exv10w1



 





Exhibit 10.1




EXECUTION COPY




SEPARATION AGREEMENT, PLAN OF REORGANIZATION AND DISTRIBUTION




by and between




PEABODY
ENERGY CORPORATION



and



PATRIOT COAL CORPORATION




Dated as of October 22, 2007










 



 


SEPARATION AGREEMENT, PLAN OF REORGANIZATION AND DISTRIBUTION




	 	 	 	 	 	 	 
	ARTICLE I DEFINITIONS	 	 	1	 
	Section 1.01.
	 	Definitions	 	 	1	 
	ARTICLE II REORGANIZATION; CONVEYANCE OF CERTAIN ASSETS;

ASSUMPTION OF CERTAIN LIABILITIES; CERTAIN PAYMENTS; AND TRANSITION ARRANGEMENTS	 	 	13	 
	Section 2.01.
	 	Reorganization	 	 	13	 
	Section 2.02.
	 	Conveyance of Assets; Discharge of Liabilities	 	 	13	 
	Section 2.03.
	 	Ancillary Agreements	 	 	15	 
	Section 2.04.
	 	Issuance of Patriot Common Stock	 	 	16	 
	Section 2.05.
	 	Resignations	 	 	16	 
	Section 2.06.
	 	Limitation of Liability	 	 	16	 
	Section 2.07.
	 	Novation of Liabilities; Consents	 	 	17	 
	Section 2.08.
	 	Assignment of Promissory Notes	 	 	18	 
	ARTICLE III the DISTRIBUTION	 	 	18	 
	Section 3.01.
	 	Cooperation Prior to the Distribution	 	 	18	 
	Section 3.02.
	 	Conditions Precedent to the Distribution	 	 	19	 
	Section 3.03.
	 	The Distribution	 	 	20	 
	ARTICLE IV COVENANTS	 	 	20	 
	Section 4.01.
	 	Bank Accounts	 	 	20	 
	Section 4.02.
	 	Guaranteed Patriot and PEC Liabilities	 	 	21	 
	Section 4.03.
	 	Insurance	 	 	23	 
	Section 4.04.
	 	No Hire; No Solicit	 	 	26	 
	Section 4.05.
	 	Legal Names and Signage	 	 	26	 
	Section 4.06.
	 	Auditors and Audits; Annual and Quarterly Financial Statements and Accounting	 	 	27	 
	Section 4.07.
	 	No Restrictions on Post-Closing Competitive Activities; Corporate Opportunities	 	 	29	 
	Section 4.08.
	 	Right of Offset	 	 	31	 
	Section 4.09.
	 	[Intentionally Omitted]	 	 	31	 
	Section 4.10.
	 	Prairie State Permits	 	 	31	 
	ARTICLE V LITIGATION MATTERS	 	 	32	 
	Section 5.01.
	 	Case Allocation	 	 	32	 
	Section 5.02.
	 	Litigation cooperation	 	 	34	 
	ARTICLE VI INDEMNIFICATION	 	 	34	 
	Section 6.01.
	 	Patriot Indemnification of the PEC Group	 	 	34	 
	Section 6.02.
	 	PEC Indemnification of Patriot Group	 	 	35	 
	Section 6.03.
	 	Contribution	 	 	35	 
	Section 6.04.
	 	Insurance and Third Party Obligations	 	 	35	 
	Section 6.05.
	 	Indemnification Obligations Net of Insurance Proceeds and Other Amounts on a Net-Tax Basis	 	 	36	 
	Section 6.06.
	 	Notice and Payment of Claims	 	 	36	 
	Section 6.07.
	 	Notice and Defense of Third Party Claims	 	 	37	 
	ARTICLE VII EMPLOYEE MATTERS	 	 	38	 
	Section 7.01.
	 	Employee Matters Agreement	 	 	38	 
	ARTICLE VIII TAX MATTERS	 	 	38	 












 



2


	 	 	 	 	 	 	 
	Section 8.01.
	 	Tax Separation Agreement	 	 	38	 
	ARTICLE IX ACCOUNTING MATTERS	 	 	38	 
	Section 9.01.
	 	Intercompany Accounts	 	 	38	 
	ARTICLE X INTELLECTUAL PROPERTY MATTERS	 	 	39	 
	Section 10.01.
	 	Software License Agreement	 	 	39	 
	ARTICLE XI TRANSITION Services	 	 	39	 
	Section 11.01.
	 	Transition Services Agreement	 	 	39	 
	ARTICLE XII REAL PROPERTY MATTERS	 	 	39	 
	Section 12.01.
	 	Real Property Agreements	 	 	39	 
	ARTICLE XIII INFORMATION; SEPARATION OF DATA	 	 	39	 
	Section 13.01.
	 	Provision of Corporate Records	 	 	39	 
	Section 13.02.
	 	Access to Information	 	 	39	 
	Section 13.03.
	 	Retention of Records	 	 	40	 
	Section 13.04.
	 	Confidentiality	 	 	40	 
	Section 13.05.
	 	Privileged Matters	 	 	41	 
	Section 13.06.
	 	Ownership of Information	 	 	43	 
	Section 13.07.
	 	Separation of Data	 	 	43	 
	ARTICLE XIV INTEREST ON PAYMENTS	 	 	43	 
	Section 14.01.
	 	Interest	 	 	43	 
	ARTICLE XV MISCELLANEOUS	 	 	44	 
	Section 15.01.
	 	Expenses	 	 	44	 
	Section 15.02.
	 	Notices	 	 	44	 
	Section 15.03.
	 	Amendment and Waiver	 	 	45	 
	Section 15.04.
	 	Entire Agreement	 	 	45	 
	Section 15.05.
	 	Consolidation, Merger, Etc.; Parties in Interest; Termination	 	 	45	 
	Section 15.06.
	 	Further Assurances and Consents	 	 	46	 
	Section 15.07.
	 	Severability	 	 	46	 
	Section 15.08.
	 	Governing Law; Jurisdiction	 	 	46	 
	Section 15.09.
	 	Counterparts	 	 	46	 
	Section 15.10.
	 	Third Party Beneficiaries	 	 	46	 
	Section 15.11.
	 	Specific Performance	 	 	46	 
	Section 15.12.
	 	Limitations of Liability	 	 	47	 
	Section 15.13.
	 	Force Majeure	 	 	47	 
	Section 15.14.
	 	Construction	 	 	47	 
	Section 15.15
	 	Disputes	 	 	47	 












 



 


	 	 	 
	Exhibits:	 	 
	 
	 	 
	Exhibit A

	 	Table of Patriot Entities
	Exhibit B

	 	Employee Matters Agreement
	Exhibit C

	 	Real Property Agreements
	Exhibit D

	 	Software License Agreement
	Exhibit E-1

	 	Coal Act Liability Assumption Agreement
	Exhibit E-2

	 	NBCWA Liability Assumption Agreement
	Exhibit E-3

	 	Salaried Employee Liability Assumption Agreement
	Exhibit F

	 	Tax Separation Agreement
	Exhibit G

	 	Transition Services Agreement
	Exhibit H

	 	Master Equipment Sublease Agreement
	Exhibit I

	 	Common Interest Agreement
	Exhibit J-1

	 	Coal Supply Agreement I
	Exhibit J-2

	 	Coal Supply Agreement II
	Exhibit J-3

	 	Master Coal Supply Agreement
	Exhibit K

	 	Administrative Services Agreement
	Exhibit L

	 	TECO Overriding Royalty Agreement
	Exhibit M

	 	DTA Throughput Agreement
	Exhibit 2.01

	 	Restructuring Steps






	 	 	 
	Schedules:	 	 
	 
	 	 
	Schedule 1.1(a)

	 	Assumed Patriot Liabilities
	Schedule 1.1(b)

	 	Patriot Contracts
	Schedule 1.1(c)

	 	Patriot Liabilities
	Schedule 1.1(d)

	 	Patriot Liabilities related to Indebtedness
	Schedule 2.02(g)

	 	Conveyance of Assets
	Schedule 2.06(b)

	 	Limitation of Liability
	Schedule 2.08(a)

	 	Promissory Notes
	Schedule 3.02(q)

	 	Released Obligations
	Schedule 4.01(a)

	 	Patriot Bank Accounts
	Schedule 4.02(a)

	 	Guaranteed Patriot Liabilities
	Schedule 4.02(b)

	 	Guaranteed PEC Liabilities
	Schedule 4.10(a)

	 	Prairie State Reorganization Steps
	Schedule 4.10(b)

	 	Prairie State Permits
	Schedule 5.01(a)

	 	Patriot Actions
	Schedule 5.01(b)

	 	PEC Actions
	Schedule 5.01(e)

	 	Joint Actions
	Schedule 9.01(a)

	 	Intercompany Accounts
	Schedule 15.01

	 	Expenses to be paid by Patriot












 



 


SEPARATION AGREEMENT, PLAN OF REORGANIZATION AND DISTRIBUTION




     SEPARATION AGREEMENT, PLAN OF REORGANIZATION AND DISTRIBUTION (this “Agreement”), dated as of
October 22, 2007, by and between Peabody Energy Corporation, a Delaware corporation (“PEC”) and
Patriot Coal Corporation, a Delaware corporation (“Patriot” and together with PEC, the “Parties”,
and each individually, a “Party”).



RECITALS




     A. Patriot is a wholly-owned subsidiary of PEC formed for the purpose of taking title to the
stock of certain PEC subsidiaries, the assets and liabilities of which constitute the coal mining
business of PEC in West Virginia, all coal mines and certain coal reserves in Kentucky and certain
coal reserves in the states of Ohio and Illinois.



     B. The Board of Directors of PEC has determined that it is in the best interests of PEC and
its shareholders to transfer and assign to Patriot effective at and after the Effective Time (as
defined herein) and as a contribution to the capital of Patriot, the capital stock of the PEC
subsidiaries that currently operate the Patriot Business (as defined herein) as listed in
Exhibit A hereto and certain related assets and to receive in exchange therefor shares of
Patriot Common Stock (as defined herein).



     C. The Board of Directors of PEC has further determined that it is in the best interests of
PEC and its shareholders to make a distribution (the “Distribution”) to the holders of PEC Common
Stock (as defined herein) of all of the outstanding shares of Patriot Common Stock at the rate of
one share of Patriot Common Stock for every ten shares of PEC Common Stock outstanding as of the
Record Date (as defined herein).



     D. The Parties intend that the Contribution (as defined herein) constitute a reorganization
described in Section 368(a)(1)(D) of the Code (as defined herein) and that the Distribution not be
taxable to PEC or its shareholders pursuant to Section 355 of the Code.



     E. The Parties have determined that it is necessary and desirable to set forth the principal
corporate transactions required to effect the Contribution and the Distribution and to set forth
other agreements that will govern certain other matters following the Distribution.



     NOW, THEREFORE, in consideration of the foregoing premises and the mutual agreements and
covenants contained in this Agreement and other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:



ARTICLE I

DEFINITIONS




     Section 1.01. Definitions. As used herein, the following terms have the following
meaning:









 



2


     “Action” means any claim, suit, arbitration, inquiry, proceeding, or investigation by or
before any court, governmental or other regulatory or administrative agency or commission or any
other tribunal.



     “Administrative Services Agreement” means the Administrative Services Agreement, substantially
in the form of Exhibit K hereto, entered into at or prior to the Effective Time, between Patriot
and Peabody Holding Company, LLC, a wholly-owned subsidiary of PEC (“Peabody Holding”), as amended
from time to time.



     “Affiliate” means, when used with respect to a specified Person, a Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or is under common
control with such specified Person. For the purposes of this definition, “control”, when used with
respect to any specified Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person, whether through the
ownership of voting securities or other interests, by contract or otherwise.



     “Ancillary Agreements” means all of the written agreements, instruments, understandings,
assignments and other arrangements (other than this Agreement) entered into in connection with the
transactions contemplated hereby, including, without limitation, the Employee Matters Agreement,
the Tax Separation Agreement, the Transition Services Agreement, the Software License Agreement,
the Real Property Agreements, the Liability Assumption Agreements, the Master Equipment Sublease
Agreement, the Administrative Services Agreement, the Common Interest Agreement, the TECO
Overriding Royalty Agreement, the DTA Throughput Agreement, the Coal Supply Agreements and other
documents relating to the transfer of assets and liabilities in contemplation of the Contribution
and Distribution.



     “Applicable Rate” means the Prime Rate plus 2.0% per annum.



     “Assets” means all properties, rights, contracts, leases and claims, of every kind and
description, wherever located, whether tangible or intangible, and whether real, personal or mixed.



     “Assumed Patriot Liabilities” means those Patriot Liabilities assumed by PEC as set forth on
Schedule 1.1(a).



     “Black Lung Benefit Guarantees” is defined in Section 4.02(a)(iv).



     “Black Lung Benefit Liabilities” means (i) liabilities in respect of the Black Lung Benefits
Revenue Act of 1977 and the Black Lung Benefits Reform Act of 1977, as amended in 1981, and (ii)
liabilities in respect of occupational disease workers compensation liabilities and traumatic
workers compensation liabilities (including, without limitation, in respect of black lung disease)
arising under state law, in each case with respect to any member of the Patriot Group.



     “BofA” is defined in Section 15.01.



     “Claims Administration” means the administration of claims made under the Third Party
Policies, including the reporting of claims to the unaffiliated, third-party insurance carriers
that









 



3

issued the Third Party Policies, management and defense of such claims, negotiating the
resolution of such claims, and providing for appropriate releases upon settlement of such claims.




     “Coal Supply Agreements” means (i) the Coal Supply Agreement I, substantially in the form of
Exhibit J-1 hereto, entered into at or before the Effective Time between COALSALES II, LLC
and Patriot Coal Sales LLC, (ii) the Coal Supply Agreement II, substantially in the form of
Exhibit J-2 hereto, entered into at of before the Effective Time between COALSALES, LLC and
Patriot Coal Sales LLC, and (iii) each agreement entered into by Patriot Coal Sales LLC,
substantially in the form of the Master Coal Supply Agreement attached hereto as Exhibit
J-3, each of which as amended from time to time.



     “Code” means the United States Internal Revenue Code of 1986, as amended.



     “Commission” means Securities and Exchange Commission.



     “Common Interest Agreement” means the Common Interest Agreement, substantially in the form of
Exhibit I hereto, entered into at or prior to the Effective Time, between PEC and Patriot,
as amended from time to time.



     “Confidential Information” means all business or operational information concerning a Party
and/or its subsidiaries (including (i) earnings reports and forecasts, (ii) macro-economic reports
and forecasts, (iii) business and strategic plans, (iv) general market evaluations and surveys, (v)
litigation presentations and risk assessments, (vi) budgets, (vii) financing and credit-related
information, (viii) specifications, ideas and concepts for products and services, (ix) quality
assurance policies, procedures and specifications, (x) customer information, (xi) Software, (xii)
training materials and information, and (xiii) all other know-how, methodology, procedures,
techniques and trade secrets related to design, development and operational processes) which, prior
to or following the Effective Time, has been disclosed by a Party or its subsidiaries to the other
Party or its subsidiaries, in written, oral (including by recording), electronic, or visual form
to, or otherwise has come into the possession of, the other (except to the extent that such
information can be shown to have been (i) in the public domain through no action of such Party or
its subsidiaries or (ii) lawfully acquired from other sources by such Party or its subsidiaries to
which it was furnished; provided, however, in the case of clause (ii) that, to the
furnished Party’s knowledge, such sources did not provide such information in breach of any
confidentiality obligations).



     “Contribution” is defined in Section 2.01.



     “Distribution” is defined in the recitals to this Agreement.



     “Distribution Agent” means American Stock Transfer & Trust Company, in its capacity as agent
for PEC in connection with the Distribution.



     “Distribution Date” means the date upon which the Distribution shall be effective, as
determined by the Board of Directors of PEC, or such committee of such Board of Directors as shall
be designated by the Board of Directors of PEC.









 



4


     “DTA Throughput Agreement” means the Throughput Agreement, substantially in the form of
Exhibit M hereto, entered into at or before the Effective Time between Peabody Terminals,
LLC, James River Coal Terminal, LLC and Patriot Coal Sales LLC, as amended from time to time.



     “Effective Time” means 11:59 p.m. New York time on the Distribution Date.



     “Employee Matters Agreement” means the Employee Matters Agreement, substantially in the form
of Exhibit B hereto, entered into at or prior to the Effective Time between PEC and
Patriot, as amended from time to time.



     “Exchange Act” means the Securities Exchange Act of 1934, as amended.



     “Force Majeure” means, with respect to a Party, an event beyond the reasonable control of such
Party (or any Person acting on its behalf), which by its nature could not have been foreseen by
such Party (or such Person), or, if it could have been foreseen, was unavoidable, and includes acts
of God, storms, floods, earthquakes, hurricanes, riots, pandemics, fires, sabotage, strikes,
lockouts, civil commotion or civil unrest, interference by civil or military authorities, acts of
war (declared or undeclared) or armed hostilities or other national or international calamity or
one or more acts of terrorism.



     “Form 10” means the registration statement on Form 10 filed by Patriot with the Commission to
effect the registration of the Patriot Common Stock pursuant to the Exchange Act, as such
registration statement may be amended from time to time.



