Document:

Exhibit
10.1

     

     

    EXECUTION
COPY

    
      PATRIOT
COAL CORPORATION

       

      U.S.$175,000,000
3.25% Convertible Senior Notes Due 20131

       

      Purchase
Agreement

       

      May 21,
2008

       

      Citigroup
Global Markets Inc.

      388
Greenwich Street

      New York,
New York  10013

       

      and

       

      Lehman
Brothers Inc.

      745
Seventh Avenue

      New York,
New York  10019

       

      As
Representatives of the Initial Purchasers

       

       

      Ladies and
Gentlemen:

       

      Patriot
Coal Corporation, a corporation organized under the laws of Delaware (the
“Company”), proposes to issue and sell to the several parties named in Schedule
I hereto (the “Initial Purchasers”), for whom you (the “Representatives”) are
acting as representatives, U.S.$175,000,000 principal amount of its 3.25%
Convertible Senior Notes due 2013 (the “Firm Securities”).  The
Company also proposes to grant to the Initial Purchasers an option to purchase
up to U.S.$25,000,000 additional principal amount of such Notes to cover
over-allotments, if any (the “Option Securities” and, together with the Firm
Securities, the “Securities”).  The Securities are convertible into
shares of Common Stock, par value U.S.$0.01 per share (the “Common Stock”), of
the Company at the conversion price set forth herein.  The Securities
are to be issued under an indenture (the “Indenture”), to be dated as of the
Closing Date, between the Company and U.S. Bank National Association, as trustee
(the “Trustee”).    To the extent there are no additional
parties listed on Schedule I other than you, the term Representatives as used
herein shall mean you as the Initial Purchasers, and the terms Representatives
and Initial Purchasers shall mean either the singular or plural as the context
requires.  The use of the neuter in this Agreement shall include the
feminine and masculine wherever appropriate.  Certain terms used
herein are defined in Section 23 hereof.

       

      Pursuant
to the Agreement and Plan of Merger (the “Merger Agreement”) dated as of April
2, 2008 by and among Magnum Coal Company, a Delaware corporation (“Magnum”), the
Company, Colt Merger Corporation, a Delaware corporation and a
wholly-

       

      
        
          

        

      

      
        1  Plus
an option to purchase up to an additional U.S.$25,000,000 aggregate principal
amount from the Company, solely to cover over-allotments.

         

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      owned
subsidiary of the Company, ArcLight Energy Partners Fund I, L.P., a Delaware
limited partnership, and ArcLight Energy Partners Fund II, L.P., a Delaware
limited partnership, subject to the conditions set forth therein, subsequent to
the Closing Date Colt Merger Corporation is to be merged with and into Magnum,
whereupon the separate existence of Colt Merger Corporation will cease, and
Magnum, as the surviving corporation, will become the Company’s
subsidiary.

       

      The sale
of the Securities to the Initial Purchasers will be made without registration of
the Securities or the Common Stock issuable upon conversion thereof under the
Act in reliance upon exemptions from the registration requirements of the
Act.

       

      In
connection with the sale of the Securities, the Company has prepared a
preliminary offering memorandum, dated May 20, 2008 (as amended or supplemented
at the date thereof, including any and all exhibits thereto and any information
incorporated by reference therein, the “Preliminary Memorandum”), and a final
offering memorandum, dated May 21, 2008 (as amended or supplemented at the
Execution Time, including any and all exhibits thereto and any information
incorporated by reference therein, the “Final Memorandum”).  Each of
the Preliminary Memorandum and the Final Memorandum sets forth certain
information concerning the Company, the Securities and the Common Stock issuable
upon conversion thereof.  The Company hereby confirms that it has
authorized the use of the Disclosure Package, the Preliminary Memorandum and the
Final Memorandum, and any amendment or supplement thereto, in connection with
the offer and sale of the Securities by the Initial
Purchasers.  Unless stated to the contrary, any references herein to
the terms “amend”, “amendment” or “supplement” with respect to the Final
Memorandum shall be deemed to refer to and include any information filed under
the Exchange Act subsequent to the Execution Time that is incorporated by
reference therein.

       

      1.      Representations and
Warranties.  The Company represents and warrants to, and agrees
with, each Initial Purchaser as set forth below in this Section 1.

       

      (a)     The
Preliminary Memorandum, at the date thereof, did not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.  At the Execution Time, on the Closing Date
and on any settlement date, the Final Memorandum did not and will not (and any
amendment or supplement thereto, at the date thereof, at the Closing Date and on
any settlement date, will not) contain any untrue statement of a material fact
or omit to state any material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading; provided, however, that the
Company makes no representation or warranty as to the information contained in
or omitted from the Preliminary Memorandum or the Final Memorandum, or any
amendment or supplement thereto, in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf of
the  Initial Purchasers through the Representatives specifically for
inclusion therein, it being understood and agreed that the only such information
furnished by or on behalf of any Initial Purchaser consists of the information
described as such in Section 8(b) hereof.

       

      (b)     The
Disclosure Package, as of the Execution Time, does not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      misleading.  The
preceding sentence does not apply to statements in or omissions from the
Disclosure Package based upon and in conformity with written information
furnished to the Company by any Initial Purchaser through the Representatives
specifically for use therein, it being understood and agreed that the only such
information furnished by or on behalf of any Initial Purchaser consists of the
information described as such in Section 8(b) hereof.

       

      (c)     None
of the Company, its Affiliates, or any person acting on its or their behalf has,
directly or indirectly, made offers or sales of any security, or solicited
offers to buy any security, under circumstances that would require the
registration of the Securities or the Common Stock issuable upon conversion
thereof under the Act.

       

      (d)     None
of the Company, its Affiliates, or any person acting on its or their behalf has
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D) in connection with any offer or sale of the
Securities.

       

      (e)     The
Disclosure Package and the Final Memorandum have been prepared by the Company
for use by the Initial Purchasers in connection with the purchase and resale of
the Securities exempt from the registration requirements of the Securities
Act.  No order or decree preventing the use of the Disclosure Package
or the Final Memorandum, or any order asserting that the transactions
contemplated by this Agreement are subject to the registration requirements of
the Securities Act has been issued, and no proceeding for that purpose has
commenced or is pending or, to the knowledge of the Company is
contemplated.

       

      (f)     The
Securities satisfy the eligibility requirements of Rule 144A(d)(3) under the
Act.

       

      (g)     Assuming
the accuracy of the representations and warranties of the Initial Purchasers
contained in Section 4 and their compliance with their agreements set forth
herein, no registration under the Act of the Securities or the Common Stock
issuable upon conversion thereof is required for the offer and sale of the
Securities to or by the Initial Purchasers in the manner contemplated herein, in
the Disclosure Package and the Final Memorandum.

       

      (h)     The
Company is not, and after giving effect to the offering and sale of the
Securities and the application of the proceeds thereof as described in the
Disclosure Package and the Final Memorandum will not be, an “investment company”
as defined in the Investment Company Act.

       

      (i)     
The Company is subject to and in compliance in all material respects with the
reporting requirements of Section 13 or Section 15(d) of the Exchange
Act.

       

      (j)     
The Company has not paid or agreed to pay to any person any compensation for
soliciting another to purchase any securities of the Company (except as
contemplated in this Agreement).

       

      (k)     The
Company has not taken, directly or indirectly, any action designed to or that
has constituted or that might reasonably be expected to cause or result, under
the Exchange Act or otherwise, in stabilization or manipulation of the price of
any security of the Company to facilitate the sale or resale of the
Securities.

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      (l)      Each
of the Company, its subsidiaries, and, to the Company’s knowledge, Magnum and
its subsidiaries, has been duly incorporated or organized and is validly
existing as a corporation, limited liability company or other entity in good
standing under the laws of the jurisdiction in which it is formed with full
corporate power and authority to own or lease, as the case may be, and to
operate its properties and conduct its business as described in the Disclosure
Package and the Final Memorandum, and is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each jurisdiction
that requires such qualification, except for such jurisdictions where the
failure to so qualify or to be in good standing would not result in a Material
Adverse Effect.

       

      (m)    All
the outstanding shares of capital stock or other equity or ownership interests
of each Significant Subsidiary have been duly authorized and validly issued and
are fully paid and nonassessable, and, except as otherwise set forth in the
Disclosure Package and the Final Memorandum, all outstanding shares of capital
stock or other equity or ownership interests of the Significant Subsidiaries are
owned by the Company either directly or through a subsidiary that is, except as
otherwise set forth in the Disclosure Package and the Final
Memorandum,  wholly-owned by the Company, free and clear of any
security interest, claim, lien or encumbrance, except in each case as set forth
in the Disclosure Package and the Final Memorandum.

       

      (n)     The
Company’s authorized equity capitalization is as set forth in the Disclosure
Package and the Final Memorandum; the capital stock of the Company conforms to
the description thereof contained in the Disclosure Package and the Final
Memorandum; the outstanding shares of Common Stock have been duly authorized and
validly issued  and are fully paid and nonassessable; the shares of
Common Stock initially issuable upon conversion of the Securities have been duly
authorized and, when issued upon conversion of the Securities against payment of
the conversion price, will be validly issued, fully paid and nonassessable; the
Board of Directors of the Company has duly and validly adopted resolutions
reserving such shares of Common Stock for issuance upon conversion of the
Securities; the holders of outstanding shares of capital stock of the Company
are not entitled to preemptive or other rights to subscribe for the Securities
or the shares of Common Stock issuable upon conversion thereof; and, except as
set forth in the Disclosure Package and the Final Memorandum, no options,
warrants or other rights to purchase, agreements or other obligations to issue,
or rights to convert any obligations into or exchange any securities for, shares
of capital stock of or ownership interests in the Company are outstanding, other
than (i) issuances pursuant to employee benefit plans or upon exercise of
outstanding options and (ii) issuances pursuant to the Merger Agreement, in each
case as described in the Disclosure Package and the Final
Memorandum.

       

      (o)     The
statements in the Preliminary Memorandum and the Final Memorandum under the
headings “Certain U.S. Federal Tax Consequences”, “Description of the Notes”,
“Description of Capital Stock”, “Business of Patriot—Regulatory Matters”,
“Business of Patriot—Environmental Laws”, “Risk Factors – Risks Relating to
Patriot—Patriot could be liable to Peabody for adverse tax consequences
resulting from certain change in control transactions and therefore could be
prevented from engaging in strategic or capital raising transactions”,
“Patriot’s mining operations are extensively regulated, which imposes
significant costs on it, and future regulations and developments could increase
those costs or limit Patriot’s ability to produce and sell coal”, “Patriot’s
exposure to statutory retiree healthcare costs could be

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      significantly
higher than Patriot has estimated”, “—Concerns about the environmental impacts
of coal combustion, such as impacts on global climate change, are resulting in
increased regulation of coal combustion and could significantly affect demand
for Patriot’s products”, “—Patriot may be unable to obtain and renew permits
necessary for its operations, which would reduce its production, cash flows and
profitability”, and “—Patriot’s operations may impact the environment or cause
exposure to hazardous substances, and its properties may have environmental
contamination, which could result in material liabilities to Patriot” fairly
summarize the matters therein described in all material respects; and, to the
knowledge of the Company, the statements in the Preliminary Memorandum and the
Final Memorandum under the headings “Risk Factors—Risk Factors Relating to
Magnum—If Magnum’s assumptions regarding its likely future expenses related to
employee benefit plans are incorrect, then expenditures for these benefits could
be materially higher than Magnum has assumed”, “—Magnum
has stopped its participation in the production of “synfuel” which has
historically generated a portion of Magnum’s revenue”, “—Judicial rulings that
restrict the issuance of permits pursuant to the Clean Water Act could
significantly increase Magnum’s operating costs, discourage customers from
purchasing Magnum’s coal and materially harm Magnum’s financial condition and
operating results”, “—Magnum has significant reclamation and mine closure
obligations. If the assumptions underlying Magnum’s accruals are materially
inaccurate, Magnum could be required to expend greater amounts than
anticipated”, “—Magnum’s operations may impact the environment or cause exposure
to hazardous materials, and its properties may have environmental contamination,
which could result in material liabilities”, “—Environmental
litigation could result in delays in Magnum’s efforts to obtain new permits, and
in certain cases new permits may not be issued”, “—Magnum is involved in legal
proceedings that if determined adversely to Magnum, could significantly impact
its profitability, financial position or liquidity”, “Business of
Magnum—Regulatory Matters”, “Business of Magnum—Environmental Laws” and
“Business of Magnum—Legal Proceedings” fairly summarize the matters therein
described in all material respects.

       

      (p)     This
Agreement has been duly authorized, executed and delivered by the Company; the
Indenture has been duly authorized and, assuming due authorization, execution
and delivery thereof by the Trustee, when executed and delivered by the Company,
will constitute a legal, valid, binding instrument enforceable against the
Company in accordance with its terms (subject, as to the enforcement of
remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or
other laws affecting creditors’ rights generally from time to time in effect and
to general principles of equity); and the Securities have been duly authorized,
and, when executed and authenticated in accordance with the provisions of the
Indenture and delivered to and paid for by the Initial Purchasers, will have
been duly executed and delivered by the Company and will constitute the legal,
valid and binding obligations of the Company entitled to the benefits of the
Indenture (subject, as to the enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium or other laws affecting creditors’ rights
generally from time to time in effect and to general principles of equity) and
will be convertible into Common Stock in accordance with their
terms.

       

      (q)      No
consent, approval, authorization, filing with or order of any court or
governmental agency or body is required in connection with the transactions
contemplated herein or in the Indenture, except such as may be required under
the blue sky laws of any jurisdiction in which the Securities are offered and
sold.

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      (r)       None
of the execution and delivery of the Indenture, this Agreement or the Merger
Agreement, the issuance and sale of the Securities or the issuance of the Common
Stock upon conversion thereof, or the consummation of any other of the
transactions herein or therein contemplated, or the fulfillment of the terms
hereof or thereof will conflict with, result in a breach or violation or
imposition of any lien, charge or encumbrance upon any property or assets of the
Company, its subsidiaries, or, to the knowledge of the Company, Magnum or any of
its subsidiaries pursuant to, (i) the charter or by-laws or comparable
constituting documents of the Company, its subsidiaries, Magnum or any of its
subsidiaries; (ii) the terms of any indenture, contract, lease, mortgage, deed
of trust, note agreement, loan agreement or other agreement, obligation,
condition, covenant or instrument to which the Company, its subsidiaries, Magnum
or any of its subsidiaries is a party or bound or to which its or their property
is subject; or (iii) any statute, law, rule, regulation, judgment, order or
decree of any court, regulatory body, administrative agency, governmental body,
arbitrator or other authority having jurisdiction over the Company, its
subsidiaries, Magnum or any of its subsidiaries or any of its or their
properties, except in the case of clause (ii) and (iii) for any such conflict,
breach, violation or imposition as would not result in a material adverse effect
on the condition (financial or otherwise), prospects, earnings, business or
properties of the Company and its subsidiaries, taken as a whole, whether or not
arising from transactions in the ordinary course of business (a “Material
Adverse Effect”).

       

      (s)       The
consolidated historical financial statements and schedules of (x) the Company
and its consolidated subsidiaries and (y) Magnum and its consolidated
subsidiaries included or incorporated by reference in the Disclosure Package and
the Final Memorandum present fairly in all material respects the financial
condition, results of operations and cash flows of the Company or Magnum, as the
case may be, as of the dates and for the periods indicated, comply as to form
with the applicable accounting requirements of Regulation S-X and have been
prepared in conformity with generally accepted accounting principles in the
United States applied on a consistent basis throughout the periods involved
(except as otherwise noted therein); the selected financial data set forth under
the captions “Summary – Summary Financial and Operating Data for Patriot,”
“Summary – Summary Financial and Operating Data for Magnum,” “Selected
Consolidated Financial Data of Patriot” and “Selected Consolidated Financial
Data of Magnum” in the Preliminary Memorandum and the Final Memorandum fairly
present, on the basis stated in the Preliminary Memorandum and the Final
Memorandum, the information included or incorporated by reference therein; the
pro forma financial statements included or incorporated by reference in the
Disclosure Package and the Final Memorandum include assumptions that provide a
reasonable basis for presenting the significant effects directly attributable to
the transactions and events described therein, the related pro forma adjustments
give appropriate effect to those assumptions; the pro forma adjustments reflect
the proper application of those adjustments to the historical financial
statement amounts in the pro forma financial statements included in the
Disclosure Package and the Final Memorandum; the pro forma financial statements
included in the Disclosure Package and the Final Memorandum comply as to form
with the applicable accounting requirements of Regulation S-X; and the pro forma
adjustments have been properly applied to the historical amounts in the
compilation of those statements.

       

      (t)        No
action, suit or proceeding by or before any court or governmental agency,
authority or body or any arbitrator involving the Company, its subsidiaries, or,
to the knowledge of the Company, Magnum or any of its subsidiaries or its or
their property is pending or, to the

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      knowledge
of the Company, threatened that (i) could reasonably be expected to have a
material adverse effect on the performance of this Agreement, the Indenture or
the Merger Agreement or the consummation of any of the transactions contemplated
hereby or thereby or (ii) could reasonably be expected to have a Material
Adverse Effect, except as set forth in or contemplated in the Disclosure Package
and the Final Memorandum (exclusive of any amendment or supplement
thereto).

       

      (u)        Each
of the Company, its subsidiaries, and, to the knowledge of the Company, Magnum
and its subsidiaries owns or leases all such properties as are necessary to the
conduct of its operations as presently conducted except where the failure to so
own or lease properties would not have a Material Adverse Effect and except as
set forth or contemplated in the Disclosure Package and the Final Memorandum
(exclusive of any amendment or supplement thereto).

       

      (v)        None
of the Company, its subsidiaries, or, to the knowledge of the Company, Magnum or
any of its subsidiaries is in violation or default of (i) any provision of its
charter or bylaws or comparable constituting documents; (ii) the terms of any
indenture, contract, lease, mortgage, deed of trust, note agreement, loan
agreement or other agreement, obligation, condition, covenant or instrument to
which it is a party or bound or to which its property is subject; or (iii) any
statute, law, rule, regulation, judgment, order, decree or requirement
applicable to the Company, its subsidiaries, Magnum or any of its subsidiaries
of any court, regulatory body, administrative agency, governmental body,
arbitrator or other authority having jurisdiction over the Company, such
subsidiary, Magnum or such subsidiary or any of its properties, as applicable,
except, with respect to clauses (ii) and (iii), as would not result in a
Material Adverse Effect.

       

      (w)       Ernst
& Young LLP, who have certified certain financial statements of (x) the
Company and its consolidated subsidiaries and (y) Magnum and its consolidated
subsidiaries and delivered their reports with respect to the audited
consolidated financial statements and schedules included or incorporated by
reference in the Disclosure Package and the Final Memorandum, are independent
public accountants with respect to each of the Company and Magnum within the
meaning of the Act.

       

      (x)         There
are no stamp or other issuance or transfer taxes or duties or other similar fees
or charges required to be paid in connection with the execution and delivery of
this Agreement or the issuance or sale of the Securities or upon the issuance of
Common Stock upon the conversion thereof.

       

      (y)        Each
of the Company, and to the knowledge of the Company, Magnum, (i) has timely
filed all applicable tax returns that are required to be filed or has requested
extensions thereof (except in any case in which the failure so to file would not
have a Material Adverse Effect and except as set forth in or contemplated in the
Disclosure Package and the Final Memorandum (exclusive of any amendment or
supplement thereto)) and all such tax returns are correct and complete in all
material respects, and (ii) has timely paid all taxes required to be paid by it
and any other assessment, fine or penalty levied against it, to the extent that
any of the foregoing is due and payable, except for any such tax or assessment,
fine or penalty that is currently being contested in good faith or as would not
have a Material Adverse

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      Effect and
except as set forth in or contemplated in the Disclosure Package and the Final
Memorandum (exclusive of any amendment or supplement thereto).

       

      (z)         No
labor problem or dispute with the employees of the Company, its subsidiaries, or
to the Company’s knowledge, Magnum or any of its subsidiaries exists or to the
Company’s knowledge is threatened or imminent, and the Company is not aware of
any existing or imminent labor disturbance by the employees of any of its, its
subsidiaries’ or to the Company’s knowledge, Magnum’s or Magnum’s subsidiaries’
principal suppliers, contractors or customers, except as would not have a
Material Adverse Effect, and except as set forth in or contemplated in the
Disclosure Package and the Final Memorandum (exclusive of any amendment or
supplement thereto).

       

      (aa)        Each
of the Company, its subsidiaries and, to the Company’s knowledge, Magnum and its
subsidiaries is insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts as are prudent and customary
in the businesses in which they are engaged; all policies of insurance and
fidelity or surety bonds insuring the Company, its subsidiaries, and to the
knowledge of the Company, Magnum or any of its subsidiaries or their respective
businesses, assets, employees, officers and directors are in full force and
effect in all material respects; the Company, its subsidiaries, and to the
Company’s knowledge Magnum and its subsidiaries are in compliance in all
material respects with the terms of such policies and instruments; there are no
material claims by the Company or its subsidiaries or, to the Company’s
knowledge, Magnum or its subsidiaries under any such policy or instrument as to
which any insurance company is denying liability or defending under a
reservation of rights clause; none of the Company or its subsidiaries or, to the
Company’s knowledge, Magnum and its subsidiaries has been refused any insurance
coverage sought or applied for; and none of the Company or its subsidiaries or,
to the Company’s knowledge, Magnum or its subsidiaries has any reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business at a cost that would not have a Material
Adverse Effect except as set forth in or contemplated in the Disclosure Package
and the Final Memorandum (exclusive of any amendment or supplement
thereto).

       

      (bb)        No
subsidiary of the Company or, to the Company’s knowledge, Magnum is currently
prohibited, and upon consummation of the acquisition Magnum will not be
prohibited, directly or indirectly, from paying any dividends to the Company
(or, to the Company’s knowledge, in the case of Magnum’s subsidiaries, to
Magnum), from making any other distribution on such subsidiary’s capital stock,
from repaying to the Company (or, to the Company’s knowledge, in the case of
Magnum’s subsidiaries, to Magnum) any loans or advances to such subsidiary from
the Company (or, to the Company’s knowledge, in the case of Magnum’s
subsidiaries, to Magnum) or from transferring any of such subsidiary’s property
or assets to the Company or any other subsidiary of the Company (or, to the
Company’s knowledge, in the case of Magnum’s subsidiaries, Magnum or any of its
other subsidiaries), except as described in or contemplated in the Disclosure
Package and the Final Memorandum (exclusive of any amendment or supplement
thereto).

       

      (cc)         Except
as set forth in the Disclosure Package and the Final Memorandum (exclusive of
any amendment or supplement thereto), the Company, its subsidiaries, and to
the

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      knowledge
of the Company, Magnum and its subsidiaries, have such permits, licenses,
franchises, certificates, consents, orders and other approvals or authorizations
of any governmental or regulatory authority (“Permits”), including, without
limitation, any permits or approvals required by the United States Environmental
Protection Agency, the United States Office of Surface Mining Reclamation and
Enforcement and corresponding state agencies, as are necessary under applicable
law to own their properties and to conduct their respective businesses in the
manner described in the Disclosure Package and the Final Memorandum, except to
the extent that the failure to have such Permits would not reasonably be
expected to have a Material Adverse Effect. The Company, Magnum and their
respective subsidiaries have performed all their material obligations with
respect to the Permits except to the extent that such failure to perform would
not reasonably be expected to have a Material Adverse Effect, and, to the best
knowledge of the Company, no event has occurred that allows, or after notice or
lapse of time would allow, revocation or termination thereof or results in any
other material impairment of the rights of the holder of any such Permit except
to the extent that such revocation or termination would not reasonably be
expected to have a Material Adverse Effect, and none of the Company, Magnum or
any of their respective subsidiaries has received any notice of proceedings or
potential proceedings relating to any such action, except as described in or
contemplated in the Disclosure Package and the Final Memorandum (exclusive of
any amendment or supplement thereto) and except to the extent that any such
revocation or termination would not have a Material Adverse Effect.

       

      (dd)         The
Company and its consolidated subsidiaries, and to the Company’s knowledge,
Magnum and its consolidated subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management’s general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles in the United States and to maintain asset accountability;
(iii) access to assets is permitted only in accordance with management’s general
or specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.  The Company and its
consolidated subsidiaries’ internal controls over financial reporting were
effective as of December 31, 2007 and are effective as of the date
hereof.  The Company is not aware of any material weakness in its or
its consolidated subsidiaries’ internal control over financial
reporting.  To the Company’s knowledge, Magnum and its consolidated
subsidiaries’ internal controls over financial reporting were effective as of
December 31, 2007 and are effective as of the date hereof.  The
Company is not aware of any material weakness in the internal control over
financial reporting of Magnum and its consolidated subsidiaries.

       

      (ee)          The
Company and its subsidiaries maintain “disclosure controls and procedures” (as
such term is defined in Rule 13a-15(e) under the Exchange Act); such disclosure
controls and procedures are effective.

       

      (ff)           The
Company, its subsidiaries, and to the Company’s knowledge, Magnum and its
subsidiaries (i) are in compliance with any and all applicable statutes, laws,
rules, regulations, judgments, orders, decrees or requirements relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants (“Environmental Laws”); (ii)
have received and are in compliance with all Permits

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      required
of them under applicable Environmental Laws to conduct their respective
businesses; (iii) have not received notice of any actual or potential liability
under any Environmental Law and have not been named as a “potentially
responsible party” under the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended; and (iv) are not aware of the presence,
spill, discharge, disposal or release of or exposure to hazardous or toxic
substances, materials or wastes relating to their properties or operations that
would require investigation or remediation pursuant to Environmental Laws,
except, for each of clause (i), (ii), (iii) and (iv) above, as would not,
individually or in the aggregate, have a Material Adverse Effect, or as set
forth in or contemplated in the Disclosure Package and the Final Memorandum
(exclusive of any amendment or supplement thereto).

       

      (gg)          The
subsidiaries listed on Annex A attached hereto are the only “significant
subsidiaries” of the Company as defined in Rule 1-02 of Regulation S-X (the
“Significant Subsidiaries”).

