-----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, FMSQR6kCX0mr/4IReJnKBQ90GyTIyv4dO1eQJPN0oVKO46o1O0FDv5Y5KDC7D1EO 14RQDTes8OSU9s+OZQGq5Q== 0001064728-00-000003.txt : 20000215 0001064728-00-000003.hdr.sgml : 20000215 ACCESSION NUMBER: 0001064728-00-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: P&L COAL HOLDINGS 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: SEC FILE NUMBER: 333-59073 FILM NUMBER: 538725 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 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1999 ------------------------------------------------ or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ---------------------- ----------------------- Commission File Number 333-59073 -------------------------------------------------------- P&L COAL HOLDINGS 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) N/A - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) 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 ----- ------ PART I - FINANCIAL INFORMATION Item 1. Financial Statements. P&L COAL HOLDINGS CORPORATION UNAUDITED STATEMENTS OF CONDENSED CONSOLIDATED OPERATIONS (In thousands) Predecessor Nine Months Company Quarter Ended Quarter Ended Ended Period Ended --------------- December 31, December 31, December 31, December 31, Period Ended 1999 1998 1999 1998 May 19, 1998 --------------- --------------- --------------- --------------- --------------- REVENUES Sales $ 635,340 $ 546,620 $ 1,859,343 $ 1,327,497 $ 278,930 Other revenues 35,385 35,984 90,050 75,272 13,478 --------------- --------------- --------------- --------------- --------------- Total revenues 670,725 582,604 1,949,393 1,402,769 292,408 OPERATING COSTS AND EXPENSES Operating costs and expenses 542,052 460,042 1,577,247 1,137,323 246,801 Depreciation, depletion and amortization 61,150 53,124 186,449 130,598 26,218 Selling and administrative expenses 22,229 18,353 63,396 44,101 12,017 --------------- --------------- --------------- --------------- --------------- OPERATING PROFIT 45,294 51,085 122,301 90,747 7,372 Interest expense 49,545 47,369 150,397 123,215 4,222 Interest income (818) (4,686) (2,913) (12,439) (1,667) --------------- --------------- --------------- --------------- --------------- INCOME (LOSS) BEFORE INCOME TAXES (3,433) 8,402 (25,183) (20,029) 4,817 Income tax provision (benefit) 1,242 3,284 (1,238) (5,188) 4,341 Minority interests 5,395 - 8,516 - - --------------- --------------- --------------- --------------- --------------- NET INCOME (LOSS) $ (10,070) $ 5,118 $ (32,461) $ (14,841) $ 476 =============== =============== =============== =============== =============== Includes results for the nine months ended December 31, 1998; however, P&L Coal Holdings Corporation had no activity for the period April 1, 1998 to May 19, 1998.
See accompanying notes to unaudited condensed consolidated financial statements. P&L COAL HOLDINGS CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) December 31, March 31, 1999 1999 --------------- --------------- ASSETS Current assets Cash and cash equivalents $ 87,493 $ 194,078 Accounts receivable, less allowance for doubtful accounts of $1,326 and $177 as of December 31, 1999 and March 31, 1999, respectively 330,040 312,748 Materials and supplies 51,108 53,978 Coal inventory 184,549 195,919 Assets from power trading activities 790,669 1,037,300 Other current assets 69,521 38,438 --------------- --------------- Total current assets 1,513,380 1,832,461 Property, plant, equipment and mine development, net of accumulated depreciation, depletion and amortization of $360,870 and $193,492, respectively 4,785,969 4,797,945 Investments and other assets 380,682 393,525 --------------- --------------- Total assets $ 6,680,031 $ 7,023,931 =============== =============== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Short-term borrowings and current maturities of long-term debt $ 76,434 $ 72,404 Income taxes payable 11,659 7,308 Liabilities from power trading activities 391,956 638,062 Accounts payable and accrued expenses 593,400 627,734 --------------- --------------- Total current liabilities 1,073,449 1,345,508 Long-term debt, less current maturities 2,430,070 2,469,975 Deferred income taxes 757,427 780,175 Accrued reclamation and other environmental liabilities 504,936 498,032 Workers' compensation obligations 209,849 207,544 Accrued postretirement benefit costs 968,911 956,714 Obligation to industry fund 62,704 63,107 Other noncurrent liabilities 168,955 183,736 --------------- --------------- Total liabilities 6,176,301 6,504,791 Minority interests 32,065 23,910 Stockholders' equity: Preferred Stock - $0.01 per share par value; 10,000,000 shares authorized, 5,000,000 shares issued and outstanding 50 50 Common Stock - Class A, $0.01 per share par value; 30,000,000 shares authorized, 19,000,000 shares issued and outstanding 190 190 Common Stock - Class B, $0.01 per share par value; 3,000,000 shares authorized, 708,767 shares issued and 698,457 and 708,767 shares outstanding, respectively 7 7 Additional paid-in capital 484,772 484,772 Employee stock loans (2,943) (2,331) Accumulated other comprehensive income 11,878 2,333 Retained earnings (accumulated deficit) (22,252) 10,209 Treasury shares, at cost: 10,310 Class B shares as of December 31, 1999 (37) - --------------- --------------- Total stockholders' equity 471,665 495,230 --------------- --------------- Total liabilities and stockholders' equity $ 6,680,031 $ 7,023,931 =============== ===============
See accompanying notes to unaudited condensed consolidated financial statements. P&L COAL HOLDINGS CORPORATION UNAUDITED STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS (In thousands) Predecessor Nine Months Company Ended Period Ended --------------- December 31, December 31, Period Ended 1999 1998 May 19, 1998 --------------- --------------- --------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ (32,461) $ (14,841) $ 476 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation, depletion and amortization 186,449 130,598 26,218 Deferred income taxes (16,291) (23,066) 2,835 Amortization of debt discount and debt issuance costs 13,637 12,273 1,379 Net gain on property and equipment disposals (4,182) - (328) Net gain on coal contract restructuring (12,957) (5,300) - Minority interests 8,516 - - Stock compensation - 3,924 - Changes in current assets and liabilities, excluding effects of acquisitions: Accounts receivable (17,174) 21,091 (132,065) Materials and supplies 2,962 1,079 881 Coal inventory 20,171 20,034 (2,807) Other current assets (30,586) 5,167 (10,701) Accounts payable and accrued expenses (36,342) (84,729) 87,814 Income taxes payable 4,818 19,152 1,234 Net assets from power trading activities 525 (2,079) 5,289 Accrued reclamation and related liabilities (10,609) 760 (1,622) Workers' compensation obligations 2,305 324 (2,156) Accrued postretirement benefit costs 12,197 8,912 6,092 Obligation to industry fund (403) (1,957) (2,379) Royalty prepayment - 135,903 - Other, net (44,109) (8,394) (10,619) --------------- --------------- --------------- Net cash provided by (used in) operating activities 46,466 218,851 (30,459) --------------- --------------- --------------- CASH FLOWS FROM INVESTING ACTIVITIES Additions to property, plant, equipment and mine development (124,030) (133,514) (20,950) Acquisitions, net (44,203) (1,994,635) - Contribution from minority interests 704 - - Proceeds from coal contract restructuring 21,877 3,889 328 Proceeds from property and equipment disposals 6,736 - 1,374 Proceeds from sale-leaseback transactions 34,234 8,392 - --------------- --------------- --------------- Net cash used in investing activities (104,682) (2,115,868) (19,248) --------------- --------------- --------------- CASH FLOWS FROM FINANCING ACTIVITIES Change in short-term borrowings (5,640) (25,812) - Proceeds from long-term debt 11,547 1,890,100 53,597 Payments of long-term debt (52,264) (179,028) (19,423) Capital contribution - 480,000 - Dividends paid to stockholders - - (173,330) Dividends paid to minority interests (2,292) - - Proceeds from affiliated loan - (940) 141,000 Advances from affiliates - - 21,693 --------------- --------------- --------------- Net cash provided by (used in) financing activities (48,649) 2,164,320 23,537 Effect of exchange rate changes on cash and cash equivalents 280 (197) (292) --------------- --------------- --------------- Net increase (decrease) in cash and cash equivalents (106,585) 267,106 (26,462) Cash and cash equivalents at beginning of period 194,078 - 96,821 --------------- --------------- --------------- Cash and cash equivalents at end of period $ 87,493 $ 267,106 $ 70,359 =============== =============== ===============
See accompanying notes to unaudited condensed consolidated financial statements. P&L COAL HOLDINGS CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (1) Basis of Presentation The accompanying condensed consolidated financial statements include the consolidated operations and balance sheets of P&L Coal Holdings Corporation (the "Company"), also known as Peabody Group. These financial statements include the subsidiaries of Peabody Holding Company, Inc. ("Peabody Holding Company"); Gold Fields Mining Corporation ("Gold Fields") which owns Lee Ranch Coal Company ("Lee Ranch"); Citizens Power LLC ("Citizens Power"); and Peabody Resources Holdings Pty. Ltd. ("Peabody Resources"), an Australian company (collectively, the "Predecessor Company" or "P&L Coal Group"). Through May 19, 1998, the Predecessor Company was a wholly owned indirect subsidiary of The Energy Group, PLC ("The Energy Group"). Effective May 20, 1998, the Predecessor Company was acquired by the Company. P&L Coal Holdings Corporation, a holding company with no direct operations and nominal assets other than its investment in its subsidiaries, was formed by Lehman Brothers Merchant Banking Partners II L. P. on February 27, 1998 for the purpose of acquiring the Predecessor Company and had no significant activity until the acquisition. The accompanying condensed consolidated financial statements as of and for the quarter and nine months ended December 31, 1999 and for the quarter and period ended December 31, 1998, and the notes thereto, are unaudited. However, in the opinion of management, these financial statements reflect all adjustments necessary for a fair presentation of the results of the periods presented. The results of operations for the quarter and nine months ended December 31, 1999 are not necessarily indicative of the results to be expected for the full year. (2) Reclassifications Certain amounts in the prior periods have been reclassified to conform with the report classifications for the nine months ended December 31, 1999, with no effect on previously reported operating results or stockholders' equity. (3) Comprehensive Income The following table sets forth the components of comprehensive income (loss) for the quarter and nine months ended December 31, 1999, and the quarter and period ended December 31, 1998 (in thousands): Nine Months Quarter Ended Quarter Ended Ended Period Ended December 31, December 31, December 31, December 31, 1999 1998 1999 1998 --------------- --------------- --------------- --------------- Net income (loss) $ (10,070) $ 5,118 $ (32,461) $ (14,841) Foreign currency translation adjustment 2,795 8,396 9,545 (5,335) --------------- --------------- --------------- --------------- Comprehensive income (loss) $ (7,275) $ 13,514 $ (22,916) $ (20,176) =============== =============== =============== ===============
(4) Restructuring Liability In conjunction with the acquisition of P&L Coal Group, the Company established a $39.4 million liability for estimated costs associated with a restructuring plan resulting from the business combination. The estimate was comprised of costs associated with exiting certain activities ("exit plan") and consolidating and restructuring certain management and administrative functions ("restructuring plan") and includes costs resulting from a plan to terminate or relocate employees. Costs associated with the restructuring and exit plans are being charged against the liability as incurred. The total costs charged against the liability for the quarter and nine months ended December 31, 1999 are $0.7 million and $6.1 million, respectively. The cumulative net cash outlays and non-cash costs charged against the liability through December 31, 1999 are as follows (in thousands): Cash Outlays Non-cash Costs Total --------------- --------------- --------------- Restructuring plan $ 24,612 $ - $ 24,612 Exit plan 6,643 3,648 10,291 --------------- --------------- --------------- $ 31,255 $ 3,648 $ 34,903 =============== =============== ===============
The exit plan was completed in the third quarter and the liability was reduced by $3.8 million to reflect the most recent cost estimates. This amount was recorded as an adjustment to the cost of the acquisition. The majority of the adjustment relates to lower exit plan costs than originally estimated. The $0.7 million remaining liability relates to residual spending, including continuing lease costs at administrative offices that were vacated as part of the restructuring plan. If the ultimate amount of cost expended is less than the $0.7 million remaining liability, the cost of the acquisition will be further reduced. (5) Business Segments The Company's industry and geographic data for continuing operations are as follows: (In thousands) Nine Months Quarter Ended Quarter Ended Ended Period Ended December 31, December 31, December 31, December 31, 1999 1998 1999 1998 --------------- --------------- --------------- --------------- Revenues: U.S. Mining $ 595,923 $ 532,696 $ 1,767,411 $ 1,285,580 Non U.S. Mining 71,660 41,739 169,931 97,810 Other 3,142 8,169 12,051 19,379 --------------- --------------- --------------- --------------- $ 670,725 $ 582,604 $ 1,949,393 $ 1,402,769 =============== =============== =============== =============== Operating profit (loss): U.S. Mining $ 34,547 $ 36,771 $ 96,077 $ 65,968 Non U.S. Mining 14,951 12,963 37,135 23,769 Other (4,204) 1,351 (10,911) 1,010 --------------- --------------- --------------- --------------- $ 45,294 $ 51,085 $ 122,301 $ 90,747 =============== =============== =============== =============== Revenues: United States $ 599,065 $ 540,865 $ 1,779,462 $ 1,304,959 Foreign 71,660 41,739 169,931 97,810 --------------- --------------- --------------- --------------- $ 670,725 $ 582,604 $ 1,949,393 $ 1,402,769 =============== =============== =============== =============== Operating profit: United States $ 30,343 $ 38,122 $ 85,166 $ 66,978 Foreign 14,951 12,963 37,135 23,769 --------------- --------------- --------------- --------------- $ 45,294 $ 51,085 $ 122,301 $ 90,747 =============== =============== =============== =============== Primarily consists of Citizens Power, a subsidiary of the Company that engages in electricity contract restructurings and electricity, gas and oil trading.
