SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 1999
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 333-59073
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P&L COAL HOLDINGS CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-4004153
- ----------------------------------- -------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
701 Market Street, St. Louis, Missouri 63101-1826
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(314) 342-3400
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
X Yes No
----- ------
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
P&L COAL HOLDINGS CORPORATION
UNAUDITED STATEMENTS OF CONDENSED CONSOLIDATED OPERATIONS
(In thousands)
Predecessor
Nine Months Company
Quarter Ended Quarter Ended Ended Period Ended ---------------
December 31, December 31, December 31, December 31, Period Ended
1999 1998 1999 1998<F1> May 19, 1998
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
REVENUES
Sales $ 635,340 $ 546,620 $ 1,859,343 $ 1,327,497 $ 278,930
Other revenues 35,385 35,984 90,050 75,272 13,478
--------------- --------------- --------------- --------------- ---------------
Total revenues 670,725 582,604 1,949,393 1,402,769 292,408
OPERATING COSTS AND EXPENSES
Operating costs and expenses 542,052 460,042 1,577,247 1,137,323 246,801
Depreciation, depletion and amortization 61,150 53,124 186,449 130,598 26,218
Selling and administrative expenses 22,229 18,353 63,396 44,101 12,017
--------------- --------------- --------------- --------------- ---------------
OPERATING PROFIT 45,294 51,085 122,301 90,747 7,372
Interest expense 49,545 47,369 150,397 123,215 4,222
Interest income (818) (4,686) (2,913) (12,439) (1,667)
--------------- --------------- --------------- --------------- ---------------
INCOME (LOSS) BEFORE INCOME TAXES (3,433) 8,402 (25,183) (20,029) 4,817
Income tax provision (benefit) 1,242 3,284 (1,238) (5,188) 4,341
Minority interests 5,395 - 8,516 - -
--------------- --------------- --------------- --------------- ---------------
NET INCOME (LOSS) $ (10,070) $ 5,118 $ (32,461) $ (14,841) $ 476
=============== =============== =============== =============== ===============
<FN>
<F1> Includes results for the nine months ended December 31, 1998; however, P&L
Coal Holdings Corporation had no activity for the period April 1, 1998 to
May 19, 1998.
</FN>
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
<PAGE>
<TABLE>
P&L COAL HOLDINGS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
December 31, March 31,
1999 1999
--------------- ---------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 87,493 $ 194,078
Accounts receivable, less allowance for
doubtful accounts of $1,326 and $177
as of December 31, 1999 and March 31, 1999,
respectively 330,040 312,748
Materials and supplies 51,108 53,978
Coal inventory 184,549 195,919
Assets from power trading activities 790,669 1,037,300
Other current assets 69,521 38,438
--------------- ---------------
Total current assets 1,513,380 1,832,461
Property, plant, equipment and mine development,
net of accumulated depreciation, depletion
and amortization of $360,870 and $193,492,
respectively 4,785,969 4,797,945
Investments and other assets 380,682 393,525
--------------- ---------------
Total assets $ 6,680,031 $ 7,023,931
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term borrowings and current maturities
of long-term debt $ 76,434 $ 72,404
Income taxes payable 11,659 7,308
Liabilities from power trading activities 391,956 638,062
Accounts payable and accrued expenses 593,400 627,734
--------------- ---------------
Total current liabilities 1,073,449 1,345,508
Long-term debt, less current maturities 2,430,070 2,469,975
Deferred income taxes 757,427 780,175
Accrued reclamation and other environmental
liabilities 504,936 498,032
Workers' compensation obligations 209,849 207,544
Accrued postretirement benefit costs 968,911 956,714
Obligation to industry fund 62,704 63,107
Other noncurrent liabilities 168,955 183,736
--------------- ---------------
Total liabilities 6,176,301 6,504,791
Minority interests 32,065 23,910
Stockholders' equity:
Preferred Stock - $0.01 per share par value;
10,000,000 shares authorized, 5,000,000
shares issued and outstanding 50 50
Common Stock - Class A, $0.01 per share par
value; 30,000,000 shares authorized,
19,000,000 shares issued and outstanding 190 190
Common Stock - Class B, $0.01 per share par
value; 3,000,000 shares authorized,
708,767 shares issued and 698,457 and
708,767 shares outstanding, respectively 7 7
Additional paid-in capital 484,772 484,772
Employee stock loans (2,943) (2,331)
Accumulated other comprehensive income 11,878 2,333
Retained earnings (accumulated deficit) (22,252) 10,209
Treasury shares, at cost: 10,310 Class B
shares as of December 31, 1999 (37) -
--------------- ---------------
Total stockholders' equity 471,665 495,230
--------------- ---------------
Total liabilities and stockholders'
equity $ 6,680,031 $ 7,023,931
=============== ===============
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
<PAGE>
<TABLE>
P&L COAL HOLDINGS CORPORATION
UNAUDITED STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS
(In thousands)
Predecessor
Nine Months Company
Ended Period Ended ---------------
December 31, December 31, Period Ended
1999 1998 May 19, 1998
--------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (32,461) $ (14,841) $ 476
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation, depletion and amortization 186,449 130,598 26,218
Deferred income taxes (16,291) (23,066) 2,835
Amortization of debt discount and debt
issuance costs 13,637 12,273 1,379
Net gain on property and equipment disposals (4,182) - (328)
Net gain on coal contract restructuring (12,957) (5,300) -
Minority interests 8,516 - -
Stock compensation - 3,924 -
Changes in current assets and liabilities,
excluding effects of acquisitions:
Accounts receivable (17,174) 21,091 (132,065)
Materials and supplies 2,962 1,079 881
Coal inventory 20,171 20,034 (2,807)
Other current assets (30,586) 5,167 (10,701)
Accounts payable and accrued expenses (36,342) (84,729) 87,814
Income taxes payable 4,818 19,152 1,234
Net assets from power trading activities 525 (2,079) 5,289
Accrued reclamation and related liabilities (10,609) 760 (1,622)
Workers' compensation obligations 2,305 324 (2,156)
Accrued postretirement benefit costs 12,197 8,912 6,092
Obligation to industry fund (403) (1,957) (2,379)
Royalty prepayment - 135,903 -
Other, net (44,109) (8,394) (10,619)
--------------- --------------- ---------------
Net cash provided by (used in) operating
activities 46,466 218,851 (30,459)
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant, equipment and
mine development (124,030) (133,514) (20,950)
Acquisitions, net (44,203) (1,994,635) -
Contribution from minority interests 704 - -
Proceeds from coal contract restructuring 21,877 3,889 328
Proceeds from property and equipment disposals 6,736 - 1,374
Proceeds from sale-leaseback transactions 34,234 8,392 -
--------------- --------------- ---------------
Net cash used in investing activities (104,682) (2,115,868) (19,248)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Change in short-term borrowings (5,640) (25,812) -
Proceeds from long-term debt 11,547 1,890,100 53,597
Payments of long-term debt (52,264) (179,028) (19,423)
Capital contribution - 480,000 -
Dividends paid to stockholders - - (173,330)
Dividends paid to minority interests (2,292) - -
Proceeds from affiliated loan - (940) 141,000
Advances from affiliates - - 21,693
--------------- --------------- ---------------
Net cash provided by (used in) financing
activities (48,649) 2,164,320 23,537
Effect of exchange rate changes on cash and cash
equivalents 280 (197) (292)
--------------- --------------- ---------------
Net increase (decrease) in cash and cash
equivalents (106,585) 267,106 (26,462)
Cash and cash equivalents at beginning of period 194,078 - 96,821
--------------- --------------- ---------------
Cash and cash equivalents at end of period $ 87,493 $ 267,106 $ 70,359
=============== =============== ===============
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
<PAGE>
P&L COAL HOLDINGS CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The accompanying condensed consolidated financial statements include the
consolidated operations and balance sheets of P&L Coal Holdings Corporation (the
"Company"), also known as Peabody Group. These financial statements include the
subsidiaries of Peabody Holding Company, Inc. ("Peabody Holding Company"); Gold
Fields Mining Corporation ("Gold Fields") which owns Lee Ranch Coal Company
("Lee Ranch"); Citizens Power LLC ("Citizens Power"); and Peabody Resources
Holdings Pty. Ltd. ("Peabody Resources"), an Australian company (collectively,
the "Predecessor Company" or "P&L Coal Group"). Through May 19, 1998, the
Predecessor Company was a wholly owned indirect subsidiary of The Energy Group,
PLC ("The Energy Group"). Effective May 20, 1998, the Predecessor Company was
acquired by the Company. P&L Coal Holdings Corporation, a holding company with
no direct operations and nominal assets other than its investment in its
subsidiaries, was formed by Lehman Brothers Merchant Banking Partners II L. P.
on February 27, 1998 for the purpose of acquiring the Predecessor Company and
had no significant activity until the acquisition.
The accompanying condensed consolidated financial statements as of and for the
quarter and nine months ended December 31, 1999 and for the quarter and period
ended December 31, 1998, and the notes thereto, are unaudited. However, in the
opinion of management, these financial statements reflect all adjustments
necessary for a fair presentation of the results of the periods presented. The
results of operations for the quarter and nine months ended December 31, 1999
are not necessarily indicative of the results to be expected for the full year.
(2) Reclassifications
Certain amounts in the prior periods have been reclassified to conform with the
report classifications for the nine months ended December 31, 1999, with no
effect on previously reported operating results or stockholders' equity.
(3) Comprehensive Income
The following table sets forth the components of comprehensive income (loss) for
the quarter and nine months ended December 31, 1999, and the quarter and period
ended December 31, 1998 (in thousands):
<TABLE>
Nine Months
Quarter Ended Quarter Ended Ended Period Ended
December 31, December 31, December 31, December 31,
1999 1998 1999 1998
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net income (loss) $ (10,070) $ 5,118 $ (32,461) $ (14,841)
Foreign currency translation adjustment 2,795 8,396 9,545 (5,335)
--------------- --------------- --------------- ---------------
Comprehensive income (loss) $ (7,275) $ 13,514 $ (22,916) $ (20,176)
=============== =============== =============== ===============
</TABLE>
(4) Restructuring Liability
In conjunction with the acquisition of P&L Coal Group, the Company established a
$39.4 million liability for estimated costs associated with a restructuring plan
resulting from the business combination. The estimate was comprised of costs
associated with exiting certain activities ("exit plan") and consolidating and
restructuring certain management and administrative functions ("restructuring
plan") and includes costs resulting from a plan to terminate or relocate
employees. Costs associated with the restructuring and exit plans are being
charged against the liability as incurred. The total costs charged against the
liability for the quarter and nine months ended December 31, 1999 are $0.7
million and $6.1 million, respectively. The cumulative net cash outlays and
non-cash costs charged against the liability through December 31, 1999 are as
follows (in thousands):
<TABLE>
Cash Outlays Non-cash Costs Total
--------------- --------------- ---------------
<S> <C> <C> <C>
Restructuring plan $ 24,612 $ - $ 24,612
Exit plan 6,643 3,648 10,291
--------------- --------------- ---------------
$ 31,255 $ 3,648 $ 34,903
=============== =============== ===============
</TABLE>
The exit plan was completed in the third quarter and the liability was reduced
by $3.8 million to reflect the most recent cost estimates. This amount was
recorded as an adjustment to the cost of the acquisition. The majority of the
adjustment relates to lower exit plan costs than originally estimated. The $0.7
million remaining liability relates to residual spending, including continuing
lease costs at administrative offices that were vacated as part of the
restructuring plan. If the ultimate amount of cost expended is less than the
$0.7 million remaining liability, the cost of the acquisition will be further
reduced.
<PAGE>
(5) Business Segments
The Company's industry and geographic data for continuing operations are as
follows:
<TABLE>
(In thousands)
Nine Months
Quarter Ended Quarter Ended Ended Period Ended
December 31, December 31, December 31, December 31,
1999 1998 1999 1998
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Revenues:
U.S. Mining $ 595,923 $ 532,696 $ 1,767,411 $ 1,285,580
Non U.S. Mining 71,660 41,739 169,931 97,810
Other<F1> 3,142 8,169 12,051 19,379
--------------- --------------- --------------- ---------------
$ 670,725 $ 582,604 $ 1,949,393 $ 1,402,769
=============== =============== =============== ===============
Operating profit (loss):
U.S. Mining $ 34,547 $ 36,771 $ 96,077 $ 65,968
Non U.S. Mining 14,951 12,963 37,135 23,769
Other<F1> (4,204) 1,351 (10,911) 1,010
--------------- --------------- --------------- ---------------
$ 45,294 $ 51,085 $ 122,301 $ 90,747
=============== =============== =============== ===============
Revenues:
United States $ 599,065 $ 540,865 $ 1,779,462 $ 1,304,959
Foreign 71,660 41,739 169,931 97,810
--------------- --------------- --------------- ---------------
$ 670,725 $ 582,604 $ 1,949,393 $ 1,402,769
=============== =============== =============== ===============
Operating profit:
United States $ 30,343 $ 38,122 $ 85,166 $ 66,978
Foreign 14,951 12,963 37,135 23,769
--------------- --------------- --------------- ---------------
$ 45,294 $ 51,085 $ 122,301 $ 90,747
=============== =============== =============== ===============
<FN>
<F1> Primarily consists of Citizens Power, a subsidiary of the Company that
engages in electricity contract restructurings and electricity, gas and oil
trading.
</FN>
</TABLE>
(6) Commitments and Contingencies
Environmental Claims
Environmental claims have been asserted against a subsidiary of the Company at
18 sites in the United States. Some of these claims are based on the
Comprehensive Environmental Response Compensation and Liability Act of 1980, as
amended, and on similar state statutes. The majority of these sites are related
to activities of former subsidiaries of the Company.
The Company's policy is to accrue environmental cleanup-related costs of a
non-capital nature when those costs are believed to be probable and can be
reasonably estimated. The quantification of environmental exposures requires an
assessment of many factors, including changing laws and regulations,
advancements in environmental technologies, the quality of information available
related to specific sites, the assessment stage of each site investigation,
preliminary findings and the length of time involved in remediation or
settlement. For certain sites, the Company also assesses the financial
capability of other potentially responsible parties and, where allegations are
based on tentative findings, the reasonableness of the Company's apportionment.
The Company has not anticipated any recoveries from insurance carriers or other
potentially responsible third parties in its Consolidated Balance Sheets. The
liabilities for environmental cleanup-related costs recorded in the Consolidated
Balance Sheet at December 31, 1999 were $56.3 million. This amount represents
those costs that the Company believes are probable and reasonably estimable. In
the event that future remediation expenditures are in excess of amounts accrued,
management does not anticipate that they will have a material adverse effect on
the results of operations or financial position of the Company.
Other
In addition, the Company at times becomes a party to claims, lawsuits,
arbitration proceedings and administrative procedures in the ordinary course of
business. Management believes that the ultimate resolution of pending or
threatened proceedings will not have a material adverse effect on the results of
operations or financial position of the Company.
<PAGE>
(7) Supplemental Guarantor/Non-guarantor Financial Information
In accordance with the indentures governing the Senior Notes and Senior
Subordinated Notes, certain wholly-owned U.S. subsidiaries of the Company have
fully and unconditionally guaranteed the debt associated with the purchase on a
joint and several basis. Separate financial statements and other disclosures
concerning the Guarantor Subsidiaries are not presented because management
believes that such information is not material to investors. The following
condensed historical financial statement information is provided for such
Guarantor/Non-guarantor Subsidiaries.
