Exhibit 10.2
 
ArcLight Energy Partners Fund I, L.P.
ArcLight Energy Partners Fund II, L.P.
c/o ArcLight Capital Partners LLC
200 Clarendon Street, 55th Floor
Boston, MA  02117

 
April 2, 2008

 
Bridge Facility Commitment Letter
 
Patriot Coal Corporation
12312 Olive Boulevard, Suite 400
St. Louis, Missouri 63141

Attention:  Mark N. Schroeder

 
Ladies and Gentlemen:
 
You have advised ArcLight Energy Partners Fund I, L.P. and ArcLight Energy
Partners Fund II, L.P. (collectively, “ArcLight” or “us”) that Patriot Coal
Corporation (the “Borrower” or “you”) intends to acquire (the “Transaction”)
Magnum Coal Company (“Magnum”) pursuant to an agreement and plan of merger dated
as of April 2, 2008 (the “Merger Agreement”).  In that connection, you have
requested that ArcLight commit to provide to the Borrower a subordinated second
lien bridge loan facility in a principal amount of $150,000,000 (the “Bridge
Facility”).
 
ArcLight is pleased to advise you of its commitment to provide the entire amount
of the Bridge Facility upon the terms and subject to the conditions set forth or
referred to in this commitment letter (the “Commitment Letter”) and in the
Summary of Terms and Conditions attached hereto as Exhibit A (the “Term Sheet”;
capitalized terms not otherwise defined herein shall have the meanings set forth
in the Term Sheet).  You and ArcLight have discussed the desire to have other
lenders participate in the Bridge Facility and ArcLight agrees to assist you in
your efforts to obtain commitments from other potential lenders approved by
ArcLight for the Bridge Facility.
 
In connection with the Bridge Facility, you agree promptly to prepare and
provide to ArcLight all information with respect to the Borrower, its
subsidiaries and the other transactions contemplated hereby, including all
financial information and projections (the “Projections”), as we may reasonably
request in connection with the Bridge Facility.  In connection with the Bridge
Facility, you hereby represent and covenant that to the best of your knowledge
(a) all information (other than Projections) provided to ArcLight, including any
updates and supplements thereof (the “Information”), when taken as a whole will
be correct in all material respects and will not, when taken as a whole, contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained therein, not misleading in
any material respect under the circumstances under which such statements are
made at the time such statements are made, and (b) the Projections that have
been
 
 

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or will be made available to ArcLight or any of your representatives have been
or will be prepared in good faith based upon reasonable assumptions (it being
understood that the Projections are as to future events and are not viewed as
facts and that actual results during the period or periods covered may differ
significantly from the projected results and such difference may be
material).  You understand that ArcLight and any other potential participants in
the Bridge Facility may use and rely on the Information and Projections without
independent verification thereof.
 
As consideration for ArcLight’s commitment hereunder, you agree to pay to
ArcLight the non-refundable fees set forth in the Fee Letter dated as of the
date hereof and delivered herewith (the “Fee Letter”).
 
ArcLight’s commitment hereunder is subject to (a) the absence of a Parent
Material Adverse Effect (as defined in the Merger Agreement) as of the date
hereof, (b) the negotiation, execution and delivery on or before September 30,
2008 of definitive documentation with respect to the Bridge Facility reasonably
satisfactory to ArcLight and its counsel on Acceptable Bridge Terms (as defined
in the Term Sheet) and (c) the conditions set forth herein and in the Term
Sheet.  Notwithstanding anything herein to the contrary, ArcLight agrees that
the execution and delivery of the Merger Agreement and consummation of the
transactions contemplated thereby shall not constitute a material adverse
condition or a material adverse change hereunder.  Those matters that are not
covered by the provisions hereof and of the Term Sheet are subject to the
approval and agreement of ArcLight and the Borrower.
 
You agree to indemnify and hold harmless ArcLight, its affiliates and its
respective officers, directors, employees, advisors, and agents in their
respective capacities as the provider of the Bridge Facility (each, an
“indemnified person”) from and against any and all third party claims, damages
and liabilities to which any such indemnified person may become subject arising
out of or in connection with this Commitment Letter, the Bridge Facility, the
use of the proceeds thereof or any claim, litigation, investigation or
proceeding relating to any of the foregoing, regardless of whether any
indemnified person is a party thereto, and to reimburse each indemnified person
upon demand for any reasonable legal or other expenses incurred in connection
with investigating or defending any of the foregoing; provided that the
foregoing indemnity will not, as to any indemnified person, apply to losses,
claims, damages, liabilities or related expenses to the extent they are found by
a final, non-appealable judgment of a court to arise from the willful misconduct
or gross negligence of such indemnified person.  No indemnified person shall be
liable for any damages arising from the use by others of Information or other
materials obtained through electronic, telecommunications or other information
transmission systems other than where such damages are found by a final,
non-appealable judgment of a court to arise from the willful misconduct or gross
negligence of such indemnified person, and neither you  nor any indemnified
person shall be liable for any special, indirect, consequential or punitive
damages in connection with the Bridge Facility.
 
This Commitment Letter and the Fee Letter shall not be assignable by any party
hereto without the prior written consent of the other parties hereto (and any
purported assignment without such consent shall be null and void), is intended
to be solely for the benefit of the parties hereto and is not intended to confer
any benefits upon, or create any rights in favor of, any person other than the
parties hereto.  This Commitment Letter may not be amended or waived except by
an instrument in writing signed by you and ArcLight.  This Commitment Letter may
 
 

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be executed in any number of counterparts, each of which shall be an original,
and all of which, when taken together, shall constitute one agreement.  Delivery
of an executed signature page of this Commitment Letter by facsimile
transmission shall be effective as delivery of a manually executed counterpart
hereof.  This Commitment Letter (including the attached exhibit) and the Fee
Letter set forth the entire understanding of the parties hereto as to the scope
of the obligations of ArcLight under this Commitment Letter.  This Commitment
Letter shall supersede all prior understandings and proposals, whether written
or oral, between ArcLight and you relating to the Bridge Facility or the
transactions contemplated under this Commitment Letter.  This Commitment Letter
shall be governed by, and construed in accordance with, the laws of the State of
New York.  To the fullest extent permitted by applicable law, the Borrower
hereby irrevocably submits to the non-exclusive jurisdiction of the Supreme
Court of the State of New York sitting in New York County and the United States
Federal District Court for the Southern District of New York and any appellate
court from any thereof in respect of any suit, action or proceeding arising out
of or relating to the provisions of this Commitment Letter or the Fee Letter and
irrevocably agrees that all claims in respect of any such suit, action or
proceeding may be heard and determined in any such court.  The parties hereto
hereby waive, to the fullest extent permitted by applicable law, any objection
that they may now or hereafter have to the laying of venue of any such suit,
action or proceeding brought in any such court, and any claim that any such
suit, action or proceeding brought in any such court has been brought in an
inconvenient forum.  THE PARTIES HERETO HEREBY WAIVE, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS COMMITMENT LETTER OR THE
FEE LETTER.
 
This Commitment Letter is delivered to you on the understanding that neither
this Commitment Letter, the Term Sheet or the Fee Letter nor any of their terms
or substance shall be disclosed, directly or indirectly, to any other person
except (a) that this Commitment Letter and the Term Sheet may be disclosed to
your and your affiliates’ and Magnum and Magnum’s affiliates’ officers,
directors, employees, agents and advisors, including your bank group who are
directly involved in the consideration of this matter or the Merger Agreement
(or both) (provided that this Commitment Letter and Term Sheet may be disclosed
to your bank group only upon the condition that you shall direct such bank group
to keep this Commitment Letter and Term Sheet, and all of the terms and the
substance contained therein, strictly confidential) or (b) as may be compelled
in a judicial or administrative proceeding or as otherwise required by law,
including applicable securities laws (in which case you agree to inform us
promptly thereof).
 
The confidentiality provisions contained herein and in the Fee Letter shall
remain in full force and effect notwithstanding the termination of this
Commitment Letter or ArcLight’s commitment hereunder.  Notwithstanding the
foregoing, all obligations of the parties under this Commitment Letter, shall
automatically terminate and be superseded by the provisions of the definitive
documentation relating to the Bridge Facility upon the execution thereof, and
each party shall automatically be released from all liability in connection
therewith at such time.
 
This Commitment Letter has been and is made solely for the benefit of the
parties hereto, the indemnified persons, and their respective successors and
assigns, and nothing in this Commitment Letter, expressed or implied, is
intended to confer or does confer on any other person or entity any rights or
remedies under or by reason of this Commitment Letter or the agreements of the
parties contained herein.
 
 

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If the foregoing correctly sets forth our agreement, please indicate your
acceptance of the terms hereof and of the Term Sheet and the Fee Letter by
returning to us executed counterparts hereof and of the Fee Letter not later
than 5:00 p.m., New York City time, on April 2, 2008.  The commitments and
agreements of the parties hereto will automatically expire (a) at such time in
the event ArcLight has not received such executed counterparts in accordance
with the immediately preceding sentence, (b) upon termination of the Merger
Agreement and (c) on September 30, 2008 (the “Termination Date”) if the Closing
Date has not yet occurred.  Each party hereto may terminate their respective
commitments and agreements under this Commitment Letter at any time if any
material breach or material default that, in each case, is not capable of being
cured occurs in the performance of any of your obligations to any of the parties
hereto with respect to the Transaction.  You may terminate your agreements under
this Commitment Letter at any time prior to the Drawdown Date upon written
notice to us, in which case ArcLight’s commitments and agreements under this
Commitment Letter will automatically expire; provided, however, that all amounts
due and owing under the Fee Letter shall have been paid in full.
 
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
 
 

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ArcLight is pleased to have been given the opportunity to assist you in
connection with this important financing.
 

Very truly yours,         ARCLIGHT ENERGY PARTNERS FUND I, L.P.        
By:
ArcLight PEF GP, LLC, its General Partner
       
By:
ArcLight Capital Holdings, LLC, its Manager
             
By:
/s/ Daniel R. Revers
   
Name:  Daniel R. Revers
   
Title:    Manager
             
By:
/s/ Robb E. Turner
   
Name:  Robb E. Turner
   
Title:    Manager
              ARCLIGHT ENERGY PARTNERS FUND II, L.P.        
By:
ArcLight PEF GP II, LLC, its General Partner
       
By:
ArcLight Capital Holdings, LLC, its Manager
             
By:
/s/ Daniel R. Revers
   
Name:  Daniel R. Revers
   
Title:    Manager
             
By:
/s/ Robb E. Turner
   
Name:  Robb E. Turner
   
Title:    Manager
 

 
 
 

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Accepted and agreed to
as of the date first
written above by:

PATRIOT COAL CORPORATION

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

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Exhibit A
   to the Commitment Letter

BRIDGE FACILITY

Summary of Terms and Conditions

April 2, 2008

Capitalized terms used and not otherwise defined herein are used with the
meanings attributed thereto in the Commitment Letter dated April 2, 2008 (the
“Commitment Letter”), from ArcLight to the Company, of which this Summary of
Terms and Conditions forms an integral part.  For the avoidance of doubt, it is
understood that the Bridge Facility Documentation shall be on (a) the terms and
conditions set forth in this Term Sheet, the Commitment Letter and the Fee
Letter, and (b) such other terms and conditions not materially less favorable,
taken as a whole, to the Company than those set forth in the Existing Credit
Agreement (collectively, the “Acceptable Bridge Terms”).
 
 
Borrower:
Patriot Coal Corporation (“Patriot” or the “Company”).
   
Lenders:
ArcLight Energy Partners Fund I, L.P. and ArcLight Energy Partners Fund II, L.P.
(collectively, “ArcLight” or the “Lender”).
   
Guarantors:
The Guarantors under the Existing Credit Agreement.
   
Facility:
Up to U.S.$150,000,000 loan facility (the “Loan”) under the unconditional
guarantee of the Guarantors subordinated as to lien and payment priority on the
terms set forth in the Intercreditor Agreement (the “Guarantees”).  Once repaid
or prepaid, the Loan may not be reborrowed.
   
Use of Proceeds:
The proceeds of the Loan shall be used by the Company to  repay a portion of the
senior secured indebtedness of Magnum Coal Company (“Magnum”) and to pay related
fees and expenses.
   
Availability:
Upon three business days’ prior notice, all or a portion of the Loan will be
available in a single drawdown on the date upon which all such conditions
precedent described below are satisfied, such date to occur no later than the
Termination Date (such date, the “Drawdown Date”).

 
 
 

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Any amounts undrawn on the Drawdown Date will be cancelled and shall not be
available for drawings thereafter.
   
Fees:
As set forth in the Fee Letter.
   
Interest Rate:
One month LIBOR plus 5.00% per annum (the “Initial Interest Rate”); provided,
however that LIBOR shall never be less than 3.25%.  Accrued interest shall be
payable in arrears on the last business day of each month following the Drawdown
Date and upon Maturity and prepayment of any amounts under the Loan.  The
portion of interest payable hereunder which exceeds the Initial Interest Rate
shall be mandatorily paid-in-kind.
   
Default Rate:
The then-current interest rate plus 2.00% per annum.
   
Maturity Date:
April 30, 2012.
   
Repayment:
Principal shall be repaid in a single payment on the earlier of (a) the Maturity
Date and (b) the date of the Optional Prepayment or the Mandatory Prepayment,
each as described below.
   
Optional Prepayment:
The Company may, at its option, upon notice to ArcLight, at any time or from
time to time after the date that is six months after the Drawdown Date,
voluntarily prepay the Bridge Facility in full (but not in part) subject to
payment of a premium, calculated as a percentage of the then outstanding Loan
balance, plus accrued and unpaid interest thereon (as set forth in the chart
below); provided, that such notice must be received by ArcLight not later than
11:00 a.m., three (3) business days prior to such voluntary prepayment.  If such
notice is given by the Company, the Company shall make such prepayment and such
payment shall be due and payable on the date specified therein.

 

 
Payment Date
 
Premium
         
Month 7
 
7.00%
 
Month 8
 
7.75%
 
Month 9
 
8.50%
 
Month 10
 
9.25%
 
Month 11
 
10.00%
 
(or thereafter)
   

 

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The Company may not optionally prepay the Loan prior to the seventh month
subsequent to the Drawdown Date.
   