     “Fort” is defined in Section 4.09(a).



     “Governmental Entity” means any nation or government, any state, municipality or other
political subdivision thereof and any entity, body, agency, commission, department, board, bureau
or court, whether domestic, foreign or multinational, exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government and any official thereof.



     “Group” means the PEC Group or the Patriot Group, as the context so requires.



     “Guaranteed Patriot Liabilities” means the Patriot Liabilities on which any member of the PEC
Group is an obligor by reason of any guarantee or contractual commitment, including Liabilities
under any contract assumed by any member of the Patriot Group from any member of the PEC Group with
respect to which any member of the PEC Group remains liable.



     “Guaranteed PEC Liabilities” means (i) the PEC Liabilities on which any member of the Patriot
Group is an obligor by reason of any guarantee or contractual commitment, including Liabilities
under any contract assumed by any member of the PEC Group from any member of the Patriot Group with
respect to which any member of the Patriot Group remains liable, and (ii) the Assumed Patriot
Liabilities.



     “Indebtedness” means (i) any indebtedness for borrowed money or the deferred purchase price of
property as evidenced by a note, bonds or other instruments, (ii) obligations as lessee









 



5

under capital leases, (iii) obligations secured by any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind existing on any asset owned or held by any Person, whether
or not such Person has assumed or becomes liable for the obligations secured thereby, (iv) any
obligation under any interest rate swap agreement, (v) accounts payable, (vi) reimbursement
obligations with respect to surety and performance bonds or letters of credit, and (vii)
obligations under direct or indirect guarantees of (including obligations, contingent or otherwise,
to assure a creditor against loss in respect of) indebtedness or obligations of the kinds referred
to in clauses (i), (ii), (iii), (iv), (v) and (vi) above.




     “Indemnifiable Loss” means any and all damage, loss, liability, and expense (including,
without limitation, reasonable expenses of investigation and reasonable attorneys’ fees and
expenses) in connection with any and all Actions or threatened Actions.



     “Information” means information, whether or not patentable or copyrightable, in written, oral,
electronic or other tangible or intangible forms, stored in any medium, including studies, reports,
records, books, contracts, instruments, surveys, discoveries, ideas, concepts, know-how,
techniques, designs, specifications, drawings, blueprints, diagrams, models, prototypes, samples,
flow charts, data, computer data, disks, diskettes, tapes, computer programs or other software,
marketing plans, customer names, communications by or to attorneys (including attorney-client
privileged communications), memos and other materials prepared by attorneys or under their
direction (including attorney work product), communications and materials otherwise related to or
made or prepared in connection with or in preparation for any legal proceeding, and other
technical, financial, employee or business information or data.



     “Information Statement” means the information statement required by the Commission to be sent
to each holder of PEC Common Stock in connection with the Distribution, and prepared in accordance
with the Exchange Act.



     “Insurance Administration” means, with respect to each Third Party Policy: (i) the accounting
for premiums, retrospectively-rated premiums, defense costs, indemnity payments, deductibles and
self-insured retentions, as appropriate, under the terms and conditions of such Third Party Policy;
(ii) the reporting to the relevant unaffiliated, third-party insurer that issues such Third Party
Policy of any losses or claims which may be covered by such Third Party Policy; and (iii) the
distribution of Insurance Proceeds related to such Third Party Policy, subject to the terms of
Section 4.03.



     “Insurance Proceeds” means those monies (i) received by an insured from an unaffiliated
third-party insurer under any Third Party Policy, or (ii) paid by such third-party insurer on
behalf of an insured under any Third Party Policy, in either case net of any applicable premium
adjustment, retrospectively-rated premium, deductible, self-insured retentions, or cost of reserve
paid or held by or for the benefit of such insured.



     “Insured Claims” means those Liabilities that, individually or in the aggregate, are covered
within the terms and conditions of any of the Third Party Policies, whether or not subject to
deductibles, co-insurance, uncollectibility or retrospectively-rated premium adjustments.









 



6


     “Intellectual Property” means all intellectual property and industrial property rights of any
kind or nature, including all United States and foreign (i) patents, patent applications, patent
disclosures, and all related continuations, continuations-in-part, divisionals, reissues,
re-examinations, substitutions and extensions thereof, (ii) Trademarks, (iii) copyrights, whether
statutory or common law, registered or unregistered and published or unpublished, (iv) rights of
publicity, (v) moral rights and rights of attribution and integrity, (vi) rights in Software, (vii)
trade secrets and all other confidential information, know-how, inventions, improvements,
proprietary processes, formulae, models and methodologies, (viii) rights to personal information,
(ix) telephone numbers and internet protocol addresses, (x) rights, priorities and privileges
arising under applicable law in the foregoing and in other similar intangible assets, (xi)
applications and registrations for the foregoing, and (xii) rights and remedies against past,
present, and future infringement, misappropriation, or other violation of the foregoing.



     “Intercompany Accounts” means any receivable, payable or loan between any member of the PEC
Group, on the one hand, and any member of the Patriot Group, on the other hand that exists prior to
the Effective Time and is reflected in the Records of the relevant members of the PEC Group and the
Patriot Group, except for any such receivable, payable or loan that arise pursuant to this
Agreement or any Ancillary Agreement.



     “IRS” means the United States Internal Revenue Service.



     “Joint Action” means any current or future Action with respect to which it is unclear at the
onset of such Action whether Liabilities will arise primarily in connection with the Patriot
Business or the PEC Business, including any of the Actions listed on Schedule 5.01(e).



     “KELLC” is defined in Section 4.09(a).



     “Law” means any United States or non-United States federal, national, supranational, state,
provincial, local or similar statute, law, ordinance, regulation, rule, code, order, requirement or
rule of law (including common law).



     “Liabilities” means any and all claims, debts, liabilities and obligations, absolute or
contingent, matured or not matured, liquidated or unliquidated, accrued or unaccrued, known or
unknown, whenever arising, including all costs and expenses relating thereto, and including,
without limitation, those debts, liabilities and obligations arising under this Agreement or any
Ancillary Agreement, any law, rule, regulation, action, order or consent decree of any governmental
entity or any award of any arbitrator of any kind, and those arising under any contract, commitment
or undertaking.



     “Liability Assumption Agreements” means each of (i) the Coal Act Liability Assumption
Agreement, substantially in the form of Exhibit E-1 hereto, (ii) the NBCWA Liability
Assumption Agreement, substantially in the form of Exhibit E-2 hereto, and (iii) the
Salaried Employee Liability Assumption Agreement, substantially in the form of Exhibit E-3
hereto, in each case entered into at or before the Effective Time between Patriot and Peabody
Holding, as amended from time to time.



     “Master Equipment Sublease Agreement” means the Master Equipment Sublease Agreement,
substantially in the form of Exhibit H hereto, entered into at or before the Effective









 



7

Time between PEC Equipment Company, LLC and Patriot Leasing Company LLC, as amended from time
to time.




     “NYSE” means the New York Stock Exchange.



     “Other Party’s Marks” is defined in Section 4.05(a).



     “Party” is defined in the preamble to this Agreement.



     “Patriot” is defined in the preamble to this Agreement.



     “Patriot Accounts” is defined in Section 4.01(a).



     “Patriot Action” means any current or future Action relating primarily to the Patriot Business
in which one or more members of the PEC Group is a defendant or the party against whom a claim or
investigation is directed, including any of the Actions listed on Schedule 5.01(a), but
excluding any Joint Action.



     “Patriot Articles” means the articles of incorporation of Patriot in the form filed as an
exhibit to the Form 10 at the time it becomes effective.



     “Patriot Assets” means:



          (a) the capital stock or partnership interest, as applicable, of any of the entities listed
in Exhibit A;




          (b) the Real Property Assets;




          (c) the Patriot Contracts; and




          (d) except as otherwise provided in an Ancillary Agreement, all Assets that are (i) owned of
record or held in the name of a member of the Patriot Group on the Distribution Date, (ii) treated
for internal financial reporting purposes of PEC prior to the Distribution Date or on the Patriot
Business Balance Sheet as owned by a member of the Patriot Group, (iii) on the Distribution Date
used exclusively by one or more members of the Patriot Group, or (iv) transferred to a member of
the Patriot Group pursuant to any Ancillary Agreement.




     “Patriot Business” means the business comprised of the Patriot Assets and the Patriot
Liabilities.



     “Patriot Business Balance Sheet” means the consolidated balance sheet of the Patriot Group as
of the Effective Time, which balance sheet shall be prepared by PEC on a basis consistent with
PEC’s historical practices for the preparation of subsidiary balance sheets.



     “Patriot Bylaws” means the bylaws of Patriot in the form filed as an exhibit to the Form 10 at
the time it becomes effective.









 



8


     “Patriot Common Stock” means the outstanding shares of common stock, $.01 par value, of
Patriot.



     “Patriot Contracts” means the following agreements or arrangements to which PEC or any of its
Affiliates is a party or by which it or any of its Affiliates or any of their respective Assets is
bound, except for any such agreement or arrangement or part thereof (i) that is expressly
contemplated not to be transferred or assigned by any member of the PEC Group to Patriot, or (ii)
that is expressly contemplated to be transferred or assigned to (or remain with) any member of the
PEC Group, in each case, pursuant to any provision of this Agreement or any Ancillary Agreement:




     (i) any agreement or arrangement entered into in the name of, or expressly on behalf
of, any division, business unit or member of the Patriot Group;




     (ii) any agreement or arrangement that relates primarily to the Patriot Business;




     (iii) any agreement or arrangement representing capital or lease obligations of
facilities or equipment primarily used by any member of the Patriot Group;




     (iv) any agreement or arrangement or part thereof that is otherwise expressly
contemplated pursuant to this Agreement or any of the Ancillary Agreements to be retained
by, transferred or assigned to, any member of the Patriot Group;




     (v) any guarantee, indemnity, representation or warranty of any member of the Patriot
Group; and




     (vi) the agreements or arrangements listed or described on Schedule 1.1(b).



     “Patriot Group” means Patriot and any of the entities listed in Exhibit A, any of their
respective subsidiaries and any subsidiary or division of any member of the PEC Group that is
included in the assets of the Patriot Business as reflected in the pro forma combined balance sheet
of Patriot as of June 30, 2007 contained in the Information Statement.



     “Patriot Liabilities” means:




     (i) the Liabilities listed or described on Schedule 1.1(c) and any and all
Liabilities that are expressly contemplated by this Agreement or any Ancillary Agreement as
Liabilities to be retained, assumed or retired by any member of the Patriot Group;




     (ii) any and all Liabilities of PEC, Patriot, or any of their respective Affiliates,
primarily relating to, arising out of or resulting from:




     (A) the operation or conduct of the Patriot Business, as conducted at any time
prior to, or the ownership or use of the Patriot Assets, on or after the Effective
Time (including any Liability relating to, arising out of or resulting from any act
or failure to act by any director, officer, employee, agent or representative of
PEC, Patriot, or any of their respective Affiliates (whether or not such act or
failure to act is or was within such Person’s authority)); or









 



9



     (B) the operation or conduct of any business conducted by any member of the
Patriot Group at any time after the Effective Time (including any Liability relating
to, arising out of or resulting from any act or failure to act by any director,
officer, employee, agent or representative of Patriot, or any of its Affiliates
after the Effective Time (whether or not such act or failure to act is or was within
such Person’s authority));




     (iii) except as otherwise expressly provided in this Agreement or any Ancillary
Agreement, Liabilities set forth on the Patriot Business Balance Sheet;




     (iv) any and all Liabilities to the extent relating to, arising out of or resulting
from any terminated, sold, discontinued or divested entity, business, real property, or
Asset formerly and primarily owned or managed by, or associated with any member of the
Patriot Group or the Patriot Business, or arising out of the sale thereof;




     (v) any Liabilities relating to or arising out of the acquisition (whether through an
acquisition of stock or assets or a merger, share exchange or other form of business
combination) of any business prior to the Effective Time by any member of the Patriot Group,
except to the extent such Liabilities arise out of or are based upon the issuance of
securities of PEC in any such business combination transaction;




     (vi) Liabilities arising under or in connection with the Form 10, except to the extent
such Liabilities arise out of or are based upon information about PEC included in the
sections of the Information Statement attached as Exhibit 99.1 to the Form 10 entitled
“Summary—Our Company,” Summary—Summary of the Spin-Off,” and “The Spin-Off—Reasons for the
Spin-Off;”




     (vii) any and all Liabilities, including those Liabilities listed on Schedule
1.1(d), relating to, arising out of or resulting from any Indebtedness (including debt
securities and asset-backed debt) of any member of the Patriot Group (whether incurred prior
to, on or after the Effective Time);




     (viii) any and all Liabilities of the guarantor under the Guaranteed Patriot
Liabilities;




     (x) any and all Liabilities relating to, resulting from, or arising out of any Action
that is primarily related to the Patriot Business, including any Patriot Action;




     (xi) any and all obligations of an insured Person under each Third Party Patriot Policy
and each Third Party Policy to the extent related to or arising out of the Patriot Business;
and




     (xii) any and all obligations relating to (A) labor or Mine Safety and Health
Administration matters arising out of the operations of PCC at Randolph South prior to the
Distribution Date or (B) labor matters arising out of the operations of PCC at Randolph
North prior to the Distribution Date.




Notwithstanding the foregoing, the Patriot Liabilities shall in any event not include:









 



10



     (A) any Liabilities that are expressly contemplated by this Agreement or any Ancillary
Agreement as Liabilities to be retained or assumed by any member of the PEC, including any
Liabilities set forth on Schedule 1.1(a) or any Liabilities that are the subject of
the Liability Assumption Agreements;




     (B) any Liabilities related or attributable to, or arising in connection with, the
employment, service, termination of employment or termination of service of Patriot
employees, which shall be exclusively governed by the Employee Matters Agreement;




     (C) any Liabilities related or attributable to, or arising in connection with, Taxes or
Tax returns, which shall be exclusively governed by the Tax Separation Agreement; and




     (D) the Assumed Patriot Liabilities and any Liabilities of the guarantor under the
Guaranteed PEC Liabilities.



     FOR THE AVOIDANCE OF DOUBT, NO LIABILITY SHALL BE A PATRIOT LIABILITY SOLELY AS A RESULT OF
PATRIOT OR ANY OTHER MEMBER OF THE PATRIOT GROUP BEING NAMED AS PARTY TO, OR IN, ANY ACTION.



     “Patriot Revolving Credit Agreement” means the Revolving Credit Agreement among various
lenders and Patriot, which provides for up to $500 million of availability.



     “PCC” shall mean Peabody Coal Company, LLC.



     “PEC” is defined in the preamble to this Agreement.



     “PEC Accounts” is defined in Section 4.01(a).



     “PEC Action” means any current or future Action that does not relate primarily to the Patriot
Business and in which one or more members of the Patriot Group is a defendant or the party against
whom any claim or investigation is directed, including any of the Actions listed on Schedule
5.01(b), but excluding any Joint Action.



     “PEC Asset” means:



          (a) the capital stock of each member of the PEC Group; and




          (b) except as otherwise provided in an Ancillary Agreement, all Assets of any member of the
PEC Group or the Patriot Group that are not Patriot Assets.




     “PEC Business” means the business now or formerly conducted by PEC and its present and former
subsidiaries, joint ventures and partnerships, other than the Patriot Business.



     “PEC Common Stock” means the outstanding shares of common stock, $0.01 par value, of PEC.









 



11


     “PEC Group” means PEC and its subsidiaries, joint ventures and partnerships, excluding any
member of the Patriot Group.



     “PEC Liabilities” means (i) Liabilities of any member of the PEC Group under this Agreement or
any Ancillary Agreement, (ii) the Assumed Patriot Liabilities, (iii) any other Liabilities of any
member of the Patriot Group or the PEC Group, whether arising before, at, or after the Effective
Time, that do not constitute Patriot Liabilities and (iv) any and all obligations relating to (A)
permit or environmental matters, or other reclamation liabilities, relating to Randolph South or
Randolph North, whether arising prior to or subsequent to the Distribution, (B) permit matters
arising out of the operations by any member of the Peabody Group under any of the permits set forth
on Schedule 4.10(b) subsequent to the Distribution Date but prior to the transfer of all
the permits set forth on Schedule 4.10(b) to a member of the Peabody Group or (C) the
requirement of Patriot or any of its Affiliates, including PCC, to make any payment under the
Prairie State Bonds after the Distribution Date as a result of either (1) the failure of PEC or any
of its Affiliates to meet its obligations underlying the Prairie State Bonds or (2) the failure of
PCC or any of its Affiliates to be fully released from the Prairie State Bonds.



     “Person” means any natural person, firm, individual, corporation, business trust, joint
venture, association, company, limited liability company, partnership or other organization or
entity, whether incorporated or unincorporated, or any Governmental Entity.



     “Plan” shall have the meaning set forth in the Employee Matters Agreement.



     “Policies” means insurance policies and insurance agreements or arrangements of any kind
(other than life and benefits policies, agreements or arrangements), including primary, excess and
umbrella policies, comprehensive general liability policies, director and officer liability,
fiduciary liability, automobile, aircraft, property and casualty, business interruption, workers’
compensation and employee dishonesty insurance policies, bonds and self-insurance company
arrangements, together with the rights, benefits and privileges thereunder.



