) any interest expense on the portion of Indebtedness of another Person that is Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries (whether or not such Guarantee or Lien is called upon) and (iv) the product of (a) all dividend payments, whether or not in cash, on any series of preferred stock of such Person or any of its Restricted Subsidiaries, other than dividend payments on Equity Interests payable solely in Equity Interests of the Company (other than Disqualified Stock) or to the Company or a Restricted Subsidiary of the Company, times (b) a fraction, the numerator of which is one and the denominator of which is one minus the effective combined federal, state and local tax rate of such Person for such period, expressed as a decimal, in each case, for the Company and its Restricted Subsidiaries on a consolidated basis and in accordance with GAAP. "Foreign Subsidiaries" means Subsidiaries of the Company that are not Domestic Subsidiaries. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the date hereof. "Global Note Legend" means the legend set forth in Section 2.06(g)(ii), which is required to be placed on all Global Notes issued under this Indenture. "Global Notes" means, individually and collectively, each of the Restricted Global Notes and the Unrestricted Global Notes, in the form of Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(iv), 2.06(d)(ii) or 2.06(f) hereof. "Government Securities" means direct obligations of, or obligations guaranteed by, the United States of America, and the payment for which the United States pledges its full faith and credit. "Guarantee" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof), of all or any part of any Indebtedness. "Hedging Obligations" means, with respect to any Person, the obligations of such Person under (i) currency exchange, interest rate or commodity swap agreements, currency exchange, interest rate or commodity cap agreements and currency exchange, interest rate or commodity collar agreements and (ii) other agreements or arrangements designed to protect such Person against fluctuations in currency exchange, interest rates 9 or commodity prices, in each case for the purpose of risk management and not for speculation. "Holder" means a Person in whose name a Note is registered. "IAI Global Note" means the Global Note in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold to Institutional Accredited Investors. "Indebtedness" means, with respect to any Person, any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or banker's acceptances or representing Capital Lease Obligations or the balance deferred and unpaid of the purchase price of any property or representing any Hedging Obligations, if and to the extent any of the foregoing (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, as well as all Indebtedness of others secured by a Lien on any asset of such Person (whether or not such Indebtedness is assumed by such Person) and, to the extent not otherwise included, the Guarantee by such Person of any indebtedness of any other Person, but excluding from the definition of "Indebtedness," any of the foregoing that constitutes (1) an accrued expense, (2) trade payables and (3) Obligations in respect of reclamation, workers' compensation, including black lung, pensions and retiree health care, in each case to the extent not overdue for more than 90 days. The amount of any Indebtedness outstanding as of any date shall be (i) the accreted value thereof, in the case of any Indebtedness issued with original issue discount, and (ii) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness. "Indenture" means this Indenture, as amended or supplemented from time to time. "Indirect Participant" means a Person who holds a beneficial interest in a Global Note through a Participant. "Initial Notes" means $650.0 million in aggregate principal amount of Notes issued under this Indenture on the date hereof. "Institutional Accredited Investor" means an institution that is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, who are not also QIBs. "Investment Grade Rating" means a rating equal to or higher than Baa3 (or the equivalent) by Moody's or BBB- (or the equivalent) by S&P. 10 "Investments" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the form of direct or indirect loans (including guarantees of any portion of Indebtedness or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Company or any Restricted Subsidiary of the Company sells or otherwise disposes of any Equity Interests of any direct or indirect Restricted Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a Restricted Subsidiary of the Company, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Equity Interests of such Restricted Subsidiary not sold or disposed of in an amount determined as provided in Section 4.07 hereof. "Legal Holiday" means a Saturday, a Sunday or a day on which banking institutions in the City of New York, the city in which the Corporate Trust Office of the Trustee is located or at a place of payment with respect to the Notes are authorized by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue on such payment for the intervening period. "Letter of Transmittal" means the letter of transmittal to be prepared by the Company and sent to all Holders of the Notes for use by such Holders in connection with the Exchange Offer. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction), but excluding any of the foregoing arising as a result of a sale, contribution, disposition or any other transfer of accounts, chattel paper, payment intangibles, promissory notes and/or related assets otherwise permitted under the terms hereof. "Liquidated Damages" means all liquidated damages then owing pursuant to Section 5 of the Registration Rights Agreement. "Marketable Securities" means, with respect to any Asset Sale, any readily marketable equity securities that are (i) traded on the New York Stock Exchange, the American Stock Exchange or the Nasdaq National Market; and (ii) issued by a corporation having a total equity market capitalization of not less than $250.0 million; provided that the excess of (A) the aggregate amount of securities of any one such corporation held by the Company and any Restricted Subsidiary over (B) ten times the 11 average daily trading volume of such securities during the 20 immediately preceding trading days shall be deemed not to be Marketable Securities; as determined on the date of the contract relating to such Asset Sale. "May 1998 Senior Note Guarantee" means the Guarantees of the May 1998 Senior Notes by each of the subsidiary guarantors pursuant to the May 1998 Senior Note Indenture and any additional Guarantee of the May 1998 Senior Notes to be executed by any Subsidiary of the Company pursuant to that indenture. "May 1998 Senior Note Indenture" means the indenture among the Company, the subsidiary guarantors party thereto, US Bank National Association, as successor to State Street Bank and Trust Company, as Trustee, dated as of May 18, 1998, governing the May 1998 Senior Notes. "May 1998 Senior Notes" means the Company's Series A and Series B 8 7/8% Senior Notes due 2008. "Moody's" means Moody's Investors Service, Inc., or any successor to the rating agency business thereof. "Net Income" means, with respect to any Person, the net income or loss of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however, (i) any gain or loss, together with any related provision for taxes on such gain or loss, realized in connection with (a) any Asset Sale (including, without limitation, dispositions pursuant to sale and leaseback transactions) or (b) the disposition of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain or loss, together with any related provision for taxes on such extraordinary or nonrecurring gain or loss. "Net Proceeds" means the aggregate proceeds (cash or property) received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any noncash consideration received in any Asset Sale) or the sale or disposition of any Investment, net of the direct costs relating to such Asset Sale, sale or disposition, (including, without limitation, legal, accounting and investment banking fees, and sales commissions) and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP. "Non-Guarantor Subsidiaries" means (i) Black Beauty; (ii) the Specified Subsidiaries, (iii) the Company's future Unrestricted Subsidiaries and (iv) the Company's current and future Foreign Subsidiaries. 12 "Non-Recourse Debt" means Indebtedness (i) as to which neither the Company nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness) other than a pledge of the Equity Interests of any Unrestricted Subsidiaries, (b) is directly or indirectly liable (as a guarantor or otherwise) other than by virtue of a pledge of the Equity Interests of any Unrestricted Subsidiaries, or (c) constitutes the lender; and (ii) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness (other than the Notes being offered hereby) of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity. "Non-U.S. Person" means a Person who is not a U.S. Person. "Notes" has the meaning assigned to it in the preamble to this Indenture. "Obligations" means any principal, premium (if any), interest, penalties, fees, charges, expenses, indemnifications, reimbursement obligations, damages, Guarantees and other liabilities and amounts payable under the documentation governing any Indebtedness or in respect thereto. "Offering" means the offering of the Notes by the Company. "Officer" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice President of such Person. "Officer's Certificate" means a certificate signed on behalf of the Company by an Officer of the Company who must be a vice-president, the principal financial officer, the treasurer or the principal accounting officer of the Company, that meets the requirements of Sections 12.04 and 12.05 hereof. "Opinion of Counsel" means an opinion from legal counsel who is reasonably acceptable to the Trustee, that meets the requirements of Sections 12.04 and 12.05 hereof. The counsel may be an employee of or counsel to the Company, any Subsidiary of the Company or the Trustee. "Participant" means, with respect to the Depositary, Euroclear or Clearstream, a Person who has an account with the Depositary, Euroclear or Clearstream, respectively, and, with respect to The Depository Trust Company, shall include Euroclear and Clearstream. "Participating Broker-Dealer" has the meaning set forth in the Registration Rights Agreement. 13 "Permitted Business" means coal production, coal mining, coal brokering, coal transportation, mine development, power marketing, electricity generation, power/energy sales and trading, energy transactions/asset restructurings, risk management products associated with energy, fuel/power integration and other energy-related businesses, ash disposal, environmental remediation and development of related real estate assets, coal, natural gas, petroleum or other fossil fuel exploration, production, marketing, transportation and distribution, and other related businesses and activities of the Company and its Subsidiaries as of the date hererof and any business or activity that is reasonably similar thereto or a reasonable extension, development or expansion thereof or ancillary thereto. "Permitted Investments" means (a) any Investment in the Company or in a Restricted Subsidiary of the Company; (b) any Investment in Cash Equivalents; (c) any Investment by the Company or any Restricted Subsidiary of the Company in a Person, if as a result of such Investment (i) such Person becomes a Restricted Subsidiary of the Company or (ii) such Person, in one transaction or a series of related transactions, is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary of the Company; (d) any acquisition of assets solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company; (e) any Investment existing on the date hereof (an "EXISTING INVESTMENT") and any Investment that replaces, refinances or refunds an Existing Investment, provided that the new Investment is in an amount that does not exceed the amount replaced, refinanced or refunded and is made in the same Person as the Investment replaced, refinanced or refunded, (f) advances to employees not in excess of $10.0 million outstanding at any one time; (g) Hedging Obligations permitted under clause (viii) of Section 4.09 hereof; (h) loans and advances to officers, directors and employees for business-related travel expenses, moving expenses and other similar expenses, in each case incurred in the ordinary course of business; (i) any Investment in a Permitted Business (whether or not an Investment in an Unrestricted Subsidiary) having an aggregate fair market value, when taken together with all other Investments made pursuant to this clause (i), does not exceed in aggregate amount the sum of (1) 15% of Total Assets at the time of such Investment (with the fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value) plus (2) 100% of the Net Proceeds from the sale or disposition of any Investment previously made pursuant to this clause (i) or 100% of the amount of any dividend, distribution or payment from any such Investment, net of income taxes paid or payable in respect thereof, in each case up to the amount of the Investment that was made pursuant to this clause (i) and 50% of the amount of such Net Proceeds or 50% of such dividends, distributions or payments, in each case received in excess of the amount of the Investments made pursuant to this clause (i); (j) guarantees (including Guarantees) of Indebtedness permitted under Section 4.09 hereof; (k) any Investment acquired by the Company or any of its Restricted Subsidiaries (A) in exchange for any other Investment or accounts receivable held by the Company or any such Restricted Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuer of such other Investment or accounts 14 receivable or (B) as a result of the transfer of title with respect to any secured Investment in default as a result of a foreclosure by the Company or any of its Restricted Subsidiaries with respect to such secured Investment; (l) any Investments in joint ventures in an amount, taken together will all other Investments made pursuant to this clause (l), that does not exceed $100.0 million at the time outstanding; and (m) that portion of any Investment by the Company or a Restricted Subsidiary in a Permitted Business to the extent that the Company or such Restricted Subsidiary will receive in a substantially concurrent transaction an amount in cash equal to the amount of such Investment (or the fair market value of such Investment), net of any obligation to pay taxes or other amounts in respect of the receipt of such cash; provided that the receipt of such cash does not carry any obligation by the Company or such Restricted Subsidiary to repay or return such cash; provided, however, that with respect to any Investment, the Company may, in its sole discretion, allocate all or any portion of any Investment to one or more of the above clauses so that the entire Investment would be a Permitted Investment. "Permitted Liens" means (i) Liens securing Indebtedness under Credit Facilities that were permitted by the terms of this Indenture to be incurred; (ii) Liens in favor of the Company; (iii) Liens on property of a Person existing at the time such Person is merged into or consolidated with the Company or any Restricted Subsidiary of the Company; provided that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with the Company; (iv) Liens on property existing at the time of acquisition thereof by the Company or any Restricted Subsidiary of the Company, provided that such Liens were in existence prior to the contemplation of such acquisition; (v) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business; (vi) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance or other kinds of social security; (vii) Liens existing on the date hereof; (viii) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded, provided that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor; (ix) Liens on assets of Subsidiary Guarantors to secure Senior Debt of such Subsidiary Guarantors that was permitted by this Indenture to be incurred; (x) Liens incurred in the ordinary course of business of the Company or any Restricted Subsidiary of the Company with respect to obligations that (a) are not incurred in connection with the borrowing of money or the obtaining of advances or credit (other than trade credit in the ordinary course of business) and (b) do not in the aggregate materially detract from the value of the property or materially impair the use thereof in the operation of business by the Company or such Restricted Subsidiary; (xi) Liens on assets of Foreign Subsidiaries to secure Indebtedness that was permitted by this Indenture to be incurred; (xii) statutory liens of landlords, mechanics, suppliers, vendors, warehousemen, carriers or other like Liens arising in the ordinary course of business; (xiii) judgment Liens not giving rise to an Event of Default so long as any appropriate legal proceeding that may have been duly initiated for the review of such 15 judgment shall not have been finally terminated or the period within which such legal proceeding may be initiated shall not have expired; (xiv) easements, rights-of-way, zoning and similar restrictions and other similar encumbrances or title defects incurred or imposed, as applicable, in the ordinary course of business and consistent with industry practices which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto (as such property is used by the Company or its Subsidiaries) or interfere with the ordinary conduct of the business of the Company or such Subsidiaries; provided, however, that any such Liens are not incurred in connection with any borrowing of money or any commitment to loan any money or to extend any credit; (xv) Liens to secure Indebtedness (including Capital Lease Obligations) permitted by clause (vi) of the second paragraph of Section 4.09 hereof and other purchase money Liens to finance property or assets of the Company or any Restricted Subsidiary acquired in the ordinary course of business; provided that such Liens are only secured by such property or assets so acquired or improved (including, in the case of the acquisition of Capital Stock of a Person who becomes a Restricted Subsidiary, Liens on the assets of the Person whose Capital Stock was so acquired); (xvi) Liens securing Indebtedness under Hedging Obligations; provided that such Liens are only secured by property or assets that secure the Indebtedness subject to the Hedging Obligation; (xvii) Liens to secure Indebtedness permitted by clause (xii) of the second paragraph of Section 4.09 hereof; and (xviii) Liens on the Equity Interests of Unrestricted Subsidiaries securing Obligations of Unrestricted Subsidiaries not otherwise prohibited by this Indenture. "Permitted Refinancing Indebtedness" means any Indebtedness of the Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Restricted Subsidiaries (other than intercompany Indebtedness); provided that: (i) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount of (or accreted value, if applicable), plus accrued interest and premium, if any, on, the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus the amount of reasonable expenses incurred in connection therewith); (ii) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by the Company or by the Restricted Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. 16 "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity. "Principals" means Lehman Brothers Merchant Banking Partners II L.P., any of its respective Affiliates and executive officers of the Company as of the date hereof. "Private Placement Legend" means the legend set forth in Section 2.06(g)(i) to be placed on all Notes issued under this Indenture except where otherwise permitted by the provisions of this Indenture. "Prospectus" means a prospectus included in a Registration Statement as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Rating Agency" means each of S&P and Moody's, or if S&P or Moody's or both shall not make a rating on the notes publicly available, a nationally recognized statistical rating agency or agencies, as the case may be, selected by the Company (as certified by a resolution of its Board of Directors) which shall be substituted for S&P or Moody's or both, as the case may be. "Rating Date" means the date which is 90 days prior to the earlier of: (a) a Change of Control, and (b) public notice of the occurrence of a Change of Control or of the intention of the Company to effect a Change of Control. "Rating Decline" means the occurrence of the following on, or within, 90 days before or after the earlier of: (i) the date of public notice of the occurrence of a Change of Control or (ii) public notice of the intention of the Company to effect a Change of Control (which 90-day period shall be extended so long as the rating of the Notes is under publicly announced consideration for possible downgrade by any of the Rating Agencies): (a) in the event the Notes are assigned an Investment Grade Rating by both Rating Agencies on the Rating Date, the rating of the Notes by one of the Rating Agencies shall be below an Investment Grade Rating; or (b) in the event the Notes are rated below an Investment Grade Rating by at least one of the Rating Agencies on the Rating Date, the rating of the Notes by at least one of the Rating Agencies shall be decreased by one or more gradations (including gradations within rating categories as well as between rating categories). 17 "Registration Default" has the meaning assigned to that term in the Registration Rights Agreement. "Registration Rights Agreement" means the Registration Rights Agreement, dated as of March 21, 2003, by and among the Company and the other parties named on the signature pages thereof, as such agreement may be amended, modified or supplemented from time to time and, with respect to any Additional Notes, one or more registration rights agreements between the Company and the other parties thereto, as such agreement(s) may be amended, modified or supplemented from time to time, relating to rights given by the Company to the purchasers of Additional Notes to register such Additional Notes under the Securities Act. "Regulation S" means Regulation S promulgated under the Securities Act. "Regulation S Global Note" means the global note in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with and registered in the name of the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of Notes sold in reliance on Regulation S. "Related Party" with respect to any Principal means (A) any controlling stockholder, 80% (or more) owned Subsidiary, or spouse or immediate family member (in the case of an individual) of such Principal or (B) any trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding an 80% or more controlling interest of which consist of such Principal and/or such other Persons referred to in the immediately preceding clause (A). "Responsible Officer," when used with respect to the Trustee, means any officer within the Corporate Trust Administration of the Trustee (or any successor group of the Trustee) or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Restricted Definitive Note" means a Definitive Note bearing the Private Placement Legend. "Restricted Global Note" means a Global Note bearing the Private Placement Legend. "Restricted Investment" means any Investment other than a Permitted Investment. "Restricted Period" means the 40-day restricted period as defined in Regulation S. 18 "Restricted Subsidiary" of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary. "Rule 144" means Rule 144 promulgated under the Securities Act. "Rule 144A" means Rule 144A promulgated under the Securities Act. "Rule 903" means Rule 903 promulgated under the Securities Act. "Rule 904" means Rule 904 promulgated the Securities Act. "S&P's" means Standard & Poor's Rating Group, Inc., or any successor to the rating agency business thereof. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Senior Subordinated Note Indenture" means the indenture, among the Company, the subsidiary guarantors party thereto, US Bank National Association, as successor to State Street Bank and Trust Company, as Trustee, dated as of May 18, 1998, governing the Senior Subordinated Notes. "Senior Subordinated Notes" means the Company's 9 5/8% Series B Senior Subordinated Notes due 2008. "Shelf Registration Statement" means the Shelf Registration Statement as defined in the Registration Rights Agreement. "Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the date of this Indenture. "Specified Subsidiaries" means Newhall Funding Company, CL Hartford, L.L.C., CL Power Sales Three, L.L.C., CP Power Sales Sixteen, L.L.C., PG Power Sales Ones, L.L.C., PG Power Sales Two, L.L.C., PG Power Sales Three, L.L.C., PG Power Sales Four, L.L.C., PG Power Sales Five, L.L.C., PG Power Sales Six, L.L.C., PG Power Sales Seven, L.L.C., PG Power Sales Eight, L.L.C., PG Power Sales Nine, L.L.C., PG Power Sales Ten, L.L.C., PG Power Sales Eleven, L.L.C., PG Power Sales Twelve, L.L.C., PG Investments One, L.L.C., PG Investments Two, L.L.C., PG Investments Three, L.L.C., PG Investments Four, L.L.C., PG Investments Five, L.L.C., PG Investments Six, L.L.C., P&L Receivables Company, LLC and United Minerals Company, LLC. "Stated Maturity" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which such payment of interest or 19 principal was scheduled to be paid in the original documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. "Subsidiary" means, with respect to any Person, (i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof) and (ii) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or of one or more Subsidiaries of such Person (or any combination thereof). "Subsidiary Guarantee" means the Guarantee of the notes by each of the Subsidiary Guarantors pursuant to this Indenture and any additional Guarantee of the notes to be executed by any Subsidiary of the Company pursuant to Section 4.16. "Subsidiary Guarantors" means all of the Company's existing Domestic Subsidiaries, except for Black Beauty and the Specified Subsidiaries, and any other Subsidiary that executes a Subsidiary Guarantee in accordance with the provisions of the Indenture, and their respective successors and assigns. "Subordinated Subsidiary Guarantees" means the Guarantees of the Senior Subordinated Notes by each of the Subsidiary Guarantors pursuant to the Senior Subordinated Note Indenture and any additional Guarantee of the Senior Subordinated Notes to be executed by any Subsidiary of the Company pursuant to that indenture. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date on which this Indenture is qualified under the TIA. "Total Assets" means the total assets of the Company and its Restricted Subsidiaries on a consolidated basis determined in accordance with GAAP, as shown on the most recently available consolidated balance sheet of the Company and its Restricted Subsidiaries. "Treasury Rate" means the yield to maturity at the time of the computation of the United States Treasury securities with a constant maturity (as compiled by and published in the most recent Federal Reserve Statistical Release H.15(519), which has become publicly available at least two Business Days prior to the date fixed for redemption (or if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the then remaining average life to March 15, 2008; provided, however, that if the average life of such Note is not equal to the constant maturity of the United States Treasury security for which weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation 20 (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the average life of such Note is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used. "Trustee" means the party named as such above until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder. "Unrestricted Definitive Note" means one or more Definitive Notes that do not bear and are not required to bear the Private Placement Legend. "Unrestricted Global Note" means a permanent global Note in the form of Exhibit A attached hereto that bears the Global Note Legend and that has the "Schedule of Exchanges of Interests in the Global Note" attached thereto, and that is deposited with or on behalf of and registered in the name of the Depositary, representing a series of Notes that do not bear the Private Placement Legend. "Unrestricted Subsidiary" means (i) the Specified Subsidiaries and (ii) any Subsidiary that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution; but only to the extent that such Person: (a) has no Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company; (c) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any obligation (x) to subscribe for additional Equity Interests in Unrestricted Subsidiaries or (y) to maintain or preserve such Person's net worth (except with respect to Permitted Investments); and (d) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries; provided, however, that the Company and its Restricted Subsidiaries may guarantee the performance of Unrestricted Subsidiaries in the ordinary course of business except for guarantees of Obligations in respect of borrowed money. Any such designation by the Board of Directors shall be evidenced to the Trustee by filing with the Trustee a certified copy of the Board Resolution giving effect to such designation and an Officer's Certificate certifying that such designation complied with the foregoing conditions and was permitted by Section 4.07 hereof. "U.S. Person" means a U.S. person as defined in Rule 902(k) under the Securities Act. "Voting Stock" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person. 21 "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (ii) the then outstanding principal amount of such Indebtedness. SECTION 1.02. OTHER DEFINITIONS.
Defined in Terms Section ----- ------- "Affiliate Transaction"..................................................... 4.11 "Asset Sale Offer".......................................................... 3.09 "Authentication Order"...................................................... 2.02 "Benefited Party"........................................................... 10.01 "Change of Control Offer"................................................... 4.15 "Change of Control Payment"................................................. 4.15 "Change of Control Payment Date"............................................ 4.15 "Covenant Defeasance"....................................................... 8.03 "Event of Default".......................................................... 6.01 "Excess Proceeds"........................................................... 4.10 "incur"..................................................................... 4.09 "Investment Grade Date"..................................................... 4.18 "Legal Defeasance".......................................................... 8.02 "Make Whole Premium"........................................................ 3.07 "Offer Amount".............................................................. 3.09 "Offer Period".............................................................. 3.09 "Paying Agent".............................................................. 2.03 "Permitted Debt"............................................................ 4.09 "Purchase Date"............................................................. 3.09 "Registrar"................................................................. 2.03 "Restricted Payments"....................................................... 4.07
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "Indenture securities" means the Notes; "Indenture security Holder" means a Holder of a Note; 22 "Indenture to be qualified" means this Indenture; "Indenture Trustee" or "institutional Trustee" means the Trustee; and "obligor" on the Notes and the Subsidiary Guarantees means the Company and the Subsidiary Guarantors, respectively, and any successor obligor upon the Notes and the Subsidiary Guarantees, respectively. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them. SECTION 1.04. RULES OF CONSTRUCTION. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) words in the singular include the plural, and in the plural include the singular; (5) provisions apply to successive events and transactions; and (6) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement or successor sections or rules adopted by the SEC from time to time. ARTICLE II THE NOTES SECTION 2.01. FORM AND DATING. (a) GENERAL. The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto, which is hereby incorporated in and expressly made part of this Indenture. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note shall be dated the date of its authentication. The Notes shall be in denominations of $1,000 and integral multiples thereof. The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture and the Company, the Subsidiary Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any 23 provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling. (b) FORM OF NOTES. The Notes shall be issued initially in global form and shall be substantially in the form of Exhibit A attached hereto (including the Global Note Legend thereon and the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Notes issued in definitive form shall be substantially in the form of Exhibit A attached hereto (but without the Global Note Legend thereon and without the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Each Global Note shall represent such of the outstanding Notes as shall be specified therein and each shall provide that it shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby shall be made by the Trustee or the Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof. (c) BOOK-ENTRY PROVISIONS. This Section 2.01(c) shall only apply to Global Notes deposited with the Trustee, as custodian for the Depositary. Participants and Indirect Participants shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depositary or by the Trustee as the custodian for the Depositary or under such Global Note, and the Depositary shall be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Participants or Indirect Participants, the Applicable Procedures or the operation of customary practices of the Depositary governing the exercise of the rights of a holder of a beneficial interest in any Global Note. SECTION 2.02. EXECUTION AND AUTHENTICATION. (a) One Officer shall sign the Notes for the Company by manual or facsimile signature. (b) If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note shall nevertheless be valid. (c) A Note shall not be valid until authenticated by the manual signature of the Trustee. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. 24 (d) The Trustee shall, upon a written order of the Company signed by an Officer (an "AUTHENTICATION ORDER"), authenticate Notes for original issue. (e) The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Company. (f) The Company may issue an unlimited amount of Additional Notes from time to time after the offering of the Initial Notes, subject to Section 4.09 hereof. The Initial Notes, the Exchange Notes and any Additional Notes subsequently issued under this Indenture shall be treated as a single class for all purposes under this Indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase. SECTION 2.03. REGISTRAR AND PAYING AGENT. (a) The Company shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange ("REGISTRAR") and an office or agency where Notes may be presented for payment ("PAYING AGENT"). The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-Registrars and one or more additional paying agents. The term "REGISTRAR" includes any co-Registrar and the term "PAYING AGENT" includes any additional paying agent. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. (b) The Company initially appoints The Depository Trust Company ("DTC") to act as Depositary with respect to the Global Notes. (c) The Company initially appoints the Trustee to act as the Registrar and Paying Agent and to act as Custodian with respect to the Global Notes. SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST. (a) The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium or Liquidated Damages, if any, or interest on the Notes, and will notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall have no further liability for the money. If the 25 Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee shall serve as Paying Agent for the Notes. SECTION 2.05. HOLDER LISTS. (a) The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes and the Company shall otherwise comply with TIA Section 312(a). SECTION 2.06. TRANSFER AND EXCHANGE. (a) TRANSFER AND EXCHANGE OF GLOBAL NOTES. A Global Note may not be transferred as a whole except by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Notes will be exchanged by the Company for Definitive Notes if (1) the Company delivers to the Trustee notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 120 days after the date of such notice from the Depositary or (2) the Company in its sole discretion determines that the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and deliver a written notice to such effect to the Trustee. Upon the occurrence of any of the preceding events in (1) or (2) above, Definitive Notes shall be issued in denominations of $1,000 or integral multiples thereof and in such names as the Depositary shall instruct the Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for another Note other than as provided in this Section 2.06(a), however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.06(b), (c) or (f) hereof. (b) TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS IN THE GLOBAL NOTES. The transfer and exchange of beneficial interests in the Global Notes shall be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also 26 shall require compliance with either clause (i) or (ii) below, as applicable, as well as one or more of the other following clauses, as applicable: (i) Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend; provided, however, that prior to the expiration of the Distribution Compliance Period, transfers of beneficial interests in the Regulation S Global Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Beneficial interests in any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.06(b)(i). (ii) All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.06(b)(i) above, the transferor of such beneficial interest must deliver to the Registrar either (A)(1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase or (B)(1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (B)(1) above. Upon consummation of an Exchange Offer by the Company in accordance with Section 2.06(f) hereof, the requirements of this Section 2.06(b)(ii) shall be deemed to have been satisfied upon receipt by the Registrar of the instructions contained in the Letter of Transmittal delivered by the Holder of such beneficial interests in the Restricted Global Notes. Upon instruction from the Depository in accordance with the Applicable Procedures and delivery of any applicable certificate required to be delivered to the Trustee by the terms of Sections 2.06(b)(iii) or (iv) or Section 2.06(c)(i) or (ii), as applicable, the Trustee shall adjust the principal amount of the relevant Global Note(s) pursuant to Section 2.06(h) hereof. (iii) Transfer of Beneficial Interests in a Restricted Global Note to Another Restricted Global Note. A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of Section 2.06(b)(ii) above and the Registrar receives the following: 27 (A) if the transferee will take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; (B) if the transferee will take delivery in the form of a beneficial interest in the Regulation S Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and (C) if the transferee will take delivery in the form of a beneficial interest in the IAI Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications and certificates and Opinion of Counsel required by item (3) thereof, if applicable. (iv) Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in an Unrestricted Global Note. A beneficial interest in any Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of Section 2.06(b)(ii) above and: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal or via the Depositary's book-entry system that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a 28 certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this clause (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and state "blue sky" laws and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. If any such transfer is effected pursuant to clause (B) or (D) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to clause (B) or (D) above. (v) Transfer or Exchange of Beneficial Interests in Unrestricted Global Notes for Beneficial Interests in Restricted Global Notes Prohibited. Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Note. (c) TRANSFER OR EXCHANGE OF BENEFICIAL INTERESTS FOR DEFINITIVE NOTES. (i) Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes. If any holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon receipt by the Registrar of the following documentation: (A) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof; 29 (B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such beneficial interest is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in clauses (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3)(d) thereof, if applicable; (F) if such beneficial interest is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or (G) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall mail or deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c)(i) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein. 30 (ii) Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes. A holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for an Unrestricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this clause (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and state "blue sky" laws and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. 31 (iii) Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive Notes. If any holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Note, then, upon satisfaction of the conditions set forth in Section 2.06(b)(ii) hereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and the Trustee shall authenticate and mail or deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iii) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall mail or deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iii) shall not bear the Private Placement Legend. (d) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES FOR BENEFICIAL INTERESTS. (i) Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes. If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation: (A) if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof; (B) if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such Restricted Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate to the effect 32 set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such Restricted Definitive Note is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in clauses (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3)(d) thereof, if applicable; (F) if such Restricted Definitive Note is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or (G) if such Restricted Definitive Note is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, the Trustee shall cancel the Restricted Definitive Note, increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, the appropriate Restricted Global Note, in the case of clause (B) above, the 144A Global Note, in the case of clause (C) above, the Regulation S Global Note, and in all other cases, the IAI Global Note. (ii) Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; 33 (C) such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or (2) if the Holder of such Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this clause (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and state "blue sky" laws and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. Upon satisfaction of the conditions of any of the clauses in this Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note. (iii) Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Unrestricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes. (iv) Transfer or Exchange of Unrestricted Definitive Notes to Beneficial Interests in Restricted Global Notes Prohibited. An Unrestricted Definitive Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, beneficial interests in a Restricted Global Note. (v) Issuance of Unrestricted Global Notes. If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to 34 clauses (ii)(B), (ii)(D) or (iii) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so transferred. (e) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES FOR DEFINITIVE NOTES. Upon request by a Holder of Definitive Notes and such Holder's compliance with the provisions of this Section 2.06(e), the Registrar shall register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by its attorney, duly authorized in writing. In addition, the requesting Holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.06(e). (i) Restricted Definitive Notes to Restricted Definitive Notes. Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following: (A) if the transfer will be made pursuant to Rule 144A, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; (B) if the transfer will be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and (C) if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable. (ii) Restricted Definitive Notes to Unrestricted Definitive Notes. Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the 35 Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) any such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or (2) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this clause (D), if the Registrar so requests, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and state "blue sky" laws and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof. (f) EXCHANGE OFFER. Upon the occurrence of the Exchange Offer in accordance with the Registration Rights Agreement, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02, the Trustee shall authenticate (i) one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of the beneficial interests in the Restricted Global Notes tendered for acceptance by Persons that certify in the applicable Letters of Transmittal that (A) they are not broker-dealers, (B) they are not participating in a distribution of the Exchange Notes and (C) they are not affiliates (as defined in Rule 144) of the Company, 36 and accepted for exchange in the Exchange Offer and (ii) Unrestricted Definitive Notes in an aggregate principal amount equal to the principal amount of the Restricted Definitive Notes tendered for acceptance by Persons who made the foregoing certification and accepted for exchange in the Exchange Offer. Concurrently with the issuance of such Notes, the Trustee shall cause the aggregate principal amount of the applicable Restricted Global Notes to be reduced accordingly, and the Company shall execute and the Trustee shall authenticate and mail or deliver to the Persons designated by the Holders of Restricted Definitive Notes so accepted Unrestricted Definitive Notes in the appropriate principal amount. (g) LEGENDS. The following legends shall appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture. (i) Private Placement Legend. (A) Except as permitted by clause (B) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form: "THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT, PRIOR TO (A) THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k) UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS NOTE) OR THE LAST DAY ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WERE THE OWNERS OF THIS NOTE (OR ANY PREDECESSOR OF THIS NOTE) AND (B) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAW (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER, SELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (I) TO THE COMPANY, (II) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (III) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT 37 PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (IV) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT OR (V) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THE COMPANY, THE TRUSTEE, AND THE REGISTRAR SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (IV) OR (V) TO REQUIRE THAT AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO THE COMPANY, THE TRUSTEE AND THE REGISTRAR IS COMPLETED AND DELIVERED BY THE TRANSFEROR. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT." (B) Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to clauses (b)(iv), (c)(ii), (c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.06 (and all Notes issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend. (ii) Global Note Legend. Each Global Note shall bear a legend in substantially the following form: "THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY. UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR 38 REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN." (h) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL NOTES. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or cancelled in whole and not in part, each such Global Note shall be returned to or retained and cancelled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase. (i) GENERAL PROVISIONS RELATING TO TRANSFERS AND EXCHANGES. (i) To permit registrations of transfers and exchanges, the Company shall execute Global Notes and Definitive Notes, and the Trustee shall authenticate Global Notes and Definitive Notes upon the Company's order(including an Authentication Order given pursuant to Section 2.02) or at the Registrar's request (in connection with any transfer or exchange of Notes pursuant to this Section 2.06). (ii) No service charge shall be made to a Holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 3.09, 4.10, 4.15 and 9.05 hereof). (iii) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange. 39 (iv) Neither the Registrar nor the Company shall be required (A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day of selection, (B) to register the transfer of or to exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part or (C) to register the transfer of or to exchange a Note between a record date and the next succeeding Interest Payment Date. (v) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary. (vi) The Trustee shall authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.02 hereof. (vii) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.06 to effect a registration of transfer or exchange may be submitted by facsimile. (viii) The Trustee is hereby authorized to enter into a letter of representation with the Depositary in the form provided by the Company and to act in accordance with such letter. (ix) Notwithstanding anything contained herein to the contrary, neither the Trustee nor the Registrar shall be responsible for ascertaining whether any purchase or transfer complies with the registration provisions of or exemptions from the Securities Act or other state, federal securities laws that may be applicable; provided, however, that if a certificate is specifically required by the express terms of this Section 2.06 to be delivered to a Trustee by a purchaser or required by the express terms of this Section 2.06 to be delivered to a Trustee by a purchaser or transferee of a Note, the Trustee shall be under a duty to receive and examine the same to determine whether it confirms on its face to the requirements of this Section 2.06 and shall promptly notify the party delivering the same if such transfer does not comply with such terms. SECTION 2.07. REPLACEMENT NOTES. If any mutilated Note is surrendered to the Trustee or the Company and the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, the Company shall issue and the Trustee, upon receipt of an Authentication Order, shall authenticate a replacement Note if the Trustee's requirements are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the 40 Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Company may charge for its expenses in replacing a Note. Every replacement Note is an additional obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. SECTION 2.08. OUTSTANDING NOTES. (a) The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note. (b) If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser. (c) If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue. (d) If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes shall be deemed to be no longer outstanding and shall cease to accrue interest. SECTION 2.09. TREASURY NOTES. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company, shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that a Responsible Officer of the Trustee knows are so owned shall be so disregarded. SECTION 2.10. TEMPORARY NOTES. Until certificates representing Notes are ready for delivery, the Company may prepare and the Trustee, upon receipt of an Authentication Order, shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of certificated Notes but may have variations that the Company considers appropriate for temporary Notes and as shall be reasonably acceptable to the Trustee. Without unreasonable delay, 41 the Company shall prepare and the Trustee shall authenticate definitive Notes in exchange for temporary Notes. Holders of temporary Notes shall be entitled to all of the benefits of this Indenture. SECTION 2.11. CANCELLATION. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall destroy canceled Notes (subject to the record retention requirement of the Exchange Act). Certification of the destruction of all canceled Notes shall be delivered to the Company. The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation. SECTION 2.12. DEFAULTED INTEREST. If the Company defaults in a payment of interest on the Notes, it shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment. The Company shall fix or cause to be fixed each such special record date and payment date, provided that no such special record date shall be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special record date, the Company (or, upon the written request of the Company, the Trustee in the name and at the expense of the Company) shall mail or cause to be mailed to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid. SECTION 2.13. CUSIP NUMBERS. The Company in issuing the Notes may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use CUSIP numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or the omission of such numbers. The Company will promptly notify the Trustee of any change in the CUSIP numbers. 42 ARTICLE III REDEMPTION AND PREPAYMENT SECTION 3.01. NOTICES TO NOTE TRUSTEE. If the Company elects to redeem Notes pursuant to the redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 45 days (unless a later date is agreed to by the Trustee at its option) but not more than 60 days before a redemption date, an Officer's Certificate setting forth (i) the clause of this Indenture pursuant to which the redemption shall occur, (ii) the redemption date, (iii) the principal amount of Notes to be redeemed, (iv) the redemption price and (v) the CUSIP numbers of the Notes to be redeemed. SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED. If less than all of the Notes are to be redeemed or purchased in an offer to purchase at any time, the Trustee shall select the Notes to be redeemed or purchased among the Holders of the Notes in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot or in accordance with any other method the Trustee considers fair and appropriate (subject in any case to the Applicable Procedures of the Depository, with respect to any Global Notes). In the event of partial redemption by lot, the particular Notes to be redeemed shall be selected, unless otherwise provided herein (or as otherwise provided in the Applicable Procedures, if applicable), not less than 30 nor more than 60 days prior to the redemption date by the Trustee from the outstanding Notes not previously called for redemption. The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount thereof to be redeemed. Notes and portions of Notes selected shall be in amounts of $1,000 or whole multiples of $1,000; except that if all of the Notes of a Holder are to be redeemed, the entire outstanding amount of Notes held by such Holder, even if not a multiple of $1,000, shall be redeemed. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. SECTION 3.03. NOTICE OF REDEMPTION. Subject to the provisions of Section 3.09 hereof, at least 30 days but not more than 60 days before a redemption date, the Company shall mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the Notes pursuant to Article VIII hereof or a satisfaction and discharge of this Indenture pursuant to Article XI. 43 The notice shall identify the Notes to be redeemed, including the CUSIP numbers, and shall state: (a) the redemption date; (b) as applicable, the redemption price pursuant to Section 3.07(c) or (d), as the case may be, or if the redemption is made pursuant to Section 3.07(b) a calculation of the redemption price; (c) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion shall be issued upon cancellation of the original Note; (d) the name and address of the Paying Agent; (e) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price; (f) that, unless the Company defaults in making such redemption payment and interest and Liquidated Damages, if any, on Notes called for redemption ceases to accrue on and after the redemption date; (g) the paragraph of the Notes or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and (h) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at its expense; provided, however, that the Company shall have delivered to the Trustee, at least 45 days, or such shorter period allowed by the Trustee, prior to the redemption date, an Officer's Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in this Section 3.03. SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional. SECTION 3.05. DEPOSIT OF REDEMPTION PRICE. One Business Day prior to the redemption date, the Company shall deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption price of and accrued interest on all Notes to be redeemed on that date. The Trustee or the 44 Paying Agent shall promptly return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption price of, and accrued interest on, all Notes to be redeemed. If the Company complies with the provisions of the preceding paragraph, on and after the redemption date, interest shall cease to accrue on the Notes or the portions of Notes called for redemption. If a Note is redeemed on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such record date. If any Note called for redemption shall not be so paid upon surrender for redemption because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof. SECTION 3.06. NOTES REDEEMED IN PART. Upon surrender of a Note that is redeemed in part, the Company shall issue and, upon the Company's written request, the Trustee shall authenticate for the Holder at the expense of the Company a new Note equal in principal amount to the unredeemed portion of the Note surrendered. SECTION 3.07. OPTIONAL REDEMPTION. (a) The Notes will be subject to redemption at any time at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' notice to Holders. (b) Prior to March 15, 2008, the Notes will be redeemable at a redemption price equal to 100% of the principal amount thereof plus the applicable Make Whole Premium, plus, to the extent not included in the Make Whole Premium, accrued and unpaid interest and Liquidated Damages, if any, to the date of redemption. For purposes of the foregoing, "MAKE WHOLE PREMIUM" means, with respect to a Note, an amount equal to the excess of (1) the present value of the remaining interest, premium, if any, and principal payments due on such Note as if such Note were redeemed on March 15, 2008, computed using a discount rate equal to the Treasury Rate plus 50 basis points, over (2) the outstanding principal amount of such Note. (c) On or after March 15, 2008, the Notes will be redeemable at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest thereon and Liquidated Damages, if any, thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on March 15 of the years indicated below: 45
Year Percentage 2008............................................... 103.438% 2009............................................... 102.292% 2010............................................... 101.146% 2011 and thereafter................................ 100.000%
(d) Notwithstanding the provisions of clauses (a), (b) and (c) of this Section 3.07, during the first 36 months after the date hereof, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes issued under this Indenture at a redemption price of 106.875% of the principal amount thereof, plus accrued and unpaid interest thereon and Liquidated Damages, if any, to the redemption date, with the net cash proceeds of one or more Equity Offerings; provided that at least 65% of the aggregate principal amount of Notes issued remain outstanding immediately after the occurrence of such redemption (excluding Notes held by the Company and its Subsidiaries); and provided, further, that such redemption shall occur within 120 days of the date of the closing of such Equity Offering. (e) Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Section 3.01 through 3.06 hereof. SECTION 3.08. MANDATORY REDEMPTION. The Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes. SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS. In the event that, pursuant to Section 4.10 hereof, the Company shall be required to commence an offer to all Holders to purchase Notes (an "ASSET SALE OFFER"), it shall follow the procedures specified below. The Asset Sale Offer shall remain open for a period of 20 Business Days following its commencement and no longer, except to the extent that a longer period is required by applicable law (the "OFFER PERIOD"). No later than five Business Days after the termination of the Offer Period (the "PURCHASE DATE"), the Company shall purchase the principal amount of Notes required to be purchased pursuant to Section 4.10 hereof (the "OFFER AMOUNT") or, if less than the Offer Amount has been tendered, all Notes tendered in response to the Asset Sale Offer. Payment for any Notes so purchased shall be made in the same manner as interest payments are made. If the Purchase Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest shall be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest shall be payable to Holders who tender Notes pursuant to the Asset Sale Offer. 46 Upon the commencement of an Asset Sale Offer, the Company shall send, by first class mail, a notice to the Trustee and each of the Holders. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer. The Asset Sale Offer shall be made to all Holders. The notice, which shall govern the terms of the Asset Sale Offer, shall state: (i) that the Asset Sale Offer is being made pursuant to this Section 3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer shall remain open; (ii) the Offer Amount, the purchase price and the Purchase Date; (iii) that any Note not tendered or accepted for payment shall continue to accrete or accrue interest; (iv) that, unless the Company defaults in making such payment, any Note accepted for payment pursuant to the Asset Sale Offer shall cease to accrete or accrue interest after the Purchase Date; (v) that Holders electing to have a Note purchased pursuant to an Asset Sale Offer may only elect to have all of such Note purchased and may not elect to have only a portion of such Note purchased; (vi) that Holders electing to have a Note purchased pursuant to any Asset Sale Offer shall be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, or transfer by book-entry transfer, to the Company, a depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice at least three days before the Purchase Date; (vii) that Holders shall be entitled to withdraw their election if the Company, the depositary or the Paying Agent, as the case may be, receives, not later than the expiration of the Offer Period, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased; (viii) that, if the aggregate principal amount of Notes surrendered by Holders exceeds the Offer Amount, the Company shall select the Notes to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000, or integral multiples thereof, shall be purchased); and 47 (ix) that Holders whose Notes were purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer). On or before the Purchase Date, the Company shall, to the extent lawful, accept for payment, on a pro rata basis to the extent necessary, the Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer, or if less than the Offer Amount has been tendered, all Notes tendered, and shall deliver to the Trustee an Officer's Certificate stating that such Notes or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 3.09. The Company, the Depositary or the Paying Agent, as the case may be, shall promptly (but in any case not later than five days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Company for purchase, and the Company shall promptly issue a new Note, and the Trustee, upon written request from the Company shall authenticate and mail or deliver such new Note to such Holder, in a principal amount equal to any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company shall publicly announce the results of the Asset Sale Offer on the Purchase Date. Other than as specifically provided in this Section 3.09, any purchase pursuant to this Section 3.09 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof. ARTICLE IV COVENANTS SECTION 4.01. PAYMENT OF NOTES. The Company or a Subsidiary Guarantor shall pay or cause to be paid the principal of, premium, if any, and interest and Liquidated Damages, if any, on the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest and Liquidated Damages, if any, shall be considered paid on the date due if the Paying Agent, if other than the Company or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest and Liquidated Damages, if any, then due. The Company shall pay all Liquidated Damages, if any, in the same manner on the dates and in the amounts set forth in the Registration Rights Agreement. The Company or a Subsidiary Guarantor shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to the then applicable interest rate on the Notes to the extent lawful; it shall pay interest (including postpetition interest in any proceeding under any Bankruptcy 48 Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace period) at the same rate to the extent lawful. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY. The Company shall maintain in the Borough of Manhattan, the City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-Registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee. The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby designates the office of the Trustee located at 100 Wall Street, Suite 1600, New York, New York 10005 as one such office or agency of the Company in accordance with Section 2.03. SECTION 4.03. REPORTS. (a) Whether or not required by the rules and regulations of the SEC, so long as any Notes are outstanding, the Company shall furnish to the Holders of Notes (i) all quarterly and annual financial information that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Company were required to file such forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" that describes the financial condition and results of operations of the Company and its consolidated Subsidiaries (showing in reasonable detail, either on the face of the financial statements or in the footnotes thereto and in Management's Discussion and Analysis of Financial Condition and Results of Operations, the financial condition and results of operations of the Company and its Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries of the Company) and, with respect to the annual information only, a report 49 thereon by the Company's certified independent accountants and (ii) all current reports that would be required to be filed with the SEC on Form 8-K if the Company were required to file such reports, in each case, within the time periods specified in the SEC's rules and regulations. In addition, whether or not required by the rules and regulations of the SEC, the Company shall file a copy of all such information and reports with the SEC for public availability within the time periods specified in the SEC's rules and regulations (unless the SEC will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. The Company shall at all times comply with TIA Section 314(a). (b) For so long as any Notes remain outstanding, the Company and the Subsidiary Guarantors shall furnish to the Holders and to securities analysts and prospective investors, upon their request, the information, if any, required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. SECTION 4.04. COMPLIANCE CERTIFICATE. (a) The Company and each Subsidiary Guarantor (to the extent that such Subsidiary Guarantor is so required under the TIA) shall deliver to the Trustee, within 90 days after the end of each fiscal year, an Officer's Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto. (b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the year-end financial statements delivered pursuant to Section 4.03(a) above shall be accompanied by a written statement of the Company's independent public accountants (who shall be a firm of established national reputation) that in making the examination necessary for certification of such financial statements, nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Article IV or Article V hereof or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation. 50 (c) The Company shall, so long as any of the Notes are outstanding, deliver to the Trustee, as soon as possible, but in no event later than five days after any Officer becoming aware of (i) any Default or Event of Default, an Officer's Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto; and (ii) any Registration Default, an Officer's Certificate specifying such Registration Default, the date thereof and the action the Company is taking or proposing to take in respect thereof. SECTION 4.05. TAXES. The Company shall pay, and shall cause each of its Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders of the Notes. SECTION 4.06. STAY, EXTENSION AND USURY LAWS. The Company and each of the Subsidiary Guarantors covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company and each of the Subsidiary Guarantors (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted. SECTION 4.07. RESTRICTED PAYMENTS. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make any other payment or distribution on account of the Company's or any of its Restricted Subsidiaries' Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company or any of its Restricted Subsidiaries) or to the direct or indirect holders of the Company's or any of its Restricted Subsidiaries' Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company); (ii) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any direct or indirect parent of the Company; (iii) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated to the Notes or any Subsidiary Guarantee, except a payment of interest or principal at Stated Maturity or Indebtedness permitted under clause (vii) of Section 4.09 hereof or (iv) make any Restricted Investment (all such payments and other actions set forth in clauses (i) through 51 (iv) above being collectively referred to as "RESTRICTED PAYMENTS"), unless, at the time of and after giving effect to such Restricted Payment: (a) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; and (b) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.09 hereof; and (c) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Subsidiaries after the date of the May 1998 Senior Note Indenture (excluding Restricted Payments permitted by clauses (ii), (iii), (iv), (v), (ix), (x) and (xi) of the next succeeding paragraph), is less than the sum, without duplication, of (i) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing after the date of the May 1998 Senior Note Indenture to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit), plus (ii) 100% of the aggregate net cash proceeds received by the Company (including the fair market value of any Permitted Business or assets used or useful in a Permitted Business to the extent acquired in consideration of Equity Interests (other than Disqualified Stock) of the Company) since the date of the May 1998 Senior Note Indenture as a contribution to its common equity capital or from the issue or sale of Equity Interests of the Company (other than Disqualified Stock and other than sales to a Subsidiary of the Company) or from the issue or sale of convertible or exchangeable Disqualified Stock or convertible or exchangeable debt securities of the Company that have been converted into or exchanged for such Equity Interests (other than Disqualified Stock or debt securities sold to a Subsidiary of the Company), plus (iii) to the extent that any Restricted Investment that reduced the amount available for Restricted Payments under this clause (c) is sold for cash or otherwise liquidated or repaid for cash or any dividend or payment is received by the Company or a Restricted Subsidiary after the date of the date of the May 1998 Senior Note Indenture in respect of such Investment, 100% of the amount of Net Proceeds or dividends or payments (including the fair market value of property) received in connection therewith, up to the amount of the Restricted Investment that reduced this clause (c), as the case may be, and thereafter 50% of the amount of Net Proceeds or dividends or payments (including the fair market value of property) received in connection therewith (except that the amount of dividends or payments received in respect of payments of Obligations in respect of such Investments, such as taxes, shall not increase the amounts under this clause (c)), plus (iv) to the extent that any Unrestricted Subsidiary of the Company is redesignated as a Restricted Subsidiary after the date hereof, 100% of the fair market value of the Company's Investment in such Subsidiary as of the date of such redesignation up to the amount of the Restricted Investments made in 52 such Subsidiary that reduced this clause (c) and 50% of the excess of the fair market value of the Company's Investment in such Subsidiary as of the date of such redesignation over (1) the amount of the Restricted Investment that reduced this clause (c) and (2) any amounts that increased the amount available as a Permitted Investment; provided, further, that any amounts that increase this clause (c) shall not duplicatively increase amounts available as Permitted Investments. The foregoing provisions will not prohibit: (i) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of the this Indenture; (ii) the redemption, repurchase, retirement, defeasance or other acquisition of any subordinated Indebtedness or Equity Interests of the Company in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary of the Company) of, other Equity Interests of the Company (other than any Disqualified Stock); provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition shall be excluded from clause (c)(ii) of the preceding paragraph; (iii) the defeasance, redemption, repurchase or other acquisition of subordinated Indebtedness with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness; (iv) dividends or distributions by a Restricted Subsidiary of the Company so long as, in the case of any dividend or distribution payable on or in respect of any class or series of securities issued by a Restricted Subsidiary, the Company or a Restricted Subsidiary receives at least its pro rata share of such dividend or distribution in accordance with its Equity Interests in such class or series of securities; (v) Investments in Unrestricted Subsidiaries having an aggregate fair market value not to exceed the amount, at the time of such Investment, substantially concurrently contributed in cash or Cash Equivalents to the common equity capital of the Company after the date hereof; provided that any such amount contributed shall be excluded from the calculation made pursuant to clause (c) above; (vi) the payment of dividends on the Company's Common Stock in an amount which, when combined with all such dividends, does not exceed $35.0 million in the aggregate in any calendar year; (vii) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of the Company or any Restricted 53 Subsidiary of the Company held by any present or former employee or director of the Company (or any of its Restricted Subsidiaries) pursuant to any management equity subscription agreement or stock option agreement or any other management or employee benefit plan in effect as of the date hereof; provided that (A) the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests shall not exceed $5.0 million in any twelve-month period (with unused amounts in any calendar year being carried over to succeeding calendar years subject to a maximum (without giving effect to the following proviso) of $10.0 million in any calendar year); provided further that such amount in any calendar year may be increased by an amount not to exceed (x) the cash proceeds from the sale of Equity Interests of the Company or a Restricted Subsidiary to members of management and directors of the Company and its Subsidiaries that occurs after the date hereof, plus (y) the cash proceeds of key- man life insurance policies received by the Company and its Restricted Subsidiaries after the date hereof, less (z) the amount of any Restricted Payments previously made pursuant to clauses (x) and (y) of this subparagraph (vii) and, provided further, that cancellation of Indebtedness owing to the Company from members of management of the Company or any of its Restricted Subsidiaries in connection with a repurchase of Equity Interests of the Company or a Restricted Subsidiary will not be deemed to constitute a Restricted Payment for purposes of this covenant or any other provision of this Indenture and (B) no Default or Event of Default shall have occurred and be continuing immediately after such transaction; (viii) repurchases of Equity Interests deemed to occur upon exercise of stock options if such Equity Interests represent a portion of the exercise price of such options; (ix) the repurchase, redemption or other acquisition or retirement for value of the Senior Subordinated Notes; (x) the repurchase, redemption or other acquisition or retirement for value of the 5% Subordinated Note; and (xi) other Restricted Payments not otherwise prohibited by this Section 4.07 in an aggregate amount not to exceed $25.0 million under this clause (xi). As of the date hereof, all of the Company's Subsidiaries, other than the Specified Subsidiaries, are Restricted Subsidiaries. The Board of Directors may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if such designation would not cause a Default. For purposes of making such determination, all outstanding Investments by the Company and its Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary so designated shall be deemed to be Restricted Payments at the time of such designation and will reduce the amount available for Restricted Payments under the first paragraph of this Section 4.07. All such outstanding Investments shall be 54 deemed to constitute Investments in an amount equal to the fair market value of such Investments at the time of such designation. Such designation will only be permitted if such Restricted Payment would be permitted at such time and if such Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. If, at any time, any Unrestricted Subsidiary would fail to meet the requirements in the definition of "UNRESTRICTED SUBSIDIARY" as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the Company as of such date (and, if such Indebtedness is not permitted to be incurred as of such date under Section 4.09 hereof, the Company shall be in default of such covenant). The Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if (i) such Indebtedness is permitted under Section 4.09 hereof, calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period, and (ii) no Default or Event of Default would be in existence following such designation. The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any noncash Restricted Payment or any adjustment made pursuant to paragraph (c) of this Section 4.07 shall be determined by the Board of Directors whose resolution with respect thereto shall be delivered to the Trustee, such determination to be based upon an opinion or appraisal issued by an accounting, appraisal or investment banking firm of national standing if such fair market value exceeds $25.0 million. Not later than the date of making any Restricted Payment, the Company shall deliver to the Trustee an Officer's Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this Section 4.07 were computed. If any Restricted Investment is sold or otherwise liquidated or repaid or any dividend or payment is received by the Company or a Restricted Subsidiary and such amounts may be credited to clause (c) above, then such amounts will be credited only to the extent of amounts not otherwise included in Consolidated Net Income and that do not otherwise increase the amount available as a Permitted Investment. SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary that is not a Subsidiary Guarantor to (i)(a) pay dividends or make any other 55 distributions to the Company or any of its Restricted Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest or participation in, or measured by, its profits, or (b) pay any indebtedness owed to the Company or any of its Restricted Subsidiaries, (ii) make loans or advances to the Company or any of its Restricted Subsidiaries or (iii) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries. However, the foregoing restrictions will not apply to encumbrances or restrictions existing under or by reason of (a) Existing Indebtedness as in effect on the date hereof, (b) the Credit Agreement, (c) this Indenture, the Notes and the Subsidiary Guarantees, (d) applicable law or any applicable rule, regulation or order, (e) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of this Indenture to be incurred, (f) customary non-assignment provisions in leases and other agreements entered into in the ordinary course of business and consistent with past practices, (g) purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the nature described in clause (iii) above on the property so acquired, (h) any agreement for the sale of a Restricted Subsidiary that restricts distributions by that Restricted Subsidiary pending its sale, (i) Permitted Refinancing Indebtedness, provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced, (j) secured Indebtedness otherwise permitted to be incurred pursuant to the provisions of Section 4.12 hereof that limits the right of the debtor to dispose of the assets securing such Indebtedness, (k) provisions with respect to the disposition or distribution of assets or property in joint venture agreements and other similar agreements entered into in the ordinary course of business, (l) restrictions on cash or other deposits or net worth imposed by customers or lessors under contracts or leases entered into in the ordinary course of business and (m) any encumbrances or restrictions imposed by any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of the contracts, instruments or obligations referred to in clauses (a) through (l) above, provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are, in the good faith judgment of the Company's Board of Directors, not materially more restrictive in the aggregate with respect to such dividend and other payment restrictions than those (considered as a whole) contained in the dividend or other payment restrictions prior to such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing. 56 SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK. The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "INCUR" ) any Indebtedness (including Acquired Debt) and the Company shall not issue any Disqualified Stock and shall not permit any of its Subsidiaries to issue any shares of preferred stock; provided, however, that the Company may incur Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock and the Company's Restricted Subsidiaries may incur Indebtedness or issue Disqualified Stock or preferred stock if the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock or preferred stock is issued would have been at least 2.0 to 1.0, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred, or the Disqualified Stock or preferred stock had been issued, as the case may be, at the beginning of such four-quarter period. The provisions of the first paragraph of this Section 4.09 will not prohibit the incurrence of any of the following items of Indebtedness (collectively, "PERMITTED DEBT"): (i) the incurrence by the Company of additional Indebtedness under any Credit Facilities (and the Guarantee thereof by the Subsidiary Guarantors); provided that the aggregate principal amount of all Indebtedness outstanding under this clause (i) after giving effect to such incurrence does not exceed an amount equal to $1,050.0 million; (ii) the incurrence by the Company and its Restricted Subsidiaries of the Existing Indebtedness; (iii) the incurrence by the Company and the Subsidiary Guarantors of Indebtedness represented by the notes issued pursuant to this offering, and any Exchange Notes issued in respect of notes outstanding under the indenture; (iv) (A) the Guarantee by the Company or any of the Subsidiary Guarantors of Indebtedness of the Company or a Restricted Subsidiary of the Company or (B) the incurrence of Indebtedness of a Restricted Subsidiary to the extent that such Indebtedness is supported by a letter of credit, in each case that was permitted to be incurred by another provision of this covenant; (v) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness (including Capital Lease Obligations) to finance the acquisition (including by direct purchase, by lease or indirectly by the acquisition of the Capital Stock of a Person that becomes a Restricted Subsidiary as a result 57 of such acquisition) or improvement of property (real or personal) in an aggregate principal amount which, when aggregated with the principal amount of all other Indebtedness then outstanding pursuant to this clause (v) and including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (v), does not exceed an amount equal to 5% of Total Assets at the time of such incurrence; (vi) the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace Indebtedness (other than intercompany Indebtedness) that was permitted by this Indenture to be incurred under the first paragraph hereof or clauses (ii), (iii) or (vi) of this paragraph; (vii) the incurrence by the Company or any of its Restricted Subsidiaries of intercompany Indebtedness between or among the Company and any of its Restricted Subsidiaries; provided, however, that (i) if the Company is the obligor on such Indebtedness, such Indebtedness is expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Notes and (ii)(A) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Restricted Subsidiary thereof and (B) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Restricted Subsidiary thereof shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (vii); (viii) the incurrence by the Company or any of its Restricted Subsidiaries of Hedging Obligations that are incurred in the ordinary course of business for the purpose of risk management and not for the purpose of speculation; (ix) the incurrence by the Company's Unrestricted Subsidiaries of Non-Recourse Debt, provided, however, that if any such Indebtedness ceases to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be deemed to constitute an incurrence of Indebtedness by a Restricted Subsidiary of the Company that was not permitted by this clause (ix), and the issuance of preferred stock by Unrestricted Subsidiaries; (x) the incurrence of Indebtedness solely in respect of performance, surety and similar bonds and letters of credit or completion or performance guarantees (including, without limitation, performance guarantees pursuant to coal supply agreements or equipment leases), to the extent that such incurrence does not result in the incurrence of any obligation for the payment of borrowed money to others; 58 (xi) the incurrence of Indebtedness arising from agreements of the Company or a Restricted Subsidiary providing for indemnification, adjustment of purchase price or similar obligations, in each case, incurred or assumed in connection with the disposition of any business, assets or a Subsidiary; provided, however that (i) such Indebtedness is not reflected on the balance sheet of the Company or any Restricted Subsidiary (contingent obligations referred to in a footnote to financial statements and not otherwise reflected on the balance sheet will not be deemed to be reflected on such balance sheet for purposes of this clause (i)) and (ii) the maximum assumable liability in respect of all such Indebtedness shall at no time exceed the gross proceeds including noncash proceeds (the fair market value of such noncash proceeds being measured at the time received and without giving effect to any subsequent changes in value) actually received by the Company and its Restricted Subsidiaries in connection with such disposition; and (xii) the incurrence by the Company or any of its Restricted Subsidiaries of additional Indebtedness in an aggregate principal amount (or accreted value, as applicable) at any time outstanding, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (xii), not to exceed $350.0 million. The Company shall not incur, and shall not permit its Restricted Subsidiaries to incur, any Indebtedness (including Permitted Debt) that is contractually subordinated in right of payment to any other Indebtedness of the Company or such Restricted Subsidiary unless such Indebtedness is also contractually subordinated in right of payment to the Notes, or the Subsidiary Guarantees, as the case may be, on substantially identical terms; provided, however, that no Indebtedness of the Company or any Restricted Subsidiary shall be deemed to be contractually subordinated in right of payment to any other Indebtedness of the Company or any Restricted Subsidiary solely by virtue of being unsecured. For purposes of determining compliance with this Section 4.09, in the event that an item of proposed Indebtedness, including Acquired Debt, meets the criteria of more than one of the categories of Permitted Debt described in clauses (i) through (xii) above or is entitled to be incurred pursuant to the first paragraph of this Section 4.09, the Company shall, in its sole discretion, classify or reclassify such item of Indebtedness in any manner that complies with this Section 4.09. For the purposes of determining compliance with any dollar-denominated restriction on the incurrence of Indebtedness denominated in a foreign currency, the dollar-equivalent principal amount of such Indebtedness incurred pursuant thereto shall be calculated based on the relevant currency exchange rate in effect on the date that such Indebtedness was incurred. Accrual of interest, accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, and the payment of dividends on Disqualified Stock in the form of additional shares of the same class of Disqualified Stock will not be deemed to be an incurrence of Indebtedness or an 59 S issuance of Disqualified Stock for purposes of this Section 4.09; provided, in each such case, that the amount thereof is included in Fixed Charges of the Company as accrued. SECTION 4.10. ASSET SALES. The Company will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the fair market value as determined in good faith by the Company of the assets or Equity Interests issued or sold or otherwise disposed of and (ii) at least 75% of the consideration therefore received by the Company or such Subsidiary is in the form of cash, Cash Equivalents or Marketable Securities; provided that the following amounts shall be deemed to be cash: (w) any liabilities (as shown on the Company's or such Restricted Subsidiary's most recent balance sheet), of the Company or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any guarantee thereof) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases the Company or such Restricted Subsidiary from further liability, (x) any securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are converted by the Company or such Restricted Subsidiary into cash within 180 days following the closing of such Asset Sale (to the extent of the cash received), (y) any Designated Noncash Consideration received by the Company or any of its Restricted Subsidiaries in such Asset Sale; provided that the aggregate fair market value (as determined above) of such Designated Noncash Consideration, taken together with the fair market value at the time of receipt of all other Designated Noncash Consideration received pursuant to this clause (y) less the amount of Net Proceeds previously realized in cash from prior Designated Noncash Consideration is less than 10% of Total Assets at the time of the receipt of such Designated Noncash Consideration (with the fair market value of each item of Designated Noncash Consideration being measured at the time received and without giving effect to subsequent changes in value) and (z) Additional Assets received in an exchange of assets transaction. Within 360 days after the receipt of any cash Net Proceeds from an Asset Sale, the Company or such Restricted Subsidiary, at its option, may apply such cash Net Proceeds, at its option, (a) to repay Indebtedness of the Company or any Restricted Subsidiary that is not subordinated in right of payment to Indebtedness under a Credit Facility, (b) to the acquisition of a majority of the assets of, or a majority of the Voting Stock of, another Permitted Business, the making of a capital expenditure or the acquisition of other assets or Investments that are used or useful in a Permitted Business or (c) to apply the cash Net Proceeds from such Asset Sale to an Investment in Additional Assets. Any cash Net Proceeds from Asset Sales that are not applied or invested as provided in the first sentence of this paragraph will be deemed to constitute "EXCESS PROCEEDS." When the aggregate amount of Excess Proceeds exceeds $20.0 million, the Company will be required to make an offer to all Holders of Notes and all holders of other Indebtedness that ranks equally with the Notes containing provisions similar to those set forth herein with respect to offers to purchase or redeem with the proceeds of 60 sales of assets (an "ASSET SALE OFFER") to purchase the maximum principal amount of Notes and such other Indebtedness that may be purchased out of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest thereon and Liquidated Damages thereon, if any, to the date of purchase, in accordance with the procedures set forth herein and such other Indebtedness. To the extent that any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company may use such Excess Proceeds for any purpose not otherwise prohibited by this Indenture. If the aggregate principal amount of Notes and such other Indebtedness tendered into such Asset Sale Offer surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and such other Indebtedness to be purchased on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds shall be reset at zero. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with each repurchase of notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the Asset Sale provisions of this Indenture, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Asset Sale provisions of the indenture by virtue of such conflict. SECTION 4.11. TRANSACTIONS WITH AFFILIATES. The Company will not, and will not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each, an "AFFILIATE TRANSACTION"), unless: (i) the Affiliate Transaction is on terms that are materially no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person; and (ii) the Company delivers to the Trustee: (a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $15.0 million, a resolution of the Board of Directors set forth in an Officer's Certificate certifying that such Affiliate Transaction complies with clause (i) above and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors; and 61 (b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $25.0 million, an opinion as to the fairness to the Holders of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing. Notwithstanding the foregoing, the following items shall not be deemed to be Affiliate Transactions: (i) any employment agreement or other compensation plan or arrangement for employees entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business and consistent with the past practice of the Company or such Restricted Subsidiary; (ii) transactions between or among the Company and/or its Restricted Subsidiaries, (iii) payment of reasonable fees to officers, directors, employees or consultants of the Company; (iv) Restricted Payments that are permitted by, and Investments that are not prohibited by, Section 4.07 hereof; (v) indemnification payments made to officers, directors and employees of the Company or any Restricted Subsidiary pursuant to charter, bylaw, statutory or contractual provisions; (vi) the payment of customary annual management, consulting and advisory fees and related expenses to Lehman Merchant Bank and its Affiliates; (vii) payments by the Company or any of its Restricted Subsidiaries to Lehman Merchant Bank and its Affiliates made for any financial advisory, financing, underwriting or placement services or in respect of other investment banking activities, including, without limitation, in connection with acquisitions or divestitures which payments are approved by a majority of the Board of Directors of the Company in good faith; (viii) the existence of, or the performance by the Company or any of its Restricted Subsidiaries of its obligations under the terms of, any stockholders' agreement (including any registration rights agreement or purchase agreement related thereto) to which it is a party as of the date hereof and any similar agreements which it may enter into thereafter; provided, however, that the existence of, or the performance by the Company or any of its Restricted Subsidiaries of obligations under any future amendment to any such existing agreement or under any similar agreement entered into after the date hereof shall only be permitted by this clause (viii) to the extent that the terms of any such amendment or new agreement are not otherwise disadvantageous to the Holders in any material respect; (ix) transactions with Unrestricted Subsidiaries, customers, clients, suppliers, joint venture partners or purchasers or sellers of goods or services, in each case in the ordinary course of business (including, without limitation, pursuant to joint venture agreements) and otherwise in compliance with the terms of this Indenture which are, in the aggregate (taking into account all the costs and benefits associated with such transactions), materially no less favorable to the Company or its Restricted Subsidiaries than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person, in the reasonable determination of the Board of Directors of the Company or the senior management thereof, or are on terms at least as favorable as might reasonably have been obtained at such time from an unaffiliated party; (x) guarantees of performance by the Company and its Restricted Subsidiaries of Unrestricted Subsidiaries in the ordinary course of business, except for guarantees of Obligations in respect of 62 borrowed money; and (xi) pledges of Equity Interests of Unrestricted Subsidiaries for the benefit of lenders of Unrestricted Subsidiaries. SECTION 4.12. LIENS. The Company will not and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or otherwise cause or suffer to exist or become effective with respect to any Indebtedness any Lien of any kind (other than Permitted Liens) upon any of their property or assets, now owned or hereafter acquired, unless all payments due under this Indenture and the notes are secured on an equal and ratable basis (or, if the Lien secured Indebtedness subordinated to the Notes or the Subsidiary Guarantees, then senior to the obligations so secured) with the obligations so secured until such time as such obligations are no longer secured by a Lien. SECTION 4.13. BUSINESS ACTIVITIES. The Company shall not, and shall not permit any Restricted Subsidiary to, engage in any business other than Permitted Businesses, except to such extent as would not be material to the Company and its Restricted Subsidiaries taken as a whole. SECTION 4.14. CORPORATE EXISTENCE. Subject to Article 5 hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect (i) its corporate existence, and the corporate, partnership or other existence of each of its Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company or any such Subsidiary and (ii) the rights (charter and statutory), licenses and franchises of the Company and its Subsidiaries; provided, however, that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of its Subsidiaries, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the Holders of the Notes. SECTION 4.15. OFFER TO REPURCHASE UPON CHANGE OF CONTROL TRIGGERING EVENT. (a) Upon the occurrence of a Change of Control Triggering Event, each Holder of Notes will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the offer described below (the "CHANGE OF CONTROL OFFER") at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase (the "CHANGE OF CONTROL PAYMENT"). Within ten days following any Change of Control Triggering Event, the Company will mail a notice to each holder describing the transaction or transactions that constitute the Change of Control Triggering Event and offering to repurchase notes on the date specified in such notice, which date shall be no earlier than 30 days and no later 63 than 60 days from the date such notice is mailed (the "CHANGE OF CONTROL PAYMENT DATE"), pursuant to the procedures required by the indenture and described in such notice. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the notes as a result of a Change of Control Triggering Event. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control Triggering Event provisions of the indenture, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Change of Control Triggering Event provisions of this Indenture by virtue of such conflict. (b) On the Change of Control Payment Date, the Company will, to the extent lawful, (1) accept for payment all notes or portions thereof properly tendered pursuant to the Change of Control Offer, (2) deposit with the paying agent an amount equal to the Change of Control Payment in respect of all notes or portions thereof so tendered and (3) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officer's Certificate stating the aggregate principal amount of notes or portions thereof being purchased by the Company. The Paying Agent will promptly mail to each Holder of Notes so tendered the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each holder a new note equal in principal amount to any unpurchased portion of the notes surrendered, if any; provided that each such new Note will be in a principal amount of $1,000 or an integral multiple thereof. Prior to complying with the provisions of this covenant, but in any event within 90 days following a Change of Control Triggering Event, the Company will either repay all outstanding Senior Debt other than the Notes or obtain the requisite consents, if any, under all agreements governing outstanding Senior Debt other than the Notes to permit the repurchase of Notes required by this Section 4.15. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. The Change of Control Triggering Event provisions described above shall be applicable whether or not any other provisions of this Indenture are applicable. (c) Notwithstanding anything to the contrary in this Section 4.15, the Company will not be required to make a Change of Control Offer upon a Change of Control Triggering Event if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth herein applicable to a Change of Control Offer made by the Company and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer or if the Company exercises its option to purchase the Notes. SECTION 4.16. ADDITIONAL SUBSIDIARY GUARANTEES. If the Company or any of its Domestic Subsidiaries shall acquire or create another Domestic Subsidiary after the date hereof and such Domestic Subsidiary provides a guarantee under the Credit Agreement, then such newly acquired or created Domestic 64 Subsidiary shall execute a supplemental indenture in form and substance substantially similar to Exhibit F hereto providing that such Domestic Subsidiary shall become a Subsidiary Guarantor under this Indenture, provided, however, this Section 4.16 shall not apply to any Domestic Subsidiary that has been properly designated as an Unrestricted Subsidiary in accordance with this Indenture for so long as it continues to constitute an Unrestricted Subsidiary. SECTION 4.17. PAYMENTS FOR CONSENTS. The Company shall not, and shall not permit, any of its Restricted Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder of any Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to be paid or is paid to all Holders of the Notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. SECTION 4.18. COVENANT TERMINATION. Upon the first date upon which the notes have an Investment Grade Rating from both of the Rating Agencies and no Default or Event of Default has occurred and is continuing under the indenture (the "INVESTMENT GRADE DATE"), the Company and its Restricted Subsidiaries will cease to be subject to the provisions of the indenture described below, which will be deemed to be terminated as of and from such date, under the following captions: Section 4.07; Section 4.08; Section 4.09; Section 4.10; Section 4.11; Section 4.13; and Section 4.17; provided, however, that the provisions of the indenture described below under the following captions will not be so terminated: Section 4.03; Section 4.12; Section 4.15; Section 4.16 (except as set forth in that Section); and Section 5.01 (except as set forth in that Section). 65 ARTICLE V SUCCESSORS SECTION 5.01. MERGER, CONSOLIDATION OR SALE OF ASSETS. The Company shall not consolidate or merge with or into (whether or not the Company is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to another corporation, Person or entity unless (i) the Company is the surviving corporation or the entity or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia; (ii) the entity or Person formed by or surviving any such consolidation or merger (if other than the Company) or the entity or Person to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made assumes all the obligations of the Company under the Registration Rights Agreement, the Notes and this Indenture pursuant to a supplemental Indenture in a form reasonably satisfactory to the Trustee; (iii) immediately after such transaction no Default or Event of Default exists; and (iv) except in the case of a merger of the Company with or into a Restricted Subsidiary of the Company, immediately after giving pro forma effect to such transaction, as if such transaction had occurred at the beginning of the applicable four-quarter period, (A) the entity surviving such consolidation or merger would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.09 or (B) the Fixed Charge Coverage Ratio for the Company or the entity or Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made would, immediately after giving pro forma effect thereto as if such transaction had occurred at the beginning of the applicable four-quarter period, would be not less than such Fixed Charge Coverage Ratio for the Company and its Restricted Subsidiaries immediately prior to such transaction; provided, however, that this clause (iv) shall no longer be applicable from and after any Investment Grade Date. The Company may not, directly or indirectly, lease all or substantially all of its properties or assets, in one or more related transactions, to any other Person. The provisions of this Section 5.01 will not be applicable to a sale, assignment, transfer, conveyance or other disposition of assets between or among the Company and its Restricted Subsidiaries. Notwithstanding the foregoing clause (iv), (i) any Restricted Subsidiary may consolidate with, merge into or transfer all or part of its properties and assets to the Company and (ii) the Company may merge with an Affiliate that has no significant assets or liabilities and was formed solely for the purpose of changing the jurisdiction of organization of the Company in another State of the United States or the form of organization of the Company so long as the amount of Indebtedness of the Company and its Restricted Subsidiaries is not increased thereby and provided that the successor 66 assumes all the obligations of the Company under the Registration Rights Agreement, the Notes and this Indenture pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee. SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED. Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Company in accordance with Section 5.01 hereof, the successor corporation formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, lease, conveyance or other disposition, the provisions of this Indenture referring to the "COMPANY" shall refer instead to the successor corporation and not to the Company), and may exercise every right and power of the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; provided, however, that the predecessor Company shall not be relieved from the obligation to pay the principal of and interest on the Notes except in the case of a sale of all of the Company's assets that meets the requirements of Section 5.01 hereof. ARTICLE VI DEFAULTS AND REMEDIES SECTION 6.01. EVENTS OF DEFAULT. An "EVENT OF DEFAULT" occurs if: (a) the Company defaults in the payment when due of interest on, or Liquidated Damages, if any, with respect to, the Notes and such default continues for a period of 30 days; (b) the Company defaults in the payment when due of principal of or premium, if any, on the Notes when the same becomes due and payable at maturity, upon redemption (including in connection with an offer to purchase) or otherwise; (c) the Company or any of its Subsidiaries fails to make the offer required or to purchase any of the Notes as required by Sections 4.10 and/or 4.15 hereof; (d) the Company fails to comply for 30 days after written notice to the Company by the Trustee with any of the provisions of Sections 4.07 or 4.09 hereof; or the Company fails to observe or perform any other covenant, representation, warranty or other agreement in this Indenture or the Notes for 60 days after written notice to the Company by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding voting as a single class; 67 (e) a default occurs under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of the Restricted Subsidiaries), whether such Indebtedness or guarantee now exists, or is created after the date of this Indenture, which default results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of such Indebtedness aggregates $50.0 million or more; (f) a final judgment or final judgments for the payment of money are entered by a court or courts of competent jurisdiction against the Company or any of its Subsidiaries that are Restricted Subsidiaries or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary and such judgment or judgments remain undischarged for a period (during which execution shall not be effectively stayed) of 60 days, provided that the aggregate of all such undischarged judgments exceeds $50.0 million; (g) the Company or any of its Significant Subsidiaries that are Restricted Subsidiaries or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary pursuant to or within the meaning of Bankruptcy Law: (i) commences a voluntary case, (ii) consents to the entry of an order for relief against it in an involuntary case, (iii) consents to the appointment of a custodian of it or for all or substantially all of its property, (iv) makes a general assignment for the benefit of its creditors, or (v) generally is not paying its debts as they become due; or (h) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company or any of its Significant Subsidiaries that are Restricted Subsidiaries or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary in an involuntary case; (ii) appoints a custodian of the Company or any of its Significant Subsidiaries that are Restricted Subsidiaries or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary or 68 for all or substantially all of the property of the Company or any of its Significant Subsidiaries that are Restricted Subsidiaries or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary; or (iii) orders the liquidation of the Company or any of its Significant Subsidiaries that are Restricted Subsidiaries or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary; and the order or decree remains unstayed and in effect for 60 consecutive days; or (i) except as permitted by this Indenture, any Subsidiary Guarantee is held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Subsidiary Guarantor, or any Person acting on behalf of any Subsidiary Guarantor, shall deny or disaffirm its obligations under such Subsidiary Guarantor's Subsidiary Guarantee. SECTION 6.02. ACCELERATION. If any Event of Default (other than an Event of Default specified in clause (g) or (h) of Section 6.01 hereof with respect to the Company, any Significant Subsidiary that is a Restricted Subsidiary or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary) occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately; provided, that so long as any Indebtedness permitted to be incurred pursuant to the Credit Agreement shall be outstanding, such acceleration shall not be effective until the earlier of (i) an acceleration of any such Indebtedness under the Credit Agreement or (ii) five Business Days after receipt by the Company of written notice of such acceleration of the Notes. Upon any such declaration, the Notes shall become due and payable immediately. Notwithstanding the foregoing, if an Event of Default specified in clause (g) or (h) of Section 6.01 hereof occurs with respect to the Company, any of its Significant Subsidiaries that are Restricted Subsidiaries or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary, all outstanding Notes shall be due and payable without further action or notice. The Holders of a majority in aggregate principal amount of the then outstanding Notes by written notice to the Trustee may on behalf of all of the Holders rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default (except nonpayment of principal, interest or premium that has become due solely because of the acceleration) have been cured or waived. SECTION 6.03. OTHER REMEDIES. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium, if any, and interest and Liquidated Damages, if any, on the Notes or to enforce the performance of any provision of the Notes or this Indenture. 69 The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. SECTION 6.04. WAIVER OF PAST DEFAULTS. Holders of not less than a majority in aggregate principal amount of the then outstanding Notes by written notice to the Trustee may on behalf of the Holders of all of the Notes waive an existing Default or Event of Default and its consequences hereunder, except a continuing Default or Event of Default in the payment of the principal of, premium and Liquidated Damages, if any, or interest on, the Notes; provided, however, that after any acceleration, but before a judgment or decree based on acceleration is obtained by the Trustee, the Holders of a majority in aggregate principal amount of the Notes then outstanding may rescind and annul such acceleration if all Events of Default, other than the nonpayment of accelerated principal, premium, Liquidated Damages, if any, or interest, have been cured or waived as provided in this Indenture. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. SECTION 6.05. CONTROL BY MAJORITY. Subject to Section 7.01, in case an Event of Default shall occur and be continuing, the Trustee will be under no obligation to exercise any of its rights or powers under this Indenture at the request or direction of any of the Holders, unless such Holders shall have offered to the Trustee reasonable indemnity against any loss, liability or expense. Subject to Section 7.07, the Holders of a majority in aggregate principal amount of the Notes then outstanding will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on the Trustee with respect to the Notes. Notwithstanding the foregoing, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders of Notes or that may involve the Trustee in personal liability. SECTION 6.06. LIMITATION ON SUITS. A Holder of a Note may pursue a remedy with respect to this Indenture or the Notes only if: (a) the Holder of a Note gives to the Trustee written notice of a continuing Event of Default; 70 (b) the Holders of at least 25% in principal amount of the then outstanding Notes make a written request to the Trustee to pursue the remedy; (c) such Holder of a Note or Holders of Notes offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; (d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and (e) during such 60-day period the Holders of a majority in principal amount of the then outstanding Notes do not give the Trustee a direction inconsistent with the request. (f) A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holder of a Note. SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT. Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal, premium and Liquidated Damages, if any, and interest on the Note, on or after the respective due dates expressed in the Note (including in connection with an offer to purchase), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.08. COLLECTION SUIT BY TRUSTEE. If an Event of Default specified in Section 6.01(a) or (b) occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as Trustee of an express trust against the Company for the whole amount of principal of, premium and Liquidated Damages, if any, and interest remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Notes allowed in any judicial proceedings relative to the Company (or any other obligor upon the Notes), 71 its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 6.10. PRIORITIES. If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order: First: to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection; Second: to Holders of Notes for amounts due and unpaid on the Notes for principal, premium and Liquidated Damages, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium and Liquidated Damages, if any, and interest, respectively; and Third: to the Company or to such party as a court of competent jurisdiction shall direct. The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10. SECTION 6.11. UNDERTAKING FOR COSTS. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due 72 regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes. ARTICLE VII TRUSTEE SECTION 7.01. DUTIES OF TRUSTEE. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (b) Except during the continuance of an Event of Default: (i) the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) of this Section; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof. 73 (d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), (c), (e) and (f) of this Section and Section 7.02. (e) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee shall be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. SECTION 7.02. RIGHTS OF TRUSTEE. (a) The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officer's Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officer's Certificate or Opinion of Counsel. The Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture. (e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company or any Subsidiary Guarantor shall be sufficient if signed by an Officer of the Company or the Subsidiary Guarantor issuing such demand, request or notice. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction. 74 (g) The Trustee shall not be deemed to have notice of any Default or Event of Default or Registration Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a Default or Event of Default or Registration Default is received by a Responsible Officer of the Trustee at the Corporate Trust Office of the Trustee, and such notice references the specific Default or Event of Default or Registration Default, the Notes and this Indenture. (h) Any permissive right of power granted to the Trustee shall not be construed to be a duty. (i) The Trustee shall not be required to give any bond or surety in respect of the performance of its power and duties hereunder. (j) The Trustee shall have no duty to inquire as to the performance of the Company's covenants herein. SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as Trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof. SECTION 7.04. TRUSTEE'S DISCLAIMER. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication. SECTION 7.05. NOTICE OF DEFAULTS. If a Default or Event of Default occurs and is continuing and if it is known to a Responsible Officer of the Trustee, the Trustee shall mail to Holders of Notes a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium, if any, or interest on any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders of the Notes. 75 SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES. Within 60 days after each March 15 beginning with the March 15 following the date of this Indenture, and for so long as Notes remain outstanding, the Trustee shall mail to the Holders of the Notes a brief report dated as of such reporting date that complies with TIA Section 313(a) (but if no event described in TIA Section 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA Section 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA Section 313(c). A copy of each report at the time of its mailing to the Holders of Notes shall be mailed to the Company and filed with the SEC and each stock exchange on which the Notes are listed in accordance with TIA Section 313(d). The Company shall promptly notify the Trustee when the Notes are listed on any stock exchange. SECTION 7.07. COMPENSATION AND INDEMNITY. The Company and the Subsidiary Guarantors shall pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder. The Trustee's compensation shall not be limited by any law on compensation of a Trustee of an express trust. The Company and the Subsidiary Guarantors shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Company and the Subsidiary Guarantors shall indemnify the Trustee against, and shall hold the Trustee harmless for and from, any and all losses, liabilities or expenses (including reasonable attorneys fees and expenses) incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Company and the Subsidiary Guarantors (including this Section 7.07) and defending itself against any claim (whether asserted by the Company and the Subsidiary Guarantors or any Holder or any other person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its negligence or bad faith. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company and the Subsidiary Guarantors of its obligations hereunder. The Company shall defend the claim and the Trustee shall reasonably cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld. 76 The obligations of the Company and the Subsidiary Guarantors under this Section 7.07 are joint and several and shall survive the satisfaction and discharge of this Indenture. To secure the Company's and the Subsidiary Guarantors' payment obligations in this Section, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien shall survive the satisfaction and discharge of this Indenture. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(g) or (h) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law. The Trustee shall comply with the provisions of TIA Section 313(b)(2) to the extent applicable. SECTION 7.08. REPLACEMENT OF TRUSTEE. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section 7.08. The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of Notes of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if: (i) the Trustee fails to comply with Section 7.10 hereof; (ii) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (iii) a custodian or public officer takes charge of the Trustee or its property; or (iv) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, or the Holders of Notes 77 of at least 10% in principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee, after written request by any Holder of a Note who has been a Holder of a Note for at least six months, fails to comply with Section 7.10, such Holder of a Note may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders of the Notes. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee. SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee. SECTION 7.10. ELIGIBILITY; DISQUALIFICATION. There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate Trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $100.0 million as set forth in its most recent published annual report of condition. This Indenture shall always have a Trustee who satisfies the requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to TIA Section 310(b). SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. The Trustee is subject to TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. 78 ARTICLE VIII LEGAL DEFEASANCE AND COVENANT DEFEASANCE SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE. The Company may, at the option of its Board of Directors evidenced by a resolution set forth in an Officer's Certificate, at any time, elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon compliance with the conditions set forth below in this Article VIII. SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Company shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from its obligations with respect to all outstanding Notes and to have each Subsidiary Guarantor's obligation discharged with respect to its Subsidiary Guarantee on the date the conditions set forth below are satisfied (hereinafter, "LEGAL DEFEASANCE"). For this purpose, Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in (a) and (b) below, and to have satisfied all its other obligations under such Notes and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of outstanding Notes to receive solely from the trust fund described in Section 8.04 hereof, and as more fully set forth in such Section, payments in respect of the principal of, premium, if any, and interest and Liquidated Damages, if any, on such Notes when such payments are due, (b) the Company's obligations with respect to such Notes under Article II and Section 4.02 hereof, (c) the rights, powers, trusts, duties, liabilities and immunities of the Trustee hereunder and the Company's and the Subsidiary Guarantors' obligations in connection therewith and (d) this Article VIII. Subject to compliance with this Article VIII, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof. SECTION 8.03. COVENANT DEFEASANCE. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Company and each Subsidiary Guarantor shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from their obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16 and 4.17 hereof with respect to the outstanding Notes on and after the date the conditions set forth in Section 8.04 are satisfied (hereinafter, "COVENANT DEFEASANCE"), and the Notes shall thereafter be deemed not "outstanding" for the 79 purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, the Company and each Subsidiary Guarantor may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03 hereof, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(d) through 6.01(f) hereof shall not constitute Events of Default. SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE. The following shall be the conditions to the application of either Section 8.02 or 8.03 hereof to the outstanding Notes: In order to exercise either Legal Defeasance or Covenant Defeasance: (a) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of the Notes, cash in U.S. dollars, non-callable Government Securities, or a combination of cash in U.S. dollars and non-callable Government Securities, in amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, interest or premium, if any, and Liquidated Damages, if any, on the outstanding Notes on the stated maturity or on the applicable redemption date, as the case may be, and the Company must specify whether the Notes are being defeased to maturity or to a particular redemption date; (b) in the case of an election under Section 8.02 hereof, the Company shall deliver to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee (subject to customary exceptions and exclusions) confirming that (a) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (b) since the date of this Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel will confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (c) in the case of an election under Section 8.03 hereof, the Company shall deliver to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee (subject to customary exceptions and exclusions) confirming that the Holders of the 80 outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (d) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the incurrence of Indebtedness all or a portion of the proceeds of which will be used to defease the Notes pursuant to this Article VIII concurrently with such incurrence) or insofar as Sections 6.01(g) or 6.01(h) hereof are concerned, at any time in the period ending on the effective date of such defeasance; (e) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (f) the Company shall have delivered to the Trustee, at or prior to the effective date of such defeasance, an opinion of counsel to the effect that, assuming no intervening bankruptcy of the Company between the date of deposit and the 91st day following the deposit and assuming that no Holder is an "insider" of the Company under applicable bankruptcy law, after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (g) the Company shall have delivered to the Trustee an Officer's Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over any other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company; and (h) the Company shall have delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with. SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS. Subject to Section 8.06 hereof, all money and non-callable Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying Trustee, collectively for purposes of this Section 8.05, the "TRUSTEE") pursuant to Section 8.04 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums 81 due and to become due thereon in respect of principal, premium, if any, and interest, but such money need not be segregated from other funds except to the extent required by law. The Company and the Subsidiary Guarantors shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Securities deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes. Anything in this Article VII to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request of the Company any money or non-callable Government Securities held by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(a) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. SECTION 8.06. REPAYMENT TO COMPANY. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium, if any, or interest on any Note and remaining unclaimed for two years after such principal, and premium, if any, or interest has become due and payable shall be paid to the Company on its request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter, as a secured creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as Trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company. SECTION 8.07. REINSTATEMENT. If the Trustee or Paying Agent is unable to apply any United States dollars or non-callable Government Securities in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; provided, however, that, if the Company makes any payment of principal of, premium, if any, or interest on any Note following 82 the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent. ARTICLE IX AMENDMENT, SUPPLEMENT AND WAIVER SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES. Notwithstanding Section 9.02 of this Indenture, the Company, the Subsidiary Guarantors and the Trustee may amend or supplement this Indenture, the Subsidiary Guarantees or the Notes without the consent of any Holder of a Note: (a) to cure any ambiguity, defect or inconsistency; (b) provide for the assumption by a successor corporation of the obligations of the Company under this Indenture in the case of a merger or consolidation or sale of all or substantially all of the Company's assets; (c) provide for uncertificated Notes in addition to or in place of certificated Notes; (d) make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights hereunder of any such Holder; (e) make any change to comply with any requirement of the SEC in order to effect or maintain the qualification of this Indenture under the TIA; (f) to provide for the issuance of Additional Notes in accordance with the limitations set forth in this Indenture as of the date hereof; or (g) to allow any Subsidiary Guarantor to execute a supplemental Indenture and/or a Subsidiary Guarantee with respect to the Notes. Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Company and the Subsidiary Guarantors in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture that affects its own rights, duties, liabilities or immunities under this Indenture or otherwise. 83 SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES. Except as provided below in this Section 9.02, the Company and the Trustee may amend or supplement this Indenture (including Sections 3.09, 4.10 and 4.15 hereof), the Subsidiary Guarantees and the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Notes, including Additional Notes, if any, then outstanding voting as a single class (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (except a continuing Default or Event of Default in the payment of interest, premium, Liquidated Damages, if any, or the principal of, the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the Notes, including Additional Notes, if any, then outstanding voting as a single class (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes). Section 2.08 hereof shall determine which Notes are considered to be "outstanding" for purposes of this Section 9.02. Upon the request of the Company accompanied by a Board Resolution of the Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Company in the execution of such amended or supplemental Indenture unless such amended or supplemental Indenture directly affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental Indenture. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Persons entitled to consent to any indenture supplemental hereto. If a record date is fixed, the Holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to consent to such supplemental indenture, whether or not such Holders remain Holders after such record date; provided, that unless such consent shall have become effective by virtue of the requisite percentage having been obtained prior to the date which is 90 days after such record date, any such consent previously given shall automatically and without further action by any Holder be cancelled and of no further effect. It shall not be necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section becomes effective, the Company shall mail to the Holders to such Holder's address appearing in the Security Register a notice briefly describing the amendment, supplement or waiver. 84 Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount of the Notes, including Additional Notes, if any, then outstanding voting as a single class may waive compliance in a particular instance by the Company with any provision of this Indenture or the Notes. Without the consent of each Holder, an amendment or waiver under this Section 9.02 may not (with respect to any Notes held by a non-consenting Holder): (a) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver; (b) reduce the principal of or change the fixed maturity of any Note or alter the provisions with respect to the redemption of the Notes except as provided above with respect to Sections 3.09, 4.10 and 4.15 hereof; (c) make any change in the provisions of Sections 4.10 or 4.15; (d) reduce the rate of or change the time for payment of interest on any Note; (e) waive a Default or Event of Default in the payment of principal of, or interest or premium, or Liquidated Damages, if any, on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the then outstanding Notes and a waiver of the payment default that resulted from such acceleration); (f) make any Note payable in money other than that stated in the Note; (g) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of, or interest or premium or Liquidated Damages, if any, on the Notes; (h) waive a redemption payment with respect to any Note (other than a payment required by Section 4.10 or 4.15 hereof); (i) release any Subsidiary Guarantor from any of its obligations under its Subsidiary Guarantee or this Indenture, except in accordance with the terms hereof; or (j) make any change in the preceding amendment and waiver provisions. SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT. Every amendment or supplement to this Indenture or the Notes shall be set forth in an amended or supplemental Indenture that complies with the TIA as then in effect. 85 SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder. SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES. The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall, upon receipt of an Authentication Order, authenticate new Notes that reflect the amendment, supplement or waiver. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver. SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC. The Trustee shall sign any amended or supplemental Indenture authorized pursuant to this Article IX if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company may not sign an amendment or supplemental Indenture until the Board of Directors approves it. In executing any amended or supplemental Indenture, the Trustee shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully protected in relying upon an Officer's Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental Indenture is authorized or permitted by this Indenture and that such amended or supplemental indenture is the legal, valid and binding obligations of the Company enforceable against it in accordance with its terms, subject to customary exceptions and that such amended or supplemental indenture complies with the provisions hereof (including Section 9.03). ARTICLE X SUBSIDIARY GUARANTEES SECTION 10.01. GUARANTEE. Subject to this Article X, each of the Subsidiary Guarantors hereby, jointly and severally, unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Notes or the obligations of the 86 Company hereunder or thereunder, that: (a) the principal of and interest on the 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 Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (b) in case of any extension of time of payment or renewal of any 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 Subsidiary Guarantors shall be jointly and severally obligated to pay the same immediately. Each Subsidiary Guarantor agrees that this is a guarantee of payment and not a guarantee of collection. Each Subsidiary Guarantor hereby agrees that its obligations with regard to this Subsidiary Guarantee shall be joint and several, unconditional, irrespective of the validity or enforceability of the Notes or the obligations of the Company under this Indenture, the absence of any action to enforce the same, the recovery of any judgment against the Company or any other obligor with respect to this Indenture, the Notes or the Obligations of the Company under this Indenture or the Notes, any action to enforce the same or any other circumstances (other than complete performance) which might otherwise constitute a legal or equitable discharge or defense of a Subsidiary Guarantor. Each Subsidiary Guarantor further, to the extent permitted by law, waives and relinquishes all claims, rights and remedies accorded by applicable law to guarantors and agrees not to assert or take advantage of any such claims, rights or remedies, including but not limited to: (a) any right to require any of the Trustee, the Holders or the Company (each a "BENEFITED PARTY"), as a condition of payment or performance by such Subsidiary Guarantor, to (1) proceed against the Company, any other guarantor (including any other Subsidiary Guarantor) of the Obligations under the Subsidiary Guarantees or any other Person, (2) proceed against or exhaust any security held from the Company, any such other guarantor or any other Person, (3) proceed against or have resort to any balance of any deposit account or credit on the books of any Benefited Party in favor of the Company or any other Person, or (4) pursue any other remedy in the power of any Benefited Party whatsoever; (b) any defense arising by reason of the incapacity, lack of authority or any disability or other defense of the Company including any defense based on or arising out of the lack of validity or the unenforceability of the Obligations under the Subsidiary Guarantees or any agreement or instrument relating thereto or by reason of the cessation of the liability of the Company from any cause other than payment in full of the Obligations under the Subsidiary Guarantees; (c) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (d) any defense based upon any Benefited Party's errors or omissions in the administration of the Obligations under the Subsidiary Guarantees, except behavior which amounts to bad faith; (e)(1) any principles or provisions of law, statutory or otherwise, which are or might be in conflict with the terms of the Subsidiary Guarantees 87 and any legal or equitable discharge of such Subsidiary Guarantor's obligations hereunder, (2) the benefit of any statute of limitations affecting such Subsidiary Guarantor's liability hereunder or the enforcement hereof, (3) any rights to set-offs, recoupments and counterclaims and (4) promptness, diligence and any requirement that any Benefited Party protect, secure, perfect or insure any security interest or lien or any property subject thereto; (f) notices, demands, presentations, protests, notices of protest, notices of dishonor and notices of any action or inaction, including acceptance of the Subsidiary Guarantees, notices of default under the Notes or any agreement or instrument related thereto, notices of any renewal, extension or modification of the Obligations under the Subsidiary Guarantees or any agreement related thereto, and notices of any extension of credit to the Company and any right to consent to any thereof; (g) to the extent permitted under applicable law, the benefits of any "One Action" rule and (h) any defenses or benefits that may be derived from or afforded by law which limit the liability of or exonerate guarantors or sureties, or which may conflict with the terms of the Subsidiary Guarantees. Each Subsidiary Guarantor hereby covenants that its Subsidiary Guarantee shall not be discharged except by complete performance of the obligations contained in its Subsidiary Guarantee and this Indenture. If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Subsidiary Guarantors or any custodian, trustee, liquidator or other similar official acting in relation to either the Company or the Subsidiary Guarantors, any amount paid by either to the Trustee or such Holder, this Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Subsidiary Guarantor agrees that it 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. Each Subsidiary Guarantor further agrees that, as between the Subsidiary Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Section 6.02 hereof for the purposes of this 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 Section 6.02 hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by the Subsidiary Guarantors for the purpose of this Subsidiary Guarantee. The Subsidiary Guarantors shall have the right to seek contribution from any non-paying Subsidiary Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Subsidiary Guarantee. SECTION 10.02. LIMITATION ON SUBSIDIARY GUARANTOR LIABILITY. Each Subsidiary Guarantor, and by its acceptance of Notes, each Holder, hereby confirms that it is the intention of all such parties that the Subsidiary Guarantee of such Subsidiary Guarantor not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to any Subsidiary 88 Guarantee. To effectuate the foregoing intention, the Trustee, the Holders and the Subsidiary Guarantors hereby irrevocably agree that the obligations of such Subsidiary Guarantor under its Subsidiary Guarantee and this Article X shall be limited to the maximum amount as will, after giving effect to such maximum amount and all other contingent and fixed liabilities of such Subsidiary Guarantor that are relevant under such laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Subsidiary Guarantor in respect of the obligations of such other Subsidiary Guarantor under this Article X, result in the obligations of such Subsidiary Guarantor under its Subsidiary Guarantee not constituting a fraudulent transfer or conveyance. SECTION 10.03. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEE. To evidence its Subsidiary Guarantee set forth in Section 10.01, each Subsidiary Guarantor hereby agrees that a notation of such Subsidiary Guarantee substantially in the form included in Exhibit E shall be endorsed by an Officer of such Subsidiary Guarantor on each Note authenticated and delivered by the Trustee and that this Indenture shall be executed on behalf of such Subsidiary Guarantor by its President or one of its Vice Presidents. Each Subsidiary Guarantor hereby agrees that its Subsidiary Guarantee set forth in Section 10.01 shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Subsidiary Guarantee. If an Officer whose signature is on this Indenture or on the Subsidiary Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Subsidiary Guarantee is endorsed, the Subsidiary Guarantee shall be valid nevertheless. The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Subsidiary Guarantee set forth in this Indenture on behalf of the Subsidiary Guarantors. In the event that the Company creates or acquires any new Subsidiaries subsequent to the date of this Indenture, if required by Section 4.16 hereof, the Company shall cause such Subsidiaries to execute supplemental Indentures to this Indenture and Subsidiary Guarantees in accordance with Section 4.16 hereof and this Article X, to the extent applicable. SECTION 10.04. SUBSIDIARY GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS. No Subsidiary Guarantor may consolidate with or merge with or into (whether or not such Subsidiary Guarantor is the surviving Person) another Person whether or not affiliated with such Subsidiary Guarantor unless: 89 (a) subject to Section 10.05 hereof, the Person formed by or surviving any such consolidation or merger (if other than a Subsidiary Guarantor or the Company) unconditionally assumes all the obligations of such Subsidiary Guarantor, pursuant to a supplemental Indenture in form and substance reasonably satisfactory to the Trustee, under the Notes, this Indenture, the Registration Rights Agreement and the Subsidiary Guarantee on the terms set forth herein or therein; (b) immediately after giving effect to such transaction, no Default or Event of Default exists; and (c) the Company would be permitted, immediately after giving effect to such transaction, to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof. In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor Person, by supplemental Indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Subsidiary Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of Indenture to be performed by the Subsidiary Guarantor, such successor Person shall succeed to and be substituted for the Subsidiary Guarantor with the same effect as if it had been named herein as a Subsidiary Guarantor. Such successor Person thereupon may cause to be signed any or all of the Subsidiary Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Subsidiary Guarantees so issued shall in all respects have the same legal rank and benefit under this Indenture as the Subsidiary Guarantees theretofore and thereafter issued in accordance with the terms of this Indenture as though all of such Subsidiary Guarantees had been issued at the date of the execution hereof. Except as set forth in Articles IV and V hereof, and notwithstanding clauses (a) and (b) above, nothing contained in this Indenture or in any of the Notes shall prevent any consolidation or merger of a Subsidiary Guarantor with or into the Company or another Subsidiary Guarantor, or shall prevent any sale or conveyance of the property of a Subsidiary Guarantor as an entirety or substantially as an entirety to the Company or another Subsidiary Guarantor. SECTION 10.05. RELEASES FOLLOWING SALE OF ASSETS. In the event of (a) a sale or other disposition of all of the assets of any Subsidiary Guarantor, by way of merger, consolidation or otherwise, (b) a sale or other disposition of all of the capital stock of any Subsidiary Guarantor or (c) the designation of a Subsidiary Guarantor as an Unrestricted Subsidiary in accordance with the terms of the Indenture, then such Subsidiary 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 Subsidiary 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 Subsidiary Guarantor) will 90 be released and relieved of any obligations under its Subsidiary Guarantee; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of this Indenture, including without limitation Section 4.10 hereof. Upon delivery by the Company to the 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 applicable provisions of this Indenture, including without limitation Section 4.10 hereof, the Trustee shall execute any documents reasonably required in order to evidence the release of any Subsidiary Guarantor from its obligations under its Subsidiary Guarantee. Any Subsidiary Guarantor not released from its obligations under its Subsidiary Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Subsidiary Guarantor under this Indenture as provided in this Article X. ARTICLE XI SATISFACTION AND DISCHARGE SECTION 11.01. SATISFACTION AND DISCHARGE. This Indenture will be discharged and will cease to be of further effect as to all Notes issued hereunder, when: (a) either: (i) all Notes that have been authenticated (except lost, stolen or destroyed Notes that have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust and thereafter repaid to the Company) have been delivered to the Trustee for cancellation; or (ii) all Notes that have not been delivered to the Trustee for cancellation have become due and payable by reason of the mailing of a notice of redemption or otherwise or will become due and payable within one year and the Company has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars and non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient without consideration of any reinvestment of interest, to pay and discharge the entire indebtedness on the Notes not delivered to the Trustee for cancellation for principal, interest, premium, if any, and accrued interest and Liquidated Damages, if any, to the date of maturity or redemption; (b) no Default or Event of Default shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under, any other 91 instrument to which the Company or any Subsidiary Guarantor is a party or by which the Company or any Subsidiary Guarantor is bound; (c) the Company has paid or caused to be paid all sums payable by it under this Indenture; and (d) the Company has delivered irrevocable instructions to the Trustee under this Indenture to apply the deposited money and/or non-callable Government Securities toward the payment of the Notes at maturity or the redemption date, as the case may be. The Company shall deliver an Officer's Certificate and an Opinion of Counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied. SECTION 11.02. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS. Subject to Section 11.03 hereof, all money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 11.02, the "Trustee") pursuant to Section 11.01 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium, if any, and interest and Additional Interest, if any, but such money need not be segregated from other funds except to the extent required by law. SECTION 11.03. REPAYMENT TO COMPANY. Subject to applicable laws, any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium, if any, or interest or Liquidated Damages, if any, on any Note and remaining unclaimed for two years after such principal, and premium, if any, or interest or Liquidated Damages, if any, has become due and payable shall be paid to the Company on its request or (if then held by the Company) shall be discharged from such trust; and the Holder shall thereafter look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in The New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company. 92 ARTICLE XII MISCELLANEOUS SECTION 12.01. TRUST INDENTURE ACT CONTROLS. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA Section 318(c), the imposed duties shall control. SECTION 12.02. NOTICES. Any notice or communication by the Company, any Subsidiary Guarantor or the Trustee to the others is duly given if in writing and delivered in Person or mailed by first class mail (registered or certified, return receipt requested), telex, telecopier or overnight air courier guaranteeing next day delivery, to the others' address. If to the Company and/or any Subsidiary Guarantor: Peabody Energy Corporation 701 Market Street St. Louis, Missouri 63101-1826 Telecopier No.: (314) 342-3419 Attention: Chief Legal Officer With a copy to: Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017-3954 75 Telecopier No. (212) 455-2502 Attention: Rise B. Norman, Esq. If to the Trustee: US Bank National Association Goodwin Square 225 Asylum Street, 23rd Floor EX-CT-SS Hartford, Connecticut 06103 Telecopier No.: (860) 241-6881 Attention: Philip J. Kane, Jr. 93 The Company, any Subsidiary Guarantor or the Trustee, by notice to the others may designate additional or different addresses for subsequent notices or communications. All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery; provided, however, that any notice of communication to the Trustee shall not be deemed to be received by it until actually received by it at the Corporate Trust Office of the Trustee. Any notice or communication to a Holder shall be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Person described in TIA Section 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication addressed to a party other than the Trustee is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time. SECTION 12.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES. Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (a) an Officer's Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and (b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.05 94 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied. SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions of TIA Section 314(e) and shall include: (i) a statement that the Person making such certificate or opinion has read such covenant or condition; (ii) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (iii) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been satisfied; and (iv) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied. SECTION 12.06. RULES BY TRUSTEE AND AGENTS. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. SECTION 12.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS. No past, present or future director, officer, employee, incorporator or stockholder of the Company or any Subsidiary Guarantor or Person controlling such Persons, as such, shall have any liability for any obligations of the Company or of the Subsidiary Guarantors or any Person controlling such Person under the Notes, this Indenture, the Subsidiary Guarantees or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the SEC that such a waiver is against public policy. 95 SECTION 12.08. GOVERNING LAW. THE LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES. SECTION 12.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This Indenture may not be used to interpret any other Indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person. Any such Indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 12.10. SUCCESSORS. All agreements of the Company in this Indenture and the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 12.11. SEVERABILITY. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 12.12. COUNTERPART ORIGINALS. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. SECTION 12.13. TABLE OF CONTENTS, HEADINGS, ETC. The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof. [Signatures on following page] 96 SIGNATURES Dated as of March 21, 2003 ISSUER: Peabody Energy Corporation By: _______________________________ Name: Steven F. Schaab Title: Vice President and Treasurer GUARANTORS AFFINITY MINING COMPANY ARID OPERATIONS INC. BEAVER DAM COAL COMPANY BIG RIDGE, INC. BIG SKY COAL COMPANY BLACK WALNUT COAL COMPANY BLUEGRASS COAL COMPANY CABALLO COAL COMPANY CHARLES COAL COMPANY CLEATON COAL COMPANY COAL PROPERTIES CORP. COOK MOUNTAIN COAL COMPANY COTTONWOOD LAND COMPANY CYPRUS CREEK LAND COMPANY CYPRUS CREEK LAND RESOURCES, LLC EACC CAMPS, INC. EASTERN ASSOCIATED COAL CORP. EASTERN ROYALTY CORP. GALLO FINANCE COMPANY GOLD FIELDS CHILE, S.A. GOLD FIELDS MINING CORPORATION GOLD FIELDS OPERATING CO.-ORTIZ GRAND EAGLE MINING, INC. HAYDEN GULCH TERMINAL, INC. HIGHLAND MINING COMPANY HILLSIDE MINING COMPANY INDEPENDENCE MATERIAL HANDLING COMPANY INTERIOR HOLDINGS CORP. JAMES RIVER COAL TERMINAL COMPANY JARRELL'S BRANCH COAL COMPANY JUNIPER COAL COMPANY KAYENTA MOBILE HOME PARK, INC. LOGAN FORK COAL COMPANY MARTINKA COAL COMPANY MIDCO SUPPLY AND EQUIPMENT CORPORATION MOUNTAIN VIEW COAL COMPANY MUSTANG ENERGY COMPANY, L.L.C. NORTH PAGE COAL CORP. OHIO COUNTY COAL COMPANY PEABODY AMERICA, INC. PEABODY ARCHVEYOR, L.L.C. PEABODY COALSALES COMPANY PEABODY COALTRADE, INC. PEABODY COAL COMPANY PEABODY DEVELOPMENT COMPANY PEABODY DEVELOPMENT LAND HOLDINGS, LLC PEABODY ENERGY GENERATION HOLDING COMPANY PEABODY ENERGY INVESTMENTS, INC. PEABODY ENERGY SOLUTIONS, INC. PEABODY HOLDING COMPANY, INC. PEABODY NATURAL GAS, LLC PEABODY RECREATIONAL LANDS, L.L.C. PEABODY SOUTHWESTERN COAL COMPANY PEABODY TERMINALS, INC. PEABODY VENEZUELA COAL CORP. PEABODY-WATERSIDE DEVELOPMENT, L.L.C. PEABODY WESTERN COAL COMPANY PINE RIDGE COAL COMPANY POND CREEK LAND RESOURCES, LLC POND RIVER LAND COMPANY PORCUPINE PRODUCTION, LLC PORCUPINE TRANSPORTATION, LLC POWDER RIVER COAL COMPANY PRAIRIE STATE GENERATING COMPANY, LLC RIO ESCONDIDO COAL CORP. RIVER'S EDGE MINING, INC. RIVERVIEW TERMINAL COMPANY SENECA COAL COMPANY SENTRY MINING COMPANY SNOWBERRY LAND COMPANY STAR LAKE ENERGY COMPANY, L.L.C. 98 STERLING SMOKELESS COAL COMPANY THOROUGHBRED, L.L.C. THOROUGHBRED GENERATING COMPANY, LLC THOROUGHBRED MINING COMPANY, L.L.C. YANKEETOWN DOCK CORPORATION By: _________________________________________ Name: Steven F. Schaab Title: Vice President COLONY BAY COAL COMPANY By: Eastern Associated Coal Corp., its general partner By: _________________________________________ Name: Steven F. Schaab Title: Vice President By: Charles Coal Company, its general partner By: _________________________________________ Name: Steven F. Schaab Title: Vice President PATRIOT COAL COMPANY, L.P. By: Bluegrass Coal Company, its managing partner By: _________________________________________ Name: Steven F. Schaab Title: Vice President 99 PEABODY NATURAL RESOURCES COMPANY By: Gold Fields Mining Corporation, its general partner By: _________________________________________ Name: Steven F. Schaab Title: Vice President By: Peabody America, Inc., its general partner By: _________________________________________ Name: Steven F. Schaab Title: Vice President 100 TRUSTEE US Bank National Association By: _________________________________________ Name: Philip J. Kane, Jr. Title: Vice President 101 EXHIBIT A (Face of Note) 6 7/8% SENIOR NOTES DUE 2013 CUSIP ______________ NO. ___ $_____________ PEABODY ENERGY CORPORATION promises to pay to CEDE & CO., INC. or registered assigns, the principal sum of _________________ Dollars ($______________) on_____, 2013. Interest Payment Dates: March 15 and September 15, commencing September 15, 2003. Record Dates: March 1 and September 1. Dated: ______________, 2003. IN WITNESS WHEREOF, the Issuer has caused this Note to be signed manually or by facsimile by its duly authorized officer. PEABODY ENERGY CORPORATION By: _________________________________________ Name: Title This is one of the [Global] Notes referred to in the within-mentioned Indenture: US Bank National Association as Trustee By: _____________________________ Authorized Signatory Dated _____________, 20__ 2 (Back of Note) 6 7/8% Notes due 2013 [Insert the Global Note Legend, if applicable, pursuant to the terms of the Indenture] [Insert the Private Placement Legend, if applicable, pursuant to the terms of the Indenture] Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. INTEREST. Peabody Energy Corporation, a Delaware corporation (the "COMPANY"), promises to pay interest on the principal amount of this Note at 6 7/8% per annum from March 21, 2003 until maturity and shall pay the Liquidated Damages payable pursuant to Section 5 of the Registration Rights Agreement referred to below. The Company will pay interest and Liquidated Damages semi-annually on March 15 and September 15 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "INTEREST PAYMENT DATE"). Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided, further, that the first Interest Payment Date shall be September 15, 2003. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate that is 1% per annum in excess of the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. METHOD OF PAYMENT. The Company will pay interest on the Notes (except defaulted interest) and Liquidated Damages to the Persons who are registered Holders of Notes at the close of business on the March 1 or September 1 next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. The Notes will be payable as to principal, premium and Liquidated Damages, if any, and interest at the office or agency of the Company maintained for such purpose within or without the City and State of New York, or, at the option of the Company, payment of interest and Liquidated Damages may be made by check mailed to the Holders at their addresses set forth in the register of Holders, and provided that payment by wire transfer of immediately available funds will be required with respect to principal of and interest, premium and Liquidated Damages on, all Global Notes and all other Notes the Holders of which shall have provided wire transfer 3 instructions to the Company or the Paying Agent. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. PAYING AGENT AND REGISTRAR. Initially, US Bank National Association, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. 4. INDENTURE. The Company issued the Notes under an Indenture dated as of March 21, 2003 ("INDENTURE") between the Company and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. The Notes are obligations of the Company. 5. The principal on the Notes shall be due and payable on March 15, 2013. 6. OPTIONAL REDEMPTION. (a) The Notes will be subject to redemption at any time at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' notice to Holders in the manner provided in the Indenture. (b) Prior to March 15, 2008, the Notes will be redeemable at a redemption price equal to 100% of the principal amount thereof plus the applicable Make Whole Premium, plus, to the extent not included in the Make Whole Premium, accrued and unpaid interest and Liquidated Damages, if any, to the date of redemption. For purposes of the foregoing, "MAKE WHOLE PREMIUM" means, with respect to a Note, an amount equal to the excess of (1) the present value of the remaining interest, premium, if any, and principal payments due on such Note as if such Note were redeemed on March 15, 2008, computed using a discount rate equal to the Treasury Rate plus 50 basis points, over (2) the outstanding principal amount of such Note. (c) On or after March 15, 2008, the Notes are redeemable at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on March 15 of the years indicated below: 4
Year Percentage - ---- ---------- 2008 103.438% 2009 102.292% 2010 101.146% 2011 and thereafter 100.000%
(d) Notwithstanding the provisions of clauses (a), (b) and (c) of this Paragraph 6, during the first 36 months after the date hereof, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes issued under this Indenture at a redemption price of 106.875% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the redemption date, with the net cash proceeds of one or more Equity Offerings; provided that at least 65% of the aggregate principal amount of Notes issued remain outstanding immediately after the occurrence of such redemption (excluding Notes held by the Company and its Subsidiaries); and provided, further, that such redemption shall occur within 120 days of the date of the closing of such Equity Offering. (e) Any redemption pursuant to this Paragraph 6 shall be made pursuant to the provisions of Article III of the Indenture. 7. MANDATORY REDEMPTION. The Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes. 8. REPURCHASE AT OPTION OF HOLDER. (a) If there is a Change of Control Triggering Event, the Company shall be required to make an offer (a "CHANGE OF CONTROL Offer") to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at a purchase price equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase (the "CHANGE OF CONTROL PAYMENT"). Within 10 days following any Change of Control Triggering Event, the Company shall mail a notice to each Holder setting forth the procedures governing the Change of Control Offer as required by the Indenture. (b) If the Company or a Subsidiary consummates any Asset Sales, within five days of each date on which the aggregate amount of Excess Proceeds exceeds $20.0 million, the Company shall commence an offer to all Holders of Notes (as "ASSET SALE OFFER") pursuant to Section 3.09 of the Indenture to purchase the maximum principal amount of Notes (including any Additional Notes) that may be purchased out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date fixed for the closing of such offer, in accordance with the procedures set forth in the Indenture. To the extent that the aggregate amount of Notes (including any Additional Notes) tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company (or such Subsidiary) may use such deficiency for general 5 corporate purposes. If the aggregate principal amount of Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro rata basis. Holders of Notes that are the subject of an offer to purchase will receive an Asset Sale Offer from the Company prior to any related purchase date and may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes. 9. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date interest ceases to accrue on Notes or portions thereof called for redemption. 10. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Company need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date. 11. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes. 12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the Indenture, the Subsidiary Guarantees or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes and Additional Notes, if any, voting as a single class, and any existing default or compliance with any provision of the Indenture, the Subsidiary Guarantees or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes and Additional Notes, if any, voting as a single class. Without the consent of any Holder of a Note, the Indenture, the Subsidiary Guarantees or the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's or Subsidiary Guarantor's obligations to Holders of the Notes in case of a merger or consolidation, to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act, to provide for the Issuance of Additional Notes in accordance with the limitations set forth in the Indenture, or to 6 allow any Subsidiary Guarantor to execute a supplemental Indenture to the Indenture and/or a Subsidiary Guarantee with respect to the Notes. 13. DEFAULTS AND REMEDIES. An "EVENT OF DEFAULT" occurs if: (i) the Company defaults in the payment when due of interest on, or Liquidated Damages, if any, with respect to, the Notes and such default continues for a period of 30 days; (ii) the Company defaults in the payment when due of principal of or premium, if any, on the Notes when the same becomes due and payable at maturity, upon redemption (including in connection with an offer to purchase) or otherwise; (iii) the Company or any of its Subsidiaries fails to make the offer required or to purchase any of the Notes as required by Sections 4.10 and/or 4.15 of the Indenture; (iv) the Company fails to comply for 30 days after written notice to the Company by the Trustee with any of the provisions of Sections 4.07 or 4.09 of the Indenture; or the Company fails to observe or perform any other covenant, representation, warranty or other agreement in the Indenture or the Notes for 60 days after written notice to the Company by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding voting as a single class; (v) a default occurs under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of the Restricted Subsidiaries), whether such Indebtedness or guarantee now exists, or is created after the date hereof, which default results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of such Indebtedness aggregates $50.0 million or more; (vi) a final judgment or final judgments for the payment of money are entered by a court or courts of competent jurisdiction against the Company or any of its Subsidiaries that are Restricted Subsidiaries or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary and such judgment or judgments remain undischarged for a period (during which execution shall not be effectively stayed) of 60 days, provided that the aggregate of all such undischarged judgments exceeds $50.0 million; (vii) certain events of bankruptcy or insolvency occur with respect to the Company or any of its Significant Subsidiaries that are Restricted Subsidiaries or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary pursuant to or within the meaning of Bankruptcy Law; or (viii) except as permitted by the Indenture, any Subsidiary Guarantee is held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Subsidiary Guarantor, or any Person acting on behalf of any Subsidiary Guarantor, shall deny or disaffirm its obligations under such Subsidiary Guarantor's Subsidiary Guarantee. If any Event of Default (other than an Event of Default specified in clause (g) or (h) of Section 6.01 of the Indenture with respect to the Company, any Significant Subsidiary that is a Restricted Subsidiary or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary) occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately; provided, that so long as any Indebtedness permitted to be incurred pursuant to the Credit Agreement shall be outstanding, such acceleration shall not be effective until the earlier of (i) an acceleration 7 under any such Indebtedness under the Credit Agreement or (ii) five Business Days after receipt by the Company of written notice of such acceleration of the Notes. Upon any such declaration, the Notes shall become due and payable immediately. Notwithstanding the foregoing, if an Event of Default specified in clause (g) or (h) of Section 6.01 of the Indenture occurs with respect to the Company, any of its Significant Subsidiaries that are Restricted Subsidiaries or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary, all outstanding Notes shall be due and payable without further action or notice. The Holders of a majority in aggregate principal amount of the then outstanding Notes by written notice to the Trustee may on behalf of all of the Holders rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default (except nonpayment of principal, interest or premium that has become due solely because of the acceleration) have been cured or waived. 14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee. 15. NO RECOURSE AGAINST OTHERS. A director, officer, employee, incorporator or stockholder, of the Company, as such, shall not have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. 16. AUTHENTICATION. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 17. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. 8 The Company will furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: Peabody Energy Corporation 701 Market Street St. Louis, Missouri 63101-1826 Attention: Chief Legal Officer 9 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to ________________________________________________________________________________ (Insert assignee's soc. sec. or other tax I.D. no.) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint ________________________________________________________ as agent to transfer this Note on the books of the Issuer. The agent may substitute another to act for him. ________________________________________________________________________________ Date: ______________ Your Signature: _____________________________ (Sign exactly as your name appears on the face of this Note) Signature Guarantee: ________________________ Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended 10 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or 4.15 of the Indenture, check the box below: [ ] Section 4.10 [ ] Section 4.15 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you elect to have purchased: $________ Date:________________ Your Signature: _____________________________ (Sign exactly as your name appears on the face of this Note) Tax Identification No: ______________________ _____________________________________________ Signature Guarantee: Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:
Principal Amount of Amount of Amount Signature of decrease in increase in of this Global authorized Principal Principal Note following signatory of Date of Amount of this Amount of this such decrease Trustee or Exchange Global Note Global Note (or increase) Note Custodian - -------- -------------- -------------- --------------- --------------
12 EXHIBIT B FORM OF CERTIFICATE OF TRANSFER Peabody Energy Corporation 701 Market Street St. Louis, Missouri 63101-1826 US Bank National Association Goodwin Square 225 Asylum Street, 23rd Floor EX-CT-SS Hartford, Connecticut 06103 Attn: Philip J. Kane, Jr Vice President Re: 6 7/8% Notes due 2013 Reference is hereby made to the Indenture, dated as of March 21, 2003 (the "INDENTURE"), among Peabody Energy Corporation, as issuer (the "ISSUER"), the Subsidiary Guarantors party thereto and US Bank National Association, as Trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. ___________________, (the "TRANSFEROR") owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in the principal amount of $___________ in such Note[s] or interests (the "TRANSFER"), to ___________________________ (the "TRANSFEREE"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that: [CHECK ALL THAT APPLY] 1. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE 144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "SECURITIES ACT"), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Note is being transferred to a Person that the Transferor reasonably believed and believes is purchasing the beneficial interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 2. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE REGULATION S GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO REGULATION S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a Person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(a) of Regulation S under the Securities Act, (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Distribution Compliance Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Global Note, the Temporary Regulation S Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 3. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE IAI GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO ANY PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one): (a) [ ] such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act; or (b) [ ] such Transfer is being effected to the Issuer or a subsidiary thereof; 2 or (c) [ ] such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act; or (d) [ ] such Transfer is being effected to an Institutional Accredited Investor and pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor hereby further certifies that it has not engaged in any general solicitation within the meaning of Regulation D under the Securities Act and the Transfer complies with the transfer restrictions applicable to beneficial interests in a Restricted Global Note or Restricted Definitive Notes and the requirements of the exemption claimed, which certification is supported by (1) a certificate executed by the Transferee in the form of Exhibit D to the Indenture and (2) if such Transfer is in respect of a principal amount of Notes at the time of transfer of less than $250,000, an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification), to the effect that such Transfer is in compliance with the Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the IAI Global Note and/or the Definitive Notes and in the Indenture and the Securities Act. 4. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE. (a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (b) [ ] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state 3 of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (c) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture. This certificate and the statements contained herein are made for your benefit and the benefit of the Issuer. ____________________________________ [Insert Name of Transferor] By: ________________________________ Name: Title: Dated: _____________________________ 4 ANNEX A TO CERTIFICATE OF TRANSFER 1. The Transferor owns and proposes to transfer the following: [CHECK ONE OF (a) OR (b)] (a) [ ] a beneficial interest in the: (i) [ ] 144A Global Note (CUSIP _________), or (ii) [ ] Regulation S Global Note (CUSIP _________), or (iii) [ ] IAI Global Note (CUSIP ________); or (b) [ ] a Restricted Definitive Note. 2. After the Transfer the Transferee will hold: [CHECK ONE] (a) [ ] a beneficial interest in the: (i) [ ] 144A Global Note (CUSIP ________), or (ii) [ ] Regulation S Global Note (CUSIP ________), or (iii) [ ] IAI Global Note (CUSIP ________); or (iv) [ ] Unrestricted Global Note (CUSIP ________); or (b) [ ] a Restricted Definitive Note; or (c) [ ] an Unrestricted Definitive Note, in accordance with the terms of the Indenture. 5 EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE Peabody Energy Corporation 701 Market Street St. Louis, Missouri 63101-1826 US Bank National Association Goodwin Square 225 Asylum Street, 23rd Floor EX-CT-SS Hartford, Connecticut 06103 Attn: Philip J. Kane, Jr Vice President Re: 6 7/8% Notes due 2013 Reference is hereby made to the Indenture, dated as of March 21, 2003 (the "INDENTURE"), among Peabody Energy Corporation, as issuer (the "COMPANY"), the Subsidiary Guarantors and US Bank National Association, as Trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. _____________ (the "Owner") owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the principal amount of $_____________ in such Note[s] or interests (the "Exchange"). In connection with the Exchange, the Owner hereby certifies that: 1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL NOTE (a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Note and pursuant to and in accordance with the United States Securities Act of 1933, as amended (the "SECURITIES ACT"), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (b) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Note and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (c) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (d) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. 2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES (a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on 2 transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and in the Indenture and the Securities Act. (b) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's Restricted Definitive Note for a beneficial interest in the [CIRCLE ONE] 144A Global Note, Regulation S Global Note, IAI Global Note with an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Definitive Note and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act. 3 This certificate and the statements contained herein are made for your benefit and the benefit of the Company. ____________________________________ [Insert Name of Transferor] By: ________________________________ Name: Title: Dated: _____________________________ 4 EXHIBIT D FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Peabody Energy Corporation 701 Market Street St. Louis, Missouri 63101-1826 US Bank National Association Goodwin Square 225 Asylum Street, 23rd Floor EX-CT-SS Hartford, Connecticut 06103 Attn: Philip J. Kane, Jr Vice President Re: 6 7/8% Notes due 2013 Reference is hereby made to the Indenture, dated as of March 21, 2003 (the "INDENTURE"), among Peabody Energy Corporation, as issuer (the "COMPANY"), the Subsidiary Guarantors and US Bank National Association, as Trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. In connection with our proposed purchase of $____________ aggregate principal amount of: (a) [ ] a beneficial interest in a Global Note, or (b) [ ] a Definitive Note, we confirm that: 1. We understand that any subsequent transfer of the Notes or any interest therein is subject to certain restrictions and conditions set forth in the Indenture and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes or any interest therein except in compliance with, such restrictions and conditions and the United States Securities Act of 1933, as amended (the "SECURITIES ACT"). 2. We understand that the offer and sale of the Notes have not been registered under the Securities Act, and that the Notes and any interest therein may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell the Notes or any interest therein, we will do so only (A) to the Company or any subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to a "QUALIFIED INSTITUTIONAL BUYER" (as defined therein), (c) to an institutional "ACCREDITED INVESTOR" (as defined below) that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you and to the Company a signed letter substantially in the form of this letter and, if such transfer is in respect of a principal amount of Notes, at the time of transfer of less than $250,000, an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such transfer is in compliance with the Securities Act, (D) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the provisions of Rule 144(k) under the Securities Act or (F) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any person purchasing the Definitive Note or beneficial interest in a Global Note from us in a transaction meeting the requirements of clauses (A) through (E) of this paragraph a notice advising such purchaser that resales thereof are restricted as stated herein. 3. We understand that, on any proposed resale of the Notes or beneficial interest therein, we will be required to furnish to you and the Company such certifications, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Notes purchased by us will bear a legend to the foregoing effect. We further understand that any subsequent transfer by us of the Notes or beneficial interest therein acquired by us must be effected through one of the Placement Agents. 4. We are an institutional "ACCREDITED INVESTOR" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 5. We are acquiring the Notes or beneficial interest therein purchased by us for our own account or for one or more accounts (each of which is an institutional "ACCREDITED INVESTOR") as to each of which we exercise sole investment discretion. 2 You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. ____________________________________ [Insert Name of Transferor] By: ________________________________ Name: Title: Dated: __________________ 3 EXHIBIT E FORM OF NOTATION OF SUBSIDIARY GUARANTEE For value received, each Subsidiary Guarantor (which term includes any successor Person under the Indenture) has, jointly and severally, unconditionally guaranteed, to the extent set forth in the Indenture and subject to the provisions in the Indenture dated as of March 21, 2003 (the "INDENTURE") among Peabody Energy Corporation, the Subsidiary Guarantors listed on Schedule I thereto and US Bank National Association, as Trustee (the "TRUSTEE"), (a) the due and punctual payment of the principal of, premium, if any, and interest on the Notes (as defined in the Indenture), whether at maturity, by acceleration, redemption or otherwise, the due and punctual payment of interest on overdue principal and premium, and, to the extent permitted by law, interest, and the due and punctual performance of all other obligations of the Company to the Holders or the Trustee all in accordance with the terms of the Indenture and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the 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. The obligations of the Subsidiary Guarantors to the Holders of Notes and to the Trustee pursuant to the Subsidiary Guarantee and the Indenture are expressly set forth in Article X of the Indenture and reference is hereby made to the Indenture for the precise terms of the Subsidiary Guarantee. Each Holder of a Note, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee, on behalf of such Holder, to take such action as may be necessary or appropriate to effectuate the subordination as provided in the Indenture and (c) appoints the Trustee attorney-in-fact of such Holder for such purpose; provided, however, that the Indebtedness evidenced by this Subsidiary Guarantee shall cease to be so subordinated and subject in right of payment upon any defeasance of this Note in accordance with the provisions of the Indenture. AFFINITY MINING COMPANY ARID OPERATIONS INC. BEAVER DAM COAL COMPANY BIG RIDGE, INC. BIG SKY COAL COMPANY BLACK WALNUT COAL COMPANY BLUEGRASS COAL COMPANY CABALLO COAL COMPANY CHARLES COAL COMPANY CLEATON COAL COMPANY COAL PROPERTIES CORP. COOK MOUNTAIN COAL COMPANY COTTONWOOD LAND COMPANY CYPRUS CREEK LAND COMPANY CYPRUS CREEK LAND RESOURCES, LLC EACC CAMPS, INC. EASTERN ASSOCIATED COAL CORP. EASTERN ROYALTY CORP. GALLO FINANCE COMPANY GOLD FIELDS CHILE, S.A. GOLD FIELDS MINING CORPORATION GOLD FIELDS OPERATING CO.-ORTIZ GRAND EAGLE MINING, INC. HAYDEN GULCH TERMINAL, INC. HIGHLAND MINING COMPANY HILLSIDE MINING COMPANY INDEPENDENCE MATERIAL HANDLING COMPANY INTERIOR HOLDINGS CORP. JAMES RIVER COAL TERMINAL COMPANY JARRELL'S BRANCH COAL COMPANY JUNIPER COAL COMPANY KAYENTA MOBILE HOME PARK, INC. LOGAN FORK COAL COMPANY MARTINKA COAL COMPANY MIDCO SUPPLY AND EQUIPMENT CORPORATION MOUNTAIN VIEW COAL COMPANY MUSTANG ENERGY COMPANY, L.L.C. NORTH PAGE COAL CORP. OHIO COUNTY COAL COMPANY PEABODY AMERICA, INC. PEABODY ARCHVEYOR, L.L.C. PEABODY COALSALES COMPANY PEABODY COALTRADE, INC. PEABODY COAL COMPANY PEABODY DEVELOPMENT COMPANY PEABODY DEVELOPMENT LAND HOLDINGS, LLC PEABODY ENERGY GENERATION HOLDING COMPANY PEABODY ENERGY INVESTMENTS, INC. PEABODY ENERGY SOLUTIONS, INC. PEABODY HOLDING COMPANY, INC. PEABODY NATURAL GAS, LLC PEABODY RECREATIONAL LANDS, L.L.C. PEABODY SOUTHWESTERN COAL COMPANY PEABODY TERMINALS, INC. PEABODY VENEZUELA COAL CORP. 2 PEABODY-WATERSIDE DEVELOPMENT, L.L.C. PEABODY WESTERN COAL COMPANY PINE RIDGE COAL COMPANY POND CREEK LAND RESOURCES, LLC POND RIVER LAND COMPANY PORCUPINE PRODUCTION, LLC PORCUPINE TRANSPORTATION, LLC POWDER RIVER COAL COMPANY PRAIRIE STATE GENERATING COMPANY, LLC RIO ESCONDIDO COAL CORP. RIVER'S EDGE MINING, INC. RIVERVIEW TERMINAL COMPANY SENECA COAL COMPANY SENTRY MINING COMPANY SNOWBERRY LAND COMPANY STAR LAKE ENERGY COMPANY, L.L.C. STERLING SMOKELESS COAL COMPANY THOROUGHBRED, L.L.C. THOROUGHBRED GENERATING COMPANY, LLC THOROUGHBRED MINING COMPANY, L.L.C. YANKEETOWN DOCK CORPORATION By: ________________________________ Name: Steven F. Schaab Title: Vice President COLONY BAY COAL COMPANY By: Eastern Associated Coal Corp., its general partner By: ________________________________ Name: Steven F. Schaab Title: Vice President By: Charles Coal Company, its general partner By: ________________________________ 3 Name: Steven F. Schaab Title: Vice President PATRIOT COAL COMPANY, L.P. By: Bluegrass Coal Company, its managing partner By: ________________________________ Name: Steven F. Schaab Title: Vice President PEABODY NATURAL RESOURCES COMPANY By: Gold Fields Mining Corporation, its general partner By: ________________________________ Name: Steven F. Schaab Title: Vice President By: Peabody America, Inc., its general partner By: ________________________________ Name: Steven F. Schaab Title: Vice President 4 EXHIBIT F FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY SUBSEQUENT SUBSIDIARY GUARANTORS Supplemental Indenture (this "SUPPLEMENTAL INDENTURE"), dated as of ________________, among __________________ (the "GUARANTEEING SUBSIDIARY"), a subsidiary of Peabody Energy Corporation (or its permitted successor), a Delaware corporation (the "COMPANY"), the Company, the other Subsidiary Guarantors (as defined in the Indenture referred to herein) and US Bank National Association, as Trustee under the Indenture referred to below (the "TRUSTEE"). W I T N E S S E T H WHEREAS, the Company has heretofore executed and delivered to the Trustee an Indenture (the "INDENTURE"), dated as of March 21, 2003 providing for the issuance of an unlimited amount of 6 7/8% Notes due 2013 (the "NOTES"); WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental Indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally guarantee all of the Company's Obligations under the Notes and the Indenture on the terms and conditions set forth herein (the "SUBSIDIARY GUARANTEE"); and WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental 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 Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows: 1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby agrees as follows: (a) Along with all Subsidiary Guarantors named in the Indenture, to jointly and severally Guarantee to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of the Indenture, the Notes or the obligations of the Company hereunder or thereunder, that: (i) the principal of and interest on the 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 Notes, if any, if lawful, and all other obligations of the Company to the Holders or the 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 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 Subsidiary 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 Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the 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 Subsidiary 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 Subsidiary Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes and the Indenture. (e) If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Subsidiary Guarantors, or any custodian, Trustee, liquidator or other similar official acting in relation to either the Company or the Subsidiary Guarantors, any amount paid by either to the Trustee or such Holder, this 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 2 guaranteed hereby until payment in full of all obligations guaranteed hereby. (g) As between the Subsidiary Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 of the Indenture for the purposes of this 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 Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by the Subsidiary Guarantors for the purpose of this Subsidiary Guarantee. (h) The Subsidiary Guarantors shall have the right to seek contribution from any non-paying Subsidiary Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Subsidiary Guarantee. (i) Pursuant to Section 10.04 of the 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 Subsidiary Guarantor in respect of the obligations of such other Subsidiary Guarantor under Article 10 of the Indenture shall result in the obligations of such Subsidiary Guarantor under its Subsidiary Guarantee not constituting a fraudulent transfer or conveyance. 3. EXECUTION AND DELIVERY. Each Guaranteeing Subsidiary agrees that the Subsidiary Guarantees shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such 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 Subsidiary Guarantor is the surviving Person) another corporation, Person or entity whether or not affiliated with such Subsidiary Guarantor unless: (i) subject to Section 10.04 of the Indenture, the Person formed by or surviving any such consolidation or merger (if other than a Subsidiary Guarantor or the Company) 3 unconditionally assumes all the obligations of such Subsidiary Guarantor, pursuant to a supplemental Indenture in form and substance reasonably satisfactory to the Trustee, under the Notes, the Indenture and the 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 Indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Subsidiary Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of the Indenture to be performed by the Subsidiary Guarantor, such successor corporation shall succeed to and be substituted for the Subsidiary Guarantor with the same effect as if it had been named herein as a Subsidiary Guarantor. Such successor corporation thereupon may cause to be signed any or all of the Subsidiary Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Subsidiary Guarantees so issued shall in all respects have the same legal rank and benefit under the Indenture as the Subsidiary Guarantees theretofore and thereafter issued in accordance with the terms of the Indenture as though all of such Subsidiary Guarantees had been issued at the date of the execution hereof. (c) Except as set forth in Articles 4 and 5 of the Indenture, and notwithstanding clauses (a) and (b) above, nothing contained in the Indenture or in any of the Notes shall prevent any consolidation or merger of a Subsidiary Guarantor with or into the Company or another Subsidiary Guarantor, or shall prevent any sale or conveyance of the property of a Subsidiary Guarantor as an entirety or substantially as an entirety to the Company or another Subsidiary Guarantor. 5. RELEASES. (a) In the event of a sale or other disposition of all of the assets of any Subsidiary Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all to the capital stock of any Subsidiary Guarantor, then such Subsidiary 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 Subsidiary Guarantor) or the corporation acquiring the property (in 4 the event of a sale or other disposition of all or substantially all of the assets of such Subsidiary Guarantor) will be released and relieved of any obligations under its Subsidiary Guarantee; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the Indenture, including without limitation Section 4.10 of the Indenture. Upon delivery by the Company to the 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 Indenture, including without limitation Section 4.10 of the Indenture, the Trustee shall execute any documents reasonably required in order to evidence the release of any Subsidiary Guarantor from its obligations under its Subsidiary Guarantee. (b) Any Subsidiary Guarantor not released from its obligations under its Subsidiary Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Subsidiary Guarantor under the Indenture as provided in Article 10 of the 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 Notes, any Subsidiary Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the 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 LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE. 8. COUNTERPARTS. The parties may sign any number of copies of this Supplemental 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 TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental 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 Indenture to be duly executed and attested, all as of the date first above written. Dated: __________________ [Guaranteeing Subsidiary] By: ________________________________ Name: Title: Peabody Energy Corporation By: ________________________________ Name: Title: [EXISTING SUBSIDIARY NOTE GUARANTORS] By: ________________________________ Name: Title: US Bank National Association as Trustee By: ________________________________ Name: Title: 6 Schedule I SCHEDULE OF SUBSIDIARY GUARANTORS The following schedule lists each Subsidiary Guarantor under the Indenture as of the Issue Date: 1. Affinity Mining Company, a West Virginia corporation 2. Arid Operations Inc., a Delaware corporation 3. Beaver Dam Coal Company, a Delaware corporation 4. Big Ridge, Inc., an Illinois corporation 5. Big Sky Coal Company, a Delaware corporation 6. Black Walnut Coal Company, a Delaware corporation 7. Bluegrass Coal Company, a Delaware corporation 8. Caballo Coal Company, a Delaware corporation 9. Charles Coal Company, a Delaware corporation 10. Cleaton Coal Company, a Delaware corporation 11. Coal Properties Corp., a Delaware corporation 12. Colony Bay Coal Company, a West Virginia general partnership 13. Cook Mountain Coal Company, a Delaware corporation 14. Cottonwood Land Company, a Delaware corporation 15. Cyprus Creek Land Company, a Delaware corporation 16. Cyprus Creek Land Resources, LLC, a Delaware limited liability company 17. EACC Camps, Inc., a West Virginia corporation 18. Eastern Associated Coal Corp., a West Virginia corporation 19. Eastern Royalty Corp., a Delaware corporation 20. Gallo Finance Company, a Delaware corporation 21. Gold Fields Chile, S.A., a Delaware corporation 22. Gold Fields Mining Corporation, a Delaware corporation 23. Gold Fields Operating Co.-Ortiz, a Delaware corporation 24. Grand Eagle Mining, Inc., a Kentucky corporation 25. Hayden Gulch Terminal, Inc., a Delaware corporation 26. Highland Mining Company, a Delaware corporation 27. Hillside Mining Company, a West Virginia corporation 28. Independence Material Handling Company, a Delaware corporation 29. Interior Holdings Corp., a Delaware corporation 30. James River Coal Terminal Company, a Delaware corporation 31. Jarrell's Branch Coal Company, a Delaware corporation 32. Juniper Coal Company, a Delaware corporation 33. Kayenta Mobile Home Park, Inc., a Delaware corporation 34. Logan Fork Coal Company, a Delaware corporation 35. Martinka Coal Company, a Delaware corporation 36. Midco Supply and Equipment Corporation, an Illinois corporation 37. Mountain View Coal Company, a Delaware corporation 38. Mustang Energy Company, L.L.C., a Delaware limited liability company 39. North Page Coal Corp., a West Virginia corporation 40. Ohio County Coal Company, a Kentucky corporation 41. Patriot Coal Company, L.P., a Delaware limited partnership 42. Peabody America, Inc., a Delaware corporation 43. Peabody Archveyor, L.L.C., a Delaware limited liability company 44. Peabody COALSALES Company, a Delaware corporation 45. Peabody COALTRADE, Inc., a Delaware corporation 46. Peabody Coal Company, a Delaware corporation 47. Peabody Development Company, a Delaware corporation 48. Peabody Development Land Holdings, LLC, a Delaware limited liability company 49. Peabody Energy Generation Holding Company, a Delaware corporation 50. Peabody Energy Investments, Inc., a Delaware corporation 51. Peabody Energy Solutions, Inc., a Delaware corporation 52. Peabody Holding Company, Inc., a New York corporation 53. Peabody Natural Gas, LLC, a Delaware limited liability company 54. Peabody Natural Resources Company, a Delaware general partnership 55. Peabody Recreational Lands, L.L.C., a Delaware limited liability company 56. Peabody Southwestern Coal Company, a Delaware corporation 57. Peabody Terminals, Inc., a Delaware corporation 58. Peabody Venezuela Coal Corp., a Delaware corporation 59. Peabody-Waterside Development, L.L.C., a Delaware limited liability company 60. Peabody Western Coal Company, a Delaware corporation 61. Pine Ridge Coal Company, a Delaware corporation 62. Pond Creek Land Resources, LLC, a Delaware limited liability company 63. Pond River Land Company, a Delaware corporation 64. Porcupine Production, LLC, a Delaware limited liability company 65. Porcupine Transportation, LLC, a Delaware limited liability company 66. Powder River Coal Company, a Delaware corporation 67. Prairie State Generating Company, LLC, a Delaware limited liability company 68. Rio Escondido Coal Corp., a Delaware corporation 69. River's Edge Mining, Inc., a Delaware corporation 70. Riverview Terminal Company, a Delaware corporation 71. Seneca Coal Company, a Delaware corporation 72. Sentry Mining Company, a Delaware corporation 73. Snowberry Land Company, a Delaware corporation 74. Star Lake Energy Company, L.L.C., a Delaware limited liability company 75. Sterling Smokeless Coal Company, a West Virginia corporation 76. Thoroughbred, L.L.C., a Delaware limited liability company 77. Thoroughbred Generating Company, LLC, a Delaware limited liability company 78. Thoroughbred Mining Company, L.L.C., a Delaware limited liability company 79. Yankeetown Dock Corporation, an Indiana corporation 2 CROSS-REFERENCE TABLE*
Note Trust Indenture Act Section Indenture Section 310 (a) (1) 7.10 (a) (2) 7.10 (a) (3) N.A. (a) (4) N.A. (a) (5) 7.10 (i) (b) 7.10 (ii) (c) N.A. 311 (a) 7.11 (b) 7.11 (iii) (c) N.A. 312 (a) 2.05 (b) 12.03 (iv) (c) 12.03 313 (a) 7.06 (b) (2) 7.07 (v) (c) 7.06; 12.02 (vi) (d) 7.06 314 (a) 4.03; 12.02 (c) (1) 12.04 (c) (2) 12.04 (c) (3) N.A. (vii) (e) 12.05 (f) N.A. 315 (a) 7.01 (b) 7.05, 12.02 (A) (c) 7.01 (d) 7.01 (e) 6.11 316 (a) (last sentence) 2.09 (a) (1) (A) 6.05 (a) (1) (B) 6.04 (a) (2) N.A. (b) 6.07 (B) (c) 2.12 317 (a) (1) 6.08
Note Trust Indenture Act Section Indenture Section (a) (2) 6.09 (b) 2.04 318 (a) 12.01 (b) N.A. (c) 12.01
N.A. means not applicable. * This Cross-Reference Table is not part of the Indenture. 4 TABLE OF CONTENTS
PAGE ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE....................................... 1 Section 1.01. Definitions............................................................. 1 Section 1.02. Other Definitions....................................................... 22 Section 1.03. Incorporation by Reference of Trust Indenture Act....................... 22 Section 1.04. Rules of Construction................................................... 23 ARTICLE II THE NOTES........................................................................ 23 Section 2.01. Form and Dating......................................................... 23 Section 2.02. Execution and Authentication............................................ 24 Section 2.03. Registrar and Paying Agent.............................................. 25 Section 2.04. Paying Agent to Hold Money in Trust..................................... 25 Section 2.05. Holder Lists............................................................ 26 Section 2.06. Transfer and Exchange................................................... 26 Section 2.07. Replacement Notes....................................................... 40 Section 2.08. Outstanding Notes....................................................... 41 Section 2.09. Treasury Notes.......................................................... 41 Section 2.10. Temporary Notes......................................................... 41 Section 2.11. Cancellation............................................................ 42 Section 2.12. Defaulted Interest...................................................... 42 Section 2.13. Cusip Numbers........................................................... 42 ARTICLE III REDEMPTION AND PREPAYMENT........................................................ 43 Section 3.01. Notices to Note Trustee................................................. 43 Section 3.02. Selection of Notes to be Redeemed....................................... 43 Section 3.03. Notice of Redemption.................................................... 43 Section 3.04. Effect of Notice of Redemption.......................................... 44 Section 3.05. Deposit of Redemption Price............................................. 44 Section 3.06. Notes Redeemed in Part.................................................. 45 Section 3.07. Optional Redemption..................................................... 45 Section 3.08. Mandatory Redemption.................................................... 46 Section 3.09. Offer to Purchase by Application of Excess Proceeds..................... 46
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PAGE ARTICLE IV COVENANTS........................................................................ 48 Section 4.01. Payment of Notes........................................................ 48 Section 4.02. Maintenance of Office or Agency......................................... 49 Section 4.03. Reports................................................................. 49 Section 4.04. Compliance Certificate.................................................. 50 Section 4.05. Taxes................................................................... 51 Section 4.06. Stay, Extension and Usury Laws.......................................... 51 Section 4.07. Restricted Payments..................................................... 51 Section 4.08. Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries................................................. 55 Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock.............. 57 Section 4.10. Asset Sales............................................................. 60 Section 4.11. Transactions With Affiliates............................................ 61 Section 4.12. Liens................................................................... 63 Section 4.13. Business Activities..................................................... 63 Section 4.14. Corporate Existence..................................................... 63 Section 4.15. Offer To Repurchase Upon Change of Control Triggering Event............. 63 Section 4.16. Additional Subsidiary Guarantees........................................ 64 Section 4.17. Payments for Consents................................................... 65 Section 4.18. Covenant Termination.................................................... 65 ARTICLE V SUCCESSORS....................................................................... 66 Section 5.01. Merger, Consolidation or Sale of Assets................................. 66 Section 5.02. Successor Corporation Substituted....................................... 67 ARTICLE VI DEFAULTS AND REMEDIES............................................................ 67 Section 6.01. Events of Default....................................................... 67 Section 6.02. Acceleration............................................................ 69 Section 6.03. Other Remedies.......................................................... 69 Section 6.04. Waiver of Past Defaults................................................. 70
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PAGE Section 6.05. Control by Majority..................................................... 70 Section 6.06. Limitation on Suits..................................................... 70 Section 6.07. Rights of Holders of Notes to Receive Payment........................... 71 Section 6.08. Collection Suit by Trustee.............................................. 71 Section 6.09. Trustee May File Proofs of Claim........................................ 71 Section 6.10. Priorities.............................................................. 72 Section 6.11. Undertaking for Costs................................................... 72 ARTICLE VII TRUSTEE.......................................................................... 73 Section 7.01. Duties of Trustee....................................................... 73 Section 7.02. Rights of Trustee....................................................... 74 Section 7.03. Individual Rights of Trustee............................................ 75 Section 7.04. Trustee's Disclaimer.................................................... 75 Section 7.05. Notice of Defaults...................................................... 75 Section 7.06. Reports by Trustee to Holders of the Notes.............................. 76 Section 7.07. Compensation and Indemnity.............................................. 76 Section 7.08. Replacement of Trustee.................................................. 77 Section 7.09. Successor Trustee by Merger, etc........................................ 78 Section 7.10. Eligibility; Disqualification........................................... 78 Section 7.11. Preferential Collection of Claims Against Company....................... 78 ARTICLE VIII LEGAL DEFEASANCE AND COVENANT DEFEASANCE......................................... 79 Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance................ 79 Section 8.02. Legal Defeasance and Discharge.......................................... 79 Section 8.03. Covenant Defeasance..................................................... 79 Section 8.04. Conditions to Legal or Covenant Defeasance.............................. 80 Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions................................... 81 Section 8.06. Repayment to Company.................................................... 82 Section 8.07. Reinstatement........................................................... 82 ARTICLE IX AMENDMENT, SUPPLEMENT AND WAIVER................................................. 83
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PAGE Section 9.01. Without Consent of Holders of Notes..................................... 83 Section 9.02. With Consent of Holders of Notes........................................ 84 Section 9.03. Compliance with Trust Indenture Act..................................... 85 Section 9.04. Revocation and Effect of Consents....................................... 86 Section 9.05. Notation on or Exchange of Notes........................................ 86 Section 9.06. Trustee to Sign Amendments, etc......................................... 86 ARTICLE X SUBSIDIARY GUARANTEES............................................................ 86 Section 10.01. Guarantee............................................................... 86 Section 10.02. Limitation on Subsidiary Guarantor Liability............................ 88 Section 10.03. Execution and Delivery of Subsidiary Guarantee.......................... 89 Section 10.04. Subsidiary Guarantors May Consolidate, etc., on Certain Terms........... 89 Section 10.05. Releases Following Sale of Assets....................................... 90 ARTICLE XI SATISFACTION AND DISCHARGE....................................................... 91 Section 11.01. Satisfaction and Discharge.............................................. 91 Section 11.02. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions........................... 92 Section 11.03. Repayment to Company.................................................... 92 ARTICLE XII MISCELLANEOUS.................................................................... 93 Section 12.01. Trust Indenture Act Controls............................................ 93 Section 12.02. Notices................................................................. 93 Section 12.03. Communication by Holders of Notes with Other Holders of Notes........... 94 Section 12.04. Certificate and Opinion as to Conditions Precedent...................... 94 Section 12.05. Statements Required in Certificate or Opinion........................... 95 Section 12.06. Rules by Trustee and Agents............................................. 95 Section 12.07. No Personal Liability of Directors, Officers, Employees and Stockholders........................................................ 95 Section 12.08. Governing Law........................................................... 95 Section 12.09. No Adverse Interpretation of Other Agreements........................... 96
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PAGE Section 12.10. Successors.............................................................. 96 Section 12.11. Severability............................................................ 96 Section 12.12. Counterpart Originals................................................... 96 Section 12.13. Table of Contents, Headings, etc........................................ 96
v EXHIBITS Exhibit A FORM OF NOTE Exhibit B FORM OF CERTIFICATE OF TRANSFER Exhibit C FORM OF CERTIFICATE OF EXCHANGE Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Exhibit E FORM OF SUBSIDIARY GUARANTEE Exhibit F FORM OF SUPPLEMENTAL INDENTURE SCHEDULES Schedule I Schedule of Subsidiary Guarantors
EX-10.43 5 c77011exv10w43.txt SECOND AMENDED AND RESTATED CREDIT AGREEMENT EXECUTION COPY EXHIBIT 10.43 $1,050,000,000 SECOND AMENDED AND RESTATED CREDIT AGREEMENT AMONG PEABODY ENERGY CORPORATION, A DELAWARE CORPORATION, AS BORROWER, THE SEVERAL LENDERS FROM TIME TO TIME PARTIES HERETO, WACHOVIA BANK, NATIONAL ASSOCIATION AND LEHMAN COMMERCIAL PAPER INC., AS SYNDICATION AGENTS, FLEET SECURITIES, INC., WACHOVIA SECURITIES, INC. AND LEHMAN BROTHERS INC., AS ARRANGERS, FLEET NATIONAL BANK, AS ADMINISTRATIVE AGENT AND MORGAN STANLEY SENIOR FUNDING, INC. AND U.S. BANK NATIONAL ASSOCIATION, AS DOCUMENTATION AGENTS DATED AS OF MARCH 21, 2003 TABLE OF CONTENTS
Page ---- SECTION 1. DEFINITIONS.................................................................................... 2 1.1 Defined Terms.................................................................................. 2 1.2 Other Definitional Provisions.................................................................. 23 1.3 Interrelationship with First Restated Credit Agreement......................................... 23 1.4 Confirmation of Existing Obligations........................................................... 24 SECTION 2. AMOUNT AND TERMS OF COMMITMENTS AND LOANS...................................................... 24 2.1 Commitments.................................................................................... 24 2.2 Procedure for Borrowing........................................................................ 26 2.3 Commitment Fee................................................................................. 26 2.4 Termination or Reduction of Revolving Credit Commitments....................................... 27 2.5 Repayment of Loans; Evidence of Debt........................................................... 27 2.6 Optional Prepayments; Mandatory Prepayments and Reduction of Commitments....................... 29 2.7 Conversion and Continuation Options............................................................ 30 2.8 Minimum Amounts and Maximum Number of Tranches................................................. 31 2.9 Interest Rates and Payment Dates............................................................... 31 2.10 Computation of Interest and Fees............................................................... 31 2.11 Inability to Determine Interest Rate........................................................... 32 2.12 Pro Rata Treatment and Payments................................................................ 32 2.13 Illegality..................................................................................... 33 2.14 Requirements of Law............................................................................ 33 2.15 Taxes.......................................................................................... 34 2.16 Indemnity...................................................................................... 36 2.17 Replacement of Lenders......................................................................... 37 2.18 Certain Fees................................................................................... 37 2.19 Certain Rules Relating to the Payment of Additional Amounts.................................... 37 SECTION 3. LETTERS OF CREDIT.............................................................................. 38 3.1 L/C Commitment................................................................................. 38 3.2 Procedure for Issuance of Letters of Credit.................................................... 38 3.3 Fees, Commissions and Other Charges............................................................ 39 3.4 L/C Participation.............................................................................. 39 3.5 Reimbursement Obligation of the Borrower....................................................... 40 3.6 Obligations Absolute........................................................................... 40 3.7 Letter of Credit Payments...................................................................... 41 3.8 Application.................................................................................... 41 SECTION 4. REPRESENTATIONS AND WARRANTIES................................................................. 41 4.1 Financial Statements and Condition............................................................. 41 4.2 No Change...................................................................................... 41 4.3 Corporate Existence............................................................................ 42 4.4 Corporate Power; Authorization; Enforceable Obligations; No Conflict........................... 42 4.5 No Legal Bar................................................................................... 42