Mandatory Prepayment:
Beginning on the date which is the first day of the eleventh month subsequent to
Drawdown Date, the Company  shall  prepay the Loan in full (and not in part), on
request from the Lender not later than 11:00 a.m., three (3) business days prior
to such mandatory prepayment (the “Lender Notice”), subject to payment of a
premium, calculated as 10.00% of the then outstanding Loan balance (excluding
any portion of such balance in respect of any accrued interest added to
principal as contemplated by the penultimate proviso of this paragraph) (the
“Prepayment Premium”), plus accrued and unpaid interest thereon (the full amount
of the Loan being prepaid, including such accrued and unpaid interest thereon
and the Prepayment Premium, the “Put Amount”); provided, however, that beginning
on the date which is the first day of the twelfth month subsequent to the
Drawdown Date, if the Company shall fail to prepay the Put Amount, then the
then-current interest rate of the Bridge Facility will increase by 200 basis
points and shall increase by an additional 200 basis points at the end of each
180-day period thereafter; and provided further, that the total interest payable
by the Company shall not exceed the maximum rate permitted by applicable law;
and provided further, that that the principal amount of the Loan on a
going-forward basis to which such Initial Interest Rate increases (which, for
the avoidance of doubt, shall include all increases set forth above) shall be
applicable shall be equal to the Put Amount.
     
The Lender may not require a mandatory prepayment of the Loan prior to the first
day of the eleventh month subsequent to the Drawdown Date.
   
Documentation:
Promissory note and other customary credit documents as ArcLight reasonably
determines to be appropriate in connection therewith (the “Bridge Facility
Documentation”). The Bridge Facility Documentation shall be on the Acceptable
Bridge Terms and otherwise reasonably satisfactory in form and substance to
ArcLight and its counsel, and all legal matters in connection with the
transaction contemplated hereby shall be reasonably satisfactory to such
counsel.
   
Conditions Precedent to
 

 
 

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Drawdown:
The availability of the Bridge Facility shall be conditioned upon the continuing
satisfaction on or before the Termination Date of the conditions precedent set
forth below (the date upon which all such conditions precedent shall be
satisfied, the “Closing Date”):
     
a) evidence of corporate authority, incumbency, and signatures;
     
b) execution and delivery of Bridge Facility Documentation and receipt of legal
opinions required under the Bridge Facility Documentation;
     
c) absence of any default or event of default (excluding any default or event of
default with respect to any representation or warranty not included in clause
(ii) below); continuing accuracy of representation and warranties; provided that
the only representations and warranties the making of which shall be a condition
to availability of the Loan on the Drawdown Date shall be such of the
representations and warranties (i) made by or on behalf of the Company and its
subsidiaries in the Merger Agreement as are material to the interests of the
Lender, but only to the extent that Magnum has a right not to consummate the
merger and related transactions contemplated by the Merger Agreement and (ii)
set forth herein relating to corporate power and authority, due authorization,
execution and delivery, in each case as they relate to the entering into and
performance of the Bridge Facility Documentation, the enforceability of the
Bridge Facility Documentation, Federal Reserve margin regulations, the
Investment Company Act and the status of the Loan as senior debt;
     
d) consummation of the merger and related transactions contemplated by the
Merger Agreement in accordance with the terms thereof, and no provision thereof
shall have been waived, amended, supplemented or otherwise modified by the
Company that would be materially adverse to the interests of the Lender (solely
in that capacity);
     
e) the consummation of the amendment of that certain Credit Agreement, dated as
of October 31, 2007, among the Company, the lenders party thereto, and Bank of
America, N.A., as administrative agent thereunder (the “Existing Credit
Agreement”) (which amendment is attached as Appendix 7); confirmation that the
Company has no other indebtedness other

 
 
 

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than as permitted under the Existing Credit Agreement; and the same has not been
waived, amended, supplemented or otherwise modified in any manner materially
adverse to the interests of the Lender without the Lender's consent, such
consent not to be unreasonably withheld or delayed;
 
 
f)  all documents and instruments required to perfect the ArcLight’s second
priority security interest in the collateral under the Bridge Facility shall,
pursuant to the Bridge Facility Documentation, have been executed;
     
g) certified copies of all necessary governmental approvals and consents for the
Loan; and
     
h) a solvency certificate from the chief financial officer of the Company, which
shall document the solvency of the Company after giving effect to the
Transaction.
   
Representations
 
and Warranties:
As set forth in Appendix 1.
   
Affirmative
 
Covenants:
As set forth on Appendix 2.
   
Financial
 
Covenants:
a) EBITDA to consolidated interest expense to be not less than a ratio of 4.00,
at the end of each fiscal quarter for the prior four quarters, calculated and
using such defined financial and other terms as set forth in the Existing Credit
Agreement; and
     
b) Total debt at the end of each fiscal quarter to EBITDA for the prior four
quarters not to exceed a ratio of 2.75, calculated and using such defined
financial and other terms as set forth in the Existing Credit Agreement.
   
Negative
 
Covenants:
As set forth on Appendix 3.
   
Events of Default:
As set forth on Appendix 4 (collectively, the “Events of Default”).
   
Collateral:
The Loan shall constitute a secured “silent” second lien obligation of the
Company that is subordinated in right of payment and the Guarantees shall
constitute a secured “silent” second lien obligation of the Guarantors that is
subordinated in

 
 

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right of payment, all as set forth in the Intercreditor Agreement, the form of
which is set forth as Appendix 6.
 
 
The Bridge Facility shall be secured by the Collateral, as defined in the
Existing Credit Agreement.  The priority of the security interests and related
creditor rights between the Existing Credit Agreement and the Bridge Facility
will be set forth in an intercreditor agreement, the form of which is attached
as Appendix 6.
   
Certain Definitions:
As set forth on Appendix 5.
   
Taxes:
Any and all payments made in connection with the Loans shall be made in U.S.
dollars free and clear of any and all current or future taxes, deductions,
charges, set-offs or counterclaims on Acceptable Bridge Terms and in a manner
not more favorable to the Lender than the terms available to the lenders under
the Existing Credit Agreement.
   
Assignment and
 
Participations:
The Lender, in its sole discretion, may assign all or a portion of the Loan
under the facility, or may sell participations therein, to another person or
persons.
   
Governing Law and
 
Jurisdiction:
The State of New York and submission to New York jurisdiction and waiver of jury
trial, to the same extent as set forth in the Existing Credit Agreement.
   
Expenses:
The Company shall reimburse ArcLight for all reasonable and documented
out-of-pocket expenses incurred in the preparation, negotiation, execution of
the Bridge Facility Documentation and enforcement of the Loans, to the same
extent as set forth in the Existing Credit Agreement.

 
 
 

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Appendix 1
to the Term Sheet
 
 
Representations and Warranties to be Incorporated
into the Bridge Facility1

Below are the representations and warranties set forth in Article V of that
certain Credit Agreement, dated as of October 31, 2007, among the Company, the
lenders party thereto, and Bank of America, N.A., as administrative agent
thereunder, as amended as of the date hereof (the “Existing Credit Agreement”).
Capitalized terms used and not otherwise defined herein are used with the
meanings attributed thereto in (i) the Commitment Letter dated April 2, 2008
(the “Commitment Letter”), from ArcLight to the Company, of which this Appendix
1 forms an integral part, or (ii) the Existing Credit Agreement, in each case as
appropriate.  All section references set forth below, or any use of the phrases
“herein,” “hereunder,” or similar phrases, shall refer to the relevant sections
of the Existing Credit Agreement.  For the avoidance of doubt, it is understood
that the representations and warranties contained in the Bridge Facility
Documentation shall (i) with respect to the matters set forth below, be in the
form set forth below, with such modifications as shall be necessary to give
effect to the terms and conditions set forth in the Term Sheet, the Commitment
Letter, the Fee Letter and, where applicable, to permit and give effect to the
existence of the Existing Credit Agreement, and (ii) in the case of all other
matters, be on Acceptable Bridge Terms.
 

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The Borrower represents and warrants to the Administrative Agent and the Lenders
that:

5.01. Existence, Qualification and Power.  Each Loan Party (a) (i) is duly
organized or formed and, validly existing and (ii) in good standing under the
Laws of the jurisdiction of its incorporation or organization, (b) has all
requisite power and authority and all requisite governmental licenses,
authorizations, consents and approvals to (i) own or lease its assets and carry
on its business and (ii) execute, deliver and perform its obligations under the
Loan Documents and Related Documents to which it is a party and consummate the
Transactions, and (c) is duly qualified and is licensed and, as applicable, in
good standing, under the Laws of each jurisdiction where its ownership, lease or
operation of properties or the conduct of its business requires such
qualification or license; except in each case referred to in clause (a)(ii),
(b)(i) or (c), to the extent that failure to do so could not reasonably be
expected to have a Material Adverse Effect.
 
5.02. Authorization; No Contravention.  The execution, delivery and performance
by each Loan Party of each Loan Document and Related Document to
 

______________ 
 1 To conform to final amendment to the Existing Credit Agreement upon
satisfactory review of the same by ArcLight and its counsel.
 
 

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which such Person is a party, (a) have been duly authorized by all necessary
corporate or other organizational action, and (b) do not and will not (i)
contravene the terms of any of such Person’s Organization Documents; (ii)
conflict with or result in any breach or contravention of, or the creation of
any Lien (except for any Liens that may arise under the Loan Documents) under,
or require any payment to be made under (A) any Contractual Obligation to which
such Person is a party or affecting such Person or the properties of such Person
or any of its Subsidiaries or (B) any order, injunction, writ or decree of any
Governmental Authority or any arbitral award to which such Person or its
property is subject; or (c) violate any Law, except in each case referred to in
clause (b)(ii) or (c) to the extent that failure to do so could not reasonably
be expected to have a Material Adverse Effect.
 
5.03. Governmental Authorization; Other Consents.  (a) No approval, consent,
exemption, authorization, or other action by, or notice to, or filing with, any
Governmental Authority and (b) no material approval, consent, exemption,
authorization, or other action by, or notice to, or filing with any other
Person, in each case, is necessary or required in connection with (i) the
execution, delivery or performance by any Loan Party of this Agreement or any
other Loan Document or Related Document, or for the consummation of the
Transaction, (ii) the grant by any Loan Party of the Liens granted by it
pursuant to the Collateral Documents or (iii) the perfection of the Liens
created under the Collateral Documents (including the first priority nature
thereof), (x) except for those approvals, consents, exemptions, authorizations
or other actions which have already been obtained, taken, given or made and are
in full force and effect, (y) any filings required to perfect the Liens created
under the Collateral Documents and (z) those landlord consents required with
respect to the leasehold mortgages required to be delivered hereunder.  All
applicable waiting periods in connection with the Transactions have expired
without any action having been taken by any Governmental Authority restraining,
preventing or imposing materially adverse conditions upon the Transaction or the
rights of the Loan Parties or their Subsidiaries freely to transfer or otherwise
dispose of, or to create any Lien on, any properties now owned or hereafter
acquired by any of them.
 
5.04. Binding Effect.  This Agreement has been, and each other Loan Document,
when delivered hereunder, will have been, duly executed and delivered by each
Loan Party that is party thereto.  This Agreement constitutes, and each other
Loan Document when so delivered will constitute, a legal, valid and binding
obligation of such Loan Party, enforceable against each Loan Party that is party
thereto in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other Laws
relating to or affecting creditors’ rights generally, general principles of
equity, regardless of whether considered in a proceeding in equity or at law and
an implied covenant of good faith and fair dealing.
 
5.05. Financial Statements; No Material Adverse Effect.  (a)  The Audited
Financial Statements of the Borrower and its Subsidiaries (i) were prepared in
accordance with GAAP consistently applied throughout the period covered thereby,
except as otherwise expressly noted therein; (ii) fairly present in all material
respects the
 
 

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financial condition of the Borrower and its Subsidiaries as of the date thereof
and their results of operations for the period covered thereby in accordance
with GAAP consistently applied throughout the period covered thereby, except as
otherwise expressly noted therein; and (iii) show all material indebtedness and
other material liabilities, direct or contingent, of the Borrower and its
Subsidiaries as of the date thereof, including material liabilities for Taxes,
material commitments and material Indebtedness.
 
(b) The unaudited consolidated balance sheet of the Borrower and its
Subsidiaries dated June 30, 2007, and the related consolidated statements of
income or operations, shareholders’ equity and cash flows for the fiscal quarter
ended on that date (i) were prepared in accordance with GAAP consistently
applied throughout the period covered thereby, except as otherwise expressly
noted therein, and (ii) fairly present in all material respects the financial
condition of the Borrower and its Subsidiaries as of the date thereof and their
results of operations for the period covered thereby, subject, in the case of
clauses (i) and (ii), to the absence of footnotes and to normal year-end audit
adjustments.
 
(c) Since June 30, 2007, 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.
 
(d) The consolidated pro forma balance sheet of the Borrower and its
Subsidiaries as at June 30, 2007, and the related consolidated pro forma
statements of income and cash flows of the Borrower and its Subsidiaries for the
six months then ended, certified by the chief financial officer or treasurer of
the Borrower, copies of which have been furnished to the Administrative Agent,
fairly present in all material respects the consolidated pro forma financial
condition of the Borrower and its Subsidiaries as at such date and the
consolidated pro forma results of operations of the Borrower and its
Subsidiaries for the period ended on such date, in each case giving effect to
the Transaction, all in accordance with GAAP.
 
(e) The consolidated forecasted balance sheet and statements of income and cash
flows of the Borrower and its Subsidiaries delivered pursuant to Section 4.01 or
Section 6.01(d) were prepared in good faith on the basis of the assumptions
stated therein, which assumptions were believed to be reasonable in light of the
conditions existing at the time of delivery of such forecasts.
 
5.06. Litigation.  There are no actions, suits, proceedings, claims or disputes
pending or, to the knowledge of the Borrower, threatened, at law, in equity, in
arbitration or before any Governmental Authority, by or against the Borrower or
any of its Subsidiaries or against any of their properties or revenues that (a)
purport to affect or pertain to this Agreement, any other Loan Document, any
Related Document or the consummation of the Transaction, or (b) except as
specifically disclosed in public filings prior to the date hereof, as to which
there is a reasonable possibility of an adverse determination and that could
reasonably be expected to have a Material Adverse Effect.
 
 

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5.07. No Default.  Neither the Borrower nor any Subsidiary is in default under
or with respect to any Contractual Obligation that could, either individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect.  No
Default has occurred and is continuing or would result from the consummation of
the transactions contemplated by this Agreement or any other Loan Document.
 
5.08. Ownership of Property; Liens; Investments.  (a)  The Borrower and each of
its Subsidiaries has good record title to, or valid leasehold, easement or other
sufficient real property interests in, all real property necessary or used in
the ordinary conduct of its business, except for such defects in title as could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
 
(b) Schedule 7.01(i) sets forth a complete and accurate list as of the Closing
Date of all Liens on the property or assets of the Borrower and each of its
Subsidiaries, showing as of the date hereof the lienholder thereof, the
principal amount of the obligations secured thereby and the property or assets
of the Borrower or such Subsidiary subject thereto.
 
(c) Schedule 5.08(c) sets forth a complete and accurate list as of the Closing
Date of the locations of all mines owned or leased by the Borrower or any of its
Subsidiaries.
 