     “Prairie State Bonds” is defined in Section 4.10(a).



     “Prime Rate” means the rate of interest announced by Bank of America, Inc. from time to time
as its “prime rate,” “prime lending rate,” “base rate” or similar reference rate. In the event the
Prime Rate is discontinued as a standard, the holder hereof shall designate a comparable reference
rate as a substitute therefor. For purposes hereof, the Prime Rate in effect at the close of
business on each business day of Bank of America, Inc. shall be the Prime Rate for that day and any
immediately succeeding non-business day or days.



     “Real Property Agreements” means all deeds, subleases, releases, assignments, consents and
agreements relating to the conveyance to Patriot of the Real Property Assets and the division of
real property and interests therein between members of the PEC Group and members of the Patriot
Group entered into as of or prior to the Distribution Date substantially in the form of Exhibit
C hereto, in each case as amended from time to time.



     “Real Property Assets” means the real property owned or controlled by the PEC Group which
shall be conveyed to the Patriot Business and conveyed by Patriot to the PEC Group pursuant to the
Real Property Agreements.









 



12


     “Record Date” means the date designated by or under the authority of PEC’s Board of Directors
as the record date for determining the shareholders of PEC entitled to receive the Distribution.



     “Records” means any agreements, documents, books, records or files.



     “Securities Act” means the Securities Act of 1933, as amended.



     “Sell Agreement” is defined in Section 4.09(a).



     “Senior Credit Facility” means the Senior Secured Credit Facility to be entered into by
Patriot in connection with the Distribution, as amended, restated, modified, renewed, refunded
replaced or refinanced in whole or in part from time to time.



     “Snowberry” is defined in Section 2.08(a).



     “Software” means all computer programs (whether in source code, object code, or other form),
algorithms, databases, compilations and data, and technology supporting the foregoing, and all
documentation, including flowcharts and other logic and design diagrams, technical, functional and
other specifications, and user and training materials related to any of the foregoing.



     “Software License Agreement” means the Software License Agreement, substantially in the form
of Exhibit D hereto, entered into at or before the Effective Time between PEC and Patriot,
as amended from time to time.



     “Tax” shall have the meaning given to such term in the Tax Separation Agreement.



     “Tax Separation Agreement” means the Tax Separation Agreement, substantially in the form of
Exhibit F hereto, entered into at or before the Effective Time between PEC and Patriot, as
amended from time to time.



     “TECO Overriding Royalty Agreement” means the Cooperation Agreement and Ratification of
Assignment of Overriding Royalty Interest Payment Obligations to Tampa Electric Company – Henderson
Reserves, substantially in the form of Exhibit L hereto, entered into at or prior to the
Effective Time, between PCC, Highland Mining Company, LLC and Midwest Coal Reserves of Kentucky,
LLC.



     “Third Party Claim” means a claim or demand made against a PEC Indemnitee or a Patriot
Indemnitee by any Person who is not a Party or an Affiliate of a Party as to which such PEC
Indemnitee or Patriot Indemnitee, as applicable, is or may be entitled to indemnification pursuant
to this Agreement.



     “Third Party Patriot Policies” means all Policies, whether or not in force on the Effective
Time, issued by unaffiliated third-party insurers to PEC, Patriot, or any of their respective
Affiliates that cover risks that relate exclusively to the Patriot Business.









 



13


     “Third Party Policies” means all Policies, whether or not in force on the Effective Time,
issued by unaffiliated third-party insurers to PEC, Patriot or any of their respective Affiliates
that cover risks that relate to both the PEC Business and the Patriot Business.



     “Trademarks” means all United States and foreign trademarks, service marks, corporate names,
trade names, domain names, logos, slogans, designs, trade dress and other similar identifiers of
source or origin, whether registered or unregistered, together with the goodwill connected with the
use of and symbolized by any of the foregoing.



     “Transition Services Agreement” means the Transition Services Agreement, substantially in the
form of Exhibit G hereto, entered into at or prior to the Effective Time between PEC and
Patriot, as amended from time to time.



ARTICLE II

REORGANIZATION; CONVEYANCE OF CERTAIN ASSETS;

ASSUMPTION OF CERTAIN LIABILITIES;

CERTAIN PAYMENTS; AND TRANSITION ARRANGEMENTS




          Section 2.01. Reorganization. Prior to the Distribution Date PEC shall, and shall
cause its respective subsidiaries to, use commercially reasonable efforts to complete the
reorganization steps described in Exhibit 2.01 hereto. On or prior to the Distribution Date
and effective as of the Effective Time, PEC shall contribute to Patriot all of the Patriot Assets
in exchange for a number of shares of Patriot Common Stock that when combined with the shares of
Patriot Common Stock already owned by PEC shall equal all the shares to be distributed as provided
in Section 3.03 below (the “Contribution”).




          Section 2.02. Conveyance of Assets; Discharge of Liabilities. Except as otherwise
expressly provided herein or in any of the Ancillary Agreements:




          (a) Effective as of the Effective Time (i) all Patriot Assets are intended to be and shall
become Assets of the Patriot Group, (ii) all Patriot Liabilities are intended to be and shall
become the Liabilities of the Patriot Group, and (iii) all other Assets and Liabilities of PEC and
its subsidiaries are intended to be and shall remain exclusively the Assets and Liabilities of the
PEC Group.




          (b) Effective as of the Effective Time, PEC agrees to transfer or cause to be transferred to
Patriot or to such other members of the Patriot Group as Patriot may designate all right, title
and interest of the PEC Group in and to all of the Patriot Assets.




          (c) Patriot agrees that, effective as of the Effective Time, it will transfer or cause to be
transferred to PEC or to such other member of the PEC Group as PEC may designate all right, title
and interest of the Patriot Group in and to all Assets that are not Patriot Assets.




          (d) Patriot agrees that it will, or will cause another member of the Patriot Group designated
by Patriot to, (i) assume any of the Patriot Liabilities for which a member of the Patriot Group
is not the obligor, effective as of the Effective Time, and (ii) timely pay and discharge all of
the Patriot Liabilities, at and after the Effective Time.










 



14




          (e) PEC agrees that it will, or will cause another member of the PEC Group designated by PEC
to, (i) assume any of the PEC Liabilities for which a member of the PEC Group is not the obligor,
effective as of the Effective Time, and (ii) timely pay and discharge all of the PEC Liabilities,
at and after the Effective Time.




          (f) PEC agrees that, on the Distribution Date, it will, or will cause another member of the
PEC Group designated by PEC to, make to Patriot a payment of $19,407,495.24 in respect of the
Black Lung Case and an additional cash contribution of $30,000,000.




          (g) In the event that any conveyance of an Asset, including conveyance of any Asset listed in
Schedule 2.02(g), required hereby is not effected at or before the Effective Time, the
obligation to transfer such Asset shall continue past the Effective Time and shall be accomplished
as soon thereafter as practicable.




          (h) If any Asset may not be transferred by reason of the requirement to obtain the consent of
any third party and such consent has not been obtained by the Effective Time, then (unless
otherwise expressly agreed by PEC and Patriot) such Asset shall not be transferred until such
consent has been obtained. PEC and Patriot, as the case may be, shall (i) cause the owner of such
Asset to use commercially reasonable efforts to provide to the appropriate member of the other
Group all the rights and benefits under such Asset, (ii) cause such owner to enforce such Asset
for the benefit of such member, and (iii) cause such member to assume all obligations of such
Asset, in each case to the extent that such action does not cause a breach or default under such
Asset. Both parties shall otherwise cooperate and use commercially reasonable efforts to provide
the economic and operational equivalent of an assignment or transfer of the Asset as of the
Effective Time.




          (i) From and after the Effective Time, each Party shall promptly transfer or cause the
members of its Group promptly to transfer to the other Party or the appropriate member of the
other Party’s Group, from time to time, any property received that is an Asset of the other Party
or a member of its Group. Without limiting the foregoing, funds received by a member of one Group
upon the payment of accounts receivable that belong to a member of the other Group shall be
transferred to the other Group by wire transfer as promptly as practicable after the receiving
party becomes aware of having received such funds.




          (j) Except as expressly set forth in this Agreement, any Ancillary Agreement, or any
instrument or document contemplated by this Agreement or any Ancillary Agreement, neither any
member of the PEC Group nor any member of the Patriot Group has made or shall be deemed to have
made any representation or warranty as to (i) the Assets, business or Liabilities retained,
transferred or assumed as contemplated hereby or thereby, (ii) any consents or approvals required
in connection with the transfer or assumption by such party of any Asset or Liability contemplated
by this Agreement, (iii) the value or freedom from any lien, claim, equity or other encumbrance
of, or any other matter concerning, any Assets of such Party, (iv) the absence of any defenses or
right of setoff or freedom from counterclaim with respect to any claim or other Asset of such
Party, or (v) the legal sufficiency of any assignment, document or instrument delivered to convey
title to any Asset transferred. EXCEPT AS MAY BE EXPRESSLY SET FORTH IN THIS AGREEMENT OR ANY
ANCILLARY AGREEMENT, ALL ASSETS WERE, OR ARE BEING, TRANSFERRED,









 



15


OR ARE BEING RETAINED, ON AN “AS IS”, “WHERE IS” BASIS AND THE RESPECTIVE TRANSFEREES WILL
BEAR THE ECONOMIC AND LEGAL RISKS THAT ANY CONVEYANCE OR OTHER TRANSFER SHALL PROVE TO BE
INSUFFICIENT TO VEST IN THE TRANSFEREE A TITLE THAT IS FREE AND CLEAR OF ANY LIEN, CLAIM, EQUITY
OR OTHER ENCUMBRANCE.




          Section 2.03. Ancillary Agreements. Concurrently with the execution of this Agreement,
PEC and Patriot (or their appropriate subsidiaries) will execute and deliver:




               (a) A duly executed Employee Matters Agreement substantially in the form of Exhibit B
hereto;



               (b) A duly executed copy of each of the Real Property Agreements substantially in the form of
Exhibit C hereto;



               (c) A duly executed Software License Agreement substantially in the form of Exhibit D
hereto;



               (d) A duly executed copy of each of the Liability Assumption Agreements substantially in the
form of Exhibits E-1, E-2 or E-3, as applicable;



               (e) A duly executed Tax Separation Agreement substantially in the form of Exhibit F
hereto;



               (f) A duly executed Transition Services Agreement substantially in the form of Exhibit
G hereto;



               (g) A duly executed Master Equipment Sublease Agreement substantially in the form of
Exhibit H hereto;



               (h) A duly executed Common Interest Agreement substantially in the form of Exhibit I
hereto;



               (i) A duly executed copy of each of the Coal Supply Agreements, substantially in the form of
Exhibits J-1, J-2 or J-3, as applicable;



               (j) A duly executed Administrative Services Agreement, substantially in the form of
Exhibit K hereto;



               (k) A duly executed TECO Overriding Royalty Agreement, substantially in the form of
Exhibit L hereto;



               (l) A duly executed DTA Throughput Agreement, substantially in the form of Exhibit M
hereto; and



               (m) Such other agreements, leases, subleases, documents, or instruments as the Parties may
agree are necessary or desirable in order to achieve the purposes hereof.









 



16


          Section 2.04. Issuance of Patriot Common Stock. On or before the Distribution Date,
and in exchange for the transfer by PEC to Patriot of the stock and assets as provided above, and
the surrender for reissue of all certificates representing outstanding Patriot Common Stock,
Patriot will issue and deliver to PEC a certificate representing shares of Patriot Common Stock
constituting all the shares to be distributed as provided in Section 3.03 below.




          Section 2.05. Resignations.




               (a) On the Distribution Date, Patriot will deliver or cause to be delivered to PEC
resignations of each individual who will be an employee of Patriot or another member of the
Patriot Group from and after the Distribution Date and who is an officer or director of PEC or any
of its subsidiaries or affiliates not constituting a member of the Patriot Group immediately prior
to the Distribution Date.



               (b) On the Distribution Date, PEC will deliver or cause to be delivered to Patriot
resignations of each individuals who will be an employee of PEC or another member of the PEC Group
from and after the Distribution Date and who is an officer or director of Patriot or any of its
subsidiaries or affiliates not constituting a member of the PEC Group immediately prior to the
Distribution Date.



          Section 2.06. Limitation of Liability.




               (a) Except as otherwise expressly provided in this Agreement, no Party or any member of such
Party’s Group shall have any Liability to any other Party or any member of each other Party’s
Group in the event that any Information exchanged or provided pursuant to this Agreement (but
excluding any such information included in the Form 10) which is an estimate or forecast, or which
is based on an estimate or forecast, is found to be inaccurate.



               (b) Except as provided in Section 4.02, Section 9.01 or as set forth in subsection (c) below,
neither Party nor any member of such Party’s Group shall have any Liability to any other Party or
any member of such other Party’s Group based upon, arising out of or resulting from any agreement,
arrangement, course of dealing or understanding existing on or prior to the Effective Time (other
than this Agreement or any Ancillary Agreement or any agreement entered into in connection
herewith or therewith in order to consummate the transactions contemplated hereby or thereby), and
each Party hereby terminates, and shall cause all members in its Group to terminate, any and all
agreements, arrangements, course of dealings or understandings between it or any members in its
Group and the other Party, or any members of its Group, effective as of the Effective Time (other
than this Agreement or any Ancillary Agreement or any agreement entered into in connection
herewith or in order to consummate the transactions contemplated hereby or thereby), unless such
agreement, arrangement, course of dealing or understanding is set forth in any Ancillary Agreement
or on Schedule 2.06(b), and any such Liability, whether or not in writing, which is not
reflected in any Ancillary Agreement or on such Schedule, is hereby irrevocably cancelled,
released and waived effective as of the Effective Time. No such terminated agreement, arrangement,
course of dealing or understanding (including any provision thereof which purports to survive
termination) shall be of any further force or effect after the Effective Time.









 



17


               (c) The provisions of Section 2.06(b) shall not apply to any of the following agreements,
arrangements, course of dealings or understandings (or to any of the provisions thereof):




          (i) any agreement or arrangement to which any Person other than the Parties and their
respective Affiliates is a Party (it being understood that to the extent that the rights and
obligations of the Parties and the members of their respective Groups under any such
agreements or arrangements constitute PEC Assets or Patriot Assets, PEC Liabilities, or
Patriot Liabilities, such agreements or arrangements shall be assigned or retained pursuant
to this Article II); and




          (ii) any agreements, arrangements, commitments or understandings to which any
non-wholly-owned subsidiary or non-wholly-owned Affiliate of PEC or Patriot is a Party.



          Section 2.07. Novation of Liabilities; Consents.




               (a) Each Party, at the request of the other Party, shall use commercially reasonable efforts
to obtain, or to cause to be obtained, any consent, release, substitution or amendment required to
novate or assign all obligations under agreements, arrangements, licenses and other obligations or
Liabilities for which a member of such Party’s Group and a member of the other Party’s Group are
jointly or severally liable and that do not constitute Liabilities of such other Party as provided
in this Agreement (such other Party, the “Other Party”), or to obtain in writing the unconditional
release of all parties to such arrangements (other than any member of the Group who assumed or
retained such Liability as set forth in this Agreement), so that, in any such case, the members of
the applicable Group will be solely responsible for such Liabilities; provided,
however, that no Party shall be obligated to pay any consideration therefor to any third
party from whom any such consent, substitution or amendment is requested (unless such Party is
fully reimbursed by the requesting Party).



               (b) If the Parties are unable to obtain, or to cause to be obtained, any such required
consent, release, substitution or amendment, the Other Party or a member of such Other Party’s
Group shall continue to be bound by such agreement, arrangement, license or other obligation that
does not constitute a Liability of such Other Party and, unless not permitted by Law or the terms
thereof, as agent or subcontractor for such Party, the Party or member of such Party’s Group who
assumed or retained such Liability as set forth in this Agreement (the “Liable Party”) shall, or
shall cause a member of its Group to, pay, perform and discharge fully all the obligations or
other Liabilities of such Other Party or member of such Other Party’s Group thereunder from and
after the Effective Time; provided, however, that the Other Party shall not be
obligated to extend, renew or otherwise cause such agreement, arrangement, license or other
obligation to remain in effect beyond the term in effect as of the Effective Time. The Liable
Party shall indemnify each Other Party and the members of such Other Party’s Group and hold each
of them harmless against any and all Liabilities arising in connection therewith;
provided, that the Liable Party shall have no obligation to indemnify the Other Party or
any member of such Other Party’s Group with respect to any matter to the extent that such Other
Party has engaged in any knowing violation of Law, fraud or misrepresentation in connection
therewith. The Other Party shall, without further









 



18

consideration, promptly pay and remit, or cause to be promptly paid or remitted, to the
Liable Party or to another member of the Liable Party’s Group, all money, rights and other
consideration received by it or any member of its Group in respect of such performance by the
Liable Party (unless any such consideration is an Asset of such Other Party pursuant to this
Agreement). If and when any such Consent, release, substitution or amendment shall be obtained or
such agreement, lease, license or other rights or obligations shall otherwise become assignable or
able to be novated, the Other Party shall promptly assign, or cause to be assigned, all rights,
obligations and other Liabilities thereunder of any member of such Other Party’s Group to the
Liable Party or to another member of the Liable Party’s Group without payment of any further
consideration and the Liable Party, or another member of such Liable Party’s Group, without the
payment of any further consideration, shall assume such rights and Liabilities.