       

      (hh)         None
of the following events has occurred or exists:  (i) a failure to
fulfill the obligations, if any, under the minimum funding standards of Section
302 of the United States Employee Retirement Income Security Act of 1974, as
amended (“ERISA”), and the regulations and published interpretations thereunder
with respect to a Plan, determined without regard to any waiver of such
obligations or extension of any amortization period; (ii) an audit or
investigation by the Internal Revenue Service, the U.S. Department of Labor, the
Pension Benefit Guaranty Corporation or any other federal or state governmental
agency or any foreign regulatory agency with respect to the employment or
compensation of employees by any of the Company, its subsidiaries, or, to the
knowledge of the Company, Magnum or its subsidiaries that could have a Material
Adverse Effect; (iii) any breach of any contractual obligation, or any violation
of law or applicable qualification standards, with respect to the employment or
compensation of employees by the Company, its subsidiaries, or, to the knowledge
of the Company, Magnum or its subsidiaries that could have a Material Adverse
Effect.  None of the following events has occurred or is reasonably
likely to occur:  (i) a material increase in the aggregate amount of
contributions required to be made to all Plans in the current fiscal year of the
Company and its subsidiaries or, to the knowledge of the Company, Magnum and its
subsidiaries compared to the amount of such contributions made in the most
recently completed fiscal year of the Company and its subsidiaries or Magnum and
its subsidiaries, respectively; (ii) a material increase in the “accumulated
post-retirement benefit obligations” (within the meaning of Statement of
Financial Accounting Standards 106) for the current fiscal year of the Company
and its subsidiaries or, to the knowledge of the Company, Magnum and its
subsidiaries, compared to the amount of such obligations in the most recently
completed fiscal year of the Company and its subsidiaries or Magnum and its
subsidiaries, respectively; (iii) any event or condition giving rise to a
liability under Title IV of ERISA that could have a Material Adverse Effect; or
(iv) the filing of a claim by one or more employees or former employees of the
Company, its subsidiaries, or, to the knowledge of the Company, Magnum or its
subsidiaries related to their employment that could have a Material Adverse
Effect.  For purposes of this paragraph, the term “Plan” means a plan
(within the meaning of Section 3(3) of ERISA) subject to Title IV of ERISA with
respect to which the Company, its subsidiaries, or, to the knowledge of the
Company, Magnum or its subsidiaries may have any liability.

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      (ii)           None
of the Company, its subsidiaries, or to the knowledge of the Company, (x) Magnum
or any of its subsidiaries or (y) any director, officer, agent, employee or
Affiliate of the Company, Magnum or any of their respective subsidiaries is
aware of or has taken any action, directly or indirectly, that would result in a
violation by such persons of the Foreign Corrupt Practices Act of 1977, as
amended, and the rules and regulations thereunder (the “FCPA”), including,
without limitation, making use of the mails or any means or instrumentality of
interstate commerce corruptly in furtherance of an offer, payment, promise to
pay or authorization of the payment of any money, or other property, gift,
promise to give, or authorization of the giving of anything of value to any
“foreign official” (as such term is defined in the FCPA) or any foreign
political party or official thereof or any candidate for foreign political
office, in contravention of the FCPA; and the Company, its subsidiaries and, to
the knowledge of the Company, its Affiliates have conducted their businesses in
compliance with the FCPA and have instituted and maintain policies and
procedures designed to ensure, and which are reasonably expected to continue to
ensure, continued compliance therewith.

       

      (jj)           The
operations of the Company, its subsidiaries, and to the knowledge of the
Company, Magnum and its subsidiaries are and have been conducted at all times in
compliance with applicable financial recordkeeping and reporting requirements
and money laundering statutes and the rules and regulations thereunder and any
related or similar rules, regulations or guidelines, issued, administered or
enforced by any governmental agency (collectively, the “Money Laundering Laws”)
and no action, suit or proceeding by or before any court or governmental agency,
authority or body or any arbitrator involving the Company, its subsidiaries, or
to the knowledge of the Company, Magnum or any of its subsidiaries with respect
to the Money Laundering Laws is pending or, to the knowledge of the Company,
threatened.

       

      (kk)         None
of the Company, its subsidiaries,  or, to the knowledge of the
Company, Magnum or its subsidiaries, any director, officer, agent, employee or
Affiliate of the Company, Magnum or any of their respective subsidiaries is
currently subject to any sanctions administered by the Office of Foreign Assets
Control of the U.S. Department of the Treasury (“OFAC”); and the Company will
not directly or indirectly use the proceeds of the offering of the Securities
hereunder, or lend, contribute or otherwise make available such proceeds to any
subsidiary, joint venture partner or other person or entity, for the purpose of
financing the activities of any person currently subject to any U.S. sanctions
administered by OFAC.

       

      (ll)           There
is and has been no failure on the part of the Company and any of the Company’s
directors or officers, in their capacities as such, to comply with any provision
of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in
connection therewith (the “Sarbanes-Oxley Act”), including Section 402 related
to loans and Sections 302 and 906 related to certifications.

       

      (mm)       The
qualitative and quantitative data regarding proven and probable coal reserves of
the Company, and to the Company’s knowledge, Magnum, included or incorporated by
reference in the Disclosure Package and the Final Memorandum (x) were derived in
accordance with the procedures described in the Disclosure Package and the Final
Memorandum and all applicable industry standards, including Industry Guide 7
under the Exchange Act, and

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      (y)         
for the Company, have been reviewed by John T. Boyd Company and Alpha
Engineering Services, Inc., and for Magnum, have been reviewed by Weir
International, Inc.

       

      (nn)         Prior
to the date hereof, the Company has furnished to the Representatives letters,
each substantially in the form of Exhibit A hereto, duly executed by each
officer and director of the Company listed on Annex B attached hereto and
addressed to the Representatives.

       

      Any
certificate signed by any officer of the Company and delivered to the
Representatives or counsel for the Initial Purchasers in connection with the
offering of the Securities shall be deemed a representation and warranty by the
Company, as to matters covered thereby, to each Initial Purchaser.

       

      2.      Purchase and
Sale.  (a)  Subject to the terms and conditions and
in reliance upon the representations and warranties herein set forth, the
Company agrees to sell to each Initial Purchaser, and each Initial Purchaser
agrees, severally and not jointly, to purchase from the Company, at a purchase
price of 97.25% of the principal amount thereof, plus accrued interest, if any,
from May 28, 2008 to the Closing Date, the principal amount of Firm Securities
set forth opposite such Initial Purchaser’s name in Schedule I
hereto.

       

      (b)           Subject
to the terms and conditions and in reliance upon the representations and
warranties herein set forth, the Company hereby grants an option to the several
Initial Purchasers to purchase, severally and not jointly, the Option Securities
at the same purchase price as Initial Purchasers shall pay for the Firm
Securities, plus accrued interest, if any, from May 28, 2008 to the settlement
date for the Option Securities.  The option may be exercised only to
cover over-allotments in the sale of the Firm Securities by the Initial
Purchasers.  The option may be exercised in whole or in part at any
time (but not more than once) on or before the 30th day after the date of the
Final Memorandum upon written or telegraphic notice by the Representatives to
the Company setting forth the principal amount of Option Securities as to which
the several Initial Purchasers are exercising the option and the settlement
date.  Delivery of the Option Securities, and payment therefor, shall
be made as provided in Section 3 hereof.  The principal amount of
Option Securities to be purchased by each Initial Purchaser shall be the same
percentage of the total principal amount of Option Securities to be purchased by
the several Initial Purchasers as such Initial Purchaser is purchasing of the
Firm Securities, subject to such adjustments as you in your absolute discretion
shall make to eliminate any fractional Securities.

       

      3.      Delivery and
Payment.  (a)  Delivery of and payment for the Firm
Securities and the Option Securities shall be made at 10:00 A.M., New York City
time, on May 28, 2008 (if the option provided for in Section 2(b) hereof shall
have been exercised on or before the first Business Day immediately preceding
the Closing Date) or at 10:00 A.M., New York City time, on the settlement date
specified by the Representatives pursuant to Section 2(b) hereof (if the option
provided for in Section 2(b) hereof shall have been exercised after the first
Business Day immediately preceding the Closing Date), or at such time on such
later date not more than three Business Days after the otherwise applicable date
as the Representatives shall designate, which date and time may be postponed by
agreement between the Representatives and the Company or as provided in Section
9 hereof (such date and time of delivery and payment for the Securities being
herein called the “Closing Date”).  Delivery of the Securities shall
be made to the Representatives for the respective accounts of the several
Initial Purchasers against payment by

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      the
several Initial Purchasers through the Representatives of the purchase price
thereof to or upon the order of the Company by wire transfer payable in same-day
funds to the account specified by the Company.  Delivery of the
Securities shall be made through the facilities of The Depository Trust Company
unless the Representatives shall otherwise instruct.

       

      (b)     If
the option provided for in Section 2(b) hereof is exercised after the first
Business Day immediately preceding the Closing Date, the Company will deliver
the Option Securities (at the expense of the Company) to the Representatives on
the date specified by the Representatives (which shall be within three Business
Days after exercise of said option) for the respective accounts of the several
Initial Purchasers, against payment by the several Initial Purchasers through
the Representatives of the purchase price thereof to or upon the order of the
Company by wire transfer payable in same-day funds to the account specified by
the Company. If settlement for the Option Securities occurs after the Closing
Date, the Company will deliver to the Representatives on the settlement date for
the Option Securities, and the obligation of the Initial Purchasers to purchase
the Option Securities shall be conditioned upon receipt of, supplemental
opinions, certificates and letters confirming as of such date the opinions,
certificates and letters delivered on the Closing Date pursuant to Section 6
hereof.

       

      4.      Offering by Initial
Purchasers.  (a)  Each Initial Purchaser acknowledges
that the Securities and the Common Stock issuable upon conversion thereof have
not been and will not be registered under the Act and may not be offered or sold
except pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Act.

       

      (b)     Each
Initial Purchaser, severally and not jointly, represents and warrants to and
agrees with the Company that:

       

      (i)           it
has not offered or sold, and will not offer or sell, any Securities as part of
their distribution at any time except to those it reasonably believes to be
“qualified institutional buyers” (as defined in Rule 144A under the
Act);

       

      (ii)          neither
it nor any person acting on its behalf has made or will make offers or sales of
the Securities in the United States by means of any form of general solicitation
or general advertising (within the meaning of Regulation D) in the United
States;

       

      (iii)         in
connection with each sale of Securities as part of their distribution, it has
taken or will take reasonable steps to ensure that the purchaser of such
Securities is aware that such sale may be made in reliance on Rule 144A;
and

       

      (iv)         it
is an “accredited investor” (as defined in Rule 501(a) of Regulation
D).

       

      5.      Agreements.  The
Company agrees with each Initial Purchaser that:

       

      (a)     The
Company will furnish to each Initial Purchaser and to counsel for the Initial
Purchasers, without charge, during the period referred to in Section 5(c) below,
as many

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      copies of
the materials contained in the Disclosure Package and the Final Memorandum and
any amendments and supplements thereto as they may reasonably
request.

       

      (b)     The
Company will not amend or supplement the Disclosure Package or the Final
Memorandum, other than by filing documents under the Exchange Act that are
incorporated by reference therein, without the prior written consent of the
Representatives; provided, however, that prior
to the completion of the distribution of the Securities by the Initial
Purchasers (as determined by the Initial Purchasers), the Company will not file
any document under the Exchange Act that is incorporated by reference in the
Disclosure Package or the Final Memorandum unless, prior to such proposed
filing, the Company has furnished the Representatives with a copy of such
document for their review and the Representatives have not reasonably objected
to the filing of such document.  The Company will promptly advise the
Representatives when any document filed under the Exchange Act that is
incorporated by reference in the Disclosure Package or the Final Memorandum
shall have been filed with the Commission.

       

      (c)      If
at any time prior to the completion of the sale of the Securities by the Initial
Purchasers (as determined by the Representatives), any event occurs as a result
of which the Disclosure Package or the Final Memorandum, as then amended or
supplemented, would include any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made or the circumstances then
prevailing, not misleading, or if it should be necessary to amend or supplement
the Disclosure Package or the Final Memorandum to comply with applicable law,
the Company will promptly (i) notify the Representatives of any such event; (ii)
subject to the requirements of Section 5(b), prepare an amendment or supplement
that will correct such statement or omission or effect such compliance; and
(iii) supply any supplemented or amended Disclosure Package or Final Memorandum
to the several Initial Purchasers and counsel for the Initial Purchasers without
charge in such quantities as they may reasonably request.

       

      (d)      Without
the prior written consent of the Representatives, the Company has not given and
will not give to any prospective purchaser of the Securities any written
information concerning the offering of the Securities other than materials
contained in the Disclosure Package, the Final Memorandum or any other offering
materials prepared by or with the prior written consent of the
Representatives.

       

      (e)       The
Company will arrange, if necessary, for the qualification of the Securities for
sale by the Initial Purchasers under the laws of such jurisdictions as the
Representatives may designate (including certain provinces of Canada) and will
maintain such qualifications in effect so long as required for the sale of the
Securities; provided that in no
event shall the Company be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action that would
subject it to service of process in suits, other than those arising out of the
offering or sale of the Securities, in any jurisdiction where it is not now so
subject.  The Company will promptly advise the Representatives of the
receipt by the Company of any notification with respect to the suspension of the
qualification of the Securities for sale in any jurisdiction or the initiation
or threatening of any proceeding for such purpose.

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      (f)        The
Company will not, and will not permit any of its Affiliates to, resell any
Securities or Shares of Common Stock issued upon conversion thereof that have
been acquired by any of them.

       

      (g)        None
of the Company, its Affiliates, or any person acting on its or their behalf
will, directly or indirectly, make offers or sales of any security, or solicit
offers to buy any security, under circumstances that would require the
registration of the Securities or Common Stock issuable upon conversion thereof
under the Act.

       

      (h)        Any
information provided by the Company, its Affiliates or any person acting on its
or their behalf to publishers of publicly available databases about the terms of
the Securities shall include a statement that the Securities have not been
registered under the Act and are subject to restrictions under Rule 144A under
the Act;

       

      (i)         None
of the Company, its Affiliates, or any person acting on its or their behalf will
engage in any form of general solicitation or general advertising (within the
meaning of Regulation D) in connection with any offer or sale of the Securities
in the United States.

       

      (j)         For
so long as any of the Securities or the Common Stock issuable upon the
conversion thereof are “restricted securities” within the meaning of Rule
144(a)(3) under the Act, the Company will, during any period in which it is not
subject to and in compliance with Section 13 or 15(d) of the Exchange Act,
provide to each holder of such restricted securities and to each prospective
purchaser (as designated by such holder) of such restricted securities, upon the
request of such holder or prospective purchaser, any information required to be
provided by Rule 144A(d)(4) under the Act.  This covenant is intended
to be for the benefit of the holders, and the prospective purchasers designated
by such holders, from time to time of such restricted securities.

       

      (k)        The
Company will cooperate with the Representatives and use its reasonable best
efforts to permit the Securities to be eligible for clearance and settlement
through The Depository Trust Company.

       

      (l)         The
Company will reserve and keep available at all times, free of pre-emptive
rights, the full number of shares of Common Stock issuable upon conversion of
the Securities.

       

      (m)       Each
of the Securities and the shares of Common Stock issuable upon conversion
thereof will bear, to the extent applicable, the legend contained in “Transfer
Restrictions” in the Preliminary Memorandum and the Final Offering Memorandum
for the time period and upon the other terms stated therein.

       

      (n)        The
Company will not for a period of 90 days following the Execution Time, without
the prior written consent of the Representatives, directly or indirectly, (i)
offer, sell, contract to sell, pledge or otherwise dispose of, (ii) enter into
any transaction which is designed to, or might reasonably be expected to, result
in the disposition (whether by actual disposition or effective economic
disposition due to cash settlement or otherwise) by the Company or any Affiliate
of the Company or any person in privity with the Company or any Affiliate of the
Company of, (iii) other than a registration statement filed in connection with
the Merger Agreement (including any amendments or supplements thereto), file (or
participate in the filing

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      of) a
registration statement with the Commission in respect of, or (iv) establish or
increase a put equivalent position or liquidate or decrease a call equivalent
position within the meaning of Section 16 of the Exchange Act in respect of, any
shares of capital stock of the Company or any securities convertible into, or
exercisable or exchangeable for, shares of capital stock of the Company (other
than the Securities), or publicly announce an intention to effect any such
transaction; provided, however, that the
Company may issue and sell Common Stock or securities convertible into or
exchangeable for Common Stock pursuant to any employee stock option or benefit
plan, stock ownership plan or dividend reinvestment plan of the Company
described in the Disclosure Package and the Final Memorandum and in effect at
the Execution Time, the Company may issue Common Stock issuable (i) upon the
conversion of securities or the exercise of warrants outstanding at the
Execution Time and (ii) pursuant to the Merger Agreement, in each case as
described in the Disclosure Package and the Final Memorandum.

       

      (o)        The
Company will not take, directly or indirectly, any action designed to or that
has constituted, or that might reasonably be expected to cause or result, under
the Exchange Act or otherwise, in stabilization or manipulation of the price of
any security of the Company to facilitate the sale or resale of the
Securities.

       

      (p)        Between
the date hereof and the Closing Date, the Company will not do or authorize any
act or thing that would result in an adjustment of the conversion price of the
Securities.

       

      (q)        The
Company will, for a period of twelve months following the Execution Time,
furnish to the Representatives all reports or other communications (financial or
other) generally made available to stockholders, and deliver such reports and
communications to the Representatives as soon as they are available, unless such
documents are furnished to or filed with the Commission or any securities
exchange on which any class of securities of the Company is listed and generally
made available to the public.

       

      (r)         The
Company will comply with all applicable securities and other laws, rules and
regulations, including, without limitation, the Sarbanes-Oxley Act, and use its
best efforts to cause the Company’s directors and officers, in their capacities
as such, to comply with such laws, rules and regulations, including, without
limitation, the provisions of the Sarbanes-Oxley Act.

       

      (s)         The
Company will prepare a final term sheet, containing solely a description of the
Securities and the offering thereof, in the form approved by you and attached as
Schedule II hereto.

       

      (t)          The
Company agrees to pay the costs and expenses relating to the following matters:
(i) the preparation of the Indenture, the issuance of the Securities, the fees
of the Trustee and the issuance of the Common Stock upon conversion of the
Securities; (ii) the preparation, printing or reproduction of the materials
contained in the Disclosure Package and the Final Memorandum and each amendment
or supplement to either of them; (iii) the printing (or reproduction) and
delivery (including postage, air freight charges and charges for counting and
packaging) of such copies of the materials contained in the Disclosure Package
and the Final Memorandum, and all amendments or supplements to either of them,
as may, in each case, be reasonably requested for use in connection with the
offering and sale of the Securities; (iv) the

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      preparation,
printing, authentication, issuance and delivery of the Securities; (v) any stamp
or transfer taxes in connection with the original issuance and sale of the
Securities; (vi) the printing (or reproduction) and delivery of this Agreement,
any blue sky memorandum and all other agreements or documents printed (or
reproduced) and delivered in connection with the offering of the Securities;
(vii) any registration or qualification of the Securities for offer and sale
under the securities or blue sky laws of the several states, the provinces of
Canada and any other jurisdictions specified pursuant to Section 5(e) (including
filing fees and the reasonable fees and expenses of counsel for the Initial
Purchasers relating to such registration and qualification and preparation of
supplemental disclosure for use in connection with sales in selected provinces
of Canada); (viii) admitting the Securities for trading in the PORTAL Market and
listing the common Stock issuable upon conversion of the Securities on the New
York Stock Exchange; (ix) the transportation and other expenses incurred by or
on behalf of Company representatives in connection with presentations to
prospective purchasers of the Securities; (x) the fees and expenses of the
Company’s accountants and the fees and expenses of counsel (including local and
special counsel) for the Company; and (xi) all other costs and expenses incident
to the performance by the Company of its obligations hereunder.

       

      6.      Conditions to the
Obligations of the Initial Purchasers.  The obligations of the
Initial Purchasers to purchase the Firm Securities and the Option Securities, as
the case may be, shall be subject to the accuracy of the representations and
warranties of the Company contained herein at the Execution Time, the Closing
Date and any settlement date pursuant to Section 3 hereof, to the accuracy of
the statements of the Company made in any certificates pursuant to the
provisions hereof, to the performance by the Company of its obligations
hereunder and to the following additional conditions:

       

      (a)     The
Company shall have requested and caused Davis Polk & Wardwell, counsel for
the Company, to furnish to the Representatives its opinion, dated the Closing
Date and addressed to the Representatives, in substantially the form of Exhibit
B hereto.

       

      (b)     The
Company shall have requested and caused Joseph W. Bean, in-house counsel for the
Company, to furnish to the Representatives his opinion, dated the Closing Date
and addressed to the Representatives, in substantially the form of Exhibit C
hereto.

       

      (c)      The
Company shall have requested and caused Freshfields Bruckhaus Deringer US LLP,
counsel for Magnum, to furnish to the Representatives its opinion, dated the
Closing Date and addressed to the Representatives, in substantially the form of
Exhibit D hereto.

       

      (d)      The
Company shall have requested and caused Magnum’s General Counsel, to furnish to
the Representatives his opinion, dated the Closing Date and addressed to the
Representatives, in substantially the form of Exhibit E hereto.

       

      (e)       The
Representatives shall have received from Cleary Gottlieb Steen & Hamilton
LLP, counsel for the Initial Purchasers, such opinion or opinions, dated the
Closing Date and addressed to the Representatives, with respect to the issuance
and sale of the Securities, the Indenture, the Disclosure Package, the Final
Memorandum (as amended or supplemented at the Closing Date) and other related
matters as the Representatives may reasonably require, and

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      the
Company shall have furnished to such counsel such documents as they request for
the purpose of enabling them to pass upon such matters.

       

      (f)        The
Company shall have furnished to the Representatives a certificate of the
Company, signed by (x) the Chief Executive Officer and (y) the Chief Financial
Officer of the Company, dated the Closing Date, to the effect that the signers
of such certificate have carefully examined the Disclosure Package and the Final
Memorandum and any amendments or supplements thereto, and this Agreement and
that, to the best of their knowledge:

       

      (i)           the
representations and warranties of the Company in this Agreement are true and
correct on and as of the Closing Date with the same effect as if made on the
Closing Date, and the Company has complied with all the agreements and satisfied
all the conditions on its part to be performed or satisfied hereunder at or
prior to the Closing Date; and

       

      (ii)           since
the date of the most recent financial statements included in the Disclosure
Package and the Final Memorandum (exclusive of any amendment or supplement
thereto), there has been no material adverse change in the condition (financial
or otherwise), prospects, earnings, business or properties of the Company and
its subsidiaries, taken as a whole, whether or not arising from transactions in
the ordinary course of business, except as set forth in or contemplated in the
Disclosure Package and the Final Memorandum (exclusive of any amendment or
supplement thereto).

       

      (g)        At
the Execution Time and at the Closing Date, the Company shall have requested and
caused Ernst & Young LLP to furnish to the Representatives letters, dated
respectively as of the Execution Time and as of the Closing Date, concerning the
Company and Magnum, in form and substance satisfactory to the
Representatives.

       

      (h)        Subsequent
to the Execution Time or, if earlier, the dates as of which information is given
in the Disclosure Package (exclusive of any amendment or supplement thereto) and
the Final Memorandum (exclusive of any amendment or supplement thereto), there
shall not have been (i) any change or decrease specified in the letter or
letters referred to in paragraph (g) of this Section 6; or (ii) any change, or
any development involving a prospective change, in or affecting the condition
(financial or otherwise), prospects, earnings, business or properties of the
Company and its subsidiaries taken as a whole or of Magnum and its subsidiaries
taken as a whole, whether or not arising from transactions in the ordinary
course of business, except as set forth in or contemplated in the Disclosure
Package and the Final Memorandum (exclusive of any amendment or supplement
thereto), the effect of which, in any case referred to in clause (i) or (ii)
above, is, in the sole judgment of the Representatives, so material and adverse
as to make it impractical or inadvisable to proceed with the offering or
delivery of the Securities as contemplated in the Disclosure Package and the
Final Memorandum (exclusive of any amendment or supplement
thereto).

       

      (i)         The
Securities shall have been designated as PORTAL-eligible securities in
accordance with the applicable rules and regulations and the Securities shall be
eligible for clearance and settlement through The Depository Trust
Company.

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      (j)         The
Company shall have caused the shares of Common Stock initially issuable upon
conversion of the Securities to be approved for listing, subject to issuance, on
the New York Stock Exchange.

       

      (k)        Prior
to the Closing Date, the Company shall have furnished to the Representatives
such further information, certificates and documents as the Representatives may
reasonably request.

       

      If any of
the conditions specified in this Section 6 shall not have been fulfilled when
and as provided in this Agreement, or if any of the opinions and certificates
mentioned above or elsewhere in this Agreement shall not be reasonably
satisfactory in form and substance to the Representatives and counsel for the
Initial Purchasers, this Agreement and all obligations of the Initial Purchasers
hereunder may be cancelled at, or at any time prior to, the Closing Date by the
Representatives.  Notice of such cancellation shall be given to the
Company in writing or by telephone or facsimile  confirmed in
writing.

       

      The
documents required to be delivered by this Section 6 will be delivered at the
office of counsel for the Initial Purchasers, at One Liberty Plaza, New York,
New York, on the Closing Date.

       

      7.      Reimbursement of
Expenses.  If the sale of the Securities provided for herein is
not consummated because any condition to the obligations of the Initial
Purchasers set forth in Section 6 hereof is not satisfied, because of any
termination pursuant to Section 10 hereof or because of any refusal, inability
or failure on the part of the Company to perform any agreement herein or comply
with any provision hereof other than by reason of a default by any of the
Initial Purchasers, the Company will reimburse the Initial Purchasers severally
through the Representatives on demand for all expenses (including reasonable
fees and disbursements of counsel) that shall have been incurred by them in
connection with the proposed purchase and sale of the Securities.