(d) To the best knowledge of the Borrower, the legal description attached as
Exhibit A to each Mortgage accurately and completely describes the Mortgaged
Property intended to be covered thereby.
 
(e) Schedule 7.03 sets forth a complete and accurate list as of the Closing Date
of all Investments held by the Borrower and any of its Subsidiaries on the date
hereof, showing as of the date hereof the amount, obligor or issuer and
maturity, if any, thereof.
 
5.09. Environmental Compliance.  Except as disclosed in the Borrower’s most
recent annual and quarterly reports filed with the SEC or on Schedule 5.09, or
as otherwise could not reasonably be expected to have a Material Adverse Effect:
 
(a) The facilities and properties currently or formerly owned, leased or
operated by the Borrower or any of its Subsidiaries (the “Properties”) do not
contain, and have not previously contained, any Hazardous Materials in amounts
or concentrations which (i) constitute or constituted a violation of, or (ii)
could reasonably be expected to give rise to liability under, any applicable
Environmental Law.
 
(b) None of the Borrower nor any of its Subsidiaries has received any notice of
violation, alleged violation, non-compliance, liability or potential liability
regarding environmental matters or compliance with Environmental Laws with
regard to any of the Properties or the business operated by the Borrower or any
of its Subsidiaries
 
 

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(the “Business”), or any prior business for which the Borrower has retained
liability under any Environmental Law.
 
(c) Hazardous Materials have not been transported or disposed of from the
Properties in violation of, or in a manner or to a location which could
reasonably be expected to give rise to liability under, any applicable
Environmental Law, nor have any Hazardous Materials been generated, treated,
stored or disposed of at, on or under any of the Properties in violation of, or
in a manner that could reasonably be expected to give rise to liability under,
any applicable Environmental Law.
 
(d) No judicial proceeding or governmental or administrative action is pending
or, to the knowledge of the Borrower, threatened under any Environmental Law to
which the Borrower or any of its Subsidiaries is or, to the knowledge of the
Borrower, will be named as a party or with respect to the Properties or the
Business, nor are there any consent decrees or other decrees, consent orders,
administrative orders or other orders, or other similar administrative or
judicial requirements outstanding under any Environmental Law with respect to
the Properties or the Business.
 
(e) There has been no release or threat of release of Hazardous Materials at or
from the Properties, or arising from or related to the operations of the
Borrower or any of its Subsidiaries in connection with the Properties or
otherwise in connection with the Business, in violation of or in amounts or in a
manner that could reasonably be expected to give rise to liability under any
applicable Environmental Laws.
 
(f) The Properties and all operations at the Properties are in compliance with
all applicable Environmental Laws.
 
(g) The Borrower and each of its Subsidiaries (i) hold all Environmental Permits
(each of which is in full force and effect and is not subject to appeal)
required for any of their current operations or for the current ownership,
operation or use of the Properties, including all Environmental Permits required
for the coal mining-related operations of the Borrower or any of its
Subsidiaries or any pending construction or expansion related thereto; (ii) are,
or have been, in compliance with all Environmental Permits; and (iii) have used
commercially reasonable efforts to cause all contractors, lessees and other
Persons occupying, operating or using the mines on the Properties to comply with
all Environmental Laws and obtain all Environmental Permits required for the
operation of the mines.
 
(h) To the knowledge of the Borrower, none of the Properties have any associated
direct or indirect acid mine drainage.
 
5.10. Mining.
 
(a) The Borrower and each of its Subsidiaries has, in the amounts and forms
required pursuant to Environmental Law, obtained all performance bonds and
surety bonds, or otherwise provided any financial assurance required under
 
 

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Environmental Law for Reclamation or otherwise (collectively, “Mining Financial
Assurances”).
 
(b) There have been no accidents, explosions, implosions, collapses or flooding
at or otherwise related to the Properties that have, directly or indirectly,
resulted in, or could reasonably be expected to result in, a Material Adverse
Effect.
 
5.11. Insurance.  The properties of the Borrower and its Subsidiaries are
insured with financially sound and reputable insurance companies which may be
Affiliates of the Borrower, in such amounts (after giving effect to any
self-insurance compatible with the following standards), with such deductibles
and covering such risks as are customarily carried by companies engaged in
similar businesses and owning similar properties in localities where the
Borrower or the applicable Subsidiary operates.
 
5.12. Taxes.  The Borrower and its Subsidiaries have filed all Federal, state
and other tax returns and reports required to be filed, and have paid all
Federal, state and other Taxes, assessments, fees and other governmental charges
levied or imposed upon them or their properties, income or assets otherwise due
and payable (other than those which are being contested in good faith by
appropriate proceedings diligently conducted and for which adequate reserves
have been provided in accordance with GAAP), except where the failure to do any
of the foregoing could not reasonably be expected to result in a Material
Adverse Effect; no material tax Lien has been filed and, to the knowledge of the
Borrower, no material claim is being asserted or audit being conducted, with
respect to any material Tax, fee or other charge of the Borrower or any of its
Subsidiaries.  There is no proposed tax assessment against the Borrower or any
Subsidiary that would, reasonably be likely to have a Material Adverse
Effect.  Neither any Loan Party nor any Subsidiary thereof is party to any tax
sharing agreement, other than the Tax Separation Agreement.  The Spin-Off will
not be taxable to the Borrower, Peabody or any of their respective Subsidiaries
or Affiliates.
 
5.13. ERISA Compliance.
 
(a) Except as could not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect, each Plan is in compliance in all
material respects with the applicable provisions of ERISA, the Code and other
Federal or state Laws (except that with respect to any Multiemployer Plan which
is a Plan, such representation is deemed made only to the knowledge of the
Borrower).  With respect to each Plan, no “accumulated funding deficiency”
(within the meaning of Section 412 of the Code) has occurred, and no application
for a funding waiver or an extension of any amortization period pursuant to
Section 412 of the Code has been made.
 
(b) There are no pending or, to the knowledge of the Borrower, threatened
claims, actions or lawsuits, or action by any Governmental Authority, with
respect to any Plan that could reasonably be expected to have a Material Adverse
Effect.  There has been no nonexempt “prohibited transaction” (as defined in
Section 406 of
 
 

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ERISA) or violation of the fiduciary responsibility rules with respect to any
Plan that has resulted or could reasonably be expected to result in a Material
Adverse Effect.
 
(c) Except as could not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect: (i) No ERISA Event has occurred or
is reasonably expected to occur; (ii) no Pension Plan has any Unfunded Pension
Liability; (iii) neither the Borrower nor any ERISA Affiliate has incurred, or
reasonably expects to incur, any liability under Title IV of ERISA with respect
to any Pension Plan (other than premiums due and not delinquent under Section
4007 of ERISA); (iv) neither the Borrower nor any ERISA Affiliate has incurred,
or reasonably expects to incur, any liability (and no event has occurred which,
with the giving of notice under Section 4219 of ERISA, would result in such
liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer
Plan; and (v) neither the Borrower nor any ERISA Affiliate has engaged in a
transaction that could be subject to Section 4069 or 4212(c) of ERISA.
 
5.14. Subsidiaries; Equity Interests; Loan Parties.  As of the Closing Date, the
Borrower has no Subsidiaries other than those specifically disclosed in Schedule
5.14, and all of the outstanding Equity Interests in such Subsidiaries have been
validly issued, are fully paid and non-assessable and are owned by each Person
in the percentages specified on Schedule 5.14 free and clear of all Liens except
those created under the Collateral Documents or permitted by this Agreement and
the other Loan Documents.  Schedule 5.14 indicates which subsidiaries are Loan
Parties as of the Closing Date showing (as to each Loan Party) the jurisdiction
of its incorporation, the address of its principal place of business and its
U.S. taxpayer identification number or, in the case of any non-U.S. Loan Party
that does not have a U.S. taxpayer identification number, its unique
identification number issued to it by the jurisdiction of its incorporation.
 
5.15. Margin Regulations; Investment Company Act.  (a)  The Borrower is not
engaged and will not engage, principally or as one of its important activities,
in the business of purchasing or carrying margin stock (within the meaning of
Regulation U issued by the FRB), or extending credit for the purpose of
purchasing or carrying margin stock.  Following the application of the proceeds
of each Borrowing or drawing under each Letter of Credit, not more than 25% of
the value of the assets (either of the Borrower only or of the Borrower and its
Subsidiaries on a consolidated basis) subject to the provisions of Section 7.01,
Section 7.04 or Section 7.05 or subject to any restriction contained in any
agreement or instrument between the Borrower and any Lender or any Affiliate of
any Lender relating to Indebtedness and within the scope of Section 8.01(e) will
be margin stock.
 
(b) None of the Borrower, any Person Controlling the Borrower, or any Subsidiary
is or is required to be registered as an “investment company” under the
Investment Company Act of 1940.
 
5.16. Disclosure.  No report, financial statement, certificate or other
information furnished (in writing) by or on behalf of any Loan Party to the
 
 

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Administrative Agent or any Lender in connection with the transactions
contemplated hereby and the negotiation of this Agreement or delivered hereunder
or under any other Loan Document, taken as a whole with any other information
furnished or publicly available, contains any material misstatement of fact or
omits to state any material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not materially
misleading as of the date when made or delivered; provided, that with respect to
any forecast, projection or other statement regarding future performance, future
financial results or other future developments, the Borrower represents only
that such information was prepared in good faith based upon assumptions believed
to be reasonable at the time such information was prepared (it being understood
that any such information is subject to significant uncertainties and
contingencies, may of which are beyond the Borrower’s control, and that no
assurance can be given that the future developments addressed in such
information can be realized).
 
5.17. Compliance with Laws.  The Borrower and each Subsidiary thereof is in
compliance in all material respects with the requirements of all Laws (including
any zoning, building, ordinance, code or approval or any building or mining
permits) and all orders, writs, injunctions and decrees applicable to it or to
its properties, except in such instances in which (a) such requirement of Law or
order, writ, injunction or decree is being contested in good faith by
appropriate proceedings diligently conducted or (b) the failure to comply
therewith, either individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
 
5.18. Intellectual Property; Licenses, Etc.  The Borrower and each of its
Subsidiaries own, or possess the right to use, all of the trademarks, service
marks, trade names, copyrights, patents, patent rights, franchises, licenses and
other intellectual property rights (collectively, “IP Rights”) that are
reasonably necessary for the operation of their respective businesses, except
where the failure to own or possess the right to use such IP Rights could not
reasonably be expected to have a Material Adverse Effect.  To the best knowledge
of the Borrower, the use of such IP Rights by the Borrower or any Subsidiary
does not infringe upon any rights held by any other Person, except for any
infringement that could not reasonably be expected to have a Material Adverse
Effect.  Except as specifically disclosed in Schedule 5.18, no claim or
litigation regarding any of the foregoing is pending or, to the best knowledge
of the Borrower, threatened, which, either individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.
 
5.19. Solvency.  (a)  As of the Closing Date, after giving effect to the
Transaction on such date, the Borrower is together with its Subsidiaries on a
consolidated basis, Solvent.
 
(b) The Borrower does not intend to, and does not believe that it or any of its
Subsidiaries will, incur debts beyond its ability to pay such debts as they
mature, taking into account the timing and amounts of cash to be received by it
or any such Subsidiary and the timing and amounts of cash to be payable on or in
respect of its Indebtedness or the Indebtedness of any such Subsidiary,
 
 

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5.20. Casualty, Etc.  Neither the businesses nor the properties of the Borrower
or any of its Subsidiaries have been affected by any fire, explosion, accident,
strike, lockout or other labor dispute, drought, storm, hail, earthquake,
embargo, act of God or of the public enemy or other casualty (whether or not
covered by insurance) that, either individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
 
5.21. Labor Matters.  Except as specifically disclosed on Schedule 5.21, there
are no collective bargaining agreements or Multiemployer Plans covering the
employees of the Borrower or any of its Subsidiaries as of the Closing Date. (a)
As of the Closing Date, neither the Borrower nor any Subsidiary has suffered any
strikes, walkouts, work stoppages or other material labor difficulty within the
last five years, and (b) since the Closing Date, neither the Borrower not any
subsidiary has suffered any strikes, walkouts, work stoppages or other material
labor difficulty that could reasonably be expected to result in a Material
Adverse Effect.
 
5.22. Collateral Documents.  The provisions of the Collateral Documents are
effective to create in favor of the Administrative Agent for the benefit of the
Secured Parties a legal, valid and enforceable Lien on all right, title and
interest of the Collateral owned by the Loan Parties and described
therein.  Except for filings contemplated hereby and by the Collateral
Documents, no filing or other action will be necessary to perfect such Liens.
 
5.23. Use of Proceeds.  The Borrower will use the proceeds of the Loans solely
as provided for in Section 6.11.
 
5.24. Coal Act; Black Lung Act.
 
(a) The Borrower, each of its Subsidiaries and its “related persons” (as defined
in the Coal Act) are in compliance in all material respects with the Coal Act
and any regulations promulgated thereunder, and none of the Borrower, its
Subsidiaries or its related persons has any liability under the Coal Act, except
as disclosed in the Borrower’s financial statements or which could reasonably be
expected to have a Material Adverse Effect or with respect to premiums or other
material payments required thereunder which have been paid when due.
 
(b) The Borrower and each of its Subsidiaries are in compliance in all material
respects with the Black Lung Act, and neither the Borrower nor any of its
Subsidiaries has either incurred any Black Lung Liability or assumed any other
Black Lung Liability, except as disclosed in the Borrower’s financial statements
or which could reasonably be expected to have a Material Adverse Effect or with
respect to premiums, contributions or other material payments required
thereunder which have been paid when due.
 
 

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Appendix 2
to the Term  Sheet
 
Affirmative Covenants to be Incorporated
into the Bridge Facility2

Below are the affirmative covenants set forth in Article VI  of  that certain
Credit Agreement, dated as of October 31, 2007, among the Company, the lenders
party thereto, and Bank of America, N.A., as administrative agent thereunder, as
amended as of the date hereof (the “Existing Credit Agreement”). Capitalized
terms used and not otherwise defined herein are used with the meanings
attributed thereto in (i) the Commitment Letter dated April 2, 2008 (the
“Commitment Letter”), from ArcLight to the Company, of which this Appendix 2
forms an integral part, or (ii) the Existing Credit Agreement, in each case as
appropriate.  All section references set forth below, or any use of the phrases
“herein,” “hereunder,” or similar phrases, shall refer to the relevant sections
of the Existing Credit Agreement.  For the avoidance of doubt, it is understood
that the affirmative covenants contained in the Bridge Facility Documentation
shall (i) with respect to the matters set forth below, be in the form set forth
below, with such modifications as shall be necessary to give effect to the terms
and conditions set forth in the Term Sheet, the Commitment Letter, the Fee
Letter and, where applicable, to permit and give effect to the existence of the
Existing Credit Agreement, and (ii) in the case of all other matters, be on
Acceptable Bridge Terms.
 

