8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 19, 2008

Patriot Coal Corporation

(Exact name of registrant as specified in its charter)

Delaware	001-33466	20-5622045
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

12312 Olive Boulevard, Suite 400	63141
St. Louis, Missouri	(Zip Code)
(Address of principal executive offices)

Registrant’s telephone number, including area code: (314) 275-3600

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

x Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

x Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry into a Material Definitive Agreement.

On May 21, 2008, Patriot Coal Corporation (“Patriot”) entered into a Purchase Agreement (the “Purchase Agreement”) with Citigroup Global Markets Inc. and Lehman Brothers Inc., acting as representatives of a group of initial purchasers named in Schedule I to the Purchase Agreement (the “Initial Purchasers”), with respect to its issuance and sale of $175 million in aggregate principal amount of 3.25% Convertible Senior Notes due 2013 (the “Notes”). Patriot also granted the Initial Purchasers of the Notes a 30-day option, beginning on and including the pricing date, to purchase up to $25 million additional aggregate principal amount of the Notes to cover over-allotments, if any. The foregoing description of the Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the Purchase Agreement, which is filed as Exhibit 10.1 hereto, and is incorporated into this report by reference.

In connection with the offering of the Notes, Patriot entered into Amendment No. 2 (the “Credit Agreement Second Amendment”) dated as of May 19, 2008 among Patriot and the lenders party thereto entered into in connection with the Credit Agreement (the “Credit Agreement”) dated as of October 31, 2007, among Patriot, Bank of America, N.A., as administrative agent, L/C Issuer and Swing Line Lender, and the lenders party thereto, as amended by that certain Amendment No. 1 to the Credit Agreement dated as of April 2, 2008 among Patriot and the lenders party thereto.  The Credit Agreement Second Amendment amends the Credit Agreement to, among other things, (i) clarify the parties’ intentions with respect to the permanent debt terms and the convertible debt terms referred to in the Credit Agreement, (ii) permit the permanent debt and the convertible debt to be incurred prior to the closing of the merger, and (iii) modify certain covenants and definitions to accommodate the issuance of the permanent debt and the convertible debt. The foregoing description of the Credit Agreement Second Amendment does not purport to be complete and is qualified in its entirety by reference to the Credit Agreement Second Amendment, which is filed as Exhibit 10.2 hereto, and is incorporated into this report by reference.

Item 2.03. Creation of a Direct Financial Obligation or an Obligation Under an Off-Balance Sheet Arrangement of a Registrant.

The information set forth under Item 1.01 of this Form 8-K is incorporated herein by reference.

Item 3.02. Unregistered Sales of Equity Securities.

The information set forth under Item 1.01 of this Form 8-K is incorporated herein by reference.

The Notes and the shares of common stock issuable upon conversion of the Notes have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state securities laws, and were offered only to “qualified institutional buyers” pursuant to Rule 144A promulgated under the Securities Act. The offering and sale of the Notes to the Initial Purchasers was made in reliance on the exemption from registration provided by Section 4(2) of the Securities Act.

 Item 9.01. Financial Statements and Exhibits

(c) Exhibits

Exhibit No.	Description
10.1	Purchase Agreement, dated May 21, 2008 by and among Patriot Coal Corporation and Citigroup Global Markets Inc. and Lehman Brothers Inc.
10.2	Amendment No. 2, dated as of May 19, 2008, to the Credit Agreement dated as of October 31, 2007, among Patriot Coal Corporation, Bank of America, N.A., as administrative agent, L/C Issuer and Swing Line Lender, and the lenders party thereto.

SIGNATURES

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 hereunto duly authorized.

Dated: May 23, 2008

PATRIOT COAL CORPORATION
By:	/s/ Joseph W. Bean
	Joseph W. Bean
	Senior Vice President, General Counsel & Corporate Secretary

EX-10.1

Exhibit 10.1

EXECUTION COPY

PATRIOT COAL CORPORATION

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

Purchase Agreement

May 21, 2008

Citigroup Global Markets Inc.

388 Greenwich Street

New York, New York  10013

and

Lehman Brothers Inc.

745 Seventh Avenue

New York, New York  10019

As Representatives of the Initial Purchasers

Ladies and Gentlemen:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

“Commission” shall mean the Securities and Exchange Commission.