<TABLE>
P&L Coal Holdings Corporation
Unaudited Supplemental Condensed Statements of Consolidated Operations
For the Quarter Ended December 31, 1999
(In thousands)
Parent Guarantor Non-guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Total revenues $ - $ 489,441 $ 183,302 $ (2,018) $ 670,725
Costs and expenses:
Operating costs and expenses - 424,044 120,026 (2,018) 542,052
Depreciation, depletion and amortization - 45,152 15,998 - 61,150
Selling and administrative expenses - 17,334 4,895 - 22,229
Interest expense 43,203 23,965 4,620 (22,243) 49,545
Interest income (17,100) (5,720) (241) 22,243 (818)
--------------- --------------- --------------- --------------- ---------------
Income (loss) before income taxes (26,103) (15,334) 38,004 - (3,433)
Income tax provision (benefit) (9,683) (2,010) 12,935 - 1,242
Minority interests - - 5,395 - 5,395
--------------- --------------- --------------- --------------- ---------------
Net income (loss) $ (16,420) $ (13,324) $ 19,674 $ - $ (10,070)
=============== =============== =============== =============== ===============
</TABLE>
<TABLE>
P&L Coal Holdings Corporation
Unaudited Supplemental Condensed Statements of Consolidated Operations
For the Quarter Ended December 31, 1998
(In thousands)
Parent Guarantor Non-guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Total revenues $ - $ 536,674 $ 45,930 $ - $ 582,604
Costs and expenses:
Operating costs and expenses - 431,694 28,348 - 460,042
Depreciation, depletion and amortization - 45,376 7,748 - 53,124
Selling and administrative expenses - 19,319 (966) - 18,353
Interest expense 47,437 (586) 518 - 47,369
Interest income (639) (3,431) (616) - (4,686)
--------------- --------------- --------------- --------------- ---------------
Income (loss) before income taxes (46,798) 44,302 10,898 - 8,402
Income tax provision (benefit) (8,673) 7,526 4,431 - 3,284
--------------- --------------- --------------- --------------- ---------------
Net income (loss) $ (38,125) $ 36,776 $ 6,467 $ - $ 5,118
=============== =============== =============== =============== ===============
</TABLE>
<PAGE>
<TABLE>
P&L Coal Holdings Corporation
Unaudited Supplemental Condensed Statements of Consolidated Operations
For the Nine Months Ended December 31, 1999
(In thousands)
Parent Guarantor Non-guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Total revenues $ - $ 1,494,084 $ 460,624 $ (5,315) $ 1,949,393
Costs and expenses:
Operating costs and expenses - 1,262,618 319,944 (5,315) 1,577,247
Depreciation, depletion and amortization - 139,997 46,452 - 186,449
Selling and administrative expenses - 51,165 12,231 - 63,396
Interest expense 130,949 48,684 12,903 (42,139) 150,397
Interest income (26,790) (17,831) (431) 42,139 (2,913)
--------------- --------------- --------------- --------------- ---------------
Income (loss) before income taxes (104,159) 9,451 69,525 - (25,183)
Income tax provision (benefit) (30,790) 5,464 24,088 - (1,238)
Minority interests - - 8,516 - 8,516
--------------- --------------- --------------- --------------- ---------------
Net income (loss) $ (73,369) $ 3,987 $ 36,921 $ - $ (32,461)
=============== =============== =============== =============== ===============
</TABLE>
<TABLE>
P&L Coal Holdings Corporation
Unaudited Supplemental Condensed Statements of Consolidated Operations
For the Period Ended December 31, 1998
(In thousands)
Parent Guarantor Non-guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Total revenues $ - $ 1,290,511 $ 112,258 $ - $ 1,402,769
Costs and expenses:
Operating costs and expenses - 1,064,734 72,589 - 1,137,323
Depreciation, depletion and amortization - 111,715 18,883 - 130,598
Selling and administrative expenses - 44,424 (323) - 44,101
Interest expense 116,698 4,939 1,578 - 123,215
Interest income (2,475) (9,248) (716) - (12,439)
--------------- --------------- --------------- --------------- ---------------
Income (loss) before income taxes (114,223) 73,947 20,247 - (20,029)
Income tax provision (benefit) (25,781) 12,476 8,117 - (5,188)
--------------- --------------- --------------- --------------- ---------------
Net income (loss) $ (88,442) $ 61,471 $ 12,130 $ - $ (14,841)
=============== =============== =============== =============== ===============
</TABLE>
<PAGE>
<TABLE>
P&L Coal Holdings Corporation
Unaudited Supplemental Condensed Consolidated Balance Sheets
As of December 31, 1999
(In thousands)
Parent Guarantor Non-guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 76 $ 32,562 $ 54,855 $ - $ 87,493
Accounts receivable 1,823 260,280 103,912 (35,975) 330,040
Inventories - 179,282 56,375 - 235,657
Assets from power trading activities - - 790,669 - 790,669
Other current assets 185 44,970 24,366 - 69,521
--------------- --------------- --------------- --------------- ---------------
Total current assets 2,084 517,094 1,030,177 (35,975) 1,513,380
Property, plant, equipment and mine
development - at cost - 4,355,675 791,164 - 5,146,839
Less accumulated depreciation, depletion
and amortization - (288,047) (72,823) - (360,870)
--------------- --------------- --------------- --------------- ---------------
- 4,067,628 718,341 - 4,785,969
Investments and other assets 1,958,935 1,437,354 146,197 (3,161,804) 380,682
--------------- --------------- --------------- --------------- ---------------
Total assets $ 1,961,019 $ 6,022,076 $ 1,894,715 $ (3,197,779) $ 6,680,031
=============== =============== =============== =============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term borrowings and current
maturities of long-term debt $ 20,724 $ 21,354 $ 34,356 $ - $ 76,434
Payable to affiliates, net (287,368) 288,847 (1,479) - -
Income taxes payable - - 11,659 - 11,659
Liabilities from power trading activities - - 391,956 - 391,956
Accounts payable and accrued expenses 48,328 427,299 153,748 (35,975) 593,400
--------------- --------------- --------------- --------------- ---------------
Total current liabilities (218,316) 737,500 590,240 (35,975) 1,073,449
Long-term debt, less current maturities 1,707,670 179,652 542,748 - 2,430,070
Deferred income taxes - 697,432 59,995 - 757,427
Other noncurrent liabilities - 1,873,920 41,435 - 1,915,355
--------------- --------------- --------------- --------------- ---------------
Total liabilities 1,489,354 3,488,504 1,234,418 (35,975) 6,176,301
Minority interests - - 32,065 - 32,065
Stockholders' equity 471,665 2,533,572 628,232 (3,161,804) 471,665
--------------- --------------- --------------- --------------- ---------------
Total liabilities and stockholders'
equity $ 1,961,019 $ 6,022,076 $ 1,894,715 $ (3,197,779) $ 6,680,031
=============== =============== =============== =============== ===============
</TABLE>
<PAGE>
<TABLE>
P&L Coal Holdings Corporation
Unaudited Supplemental Condensed Consolidated Balance Sheets
As of March 31, 1999
(In thousands)
Parent Guarantor Non-guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ - $ 130,861 $ 63,217 $ - $ 194,078
Accounts receivable - 220,287 107,770 (15,309) 312,748
Inventories - 202,749 47,148 - 249,897
Assets from power trading activities - - 1,037,300 - 1,037,300
Other current assets - 24,293 14,145 - 38,438
--------------- --------------- --------------- --------------- ---------------
Total current assets - 578,190 1,269,580 (15,309) 1,832,461
Property, plant, equipment and mine
development - at cost - 4,298,203 693,234 - 4,991,437
Less accumulated depreciation,
depletion and amortization - (158,295) (35,197) - (193,492)
--------------- --------------- --------------- --------------- ---------------
- 4,139,908 658,037 - 4,797,945
Investments and other assets 2,461,362 1,464,147 158,912 (3,690,896) 393,525
--------------- --------------- --------------- --------------- ---------------
Total assets $ 2,461,362 $ 6,182,245 $ 2,086,529 $ (3,706,205) $ 7,023,931
=============== =============== =============== =============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term borrowings and current
maturities of long-term debt $ 19,670 $ 21,666 $ 31,068 $ - $ 72,404
Payable to affiliates, net 152,364 (151,199) (1,165) - -
Income taxes payable - 229 7,079 - 7,308
Liabilities from power trading activities - - 638,062 - 638,062
Accounts payable and accrued expenses 56,562 440,331 146,150 (15,309) 627,734
--------------- --------------- --------------- --------------- ---------------
Total current liabilities 228,596 311,027 821,194 (15,309) 1,345,508
Long-term debt, less current maturities 1,737,536 173,364 559,075 - 2,469,975
Deferred income taxes - 711,932 68,243 - 780,175
Other noncurrent liabilities - 1,886,337 22,796 - 1,909,133
--------------- --------------- --------------- --------------- ---------------
Total liabilities 1,966,132 3,082,660 1,471,308 (15,309) 6,504,791
Minority interest - - 23,910 - 23,910
Stockholders' equity 495,230 3,099,585 591,311 (3,690,896) 495,230
--------------- --------------- --------------- --------------- ---------------
Total liabilities and stockholders'
equity $ 2,461,362 $ 6,182,245 $ 2,086,529 $ (3,706,205) $ 7,023,931
=============== =============== =============== =============== ===============
</TABLE>
<PAGE>
<TABLE>
P&L Coal Holdings Corporation
Unaudited Supplemental Condensed Statements of Consolidated Cash Flows
For the Nine Months Ended December 31, 1999
(In thousands)
Parent Guarantor Non-guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in) operating
activities $ (100,192) $ 70,345 $ 76,313 $ - $ 46,466
--------------- --------------- --------------- --------------- ---------------
Additions to property, plant, equipment
and mine development - (88,498) (35,532) - (124,030)
Acquisitions, net - - (44,203) - (44,203)
Contribution from minority interests - - 704 - 704
Proceeds from coal contract restructuring - 877 21,000 - 21,877
Proceeds from property and equipment disposals - 6,144 592 - 6,736
Proceeds from sale-leaseback transactions - 34,234 - - 34,234
--------------- --------------- --------------- --------------- ---------------
Net cash used in investing activities - (47,243) (57,439) - (104,682)
--------------- --------------- --------------- --------------- ---------------
Change in short-term borrowings - - (5,640) - (5,640)
Proceeds from long term debt - - 11,547 - 11,547
Payments of long-term debt (30,000) (1,380) (20,884) - (52,264)
Dividends paid to minority interests - 9,933 (12,225) - (2,292)
Net change in due to/from affiliates 130,268 (129,954) (314) - -
--------------- --------------- --------------- --------------- ---------------
Net cash provided by (used in)
financing activities 100,268 (121,401) (27,516) - (48,649)
Effect of exchange rate changes on
cash and equivalents - - 280 - 280
--------------- --------------- --------------- --------------- ---------------
Net increase (decrease) in cash and equivalents 76 (98,299) (8,362) - (106,585)
Cash and cash equivalents at beginning of period - 130,861 63,217 - 194,078
--------------- --------------- --------------- --------------- ---------------
Cash and cash equivalents at end of period $ 76 $ 32,562 $ 54,855 $ - $ 87,493
=============== =============== =============== =============== ===============
</TABLE>
<PAGE>
<TABLE>
P&L Coal Holdings Corporation
Unaudited Supplemental Condensed Statements of Consolidated Cash Flows
For the Period Ended December 31, 1998
(In thousands)
Parent Guarantor Non-guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities $ (129,339) $ 338,737 $ 9,453 $ - $ 218,851
--------------- --------------- --------------- --------------- ---------------
Additions to property, plant, equipment
and mine development - (80,369) (53,145) - (133,514)
Acquisitions, net (1,994,635) - - - (1,994,635)
Proceeds from coal contract restructuring - 3,889 - - 3,889
Proceeds from property and equipment disposals - 7,783 609 - 8,392
--------------- --------------- --------------- --------------- ---------------
Net cash used in investing activities (1,994,635) (68,697) (52,536) - (2,115,868)
--------------- --------------- --------------- --------------- ---------------
Change in short-term borrowings - - (25,812) - (25,812)
Proceeds from long-term debt 1,817,390 - 72,710 - 1,890,100
Payments of long-term debt (158,583) (1,154) (19,291) - (179,028)
Capital contribution 398,000 - 82,000 - 480,000
Net change in due to/from affiliates 67,167 (57,947) (10,160) - (940)
--------------- --------------- --------------- --------------- ---------------
Net cash provided by (used in)
financing activities 2,123,974 (59,101) 99,447 - 2,164,320
Effect of exchange rate changes on
cash and equivalents - - (197) - (197)
--------------- --------------- --------------- --------------- ---------------
Net increase in cash and cash equivalents - 210,939 56,167 - 267,106
Cash and cash equivalents at beginning of period - - - - -
--------------- --------------- --------------- --------------- ---------------
Cash and cash equivalents at end of period $ - $ 210,939 $ 56,167 $ - $ 267,106
=============== =============== =============== =============== ===============
</TABLE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
For purposes of comparison to prior year operating results, the results of
operations and cash flows for the nine months ended December 31, 1998 reflect
the results of the Company from April 1 to December 31, 1998 (the Company
acquired the Predecessor Company on May 19, 1998 and prior to such date had no
separate operations) and the results of the Predecessor Company from April 1 to
May 19, 1998.
The results of operations and cash flows for the period ended December 31, 1999
may not be directly comparable to the other periods indicated as a result of the
effects of restatement of assets and liabilities to their estimated fair market
value in accordance with the application of purchase accounting pursuant to
Accounting Principles Board Opinion No. 16.
<PAGE>
<TABLE>
Quarter Ended Nine Months Ended
------------------------------- --------------------------------
December 31, December 31, December 31, December 31,
(In thousands) 1999 1998 1999 1998<F1>
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Revenues:
Sales $ 635,340 $ 546,620 $ 1,859,343 $ 1,606,427
Other revenues 35,385 35,984 90,050 88,750
--------------- --------------- --------------- ---------------
Total revenues 670,725 582,604 1,949,393 1,695,177
Operating costs and expenses 625,431 531,519 1,827,092 1,597,058
--------------- --------------- --------------- ---------------
Operating profit 45,294 51,085 122,301 98,119
Interest expense 49,545 47,369 150,397 127,437
Interest income (818) (4,686) (2,913) (14,106)
--------------- --------------- --------------- ---------------
Income (loss) before income taxes (3,433) 8,402 (25,183) (15,212)
Income tax provision (benefit) 1,242 3,284 (1,238) (847)
Minority interests 5,395 - 8,516 -
--------------- --------------- --------------- ---------------
Net income (loss) $ (10,070) $ 5,118 $ (32,461) $ (14,365)
=============== =============== =============== ===============
Other Data:
EBITDA<F2> $ 106,444 $ 104,209 $ 308,750 $ 254,935
Cash provided by (used in):
Operating activities $ 46,466 $ 188,392
Investing activities (104,682) (2,135,116)
Financing activities (48,649) 2,187,857
Tons sold (In millions) 48.8 43.4 143.3 127.2
<FN>
<F1> Represents the combination of the results of operations for the period from
May 20, 1998 to December 31, 1998 with those of the Predecessor Company for
the period from April 1 to May 19, 1998.
<F2> EBITDA is defined as income before deducting net interest expense, income
taxes, minority interests and depreciation, depletion and amortization.