(6) Commitments and Contingencies Environmental Claims Environmental claims have been asserted against a subsidiary of the Company at 18 sites in the United States. Some of these claims are based on the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended, and on similar state statutes. The majority of these sites are related to activities of former subsidiaries of the Company. The Company's policy is to accrue environmental cleanup-related costs of a non-capital 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 its Consolidated Balance Sheets. The liabilities for environmental cleanup-related costs recorded in the Consolidated Balance Sheet at December 31, 1999 were $56.3 million. This amount represents those costs that the Company believes are probable and reasonably estimable. In the event that future remediation expenditures are in excess of amounts accrued, management does not anticipate that they will have a material adverse effect on the results of operations or financial position of the Company. 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 adverse effect on the results of operations or financial position of the Company. (7) Supplemental Guarantor/Non-guarantor Financial Information In accordance with the indentures governing the Senior Notes and Senior Subordinated Notes, certain wholly-owned U.S. subsidiaries of the Company have fully and unconditionally guaranteed the debt associated with the purchase 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 investors. The following condensed historical financial statement information is provided for such Guarantor/Non-guarantor Subsidiaries. P&L Coal Holdings Corporation Unaudited Supplemental Condensed Statements of Consolidated Operations For the Quarter Ended December 31, 1999 (In thousands) Parent Guarantor Non-guarantor Company Subsidiaries Subsidiaries Eliminations Consolidated --------------- --------------- --------------- --------------- --------------- Total revenues $ - $ 489,441 $ 183,302 $ (2,018) $ 670,725 Costs and expenses: Operating costs and expenses - 424,044 120,026 (2,018) 542,052 Depreciation, depletion and amortization - 45,152 15,998 - 61,150 Selling and administrative expenses - 17,334 4,895 - 22,229 Interest expense 43,203 23,965 4,620 (22,243) 49,545 Interest income (17,100) (5,720) (241) 22,243 (818) --------------- --------------- --------------- --------------- --------------- Income (loss) before income taxes (26,103) (15,334) 38,004 - (3,433) Income tax provision (benefit) (9,683) (2,010) 12,935 - 1,242 Minority interests - - 5,395 - 5,395 --------------- --------------- --------------- --------------- --------------- Net income (loss) $ (16,420) $ (13,324) $ 19,674 $ - $ (10,070) =============== =============== =============== =============== ===============
P&L Coal Holdings Corporation Unaudited Supplemental Condensed Statements of Consolidated Operations For the Quarter Ended December 31, 1998 (In thousands) Parent Guarantor Non-guarantor Company Subsidiaries Subsidiaries Eliminations Consolidated --------------- --------------- --------------- --------------- --------------- Total revenues $ - $ 536,674 $ 45,930 $ - $ 582,604 Costs and expenses: Operating costs and expenses - 431,694 28,348 - 460,042 Depreciation, depletion and amortization - 45,376 7,748 - 53,124 Selling and administrative expenses - 19,319 (966) - 18,353 Interest expense 47,437 (586) 518 - 47,369 Interest income (639) (3,431) (616) - (4,686) --------------- --------------- --------------- --------------- --------------- Income (loss) before income taxes (46,798) 44,302 10,898 - 8,402 Income tax provision (benefit) (8,673) 7,526 4,431 - 3,284 --------------- --------------- --------------- --------------- --------------- Net income (loss) $ (38,125) $ 36,776 $ 6,467 $ - $ 5,118 =============== =============== =============== =============== ===============
P&L Coal Holdings Corporation Unaudited Supplemental Condensed Statements of Consolidated Operations For the Nine Months Ended December 31, 1999 (In thousands) Parent Guarantor Non-guarantor Company Subsidiaries Subsidiaries Eliminations Consolidated --------------- --------------- --------------- --------------- --------------- Total revenues $ - $ 1,494,084 $ 460,624 $ (5,315) $ 1,949,393 Costs and expenses: Operating costs and expenses - 1,262,618 319,944 (5,315) 1,577,247 Depreciation, depletion and amortization - 139,997 46,452 - 186,449 Selling and administrative expenses - 51,165 12,231 - 63,396 Interest expense 130,949 48,684 12,903 (42,139) 150,397 Interest income (26,790) (17,831) (431) 42,139 (2,913) --------------- --------------- --------------- --------------- --------------- Income (loss) before income taxes (104,159) 9,451 69,525 - (25,183) Income tax provision (benefit) (30,790) 5,464 24,088 - (1,238) Minority interests - - 8,516 - 8,516 --------------- --------------- --------------- --------------- --------------- Net income (loss) $ (73,369) $ 3,987 $ 36,921 $ - $ (32,461) =============== =============== =============== =============== ===============
P&L Coal Holdings Corporation Unaudited Supplemental Condensed Statements of Consolidated Operations For the Period Ended December 31, 1998 (In thousands) Parent Guarantor Non-guarantor Company Subsidiaries Subsidiaries Eliminations Consolidated --------------- --------------- --------------- --------------- --------------- Total revenues $ - $ 1,290,511 $ 112,258 $ - $ 1,402,769 Costs and expenses: Operating costs and expenses - 1,064,734 72,589 - 1,137,323 Depreciation, depletion and amortization - 111,715 18,883 - 130,598 Selling and administrative expenses - 44,424 (323) - 44,101 Interest expense 116,698 4,939 1,578 - 123,215 Interest income (2,475) (9,248) (716) - (12,439) --------------- --------------- --------------- --------------- --------------- Income (loss) before income taxes (114,223) 73,947 20,247 - (20,029) Income tax provision (benefit) (25,781) 12,476 8,117 - (5,188) --------------- --------------- --------------- --------------- --------------- Net income (loss) $ (88,442) $ 61,471 $ 12,130 $ - $ (14,841) =============== =============== =============== =============== ===============
P&L Coal Holdings Corporation Unaudited Supplemental Condensed Consolidated Balance Sheets As of December 31, 1999 (In thousands) Parent Guarantor Non-guarantor Company Subsidiaries Subsidiaries Eliminations Consolidated --------------- --------------- --------------- --------------- --------------- ASSETS Current assets Cash and cash equivalents $ 76 $ 32,562 $ 54,855 $ - $ 87,493 Accounts receivable 1,823 260,280 103,912 (35,975) 330,040 Inventories - 179,282 56,375 - 235,657 Assets from power trading activities - - 790,669 - 790,669 Other current assets 185 44,970 24,366 - 69,521 --------------- --------------- --------------- --------------- --------------- Total current assets 2,084 517,094 1,030,177 (35,975) 1,513,380 Property, plant, equipment and mine development - at cost - 4,355,675 791,164 - 5,146,839 Less accumulated depreciation, depletion and amortization - (288,047) (72,823) - (360,870) --------------- --------------- --------------- --------------- --------------- - 4,067,628 718,341 - 4,785,969 Investments and other assets 1,958,935 1,437,354 146,197 (3,161,804) 380,682 --------------- --------------- --------------- --------------- --------------- Total assets $ 1,961,019 $ 6,022,076 $ 1,894,715 $ (3,197,779) $ 6,680,031 =============== =============== =============== =============== =============== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Short-term borrowings and current maturities of long-term debt $ 20,724 $ 21,354 $ 34,356 $ - $ 76,434 Payable to affiliates, net (287,368) 288,847 (1,479) - - Income taxes payable - - 11,659 - 11,659 Liabilities from power trading activities - - 391,956 - 391,956 Accounts payable and accrued expenses 48,328 427,299 153,748 (35,975) 593,400 --------------- --------------- --------------- --------------- --------------- Total current liabilities (218,316) 737,500 590,240 (35,975) 1,073,449 Long-term debt, less current maturities 1,707,670 179,652 542,748 - 2,430,070 Deferred income taxes - 697,432 59,995 - 757,427 Other noncurrent liabilities - 1,873,920 41,435 - 1,915,355 --------------- --------------- --------------- --------------- --------------- Total liabilities 1,489,354 3,488,504 1,234,418 (35,975) 6,176,301 Minority interests - - 32,065 - 32,065 Stockholders' equity 471,665 2,533,572 628,232 (3,161,804) 471,665 --------------- --------------- --------------- --------------- --------------- Total liabilities and stockholders' equity $ 1,961,019 $ 6,022,076 $ 1,894,715 $ (3,197,779) $ 6,680,031 =============== =============== =============== =============== ===============
P&L Coal Holdings Corporation Unaudited Supplemental Condensed Consolidated Balance Sheets As of March 31, 1999 (In thousands) Parent Guarantor Non-guarantor Company Subsidiaries Subsidiaries Eliminations Consolidated --------------- --------------- --------------- --------------- --------------- ASSETS Current assets Cash and cash equivalents $ - $ 130,861 $ 63,217 $ - $ 194,078 Accounts receivable - 220,287 107,770 (15,309) 312,748 Inventories - 202,749 47,148 - 249,897 Assets from power trading activities - - 1,037,300 - 1,037,300 Other current assets - 24,293 14,145 - 38,438 --------------- --------------- --------------- --------------- --------------- Total current assets - 578,190 1,269,580 (15,309) 1,832,461 Property, plant, equipment and mine development - at cost - 4,298,203 693,234 - 4,991,437 Less accumulated depreciation, depletion and amortization - (158,295) (35,197) - (193,492) --------------- --------------- --------------- --------------- --------------- - 4,139,908 658,037 - 4,797,945 Investments and other assets 2,461,362 1,464,147 158,912 (3,690,896) 393,525 --------------- --------------- --------------- --------------- --------------- Total assets $ 2,461,362 $ 6,182,245 $ 2,086,529 $ (3,706,205) $ 7,023,931 =============== =============== =============== =============== =============== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Short-term borrowings and current maturities of long-term debt $ 19,670 $ 21,666 $ 31,068 $ - $ 72,404 Payable to affiliates, net 152,364 (151,199) (1,165) - - Income taxes payable - 229 7,079 - 7,308 Liabilities from power trading activities - - 638,062 - 638,062 Accounts payable and accrued expenses 56,562 440,331 146,150 (15,309) 627,734 --------------- --------------- --------------- --------------- --------------- Total current liabilities 228,596 311,027 821,194 (15,309) 1,345,508 Long-term debt, less current maturities 1,737,536 173,364 559,075 - 2,469,975 Deferred income taxes - 711,932 68,243 - 780,175 Other noncurrent liabilities - 1,886,337 22,796 - 1,909,133 --------------- --------------- --------------- --------------- --------------- Total liabilities 1,966,132 3,082,660 1,471,308 (15,309) 6,504,791 Minority interest - - 23,910 - 23,910 Stockholders' equity 495,230 3,099,585 591,311 (3,690,896) 495,230 --------------- --------------- --------------- --------------- --------------- Total liabilities and stockholders' equity $ 2,461,362 $ 6,182,245 $ 2,086,529 $ (3,706,205) $ 7,023,931 =============== =============== =============== =============== ===============
P&L Coal Holdings Corporation Unaudited Supplemental Condensed Statements of Consolidated Cash Flows For the Nine Months Ended December 31, 1999 (In thousands) Parent Guarantor Non-guarantor Company Subsidiaries Subsidiaries Eliminations Consolidated --------------- --------------- --------------- --------------- --------------- Net cash provided by (used in) operating activities $ (100,192) $ 70,345 $ 76,313 $ - $ 46,466 --------------- --------------- --------------- --------------- --------------- Additions to property, plant, equipment and mine development - (88,498) (35,532) - (124,030) Acquisitions, net - - (44,203) - (44,203) Contribution from minority interests - - 704 - 704 Proceeds from coal contract restructuring - 877 21,000 - 21,877 Proceeds from property and equipment disposals - 6,144 592 - 6,736 Proceeds from sale-leaseback transactions - 34,234 - - 34,234 --------------- --------------- --------------- --------------- --------------- Net cash used in investing activities - (47,243) (57,439) - (104,682) --------------- --------------- --------------- --------------- --------------- Change in short-term borrowings - - (5,640) - (5,640) Proceeds from long term debt - - 11,547 - 11,547 Payments of long-term debt (30,000) (1,380) (20,884) - (52,264) Dividends paid to minority interests - 9,933 (12,225) - (2,292) Net change in due to/from affiliates 130,268 (129,954) (314) - - --------------- --------------- --------------- --------------- --------------- Net cash provided by (used in) financing activities 100,268 (121,401) (27,516) - (48,649) Effect of exchange rate changes on cash and equivalents - - 280 - 280 --------------- --------------- --------------- --------------- --------------- Net increase (decrease) in cash and equivalents 76 (98,299) (8,362) - (106,585) Cash and cash equivalents at beginning of period - 130,861 63,217 - 194,078 --------------- --------------- --------------- --------------- --------------- Cash and cash equivalents at end of period $ 76 $ 32,562 $ 54,855 $ - $ 87,493 =============== =============== =============== =============== ===============
P&L Coal Holdings Corporation Unaudited Supplemental Condensed Statements of Consolidated Cash Flows For the Period Ended December 31, 1998 (In thousands) Parent Guarantor Non-guarantor Company Subsidiaries Subsidiaries Eliminations Consolidated --------------- --------------- --------------- --------------- --------------- Net cash provided by (used in) operating activities $ (129,339) $ 338,737 $ 9,453 $ - $ 218,851 --------------- --------------- --------------- --------------- --------------- Additions to property, plant, equipment and mine development - (80,369) (53,145) - (133,514) Acquisitions, net (1,994,635) - - - (1,994,635) Proceeds from coal contract restructuring - 3,889 - - 3,889 Proceeds from property and equipment disposals - 7,783 609 - 8,392 --------------- --------------- --------------- --------------- --------------- Net cash used in investing activities (1,994,635) (68,697) (52,536) - (2,115,868) --------------- --------------- --------------- --------------- --------------- Change in short-term borrowings - - (25,812) - (25,812) Proceeds from long-term debt 1,817,390 - 72,710 - 1,890,100 Payments of long-term debt (158,583) (1,154) (19,291) - (179,028) Capital contribution 398,000 - 82,000 - 480,000 Net change in due to/from affiliates 67,167 (57,947) (10,160) - (940) --------------- --------------- --------------- --------------- --------------- Net cash provided by (used in) financing activities 2,123,974 (59,101) 99,447 - 2,164,320 Effect of exchange rate changes on cash and equivalents - - (197) - (197) --------------- --------------- --------------- --------------- --------------- Net increase in cash and cash equivalents - 210,939 56,167 - 267,106 Cash and cash equivalents at beginning of period - - - - - --------------- --------------- --------------- --------------- --------------- Cash and cash equivalents at end of period $ - $ 210,939 $ 56,167 $ - $ 267,106 =============== =============== =============== =============== ===============