i 4.6 Litigation; Compliance with Laws; Reserves..................................................... 42 4.7 No Default..................................................................................... 43 4.8 Ownership and Location of Property; Liens...................................................... 43 4.9 Intellectual Property.......................................................................... 44 4.10 Taxes.......................................................................................... 44 4.11 Federal Regulations............................................................................ 44 4.12 ERISA; Coal Act; Black Lung Act................................................................ 44 4.13 Investment Company Act; Other Regulations...................................................... 45 4.14 Subsidiaries and Other Investments............................................................. 45 4.15 Purpose of Loans............................................................................... 46 4.16 Environmental Matters.......................................................................... 46 4.17 Collateral Documents........................................................................... 47 4.18 Accuracy and Completeness of Information....................................................... 47 4.19 Solvency....................................................................................... 48 4.20 Labor Matters.................................................................................. 48 4.21 Insurance...................................................................................... 48 4.22 Coal Supply Agreements......................................................................... 48 4.23 Mines.......................................................................................... 48 4.24 Titled Equipment............................................................................... 48 4.25 Acts of God.................................................................................... 49 4.26 Surety Bonds................................................................................... 49 SECTION 5. CONDITIONS PRECEDENT........................................................................... 49 5.1 Effective Date................................................................................. 49 5.2 Conditions to a Credit Event................................................................... 52 SECTION 6. AFFIRMATIVE COVENANTS.......................................................................... 52 6.1 Financial Statements........................................................................... 52 6.2 Certificates; Other Information................................................................ 53 6.3 Payment of Obligations......................................................................... 54 6.4 Existence; Businesses and Properties........................................................... 54 6.5 Insurance...................................................................................... 55 6.6 Inspection of Properties; Books and Records; Discussions....................................... 56 6.7 Notices........................................................................................ 56 6.8 Mining and Environmental Laws.................................................................. 57 6.9 Further Assurances............................................................................. 57 6.10 Additional Collateral.......................................................................... 57 6.11 Foreign Jurisdictions.......................................................................... 60 6.12 Maintenance of Collateral; Alterations......................................................... 60 6.13 Use of Proceeds................................................................................ 60 6.14 Preparation of Environmental Reports........................................................... 60 6.15 Maintenance of Coal Reserves................................................................... 61 6.16 Coal Supply Agreements......................................................................... 61 6.17 Exploration and Reserves....................................................................... 61 6.18 Certain Long Term Liabilities and Environmental Reserves....................................... 61 6.19 Unrestricted Subsidiaries...................................................................... 61 6.20 Partner Support Percentage; Total Project Cost................................................. 61 6.21 Black Beauty................................................................................... 62 6.22 Liens.......................................................................................... 62
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6.23 Existing Notes................................................................................. 62 SECTION 7. NEGATIVE COVENANTS............................................................................. 62 7.1 Financial Condition Covenants.................................................................. 62 7.2 Limitation on Indebtedness..................................................................... 63 7.3 Limitation on Liens............................................................................ 65 7.4 Limitation on Guarantee Obligations............................................................ 67 7.5 Limitation on Fundamental Changes.............................................................. 68 7.6 Limitation on Sale of Assets................................................................... 68 7.7 Dividends and Distributions; Restrictions on Ability of Restricted Subsidiaries to Pay Dividends...................................................................................... 70 7.8 Limitation on Capital Expenditures............................................................. 71 7.9 Limitation on Investments, Loans and Advances.................................................. 71 7.10 Limitation on Optional Payments and Modifications of Instruments and Agreements................ 73 7.11 Limitation on Transactions with Affiliates..................................................... 73 7.12 Limitation on Sale and Leaseback Transactions.................................................. 74 7.13 Limitation on Changes in Fiscal Year........................................................... 74 7.14 Limitation on Negative Pledge Clauses.......................................................... 74 7.15 Limitation on Lines of Business................................................................ 75 SECTION 8. EVENTS OF DEFAULT.............................................................................. 75 SECTION 9. THE AGENTS..................................................................................... 78 9.1 Appointment.................................................................................... 78 9.2 Delegation of Duties........................................................................... 79 9.3 Exculpatory Provisions......................................................................... 79 9.4 Reliance by Agents............................................................................. 79 9.5 Notice of Default.............................................................................. 79 9.6 Non-Reliance on Agents and Other Lenders....................................................... 79 9.7 Indemnification................................................................................ 80 9.8 Agents, in Their Individual Capacities......................................................... 80 9.9 Successor Administrative Agent, Syndication Agents and Documentation Agents.................... 80 9.10 Duties of Arrangers, Documentation Agents and Syndication Agents............................... 81 SECTION 10. MISCELLANEOUS.................................................................................. 81 10.1 Amendments and Waivers......................................................................... 81 10.2 Notices........................................................................................ 82 10.3 No Waiver; Cumulative Remedies................................................................. 85 10.4 Survival of Representations and Warranties..................................................... 85 10.5 Payment of Expenses and Taxes.................................................................. 85 10.6 Successors and Assigns; Participations and Assignments......................................... 86 10.7 Adjustments; Set-off........................................................................... 89 10.8 Counterparts................................................................................... 89 10.9 Severability................................................................................... 89 10.10 Integration.................................................................................... 89 10.11 GOVERNING LAW.................................................................................. 89 10.12 SUBMISSION TO JURISDICTION; WAIVERS............................................................ 90
iii 10.13 Acknowledgements............................................................................... 90 10.14 WAIVERS OF JURY TRIAL.......................................................................... 90 10.15 Confidentiality................................................................................ 91 10.16 Prudential Note................................................................................ 91 10.17 Existing Agreements Superseded................................................................. 91 10.18 Delivery of Lender Addenda..................................................................... 91
iv EXHIBITS Exhibit A-1 Form of Term Note Exhibit A-2 Form of Revolving Credit Note Exhibit A-3 Form of Swing Line Note Exhibit B Form of Guarantee and Collateral Agreement Exhibit C-1 Form of Legal Opinion of Simpson Thacher & Bartlett Exhibit C-2 Form of Legal Opinion of Jeffery Klinger, Esq. Exhibit D Form of Notice of Borrowing Exhibit E Form of Certificate of Non-U.S. Lender Exhibit F Form of Assignment and Acceptance Exhibit G Form of Subordination Agreement Exhibit H Form of Lender Addendum SCHEDULES Schedule I Pricing Grids Schedule II Coal Act Schedule III Black Lung Act Schedule IV Retiree Welfare Benefits Schedule V Unrestricted Subsidiaries Schedule 4.4 Required Consents Schedule 4.5 No Legal Bar Schedule 4.6 Material Litigation Schedule 4.8(a)(i) Owned Real Property Schedule 4.8(a)(ii) Mortgages and Fixture Filings Schedule 4.8(b) Leased Real Property Schedule 4.9 Intellectual Property Claims Schedule 4.14(a) Subsidiaries Schedule 4.14(b) Joint Ventures Schedule 4.15 Refinanced Indebtedness Schedule 4.16 Environmental Matters Schedule 4.17 Filing Jurisdictions Schedule 4.21 Existing Insurance Schedule 4.22 Coal Supply Agreements Schedule 4.23 Mines Schedule 7.2(e) Existing Indebtedness Schedule 7.3(f) Existing Liens Schedule 7.4 Existing Guarantee Obligations Schedule 7.7 Operating Leases Schedule 7.9(e) Existing Investments v THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT, dated as of March 21, 2003, among Peabody Energy Corporation, a Delaware corporation (the "Borrower"), the several lenders from time to time parties hereto (the "Lenders"), Fleet Securities, Inc., Wachovia Securities, Inc. and Lehman Brothers Inc., each as arranger (in such capacity, the "Arrangers"), Wachovia Bank, National Association and Lehman Commercial Paper Inc., each as syndication agent (in such capacity, the "Syndication Agents"), Morgan Stanley Senior Funding, Inc. and U.S. Bank National Association, each as documentation agents (in such capacity, the "Documentation Agents") and Fleet National Bank, as administrative agent for the Agents (as defined below) and the Lenders (in such capacity, the "Administrative Agent"), AMENDS AND RESTATES IN FULL the Amended and Restated Credit Agreement, dated as of June 9, 1998 (as amended prior to the date hereof, the "First Restated Credit Agreement"), among the Borrower, the lenders party thereto on the Effective Date (the "Original Lenders"), Lehman Commercial Paper Inc., as syndication agent, Lehman Brothers Inc., as arranger, The First National Bank of Chicago, as administrative agent and Bank of America National Trust & Savings Association and The Fuji Bank, Limited, each as documentation agent; this amendment and restatement of the First Restated Credit Agreement, as amended, supplemented, restated or otherwise modified from time to time, the "Credit Agreement". W I T N E S E T H : WHEREAS, the Original Lenders previously extended credit to the Borrower under the First Restated Credit Agreement to (i) finance the acquisition of certain subsidiaries and certain minority interests and related fees and expenses, (ii) provide cash collateral for certain letters of credit of the acquired subsidiaries and (iii) to finance the working capital and other general corporate needs of the Borrower and its Restricted Subsidiaries in the ordinary course of business and to make certain investments permitted thereunder; WHEREAS, on the Effective Date the Borrower intends to borrow the Term Loans, a portion of the proceeds of which will be used to repay a portion of the Indebtedness outstanding under the Existing Notes; WHEREAS, the Borrower has requested that the First Restated Credit Agreement be amended and restated in full as set forth herein; WHEREAS, the Original Lenders are willing so to amend and restate the First Restated Credit Agreement and to continue to extend credit to the Borrower, upon and subject to the terms and conditions set forth herein; WHEREAS, it is the intent of the Borrower, the Original Lenders, the Lenders and the Agents that this Credit Agreement amend and restate in its entirety the First Restated Credit Agreement and that, from and after the Effective Date, the First Restated Credit Agreement shall be of no force and effect except to evidence the terms and conditions under which the Borrower heretofore has incurred obligations and liabilities to the Original Lenders and the agents under the First Restated Credit Agreement (as evidenced by the First Restated Credit Agreement and the books and records of the agents thereunder); and WHEREAS, this Credit Agreement is made in renewal, amendment, restatement and modification of, but not in extinguishment of, the obligations under the First Restated Credit Agreement. NOW, THEREFORE, the parties hereto hereby agree as follows: SECTION 1. DEFINITIONS 1.1 Defined Terms. As used in this Agreement, the following terms shall have the following meanings: "Adjustment Date": the fifth day following the receipt by the Administrative Agent of the financial statements for the most recently completed fiscal period furnished pursuant to subsection 6.1(a) or (b), as the case may be, and the compliance certificate with respect to such financial statements furnished pursuant to subsection 6.2(c). For purposes of determining the Applicable Margin and the Commitment Fee Rate, the first "Adjustment Date" shall mean the date on which the financial statements for the fiscal quarter ended June 30, 2003 furnished pursuant to subsection 6.1(b) and the related compliance certificate furnished pursuant to subsection 6.2(c) are delivered to the Administrative Agent pursuant to subsection 6.1(b) and 6.2(c), respectively. "Affiliate": as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" of a Person means the power, directly or indirectly, either to (a) vote 10% or more of the securities having ordinary voting power for the election of directors of such Person or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise. "Agents": the collective reference to the Arrangers, the Syndication Agents, the Documentation Agents and the Administrative Agent. "Aggregate Outstanding Extensions of Credit": as to any Lender with respect to any Type of Loan at any time, an amount equal to the sum of (a) the aggregate principal amount of all Loans of such Type made by such Lender then outstanding and (b) in the case of Revolving Credit Loans, such Lender's Commitment Percentage of the L/C Obligations then outstanding. "Agreement": this Credit Agreement, as amended, restated, supplemented or otherwise modified from time to time. "Applicable Margin": at any time, the percentages set forth on Schedule I under the relevant column heading opposite the level of the Consolidated Total Obligations to Consolidated EBITDA Ratio most recently determined; provided that (a) the Applicable Margins commencing on the Effective Date shall be those set forth in Schedule I opposite a Consolidated Total Obligations to Consolidated EBITDA Ratio captioned > or = 2.75x" until the first Adjustment Date, (b) the Applicable Margins determined for any Adjustment Date (including the first Adjustment Date) shall remain in effect until a subsequent Adjustment Date for which the Consolidated Total Obligations to Consolidated EBITDA Ratio falls within a different level and (c) if the financial statements and related compliance certificate for any fiscal period are not delivered by the date due pursuant to subsections 6.1 and 6.2, the Applicable Margins shall be (i) for the first 35 days subsequent to such due date, the Applicable Margin in effect prior to such due date and (ii) thereafter, those set forth opposite a Consolidated Total Obligations to Consolidated EBITDA Ratio captioned > or = 3.75x" in either case, until the date of delivery of such financial statements and compliance certificate. "Application": an application or request, in such form as the Issuing Lender may specify from time to time and delivered by such means (including, without limitation, by facsimile or other means of electronic transmission or pursuant to a computerized system established by the Issuing Lender) as the 2 Issuing Lender and the Borrower may from time to time agree, requesting the Issuing Lender to issue a Letter of Credit. "Approved Project": as specified in a written notice delivered by the Borrower to the Administrative Agent, either, but not both, of the Thoroughbred Power Generation Project or the Prairie State Power Generation Project. "Asset Sale": any sale, sale and leaseback, or other disposition by any Person or any Subsidiary thereof of any of its property or assets, including the stock of any Subsidiary of such Person, except (i) sales and dispositions permitted by subsection 7.6 (other than subsection 7.6(b), (e), (k)(other than as set forth in clause (ii) of this definition) or (m)) and (ii) a sale and leaseback of property or assets consummated within 180 days of the initial acquisition of such property or assets by such Person or its Subsidiary. "Assignee": as defined in subsection 10.6(c). "Assignment and Acceptance": as defined in subsection 10.6(c). "Attributable Debt": in respect of a sale and leaseback transaction resulting in a Financing Lease, at the time of determination, the present value (discounted at the rate of interest implicit in such transaction, determined in accordance with GAAP) of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction (including any period for which such lease has been extended or may, at the option of the lessor, be extended). "Available Commitment": as to any Lender and any Type of Loan, at any time, an amount equal to the excess, if any, of (a) such Lender's Commitment with respect to such Type of Loan minus (b) such Lender's Aggregate Outstanding Extensions of Credit with respect to such Type of Loan. "Base Rate": for any day, the higher of: (a) 0.50% per annum above the latest Federal Funds Rate; and (b) the per annum rate of interest in effect for such day as announced from time to time by the Administrative Agent as its "Base Rate" or the substantial equivalent of any thereof. "Base Rate Loans": Loans the rate of interest applicable to which is based upon the Base Rate. "Black Beauty": Black Beauty Coal Company, an Indiana general partnership. "Black Beauty Acquisition": the acquisition by the Borrower or one of its Restricted Subsidiaries of all of the outstanding Capital Stock of Black Beauty Resources, Inc., which as of the Effective Date owns all of the outstanding Capital Stock of Black Beauty not already owned by the Borrower or such Restricted Subsidiary. "Black Beauty Collateral Event": the grant of a perfected, first priority Lien (subject only to Permitted Liens) to the Administrative Agent for the ratable benefit of the Secured Parties on substantially all of the assets and property of Black Beauty. "Black Beauty Condition": as defined in subsection 6.10(e). "Black Beauty Debt": the revolving credit facility of Black Beauty, maturing in April 2004. 3 "Black Lung Act": collectively, the Black Lung Benefits Revenue Act of 1977, as amended and the Black Lung Benefits Reform Act of 1977, as amended. "Blanket Grantor": a Credit Party that has granted a perfected, first priority Lien (subject only to Permitted Liens) on substantially all of its assets to the Administrative Agent for the ratable benefit of the Secured Parties. "Borrowing Date": any Business Day specified in a notice pursuant to subsection 2.2 as a date on which the Borrower requests the Lenders to make Loans hereunder. "Business": as defined in subsection 4.16(b). "Business Day": a day other than a Saturday, Sunday or other day on which commercial banks in New York, New York, or Boston, Massachusetts, are authorized or required by law to close and, if the applicable Business Day relates to LIBOR Loans, any day on which dealings are carried on in the applicable London interbank market. "Capital Expenditures": for any fiscal period, the aggregate of all expenditures that, in conformity with GAAP (but excluding capitalized interest), are or are required to be included as additions during such period to property, plant or equipment reflected on the consolidated balance sheet of the Borrower and its Subsidiaries, excluding the non-cash component of any federal coal lease obligations during such period. "Capital Lease Obligations": of any Person as of the date of determination, the aggregate liability of such Person under Financing Leases reflected on a balance sheet of such Person under GAAP. "Capital Stock": any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants or options to purchase any of the foregoing. "Cash Equivalents": (a) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed or insured by the United States Government or any agency thereof, (b) certificates of deposit and time deposits with maturities of one year or less from the date of acquisition and overnight bank deposits of any Lender or of any commercial bank having capital and surplus in excess of $500,000,000, (c) repurchase obligations of any Lender or of any commercial bank satisfying the requirements of clause (b) of this definition, having a term of not more than 90 days with respect to securities issued or fully guaranteed or insured by the United States Government, (d) commercial paper of a domestic issuer rated at least A-2 by S&P or P-2 by Moody's, or carrying an equivalent rating by a nationally recognized rating agency if both of S&P and Moody's cease publishing ratings of investments, (e) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated at least A by S&P or A by Moody's, (f) securities with maturities of one year or less from the date of acquisition backed by standby letters of credit issued by any Lender or any commercial bank satisfying the requirements of clause (b) of this definition or (g) shares of money market mutual or similar funds which invest principally in assets satisfying the requirements of clauses (a) through (f) of this definition. "Change in Control": (i) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), excluding 4 LBMBP II and its Affiliates shall (x) become, or obtain rights (whether by means or warrants, options or otherwise) to become, the "beneficial owner" (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of a greater percentage of the outstanding common stock of the Borrower than the percentage of such common stock owned by LBMBP II and its Affiliates or (y) have the power to vote or direct the voting of securities having a majority of the ordinary voting power for the election of directors or managers of the Borrower (determined on a fully diluted basis) or (ii) a "Change of Control" (as defined in the Senior Notes Indenture as in effect on the Effective Date). "Class": (i) Lenders having Revolving Credit Loan Exposure and (ii) Lenders having Term Loan Exposure. "Coal": all of the coal owned or leased by any Credit Party and (i) located on, under, or within, or (ii) produced and severed from, the properties owned or leased by any Credit Party. "Coal Act": the Coal Industry Retiree Health Benefits Act of 1992, as amended. "Coal Supply Agreements": those contracts now in effect or hereafter entered into by the Borrower or any of its Subsidiaries for the sale, purchase, exchange, processing or handling of Coal with an initial term of more than one year. "Code": the Internal Revenue Code of 1986, as amended from time to time. "Collateral": all assets of the Credit Parties, now owned or hereafter acquired, upon which a Lien is purported to be created by this Agreement or any Security Document. "Collateral Account": as defined in subsection 6.23. "Collateral Amount": as defined in subsection 7.6. "Commitment": as to any Lender, such Lender's Term Loan Commitment and Revolving Credit Commitment. "Commitment Fee Rate": at any time, the rate per annum set forth on Schedule I under the relevant column heading opposite the level of the Usage Ratio as of such date. "Commitment Letter": the letter agreement dated as of March 3, 2003, among the Borrower, and the Arrangers, the Administrative Agent and the Syndication Agents. "Commitment Percentage": as to the Commitment of any Lender with respect to any Type of Loan at any time, the percentage which the Commitment of such Lender with respect to such Type of Loan then constitutes of the aggregate Commitments with respect to such Type of Loan (or, at any time after such Commitments shall have expired or terminated, the percentage which the aggregate amount of the Aggregate Outstanding Extensions of Credit of such Lender with respect to such Type of Loan constitutes of the aggregate amount of the Aggregate Outstanding Extensions of Credit of all Lenders with respect to such Type of Loan). "Commitment Period": the period from and including the Effective Date to but not including the Revolving Loan Termination Date or such earlier date on which the Revolving Credit Commitments shall terminate as provided herein. 5 "Commonly Controlled Entity": an entity, whether or not incorporated, which is under common control with the Borrower within the meaning of Section 4001 of ERISA or is part of a group which includes the Borrower and which is treated as a single employer under Section 414 (b) or (c) of the Code. "Consolidated": consolidation in accordance with GAAP, but excluding any Unrestricted Subsidiary. "Consolidated Cash Interest Expense": as of the last day of any fiscal quarter, the amount of interest expense and letter of credit fees and commissions (in each case payable in cash) of the Borrower and its Restricted Subsidiaries determined in accordance with GAAP, for the four fiscal quarters ended on such date; provided that Consolidated Cash Interest Expense shall exclude prepayment premiums and penalties in connection with the redemption of the Existing Notes. "Consolidated EBITDA": as of the last day of any fiscal quarter, Consolidated Net Income for such quarter (excluding without duplication, (w) noncash compensation expenses related to common stock and other equity securities issued to employees, (x) extraordinary or non-recurring gains and losses in accordance with GAAP, (y) gains or losses on discontinued operations and (z) any FAS 121 writedowns, in each case for such quarter), plus (i) consolidated interest expense for such quarter, determined in accordance with GAAP, plus (ii) any minority interests share of income and losses, plus (iii) to the extent deducted in computing such Consolidated Net Income, the sum of all income taxes, depreciation, depletion and amortization of property, plant, equipment and intangibles, plus (iv) any debt extinguishment costs plus (v) non-cash charges due to cumulative effects of changes in accounting principles, in each case for such quarter; provided, however that for the purposes of this Agreement, EBITDA derived from broker and trading operations shall not be included in Consolidated EBITDA as of the last day of any fiscal quarter to the extent that such EBITDA derived from broker and trading operations (accounted for on a mark to market basis) exceeded 20% of Consolidated EBITDA as of the last day of any fiscal quarter. "Consolidated EBITDA to Consolidated Cash Interest Expense Ratio": as of any date of determination, the ratio of Consolidated EBITDA to Consolidated Cash Interest Expense for the preceding four fiscal quarters ended on such date. "Consolidated Net Income": for any fiscal period, net income of the Borrower and its Restricted Subsidiaries for such period, determined in accordance with GAAP. "Consolidated Secured Debt": at any date, all Consolidated Total Obligations of the Borrower and its Consolidated Subsidiaries that are secured by a Lien. "Consolidated Secured Debt to Consolidated EBITDA Ratio": as of any date of determination, the ratio of Consolidated Secured Debt to Consolidated EBITDA for the preceding four fiscal quarters ended on such date. "Consolidated Total Debt": at any date, all indebtedness of the Borrower and its Restricted Subsidiaries outstanding on such date for borrowed money, obligations pursuant to standby letters of credit (other than Designated Letters of Credit), the deferred purchase price of property (other than (i) current trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices and accrued expenses incurred in the ordinary course of business, (ii) obligations under federal coal leases, (iii) obligations under coal leases which may be terminated at the discretion of the lessee and (iv) deferred purchase obligations in connection with the acquisition of the Martinka mine) 6 and all obligations of the Borrower and its Restricted Subsidiaries in respect of Financing Leases; provided, that Consolidated Total Debt shall not include, in any event, Non-Recourse Debt. "Consolidated Total Obligations": at any date, the sum of (a) Consolidated Total Debt plus (b) Project Guarantee Obligations plus (c) amounts due under securitization programs of any Credit Party (other than the Existing Securitization) permitted pursuant to subsections 7.2 and 7.6. "Consolidated Total Obligations to Consolidated EBITDA Ratio": as of any date of determination, the ratio of Consolidated Total Obligations to Consolidated EBITDA for the preceding four fiscal quarters ended on such date. "Consolidated Working Capital": at any date, the excess of (a) the sum of all amounts (other than cash and Cash Equivalents) that would, in accordance with GAAP, be set forth opposite the caption "total current assets" (or any like caption) on a consolidated balance sheet of the Borrower and its Restricted Subsidiaries at such date minus (b) the sum of all amounts that would, in accordance with GAAP, be set forth opposite the caption "total current liabilities" (or any like caption) on a consolidated balance sheet of the Borrower and its Restricted Subsidiaries on such date (excluding, to the extent it would otherwise be included under current liabilities, any short-term Consolidated Total Debt and the current portion of any long-term Consolidated Total Debt). "Constitutional Documents": as to any Person, the articles or certificate of incorporation and by-laws, partnership agreement, limited liability company agreement, shareholders agreement or other organizational documents of such Person. "Contractual Obligation": as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound. "Credit Documents": this Agreement, the Notes, the Applications, the Subordination Agreement and the Security Documents. "Credit Event": the obligation of any Lender to make a Loan or of the Issuing Lender to issue a Letter of Credit. "Credit Parties": the Borrower and each Subsidiary of the Borrower which is a party to a Credit Document. "Default": any of the events specified in Section 8, whether or not any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "Default Rate": as defined in subsection 2.9(c). "Designated Letters of Credit": letters of credit issued with respect to mine reclamation, workers compensation and other employee benefit liabilities. "Dollars" and "$": dollars in lawful currency of the United States of America. "EBITDA": for any Person, as of the last day of any fiscal quarter, Net Income of such Person for such quarter (excluding without duplication, (w) noncash compensation expenses related to common stock and other equity securities issued to employees, (x) extraordinary or non-recurring gains and losses in accordance with GAAP, (y) gains or losses on discontinued operations and (z) any FAS 121 7 writedowns, in each case, for such quarter), plus (i) consolidated interest expense for such quarter, determined in accordance with GAAP, plus (ii) any minority interests share of income and losses plus (iii) to the extent deducted in computing such Net Income, the sum of all income taxes, depreciation, depletion and amortization of property, plant, equipment and intangibles, in each case, for such quarter plus (iv) any debt extinguishment costs plus (v) non-cash charges due to cumulative effects of changes in accounting principles, in each case for such quarter. "Effective Date": the first date on which all of the conditions precedent set forth in subsection 5.1 have been satisfied. "EPC Contract": a turn-key engineering, procurement and construction contract among the Borrower (or one of its Affiliates) and one or more nationally recognized construction contractors that provides for a guaranteed fixed price and completion date for the Approved Project, and that contains performance and completion obligations that are usual and customary for engineering, procurement and construction contracts for projects substantially similar to the Approved Project (as reasonably determined by the Administrative Agent). "ERISA": the Employee Retirement Income Security Act of 1974, as amended from time to time. "Event of Default": any of the events specified in Section 8, provided that any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "Excess Cash Flow": for any fiscal year of the Borrower, the excess of (a) the sum, without duplication, of (i) Consolidated Net Income for such fiscal year, (ii) the net decrease, if any, in Consolidated Working Capital during such fiscal year, (iii) to the extent deducted in computing such Consolidated Net Income, non-cash interest expense, depreciation, depletion and amortization for such fiscal year, (iv) extraordinary non-cash losses during such fiscal year subtracted in the determination of Consolidated Net Income for such fiscal year, (v) net decrease in deferred income tax assets or net increase in deferred income tax liabilities of the Borrower and its Restricted Subsidiaries for such fiscal year, (vi) non-cash losses in connection with asset dispositions whether or not constituting extraordinary losses and (vii) non-cash ordinary losses in excess of (b) the sum, without duplication, of (i) the aggregate amount of permitted cash Capital Expenditures made by the Borrower and its Restricted Subsidiaries during such fiscal year, (ii) the net increase, if any, in Consolidated Working Capital during such fiscal year, (iii) the aggregate amount of payments of principal in respect of any Indebtedness not prohibited hereunder during such fiscal year (other than prepayments of Revolving Credit Loans not accompanied by reductions of the Commitments and prepayments of other short-term lines of credit), (iv) net increase in deferred income tax assets or net decrease in deferred income tax liabilities of the Borrower and its Restricted Subsidiaries for such fiscal year, (v) extraordinary non-cash gains during such fiscal year added in the determination of Consolidated Net Income for such fiscal year, (vi) non-cash gains in connection with asset dispositions whether or not constituting extraordinary gains and (vii) non-cash ordinary gains. "Excess Cash Flow Payment Date": in respect of any fiscal year, the date on which the Borrower is required to deliver audited financial statements for such fiscal year to each Lender pursuant to subsection 6.1(a). "Existing Notes": the Borrower's 8 7/8% Senior Notes, due 2008 and 9 5/8% Senior Subordinated Notes, due 2008. 8 "Existing Securitization": the accounts receivable securitization financing of P&L Receivables Company LLC, existing as of the Effective Date. "Federal Funds Rate": means, for any day, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighed average of the per annum rates on overnight Federal funds transactions with member banks of the Federal Reserve System arranged by Federal funds brokers as published by the Federal Reserve Bank of New York for such day (or, if such rate is not so published for any day, the average of the rates quoted by three federal funds brokers to the Administrative Agent on such day on such transactions). "Final Maturity Date": March 21, 2010. "Financing Lease": any lease of property, real or personal, the obligations of the lessee in respect of which are required in accordance with GAAP to be capitalized on a balance sheet of the lessee. "First Restated Credit Agreement": as defined in the preamble hereto. "Foreign Subsidiary": any Subsidiary which is organized under the laws of any jurisdiction outside the United States or under the laws of the U.S. Virgin Islands, excluding any such Subsidiary that is, as of the date of determination, treated as (i) a domestic entity or (ii) a partnership or a division of a domestic entity, in each case for United States federal income tax purposes. "FRB": means the Board of Governors of the Federal Reserve System, and any governmental authority succeeding to any of its principal functions. "GAAP": generally accepted accounting principles in the United States of America as in effect from time to time; provided, that with respect to Australian Subsidiaries of the Borrower, "GAAP" shall mean generally accepted accounting principles in Australia to the extent such principles are permitted to be applied in accordance with generally accepted accounting principles in the United States of America. In the event that any "Accounting Change" (as defined below) shall occur and such change results in a change in the method of calculation of financial covenants, standards or terms in this Agreement, then the Borrower and the Administrative Agent agree to enter into negotiations in order to amend such provisions of this Agreement so as to equitably reflect such Accounting Changes with the desired result that the criteria for evaluating the Borrower's financial condition shall be the same after such Accounting Changes as if such Accounting Changes had not been made. Until such time as such an amendment shall have been executed and delivered by the Borrower, the Administrative Agent and the Required Lenders, all financial covenants, standards and terms in this Agreement shall continue to be calculated or construed as if such Accounting Changes had not occurred. "Accounting Changes" refers to changes in accounting principles required by the promulgation of any rule, regulation, pronouncement or opinion by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants or, if applicable, the Securities and Exchange Commission. "Governmental Authority": any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Guarantee and Collateral Agreement": the Amended and Restated Guarantee and Collateral Agreement, dated as of the date hereof, substantially in the form of Exhibit B, among the Borrower, the Subsidiaries from time to time party thereto and the Administrative Agent, for the benefit 9 of the Secured Parties, as the same may be amended, restated, supplemented or otherwise modified from time to time. "Guarantee Obligation": as to any Person (the "guaranteeing person"), any obligation of (a) the guaranteeing person or (b) another Person (including, without limitation, any bank under any letter of credit) to the extent the guaranteeing person has issued a reimbursement, counterindemnity or similar obligation in order to induce the creation of such obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the "primary obligations") of any other third Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, reimbursement obligations under letters of credit and any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall not include (i) indemnification or reimbursement obligations under or in respect of Surety Bonds or Designated Letters of Credit, (ii) ordinary course performance guarantees by any Credit Party of the obligations (other than for the payment of borrowed money) of any other Credit Party and (iii) endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person's maximum reasonably anticipated liability in respect thereof as determined by the Borrower in good faith. "Hedge Agreement": any Interest Rate Agreement, and any currency future or option contract, commodities future or option contract for materials used in the ordinary course of business and other similar agreements. "Indebtedness": of any Person at any date, (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services (other than current trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices and accrued expenses incurred in the ordinary course of business), (b) any other indebtedness of such Person which is evidenced by a note, bond, debenture or similar instrument, (c) all obligations of such Person under Financing Leases, (d) all obligations of such Person in respect of acceptances issued or created for the account of such Person, (e) all liabilities secured by any Lien on any property owned by such Person even though such Person has not assumed or otherwise become liable for the payment thereof, (f) all Attributable Debt of such Person with respect to sale and leaseback transactions of such Person, (g) obligations of such Person in respect of Hedge Agreements (on a net basis with respect to any counterparty), (h) all obligations of such Person for Production Payments from property operated by or on behalf of such Person and (i) all Guarantee Obligations of such Person that have been deemed to be Indebtedness in accordance with subsection 7.4(a). "Insolvency": with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA. 10 "Insolvent": pertaining to a condition of Insolvency. "Interest Payment Date": (a) as to any Base Rate Loan, the last Business Day of each March, June, September and December, (b) as to any LIBOR Loan having an Interest Period of three months or less, the last Business Day of such Interest Period, and (c) as to any LIBOR Loan having an interest period longer than three months, (i) each Business Day which is three months or a whole multiple thereof after the first day of such Interest Period and (ii) the last Business Day of such Interest Period. "Interest Period": with respect to any LIBOR Loan: (a) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such LIBOR Loan and ending one, two, three or six, and to the extent available to all the Lenders, nine or twelve months thereafter, as selected by the Borrower in its notice of borrowing or notice of conversion, as the case may be, given with respect thereto; and (b) thereafter, each period commencing on the last day of the preceding Interest Period applicable to such LIBOR Loan and ending one, two, three or six, and to the extent available to all the Lenders, nine or twelve months thereafter, as selected by the Borrower by irrevocable notice to the Administrative Agent not less than three Business Days prior to the last day of the then current Interest Period with respect thereto; provided that, all of the foregoing provisions relating to Interest Periods are subject to the following: (i) if any Interest Period pertaining to a LIBOR Loan would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding Business Day; (ii) any Interest Period for any Loan that would otherwise extend beyond the Termination Date of such Loan shall end on the Termination Date of such Loan; (iii) any Interest Period pertaining to a LIBOR Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month in which such Interest Period would otherwise be scheduled to end) shall end on the last Business Day of the appropriate calendar month; and (iv) no Interest Period with respect to any portion of any Term Loan shall extend beyond a date on which the Borrower is required to make a scheduled payment of principal of Term Loans unless the sum of (a) the aggregate principal amount of Term Loans that are Base Rate Loans plus (b) the aggregate principal amount of Term Loans that are LIBOR Rate Loans with Interest Periods expiring on or before such date equals or exceeds the principal amount required to be paid on Term Loans on such date. "Interest Rate Agreement": any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate future or option contract, or other similar agreement or arrangement. 11 "Interest Rate Agreement Obligations": the obligations of the Borrower or any of its Subsidiaries to make payments to counterparties under Interest Rate Agreements in the event of the occurrence of a termination event thereunder. "Investments": as defined in subsection 7.9. "Issuing Lender": such Lender or Lenders that agree to act as Issuing Lender at the request of the Administrative Agent and the Borrower. "Joint Venture": any Person (other than a Subsidiary) in which the Borrower and its Subsidiaries collectively hold an ownership interest. "LBMBP II": Lehman Brothers Merchant Banking Partners II L.P., a Delaware limited partnership. "L/C Fee Payment Date": the last Business Day of each March, June, September and December. "L/C Obligations": at any time, an amount equal to the sum of (a) the aggregate then undrawn and unexpired amount of the then outstanding Letters of Credit and (b) the aggregate amount of drawings under Letters of Credit which have not then been reimbursed pursuant to subsection 3.5. "L/C Participants": the collective reference to all the Revolving Credit Lenders other than the Issuing Lender. "Lender" and "Lenders": as defined in the preamble hereto and including the Issuing Lender and the Swing Line Lender; provided that the term "Lenders", when used in the context of a particular Commitment, shall mean Lenders having that Commitment. "Lender Addendum": with respect to any Lender to be a party hereto on the date hereof (other than by assignment) that is not an Original Lender, a Lender Addendum, substantially in the form of Exhibit H, to be executed and delivered by such Lender on the Effective Date as provided in subsection 10.18. "Letters of Credit": as defined in subsection 3.1(a). "LIBOR": with respect to each day during each Interest Period, the rate appearing on Page 3750 of the Telerate Service (or on any successor or substitute page of such service, or any successor to or substitute for such service, providing rate quotations comparable to those currently provided on such page of such service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to commencement of such Interest Period, as the rate of interest for dollar deposits in the approximate amount of the Loan to be made or continued as, or converted into, a LIBOR Rate Loan and having a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then LIBOR shall be the rate of interest per annum determined by the Administrative Agent to be the arithmetic mean (rounded upward to the next 1/16th of 1%) of the rates of interest per annum notified to the Administrative Agent by each Reference Bank as the rate of interest at which dollar deposits in the approximate amount of the amount of the Loan to be made or continued as, or converted into, a LIBOR Rate Loan by such Reference Bank and having a maturity comparable to such Interest Period would be 12 offered to such Reference Bank in the London interbank market at its request at approximately 11:00 a.m. (London time) two Business Days prior to the commencement of such Interest Period. "LIBOR Loans": Loans the rate of interest applicable to which is based upon the LIBOR Rate. "LIBOR Rate": means, for any Interest Period, with respect to LIBOR Loans comprising part of the same borrowing, the rate of interest per annum (rounded upward to the next 1/16th of 1%) determined by the Administrative Agent as follows: LIBOR Rate = LIBOR ----- 1.00 - LIBOR Reserve Percentage "LIBOR Reserve Percentage": for any day for any Interest Period the maximum reserve percentage (expressed as a decimal, rounded upward to the next 1/100th of 1%) in effect on such day (whether or not applicable to any Lender) under regulations issued from time to time by the FRB for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as "Eurocurrency liabilities"). "Lien": any mortgage, deed of trust, charge, pledge, hypothecation, assignment, easement, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement and any Financing Lease having substantially the same economic effect as any of the foregoing). "Loan": any loan made by any Lender pursuant to this Agreement. "Martinka mine": the closed deep mine located in Marion County, West Virginia, also known as the Tygart River Mine. "Material Adverse Effect": a material adverse effect on (a) the business, assets, operations, property or condition (financial or otherwise) of the Borrower and its Restricted Subsidiaries taken as a whole, (b) the validity or enforceability of this or any of the other Credit Documents or the rights or remedies of the Agents or the Lenders hereunder or thereunder or (c) the value of the Collateral taken as a whole or the ability of the Agents and the Lenders to realize thereon. "Materials of Environmental Concern": any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under, or that could give rise to liability under, any applicable Mining and Environmental Law, including, without limitation, asbestos, polychlorinated biphenyls, urea-formaldehyde insulation, gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products. "Mine": any excavation or opening into the earth now and hereafter made from which Coal is or can be extracted on or from any of the properties owned or leased by any Credit Party, together with all appurtenances, fixtures, structures, improvements, and all tangible property of whatsoever kind or nature in connection therewith, including without limitation the Mines described in Schedule 4.23. "Mining and Environmental Laws": any and all applicable current and future federal, state, local and foreign statutes, laws, regulations, guidances, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or other governmental restrictions 13 or common law causes of action relating to mining operations and activities or to the environment or to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment including ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes or to the reclamation of lands. Mining and Environmental Laws shall include, but not be limited to the Federal Coal Leasing Amendments Act, the Surface Mining Control and Reclamation Act, all other land reclamation and use statutes and regulations, the Federal Coal Mine Health and Safety Act, the Comprehensive Environmental Response, Compensation, and Liability Act; the Resource Conservation and Recovery Act; the Toxic Substances Control Act; the Federal Water Pollution Control Act; the Hazardous Materials Transportation Act; the Clean Air Act; the Safe Drinking Water Act; the Occupational Safety and Health Act; the Federal Insecticide, Fungicide and Rodenticide Act; the Endangered Species Act, the Black Lung Act and the Coal Act, each as amended, and their state and local counterparts or equivalents. "Mining and Environmental Permits": any and all permits, licenses, registrations, notifications, exemptions and any other authorization required under any applicable Mining and Environmental Law. "Moody's": Moody's Investor's Service, Inc., or any successor entity. "Mortgages": the collective reference to the mortgages, deeds of trust, fixture filings (whether recorded as part of such mortgages or deeds of trust or as separate instruments), assignments of rent, and any other functionally similar instruments or agreements, securing the obligations under the Credit Documents, and covering certain real property (whether owned or leased) of the Borrower or the appropriate Restricted Subsidiary as contemplated hereunder, to be executed and delivered by the Borrower or such Restricted Subsidiary in form and substance reasonably satisfactory to the Agents, as the same may be amended, supplemented or otherwise modified from time to time (individually, a "Mortgage"). "Multiemployer Plan": a Plan which is a multiemployer plan as defined in Section 3(37) or Section 4001(a)(3) of ERISA. "Net Income": for any Person for any fiscal period, net income of such Person for such period, determined in accordance with GAAP. "Net Proceeds": the aggregate cash proceeds (including Cash Equivalents) received by the Borrower or any of its Restricted Subsidiaries in respect of: (a) any issuance after the Effective Date by the Borrower or any of its Restricted Subsidiaries of (i) indebtedness for borrowed money and (ii) any other indebtedness of the Borrower or its Restricted Subsidiaries evidenced by a note, bond, debenture or similar instrument; (b) any Asset Sale by the Borrower or any Restricted Subsidiary; and (c) any cash payments received in respect of promissory notes or other evidences of indebtedness delivered to the Borrower or such Restricted Subsidiary in respect of any such Asset Sale; 14 in each case net of (without duplication) (i) (A) in the case of an Asset Sale, the amount required to repay any Indebtedness (other than the Loans) secured by a Lien on any assets of the Borrower or a Subsidiary of the Borrower that are sold or otherwise disposed of in connection with such Asset Sale and (B) reasonable and appropriate amounts established by the Borrower or such Subsidiary, as the case may be, as a reserve against liabilities associated with such Asset Sale and retained by the Borrower or such Subsidiary, (ii) the reasonable expenses (including legal fees and brokers' and underwriters' commissions, lenders fees, credit enhancement fees, accountants' fees, investment banking fees, survey costs, title insurance premiums and other customary fees, in any case, paid to third parties or, to the extent permitted hereby, Affiliates) incurred in effecting such issuance or sale and (iii) any taxes reasonably attributable to such sale and reasonably estimated by the Borrower or such Subsidiary to be actually payable. "Non-Excluded Taxes": as defined in subsection 2.15(a). "Non-Recourse Debt" means Indebtedness (i) as to which neither the Borrower nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness) other than a pledge of the equity interests of any Unrestricted Subsidiary, (b) is directly or indirectly liable (as a guarantor or otherwise) other than by virtue of a pledge of the equity interests of any Unrestricted Subsidiary, or (c) constitutes the lender; (ii) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against any Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness (other than the Obligations) of the Borrower or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and (iii) as to which the lenders thereunder will not have any recourse to the Capital Stock or assets of the Borrower or any of its Restricted Subsidiaries (other than the equity interests of any Unrestricted Subsidiary). "Non-U.S. Lender": as defined in subsection 2.15(b). "Notes": the collective reference to the Term Notes, the Revolving Credit Notes and the Swing Line Note, if any, evidencing Loans. "Notice of Borrowing": as defined in subsection 2.2. "Obligations": as defined in the Security Documents. "Operating Equipment": all surface and subsurface machinery, equipment, facilities and other property of every kind or nature now owned or hereafter acquired (by purchase or lease) by the Borrower or any Subsidiary, which are useful for the processing or transportation of Coal, including, but not by way of limitation, all hoisting shafts, air shafts, draglines, miners, longwall units, engines, boilers, dynamos, generators, belts and conveyor belts and other electrical apparatus, drills, machinery and tipples, store houses and other buildings of every kind, used in connection with the Mines; and all trucks, shovels, endloaders, dozers, loaders, tools, supplies, equipment and personal property of every kind or nature now owned or hereafter acquired by the Borrower or any Subsidiary for use, or used in connection with the Mines or the processing and transportation of Coal. "Original Lender": as defined in the preamble to this Agreement. "Participants": as defined in subsection 10.6(b). 15 "Partner Support": the guarantee or such other credit support as required by the Qualified Project Lenders provided by each of the Project Partners in support of the Project Construction Financing. "Partner Support Amount": the dollar amount of the aggregate Partner Support. "Partner Support Percentage": the Partner Support Amount divided by the total dollar amount, including accrued interest and fees, of the Project Construction Financing. "Patent Security Agreements": the agreements dated as of June 9, 1998 by certain Credit Parties in favor of the Administrative Agent (as defined in the First Restated Credit Agreement), for the benefit of the Agents (as defined in the First Restated Credit Agreement) and the Original Lenders, as amended, modified, restated, supplemented and in effect from time to time. "PBGC": the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA, or any successor thereto. "Permitted Liens": Liens permitted to exist under subsection 7.3. "Person": an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature. "PHCI": Peabody Holding Company, Inc., a New York corporation. "Plan": at a particular time, any employee benefit plan as defined in Section 3(3) of ERISA which the Borrower or any Commonly Controlled Entity maintains, administers, contributes to or is required to contribute to, or under which the Borrower or any Commonly Controlled Entity could reasonably be expected to incur any liability. "Prairie State Power Generation Project" or "Prairie State": that certain project to construct and operate an approximately 1,500 megawatt capacity coal-fired electricity generation plant on an approximately 1,150 acre reclaimed mine site owned by an Affiliate of the Borrower in Washington County, Illinois. Prairie States shall be fueled with coal substantially extracted from coal reserves owned or contributed by the Borrower or one of its Affiliates by a coal mining facility to be constructed as part of the Prairie State Power Generation Project, both of which shall be located immediately adjacent to the power generation facility. "Production Payments": with respect to any Person, all production payment obligations and other similar obligations with respect to coal and other natural resources of such Person that are recorded as a liability or deferred revenue on the financial statements of such Person in accordance with GAAP. "Project Construction Financing": limited recourse loans, advances or lease proceeds provided by the Qualified Project Lenders sufficient to provide at least 70% of the Total Project Cost. "Project Entity": the partnership or corporation formed for the purpose of constructing and operating the Approved Project. "Project Guarantee Obligation": the guarantee by one or more of the Credit Parties in support of the Project Construction Financing, provided that the amount of such Project Guarantee 16 Obligation shall represent no larger a percentage of the Partner Support Amount than the Borrower's percentage equitable ownership interest in the Project Entity. "Project Guarantee Obligations Conditions Precedent": the following conditions: (i) the Borrower (or an Affiliate thereof) shall have executed a partnership agreement reasonably satisfactory to the Administrative Agent establishing the Project Entity with one or more Qualified Partners (together with the Borrower, the "Project Partners"), at least one of which shall be a Qualified Operating Partner with an economic interest in the Project Entity of not less than 25%; (ii) the Borrower shall hold no more than a 50% economic and voting interest in the Project Entity; (iii) the EPC Contract shall have been executed and delivered by the Project Entity and each other party thereto; (iv) the Project Entity shall have received written financing commitments from Qualified Project Lenders for the Project Construction Financing, such commitments subject only to provision of (a) documented Partner Support as required by the Qualified Project Lenders and (b) receipt of financing commitments for permanent take-out financing; (v) the Project Entity shall have received documented evidence reasonably satisfactory to the Administrative Agent of Partner Support from each of the Qualified Partners executed substantially simultaneously with the Project Guarantee Obligation; and (vi) receipt by the Administrative Agent and the Syndication Agents of a satisfactory report from a reputable and experienced industry consultant, reasonably satisfactory to the Administrative Agent and the Syndication Agents, confirming the feasibility and economic viability of the Approved Project. "Project Partners": as defined in the definition of "Project Guarantee Obligations Conditions Precedent". "Properties": as defined in subsection 4.16. "Prudential Note": that certain 5% Subordinated Income Note Due March 1, 2007, made by PHCI in favor of The Prudential Insurance Company of America (as successor-in-interest to Kennecott Copper Corporation), dated June 30, 1977 (as amended by Amendment No. 1 dated as of February 8, 1991, and Amendment No. 2 dated as of September 9, 1992), in a principal amount as of the Effective Date of approximately $90,000,000. "Purchase Agreement": the Purchase Agreement, dated as of March 14, 2003, among the Borrower, the guarantors named therein, Lehman Brothers Inc., Morgan Stanley & Co. Incorporated and the other initial purchasers named therein. "Qualified Operating Partner": a Qualified Partner that is a nationally recognized operator of coal-fired power generation plants and otherwise reasonably satisfactory to the Arrangers. 17 "Qualified Partner": a corporation or financial institution rated at least BBB and Baa2 by S&P and Moody's, respectively, and otherwise reasonably satisfactory to the Arrangers. "Qualified Project Lenders": one or more financial institutions rated at least BBB+ and Baa1 by S&P and Moody's, respectively, with tangible capital of no less than $500,000,000 and with specific experience in the financing of projects substantially similar to the Approved Project. "Reference Bank": each of the Administrative Agent and Wachovia Bank, National Association. "Refinancing Indebtedness": as defined in subsection 7.2(i). "Refunded Swing Line Loan": as defined in subsection 2.1(b)(iii). "Register": as defined in subsection 10.6(d). "Registration Rights Agreement": the Registration Rights Agreement, dated as of March 21, 2003, among the Borrower, the guarantors named therein and the initial purchasers named therein. "Regulation H": Regulation H of the FRB as in effect from time to time. "Regulation U": Regulation U of the FRB as in effect from time to time. "Regulation X": Regulation X of the FRB as in effect from time to time. "Reimbursement Obligation": the obligation of the Borrower to reimburse the Issuing Lender pursuant to subsection 3.5 for amounts drawn under Letters of Credit. "Reorganization": with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA. "Reportable Event": any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the thirty-day notice period is waived under the regulations of the PBGC. "Required Lenders": at any time, Lenders the Commitment Percentages for all Types of Loans of which aggregate more than 50%. "Requirement of Law": as to any Person, the Constitutional Documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Requisite Class Lenders": at any time, (a) for the Class Lenders having Term Loan Exposure, Lenders having or holding more than 50% of the aggregate Term Loan Exposure of all Lenders and (b) for the Class Lenders having Revolving Credit Loan Exposure, Lenders having or holding more than 50% of the aggregate Revolving Credit Loan Exposure of all Lenders. "Responsible Officer": the chief executive officer, the president or any vice president of the Borrower or, with respect to financial matters, the chief financial officer or treasurer of the Borrower. 18 "Restricted Subsidiary" of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary. For the avoidance of doubt, as of the Effective Date Black Beauty is a Restricted Subsidiary. "Revolving Credit Commitment": the commitment of a Lender, as set forth in the Register (with respect to any Original Lender that is also a Lender hereunder on the Effective Date) or as set forth on Schedule 1 to the Lender Addendum delivered by such Lender (or, as the case may be, in the Assignment and Acceptance pursuant to which such Lender became a party hereto, as the same may be changed from time to time pursuant to the terms hereof) to make Revolving Credit Loans to the Borrower pursuant to subsection 2.1(a)(ii) and, to issue and/or purchase participations in Letters of Credit pursuant to Section 3; and "Revolving Credit Commitments" means such commitments of all Lenders in the aggregate, which shall be $600,000,000. "Revolving Credit Lender": any Lender having a Revolving Credit Commitment or a Revolving Credit Loan outstanding. "Revolving Credit Loans": the Loans made (or deemed made) by Revolving Credit Lenders to the Borrower pursuant to subsection 2.1(a)(ii). "Revolving Credit Loan Exposure": with respect to any Lender as of any date of determination, (i) if there are no outstanding Letters of Credit or Revolving Credit Loans, that Lender's Revolving Credit Commitment, and (ii) otherwise, the sum of (a) the aggregate outstanding principal amount of the Revolving Credit Loans of that Lender plus (b) in the event that Lender is an Issuing Lender, the aggregate face amount in respect of all Letters of Credit issued by that Lender (in each case net of any participations purchased by other Lenders in such Letters of Credit or any unreimbursed drawings thereunder) plus (c) in the event that such Lender is the Swing Line Lender, the aggregate principal amount of Swing Line Loans made by such Lender then outstanding (net of any participations purchased by other Lenders in such Swing Line Loans) plus (d) the aggregate amount of all participations purchased by that Lender in any outstanding Swing Line Loans or Letters of Credit or any unreimbursed drawings under any Letters of Credit. "Revolving Credit Note": as defined in subsection 2.5(g)(B). "Revolving Loan Termination Date": March 21, 2008. "S&P": Standard and Poor's Ratings Group, or any successor entity. "Secured Parties": collectively, the Agents, the Lenders and, with respect to any Specified Hedge Agreement, any affiliate of any Lender party thereto (or any Person that was a Lender or an affiliate thereof when such Specified Hedge Agreement was entered into) that has agreed to be bound by the provisions of Section 7.2 of the Guarantee and Collateral Agreement as if it were a party thereto and by the provisions of Section 9 hereof as if it were a Lender party hereto. "Security Documents": the collective reference to the Guarantee and Collateral Agreement, the Patent Security Agreements, the Trademark Security Agreement, the Mortgages and all other security documents now or hereafter delivered to the Administrative Agent in connection with this Agreement granting a Lien on any asset or assets of any Person to secure the obligations and liabilities of the Borrower under the First Restated Credit Agreement and/or this Agreement and under any of the other Credit Documents or to secure any guarantee of any such obligations and liabilities. 