Document:

exv10w1

Exhibit 10.1

 

 

CREDIT AGREEMENT

BETWEEN

POWELL POWERCOMM INC.

as Borrower

AND

POWELL INDUSTRIES, INC.,

NEXTRON LIMITED, and

PPC TECHNICAL SERVICES INC.

as Guarantors

AND

HSBC BANK CANADA,

as Lender

MADE AS OF DECEMBER 15, 2009

 

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	ARTICLE 1 — INTERPRETATION	 	 	6	 
	1.1
	 	Definitions	 	 	6	 
	1.2
	 	Headings; Articles and Sections	 	 	27	 
	1.3
	 	Number; persons; including	 	 	27	 
	1.4
	 	Application of Accounting Principles	 	 	27	 
	1.5
	 	References to Agreements and Enactments	 	 	27	 
	1.6
	 	Per Annum Calculations	 	 	28	 
	1.7
	 	References to Borrower	 	 	28	 
	1.8
	 	Schedules	 	 	28	 
	ARTICLE 2 THE CREDIT FACILITIES	 	 	28	 
	2.1
	 	The Credit Facilities	 	 	28	 
	2.2
	 	Types of Availments	 	 	29	 
	2.3
	 	Purpose	 	 	29	 
	2.4
	 	Availability and Nature of the Credit Facilities	 	 	29	 
	2.5
	 	Margin Requirements	 	 	30	 
	2.6
	 	Notice Periods for Drawdowns, Conversions and Rollovers	 	 	30	 
	2.7
	 	Currency Determination	 	 	31	 
	2.8
	 	Conversion Option	 	 	31	 
	2.9
	 	Rollovers and Conversions not Repayments	 	 	31	 
	2.10
	 	Irrevocability	 	 	31	 
	2.11
	 	Optional Cancellation or Reduction of the Revolving Facility	 	 	32	 
	2.12
	 	Optional Repayment of Credit Facilities	 	 	32	 
	2.13
	 	Mandatory Repayment of Credit Facilities	 	 	32	 
	2.14
	 	Cash Collateral	 	 	33	 
	2.15
	 	Commitment and Renewal Fees	 	 	34	 
	ARTICLE 3 CONDITIONS PRECEDENT TO DRAWDOWN	 	 	34	 
	3.1
	 	Conditions for All Drawdowns	 	 	34	 
	3.2
	 	Conditions for Closing and Initial Drawdown	 	 	35	 
	3.3
	 	Waiver	 	 	36	 
	ARTICLE 4 EVIDENCE OF DRAWDOWNS	 	 	36	 
	4.1
	 	Account of Record	 	 	36	 
	ARTICLE 5 PAYMENTS OF INTEREST AND FEES	 	 	36	 
	5.1
	 	Interest on Canadian Prime Rate Loans	 	 	36	 
	5.2
	 	Interest on U.S. Base Rate Loans	 	 	36	 
	5.3
	 	Standby Fees for Revolving Facility	 	 	36	 
	5.4
	 	Stamping Fees	 	 	36	 
	5.5
	 	Fees Relating to Letters of Credit	 	 	36	 
	5.6
	 	Interest Act (Canada)	 	 	36	 
	5.7
	 	Nominal Rates; No Deemed Reinvestment	 	 	36	 
	5.8
	 	Interest on Overdue Amounts	 	 	36	 
	5.9
	 	Waiver	 	 	36	 
	5.10
	 	Maximum Rate Permitted by Law	 	 	36	 
	ARTICLE 6 BANKERS’ ACCEPTANCES	 	 	36	 
	6.1
	 	Bankers Acceptances	 	 	36	 
	6.2
	 	Fees	 	 	36	 
	6.3
	 	Form and Execution of
Bankers’ Acceptances	 	 	36	 
	6.4
	 	Power of Attorney; Provision of
Bankers’ Acceptances to Lender	 	 	36	 
	6.5
	 	Mechanics of Issuance	 	 	36	 
	6.6
	 	Rollover, Conversion or Payment on Maturity	 	 	36	 

 

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	6.7
	 	Restriction on Rollovers and Conversions	 	 	36	 
	6.8
	 	Rollovers	 	 	36	 
	6.9
	 	Conversion into Bankers’ Acceptances	 	 	36	 
	6.10
	 	Conversion from Bankers’ Acceptances	 	 	36	 
	ARTICLE 7 LETTERS OF CREDIT	 	 	36	 
	7.1
	 	Availability	 	 	36	 
	7.2
	 	Currency, Type and Expiry	 	 	36	 
	7.3
	 	Reimbursement or Conversion on Presentation	 	 	36	 
	7.4
	 	Uniform Customs and Practice	 	 	36	 
	ARTICLE 8 PLACE AND APPLICATIONS OF PAYMENTS	 	 	36	 
	8.1
	 	Place of Payment of Principal, Interest and Fees; Payments to Lender	 	 	36	 
	8.2
	 	Absolute and Unconditional Obligation to Pay	 	 	36	 
	8.3
	 	Funds	 	 	36	 
	8.4
	 	Application of Payments	 	 	36	 
	8.5
	 	Payments Clear of Taxes	 	 	36	 
	8.6
	 	Set Off	 	 	36	 
	8.7
	 	Margin Changes	 	 	36	 
	ARTICLE 9 REPRESENTATIONS AND WARRANTIES	 	 	36	 
	9.1
	 	Representations and Warranties	 	 	36	 
	9.2
	 	Deemed Repetition	 	 	36	 
	9.3
	 	Other Documents	 	 	36	 
	9.4
	 	Effective Time of Repetition	 	 	36	 
	9.5
	 	Nature of Representations and Warranties	 	 	36	 
	ARTICLE 10 GENERAL COVENANTS	 	 	36	 
	10.1
	 	Affirmative Covenants of the Borrower	 	 	36	 
	10.2
	 	Negative Covenants of the Borrower	 	 	36	 
	10.3
	 	Financial Covenants	 	 	36	 
	10.4
	 	Lender May Perform Covenants	 	 	36	 
	ARTICLE 11 SECURITY	 	 	36	 
	11.1
	 	Security on all Assets	 	 	36	 
	11.2
	 	Registration	 	 	36	 
	11.3
	 	Forms	 	 	36	 
	11.4
	 	Continuing Security	 	 	36	 
	11.5
	 	Dealing with Security	 	 	36	 
	11.6
	 	Effectiveness	 	 	36	 
	11.7
	 	Release and Discharge of Security	 	 	36	 
	ARTICLE 12 EVENTS OF DEFAULT AND ACCELERATION	 	 	36	 
	12.1
	 	Events of Default	 	 	36	 
	12.2
	 	Acceleration	 	 	36	 
	12.3
	 	Set Off; Cash Collateral Accounts	 	 	36	 
	12.4
	 	Remedies Cumulative and Waivers	 	 	36	 
	12.5
	 	Termination of Lender’s Obligations	 	 	36	 
	12.6
	 	Acceleration of All Lender Obligations	 	 	36	 
	12.7
	 	Application of Payments Following Acceleration	 	 	36	 
	12.8
	 	Calculations as at the Adjustment Time	 	 	36	 
	ARTICLE 13 CHANGE OF CIRCUMSTANCES	 	 	36	 
	13.1
	 	Market Disruption Respecting Bankers’ Acceptances	 	 	36	 
	13.2
	 	Illegality	 	 	36	 

 

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	ARTICLE 14 COSTS, EXPENSES AND INDEMNIFICATION	 	 	36	 
	14.1
	 	Costs and Expenses	 	 	36	 
	14.2
	 	General Indemnity	 	 	36	 
	14.3
	 	Environmental Indemnity	 	 	36	 
	14.4
	 	Judgment Currency	 	 	36	 
	ARTICLE 15 GENERAL	 	 	36	 
	15.1
	 	Exchange and Confidentiality of Information	 	 	36	 
	15.2
	 	Notices	 	 	36	 
	15.3
	 	Governing Law	 	 	36	 
	15.4
	 	Benefit of the Agreement	 	 	36	 
	15.5
	 	Assignments and Participations	 	 	36	 
	15.6
	 	Severability	 	 	36	 
	15.7
	 	Whole Agreement	 	 	36	 
	15.8
	 	Amendments and Waivers	 	 	36	 
	15.9
	 	Further Assurances	 	 	36	 
	15.10
	 	Attornment
	 	 	36	 
	15.11
	 	Time of the Essence
	 	 	36	 
	15.12
	 	Credit Agreement Governs
	 	 	36	 
	15.13
	 	Counterparts
	 	 	36	 

 

 

CREDIT AGREEMENT

THIS AGREEMENT is made as of December 15, 2009

BETWEEN:

POWELL POWERCOMM INC., a Canada Corporation
(hereinafter sometimes referred to as the “Borrower”),

OF THE FIRST PART,

-and-

POWELL INDUSTRIES, INC., a Delaware Corporation,
(hereinafter sometimes referred to as “Powell” and sometimes
referred to as the “Guarantor”)

OF THE SECOND PART,

-and-

NEXTRON LIMITED, a Canada Corporation, and PPC
TECHNICAL SERVICES INC., a Canada Corporation (hereinafter
sometimes referred to as “Nextron” and “PPC Technical”,
respectively, and sometimes referred to as the “Subsidiaries”)

OF THE THIRD PART,

-and-

HSBC BANK CANADA, a Canadian Chartered Bank
(hereinafter referred to as a “Lender”),

OF THE FOURTH PART

WHEREAS the Borrower and Powell have requested the Lender to provide the Credit Facilities to the
Borrower for the purposes set forth herein and the Lender has agreed to provide the Credit
Facilities to the Borrower on the terms and conditions hereinafter set forth;

NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the covenants and agreements herein
contained and other good and valuable consideration, the receipt and sufficiency of which is hereby
conclusively acknowledged by each of the parties hereto, the parties hereto covenant and agree as
follows:

 

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ARTICLE 1 — INTERPRETATION 

	1.1	 	Definitions 

          In this Agreement, unless something in the subject matter or context is inconsistent
therewith:

“Acceleration Notice” means a written notice delivered by the Lender to the Borrower pursuant to
Section 12.2 declaring all Obligations of the Borrower outstanding hereunder to be due and payable.

“Acceptable Inventory” means the value, determined by the Lender from its review of the most recent
financial statements and inventory declaration provided by the Borrower, based on the lower of cost
and fair market value of all materials owned by the Borrower for resale or for production of goods
for resale, excluding work in progress, and over which the Lender holds a first priority security
interest.

Acceptable Receivables” means the aggregate of accounts receivable of the Borrower, determined by
the Lender from the most recent financial statements and aged list of accounts receivable of the
Borrower, over which the Lender holds a first priority security interest, from Canadian customers
approved by the Lender and which have been outstanding for less than 90 days (120 days for major
corporations as determined by the Lender), from which shall be excluded accounts receivable from
Affiliates of the Borrower and accounts which are disputed by the Borrower’s customers or are
subject to set-off.

“Additional Compensation” has the meaning set out in Section 13.2(a).

“Adjustment Time” means the time of occurrence of the last event necessary (being either the
delivery of a Demand for Payment or the occurrence of a Termination Event) to ensure that all
Obligations and the Financial Instrument Obligations under any Lender Financial Instruments are
thereafter due and payable.

“Advance” means an advance of funds made by the Lender to the Borrower, but does not include any
Conversion or Rollover.

“Affected Loan” has the meaning set out in Section 13.3.

“Affiliate” means any person which, directly or indirectly, controls, is controlled by or is under
common control with another person; and, for the purposes of this definition, “control” (including,
with correlative meanings, the terms “controlled by” or “under common control with”) means the
power to direct or cause the direction of the management and policies of any person, whether
through the ownership of shares or other economic interests, the holding of voting rights or
contractual rights or otherwise.

“Agreement” means this credit agreement, as the same may be amended, modified, supplemented or
restated from time to time in accordance with the provisions hereof.

“Applicable Laws” means, in relation to any person, transaction or event:

	 	(a)	 	all applicable provisions of laws, statutes, rules and regulations from time to
time in effect of any Governmental Authority; and

 

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	 	(b)	 	all Governmental Authorizations to which the person is a party or by which it
or its property is bound or having application to the transaction or event.

“Applicable Pricing Rate”, with respect to any Loan, means, when the Debt to EBITDA Ratio for
Powell, on a consolidated basis, (calculated as at the Quarter End for the most recently completed
fiscal quarter and for the 12 months ended on such date) is one of the following, the percentage
rate per annum set forth opposite such ratio in the column applicable to the type of Loan in
question:

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Canadian Prime Rate	 	U.S. Base Rate	 	Bankers’ Acceptance	 	 	 	 
	 	 	Ratio of Debt to	 	Loans — Canadian		 Loans U.S. Base —		based Loans —	 	Letters of	 	Standby
	Pricing Level	 	EBITDA for Powell	 	Prime Rate Plus	 	Rate Plus	 	stamping fee	 	Credit	 	Fee
	i

	 	Greater than or
equal to 2.00:1 but
less than 2.75:1
	 	112.5 BPS
	 	112.5 BPS
	 	237.5 BPS
	 	200 BPS
	 	50 BPS
	ii

	 	Greater than or
equal to 1.50:1 but
less than 2.00:1
	 	87.5 BPS
	 	87.5 BPS
	 	212.5 BPS
	 	175 BPS
	 	25 BPS
	iii

	 	Greater than or
equal to 1.00:1 but
less than 1.50:1
	 	62.5 BPS
	 	62.5 BPS
	 	187.5 BPS
	 	150 BPS
	 	25 BPS
	iv

	 	Less than 1.00
	 	37.5 BPS
	 	37.5 BPS
	 	162.5 BPS
	 	125 BPS
	 	25 BPS

Initial pricing to be set at pricing level iv, with changes thereafter to be made in accordance
with Section 8.7.

“Approved Securities” means obligations maturing within one year from their date of purchase or
other acquisition by the Borrower or Subsidiary and which are:

	 	(a)	 	issued by the Government of Canada or an instrumentality or agency thereof and
guaranteed fully as to principal, premium, if any, and interest by the Government of
Canada; or
	 
	 	(b)	 	term deposits, guaranteed investment certificates, certificates of deposit,
bankers’ acceptances or bearer deposit notes, in each case, of any Canadian chartered
bank or other Canadian financial institution which has a long term debt rating of at
least A+ by S&P, A1 by Moody’s, or A (high) by DBRS.

“Attributable Debt” means, in respect of any lease (whether characterized as an operating lease
under GAAP or not) entered into by a person or a Subsidiary thereof as lessee, the present value
(discounted at the rate of interest implicit in such transaction, determined in accordance with
GAAP) of the lease payments of the lessee, including all rent and payments to be made by the lessee
in connection with the return of the leased property, during the remaining term of the lease
(including any period for which such lease has been extended or may, at the option of the lessor,
be extended) but excluding for certainty, (a) amounts required to be paid on account of insurance,
taxes, assessments, utility, operating and labour costs and similar charges and (b) amounts payable
by the lessee in connection with the exercise of any end-of-term purchase option, early buyout
option or any similar amounts payable at the election of the

 

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lessee.

“BA Rate” means, on any date which Bankers’ Acceptances are to be issued pursuant hereto, the per
annum rate of interest which is the rate established from time to time by the Lender as the annual
yield rate applicable to Canadian Dollar bankers’ acceptances having identical issue and comparable
maturity dates as the Bankers’ Acceptances proposed to be issued by the Borrower.

“Bankers’ Acceptance” means a draft in Canadian Dollars drawn by the Borrower, accepted by a Lender
and issued for value pursuant to this Agreement.

“Banking Day” means a day on which banks are open for business in Edmonton, Alberta, Toronto,
Ontario and New York, New York, but does not in any event include a Saturday or a Sunday.

“BPS” means basis points, with one basis point equal to one one hundredth of one percent (0.01%).

“Canadian Dollars” and “Cdn.$’’ mean the lawful money of Canada.

“Canadian Prime Rate” means, for any day, the variable annual rate of interest per annum
established from time to time by the Lender as the reference rate of interest for the determination
of interest rates that the Lender will charge to customers in Canada for Canadian Dollar prime rate
loans and which was 2.25% on December 8, 2009.

“Canadian Prime Rate Loan” means an Advance in, or Conversion into, Canadian Dollars made by the
Lender to the Borrower with respect to which the Borrower has specified or a provision hereof
requires that interest is to be calculated by reference to the Canadian Prime Rate.

“Change of Control” means Powell ceases to own and control Voting Shares in the capital of the
Borrower which have or represent 100% of all of the votes entitled to be cast by shareholders for
the election of the board of directors of the Borrower.

“clearing house” has the meaning set out in Section 6.4.

“Closing Date” means the date of the initial Drawdown under any of the Facilities.

“Commitments” means:

	 	(a)	 	the Revolving Facility Commitment,
	 
	 	(b)	 	the Term Facility Commitment,
	 
	 	(c)	 	the EFT Facility Commitment,
	 
	 	(d)	 	the MC Facility Commitment,
	 
	 	(e)	 	the F/X Facility Commitment, and
	 
	 	(f)	 	the DSL Facility Commitment, and

 

-9-

	 	 	 	“Commitment” means any of the Commitments.

“Compliance Certificate” means a certificate of the Borrower signed on its behalf by the president,
chief financial officer, vice president — financial or treasurer of the Borrower, substantially in
the form annexed hereto as Schedule A, to be given to the Lender by the Borrower pursuant hereto.

“Consolidated Tangible Net Worth” means, with respect to any person, all Shareholders’ Equity of
such person and its Subsidiaries which would, in accordance with GAAP, be classified upon a
consolidated balance sheet of such person as Shareholders’ Equity of such person and its
Subsidiaries, and whether or not so classified, shall include, without duplication, preferred
capital, plus (i) Permitted Subordinated Debt, less (ii) intangible assets
including, without limitation, good will, trademarks and loans to and investments in Affiliates.

“Conversion” means a conversion or deemed conversion of a Loan under the Credit Facilities into
another type of Loan under the Credit Facilities pursuant to the provisions hereof, subject to
Section 2.7 and to Article 6 with respect to Bankers’ Acceptances.

“Conversion Date” means the date specified by the Borrower as being the date on which the Borrower
has elected to convert, or this Agreement requires the conversion of, one type of Loan into another
type of Loan and which shall be a Banking Day.

“Conversion Notice” means a notice substantially in the form annexed hereto as Schedule B to be
given to the Lender by the Borrower pursuant hereto.

“Credit Facilities” means, collectively, the Term Facility, Revolving Facility, EFT Facility, MC
Facility, F/X Facility and DSL Facility, and “Credit Facility” means anyone of them.

“Currency Hedging Agreement” means any currency swap agreement, cross currency agreement, forward
agreement, floor, cap or collar agreement, futures or options, insurance or other similar agreement
or arrangement, or any combination thereof, entered into by the Borrower or a Subsidiary where the
subject matter of the same is currency exchange rates or the price, value or amount payable
thereunder is dependent or based upon currency exchange rates or fluctuations in currency exchange
rates as in effect from time to time.

“DBNA” has the meaning set out in Section 6.4.

“DBRS” means Dominion Bond Rating Service Limited and any successors thereto.

“Debt” means, with respect to any person, all obligations, liabilities and indebtedness of such
person and its Subsidiaries which would, in accordance with GAAP, be classified upon a consolidated
balance sheet of such person as liabilities of such person and its Subsidiaries and, whether or not
so classified, shall include (without duplication):

	 	(a)	 	indebtedness of such person and its Subsidiaries for borrowed money;
	 
	 	(b)	 	obligations of such person and its Subsidiaries arising pursuant or in relation
to: (i) bankers’ acceptances (including payment and reimbursement obligations in
respect thereof), or (ii) letters of credit and letters of guarantee supporting
obligations which would otherwise constitute Debt within the meaning of this definition
or indemnities issued in connection therewith;

 

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	 	(c)	 	obligations of such person and its Subsidiaries with respect to drawings under
all other letters of credit and letters of guarantee;
	 
	 	(d)	 	obligations of such person and its Subsidiaries under Guarantees, indemnities,
assurances, legally binding comfort letters or other contingent obligations relating to
the indebtedness or other obligations of any other person which would otherwise
constitute Debt within the meaning of this definition and all Financial Assistance
including endorsements of bills of exchange (other than for collection or deposit in
the ordinary course of business);
	 
	 	(e)	 	(i) all indebtedness of such person and its Subsidiaries representing the
deferred purchase price of any property to the extent that such indebtedness is or
remains unpaid after the expiry of the customary time period for payment, provided
however that such time period shall in no event exceed 90 days, and (ii) all
obligations of such person and its Subsidiaries created or arising under any: (A)
conditional sales agreement or other title retention agreement or (B) capital lease;
	 
	 	(f)	 	all Attributable Debt of such person and its Subsidiaries other than in respect
of (i) leases of office space or (ii) operating leases, in each case entered into in
the ordinary course of business (and, for certainty, no Sale-Leaseback shall be
considered to be entered into in the ordinary course of business);
	 
	 	(g)	 	all other long-term obligations (including the current portion thereof) upon
which interest charges are customarily paid prior to a default by such person; and
	 
	 	(h)	 	all indebtedness of other persons secured by a Security Interest on any asset
of such person and its Subsidiaries, whether or not such indebtedness is assumed
thereby; provided that the amount of such indebtedness shall be the lesser of (i) the
fair market value of such asset at such date of determination, and (ii) the amount of
such indebtedness shall only be Debt to the extent recorded as a liability in
accordance with GAAP;

but shall exclude each of the following, determined (as required) in accordance with GAAP:

	 	(i)	 	accounts payable to trade creditors and accrued liabilities incurred in the
ordinary course of business;
	 
	 	(j)	 	deferred and future taxes;
	 
	 	(k)	 	dividends or other equity distributions payable;
	 
	 	(l)	 	accrued interest not yet due and payable;
	 
	 	(m)	 	liabilities in respect of deferred credits and liabilities;
	 
	 	(n)	 	for certainty, any Debt owing to the Borrower or a Subsidiary; and
	 
	 	(o)	 	such other similar liabilities as may be agreed by the Lender from time to
time.

 

-11-

“Debt to EBlTDA Ratio” means, as at any date of determination, the ratio of (a) Debt as at such
date to (b) EBITDA for the 12 months ending at such Quarter End, provided that, unless otherwise
expressly provided or the context otherwise requires, references to “Debt to EBITDA Ratio” shall be
and shall be deemed to be references to the Debt and EBITDA of Powell, on a consolidated basis.

“Default” means any event or condition which, with the giving of notice, lapse of time or upon a
declaration or determination being made (or any combination thereof), would constitute an Event of
Default.

“Demand for Payment” means an Acceleration Notice or a Financial Instrument Demand for Payment.

“Disclosure Schedule” means the disclosure schedule attached hereto as Schedule E.

“Discount Proceeds” means the net cash proceeds to the Borrower from the sale of a Bankers’
Acceptance pursuant hereto before deduction or payment of the fees to be paid to the Lender under
Section 6.2.

“Distribution” means:

	 	(a)	 	the declaration, payment or setting aside for payment of any distribution on or
in respect of any Ownership Interest in the Borrower or any Subsidiary which is not a
Wholly-Owned Subsidiary (including any return of capital), but excluding to Powell or
any of it’s Subsidiaries;
	 
	 	(b)	 	the redemption, retraction, purchase, retirement or other acquisition, in whole
or in part, of any Ownership Interest in the Borrower or any Subsidiary which is not a
Wholly-Owned Subsidiary, but excluding by Powell or any of it’s Subsidiaries;
	 
	 	(c)	 	the making of any loan or advance or any other provision of credit or Financial
Assistance by the Borrower or any Subsidiary to any Related Party other than to the
Borrower or a Wholly-Owned Subsidiary or Powell or any of it’s Subsidiaries;
	 
	 	(d)	 	the payment of any principal, interest, fees or other amounts on or in respect
of any loans, advances or other Debt owing at any time by the Borrower or any
Subsidiary to any Related Party, other than to the Borrower or a Wholly-Owned
Subsidiary or Powell or any of it’s Subsidiaries; or
	 
	 	(e)	 	(i) the payment of any amount, (ii) the sale, transfer, lease or other
disposition of any property or assets, or (iii) any granting or creation of any rights
or interests, at any time, by the Borrower or any Subsidiary to or in favour of any
Related Party, other than to or in favour of the Borrower or a Wholly-Owned Subsidiary
or Powell or any of it’s Subsidiaries,

and whether any of the foregoing is made, paid or satisfied in or for cash, property or any
combination thereof.

“Documents” means this Agreement, the Security Documents and all certificates, notices, instruments
and other documents delivered or to be delivered to the Lender in relation to the Credit Facilities
pursuant hereto or thereto and, when used in relation to any person, the term “Documents” shall
mean and refer to the Documents executed and delivered by such person.

 

-12-

“Drawdown” means:

	 	(a)	 	an Advance of a Canadian Prime Rate Loan;
	 
	 	(b)	 	an Advance of a U.S. Base Rate Loan;
	 
	 	(c)	 	the issuance of a Letter of Credit; or
	 
	 	(d)	 	the issuance of Bankers’ Acceptances;

other than as a result of Conversions or Rollovers.

“Drawdown Date” means the date on which a Drawdown is made by the Borrower pursuant to the
provisions hereof and which shall be a Banking Day.

“Drawdown Notice” means a notice substantially in the form annexed hereto as Schedule C to be given
to the Lender by the Borrower pursuant hereto.

“DSL Facility” means the foreign exchange daily settlement facility in the maximum principal amount
of Cdn. $2,000,000.00 (or the Equivalent Amount thereof in United States Dollars) to be made
available to the Borrower by the Lender in accordance with the provisions hereof, subject to any
reduction in accordance with the provisions hereof.

“DSL Facility Commitment” means the maximum principal amount the Lender has agreed to make
available to the Borrower under the DSL Facility, being Cdn. $2,000,000.00, subject to reductions
or adjustments pursuant to the terms hereof.

“EBITDA” means, with respect to any fiscal period of Powell, the Net Income for such period
plus (on a consolidated basis and without duplication):

	 	(a)	 	Interest Expense for such period, to the extent deducted in determining any
portion of the Net Income;
	 
	 	(b)	 	all amounts deducted in the calculation of any portion of the Net Income for
such period in respect of the provision for cash taxes (in accordance with GAAP); and
	 
	 	(c)	 	all amounts deducted in the calculation of any portion of the Net Income for
such period in respect of non-cash items, including depreciation, amortization,
deferred/future taxes, and other non-cash items approved by the Lender.

“EFT Facility” means the electronic funds transfer facility in the maximum principal amount of Cdn.
$2,000,000.00 per day, to be made available to the Borrower by the Lender in accordance with the
provisions hereof, subject to any reduction in accordance with the provisions hereof, and to be
governed by the terms of the Lender’s Electronic Funds Transfer (EFT) Application Form.

“EFT Facility Commitment” means the maximum principal amount the Lender has agreed to make
available to the Borrower under the EFT Facility, being Cdn. $2,000,000.00 per day, subject to
reductions or adjustments pursuant to the terms hereof.

 

-13-

“Environmental Claims” means any and all administrative, regulatory or judicial actions, suits,
demands, claims, liens, notices of non-compliance or violation, investigations, inspections,
inquiries or proceedings relating in any way to any Environmental Laws or to any permit issued
under any such Environmental Laws including, without limitation:

	 	(a)	 	any claim by a Governmental Authority for enforcement, clean up, removal,
response, remedial or other actions or damages pursuant to any Environmental Laws; and
	 
	 	(b)	 	any claim by a person seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive or other relief resulting from or relating to
Hazardous Materials, including any Release thereof, or arising from alleged injury or
threat of injury to human health or safety (arising from environmental matters) or the
environment.

“Environmental Laws” means all Applicable Laws with respect to the environment or environmental or
public health and safety matters contained in statutes, regulations, rules, ordinances, orders,
judgments, approvals, notices, permits or policies, guidelines or directives having the force of
law.

“Equity Interests” means shares of capital stock, partnership interests, membership interests in a
limited liability company, beneficial interests in a trust or other equity ownership interests in a
Person, and any warrants, options or other rights entitling the holder thereof to purchaser or
acquire any such Equity Interest.

“Equivalent Amount” means, on any date, the equivalent amount of currency after giving effect to a
conversion of a specified amount of currency at the noon rate of exchange for Canadian interbank
transactions established by the Bank of Canada for the day in question, or, if such rate is for any
reason unavailable, at the spot rate quoted for wholesale transactions by the Lender at
approximately noon (Edmonton time) on that date in accordance with its normal practice.

“Event of Default” has the meaning set out in Section 12.1.

“Facility Installments” has the meaning set out in Section 2.13(b).

“Financial Assistance” means, with respect to any person and without duplication, any loan,
guarantee, indemnity, assurance, acceptance, extension of credit, loan purchase, share purchase,
equity or capital contribution, investment or other form of direct or indirect financial assistance
or support of any other person or any obligation (contingent or otherwise) primarily for the
purpose of enabling another person to incur or pay any Debt or to comply with agreements relating
thereto or otherwise to assure or protect creditors of the other person against loss in respect of
Debt of the other person and includes any guarantee of or indemnity in respect of the Debt of the
other person and any absolute or contingent obligation to (directly or indirectly):

	 	(a)	 	advance or supply funds for the payment or purchase of any Debt of any other
person;

 

-14-

	 	(b)	 	purchase, sell or lease (as lessee or lessor) any property, assets, goods,
services, materials or supplies primarily for the purpose of enabling any person to
make payment of Debt or to assure the holder thereof against loss;
	 
	 	(c)	 	guarantee, indemnify, hold harmless or otherwise become liable to, any creditor
of any other person from or against any losses, liabilities or damages in respect of
Debt;
	 
	 	(d)	 	make a payment to another for goods, property or services regardless of the
non-delivery or non-furnishing thereof to the Borrower or any Subsidiary (as
applicable); or
	 
	 	(e)	 	make an advance, loan or other extension of credit to another person, or make
any subscription for equity, capital contribution, or investment in another person, or
maintain the capital, working capital, solvency or general financial condition of
another person.

The amount of any Financial Assistance is the amount of any loan or direct or indirect financial
assistance or support, without duplication, given, or all Debt of the obligor to which the
Financial Assistance relates, unless the Financial Assistance is limited to a determinable amount,
in which case the amount of the Financial Assistance is the determinable amount.

“Financial Instrument” means any Currency Hedging Agreement.

“Financial Instrument Demand for Payment” means a demand made by the Lender pursuant to a Lender
Financial Instrument demanding payment of the Financial Instrument Obligations which are then due
and payable relating thereto and shall include, without limitation, any notice under any agreement
evidencing a Lender Financial Instrument which, when delivered, would require an early termination
thereof and a payment by the Borrower or a Subsidiary in settlement of obligations thereunder as a
result of such early termination.

“Financial Instrument Obligations” means obligations arising under Financial Instruments entered
into by the Borrower or a Subsidiary to the extent of the net amount due or accruing due by the
Borrower or Subsidiary thereunder (determined by marking to market the same in accordance with
their terms).

“fiscal quarter” means the three month period commencing on the first day of each fiscal year and
each successive three month period thereafter during such fiscal year.

“fiscal year” means the fiscal year of the Borrower which commences on October 1 of each year and
ends on September 30 of each subsequent year.

“Fixed Charge Coverage Ratio” means, as at a Quarter End, the ratio of (a) EBITDA for the 12 months
ending at such Quarter End less (i) maintenance capital expenditures and Unfunded Capital
Expenditures plus (ii) amounts paid or the provision for federal state, local or foreign
income taxes for such period, on a consolidated basis, to (b) the Fixed Charges for the 12 months
ending at such Quarter End; provided that, if any Debt has created, issued, incurred, assumed,
Guaranteed, repaid, repurchased or redeemed during such 12 month period (other than Debt under a
revolving facility), then the Fixed Charge Coverage Ratio will be calculated giving pro forma
effect thereto and the use of proceeds therefrom as if the same had occurred at the beginning of
such 12 month period.

 

-15-

“Fixed Charges” means, for any period of determination, the sum of the following determined on a
consolidated basis and without duplication:

	 	(a)	 	the Interest Expense for such period; plus
	 
	 	(b)	 	the amount of Debt which has a scheduled due date or is otherwise required to
be repaid or paid, as the case may be, during such period (which, for certainty, does
not include voluntary prepayments);

provided that, if Powell has guaranteed any Debt of any person which is not the Borrower or a
Subsidiary, then the Fixed Charges shall be determined as if such Debt was directly created,
issued, incurred or assumed by Powell.

“F/X Facility” means the foreign exchange forward contract facility in the maximum principal amount
of U.S. $2,000,000.00 to be made available to the Borrower by the Lender in accordance with the
provisions hereof, subject to any reduction in accordance with the provisions hereof, and to be
governed by the terms of the Lender’s Agreement for Foreign Exchange Contracts.

“F/X Facility Commitment” means the maximum principal amount the Lender has agreed to make
available to the Borrower under the F/X Facility, being U.S. $2,000,000.00, subject to reductions
or adjustments pursuant to the terms hereof.

“GAAP” means generally accepted accounting principles in the United States set out in the opinions
and pronouncements of the Accounting Principles Board and the American Institute of Certified
Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or
such other principles as may be approved by a significant segment of the accounting profession in
the United States, that are applicable to the circumstances as of the date of determination,
consistently applied.

“Governmental Authority” means any federal, provincial, state, regional, municipal or local
government or any department, agency, board, tribunal or authority thereof or other political
subdivision thereof and any entity or person exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, government or the operation thereof.

“Governmental Authorization” means an authorization, order, permit, approval, grant, license,
consent, right, franchise, privilege, certificate, judgment, writ, injunction, award,
determination, direction, decree or demand or the like issued or granted by law or by rule or
regulation of any Governmental Authority.

“Guarantee” means any guarantee, undertaking to assume, endorse, contingently agree to purchase or
to provide funds for the payment of, or otherwise become liable in respect of, any obligation of
any person; provided that the amount of each Guarantee shall be deemed to be the amount of the
obligation guaranteed thereby, unless the Guarantee is limited to a determinable amount in which
case the amount of such Guarantee shall be deemed to be the lesser of such determinable amount or
the amount of such obligation.

“Hazardous Materials” means any substance or mixture of substances which, if released into the
environment, would likely cause, immediately or at some future time, harm or degradation to the
environment or to human health or safety and includes any substance defined as or

 

-16-

determined to be a pollutant, contaminant, waste, hazardous waste, hazardous chemical, hazardous
substance, toxic substance or dangerous good under any Environmental Law.

“Hedging Affiliate” means any Affiliate of a Lender which enters into Financial Instrument.

“HSBC” means HSBC Bank Canada, a Canadian chartered bank.

“Indemnified Parties” means, collectively, the Lender, including a receiver, receiver manager or
similar person appointed under Applicable Laws, and their respective shareholders, Affiliates,
officers, directors, employees and agents, and “Indemnified Party” means anyone of the foregoing.

“Indemnified Third Party” has the meaning set out in Section 14.3.

“Information” has the meaning set out in Section 15.1.

“Intellectual Property” means, collectively, patents, patents pending, copyrights, proprietary
processes or programs, industrial designs, trademarks, trademark applications, tradenames and other
intellectual property of every nature and kind.

“Interest Expense” means, for any period, without duplication, interest expense determined on a
consolidated basis in accordance with GAAP as the same would be set forth or reflected in a
consolidated statement of income and, in any event and without limitation, shall include:

	 	(a)	 	all interest accrued or payable in respect of such period, including
capitalized interest;
	 
	 	(b)	 	all fees (including standby, commitment and stamping fees and fees payable in
respect of letters of credit and letters of guarantee supporting obligations which
constitute Debt, but excluding the fees payable on the date hereof in relation to the
establishment of the Credit Facilities accrued or payable in respect of such period and
which relate to any indebtedness or credit agreement, prorated (as required) over such
period);
	 
	 	(c)	 	any difference between the face amount and the discount proceeds of any
bankers’ acceptances, commercial paper and other obligations issued at a discount,
prorated (as required) over such period.

“Interest Payment Date” means with respect to each Canadian Prime Rate Loan or U.S. Base Rate Loan,
the first Banking Day of each calendar month provided that, in any case, the Maturity Date or, if
applicable, any earlier date on which the Credit Facilities are fully cancelled or permanently
reduced in full, shall be an Interest Payment Date with respect to all Loans then outstanding under
the Credit Facilities.

“Interest Period” means:

	 	(a)	 	with respect to each Canadian Prime Rate Loan or U.S. Base Rate Loan, the
period commencing on the applicable Drawdown Date or Conversion Date, as the case may
be, and terminating on the date selected by the Borrower hereunder for the Conversion
of such Loan into another type of Loan or for the repayment of such Loan;

 

-17-

	 	(b)	 	with respect to each Bankers’ Acceptance, the period selected by the Borrower
hereunder and being of one (I), two (2) or three (3) months’ duration, subject to
market availability, (or, subject to the agreement of the Lender, a longer or shorter
period) commencing on the Drawdown Date, Rollover Date or Conversion Date of such Loan,
provided that the last day of all Interest Periods for Bankers’ Acceptances outstanding
under the Term Facility and the Revolving Facility shall expire on or prior to the
applicable Maturity Date under such Credit Facility; and
	 
	 	(c)	 	with respect to each Letter of Credit, the period commencing on the date of
issuance of such Letter of Credit and terminating on the last day the Letter of Credit
is outstanding.

“Investment” means (a) any purchase or other acquisition of shares or other securities of any
person, (b) any form of Financial Assistance to or for the benefit of any person, (c) any capital
contribution to any other person and (d) any purchase or other acquisition of any assets, property
or undertaking other than an acquisition in the ordinary course of business of the purchaser.

“Judgment Conversion Date” has the meaning set out in Section 14.4.

“Judgment Currency” has the meaning set out in Section 14.4.

“LC Fee” means the fee charged by the Lender for issuing a Letter of Credit under the Revolving
Facility, which shall be calculated by the Lender in accordance with Section 5.5.

“Lender’s Account” means the account maintained by the Lender to which payments and transfers under
this Agreement are to be effected as designated by written notice to the Borrower from time to
time.

“Lender Financial Instrument” means a Financial Instrument entered into between the Lender or a
Hedging Affiliate and the Borrower or a Subsidiary.

“Lender Financial Instrument Obligations” means, collectively, all of the obligations, indebtedness
and liabilities (present or future, absolute or contingent, mature or not) of the Borrower and its
Subsidiaries under, pursuant or relating to any and all Lender Financial Instruments.

“Letter of Credit” or “LC” means a Canadian Dollar financial or non-financial standby letter of
credit, documentary letter of credit or letter of guarantee issued by and in a form satisfactory to
the Lender, which Letters of Credit shall be issued at the request of and for the account of the
Borrower pursuant to Article 7 for the purpose of supporting the Borrower’s and its Subsidiaries’
ordinary course business operations.

“Loans” means all Canadian Prime Rate Loans, U.S. Base Rate Loans, Bankers’ Acceptances and Letters
of Credit outstanding hereunder as well as the amounts owing under the EFT Facility, MC Facility,
F/X Facility and DSL Facility, and “Loan” means anyone of the foregoing.

 

-18-

“Material Adverse Effect” means a material adverse effect on:

	 	(a)	 	the financial condition of Powell or on the Borrower and its Subsidiaries on a
consolidated basis, as the case may be;
	 
	 	(b)	 	the ability of Powell, the Borrower or any of its Subsidiaries to observe or
perform its obligations under the Documents to which it is a party or the validity or
enforceability of such Documents or any material provision thereof;
	 
	 	(c)	 	the property, business, operations, expected net cash flows of Powell or the
Borrower, liabilities or capitalization of Powell or of the Borrower and its
Subsidiaries on a consolidated basis, as the case may be; or
	 
	 	(d)	 	the Security, the priority thereof or any right or remedy of the Lender
thereunder.

“Material Agreements” means, collectively, each agreement, lease, instrument, indenture or other
document to which the Borrower or any Subsidiary is a party and which if terminated or released
(without replacement) or if the counterparty thereto defaulted in its performance thereof, such
termination, release or default would have or would reasonably be expected to have a Material
Adverse Effect.

“Maturity Date” means February 29, 2012.

“MC Facility” means the Mastercard facility in the maximum principal amount of Cdn. $500,000.00 to
be made available to the Borrower by the Lender in accordance with the provisions hereof, subject
to any reduction in accordance with the provisions hereof, and to be governed by the terms of the
Lender’s Mastercard Program Application and the Lender’s Mastercard Cardholder Application.

“MC Facility Commitment” means the maximum principal amount the Lender has agreed to make available
to the Borrower under the MC Facility, being Cdn. $500,000.00, subject to reductions or adjustments
pursuant to the terms hereof.

“Moody’s” means Moody’s Investors Service, Inc. and any successors thereto.

“Net Income” means, in respect of the period for which it is being determined, the net income
determined on a consolidated basis in accordance with GAAP.

“Obligations” means, at any time and from time to time, all of the obligations, indebtedness and
liabilities (present or future, absolute or contingent, matured or not) of the Borrower and its
Subsidiaries to the Lender under, pursuant or relating to the Documents, the Credit Facilities and
whether the same are from time to time reduced and thereafter increased or entirely extinguished
and thereafter incurred again and including, without limitation, all principal, interest, fees,
legal and other costs, charges and expenses, and other amounts payable by the Borrower under this
Agreement.

“Officer’s Certificate” means a certificate or notice (other than a Compliance Certificate) signed
by anyone of the president, chief financial officer, a vice president, treasurer, assistant
treasurer, controller, corporate secretary or assistant secretary of the Borrower or Subsidiary, as
the case may be, (including, in the case of a partnership a certificate or notice signed by such an
officer of a general partner of such partnership); provided, however, that Drawdown Notices,
Conversion Notices, Rollover Notices and Repayment Notices shall be executed on behalf of

 

-19-

the Borrower by anyone of the foregoing persons or such other persons as may from time to time be
designated by written notice from the Borrower to the Lender.

“Outstanding Principal” means, at any time, the aggregate of (a) the principal amount of all
outstanding Canadian Prime Rate Loans, (b) the principal amount of all outstanding U.S. Base Rate
Loans, (c) the amounts payable at maturity of all outstanding Bankers’ Acceptances, (d) the face
amount of all outstanding and undrawn Letters of Credit, as well as the principal amount
outstanding under the EFT Facility, MC Facility, F/X Facility and the DSL Facility if not otherwise
hereinbefore referred to.

“Ownership Interest” means:

	 	(a)	 	in respect of a body corporate, any shares in the capital of such body
corporate;
	 
	 	(b)	 	in respect of a partnership, any partnership units or interests in such partner
and includes any other income, capital, beneficial or ownership interest (however
designated) in such partnership; and
	 
	 	(c)	 	in respect of any other person, any income, capital, beneficial or ownership
interest (however designated) in such person (including, for certainty, any trust units
in the case of a trust),

in each case, whether any of the foregoing are voting or non-voting and including any securities,
instruments or contractual rights capable of being converted into, exchanged or exercised for any
of the foregoing (including options, warrants, conversion or exchange privileges and similar
rights).

“Permitted Contest” means action taken by or on behalf the Borrower or Subsidiary in good faith by
appropriate proceedings diligently pursued to contest a Tax, claim or Security Interest, provided
that:

	 	(a)	 	the person to which the Tax, claim or Security Interest being contested is
relevant (and, in the case of a Subsidiary, the Borrower on a consolidated basis) has
established reasonable reserves therefore if and to the extent required by GAAP;
	 
	 	(b)	 	proceeding with such contest does not have, and would not reasonably be
expected to have, a Material Adverse Effect; and
	 
	 	(c)	 	proceeding with such contest will not create a material risk of sale,
forfeiture or loss of, or interference with the use or operation of, a material part of
the property, assets and undertaking of the Borrower and its Subsidiaries.

“Permitted Debt” means the following:

	 	(a)	 	the Obligations;
	 
	 	(b)	 	any Debt owing by the Borrower or any of its Subsidiaries to Powell;
	 
	 	(c)	 	any Debt owing by a Subsidiary to the Borrower, by a Subsidiary to a Subsidiary
which is a Wholly-Owned Subsidiary and by the Borrower to a Subsidiary which is a
Wholly-Owned Subsidiary;

 

-20-

	 	(d)	 	Attributable Debt of the Borrower or any Subsidiary arising in connection with
operating leases entered into in the ordinary course of business (which, for certainty,
shall not include any operating leases entered into in connection with any
Sale-Leaseback);
	 
	 	(e)	 	Debt arising pursuant to the indemnification, purchase price adjustment or
similar provisions of agreements entered into by the Borrower or any Subsidiary in
connection with acquisitions, Investments or dispositions permitted hereunder, or
pursuant to guarantees, letters of credit, surety bonds or performance bonds provided
to secure the performance of the Borrower or any Subsidiary pursuant to such
agreements; provided that, for certainty, in no event shall such Debt include any Debt
specified in subparagraphs (a) to (h), inclusive, of the definition thereof; and
	 
	 	(f)	 	Debt consisting of Financial Assistance permitted under Section 10.2(i).

“Permitted Disposition” means, in respect of the Borrower or any of its Subsidiaries, any of the
following:

	 	(a)	 	a sale or disposition by the Borrower or such Subsidiary in the ordinary course
of business and in accordance with sound industry practice of tangible personal
property that is obsolete, no longer useful for its intended purpose or being replaced
in the ordinary course of business;
	 
	 	(b)	 	a sale or disposition of assets (including shares or ownership interests) by a
Subsidiary to the Borrower, by a Subsidiary to a Subsidiary which is a Wholly-Owned
Subsidiary and by the Borrower to a Subsidiary which is a Wholly-Owned Subsidiary;
	 
	 	(c)	 	a sale or disposition by the Borrower or any Subsidiary of its interest in
machinery, equipment or other tangible personal property for which Purchase Money
Obligations were incurred and (i) such Purchase Money Obligations are fully repaid
concurrently with such sale or disposition and (ii) such sale or disposition is made in
the ordinary course of business at fair market value to a person at arm’s length from
the Borrower and its Subsidiaries; and
	 
	 	(d)	 	any sale or disposition of inventory of the Borrower or such Subsidiary,
provided that such sale or disposition is made in the ordinary course of business for
cash consideration not less than the fair market value of the inventory being sold or
otherwise disposed of.

“Permitted Encumbrances” means as at any particular time any of the following encumbrances on the
property or any part of the property of the Borrower or any Subsidiary:

	 	(a)	 	liens for taxes, assessments or governmental charges not at the time due or
delinquent or, if due or delinquent, the validity of which is being contested at the
time by a Permitted Contest;
	 
	 	(b)	 	deemed liens and trusts arising by operation of law in connection with workers’
compensation, employment insurance and other social security legislation, in each case,
which secure obligations not at the time due or delinquent or, if due or

 

-21-

	 	 	 	delinquent, the validity of which is being contested at the time by a Permitted
Contest;

	 	(c)	 	liens under or pursuant to any judgment rendered, or claim filed, against the
Borrower or Subsidiary, which the Borrower or Subsidiary (as applicable) shall be
contesting at the time by a Permitted Contest;
	 
	 	(d)	 	undetermined or inchoate liens and charges incidental to construction or
current operations which have not at such time been filed pursuant to law against the
Borrower or Subsidiary or which relate to obligations not due or delinquent or, if due
or delinquent, the validity of which is being contested at the time by a Permitted
Contest;
	 
	 	(e)	 	easements, rights of way, servitudes or other similar rights in land
(including, without in any way limiting the generality of the foregoing, rights of way
and servitudes for railways, sewers, drains, gas and oil and other pipelines, gas and
water mains, electric light and power and telecommunication, telephone or telegraph or
cable television conduits, poles, wires and cables) granted to or reserved or taken by
other persons which individually or in the aggregate do not materially detract from the
value of the land concerned or materially impair its use in the operation of the
business of the Borrower and its Subsidiaries, taken as a whole;
	 
	 	(f)	 	security given by the Borrower or Subsidiary to a public utility or any
municipality or governmental or other public authority when required by such utility or
municipality or other authority in connection with the operations of the Borrower or
Subsidiary (as applicable), all in the ordinary course of its business which
individually or in the aggregate do not materially detract from the value of the asset
concerned or materially impair its use in the operation of the business of the Borrower
and its Subsidiaries, taken as a whole;
	 
	 	(g)	 	the reservation in any original grants from the Crown of any land or interests
therein and statutory exceptions and reservations to title;
	 
	 	(h)	 	Security Interests in favour of the Lender;
	 
	 	(i)	 	the Security;
	 
	 	(j)	 	any operating lease entered into in the ordinary course of business (which, for
certainty, shall not include any operating leases entered into in connection with any
Sale-Leaseback);
	 
	 	(k)	 	bankers’ liens, rights of set-off and other similar liens existing solely with
respect to cash and Approved Securities on deposit in one or more accounts maintained
by the Borrower or any of its Subsidiaries, in each case, granted in the ordinary
course of business in favour of the Lender with which such accounts are maintained,
securing amounts owing to the Lender with respect to cash management and operating
account arrangements, including those involving pooled accounts and netting
arrangements;
	 
	 	(l)	 	to the extent constituting Security Interests, Financial Assistance permitted
under this Agreement;

 

-22-

	 	(m)	 	Security Interests securing Attributable Debt, provided that such Security
Interests shall attach only to the property subject to the lease giving rise to such
Attributable Debt and provided further that such Attributable Debt is Permitted Debt;
	 
	 	(n)	 	Security Interests securing a Purchase Money Obligation, provided that such
Security Interests shall attach only to the property acquired in connection with which
such Purchase Money Obligation was incurred (and proceeds thereof) and provided further
that such Purchase Money Obligation is Permitted Debt;
	 
	 	(o)	 	landlords’ liens or any other rights of distress reserved in or exercisable
under any lease of real property for rent and for compliance with the terms of such
lease; provided that such lien does not attach generally to all or substantially all of
the undertaking, assets and property of the Borrower or any Subsidiary;
	 
	 	(p)	 	pledges or deposits to secure performance of (i) bids, tenders, contracts
(other than contracts for the payment of money) or (ii) leases of real property, in
each case, to which the Borrower or a Subsidiary is a party;
	 
	 	(q)	 	Security Interests resulting from the deposit of cash or Approved Securities as
security when the Borrower or a Subsidiary is required to do so by a Governmental
Authority or by normal business practice in connection with contracts, licenses or
tenders or similar matters in the ordinary course of business and for the purpose of
carrying on the same, or to secure workers’ compensation, surety or appeal bonds or to
secure costs of litigation when required by Applicable Law;
	 
	 	(r)	 	minor defects of title which, individually and in the aggregate, do not
materially affect the right of ownership of the Borrower or its Subsidiary in and to
the property affected thereby or the right of the Borrower or its Subsidiary to utilize
such property to conduct its business; and
	 
	 	(s)	 	any extension, renewal or replacement (or successive extensions, renewals or
replacements), as a whole or in part, of any Security Interest referred to in the
preceding subparagraphs (a) to (r) inclusive of this definition, so long as any such
extension, renewal or replacement of such Security Interest is limited to all or any
part of the same property that secured the Security Interest extended, renewed or
replaced (plus improvements on such property) and the indebtedness or obligation
secured thereby is not increased;

provided that nothing in this definition shall in and of itself cause the Obligations hereunder or
the other obligations secured by the Security to be subordinated in priority of payment to any such
Permitted Encumbrance or cause any Security Interests in favour of the Lender to rank subordinate
to any such Permitted Encumbrance.