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Results of Operations For purposes of comparison to prior year operating results, the results of operations and cash flows for the nine months ended December 31, 1998 reflect the results of the Company from April 1 to December 31, 1998 (the Company acquired the Predecessor Company on May 19, 1998 and prior to such date had no separate operations) and the results of the Predecessor Company from April 1 to May 19, 1998. The results of operations and cash flows for the period ended December 31, 1999 may not be directly comparable to the other periods indicated as a result of the effects of restatement of assets and liabilities to their estimated fair market value in accordance with the application of purchase accounting pursuant to Accounting Principles Board Opinion No. 16. Quarter Ended Nine Months Ended ------------------------------- -------------------------------- December 31, December 31, December 31, December 31, (In thousands) 1999 1998 1999 1998 --------------- --------------- --------------- --------------- Revenues: Sales $ 635,340 $ 546,620 $ 1,859,343 $ 1,606,427 Other revenues 35,385 35,984 90,050 88,750 --------------- --------------- --------------- --------------- Total revenues 670,725 582,604 1,949,393 1,695,177 Operating costs and expenses 625,431 531,519 1,827,092 1,597,058 --------------- --------------- --------------- --------------- Operating profit 45,294 51,085 122,301 98,119 Interest expense 49,545 47,369 150,397 127,437 Interest income (818) (4,686) (2,913) (14,106) --------------- --------------- --------------- --------------- Income (loss) before income taxes (3,433) 8,402 (25,183) (15,212) Income tax provision (benefit) 1,242 3,284 (1,238) (847) Minority interests 5,395 - 8,516 - --------------- --------------- --------------- --------------- Net income (loss) $ (10,070) $ 5,118 $ (32,461) $ (14,365) =============== =============== =============== =============== Other Data: EBITDA $ 106,444 $ 104,209 $ 308,750 $ 254,935 Cash provided by (used in): Operating activities $ 46,466 $ 188,392 Investing activities (104,682) (2,135,116) Financing activities (48,649) 2,187,857 Tons sold (In millions) 48.8 43.4 143.3 127.2 Represents the combination of the results of operations for the period from May 20, 1998 to December 31, 1998 with those of the Predecessor Company for the period from April 1 to May 19, 1998. EBITDA is defined as income before deducting net interest expense, income taxes, minority interests and depreciation, depletion and amortization. EBITDA has been reduced by costs associated with reclamation, retiree health care and workers' compensation. EBITDA is not a substitute for operating income, net income and cash flow from operating activities as determined in accordance with generally accepted accounting principles as a measure of profitability or liquidity. EBITDA is presented as additional information because management believes it to be a useful indicator of the Company's ability to meet debt service and capital expenditure requirements. Because EBITDA is not calculated identically by all companies, the presentation herein may not be comparable to other similarly titled measures of other companies. The amounts presented include EBITDA losses for Citizens Power of $3.4 million, $0.7 million, $6.6 million and $0.3 million for the quarters ended December 31, 1999 and 1998 and the nine months ended December 31, 1999 and 1998, respectively.
Quarter Ended December 31, 1999 Sales. Sales for the quarter ended December 31, 1999 were $635.3 million, an increase of $88.7 million, or 16.2%. Overall sales volume increased 12.4% to 48.8 million tons. The current quarter results include sales of 4.6 million tons and $85.6 million from Black Beauty Coal Company (Black Beauty), which in the prior year was accounted for under the equity method (and included as Other Revenues). The Company increased its ownership interest in Black Beauty to 81.7% effective January 1, 1999. Sales for the third quarter also increased $19.3 million as a result of the Moura Mine acquisition in Australia completed in August 1999. Excluding Black Beauty, sales in the U.S. decreased $27.8 million, mainly as mild winter weather increased customer stockpiles, causing lower demand and pricing in our Midwestern and Appalachian markets. Further declines were attributable to operational difficulties at two eastern mines and the closure of one mine and suspension of two mines during the current quarter. The operational difficulties were primarily related to delays in longwall panel development and adverse geological conditions. Excluding Moura, sales in Australia increased $11.4 million for the quarter, mainly due to higher customer demand. Other Revenues. Other revenues decreased $0.6 million as compared to the third quarter of fiscal year 1999. In the current quarter, contract restructuring gains increased $7.7 million as Black Beauty executed the buyout of a contract to provide capacity to meet a new long-term coal supply agreement. The prior year quarter included income from monetization of a long-term royalty agreement of $3.9 million and joint venture equity income was lower due to the consolidation of Black Beauty in the current year. Operating Profit. Operating profit declined $5.8 million for the three-month period ended December 31, 1999. Operating profit attributable to U.S. mining locations decreased $2.3 million, mainly due to lower profits in Appalachia ($17.8 million) resulting from the weak market conditions and operating difficulties discussed above, partially offset by the $7.7 million in higher revenues from contract restructurings and the consolidation of Black Beauty ($4.2 million increase, excluding contract restructuring gains). In addition, the higher royalty income in the prior year previously mentioned also contributed to the variance. Operating profit increased $2.0 million in Australia, mainly due to higher demand and contributions from the recently acquired Moura mine. Citizens Power's operating profit declined $2.7 million due mainly to the timing of closing asset restructuring transactions in the current year. Interest Expense. Interest expense increased $2.1 million, or 4.4%, to $49.5 million. This increase is due to the inclusion of Black Beauty's results in the current year and higher short-term Australian borrowings to fund the Moura Mine acquisition, partially offset by lower interest expense on the acquisition borrowings due to prepayments and lower average borrowing costs. Interest Income. Interest income for the three months ended December 31, 1999 was $0.8 million, a decrease of $3.9 million. This decrease is primarily due to interest income associated with a prior year Federal tax refund, and higher cash balances in the prior year in anticipation of the acquisition of the Black Beauty controlling interest. Income Taxes. For the quarter ended December 31, 1999, the Company had tax expense of $1.2 million, and a pretax loss of $3.4 million, compared to tax expense of $3.3 million and pretax income of $8.4 million in the prior year quarter. The Company's consolidated tax position is impacted by the percentage depletion tax deduction utilized by the Company and its subsidiaries that creates an alternative minimum tax situation, and the positive contribution of its Australian operations which are taxed at a higher rate than the U.S. On a consolidated basis, the foreign tax expense exceeded the tax benefit recorded on U.S. pretax losses. Nine Months Ended December 31, 1999 Sales. Sales for the nine months ended December 31, 1999 were $1,859.3 million, an increase of $252.9 million, or 15.7%, over the prior year. Overall sales volume increased 12.7% to 143.3 million tons. The Black Beauty and Moura acquisitions contributed $250.6 million and $27.1 million, respectively, in sales for the nine-month period. Excluding Black Beauty, sales in the U.S. declined $45.8 million, primarily due to declines in Appalachia ($50.0 million). Appalachia was impacted by the mild winter weather, lower export demand and pricing and reduced production volumes caused by operational difficulties. Sales in the Midwest declined $12.4 million due to the closure and suspension of three mines, while Powder River Basin sales have improved $19.2 million as a result of higher demand and pricing. Excluding the Moura Mine acquisition, sales improved $24.1 million in Australia due to higher customer demand. Other Revenues. Other revenues were $90.1 million for the nine-month period, an increase of $1.3 million over the prior year. The current year results include $7.7 million in higher contract restructuring gains, partially offset by $4.4 million in lower revenues at Citizens Power due to the timing of asset restructuring activities, and lower joint venture equity income due to the consolidation of Black Beauty. Operating Profit. Operating profit was $122.3 million, an increase of $24.2 million over the prior year. U.S. mining operating profit improved $23.2 million, including $16.7 million from the acquisition of Black Beauty. The remainder of the increase in the U.S. primarily relates to higher productivity and lower operating and reclamation costs at the Midwestern operations, higher volumes and pricing in Powder River, and $7.7 million in higher gains on contract restructurings, partially offset by operational difficulties and the unfavorable market conditions in Appalachia discussed above, higher operating costs and lower volumes in the Southwest region, lower coal royalty income due to monetizations in the prior year and higher costs for past mining obligations due mainly to a multiemployer benefit plan refund of $2.8 million in the prior year that is non-recurring. Operating profit improved $10.4 million in Australia, reflecting higher volumes, lower than anticipated repair and maintenance expenses and contributions from the new Bengalla and Moura mines. Citizens Power's operating profit declined $6.3 million, primarily due to delays in the closing of asset restructuring transactions. Interest Expense. Interest expense increased $23.0 million for the nine-month period, to $150.4 million, primarily because prior year results reflected acquisition-related indebtedness only from the May 20, 1998 acquisition date forward. Interest Income. Interest income was $2.9 million for the nine months ended December 31, 1999, a decrease of $11.2 million. The prior year results reflect interest income from higher average cash balances, and interest from the Federal tax refund discussed above. Liquidity and Capital Resources Net cash provided by operating activities was $46.5 million for the nine-month period ended December 31, 1999, a decrease of $141.0 million. The prior year results include the monetization of a long-term royalty agreement that resulted in a prepayment to the Company of $135.9 million. Excluding the effect of acquisitions, net cash used in investing activities decreased $80.0 million compared to the prior nine-month period. This is mainly the result of a decrease in capital expenditures amounting to $30.5 million, and increases in proceeds from contract restructurings ($17.7 million), asset sales ($5.3 million) and sale-leaseback transactions ($25.8 million). The prior year results include the acquisition of the Predecessor Company for approximately $2.0 billion, while the current year results include the acquisition of the Moura Mine in Australia for $30.2 million and the $14.0 million acquisition of Catlin Coal Company (Catlin). The Catlin acquisition occurred in November 1999 and provides Black Beauty with a source of low sulfur coal located near the plant of a customer that recently agreed to a new long-term coal supply agreement. As of December 31, 1999, the Company had $120.9 million of committed capital expenditures, primarily related to coal reserves and mining equipment. It is anticipated these capital expenditures will be funded through available cash and credit facilities. The Company has approximately $270 million of unused borrowing capacity under its revolving credit agreements. Net cash used in financing activities for the nine months ended December 31, 1999 was $48.6 million, compared to the prior year's proceeds of $2.2 billion. The prior year results include the financing of the acquisition of the Predecessor Company of $1.8 billion and the related equity contribution of $480.0 million, while the current year results include borrowings to fund the Moura and Catlin acquisitions net of a debt prepayment of $30.0 million and an overall reduction in short-term borrowings. As of December 31, 1999, the Company had total indebtedness of $2,506.5 million, consisting of the following: (In millions) Term loans under senior credit facilities $ 810.0 9.625% Senior Subordinated Notes due 2008 ("Senior Subordinated Notes") 498.7 8.875% Senior Notes due 2008 ("Senior Notes") 398.9 Non-Recourse Debt (Citizens Power) 323.4 5.0% Subordinated Note (Peabody Holding Company) 197.8 Senior unsecured notes under various agreements (Black Beauty Coal Company) 99.3 Project finance facility (Peabody Resources) 76.4 Bank loan facilities 49.6 Capital lease obligations 28.0 Other 24.4 ------------- $ 2,506.5 ============= The Senior Credit Facilities include a Revolving Credit Facility that provides for aggregate borrowings of up to $150.0 million and letters of credit of up to $330.0 million. The Company had no borrowings outstanding under the Revolving Credit Facility during either period. Interest rates on the revolving loans under the Revolving Credit Facility are based on the Base Rate (as defined in the Senior Credit Facilities), or LIBOR (as defined in the Senior Credit Facilities) at the Company's option. On October 1, 1998, the Company entered into two interest rate swaps to fix the interest cost on $500 million of long-term debt outstanding under the Term Loan Facility. The Company will pay a fixed rate of approximately 7.0% on $300 million of such long-term debt for a period of three years ending October 1, 2001, and on $200 million of such long-term debt for two years ending October 1, 2000. The Revolving Credit Facility commitment matures in fiscal year 2005. The Revolving Credit Facility and related Term Loan Facility also contain certain restrictions and limitations including, but not limited to, financial covenants that will require the Company to maintain and achieve certain levels of financial performance and limit the payment of cash dividends and similar restricted payments. In addition, the Senior Credit Facilities prohibit the Company from allowing its Restricted Subsidiaries (which include all Guarantors) to create or otherwise cause any encumbrance or restriction on the ability of any such Restricted Subsidiary to pay any dividends or make certain other upstream payments subject to certain exceptions. The indentures governing the Senior Notes and Senior Subordinated Notes permit the Company and its Restricted Subsidiaries (which include all subsidiaries of the Company except Citizens Power and its subsidiaries) to incur additional indebtedness, including secured indebtedness, subject to certain limitations. In addition, among other customary restrictive covenants, the indentures prohibit the Company and its Restricted Subsidiaries from creating or otherwise causing any encumbrance or restriction on the ability of any Restricted Subsidiary that is not a Guarantor to pay dividends or to make certain other upstream payments to the Company or any of its Restricted Subsidiaries (subject to certain exceptions). The Company was in compliance with all of the restrictive covenants of its loan agreements as of December 31, 1999. Other Mine Closure. In October 1999, the Company suspended operations at its Marissa Operating Unit in Illinois. The Marissa Operating Unit, which shipped 4.4 million tons of coal in fiscal year 1999, had attempted to secure additional business after its principal customer began shifting its supply to lower-sulfur coal from the Company's Powder River operations. These efforts were unsuccessful, and as a result the mine was closed in December 1999. The Company does not anticipate a material adverse impact on its results of operations or financial position from the mine closure. Mine Suspensions. In addition, the Company suspended operations at its Lynnville and Hawthorn mines in Indiana in December 1999. The suspension of operations at these locations is not anticipated to materially affect the consolidated results of operations or financial