exv10w3



 





Exhibit 10.3




EXECUTION COPY




SECTION 9711 COAL ACT LIABILITIES

ASSUMPTION AGREEMENT




     This SECTION 9711 COAL ACT LIABILITIES ASSUMPTION AGREEMENT (“Agreement”) is made on the 22nd
day of October, 2007 by and between Peabody Holding Company, LLC (“PHC”), a Delaware limited
liability company with principal offices at 701 Market Street, St. Louis, MO 63101, Patriot Coal
Corporation (“Patriot”), a Delaware corporation with principal offices at 12312 Olive Boulevard,
Suite 400, St. Louis, Missouri, and, solely with respect to its obligations under Section 7 hereof,
Peabody Energy Corporation (“PEC”), a Delaware corporation with principal offices at 701 Market
Street, St. Louis, MO 63101 (each of the foregoing being sometimes referred to hereinafter
individually as “a party” or jointly as “the parties”).



RECITALS




     WHEREAS, contemporaneously herewith, all of the shares of common stock of Patriot have been
distributed to the stockholders of PEC, PHC’s ultimate parent company, and Patriot will indirectly
own all of the capital stock of certain Transferred Companies (as defined below); and



     WHEREAS, the Transferred Companies, as defined below, have obligations to provide healthcare
to eligible retirees and their eligible dependents pursuant to the Coal Act (as defined below); and



     WHEREAS, notwithstanding the transfer of ownership, PHC will remain a “related person” to the
Transferred Companies as the term “related person” is defined in Section 9701 of the Coal Act; and,



     WHEREAS, as a “related person” within the meaning of the Coal Act to the Transferred
Companies, PHC will remain liable for the provision of healthcare benefits to eligible retirees and
their eligible dependents under the Coal Act; and



     WHEREAS, PHC and Patriot desire to provide for the continued payment for the healthcare
benefits in accordance with the requirements of certain provisions of the Coal Act and with the
retiree healthcare plans adopted pursuant to those provisions of the Coal Act;



     WHEREAS, PHC has agreed to assume the liabilities for the provision of such healthcare
benefits; and



     WHEREAS, contemporaneously herewith PHC and Patriot have entered an Administrative Service
Agreement pursuant to which Patriot will take certain actions necessary and appropriate for the
administration of any Coal Act Plans (as defined below) and delivery of benefits constituting
Section 9711 Coal Act Liabilities (as defined below).



     NOW, THEREFORE, in consideration of the mutual promises, covenants and



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agreements contained herein, the parties do hereby agree as follows:




     Section 1. Defined Terms.



     (a) The term “Coal Act” shall mean the Coal Industry Retiree Health Benefit Act of 1992, 26
U.S.C. §§ 9701 — 9722, as may be amended, modified or replaced from time to time.



     (b) The term “Section 9711 Coal Act Liabilities” shall mean amounts the Transferred Companies
are required to pay in order to provide healthcare benefits to those retirees of the Transferred
Companies, identified on Attachment A hereto, and their eligible dependents who, as of the
Effective Date of this Agreement, were receiving benefits from a health plan maintained by the
Transferred Companies pursuant to Section 9711 of the Coal Act and remain eligible for such
benefits. PHC shall not assume liability for payments to any individual not listed on Attachment A
(other than any eligible dependent of an individual listed on Attachment A) and for any individual
listed on Attachment A including any eligible dependent who becomes ineligible for such benefits
(but only for costs arising from and after the time such individual becomes ineligible).



     (c) The term “Coal Act Plan” shall mean a plan for the provision of benefits in accordance
with the Coal Act.



     (d) The term “Effective Date” shall mean the date first hereinabove entered.



     (e) The term “Patriot Group” shall mean Patriot and the Transferred Companies, as defined
herein.



     (f) The term “Transferred Companies” shall mean Affinity Mining Company, Colony Bay Coal
Company, Eastern Associated Coal, LLC, Martinka Coal Company, LLC, Mountain View Coal Company, LLC,
Peabody Coal Company, LLC, Pine Ridge Coal Company, LLC, and Sterling Smokeless Coal Company, LLC,
and each of their respective successors.



     Section 2. Assumption of Section 9711 Coal Act Liabilities.



     (a) PHC assumes, and agrees to pay and discharge when due in accordance herewith, the Section
9711 Coal Act Liabilities.