19 "Senior Notes": $650,000,000 in aggregate principal amount of the Borrower's 6 7/8% Senior Notes, due 2013 (the "Initial Senior Notes"), issued on the Effective Date, and the senior notes of the Borrower, having the same principal amount and other terms as the Initial Senior Notes, issued in exchange for the Initial Senior Notes as contemplated by the Senior Notes Documents. "Senior Notes Documents": the Senior Notes Indenture, the Registration Rights Agreement, the Purchase Agreement and the Senior Notes. "Senior Notes Indenture": the Indenture, dated as of March 21, 2003, among the Borrower, the guarantors named therein and US Bank National Association, as trustee, pursuant to which the Senior Notes are issued. "Similar Business": coal production, coal mining, coal brokering, coal transportation, mine development, electricity generation, power/energy sales and other energy related businesses, coal supply contract restructurings, ash disposal, environmental remediation, coal and coal bed methane exploration, production, marketing, transportation and distribution, real estate development and other related businesses, and activities of the Borrower and its Subsidiaries as of the date hereof and any business or activity that is reasonably similar thereto or a reasonable extension, development or expansion thereof or ancillary thereto. "Single Employer Plan": any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan. "Specified Hedge Agreement": any Hedge Agreement (a) entered into by (i) the Borrower or any of its Subsidiaries and (ii) any Lender or any affiliate thereof, or any Person that was a Lender or an affiliate thereof when such Hedge Agreement was entered into as counterparty and (b) which has been designated by such Lender and the Borrower, by notice to the Administrative Agent and the Syndication Agents not later than 90 days after the execution and delivery thereof by the Borrower or such Subsidiary, as a Specified Hedge Agreement; provided that the designation of any Hedge Agreement as a Specified Hedge Agreement shall not create in favor of any Lender or affiliate thereof that is a party thereto any rights in connection with the management or release of any Collateral or of the obligations of any Guarantor under the Guarantee and Collateral Agreement. "Specified Subsidiary": any Subsidiary whose EBITDA determined for the fiscal quarter most recently ended prior to the time of determination hereunder was greater than or equal to 20% of the Consolidated EBITDA of the Borrower and its Subsidiaries for such fiscal quarter, as determined in accordance with GAAP. "Subordination Agreement": the Amended and Restated Subordination Agreement, dated as of the date hereof, substantially in the form of Exhibit G, among the Credit Parties, as subordinated creditors, in favor of the Agents and the Lenders, as senior creditors, pursuant to which all Indebtedness of any Credit Party to any other Credit Party is subordinated to the Obligations. "Subsidiary": as to any Person, a corporation, partnership or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, directly or indirectly, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower. 20 "Surety Bonds": surety bonds obtained by the Borrower or any Restricted Subsidiary in the ordinary course of business consistent with past practice and the indemnification or reimbursement obligations of the Borrower or such Restricted Subsidiary in connection therewith as to which reserves with respect to the underlying obligations are maintained in accordance with GAAP. "Swing Line Lender": means Fleet National Bank or such other Lender that agrees to act as Swing Line Lender at the request of the Administrative Agent and the Borrower. "Swing Line Loans": as defined in subsection 2.1(b). "Swing Line Note": as defined in subsection 2.1(b)(ii). "Tangible Assets": at any date, (a) the sum of all amounts that would, in accordance with GAAP, be set forth opposite the caption "total assets" (or any like caption) on a consolidated balance sheet of the Borrower and its Restricted Subsidiaries at such date minus (b) the sum of all amounts that would, in accordance with GAAP, be set forth opposite the captions "goodwill" or other intangible categories (or any like caption) on a consolidated balance sheet of the Borrower and its Restricted Subsidiaries on such date. "Term Lender": any Lender having a Term Loan Commitment or a Term Loan outstanding. "Term Loans": the Loans made by Term Lenders to the Borrower pursuant to subsection 2.1(a)(i). "Term Loan Commitment": the commitment of a Term Lender, as set forth in the Register (with respect to any Original Lender that is also a Lender hereunder on the Effective Date) or as set forth on Schedule 1 to the Lender Addendum delivered by such Lender (or, as the case may be, in the Assignment and Acceptance pursuant to which such Lender became a party hereto, as the same may be changed from time to time pursuant to the terms hereof), to make a Term Loan to the Borrower pursuant to subsection 2.1(a)(i); and "Term Loan Commitments" means such commitments of all Term Lenders in the aggregate, which shall be $450,000,000. "Term Loan Exposure": with respect to a Lender of a Term Loan as of any date of determination, (i) prior to the termination of all of a Lender's Commitment with respect to the Term Loans, that Lender's Commitment with respect to Term Loans (or any portion thereof that has not been terminated) plus the outstanding principal amount of the Term Loan of that Lender, and (ii) after the termination of all of a Lender's Commitment with respect to the Term Loans, the outstanding principal amount of the Term Loan of that Lender. "Term Loan Termination Date": March 21, 2010. "Term Note": as defined in subsection 2.5(g)(A). "Termination Date": (i) with respect to Term Loans, the Term Loan Termination Date and (ii) with respect to Revolving Credit Loans and Swing Line Loans, the Revolving Loan Termination Date. "Thoroughbred Power Generation Project" or "Thoroughbred": that certain project to construct and operate an approximately 1,540 megawatt capacity coal-fired electricity generation plant on an approximately 4,100 acre reclaimed mine site owned by an Affiliate of the Borrower in Muhlenberg 21 County, Kentucky. Thoroughbred shall be fueled with coal substantially extracted from coal reserves owned or contributed by the Borrower or one of its Affiliates at a coal mining facility to be constructed as part of the Thoroughbred Power Generation Project, both of which shall be located immediately adjacent to the power generation facility. "Title Opinion": as defined in subsection 6.10(c). "Title Policy": as defined in subsection 6.10(c). "Total Assets": the total assets of the Borrower and its Consolidated Subsidiaries, as shown on the most recently available Consolidated balance sheet of the Borrower. "Total Commitments": the sum of the Revolving Credit Commitments and the Term Loan Commitments. "Total Project Cost": the aggregate funds necessary to bring the Approved Project into commercial operation, including, without limitation, interest and other financing costs incurred during the construction period, as specified in the EPC Contract. "Trademark Security Agreement": the agreement dated as of June 9, 1998 by a certain Credit Party in favor of the Administrative Agent (as defined in the First Restated Credit Agreement), for the benefit of the Agents (as defined in the First Restated Credit Agreement) and the Original Lenders, as amended, modified, restated, supplemented and in effect from time to time. "Tranche": the collective reference to certain LIBOR Loans, the then current Interest Periods with respect to all of which begin on the same date and end on the same later date (whether or not such Loans shall originally have been made on the same day); Tranches may be identified as "LIBOR Tranches". "Transferee": as defined in subsection 10.6(f). "TXU Europe": TXU Europe Limited, a Company organized under the laws of the England and Wales. "Type": a Revolving Credit Loan, a Term Loan or a Swing Line Loan. "Uniform Customs": the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, as the same may be amended from time to time. "Unrestricted Subsidiary": any Subsidiary of the Borrower that the Borrower notifies the Administrative Agent in writing is an "Unrestricted Subsidiary", including, as of the Effective Date, those entities listed on Schedule V hereto, but only to the extent that such Subsidiary (a) has no Indebtedness other than Non-Recourse Debt; (b) is not a party to any agreement, contract, arrangement or understanding with the Borrower or any Restricted Subsidiary of the Borrower except as expressly permitted by subsection 7.11; (c) is a Person with respect to which neither the Borrower nor any of its Restricted Subsidiaries has any direct or indirect obligation (x) to subscribe for additional equity interests in such Person, except with respect to Investments permitted under subsection 7.9(l), or (y) to maintain or preserve such Person's financial condition (except with respect to performance guarantees expressly permitted under subsection 7.4(f)) or to cause such Person to achieve any specified levels of operating results; and (d) has not guaranteed or otherwise directly or indirectly provided credit support for any 22 Indebtedness of the Borrower or any of its Restricted Subsidiaries. If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary (or is redesignated by the Borrower as a Restricted Subsidiary), it shall thereafter cease to be an Unrestricted Subsidiary for purposes of this Agreement, any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the Borrower as of such date and any Investments in such Subsidiary shall be deemed to be Investments in a Restricted Subsidiary of the Borrower as of such date (and, if such Indebtedness or Investments are not permitted to be incurred hereunder the Borrower shall be in default under this Agreement). At the time of any designation by the Borrower of any Restricted Subsidiary as an Unrestricted Subsidiary, such designation shall be deemed (A) an Investment in an Unrestricted Subsidiary in an amount equal to the sum of (i) the net worth of such designated Restricted Subsidiary immediately prior to such designation (such net worth to be calculated without regard to any Guarantee Obligation incurred by such designated Restricted Subsidiary with respect to the Obligations) and (ii) the aggregate principal amount of any Indebtedness owed by such designated Restricted Subsidiary to the Borrower or any other Restricted Subsidiary immediately prior to such designation, all calculated, except as set forth in the parenthetical to clause (i), on a consolidated basis in accordance with GAAP and (B) an Asset Sale which must comply with the provisions of subsections 7.6(b), (l) or (n). "Upstream Payment": as defined in subsection 7.7. "U.S. Taxes": any tax, assessment, or other charge or levy and any liabilities with respect thereto, including any penalties, additions to tax, fines or interest thereon, imposed by or on behalf of the United States or any taxing authority thereof. "Usage Ratio": as of any date, the ratio of (a) the principal amount of all Revolving Credit Loans and L/C Obligations outstanding on such date to (b) the aggregate Revolving Credit Commitments on such date, as determined by the Administrative Agent. 1.2 Other Definitional Provisions. (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in any Credit Document or any certificate or other document made or delivered pursuant hereto. (b) As used herein and in any Credit Document, and any certificate or other document made or delivered pursuant hereto, accounting terms relating to the Borrower and its Subsidiaries not defined in subsection 1.1 and accounting terms partly defined in subsection 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP. (c) The words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, subsection, Schedule and Exhibit references are to this Agreement unless otherwise specified. (d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. 1.3 Interrelationship with First Restated Credit Agreement. As stated in the preamble hereof, this Credit Agreement is intended to amend and restate the provisions of the First Restated Credit Agreement and, notwithstanding any substitution of Notes as of the Effective Date, except as expressly modified herein, (a) all of the terms and provisions of the First Restated Credit Agreement shall continue to apply for the period prior to the Effective Date, including any determinations of payment dates, interest rates, Events of Default or any amount that may be payable to the Agents (as defined in the First Restated Credit Agreement) or the Original Lenders (or their assignees or 23 replacements hereunder), and (b) the Obligations (as defined in the First Restated Credit Agreement) under the First Restated Credit Agreement shall continue to be paid or prepaid on or prior to the Effective Date, and be secured by the Collateral, and shall from and after the Effective Date continue to be owing and be subject to the terms of this Credit Agreement. All references in the Notes and the other Credit Documents to (i) the First Restated Credit Agreement or the "Credit Agreement" shall be deemed to include references to this Credit Agreement and (ii) the "Lenders" or a "Lender" or to the "Agents" or any Agent shall mean such terms as defined in this Credit Agreement. As of the Effective Date all of the covenants set forth in the First Restated Credit Agreement are of no further force and effect, it being understood that all obligations of the Borrower with respect to the Obligations (as defined in the First Restated Credit Agreement) shall be governed by this Credit Agreement from and after the Effective Date. 1.4 Confirmation of Existing Obligations. The Borrower hereby (i) confirms and agrees that it is truly and justly indebted to the Lenders (as assignees of the Original Lenders) in the aggregate amount of the Obligations (as defined in the First Restated Credit Agreement) outstanding immediately prior to the Effective Date, including, without limitation, all accrued and unpaid interest, fees and expenses that are due and owing in respect thereto, (ii) reaffirms and admits the validity and enforceability of this Agreement and the other Credit Documents (including the granting of liens and security interests in the Collateral) and all of its obligations thereunder and (iii) agrees and admits that, as of the date hereof, it has no defenses to, or offsets or counterclaim against, any of its obligations to the Agents or any Lender under the Credit Documents of any kind whatsoever. Section 2. AMOUNT AND TERMS OF COMMITMENTS AND LOANS 2.1 Commitments. (a) Subject to the terms and conditions hereof, each Lender severally agrees to make the loans described in this subsection 2.1(a), as applicable, to the Borrower. (i) Term Loans. Each Term Lender severally agrees to make a term loan to the Borrower on the Effective Date in an aggregate principal amount equal to such Lender's Term Loan Commitment. Amounts borrowed under this subsection 2.1(a)(i) and subsequently repaid may not be reborrowed. (ii) Revolving Credit Loans. To the extent that any Revolving Credit Loans are outstanding under the First Restated Credit Agreement on the Effective Date, each Revolving Credit Lender shall be deemed to have made Revolving Credit Loans to the Borrower on the Effective Date in an aggregate principal amount equal to such Lender's Commitment Percentage of all Revolving Credit Loans outstanding on the Effective Date. In addition, subject to the immediately following sentence, each Revolving Credit Lender severally agrees to make revolving credit loans to the Borrower, from time to time during the Commitment Period, in an aggregate principal amount at any one time outstanding which, when added to the aggregate principal amount of outstanding Swing Line Loans made by such Lender (or in which such Lender has purchased a participation) and such Lender's Commitment Percentage of (A) the then outstanding L/C Obligations and (B) any Revolving Credit Loans then outstanding, does not exceed the amount of such Lender's Revolving Credit Commitment. During the Commitment Period, the Borrower may use the Revolving Credit Commitments by borrowing, prepaying the Revolving Credit Loans, in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof. (b) (i) Subject to the terms and conditions hereof, the Swing Line Lender agrees to make swing line loans (individually, a "Swing Line Loan"; collectively, the "Swing Line Loans") to the Borrower from time to time during the Commitment Period in an aggregate principal amount at any one time outstanding not to exceed $50,000,000; provided, that no Swing Line Loan shall be made if, after giving effect thereto and to the simultaneous use of the proceeds thereof, the aggregate principal amount 24 of Revolving Credit Loans then outstanding plus the aggregate principal amount of Swing Line Loans then outstanding, plus the aggregate amount of L/C Obligations then outstanding would exceed the Revolving Credit Commitments of the Revolving Credit Lenders. Until the Revolving Loan Termination Date, amounts borrowed by the Borrower under this subsection 2.1(b) may be repaid and reborrowed. All Swing Line Loans shall be made as Base Rate Loans and may not be converted into LIBOR Loans. In order to borrow a Swing Line Loan, the Borrower shall give the Swing Line Lender, with a copy to the Administrative Agent, irrevocable notice (which notice must be received by the Swing Line Lender prior to 12:00 Noon, New York City time) on the requested Borrowing Date specifying the amount of the requested Swing Line Loan which shall be in a minimum amount of $500,000 or whole multiples of $100,000 in excess thereof. The proceeds of the Swing Line Loan will be made available by the Swing Line Lender to the Borrower at the office of the Swing Line Lender by crediting the account of the Borrower at such office with such proceeds. (ii) If requested by the Swing Line Lender, the Swing Line Loans shall be evidenced by a promissory note of the Borrower, substantially in the form of Exhibit A-3 (the "Swing Line Note"), with appropriate insertions, payable to the order of the Swing Line Lender and representing the obligation of the Borrower to pay the unpaid principal amount of the Swing Line Loans, with interest thereon as prescribed in subsection 2.9. The Swing Line Note shall (i) be dated the Effective Date, (ii) be stated to mature on the Revolving Loan Termination Date and (iii) bear interest, payable on the dates specified in 2.9, for the period from the date thereof to the Revolving Loan Termination Date on the unpaid principal amount thereof from time to time outstanding at the applicable interest rate per annum specified in subsection 2.9. (iii) The Swing Line Lender, at any time in its sole and absolute discretion, may on behalf of the Borrower (which hereby irrevocably directs the Swing Line Lender to act on its behalf) request each Lender, including the Swing Line Lender, to make a Revolving Credit Loan (which shall be a Base Rate Loan) in an amount equal to such Lender's Commitment Percentage with respect to Revolving Credit Loans of the Swing Line Loans (the "Refunded Swing Line Loans") outstanding on the date such notice is given. Unless any of the events described in subsection 8(f) shall have occurred (in which event the procedures of subsection 2.1(b)(iv) shall apply) each Lender shall, not later than 12:00 P.M., New York City time, on the Business Day next succeeding the date on which such notice is given, make available to the Swing Line Lender in immediately available funds the amount equal to the Revolving Credit Loan to be made by such Lender. The proceeds of such Revolving Credit Loans shall be immediately applied to repay the Refunded Swing Line Loans. Upon any request by the Swing Line Lender to the Lender pursuant to this subsection 2.1(b)(iii), the Administrative Agent shall promptly give notice to the Borrower of such request. (iv) If prior to the making of a Revolving Credit Loan pursuant to subsection 2.1(b)(iii) one of the events described in subsection 8(f) shall have occurred, each Lender will, on the date such Loan was to have been made, purchase an undivided participating interest in the Swing Line Loans in an amount equal to its Commitment Percentage with respect to Revolving Credit Loans. Each Lender will immediately transfer to the Swing Line Lender, in immediately available funds, the amount of its participation. (v) Whenever, at any time after the Swing Line Lender has received from any Lender such Lender's participating interest in a Swing Line Loan, the Swing Line Lender receives any payment on account thereof, the Swing Line Lender will distribute to such Lender its participating interest in such amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender's participating interest was outstanding and funded); provided, however, that in the event that such payment received by the Swing Line Lender is required to be returned, such 25 Lender will return to the Swing Line Lender any portion thereof previously distributed by the Swing Line Lender to it. (vi) Each Lender's obligation to purchase participating interests pursuant to subsection 2.1(b)(iv) shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, (a) any set-off, counterclaim, recoupment, defense or other right which such Lender or the Borrower may have against the Swing Line Lender, any other Lender or anyone else for any reason whatsoever, (b) the occurrence or continuance of any Default or Event of Default; (c) any adverse change in the condition (financial or otherwise) of the Borrower; (d) any breach of this Agreement by the Borrower or any other Lender; or (e) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. (c) Except for Swing Line Loans, which shall be Base Rate Loans, the Loans may from time to time be (i) LIBOR Loans, (ii) Base Rate Loans or (iii) a combination thereof, as determined by the Borrower and notified to the Administrative Agent in accordance with subsections 2.2 and 2.7, provided that no Revolving Credit Loan shall be made as a LIBOR Loan after the day that is one month prior to the Termination Date with respect to such Loan. 2.2 Procedure for Borrowing. The Borrower may borrow under the Commitments during the Commitment Period on any Business Day, provided that the Borrower shall give the Administrative Agent irrevocable notice substantially in the form attached as Exhibit D (a "Notice of Borrowing") (which notice must be received by the Administrative Agent prior to (a) 11:00 A.M., New York City time, three Business Days prior to the requested Borrowing Date, in the case of LIBOR Loans, (b) 11:00 A.M., New York City time, one Business Day prior to the requested Borrowing Date in the case of a Base Rate Loan and, (c) 11:00 A.M., New York City time, on the requested Borrowing Date in the case of a Swing Line Loan), specifying (i) the amount to be borrowed of each Type of Loan, (ii) the requested Borrowing Date, (iii) whether the borrowing is to be of LIBOR Loans, Base Rate Loans or a combination thereof and (iv) if the borrowing is to be entirely or partly of LIBOR Loans, the respective lengths of the initial Interest Periods therefor. Each borrowing under the Commitments shall be in an amount equal to (x) in the case of Base Rate Loans (other than Swing Line Loans), $2,000,000 or a whole multiple of $100,000 in excess thereof (or, if the then Available Commitments are less than $2,000,000, such lesser amount), (y) in the case of Swing Line Loans, as provided in subsection 2.1(b)(i) and (z) in the case of LIBOR Loans, $5,000,000 or a whole multiple of $100,000 in excess thereof. Upon receipt of any such notice from the Borrower, the Administrative Agent shall promptly notify each applicable Lender thereof. Each such Lender will make the amount of its pro rata share of each borrowing available to the Administrative Agent for the account of the Borrower at the office of the Administrative Agent specified in subsection 10.2 prior to 11:00 A.M., New York City time (in the case of LIBOR Loans) or 2:30 P.M., New York City time (in the case of Base Rate Loans), on the Borrowing Date requested by the Borrower in funds immediately available to the Administrative Agent. Such borrowing will then be made available to the Borrower by the Administrative Agent crediting the account of the Borrower on the books of such office with the aggregate of the amounts made available to the Administrative Agent by the Lenders and in like funds as received by the Administrative Agent. All notices given by the Borrower under this subsection 2.2 may be made by telephonic notice promptly confirmed in writing. 2.3 Commitment Fee. The Borrower agrees to pay to the Administrative Agent for the account of each Revolving Credit Lender a commitment fee for the period from and including the first day of the Commitment Period to and including the Revolving Loan Termination Date, computed at the Commitment Fee Rate on the average daily amount of the Available Commitment of such Revolving Credit Lender during the period for which payment is made, payable in arrears within 15 days after the last Business Day of each March, June, September and December and on the Revolving Loan Termination Date, commencing on the first of such dates to occur after the date hereof. 26 2.4 Termination or Reduction of Revolving Credit Commitments. The Borrower shall have the right, upon not less than three Business Days' written notice to the Administrative Agent, to terminate the Revolving Credit Commitments or, from time to time, to reduce the amount of the Revolving Credit Commitments ratably among the Revolving Credit Lenders; provided that no such termination or reduction shall be permitted if, after giving effect thereto and to any prepayments of the Revolving Credit Loans made on the effective date thereof, the aggregate principal amount of the Revolving Credit Loans then outstanding, when added to the then outstanding L/C Obligations and the outstanding Swing Line Loans, would exceed the Revolving Credit Commitments then in effect. Any such reduction shall be in an amount equal to $5,000,000 or a whole multiple of $1,000,000 in excess thereof and shall reduce permanently the Revolving Credit Commitments then in effect. 2.5 Repayment of Loans; Evidence of Debt. (a) Scheduled Payments of Term Loans. The Borrower shall make principal payments on the Term Loans on March 31, June 30, September 30 and December 31 of each year, commencing on June 30, 2003, in the amounts set forth opposite the corresponding Payment Date as follows:
Scheduled Repayment of Payment Date Term Loans - ------------ ---------- 6/30/03 $ 1,125,000 9/30/03 $ 1,125,000 12/31/03 $ 1,125,000 3/31/04 $ 1,125,000 6/30/04 $ 1,125,000 9/30/04 $ 1,125,000 12/31/04 $ 1,125,000 3/31/05 $ 1,125,000 6/30/05 $ 1,125,000 9/30/05 $ 1,125,000 12/31/05 $ 1,125,000 3/31/06 $ 1,125,000 6/30/06 $ 1,125,000 9/30/06 $ 1,125,000 12/31/06 $ 1,125,000 3/31/07 $ 1,125,000 6/30/07 $ 1,125,000 9/30/07 $ 1,125,000 12/31/07 $ 1,125,000 3/31/08 $ 1,125,000 6/30/08 $ 1,125,000 9/30/08 $ 1,125,000 12/31/08 $ 1,125,000 3/31/09 $ 1,125,000 6/30/09 $105,750,000 9/30/09 $105,750,000 12/31/09 $105,750,000 Termination Date $105,750,000
27 provided that the scheduled installments of principal of the Term Loans set forth above shall be reduced in connection with any voluntary or mandatory prepayments of the Term Loans in accordance with subsection 2.6 (as provided in such subsection); and provided further that the Term Loans and all other amounts owed hereunder with respect to the Term Loans shall be paid in full no later than the Termination Date, and the final installment payable by the Borrower in respect of the Term Loans on such date shall be in an amount, if such amount is different from that specified above, sufficient to repay all amounts owing by the Borrower under this Agreement with respect to the Term Loans. (b) Payments on Revolving Credit Loans and Swing Line Loans. The Borrower hereby unconditionally promises to pay to the Administrative Agent on the Revolving Loan Termination Date (or such earlier date on which the Loans become due and payable pursuant to Section 8) (i) for the account of each Revolving Credit Lender the then unpaid principal amount of each Revolving Credit Loan of such Lender and all other amounts owing to such Lender hereunder with respect to such Revolving Credit Loan and (ii) for the account of the Swing Line Lender (and each other Revolving Credit Lender that has purchased a participation in then outstanding Swing Line Loans) the then unpaid principal amount of Swing Line Loans and all other amounts owed to such Lender hereunder with respect to the Swing Line Loans. (c) Interest. The Borrower hereby further agrees to pay interest on the unpaid principal amount of the Loans from time to time outstanding from the date such Loans are made until payment in full thereof at the rates per annum, and on the dates, set forth in subsection 2.9. (d) Recording. Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of the Borrower to such Lender resulting from each Loan of such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement. (e) Register. The Administrative Agent shall maintain the Register pursuant to subsection 10.6(d), and a subaccount therein for each Lender, in which shall be recorded (i) the amount of each Loan and each Obligation evidenced by a Note made hereunder, the Type thereof, whether each such Loan is a Base Rate Loan or a LIBOR Loan and each Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) both the amount of any sum received by the Administrative Agent hereunder from the Borrower and each Lender's share thereof. (f) Prima Facie Evidence. The entries made in the Register and the accounts of each Lender maintained pursuant to subsection 2.5(e) shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded; provided, however, that the failure of any Lender or the Administrative Agent to maintain the Register or any such account, or any error therein, shall not in any manner affect the obligation of the Borrower to repay (with applicable interest) the Loans made to the Borrower by such Lender in accordance with the terms of this Agreement. (g) Notes. The Borrower agrees that upon the request to the Administrative Agent by any Lender, the Borrower will execute and deliver to such Lender a promissory note of the Borrower evidencing (A) the Term Loans of such Lender, substantially in the form of Exhibit A-1 with appropriate insertions as to date and principal amount (a "Term Note"), and/or (B) the Revolving Credit Loans of such Lender, substantially in the form of Exhibit A-2 with appropriate insertions as to date and principal amount ("Revolving Credit Note"). 28 2.6 Optional Prepayments; Mandatory Prepayments and Reduction of Commitments. (a) Subject to subsection 2.16, the Borrower may at any time and from time to time prepay any Loans, in whole or in part, without premium or penalty, upon irrevocable notice to the Administrative Agent prior to 11:00 A.M., New York City time, three Business Days prior to the date of prepayment, specifying the date and amount of prepayment, the Type of Loan to be prepaid (which loans shall be prepaid on a pro rata basis among the applicable Lenders) and whether the prepayment is of LIBOR Loans, Base Rate Loans or a combination thereof, and, if of a combination thereof, the amount allocable to each. Upon receipt of any such notice the Administrative Agent shall promptly notify each applicable Lender thereof. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with any amounts payable pursuant to subsection 2.16. Partial prepayments shall be in an aggregate principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof. (b) (i) If, subsequent to the Effective Date, the Borrower or any of its Subsidiaries shall incur or permit the incurrence of any Indebtedness (other than Indebtedness permitted pursuant to subsection 7.2), 100% of the Net Proceeds thereof shall be promptly applied toward the prepayment of the Loans as set forth in clause (iv) of this subsection 2.6(b). Nothing in this paragraph (b) shall be deemed to permit any Indebtedness not permitted by subsection 7.2. (ii) If, subsequent to the Effective Date, the Borrower or any of its Restricted Subsidiaries shall receive Net Proceeds from any Asset Sale or series of related Asset Sales in excess of $500,000, such Net Proceeds shall be promptly applied toward the prepayment of the Loans as set forth in clause (iv) of this subsection 2.6(b); provided that Net Proceeds from any Asset Sales shall not be required to be so applied to the extent that such Net Proceeds are (A) used by the Borrower or such Restricted Subsidiary to acquire assets to be employed in the business of the Borrower or its Restricted Subsidiaries or a Similar Business of the Borrower or its Restricted Subsidiaries or (B) used by the Borrower or such Restricted Subsidiary to the extent permitted by subsection 7.9, to acquire (i) equity interests in a Person engaged in a Similar Business or (ii) assets constituting a business unit of a Person engaged in a Similar Business, in each case within 358 days of receipt thereof, but if such Net Proceeds are not so used, 100% of the amount of such Net Proceeds not so used shall be applied toward the prepayment of the Loans as set forth in clause (iv) of this subsection 2.6(b) on the earlier of (x) the 359th day after receipt of such Net Proceeds and (y) the date on which the Borrower has determined that such Net Proceeds shall not be so used. (iii) If there is Excess Cash Flow for any fiscal year and the Consolidated Total Obligations to Consolidated EBITDA Ratio as of the last day of such fiscal year was greater than or equal to 3.0 to 1.0, 50% of such Excess Cash Flow shall be applied toward the prepayment of the Loans as set forth in clause (iv) of this subsection 2.6(b) on the Excess Cash Flow Payment Date for such fiscal year, unless waived as provided below. If there is Excess Cash Flow for any fiscal year and the Consolidated Total Obligations to Consolidated EBITDA Ratio as of the last day of such fiscal year was less than 3.0 to 1.0 and greater than or equal to 2.0 to 1.0, 25% of such Excess Cash Flow shall be applied toward the prepayment of the Loans as set forth in clause (iv) of this subsection 2.6(b) on the Excess Cash Flow Payment Date for such fiscal year, unless waived as provided below. Notwithstanding the foregoing, in the case of Term Loans, each Term Lender shall have the right to waive such Lender's right to receive any portion of any prepayment made under this subsection 2.6(b)(iii). The Borrower shall notify the Administrative Agent of the amount of the prepayment from Excess Cash Flow at least three Business Days prior to the related Excess Cash Flow Payment Date. In the event any such Term Lender desires to waive such Lender's right to receive any such mandatory prepayment, such Lender shall so advise the Administrative Agent no later than the close of business on the Excess Cash Flow Payment Date. In the event that any such Lender waives such Lender's right to any such mandatory prepayment, the Administrative Agent shall apply the amount so waived to the repayment of outstanding Revolving 29 Credit Loans on a pro rata basis (without any permanent reduction in the Revolving Credit Commitments) and shall then return any remainder of the amount so waived to the Borrower. (iv) Any mandatory prepayments of the Loans pursuant to this subsection 2.6 (other than waived mandatory prepayments covered by the preceding subsection 2.6(b)(iii)) shall be applied (y) first, to the Term Loans to reduce the unpaid scheduled installments of principal of the Term Loans on a pro rata basis and (z) thereafter to the repayment of Revolving Credit Loans on a pro rata basis. (v) If after giving effect to any reduction of the Revolving Credit Commitments under subsection 2.4, the aggregate outstanding principal amount of Swing Line Loans plus the aggregate outstanding principal amount of Revolving Credit Loans plus the aggregate outstanding amount of L/C Obligations, shall exceed the aggregate amount of the Revolving Credit Commitments, such reduction shall be accompanied by prepayment in the amount of such excess to be applied (x) first, to the outstanding Swing Line Loans and (y) second, to outstanding Revolving Credit Loans (in each case, together with any amounts payable under subsection 2.16); provided that if the aggregate principal amount of Swing Line Loans and Revolving Credit Loans then outstanding is less than the amount of such excess (because Letters of Credit constitute a portion of such excess), the Borrower shall immediately, without notice or demand, to the extent of the balance of such excess, replace outstanding Letters of Credit and/or deposit an amount (but in no event greater than such balance) in a cash collateral account satisfactory to the Administrative Agent established for the benefit of the Issuing Lender and the L/C Participants. The Borrower hereby grants to the Administrative Agent, for the benefit of the Issuing Lender and the L/C Participants, a security interest in such cash collateral account and cash collateral to secure all obligations of the Borrower under this Agreement and the other Credit Documents. 2.7 Conversion and Continuation Options. (a) The Borrower may elect from time to time to convert LIBOR Loans to Base Rate Loans, by giving the Administrative Agent prior irrevocable notice of such election at or before 11:00 A.M. New York City time, on the Business Day immediately preceding the date of the proposed conversion and of the amount and Type of Loan to be converted, provided that any such conversion of LIBOR Loans may only be made on the last day of an Interest Period with respect thereto. The Borrower may elect from time to time to convert Base Rate Loans (other than Swing Line Loans) to LIBOR Loans by giving the Administrative Agent prior irrevocable notice of such election at or before 11:00 A.M., New York City time, on the third Business Day immediately preceding the date of the proposed conversion and of the amount and Type of Loan to be converted. Any such notice of conversion to LIBOR Loans shall specify the length of the initial Interest Period or Interest Periods therefor. Upon receipt of any such notice the Administrative Agent shall promptly notify each applicable Lender thereof. All or any part of outstanding LIBOR Loans and Base Rate Loans may be converted as provided herein, provided that (i) no Loan may be converted into a LIBOR Loan when any Event of Default has occurred and is then continuing and the Required Lenders have determined in their sole discretion not to permit such conversion and (ii) no Loan may be converted into a LIBOR Loan after the date that is one month prior to the Termination Date with respect to such Loan. (b) Any LIBOR Loans may be continued as such upon the expiration of the then current Interest Period with respect thereto by the Borrower giving notice to the Administrative Agent, in accordance with the applicable provisions of the term "Interest Period" set forth in subsection 1.1, of the length of the next Interest Period to be applicable to such Loans and of the amount and Type of Loan to be continued, provided that no LIBOR Loan may be continued as such (i) when any Event of Default has occurred and is then continuing and the Required Lenders have determined in their sole discretion not to permit such continuation or (ii) after the date that is one month prior to the Termination Date with respect to such Loan and provided, further, that if the Borrower shall fail to give such notice or if such 30 continuation is not permitted such Loans shall be automatically converted to Base Rate Loans on the last day of such then expiring Interest Period. (c) All notices given by the Borrower under this subsection 2.7 may be made by telephonic notice promptly confirmed in writing. 2.8 Minimum Amounts and Maximum Number of Tranches. All borrowings, conversions and continuations of Loans hereunder and all selections of Interest Periods hereunder shall be in such amounts and be made pursuant to such elections so that, after giving effect thereto, the aggregate principal amount of the Loans comprising each LIBOR Tranche shall be equal to $10,000,000 or a whole multiple of $1,000,000 in excess thereof. All Loans hereunder may be converted or continued into Base Rate Loans without reference to the minimum principal amount requirements for new Base Rate Borrowings set forth in subsection 2.2 above. In no event shall there be more than 15 LIBOR Tranches outstanding at any time. 2.9 Interest Rates and Payment Dates. (a) Each LIBOR Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the LIBOR Rate determined for such day plus the Applicable Margin. (b) Each Base Rate Loan shall bear interest at a rate per annum equal to the Base Rate plus the Applicable Margin. (c) If all or a portion of (i) any principal of any Loan, (ii) any interest payable thereon, (iii) any commitment fee, (iv) any other amount payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise) or (v) any other Event of Default has occurred and is continuing and, in the case of this clause (v), the Administrative Agent and one of the Syndication Agents together have notified the Borrower of their intention to impose the Default Rate, the principal of the Loans and any such overdue interest, commitment fee or other amount shall bear interest at a rate per annum (the "Default Rate") which is (x) in the case of principal, the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this subsection plus 2% or (y) in the case of any such overdue interest, commitment fee or other amount, the rate described in paragraph (b) of this subsection plus 2%, in each case from the date of such non-payment until such overdue principal, interest, commitment fee or other amount is paid in full (as well after as before judgment). (d) Interest shall be payable with respect to each Loan in arrears on each Interest Payment Date and on the Termination Date with respect to such Loan, provided that interest accruing pursuant to paragraph (c) of this subsection shall be payable from time to time on demand. 2.10 Computation of Interest and Fees. (a) Interest on Base Rate Loans and fees shall be calculated on the basis of a 365- (or 366-, as the case may be) day year for the actual days elapsed; all other interest shall be calculated on the basis of a 360-day year for the actual days elapsed. The Administrative Agent shall as soon as practicable notify the Borrower and the Lenders of each determination of a LIBOR Rate. Any change in the interest rate on a Loan resulting from a change in the Base Rate or the LIBOR Reserve Percentage shall become effective as of the opening of business on the day on which such change becomes effective. The Administrative Agent shall as soon as practicable notify the Borrower and the Lenders of the effective date and the amount of each such change in interest rate. (b) Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrower and the Lenders in the absence of manifest error. The Administrative Agent shall, at the request of the Borrower, deliver to the 31 Borrower a statement showing the quotations used by the Administrative Agent in determining any interest rate pursuant to subsection 2.9(a) or (c). 2.11 Inability to Determine Interest Rate. If prior to the first day of any Interest Period: (a) the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrower) that, by reason of circumstances affecting the eurodollar market, adequate and reasonable means do not exist for ascertaining the LIBOR Rate for such Interest Period, or (b) the Administrative Agent shall have received notice from the Required Lenders that the LIBOR Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Lenders (as conclusively certified by such Lenders) of making or maintaining their affected Loans during such Interest Period, the Administrative Agent shall give telecopy or telephonic notice thereof to the Borrower and the Lenders as soon as practicable thereafter. If such notice is given (x) any LIBOR Loans requested to be made on the first day of such Interest Period shall be made as Base Rate Loans, (y) any Loans that were to have been converted on the first day of such Interest Period to LIBOR Loans shall be converted to or continued as Base Rate Loans and (z) any outstanding LIBOR Loans shall be converted, on the first day of such Interest Period, to Base Rate Loans. Until such notice has been withdrawn in writing by the Administrative Agent (which the Administrative Agent agrees to do when the Administrative Agent has determined, or has been instructed by the Required Lenders that, the circumstances that prompted the delivery of such notice no longer exist), no further LIBOR Loans shall be made or continued as such, nor shall the Borrower have the right to convert Base Rate Loans to LIBOR Loans. 2.12 Pro Rata Treatment and Payments. (a) Each borrowing by the Borrower from the Revolving Credit Lenders hereunder, each payment by the Borrower on account of any commitment fee hereunder and any reduction of the Revolving Credit Commitments of Revolving Credit Lenders shall be made pro rata according to the respective Commitment Percentages of the Revolving Credit Lenders. Each payment (including each prepayment) by the Borrower on account of principal of and interest on any Term Loans or the Revolving Credit Loans, and any application by the Administrative Agent of the proceeds of any Collateral, shall be made pro rata according to the respective outstanding principal amounts of such Loans then held by the Lenders. All payments (including prepayments) to be made by the Borrower hereunder in respect of any Loan, whether on account of principal, interest, Reimbursement Obligations, fees, expenses or otherwise, shall be made without set off or counterclaim and shall be made prior to 11:00 A.M., New York City time, on the due date thereof to the Administrative Agent, for the account of the Lenders with respect to such Loans, at the Administrative Agent's office specified in subsection 10.2, in Dollars and in immediately available funds. The Administrative Agent shall distribute such payments to the applicable Lenders promptly upon receipt in like funds as received. If any payment hereunder becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day, and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. (b) Unless the Administrative Agent shall have been notified in writing by any Lender prior to a borrowing that such Lender will not make the amount that would constitute its Commitment Percentage of such borrowing available to the Administrative Agent, the Administrative Agent may assume that such Lender is making such amount available to the Administrative Agent on such Borrowing Date, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such amount is not made available to the 32 Administrative Agent by the required time on the Borrowing Date therefor, such Lender shall pay to the Administrative Agent, on demand, such amount with interest thereon at a rate equal to the daily average Federal Funds Rate for the period until such Lender makes such amount immediately available to the Administrative Agent. A certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing under this subsection shall be conclusive in the absence of manifest error. If such Lender's Commitment Percentage of such borrowing is not made available to the Administrative Agent by such Lender within three Business Days of such Borrowing Date, the Administrative Agent shall also be entitled to recover such amount with interest thereon at the rate per annum applicable to Base Rate Loans hereunder, on demand, from the Borrower. The failure of any Lender to make any Loan to be made by it shall not relieve any other Lender of its obligation hereunder to make its Loan on such Borrowing Date. 2.13 Illegality. Notwithstanding any other provision herein, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for any Lender to make or maintain LIBOR Loans as contemplated by this Agreement, (a) the commitment of such Lender hereunder to make LIBOR Loans, continue LIBOR Loans as such and convert Base Rate Loans to LIBOR Loans shall forthwith be cancelled and (b) such Lender's Loans then outstanding as LIBOR Loans, if any, shall be converted automatically to Base Rate Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law. If any such conversion of a LIBOR Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Borrower shall pay to such Lender such amounts, if any, as may be required pursuant to subsection 2.16. If circumstances subsequently change so that any affected Lender shall determine that it is no longer so affected, such Lender will promptly notify the Borrower and the Administrative Agent, and upon receipt of such notice, the obligations of such Lender to make or continue LIBOR Loans or to convert Base Rate Loans into LIBOR Loans shall be reinstated. 2.14 Requirements of Law. (a) If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof: (i) shall subject any Lender to any tax of any kind whatsoever with respect to this Agreement, any Note, any Letter of Credit, any Application or any LIBOR Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof (except for Non-Excluded Taxes that are covered by subsection 2.15 and changes in the rate of net income taxes (including branch profits taxes and minimum taxes) or franchise taxes (imposed in lieu of net income taxes) of such Lender); (ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender which is not otherwise included in the determination of the LIBOR Rate hereunder; or (iii) shall impose on such Lender any other condition; and the result of any of the foregoing is to increase the cost to such Lender, by an amount which such Lender deems to be material, of making, converting into, continuing or maintaining LIBOR Loans or issuing or participating in Letters of Credit or to reduce any amount receivable hereunder in respect thereof, then, in any such case, the Borrower shall promptly pay such Lender upon written demand such 33 additional amount or amounts as will compensate such Lender for such increased cost or reduced amount receivable; provided that before making any such demand, each Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions and so long as such efforts would not be disadvantageous to it, in its reasonable discretion, in any legal, economic or regulatory manner) to designate a different LIBOR lending office if the making of such designation would allow the Lender or its LIBOR lending office to continue to perform its obligations to make LIBOR Loans or to continue to fund or maintain LIBOR Loans and avoid the need for, or reduce the amount of, such increased cost. If any Lender becomes entitled to claim any additional amounts pursuant to this subsection, it shall promptly notify the Borrower, through the Administrative Agent, of the event by reason of which it has become so entitled. If the Borrower so notifies the Administrative Agent within five Business Days after any Lender notifies the Borrower of any increased cost pursuant to the foregoing provisions of this Section, the Borrower may convert all LIBOR Loans of such Lender then outstanding into Base Rate Loans in accordance with the terms hereof. (b) If any Lender shall have determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof shall have the effect of reducing the rate of return on such Lender's or such corporation's capital as a consequence of its obligations hereunder or under any Letter of Credit to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, after submission by such Lender to the Borrower (with a copy to the Administrative Agent) of a prompt written request therefor, the Borrower shall promptly pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction. (c) If any Lender becomes entitled to claim any additional amounts pursuant to this subsection, it shall promptly notify the Borrower (with a copy to the Administrative Agent) of the event by reason of which it has become so entitled; provided that the Borrower shall not be required to compensate a Lender pursuant to this subsection for any increased costs or reductions incurred more than 90 days prior to the date that such Lender notifies the Borrower of the Requirement of Law giving rise to such increased costs or reductions and of such Lender's intention to claim compensation therefor; provided further that, if the Requirement of Law giving rise to such increased costs or reductions is retroactive, then the 90-day period referred to above shall be extended to include the period of retroactive effect thereof. A certificate as to any additional amounts payable pursuant to this subsection, showing the calculation thereof in reasonable detail, submitted by such Lender to the Borrower (with a copy to the Administrative Agent) shall be conclusive in the absence of manifest error. The agreements in this subsection shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 2.15 Taxes. (a) Except as provided in this subsection 2.15, all payments made by the Borrower under this Agreement and any Notes shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority ("Taxes"), excluding Taxes on net income (including, without limitation, branch profits taxes and minimum taxes) and franchise taxes (imposed in lieu of net income taxes) imposed on any Agent or any Lender as a result of a present or former connection between such Agent or such Lender and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from such Agent or such Lender having executed, delivered or performed its obligations or received a 34 payment under, or enforced, this Agreement or any Note). If any such non-excluded taxes, levies, imposts, duties, charges, fees, deductions or withholdings ("Non-Excluded Taxes") are required to be withheld or deducted from any amounts payable to any Agent or any Lender hereunder or under any Note, the amounts so payable to such Agent or such Lender shall be increased to the extent necessary to yield to such Agent or such Lender (after payment of all Non-Excluded Taxes) the amount of interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement, provided, however, that the Borrower shall not be required to increase any such amounts payable to any Lender that is not a United States person as defined in Section 7701(a)(30) of the Code with respect to any Taxes that are imposed on amounts payable to such Lender at the time such Lender becomes a party to this Agreement or that are attributable to such Lender's failure at any time to comply with the requirements of paragraph (b) of this subsection. Whenever any Non-Excluded Taxes are so required to be withheld or deducted, the Borrower shall make any such required withholding or deduction and remit the full amount withheld or deducted to the relevant authority in accordance with applicable law, and, as promptly as possible thereafter, the Borrower shall send to the relevant Agent for its own account or for the account of such Lender, as the case may be, a certified copy of an original official receipt received by the Borrower showing payment thereof or, if such official receipt was not received, any other proof of payment reasonably satisfactory to such Agent and Lender. (b) Each Lender, Assignee and Participant that is not a United States person as defined in Section 7701(a)(30) of the Code (a "Non-U.S. Lender") shall deliver to the Borrower and the Administrative Agent, and if applicable, the assigning Lender (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) on or before the date on which it becomes a party to this Agreement (or, in the case of a Participant, on or before the date on which such Participant purchases the related participation) either: (A) two duly completed and signed copies of either Internal Revenue Service Form W-8BEN (relating to such Non-U.S. Lender and entitling it to a complete exemption from or a reduction in withholding of U.S. Taxes on all amounts to be received by such Non-U.S. Lender pursuant to this Agreement and the other Credit Documents under an applicable treaty) or Internal Revenue Service Form W-8ECI (relating to all amounts to be received by such Non-U.S. Lender pursuant to this Agreement and the other Credit Documents), or successor and related applicable forms, as the case may be; or (B) in the case of a Non-U.S. Lender that is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code and that cannot comply with the requirements of clause (A) hereof, (x) a statement in the form of Exhibit E (or such other form of statement as shall be reasonably requested by the Borrower (or, in the case of a Participant, the applicable Lender) from time to time) to the effect that such Non-U.S. Lender is eligible for a complete exemption from withholding of U.S. Taxes under Code Section 871(h) or 881(c), and (y) two duly completed and signed copies of Internal Revenue Service Form W-8BEN or successor and related applicable form. Further, each Non-U.S. Lender agrees (i) to deliver, upon request, to the Borrower and the Administrative Agent, and if applicable, the assigning Lender (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) two further duly completed and signed copies of such Internal Revenue Service Forms W-8BEN or W-8ECI, as the case may be, or successor and related applicable forms, on or before the date that any such form expires or becomes obsolete and promptly after the occurrence of any event requiring a change from the most recent form(s) previously delivered by it to the Borrower (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) in accordance with applicable U.S. laws and regulations and (ii) in the case of a Non-U.S. Lender that delivers a statement in the form of Exhibit E (or such other form of statement as shall 35 have been requested by the Borrower), to deliver to the Borrower and the Administrative Agent, and if applicable, the assigning Lender, such additional statements and forms as shall be reasonably requested by the Borrower (or, in the case of a Participant, the applicable Lender) from time to time unless, in any such case, any change in law or regulation has occurred subsequent to the date such Lender (or Participant) became a party to this Agreement (or in the case of a Participant, the date on which such Participant purchased the related participation) which renders all such forms inapplicable or which would prevent such Lender (or Participant) from properly completing and executing any such form with respect to it and such Lender (or Participant) promptly notifies the Borrower and the Administrative Agent (or, in the case of a Participant, the Lender from which the related participation shall have been purchased) if it is no longer able to deliver, or if it is required to withdraw or cancel, any form or statement previously delivered by it pursuant to this subsection 2.15(b). The Borrower hereby agrees that for so long as a Lender that is a Non-U.S. Lender complies with this subsection 2.15(b), the Borrower shall not withhold any amounts from any payments made pursuant to this Agreement to such Non-U.S. Lender, unless the Borrower reasonably determines that it is required by law to withhold or deduct any amounts from any payments made to such Non-U.S. Lender pursuant to this Agreement. (c) The Borrower will indemnify each Agent and each Lender for the full amount of Non-Excluded Taxes paid by such Agent or such Lender, as the case may be, and any liability for penalties, interest and expenses (including reasonable attorney's fees and expenses) arising therefrom or with respect thereto, whether or not such Non-Excluded Taxes were correctly or legally asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability prepared by an Agent or a Lender, absent manifest error, shall be final after the date such Agent or such Lender, as the case may be, makes written demand therefor. (d) If any Agent or any Lender receives a refund with respect to Non-Excluded Taxes paid by the Borrower, which in the sole discretion and good faith judgment of such Lender or Agent is allocable to such payment, it shall promptly pay such refund to the extent allocable to payment of Non-Excluded Taxes to the Borrower, net of all out-of-pocket expenses of such Lender incurred in obtaining such refund, if all the payments due under this subsection 2.15 have been paid in full; provided, however, that the Borrower agrees to promptly return such amount, net of any incremental additional costs, to the applicable Agent or Lender, as the case may be, if it receives notice from the applicable Agent or Lender that such Agent or Lender is required to repay such refund. (e) In addition to its agreements under paragraph (b) of this subsection, each Lender and each Agent shall, at the request of the Borrower, use best efforts to provide any certificate or document that such Lender or Agent could legally provide without any material burden on its part and that would reduce (or avoid) any Non-Excluded Taxes on payments to it made under this Agreement or any Notes. (f) The agreements in this subsection 2.15 shall survive the termination of this Agreement and the payment of all Loans and other amounts payable hereunder. 2.16 Indemnity. The Borrower agrees to indemnify each Lender and to hold each Lender harmless from any loss or expense which such Lender may sustain or incur as a consequence of (a) default by the Borrower in making a borrowing of, conversion into or continuation of LIBOR Loans after the Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (b) default by the Borrower in making any prepayment after the Borrower has given a notice thereof in accordance with the provisions of this Agreement or (c) the making of a prepayment of LIBOR Loans on a day which is not the last day of an Interest Period with respect thereto (but excluding loss of margin). Such indemnification under this subsection 2.16 may include an amount equal to the excess, if any, of (i) the amount of interest which would have accrued on the amount so prepaid, or not so 36 borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to the last day of such Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Loans provided for herein (but excluding loss of margin) over (ii) the amount of interest (as reasonably determined by such Lender) which would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank eurodollar market. This covenant shall survive the termination of this Agreement and the payment of the Loans and all amounts payable thereunder. 2.17 Replacement of Lenders. If at any time (a) the Borrower becomes obligated to pay additional amounts described in subsection 2.14 or 2.15 as a result of any condition described in such subsections, or any Lender ceases to make LIBOR Loans pursuant to subsection 2.13, (b) any Lender becomes insolvent and its assets become subject to a receiver, liquidator, trustee, custodian or other Person having similar powers or (c) any Lender becomes a "Nonconsenting Lender" (hereinafter defined), then the Borrower may, on ten Business Days' prior written notice to the Administrative Agent and such Lender, replace such Lender by causing such Lender to (and such Lender shall) assign pursuant to subsection 10.6 all of its rights and obligations under this Agreement to a Lender or other financial institution selected by the Borrower and acceptable to the Administrative Agent for a purchase price equal to the outstanding principal amount of such Lender's Loans and all accrued interest and fees and other amounts payable hereunder (including amounts payable under subsection 2.16 as though such Loans were being paid instead of being purchased); provided that (i) neither the Administrative Agent nor any Lender shall have any obligation to the Borrower to find a replacement Lender or other such entity and (ii) in no event shall the Lender hereby replaced be required to pay or surrender to such replacement Lender or other entity any of the fees received by such Lender hereby replaced pursuant to this Agreement. In the case of a replacement of a Lender to which the Borrower becomes obligated to pay additional amounts pursuant to subsection 2.14 or 2.15, the Borrower shall pay such additional amounts to such Lender prior to such Lender being replaced and the payment of such additional amounts shall be a condition to the replacement of such Lender. In the event that (x) the Borrower or the Administrative Agent has requested the Lenders to consent to a departure or waiver of any provisions of the Credit Documents or to agree to any amendment thereto, (y) the consent, waiver or amendment in question requires the agreement of all Lenders in accordance with the terms of subsection 10.1 and (z) the Required Lenders have agreed to such consent, waiver or amendment, then any Lender who does not agree to such consent, waiver or amendment shall be deemed a "Nonconsenting Lender." 2.18 Certain Fees. Borrower agrees to pay to the Administrative Agent, for its own account, a non-refundable administration fee in an amount previously agreed to with the Administrative Agent, payable in advance on the Effective Date and annually in advance on each anniversary thereof prior to the earlier of (x) the Final Maturity Date and (y) the payment in full of all Loans and all other amounts owing under this Agreement and the termination of all Commitments. 2.19 Certain Rules Relating to the Payment of Additional Amounts. (a) Upon the request, and at the expense, of the Borrower, each Lender to which the Borrower is required to pay any additional amount pursuant to subsection 2.14 or 2.15 shall, at the option of such Lender, either (A) forego payment of such additional amount from the Borrower or (B) reasonably afford the Borrower the opportunity to contest, and reasonably cooperate with the Borrower in contesting, the imposition of any Non-Excluded Taxes giving rise to such payment; provided that (i) such Lender shall not be required to afford the Borrower the opportunity to so contest unless the Borrower shall have confirmed in writing to such Lender its obligation to pay such amounts pursuant to this Agreement and (ii) the Borrower shall reimburse such Lender for its out-of-pocket costs, including attorneys' and accountants' fees and disbursements incurred in so cooperating with the Borrower in contesting the imposition of such Non-Excluded Taxes. 37 (b) Each Lender agrees that if it makes any demand for payment under subsection 2.14 or 2.15(a), or if any adoption or change of the type described in subsection 2.13 shall occur with respect to it, it will use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions and so long as such efforts would not be disadvantageous to it, as determined in its reasonable discretion) to designate a different lending office if the making of such a designation would allow the Lender to continue to make and maintain LIBOR Loans and would reduce or obviate the need for the Borrower to make payments under subsection 2.14 or 2.15(a), or would eliminate or reduce the effect of any adoption or change described in subsection 2.13. Section 3. LETTERS OF CREDIT 3.1 L/C Commitment. (a) Subject to the terms and conditions hereof, the Issuing Lender, in reliance on the agreements of the Revolving Credit Lenders set forth in subsection 3.4(a), agrees to issue letters of credit ("Letters of Credit") for the account of the Borrower on any Business Day during the Commitment Period in such form as may be approved from time to time by the Issuing Lender; provided that the Issuing Lender shall not issue any Letter of Credit if, after giving effect to such issuance, the Available Commitment with respect to Revolving Credit Loans of all Revolving Credit Lenders less the aggregate principal amount of the Swing Line Loans then outstanding would be less than zero. (b) Each Letter of Credit shall (i) be denominated in Dollars, (ii) be a standby letter of credit issued to support obligations of the Borrower or any of its Restricted Subsidiaries, contingent or otherwise and (iii) expire no later than the earlier of (x) the date that is 12 months after the date of its issuance and (y) the fifth Business Day prior to the Revolving Loan Termination Date; provided that any Letter of Credit with an expiration date occurring up to twelve months after such Letter of Credit's date of issuance may be automatically renewable for subsequent 12-month periods (but in no event later than the fifth Business Day prior to the Revolving Loan Termination Date). (c) Each Letter of Credit shall be subject to the Uniform Customs and, to the extent not inconsistent therewith, the laws of the State of New York. (d) The Issuing Lender shall not at any time be obligated to issue any Letter of Credit hereunder if such issuance would conflict with, or cause the Issuing Lender or any L/C Participant to exceed any limits imposed by, any applicable Requirement of Law or any policies of the Issuing Lender. 3.2 Procedure for Issuance of Letters of Credit. The Borrower may from time to time request that the Issuing Lender issue a Letter of Credit at any time prior to the fifth Business Day prior to the Revolving Loan Termination Date by delivering to the Issuing Lender with a copy to the Administrative Agent at its address for notices specified herein an Application therefor, completed to the satisfaction of the Issuing Lender, and such other certificates, documents and other papers and information as the Issuing Lender may reasonably request. Upon receipt of any Application, the Issuing Lender will process such Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and shall promptly issue the Letter of Credit requested thereby (but in no event shall the Issuing Lender be required to issue any Letter of Credit earlier than three Business Days after its receipt of the Application therefor and all such other certificates, documents and other papers and information relating thereto) by issuing the original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed by the Issuing Lender and the Borrower. The Issuing Lender shall furnish a copy of such Letter of Credit to the Borrower and the Administrative Agent (with copies for each Lender) promptly following the issuance thereof. 38 3.3 Fees, Commissions and Other Charges. (a) The Borrower shall pay to the Administrative Agent, for the account of the Issuing Lender and the L/C Participants, a letter of credit fee with respect to each Letter of Credit, computed for the period from and including the date of issuance of such Letter of Credit to the expiration date of such Letter of Credit at a rate per annum equal to the Applicable Margin then in effect for LIBOR Revolving Credit Loans, of the aggregate maximum drawable amount of Letters of Credit outstanding from time to time, payable in arrears within 15 days following each L/C Fee Payment Date and on the Revolving Loan Termination Date. Such fee shall be payable to the Administrative Agent to be shared ratably among the Revolving Credit Lenders in accordance with their respective Commitment Percentages with respect to Revolving Credit Loans. In addition, the Borrower shall pay to the Administrative Agent, for the sole account of the Issuing Lender, a fee equal to the greater of (i) $150 and (ii) 0.125% per annum of the aggregate maximum drawable amount of Letters of Credit outstanding from time to time, payable quarterly in arrears within 15 days following each L/C Fee Payment Date and on the Revolving Loan Termination Date. (b) In addition to the foregoing fees and commissions, the Borrower shall pay or reimburse the Issuing Lender for such normal and customary costs and expenses as are incurred or charged by the Issuing Lender in issuing, effecting payment under, amending or otherwise administering any Letter of Credit. (c) The Administrative Agent shall, promptly following its receipt thereof, distribute to the Issuing Lender and the L/C Participants all fees and commissions received by the Administrative Agent for their respective accounts pursuant to this subsection. 3.4 L/C Participation. (a) The Issuing Lender irrevocably agrees to sell and hereby sells to each L/C Participant, and, to induce the Issuing Lender to issue Letters of Credit hereunder, each L/C Participant irrevocably agrees to accept and purchase and hereby accepts and purchases from the Issuing Lender, on the terms and conditions hereinafter stated, for such L/C Participant's own account and risk an undivided interest equal to such L/C Participant's Commitment Percentage with respect to Revolving Credit Loans from time to time in effect in the Issuing Lender's obligations and rights under each Letter of Credit issued hereunder and the amount of each draft paid by the Issuing Lender thereunder. Each L/C Participant unconditionally and irrevocably agrees with the Issuing Lender that, if a draft is paid under any Letter of Credit for which the Issuing Lender is not reimbursed in full by the Borrower in accordance with the terms of this Agreement, such L/C Participant shall pay to the Issuing Lender upon demand at the Issuing Lender's address for notices specified herein an amount equal to such L/C Participant's then Commitment Percentage with respect to Revolving Credit Loans of the amount of such draft, or any part thereof, which is not so reimbursed; provided that, if such demand is made prior to 11:00 A.M., New York City time, on a Business Day, such L/C Participant shall make such payment to the Issuing Lender prior to the end of such Business Day and otherwise such L/C Participant shall make such payment on the next succeeding Business Day. (b) If any amount required to be paid by any L/C Participant to the Issuing Lender pursuant to subsection 3.4(a) in respect of any unreimbursed portion of any payment made by the Issuing Lender under any Letter of Credit is paid to the Issuing Lender within three Business Days after the date such payment is due, such L/C Participant shall pay to the Issuing Lender on demand an amount equal to the product of (i) such amount, times (ii) the daily average Federal Funds Rate, as quoted by the Issuing Lender, during the period from and including the date such payment is required to the date on which such payment is immediately available to the Issuing Lender, times (iii) a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is 360. If any such amount required to be paid by any L/C Participant pursuant to subsection 3.4(a) is not in fact made available to the Issuing Lender by such L/C Participant within three Business Days after the date such payment is due, the Issuing Lender shall be entitled to recover from such L/C Participant, on demand, 39 such amount with interest thereon calculated from such due date at the rate per annum applicable to Base Rate Loans hereunder. A certificate of the Issuing Lender submitted to any L/C Participant with respect to any amounts owing under this subsection shall be conclusive in the absence of manifest error. (c) Whenever, at any time after the Issuing Lender has made payment under any Letter of Credit and has received from any L/C Participant its pro rata share of such payment in accordance with subsection 3.4(a), the Issuing Lender receives any payment related to such Letter of Credit (whether directly from the Borrower or otherwise, including proceeds of collateral applied thereto by the Issuing Lender), or any payment of interest on account thereof, the Issuing Lender will, if such payment is received prior to 11:00 A.M., New York City time, on a Business Day, distribute to such L/C Participant its pro rata share thereof prior to the end of such Business Day and otherwise the Issuing Lender will distribute such payment on the next succeeding Business Day; provided, however, that in the event that any such payment received by the Issuing Lender and distributed to the L/C Participants shall be required to be returned by the Issuing Lender, each such L/C Participant shall return to the Issuing Lender the portion thereof previously distributed by the Issuing Lender to it. 3.5 Reimbursement Obligation of the Borrower. (a) The Borrower agrees to reimburse the Issuing Lender on the same Business Day on which the Issuing Lender notifies the Borrower of the date and amount of a draft presented under any Letter of Credit and paid by the Issuing Lender provided such notice is received by 1:00 P.M., New York City time, on such Business Day, and the next Business Day if such notice is received after such time. The Issuing Lender shall provide notice to the Borrower on each Business Day on which a draft is presented and paid by the Issuing Lender indicating the amount of (i) such draft so paid and (ii) any taxes, fees, charges or other costs or expenses incurred by the Issuing Lender in connection with such payment. Each such payment shall be made to the Issuing Lender at its address for notices specified herein in lawful money of the United States of America and in immediately available funds. (b) Interest shall be payable on any and all amounts remaining unpaid by the Borrower under this subsection from the date a draft presented under any Letter of Credit is paid by the Issuing Lender until payment in full (i) at the rate which would be payable on any Loans that are Base Rate Loans at such time until such payment is required to be made pursuant to subsection 3.5(a), and (ii) thereafter, at the rate which would be payable on any Loans that are Base Rate Loans at such time which were then overdue. 