“Permitted Hedging” means Financial Instruments which are entered into in the ordinary course of
business and for hedging purposes and not for speculative purposes (determined, where relevant, by
reference to GAAP).

“Permitted Subordinated Debt” means any Debt owed by Powell to another person which Debt is
specifically postponed and assigned to the Lender as security for the payment of the Obligations,
or any of them.

 

-23-

“Person” means an individual, a partnership, a corporation, a limited or unlimited liability
company, a joint venture, a trust, an unincorporated organization, a union, a government or any
department or agency thereof and the heirs, executors, administrators or other legal
representatives of an individual, and words importing persons have a similar meaning.

“Power of Attorney” means a power of attorney provided by the Borrower to the Lender with respect
to Bankers’ Acceptances in accordance with and pursuant to Section 6.4 hereof.

“Priority Claims” means any lien, claim, charge, security interest, trust claim, right or
encumbrance of any Governmental Authority or other party (whether arising out of any statute, law,
contract or otherwise) having priority over the Security Documents and the mortgage, charge and
security interest of the Lender in any of the inventory or accounts receivable of the Borrower.

“Purchase Money Obligation” means any monetary obligation created or assumed as part of the
purchase price of real or tangible personal property, whether or not secured, any extensions,
renewals or refundings of any such obligation, provided that the principal amount of such
obligation outstanding on the date of such extension, renewal or refunding is not increased and
further provided that any security given in respect of such obligation shall not extend to any
property other than the property acquired in connection with which such obligation was created or
assumed and fixed improvements, if any, erected or constructed thereon and the proceeds thereof.

“Quarter End” means September 30, December 31, March 31 and June 30, in each year.

“Realization Proceeds” has the meaning set out in Section 12.7.

“Related Party” means any person which is anyone or more of the following:

	 	(a)	 	an Affiliate of the Borrower or any Subsidiary thereof;
	 
	 	(b)	 	a shareholder or partner of the Borrower or any Subsidiary which, together with
all Affiliates of such person, owns or controls, directly or indirectly, more than 10%
of the Ownership Interests of the Borrower or any Subsidiary, or an Affiliate of any
such shareholder or partner;
	 
	 	(c)	 	an officer or director of any of the foregoing; and
	 
	 	(d)	 	a person which is not at arm’s length from the Borrower and its Subsidiaries.

“Release” means any release, spill, emission, leak, pumping, injection, deposit, disposal,
discharge, dispersal, leaching or migration into the environment including, without limitation, the
movement of Hazardous Materials through ambient air, soil, surface water, ground water, wetlands,
land or sub-surface strata.

“Required Permits” means all Governmental Authorizations which are necessary at any given time for
the Borrower and each of its Subsidiaries to own and operate its property, assets, rights and
interests or to carryon its business and affairs.

“Revolving Facility” means the revolving credit facility in the maximum principal amount of Cdn.
$20,000,000.00 (or the Equivalent Amount thereof in United States Dollars) to be made

 

 -24-

available to the Borrower by the Lender in accordance with the provisions hereof, subject to any
reduction in accordance with the provisions hereof.

“Revolving Facility Commitment” means the maximum principal amount the Lender has agreed to make
available to the Borrower under the Revolving Facility, being Cdn. $20,000,000.00, subject to
reductions or adjustments pursuant to the terms hereof.

“Rollover” means with respect to Bankers’ Acceptances, the issuance of new Bankers’ Acceptances in
respect of all or any portion of Bankers’ Acceptances maturing at the end of the Interest Period
applicable thereto, all in accordance with Article 6 hereof.

“Rollover Date” means the date of commencement of a new Interest Period applicable to a Loan and
which shall be a Banking Day.

“Rollover Notice” means a notice substantially in the form annexed hereto as Schedule D to be given
to the Lender by the Borrower pursuant hereto.

“S&P” means the Standard & Poor’s Rating Group (a division of The McGraw-Hill Companies, Inc.) and
any successors thereto.

“Sale-Leaseback” means an arrangement, transaction or series of arrangements or transactions under
which title to any real property, tangible personal property or fixture is transferred by the
Borrower or a Subsidiary (a “transferor”) to another person which leases or otherwise grants the
right to use such property to the transferor (or nominee of the transferor) and, whether or not in
connection therewith, the transferor also acquires a right or is subject to an obligation to
acquire such property or a material portion thereof, and regardless of the accounting treatment of
such arrangement, transaction or series of arrangements or transactions.

“Security” means the security and Security Interests created under the Security Documents.

“Security Documents” means the security and related agreements executed and delivered, or required
to be executed and delivered, in favour of the Lender by Powell, the Borrower and the Subsidiaries
pursuant to Section 11.1, as amended, supplemented, replaced or otherwise modified from time to
time.

“Security Interest” means mortgages, charges, pledges, hypothecs, assignments by way of security,
conditional sales or other title retentions, security created under the Bank Act (Canada), liens,
encumbrances, security interests or other interests in property, howsoever created or arising,
whether fixed or floating, perfected or not, which secure payment or performance of an obligation
and, including, in any event:

	 	(a)	 	deposits or transfers of cash, marketable securities or other financial assets
under any agreement or arrangement whereby such cash, securities or assets may be
withdrawn, returned or transferred only upon fulfilment of any condition as to the
discharge of any other indebtedness or other obligation to any creditor;
	 
	 	(b)	 	(i) rights of set-off or (ii) any other right of or arrangement of any kind
with any creditor, which in any case are made, created or entered into, as the case may
be, for the purpose of or having the effect (directly or indirectly) of (A) securing
Debt, (B) preferring some holders of Debt over other holders of Debt or (C)

 

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	 	 	 	having the claims of any creditor be satisfied prior to the claims of other
creditors with or from the proceeds of any properties, assets or revenues of any
kind now owned or later acquired (other than, with respect to (C) only, rights of
set-off granted or arising in the ordinary course of business);

	 	(c)	 	the rights of lessors under capital leases, operating leases and any other
lease financing; and
	 
	 	(d)	 	absolute assignments of accounts receivable.

“Shareholders’ Equity” means with respect to any person, all equity of such person and its
Subsidiaries which would, in accordance with GAAP, be classified upon a consolidated balance sheet
of such person as equity of such person and its Subsidiaries and, whether or not so classified,
shall include (without duplication) preferred capital.

“Subsidiary” means, with respect to any person (“X”):

	 	(a)	 	any corporation of which at least a majority of the outstanding shares having
by the terms thereof ordinary voting power to elect a majority of the board of
directors of such corporation (irrespective of whether at the time shares of any other
class or classes of such corporation might have voting power by reason of the happening
of any contingency, unless the contingency has occurred and then only for as long as it
continues) is at the time directly, indirectly or beneficially owned or controlled by X
or one or more of its Subsidiaries, or X and one or more of its Subsidiaries;
	 
	 	(b)	 	any partnership of which, at the time, X, or one or more of its Subsidiaries,
or X and one or more of its Subsidiaries: (i) directly, indirectly or beneficially own
or control more than 50% of the income, capital, beneficial or ownership interests
(however designated) thereof; and (ii) is a general partner, in the case of limited
partnerships, or is a partner or has authority to bind the partnership, in all other
cases; or
	 
	 	(c)	 	any other person of which at least a majority of the income, capital,
beneficial or ownership interests (however designated) are at the time directly,
indirectly or beneficially owned or controlled by X, or one or more of its
Subsidiaries, or X and one or more of its Subsidiaries,

provided that, unless otherwise expressly provided or the context otherwise requires, references
herein to “Subsidiary” or “Subsidiaries” shall be and shall be deemed to be references to
Subsidiaries of the Borrower, and shall include Nextron and PPC Technical.

“Taxes” means all taxes, levies, imposts, stamp taxes, duties, fees, deductions, withholdings,
charges, compulsory loans or restrictions or conditions resulting in a charge which are imposed,
levied, collected, withheld or assessed by any country or political subdivision or taxing authority
thereof now or at any time in the future, together with interest thereon and penalties, charges or
other amounts with respect thereto, if any, and “Tax” and “Taxation” shall be construed
accordingly.

 

-26-

“Term Facility” means the non-revolving term facility in the maximum principal amount of Cdn.
$2,500,000.00 to be made available to the Borrower by the Lender in accordance with the provisions
hereof, subject to any reduction in accordance with the provisions hereof.

“Term Facility Commitment” means the maximum principal amount the Lender has agreed to make
available to the Borrower under the Term Facility, being Cdn. $2,500,000.00, subject to reductions
or adjustments pursuant to the terms hereof.

“Termination Event” means an automatic early termination of obligations relating to a Lender
Financial Instrument under any agreement relating thereto without any notice being required from a
Lender.

“Total Commitment” means, at any time, the aggregate of all of the Commitments.

“U.S. Base Rate” means the variable annual rate of interest per annum established from time to time
by the Lender as the reference rate of interest for the determination of interest rates that the
Lender will charge to customers in Canada for United States Dollar base rate loans in Canada and
which was 3.75% on December 8, 2009.

“U.S. Base Rate Loan” means an Advance in United States Dollars made by the Lender to the Borrower
under the Revolving Facility with respect to which the Borrower has specified or a provision hereof
requires that interest is to be calculated by reference to the U.S. Base Rate.

“U.S. Dollars” and “US$” means the lawful money of the United States of America.

“Unfunded Capital Expenditures” means capital expenditures funded from cashflow or the Revolving
Facility.

“Uniform Customs” has the meaning set out in Section 7.4.

“Vendors” means, collectively Powercomm Inc., Redhill Systems Ltd., Nextron Corporation, PCG
Technical Services Inc. and Concorde Metal Manufacturing Ltd.

“Voting Shares” means capital stock of any class of any corporation which carries voting rights to
elect the board of directors thereof under any circumstances, provided that, for purposes hereof,
shares which carry the right to so vote conditionally upon the happening of an event shall not be
considered Voting Shares until the occurrence of such event.

“Wholly-Owned Subsidiary” means:

	 	(a)	 	a corporation, all of the issued and outstanding shares in the capital of which
are beneficially held by:

	 	(i)	 	the Borrower or Powell, as the context requires;
	 
	 	(ii)	 	the Borrower or Powell, as the context requires, and one or
more corporations, all of the issued and outstanding shares in the capital of
which are held by the Borrower or Powell, as the context requires; or
	 
	 	(iii)	 	two or more corporations, all of the issued and outstanding
shares in the capital of which are held by the Borrower or Powell, as the
context requires;

 

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	 	(b)	 	a corporation which is a Wholly-Owned Subsidiary of a corporation that is a
Wholly-Owned Subsidiary of the Borrower or Powell, as the context requires;
	 
	 	(c)	 	a partnership, all of the partners of which are the Borrower or Powell, as the
context requires, and/or Wholly-Owned Subsidiaries of the Borrower or Powell, as the
context requires; or
	 
	 	(d)	 	any person of which all of the income, capital, beneficial and ownership
interests (however designated) are beneficially owned and controlled by the Borrower or
Powell, as the context requires, and/or Wholly-Owned Subsidiaries of the Borrower or
Powell, as the context requires.

	1.2	 	Headings; Articles and Sections

The division of this Agreement into Articles and Sections and the insertion of headings are for
convenience of reference only and shall not affect the construction or interpretation of this
Agreement. The terms “this Agreement”, “hereof”, “hereunder” and similar expressions refer to this
Agreement and not to any particular Article, Section or other portion hereof and include any
agreement supplemental hereto. Unless something in the subject matter or context is inconsistent
therewith, references herein to Articles and Sections are to Articles and Sections of this
Agreement.

	1.3	 	Number; persons; including

Words importing the singular number only shall include the plural and vice versa, words importing
the masculine gender shall include the feminine and neuter genders and vice versa, words importing
persons shall include individuals, partnerships, associations, trusts, unincorporated organizations
and corporations and vice versa and words and terms denoting inclusiveness (such as “include” or
“includes” or “including”), whether or not so stated, are not limited by their context or by the
words or phrases which precede or succeed them.

	1.4	 	Application of Accounting Principles

Where the character or amount of any asset or liability or item of revenue or expense or amount of
equity is required to be determined, or any consolidation or other accounting computation is
required to be made for the purpose of this Agreement or any other Document, such determination or
calculation shall, to the extent applicable and except as otherwise specified herein or as
otherwise agreed in writing by the parties, be made in accordance with GAAP applied on a consistent
basis.

	1.5	 	References to Agreements and Enactments

Reference herein to any agreement, instrument, licence or other document shall be deemed to include
reference to such agreement, instrument, licence or other document as the same may from time to
time be amended, modified, supplemented or restated in accordance with the provisions of this
Agreement if and to the extent such provisions are applicable; and reference herein to any
enactment shall be deemed to include reference to such enactment as re-enacted, amended or extended
from time to time and to any successor enactment.

 

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	1.6	 	Per Annum Calculations

Unless otherwise stated, wherever in this Agreement reference is made to a rate “per annum” or a
similar expression is used, such rate is expressed on the basis of, and shall be calculated on the
basis of, a year of 365 days.

	1.7	 	References to Borrower

References in this Agreement to actions and steps by, or the performance of the terms and
conditions hereof by, the Borrower shall, if the context requires, be and shall be construed as
being by the general partner on behalf of and in respect of the Borrower, if the Borrower is a
limited partnership.

	1.8	 	Schedules

The following are the Schedules annexed hereto and incorporated by reference and deemed to be part
hereof:

	 	 	 	 	 	 	 
	 

	 	Schedule A
	 	—
	 	Compliance Certificate
	 
	 	 	 	 	 	 
	 

	 	Schedule B
	 	—
	 	Conversion Notice
	 
	 	 	 	 	 	 
	 

	 	Schedule C
	 	—
	 	Drawdown Notice
	 
	 	 	 	 	 	 
	 

	 	Schedule D
	 	—
	 	Rollover Notice
	 
	 	 	 	 	 	 
	 

	 	Schedule E
	 	—
	 	Disclosure Schedule

ARTICLE 2

THE CREDIT FACILITIES

	2.1	 	The Credit Facilities

	 	(a)	 	Term Facility. Subject to the terms and conditions hereof, the Lender
shall make available to the Borrower the Term Facility. The Outstanding Principal under
the Term Facility shall not exceed the Term Facility Commitment.
	 
	 	(b)	 	Revolving Facility. Subject to the terms and conditions hereof, the
Lender shall make available to the Borrower the Revolving Facility. The Outstanding
Principal under the Revolving Facility shall not exceed the Revolving Facility
Commitment.
	 
	 	(c)	 	EFT Facility.Subject to the terms and conditions hereof, the Lender
shall make available to the Borrower the EFT Facility. The Outstanding Principal under
the EFT Facility shall not exceed the EFT Facility Commitment.
	 
	 	(d)	 	MC Facility.Subject to the terms and conditions hereof, the Lender
shall make available to the Borrower the MC Facility. The Outstanding Principal under
the MC Facility shall not exceed the MC Facility Commitment.

 

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	 	(e)	 	F/X Facility.Subject to the terms and conditions hereof, the Lender
shall make available to the Borrower the F/X Facility. The Outstanding Principal under
the F/X Facility shall not exceed the F/X Facility Commitment.
	 
	 	(f)	 	DSL Facility.Subject to the terms and conditions hereof, the Lender
shall make available to the Borrower the DSL Facility. The Outstanding Principal under
the DSL Facility shall not exceed the DSL Facility Commitment.

	2.2	 	Types of Availments

	 	(a)	 	Term Facility. The Borrower may make Drawdowns, Conversions and
Rollovers under the Term Facility of (1) Canadian Prime Rate Loans, and (2) Bankers’
Acceptances. The Borrower shall have the option, subject to the terms and conditions
hereof, to determine which types of Loans shall be drawn down and in which combinations
or proportions.
	 
	 	(b)	 	Revolving Facility. The Borrower may make Drawdowns, Conversions and
Rollovers under the Revolving Facility of (1) Canadian Prime Rate Loans, (2) U.S. Base
Rate Loans, (3) Bankers’ Acceptances, and (4) Letters of Credit with terms of up to one
year in Canadian Dollars. The Borrower shall have the option, subject to the terms and
conditions hereof, to determine which types of Loans shall be drawn down and in which
combinations or proportions.

	2.3	 	Purpose

	 	(a)	 	Term Facility. The Term Facility is being made available for the
purpose of enhancing the working capital of the Borrower.
	 
	 	(b)	 	Revolving Facility. The Revolving Facility is being made available for
working capital and other general corporate purposes of the Borrower.
	 
	 	(c)	 	EFT Facility. The EFT Facility is being made available to assist the
Borrower with the payment of payroll and other payables.
	 
	 	(d)	 	MC Facility. The MC Facility is being made available for the issuance
of expense cards to key employees of the Borrower.
	 
	 	(e)	 	F/X Facility. The F/X Facility is being made available for the
purchase of forward contracts of U.S. Dollars with a maximum maturity of twelve (12)
months to hedge against currency fluctuations.
	 
	 	(f)	 	DSL Facility. The DSL Facility is being made available for spot
foreign exchange transactions.

	2.4	 	Availability and Nature of the Credit Facilities

	 	(a)	 	Term Facility. The Term Facility is a non-revolving facility: any
repayment of any Loan under the Term Facility shall result in a permanent reduction in
the Term Facility to the extent of such repayment and the Borrower shall not be
entitled to make any further Drawdown in respect of and to the extent of any such
repayment. The Borrower shall only be entitled to make a single Drawdown

 

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	 	 	 	under the Term Facility on or up to fourteen (14) days following the Closing Date,
but only after the completion and registration, if applicable, of the Documents and
the satisfaction of the Conditions Precedent to Drawdown as set out in Article 3
hereof. After such Drawdown any unutilized portion of the Term Facility shall be
cancelled.

	 	(b)	 	Revolving Facility. The Revolving Facility is a revolving credit
facility: prior to the applicable Maturity Date or the occurrence of an Event of
Default, the Outstanding Principal under the Revolving Facility may revolve and
Borrower may borrow, repay and re-borrow up to the Revolving Facility Commitment, but
only after the completion and registration, if applicable, of the Documents and the
satisfaction of the Conditions Precedent to Drawdown as set out in Article 3 hereof.
	 
	 	(c)	 	EFT Facility, MC Facility, F/X Facility and DSL Facility. The EFT
Facility, MC Facility, F/X Facility and DSL Facility shall be available to the Borrower
after the completion and registration, if applicable, of the Documents and the
satisfaction of the Conditions Precedent to Drawdown as set out in Article 3 hereof.

	2.5	 	Margin Requirements

The obligations outstanding under the Revolving Facility (including the undrawn face amount of
Letters of Credit) shall at no time exceed the lesser of:

	 	(a)	 	the Revolving Facility Commitment, or
	 
	 	(b)	 	the aggregate of:

	 	(i)	 	Cdn. $2,500,000.00 of unmargined availability, plus
	 
	 	(ii)	 	85% of Acceptable Receivables, plus
	 
	 	(iii)	 	the lesser of 50% of Acceptable Inventory and Cdn. $10,000,000.00, less
	 
	 	(iv)	 	100% of lienable payables and holdback receivables, less
	 
	 	(v)	 	Priority Claims.

	2.6	 	Notice Periods for Drawdowns, Conversions and Rollovers

Subject to the provisions hereof, the Borrower may make a Drawdown, Conversion or Rollover under
the Term Facility or the Revolving Facility by delivering a Drawdown Notice, Conversion Notice or
Rollover Notice, as the case may be (executed in accordance with the definition of Officer’s
Certificate), with respect to a specified type of Loan to the Lender not later than:

	 	(a)	 	10:30 a.m. (Edmonton time) three (3) Banking Days prior to the proposed
Drawdown Date, Conversion Date or Rollover Date, as the case may be, for the Drawdown
of, Conversion into or Rollover of Bankers’ Acceptances;
	 
	 	(b)	 	10:30 a.m. (Edmonton time) three (3) Banking Day prior to the proposed Drawdown
Date or Conversion Date, as the case may be, for Drawdowns of or Conversions into
Canadian Prime Rate Loans or U.S. Base Rate Loans; and

 

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	 	(c)	 	10:30 a.m. (Edmonton time) three (3) Banking Days prior to the proposed
Drawdown Date for the issuance of a Letter of Credit, which shall be accompanied by the
appropriate application and indemnity in the applicable Lender’s customary form.

	2.7	 	Currency Determination

In respect of any Drawdown, Conversion or Rollover under the Revolving Facility in United States
Dollars, the Lender will determine the Equivalent Amount in Canadian Dollars for such Loan as of
the date of the Drawdown Notice, Conversion Notice or Rollover Notice, as applicable.

	2.8	 	Conversion Option

Subject to the provisions of this Agreement, the Borrower may convert the whole or any part of any
type of Loan under the Term Facility or the Revolving Facility into any other type of permitted
Loan under such Credit Facility by giving the Lender a Conversion Notice in accordance herewith;
provided that:

	 	(a)	 	Conversions of Bankers’ Acceptances may only be made on the last day of the
Interest Period applicable thereto;
	 
	 	(b)	 	a Conversion shall not result in an increase in Outstanding Principal;
increases in Outstanding Principal may only be effected by Drawdowns;
	 
	 	(c)	 	in respect of Conversions of a Loan denominated in one currency to a Loan
denominated in another currency, the Borrower shall at the time of the Conversion repay
the Loan or portion thereof being converted in the currency in which it was
denominated; and
	 
	 	(d)	 	a Conversion of a Letter of Credit may occur only in accordance with Section
7.3.

	2.9	 	Rollovers and Conversions not Repayments

Any amount converted shall be a Loan of the type converted to upon such Conversion taking place,
and any amount rolled over shall continue to be the same type of Loan under the applicable Credit
Facility as before the Rollover, but such Conversion or Rollover (to the extent of the amount
converted or rolled over)shall not of itself constitute a repayment or a fresh utilization of any
part of the amount available under the applicable Credit Facility.

	2.10	 	Irrevocability

A Drawdown Notice, Rollover Notice, Conversion Notice or Repayment Notice given by the Borrower
hereunder shall be irrevocable and, subject to any options the Lender may have hereunder in regard
thereto and the Borrower’s rights hereunder in regard thereto, shall oblige the Borrower to take
the action contemplated on the date specified therein.

 

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	2.11	 	Optional Cancellation or Reduction of the Revolving Facility

The Borrower may, at any time, upon giving at least five (5) Banking Days’ prior written notice to
the Lender, cancel in full or, from time to time, permanently reduce in part the unutilized portion
of Revolving Facility; provided, however, that any such reduction shall be in a minimum amount of
Cdn. $500,000.

	2.12	 	Optional Repayment of Credit Facilities

The Borrower may at any time and from time to time repay, without penalty, to the Lender the whole
or any part of any Loan owing by it under the Term Facility or the Revolving Facility together with
accrued interest thereon to the date of such repayment provided that:

	 	(a)	 	repayments pursuant to this Section may only be made on a Banking Day;
	 
	 	(b)	 	a Bankers’ Acceptance may only be repaid on its maturity unless collateralized
in accordance with Section 2.14;
	 
	 	(c)	 	a Letter of Credit may only be repaid to the extent it is drawn or returned for
cancellation; and
	 
	 	(d)	 	any repayment of the Term Facility shall require at least five (5) Banking
Days’ prior written notice to the Lender, any such reduction shall be in the minimum
amount of Cdn. $500,000.00, shall permanently reduce the Term Facility by the amount so
repaid and shall be applied in the manner set forth in Section 2.13(b).

	2.13	 	Mandatory Repayment of Credit Facilities

	 	(a)	 	All Facilities. Subject to Section 12.2, the Borrower shall repay or
pay, as the case may be, to the Lender all Loans and other Obligations outstanding
under each of the Credit Facilities on or before the Maturity Date.
	 
	 	(b)	 	Term Facility.

	 	(i)	 	Scheduled Term Facility Payments. Subject to the terms of this
Agreement, the principal amount of the Term Facility shall be repaid in
installments on the dates and in the respective amounts shown bellow:

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Repayment
	 	 	 	 	 	 	 	 	Amount of
	 	 	 	 	 	 	 	 	Advanced Term
	 	 	 	 	 	 	 	 	Facility Each
	 	 	 	 	 	 	 	 	Scheduled
	Scheduled Repayment Date	 	Repayment
	March 31, 2010
	 	June 30, 2010	 	September 30, 2010	 	December 31, 2010	 	$	125,000.00	 
	March 21, 2011
	 	June 30, 2011	 	September 30, 2011	 	December 31, 2011	 	$	125,000.00	 
	Maturity Date
	 	—	 	—	 	—	 	All remaining amounts owing

 

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	 	(ii)	 	In addition to and without limiting the provisions of Sections
2.13(a) and 2.13(b), unless otherwise agreed by the Lender in writing, the
Borrower shall or shall cause each of the following to be paid to the Lender,
in repayment of the outstanding Obligations under the Term Facility:

	 	(A)	 	within 3 Banking Days after the receipt by the
Borrower, 100% of the net proceeds from the sale(s) of assets by the
Borrower, other than a Permitted Disposition.

	 	(iii)	 	Any optional repayment under the Term Facility pursuant to
Section 2.12 or mandatory repayment pursuant to Section 2.13(b)(ii) shall be
applied first to the Outstanding Principal amount of the Term Facility due on
the Maturity Date and thereafter to the payment of Facility Installments in
inverse order of maturity.
	 
	 	(iv)	 	Any repayment made under this Section 2.13 that is in respect
of Bankers’ Acceptances shall be held by the Lender in a cash collateral
account in the manner described in Section 2.14 until the maturity date of such
Bankers’ Acceptances.

	2.14	 	Cash Collateral

	 	(a)	 	With respect to the prepayment or cash collateralization of unmatured Bankers’
Acceptances required or contemplated pursuant to Section 2.12(b), Section 2.13 or
Section 12.3 or elsewhere in this Agreement, the Borrower shall provide for the funding
in full of such unmatured Bankers’ Acceptances by paying to and depositing with the
Lender cash collateral for each such unmatured Bankers’ Acceptances equal to the face
amount payable at maturity thereof; such cash collateral deposited by the Borrower
shall be held by the Lender in a cash collateral account. Such cash collateral account
shall be assigned to the Lender as security for the obligations of the Borrower in
relation to such Bankers’ Acceptances and the security of the Lender thereby created
shall rank in priority to all other Security Interests and adverse claims against such
cash collateral. Such cash collateral shall be applied to satisfy the obligations of
the Borrower for such Bankers’ Acceptances as they mature and the Lender is hereby
irrevocably directed by the Borrower to apply any such cash collateral to such maturing
Bankers’ Acceptances. Amounts held in such cash collateral accounts may not be
withdrawn by the Borrower without the consent of the Lender. If after maturity of the
Bankers’ Acceptances for which such funds are held and application by the Lender of the
amounts in such cash collateral accounts to satisfy the obligations of the Borrower
hereunder with respect to the Bankers’ Acceptances being repaid, any excess remains,
such excess shall be promptly paid by the Lender to the Borrower so long as no Default
or Event of Default is then continuing.
	 
	 	(b)	 	With respect to funding the cash collateralization of unexpired Letters of
Credit as a result of Section 12.3 or elsewhere in this Agreement, the Borrower shall
provide for the funding in full of the unexpired Letters of Credit by paying to and
depositing with the Lender, cash collateral for each such unexpired Letter of Credit,
equal to the undrawn face amount thereof. Such cash collateral deposited by the
Borrower shall be held by the Lender in a cash collateral account, which shall be
assigned to the Lender as security for the obligations of the Borrower in

 

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	 	 	 	relation to such Letters of Credit and the security of the Lender thereby created in
such cash collateral shall rank in priority to all other Security Interests and
adverse claims against such cash collateral. Such cash collateral shall be applied
to satisfy the obligations of the Borrower for such Letters of Credit if drawn upon
and the Lender is hereby irrevocably directed by the Borrower to so apply any such
cash collateral. Amounts held in such cash collateral accounts may not be withdrawn
by the Borrower without the consent of the Lender. If after the drawing in full or
expiration of the Letters of Credit for which such funds are held and application by
the Lender of the amounts in such cash collateral accounts to satisfy the
obligations of the Borrower hereunder with respect thereto, any excess remains, such
excess shall be promptly paid by the Lender to the Borrower so long as no Default or
Event of Default is then continuing.

	2.15	 	Commitment and Renewal Fees

The Borrower will pay to the Lender:

	 	(a)	 	on the Closing Date, an up-front commitment fee equal to 0.50% of the aggregate
of the Revolving Facility Commitment and the Term Facility Commitment; and
	 
	 	(b)	 	on each anniversary of the Closing Date on which any amount remains outstanding
or available under any of the Credit Facilities, an annual renewal fee of Cdn.
$10,000.00.

Fees collected by the Lender shall be its property as consideration for the time, effort and
expense incurred by it in the review and administration of documents and financial statements, and
the Borrower acknowledges and agrees that the determination of these costs is not feasible and that
the fees set out herein represent a reasonable estimate of such costs.

ARTICLE 3

CONDITIONS PRECEDENT TO DRAWDOWN

	3.1	 	Conditions for All Drawdowns

On or before each Drawdown hereunder, the following conditions shall be satisfied:

	 	(a)	 	the Lender shall have received a proper and timely Drawdown Notice from the
Borrower requesting the Drawdown;
	 
	 	(b)	 	the representations and warranties set forth in Section 9.1 shall be true and
accurate in all respects on and as of the date of the requested Drawdown;
	 
	 	(c)	 	no Default or Event of Default shall have occurred and be continuing on and as
of the date of the requested Drawdown nor shall the Drawdown result in the occurrence
of a Default or Event of Default; and
	 
	 	(d)	 	after giving effect to the proposed Drawdown, the Outstanding Principal of all
Loans outstanding under the applicable Credit Facility shall not exceed the maximum
amount of such Credit Facility.

 

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	3.2	 	Conditions for Closing and Initial Drawdown

In addition to the conditions set forth in Section 3.1, the effectiveness of this Agreement and the
obligation of the Lender to advance the initial Drawdowns hereunder are subject to the satisfaction
of the following additional conditions:

	 	(a)	 	the Lender, Borrower and Powell shall have fully executed and delivered this
Agreement, in form and substance satisfactory to the Lender (acting reasonably);
	 
	 	(b)	 	the Lender shall have received satisfactory evidence that the Borrower has, or
the Borrower and its Subsidiaries have, acquired, or with the Drawdown of the Credit
Facilities, shall acquire good and marketable title to substantially all of the
business assets of the Vendors free and clear of all liens, encumbrances, mortgages,
pledges, charges, options, rights, security interest, agreements or claims of any
nature whatsoever, other than Permitted Encumbrances (but for the purposes of this
Section only, the definition of “Permitted Encumbrances” shall be deemed amended so as
to refer to the Vendors rather than the Borrower or a Subsidiary or Subsidiaries.)
	 
	 	(c)	 	all reasonable fees and expenses previously agreed in writing between the
Borrower and the Lender shall be paid by the Borrower to the Lender (including the
payment of all of the fees, charges and expenses of Lender’s legal counsel);
	 
	 	(d)	 	the Borrower, Powell and each corporate Subsidiary of the Borrower which is
executing and delivering Documents shall have delivered to the Lender a current
certificate of status, compliance or good standing, as the case may be, in respect of
its jurisdiction of incorporation and certified copies of its constating documents,
by-laws, shareholders agreement (if any) and the resolutions authorizing the Documents
to which it is a party and transactions hereunder and an Officer’s Certificate as to
the incumbency of the officers of Powell, the Borrower or the Subsidiary, as the case
may be, signing the Documents to which it is a party;
	 
	 	(e)	 	the Borrower shall have delivered to the Lender true, correct and complete
copies of each Material Agreement (if any) of the Borrower and its Subsidiaries,
together with an Officer’s Certificate certifying the same to the Lender;
	 
	 	(f)	 	the Borrower shall have delivered to the Lender an Officer’s Certificate
detailing ownership structure of the Borrower and its Subsidiaries as of the date of
the requested Drawdown, which certificate shall be in form and substance satisfactory
to the Lender (acting reasonably);
	 
	 	(g)	 	the Security and other Documents shall have been fully executed and delivered,
each in form and substance satisfactory to the Lender (acting reasonably), and all
registrations, filings and recordings necessary or desirable (as determined by the
Lender’s legal counsel, acting reasonably) in connection with the Security shall have
been made and completed,
	 
	 	(h)	 	the Lender shall have received (i) a legal opinion from legal counsel to each
of Powell, the Borrower and its Subsidiaries in each applicable jurisdiction and (ii) a
legal opinion from Lender’s legal counsel in each applicable jurisdiction, each in
form and substance as may be required by the Lender;

 

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	 	(i)	 	the Lender shall have received current certificates of insurance evidencing
that the Borrower and the Subsidiaries maintain insurance in amounts, terms and
coverage in accordance with prudent industry practices and to the extent available on
commercially reasonable terms, as required by the Lender, acting reasonably;
	 
	 	(j)	 	the Lender shall have received such other certificates, instruments and
documents as may be reasonably requested by the Lender;
	 
	 	(k)	 	the Lender shall have received from Powell an executed Compliance Certificate,
inter alia, evidencing compliance with the financial covenants set forth in Section
10.3;
	 
	 	(l)	 	as at the date of such Drawdown, no material adverse change in the business,
affairs, assets, properties, operations, or condition, financial or otherwise, of
Powell or of the Borrower and its Subsidiaries taken as a whole, shall have occurred
since November 11, 2009;
	 
	 	(m)	 	the Lender shall have received a pro-forma consolidated balance sheet of
Powell, evidencing compliance with financial and other covenants upon completion of the
acquisition of the assets of Powercomm Inc. to the satisfaction of the Lender;
	 
	 	(n)	 	the Lender shall have received company prepared year end consolidated financial
statements of Powell, which are to the satisfaction of the Lender;
	 
	 	(o)	 	the Lender shall have received a pro-forma opening balance sheet for the
Borrower which is to the satisfaction of the Lender;
	 
	 	(p)	 	the Lender shall have received the fiscal 2010 consolidated cash flow
projections for Powell, which shall include a pro-forma balance sheet, income statement
and cash flow statement, and a capital expenditure budget for each quarter during such
fiscal year, and shall otherwise be in a form and substance satisfactory to the Lender,
acting reasonably;
	 
	 	(q)	 	the Lender shall have received the corporate organizational chart for Powell
and all of its Subsidiaries, including the Borrower;
	 
	 	(r)	 	the Lender shall have received from the Borrower an executed Compliance
Certificate, inter alia, evidencing compliance with the covenants of the Borrower
contained herein, in form and substance satisfactory to the Lender, acting reasonably;
	 
	 	(s)	 	the Lender shall have received evidence satisfactory to the Lender that all
material governmental approvals, licenses, consents and permits of the Borrower and its
Subsidiaries are in full force and effect, except for those not then required by law
and which can be obtained in the normal course; and
	 
	 	(t)	 	the Lender shall have received such other documents and information as the
Lender may reasonably request, including any internally or independently prepared
environmental assessment reports for the Borrower and its Subsidiaries.

 

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	3.3	 	Waiver

The conditions set forth in Sections 3.1 and 3.2 are inserted for the sole benefit of the Lender
and may be waived by the Lender, in whole or in part (with or without terms or conditions).

ARTICLE 4

EVIDENCE OF DRAWDOWNS

	4.1	 	Account of Record

The Lender shall open and maintain books of account evidencing all Loans and all other amounts
owing by the Borrower to the Lender hereunder. The Lender shall enter in the foregoing accounts
details of all amounts from time to time owing, paid or repaid by the Borrower hereunder. The
information entered in the foregoing accounts shall, absent manifest error, constitute prima facie
evidence of the obligations of the Borrower to the Lender hereunder with respect to all Loans and
all other amounts owing by the Borrower to the Lender hereunder. After a request by the Borrower,
the Lender shall promptly advise the Borrower of such entries made in the Lender’s books of
account.

ARTICLE 5

PAYMENTS OF INTEREST AND FEES

	5.1	 	Interest on Canadian Prime Rate Loans

The Borrower shall pay interest on each Canadian Prime Rate Loan owing by it under the Revolving
Facility or the Term Facility during each Interest Period applicable thereto in Canadian Dollars at
a rate per annum equal to the Canadian Prime Rate in effect from time to time during such Interest
Period plus the Applicable Pricing Rate. Each determination by the Lender of the Canadian Prime
Rate applicable from time to time during an Interest Period shall, in the absence of manifest
error, be prima facie evidence thereof. Such interest shall accrue daily and shall be payable in
arrears on each Interest Payment Date for such Loan for the period from and including the Drawdown
Date or the preceding Conversion Date or Interest Payment Date, as the case may be, for such Loan
to and including the day preceding such Interest Payment Date and shall be calculated on the
principal amount of the Canadian Prime Rate Loan outstanding during such period and on the basis of
the actual number of days elapsed in a year of 365 days. Changes in the Canadian Prime Rate shall
cause an immediate adjustment of the interest rate applicable to such Loans without the necessity
of any notice to the Borrower.

	5.2	 	Interest on U.S. Base Rate Loans

The Borrower shall pay interest on each U.S. Base Rate Loan owing by it under the Operating
Facility during each Interest Period applicable thereto in United States Dollars at a rate per
annum equal to the U.S. Base Rate in effect from time to time during such Interest Period plus the
Applicable Pricing Rate. Each determination by the Lender of the U.S. Base Rate applicable from
time to time during an Interest Period shall, in the absence of manifest error, be prima facie
evidence thereof. Such interest shall accrue daily and shall be
payable monthly in arrears on each Interest Payment Date for such Loan for the period from and including the Drawdown Date or the
preceding Conversion Date or Interest Payment Date, as the case may be, for such Loan to and
including the day preceding such Interest Payment Date and shall be calculated on the principal
amount of the U.S. Base Rate Loan outstanding during such period and on the basis of the actual
number of days elapsed in a year of 360 days. Changes in the U.S. Base Rate shall

 

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 cause an
immediate adjustment of the interest rate applicable to such Loans without the necessity of any
notice to the Borrower.

	5.3	 	Standby Fees for Revolving Facility

	 	(a)	 	The Borrower shall pay to the Lender a standby fee in Canadian Dollars
calculated at a rate per annum equal to the Applicable Pricing Rate (based on a year of
365 days) for Standby Fees on the amount, if any, for each day by which the amount of
the Outstanding Principal owing to the Lender under the Revolving Facility is less than
the Revolving Facility Commitment. Fees determined in accordance with this Section
shall be payable by the Borrower in accordance with Section 5.3(b) until the earlier of
cancellation in full of the undrawn portion of the Revolving Facility and the Maturity
Date under the Revolving Facility.
	 
	 	(b)	 	The standby fees referred to in Section 5.3(a) shall accrue daily and be
payable monthly in arrears on each Interest Payment Date applicable to Canadian Prime
Rate Loans for the period from the date hereof or the preceding Interest Payment Date,
as the case may be, to and including the day before such Interest Payment Date.
	 
	 	(c)	 	In order to calculate the daily Outstanding Principal under this Section 5.3
for any day in a calendar month, the Lender shall convert any U.S. Base Rate Loans into
the Equivalent Amount thereof in Canadian dollars.

	5.4	 	Stamping Fees

Upon the acceptance by the Lender of a Bankers’ Acceptance, the Borrower shall pay to the Lender a
stamping fee in Canadian Dollars equal to the Applicable Pricing Rate for Stamping Fees for
Bankers’ Acceptances calculated on the principal amount at maturity of such Bankers’ Acceptance and
for the period of time from and including the date of acceptance to but excluding the maturity date
of such Bankers’ Acceptance, and calculated on the basis of the number of days elapsed in a year of
365 days.

	5.5	 	Fees Relating to Letters of Credit

	 	(a)	 	The Borrower shall pay to the Lender in respect of Letters of Credit issued
hereunder, an LC Fee payable annually on the date of issuance, calculated at a rate per
annum equal to the Lender’s Applicable Pricing Rate and on the average daily amount of
such Letter of Credit for the number of days such Letter of Credit was outstanding for
the period from and including the date of issuance or the date of the immediately
preceding determination of the LC Fee (as the case may be) to but excluding that date
of determination, in each case, in a year of 365 days.
	 
	 	(b)	 	In addition, with respect to all Letters of Credit, the Borrower shall from
time to time pay to the Lender its usual and customary fees and charges (at the then
prevailing rates) for the amendment, delivery and administration of letters of
credit such as the Letters of Credit and shall pay and reimburse the Lender for any
reasonable out-of-pocket costs and expenses incurred in connection with any Letter
of Credit, including in connection with any payment thereunder.

 

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	5.6	 	Interest Act (Canada)

Whenever a
rate of interest hereunder is calculated on the basis of a year (the “deemed year”)
which contains fewer days than the actual number of days in the calendar year of calculation, such
rate of interest shall be expressed as a yearly rate for purposes of the Interest Act (Canada) by
multiplying such rate of interest by the actual number of days in the calendar year of calculation
and dividing it by the number of days in the deemed year.

	5.7	 	Nominal Rates; No Deemed Reinvestment

The principle of deemed reinvestment of interest shall not apply to any interest calculation under
this Agreement; all interest payments to be made hereunder shall be paid without allowance or
deduction for deemed reinvestment or otherwise, before and after maturity, default and judgment.
The rates of interest specified in this Agreement are intended to be nominal rates and not
effective rates. Interest calculated hereunder shall be calculated using the nominal rate method
and not the effective rate method of calculation.

	5.8	 	Interest on Overdue Amounts

Notwithstanding any other provision hereof, in the event that any amount due hereunder (including,
without limitation, any interest payment) is not paid when due (whether by acceleration or
otherwise), the Borrower shall pay interest on such unpaid amount (including, without limitation,
interest on interest), if and to the fullest extent permitted by Applicable Law, from the date that
such amount is due until the date that such amount is paid in full (but excluding the date of such
payment if the payment is received for value at the required place of payment on the date of such
payment), and such interest shall accrue daily, be calculated and compounded monthly and be payable
on demand, after as well as before maturity, default and judgment, at a rate per annum that is
equal to (i) in respect of amounts due in Canadian Dollars, the rate of interest then payable on
Canadian Prime Rate Loans plus 3.0% per annum and (ii) in respect of amounts due in United States
Dollars, the rate of interest then payable on U.S. Base Rate Loans plus 3.0% per annum.

	5.9	 	Waiver

To the extent permitted by Applicable Law, the covenant of the Borrower to pay interest at the
rates provided herein shall not merge in any judgment relating to any obligation of the Borrower to
the Lender and any provision of the Interest Act (Canada) or Judgment Interest Act (Alberta) which
restricts any rate of interest set forth herein shall be inapplicable to this Agreement and is
hereby waived by the Borrower.

	5.10	 	Maximum Rate Permitted by Law

No interest or fee to be paid hereunder shall be paid at a rate exceeding the maximum rate
permitted by Applicable Law. In the event that such interest or fee exceeds such maximum rate, such
interest or fees shall be reduced or refunded, as the case may be, so as to be payable at the
highest rate recoverable under Applicable Law.

 

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ARTICLE 6

BANKERS’ ACCEPTANCES

	6.1	 	Bankers Acceptances

The Borrower may give the Lender notice that Bankers’ Acceptances will be required under the
Revolving Facility or the Term Facility pursuant to a Drawdown, Rollover or Conversion.

	6.2	 	Fees

Upon the acceptance by the Lender of a Bankers’ Acceptance, the Borrower shall pay to the Lender a
fee in Canadian Dollars equal to the Applicable Pricing Rate calculated on the principal amount at
maturity of such Bankers’ Acceptance and for the period of time from and including the date of
acceptance to but excluding the maturity date of such Bankers’ Acceptance and calculated on the
basis of the number of days elapsed in a year of 365 days.

	6.3	 	Form and Execution of Bankers’ Acceptances

The following provisions shall apply to each Bankers’ Acceptance hereunder:

	 	(a)	 	the face amount at maturity of each draft drawn by the Borrower to be accepted
as a Bankers’ Acceptance shall be Cdn. $100,000 and integral multiples thereof,
provided that no more than four (4) Bankers’ Acceptances may be outstanding under the
Term Facility at any time;
	 
	 	(b)	 	the term to maturity of each draft drawn by the Borrower to be accepted as a
Bankers’ Acceptance shall, subject to market availability as determined by the Lender,
be one (I), two (2) or three (3) months (or such other longer or shorter term as agreed
by the Lender), as selected by the Borrower in the relevant Drawdown, Rollover or
Conversion Notice, and each Bankers’ Acceptance shall be payable and mature on the last
day of the Interest Period selected by the Borrower for such Bankers’ Acceptance
(which, for certainty, pursuant to the definition of “Interest Period” shall be on or
prior to the Maturity Date);
	 
	 	(c)	 	each draft drawn by the Borrower and presented for acceptance by the Lender
shall be drawn on the standard form of the Lender in effect at the time; provided,
however, that the Lender may use a generic form of Bankers’ Acceptance, in a form
satisfactory to the Lender, acting reasonably;
	 
	 	(d)	 	subject to Section 6.3(e) below, Bankers’ Acceptances shall be signed by duly
authorized officers of the Borrower or, in the alternative, the signatures of such
officers may be mechanically reproduced in facsimile thereon and Bankers’ Acceptances
bearing such facsimile signatures shall be binding on the Borrower as if they had been
manually executed and delivered by such officers on behalf of the Borrower;
notwithstanding that any person whose manual or facsimile signature appears on any
Bankers’ Acceptance may no longer be an authorized signatory for the Borrower on the
date of issuance of a Bankers’ Acceptance, such signature shall nevertheless be valid
and sufficient for all purposes as if such authority had remained in force at the time
of such issuance and any such Bankers’ Acceptance shall be binding on the Borrower; and

 

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	 	(e)	 	in lieu of signing Bankers’ Acceptances in accordance with Section 6.3(d)
above, the Borrower may provide a Power of Attorney to the Lender; for so long as a
Power of Attorney is in force with respect to the Lender, the Lender shall execute and
deliver Bankers’ Acceptances on behalf of the Borrower in accordance with the
provisions thereof and, for certainty, all references herein to drafts drawn by the
Borrower, Bankers’ Acceptances executed by the Borrower or similar expressions shall be
deemed to include Bankers’ Acceptances executed in accordance with a Power of Attorney,
unless the context otherwise requires.