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

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

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

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

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

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

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

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

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

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

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

Very truly yours,
Patriot Coal Corporation
By:	/s/ Mark N. Schroeder
	Name:	Mark N. Schroeder
	Title:	Senior Vice President and Chief Financial Officer

The foregoing Agreement is hereby confirmed

and accepted as of the date first above written.

Citigroup Global Markets Inc.

Citigroup Global Markets Inc.
By:	/s/ Philip Battaglia
	Name:	Philip Battaglia
	Title:	Vice President

Lehman Brothers Inc.
By:	/s/ Robert Milius
	Name:	Robert Milius
	Title:	Managing Director

Each, for itself and the other several Initial

Purchasers named in Schedule I to the

foregoing Agreement.

SCHEDULE I
Initial Purchasers	Principal Amount of Firm Securities to be        Purchased
Citigroup Global Markets Inc.	U.S.$ 61,250,000
Lehman Brothers Inc.	61,250,000
Friedman, Billings, Ramsey & Co. Inc.	21,000,000
Fifth Third Securities, Inc.	10,500,000
PNC Capital Markets LLC	10,500,000
U.S. Bancorp Investments, Inc.	10,500,000
Total	U.S.$175,000,000

SCHEDULE II

Patriot Coal Corporation

3.25% Convertible Senior Notes due 2013

Pricing Term Sheet

Issuer:	Patriot Coal Corporation (“Patriot”)
Ticker / Exchange:	PCX / The New York Stock Exchange (“NYSE”)
Title of securities:	3.25% Convertible Senior Notes Due 2013 (the “notes”)
Aggregate principal amount offered:	$175,000,000
Offering price:	Each note will be issued at a price of 100% of its principal amount plus accrued interest, if any, from May 28, 2008
Option to purchase additional notes:	$25,000,000 additional aggregate principal amount of notes
Annual interest rate:	The notes will bear interest at an annual rate equal to 3.25% per annum from May 28, 2008
Reference price (closing price of the common stock on the NYSE on May 21, 2008):	$96.67
Conversion premium:	Approximately 40% of the Reference Price
Initial conversion price:	Approximately $135.34 for each $1,000 principal amount of the notes per share of Patriot common stock
Initial conversion rate:	7.3889 shares of Patriot common stock per $1,000 principal amount of the notes
Interest payment dates:	May 31 and November 30, commencing on November 30, 2008
Maturity date:	May 31, 2013
Call dates:	Patriot may, at its option, redeem for cash (i) some or all of the outstanding notes at any time on or after May 31, 2011, but only if the last reported sale price of Patriot’s common stock for 20 or more trading days in a period of 30 consecutive trading days ending on the trading day prior to the date Patriot provides the relevant notice of redemption to holders exceeds 130% of the conversion price in effect on each such trading day, or (ii) all the outstanding notes if at any time less than 10% of the aggregate principal amount of notes initially issued (including any additional notes issued in connection with exercise by the initial purchasers of their over-allotment option) remain outstanding. In each case, any notes redeemed by Patriot will be redeemed for cash at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus any accrued and unpaid interest to, but excluding, the date fixed for redemption.
Redemption upon termination of merger agreement:	If the merger agreement relating to Patriot’s pending acquisition of Magnum Coal Company (“Magnum”) has been terminated, Patriot may, at its option, redeem the notes, in whole or in part, at any time on or before December 31, 2008 at a redemption price that will be: ·      an amount in cash equal to the principal amount of the notes to be redeemed, plus any accrued and unpaid interest thereon to, but excluding, the date fixed for redemption; and