position, as the primary customers of these mines have signed long-term coal supply agreements to purchase coal from another Peabody subsidiary, Black Beauty. The Company periodically evaluates the possibility of suspending other mines due to market conditions. Such suspensions, if any, are not expected to have a material adverse impact on the Company's results of operations or financial condition. Status of West Virginia Mountaintop Mining. On October 20, 1999, the U.S. District Court for the Southern District of West Virginia issued a permanent injunction against the West Virginia Department of Environmental Protection in a mountaintop-mining lawsuit. As interpreted by the Director of the Department of Environmental Protection, the injunction prohibits the Department from approving any new permits that would authorize the placement of excess spoil in intermittent and perennial streams for the primary purpose of waste (overburden) disposal. The Department also interpreted the injunction to affect certain existing coal refuse ponds, sediment ponds and mountaintop mining operations. The Department has filed an appeal of the decision with the Fourth Circuit Court of Appeals. On October 29, 1999, the District Court issued a stay of its decision pending a resolution of the appeal. The Court of Appeals has not yet set a briefing schedule for the appeal. The Company does not believe the court order (which is currently being stayed) will have any immediate effect on its West Virginia mines. In late 1999 certain members of Congress pursued legislation which would have resolved the issues raised by the district court's decision. That legislation did not pass in 1999 but the Company anticipates that similar legislation will be introduced in 2000. The Company cannot predict whether any such legislation will be passed by Congress in 2000. Recent Accounting Pronouncements. In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 requires the recognition of all derivatives as assets or liabilities within the balance sheet, and requires both the derivatives and the underlying exposure to be recorded at fair value. Any gain or loss resulting from changes in fair value will be recorded as part of the results of operations, or as a component of comprehensive income or loss, depending upon the intended use of the derivative. The Financial Accounting Standards Board also issued SFAS No. 137, which defers the effective date of SFAS No. 133 to all fiscal quarters of fiscal years beginning after June 15, 2000 (effective April 1, 2001 for the Company). The Company is evaluating the requirements of this Statement and has not determined the impact of adoption on the consolidated financial statements. Year 2000 Issue. The "Year 2000 Issue" is a term used to describe the problems created by systems that are unable to accurately interpret dates after December 31, 1999. These problems are derived predominantly from the fact that many software programs have historically categorized the "year" in a two-digit format. The Company has not experienced any significant impact on its systems or operations as a result of the Year 2000 Issue. The total cost incurred to prepare for the Year 2000 Issue was approximately $6.4 million, which includes $2.3 million for the purchase of new software and hardware that was capitalized and $4.1 million that was expensed as incurred. In addition, the Company has not encountered any significant problems with third parties such as its customers, suppliers, service providers and other business partners. However, if these or other third parties with whom the Company conducts business experience lingering Year 2000 Issues, the Company could experience a material adverse impact on its results of operations and financial position. Forward Looking Statements. This quarterly report and certain press releases and statements the Company makes from time to time include statements of the Company's and management's 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. Forward looking statements involve risks and uncertainties, and a variety of factors could cause actual results to differ materially from the Company's current expectations, including but not limited to: coal and power market conditions and fluctuations in the demand for coal as an energy source, economic conditions, weather conditions, the continued availability of long-term coal supply contracts, railroad performance, foreign currency translation, changes in the government regulation of the mining industry, risks inherent to mining, changes in the Company's leverage position, the ability to successfully implement operating strategies, the impact of Year 2000 compliance by the Company or those entities with which the Company does business and other factors discussed in the Company's filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward looking statements, which speak only as of the date hereof. The Company undertakes no obligation to publicly release the results of any revisions to such forward looking statements that may be made to reflect events or circumstances after the date hereof, or thereof, as the case may be, or to reflect the occurrence of anticipated events. PART II - OTHER INFORMATION Item 1. Legal Proceedings. The Navajo Nation On June 18, 1999, The Navajo Nation served the Company's subsidiaries, Peabody Holding Company, Inc., Peabody Coal Company and Peabody Western Coal Company, with a complaint that had been filed in the U. S. District Court for the District of Columbia. Other defendants in the litigation are two utilities, two current employees and one former employee. The Navajo Nation has alleged sixteen claims including civil Racketeer Influenced and Corrupt Organizations Act, or RICO, claims, fraud and tortious interference with contractual relationships. The plaintiff is seeking various remedies including actual damages of at least $600 million which could be trebled under the RICO counts, punitive damages of at least $1 billion, a determination that Peabody Western Coal Company's two coal leases for the Kayenta and Black Mesa mines have terminated due to the failure of a condition and a reformation of the two coal leases to adjust the royalty rate to 20%. All defendants have filed a motion to dismiss the complaint. The Company believes this matter will be resolved without a material adverse effect on its financial condition or results of operations. Minerals Management Service The Minerals Management Service (MMS) issued a preliminary administrative decision in August 1992, determining that a subsidiary of the Company, subsequently merged into Powder River Coal Company, had underpaid royalties owed to the federal government. On October 15, 1999, the Company signed a settlement agreement with the federal government on all civil claims related to the dispute. The Company agreed to pay $11.0 million in two installments, which was charged against a previously established reserve. Environmental Claims Environmental claims have been asserted against a subsidiary of the Company at 18 sites in the United States. Some of these claims are based on the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended, and on similar state statutes. The majority of these sites are related to activities of former subsidiaries of the Company. The Company's policy is to accrue environmental cleanup-related costs of a non-capital 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 its Consolidated Balance Sheets. The liabilities for environmental cleanup-related costs recorded in the Consolidated Balance Sheet at December 31, 1999 were $56.3 million. This amount represents those costs that the Company believes are probable and reasonably estimable. In the event that future remediation expenditures are in excess of amounts accrued, management does not anticipate that they will have a material adverse effect on the results of operations or financial position of the Company. 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 adverse effect on the results of operations or financial position of the Company. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits See the Exhibit Index at page 21 of this report. (b) Reports on Form 8-K None. 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. P&L COAL HOLDINGS CORPORATION Date: February 11, 2000 By: /s/ RICHARD A. NAVARRE ------------------------- Richard A. Navarre Vice President and Chief Financial Officer (Principal Financial Officer) 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 Second Amended and Restated Certificate of Incorporation of P&L Coal Holdings Corporation (Incorporated by reference to Exhibit 3.1 of the Company's Form 10-Q for the third quarter ended December 31, 1998). 3.2 By-Laws of P&L Coal Holdings Corporation (Incorporated by reference to Exhibit 3.2 of the Company's Form S-4 Registration Statement No. 333-59073). 4.9 Second Supplemental Senior Note Indenture dated as of December 31, 1998 among the Guaranteeing Subsidiary (as defined therein), P&L Coal Holdings Corporation, the other Senior Note Guarantors (as defined in the Senior Note Indenture) and State Street Bank and Trust Company, as Senior Note Trustee. 4.10 Second Supplemental Senior Subordinated Note Indenture dated as of December 31, 1998 among the Guaranteeing Subsidiary (as defined therein), P&L Coal Holdings Corporation, the other Senior Subordinated Note Gurantors (as defined in the Senior Subordinated Note Indenture) and State Street Bank and Trust Company, as Senior Subordinated Note Trustee. 4.11 Third Supplemental Senior Note Indenture dated as of June 30, 1999 among the Guaranteeing Subsidiary (as defined therein), P&L Coal Holdings Corporation, the other Senior Note Gurantors (as defined in the Senior Note Indenture) and State Street Bank and Trust Company, as Senior Note Trustee. 4.12 Third Supplemental Senior Subordinated Note Indenture dated as of June 30, 1999 among the Guaranteeing Subsidiary (as defined therein), P&L Coal Holdings Corporation, the other Senior Subordinated Note Gurantors (as defined in the Senior Subordinated Note Indenture) and State Street Bank and Trust Company, as Senior Subordinated Note Trustee. 27 Financial Data Schedule (filed electronically with the SEC only). EX-4 2 EXHIBIT 4.9 SECOND SUPPLEMENTAL SENIOR NOTE INDENTURE SECOND SUPPLEMENTAL SENIOR NOTE INDENTURE (this "Supplemental Senior Note Indenture"), dated as of December 31, 1998, among Gallo Finance Company, a Delaware corporation (together, the "Guaranteeing Subsidiaries"), a subsidiary of P&L Coal Holdings Corporation (or its permitted successor), a Delaware corporation (the "Company"), the Company, the other Senior Note Guarantors (as defined in the Senior Note Indenture referred to herein) and State Street Bank and Trust Company, as Senior Note Trustee under the Senior Note Indenture referred to below (the "Senior Note Trustee"). W I T N E S S E T H WHEREAS, the Company has heretofore executed and delivered to the Senior Note Trustee a Senior Note Indenture (the "Senior Note Indenture"), dated as of May 18, 1998 providing for the issuance of an aggregate principal amount of up to $550.0 million of 8-7/8% Senior Notes due 2008 (the "Senior Notes"); WHEREAS, the Senior Note Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Senior Note Trustee a supplemental Senior Note Indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally guarantee all of the Company's Obligations under the Senior Notes and the Senior Note Indenture on the terms and conditions set forth herein (the "Senior Subsidiary Guarantee"); and WHEREAS, pursuant to Section 9.01 of the Senior Note Indenture, the Senior Note Trustee is authorized to execute and deliver this Supplemental Senior Note Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiary and the Senior Note Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Senior Notes as follows: 1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Senior Note Indenture. 2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby agrees as follows: (a) Along with all Senior Note Guarantors named in the Senior Note Indenture, to jointly and severally Guarantee to each Holder of a Senior Note authenticated and delivered by the Senior Note Trustee and to the Senior Note Trustee and its successors and assigns, irrespective of the validity and enforceability of the Senior Note Indenture, the Senior Notes or the obligations of the Company hereunder or thereunder, that: (i) the principal of and interest on the Senior Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Senior Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Senior Note Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (ii) in case of any extension of time of payment or renewal of any Senior Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Senior Note Guarantors shall be jointly and severally obligated to pay the same immediately. (b) The obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Senior Notes or the Senior Note Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Senior Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Senior Note Guarantor. (c) The following is hereby waived: diligence presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever. (d) This Senior Subsidiary Guarantee shall not be discharged except by complete performance of the obligations contained in the Senior Notes and the Senior Note Indenture. (e) If any Holder or the Senior Note Trustee is required by any court or otherwise to return to the Company, the Senior Note Guarantors, or any custodian, Senior Note Trustee, liquidator or other similar official acting in relation to either the Company or the Senior Note Guarantors, any amount paid by either to the Senior Note Trustee or such Holder, this Senior Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. (f) The Guaranteeing Subsidiary shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. (g) As between the Senior Note Guarantors, on the one hand, and the Holders and the Senior Note Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 of the Senior Note Indenture for the purposes of this Senior Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 of the Senior Note Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by the Senior Note Guarantors for the purpose of this Senior Subsidiary Guarantee. (h) The Senior Note Guarantors shall have the right to seek contribution from any non-paying Senior Note Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Senior Subsidiary Guarantee. (i) Pursuant to Section 10.02 of the Senior Note Indenture, the obligations of the Guaranteeing Subsidiary hereunder and under Article 10 of the Senior Note Indenture will be limited to the maximum amount as will, after giving effect to any maximum amount and any other contingent and fixed liabilities that are relevant under any applicable Bankruptcy or fraudulent conveyance laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Senior Note Guarantor in respect of the obligations of such other Senior Note Guarantor under Article 10 of the Senior Note Indenture, result in the obligations of such Senior Note Guarantor under its Senior Subsidiary Guarantee not constituting a fraudulent transfer or conveyance. 3. EXECUTION AND DELIVERY. The Guaranteeing Subsidiary agrees that the Senior Subsidiary Guarantees shall remain in full force and effect notwithstanding any failure to endorse on each Senior Note a notation of such Senior Subsidiary Guarantee. 4. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. (a) Neither of the Guaranteeing Subsidiary may consolidate with or merge with or into (whether or not such Senior Note Guarantor is the surviving Person) another corporation, Person or entity whether or not affiliated with such Senior Note Guarantor unless: (i) subject to Section 10.04 of the Senior Note Indenture, the Person formed by or surviving any such consolidation or merger (if other than a Senior Note Guarantor or the Company) unconditionally assumes all the obligations of such Senior Note Guarantor, pursuant to a supplemental Senior Note Indenture in form and substance reasonably satisfactory to the Senior Note Trustee, under the Senior Notes, the Senior Note Indenture and the Senior Subsidiary Guarantee on the terms set forth herein or therein; and (ii) immediately after giving effect to such transaction, no Default or Event of Default exists. (b) In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor corporation, by supplemental Senior Note Indenture, executed and delivered to the Senior Note Trustee and satisfactory in form to the Senior Note Trustee, of the Senior Subsidiary Guarantee endorsed upon the Senior Notes and the due and punctual performance of all of the covenants and conditions of the Senior Note Indenture to be performed by the Senior Note Guarantor, such successor corporation shall succeed to and be substituted for the Senior Note Guarantor with the same effect as if it had been named herein as a Senior Note Guarantor. Such successor corporation thereupon may cause to be signed any or all of the Senior Subsidiary Guarantees to be endorsed upon all of the Senior Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Senior Note Trustee. All the Senior Subsidiary Guarantees so issued shall in all respects have the same legal rank and benefit under the Senior Note Indenture as the Senior Subsidiary Guarantees theretofore and thereafter issued in accordance with the terms of the Senior Note Indenture as though all of such Senior Subsidiary Guarantees had been issued at the date of the execution hereof. (c) Except as set forth in Articles 4 and 5 of the Senior Note Indenture, and notwithstanding clauses (a) and (b) above, nothing contained in the Senior Note Indenture or in any of the Senior Notes shall prevent any consolidation or merger of a Senior Note Guarantor with or into the Company or another Senior Note Guarantor, or shall prevent any sale or conveyance of the property of a Senior Note Guarantor as an entirety or substantially as an entirety to the Company or another Senior Note Guarantor. 5. RELEASES. (a) In the event of a sale or other disposition of all of the assets of any Senior Note Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all to the capital stock of any Senior Note Guarantor, then such Senior Note Guarantor (in the event of a sale or other disposition, by way of merger, consolidation or otherwise, of all of the capital stock of such Senior Note Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Senior Note Guarantor) will be released and relieved of any obligations under its Senior Subsidiary Guarantee; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the Senior Note Indenture, including without limitation Section 4.10 of the Senior Note Indenture. Upon delivery by the Company to the Senior Note Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made by the Company in accordance with the provisions of the Senior Note Indenture, including without limitation Section 4.10 of the Senior Note Indenture, the Senior Note Trustee shall execute any documents reasonably required in order to evidence the release of any Senior Note Guarantor from its obligations under its Senior Subsidiary Guarantee. (b) Any Senior Note Guarantor not released from its obligations under its Senior Subsidiary Guarantee shall remain liable for the full amount of principal of and interest on the Senior Notes and for the other obligations of any Senior Note Guarantor under the Senior Note Indenture as provided in Article 10 of the Senior Note Indenture. 6. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator, stockholder or agent of either Guaranteeing Subsidiary, as such, shall have any liability for any obligations of the Company or any Guaranteeing Subsidiary under the Senior Notes, any Senior Subsidiary Guarantees, the Senior Note Indenture or this Supplemental Senior Note Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Senior Notes by accepting a Senior Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Senior Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy. 7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL SENIOR NOTE INDENTURE BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 8. COUNTERPARTS The parties may sign any number of copies of this Supplemental Senior Note Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 9. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof. 10. THE SENIOR NOTE TRUSTEE. The Senior Note Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Senior Note Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiary and the Company. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Senior Note Indenture to be duly executed and attested, all as of the date first above written. Dated: AFFINITY MINING COMPANY /s/ T.L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer ARID OPERATIONS, INC. /s/ Collon Kennedy - ------------------------------------------ Name: Collon Kennedy Title: Vice President, Secretary & General Counsel BIG SKY COAL COMPANY /s/ T.L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Treasurer & Asst. Secretary BLACKROCK FIRST CAPITAL CORPORATION /s/ T.L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer BLUEGRASS COAL COMPANY /s/ John Hill - ------------------------------------------ Name: John Hill Title: President CABALLO COAL COMPANY /s/ Richard Robinson - ------------------------------------------ Name: Richard Robinson Title: Vice President CHARLES COAL COMPANY /s/ T.L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer COAL PROPERTIES CORP. /s/ J.A. Beck - ------------------------------------------ Name: J.A. Beck Title: President COLONY BAY COAL COMPANY By: Charles Coal Company /s/ T.L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer COOK MOUNTAIN COAL COMPANY /s/ J.A. Beck - ------------------------------------------ Name: J.A. Beck Title: President COTTONWOOD LAND COMPANY /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer EACC CAMPS, INC. /s/ T.L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer EASTERN ASSOCIATED COAL CORP /s/ T.L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer EASTERN ROYALTY CORP. /s/ T.L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer GOLD FIELDS CHILE, S.A /s/ Collon Kennedy - ------------------------------------------ Name: Collon Kennedy Title: Vice President, Secretary & General Counsel GOLD FIELDS MINING CORPORATION /s/ Collon Kennedy - ------------------------------------------ Name: Collon Kennedy Title: Vice President, Secretary & General Counsel GOLD FIELDS OPERATING CO.-ORTIZ /s/ Collon Kennedy - ------------------------------------------ Name: Collon Kennedy Title: Vice President, Secretary & General Counsel GRAND EAGLE MINING, INC. /s/ John Hill - ------------------------------------------ Name: John Hill Title: President HAYDEN GULCH TERMINAL, INC. /s/ D.A. Wagner - ------------------------------------------ Name: D.A. Wagner Title: President INDEPENDENCE MATERIAL HANDLING COMPANY /s/ S. F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer INTERIOR HOLDINGS CORP. /s/ S. F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer JAMES RIVER COAL TERMINAL COMPANY /s/ R. A. Navarre - ------------------------------------------ Name: R. A. Navarre Title: President JUNIPER COAL COMPANY /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer KAYENTA MOBILE HOME PARK, INC. /s/ T. L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Treasurer & Asst. Secretary MARTINKA COAL COMPANY /s/ T. L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer MIDCO SUPPLY AND EQUIPMENT CORPORATION /s/ D. C. Hegger - ------------------------------------------ Name: D.C. Hegger Title: President MOUNTAIN VIEW COAL COMPANY /s/ T. L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer NORTH PAGE COAL CORP. /s/ T. L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer OHIO COUNTY COAL COMPANY /s/ John Hill - ------------------------------------------ Name: John Hill Title: President PATRIOT COAL COMPANY L.P. By: Bluegrass Coal Company /s/ John Hill - ------------------------------------------ Name: John Hill Title: President PEABODY AMERICA, INC. /s/ D. C. Hegger - ------------------------------------------ Name: D.C. Hegger Title: President PEABODY COALSALES COMPANY /s/ R.A. Navarre - ------------------------------------------ Name: R.A. Navarre Title: President PEABODY COALTRADE, INC. /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer PEABODY COAL COMPANY /s/ D.A. Wagner - ------------------------------------------ Name: D.A. Wagner Title: Vice President PEABODY DEVELOPMENT COMPANY /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer PEABODY ENERGY SOLUTIONS, INC. /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer PEABODY HOLDING COMPANY, INC. /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer PEABODY NATURAL RESOURCE COMPANY By: Gold Fields Mining Corp. /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer PEABODY TERMINALS, INC. /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer PEABODY VENEZUELA COAL CORP. /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer PEABODY WESTERN COAL COMPANY /s/ D.A. Wagner - ------------------------------------------ Name: D.A. Wagner Title: President PINE RIDGE COAL COMPANY /s/ T.L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer POWDER RIVER COAL COMPANY /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer RIO ESCONDIDO COAL CORP. /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer SENECA COAL COMPANY /s/ D.A. Wagner - ------------------------------------------ Name: D.A. Wagner Title: President SENTRY MINING COMPANY /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer SNOWBERRY LAND COMPANY /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer STERLING SMOKELESS COAL COMPANY /s/ T.L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer THOROUGHBRED, L.L.C. By: Peabody Holding Company /s/ Steven F. Schaab - ------------------------------------------ Name: S. F. Schaab Title: Vice President & Treasurer GALLO FINANCE COMPANY /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer P&L COAL HOLDINGS CORPORATION /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer STATE STREET BANK AND TRUST COMPANY as Senior Note Trustee /s/ Philip G. Kane, Jr. - ------------------------------------------ Name: Philip G. Kane, Jr. Title: Vice President EX-4 3 EXHIBIT 4.10 SECOND SUPPLEMENTAL SENIOR SUBORDINATED NOTE INDENTURE SECOND SUPPLEMENTAL SENIOR SUBORDINATED NOTE INDENTURE (this "Supplemental Senior Subordinated Note Indenture"), dated as of December 31, 1998, among Gallo Finance Company, a Delaware corporation (the "Guaranteeing Subsidiaries"), a subsidiary of P&L Coal Holdings Corporation (or its permitted successor), a Delaware corporation (the "Company"), the Company, the other Senior Subordinated Note Guarantors (as defined in the Senior Subordinated Note Indenture referred to herein) and State Street Bank and Trust Company, as Senior Subordinated Note Trustee under the Senior Subordinated Note Indenture referred to below (the "Senior Subordinated Note Trustee"). W I T N E S S E T H WHEREAS, the Company has heretofore executed and delivered to the Senior Subordinated Note Trustee a Senior Subordinated Note Indenture (the "Senior Subordinated Note Indenture"), dated as of May 18, 1998 providing for the issuance of an aggregate principal amount of up to $650.0 million of 9-5/8% Senior Subordinated Notes due 2008 (the "Senior Subordinated Notes"); WHEREAS, the Senior Subordinated Note Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Senior Subordinated Note Trustee a Supplemental Senior Subordinated Note Indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally guarantee all of the Company's Obligations under the Senior Subordinated Notes and the Senior Subordinated Note Indenture on the terms and conditions set forth herein (the "Subordinated Subsidiary Guarantee"); and WHEREAS, pursuant to Section 9.01 of the Senior Subordinated Note Indenture, the Senior Subordinated Note Trustee is authorized to execute and deliver this Supplemental Senior Subordinated Note Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiary and the Senior Subordinated Note Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Senior Subordinated Notes as follows: 1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Senior Subordinated Note Indenture. 2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby agrees as follows: (a) Along with all Senior Subordinated Note Guarantors named in the Senior Subordinated Note Indenture, to jointly and severally Guarantee to each Holder of a Senior Subordinated Note authenticated and delivered by the Senior Subordinated Note Trustee and to the Senior Subordinated Note Trustee and its successors and assigns, irrespective of the validity and enforceability of the Senior Subordinated Note Indenture, the Senior Subordinated Notes or the obligations of the Company hereunder or thereunder, that: (i) the principal of and interest on the Senior Subordinated Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Senior Subordinated Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Senior Subordinated Note Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (ii) in case of any extension of time of payment or renewal of any Senior Subordinated Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Senior Subordinated Note Guarantors shall be jointly and severally obligated to pay the same immediately. (b) The obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Senior Subordinated Notes or the Senior Subordinated Note Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Senior Subordinated Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Senior Subordinated Note Guarantor. (c) The following is hereby waived: diligence presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever. (d) This Subordinated Subsidiary Guarantee shall not be discharged except by complete performance of the obligations contained in the Senior Subordinated Notes and the Senior Subordinated Note Indenture. (e) If any Holder or the Senior Subordinated Note Trustee is required by any court or otherwise to return to the Company, the Senior Subordinated Note Guarantors, or any custodian, Senior Subordinated Note Trustee, liquidator or other similar official acting in relation to either the Company or the Senior Subordinated Note Guarantors, any amount paid by either to the Senior Subordinated Note Trustee or such Holder, this Subordinated Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. (f) Neither of the Guaranteeing Subsidiary shall be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. (g) As between the Senior Subordinated Note Guarantors, on the one hand, and the Holders and the Senior Subordinated Note Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 of the Senior Subordinated Note Indenture for the purposes of this Subordinated Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 of the Senior Subordinated Note Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by the Senior Subordinated Note Guarantors for the purpose of this Subordinated Subsidiary Guarantee. (h) The Senior Subordinated Note Guarantors shall have the right to seek contribution from any non-paying Senior Subordinated Note Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Subordinated Subsidiary Guarantee. (i) Pursuant to Section 11.03 of the Senior Subordinated Note Indenture, the obligations of the Guaranteeing Subsidiary hereunder and under Article 11 of the Senior Subordinated Note Indenture will be limited to the maximum amount as will, after giving effect to any maximum amount and any other contingent and fixed liabilities that are relevant under any applicable Bankruptcy or fraudulent conveyance laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Senior Subordinated Note Guarantor in respect of the obligations of such other Senior Subordinated Note Guarantor under Article 11 of the Senior Subordinated Note Indenture, result in the obligations of such Senior Subordinated Note Guarantor under its Subordinated Subsidiary Guarantee not constituting a fraudulent transfer or conveyance. 