	6.4	 	Power of Attorney; Provision of Bankers’ Acceptances to Lender

	 	(a)	 	Unless revoked in accordance herewith, the Borrower hereby appoints the Lender,
acting by any authorized signatory of the Lender in question, the attorney of the
Borrower:

	 	(i)	 	to sign for and on behalf and in the name of the Borrower as
drawer, drafts in the Lender’s standard form which are depository bills as
defined in the Depository Bills and Notes Act (Canada) (the “DBNA”), payable to
a “clearing house” (as defined in the DBNA) including, without limitation, The
Canadian Depository For Securities Limited or its nominee, CDS & Co. (the
“clearing house”);
	 
	 	(ii)	 	for drafts which are not depository bills, to sign for and on
behalf and in the name of the Borrower as drawer and to endorse on its behalf,
Bankers’ Acceptances drawn on the Lender payable to the order of the
undersigned or payable to the order of the Lender;
	 
	 	(iii)	 	to fill in the amount, date and maturity date of such Bankers’
Acceptances; and
	 
	 	(iv)	 	to deposit and/or deliver such Bankers’ Acceptances which have
been accepted by the Lender,

	 	 	 	provided that such acts in each case are to be undertaken by the Lender in question
strictly in accordance with instructions given to the Lender by the Borrower as
provided in this Section. For certainty, signatures of any authorized signatory of
the Lender may be mechanically reproduced in facsimile on Bankers’ Acceptances in
accordance herewith and such facsimile signatures shall be binding and effective as
if they had been manually executed by such authorized signatory of the Lender.
	 
	 	 	 	Instructions from the Borrower to the Lender relating to the execution, completion,
endorsement, deposit and/or delivery by the Lender on behalf of the Borrower of
Bankers’ Acceptances which the Borrower wishes to submit to the Lender for
acceptance by the Lender shall be communicated by the Borrower in writing to the
Lender by delivery to the Lender of Drawdown Notices, Conversion Notices and
Rollover Notices, as the case may be, in accordance with this Agreement.

 

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	 	 	 	The communication in writing by the Borrower to the Lender of the instructions set
out in the Drawdown Notices, Conversion Notices and Rollover Notices referred to
above shall constitute (a) the authorization and instruction of the Borrower to the
Lender to sign for and on behalf and in the name of the Borrower as drawer the
requested Bankers’ Acceptances and to complete and/or endorse Bankers’ Acceptances
in accordance with such information as set out above and (b) the request of the
Borrower to the Lender to accept such Bankers’ Acceptances and deposit the same with
the clearing house or deliver the same, as the case may be, in each case in
accordance with this Agreement and such instructions. The Borrower acknowledges that
the Lender shall not be obligated to accept any such Bankers’ Acceptances except in
accordance with the provisions of this Agreement.
	 
	 	 	 	The Lender shall be and it is hereby authorized to act on behalf of the Borrower
upon and in compliance with instructions communicated to the Lender as provided
herein if the Lender reasonably believes such instructions to be genuine.
	 
	 	 	 	This Power of Attorney may be revoked by the Borrower with respect to the Lender at
any time upon not less than 5 Banking Days’ prior written notice served upon the
Lender, provided that no such revocation shall reduce, limit or otherwise affect the
obligations of the Borrower in respect of any Bankers’ Acceptance executed,
completed, endorsed, deposited and/or delivered in accordance herewith prior to the
time at which such revocation becomes effective.
	 
	 	(b)	 	Unless the Borrower has provided Powers of Attorney to the Lender, to
facilitate Drawdowns, Rollovers or Conversions of Bankers’ Acceptances, the Borrower
shall, upon execution of this Agreement and thereafter from time to time as required by
the Lender, provide to the Lender drafts drawn in blank by the Borrower (pre-endorsed
and otherwise in fully negotiable form, if applicable) in quantities sufficient for the
Lender to fulfill its obligations hereunder. Any such pre signed drafts which are
delivered by the Borrower to the Lender shall be held in safekeeping by the Lender with
the same degree of care as if they were the Lender’s property, and shall only be dealt
with by the Lender in accordance herewith. The Lender shall not be responsible or
liable for its failure to make any Drawdown, Rollover or Conversion of Bankers’
Acceptances required hereunder if the cause of such failure is, in whole or in part,
due to the failure of the Borrower to provide such pre-signed drafts to the Lender on a
timely basis.
	 
	 	(c)	 	By 10:00 a.m. (Edmonton time) on the applicable Drawdown Date, Conversion Date
or Rollover Date for which Borrower has given notice hereunder that Bankers’
Acceptances have been elected or will be required by Borrower, the Borrower shall (i)
either deliver to the Lender, or, if previously delivered, be deemed to have authorized
the Lender to complete and accept, or (ii) where the Borrower has previously executed
and delivered a Power of Attorney to the Lender, be deemed to have authorized the
Lender to sign on behalf of the Borrower, complete and accept, drafts drawn by the
Borrower on the Lender in a principal amount at maturity equal to the Bankers’
Acceptances specified by the Borrower in the relevant Drawdown Notice, Conversion
Notice or Rollover Notice, as the case may be, as notified to the Lender by the
Borrower.

 

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	6.5	 	Mechanics of Issuance

	 	(a)	 	The Lender may at any time and from time to time hold, sell, rediscount or
otherwise dispose of any or all Bankers’ Acceptances accepted and purchased by it for
its own account.
	 
	 	(b)	 	On each such Drawdown Date, Rollover Date or Conversion Date involving the
issuance of Bankers’ Acceptances:

	 	(i)	 	Lender shall complete and accept, in accordance with the
Drawdown Notice, Conversion Notice or Rollover Notice delivered by the Borrower
the Bankers’ Acceptances to be issued on such date and shall purchase such
Bankers’ Acceptances for its own account at a purchase price which reflects the
BA Rate applicable to such issue; and
	 
	 	(ii)	 	in the case of a Drawdown, the Lender shall, for same day value
on the Drawdown Date, remit the Discount Proceeds payable by the Lender (net of
the acceptance fee payable to the Lender pursuant to Section 6.2) to the
Borrower.

	6.6	 	Rollover, Conversion or Payment on Maturity 

In anticipation of the maturity of Bankers’ Acceptances, the Borrower shall, subject to and in
accordance with the requirements hereof, do one or a combination of the following with respect to
the aggregate face amount at maturity of all such Bankers’ Acceptances:

	 	(a)	 	(i) deliver to the Lender a Rollover Notice that the Borrower intends to draw
and present for acceptance on the maturity date new Bankers’ Acceptances in an
aggregate face amount up to the aggregate amount of the maturing Bankers’ Acceptances
and (ii) on the maturity date pay to the Lender an additional amount equal to the
difference between the aggregate face amount of the maturing Bankers’ Acceptances and
the Discount Proceeds of such new Bankers’ Acceptances;
	 
	 	(b)	 	(i) deliver to the Lender a Conversion Notice requesting a Conversion of the
maturing Bankers’ Acceptances to another type of Loan under the applicable Credit
Facility as the maturing Bankers’ Acceptances and (ii) on the maturity date pay to the
Lender an amount equal to the difference, if any, between the aggregate face amount of
the maturing Bankers’ Acceptances and the amount of the Loans into which Conversion is
requested; or
	 
	 	(c)	 	on the maturity date of the maturing Bankers’ Acceptances, pay to the Lender an
amount equal to the aggregate face amount of such Bankers’ Acceptances.

If the Borrower fails to so notify the Lender or make such payments on maturity, the Lender shall
effect a Conversion into a Canadian Prime Rate Loan of the entire amount of such maturing Bankers’
Acceptances as if a Conversion Notice had been given by the Borrower to the Lender to that effect.

 

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	6.7	 	Restriction on Rollovers and Conversions 

Subject to the other provisions hereof, Conversions and Rollovers of Bankers’ Acceptances may only
occur on the maturity date thereof.

	6.8	 	Rollovers 

In order to satisfy the continuing liability of the Borrower to the Lender for the face amount of
maturing Bankers’ Acceptances accepted by the Lender, the Lender shall receive and retain for its
own account the Discount Proceeds of new Bankers’ Acceptances issued on a Rollover, and the
Borrower shall on the maturity date of the Bankers’ Acceptances being rolled over pay to the Lender
an amount equal to the difference between the face amount of the maturing Bankers’ Acceptances and
the Discount Proceeds from the new Bankers’ Acceptances, together with the acceptance fees to which
the Lender is entitled pursuant to Section 6.2.

	6.9	 	Conversion into Bankers’ Acceptances 

In respect of Conversions into Bankers’ Acceptances, in order to satisfy the continuing liability
of the Borrower to the Lender for the amount of the converted Loan, the Lender shall receive and
retain for its own account the Discount Proceeds of the Bankers’ Acceptances issued upon such
Conversion, and the Borrower shall on the Conversion Date pay to the Lender an amount equal to the
difference between the principal amount of the converted Loan and the aggregate Discount Proceeds
from the Bankers’ Acceptances issued on such Conversion, together with the acceptance fees to which
the Lender is entitled pursuant to Section 6.2.

	6.10	 	Conversion from Bankers’ Acceptances 

In order to satisfy the continuing liability of the Borrower to the Lender for an amount equal to
the aggregate face amount of the maturing Bankers’ Acceptances converted to another type of Loan,
the Lender shall record the obligation of the Borrower as a Loan of the type into which such
continuing liability has been converted.

ARTICLE 7 

LETTERS OF CREDIT 

	7.1	 	Availability 

Subject to the provisions hereof, the Borrower may require that Letters of Credit be issued under
the Revolving Facility by delivering a Drawdown Notice in accordance with Section 2.6. The issuance
of Letters of Credit shall constitute a Drawdown hereunder and shall reduce the availability of the
Revolving Facility by the aggregate Outstanding Principal of Letters of Credit under the Revolving
Facility.

	7.2	 	Currency, Type and Expiry 

Letters of Credit issued pursuant hereto shall be denominated in Canadian Dollars and amounts
payable thereunder shall be paid in the currency in which the Letter of Credit is denominated. A
Letter of Credit issued hereunder shall be issued by the Lender; provided that the Lender
shall have no obligation to issue any Letter of Credit unless and until it has received such
ancillary documents, including applications and indemnities, as the Lender normally requires for
similar transactions. Letters of Credit shall be in a form satisfactory to the Lender, acting reasonably,

 

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and shall have an expiration date not in excess of one year from the date of issue and, in any
event, not later than the Maturity Date.

	7.3	 	Reimbursement or Conversion on Presentation 

Upon presentation of a Letter of Credit and payment thereunder by the Lender, the Borrower shall
(at its option) either forthwith pay to and reimburse the Lender all amounts paid pursuant to such
Letter of Credit or, failing such payment, the Borrower shall be deemed to have effected a
Conversion of such Letter of Credit into a Canadian Prime Rate Loan.

	7.4	 	Uniform Customs and Practice 

The Uniform Customs and Practice for Loan Documentary Credits as most recently published by the
International Chamber of Commerce (the “Uniform Customs”) shall in all respects apply to each
Letter of Credit unless expressly provided to the contrary therein and shall be deemed for such
purpose to be a part of this Agreement as if fully incorporated herein. In the event of any
conflict or inconsistency between the Uniform Customs and the governing law of this Agreement, the
Uniform Customs shall, to the extent permitted by Applicable Law, prevail to the extent necessary
to remove the conflict or inconsistency.

ARTICLE 8 

PLACE AND APPLICATIONS OF PAYMENTS 

	8.1	 	Place of Payment of Principal, Interest and Fees; Payments to Lender 

All payments of principal, interest, fees and other amounts to be made by the Borrower to the
Lender pursuant to this Agreement shall be made to the Lender in the currency in which the Loan is
outstanding for value on the day such amount is due, and if such day is not a Banking Day on the
Banking Day next following, by deposit or transfer thereof to the Lender’s Account or at such other
place as the Lender may specify in writing from time to time. Any payment delivered or made to the
Lender by 1:00 p.m. local time at the place where such payment is to be made shall be credited as
of that day, but if made afterwards shall be credited as of the next Banking Day thereafter.

	8.2	 	Absolute and Unconditional Obligation to Pay

The obligation of the Borrower to make all payments pursuant to this Agreement and the Security
Documents shall be absolute and unconditional and shall not be limited or affected by any
circumstance, including, without limitation:

	 	(a)	 	any set-off, compensation, counter-claim, recoupment, defense or other right
which the Borrower may have against the Lender or anyone else for any reason
whatsoever; or
	 
	 	(b)	 	any insolvency, bankruptcy, reorganization or similar proceedings by or against
the Borrower.

	8.3	 	Funds 

Each amount advanced, disbursed or paid hereunder shall be advanced, disbursed or paid, as the case
may be, in such form of funds as may from time to time be customarily used in
Edmonton, Alberta in the settlement of banking transactions similar to the banking transactions

 

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required to give effect to the provisions of this Agreement on the day such advance, disbursement
or payment is to be made (for certainty, each such amount advanced, disbursed or paid hereunder
shall be advanced, disbursed or paid, as the case may be, in immediately available funds to the
extent possible).

	8.4	 	Application of Payments 

Except as otherwise agreed in writing by the Lender, if any Event of Default shall occur and be
continuing, all payments made by the Borrower to the Lender shall be applied in the following
order:

	 	(a)	 	to amounts due hereunder as fees other than acceptance fees for Bankers’
Acceptances;
	 
	 	(b)	 	to amounts due hereunder as costs and expenses;
	 
	 	(c)	 	to amounts due hereunder as default interest;
	 
	 	(d)	 	to amounts due hereunder as interest, acceptance fees for Bankers’ Acceptances;
and
	 
	 	(e)	 	(e) to amounts due hereunder as principal (including reimbursement obligations
in respect of Bankers’ Acceptances).

	8.5	 	Payments Clear of Taxes 

	 	(a)	 	Any and all payments by the Borrower to the Lender hereunder shall be made free
and clear of, and without deduction or withholding for or on account of, any and all
present or future Taxes and all liabilities with respect thereto imposed, levied,
collected, withheld or assessed by any Governmental Authority or under the laws of any
international tax authority imposed on the Lender, or by or on behalf of the foregoing
(and, for greater certainty, nothing in this Section 8.5(a) shall make the Borrower
liable for any taxes imposed on or measured by the Lender’s overall net income or
franchise taxes imposed on it (in lieu of net income taxes) by the jurisdiction (or any
political subdivision thereof) under the laws of which the Lender is organized, in
which its applicable lending office is maintained or in which its principal office is
located). In addition, the Borrower agrees to pay any present or future stamp,
transfer, registration, excise, issues, documentary or other taxes, charges or similar
levies which arise from any payment made under this Agreement or the Loans or in
respect of the execution, delivery or registration or the compliance with this
Agreement or the other Documents contemplated hereunder other than taxes imposed on or
measured by the Lender’s overall net income and franchise taxes imposed on it (in lieu
of net income taxes) by the jurisdiction (or any political subdivision thereof) under
the laws of which the Lender is organized, in which its applicable lending office is
maintained or in which its principal office is located. The Borrower shall indemnify
and hold harmless the Lender for the full amount of any Taxes or other amounts paid or
payable by the Lender and any liability (including penalties, interest, additions to
tax and reasonable out-of-pocket expenses) resulting therefrom or with respect thereto
which arise from any payment made under or pursuant to this Agreement or the Loans or
in respect of the execution, delivery or registration of, or compliance with, this Agreement or the other Documents other

 

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	 	 	 	than taxes imposed on or measured by the Lender’s overall net income and franchise
taxes imposed on it (in lieu of net income taxes) by the jurisdiction (or any
political subdivision thereof) under the laws of which the Lender is organized, in
which its applicable lending office is maintained or in which its principal office
is located.
	 
	 	(b)	 	If the Borrower shall be required by law to deduct or withhold any amount from
any payment or other amount required to be paid to the Lender hereunder, or if any
liability therefor shall be imposed or shall arise from or in respect of any sum
payable hereunder, then the sum payable to the Lender hereunder shall be increased as
may be necessary so that after making all required deductions, withholdings, and
additional income tax payments attributable thereto (including deductions, withholdings
or income tax payable for additional sums payable under this provision) the Lender
receives an amount equal to the amount it would have received had no such deductions or
withholdings been made or if such additional taxes had not been imposed; in addition,
the Borrower shall pay the full amount deducted or withheld for such liabilities to the
relevant taxation authority or other authority in accordance with Applicable Law, such
payment to be made (if the liability is imposed on the Borrower) for its own account or
(if the liability is imposed on the Lender) on behalf of and in the name of the Lender.
If the liability is imposed on the Lender, the Borrower shall deliver to the Lender
evidence satisfactory to the Lender, acting reasonably, of the payment to the relevant
taxation authority or other authority of the full amount deducted or withheld.

	8.6	 	Set Off

	 	(a)	 	In addition to any rights now or hereafter granted under Applicable Law and not
by way of limitation of any such rights, upon the occurrence of an Event of Default
which remains unremedied (whether or not the Loans have been accelerated hereunder),
the Lender shall have the right (and are hereby authorized by the Borrower) at any time
and from time to time to combine all or any of the Borrower’s accounts with the Lender
and to set off and to appropriate and to apply any and all deposits (general or
special, term or demand) including, but not limited to, indebtedness evidenced by
certificates of deposit whether matured or unmatured, and any other indebtedness at any
time held by the Borrower or owing by the Lender to or for the credit or account of the
Borrower against and towards the satisfaction of any Obligations owing by the Borrower,
and may do so notwithstanding that the balances of such accounts and the liabilities
are expressed in different currencies, and the Lender is hereby authorized to effect
any necessary currency conversions at the noon spot rate of exchange announced by the
Bank of Canada on the Banking Day before the day of conversion.
	 
	 	(b)	 	The Lender shall notify the Borrower of any such set off from the Borrower’s
accounts within a reasonable period of time thereafter, although the Lender shall not
be liable to the Borrower for its failure to so notify.

 

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	8.7	 	Margin Changes 

Changes in Applicable Pricing Rate shall be effective:

	 	(a)	 	within three (3) Banking Days following the scheduled receipt of a Compliance
Certificate pursuant to Section 10.1(e)(iii) evidencing a change in the Debt to EBITDA
Ratio which results in a change in the Applicable Pricing Rate in accordance with the
provisions of such definition; and
	 
	 	(b)	 	without the necessity of notice to the Borrower,

provided that, notwithstanding the foregoing provisions of subparagraph (a) of this Section 8.7, if
the Borrower has failed to deliver a Compliance Certificate for the immediately preceding Quarter
End in accordance with the provisions hereof, then the Debt to EBITDA Ratio shall be deemed to be
greater than 2.0: 1.0 for the purposes of determining the Applicable Pricing Rate until the
Borrower has remedied such failure and delivered such Compliance Certificate (and, from and after
such delivery, the Applicable Pricing Rate shall be based upon the Debt to EBITDA Ratio set forth
in such Compliance Certificate for the remainder of the period until the next such Compliance
Certificate is required to be delivered hereunder). With respect to Bankers’ Acceptances
outstanding on the effective date of any such change in Applicable Pricing Rate, changes in the
Applicable Pricing Rate shall become applicable thereto upon the next Rollover or Conversion
thereof after such change.

ARTICLE 9 

REPRESENTATIONS AND WARRANTIES 

	9.1	 	Representations and Warranties 

Each of Powell and the Borrower represents and warrants as follows to the Lender and acknowledges
and confirms that the Lender is relying upon such representations and warranties:

	 	(a)	 	Existence — The Borrower 
	 
	 	 	 	The Borrower is a corporation duly incorporated and validly existing under the laws
of Canada and is duly registered in all other jurisdictions where the nature of its
property or character of its business requires registration, except for
jurisdictions where the failure to be so registered or qualified would not have a
Material Adverse Effect, and has all necessary power and authority to own its
properties and carry on its business as presently carried on or as contemplated by
the Documents.
	 
	 	(b)	 	Existence — Powell
	 
	 	 	 	Powell is a corporation duly incorporated and validly existing under the laws of the
State of Delaware and is duly registered in all other jurisdiction where the nature
of its property or character of its business requires registration, except for
jurisdictions where the failure to be so registered or qualified would not have a
Material Material Adverse Effect, and has all necessary power and authority to own
its properties and carry on its business as presently carried on.

 

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	 	(c)	 	Existence and Good Standing -Corporations 
	 
	 	 	 	Each of the Subsidiaries is a corporation incorporated and validly existing and in
good standing under the laws of Canada; each is duly registered in all other
jurisdictions where the nature of its property or character of its business requires
registration, except for jurisdictions where the failure to be so registered or
qualified would not have a Material Adverse Effect, and has all necessary power and
authority to own its properties and carry on its business as presently carried on or
as contemplated by the Documents.
	 
	 	(d)	 	Existence -Partnerships and Trusts 
	 
	 	 	 	Each Subsidiary that is a partnership or a trust is validly existing under the laws
of the Province of Alberta and is duly registered in all other jurisdictions where
the nature of its property or character of its business requires registration,
except for jurisdictions where the failure to be so registered or qualified would
not have a Material Adverse Effect, and has all necessary power and authority to own
its properties and carry on its business as presently carried on or as contemplated
by the Documents.
	 
	 	(e)	 	Authority 
	 
	 	 	 	Each of the Borrower, Powell and each Subsidiary have full power, legal right and
authority to enter into the Documents to which it is a party and do all such acts
and things as are required by such Documents to be done, observed or performed, in
accordance with the terms thereof.
	 
	 	(f)	 	Valid Authorization and Execution 
	 
	 	 	 	Each of the Borrower, Powell and each Subsidiary has taken all necessary corporate,
partnership and other action (as applicable) of its directors, shareholders,
partners, trustees and other persons (as applicable) to authorize the execution,
delivery and performance of the Documents to which it is a party and to observe and
perform the provisions thereof in accordance with the terms therein contained.
	 
	 	(g)	 	Validity of Agreement Non-Conflict 
	 
	 	 	 	None of the authorization, execution or delivery of this Agreement or performance of
any obligation pursuant thereto requires or will require, pursuant to Applicable Law
now in effect, any approval or consent of any Governmental Authority having
jurisdiction (except such as has already been obtained and are in full force and
effect) nor is in conflict with or contravention of (i) the Borrower’s, (ii)
Powell’s or (iii) any Subsidiary’s articles, by laws or other constating documents
or any resolutions of directors or shareholders or the provisions of its partnership
agreement or declaration of trust or trust indenture (as applicable) or (iv) the
provisions of any other indenture, instrument, undertaking or other agreement to
which Powell, the Borrower or any of its Subsidiaries is a party or by which they or
their properties or assets are bound, the contravention of which would have or would
reasonably be expected to have a Material Adverse Effect. The Documents when
executed and delivered will constitute valid and legally binding obligations of each
of Powell, the Borrower and each of its Subsidiaries

 

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	 	 	 	which is a party thereto enforceable against each such party in accordance with
their respective terms, subject to applicable bankruptcy, insolvency and other laws
of general application limiting the enforceability of creditors’ rights and to the
fact that equitable remedies are only available in the discretion of the court.
	 
	 	(h)	 	Ownership of Property 
	 
	 	 	 	Each of the Borrower, Powell, and each Subsidiary has good and marketable title to
its material property, subject to Permitted Encumbrances which, individually and in
the aggregate, do not materially affect their respective rights of ownership to such
property, the value thereof or their right or ability to utilize the same in the
conduct of their business and affairs.
	 
	 	(i)	 	Acquisition from Powercomm
	 
	 	 	 	The Borrower has, or the Borrower and its Subsidiaries have, acquired, or upon the
initial Drawdown of the Credit Facilities, shall acquire good and marketable title
to substantially all of the business assets of the Vendor’s free and clear of all
liens, encumbrances, mortgages, pledges, charges, options, rights, security
interest, agreements or claims of any nature whatsoever, other than Permitted
Encumbrances.
	 
	 	(j)	 	Debt 
	 
	 	 	 	Neither the Borrower nor any Subsidiary has created, incurred, assumed, suffered to
exist, or entered into any contract, instrument or undertaking pursuant to which,
the Borrower or any Subsidiary is now or may hereafter become liable for Debt other
than Permitted Debt, in the aggregate, in excess of $500,000.00.
	 
	 	(k)	 	Encumbrances 
	 
	 	 	 	Neither the Borrower nor any Subsidiary has created, incurred, assumed, suffered to
exist, or entered into any contract, instrument or undertaking pursuant to which,
any person may have or be entitled to any Security Interest on or in respect of its
property and assets or any part thereof except for Permitted Encumbrances.
	 
	 	(l)	 	No Material Adverse Effect 
	 
	 	 	 	No event or circumstance has occurred or is continuing which has had or would
reasonably be expected to have a Material Adverse Effect.
	 
	 	(m)	 	No Omissions 
	 
	 	 	 	The Borrower has made available to the Lender all material information necessary to
make any representations, warranties and statements contained in this Agreement not
misleading in any material respect in light of the circumstances in which they are
given.

 

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	 	(n)	 	Non-Default 
	 
	 	 	 	No Default or Event of Default has occurred or is continuing or would occur
following any Drawdown hereunder.
	 
	 	(o)	 	Financial Condition 
	 
	 	 	 	The audited and unaudited consolidated financial statements of Powell delivered to
the Lender pursuant hereto present fairly, in all material respects, the
consolidated financial condition of Powell as at the date thereof and the results of
the consolidated operations thereof for the fiscal year or fiscal quarter (as
applicable) then ending, all in accordance with GAAP consistently applied.
	 
	 	(p)	 	Information Provided 
	 
	 	 	 	All information, materials and documents, including all cash flow projections,
economic models, capital and operating budgets and other information and data:

	 	(i)	 	prepared and provided to the Lender by Powell, the Borrower or
any Subsidiary in respect of the transactions contemplated by this Agreement,
or as required by the terms of this Agreement, were, in the case of financial
projections, prepared in good faith based upon reasonable assumptions at the
date of preparation, and, in all other cases, true, complete and correct in all
material respects as of the respective dates thereof; and
	 
	 	(ii)	 	to the extent prepared by persons other than Powell, the
Borrower or a Subsidiary and provided to the Lender by or on behalf of Powell,
the Borrower or any Subsidiary in respect of the transactions contemplated by
this Agreement, or as required by the terms of this Agreement, were, to the
best of the knowledge of Powell and the Borrower after due inquiry, in the case
of financial projections, prepared in good faith based upon reasonable
assumptions at the date of preparation, and, in all other cases, true, complete
and correct in all material respects as of the respective dates thereof.

	 	(q)	 	Absence of Litigation 
	 
	 	 	 	There are no actions, suits or proceedings pending or, to the knowledge of Powell
and the Borrower, threatened against or affecting Powell, the Borrower or any of its
Subsidiaries, their property or any of their undertakings and assets, at law, in
equity or before any arbitrator or before or by any Governmental Authority having
jurisdiction in the premises in respect of which there is a reasonable possibility
of a determination adverse to Powell, the Borrower or any Subsidiary and which, if
determined adversely, would have or would reasonably be expected to have a Material
Adverse Effect.
	 
	 	(r)	 	Compliance with Applicable Laws, Court Orders and Agreements 
	 
	 	 	 	Powell, the Borrower and each of its Subsidiaries and their respective property,
businesses and operations are in compliance with all Applicable Laws (including,
without limitation, all applicable Environmental Laws), all applicable directives,

 

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	 	 	 	judgments, decrees, injunctions and orders rendered by any Governmental Authority or
court of competent jurisdiction, its articles, by laws and other constating
documents, all agreements or instruments to which it is a party or by which its
property or assets are bound, and any employee benefit plans, except to the extent
that failure to so comply would not have and would not reasonably be expected to
have a Material Adverse Effect.
	 
	 	(s)	 	Required Permits in Effect 
	 
	 	 	 	All Required Permits are in full force and effect, except to the extent that the
failure to have or maintain the same in full force and effect would not, when taken
in the aggregate, have or reasonably be expected to have a Material Adverse Effect.
	 
	 	(t)	 	Remittances Up to Date 
	 
	 	 	 	All of the material remittances required to be made by Powell, the Borrower and its
Subsidiaries to Governmental Authorities which are due and payable have been made,
are currently up to date and there are no outstanding arrears, other than those
which are being contested by Permitted Contest.
	 
	 	(u)	 	Environmental 

	 	(i)	 	To the best of the knowledge and belief of Powell and the
Borrower, after due inquiry, Powell, the Borrower, its Subsidiaries and their
respective properties, assets and undertakings taken as a whole comply in all
respects and the businesses, activities and operations of same and the use of
such properties, assets and undertakings and the processes and undertakings
performed thereon comply in all respects with all Environmental Laws except to
the extent that failure to so comply would not have and would not reasonably be
expected to have a Material Adverse Effect; further, neither Powell nor the
Borrower knows, and has no reasonable grounds to know, of any facts which
result in or constitute or are likely to give rise to non-compliance with any
Environmental Laws, which facts or non-compliance have or would reasonably be
expected to have a Material Adverse Effect.
	 
	 	(ii)	 	Neither Powell nor the Borrower have received written notice
and, except as previously disclosed to the Lender in writing, has no knowledge
after due inquiry, of any facts which could give rise to any notice of
non-compliance with any Environmental Laws, which non-compliance has or would
reasonably be expected to have a Material Adverse Effect and has not received
any notice that Powell, the Borrower or any of its Subsidiaries is a
potentially responsible party for a federal, provincial, regional, municipal or
local clean up or corrective action in connection with their respective
properties, assets and undertakings where such clean up or corrective action
has or would reasonably be expected to have a Material Adverse Effect.

 

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	 	(v)	 	Taxes 
	 
	 	 	 	Each of Powell, the Borrower and each of its Subsidiaries has duly filed on a timely
basis all tax returns required to be filed and have paid all material Taxes which
are due and payable, and have paid all material assessments and reassessments, and
all other material Taxes, governmental charges, governmental royalties, penalties,
interest and fines claimed against them, other than those which are being contested
by them by Permitted Contest; they have made adequate provision for, and all
required installment payments have been made in respect of, Taxes payable for the
current period for which returns are not yet required to be filed; there are no
agreements, waivers or other arrangements providing for an extension of time with
respect to the filing of any tax return by them or the payment of any Taxes; there
are no actions or proceedings being taken by any taxation authority in any
jurisdictions where Powell, the Borrower or any Subsidiary carries on business to
enforce the payment of any Taxes by them other than those which are being contested
by them by Permitted Contest.
	 
	 	(w)	 	Subsidiaries and Assets; Documents of Title 
	 
	 	 	 	The Disclosure Schedule (as it may be supplemented from time to time by the
Borrower) sets forth as at the date hereof:

	 	(i)	 	the corporate organizational chart of Powell and its
Subsidiaries and the names and jurisdictions of incorporation of each of
Powell, the Borrower and Subsidiaries, their respective share capital or other
ownership interests and the outstanding shares or ownership interests, and any
trade names used by such entities;
	 
	 	(ii)	 	the jurisdictions in which Powell, the Borrower and the
Subsidiaries conduct business;
	 
	 	(iii)	 	the location of Powell’s, the Borrower’s and the Subsidiaries’
respective places of business, locations where inventory or other assets are
held and the locations of their respective chief executive offices;
	 
	 	(iv)	 	all fee interests in any real property, and all material
leases, subleases or assignments of leases (together with all amendments,
modifications, supplements, renewals or extensions of any thereof) in real
property, regardless of whether Powell, the Borrower or any Subsidiary is the
landlord or tenant (whether directly or as an assignee or successor in
interest) under such lease, sublease or assignment;
	 
	 	(v)	 	all Material Agreements (of the Borrower and its Subsidiaries
only); and
	 
	 	(vi)	 	all trademarks, patents and other material intellectual
property.

No negotiable documents of title, bills of lading or warehouse receipts have been
issued in respect of the Borrower’s or any Subsidiary’s inventory or assets.

 

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	 	(x)	 	Intellectual Property 
	 
	 	 	 	Each of the Borrower and its Subsidiaries has or has the legal right to use all
Intellectual Property necessary for the operation and conduct of their business,
affairs, operations and processes and, to the best of their knowledge and belief, no
person has asserted any claim or taken any step or proceedings to prohibit or limit
the use of such Intellectual Property by the Borrower and its Subsidiaries.
	 
	 	(y)	 	Performance of Material Agreements 
	 
	 	 	 	Neither the Borrower nor any of its Subsidiaries is in default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any of its Material Agreements, and no condition exists that, with the
giving of notice or the lapse of time or both, would constitute such a default,
except in either case where the consequences, direct or indirect, of such default or
defaults, if any, could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect (“Material Defaults”). All Material
Agreements are in full force and effect and no dispute which could reasonably be
expected to have a Material Adverse Effect currently exist thereunder, and neither
Powell nor the Borrower has knowledge of any Material Defaults by any third party
currently existing thereunder.
	 
	 	(z)	 	Books and Records 
	 
	 	 	 	All books and records of Powell, the Borrower and the Subsidiaries have been fully,
properly and accurately kept and completed in all material respects and there are no
material inaccuracies or material discrepancies of any kind contained or reflected
therein.
	 
	 	(aa)	 	Employee Matters 
	 
	 	 	 	Each of Powell, the Borrower and its Subsidiaries has made full payment when due of
all required contributions to any employee benefit plan except where failure to do
so, individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect. There is no strike or work stoppage in existence or
threatened involving Powell, the Borrower or any of its Subsidiaries that could,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.

	9.2	 	Deemed Repetition 

On the date of delivery by the Borrower of a Drawdown Notice, Conversion Notice or Rollover Notice
to the Lender, and again on the date of any Drawdown, Conversion or Rollover made by the Borrower
pursuant thereto, as well as on each anniversary of the Closing Date:

	 	(a)	 	Each of the representations and warranties contained in Section 9.1 shall be
deemed to be repeated; and
	 
	 	(b)	 	Each of the Borrower and Powell shall be deemed to have represented to the
Lender that no event has occurred and remains outstanding which would constitute a
Default or an Event of Default nor will any such event occur as a result of the
aforementioned Drawdown, Conversion or Rollover.

 

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9.3 Other Documents 

All representations, warranties, certifications and statements of Powell, the Borrower or any
Subsidiary contained in any other Document delivered pursuant hereto or thereto shall be deemed to
constitute representations and warranties made by Powell and the Borrower to the Lender under
Section 9.1 of this Agreement.

9.4 Effective Time of Repetition 

All representations and warranties, when repeated or deemed to be repeated hereunder, shall be
construed with reference to the facts and circumstances existing at the time of repetition, unless
they are stated herein to be made as at the date hereof or as at another date.

9.5 Nature of Representations and Warranties 

The representations and warranties set out in this Agreement or deemed to be made pursuant hereto
shall survive the execution and delivery of this Agreement and the making of each Drawdown,
notwithstanding any investigations or examinations which may be made by the Lender or Lender’s
legal counsel. Such representations and warranties shall survive until this Agreement has been
terminated, provided that the representations and warranties relating to environmental matters
shall survive the termination of this Agreement.

ARTICLE 10 

GENERAL COVENANTS 

10.1 Affirmative Covenants of the Borrower 

So long as any Obligation is outstanding or any Credit Facility is available hereunder, the
Borrower covenants and agrees with the Lender that, unless the Lender otherwise consent in writing:

	 	(a)	 	Punctual Payment and Performance 
	 
	 	 	 	It shall duly and punctually pay the principal of all Loans, all interest thereon
and all fees and other amounts required to be paid by the Borrower hereunder in the
manner specified hereunder and the Borrower shall perform and observe all of its
obligations under this Agreement and under any other Document to which it is a
party.
	 
	 	(b)	 	Books and Records 
	 
	 	 	 	It shall keep proper books of record and account in which complete and correct
entries will be made of its transactions in accordance with GAAP.
	 
	 	(c)	 	Maintenance and Operation 
	 
	 	 	 	It shall do or cause to be done, and will cause each Subsidiary to do or cause to be
done, all things necessary or required to have all its properties, assets and
operations owned, operated and maintained in accordance with diligent and prudent
industry practice and Applicable Laws except to the extent that the failure to do or
cause to be done the same would not have and would not reasonably be expected to
have a Material Adverse Effect, and at all times cause

 

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	 	 	 	the same to be owned, operated, maintained and used in compliance with all terms of
any applicable insurance policy to the extent necessary to ensure that coverage
under any such policy cannot be denied by the insurers thereunder.
	 
	 	(d)	 	Maintain Existence; Compliance with Legislation Generally; Required Permits

	 
	 	 	 	Except as otherwise permitted by Section 10.2(d), the Borrower shall, and shall
cause each of its Subsidiaries, to preserve and maintain its corporate, partnership
or trust existence (as the case may be) as a corporation, partnership or trust
existing under the laws of Canada or any province thereof. The Borrower shall do or
cause to be done, and shall cause its Subsidiaries to do or cause to be done, all
acts necessary or desirable to comply with all Applicable Laws, except where such
failure to comply does not and would not reasonably be expected to have a Material
Adverse Effect, and to preserve and keep in full force and effect all Required
Permits and all other franchises, licences, rights, privileges, permits and
Governmental Authorizations necessary to enable the Borrower and each of its
Subsidiaries to operate and conduct their respective businesses in accordance with
prudent industry practice, except to the extent that the failure to have any of the
same does not and would not reasonably be expected to have a Material Adverse
Effect.
	 
	 	(e)	 	Budgets, Financial Statements, Engineering Reports and Other Information

	 
	 	 	 	The Borrower shall deliver to the Lender:

	 	(i)	 	Annual Financials — as soon as available and, in any
event, within 120 days after the end of each of its fiscal years, copies of
Powell’s audited annual financial statements on a consolidated basis with a
comparison to the forecast for such year, and, if requested, copies of the
unaudited annual financial statements on an unconsolidated basis of the
Borrower and each Subsidiary, each consisting of a balance sheet, statement of
income, statement of cash flows and statement of shareholders’ equity for each
such year, together with the notes thereto in the case of the audited annual
financial statements, all prepared in accordance with GAAP consistently
applied, together with a report and unqualified opinion of Powell’s auditors
thereon in the case of audited annual financial statements of Powell and
including any management letters provided by the auditors in connection with
such audit;
	 
	 	(ii)	 	Quarterly Financials — as soon as available and, in any
event within 60 days after the end of each of the first three (3) fiscal
quarters, copies of Powell’s unaudited financial statements on a consolidated
basis with a comparison to the approved forecast for such fiscal quarter, in
each case consisting of a balance sheet, statement of income and statement of
cash flows for each such period all in reasonable detail and stating in
comparative form the figures for the corresponding date and fiscal quarter in
the previous fiscal year, all prepared in accordance with GAAP consistently
applied;

 

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	 	(iii)	 	Compliance Certificates — concurrently with furnishing the annual
financial statements pursuant to Section 10.1 (e)(i) and the quarterly
financial statements pursuant to Section 10.1 (e)(ii) after each Quarter End
(except for the fourth fiscal quarter), a Compliance Certificate signed by
anyone of the president, chief financial officer, vice president -finance or
treasurer of the Borrower and stating that, inter alia, the representations
and warranties in Section 9.1 are true and accurate in all respects (or, if
applicable, specifying those representations and warranties that are not),
that no Default or Event of Default has occurred and is continuing (or, if
applicable, specifying those defaults or events notified in accordance with
Section 10.I(h) below) and demonstrating compliance with all covenants of
the Borrower in Sections 10.1 and 10.2, and all covenants of the Borrower
and Powell in Section 10.3;
	 
	 	(iv)	 	Financial Statements of the Borrower — as soon as
available and, in any event within sixty (60) days after the end of each of the
first three (3) fiscal quarters and after the end of each of its fiscal years,
copies of Borrower’s unaudited financial statements on a consolidated basis for
each of the first three (3) fiscal quarters and for the fiscal year,
respectively (in-house statements are acceptable), with a comparison to the
approved forecast for such fiscal quarters and fiscal year, and in each case
consisting of a balance sheet, statement of income and statement of cash flows
for each such period all in reasonable detail and stating in comparative form
the figures for the corresponding fiscal quarters in the previous fiscal year
and the immediately preceding fiscal year, respectively, all prepared in
accordance with GAAP consistently applied.
	 
	 	(v)	 	Forecasts — within 120 days after the end of each of
its fiscal years, the Borrower shall provide the Lender with an annual business
and finance plan including a consolidated financial forecast for the next
fiscal year (quarter by quarter for the first year), including a balance sheet,
statement of income, statement of cash flows, statement of shareholders’
equity, a statement of changes from the prior forecasts, a capital expenditure
budget and a pro forma calculation of the financial covenants set forth in
Section 10.3, each containing reasonable detail, together with a statement of
anticipated significant events for the Borrower and Subsidiaries;
	 
	 	(vi)	 	Accounts Receivable — within 45 days after the end of
each calendar month for the first 6 months after the Closing Date, and
thereafter, subject to the Lender’s satisfaction with the reports to date,
quarterly, within 45 days after the end of each fiscal quarter, listings of
aged accounts receivable and accounts payable together with a declaration in a
form satisfactory to the Lender signed by a senior officer of the Borrower
setting out the calculation of Acceptable Receivables and Acceptable Inventory
as at the preceding period end;
	 
	 	(vii)	 	Financial Instruments — concurrently with furnishing
the Compliance Certificates pursuant to Section 10.1 (e)(iii), a report on the
status of all outstanding Financial Instruments, such report to be in a form
and containing such information as may be required by the Lender; and

 

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	 	(viii)	 	Other — at the request of the Lender, such other information,
reports, engineering data, certificates, projections of income and cash flow or
other matters affecting the business, affairs, financial condition, property or
assets of the Borrower or the business, affairs, financial condition, property
or assets of any of its Subsidiaries as the Lender may reasonably request.

	 	(f)	 	Rights of Inspection 
	 
	 	 	 	At any reasonable time and from time to time upon reasonable prior notice, the
Borrower shall permit the Lender or any representative thereof(at the expense of the
Borrower during the continuance of a Default or Event of Default and, otherwise, at
the expense of the Lender, as applicable) to (i) examine and make copies of and
abstracts from the records and books of account of the Borrower or any of its
Subsidiaries, (ii) visit and inspect the premises and properties of the Borrower or
any of its Subsidiaries (in each case at the risk of the Borrower, except for the
gross negligence or willful misconduct of the inspecting party or the failure of any
such inspecting party to comply with the Borrower’s or any such Subsidiary’s health
and safety requirements, as advised to such inspecting party), and (iii) discuss the
affairs, operations, finances and accounts of the Borrower or any of the
Subsidiaries with any of the officers or directors of the Borrower or any of its
Subsidiaries.
	 
	 	(g)	 	Notice of Material Litigation 
	 
	 	 	 	The Borrower shall promptly give written notice to the Lender of any litigation,
proceeding or dispute affecting the Borrower or any of its Subsidiaries in respect
of a demand or claim in respect of which there is a reasonable possibility of an
adverse determination and which if adversely determined would reasonably be expected
to result in a liability, obligation or judgment in excess of Cdn. $250,000 (or the
Equivalent Amount thereof in any other currency) or to have a Material Adverse
Effect, and shall from time to time furnish to the Lender all reasonable information
requested by the Lender concerning the status of any such litigation, proceeding or
dispute.
	 
	 	(h)	 	Notice of Default or Event of Default 
	 
	 	 	 	The Borrower shall deliver to the Lender, as soon as reasonably practicable and in
any event no later than three (3) Banking Days after becoming aware of a Default or
an Event of Default, an Officer’s Certificate describing in detail such Default or
such Event of Default and specifying the steps, if any, being taken to cure or
remedy the same.
	 
	 	(i)	 	Notice of Material Adverse Effect 
	 
	 	 	 	The Borrower shall, as soon as reasonably practicable, promptly notify the Lender of
any event, circumstance or condition that has had or is reasonably likely to have a
Material Adverse Effect.

 

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	 	(j)	 	New Subsidiaries and Security Related Notices. 
	 
	 	 	 	The Borrower shall promptly give written notice to the Lender of:

	 	(i)	 	the acquisition, creation or existence of each new Subsidiary
and the information set forth in the Disclosure Schedule as described in
Section 9.1(w) with respect to such Subsidiary, which notice shall be provided
at least fifteen (15) days before such event;
	 
	 	(ii)	 	any name change of the Borrower or any Subsidiary, which notice
shall be provided at least fifteen (15) days before such name change;
	 
	 	(iii)	 	any change in the location of the Borrower’s or any
Subsidiary’s chief executive office, which notice shall be provided at least
fifteen (15) days before the change in the location;
	 
	 	(iv)	 	any acquisition (whether by purchase, lease or otherwise) of
any real or personal property or assets by the Borrower or any Subsidiary which
are intended to be used or kept in any jurisdiction or location not identified
in the Disclosure Schedule, or any relocation of existing assets outside said
jurisdictions or locations; and
	 
	 	(v)	 	any of the Borrower or Subsidiary acquiring (whether by
purchase, lease or otherwise) an interest in real property where such property
has a fair market value in excess of Cdn. $500,000 (or the Equivalent Amount
thereof in any other currency).

	 	(k)	 	Documents of Title 
	 
	 	 	 	If any negotiable document of title is issued in respect of the inventory or other
assets of the Borrower or any Subsidiary, the Borrower shall notify the Lender of
such negotiable document of title and the details regarding same and the Borrower or
Subsidiary shall at all times maintain possession of such negotiable document of
title; provided that, upon the occurrence of an Event of Default, such negotiable
document of title shall be delivered to the Lender.
	 
	 	(l)	 	Payment of Taxes, Withholdings, etc. 
	 
	 	 	 	The Borrower shall, and shall cause its Subsidiaries to, from time to time pay or
cause to be paid all material Taxes, rents, rates, levies or assessments, ordinary
or extraordinary, governmental fees or dues, and to make and remit all withholdings,
lawfully levied, assessed or imposed upon the Borrower or its Subsidiaries or any of
the assets of the Borrower or its Subsidiaries, as and when the same become due and
payable, except when and so long as the validity of any such material Taxes, rents,
rates, levies, assessments, fees, dues or withholdings is being contested by the
Borrower or its Subsidiaries by a Permitted Contest.

 

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	 	(m)	 	Payment of Preferred Claims 
	 
	 	 	 	The Borrower shall, and shall cause its Subsidiaries to, from time to time pay when
due or cause to be paid when due all material amounts related to wages, workers’
compensation obligations, government royalties or pension fund obligations and any
other amount which may result in a lien, charge, Security Interest or similar
encumbrance against the assets of the Borrower or such Subsidiary arising under
statute or regulation, except when and so long as the validity of any such material
amounts or other obligations is being contested by the Borrower or its Subsidiaries
by a Permitted Contest.
	 
	 	(n)	 	Environmental Covenants 

	 	(i)	 	Without limiting the generality of Section 10.1(d) above, the
Borrower shall, and shall cause its Subsidiaries and any other party acting
under their direction to, conduct their business and operations so as to comply
at all times with all Environmental Laws.
	 
	 	(ii)	 	If the Borrower or its Subsidiaries shall:
	 
	 	 	 	(A) receive or give any notice that a violation of any Environmental Law has
or may have been committed or is about to be committed by the same;
	 
	 	 	 	(B) receive any notice that a complaint, proceeding or order has been filed
or is about to be filed against the same alleging a violation of any
Environmental Law; or
	 
	 	 	 	(C) receive any notice requiring the Borrower or a Subsidiary, as the case
may be, to take any action in connection with the Release of Hazardous
Materials into the environment or alleging that the Borrower or the
Subsidiary may be liable or responsible for costs associated with a response
to or to clean up a Release of Hazardous Materials into the environment or
any damages caused thereby,

	 	 	 	if such violation, action or liability could reasonably be expected to give rise to
liability of the Borrower and/or any of its Subsidiaries, in the aggregate, in any
fiscal year exceeding $250,000.00, the Borrower shall promptly provide the Lender
with a copy of such notice and shall, or shall cause its Subsidiary to, furnish to
the Lender from time to time all reasonable information requested by the Lender
relating to the same.
	 
	 	(o)	 	Use of Loans 
	 
	 	 	 	The Borrower shall use all Loans and the proceeds thereof solely for the purposes
set forth in Section 2.3 hereof.

 

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	 	(p)	 	Required Insurance 
	 
	 	 	 	The Borrower shall, and shall cause each of its Subsidiaries to, maintain, with
financially sound and reputable insurers, insurance with respect to their respective
properties and business and against such casualties and contingencies and in such
types and such amounts as shall be required by the Lender (acting reasonably) and,
in any event, as shall be in accordance with prudent business practices for persons
of the size and type of business and operations as the Borrower and its
Subsidiaries.
	 
	 	(q)	 	Compliance With Material Agreements 
	 
	 	 	 	The Borrower shall, and shall cause each of its Subsidiaries to, comply in all
material respects with their respective Material Agreements.
	 
	 	(r)	 	Intellectual Property 
	 
	 	 	 	The Borrower and its Subsidiaries shall have, or shall have the legal right to use,
all Intellectual Property necessary for the operation and conduct of their business,
affairs, operations and processes.

	10.2	 	Negative Covenants of the Borrower 

So long as any Obligation is outstanding or any Credit Facility is available hereunder, the
Borrower covenants and agrees with the Lender that, unless the Lender otherwise consents in
writing:

	 	(a)	 	Change of Business 
	 
	 	 	 	The Borrower shall not, and shall not permit any Subsidiary to, change in any
material respect the nature of its business or operations from the types of
businesses and intended operations carried on by the Borrower and its Subsidiaries
as set out in the business plan presented to the Lender with the Borrower’s
application or request for the Credit Facilities.
	 
	 	(b)	 	No Change of Control
	 
	 	 	 	The Borrower shall remain a Wholly-Owned Subsidiary of Powell.
	 