       

      8.      Indemnification and
Contribution.  (a)  The Company agrees to indemnify
and hold harmless each Initial Purchaser, the directors, officers, employees,
Affiliates and agents of each Initial Purchaser and each person who controls any
Initial Purchaser within the meaning of either the Act or the Exchange Act
against any and all losses, claims, damages or liabilities, joint or several, to
which they or any of them may become subject under the Act, the Exchange Act or
other U.S. federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in the Preliminary Memorandum, the
Disclosure Package, the Final Memorandum or any other written information used
by or on behalf of the Company in connection with the offer, sale or marketing
of the Securities including any roadshow or investor presentation made to
investors by the Company (whether in person or electronically), or in any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and agrees to
reimburse each such indemnified party, as incurred, for any legal or other
expenses reasonably incurred by it in connection with investigating or defending
any such loss, claim, damage, liability or action;

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      provided, however, that the
Company will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made in
the Preliminary Memorandum, the Disclosure Package, the Final Memorandum, or in
any amendment thereof or supplement thereto, in reliance upon and in conformity
with written information furnished to the Company by or on behalf of any Initial
Purchaser through the Representatives specifically for inclusion
therein.  This indemnity agreement will be in addition to any
liability that the Company may otherwise have.

       

      (b)     Each
Initial Purchaser severally, and not jointly, agrees to indemnify and hold
harmless the Company, each of its directors, each of its officers, and each
person who controls the Company within the meaning of either the Act or the
Exchange Act, to the same extent as the foregoing indemnity to each Initial
Purchaser, but only with reference to written information relating to such
Initial Purchaser furnished to the Company by or on behalf of such Initial
Purchaser through the Representatives specifically for inclusion in the
Preliminary Memorandum, the Disclosure Package, the Final Memorandum or in any
amendment or supplement thereto.  This indemnity agreement will be in
addition to any liability that any Initial Purchaser may otherwise
have.  The Company acknowledges that (i) the statements set forth in
the last paragraph of the cover page regarding delivery of the Securities and
(ii), under the heading “Plan of Distribution” the 11th paragraph related to
stabilization, syndicate covering transactions and penalty bids in the
Preliminary Memorandum, the Disclosure Package and the Final Memorandum
constitute the only information furnished in writing by or on behalf of the
Initial Purchasers for inclusion in the Preliminary Memorandum, the Final
Memorandum or in any amendment or supplement thereto.

       

      (c)     Promptly
after receipt by an indemnified party under this Section 8 of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party under this Section 8,
notify the indemnifying party in writing of the commencement thereof; but the
failure so to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a) or (b)
above.  The indemnifying party shall be entitled to appoint counsel
(including local counsel) of the indemnifying party’s choice at the indemnifying
party’s expense to represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall not
thereafter be responsible for the fees and expenses of any separate counsel,
other than local counsel if not appointed by the indemnifying party, retained by
the indemnified party or parties except as set forth below); provided, however, that such
counsel shall be satisfactory to the indemnified
party.  Notwithstanding the indemnifying party’s election to appoint
counsel (including local counsel) to represent the indemnified party in an
action, the indemnified party shall have the right to employ separate counsel
(including local counsel), and the indemnifying party shall bear the reasonable
fees, costs and expenses of such separate counsel if (i) the use of counsel
chosen by the indemnifying party to represent the indemnified party would
present such counsel with a conflict of interest; (ii) the actual or potential
defendants in, or targets of, any such action include both the indemnified party
and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      available
to it and/or other indemnified parties that are different from or additional to
those available to the indemnifying party; (iii) the indemnifying party shall
not have employed counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of the institution of
such action; or (iv) the indemnifying party shall authorize the indemnified
party to employ separate counsel at the expense of the indemnifying
party.  An indemnifying party will not, without the prior written
consent of the indemnified parties, settle or compromise or consent to the entry
of any judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding.

       

      (d)     In
the event that the indemnity provided in paragraph (a) or (b) of this Section 8
is unavailable to or insufficient to hold harmless an indemnified party for any
reason, the Company and the Initial Purchasers severally agree to contribute to
the aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating or defending any
loss, claim, damage, liability or action) (collectively “Losses”) to which the
Company and one or more of the Initial Purchasers may be subject in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and by the Initial Purchasers on the other from the
offering of the Securities; provided, however, that in no
case shall any Initial Purchaser be responsible for any amount in excess of the
purchase discount or commission applicable to the Securities purchased by such
Initial Purchaser hereunder.  If the allocation provided by the
immediately preceding sentence is unavailable for any reason, the Company and
the Initial Purchasers severally shall contribute in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Initial Purchasers on the other in
connection with the statements or omissions that resulted in such Losses, as
well as any other relevant equitable considerations.  Benefits
received by the Company shall be deemed to be equal to the total net proceeds
from the offering (before deducting expenses) received by it, and benefits
received by the Initial Purchasers shall be deemed to be equal to the total
purchase discounts and commissions.  Relative fault shall be
determined by reference to, among other things, whether any untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information provided by the Company on the one hand
or the Initial Purchasers on the other, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission.  The Company and the Initial
Purchasers agree that it would not be just and equitable if contribution were
determined by pro rata allocation or any other method of allocation that does
not take account of the equitable considerations referred to
above.  Notwithstanding the provisions of this paragraph (d), no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.  For purposes of this
Section 8, each person who controls an Initial Purchaser within the meaning of
either the Act or the Exchange Act and each director, officer, employee,
Affiliate and agent of an Initial Purchaser shall have the same rights to
contribution as such Initial Purchaser, and each person who controls the Company
within the meaning of either the Act or the Exchange Act and each officer and
director of the Company shall have the same rights to contribution as the
Company, subject in each case to the applicable terms and conditions of this
paragraph (d).

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      9.      Default by an Initial
Purchaser.  If any one or more Initial Purchasers shall fail to
purchase and pay for any of the Securities agreed to be purchased by such
Initial Purchaser hereunder and such failure to purchase shall constitute a
default in the performance of its or their obligations under this Agreement, the
remaining Initial Purchasers shall be obligated severally to take up and pay for
(in the respective proportions which the principal amount of Securities set
forth opposite their names in Schedule I hereto bears to the aggregate principal
amount of Securities set forth opposite the names of all the remaining Initial
Purchasers) the Securities which the defaulting Initial Purchaser or Initial
Purchasers agreed but failed to purchase; provided, however, that in the
event that the aggregate principal amount of Securities which the defaulting
Initial Purchaser or Initial Purchasers agreed but failed to purchase shall
exceed 10% of the aggregate principal amount of Securities set forth in Schedule
I hereto, the remaining Initial Purchasers shall have the right to purchase all,
but shall not be under any obligation to purchase any, of the Securities, and if
such nondefaulting Initial Purchasers do not purchase all the Securities, this
Agreement will terminate without liability to any nondefaulting Initial
Purchaser or the Company.  In the event of a default by any Initial
Purchaser as set forth in this Section 9, the Closing Date shall be postponed
for such period, not exceeding five Business Days, as the Representatives shall
determine in order that the required changes in the Final Memorandum or in any
other documents or arrangements may be effected.  Nothing contained in
this Agreement shall relieve any defaulting Initial Purchaser of its liability,
if any, to the Company or any nondefaulting Initial Purchaser for damages
occasioned by its default hereunder.

       

      10.     Termination.  This
Agreement shall be subject to termination in the absolute discretion of the
Representatives, by notice given to the Company prior to delivery of, and
payment for, the Securities, if at any time prior to such delivery and payment
(i) trading in the Company’s Common Stock shall have been suspended by the
Commission or the New York Stock Exchange or trading in securities generally on
the New York Stock Exchange shall have been suspended or limited or minimum
prices shall have been established on such exchange; (ii) a banking moratorium
shall have been declared either by U.S. federal or New York State authorities;
(iii) there shall have occurred any outbreak or escalation of hostilities,
declaration by the United States of a national emergency or war or other
calamity or crisis or (iv) there shall have occurred a material adverse change
in general economic, political or financial conditions, including, without
limitation, as a result of terrorist activities after the date hereof, the
effect of which on financial markets is such as to make it, in the sole judgment
of the Representatives, impractical or inadvisable to proceed with the offering
or delivery of the Securities as contemplated in the Disclosure Package and the
Final Memorandum (exclusive of any amendment or supplement
thereto).

       

      11.     Representations and
Indemnities to Survive.  The respective agreements,
representations, warranties, indemnities and other statements of the Company or
its officers and of the Initial Purchasers set forth in or made pursuant to this
Agreement will remain in full force and effect, regardless of any investigation
made by or on behalf of the Initial Purchasers or the Company or any of the
indemnified persons referred to in Section 8 hereof, and will survive delivery
of and payment for the Securities.  The provisions of Sections 7 and 8
hereof shall survive the termination or cancellation of this
Agreement.

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      12.     Notices.  All
communications hereunder will be in writing and effective only on receipt, and,
if sent to the Representatives, will be mailed, delivered or telefaxed to (a)
Citigroup Global Markets Inc. General Counsel (fax no.: (212) 816-7912) and
confirmed to Citigroup Global Markets Inc. at 388 Greenwich Street, New York,
New York 10013, Attention:  General Counsel, (b) Lehman Brothers Inc.
(fax no.: 646-834-8133) and confirmed to Lehman Brothers Inc. at 1272 Avenue of
the Americas, 42nd Floor,
New York, New York 10020, Attention: Syndicate Registration and with a copy, in
the case of any notice pursuant to Section 8, to the Director of Litigation,
Office of the General Counsel, Lehman Brothers Inc. (fax no.: 212-520-0421) and
confirmed to the Director of Litigation, Office of the General Counsel, Lehman
Brothers Inc. at  1272 Avenue of the Americas, 44th Floor,
New York, New York 10020 and (c) Cleary Gottlieb Steen & Hamilton LLP,
Attention: David Lopez, Esq. (fax no.: (212) 225-3999) and confirmed to Cleary
Gottlieb Steen & Hamilton LLP, One Liberty Plaza, New York New York
10006,  Attention: David Lopez, Esq.; or, if sent to the Company, will
be mailed, delivered or telefaxed to Patriot Coal Corporation (fax no.: (314)
275-3656) and confirmed to it at Patriot Coal Corporation, 12312 Olive
Boulevard, Suite 400, St. Louis, Missouri 63141, Attention: Joseph W. Bean, with
a copy to Davis Polk & Wardwell, Attention: Sarah E. Beshar, Esq. (fax no.:
(212) 450-3800) and confirmed to Davis Polk & Wardwell, 450 Lexington
Avenue, New York, New York 10017.

       

      13.     Successors.  This
Agreement will inure to the benefit of and be binding upon the parties hereto
and their respective successors and the indemnified persons referred to in
Section 8 hereof and their respective successors, and, except as expressly set
forth in Section 5(j) hereof, no other person will have any right or obligation
hereunder.

       

      14.     Jurisdiction.  The
Company agrees that any suit, action or proceeding against the Company brought
by any Initial Purchaser, the directors, officers, employees and agents of any
Initial Purchaser, or by any person who controls any Initial Purchaser, arising
out of or based upon this Agreement or the transactions contemplated hereby may
be instituted in any State or U.S. federal court in The City of New York and
County of New York, and waives any objection which it may now or hereafter have
to the laying of venue of any such proceeding, and irrevocably submits to the
non-exclusive jurisdiction of such courts in any suit, action or
proceeding.

       

      15.     Internet Document
Service.  The Company hereby agrees that the Representatives
may provide copies of the Preliminary Memorandum and Final Memorandum and any
other agreement or document relating to the offer and sale of the Securities,
including, without limitation, the Indenture, to Xtract Research LLC (“Xtract”)
following the Closing Date for inclusion in an online research service sponsored
by Xtract, access to which is restricted to “qualified institutional buyers” (as
defined in Rule 144A under the Act).

       

      16.     Integration.  This
Agreement supersedes all prior agreements and understandings (whether written or
oral) between the Company and the Initial Purchasers, or any of them, with
respect to the subject matter hereof.

       

      17.     Applicable
Law.  This Agreement will be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed within the State of New York.

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      18.     Waiver of Jury
Trial.  The Company hereby irrevocably waives, to the fullest
extent permitted by applicable law, any and all right to trial by jury in any
legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby.

       

      19.     No Fiduciary
Duty.  The Company hereby acknowledges that (a) the purchase
and sale of the Securities pursuant to this Agreement is an arm’s-length
commercial transaction between the Company, on the one hand, and each Initial
Purchaser and any Affiliate through which it may be acting, on the other, (b)
the Initial Purchasers are acting as principals and not as agents or fiduciaries
of the Company and (c) the Company’s engagement of the Initial Purchasers in
connection with the
offering and the process leading up to the offering is as independent
contractors and not in any other capacity.  Furthermore, the Company
agrees that it is solely responsible for making its own judgments in connection
with the offering (irrespective of whether any of the Initial Purchasers has
advised or is currently advising the Company on related or other
matters).  The Company agrees that it will not claim that the Initial
Purchasers have rendered advisory services of any nature or respect, or owe an
agency, fiduciary or similar duty to the Company in connection with such
transaction or the process leading thereto.

       

      20.     Waiver of Tax
Confidentiality.  Notwithstanding anything herein to the
contrary, purchasers of the Securities (and each employee, representative or
other agent of a purchaser) may disclose to any and all persons, without
limitation of any kind, the U.S. tax treatment and U.S. tax structure of any
transaction contemplated herein and all materials of any kind (including
opinions or other tax analyses) that are provided to the purchasers of the
Securities relating to such U.S. tax treatment and U.S tax structure, other than
any information for which nondisclosure is reasonably necessary in order to
comply with applicable securities laws.

       

      21.     Counterparts.  This
Agreement may be signed in one or more counterparts, each of which shall
constitute an original and all of which together shall constitute one and the
same agreement.

       

      22.     Headings.  The
section headings used herein are for convenience only and shall not affect the
construction hereof.

       

      23.     Definitions.  The
terms that follow, when used in this Agreement, shall have the meanings
indicated.

       

      “Act”
shall mean the U.S. Securities Act of 1933, as amended, and the rules and
regulations of the Commission promulgated thereunder.

       

      “Affiliate”
shall have the meaning specified in Rule 501(b) of
Regulation D.

       

      “Business
Day” shall mean any day other than a Saturday, a Sunday or a legal holiday or a
day on which banking institutions or trust companies are authorized or obligated
by law to close in The City of New York.

       

      “Commission”
shall mean the Securities and Exchange Commission.

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      “Disclosure
Package” shall mean (i) the Preliminary Memorandum, as amended or supplemented
at the Execution Time, (ii) the final term sheet prepared pursuant to Section
5(s) hereto and in the form attached as Schedule II hereto and (iii) any Issuer
Written Information.

       

      “Exchange
Act” shall mean the U.S. Securities Exchange Act of 1934, as amended, and the
rules and regulations of the Commission promulgated thereunder.

       

      “Execution
Time” shall mean 7:00 pm on May 21, 2008.

       

      “FINRA”
shall mean the Financial Industry Regulatory Authority, Inc.

       

      “Investment
Company Act” shall mean the U.S. Investment Company Act of 1940, as amended, and
the rules and regulations of the Commission promulgated thereunder.

       

      “Issuer
Written Information” shall mean any writings in addition to the Preliminary
Memorandum that the parties expressly agree in writing to treat as part of the
Disclosure Package.

       

      “PORTAL”
shall mean the Private Offerings, Resales and Trading through Automated Linkages
system of the Nasdaq OMX Group, Inc.

       

      “Regulation D”
shall mean Regulation D under the Act.

       

      “Regulation
S-X” shall mean Regulation S-X under the Act.

       

      “Trust
Indenture Act” shall mean the U.S. Trust Indenture Act of 1939, as amended, and
the rules and regulations of the Commission promulgated thereunder.

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
 

      If the
foregoing is in accordance with your understanding of our agreement, please sign
and return to us the enclosed duplicate hereof, whereupon this letter and your
acceptance shall represent a binding agreement between the Company and the
several Initial Purchasers.

       

      
      

       

      
        	
                Very
      truly yours,

              	 
	 	 	 	 
	
                Patriot
      Coal Corporation

              	 
	 	 	 	 
	 	 	 	 
	By:	/s/
      Mark N. Schroeder	 
	 	Name:	Mark
      N. Schroeder	 
	 	Title:	Senior
      Vice President and Chief Financial
Officer

      

       

      The
foregoing Agreement is hereby confirmed

      and
accepted as of the date first above written.

      Citigroup
Global Markets Inc.

       

      
         

        
          	
                  Citigroup
      Global Markets Inc.

                	 
	 	 	 	 
	 	 	 	 
	By:	
                  /s/ Philip
      Battaglia

                	 
	 	Name:	
                  Philip
      Battaglia

                	 
	 	Title:	Vice
      President

        

         

      

       

      
      

      
        
           

          
            	
                    
                      Lehman
      Brothers Inc.

                    

                  	 
	 	 	 	 
	 	 	 	 
	By:	/s/ Robert
      Milius	 
	 	Name:	
                    Robert
      Milius

                  	 
	 	Title:	Managing
      Director	 

          

           

        

      

      Each, for
itself and the other several Initial

      Purchasers
named in Schedule I to the

      foregoing
Agreement.

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      
        
          	
                  SCHEDULE
      I

                
	 
	
                  Initial
      Purchasers

                	
                  Principal
      Amount

                  of
      Firm

                  Securities
      to be

                  
                       
         Purchased      
      

                  

                
	 	 
	
                  Citigroup
      Global Markets Inc.

                	
                  U.S.$
      61,250,000

                
	 	 
	
                  Lehman
      Brothers Inc.

                	
                           
      61,250,000

                
	 	 
	
                  Friedman,
      Billings, Ramsey & Co. Inc.

                	
                           
      21,000,000

                
	 	 
	
                  Fifth
      Third Securities, Inc.

                	
                           
      10,500,000

                
	 	 
	
                  PNC
      Capital Markets LLC

                	
                           
      10,500,000

                
	 	 
	
                  U.S.
      Bancorp Investments, Inc.

                	
                            10,500,000

                
	 
      	
                   
      

                
	
                  Total

                	
                  U.S.$175,000,000

                

        

      

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      SCHEDULE
II

      
 

      
        
           

          Patriot
Coal Corporation

          3.25%
Convertible Senior Notes due 2013

          Pricing
Term Sheet

           

          
            	
                    Issuer:

                  	 	
                    Patriot
      Coal Corporation (“Patriot”)

                  
	 	 	 
	
                    Ticker
      / Exchange:

                  	 	
                    PCX
      / The New York Stock Exchange (“NYSE”)

                  
	 	 	 
	
                    Title
      of securities:

                  	 	
                    3.25%
      Convertible Senior Notes Due 2013 (the “notes”)

                  
	 	 	 
	
                    Aggregate
      principal amount
      offered:

                  	 	
                    $175,000,000

                  
	 	 	 
	
                    Offering
      price:

                  	 	
                    Each
      note will be issued at a price of 100% of its principal amount plus
      accrued interest, if any, from May 28, 2008

                  
	 	 	 
	
                    Option
      to purchase additional notes:

                  	 	
                    $25,000,000
      additional aggregate principal amount of notes

                  
	 	 	 
	
                    Annual
      interest rate:

                  	 	
                    The
      notes will bear interest at an annual rate equal to 3.25% per annum from
      May 28, 2008

                  
	 	 	 
	
                    Reference
      price (closing price of the common stock on the NYSE on May 21,
      2008):

                  	 	
                    $96.67

                  
	 	 	 
	
                    Conversion
      premium:

                  	 	
                    Approximately
      40% of the Reference Price

                  
	 	 	 
	
                    Initial
      conversion price:

                  	 	
                    Approximately
      $135.34 for each $1,000 principal amount of the notes per share of Patriot
      common stock

                  
	 	 	 
	
                    Initial
      conversion rate:

                  	 	
                    7.3889
      shares of Patriot common stock per $1,000 principal amount of the
      notes

                  
	 	 	 
	
                    Interest
      payment dates:

                  	 	
                    May
      31 and November 30, commencing on November 30, 2008

                  
	 	 	 
	
                    Maturity
      date:

                  	 	
                    May
      31, 2013

                  
	 	 	 
	
                    Call
      dates:

                  	 	
                    Patriot
      may, at its option, redeem for cash (i) some or all of the outstanding
      notes at any time on or after May 31, 2011, but only if the last reported
      sale price of Patriot’s common stock for 20 or more trading days in a
      period of 30 consecutive trading days ending on the trading day prior to
      the date Patriot provides the relevant notice of redemption to holders
      exceeds 130% of the conversion price in effect on each such trading day,
      or (ii) all the outstanding notes if at any time less than 10% of the
      aggregate principal amount of notes initially issued (including any
      additional notes issued in connection with exercise by the initial
      purchasers of their over-allotment option) remain outstanding. In each
      case, any notes redeemed by Patriot will be redeemed for cash at a
      redemption price equal to 100% of the principal amount of the notes to be
      redeemed, plus any accrued and unpaid interest to, but excluding, the date
      fixed for redemption.

                  
	 	 	 
	
                    Redemption
      upon termination of merger agreement:

                  	 	
                    If
      the merger agreement relating to Patriot’s pending acquisition of Magnum
      Coal Company (“Magnum”) has been terminated, Patriot may, at its option,
      redeem the notes, in whole or in part, at any time on or before December
      31, 2008 at a redemption price that will be:

                     

                    ·     
      an amount in cash equal to the principal amount of the notes to be
      redeemed, plus
      any accrued and unpaid interest thereon to, but excluding, the date fixed
      for redemption; and

                  

          

           

           

          
            
              
              

            

            
              1

              
                

              

            

            
              
              

            

          

           

          
            	 	 	
                    ·     
      an amount in shares of Patriot common stock, for each $1,000 principal
      amount of the notes to be redeemed, equal to the lesser of:

                     

                    (i)   
      the sum of (a) $20 plus (b) 80% of the
      amount, if any, by which the “redemption conversion value” (as defined in
      the Preliminary Offering Memorandum) of such notes exceeds $714.28, such
      sum divided by
      the “average redemption VWAP” (as defined in the Preliminary Offering
      Memorandum); and

                     

                    (ii)
         26.6221 shares (subject to adjustment in the same
      manner as the conversion rate is adjusted).

                     

                    Patriot
      is currently required under its amended credit facility to redeem the
      notes before December 31, 2008 (or such later date agreed between Patriot
      and the required majority of the lenders under the credit facility) in the
      event that the merger agreement relating to Patriot’s pending acquisition
      of Magnum is terminated.

                  
	 	 	 
	
                    Put
      rights:

                  	 	
                    Holders
      have the option to require the repurchase of their notes as described
      below under “Repurchase at the Option of the Holder upon a Fundamental
      Change.”

                  
	 	 	 
	
                    Repurchase
      at the option of the holder upon a fundamental change:

                  	 	
                    Upon
      a “fundamental change” as defined in the Preliminary Offering Memorandum,
      the holders may require Patriot to repurchase for cash all or a portion of
      their notes at a repurchase price equal to 100% of the principal amount of
      the notes to be repurchased, plus accrued and unpaid
      interest to, but excluding, the “fundamental change repurchase date” (as
      defined in the Preliminary Offering Memorandum).

                  
	 	 	 
	
                    Ranking:

                  	 	
                    The
      notes will be general senior unsecured obligations of
    Patriot.

                  
	 	 	 
	
                    Listing:

                  	 	
                    None

                  
	 	 	 
	
                    Trade
      date:

                  	 	
                    May
      21, 2008

                  
	 	 	 
	
                    Settlement
      date:

                  	 	
                    May
      28, 2008

                  
	 	 	 
	
                    CUSIP:

                  	 	
                    70336T
      AA2

                  
	 	 	 
	
                    ISIN
      NUMBER:

                  	 	
                    US70336TAA25

                  
	 	 	 
	
                    No
      registration rights; additional interest

                     

                  	 	
                    Patriot
      will not file a shelf registration statement for the resale of the notes
      or any common stock issuable upon conversion of the notes.

                     

                    If,
      at any time during the six-month period from, and including, the date
      which is six months after the original issuance date of the notes offered
      by the Preliminary Offering Memorandum, Patriot fails to timely file any
      document or report that Patriot is required to file with the SEC pursuant
      to Section 13 or 15(d) of the Exchange Act (other than reports on Form
      8-K), Patriot will pay additional interest at an annual rate of 0.50% per
      annum on the notes.

                  
	 	 	 
	
                    Use
      of proceeds:

                  	 	
                    Patriot
      estimates that the net proceeds to it from this offering will be
      approximately $168.5 million (or approximately $192.8 million if the
      initial purchasers exercise their over-allotment option in full), after
      deducting the initial purchasers’ discounts or commissions and estimated
      fees and expenses of the offering payable by Patriot.

                  
	 	 	 
	 
      	 	
                    Patriot
      will place the net proceeds of this offering in a deposit account pending
      consummation of its acquisition of Magnum.  If the acquisition
      is consummated on or before September 30, 2008, the net proceeds will be
      released from the deposit account, in which case Patriot intends to use
      

                  

          

           

           

          
            
              
              

            

            
              2

              
                

              

            

            
              
              

            

          

           

          
            	 	 	approximately
      $150 million of the net proceeds of this offering to repay existing
      indebtedness of Magnum at the closing of the acquisition and the
      remainder, if any, for general corporate purposes.  If the
      merger agreement relating to the Magnum acquisition is terminated, Patriot
      intends to redeem the notes, in which case the net offering proceeds in
      the deposit account will be released to fund any payment due upon such
      redemption.  However, if Patriot determines that it is in its
      best interests not to redeem the notes and secures the consent of the
      majority of lenders under the credit facility to allow the notes to remain
      outstanding, Patriot may use such remaining funds for general corporate
      purposes. An
      affiliate of Lehman Brothers Inc. is a lender under Magnum’s credit
      facilities, and accordingly, if the Magnum acquisition is completed, such
      affiliate will receive a portion of the proceeds from this offering
      through the repayment of such credit facilities.
	 	 	 
	
                    Joint
      book-running managers

                  	 	
                    Citigroup
      Global Markets Inc. and Lehman Brothers Inc.

                  
	 	 	 
	
                    Adjustment
      to conversion rate upon a make-whole fundamental change:

                  	 	
                    The
      following table sets forth the number of additional shares to be added to
      the conversion rate per $1,000 principal amount of the notes in connection
      with a “make-whole fundamental change” as defined in the Preliminary
      Offering Memorandum, based on the “stock price” and “effective date” (each
      as defined in the Preliminary Offering Memorandum) of the make-whole
      fundamental change.