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	·      an amount in shares of Patriot common stock, for each $1,000 principal amount of the notes to be redeemed, equal to the lesser of: (i)    the sum of (a) $20 plus (b) 80% of the amount, if any, by which the “redemption conversion value” (as defined in the Preliminary Offering Memorandum) of such notes exceeds $714.28, such sum divided by the “average redemption VWAP” (as defined in the Preliminary Offering Memorandum); and (ii)    26.6221 shares (subject to adjustment in the same manner as the conversion rate is adjusted). Patriot is currently required under its amended credit facility to redeem the notes before December 31, 2008 (or such later date agreed between Patriot and the required majority of the lenders under the credit facility) in the event that the merger agreement relating to Patriot’s pending acquisition of Magnum is terminated.
Put rights:	Holders have the option to require the repurchase of their notes as described below under “Repurchase at the Option of the Holder upon a Fundamental Change.”
Repurchase at the option of the holder upon a fundamental change:	Upon a “fundamental change” as defined in the Preliminary Offering Memorandum, the holders may require Patriot to repurchase for cash all or a portion of their notes at a repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest to, but excluding, the “fundamental change repurchase date” (as defined in the Preliminary Offering Memorandum).
Ranking:	The notes will be general senior unsecured obligations of Patriot.
Listing:	None
Trade date:	May 21, 2008
Settlement date:	May 28, 2008
CUSIP:	70336T AA2
ISIN NUMBER:	US70336TAA25
No registration rights; additional interest	Patriot will not file a shelf registration statement for the resale of the notes or any common stock issuable upon conversion of the notes. If, at any time during the six-month period from, and including, the date which is six months after the original issuance date of the notes offered by the Preliminary Offering Memorandum, Patriot fails to timely file any document or report that Patriot is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act (other than reports on Form 8-K), Patriot will pay additional interest at an annual rate of 0.50% per annum on the notes.
Use of proceeds:	Patriot estimates that the net proceeds to it from this offering will be approximately $168.5 million (or approximately $192.8 million if the initial purchasers exercise their over-allotment option in full), after deducting the initial purchasers’ discounts or commissions and estimated fees and expenses of the offering payable by Patriot.
	Patriot will place the net proceeds of this offering in a deposit account pending consummation of its acquisition of Magnum.  If the acquisition is consummated on or before September 30, 2008, the net proceeds will be released from the deposit account, in which case Patriot intends to use

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	approximately $150 million of the net proceeds of this offering to repay existing indebtedness of Magnum at the closing of the acquisition and the remainder, if any, for general corporate purposes.  If the merger agreement relating to the Magnum acquisition is terminated, Patriot intends to redeem the notes, in which case the net offering proceeds in the deposit account will be released to fund any payment due upon such redemption.  However, if Patriot determines that it is in its best interests not to redeem the notes and secures the consent of the majority of lenders under the credit facility to allow the notes to remain outstanding, Patriot may use such remaining funds for general corporate purposes. An affiliate of Lehman Brothers Inc. is a lender under Magnum’s credit facilities, and accordingly, if the Magnum acquisition is completed, such affiliate will receive a portion of the proceeds from this offering through the repayment of such credit facilities.
Joint book-running managers	Citigroup Global Markets Inc. and Lehman Brothers Inc.
Adjustment to conversion rate upon a make-whole fundamental change:	The following table sets forth the number of additional shares to be added to the conversion rate per $1,000 principal amount of the notes in connection with a “make-whole fundamental change” as defined in the Preliminary Offering Memorandum, based on the “stock price” and “effective date” (each as defined in the Preliminary Offering Memorandum) of the make-whole fundamental change.

	Effective Date
Stock Price	5/28/08	5/31/09	5/31/10	5/31/11	5/31/12	5/31/13
$  96.67	2.9555	2.9555	2.9555	2.9555	2.9555	2.9555
$110.00	2.5206	2.3903	2.2333	2.1207	2.0359	1.7020
$125.00	1.9887	1.8297	1.6223	1.4104	1.3180	0.6111
$140.00	1.6021	1.4284	1.1924	0.8854	0.8170	0.0000
$155.00	1.3136	1.1343	0.8853	0.4921	0.4593	0.0000
$170.00	1.0934	0.9144	0.6637	0.2061	0.2040	0.0000
$185.00	0.9221	0.7474	0.5024	0.0000	0.0000	0.0000
$200.00	0.7869	0.6186	0.3842	0.0000	0.0000	0.0000
$225.00	0.6178	0.4629	0.2516	0.0000	0.0000	0.0000
$250.00	0.4969	0.3564	0.1704	0.0000	0.0000	0.0000
$300.00	0.3409	0.2277	0.0874	0.0000	0.0000	0.0000
$350.00	0.2487	0.1578	0.0525	0.0000	0.0000	0.0000
$400.00	0.1899	0.1167	0.0363	0.0000	0.0000	0.0000

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

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

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

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

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

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

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

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

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

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

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EXHIBIT A

[Letterhead of the Company]

____________, 2008

Citigroup Global Markets Inc.

388 Greenwich Street

New York, New York  10013

and

Lehman Brothers Inc.