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So long as any Lender shall have any Commitment hereunder, any Loan or other
Obligation hereunder shall remain unpaid or unsatisfied (other than in respect
of contingent obligations, indemnities and expenses related thereto not then
payable or in existence as of the later of the Maturity Date or the Letter of
Credit Expiration Date), or any Letter of Credit shall remain outstanding, the
Borrower shall, and shall (except in the case of the covenants set forth in
Sections 6.01 and 6.02 (a) – (g)) cause each Subsidiary to:

6.01. Financial Statements.  Deliver to the Administrative Agent and each
Lender, in form and detail reasonably satisfactory to the Administrative Agent:
 
(a) as soon as available, but in any event within 90 days after the end of each
fiscal year of the Borrower (commencing with the fiscal year ended December 31,
2007), a consolidated balance sheet of the Borrower and its Subsidiaries as at
the end of such fiscal year, and the related consolidated statements of income
or operations, changes in shareholders’ equity and cash flows for such fiscal
year, setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail and prepared in accordance with
GAAP, such consolidated statements to be audited and accompanied by a report and
opinion of an independent certified public accountant of
 
______________ 
 2 To conform to final amendment to the Existing Credit Agreement upon
satisfactory review of the same by ArcLight and its counsel.
 
 

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nationally recognized standing, which report and opinion shall be prepared in
accordance with generally accepted auditing standards and shall not be subject
to any “going concern” or like qualification or exception or any qualification
or exception as to the scope of such audit; and
 
(b) as soon as available, but in any event within 45 days after the end of each
of the first three fiscal quarters of each fiscal year of the Borrower
(commencing with the fiscal quarter ended March 31, 2008), a consolidated
balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal
quarter, and the related consolidated statements of income or operations,
changes in shareholders’ equity and cash flows for such fiscal quarter and for
the portion of the Borrower’s fiscal year then ended, setting forth in each case
in comparative form the figures for the corresponding fiscal quarter of the
previous fiscal year and the corresponding portion of the previous fiscal year,
all in reasonable detail, such consolidated statements to be certified by a
Responsible Officer of the Borrower as fairly presenting in all material
respects the financial condition, results of operations, changes in
shareholders’ equity and cash flows of the Borrower and its Subsidiaries in
accordance with GAAP, subject only to normal year-end audit adjustments and the
absence of footnotes.
 
As to any information contained in materials furnished pursuant to Section
6.02(d), the Borrower shall not be separately required to furnish such
information under Section 6.01(a) or (b) above, but the foregoing shall not be
in derogation of the obligation of the Borrower to furnish the information and
materials described in Sections 6.01(a) and (b) above at the times specified
therein.

6.02. Certificates; Other Information.  Deliver to the Administrative Agent, in
form and detail reasonably satisfactory to the Administrative Agent:

(a) concurrently with the delivery of the financial statements referred to in
Section 6.01(a), a certificate of its independent certified public accountants
reporting on such financial statements and stating that in performing their
audit nothing came to their attention that caused them to believe the Borrower
failed to comply with the financial covenants set forth in Section 7.11, except
as specified in such certificate;

(b) concurrently with the delivery of the financial statements referred to in
Sections 6.01(a) and (b) (commencing with the delivery of the financial
statements for the fiscal quarter ended March 31, 2008), a duly completed
Compliance Certificate signed by a Responsible Officer of the Borrower,  which
shall include detailed computations of the financial covenants;

(c) promptly after any request by the Administrative Agent, copies of any
detailed audit reports, management letters or recommendations submitted to the
board of directors (or the audit committee of the board of directors) of any
Loan Party by independent accountants in connection with the accounts or books
of the Borrower or any of its Subsidiaries, or any audit of any of them;
 
 

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(d) promptly after the same are available, copies of each annual report, proxy
or financial statement or other report or communication sent to the stockholders
of the Borrower, and copies of all annual, regular, periodic and special reports
and registration statements which the Borrower may file or be required to file
with the SEC under Section 13 or 15(d) of the Securities Exchange Act of 1934,
or with any national securities exchange, and in any case not otherwise required
to be delivered to the Administrative Agent pursuant hereto;

(e) unless otherwise required to be delivered to the Lenders hereunder, promptly
after the furnishing thereof, copies of any statement or report furnished to any
holder of debt securities of any Loan Party or of any of its Subsidiaries
pursuant to the terms of any indenture or similar agreement and not otherwise
required to be furnished to the Lenders pursuant to Section 6.01 or any other
clause of this Section 6.02;

(f) as soon as available, but in any event prior to the date audited financial
statements are required to be delivered, a report summarizing the insurance
coverage (specifying type, amount and carrier) in effect for each Loan Party and
its Subsidiaries and containing such additional information as the
Administrative Agent, or any Lender through the Administrative Agent, may
reasonably specify;

(g) promptly, and in any event within five Business Days after receipt thereof
by the Borrower or any Subsidiary, copies of each material notice or other
correspondence received from the SEC (or comparable agency in any applicable
non-U.S. jurisdiction) concerning any material investigation or possible
material investigation or other material inquiry by such agency regarding
financial or other operational results of the Borrower or any Subsidiary;

(h) unless otherwise required to be delivered to the Lenders hereunder, not
later than ten days after receipt thereof by the Borrower or any Subsidiary,
copies of all notices of default, non-compliance or any other material matters
(excluding those delivered pursuant to the relevant agreement in the ordinary
course of business), material requests and other material documents (including
amendments, waivers and other modifications) so received under or pursuant to
any Related Document and, from time to time upon request by the Administrative
Agent, such other information and reports regarding the Related Documents as the
Administrative Agent may reasonably request;

(i) as soon as available, but in any event within the time period in which the
Borrower must deliver its annual audited financials under Section 6.01(a), a
report supplementing Schedule 5.08(c), identifying all Material Owned Real
Property and Material Leased Real Property acquired or disposed of by any Loan
Party during such fiscal year;

(j) promptly, such additional information regarding the business, financial,
legal or corporate affairs of the Borrower or any Subsidiary, or compliance
 
 

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with the terms of the Loan Documents, as the Administrative Agent or any Lender
may from time to time reasonably request;

(k) not later than 90 days after the end of each fiscal year of the Borrower, a
copy of summary projections by the Borrower of the operating budget and cash
flow budget of the Borrower and its Subsidiaries for the succeeding fiscal year,
such projections to be accompanied by a certificate of a Responsible Officer to
the effect that such projections have been prepared based on assumptions
believed by the Borrower to be reasonable.

Documents required to be delivered pursuant to Section 6.01(a) or (b) or Section
6.02(d) (to the extent any such documents are included in materials otherwise
filed with the SEC) may be delivered electronically and if so delivered, shall
be deemed to have been delivered on the date (i) on which the Borrower posts
such documents, or provides a link thereto on the Borrower’s website on the
Internet at the website address listed on Schedule 10.02; (ii) on which such
documents are posted on the Borrower’s behalf on an Internet or intranet
website, if any, to which each Lender and the Administrative Agent have access
(whether a commercial, third-party website or whether sponsored by the
Administrative Agent); or (iii) on which such documents are filed for public
availability of the SEC’s Electronic Data Gathering and Retrieval system;
provided, that the Borrower shall notify the Administrative Agent and each
Lender (by telecopier or electronic mail) of the posting of any such documents
and provide to the Administrative Agent by electronic mail electronic versions
(i.e., soft copies) of the documents required to be delivered pursuant to
Section 6.01(a) or (b) or Section 6.02(a).  Notwithstanding anything contained
herein, in every instance the Borrower shall be required to provide paper copies
of the Compliance Certificates required by Section 6.02(b) to the Administrative
Agent.  Except for such Compliance Certificates, the Administrative Agent shall
have no obligation to request the delivery or to maintain copies of the
documents referred to above, and in any event shall have no responsibility to
monitor compliance by the Borrower with any such request for delivery, and each
Lender shall be solely responsible for requesting delivery to it or maintaining
its copies of such documents.

The Borrower hereby acknowledges that (a) the Administrative Agent and/or the
Arranger will make available to the Lenders and the L/C Issuer materials and/or
information provided by or on behalf of the Borrower hereunder (collectively,
“Borrower Materials”) by posting the Borrower Materials on IntraLinks or another
similar electronic system (the “Platform”) and (b) certain of the Lenders may be
“public-side” Lenders (i.e., Lenders that do not wish to receive material
non-public information with respect to the Borrower or its securities) (each, a
“Public Lender”).  The Borrower hereby agrees that so long as the Borrower is
the issuer of any outstanding debt or equity securities that are registered or
issued pursuant to a private offering or is actively contemplating issuing any
such securities (w) all Borrower Materials that are to be made available to
Public Lenders shall be clearly and conspicuously marked “PUBLIC” which, at a
minimum, shall mean that the word “PUBLIC” shall appear prominently on the first
page thereof; (x) by
 
 

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marking Borrower Materials “PUBLIC,” the Borrower shall be deemed to have
authorized the Administrative Agent, the Arranger, the L/C Issuer and the
Lenders to treat the Borrower Materials as not containing any material
non-public information with respect to the Borrower or its securities for
purposes of United States Federal and state securities laws (provided, however,
that to the extent the Borrower Materials constitute Information, they shall be
treated as set forth in Section 10.07); (y) all Borrower Materials marked
“PUBLIC” are permitted to be made available through a portion of the Platform
designated “Public Investor;” and (z) the Administrative Agent and the Arranger
shall be entitled to treat the Borrower Materials that are not marked “PUBLIC”
as being suitable only for posting on a portion of the Platform not designated
“Public Investor.”  Notwithstanding the foregoing, the Borrower shall not be
under any obligation to mark the Borrower Materials “PUBLIC.”  In connection
with the foregoing, each party hereto acknowledges and agrees that the foregoing
provisions are not in derogation of their confidentiality obligations under
Section 10.07.

6.03. Notices.  Notify the Administrative Agent:

(a) promptly, of the occurrence of any Default or Event of Default;

(b) promptly, of any event which could reasonably be expected to have a Material
Adverse Effect;

(c) of the occurrence of any ERISA Event that, individually, or in the
aggregate, would be reasonably likely to have a Material Adverse  Effect, as
soon as possible and in any event within 30 days after the Borrower knows or has
obtained notice thereof;

(d) of any material change in accounting policies or financial reporting
practices by any Loan Party or any Subsidiary thereof, including any
determination by the Borrower referred to in Section 2.10(b);

(e) promptly after the occurrence thereof, notice of any Environmental Liability
Claim against or by the Borrower or any of its Subsidiaries that could (i)
reasonably be expected to have a Material Adverse Effect or (ii) cause any
property described in the Mortgages to be subject to any additional material
restrictions on ownership, occupancy, use or transferability under any
Environmental Law;

(f) promptly after the occurrence thereof, notice of any accidents, explosions,
implosions, collapses or flooding at or otherwise related to the Properties that
result in (i) any fatality or (ii) the trapping of any Person in any mine for
more than twenty-four hours; and

(g) promptly after the occurrence thereof, notice of any matter that could
reasonably be expected to result in an injunction or the issuance of any closure
order pursuant to any Environmental Law or pursuant to any Environmental Permit
that
 
 

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could reasonably be expected to directly or indirectly result in the closure or
cessation of operation of any mine for a period of more than 5 consecutive days.

Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer of the Borrower setting forth details of the occurrence
referred to therein and stating what action the Borrower has taken and proposes
to take with respect thereto.

6.04. Payment of Obligations.  Pay and discharge as the same shall become due
and payable (a) all Tax liabilities, assessments and governmental charges or
levies upon it or its properties or assets, unless the same are being contested
in good faith by appropriate proceedings diligently conducted and adequate
reserves in accordance with GAAP are being maintained by the Borrower or such
Subsidiary, except where failure to do so could not reasonably be expected to
result in a Material Adverse Effect; (b) all lawful claims which, if unpaid,
would by law become a Lien upon any material portion of the Collateral; and (c)
all Indebtedness, as and when due and payable, but subject to any subordination
provisions contained in any instrument or agreement evidencing such
Indebtedness, except where failure to do so could not reasonably be expected to
result in a Material Adverse Effect.

6.05. Preservation of Existence, Etc.  With respect to the Borrower and each of
its Subsidiaries, (a) preserve, renew and maintain in full force and effect its
legal existence and good standing under the Laws of the jurisdiction of its
organization except in a transaction permitted by Section 7.04 or 7.05;
provided, however, that the Borrower and its Subsidiaries may consummate the
Spin-Off; (b) take all reasonable action to maintain all rights, privileges,
permits, licenses and franchises necessary for the normal conduct of its
business, except to the extent that failure to do so could not reasonably be
expected to have a Material Adverse Effect; and (c) preserve or renew all of its
registered patents, trademarks, trade names and service marks, the
non-preservation of which could reasonably be expected to have a Material
Adverse Effect.

6.06. Maintenance of Properties.  With respect to the Borrower and each of its
Subsidiaries, maintain, preserve and protect all of its material properties and
equipment necessary in the operation of its business in good working order and
condition (ordinary wear and tear and damage by fire or other casualty or taking
by condemnation excepted); except where the failure to do so could not
reasonably be expected to have a Material Adverse Effect.

6.07. Maintenance of Insurance.  Maintain with financially sound and reputable
insurance companies which may be Affiliates of the Borrower, insurance with
respect to its properties and business against loss or damage of the kinds
customarily insured against by Persons engaged in the same or similar business,
of such types and in such amounts (after giving effect to any self-insurance
compatible with the following standards) as are customarily carried by companies
engaged in similar businesses and owning similar properties in localities where
the Borrower or the applicable Subsidiary
 
 

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operates, except to the extent the failure to do so could not reasonably be
expected to have a Material Adverse Effect.  Without limiting the generality of
the foregoing, the Borrower and its Subsidiaries will maintain or cause to be
maintained (a) flood insurance with respect to each Flood Hazard Property that
is located in a community that participates in the National Flood Insurance
Program, in each case in compliance with any applicable regulations of the Board
of Governors of the Federal Reserve System, (b) liability insurance, (c)
business interruption insurance, and (d) replacement value casualty insurance on
the Collateral under such policies of insurance, with such insurance companies,
in such amounts, with such deductibles, and covering such risks as would be
carried or maintained under similar circumstances by Persons of established
reputation engaged in similar businesses.  Each such policy of insurance shall
(i) name the Administrative Agent, on behalf of Secured Parties, as an
additional insured thereunder as its interests may appear, (ii) in the case of
each casualty insurance policy, contain a loss payable clause or endorsement,
reasonably satisfactory in form and substance to the Administrative Agent, that
names the Administrative Agent, on behalf of the Secured Parties, as the loss
payee thereunder and provide for at least thirty days’ prior written notice to
the Administrative Agent of any modification or cancellation of such policy.