                  

          

          
            
            

            

            
              	 	
                      Effective
      Date

                    
	
                      Stock
      Price

                    	
                      5/28/08

                    	
                      5/31/09

                    	
                      5/31/10

                    	
                      5/31/11

                    	
                      5/31/12

                    	
                      5/31/13

                    
	
                      $ 
      96.67

                    	
                      2.9555

                    	
                      2.9555

                    	
                      2.9555

                    	
                      2.9555

                    	
                      2.9555

                    	
                      2.9555

                    
	
                      $110.00

                    	
                      2.5206

                    	
                      2.3903

                    	
                      2.2333

                    	
                      2.1207

                    	
                      2.0359

                    	
                      1.7020

                    
	
                      $125.00

                    	
                      1.9887

                    	
                      1.8297

                    	
                      1.6223

                    	
                      1.4104

                    	
                      1.3180

                    	
                      0.6111

                    
	
                      $140.00

                    	
                      1.6021

                    	
                      1.4284

                    	
                      1.1924

                    	
                      0.8854

                    	
                      0.8170

                    	
                      0.0000

                    
	
                      $155.00

                    	
                      1.3136

                    	
                      1.1343

                    	
                      0.8853

                    	
                      0.4921

                    	
                      0.4593

                    	
                      0.0000

                    
	
                      $170.00

                    	
                      1.0934

                    	
                      0.9144

                    	
                      0.6637

                    	
                      0.2061

                    	
                      0.2040

                    	
                      0.0000

                    
	
                      $185.00

                    	
                      0.9221

                    	
                      0.7474

                    	
                      0.5024

                    	
                      0.0000

                    	
                      0.0000

                    	
                      0.0000

                    
	
                      $200.00

                    	
                      0.7869

                    	
                      0.6186

                    	
                      0.3842

                    	
                      0.0000

                    	
                      0.0000

                    	
                      0.0000

                    
	
                      $225.00

                    	
                      0.6178

                    	
                      0.4629

                    	
                      0.2516

                    	
                      0.0000

                    	
                      0.0000

                    	
                      0.0000

                    
	
                      $250.00

                    	
                      0.4969

                    	
                      0.3564

                    	
                      0.1704

                    	
                      0.0000

                    	
                      0.0000

                    	
                      0.0000

                    
	
                      $300.00

                    	
                      0.3409

                    	
                      0.2277

                    	
                      0.0874

                    	
                      0.0000

                    	
                      0.0000

                    	
                      0.0000

                    
	
                      $350.00

                    	
                      0.2487

                    	
                      0.1578

                    	
                      0.0525

                    	
                      0.0000

                    	
                      0.0000

                    	
                      0.0000

                    
	
                      $400.00

                    	
                      0.1899

                    	
                      0.1167

                    	
                      0.0363

                    	
                      0.0000

                    	
                      0.0000

                    	
                      0.0000

                    

            

             

          

          The exact
stock prices and effective dates may not be set forth in the table above, in
which case:

           

          
            	
                    ·

                  	
                    If
      the stock price is between two stock prices in the table or the effective
      date is between two effective dates in the table, the number of additional
      shares will be determined by a straight-line interpolation between the
      number of additional shares set forth for the higher and lower stock
      prices and the two effective dates, as applicable, based on a 365-day
      year.

                  

          

           

          
            	
                    ·

                  	
                    If
      the stock price is greater than $400.00 per share (subject to adjustment
      in the same manner and at the same time as the stock prices in the table
      above), no adjustments will be made in the conversion
  rate.

                  

          

           

          
            	
                    ·

                  	
                    If
      the stock price is less than $96.67 per share (subject to adjustment in
      the same manner and at the same time as the stock prices in the table
      above), no adjustments will be made in the conversion
  rate.

                  

          

           

           

          
            
              
              

            

            
              3

              
                

              

            

            
              
              

            

          

           

          Notwithstanding
the foregoing, in no event will the conversion rate exceed 10.3444 shares of
common stock (adjusted in the same manner as the conversion rate as described in
the Preliminary Offering Memorandum) per $1,000 principal amount of notes as a
result of additional shares.

           

          This
communication is intended for the sole use of the person to whom it is provided
by the sender.

           

          This
communication shall not constitute an offer to sell or the solicitation of an
offer to buy securities nor shall there be any sale of these securities in any
state in which such solicitation or sale would be unlawful prior to registration
or qualification of these securities under the laws of any such
state.

           

          The
notes and any Patriot common stock issuable upon conversion of the notes have
not been registered under the Securities Act of 1933, as amended (the
“Securities Act”), or any state securities laws.  Accordingly, the
notes are being offered and sold only to “qualified institutional buyers” as
defined in Rule 144A promulgated under the Securities Act.  The notes
and any Patriot common stock issuable upon conversion of the notes are not
transferable except in accordance with the restrictions described under
“Transfer Restrictions” in the Preliminary Offering Memorandum.

           

          The
information in this pricing term sheet supplements Patriot’s Preliminary
Offering Memorandum, dated May 20, 2008.  This pricing term sheet is
qualified in its entirety by reference to the Preliminary Offering
Memorandum.  Terms used herein but not defined herein shall have the
respective meanings as set forth in the Preliminary Offering
Memorandum.

           

          ANY
DISCLAIMERS OR OTHER NOTICES THAT MAY APPEAR BELOW ARE NOT APPLICABLE TO THIS
COMMUNICATION AND SHOULD BE DISREGARDED.  SUCH DISCLAIMERS OR OTHER
NOTICES WERE AUTOMATICALLY GENERATED AS A RESULT OF THIS COMMUNICATION BEING
SENT VIA BLOOMBERG OR ANOTHER EMAIL SYSTEM.

           

        

      

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

         

      

      EXHIBIT
A

       

      [Letterhead
of the Company]

       

      ____________,
2008

       

      Citigroup
Global Markets Inc.

      388
Greenwich Street

      New York,
New York  10013

      

      and

      

      Lehman
Brothers Inc.

      745
Seventh Avenue

      New York,
New York  10019

      

      As
Representatives of the Initial Purchasers

      

      Ladies and
Gentlemen:

       

      This
letter is being delivered to you in connection with a proposed Purchase
Agreement (the “Purchase Agreement”) between Patriot Coal Corporation, a
Delaware corporation (the “Company”) and each of you as representatives (the
“Representatives”) of a group of initial purchasers (the “Initial Purchasers”)
named therein, relating to an offering of notes that will be convertible into
common stock, $0.01 par value (the “Common Stock”), of the Company.

       

      In order
to induce you and the other Initial Purchasers to enter into the Purchase
Agreement, the undersigned will not, without the prior written consent of the
Representatives, directly or indirectly, (i) offer, sell, contract to sell,
pledge or otherwise dispose of, (ii) enter into any transaction which is
designed to, or might reasonably be expected to, result in the disposition
(whether by actual disposition or effective economic disposition due to cash
settlement or otherwise) by the undersigned or any affiliate of the undersigned
or any person in privity with the undersigned or any affiliate of the
undersigned of, (iii) other than participating in the preparation and filing of
a registration statement in connection with the Merger Agreement (including any
amendments or supplements thereto), participate in the filing of a registration
statement with the U.S. Securities and Exchange Commission in respect of, or
(iv) establish or increase a put equivalent position or liquidate or decrease a
call equivalent position within the meaning of Section 16 of the Securities
Exchange Act of 1934, as amended, and the rules and regulations of the U.S.
Securities and Exchange Commission promulgated thereunder in respect of, any
shares of capital stock of the Company or any securities convertible into, or
exercisable or exchangeable for such capital stock, or publicly announce an
intention to effect any such transaction, for a period of 90 days after the date
of the Purchase Agreement, other than (x) shares of Common Stock disposed of as
bona fide gifts approved by the Representatives, (y) transfers of Common Stock
by will or intestacy, including, without limitation, transfers by will or
intestacy to the undersigned’s family members or to any trust (provided that the
transferee shall enter into a lock-up agreement substantially in the form of
this letter), or (z) the exercise by

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      the
undersigned of options or other rights to purchase Common Stock (provided,
however, that shares of Common Stock acquired upon such exercise shall be
subject to this letter).

       

      If for any
reason the Purchase Agreement shall be terminated prior to the Closing Date (as
defined in the Purchase Agreement), the agreement set forth above shall likewise
be terminated.

       

      
         

        
          	
                  Very
      truly yours,

                	 
	 	 	 	 
	 	 	 	 
	By:	 	 
	 	Name:	 	 
	 	Title:	 	 

        

         

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

           

        

      

      ANNEX
A

      

      Significant
Subsidiaries

       

      
        	
                1.

              	
                Eastern
      Coal Company, LLC

              

      

      
        	
                2.

              	
                Interior
      Holdings, LLC

              

      

      
        	
                3.

              	
                Heritage
      Coal Company LLC

              

      

      
        	
                4.

              	
                Coal
      Properties, LLC

              

      

      
        	
                5.

              	
                Eastern
      Associated Coal, LLC

              

      

      
        	
                6.

              	
                Central
      States Coal Reserves of Kentucky,
LLC

              

      

      
        	
                7.

              	
                Snowberry
      Land Company

              

      

      
        	
                8.

              	
                KE
      Ventures LLC

              

      

      
        	
                9.

              	
                Kanawha
      Eagle Coal LLC

              

      

      
        	
                10.

              	
                Grand
      Eagle Mining, Inc

              

      

      
        	
                11.

              	
                Ohio
      county Coal Company, LLC

              

      

      
        	
                12.

              	
                Midwest
      Coal Resources II, LLC

              

      

      
        	
                13.

              	
                Black
      Stallion Coal Company

              

      

      
        	
                14.

              	
                Black
      Walnut Coal Company

              

      

      
        	
                15.

              	
                Rivers
      Edge Mining Inc

              

      

      
        	
                16.

              	
                Colony
      Bay Coal Company

              

      

      
        	
                17.

              	
                Sterling
      Smokeless Coal Company

              

      

      
        	
                18.

              	
                Pine
      Ridge Coal Company

              

      

      
        	
                19.

              	
                Highland
      Mining Company

              

      

      
        	
                20.

              	
                Beaver
      Dam Coal Company

              

      

      
 

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      ANNEX
B

      

      J. Joe
Adorjan

      Michael V.
Altrudo

      Joseph W.
Bean

      B.R.
Brown

      Charles A.
Ebetino

      Irl F.
Engelhardt

      John E.
Lushefski

      Jiri
Nemec

      Michael M.
Scharf

      Mark N.
Schroeder

      Robert O.
Viets 

        Richard M.
WhitingExhibit
10.2

     

     

    EXECUTION
VERSION

     

    AMENDMENT
NO. 2 TO CREDIT AGREEMENT

     

    AMENDMENT
(this “Amendment”) dated as
of May 19, 2008 to the Credit Agreement (the “Credit Agreement”)
dated as of October 31, 2007, among PATRIOT COAL CORPORATION, a Delaware
corporation (the “Borrower”) and each
lender from time to time party thereto (collectively, the “Lenders” and
individually, a “Lender”), as amended
by that certain Amendment No. 1 to Credit Agreement dated as of April 2, 2008,
among the Borrower and the Required Lenders.

     

    W
I T N E S S E T H :

     

    WHEREAS,
the parties hereto desire to amend the Credit Agreement to, among other things,
(i) clarify the parties’ intentions with respect to the Permanent Debt Terms and
the Convertible Debt Terms, (ii) permit Permanent Debt and Convertible Debt
to be incurred prior to the Merger Date, and (iii) modify certain covenants and
related definitions to accommodate the issuance of the Permanent Debt and the
Convertible Debt.

     

    NOW,
THEREFORE, the parties hereto agree as follows:

     

    SECTION
1.  Defined Terms;
References.  Unless
otherwise specifically defined herein, each term used herein that is defined in
the Credit Agreement has the meaning assigned to such term in the Credit
Agreement.  Each reference to “hereof”, “hereunder”, “herein” and
“hereby” and each other similar reference and each reference to “this Agreement”
and each other similar reference contained in the Credit Agreement shall, after
this Amendment becomes effective, refer to the Credit Agreement as amended
hereby.

     

    SECTION
2.
Definition of Amendment
No. 2 to Credit Agreement.  Section 1.01 of the Credit
Agreement is amended to add a new definition in appropriate alphabetical
order:

     

    “Amendment No. 2 to Credit
Agreement” means that
certain Amendment No. 2 to Credit Agreement dated as of May 19, 2008 by and
among the Borrower and the Required Lenders.

     

    SECTION
3.  Definition of Consolidated Interest
Coverage Ratio.  The definition of “Consolidated Interest
Coverage Ratio” in Section 1.01 of the Credit Agreement is hereby amended by
adding the following words at the end thereof to read as follows:

     

    “; provided that for the
purposes of calculating the Consolidated Interest Coverage Ratio (and not for
any other purpose), Consolidated Cash Interest Charges for any period ending on
or prior to the first to occur of the Merger Date and the Unwind Date shall
exclude any interest expense and letter of credit fees and commissions of the
Borrower and its Subsidiaries in connection with any Permanent Debt or any
Convertible Debt to the extent such interest and letter of credit fees and
commissions are treated as interest in accordance with GAAP and payable in
cash.”

     

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

       

      
        SECTION
4.  Definition of Consolidated Leverage
Ratio.  The definition of “Consolidated Leverage Ratio” in
Section 1.01 of the Credit Agreement is hereby amended by adding the following
words at the end thereof to read as follows:

         

        “; provided that for the
purposes of calculating the Consolidated Leverage Ratio (and not for any other
purpose), Consolidated Funded Indebtedness for any period ending on or prior to
the first to occur of the Merger Date and the Unwind Date shall be less the sum
of all Unrestricted Cash.”

         

      

    

    SECTION
5.
Definition of Escrow
Account.  Section 1.01 of the Credit Agreement is amended to
add a new definition in appropriate alphabetical order:

     

    “Escrow Account”
means the
account established and maintained by LaSalle Bank National Association, as
Escrow Agent (together with its permitted successors), pursuant to that certain
Escrow Agreement (the “Escrow Agreement”)
dated as of May 20, 2008 by and among the Borrower, LaSalle Bank National
Association, as Escrow Agent (together with its permitted successors), and
others in which the Borrower shall deposit the proceeds of any Permanent Debt or
any Convertible Debt.

     

    SECTION
6.  Definition of Magnum Acquisition
Credit Agreement.  Clauses (ii) and (iii) of the definition of
“Magnum Acquisition Credit Agreement” in Section 1.01 of the Credit Agreement
are hereby deleted and replaced in their entirety to read as
follows:

     

    “(ii) the
documentation with respect to second lien secured debt (the “Permanent Debt”) of
the Borrower on terms substantially similar to (or not materially more
restrictive than) those set forth on Annex B-II (the
“Permanent Debt
Terms”), or (iii) the documentation with respect to convertible senior
debt or senior subordinated debt (the “Convertible Debt”) of
the Borrower on terms substantially similar to (or not materially more
restrictive than) those set forth on Annex B-III(a) or on
those terms set forth on Annex B-III(b) (as
applicable, the “Convertible Debt
Terms”), and, in respect of both the Permanent Debt and the Convertible
Debt, other material terms not otherwise included in the Permanent Debt Terms or
the Convertible Debt Terms, as the case may be, which are (A) ordinary and
customary in indentures, fiscal agency agreements or other instruments in
connection with similar types of debt offerings or placements, (B) not
materially more restrictive to the Borrower than the representations,
warranties, covenants, events of default or other correlative terms contained in
this Agreement, (C) not adverse to the interests of the Lenders in any material
respect, or (D) which shall have been approved by the Administrative Agent on
behalf of the Required Lenders.”

     

    SECTION
7.
Definition of
Unrestricted Cash.  Section 1.01 of the Credit Agreement is
amended to add a new definition in appropriate alphabetical order:

     

    “Unrestricted Cash”
means cash or Cash Equivalents of the Borrower or any of its Subsidiaries that
would not appear as “restricted” on a consolidated balance sheet of the Borrower
and its Subsidiaries plus (without duplication) cash on deposit in the Escrow
Account or Cash Equivalents held in the Escrow Account.

     

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

       

    

    SECTION
8 Indebtedness.  Section
7.02(n) of the Credit Agreement is hereby amended by adding the words “(other
than with respect to any Permanent Debt or any Convertible Debt incurred under
this sub-section (n), which may be incurred prior to the consummation of the
Magnum Acquisition)” after the words “Subject to the consummation of the Magnum
Acquisition”.

     

    SECTION
9.
Magnum Acquisition
Credit Agreement.  Section
7.18 of the Credit Agreement is hereby amended by adding the words “, purchase,
redeem, convert or acquire any Convertible Debt or any Permanent Debt” after the
word “prepay” in the first proviso thereof and by adding the following words at
the end thereof to read as follows:

     

    “; provided, further, that (A) the
Borrower may make any prepayment of principal, interest, fees or premiums, or
purchase, redemption, conversion or other acquisition of any Permanent Debt or
any Convertible Debt (or any Equity Interest or other security for or into which
any Permanent Debt or Convertible Debt is exchangeable or convertible), if (x)
such payment, purchase, redemption, conversion or other acquisition would be
permitted as (and shall be deemed to be) a Restricted Payment in such amount
under Section
7.06(d), or (y) such prepayment, purchase, redemption, conversion or
other acquisition is made with Capital Stock or Indebtedness permitted under
Section 7.02
(or the proceeds of any issuance of any such Capital Stock or Indebtedness), (B)
the Borrower may make any payment of principal, interest, fees or premiums at
maturity of any Convertible Debt that is not subordinated to the Obligations,
and (C) for the avoidance of doubt, notwithstanding any term of the Magnum
Acquisition Credit Agreement relating to any Permanent Debt or any Convertible
Debt, any prepayment, purchase, redemption, conversion or other acquisition with
respect thereto shall be subject to full compliance by the Borrower with the
provisions of this Section 7.18 and
Section 20 of
Amendment No. 2 to Credit Agreement.”

     

    SECTION
10.  Events of Default.  Section
8.01 of the Credit Agreement is amended by replacing the “.” with the words “;
or” at the end of clause (m) thereof, and adding the following new clause (n) at
the end thereof to read as follows:

     

    “(n)           Mandatory Prepayment or
Redemption if the Magnum Acquisition is not Consummated.  The
Borrower fails to perform or observe any term, covenant or agreement contained
in Section 20
of Amendment No. 2 to Credit Agreement and such failure continues for 10
days.”

     

    SECTION
11.  Annexes.  (a) Annex
B-III of the Credit Agreement is hereby amended to read as “Annex B-III(b)” and
is otherwise amended by deleting and replacing in its entirety, in the row
styled “Early Redemption or Repurchase”, the column styled “Detail” to read “On
arm’s length market terms.”.

     

    (b) The
Credit Agreement is hereby amended by adding in appropriate order a new “Annex B-III(a)”
attached hereto as Annex
B-III(a).

     

    SECTION
12.  Representations
of Borrower.  The
Borrower represents and warrants that (i) both before and after giving effect to
this Amendment, the representations and warranties

     

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

       

      of the Borrower
set forth in Article V of the Credit Agreement and contained in each other Loan
Document, or which are contained in any document furnished at any time under or
in connection with the Credit Agreement, are true and correct in all material
respects on and as of the Amendment Effective Date, except to the extent that
such representations and warranties specifically refer to an earlier date, in
which case they shall be true and correct in all material respects as of such
earlier date, and (ii) both before and after giving effect to this Amendment, no
Default or Event of Default will have occurred and be continuing.

       

    

    SECTION
13.  Authority.  The
Borrower has the requisite corporate or other organizational power and authority
to execute and deliver this Amendment and to perform its obligations hereunder
and under the Credit Agreement (as amended hereby).  Each of the
Subsidiary Guarantors has the requisite corporate or other organizational power
and authority to execute and deliver the Consent (as defined
below).  The execution, delivery and performance by the Borrower of
this Amendment and by the Subsidiary Guarantors of the Consent and the
performance by the Borrower and each other Loan Party of the Credit Agreement
(as amended hereby) and each other Loan Document to which it is a party, in each
case, have been authorized by all necessary corporate or other organizational
action of such Person, and no other corporate or other organizational
proceedings on the part of each such Person is necessary to consummate such
transactions.

     

    SECTION
14.  Enforceability.  This
Amendment has been duly executed and delivered on behalf of the
Borrower.  The Consent has been duly executed and delivered by each of
the Subsidiary Guarantors.  Each of this Amendment, the Consent and,
after giving effect to this Amendment, the Credit Agreement and the other Loan
Documents, (i) is the legal, valid and binding obligation of each Loan Party
party hereto and thereto, enforceable against such Loan Party in accordance with
its terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors’ rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law) and (ii) is in full
force and effect.  Neither the execution, delivery or performance of
this Amendment or of the Consent or the performance of the Credit Agreement (as
amended hereby), nor the performance of the transactions contemplated hereby or
thereby, will adversely affect the validity, perfection or priority of the
Administrative Agent’s Lien on any of the Collateral or its ability to realize
thereon.  This Amendment is effective to amend the Credit Agreement as
provided therein.

     

    SECTION
15.  No Conflicts.  Neither
the execution and delivery of this Amendment or the Consent, nor the
consummation of the transactions contemplated hereby and thereby, nor the
performance of and compliance with the terms and provisions hereof or of the
Credit Agreement (as amended hereby) by any Loan Party will, at the time of such
performance, (i) violate or conflict with any provision of its certificate of
formation or limited liability company agreement or other governing documents of
such Person, (ii) violate, contravene or materially conflict with any
Requirement of Law or Contractual Obligation (including, without limitation,
Regulation U), except for any violation, contravention or conflict which could
not reasonably be expected to have a Material Adverse Effect or (iii) result in
or require the creation of any Lien (other than those permitted by the Loan
Documents) upon or with respect to its properties.  No consent or
authorization of, filing with, notice to or other act by or in respect of, any
Governmental

     

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

       

      Authority or any
other Person is required in connection with the transactions contemplated
hereby.

       

    

    SECTION
16.  Effect of Amendment.  (a)
Except as specifically amended above or by the Credit Agreement and the other
Loan Documents are and shall continue to be in full force and effect and are
hereby in all respects ratified and confirmed.  Without limiting the
generality of the foregoing, the Collateral Documents and all of the Collateral
described therein do and shall continue to secure the payment of all Obligations
under and as defined therein.

     

    (b)           The
execution, delivery and effectiveness of this Amendment shall not operate as a
waiver of any right, power or remedy of any Secured Party under any of the Loan
Documents, nor, except as expressly provided herein, constitute a waiver or
amendment of any provision of any of the Loan Documents.

     

    SECTION
17.  Governing Law.  This
Amendment shall be governed by and construed in accordance with the laws of the
State of New York.

     

    SECTION
18.  Counterparts.  This
Amendment may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument.

     

    SECTION
19.  Effectiveness.  This
Amendment shall become effective on the date hereof provided that the following
conditions are met (the “Amendment Effective
Date”):

     

    (i)           the
Administrative Agent shall have received from each of the Borrower and the
Required Lenders a counterpart hereof signed by such party or facsimile or other
written confirmation (in form satisfactory to the Administrative Agent) that
such party has signed a counterpart hereof;

     

    (ii)           the
Administrative Agent shall have received counterparts of the Consent of
Guarantors attached hereto as Annex I (the “Consent”) executed by
each of the Subsidiary Guarantors as of the date hereof; and

     

    (iii)           the
Administrative Agent shall have received a certificate from a Responsible
Officer of the Borrower to the effect that since December 31, 2007, until the
date hereof, there has been no event or circumstance, either individually or in
the aggregate, that has had or could reasonably be expected to have a Material
Adverse Effect.

     

    SECTION
20.  Mandatory Prepayment or Redemption
if the Magnum Acquisition is not Consummated. This
Amendment and Amendment No. 1 to Credit Agreement shall remain in full force and
effect with respect to any Permanent Debt or any Convertible Debt
(notwithstanding any condition subsequent in Amendment No. 1 to Credit
Agreement); provided, that if the
Merger Date shall have not occurred on or prior to September 30, 2008, then any
Permanent Debt or any Convertible Debt outstanding after September 30, 2008
shall be prepaid, purchased, redeemed, converted or otherwise acquired by the
Borrower on or prior to December 31, 2008 (or such later date approved by the
Administrative Agent on behalf of the Required Lenders) (the “Unwind Date”) for an
amount in cash up to the amount of principal of, and any interest
accrued

     

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    on, such
Permanent Debt or such Convertible Debt and any additional payment in the form
of Capital Stock or Indebtedness permitted under Section 7.02 (or the
proceeds of any issuance of any such Capital Stock or Indebtedness), in each
case, as agreed to by the Borrower and any such prepayment, purchase,
redemption, conversion or other acquisition shall not be subject to the
restrictions of Sections 7.15
and
7.18.

     

    SECTION
21.  Escrow Account
not Assets or Property of the Borrower. For
the avoidance of doubt, unless otherwise specified herein, for all purposes of
the Loan Documents, cash on deposit in the Escrow Account or Cash Equivalents
held in the Escrow Account (and any returns thereon) (collectively, “Escrow Amounts”) will
not constitute or be deemed to constitute any property or assets of the Borrower
except to the extent that any Escrow Amount is transferred or released from the
Escrow Account to an account of the Borrower for any purpose other than to fund
the Magnum Acquisition or to prepay, purchase, redeem, convert or otherwise
acquire any Permanent Debt or any Convertible Debt.

     

    SECTION
22.  Deposit of Net
Proceeds in Escrow Account. The
Borrower agrees to deposit the net proceeds of any Permanent Debt or any
Convertible Debt into the Escrow Account on the following dates: (a) if such net
proceeds are received by the Borrower on or prior to 10:00 a.m. (New York City
time) on a Business Day, then on the same Business Day, or (b) if such net
proceeds are received by the Borrower (A) after 10:00 a.m. (New York City time)
on a Business Day, or (B) on a day that is not a Business Day, then on the next
succeeding Business Day (clauses (a) and (b), each a “Deposit
Date”).

     

    [Signature pages
follow]

     

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

       

    

    IN WITNESS
WHEREOF, the parties hereto have caused this Amendment to be duly executed as of
the date first above written.