745 Seventh Avenue

New York, New York  10019

As Representatives of the Initial Purchasers

Ladies and Gentlemen:

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

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

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

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

Very truly yours,
By:
	Name:
	Title:

ANNEX A

Significant Subsidiaries

1. Eastern Coal Company, LLC

2. Interior Holdings, LLC

3. Heritage Coal Company LLC

4. Coal Properties, LLC

5. Eastern Associated Coal, LLC

6. Central States Coal Reserves of Kentucky, LLC

7. Snowberry Land Company

8. KE Ventures LLC

9. Kanawha Eagle Coal LLC

10. Grand Eagle Mining, Inc

11. Ohio county Coal Company, LLC

12. Midwest Coal Resources II, LLC

13. Black Stallion Coal Company

14. Black Walnut Coal Company

15. Rivers Edge Mining Inc

16. Colony Bay Coal Company

17. Sterling Smokeless Coal Company

18. Pine Ridge Coal Company

19. Highland Mining Company

20. Beaver Dam Coal Company

ANNEX B

J. Joe Adorjan

Michael V. Altrudo

Joseph W. Bean

B.R. Brown

Charles A. Ebetino

Irl F. Engelhardt

John E. Lushefski

Jiri Nemec

Michael M. Scharf

Mark N. Schroeder

Robert O. Viets

Richard M. Whiting

EX-10.2

Exhibit 10.2

EXECUTION VERSION

AMENDMENT NO. 2 TO CREDIT AGREEMENT

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

W I T N E S S E T H :

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

NOW, THEREFORE, the parties hereto agree as follows:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[Signature pages follow]

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

PATRIOT COAL CORPORATION
By:	/s/ Robert L. Mead
	Name:	Robert L. Mead
	Title:	Vice President & Treasurer

BNP Paribas., as a Lender
By:	/s/ Greg George
	Name:	Greg George
	Title:	Managing Director

By:	/s/ Greg Smothers
	Name:	Greg Smothers
	Title:	Director

BANK OF AMERICA, N.A., as a Lender
By:	/s/ Adam H. Fey
	Name:	Adam H. Fey
	Title:	Vice President

Citibank, N.A., as a Lender
By:	/s/ Mason McGurrin
	Name:	Mason McGurrin
	Title:	Vice President

Fifth Third Bank, as a Lender
By:	/s/ Robert M. Sander
	Name:	Robert M. Sander
	Title:	Vice President

LEHMAN COMMERCIAL PAPER, INC., as a Lender
By:	/s/ Randall Braunfeld
	Name:	Randall Braunfeld
	Title:	Authorized Signatory

PNC Bank, National Association as a Lender
By:	/s/ Helmut Vogel
	Name:	Helmut Vogel
	Title:	Credit Officer

Southwest Bank, An M&I Bank, as a Lender
By:	/s/ Roy C. Postel
	Name:	Roy C. Postel
	Title:	Senior Vice President

Sovereign Bank., as a Lender
By:	/s/ Robert D. Lanigan
	Name:	Robert D. Lanigan
	Title:	Senior Vice President

US Bank as a Lender
By:	/s/ Karen Meyer
	Name:	Karen Meyer
	Title:	Vice President

Acknowledged by:
BANK OF AMERICA, N.A., as Administrative Agent
By:	/s/ Todd Mac Neill
	Name:	Todd Mac Neill
	Title:	Vice President

Annex 1

CONSENT OF GUARANTORS

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

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

[Signature pages follow]

AFFINITY MINING COMPANY

APPALACHIA MINE SERVICES, LLC

BEAVER DAM COAL COMPANY, LLC

BIG EAGLE LLC

BIG EAGLE RAIL LLC

BLACK STALLION COAL COMPANY, LLC

BLACK WALNUT COAL COMPANY

BLUEGRASS MINE SERVICES, LLC

CENTRAL STATES COAL RESERVES OF KENTUCKY, LLC

CHARLES COAL COMPANY, LLC

CLEATON COAL COMPANY

COAL PROPERTIES, LLC

COAL RESERVE HOLDING LIMITED LIABILITY COMPANY NO. 2

COLONY BAY COAL COMPANY

COOK MOUNTAIN COAL COMPANY, LLC

DIXON MINING COMPANY, LLC

DODGE HILL HOLDING JV, LLC

DODGE HILL OF KENTUCKY, LLC

DODGE HILL MINING COMPANY, LLC

EASTERN ASSOCIATED COAL, LLC

EASTERN COAL COMPANY, LLC

EASTERN ROYALTY, LLC

FORT ENERGY, LLC

GRAND EAGLE MINING, INC.