6.08. Compliance with Laws.  Comply in all material respects with the
requirements of all Laws and all orders, writs, injunctions and decrees
applicable to it or to its business or property, except in such instances in
which (a) such requirement of Law or order, writ, injunction or decree is being
contested in good faith by appropriate proceedings diligently conducted; or (b)
the failure to comply therewith could not reasonably be expected to have a
Material Adverse Effect.

6.09. Books and Records.  (a) Maintain proper books of record and account, in
which in all material respects full, true and correct entries in conformity with
GAAP consistently applied shall be made of all material financial transactions
and matters involving the assets and business of the Borrower or such
Subsidiary, as the case may be; and (b) maintain such books of record and
account in material conformity with all applicable requirements of any
Governmental Authority having regulatory jurisdiction over the Borrower or such
Subsidiary, as the case may be.

6.10. Inspection Rights.  Permit representatives and independent contractors of
the Administrative Agent and each Lender to visit and inspect any of its
properties, to examine its corporate, financial and operating records, and make
copies thereof or abstracts therefrom (except to the extent (i) any such access
is restricted by a Requirement of Law or (ii) any such agreements, contracts or
the like are subject to a written confidentiality agreement with a non-Affiliate
that prohibits the Borrower or any of its Subsidiaries from granting such access
to the Administrative Agent or the Lenders; provided, that with respect to such
confidentiality restrictions affecting the Borrower or any of its Subsidiaries,
a Responsible Officer is made available to such Lender to discuss such
confidential information to the extent permitted), and to discuss the business,
finances and accounts with its officers and independent public accountants at
such reasonable times during normal business hours and as often as may be
reasonably
 
 

--------------------------------------------------------------------------------

 
 
desired, provided, that the Administrative Agent or such Lender shall give
Borrower reasonable advance notice prior to any contact with such accountants
and give the Borrower the opportunity to participate in such discussions.

6.11. Use of Proceeds.  Use the proceeds of the Credit Extensions for working
capital, capital expenditures and other general corporate purposes.

6.12. Covenant to Guarantee Obligations and Give Security.  (a) Upon the
formation or acquisition of any new direct or indirect Guarantor Subsidiary by
any Loan Party, then the Borrower shall, at the Borrower’s expense:

(i) within 30 days after such formation or acquisition, cause such Guarantor
Subsidiary, to duly execute and deliver to the Administrative Agent a
counterpart of the Subsidiary Guaranty, guaranteeing the other Loan Parties’
obligations under the Loan Documents;

(ii) within 30 days after such formation or acquisition, furnish to the
Administrative Agent a description any Material Owned Real Property and Material
Owned Leased Property of such Guarantor Subsidiary, in detail reasonably
satisfactory to the Administrative Agent;

(iii) (A) cause such Guarantor Subsidiary to duly execute and deliver to the
Administrative Agent within 90 days after such formation or acquisition, deeds
of trust, trust deeds, deeds to secure debt and/or mortgages covering Material
Owned Real Property of such Guarantor Subsidiary, (B) cause such Guarantor
Subsidiary to duly execute and deliver to the Administrative Agent within 120
days after such formation or acquisition, leasehold mortgages or leasehold deeds
of trust with respect to all Material Leased Real Property of such Guarantor
Subsidiary where the terms of the lease of such Material Leased Property (or
applicable state law, if such lease is silent on the issue) do not prohibit a
mortgage thereof, (C) cause such Guarantor Subsidiary to use commercially
reasonable efforts to duly execute and deliver to the Administrative Agent
within 120 days after such formation or acquisition, leasehold mortgages or
leasehold deeds of trust with respect to all Material Leased Real Property of
such Guarantor Subsidiary where the terms of the lease of such Material Leased
Property (or applicable state law, if such lease is silent on the issue)
prohibit a mortgage thereof; provided, that the Borrower shall use commercially
reasonable efforts to deliver estoppel and consent agreements executed by the
lessors of such Material Leased Real Property; provided, further, that the
Borrower shall (x) deliver the initial requested form of consent to the lessor
within 30 days after such formation or acquisition and (y) initiate
communications with the lessors on the status of all such consents within 60
days after such formation or acquisition; provided, however, that if any consent
has not been executed and returned to the Administrative Agent in a form
reasonably satisfactory to the Administrative Agent within 90 days after such
formation or acquisition, then the Administrative
 
 

--------------------------------------------------------------------------------

 
 
Agent shall determine in its reasonable discretion whether such Subsidiary
Guarantor has satisfied its obligations hereunder or whether such Subsidiary
Guarantor’s obligations hereunder shall be extended for an additional period of
time to be determined by the Administrative Agent, and (D) cause such Guarantor
Subsidiary to duly execute and deliver to the Administrative Agent within 60
days after such formation or acquisition, supplements to the Security Agreement,
supplements to the Intellectual Property Security Agreements and other security
and pledge agreements, in all such cases, as specified by and in form and
substance reasonably satisfactory to the Administrative Agent (including
delivery of all Pledged Interests in and of such Guarantor Subsidiary, and other
instruments of the type specified in Section 4.01(a)(iii)), in all such cases to
the same extent that such documents and instruments would have been required to
have been delivered by Persons that were Guarantor Subsidiaries on the Closing
Date, securing payment of all the Obligations of such Guarantor Subsidiary under
the Loan Documents;

(iv) (A) within 60 days after such formation or acquisition in the case of
personal property, (B) within 90 days after such formation or acquisition in the
case of Material Owned Real Property, and (C) within 120 days after such
formation or acquisition in the case of Material Leased Real Property, cause
such Guarantor Subsidiary to take, or, in the case of Material Leased Real
Property where the terms of the lease of such Material Leased Real Property (or
applicable state law, if such lease is silent on the issue) prohibit a mortgage
thereof, cause such Guarantor Subsidiary to use commercially reasonable efforts
to take, whatever additional action (including the recording of mortgages, the
filing of Uniform Commercial Code financing statements, the giving of notices
and the endorsement of notices on title documents) may be necessary in the
reasonable opinion of the Administrative Agent to vest in the Administrative
Agent (or in any representative of the Administrative Agent designated by it)
valid and subsisting Liens on the properties purported to be subject to the
deeds of trust, trust deeds, deeds to secure debt and/or mortgages, leasehold
mortgages or leasehold deeds of trust, supplements to the Security Agreement,
supplements to the Intellectual Property Security Agreements and security and
pledge agreements delivered pursuant to Section 6.12(a)(iii), enforceable
against all third parties, in all such cases to the same extent that such action
would have been required to have been taken by Persons that were Guarantor
Subsidiaries on the Closing Date;

(v) deliver to the Administrative Agent, upon the request of the Administrative
Agent in its reasonable discretion, a signed copy of an opinion, addressed to
the Administrative Agent and the other Secured Parties, of counsel for the Loan
Parties reasonably acceptable to the Administrative Agent (A) as to the validity
and enforceability of the agreements entered into pursuant to clause (iii)(A)
above, and as to such other related matters as the Administrative Agent may
reasonably request, within 90 days after such formation or acquisition, (B) as
to the validity and enforceability of the agreements entered into pursuant to
clause
 
 

--------------------------------------------------------------------------------

 
 
(iii)(B) and, to the extent a mortgage is filed thereon, (iii)(C) above, and as
to such other related matters as the Administrative Agent may reasonably
request, within 120 days after such formation or acquisition, and (C) as to the
validity and enforceability of the agreements entered into pursuant to clauses
(i) and (iii)(D) above, and as to such other related matters as the
Administrative Agent may reasonably request, within 60 days after such formation
or acquisition; and

(vi) (A) within 90 days after such formation or acquisition in the case of
Material Owned Real Property and (B) within 120 days after such formation or
acquisition in the case of Material Leased Real Property, cause such Guarantor
Subsidiary to provide, or, in the case of Material Leased Real Property where
the terms of the lease of such Material Leased Real Property (or applicable
state law, if such lease is silent on the issue) prohibit a mortgage thereof,
cause such Guarantor Subsidiary to use commercially reasonable efforts to
provide, the Administrative Agent with a legal description of all Material Owned
Real Property and Material Leased Real Property, as applicable, from which any
As-Extracted Collateral (as defined in the Security Agreement) will be severed
or to which As-Extracted Collateral (as defined in the Security Agreement)
otherwise relates, together with the name of the record owner of such Material
Owned Real Property or Material Leased Real Property, as applicable, the county
in which such Material Owned Real Property or Material Leased Real Property, as
applicable, is located and such other information as may be necessary or
desirable to file real property related financing statements, deeds of trust,
trust deeds, deeds to secure debt, mortgages, leasehold mortgages and/or
leasehold deeds of trust under Section 9-502(b) or 9-502(c) of the UCC or any
similar legal requirements.

(b) Upon the acquisition of any Material Owned Real Property or Material Leased
Real  Property by any Loan Party other than pursuant to any acquisition covered
by Section 6.12(a), the Borrower shall, at the Borrower’s expense:

(i) within 30 days after such acquisition, furnish to the Administrative Agent a
description of the property so acquired in detail reasonably satisfactory to the
Administrative Agent;

(ii) (A) with respect to Material Owned Real Property, cause the applicable Loan
Party to duly execute and deliver to the Administrative Agent within 90 days
after such acquisition, deeds of trust, trust deeds, deeds to secure debt and/or
mortgages, (B) with respect to Material Leased Real Property where the terms of
the lease of such Material Leased Real Property (or applicable state law, if
such lease is silent on the issue) do not prohibit a mortgage thereof, cause the
applicable Loan Party to duly execute and deliver to the Administrative Agent
within 120 days after such acquisition, leasehold mortgages or leasehold deeds
of trust, and (C) with respect to Material Leased Real Property where the terms
of the lease of such Material Leased Real Property (or applicable state law, if
such lease is silent on the issue) prohibit a mortgage thereof, cause the
applicable Loan
 
 

--------------------------------------------------------------------------------

 
 
Party to use commercially reasonable efforts to duly execute and deliver to the
Administrative Agent within 120 days after such acquisition, leasehold mortgages
or leasehold deeds of trust; provided, that the Borrower shall use commercially
reasonable efforts to deliver estoppel and consent agreements executed by the
lessors of such Material Leased Real Property; provided, further, that the
Borrower shall (x) deliver the initial requested form of consent to the lessor
within 30 days after such acquisition and (y) initiate communications with the
lessors on the status of all such consents within 60 days after such
acquisition; provided, however, that if any consent has not been executed and
returned to the Administrative Agent in a form reasonably satisfactory to the
Administrative agent within 90 days after such acquisition, then the
Administrative Agent shall determine in its reasonable discretion whether such
Subsidiary Guarantor has satisfied its obligations hereunder or whether such
Subsidiary Guarantor’s obligations hereunder shall be extended for an additional
period of time to be determined by the Administrative Agent, in the case of
clauses (A), (B) and (C), in form and substance reasonably satisfactory to the
Administrative Agent, securing payment of all the Obligations of the applicable
Loan Party under the Loan Documents;

(iii) (A) within 90 days after such acquisition in the case of Material Owned
Real Property, and (B) within 120 days after such formation or acquisition in
the case of Material Leased Real Property, cause the applicable Loan Party to
take, or, in the case of Material Leased Real Property where the terms of the
lease of such Material Leased Real Property do not permit a mortgage thereof,
cause such Loan Party to use commercially reasonable efforts to take, whatever
additional action (including the recording of mortgages and the filing of
Uniform Commercial Code financing statements) may be necessary in the reasonable
opinion of the Administrative Agent to vest in the Administrative Agent (or in
any representative of the Administrative Agent designated by it) valid and
subsisting Liens on such property, enforceable against all third parties;

(iv) deliver to the Administrative Agent, upon the request of the Administrative
Agent in its reasonable discretion, a signed copy of an opinion, addressed to
the Administrative Agent and the other Secured Parties, of counsel for the Loan
Parties acceptable to the Administrative Agent (A) as to the validity and
enforceability of the Collateral Documents entered into pursuant to clause
(ii)(A) above and as to such other related matters as the Administrative Agent
may reasonably request, within 90 days after such acquisition and (B) as to the
validity and enforceability of the Collateral Documents entered into pursuant to
clause (ii)(B) and, to the extent a mortgage is filed thereon, (ii)(B) above and
as to such other related matters as the Administrative Agent may reasonably
request, within 120 days after such acquisition; and

(v) (A) within 90 days after such acquisition in the case of Material Owned Real
Property and (B) within 120 days after such acquisition in
 
 

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the case of Material Leased Real Property, cause such Guarantor Subsidiary to
provide, or, in the case of Material Leased Real Property where the terms of the
lease of such Material Leased Real Property (or applicable state law, if such
lease is silent on the issue) prohibit a mortgage thereof, cause such Guarantor
Subsidiary to use commercially reasonable efforts to provide, the Administrative
Agent with a legal description of all Material Owned Real Property and Material
Leased Real Property, as applicable, from which any As-Extracted Collateral (as
defined in the Security Agreement) will be severed or to which As-Extracted
Collateral (as defined in the Security Agreement) otherwise relates, together
with the name of the record owner of such Material Owned Real Property or
Material Leased Real Property, as applicable, the county in which such Material
Owned Real Property or Material Leased Real Property, as applicable, is located
and such other information as may be necessary or desirable to file real
property related financing statements, deeds of trust, trust deeds, deeds to
secure debt, mortgages, leasehold mortgages and/or leasehold deeds of trust
under Section 9-502(b) or 9-502(c) of the UCC or any similar legal requirements.

(c) Use commercially reasonable efforts to not enter into any lease prohibiting
the granting of any mortgage or other security interest thereon (and the
exercise of remedies with respect thereto), in each case to the Administrative
Agent for the benefit of the Secured Parties, with respect to any Material
Leased Real Property acquired after the Closing Date.

The foregoing requirements of Section 6.12(a) and (b) shall not apply to (i)
those assets over which the granting of security interests in such assets would
be prohibited by contract, applicable law or regulation or, with respect to the
assets of any non-wholly owned subsidiary, the organizational documents of such
non-wholly owned subsidiary, (ii) payroll, tax and other trust accounts, and
(iii) those assets as to which the Administrative Agent and the Borrower
reasonably determine that the cost of obtaining such security interest or
perfection thereof are excessive in relation to the benefit to the Lenders of
the security to be afforded thereby.