     

    

     

    
      	
              PATRIOT
      COAL CORPORATION

            	 
	 	 
	 	 
	
              By:

            	
              /s/
      Robert L. Mead

            	 
	 
      	
              Name:

            	
              Robert
      L. Mead

            	 
	 
      	
              Title:

            	
              Vice
      President & Treasurer

            	 

    

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
 

    
      	
              BNP
      Paribas., as a Lender

            	 
	 	 
	 	 
	
              By:

            	
              /s/
      Greg George

            	 
	 
      	
              Name:

            	
              Greg
      George

            	 
	 
      	
              Title:

            	
              Managing
      Director

            	 

    

    
 

    
      	
              By:

            	
              /s/
      Greg Smothers

            	 
	 
      	
              Name:

            	
              Greg
      Smothers

            	 
	 
      	
              Title:

            	
              Director

            	 

    

    

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

       

    

    
      	
              BANK
      OF AMERICA, N.A., as a Lender

            	 
	 	 
	 	 
	
              By:

            	
              /s/
      Adam H. Fey

            	 
	 
      	
              Name:

            	
              Adam
      H. Fey

            	 
	 
      	
              Title:

            	
              Vice
      President

            	 

    

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

       

    

    
      	
              Citibank,
      N.A., as a Lender

            	 
	 	 
	 	 
	
              By:

            	
              /s/
      Mason McGurrin

            	 
	 
      	
              Name:

            	
              Mason
      McGurrin

            	 
	 
      	
              Title:

            	
              Vice
      President

            	 

    

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

       

    

    
      	
              Fifth
      Third Bank, as a Lender

            	 
	 	 
	 	 
	
              By:

            	
              /s/
      Robert M. Sander

            	 
	 
      	
              Name:

            	
              Robert
      M. Sander

            	 
	 
      	
              Title:

            	
              Vice
      President

            	 

    

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
 

    
      	
              LEHMAN
      COMMERCIAL PAPER,

              INC., as
      a Lender

            	 
	 	 
	 	 
	
              By:

            	
              /s/
      Randall Braunfeld

            	 
	 
      	
              Name:

            	
              Randall
      Braunfeld

            	 
	 
      	
              Title:

            	
              Authorized
      Signatory

            	 

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

       

    

    
      	
              PNC
      Bank, National Association as a Lender

            	 
	 	 
	 	 
	
              By:

            	
              /s/
      Helmut Vogel

            	 
	 
      	
              Name:

            	
              Helmut
      Vogel

            	 
	 
      	
              Title:

            	
              Credit
      Officer

            	 

    

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

       

    

    
      	
              Southwest
      Bank, An M&I Bank, as a Lender

            	 
	 	 
	 	 
	
              By:

            	
              /s/
      Roy C. Postel

            	 
	 
      	
              Name:

            	
              Roy
      C. Postel

            	 
	 
      	
              Title:

            	
              Senior
      Vice President

            	 

    

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

       

    

    
      	
              Sovereign
      Bank., as a Lender

            	 
	 	 
	 	 
	
              By:

            	
              /s/
      Robert D. Lanigan

            	 
	 
      	
              Name:

            	
              Robert
      D. Lanigan

            	 
	 
      	
              Title:

            	
              Senior
      Vice President

            	 

    

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

       

    

    
      	
              US
      Bank as a Lender

            	 
	 	 
	 	 
	
              By:

            	
              /s/
      Karen Meyer

            	 
	 
      	
              Name:

            	
              Karen
      Meyer

            	 
	 
      	
              Title:

            	
              Vice
      President

            	 

    

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    

    
      	
              Acknowledged
      by:

            	 
	 	 
	
              BANK
      OF AMERICA, N.A., as Administrative Agent

            	 
	 	 
	 	 
	
              By:

            	
              /s/
      Todd Mac Neill

            	 
	 
      	
              Name:

            	
              Todd
      Mac Neill

            	 
	 
      	
              Title:

            	
              Vice
      President

            	 

    

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    Annex 1

    

     

    CONSENT
OF GUARANTORS

    

    

    Each of
the undersigned is a Subsidiary Guarantor of the Obligations of the Borrower
under the Credit Agreement and hereby (a) consents to the foregoing
Amendment, (b) acknowledges that, notwithstanding the execution and
delivery of the foregoing Amendment, the obligations of each of the undersigned
Subsidiary Guarantors are not impaired or affected and all guaranties given to
the holders of Obligations and all Liens granted as security for the Obligations
continue in full force and effect, and (c) confirms and ratifies its
obligations under each of the Loan Documents executed by
it.  Capitalized terms used herein without definition shall have the
meanings given to such terms in the Amendment to which this Consent is attached
or in the Credit Agreement referred to therein, as applicable.

    

    IN WITNESS WHEREOF, each of the
undersigned has executed and delivered this Consent of Guarantors as of the
19th
day of May 2008.

     

    [Signature pages
follow]

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

     

    
      	
              AFFINITY
      MINING COMPANY

              APPALACHIA
      MINE SERVICES, LLC

              BEAVER
      DAM COAL COMPANY, LLC

              BIG
      EAGLE LLC

              BIG
      EAGLE RAIL LLC

              BLACK
      STALLION COAL COMPANY, LLC

              BLACK
      WALNUT COAL COMPANY

              BLUEGRASS
      MINE SERVICES, LLC

              CENTRAL
      STATES COAL RESERVES OF KENTUCKY, LLC

              CHARLES
      COAL COMPANY, LLC

              CLEATON
      COAL COMPANY

              COAL
      PROPERTIES, LLC

              COAL
      RESERVE HOLDING LIMITED LIABILITY COMPANY NO. 2

              COLONY
      BAY COAL COMPANY

              COOK
      MOUNTAIN COAL COMPANY, LLC

              DIXON
      MINING COMPANY, LLC

              DODGE
      HILL HOLDING JV, LLC

              DODGE
      HILL OF KENTUCKY, LLC

              DODGE
      HILL MINING COMPANY, LLC

              EASTERN
      ASSOCIATED COAL, LLC

              EASTERN
      COAL COMPANY, LLC

              EASTERN
      ROYALTY, LLC

              FORT
      ENERGY, LLC

              GRAND
      EAGLE MINING, INC.

              HCR
      HOLDINGS, LLC

              HERITAGE
      COAL COMPANY LLC

              HIGHLAND
      MINING COMPANY, LLC

              HILLSIDE
      MINING COMPANY

              INDIAN
      HILL COMPANY

              INTERIOR
      HOLDINGS, LLC

              JARRELL'S
      BRANCH COAL COMPANY

              KANAWHA
      EAGLE COAL LLC

              KANAWHA
      RIVER VENTURES I LLC

              KE
      VENTURES LLC

              LOGAN
      FORK COAL COMPANY

              MARTINKA
      COAL COMPANY, LLC

              MIDWEST
      COAL RESOURCES II, LLC

              MOUNTAIN
      VIEW COAL COMPANY, LLC

              NORTH
      PAGE COAL CORP.

              OHIO
      COUNTY COAL COMPANY, LLC

              PATRIOT
      COAL COMPANY, L.P.

              PATRIOT
      COAL SALES LLC

              PATRIOT
      LEASING COMPANY LLC

            

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    
      	
              PATRIOT
      MIDWEST HOLDINGS, LLC

              PINE
      RIDGE COAL COMPANY, LLC

              POND
      CREEK LAND RESOURCES, LLC

              RIVERS
      EDGE MINING, INC.

              SENTRY
      MINING, LLC

              SNOWBERRY
      LAND COMPANY

              STERLING
      SMOKELESS COAL COMPANY, LLC

              UNION
      COUNTY COAL CO., LLC

              WINIFREDE
      DOCK LIMITED LIABILITY COMPANY

              YANKEETOWN
      DOCK, LLC

            

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

       

    

    
      	
              Executing
      this Consent of Guarantors as Vice-

              President
      of each of the foregoing persons on behalf

              of
      and so as to bind the persons named above

            
	 
	 
	
              By:

            	
              /s/
      Robert L. Mead

            	 
	 
      	
              Name:

            	
              Robert
      L. Mead

            	 
	 
      	
              Title:

            	
              Vice-President

            	 

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    Annex
B-III(a)

    

    Convertible Debt Terms -
Description of Notes

    
 

    See Attached

     

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
       

      DESCRIPTION
OF THE NOTES

       

      Patriot
will issue the notes under an indenture to be dated as of
May      , 2008 (the “indenture”) between Patriot
and U.S. Bank National Association, as trustee (the “trustee”). The terms of the
notes include those expressly set forth in the indenture and the
notes.

       

      The
following description is a summary of the material provisions of the notes and
the indenture and does not purport to be complete. This summary is subject to
and is qualified by reference to all the provisions of the notes and the
indenture, including the definitions of certain terms used in the indenture. You
may request a copy of the indenture from Patriot as set forth in “Where You Can
Find More Information.” Patriot urges you to read the indenture (including the
form of note contained therein) because it, and not this description of the
notes, defines your rights as a holder of the notes. For purposes of this
description of the notes, references to “Patriot” refer only to Patriot Coal
Corporation and not to its subsidiaries. In addition, references to “interest”
include any additional interest as described below.

       

      General

       

      The
notes:

       

      
        	
                 
      

              	
                ·

              	
                will
      be Patriot’s general unsecured obligations and
  will:

              

      

       

      
        	
                 
      

              	
                

              	
                rank
      equally in right of payment to all of Patriot’s other senior unsecured
      debt;

              

      

       

      
        	
                 
      

              	
                

              	
                rank
      senior in right of payment to all debt that is expressly subordinated in
      right of payment to the notes;

              

      

       

      
        	
                 
      

              	
                

              	
                be
      structurally subordinated to the existing and future claims of creditors
      of Patriot’s subsidiaries; and

              

      

       

      
        	
                 
      

              	
                

              	
                be
      effectively subordinated to all of Patriot’s existing and future secured
      debt to the extent of the value of the assets securing such
      debt;

              

      

       

      
        	
                 
      

              	
                ·

              	
                will
      be limited to an aggregate principal amount of $175,000,000 ($200,000,000
      if the initial purchasers exercise their over-allotment option to purchase
      additional notes in full) except as set forth
  below;

              

      

       

      
        	
                 
      

              	
                ·

              	
                will
      mature on May 31, 2013 (the “maturity date”), unless earlier converted,
      redeemed or repurchased;

              

      

       

      
        	
                 
      

              	
                ·

              	
                will
      be issued in denominations of $1,000 and integral multiples of
      $1,000;

              

      

       

      
        	
                 
      

              	
                ·

              	
                will
      initially be represented by one or more registered notes in global form,
      but in certain limited circumstances described under the heading “— Global
      Notes, Book-Entry Form” below may be represented by notes in definitive
      form; and

              

      

       

      
        	
                 
      

              	
                ·

              	
                will
      not be entitled to any registration rights, although holders will be
      entitled to receive additional interest under certain circumstances
      affecting their ability to transfer their
notes.

              

      

       

      As of
March 31, 2008, Patriot had outstanding:

       

      
        	
                 
      

              	
                ·

              	
                $11.4
      million of senior unsecured debt equal in right of payment to the notes;
      and

              

      

       

      
        	
                 
      

              	
                ·

              	
                $22.5
      million of secured debt that would have effectively ranked senior to the
      notes.

              

      

       

      As of
March 31, 2008, Patriot’s subsidiaries had $1,143.8 million of liabilities
outstanding.

       

      The
indenture does not limit the amount of debt that may be issued by Patriot or its
subsidiaries. Patriot’s subsidiaries will not guarantee any of its obligations
under the notes. See “Risk Factors — Risks Relating to the

       

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

         

      

      Notes —
The notes are unsecured, are effectively subordinated to secured indebtedness
and are structurally subordinated to all liabilities of Patriot’s
subsidiaries.”

       

      Subject to
the satisfaction of certain conditions and during the periods described below,
the notes may be converted at an initial conversion rate of
                 shares
of common stock per $1,000 in principal amount of notes (equivalent to an
initial conversion price of approximately
$          per share of common
stock). The conversion rate is subject to adjustment if certain events described
below occur. Upon conversion of any notes, Patriot will pay an amount in cash
equal to the aggregate “principal portion” (as defined below) of the notes
converted for each of the 20 “VWAP trading days” (as defined below) of the
“observation period” (as defined below) for the converted notes. If, in respect
of the notes being converted, the “daily conversion value” (as defined below)
exceeds one-twentieth of  their principal amount on any VWAP trading
day during the observation period, in addition to paying the principal portion
in cash for such VWAP trading day, Patriot will also deliver shares of its
common stock based upon the excess of the daily conversion value over the
principal portion on that VWAP trading day (subject to its right to deliver cash
in lieu of all or a portion of such shares). Patriot will perform this
calculation and make an aggregate payment of cash and shares of common stock, if
any, for all VWAP trading days of the relevant 20 VWAP trading day observation
period on the third business day after the end of that period, as described
below. See “— Conversion Rights — Payment upon Conversion.” You will not receive
any separate cash payment for interest accrued and unpaid to the “conversion
date” (as defined below), except under the limited circumstances described
below.

       

      The
following terms have the following meanings in this offering
memorandum:

       

      
        	
                 
      

              	
                ·

              	
                “business
      day” means any day, other than a Saturday or a Sunday, that is neither a
      legal holiday nor a day on which banking institutions are authorized or
      required by law, regulation or executive order to close in the City of New
      York;

              

      

       

      
        	
                 
      

              	
                ·

              	
                “common
      stock” means Patriot’s common stock, par value $0.01 per
      share;

              

      

       

      
        	
                 
      

              	
                ·

              	
                “note”
      means each $1,000 in principal amount of notes;
  and

              

      

       

      
        	
                 
      

              	
                ·

              	
                “scheduled
      trading day” means a day during which trading in Patriot’s common stock is
      scheduled to occur on the principal United States national or regional
      securities exchange or market on which Patriot’s common stock is listed or
      admitted for trading.  If Patriot’s common stock is not so
      listed or traded, then “scheduled trading day” means a business
      day.

              

      

       

      Patriot
may, without the consent of the holders, issue additional notes under the
indenture with the same terms and, if permissible as a “qualified reopening” for
U.S federal income tax purposes and if the resale of such notes by
non-affiliates of Patriot would not require registration under Unites States
securities laws, with the same CUSIP number as the notes offered hereby in an
unlimited aggregate principal amount. Patriot may, from time to time, repurchase
the notes in open market purchases or negotiated transactions without prior
notice to holders.

       

      The
registered holder of a note will be treated as the owner of it for all
purposes.

       

      Other than
the restrictions described under “— Fundamental Change — Fundamental Change
Permits Holders to Require Patriot to Repurchase Notes” and “— Consolidation,
Merger and Sale of Assets” below, and except for the provisions set forth under
“— Conversion Rights — Conversion upon Specified Corporate Events” and “—
Make-Whole Fundamental Change — Adjustment to Conversion Rate upon Make-Whole
Fundamental Change,” the indenture does not contain any covenants or other
provisions designed to afford holders of the notes protection in the event of a
highly leveraged transaction involving Patriot, or in the event of a decline in
Patriot’s credit rating as the result of a takeover, recapitalization, highly
leveraged transaction or similar restructuring involving Patriot that could
adversely affect such holders. See “Risk Factors — Risks Relating to the
Notes.”

       

      No sinking
fund is provided for the notes, which means that the indenture does not require
Patriot to redeem or retire the notes periodically.

       

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

         

      

      Payments
on the Notes; Paying Agent and Registrar

       

      Patriot
will issue and deposit with The Depository Trust Company (“DTC”) one or more
fully registered global certificates representing all of the notes. Patriot will
pay the principal of, and interest on, notes in global form registered in the
name of or held by DTC or its nominee in immediately available funds to DTC or
its nominee, as the case may be, as the registered holder of such global notes
or as otherwise required under standing arrangements with DTC.

       

      In the
event Patriot issues notes in certificated form other than to DTC, Patriot will
pay the principal of certificated notes at the office or agency designated by
Patriot. Patriot has initially designated the trustee as Patriot’s paying agent
and registrar and a corporate trust office of the trustee as a place where notes
may be presented for payment or for registration of transfer. Patriot may,
however, change the paying agent or registrar without prior notice to the
holders of the notes, and Patriot may act as paying agent or registrar. Interest
on certificated notes will be payable (i) to holders having an aggregate
principal amount of $5.0 million or less, by check mailed to the holders of such
notes, and (ii) to holders having an aggregate principal amount of more than
$5.0 million, either by check mailed to each holder or, upon application by a
holder to the registrar not later than the relevant record date, by wire
transfer in immediately available funds to that holder’s account within the
United States, which application shall remain in effect until the holder
notifies, in writing, the registrar to the contrary.

       

      If any
interest payment date or any date on which any principal is payable in respect
of the notes falls on a day that is not a business day, such payment of interest
or principal, as the case may be, will be postponed to the next succeeding
business day and no interest or other amount will be paid as a result of such
postponement.

       

      Transfer
and Exchange

       

      A holder
of notes may transfer or exchange notes in certificated form at the office of
the registrar in accordance with the indenture. The registrar and the trustee
may require a holder, among other things, to furnish appropriate endorsements
and transfer documents. No service charge will be imposed by Patriot, the
trustee or the registrar for any registration of transfer or exchange of notes,
but Patriot, the trustee or registrar may require a holder to pay a sum
sufficient to cover any transfer tax or other similar governmental charge
required by law or permitted by the indenture. Patriot is not required to allow
the transfer or exchange of any note selected for redemption, or surrendered for
conversion or repurchase.

       

      Interest

       

      The notes
will bear interest at a rate of        %
per year from May      , 2008, or from the most recent
date to which interest has been paid or duly provided for. Interest will be
payable semiannually in arrears on May 31 and November 30 of each year,
beginning November 30, 2008.

       

      Patriot
will pay additional interest, if any, on the same dates and in the same manner
as regular interest on the notes in the circumstances described under “— No
Registration Rights; Additional Interest” and “— Events of
Default.”  All references to interest in this description of the notes
include such additional interest.

       

      Interest
will be paid to the person in whose name a note is registered at the close of
business on May 15 or November 15, as the case may be (whether or not a business
day), immediately preceding the relevant interest payment date. Interest on the
notes will be computed on the basis of a 360-day year comprised of twelve 30-day
months.

       

      Conversion
Rights

       

      General

       

      Prior to
the close of business on the business day immediately preceding February 15,
2013, holders may convert their notes at the conversion rate only upon the
occurrence of any of the conditions described under the headings “— Conversion
upon Satisfaction of Trading Price Condition,” “— Conversion Based on Common
Stock Price,” “— Conversion Upon Notice of Redemption” and “— Conversion upon
Specified Corporate Events.” On or

       

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      after
February 15, 2013, holders may convert their notes at the conversion rate at any
time prior to the close of business on the business day immediately preceding
the maturity date.  A holder may convert fewer than all of such
holder’s notes so long as the notes converted are an integral multiple of $1,000
in principal amount.

       

      Patriot
will use its commercially reasonable efforts to notify holders and the trustee
that the notes have become convertible as soon as practicable after Patriot is
aware that the notes have become convertible. Patriot will provide such notice
to the holders and the trustee in accordance with the indenture.

       

      The
conversion rate will initially
be          shares of common
stock per $1,000 in principal amount of notes, which is equivalent to an initial
conversion price of approximately
$           per share of
common stock. The conversion price at any given time will be computed by
dividing $1,000 by the conversion rate at such time. In this offering
memorandum, the terms “conversion rate” and “conversion price” refer to the
conversion rate and the equivalent conversion price, respectively, in effect at
any given time after adjustment in the manner described under the heading “—
Conversion Rate Adjustments” and “— Adjustments to Conversion Rate Upon
Make-Whole Fundamental Change.”

       

      Upon
conversion of any notes, you will not receive any separate cash payment for
accrued and unpaid interest, unless such conversion occurs between a record date
on which you held the converted notes and the interest payment date to which
such record date relates. Patriot’s settlement of conversions as described below
under “— Payment upon Conversion” will be deemed to satisfy its obligation to
pay:

       

      
        	
                 
      

              	
                ·

              	
                the
      principal amount of the note; and

              

      

       

      
        	
                 
      

              	
                ·

              	
                accrued
      and unpaid interest on the note to, but not including, the conversion
      date.

              

      

       

      As a
result, accrued and unpaid interest to, but not including, the conversion date
will be deemed to be paid in full rather than cancelled, extinguished or
forfeited.

       

      Notwithstanding
the preceding paragraph, if notes are converted after 5:00 p.m., New York City
time, on a record date, holders of such notes at 5:00 p.m., New York City time,
on the record date will receive the interest payable on such notes on the
corresponding interest payment date notwithstanding the conversion. Accordingly,
notes surrendered for conversion during the period from 5:00 p.m., New York City
time, on any record date to 9:00 a.m., New York City time, on the immediately
following interest payment date must be accompanied by funds equal to the amount
of interest payable on the notes so converted, except that no such payment need
be made:

       

      
        	
                 
      

              	
                ·

              	
                if
      Patriot has specified a “fundamental change repurchase date” (as defined
      below) that is after a record date and on or prior to the corresponding
      interest payment date;

              

      

       

      
        	
                 
      

              	
                ·

              	
                on
      any notes called for redemption, if Patriot has
      specified a redemption date that is after a record date and on or prior to
      the corresponding interest payment
date;

              

      

       

      
        	
                 
      

              	
                ·

              	
                to
      the extent of any overdue interest, if any overdue interest remains unpaid
      at the time of conversion with respect to such notes;
  or

              

      

       

      
        	
                 
      

              	
                ·

              	
                in
      respect of any conversions that occur after the record date immediately
      preceding the maturity date.

              

      

       

      Upon
conversion, Patriot will deliver cash and shares of its common stock, if any, as
described under “— Payment upon Conversion” below.

       

      Patriot’s
current and future debt or other agreements may restrict its ability to pay the
principal portion of the notes in cash upon conversion. Patriot’s failure to pay
in cash the principal portion of the notes when converted would result in an
event of default with respect to the notes. See “Risk Factors — Risks Relating
to the Notes — Patriot’s credit facility currently contains, and any future
agreements or indebtedness Patriot enters into may contain, limitations on its
ability to pay any cash due upon conversion of the notes.”

       

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

         

      

      If a
holder converts notes, Patriot will pay any documentary, stamp or similar issue
or transfer tax due on the issue of any shares of Patriot’s common stock upon
the conversion, unless the tax is due because the holder requests any shares to
be issued in a name other than the holder’s name, in which case the holder will
pay that tax.

       

      Conversion
upon Satisfaction of Trading Price Condition

       

      Prior to
the close of business on the business day immediately preceding February 15,
2013, a holder may surrender notes for conversion during the five trading day
period after any ten consecutive trading day period (the “measurement period”)
in which the “trading price” (as defined below) per $1,000 in principal amount
of the notes for each trading day of the measurement period was less than 97% of
the product of the “last reported sale price” (as defined below) of Patriot’s
common stock and the conversion rate for the notes for such trading day, as
determined by the “bid solicitation agent” (as defined below) and subject to
compliance with the procedures and conditions described below concerning the bid
solicitation agent’s obligation to make such determination (the “trading price
condition”).

       

      The bid
solicitation agent will have no obligation to determine the trading price of the
notes unless Patriot has requested such determination, and Patriot will have no
obligation to make such request unless a holder provides Patriot with reasonable
evidence that the trading price per $1,000 in principal amount of the notes
would be less than 97% of the product of the last reported sale price of
Patriot’s common stock and the conversion rate. At such time, the bid
solicitation agent will determine the trading price of the notes in the manner
described below, beginning on the next trading day and on each successive
trading day until the trading price per $1,000 in principal amount of the notes
is greater than or equal to 97% of the product of the last reported sale price
of Patriot’s common stock and the conversion rate.

       

      The
“trading price” of the notes on any date of determination means the average of
the secondary market bid quotations obtained by the bid solicitation agent for
$2.0 million in principal amount of the notes at approximately 3:30 p.m., New
York City time, on such determination date from three independent nationally
recognized securities dealers Patriot selects, which may include one or more of
the initial purchasers; provided that if three such
bids cannot reasonably be provided to the bid solicitation agent, but two such
bids are obtained, then the average of the two bids will be used, and if only
one such bid is obtained, that one bid will be used. If at least one bid for
$2.0 million in principal amount of the notes cannot reasonably be obtained from
an independent nationally recognized securities dealer, then the trading price
per $1,000 in principal amount of notes will be deemed to be less than 97% of
the product of the last reported sale price of Patriot’s common stock and the
conversion rate. Any such determination will be conclusive absent manifest
error.

       

      The “bid
solicitation agent” will initially be Patriot. Patriot may, however, appoint
another person (including the trustee) as the bid solicitation agent without
prior notice to the holders of the notes.

       

      The “last
reported sale price” of Patriot’s common stock on any date means the closing
sale price per share (or if no closing sale price is reported, the average of
the last bid and ask prices or, if more than one in either case, the average of
the average last bid and the average last ask prices) on that date as reported
in composite transactions for the principal United States national or regional
securities exchange on which Patriot’s common stock is traded. If Patriot’s
common stock is not listed for trading on a United States national or regional
securities exchange on the relevant date, the “last reported sale price” will be
the average of the last quoted bid and ask prices for Patriot’s common stock in
the over-the-counter market on the relevant date as reported by Pink Sheets LLC
or similar organization. If Patriot’s common stock is not so quoted, the “last
reported sale price” will be the average of the mid-point of the last bid and
ask prices for Patriot’s common stock on the relevant date from each of at least
three nationally recognized independent investment banking firms selected by
Patriot for this purpose, which may include one or more of the initial
purchasers. Any such determination will be conclusive absent manifest
error.

       

      “Trading
day” means a day during which (i) trading in Patriot’s common stock generally
occurs on the principal United States national or regional securities exchange
or market on which Patriot’s common stock is listed or admitted for trading and
(ii) there is no “market disruption event” (as defined below).  If
Patriot’s common stock is not so listed or traded, then “trading day” means a
business day.

       

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

         

      

       “Market
disruption event” means the occurrence or existence on any scheduled trading day
for Patriot’s common stock of any suspension or limitation imposed on trading
(by reason of movements in price exceeding limits permitted by the stock
exchange or otherwise) in Patriot’s common stock or in any options contracts or
futures contracts relating to its common stock on the principal United States
national or regional securities exchange or market on which its common stock is
listed or admitted for trading, and such suspension or limitation occurs or
exists at any time within the 30 minutes prior to the closing time of the
relevant exchange on such day.

       

      Conversion
Based on Common Stock Price

       

      Prior to
the close of business on the business day immediately preceding February 15,
2013, a holder may surrender its notes for conversion during any calendar
quarter after the calendar quarter ending September 30, 2008, and only during
such calendar quarter, if the last reported sale price of Patriot’s common stock
for 20 or more trading days in a period of 30 consecutive trading days ending on
the last trading day of the immediately preceding calendar quarter exceeds 130%
of the conversion price in effect for the notes on each such trading day (the
“stock price condition”).