	 	(c)	 	Negative Pledge 
	 
	 	 	 	The Borrower shall not, nor shall it permit any of its Subsidiaries to, create,
issue, incur, assume or permit to exist any Security Interests on any of their
property, undertakings or assets other than Permitted Encumbrances.
	 
	 	(d)	 	No Dissolution 
	 
	 	 	 	The Borrower shall not, nor shall it permit any of its Subsidiaries to, liquidate,
dissolve or wind up or take any steps or proceedings in connection therewith except,
in the case of Subsidiaries, where the successor thereto or transferee thereof is
the Borrower or another Wholly-Owned Subsidiary of the Borrower.

 

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	 	(e)	 	Limit on Purchase or Sale of Assets 
	 
	 	 	 	Except for Permitted Dispositions, the Borrower shall not, and shall not permit its
Subsidiaries to:

	 	(i)	 	sell, transfer or otherwise dispose of any of their respective
property or assets during the continuance of a Default or Event of Default; or
	 
	 	(ii)	 	purchase, sell, transfer or otherwise dispose of property or
assets in any period of twelve consecutive months, whether in one or a series
of transactions, having an aggregate fair market value in excess of Cdn.
$500,000 (or the Equivalent Amount thereof in any other currency), other than
in the ordinary course of its business.

	 	(f)	 	Limitation on Debt 
	 
	 	 	 	The Borrower shall not have or incur, or permit any Subsidiary to have or incur, any
Debt other than Permitted Debt, in the aggregate, in excess of $500,000.00 at any
time.
	 
	 	(g)	 	Limit on Investment 
	 
	 	 	 	The Borrower shall not, nor shall it permit any Subsidiary to, make Investments
other than:

	 	(i)	 	Investments consisting of Financial Assistance permitted under
Section 10.2(i);
	 
	 	(ii)	 	Investments in Approved Securities; and
	 
	 	(iii)	 	Investments consisting of the acquisition of all of the shares
of another Person or substantially all of the business assets, property and
undertaking of another Person, not exceeding, in the aggregate in any fiscal
year, Cdn. $2,000,000.00 (or the Equivalent Amount thereof in any other
currency), provided that in any event any such acquisition shall not be a
hostile acquisition or takeover.

	 	(h)	 	Limits on Distributions 
	 
	 	 	 	The Borrower shall not make, or permit any Subsidiary to make any Distributions.
	 
	 	(i)	 	Limit on Financial Assistance 
	 
	 	 	 	The Borrower and its Subsidiaries shall not provide any Financial Assistance to or
in favour of any person except:

	 	(i)	 	in favour of the Lender and their respective Hedging Affiliates
for or in respect of the Obligations or Lender Financial Instrument
Obligations;
	 
	 	(ii)	 	for the benefit of the Borrower or a Wholly-Owned Subsidiary in
connection with Permitted Debt;
	 
	 	(iii)	 	in favour of the Borrower or a Wholly-Owned Subsidiary;

 

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	 	(iv)	 	for Investments permitted pursuant to Section 10.2(g); and
	 
	 	(v)	 	Powell or any of its Subsidiaries

	 	(j)	 	No Financial Instruments Other Than Permitted Hedging 
	 
	 	 	 	The Borrower and its Subsidiaries shall not enter into, transact or have outstanding
any Financial Instruments or Financial Instrument Obligations other than Permitted
Hedging.
	 
	 	(k)	 	Non-Arm’s Length Transaction 
	 
	 	 	 	Except in respect of transactions between or among the Borrower and/or one or more
of its Wholly-Owned Subsidiaries, the Borrower shall not, nor shall it permit any
Subsidiary to, enter into any contract, agreement or transaction whatsoever,
including for the sale, purchase, lease or other dealing in any property or the
provision of any services (other than office and administration services provided in
the ordinary course of business), with any Related Party except upon fair and
reasonable terms, which terms are not less favourable to the Borrower or a
Subsidiary than it would obtain in an arm’s length transaction and, if applicable,
for consideration which equals the fair market value of such property or other than
at a fair market rental as regards leased property.
	 
	 	(l)	 	No Merger, Amalgamation, etc. 
	 
	 	 	 	The Borrower shall not, nor shall it permit any of its Subsidiaries to, enter into
any transaction whereby all or substantially all of its undertaking, property and
assets would become the property of any other person whether by way of
reconstruction, reorganization, recapitalization, consolidation, amalgamation,
merger, transfer, sale or otherwise except, in the case of Subsidiaries, where the
successor thereto or transferee thereof is the Borrower or another Wholly-Owned
Subsidiary of the Borrower.
	 
	 	(m)	 	Material Agreements
	 
	 	 	 	The Borrower shall not, nor shall it permit any Subsidiary to, take any steps to
terminate (without replacement), forfeit, surrender, amend, supplement or modify any
Material Agreement (or provide any waiver or consent to like effect) or waive any
failure of any counterparty thereto perform its obligations thereunder, if any of
the foregoing would have or reasonably be expected to have a Material Adverse Effect
or if the amendment, supplement, modification, waiver or consent relates to the
assignment provisions of such agreement.

	10.3	 	Financial Covenants

So long as any Obligation is outstanding or any Credit Facility is available hereunder, Powell and
the Borrower each covenants and agrees with the Lender that, unless the Lender otherwise consent in
writing:

 

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	 	(a)	 	Maximum Debt to EBITDA Ratio 

	 	(i)	 	As of the Closing Date and as of each Quarter End thereafter,
the Debt to EBITDA Ratio for Powell shall not exceed 2.75:1.0.

	 	(b)	 	Minimum Fixed Charge Coverage Ratio 
	 
	 	 	 	As at each Quarter End, the Fixed Charge Coverage Ratio for Powell shall be equal to
or greater than 1.25:1.0.
	 
	 	(c)	 	Consolidated Tangible Net Worth
	 
	 	 	 	As at each Quarter End, commencing with the Quarter ending December 31, 2009, the
Consolidated Tangible Net Worth of Powell shall be equal or greater than the sum of:

	 	(i)	 	U.S. $172,500,000, plus
	 
	 	(ii)	 	an amount equal to 50% of the Net Income for each fiscal
Quarter, commencing with the fiscal quarter ended December 31, 2008, and for
each fiscal quarter thereafter (with no deduction for any net loss in any
fiscal quarter), plus
	 
	 	(iii)	 	an amount equal to 100% of the aggregate increase in
Shareholders’ Equity of Powell and its Subsidiaries after the date hereof by
reason of the issuance and sale of any Equity Interests of Powell or any of its
Subsidiaries (other than issuances to Powell or a Wholly-Owned Subsidiary),
including upon any conversion of any debt securities of Powell into capital
stock or other equity interests.

	10.4	 	Lender May Perform Covenants 

If Powell or the Borrower fails to perform any covenants on its part herein contained, subject to
any consents or notice or cure periods required by Section 12.1, the Lender may give notice to
Powell and the Borrower of such failure and if such covenant remains unperformed, the Lender may,
in its discretion but need not, perform any such covenant capable of being performed by the Lender
and if the covenant requires the payment or expenditure of money, the Lender may make such payments
or expenditure and all sums so expended shall be forthwith payable by the Borrower to the Lender
and shall bear interest at the applicable interest rate provided in Section 5.8 for amounts due in
Canadian Dollars or United States Dollars, as the case may be. No such performance, payment or
expenditure by the Lender shall be deemed to relieve the Borrower of any default hereunder or under
the other Documents.

ARTICLE 11 

SECURITY

	11.1	 	Security on all Assets 

The (i) Obligations and (ii) Lender Financial Instrument Obligations shall be secured by first
priority perfected Security Interests on, to and against all present and future property, assets
and undertaking of the Borrower and each of its Subsidiaries. As continuing collateral security for
the Obligations and the Lender Financial Instrument Obligations, the Borrower has delivered

 

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or shall deliver to the Lender the following Security (unless expressly indicated otherwise)
completed in form and manner satisfactory to the Lender or its solicitors:

	 	(a)	 	line of credit by way of current account overdraft agreement executed by the
Borrower respecting the Revolving Facility;
	 
	 	(b)	 	general security agreement executed by the Borrower creating a first priority
security interest in all present and after acquired personal property of the Borrower
and a floating charge over all of the Borrower’s present and after acquired real
property (with a floating charge to be registered against the Borrower at Personal
Property Registry and against titles to Borrower’s real property at Alberta Land
Titles) ;
	 
	 	(c)	 	guarantee of the indebtedness of the Borrower to the Lender executed by Powell,
limited to Cdn. $28,000,000.00 plus interest and charges as provided in the guarantee;
	 
	 	(d)	 	unlimited guarantee of the indebtedness of the Borrower to the Lender executed
by each of the Subsidiaries of the Borrower from time to time, including Nextron and
PPC Technical, supported by a general security agreement creating a first priority
security interest in all present and after acquired personal property of each such
Subsidiary and a floating charge over all of each such Subsidiary’s present and after
acquired real property;
	 
	 	(e)	 	the Lender’s standard application and indemnity agreement with respect to the
issuance of Letters of Credit, executed by the Borrower;
	 
	 	(f)	 	Banker’s Acceptances agreement, executed by the Borrower;
	 
	 	(g)	 	the Bank’s standard electronic funds transfer agreement respecting the EFT
Facility, executed by the Borrower;
	 
	 	(h)	 	the Bank’s standard Mastercard agreements respecting the MC Facility, executed
by the Borrower and cardholders;
	 
	 	(i)	 	the Bank’s standard foreign exchange contracts agreement respecting the F/X
Facility, executed by the Borrower and cardholders; and
	 
	 	(j)	 	any related documents and registrations required by the Lender or its
solicitors (acting reasonably), including, without limitation, all supporting
certificates and opinions as the Lender may reasonably require.

	11.2	 	Registration

The Borrower shall, at its expense, register, file or record the Security in all offices where such
registration, filing or recording is necessary or of advantage to the creation, perfection and
preserving of the security applicable to it. The Borrower shall amend and renew such
registrations, filings and recordings from time to time as and when required to keep them in full
force and effect or to preserve the priority established by any prior registration, filing or
recording thereof. The Security shall rank in priority to all other mortgages, charges, liens,
encumbrances and security interests unless otherwise specifically agreed to in writing by the
Lender.

 

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11.3 Forms 

The forms of Security shall have been or be prepared based upon the laws of Alberta applicable
thereto in effect at the date hereof. The Lender shall have the right to require that:

	 	(a)	 	any such Security be amended to reflect any changes in such laws, whether
arising as a result of statutory amendments, court decisions or otherwise, in order to
confer upon the Lender the Security Interests intended to be created thereby, and
	 
	 	(b)	 	the Borrower and its Subsidiaries execute and deliver to the Lender such other
and further debentures, mortgages, trust deeds, assignments and security agreements as
may be reasonably required to ensure the Lender holds, subject to Permitted
Encumbrances, first priority, perfected Security Interests on and against all of the
property and assets of the Borrower and its Subsidiaries.

11.4 Continuing Security 

Each item or part of the Security shall for all purposes be treated as a separate and continuing
collateral security and shall be deemed to have been given in addition to and not in place of any
other item or part of the Security or any other security now held or hereafter acquired by the the
Lender. No item or part of the Security shall be merged or be deemed to have been merged in or by
this Agreement or any documents, instruments or acknowledgements delivered hereunder, or any simple
contract debt or any judgment, and any realization of or steps taken under or pursuant to any
security, instrument or agreement shall be independent of and not create a merger with any other
right available to the Lender under any security, instruments or agreements held by it or at law or
in equity.

11.5 Dealing with Security 

The Lender may grant extensions of time or other indulgences, take and give up securities
(including the Security or any part or parts thereof), accept compositions, grant releases and
discharges and otherwise deal with the Borrower and other parties and with security (including
without limitation, the Security and each part thereof) as the Lender may see fit, without
prejudice to or in any way limiting the liability of the Borrower under this Agreement or the other
Documents or under any of the Security or any other collateral security.

11.6 Effectiveness 

The Security and the security created by any other Document constituted or required to be created
shall be effective, and the undertakings as to the Security herein or in any other Document shall
be continuing, whether any Loans or Lender Financial Instrument Obligations are then outstanding or
any amounts thereby secured or any part thereof shall be owing before or after, or at the same time
as, the creation of such Security Interests or before or after or upon the date of execution of any
amendments to this Agreement.

11.7 Release and Discharge of Security 

The Borrower and its Subsidiaries shall not be discharged from the Security or any part thereof,
other than to the extent that such Security applies to a Permitted Disposition (in which case the
Security shall cease to apply to the subject matter thereof) except by a written release and
discharge signed by the Lender. If all of the Obligations and Lender Financial Instrument

 

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Obligations have been unconditionally and indefeasibly repaid, paid, satisfied and discharged, as
the case may be, in full and the Credit Facilities have been fully cancelled, then the Lender shall
release and discharge the Security, all at the expense of the Borrower.

ARTICLE 12 

EVENTS OF DEFAULT AND ACCELERATION 

12.1 Events of Default 

The occurrence of anyone or more of the following events (each such event being herein referred to
as an “Event of Default”) shall constitute a default under this Agreement:

	 	(a)	 	Principal Default: if the Borrower fails to pay the principal of any
Loan hereunder when due and payable or fails to cash collateralize any Bankers’
Acceptance or Letter of Credit when required to do so hereunder;
	 
	 	(b)	 	Other Payment Default: if the Borrower fails to pay:

	 	(i)	 	any interest (including, if applicable, default interest)
accrued on any Loan;
	 
	 	(ii)	 	any acceptance fee with respect to a Bankers’ Acceptance; or
	 
	 	(iii)	 	any other amount not specifically referred to in Section
12.1(a) or in this Section 12.1(b) payable by the Borrower hereunder;

	 	 	 	in each case when due and payable, and such default is not remedied within three (3)
Banking Days after written notice thereof is given by the Lender to the Borrower
specifying such default and requiring the Borrower to remedy or cure the same;
	 
	 	(c)	 	Certain Covenant Defaults: if the Borrower fails to observe or perform
any covenant in Sections 10.2(b) to (j), inclusive and Section 10.2(l), or should the
Borrower or Powell fail to observe or perform any covenant in Section 10.3;
	 
	 	(d)	 	Breach of Other Covenants: if the Borrower or a Subsidiary fails to
observe or perform any covenant or obligation herein or in any other Document required
on its part to be observed or performed (other than a covenant or condition whose
breach or default in performance is specifically dealt with elsewhere in this Section)
and, after notice has been given by the Lender to the Borrower or Subsidiary specifying
such default and requiring the Borrower or Subsidiary to remedy or cure the same, the
Borrower or Subsidiary shall fail to remedy such default within a period of twenty (20)
Banking Days after the giving of such notice;
	 
	 	(e)	 	Incorrect Representations: if any representation or warranty made by
Powell, the Borrower or any Subsidiary herein or in any other Document shall prove to
have been incorrect or misleading in any respect on and as of the date made and the
facts or circumstances which make such representation or warranty incorrect or
misleading are not remedied and the representation or warranty in question remains
incorrect or misleading more than twenty (20) Banking Days after the Lender notifies
the Borrower of the same;

 

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	 	(f)	 	Involuntary Insolvency: if a decree or order of a court of competent
jurisdiction is entered adjudging the Borrower or a Subsidiary a bankrupt or insolvent
under the Companies’ Creditors Arrangement Act (Canada), the Bankruptcy and Insolvency
Act (Canada), the Winding-up and Restructuring Act (Canada) or any other bankruptcy,
insolvency or analogous laws or ordering the winding up or liquidation of its affairs;
or if a decree or order of a court of competent jurisdiction is entered adjudging
Powell a bankrupt or insolvent under any bankruptcy, insolvency or analogous laws or
ordering the winding up for liquidation of its affairs;
	 
	 	(g)	 	Idem: if any case, proceeding or other action shall be instituted in
any court of competent jurisdiction against Powell, the Borrower or any Subsidiary,
seeking in respect of it an adjudication in bankruptcy, reorganization, dissolution,
winding up, liquidation, a composition, proposal or arrangement with creditors, a
readjustment of debts, the appointment of trustee in bankruptcy, receiver, receiver and
manager, interim receiver, custodian, sequestrator or other person with similar powers
with respect to Powell, the Borrower or any Subsidiary or of all or any substantial
part of its assets, or any other like relief in respect of Powell, the Borrower or any
Subsidiary under any bankruptcy or insolvency law and:

	 	(i)	 	such case, proceeding or other action results in an entry of an
order for such relief or any such adjudication or appointment, or
	 
	 	(ii)	 	such case, proceeding or other action shall continue
undismissed, or unstayed and in effect, for any period of ten (l0) consecutive
Banking Days;

	 	(h)	 	Voluntary Insolvency: if the Borrower or any Subsidiary makes any
assignment in bankruptcy or makes any other assignment for the benefit of creditors or
makes any proposal under the Bankruptcy and Insolvency Act (Canada) or any comparable
law, seeks relief under the Companies’ Creditors Arrangement Act (Canada), the
Winding-up and Restructuring Act (Canada) or any other bankruptcy, insolvency or
analogous law; or if Powell makes an assignment in bankruptcy or makes any other
assignment for the benefit of creditors or makes any proposal under any bankruptcy,
insolvency or analogous law; or if Powell, the Borrower or any Subsidiary files a
petition or proposal to take advantage of any act of insolvency, consents to or
acquiesces in the appointment of a trustee in bankruptcy, receiver, receiver and
manager, interim receiver, custodian, sequestrator or other person with similar powers
of itself or of all or any substantial portion of its assets, or files a petition or
otherwise commences any proceeding seeking any reorganization, arrangement,
composition, administration or readjustment under any applicable bankruptcy,
insolvency, moratorium, reorganization or other similar law affecting creditors’ rights
or consents to, or acquiesces in, the filing of such assignment, proposal, relief,
petition, proposal, appointment or proceeding;
	 
	 	(i)	 	Dissolution: except as permitted by Section 10.2(d), if proceedings are
commenced for the dissolution, liquidation or winding up of Powell, the Borrower or any
Subsidiary unless such proceedings are being actively and diligently contested in good
faith to the satisfaction of the Lender;

 

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	 	(j)	 	Security Realization: if creditors of Powell, the Borrower or any
Subsidiaries having a Security Interest against or in respect of the property and
assets thereof, or any part thereof, realize upon or enforce any such security against
such property and assets or any part thereof having an aggregate fair market value in
excess of Cdn. $100,000 (or the Equivalent Amount thereof in United States Dollars or
the equivalent thereof in any other currency) and such realization or enforcement shall
continue in effect and not be released, discharged or stayed within the lesser of
twenty (20) Banking Days and the period of time prescribed under Applicable Laws for
the completion of the sale of or realization against the assets subject to such seizure
or attachment;
	 
	 	(k)	 	Seizure: if property and assets of Powell, the Borrower and its
Subsidiaries or any part thereof having an aggregate fair market value in excess of
Cdn. $100,000 (or the Equivalent Amount thereof in any other currency) are seized or
otherwise attached by anyone pursuant to any legal process or other means, including,
without limitation, distress, execution or any other step or proceeding with similar
effect and such attachment, step or other proceeding shall continue in effect and not
be released, discharged or stayed within the lesser of twenty (20) Banking Days and the
period of time prescribed under Applicable Laws for the completion of the sale of or
realization against the assets subject to such seizure or attachment;
	 
	 	(l)	 	Judgment: if one or more final judgments, decrees or orders, after
available appeals have been exhausted, shall be awarded against Powell, the Borrower or
any Subsidiary for an aggregate amount in excess of Cdn. $100,000 (or the Equivalent
Amount thereof in any other currency) and Powell or the Borrower has not provided
security for any of such judgments, decrees or orders within twenty (20) Banking Days
of such judgment, decree or order being awarded;
	 
	 	(m)	 	Payment Cross-Default: if Powell, the Borrower or any of its
Subsidiaries (or any combination thereof) defaults in the payment when due (whether at
maturity, upon acceleration, or otherwise) of Debt or Financial Instrument Obligations
thereof in aggregate in excess of Cdn. $100,000 (or the Equivalent Amount thereof in
any other currency);
	 
	 	(n)	 	Event Cross Default: if a default, event of default or other similar
condition or event (however described) in respect of Powell, the Borrower or any of its
Subsidiaries (or any combination thereof) occurs or exists under any indentures, credit
agreements, agreements or other instruments evidencing or relating to Debt or Financial
Instrument Obligations thereof(individually or collectively) in an aggregate amount in
excess of Cdn. $100,000 (or the Equivalent Amount thereof in any other currency) and
such default, event or condition has resulted in such Debt or Financial Instrument
Obligations becoming, or becoming capable at such time of being declared, due and
payable thereunder before it would otherwise have been due and payable (whether or not
it is so declared), unless the default, event or condition has been remedied or waived
in accordance with the provisions of the relevant indentures, credit agreements,
agreements or other instruments;

 

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	 	(o)	 	Cease to Carry on Business: if Powell, the Borrower or any Subsidiary
ceases to carryon business, except in the case of Subsidiaries in compliance with the
Documents;
	 
	 	(p)	 	Change of Control: if the Borrower ceases to be a Wholly-Owned
Subsidiary of Powell, or if any of the Subsidiaries of the Borrower cease to be
Wholly-Owned Subsidiaries of the Borrower;
	 
	 	(q)	 	Lender Financial Instruments: if a Financial Instrument Demand for
Payment has been delivered to the Borrower or any Subsidiary and such person fails to
make payment thereunder within the time otherwise required for payment thereunder, or
if a Termination Event occurs;
	 
	 	(r)	 	Loss and Priority of Security: except for Permitted Encumbrances, if
any of the Security shall cease to be a valid first priority Security Interest against
the property, assets and undertaking of the Borrower or any Subsidiary as against third
parties (and the same is not forthwith effectively rectified or replaced by the
Borrower upon becoming aware thereof);
	 
	 	(s)	 	Invalidity: if any of this Agreement or any Security or any material
provision of any of the foregoing shall at any time for any reason cease to be in full
force and effect, be declared to be void or voidable (and the same is not forthwith
effectively rectified or replaced by Powell or the Borrower upon becoming aware
thereof) or shall be repudiated, or the validity or enforceability thereof shall at any
time be contested by Powell or the Borrower or any Subsidiary of the Borrower, or
should Powell, the Borrower or any Subsidiary deny that it has any or any further
liability or obligation thereunder, or at any time it shall be unlawful or impossible
for them to perform any of their respective Obligations;
	 
	 	(t)	 	Qualified Auditor’s Report: if the audited consolidated financial
statements of Powell are issued with a report of Powell’s auditors which is qualified
in any material respect and such qualification is not removed within 20 Banking Days;
and
	 
	 	(u)	 	Material Adverse Effect: if any event or circumstance has occurred and
is continuing which, in the opinion of the Lender (acting reasonably), has had or would
reasonably be expected to have a Material Adverse Effect.

12.2 Acceleration 

If any Event of Default shall occur and for so long as it is continuing:

	 	(a)	 	the entire principal amount of all Loans then outstanding from the Borrower and
all accrued and unpaid interest thereon,
	 
	 	(b)	 	an amount equal to the face amount at maturity of all Bankers’ Acceptances
issued by the Borrower which are unmatured, and
	 
	 	(c)	 	all other Obligations outstanding hereunder,

shall, at the option of the Lender, become immediately due and payable upon written notice to that
effect from the Lender to the Borrower, all without any other notice and without

 

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presentment, protest, demand, notice of dishonour or any other demand whatsoever (all of which are
hereby expressly waived by the Borrower). In such event and if the Borrower does not immediately
pay all such amounts upon receipt of such notice, the Lender may exercise any right or recourse
and/or proceed by any action, suit, remedy or proceeding against the Borrower and Powell authorized
or permitted by law for the recovery of all the indebtedness and liabilities of the Borrower to the
Lender and proceed to exercise any and all rights hereunder and under the other Documents and no
such remedy for the enforcement of the rights of the Lender shall be exclusive of or dependent on
any other remedy but anyone or more of such remedies may from time to time be exercised
independently or in combination.

12.3 Set Off; Cash Collateral Accounts. 

	 	(a)	 	Upon the occurrence of an Event of Default, the Lender may require the Borrower
to forthwith pay funds in an amount sufficient to pay the maximum aggregate amount for
which the Lender is or may become liable in respect of all outstanding Bankers’
Acceptances and Letters of Credit into a cash collateral account in accordance with
Section 2.14 and any amount not so paid by the Borrower may, at the option of the
Lender and without notice to the Borrower, be paid by the Lender into a cash collateral
account and shall be deemed to constitute a Canadian Prime Rate Loan; and
	 
	 	(b)	 	In addition to any rights now or hereafter granted under Applicable Law and not
by way of limitation of any such rights, upon the occurrence of an Event of Default
which remains unremedied or unwaived (whether or not the Loans have been accelerated
hereunder), the Lender shall have the right (and is hereby authorized by the Borrower)
at any time and from time to time to combine all or any of the Borrower’s or
Subsidiaries’ accounts with the Lender and to set off and to appropriate and to apply
any and all deposits (general or special, term or demand) including, but not limited
to, indebtedness evidenced by certificates of deposit whether matured or unmatured, and
any other indebtedness at any time held by the Borrower or owing by the Lender to or
for the credit or account of the Borrower against and towards the satisfaction of any
Obligations, and may do so notwithstanding that the balances of such accounts and the
liabilities are expressed indifferent currencies, and the Lender is hereby authorized
to effect any necessary currency conversions at the applicable Bank of Canada noon rate
on the Banking Day before the day of conversion. The Lender shall notify the Borrower
of any such set-off from the Borrower’s accounts within a reasonable period of time
thereafter.

12.4 Remedies Cumulative and Waivers 

For greater certainty, it is expressly understood and agreed that the rights and remedies of the
Lender hereunder or under any other Document are cumulative and are in addition to and not in
substitution for any rights or remedies provided by law or by equity; and any single or partial
exercise by the Lender of any right or remedy for a default or breach of any term, covenant,
condition or agreement contained in this Agreement or other Document shall not be deemed to be a
waiver of or to alter, affect or prejudice any other right or remedy or other rights or remedies to
which the Lender may be lawfully entitled for such default or breach. Any waiver by, the Lender of
the strict observance, performance or compliance with any term, covenant, condition or other matter
contained herein and any indulgence granted, either expressly or by course of conduct, by the
Lender shall be effective only in the specific instance and for the

 

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purpose for which it was given and shall be deemed not to be a waiver of any rights and remedies of
the Lender under this Agreement or any other Document as a result of any other default or breach
hereunder or thereunder.

12.5 Termination of Lender’s Obligations 

The occurrence of a Default or Event of Default shall relieve the Lender of all obligations to
provide any further Drawdowns, Rollovers or Conversions to the Borrower hereunder; provided that
the foregoing shall not prevent the Lender from disbursing money or effecting any Conversion which,
by the terms hereof, it is entitled to effect, or any Conversion or Rollover requested by the
Borrower and acceptable to the Lender.

12.6 Acceleration of All Lender Obligations 

	 	(a)	 	If:

	 	(i)	 	a Termination Event has occurred;
	 
	 	(ii)	 	a Financial Instrument Demand for Payment has been delivered to
the Borrower or a Subsidiary by the Lender of Hedging Affiliate and the cure
period provided in Section 12.1(q) has expired; or
	 
	 	(iii)	 	an Acceleration Notice has been delivered to the Borrower,

	 	 	 	then, to the extent that it is not already the case, all Obligations and all
Financial Instrument Obligations under Lender Financial Instruments shall be
immediately due and payable and the Lender shall (and shall be entitled to) deliver
such other Demands for Payment and notices as may be necessary to ensure that all
Obligations and Financial Instrument Obligations under Lender Financial Instruments
are thereafter due and payable under this Agreement and the Lender Financial
Instruments, as applicable.
	 
	 	(b)	 	Each agreement, indenture, instrument or other document evidencing or relating
to a Lender Financial Instrument shall, notwithstanding any provision thereof to the
contrary, be deemed to be hereby amended to allow and permit the Lender to comply with
the provisions of this Section 12.6.

12.7 Application of Payments Following Acceleration 

All monies and property received by the Lender for application in respect of the Obligations and
the Financial Instrument Obligations under Lender Financial Instruments subsequent to the
Adjustment Time and all monies received as a result of a realization upon the Security
(collectively, the “Realization Proceeds”) shall be applied in the order and manner set forth
below:

	 	(a)	 	firstly, applied and distributed on account of the costs and expenses of
enforcement and realization upon the Security or costs, expenses and fees otherwise
owing to the Lender hereunder or under the Security; and
	 
	 	(b)	 	secondly, distributed to the Lender and Hedging Affiliates on account of the
Obligations and the Financial Instrument Obligations under Lender Financial
Instruments,

 

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and the balance (if any) of the Realization Proceeds after the payment in full and in cash of all
such obligations shall be paid to the Borrower or otherwise as may be required by Applicable Law.

12.8 Calculations as at the Adjustment Time 

For the purposes of this Agreement, if:

	 	(a)	 	a Financial Instrument Demand for Repayment has been delivered; or
	 
	 	(b)	 	a Termination Event has occurred under any agreement evidencing a Permitted
Lender Financial Instrument;

then any amount which is payable by the Borrower or a Subsidiary under such Lender Financial
Instrument in settlement of obligations arising thereunder as a result of the early termination of
the Lender Financial Instrument shall be deemed to have become payable at the time of delivery of
such Financial Instrument Demand for Repayment or the time of occurrence of such Termination Event,
as the case may be, notwithstanding that the amount payable by the Borrower or a Subsidiary is to
be subsequently calculated and notice thereof given to the Borrower or such Subsidiary in
accordance with such Lender Financial Instrument.

ARTICLE 13 

CHANGE OF CIRCUMSTANCES 

13.1 Market Disruption Respecting Bankers’ Acceptances 

If the Lender (acting reasonably) makes a determination, which determination shall be conclusive
and binding upon the Borrower, and notifies the Borrower, that:

	 	(a)	 	there no longer exists an active market for bankers’ acceptances accepted by
the Lender; or
	 
	 	(b)	 	the bid rate does not accurately reflect the rate which would be applicable to
a sale of Bankers’ Acceptances in the market;

then:

	 	(c)	 	the right of the Borrower to request Bankers’ Acceptances from the Lender shall
be suspended until the Lender determines that the circumstances causing such suspension
no longer exist, and so notifies the Borrower;
	 
	 	(d)	 	any outstanding Drawdown Notice requesting a Loan by way of Bankers’
Acceptances shall be deemed to be a Drawdown Notice requesting a Loan by way of
Canadian Prime Rate Loans in the amount specified in the original Drawdown Notice; and
	 
	 	(e)	 	any outstanding Rollover Notice requesting a Rollover of a Loan by way of
Bankers’ Acceptances shall be deemed to be a Conversion Notice requesting a Conversion
of such Loans into a Loan by way of Canadian Prime Rate Loans.

The Lender shall promptly notify the Borrower of any suspension of the Borrower’s right to request
the Bankers’ Acceptances and of any termination of any such suspension.

 

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13.2 Illegality 

If a Lender determines, in good faith, that the adoption of any Applicable Law, regulation, treaty
or official directive (whether or not having the force of law) or any change therein or in the
interpretation or application thereof by any court or by any Governmental Authority or any other
entity charged with the interpretation or administration thereof or compliance by the Lender with
any request or direction (whether or not having the force of law) of any such authority or entity,
now or hereafter makes it unlawful or impossible for the Lender to make, fund or maintain a Loan
under a Credit Facility or to give effect to its obligations in respect of such a Loan, the Lender
may, by written notice thereof to the Borrower declare its obligations under this Agreement in
respect of such Loan to be terminated whereupon the same shall forthwith terminate, and the
Borrower shall, within the time required by such law (or at the end of such longer period as the
Lender at its discretion has agreed), either effect a Conversion of such Loan in accordance with
the provisions hereof (if such Conversion would resolve the unlawfulness or impossibility) or
prepay the principal of such Loan together with accrued interest, such Additional Compensation as
may be applicable with respect to such Loan to the date of such payment and all costs, losses and
expenses incurred by the Lender by reason of the liquidation or redeployment of deposits or other
funds or for any other reason whatsoever resulting from the repayment of such Loan or any part
thereof on other than the last day of the applicable Interest Period. If any such change shall only
affect a portion of the Lender’s obligations under this Agreement which is, in the opinion of the
Lender, severable from the remainder of this Agreement so that the remainder of this Agreement may
be continued in full force and effect without otherwise affecting any of the obligations of the
Lender or the Borrower hereunder, such Lender shall only declare its obligations under that portion
so terminated.

ARTICLE 14 

COSTS, EXPENSES AND INDEMNIFICATION 

14.1 Costs and Expenses 

The Borrower shall pay promptly upon notice from the Lender all reasonable out-of-pocket costs and
expenses of the Lender in connection with the Documents and the establishment of the Credit
Facilities, including in connection with preparation, printing, execution and delivery of this
Agreement and the other Documents whether or not any Drawdown has been made hereunder, and also
including, without limitation, the reasonable fees and out-of-pocket costs and expenses of Lender’s
legal counsel with respect thereto and with respect to advising the Lender as to their rights and
responsibilities under this Agreement and the other Documents. Except for ordinary expenses of the
Lender relating to the day to day administration of this Agreement, the Borrower further agrees to
pay within 30 days of demand by the Lender all reasonable out-of-pocket costs and expenses in
connection with the preparation or review of waivers, consents and amendments pertaining to this
Agreement, and in connection with the establishment of the validity and enforceability of this
Agreement and the preservation or enforcement of rights of the Lender under this Agreement and
other Documents, including, without limitation, all reasonable out-of-pocket costs and expenses
sustained by the Lender as a result of any failure by the Borrower to perform or observe any of its
obligations hereunder or in connection with any action, suit or proceeding (whether or not an
Indemnified Party is a party or subject thereto), together with interest thereon from and after
such 30th  day if such payment is not made by such time, such costs to
include Lender’s legal costs on a solicitor and his own client basis.

 

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14.2 General Indemnity 

In addition to any liability of the Borrower to the Lender under any other provision hereof, the
Borrower shall indemnify each Indemnified Party and hold each Indemnified Party harmless against
any losses, claims, costs, damages or liabilities (including, without limitation, any expense or
cost incurred in the liquidation and redeployment of funds acquired to fund or maintain any portion
of a Loan and reasonable out-of-pocket expenses and reasonable legal fees on a solicitor and his
own client basis) incurred by the same as a result of or in connection with the Credit Facilities
or the Documents (including any use of the proceeds of any Loan), including as a result of or in
connection with:

	 	(a)	 	any cost or expense incurred by reason of the liquidation or redeployment in
whole or in part of deposits or other funds required by the Lender to fund any Bankers’
Acceptance or to fund or maintain any Loan as a result of the Borrower’s failure to
complete a Drawdown or to make any payment, repayment or prepayment on the date
required hereunder or specified by it in any notice given hereunder;
	 
	 	(b)	 	subject to permitted or deemed Rollovers and Conversions, the Borrower’s
failure to provide for the payment to the Lender of the full principal amount of each
Bankers’ Acceptance on its maturity date;
	 
	 	(c)	 	the Borrower’s failure to pay any other amount, including without limitation
any interest or fee, due hereunder on its due date after the expiration of any
applicable grace or notice periods (subject, however, to the interest obligations of
the Borrower hereunder for overdue amounts);
	 
	 	(d)	 	the prepayment of any outstanding Bankers’ Acceptance before the maturity date
of such Bankers’ Acceptance;
	 
	 	(e)	 	the Borrower’s failure to give any notice required to be given by it to the
Lender hereunder;
	 
	 	(f)	 	the failure of the Borrower to make any other payment due hereunder;
	 
	 	(g)	 	any inaccuracy or incompleteness of the representations and warranties
contained in Article 9;
	 
	 	(h)	 	any failure of the Borrower or Powell to observe or fulfill its obligations
under Article 10;
	 
	 	(i)	 	any failure of the Borrower to observe or fulfill any other Obligation not
specifically referred to above; or
	 
	 	(j)	 	the occurrence of any Default or Event of Default in respect of the Borrower or
Powell,

provided that this Section shall not apply to any losses, claims, costs, damages or liabilities
that arise by reason of the gross negligence or wilful misconduct of the Indemnified Party claiming
indemnity hereunder. The provisions of this Section shall survive repayment of the Obligations.

 

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14.3 Environmental Indemnity 

The Borrower shall indemnify and hold harmless the Indemnified Parties forthwith on demand by the
Lender from and against any and all claims, suits, actions, debts, damages, costs, losses,
liabilities, penalties, obligations, judgments, charges, expenses and disbursements (including
without limitation, all reasonable legal fees and disbursements on a solicitor and his own client
basis) of any nature whatsoever, suffered or incurred by the Indemnified Parties or any of them in
connection with the Credit Facilities, whether as beneficiaries under the Documents, as successors
in interest of Lender, or voluntary transfer in lieu of foreclosure, or otherwise howsoever, with
respect to any Environmental Claims relating to the property of the Borrower or any of its
Subsidiaries arising under any Environmental Laws as a result of the past, present or future
operations of the Borrower or any of its Subsidiaries (or any predecessor in interest to the
Borrower or its Subsidiaries) relating to the property of the Borrower or its Subsidiaries, or the
past, present or future condition of any part of the property of the Borrower or its Subsidiaries
owned, operated or leased by the Borrower or its Subsidiaries (or any such predecessor in
interest), including any liabilities arising as a result of any indemnity covering Environmental
Claims given to any person by the Lender or a receiver, receiver manager or similar person
appointed hereunder or under Applicable Law (collectively, the “Indemnified Third Party”); but
excluding any Environmental Claims or liabilities relating thereto to the extent that such
Environmental Claims or liabilities arise by reason of the gross negligence or wilful misconduct of
the Indemnified Party or the Indemnified Third Party claiming indemnity hereunder. The provisions
of this Section shall survive the repayment of the Obligations.

14.4 Judgment Currency 

	 	(a)	 	If for the purpose of obtaining or enforcing judgment against Powell, the
Borrower or any of its Subsidiaries in any court in any jurisdiction, it becomes
necessary to convert into any other currency (such other currency being hereinafter in
this Section referred to as the “Judgment Currency”) an amount due in Canadian Dollars
under this Agreement, the conversion shall be made at the rate of exchange prevailing
on the Banking Day immediately preceding:

	 	(i)	 	the date of actual payment of the amount due, in the case of
any proceeding in the courts of any jurisdiction that will give effect to such
conversion being made on such date; or
	 
	 	(ii)	 	the date on which the judgment is given, in the case of any
proceeding in the courts of any other jurisdiction (the date as of which such
conversion is made pursuant to this Section being hereinafter in this Section
referred to as the “Judgment Conversion Date”).

	 	(b)	 	If, in the case of any proceeding in the court of any jurisdiction referred to
in Section 14.4(a)(ii), there is a change in the rate of exchange prevailing between
the Judgment Conversion Date and the date of actual payment of the amount due, the
Borrower shall pay such additional amount (if any) as may be necessary to ensure that
the amount paid in the Judgment Currency, when converted at the rate of exchange
prevailing on the date of payment, will produce the amount of Canadian Dollars which
could have been purchased with the amount of Judgment Currency stipulated in the
judgment or judicial order at the rate of exchange prevailing on the Judgment
Conversion Date.

 

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	 	(c)	 	Any amount due from the Borrower under the provisions of Section 14.4(b) shall
be due as a separate debt and shall not be affected by judgment being obtained for any
other amounts due under or in respect of this Agreement.
	 
	 	(d)	 	The term “rate of exchange” in this Section 14.4 means the noon rate of
exchange for Canadian interbank transactions in Canadian Dollars in the Judgment
Currency published by the Bank of Canada for the day in question, or if such rate is
not so published by the Bank of Canada, such term shall mean the equivalent amount of
the Judgment Currency determined by the Lender, acting reasonably.

ARTICLE 15 

GENERAL 

15.1 Exchange and Confidentiality of Information 

	 	(a)	 	Powell and the Borrower each agrees that the Lender may provide any assignee or
participant or any bona fide prospective assignee or participant pursuant to Section
15.5 with any information concerning the financial condition of Powell, the Borrower
and its Subsidiaries provided such party agrees in writing with the Lender for the
benefit of Powell and the Borrower to be bound by a like duty of confidentiality to
that contained in this Section.
	 
	 	(b)	 	The Lender acknowledges the confidential nature of the financial, operational
and other information and data provided and to be provided to it by Powell, the
Borrower pursuant hereto (the “Information”) and agrees to use all reasonable efforts
to prevent the disclosure thereof provided, however, that:

	 	(i)	 	the Lender may disclose all or any part of the Information if,
in its reasonable opinion, such disclosure is required in connection with any
actual or threatened judicial, administrative or governmental proceedings
including, without limitation, proceedings initiated under or in respect of
this Agreement;
	 
	 	(ii)	 	the Lender shall incur no liability in respect of any
Information required to be disclosed by any Applicable Law or regulation, or by
applicable order, policy or directive having the force of law, to the extent of
such requirement;
	 
	 	(iii)	 	the Lender may provide Lender’s legal counsel and its other
agents and professional advisors with any Information; provided that such
persons shall be under a like duty of confidentiality to that contained in this
Section;
	 
	 	(iv)	 	the Lender shall incur no liability in respect of any
Information: (A) which is or becomes readily available to the public (other
than by a breach hereof) or which has been made readily available to the public
by Powell, the Borrower or its Subsidiaries, (B) which the Lender can show was,
prior to receipt thereof from Powell or the Borrower, lawfully in the Lender’s
possession and not then subject to any obligation on its part to Powell or the
Borrower to maintain confidentiality, or (C) which the Lender received from a
third party who was not, to the knowledge of the Lender,

 

-78-

	 	 	 	under a duty of confidentiality to Powell or the Borrower at the time the
information was so received;

	 	(v)	 	the Lender may disclose the Information to other financial
institutions and other persons in connection with the syndication by the Lender
of a Credit Facility or the granting by the Lender of a participation in the
Credit Facility where such financial institution or other person agrees to be
under a like duty of confidentiality to that contained in this Section; and
	 
	 	(vi)	 	the Lender may disclose all or any part of the Information so
as to enable the Lender to initiate any lawsuit against Powell, the Borrower or
any of its Subsidiaries or to defend any lawsuit commenced by Powell, the
Borrower or any of its Subsidiaries the issues of which touch on the
Information, but only to the extent such disclosure is necessary to the
initiation or defense of such lawsuit.

15.2 Notices

	 	(a)	 	Notices Generally. Except in the case of notices and other
communications expressly permitted to be given by telephone, all notices and other
communications provided for herein shall be in writing and shall be delivered by hand
or overnight courier service, mailed by registered mail or sent by telecopier to the
addresses or telecopier numbers specified below or, if to a Subsidiary, in care of the
Borrower. Notices sent by hand or overnight courier service, or mailed by registered
mail, shall be deemed to have been given when received; notices sent by telecopier
shall be deemed to have been given when sent (except that, if not given on a business
day between 9:00 a.m. and 5:00 p.m. local time where the recipient is located, shall be
deemed to have been given at 9:00 a.m. on the next business day for the recipient). The
respective parties’ addresses and contact information shall be as follows:
	 
	 	 	 	To the Borrower, Nextron and PPC Technical:

	 	 	 	Powell Powercomm Inc.

6005 — 72A Avenue

Edmonton, Alberta T6B 2J1

Attention: Wayne Rutherford

Facsimile: 780-465-0379

	 	 	 	To Powell:

	 	 	 	Powell Industries Inc.

8550 Mosley Drive

Post Office Box 12818

Houston, Texas, USA 77075

Attention: Don Madison

Facsimile: (713) 947-4435

 

-79-

	 	 	 	To the Lender:

	 	 	 	 	HSBC Bank Canada

9th Floor, 10250 — 101 Street NW

Edmonton, Alberta, Canada T5J 3P4

Attention: Keith Peters

Fax: (780) 426-2660

	 	(b)	 	Change of Address. Any party hereto may change its address or
telecopier number for notices and other communications hereunder by notice to the other
parties hereto.

15.3 Governing Law 

This Agreement shall be governed by and construed in accordance with the laws of the Province of
Alberta and the laws of Canada applicable therein, without prejudice to or limitation of any other
rights or remedies available under the laws of any jurisdiction where property or assets of the
Borrower may be found.

15.4 Benefit of the Agreement 

This Agreement shall enure to the benefit of and be binding upon Powell, the Borrower, the Lender
and their respective successors and permitted assigns.

15.5 Assignments and Participations

The Lender may, without consent of Powell or the Borrower during the continuance of an Event of
Default and at all other times with the prior written consent of Powell and the Borrower, which
consents shall not be unreasonably withheld or delayed:

	 	(a)	 	sell, assign, transfer and grant an interest in any or all of the Commitments
under any or all of the Credit Facilities, the Loans under such Credit Facilities and
its rights under the Documents; and
	 
	 	(b)	 	grant one or more participations in any or all of the Commitments under any or
all of the Credit Facilities, the Loans under such Credit Facilities and its rights
under the Documents;

to:

	 	(c)	 	any Person(s) during the continuance of an Event of Default; and
	 
	 	(d)	 	any other financial institution(s) which are resident in Canada for the
purposes of the Income Tax Act (Canada), and in such case the Borrower shall not be
under obligation to pay by way of withholding tax or otherwise any greater amount than
it would have been obliged to pay if the Lender had not made such sale, assignment,
transfer or grant, and further provided that no sale, assignment, transfer or grant of
less than all of the Lender’s interest in the Commitment(s), the Loans under such
Credit Facilities and its rights under the Documents shall result in any Person having
less than Cdn. $5,000,000.00 of the Total Commitment.

 

-80-

Upon any such sale, assignment, transfer or grant, the Lender shall have no further obligation
hereunder with respect to such interest. Upon any such sale, assignment, transfer or grant, the
granting Lender, the new Lender, Powell and the Borrower shall execute and deliver an assignment
agreement. The Borrower shall not assign its rights or obligations hereunder without the prior
written consent of the Lender, such consent not to be unreasonably withheld. Powell shall not
assign its rights or obligations hereunder without the prior written consent of the Lender.

15.6 Severability 

Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall not
invalidate the remaining provisions hereof and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

15.7 Whole Agreement 

This Agreement and the other Documents constitute the whole and entire agreement between the
parties hereto regarding the subject matter hereof and thereof and cancel and supersede any prior
agreements, undertakings, declarations, commitments, representations, written or oral, in respect
thereof.

15.8 Amendments and Waivers 

Any provision of this Agreement may be amended or waived only if Powell, the Borrower and the
Lender so agree in writing. Any waiver or consent shall be effective only in the instance and for
the purpose for which it is given.

15.9 Further Assurances 

Powell, the Borrower and the Lender shall promptly cure any default by it in the execution and
delivery of this Agreement, the other Documents or any of the agreements provided for hereunder to
which it is a party. Each of the Borrower and Powell, at its expense, shall promptly execute and
deliver to the Lender, upon request by the Lender (acting reasonably), all such other and further
deeds, agreements, opinions, certificates, instruments, affidavits, registration materials and
other documents reasonably necessary for the Borrower’s or Powell’s compliance with, or
accomplishment of the covenants and agreements of the Borrower or Powell hereunder or more fully to
state the obligations of the Borrower or Powell as set out herein or to make any registration,
recording, file any notice or obtain any consent, all as may be reasonably necessary or appropriate
in connection therewith.

15.10 Attornment 

The parties hereto each hereby attorn and submit to the jurisdiction of the courts of the Province
of Alberta in regard to legal proceedings relating to the Documents. For the purpose of all such
legal proceedings, this Agreement shall be deemed to have been performed in the Province of Alberta
and the courts of the Province of Alberta shall have jurisdiction to entertain any action arising
under this Agreement. Notwithstanding the foregoing, nothing in this Section shall be construed nor
operate to limit the right of any party hereto to commence any action relating hereto in any other
jurisdiction, nor to limit the right of the courts of any other jurisdiction to take jurisdiction
over any action or matter relating hereto.

 

-81-

15.11 Time of the Essence

Time shall be of the essence of this Agreement.

15.12 Credit Agreement Governs

In the event of any conflict or inconsistency between the provisions of this Agreement and the
provisions of the other Documents, the provisions of this Agreement, to the extent of the conflict
or inconsistency, shall govern and prevail.

15.13 Counterparts 

This Agreement may be executed in any number of counterparts, each of which shall be deemed to be
an original and all of which taken together shall be deemed to constitute one and the same
instrument, and it shall not be necessary in making proof of this Agreement to produce or account
for more than one such counterpart. Delivery of an executed counterpart of a signature page of this
Agreement by telecopy or by sending a scanned copy by electronic mail shall be effective as
delivery of a manually executed counterpart of this Agreement.