6.13. Compliance with Environmental Laws.  (a) Comply, and use commercially
reasonable efforts to cause all lessees and other Persons operating or occupying
its properties to comply, in all material respects, with all applicable
Environmental Laws and Environmental Permits; obtain and renew all Environmental
Permits necessary for its operations and properties, except where the failure to
so comply, obtain or renew could not reasonably be expected to have Material
Adverse Effect; and (b) undertake and perform any cleanup, removal, remedial or
other action necessary to remove and clean up all Hazardous Materials from any
of its properties, in accordance with the requirements of all Environmental
Laws, except where the failure to so undertake and perform could not reasonably
be expected to have a Material Adverse Effect.
 
 

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6.14. Preparation of Environmental Reports.  Not more often than once per
Property during the term of this Agreement (or more frequently during the
continuance of an Event of Default), at the reasonable request of the
Administrative Agent, the Borrower shall provide to the Lenders within 60 days
after such request, at the expense of the Borrower, an environmental or mining
site assessment or audit report for any of its Properties described in such
request, prepared by an environmental or mining consulting firm reasonably
acceptable to the Administrative Agent and indicating the presence or absence of
Hazardous Materials and the estimated cost of any compliance or remedial action
in connection with such Properties and the estimated cost of curing any
violation or non-compliance of any Environmental Law.

6.15. Further Assurances.  Promptly upon request by the Administrative Agent, or
any Lender through the Administrative Agent, (a) correct any material defect or
error that may be discovered in any Loan Document or in the execution,
acknowledgment, filing or recordation thereof, and (b) do, execute, acknowledge,
deliver, record, re-record, file, re-file, register and re-register any and all
such further acts, deeds, certificates, assurances and other instruments as the
Administrative Agent, or any Lender through the Administrative Agent, may
reasonably require from time to time in order to (i) carry out more effectively
the purposes of the Loan Documents, (ii) to the fullest extent permitted by
applicable law, subject the Borrower’s or any of its Subsidiaries’ properties,
assets, rights or interests to the Liens now or hereafter intended to be covered
by any of the Collateral Documents, and (iii) perfect and maintain the validity,
effectiveness and priority of any of the Collateral Documents and any of the
Liens intended to be created thereunder.

6.16. Compliance with Terms of Leaseholds and Related Documents.  (a)  Make all
payments and otherwise perform all obligations in respect of all leases of real
property to which the Borrower or any of its Subsidiaries is a party, keep such
leases in full force and effect and not allow such leases to lapse or be
terminated or any rights to renew such leases to be forfeited or cancelled,
except, in any case, where the failure to do so, either individually or in the
aggregate, could not be reasonably likely to have a Material Adverse Effect.

(b) Make all payments and otherwise perform all obligations in respect of all
Related Documents, keep such Related Documents in full force and effect and not
allow such Related Documents to lapse or be terminated or any rights to renew
such Related Documents to be forfeited or cancelled, except, in any case, where
the failure to do so, either individually or in the aggregate, could not be
reasonably likely to have a Material Adverse Effect.

6.17. [Reserved].

6.18. [Reserved].
 
 

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6.19. Certain Long Term Liabilities and Environmental Reserves.  To the extent
required by GAAP, maintain adequate reserves for (i) future costs associated
with any lung disease claim alleging pneumoconiosis or silicosis or arising out
of exposure or alleged exposure to coal dust or the coal mining environment,
(ii) future costs associated with retiree and health care benefits, (iii) future
costs associated with Reclamation of disturbed acreage, removal of facilities
and other closing costs in connection with its mining operations and (iv) future
costs associated with other potential Environmental Liabilities.

6.20. Mining Financial Assurances.  Maintain all material Mining Financial
Assurances to the extent required pursuant to any Environmental Law.

6.21. Post-Closing Obligations.  Perform the obligations set forth on Schedule
6.21, as and when set forth therein.
 
 

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Appendix 3
to the Term Sheet
 
Negative Covenants to be Incorporated
into the Bridge Facility3

Below are the negative covenants set forth in Article VII  of  that certain
Credit Agreement, dated as of October 31, 2007, among the Company, the lenders
party thereto, and Bank of America, N.A., as administrative agent thereunder, as
amended as of the date hereof (the “Existing Credit Agreement”). Capitalized
terms used and not otherwise defined herein are used with the meanings
attributed thereto in (i) the Commitment Letter dated April 2, 2008 (the
“Commitment Letter”), from ArcLight to the Company, of which this Appendix 3
forms an integral part, or (ii) the Existing Credit Agreement, in each case as
appropriate.  All section references set forth below, or any use of the phrases
“herein,” “hereunder,” or similar phrases, shall refer to the relevant sections
of the Existing Credit Agreement.  For the avoidance of doubt, it is understood
that the negative covenants contained in the Bridge Facility Documentation shall
(i) with respect to the matters set forth below, be in the form set forth below,
with such modifications as shall be necessary to give effect to the terms and
conditions set forth in the Term Sheet, the Commitment Letter, the Fee Letter
and, where applicable, to permit and give effect to the existence of the
Existing Credit Agreement, and (ii) in the case of all other matters, be on
Acceptable Bridge Terms.
 

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So long as any Lender shall have any Commitment hereunder, any Loan or other
Obligation hereunder shall remain unpaid or unsatisfied (other than in respect
of contingent obligations, indemnities and costs and expenses related thereto
not then payable or in existence as of the later of the Maturity Date or the
Letter of Credit Expiration Date), or any Letter of Credit shall remain
outstanding, the Borrower shall not, nor shall it permit any Subsidiary to,
directly or indirectly:

7.01. Liens.  Create, incur, assume or suffer to exist any Lien upon, or
exception to title to, any of its property, assets or revenues, whether now
owned or hereafter acquired, or sign or file under the Uniform Commercial Code
of any jurisdiction a financing statement that names the Borrower or any of its
Subsidiaries as debtor, or assign any accounts or other right to receive income,
other than the following:

(a) Liens pursuant to any Loan Document;

(b) (i) Liens existing on the date hereof and listed on Schedule 7.01(i) and
(ii) Liens securing Indebtedness assumed by Merger Sub on the Merger Date in
connection with the Magnum Acquisition and listed on Schedule 7.01(ii) and, in
each case, any refinancing, refunding, renewal or extension thereof; provided,
that (A) the
 
_____________ 
 3 To conform to final amendment to the Existing Credit Agreement upon
satisfactory review of the same by ArcLight and its counsel.
 
 

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assets and other property subject thereto are not expanded from the assets and
other property subject thereto immediately prior to the Merger Date, (B) such
Lien shall secure only those obligations which it secures on the Merger Date and
the principal amount secured or benefited thereby is not increased from the
principal amount so secured or benefited thereby immediately prior to the Merger
Date, and (C) any refinancing, refunding, renewal or extension of the
obligations secured or benefited thereby is permitted by Section 7.02(c);

(c) Liens for Taxes not yet due or which are being contested in good faith and
by appropriate proceedings, if adequate reserves with respect thereto are
maintained on the books of the applicable Person in accordance with GAAP;

(d) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other
like Liens arising in the ordinary course of business which are not overdue for
a period of more than 60 days or which are being contested in good faith and by
appropriate proceedings, if adequate reserves with respect thereto are
maintained on the books of the applicable Person;

(e) pledges or deposits in the ordinary course of business in connection with
workers’ compensation, unemployment insurance and other social security
legislation and deposits securing liability to insurance carriers under
insurance or self-insurance arrangements;

(f) (i) deposits to secure the performance of bids, trade contracts and leases
(other than Indebtedness), reclamation bonds, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature incurred
in the ordinary course of business and (ii) Liens on assets to secure
obligations under surety bonds obtained as required in connection with the
entering into of new federal coal leases;

(g) easements, covenants, conditions, rights-of-way, zoning restrictions, other
restrictions and other similar encumbrances which, in the aggregate, are not
substantial in amount, and which do not in any case materially detract from the
value of the property subject thereto or materially interfere with the ordinary
conduct of the business of the applicable Person;

(h) Liens securing attachments or judgments for the payment of money not
constituting an Event of Default under Section 8.01(h) or securing appeal or
surety bonds related to such attachments or judgments;

(i) Liens securing Indebtedness of the Borrower and its Subsidiaries permitted
by Section 7.02(e) incurred to finance the acquisition of fixed or capital
assets; provided, that (i) such Liens shall be created substantially
simultaneously with the acquisition of such fixed or capital assets, (ii) such
Liens do not at any time encumber any property other than the property financed
by such Indebtedness (other than after-
 
 

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acquired title in or on such property and proceeds of the existing collateral in
accordance with the instrument creating such Lien), (iii) the principal amount
of Indebtedness secured by any such Lien shall at no time exceed 100% of the
original purchase price of such property at the time it was acquired, and (iv)
if the terms of such Indebtedness require any Lien hereunder to be subordinated
to such Liens, then the Lien hereunder shall be subordinated on terms reasonably
acceptable to the Administrative Agent;

(j) Liens on the property or assets of a Person which becomes a Guarantor
Subsidiary after the date hereof securing Indebtedness permitted by Section 7.02
not to exceed $25,000,000 at any time outstanding, provided, that (i) such Liens
existed at the time such entity became a Guarantor Subsidiary and were not
created in anticipation thereof, (ii) any such Lien is not expanded to cover any
other property or assets of such Person (other than the proceeds of the property
or assets subject to such Lien) or of the Borrower or any Guarantor Subsidiary,
(iii) the amount of Indebtedness secured thereby is not increased, and (iv) if
the terms of such Indebtedness require any Lien hereunder to be subordinated to
such Liens, then the Lien hereunder shall be subordinated on terms reasonably
acceptable to the Administrative Agent;

(k) Liens on the property of the Borrower or any of its Subsidiaries, as a
tenant under a lease or sublease entered into in the ordinary course of business
by such Person, in favor of the landlord under such lease or sublease, securing
the tenant’s performance under such lease or sublease, as such Liens are
provided to the landlord under applicable law and not waived by the landlord;

(l) Liens arising from precautionary Uniform Commercial Code financing statement
filings with respect to operating leases or consignment arrangements entered
into by the Borrower or any of its Subsidiaries in the ordinary course of
business;

(m) Liens securing Refinancing Indebtedness, to the extent that the Indebtedness
being refinanced was originally secured in accordance with this Section 7.01,
provided, that such Lien does not apply to any additional property or assets of
the Borrower or any of its Subsidiaries (other than the proceeds of the property
or assets subject to such Lien);

(n) Production Payments, royalties, dedication of reserves under supply
agreements or similar rights or interests granted, taken subject to, or
otherwise imposed on properties consistent with normal practices in the mining
industry;

(o) leases, subleases, licenses and rights-of-use granted to others incurred in
the ordinary course of business and that do not materially and adversely affect
the use of the property encumbered thereby for its intended purpose;

(p) Liens in favor of a banking institution arising by operation of law or any
contract encumbering deposits (including the right of set-off) held by such
 
 

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banking institutions incurred in the ordinary course of business and which are
within the general parameters customary in the banking industry;

(q) Liens on receivables and rights related to such receivables created pursuant
to any Permitted Securitization Programs (to the extent that any such
Disposition of receivables is deemed to give rise to a Lien);

(r) Liens on assets of the Borrower and its Subsidiaries that are not Collateral
with a value (determined immediately prior to the incurrence of such Lien) in an
aggregate amount (at actual cost, without adjustment for subsequent increases or
decreases in the value of such asset) not in excess of $12,000,000 in the
aggregate;

(s) Liens in favor of an escrow agent arising under an escrow arrangement
incurred in connection with the issuance of notes with respect of the proceeds
of such notes and anticipated interest expenses with respect to such notes;

(t) rights of owners of interests in overlying, underlying or intervening strata
and/or mineral interests not owned by Borrower or on of its Subsidiaries, with
respect to tracts of real property where the Borrower or applicable Subsidiary’s
ownership is only surface or severed mineral or is otherwise subject to mineral
severances in favor of one or more third parties;

(u) other defects and exceptions to title of real property where such defects or
exceptions could not be reasonably be expected to have a Material Adverse
Effect; and
 
(v) Liens securing Indebtedness under the Magnum Acquisition Credit Agreement;
provided, that (A) such Liens do not encumber any property in which the Lenders
do not have a perfected Lien securing the Obligations, (B) the principal amount
secured or benefited thereby is not increased after the Amendment Effective Date
(other than with respect to the capitalization of interest, if any), and (C) any
refinancing, refunding, renewal or extension of the obligations secured or
benefited thereby is permitted by Section 7.02(c).

7.02. Indebtedness.  Create, incur, assume or suffer to exist any Indebtedness,
except:

(a) Indebtedness under the Loan Documents;

(b) (i) Indebtedness outstanding on the date hereof and listed on Schedule
7.02(i) and (ii) Indebtedness assumed by Merger Sub in connection with the
Magnum Acquisition on the Merger Date and listed on Schedule 7.02(ii);

(c) any refinancings, refundings, renewals or extensions of Indebtedness
permitted under Section 7.02(b) and Section 7.02(n); provided, that (i) the
amount of such Indebtedness (the “Refinancing Indebtedness”) is not increased at
the
 
 

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time of such refinancing, refunding, renewal or extension except by an amount
equal to a reasonable premium or other reasonable amount paid, and fees and
expenses reasonably incurred, in connection with such refinancing and by an
amount equal to any existing commitments unutilized thereunder, (ii) the direct
or any contingent obligor with respect thereto is not changed, as a result of or
in connection with such refinancing, refunding, renewal or extension and (iii)
the terms relating to principal amount, amortization, maturity, collateral (if
any) and subordination (if any), and other material terms taken as a whole, of
any such refinancing, refunding, renewing or extending Indebtedness, and of any
agreement entered into and of any instrument issued in connection therewith, are
no less favorable in any material respect to the Loan Parties or the Lenders
than the terms of any agreement or instrument governing the Indebtedness being
refinanced, refunded, renewed or extended and the interest rate applicable to
any such refinancing, refunding, renewing or extending Indebtedness does not
exceed the then applicable market interest rate (as determined in good faith by
the Board of Directors of the Borrower, or as determined by the Administrative
Agent in the case of any refinancings, refundings, renewals or extensions of
Indebtedness permitted under Section 7.02(n));

(d) Guarantees of the Borrower or any of its Subsidiaries in respect of
Indebtedness otherwise permitted hereunder of the Borrower or any other Loan
Party, other than Guarantees by Subsidiaries of the Borrower of Indebtedness
permitted under Section 7.02(n);

(e) Indebtedness in respect of Capital Lease Obligations and purchase money
obligations for fixed or capital assets within the limitations set forth in
Section 7.01(i); provided, however, that the aggregate amount of all such
Indebtedness at any one time outstanding shall not exceed 1.0% of Tangible
Assets of the Loan Parties;

(f) Indebtedness in respect of Swap Contracts incurred in the ordinary course of
business and consistent with prudent business practice;

(g) Indebtedness of the Borrower or any other Loan Party to any other Loan Party
and of any non-Loan Party Subsidiary to any Loan Party or any other non-Loan
Party; provided, that such Indebtedness must be subordinated to the Obligations
on customary terms;

(h) Intercompany current liabilities incurred in the ordinary course of business
of the Borrower and its Subsidiaries;

(i) Indebtedness incurred in connection with any Permitted Securitization
Program in an aggregate principal amount not to exceed $50,000,000; and

(j) Indebtedness in respect of netting services, automatic clearinghouse
arrangements, overdraft protections and similar arrangements in each case in
connection with deposit accounts and in the ordinary course of business;
 
 

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(k) Indebtedness representing deferred or equity compensation to employees of
the Borrower or any of its Subsidiaries incurred in the ordinary course of
business;

(l) Indebtedness in an aggregate principal amount not to exceed 5% of Tangible
Assets of the Borrower and its Subsidiaries at any time outstanding; provided,
that (i) the covenants and events of default of such Indebtedness are, as a
whole, no more restrictive to the obligors or the lenders thereon than the
Revolving Credit Loans and (ii) such Indebtedness shall not be Guaranteed by any
Subsidiary of the Borrower that is not a Subsidiary Guarantor hereunder;

(m) Indebtedness in the form of bank guaranties, bid, performance, reclamation
bonds, statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature incurred in the ordinary course of business,
in an aggregate amount not to exceed $400,000,000; provided that such
Indebtedness described in this clause (m) is not secured by any Lien other than
a Lien on cash described in Section 7.01(f); and

(n) subject to the consummation of the Magnum Acquisition, Indebtedness incurred
by the Borrower under the Magnum Acquisition Credit Agreement.