       

      Conversion
Upon Notice of Redemption

       

      Prior to
the close of business on the business day immediately preceding February 15,
2013, if Patriot calls any of the notes for redemption (other than in connection
with the termination of the merger agreement relating to Patriot’s acquisition
of Magnum Coal Company described under “— Optional Redemption by Patriot —
Redemption Upon Termination of Merger Agreement”), holders may convert such
notes called for redemption at any time prior to the close of business on the
business day immediately preceding the redemption date, even if the notes are
not otherwise convertible at such time.

       

      Conversion
upon Specified Corporate Events

       

      If Patriot
elects to:

       

      
        	
                 
      

              	
                ·

              	
                distribute
      to all or substantially all holders of Patriot’s common stock any rights
      or warrants entitling them for a period of not more than 60 days after the
      date of issuance to subscribe for or purchase shares of Patriot’s common
      stock at a price per share less than the last reported sale price of
      Patriot’s common stock on the trading day immediately preceding the
      declaration date of the distribution;
or

              

      

       

      
        	
                 
      

              	
                ·

              	
                distribute
      to all or substantially all holders of Patriot’s common stock assets
      (including cash), debt securities or other property, which distribution
      has a per share value (as determined by Patriot’s board of directors or a
      committee thereof) exceeding 10% of the last reported sale price of
      Patriot’s common stock on the trading day immediately preceding the
      declaration date for such
distribution,

              

      

       

      Patriot
must notify the holders of the notes and the trustee at least 30 scheduled
trading days prior to the “ex-date” (as defined below) for such distribution.
Once Patriot has given such notice, holders may surrender their notes for
conversion at any time until the earlier of (i) 5:00 p.m., New York City time,
on the business day immediately prior to the ex-date for such distribution and
(ii) Patriot’s announcement that such distribution will not take place, even if
the notes are not otherwise convertible at such time. A holder of the notes may
not exercise this right if it may participate (as a result of holding the notes,
and at the same time as common stockholders participate) in any of the
transactions described above as if such holder held a number of shares of
Patriot’s common stock equal to the conversion rate, multiplied by the principal
amount (expressed in thousands) of notes held by such holder, without having to
convert its notes.

       

      The
“ex-date” means, for an issuance or distribution to holders of Patriot’s common
stock, the first date on which the shares of Patriot’s common stock trade on the
relevant exchange or in the relevant market, regular way, without the right to
receive such issuance or distribution.

       

      If a
transaction or event occurs that (i) constitutes a “fundamental change” as
defined under “—Fundamental Change — Fundamental Change Permits Holders to
Require Patriot to Repurchase Notes,” or (ii) would constitute a “fundamental
change” but for the paragraph immediately following the definition thereof, then
a holder may

       

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

         

      

      surrender
notes for conversion at any time from, and including, the effective date of such
fundamental change to, and including, (a) the business day immediately preceding
the “fundamental change repurchase date” (as defined below) corresponding to
such event or (b) if there is no such fundamental change repurchase date, 30
scheduled trading days following the effective date of such fundamental
change.

       

      Conversion
Procedures

       

      If you
hold a beneficial interest in a global note, to convert you must comply with
DTC’s procedures for converting a beneficial interest in a global note and, if
required, pay funds equal to interest payable on the next interest payment date
to which you are not entitled and, if required, pay all taxes or duties, if any.
See “— Global Notes, Book-Entry Form” below.

       

      If you
hold a certificated note, to convert you must:

       

      
        	
                 
      

              	
                ·

              	
                complete
      and manually sign the conversion notice on the back of the note, or a
      facsimile of the conversion notice;

              

      

       

      
        	
                 
      

              	
                ·

              	
                deliver
      the conversion notice, which is irrevocable, and the note to the
      conversion agent;

              

      

       

      
        	
                 
      

              	
                ·

              	
                if
      required, furnish appropriate endorsements and transfer
      documents;

              

      

       

      
        	
                 
      

              	
                ·

              	
                if
      required, pay all transfer or similar taxes;
and

              

      

       

      
        	
                 
      

              	
                ·

              	
                if
      required, pay funds equal to interest payable on the next interest payment
      date to which you are not entitled.

              

      

       

      The date
you comply with these requirements is the “conversion date” under the
indenture.

       

      If a
holder has already delivered a repurchase notice as described under
“—Fundamental Change — Fundamental Change Permits Holders to Require Patriot to
Repurchase Notes” with respect to a note, such holder may not surrender that
note for conversion until the holder has withdrawn such repurchase notice in
accordance with the indenture. In addition, if Patriot has already delivered a
notice of redemption under “— Redemption Upon Termination of Merger Agreement”
with respect to a note, the holder of such note may not surrender that note for
conversion.

       

      Payment
Upon Conversion

       

      Subject to
certain exceptions set forth in “— Make-Whole Fundamental Change — Settlement of
Conversions Upon a Make-Whole Fundamental Change” below, upon conversion of any
notes, Patriot will pay an amount in cash equal to the aggregate principal
portion of the notes converted, calculated as described below. If, in respect of
the notes being converted, the daily conversion value exceeds one-twentieth of
$1,000 on any VWAP trading day during the observation period, in addition to
paying the principal portion in cash for such VWAP trading day, Patriot will
also deliver shares of its common stock in an amount equal to the aggregate
daily share amount, subject to Patriot’s right to pay cash in lieu of all or a
portion of such shares, as described below. Patriot will settle each note being
converted by delivering, on the third business day immediately following the
last day of the related observation period, cash and shares of Patriot’s common
stock, if applicable, equal to the sum of the daily settlement amounts for each
of the 20 VWAP trading days during the related observation period.

       

      The
“observation period” with respect to any note means:

       

      
        	
                 
      

              	
                ·

              	
                with
      respect to any conversion date occurring during the period beginning on,
      and including, April 30, 2013, and ending at the close of business on the
      business day immediately preceding the maturity date (other than notes
      called for redemption), the 20 consecutive VWAP trading day period
      beginning on, and including, the 22nd
      scheduled trading day prior to the maturity
  date;

              

      

       

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

         

      

      
        	
                 
      

              	
                ·

              	
                with
      respect to any conversion date of notes called for redemption, the 20
      consecutive VWAP trading day period beginning on, and including the
      22nd
      scheduled trading day prior to the redemption date;
  and

              

      

       

      
        	
                 
      

              	
                ·

              	
                in
      all other instances, the 20 consecutive VWAP trading day period beginning
      on, and including, the third VWAP trading day immediately following the
      conversion date.

              

      

       

      The “daily
settlement amount” for each note means, for each of the 20 VWAP trading days
during the observation period:

       

      
        	
                 
      

              	
                ·

              	
                an
      amount of cash equal to the lesser of (i) one-twentieth of $1,000 and (ii)
      the daily conversion value relating to such VWAP trading day (such cash
      amount, the “principal portion”);
and

              

      

       

      
        	
                 
      

              	
                ·

              	
                if
      such daily conversion value exceeds one-twentieth of $1,000, a number of
      shares of Patriot’s common stock (the “daily share amount”), subject to
      Patriot’s right to pay cash in lieu of all or a portion of such shares, as
      described below, equal to (i) the difference between such daily conversion
      value and one-twentieth of $1,000, divided by (ii) the
      daily VWAP of Patriot’s common stock for such VWAP trading
      day.

              

      

       

      By the
close of business on the VWAP trading day prior to the first scheduled trading
day of the applicable observation period, Patriot may specify a percentage of
the daily share amount that will be settled in cash (the “cash percentage”) and
Patriot will notify you of such cash percentage by notifying the trustee (the
“cash percentage notice”). With respect to any notes that are converted on or
after February 15, 2013 or any converted notes called for redemption, the cash
percentage that Patriot specifies for the corresponding observation period will
apply to all such conversions. If Patriot elects to specify a cash percentage,
the amount of cash that Patriot will deliver in lieu of all or the applicable
portion of the daily share amount in respect of each VWAP trading day in the
applicable observation period will equal (i) the cash percentage, multiplied by (ii) the daily
share amount for such VWAP trading day (assuming Patriot had not specified a
cash percentage), multiplied
by (iii) the daily VWAP for such VWAP trading day. The number of shares
deliverable in respect of each VWAP trading day in the applicable observation
period will be a percentage of the daily share amount (assuming Patriot had not
specified a cash percentage) equal to 100% minus the cash percentage. If
Patriot does not specify a cash percentage, Patriot must settle the entire daily
share amount for each VWAP trading day in such observation period in Patriot’s
common stock (plus cash in lieu of fractional shares). Patriot may, at its
option, revoke any cash percentage notice in respect of any observation period
by notifying the trustee; provided that Patriot revokes
such notice by the close of business on the VWAP trading day prior to the first
scheduled trading day of such observation period.

       

      The “daily
conversion value” means, for each of the 20 consecutive VWAP trading days during
the observation period, one-twentieth of the product of (i) the conversion rate
and (ii) the “daily VWAP” (as defined below) of Patriot’s common stock, or the
consideration into which the notes are convertible pursuant to the indenture in
connection with certain corporate transactions, on such VWAP trading day. Any
determination of the daily conversion value by Patriot will be conclusive absent
manifest error.

       

      The “daily
VWAP” of Patriot’s common stock means, for each of the 20 consecutive VWAP
trading days during the observation period, the per share volume-weighted
average price as displayed under the heading “Bloomberg VWAP” on Bloomberg page
“PCX.N <equity> AQR” (or any equivalent successor page if such page is not
available) in respect of the period from the scheduled open of trading on the
principal United States national or regional securities exchange or market on
which Patriot’s common stock is listed or admitted for trading to the scheduled
close of trading on such exchange or market on such VWAP trading day, or if such
volume-weighted average price is unavailable, the market value of one share of
Patriot’s common stock on such VWAP trading day using a volume-weighted method
as determined by a nationally recognized independent investment banking firm
retained for this purpose by Patriot. Daily VWAP will be determined without
regard to after hours trading or any other trading outside of the regular
trading session trading hours.

       

      “VWAP
trading day” means a day during which (i) trading in Patriot’s common stock
generally occurs on the principal United States national or regional securities
exchange or market on which Patriot’s common stock is listed

       

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

         

      

      or
admitted for trading and (ii) there is no “VWAP market disruption event” (as
defined below). If Patriot’s common stock is not so listed or traded, then “VWAP
trading day” means a business day.

       

      “VWAP
market disruption event” means (i) a failure by the principal United States
national or regional securities exchange or market on which Patriot’s common
stock is listed or admitted to trading to open for trading during its regular
trading session or (ii) the occurrence or existence prior to 1:00 p.m. (local
time on such exchange or markets) on any scheduled trading day for Patriot’s
common stock for an aggregate one half-hour period or longer of any suspension
or limitation imposed on trading (by reason of movements in price exceeding
limits permitted by the stock exchange or otherwise) in Patriot’s common stock
or in any options contracts or futures contracts relating to Patriot’s common
stock, in each case, on the principal United States national or regional
securities exchange or market on which shares of Patriot’s common stock or such
options, contracts or futures contracts, as the case may be, trade or are
quoted.

       

      Patriot
will deliver cash in lieu of any fractional shares of its common stock
deliverable upon conversion based on the daily VWAP on the last VWAP trading day
of the applicable observation period.

       

      As
described above, Patriot’s current and future debt or other agreements may
restrict its ability to pay the principal portion of the notes in cash upon
conversion. Patriot’s failure to pay in cash the principal portion of the notes
when converted would result in an event of default with respect to the notes.
See “Risk Factors — Risks Relating to the Notes — Patriot’s credit facility
currently contains, and any future agreements or indebtedness Patriot enters
into may contain, limitations on its ability to pay any cash due upon conversion
of the notes.”

       

      The notes
will be deemed to have been converted immediately prior to the close of business
on the conversion date, and as of the close of business on the last trading day
of the related observation period (as defined below), the converting holder will
be deemed to be a holder of record of any shares of Patriot’s common stock
issuable as a result of that conversion.

       

      Exchange
in Lieu of Conversion

       

      When a
holder surrenders notes for conversion, Patriot may direct the conversion agent
to surrender, prior to the commencement of the applicable observation period,
such notes to a financial institution designated by Patriot for exchange in lieu
of conversion.

       

      The
institution may accept or reject the notes submitted for exchange and Patriot’s
designation of an institution does not require the institution to accept any
notes. In order to accept any notes surrendered for conversion, the designated
institution must agree to deliver, in exchange for such notes, all cash or a
combination of cash and shares of Patriot’s common stock, equal to the
consideration otherwise due upon conversion, as provided above under “— Payment
upon Conversion,” at the sole option of the designated financial institution and
as is designated to the conversion agent by Patriot. By the close of business on
the scheduled trading day immediately preceding the start of the observation
period, Patriot will notify the holder surrendering notes for conversion that
Patriot has directed the designated financial institution to make an exchange in
lieu of conversion and such financial institution will be required to notify the
conversion agent, who will then notify the holder, whether it will deliver, upon
exchange, all cash or a combination of cash and shares of common stock (by
specifying a cash percentage as described above).

       

      If the
designated institution accepts any such notes, it will deliver cash and, if
applicable, the appropriate number of shares of Patriot’s common stock to the
conversion agent and the conversion agent will deliver the cash and those shares
to you. Any notes exchanged by the designated institution will remain
outstanding. If the designated institution agrees to accept any notes for
exchange but does not timely deliver the related consideration, or if such
designated financial institution does not accept the notes for exchange, Patriot
will, no later than the third business day immediately following the last day of
the related observation period, convert the notes into cash and shares, if any,
of Patriot’s common stock, as described above under “— Conversion Rights —
Payment Upon Conversion.”

       

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

         

      

      Conversion
Rate Adjustments

       

      The
conversion rate will be adjusted as described below, except that Patriot will
not make any adjustments to the conversion rate if holders of the notes
participate (as a result of holding the notes, and at the same time as common
stockholders participate) in any of the transactions described below as if such
holders of the notes held a number of shares of Patriot’s common stock equal to
the conversion rate, multiplied by the principal
amount (expressed in thousands) of notes held by such holders, without having to
convert their notes. This exception will not apply to any adjustment described
under “— Make-Whole Fundamental Change — Adjustment to Conversion Rate Upon
Make-Whole Fundamental Change.”

       

      Adjustment
Events

       

      (1) If
Patriot issues shares of its common stock as a dividend or distribution on
shares of its common stock, or if Patriot effects a share split or share
combination, the conversion rate will be adjusted based on the following
formula:

       

      

      where,

       

      
        	
                CR1
      =

              	
                the
      conversion rate in effect immediately after the open of business on the
      ex-date for such dividend or distribution or the effective date of such
      share split or combination, as the case may
be;

              

      

       

      
        	
                CR0
      =

              	
                the
      conversion rate in effect immediately prior to the open of business on the
      ex-date for such dividend or distribution or the effective date of such
      share split or combination, as the case may
be;

              

      

       

      
        	
                OS1
      =

              	
                the
      number of shares of Patriot’s common stock outstanding immediately prior
      to the open of business on the ex-date for such dividend or distribution
      or the effective date of such share split or combination,  in
      each case, after giving effect to such dividend, distribution or share
      split or combination, as the case may
be;

              

      

       

      
        	
                OS0
      =

              	
                the
      number of shares of Patriot’s common stock outstanding immediately prior
      to the open of business on the ex-date for such dividend or distribution
      or the effective date of such share split or combination, as the case may
      be.

              

      

       

      (2) If
Patriot distributes to all or substantially all holders of its common stock any
rights or warrants entitling them for a period of not more than 60 days from the
issuance date for such distribution to subscribe for or purchase shares of
Patriot’s common stock, at a price per share less than the last reported sale
price of Patriot’s common stock on the trading day immediately preceding the
declaration date of such distribution, the conversion rate will be increased
based on the following formula; provided that the conversion
rate will be readjusted to the extent that such rights or warrants are not
exercised prior to their expiration:

       

      

      where,

       

      
        	
                CR1
      =

              	
                the
      conversion rate in effect immediately after the open of business on the
      ex-date for such distribution;

              

      

       

      
        	
                CR0
      =

              	
                the
      conversion rate in effect immediately prior to the open of business on the
      ex-date for such distribution;

              

      

       

      
        	
                OS0
      =

              	
                the
      number of shares of Patriot’s common stock outstanding immediately prior
      to the open of business on the ex-date for such
    distribution;

              

      

       

      
        	
                 
      

              	
                X
      =

              	
                the
      total number of shares of Patriot’s common stock issuable pursuant to such
      rights or warrants; and

              

      

       

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

         

      

      
        	
                 
      

              	
                Y
      =

              	
                the
      number of shares of Patriot’s common stock equal to the aggregate price
      payable to exercise such rights or warrants, divided by the average
      of the last reported sale prices of Patriot’s common stock over the 10
      consecutive trading day period ending on the trading day immediately
      preceding the ex-date date for such
  distribution.

              

      

       

      (3) If
Patriot distributes shares of its capital stock, evidences of its indebtedness
or other of its assets or property to all or substantially all holders of its
common stock, excluding:

       

      
        	
                 
      

              	
                ·

              	
                dividends
      or distributions as to which adjustment is required to be effected in
      clause (1) or (2) above;

              

      

       

      
        	
                 
      

              	
                ·

              	
                dividends
      or distributions paid exclusively in cash;
and

              

      

       

      
        	
                 
      

              	
                ·

              	
                spin-offs
      described below in the second paragraph of this clause
  (3),

              

      

       

      then the
conversion rate will be increased based on the following formula:

       

      

      where,

       

      
        	
                CR1
      =

              	
                the
      conversion rate in effect immediately after the open of business on the
      ex-date for such distribution;

              

      

       

      
        	
                CR0
      =

              	
                the
      conversion rate in effect immediately prior to the open of business on the
      ex-date for such distribution;

              

      

       

      
        	
                SP0
      =

              	
                the
      average of the last reported sale prices of Patriot’s common stock over
      the 10 consecutive trading day period ending on the trading day
      immediately preceding the ex-date for such distribution;
    and

              

      

       

      
        	
                FMV
      =

              	
                the
      fair market value (as determined by Patriot’s board of directors or a
      committee thereof) of the shares of capital stock, evidences of
      indebtedness, assets or property distributed with respect to each
      outstanding share of Patriot’s common stock as of the open of business on
      the ex-date for such distribution.

              

      

       

      With
respect to an adjustment pursuant to this clause (3) where there has been a
payment of a dividend or other distribution on Patriot’s common stock in shares
of capital stock of any class or series, or similar equity interest, of or
relating to a subsidiary or other business unit of Patriot that are listed on a
national or regional securities exchange, which is referred to in this offering
memorandum as a “spin-off,” the conversion rate will be increased based on the
following formula:

       

      

      where,

       

      
        	
                CR1
      =

              	
                the
      conversion rate in effect immediately after the open of business on the
      ex-date for the spin-off;

              

      

       

      
        	
                CR0
      =

              	
                the
      conversion rate in effect immediately prior to the open of business on the
      ex-date for the spin-off;

              

      

       

      
        	
                FMV
      =

              	
                the
      average of the last reported sale prices of the capital stock or similar
      equity interest distributed to holders of Patriot’s common stock
      applicable to one share of Patriot’s common stock over the first 10
      consecutive trading day period immediately following, and including, the
      third trading day after the ex-date for such spin-off (such period, the
      “valuation period”); and

              

      

       

      
        	
                MP0
      =

              	
                the
      average of the last reported sale prices of Patriot’s common stock over
      the valuation period.

              

      

       

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

         

      

      Any
adjustment to the conversion rate under the preceding paragraph of this clause
(3) will be made immediately after the open of business on the day after the
last day of the valuation period, but will be given effect as of the open of
business on the ex-date for the spin-off. Because Patriot will make the
adjustment to the conversion rate at the end of the valuation period with
retroactive effect, Patriot will delay the settlement of any notes where the
final day of the related observation period occurs during the valuation period.
In such event, Patriot will pay the principal portion and deliver shares of
Patriot’s common stock, if any, and any cash in lieu thereof (based on the
adjusted conversion rate as described above) on the third business day
immediately following the last day of the valuation period.

       

      (4) If
Patriot pays any cash dividends or distributions to all or substantially all
holders of Patriot’s common stock, the conversion rate will be increased based
on the following formula:

       

      

      where,

       

      
        	
                CR1
      =

              	
                the
      conversion rate in effect immediately after the open of business on the
      ex-date for such distribution;

              

      

       

      
        	
                CR0
      =

              	
                the
      conversion rate in effect immediately prior to the open of business on the
      ex-date for such distribution;

              

      

       

      
        	
                SP0
      =

              	
                the
      average of the last reported sale prices of Patriot’s common stock over
      the 10 consecutive trading day period on the trading day immediately
      preceding the ex-date for such distribution;
and

              

      

       

      
        	
                 
      

              	
                C
      =

              	
                the
      amount in cash per share Patriot distributes to holders of Patriot’s
      common stock.

              

      

       

      (5) If
Patriot or any of its subsidiaries makes a payment in respect of a tender offer
or exchange offer for Patriot’s common stock, to the extent that the cash and
value of any other consideration included in the payment per share of Patriot’s
common stock exceeds the last reported sale price of Patriot’s common stock on
the trading day next succeeding the last date on which tenders or exchanges may
be made pursuant to such tender or exchange offer, the conversion rate will be
increased based on the following formula:

       

      

      where,

       

      
        	
                CR1
      =

              	
                the
      conversion rate in effect immediately after the open of business on the
      trading day next succeeding the date such tender offer or exchange offer
      expires;

              

      

       

      
        	
                CR0
      =

              	
                the
      conversion rate in effect immediately prior to the open of business on the
      trading day next succeeding the date such tender offer or exchange offer
      expires;

              

      

       

      
        	
                 
      

              	
                AC
      =

              	
                the
      aggregate value of all cash and any other consideration (as determined by
      Patriot’s board of directors or a committee thereof) paid or payable for
      shares purchased in such tender or exchange
  offer;

              

      

       

      
        	
                SP1
      =

              	
                the
      average of the last reported sale prices of Patriot’s common stock over
      the 10 consecutive trading day period commencing on, and including, the
      trading day next succeeding the date such tender or exchange offer expires
      (the “averaging period”);

              

      

       

      
        	
                OS1
      =

              	
                the
      number of shares of Patriot’s common stock outstanding immediately after
      the close of business on the date such tender or exchange offer expires
      (after giving effect to such tender offer or exchange offer);
      and

              

      

       

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      
        	
                OS0
      =

              	
                the
      number of shares of Patriot’s common stock outstanding immediately prior
      to the date such tender or exchange offer expires (prior to giving effect
      to such tender offer or exchange
offer).

              

      

       

      Any
adjustment to the conversion rate under this clause (5) will be made immediately
prior to the open of business on the day following the last day of the averaging
period, but will be given effect as of the open of business on the trading day
next succeeding the date such tender offer or exchange offer expires. Because
Patriot will make the adjustment to the conversion rate at the end of the
averaging period with retroactive effect, Patriot will delay the settlement of
any notes where the final day of the related observation period occurs during
the averaging period. In such event, Patriot will pay the principal portion and
deliver shares of Patriot’s common stock, if any, and any cash in lieu thereof
(based on the adjusted conversion rate as described above) on the third business
day immediately following the last day of the averaging period.

       

      If Patriot
or one of its subsidiaries is obligated to purchase Patriot’s common stock
pursuant to any such tender or exchange offer described in this clause (5) but
is permanently prevented by applicable law from effecting any such purchase or
all such purchases are rescinded, the new conversion rate will be readjusted to
be the conversion rate that would then be in effect if such tender or exchange
offer had not been made.

       

      Patriot
will not adjust the conversion rate pursuant to clauses (1) through (5) above
unless the adjustments would result in a change of at least 1% in the conversion
rate.  However, Patriot will carry forward any adjustment that Patriot
would otherwise have to make and take that adjustment into account in any
subsequent adjustment. In addition, regardless of whether the aggregate
adjustment is less than 1%, Patriot will make such carried-forward adjustments
not otherwise effected with respect to any notes (i) upon conversion of such
notes, (ii) within one year of the first date upon which an adjustment would
otherwise have been made, and (iii) otherwise, on February 15, 2013, except to
the extent such adjustment has already been made.

       

      Adjustments
to the conversion rate will be calculated to the nearest 1/10,000th of a
share.

       

      If, in
respect of any VWAP trading day within the observation period for any notes you
have converted:

       

      
        	
                 
      

              	
                ·

              	
                shares
      are deliverable to settle the daily share amount for such VWAP trading
      day;

              

      

       

      
        	
                 
      

              	
                ·

              	
                any
      event has occurred that requires an adjustment to the conversion rate
      under any of clauses (1) through (5) above, but such adjustment has not
      been made to the conversion rate as of such VWAP trading day;
      and

              

      

       

      
        	
                 
      

              	
                ·

              	
                the
      shares you will receive in respect of such VWAP trading day are not
      entitled to participate in the distribution or transaction giving rise to
      such adjustment event because such shares were not held on the record date
      corresponding to such distribution or transaction (because a holder is
      deemed to become a holder of shares as of the last trading day of the
      applicable observation period as described under “— Conversion Rights —
      Payment Upon Conversion”),

              

      

       

      then
Patriot will adjust the daily share amount for such VWAP trading day to reflect
the such adjustment event.

       

      Events that Will
Not Result in Adjustments. Except as described in this section or in “—
Make-Whole Fundamental Change — Adjustment to Conversion Rate upon Make-Whole
Fundamental Change” below, Patriot will not adjust the conversion rate. Without
limiting the foregoing, the conversion rate will not be adjusted:

       

      
        	
                 
      

              	
                ·

              	
                upon
      the issuance of shares of Patriot’s common stock to stockholders of Magnum
      pursuant to Patriot’s merger agreement described under “The Merger,” as
      such merger agreement is in effect as at the date of this offering
      memorandum;

              

      

       

      
        	
                 
      

              	
                ·

              	
                upon
      the issuance of any shares of Patriot’s common stock pursuant to any
      present or future plan providing for the reinvestment of dividends or
      interest payable on Patriot’s securities and the investment of optional
      amounts in shares of Patriot’s common stock under any
  plan;

              

      

       

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

      
        	
                 
      

              	
                ·

              	
                upon
      the issuance of any shares of Patriot’s common stock or options or rights
      to purchase those shares pursuant to any present or future employee,
      director or consultant benefit plan or program or stock purchase plan of
      or assumed by Patriot or any of its
  subsidiaries;

              

      

       

      
        	
                 
      

              	
                ·

              	
                upon
      the issuance of any shares of Patriot’s common stock pursuant to any
      option, warrant, right or exercisable, exchangeable or convertible
      security not described in the preceding bullet and outstanding as of the
      date the notes were first issued;

              

      

       

      
        	
                 
      

              	
                ·

              	
                for
      a change in the par value of Patriot’s common stock;
  or

              

      

       

      
        	
                 
      

              	
                ·

              	
                for
      accrued and unpaid interest.