EBITDA has been reduced by costs associated with reclamation, retiree
health care and workers' compensation. EBITDA is not a substitute for
operating income, net income and cash flow from operating activities as
determined in accordance with generally accepted accounting principles as a
measure of profitability or liquidity. EBITDA is presented as additional
information because management believes it to be a useful indicator of the
Company's ability to meet debt service and capital expenditure
requirements. Because EBITDA is not calculated identically by all
companies, the presentation herein may not be comparable to other similarly
titled measures of other companies. The amounts presented include EBITDA
losses for Citizens Power of $3.4 million, $0.7 million, $6.6 million and
$0.3 million for the quarters ended December 31, 1999 and 1998 and the nine
months ended December 31, 1999 and 1998, respectively.
</FN>
</TABLE>
<PAGE>
Quarter Ended December 31, 1999
Sales. Sales for the quarter ended December 31, 1999 were $635.3 million, an
increase of $88.7 million, or 16.2%. Overall sales volume increased 12.4% to
48.8 million tons. The current quarter results include sales of 4.6 million tons
and $85.6 million from Black Beauty Coal Company (Black Beauty), which in the
prior year was accounted for under the equity method (and included as Other
Revenues). The Company increased its ownership interest in Black Beauty to 81.7%
effective January 1, 1999. Sales for the third quarter also increased $19.3
million as a result of the Moura Mine acquisition in Australia completed in
August 1999.
Excluding Black Beauty, sales in the U.S. decreased $27.8 million, mainly as
mild winter weather increased customer stockpiles, causing lower demand and
pricing in our Midwestern and Appalachian markets. Further declines were
attributable to operational difficulties at two eastern mines and the closure of
one mine and suspension of two mines during the current quarter. The operational
difficulties were primarily related to delays in longwall panel development and
adverse geological conditions. Excluding Moura, sales in Australia increased
$11.4 million for the quarter, mainly due to higher customer demand.
Other Revenues. Other revenues decreased $0.6 million as compared to the third
quarter of fiscal year 1999. In the current quarter, contract restructuring
gains increased $7.7 million as Black Beauty executed the buyout of a contract
to provide capacity to meet a new long-term coal supply agreement. The prior
year quarter included income from monetization of a long-term royalty agreement
of $3.9 million and joint venture equity income was lower due to the
consolidation of Black Beauty in the current year.
Operating Profit. Operating profit declined $5.8 million for the three-month
period ended December 31, 1999. Operating profit attributable to U.S. mining
locations decreased $2.3 million, mainly due to lower profits in Appalachia
($17.8 million) resulting from the weak market conditions and operating
difficulties discussed above, partially offset by the $7.7 million in higher
revenues from contract restructurings and the consolidation of Black Beauty
($4.2 million increase, excluding contract restructuring gains). In addition,
the higher royalty income in the prior year previously mentioned also
contributed to the variance.
Operating profit increased $2.0 million in Australia, mainly due to higher
demand and contributions from the recently acquired Moura mine. Citizens Power's
operating profit declined $2.7 million due mainly to the timing of closing asset
restructuring transactions in the current year.
Interest Expense. Interest expense increased $2.1 million, or 4.4%, to $49.5
million. This increase is due to the inclusion of Black Beauty's results in the
current year and higher short-term Australian borrowings to fund the Moura Mine
acquisition, partially offset by lower interest expense on the acquisition
borrowings due to prepayments and lower average borrowing costs.
Interest Income. Interest income for the three months ended December 31, 1999
was $0.8 million, a decrease of $3.9 million. This decrease is primarily due to
interest income associated with a prior year Federal tax refund, and higher cash
balances in the prior year in anticipation of the acquisition of the Black
Beauty controlling interest.
Income Taxes. For the quarter ended December 31, 1999, the Company had tax
expense of $1.2 million, and a pretax loss of $3.4 million, compared to tax
expense of $3.3 million and pretax income of $8.4 million in the prior year
quarter. The Company's consolidated tax position is impacted by the percentage
depletion tax deduction utilized by the Company and its subsidiaries that
creates an alternative minimum tax situation, and the positive contribution of
its Australian operations which are taxed at a higher rate than the U.S. On a
consolidated basis, the foreign tax expense exceeded the tax benefit recorded on
U.S. pretax losses.
Nine Months Ended December 31, 1999
Sales. Sales for the nine months ended December 31, 1999 were $1,859.3 million,
an increase of $252.9 million, or 15.7%, over the prior year. Overall sales
volume increased 12.7% to 143.3 million tons. The Black Beauty and Moura
acquisitions contributed $250.6 million and $27.1 million, respectively, in
sales for the nine-month period. Excluding Black Beauty, sales in the U.S.
declined $45.8 million, primarily due to declines in Appalachia ($50.0 million).
Appalachia was impacted by the mild winter weather, lower export demand and
pricing and reduced production volumes caused by operational difficulties. Sales
in the Midwest declined $12.4 million due to the closure and suspension of three
mines, while Powder River Basin sales have improved $19.2 million as a result of
higher demand and pricing. Excluding the Moura Mine acquisition, sales improved
$24.1 million in Australia due to higher customer demand.
Other Revenues. Other revenues were $90.1 million for the nine-month period, an
increase of $1.3 million over the prior year. The current year results include
$7.7 million in higher contract restructuring gains, partially offset by $4.4
million in lower revenues at Citizens Power due to the timing of asset
restructuring activities, and lower joint venture equity income due to the
consolidation of Black Beauty.
<PAGE>
Operating Profit. Operating profit was $122.3 million, an increase of $24.2
million over the prior year. U.S. mining operating profit improved $23.2
million, including $16.7 million from the acquisition of Black Beauty. The
remainder of the increase in the U.S. primarily relates to higher productivity
and lower operating and reclamation costs at the Midwestern operations, higher
volumes and pricing in Powder River, and $7.7 million in higher gains on
contract restructurings, partially offset by operational difficulties and the
unfavorable market conditions in Appalachia discussed above, higher operating
costs and lower volumes in the Southwest region, lower coal royalty income due
to monetizations in the prior year and higher costs for past mining obligations
due mainly to a multiemployer benefit plan refund of $2.8 million in the prior
year that is non-recurring.
Operating profit improved $10.4 million in Australia, reflecting higher volumes,
lower than anticipated repair and maintenance expenses and contributions from
the new Bengalla and Moura mines. Citizens Power's operating profit declined
$6.3 million, primarily due to delays in the closing of asset restructuring
transactions.
Interest Expense. Interest expense increased $23.0 million for the nine-month
period, to $150.4 million, primarily because prior year results reflected
acquisition-related indebtedness only from the May 20, 1998 acquisition date
forward.
Interest Income. Interest income was $2.9 million for the nine months ended
December 31, 1999, a decrease of $11.2 million. The prior year results reflect
interest income from higher average cash balances, and interest from the Federal
tax refund discussed above.
Liquidity and Capital Resources
Net cash provided by operating activities was $46.5 million for the nine-month
period ended December 31, 1999, a decrease of $141.0 million. The prior year
results include the monetization of a long-term royalty agreement that resulted
in a prepayment to the Company of $135.9 million.
Excluding the effect of acquisitions, net cash used in investing activities
decreased $80.0 million compared to the prior nine-month period. This is mainly
the result of a decrease in capital expenditures amounting to $30.5 million, and
increases in proceeds from contract restructurings ($17.7 million), asset sales
($5.3 million) and sale-leaseback transactions ($25.8 million). The prior year
results include the acquisition of the Predecessor Company for approximately
$2.0 billion, while the current year results include the acquisition of the
Moura Mine in Australia for $30.2 million and the $14.0 million acquisition of
Catlin Coal Company (Catlin). The Catlin acquisition occurred in November 1999
and provides Black Beauty with a source of low sulfur coal located near the
plant of a customer that recently agreed to a new long-term coal supply
agreement. As of December 31, 1999, the Company had $120.9 million of committed
capital expenditures, primarily related to coal reserves and mining equipment.
It is anticipated these capital expenditures will be funded through available
cash and credit facilities. The Company has approximately $270 million of unused
borrowing capacity under its revolving credit agreements.
Net cash used in financing activities for the nine months ended December 31,
1999 was $48.6 million, compared to the prior year's proceeds of $2.2 billion.
The prior year results include the financing of the acquisition of the
Predecessor Company of $1.8 billion and the related equity contribution of
$480.0 million, while the current year results include borrowings to fund the
Moura and Catlin acquisitions net of a debt prepayment of $30.0 million and an
overall reduction in short-term borrowings. As of December 31, 1999, the Company
had total indebtedness of $2,506.5 million, consisting of the following:
(In millions)
Term loans under senior credit facilities $ 810.0
9.625% Senior Subordinated Notes due 2008 ("Senior
Subordinated Notes") 498.7
8.875% Senior Notes due 2008 ("Senior Notes") 398.9
Non-Recourse Debt (Citizens Power) 323.4
5.0% Subordinated Note (Peabody Holding Company) 197.8
Senior unsecured notes under various agreements (Black
Beauty Coal Company) 99.3
Project finance facility (Peabody Resources) 76.4
Bank loan facilities 49.6
Capital lease obligations 28.0
Other 24.4
-------------
$ 2,506.5
=============
<PAGE>
The Senior Credit Facilities include a Revolving Credit Facility that provides
for aggregate borrowings of up to $150.0 million and letters of credit of up to
$330.0 million. The Company had no borrowings outstanding under the Revolving
Credit Facility during either period. Interest rates on the revolving loans
under the Revolving Credit Facility are based on the Base Rate (as defined in
the Senior Credit Facilities), or LIBOR (as defined in the Senior Credit
Facilities) at the Company's option. On October 1, 1998, the Company entered
into two interest rate swaps to fix the interest cost on $500 million of
long-term debt outstanding under the Term Loan Facility. The Company will pay a
fixed rate of approximately 7.0% on $300 million of such long-term debt for a
period of three years ending October 1, 2001, and on $200 million of such
long-term debt for two years ending October 1, 2000. The Revolving Credit
Facility commitment matures in fiscal year 2005.
The Revolving Credit Facility and related Term Loan Facility also contain
certain restrictions and limitations including, but not limited to, financial
covenants that will require the Company to maintain and achieve certain levels
of financial performance and limit the payment of cash dividends and similar
restricted payments. In addition, the Senior Credit Facilities prohibit the
Company from allowing its Restricted Subsidiaries (which include all Guarantors)
to create or otherwise cause any encumbrance or restriction on the ability of
any such Restricted Subsidiary to pay any dividends or make certain other
upstream payments subject to certain exceptions.
The indentures governing the Senior Notes and Senior Subordinated Notes permit
the Company and its Restricted Subsidiaries (which include all subsidiaries of
the Company except Citizens Power and its subsidiaries) to incur additional
indebtedness, including secured indebtedness, subject to certain limitations. In
addition, among other customary restrictive covenants, the indentures prohibit
the Company and its Restricted Subsidiaries from creating or otherwise causing
any encumbrance or restriction on the ability of any Restricted Subsidiary that
is not a Guarantor to pay dividends or to make certain other upstream payments
to the Company or any of its Restricted Subsidiaries (subject to certain
exceptions). The Company was in compliance with all of the restrictive covenants
of its loan agreements as of December 31, 1999.
Other
Mine Closure. In October 1999, the Company suspended operations at its Marissa
Operating Unit in Illinois. The Marissa Operating Unit, which shipped 4.4
million tons of coal in fiscal year 1999, had attempted to secure additional
business after its principal customer began shifting its supply to lower-sulfur
coal from the Company's Powder River operations. These efforts were
unsuccessful, and as a result the mine was closed in December 1999. The Company
does not anticipate a material adverse impact on its results of operations or
financial position from the mine closure.
Mine Suspensions. In addition, the Company suspended operations at its Lynnville
and Hawthorn mines in Indiana in December 1999. The suspension of operations at
these locations is not anticipated to materially affect the consolidated results
of operations or financial position, as the primary customers of these mines
have signed long-term coal supply agreements to purchase coal from another
Peabody subsidiary, Black Beauty. The Company periodically evaluates the
possibility of suspending other mines due to market conditions. Such
suspensions, if any, are not expected to have a material adverse impact on the
Company's results of operations or financial condition.
Status of West Virginia Mountaintop Mining. On October 20, 1999, the U.S.
District Court for the Southern District of West Virginia issued a permanent
injunction against the West Virginia Department of Environmental Protection in a
mountaintop-mining lawsuit. As interpreted by the Director of the Department of
Environmental Protection, the injunction prohibits the Department from approving
any new permits that would authorize the placement of excess spoil in
intermittent and perennial streams for the primary purpose of waste (overburden)
disposal. The Department also interpreted the injunction to affect certain
existing coal refuse ponds, sediment ponds and mountaintop mining operations.
The Department has filed an appeal of the decision with the Fourth Circuit Court
of Appeals. On October 29, 1999, the District Court issued a stay of its
decision pending a resolution of the appeal. The Court of Appeals has not yet
set a briefing schedule for the appeal. The Company does not believe the court
order (which is currently being stayed) will have any immediate effect on its
West Virginia mines.
In late 1999 certain members of Congress pursued legislation which would have
resolved the issues raised by the district court's decision. That legislation
did not pass in 1999 but the Company anticipates that similar legislation will
be introduced in 2000. The Company cannot predict whether any such legislation
will be passed by Congress in 2000.
<PAGE>
Recent Accounting Pronouncements. In June 1998, the Financial Accounting
Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities." SFAS No. 133 requires the recognition of all derivatives as
assets or liabilities within the balance sheet, and requires both the
derivatives and the underlying exposure to be recorded at fair value. Any gain
or loss resulting from changes in fair value will be recorded as part of the
results of operations, or as a component of comprehensive income or loss,
depending upon the intended use of the derivative. The Financial Accounting
Standards Board also issued SFAS No. 137, which defers the effective date of
SFAS No. 133 to all fiscal quarters of fiscal years beginning after June 15,
2000 (effective April 1, 2001 for the Company). The Company is evaluating the
requirements of this Statement and has not determined the impact of adoption on
the consolidated financial statements.
Year 2000 Issue. The "Year 2000 Issue" is a term used to describe the problems
created by systems that are unable to accurately interpret dates after December
31, 1999. These problems are derived predominantly from the fact that many
software programs have historically categorized the "year" in a two-digit
format.
The Company has not experienced any significant impact on its systems or
operations as a result of the Year 2000 Issue. The total cost incurred to
prepare for the Year 2000 Issue was approximately $6.4 million, which includes
$2.3 million for the purchase of new software and hardware that was capitalized
and $4.1 million that was expensed as incurred.
In addition, the Company has not encountered any significant problems with third
parties such as its customers, suppliers, service providers and other business
partners. However, if these or other third parties with whom the Company
conducts business experience lingering Year 2000 Issues, the Company could
experience a material adverse impact on its results of operations and financial
position.
Forward Looking Statements. This quarterly report and certain press releases and
statements the Company makes from time to time include statements of the
Company's and management's expectations, intentions, plans and beliefs that
constitute "forward looking statements" within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934
and are intended to come within the safe harbor protection provided by those
sections. Forward looking statements involve risks and uncertainties, and a
variety of factors could cause actual results to differ materially from the
Company's current expectations, including but not limited to: coal and power
market conditions and fluctuations in the demand for coal as an energy source,
economic conditions, weather conditions, the continued availability of long-term
coal supply contracts, railroad performance, foreign currency translation,
changes in the government regulation of the mining industry, risks inherent to
mining, changes in the Company's leverage position, the ability to successfully
implement operating strategies, the impact of Year 2000 compliance by the
Company or those entities with which the Company does business and other factors
discussed in the Company's filings with the Securities and Exchange Commission.