3. EXECUTION AND DELIVERY. The Guaranteeing Subsidiary agrees that the Subordinated Subsidiary Guarantees shall remain in full force and effect notwithstanding any failure to endorse on each Senior Subordinated Note a notation of such Subordinated Subsidiary Guarantee. 4. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. (a) Neither of the Guaranteeing Subsidiary may consolidate with or merge with or into (whether or not such Senior Subordinated Note Guarantor is the surviving Person) another corporation, Person or entity whether or not affiliated with such Senior Subordinated Note Guarantor unless: (i) subject to Section 11.05 of the Senior Subordinated Note Indenture, the Person formed by or surviving any such consolidation or merger (if other than a Senior Subordinated Note Guarantor or the Company) unconditionally assumes all the obligations of such Senior Subordinated Note Guarantor, pursuant to a supplemental Senior Subordinated Note Indenture in form and substance reasonably satisfactory to the Senior Subordinated Note Trustee, under the Senior Subordinated Notes, the Senior Subordinated Note Indenture and the Subordinated Subsidiary Guarantee on the terms set forth herein or therein; and (ii) immediately after giving effect to such transaction, no Default or Event of Default exists. (b) In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor corporation, by supplemental Senior Subordinated Note Indenture, executed and delivered to the Senior Subordinated Note Trustee and satisfactory in form to the Senior Subordinated Note Trustee, of the Subordinated Subsidiary Guarantee endorsed upon the Senior Subordinated Notes and the due and punctual performance of all of the covenants and conditions of the Senior Subordinated Note Indenture to be performed by the Senior Subordinated Note Guarantor, such successor corporation shall succeed to and be substituted for the Senior Subordinated Note Guarantor with the same effect as if it had been named herein as a Senior Subordinated Note Guarantor. Such successor corporation thereupon may cause to be signed any or all of the Subordinated Subsidiary Guarantees to be endorsed upon all of the Senior Subordinated Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Senior Subordinated Note Trustee. All the Subordinated Subsidiary Guarantees so issued shall in all respects have the same legal rank and benefit under the Senior Subordinated Note Indenture as the Subordinated Subsidiary Guarantees theretofore and thereafter issued in accordance with the terms of the Senior Subordinated Note Indenture as though all of such Subordinated Subsidiary Guarantees had been issued at the date of the execution hereof. (c) Except as set forth in Articles 4 and 5 of the Senior Subordinated Note Indenture, and notwithstanding clauses (a) and (b) above, nothing contained in the Senior Subordinated Note Indenture or in any of the Senior Subordinated Notes shall prevent any consolidation or merger of a Senior Subordinated Note Guarantor with or into the Company or another Senior Subordinated Note Guarantor, or shall prevent any sale or conveyance of the property of a Senior Subordinated Note Guarantor as an entirety or substantially as an entirety to the Company or another Senior Subordinated Note Guarantor. 5. RELEASES. (a) In the event of a sale or other disposition of all of the assets of any Senior Subordinated Note Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all to the capital stock of any Senior Subordinated Note Guarantor, then such Senior Subordinated Note Guarantor (in the event of a sale or other disposition, by way of merger, consolidation or otherwise, of all of the capital stock of such Senior Subordinated Note Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Senior Subordinated Note Guarantor) will be released and relieved of any obligations under its Subordinated Subsidiary Guarantee; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the Senior Subordinated Note Indenture, including without limitation Section 4.10 of the Senior Subordinated Note Indenture. Upon delivery by the Company to the Senior Subordinated Note Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made by the Company in accordance with the provisions of the Senior Subordinated Note Indenture, including without limitation Section 4.10 of the Senior Subordinated Note Indenture, the Senior Subordinated Note Trustee shall execute any documents reasonably required in order to evidence the release of any Senior Subordinated Note Guarantor from its obligations under its Subordinated Subsidiary Guarantee. (b) Any Senior Subordinated Note Guarantor not released from its obligations under its Subordinated Subsidiary Guarantee shall remain liable for the full amount of principal of and interest on the Senior Subordinated Notes and for the other obligations of any Senior Subordinated Note Guarantor under the Senior Subordinated Note Indenture as provided in Article 11 of the Senior Subordinated Note Indenture. 6. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator, stockholder or agent of either Guaranteeing Subsidiary, as such, shall have any liability for any obligations of the Company or any Guaranteeing Subsidiary under the Senior Subordinated Notes, any Subordinated Subsidiary Guarantees, the Senior Subordinated Note Indenture or this Supplemental Senior Subordinated Note Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Senior Subordinated Notes by accepting a Senior Subordinated Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Senior Subordinated Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy. 7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL SENIOR SUBORDINATED NOTE INDENTURE BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 8. COUNTERPARTS The parties may sign any number of copies of this Supplemental Senior Subordinated Note Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 9. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof. 10. THE SENIOR SUBORDINATED NOTE TRUSTEE. The Senior Subordinated Note Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Senior Subordinated Note Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiary and the Company. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Senior Subordinated Note Indenture to be duly executed and attested, all as of the date first above written. Dated: AFFINITY MINING COMPANY /s/ T.L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer ARID OPERATIONS, INC. /s/ Collon Kennedy - ------------------------------------------ Name: Collon Kennedy Title: Vice President, Secretary & General Counsel BIG SKY COAL COMPANY /s/ T.L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Treasurer & Asst. Secretary BLACKROCK FIRST CAPITAL CORPORATION /s/ T.L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer BLUEGRASS COAL COMPANY /s/ John Hill - ------------------------------------------ Name: John Hill Title: President CABALLO COAL COMPANY /s/ Richard Robinson - ------------------------------------------ Name: Richard Robinson Title: Vice President CHARLES COAL COMPANY /s/ T.L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer COAL PROPERTIES CORP. /s/ J.A. Beck - ------------------------------------------ Name: J.A. Beck Title: President COLONY BAY COAL COMPANY By: Charles Coal Company /s/ T.L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer COOK MOUNTAIN COAL COMPANY /s/ J.A. Beck - ------------------------------------------ Name: J.A. Beck Title: President COTTONWOOD LAND COMPANY /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer DARIUS GOLD MINE, INC. /s/ Collon Kennedy - ------------------------------------------ Name: Collon Kennedy Title: Vice President, Secretary & General Counsel EACC CAMPS, INC. /s/ T.L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer EASTERN ASSOCIATED COAL CORP /s/ T.L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer EASTERN ROYALTY CORP. /s/ T.L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer GALLO FINANCE COMPANY /s/ D.A. Wagner - ------------------------------------------ Name: D.A. Wagner Title: President GOLD FIELDS CHILE, S.A /s/ Collon Kennedy - ------------------------------------------ Name: Collon Kennedy Title: Vice President, Secretary & General Counsel GOLD FIELDS MINING CORPORATION /s/ Collon Kennedy - ------------------------------------------ Name: Collon Kennedy Title: Vice President, Secretary & General Counsel GOLD FIELDS OPERATING CO.-ORTIZ /s/ Collon Kennedy - ------------------------------------------ Name: Collon Kennedy Title: Vice President, Secretary & General Counsel GRAND EAGLE MINING, INC. /s/ John Hill - ------------------------------------------ Name: John Hill Title: President HAYDEN GULCH TERMINAL, INC. /s/ D.A. Wagner - ------------------------------------------ Name: D.A. Wagner Title: President INDEPENDENCE MATERIAL HANDLING COMPANY /s/ S. F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer INTERIOR HOLDINGS CORP. /s/ S. F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer JAMES RIVER COAL TERMINAL COMPANY /s/ R. A. Navarre - ------------------------------------------ Name: R.A. Navarre Title: President JUNIPER COAL COMPANY /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer KAYENTA MOBILE HOME PARK, INC. /s/ T. L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Treasurer & Asst. Secretary MARTINKA COAL COMPANY /s/ T. L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer MIDCO SUPPLY AND EQUIPMENT CORPORATION /s/ D. C. Hegger - ------------------------------------------ Name: David C. Hegger Title: President MOUNTAIN VIEW COAL COMPANY /s/ T. L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer NORTH PAGE COAL CORP. /s/ T. L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer OHIO COUNTY COAL COMPANY /s/ John Hill - ------------------------------------------ Name: John Hill Title: President PATRIOT COAL COMPANY L.P. By: Bluegrass Coal Company /s/ John Hill - ------------------------------------------ Name: John Hill Title: President PEABODY AMERICA, INC. /s/ D. C. Hegger - ------------------------------------------ Name: D. C. Hegger Title: President PEABODY COALSALES COMPANY /s/ R.A. Navarre - ------------------------------------------ Name: R.A. Navarre Title: President PEABODY COALTRADE, INC. /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer PEABODY COAL COMPANY /s/ D.A. Wagner - ------------------------------------------ Name: D.A. Wagner Title: Vice President PEABODY DEVELOPMENT COMPANY /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer PEABODY ENERGY SOLUTIONS, INC. /s/ Steven F. Schaab - ------------------------------------------ Name: Steven F. Schaab Title: Vice President & Treasurer PEABODY HOLDING COMPANY, INC. /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer PEABODY NATURAL RESOURCE COMPANY By: Gold Fields Mining Corp. /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer PEABODY TERMINALS, INC. /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer PEABODY VENEZUELA COAL CORP. /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer PEABODY WESTERN COAL COMPANY /s/ D.A. Wagner - ------------------------------------------ Name: D.A. Wagner Title: President PINE RIDGE COAL COMPANY /s/ T.L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer POWDER RIVER COAL COMPANY /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer RIO ESCONDIDO COAL CORP. /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer SENECA COAL COMPANY /s/ D.A. Wagner - ------------------------------------------ Name: D.A. Wagner Title: President SENTRY MINING COMPANY /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer SNOWBERRY LAND COMPANY /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer STERLING SMOKELESS COAL COMPANY /s/ T.L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer GALLO FINANCE COMPANY /s/ Joseph C. Klingl - ------------------------------------------ Name: Joseph C. Klingl Title: Vice President PEABODY SOUTHWESTERN COAL COMPANY /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer P&L COAL HOLDINGS CORPORATION /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer STATE STREET BANK AND TRUST COMPANY as Senior Subordinated Note Trustee /s/ Philip G. Kane, Jr. - ------------------------------------------ Name: Philip G. Kane, Jr. Title: Vice President EX-4 4 EXHIBIT 4.11 THIRD SUPPLEMENTAL SENIOR NOTE INDENTURE THIRD SUPPLEMENTAL SENIOR NOTE INDENTURE (this "Supplemental Senior Note Indenture"), dated as of June 30, 1999, among Highland Mining Company, a Delaware corporation, Peabody Southwestern Coal Company; a Delaware corporation (together, the "Guaranteeing Subsidiaries"), each a subsidiary of P&L Coal Holdings Corporation (or its permitted successor), a Delaware corporation (the "Company"), the Company, the other Senior Note Guarantors (as defined in the Senior Note Indenture referred to herein) and State Street Bank and Trust Company, as Senior Note Trustee under the Senior Note Indenture referred to below (the "Senior Note Trustee"). W I T N E S S E T H WHEREAS, the Company has heretofore executed and delivered to the Senior Note Trustee a Senior Note Indenture (the "Senior Note Indenture"), dated as of May 18, 1998 providing for the issuance of an aggregate principal amount of up to $550.0 million of 8-7/8% Senior Notes due 2008 (the "Senior Notes"); WHEREAS, the Senior Note Indenture provides that under certain circumstances the Guaranteeing Subsidiaries shall execute and deliver to the Senior Note Trustee a supplemental Senior Note Indenture pursuant to which the Guaranteeing Subsidiaries shall each unconditionally guarantee all of the Company's Obligations under the Senior Notes and the Senior Note Indenture on the terms and conditions set forth herein (the "Senior Subsidiary Guarantee"); and WHEREAS, pursuant to Section 9.01 of the Senior Note Indenture, the Senior Note Trustee is authorized to execute and deliver this Supplemental Senior Note Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiaries and the Senior Note Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Senior Notes as follows: 1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Senior Note Indenture. 2. AGREEMENT TO GUARANTEE. Each of the Guaranteeing Subsidiaries hereby agrees as follows: (a) Along with all Senior Note Guarantors named in the Senior Note Indenture, to jointly and severally Guarantee to each Holder of a Senior Note authenticated and delivered by the Senior Note Trustee and to the Senior Note Trustee and its successors and assigns, irrespective of the validity and enforceability of the Senior Note Indenture, the Senior Notes or the obligations of the Company hereunder or thereunder, that: (i) the principal of and interest on the Senior Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Senior Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Senior Note Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (ii) in case of any extension of time of payment or renewal of any Senior Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Senior Note Guarantors shall be jointly and severally obligated to pay the same immediately. (b) The obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Senior Notes or the Senior Note Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Senior Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Senior Note Guarantor. (c) The following is hereby waived: diligence presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever. (d) This Senior Subsidiary Guarantee shall not be discharged except by complete performance of the obligations contained in the Senior Notes and the Senior Note Indenture. (e) If any Holder or the Senior Note Trustee is required by any court or otherwise to return to the Company, the Senior Note Guarantors, or any custodian, Senior Note Trustee, liquidator or other similar official acting in relation to either the Company or the Senior Note Guarantors, any amount paid by either to the Senior Note Trustee or such Holder, this Senior Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. (f) The Guaranteeing Subsidiary shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. (g) As between the Senior Note Guarantors, on the one hand, and the Holders and the Senior Note Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 of the Senior Note Indenture for the purposes of this Senior Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 of the Senior Note Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by the Senior Note Guarantors for the purpose of this Senior Subsidiary Guarantee. (h) The Senior Note Guarantors shall have the right to seek contribution from any non-paying Senior Note Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Senior Subsidiary Guarantee. (i) Pursuant to Section 10.02 of the Senior Note Indenture, the obligations of each Guaranteeing Subsidiary hereunder and under Article 10 of the Senior Note Indenture will be limited to the maximum amount as will, after giving effect to any maximum amount and any other contingent and fixed liabilities that are relevant under any applicable Bankruptcy or fraudulent conveyance laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Senior Note Guarantor in respect of the obligations of such other Senior Note Guarantor under Article 10 of the Senior Note Indenture, result in the obligations of such Senior Note Guarantor under its Senior Subsidiary Guarantee not constituting a fraudulent transfer or conveyance. 