          Section 2.08. Assignment of Promissory Notes.




               (a) On the Distribution Date, PEC will assign to Snowberry Land Company (“Snowberry”), a
Delaware corporation and a member of the Patriot Group all of its rights as the payee under those
promissory notes listed on Schedule 2.08(a).



               (b) On the Distribution Date, PEC will cause Peabody Investments Corp., a Delaware
corporation and a member of the PEC Group, to assign to Patriot or a designated member of the
Patriot Group all of its rights as lender and payee under the Loan Agreement, dated June 15, 2006,
with Kanawha Eagle Coal, LLC, as the borrower.



ARTICLE III

THE DISTRIBUTION




          Section 3.01. Cooperation Prior to the Distribution.




               (a) PEC and Patriot shall prepare, and PEC shall mail to the holders of PEC Common Stock, the
Information Statement, which shall set forth appropriate disclosure concerning Patriot, the
Distribution and any other appropriate matters. PEC and Patriot shall also prepare, and Patriot
shall file with the Commission, the Form 10, which shall include the Information Statement. PEC
and Patriot shall use commercially reasonable efforts to cause the Form 10 to become effective
under the Exchange Act.



               (b) PEC shall, as the sole shareholder of Patriot, approve and adopt the Patriot employee
benefit plans contemplated by the Employee Matters Agreement and PEC and Patriot shall cooperate
in preparing, filing with the Commission under the Securities Act and causing to become effective
not later than the Distribution Date any registration statements or amendments thereto that are
appropriate to reflect the establishment of or amendments to any employee benefit plan of Patriot
contemplated by the Employee Matters Agreement, including without limitation, a Form S-8 with
respect thereto.



               (c) PEC and Patriot shall take all such action as may be necessary or appropriate under the
securities or blue sky laws of states or other political subdivisions of the United States in
connection with the transactions contemplated by this Agreement or any Ancillary Agreement.









 



19


               (d) Patriot shall prepare, file, and use all reasonable efforts to cause to be approved prior
to the Record Date, the application to permit listing of the Patriot Common Stock on the New York
Stock Exchange.



               (e) PEC and Patriot shall take all such actions as may be deemed reasonably necessary to
secure a favorable ruling from the IRS that the Distribution is not taxable to PEC or its
shareholders pursuant to Section 355 of the Code.



          Section 3.02. Conditions Precedent to the Distribution. In no event shall the
Distribution occur unless the following conditions shall have been satisfied or, in the case of any
condition other than the condition set forth in Section 3.02(q) below, waived by PEC:




               (a) PEC’s Board of Directors or a duly appointed committee thereof, shall, in its sole
discretion, have established the Record Date and the Distribution Date and any appropriate
procedures in connection with the Distribution;



               (b) all necessary regulatory approvals shall have been received;



               (c) the Information Statement shall have been mailed to the holders of PEC Common Stock;



               (d) the Form 10 shall have become effective under the Exchange Act, and all registration
statements referred to under Section 3.01(b) shall have become effective under the Securities Act;



               (e) the Patriot Board of Directors, as named in the Form 10, shall have been elected by PEC,
as sole shareholder of Patriot, and the Patriot Articles and Patriot Bylaws shall have been
adopted and be in effect;



               (f) the Patriot Common Stock shall have been approved for listing on the New York Stock
Exchange, subject to official notice of issuance;



               (g) PEC and Patriot shall have taken all such action as may be necessary or appropriate under
the securities or blue sky laws of states or other political subdivisions of the United States in
connection with the transactions contemplated by this Agreement or any Ancillary Agreement;



               (h) PEC shall have received a favorable private letter ruling from the IRS that the
Contribution constitutes a reorganization pursuant to Section 368(a)(1)(D) of the Code and that
the Distribution will not be taxable to PEC or its shareholders pursuant to Section 355 of the
Code, and such ruling shall continue in effect;



               (i) Patriot shall have entered into the Patriot Revolving Credit Agreement;



               (j) PEC shall have received a tax opinion from Ernst & Young LLP, in form and substance
satisfactory to PEC;









 



20


               (k) PEC shall have received a solvency opinion from Duff & Phelps, in form and substance
satisfactory to PEC, regarding Patriot after the Distribution;



               (l) Patriot shall have established insurance arrangements with insurers of recognized
financial responsibility for Policies in such amounts and covering such risks as is adequate for
the conduct of the Patriot Business and the value of Patriot’s properties and as is customary for
companies engaged in similar businesses in similar industries;



               (m) the transactions described in Section 2.01 shall have occurred;



               (n) no order, injunction, or decree issued by any court of competent jurisdiction or other
legal restraint or prohibition preventing consummation of the Distribution shall be in effect;



               (o) PEC and Patriot shall each have performed its obligations under this Agreement and each
Ancillary Agreement, which are required to be performed prior to or at the time of the
Distribution;



               (p) the Parties shall have consummated those other transactions in connection with the
Distribution that are contemplated by the Information Statement to be consummated prior to or at
the time of the Distribution and are not specifically referred to in this Agreement or the
Ancillary Agreements identified in Sections 2.03(a) — (f); and



               (q) all members of the Patriot Group shall have been released from their obligations as
guarantors with respect to the guarantees listed or described on Schedule 3.02(q).



          Section 3.03. The Distribution. On or before the Distribution Date, subject to
satisfaction or waiver of the conditions set forth in this Agreement, PEC shall deliver to the
Distribution Agent a certificate or certificates representing all of the then outstanding shares of
Patriot Common Stock held by the PEC Group, endorsed in blank, and shall instruct the Distribution
Agent, except as otherwise provided in Sections 3.04 and 3.05, to distribute to each holder of
record of PEC Common Stock on the Record Date one share of Patriot Common Stock for each ten shares
of PEC Common Stock so held either by crediting the holder’s brokerage account or by delivering a
certificate or certificates representing such shares. Patriot agrees to provide all certificates
for shares of Patriot Common Stock that the Distribution Agent shall require in order to effect the
Distribution.




ARTICLE IV

COVENANTS




          Section 4.01. Bank Accounts.




               (a) The Parties agree to take, or cause the respective members of their respective Groups to
take, at the Effective Time (or such earlier time as the Parties may agree), all actions necessary
to amend all agreements or arrangements governing each bank and brokerage account owned by Patriot
or any other member of the Patriot Group (the “Patriot Accounts”), including all Patriot Accounts
listed or described on Schedule 4.01(a), so that such









 



21

Patriot Accounts, if currently linked (whether by automatic withdrawal, automatic deposit, or
any other authorization to transfer funds from or to, hereinafter “linked”) to any bank or
brokerage account owned by PEC or any other member of the PEC Group (the “PEC Accounts”) are
de-linked from the PEC Accounts. From and after the Effective Time, no current or former employee
of any member of the PEC Group shall have any authority to access or control any Patriot Account
other than those who will be Patriot employees.




               (b) The Parties agree to take, or cause the respective members of their respective Groups to
take, at the Effective Time (or such earlier time as the Parties may agree), all actions necessary
to amend all agreements or arrangements governing the PEC Accounts so that such PEC Accounts, if
currently linked to a Patriot Account, are de-linked from the Patriot Accounts. From and after the
Effective Time, no current or former employee of any member of the Patriot Group shall have any
authority to access or control any PEC Account.



               (c) With respect to any outstanding checks issued by PEC, Patriot, or any of their respective
subsidiaries prior to the Effective Time, such outstanding checks shall be honored following the
Effective Time by the entity or Group owning the account on which the check is drawn.



               (d) As between the two Parties (and the members of their respective Groups) all payments and
reimbursements received after the Effective Time by any Party (or member of its Group) that relate
to a business, Asset or Liability of another Party (or member of its Group), shall be held by such
Party in trust for the use and benefit of the Party entitled thereto (at the expense of the Party
entitled thereto) and, promptly upon receipt by such Party of any such payment or reimbursement,
such Party shall pay over, or shall cause the applicable member of its Group to pay over to the
other Party the amount of such payment or reimbursement without right of set-off.



          Section 4.02. Guaranteed Patriot and PEC Liabilities.





          (a) (i) Patriot shall use commercially reasonable efforts (excluding payment of money
or incurrence of Liabilities) to obtain as promptly as practicable after the Distribution
Date the release of all members of the PEC Group from any obligations with respect to
Guaranteed Patriot Liabilities, including removing all members of the PEC Group from their
obligations as guarantors with respect to the guarantees listed or described on Schedule
4.02(a). In no event shall any member of the Patriot Group take any action with respect
to any Guaranteed Patriot Liabilities which could be reasonably expected to adversely affect
the PEC Group members in any way, including, without limitation, extending the term of any
Guaranteed Patriot Liabilities or increasing the liability guaranteed thereunder, unless the
guarantee or obligation of all PEC Group members is released as to any extended or modified
liability obligations under such Guaranteed Patriot Liabilities or PEC otherwise consents in
writing.




          (ii) If at any time any member of the PEC Group is required by any governmental agency
to arrange or provide letters of credit, surety bonds or other credit arrangements, in
support of Guaranteed Patriot Liabilities constituting Black Lung









 



22



Benefit Liabilities, then Patriot shall provide such letters of credit, surety bonds or
other credit arrangements, at its expense.




          (iii) Until such time as Patriot shall have no amounts recorded in its most recent
audited balance sheet in respect of Black Lung Benefit Liabilities, Patriot shall use best
efforts to maintain sufficient capacity under the Senior Credit Facility to permit it to
obtain (subject to the satisfaction of the conditions precedent contained therein) letters
of credit in an aggregate amount equal to not less than the amount of Black Lung Benefit
Liabilities recorded in its most recent audited balance sheet, less the amount of letters of
credit provided by Patriot to any governmental agency in respect of Guaranteed Patriot
Liabilities constituting Black Lung Benefit Liabilities.




          (iv) If (x) at any time prior to June 30, 2011, any member of the Patriot Group shall
have failed to pay any Black Lung Benefit Liabilities when due and any member of the PEC
Group remains obligated with respect to Guaranteed Patriot Liabilities constituting Black
Lung Benefit Liabilities (such PEC Group obligations, the “Black Lung Benefit Guarantees”)
or (y) on June 30, 2011, any member of the PEC Group remains obligated under any Black Lung
Benefit Guarantees, then commencing on the date of such failure (in the case of clause (x))
or on July 1, 2011 (in the case of clause (y)) and continuing in either case until the date
on which no member of the PEC Group has any obligation under any Black Lung Benefit
Guarantee, upon the written request of PEC, Patriot shall use best efforts to obtain letters
of credit in favor of PEC in an amount specified by PEC, which amount shall be (at PEC’s
sole option) up to the amount recorded by Patriot in its most recent audited consolidated
balance sheet in respect of Guaranteed Patriot Liabilities constituting Black Lung Benefits,
less the amount of letters of credit provided by Patriot to any governmental agency in
respect of Guaranteed Patriot Liabilities constituting Black Lung Benefit Liabilities.




          (v) Patriot shall provide prompt written notice to Peabody in the event that (A) any
issuer of a letter of credit required pursuant to this Section 4.02(a) notifies Patriot that
it does not intend to renew any letter of credit provided pursuant hereto or (B) Patriot’s
capacity to obtain letters of credit under its Senior Credit Facility or otherwise is not
sufficient, or is not expected to be sufficient, to permit Patriot to meet or to continue to
meet its obligations under this Section 4.02(a).



          (b) PEC shall use commercially reasonable efforts (excluding payment of money or incurrence
of Liabilities) to obtain as promptly as practicable after the Distribution Date the release of
all members of the Patriot Group from any obligations with respect to Guaranteed PEC Liabilities
to which they have not been released as of the Distribution Date, including removing all members
of the Patriot Group from their obligations as guarantors with respect to the guarantees listed or
described on Schedule 4.02(b). In no event shall any member of the PEC Group take any
action with respect to any Guaranteed PEC Liabilities which could be reasonably expected to
adversely affect the Patriot Group members in any way including, without limitation, extending the
term of any Guaranteed PEC Liabilities or increasing the liability guaranteed thereunder, unless
the guarantee or obligation of all Patriot Group members is released as to any extended or
modified liability obligations under such Guaranteed PEC Liabilities or Patriot otherwise consents
in writing.









 



23


               (c) In the event that any PEC Group member is required to pay or otherwise satisfy any
Guaranteed Patriot Liabilities, without limiting any of PEC’s rights and remedies against Patriot
under this Agreement or otherwise, in order to secure Patriot’s indemnity obligations to PEC
hereunder in respect of such Guaranteed Patriot Liabilities, PEC shall be entitled to all the
rights of the payee in any property of any member of the Patriot Group pledged as security for
such Guaranteed Patriot Liabilities.



               (d) In the event that Patriot Group member is required to pay or otherwise satisfy any
Guaranteed PEC Liabilities, without limiting any of Patriot’s rights and remedies against PEC
under this Agreement or otherwise, in order to secure PEC’s indemnity obligations to Patriot
hereunder in respect of such Guaranteed PEC Liabilities, Patriot shall be entitled to all the
rights of the payee in any property of any member of the PEC Group pledged as security for such
Guaranteed PEC Liabilities.



          Section 4.03. Insurance.




               (a) Directors and Officers and Fiduciary Liability Policies. Following the Distribution, PEC
will maintain directors’ and officers’ liability and fiduciary liability insurance coverage for a
period of six (6) years from the Distribution Date for the directors and officers of Patriot who
were directors or officers of PEC or members of the PEC Group as of the Distribution Date for acts
as directors and officers of members of the PEC Group during periods prior to the Distribution
Date.



               (b) Third Party Policies.




               (i) With respect to Third Party Policies, if an occurrence for which coverage is
available under such Third Party Policies happens prior to the Effective Time, and a claim
arising therefrom has been or is eventually asserted against Patriot or any other member of
the Patriot Group and such claim is reported by Patriot to the carrier, with a copy to PEC,
in accordance with the reporting provision of the applicable policy, then PEC will, or will
cause the members of the PEC Group that are insured thereunder to, (A) continue to provide
Patriot and any other member of the Patriot Group with access to and coverage under the
applicable Third Party Policies and (B) reasonably cooperate with Patriot and take
commercially reasonable actions as may be necessary or advisable to assist Patriot in
submitting such claims under the applicable Third Party Policies, provided that
Patriot shall be responsible for its portion of any deductibles or self-insured retentions
or co-payments legally due and owing relating to such claims. For the avoidance of doubt, if
an occurrence for which coverage is available under such Third Party Policies happens after
the Effective Time, or a claim arising from an occurrence prior to the Effective Time is not
reported by Patriot to PEC on or before the date when such occurrence must be reported to
the carrier under the applicable Third Party Policy, then no payment for any damages, costs
of defense, or other sums with respect to such claim shall be available to Patriot under
such Third Party Policies.




               (ii) With respect to all Third Party Policies, Patriot agrees and covenants (on behalf
of itself and each other member of the Patriot Group, and each other Affiliate of Patriot)
not to make any claim or assert any rights against PEC and any other









 



24

member of the PEC Group (including the captive insurance companies that are insured
under the Third Party Policies), or the unaffiliated third-party insurers of such Third
Party Policies, except as expressly provided under this Section 4.03(b).




          (c) Administration of Third Party Policies; Other Matters.





          (i) From and after the Effective Time, Patriot or a member of the Patriot Group shall
be responsible for the administration of all Third Party Patriot Policies and Patriot shall
be responsible for any premium adjustments, audits, deductible bills, collateral, Taxes and
claims handling charges or other expenses associated with Third Party Patriot Policies.




          (ii) With respect to all Third Party Policies, from and after the Effective Time, the
agent for the applicable policy shall be responsible for the Insurance Administration and
Claims Administration of such Third Party Policies; provided that the retention of
such administrative responsibilities by an agent of Peabody is in no way intended to limit,
inhibit or preclude any right to insurance coverage for any Insured Claim of a named insured
under such Third Party Policies as contemplated by the terms of this Agreement;
provided, further, that the retention of such administrative
responsibilities by an agent of Peabody shall not relieve the Person submitting any Insured
Claim of the primary responsibility for reporting such Insured Claim accurately, completely
and in a timely manner, or of such Person’s authority to settle any such Insured Claim
within any period permitted or required by the relevant Third Party Policy. PEC or any
member of the PEC Group or any agent of PEC shall not settle any Insured Claim of Patriot or
any member of the Patriot Group under the Third Party Policies without first obtaining the
approval of Patriot or another member of the Patriot Group. Such approval shall not be
unreasonably withheld, delayed or conditioned. Patriot shall have the right to utilize its
broker to advocate for their interest.




          (iii) Where Patriot Liabilities are specifically covered under a Third Party Policy for
periods prior to the Effective Time, or where such Third Party Policy covers claims made
after the Effective Time with respect to an occurrence prior to the Effective Time, then
from and after the Effective Time, Patriot may claim coverage for Insured Claims under such
Third Party Policy as and to the extent that such insurance is available up to the full
extent of the applicable limits of liability of such Third Party Policy (and may receive any
Insurance Proceeds with respect thereto as contemplated by Section 4.03(b) or
Section 4.03(c)(v)), subject to the terms of this Section 4.03(c).