7.03. Investments.  Make or hold any Investments, except:

(a) Investments held by the Borrower or any of its Subsidiaries in the form of
Cash Equivalents;

(b) advances to officers, directors and employees of the Borrower and
Subsidiaries in an aggregate amount not to exceed $500,000 at any time
outstanding, for travel, entertainment, relocation and analogous ordinary
business purposes;

(c) Investments consisting of extensions of credit in the nature of accounts
receivable or notes receivable arising from the grant of trade credit in the
ordinary course of business, and Investments received in satisfaction or partial
satisfaction thereof from financially troubled account debtors to the extent
reasonably necessary in order to prevent or limit loss;

(d) Investments (including debt obligations and Equity Interests) received in
satisfaction of judgments or in connection with the bankruptcy or reorganization
of suppliers and customers of the Borrower and its Subsidiaries and in
settlement of delinquent obligations of, and other disputes with, such customers
and suppliers arising in the ordinary course of business;

(e) Investments in the nature of Production Payments, royalties, dedication of
reserves under supply agreements or similar rights or interests granted,
 
 

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taken subject to, or otherwise imposed on properties with normal practices in
the mining industry;

(f) Investments existing on the date hereof and set forth on Schedule 7.03 and
extensions, renewals, modifications, restatements or replacements thereof;
provided, that no such extension, renewal, modification or restatement shall
increase the amount of the original loan, advance or investment, except by an
amount equal to any premium or other reasonable amount paid in respect of the
underlying obligations and fees and expenses incurred in connection with such
replacement, renewal or extension;

(g) promissory notes and other similar non-cash consideration received by the
Borrower and its Subsidiaries in connection with Dispositions not otherwise
prohibited under this Agreement;

(h) Investments in any assets constituting a business unit received by the
Borrower or its Subsidiaries by virtue of an asset exchange or swap with a third
party or acquired as a capital expenditure;

(i) Swap Contracts permitted under Section 7.02(f);

(j) Investments by the Borrower or its Subsidiaries in any Loan Party or entity
that becomes a Loan Party as a result of such Investment and Investments by any
non-Loan Party in any other non-Loan Party; provided, that if the Investment is
in the form of Indebtedness, such Indebtedness must be permitted pursuant to
Section 7.02(g);

(k) Permitted Acquisitions;

(l) Investments by the Borrower or its Subsidiaries to acquire the remaining
18.5% of Capital Stock of KE Ventures, LLC in an aggregate principal amount not
to exceed $34,000,000;

(m) Investments by the Borrower or any of its Subsidiaries not otherwise
permitted under this Section 7.03 in an aggregate amount not in excess of 2.5%
of Tangible Assets of the Borrower and Subsidiaries; and

(n) the Magnum Acquisition.

7.04. Fundamental Changes.  Merge, dissolve, liquidate, consolidate with or into
another Person, or Dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) to or in favor of any Person, except that, so long as no
Default exists or would result therefrom:

(a) any Subsidiary may merge with (i) the Borrower, provided, that the Borrower
shall be the continuing or surviving Person, or (ii) any one or more other
 
 

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Subsidiaries, provided, that when any Subsidiary that is a Loan Party is merging
with another Subsidiary, the Loan Party shall be the continuing or surviving
Person;

(b) any Subsidiary may Dispose of all or substantially all of its assets (upon
voluntary liquidation or otherwise) to the Borrower or to another Subsidiary;
provided, that if the transferor in such a transaction is a Loan Party, then the
transferee must either be the Borrower or another Loan Party;

(c) the Borrower and any Subsidiary may merge or consolidate with any other
Person in a transaction in which the Borrower is the surviving or continuing
Person;

(d) the Borrower and its Subsidiaries may consummate the Spin-Off; and

(e) the Borrower and its Subsidiaries may consummate any transaction that would
be permitted as an Investment under Section 7.03.

7.05. Dispositions.  Make any Disposition or enter into any agreement to make
any Disposition, except:

(a) Dispositions of used, worn out, obsolete or surplus property by the Borrower
or any of its Subsidiaries in the ordinary course of business or the abandonment
or allowance to lapse or expire or other Disposition of Intellectual Property in
the ordinary course of business that is, in the reasonable judgment of the
Borrower, no longer economically practicable to maintain or useful in the
conduct of the Borrower and its Subsidiaries taken as a whole;

(b) Dispositions of inventory in the ordinary course of business;

(c) Dispositions of equipment or real property to the extent that (i) such
property is exchanged for credit against the purchase price of similar
replacement property or (ii) the proceeds of such Disposition are reasonably
promptly applied to the purchase price of such replacement property;

(d) Dispositions of property by any Subsidiary to the Borrower or to a
wholly-owned Subsidiary; provided, that if the transferor of such property is a
Loan Party, the transferee thereof must either be the Borrower or a another Loan
Party;

(e) Dispositions permitted by Section 7.04;

(f) Dispositions by the Borrower and its Subsidiaries of property pursuant to
sale-leaseback transactions, provided, that the book value of all property so
Disposed of, from and after the Closing Date, shall not exceed 2.0% of Tangible
Assets;
 
 

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(g) Dispositions by the Borrower and its Subsidiaries not otherwise permitted
under this Section 7.05; provided, that (i) at the time of such Disposition, no
Default shall exist or would result from such Disposition, and (ii) the
aggregate book value of all property Disposed of in reliance on this clause (g)
in any fiscal year shall not exceed 2.5% of Tangible Assets;

(h) so long as no Default shall occur and be continuing, the grant of any option
or other right to purchase any asset in a transaction that would be permitted
under the provisions of this Section 7.05;

(i) leases, subleases, assignments, licenses, sublicenses of real or personal
property or Intellectual Property in the ordinary course of business and in
accordance with the applicable Collateral Documents; provided, however, that any
license or sublicense of intellectual property shall be on the non-exclusive
basis;

(j) sales or discounts (without recourse) of accounts receivable arising in the
ordinary course of business in connection with the compromise of collection
thereof;

(k) sales, transfers and other dispositions of Investments in joint ventures to
the extent required by, or make pursuant to customary buy/sell arrangement
between, the joint venture parties set forth in joint venture arrangements and
similar binding arrangements;

(l) transfers of property subject to casualty or condemnation events upon
receipt of the Net Cash Proceeds constituting and Extraordinary Receipt; and

(m)  Permitted Securitization Programs.

provided, however, that any Disposition pursuant to Section 7.05(a), (b), (c),
(f), (g), (l), and (m) shall be for fair market value.

7.06. Restricted Payments.  Declare or make, directly or indirectly, any
Restricted Payment, except that, so long as no Default shall have occurred and
be continuing at the time of any action described below or would result
therefrom:

(a) each Subsidiary may make Restricted Payments to the Borrower, the Subsidiary
Guarantors and any other Person that owns a direct Equity Interest in such
Subsidiary, ratably according to their respective holdings of the type of Equity
Interest in respect of which such Restricted Payment is being made;

(b) the Borrower and each Subsidiary may declare and make dividend payments or
other distributions payable solely in the common stock or other Equity Interests
of such Person;
 
 

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(c) the Borrower and each Subsidiary may purchase, redeem or otherwise acquire
Equity Interests issued by it with the proceeds received from the substantially
concurrent issue of new shares of its common Equity Interests;

(d) the Borrower may declare or pay cash dividends to its stockholders and
purchase, redeem, or otherwise acquire for cash Equity Interests issued by it
solely out of 25% of consolidated net income of the Borrower and its
Subsidiaries arising after December 31, 2008 and computed on a cumulative
consolidated basis with other such transactions by the Borrower since such date;
provided, that at the time of such declaration (in the case of dividends) or the
date of any such Restricted Payment (in the case of any other Restricted
Payment), and after giving effective thereto, no Default shall have occurred and
be continuing and the Borrower is in compliance with the financial covenants set
forth in Section 7.11; and

(e) the Borrower or any of its Subsidiaries may purchase (i) Equity Interests in
any Loan Party or options with respect thereto held by directors, officers or
employees of the Borrower or any Subsidiary (or their estates or authorized
representatives) in connection with the death, disability or termination of
employment of any such director, officer or employee and (ii) Equity Interests
in any Loan Party for future issuance under any employee stock plan.

7.07. Change in Nature of Business.  Engage in any material line of business
other than a Similar Business.

7.08. Transactions with Affiliates.  Enter into any transaction of any kind with
any Affiliate, including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service, unless such transaction is
(a) not prohibited by this Agreement and (b) upon fair and reasonable terms
substantially as favorable to the Borrower or such Subsidiary as would be
obtainable by the Borrower or such Subsidiary at the time in a comparable arm’s
length transaction with a Person other than an Affiliate.  The foregoing
restrictions shall not apply to the following:

(a) transactions between or among the Borrower and any other Loan Parties or
between and among any Loan Parties;

(b) the payment of reasonable and customary fees and reimbursement of expenses
payable to directors of the Borrower or any Subsidiary or to any Plan, Plan
administrator or Plan trustee;

(c) loans and advances to directors, officers and employees to the extent
permitted by Section 7.03;

(d) arrangements with respect to the procurement of services of directors,
officers, independent contractors, consultants or employees in the ordinary
course of business and the payment of customary compensation (including bonuses)
and
 
 

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other benefits (including retirement, health, stock option and other benefit
plans) and reasonable reimbursement arrangements in connection therewith;

(e) payments to directors and officers of the Borrower and its Subsidiaries in
respect of the indemnification of such Persons in such respective capacities
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements, as the
case may be, pursuant to the Organization Documents or other corporate action of
the Borrower or its Subsidiaries, respectively, or pursuant to applicable law;
and

(f) Restricted Payments permitted by Section 7.06.

7.09. Burdensome Agreements.  Enter into any Contractual Obligation (other than
this Agreement or any other Loan Document) that (a) limits the ability (i) of
any Subsidiary to make Restricted Payments to the Borrower or any Subsidiary
Guarantor or to otherwise transfer property to or invest in the Borrower or any
Subsidiary Guarantor, unless such Contractual Obligations could not reasonably
be expected to materially hinder the Borrower’s ability to meet its obligations
under this Agreement.

7.10. Use of Proceeds.  Use the proceeds of any Credit Extension, whether
directly or indirectly, and whether immediately, incidentally or ultimately, to
purchase or carry margin stock (within the meaning of Regulation U of the FRB)
or to extend credit to others for the purpose of purchasing or carrying margin
stock or to refund indebtedness originally incurred for such purpose.

7.11. Financial Covenants.  (a)  Consolidated Interest Coverage Ratio.  Permit
the Consolidated Interest Coverage Ratio as of the end of any fiscal quarter of
the Borrower, commencing with the fiscal quarter ending March 31, 2008, for the
period of four consecutive fiscal quarters of the Borrower ending on such date
to be less than 4.00:1.00; provided, that (i) the Consolidated Interest Coverage
Ratio for the fiscal quarter ending March 31, 2008, shall be measured for such
fiscal quarter only, (ii) the Consolidated Interest Coverage Ratio for the
fiscal quarter ending June 30, 2008, shall be measured for a period of two
consecutive fiscal quarters of the Borrower ending on such date, and (iii) the
Consolidated Interest Coverage Ratio for the fiscal quarter ending September 30,
2008, shall be measured for a period of three consecutive fiscal quarters of the
Borrower ending on such date.

(b) Consolidated Leverage Ratio.  Permit the Consolidated Leverage Ratio as of
the end of any fiscal quarter of the Borrower, commencing with the fiscal
quarter ending March 31, 2008, for any period of four consecutive fiscal
quarters of the Borrower ending on such date to be greater than 2.75:1.00.

7.12. Capital Expenditures.  Make or become legally obligated to make any
Capital Expenditure, except for Capital Expenditures in the ordinary course of
 
 

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business not exceeding, in the aggregate for the Borrower and its Subsidiaries
during each fiscal year set forth below, the amount set forth opposite such
fiscal year:

Fiscal Year
Amount
2008
$220,000,000
2009
$235,000,000
2010
$220,000,000
2011
$220,000,000

provided, however, that so long as no Default has occurred and is continuing or
would result from such expenditure, any portion of any amount set forth above,
if not expended in the fiscal year for which it is permitted above, may be
carried over for expenditure in the next following fiscal year; and provided,
further, if any such amount is so carried over, it will be deemed used in the
applicable subsequent fiscal year before the amount set forth opposite such
fiscal year above

7.13. Amendments of Organization Documents.  Amend any of its Organization
Documents in any respect materially adverse to the Lenders.

7.14. Accounting Changes.  Make any change in (a) its accounting policies or
reporting practices, except as required or permitted by GAAP, or (b) its fiscal
year.

7.15. Prepayments, Etc. of Indebtedness.  If an Event of Default under Sections
8.01(a) or (b) (only with respect to an Event of Default under Section 7.11)
shall have occurred and be continuing, voluntarily prepay, redeem, purchase,
defease or otherwise satisfy prior to the scheduled maturity thereof in any
manner, or make any payment in violation of any subordination terms of, any
Indebtedness, except (a) the prepayment of the Credit Extensions in accordance
with the terms of this Agreement and (b) regularly scheduled or required
repayments or redemptions of Indebtedness set forth in Schedule 7.02(i) and
refinancings and refundings of such Indebtedness in compliance with Section
7.02(c).