Readers are cautioned not to place undue reliance on these forward looking
statements, which speak only as of the date hereof. The Company undertakes no
obligation to publicly release the results of any revisions to such forward
looking statements that may be made to reflect events or circumstances after the
date hereof, or thereof, as the case may be, or to reflect the occurrence of
anticipated events.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Navajo Nation
On June 18, 1999, The Navajo Nation served the Company's subsidiaries, Peabody
Holding Company, Inc., Peabody Coal Company and Peabody Western Coal Company,
with a complaint that had been filed in the U. S. District Court for the
District of Columbia. Other defendants in the litigation are two utilities, two
current employees and one former employee. The Navajo Nation has alleged sixteen
claims including civil Racketeer Influenced and Corrupt Organizations Act, or
RICO, claims, fraud and tortious interference with contractual relationships.
The plaintiff is seeking various remedies including actual damages of at least
$600 million which could be trebled under the RICO counts, punitive damages of
at least $1 billion, a determination that Peabody Western Coal Company's two
coal leases for the Kayenta and Black Mesa mines have terminated due to the
failure of a condition and a reformation of the two coal leases to adjust the
royalty rate to 20%. All defendants have filed a motion to dismiss the
complaint. The Company believes this matter will be resolved without a material
adverse effect on its financial condition or results of operations.
Minerals Management Service
The Minerals Management Service (MMS) issued a preliminary administrative
decision in August 1992, determining that a subsidiary of the Company,
subsequently merged into Powder River Coal Company, had underpaid royalties owed
to the federal government. On October 15, 1999, the Company signed a settlement
agreement with the federal government on all civil claims related to the
dispute. The Company agreed to pay $11.0 million in two installments, which was
charged against a previously established reserve.
<PAGE>
Environmental Claims
Environmental claims have been asserted against a subsidiary of the Company at
18 sites in the United States. Some of these claims are based on the
Comprehensive Environmental Response Compensation and Liability Act of 1980, as
amended, and on similar state statutes. The majority of these sites are related
to activities of former subsidiaries of the Company.
The Company's policy is to accrue environmental cleanup-related costs of a
non-capital nature when those costs are believed to be probable and can be
reasonably estimated. The quantification of environmental exposures requires an
assessment of many factors, including changing laws and regulations,
advancements in environmental technologies, the quality of information available
related to specific sites, the assessment stage of each site investigation,
preliminary findings and the length of time involved in remediation or
settlement. For certain sites, the Company also assesses the financial
capability of other potentially responsible parties and, where allegations are
based on tentative findings, the reasonableness of the Company's apportionment.
The Company has not anticipated any recoveries from insurance carriers or other
potentially responsible third parties in its Consolidated Balance Sheets. The
liabilities for environmental cleanup-related costs recorded in the Consolidated
Balance Sheet at December 31, 1999 were $56.3 million. This amount represents
those costs that the Company believes are probable and reasonably estimable. In
the event that future remediation expenditures are in excess of amounts accrued,
management does not anticipate that they will have a material adverse effect on
the results of operations or financial position of the Company.
Other
In addition, the Company at times becomes a party to claims, lawsuits,
arbitration proceedings and administrative procedures in the ordinary course of
business. Management believes that the ultimate resolution of pending or
threatened proceedings will not have a material adverse effect on the results of
operations or financial position of the Company.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
See the Exhibit Index at page 21 of this report.
(b) Reports on Form 8-K
None.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
P&L COAL HOLDINGS CORPORATION
Date: February 11, 2000 By: /s/ RICHARD A. NAVARRE
-------------------------
Richard A. Navarre
Vice President and Chief Financial Officer
(Principal Financial Officer)
<PAGE>
EXHIBIT INDEX
The exhibits below are numbered in accordance with the Exhibit Table of Item 601
of Regulation S-K.
Exhibit
No. Description of Exhibit
------- ----------------------
3.1 Second Amended and Restated Certificate of Incorporation of P&L
Coal Holdings Corporation (Incorporated by reference to Exhibit
3.1 of the Company's Form 10-Q for the third quarter ended
December 31, 1998).
3.2 By-Laws of P&L Coal Holdings Corporation (Incorporated by
reference to Exhibit 3.2 of the Company's Form S-4 Registration
Statement No. 333-59073).
4.9 Second Supplemental Senior Note Indenture dated as of December
31, 1998 among the Guaranteeing Subsidiary (as defined therein),
P&L Coal Holdings Corporation, the other Senior Note Guarantors
(as defined in the Senior Note Indenture) and State Street Bank
and Trust Company, as Senior Note Trustee.
4.10 Second Supplemental Senior Subordinated Note Indenture dated as
of December 31, 1998 among the Guaranteeing Subsidiary (as
defined therein), P&L Coal Holdings Corporation, the other Senior
Subordinated Note Gurantors (as defined in the Senior
Subordinated Note Indenture) and State Street Bank and Trust
Company, as Senior Subordinated Note Trustee.
4.11 Third Supplemental Senior Note Indenture dated as of June 30,
1999 among the Guaranteeing Subsidiary (as defined therein), P&L
Coal Holdings Corporation, the other Senior Note Gurantors (as
defined in the Senior Note Indenture) and State Street Bank and
Trust Company, as Senior Note Trustee.
4.12 Third Supplemental Senior Subordinated Note Indenture dated as of
June 30, 1999 among the Guaranteeing Subsidiary (as defined
therein), P&L Coal Holdings Corporation, the other Senior
Subordinated Note Gurantors (as defined in the Senior
Subordinated Note Indenture) and State Street Bank and Trust
Company, as Senior Subordinated Note Trustee.
27 Financial Data Schedule (filed electronically with the SEC only).
SECOND SUPPLEMENTAL SENIOR NOTE INDENTURE
SECOND SUPPLEMENTAL SENIOR NOTE INDENTURE (this "Supplemental Senior Note
Indenture"), dated as of December 31, 1998, among Gallo Finance Company, a
Delaware corporation (together, the "Guaranteeing Subsidiaries"), a subsidiary
of P&L Coal Holdings Corporation (or its permitted successor), a Delaware
corporation (the "Company"), the Company, the other Senior Note Guarantors (as
defined in the Senior Note Indenture referred to herein) and State Street Bank
and Trust Company, as Senior Note Trustee under the Senior Note Indenture
referred to below (the "Senior Note Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the Senior
Note Trustee a Senior Note Indenture (the "Senior Note Indenture"), dated as of
May 18, 1998 providing for the issuance of an aggregate principal amount of up
to $550.0 million of 8-7/8% Senior Notes due 2008 (the "Senior Notes");
WHEREAS, the Senior Note Indenture provides that under certain
circumstances the Guaranteeing Subsidiary shall execute and deliver to the
Senior Note Trustee a supplemental Senior Note Indenture pursuant to which the
Guaranteeing Subsidiary shall unconditionally guarantee all of the Company's
Obligations under the Senior Notes and the Senior Note Indenture on the terms
and conditions set forth herein (the "Senior Subsidiary Guarantee"); and
WHEREAS, pursuant to Section 9.01 of the Senior Note Indenture, the Senior
Note Trustee is authorized to execute and deliver this Supplemental Senior Note
Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the
Guaranteeing Subsidiary and the Senior Note Trustee mutually covenant and agree
for the equal and ratable benefit of the Holders of the Senior Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Senior Note Indenture.
2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby agrees
as follows:
(a) Along with all Senior Note Guarantors named in the Senior
Note Indenture, to jointly and severally Guarantee to each Holder of a
Senior Note authenticated and delivered by the Senior Note Trustee and
to the Senior Note Trustee and its successors and assigns,
irrespective of the validity and enforceability of the Senior Note
Indenture, the Senior Notes or the obligations of the Company
hereunder or thereunder, that:
(i) the principal of and interest on the Senior Notes will
be promptly paid in full when due, whether at maturity, by
acceleration, redemption or otherwise, and interest on the
overdue principal of and interest on the Senior Notes, if any, if
lawful, and all other obligations of the Company to the Holders
or the Senior Note Trustee hereunder or thereunder will be
promptly paid in full or performed, all in accordance with the
terms hereof and thereof; and
(ii) in case of any extension of time of payment or renewal
of any Senior Notes or any of such other obligations, that same
will be promptly paid in full when due or performed in accordance
with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise. Failing payment when due
of any amount so guaranteed or any performance so guaranteed for
whatever reason, the Senior Note Guarantors shall be jointly and
severally obligated to pay the same immediately.
(b) The obligations hereunder shall be unconditional,
irrespective of the validity, regularity or enforceability of the
Senior Notes or the Senior Note Indenture, the absence of any action
to enforce the same, any waiver or consent by any Holder of the Senior
Notes with respect to any provisions hereof or thereof, the recovery
of any judgment against the Company, any action to enforce the same or
any other circumstance which might otherwise constitute a legal or
equitable discharge or defense of a Senior Note Guarantor.
(c) The following is hereby waived: diligence presentment, demand
of payment, filing of claims with a court in the event of insolvency
or bankruptcy of the Company, any right to require a proceeding first
against the Company, protest, notice and all demands whatsoever.
(d) This Senior Subsidiary Guarantee shall not be discharged
except by complete performance of the obligations contained in the
Senior Notes and the Senior Note Indenture.
(e) If any Holder or the Senior Note Trustee is required by any
court or otherwise to return to the Company, the Senior Note
Guarantors, or any custodian, Senior Note Trustee, liquidator or other
similar official acting in relation to either the Company or the
Senior Note Guarantors, any amount paid by either to the Senior Note
Trustee or such Holder, this Senior Subsidiary Guarantee, to the
extent theretofore discharged, shall be reinstated in full force and
effect.
(f) The Guaranteeing Subsidiary shall not be entitled to any
right of subrogation in relation to the Holders in respect of any
obligations guaranteed hereby until payment in full of all obligations
guaranteed hereby.
(g) As between the Senior Note Guarantors, on the one hand, and
the Holders and the Senior Note Trustee, on the other hand, (x) the
maturity of the obligations guaranteed hereby may be accelerated as
provided in Article 6 of the Senior Note Indenture for the purposes of
this Senior Subsidiary Guarantee, notwithstanding any stay, injunction
or other prohibition preventing such acceleration in respect of the
obligations guaranteed hereby, and (y) in the event of any declaration
of acceleration of such obligations as provided in Article 6 of the
Senior Note Indenture, such obligations (whether or not due and
payable) shall forthwith become due and payable by the Senior Note
Guarantors for the purpose of this Senior Subsidiary Guarantee.
(h) The Senior Note Guarantors shall have the right to seek
contribution from any non-paying Senior Note Guarantor so long as the
exercise of such right does not impair the rights of the Holders under
the Senior Subsidiary Guarantee.
(i) Pursuant to Section 10.02 of the Senior Note Indenture,
the obligations of the Guaranteeing Subsidiary hereunder and
under Article 10 of the Senior Note Indenture will be limited to
the maximum amount as will, after giving effect to any maximum
amount and any other contingent and fixed liabilities that are
relevant under any applicable Bankruptcy or fraudulent conveyance
laws, and after giving effect to any collections from, rights to
receive contribution from or payments made by or on behalf of any
other Senior Note Guarantor in respect of the obligations of such
other Senior Note Guarantor under Article 10 of the Senior Note
Indenture, result in the obligations of such Senior Note
Guarantor under its Senior Subsidiary Guarantee not constituting
a fraudulent transfer or conveyance.
3. EXECUTION AND DELIVERY. The Guaranteeing Subsidiary agrees that the
Senior Subsidiary Guarantees shall remain in full force and effect
notwithstanding any failure to endorse on each Senior Note a notation of such
Senior Subsidiary Guarantee.
4. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS.
(a) Neither of the Guaranteeing Subsidiary may consolidate with or
merge with or into (whether or not such Senior Note Guarantor is the
surviving Person) another corporation, Person or entity whether or not
affiliated with such Senior Note Guarantor unless:
(i) subject to Section 10.04 of the Senior Note Indenture, the
Person formed by or surviving any such consolidation or merger (if
other than a Senior Note Guarantor or the Company) unconditionally
assumes all the obligations of such Senior Note Guarantor, pursuant to
a supplemental Senior Note Indenture in form and substance reasonably
satisfactory to the Senior Note Trustee, under the Senior Notes, the
Senior Note Indenture and the Senior Subsidiary Guarantee on the terms
set forth herein or therein; and
(ii) immediately after giving effect to such transaction, no
Default or Event of Default exists.
(b) In case of any such consolidation, merger, sale or conveyance and
upon the assumption by the successor corporation, by supplemental Senior
Note Indenture, executed and delivered to the Senior Note Trustee and
satisfactory in form to the Senior Note Trustee, of the Senior Subsidiary
Guarantee endorsed upon the Senior Notes and the due and punctual
performance of all of the covenants and conditions of the Senior Note
Indenture to be performed by the Senior Note Guarantor, such successor
corporation shall succeed to and be substituted for the Senior Note
Guarantor with the same effect as if it had been named herein as a Senior
Note Guarantor. Such successor corporation thereupon may cause to be signed
any or all of the Senior Subsidiary Guarantees to be endorsed upon all of
the Senior Notes issuable hereunder which theretofore shall not have been
signed by the Company and delivered to the Senior Note Trustee. All the
Senior Subsidiary Guarantees so issued shall in all respects have the same
legal rank and benefit under the Senior Note Indenture as the Senior
Subsidiary Guarantees theretofore and thereafter issued in accordance with
the terms of the Senior Note Indenture as though all of such Senior
Subsidiary Guarantees had been issued at the date of the execution hereof.
(c) Except as set forth in Articles 4 and 5 of the Senior Note
Indenture, and notwithstanding clauses (a) and (b) above, nothing contained
in the Senior Note Indenture or in any of the Senior Notes shall prevent
any consolidation or merger of a Senior Note Guarantor with or into the
Company or another Senior Note Guarantor, or shall prevent any sale or
conveyance of the property of a Senior Note Guarantor as an entirety or
substantially as an entirety to the Company or another Senior Note
Guarantor.
<PAGE>
5. RELEASES.
(a) In the event of a sale or other disposition of all of the assets
of any Senior Note Guarantor, by way of merger, consolidation or otherwise,
or a sale or other disposition of all to the capital stock of any Senior
Note Guarantor, then such Senior Note Guarantor (in the event of a sale or
other disposition, by way of merger, consolidation or otherwise, of all of
the capital stock of such Senior Note Guarantor) or the corporation
acquiring the property (in the event of a sale or other disposition of all
or substantially all of the assets of such Senior Note Guarantor) will be
released and relieved of any obligations under its Senior Subsidiary
Guarantee; provided that the Net Proceeds of such sale or other disposition
are applied in accordance with the applicable provisions of the Senior Note
Indenture, including without limitation Section 4.10 of the Senior Note
Indenture. Upon delivery by the Company to the Senior Note Trustee of an
Officers' Certificate and an Opinion of Counsel to the effect that such
sale or other disposition was made by the Company in accordance with the
provisions of the Senior Note Indenture, including without limitation
Section 4.10 of the Senior Note Indenture, the Senior Note Trustee shall
execute any documents reasonably required in order to evidence the release
of any Senior Note Guarantor from its obligations under its Senior
Subsidiary Guarantee.