          (iv) Except as set forth in this Section 4.03(c), PEC and Patriot shall not be liable
to one another (or any of the members of their respective Groups) for claims, or portions of
claims, not reimbursed by insurers under any Third Party Policy for any reason not within
the control of PEC or Patriot, including coinsurance provisions, deductibles, quota share
deductibles, self-insured retentions, bankruptcy or insolvency of any insurance carrier(s),
Third Party Policy limitations or restrictions, any coverage disputes, any failure to timely
file a claim by PEC or Patriot (or any of the members of their respective Groups), or any
defect in such claim or its processing. The liability of PEC and Patriot to one another for
such claims is expressly limited to the amount of









 



25

Insurance Proceeds received with respect to such claims and allocated to the respective
Parties in accordance with Section 4.03(c)(v). It is expressly understood that the foregoing
provisions in this Section 4.03(c)(iv) shall not limit any Party’s liability to any other
Party for indemnification pursuant to Article VI.





          (v) Except as otherwise provided in Section 4.03(b), Insurance Proceeds received with
respect to claims, costs and expenses under the Third Party Policies shall be paid, as
appropriate, to PEC with respect to the PEC Liabilities, and Patriot, with respect to
Patriot Liabilities. In the event that the aggregate limits on any Third Party Policies are
exceeded by the aggregate of outstanding Insured Claims by the Parties or members of their
respective Groups, the Parties agree to allocate the Insurance Proceeds received thereunder
based upon their respective percentage of the total of their bona fide claims which were
covered under such Third Party Policy, and any Party who has received Insurance Proceeds in
excess of such Party’s respective percentage of Insurance Proceeds shall pay to the other
Party the appropriate amount so that each Party will have received its respective percentage
of Insurance Proceeds pursuant hereto. Each of the Parties agrees to use commercially
reasonable efforts to maximize available coverage under those Third Party Policies
applicable to it, and to take all commercially reasonable steps to recover from all other
responsible parties in respect of an Insured Claim to the extent coverage limits under a
Third Party Policy have been exceeded or would be exceeded as a result of such Insured
Claim.




          (vi) In the event that the Parties or members of their respective Groups have bona fide
claims under any Third Party Policy arising from the same occurrence and for which a
deductible or self-insured retention is payable, the Parties agree that the aggregate amount
of the deductible or self-insured retention paid shall be borne by the Parties in the same
proportion which the Insurance Proceeds received by each such Party bears to the total
Insurance Proceeds received under the applicable Third Party Policy pursuant to
Section 4.03(c)(v), and any Party who has paid more than such allocable share of the
deductible or self-insured retention shall be entitled to receive from the other Party an
appropriate amount so that each Party has borne its allocable share of the deductible or
self-insured retention pursuant hereto.



          (d) Agreement for Waiver of Conflict and Shared Defense. In the event that Insured Claims of
both Parties exist relating to the same occurrence, the Parties shall jointly defend and waive any
conflict of interest necessary to the conduct of the joint defense. Nothing in this Section 4.03
shall be construed to limit or otherwise alter in any way the obligations of the Parties,
including those created by this Agreement, by operation of Law or otherwise.



          (e) Cooperation. The Parties agree to use (and cause the members in their respective Groups
to use) all commercially reasonable efforts to cooperate with respect to the various insurance
matters contemplated by this Section 4.03.



          (f) Miscellaneous.




          (i) Nothing in this Agreement shall be deemed to restrict Patriot or PEC, or any
members of their respective Groups, from acquiring at its own expense any









 



26



insurance Policy in respect of any Liabilities or covering any period. Except as
otherwise provided in this Agreement, from and after the Effective Time, Patriot and PEC
shall be responsible for obtaining and maintaining their respective insurance programs for
their risk of loss and such insurance arrangements shall be separate programs apart from
each other and each will be responsible for its own deductibles and self-insured retentions
for such insurance programs.




          (ii) Each of the Parties intends by this Agreement that a third-party Person, including
a third-party insurer or reinsurer, or other third-party Person that, in the absence of the
Agreement would otherwise be obligated to pay any claim or satisfy any indemnity or other
obligation, shall not be relieved of the responsibility with respect thereto and shall not
be entitled to a “windfall” (i.e., avoidance of the obligation that such Person would have
in the absence of this Agreement). To the extent that any such Person would receive such a
windfall, the Parties shall negotiate in good faith concerning an amendment of this
Agreement.



          Section 4.04. No Hire; No Solicit. None of PEC or Patriot or any member of their
respective Groups will from the Effective Time through and including the one-year anniversary of
the Effective Time, without the prior written consent of the other Party, either directly or
indirectly, on their own behalf or in the service or on behalf of others, (i) solicit, aid, induce
or encourage any individual who is an employee of a member of the other Party’s Group to leave his
or her employment, or (ii) hire any individual who is an employee of a member of the other Party’s
Group; provided, however, that nothing in this Section 4.04 shall be deemed to
prohibit, any general solicitation for employment through advertisements and search firms not
specifically directed at employees of such other applicable Party; provided
further, that the applicable Party has not encouraged or advised such firm to approach any
such employee.




          Section 4.05. Legal Names and Signage. (a) Except as otherwise specifically provided
in any Ancillary Agreement, each Party shall exercise commercially reasonable efforts to cease (and
cause all of the other members of its Group to cease), as soon as reasonably practicable after the
Distribution Date, but in any event within six (6) months thereafter: (i) making any use of any
names or Trademarks that include (A) any of the Trademarks of the other Party or such other Party’s
subsidiaries or Affiliates (including, in the case of Patriot, “Peabody Energy” or “Peabody Energy
Corporation” or any other name or Trademark containing the word “Peabody”) and (B) any names or
Trademarks related thereto including any names or Trademarks confusingly similar thereto or
dilutive thereof (with respect to each Party, such Trademarks of the other Party or any of such
other Party’s subsidiaries or Affiliates, the “Other Party Marks”), and (ii) holding
themselves out as having any affiliation with the other Party or such other Party’s subsidiaries or
Affiliates; provided, however, that the foregoing shall not prohibit any Party or
any member of a Party’s Group from (1) stating in any advertising or any other communication that
it is formerly a PEC affiliate or (2) making use of any Other Party Mark in a manner that would
constitute “fair use” under applicable Law if any unaffiliated third party made such use or would
otherwise be legally permissible for any unaffiliated third party without the consent of the Party
owning such Other Party Mark. In furtherance of the foregoing, as soon as practicable, but in no
event later than three (3) months following the Effective Time, each Party shall (and cause all of
the other members of its Group to) remove, strike over or otherwise obliterate all Other Party
Marks from all of such Party’s and its subsidiaries’ and









 



27


Affiliates’ assets and other materials, including any vehicles, business cards, schedules,
stationery, packaging materials, displays, signs, promotional materials, manuals, forms, websites,
email, computer software and other materials and systems; provided, however, that
Patriot shall promptly after the Effective Time post a disclaimer on the “www.patriotcoal.com”
website informing its customers that as of the Effective Time and thereafter Patriot, and not PEC,
is responsible for the operation of the Patriot Business, including such website and any applicable
services. Any use by any Party or any of such Party’s Subsidiaries or Affiliates of any of the
Other Party Marks as permitted in this Section 4.05 is subject to their compliance with all quality
control and related requirements and guidelines in effect for the Other Party Marks as of the
Effective Time.




               (b) Notwithstanding the foregoing requirements of Section 4.05(a), if any Party or
any member of such Party’s Group exercised good faith efforts to comply with
Section 4.05(a) but is unable, due to regulatory or other circumstance beyond its control,
to effect a legal name change in compliance with applicable Law such that an Other Party Mark
remains in such Party’s or its Group member’s legal name, then such Party or its relevant Group
member will not be deemed to be in breach hereof as long as it continues to exercise good faith
efforts to effectuate such name change and does effectuate such name change within nine (9) months
after the Effective Time, and, in such circumstances, such Party or Group member may continue to
include in its assets and other materials references to the Other Party Mark that is in such
Party’s or Group member’s legal name which includes references to “Patriot Coal” or “Peabody
Energy” as applicable, but only to the extent necessary to identify such Party or Group member and
only until such Party’s or Group member’s legal name can be changed to remove and eliminate such
references.



               (c) Notwithstanding the foregoing requirements of Section 4.05(a), Patriot shall not be
required to change any name including the word “Peabody” in any third-party contract or license,
or in property records with respect to real or personal property, if an effort to change the name
is commercially unreasonable; provided, however, that (i) Patriot on a prospective
basis from and after the Effective Time shall change the name in any new or amended third-party
contract or license or property record and (ii) Patriot shall not advertise or make public any
continued use of the “Peabody” name permitted by this Section 4.05(c).



          Section 4.06. Auditors and Audits; Annual and Quarterly Financial Statements and
Accounting.




               (a) Each Party agrees that during the period ending one hundred and eighty (180) days
following the Effective Time and in any event solely with respect to the preparation and audit of
each of the Party’s financial statements for any of the years ended December 31, 2007, 2006 and
2005, the printing, filing and public dissemination of such financial statements, the audit of
each Party’s internal control over financial reporting related to such financial statements and
such Party’s management’s assessment thereof, if applicable, and each Party’s management’s
assessment of such Party’s disclosure controls and procedures related to such financial
statements:




               (i) Annual Financial Statements. Each Party shall provide to the other Party on a
timely basis all information reasonably required to meet its schedule for the









 



28



preparation, printing, filing, and public dissemination of its annual financial
statements and, to the extent applicable to such Party, for management’s assessment of the
effectiveness of its disclosure controls and procedures and its internal control over
financial reporting in accordance with all applicable provisions of Regulation S-K,
including, without limitation, Items 307 and 308 of Regulation S-K and, to the extent
applicable to such party, its auditor’s audit of its internal control over financial
reporting and management’s assessment thereof in accordance with Section 404 of the
Sarbanes-Oxley Act of 2002 and the Commission’s and Public Company Accounting Oversight
Board’s rules and auditing standards thereunder (such assessments and audit being referred
to as the “Internal Control Audit and Management Assessments”). Without limiting the
generality of the foregoing, each Party will provide all required financial and other
Information with respect to itself and its Subsidiaries to its auditors in a sufficient and
reasonable time and in sufficient detail to permit its auditors to take all steps and
perform all reviews necessary to provide sufficient assistance to the other Party’s auditors
with respect to information to be included or contained in the other Party’s annual
financial statements and to permit the other Party’s auditors and management to complete the
Internal Control Audit and Management Assessments.




               (ii) Access to Personnel and Records. With respect to the 2007 fiscal year of each of
PEC and Patriot, if PEC and Patriot use a different independent auditor then each audited
Party shall authorize, and use commercially reasonable efforts to cause, its respective
auditors to make available to the other Party’s auditors (the other Party’s auditors,
collectively, the “Other Party’s Auditors”) both the personnel who performed or are
performing the annual audits of such audited party (each such Party with respect to its own
audit, the “Audited Party”) and work papers related to the annual audits of such Audited
Party, in all cases within a reasonable time prior to such Audited Party’s auditors’ opinion
date, so that the Other Party’s Auditors are able to perform the procedures they consider
necessary to take responsibility for the work of the Audited Party’s auditors as it relates
to their auditors’ report on such other Party’s financial statements, all within sufficient
time to enable such other Party to meet its timetable for the printing, filing and public
dissemination of its annual financial statements. In such an event, each Party shall make
available to the Other Party’s Auditors and management its personnel and Records in a
reasonable time prior to the Other Party’s Auditors’ opinion date and the other party’s
management’s assessment date so that the Other Party’s Auditors and the other Party’s
management are able to perform the procedures they consider necessary to conduct the
Internal Control Audit and Management Assessments.



               (b) In the event a Party restates any of its financial statements that includes such Party’s
audited or unaudited financial statements with respect to any balance sheet date or period of
operation between January 1, 2004 and December 31, 2007, such Party will deliver to the other
Party a substantially final draft, as soon as the same is prepared, of any report to be filed by
such first Party with the Commission that includes such restated audited or unaudited financial
statements (the “Amended Financial Report”); provided, however, that such first
Party may continue to revise its Amended Financial Report prior to its filing thereof with the
Commission, which changes will be delivered to the other Party as soon as reasonably practicable;
provided, further, however, that such first Party’s financial personnel
will actively consult with the other Party’s financial personnel regarding any changes which such
first Party









 



29

may consider making to its Amended Financial Report and related disclosures prior to the
anticipated filing of such report with the Commission, with particular focus on any changes which
would have an effect upon the other Party’s financial statements or related disclosures. Each
Party will reasonably cooperate with, and permit and make any necessary employees available to,
the other Party, in connection with the other Party’s preparation of any Amended Financial
Reports.




               (c) If any Party or member of its respective Group is required, pursuant to Rule 3-09 of
Regulation S-X or otherwise, to include in its Exchange Act filings audited financial statements
or other information of the other Party or member of the other Party’s Group, the other Party
shall use commercially reasonable efforts (i) to provide such audited financial statements or
other information, and (ii) to cause its outside auditors to consent to the inclusion of such
audited financial statements or other information in the Party’s Exchange Act filings.



               (d) Nothing in this Section 4.06 shall require any Party to violate any agreement with any
third party regarding the confidentiality of confidential and proprietary information relating to
that third party or its business; provided, however, that in the event that a
Party is required under this Section 4.06 to disclose any such information, such Party shall use
commercially reasonable efforts to seek to obtain such third party’s consent to the disclosure of
such information.



          Section 4.07. No Restrictions on Post-Closing Competitive Activities; Corporate
Opportunities.




               (a) Except as expressly provided herein or in any of the Ancillary Agreements, it is the
explicit intent of each of the Parties that this Agreement shall not include any non-competition
or other similar restrictive arrangements with respect to the range of business activities that
may be conducted by the Parties. Accordingly, each of the Parties acknowledges and agrees that
nothing set forth in this Agreement shall be construed to create any explicit or implied
restriction or other limitation on (i) the ability of the other Party hereto to engage in any
business or other activity that competes with the business of such Party, or (ii) the ability of
the other Party to engage in any specific line of business or engage in any business activity in
any specific geographic area.



               (b) Except as expressly provided herein or in any of the Ancillary Agreements, PEC and the
PEC Group shall have the right to, and shall have no duty not to, (i) engage in the same or
similar business activities or lines of business as Patriot or any other member of the Patriot
Group, (ii) do business with any client or customer of Patriot or any other member of the Patriot
Group, and (iii) employ or otherwise engage any officer or employee of Patriot or any other member
of the Patriot Group, and neither PEC nor the PEC Group nor any officer or director thereof shall
be liable to Patriot or any other member of the Patriot Group or any of Patriot’s stockholders for
breach of any fiduciary duty by reason of any such activities of PEC or any other member of the
PEC Group or of such person’s participation therein.









 



30


               (c) Except as expressly provided in the Ancillary Agreements, Patriot and the Patriot Group
shall have the right to, and shall have no duty not to, (i) engage in the same or similar business
activities or lines of business as PEC or any other member of the PEC Group, (ii) do business with
any client or customer of PEC or any other member of the PEC Group, and (iii) employ or otherwise
engage any officer or employee of PEC or any other member of the PEC Group, and neither Patriot
nor the Patriot Group nor any officer or director thereof shall be liable to PEC or any other
member of the PEC Group or any of PEC’s stockholders for breach of any fiduciary duty by reason of
any such activities of Patriot or the Patriot Group or of such person’s participation therein.



               (d) In the event that PEC or any other member of the PEC Group acquires knowledge of a
potential transaction or matter that may be a corporate opportunity for both PEC or any other
member of the PEC Group and Patriot or any other member of the Patriot Group, neither PEC nor any
other member of the PEC Group nor any agent or advisor thereof shall have any duty to communicate
or present such corporate opportunity to Patriot or any other member of the Patriot Group and
shall not be liable to Patriot or any other member of the Patriot Group or to Patriot’s
stockholders for breach of any fiduciary duty as a stockholder of Patriot by reason of the fact
that PEC or any other member of the PEC Group pursues or acquires such corporate opportunity for
itself, directs such corporate opportunity to another person or entity, or does not present such
corporate opportunity to Patriot or any other member of the Patriot Group.



               (e) In the event that Patriot or any other member of the Patriot Group acquires knowledge of
a potential transaction or matter that may be a corporate opportunity for both PEC or any other
member of the PEC Group and Patriot or any other member of the Patriot Group, neither Patriot nor
any other member of the Patriot Group nor any agent or advisor thereof shall have any duty to
communicate or present such corporate opportunity to PEC or any other member of the PEC Group and
shall not be liable to PEC or any other member of the PEC Group or to PEC’s stockholders for
breach of any fiduciary duty as a stockholder of Patriot by reason of the fact that Patriot or any
other member of the Patriot Group pursues or acquires such corporate opportunity for itself,
directs such corporate opportunity to another person or entity, or does not present such corporate
opportunity to PEC or any other member of the PEC Group.