IN WITNESS WHEREOF the parties hereto have executed this Agreement.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	POWELL POWERCOMM INC.	 	 	 	POWELL INDUSTRIES, INC.
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	By:	 	/s/ Don R. Madison	 	 	 	By:	 	/s/ Don R. Madison
	 	 	 	 	 	 	 	 	 
	 

	 	Name:
	 	Don R. Madison
	 	 	 	 	 	Name:
	 	Don R. Madison
	 

	 	Title:
	 	 President
	 	 	 	 	 	Title:
	 	Executive Vice President and

Chief Financial Officer
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	 	 	By:	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 

	 	Name:
	 	 	 	 	 	 	 	Name:	 	 
	 

	 	Title:
	 	 	 	 	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	NEXTRON LIMITED	 	 	 	PPC TECHNICAL SERVICES INC.
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	By:	 	/s/ Don R. Madison	 	 	 	By:	 	/s/ Don R. Madison
	 	 	 	 	 	 	 	 	 
	 

	 	Name:
	 	Don R. Madison
	 	 	 	 	 	Name:
	 	Don R. Madison
	 

	 	Title:
	 	 President
	 	 	 	 	 	Title:
	 	President
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	 	 	By:	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 

	 	Name:
	 	 	 	 	 	 	 	Name:	 	 
	 

	 	Title:
	 	 	 	 	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	HSBC BANK CANADA	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	By:	 	/s/ Keith Peters	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Name:
	 	Keith Peters	 	 	 	 	 	 	 	 
	 

	 	Title:
	 	Commercial Financial Services	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	By:	 	/s/ Ken Keenleyside	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Name:
	 	K.G. (Ken) Keenleyside	 	 	 	 	 	 	 	 
	 

	 	Title:
	 	Commercial Financial Services	 	 	 	 	 	 	 	 

 

SCHEDULE “A”

FORM OF COMPLIANCE CERTIFICATE

	 	 	 	 	 
	TO:

	 	HSBC BANK CANADA	 	 
	 
	 	 	 	 
	DATE:

	 	 
	 	 

	1.	 	Reference is made to the credit agreement made as of December 15, 2009 between Powell
Powercomm Inc., Powell Industries, Inc. and HSBC Bank Canada and relating to the establishment
of certain credit facilities in favour of the Borrower (as amended, modified, supplemented or
restated, the “Credit Agreement”). Unless otherwise expressly defined herein, capitalized
terms set forth in this Conversion Notice shall have the respective meanings set forth in the
Credit Agreement.
	 
	2.	 	This Compliance Certificate is delivered to the Lender pursuant to Section 10.1(e)(iii) of
the Credit Agreement.
	 
	3.	 	The undersigned,                                         ,                         
        
         of Powell Industries, Inc.
(“Powell”), hereby certifies that, as of the date of this Compliance Certificate, I have made
or caused to be made such investigations as are necessary or appropriate for the purposes of
this Compliance Certificate and:

	 	(a)	 	the consolidated financial statements for the [fiscal quarter OR fiscal year]
ending                                         ,                     , provided to the Lender pursuant to Section
10.1(e) of the Credit Agreement were prepared in accordance with GAAP and present
fairly, in all material respects, the consolidated financial position of Powell and its
Subsidiaries as at the date thereof;
	 
	 	(b)	 	the representations and warranties made by Powell and the Borrower in Section
9.1 of the Credit Agreement are true and accurate in all respects as at the date
hereof, except as has heretofore been notified to the Lender by the Borrower in writing
[or except as described in Exhibit ___ hereto];
	 
	 	(c)	 	no event has occurred or is continuing which would constitute a Default or
Event of Default, except as has heretofore been notified to the Lender by the Borrower
in writing [or except as described in Exhibit ___ hereto];
	 
	 	(d)	 	as at the Quarter End ending                                         ,                     , the Debt to EBITDA
Ratio of Powell was                     :1.0; attached hereto as Exhibit A is a determination of
the Debt to EBITDA Ratio as at the end of the aforementioned Quarter End, together with
particulars of each of the definitions and elements included in the determination
thereof;
	 
	 	(e)	 	as at the aforementioned Quarter End, the Fixed Charge Coverage Ratio of Powell
was                     :1.0; attached hereto as Exhibit B is a determination of the Fixed Charge
Coverage Ratio as at the aforementioned Quarter End, together with particulars of each
of the definitions and elements included in the determination thereof;

 

 

-2-

	 	(f)	 	as at the aforementioned Quarter End, the Consolidated Tangible Net Worth of
Powell was U.S.$                    ; attached hereto as Exhibit C is a determination of the
Consolidated Tangible Net Worth as at the aforementioned Quarter End together with
particulars of each of the definitions and elements included in the determination
thereof;
	 
	 	(g)	 	no Default or Event of Default has occurred and is continuing [except as
described in Exhibit ___ hereto].

          I give this Compliance Certificate on behalf of Powell and in my capacity as the
                                         of Powell and no personal liability is created against or assumed by me
in the giving of this Certificate.

          Dated at                                         ,      
               
this ___ day of                     ,                     .

	 	 	 	 	 
	 	 	 
	 	
 	 
	 	Name:  	 	 
	 	Title:  	 	 

 

	 	 	 	 	 

SCHEDULE “B”

CONVERSION NOTICE

	 	 	 	 	 
	TO:

	 	HSBC BANK CANADA	 	 
	 
	 	 	 	 
	DATE:

	 	 
	 	 

	4.	 	This Conversion Notice is delivered to you pursuant to the terms and conditions of the credit
agreement made as of December 15, 2009 between Powell Powercomm Inc., Powell Industries, Inc.
and HSBC Bank Canada and relating to the establishment of certain credit facilities in favour
of the Borrower (as amended, modified, supplemented or restated, the “Credit Agreement”).
Unless otherwise expressly defined herein, capitalized terms set forth in this Conversion
Notice shall have the respective meanings set forth in the Credit Agreement.
	 
	5.	 	The Borrower hereby requests a Conversion as follows:

	 	(h)	 	Conversion Date:   

	 
	 	(i)	 	Applicable Credit Facility: [Term Facility/Revolving Facility]
	 
	 	(j)	 	Conversion of the following Loans:

	 	(i)	 	Type of Loan  

	 
	 	(ii)	 	Amount being converted:  

	 
	 	(iii)	 	Interest Period maturity (for Bankers’ Acceptances):  

	 
	 	 	 	 

INTO the following Loan:

	 	(i)	 	Type of Loan:  

	 
	 	(ii)	 	Interest Period (specify term of Bankers’ Acceptances):  

	 
	 	 	 	 

	 	(k)	 	Payment, delivery or issuance instructions (if any):  

	 
	 	 	 	 

 

 

-2-

	6.	 	The undersigned certifies to the Lender that:

	 	(a)	 	each of the representations and warranties contained in Section 9.1 of the
Credit Agreement shall be true, correct and complete on and as of the Conversion Date
to the same extent as though made on and as of such date (except to the extent such
representations and warranties specifically relate to an earlier date, in which case
such representations and warranties shall have been true, correct and complete on and
as of such earlier date); and
	 
	 	(b)	 	on the date hereof, no Default or Event of Default has occurred and is
continuing and no Default or Event of Default will occur as a result of the making of
the Conversion contemplated herein.

	 	 	 	 	 
	 	Yours very truly,

POWELL POWERCOMM INC.

 	 
	 	Per:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	 	 
	 	Per:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

 

SCHEDULE “C”

DRAWDOWN NOTICE

	 	 	 	 	 
	TO:

	 	HSBC Bank Canada
	 	 
	 
	 	 	 	 
	DATE:
	 	 	 	 
	 

	 	 	 	 

	1.	 	This Drawdown Notice is delivered to you pursuant to the terms and conditions of the credit
agreement made as of December 15, 2009 between Powell Powercomm Inc., Powell Industries, Inc.
and HSBC Bank Canada and relating to the establishment of certain credit facilities in favour
of the Borrower (as amended, modified, supplemented or restated, the “Credit Agreement”).
Unless otherwise expressly defined herein, capitalized terms set forth in this Drawdown Notice
shall have the respective meanings set forth in the Credit Agreement.
	 
	2.	 	The Borrower hereby requests a Drawdown as follows:

	 	(a)	 	Drawdown Date: ______________________________
	 
	 	(b)	 	Applicable Credit Facility: [Term Facility/Revolving Facility]
	 
	 	(c)	 	Amount of
Drawdown: 

	 
	 	(d)	 	Type of
Loan: 

	 
	 	(e)	 	Interest Period (specify term for Bankers’ Acceptances):
 

 

	 
	 	(f)	 	Payment, delivery or issuance instructions (if any):
 

 

 

-2-

	3.	 	The undersigned certifies to the Lender that:

	 	(a)	 	each of the representations and warranties contained in Section 9.1 of the
Credit Agreement shall be true, correct and complete on and as of the Drawdown Date to
the same extent as though made on and as of such date (except to the extent such
representations and warranties specifically relate to an earlier date, in which case
such representations and warranties shall have been true, correct and complete on and
as of such earlier date); and
	 
	 	(b)	 	on the date hereof, no Default or Event of Default has occurred and is
continuing and no Default or Event of Default will occur as a result of the making of
the Drawdown contemplated herein; and
	 
	 	(c)	 	after giving effect to the foregoing Advances, the Outstanding Principal of all
Loans outstanding under the [Term Facility/Revolving Facility] will not exceed the
maximum amount of such Credit Facility.

	 	 	 	 	 
	 	Yours very truly,

POWELL POWERCOMM INC.

 	 
	 	Per:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	 	 
	 	Per:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

 

 

	 	 	 	 	 

SCHEDULE “D”

ROLLOVER NOTICE

	 	 	 	 	 
	TO:
	 	HSBC Bank Canada	 	 
	 
	 	 	 	 
	DATE:
	 	 	 	 
	 
	 	 	 	 

	1.	 	This Rollover Notice is delivered to you pursuant to the terms and conditions of the credit
agreement made as of December 15, 2009 between Powell Powercomm Inc., Powell Industries, Inc.
and HSBC Bank Canada and relating to the establishment of certain credit facilities in favour
of the Borrower (as amended, modified, supplemented or restated, the “Credit Agreement”).
Unless otherwise expressly defined herein, capitalized terms set forth in this Rollover Notice
shall have the respective meanings set forth in the Credit Agreement.
	 
	2.	 	The Borrower hereby requests a Rollover as follows:

	 	(a)	 	Rollover Date: ______________________________
	 
	 	(b)	 	Applicable Credit Facility: [Term Facility/Revolving Facility]
	 
	 	(c)	 	Type of
Loan: 

	 
	 	(d)	 	Amount of
Rollover: 

	 
	 	(e)	 	New Interest Period (specify
term): 

 

	 
	 	(f)	 	Payment, delivery or issuance instructions (if
any): 

 

 

-2-

	3.	 	The undersigned certifies to the Lender that:

	 	(a)	 	each of the representations and warranties contained in Section 9.1 of the
Credit Agreement shall be true, correct and complete on and as of the Rollover Date to
the same extent as though made on and as of such date (except to the extent such
representations and warranties specifically relate to an earlier date, in which case
such representations and warranties shall have been true, correct and complete on and
as of such earlier date); and
	 
	 	(b)	 	on the date hereof, no Default or Event of Default has occurred and is
continuing and no Default or Event of Default will occur as a result of the making of
the Rollover contemplated herein; and

	 	 	 	 	 
	 	Yours very truly,

POWELL POWERCOMM INC.

 	 
	 	Per:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	 	 
	 	Per:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

 

SCHEDULE “E”

DISCLOSURE SCHEDULE

THIS DISCLOSURE SCHEDULE is made as of December 15, 2009.

			
	1.	 	Corporate Organization Chart of Powell Industries, Inc.
and the Subsidiaries

	 	•	 	See Appendix “A” attached hereto.

			
	2.	 	Powell Industries, Inc.

	A.	 	Corporate Information:

	 	(i)	 	Jurisdiction of Incorporation:
	 
	 	(ii)	 	Date of Incorporation:

	 	(a)	 	Certificate of Incorporation:
	 
	 	(b)	 	Certificate of Amendment(s):

	 	(iii)	 	Share Capital and Other Ownership Interests:

	 	(a)	 	Issues Shares:
	 
	 	(b)	 	Shareholders:

	 	(iv)	 	Directors and Officers:

	 	(a)	 	Directors:
	 
	 	(b)	 	Officers:

 

-2-

	B.	 	Business Information:

	 	(i)	 	Chief Executive Office Location:
	 
	 	(ii)	 	Jurisdiction of Conduct of Business:
	 
	 	(iii)	 	Locations where Inventory or other Assets (other than Real Property) are
held:

	C.	 	Real Property and Leases Relating to Real Property:

	 	(i)	 	Real Property:
	 
	 	(ii)	 	Leases:

	D.	 	Trademarks, Patents, and Other Material Intellectual Property:

	 	(i)	 	Trade Names:
	 
	 	(ii)	 	Trademarks:
	 
	 	(iii)	 	Patents:

 

-3-

			
	3.	 	Powell Powercomm Inc.

	A.	 	Corporate Information:

	 	(i)	 	Jurisdiction of Incorporation:

	 	•	 	Canada

	 	(ii)	 	Date of Incorporation:

	 	(a)	 	Certificate of Incorporation:
	 
	 	(b)	 	Certificate of Amendment(s):

	 	(iii)	 	Share Capital and Other Ownership Interests:

	 	(c)	 	Issues Shares:
	 
	 	(d)	 	Shareholders:

	 	•	 	Powell Industries, Inc. — 100%

	 	(iv)	 	Directors and Officers:

	 	(c)	 	Directors:
	 
	 	(d)	 	Officers:

	B.	 	Business Information:

	 	(i)	 	Chief Executive Office Location:

	 	•	 	Edmonton, Alberta

	 	(ii)	 	Jurisdiction of Conduct of Business:

	 	•	 	Canada

	 	(iii)	 	Locations where Inventory or other Assets (other than Real Property) are
held:

 

-4-

	C.	 	Real Property and Leases Relating to Real Property:

	 	(i)	 	Real Property:
	 
	 	(ii)	 	Leases:

	D.	 	List of Material Agreement:

	 	(i)	 	     

	E.	 	Trademarks, Patents, and Other Material Intellectual Property:

	 	(i)	 	Trade Names:
	 
	 	(ii)	 	Trademarks:
	 
	 	(iii)	 	Patents:exv10w1

Exhibit 10.1

EXECUTION COPY

SECOND AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT

DATED AS OF DECEMBER 15, 2009

BY AND AMONG

P&L RECEIVABLES COMPANY, LLC,

As Seller

AND

PEABODY ENERGY CORPORATION,

As initial Servicer

AND

ARCLAR COMPANY, LLC

PEABODY MIDWEST MINING, LLC

TWENTYMILE COAL, LLC

CABALLO COAL, LLC

COALSALES II, LLC

PEABODY WESTERN COAL COMPANY

POWDER RIVER COAL, LLC

PEABODY HOLDING COMPANY, LLC

COALTRADE, LLC

PEABODY COALTRADE INTERNATIONAL (CTI), LLC

COALSALES, LLC,

As Sub-Servicers

AND

MARKET STREET FUNDING LLC,

As Issuer

AND

THE FINANCIAL INSTITUTIONS FROM TIME TO TIME PARTIES HERETO,

As LC Participants

AND

PNC BANK, NATIONAL ASSOCIATION,

As Administrator and As LC Bank

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	ARTICLE I. AMOUNTS AND TERMS OF THE INVESTMENTS 
	 	 	2	 
	Section 1.1 Investment Facility
	 	 	2	 
	Section 1.2 Making Investments
	 	 	3	 
	Section 1.3 Transfer of Receivables and Other Purchased Assets
	 	 	3	 
	Section 1.4 Terms and Conditions for Sale, Assignment and Transfer
	 	 	4	 
	Section 1.5 Purchased Assets Coverage Percentage Computation
	 	 	6	 
	Section 1.6 Settlement Procedures
	 	 	6	 
	Section 1.7 Fees
	 	 	9	 
	Section 1.8 Payments and Computations, Etc
	 	 	10	 
	Section 1.9 Increased Costs
	 	 	10	 
	Section 1.10 Requirements of Law
	 	 	11	 
	Section 1.11 Inability to Determine Euro-Rate
	 	 	12	 
	Section 1.12 Extension of the Facility Termination Date
	 	 	13	 
	Section 1.13 Letters of Credit
	 	 	13	 
	Section 1.14 Issuance of Letters of Credit
	 	 	13	 
	Section 1.15 Requirements For Issuance of Letters of Credit
	 	 	14	 
	Section 1.16 Disbursements, Reimbursement
	 	 	14	 
	Section 1.17 Repayment of Participation Advances
	 	 	15	 
	Section 1.18 Documentation
	 	 	16	 
	Section 1.19 Determination to Honor Drawing Request
	 	 	16	 
	Section 1.20 Nature of Participation and Reimbursement Obligations
	 	 	16	 
	Section 1.21 Indemnity
	 	 	18	 
	Section 1.22 Liability for Acts and Omissions
	 	 	18	 
	ARTICLE II. REPRESENTATIONS AND WARRANTIES; COVENANTS; TERMINATION EVENTS 
	 	 	20	 
	Section 2.1 Representations and Warranties; Covenants
	 	 	20	 
	Section 2.2 Termination Events
	 	 	20	 
	ARTICLE III. INDEMNIFICATION 
	 	 	20	 
	Section 3.1 Indemnities by the Seller
	 	 	20	 
	Section 3.2 Indemnities by the Servicer
	 	 	22	 

-i-

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 
	 	 	Page	 
	ARTICLE IV. ADMINISTRATION AND COLLECTIONS 
	 	 	22	 
	Section 4.1 Appointment of the Servicer
	 	 	22	 
	Section 4.2 Duties of the Servicer
	 	 	23	 
	Section 4.3 Lock-Box Arrangements
	 	 	24	 
	Section 4.4 Enforcement Rights
	 	 	24	 
	Section 4.5 Responsibilities of the Seller
	 	 	25	 
	Section 4.6 Servicing Fee
	 	 	26	 
	Section 4.7 Authorization and Action of the Administrator
	 	 	26	 
	Section 4.8 Nature of Administrator’s Duties
	 	 	26	 
	Section 4.9 UCC Filings
	 	 	27	 
	Section 4.10 Administrator’s Reliance, Etc
	 	 	27	 
	Section 4.11 Administrator and Affiliates
	 	 	28	 
	Section 4.12 Purchase Decision
	 	 	28	 
	Section 4.13 Indemnification
	 	 	28	 
	Section 4.14 Successor Administrator
	 	 	29	 
	ARTICLE V. MISCELLANEOUS 
	 	 	29	 
	Section 5.1 Amendments, Etc
	 	 	29	 
	Section 5.2 Notices, Etc
	 	 	30	 
	Section 5.3 Successors and Assigns; Assignability; Participations
	 	 	30	 
	Section 5.4 Costs, Expenses and Taxes
	 	 	31	 
	Section 5.5 No Proceedings; Limitation on Payments
	 	 	32	 
	Section 5.6 Confidentiality
	 	 	32	 
	Section 5.7 GOVERNING LAW AND JURISDICTION
	 	 	33	 
	Section 5.8 Execution in Counterparts
	 	 	33	 
	Section 5.9 Survival of Termination; Non-Waiver
	 	 	33	 
	Section 5.10 WAIVER OF JURY TRIAL
	 	 	34	 
	Section 5.11 Entire Agreement
	 	 	34	 
	Section 5.12 Headings
	 	 	34	 
	Section 5.13 Issuer’s Liabilities
	 	 	34	 

-ii-

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 	 	 
	 	 	 	 	 	Page	 
	EXHIBIT I
	 	DEFINITIONS	 	 	I-1	 
	EXHIBIT II
	 	CONDITIONS PRECEDENT	 	 	II-1	 
	EXHIBIT III
	 	REPRESENTATIONS AND WARRANTIES	 	 	III-1	 
	EXHIBIT IV
	 	COVENANTS	 	 	IV-1	 
	EXHIBIT V
	 	TERMINATION EVENTS	 	 	V-1	 
	SCHEDULE I
	 	CREDIT AND COLLECTION POLICY	 	 	Schedule I-1	 
	SCHEDULE II
	 	LOCK-BOX BANKS AND LOCK-BOX ACCOUNTS	 	 	Schedule II-1	 
	SCHEDULE III
	 	TRADE NAMES	 	 	Schedule III-1	 
	SCHEDULE IV
	 	OFFICE LOCATIONS	 	 	Schedule IV-1	 
	ANNEX A
	 	FORM OF INFORMATION PACKAGE	 	 	Annex A-1	 
	ANNEX B
	 	FORM OF INVESTMENT NOTICE	 	 	Annex B-1	 
	ANNEX C
	 	FORM OF PAYDOWN NOTICE	 	 	Annex C-1	 
	ANNEX D
	 	FORM OF COMPLIANCE CERTIFICATE	 	 	Annex D-1	 
	ANNEX E
	 	FORM OF LETTER OF CREDIT APPLICATION	 	 	Annex E-1	 

-iii-

 

     This SECOND AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT (as amended, supplemented or
otherwise modified from time to time, this “Agreement”) is entered into as of December 15,
2009, by and among P&L RECEIVABLES COMPANY, LLC, a Delaware limited liability company, as seller
(the “Seller”), PEABODY ENERGY CORPORATION, a Delaware corporation (“Peabody”), as
initial servicer (in such capacity, collectively, together with its successors and permitted
assigns in such capacity, the “Servicer”), ARCLAR COMPANY, LLC, an Indiana limited
liability company, PEABODY MIDWEST MINING, LLC, an Indiana limited liability company, TWENTYMILE
COAL, LLC, a Delaware corporation, CABALLO COAL, LLC, a Delaware corporation, COALSALES II, LLC, a
Delaware limited liability company, PEABODY WESTERN COAL COMPANY, a Delaware corporation, POWDER
RIVER COAL, LLC, a Delaware limited liability company, PEABODY HOLDING COMPANY, LLC, a Delaware
limited liability company, COALTRADE, LLC, a Delaware limited liability company, PEABODY COALTRADE
INTERNATIONAL (CTI), LLC, a Delaware limited liability company, COALSALES, LLC, a Delaware limited
liability company (each a “Sub-Servicer” and collectively the “Sub-Servicers”),
MARKET STREET FUNDING LLC, a Delaware limited liability company (together with its successors and
permitted assigns, the “Issuer”), THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES
HEREOF (together with their successors and permitted assigns in such capacity, the “LC
Participants”), PNC BANK, NATIONAL ASSOCIATION, a national banking association (“PNC”),
as administrator (in such capacity, together with its successors and assigns in such capacity, the
“Administrator”) and as issuer of Letters of Credit (in such capacity, together with its
successors and assigns in such capacity, the “LC Bank”).

     PRELIMINARY STATEMENTS. Certain terms that are capitalized and used throughout this Agreement
are defined in Exhibit I. References in the Exhibits hereto to the “Agreement” refer to
this Agreement, as amended, supplemented or otherwise modified from time to time.

     The Seller desires to sell, transfer and assign receivables, and the Purchasers desire to
acquire such receivables from time to time on the terms and subject to the conditions set forth
herein.

     This Agreement amends and restates in its entirety, as of the Closing Date, the Amended and
Restated Receivables Purchase Agreement, dated as of September 30, 2005 (as amended, restated,
supplemented or otherwise modified prior to the date hereof, the “Original Agreement”),
among the Seller, the Servicer, the Sub-Servicers, the Issuer and the Administrator.
Notwithstanding the amendment and restatement of the Original Agreement by this Agreement, (i) the
Seller and Servicer shall continue to be liable to PNC, the Issuer or any other Indemnified Party
or Affected Person (as such terms are defined in the Original Agreement) for fees and expenses
which are accrued and unpaid under the Original Agreement on the date hereof (collectively, the
“Original Agreement Outstanding Amounts”) and all agreements to indemnify such parties in
connection with events or conditions arising or existing prior to the effective date of this
Agreement and (ii) the security interest created under the Original Agreement shall remain in full
force and effect as security for such Original Agreement Outstanding Amounts until such Original
Agreement Outstanding Amounts shall have been paid in full. Upon the effectiveness of this
Agreement, each reference to the Original Agreement in

 

 

any other document, instrument or agreement shall mean and be a reference to this Agreement.
Nothing contained herein, unless expressly herein stated to the contrary, is intended to amend,
modify or otherwise affect any other instrument, document or agreement executed and/or delivered in
connection with the Original Agreement.

     In consideration of the mutual agreements, provisions and covenants contained herein, the
parties hereto agree as follows:

ARTICLE I.

AMOUNTS AND TERMS OF THE INVESTMENTS

     Section 1.1 Investment Facility.

     (a) On the terms and conditions hereinafter set forth, the Issuer hereby agrees to make
investments in (each, an “Investment”) and, if so requested in accordance with and subject
to the terms of this Agreement, the LC Bank hereby agrees to issue Letters of Credit in return for
(and each LC Participant hereby severally agrees to make participation advances in connection with
any draws under such Letters of Credit equal to such LC Participant’s Pro Rata Share thereof), the
Purchased Assets from time to time from the date hereof to the Facility Termination Date.

     The Seller may, subject to the remainder of this paragraph (a) and the other
requirements and conditions herein, use the proceeds of any Investment or Reinvestment by the
Issuer, hereunder, to satisfy its Reimbursement Obligation to the LC Bank and the LC Participants
(ratably, based on the outstanding amounts funded by the LC Bank and each such LC Participant)
pursuant to Section 1.16 below.

     In addition, in the event the Seller fails to reimburse the LC Bank and each applicable LC
Participant for the full amount of any drawing under any Letter of Credit on the applicable Drawing
Date (out of its own funds available therefor, or otherwise, at such time), pursuant to Section
1.16, then the Seller shall, automatically (and without the requirement of any further action
on the part of any Person hereunder), be deemed to have requested a new Investment from the Issuer
on such date, pursuant to the terms hereof, in an amount equal to the amount of such Reimbursement
Obligation at such time. Subject to the limitations on funding set forth in the remainder of this
paragraph (a), below (and otherwise herein), the Issuer shall fund such deemed Investment
request and deliver the proceeds thereof directly to the Administrator to be immediately
distributed (ratably) to the LC Bank and the applicable LC Participants in satisfaction of the
Seller’s Reimbursement Obligation pursuant to Section 1.16, below, to the extent of the
amounts permitted to be funded by the Issuer, at such time, hereunder.

     Notwithstanding anything set forth in this paragraph (a), or otherwise herein to the
contrary, under no circumstances shall any Purchaser make any such Investment or Reinvestment
(including, without limitation, any deemed Investment by the Issuer pursuant to the immediately
preceding paragraphs of this Section 1.1(a)), or issue any Letter of Credit, as applicable,
if, after giving effect to such Investment, Reinvestment or issuance, (i) the aggregate outstanding
amount of the Capital funded by such Purchaser shall exceed (A) the Commitment set forth opposite
its name on the signature page hereto, as the same may be reduced from time

2

 

to time pursuant to Section 1.1(b), minus (B) in the case of any LC Participant such
LC Participant’s Pro Rata Share of the face amount of any outstanding Letters of Credit, (ii) the
aggregate outstanding Capital plus the LC Participation Amount would exceed the Purchase Limit or
(iii) or the Purchased Assets Coverage Percentage would exceed 100%.

     (b) The Seller may, upon at least 30 days’ written notice to the Administrator, irrevocably
reduce the unused portion of the Purchase Limit in whole or in part (but not below the amount that
would cause the aggregate outstanding Capital plus the LC Participation Amount to exceed the
Purchase Limit (after giving effect to such reduction)); provided, that each partial
reduction shall be in the amount of at least $5,000,000, or an integral multiple of $1,000,000 in
excess thereof, and that, unless terminated in whole, the Purchase Limit shall in no event be
reduced below $50,000,000. Each reduction in the Commitments hereunder shall be made ratably among
the LC Participants in accordance with their respective Pro Rata Shares. The Administrator shall
promptly advise the Purchasers of any notice pursuant to this Section 1.1(b); it being
understood that (in addition to and without limiting any other requirements for termination,
prepayment and/or the funding of the LC Collateral Account hereunder) no such reduction shall be
effective unless and until (i) in the case of a reduction of the Purchase Limit in whole to zero
($0), the amount on deposit in the LC Collateral Account is at least equal to the then outstanding
LC Participation Amount and (ii) in the case of a partial reduction, the amount on deposit in the
LC Collateral Account is at least equal to the difference between the then outstanding LC
Participation Amount and the Purchase Limit as so reduced by such partial reduction.

     Section 1.2 Making Investments.

     (a) Each request for any Investment hereunder may be made on any day upon the Seller’s
irrevocable written notice in the form of Annex B (each, an “Investment Notice”)
delivered to the Administrator in accordance with Section 5.2 (which notice must be
received by the Administrator before 11:00 a.m., New York City time) at least two Business Days
before the requested Investment Date, which notice shall specify: (A) the amount requested to be
paid to the Seller (such amount, which shall not be less than $300,000 and shall be in integral
multiples of $100,000, (B) the requested date of such Investment (which shall be a Business Day)
and (C) the pro forma calculation of the Purchased Assets Coverage Percentage after giving effect
to the increase in the Capital.

     (b) On the date of each Investment hereunder, the Issuer shall, upon satisfaction of the
applicable conditions set forth in Exhibit II, make available to the Seller in same day
funds, at Bank of America, N.A., account number 4426927763, ABA No. 026009593, an amount equal to
the Capital of the Investment being funded by the Issuer.

     Section 1.3 Transfer of Receivables and Other Purchased Assets.

     (a) Sale of Receivables. Notwithstanding the otherwise applicable conditions
precedent to Investments hereunder, upon effectiveness of this Agreement in accordance with its
terms, (i) the Issuer shall be deemed to have made an Investment in an amount equal to its
outstanding Capital under the Original Agreement, and (ii) the Issuer’s outstanding Capital

3

 

hereunder after giving effect to such deemed Investment shall be equal to the Issuer’s
outstanding Capital that was outstanding under the Original Agreement immediately prior to the
effectiveness of this Agreement. In consideration of such initial Investment, the entry into this
Agreement by the Administrator and the Purchasers and the Administrator’s agreement (on behalf of
the applicable Purchasers) to make payments to the Seller from time to time in accordance with
Section 1.4, effective on the Closing Date, the Seller hereby sells, conveys, transfers and
assigns to the Administrator, on behalf of the Purchasers, all of Seller’s right, title and
interest in and to (i) all Pool Receivables existing on the Closing Date or thereafter arising or
acquired by the Seller from time to time prior to the Facility Termination Date and (ii) all
Related Security, whether existing on the Closing Date or thereafter arising at any time and
acquired by the Seller.

     (b) Purchase of Purchased Assets. Subject to the terms and conditions hereof, the
Administrator (on behalf of the Purchasers) hereby purchases and accepts from the Seller the Pool
Receivables and all other Related Security sold, assigned and transferred pursuant to Section
1.3(a) (collectively, the “Purchased Assets”).

     (c) Obligations Not Assumed. The foregoing sale, assignment and transfer does not
constitute and is not intended to result in the creation, or an assumption by the Administrator or
any Purchaser, of any obligation of the Seller, any Originator or any other Person under or in
connection with the Receivables or any other Related Security, all of which shall remain the
obligations and liabilities of the Seller, the Originator and/or such other Person, as applicable.

     Section 1.4 Terms and Conditions for Sale, Assignment and Transfer. Subject to the
terms and conditions hereof, including Exhibit II, in consideration for the sale,
assignment and transfer of the Purchased Assets by the Seller to the Administrator (on behalf of
the Purchasers) hereunder:

     (a) Investments. On the Closing Date, and thereafter from time to time prior to the
Facility Termination Date, on request of the Seller for an Investment in accordance with
Section 1.2(a), the Issuer, in accordance with Section 1.2(b), shall pay to the
Seller the amount requested by the Seller under Section 1.2(a).

     (b) Reinvestments. On each Business Day prior to the Facility Termination Date, the
Servicer, on behalf of the Issuer, shall pay to the Seller, out of Collections of the Pool
Receivables, the amount available for reinvestment in accordance with Section 1.6(b)(ii).
Each such payment is herein referred to as a “Reinvestment”.

     (c) Deferred Purchase Price. The Servicer, on behalf of the Administrator and the
Purchasers, shall pay to the Seller, from Collections, the amounts payable to the Seller from time
to time pursuant to Section 1.6(b)(iv) and clause sixth of Section
1.6(d)(ii) (such amounts, the “Deferred Purchase Price” with respect to the Purchased
Assets) at the times specified in such Sections. The parties hereto acknowledge and agree that the
Administrator and the Purchasers shall have the right to, and intend to, set off (i) the Seller’s
obligation to pay (or cause to be paid) to the Purchasers (or to the Administrator on their behalf)
all Collections on the portion of the

4

 

Purchased Assets attributable to the Deferred Purchase Price against (ii) the Administrator’s
and the Purchasers’ obligations to pay (or cause to be paid) to the Seller the Deferred Purchase
Price.

     (d) Seller Payments Limited to Collections. Notwithstanding any provision contained
in this Agreement to the contrary, none of the Administrator or the Purchasers shall be obligated
to pay any amount to the Seller as the purchase price of the Purchased Assets pursuant to
subsections (b) and (c) above except to the extent of Collections on Receivables
available for distribution to the Seller in accordance with this Agreement. Any amount that
Administrator or any Purchaser does not pay pursuant to the preceding sentence shall not constitute
a claim (as defined in § 101 of the Bankruptcy Code) against or corporate obligation of such Person
for any such insufficiency unless and until such amount becomes available for distribution to the
Seller in accordance with Section 1.6(d)(ii).

     (e) Intent of the Parties. The Seller, the Administrator and the Purchasers intend
that the sale, assignment and transfer of Purchased Assets to the Administrator (on behalf of the
Purchasers) shall be treated as a sale for all purposes (other than for federal, state and local
income and franchise tax purposes as provided in the following paragraph of this clause
(e)). If notwithstanding the intent of the parties, such sale, transfer and assignment is not
treated as a sale for such purposes, such sale, assignment and transfer shall be treated as the
grant of, and the Seller does hereby grant to the Administrator (for the benefit of the Purchasers)
a security interest in the following property to secure all of the Seller’s obligations (monetary
or otherwise) under this Agreement and the other Transaction Documents to which it is a party,
whether now or hereafter existing or arising, due or to become due, direct or indirect, absolute or
contingent: all of the Seller’s right, title and interest in, to and under all of the following,
whether now or hereafter owned, existing or arising: (i) all Pool Receivables, (ii) all Related
Security with respect to such Pool Receivables, (iii) all Collections with respect to such Pool
Receivables, (iv) the Lock-Box Accounts and all amounts on deposit therein, and all certificates
and instruments, if any, from time to time evidencing such Lock-Box Accounts and amounts on deposit
therein, (v) all rights (but none of the obligations) of the Seller under the Sale Agreement and
(vi) all proceeds of, and all amounts received or receivable under any or all of, the foregoing
(collectively, the “Pool Assets”). The Seller hereby authorizes the Administrator to file
financing statements describing as the collateral covered thereby as “all of the debtor’s personal
property or assets” or words to that effect, notwithstanding that such wording may be broader in
scope than the collateral described in this Agreement. The Administrator, for the benefit of the
Purchasers, shall have, with respect to the Pool Assets, and in addition to all the other rights
and remedies available to the Administrator and the Purchasers, all the rights and remedies of a
secured party under any applicable UCC.

     Notwithstanding the foregoing paragraph of this clause (e), the Seller, the
Administrator, the Purchasers and all other parties to this Agreement intend and agree to treat,
for U.S. federal, state and local income and franchise tax (in the nature of income tax) purposes
only, the sale, assignment and transfer of the Purchased Assets to the Administrator (on behalf of
the Purchasers) as a loan to the Seller secured by the Pool Assets. The provisions of this
Agreement and all related Transaction Documents shall be construed to further these intentions of
the parties.

5

 

     (f) LC Participant Investments. Whenever the LC Bank issues a Letter of Credit
pursuant to Section 1.14 hereof, each LC Participant shall, automatically and without
further action of any kind upon the effective date of issuance of such Letter of Credit, have
irrevocably deemed to make an Investment hereunder in the event that such Letter of Credit is
subsequently drawn and such drawn amount shall not have been reimbursed pursuant to Section
1.16 upon such draw. All such Investments shall comprise Base Rate Portions of Capital in an
amount equal to the amount of such draw (without regard to the numerical requirements set forth in
Section 1.2(a)), shall be made ratably by the LC Participants according to their Pro Rata
Shares and shall accrue Discount. In the event that any Letter of Credit expires or is surrendered
without being drawn (in whole or in part) then, in such event, the foregoing commitment to make
Investments shall expire with respect to such Letter of Credit and the LC Participation Amount
shall automatically reduce by the amount of the Letter of Credit which is no longer outstanding.

     Section 1.5 Purchased Assets Coverage Percentage Computation.

          The Purchased Assets Coverage Percentage shall be initially computed on the Closing Date.
Thereafter, until the Facility Termination Date, such Purchased Assets Coverage Percentage shall be
automatically recomputed (or deemed to be recomputed) on each Business Day other than a Termination
Day. From and after the occurrence of any Termination Day, the Purchased Assets Coverage
Percentage shall (until the event(s) giving rise to such Termination Day are satisfied or are
waived in accordance with Section 5.1) be deemed to be 100%. The Purchased Assets Coverage
Percentage shall become zero when the Final Payout Date has occurred and the Servicer shall have
received the accrued Servicing Fee thereon.

     Section 1.6 Settlement Procedures.

     (a) The collection of the Pool Receivables shall be administered by the Servicer in accordance
with this Agreement. The Seller shall provide to the Servicer on a timely basis all information
needed for such administration, including notice of the occurrence of any Termination Day and
current computations of the Purchased Assets Coverage Percentage.

     (b) The Servicer shall, on each day on which Collections of Pool Receivables are received (or
deemed received) by the Seller or the Servicer:

     (i) set aside and hold in trust (and shall, at the request of the Administrator,
segregate in a separate account approved by the Administrator) for the Administrator (for
the benefit of the Purchasers), out of such Collections, first, an amount equal to
the Discount accrued through such day for each Portion of Capital and not previously set
aside, second, an amount equal to the fees set forth in the Fee Letter accrued and
unpaid through such day, and third, to the extent funds are available therefor, an
amount equal to the Servicing Fee accrued through such day and not previously set aside,

     (ii) subject to Section 1.6(f), if such day is not a Termination Day, remit to
the Seller, on behalf of the Purchasers, the remainder of such Collections. Such remainder
shall, to the extent representing a return on Capital, be automatically reinvested in Pool
Receivables, and in the Related Security, Collections and other proceeds with respect

6

 

thereto; provided, however, that if the Purchased Assets Coverage
Percentage would exceed 100%, then the Servicer shall not reinvest, but shall set aside and
hold in trust for the benefit of the Purchasers (and shall, at the request of the
Administrator, segregate in a separate account approved by the Administrator) a portion of
such Collections that, together with the other Collections set aside pursuant to this
paragraph, shall equal the amount necessary to reduce the Purchased Assets Coverage
Percentage to 100%,

     (iii) if such day is a Termination Day, set aside, segregate and hold in trust (and
shall, at the request of the Administrator, segregate in a separate account approved by the
Administrator) for the Purchasers, the entire remainder of such Collections;
provided, that if amounts are set aside and held in trust on any Termination Day of
the type described in clause (a) of the definition of “Termination Day” and,
thereafter, the conditions set forth in Section 2 of Exhibit II are
satisfied or waived by the Administrator, such previously set-aside amounts shall, to the
extent representing a return of the Capital, be reinvested in accordance with clause
(ii) on the day of such subsequent satisfaction or waiver of conditions, and

     (iv) subject to Section 1.6(f), pay to the Seller (on behalf of the
Administrator and the Purchasers) for the Seller’s own account and in payment of the
Deferred Purchase Price for the Purchased Assets any Collections in excess of: (x) amounts
required to be reinvested in accordance with clause (ii) above or the proviso to
clause (iii) above, plus (y) the amounts that are required to be set aside
pursuant to clause (i) above, the proviso to clause (ii) and clause
(iii) above, plus (z) all reasonable and appropriate out-of-pocket costs and
expenses of the Servicer for servicing, collecting and administering the Pool Receivables.

     (c) The Servicer shall, in accordance with the priorities set forth in Section 1.6(d),
deposit into the Administration Account (or such other account designated by the Administrator), on
each Settlement Date (or, solely with respect to Collections held for the Purchasers pursuant to
Section 1.6(f)(iii), such other date approved by the Administrator with at least five (5)
Business Days prior written notice to the Administrator of such payment), Collections held for the
Purchasers pursuant to Section 1.6(b)(i) or 1.6(f) plus the amount of Collections
then held for the Purchasers pursuant to clauses (b)(ii) and (iii) of Section
1.6; provided, that if Peabody or an Affiliate thereof is the Servicer, such day is not
a Termination Day and the Administrator has not notified Peabody (or such Affiliate) that the right
to retain the portion of Collections set aside pursuant to Section 1.6(b)(i) that
represents the Servicing Fee is revoked, Peabody (or such Affiliate) may retain the portion of the
Collections set aside pursuant to Section 1.6(b)(i) that represents the Servicing Fee in
payment in full of the accrued Servicing Fees so set aside. On the last day of each Settlement
Period, the Administrator will notify the Servicer by facsimile of the amount of Discount accrued
with respect to each Portion of Capital during such Settlement Period or portion thereof.

     (d) Upon receipt of funds deposited into the Administration Account pursuant to clause
(c) above, the Administrator shall cause such funds to be distributed as follows:

7

 

     (i) if such distribution occurs on a day that is not a Termination Day and the
Purchased Assets Coverage Percentage does not exceed 100%, first to the Purchasers
ratably (based on the aggregate accrued and unpaid Discount and fees payable to all
Purchasers at such time) in payment in full of all accrued Discount and fees (other than
Servicing Fees) with respect to each Portion of Capital, and second, if the Servicer
has set aside amounts in respect of the Servicing Fee pursuant to clause (b)(i)
above and has not retained such amounts pursuant to clause (c) above, to the
Servicer (payable in arrears on each Settlement Date) in payment in full of the accrued
Servicing Fees so set aside, and

     (ii) if such distribution occurs on a Termination Day or on a day when the Purchased
Assets Coverage Percentage exceeds 100%, first to the Purchasers ratably (based on
the aggregate accrued and unpaid Discount and fees payable to all Purchasers at such time)
in payment in full of all accrued Discount and fees (other than Servicing Fees) with respect
to each Portion of Capital, second to the Purchasers ratably (based on their
respective Portions of Capital funded thereby) in payment in full of Capital (or, if such
day is not a Termination Day, the amount necessary to reduce the Purchased Assets Coverage
Percentage to 100%) (determined as if such Collections had been applied to reduce the
aggregate outstanding Capital), third, to the LC Collateral Account for the benefit
of the LC Bank and the LC Participants, the amount (if any) necessary to cause the amount of
cash collateral held in the LC Collateral Account to equal the aggregate outstanding amount
of the LC Participation Amount (or, if such day is not a Termination Day, the amount
necessary to reduce the Purchased Assets Coverage Percentage to 100%) (determined as if such
Collections had been applied to reduce the aggregate outstanding amount of the LC
Participation Amount), fourth, to the Servicer in payment in full of all accrued
Servicing Fees, fifth, if the Capital and accrued Discount with respect to each
Portion of Capital have been reduced to zero, and all accrued Servicing Fees payable to the
Servicer have been paid in full, to the Purchasers ratably (based on their respective
Portions of Capital funded thereby), the Administrator and any other Indemnified Party or
Affected Person in payment in full of any other amounts owed thereto by the Seller
hereunder, and sixth, after the occurrence of the Final Payout Date, all additional
Collections with respect to the Purchased Assets shall be paid to the Seller for its own
account in payment of the Deferred Purchase Price for such Purchased Assets.

     (e) For the purposes of this Section 1.6:

     (i) if on any day the Outstanding Balance of any Pool Receivable is reduced or adjusted
as a result of any defective, rejected, returned, repossessed or foreclosed goods or
services, or any revision, cancellation, allowance, rebate, discount or other adjustment
made by the Seller or any Affiliate of the Seller, or any setoff or dispute between the
Seller or any Affiliate of the Seller and an Obligor, the Seller shall be deemed to have
received on such day a Collection of such Pool Receivable in the amount of such reduction or
adjustment;

     (ii) if on any day any of the representations or warranties in Section l(g) or
(n) of Exhibit III is not true with respect to any Pool Receivable, the
Seller shall be deemed to have received on such day a Collection of such Pool Receivable in
full;

8

 

     (iii) except as provided in clause (i) or (ii) above, or as otherwise
required by applicable law or the relevant Contract, all Collections received from an
Obligor of any Receivable shall be applied to the Receivables of such Obligor in the order
of the age of such Receivables, starting with the oldest such Receivable, unless such
Obligor designates in writing its payment for application to specific Receivables; and

     (iv) if and to the extent the Administrator or any Purchaser shall be required for any
reason to pay over to an Obligor (or any trustee, receiver, custodian or similar official in
any Insolvency Proceeding) any amount received by it hereunder, such amount shall be deemed
not to have been so received by the Administrator or such Purchaser but rather to have been
retained by the Seller and, accordingly, the Administrator or such Purchaser, as the case
may be, shall have a claim against the Seller for such amount, payable when and to the
extent that any distribution from or on behalf of such Obligor is made in respect thereof.

     (f) If at any time the Seller shall wish to cause the reduction of Capital (but not to
commence the liquidation, or reduction to zero, of the entire Capital), the Seller may do so as
follows:

     (i) the Seller shall give the Administrator and the Servicer written notice in the form
of Annex C (the “Paydown Notice”) (A) at least two Business Days’ prior to
the date of such reduction for any reduction of Capital less than or equal to $20,000,000
and (B) at least five Business Days’ prior to the date of such reduction for any reduction
of Capital greater than $20,000,000, in each case such notice shall include the amount of
such reduction and the proposed date on which such reduction shall commence;

     (ii) on the proposed date of the commencement of such reduction and on each day
thereafter, the Servicer shall cause Collections not to be reinvested until the amount
thereof not so reinvested shall equal the desired amount of reduction; and

     (iii) the Servicer shall hold such Collections in trust for the Purchasers, for payment
to the Administrator on the next Settlement Date immediately following the current
Settlement Period or such other date approved by the Administrator, and Capital shall be
deemed reduced in the amount to be paid to the Administrator only when in fact finally so
paid;

provided, that the amount of any such reduction shall be not less than $300,000 and shall
be an integral multiple of $100,000.

     Section 1.7 Fees.

          The Seller shall pay to the Administrator for the benefit of the Issuer, the LC Bank and each
LC Participant, certain fees in the amounts and on the dates set forth in that certain amended and
restated fee letter agreement, dated as of May 12, 2009, among Peabody, the Seller, the
Administrator and the Issuer (as such letter agreement may be amended, supplemented or otherwise
modified from time to time, the “Fee Letter”).

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     Section 1.8 Payments and Computations, Etc.

     (a) All amounts to be paid or deposited by the Seller or the Servicer hereunder shall be made
without reduction for offset or counterclaim and shall be paid or deposited no later than noon (New
York City time) on the day when due in same day funds to the Administration Account. All amounts
received after noon (New York City time) will be deemed to have been received on the next Business
Day.

     (b) The Seller or the Servicer, as the case may be, shall, to the extent permitted by law, pay
interest on any amount not paid or deposited by the Seller or the Servicer, as the case may be,
when due hereunder, at an interest rate equal to 2.0% per annum above the Base Rate, payable on
demand.

     (c) All computations of interest under clause (b) above and all computations of
Discount, fees and other amounts hereunder shall be made on the basis of a year of 360 (or 365 or
366, as applicable, with respect to Discount or other amounts calculated by reference to the Base
Rate) days for the actual number of days elapsed. Whenever any payment or deposit to be made
hereunder shall be due on a day other than a Business Day, such payment or deposit shall be made on
the next Business Day and such extension of time shall be included in the computation of such
payment or deposit.

     Section 1.9 Increased Costs.

     (a) If the Administrator, the LC Bank, the Issuer, any Purchaser, any Liquidity Bank, any
other Program Support Provider or any of their respective Affiliates (each an “Affected
Person”) reasonably determines that the existence of or compliance with: (i) any law or
regulation or any change therein or in the interpretation or application thereof, in each case
adopted, issued or occurring after the date hereof, or (ii) any request, guideline or directive
from any central bank or other Governmental Authority (whether or not having the force of law)
issued or occurring after the date of this Agreement, affects or would affect the amount of capital
required or expected to be maintained by such Affected Person, and such Affected Person determines
that the amount of such capital is increased by or based upon the existence of any commitment to
make Investments in (or otherwise to maintain the Investments in) Pool Receivables or issue any
Letter of Credit related to this Agreement or any related liquidity facility, credit enhancement
facility and other commitments of the same type, then, upon demand by such Affected Person (with a
copy to the Administrator), the Seller shall promptly pay to the Administrator, for the account of
such Affected Person, from time to time as specified by such Affected Person, additional amounts
sufficient to compensate such Affected Person in the light of such circumstances, to the extent
that such Affected Person reasonably determines such increase in capital to be allocable to the
existence of any of such commitments. A certificate as to such amounts submitted to the Seller and
the Administrator by such Affected Person shall be conclusive and binding for all purposes, absent
manifest error.