(b) Any Senior Note Guarantor not released from its obligations under
its Senior Subsidiary Guarantee shall remain liable for the full amount of
principal of and interest on the Senior Notes and for the other obligations
of any Senior Note Guarantor under the Senior Note Indenture as provided in
Article 10 of the Senior Note Indenture.
6. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator, stockholder or agent of either Guaranteeing
Subsidiary, as such, shall have any liability for any obligations of the Company
or any Guaranteeing Subsidiary under the Senior Notes, any Senior Subsidiary
Guarantees, the Senior Note Indenture or this Supplemental Senior Note Indenture
or for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder of the Senior Notes by accepting a Senior Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Senior Notes. Such waiver may not be effective
to waive liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL
GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL SENIOR NOTE INDENTURE BUT
WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT
THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED
THEREBY.
8. COUNTERPARTS The parties may sign any number of copies of this
Supplemental Senior Note Indenture. Each signed copy shall be an original, but
all of them together represent the same agreement.
9. EFFECT OF HEADINGS. The Section headings herein are for convenience only
and shall not affect the construction hereof.
10. THE SENIOR NOTE TRUSTEE. The Senior Note Trustee shall not be
responsible in any manner whatsoever for or in respect of the validity or
sufficiency of this Supplemental Senior Note Indenture or for or in respect of
the recitals contained herein, all of which recitals are made solely by the
Guaranteeing Subsidiary and the Company.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Senior
Note Indenture to be duly executed and attested, all as of the date first above
written.
Dated:
AFFINITY MINING COMPANY
/s/ T.L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
ARID OPERATIONS, INC.
/s/ Collon Kennedy
- ------------------------------------------
Name: Collon Kennedy
Title: Vice President, Secretary & General Counsel
BIG SKY COAL COMPANY
/s/ T.L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Treasurer & Asst. Secretary
BLACKROCK FIRST CAPITAL CORPORATION
/s/ T.L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
BLUEGRASS COAL COMPANY
/s/ John Hill
- ------------------------------------------
Name: John Hill
Title: President
CABALLO COAL COMPANY
/s/ Richard Robinson
- ------------------------------------------
Name: Richard Robinson
Title: Vice President
CHARLES COAL COMPANY
/s/ T.L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
COAL PROPERTIES CORP.
/s/ J.A. Beck
- ------------------------------------------
Name: J.A. Beck
Title: President
COLONY BAY COAL COMPANY
By: Charles Coal Company
/s/ T.L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
COOK MOUNTAIN COAL COMPANY
/s/ J.A. Beck
- ------------------------------------------
Name: J.A. Beck
Title: President
<PAGE>
COTTONWOOD LAND COMPANY
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
EACC CAMPS, INC.
/s/ T.L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
EASTERN ASSOCIATED COAL CORP
/s/ T.L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
EASTERN ROYALTY CORP.
/s/ T.L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
GOLD FIELDS CHILE, S.A
/s/ Collon Kennedy
- ------------------------------------------
Name: Collon Kennedy
Title: Vice President, Secretary & General Counsel
GOLD FIELDS MINING CORPORATION
/s/ Collon Kennedy
- ------------------------------------------
Name: Collon Kennedy
Title: Vice President, Secretary & General Counsel
GOLD FIELDS OPERATING CO.-ORTIZ
/s/ Collon Kennedy
- ------------------------------------------
Name: Collon Kennedy
Title: Vice President, Secretary & General Counsel
GRAND EAGLE MINING, INC.
/s/ John Hill
- ------------------------------------------
Name: John Hill
Title: President
HAYDEN GULCH TERMINAL, INC.
/s/ D.A. Wagner
- ------------------------------------------
Name: D.A. Wagner
Title: President
INDEPENDENCE MATERIAL HANDLING COMPANY
/s/ S. F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
INTERIOR HOLDINGS CORP.
/s/ S. F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
<PAGE>
JAMES RIVER COAL TERMINAL COMPANY
/s/ R. A. Navarre
- ------------------------------------------
Name: R. A. Navarre
Title: President
JUNIPER COAL COMPANY
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
KAYENTA MOBILE HOME PARK, INC.
/s/ T. L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Treasurer & Asst. Secretary
MARTINKA COAL COMPANY
/s/ T. L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
MIDCO SUPPLY AND EQUIPMENT CORPORATION
/s/ D. C. Hegger
- ------------------------------------------
Name: D.C. Hegger
Title: President
MOUNTAIN VIEW COAL COMPANY
/s/ T. L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
NORTH PAGE COAL CORP.
/s/ T. L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
OHIO COUNTY COAL COMPANY
/s/ John Hill
- ------------------------------------------
Name: John Hill
Title: President
PATRIOT COAL COMPANY L.P.
By: Bluegrass Coal Company
/s/ John Hill
- ------------------------------------------
Name: John Hill
Title: President
PEABODY AMERICA, INC.
/s/ D. C. Hegger
- ------------------------------------------
Name: D.C. Hegger
Title: President
PEABODY COALSALES COMPANY
/s/ R.A. Navarre
- ------------------------------------------
Name: R.A. Navarre
Title: President
<PAGE>
PEABODY COALTRADE, INC.
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
PEABODY COAL COMPANY
/s/ D.A. Wagner
- ------------------------------------------
Name: D.A. Wagner
Title: Vice President
PEABODY DEVELOPMENT COMPANY
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
PEABODY ENERGY SOLUTIONS, INC.
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
PEABODY HOLDING COMPANY, INC.
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
PEABODY NATURAL RESOURCE COMPANY
By: Gold Fields Mining Corp.
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
PEABODY TERMINALS, INC.
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
PEABODY VENEZUELA COAL CORP.
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
PEABODY WESTERN COAL COMPANY
/s/ D.A. Wagner
- ------------------------------------------
Name: D.A. Wagner
Title: President
PINE RIDGE COAL COMPANY
/s/ T.L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
POWDER RIVER COAL COMPANY
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
<PAGE>
RIO ESCONDIDO COAL CORP.
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
SENECA COAL COMPANY
/s/ D.A. Wagner
- ------------------------------------------
Name: D.A. Wagner
Title: President
SENTRY MINING COMPANY
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
SNOWBERRY LAND COMPANY
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
STERLING SMOKELESS COAL COMPANY
/s/ T.L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
THOROUGHBRED, L.L.C.
By: Peabody Holding Company
/s/ Steven F. Schaab
- ------------------------------------------
Name: S. F. Schaab
Title: Vice President & Treasurer
GALLO FINANCE COMPANY
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
P&L COAL HOLDINGS CORPORATION
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
STATE STREET BANK AND TRUST COMPANY
as Senior Note Trustee
/s/ Philip G. Kane, Jr.
- ------------------------------------------
Name: Philip G. Kane, Jr.
Title: Vice President
SECOND SUPPLEMENTAL SENIOR SUBORDINATED NOTE INDENTURE
SECOND SUPPLEMENTAL SENIOR SUBORDINATED NOTE INDENTURE (this "Supplemental
Senior Subordinated Note Indenture"), dated as of December 31, 1998, among Gallo
Finance Company, a Delaware corporation (the "Guaranteeing Subsidiaries"), a
subsidiary of P&L Coal Holdings Corporation (or its permitted successor), a
Delaware corporation (the "Company"), the Company, the other Senior Subordinated
Note Guarantors (as defined in the Senior Subordinated Note Indenture referred
to herein) and State Street Bank and Trust Company, as Senior Subordinated Note
Trustee under the Senior Subordinated Note Indenture referred to below (the
"Senior Subordinated Note Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the Senior
Subordinated Note Trustee a Senior Subordinated Note Indenture (the "Senior
Subordinated Note Indenture"), dated as of May 18, 1998 providing for the
issuance of an aggregate principal amount of up to $650.0 million of 9-5/8%
Senior Subordinated Notes due 2008 (the "Senior Subordinated Notes");
WHEREAS, the Senior Subordinated Note Indenture provides that under certain
circumstances the Guaranteeing Subsidiary shall execute and deliver to the
Senior Subordinated Note Trustee a Supplemental Senior Subordinated Note
Indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally
guarantee all of the Company's Obligations under the Senior Subordinated Notes
and the Senior Subordinated Note Indenture on the terms and conditions set forth
herein (the "Subordinated Subsidiary Guarantee"); and
WHEREAS, pursuant to Section 9.01 of the Senior Subordinated Note
Indenture, the Senior Subordinated Note Trustee is authorized to execute and
deliver this Supplemental Senior Subordinated Note Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the
Guaranteeing Subsidiary and the Senior Subordinated Note Trustee mutually
covenant and agree for the equal and ratable benefit of the Holders of the
Senior Subordinated Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Senior Subordinated Note
Indenture.
2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby agrees
as follows:
(a) Along with all Senior Subordinated Note Guarantors named in
the Senior Subordinated Note Indenture, to jointly and severally
Guarantee to each Holder of a Senior Subordinated Note authenticated
and delivered by the Senior Subordinated Note Trustee and to the
Senior Subordinated Note Trustee and its successors and assigns,
irrespective of the validity and enforceability of the Senior
Subordinated Note Indenture, the Senior Subordinated Notes or the
obligations of the Company hereunder or thereunder, that:
(i) the principal of and interest on the Senior Subordinated
Notes will be promptly paid in full when due, whether at
maturity, by acceleration, redemption or otherwise, and interest
on the overdue principal of and interest on the Senior
Subordinated Notes, if any, if lawful, and all other obligations
of the Company to the Holders or the Senior Subordinated Note
Trustee hereunder or thereunder will be promptly paid in full or
performed, all in accordance with the terms hereof and thereof;
and
(ii) in case of any extension of time of payment or renewal
of any Senior Subordinated Notes or any of such other
obligations, that same will be promptly paid in full when due or
performed in accordance with the terms of the extension or
renewal, whether at stated maturity, by acceleration or
otherwise. Failing payment when due of any amount so guaranteed
or any performance so guaranteed for whatever reason, the Senior
Subordinated Note Guarantors shall be jointly and severally
obligated to pay the same immediately.
(b) The obligations hereunder shall be unconditional, irrespective of
the validity, regularity or enforceability of the Senior Subordinated Notes
or the Senior Subordinated Note Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of the Senior
Subordinated Notes with respect to any provisions hereof or thereof, the
recovery of any judgment against the Company, any action to enforce the
same or any other circumstance which might otherwise constitute a legal or
equitable discharge or defense of a Senior Subordinated Note Guarantor.
(c) The following is hereby waived: diligence presentment, demand of
payment, filing of claims with a court in the event of insolvency or
bankruptcy of the Company, any right to require a proceeding first against
the Company, protest, notice and all demands whatsoever.
(d) This Subordinated Subsidiary Guarantee shall not be discharged
except by complete performance of the obligations contained in the Senior
Subordinated Notes and the Senior Subordinated Note Indenture.
(e) If any Holder or the Senior Subordinated Note Trustee is required
by any court or otherwise to return to the Company, the Senior Subordinated
Note Guarantors, or any custodian, Senior Subordinated Note Trustee,
liquidator or other similar official acting in relation to either the
Company or the Senior Subordinated Note Guarantors, any amount paid by
either to the Senior Subordinated Note Trustee or such Holder, this
Subordinated Subsidiary Guarantee, to the extent theretofore discharged,
shall be reinstated in full force and effect.
(f) Neither of the Guaranteeing Subsidiary shall be entitled to any
right of subrogation in relation to the Holders in respect of any
obligations guaranteed hereby until payment in full of all obligations
guaranteed hereby.
(g) As between the Senior Subordinated Note Guarantors, on the one
hand, and the Holders and the Senior Subordinated Note Trustee, on the
other hand, (x) the maturity of the obligations guaranteed hereby may be
accelerated as provided in Article 6 of the Senior Subordinated Note
Indenture for the purposes of this Subordinated Subsidiary Guarantee,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the obligations guaranteed hereby, and (y) in
the event of any declaration of acceleration of such obligations as
provided in Article 6 of the Senior Subordinated Note Indenture, such
obligations (whether or not due and payable) shall forthwith become due and
payable by the Senior Subordinated Note Guarantors for the purpose of this
Subordinated Subsidiary Guarantee.
(h) The Senior Subordinated Note Guarantors shall have the right to
seek contribution from any non-paying Senior Subordinated Note Guarantor so
long as the exercise of such right does not impair the rights of the
Holders under the Subordinated Subsidiary Guarantee.
(i) Pursuant to Section 11.03 of the Senior Subordinated Note
Indenture, the obligations of the Guaranteeing Subsidiary hereunder and
under Article 11 of the Senior Subordinated Note Indenture will be limited
to the maximum amount as will, after giving effect to any maximum amount
and any other contingent and fixed liabilities that are relevant under any
applicable Bankruptcy or fraudulent conveyance laws, and after giving
effect to any collections from, rights to receive contribution from or
payments made by or on behalf of any other Senior Subordinated Note
Guarantor in respect of the obligations of such other Senior Subordinated
Note Guarantor under Article 11 of the Senior Subordinated Note Indenture,
result in the obligations of such Senior Subordinated Note Guarantor under
its Subordinated Subsidiary Guarantee not constituting a fraudulent
transfer or conveyance.
3. EXECUTION AND DELIVERY. The Guaranteeing Subsidiary agrees that the
Subordinated Subsidiary Guarantees shall remain in full force and effect
notwithstanding any failure to endorse on each Senior Subordinated Note a
notation of such Subordinated Subsidiary Guarantee.
4. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS.
(a) Neither of the Guaranteeing Subsidiary may consolidate with or
merge with or into (whether or not such Senior Subordinated Note Guarantor
is the surviving Person) another corporation, Person or entity whether or
not affiliated with such Senior Subordinated Note Guarantor unless:
(i) subject to Section 11.05 of the Senior Subordinated Note
Indenture, the Person formed by or surviving any such consolidation or
merger (if other than a Senior Subordinated Note Guarantor or the
Company) unconditionally assumes all the obligations of such Senior
Subordinated Note Guarantor, pursuant to a supplemental Senior
Subordinated Note Indenture in form and substance reasonably
satisfactory to the Senior Subordinated Note Trustee, under the Senior
Subordinated Notes, the Senior Subordinated Note Indenture and the
Subordinated Subsidiary Guarantee on the terms set forth herein or
therein; and
(ii) immediately after giving effect to such transaction, no
Default or Event of Default exists.
<PAGE>
(b) In case of any such consolidation, merger, sale or conveyance and
upon the assumption by the successor corporation, by supplemental Senior
Subordinated Note Indenture, executed and delivered to the Senior
Subordinated Note Trustee and satisfactory in form to the Senior
Subordinated Note Trustee, of the Subordinated Subsidiary Guarantee
endorsed upon the Senior Subordinated Notes and the due and punctual
performance of all of the covenants and conditions of the Senior
Subordinated Note Indenture to be performed by the Senior Subordinated Note
Guarantor, such successor corporation shall succeed to and be substituted
for the Senior Subordinated Note Guarantor with the same effect as if it
had been named herein as a Senior Subordinated Note Guarantor. Such
successor corporation thereupon may cause to be signed any or all of the
Subordinated Subsidiary Guarantees to be endorsed upon all of the Senior
Subordinated Notes issuable hereunder which theretofore shall not have been
signed by the Company and delivered to the Senior Subordinated Note
Trustee. All the Subordinated Subsidiary Guarantees so issued shall in all
respects have the same legal rank and benefit under the Senior Subordinated
Note Indenture as the Subordinated Subsidiary Guarantees theretofore and
thereafter issued in accordance with the terms of the Senior Subordinated
Note Indenture as though all of such Subordinated Subsidiary Guarantees had
been issued at the date of the execution hereof.