     (b) Patriot shall instruct each third party administrator to deliver each invoice with respect
to Section 9711 Coal Act Liabilities directly to PHC in accordance with such third party
administrator’s normal billing cycle, and PHC shall pay each such invoice in full (solely to the
extent such amounts relate to the Section 9711 Coal Act Liabilities) by wire transfer in
immediately available funds when due. PHC shall pay the fees of the third-party administrators of
the medical and prescription drug services to the retirees identified on Attachment A when due.
The parties hereto acknowledge that the current practice is to include such fees in the last
invoice of the month related to such medical or prescription drug services.



     Section 3. Mutual Cooperation. Each of PHC and Patriot will use their commercially
reasonable efforts to cooperate with each other to give full effect to the transactions
contemplated by this Agreement. If PHC provides written notice that any amounts were paid under
this



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agreement in excess of the actual Section 9711 Coal Act Liabilities, Patriot will use its
commercially reasonable efforts to recover such excess amounts for PHC’s benefit.




     Section 4. Settlement of Claims. Patriot shall immediately notify PHC when Patriot or
any of its subsidiaries are sued by the UMWA or a former employee or his or her eligible dependents
regarding the Section 9711 Coal Act Liabilities. Patriot may not settle any such dispute without
the prior written consent of PHC, not to be unreasonably withheld or delayed. If Patriot settles
any such claim without the prior written consent of PHC, then PHC shall not be liable for
reimbursement of any amounts paid by Patriot as a result of such un-consented settlement under this
Agreement.



     Section 5. PHC Right to Pursue a Claim or Defense. If PHC determines that Patriot or
any of the Transferred Companies is failing to pursue with reasonable diligence a claim or defense
related to any Section 9711 Coal Act Liabilities, it shall notify Patriot in writing of such
failure. If Patriot fails or refuses to pursue such claim or defense diligently within thirty (30)
days of such notice, then PHC at its option may elect to pursue such claim or defense at its cost
in the name of Patriot or the affected Transferred Company. Any contest assumed by PHC pursuant to
this provision shall be conducted by attorneys employed or retained by PHC (subject to the right of
Patriot to participate in such prosecution or defense at Patriot’s cost) and PHC may settle or
compromise the claim or defense without the consent of Patriot or the affected Transferred Company,
so long as such settlement or compromise does not include any payment or other obligation of
Patriot or its controlled affiliates. PHC, Patriot and the Transferred Companies shall use their
commercially reasonable efforts to cooperate with each other in the continued prosecution or
defense of any such claim, including the provision of witnesses and production of documents.



     Section 6. Maintenance of Books and Records; Inspection. Patriot shall, at all times
during the continuance of this Agreement, maintain full and complete books of account and other
records with respect to all activities under this Agreement including, but not limited to, records
of all payments made in connection with, or as a result of, such activities and all contracts
entered and evaluations performed with respect to payment of Section 9711 Coal Act Liabilities.
PHC shall, at all times during the continuance of this Agreement, have the right to inspect, copy,
and/or audit all account books and other records with respect to this Agreement at Patriot’s
offices and during regular business hours; provided that (i) PHC is not entitled to inspect such
books and records more than once every six months, (ii) PHC shall provide at least forty-eight (48)
hours advance notification, including reasonable detail of the materials to be reviewed, and (iii)
no such inspection or audit shall unreasonably interfere with the normal and regular conduct of
Patriot’s business.



     Section 7. PEC Guarantee. PEC hereby irrevocably and unconditionally guarantees the
prompt and full payment by PHC of all amounts owed by it under this Agreement, subject to its right
of setoff set forth in the Separation Agreement, Plan of Reorganization and Distribution, dated as
of October 22, 2007 (the “Separation Agreement”) by and between PEC and Patriot. Such guaranty
shall be a guaranty of payment and not merely of collection, and shall not be conditioned or
contingent upon the pursuit of any remedies against PHC. The liability of PEC under this guaranty
shall, to the fullest extent permitted under applicable law, be absolute, unconditional and
irrevocable. PEC hereby waives any and all notice of the creation, renewal,