7.16. Amendment, Etc. of Related Documents and Indebtedness.  (a)  Cancel or
terminate any Related Document or consent to or accept any cancellation or
termination thereof, other than in accordance with its terms (b) amend, modify
or change in any manner any term or condition of any Related Document or give
any consent, waiver or approval thereunder, (c) waive any default under or any
breach of any term or condition of any Related Document, (d) take any other
action in connection with any Related Document, in the case of each of clauses
(a) through (d), that would materially impair the value of the interest or
rights of any Loan Party thereunder or that would materially impair the ability
of the Lenders to be repaid hereunder or (e) if an Event of Default under
Sections 8.01(a) or (b) (only with respect to an Event of Default under Section
7.11) shall have occurred and be continuing, amend, modify or change in any
 
 

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manner any term or condition of any Indebtedness set forth in Schedule 7.02(i),
except for any refinancing, refunding, renewal or extension thereof permitted by
Section 7.02(c).

7.17. Limitation on Negative Pledge Clauses.  Enter into any Contractual
Obligation (other than this Agreement or any other Loan Document) that limits
the ability of the Borrower or any Subsidiary Guarantor to create, incur, assume
or suffer to exist any Lien upon any of its property to secure the Obligations
hereunder; provided, however, that the foregoing clause shall not apply to
Contractual Obligations which:

(a) exist on the date hereof and (to the extent not otherwise permitted by this
Section 7.17) are listed on Schedule 7.17 hereto;

(b) are binding on a Subsidiary at the time such Subsidiary first becomes a
Subsidiary of the Borrower, so long as such Contractual Obligations were not
entered into solely in contemplation of such Person becoming a Subsidiary of the
Borrower;

(c) arise in connection with any Lien permitted by Section 7.01 to the extent
such restrictions relate solely to the assets (and any proceeds in respect
thereof) which are the subject of such Lien;

(d) represent Indebtedness permitted by Section 7.02 (b), (c), (d), (e), (k) and
(l); provided, that such Indebtedness shall not conflict with (i) any terms of
this Agreement, any other Loan Document or the terms of any other Indebtedness
and (ii) the Borrower’s obligation to grant Liens to the Administrative Agent
for the benefit of the Secured Parties in Collateral acquired after the Closing
Date in accordance with the terms of the Loan Documents;

(e) represent secured Indebtedness permitted by Section 7.01(j) to the extent
that such restrictions apply only to the Subsidiaries incurring or guaranteeing
such Indebtedness (and the Subsidiaries of such Subsidiaries);

(f) arise in connection with any Disposition permitted by Section 7.05, with
respect to the assets so Disposed;

(g) are customary provisions in joint venture agreements and other similar
agreements applicable solely to such joint venture or the Equity Interests
therein;

(h) are customary restrictions on leases, subleases, licenses or asset sale
agreements otherwise permitted hereby so long as such restrictions relate to the
assets subject thereto;

(i) are customary provisions restricting subletting or assignment of any lease
governing a leasehold interest of the Borrower or any Subsidiary;
 
 

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(j) are customary limitations (including financial maintenance covenants)
existing under or by reason of leases entered into in the ordinary course of
business;

(k) are restrictions on cash or other deposits imposed under contracts entered
into in the ordinary course of business;

(l) are customary provisions restricting assignment of any agreements;

(m) are restrictions imposed by any agreement relating to any Permitted
Securitization Program to the extent that such restrictions relate to the assets
(and any proceeds in respect thereof) that are the subject of such Permitted
Securitization Program; or

(n) are set forth in any agreement evidencing an amendment, modification,
restatement, renewal, increase, supplement, refunding, replacement or
refinancing of the Contractual Obligations referred to in clauses (a) through
(l) above; provided, that such amendment, modification, restatement, renewal,
increase, supplement, refunding, replacement or refinancing is, in the good
faith judgment of the Borrower, not materially less favorable to the Loan
Parties and the Lenders with respect to such limitations than those applicable
pursuant to such Contractual Obligations prior to such amendment, modification,
restatement, renewal, increase, supplement, refunding, replacement or
refinancing.
 
 

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Appendix 4
to the Term  Sheet
 
Events of Default to be Incorporated
into the Bridge Facility4

Below are the Events of Default set forth in Section 8.01 of  that certain
Credit Agreement, dated as of October 31, 2007, among the Company, the lenders
party thereto, and Bank of America, N.A., as administrative agent thereunder, as
amended as of the date hereof (the “Existing Credit Agreement”). Capitalized
terms used and not otherwise defined herein are used with the meanings
attributed thereto in (i) the Commitment Letter dated April 2, 2008 (the
“Commitment Letter”), from ArcLight to the Company, of which this Appendix 4
forms an integral part, or (ii) the Existing Credit Agreement, in each case as
appropriate.  All section references set forth below, or any use of the phrases
“herein,” “hereunder,” or similar phrases, shall refer to the relevant sections
of the Existing Credit Agreement.  For the avoidance of doubt, it is understood
that the Events of Default contained in the Bridge Facility Documentation shall
(i) with respect to the matters set forth below, be in the form set forth below,
with such modifications as shall be necessary to give effect to the terms and
conditions set forth in the Term Sheet, the Commitment Letter, the Fee Letter
and, where applicable, to permit and give effect to the existence of the
Existing Credit Agreement, and (ii) in the case of all other matters, be on
Acceptable Bridge Terms.
 

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8.01. Events of Default.  Any of the following shall constitute an Event of
Default:

(a) Non-Payment.  The Borrower or any other Loan Party fails to pay (i) when and
as required to be paid herein, any amount of principal of any Loan or any L/C
Obligation or (ii) within three days after the same becomes due, any interest on
any Loan or on any L/C Obligation, any fee due hereunder, or any other amount
payable hereunder or under any other Loan Document; or

(b) Specific Covenants.  (i) The Borrower fails to perform or observe any term,
covenant or agreement contained in any of Sections 6.03(a), 6.03(b), 6.03(c),
6.05(a), 6.07, 6.08, 6.10, 6.11, 6.12, 6.15, 6.16, 6.20, 6.21 or Article VII,
(ii) any of the Subsidiary Guarantors fails to perform or observe any term,
covenant or agreement contained in Section IV of the Subsidiary Guaranty (but
only to the extent it relates to a default under one of the covenants listed in
clause (i) above) or (iii) any of the Loan Parties fails to perform or observe
any term, covenant or agreement contained in Section 4 of the Security
Agreement; or
 
___________ 
 4 To conform to final amendment to the Existing Credit Agreement upon
satisfactory review of the same by ArcLight and its counsel.

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(c) Other Defaults.  Any Loan Party fails to perform or observe any other
covenant or agreement (not specified in Section 8.01(a) or (b) above) contained
in any Loan Document on its part to be performed or observed and such failure
continues for 30 days; or

(d) Representations and Warranties.  Any representation, warranty, certification
or statement of fact made or deemed made by or on behalf of the Borrower or any
other Loan Party herein, in any other Loan Document, or in any document
delivered in connection herewith or therewith shall be incorrect or misleading
in any material respect when made or deemed made; or

(e) Cross-Default.  (i) The Borrower or any Subsidiary (A) fails to make any
payment when due (whether by scheduled maturity, required prepayment,
acceleration, demand, or otherwise) in respect of any Indebtedness or Guarantee
(other than Indebtedness hereunder, Indebtedness under Swap Contracts or
Guarantees of the Obligations), in each case having an aggregate principal
amount (including undrawn committed or available amounts and including amounts
owing to all creditors under any combined or syndicated credit agreement) of
more than the Threshold Amount, beyond the period of grace, if any, provided in
the instrument or agreement under which such Indebtedness or Guarantee was
created or (B) fails to observe or perform any other agreement or condition
relating to any such Indebtedness or Guarantee or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event occurs,
the effect of which default or other event is to permit the holder or holders of
such Indebtedness or the beneficiary or beneficiaries of such Guarantee (or a
trustee or agent on behalf of such holder or holders or beneficiary or
beneficiaries) to cause, with the giving of notice if required, such
Indebtedness to become due prior to its stated maturity, or such Guarantee to
become due or payable; (ii) there occurs under any Swap Contract an Early
Termination Date (as defined under such Swap Contract) resulting from (A) any
event of default under such Swap Contract as to which a Loan Party or any
Subsidiary thereof is the Defaulting Party (as defined in such Swap Contract) or
(B) any Termination Event (as so defined) under such Swap Contract as to which a
Loan Party or any Subsidiary thereof is an Affected Party (as so defined) and,
in either event, the Swap Termination Value owed by such Loan Party or such
Subsidiary as a result thereof is greater than the Threshold Amount; or (iii)
there occurs under any of the Coal Supply Agreements, the Coal Supply Agreement
I, the Coal Supply Agreement II, or any Liability Assumption Agreement an early
termination of such agreement for any reason which could reasonably be expected
to have an adverse effect on any Loan Party or that would impair the ability of
the Lenders to be repaid in full hereunder.

(f) Insolvency Proceedings, Etc.  The Borrower or any of its Subsidiaries
institutes or consents to the institution of any proceeding under any Debtor
Relief Law, or makes an assignment for the benefit of creditors; or applies for
or consents to the appointment of any receiver, trustee, custodian, conservator,
liquidator, rehabilitator or similar officer for it or for all or any
substantial part of its property; or any receiver, trustee, custodian,
conservator, liquidator, rehabilitator or similar officer is
 
 

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appointed without the application or consent of such Person and the appointment
continues undischarged or unstayed for 60 calendar days; or any proceeding under
any Debtor Relief Law relating to any such Person or to all or any substantial
part of its property is instituted without the consent of such Person and
continues undismissed or unstayed for 60 calendar days, or an order for relief
is entered in any such proceeding; or

(g) Inability to Pay Debts; Attachment.  (i) The Borrower or any of its
Subsidiaries becomes unable or admits in writing its inability or fails
generally to pay its debts as they become due, or (ii) any writ or warrant of
attachment or execution or similar process is issued or levied against all or
any substantial part of the property of any such Person and is not released,
vacated or fully bonded within 60 days after its issue or levy; or

(h) Judgments.  There is entered against the Borrower or any of its Subsidiaries
one or more final judgments or orders for the payment of money in an aggregate
amount (as to all such judgments and orders) exceeding the Threshold Amount (to
the extent not covered by independent third-party insurance), and, such
judgments or orders shall not have been vacated, discharged, stayed or bonded
pending appeal within 60 days from the entry thereof; or

(i) ERISA.  (i) The occurrence of any of the following events that, individually
or in the aggregate, could reasonably be expected to result in a Material
Adverse Effect: (i) an ERISA Event occurs with respect to a Pension Plan or
Multiemployer Plan which has resulted or could reasonably be expected to result
in an actual obligation to pay money of the Borrower under Title IV of ERISA to
the Pension Plan, Multiemployer Plan or the PBGC or (ii) the Borrower or any
ERISA Affiliate fails to pay when due, after the expiration of any applicable
grace period, any installment payment with respect to its withdrawal liability
under Section 4201 of ERISA under a Multiemployer Plan; or

(j) Invalidity of Loan Documents.  Any Loan Document, at any time after its
execution and delivery and for any reason other than as expressly permitted
hereunder or satisfaction in full of all the Obligations, ceases to be in full
force and effect; or any Loan Party or any other Person contests in any manner
the validity or enforceability of any Loan Document; or any Loan Party denies
that it has any or further liability or obligation under any Loan Document, or
purports to revoke, terminate or rescind any Loan Document; or

(k) Change of Control.  There occurs any Change of Control;

(l) Collateral Documents.  Any Collateral Document after delivery thereof
pursuant to Section 4.01 or 6.12 shall for any reason (other than pursuant to
the terms hereof or thereof, including as a result of a transaction permitted by
Section 7.04 or 7.05) cease to create a valid and perfected Lien, with the
priority required hereby or thereby (subject to Liens permitted by Section
7.01), on the Collateral purported to be
 
 

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covered thereby, except to the extent that any such loss of perfection or
priority results from the failure of the Administrative Agent to maintain
possession of certificates actually delivered to it representing securities
pledged under the Collateral Documents or to file UCC continuation statements
and except as to Collateral consisting of real property to the extent that such
losses are covered by a lender’s title insurance policy and such insurer has not
denied or failed to acknowledge coverage; or

(m) Tax Matters.  (i) The Spin-Off fails to qualify under Section 355 of the
Code, (ii) the Capital Stock of Borrower distributed in connection with the
Spin-Off fails to be treated as qualified property pursuant to Section 355(e) of
the Code or (iii) the contribution of assets by Peabody to Borrower in
connection with the Spin-Off fails to qualify under Section 368 of the Code or
Peabody recognizes any gain in connection with such contribution.
 
 

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Appendix 5
to the Term Sheet
 
Definitions to be Incorporated
into the Bridge Facility5

Below are certain Definitions set forth in Section 1.01 of that certain Credit
Agreement, dated as of October 31, 2007, among the Company, the lenders party
thereto, and Bank of America, N.A., as administrative agent thereunder, as
amended as of the date hereof (the “Existing Credit Agreement”).  Capitalized
terms used and not otherwise defined herein are used with the meanings
attributed thereto in (i) the Commitment Letter dated April 2, 2008 (the
“Commitment Letter”), from ArcLight to the Company, of which this Appendix 5
forms an integral part, or (ii) the Existing Credit Agreement, in each case as
appropriate.  All section references set forth below, or any use of the phrases
“herein,” “hereunder,” or similar phrases, shall refer to the relevant sections
of the Existing Credit Agreement.  For the avoidance of doubt, it is understood
that the Definitions contained in the Bridge Facility Documentation shall (i)
with respect to the matters set forth below, be in the form set forth below, and
(ii) in the case of all other matters, be on Acceptable Bridge Terms.

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“Amendment” means the Amendment No. 1 to that certain Credit Agreement, dated as
of October 31, 2007, among the Company, the lenders party thereto, and Bank of
America, N.A., as administrative agent thereunder (the “Existing Credit
Agreement”).

“Amendment Effective Date” means the date that the Amendment shall become
effective.

“Magnum Acquisition” has the meaning set forth in the Existing Credit Agreement
(as amended by the Amendment).

“Magnum Acquisition Credit Agreement” has the meaning set forth in the Existing
Credit Agreement (as amended by the Amendment).

“Merger Date” means the date that the Magnum Acquisition is consummated.
 
____________
5 Note: Definitions to conform with the Existing Credit Agreement, as amended,
and the Intercreditor Agreement definitions.  Also, additional definitions are
to be imported as required.
 
 

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“Subsidiary Guarantors” means, collectively, the subsidiaries of the Borrower
listed on Schedule 1.01(a) and each other Guarantor Subsidiary of the Borrower
that guarantees the Obligations pursuant to Section 6.12 or otherwise.

 
 

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