               (f) For the purposes of this Section 4.07, “corporate opportunities” of Patriot or any other
member of the Patriot Group shall include, but not be limited to, business opportunities (i) that
Patriot or any other member of the Patriot Group is financially able to undertake, (ii) that are,
by their nature, in a line of business of Patriot or any other member of the Patriot Group,
including the Patriot Business, (iii) that are of practical advantage to Patriot or any other
member of the Patriot Group, (iv) in which Patriot or any other member of the Patriot Group has an
interest or a reasonable expectancy, and (v) in which, by embracing the opportunities, Patriot or
any other member of the Patriot Group will cause the self-interest of PEC or any other member of
the PEC Group or any of their officers or directors to be brought into conflict with that of
Patriot or any other member of the Patriot Group, and “corporate opportunities” of PEC or any
other member of the PEC Group shall include, but not be limited to, business opportunities (i)
that PEC or any other member of the PEC Group is financially able to undertake, (ii) that are, by
their nature, in a line of business of PEC or any other









 



31

member of the PEC Group, (iii) that are of practical advantage to PEC or any other member of
the PEC Group, (iv) in which PEC or any other member of the PEC Group have an interest or a
reasonable expectancy, and (v) in which, by embracing the opportunities, PEC or any other member
of the PEC Group will cause the self-interest of Patriot or any other member of the Patriot Group
or any of their officers or directors to be brought into conflict with that of PEC or any other
member of the PEC Group.




          Section 4.08. Right of Offset.




               (a) To the extent PEC or any other member of the PEC Group has the right to receive any
amounts hereunder, including under the provisions of Article VI, or under any Ancillary Agreement
or under any other arrangement between any member of the PEC Group and Patriot or any other member
of the Patriot Group, then PEC may satisfy such amounts out of and shall have a right of off-set
against any amounts then currently due from Patriot or any other member of the Patriot Group to
PEC or any other member of the PEC Group hereunder or thereunder. For the avoidance of doubt, the
parties acknowledge that expenses payable by Patriot pursuant to Section 15.01 of this agreement
may be offset against amounts payable to Patriot pursuant to Section 2.02(f). PEC shall be
entitled to offset from the amount to be contributed by it to Patriot pursuant to Section 2.02(f)
of this Agreement an amount representing PEC’s estimate of expenses to be paid by Patriot pursuant
to Section 15.01 hereof. The parties shall conduct a final accounting for such expenses within 60
days of the Distribution Date and related payments required to be made by either Patriot or PEC to
the extent the expenses determined by such final accounting are higher or lower, respectively,
than PEC’s estimate, shall be made not later than 90 days after the Distribution Date.



               (b) To the extent Patriot or any other member of the Patriot Group has the right to receive
any amounts hereunder, including under the provisions of Article VI, or under any Ancillary
Agreement or under any other arrangement between any member of the Patriot Group and PEC or any
other member of the PEC Group, then Patriot may satisfy such amounts out of and shall have a right
of off-set against any amounts then currently due from PEC or any other member of the PEC Group to
Patriot or any other member of the Patriot Group hereunder or thereunder



          Section 4.09. [Intentionally Omitted].




          Section 4.10. Prairie State Permits.




               (a) After the Distribution Date, PEC shall use its commercially reasonable efforts to cause a
member of the Peabody Group to apply for, and diligently pursue, the transfer of the permits held
by PCC and set forth on Schedule 4.10(b) and to cause in connection with such transfers
the replacement of each surety bond, letter of credit or other similar arrangement (collectively,
“Prairie State Bonds”) with respect to the permits set forth on Schedule 4.10(b)
by posting, or causing another party to post, a new bond in form and substance satisfactory to the
applicable beneficiary of such Prairie State Bond.



               (b) Patriot will use commercially reasonable efforts to (i) execute and deliver such further
instruments and documents and take such other actions as PEC may









 



32

reasonably request in order to effectuate the transfer of the permits identified in
Schedule 4.10(b) and (ii) take, or cause to be taken, all actions, and do, or cause to be
done, all things, reasonably necessary, proper or advisable under applicable laws, regulations and
agreements or otherwise to consummate and make effective such transfers, including, without
limitation, using commercially reasonable efforts to obtain any consents and approvals, make any
filings and applications and remove any liens, claims, equity or other encumbrance on an Asset
necessary or desirable in order to effect such transfers; provided that neither Patriot
nor any of its Affiliates shall be obligated to pay any consideration therefor (except for filing
fees and other similar charges) to any third party from whom such consents, approvals and
amendments are requested or to take any action or omit to take any action if the taking of or the
omission to take such action would be unreasonably burdensome to Patriot or the Patriot Group or
the business thereof. PEC shall (i) use commercially reasonable efforts to cooperate with Patriot
in order to effect the transfer of the permits identified in Schedule 4.10(b) and (ii)
promptly reimburse Patriot or its Affiliate, as the case may be, for any filing fee or other
similar charge paid to a third party from whom such consents, approvals and amendments are
requested.




ARTICLE V

LITIGATION MATTERS




          Section 5.01. Case Allocation.




               (a) As of the Distribution Date, Patriot shall, and, as applicable, shall cause the other
members of the Patriot Group to, (i) diligently conduct, at its sole cost and expense, the defense
of the Patriot Actions, including the Patriot Actions listed on Schedule 5.01(a) and any
applicable future Patriot Actions; (ii) notify PEC of material litigation developments related to
the Patriot Actions; and (iii) agree not to file any cross claim or institute separate legal
proceedings against PEC in relation to the Patriot Actions.



               (b) As of the Distribution Date, PEC shall, and, as applicable, shall cause the other members
of the PEC Group to, (i) diligently conduct, at its sole cost and expense, the defense of the PEC
Actions, including the PEC Actions listed on Schedule 5.01(b) and any applicable future
PEC Actions; (ii) notify Patriot of material litigation developments related to the PEC Actions;
and (iii) agree not to file any cross claim or institute separate legal proceedings against
Patriot in relation to the PEC Actions.



               (c) Notwithstanding anything in this Section 5.01 to the contrary, PEC shall have the right
to participate in the defense of any Patriot Action and to be represented by attorneys of its own
choosing and at its sole cost and expense, and Patriot shall have the right to participate in the
defense of any PEC Action and to be represented by attorneys of its own choosing and at its sole
cost and expense.



               (d) Patriot shall indemnify and hold harmless PEC and other members of the PEC Group against
Liabilities arising in connection with Patriot Actions, and PEC shall indemnify and hold harmless
Patriot and other members of the Patriot Group against Liabilities arising in connection with PEC
Actions, in each case, in accordance with the indemnification provisions of Article VI.









 



33


               (e) As of the Distribution Date, PEC shall, and, as applicable, shall cause the other members
of the PEC Group to, (i) diligently conduct the defense of the Joint Actions; (ii) notify Patriot
of material litigation developments related to the Joint Actions; and (iii) agree not to file any
cross claim or institute separate legal proceedings against Patriot in relation to the Joint
Actions; provided that if it becomes clear that a Joint Action relates primarily to the
Patriot Business then from and after such time such Joint Action shall instead be deemed to be a
Patriot Action subject to clause (a) above; and provided, further, that if it
becomes clear that a Joint Action does not relate primarily to the Patriot Business then from and
after such time such Joint Action shall instead be deemed to be a PEC Action subject to clause (b)
above. PEC and Patriot shall regularly meet to review and discuss the progress of the Joint
Actions and the classification thereof. Any dispute regarding whether an Action remains a Joint
Action shall be settle pursuant to the dispute resolution mechanics of Section 15.15.



               (f) Until such time as the respective Liabilities of the members of the PEC Group and Patriot
Group are determined in connection with any Joint Action, PEC and Patriot shall each pay 50% of
the cost and expenses associated with the defense of such Joint Action. The parties agree that,
to effect the foregoing sharing arrangement, counsel in connection with any Joint Action shall be
instructed to render separate bills to PEC and to Patriot. In the event that PEC pays any costs
or expenses that are the responsibility of Patriot hereunder, Patriot shall promptly reimburse PEC
for such amounts. Patriot shall have the right to employ separate counsel to represent it and
members of the Patriot Group if Patriot shall have reasonably concluded that there may be a legal
defense available to members of the Patriot Group that are different from or in addition to those
available to PEC or representation of both PEC (or any member of the PEC Group) and Patriot (or
any member of the Patriot Group) by the same counsel would be inappropriate due to actual or
potential differing interests between them, in which case fees and expenses of such counsel
incurred by Patriot shall be included in the amounts allocated by the next sentence of this
paragraph (f). Upon the determination of Liability of the members of the PEC Group and Patriot
Group in connection with any Joint Action, Patriot shall indemnify and hold harmless PEC and other
members of the PEC Group against the portion of such Liabilities relating primarily to the Patriot
Business, and PEC shall indemnify and hold harmless Patriot and other members of the Patriot Group
against the portion of such Liabilities relating primarily to the PEC Business, including, in each
case, the costs and expenses associated with the defense of such Joint Action since the beginning
of such Joint Action, which shall be allocated between PEC and Patriot in proportion to the
Liability with respect to such Joint Action of members of the PEC Group, on the one hand, and
members of the Patriot Group, on the other hand. Indemnification pursuant to this Section 5.01(f)
shall be in accordance with the indemnification provisions of Article VI.



               (g) [Intentionally Omitted].



               (h) [Intentionally Omitted].



               (i) As of the Distribution Date, PEC shall assume the responsibility of litigating the case
of Clintwood Elkhorn Mining Co. v. United States, pending before the United States Court of
Appeals for the Federal Circuit (the “Black Lung Case”). PEC shall receive and have the
benefit of all of the proceeds of the Black Lung Case, including interest, and shall be
responsible for the payment of attorneys’ fees and costs.









 



34


               (j) As of the Distribution Date, PEC shall assume the responsibility of litigating
Consolidated Coal Co. v. United States, No. 01-254C, pending in the United States Court of Federal
Claims (the “Federal Reclamation Case”). PEC shall receive and have the benefit of all of
the proceeds of the Federal Reclamation Case, including interest, and shall be responsible for the
payment of attorneys’ fees and costs in connection with the Federal Reclamation Case.



          Section 5.02. Litigation cooperation.




               (a) Each of PEC and Patriot agrees that at all times from and after the Effective Time, if an
Action currently exists or is commenced by a third-party with respect to which a Party (or any
member of such Party’s respective Group) is a named defendant but such Action is otherwise not a
Liability allocated to such named Party under this Agreement or any Ancillary Agreement, then the
other Party shall use commercially reasonable efforts to cause the named but not liable defendant
to be removed from such Action and such defendant shall not be required to make any payments or
contribution in connection therewith.



               (b) If, in the case of any Action involving a matter contemplated by Section 5.01, there is a
conflict of interest between the Parties, or in the event that any Third Party Claim seeks
equitable relief which would restrict or limit the future conduct of the non-responsible Party or
such Party’s business or operations, such Party shall be entitled to retain, at the responsible
Party’s expense, separate counsel as required by the applicable rules of professional conduct
(which counsel shall be reasonably acceptable to the responsible Party) and to participate in (but
not control) the defense, compromise, or settlement of that portion of the Third Party Claim that
seeks equitable relief with respect to the named Party.



               (c) PEC and Patriot shall each use commercially reasonable efforts to make available to the
other, upon written request, its officers, directors, employees and agents, and the officers,
directors, employees and agents of its subsidiaries, as witnesses to the extent that such
individuals may reasonably be required in connection with any legal, administrative or other
proceedings arising out of the business of the other, or of any entity that is part of the other
Party’s Group in which the requesting Party or a member of its Group may be involved. The
requesting Party shall bear all out-of-pocket costs and expenses in connection therewith. On and
after the Effective Time, in connection with any matter contemplated by this Section 5.02(c), the
Parties will maintain any attorney-client privilege or work product immunity of any member of any
Group as required by the Common Interest Agreement.



ARTICLE VI

INDEMNIFICATION




          Section 6.01. Patriot Indemnification of the PEC Group. On and after the Distribution
Date, Patriot shall indemnify, defend and hold harmless each member of the PEC Group, and each of
their respective directors, officers, employees and agents (the “PEC Indemnitees”) from and against
any and all Indemnifiable Losses incurred or suffered by any of the PEC Indemnitees and arising out
of, or due to, (a) the failure of Patriot or any member of the Patriot Group to pay, perform or
otherwise discharge, any of the Patriot Liabilities and (b) any untrue statement or alleged untrue
statement of any material fact contained in the preliminary or









 



35


final Form 10, the preliminary or final Information Statement or any amendment or supplement
thereto or the omission or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading (other than the information
about PEC included in the sections of the Information Statement attached as Exhibit 99.1 to the
Form 10 entitled “Summary — Our Business,” “Summary – Summary of the Spin-Off,” and “The Spin-Off -
Reasons for the Spin-Off,” or any amendment or supplement thereto); provided, that Patriot
shall have no obligation to indemnify PEC or any other member of the PEC Group with respect to any
matter to the extent that such party has engaged in any knowing violation of Law, fraud or
misrepresentation in connection therewith.




          Section 6.02. PEC Indemnification of Patriot Group. On and after the Distribution
Date, PEC shall indemnify, defend and hold harmless each member of the Patriot Group and each of
their respective directors, officers, employees and agents (the “Patriot Indemnitees”) from and
against any and all Indemnifiable Losses incurred or suffered by any of the Patriot Indemnitees and
arising out of, or due to, (a) the failure of PEC or any member of the PEC Group to pay, perform or
otherwise discharge, any of the PEC Liabilities and (b) any untrue statement or alleged untrue
statement of any material fact regarding PEC included in the sections of the Information Statement
attached as Exhibit 99.1 to the Form 10 entitled “Summary – Our Business,” “Summary — The
Spin-Off,” and “The Spin-Off — Reasons for the Spin-Off,” or any amendment or supplement thereto or
the omission or alleged omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, that PEC shall have no
obligation to indemnify Patriot or any other member of the Patriot Group with respect to any matter
to the extent that such party has engaged in any knowing violation of Law, fraud or
misrepresentation in connection therewith.




          Section 6.03. Contribution. In circumstances in which the indemnity agreements
provided for in Sections 6.01(b) and 6.02(b) are unavailable or insufficient, for any reason, to
hold harmless an indemnified party in respect of any Indemnifiable Losses arising thereunder, each
indemnifying party, in order to provide for just and equitable contribution, shall contribute to
the amount paid or payable by such indemnified party as a result of such Indemnifiable Losses, in
such proportion as is appropriate to reflect the relative fault of the indemnifying party or
parties on the one hand and the indemnified party on the other in connection with the statements or
omissions or alleged statements or omissions that resulted in such Indemnifiable Losses, as well as
any other relevant equitable considerations. The relative fault of the parties shall be determined
by reference to, among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to information supplied
by Patriot or PEC, the Parties’ relative intents, knowledge, access to information and opportunity
to correct or prevent such statement or omission, and any other equitable considerations
appropriate in the circumstances.




          Section 6.04. Insurance and Third Party Obligations. No insurer or any other third
party shall be, by virtue of the foregoing indemnification provisions, (a) entitled to a benefit it
would not be entitled to receive in the absence of such provisions, (b) relieved of the
responsibility to pay any claims to which it is obligated, or (c) entitled to any subrogation
rights with respect to any obligation hereunder.










 



36




          Section 6.05. Indemnification Obligations Net of Insurance Proceeds and Other Amounts on a
Net-Tax Basis.




               (a) Any Liability subject to indemnification or contribution pursuant to this Article VI,
will (i) be net of Insurance Proceeds that actually reduce the amount of the Liability, (ii) be
net of any proceeds received by an Indemnified Party from any third party for indemnification for
such Liability that actually reduce the amount of the Liability (“Third Party Proceeds”) and
(iii) will be determined on a Net-Tax Basis. Accordingly, the amount which any Indemnifying Party
is required to pay pursuant to this Article VI to any Indemnified Party will be reduced by any
Insurance Proceeds or Third Party Proceeds theretofore actually recovered by or on behalf of the
Indemnified Party in respect of the related Liability. If an Indemnified Party receives a payment
required by this Agreement from an Indemnifying Party in respect of any Liability (an “Indemnity
Payment”) and subsequently receives Insurance Proceeds or Third Party Proceeds, then the
Indemnified Party will pay to the Indemnifying Party an amount equal to the excess of the
Indemnity Payment received over the amount of the Indemnity Payment that would have been due if
the Insurance Proceeds or Third Party Proceeds had been received, realized or recovered before the
Indemnity Payment was made.



               (b) An insurer who would otherwise be obligated to pay any claim shall not be relieved of the
responsibility with respect thereto or, solely by virtue of the indemnification and contributions
provisions hereof, have any subrogation rights with respect thereto. The Indemnified Party shall
use commercially reasonable efforts to seek to collect or recover any third-party Insurance
Proceeds and any Third Party Proceeds to which the Indemnified Party is entitled in connection
with any Liability for which the Indemnified Party seeks contribution or indemnification pursuant
to this Article VI; provided that the Indemnified Party’s inability to collect or recover
any such Insurance Proceeds or Third Party Proceeds shall not limit the Indemnifying Party’s
obligations hereunder.