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extension or accrual of any of the guaranteed obligations and notice of or proof of reliance
by Patriot upon this guaranty or acceptance of this guaranty. The guaranteed obligations, and any
of them, shall conclusively be deemed to have been created, contracted or incurred in reliance upon
this guaranty. When pursuing its rights and remedies hereunder against PEC, Patriot shall be under
no obligation to pursue such rights and remedies it may have against PHC or any right of offset
with respect thereto, and any failure by Patriot to pursue such other rights or remedies or to
collect any payments from PHC or to realize upon or to exercise any such right of offset shall not
relieve PEC of any liability hereunder, and shall not impair or affect the rights and remedies,
whether express, implied or available as a matter of law, of Patriot. PEC irrevocably waives
acceptance hereof, presentment, demand, protest, promptness, diligence, obligation to protect,
secure or perfect any security interest and any notice. Patriot shall not be obligated to file any
claim relating to any guaranteed obligation in the event that PHC becomes subject to a bankruptcy,
reorganization or similar proceeding, and the failure of Patriot to so file shall not affect PEC’s
obligations hereunder. In the event that any payment to Patriot in respect of any guaranteed
obligation is rescinded or must otherwise be returned for any reason whatsoever, PEC shall remain
liable hereunder with respect to the guaranteed obligation as if such payment had not been made,
and the guaranty shall be reinstated and shall continue even if otherwise terminated.




     Section 8. Indemnification. PHC agrees that it shall indemnify, defend and hold
harmless Patriot and its respective affiliates and the successors, assigns, employees, officers,
directors and agents of each, from and against any claims, actions or causes of action, damages,
penalties, fines, assessments, attorney fees or other costs or expenses principally resulting from
the failure of PHC to timely pay and discharge the Section 9711 Coal Act Liabilities.



     Section 9. Resolution of Disputes. Any party or parties to a dispute or disagreement
under this Agreement (“Covered Dispute”) (including but not limited to any issue as to the
arbitrability of such Covered Dispute) may give the other parties to the Covered Dispute written
notice of the Covered Dispute initiating the provisions hereunder. Within ten days after delivery
of the notice of a Covered Dispute, the receiving parties shall submit to the other a written
response. The notice and the response shall include a statement of each party’s respective position
and a summary of arguments supporting that position and the name and title of the executive who
will represent the claimants and of any other individual who will accompany such executive in
resolving the Covered Dispute. Within twenty (20) days after delivery of the first notice, such
executives shall meet at a mutually acceptable time and place, and thereafter as often as they
reasonably deem necessary, and shall negotiate in good faith to attempt to resolve the Covered
Dispute. All reasonable requests for information made by one party to the other will be honored.
If the Covered Dispute has not been resolved by negotiation within thirty (30) days of the first
notice of the Covered Dispute, the parties to the Covered Dispute may, by their mutual consent,
submit the Covered Dispute to arbitration in St. Louis, Missouri. Arbitration of any Covered
Dispute shall be conducted in accordance with the Commercial Arbitration Rules of the American
Arbitration Association in effect on the date of the first notice of the Covered Dispute. The
parties agree to use 3 arbitrators for any Covered Dispute in excess of Two Million Dollars
($2,000,000.00). Any decision of the arbitrator (or arbitrators) agreed upon or appointed and
acting pursuant to this Section 9 shall be final and binding upon the parties and judgment may be
entered thereon, upon the application of any of the parties, by any court of competent
jurisdiction. The arbitrator may also award reasonable attorney’s fees and the costs of the
arbitration to the prevailing party. This Section 9 shall not preclude any of the parties from
seeking a temporary



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restraining order, preliminary injunction or other temporary injunctive relief necessary to
enforce this Section 9 or protect rights under this Agreement. If the parties do not mutually
agree to arbitrate the Covered Dispute, the Covered Dispute shall be resolved pursuant to Section
15.08 of the Separation Agreement.




     Section 10. Waiver. The failure of any party to comply with any of its obligations or
agreements or to fulfill any conditions contained in this Agreement may be excused only by a
written waiver from the other parties. Failure by any party to exercise, or delay by any party in
exercising, any right under this Agreement shall not operate as a waiver thereof, nor shall any
single or partial exercise of any right hereunder by a party preclude any other or future exercise
of that right or any other right hereunder by such party.



     Section 11. Notices. All notices, requests or other communications required or
permitted hereunder shall be given in writing by hand delivery, registered mail, certified mail or
overnight courier, return receipt requested, postage prepaid, to the party to receive the same at
its respective address set forth below, or at such other address as may from time to time be
designated by such party to the others in accordance with this Section 11.



If to Patriot, to:




Joseph W. Bean

Senior Vice President, General Counsel and Corporate Secretary

Patriot Coal Corporation

12312 Olive Boulevard, Suite 400

St. Louis, MO 63141

Fax:




If to PHC, to:




Alexander Schoch, Esq.