     (b) If, due to either: (i) the introduction of or any change in or in the interpretation of
any law or regulation or (ii) compliance with any guideline or request from any central bank or
other Governmental Authority (whether or not having the force of law), there shall be any

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increase in the cost to any Affected Person of agreeing to purchase or purchasing, or
maintaining the ownership of, the Purchased Assets in respect of which Discount is computed by
reference to the Euro-Rate, then, upon demand by such Affected Person, the Seller shall promptly
pay to such Affected Person, from time to time as specified by such Affected Person, additional
amounts sufficient to compensate such Affected Person for such increased costs. A certificate as
to such amounts submitted to the Seller and the Administrator by such Affected Person shall be
conclusive and binding for all purposes, absent manifest error.

     (c) If such increased costs affect the related Affected Person’s portfolio of financing
transactions, such Affected Person shall use reasonable averaging and attribution methods to
allocate such increased costs to the transactions contemplated by this Agreement.

     Section 1.10 Requirements of Law.

          If any Affected Person reasonably determines that the existence of or compliance with: (a)
any law or regulation or any change therein or in the interpretation or application thereof, in
each case adopted, issued or occurring after the date hereof, or (b) any request, guideline or
directive from any central bank or other Governmental Authority (whether or not having the force of
law) issued or occurring after the date of this Agreement:

     (i) does or shall subject such Affected Person to any tax of any kind whatsoever with
respect to this Agreement, any purchase of or investment in the Purchased Assets or any
increase in the amount of Capital relating thereto, or does or shall change the basis of
taxation of payments to such Affected Person on account of Collections, Discount or any
other amounts payable hereunder (excluding taxes imposed on the overall or branch pre-tax
net income of such Affected Person, and franchise taxes imposed on such Affected Person, by
the jurisdiction under the laws of which such Affected Person is organized or otherwise is
considered doing business (unless the Affected Person would not be considered doing business
in such jurisdiction, but for having entered into, or engaged in the transactions in
connection with, this Agreement or any other Transaction Document) or a political
subdivision thereof),

     (ii) does or shall impose, modify or hold applicable any reserve, special deposit,
compulsory loan or similar requirement against assets held by, or deposits or other
liabilities in or for the account of, purchases, advances or loans by, or other credit
extended by, or any other acquisition of funds by, any office of such Affected Person that
are not otherwise included in the determination of the Euro-Rate or the Base Rate hereunder,
or

     (iii) does or shall impose on such Affected Person any other condition, and the result
of any of the foregoing is: (A) to increase the cost to such Affected Person of agreeing to
purchase or purchasing or maintaining the ownership of, or issuing any Letter of Credit in
respect of, the Purchased Assets (or interests therein) or any Portion of Capital, or (B) to
reduce any amount receivable hereunder (whether directly or indirectly), then, in any such
case, upon demand by such Affected Person, the Seller shall promptly pay to such Affected
Person additional amounts necessary to compensate such

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Affected Person for such additional cost or reduced amount receivable. All such
amounts shall be payable as incurred. A certificate from such Affected Person to the Seller
and the Administrator certifying, in reasonably specific detail, the basis for, calculation
of, and amount of such additional costs or reduced amount receivable shall be conclusive and
binding for all purposes, absent manifest error; provided, however, that no
Affected Person shall be required to disclose any confidential or tax planning information
in any such certificate.

     Section 1.11 Inability to Determine Euro-Rate.

     (a) If the Administrator determines before the first day of any Settlement Period (which
determination shall be final and conclusive) that, by reason of circumstances affecting the
interbank eurodollar market generally, deposits in dollars (in the relevant amounts for such
Settlement Period) are not being offered to banks in the interbank eurodollar market for such
Settlement Period, or adequate means do not exist for ascertaining the Euro-Rate for such
Settlement Period, then the Administrator shall give notice thereof to the Seller. Thereafter,
until the Administrator notifies the Seller that the circumstances giving rise to such suspension
no longer exist, (i) no Portion of Capital shall be funded at the Alternate Rate determined by
reference to the Euro-Rate and (ii) the Discount for any outstanding Portions of Capital then
funded at the Alternate Rate determined by reference to the Euro-Rate shall, on the last day of the
then current Settlement Period, be converted to the Alternate Rate determined by reference to the
Base Rate.

     (b) If, on or before the first day of any Settlement Period, the Administrator shall have been
notified by any Affected Person that, such Affected Person has determined (which determination
shall be final and conclusive) that, any enactment, promulgation or adoption of or any change in
any applicable law, rule or regulation, or any change in the interpretation or administration
thereof by a governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by such Affected Person with any guideline,
request or directive (whether or not having the force of law) of any such authority, central bank
or comparable agency shall make it unlawful or impossible for such Affected Person to fund or
maintain any Portion of Capital at the Alternate Rate and based upon the Euro-Rate, the
Administrator shall notify the Seller thereof. Upon receipt of such notice, until the
Administrator notifies the Seller that the circumstances giving rise to such determination no
longer apply, (i) no Portion of Capital shall be funded at the Alternate Rate determined by
reference to the Euro-Rate and (ii) the Discount for any outstanding Portions of Capital then
funded at the Alternate Rate determined by reference to the Euro-Rate shall be converted to the
Alternate Rate determined by reference to the Base Rate either (A) on the last day of the then
current Settlement Period if such Affected Person may lawfully continue to maintain such Portion of
Capital at the Alternate Rate determined by reference to the Euro-Rate to such day, or (B)
immediately, if such Affected Person may not lawfully continue to maintain such Portion of Capital
at the Alternate Rate determined by reference to the Euro-Rate to such day.

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     Section 1.12 Extension of the Facility Termination Date.

          Provided that no Termination Event or Unmatured Termination Event exists and is continuing,
the Seller may request the extension of the Facility Termination Date by providing written notice
to the Administrator; provided such request is made not more than 120 days prior to, and
not less than 60 days prior to, the then current Facility Termination Date. In the event that the
Purchasers are all agreeable to such extension, the Administrator shall so notify the Seller and
the Servicer in writing (it being understood that the Purchasers may accept or decline such
a request in their sole discretion and on such terms as they may elect) not less than 30 days prior
to the then current Facility Termination Date and the Seller, the Servicer, the Sub-Servicers, the
Administrator and the Purchasers shall enter into such documents as the Administrator and the
Purchasers may deem necessary or appropriate to reflect such extension, and all reasonable costs
and expenses incurred by the Purchasers and the Administrator in connection therewith (including
reasonable Attorney Costs) shall be paid by the Seller. In the event any Purchaser declines the
request for such extension, such Purchaser shall so notify the Administrator and the Administrator
shall so notify the Seller of such determination; provided, that the failure of the
Administrator to notify the Seller of the determination to decline such extension shall not affect
the understanding and agreement that the applicable Purchasers shall be deemed to have refused to
grant the requested extension in the event the Administrator fails to affirmatively notify the
Seller, in writing, of their agreement to accept the requested extension.

     Section 1.13 Letters of Credit.

          Subject to the terms and conditions hereof, the LC Bank shall issue or cause the issuance of
standby Letters of Credit (“Letters of Credit”) on behalf of Seller (and, if applicable, on
behalf of, or for the account of, the Servicer or any Sub-Servicer); provided,
however, that the LC Bank will not be required to issue or cause to be issued any Letters
of Credit to the extent that the issuance of such Letters of Credit would then cause the sum of (i)
the outstanding Capital plus (ii) the LC Participation Amount to exceed the Purchase Limit. The LC
Participation Amount shall not exceed in the aggregate, at any time, the aggregate of the
Commitments of the LC Bank and the LC Participants. All amounts drawn upon Letters of Credit shall
accrue Discount. Letters of Credit that have not been drawn upon shall not accrue Discount.

     Section 1.14 Issuance of Letters of Credit.

     (a) The Seller may request the LC Bank, upon two (2) Business Days’ prior written notice
submitted on or before 11:00 a.m., New York time, to issue a Letter of Credit by delivering to the
Administrator an Investment Notice substantially in the form of Annex B attached hereto and
the LC Bank’s form of Letter of Credit Application (the “Letter of Credit Application”),
substantially in the form of Annex E attached hereto completed to the satisfaction of the
Administrator and the LC Bank; and, such other certificates, documents and other papers and
information as the Administrator may reasonably request. The Seller also has the right to give
instructions and make agreements with respect to any Letter of Credit Application and the
disposition of documents, and to agree with the Administrator upon any amendment, extension or
renewal of any Letter of Credit.

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     (b) Each Letter of Credit shall, among other things, (i) provide for the payment of sight
drafts or other written demands for payment when presented for honor thereunder in accordance with
the terms thereof and when accompanied by the documents described therein and (ii) have an expiry
date not later than twelve (12) months after such Letter of Credit’s date of issuance, extension or
renewal, as the case may be, and in no event later than twelve (12) months after the Facility
Termination Date. Each Letter of Credit shall be subject either to the Uniform Customs and
Practice for Documentary Credits (2007 Revision), International Chamber of Commerce Publication No.
600, and any amendments or revisions thereof adhered to by the LC Bank (“UCP 600”) or the
International Standby Practices (ISP98-International Chamber of Commerce Publication Number 590),
and any amendments or revisions thereof adhered to by the LC Bank (the “ISP98 Rules”), as
determined by the LC Bank.

     (c) The Administrator shall promptly notify the LC Bank , at its address for notices
hereunder, and each LC Participant of the request by the Seller for a Letter of Credit hereunder,
and shall provide the LC Bank with the Letter of Credit Application delivered to the Administrator
by the Seller pursuant to paragraph (a), above, by the close of business on the day
received or if received on a day that is not a Business Day or on any Business Day after 11:00 a.m.
New York time on such day, on the next Business Day.

     Section 1.15 Requirements For Issuance of Letters of Credit.

     The Seller shall authorize and direct the LC Bank to name the Seller as the “Applicant” or
“Account Party” of each Letter of Credit.

     Section 1.16 Disbursements, Reimbursement.

     (a) Immediately upon the issuance of each Letter of Credit, each LC Participant shall be
deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the LC Bank a
participation in such Letter of Credit and each drawing thereunder in an amount equal to such LC
Participant’s Pro Rata Share of the face amount of such Letter of Credit and the amount of such
drawing, respectively.

     (b) In the event of any request for a drawing under a Letter of Credit by the beneficiary or
transferee thereof, the LC Bank will promptly notify the Administrator and the Seller of such
request. Provided that it shall have received such notice, the Seller shall reimburse (such
obligation to reimburse the LC Bank shall sometimes be referred to as a “Reimbursement
Obligation”) the LC Bank prior to 12:00 p.m., New York time on each date that an amount is paid
by the LC Bank under any Letter of Credit (each such date, a “Drawing Date”) in an amount
equal to the amount so paid by the LC Bank. In the event the Seller fails to reimburse the LC Bank
for the full amount of any drawing under any Letter of Credit by 12:00 p.m., New York time, on the
Drawing Date, the LC Bank will promptly notify each LC Participant thereof, and the Seller shall be
deemed to have requested that an Investment be made by the LC Bank and the LC Participants to be
disbursed on the Drawing Date under such Letter of Credit, subject to the amount of the unutilized
portion of the Purchase Limit. Any notice given by the LC Bank pursuant to this Section may be
oral if immediately confirmed in writing; provided that the lack

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of such an immediate confirmation shall not affect the conclusiveness or binding effect of
such notice.

     (c) Each LC Participant shall upon any notice pursuant to clause (b) above make
available to the LC Bank an amount in immediately available funds equal to its Pro Rata Share of
the amount of the drawing, whereupon the LC Participants shall each be deemed to have made an
Investment in that amount. If any LC Participant so notified fails to make available to the LC
Bank the amount of such LC Participant’s Pro Rata Share of such amount by no later than 2:00 p.m.,
New York time on the Drawing Date, then interest shall accrue on such LC Participant’s obligation
to make such payment, from the Drawing Date to the date on which such LC Participant makes such
payment (i) at a rate per annum equal to the Federal Funds Rate during the first three days
following the Drawing Date and (ii) at a rate per annum equal to the rate applicable to Capital on
and after the fourth day following the Drawing Date. The LC Bank will promptly give notice of the
occurrence of the Drawing Date, but failure of the LC Bank to give any such notice on the Drawing
Date or in sufficient time to enable any LC Participant to effect such payment on such date shall
not relieve such LC Participant from its obligation under this clause (c), provided
that such LC Participant shall not be obligated to pay interest as provided in subclauses
(i) and (ii) above until and commencing from the date of receipt of notice from the LC
Bank or the Administrator of a drawing. Each LC Participant’s Commitment shall continue until the
last to occur of any of the following events: (A) the LC Bank ceases to be obligated to issue or
cause to be issued Letters of Credit hereunder; (B) no Letter of Credit issued hereunder remains
outstanding and uncancelled or (C) all Persons (other than the Seller) have been fully reimbursed
for all payments made under or relating to Letters of Credit.

     Section 1.17 Repayment of Participation Advances.

     (a) Upon (and only upon) receipt by the LC Bank for its account of immediately available funds
from the Seller (i) in reimbursement of any payment made by the LC Bank under a Letter of Credit
with respect to which any LC Participant has made a participation advance to the LC Bank, or (ii)
in payment of Discount on the Investments made or deemed to have been made in connection with any
such draw, the LC Bank will pay to each LC Participant, ratably (based on the outstanding drawn
amounts funded by each such LC Participant in respect of such Letter of Credit), in the same funds
as those received by the LC Bank; it being understood, that the LC Bank
shall retain a ratable amount of such funds that were not the subject of any payment in respect of
such Letter of Credit by any LC Participant.

     (b) If the LC Bank is required at any time to return to the Seller, or to a trustee, receiver,
liquidator, custodian, or any official in any insolvency proceeding, any portion of the payments
made by the Seller to the LC Bank pursuant to this Agreement in reimbursement of a payment made
under the Letter of Credit or interest or fee thereon, each LC Participant shall, on demand of the
LC Bank, forthwith return to the LC Bank the amount of its Pro Rata Share of any amounts so
returned by the LC Bank plus interest at the Federal Funds Rate.

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     Section 1.18 Documentation.

          The Seller agrees to be bound by the terms of the Letter of Credit Application and by the LC
Bank’s interpretations of any Letter of Credit issued for the Seller and by the LC Bank’s written
regulations and customary practices relating to letters of credit, though the LC Bank’s
interpretation of such regulations and practices may be different from the Seller’s own. In the
event of a conflict between the Letter of Credit Application and this Agreement, this Agreement
shall govern. It is understood and agreed that, except in the case of gross negligence or willful
misconduct by the LC Bank, the LC Bank shall not be liable for any error, negligence and/or
mistakes, whether of omission or commission, in following the Seller’s instructions or those
contained in the Letters of Credit or any modifications, amendments or supplements thereto.

     Section 1.19 Determination to Honor Drawing Request.

          In determining whether to honor any request for drawing under any Letter of Credit by the
beneficiary thereof, the LC Bank shall be responsible only to determine that the documents and
certificates required to be delivered under such Letter of Credit have been delivered and that they
comply on their face with the requirements of such Letter of Credit and that any other drawing
condition appearing on the face of such Letter of Credit has been satisfied in the manner so set
forth.

     Section 1.20 Nature of Participation and Reimbursement Obligations.

          Each LC Participant’s obligation in accordance with this Agreement to make participation
advances as a result of a drawing under a Letter of Credit, and the obligations of the Seller to
reimburse the LC Bank upon a draw under a Letter of Credit, shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance with the terms of this Article I
under all circumstances, including the following circumstances:

     (i) any set-off, counterclaim, recoupment, defense or other right which such LC
Participant may have against the LC Bank, the Administrator, the Issuer, the Seller or any
other Person for any reason whatsoever;

     (ii) the failure of the Seller or any other Person to comply with the conditions set
forth in this Agreement for the making of an Investment, Reinvestments, requests for Letters
of Credit or otherwise, it being acknowledged that such conditions are not required for the
making of participation advances hereunder;

     (iii) any lack of validity or enforceability of any Letter of Credit;

     (iv) any claim of breach of warranty that might be made by the Seller, the LC Bank or
any LC Participant against the beneficiary of a Letter of Credit, or the existence of any
claim, set-off, defense or other right which the Seller, the LC Bank or any LC Participant
may have at any time against a beneficiary, any successor beneficiary or any transferee of
any Letter of Credit or the proceeds thereof (or any Persons for whom any such transferee
may be acting), the LC Bank, any LC Participant, the Issuer or any other

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Person, whether in connection with this Agreement, the transactions contemplated herein
or any unrelated transaction (including any underlying transaction between the Seller or any
Subsidiaries of the Seller or any Affiliates of the Seller and the beneficiary for which any
Letter of Credit was procured);

     (v) the lack of power or authority of any signer of, or lack of validity, sufficiency,
accuracy, enforceability or genuineness of, any draft, demand, instrument, certificate or
other document presented under any Letter of Credit, or any such draft, demand, instrument,
certificate or other document proving to be forged, fraudulent, invalid, defective or
insufficient in any respect or any statement therein being untrue or inaccurate in any
respect, even if the Administrator or the LC Bank has been notified thereof;

     (vi) payment by the LC Bank under any Letter of Credit against presentation of a
demand, draft or certificate or other document which does not comply with the terms of such
Letter of Credit other than as a result of the gross negligence or willful misconduct of the
LC Bank;

     (vii) the solvency of, or any acts or omissions by, any beneficiary of any Letter of
Credit, or any other Person having a role in any transaction or obligation relating to a
Letter of Credit, or the existence, nature, quality, quantity, condition, value or other
characteristic of any property or services relating to a Letter of Credit;

     (viii) any failure by the LC Bank or any of the LC Bank’s Affiliates to issue any
Letter of Credit in the form requested by the Seller, unless the LC Bank has received
written notice from the Seller of such failure within three Business Days after the LC Bank
shall have furnished the Seller a copy of such Letter of Credit and such error is material
and no drawing has been made thereon prior to receipt of such notice;

     (ix) any Material Adverse Effect on the Seller, any Originator or any Affiliates
thereof;

     (x) any breach of this Agreement or any Transaction Document by any party thereto;

     (xi) the occurrence or continuance of an Insolvency Proceeding with respect to the
Seller, any Originator or any Affiliate thereof;

     (xii) the fact that a Termination Event or an Unmatured Termination Event shall have
occurred and be continuing;

     (xiii) the fact that this Agreement or the obligations of Seller or Servicer hereunder
shall have been terminated; and

     (xiv) any other circumstance or happening whatsoever, whether or not similar to any of
the foregoing.

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     Nothing in this Section 1.20 shall relieve the LC Bank from liability for its gross
negligence or willful misconduct, as determined by a final non-appealable judgment of a court of
competent jurisdiction.

     Section 1.21 Indemnity.

          In addition to other amounts payable hereunder, the Seller hereby agrees to protect,
indemnify, pay and save harmless the Administrator, the LC Bank, each LC Participant and any of the
LC Bank’s Affiliates that have issued a Letter of Credit from and against any and all claims,
demands, liabilities, damages, taxes, penalties, interest, judgments, losses, costs, charges and
expenses (including Attorney Costs) which the Administrator, the LC Bank, any LC Participant or any
of their respective Affiliates may incur or be subject to as a consequence, direct or indirect, of
the issuance of any Letter of Credit, other than as a result of (a) the gross negligence or willful
misconduct of the party to be indemnified as determined by a final judgment of a court of competent
jurisdiction or (b) the wrongful dishonor by the LC Bank of a proper demand for payment made under
any Letter of Credit, except if such dishonor resulted from any act or omission, whether rightful
or wrongful, of any present or future de jure or de facto Governmental Authority (all such acts or
omissions herein called “Governmental Acts”).

     Section 1.22 Liability for Acts and Omissions.

          As between the Seller, on the one hand, and the Administrator, the LC Bank, the LC
Participants and the Issuer, on the other, the Seller assumes all risks of the acts and omissions
of, or misuse of the Letters of Credit by, the respective beneficiaries of such Letters of Credit.
In furtherance and not in limitation of the respective foregoing, none of the Administrator, the LC
Bank, the LC Participants or the Issuer shall be responsible for: (i) the form, validity,
sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in
connection with the application for an issuance of any such Letter of Credit, even if it should in
fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged
(even if the LC Bank shall have been notified thereof); (ii) the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign any such Letter of Credit
or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason; (iii) the failure of the beneficiary of any such Letter
of Credit, or any other party to which such Letter of Credit may be transferred, to comply fully
with any conditions required in order to draw upon such Letter of Credit or any other claim of the
Seller against any beneficiary of such Letter of Credit, or any such transferee, or any dispute
between or among the Seller and any beneficiary of any Letter of Credit or any such transferee;
(iv) errors, omissions, interruptions or delays in transmission or delivery of any messages, by
mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (v) errors in
interpretation of technical terms; (vi) any loss or delay in the transmission or otherwise of any
document required in order to make a drawing under any such Letter of Credit or of the proceeds
thereof; (vii) the misapplication by the beneficiary of any such Letter of Credit of the proceeds
of any drawing under such Letter of Credit; or (viii) any consequences arising from causes beyond
the control of the Administrator, the LC Bank, the LC Participants and the Issuer, including any
Governmental Acts, and none of the above shall

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affect or impair, or prevent the vesting of, any of the LC Bank’s rights or powers hereunder.
Nothing in the preceding sentence shall relieve the LC Bank from liability for its gross negligence
or willful misconduct, as determined by a final non-appealable judgment of a court of competent
jurisdiction, in connection with actions or omissions described in such clauses (i) through (viii)
of such sentence. In no event shall the Administrator, the LC Bank, the LC Participants, the
Issuer or their respective Affiliates, be liable to the Seller or any other Person for any
indirect, consequential, incidental, punitive, exemplary or special damages or expenses (including
without limitation attorneys’ fees), or for any damages resulting from any change in the value of
any property relating to a Letter of Credit.

          Without limiting the generality of the foregoing, the Administrator, the LC Bank, the LC
Participants and the Issuer and each of its Affiliates (i) may rely on any written communication
believed in good faith by such Person to have been authorized or given by or on behalf of the
applicant for a Letter of Credit; (ii) may honor any presentation if the documents presented appear
on their face to comply with the terms and conditions of the relevant Letter of Credit; (iii) may
honor a previously dishonored presentation under a Letter of Credit, whether such dishonor was
pursuant to a court order, to settle or compromise any claim of wrongful dishonor, or otherwise,
and shall be entitled to reimbursement to the same extent as if such presentation had initially
been honored, together with any interest paid by the LC Bank or its Affiliates; (iv) may honor any
drawing that is payable upon presentation of a statement advising negotiation or payment, upon
receipt of such statement (even if such statement indicates that a draft or other document is being
delivered separately), and shall not be liable for any failure of any such draft or other document
to arrive, or to conform in any way with the relevant Letter of Credit; (v) may pay any paying or
negotiating bank claiming that it rightfully honored under the laws or practices of the place where
such bank is located; and (vi) may settle or adjust any claim or demand made on the Administrator,
the LC Bank, the LC Participants, the Issuer or their respective Affiliates, in any way related to
any order issued at the applicant’s request to an air carrier, a letter of guarantee or of
indemnity issued to a carrier or any similar document (each an “Order”) and honor any
drawing in connection with any Letter of Credit that is the subject of such Order, notwithstanding
that any drafts or other documents presented in connection with such Letter of Credit fail to
conform in any way with such Letter of Credit.

          In furtherance and extension and not in limitation of the specific provisions set forth above,
any action taken or omitted by the LC Bank under or in connection with the Letters of Credit issued
by it or any documents and certificates delivered thereunder, if taken or omitted in good faith and
without gross negligence or willful misconduct, as determined by a final non-appealable judgment of
a court of competent jurisdiction, shall not put the LC Bank under any resulting liability to the
Seller, any LC Participant or any other Person.

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ARTICLE II.

REPRESENTATIONS AND WARRANTIES; COVENANTS; TERMINATION EVENTS

     Section 2.1 Representations and Warranties; Covenants.

          Each of the Seller, Peabody and the Servicer hereby makes the representations and warranties,
and hereby agrees to perform and observe the covenants, applicable to it set forth in Exhibits
III and IV, respectively.

     Section 2.2 Termination Events.

          If any of the Termination Events set forth in Exhibit V shall occur, the Administrator
may, by notice to the Seller, declare the Facility Termination Date to have occurred (in which case
the Facility Termination Date shall be deemed to have occurred); provided, that
automatically upon the occurrence of any event (without any requirement for the passage of time or
the giving of notice) described in paragraph (f) of Exhibit V, the Facility
Termination Date shall occur. Upon any such declaration, occurrence or deemed occurrence of the
Facility Termination Date, the Purchasers and the Administrator shall have, in addition to the
rights and remedies that they may have under this Agreement, all other rights and remedies provided
after default under the Illinois UCC and under other applicable law, which rights and remedies
shall be cumulative.

ARTICLE III.

INDEMNIFICATION

     Section 3.1 Indemnities by the Seller.

          Without limiting any other rights that the Administrator, the Purchasers, the Liquidity Banks,
any Program Support Provider or any of their respective Affiliates, employees, officers, directors,
agents, counsel, successors, transferees or permitted assigns (each, an “Indemnified
Party”) may have hereunder or under applicable law, the Seller hereby agrees to indemnify each
Indemnified Party from and against any and all claims, damages, expenses, costs, losses and
liabilities (including Attorney Costs) (all of the foregoing being collectively referred to as
“Indemnified Amounts”) arising out of or resulting from this Agreement (whether directly or
indirectly), the use of proceeds of Investments or Reinvestments, the ownership of any portion of
the Purchased Assets, or any interest therein, or in respect of any Receivable, Related Security or
Contract, excluding, however: (a) Indemnified Amounts to the extent resulting from gross
negligence or willful misconduct on the part of such Indemnified Party or its officers, directors,
agents, counsel, successors, transferees or permitted assigns, (b) any indemnification which has
the effect of recourse for the non-payment of the Receivables to any indemnitor (except as
otherwise specifically provided in this Agreement), or (c) overall net income taxes or franchise
taxes imposed on such Indemnified Party by the jurisdiction under the laws of which such
Indemnified Party is organized or any political subdivision thereof. Without limiting or being
limited by the foregoing, and subject to the exclusions set forth in the preceding sentence, the
Seller shall pay on demand (which demand shall be accompanied by documentation of the Indemnified
Amounts, in reasonable detail) to each Indemnified Party any and all amounts

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necessary to indemnify such Indemnified Party from and against any and all Indemnified Amounts
relating to or resulting from any of the following:

               (i) the failure of any Receivable included in the calculation of the Net Receivables Pool
Balance as an Eligible Receivable to be an Eligible Receivable, the failure of any information
contained in an Information Package to be true and correct, or the failure of any other information
provided to any Purchaser or the Administrator with respect to Receivables or this Agreement to be
true and correct,

               (ii) the failure of any representation, warranty or statement made or deemed made by the
Seller (or any of its officers) under or in connection with this Agreement to have been true and
correct as of the date made or deemed made in all respects when made,

               (iii) the failure by the Seller to comply with any applicable law, rule or regulation with
respect to any Pool Receivable or the related Contract, or the failure of any Pool Receivable or
the related Contract to conform to any such applicable law, rule or regulation,

               (iv) the failure to vest in the Administrator (on behalf of the Purchasers) a valid and
enforceable first priority perfected ownership or security interest in the Pool Assets, free and
clear of any Adverse Claim,

               (v) the failure to have filed, or any delay in filing, financing statements or other similar
instruments or documents under the UCC of any applicable jurisdiction or other applicable laws with
respect to any Receivables in, or purporting to be in, the Receivables Pool and the other Pool
Assets, whether at the time of any Investment or Reinvestment or at any subsequent time,

               (vi) any dispute, claim, offset or defense (other than discharge in bankruptcy of the Obligor)
of the Obligor to the payment of any Receivable in, or purporting to be in, the Receivables Pool
(including a defense based on such Receivable or the related Contract not being a legal, valid and
binding obligation of such Obligor enforceable against it in accordance with its terms), or any
other claim resulting from the sale of the goods or services related to such Receivable or the
furnishing or failure to furnish such goods or services or relating to collection activities with
respect to such Receivable (if such collection activities were performed by the Seller or any of
its Affiliates acting as Servicer or by any agent or independent contractor retained by the Seller
or any of its Affiliates),

               (vii) any failure of the Seller (or any of its Affiliates acting as the Servicer) to perform
its duties or obligations in accordance with the provisions hereof or under the Contracts,

               (viii) any products liability or other claim, investigation, litigation or proceeding arising
out of or in connection with merchandise, insurance or services that are the subject of any
Contract,

               (ix) the commingling of Collections at any time with other funds,

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               (x) the use of proceeds of Investments or Reinvestments, or

               (xi) any reduction in Capital as a result of the distribution of Collections pursuant to
Section 1.6(d), if all or a portion of such distributions shall thereafter be rescinded or
otherwise must be returned for any reason.

     Section 3.2 Indemnities by the Servicer.

          Without limiting any other rights that the Administrator, any Purchasers, any Liquidity Banks,
any Program Support Provider or any other Indemnified Party may have hereunder or under applicable
law, the Servicer hereby agrees to indemnify each Indemnified Party from and against any and all
Indemnified Amounts arising out of or resulting from (whether directly or indirectly): (a) the
failure of any information contained in an Information Package to be true and correct, or the
failure of any other information provided to any such Indemnified Party by, or on behalf of, the
Servicer to be true and correct, (b) the failure of any representation, warranty or statement made
or deemed made by the Servicer (or any of its officers) under or in connection with this Agreement
to have been true and correct as of the date made or deemed made in all respects when made, (c) the
failure by the Servicer to comply with any applicable law, rule or regulation with respect to any
Pool Receivable or the related Contract, (d) any dispute, claim, offset or defense of the Obligor
to the payment of any Receivable in, or purporting to be in, the Receivables Pool resulting from or
related to the collection activities with respect to such Receivable, or (e) any failure of the
Servicer to perform its duties or obligations in accordance with the provisions hereof.

ARTICLE IV.

ADMINISTRATION AND COLLECTIONS

     Section 4.1 Appointment of the Servicer.

     (a) The servicing, administering and collection of the Pool Receivables shall be conducted by
the Person so designated from time to time as the Servicer in accordance with this Section. Until
the Administrator gives notice to Peabody (in accordance with this Section) of the designation of a
new Servicer, Peabody is hereby designated as, and hereby agrees to perform the duties and
obligations of, the Servicer pursuant to the terms hereof. Upon the occurrence of a Termination
Event, the Administrator may designate as Servicer any Person (including itself) to succeed Peabody
or any successor Servicer, on the condition in each case that any such Person so designated shall
agree to perform the duties and obligations of the Servicer pursuant to the terms hereof.

     (b) Upon the designation of a successor Servicer as set forth in clause (a) above,
Peabody agrees that it will terminate its activities as Servicer hereunder in a manner that the
Administrator determines will facilitate the transition of the performance of such activities to
the new Servicer, and Peabody shall cooperate with and assist such new Servicer. Such cooperation
shall include access to and transfer of related records and use by the new Servicer of all
licenses, hardware or software necessary or desirable to collect the Pool Receivables and the
Related Security.

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     (c) Peabody acknowledges that, in making their decision to execute and deliver this Agreement,
the Administrator and the Purchasers have relied on Peabody’s agreement to act as Servicer
hereunder. Accordingly, Peabody agrees that it will not voluntarily resign as Servicer.

     (d) The Servicer may and hereby does delegate its duties and obligations hereunder to the
Originators as subservicer (each a “Sub-Servicer”); provided, that, in such
delegation: (i) each such Sub-Servicer shall and hereby does agree in writing to perform the
duties and obligations of the Servicer pursuant to the terms hereof, (ii) the Servicer shall remain
primarily liable for the performance of the duties and obligations so delegated, (iii) the Seller,
the Administrator and the Purchasers shall have the right to look solely to the Servicer for
performance, and (iv) the terms of any agreement with any Sub-Servicer shall and hereby do provide
that the Administrator may terminate such agreement upon the termination of the Servicer hereunder
by giving notice of its desire to terminate such agreement to the Servicer (and the Servicer shall
provide appropriate notice to each such Sub-Servicer); provided, however, that if
any such delegation is to any Person other than Arclar Company, LLC, Peabody Midwest Mining, LLC,
Twentymile Coal, LLC, Caballo Coal, LLC, COALSALES II, LLC, Peabody Western Coal Company, Powder
River Coal, LLC, Peabody Holding Company, LLC, COALTRADE, LLC, Peabody COALTRADE International
(CTI), LLC, or COALSALES, LLC, the Administrator shall have consented in writing in advance to such
delegation.

     Section 4.2 Duties of the Servicer.

     (a) The Servicer shall take or cause to be taken all such action as may be necessary or
advisable to administer and collect each Pool Receivable from time to time, all in accordance with
this Agreement and all applicable laws, rules and regulations, with reasonable care and diligence,
and in accordance with the Credit and Collection Policies. The Servicer shall set aside, for the
accounts of the Seller and the Purchasers, the amount of the Collections to which each is entitled
in accordance with Article I. The Servicer may, in accordance with the applicable Credit
and Collection Policy, extend the maturity of any Pool Receivable and extend the maturity or adjust
the Outstanding Balance of any Defaulted Receivable as the Servicer may determine to be appropriate
to maximize Collections thereof; provided, however, that: for the purposes of this
Agreement, (i) such extension shall not change the number of days such Pool Receivable has remained
unpaid from the date of the invoice date related to such Pool Receivable, (ii) such extension or
adjustment shall not alter the status of such Pool Receivable as a Delinquent Receivable or a
Defaulted Receivable or limit the rights of any of the Purchasers or the Administrator under this
Agreement and (iii) if a Termination Event has occurred and is continuing and Peabody or an
Affiliate thereof is serving as the Servicer, Peabody or such Affiliate may make such extension or
adjustment only upon the prior approval of the Administrator. The Seller shall deliver to the
Servicer and the Servicer shall hold for the benefit of the Seller and the Administrator
(individually and for the benefit of the Purchasers), in accordance with their respective
interests, all records and documents (including computer tapes or disks) with respect to each Pool
Receivable. Notwithstanding anything to the contrary contained herein, the Administrator may
direct the Servicer (whether the Servicer is Peabody or any other Person) to commence or settle any
legal action to enforce collection of any Pool Receivable or to foreclose upon or repossess any
Related Security.

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     (b) The Servicer shall, as soon as practicable following actual receipt of collected funds,
turn over to the Seller the collections of any indebtedness that is not a Pool Receivable, less, if
Peabody or an Affiliate thereof is not the Servicer, all reasonable and appropriate out-of-pocket
costs and expenses of such Servicer of servicing, collecting and administering such collections.
The Servicer, if other than Peabody or an Affiliate thereof, shall, as soon as practicable upon
demand, deliver to the Seller all records in its possession that evidence or relate to any
indebtedness that is not a Pool Receivable, and copies of records in its possession that evidence
or relate to any indebtedness that is a Pool Receivable.

     (c) The Servicer’s obligations hereunder shall terminate on the Final Payout Date.

     After such termination, if Peabody or an Affiliate thereof was not the Servicer on the date of
such termination, the Servicer shall promptly deliver to the Seller all books, records and related
materials that the Seller previously provided to the Servicer, or that have been obtained by the
Servicer, in connection with this Agreement.

     Section 4.3 Lock-Box Arrangements.

          Prior to the Closing Date, the Seller shall enter into Lock-Box Agreements with all of the
Lock-Box Banks and deliver original counterparts thereof to the Administrator. Upon the occurrence
of a Termination Event, the Administrator may at any time thereafter give notice to each Lock-Box
Bank that the Administrator is exercising its rights under the Lock-Box Agreements to do any or all
of the following: (a) to have the exclusive ownership and control of the Lock-Box Accounts
transferred to the Administrator and to exercise exclusive dominion and control over the funds
deposited therein, (b) to have the proceeds that are sent to the respective Lock-Box Accounts
redirected pursuant to the Administrator’s instructions rather than deposited in the applicable
Lock-Box Account, and (c) to take any or all other actions permitted under the applicable Lock-Box
Agreement. The Seller hereby agrees that if the Administrator at any time takes any action set
forth in the preceding sentence, the Administrator shall have exclusive control of the proceeds
(including Collections) of all Pool Receivables and the Seller hereby further agrees to take any
other action that the Administrator may reasonably request to transfer such control. Any proceeds
of Pool Receivables received by the Seller or the Servicer thereafter shall be sent immediately to
the Administrator. The parties hereto hereby acknowledge that if at any time the Administrator
takes control of any Lock-Box Account, the Administrator shall not have any rights to the funds
therein in excess of the unpaid amounts due to the Administrator, the Purchasers or any other
Person hereunder, and the Administrator shall distribute or cause to be distributed such funds in
accordance with Section 4.2(b) and Article I (in each case as if such funds were
held by the Servicer thereunder).

     Section 4.4 Enforcement Rights.

     (a) At any time following the occurrence and during the continuation of a Termination Event:

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          (i) the Administrator may direct the Obligors that payment of all amounts payable under
any Pool Receivable is to be made directly to the Administrator or its designee,

          (ii) the Administrator may instruct the Seller or the Servicer to give notice of the
Purchasers’ interest in Pool Receivables to each Obligor, which notice shall direct that
payments be made directly to the Administrator or its designee, and the Seller or the
Servicer, as the case may be, shall give such notice at the expense of the Seller or the
Servicer, as the case may be; provided, that if the Seller or the Servicer, as the
case may be, fails to so notify each Obligor, the Administrator (at the Seller’s or the
Servicer’s, as the case may be, expense) may so notify the Obligors, and

          (iii) the Administrator may request the Servicer to, and upon such request the Servicer
shall: (A) assemble all of the records necessary or desirable to collect the Pool
Receivables and the Related Security, and transfer or license to a successor Servicer the
use of all software necessary or desirable to collect the Pool Receivables and the Related
Security, and make the same available to the Administrator or its designee at a place
selected by the Administrator, and (B) segregate all cash, checks and other instruments
received by it from time to time constituting Collections in a manner acceptable to the
Administrator and, promptly upon receipt, remit all such cash, checks and instruments, duly
endorsed or with duly executed instruments of transfer, to the Administrator or its
designee.

     (b) The Seller hereby authorizes the Administrator, and irrevocably appoints the Administrator
as its attorney-in-fact with full power of substitution and with full authority in the place and
stead of the Seller, which appointment is coupled with an interest, to take any and all steps in
the name of the Seller and on behalf of the Seller necessary or desirable following the occurrence
and during the continuation of a Termination Event, in the determination of the Administrator, to
collect any and all amounts or portions thereof due under any and all Pool Assets, including
endorsing the name of the Seller on checks and other instruments representing Collections and
enforcing such Pool Assets. Notwithstanding anything to the contrary contained in this subsection,
none of the powers conferred upon such attorney-in-fact pursuant to the preceding sentence shall
subject such attorney-in-fact to any liability if any action taken by it shall prove to be
inadequate or invalid, nor shall they confer any obligations upon such attorney-in-fact in any
manner whatsoever.

     Section 4.5 Responsibilities of the Seller.

     (a) Anything herein to the contrary notwithstanding, the Seller shall: (i) perform all of its
obligations, if any, under the Contracts related to the Pool Receivables to the same extent as if
such Pool Receivables had not been transferred hereunder, and the exercise by the Administrator or
any Purchaser of their respective rights hereunder shall not relieve the Seller from such
obligations, and (ii) pay when due any taxes, including any sales taxes payable in connection with
the Pool Receivables and their creation and satisfaction. Neither the Administrator nor any
Purchaser shall have any obligation or liability with respect to any Pool

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Asset, nor shall any of them be obligated to perform any of the obligations of the Seller,
Peabody or any Originator thereunder.

     (b) Peabody hereby irrevocably agrees that if at any time it shall cease to be the Servicer
hereunder, it shall act (if the then-current Servicer so requests) as the data-processing agent of
the Servicer and, in such capacity, Peabody shall conduct the data-processing functions of the
administration of the Receivables and the Collections thereon in substantially the same way that
Peabody conducted such data-processing functions while it acted as the Servicer.

     Section 4.6 Servicing Fee.

     (a) Subject to clause (b), the Servicer shall be paid a fee equal to 1.00% per
annum (the “Servicing Fee Rate”) of the daily average aggregate Outstanding Balance of
the Pool Receivables. Such fee shall be paid through the distributions contemplated by Section
1.6(d).

     (b) If the Servicer ceases to be Peabody or an Affiliate thereof, the servicing fee shall be
the greater of: (i) the amount calculated pursuant to clause (a), and (ii) an alternative
amount specified by the successor Servicer not to exceed 110% of the aggregate reasonable costs and
expenses incurred by such successor Servicer in connection with the performance of its obligations
as Servicer.

     Section 4.7 Authorization and Action of the Administrator.

          Each Purchaser hereby accepts the appointment of and irrevocably authorizes the Administrator
to take such action as agent on its behalf and to exercise such powers as are delegated to the
Administrator by the terms hereof, together with such powers as are reasonably incidental thereto.
The Administrator shall not be required to take any action which exposes such Administrator to
personal liability or which is contrary to this Agreement or applicable law. The appointment and
authority of the Administrator hereunder shall terminate upon the occurrence of the Final Payout
Date.

     Section 4.8 Nature of Administrator’s Duties.

          The Administrator shall have no duties or responsibilities except those expressly set forth in
this Agreement or in the other Transaction Documents. The duties of the Administrator shall be
mechanical and administrative in nature. The Administrator shall not have, by reason of this
Agreement, a fiduciary relationship in respect of any Purchaser. Nothing in this Agreement or any
of the Transaction Documents, express or implied, is intended to or shall be construed to impose
upon the Administrator any obligations in respect of this Agreement or any of the Transaction
Documents except as expressly set forth herein or therein. The Administrator shall not have any
duty or responsibility, either initially or on a continuing basis, to provide any Purchaser with
any credit or other information with respect to the Seller, any Originator, any Sub-Servicer or the
Servicer, whether coming into its possession before the date hereof or at any time or times
thereafter. If the Administrator seeks the consent or approval of the Purchasers to the taking or
refraining from taking any action hereunder, the Administrator shall send notice thereof to each
Purchaser. The Administrator shall promptly notify each

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Purchaser any time that the Purchasers have instructed the Administrator to act or refrain
from acting pursuant hereto.

     Section 4.9 UCC Filings.

          Each of the Seller and the Purchasers expressly recognizes and agrees that the Administrator
may be listed as the assignee or secured party of record on the various UCC filings required to be
made hereunder in order to perfect the sale of the Purchased Assets from the Seller to the
Purchasers, that such listing shall be for administrative convenience only in creating a record or
nominee owner to take certain actions hereunder on behalf of the Purchasers and that such listing
will not affect in any way the status of the Purchasers as the owners of the Purchased Assets. In
addition, such listing shall impose no duties on the Administrator other than those expressly and
specifically undertaken in accordance with this Section 4.9.

     Section 4.10 Administrator’s Reliance, Etc.

          Neither the Administrator nor any of its directors, officers, agents or employees shall be
liable for any action taken or omitted to be taken by it as Administrator under or in connection
with this Agreement except for its own gross negligence or willful misconduct. Without limiting
the foregoing, the Administrator: (i) may consult with legal counsel (including counsel for the
Seller), independent public accountants and other experts selected by it and shall not be liable
for any action taken or omitted to be taken in good faith by it in accordance with the advice of
such counsel, accountants or experts; (ii) makes no warranty or representation to any Purchaser and
shall not be responsible to any Purchaser for any statements, warranties or representations made in
or in connection with this Agreement; (iii) shall not have any duty to ascertain or to inquire as
to the performance or observance of any of the terms, covenants or conditions of this Agreement on
the part of the Seller, the Servicer, any Sub-Servicer or any Originator or to inspect the property
(including the books and records) of the Seller, the Servicer, any Sub-Servicer or any Originator;
(iv) shall not be responsible to any Purchaser for the due execution, legality, validity,
enforceability, genuineness, sufficiency, or value of this Agreement, or any other instrument or
document furnished pursuant hereto; and (v) shall incur no liability under or in respect of this
Agreement or any other Transaction Document by acting upon any notice (including notice by
telephone), consent, certificate or other instrument or writing (which may be by telex) believed by
it to be genuine and signed or sent by the proper party or parties. The Administrator may at any
time request instructions from the Purchasers with respect to any actions or approvals which by the
terms of this Agreement or of any of the other Transaction Documents the Administrator is permitted
or required to take or to grant, and if such instructions are promptly requested, the Administrator
shall be absolutely entitled to refrain from taking any action or to withhold any approval and
shall not be under any liability whatsoever to any Person for refraining from any action or
withholding any approval under any of the Transaction Documents until it shall have received such
instructions from the Issuer and the Majority LC Participants (or, where expressly required
hereunder, from the Required LC Participants or all of the LC Participants). Without limiting the
foregoing, neither the Issuer, the LC Bank nor any LC Participant shall have any right of action
whatsoever against the Administrator as a result of the Administrator acting or refraining from
acting under this Agreement or any of the other Transaction Documents in accordance with the
instructions of the Issuer and the Majority LC

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Participants (or, where expressly required hereunder, the Required LC Participants or all of
the LC Participants).

     Section 4.11 Administrator and Affiliates.

          To the extent that the Administrator or any of its Affiliates is or shall become an LC
Participant hereunder, the Administrator or such Affiliate, in such capacity, shall have the same
rights and powers under this Agreement as would any other LC Participant hereunder and may exercise
the same as though it were not the Administrator. The Administrator and its Affiliates may
generally engage in any kind of business with the Seller, any Originator, Peabody, any Sub-Servicer
or the Servicer, any of their respective Affiliates and any Person who may do business with or own
securities of the Seller, any Originator, Peabody, any Sub-Servicer or the Servicer or any of their
respective Affiliates, all as if it were not the Administrator hereunder and without any duty to
account therefor to the Issuer or the LC Participants.

     Section 4.12 Purchase Decision.

          Each of the Purchasers acknowledges that it has, independently and without reliance upon the
Administrator, the LC Bank or any LC Participant and based on such documents and information as it
has deemed appropriate, made its own evaluation and decision to enter into this Agreement and, to
the extent it so determines, to issue Letters of Credit and/or to purchase the Purchased Assets
hereunder. Each Purchaser also acknowledges that it will, independently and without reliance upon
the Administrator, the LC Bank or any LC Participant, and based on such documents and information
as it shall deem appropriate at the time, continue to make its own decisions in taking or not
taking action under this Agreement.

     Section 4.13 Indemnification.

          Each LC Participant agrees to indemnify the Administrator and the LC Bank (to the extent not
reimbursed by the Seller or the Servicer), ratably according to its Pro Rata Share, from and
against any and all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses, or disbursements of any kind or nature whatsoever which may be imposed on,
incurred by, or asserted against the Administrator in any way relating to or arising out of this
Agreement or any action taken or omitted by the Administrator under this Agreement;
provided, however, that no LC Participant shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses,
or disbursements resulting from the Administrator’s or the LC Bank’s gross negligence or willful
misconduct, as determined by a final non-appealable judgment of a court of competent jurisdiction.
Without limiting the generality of the foregoing, each LC Participant agrees to reimburse the
Administrator and the LC Bank, ratably according to their Pro Rata Shares, promptly upon demand,
for any out-of-pocket expenses (including reasonable counsel fees) incurred by the Administrator or
the LC Bank in connection with the administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or legal advice in respect of its rights
or responsibilities under, this Agreement.

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     Section 4.14 Successor Administrator.

          The Administrator may resign at any time by giving thirty days’ notice thereof to the
Purchasers, the Seller and the Servicer. Upon any such resignation, the Issuer and the Majority LC
Participants shall have the right to appoint a successor Administrator approved by the Seller
(which approval will not be unreasonably withheld or delayed). If no successor Administrator shall
have been so appointed and accepted such appointment within 30 days after the retiring
Administrator’s giving of notice of resignation, then the retiring Administrator may appoint a
successor Administrator approved by the Seller (which approval will not be unreasonably withheld or
delayed), which successor Administrator shall be either (i) a commercial bank having a combined
capital and surplus of at least $250,000,000 or (ii) an Affiliate of such an institution Upon the
acceptance of any appointment as an Administrator hereunder by a successor Administrator, such
successor Administrator shall thereupon succeed to and become vested with all of the rights,
powers, privileges and duties of the retiring Administrator, and the retiring Administrator shall
be discharged from any further duties and obligations under this Agreement. After any retiring
Administrator’s resignation hereunder as Administrator, the provisions of this Article IV
shall inure to its benefit as to any actions taken or omitted to be taken by it while it was an
Administrator under this Agreement.

ARTICLE V.

MISCELLANEOUS

     Section 5.1 Amendments, Etc.