              

      

       

      Treatment of
Reference Property. In the event of:

       

      
        	
                 
      

              	
                ·

              	
                any
      reclassification of Patriot’s common stock (other than a change solely in
      the par value of Patriot’s common
stock);

              

      

       

      
        	
                 
      

              	
                ·

              	
                a
      consolidation, binding share exchange, recapitalization, reclassification,
      merger, combination or other similar event;
or

              

      

       

      
        	
                 
      

              	
                ·

              	
                a
      sale or conveyance to another person of all or substantially all of
      Patriot’s property and assets (excluding a pledge of securities issued by
      any of Patriot’s subsidiaries),

              

      

       

      in each
case, in which holders of Patriot’s outstanding common stock would be entitled
to receive cash, securities or other property (“reference property”) for their
shares of common stock, you will be entitled thereafter to convert your notes
into the same type of consideration that you would have been entitled to receive
if you had held a number of shares of Patriot’s common stock equal to the
conversion rate in effect immediately prior to these events, multiplied by the principal
amount (expressed in thousands) of your notes.  However, at and after
the effective time of any such transaction, upon conversion of the
notes:

       

      
        	
                 
      

              	
                ·

              	
                the
      portion of each daily settlement amount payable in cash shall continue to
      be payable in cash; and

              

      

       

      
        	
                 
      

              	
                ·

              	
                the
      portion, if any, of each daily settlement amount payable in shares of
      Patriot’s common stock shall be payable in units of reference
      property.

              

      

       

      The amount
of consideration, and, consequently, reference property, you receive upon
conversion will be based on the daily conversion value and the conversion rate,
as described above. The daily conversion value shall be calculated based on the
value of a unit of reference property corresponding to the amount of reference
property that a holder of one share of Patriot’s common stock would have
received in the transaction. The daily VWAP and the last report sale price shall
be calculated with respect to a unit of reference property corresponding to the
amount of reference property that a holder of one share of Patriot’s common
stock would have received in the relevant transaction.

       

      For
purposes of the foregoing, the type and amount of consideration that a holder of
Patriot’s common stock would have been entitled to in the case of
reclassifications, consolidations, mergers, sales or transfers of assets or
other transactions that cause Patriot’s common stock to be converted into the
right to receive more than a single type of consideration determined, based in
part upon any form of stockholder election, will be deemed to be (i) the
weighted average of the types and amounts of consideration received by the
holders of Patriot’s common stock that affirmatively make such an election or
(ii) if no holders of Patriot’s common stock affirmatively make such an
election, the types and amount of consideration actually received by such
holders.

       

      Voluntary
Increases of Conversion Rate. Patriot is permitted, in its sole
discretion, to the extent permitted by law and the rules of the New York Stock
Exchange or any other securities exchange or market on which Patriot’s common
stock is then listed, to increase the conversion rate of the notes by any amount
for a period of at least 20 business days, if Patriot’s board of directors
determines that such increase would be in Patriot’s best interest.
If

       

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

         

      

      Patriot
makes such determination, it will be conclusive and Patriot will notify the
holders of the notes and the trustee of the increased conversion rate and the
period during which it will be in effect at least 20 business days prior to the
date the increased conversion rate takes effect, in accordance with applicable
law. Patriot may also, but is not required to, increase the conversion rate to
avoid or diminish income tax to holders of Patriot’s common stock or rights to
purchase shares of Patriot’s common stock in connection with a dividend or
distribution of shares or rights to acquire shares or similar
event.

       

      Make-Whole
Fundamental Change

       

      Conversion
in Connection with Make-Whole Fundamental Change

       

      If you
elect to convert your notes in connection with a “make-whole fundamental change”
(as defined below), the conversion rate will be increased by an additional
number of shares of common stock (the “additional shares”) as described below
under “— Adjustment to Conversion Rate Upon Make-Whole Fundamental
Change.”

       

      A
“make-whole fundamental change” means any transaction or event that constitutes
a “fundamental change” pursuant to clause (1) or (2) of the definition thereof
under “— Fundamental Change — Fundamental Change Permits Holders to Require
Patriot to Repurchase Notes” (other than, for the avoidance of doubt, any such
transaction or event that is not a “fundamental change” as a result of the
paragraph immediately following the definition of a fundamental change). A
conversion shall be deemed to be in connection with a make whole fundamental
change if such conversion occurs at any time from, and including, the effective
date of such make-whole fundamental change to, and including, the business day
prior to the related fundamental change repurchase date.

       

      Patriot
will notify holders and the trustee of the occurrence of any such make-whole
fundamental change on the effective date of such transaction or event. Patriot
will settle conversions of notes as described below under “— Settlement of
Conversions upon a Make-Whole Fundamental Change.”

       

      Adjustment
to Conversion Rate Upon Make-Whole Fundamental Change

       

      The number
of additional shares by which the conversion rate will be increased in the event
of a make-whole fundamental change will be determined by reference to the table
below, based on the date on which such make-whole fundamental change becomes
effective (the “effective date”) and the price (the “stock price”) per share of
Patriot’s common stock at the time of such make-whole fundamental change. If
holders of Patriot’s common stock receive only cash consideration for their
shares of common stock in connection with a make-whole fundamental change, the
stock price will be the cash amount paid per share. Otherwise, the stock price
will be the average of the last reported sale prices of Patriot’s common stock
over the 10 trading day period ending on the trading day immediately preceding
the effective date.

       

      The stock
prices set forth in the first column of the table below will be adjusted as of
any date on which the conversion rate of the notes is adjusted. The adjusted
stock prices will equal the stock prices applicable immediately prior to such
adjustment, multiplied
by a fraction, the numerator of which is the conversion rate immediately
prior to the adjustment giving rise to the stock price adjustment and the
denominator of which is the conversion rate as so adjusted. The number of
additional shares will be adjusted in the same manner as the conversion rate as
set forth under “— Conversion Rate Adjustments.”

       

      The
following table sets forth the stock prices and the adjustments to the
conversion rate, expressed as a number of additional shares to be received per
$1,000 in principal amount of the notes, in the event of a make-whole
fundamental change.

       

      
        
          
            	 	 
      	 	
                    
                      Effective
      Date

                    

                  
	Stock
      price	 	
                    
                      May     ,

                      2008

                    

                  	 	
                    
                      May
      31,

                      2009

                    

                  	 	
                    
                      May
      31,

                      2010

                    

                  	 	
                    
                      May
      31,

                      2011

                    

                  	 	
                    
                      May
      31,

                      2012

                    

                  	 	
                    
                      May
      31,

                      2013

                    

                  
	$	 	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      
	$	
                     

                  	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      

          

           

        

      

       

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

      
         

        
          	 	 
      	 	
                  
                    Effective
      Date

                  

                
	Stock
      price	 	
                  
                    May     ,

                    2008

                  

                	 	
                  
                    May
      31,

                    2009

                  

                	 	
                  
                    May
      31,

                    2010

                  

                	 	
                  
                    May
      31,

                    2011

                  

                	 	
                  
                    May
      31,

                    2012

                  

                	 	
                  
                    May
      31,

                    2013

                  

                
	$	 	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      
	$	
                   

                	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      
	$	
                   

                	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      
	$	
                   

                	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      
	$	
                   

                	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      
	$	
                   

                	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      
	$	
                   

                	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      

        

         

      

      The exact
stock prices and effective dates may not be set forth in the table above, in
which case:

       

      
        	
                 
      

              	
                ·

              	
                If
      the stock price is between two stock prices in the table or the effective
      date is between two effective dates in the table, the number of additional
      shares will be determined by a straight-line interpolation between the
      number of additional shares set forth for the higher and lower stock
      prices and the two effective dates, as applicable, based on a 365-day
      year.

              

      

       

      
        	
                 
      

              	
                ·

              	
                If
      the stock price is greater than
      $             per
      share (subject to adjustment in the same manner and at the same time as
      the stock prices in the table above), no adjustments will be made in the
      conversion rate.

              

      

       

      
        	
                 
      

              	
                ·

              	
                If
      the stock price is less than
      $           per
      share (subject to adjustment in the same manner and at the same time as
      the stock prices in the table above), no adjustments will be made in the
      conversion rate.

              

      

       

      Notwithstanding
the foregoing, in no event will the conversion rate
exceed            shares
of common stock (adjusted in the same manner as the conversion rate is adjusted
under “— Conversion Rate Adjustments — Adjustment Events”) per $1,000 principal
amount of notes as a result of additional shares.

       

      Patriot’s
obligation to increase the conversion rate as described above could be
considered a penalty, in which case the enforceability thereof would be subject
to general principles of equity and the discretion of the court in applying
equitable remedies.

       

      Settlement
of Conversions Upon a Make-Whole Fundamental Change

       

      As
described above under “— Conversion Rate Adjustments — Treatment of Reference
Property,” upon effectiveness of certain transactions (which may include a
make-whole fundamental change), the notes will be convertible into cash and
reference property, if any. If, as described above, Patriot is required to
increase the conversion rate by the additional shares as a result of a
make-whole fundamental change, notes surrendered for conversion will be settled
as described above under “— Conversion Rights — Payment upon Conversion” based
on the conversion rate as increased by the additional shares described above on
the third business day immediately following the last VWAP trading day of the
applicable observation period. However, if the reference property following such
make-whole fundamental change consists solely of cash, then, notwithstanding “—
Payment upon Conversion” above for all conversions following the effective date,
the aggregate daily conversion value due upon conversion will be deemed to be
the conversion rate multiplied
by the stock price (as defined above) and Patriot will settle conversions
on the third business day following the conversion date.

       

      Fundamental
Change

       

      Fundamental
Change Permits Holders to Require Patriot to Repurchase Notes

       

      If a
“fundamental change” (as defined below) occurs at any time, you will have the
right, at your option, to require Patriot to repurchase all of your notes, or
any portion of the principal amount thereof that is equal to $1,000 or an
integral multiple of $1,000, on a date (the “fundamental change repurchase
date”) of Patriot’s choosing that is not less than 20 nor more than 35 days
after the date of the “fundamental change repurchase right notice” (as defined
below).  Patriot will repurchase your notes for cash at a price (the
“fundamental change repurchase price”) equal to

       

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

         

      

      100% of
the principal amount of the notes to be repurchased, plus accrued and unpaid
interest to, but not including, the fundamental change repurchase
date.  However, if such fundamental change repurchase date falls after
a record date and on or prior to the corresponding interest payment date,
Patriot will pay the full amount of accrued and unpaid interest payable on such
interest payment date to the holder of record at the close of business on such
record date, and the repurchase price will be reduced by the amount of such
accrued and unpaid interest.

       

      A
“fundamental change” will be deemed to have occurred if any of the following
occurs:

       

      (1) 
any person other than Patriot, its subsidiaries or its or their employee benefit
plans, files a Schedule TO or any similar schedule, form or report under the
Exchange Act disclosing that such person has become the direct or indirect
ultimate beneficial owner of Patriot’s capital stock representing more than 50%
of the total voting power of all shares of Patriot’s capital stock entitled to
vote generally in elections of directors;

       

      (2)  Patriot
(i) merges or consolidates with or into any other person, another person merges
with or into Patriot, or Patriot conveys, sells, transfers or leases all or
substantially all of its assets to another person (excluding a pledge of
securities issued by Patriot or any of its subsidiaries) or (ii) engages in any
recapitalization, reclassification or other acquisition transaction or series of
transactions in which all or substantially all Patriot’s common stock is
exchanged for or converted into cash, securities or other property, in each
case, other than any merger or consolidation:

       

      
        	
                 
      

              	
                ·

              	
                pursuant
      to which the holders of Patriot’s common stock immediately prior to the
      transaction have the entitlement to exercise, directly or indirectly, 50%
      or more of the voting power of all shares of capital stock entitled to
      vote generally in the election of directors of either (a) the continuing
      or surviving corporation immediately after the transaction or (b) the
      corporation that directly or indirectly owns 100% of the capital stock of
      such continuing or surviving
corporation;

              

      

       

      
        	
                 
      

              	
                ·

              	
                that
      does not result in a reclassification, conversion, exchange or
      cancellation of Patriot’s outstanding common stock;
  or

              

      

       

      
        	
                 
      

              	
                ·

              	
                which
      is effected solely to change Patriot’s jurisdiction of incorporation and
      results in a reclassification, conversion or exchange of outstanding
      shares of Patriot’s common stock solely into shares of common stock of the
      surviving entity;

              

      

       

      (3)  at
any time Patriot’s “continuing directors” (as defined below) do not constitute a
majority of Patriot’s board of directors (or, if applicable, of a successor
person to Patriot); or

       

      (4)  if
shares of Patriot’s common stock, or shares of any other capital stock into
which the notes are convertible pursuant to the terms of the indenture, are not
listed for trading on any United States national or regional securities
exchange.

       

      Notwithstanding
the foregoing, any transaction or event described above will not constitute a
fundamental change if, in connection with such transaction or event, or as a
result therefrom, a transaction described in clause (2) above occurs (without
regard to any exclusion to such clause described in the bullets thereunder) and
at least 90% of the consideration paid for Patriot’s common stock (excluding
cash payments for fractional shares, cash payments made pursuant to dissenters’
appraisal rights and cash dividends) consists of shares of common stock (or
depositary receipts in respect thereof) traded on any of the New York Stock
Exchange, the NASDAQ Global Market, the NASDAQ Global Select Market or the
American Stock Exchange (or any of their respective successors) (or will be so
traded or quoted immediately following the completion of the merger or
consolidation or such other transaction) and, as a result of such transaction,
the notes become convertible into a combination of cash (in respect of the
principal portion of such notes) and reference property as described under “—
Conversion Rate Adjustments — Treatment of Reference Property”
above.

       

      Patriot’s
acquisition of Magnum pursuant to the merger agreement described under “The
Merger” will not, as such merger agreement is in effect as at the date of this
offering memorandum, constitute a fundamental change.

       

      For
purposes of these provisions, whether a person is a “beneficial owner” will be
determined in accordance with Rule 13d-3 under the Securities Exchange Act of
1934, as amended (the “Exchange Act”), and “person” includes any syndicate or
group that would be deemed to be a “person” under Section 13(d)(3) of the
Exchange Act.

       

      “Continuing
directors” means (i) individuals who on the date of original issuance of the
notes were members of Patriot’s board of directors and (ii) any new directors
whose election or appointment to Patriot’s board of directors or nomination for
election by Patriot’s stockholders was approved by at least a majority of
Patriot’s directors then still in office (or a duly constituted committee
thereof), either who were directors on the date of original issuance of the
notes or whose election, appointment or nomination for election was previously
so approved.

       

      The term
fundamental change is limited to specified transactions and may not include
other events that might adversely affect Patriot’s financial condition. In
addition, the requirement that Patriot offers to repurchase the notes upon a
fundamental change may not protect holders in the event of a highly leveraged
transaction, reorganization, merger or similar transaction involving
Patriot.

       

      The
repurchase rights of the holders could discourage a potential acquirer of
Patriot. The fundamental change repurchase feature, however, is not the result
of management’s knowledge of any specific effort to obtain control of Patriot by
any means or part of a plan by management to adopt a series of anti-takeover
provisions.

       

      Patriot’s
current and future debt or other agreements may restrict its ability to
repurchase notes upon a fundamental change. Patriot’s failure to repurchase
notes when required following a fundamental change would result in an event of
default with respect to the notes. See “Risk Factors — Risks Relating to the
Notes — Patriot may not have the ability to pay interest on the notes or to
purchase the notes upon a fundamental change.”

       

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

       

      Fundamental
Change Repurchase Procedures

       

      After the
occurrence of a fundamental change, but in no event later than the 10th day
following such occurrence, Patriot will notify all holders of the notes and the
trustee and paying agent on the occurrence of the fundamental change and of the
resulting repurchase right, if any (the “fundamental change repurchase right
notice”). Such notice shall state, among other things:

       

      
        	
                 
      

              	
                ·

              	
                the
      events causing a fundamental
change;

              

      

       

      
        	
                 
      

              	
                ·

              	
                the
      date of the fundamental change;

              

      

       

      
        	
                 
      

              	
                ·

              	
                the
      last date on which a holder may exercise the repurchase right, if
      applicable;

              

      

       

      
        	
                 
      

              	
                ·

              	
                the
      fundamental change repurchase price, if
  applicable;

              

      

       

      
        	
                 
      

              	
                ·

              	
                the
      fundamental change repurchase date, if
  applicable;

              

      

       

      
        	
                 
      

              	
                ·

              	
                the
      name and address of the paying agent and the conversion agent, if
      applicable;

              

      

       

      
        	
                 
      

              	
                ·

              	
                the
      conversion rate and any adjustments to the conversion
  rate;

              

      

       

      
        	
                 
      

              	
                ·

              	
                that
      the notes with respect to which a fundamental change repurchase notice has
      been delivered by a holder may be converted only if the holder withdraws
      the fundamental change repurchase notice in accordance with the terms of
      the indenture; and

              

      

       

      
        	
                 
      

              	
                ·

              	
                the
      procedures that holders must follow to require Patriot to repurchase their
      notes, if applicable.

              

      

       

      To
exercise the repurchase right, you must deliver, on or before the scheduled
trading day immediately preceding the fundamental change repurchase date, the
notes to be repurchased. If the notes are held in global form, such delivery
(and the related repurchase notice) must comply with all applicable DTC
procedures. If the notes are held in certificated form, such notes must be duly
endorsed for transfer, together with a written repurchase notice

       

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

       

      and the
form entitled “Form of Fundamental Change Repurchase Notice” on the reverse side
of the notes duly completed, to the paying agent. Your repurchase notice must
state:

       

      
        	
                 
      

              	
                ·

              	
                if
      certificated, the certificate numbers of your notes to be delivered for
      repurchase;

              

      

       

      
        	
                 
      

              	
                ·

              	
                the
      portion of the principal amount of notes to be repurchased, which must be
      $1,000 or an integral multiple thereof;
and

              

      

       

      
        	
                 
      

              	
                ·

              	
                that
      the notes are to be repurchased by Patriot pursuant to the applicable
      provisions of the notes and the
indenture.

              

      

       

      You may
withdraw any repurchase notice in whole or in part by a written notice of
withdrawal delivered to the paying agent prior to 5:00 p.m., New York City time,
on the scheduled trading day prior to the fundamental change repurchase date. If
the notes are held in global form, the notice of withdrawal must comply with all
applicable DTC procedures. If the notes are held in certificated form, the
notice of withdrawal shall state:

       

      
        	
                 
      

              	
                ·

              	
                the
      principal amount of the withdrawn
notes;

              

      

       

      
        	
                 
      

              	
                ·

              	
                the
      certificate numbers of the withdrawn notes;
and

              

      

       

      
        	
                 
      

              	
                ·

              	
                the
      principal amount, if any, which remains subject to the repurchase
      notice.

              

      

       

      In
connection with any repurchase of the notes, Patriot will agree under the
indenture to:

       

      
        	
                 
      

              	
                ·

              	
                comply
      with the provisions of Rule 13e-1, Rule 13e-4, Rule 14e-1 and any other
      tender offer rules under the Exchange Act that may then be applicable;
      and

              

      

       

      
        	
                 
      

              	
                ·

              	
                otherwise
      comply with all applicable federal and state securities
    laws.

              

      

       

      No notes
may be repurchased at the option of holders upon a fundamental change if the
principal amount of the notes has been accelerated, and such acceleration has
not been rescinded, on or prior to such date.

       

      Settlement
of Fundamental Change Repurchase

       

      Patriot
will be required to repurchase the notes on the fundamental change repurchase
date. You will receive payment of the fundamental change repurchase price
promptly following the later of the fundamental change repurchase date or the
time of book-entry transfer or the delivery of the notes. Subject to a holder’s
right to receive interest on the related interest payment date where the
fundamental change repurchase date falls between a record date and the interest
payment date to which it relates as described above, if the paying agent holds
money sufficient to pay the fundamental change repurchase price of the notes on
the business day following the fundamental change repurchase date,
then:

       

      
        	
                 
      

              	
                ·

              	
                the
      notes will cease to be outstanding and interest, if any, will cease to
      accrue, whether or not book-entry transfer of the notes is made or whether
      or not the note is delivered to the paying agent;
  and

              

      

       

      
        	
                 
      

              	
                ·

              	
                all
      other rights of the holder will terminate, other than the right to receive
      the fundamental change repurchase price and previously accrued and unpaid
      interest, if any, upon delivery or transfer of the
  notes.

              

      

       

      Optional
Redemption by Patriot

       

      Redemption
Upon Termination of Merger Agreement

       

      If the
merger agreement relating to Patriot’s pending acquisition of Magnum described
under “The Merger” has been terminated, Patriot may, at its option, by providing
not less than 10 nor more than 30 days’ notice to each holder of notes to be
redeemed, redeem the notes, in whole or in part, at any time on or before
December 31, 2008.

       

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

         

      

      The
redemption price for any notes redeemed pursuant to the preceding paragraph will
be:

       

      
        	
                 
      

              	
                ·

              	
                an
      amount in cash equal to the principal amount of notes to be redeemed,
      plus any accrued
      and unpaid interest thereon to, but excluding, the date fixed for
      redemption; and

              

      

       

      
        	
                 
      

              	
                ·

              	
                an
      amount in shares of Patriot common stock, for each $1,000 principal amount
      of notes to be redeemed, equal to the lesser
of:

              

      

       

      
        	
                 
      

              	
                (i)

              	
                the
      sum of (a) $20 plus (b) 80% of the
      amount, if any, by which the “redemption conversion value” of such notes
      exceeds their “initial conversion value” (each as defined below), such sum
      divided by the
      “average redemption VWAP” (as defined below);
  and

              

      

       

      
        
          	
                	
                  (ii)

                	
                  26.6221 shares
      (subject to adjustment in the same manner as the conversion rate is
      adjusted under “— Conversion Rate Adjustments — Adjustment
      Events”).

                

        

      

       

      Patriot
will deliver the cash and shares of its common stock on the redemption
date.  However, if the date fixed for redemption falls after a record
date for the payment of interest and on or prior to the corresponding interest
payment date, Patriot will pay the full amount of accrued and unpaid interest
payable on such interest payment date to the holder of record at the close of
business on such record date, and the cash portion of the redemption price
described above will be reduced by the amount of such accrued and unpaid
interest.

       

      The
“initial conversion value” means, for each $1,000 principal amount of notes to
be redeemed, an amount equal to (i) the initial conversion rate, multiplied by
(ii)  $            ,
being the last reported sale price of Patriot’s common stock on May
      , 2008.

       

      The
“redemption conversion value” means, for each $1,000 principal amount of notes
to be redeemed, an amount equal to (i) the conversion rate in effect on the
redemption date, multiplied by (ii) the average redemption VWAP.

       

      The
“average redemption VWAP” means the average of the daily VWAP for the five
consecutive trading days ending on the third VWAP trading day immediately
preceding the redemption date.

       

      Patriot’s
obligation to deliver shares of its common stock as described above could be
considered a penalty, in which case the enforceability thereof would be subject
to general principles of equity and the discretion of the court in applying
equitable remedies.

       

      Other
Redemption Rights

       

      Patriot
may, at any time on or after May 31, 2011, at its option, by providing not less
than 25 scheduled trading days’ nor more than 60 days’ notice to each holder of
notes to be redeemed, redeem for cash all or any portion of the outstanding
notes, but only if the last reported sale price of Patriot’s common stock for 20
or more trading days in a period of 30 consecutive trading days ending on the
trading day prior to the date Patriot provides the notice of redemption to
holders exceeds 130% of the conversion price in effect on each such trading
day.

       

      In
addition, Patriot may, at its option, by providing not less than 25 scheduled
trading days’ nor more than 60 days’ notice to each holder of the notes to be
redeemed, redeem for cash all of the outstanding notes if less than 10% of the
aggregate principal amount of notes initially issued (including any additional
notes issued in connection with exercise by the initial purchasers of their
over-allotment option) remain outstanding.

       

      The
redemption price for any notes redeemed pursuant to the preceding two paragraphs
will be an amount in cash equal to 100% of the principal amount of the notes to
be redeemed, plus any
accrued and unpaid interest to, but excluding, the date fixed for
redemption.  However, if the date fixed for redemption falls after a
record date and on or prior to the corresponding interest payment date, Patriot
will pay the full amount of accrued and unpaid interest payable on such interest
payment date to the holder of record at the close of business on such record
date, and the redemption price of the notes will be reduced by the amount of
such accrued and unpaid interest.

       

       

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

         

      

      Redemption
Procedures

       

      Patriot
will be required to redeem any notes Patriot calls for redemption on the
applicable date fixed for redemption (the “redemption date”). You will receive
payment of the redemption price promptly following the later of the redemption
date or the time of book-entry transfer or other delivery of the notes to be
redeemed. Subject to a holder’s right to receive interest on the related
interest payment date where the redemption date falls between a record date and
the interest payment date to which it relates as described above, if the paying
agent holds money and, if applicable, shares of Patriot’s common stock
sufficient to pay the redemption price of the notes on the business day
following the redemption date, then:

       

      
        	
                 
      

              	
                ·

              	
                the
      notes will cease to be outstanding as of the redemption date and interest,
      if any, will cease to accrue, whether or not book-entry transfer of the
      notes is made or whether or not the note is delivered to the paying
      agent;

              

      

       

      
        	
                 
      

              	
                ·

              	
                all
      other rights of the holder will terminate as of the redemption date, other
      than the right to receive the redemption price and previously accrued and
      unpaid interest, if any, upon delivery or transfer of the notes;
      and

              

      

       

      
        	
                 
      

              	
                ·

              	
                the
      holder will be deemed to be a holder of record of any shares of Patriot’s
      common stock issuable in connection with such redemption as of the date of
      delivery or transfer of the notes by such
  holder.