(c) Except as set forth in Articles 4 and 5 of the Senior Subordinated
Note Indenture, and notwithstanding clauses (a) and (b) above, nothing
contained in the Senior Subordinated Note Indenture or in any of the Senior
Subordinated Notes shall prevent any consolidation or merger of a Senior
Subordinated Note Guarantor with or into the Company or another Senior
Subordinated Note Guarantor, or shall prevent any sale or conveyance of the
property of a Senior Subordinated Note Guarantor as an entirety or
substantially as an entirety to the Company or another Senior Subordinated
Note Guarantor.
5. RELEASES.
(a) In the event of a sale or other disposition of all of the assets
of any Senior Subordinated Note Guarantor, by way of merger, consolidation
or otherwise, or a sale or other disposition of all to the capital stock of
any Senior Subordinated Note Guarantor, then such Senior Subordinated Note
Guarantor (in the event of a sale or other disposition, by way of merger,
consolidation or otherwise, of all of the capital stock of such Senior
Subordinated Note Guarantor) or the corporation acquiring the property (in
the event of a sale or other disposition of all or substantially all of the
assets of such Senior Subordinated Note Guarantor) will be released and
relieved of any obligations under its Subordinated Subsidiary Guarantee;
provided that the Net Proceeds of such sale or other disposition are
applied in accordance with the applicable provisions of the Senior
Subordinated Note Indenture, including without limitation Section 4.10 of
the Senior Subordinated Note Indenture. Upon delivery by the Company to the
Senior Subordinated Note Trustee of an Officers' Certificate and an Opinion
of Counsel to the effect that such sale or other disposition was made by
the Company in accordance with the provisions of the Senior Subordinated
Note Indenture, including without limitation Section 4.10 of the Senior
Subordinated Note Indenture, the Senior Subordinated Note Trustee shall
execute any documents reasonably required in order to evidence the release
of any Senior Subordinated Note Guarantor from its obligations under its
Subordinated Subsidiary Guarantee.
(b) Any Senior Subordinated Note Guarantor not released from its
obligations under its Subordinated Subsidiary Guarantee shall remain liable
for the full amount of principal of and interest on the Senior Subordinated
Notes and for the other obligations of any Senior Subordinated Note
Guarantor under the Senior Subordinated Note Indenture as provided in
Article 11 of the Senior Subordinated Note Indenture.
6. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator, stockholder or agent of either Guaranteeing
Subsidiary, as such, shall have any liability for any obligations of the Company
or any Guaranteeing Subsidiary under the Senior Subordinated Notes, any
Subordinated Subsidiary Guarantees, the Senior Subordinated Note Indenture or
this Supplemental Senior Subordinated Note Indenture or for any claim based on,
in respect of, or by reason of, such obligations or their creation. Each Holder
of the Senior Subordinated Notes by accepting a Senior Subordinated Note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Senior Subordinated Notes. Such waiver may not
be effective to waive liabilities under the federal securities laws and it is
the view of the Commission that such a waiver is against public policy.
7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL
GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL SENIOR SUBORDINATED NOTE
INDENTURE BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW
TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.
8. COUNTERPARTS The parties may sign any number of copies of this
Supplemental Senior Subordinated Note Indenture. Each signed copy shall be an
original, but all of them together represent the same agreement.
9. EFFECT OF HEADINGS. The Section headings herein are for convenience only
and shall not affect the construction hereof.
<PAGE>
10. THE SENIOR SUBORDINATED NOTE TRUSTEE. The Senior Subordinated Note
Trustee shall not be responsible in any manner whatsoever for or in respect of
the validity or sufficiency of this Supplemental Senior Subordinated Note
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made solely by the Guaranteeing Subsidiary and the Company.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Senior
Subordinated Note Indenture to be duly executed and attested, all as of the date
first above written.
Dated:
AFFINITY MINING COMPANY
/s/ T.L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
ARID OPERATIONS, INC.
/s/ Collon Kennedy
- ------------------------------------------
Name: Collon Kennedy
Title: Vice President, Secretary & General Counsel
BIG SKY COAL COMPANY
/s/ T.L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Treasurer & Asst. Secretary
BLACKROCK FIRST CAPITAL CORPORATION
/s/ T.L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
BLUEGRASS COAL COMPANY
/s/ John Hill
- ------------------------------------------
Name: John Hill
Title: President
CABALLO COAL COMPANY
/s/ Richard Robinson
- ------------------------------------------
Name: Richard Robinson
Title: Vice President
CHARLES COAL COMPANY
/s/ T.L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
COAL PROPERTIES CORP.
/s/ J.A. Beck
- ------------------------------------------
Name: J.A. Beck
Title: President
COLONY BAY COAL COMPANY
By: Charles Coal Company
/s/ T.L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
COOK MOUNTAIN COAL COMPANY
/s/ J.A. Beck
- ------------------------------------------
Name: J.A. Beck
Title: President
<PAGE>
COTTONWOOD LAND COMPANY
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
DARIUS GOLD MINE, INC.
/s/ Collon Kennedy
- ------------------------------------------
Name: Collon Kennedy
Title: Vice President, Secretary & General Counsel
EACC CAMPS, INC.
/s/ T.L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
EASTERN ASSOCIATED COAL CORP
/s/ T.L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
EASTERN ROYALTY CORP.
/s/ T.L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
GALLO FINANCE COMPANY
/s/ D.A. Wagner
- ------------------------------------------
Name: D.A. Wagner
Title: President
GOLD FIELDS CHILE, S.A
/s/ Collon Kennedy
- ------------------------------------------
Name: Collon Kennedy
Title: Vice President, Secretary & General Counsel
GOLD FIELDS MINING CORPORATION
/s/ Collon Kennedy
- ------------------------------------------
Name: Collon Kennedy
Title: Vice President, Secretary & General Counsel
GOLD FIELDS OPERATING CO.-ORTIZ
/s/ Collon Kennedy
- ------------------------------------------
Name: Collon Kennedy
Title: Vice President, Secretary & General Counsel
GRAND EAGLE MINING, INC.
/s/ John Hill
- ------------------------------------------
Name: John Hill
Title: President
<PAGE>
HAYDEN GULCH TERMINAL, INC.
/s/ D.A. Wagner
- ------------------------------------------
Name: D.A. Wagner
Title: President
INDEPENDENCE MATERIAL HANDLING COMPANY
/s/ S. F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
INTERIOR HOLDINGS CORP.
/s/ S. F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
JAMES RIVER COAL TERMINAL COMPANY
/s/ R. A. Navarre
- ------------------------------------------
Name: R.A. Navarre
Title: President
JUNIPER COAL COMPANY
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
KAYENTA MOBILE HOME PARK, INC.
/s/ T. L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Treasurer & Asst. Secretary
MARTINKA COAL COMPANY
/s/ T. L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
MIDCO SUPPLY AND EQUIPMENT CORPORATION
/s/ D. C. Hegger
- ------------------------------------------
Name: David C. Hegger
Title: President
MOUNTAIN VIEW COAL COMPANY
/s/ T. L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
NORTH PAGE COAL CORP.
/s/ T. L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
<PAGE>
OHIO COUNTY COAL COMPANY
/s/ John Hill
- ------------------------------------------
Name: John Hill
Title: President
PATRIOT COAL COMPANY L.P.
By: Bluegrass Coal Company
/s/ John Hill
- ------------------------------------------
Name: John Hill
Title: President
PEABODY AMERICA, INC.
/s/ D. C. Hegger
- ------------------------------------------
Name: D. C. Hegger
Title: President
PEABODY COALSALES COMPANY
/s/ R.A. Navarre
- ------------------------------------------
Name: R.A. Navarre
Title: President
PEABODY COALTRADE, INC.
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
PEABODY COAL COMPANY
/s/ D.A. Wagner
- ------------------------------------------
Name: D.A. Wagner
Title: Vice President
PEABODY DEVELOPMENT COMPANY
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
PEABODY ENERGY SOLUTIONS, INC.
/s/ Steven F. Schaab
- ------------------------------------------
Name: Steven F. Schaab
Title: Vice President & Treasurer
PEABODY HOLDING COMPANY, INC.
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
PEABODY NATURAL RESOURCE COMPANY
By: Gold Fields Mining Corp.
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
<PAGE>
PEABODY TERMINALS, INC.
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
PEABODY VENEZUELA COAL CORP.
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
PEABODY WESTERN COAL COMPANY
/s/ D.A. Wagner
- ------------------------------------------
Name: D.A. Wagner
Title: President
PINE RIDGE COAL COMPANY
/s/ T.L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
POWDER RIVER COAL COMPANY
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
RIO ESCONDIDO COAL CORP.
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
SENECA COAL COMPANY
/s/ D.A. Wagner
- ------------------------------------------
Name: D.A. Wagner
Title: President
SENTRY MINING COMPANY
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
SNOWBERRY LAND COMPANY
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
STERLING SMOKELESS COAL COMPANY
/s/ T.L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
<PAGE>
GALLO FINANCE COMPANY
/s/ Joseph C. Klingl
- ------------------------------------------
Name: Joseph C. Klingl
Title: Vice President
PEABODY SOUTHWESTERN COAL COMPANY
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
P&L COAL HOLDINGS CORPORATION
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
STATE STREET BANK AND TRUST COMPANY
as Senior Subordinated Note Trustee
/s/ Philip G. Kane, Jr.
- ------------------------------------------
Name: Philip G. Kane, Jr.
Title: Vice President
THIRD SUPPLEMENTAL SENIOR NOTE INDENTURE
THIRD SUPPLEMENTAL SENIOR NOTE INDENTURE (this "Supplemental Senior Note
Indenture"), dated as of June 30, 1999, among Highland Mining Company, a
Delaware corporation, Peabody Southwestern Coal Company; a Delaware corporation
(together, the "Guaranteeing Subsidiaries"), each a subsidiary of P&L Coal
Holdings Corporation (or its permitted successor), a Delaware corporation (the
"Company"), the Company, the other Senior Note Guarantors (as defined in the
Senior Note Indenture referred to herein) and State Street Bank and Trust
Company, as Senior Note Trustee under the Senior Note Indenture referred to
below (the "Senior Note Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the Senior
Note Trustee a Senior Note Indenture (the "Senior Note Indenture"), dated as of
May 18, 1998 providing for the issuance of an aggregate principal amount of up
to $550.0 million of 8-7/8% Senior Notes due 2008 (the "Senior Notes");
WHEREAS, the Senior Note Indenture provides that under certain
circumstances the Guaranteeing Subsidiaries shall execute and deliver to the
Senior Note Trustee a supplemental Senior Note Indenture pursuant to which the
Guaranteeing Subsidiaries shall each unconditionally guarantee all of the
Company's Obligations under the Senior Notes and the Senior Note Indenture on
the terms and conditions set forth herein (the "Senior Subsidiary Guarantee");
and
WHEREAS, pursuant to Section 9.01 of the Senior Note Indenture, the Senior
Note Trustee is authorized to execute and deliver this Supplemental Senior Note
Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the
Guaranteeing Subsidiaries and the Senior Note Trustee mutually covenant and
agree for the equal and ratable benefit of the Holders of the Senior Notes as
follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Senior Note Indenture.
2. AGREEMENT TO GUARANTEE. Each of the Guaranteeing Subsidiaries hereby
agrees as follows:
(a) Along with all Senior Note Guarantors named in the Senior Note
Indenture, to jointly and severally Guarantee to each Holder of a Senior
Note authenticated and delivered by the Senior Note Trustee and to the
Senior Note Trustee and its successors and assigns, irrespective of the
validity and enforceability of the Senior Note Indenture, the Senior Notes
or the obligations of the Company hereunder or thereunder, that:
(i) the principal of and interest on the Senior Notes will be
promptly paid in full when due, whether at maturity, by acceleration,
redemption or otherwise, and interest on the overdue principal of and
interest on the Senior Notes, if any, if lawful, and all other
obligations of the Company to the Holders or the Senior Note Trustee
hereunder or thereunder will be promptly paid in full or performed,
all in accordance with the terms hereof and thereof; and
(ii) in case of any extension of time of payment or renewal of
any Senior Notes or any of such other obligations, that same will be
promptly paid in full when due or performed in accordance with the
terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise. Failing payment when due of any amount so
guaranteed or any performance so guaranteed for whatever reason, the
Senior Note Guarantors shall be jointly and severally obligated to pay
the same immediately.
(b) The obligations hereunder shall be unconditional, irrespective of
the validity, regularity or enforceability of the Senior Notes or the
Senior Note Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Senior Notes with respect to any
provisions hereof or thereof, the recovery of any judgment against the
Company, any action to enforce the same or any other circumstance which
might otherwise constitute a legal or equitable discharge or defense of a
Senior Note Guarantor.
(c) The following is hereby waived: diligence presentment, demand of
payment, filing of claims with a court in the event of insolvency or
bankruptcy of the Company, any right to require a proceeding first against
the Company, protest, notice and all demands whatsoever.
<PAGE>
(d) This Senior Subsidiary Guarantee shall not be discharged except by
complete performance of the obligations contained in the Senior Notes and
the Senior Note Indenture.
(e) If any Holder or the Senior Note Trustee is required by any court
or otherwise to return to the Company, the Senior Note Guarantors, or any
custodian, Senior Note Trustee, liquidator or other similar official acting
in relation to either the Company or the Senior Note Guarantors, any amount
paid by either to the Senior Note Trustee or such Holder, this Senior
Subsidiary Guarantee, to the extent theretofore discharged, shall be
reinstated in full force and effect.
(f) The Guaranteeing Subsidiary shall not be entitled to any right of
subrogation in relation to the Holders in respect of any obligations
guaranteed hereby until payment in full of all obligations guaranteed
hereby.
(g) As between the Senior Note Guarantors, on the one hand, and the
Holders and the Senior Note Trustee, on the other hand, (x) the maturity of
the obligations guaranteed hereby may be accelerated as provided in Article
6 of the Senior Note Indenture for the purposes of this Senior Subsidiary
Guarantee, notwithstanding any stay, injunction or other prohibition
preventing such acceleration in respect of the obligations guaranteed
hereby, and (y) in the event of any declaration of acceleration of such
obligations as provided in Article 6 of the Senior Note Indenture, such
obligations (whether or not due and payable) shall forthwith become due and
payable by the Senior Note Guarantors for the purpose of this Senior
Subsidiary Guarantee.
(h) The Senior Note Guarantors shall have the right to seek
contribution from any non-paying Senior Note Guarantor so long as the
exercise of such right does not impair the rights of the Holders under the
Senior Subsidiary Guarantee.
(i) Pursuant to Section 10.02 of the Senior Note Indenture, the
obligations of each Guaranteeing Subsidiary hereunder and under
Article 10 of the Senior Note Indenture will be limited to the maximum
amount as will, after giving effect to any maximum amount and any
other contingent and fixed liabilities that are relevant under any
applicable Bankruptcy or fraudulent conveyance laws, and after giving
effect to any collections from, rights to receive contribution from or
payments made by or on behalf of any other Senior Note Guarantor in
respect of the obligations of such other Senior Note Guarantor under
Article 10 of the Senior Note Indenture, result in the obligations of
such Senior Note Guarantor under its Senior Subsidiary Guarantee not
constituting a fraudulent transfer or conveyance.