3.6 Obligations Absolute. (a) The Borrower's obligations under subsection 3.5(a) shall be absolute and unconditional under any and all circumstances and irrespective of any set-off, counterclaim or defense to payment which the Borrower may have or have had against the Issuing Lender, any L/C Participant or any beneficiary of a Letter of Credit. (b) The Borrower also agrees with the Issuing Lender that the Issuing Lender shall not be responsible for, and the Borrower's Reimbursement Obligations under subsection 3.5(a) shall not be affected by, among other things, (i) the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged (unless the Issuing Lender has actual knowledge of such invalidity, fraud or forgery), or (ii) any dispute between or among the Borrower and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred or (iii) any claims whatsoever of the Borrower against any beneficiary of such Letter of Credit or any such transferee. (c) Neither the Issuing Lender nor any L/C Participant shall be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however 40 transmitted, in connection with any Letter of Credit, except for errors or omissions caused by the Issuing Lender's gross negligence or willful misconduct. (d) The Borrower agrees that any action taken or omitted by the Issuing Lender under or in connection with any Letter of Credit or the related drafts or documents, if done in the absence of gross negligence or willful misconduct and in accordance with the standards of care specified in the Uniform Commercial Code of the State of New York, shall be binding on the Borrower and shall not result in any liability of the Issuing Lender or any L/C Participant to the Borrower. 3.7 Letter of Credit Payments. If any draft shall be presented for payment under any Letter of Credit, the Issuing Lender shall promptly notify the Borrower and the Administrative Agent of the date and amount thereof. If any draft shall be presented for payment under any Letter of Credit, the responsibility of the Issuing Lender to the Borrower in connection with such draft shall, in addition to any payment obligation expressly provided for in such Letter of Credit, be limited to determining that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment appear on their face to be in conformity with such Letter of Credit. 3.8 Application. To the extent that any provision of any Application related to any Letter of Credit is inconsistent with the provisions of this Section 3, the provisions of this Section 3 shall govern and control. SECTION 4. REPRESENTATIONS AND WARRANTIES To induce the Agents, the Issuing Lender, the Swing Line Lender and the Lenders to enter into this Agreement and to make (or continue to make) the Loans and issue or participate in the Letters of Credit, the Borrower hereby represents and warrants to the Agents, the Issuing Lender, the Swing Line Lender and each Lender that: 4.1 Financial Statements and Condition. The audited consolidated balance sheets of the Borrower and its consolidated Subsidiaries as at December 31, 2002, December 31, 2001 and March 31, 2001, and the related consolidated statements of income and of cash flows for the fiscal periods ended on such dates, reported on by and accompanied by a report from Ernst & Young LLP present fairly, in all material respects and on the basis disclosed in the footnotes to such financial statements, the consolidated financial condition of the Borrower and its consolidated Subsidiaries as at such date, and the consolidated results of its operations and its consolidated cash flows for the respective fiscal periods then ended. All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as approved by the aforementioned firm of accountants and disclosed therein). The Borrower and its Subsidiaries do not have any material Guarantee Obligations, contingent liabilities and liabilities for taxes, or any long-term leases or unusual forward or long-term commitments, including, without limitation, any interest rate or foreign currency swap or exchange transaction or other obligation in respect of derivatives, that are not reflected in the most recent financial statements (or in the notes thereto) referred to in this paragraph. During the period from December 31, 2002 to and including the date hereof there has been no disposition by the Borrower and its Consolidated Subsidiaries of any material part of its business or property and no purchase or other acquisition of any business or property (including Capital Stock of any other Person) material in relation to the consolidated financial condition of the Borrower and its consolidated Subsidiaries at December 31, 2002. 4.2 No Change. Since December 31, 2002, there has been no development, event or circumstance which has had or could reasonably be expected to have a Material Adverse Effect. 41 4.3 Corporate Existence. The Borrower and each of its Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization (i) as of the Effective Date and (ii) with respect to the Borrower and its Restricted Subsidiaries, on the Effective Date and on each Borrowing Date, (b) has the corporate (or equivalent) power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged except, with respect to Unrestricted Subsidiaries, where the failure to have such power, authority and legal right could not reasonably be expected to have a Material Adverse Effect and (c) is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except to the extent that the failure to so qualify could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. 4.4 Corporate Power; Authorization; Enforceable Obligations; No Conflict. The Borrower and each of its Restricted Subsidiaries has the corporate (or equivalent) power and authority, and the legal right, to make, deliver and perform the Credit Documents to which it is a party and, in the case of the Borrower, to borrow hereunder and has taken all necessary corporate action to authorize the borrowings on the terms and conditions of this Agreement and to authorize the execution, delivery and performance of such Credit Documents. No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the borrowings hereunder or with the execution, delivery, performance, validity or enforceability of the Credit Documents to which the Borrower and each other Credit Party is a party (including, without limitation, the collateral assignment of the Coal Supply Agreements listed on Schedule 4.22 to the Administrative Agent for the benefit of the Secured Parties and the mortgaging of all real property intended by the Credit Agreement to be mortgaged to the Administrative Agent for the benefit of the Secured Parties), except those set forth on Schedule 4.4. This Agreement and each other Credit Document have been duly executed and delivered on behalf of the Borrower and each other Credit Party. This Agreement and each other Credit Document to which it is a party constitute legal, valid and binding obligations of each Credit Party party thereto enforceable against each such Credit Party, as the case may be, in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. 4.5 No Legal Bar. Except as set forth on Schedule 4.5 or as could not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect, the execution, delivery and performance of each Credit Document by the Borrower and each Restricted Subsidiary party thereto, the borrowing and use of the proceeds of the Loans and the consummation of the transactions contemplated by the Credit Documents and the Senior Notes Documents: (a) will not violate any Requirement of Law or any Contractual Obligation applicable to or binding, the Borrower or any Restricted Subsidiary or any of their respective properties or assets and (b) will not result in the creation or imposition of any Lien on any of its properties or assets pursuant to any Requirement of Law applicable to it or any of its Contractual Obligations, except for the Liens arising under the Credit Documents. 4.6 Litigation; Compliance with Laws; Reserves. (a) There are not any actions, suits or proceedings at law or in equity or by or before any Governmental Authority now pending or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any Subsidiary or any business, property or rights of any such person (i) that expressly involve any Credit Document or (ii) except to the extent set forth on Schedule 4.6, as to which there is a reasonable possibility of any adverse determination and that, in either case could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. 42 (b) To the extent required by GAAP, the Borrower and its Subsidiaries maintain adequate reserves for (i) future costs associated with any lung disease claim alleging pneumoconiosis or silicosis or arising out of exposure or alleged exposure to coal dust or the coal mining environment, (ii) future costs associated with retiree and health care benefits, (iii) future costs associated with reclamation of disturbed acreage, removal of facilities and other closing costs in connection with its mining operations and (iv) future costs associated with other potential environmental liabilities. (c) None of the Borrower or any of its Subsidiaries or any of its respective material properties or assets is in violation of, nor will the continued operation of its material properties and assets as currently conducted violate, any law, rule or regulation (including any zoning, building, Mining and Environmental Law, ordinance, code or approval or any building or mining permits), or is in default with respect to any judgment, writ, injunction, decree or order of any Governmental Authority, where such violation or default could reasonably be expected to result in a Material Adverse Effect. 4.7 No Default. Neither the Borrower nor any of its Subsidiaries is in default under or with respect to any of its Contractual Obligations in any respect which could reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. 4.8 Ownership and Location of Property; Liens. (a) Schedule 4.8(a)(i) lists completely and correctly as of the Effective Date all material real property (including surface rights and coal and other mineral rights) owned by the Borrower and the other Credit Parties (other than Black Beauty) and Schedule 4.8(a)(ii) sets forth reasonably specific locations of the properties for which a Mortgage or fixture filing has been granted pursuant to the First Restated Credit Agreement. As of the Effective Date, (i) with respect to each parcel of real property listed on Schedule 4.8(a)(ii), the Borrower or its applicable Restricted Subsidiary has good record title in fee simple to such parcel, except for defects in title to such parcel which do not or will not have a material adverse effect on the (A) marketability, (B) title insurability, or (C) operation and intended use, of such parcel; and (ii) with respect to all other real property listed on Schedule 4.8(a)(i), the Borrower and its applicable Restricted Subsidiaries have good record title in fee simple, except, with respect to this clause (ii), for defects in title which could not reasonably be expected to result in a Material Adverse Effect. (b) Schedule 4.8(b) lists completely and correctly as of the Effective Date (A) all material real property (including surface rights and coal and other mineral rights) leased by the Borrower and the other Credit Parties (other than Black Beauty) and (B) the lessors thereof. As of the Effective Date, (i)(A) with respect to each parcel of real property listed on Schedule 4.8(b) for which a Mortgage has been granted pursuant to the First Restated Credit Agreement, the Borrower or its applicable Restricted Subsidiary has a valid and enforceable leasehold interest, except where such lack of validity or enforceability does not or will not have a material adverse effect on the (x) title insurability or (y) operation and intended use, of such parcel, and (B) with respect to all other real property listed on Schedule 4.8(b), the Borrower and its applicable Restricted Subsidiaries have valid and enforceable leasehold interests, except, with respect to this clause (B), where such lack of validity or enforceability could not reasonably be expected to have a Material Adverse Effect; (ii)(A) with respect to each parcel of real property listed on Schedule 4.8(b) for which a Mortgage has been granted pursuant to the First Restated Credit Agreement, the Borrower or its applicable Restricted Subsidiary possesses the leasehold interest(s) necessary for the operation of the applicable Mine(s) currently being operated on such parcel, and each of its rights under the applicable lease(s), contracts, rights-of-way and easements necessary for the operation of such Mine(s) is in full force and effect, except to the extent that failure to maintain such lease(s), contracts, rights of way and easements in full force and effect does not and will not have a material adverse effect on the operation and intended use of such parcel by the Borrower or such Restricted Subsidiary, and (B) with respect to all other real property listed on Schedule 4.8(b), the Borrower and its Restricted Subsidiaries possess all leasehold interests necessary for the operation of the 43 Mines currently being operated by each of them, and each of their respective rights under the leases, contracts, rights-of-way and easements necessary for the operation of such Mines are in full force and effect, except to the extent, with respect to this clause (B), that failure to maintain such leases, contracts, rights of way and easements in full force and effect could not reasonably be expected to have a Material Adverse Effect; (iii)(A) with respect to each parcel of real property listed on Schedule 4.8(b) for which a Mortgage is required hereunder, neither the Borrower nor its applicable Restricted Subsidiary is in default under any of the applicable instruments or agreements described in clauses 4.8(b)(i) and 4.8(b)(ii) above, except for any defaults which, in the aggregate, do not or will not have a material adverse effect on the operation and intended use of such parcel, and (B) with respect to all other real property listed on Schedule 4.8(b), neither the Borrower nor its Restricted Subsidiaries is in default under any of the applicable instruments or agreements described in clauses 4.8(b)(i) and 4.8(b)(ii) above, except, with respect to this clause (B), for any defaults which, in the aggregate, could not reasonably be expected to have a Material Adverse Effect; (iv) each of the Borrower and its Restricted Subsidiaries possesses all licenses, permits (including, but not limited to, all Mining and Environmental Permits necessary for the operation of the Mines being operated by each of them in accordance with applicable Mining and Environmental Laws) or franchises which are necessary to carry out its business as presently conducted, except where failure to possess such licenses, permits or franchises could not, in the aggregate, be reasonably expected to have a Material Adverse Effect, and neither the Borrower nor any Restricted Subsidiary is in violation in any material respect of any such license, permit or franchise. 4.9 Intellectual Property. Each of the Borrower and its Restricted Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, technology, know-how and processes necessary for the conduct of its business as currently conducted except for those the failure to own or license which could not reasonably be expected to have a Material Adverse Effect (the "Intellectual Property"). To the best of the Borrower's knowledge, and except as set forth on Schedule 4.9, no claim has been asserted and is pending by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor does the Borrower know of any valid basis for any such claim which could reasonably be expected to have a Material Adverse Effect. The use of such Intellectual Property by the Borrower and its Restricted Subsidiaries does not infringe on the rights of any Person, except for such claims and infringements that, in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 4.10 Taxes. Each of the Borrower and its Subsidiaries, and any other affiliate with joint and several liability for taxes, has filed or caused to be filed all Federal, state, local and other material tax returns or materials required to have been filed by it and has paid or caused to be paid all taxes due and payable by it pursuant thereto and all assessments received by it (other than any taxes or assessments the amount or validity of which are currently being contested in good faith and for which adequate reserves are maintained on the books of the Borrower or such affiliate), except where the failure to do any of the foregoing could not reasonably be expected to result in a Material Adverse Effect; no tax Lien has been filed, and, to the knowledge of the Borrower, no claim is being asserted, with respect to any such tax, fee or other charge. 4.11 Federal Regulations. No part of the proceeds of any Loans has been or will be used for "purchasing" or "carrying" any "margin stock" within the respective meanings of each of the quoted terms under Regulation U and Regulation X of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect. 4.12 ERISA; Coal Act; Black Lung Act. Except as could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect: no Reportable Event has occurred with respect to any Single Employer Plan; all contributions required to be made with respect to a Plan have been timely made; none of the Borrower or any of its Subsidiaries nor any Commonly Controlled 44 Entity has incurred any material liability to or on account of a Plan pursuant to Section 409, 502(i), 502(1), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971, 4975 or 4980 of the Code or, to the knowledge of the Borrower, reasonably expects to incur any liability (including any indirect, contingent or secondary liability) under any of the foregoing Sections with respect to any Plan; no termination of, or institution of proceedings to terminate or appoint a trustee to administer, a Single Employer Plan has occurred; and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code (except that with respect to any Multiemployer Plan, such representation is deemed made only to the knowledge of the Borrower). No "accumulated funding deficiency" (within the meaning of Section 412 of the Code or Section 302 of ERISA), extension of any amortization period (within the meaning of Section 412 of the Code) or Lien in favor of the PBGC or a Plan has arisen or has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Single Employer Plan. Neither the Borrower nor any Commonly Controlled Entity currently intends to undertake a complete or partial withdrawal (as described in ERISA section 4203 and 4205, respectively) from any Multiemployer Plan for which there is any outstanding liability; if the Borrower or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made, the Borrower anticipates that there would be a withdrawal liability in an amount which would be reasonably likely to have a Material Adverse Effect. To the best knowledge of the Borrower, no such Multiemployer Plan is in Reorganization or Insolvent. The Borrower, its Subsidiaries and its "related persons" (as defined in the Coal Act) are in compliance in all material respects with the Coal Act and none of the Borrower, its Subsidiaries or its related persons has any liability under the Coal Act except with respect to premiums or other payments required thereunder which have been paid when due and except to the extent that the liability thereunder could not reasonably be expected to have a Material Adverse Effect. The Borrower and its Subsidiaries are in compliance in all material respects with the Black Lung Act, and neither the Borrower nor its Subsidiaries has any liability under the Black Lung Act except with respect to premiums, contributions or other payments required thereunder which have been paid when due and except to the extent that the liability thereunder could not reasonably be expected to have a Material Adverse Effect. 4.13 Investment Company Act; Other Regulations. Neither the Borrower nor any Restricted Subsidiary is (a) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935. None of the Borrower or any of its Restricted Subsidiaries is subject to regulation under the Federal Power Act or any other Federal or State statute or regulation (other than Regulation X) which limits its ability to incur Indebtedness. 4.14 Subsidiaries and Other Investments. (a) Schedule 4.14(a) sets forth as of the Effective Date a list of all direct and indirect Subsidiaries of the Borrower and the percentage ownership interest of the Borrower (and each Subsidiary) therein. The shares of Capital Stock or other ownership interests so indicated in Schedule 4.14(a) are owned by the Borrower (or such Subsidiaries), directly or indirectly, and, with respect to Restricted Subsidiaries only, are fully paid and non-assessable and free and clear of all Liens, except for Permitted Liens. (b) Schedule 4.14(b) sets forth as of the Effective Date a list of all Joint Ventures and other minority investments to which the Borrower or any Subsidiary is a party, including a listing of each other Person party to such Joint Venture or investment and the Borrower's or such Subsidiary's percentage interest therein. The shares of Capital Stock or other ownership interests so indicated in Schedule 4.14(b) are owned by the Borrower or such Subsidiary, directly or indirectly, and except with respect to Unrestricted Subsidiaries, are fully paid and non-assessable and free and clear of all Liens, except for Permitted Liens. 45 4.15 Purpose of Loans. The proceeds of the Loans shall be used by the Borrower (i) (A) to refinance the existing Indebtedness of the Borrower and Black Beauty listed on Schedule 4.15 and (B) on the Effective Date to consummate a portion of a tender offer for the Existing Notes and (ii) for working capital purposes and other general corporate purposes, including, without limitation, to make Investments permitted under subsection 7.9. In addition, a portion of the proceeds of the Term Loans may be used by the Borrower to finance the Black Beauty Acquisition and related fees and expenses. 4.16 Environmental Matters. Except as listed on Schedule 4.16, or as would not, individually or in the aggregate, be expected to result in a Material Adverse Effect: (a) The facilities and properties currently or formerly owned, leased or operated by the Borrower or any of its Subsidiaries (the "Properties") do not contain, and have not previously contained, any Materials of Environmental Concern in amounts or concentrations which (i) constitute or constituted a violation of, or (ii) could reasonably be expected to give rise to liability under, any applicable Mining and Environmental Law. (b) None of the Borrower nor any of its Subsidiaries has received any notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Mining and Environmental Laws with regard to any of the Properties or the business operated by the Borrower or any of its Subsidiaries (the "Business"), or any prior business for which the Borrower has, or may reasonably be alleged to have, retained liability under any Mining and Environmental Law, nor does the Borrower have knowledge or reason to believe that any such notice will be received or is being threatened. (c) Materials of Environmental Concern have not been transported or disposed of from the Properties in violation of, or in a manner or to a location which could reasonably be expected to give rise to liability under, any applicable Mining and Environmental Law, nor have any Materials of Environmental Concern been generated, treated, stored or disposed of at, on or under any of the Properties in violation of, or in a manner that could reasonably be expected to give rise to liability under, any applicable Mining and Environmental Law. (d) No judicial proceeding or governmental or administrative action is pending or, to the knowledge of the Borrower, threatened under any Mining and Environmental Law to which the Borrower or any Subsidiary is or, to the knowledge of the Borrower, will be named as a party or with respect to the Properties or the Business, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other similar administrative or judicial requirements outstanding under any Mining and Environmental Law with respect to the Properties or the Business. (e) There has been no release or threat of release of Materials of Environmental Concern at or from the Properties, or arising from or related to the operations of the Borrower or any Subsidiary in connection with the Properties or otherwise in connection with the Business, in violation of or in amounts or in a manner that could reasonably give rise to liability under any applicable Mining and Environmental Laws. (f) The Properties and all operations at the Properties are in compliance in all respects with all applicable Mining and Environmental Laws, and there is no contamination at, under or about the Properties or violation of any applicable Mining and Environmental Law with 46 respect to the Properties or the Business that could interfere with the continued operation of the Properties or materially impair the fair saleable value thereof. (g) The Borrower and its Subsidiaries hold and are in compliance with all Mining and Environmental Permits necessary for their operations. (h) No Lien relating to or in connection with any Mining and Environmental Law has been filed or has been attached to any Property. (i) The Borrower has delivered, or otherwise made available, to the Lenders copies of all written environmental reports, audits and assessments concerning the Properties and the Business in the custody or control of the Borrower which are material to the Business of the Borrower and the Subsidiaries taken as a whole, including any prior business for which the Borrower or any of its Subsidiaries has, or may reasonably be alleged to have, retained liability under any Mining and Environmental Law. 4.17 Collateral Documents. (a) The Guarantee and Collateral Agreement is effective to create in favor of the Administrative Agent, for the ratable benefit of the Secured Parties, a legal, valid and enforceable security interest in the pledged stock and other equity ownership interests described therein and, when stock certificates representing or constituting the pledged stock and other equity ownership interests described therein are delivered to the Administrative Agent, such security interest shall, subject to the existence of Permitted Liens, constitute a perfected first lien on, and security interest in, all right, title and interest of the pledgor party thereto in the pledged stock or other equity ownership interests described therein. (b) The Guarantee and Collateral Agreement is effective to create in favor of the Administrative Agent, for the ratable benefit of the Secured Parties, a legal, valid and enforceable security interest in the Collateral described therein. Uniform Commercial Code financing statements have been filed in each of the jurisdictions listed on Part I of Schedule 4.17 (which lists fixture filings as well), or arrangements have been made for such filing in such jurisdictions, and upon such filings, and upon the taking of possession by the Administrative Agent of any such Collateral the security interests in which may be perfected only by possession, such security interests will, subject to the existence of Permitted Liens, constitute perfected first priority Liens on, and security interests in, all right, title and interest of the debtor party thereto in the collateral described therein. (c) Any and all consents or approvals (whether pursuant to Requirements of Law or any contract or other agreement or instrument) which are required, necessary or prudent to perfect a security interest in each of the Mortgages required hereunder, have been obtained. Each of the Mortgages is effective to create in favor of the Administrative Agent, for the ratable benefit of the Secured Parties, a legal, valid and enforceable lien on the real property or leasehold interest described therein and such liens constitute first priority liens on the real property or leasehold interest described therein, subject only to the existence of Liens as permitted by subsection 7.3(a), (e), (f), (g) and (j). 4.18 Accuracy and Completeness of Information. No fact is known to the Borrower or any of its Subsidiaries which has had or could reasonably be expected to have a Material Adverse Effect, which has not been disclosed to the Lenders by the Borrower or its Subsidiaries in writing prior to the date hereof. No document furnished or statement made in writing to the Lenders by the Borrower or any Subsidiary in connection with the negotiation, preparation or execution of this Agreement or any of the other Credit Documents, taken as a whole, contains any untrue statement of a material fact or omits to state any such material fact necessary in order to make the statements contained therein not misleading in 47 the context in which such statements are made. The Senior Notes Documents constitute all of the material agreements relating to the Senior Notes. 4.19 Solvency. As of the Effective Date and after giving effect to the Black Beauty Acquisition and the other transactions contemplated by this Credit Agreement and the Senior Notes Documents, the Borrower was "Solvent," in that (a) the property, at a fair valuation, of the Borrower and its Subsidiaries, taken together as a single entity, exceeded their debts, (b) the present fair salable value of the assets of the Borrower and its Subsidiaries, taken together as a single entity, was greater than the amount that will be required to pay their probable debts as such debts become absolute and matured, and (c) the Borrower did not intend to, and did not believe that the Borrower and its Subsidiaries, taken together as a single entity, would, incur debts or liabilities beyond the their ability to pay as such debts and liabilities mature. For purposes of this subsection, "debt" means "liability on a claim" and "claim" means any (i) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured or (ii) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured, or unsecured. 4.20 Labor Matters. There are no strikes, stoppages, slowdowns or other labor disputes or controversies pending or, to the Borrower's knowledge, overtly threatened against the Borrower or any of its Subsidiaries which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. The hours worked and payments made to employees of the Borrower and each of its Subsidiaries (and their predecessors) have not been in violation of the Fair Labor Standards Act or any other applicable Requirement of Law, except to the extent such violations could not, or in the aggregate, be reasonably expected to have a Material Adverse Effect. 4.21 Insurance. Schedule 4.21 sets forth a true, complete and correct description of all material insurance maintained by the Borrower or by the Borrower for its Subsidiaries as of the Effective Date. As of such date, such insurance is in full force and effect and all premiums have been duly paid (unless such premium is being contested in good faith; provided that the policy to which such premium relates is not canceled or in imminent danger of cancellation as a result of such contest). The Borrower and its Restricted Subsidiaries have insurance in such amounts and covering such risks and liabilities as are in accordance with normal industry practice. 4.22 Coal Supply Agreements. Schedule 4.22 sets forth a complete and accurate list of all Coal Supply Agreements to which the Borrower or any other Credit Party is a party as of the Effective Date, including the counterparty to each such agreement, which, by their terms, do not prohibit a collateral assignment thereof to the Administrative Agent for the ratable benefit of the Secured Parties or would not, upon such assignment or attempted assignment require notice to any other party thereto. As of the Effective Date, each such Coal Supply Agreement is in full force and effect, except to the extent that the failure to be in full force and effect could not reasonably be expected to have a Material Adverse Effect. 4.23 Mines. Schedule 4.23 sets forth a complete and accurate list of all Mines (including addresses and the owner and operator thereof) owned or operated by the Borrower or any of its Restricted Subsidiaries as of the Effective Date. 4.24 Titled Equipment. The value of all vehicles, rolling stock and other Operating Equipment owned by the Borrower or any of its Restricted Subsidiaries as of the Effective Date and covered by certificates of title is not, in the aggregate, material to the Borrower and its Subsidiaries taken as a whole. 48 4.25 Acts of God. Neither the Business nor the Properties has been affected by any fire, explosion, accident, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or other casualty (whether or not covered by insurance), which could reasonably be expected to have a Material Adverse Effect. 4.26 Surety Bonds. All surety, reclamation and similar bonds required to be maintained by the Borrower or any of its Restricted Subsidiaries under any Requirement of Law or Contractual Obligation are in full force and effect and were not and will not be terminated, suspended, revoked or otherwise adversely affected by virtue of the consummation of the financing hereunder and under the Senior Notes Documents; provided that (i) self-bonding permitted under Requirements of Law prior to the Effective Date may be required to be replaced following the Effective Date with surety bonds, (ii) the cost of such bonds may be increased and (iii) certain of such bonds may be terminated, suspended or revoked, provided that, taken together, the events specified in clauses (i), (ii) and (iii) above will not have a Material Adverse Effect. All required guarantees of, and letters of credit with respect to, such surety, reclamation and similar bonds are in full force and effect except where such failure to be in full force and effect could not reasonably be expected to have a Material Adverse Effect. SECTION 5. CONDITIONS PRECEDENT 5.1 Effective Date. The effectiveness of this Agreement shall be subject to the satisfaction of each of the following conditions precedent: (a) The Administrative Agent shall have received (i) a copy of the certificate of incorporation (or equivalent Constitutional Document), including all amendments thereto, of each Credit Party, certified as of a recent date by the Secretary of State of the state of its organization, and a certificate as to the good standing of such Credit Party as of a recent date, from such Secretary of State; (ii) a certificate of the Secretary or Assistant Secretary of each Credit Party dated the Effective Date and certifying (A) that attached thereto is a true and complete copy of the by-laws (or equivalent Constitutional Document) of such Credit Party as in effect on the Effective Date and at all times since a date prior to the date of the resolutions described in clause (B) below, (B) that attached thereto is a true and complete copy of resolutions duly adopted by the Board of Directors (or equivalent governing body) of such Credit Party authorizing the execution, delivery and performance of the Credit Documents to which such Credit Party is a party, the borrowings hereunder (in the case of the Borrower), the granting by it of the Liens created pursuant to the Security Documents to which it is a party, and that such resolutions have not been modified or rescinded and that the Constitutional Documents of such Credit Party have not been amended since the date of the last amendment thereto shown on the certificate of good standing furnished pursuant to clause (i) above, and (C) as to the incumbency and specimen signature of each officer executing any Credit Document or any other document delivered in connection herewith on behalf of the Borrower; and (iii) a certificate of a Responsible Officer (other than the Secretary or Assistant Secretary executing the certificate pursuant to clause (ii) above) as to the incumbency and specimen signature of such Secretary or Assistant Secretary. (b) The Borrower and each Restricted Subsidiary that owns or operates any of the real property Collateral (including any of the mines located on or under such real property) or conducts any business material to the Credit Parties taken as a whole shall be duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except to the extent that the failure to so qualify could not, in the aggregate, reasonably be expected to have a Material Adverse Effect, and the Administrative Agent shall have received certificates of good 49 standing with respect to the Borrower and the other Credit Parties issued by the Secretary of State (or other relevant officers) of each such jurisdiction, each dated as of a recent date. (c) The Administrative Agent shall have received from the Borrower, the other Credit Parties, the Lenders and the Agents duly-executed signature pages to each Credit Document to which each such Person is a party (including, without limitation, this Agreement, the Notes (if any), the Guarantee and Collateral Agreement and any other Security Document) and each such Credit Document shall be in full force and effect. (d) The Administrative Agent shall have received the following executed legal opinions: (i) the executed legal opinion of Simpson Thacher & Bartlett, counsel to the Borrower and special New York counsel to the other Credit Parties, substantially in the form of Exhibit C-1; (ii) the executed legal opinion of Jeffery Klinger, Esq., special Missouri counsel to the Borrower and in-house counsel to the other Credit Parties, substantially in the form of Exhibit C-2; and (iii) the executed legal opinions of local counsel to the Borrower and the other Credit Parties in the states of Illinois, Kentucky, New Mexico, Wyoming, and West Virginia regarding perfection of security interests in Collateral located in such jurisdictions. Each such legal opinion shall cover such other matters incident to the transactions contemplated by this Agreement as the Agents may reasonably require. (e) The Administrative Agent shall have received UCC financing statement amendments with respect to certain UCC-1 financing statements and fixture filings originally executed and delivered by the Credit Parties under the First Restated Credit Agreement and fully executed amendments to the Mortgages originally executed and delivered by the Credit Parties under the First Restated Credit Agreement, in each case reflecting the amendment and restatement of the First Restated Credit Agreement by this Agreement, as well as any other instruments and documents in form and substance reasonably satisfactory to the Administrative Agent necessary or, in the opinion of the Administrative Agent, desirable to perfect, or continue the perfection of, the Administrative Agent's security interest in any Collateral granted by the Credit Parties pursuant to the Security Documents. (f) The Administrative Agent shall have received (i) evidence reasonably satisfactory to it that the Agents and the Lenders have been named as additional insureds on all liability insurance policies of the Borrower and its Restricted Subsidiaries and that the Administrative Agent has been named as loss payee on all property and casualty insurance policies of the Borrower and its Restricted Subsidiaries and (ii) the other information required under subsection 6.5(b) to be delivered to the Administrative Agent on the Effective Date. (g) Each assignment of a Loan and/or a Commitment by the Original Lenders to a Lender contemplated to occur on or prior to the Effective Date shall have been consummated. (h) The Lenders and the Agents shall have received payment in full for all fees required to be paid and expenses for which invoices have been presented on or before the 50 Effective Date (including, without limitation, the fees and expenses of legal counsel to the Administrative Agent and the Syndication Agents). (i) The Administrative Agent shall have received a certificate, signed by a Responsible Officer of the Borrower, dated the Effective Date and confirming that the representations and warranties set forth herein and in the other Credit Documents are true and correct in all material respects as of such date, except to the extent such representations and warranties expressly relate solely to an earlier date. (j) On the Effective Date, no Default or Event of Default shall have occurred and be continuing. (k) No event shall have occurred since December 31, 2002 that could reasonably be expected to have a Material Adverse Effect. (l) The Administrative Agent shall have received the results of a recent lien, tax lien, judgment and litigation search in each of the jurisdictions or offices in which UCC financing statements or other filings or recordations should be made to evidence or perfect (with the priority required under the Credit Documents) security interests in all Collateral, and such search shall reveal no Liens on any of the assets of the Borrower or its Subsidiaries except for (i) Permitted Liens, (ii) Liens to be released on the Effective Date and (iii) Liens subject to the provisions of subsection 6.22. (m) The Administrative Agent shall have received the certificates representing the shares of Capital Stock pledged pursuant to the Guarantee and Collateral Agreement, together with an undated stock power for each such certificate executed in blank by a duly authorized officer of the pledgor thereof. (n) The Lenders shall have received copies of the balance sheets and statements of income and cash flows referred to in subsection 4.1. (o) The Lenders shall have received a report from Marshall Miller and Associates confirming and validating the methodology for establishing and calculating the coal reserves as reported in the Borrower's Form 10-K for the period ending December 31, 2002, which shall be in form and substance reasonably satisfactory to the Administrative Agent and the Syndication Agents. (p) The Lenders shall have received financial projections prepared by the Borrower for the Borrower and its Subsidiaries, including, without limitation, income statements, balance sheets and cash flow statements for the calendar years 2003 through 2007, which shall be in form and substance reasonably satisfactory to the Lenders. (q) On the Effective Date, the senior secured Indebtedness of the Borrower shall be rated at least BB+ by S&P and Ba1 by Moody's. (r) The Lenders shall have received evidence that, on and after the Effective Date, Black Beauty shall be a guarantor of the Obligations pursuant to the Guarantee and Collateral Agreement, Black Beauty shall be a Restricted Subsidiary under this Agreement and all of the Capital Stock of Black Beauty owned by any Credit Party shall be pledged to the Administrative Agent for the ratable benefit of the Secured Parties. 51 (s) On the Effective Date, the Borrower shall have consummated a portion of a tender offer for and retired a portion of the Existing Notes on terms and conditions satisfactory to the Administrative Agent. (t) On the Effective Date, the Borrower shall have received not less than $650,000,000 in gross proceeds from the sale of the Senior Notes on terms and conditions reasonably satisfactory to the Administrative Agent. (u) The Administrative Agent and the Syndication Agents shall have received such other documents, agreements, certificates and information as it shall reasonably request. 5.2 Conditions to a Credit Event. The obligation of any Lender or of the Issuing Lender on the occasion of any Credit Event is subject to the satisfaction of the following conditions: (a) The Administrative Agent shall have received a Notice of Borrowing at least three (3) Business Days in advance of the date of such Credit Event (subject to any shorter notice periods provided for in subsection 2.2) or, in the case of the issuance of a Letter of Credit, the Issuing Lender, the Administrative Agent shall have received an Application requesting the issuance of such Letter of Credit at least three (3) Business Days in advance of the date of such Credit Event. (b) On the date of such requested Credit Event, the representations and warranties set forth herein and in the other Credit Documents shall be true and correct in all material respects on and as of such date, except for representations and warranties expressly stated to relate solely to a specific earlier date, in which case such representations and warranties shall have been true and correct in all material respects as of such earlier date. (c) At the time of and immediately after such Credit Event, no Default or Event of shall have occurred and be continuing. (d) No event shall have occurred since the immediately preceding Credit Event that could reasonably be expected to have a Material Adverse Effect. SECTION 6. AFFIRMATIVE COVENANTS The Borrower hereby agrees that, so long as the Commitments remain in effect or any amount is owing to any Lender or any Agent hereunder or under any other Credit Document, the Borrower shall, and shall cause each of its Subsidiaries (or, where specified, Restricted Subsidiaries) to: 6.1 Financial Statements. Furnish to the Administrative Agent: (a) as soon as available, but in any event within 90 days after the end of each fiscal year of the Borrower beginning with the fiscal year ending on December 31, 2003, a copy of the consolidated balance sheet of (i) the Borrower and its consolidated Subsidiaries and (ii) the Borrower and its Consolidated Subsidiaries, in each case as at the end of such year and the related consolidated and Consolidated statements of income and retained earnings and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year and, in the case of statements delivered under clause (i), reported on without a "going concern" or like qualification or exception, or qualification arising out of the scope of the audit, by independent certified public accountants of nationally recognized standing and, in the case of statements delivered under clause (ii), certified by a Responsible Officer; 52 (b) as soon as available, but in any event not later than 45 days after the end of each of the first three quarterly periods of each fiscal year of the Borrower, (i) the unaudited consolidated balance sheet of the Borrower and its consolidated Subsidiaries and (ii) the Consolidated balance sheet of the Borrower and its Consolidated Subsidiaries, in each case as at the end of such quarter and the related unaudited consolidated and Consolidated statements of income and retained earnings and of cash flows of the Borrower and its applicable Subsidiaries for such quarter and the portion of the fiscal year through the end of such quarter, setting forth in each case in comparative form the figures for the previous year, certified by a Responsible Officer as being fairly stated in all material respects (subject to normal year-end audit adjustments). All such financial statements shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods (except as approved by such accountants or officer, as the case may be, and disclosed therein). 6.2 Certificates; Other Information. Furnish to the Administrative Agent: (a) concurrently with the delivery of the financial statements referred to in subsection 6.1(a)(i), a certificate of the independent certified public accountants reporting on such financial statements stating that, in performing their audit, nothing came to their attention that caused them to believe that the Borrower failed to comply with the provisions of subsection 7.1, except as specified in such certificate; (b) concurrently with the delivery of the financial statements referred to in subsections 6.1(a)(ii) and (b), a certificate of a Responsible Officer stating that, to the best of such Officer's knowledge, during such period (i) no Restricted Subsidiary has been formed or acquired (or, if any such Subsidiary has been formed or acquired, the Borrower has complied with the requirements of subsection 6.10 with respect thereto), (ii) neither of the Borrower nor any of its Restricted Subsidiaries has changed its legal name or its jurisdiction of organization without complying with the requirements of this Agreement and the Security Documents with respect thereto and (iii) such Officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate; (c) concurrently with the delivery of financial statements pursuant to subsection 6.1(a)(ii) (and, in the case of the following clauses (ii) and (iii), concurrently with the delivery of the financial statements referred to in subsection 6.1(b)), a certificate of a Responsible Officer of the Borrower setting forth, in reasonable detail, the computations, as applicable, of (i) Excess Cash Flow, (ii) Capital Expenditures and (iii) the covenants set forth in subsection 7.1 and , as of such last day or for the fiscal period then ended, as the case may be; (d) not later than 60 days after the end of each fiscal year of the Borrower, a copy of summary projections by the Borrower of the operating budget and cash flow budget of the Borrower and its Subsidiaries for the succeeding fiscal year, such projections to be accompanied by a certificate of a Responsible Officer to the effect that such projections have been prepared based on assumptions believed by the Borrower to be reasonable; (e) within five days after the same are sent, copies of all financial statements and reports which the Borrower or any of its Restricted Subsidiaries sends to its stockholders, and within five days after the same are filed, copies of all financial statements and other reports which 53 the Borrower or any of its Subsidiaries may make to, or file with, the Securities and Exchange Commission or any successor or analogous Governmental Authority; and (f) promptly, such additional financial and other information as any Lender may from time to time reasonably request. 6.3 Payment of Obligations. With respect to the Borrower and each of its Restricted Subsidiaries, pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, or otherwise in accordance with customary industry practice, as the case may be, all its material obligations of whatever nature, except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the Borrower or such Restricted Subsidiary, as the case may be. 6.4 Existence; Businesses and Properties. (a) Do or cause to be done all things necessary to preserve, renew and keep in full force and effect the legal existence of the Borrower and each Restricted Subsidiary, except as otherwise expressly permitted under subsections 7.5 and 7.6. (b) With respect to the Borrower and its Restricted Subsidiaries, maintain, preserve, protect, and keep all Collateral and all other property used or useful and necessary in the conduct of its business in good condition (ordinary wear and tear and damage by fire or other casualty or taking by condemnation excepted) and in compliance with all applicable material Requirements of Law. (c) Keep in full force and effect all of its material leases and other material contract rights, and all material rights of way, easements and privileges necessary or appropriate for the proper operation of the Mines being operated by the Borrower or a Restricted Subsidiary. (d) Obtain and comply with each permit, license, authorization and other governmental approval necessary to recover Coal from any Mine being operated by the Borrower or a Restricted Subsidiary and observe the requirements thereof in all material respects, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect. (e) Cause each Mine being operated by the Borrower or a Restricted Subsidiary to be operated, maintained, developed and mined and cause the associated processing plants and other fixed and operating assets to be operated and maintained, in a workmanlike manner, as would a prudent coal mine operator, and in accordance with generally accepted mining practices and all applicable Requirements of Law, including but not limited to applicable Mining and Environmental Laws, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect. (f) Cause the Operating Equipment, the processing plants associated with the Mines being operated by the Borrower or a Restricted Subsidiary and other fixed and operating assets to be kept in effective operating condition, and all repairs, renewals, replacements, addition and improvements thereof or thereto needful to the production, processing and transportation of Coal from any such Mine or associated properties to be promptly made, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect. (g) Pay or cause to be paid when due all expenses incurred in connection with the maintenance, development, operation and protection of processing plants associated with the Mines being operated by the Borrower or a Restricted Subsidiary and other fixed and operating assets, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect. 54 6.5 Insurance. (a) Maintain with financially sound and reputable insurance companies insurance (including, without limitation, all required surety, reclamation and similar bonds) on all its property in at least such amounts and against at least such risks (but including in any event public liability, cargo loss and business interruption) as are usually insured against in the same general area by companies engaged in the same or a similar business; and furnish to the Administrative Agent, upon written request, full information as to the insurance carried except to the extent that the failure to do any of the foregoing with respect to any such property could not reasonably be expected to result in a Material Adverse Effect, or, in the case of the Borrower and any Restricted Subsidiary, materially adversely affect the value or usefulness of such property; provided that in any event the Borrower will maintain, and will cause each of its Restricted Subsidiaries to maintain, to the extent obtainable on commercially reasonable terms, (i) property and casualty insurance on all real and personal property on an all risks basis (including the perils of flood and quake), covering the repair or replacement cost of all such property and consequential loss coverage for business interruption and extra expense (which shall be limited to fixed construction expenses and such other business interruption expenses as are otherwise generally available to similar businesses), and (ii) public liability insurance. All such insurance with respect to the Borrower and its Restricted Subsidiaries shall be provided by insurers or reinsurers which (x) in the case of United States insurers and reinsurers, have an A.M. Best policyholders rating of not less than A- with respect to primary insurance and B+ with respect to excess insurance and (y) in the case of non-United States insurers or reinsurers, the providers of at least 80% of such insurance have either an ISI policyholders rating of not less than A, an A.M. Best policyholders rating of not less than A- or a surplus of not less than $500,000,000 with respect to primary insurance, and an ISI policyholders rating of not less than BBB with respect to excess insurance, or, if the relevant insurance is not available from such insurers, such other insurers as the Administrative Agent may approve in writing. All insurance shall provide that no cancellation, material reduction in amount or material change in coverage thereof shall be effective until at least 30 days after receipt by the Administrative Agent of written notice thereof. (b) The Borrower and its Restricted Subsidiaries will deliver to the Administrative Agent on behalf of the Lenders, (i) on the Effective Date a certificate dated such date showing the amount of insurance coverage as of such date, (ii) upon request of any Lender through the Administrative Agent from time to time full information as to the insurance carried, (iii) promptly following receipt of notice from any insurer, a copy of any notice of cancellation or material change in coverage from that existing on the Effective Date, (iv) forthwith, notice of any cancellation or nonrenewal of coverage by the Borrower or any Subsidiary, and (v) promptly after such information is available to the Borrower, full information as to any claim for an amount in excess of $2,500,000 with respect to any property and casualty insurance policy maintained by the Borrower or any Restricted Subsidiary. The Agents and the Lenders shall be named as additional insureds on all such liability insurance policies of the Borrower and its Restricted Subsidiaries and the Administrative Agent shall be named as loss payee on all property and casualty insurance policies of the Borrower and its Restricted Subsidiaries. Any proceeds from any such insurance policy in respect of any claim, or any condemnation award or other compensation in respect of a condemnation (or any transfer or disposition of property in lieu of condemnation) for which the Borrower or any of its Restricted Subsidiaries receives a condemnation award or other compensation shall be paid to the Borrower or the Restricted Subsidiary; provided that any such proceeds paid to the Borrower or any Restricted Subsidiary with respect to, and to the extent of, a loss attributable to any Unrestricted Subsidiary or its property shall be paid to such Unrestricted Subsidiary; provided further that: (A) the Borrower or the Restricted Subsidiary will use such proceeds, condemnation award or other compensation to repair, restore or replace the assets which were the subject of such claim within 12 months after receipt thereof (and a Responsible Officer shall deliver a certificate specifying in reasonable detail such usage not later than the last day of such relevant period), and (B) if, at the time of the receipt of such proceeds, condemnation award or other compensation, an Event of Default has occurred and is continuing, the aggregate amount of all such proceeds, condemnation award or other compensation shall be paid to the Administrative Agent and held as Collateral for application in accordance with the Security 55 Documents; and provided further that, to the extent that any amount of such proceeds, condemnation award or other compensation are not used or committed during the time period specified in proviso (A) above, then, if requested by notice from the Required Lenders to the Borrower, all such remaining uncommitted proceeds, condemnation award or other compensation shall be paid to the Administrative Agent and held as Collateral for application in accordance with the Security Documents. 6.6 Inspection of Properties; Books and Records; Discussions. Keep proper books of record and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities; and permit representatives of any Lender to visit and inspect any of its properties and examine any of its books, records, agreements, contracts and the like (except to the extent (i) any such access is restricted by a Requirement of Law or (ii) any such agreements, contracts or the like are subject to a written confidentiality agreement with a non-Affiliate that prohibits the Borrower or any of its Subsidiaries from granting such access to the Lenders; provided that, with respect to such confidentiality restrictions affecting the Borrower or any of its Restricted Subsidiaries, a Responsible Officer is made available to such Lender to discuss such confidential information to the extent permitted) at any reasonable time and upon reasonable notice on a Business Day and as often as may reasonably be desired by any Lender and to discuss the business, operations, properties and financial and other condition of the Borrower and its Subsidiaries with officers and employees of the Borrower and its Subsidiaries and with its independent certified public accountants; provided that the Administrative Agent or such Lender shall notify the Borrower prior to any contact with such accountants and give the Borrower the opportunity to participate in such discussions; provided, further, that the Borrower shall notify the Administrative Agent of any such visits, inspections or discussions prior to each occurrence thereof. 6.7 Notices. Promptly give notice to the Administrative Agent and each Lender of: (a) the occurrence of any Default or Event of Default; (b) any (i) default or event of default under any material Contractual Obligation of the Borrower or any of its Restricted Subsidiaries, (ii) litigation, investigation or proceeding which may exist at any time between the Borrower or any of its Subsidiaries and any Governmental Authority, which in either case, could reasonably be expected to have a Material Adverse Effect or (iii) any material asset sale by the Borrower or a Restricted Subsidiary (describing in reasonable detail the assets sold, the consideration received therefor and the proposed use of the proceeds thereof); (c) any other litigation or proceeding affecting the Borrower or any of its Restricted Subsidiaries in which the amount involved is $10,000,000 or more and not covered by insurance; and (d) the following events that, individually or in the aggregate, would be reasonably likely to have a Material Adverse Effect, as soon as possible and in any event within 20 days after the Borrower knows or has reason to know thereof: (i) the incurrence or expected incurrence of an accumulated funding deficiency or the filing or expected filing of an application to the Secretary of the Treasury for a waiver or modification of the minimum funding standard (including any required installment payments) or an extension or expected extension of any amortization period under Section 412 of the Code with respect to a Plan, the creation of any Lien or the expected creation of any Lien in favor of the PBGC or a Plan, and the reassumption or expected reassumption by the Seller of sponsorship of any Single Employer Plan, (ii) the occurrence or expected occurrence of any Reportable Event with respect to any Plan (other than a Multiple Employer Plan), or any withdrawal from or expected withdrawal from, or the 56 termination, Reorganization or Insolvency, or expected termination, Reorganization or Insolvency of, any Multiemployer Plan, or a failure or reasonably expected failure to make any required contribution to a Plan, (iii) the institution or the expected institution of proceedings by the PBGC or any Person (including any employer) with respect to the withdrawal from, or the termination, Reorganization or Insolvency of, any Single Employer Plan or Multiemployer Plan, (iv) the incurrence or expected incurrence of any liability pursuant to (A) the Coal Act (other than with respect to required premiums or other payments which are timely paid), or (B) the Black Lung Act (other than with respect to required premiums, contributions or other payments which are timely paid), or (v) any adoption of, assumption of, amendment of, or modification of any employee welfare benefit plan (as defined in Section 3(1) of ERISA) that provides benefits to retired employees (other than as required by Section 601 of ERISA or the Coal Act which on a FAS 106 basis results in the incurrence or expected incurrence of any increased liability with respect thereto). Each notice pursuant to this subsection shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the Borrower proposes to take with respect thereto. 6.8 Mining and Environmental Laws. Except as would not reasonably be expected to have a Material Adverse Effect: (a)(i) Comply in all respects with all applicable Mining and Environmental Laws, and obtain, comply in all respects with, and maintain any and all Mining and Environmental Permits necessary for its operations as conducted and as planned; and (ii) take all reasonable efforts to ensure that all of its tenants, subtenants, contractors, subcontractors, and invitees comply in all respects with all applicable Mining and Environmental Laws, and obtain, comply in all respects with and maintain any and all Mining and Environmental Permits, applicable to any of them. Notwithstanding the foregoing, upon learning of any actual or suspected noncompliance covered above, the Borrower or one or more of its Subsidiaries, as appropriate, shall promptly undertake all reasonable efforts to achieve compliance; and (b) Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions in each case required under applicable Mining and Environmental Laws and promptly comply in all respects with all lawful orders and directives of all Governmental Authorities regarding applicable Mining and Environmental Laws except to the extent that the same are being contested in good faith by appropriate proceedings and the pendency of such proceedings could not be reasonably expected to have a Material Adverse Effect. 