3. EXECUTION AND DELIVERY. Each Guaranteeing Subsidiary agrees that the Senior Subsidiary Guarantees shall remain in full force and effect notwithstanding any failure to endorse on each Senior Note a notation of such Senior Subsidiary Guarantee. 4. GUARANTEEING SUBSIDIARIES MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. (a) Neither of the Guaranteeing Subsidiary may consolidate with or merge with or into (whether or not such Senior Note Guarantor is the surviving Person) another corporation, Person or entity whether or not affiliated with such Senior Note Guarantor unless: (i) subject to Section 10.04 of the Senior Note Indenture, the Person formed by or surviving any such consolidation or merger (if other than a Senior Note Guarantor or the Company) unconditionally assumes all the obligations of such Senior Note Guarantor, pursuant to a supplemental Senior Note Indenture in form and substance reasonably satisfactory to the Senior Note Trustee, under the Senior Notes, the Senior Note Indenture and the Senior Subsidiary Guarantee on the terms set forth herein or therein; and (ii) immediately after giving effect to such transaction, no Default or Event of Default exists. (b) In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor corporation, by supplemental Senior Note Indenture, executed and delivered to the Senior Note Trustee and satisfactory in form to the Senior Note Trustee, of the Senior Subsidiary Guarantee endorsed upon the Senior Notes and the due and punctual performance of all of the covenants and conditions of the Senior Note Indenture to be performed by the Senior Note Guarantor, such successor corporation shall succeed to and be substituted for the Senior Note Guarantor with the same effect as if it had been named herein as a Senior Note Guarantor. Such successor corporation thereupon may cause to be signed any or all of the Senior Subsidiary Guarantees to be endorsed upon all of the Senior Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Senior Note Trustee. All the Senior Subsidiary Guarantees so issued shall in all respects have the same legal rank and benefit under the Senior Note Indenture as the Senior Subsidiary Guarantees theretofore and thereafter issued in accordance with the terms of the Senior Note Indenture as though all of such Senior Subsidiary Guarantees had been issued at the date of the execution hereof. (c) Except as set forth in Articles 4 and 5 of the Senior Note Indenture, and notwithstanding clauses (a) and (b) above, nothing contained in the Senior Note Indenture or in any of the Senior Notes shall prevent any consolidation or merger of a Senior Note Guarantor with or into the Company or another Senior Note Guarantor, or shall prevent any sale or conveyance of the property of a Senior Note Guarantor as an entirety or substantially as an entirety to the Company or another Senior Note Guarantor. 5. RELEASES. (a) In the event of a sale or other disposition of all of the assets of any Senior Note Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all to the capital stock of any Senior Note Guarantor, then such Senior Note Guarantor (in the event of a sale or other disposition, by way of merger, consolidation or otherwise, of all of the capital stock of such Senior Note Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Senior Note Guarantor) will be released and relieved of any obligations under its Senior Subsidiary Guarantee; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the Senior Note Indenture, including without limitation Section 4.10 of the Senior Note Indenture. Upon delivery by the Company to the Senior Note Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made by the Company in accordance with the provisions of the Senior Note Indenture, including without limitation Section 4.10 of the Senior Note Indenture, the Senior Note Trustee shall execute any documents reasonably required in order to evidence the release of any Senior Note Guarantor from its obligations under its Senior Subsidiary Guarantee. (b) Any Senior Note Guarantor not released from its obligations under its Senior Subsidiary Guarantee shall remain liable for the full amount of principal of and interest on the Senior Notes and for the other obligations of any Senior Note Guarantor under the Senior Note Indenture as provided in Article 10 of the Senior Note Indenture. 6. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator, stockholder or agent of either Guaranteeing Subsidiary, as such, shall have any liability for any obligations of the Company or any Guaranteeing Subsidiary under the Senior Notes, any Senior Subsidiary Guarantees, the Senior Note Indenture or this Supplemental Senior Note Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Senior Notes by accepting a Senior Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Senior Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy. 7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL SENIOR NOTE INDENTURE BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 8. COUNTERPARTS The parties may sign any number of copies of this Supplemental Senior Note Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 9. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof. 10. THE SENIOR NOTE TRUSTEE. The Senior Note Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Senior Note Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiaries and the Company. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Senior Note Indenture to be duly executed and attested, all as of the date first above written. Dated: AFFINITY MINING COMPANY /s/ T.L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer ARID OPERATIONS, INC. /s/ Collon Kennedy - ------------------------------------------ Name: Collon Kennedy Title: Vice President, Secretary & General Counsel BIG SKY COAL COMPANY /s/ T.L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Treasurer & Asst. Secretary BLACKROCK FIRST CAPITAL CORPORATION /s/ T.L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer BLUEGRASS COAL COMPANY /s/ John Hill - ------------------------------------------ Name: John Hill Title: President CABALLO COAL COMPANY /s/ Richard Robinson - ------------------------------------------ Name: Richard Robinson Title: Vice President CHARLES COAL COMPANY /s/ T.L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer COAL PROPERTIES CORP. /s/ J.A. Beck - ------------------------------------------ Name: J.A. Beck Title: President COLONY BAY COAL COMPANY By: Charles Coal Company /s/ T.L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer COOK MOUNTAIN COAL COMPANY /s/ J.A. Beck - ------------------------------------------ Name: J.A. Beck Title: President COTTONWOOD LAND COMPANY /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer EACC CAMPS, INC. /s/ T.L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer EASTERN ASSOCIATED COAL CORP /s/ T.L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer EASTERN ROYALTY CORP. /s/ T.L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer GOLD FIELDS CHILE, S.A /s/ Collon Kennedy - ------------------------------------------ Name: Collon Kennedy Title: Vice President, Secretary & General Counsel GOLD FIELDS MINING CORPORATION /s/ Collon Kennedy - ------------------------------------------ Name: Collon Kennedy Title: Vice President, Secretary & General Counsel GOLD FIELDS OPERATING CO.-ORTIZ /s/ Collon Kennedy - ------------------------------------------ Name: Collon Kennedy Title: Vice President, Secretary & General Counsel GRAND EAGLE MINING, INC. /s/ John Hill - ------------------------------------------ Name: John Hill Title: President HAYDEN GULCH TERMINAL, INC. /s/ D.A. Wagner - ------------------------------------------ Name: D.A. Wagner Title: President INDEPENDENCE MATERIAL HANDLING COMPANY /s/ S. F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer INTERIOR HOLDINGS CORP. /s/ S. F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer JAMES RIVER COAL TERMINAL COMPANY /s/ R. A. Navarre - ------------------------------------------ Name: R. A. Navarre Title: President JUNIPER COAL COMPANY /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer KAYENTA MOBILE HOME PARK, INC. /s/ T. L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Treasurer & Asst. Secretary MARTINKA COAL COMPANY /s/ T. L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer MIDCO SUPPLY AND EQUIPMENT CORPORATION /s/ D. C. Hegger - ------------------------------------------ Name: D.C. Hegger Title: President MOUNTAIN VIEW COAL COMPANY /s/ T. L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer NORTH PAGE COAL CORP. /s/ T. L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer OHIO COUNTY COAL COMPANY /s/ John Hill - ------------------------------------------ Name: John Hill Title: President PATRIOT COAL COMPANY L.P. By: Bluegrass Coal Company /s/ John Hill - ------------------------------------------ Name: John Hill Title: President PEABODY AMERICA, INC. /s/ D. C. Hegger - ------------------------------------------ Name: D.C. Hegger Title: President PEABODY COALSALES COMPANY /s/ R.A. Navarre - ------------------------------------------ Name: R.A. Navarre Title: President PEABODY COALTRADE, INC. /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer PEABODY COAL COMPANY /s/ D.A. Wagner - ------------------------------------------ Name: D.A. Wagner Title: Vice President PEABODY DEVELOPMENT COMPANY /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer PEABODY ENERGY SOLUTIONS, INC. /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer PEABODY HOLDING COMPANY, INC. /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer PEABODY NATURAL RESOURCE COMPANY By: Gold Fields Mining Corp. /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer PEABODY TERMINALS, INC. /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer PEABODY VENEZUELA COAL CORP. /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer PEABODY WESTERN COAL COMPANY /s/ D.A. Wagner - ------------------------------------------ Name: D.A. Wagner Title: President PINE RIDGE COAL COMPANY /s/ T.L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer POWDER RIVER COAL COMPANY /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer RIO ESCONDIDO COAL CORP. /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer SENECA COAL COMPANY /s/ D.A. Wagner - ------------------------------------------ Name: D.A. Wagner Title: President SENTRY MINING COMPANY /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer SNOWBERRY LAND COMPANY /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer STERLING SMOKELESS COAL COMPANY /s/ T.L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer THOROUGHBRED, L.L.C. By: Peabody Holding Company /s/ Steven F. Schaab - ------------------------------------------ Name: S. F. Schaab Title: Vice President & Treasurer HIGHLAND MINING COMPANY /s/ Joseph C. Klingl - ------------------------------------------ Name: Joseph C. Klingl Title: Vice President PEABODY SOUTHWESTERN COAL COMPANY /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer P&L COAL HOLDINGS CORPORATION /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer STATE STREET BANK AND TRUST COMPANY as Senior Note Trustee /s/ Philip G. Kane, Jr. - ------------------------------------------ Name: Philip G. Kane, Jr. Title: Vice President EX-4 5 EXHIBIT 4.12 THIRD SUPPLEMENTAL SENIOR SUBORDINATED NOTE INDENTURE THIRD SUPPLEMENTAL SENIOR SUBORDINATED NOTE INDENTURE (this "Supplemental Senior Subordinated Note Indenture"), dated as of June 30, 1999, among Highland Mining Company, a Delaware corporation, Peabody Southwestern Coal Company, a Delaware corporation (together, the "Guaranteeing Subsidiaries"), each a subsidiary of P&L Coal Holdings Corporation (or its permitted successor), a Delaware corporation (the "Company"), the Company, the other Senior Subordinated Note Guarantors (as defined in the Senior Subordinated Note Indenture referred to herein) and State Street Bank and Trust Company, as Senior Subordinated Note Trustee under the Senior Subordinated Note Indenture referred to below (the "Senior Subordinated Note Trustee"). W I T N E S S E T H WHEREAS, the Company has heretofore executed and delivered to the Senior Subordinated Note Trustee a Senior Subordinated Note Indenture (the "Senior Subordinated Note Indenture"), dated as of May 18, 1998 providing for the issuance of an aggregate principal amount of up to $650.0 million of 9-5/8% Senior Subordinated Notes due 2008 (the "Senior Subordinated Notes"); WHEREAS, the Senior Subordinated Note Indenture provides that under certain circumstances the Guaranteeing Subsidiaries shall execute and deliver to the Senior Subordinated Note Trustee a Supplemental Senior Subordinated Note Indenture pursuant to which the Guaranteeing Subsidiaries shall each unconditionally guarantee all of the Company's Obligations under the Senior Subordinated Notes and the Senior Subordinated Note Indenture on the terms and conditions set forth herein (the "Subordinated Subsidiary Guarantee"); and WHEREAS, pursuant to Section 9.01 of the Senior Subordinated Note Indenture, the Senior Subordinated Note Trustee is authorized to execute and deliver this Supplemental Senior Subordinated Note Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiaries and the Senior Subordinated Note Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Senior Subordinated Notes as follows: 1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Senior Subordinated Note Indenture. 