               (c) The term “Net-Tax Basis” as used in this Article VI means that, in determining the amount
of the payment necessary to indemnify any party against, or reimburse any party for, Liabilities,
the amount of such Liabilities will be determined net of any theoretical reduction in Tax
realizable (assuming a hypothetical effective tax rate of 40%) by the Indemnified Party as the
result of sustaining or paying such Liabilities after taking into account any Tax incurred on the
receipt of Insurance Proceeds, and the amount of such Indemnity Payment will be increased (i.e.,
“grossed up”) by the amount necessary to satisfy any income or franchise Tax liabilities that will
be incurred by the Indemnified Party as a result of its receipt of, or right to receive, such
Indemnity Payment (as so increased), so that the Indemnified Party is put in the same net
after-Tax economic position as if it had not incurred such Liabilities, in each case without
taking into account any impact on the Tax basis that an Indemnified Party has in its assets.



          Section 6.06. Notice and Payment of Claims. If any PEC or Patriot Indemnitee (the
“Indemnified Party”) determines that it is or may be entitled to indemnification by a Party (the
“Indemnifying Party”) under this Article VI (other than in connection with any Action or claim
subject to Section 6.07), the Indemnified Party shall deliver to the Indemnifying Party a written
notice specifying, to the extent reasonably practicable, the basis for its claim for
indemnification and the amount for which the Indemnified Party reasonably believes it is entitled









 



37


to be indemnified. After the Indemnifying Party shall have been notified of the amount for
which the Indemnified Party seeks indemnification, the Indemnifying Party shall, within 30 days
after receipt of such notice, pay the Indemnified Party such amount in cash or other immediately
available funds (or reach agreement with the Indemnified Party as to a mutually agreeable
alternative payment schedule) unless the Indemnifying Party objects to the claim for
indemnification or the amount thereof. If the Indemnifying Party does not give the Indemnified
Party written notice objecting to such claim and setting forth the grounds therefor within the same
30 day period, the Indemnifying Party shall be deemed to have acknowledged its liability for such
claim and the Indemnified Party may exercise any and all of its rights under applicable law to
collect such amount.




          Section 6.07. Notice and Defense of Third Party Claims. Promptly following the earlier
of (a) receipt of notice of the commencement by a third party of any Action against or otherwise
involving any Indemnified Party or (b) receipt of information from a third party alleging the
existence of a claim against an Indemnified Party, in either case, with respect to which
indemnification may be sought pursuant to this Agreement (a “Third Party Claim”), the Indemnified
Party shall give the Indemnifying Party written notice thereof. The failure of the Indemnified
Party to give notice as provided in this Section 6.07 shall not relieve the Indemnifying Party of
its obligations under this Agreement, except to the extent that the Indemnifying Party is
prejudiced by such failure to give notice. Within 30 days after receipt of such notice, the
Indemnifying Party shall by giving written notice thereof to the Indemnified Party, (a)
acknowledge, as between the parties hereto, liability for, and at its option elect to assume the
defense of such Third Party Claim at its sole cost and expense or (b) object to the claim of
indemnification set forth in the notice delivered by the Indemnified Party pursuant to the first
sentence of this Section 6.07 setting forth the grounds therefor; provided that if the
Indemnifying Party does not within the same 30 day period give the Indemnified Party written notice
acknowledging liability or objecting to such claim and setting forth the grounds therefor, the
Indemnifying Party shall be deemed to have acknowledged, as between the parties hereto, its
liability to the Indemnified Party for such Third Party Claim. Any contest of a Third Party Claim
as to which the Indemnifying Party has elected to assume the defense shall be conducted by
attorneys employed by the Indemnifying Party and reasonably satisfactory to the Indemnified Party;
provided that the Indemnified Party shall have the right to participate in such proceedings
and to be represented by attorneys of its own choosing at the Indemnified Party’s sole cost and
expense. If the Indemnifying Party assumes the defense of a Third Party Claim, the Indemnifying
Party may settle or compromise the claim without the prior written consent of the Indemnified
Party; provided that the Indemnifying Party may not agree to any such settlement pursuant
to which any remedy or relief, other than monetary damages for which the Indemnifying Party shall
be responsible hereunder, shall be applied to or against the Indemnified Party, without the prior
written consent of the Indemnified Party, which consent shall not be unreasonably withheld. If the
Indemnifying Party does not assume the defense of a Third Party Claim for which it has acknowledged
liability for indemnification under Article VI, the Indemnified Party may require the Indemnifying
Party to reimburse it on a current basis for its reasonable expenses of investigation, reasonable
attorney’s fees and reasonable out-of-pocket expenses incurred in defending against such Third
Party Claim, and the Indemnifying Party shall be bound by the result obtained with respect thereto
by the Indemnified Party; provided that the Indemnifying Party shall not be liable for any
settlement effected without its consent, which consent shall not be unreasonably withheld. The
Indemnifying Party shall pay to the Indemnified Party in cash the









 



38


amount for which the Indemnified Party is entitled to be indemnified (if any) within 15 days
after the final resolution of such Third Party Claim (whether by the final nonappealable judgment
of a court of competent jurisdiction or otherwise), or, in the case of any Third Party Claim as to
which the Indemnifying Party has not acknowledged liability, within 15 days after such Indemnifying
Party’s objection has been resolved by settlement, compromise or the final nonappealable judgment
of a court of competent jurisdiction.




ARTICLE VII

EMPLOYEE MATTERS




          Section 7.01. Employee Matters Agreement. All matters relating to or arising out of
any employee benefit, compensation or welfare arrangement in respect of any present and former
employee of the PEC Group or the Patriot Group shall be governed by the Employee Matters Agreement
substantially in the form of Exhibit B hereto, except as may be expressly stated herein. In
the event of any inconsistency with respect to such matters between the Employee Matters Agreement
and this Agreement or any Ancillary Agreement, the Employee Matters Agreement shall govern to the
extent of the inconsistency.




ARTICLE VIII

TAX MATTERS




          Section 8.01. Tax Separation Agreement. All matters relating to Taxes shall be
governed exclusively by the Tax Separation Agreement substantially in the form of Exhibit F
hereto, except as may be expressly stated herein. In the event of any inconsistency with respect to
such matters between the Tax Separation Agreement and this Agreement or any Ancillary Agreement,
the Tax Separation Agreement shall govern to the extent of the inconsistency.




ARTICLE IX

ACCOUNTING MATTERS




          Section 9.01.
Intercompany Accounts (a).




               (a) Each Intercompany Account outstanding immediately prior to the Effective Time, in any
general ledger account of PEC, Patriot or any of their respective Affiliates, other than those set
forth on Schedule 9.01(a), shall be satisfied and/or settled by the relevant members of
the PEC Group and the Patriot Group no later than the Effective Time by (i) forgiveness by the
relevant obligor, (ii) one or a related series of distributions of and/or contributions to
capital, or (iii) cash payment by the relevant obligor to the relevant obligee, in each case as
agreed to by the Parties.



               (b) To the extent intercompany accounts are not satisfied in accordance with Section 9.01(a),
each Intercompany Account outstanding immediately prior to the Effective Time under any of the
general ledger accounts of PEC, Patriot or any of their respective Affiliates set forth on
Schedule 9.01(a) shall continue to be outstanding after the Effective Time and thereafter
(i) shall be an obligation of the relevant Party (or the relevant member of such Party’s Group),
each responsible for fulfilling its (or a member of such Party’s Group’s) obligations in
accordance with the terms and conditions applicable to such obligation, and









 



39

(ii) shall be for each relevant Party (or the relevant member of such Party’s Group) an
obligation to a third-party and shall no longer be an Intercompany Account.




ARTICLE X

INTELLECTUAL PROPERTY MATTERS




          Section 10.01. Software License Agreement. All matters relating to the ownership and
right to use intellectual property, other than trademarks or as provided in Section 13.07, shall be
governed exclusively by the Software License Agreement substantially in the form of Exhibit
D hereto. In the event of any inconsistency with respect to such matters between the Software
License Agreement and this Agreement or any Ancillary Agreement, the Software License Agreement
shall govern to the extent of the inconsistency.




ARTICLE XI

TRANSITION SERVICES




          Section 11.01. Transition Services Agreement. All matters relating to the provision of
support and other services by the PEC Group to the Patriot Group after the Effective Time covered
by the Transition Services Agreement, other than as provided in Section 13.07, shall be governed
exclusively by the Transition Services Agreements substantially in the form of Exhibit G
hereto, except as may be expressly stated herein. In the event of any inconsistency with respect to
such matters between the Transition Services Agreement and this Agreement or any Ancillary
Agreement, the Transition Services Agreement shall govern to the extent of the inconsistency.




ARTICLE XII

REAL PROPERTY MATTERS




          Section 12.01. Real Property Agreements. All matters relating to real property to be
owned, leased, subleased, occupied, or shared by the PEC Group or the Patriot Group after the
Effective Time shall be governed by the Real Property Agreements substantially in the form of
Exhibit C hereto. In the event of any inconsistency with respect to such matters between
the Real Property Agreements and this Agreement or any Ancillary Agreement, the Real Property
Agreements shall govern to the extent of the inconsistency.




ARTICLE XIII

INFORMATION; SEPARATION OF DATA




          Section 13.01. Provision of Corporate Records. As soon as practicable following the
Effective Time, PEC and Patriot shall each arrange for the provision to the other of existing
corporate documents (e.g. minute books, stock registers, stock certificates, documents of title,
contracts, etc.) in its possession relating to the other or its business and affairs or to any
other entity that is part of such other’s respective Group or to the business and affairs of such
other entity.




          Section 13.02. Access to Information. From and after the Effective Time, PEC and
Patriot shall each afford the other and its accountants, counsel and other designated
representatives reasonable access (including using commercially reasonable efforts to give









 



40


access to Persons possessing information) and duplicating rights during normal business hours
to all records, books, contracts, instruments, computer data and other data and information in its
possession relating to the business and affairs of the other or a member of its Group (other than
data and information subject to an attorney/client or other privilege), insofar as such access is
reasonably required by the other including, without limitation, for audit, accounting and
litigation purposes.




          Section 13.03. Retention of Records. Except as otherwise required by law or agreed to
in writing, each Party shall, and shall cause the members of its Group to, retain all information
relating to the other’s business in accordance with the past practice of such Party.
Notwithstanding the foregoing, either Party may destroy or otherwise dispose of any information at
any time in accordance with the corporate record retention policy maintained by such Party with
respect to its own records.




          Section 13.04. Confidentiality.




               (a) Notwithstanding any termination of this Agreement, for a period of five (5) years from
the Effective Time the Parties shall hold, and shall cause each of their respective subsidiaries
to hold, and shall each cause their respective officers, employees, agents, consultants and
advisors to hold, in strict confidence, and not to disclose or release or use, for any ongoing or
future commercial purpose, without the prior written consent of the other Party, any and all
Confidential Information concerning any other Party; provided, that the Parties may
disclose, or may permit disclosure of, Confidential Information (i) to their respective auditors,
attorneys, financial advisors, bankers and other appropriate consultants and advisors who have a
need to know such information for our auditing and other non-commercial purposes and are informed
of their obligation to hold such information confidential to the same extent as is applicable to
the Parties and in respect of whose failure to comply with such obligations, the applicable Party
will be responsible, (ii) if the Parties or any of their respective subsidiaries are required or
compelled to disclose any such Confidential Information by judicial or administrative process or
by other requirements of Law or stock exchange rule, (iii) as required in connection with any
legal or other proceeding by one Party against any other Party, or (iv) as necessary in order to
permit a Party to prepare and disclose its financial statements, or other required disclosures;
provided, further, that each Party (and members of its Group as necessary) may
use, or may permit use of, Confidential Information of the other Party in connection with such
first Party performing its obligations, or exercising its rights, under this Agreement or any
Ancillary Agreement. Notwithstanding the foregoing, in the event that any demand or request for
disclosure of Confidential Information is made pursuant to clause (ii) above, each Party, as
applicable, shall promptly notify the other of the existence of such request or demand and shall
provide the other a reasonable opportunity to seek an appropriate protective order or other
remedy, which such Parties will cooperate in obtaining. In the event that such appropriate
protective order or other remedy is not obtained, the Party whose Confidential Information is
required to be disclosed shall or shall cause the other applicable Party or Parties to furnish, or
cause to be furnished, only that portion of the Confidential Information that is legally required
to be disclosed and shall take commercially reasonable steps to ensure that confidential treatment
is accorded such information.









 



41


               (b) Notwithstanding anything to the contrary set forth herein, (i) the Parties shall be
deemed to have satisfied their obligations hereunder with respect to Confidential Information if
they exercise the same degree of care (but no less than a reasonable degree of care) as they take
to preserve confidentiality for their own similar information and (ii) confidentiality obligations
provided for in any agreement between each Party or its Subsidiaries and their respective
employees shall remain in full force and effect. Notwithstanding anything to the contrary set
forth herein, Confidential Information of any Party in the possession of and used by any other
Party as of the Effective Time may continue to be used by such Party in possession of the
Confidential Information in and only in the operation of the PEC Business or the Patriot Business,
as the case may be; provided, such Confidential Information may be used only so long as
the Confidential Information is maintained in confidence and not disclosed in violation of
Section 13.04(a). Such continued right to use may not be transferred (directly or indirectly) to
any third party without the prior written consent of the applicable Party, except pursuant to
Section 15.05(b).



               (c) Each Party acknowledges that it and the other members of its Group may have in their
possession confidential or proprietary information of third parties that was received under
confidentiality or non-disclosure agreements with such third party prior to the Effective Time.
Such Party will hold, and will cause the other members of its Group and their respective
representatives to hold, in strict confidence the confidential and proprietary information of
third parties to which they or any other member of their respective Groups has access, in
accordance with the terms of any agreements entered into prior to the Effective Time between one
or more members of the such Party’s Group (whether acting through, on behalf of, or in connection
with, the separated businesses) and such third parties.



               (d) Upon the written request of a Party, the other Party shall promptly, (i) deliver to such
requesting Party all original Confidential Information (whether written or electronic) concerning
such requesting Party and/or its Subsidiaries, and (ii) if specifically requested by such
requesting Party, destroy any copies of such Confidential Information (including any extracts
there from). Upon the written request of such requesting Party, the other Party shall cause one of
its duly authorized officers to certify in writing to such requesting Party that the requirements
of the preceding sentence have been satisfied in full.



          Section 13.05. Privileged Matters.




               (a) The Parties recognize that legal and other professional services that have been and will
be provided prior to the Effective Time have been and will be rendered for the collective benefit
of each of the members of the PEC Group and the Patriot Group, and that each of the members of the
PEC Group and the Patriot Group should be deemed to be the client with respect to such
pre-separation services for the purposes of asserting all privileges which may be asserted under
applicable Law.



               (b) The Parties recognize that legal and other professional services will be provided
following the Effective Time which will be rendered solely for the benefit of PEC or Patriot, as
the case may be. With respect to such post-separation services, the Parties agrees as follows:









 



42



               (i) PEC shall be entitled, in perpetuity, to control the assertion or waiver of all
privileges in connection with privileged information which relates solely to the PEC
Business, whether or not the privileged information is in the possession of or under the
control of PEC or Patriot. PEC shall also be entitled, in perpetuity, to control the
assertion or waiver of all privileges in connection with privileged information that relates
solely to the subject matter of any claims constituting PEC Liabilities, now pending or
which may be asserted in the future, in any lawsuits or other proceedings initiated against
or by PEC, whether or not the privileged information is in the possession of or under the
control of PEC or Patriot; and




               (ii) Patriot shall be entitled, in perpetuity, to control the assertion or waiver of
all privileges in connection with privileged information which relates solely to the Patriot
Business, whether or not the privileged information is in the possession of or under the
control of PEC or Patriot. Patriot shall also be entitled, in perpetuity, to control the
assertion or waiver of all privileges in connection with privileged information that relates
solely to the subject matter of any claims constituting Patriot Liabilities, now pending or
which may be asserted in the future, in any lawsuits or other proceedings initiated against
or by Patriot, whether or not the privileged information is in the possession of or under
the control of PEC or Patriot.



               (c) The Parties agree that they shall have a shared privilege, with equal right to assert or
waive, subject to the restrictions in this Section 13.05, with respect to all privileges not
allocated pursuant to the terms of Section 13.05(b). All privileges relating to any claims,
proceedings, litigation, disputes, or other matters which involve both PEC and Patriot in respect
of which both Parties retain any responsibility or Liability under this Agreement, shall be
subject to a shared privilege among them.



               (d) No Party may waive any privilege which could be asserted under any applicable Law, and in
which any other Party has a shared privilege, without the consent of the other Party, which shall
not be unreasonably withheld or delayed or as provided in subsections (e) or (f) below. Consent
shall be in writing, or shall be deemed to be granted unless written objection is made within
twenty (20) days after notice upon the other Party requesting such consent. Each Party shall use
its reasonable best efforts to preserve any privilege held by the other party if that privilege is
a shared privilege or has been allocated to the other party pursuant to Section 13.05(b).



               (e) In the event of any litigation or dispute between or among any of the Parties, or any
members of their respective Groups, either such Party may waive a privilege in which the other
Party or member of such Group has a shared privilege, without obtaining the consent of the other
Party; provided, that such waiver of a shared privilege shall be effective only as to the
use of information with respect to the litigation or dispute between the relevant Parties and/or
the applicable members of their respective Group’s, and shall not operate as a waiver of the
shared privilege with respect to third parties.