6.9 Further Assurances. With respect to the Borrower and its Restricted Subsidiaries, upon the reasonable request of the Administrative Agent, promptly perform or cause to be performed any and all acts and execute or cause to be executed any and all documents (including, without limitation, financing statements and continuation statements) for filing under the provisions of the Uniform Commercial Code or any other Requirement of Law which are necessary or advisable to maintain in favor of the Administrative Agent, for the benefit of the Secured Parties, Liens on the Collateral that are duly perfected in accordance with all applicable Requirements of Law. 6.10 Additional Collateral. (a) With respect to any assets (other than (w) any assets described in subsection 6.10(b), (x) assets of Black Beauty, which are governed by subsection 6.10(e), (y) immaterial assets a Lien on which cannot be perfected by physical delivery to the Administrative Agent or by filing UCC-1 financing statements, and (z) assets constituting interests in real property) acquired on or after the Effective Date by the Borrower or any of its Restricted Subsidiaries existing on the Effective Date or owned by any Credit Party that becomes a Restricted Subsidiary after the Effective Date and which has elected in writing to the Administrative Agent to be irrevocably bound by the provisions of this 57 subsection 6.10(a), in each case which assets are not already subject to the Lien created by any of the Security Documents, promptly (and in any event within thirty (30) days after the acquisition thereof): (i) execute and deliver to the Administrative Agent such amendments to the relevant Security Documents or such other documents as the Administrative Agent shall deem necessary or advisable to grant to the Administrative Agent, for the benefit of the Secured Parties, a Lien on such assets, (ii) take all actions necessary or advisable to cause such Lien to be duly perfected in accordance with all applicable Requirements of Law, including, without limitation, the delivery of the applicable assets to the Administrative Agent or the filing of financing statements in such jurisdictions as may be requested by the Administrative Agent, and (iii) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described in clauses (i) and (ii) of this subsection 6.10(a), which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent. (b) With respect to any Person that, on or subsequent to the Effective Date, (x) becomes a direct or indirect Restricted Subsidiary, (y) ceases to be a Foreign Subsidiary but retains its Restricted Subsidiary status, or (z) ceases to be an Unrestricted Subsidiary but retains its, or otherwise qualifies hereunder for, Subsidiary status, as applicable: (i) no later than thirty (30) days after the date such Person becomes such a Subsidiary, execute and deliver to the Administrative Agent, for the benefit of the Secured Parties, such amendments to the Guarantee and Collateral Agreement as the Administrative Agent shall deem necessary or advisable to grant to the Administrative Agent, for the benefit of the Secured Parties, a Lien on the Capital Stock of such Restricted Subsidiary which is owned by the Borrower or any of its Restricted Subsidiaries, provided that with respect to any Restricted Subsidiary which is not wholly owned by a Credit Party or any Affiliate thereof, a Lien on the Capital Stock of such Restricted Subsidiary shall not be required to the extent that the grant of such Lien is prohibited by the Constitutional Documents of such Restricted Subsidiary, (ii) no later than thirty (30) days after the date such Person becomes such a Subsidiary, deliver to the Administrative Agent the certificates, if any, representing such Capital Stock, together with undated stock powers executed and delivered in blank by a duly authorized officer of the Borrower or such Restricted Subsidiary, as the case may be, (iii) cause such Restricted Subsidiary no later than thirty (30) days after the date such Person becomes such a Subsidiary, to become a party to the Guarantee and Collateral Agreement (solely for the purpose of guaranteeing the Obligations and not for the purpose of granting a Lien on the assets of such Restricted Subsidiary to the Administrative Agent) and the Subordination Agreement, in each case pursuant to documentation which is in form and substance reasonably satisfactory to the Administrative Agent, and (iv) within thirty (30) days of the date such Person becomes such a Subsidiary, if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described in clauses (i), (ii) and (iii) of this subsection 6.10(b), which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent. Notwithstanding the foregoing, (1) no Foreign Subsidiary of the Borrower shall be required to execute the Guarantee and Collateral Agreement, (2) no more than 65% of the Capital Stock of or equity interests in any direct Foreign Subsidiary of the Borrower or any of its Subsidiaries (and none of the Capital Stock of or equity interests in any indirect Foreign Subsidiary), or any other of its Subsidiaries if more than 65% of the assets of such Subsidiary are securities of foreign companies (such determination to be made on the basis of fair market value), shall be required to be pledged hereunder, (3) no Unrestricted Subsidiary shall be required to become a party to the Guarantee and Collateral Agreement and (4) the Capital Stock of Unrestricted Subsidiaries pledged to the Administrative Agent pursuant to the Guarantee and Collateral Agreement shall be released as provided in subsection 8.16 thereof. (c) At all times after the Borrower and its Restricted Subsidiaries have recognized, collectively, an asset "impairment loss" (as such term is contemplated by and pursuant to F.A.S. 121 ("Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of")) (or more than one such asset impairment loss) with respect to Collateral totaling in the aggregate Fifty 58 Million Dollars ($50,000,000.00) or more, as promptly as reasonably practical but in any event no later than ninety (90) days after each such recognition in excess of such initial $50,000,000, the Borrower at its sole cost and expense shall have delivered or caused to be delivered to the Administrative Agent (i) one or more Mortgages with respect to real property interests owned by Borrower or any of its Restricted Subsidiaries (other than leased real property located in the State of Arizona, the mortgaging of which would require the consent of the lessor thereof and with respect to which the Borrower has determined in good faith, after consultation with the Administrative Agent, that the seeking of such consent would be materially disadvantageous to its business) which (A) are not already subject to any Mortgage, (B) which have been selected by the Administrative Agent in its reasonable discretion, and (C) have a total value (as reasonably determined by the Administrative Agent) at least equal to the dollar value of such "impairment loss" recognition, such Mortgages in each case to be executed and delivered by a duly authorized officer of the mortgagor party thereto, with a counterpart or a conformed copy for each Lender, (ii) a legal opinion in form and substance, and from counsel licensed to practice in the jurisdiction in which each such Mortgage is to be recorded, reasonably satisfactory to the Administrative Agent, including, without limitation, an opinion that such Mortgage is a legal, valid and binding instrument, enforceable according to its terms, (iii) as selected by the Administrative Agent in its reasonable discretion (the exercise of which shall take into account industry practices in the area in which each such Mortgage is to be recorded), with respect to each parcel covered by the applicable Mortgage encumbering such real property, either (A) a mortgagee's title policy (or policies) (each such policy satisfying the requirements of this subsection 6.10(c), a "Title Policy") dated a date reasonably satisfactory to the Administrative Agent, which such policy(ies) shall (1) be in an amount reasonably satisfactory to the Administrative Agent; (2) ensure that the Mortgage insured thereby creates a valid first Lien on such parcel free and clear of all defects and encumbrances, except for liens permitted by subsections 7.3(a), (e), (f), (g), and (j) such other liens and defects as may be approved in writing by the Administrative Agent; (3) name the Administrative Agent for the benefit of the Secured Parties as the insured thereunder; (4) be in the form of ALTA Loan Policy - 1992; (5) contain such endorsements and affirmative coverage as the Administrative Agent may reasonably request and (6) be issued by title companies reasonably satisfactory to the Administrative Agent (including any such title companies acting as co-insurers or reinsures, at the option of the Administrative Agent), and the Administrative Agent shall have received evidence reasonably satisfactory to it that all premiums in respect of each such policy, and all charges for mortgage recording tax, if any, have been paid or (B) a legal opinion from local counsel in the jurisdiction of such Mortgage, in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent, including, without limitation, an opinion that the mortgagor who is named in such Mortgage holds legal and valid title to the interests secured thereby, free and clear of all defects and encumbrances, except for liens permitted by subsections 7.3(a), (e), (f), (g) and (j), and such other liens and defects approved by and/or acceptable to the Administrative Agent (a "Title Opinion") and (iv) a certificate executed by an officer of the Borrower or the Restricted Subsidiary, as applicable, issued to the Administrative Agent, certifying that at the time of such certification the fair market value of the real property interests which are being secured pursuant to this clause 6.10(c)(vii) equal or exceed the amount of the applicable "impairment loss" recognition, and that such recognition is in all other respects in accordance with GAAP. (d) If required pursuant to Regulation H, the Borrower shall deliver to the Administrative Agent (A) a policy of or certificate evidencing flood insurance which (i) covers the parcel of improved real property which is encumbered by the applicable Mortgage, (ii) is written in an amount not less than the outstanding principal amount of the indebtedness secured by such Mortgage which is reasonably allocable to such parcel of improved real property or the maximum limit of coverage made available with respect to the particular type of property under the National Flood Insurance Act of 1968, whichever is less, and (iii) will be renewed annually at least for a series of terms ending not earlier than the maturity of the Indebtedness secured by such Mortgage and (B) confirmation that the Borrower has received the notice required pursuant to Section 208(e)(3) of Regulation H. 59 (e) If at any time following the consummation of the Black Beauty Acquisition the Borrower's senior secured Indebtedness is rated BB- or below by S&P or Ba3 or below by Moody's (the "Black Beauty Condition"), promptly (i) cause a Lien to be granted to the Administrative Agent for the ratable benefit of the Secured Parties and perfected on substantially all of the assets and property of Black Beauty, its wholly owned Subsidiaries and its non-wholly owned Subsidiaries with respect to which any equity interests not owned by Black Beauty are owned directly or indirectly by a Credit Party, (ii) a Mortgage with respect to each of the real property interests held by Black Beauty, its wholly owned Subsidiaries and its non-wholly owned Subsidiaries with respect to which any equity interests not owned by Black Beauty are owned directly or indirectly by a Credit Party, executed and delivered by a duly authorized officer of the mortgagor party thereto, with a counterpart or a conformed copy for each Lender, (iii) a legal opinion in form and substance, and from counsel licensed to practice in the jurisdiction in which such Mortgage is to be recorded, reasonably satisfactory to the Administrative Agent, including, without limitation, an opinion that such Mortgage is a legal, valid and binding instrument, enforceable according to its terms (subject to customary exceptions), and (iv) either a Title Policy or a Title Opinion, to be selected by the Administrative Agent in its reasonable discretion, the exercise of which shall take into account industry practices in the area in which such Mortgage is to be recorded . (f) If at any time prior to the occurrence of the Black Beauty Collateral Event (i) Black Beauty shall no longer be a Restricted Subsidiary and (ii) the Black Beauty Condition shall exist, then the Borrower shall promptly cause a Lien to be granted to the Administrative Agent for the ratable benefit of the Secured Parties and perfected on assets of a Credit Party whose aggregate value, in the reasonable opinion of the Administrative Agent (after consultation with the Borrower), shall be equal to the value of assets on which a Lien would have been granted to the Administrative Agent if Black Beauty had been a Restricted Subsidiary upon the occurrence of the Black Beauty Condition. (g) The Borrower hereby represents and warrants that the real property interests described on Schedule 4.8(a)(ii) constitute substantially all of the real property interests owned or controlled by the Borrower or any of its Restricted Subsidiaries with respect to (i) the operating mines (including coal reserves) known or referred to by the Borrower or any of its Restricted Subsidiaries as the Rawhide Mine, the Caballo Mine, the North Antelope/Rochelle Mine Complex and the Black Mesa/Kayenta Mine Complex, and (ii) the coal reserves known or referred to by the Borrower or its Restricted Subsidiaries as the Belleville Reserves and the Beaver Dam Reserves. 6.11 Foreign Jurisdictions. Maintain qualification as a foreign corporation in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except to the extent that the failure to do so qualify could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. 6.12 Maintenance of Collateral; Alterations. Refrain from committing any waste on any Collateral, except in the ordinary course of its business, or make any material change in the use of any Collateral, provided that, unless otherwise permitted by, and subject to the other provisions of, this Agreement, any Credit Party may sell or lease to any other Person all or any portion of any item of Collateral that the Borrower has determined in good faith is not used or useful in such Credit Party's operating business. 6.13 Use of Proceeds. Use the proceeds of the Loans only for the purposes specified in subsection 4.15. 6.14 Preparation of Environmental Reports. If an Event of Default caused by reason of a breach of subsection 4.16 or 6.8 (with respect to compliance with Mining and Environmental Laws) 60 shall have occurred and be continuing, at the reasonable request of the Required Lenders through the Administrative Agent, the Borrower shall provide to the Lenders within 60 days after such request, at the expense of the Borrower, an environmental site assessment report for the Properties which are the subject of such default prepared by an environmental consulting firm reasonably acceptable to the Administrative Agent and indicating the presence or absence of Hazardous Materials and the estimated cost of any compliance or remedial action in connection with such Properties. 6.15 Maintenance of Coal Reserves. Maintain at all times available Coal reserves, or the rights to acquire coal from third parties, sufficient to fulfill its requirements under existing Coal Supply Agreements. 6.16 Coal Supply Agreements. At all times comply fully with all of the terms and conditions of its Coal Supply Agreements, the nonperformance with which could reasonably be expected to have a Material Adverse Effect. The Borrower and each of its Subsidiaries shall further perform any and all actions necessary to maintain all Coal Supply Agreements material to its business in full force and effect. To the extent practicable and commercially reasonable (provided that in no circumstance shall the Borrower or any of its Restricted Subsidiaries be required to incur any additional costs or impair any existing or potential business relationship), neither the Borrower nor any of its Restricted Subsidiaries shall after the Effective Date enter into any Coal Supply Agreements which do not provide that such Coal Supply Agreements are assignable to the Lenders without the consent of any other party to such Coal Supply Agreement. 6.17 Exploration and Reserves. All primary and basic exploration data and information pertaining to the Mines will be preserved where reasonable in accordance with customary industry practice and in a sound and careful manner for future use and review. All such information together with all other reserve reports and maps, analysis and, upon reasonable notice, engineering and operating data and similar information pertaining to the Mines being operated by any Credit Party shall be available at all reasonable times for inspection and review by authorized representatives of the Administrative Agent (except to the extent (i) any such access is restricted by a Requirement of Law or (ii) any such data, information or the like are subject to a written confidentiality agreement with a non-Affiliate that prohibits the Borrower or any of its Subsidiaries from granting such access to the Lenders; provided that, with respect to the Borrower or any of its Restricted Subsidiaries, a Responsible Officer is made available to such Lender to discuss such confidential information to the extent permitted). 6.18 Certain Long Term Liabilities and Environmental Reserves. To the extent required by GAAP, maintain adequate reserves for (i) future costs associated with any lung disease claim alleging pneumoconiosis or silicosis or arising out of exposure or alleged exposure to coal dust or the coal mining environment, (ii) future costs associated with retiree and health care benefits, (iii) future costs associated with reclamation of disturbed acreage, removal of facilities and other closing costs in connection with its mining operations and (iv) future costs associated with other potential environmental liabilities. 6.19 Unrestricted Subsidiaries. No Restricted Subsidiary may be owned in whole or in part by an Unrestricted Subsidiary. 6.20 Partner Support Percentage; Total Project Cost. Cause (i) the Partner Support Percentage to represent the maximum recourse of the Project Construction Lenders to the Project Partners, (ii) the Partner Support Percentage to not exceed 60% of the Total Project Cost and (iii) the Total Project Cost to not exceed $2,600,000,000 in the case of Thoroughbred and $2,600,000,000 in the case of Prairie States, without the consent of the Administrative Agent and Required Lenders. 61 6.21 Black Beauty. (i) Endeavor in good faith to consummate the Black Beauty Acquisition as promptly after the Effective Date as commercially reasonable, (ii) on the Effective Date, issue a notice of prepayment to the holders of the Black Beauty Debt and (iii) repay or cause to be repaid in full all Black Beauty Debt within 45 days following the Effective Date. 6.22 Liens. Cause the prompt release and discharge of, or take other action as may be reasonably satisfactory to the Administrative Agent with respect to, Liens (other than Permitted Liens) reflected in the results of the lien searches required pursuant to subsection 5.1(l). 6.23 Existing Notes. (a) On the Effective Date, deposit into a collateral account opened by the Administrative Agent (the "Collateral Account") proceeds of the Term Loans (and/or the Senior Notes) in an amount sufficient to repay in full all Existing Notes other than the Existing Notes repaid on the Effective Date. The Borrower hereby grants to the Administrative Agent, for the benefit of the Secured Parties, a security interest in such proceeds and the Collateral Account to secure all obligations of the Borrower under this Agreement and the other Credit Documents. From time to time upon the written request of the Borrower, the Administrative Agent shall release funds from the Collateral Account to be used within one Business Day of such release to repay or redeem Existing Notes. Amounts in the Collateral Account shall be invested by the Administrative Agent at the direction of the Borrower in Cash or Cash Equivalents. (b) The Borrower will (i) on or before April 15, 2003, deliver (or cause the delivery of) notice to the holders of all outstanding Existing Notes of the exercise of optional prepayment of all such Existing Notes and (ii) cause the repayment in full of all Existing Notes on or before May 31, 2003. Any amounts remaining in the Collateral Account after May 31, 2003, will be returned to the Borrower unless any Existing Notes remain outstanding, in which case such amounts may be applied by the Administrative Agent to prepay the Loans in accordance with subsection 2.6(b)(iv). SECTION 7. NEGATIVE COVENANTS The Borrower hereby agrees that, so long as any portion of the Commitments remain in effect or any amount is owing to any Lender or any of the Agents hereunder or under any other Credit Document, the Borrower shall not, and (except with respect to subsection 7.1) shall not permit any of its Restricted Subsidiaries (and, with respect to subsections 7.2, 7.3 and 7.4, its Unrestricted Subsidiaries) to, directly or indirectly: 7.1 Financial Condition Covenants. (a) Consolidated EBITDA to Consolidated Cash Interest Expense Ratio. Permit the Consolidated EBITDA to Consolidated Cash Interest Expense Ratio at the last day of any fiscal quarter to be less than 2.50:1.00. (b) Consolidated Total Obligations to Consolidated EBITDA Ratio. Permit the Consolidated Total Obligations to Consolidated EBITDA Ratio at the last day of any fiscal quarter to be greater than the ratio set forth below opposite such date:
Fiscal Quarter Ending Ratio - --------------------- ----- 6/30/03 4.25 9/30/03 4.25 12/31/03 4.25 3/31/04 4.25
62
Fiscal Quarter Ending Ratio - --------------------- ----- 6/30/04 4.00 9/30/04 4.00 12/31/04 4.00 3/31/05 4.00 6/30/05 3.75 9/30/05 3.75 12/31/05 3.75 3/31/06 3.75 6/30/06 3.50 Thereafter 3.50
(c) Consolidated Secured Debt to Consolidated EBITDA Ratio. Permit the Consolidated Secured Debt to Consolidated EBITDA Ratio at the last day of any fiscal quarter to be greater than 2.50:1.00. 7.2 Limitation on Indebtedness. Create, incur, assume or suffer to exist any Indebtedness (including in respect of Interest Rate Agreements) except: (a) (i) Indebtedness of the Borrower under the Credit Documents and (ii) Indebtedness evidenced by the Senior Notes; (b) Indebtedness of the Borrower and any Restricted Subsidiary incurred to finance the acquisition by the Borrower or a Restricted Subsidiary of fixed or capital assets (whether pursuant to a loan, a Financing Lease or otherwise) in an aggregate principal amount not exceeding $250,000,000 at any time outstanding; (c) Indebtedness of a Person which becomes a Restricted Subsidiary after the date hereof, provided that (i) such indebtedness existed at the time such Person became a Restricted Subsidiary and was not created in anticipation thereof, (ii) immediately after giving effect to the acquisition of such Person by the Borrower or its Restricted Subsidiary, no Default or Event of Default shall have occurred and be continuing, (iii) immediately after giving effect to the acquisition of such Person by the Borrower or its Restricted Subsidiary, the Borrower and its Restricted Subsidiaries shall be in pro forma compliance with the covenants contained in subsection 7.1, calculated based on the relevant financial statements delivered pursuant to subsection 6.1, as though such acquisition occurred at the beginning of the period covered thereby, as evidenced by a certificate of a Responsible Officer of the Borrower furnished to the Administrative Agent demonstrating such compliance; and (iv) at no time shall all such Indebtedness permitted under this subsection (c) exceed $300,000,000 in the aggregate outstanding. (d) additional Indebtedness of the Borrower and its Restricted Subsidiaries not otherwise permitted hereunder not exceeding an aggregate principal amount at any time outstanding equal to 15% of Tangible Assets minus the aggregate amount of outstanding Project Guarantee Obligations; provided, however, that immediately after giving effect to the incurrence of any such Indebtedness by the Borrower or its Restricted Subsidiary, (i) no Default or Event of Default shall have occurred and be continuing and (ii) the Borrower and its Restricted Subsidiaries shall be in pro forma compliance with the covenants contained in subsection 7.1, calculated based on the relevant financial statements delivered pursuant to subsection 6.1, as though such incurrence occurred at the beginning of the period covered thereby, as evidenced by 63 a certificate of a Responsible Officer of the Borrower furnished to the Administrative Agent demonstrating such compliance; and (e) Indebtedness of the Borrower and its Restricted Subsidiaries (other than under subsection (a)) outstanding or committed on the Effective Date and reflected on Schedule 7.2(e), provided that, with respect to all Indebtedness of one Credit Party to another Credit Party, such Credit Parties have complied with the provisions of subsection 7.2(g); (f) Indebtedness in respect of Hedge Agreements incurred in the ordinary course of business and consistent with prudent business practice (in any case, for the purpose of risk management only and not for the purpose of speculation); (g) unsecured Indebtedness of any Credit Party to any other Credit Party that is a Blanket Grantor; provided, that (i) such Credit Parties have complied with the provisions of Subsection 6.10(b) and (ii) with respect to Indebtedness for borrowed money, there exists an instrument or instruments evidencing such Indebtedness and such instrument or instruments have been pledged to the Administrative Agent, for the benefit of the Secured Parties, pursuant to the terms of the Guarantee and Collateral Agreement; (h) Indebtedness secured by Permitted Liens; (i) extensions, renewals or refinancings of Indebtedness under subsections 7.2(a)(ii) and 7.2(c) and (e) so long as (i) such Indebtedness (the "Refinancing Indebtedness") is in an aggregate principal amount not greater than the aggregate principal amount of the Indebtedness being extended, renewed or refinanced plus the amount of any premiums required to be paid thereon and fees and expenses associated therewith, (ii) such Refinancing Indebtedness has a later or equal final maturity and a longer or equal weighted average life than the Indebtedness being extended, renewed or refinanced, (iii) the interest rate applicable to such Refinancing Indebtedness is a market interest rate (as determined in good faith by the Board of Directors of the Borrower) as of the time of such extension, renewal or refinancing, (iv) if the Indebtedness being extended, renewed or refinanced is subordinated to the Obligations, such Refinancing Indebtedness is subordinated to the extent of the Indebtedness being extended, renewed, or refinanced, (v) the covenants, events of default and other provisions thereof (including any guarantees thereof and security therefor), taken as a whole, are no less favorable to the Lenders than those contained in the Indebtedness being refinanced and (vi) at the time and after giving effect to such extension, renewal or refinancing, no Event of Default shall have occurred and be continuing; (j) Indebtedness of any Unrestricted Subsidiary consisting entirely of Non-Recourse Debt; provided, however, that if any such Indebtedness ceases to be Non-Recourse Debt of such Unrestricted Subsidiary, such event shall be deemed to constitute an incurrence of Indebtedness by a Restricted Subsidiary of the Borrower that was not permitted by this subsection 7.2(j); (k) Guarantee Obligations that have been deemed to be Indebtedness pursuant to subsection 7.4(a); (l) Indebtedness incurred pursuant to the Existing Securitization; (m) Indebtedness incurred in connection with a securitization transaction permitted by subsection 7.6(j); 64 (n) subject to the provisions of subsection 6.23, Indebtedness under the Existing Notes not retired as of the Effective Date; (o) intercompany current liabilities incurred in the ordinary course of business in connection with cash management operations of the Borrower and its Subsidiaries; and (p) Indebtedness of Peabody Energy Australia Pty Ltd and Peabody COALTRADE Australia Pty Ltd to the Borrower in an aggregate amount not to exceed $50,000,000; provided that there exists an instrument or instruments evidencing such Indebtedness and such instrument or instruments have been pledged to the Administrative Agent for the benefit of the Secured Parties pursuant to the terms of the Guarantee and Collateral Agreement. 7.3 Limitation on Liens. Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, except for: (a) Liens for taxes not yet due or which are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of the Borrower or its Subsidiaries, as the case may be, in conformity with GAAP; (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 60 days or which are being contested in good faith by appropriate proceedings; (c) pledges or deposits in connection with workers' compensation, unemployment insurance and other social security legislation and deposits securing liability to insurance carriers under insurance or self-insurance arrangements; (d) (i) deposits to secure the performance of bids, surety bonds, trade contracts (other than for borrowed money), leases (other than Capital Lease Obligations), reclamation bonds, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business, (ii) Liens on assets not constituting Collateral to secure obligations under surety bonds obtained as required in connection with the entering into of new federal coal leases and (iii) Liens on other assets not constituting Collateral with a value not in excess of $100,000,000 at any time to secure obligations under other surety bonds; (e) easements, rights-of-way, zoning restrictions, other restrictions and other similar encumbrances previously or hereafter incurred in the ordinary course of business which, in the aggregate, are not substantial in amount and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the Borrower or such Subsidiary, or which are set forth in any Title Policy delivered to the Administrative Agent pursuant to the terms of this Agreement; (f) Liens in existence on the Effective Date and listed on Schedule 7.3(f), securing Indebtedness permitted by subsection 7.2(e); (g) Liens securing Indebtedness of the Borrower and its Restricted Subsidiaries permitted by subsection 7.2(b) incurred to finance the acquisition of fixed or capital assets, provided that (i) such Liens shall be created substantially simultaneously with the acquisition of such fixed or capital assets, (ii) such Liens do not at any time encumber any property other than the property financed by such Indebtedness (other than after acquired title in or on such property and proceeds of the existing collateral in accordance with the instrument creating such Lien) and 65 (iii) the principal amount of Indebtedness secured by any such Lien shall at no time exceed 100% of the original purchase price of such property of such property at the time it was acquired; (h) Liens on the property or assets of a Person which becomes a Restricted Subsidiary after the date hereof securing Indebtedness permitted by subsection 7.2(c), provided that (i) such Liens existed at the time such entity became a Subsidiary and were not created in anticipation thereof, (ii) any such Lien is not expanded to cover any other property or assets of such Person (other than the proceeds of the property or assets subject to such Lien) or of the Borrower or any Restricted Subsidiary, and (iii) the amount of Indebtedness secured thereby is not increased; (i) Liens created pursuant to this Agreement and the Security Documents; (j) Liens on the property of the Borrower or any of its Subsidiaries, as a tenant under a lease or sublease entered into in the ordinary course of business by such Person, in favor of the landlord under such lease or sublease, securing the tenant's performance under such lease or sublease, as such Liens are provided to the landlord under applicable law and not waived by the landlord; (k) so long as no Default or Event of Default shall have occurred and be continuing under subsection 8(h), attachment or judgment Liens in an aggregate amount outstanding at any one time not in excess of $35,000,000; (l) Liens arising from precautionary Uniform Commercial Code financing statement filings with respect to operating leases or consignment arrangements entered into by the Borrower or any of its Restricted Subsidiaries in the ordinary course of business; (m) Liens in favor of a banking institution arising by operation of law encumbering deposits (including the right of set-off) held by such banking institutions incurred in the ordinary course of business and which are within the general parameters customary in the banking industry; (n) Liens securing Refinancing Indebtedness, to the extent that the Indebtedness being refinanced was originally secured in accordance with this subsection 7.3; provided that such Lien does not apply to any additional property or assets of the Borrower or any Subsidiary (other than the proceeds of the property or assets subject to such Lien); (o) Production Payments, royalties, dedication of reserves under supply agreements or similar rights or interests granted, taken subject to, or otherwise imposed on properties consistent with normal practices in the mining industry; (p) Liens on assets of (and Capital Stock and other equity interests in) Unrestricted Subsidiaries securing obligations of Unrestricted Subsidiaries not otherwise prohibited hereunder; (q) Liens (not otherwise permitted hereunder) which secure obligations not exceeding $25,000,000 in the aggregate at any time outstanding and which are not senior to the Liens created pursuant to this Agreement and the Security Documents; and (r) Liens on assets other than Collateral securing the net amount of Indebtedness under Hedge Agreements that are not Specified Hedge Agreements. 66 7.4 Limitation on Guarantee Obligations. Create, incur, assume or suffer to exist any Guarantee Obligation except: (a) Guarantee Obligations not otherwise permitted under this subsection 7.4 incurred after the Effective Date in an aggregate amount not to exceed $100,000,000 at any one time outstanding for the Borrower and its Restricted Subsidiaries; provided, however, that (i) any such Guarantee Obligations incurred by the Borrower and any of its Restricted Subsidiaries with respect to the same transaction shall be treated as a single transaction for the purposes of calculating the amount of Guarantee Obligations outstanding under this subsection 7.4(a) and (ii) to the extent that Guarantee Obligations incurred by the Borrower and any of its Restricted Subsidiaries under this subsection 7.4(a) exceed $50,000,000 at any one time outstanding, such excess shall be deemed to constitute Indebtedness; (b) guarantees made by the Subsidiaries of the Borrower pursuant to the Senior Notes Documents; provided that such Subsidiaries are parties to the Guarantee and Collateral Agreement; (c) Guarantee Obligations of the Credit Parties created under the Credit Documents; (d) the L/C Obligations; (e) Guarantee Obligations of the Borrower or any Subsidiary in respect of obligations of a Restricted Subsidiary or the Borrower permitted to be incurred by such Subsidiary or the Borrower by this Agreement; (f) Guarantee Obligations which are performance guarantees by the Borrower or any of its Restricted Subsidiaries of the ordinary course obligations (other than for the payment of borrowed money) of any Unrestricted Subsidiary in an aggregate amount not to exceed $150,000,000 at any one time outstanding; provided, however, that any such performance guarantee incurred by the Borrower and any of its Subsidiaries with respect to the same transaction shall be treated as a single transaction for the purpose of calculating the amount of obligations outstanding under this subsection 7.4(f); (g) indemnities in favor of the companies issuing title insurance policies insuring the Mortgages to induce such issuance; (h) indemnities made in the Commitment Letter, the Credit Documents and the Senior Notes Documents and in the Constitutional Documents of the Borrower and its Subsidiaries; (i) Guarantee Obligations of Unrestricted Subsidiaries in respect of the obligations of other Unrestricted Subsidiaries not otherwise prohibited hereunder; (j) Guarantee Obligations in respect of a letter of credit issued for the account of the Borrower and for benefit of the PBGC in a face amount not to exceed $37,000,000 and for which TXU Europe (or its successors) provides credit support; (k) Project Guarantee Obligations (subject to the satisfaction of the Project Guarantee Obligations Conditions Precedent) in an aggregate amount at any one time outstanding not to exceed (i) $375,000,000 minus (ii) the aggregate amount of Investments made in accordance with subsection 7.9(o); and 67 (l) Guarantee Obligations in existence on the Effective Date and listed on Schedule 7.4. 7.5 Limitation on Fundamental Changes. Enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of, all or substantially all of its property, business or assets, or make any material change in its present method of conducting business (other than as provided in subsection 7.15), except: (a) any Restricted Subsidiary of the Borrower may be merged or consolidated with or into the Borrower (provided that the Borrower shall be the continuing or surviving corporation) or with or into any one or more wholly-owned Restricted Subsidiaries of the Borrower (provided that the wholly owned Subsidiary or Subsidiaries shall be the continuing or surviving corporations); provided that a Credit Party may only be merged or consolidated with or into another Credit Party and, if only one such Credit Party is a Blanket Grantor, the Blanket Grantor must be the surviving entity of such merger or consolidation; (b) any wholly-owned Restricted Subsidiary may sell, lease, transfer or otherwise dispose of any or all of its assets (upon voluntary liquidation or otherwise) to the Borrower or any other wholly-owned Restricted Subsidiary of the Borrower that is a Credit Party; provided that a Blanket Grantor shall not sell, lease, transfer or otherwise dispose of any or all of its assets (upon voluntary liquidation or otherwise) to a Credit Party that is not a Blanket Grantor; (c) the Black Beauty Acquisition; and (d) any transaction which would be permitted as an Investment pursuant to subsection 7.9. 7.6 Limitation on Sale of Assets. Convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets (including, without limitation, receivables and leasehold interests), whether now owned or hereafter acquired, or, in the case of any Restricted Subsidiary, issue or sell any shares of such Subsidiary's Capital Stock to any Person other than the Borrower or any wholly-owned Subsidiary that is a Credit Party and a Blanket Grantor, except: (a) the sale or other disposition of obsolete or worn out property in the ordinary course of business; (b) the sale for fair market value (as determined in good faith by the Borrower (and evidenced in a resolution of the Board of Directors of the Borrower delivered to the Administrative Agent with respect to any such sale determined to have a fair market value in excess of $100,000,000, provided that if the Board of Directors receives a fairness opinion with respect to such sale, a copy of such opinion shall be delivered to the Administrative Agent)) of any property or assets not otherwise permitted by this subsection 7.6; provided that the Net Proceeds thereof shall be applied pursuant to subsection 2.6(b)(ii); provided, further, that the aggregate fair market value of all such Asset Sales during each year does not exceed ten percent (10%) of the Total Assets of the Borrower and its Restricted Subsidiaries (determined immediately prior to the time of each such sale); (c) as permitted pursuant to subsection 7.5(b); 68 (d) the sale, lease, transfer or exchange of inventory (including Coal and related products and mining equipment) in the ordinary course of business; (e) subject to subsection 6.5, transfers resulting from any casualty or condemnation of property or assets; (f) intercompany sales or transfers (among Credit Parties (other than (a) to Black Beauty prior to the consummation of the Black Beauty Acquisition and the occurrence of the Black Beauty Collateral Event) and (b) with respect to Collateral, from a Blanket Grantor to a Credit Party that is not a Blanket Grantor) of assets made in the ordinary course of business; (g) licenses, leases or subleases of tangible property in the ordinary course of business; (h) any consignment arrangements or similar arrangements for the sale of assets in the ordinary course of business; (i) the sale or discount of overdue accounts receivable arising in the ordinary course of business, but only in connection with the compromise or collection thereof; (j) (A) the sale or discount of accounts receivable without recourse arising in the ordinary course of business, (B) the sale or discount of accounts receivable pursuant to the Existing Securitization and (C) the sale or discount of accounts receivable pursuant to a securitization involving any Credit Party, provided, however, that in the case of clause (C), (i) all obligations of such Credit Party arising pursuant to such securitizations shall be included in the calculation of Consolidated Total Obligations and (ii) the aggregate dollar value of all uncollected accounts receivable transferred pursuant to such securitizations at any time shall not exceed $50,000,000; (k) the sale of any assets in connection with any sale and leaseback transaction otherwise permitted by subsection 7.12; (l) the sale or transfer of property or assets to the extent constituting an Investment permitted under subsection 7.9; (m) the restructuring, renegotiation or termination of any Coal Supply Agreements resulting in the Borrower or its Restricted Subsidiaries receiving in a single transaction, or series of related transactions, cash proceeds of no greater than $75,000,000; and (n) an exchange or "swap" of assets of the Borrower or any of its Restricted Subsidiaries for the assets (including ownership interests and excluding cash) of a Person other than the Borrower or a Restricted Subsidiary; provided that (A) the assets received by the Borrower or such Restricted Subsidiary will be used or useful in a Similar Business and (B) the Borrower or such Restricted Subsidiary receives reasonably equivalent value for such assets, such equivalent value to be demonstrated to the Administrative Agent (i) in a certificate of a Responsible Officer of the Borrower or such Restricted Subsidiary if the fair market value of the assets received by the Borrower or such Restricted Subsidiary is no greater than $100,000,000 or (ii) in a resolution of the Board of Directors of the Borrower or such Restricted Subsidiary if the fair market value of the assets received by the Borrower or such Restricted Subsidiary is greater than $100,000,000, provided that if the Board of Directors receives a fairness opinion with respect to such exchange or "swap", a copy of such opinion shall be delivered to the 69 Administrative Agent; provided, further, that the fair market value of all such assets exchanged or "swapped" in any fiscal year of the Borrower does not exceed ten percent (10%) of the Total Assets of the Borrower and its Restricted Subsidiaries (determined immediately prior to the time of each such exchange or swap); provided, however, that with respect to any conveyance, sale, lease, assignment, transfer, exchange, "swap" or disposition of any assets of the Borrower or its Restricted Subsidiaries that constitutes Collateral to Persons that are not Blanket Grantors (including, without limitation, by virtue of the designation of a Blanket Grantor as an Unrestricted Subsidiary as otherwise permitted hereunder, but other than pursuant to subsections 7.6(a), (d), (e), (g), (h), (i) or (j)), no more than the sum (the "Collateral Amount") of (i) 5% of the Total Assets of the Borrower and its Restricted Subsidiaries (determined immediately prior to the time of each such conveyance, sale, lease, assignment, transfer, exchange, "swap", disposition or designation) and (ii) the net amount by which the Total Commitments have been permanently reduced at such time, may be so conveyed, sold, leased, assigned, transferred or disposed of in the aggregate following the Effective Date and during the term of this Agreement without the Borrower replacing within 90 days after the Collateral Amount is exceeded (pursuant to subsections 2.6(b)(ii), 7.6(n) or otherwise) such assets so conveyed, sold, leased, assigned, transferred, exchanged, "swapped," disposed of or designated in excess of the Collateral Amount with other assets to be included as Collateral on a dollar-for-dollar basis (as valued by the Administrative Agent (or its experts) in its reasonable discretion (but at the expense of the Borrower)) and provided further that to the extent such assets so conveyed, sold, leased, assigned, transferred, exchanged, "swapped," disposed of or designated in excess of the Collateral Amount constitute real property, the Borrower shall either (A) replace such assets with other real property to be included as Collateral on a dollar-for-dollar basis (as valued by the Administrative Agent (or its experts) in its reasonable discretion (but at the expense of the Borrower)) or (B) prepay the Term Loans in an amount equal to the value of such real property (as valued by the Administrative Agent (or its experts) in its reasonable discretion (but at the expense of the Borrower)), which shall be applied first to the Term Loans to reduce the unpaid scheduled installments of principal of the Term Loans on a pro rata basis and thereafter to the repayment of Revolving Credit Loans on a pro rata basis. 7.7 Dividends and Distributions; Restrictions on Ability of Restricted Subsidiaries to Pay Dividends. (a) Declare or pay, directly or indirectly, any dividend or make any other distribution (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof, with respect to any shares of its Capital Stock or directly or indirectly redeem, purchase, retire or otherwise acquire for value (or permit any Subsidiary to purchase or acquire) any shares of any class of its Capital Stock or set aside any amount for any such purpose, except that, so long as no Default or Event of Default has occurred and is continuing, the Borrower may (i) pay dividends on its common stock in an amount not to exceed in any fiscal year $50,000,000 plus 25% of the Borrower's cumulative Net Income for such fiscal year, as reflected on the Borrower's most recent quarterly financial statements and (ii) repurchase the Borrower's Capital Stock in an amount not to exceed $100,000,000 during the term of this Agreement; provided, however, that (A) any amounts available to pay dividends pursuant to the preceding clause (i) but not used for such purpose and (B) 25% of the proceeds actually received by the Borrower from the issuance of additional Capital Stock at any time following the Effective Date, may be used to repurchase the Borrower's Capital Stock without being counted against the $100,000,000 limit pursuant to clause (ii). Notwithstanding any of the foregoing, any Restricted Subsidiary may declare and pay dividends or make other distributions to its equity holders on a pro rata basis. (b) Permit its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any such Restricted Subsidiary to (i) pay any dividends or make any other distributions on its Capital Stock or any other interest or (ii) make or repay any loans or advances to the Borrower or the parent of such Restricted 70 Subsidiary (subclauses (i) and (ii) are collectively referred to as an "Upstream Payment"); provided, however, that the foregoing shall not restrict any encumbrances or restrictions: (i) existing on the Effective Date under Indebtedness set forth on Schedule 7.2(e) or under Operating Leases set forth on Schedule 7.7; (ii) contained in any debt instrument relating to a Person acquired after the Effective Date; provided that (A) such encumbrances and restrictions are not applicable to any Person other than such Person or property or assets acquired, (B) such instrument was in existence at the time of such acquisition, and (C) the Borrower reasonably believes at the time of such acquisition that the terms of such instrument will not encumber or restrict the ability of such acquired Person to make an Upstream Payment in manner that would adversely affect the Borrower's ability to perform its obligations under the Credit Documents when due; (iii) incurred in connection with any Indebtedness permitted pursuant to subsection 7.2 (including any permitted extension, refinancing, renewal or replacement of Indebtedness contemplated by clauses (i) and (ii) above); provided that, (A) the Borrower reasonably believes at the time such Indebtedness is incurred that the terms of such Indebtedness will not restrict the ability of the Person incurring such Indebtedness to make an Upstream Payment in a manner that would adversely affect the Borrower's ability to perform its obligations under the Credit Documents when due and (B) such Indebtedness (other than Non-Recourse Debt of Unrestricted Subsidiaries) contains no express encumbrances or restrictions on the ability of such Person to make an Upstream Payment; (iv) contained in agreements relating to the sale of a Subsidiary not prohibited hereunder pending such sale, provided, that such encumbrances and restrictions apply only to the Subsidiary that is to be sold and that such sale is otherwise permitted hereunder; and (v) existing under, or by reason of, applicable law. 7.8 Limitation on Capital Expenditures. Make or commit to make Capital Expenditures in respect of the purchase or other acquisition of fixed or capital assets (excluding with respect to any such asset acquired in connection with normal replacement and maintenance programs properly charged to current operations, any assets acquired with the proceeds from insurance for casualty or condemnation losses whether or not paid with the proceeds from insurance policies, any assets purchased with the intent to enter into a permitted sale and leaseback transaction resulting in an operating lease pursuant to subsection 7.12(b) and reinvestments of the proceeds of Asset Sales permitted by subsection 2.6(b)(ii)) except for Capital Expenditures in the ordinary course of business not exceeding $350,000,000 in the aggregate for the Borrower and its Restricted Subsidiaries during any fiscal year of the Borrower; provided, that any amount for any fiscal year not so expended in such fiscal year may be carried over for expenditure in the immediately following fiscal year. 7.9 Limitation on Investments, Loans and Advances. Make any advance, loan (excluding intercompany current liabilities incurred in the ordinary course of business in connection with the cash management operations of the Borrower and its Subsidiaries), extension of credit or capital contribution to, or purchase any stock, bonds, notes, debentures or other securities of or any assets constituting a business unit of, or make any other investment in, any Person ("Investments"), except: (a) extensions of trade credit in the ordinary course of business; (b) Investments in Cash Equivalents; 71 (c) loans and advances to employees of the Borrower or its Restricted Subsidiaries for travel, entertainment and relocation expenses in the ordinary course of business in an aggregate amount for the Borrower and its Restricted Subsidiaries not to exceed $10,000,000 at any one time outstanding; (d) Investments by the Borrower or its Restricted Subsidiaries in Persons that are, or become by virtue of such Investment (and compliance with subsection 6.10), Blanket Grantors and investments by such Subsidiaries in the Borrower and in other Subsidiaries that are Blanket Grantors; (e) Investments in existence on the Effective Date set forth on Schedule 7.9(e) and extensions, renewals, modifications, restatements or replacements thereof; provided that no such extension, renewal, modification or restatement shall increase the amount of the original loan, advance or investment; (f) promissory notes and other similar non-cash consideration received by the Borrower and its Restricted Subsidiaries in connection with the dispositions permitted by subsection 7.6(b); (g) Investments (including debt obligations and Capital Stock) received in connection with the bankruptcy or reorganization of suppliers and customers of the Borrower and its Restricted Subsidiaries and in settlement of delinquent obligations of, and other disputes with, such customers and suppliers arising in the ordinary course of business; (h) so long as no Event of Default has occurred and is continuing, in addition to the other Investments permitted by this subsection 7.9, Investments in an aggregate amount not exceeding $100,000,000 (net of dividends and any other distributions paid in respect thereof), at cost, without regard to any write down or write up thereof; (i) Investments in the nature of Production Payments, royalties, dedication of reserves under supply agreements or similar rights or interests granted, taken subject to, or otherwise imposed on properties with normal practices in the mining industry; (j) (i) Investments in Joint Ventures in existence on the Effective Date and set forth on Schedule 4.14(b) hereto and (ii) in addition to the Investments permitted under clause (i) hereof, and, with respect to Credit Parties that are not Blanket Grantors, under subsection 7.9(l), Investments in Joint Ventures and Credit Parties which are not Blanket Grantors in an amount not to exceed, in the aggregate outstanding at any time (net of dividends and any other distributions paid in respect thereof), five percent (5%) of the Total Assets of the Borrower and its Restricted Subsidiaries (determined immediately prior to the time of each such Investment); (k) Investments in any assets constituting a business unit received by the Borrower or its Restricted Subsidiaries by virtue of an asset exchange or swap with a third party permitted by subsection 7.6(n) or acquired as a permitted Capital Expenditure under subsection 7.8; (l) in addition to the Investments permitted by under subsection 7.9(o), and, with respect to Credit Parties that are not Blanket Grantors under subsection 7.9(j), Investments in Unrestricted Subsidiaries and Credit Parties which are not Blanket Grantors, in an amount not to exceed in the aggregate outstanding at any time (net of dividends and any other distributions paid in respect thereof) and five percent (5%) of the Total Assets of the Borrower and its Restricted Subsidiaries (determined immediately prior to the time of each such Investment); 72 (m) Hedge Agreements permitted under subsection 7.2(f); (n) so long as no Event of Default has occurred and is continuing, Investments consisting of purchases of Senior Notes pursuant to the provisions of subsection 7.10(a); (o) any Investment in the Project Entity in an amount not to exceed at any time (i) the lesser of (A) $375,000,000 and (B) the Credit Parties' pro rata share of 30% of Total Project Costs minus (ii) the aggregate amount of Project Guarantee Obligations incurred in accordance with subsection 7.4(k); and (p) subject to the provisions of subsection 7.2(p), Investments by the Borrower in Peabody Energy Australia Pty Ltd and Peabody COALTRADE Australia Pty Ltd in an aggregate amount not to exceed $50,000,000. 7.10 Limitation on Optional Payments and Modifications of Instruments and Agreements. (a) Make any optional payment or prepayment on or redemption or purchase of, or deliver any funds to any trustee for the prepayment, redemption or defeasance of, the Senior Notes (whether upon acceleration of the maturity thereof, upon a "Change of Control" (as defined in the Senior Notes Indenture) or otherwise), provided that the Borrower may (i) prepay the Senior Notes in connection with a refinancing of such notes on terms no less favorable to the Borrower and the Lenders and (ii) make any other optional payment, prepayment, redemption, purchase or defeasance during the term of this Agreement in an aggregate amount not in excess of $100,000,000, or (b) amend, modify or change, or consent or agree to any amendment, modification or change to any of the material terms of any Senior Notes Documents (other than any such amendment, modification or change which would extend the maturity or reduce the amount of any payment of principal thereof or which would reduce the rate or extend the date for payment of interest thereon). (b) Amend its Constitutional Documents in any manner which could adversely affect the rights of the Lenders under the Credit Documents or their ability to enforce the same. (c) Modify or amend, or waive any provision or condition contained in, any of the Senior Notes Documents in any manner that could reasonably be expected to be adverse to the Lenders. 7.11 Limitation on Transactions with Affiliates. (a) Enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate unless such transaction is (i) otherwise permitted under this Agreement, (ii) in the ordinary course of the Borrower's or such Restricted Subsidiary's business and (iii) upon fair and not materially less favorable terms to the Borrower or such Restricted Subsidiary, as the case may be, than it reasonably believes it would obtain in a comparable arm's length transaction with a Person which is not an Affiliate; provided that satisfaction of the foregoing clause (iii) shall be demonstrated to the Administrative Agent (i) in a certificate of a Responsible Officer of the Borrower or such Restricted Subsidiary if the fair market value of the property or service purchased, sold, leased or exchanged by the Borrower or such Restricted Subsidiary is no greater than $10,000,000 (ii) in a resolution of the Board of Directors of the Borrower or such Restricted Subsidiary if the fair market value of the property or service purchased, sold, leased or exchanged by the Borrower or such Restricted Subsidiary is greater than $10,000,000 but no greater than $25,000,000 or (iii) at the Borrower's expense in an opinion of an independent valuation firm selected by the Administrative Agent and reasonably acceptable to the Borrower if the fair market value of the property or service purchased, sold, leased or exchanged by the Borrower or such Restricted Subsidiary is greater than $25,000,000. Notwithstanding the foregoing, any such transaction which is determined to be materially less favorable to the Borrower or a Restricted Subsidiary than the Borrower or such Restricted Subsidiary reasonably believes it would obtain in a 73 comparable arm's length transaction nevertheless shall be permitted if the excess consideration being paid to such Affiliate would otherwise be permitted at such time as an Investment in such Affiliate under subsection 7.9 and, upon consummation of such transaction, such excess consideration being paid to such Affiliate shall constitute an Investment for the purposes of calculating compliance with subsection 7.9; (b) In addition, notwithstanding the foregoing, the Borrower and its Restricted Subsidiaries shall be entitled to make the following payments and/or to enter into the following transactions: (i) the payment of reasonable and customary fees and reimbursement of expenses payable to directors of the Borrower; (ii) the employment arrangements with respect to the procurement of services of directors, officers and employees in the ordinary course of business and the payment of reasonable fees in connection therewith; (iii) payments to directors and officers of the Borrower and its Subsidiaries in respect of the indemnification of such Persons in such respective capacities from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements, as the case may be, pursuant to the Constitutional Documents or other corporate action of the Borrower or its Restricted Subsidiaries, respectively, or pursuant to applicable law; (iv) transactions described in the Senior Notes Documents; (v) Investments in Unrestricted Subsidiaries, Joint Ventures and the Project Entity permitted by subsection 7.9. (vi) transactions among Credit Parties; provided that a Blanket Grantor may not transfer (by way of sale, investment, dividend or otherwise) Collateral to a Credit Party that is not a Blanket Grantor except pursuant to a provision of this Agreement that would permit such sale, investment, dividend or other payment to be made to a non-Credit Party. 7.12 Limitation on Sale and Leaseback Transactions. Enter into any arrangement with any Person providing for the leasing by the Borrower or any Restricted Subsidiary of real or personal property which has been or is to be sold or transferred by the Borrower or such Restricted Subsidiary to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of the Borrower or such Restricted Subsidiary; provided that the Borrower or a Restricted Subsidiary may enter into sale and leaseback transactions with sale prices not to exceed $100,000,000 in the aggregate during the term of this Agreement. 7.13 Limitation on Changes in Fiscal Year. Permit the fiscal year of the Borrower to end on a day other than December 31. 7.14 Limitation on Negative Pledge Clauses. Enter into with any Person any agreement, other than (a) this Agreement, (b) the Senior Notes Documents and (c) any industrial revenue bonds, purchase money mortgages, Financing Leases permitted by this Agreement or agreements evidencing Indebtedness permitted by subsection 7.2(b), (c) or (i) (to the extent refinancing Indebtedness incurred under subsection 7.2(c)) (in which cases, any prohibition or limitation shall only be effective against the assets financed thereby other than after acquired title in or on such property and proceeds of the existing collateral in accordance with the instrument creating such Lien), which prohibits or limits the 74 ability of the Borrower or any of its Restricted Subsidiaries to create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired. 7.15 Limitation on Lines of Business. Enter into or engage in any business, either directly or through any Subsidiary, except for Similar Businesses. SECTION 8. EVENTS OF DEFAULT If any of the following events shall occur and be continuing: (a) The Borrower shall fail to pay any principal of any Loan or any Reimbursement Obligation when due in accordance with the terms thereof or hereof; or the Borrower shall fail to pay any interest on any Loan, or any other amount payable hereunder, within five days after any such interest or other amount becomes due in accordance with the terms thereof or hereof; or (b) any representation or warranty made or deemed made by the Borrower or any other Credit Party herein or in any other Credit Document or which is contained in any certificate, document or financial or other statement furnished by it at any time under or in connection with this Agreement or any such other Credit Document shall prove to have been incorrect in any material respect on or as of the date made or deemed made; or (c) the Borrower or any other Credit Party shall default in the observance or performance of any agreement contained in subsection 6.4(a), 6.4(d), 6.5(a) (first sentence only), 6.7(d), 6.10 or 6.13 or Section 7 of this Agreement or subsection 5.5, 5.6, 5.7, 5.8(b), 5.9(a) or 5.10 of the Guarantee and Collateral Agreement; or (d) the Borrower or any other Credit Party shall default in the observance or performance of any other agreement contained in this Agreement or any other Credit Document (other than as provided in paragraphs (a) through (c) of this Section), and such default shall continue unremedied for a period of 30 days (unless a shorter cure period therefor is provided therein); or (e) the Borrower or any of its Restricted Subsidiaries shall (i) default (w) in any payment under any coal lease, (x) in any payment of principal of or interest of any Indebtedness (other than the Loans, the L/C Obligations and any intercompany debt) or the net obligations under any Interest Rate Agreement or (y) in the payment of any Guarantee Obligation (excluding any guaranties of the Obligations), beyond the period of grace, if any, provided in the instrument or agreement under which such lease, Indebtedness, Interest Rate Agreement obligation or Guarantee Obligation was created; or (ii) default in the observance or performance of any other agreement or condition relating to any such lease, Indebtedness, Interest Rate Agreement obligation or Guarantee Obligation or contained in any instrument or agreement evidencing, securing or relating thereto, or, other than with respect to a lease, any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the lessor under such lease or the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Guarantee Obligation (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such lease to be terminated (and such lease is actually terminated), such Indebtedness to become due prior to its stated maturity or such Guarantee Obligation to become payable; provided, however, that no Default or Event of Default shall exist under this paragraph unless (i) the aggregate amount of lease payment obligations, Indebtedness, Interest Rate Agreement obligations and/or Guarantee Obligations in respect of which any default or other event or condition referred to in this 75 paragraph shall have occurred shall be equal to at least $50,000,000, (ii) such default continues for a period in excess of 10 days and (iii) with respect to defaults under coal leases only, the termination of such lease could reasonably be expected to result in a Material Adverse Effect; or (f) (i) the Borrower, any of its Restricted Subsidiaries or any of its Specified Subsidiaries shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, the Borrower, any of its Restricted Subsidiaries or any of its Specified Subsidiaries shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the Borrower, any of its Restricted Subsidiaries or any of its Specified Subsidiaries, any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against the Borrower, any of its Restricted Subsidiaries or any of its Specified Subsidiaries, any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) the Borrower, any of its Restricted Subsidiaries or any of its Specified Subsidiaries shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) the Borrower, any of its Restricted Subsidiaries or any of its Specified Subsidiaries shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or (g) (i) the Borrower, any Subsidiary or any Commonly Controlled Entity has incurred or is likely to incur a liability in connection with any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of the Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the Borrower or any Commonly Controlled Entity shall, or in the reasonable opinion of the Administrative Agent is reasonably likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan, (vi) the Borrower, its Subsidiaries or its "related persons" as defined in the Coal Act, shall be required to make during any fiscal year payments pursuant to the Coal Act that, in the aggregate, exceed the amount set forth on Schedule II with respect to such fiscal year, (vii) the Borrower or its Subsidiaries shall be required to make during any fiscal year payments pursuant to federal and state Black Lung Act claims in excess of the amount set forth on Schedule III with respect to such fiscal year, (viii) the Borrower or its Subsidiaries shall be required to make during any fiscal year payments pursuant to any employee welfare benefit plan (as defined in Section 3(1) of ERISA) that provides benefits to retired employees (other than as required by Section 601 of ERISA or the Coal Act) that, in the aggregate, exceed the amount set forth on Schedule IV with respect to such fiscal year or (ix) any other similar event or condition shall occur or exist with respect to a Plan that is not in the ordinary course; and in each case in clauses 76 (i) through (ix) above, such event or condition, together with all other such events or conditions, if any, could reasonably be expected to have a Material Adverse Effect; or (h) one or more judgments or decrees shall be entered against the Borrower or any of its Restricted Subsidiaries involving in the aggregate a liability (not paid or fully covered by insurance (which coverage has been acknowledged by the appropriate insurers)) of $50,000,000 or more, and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 60 days from the entry thereof; or (i) one or more surety, reclamation or similar bonds securing obligations of the Borrower or any Subsidiary (or any required guarantees thereof or required letters of credit with respect thereto) with an aggregate face amount of $100,000,000 or more shall be actually terminated, suspended or revoked and not replaced within 30 days of such termination, suspension or revocation; provided that the Borrower or any Subsidiary shall be permitted to replace such surety bonds with self-bonding obligations to the extent permitted by any Person to which the obligations secured by such bonds are owed) prior to full satisfaction of the obligations secured by such bonds; or (j) (i) any of the Security Documents shall cease, for any reason, to be in full force and effect (unless released by the Administrative Agent at the direction of the requisite Lenders or as otherwise permitted under this Agreement or the other Credit Documents), or the Borrower or any other Credit Party which is a party to any of the Security Documents shall so assert or (ii) the Lien created by any of the Security Documents shall cease to be enforceable and of the same effect and priority purported to be created thereby (and, if such invalidity is such so as to be amenable to cure without materially disadvantaging the position of the Administrative Agent and the Lenders, as the case may be, as secured parties thereunder, the Credit Party shall have failed to cure such invalidity within 30 days after notice from the Administrative Agent); or (k) the Guarantee Obligation of any Credit Party under the Credit Documents shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Credit Party or any Person acting on behalf of any Credit Party, shall deny or disaffirm its obligations under such Guarantee Obligation; or (l) there shall have occurred a Change in Control; or (m) an event has occurred which entitles the beneficiary of the Project Guarantee Obligation to make a demand for payment thereunder, and such demand has actually been made, then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (f) of this Section above with respect to the Borrower, automatically the Commitments shall immediately terminate and the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement (including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) and the Notes shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the following actions may be taken: (i) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower declare the Commitments to be terminated forthwith, whereupon the Commitments shall immediately terminate; and (ii) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice of default to the Borrower, declare the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement (including, without 77 limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) and the Notes to be due and payable forthwith, whereupon the same shall immediately become due and payable. Upon an Event of Default hereunder, the Agents and the Lenders shall also have all of the rights granted to them under the Security Documents and applicable law. Upon an Event of Default, and at the request of the Administrative Agent, for each real property interest (including coal reserves) selected by the Administrative Agent which is owned or leased by the Borrower or any of its Restricted Subsidiaries (other than with respect to leased real property located in the State of Arizona, the mortgaging of which would require the consent of the lessor thereof and with respect to which the Borrower has determined in good faith, after consultation with the Administrative Agent, that the seeking of such consent would be materially disadvantageous to its business), the Borrower shall promptly (i) deliver to the Administrative Agent, a Mortgage, executed and delivered by a duly authorized officer of the mortgagor party thereto, with a counterpart or a conformed copy for each Lender, and (ii) with respect to each such Mortgage, comply with all other requirements in connection with the delivery thereof as set forth in subsections 6.10(c)(i)(B) and 6.10(c)(i)(C). With respect to all Letters of Credit with respect to which presentment for honor shall not have occurred at the time of an acceleration pursuant to the preceding paragraph, the Borrower shall at such time deposit in a cash collateral account opened by the Administrative Agent an amount equal to the aggregate then undrawn and unexpired amount of such Letters of Credit. The Borrower hereby grants to the Administrative Agent, for the benefit of the Issuing Lender and the L/C Participants, a security interest in such cash collateral and cash collateral account to secure all obligations of the Borrower under this Agreement and the other Credit Documents. Amounts held in such cash collateral account shall be applied by the Administrative Agent to the payment of drafts drawn under such Letters of Credit, and the unused portion thereof after all such Letters of Credit shall have expired or been fully drawn upon, if any, shall be applied to repay other obligations of the Borrower hereunder and under the Notes. After all such Letters of Credit shall have expired or been fully drawn upon, all Reimbursement Obligations shall have been satisfied and all other obligations of the Borrower hereunder and under the Notes shall have been paid in full, the balance, if any, in such cash collateral account shall be returned to the Borrower. The Borrower shall execute and deliver to the Administrative Agent, for the account of the Issuing Lender and the L/C Participants, such further documents and instruments as the Administrative Agent may request to evidence the creation and perfection of such security interest in such cash collateral account. EXCEPT AS EXPRESSLY PROVIDED ABOVE IN THIS SECTION, PRESENTMENT, DEMAND, PROTEST AND ALL OTHER NOTICES OF ANY KIND ARE HEREBY EXPRESSLY WAIVED. SECTION 9. THE AGENTS 9.1 Appointment. Each Lender hereby irrevocably designates and appoints each of the Agents as the agent of such Lender under this Agreement and the other Credit Documents, and each such Lender irrevocably authorizes each of the Agents, in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Credit Documents and to exercise such powers and perform such duties as are expressly delegated to such Agent by the terms of this Agreement and the other Credit Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, none of the Agents shall have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Credit Document or otherwise exist against any of the Agents. 78 9.2 Delegation of Duties. The Agents may execute any of their duties under this Agreement and the other Credit Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. None of the Agents shall be responsible for the negligence or misconduct of any agents or attorneys in-fact selected by it with reasonable care. 9.3 Exculpatory Provisions. Neither any of the Agents nor any of their officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Credit Document (except for its or such Person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Borrower or any officer thereof contained in this Agreement or any other Credit Document or in any certificate, report, statement or other document referred to or provided for in, or received by such Agent under or in connection with, this Agreement or any other Credit Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Credit Document or for any failure of the Borrower to perform its obligations hereunder or thereunder. None of the Agents shall be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Credit Document, or to inspect the properties, books or records of the Borrower. 9.4 Reliance by Agents. The Agents shall be entitled to rely, and shall be fully protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrower), independent accountants and other experts selected by such Agent. The Agents may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with such Agent. Except as expressly provided in this Agreement, the Agents shall be fully justified in failing or refusing to take any action under this Agreement or any other Credit Document unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agents shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Credit Documents in accordance with a request of the Required Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Loans. 