          No amendment or waiver of any provision of this Agreement or any other Transaction Document,
or consent to any departure by the Seller or the Servicer therefrom, shall be effective unless in a
writing signed by the Administrator, the LC Bank and the Majority LC Participants;
provided, however, that no such amendment shall (i) decrease the outstanding amount
of, or extend the repayment of or any scheduled payment date for the payment of, any Discount in
respect of any Portion of Capital or any fees owed to a Purchaser without the prior written consent
of such Purchaser; (ii) forgive or waive or otherwise excuse any repayment of Capital without the
prior written consent of each Purchaser affected thereby; (iii) increase the Commitment of any
Purchaser without its prior written consent; (iv) amend or modify the Pro Rata Share of any LC
Participant without its prior written consent; (v) amend or modify the provisions of this
Section 5.1 or the definition of “Majority LC Participants” or “Required LC Participants”
without the prior written consent of the LC Bank and all LC Participants; (vi) waive any
Termination Event arising from an Event of Bankruptcy with respect to Seller, the Servicer, any
Sub-Servicer or any Originator; (vii) without the prior written consent of all Purchasers affected
thereby, extend the Facility Termination Date or waive, amend or otherwise modify the definition of
Facility Termination Date; (viii) amend, modify or otherwise affect the rights or duties of the
Administrator or the LC Bank hereunder without the prior written consent of the Administrator or
the LC Bank, as the case may be; and (ix) amend, waive or modify any definition or provision
expressly requiring the consent of the Required LC Participants without the prior written consent
of the LC Bank and the Required LC Participants, and, in the case of any amendment, by the other
parties thereto; and then such amendment, waiver or consent shall

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be effective only in the specific instance and for the specific purpose for which given. No
failure on the part of the Issuer or the Administrator to exercise, and no delay in exercising any
right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise of any other right.

     Section 5.2 Notices, Etc.

          All notices and other communications hereunder shall, unless otherwise stated herein, be in
writing (which shall include facsimile communication) and be sent or delivered to each party hereto
at its address set forth under its name on the signature pages hereof or at such other address as
shall be designated by such party in a written notice to the other parties hereto. Notices and
communications by facsimile shall be effective when sent (and shall be followed by hard copy sent
by first class mail), and notices and communications sent by other means shall be effective when
received.

     Section 5.3 Successors and Assigns; Assignability; Participations.

     (a) Whenever in this Agreement any of the parties hereto is referred to, such reference shall
be deemed to include the successors and assigns of such party; all covenants, promises and
agreements by or on behalf of any parties hereto that are contained in this Agreement shall bind
and inure to the benefit of their respective successors and assigns. The Seller may not assign or
transfer any of its rights or obligations hereunder without the written consent of the
Administrator, the LC Bank and the Required LC Participants. Each of the LC Participants, with the
prior written consent of the Administrator, the LC Bank and of the Seller (such consent not to be
unreasonably withheld), may assign any of its interests, rights and obligations hereunder to an
Eligible Assignee; provided, that (i) the Commitment amount to be assigned by any such LC
Participant hereunder shall not be less than $5,000,000 and (ii) prior to the effective date of any
such assignment, the assignee and assignor shall have executed and delivered to the Administrator
and the LC Bank an assignment and acceptance agreement in form and substance satisfactory to the
Administrator and the LC Bank. Upon the effectiveness of any such permitted assignment, (i) the
assignee thereunder shall, to the extent of the interests assigned to it, be entitled to the
interests, rights and obligations of an LC Participant under this Agreement and (ii) the assigning
LC Participant shall, to the extent of the interest assigned, be released from any further
obligations under this Agreement.

     (b) Notwithstanding anything contained in clause (a) of this Section 5.3, each
of the LC Bank and each LC Participant may sell participations in all or any part of any Investment
made by such LC Participant to another bank or other entity so long as (A) no such grant of a
participation shall, without the consent of the Seller, require the Seller to file a registration
statement with the Securities and Exchange Commission and (B) no holder of any such participation
shall be entitled to require such LC Participant to take or omit to take any action hereunder
except that such LC Participant may agree with such participant that, without such participant’s
consent, such LC Participant will not consent to an amendment, modification or waiver referred to
in clauses (i) through (vi) of Section 5.1. Any such participant shall not have any rights
hereunder or under the Transaction Documents except that such participant shall have rights under
Sections 1.9, 1.10 and 1.11 hereunder as if it were an LC Participant;
provided that

30

 

no such participant shall be entitled to receive any payment pursuant to such sections which
is greater in amount than the payment which the transferor LC Participant would have otherwise been
entitled to receive in respect of the participation interest so sold.

     (c) This Agreement and the Issuer’s rights and obligations herein (including ownership of the
Purchased Assets or an interest therein) shall be assignable, in whole or in part, by the Issuer
and its successors and assigns with the prior written consent of the Seller; provided,
however, that such consent shall not be unreasonably withheld; and provided
further, that no such consent shall be required if the assignment is made to PNC, any
Affiliate of PNC (other than a director or officer of PNC), any Liquidity Bank or other Program
Support Provider or any Person that is: (i) in the business of issuing Notes and (ii) associated
with or administered by PNC or any Affiliate of PNC. Each assignor may, in connection with the
assignment, disclose to the applicable assignee (that shall have agreed to be bound by Section
5.6) any information relating to the Servicer, the Seller or the Pool Receivables furnished to
such assignor by or on behalf of the Servicer, the Seller, the Issuer or the Administrator. The
Administrator shall give prior written notice of any assignment of the Issuer’s rights and
obligations (including ownership of the Purchased Assets to any Person other than a Program Support
Provider).

     (d) The Issuer may at any time grant to one or more banks or other institutions (each a
“Liquidity Bank”) party to the Liquidity Agreement, or to any other Program Support
Provider, participating interests in the Purchased Assets. In the event of any such grant by the
Issuer of a participating interest to a Liquidity Bank or other Program Support Provider, the
Issuer shall remain responsible for the performance of its obligations hereunder. The Seller
agrees that each Liquidity Bank or other Program Support Provider shall be entitled to the benefits
of Sections 1.9 and 1.10.

     (e) This Agreement and the rights and obligations of the Administrator hereunder shall be
assignable, in whole or in part, by the Administrator and its successors and assigns;
provided, that unless: (i) such assignment is to an Affiliate of PNC, (ii) it becomes
unlawful for PNC to serve as the Administrator or (iii) a Termination Event exists, the Seller has
consented to such assignment, which consent shall not be unreasonably withheld.

     (f) Except as provided in Section 4.1(d), none of the Seller, Peabody or the Servicer
may assign its rights or delegate its obligations hereunder or any interest herein without the
prior written consent of the Administrator.

     (g) Without limiting any other rights that may be available under applicable law, the rights
of the Issuer and each Liquidity Bank may be enforced through it or by its agents.

     Section 5.4 Costs, Expenses and Taxes.

     (a) In addition to the rights of indemnification granted under Sections 1.18 and
3.1, the Seller agrees to pay on demand (which demand shall be accompanied by documentation
thereof in reasonable detail) all reasonable costs and expenses in connection with the preparation,
execution, delivery and administration (including periodic internal audits by the Administrator of
Pool Receivables, provided that at any time when no Termination Event exists and is
continuing,

31

 

the Seller shall not be required to pay the costs and expenses of more than one such audit per
year) of this Agreement, the other Transaction Documents and the other documents and agreements to
be delivered hereunder (and all reasonable costs and expenses in connection with any amendment,
waiver or modification of any thereof), including: (i) Attorney Costs for the Administrator, the
Issuer and their respective Affiliates and agents with respect thereto and with respect to advising
the Administrator, the Issuer and their respective Affiliates and agents as to their rights and
remedies under this Agreement and the other Transaction Documents, and (ii) all reasonable costs
and expenses (including Attorney Costs), if any, of the Administrator, the Issuer and their
respective Affiliates and agents in connection with the enforcement of this Agreement and the other
Transaction Documents.

     (b) In addition, the Seller shall pay on demand any and all stamp and other taxes and fees
payable in connection with the execution, delivery, filing and recording of this Agreement or the
other documents or agreements to be delivered hereunder, and agrees to save each Indemnified Party
harmless from and against any liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes and fees.

     Section 5.5 No Proceedings; Limitation on Payments.

          Each of the Seller, Peabody, the Servicer, the Administrator, the LC Bank, each LC Participant
and each assignee of the Purchased Assets or any interest therein, and each Person that enters into
a commitment to purchase or make Investments in the Purchased Assets or any interest therein,
hereby covenants and agrees that it will not institute against, or join any other Person in
instituting against, the Issuer any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceeding, or other proceeding under any federal or state bankruptcy or similar law,
for one year and one day after the latest maturing Note issued by the Issuer is paid in full. The
provision of this Section 5.5 shall survive any termination of this Agreement.

     Section 5.6 Confidentiality.

          Each of the Seller and the Servicer agrees to maintain the confidentiality of this Agreement
and the other Transaction Documents (and all drafts thereof) in communications with third parties
and otherwise; provided, that this Agreement and the other Transaction Documents may be
disclosed to: (a) third parties to the extent such disclosure is made pursuant to a written
agreement of confidentiality in form and substance reasonably satisfactory to the Administrator,
(b) the Seller’s legal counsel and auditors if they agree to hold it confidential, and (c) as
otherwise required by applicable law (including applicable SEC requirements); and provided,
further, however, that the Seller and the Servicer may disclose this Agreement and
the other Transaction Documents (other than the Fee Letter or any such Transaction Document that
discloses the fees set forth in the Fee Letter) to other financial institutions and their
affiliates in connection with a replacement of the receivables securitization facility represented
by this Agreement and the other Transaction Documents with a new receivables securitization
facility. The Seller and the Servicer shall cause any financial institution and its affiliates
described in the foregoing proviso to maintain the confidentiality of the Transaction Documents in
accordance with the Seller’s and the Servicer’s obligations under this Section 5.6;
provided, however, that any such financial institution and its affiliates may disclose this
Agreement and the other

32

 

Transaction Documents it receives in accordance with the immediately preceding sentence to
their legal counsel and auditors if they agree to hold them confidential and to any regulatory
authorities having jurisdiction over such financial institution or its affiliates. Unless
otherwise required by applicable law, each of the Administrator, the Issuer, the LC Bank and each
LC Participant agrees to maintain the confidentiality of non-public financial information regarding
Peabody and its Subsidiaries and Affiliates; provided, that such information may be
disclosed to: (i) third parties to the extent such disclosure is made pursuant to a written
agreement of confidentiality in form and substance reasonably satisfactory to Peabody, (ii) legal
counsel and auditors of the Issuer, the Administrator, the LC Bank or any LC Participant if they
agree to hold it confidential, (iii) the rating agencies rating the Notes, (iv) any Program Support
Provider or potential Program Support Provider (if they agree to hold it confidential), (v) any
placement agent placing the Notes and (vi) any regulatory authorities having jurisdiction over PNC,
the Issuer, the LC Bank, any LC Participant, any Program Support Provider or any Purchaser.

     Section 5.7 GOVERNING LAW AND JURISDICTION.

     (a) THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL
LAWS OF THE STATE OF ILLINOIS EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF A SECURITY
INTEREST OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF
A JURISDICTION OTHER THAN THE STATE OF ILLINOIS.

     (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS
OF THE STATE OF ILLINOIS OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF ILLINOIS; AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES HERETO CONSENTS, FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE PARTIES
HERETO IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ANY OBJECTION, INCLUDING ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, THAT IT MAY NOW
OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF
THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. EACH OF THE PARTIES HERETO WAIVES PERSONAL SERVICE
OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH SERVICE MAY BE MADE BY ANY OTHER MEANS PERMITTED
BY ILLINOIS LAW.

     Section 5.8 Execution in Counterparts.

          This Agreement may be executed in any number of counterparts, each of which, when so executed,
shall be deemed to be an original, and all of which, when taken together, shall constitute one and
the same agreement.

33

 

     Section 5.9 Survival of Termination; Non-Waiver.

          The provisions of Sections 1.9, 1.10, 1.21, 1.22, 3.1,
3.2, 4.10, 4.12, 4.13, 5.4, 5.5, 5.6,
5.7, 5.10 and 5.13 shall survive any termination of this Agreement. Neither
the Servicer nor any other Person may waive a breach of Exhibit III, Section 1(g)
of this Agreement for so long as the Notes are outstanding.

     Section 5.10 WAIVER OF JURY TRIAL.

          EACH OF THE PARTIES HERETO WAIVES THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE
PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS OR
OTHERWISE. EACH OF THE PARTIES HERETO AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED
BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, EACH OF THE PARTIES HERETO
FURTHER AGREES THAT ITS RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION
AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING THAT SEEKS, IN WHOLE OR IN PART, TO CHALLENGE
THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY PROVISION HEREOF. THIS WAIVER SHALL APPLY
TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.

     Section 5.11 Entire Agreement.

          This Agreement and the other Transaction Documents embody the entire agreement and
understanding between the parties hereto, and supersede all prior or contemporaneous agreements and
understandings of such Persons, verbal or written, relating to the subject matter hereof and
thereof, except for any prior arrangements made with respect to the payment by the Issuer of (or
any indemnification for) any fees, costs or expenses payable to or incurred (or to be incurred) by
or on behalf of the Seller, the Servicer and the Administrator.

     Section 5.12 Headings.

          The captions and headings of this Agreement and any Exhibit, Schedule or Annex hereto are for
convenience of reference only and shall not affect the interpretation hereof or thereof.

     Section 5.13 Issuer’s Liabilities.

          The obligations of the Issuer under the Transaction Documents are solely the corporate
obligations of the Issuer. No recourse shall be had for any obligation or claim arising out of or
based upon any Transaction Document against any stockholder, employee, officer, director or
incorporator of the Issuer; provided, however, that this Section shall not relieve
any

34

 

such Person of any liability it might otherwise have for its own gross negligence or willful
misconduct.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

35

 

     IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective
officers thereunto duly authorized, as of the date first above written.

	 	 	 	 	 
	 	P&L RECEIVABLES COMPANY, LLC,

as Seller

 	 
	 	By:  	/s/ Walter L. Hawkins, Jr.
 	 
	 	 	Name:  	Walter L. Hawkins, Jr. 	 
	 	 	Title:  	Sr. Vice President and Treasurer 	 
	 

	 	 	 	 	 
	 
	 	Address:	 	701 Market Street
	 
	 	 	 	St. Louis, MO 63101
	 
	 	 	 	 
	 
	 	Attention:	 	Treasurer
	 
	 	Telephone:	 	314-342-3400
	 
	 	Facsimile:	 	314-342-7740

	 	 	 	 	 
	 	PEABODY ENERGY CORPORATION,

as initial Servicer

 	 
	 	By:  	/s/ Walter L. Hawkins, Jr.
 	 
	 	 	Name:  	Walter L. Hawkins, Jr. 	 
	 	 	Title:  	Sr. Vice President and Treasurer 	 
	 

	 	 	 	 	 
	 
	 	Address:	 	701 Market Street
	 
	 	 	 	St. Louis, MO 63101
	 
	 	 	 	 
	 
	 	Attention:	 	Treasurer
	 
	 	Telephone:	 	314-342-3400
	 
	 	Facsimile:	 	314-342-7740

Amended and Restated

Receivables Purchase Agreement

S-1

 

	 	 	 	 	 
	 	ARCLAR COMPANY, LLC,

as Sub-Servicer

 	 
	 	By:  	/s/ Walter L. Hawkins, Jr.
 	 
	 	 	Name:  	Walter L. Hawkins, Jr.	 
	 	 	Title:  	Sr. Vice President and Treasurer 	 
	 

	 	 	 	 	 
	 
	 	Address:	 	701 Market Street
	 
	 	 	 	St. Louis, MO 63101
	 
	 	 	 	 
	 
	 	Attention:	 	Treasurer
	 
	 	Telephone:	 	314-342-3400
	 
	 	Facsimile:	 	341-342-7740

	 	 	 	 	 
	 	PEABODY MIDWEST MINING, LLC,

as Sub-Servicer

 	 
	 	By:  	/s/ Walter L. Hawkins, Jr.
 	 
	 	 	Name:  	Walter L. Hawkins, Jr. 	 
	 	 	Title:  	Sr. Vice President and Treasurer 	 
	 

	 	 	 	 	 
	 
	 	Address:	 	701 Market Street
	 
	 	 	 	St. Louis, MO 63101
	 
	 	 	 	 
	 
	 	Attention:	 	Treasurer
	 
	 	Telephone:	 	314-342-3400
	 
	 	Facsimile:	 	341-342-7740

Amended and Restated

Receivables Purchase Agreement

S-2

 

	 	 	 	 	 
	 	TWENTYMILE COAL, LLC,

as Sub-Servicer

 	 
	 	By:  	/s/ Walter L. Hawkins, Jr.
 	 
	 	 	Name:  	Walter L. Hawkins, Jr. 	 
	 	 	Title:  	Sr. Vice President and Treasurer 	 
	 

	 	 	 	 	 
	 
	 	Address:	 	701 Market Street
	 
	 	 	 	St. Louis, MO 63101
	 
	 	 	 	 
	 
	 	Attention:	 	Treasurer
	 
	 	Telephone:	 	314-342-3400
	 
	 	Facsimile:	 	341-342-7740

	 	 	 	 	 
	 	CABALLO COAL, LLC ,

as Sub-Servicer

 	 
	 	By:  	/s/ Walter L. Hawkins, Jr.
 	 
	 	 	Name:  	Walter L. Hawkins, Jr. 	 
	 	 	Title:  	Sr. Vice President and Treasurer 	 
	 

	 	 	 	 	 
	 
	 	Address:	 	701 Market St.
	 
	 	 	 	St. Louis, MO 63101-1826
	 
	 	 	 	 
	 
	 	Attention:	 	Treasurer
	 
	 	Telephone:	 	314-342-3400
	 
	 	Facsimile:	 	314-342-7740

Amended and Restated

Receivables Purchase Agreement

S-3

 

	 	 	 	 	 
	 	COALSALES II, LLC,

as Sub-Servicer

 	 
	 	By:  	/s/ Walter L. Hawkins, Jr.
 	 
	 	 	Name:  	Walter L. Hawkins, Jr. 	 
	 	 	Title:  	Sr. Vice President and Treasurer 	 
	 

	 	 	 	 	 
	 
	 	Address:	 	701 Market St.
	 
	 	 	 	St. Louis, MO 63101-1826
	 
	 	 	 	 
	 
	 	Attention:	 	Treasurer
	 
	 	Telephone:	 	314-342-3400
	 
	 	Facsimile:	 	314-342-7740

Amended and Restated

Receivables Purchase Agreement

S-4

 

	 	 	 	 	 
	 	PEABODY WESTERN COAL COMPANY,

as Sub-Servicer

 	 
	 	By:  	/s/ Walter L. Hawkins, Jr.
 	 
	 	 	Name:  	Walter L. Hawkins, Jr. 	 
	 	 	Title:  	Sr. Vice President and Treasurer 	 
	 

	 	 	 	 	 
	 
	 	Address:	 	701 Market St.
	 
	 	 	 	St. Louis, MO 63101-1826
	 
	 	 	 	 
	 
	 	Attention:	 	Treasurer
	 
	 	Telephone:	 	314-342-3400
	 
	 	Facsimile:	 	314-342-7740

Amended and Restated

Receivables Purchase Agreement

S-5

 

	 	 	 	 	 
	 	POWDER RIVER COAL, LLC

as Sub-Servicer

 	 
	 	By:  	/s/ Walter L. Hawkins, Jr.
 	 
	 	 	Name:  	Walter L. Hawkins, Jr. 	 
	 	 	Title:  	Sr. Vice President and Treasurer 	 
	 

	 	 	 	 	 
	 
	 	Address:	 	701 Market St.
	 
	 	 	 	St. Louis, MO 63101-1826
	 
	 	 	 	 
	 
	 	Attention:	 	Treasurer
	 
	 	Telephone:	 	314-342-3400
	 
	 	Facsimile:	 	314-342-7740

	 	 	 	 	 
	 	PEABODY HOLDING COMPANY, LLC,

as Sub-Servicer

 	 
	 	By:  	/s/ Walter L. Hawkins, Jr.
 	 
	 	 	Name:  	Walter L. Hawkins, Jr. 	 
	 	 	Title:  	Sr. Vice President and Treasurer 	 
	 

	 	 	 	 	 
	 
	 	Address:	 	701 Market St.
	 
	 	 	 	St. Louis, MO 63101-1825
	 
	 	 	 	 
	 
	 	Attention:	 	Treasurer
	 
	 	Telephone:	 	314-342-3400
	 
	 	Facsimile:	 	314-342-7740

Amended and Restated

Receivables Purchase Agreement

S-6

 

	 	 	 	 	 
	 	COALTRADE, LLC,

as Sub-Servicer

 	 
	 	By:  	/s/ Walter L. Hawkins, Jr.
 	 
	 	 	Name:  	Walter L. Hawkins, Jr. 	 
	 	 	Title:  	Sr. Vice President and Treasurer 	 
	 

	 	 	 	 	 
	 
	 	Address:	 	701 Market St.
	 
	 	 	 	St. Louis, MO 63101-1825
	 
	 	 	 	 
	 
	 	Attention:	 	Treasurer
	 
	 	Telephone:	 	314-342-3400
	 
	 	Facsimile:	 	314-342-7740

	 	 	 	 	 
	 	PEABODY COALTRADE INTERNATIONAL (CTI), LLC,

as Sub-Servicer

 	 
	 	By:  	/s/ Walter L. Hawkins, Jr.
 	 
	 	 	Name:  	Walter L. Hawkins, Jr. 	 
	 	 	Title:  	Sr. Vice President and Treasurer 	 
	 

	 	 	 	 	 
	 
	 	Address:	 	701 Market St.
	 
	 	 	 	St. Louis, MO 63101-1825
	 
	 
	 	Attention:	 	Treasurer
	 
	 	Telephone:	 	314-342-3400
	 
	 	Facsimile:	 	314-342-7740

Amended and Restated

Receivables Purchase Agreement

S-7

 

	 	 	 	 	 
	 	COALSALES, LLC,

as Sub-Servicer

 	 
	 	By:  	/s/ Walter L. Hawkins, Jr.
 	 
	 	 	Name:  	Walter L. Hawkins, Jr. 	 
	 	 	Title:  	Sr. Vice President and Treasurer 	 
	 

	 	 	 	 	 
	 
	 	Address:	 	701 Market St.
	 
	 	 	 	St. Louis, MO 63101-1825
	 
	 	 	 	 
	 
	 	Attention:	 	Treasurer
	 
	 	Telephone:	 	314-342-3400
	 
	 	Facsimile:	 	314-342-7740

Amended and Restated

Receivables Purchase Agreement

S-8

 

	 	 	 	 	 
	 	MARKET STREET FUNDING LLC,

as Issuer

 	 
	 	By:  	/s/ Doris J. Hearn
 	 
	 	 	Name:  	Doris J. Hearn 	 
	 	 	Title:  	Vice President 	 
	 

	 	 	 	 	 
	 
	 	Address:	 	Market Street Funding LLC
	 
	 	 	 	c/o AMACAR Group, LLC
	 
	 	 	 	6525 Morrison Boulevard, Suite 318
	 
	 	 	 	Charlotte, NC  28211
	 
	 	 	 	 
	 
	 	Attention:	 	Doug Johnson
	 
	 	Telephone:	 	704-365-0569
	 
	 	Facsimile:	 	704-365-1362
	 
	 	 	 	 
	 
	 	With a copy to:	 	 
	 
	 	 	 	 
	 	 	PNC Bank, National Association
	 	 	One PNC Plaza, 26th Floor
	 	 	249 Fifth Avenue
	 	 	Pittsburgh, PA 15222-2707
	 	 	Attention: William Falcon
	 
	 	Telephone:	 	412-762-5442
	 
	 	Facsimile:	 	412-762-9184

Amended and Restated

Receivables Purchase Agreement

S-9

 

	 	 	 	 	 
	 	PNC BANK, NATIONAL ASSOCIATION,

as Administrator

 	 
	 	By:  	/s/ William Falcon
 	 
	 	 	Name:  	William Falcon 	 
	 	 	Title:  	Vice President 	 
	 

	 	 	 	 	 
	 
	 	Address:	 	PNC Bank, National Association
	 
	 	 	 	One PNC Plaza, 26th Floor
	 
	 	 	 	249 Fifth Avenue
	 
	 	 	 	Pittsburgh, PA  15222-2707
	 
	 	Attention:	 	William Falcon
	 
	 	Telephone:	 	412-762-5442
	 
	 	Facsimile:	 	412-762-9184

	 	 	 	 	 
	 	LC BANK/LC PARTICIPANTS:

PNC BANK, NATIONAL ASSOCIATION,

as the LC Bank and as an LC Participant

 	 
	 	By:  	/s/ Richard Munsick
 	 
	 	 	Name:  	Richard Munsick 	 
	 	 	Title:  	Senior Vice President 	 
	 

	 	 	 	 	 
	 
	 	Address:	 	PNC Bank, National Association
	 
	 	 	 	500 First Avenue
	 
	 	 	 	Third Floor
	 
	 	 	 	Pittsburgh, PA  15219
	 
	 	Attention:	 	Richard Munsick
	 
	 	Telephone:	 	412-762-4299
	 
	 	Facsimile:	 	412-762-9184
	 
	 	 	 	 
	 	 	Commitment: $275,000,000
	 	 	Pro-Rata Share: 100%

Amended and Restated

Receivables Purchase Agreement

S-10

 

EXHIBIT I

DEFINITIONS

     As used in the Agreement (including its Exhibits, Schedules and Annexes), the following terms
shall have the following meanings (such meanings to be equally applicable to both the singular and
plural forms of the terms defined). Unless otherwise indicated, all Section, Annex, Exhibit and
Schedule references in this Exhibit are to Sections of and Annexes, Exhibits and Schedules to the
Agreement.

     “Adjusted LC Participation Amount” means, at any time, the LC Participation Amount
less the amount of cash collateral held in the LC Collateral Account at such time.

     “Administration Account” means the account number 1002422076 of the Administrator
maintained at the office of PNC at One PNC Plaza, 249 Fifth Avenue, Pittsburgh, Pennsylvania
15222-2707, or such other account as may be so designated in writing by the Administrator to the
Servicer.

     “Administrator” has the meaning set forth in the preamble to the Agreement.

     “Adverse Claim” means a lien, security interest or other charge or encumbrance, or any
other type of preferential arrangement; it being understood that any thereof in favor of, or
assigned to, the Administrator (for the benefit of the Purchasers) shall not constitute an Adverse
Claim.

     “Affected Person” has the meaning set forth in Section 1.9 of the Agreement.

     “Affiliate” means, as to any Person: (a) any Person that, directly or indirectly, is
in control of, is controlled by or is under common control with such Person, or (b) who is a
director or officer: (i) of such Person or (ii) of any Person described in clause (a),
except that, with respect to the Issuer, Affiliate shall mean the holder(s) of its capital stock.
For purposes of this definition, control of a Person shall mean the power, direct or indirect: (x)
to vote 25% or more of the securities having ordinary voting power for the election of directors or
managers of such Person, or (y) to direct or cause the direction of the management and policies of
such Person, in either case whether by ownership of securities, contract, proxy or otherwise.

     “Agreement” has the meaning set forth in the preamble to the Agreement.

     “Alternate Rate” for any Settlement Period for any Portion of Capital means an
interest rate per annum equal to: (a) 3.25% per annum above the Euro-Rate for such Settlement
Period or, in the sole discretion of the applicable Purchaser, (b) the Base Rate for such
Settlement Period; provided, that the “Alternate Rate” for any day while a Termination
Event exists shall be an interest rate equal to the greater of (i) 3.00% per annum above the Base
Rate in effect on such day and (ii) the “Alternate Rate” as calculated in clause (a) above.

     “Attorney Costs” means and includes all reasonable fees and disbursements of any law
firm or other external counsel.

I-1

 

     “Bankruptcy Code” means the United States Bankruptcy Reform Act of 1978 (11 U.S.C. §
101, et seq.), as amended from time to time.

     “Base Rate” means, for any day, a fluctuating interest rate per annum as shall be in
effect from time to time, which rate shall be at all times equal to the higher of:

     (a) the rate of interest in effect for such day as publicly announced from time to time
by PNC in Pittsburgh, Pennsylvania as its “prime rate.” Such “prime rate” is set by PNC
based upon various factors, including PNC’s costs and desired return, general economic
conditions and other factors, and is used as a reference point for pricing some loans, which
may be priced at, above or below such announced rate, and

     (b) 0.50% per annum above the latest Federal Funds Rate.

     “Base Rate Portion of Capital” shall mean a Portion of Capital, the Discount with
respect to which is calculated at a per annum rate based on the interest rate
determined by reference to the Base Rate.

     “BBA” means the British Bankers’ Association.

     “Benefit Plan” means any employee benefit pension plan as defined in Section 3(2) of
ERISA in respect of which the Seller, any Originator, Peabody or any ERISA Affiliate is, or at any
time during the immediately preceding six years was, an “employer” as defined in Section 3(5) of
ERISA.

     “Business Day” means any day (other than a Saturday or Sunday) on which: (a) banks
are not authorized or required to close in New York City, New York, or Pittsburgh, Pennsylvania and
(b) if this definition of “Business Day” is utilized in connection with the Euro-Rate, dealings are
carried out in the London interbank market.

     “Capital” means the aggregate amounts paid to (or for the benefit of) the Seller in
respect of Investments by the Purchasers (including, without limitation, pursuant to Section
1.4(f)), as reduced from time to time by Collections distributed and applied on account of such
Capital pursuant to Section 1.6(d) of the Agreement; provided, that if such Capital
shall have been reduced by any distribution and thereafter all or a portion of such distribution is
rescinded or must otherwise be returned for any reason, such Capital shall be increased by the
amount of such rescinded or returned distribution as though it had not been made.

     “Change in Control” means (a) Peabody ceases to own, directly or indirectly, 100% of
the membership interests of the Seller free and clear of all Adverse Claims; (b) a “Change in
Control” (as defined in the Senior Notes Indenture as in effect on September 30, 2005); (c) with
respect to any Material Originator, Peabody ceases to be the beneficial owner (as defined in Rules
13(d)-3 and 13(d)-5 under the Securities Exchange Act of 1934, as amended), directly or indirectly,
of at least 75% of the outstanding shares of voting securities of such Material Originator without
the prior written consent of the Administrator, such consent not to be unreasonably withheld; or
(d) Peabody ceases to have beneficial ownership (as defined in clause (c)), directly or indirectly,
of 100% of the outstanding shares of voting securities of Peabody Holding Company, LLC

I-2

 

     “Closing Date” means December 15, 2009.

     “Collateral” shall have the meaning set forth in Section 1.1 of the Sale
Agreement.

     “Collections” means, with respect to any Pool Receivable: (a) all funds that are
received by any Originator, Peabody, the Seller or the Servicer in payment of any amounts owed in
respect of such Receivable (including purchase price, finance charges, interest and all other
charges), or applied to amounts owed in respect of such Receivable (including insurance payments
and net proceeds of the sale or other disposition of repossessed goods or other collateral or
property of the related Obligor or any other Person directly or indirectly liable for the payment
of such Pool Receivable and available to be applied thereon), (b) all amounts deemed to have been
received pursuant to Section 1.6(e) of the Agreement and (c) all other proceeds of such
Pool Receivable.

     “Commitment” shall mean, as to any LC Participant, its commitment to make
participation advances and/or share in draws, in each case, under Letters of Credit up to that
dollar amount set forth as the “Commitment” under its name on the signature pages to the Agreement
(or, as applicable, set forth in any amendment thereto or set forth in any assignment agreement
entered into pursuant to Section 5.3 as such dollar amount may be reduced pursuant to
Section 1.1(b) of the Agreement, and “Commitments” shall mean the aggregate
commitments of the LC Participants to make participating advances in the Letters of Credit up to
the Purchase Limit (or, if less, the amount permitted under Section 1.1(a)).

     “Company Note” has the meaning set forth in Section 3.1 of the Sale Agreement.

     “Concentration Percentage” means: (a) for any Group A Obligor, 15%, (b) for any Group
B Obligor, 7.5%, (c) for any Group C Obligor 5.0% and (d) for any Group D Obligor, 3.0%.

     “Concentration Reserve” means the product of (a) the Capital plus the LC Participation
Amount, and (b)(i) the Concentration Reserve Percentage divided by (ii) 1 minus the Concentration
Reserve Percentage.

     “Concentration Reserve Percentage” means the (a) largest of the following (i) the sum
of the five (5) largest Group D Obligor Receivables balances (up to the Concentration Percentage
for each Obligor), (ii) the sum of the three (3) largest Group C Obligor Receivables balances (up
to the Concentration Percentage for each Obligor), (iii) the sum of the two (2) largest Group B
Obligor Receivables balances (up to the Concentration Percentage for each Obligor), and (iv) the
one (1) largest Group A Obligor Receivables balance (up to the Concentration Percentage for such
Obligor), divided by (b) the Eligible Receivables.

     “Contract” means, with respect to any Receivable, any and all contracts, instruments,
agreements, leases, invoices, notes or other writings pursuant to which such Receivable arises or
that evidence such Receivable or under which an Obligor becomes or is obligated to make payment in
respect of such Receivable.

I-3

 

     “Contribution Agreement” means that certain Contribution Agreement dated as of
February 20, 2002 by and between the Contributor and the Seller, as the same may be amended from
time to time.

     “Contribution Indemnified Amounts” has the meaning set forth in Section 7.1 of
the Contribution Agreement.

     “Contribution Indemnified Party” has the meaning set forth in Section 7.1 of
the Contribution Agreement.

     “Contribution Termination Date” has the meaning set forth in Section 1.3 of
the Contribution Agreement.

     “Contribution Termination Event” has the meaning set forth in Section 6.1 of
the Contribution Agreement.

     “Contributor” means Peabody Energy Corporation, a Delaware corporation.

     “CP Rate” for any Settlement Period for any Portion of Capital means a rate calculated
by the Administrator equal to: (a) the rate (or if more than one rate, the weighted average of the
rates) at which Notes of the Issuer on each day during such period have been outstanding;
provided, that if such rate(s) is a discount rate(s), then the CP Rate shall be the rate
(or if more than one rate, the weighted average of the rates) resulting from converting such
discount rate(s) to an interest-bearing equivalent rate plus (b) the commissions and charges
charged by such placement agent or commercial paper dealer with respect to such Notes, expressed as
a percentage of the face amount of such Notes and converted to an interest-bearing equivalent rate
per annum. Notwithstanding the foregoing, the “CP Rate” for any day while a Termination Event
exists shall be an interest rate equal to the greater of (a) 3.00% above the Base Rate in effect on
such day and (b) the Alternate Rate as calculated in the definition thereof.

     “Credit Agreement” means that certain Third Amended and Restated Credit Agreement,
dated as of September 15, 2006, among Peabody, as borrower, the several lenders from time to time
parties thereto, Bank of America Securities, LLC and Citigroup Global Markets, Inc., as arrangers,
the various other parties thereto, and Bank of America, N.A., as administrative agent, and shall
include, except as otherwise expressly provided herein, such agreement as amended, restated and/or
otherwise modified from time to time in accordance with the terms thereof, and any extension,
replacement, substitution, and/or refinancing thereof.

     “Credit and Collection Policy” means, as the context may require, those receivables
credit and collection policies and practices of the Originators in effect on the date of the
Agreement and described in Schedule I to the Agreement, as modified in compliance with the
Agreement.

     “Cut-off Date” has the meaning set forth in the Sale Agreement.

     “Days’ Sales Outstanding” means, at any time, an amount computed as of the last day of
each calendar month equal to: (a) the average of the Outstanding Balance of all Pool Receivables
as of the last day of each of the three most recent calendar months ended on the last

I-4

 

day of such
calendar month divided by (b) (i) the aggregate credit sales made by the Originators during the
three calendar months ended on or before the last day of such calendar month divided by (ii) 90.

     “Debt” means: (a) indebtedness for borrowed money, (b) obligations evidenced by
bonds, debentures, notes or other similar instruments, (c) obligations to pay the deferred purchase
price of property or services, (d) obligations as lessee under leases that shall have been or
should be, in accordance with generally accepted accounting principles, recorded as capital leases,
and (e) obligations under direct or indirect guaranties in respect of, and obligations (contingent
or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in
respect of, indebtedness or obligations of others of the kinds referred to in clauses (a)
through (d) above.

     “Defaulted Receivable” means a Receivable:

     (a) as to which any payment, or part thereof, remains unpaid for more than 60
days from the due date for such payment (which shall be determined without regard to
any credit memos or credit balances available to the Obligor); provided,
that, any Receivable the related Obligor of which is TVA that would
otherwise have become a Defaulted Receivable pursuant to this clause (a)
during the calendar month of March 2007 shall not be deemed a Defaulted Receivable,
or

     (b) without duplication (i) as to which an Insolvency Proceeding shall have
occurred with respect to the Obligor thereof or any other Person obligated thereon
or owning any Related Security with respect thereto, or (ii) that has been written
off the Seller’s books as uncollectible.

     “Default Ratio” means the ratio (expressed as a percentage and rounded to the nearest
1/100 of 1%, with 5/1000th of 1% rounded upward) computed as of the last day of each calendar month
by dividing: (a) the aggregate Outstanding Balance of all Pool Receivables that became Defaulted
Receivables during such month (other than Receivables that became Defaulted Receivables as a result
of an Event of Bankruptcy with respect to the Obligor thereof during such month), by (b) the
aggregate credit sales made by the Originators during the month that is three calendar months
before such month.

     “Deferred Purchase Price” has the meaning set forth in Section 1.4(c) of the
Agreement.

     “Delinquency Ratio” means the ratio (expressed as a percentage and rounded to the
nearest 1/100 of 1%, with 5/1000th of 1% rounded upward) computed as of the last day of each
calendar month by dividing: (a) the aggregate Outstanding Balance of all Pool Receivables that
were Delinquent Receivables on such day by (b) the aggregate Outstanding Balance of all Pool
Receivables on such day.

     “Delinquent Receivable” means a Receivable as to which any payment, or part thereof,
remains unpaid for more than 60 days from the due date for such payment.

     “Dilution Horizon” means, for any calendar month, the ratio (expressed as a percentage
and rounded to the nearest 1/100th of 1%, with 5/l000th of 1% rounded upward) computed as of

I-5

 

the
last day of such calendar month of: (a) the aggregate credit sales made by the Originators during
the two most recent calendar months to (b) the Net Receivables Pool Balance at the last day of the
most recent calendar month.

     “Dilution Ratio” means the ratio (expressed as a percentage and rounded to the nearest
1/100th of 1%, with 5/1000th of 1% rounded upward), computed as of the last day of each calendar
month by dividing: (a) the aggregate amount of payments required to be made by the Seller pursuant
to Section 1.6(e)(i) of the Agreement during such calendar month by (b) the aggregate
credit sales made by the Originators during the month that is one month prior to the current month.

     “Dilution Reserve” means, on any date, an amount equal to: (a) the sum of the Capital
plus the LC Participation Amount at the close of business of the Seller on such date multiplied by
(b) (i) the Dilution Reserve Percentage on such date, divided by (ii) 100% minus the
Dilution Reserve Percentage on such date.

     “Dilution Reserve Percentage” means on any date, the product of (i) the Dilution
Horizon multiplied by (ii) the sum of (x) 2.25 times the average of the Dilution
Ratio for the twelve most recent calendar months and (y) the Spike Factor.

     “Discount” means:

     (a) for the Portion of Capital for any Settlement Period to the extent the Issuer will
be funding such Portion of Capital during such Settlement Period through the issuance of
Notes:

CPR x C x ED/360

     (b) for the Portion of Capital for any Settlement Period to the extent the Issuer will
not be funding such Portion of Capital during such Settlement Period through the issuance of
Notes or, to the extent the LC Bank and/or any LC Participant has made an Investment in
connection with any drawing under a Letter of Credit, which Investment accrues Discount
pursuant to Section 1.4(f) of the Agreement:

AR x C x ED/Year + TF

     where:

	 	 	 	 	 
	 	AR

	=
	 	the Alternate Rate for the Portion of Capital for such
Settlement Period,
	 
	 	 	 	 
	 	C

	=
	 	the Portion of Capital during such Settlement Period,
	 
	 	 	 	 
	 	CPR

	=
	 	the CP Rate for the Portion of Capital for such Settlement
Period,
	 
	 	 	 	 
	 	ED

	=
	 	the actual number of days during such Settlement Period,

I-6

 

	 	 	 	 	 
	 	Year

	=
	 	if such Portion of Capital is funded based upon: (i) the
Euro-Rate, 360 days, and (ii) the Base Rate, 365 or 366 days, as applicable,
and
	 
	 	 	 	 
	 	TF

	=
	 	the Termination Fee, if any, for the Portion of Capital for
such Settlement Period;

provided, that no provision of the Agreement shall require the payment or permit the
collection of Discount in excess of the maximum permitted by applicable law; and provided
further, that Discount for the Portion of Capital shall not be considered paid by any
distribution to the extent that at any time all or a portion of such distribution is rescinded or
must otherwise be returned for any reason.

     “Drawing Date” has the meaning set forth in Section 1.16 of the Agreement.

     “Eligible Assignee” means any bank or financial institution acceptable to the LC Bank
and the Administrator.

     “Eligible Receivable” means, at any time, a Pool Receivable:

     (a) the Obligor of which is (i) a United States resident or if such Obligor is not a
United States resident: (A) such Pool Receivable must result from goods sold and shipped
from the Originator in the United States and payment for such goods must be denominated and
payable only in U.S. dollars and payable to an Originator at a Lock-Box Account, (B) if such
Obligor is a resident of Canada, the total of all Eligible Receivables the Obligors of which
are Canadian residents does not exceed 3% (or, if at any time the foreign currency rating of
Canada falls below A by Standard & Poor’s or A2 by Moody’s, 2%) of all Eligible Receivables
and (C) if such Obligor is neither a U.S. nor a Canadian resident, the total of all Eligible
Receivables the Obligors of which are both non-U.S. and non-Canadian residents does not
exceed 5% of all Eligible Receivables, (ii) not a government or a governmental subdivision,
affiliate or agency, except that up to 3% of all Eligible Receivables may consist of
Receivables the Obligors of which are governments, governmental subdivisions, affiliates or
agencies, provided, however, that TVA shall not be subject to the
restrictions of this subsection (ii), (iii) not subject to any action of the type described
in paragraph (f) of Exhibit V to the Agreement, (iv) not an Affiliate of Peabody or
any other Originator, and (v) not an Obligor as to which the Administrator, in its
reasonable business judgment, has notified the Seller that such Obligor is not acceptable,

     (b) that is denominated and payable only in U.S. dollars in the United States to the
Originator at a Lockbox Account,

     (c) that does not have a stated maturity which is more than 60 days after the original
invoice date of such Receivable,

     (d) that arises under a duly authorized Contract for the sale and delivery of goods or
services in the ordinary course of the Originator’s business,

I-7

 

     (e) that arises under a duly authorized Contract that is in full force and effect and
that is a legal, valid and binding obligation of the related Obligor, enforceable against
such Obligor in accordance with its terms,

     (f) that conforms in all material respects with all applicable laws, rulings and
regulations in effect,

     (g) that is not the subject of any asserted dispute, offset, hold back defense, Adverse
Claim or other claim, provided, that, with respect to any Receivable which is subject to any
such a claim, the amount of such Receivable which shall be treated as an Eligible Receivable
shall equal the excess of the amount of such Receivable over the amount of such claim
asserted by or available to the account party or other obligor,

     (h) that satisfies all applicable requirements of the applicable Credit and Collection
Policy,

     (i) that has not been modified, waived or restructured since its creation, except as
permitted pursuant to Section 4.2 of the Agreement,

     (j) in which the Seller owns good and marketable title, free and clear of any Adverse
Claims, and that is freely assignable by the Seller (including without any consent of the
related Obligor),

     (k) for which the Administrator (on behalf of the Purchasers) shall have a valid and
enforceable ownership or security interest and a valid and enforceable first priority
perfected ownership or security interest therein and in the Related Security and Collections
with respect thereto, in each case free and clear of any Adverse Claim,

     (l) that constitutes an account as defined in the UCC, and that is not evidenced by
instruments or chattel paper,

     (m) that is neither a Defaulted Receivable nor a Delinquent Receivable,

     (n) for which neither the Originator thereof, the Seller nor the Servicer has
established any offset arrangements with the related Obligor,

     (o) for which Defaulted Receivables of the related Obligor do not exceed 25% of the
Outstanding Balance of all such Obligor’s Receivables,

     (p) that represents amounts earned and payable by the Obligor that are not subject to
the performance of additional services by the Originator thereof,

     (q) that is not a Receivable considered to be a “quality accrual” (as reported on the
monthly Information Package), except that up to 5% of Eligible Receivables may be “quality
accruals”, and

     (r) the Obligor of which is not the Mohave Project.

I-8

 

     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from
time to time, and any successor statute of similar import, together with the regulations
thereunder, in each case as in effect from time to time. References to sections of ERISA also
refer to any successor sections.

     “ERISA Affiliate” means: (a) any corporation that is a member of the same controlled
group of corporations (within the meaning of Section 414(b) of the Internal Revenue Code) as the
Seller, any Originator or Peabody, (b) a trade or business (whether or not incorporated) under
common control (within the meaning of Section 414(c) of the Internal Revenue Code) with the Seller,
any Originator or Peabody, or (c) a member of the same affiliated service group (within the meaning
of Section 414(m) of the Internal Revenue Code) as the Seller, any Originator, any corporation
described in clause (a) or any trade or business described in clause (b).

     “Euro-Rate” means with respect to any Settlement Period the interest rate per annum
determined by the Administrator by dividing (the resulting quotient rounded upwards, if necessary,
to the nearest 1/100th of 1% per annum) (i) the rate of interest determined by the Administrator in
accordance with its usual procedures (which determination shall be conclusive absent manifest
error) to be the average of the London interbank market offered rates for U.S. dollars quoted by
the BBA as set forth on Dow Jones Markets Service (formerly known as Telerate) (or appropriate
successor or, if the BBA or its successor ceases to provide display page 3750 (or such other
display page on the Dow Jones Markets Service system as may replace display page 3750) at or about
11:00 a.m. (London time) on the Business Day which is two (2) Business Days prior to the first day
of such Settlement Period for an amount comparable to the Portion of Capital to be funded at the
Alternate Rate and based upon the Euro-Rate during such Settlement Period by (ii) a number equal to
1.00 minus the Euro-Rate Reserve Percentage. The Euro-Rate may also be expressed by the following
formula:

	 	 	 	 	 
	Euro-Rate

	 	=
	 	Average of London interbank offered rates quoted
 by BBA
as shown on Dow Jones Markets Service

display page 3750 or appropriate
successor               
	 

	 	 	 	            1.00 – Euro-Rate Reserve Percentage

where “Euro-Rate Reserve Percentage” means, the maximum effective percentage in effect on
such day as prescribed by the Board of Governors of the Federal Reserve System (or any successor)
for determining the reserve requirements (including without limitation, supplemental, marginal, and
emergency reserve requirements) with respect to eurocurrency funding (currently referred to as
“Eurocurrency Liabilities”). The Euro-Rate shall be adjusted with respect to any Portion
of Capital funded at the Alternate Rate and based upon the Euro-Rate that is outstanding on the
effective date of any change in the Euro-Rate Reserve Percentage as of such effective date. The
Administrator shall give prompt notice to the Seller of the Euro-Rate as determined or adjusted in
accordance herewith (which determination shall be conclusive absent manifest error).

     “Event of Bankruptcy” means (a) any case, action or proceeding before any court or
other governmental authority relating to bankruptcy, reorganization, insolvency, liquidation,
receivership, dissolution, winding-up or relief of debtors or (b) any general assignment for the
benefit of creditors of a Person or any composition, marshalling of assets for creditors of a
Person, or other similar arrangement in respect of its creditors generally or any substantial

I-9

 

portion of its creditors; in each of cases (a) and (b) undertaken under U.S. Federal, state or
foreign law, including the Bankruptcy Code.

     “Excess Concentration” means the sum of the amounts by which the Outstanding Balance
of Eligible Receivables of each Obligor then in the Receivables Pool exceeds an amount equal
to: (a) the Concentration Percentage for such Obligor multiplied by (b) the Outstanding
Balance of all Eligible Receivables then in the Receivables Pool.

     “Facility Termination Date” means the earliest to occur of: (a) May 12, 2012, subject
to any extension thereof pursuant to Section 1.12, (b) the date determined pursuant to
Section 2.2 of the Agreement, (c) the date the Purchase Limit reduces to zero pursuant to
Section 1.1(b) of the Agreement, (d) the date on which the commitments of the purchasers
under the Liquidity Agreement terminate and (e) the Issuer shall fail to cause the amendment or
modification of any Transaction Document or related opinion as required by Moody’s or Standard and
Poor’s, and such failure shall continue for 30 days after such amendment is initially requested.

     “Federal Funds Rate” means, for any day, the per annum rate set forth in the weekly
statistical release designated as H.15(519), or any successor publication, published by the Federal
Reserve Board (including any such successor, “H.15(519)”) for such day opposite the caption
“Federal Funds (Effective).” If on any relevant day such rate is not yet published in H. 15(519),
the rate for such day will be the rate set forth in the daily statistical release designated as the
Composite 3:30 p.m. Quotations for U.S. Government Securities, or any successor publication,
published by the Federal Reserve Bank of New York (including any such successor, the “Composite
3:30 p.m. Quotations”) for such day under the caption “Federal Funds Effective Rate.” If on any
relevant day the appropriate rate is not yet published in either H.15(519) or the Composite 3:30
p.m. Quotations, the rate for such day will be the arithmetic mean as determined by the
Administrator of the rates for the last transaction in overnight Federal funds arranged before 9:00
a.m. (New York time) on that day by each of three leading brokers of Federal funds transactions in
New York City selected by the Administrator.