3. EXECUTION AND DELIVERY. Each Guaranteeing Subsidiary agrees that the
Senior Subsidiary Guarantees shall remain in full force and effect
notwithstanding any failure to endorse on each Senior Note a notation of such
Senior Subsidiary Guarantee.
4. GUARANTEEING SUBSIDIARIES MAY CONSOLIDATE, ETC. ON CERTAIN TERMS.
(a) Neither of the Guaranteeing Subsidiary may consolidate with or
merge with or into (whether or not such Senior Note Guarantor is the
surviving Person) another corporation, Person or entity whether or not
affiliated with such Senior Note Guarantor unless:
(i) subject to Section 10.04 of the Senior Note Indenture, the
Person formed by or surviving any such consolidation or merger (if
other than a Senior Note Guarantor or the Company) unconditionally
assumes all the obligations of such Senior Note Guarantor, pursuant to
a supplemental Senior Note Indenture in form and substance reasonably
satisfactory to the Senior Note Trustee, under the Senior Notes, the
Senior Note Indenture and the Senior Subsidiary Guarantee on the terms
set forth herein or therein; and
(ii) immediately after giving effect to such transaction, no
Default or Event of Default exists.
(b) In case of any such consolidation, merger, sale or conveyance and
upon the assumption by the successor corporation, by supplemental Senior
Note Indenture, executed and delivered to the Senior Note Trustee and
satisfactory in form to the Senior Note Trustee, of the Senior Subsidiary
Guarantee endorsed upon the Senior Notes and the due and punctual
performance of all of the covenants and conditions of the Senior Note
Indenture to be performed by the Senior Note Guarantor, such successor
corporation shall succeed to and be substituted for the Senior Note
Guarantor with the same effect as if it had been named herein as a Senior
Note Guarantor. Such successor corporation thereupon may cause to be signed
any or all of the Senior Subsidiary Guarantees to be endorsed upon all of
the Senior Notes issuable hereunder which theretofore shall not have been
signed by the Company and delivered to the Senior Note Trustee. All the
Senior Subsidiary Guarantees so issued shall in all respects have the same
legal rank and benefit under the Senior Note Indenture as the Senior
Subsidiary Guarantees theretofore and thereafter issued in accordance with
the terms of the Senior Note Indenture as though all of such Senior
Subsidiary Guarantees had been issued at the date of the execution hereof.
<PAGE>
(c) Except as set forth in Articles 4 and 5 of the Senior Note
Indenture, and notwithstanding clauses (a) and (b) above, nothing contained
in the Senior Note Indenture or in any of the Senior Notes shall prevent
any consolidation or merger of a Senior Note Guarantor with or into the
Company or another Senior Note Guarantor, or shall prevent any sale or
conveyance of the property of a Senior Note Guarantor as an entirety or
substantially as an entirety to the Company or another Senior Note
Guarantor.
5. RELEASES.
(a) In the event of a sale or other disposition of all of the assets
of any Senior Note Guarantor, by way of merger, consolidation or otherwise,
or a sale or other disposition of all to the capital stock of any Senior
Note Guarantor, then such Senior Note Guarantor (in the event of a sale or
other disposition, by way of merger, consolidation or otherwise, of all of
the capital stock of such Senior Note Guarantor) or the corporation
acquiring the property (in the event of a sale or other disposition of all
or substantially all of the assets of such Senior Note Guarantor) will be
released and relieved of any obligations under its Senior Subsidiary
Guarantee; provided that the Net Proceeds of such sale or other disposition
are applied in accordance with the applicable provisions of the Senior Note
Indenture, including without limitation Section 4.10 of the Senior Note
Indenture. Upon delivery by the Company to the Senior Note Trustee of an
Officers' Certificate and an Opinion of Counsel to the effect that such
sale or other disposition was made by the Company in accordance with the
provisions of the Senior Note Indenture, including without limitation
Section 4.10 of the Senior Note Indenture, the Senior Note Trustee shall
execute any documents reasonably required in order to evidence the release
of any Senior Note Guarantor from its obligations under its Senior
Subsidiary Guarantee.
(b) Any Senior Note Guarantor not released from its obligations under
its Senior Subsidiary Guarantee shall remain liable for the full amount of
principal of and interest on the Senior Notes and for the other obligations
of any Senior Note Guarantor under the Senior Note Indenture as provided in
Article 10 of the Senior Note Indenture.
6. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator, stockholder or agent of either Guaranteeing
Subsidiary, as such, shall have any liability for any obligations of the Company
or any Guaranteeing Subsidiary under the Senior Notes, any Senior Subsidiary
Guarantees, the Senior Note Indenture or this Supplemental Senior Note Indenture
or for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder of the Senior Notes by accepting a Senior Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Senior Notes. Such waiver may not be effective
to waive liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL
GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL SENIOR NOTE INDENTURE BUT
WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT
THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED
THEREBY.
8. COUNTERPARTS The parties may sign any number of copies of this
Supplemental Senior Note Indenture. Each signed copy shall be an original, but
all of them together represent the same agreement.
9. EFFECT OF HEADINGS. The Section headings herein are for convenience only
and shall not affect the construction hereof.
10. THE SENIOR NOTE TRUSTEE. The Senior Note Trustee shall not be
responsible in any manner whatsoever for or in respect of the validity or
sufficiency of this Supplemental Senior Note Indenture or for or in respect of
the recitals contained herein, all of which recitals are made solely by the
Guaranteeing Subsidiaries and the Company.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Senior
Note Indenture to be duly executed and attested, all as of the date first above
written.
Dated:
AFFINITY MINING COMPANY
/s/ T.L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
ARID OPERATIONS, INC.
/s/ Collon Kennedy
- ------------------------------------------
Name: Collon Kennedy
Title: Vice President, Secretary & General Counsel
BIG SKY COAL COMPANY
/s/ T.L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Treasurer & Asst. Secretary
BLACKROCK FIRST CAPITAL CORPORATION
/s/ T.L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
BLUEGRASS COAL COMPANY
/s/ John Hill
- ------------------------------------------
Name: John Hill
Title: President
CABALLO COAL COMPANY
/s/ Richard Robinson
- ------------------------------------------
Name: Richard Robinson
Title: Vice President
CHARLES COAL COMPANY
/s/ T.L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
COAL PROPERTIES CORP.
/s/ J.A. Beck
- ------------------------------------------
Name: J.A. Beck
Title: President
COLONY BAY COAL COMPANY
By: Charles Coal Company
/s/ T.L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
COOK MOUNTAIN COAL COMPANY
/s/ J.A. Beck
- ------------------------------------------
Name: J.A. Beck
Title: President
<PAGE>
COTTONWOOD LAND COMPANY
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
EACC CAMPS, INC.
/s/ T.L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
EASTERN ASSOCIATED COAL CORP
/s/ T.L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
EASTERN ROYALTY CORP.
/s/ T.L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
GOLD FIELDS CHILE, S.A
/s/ Collon Kennedy
- ------------------------------------------
Name: Collon Kennedy
Title: Vice President, Secretary & General Counsel
GOLD FIELDS MINING CORPORATION
/s/ Collon Kennedy
- ------------------------------------------
Name: Collon Kennedy
Title: Vice President, Secretary & General Counsel
GOLD FIELDS OPERATING CO.-ORTIZ
/s/ Collon Kennedy
- ------------------------------------------
Name: Collon Kennedy
Title: Vice President, Secretary & General Counsel
GRAND EAGLE MINING, INC.
/s/ John Hill
- ------------------------------------------
Name: John Hill
Title: President
HAYDEN GULCH TERMINAL, INC.
/s/ D.A. Wagner
- ------------------------------------------
Name: D.A. Wagner
Title: President
INDEPENDENCE MATERIAL HANDLING COMPANY
/s/ S. F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
INTERIOR HOLDINGS CORP.
/s/ S. F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
<PAGE>
JAMES RIVER COAL TERMINAL COMPANY
/s/ R. A. Navarre
- ------------------------------------------
Name: R. A. Navarre
Title: President
JUNIPER COAL COMPANY
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
KAYENTA MOBILE HOME PARK, INC.
/s/ T. L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Treasurer & Asst. Secretary
MARTINKA COAL COMPANY
/s/ T. L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
MIDCO SUPPLY AND EQUIPMENT CORPORATION
/s/ D. C. Hegger
- ------------------------------------------
Name: D.C. Hegger
Title: President
MOUNTAIN VIEW COAL COMPANY
/s/ T. L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
NORTH PAGE COAL CORP.
/s/ T. L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
OHIO COUNTY COAL COMPANY
/s/ John Hill
- ------------------------------------------
Name: John Hill
Title: President
PATRIOT COAL COMPANY L.P.
By: Bluegrass Coal Company
/s/ John Hill
- ------------------------------------------
Name: John Hill
Title: President
PEABODY AMERICA, INC.
/s/ D. C. Hegger
- ------------------------------------------
Name: D.C. Hegger
Title: President
<PAGE>
PEABODY COALSALES COMPANY
/s/ R.A. Navarre
- ------------------------------------------
Name: R.A. Navarre
Title: President
PEABODY COALTRADE, INC.
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
PEABODY COAL COMPANY
/s/ D.A. Wagner
- ------------------------------------------
Name: D.A. Wagner
Title: Vice President
PEABODY DEVELOPMENT COMPANY
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
PEABODY ENERGY SOLUTIONS, INC.
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
PEABODY HOLDING COMPANY, INC.
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
PEABODY NATURAL RESOURCE COMPANY
By: Gold Fields Mining Corp.
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
PEABODY TERMINALS, INC.
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
PEABODY VENEZUELA COAL CORP.
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
PEABODY WESTERN COAL COMPANY
/s/ D.A. Wagner
- ------------------------------------------
Name: D.A. Wagner
Title: President
PINE RIDGE COAL COMPANY
/s/ T.L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
<PAGE>
POWDER RIVER COAL COMPANY
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
RIO ESCONDIDO COAL CORP.
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
SENECA COAL COMPANY
/s/ D.A. Wagner
- ------------------------------------------
Name: D.A. Wagner
Title: President
SENTRY MINING COMPANY
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
SNOWBERRY LAND COMPANY
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
STERLING SMOKELESS COAL COMPANY
/s/ T.L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
THOROUGHBRED, L.L.C.
By: Peabody Holding Company
/s/ Steven F. Schaab
- ------------------------------------------
Name: S. F. Schaab
Title: Vice President & Treasurer
HIGHLAND MINING COMPANY
/s/ Joseph C. Klingl
- ------------------------------------------
Name: Joseph C. Klingl
Title: Vice President
PEABODY SOUTHWESTERN COAL COMPANY
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
P&L COAL HOLDINGS CORPORATION
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
STATE STREET BANK AND TRUST COMPANY
as Senior Note Trustee
/s/ Philip G. Kane, Jr.
- ------------------------------------------
Name: Philip G. Kane, Jr.
Title: Vice President
THIRD SUPPLEMENTAL SENIOR SUBORDINATED NOTE INDENTURE
THIRD SUPPLEMENTAL SENIOR SUBORDINATED NOTE INDENTURE (this "Supplemental
Senior Subordinated Note Indenture"), dated as of June 30, 1999, among Highland
Mining Company, a Delaware corporation, Peabody Southwestern Coal Company, a
Delaware corporation (together, the "Guaranteeing Subsidiaries"), each a
subsidiary of P&L Coal Holdings Corporation (or its permitted successor), a
Delaware corporation (the "Company"), the Company, the other Senior Subordinated
Note Guarantors (as defined in the Senior Subordinated Note Indenture referred
to herein) and State Street Bank and Trust Company, as Senior Subordinated Note
Trustee under the Senior Subordinated Note Indenture referred to below (the
"Senior Subordinated Note Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the Senior
Subordinated Note Trustee a Senior Subordinated Note Indenture (the "Senior
Subordinated Note Indenture"), dated as of May 18, 1998 providing for the
issuance of an aggregate principal amount of up to $650.0 million of 9-5/8%
Senior Subordinated Notes due 2008 (the "Senior Subordinated Notes");
WHEREAS, the Senior Subordinated Note Indenture provides that under certain
circumstances the Guaranteeing Subsidiaries shall execute and deliver to the
Senior Subordinated Note Trustee a Supplemental Senior Subordinated Note
Indenture pursuant to which the Guaranteeing Subsidiaries shall each
unconditionally guarantee all of the Company's Obligations under the Senior
Subordinated Notes and the Senior Subordinated Note Indenture on the terms and
conditions set forth herein (the "Subordinated Subsidiary Guarantee"); and
WHEREAS, pursuant to Section 9.01 of the Senior Subordinated Note
Indenture, the Senior Subordinated Note Trustee is authorized to execute and
deliver this Supplemental Senior Subordinated Note Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the
Guaranteeing Subsidiaries and the Senior Subordinated Note Trustee mutually
covenant and agree for the equal and ratable benefit of the Holders of the
Senior Subordinated Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Senior Subordinated Note
Indenture.
2. AGREEMENT TO GUARANTEE. Each of the Guaranteeing Subsidiaries
hereby agrees as follows:
(a) Along with all Senior Subordinated Note Guarantors named in
the Senior Subordinated Note Indenture, to jointly and severally
Guarantee to each Holder of a Senior Subordinated Note authenticated
and delivered by the Senior Subordinated Note Trustee and to the
Senior Subordinated Note Trustee and its successors and assigns,
irrespective of the validity and enforceability of the Senior
Subordinated Note Indenture, the Senior Subordinated Notes or the
obligations of the Company hereunder or thereunder, that:
(i) the principal of and interest on the Senior Subordinated
Notes will be promptly paid in full when due, whether at
maturity, by acceleration, redemption or otherwise, and interest
on the overdue principal of and interest on the Senior
Subordinated Notes, if any, if lawful, and all other obligations
of the Company to the Holders or the Senior Subordinated Note
Trustee hereunder or thereunder will be promptly paid in full or
performed, all in accordance with the terms hereof and thereof;
and
(ii) in case of any extension of time of payment or renewal
of any Senior Subordinated Notes or any of such other
obligations, that same will be promptly paid in full when due or
performed in accordance with the terms of the extension or
renewal, whether at stated maturity, by acceleration or
otherwise. Failing payment when due of any amount so guaranteed
or any performance so guaranteed for whatever reason, the Senior
Subordinated Note Guarantors shall be jointly and severally
obligated to pay the same immediately.
(b) The obligations hereunder shall be unconditional,
irrespective of the validity, regularity or enforceability of the
Senior Subordinated Notes or the Senior Subordinated Note Indenture,
the absence of any action to enforce the same, any waiver or consent
by any Holder of the Senior Subordinated Notes with respect to any
provisions hereof or thereof, the recovery of any judgment against the
Company, any action to enforce the same or any other circumstance
which might otherwise constitute a legal or equitable discharge or
defense of a Senior Subordinated Note Guarantor.
(c) The following is hereby waived: diligence presentment, demand
of payment, filing of claims with a court in the event of insolvency
or bankruptcy of the Company, any right to require a proceeding first
against the Company, protest, notice and all demands whatsoever.
<PAGE>
(d) This Subordinated Subsidiary Guarantee shall not be
discharged except by complete performance of the obligations contained
in the Senior Subordinated Notes and the Senior Subordinated Note
Indenture.