2. AGREEMENT TO GUARANTEE. Each of the Guaranteeing Subsidiaries hereby agrees as follows: (a) Along with all Senior Subordinated Note Guarantors named in the Senior Subordinated Note Indenture, to jointly and severally Guarantee to each Holder of a Senior Subordinated Note authenticated and delivered by the Senior Subordinated Note Trustee and to the Senior Subordinated Note Trustee and its successors and assigns, irrespective of the validity and enforceability of the Senior Subordinated Note Indenture, the Senior Subordinated Notes or the obligations of the Company hereunder or thereunder, that: (i) the principal of and interest on the Senior Subordinated Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Senior Subordinated Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Senior Subordinated Note Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (ii) in case of any extension of time of payment or renewal of any Senior Subordinated Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Senior Subordinated Note Guarantors shall be jointly and severally obligated to pay the same immediately. (b) The obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Senior Subordinated Notes or the Senior Subordinated Note Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Senior Subordinated Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Senior Subordinated Note Guarantor. (c) The following is hereby waived: diligence presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever. (d) This Subordinated Subsidiary Guarantee shall not be discharged except by complete performance of the obligations contained in the Senior Subordinated Notes and the Senior Subordinated Note Indenture. (e) If any Holder or the Senior Subordinated Note Trustee is required by any court or otherwise to return to the Company, the Senior Subordinated Note Guarantors, or any custodian, Senior Subordinated Note Trustee, liquidator or other similar official acting in relation to either the Company or the Senior Subordinated Note Guarantors, any amount paid by either to the Senior Subordinated Note Trustee or such Holder, this Subordinated Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. (f) Neither of the Guaranteeing Subsidiaries shall be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. (g) As between the Senior Subordinated Note Guarantors, on the one hand, and the Holders and the Senior Subordinated Note Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 of the Senior Subordinated Note Indenture for the purposes of this Subordinated Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 of the Senior Subordinated Note Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by the Senior Subordinated Note Guarantors for the purpose of this Subordinated Subsidiary Guarantee. (h) The Senior Subordinated Note Guarantors shall have the right to seek contribution from any non-paying Senior Subordinated Note Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Subordinated Subsidiary Guarantee. (i) Pursuant to Section 11.03 of the Senior Subordinated Note Indenture, the obligations of each Guaranteeing Subsidiary hereunder and under Article 11 of the Senior Subordinated Note Indenture will be limited to the maximum amount as will, after giving effect to any maximum amount and any other contingent and fixed liabilities that are relevant under any applicable Bankruptcy or fraudulent conveyance laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Senior Subordinated Note Guarantor in respect of the obligations of such other Senior Subordinated Note Guarantor under Article 11 of the Senior Subordinated Note Indenture, result in the obligations of such Senior Subordinated Note Guarantor under its Subordinated Subsidiary Guarantee not constituting a fraudulent transfer or conveyance. 3. EXECUTION AND DELIVERY. Each Guaranteeing Subsidiary agrees that the Subordinated Subsidiary Guarantees shall remain in full force and effect notwithstanding any failure to endorse on each Senior Subordinated Note a notation of such Subordinated Subsidiary Guarantee. 4. GUARANTEEING SUBSIDIARIES MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. (a) Neither of the Guaranteeing Subsidiary may consolidate with or merge with or into (whether or not such Senior Subordinated Note Guarantor is the surviving Person) another corporation, Person or entity whether or not affiliated with such Senior Subordinated Note Guarantor unless: (i) subject to Section 11.05 of the Senior Subordinated Note Indenture, the Person formed by or surviving any such consolidation or merger (if other than a Senior Subordinated Note Guarantor or the Company) unconditionally assumes all the obligations of such Senior Subordinated Note Guarantor, pursuant to a supplemental Senior Subordinated Note Indenture in form and substance reasonably satisfactory to the Senior Subordinated Note Trustee, under the Senior Subordinated Notes, the Senior Subordinated Note Indenture and the Subordinated Subsidiary Guarantee on the terms set forth herein or therein; and (ii) immediately after giving effect to such transaction, no Default or Event of Default exists. (b) In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor corporation, by supplemental Senior Subordinated Note Indenture, executed and delivered to the Senior Subordinated Note Trustee and satisfactory in form to the Senior Subordinated Note Trustee, of the Subordinated Subsidiary Guarantee endorsed upon the Senior Subordinated Notes and the due and punctual performance of all of the covenants and conditions of the Senior Subordinated Note Indenture to be performed by the Senior Subordinated Note Guarantor, such successor corporation shall succeed to and be substituted for the Senior Subordinated Note Guarantor with the same effect as if it had been named herein as a Senior Subordinated Note Guarantor. Such successor corporation thereupon may cause to be signed any or all of the Subordinated Subsidiary Guarantees to be endorsed upon all of the Senior Subordinated Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Senior Subordinated Note Trustee. All the Subordinated Subsidiary Guarantees so issued shall in all respects have the same legal rank and benefit under the Senior Subordinated Note Indenture as the Subordinated Subsidiary Guarantees theretofore and thereafter issued in accordance with the terms of the Senior Subordinated Note Indenture as though all of such Subordinated Subsidiary Guarantees had been issued at the date of the execution hereof. (c) Except as set forth in Articles 4 and 5 of the Senior Subordinated Note Indenture, and notwithstanding clauses (a) and (b) above, nothing contained in the Senior Subordinated Note Indenture or in any of the Senior Subordinated Notes shall prevent any consolidation or merger of a Senior Subordinated Note Guarantor with or into the Company or another Senior Subordinated Note Guarantor, or shall prevent any sale or conveyance of the property of a Senior Subordinated Note Guarantor as an entirety or substantially as an entirety to the Company or another Senior Subordinated Note Guarantor. 5. RELEASES. (a) In the event of a sale or other disposition of all of the assets of any Senior Subordinated Note Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all to the capital stock of any Senior Subordinated Note Guarantor, then such Senior Subordinated Note Guarantor (in the event of a sale or other disposition, by way of merger, consolidation or otherwise, of all of the capital stock of such Senior Subordinated Note Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Senior Subordinated Note Guarantor) will be released and relieved of any obligations under its Subordinated Subsidiary Guarantee; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the Senior Subordinated Note Indenture, including without limitation Section 4.10 of the Senior Subordinated Note Indenture. Upon delivery by the Company to the Senior Subordinated Note Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made by the Company in accordance with the provisions of the Senior Subordinated Note Indenture, including without limitation Section 4.10 of the Senior Subordinated Note Indenture, the Senior Subordinated Note Trustee shall execute any documents reasonably required in order to evidence the release of any Senior Subordinated Note Guarantor from its obligations under its Subordinated Subsidiary Guarantee. (b) Any Senior Subordinated Note Guarantor not released from its obligations under its Subordinated Subsidiary Guarantee shall remain liable for the full amount of principal of and interest on the Senior Subordinated Notes and for the other obligations of any Senior Subordinated Note Guarantor under the Senior Subordinated Note Indenture as provided in Article 11 of the Senior Subordinated Note Indenture. 6. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator, stockholder or agent of either Guaranteeing Subsidiary, as such, shall have any liability for any obligations of the Company or any Guaranteeing Subsidiary under the Senior Subordinated Notes, any Subordinated Subsidiary Guarantees, the Senior Subordinated Note Indenture or this Supplemental Senior Subordinated Note Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Senior Subordinated Notes by accepting a Senior Subordinated Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Senior Subordinated Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy. 7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL SENIOR SUBORDINATED NOTE INDENTURE BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 8. COUNTERPARTS The parties may sign any number of copies of this Supplemental Senior Subordinated Note Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 9. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof. 10. THE SENIOR SUBORDINATED NOTE TRUSTEE. The Senior Subordinated Note Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Senior Subordinated Note Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiaries and the Company. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Senior Subordinated Note Indenture to be duly executed and attested, all as of the date first above written. Dated: AFFINITY MINING COMPANY /s/ T.L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer ARID OPERATIONS, INC. /s/ Collon Kennedy - ------------------------------------------ Name: Collon Kennedy Title: Vice President, Secretary & General Counsel BIG SKY COAL COMPANY /s/ T.L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Treasurer & Asst. Secretary BLACKROCK FIRST CAPITAL CORPORATION /s/ T.L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer BLUEGRASS COAL COMPANY /s/ John Hill - ------------------------------------------ Name: John Hill Title: President CABALLO COAL COMPANY /s/ Richard Robinson - ------------------------------------------ Name: Richard Robinson Title: Vice President CHARLES COAL COMPANY /s/ T.L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer COAL PROPERTIES CORP. /s/ J.A. Beck - ------------------------------------------ Name: J.A. Beck Title: President COLONY BAY COAL COMPANY By: Charles Coal Company /s/ T.L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer COOK MOUNTAIN COAL COMPANY /s/ J.A. Beck - ------------------------------------------ Name: J.A. Beck Title: President COTTONWOOD LAND COMPANY /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer DARIUS GOLD MINE, INC. /s/ Collon Kennedy - ------------------------------------------ Name: Colon Kennedy Title: Vice President, Secretary & General Counsel EACC CAMPS, INC. /s/ T.L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer EASTERN ASSOCIATED COAL CORP /s/ T.L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer EASTERN ROYALTY CORP. /s/ T.L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer GALLO FINANCE COMPANY /s/ D.A. Wagner - ------------------------------------------ Name: D.A. Wagner Title: President GOLD FIELDS CHILE, S.A /s/ Collon Kennedy - ------------------------------------------ Name: Collon Kennedy Title: Vice President, Secretary & General Counsel GOLD FIELDS MINING CORPORATION /s/ Collon Kennedy - ------------------------------------------ Name: Collon Kennedy Title: Vice President, Secretary & General Counsel GOLD FIELDS OPERATING CO.-ORTIZ /s/ Collon Kennedy - ------------------------------------------ Name: Collon Kennedy Title: Vice President, Secretary & General Counsel GRAND EAGLE MINING, INC. /s/ John Hill - ------------------------------------------ Name: John Hill Title: President HAYDEN GULCH TERMINAL, INC. /s/ D.A. Wagner - ------------------------------------------ Name: D.A. Wagner Title: President INDEPENDENCE MATERIAL HANDLING COMPANY /s/ S. F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer INTERIOR HOLDINGS CORP. /s/ S. F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer JAMES RIVER COAL TERMINAL COMPANY /s/ R. A. Navarre - ------------------------------------------ Name: R.A. Navarre Title: President JUNIPER COAL COMPANY /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer KAYENTA MOBILE HOME PARK, INC. /s/ T. L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Treasurer & Asst. Secretary MARTINKA COAL COMPANY /s/ T. L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer MIDCO SUPPLY AND EQUIPMENT CORPORATION /s/ D. C. Hegger - ------------------------------------------ Name: David C. Hegger Title: President MOUNTAIN VIEW COAL COMPANY /s/ T. L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer NORTH PAGE COAL CORP. /s/ T. L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer OHIO COUNTY COAL COMPANY /s/ John Hill - ------------------------------------------ Name: John Hill Title: President PATRIOT COAL COMPANY L.P. By: Bluegrass Coal Company /s/ John Hill - ------------------------------------------ Name: John Hill Title: President PEABODY AMERICA, INC. /s/ D. C. Hegger - ------------------------------------------ Name: D. C. Hegger Title: President PEABODY COALSALES COMPANY /s/ R.A. Navarre - ------------------------------------------ Name: R.A. Navarre Title: President PEABODY COALTRADE, INC. /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer PEABODY COAL COMPANY /s/ D.A. Wagner - ------------------------------------------ Name: D.A. Wagner Title: Vice President PEABODY DEVELOPMENT COMPANY /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer PEABODY ENERGY SOLUTIONS, INC. /s/ Steven F. Schaab - ------------------------------------------ Name: Steven F. Schaab Title: Vice President & Treasurer PEABODY HOLDING COMPANY, INC. /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer PEABODY NATURAL RESOURCE COMPANY By: Gold Fields Mining Corp. /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer PEABODY TERMINALS, INC. /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer PEABODY VENEZUELA COAL CORP. /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer PEABODY WESTERN COAL COMPANY /s/ D.A. Wagner - ------------------------------------------ Name: D.A. Wagner Title: President PINE RIDGE COAL COMPANY /s/ T.L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer POWDER RIVER COAL COMPANY /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer RIO ESCONDIDO COAL CORP. /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer SENECA COAL COMPANY /s/ D.A. Wagner - ------------------------------------------ Name: D.A. Wagner Title: President SENTRY MINING COMPANY /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer SNOWBERRY LAND COMPANY /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer STERLING SMOKELESS COAL COMPANY /s/ T.L. Bethel - ------------------------------------------ Name: T.L. Bethel Title: Vice President & Treasurer THOROUGHBRED, L.L.C. By: Peabody Holding Company /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer HIGHLAND MINING COMPANY /s/ Joseph C. Klingl - ------------------------------------------ Name: Joseph C. Klingl Title: Vice President PEABODY SOUTHWESTERN COAL COMPANY /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer P&L COAL HOLDINGS CORPORATION /s/ S.F. Schaab - ------------------------------------------ Name: S.F. Schaab Title: Vice President & Treasurer STATE STREET BANK AND TRUST COMPANY as Senior Subordinated Note Trustee /s/ Philip G. Kane, Jr. - ------------------------------------------ Name: Philip G. Kane, Jr. Title: Vice President EX-27 6 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the consolidated balance sheet and consolidated statement of operations as of December 31, 1999 and for the nine months then ended, and is qualified in its entirety by reference to such financial statements. 1000 9-MOS MAR-31-2000 OCT-01-1999 DEC-31-1999 87,493 0 331,366 1,326 235,657 1,513,380 5,146,839 360,870 6,680,031 1,073,449 2,430,070 0 50 197 471,418 6,680,031 1,859,343 1,949,393 1,577,247 1,577,247 0 1,149 150,397 (25,183) (1,238) (32,461) 0 0 0 (32,461) 0 0
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