9.5 Notice of Default. No Agent shall be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless such Agent has received notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that any Agent receives such a notice, such Agent shall give notice thereof to the Lenders. Each Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders; provided that unless and until such Agent shall have received such directions, such Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders. 9.6 Non-Reliance on Agents and Other Lenders. Each Lender expressly acknowledges that neither any of the Agents nor any of their officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by any of the Agents hereafter taken, including any review of the affairs of the Borrower, shall be deemed to 79 constitute any representation or warranty by any of the Agents to any Lender. Each Lender represents to each of the Agents that it has, independently and without reliance upon any of the Agents or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Borrower and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon any of the Agents or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Credit Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and credit worthiness of the Borrower. Except for notices, reports and other documents expressly required to be furnished to the Lenders by any of the Agents hereunder (or copies of which have been provided to the Administrative Agent pursuant to this Agreement), none of the Agents shall have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of any Credit Party which may come into the possession of such Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. 9.7 Indemnification. The Lenders agree to indemnify each of the Agents in their respective capacities as such (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to their respective Commitment Percentages with respect to all Types of Loans in effect on the date on which indemnification is sought, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Loans) be imposed on, incurred by or asserted against any of the Agents in any way relating to or arising out of, the Commitments, this Agreement, any of the other Credit Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by any of the Agents under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Agent's gross negligence or willful misconduct. The agreements in this subsection shall survive the payment of the Loans and all other amounts payable hereunder. 9.8 Agents, in Their Individual Capacities. The Agents and their respective Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower as though the Agents were not acting in such capacities hereunder and under the other Credit Documents. With respect to the Loans made or renewed by it and any Note issued to it and with respect to any Letter of Credit issued or participated in by it, each Agent shall have the same rights and powers under this Agreement and the other Credit Documents as any Lender and may exercise the same as though it were not an Agent, and the terms "Lender" and "Lenders" shall include the Agents in their individual capacities. 9.9 Successor Administrative Agent, Syndication Agents and Documentation Agents. The Administrative Agent may resign as Administrative Agent upon 30 days' notice to the Lenders. If the Administrative Agent shall resign as Administrative Agent under this Agreement and the other Credit Documents, then the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent (provided that it shall have been approved by the Borrower, which approval shall not be unreasonably withheld), shall succeed to the rights, powers and duties of the Administrative Agent hereunder. If no successor Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Administrative 80 Agent's giving of notice of resignation, the retiring Administrative Agent may, on behalf of the Required Lenders, appoint a successor Administrative Agent, which shall be a Lender, and if no Lender shall be willing to serve, be a commercial bank having a combined capital and surplus of at least $500,000,000. Any Documentation Agent or any Syndication Agent may resign as Documentation Agent or Syndication Agent, as the case may be, upon 30 days' notice to the Administrative Agent, and upon such resignation, the Administrative Agent may appoint a replacement Documentation Agent or Syndication Agent, as the case may be, from among the Lenders, which shall succeed to the rights, powers and duties of the Documentation Agent or Syndication Agent hereunder, as the case may be. Effective upon such foregoing appointment and approval, the term "Administrative Agent" or "Documentation Agent" or "Syndication Agent" as the case may be, shall mean or include such successor agent, and the former Administrative Agent's or Syndication Agent's or Documentation Agent's, as the case may be, rights, powers and duties as Administrative Agent or Syndication Agent or Documentation Agent, as the case may be, shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or Documentation Agent or Syndication Agent, as the case may be, or any of the parties to this Agreement or any holders of the Loans. After any retiring Administrative Agent's or Documentation Agent's or Syndication Agent's resignation as Administrative Agent or Documentation Agent or Syndication Agent, as the case may be, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent or Documentation Agent or Syndication Agent, as the case may be, under this Agreement and the other Credit Documents. In connection with the appointment of any successor Administrative Agent hereunder, the Borrower shall, and shall cause each of the Credit Parties to, promptly execute such documents, instruments, amendments and the like (such as, without limitation, UCC-3 amendments) necessary to effect such succession and preserve the Agents' and the Lenders' rights hereunder, under the other Credit Documents and in the Collateral. 9.10 Duties of Arrangers, Documentation Agents and Syndication Agents. Except as expressly set forth herein, each Arranger, each Syndication Agent and each Documentation Agent, in its respective capacity as such, shall have no duties or responsibilities, and shall incur no liabilities, under this Agreement or the other Credit Documents. SECTION 10. MISCELLANEOUS 10.1 Amendments and Waivers. Neither this Agreement nor any other Credit Document, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of this subsection. The Required Lenders may, or, with the written consent of the Required Lenders, the Administrative Agent may, from time to time, (a) enter into with the Borrower written amendments, supplements or modifications hereto and to the other Credit Documents for the purpose of adding any provisions to this Agreement or the other Credit Documents or changing in any manner the rights of the Lenders or of the Borrower hereunder or thereunder or (b) waive, on such terms and conditions as the Required Lenders or the Administrative Agent, as the case may be, may specify in such instrument, any of the requirements of this Agreement or the other Credit Documents or any Default or Event of Default and its consequences; provided, however, that no such waiver and no such amendment, supplement or modification shall (i) reduce the amount or extend any scheduled date of payment or maturity of any Loan or any L/C Obligation under subsection 3.5, extend the expiration of any Letter of Credit beyond the Revolving Loan Termination Date, or reduce the stated rate or amount of any interest or fee payable hereunder or extend the scheduled date of any payment thereof, in each case without the consent of each Lender directly affected thereby, or increase any commitment of any Lender or extend the expiry of any commitment of any Lender without the consent of such Lender, or (ii) amend, modify or waive any provision of this subsection or reduce the percentage specified in the definition of Required Lenders or Requisite Class Lenders, or consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement and the other Credit Documents, in each case 81 without the written consent of all the Lenders, or (iii) release all or substantially all of the Collateral or release all or substantially all of the Credit Parties from their Guarantee Obligations under the Credit Documents without the consent of all Lenders, or (iv) amend, modify or waive any provision of Section 9 without the written consent of the Administrative Agent and any other Agent prejudiced thereby, (v) amend, modify or waive any provision of subsection 2.1(b), any other provision of this Agreement relating to the Swing Line Loans or the Swing Line Note without the written consent of the Swing Line Lender, or (vi) amend, modify or waive any provision of this Agreement or any other Credit Document which would directly and adversely affect the Arrangers or the Agents or the Issuing Lender or the Swing Line Lender without the written consent of the Arrangers, the Agents or the Issuing Lender or the Swing Line Lender, as the case may be. In addition to the foregoing, no amendment, modification, termination or waiver of any provision of subsection 2.5 or subsection 2.6 which has the effect of changing any interim scheduled payments, voluntary or mandatory prepayments (or the applications thereof or any right to waive such payment) or Commitment reductions applicable to any Class (an "Affected Class") in a manner that disproportionately disadvantages such Class relative to the other Class shall be effective without the written concurrence of the Requisite Class Lenders of the Affected Class (it being understood and agreed that any amendment, modification, termination or waiver of any provision which only postpones or reduces any interim scheduled payment, voluntary or mandatory prepayment or Commitment reduction from those set forth in subsection 2.6 with respect to only one Class shall be deemed to not disproportionately disadvantage the other Class and, therefore, shall not require the consent of Requisite Class Lenders of such other Class). Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Borrower, the Lenders, the Agents and the Issuing Lender and all future holders of the Loans. Any extension of a Letter of Credit by the Issuing Lender shall be treated hereunder as an issuance of a new Letter of Credit. In the case of any waiver, the Borrower, the Lenders and the Agents and the Issuing Lender shall be restored to their former positions and rights hereunder and under the other Credit Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. Notwithstanding the foregoing, this Agreement may be amended (or amended and restated) with the written consent of the Required Lenders, the Arrangers, the Administrative Agent, the Syndication Agents and the Borrower (x) to add one or more additional credit facilities to this Agreement and to permit the extensions of credit from time to time outstanding thereunder and the accrued interest and fees in respect thereof (collectively, the "Additional Extensions of Credit") to share ratably in the benefits of this Agreement and the other Credit Documents with the Term Loans and Revolving Credit Loans and the accrued interest and fees in respect thereof and (y) to include appropriately the Lenders holding such credit facilities in any determination of the Required Lenders and Requisite Class Lenders; provided, however, that no such amendment shall permit the Additional Extensions of Credit to share ratably with or with preference to the Term Loans in the application of mandatory prepayments without the consent of the Requisite Class Lenders or otherwise to share ratably with or with preference to the Revolving Credit Loans without the consent of the Requisite Class Lenders. 10.2 Notices. Except as otherwise expressly set forth herein, all notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by facsimile transmission) and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made (a) in the case of delivery by hand, when delivered, (b) in the case of delivery by mail, three days after being deposited in the mails, postage prepaid, or (c) in the case of delivery by facsimile transmission, when sent and receipt has been confirmed, addressed as follows in the case of the Borrower, the Administrative Agent, either Syndication Agent or either Documentation Agent, and to such other address as may be hereafter notified by the respective parties hereto: 82 The Borrower or any of its Subsidiaries: Peabody Energy Corporation 701 Market Street St. Louis, MO 63101 Attention: Steve Schaab Fax: (314) 342-7740 The Administrative Agent: Fleet National Bank 100 Federal Street Mailstop MADE10009H Boston, MA 02110 Attention: David Lundberg Fax: (617) 434-3652 with a copy to: Christopher R. Plaut Latham & Watkins LLP 885 Third Avenue New York, NY 100022 Fax: (212) 751-4864 The Documentation Agents: U.S. Bank National Association 7th & Washington, 12th Floor St. Louis, MO 63101 Attn: Eric Hartman Fax: (314) 418-3859 Morgan Stanley Senior Funding, Inc. 750 Seventh Avenue, 11th Floor New York, NY 10020 Fax: (212) 507-3138 The Syndication Agents: Wachovia Bank, National Association 301 South College Street Charlotte, NC 28288 Attention: Stephan Hyde Fax: (704) 383-8494 83 with a copy to: James T. Hedrick, Jr. Kennedy Covington Lobdell & Hickman, L.L.P. 214 N. Tryon Street, 47th Floor Charlotte, NC 28202 Fax: (704) 331-7598 and Lehman Commercial Paper Inc. 745 Seventh Avenue New York, NY 10019 Attention: Francis Chang Fax: (646) 758-3864 with a copy to: Christopher R. Plaut Latham & Watkins LLP 885 Third Avenue New York, NY 100022 Fax: (212) 751-4864 The Arrangers: Fleet Securities, Inc. 100 Federal Street Mailstop MADE10011 Boston, MA 02110 Attention: Jennifer Dumas Fax: (617) 434-6669 with a copy to: Christopher R. Plaut Latham & Watkins LLP 885 Third Avenue New York, NY 100022 Fax: (212) 751-4864 Wachovia Securities, Inc. 301 South College Street Charlotte, NC 28288 Attention: Stephan Hyde Fax: (704) 383-8494 84 with a copy to: James T. Hedrick, Jr. Kennedy Covington Lobdell & Hickman, L.L.P. 214 N. Tryon Street, 47th Floor Charlotte, NC 28202 Fax: (704) 331-7598 and Lehman Brothers Inc. 745 Seventh Avenue New York, NY 10019 Attention: Francis Chang Fax: (646) 758-3864 with a copy to: Christopher R. Plaut Latham & Watkins LLP 885 Third Avenue New York, NY 100022 Fax: (212) 751-4864 provided that any notice, request or demand to or upon the Administrative Agent or the Lenders pursuant to subsection 2.2, 2.4, 2.6, 2.7, 2.12 or 3.2 shall not be effective until received, and provided further that any notices required to be given to all the Lenders hereunder may be effected by delivery of notice to the Administrative Agent as provided above, followed by distribution of such notice by the Administrative Agent to the Lenders through IntraLinks (or another similar electronic system customarily used by financial institutions). 10.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of any Agent or any Lender, any right, remedy, power or privilege hereunder or under the other Credit Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 10.4 Survival of Representations and Warranties. All representations and warranties made hereunder, in the other Credit Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the making of the Loans hereunder. 10.5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay or reimburse each Agent for all its reasonable out-of-pocket costs and expenses incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement and the other Credit Documents and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including, without limitation, the reasonable fees, charges and disbursements of a single counsel for the Agents (in addition to any local and foreign counsel), (b) to pay or reimburse each Lender and each Agent 85 for all its costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the other Credit Documents and any such other documents and any "workout" hereunder or thereunder, including, without limitation, the fees and disbursements of counsel to each Lender and of counsel to any Agent, (c) to pay, indemnify, and hold each Lender and each Agent and each Issuing Lender harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other similar taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the other Credit Documents and any such other documents, and (d) to pay, defend, indemnify, and hold each Lender and each Agent and each Issuing Lender harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement or the other Credit Documents or the use of the proceeds of the Loans in connection with the Black Beauty Acquisition, including, without limitation, any of the foregoing relating to the violation of, noncompliance with or liability under, any Mining and Environmental Law applicable to the activities of the Borrower, any of its Subsidiaries or any of the Properties or Businesses or any prior businesses for which the Borrower has, or may reasonably be alleged to have retained liability (all the foregoing in this clause (d), collectively, the "indemnified liabilities"). The Borrower shall have no obligation hereunder to any Agent or the Issuing Lender or any Lender with respect to otherwise indemnified liabilities arising from the gross negligence or willful misconduct of such Agent or the Issuing Lender or such Lender. The agreements in this subsection shall survive repayment of the Loans and all other amounts payable hereunder. 10.6 Successors and Assigns; Participations and Assignments. (a) This Agreement shall be binding upon and inure to the benefit of the Borrower, the Lenders, the Agents and their respective successors and assigns, except that the Borrower may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Lender. (b) Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time sell to one or more banks or other entities ("Participants") participating interests in any Loan owing to such Lender or any other interest of such Lender hereunder and under the other Credit Documents. In the event of any such sale by a Lender of a participating interest to a Participant, such Lender's obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any such Loan for all purposes under this Agreement and the other Credit Documents, and the Borrower and the Agents shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the other Credit Documents. No Lender shall be entitled to create in favor of any Participant, in the participation agreement pursuant to which such Participant's participating interest shall be created or otherwise, any right to vote on, consent to or approve any matter relating to this Agreement or any other Credit Document except for those specified in clauses (i) and (ii) of the proviso to subsection 10.1. The Borrower agrees that if amounts outstanding under this Agreement are due and unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall, to the maximum extent permitted by applicable law, be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement; provided that, in purchasing such participating interest, such Participant shall be deemed to have agreed to share with the Lenders the proceeds thereof as provided in subsection 10.7(a) as fully as if it were a Lender hereunder. The Borrower also agrees that each Participant shall be entitled to the benefits of subsections 2.14, 2.15 and 2.16 with respect to its participation in the Letters of Credit, the Commitments 86 and the Loans outstanding from time to time as if it was a Lender; provided that in the case of subsection 2.15, such Participant shall have complied with the requirements of said Section; provided, further, that no Participant shall be entitled to receive any greater amount pursuant to any such subsection than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred. (c) Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time and from time to time assign to any Lender or any affiliate thereof (including, without limitation, in the case of any Lender that is an investment fund which is regularly engaged in making, purchasing or investing in loans or securities, any other such fund which is under common (or affiliated) management with such Lender or advised by the same investment advisor as such Lender), or, with the consent of the Borrower, the Issuing Lender (with respect to assignments of Revolving Credit Commitments and Revolving Credit Loans only) and the Administrative Agent (which in each case shall not be unreasonably withheld or delayed), to any other Person (an "Assignee") all or any part of its rights and obligations under this Agreement and the other Credit Documents pursuant to an Assignment and Acceptance, substantially in the form of Exhibit F (an "Assignment and Acceptance"), executed by such Assignee, such assigning Lender (and, in the case of an Assignee that is not then a Lender or an affiliate thereof (including, without limitation, in the case of a fund, another fund under common (or affiliated) management therewith or advised by the same investment advisor as a Lender), by the Borrower, the Issuing Lender (with respect to assignments of Revolving Credit Commitments and Revolving Credit Loans only) and the Administrative Agent or advised by the same investment advisor as a Lender) and delivered to the Administrative Agent for its acceptance and recording in the Register, provided that, (A) in the case of any such assignment to a Person other than a Lender or any affiliate thereof (including, without limitation, in the case of a fund, another fund under common (or affiliated) management therewith), either (x) such assignment is of all the rights and obligations of the assigning Lender or (y) the sum of the aggregate principal amount of the Loans, the aggregate amount of the L/C Obligations and the aggregate amount of the unused Commitments being assigned is not less than $1,000,000 (in the aggregate, in the case of contemporaneous assignments to affiliated funds) (or such lesser amount as may be agreed to by the Borrower and the Administrative Agent), (B) in the case of any such assignment to a Person other than a Lender or any affiliate thereof (including, without limitation, in the case of a fund, another fund under common (or affiliated) management therewith), each Assignee which is a Non-U.S. Lender shall comply with the provisions of subsection 2.15(b) hereof and (C) any assignment to an Assignee as to which the Borrower has no right of consent under this subsection shall not be permitted if it would at the time of assignment thereof result in additional cost to the Borrower under subsection 2.14 or 2.15. Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereunder with a Commitment as set forth therein and (y) the assigning Lender thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such assigning Lender shall cease to be a party hereto). Notwithstanding any provision of this paragraph (c) and paragraph (f) of this subsection to the contrary, the consent of the Borrower shall not be required for any assignment (i) of Term Loans or (ii) which occurs at any time when any of the events described in Section 8 shall have occurred and be continuing. (d) The Administrative Agent, on behalf of the Borrower, shall maintain at the address of the Administrative Agent referred to in subsection 10.2 a copy of each Assignment and Acceptance delivered to it and a register (the "Register") for the recordation of the names and addresses of the Lenders and Commitments of and principal amounts of the Loans of each Type owing to, each Lender from time to time. The entries in the Register shall be conclusive, in the absence of manifest 87 error, and the Borrower, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register as the owner of a Loan, any Note evidencing such Loan or other Obligation hereunder as the owner thereof for all purposes of this Agreement and the other Credit Documents, notwithstanding any notice to the contrary. Any assignment of any Loan, whether or not evidenced by a Note, shall be effective only upon appropriate entries with respect thereto being made in the Register (and each Note shall expressly so provide). Any assignment or transfer of all or part of an Obligation evidenced by a Note shall be registered in the Register only upon surrender for registration of assignment or transfer of the Note evidencing such Obligation, duly endorsed by (or accompanied by a written instrument of assignment or transfer duly executed by) the holder thereof and accompanied by a duly executed Assignment and Acceptance; thereupon, at the request of the Assignee, one or more new Notes shall be issued to the designated Assignee and the old Note shall be returned by the Administrative Agent to the Borrower marked "cancelled." (e) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an Assignee (and, in the case of an Assignee that is not then a Lender or an affiliate thereof (including, without limitation, in the case of a fund, another fund under common (or affiliated) management therewith), by the Borrower, the Issuing Lender (with respect to assignments of Revolving Credit Commitments and Revolving Credit Loans only) and the Administrative Agent) together with payment by the assigning Lender or the Assignee to the Administrative Agent of a registration and processing fee of $2,500 (provided that no such payment shall be required with respect to assignments to an Assignee which is already a Lender; provided, further, that with respect to one or more substantially concurrent assignments by a Lender to an affiliate or affiliates thereof or to Persons under common (or affiliated) management with such Lender, only one such fee shall be payable), the Administrative Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the effective date determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to the Lenders and the Borrower. (f) The Borrower authorizes each Lender to disclose to any Participant or Assignee (each, a "Transferee") and any prospective Transferee, subject to the provisions of subsection 10.15, any and all financial information in such Lender's possession concerning the Borrower and its Affiliates which has been delivered to such Lender by or on behalf of the Borrower pursuant to this Agreement or which has been delivered to such Lender by or on behalf of the Borrower in connection with such Lender's credit evaluation of the Borrower and its Affiliates prior to becoming a party to this Agreement. (g) If, pursuant to this subsection 10.6, any interest in this Agreement or any Loan is transferred to any Transferee which would be a Non-U.S. Lender upon the effectiveness of such transfer, the assigning Lender shall cause such Transferee, concurrently with the effectiveness of such transfer, (i) to represent to the assigning Lender (for the benefit of the assigning Lender, the Administrative Agent and the Borrower) that under applicable law and treaties no U.S. Taxes will be required to be withheld by the Administrative Agent, the Borrower or the assigning Lender with respect to any payments to be made to such Transferee in respect of the Loans, (ii) to furnish to the assigning Lender (and, in the case of any Assignee registered in the Register, the Administrative Agent and the Borrower such Internal Revenue Service Forms required to be furnished pursuant to subsection 2.15(b) and (iii) to agree (for the benefit of the assigning Lender, the Administrative Agent and the Borrower) to be bound by the provisions of subsection 2.15(b). (h) For the avoidance of doubt, the parties to this Agreement acknowledge that the provisions of this subsection and subsection 2.5(g) concerning assignments of Loans and Notes relate only to absolute assignments and that such provisions do not prohibit assignments creating security interests, including, without limitation, (i) any pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank in accordance with applicable law and (ii) the assignment or pledge by any 88 Lender that is a fund of all or any portion of its rights under this Agreement to secure such Lender's Indebtedness; provided that, no such assignment under this clause (h) shall release the assignor Lender from its obligations hereunder. 10.7 Adjustments; Set-off. (a) If any Lender (a "benefitted Lender") shall at any time receive any payment of all or part of its Loans or the Reimbursement Obligations owing to it, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in subsection 8(f), or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of such other Lender's Loans or the Reimbursement Obligations owing to it, or interest thereon, such benefitted Lender shall purchase for cash from the other Lenders a participating interest in such portion of each such other Lender's Loans or the Reimbursement Obligations owing to it, or shall provide such other Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such benefitted Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. (b) In addition to any rights and remedies of the Lenders provided by law, each Lender shall have the right, without prior notice to the Borrower, any such notice being expressly waived by the Borrower to the extent permitted by applicable law, upon any amount becoming due and payable by the Borrower hereunder (whether at the stated maturity, by acceleration or otherwise) to set-off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency thereof to or for the credit or the account of the Borrower. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such set-off and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application. 10.8 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by facsimile transmission), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrower and the Administrative Agent. 10.9 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 10.10 Integration. This Agreement and the other Credit Documents represent the agreement of the Borrower, the Agents and the Lenders with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by any Agent or any Lender relative to subject matter hereof not expressly set forth or referred to herein or in the other Credit Documents. 10.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 89 10.12 SUBMISSION TO JURISDICTION; WAIVERS. THE BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY: (a) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS TO WHICH IT IS A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF; (b) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME; (c) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO THE BORROWER AT ITS ADDRESS SET FORTH IN SUBSECTION 10.2 OR AT SUCH OTHER ADDRESS OF WHICH THE ADMINISTRATIVE AGENT SHALL HAVE BEEN NOTIFIED PURSUANT THERETO; (d) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION; AND (e) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LEGAL ACTION OR PROCEEDING REFERRED TO IN THIS SUBSECTION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES. 10.13 Acknowledgements. The Borrower hereby acknowledges that: (a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Credit Documents; (b) none of the Arrangers, the Agents or the Lenders has any fiduciary relationship with or duty to the Borrower arising out of or in connection with this Agreement or any of the other Credit Documents, and the relationship between any of the Agents and the Lenders, on one hand, and the Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and (c) no joint venture is created hereby or by the other Credit Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Borrower and the Lenders. 10.14 WAIVERS OF JURY TRIAL. THE BORROWER, THE AGENTS, THE LENDERS AND THE OTHER PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING 90 RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. 10.15 Confidentiality. Each Lender agrees to keep confidential all non-public information provided to it by the Borrower pursuant to this Agreement that is designated by the Borrower in writing as confidential (excluding any such information already in the possession of such Lender or provided to such Lender by a third party not in violation of this Agreement which, in either case, is not, to the knowledge of such Lender, subject to a confidentiality agreement); provided that nothing herein shall prevent any Lender from disclosing any such information (i) to any Agent or any other Lender or any of its Affiliates, (ii) to any Transferee or prospective Transferee or to any direct or indirect contractual counterparties in swap agreements or such contractual counterparties' professional advisors which receives such information and agrees to be bound by the confidentiality provisions hereof, (iii) to its employees, directors, agents, attorneys, accountants and other professional advisors, (iv) upon the request or demand of any Governmental Authority having jurisdiction over such Lender, (v) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Requirement of Law, (vi) which has been publicly disclosed other than in breach of this Agreement, (vii) to the National Association of Insurance Commissioners or any similar organization or any nationally-recognized rating agency that requires access to information about such Lender's investment portfolio in connection with ratings issued with respect to such Lender, or (viii) in connection with the exercise of any remedy hereunder. Notwithstanding the foregoing, each party hereto may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transactions contemplated by this Credit Agreement and all materials of any kind (including opinions or other tax analyses) that are provided to such party relating to such tax treatment and tax structure. 10.16 Prudential Note. For the avoidance of doubt, the parties hereto hereby agree that the Obligations of the Borrower and the other Credit Parties hereunder and under the other Credit Documents (including, without limitation, all Indebtedness of the Borrower hereunder and of the other Credit Parties (including, without limitation, PHCI) under the Guarantee and Collateral Agreement) is "Senior Debt," as such term is defined in the Prudential Note. 10.17 Existing Agreements Superseded. As set forth in subsection 1.3 hereof, the First Restated Credit Agreement is superseded by this Credit Agreement, which has been executed in renewal, amendment, restatement and modification, but not in extinguishment of, the obligations under the First Restated Credit Agreement. 10.18 Delivery of Lender Addenda. Each initial Lender that is not an Original Lender shall become a party to this Agreement by delivering to the Administrative Agent a Lender Addendum duly executed by such Lender, the Borrower and the Administrative Agent. [SIGNATURE PAGES FOLLOW] 91 IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. PEABODY ENERGY CORPORATION as Borrower By:_________________________________________ Name: Title: FLEET NATIONAL BANK, as Administrative Agent and as a Lender By:_________________________________________ Name: Title: WACHOVIA BANK, NATIONAL ASSOCIATION, as Syndication Agent By:_________________________________________ Name: Title: LEHMAN COMMERCIAL PAPER INC., as Syndication Agent By:_________________________________________ Name: Title: FLEET SECURITIES, INC., as Arranger By:_________________________________________ Name: Title: WACHOVIA SECURITIES, INC., as Arranger By:_________________________________________ Name: Title: LEHMAN BROTHERS INC., as Arranger By:_________________________________________ Name: Title: MORGAN STANLEY SENIOR FUNDING, INC., as Documentation Agent By:_________________________________________ Name: Title: U.S. BANK NATIONAL ASSOCIATION, as Documentation Agent By:_________________________________________ Name: Title: Schedule I to Credit Agreement Pricing Grids
CONSOLIDATED REVOLVING REVOLVING TOTAL CREDIT FACILITY CREDIT FACILITY TERM LOAN TERM LOAN OBLIGATIONS TO APPLICABLE APPLICABLE APPLICABLE APPLICABLE CONSOLIDATED MARGIN - MARGIN - BASE MARGIN - LIBOR MARGIN - BASE EBITDA RATIO LIBOR RATE RATE RATE RATE - -------------- --------------- --------------- -------------- ------------- < or = 3.75x 2.500% 1.500% 2.500% 1.500% < or = 3.25x 2.250% 1.250% 2.500% 1.500% < or = 2.75x 2.000% 1.000% 2.500% 1.500% < or = 2.25x 1.750% 0.750% 2.250% 1.250% < or = 2.25x 1.500% 0.500% 2.250% 1.250%
USAGE RATIO COMMITMENT FEE - ------------- ---------- < or = 66.67% 0.250% < or = 33.33% 0.375% <33.33% 0.500%
S-IV-1 EX-10.44 6 c77011exv10w44.txt EMPLOYMENT AGREEMENT - FREDRICK D. PALMER EXHIBIT 10.44 EMPLOYMENT AGREEMENT AGREEMENT, as of the date set forth on the signature page hereof, by and between P&L Coal Holdings Corporation, a Delaware corporation (the "Company") and the undersigned executive (the "Executive"). RECITALS In order to induce Executive to continue to serve in the executive team position set forth on the signature page hereof, the Company desires to provide Executive with compensation and other benefits on the terms and conditions set forth in this Agreement. Executive is willing to accept such employment and perform services for the Company, on the terms and conditions hereinafter set forth. It is therefore hereby agreed by and between the parties as follows: 1. Employment. 1.1 Subject to the terms and conditions of this Agreement, the Company agrees to employ Executive during the Term hereof in the executive team position set forth on the signature page hereof. In such capacity, Executive shall report to the Chief Executive Officer of the Company (the "CEO") and shall have the customary powers, responsibilities and authorities of executives holding such positions in corporations of the size, type and nature of the Company, as it exists from time to time, and as are assigned by the Board of Directors of the Company (the "Board") and the CEO. 1.2 Subject to the terms and conditions of this Agreement, Executive hereby accepts employment in the executive team position set forth on the signature page hereof commencing as of the date hereof (the "Commencement Date") and agrees, subject to any period of vacation and sick leave, to devote his full business time and efforts to the performance of services, duties and responsibilities in connection therewith, subject at all times to review and control of the Board or the CEO. 1.3 Nothing in this Agreement shall preclude Executive from engaging in charitable work and community affairs, from delivering lectures, fulfilling speaking engagements or teaching at educational institutions, from managing any investment made by him or his immediate family with respect to which Executive or such family member is not substantially involved with the management or operation of the entity in which Executive has invested (provided that no such investment in publicly traded equity securities or other property may exceed 5% of the equity of any entity, without the prior approval of the CEO or the Board) or from serving, subject to the prior approval of the CEO or the Board, as a member of boards of directors or as a trustee of any other corporation, association or entity, to the extent that any of the above activities do not materially interfere with the performance of his duties hereunder. For purposes of the preceding sentence, any approval by the CEO or the Board required therein shall not be unreasonably withheld. 2. Term of Employment. Executive's term of employment under this Agreement (the "Term of Employment") shall commence on the Commencement Date and, subject to termination by the terms hereunder, shall have an initial term of two years (the "Initial Term"), which, beginning on the first anniversary of the Commencement Date, shall extend thereafter on a day-to-day basis for an "evergreen" one-year term. 2 3. Compensation. 3.1 Salary. During the Term of Employment, the Company shall pay Executive a base salary ("Base Salary") at an initial rate as set forth on the signature page hereof. Base Salary shall be payable in accordance with the ordinary payroll practices of the Company. During the Term of Employment, the Board and the CEO shall, in good faith, review, at least annually, Executive's Base Salary in accordance with the Company's customary procedures and practices regarding the salaries of senior executives and may, if determined by the Board to be appropriate, increase Executive's Base Salary following such review; provided, however, that no such increase shall be made before the Company obtains ratings on its unsecured debt from Standard & Poor's and Moody's of at least BBB- and Baa3, respectively ("Investment-Grade Credit Rating"). "Base Salary" for all purposes herein shall be deemed to be a reference to any such increased amount. 3.2 Annual Bonus. In addition to his Base Salary, Executive shall, commencing with the current fiscal year and continuing each fiscal year thereafter, be eligible to receive an annual cash bonus (the "Bonus") during the term of his employment hereunder to be developed by the Board, based on achievement of performance targets established by the Board in consultation with the CEO as soon as practicable at the beginning of the fiscal year for which the performance targets relate. Executive's target Bonus for the current fiscal year is set forth on the signature page hereof, and such target shall not be increased before the Company obtains an Investment-Grade Credit Rating. A Bonus award shall be payable to Executive at the time bonuses are paid to executive officers in accordance with the Company's policies and practices as set by the Board in consultation with the CEO. 3 4. Employee Benefits. 4.1 Equity and Stock Options. Simultaneously with the execution of this Agreement, the Company and Executive are entering into the Option Grant Agreement[s] and the Stockholders Agreement in the forms attached hereto as Exhibits A, B and C, respectively (together with any other agreement approved by the Board and designated by the Board an "Ancillary Document" for purposes of this Agreement, the "Ancillary Documents"). Executive shall not be eligible to receive any stock option or other equity incentive other than as set forth in the Ancillary Documents. 4.2 Employee Benefit Programs, Plans and Practices; Perquisites. The Company shall provide Executive while employed hereunder with coverage under such employee benefits (commensurate with his position in the Company and to the extent permitted under any employee benefit plan) in accordance with the terms thereof, including the Continuation Benefits (as defined herein), D&O insurance, which covers claims arising out of actions or inactions occurring during the Term of Employment, in accordance with the D&O insurance policy, and other employee benefits which the Company may make available to its senior executives from time to time in its discretion. The Company shall also provide Executive with perquisites which the Company may make available to its senior executives from time to time in its discretion. 4.3 Vacation. Executive shall be entitled to the number of business days paid vacation in each calendar year as determined in accordance with the Company's applicable vacation policies, which shall be taken at such times as are consistent with Executive's responsibilities hereunder. 4 5. Expenses. Subject to prevailing Company policy or such guidelines as may be established by the Board, the Company will reimburse Executive for all reasonable expenses incurred by Executive in carrying out his duties. 6. Termination of Employment. 6.1 Termination Not for Cause or for Good Reason. (a) The Company or Executive may terminate Executive's Term of Employment at any time for any reason by written notice at least thirty (30) days in advance. If Executive's employment is terminated (i) by the Company other than for Cause (as defined in Section 6.2(b) hereof), Disability (as defined in Section 6.3 hereof) or death or (ii) by Executive for Good Reason (as defined in Section 6.1(b) hereof), the Company, as liquidated damages and in lieu of any other damages therefor, shall (A) continue to pay to Executive Base Salary through the end of the Initial Term if such termination occurs during the first year of the Initial Term or for a period of one year for such termination thereafter (the "Continuation Period"), with such payments to be made in accordance with the terms of Section 3.1. and (B) pay to Executive an additional amount equal to the Bonus actually paid in the year prior to such termination (the "Severance Payments"). The Severance Payments shall be made in substantially equal installments over the Continuation Period in accordance with Company payroll practices, unless the CEO or the Board approves payment in a lump sum. In addition, the Company shall pay to Executive a prorated bonus (the "Prorated Bonus") for the year of termination, payable when such bonuses are paid to other senior executives of the Company, calculated as the Bonus Executive would have received in such year based on the Company's actual performance multiplied by a fraction, the numerator of which is the number of business days during the year of termination that Executive was employed and the denominator of which is the total number of business days during the year of termination. The Company shall 5 also continue to provide Executive during the Continuation Period with qualified and nonqualified defined benefit and defined contribution pension, life insurance, medical and other benefits set forth on the signature page hereof (collectively, the "Continuation Benefits"); provided, however, that the Company shall not be obligated to provide any benefits under tax qualified plans which are not permitted by the terms of such plan or by applicable law or could jeopardize the plan's tax status; provided, further, that any such coverage shall terminate to the extent that Executive is offered or obtains comparable benefits from any other employer during the Continuation Period. Notwithstanding the foregoing, if Executive breaches any provision of Section 11 hereof, the remaining balance of the Severance Payments, the Prorated Bonus and any Continuation Benefits shall be forfeited. (b) For purposes of this Agreement, "Good Reason" shall mean (i) a reduction by the Company in Executive's Base Salary (in which event Severance Payments shall be made based upon Executive's Base Salary in effect prior to any such reduction), (ii) a material reduction in the aggregate program of employee benefits and perquisites to which Executive is entitled (other than a reduction which affects all executives and is approved by the initial CEO; provided, however; that if the initial CEO terminates without Good Reason, voluntarily retires, dies or has a Disability or if such reduction is necessary to maintain the financial viability or solvency of the Company, the reduction does not require the approval of the initial CEO); or, without the approval of the initial CEO: (iii) relocation by more than 50 miles from Executive's workplace, (iv) any material diminution or material adverse change in Executive's duties, responsibilities or reporting relationships, which causes Executive to fall below the level of the executive team, or (v) a material decline in Executive's Bonus opportunity; provided, however, that after a Change of Control of the Company or an IPO (as those terms are defined in the 1998 6 Stock Purchase and Option Plan for Key Employees of P&L Coal Holdings Corporation), clauses (ii) through (v) above shall be replaced by the following: (ii) a material reduction in the aggregate program of employee benefits and perquisites to which Executive is entitled (other than a reduction which affects all executives), (iii) relocation by more than 50 miles from Executive's workplace, (iv) any material diminution or material adverse change in Executive's duties, responsibilities or reporting relationships, which causes Executive to fall below the level of the executive team, or (v) a material decline in Executive's Bonus opportunity. (c) Termination by Executive for Good Reason shall be made by delivery to the Company by Executive of written notice, given at least 45 days prior to such termination, which sets forth the conduct believed to constitute Good Reason; provided, however, that the Company shall have the opportunity to cure the Good Reason during the first 30 days of such notice period and if the Good Reason is cured within such 30-day period, Executive's notice of termination shall be deemed withdrawn. If no notice is given within 90 days of the event giving rise to Good Reason, the Good Reason shall be deemed waived. 6.2 Voluntary Termination by Executive; Discharge for Cause. (a) In the event that Executive's employment is terminated (i) by the Company for Cause, as hereinafter defined, (ii) by Executive other than for Good Reason, Disability or death, Executive shall only be entitled to receive (A) any Base Salary accrued but unpaid prior to such termination and (B) any vacation accrued but unused prior to such termination and any other benefits provided under the employee benefit programs, plans and practices referred to in Section 4.2 hereof, in accordance with their terms. After the termination of Executive's employment under this Section 6.2, the obligations of the Company under this Agreement to make any further payments, or 7 provide any benefits specified herein, to Executive, except as provided in the previous sentence, shall thereupon cease and terminate. (b) As used herein, the term "Cause" shall be limited to (i) any material and uncorrected breach by Executive of the terms of this Agreement, including, but not limited to, engaging in action in violation of Section 11 hereof, (ii) any willful fraud or dishonesty of Executive involving the property or business of the Company, (iii) a deliberate or willful refusal or failure of Executive to comply with any major corporate policy of the Company which is communicated to Executive in writing or (iv) Executives conviction of, or plea of nolo contendere to, any felony if such conviction shall result in his imprisonment; provided that with respect to clauses (i), (ii) or (iii) above, Executive shall have 10 days following written notice of the conduct which is the basis for the potential termination for Cause within which to cure such conduct in order to prevent termination for Cause by the Company. In the event that Executive is terminated for failure to meet performance goals, as determined by the initial CEO, such termination shall be considered a termination for Cause for all purposes relating to his equity (stock and options), but it shall be considered a termination without Cause for purposes of such Executive's right to receive Severance Payments, the Prorated Bonus and the Continuation Benefits. 6.3 Disability. In the event of the Disability (as defined below) of Executive during the Term of Employment, the Company may terminate Executive's Term of Employment upon written notice to Executive (or Executive's personal representative, if applicable) effective upon the date of receipt thereof (the "Disability Commencement Date"). The obligation of the Company to make any further payments under this Agreement shall, except for earned but unpaid Base Salary, amounts attributable to accrued but unused vacation days and the Prorated 8 Bonus cease as of the Disability Commencement Date. The term "Disability," for purposes of this Agreement, shall mean Executive's absence from the full-time performance of Executive's duties pursuant to a reasonable determination made in accordance with the Company's disability plan that Executive is disabled as a result of incapacity due to physical or mental illness that lasts, or is reasonably expected to last, for at least six months. Benefits under all other employee benefit programs, plans and practices shall be paid in accordance with their terms. 6.4 Death. In the event of Executive's death during his Term of Employment hereunder or at any time thereafter while payments are still owing to Executive under the terms of this Agreement, all obligations of the Company to make any further payments, other than the obligation to pay any accrued but unpaid Base Salary, amounts attributable to accrued but unused vacation days and the Prorated Bonus or any remaining payments that were payable to Executive by reason of his termination of employment under Section 6.1 to which Executive was entitled at the time of his death, shall terminate upon Executive's death. Benefits under all other employee benefit programs, plans and practices shall be paid in accordance with their terms. 6.5 No Further Notice or Compensation or Damages. Executive understands and agrees that he shall not be entitled to any further notice, compensation or damages upon Termination of Employment under this Agreement, other than amounts specified in this Section 6 and the Ancillary Documents. 6.6 Executive's Duty to Provide Materials. Upon the termination of the Term of Employment for any reason, Executive or his estate shall surrender to the Company all correspondence, letters, files, contracts, mailing lists, customer lists, advertising materials, ledgers, supplies, equipment, checks, and all other materials and records of any kind that are the 9 property of the Company or any of its subsidiaries or affiliates, that may be in Executive's possession or under his control, including all copies of any of the foregoing. 7. Notices. All notices or communications hereunder shall be in writing, addressed as follows: To the Company: P&L Coal Holdings Corporation 701 Market Street, Suite 700 St. Louis, Missouri 63101-1826 attn: Chief Executive Officer with a copy to: Alvin H. Brown, Esq. Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017 To Executive at the address set forth on the signature page hereof, Any such notice or communication shall be delivered by hand or by courier or sent certified or registered mail, return receipt requested, postage prepaid, addressed as above (or to such other address as such party may designate in a notice duly delivered as described above), and the third business day after the actual date of sending shall constitute the time at which notice was given. 8. Separability. If any provision of this Agreement shall be declared to be invalid or unenforceable, in whole or in part, such invalidity or unenforceability shall not affect the remaining provisions hereof which shall remain in full force and effect. 9. Assignment. This Agreement shall be binding upon, inure to the benefit of and be enforceable by the heirs and representatives of Executive and the assigns and successors of the Company, but neither this Agreement nor any rights or obligations hereunder shall be assignable or otherwise subject to hypothecation by Executive (except by will or by 10 operation of the laws of intestate succession) or by the Company, except that the Company may assign this Agreement to any successor (whether by merger, purchase or otherwise) to all or substantially all of the stock, assets or businesses of the Company. 10. Amendment. This Agreement may only be amended by written agreement of the parties hereto. 11. Nondisclosure of Confidential Information; Non-Competition. (a) Executive, both during the term hereof and thereafter, will not, directly or indirectly, use for himself or use for, or disclose to, any party other than the Company, or any subsidiary of the Company (other than in the ordinary course of Executive's duties for the benefit of the Company or any subsidiary of the Company), any secret or confidential information regarding the business or property of the Company or its subsidiaries or regarding any secret or confidential apparatus, process, system, or other method at any time used, developed, acquired, discovered or investigated by or for the Company or its subsidiaries, whether or not developed, acquired, discovered or investigated by Executive. At the termination of Executive's employment or at any other time the Company or any of its subsidiaries may request, Executive shall promptly deliver to the Company all memoranda, notes, records, plats, sketches, plans or other documents made by, compiled by, delivered to, or otherwise acquired by Executive concerning the business or properties of the Company or its subsidiaries or any secret or confidential product, apparatus or process used developed, acquired or investigated by the Company or its subsidiaries. (b) In consideration of the Company's obligations under this Agreement, Executive agrees that during the period of his employment hereunder and for a period of one year thereafter, without the prior written consent of the Board, (i) he will not, directly or indirectly, either as principal, manager, agent, consultant, officer, stockholder, partner, investor, 11 lender or employee or in any other capacity, carry on, be engaged in or have any financial interest in, any entity which is in competition with the business of the Company or its subsidiaries and (ii) he shall not, on his own behalf or on behalf of any person, firm or company, directly or indirectly, solicit or offer employment to any person who is or has been employed by the Company or its subsidiaries at any time during the twelve (12) months immediately preceding such solicitation. (c) For purposes of this Section 11, an entity shall be deemed to be in competition with the Company if it is principally involved in the purchase, sale or other dealing in any property or the rendering of any service purchased, sold, dealt in or rendered by the Company as a part of the business of the Company within the same geographic area in which the Company effects such sales or dealings or renders such services. Notwithstanding this subsection 11(c) or subsection 11(b), nothing herein shall be construed so as to preclude Executive from investing in any publicly or privately held company, provided Executive's beneficial ownership of any class of such company's securities does not exceed 5% of the outstanding securities of such class. (d) Executive agrees that this covenant not to compete is reasonable under the circumstances and will not interfere with his ability to earn a living or to otherwise meet his financial obligations. Executive and the Company agree that if in the opinion of any court of competent jurisdiction such restraint is not reasonable in any respect, such court shall have the right, power and authority to excise or modify such provision or provisions of this covenant as to the court shall appear not reasonable and to enforce the remainder of the covenant as so amended. Executive agrees that any breach of the covenants contained in this Section 11 would irreparably injure the Company. Accordingly, Executive agrees that, in the event that a court 12 enjoins Executive from any activity prohibited by this Section 11, the Company may, in addition to pursuing any other remedies it may have in law or in equity, cease making any payments otherwise required by this Agreement and obtain an injunction against Executive from any court having jurisdiction over the matter restraining any further violation of this Agreement by Executive. 12. Beneficiaries; References. Executive shall be entitled to select (and change, to the extent permitted under any applicable law) a beneficiary or beneficiaries to receive any compensation or benefit payable hereunder following Executive's death, and may change such election, in either case by giving the Company written notice thereof. In the event of Executive's death or a judicial determination of his incompetence, reference in this Agreement to Executive shall be deemed, where appropriate, to refer to his beneficiary, estate or other legal representative. Any reference to the masculine gender in this Agreement shall include, where appropriate, the feminine. 13. Dispute Resolution. Any dispute or controversy arising under or in connection with this Agreement (other than an action to enforce the covenants in Section 11 hereof) or the Ancillary Documents shall be resolved by arbitration. Arbitrators shall be selected, and arbitration shall be conducted, in accordance with the rules of the American Arbitration Association. The Company shall pay any legal fees in connection with such arbitration in the event that Executive prevails on a material element of his claim or defense. 14. Governing Law. This Agreement shall be construed, interpreted and governed in accordance with the laws of the State of New York, without reference to rules relating to conflicts of law. 13 15. Effect on Prior Agreements. This Agreement and the Ancillary Documents contain the entire understanding between the parties hereto and supersedes in all respects any prior or other agreement or understanding, both written and oral, between the Company, any affiliate of the Company or any predecessor of the Company or affiliate of the Company and Executive. 16. Withholding. The Company shall be entitled to withhold from payment any amount of withholding required by law. 17. Survival. Notwithstanding the expiration of the term of this Agreement, the provisions of Section 11 hereunder shall remain in effect as long as is reasonably necessary to give effect thereto in accordance with the terms hereof. 14 18. Counterparts. This Agreement may be executed in two or more counterparts, each of which will be deemed an original. P&L Coal Holdings Corporation By --------------------------------- Name: Irl F. Engelhardt Title: Chairman and CEO SIGNATURE OF EXECUTIVE: ___________________________________ DATE OF AGREEMENT: February 12, 2001 NAME OF EXECUTIVE: Fredrick D. Palmer ADDRESS OF EXECUTIVE: 3488 North Venice Street Arlington, VA 22207 EXECUTIVE TEAM POSITION: Executive Vice President - Legal and External Affairs BASE SALARY: $350,000 per annum BONUS TARGET: 100% of Base Salary CONTINUATION BENEFITS: 1. Medical, dental and vision benefits; 2. Defined contribution plans (qualified and non-qualified); 3. Life insurance; 4. AD&D; 5. Health care reimbursement account; and 6. Day care reimbursement account. 15 EX-10.45 7 c77011exv10w45.txt FIRST AMENDMENT TO EMPLOYMENT AGREEMENT-F. PALMER EXHIBIT 10.45 FIRST AMENDMENT TO PEABODY ENERGY CORPORATION EMPLOYMENT AGREEMENT (FOR LISTED OFFICERS) THIS AMENDMENT (this "Amendment") to the Employment Agreement (as defined below) is entered into as of May 10, 2001, by and between Peabody Energy Corporation (the "Company" formerly known as P&L Coal Holdings Corporation), a Delaware corporation and Fredrick D. Palmer ("Executive"). WITNESSETH WHEREAS, the Company and Executive entered into that certain Employment Agreement dated as of February 13, 2001 (the "Employment Agreement"); WHEREAS, pursuant to Section 10 of the Employment Agreement, the Employment Agreement may be amended by written agreement of the parties thereto; WHEREAS, the Company desires, and Executive agrees, to amend the provisions of the Employment Agreement, subject to the consummation on or before July 31, 2001, of an initial public offering with respect to the Company's shares of common stock ("IPO"); NOW, THEREFORE, in the event that an IPO is consummated on or before July 31, 2001, the Employment Agreement is hereby amended, effective upon the date of such IPO, as follows: I. Section 2 of the Employment Agreement is amended in part to change the reference to the "'evergreen' one-year term" to the "'evergreen' two-year term." II. Section 3.1 of the Employment Agreement is amended in part by deleting from the end of the third sentence the words "provided, however, that no such increase shall be made before the Company obtains ratings on its unsecured debt from Standard & Poor's and Moody's of at least BBB- and Baa3, respectively ("Investment-Grade Credit Rating")". III. Section 3.2 of the Employment Agreement is amended in part by deleting from the second sentence the words ", and such target shall not be increased before the Company obtains an Investment-Grade Credit Rating". IV. Section 6.1(a) of the Employment Agreement is amended in part by replacing the second sentence thereof with the following: "If the Executive's employment is terminated (i) by the Company other than for Cause (as defined in Section 6.2(b) hereof), Disability (as defined in Section 6.3 hereof) or death or (ii) by Executive for Good Reason (as defined in Section 6.1(b) hereof), the Company, as liquidated damages and in lieu of any other damages therefor, shall (A) continue to pay to Executive Base Salary for a period of two years following such termination (the "Continuation Period"), with such payments to be made in accordance with the terms of Section 3.1 and (B) pay to Executive an additional amount equal to two (2) times the higher of (x) Executive's target Bonus for the year of termination (as established by the Board under Section 3.2 hereof), or (y) the average of the actual Bonus awards paid to Executive in the three-year period prior to such termination (the "Severance Payments")." V. A new Section 6.1(d) is added to the Employment Agreement to read as follows: "(i) If Executive becomes entitled to any payment, benefit or distribution (or combination thereof) by the Company, any affiliated company, or one or more trusts established by the Company for the benefit of its employees, whether paid or payable pursuant to Section 6.1 of this Agreement or any other plan, arrangement, or agreement with the Company or any affiliated company (the "Payments"), which are or become subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, hereinafter collectively referred to as the "Excise Tax"), the Company shall make to Executive an additional payment (the "Gross-Up Payment") in an amount such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and the Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments; provided, however, that such Gross-Up Payment shall not exceed $956,161. (ii) All determinations required to be made under this Section 6.1(d), including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by a nationally recognized certified public accounting firm as may be designated by the Company (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and Executive within ten business days of the receipt of notice from Executive that Payments were made, or such earlier time as is required by the Company; provided that for purposes of determining the amount of any Gross-Up Payment, Executive shall be deemed to pay federal income tax at the highest marginal rates applicable to individuals in the calendar year in which any such Gross-Up Payment is to be made and 2 deemed to pay state and local income taxes at the highest effective rates applicable to individuals in the state or locality of Executive's residence or place of employment in the calendar year in which any such Gross-Up Payment is to be made, net of the maximum reduction in federal income taxes that can be obtained from deduction of such state and local taxes, taking into account limitations applicable to individuals subject to federal income tax at the highest marginal rates. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 6.1(d), shall be paid by the Company to Executive (or to the appropriate taxing authority on Executive's behalf) when due. If the Accounting Firm determines that no Excise Tax is payable by Executive, it shall so indicate to Executive in writing. Any determination by the Accounting Firm shall be binding upon the Company and Executive. As a result of the uncertainty in the application of Section 4999 of the Code, it is possible that the amount of the Gross-Up Payment determined by the Accounting Firm to be due to (or on behalf of) Executive was lower than the amount actually due ("Underpayment"). In the event that the Company exhausts its remedies hereunder and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of Executive. (iii) Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of any Gross-Up Payment. Such notification shall be given as soon as practicable, but no later than ten business days after Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. Executive shall not pay such claim prior to the expiration of the thirty-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order to effectively contest such claim and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 6.1(d), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate 3 courts, as the Company shall determine; provided, further, that if the Company directs Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Executive, on an interest-free basis, and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; provided, further, that if Executive is required to extend the statute of limitations to enable the Company to contest such claim, Executive may limit this extension solely to such contested amount. The Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (iv) If, after the receipt by Executive of an amount paid or advanced by the Company pursuant to this Section 6.1(d), Executive becomes entitled to receive any refund with respect to a Gross-Up Payment, Executive shall (subject to the Company's complying with the requirements of Section 6.1(d)(iii)) promptly pay to the Company the amount of such refund received (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 6.1(d), a determination is made that Executive shall not be entitled to any refund with respect to such claim and the Company does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of the Gross-Up Payment required to be paid." VI. This Amendment shall only become valid and binding upon consummation of an IPO on or before July 31, 2001, and shall otherwise be null and void. Except as provided herein, the Employment Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first above written. P&L Coal Holdings Corporation By: ______________________________ Chairman & Chief Executive Officer Executive ______________________________ Name: ______________________________ 4 EX-18.1 8 c77011exv18w1.txt LETTER RE: CHANGE IN ACCOUNTING PRINCIPLE EXHIBIT 18.1 April 14, 2003 Richard A. Navarre Executive Vice President and Chief Financial Officer Peabody Energy Corporation 701 Market Street St. Louis, Missouri 63101 Dear Mr. Navarre: As discussed in Note 3 of the Notes to unaudited condensed consolidated financial statements of Peabody Energy Corporation, included in its Form 10-Q for the quarter ended March 31, 2003, the Company changed its method of accounting for unrecognized net gains and losses for postretirement benefits other than pensions from a method that amortized such amounts in excess of a 5% corridor over a three-year period to a method that amortizes all unrecognized net gains and losses over the average remaining service period of active plan participants. Management has advised us that it believes the change is to a preferable method in the Company's circumstances for the following reasons. The elimination of the corridor will allow the Company to recognize over time all differences (versus only those outside the corridor) between the fair value of its postretirement benefit obligations and the amount reflected in the balance sheet. In addition, the use of an amortization period equal to the average remaining service period of active plan participants more closely matches the long-term expected costs of the Company's unfunded plans with the benefits provided by the Company's continuing employee workforce. There are no authoritative criteria for determining a "preferable" amortization method based on the particular circumstances. However, we conclude that the change in the method of accounting for postretirement benefits other than pensions by the elimination of the corridor and the change in the amortization period to the average remaining service life of plan participants is a change to an acceptable alternative method which, based on management's business judgment to make this change, is preferable in the Company's circumstances. We have not conducted an audit in accordance with auditing standards generally accepted in the United States of any financial statements of the Company as of any date or for any period subsequent to December 31, 2002, and therefore, we do not express any opinion on any financial statements of the Company subsequent to that date. Very truly yours, /s/ Ernst & Young LLP EX-99.1 9 c77011exv99w1.txt CERTIFICATION PURSUANT TO SECTION 906 EXHIBIT 99.1 CERTIFICATION OF PERIODIC FINANCIAL REPORTS I, Irl F. Engelhardt, Chairman and Chief Executive Officer of Peabody Energy Corporation, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) the Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 (the "Periodic Report") which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and (2) information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of Peabody Energy Corporation. Dated: May 9, 2003 /s/ IRL F. ENGELHARDT ------------------------------------------- Irl F. Engelhardt Chairman and Chief Executive Officer EX-99.2 10 c77011exv99w2.txt CERTIFICATION PURSUANT TO SECTION 906 EXHIBIT 99.2 CERTIFICATION OF PERIODIC FINANCIAL REPORTS I, Richard A. Navarre, Executive Vice President and Chief Financial Officer of Peabody Energy Corporation, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) the Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 (the "Periodic Report") which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and (2) information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of Peabody Energy Corporation. Dated: May 9, 2003 /s/ RICHARD A. NAVARRE ----------------------------------- Richard A. Navarre Executive Vice President and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----