SEPARATION AGREEMENT, PLAN OF REORGANIZATION AND DISTRIBUTION

Exhibit 2.1

EXECUTION COPY

SEPARATION AGREEMENT, PLAN OF REORGANIZATION AND DISTRIBUTION

by and between

PEABODY ENERGY CORPORATION

and

PATRIOT COAL CORPORATION

Dated as of October 22, 2007

SEPARATION AGREEMENT, PLAN OF REORGANIZATION AND DISTRIBUTION

ARTICLE I DEFINITIONS					1
Section 1.01.		Definitions			1
ARTICLE II REORGANIZATION; CONVEYANCE OF CERTAIN ASSETS; ASSUMPTION OF CERTAIN LIABILITIES; CERTAIN PAYMENTS; AND TRANSITION ARRANGEMENTS					13
Section 2.01.		Reorganization			13
Section 2.02.		Conveyance of Assets; Discharge of Liabilities			13
Section 2.03.		Ancillary Agreements			15
Section 2.04.		Issuance of Patriot Common Stock			16
Section 2.05.		Resignations			16
Section 2.06.		Limitation of Liability			16
Section 2.07.		Novation of Liabilities; Consents			17
Section 2.08.		Assignment of Promissory Notes			18
ARTICLE III the DISTRIBUTION					18
Section 3.01.		Cooperation Prior to the Distribution			18
Section 3.02.		Conditions Precedent to the Distribution			19
Section 3.03.		The Distribution			20
ARTICLE IV COVENANTS					20
Section 4.01.		Bank Accounts			20
Section 4.02.		Guaranteed Patriot and PEC Liabilities			21
Section 4.03.		Insurance			23
Section 4.04.		No Hire; No Solicit			26
Section 4.05.		Legal Names and Signage			26
Section 4.06.		Auditors and Audits; Annual and Quarterly Financial Statements and Accounting			27
Section 4.07.		No Restrictions on Post-Closing Competitive Activities; Corporate Opportunities			29
Section 4.08.		Right of Offset			31
Section 4.09.		[Intentionally Omitted]			31
Section 4.10.		Prairie State Permits			31
ARTICLE V LITIGATION MATTERS					32
Section 5.01.		Case Allocation			32
Section 5.02.		Litigation cooperation			34
ARTICLE VI INDEMNIFICATION					34
Section 6.01.		Patriot Indemnification of the PEC Group			34
Section 6.02.		PEC Indemnification of Patriot Group			35
Section 6.03.		Contribution			35
Section 6.04.		Insurance and Third Party Obligations			35
Section 6.05.		Indemnification Obligations Net of Insurance Proceeds and Other Amounts on a Net-Tax Basis			36
Section 6.06.		Notice and Payment of Claims			36
Section 6.07.		Notice and Defense of Third Party Claims			37
ARTICLE VII EMPLOYEE MATTERS					38
Section 7.01.		Employee Matters Agreement			38
ARTICLE VIII TAX MATTERS					38

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

Exhibits:
Exhibit A		Table of Patriot Entities
Exhibit B		Employee Matters Agreement
Exhibit C		Real Property Agreements
Exhibit D		Software License Agreement
Exhibit E-1		Coal Act Liability Assumption Agreement
Exhibit E-2		NBCWA Liability Assumption Agreement
Exhibit E-3		Salaried Employee Liability Assumption Agreement
Exhibit F		Tax Separation Agreement
Exhibit G		Transition Services Agreement
Exhibit H		Master Equipment Sublease Agreement
Exhibit I		Common Interest Agreement
Exhibit J-1		Coal Supply Agreement I
Exhibit J-2		Coal Supply Agreement II
Exhibit J-3		Master Coal Supply Agreement
Exhibit K		Administrative Services Agreement
Exhibit L		TECO Overriding Royalty Agreement
Exhibit M		DTA Throughput Agreement
Exhibit 2.01		Restructuring Steps

Schedules:
Schedule 1.1(a)		Assumed Patriot Liabilities
Schedule 1.1(b)		Patriot Contracts
Schedule 1.1(c)		Patriot Liabilities
Schedule 1.1(d)		Patriot Liabilities related to Indebtedness
Schedule 2.02(g)		Conveyance of Assets
Schedule 2.06(b)		Limitation of Liability
Schedule 2.08(a)		Promissory Notes
Schedule 3.02(q)		Released Obligations
Schedule 4.01(a)		Patriot Bank Accounts
Schedule 4.02(a)		Guaranteed Patriot Liabilities
Schedule 4.02(b)		Guaranteed PEC Liabilities
Schedule 4.10(a)		Prairie State Reorganization Steps
Schedule 4.10(b)		Prairie State Permits
Schedule 5.01(a)		Patriot Actions
Schedule 5.01(b)		PEC Actions
Schedule 5.01(e)		Joint Actions
Schedule 9.01(a)		Intercompany Accounts
Schedule 15.01		Expenses to be paid by Patriot

SEPARATION AGREEMENT, PLAN OF REORGANIZATION AND DISTRIBUTION

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

RECITALS

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

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

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

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

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

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

ARTICLE I
DEFINITIONS

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

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

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

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

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

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

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

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

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

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

     “BofA” is defined in Section 15.01.

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

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

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

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

     “Commission” means Securities and Exchange Commission.

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

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

     “Contribution” is defined in Section 2.01.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     “IRS” means the United States Internal Revenue Service.

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

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

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

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

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

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

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

     “NYSE” means the New York Stock Exchange.

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

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

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

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

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

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

     “Patriot Assets” means:

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

          (b) the Real Property Assets;

          (c) the Patriot Contracts; and

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

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

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

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

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

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

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

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

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

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

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

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

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

     “Patriot Liabilities” means:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     “PCC” shall mean Peabody Coal Company, LLC.

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

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

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

     “PEC Asset” means:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

ARTICLE II
REORGANIZATION; CONVEYANCE OF CERTAIN ASSETS;
ASSUMPTION OF CERTAIN LIABILITIES;
CERTAIN PAYMENTS; AND TRANSITION ARRANGEMENTS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

          Section 2.05. Resignations .

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

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

          Section 2.06. Limitation of Liability .

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

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

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

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

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

          Section 2.07. Novation of Liabilities; Consents .

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

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

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

          Section 2.08. Assignment of Promissory Notes .

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

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

ARTICLE III
THE DISTRIBUTION

          Section 3.01. Cooperation Prior to the Distribution .

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

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

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

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

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

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

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

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

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

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