               (f) If a dispute arises between the Parties or their respective subsidiaries regarding
whether a privilege should be waived to protect or advance the interest of either Party, each
Party agrees that it shall negotiate in good faith, shall endeavor to minimize any









 



43

prejudice to the rights of the other Party, and shall not unreasonably withhold consent to
any request for waiver by the other Party. Each Party specifically agrees that it will not
withhold consent to waiver for any purpose except to protect its own legitimate interests.




               (g) Upon receipt by either Party or by any subsidiary thereof of any subpoena, discovery or
other request which arguably calls for the production or disclosure of information subject to a
shared privilege or as to which the other Party has the sole right hereunder to assert a
privilege, or if either Party obtains knowledge that any of its or any of its Subsidiaries’
current or former directors, officers, agents or employees have received any subpoena, discovery
or other requests which arguably calls for the production or disclosure of such privileged
information, such Party shall promptly notify the other Party of the existence of the request and
shall provide the other Party a reasonable opportunity to review the information and to assert any
rights it or they may have under this Section 13.05 or otherwise to prevent the production or
disclosure of such privileged information.



               (h) The transfer of all Information pursuant to this Agreement is made in reliance on the
agreement of PEC and Patriot as set forth in Section 13.04 and Section 13.05, to maintain the
confidentiality of privileged information and to assert and maintain all applicable privileges.
Nothing provided for herein or in any Ancillary Agreement shall be deemed a waiver of any
privilege that has been or may be asserted under this Agreement or otherwise.



          Section 13.06. Ownership of Information. Any Information owned by one Party or any of
its subsidiaries that is provided to a requesting Party pursuant to Article VI, Article XV, or this
Article XIII shall be deemed to remain the property of the providing party. Unless specifically set
forth herein, nothing contained in this Agreement shall be construed as granting or conferring
rights of license or otherwise in any such information.




          Section 13.07. Separation of Data. Patriot acknowledges and agrees that PEC may, after
the Effective Time, delete or cause to be deleted any Information which does not relate to the
Patriot Business which is contained in, stored in or accessible through any Software provided to
Patriot under the Software License Agreement, the Transition Services Agreement or otherwise. The
foregoing will not be deemed to be a violation of any provision of this Agreement, the Software
License Agreement, or the Transition Services Agreement. The provisions of Section 13.04 apply to
Patriot’s use of any such Information prior to its deletion.




ARTICLE XIV

INTEREST ON PAYMENTS




          Section 14.01. Interest. Except as otherwise expressly provided in this Agreement or
an Ancillary Agreement, all payments by one Party to the other under this Agreement or any
Ancillary Agreement shall be paid by company check or wire transfer of immediately available funds
to an account in the United States designated by the recipient, within thirty (30) days after
receipt of an invoice or other written request for payment setting forth the specific amount due
and a description of the basis therefor in reasonable detail. Any amount remaining unpaid beyond
its due date, including disputed amounts that are ultimately determined to be payable, shall bear
interest at a rate of simple interest per annum equal to the Applicable Rate. Notwithstanding
anything to the contrary contained herein or in any Ancillary Agreement, in no









 



44


event shall the amount or rate of interest due and payable exceed the maximum amount or rate
of interest allowed by applicable law and, in the event any such excess payment is made or
received, such excess sum shall be credited as a payment of principal (or if no principal shall
remain outstanding, shall be refunded).




ARTICLE XV

MISCELLANEOUS




          Section 15.01. Expenses. Except as set forth on Schedule 15.01 or as
specifically provided in this Agreement or any Ancillary Agreement, PEC shall pay (a) all costs and
expenses incurred in connection with the spin-off and the transactions contemplated by this
Agreement (including transfer taxes and the fees and expenses of the Distribution Agent and of all
counsel, accountants and financial and other advisors), (b) all costs and expenses incurred in
connection with the preparation, execution, delivery and implementation of this Agreement and the
Ancillary Agreements, (c) all costs and expenses incurred by Patriot (including fees and expenses
of all counsel, accountants and financial advisors) in connection with Patriot’s Senior Credit
Facility, (d) all costs and expenses payable by Patriot to Bank of America, N.A. or Banc of America
Securities LLC (collectively, “BofA”) pursuant to the Senior Secured Credit Facility
Commitment Letter and Fee Letter, in each case dated September 24, 2007, entered into by Patriot
with BofA, representing amounts owed to BofA in connection with the establishment of Patriot’s
Senior Credit Facility in respect of the preparation, due diligence, syndication and closing of all
loan documentation (including, without limitation, the legal fees of counsel to BofA) and amounts
owed to BofA in respect of underwriting and administrative agency fees, and (e) all legal, filing,
accounting, printing, and other expenses in connection with the preparation, printing and filing of
the Form 10 and the Information Statement.




          Section 15.02. Notices. All notices and communications under this Agreement shall be
in writing and shall be deemed to have been given (a) when received, if such notice or
communication is delivered by facsimile, hand delivery or overnight courier, and, (b) three (3)
business days after mailing if such notice or communication is sent by United States registered or
certified mail, return receipt requested, first class postage prepaid. All notices and
communications, to be effective, must be properly addressed to the party to whom the same is
directed at its address as follows:




	 	 	 	 
	 	If to PEC, to:

	 	Peabody Energy Corporation
	 	 

	 	701 Market Street
	 	 

	 	St. Louis, MO 63101
	 	 

	 	Attention: Alexander Schoch
	 	 

	 	Executive Vice President – Law
	 	 

	 	Fax: 314-342-3419
	 	 
	 	 
	 	If to Patriot, to:

	 	Patriot Coal Corporation
	 	 

	 	12312 Olive Boulevard, Suite 400
	 	 

	 	St. Louis, MO 63141
	 	 

	 	Attention: Joseph W. Bean
	 	 

	 	Senior Vice President, General Counsel & Corporate Secretary
	 	 

	 	Fax:












 



45


     Either Party may, by written notice delivered to the other Party in accordance with this
Section 15.02, change the address to which delivery of any notice shall thereafter be made.



          Section 15.03. Amendment and Waiver. This Agreement may not be altered or amended, nor
may any rights hereunder be waived, except by an instrument in writing executed by the Party or
Parties to be charged with such amendment or waiver. No waiver of any terms, provision or condition
of or failure to exercise or delay in exercising any rights or remedies under this Agreement, in
any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver
of any such term, provision, condition, right or remedy or as a waiver of any other term, provision
or condition of this Agreement.




          Section 15.04. Entire Agreement. This Agreement, together with the Ancillary
Agreements, constitutes the entire understanding of the Parties hereto with respect to the subject
matter hereof, superseding all negotiations, prior discussions and prior agreements and
understandings relating to such subject matter. To the extent that the provisions of this Agreement
are inconsistent with the provisions of any Ancillary Agreement with respect to the subject matter
thereof, the provisions of such Ancillary Agreement shall prevail to the extent of the
inconsistency.




          Section 15.05. Consolidation, Merger, Etc.; Parties in Interest; Termination.




               (a) Neither Party (referred to in this Section 15.05(a) as a “Transferring Party”) shall
consolidate with or merge into any other entity or convey, transfer or lease all or any
substantial portion of its properties and assets to any entity, unless, in each case, the other
party to such transaction expressly assumes, by a written agreement, executed and delivered to the
other Party hereto, in form reasonably satisfactory to such other Party, all of the Liabilities of
the Transferring Party under this Agreement and the Ancillary Agreements and the due and punctual
performance or observance of every agreement and covenant of this Agreement and Ancillary
Agreements on the part of the Transferring Party to be performed or observed.



               (b) Neither of the Parties hereto may assign its rights or delegate any of its duties under
this Agreement without the prior written consent of each other Party. This Agreement shall be
binding upon, and shall inure to the benefit of, the Parties hereto and their respective
successors and permitted assigns. Nothing contained in this Agreement, express or implied, is
intended to confer any benefits, rights or remedies upon any Person other than members of the PEC
Group and the Patriot Group and the PEC Indemnitees and Patriot Indemnitees under Article VI
hereof.



               (c) This Agreement (including Article VI hereof) may be terminated and the Distribution may
be amended, modified or abandoned at any time prior to the Distribution by and in the sole
discretion of PEC without the approval of Patriot or the shareholders of PEC. In the event of such
termination, neither Party shall have any liability of any kind arising from such termination to
the other Party or any other Person. After the Distribution, this Agreement may not be terminated
except by an agreement in writing signed by the Parties; provided, however, that
Article VI shall not be terminated or amended after the Distribution in respect of any PEC
Indemnitee or Patriot Indemnitee without the consent of such Person.









 



46


          Section 15.06. Further Assurances and Consents. In addition to the actions
specifically provided for elsewhere in this Agreement, each of the Parties hereto will use
commercially reasonable efforts to (a) execute and deliver such further instruments and documents
and take such other actions as any other Party may reasonably request in order to effectuate the
purposes of this Agreement and to carry out the terms hereof and (b) take, or cause to be taken,
all actions, and do, or cause to be done, all things, reasonably necessary, proper or advisable
under applicable laws, regulations and agreements or otherwise to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation, using commercially
reasonable efforts to obtain any consents and approvals, make any filings and applications and
remove any liens, claims, equity or other encumbrance on an Asset of the other Party necessary or
desirable in order to consummate the transactions contemplated by this Agreement; provided
that no Party hereto shall be obligated to pay any consideration therefor (except for filing fees
and other similar charges) to any third party from whom such consents, approvals and amendments are
requested or to take any action or omit to take any action if the taking of or the omission to take
such action would be unreasonably burdensome to the Party or its Group or the business thereof.




          Section 15.07. Severability. In the event that any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained herein shall not in any
way be affected or impaired thereby, and the Parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions, the economic effect
of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.




          Section 15.08. Governing Law; Jurisdiction. This Agreement shall be construed in
accordance with, and governed by, the laws of the State of Delaware, without regard to the
conflicts of law rules of such state. Each of the parties hereto (a) consents to submit itself to
the personal jurisdiction of the courts of the State of Missouri or any federal court with subject
matter jurisdiction located in the City of St. Louis (and any appeals court therefrom) in the event
any dispute arises out of this Agreement or any Ancillary Agreement or any transaction contemplated
hereby or thereby, (b) agrees that it will not attempt to deny or defeat such personal jurisdiction
by motion or other request for leave from any such court, and (c) agrees that it will not bring any
action relating to this Agreement or any Ancillary Agreement or any transaction contemplated hereby
or thereby in any court other than such courts.




          Section 15.09. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original instrument, but all of which together shall
constitute but one and the same Agreement.




          Section 15.10. Third Party Beneficiaries. Except as provided in Article VI and except
as specifically provided in any Ancillary Agreement, this Agreement is solely for the benefit of
the Parties and should not be deemed to confer upon third parties any remedy, claim, liability,
reimbursement, cause of action or other right in excess of those existing without reference to this
Agreement.




          Section 15.11. Specific Performance. The Parties agree that irreparable damage would
occur in the event that the provisions of this Agreement were not performed in accordance









 



47


with their specific terms. Accordingly, it is hereby agreed that the Parties shall be entitled
to provisional or temporary injunctive relief in accordance therewith in any court of the United
States, this being in addition to any other remedy or relief to which they may be entitled.




          Section 15.12. Limitations of Liability. Notwithstanding anything in this Agreement to
the contrary, no Indemnifying Party shall be liable to an Indemnified Party for any special,
indirect, incidental, punitive, consequential, exemplary, statutorily-enhanced or similar damages
in excess of compensatory damages (provided that any such liability with respect to a Third Party
Claim shall be considered direct damages) arising in connection with the transactions contemplated
by this Agreement or the Ancillary Agreements.




          Section 15.13. Force Majeure. No Party (or any Person acting on its behalf) shall have
any liability or responsibility for failure to fulfill any obligation (other than a payment
obligation) under this Agreement or, unless otherwise expressly provided therein, any Ancillary
Agreement, so long as and to the extent to which the fulfillment of such obligation is prevented,
frustrated, hindered or delayed as a consequence of circumstances of Force Majeure. A Party
claiming the benefit of this provision shall, as soon as reasonably practicable after the
occurrence of any such event: (a) notify the other Party of the nature and extent of any such Force
Majeure condition, and (b) use due diligence to remove any such causes and resume performance under
this Agreement as soon as reasonably practicable.




          Section 15.14. Construction. The Parties have participated jointly in the negotiation
and drafting of this Agreement. This Agreement shall be construed without regard to any presumption
or rule requiring construction or interpretation against the party drafting or causing any
instrument to be drafted.




          Section 15.15. Disputes.




               (a) Except as otherwise provided in any Ancillary Agreement, all disputes, controversies or
claims between members of the PEC Group and the Patriot Group, which are parties to this Agreement
or any Ancillary Agreement, arising out of or relating to this Agreement or any Ancillary
Agreement or the performance by the parties of its or their terms, whether based on contract,
tort, statute or otherwise, including, but not limited to, disputes in connection with claims by
third parties (collectively, “Disputes”), shall be resolved only in accordance with the provisions
of this Section 15.15; provided, however, that nothing contained herein shall
preclude any party to a Dispute from seeking or obtaining (i) injunctive relief to prevent an
actual or threatened breach of any of the provisions of this Agreement or any Ancillary Agreement,
or (ii) equitable or other judicial relief to enforce the provisions of this Section 15.15 hereof
or to preserve the status quo pending resolution of Disputes hereunder.



               (b) Any party or parties to a Dispute of either Group may give the parties to the Dispute of
the other Group written notice of the Dispute initiating the procedures hereunder. Within ten days
after delivery of the notice of a 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









 



48

who will accompany such executive in resolving the Dispute. Within twenty (20) days after
delivery of the first notice, the executives of both Groups 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 Dispute. All reasonable requests for information made by one
party to the another will be honored. If the Dispute has not been resolved by negotiation within
forty (40) days of the notice of the Dispute, the board of directors of PEC and Patriot shall
appoint independent committees that will negotiate in good faith to attempt to resolve the
Dispute.




               (c) If the Dispute has not been resolved by negotiation within sixty (60) days of the notice
of Dispute, the Dispute may, by mutual consent of both Parties, be submitted for resolution by a
panel of three arbitrators conducted in accordance with the CPR Rules for Non-Administered
Arbitration or AAA Rules (the “Rules”), as modified by this Section 15.15. The Claimants acting
jointly, on the one hand, and the Respondents acting jointly, on the other hand, shall each
appoint one arbitrator within fourteen (14) days after the Claimants give an arbitration notice.
The two arbitrators so appointed shall designate the third arbitrator by mutual agreement within
30 days after the arbitration notice is given. If the two arbitrators so appointed fail to
designate the third arbitrator within such period, then any Party may request the International
Institute for Conflict Prevention & Resolution (“CPR”) to appoint the third arbitrator within
fourteen (14) days after such request. The third arbitrator shall be a lawyer licensed to practice
in the State of Missouri who shall not be related to, employed by, affiliated with or have had a
substantial or ongoing business relationship with any member of either Group. Notwithstanding the
foregoing, if the amount in dispute is less than $5,000,000, then the Claimants and Respondents
shall appoint, together, a single arbitrator, reasonably acceptable to them, licensed to practice
in the State of Missouri who shall not be related to, employed by, affiliated with or have had a
substantial or ongoing business relationship with any member of either Group.



               (d) The arbitration shall be conducted in St. Louis, Missouri (or at any other place agreed
upon by the parties and the arbitrators). The parties will facilitate the arbitration by: (i)
making available to one another and to the arbitrators for examination, inspection and extraction
all documents, books, records and personnel under their control if determined by the arbitrators
to be relevant to the dispute; (ii) conducting arbitration hearings to the greatest extent
possible on successive days; and (iii) observing strictly the time periods established by this
Section 15.15, the Rules or by the arbitrators for submission of evidence or briefs. All issues in
connection with the Dispute, including procedural issues, shall be decided by the concurrence of
at least two arbitrators, and all decisions by the arbitrators shall be accompanied by a written
opinion setting forth the findings of fact and conclusions of law relied upon in reaching the
decision. The panel of arbitrators shall decide the issues submitted to it in accordance
with the language and commercial purposes of this Agreement or the relevant Ancillary Agreement
(as applicable); provided that all questions of law shall be governed by the internal laws
of the State of Delaware, without regard to its conflict of laws rules. The arbitrators’ decision
shall be final and binding as to all matters at issue in the Dispute; provided,
however, if necessary such decision may be enforced by either party in any court having
jurisdiction over the parties or the subject matter of the Dispute. Unless the arbitrators shall
assess the costs and expenses of the arbitration proceeding and of the parties differently,









 



49

each party shall pay its costs and expenses incurred in connection with the arbitration
proceeding, and the costs and expenses of the arbitrators shall be shared equally by the parties.




[Signatures appear on following page.]










 



50




     IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the
day and year first above written.



	 	 	 	 	 	 	 
	 	 	PEABODY ENERGY CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Richard A. Navarre
 

Name: Richard A. Navarre
	 	 
	 

	 	 	 	Title: Executive Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	PATRIOT COAL CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Richard M. Whiting	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Richard M. Whiting	 	 
	 

	 	 	 	Title: President & Chief Executive Officer