HCR HOLDINGS, LLC

HERITAGE COAL COMPANY LLC

HIGHLAND MINING COMPANY, LLC

HILLSIDE MINING COMPANY

INDIAN HILL COMPANY

INTERIOR HOLDINGS, LLC

JARRELL'S BRANCH COAL COMPANY

KANAWHA EAGLE COAL LLC

KANAWHA RIVER VENTURES I LLC

KE VENTURES LLC

LOGAN FORK COAL COMPANY

MARTINKA COAL COMPANY, LLC

MIDWEST COAL RESOURCES II, LLC

MOUNTAIN VIEW COAL COMPANY, LLC

NORTH PAGE COAL CORP.

OHIO COUNTY COAL COMPANY, LLC

PATRIOT COAL COMPANY, L.P.

PATRIOT COAL SALES LLC

PATRIOT LEASING COMPANY LLC

PATRIOT MIDWEST HOLDINGS, LLC

PINE RIDGE COAL COMPANY, LLC

POND CREEK LAND RESOURCES, LLC

RIVERS EDGE MINING, INC.

SENTRY MINING, LLC

SNOWBERRY LAND COMPANY

STERLING SMOKELESS COAL COMPANY, LLC

UNION COUNTY COAL CO., LLC

WINIFREDE DOCK LIMITED LIABILITY COMPANY

YANKEETOWN DOCK, LLC

Executing this Consent of Guarantors as Vice- President of each of the foregoing persons on behalf of and so as to bind the persons named above
By:	/s/ Robert L. Mead
	Name:	Robert L. Mead
	Title:	Vice-President

Annex B-III(a)

Convertible Debt Terms - Description of Notes

See Attached

DESCRIPTION OF THE NOTES

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

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

General

The notes:

· will be Patriot’s general unsecured obligations and will:

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

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

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

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

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

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

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

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

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

As of March 31, 2008, Patriot had outstanding:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Payments on the Notes; Paying Agent and Registrar

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

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

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

Transfer and Exchange

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

Interest

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

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

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

Conversion Rights

General

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

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

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

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

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

· the principal amount of the note; and

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

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

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

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

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

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

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

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

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

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

Conversion upon Satisfaction of Trading Price Condition

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

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

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

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

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

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

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

Conversion Based on Common Stock Price

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

Conversion Upon Notice of Redemption

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

Conversion upon Specified Corporate Events

If Patriot elects to:

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

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

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

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

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

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

Conversion Procedures

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

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

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

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

· if required, furnish appropriate endorsements and transfer documents;

· if required, pay all transfer or similar taxes; and

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

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

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

Payment Upon Conversion

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Exchange in Lieu of Conversion

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

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

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

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Conversion Rate Adjustments

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

Adjustment Events

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

where,

CR1 = the conversion rate in effect immediately after the open of business on the ex-date for such dividend or distribution or the effective date of such share split or combination, as the case may be;

CR0 = the conversion rate in effect immediately prior to the open of business on the ex-date for such dividend or distribution or the effective date of such share split or combination, as the case may be;

OS1 = the number of shares of Patriot’s common stock outstanding immediately prior to the open of business on the ex-date for such dividend or distribution or the effective date of such share split or combination,  in each case, after giving effect to such dividend, distribution or share split or combination, as the case may be;

OS0 = the number of shares of Patriot’s common stock outstanding immediately prior to the open of business on the ex-date for such dividend or distribution or the effective date of such share split or combination, as the case may be.

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

where,

CR1 = the conversion rate in effect immediately after the open of business on the ex-date for such distribution;

CR0 = the conversion rate in effect immediately prior to the open of business on the ex-date for such distribution;

OS0 = the number of shares of Patriot’s common stock outstanding immediately prior to the open of business on the ex-date for such distribution;

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

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

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

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

· dividends or distributions paid exclusively in cash; and

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

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

where,

CR1 = the conversion rate in effect immediately after the open of business on the ex-date for such distribution;

CR0 = the conversion rate in effect immediately prior to the open of business on the ex-date for such distribution;

SP0 = the average of the last reported sale prices of Patriot’s common stock over the 10 consecutive trading day period ending on the trading day immediately preceding the ex-date for such distribution; and

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

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

where,

CR1 = the conversion rate in effect immediately after the open of business on the ex-date for the spin-off;

CR0 = the conversion rate in effect immediately prior to the open of business on the ex-date for the spin-off;

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

MP0 = the average of the last reported sale prices of Patriot’s common stock over the valuation period.