              

      

       

      If Patriot
redeems less than all of the outstanding notes, the trustee will select the
notes to be redeemed in integral multiples of $1,000 principal amount by lot, on
a pro rata basis or in accordance with another method that the trustee
reasonably considers fair and appropriate. If the trustee selects a portion of
your note for partial redemption and you convert a portion of the same note, the
converted portion will be deemed to be from the portion selected for redemption.
In the event of any redemption in part, Patriot will not be required to issue,
register the transfer of or exchange any certificated note.

       

      If Patriot
calls notes for redemption, a holder may convert its notes only until the close
of business on the business day prior to the redemption date as described under
“— Conversion Rights — Conversion Upon Notice of Redemption,” except in the case
of a redemption in connection with the termination of the merger agreement
relating to Patriot’s acquisition of Magnum Coal Company described under “—
Redemption Upon Termination of Merger Agreement” above.

       

      Patriot
may not redeem the notes on any date if the principal amount of the notes has
been accelerated, and such acceleration has not been rescinded, on or prior to
such date.

       

      Consolidation,
Merger and Sale of Assets

       

      The
indenture provides that Patriot will not consolidate with or merge with or into,
or transfer all or substantially all of Patriot’s assets (excluding a pledge of
securities issued by Patriot or any of its subsidiaries) to, another person,
unless:

       

      
        	
                 
      

              	
                ·

              	
                the
      resulting, surviving or transferee person (the “successor entity”) assumes
      by supplemental indenture all of Patriot’s obligations under the notes and
      the indenture;

              

      

       

      
        	
                 
      

              	
                ·

              	
                immediately
      after giving effect to the transaction, no event of default under the
      indenture shall have occurred and be
continuing;

              

      

       

      
        	
                 
      

              	
                ·

              	
                if
      the notes become convertible into common stock or other securities issued
      by a person other than the successor entity as a result of such
      transaction, such person shall fully and unconditionally guarantee all
      obligations of the successor entity under the notes and the indenture;
      and

              

      

       

      
        	
                 
      

              	
                ·

              	
                any
      other conditions specified in the indenture are
  met.

              

      

       

       

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

         

      

      In
addition, if the successor entity in any merger, consolidation, or transfer is
not organized and existing under the laws of the United States of America, any
state thereof or the District of Columbia, Patriot must deliver to the
trustee:

       

      
        	
                 
      

              	
                ·

              	
                an
      opinion of counsel to the effect that the holders will not recognize
      income, gain or loss for United States Federal income tax purposes as a
      result of such transaction and will be subject to United States Federal
      income tax on the same amounts and at the same times as would have been
      the case if such transaction had not occurred;
  and

              

      

       

      
        	
                 
      

              	
                ·

              	
                an
      opinion of counsel in the jurisdiction of the successor entity to the
      effect that (i) any payment of interest, principal, or any other payment
      or amount delivered under the notes under or with respect to the notes
      will, after giving effect to such transaction, be exempt from any
      withholding or deduction for or on account of any present or future tax,
      duty, levy, impost, assessment or other governmental charge of whatever
      nature imposed or levied by or on behalf of any jurisdiction from or
      through which payment is made or in which the payor is organized, resident
      or engaged in business for tax purposes, and (ii) no transfer taxes, stamp
      taxes, or taxes on income (including capital gains) will be payable by a
      holder of notes under the laws of any jurisdiction where the successor
      entity is or becomes organized, resident or engaged in business for tax
      purposes in respect of the acquisition, ownership or disposition of the
      notes, including the receipt of interest or principal thereon, provided
      that such holder does not use or hold, and is not deemed to use or hold
      the notes in carrying on a business in the jurisdiction where the
      successor entity is or becomes organized, resident or engaged in business
      for tax purposes, provided that the holder will not be deemed to use or
      hold the notes in carrying on a business in such jurisdiction solely as a
      result of the holder’s ownership of the
notes.

              

      

       

      Upon
satisfaction of the conditions described above, all Patriot’s obligations in
respect of the notes shall be terminated, and the successor entity shall succeed
to, and may exercise, all of Patriot’s rights and powers under the
indenture.

       

      Although
these types of transactions are permitted under the indenture, certain of the
foregoing transactions could constitute a fundamental change permitting each
holder to require Patriot to repurchase the notes of such holder as described
above. The indenture expressly permits Patriot’s acquisition of Magnum described
under “The Merger,” and that transaction also does not constitute a fundamental
change or give rise to adjustment to the conversion rate.

       

      Events
of Default

       

      Each of
the following is an event of default:

       

      (1)  default
in any payment of interest on any note when due and payable and the default
continues for a period of 30 days;

       

      (2)  default
in the payment of principal of any note when due and payable at maturity, upon
redemption, upon required repurchase, upon acceleration or
otherwise;

       

      (3)  failure
by Patriot to comply with its obligation to convert the notes into cash and, if
applicable, shares of Patriot’s common stock upon exercise of a holder’s
conversion right and that failure continues for 5 days;

       

      (4)  failure
by Patriot to comply with its obligations under “— Consolidation, Merger and
Sale of Assets;”

       

      (5)  default
in the performance, or breach of any covenant or agreement by Patriot under the
indenture (other than a covenant or agreement otherwise described as a separate
“Event of Default” in the indenture) and continuance of such default or breach
by Patriot for 60 days after written notice has been given, by registered or
certified mail, to Patriot from the trustee or to Patriot and the trustee from
the holders of at least 25% principal amount of the notes then outstanding which
written notice shall specify such default or breach and requiring it to be
remedied and stating that such notice is a “Notice of Default” under the
indenture;

       

       

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

         

      

      (6)  failure
by Patriot to comply with its notice obligations under “— Conversion Rights —
Conversion upon Specified Corporate Events,” “— Make-Whole Fundamental Change”
or “— Fundamental Change;”

       

      (7)  failure
by Patriot or any of its majority owned subsidiaries to make any payment by the
end of the applicable grace period, if any, after the maturity date or required
repurchase date of any indebtedness for borrowed money where the aggregate
principal amount to which such failure relates is more than $25 million, or
acceleration of any indebtedness for borrowed money due to a default with
respect to such indebtedness where the aggregate principal amount accelerated is
more than $25 million and such indebtedness is not discharged or such
acceleration is not cured, waived, rescinded or annulled, in either case, for a
period of 30 days after written notice to Patriot by the trustee or to Patriot
and the trustee by holders of at least 25% in aggregate principal amount of the
notes then outstanding;

       

      (8)  one
or more judgments or orders for the payment of money are entered against Patriot
or any of its majority owned subsidiaries in an aggregate uninsured amount
exceeding $25 million that are not vacated, discharged, stayed or bonded pending
appeal within 60 days;

       

      (9)  Patriot
or any “significant subsidiary” (as defined below) of Patriot, pursuant to or
within the meaning of any “bankruptcy law” (as defined below) (i) commences a
voluntary case, (ii) consents to the entry of an order for relief against
Patriot or such significant subsidiary in an involuntary case, as the case may
be, (iii) consents to the appointment of a “custodian” (as defined below) of
Patriot or such significant subsidiary or all or substantially all of the
property of Patriot or such significant subsidiary, as the case may be, or (iv)
makes a general assignment for the benefit of creditors of Patriot or such
significant subsidiary, as the case may be; or

       

      (10) 
a court of competent jurisdiction enters an order or decree under any bankruptcy
law that (i) is for relief against Patriot or a significant subsidiary of
Patriot in an involuntary case, (ii) appoints a custodian of Patriot or a
significant subsidiary of Patriot or for all or substantially all of the
property of Patriot or a significant subsidiary of Patriot, or (iii) orders the
liquidation of Patriot or a significant subsidiary of Patriot and the order or
decree remains unstayed and in effect for 60 days.

       

      For the
purposes of the events of default described above, the following terms have the
following meaning:

       

      
        	
                 
      

              	
                ·

              	
                “bankruptcy
      law” means Title 11 of the U.S. Code or any similar Federal or State law
      for relief of debtors;

              

      

       

      
        	
                 
      

              	
                ·

              	
                “custodian”
      means any receiver, trustee, assignee, liquidator or similar official
      under any bankruptcy law; and

              

      

       

      
        	
                 
      

              	
                ·

              	
                “significant
      subsidiary” means any subsidiary, or group of subsidiaries, that would
      constitute a “significant subsidiary” under Regulation S-X under the
      Securities Act.

              

      

       

      If an
event of default occurs and is continuing, the trustee by notice to Patriot, or
the holders of at least 25% principal amount of the outstanding notes by notice
to Patriot and the trustee, may, and the trustee at the request of such holders
shall, declare the principal amount of all the notes to be due and payable. Upon
such a declaration of acceleration, such principal amount shall become
immediately due and payable. However, upon an event of default described in
clause (9) or (10) above, the aggregate principal amount and accrued and unpaid
interest, if any, will be due and payable immediately. If any portion of the
amount payable on the notes upon acceleration in a bankruptcy proceeding of
Patriot is considered by a court to be unearned interest, a court could disallow
recovery of any such portion. As described above under “Risk Factors — Risks
Relating to the Notes — The accounting method for convertible debt securities
with net share settlement, like the notes, will be subject to change,” Patriot
will be required to account for a portion of the proceeds of the issuance of the
notes as consideration for an equity component, and, therefore, the principal
amount of the notes will be accounted for as less than the stated principal
amount of the notes.  This treatment could permit creditors of
Patriot, or Patriot itself, to argue in a bankruptcy of Patriot that the
accounting treatment gives rise to unearned interest that should be
disallowed.

       

      Notwithstanding
the foregoing, if Patriot so elects, the sole remedy of holders for an event of
default relating to any obligation to file reports as described under “—
Reports” below will, for the first 365 days after the occurrence

       

       

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

       

      of such an
event of default (which will be the 60th day
after written notice is provided to Patriot in accordance with clause (5)
above), consist exclusively of the right to receive additional interest on the
notes at an annual rate equal to 0.25% per annum of the principal amount of the
notes outstanding for each day of such 365-day period during which Patriot
remains in default. Additional interest will be payable in arrears on each
interest payment date following the occurrence of such event of default in the
same manner as regular interest on the notes. On the 366th day
after such event of default (if such violation is not cured or waived prior to
such 366th day),
the notes will be subject to acceleration as provided above. The provisions of
the indenture described in this paragraph will not affect the rights of holders
of notes in the event of the occurrence of any other event of default. In the
event Patriot does not elect to pay additional interest upon an event of default
in accordance with this paragraph, the notes will be subject to acceleration as
provided above.

       

      In order
to elect to pay additional interest as the sole remedy during the first 365 days
after the occurrence of an event of default relating to the failure to comply
with the reporting obligations in accordance with the immediately preceding
paragraph, Patriot must notify all holders of record of notes and the trustee
and paying agent of such election on or before the close of business on the date
on which such event of default occurs. Upon Patriot’s failure to timely give
such notice or pay additional interest, the notes will be immediately subject to
acceleration as provided above.

       

      Subject to
the provisions of the indenture relating to the duties of the trustee, if an
event of default occurs and is continuing, the trustee will be under no
obligation to exercise any of the rights or powers under the indenture at the
request or direction of any of the holders unless such holders have offered to
the trustee indemnity or security satisfactory to it against any loss, liability
or expense. Except to enforce the right to receive payment of principal or
interest when due or to receive amounts due to it upon conversion, no holder may
pursue any remedy with respect to the indenture or the notes
unless:

       

      (1)  such
holder has previously given the trustee notice that an event of default is
continuing;

       

      (2)  holders
of at least 25% principal amount of the outstanding notes have made written
request to the trustee to pursue the remedy;

       

      (3)  such
holders have offered the trustee security or indemnity satisfactory to it
against any loss, liability or expense to be incurred in compliance with such
request;

       

      (4)  the
trustee has not complied with such request within 60 days after the receipt of
the request and the offer of security or indemnity; and

       

      (5)  the
holders of a majority principal amount of the outstanding notes have not given
the trustee a direction that is inconsistent with such request within such 60
day period.

       

      Subject to
certain restrictions, the holders of a majority in principal amount of the
outstanding notes are given the right to direct the time, method and place of
conducting any proceeding for any remedy available to the trustee or of
exercising any trust or power conferred on the trustee. The indenture provides
that in the event an event of default has occurred and is continuing, the
trustee will be required in the exercise of its powers to use the degree of care
that a prudent person would use in the conduct of its own affairs. The trustee,
however, may refuse to follow any direction that conflicts with law or the
indenture or that the trustee determines is unduly prejudicial to the rights of
any other holder or that would involve the trustee in personal liability. Prior
to taking any action under the indenture, the trustee will be entitled to
indemnification satisfactory to it in its sole discretion against all losses and
expenses caused by taking or not taking such action.

       

      The
indenture provides that if a default occurs and is continuing and is actually
known to a responsible officer of the trustee, the trustee must mail to each
holder notice of the default within 90 days after it occurs unless such default
has been cured or waived. Except in the case of a default in the payment of
principal of or interest on any note or a conversion default, the trustee shall
be protected in withholding such notice if and so long as the board of
directors, the executive committee or a trust committee of directors, or
responsible officers of the trustee in good faith determines that withholding
notice is in the interests of the holders.

       

       

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

         

      

      No
Registration Rights; Additional Interest

       

      Patriot
will not file a shelf registration statement for the resale of the notes or the
common stock issuable upon conversion of the notes. As a result, you may only
resell your notes or common stock pursuant to an exemption from the registration
requirements of the Securities Act.

       

      Under Rule
144 as currently in effect, a person who acquired securities from Patriot or an
affiliate of Patriot and that has beneficially owned notes or shares of
Patriot’s common stock issuable upon conversion of the notes for at least one
year is entitled to sell their securities, but only if such person is not deemed
to have been one of Patriot’s affiliates at the time of, or at any time during
three months preceding, the sale. However, a person who acquires securities from
Patriot or an affiliate of Patriot and that has beneficially owned notes or
shares of Patriot’s common stock issuable upon conversion of the notes for at
least six months is entitled to sell their securities; provided that (i) such person
is not deemed to have been one of Patriot’s affiliates at the time of, or at any
time during three months preceding, the sale and (ii) Patriot has filed all
required reports under Section 13 or 15(d) of the Exchange Act, as applicable,
during the twelve months preceding such sale (other than Form 8-K reports). If
Patriot is not current in its Exchange Act reports, a person who acquires from
an affiliate of Patriot notes or shares of Patriot’s common stock issuable upon
conversion of the notes could be required to hold their securities for up to one
year following such acquisition. If Patriot is not current in its Exchange Act
reports, a person who is an affiliate of Patriot and who owns notes or shares of
Patriot’s common stock issuable upon conversion of the notes could be required
to hold their securities indefinitely.

       

      If, at any
time during the six-month period beginning on, and including, the date which is
six months after the original issuance date of the notes, Patriot fails to
timely file any document or report that Patriot is required to file with the SEC
pursuant to Section 13 or 15(d) of the Exchange Act, as applicable (other than
reports on Form 8-K), Patriot will pay additional interest on the
notes.  Additional interest will accrue on all transfer restricted
notes at an annual rate of 0.50% per annum of the principal amount of such notes
outstanding for each day during such period for which Patriot’s failure to file
continues; provided
that Patriot will have 14 days, in the aggregate, to cure any such late filings
before any additional interest shall accrue.  Additional interest will
be payable in arrears on each interest payment date following the late filing in
the same manner as regular interest on the notes. No additional interest will
accrue after such six month period, regardless of whether such failure has
occurred or is continuing. Patriot will not pay any additional interest or
other amounts on Patriot’s common stock, if any, received upon conversion. 
  

       

      Modification
and Amendment

       

      Subject to
certain exceptions, the indenture or the notes may be amended with the consent
of the holders of at least a majority principal amount of the notes then
outstanding (including without limitation, consents obtained in connection with
a purchase of, or tender offer or exchange offer for, notes) and, subject to
certain exceptions, any past default or compliance with any provisions may be
waived with the consent of the holders of a majority principal amount of the
notes then outstanding (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, notes).
However, without the consent of each holder of an outstanding note affected, no
amendment may, among other things:

       

      (1)  reduce
the amount of notes whose holders must consent to an amendment;

       

      (2)  reduce
the rate, or extend the stated time for payment, of interest on any
note;

       

      (3)  reduce
the principal, or extend the stated maturity, of any note;

       

      (4)  make
any change that adversely affects the conversion rights of any
notes;

       

      (5)  reduce
the fundamental change repurchase price of any note or amend or modify in any
manner adverse to the holders of notes Patriot’s obligation to make such
payments, whether through an amendment or waiver of provisions in the covenants,
definitions or otherwise;

       

      (6)  change
the place or currency of payment of principal or interest in respect of any
note;

       

       

      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

         

      

      (7)  impair
the right of any holder to receive payment of principal of and interest on such
holder’s notes on or after the due dates therefore or to institute suit for the
enforcement of any payment on or with respect to such holder’s
notes;

       

      (8)  modify
the redemption provisions of the notes in any manner adverse to the holders of
notes;

       

      (9)  adversely
affect the ranking of the notes as Patriot’s senior unsecured indebtedness;
or

       

      (10)  make
any change in the amendment provisions that require each holder’s consent or in
the waiver provisions.

       

      Without
the consent of any holder, Patriot and the trustee may amend the indenture
to:

       

      (1)  cure
any manifest error or defect;

       

      (2)  cure
any ambiguity, omission or inconsistency; provided that the rights of
the holders are not adversely affected in any material respect;

       

      (3)  provide
for the assumption by a successor corporation of Patriot’s obligations under the
indenture;

       

      (4)  add
guarantees with respect to the notes;

       

      (5)  secure
the notes;

       

      (6)  add
to Patriot’s covenants for the benefit of the holders or surrender any right or
power conferred upon Patriot;

       

      (7)  provide
for the conversion of notes into cash and reference property in accordance with
the terms of the indenture;

       

      (8)  provide
for the conversion rights of holders of notes and Patriot’s repurchase
obligation in connection with a fundamental change in accordance with the terms
of the indenture in the event of any reclassification of Patriot’s common stock,
merger or consolidation, or sale, conveyance, transfer or lease of Patriot’s
property and assets substantially as an entirety; or

       

      (9)  make
any change that does not adversely affect the rights of any holder in any
material respect; provided that any amendment
to conform the terms of the indenture or the notes to the description contained
herein will be deemed not to be adverse to any holder.

       

      The
consent of the holders is not necessary under the indenture to approve the
particular form of any proposed amendment. It is sufficient if such consent
approves the substance of the proposed amendment. After an amendment under the
indenture becomes effective, Patriot is required to issue a notice to the
holders briefly describing such amendment. However, the failure to give such
notice to all the holders, or any defect in the notice, will not impair or
affect the validity of the amendment.

       

      Discharge

       

      Patriot
may satisfy and discharge its obligations under the indenture by delivering to
the trustee for cancellation all outstanding notes or by depositing with the
trustee or delivering to the holders, as applicable, after the notes have become
due and payable, whether at stated maturity, or any repurchase or redemption
date, or upon conversion or otherwise, cash and shares of common stock, if
applicable, sufficient to pay all of the outstanding notes and paying all other
sums payable under the indenture by Patriot (including any cash and common stock
or reference property deliverable in respect of notes that have been validly
submitted for conversion). Such discharge is subject to terms contained in the
indenture.

       

       

      
        
          
          

        

        
          26

          
            

          

        

        
          
          

        

         

      

      Calculations
in Respect of Notes

       

      Except as
otherwise provided above, Patriot will be responsible for making all
calculations called for under the notes or in connection with a conversion.
These calculations include, but are not limited to, determinations of the last
reported sale prices of Patriot’s common stock, accrued interest payable on the
notes and the conversion rate of the notes. Patriot will make all these
calculations in good faith and, absent manifest error, Patriot’s calculations
will be final and binding on holders of notes. Patriot will provide a schedule
of its calculations to each of the trustee and the conversion agent, and each of
the trustee and conversion agent is entitled to rely conclusively upon the
accuracy of Patriot’s calculations without independent verification. The trustee
will forward Patriot’s calculations to any holder of notes upon the request of
that holder.

       

      Trustee

       

      U.S. Bank
National Association is the initial trustee, registrar, paying agent and
conversion agent.

       

      Form,
Denomination and Registration

       

      The notes
will be issued:

       

      
        	
                 
      

              	
                ·

              	
                in
      fully registered form;

              

      

       

      
        	
                 
      

              	
                ·

              	
                without
      interest coupons; and

              

      

       

      
        	
                 
      

              	
                ·

              	
                in
      denominations of $1,000 in principal amount and multiples of
      $1,000.

              

      

       

      Rule
144A Information

       

      At any
time that Patriot is not required to file with the SEC reports pursuant to
Section 13 or 15(d) of the Exchange Act, Patriot will furnish to the holders or
beneficial owners of the notes and prospective purchasers, upon their request,
the information, if any, required under Rule 144A(d)(4) under the Securities
Act.

       

      Reports

       

      The
indenture provides that any documents or reports that Patriot is required to
file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act will be
filed with the trustee within 15 days after the same are required to be filed
with the SEC (giving effect to any grace period provided by Rule 12b-25 under
the Exchange Act). Documents filed by Patriot with the SEC via the EDGAR system
will be deemed filed with the trustee as of the time such documents are filed
via EDGAR.

       

      Global
Notes, Book-Entry Form

       

      The notes
will be evidenced by one or more global notes. Patriot will deposit the global
note or notes with DTC and register the global notes in the name of Cede &
Co. as DTC’s nominee. Except as set forth below, a global note may be
transferred, in whole or in part, only to another nominee of DTC or to a
successor of DTC or its nominee.

       

      Beneficial
interests in a global note may be held directly through DTC if such holder is a
participant in DTC, or indirectly through organizations that are participants in
DTC, whom are referred to in this offering memorandum as “participants.”
Transfers between participants will be effected in the ordinary way in
accordance with DTC rules and will be settled in clearing house funds. The laws
of some states require that some persons take physical delivery of securities in
definitive form. As a result, the ability to transfer beneficial interests in
the global note to such persons may be limited.

       

      Holders
who are not participants may beneficially own interests in a global note held by
DTC only through participants, or certain banks, brokers, dealers, trust
companies and other parties that clear through or maintain a custodial
relationship with a participant, either directly or indirectly, who are referred
to in this offering memorandum as “indirect participants.” So long as Cede &
Co., as the nominee of DTC, is the registered owner of a

       

       

      
        
          
          

        

        
          27

          
            

          

        

        
          
          

        

         

      

      global
note, Cede & Co. for all purposes will be considered the sole holder of such
global note. Except as provided below, owners of beneficial interests in a
global note will:

       

      
        	
                 
      

              	
                ·

              	
                not
      be entitled to have certificates registered in their
  names;

              

      

       

      
        	
                 
      

              	
                ·

              	
                not
      receive physical delivery of certificates in definitive registered form;
      and

              

      

       

      
        	
                 
      

              	
                ·

              	
                not
      be considered holders of the global
note.

              

      

       

      Patriot
will make payments on a global note to Cede & Co., as the registered owner
of the global note, by wire transfer of immediately available funds on each
interest payment date, redemption date, repurchase date or fundamental change
repurchase date, as the case may be, and the maturity date. Neither Patriot, the
trustee nor any paying agent will be responsible or liable:

       

      
        	
                 
      

              	
                ·

              	
                for
      the records relating to, or payments made on account of, beneficial
      ownership interests in a global note;
or

              

      

       

      
        	
                 
      

              	
                ·

              	
                for
      maintaining, supervising or reviewing any records relating to the
      beneficial ownership interests.

              

      

       

      Patriot
has been informed that DTC’s practice is to credit participants’ accounts upon
receipt of funds on that payment date with payments in amounts proportionate to
their respective beneficial interests in the principal amount represented by a
global note as shown in the records of DTC. Payments by participants to owners
of beneficial interests in the principal amount represented by a global note
held through participants will be the responsibility of the participants, as is
now the case with securities held for the accounts of customers registered in
“street name.”

       

      Because
DTC can only act on behalf of participants, who in turn act on behalf of
indirect participants, the ability of a person having a beneficial interest in
the principal amount represented by the global note to pledge such interest to
persons or entities that do not participate in the DTC system, or otherwise take
actions in respect of such interest, may be affected by the lack of a physical
certificate evidencing its interest.

       

      Neither
Patriot, the trustee, registrar, paying agent nor conversion agent will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations. DTC has advised Patriot that it will take any action
permitted to be taken by a holder of notes, including the presentation of notes
for exchange, only at the direction of one or more participants to whose account
with DTC interests in the global note are credited, and only in respect of the
principal amount of the notes represented by the global note as to which the
participant or participants has or have given such direction.

       

      DTC has
advised Patriot that it is:

       

      
        	
                 
      

              	
                ·

              	
                a
      limited purpose trust company organized under the laws of the State of New
      York, and a member of the Federal Reserve
  System;

              

      

       

      
        	
                 
      

              	
                ·

              	
                a
      “clearing corporation” within the meaning of the Uniform Commercial Code;
      and

              

      

       

      
        	
                 
      

              	
                ·

              	
                a
      “clearing agency” registered pursuant to the provisions of Section 17A of
      the Exchange Act.

              

      

       

      DTC was
created to hold securities for its participants and to facilitate the clearance
and settlement of securities transactions between participants through
electronic book-entry changes to the accounts of its participants. Participants
include securities brokers, dealers, banks, trust companies and clearing
corporations and other organizations. Some of the participants or their
representatives, together with other entities, own DTC. Indirect access to the
DTC system is available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly.

       

      DTC has
agreed to the foregoing procedures to facilitate transfers of interests in a
global note among participants. However, DTC is under no obligation to perform
or continue to perform these procedures, and may discontinue these procedures at
any time. If DTC is at any time unwilling or unable to continue as depository
and a

       

       

      
        
          
          

        

        
          28

          
            

          

        

        
          
          

        

      

       

      successor
depository is not appointed by Patriot within 90 days, Patriot will issue notes
in fully registered certificated form in exchange for global notes. In addition,
the owner of a beneficial interest in a global note will be entitled to receive
a note in fully registered certificated form in exchange for such interest if an
event of default has occurred and is continuing.

       

      Restrictions
on Transfer, Legends

       

      The notes
and shares of common stock that are issued upon conversion will be subject to
certain restrictions on transfer, as described “Transfer Restrictions.” Such
notes and shares will bear a legend regarding such transfer
restrictions.

       

      Governing
Law

       

      The notes
and the indenture will be governed by, and construed in accordance with, the
laws of the State of New York.

       

       

      29

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