(e) If any Holder or the Senior Subordinated Note Trustee is
required by any court or otherwise to return to the Company, the
Senior Subordinated Note Guarantors, or any custodian, Senior
Subordinated Note Trustee, liquidator or other similar official acting
in relation to either the Company or the Senior Subordinated Note
Guarantors, any amount paid by either to the Senior Subordinated Note
Trustee or such Holder, this Subordinated Subsidiary Guarantee, to the
extent theretofore discharged, shall be reinstated in full force and
effect.
(f) Neither of the Guaranteeing Subsidiaries shall be entitled to
any right of subrogation in relation to the Holders in respect of any
obligations guaranteed hereby until payment in full of all obligations
guaranteed hereby.
(g) As between the Senior Subordinated Note Guarantors, on the
one hand, and the Holders and the Senior Subordinated Note Trustee, on
the other hand, (x) the maturity of the obligations guaranteed hereby
may be accelerated as provided in Article 6 of the Senior Subordinated
Note Indenture for the purposes of this Subordinated Subsidiary
Guarantee, notwithstanding any stay, injunction or other prohibition
preventing such acceleration in respect of the obligations guaranteed
hereby, and (y) in the event of any declaration of acceleration of
such obligations as provided in Article 6 of the Senior Subordinated
Note Indenture, such obligations (whether or not due and payable)
shall forthwith become due and payable by the Senior Subordinated Note
Guarantors for the purpose of this Subordinated Subsidiary Guarantee.
(h) The Senior Subordinated Note Guarantors shall have the right
to seek contribution from any non-paying Senior Subordinated Note
Guarantor so long as the exercise of such right does not impair the
rights of the Holders under the Subordinated Subsidiary Guarantee.
(i) Pursuant to Section 11.03 of the Senior Subordinated Note
Indenture, the obligations of each Guaranteeing Subsidiary hereunder
and under Article 11 of the Senior Subordinated Note Indenture will be
limited to the maximum amount as will, after giving effect to any
maximum amount and any other contingent and fixed liabilities that are
relevant under any applicable Bankruptcy or fraudulent conveyance
laws, and after giving effect to any collections from, rights to
receive contribution from or payments made by or on behalf of any
other Senior Subordinated Note Guarantor in respect of the obligations
of such other Senior Subordinated Note Guarantor under Article 11 of
the Senior Subordinated Note Indenture, result in the obligations of
such Senior Subordinated Note Guarantor under its Subordinated
Subsidiary Guarantee not constituting a fraudulent transfer or
conveyance.
3. EXECUTION AND DELIVERY. Each Guaranteeing Subsidiary agrees that
the Subordinated Subsidiary Guarantees shall remain in full force and
effect notwithstanding any failure to endorse on each Senior Subordinated
Note a notation of such Subordinated Subsidiary Guarantee.
4. GUARANTEEING SUBSIDIARIES MAY CONSOLIDATE, ETC. ON CERTAIN TERMS.
(a) Neither of the Guaranteeing Subsidiary may consolidate with
or merge with or into (whether or not such Senior Subordinated Note
Guarantor is the surviving Person) another corporation, Person or
entity whether or not affiliated with such Senior Subordinated Note
Guarantor unless:
(i) subject to Section 11.05 of the Senior Subordinated Note
Indenture, the Person formed by or surviving any such
consolidation or merger (if other than a Senior Subordinated Note
Guarantor or the Company) unconditionally assumes all the
obligations of such Senior Subordinated Note Guarantor, pursuant
to a supplemental Senior Subordinated Note Indenture in form and
substance reasonably satisfactory to the Senior Subordinated Note
Trustee, under the Senior Subordinated Notes, the Senior
Subordinated Note Indenture and the Subordinated Subsidiary
Guarantee on the terms set forth herein or therein; and
(ii) immediately after giving effect to such transaction, no
Default or Event of Default exists.
<PAGE>
(b) In case of any such consolidation, merger, sale or conveyance
and upon the assumption by the successor corporation, by supplemental
Senior Subordinated Note Indenture, executed and delivered to the
Senior Subordinated Note Trustee and satisfactory in form to the
Senior Subordinated Note Trustee, of the Subordinated Subsidiary
Guarantee endorsed upon the Senior Subordinated Notes and the due and
punctual performance of all of the covenants and conditions of the
Senior Subordinated Note Indenture to be performed by the Senior
Subordinated Note Guarantor, such successor corporation shall succeed
to and be substituted for the Senior Subordinated Note Guarantor with
the same effect as if it had been named herein as a Senior
Subordinated Note Guarantor. Such successor corporation thereupon may
cause to be signed any or all of the Subordinated Subsidiary
Guarantees to be endorsed upon all of the Senior Subordinated Notes
issuable hereunder which theretofore shall not have been signed by the
Company and delivered to the Senior Subordinated Note Trustee. All the
Subordinated Subsidiary Guarantees so issued shall in all respects
have the same legal rank and benefit under the Senior Subordinated
Note Indenture as the Subordinated Subsidiary Guarantees theretofore
and thereafter issued in accordance with the terms of the Senior
Subordinated Note Indenture as though all of such Subordinated
Subsidiary Guarantees had been issued at the date of the execution
hereof.
(c) Except as set forth in Articles 4 and 5 of the Senior
Subordinated Note Indenture, and notwithstanding clauses (a) and (b)
above, nothing contained in the Senior Subordinated Note Indenture or
in any of the Senior Subordinated Notes shall prevent any
consolidation or merger of a Senior Subordinated Note Guarantor with
or into the Company or another Senior Subordinated Note Guarantor, or
shall prevent any sale or conveyance of the property of a Senior
Subordinated Note Guarantor as an entirety or substantially as an
entirety to the Company or another Senior Subordinated Note Guarantor.
5. RELEASES.
(a) In the event of a sale or other disposition of all of the
assets of any Senior Subordinated Note Guarantor, by way of merger,
consolidation or otherwise, or a sale or other disposition of all to
the capital stock of any Senior Subordinated Note Guarantor, then such
Senior Subordinated Note Guarantor (in the event of a sale or other
disposition, by way of merger, consolidation or otherwise, of all of
the capital stock of such Senior Subordinated Note Guarantor) or the
corporation acquiring the property (in the event of a sale or other
disposition of all or substantially all of the assets of such Senior
Subordinated Note Guarantor) will be released and relieved of any
obligations under its Subordinated Subsidiary Guarantee; provided that
the Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of the Senior Subordinated
Note Indenture, including without limitation Section 4.10 of the
Senior Subordinated Note Indenture. Upon delivery by the Company to
the Senior Subordinated Note Trustee of an Officers' Certificate and
an Opinion of Counsel to the effect that such sale or other
disposition was made by the Company in accordance with the provisions
of the Senior Subordinated Note Indenture, including without
limitation Section 4.10 of the Senior Subordinated Note Indenture, the
Senior Subordinated Note Trustee shall execute any documents
reasonably required in order to evidence the release of any Senior
Subordinated Note Guarantor from its obligations under its
Subordinated Subsidiary Guarantee.
(b) Any Senior Subordinated Note Guarantor not released from its
obligations under its Subordinated Subsidiary Guarantee shall remain
liable for the full amount of principal of and interest on the Senior
Subordinated Notes and for the other obligations of any Senior
Subordinated Note Guarantor under the Senior Subordinated Note
Indenture as provided in Article 11 of the Senior Subordinated Note
Indenture.
6. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator, stockholder or agent of either
Guaranteeing Subsidiary, as such, shall have any liability for any
obligations of the Company or any Guaranteeing Subsidiary under the Senior
Subordinated Notes, any Subordinated Subsidiary Guarantees, the Senior
Subordinated Note Indenture or this Supplemental Senior Subordinated Note
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of the Senior Subordinated Notes
by accepting a Senior Subordinated Note waives and releases all such
liability. The waiver and release are part of the consideration for
issuance of the Senior Subordinated Notes. Such waiver may not be effective
to waive liabilities under the federal securities laws and it is the view
of the Commission that such a waiver is against public policy.
7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK
SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL SENIOR SUBORDINATED
NOTE INDENTURE BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF
CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION WOULD BE REQUIRED THEREBY.
<PAGE>
8. COUNTERPARTS The parties may sign any number of copies of this
Supplemental Senior Subordinated Note Indenture. Each signed copy shall be
an original, but all of them together represent the same agreement.
9. EFFECT OF HEADINGS. The Section headings herein are for convenience
only and shall not affect the construction hereof.
10. THE SENIOR SUBORDINATED NOTE TRUSTEE. The Senior Subordinated Note
Trustee shall not be responsible in any manner whatsoever for or in respect
of the validity or sufficiency of this Supplemental Senior Subordinated
Note Indenture or for or in respect of the recitals contained herein, all
of which recitals are made solely by the Guaranteeing Subsidiaries and the
Company.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Senior
Subordinated Note Indenture to be duly executed and attested, all as of the date
first above written.
Dated:
AFFINITY MINING COMPANY
/s/ T.L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
ARID OPERATIONS, INC.
/s/ Collon Kennedy
- ------------------------------------------
Name: Collon Kennedy
Title: Vice President, Secretary & General Counsel
BIG SKY COAL COMPANY
/s/ T.L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Treasurer & Asst. Secretary
BLACKROCK FIRST CAPITAL CORPORATION
/s/ T.L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
BLUEGRASS COAL COMPANY
/s/ John Hill
- ------------------------------------------
Name: John Hill
Title: President
CABALLO COAL COMPANY
/s/ Richard Robinson
- ------------------------------------------
Name: Richard Robinson
Title: Vice President
CHARLES COAL COMPANY
/s/ T.L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
COAL PROPERTIES CORP.
/s/ J.A. Beck
- ------------------------------------------
Name: J.A. Beck
Title: President
COLONY BAY COAL COMPANY
By: Charles Coal Company
/s/ T.L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
COOK MOUNTAIN COAL COMPANY
/s/ J.A. Beck
- ------------------------------------------
Name: J.A. Beck
Title: President
<PAGE>
COTTONWOOD LAND COMPANY
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
DARIUS GOLD MINE, INC.
/s/ Collon Kennedy
- ------------------------------------------
Name: Colon Kennedy
Title: Vice President, Secretary & General Counsel
EACC CAMPS, INC.
/s/ T.L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
EASTERN ASSOCIATED COAL CORP
/s/ T.L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
EASTERN ROYALTY CORP.
/s/ T.L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
GALLO FINANCE COMPANY
/s/ D.A. Wagner
- ------------------------------------------
Name: D.A. Wagner
Title: President
GOLD FIELDS CHILE, S.A
/s/ Collon Kennedy
- ------------------------------------------
Name: Collon Kennedy
Title: Vice President, Secretary & General Counsel
GOLD FIELDS MINING CORPORATION
/s/ Collon Kennedy
- ------------------------------------------
Name: Collon Kennedy
Title: Vice President, Secretary & General Counsel
GOLD FIELDS OPERATING CO.-ORTIZ
/s/ Collon Kennedy
- ------------------------------------------
Name: Collon Kennedy
Title: Vice President, Secretary & General Counsel
GRAND EAGLE MINING, INC.
/s/ John Hill
- ------------------------------------------
Name: John Hill
Title: President
HAYDEN GULCH TERMINAL, INC.
/s/ D.A. Wagner
- ------------------------------------------
Name: D.A. Wagner
Title: President
<PAGE>
INDEPENDENCE MATERIAL HANDLING COMPANY
/s/ S. F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
INTERIOR HOLDINGS CORP.
/s/ S. F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
JAMES RIVER COAL TERMINAL COMPANY
/s/ R. A. Navarre
- ------------------------------------------
Name: R.A. Navarre
Title: President
JUNIPER COAL COMPANY
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
KAYENTA MOBILE HOME PARK, INC.
/s/ T. L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Treasurer & Asst. Secretary
MARTINKA COAL COMPANY
/s/ T. L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
MIDCO SUPPLY AND EQUIPMENT CORPORATION
/s/ D. C. Hegger
- ------------------------------------------
Name: David C. Hegger
Title: President
MOUNTAIN VIEW COAL COMPANY
/s/ T. L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
NORTH PAGE COAL CORP.
/s/ T. L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
OHIO COUNTY COAL COMPANY
/s/ John Hill
- ------------------------------------------
Name: John Hill
Title: President
PATRIOT COAL COMPANY L.P.
By: Bluegrass Coal Company
/s/ John Hill
- ------------------------------------------
Name: John Hill
Title: President
<PAGE>
PEABODY AMERICA, INC.
/s/ D. C. Hegger
- ------------------------------------------
Name: D. C. Hegger
Title: President
PEABODY COALSALES COMPANY
/s/ R.A. Navarre
- ------------------------------------------
Name: R.A. Navarre
Title: President
PEABODY COALTRADE, INC.
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
PEABODY COAL COMPANY
/s/ D.A. Wagner
- ------------------------------------------
Name: D.A. Wagner
Title: Vice President
PEABODY DEVELOPMENT COMPANY
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
PEABODY ENERGY SOLUTIONS, INC.
/s/ Steven F. Schaab
- ------------------------------------------
Name: Steven F. Schaab
Title: Vice President & Treasurer
PEABODY HOLDING COMPANY, INC.
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
PEABODY NATURAL RESOURCE COMPANY
By: Gold Fields Mining Corp.
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
PEABODY TERMINALS, INC.
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
PEABODY VENEZUELA COAL CORP.
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
PEABODY WESTERN COAL COMPANY
/s/ D.A. Wagner
- ------------------------------------------
Name: D.A. Wagner
Title: President
<PAGE>
PINE RIDGE COAL COMPANY
/s/ T.L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
POWDER RIVER COAL COMPANY
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
RIO ESCONDIDO COAL CORP.
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
SENECA COAL COMPANY
/s/ D.A. Wagner
- ------------------------------------------
Name: D.A. Wagner
Title: President
SENTRY MINING COMPANY
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
SNOWBERRY LAND COMPANY
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
STERLING SMOKELESS COAL COMPANY
/s/ T.L. Bethel
- ------------------------------------------
Name: T.L. Bethel
Title: Vice President & Treasurer
THOROUGHBRED, L.L.C.
By: Peabody Holding Company
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
HIGHLAND MINING COMPANY
/s/ Joseph C. Klingl
- ------------------------------------------
Name: Joseph C. Klingl
Title: Vice President
PEABODY SOUTHWESTERN COAL COMPANY
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
P&L COAL HOLDINGS CORPORATION
/s/ S.F. Schaab
- ------------------------------------------
Name: S.F. Schaab
Title: Vice President & Treasurer
<PAGE>
STATE STREET BANK AND TRUST COMPANY
as Senior Subordinated Note Trustee
/s/ Philip G. Kane, Jr.
- ------------------------------------------
Name: Philip G. Kane, Jr.
Title: Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet and consolidated statement of operations as of
December 31, 1999 and for the nine months then ended, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 87,493
<SECURITIES> 0
<RECEIVABLES> 331,366
<ALLOWANCES> 1,326
<INVENTORY> 235,657
<CURRENT-ASSETS> 1,513,380
<PP&E> 5,146,839
<DEPRECIATION> 360,870
<TOTAL-ASSETS> 6,680,031
<CURRENT-LIABILITIES> 1,073,449
<BONDS> 2,430,070
0
50
<COMMON> 197
<OTHER-SE> 471,418
<TOTAL-LIABILITY-AND-EQUITY> 6,680,031
<SALES> 1,859,343
<TOTAL-REVENUES> 1,949,393
<CGS> 1,577,247
<TOTAL-COSTS> 1,577,247
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,149
<INTEREST-EXPENSE> 150,397
<INCOME-PRETAX> (25,183)
<INCOME-TAX> (1,238)
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