Executive Vice President Law and Chief Legal Officer

Peabody Holding Company, LLC

701 Market Street

St. Louis, MO 63101

Fax: 314-342-3419



All such notices and communications hereunder shall be deemed given when received, as evidenced by
the acknowledgment of receipt issued with respect thereto by the applicable postal authorities or
the signed acknowledgment of receipt of the person to whom such notice or communication shall have
been addressed or his or her authorized representative.




     Section 12. No Third-Party Beneficiaries. Except for the Transferred Companies,
neither this Agreement nor any provision hereof shall create any right in favor of or impose any
obligation upon any person or entity other than the parties hereto and their respective successors
and permitted assigns. Without limiting the generality of the foregoing, this Agreement is not
intended to, and does not, create any rights, third party or otherwise, on behalf of the United
Mine Workers of America Combined Benefit Fund, the 1992 Fund, the 1993 Fund, the United Mine



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Workers of America, any retiree or dependent, or any other person or individual. No third
party shall be entitled to any subrogation rights with respect to any obligation of any party under
this Agreement.




     Section 13. Captions and Paragraph Headings. Captions and paragraph headings are used
hereinafter for convenience only and are not a part of this Agreement and shall not be used in
construing it.



     Section 14. Entire Agreement. The making, execution and delivery of this Agreement by
the parties has been induced by no representations, statements, warranties or agreements other than
those herein expressed. Notwithstanding any provisions in any other agreement, this Agreement,
together with the Separation Agreement and the other agreements contemplated thereby, including
without limitation the Administrative Services Agreement, dated as of October 22, 2007, by and
between PHC and Patriot, embodies the entire understanding of the parties and their respective
subsidiaries and affiliates relating to the matters set forth herein. This Agreement may be
modified only by a written instrument executed by the parties. The parties make no representation
or warranties with respect to the subject matter of this Agreement not expressly set forth in this
Agreement. This Agreement supersedes and terminates all other discussions, negotiations,
understandings, arrangements and agreements between or among PHC, Patriot, the Transferred
Companies, or any respective affiliated companies, entities or persons relating to the subject
matter hereof.



     Section 15. Assignability. Neither of the parties hereto may assign this Agreement
without the prior written consent of the other parties, which consent will not be unreasonably
withheld or delayed. Any impermissible attempted assignment of this Agreement without such prior
written consent shall be void, and the party assigning or attempting to assign this Agreement shall
remain bound by and obligated by this Agreement as if no assignment or attempted assignment had
occurred.



     Section 16. Successors and Assigns. This Agreement and the provisions hereof shall be
binding upon and inure to the benefit of the respective successors and permitted assigns of the
parties hereto.



     Section 17. Severability. In the event one or more of the provisions of this
Agreement shall, for any reason, be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect the validity, legality or
enforceability of any other provision of this Agreement, and this Agreement shall be construed as
if such invalid, illegal or unenforceable provision was not a part of this Agreement.



     Section 18. Counterparts. This Agreement may be executed in any number of duplicate
counterparts, each of which shall be deemed an original and all of which together shall constitute
one and the same instrument.



     Section 19. Governing Law. The parties hereto have agreed that the validity,
construction, operation and effect of any and all of the terms and provisions of this Agreement
shall be determined and enforced in accordance with the laws and regulations of the State of
Delaware, without giving effect to principles of conflicts of law thereunder.



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     IN WITNESS WHEREOF, the parties hereto have caused this Section 9711 Coal Act Liabilities
Assumption Agreement to be duly executed by one of their respective officers duly authorized and
directed as of the date first written above.



	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	PEABODY HOLDING COMPANY, LLC	 	 	 	PATRIOT COAL CORPORATION	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Richard A. Navarre
	 	 	 	By:
	 	/s/ Richard M. Whiting	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 

	 	Name: Richard A. Navarre
	 	 	 	 	 	Name: Richard M. Whiting	 	 
	 

	 	Title: Executive Vice President
	 	 	 	 	 	Title: President & Chief Financial Officer	 	 






	 	 	 	 	 
	 

	 	 	 	 
	Solely for purposes of Section 7 hereof:
PEABODY ENERGY CORPORATION	 	 
	 
	 	 	 	 
	By:

	 	/s/ Richard A. Navarre	 	 
	 

	 	 	 	 
	 

	 	Name: Richard A. Navarre	 	 
	 

	 	Title: Executive Vice President	 	 







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