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

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

where,

CR1 = the conversion rate in effect immediately after the open of business on the ex-date for such distribution;

CR0 = the conversion rate in effect immediately prior to the open of business on the ex-date for such distribution;

SP0 = the average of the last reported sale prices of Patriot’s common stock over the 10 consecutive trading day period on the trading day immediately preceding the ex-date for such distribution; and

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

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

where,

CR1 = the conversion rate in effect immediately after the open of business on the trading day next succeeding the date such tender offer or exchange offer expires;

CR0 = the conversion rate in effect immediately prior to the open of business on the trading day next succeeding the date such tender offer or exchange offer expires;

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

SP1 = the average of the last reported sale prices of Patriot’s common stock over the 10 consecutive trading day period commencing on, and including, the trading day next succeeding the date such tender or exchange offer expires (the “averaging period”);

OS1 = the number of shares of Patriot’s common stock outstanding immediately after the close of business on the date such tender or exchange offer expires (after giving effect to such tender offer or exchange offer); and

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OS0 = the number of shares of Patriot’s common stock outstanding immediately prior to the date such tender or exchange offer expires (prior to giving effect to such tender offer or exchange offer).

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

· for accrued and unpaid interest.

Treatment of Reference Property. In the event of:

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

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

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

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

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

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

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

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

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

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

Make-Whole Fundamental Change

Conversion in Connection with Make-Whole Fundamental Change

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

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

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

Adjustment to Conversion Rate Upon Make-Whole Fundamental Change

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

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

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

	Effective Date
Stock price	May     , 2008	May 31, 2009	May 31, 2010	May 31, 2011	May 31, 2012	May 31, 2013
$
$

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	Effective Date
Stock price	May     , 2008	May 31, 2009	May 31, 2010	May 31, 2011	May 31, 2012	May 31, 2013
$
$
$
$
$
$
$

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

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

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

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

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

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

Settlement of Conversions Upon a Make-Whole Fundamental Change

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

Fundamental Change

Fundamental Change Permits Holders to Require Patriot to Repurchase Notes

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Fundamental Change Repurchase Procedures

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

· the events causing a fundamental change;

· the date of the fundamental change;

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

· the fundamental change repurchase price, if applicable;

· the fundamental change repurchase date, if applicable;

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

· the conversion rate and any adjustments to the conversion rate;

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

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

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

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

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

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

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

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

· the principal amount of the withdrawn notes;

· the certificate numbers of the withdrawn notes; and

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

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

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

· otherwise comply with all applicable federal and state securities laws.

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

Settlement of Fundamental Change Repurchase

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

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

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

Optional Redemption by Patriot

Redemption Upon Termination of Merger Agreement

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

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

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

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

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

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

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

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

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

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

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

Other Redemption Rights

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

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

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

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Redemption Procedures

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

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

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

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

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

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

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

Consolidation, Merger and Sale of Assets

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

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

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

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

· any other conditions specified in the indenture are met.

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

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

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

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

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

Events of Default

Each of the following is an event of default:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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No Registration Rights; Additional Interest

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

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

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

Modification and Amendment

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

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

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

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

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

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

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

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

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

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

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

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

(1)  cure any manifest error or defect;

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

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

(4)  add guarantees with respect to the notes;

(5)  secure the notes;

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

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

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

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

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

Discharge

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

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Calculations in Respect of Notes

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

Trustee

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

Form, Denomination and Registration

The notes will be issued:

· in fully registered form;

· without interest coupons; and

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

Rule 144A Information

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

Reports

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

Global Notes, Book-Entry Form

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

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

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

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

· not be entitled to have certificates registered in their names;

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

· not be considered holders of the global note.

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

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

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

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

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

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

DTC has advised Patriot that it is:

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

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

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

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

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

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

Restrictions on Transfer, Legends

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

Governing Law

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

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