     “Federal Reserve Board” means the Board of Governors of the Federal Reserve System, or
any entity succeeding to any of its principal functions.

     “Fee Letter” has the meaning set forth in Section 1.7 of the Agreement.

     “Final Payout Date” means the date on or after the Facility Termination Date on which
(i) the Purchase Limit has been reduced to zero ($0), (ii) the Capital has been reduced to zero
($0), (iii) all accrued Discount has been paid in full, (iv) all accrued fees under the Fee Letter
have been paid in full, (v) the Adjusted LC Participation Amount has been reduced to zero ($0) and
(vi) all other amounts owing by the Seller and the Servicer to the Administrator, the Purchasers,
the Indemnified Parties and the other Affected Persons hereunder and under the other Transaction
Documents have been paid in full.

     “Governmental Authority” means any nation or government, any state or other political
subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any
body or entity exercising executive, legislative, judicial, regulatory or administrative functions
of

I-10

 

or pertaining to government, including any court, and any Person owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.

     “Group A Obligor” means any Obligor with a short-term rating of at least: (a) “A1” by
Standard & Poor’s, or if such Obligor does not have a short-term rating from Standard & Poor’s, a
rating of “A+” or better by Standard & Poor’s on its long-term senior unsecured and uncredit-
enhanced debt securities, and (b) “P-1” by Moody’s, or if such Obligor does not have a
short-term rating from Moody’s, “Al” or better by Moody’s on its long-term senior unsecured and
uncredit-enhanced debt securities, and any Special Group A Obligor.

     “Group B Obligor” means an Obligor, not a Group A Obligor, with a short-term rating of
at least: (a) “A-2” by Standard & Poor’s, or if such Obligor does not have a short-term rating
from Standard & Poor’s, a rating of “BBB+” to “A” by Standard & Poor’s on its long-term senior
unsecured and uncredit-enhanced debt securities, and (b) “P-2” by Moody’s, or if such
Obligor does not have a short-term rating from Moody’s, “Baal” to “A2” by Moody’s on its long-term
senior unsecured and uncredit-enhanced debt securities, and any Special Group B Obligor.

     “Group C Obligor” means an Obligor, not a Group A Obligor or a Group B Obligor, with a
short-term rating of at least: (a) “A-3” by Standard & Poor’s, or if such Obligor does not have a
short-term rating from Standard & Poor’s, a rating of “BBB-” to “BBB” by Standard & Poor’s on its
long-term senior unsecured and uncredit-enhanced debt securities, and (b) “P-3” by Moody’s,
or if such Obligor does not have a short-term rating from Moody’s, “Baa3” to “Baa2” by Moody’s on
its long-term senior unsecured and uncredit-enhanced debt securities, and any Special Group C
Obligor.

     “Group D Obligor” means any Obligor that is not a Group A Obligor, Group B Obligor or
Group C Obligor, and any Special Group D Obligor.

     “Indemnified Amounts” has the meaning set forth in Section 3.1 of the
Agreement.

     “Indemnified Party” has the meaning set forth in Section 3.1 of the Agreement.

     “Independent Director” has the meaning set forth in paragraph 3(c) of
Exhibit IV to the Agreement.

     “Information Package” means a report, in substantially the form of Annex A to
the Agreement, furnished to the Administrator pursuant to the Agreement.

     “Insolvency Proceeding” means: (a) any case, action or proceeding before any court or
other Governmental Authority relating to bankruptcy, reorganization, insolvency, liquidation,
receivership, dissolution, winding-up or relief of debtors, or (b) any general assignment for the
benefit of creditors of a Person, composition, marshaling of assets for creditors of a Person, or
other, similar arrangement in respect of its creditors generally or any substantial portion of its
creditors, in each of cases (a) and (b) undertaken under U.S. Federal, state or foreign law,
including the Bankruptcy Code.

I-11

 

     “Intercreditor Agreement” means that certain Intercreditor Agreement dated as of
February 20, 2002, by and between the Administrator and Bank One, NA, in its capacity as
administrative agent under the Credit Agreement, as such Intercreditor Agreement may be amended,
restated and/or otherwise modified from time to time in accordance with the terms thereof.

     “Internal Revenue Code” means the Internal Revenue Code of 1986, as amended from time
to time, and any successor statute of similar import, together with the regulations
thereunder, in each case as in effect from time to time. References to sections of the
Internal Revenue Code also refer to any successor sections.

     “Investment” has the meaning set forth in Section 1.1(a) of the Agreement.

     “Investment Date” means the date on which an Investment or a Reinvestment is made
pursuant to this Agreement.

     “Investment Notice” has the meaning set forth in Section 1.2(a) of this
Agreement.

     “ISP98 Rules” has the meaning set forth in Section 1.14 of the Agreement.

     “Issuer” has the meaning set forth in the preamble to the Agreement.

     “LC Bank” has the meaning set forth in the preamble to the Agreement.

     “LC Collateral Account” means the account designated as the LC Collateral Account
established and maintained by the Administrator (for the benefit of the LC Bank and the LC
Participants), or such other account as may be so designated as such by the Administrator.

     “LC Commitment” means, the “Commitment” of each LC Participant party hereto as set
forth under its name on the signature pages to the Agreement or as set forth in any assignments
agreement pursuant to which it became a party hereto.

     “LC Participant” has the meaning set forth in the preamble to the Agreement.

     “LC Participation Amount” shall mean, at any time, the then aggregate face amount of
the outstanding Letters of Credit.

     “Letter of Credit” shall mean any stand-by letter of credit issued by the LC Bank for
the account of the Seller pursuant to the Agreement.

     “Letter of Credit Application” has the meaning set forth in Section 1.14 of
the Agreement.

     “Liquidity Agent” means PNC in its capacity as the Liquidity Agent pursuant to the
Liquidity Agreement.

     “Liquidity Agreement” means the Liquidity Asset Purchase Agreement, dated as of
February 20, 2002, between the purchasers from time to time party thereto, the Issuer and PNC,

I-12

 

as
Administrator and Liquidity Agent, as amended, supplemented or otherwise modified from time to
time.

     “Liquidity Bank” shall have the meaning set forth in Section 5.3(d) of the
Agreement.

     “LLC Agreement” means the Second Amended and Restated Limited Liability Company
Agreement of P&L Receivables Company, LLC.

     “Lock-Box Account” means an account in the name of the Seller and maintained by the
Seller at a bank or other financial institution for the purpose of receiving Collections.

     “Lock-Box Agreement” means an agreement, in form and substance satisfactory to the
Administrator, among the Seller, the Servicer, the Issuer and a Lock-Box Bank.

     “Lock-Box Bank” means any of the banks or other financial institutions holding one or
more Lock-Box Accounts.

     “Loss Reserve” means, on any date, an amount equal to: (a) the sum of Capital plus
the LC Participation Amount at the close of business of the Seller on such date multiplied by (b)
(i) the Loss Reserve Percentage on such date divided by (ii) 100% minus the Loss Reserve Percentage
on such date.

     “Loss Reserve Percentage” means, on any date, the product of (i) 2.25 times (ii) the
highest average of the Default Ratios for any three consecutive calendar months during the twelve
most recent calendar months and (iii) (A) the aggregate credit sales made by the Originator during
the four most recent calendar months divided by (B) the Net Receivables Pool Balance as of such
date.

     “Majority LC Participants” shall mean LC Participants whose Pro Rata Shares aggregate
51% or more.

     “Material Adverse Effect” means with respect to any event or circumstance, a material
adverse effect on:

     (a) the assets, operations, business or financial condition of (i) the Seller, or (ii)
Peabody and its Subsidiaries taken as a whole,

     (b) the ability of any of the Originators, the Contributor, the Servicer, any of the
Sub-Servicers, the Transferee or the Seller to perform its obligations under the Agreement
or any other Transaction Document to which it is a party,

     (c) the validity or enforceability of the Agreement or any other Transaction Document,
or the validity, enforceability or collectibility of a material portion of the Pool
Receivables, or

     (d) the status, perfection, enforceability or priority of the Administrator’s, the
Purchasers’ or the Seller’s interest in the Pool Assets.

I-13

 

     “Material Originator” means any of the following at any time, so long as such Person
is an Originator: (i) COALSALES II, LLC, a Delaware corporation, (ii) Powder River Coal, LLC, a
Delaware limited liability company, (iii) Peabody Western Coal Company, a Delaware corporation,
(iv) Peabody Midwest Mining, LLC, an Indiana limited liability company and (v) any other Originator
now or hereafter party to the Sale Agreement whose Receivables represent 15% or more of the
aggregate Receivables originated by the Originators in any calendar month during the immediately
preceding 12 Settlement Periods.

     “Member” shall have the meaning set forth in Schedule A to the LLC Agreement.

     “Mohave Project” means that certain joint venture that developed, built and operates
the Mohave Generating Station located in Laughlin, Nevada, which joint venture is owned by Southern
California Edison (56%), Nevada Power Company (14%), Salt River Project Agricultural Improvement
and Power District (10%), and Department of Water and Power of Los Angeles (20%).

     “Monthly Settlement Date” means the twenty-third day of each calendar month (or the
next succeeding Business Day if such day is not a Business Day), beginning May 23, 2008.

     “Moody’s” means Moody’s Investors Service, Inc.

     “Navajo Project” means that certain joint venture that developed, built and operates
the Navajo Electric Generating Station located in Page, Arizona, which joint venture is owned by
Nevada Power Company (11.3%), Salt River Project Agricultural Improvement and Power District (46%),
Department of Water and Power of Los Angeles (21.2%), Arizona Public Service Co. (14%), and Tucson
Gas and Electric Co. (7.5%).

     “Net Receivables Pool Balance” means, at anytime: (a) the Outstanding Balance of
Eligible Receivables then in the Receivables Pool minus (b) Excess Concentration.

     “Notes” means short-term promissory notes issued, or to be issued, by the Issuer to
fund its investments in accounts receivable or other financial assets.

     “Obligor” means, with respect to any Receivable, the Person obligated to make payments
pursuant to the Contract relating to such Receivable.

     “Obligor Group” means any of the following: Group A Obligor, Group B Obligor, Group C
Obligor or Group D Obligor.

     “Order” has the meaning set forth in Section 1.22 of the Agreement.

     “Original Agreement” has the meaning set forth in the preliminary statements of the
Agreement.

     “Original Agreement Outstanding Amounts” has the meaning set forth in the preliminary
statements of the Agreement.

I-14

 

     “Originator” and “Originators” have the meaning set forth in the Sale
Agreement, as the same may be modified from time to time by adding new Originators or removing
Originators, in each case with the prior written consent of the Administrator.

     “Originator Assignment Certificate” means the assignment by each Originator to the
Contributor, and subsequently to the Seller, in substantially the form of Exhibit C to the
Sale Agreement, evidencing Seller’s ownership of the Receivables generated by the Originators, as
the same may be amended, supplemented, amended and restated, or otherwise modified from time to
time in accordance with the Sale Agreement.

     “Other Material Financing Agreement” has the meaning set forth in paragraph
(j) of Exhibit V of the Agreement.

     “Outstanding Balance” of any Receivable at any time means the then outstanding
principal balance thereof.

     “Paydown Notice” has the meaning set forth in Section 1.6(f)(i) of the
Agreement.

     “Payment Date” has the meaning set forth in Section 2.1 of the Sale Agreement.

     “Peabody” has the meaning set forth in the preamble to the Agreement.

     “Performance Reserve” means the sum of the Loss Reserve and the Dilution Reserve.

     “Permitted Lock-Box Bank” means a bank or other financial institution with minimum
capital of at least $250,000.

     “Person” means an individual, partnership, corporation (including a business trust),
joint stock company, trust, unincorporated association, joint venture, limited liability company or
other entity, or a government or any political subdivision or agency thereof.

     “PNC” has the meaning set forth in the preamble to the Agreement.

     “Pool Assets” has the meaning set forth in Section 1.4(e) of the Agreement.

     “Pool Receivable” means a Receivable in the Receivables Pool.

     “Portion of Capital” means any separate portion of Capital being funded or maintained
by the Issuer (or its successors or permitted assigns) by reference to a particular interest rate
basis. In addition, at any time when the Capital is not divided into two or more such portions,
“Portion of Capital” means 100% of the Capital.

     “Program Support Agreement” means and includes the Liquidity Agreement and any other
agreement entered into by any Program Support Provider providing for: (a) the issuance of one or
more letters of credit for the account of the Issuer, (b) the issuance of one or more surety bonds
for which the Issuer is obligated to reimburse the applicable Program Support Provider for any
drawings thereunder, (c) the sale by the Issuer to any Program Support Provider of the Purchased
Assets (or portions thereof) and/or (d) the making of loans and/or other extensions of

I-15

 

credit to
the Issuer in connection with the Issuer’s Receivables-securitization program contemplated in the
Agreement, together with any letter of credit, surety bond or other instrument issued thereunder
(but excluding any discretionary advance facility provided by the Administrator).

     “Program Support Provider” means and includes any Liquidity Bank and any other Person
(other than any customer of the Issuer) now or hereafter extending credit or having a commitment to
extend credit to or for the account of, or to make purchases from, the Issuer pursuant to any
Program Support Agreement.

     “Pro Rata Share” shall mean, as to any LC Participant, a fraction, the numerator of
which equals the Commitment of such LC Participant at such time and the denominator of which equals
the aggregate of the Commitments of all LC Participant at such time.

     “Purchase and Sale Indemnified Amounts” has the meaning set forth in Section
9.1 of the Sale Agreement.

     “Purchase and Sale Indemnified Party” has the meaning set forth in Section 9.1
of the Sale Agreement.

     “Purchase and Sale Termination Date” has the meaning set forth in Section 1.4
of the Sale Agreement.

     “Purchase and Sale Termination Event” has the meaning set forth in Section 8.1
of the Sale Agreement.

     “Purchased Assets” has the meaning set forth in Section 1.3(b) of the
Agreement.

     “Purchased Assets Coverage Percentage” means, at any time and subject to Section
1.5 of the Agreement, the percentage computed as:

Capital + Adjusted LC Participation Amount + Total Reserves

Net Receivables Pool Balance

The Purchased Assets Coverage Percentage shall be determined from time to time in accordance with
Section 1.5 of the Agreement.

     “Purchase Limit” means $275,000,000, as such amount may be reduced pursuant to
Section 1.1(b) of the Agreement. References to the unused portion of the Purchase Limit
shall mean, at any time, the Purchase Limit minus the sum of the then aggregate outstanding Capital
plus the LC Participation Amount.

     “Purchase Price” has the meaning set forth in Section 2.1 of the Sale
Agreement.

     “Purchase Report” has the meaning set forth in Section 2.1 of the Sale
Agreement.

     “Purchasers” means the Issuer, the LC Bank and each LC Participant.

I-16

 

     “Receivable” means any indebtedness and other obligations owed to the Seller (as
assignee of the Contributor and each Originator), the Contributor or any Originator by, or any
right of the Seller, the Contributor or any Originator to payment from or on behalf of, an Obligor,
whether constituting an account, chattel paper, instrument or general intangible, arising in
connection with the sale of goods or the rendering of services by any Originator, and includes the
obligation to pay any finance charges, fees and other charges with respect thereto. Indebtedness
and other obligations arising from any one transaction, including indebtedness and other
obligations represented by an individual invoice or agreement, shall constitute a Receivable
separate from a Receivable consisting of the indebtedness and other obligations arising from any
other transaction.

     “Receivables Pool” means, at any time, all of the then outstanding Receivables
purchased by the Contributor pursuant to the Sale Agreement prior to the Facility Termination Date.

     “Reference Bank” means PNC.

     “Reimbursement Obligation” has the meaning set forth in Section 1.16 of the
Agreement.

     “Reinvestment” has the meaning set forth in Section 1.4(b) of the Agreement.

     “Related Rights” has the meaning set forth in Section 1.1 of the Sale
Agreement.

     “Related Security” means, with respect to any Receivable:

     (a) all of the Seller’s, the Contributor’s and each Originator’s interest in any goods
(including returned goods), and documentation of title evidencing the shipment or storage of
any goods (including returned goods), relating to any sale giving rise to such Receivable,

     (b) all instruments and chattel paper that may evidence such Receivable,

     (c) all other security interests or liens and property subject thereto from time to
time purporting to secure payment of such Receivable, whether pursuant to the Contract
related to such Receivable or otherwise, together with all UCC financing statements or
similar filings relating thereto, and

     (d) all of the Seller’s, the Contributor’s and each Originator’s rights, interests and
claims under the Contracts and all guaranties, indemnities, insurance and other agreements
(including the related Contract) or arrangements of whatever character from time to time
supporting or securing payment of such Receivable or otherwise relating to such Receivable,
whether pursuant to the Contract related to such Receivable or otherwise.

     “Required LC Participants” shall mean the LC Participants whose Pro Rata Shares
aggregate 662⁄3% or more.

     “Responsible Officer” means, with respect to each Originator, the Contributor, the
Servicer, the Transferee and the Seller, any president, vice president, treasurer, assistant

I-17

 

treasurer, secretary, assistant secretary, chief financial officer, controller or any other
officer of any such Person charged with the responsibility for administration of any Transaction
Document.

     “Restricted Payments” has the meaning set forth in Section 1(n) of Exhibit
IV of the Agreement.

     “Sale Agreement” means the Purchase and Sale Agreement, dated as of February 20, 2002,
between the Contributor and the Originators as such agreement may be amended, amended and restated,
supplemented or otherwise modified from time to time.

     “Seller” has the meaning set forth in the preamble to the Agreement.

     “Senior Notes Indenture” means that certain Indenture, dated as of March 21, 2003,
among Peabody, the guarantors named therein, and U.S. Bank National Association, as trustee.

     “Servicer” has the meaning set forth in the preamble to the Agreement.

     “Servicer Note” shall mean that certain Promissory Note dated February 20, 2002 made
by Peabody in favor of the Seller, as the same may be amended from time to time.

     “Servicing Fee” shall mean the fee referred to in Section 4.6 of the
Agreement.

     “Servicing Fee Rate” shall mean the rate referred to in Section 4.6 of the
Agreement.

     “Settlement Date” means with respect to any Portion of Capital for any Settlement
Period, (i) prior to the Facility Termination Date, the Monthly Settlement Date and (ii) on and
after the Facility Termination Date, each day selected from time to time by the Administrator (it
being understood that the Administrator may select such Settlement Date to occur as frequently as
daily), or, in the absence of such selection, the Monthly Settlement Date.

     “Settlement Period” means: (a) before the Facility Termination Date, each period
commencing on the second Business Day prior to each Monthly Settlement Date and ending on (but not
including) the second Business Day prior to the next Monthly Settlement Date, and (b) on and after
the Facility Termination Date, such period (including a period of one day) as shall be selected
from time to time by the Administrator or, in the absence of any such selection, each period of 30
days from the last day of the preceding Settlement Period.

     “Similar Businesses” means coal production, coal mining, coal brokering, coal
transportation, mine development, power marketing, electricity generation, power/ energy sales and
trading, energy transactions/ asset restructurings, risk management products associated with
energy, fuel/ power integration and other energy related businesses, ash disposal, environmental
remediation, coal, natural gas, petroleum or other fossil fuel exploration, production, marketing,
transportation and distribution and other related businesses, and activities of Peabody and its
Subsidiaries as of the Closing Date and any business or activity that is reasonably similar thereto
or a reasonable extension, development or expansion thereof or ancillary thereto.

I-18

 

     “Solvent” means, with respect to any Person at any time, a condition under which:

     (i) the fair value and present fair saleable value of such Person’s total assets is, on
the date of determination, greater than such Person’s total liabilities (including
contingent and unliquidated liabilities) at such time;

     (ii) the fair value and present fair saleable value of such Person’s assets is greater
than the amount that will be required to pay such Person’s probable liability on its
existing debts as they become absolute and matured (“debts,” for this purpose, includes all
legal liabilities, whether matured or unmatured, liquidated or unliquidated, absolute,
fixed, or contingent);

     (iii) such Person is and shall continue to be able to pay all of its liabilities as
such liabilities mature; and

     (iv) such Person does not have unreasonably small capital with which to engage in its
current and in its anticipated business.

For purposes of this definition:

     (A) the amount of a Person’s contingent or unliquidated liabilities at any time shall
be that amount which, in light of all the facts and circumstances then existing, represents
the amount which can reasonably be expected to become an actual or matured liability;

     (B) the “fair value” of an asset shall be the amount which may be realized within a
reasonable time either through collection or sale of such asset at its regular market value;

     (C) the “regular market value” of an asset shall be the amount which a capable and
diligent business person could obtain for such asset from an interested buyer who is willing
to Purchase such asset under ordinary selling conditions; and

     (D) the “present fair saleable value” of an asset means the amount which can be
obtained if such asset is sold with reasonable promptness in an arm’s-length transaction in
an existing and not theoretical market.

     “Special Member” shall have the meaning set forth in Schedule A to the LLC
Agreement.

     “Special Obligor” means the Navajo Project, for so long as, with respect to such
Navajo Project, (a) the agreement among the project participants requires that upon the default of
any participant, the non-defaulting participants are required to cure any such default, and (b)
Peabody represents and warrants that, to its knowledge, the statement set forth in subsection (a)
above is true, complete and correct. The Navajo Project shall be deemed to be a “Special
Group A Obligor” hereunder for so long as such Navajo Project has at least one project
participant with the rating of a Group A Obligor; the Navajo Project shall be deemed to be a
“Special Group B Obligor” hereunder for so long as such Navajo Project has at least one
project participant with the rating of a Group B Obligor (but no project participants with the
rating of a Group A

I-19

 

Obligor); the Navajo Project shall be deemed to be a “Special Group C Obligor”
hereunder for so long as such Navajo Project has at least one project participant with the rating
of a Group C Obligor (but no project participants with the rating of a Group A Obligor or a Group B
Obligor); and the Navajo Project shall be deemed to be a “Special Group D Obligor”
hereunder for so long as such Navajo Project has no project participants with the rating of a Group
A Obligor, a Group B Obligor or a Group C Obligor.

     “Special Obligor Group” means any one of the following: Special Group A Obligor,
Special Group B Obligor, Special Group C Obligor, or Special Group D Obligor.

     “Spike Factor” means, for any calendar month, (a) the positive difference, if any,
between: (i) the highest Dilution Ratio for any one calendar month during the twelve most recent
calendar months and (ii) the arithmetic average of the Dilution Ratios for such twelve months
times (b) (i) the highest Dilution Ratio for any one calendar month during the twelve most
recent calendar months divided by (ii) the arithmetic average of the Dilution Ratios for
such twelve months.

     “Standard & Poor’s” means Standard & Poor’s Ratings Services, a Standard and Poor’s
Financial Services LLC business.

     “Sub-Servicer” has the meaning set forth in Section 4.1 of the Agreement.

     “Subsidiary” means, as to any Person, a corporation, partnership, limited liability
company or other entity of which shares of stock of each class or other interests having ordinary
voting power (other than stock or other interests having such power only by reason of the happening
of a contingency) to elect a majority of the Board of Directors or other managers of such entity
are at the time owned, or management of which is otherwise controlled: (a) by such Person, (b) by
one or more Subsidiaries of such Person or (c) by such Person and one or more Subsidiaries of such
Person.

     “Termination Day” means: (a) each day on which the conditions set forth in
Section 2 of Exhibit II to the Agreement are not satisfied or (b) each day that
occurs on or after the Facility Termination Date.

     “Termination Event” has the meaning specified in Exhibit V to the Agreement.

     “Termination Fee” means, for any Settlement Period during which a Termination Day
occurs, the amount, if any, by which: (a) the additional Discount (calculated without taking into
account any Termination Fee or any shortened duration of such Settlement Period pursuant to the
definition thereof) that would have accrued during such Settlement Period on the reductions of
Capital relating to such Settlement Period had such reductions not been made, exceeds (b) the
income, if any, received by the Issuer from investing the proceeds of such reductions of Capital,
as determined by the Administrator, which determination shall be binding and conclusive for all
purposes, absent manifest error.

     “Total Reserves” means, at any time the sum of: (a) the Yield Reserve, plus the
greater of (b) (i) the Performance Reserve, or (ii) the Concentration Reserve.

I-20

 

     “Transaction Documents” means the Agreement, the Lock-Box Agreements, the Fee Letter,
the Sale Agreement, the Contribution Agreement, the Intercreditor Agreement, the Servicer Note, and
all other certificates, instruments, UCC financing statements, reports, notices, agreements and
documents executed or delivered under or in connection with the Agreement, in each case as the same
may be amended, supplemented or otherwise modified from time to time in accordance with the
Agreement.

     “TVA” means Tennessee Valley Authority, an Obligor of the Originators.

     “UCC” means the Uniform Commercial Code as from time to time in effect in the
applicable jurisdiction.

     “UCP 600” has the meaning set forth in Section 1.14 of the Agreement.

     “Unmatured Contribution Termination Event” means any event which, with the giving of
notice or lapse of time, or both, would become a Contribution Termination Event.

     “Unmatured Purchase and Sale Termination Event” means any event which, with the giving
of notice or lapse of time, or both, would become a Purchase and Sale Termination Event.

     “Unmatured Termination Event” means an event that, with the giving of notice or lapse
of time, or both, would constitute a Termination Event.

     “Yield Reserve” means, on any date, an amount equal to: (a) the sum of the Capital
plus the LC Participation Amount at the close of business of the Seller on such date multiplied by
(b) (i) the Yield Reserve Percentage on such date divided by (ii) 100% minus the Yield Reserve
Percentage on such date.

     “Yield Reserve Percentage” means at any time:

	 	 	 	 	 
	 

	 	(BR+SFR)
 

360
	 	x l.5 x DSO 

     where:

BR = the Base Rate computed for the most recent Settlement Period,

DSO = Days’ Sales Outstanding, and

SFR = the Servicing Fee Rate

     Other Terms. All accounting terms not specifically defined herein shall be construed
in accordance with generally accepted accounting principles. All terms used in Article 9 of the
UCC in the State of Illinois, and not specifically defined herein, are used herein as defined in
such Article 9. Unless the context otherwise requires, “or” means “and/or,” and “including” (and
with correlative meaning “include” and “includes”) means including without limiting the generality
of any description preceding such term.

I-21

 

EXHIBIT II

CONDITIONS PRECEDENT

     1. Conditions Precedent to Effectiveness of this Agreement. The effectiveness of
this Agreement is subject to the following conditions precedent that the Administrator shall have
received on or before the Closing Date, each in form and substance (including the date thereof)
satisfactory to the Administrator:

     (a) A counterpart of the Agreement executed by the parties thereto.

     (b) Executed counterparts of that certain Seventh Amendment to the Purchase and Sale
Agreement, dated as of the date hereof, by and among the parties thereto and satisfaction of the
conditions precedent to the effectiveness thereto.

     (c) Copies of the resolutions of the Board of Directors of each of the Seller, the
Sub-Servicers and Peabody authorizing the execution, delivery and performance by the Seller, the
Sub-Servicers and Peabody of the Agreement and, with respect to Peabody and the Seller, the LLC
Agreement.

     (d) A certificate of the Secretary or Assistant Secretary of each of the Seller, the
Sub-Servicers and Peabody certifying the names and true signatures of its officers who are
authorized to sign the Agreement. Until the Administrator receives a subsequent incumbency
certificate from the Seller, the Sub-Servicers or Peabody, as the case may be, the Administrator
shall be entitled to rely on the last such certificate delivered to it by the Seller, the
Sub-Servicers or Peabody, as the case may be.

     (e) Proper financing statements (Forms UCC-1 and UCC-3), duly executed on or before the date
of such initial purchase suitable for filing under the UCC of all jurisdictions that the
Administrator may deem, if any, necessary or desirable in order to perfect the interests of the
Seller and the Administrator (for the benefit of the Purchasers) contemplated by the Agreement, the
Contribution Agreement and the Sale Agreement.

     (f) Proper financing statements (Form UCC-3), duly executed and suitable for filing under the
UCC of all jurisdictions that the Administrator may deem, if any, necessary or desirable to release
all security interests and other rights of any Person in the Receivables, Contracts or Related
Security previously granted by the Originators, Peabody or the Seller.

     (g) A fully executed copy of the LLC Agreement in form and substance satisfactory to the
Administrator and conforming the LLC Agreement to the applicable requirements set forth in this
Agreement (including, without limitation, as set forth in Section 3(c) of Exhibit
IV to this Agreement).

     (h) Good standing certificates with respect to each of the Seller, the Originators, and
Peabody issued by the Secretary of State (or similar official) of the state of each such Person’s
organization or formation and principal place of business.

     2. Conditions Precedent to All Investments, Issuances of Letters of Credit and
Reinvestments. Each Investment (including the initial Investment, but excluding the deemed

II-1

 

Investment made pursuant to the first sentence of Section 1.3(a) and any deemed
Investment pursuant to Section 1.4(f) of the Agreement) and the issuance of any Letters of
Credit and each Reinvestment shall be subject to the further conditions precedent that:

     (a) in the case of each Investment and the issuance of any Letters of Credit, the Servicer
shall have delivered to the Administrator on or before such Investment or issuance, as the case may
be, in form and substance satisfactory to the Administrator, a completed pro forma Information
Package to reflect the level of Capital, the LC Participation Amount and related reserves and the
calculation of the Purchased Asset Coverage Percentage after such subsequent Investment or
issuance, as the case may be, and a completed Investment Notice in the form of Annex B; and

     (b) on the date of such Investment, issuance or Reinvestment, as the case may be, the
following statements shall be true (and acceptance of the proceeds of such Investment, issuance or
Reinvestment shall be deemed a representation and warranty by the Seller that such statements are
then true):

     (i) the representations and warranties contained in Exhibit III to the
Agreement are true and correct in all material respects on and as of the date of such
Investment, issuance or Reinvestment as though made on and as of such date (except to the
extent that such representations and warranties expressly relate to an earlier date, and in
which case such representations and warranties shall be true and correct in all material
respects as of such earlier date);

     (ii) no event has occurred and is continuing, or would result from such Investment,
issuance or Reinvestment, that constitutes a Termination Event;

     (iii) solely in the case of any Investment (but not Reinvestment) or any such issuance,
no Unmatured Termination Event shall exist and be continuing;

     (iv) the sum of the Capital plus the LC Participation Amount, after giving effect to
any such Investment, issuance or Reinvestment, as the case may be, shall not exceed the
Purchase Limit;

     (v) after giving effect to any such Investment, issuance or Reinvestment, as the case
may be, the Purchased Assets Coverage Percentage shall not exceed 100%; and

     (vi) the Facility Termination Date shall not have occurred.

II-2

 

EXHIBIT III

REPRESENTATIONS AND WARRANTIES

     1. Representations and Warranties of the Seller. The Seller represents and warrants
as follows:

     (a) The Seller is a limited liability company duly organized, validly existing and in good
standing under the laws of the State of Delaware, and is duly qualified to do business and is in
good standing as a foreign limited liability company in every jurisdiction where the nature of its
business requires it to be so qualified, except where the failure to be so qualified would not have
a Material Adverse Effect.

     (b) The execution, delivery and performance by the Seller of the Agreement and the other
Transaction Documents to which it is a party, including its use of the proceeds of Investments and
Reinvestments: (i) are within its organizational powers; (ii) have been duly authorized by all
necessary organizational action; (iii) do not contravene or result in a default under or conflict
with: (A) its certificate of formation or any other organizational document of the Seller, (B) any
law, rule or regulation applicable to it, (C) any indenture, loan agreement, mortgage, deed of
trust or other material agreement or instrument to which it is a party or by which it is bound, or
(D) any order, writ, judgment, award, injunction or decree binding on or affecting it or any of its
property; and (iv) do not result in or require the creation of any Adverse Claim upon or with
respect to any of its properties. The Agreement and the other Transaction Documents to which it is
a party have been duly executed and delivered by the Seller.

     (c) No authorization, approval or other action by, and no notice to or filing with, any
Governmental Authority or other Person is required for its due execution, delivery and performance
by the Seller of the Agreement or any other Transaction Document to which it is a party, other than
the Uniform Commercial Code filings referred to in Exhibit II to the Agreement, all of
which shall have been filed on or before the Closing Date.

     (d) Each of the Agreement and the other Transaction Documents to which the Seller is a party
constitutes its legal, valid and binding obligation enforceable against the Seller in accordance
with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization
or other similar laws from time to time in effect affecting the enforcement of creditors’ rights
generally and by general principles of equity, regardless of whether such enforceability is
considered in a proceeding in equity or at law.

     (e) There is no pending or, to Seller’s best knowledge, threatened action or proceeding
affecting Seller or any of its properties before any Governmental Authority or arbitrator.

     (f) No proceeds of any Investment or Reinvestment will be used to acquire any equity security
of a class that is registered pursuant to Section 12 of the Securities Exchange Act of 1934.

     (g) The Seller is the legal and beneficial owner of, and has good and marketable title to, the
Pool Receivables, the Lock-Box Accounts (and related lock-boxes) and Related Security,

III -1

 

free and clear of any Adverse Claim. Upon each Investment or Reinvestment, the Administrator
(on behalf of the Purchasers) shall acquire a valid and enforceable perfected ownership or security
interest in each Pool Receivable then existing or thereafter arising and in the Related Security,
Collections and other proceeds with respect thereto, free and clear of any Adverse Claim. The
Agreement creates a valid and continuing ownership or security interest (as defined in the
applicable UCC) in favor of the Administrator in the Pool Assets and the Lock-Box Accounts (and
related lock-boxes), which ownership or security interest is prior to all other Adverse Claims, and
is enforceable as such against creditors of and purchasers from the Seller. The Pool Assets
constitute “accounts”, “general intangibles” or “tangible chattel paper” within the meaning of the
applicable UCC. Each Lock-Box Account constitutes a “deposit account: within the meaning of the
applicable UCC. The Seller has caused or will have caused, within ten (10) days, the filing of all
appropriate UCC financing statements in the proper filing offices in the appropriate jurisdictions
under applicable laws in order to perfect the ownership or security interest in the Pool Assets and
the Lock-Box Accounts (and related lock-boxes) granted to the Administrator (on behalf of the
Purchasers) hereunder. Other than the ownership or security interest granted to the Administrator
(on behalf of the Purchasers) pursuant to this Agreement, Seller has not pledged, assigned, sold,
granted a security interest in, or otherwise conveyed any of the Pool Assets or the Lock-Box
Accounts (and related lock-boxes). Seller has not authorized the filing of and is not aware of any
UCC financing statements against Seller that include a description of collateral covering the Pool
Assets, other than any UCC financing statement relating to the security interest granted to the
Administrator (on behalf of the Purchasers) hereunder or that has been terminated. Seller is not
aware of any judgment, ERISA or tax lien filings against the Seller. With respect to any Pool
Receivable that constitutes “tangible chattel paper”, the Servicer is in possession of the original
copies of the tangible chattel paper that constitutes or evidences such Pool Receivables, and the
Seller has filed or has caused to be filed within ten (10) days after the date hereof the financing
statements described in this section above, each of which will contain a statement that “A purchase
of or a grant of a security interest in any property described in this financing statement will
violate the rights of the Administrator.” The Pool Receivables to the extent they are evidenced by
“tangible chattel paper” do not have any marks or notations indicating that they have been pledged,
assigned or otherwise conveyed to any Person other than the Seller or the Administrator (on behalf
of the Purchasers).

     (h) Each Information Package (if prepared by the Seller or one of its Affiliates, or to the
extent that information contained therein is supplied by the Seller or one of its Affiliates),
information, exhibit, financial statement, document, book, record or report furnished or to be
furnished at any time by or on behalf of the Seller to the Administrator in connection with the
Agreement or any other Transaction Document to which it is a party is or will be complete and
accurate in all material respects as of its date or (except as otherwise disclosed to the
Administrator at such time) as of the date so furnished.

     (i) The Seller’s principal place of business, chief executive office and state of formation
(as such terms are used in the UCC) and the office where it keeps its records concerning the
Receivables are located at the address referred to in Sections l(b) and 2(b) of
Exhibit IV to the Agreement.

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     (j) The names and addresses of all the Lock-Box Banks, together with the account numbers of
the Lock-Box Accounts at such Lock-Box Banks, are specified in Schedule II to the Agreement
(or at such other Lock-Box Banks and/or with such other Lock-Box Accounts as have been notified to
the Administrator in accordance with the Agreement) and all Lock-Box Accounts are subject to
Lock-Box Agreements. With respect to all Lock-Box Accounts (and related lock-boxes), the Seller
has delivered to the Administrator, on behalf of the Purchasers, a fully executed Lock-Box
Agreement pursuant to which the applicable Lock-Box Bank has agreed, following the occurrence and
continuation of a Termination Event, to comply with all instructions given by the Administrator
with respect to all funds on deposit in such Lock-Box Account (and all funds sent to the respective
lock-box), without further consent by the Seller or the Servicer. None of the Lock-Box Accounts
(and the related lock-boxes) are in the name of any Person other than the Seller or the
Administrator (on behalf of the Purchasers). The Seller has not consented to any Lock-Box Bank’s
complying with instructions of any person other than the Administrator.

     (k) The Seller is not in violation of any order of any court, arbitrator or Governmental
Authority.

     (l) Neither the Seller nor any of its Affiliates has any direct or indirect ownership or other
financial interest in the Issuer.

     (m) No proceeds of any Investment or Reinvestment will be used for any purpose that violates
any applicable law, rule or regulation, including Regulations T, U or X of the Federal Reserve
Board.

     (n) Each Pool Receivable included as an Eligible Receivable in the calculation of the Net
Receivables Pool Balance is an Eligible Receivable.

     (o) No event has occurred and is continuing, or would result from an Investment or
Reinvestment or from the application of the proceeds therefrom, that constitutes a Termination
Event or an Unmatured Termination Event.

     (p) The Seller has accounted for each sale of the Receivables and the other Purchased Assets
in its books and financial statements as sales, consistent with generally accepted accounting
principles.

     (q) The Seller has complied in all material respects with the Credit and Collection Policies
of the Originators with regard to each Receivable originated by the Originators.

     (r) The Seller has complied in all material respects with all of the terms, covenants and
agreements contained in the Agreement and the other Transaction Documents that are applicable to
it.

     (s) The Seller’s complete organizational name is set forth in the preamble to the Agreement,
and it does not use and has not during the last six years used any other organizational name, trade
name, doing-business name or fictitious name, except as set forth on Schedule III to the
Agreement and except for names first used after the date of the Agreement and set forth in a

III -3

 

notice delivered to the Administrator pursuant to Section 1(1)(iv) of Exhibit
IV to the Agreement.

     (t) The Seller is not an “investment company,” or a company “controlled” by an “investment
company” within the meaning of the Investment Company Act of 1940, as amended.

     2. Representations and Warranties of Peabody (including in its capacity as the
Servicer). Peabody, individually and in its capacity as the Servicer, represents and warrants
jointly and severally as follows:

     (a) Peabody is a corporation duly formed, validly existing and in good standing under the laws
of the State of Delaware, and is duly qualified to do business and is in good standing as a foreign
corporation in every jurisdiction where the nature of its business requires it to be so qualified,
except where the failure to be so qualified would not have a Material Adverse Effect.

     (b) The execution, delivery and performance by Peabody of the Agreement and the other
Transaction Documents to which it is a party, including the Servicer’s use of the proceeds of
Investments and Reinvestments: (i) are within its organizational powers; (ii) have been duly
authorized by all necessary organizational action; (iii) do not contravene or result in a default
under or conflict with: (A) its certificate of incorporation or any other organizational document
of Peabody, (B) any law, rule or regulation applicable to it, (C) any indenture, loan agreement,
mortgage, deed of trust or other material agreement or instrument to which it is a party or by
which it is bound, or (D) any order, writ, judgment, award, injunction or decree binding on or
affecting it or any of its property; and (iv) do not result in or require the creation of any
Adverse Claim upon or with respect to any of its properties. The Agreement and the other
Transaction Documents to which Peabody is a party have been duly executed and delivered by Peabody.

     (c) No authorization, approval or other action by, and no notice to or filing with any
Governmental Authority or other Person, is required for the due execution, delivery and performance
by Peabody of the Agreement or any other Transaction Document to which it is a party.

     (d) Each of the Agreement and the other Transaction Documents to which Peabody is a party
constitutes the legal, valid and binding obligation of Peabody enforceable against Peabody in
accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization or other similar laws from time to time in effect affecting the enforcement of
creditors’ rights generally and by general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law.

     (e) The balance sheets of Peabody and its consolidated Subsidiaries as at December 31, 2008,
and the related statements of income and retained earnings for the fiscal year then ended, copies
of which have been furnished to the Administrator, fairly present in all material respects the
financial condition of Peabody and its consolidated Subsidiaries as at such date and the results of
the operations of Peabody and its Subsidiaries for the period ended on such date, all in accordance
with generally accepted accounting principles consistently applied, and since

III -4

 

December 31, 2008 there has been no event or circumstances which have had a Material Adverse
Effect.

     (f) Except as disclosed in the most recent audited financial statements of Peabody furnished
to the Administrator, there is no pending or, to its best knowledge, threatened action or
proceeding affecting it or any of its Subsidiaries before any Governmental Authority or arbitrator
that is reasonably likely to have a Material Adverse Effect.

     (g) No proceeds of any Investment or Reinvestment will be used to acquire any equity security
of a class that is registered pursuant to Section 12 of the Securities Exchange Act of 1934. No
proceeds of any Investment or Reinvestment will be used for any purpose that violates any
applicable law, rule or regulation, including Regulations T, U or X of the Federal Reserve Board.

     (h) Each Information Package (if prepared by Peabody or one of its Affiliates, or to the
extent that information contained therein is supplied by Peabody or an Affiliate), information,
exhibit, financial statement, document, book, record or report furnished or to be furnished at any
time by or on behalf of the Servicer to the Administrator in connection with the Agreement is or
will be complete and accurate in all material respects as of its date or (except as otherwise
disclosed to the Administrator at such time) as of the date so furnished.

     (i) The principal place of business, chief executive office and state of formation (as such
terms are used in the UCC) of Peabody and the office where it keeps its records concerning the
Receivables are located at the address referred to in Section 2(b) of Exhibit IV to
the Agreement.

     (j) Peabody is not in violation of any order of any court, arbitrator or Governmental
Authority, which is reasonably likely to have a Material Adverse Effect.

     (k) Neither Peabody nor any of its Affiliates has any direct or indirect ownership or other
financial interest in the Issuer.

     (l) The Servicer has complied in all material respects with the Credit and Collection Policy
of the Originators with regard to each Receivable originated by the Originators.

     (m) Peabody has complied in all material respects with all of the terms, covenants and
agreements contained in the Agreement and the other Transaction Documents that are applicable to
it.

     (n) Peabody is not an “investment company” or a company “controlled” by an “investment
company” within the meaning of the Investment Company Act of 1940, as amended.

     (o) [Reserved].

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     (p) The agreement among the project participants of the Navajo Project requires that upon the
default of any participant, the non-defaulting participants are required to cure any such default.

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EXHIBIT IV

COVENANTS

     1. Covenants of the Seller. Until the Final Payout Date:

     (a) Compliance with Laws, Etc. The Seller shall comply in all material respects with
all applicable laws, rules, regulations and orders, and preserve and maintain its organizational
existence, rights, franchises, qualifications and privileges, except to the extent that the failure
so to comply with such laws, rules, regulations and orders or the failure so to preserve and
maintain such rights, franchises, qualifications and privileges would not have a Material Adverse
Effect.

     (b) Offices, Records and Books of Account, Etc. The Seller: (i) shall keep its
principal place of business, chief executive office and state of formation (as such terms or
similar terms are used in the UCC) and the office where it keeps its records concerning the
Receivables at the address of the Seller set forth on Schedule IV or, pursuant to
clause (1)(iv) below, at any other locations in jurisdictions where all actions reasonably
requested by the Administrator to protect and perfect the interest of the Administrator in the
Receivables and related items (including the Pool Assets) have been taken and completed and (ii)
shall provide the Administrator with at least 30 days’ written notice before making any change in
the Seller’s name or making any other change in the Seller’s identity or organizational structure
(including a Change in Control) that could render any UCC financing statement filed in connection
with this Agreement “seriously misleading” as such term (or similar term) is used in the UCC; each
notice to the Administrator pursuant to this sentence shall set forth the applicable change and the
effective date thereof. The Seller also will maintain and implement (or cause the Servicer to
maintain and implement) administrative and operating procedures (including an ability to recreate
records evidencing Receivables and related Contracts in the event of the destruction of the
originals thereof), and keep and maintain (or cause the Servicer to keep and maintain) all
documents, books, records, computer tapes and disks and other information reasonably necessary or
advisable for the collection of all Receivables (including records adequate to permit the daily
identification of each Receivable and all Collections of and adjustments to each existing
Receivable). Notwithstanding the above, in no event shall the Seller have or maintain, or be a
partner in any partnership that has or maintains, its jurisdiction of organization, principal place
of business or principal assets in any of the states of Colorado, Kansas, New Mexico, Oklahoma,
Utah or Wyoming.

     (c) Performance and Compliance with Contracts and Credit and Collection Policy. The
Seller shall (and shall cause the Servicer to), at its expense, timely and fully perform and comply
with all material provisions, covenants and other promises required to be observed by it under the
Contracts related to the Receivables, and timely and fully comply in all material respects with the
applicable Credit and Collection Policies with regard to each Receivable and the related Contract.

     (d) Ownership Interest, Etc. The Seller shall (and shall cause the Servicer to), at
its expense, take all action necessary or desirable to establish and maintain a valid and
enforceable ownership or security interest in the Pool Receivables, the Related Security and
Collections with respect thereto, and a first priority perfected ownership or security interest in
the Pool Assets, in

IV-1

 

each case free and clear of any Adverse Claim, in favor of the Administrator (on behalf of the
Purchasers), including taking such action to perfect, protect or more fully evidence the interest
of the Administrator (on behalf of the Purchasers), as the Administrator, may reasonably request.
The Seller shall from time to time and within the time limits established by law prepare and
present to the Administrator for the Administrator’s authorization and approval all financing
statements, amendments, continuations or initial financing statements in lieu of a continuation
statement, or other filings necessary to continue, maintain and perfect the Administrator’s (on
behalf of the Purchasers) ownership or security interest in the Pool Assets as a first-priority
interest. The Administrator’s approval of such filings shall authorize the Seller to file such
financing statements under the UCC without the signature of the Seller, or the Issuer, the
Administrator or any Purchaser where allowed by applicable law. Notwithstanding anything else in
the Transaction Documents to the contrary, neither the Seller, the Servicer nor any other Person
shall have any authority to file a termination, partial termination, release or partial release or
any amendment that deletes the name of a debtor or excludes collateral of any such financing
statements without the prior written consent of the Administrator.

     (e) Sales, Liens, Etc. The Seller shall not sell, assign (by operation of law or
otherwise) or otherwise dispose of, or create or suffer to exist any Adverse Claim upon or with
respect to, any or all of its right, title or interest in, to or under any Pool Assets (including
the Seller’s interest in any Receivable, Related Security or Collections, or upon or with respect
to any account to which any Collections of any Receivables are sent), or assign any right to
receive income in respect of any items contemplated by this paragraph.

     (f) Extension or Amendment of Receivables. Except as provided in the Agreement, the
Seller shall not, and shall not permit the Servicer to, alter the delinquency status or adjust the
Outstanding Balance or otherwise modify the terms of any Pool Receivable in any material respect,
or amend, modify or waive, in any material respect, any term or condition of any related Contract
(which term or condition relates to payments under, or the enforcement of, such Contract).

     (g) Change in Business or Credit and Collection Policy. Without the prior written
consent of the Administrator, the Seller shall not make (or permit the Originators to make) any
material change in the character of its business or in any Credit and Collection Policy, or any
change in any Credit and Collection Policy that would have a Material Adverse Effect with respect
to the Receivables. The Seller shall not make (or permit the Originators to make) any other change
in any Credit and Collection Policy without giving 30 days’ prior written notice thereof to the
Administrator.

     (h) Audits. The Seller shall (and shall cause the Originators to), from time to time
during regular business hours as reasonably requested in advance (unless a Termination Event or
Unmatured Termination Event exists) by the Administrator, permit the Administrator, or its agents
or representatives: (i) to examine and make copies of and abstracts from all books, records and
documents (including computer tapes and disks) in the possession or under the control of the Seller
(or the Originators) relating to Receivables and the Related Security, including the related
Contracts, (ii) to visit the offices and properties of the Seller and the Originators for the
purpose of examining such materials described in clause (i) above, and to

IV-2

 

discuss matters relating to Receivables and the Related Security or the Seller’s, Peabody’s or
any Originator’s performance under the Transaction Documents or under the Contracts with any of the
officers, employees, agents or contractors of the Seller, Peabody or any Originator having
knowledge of such matters and (iii) without limiting the clauses (i) and (ii)
above, to engage certified public accountants or other auditors acceptable to the Seller and the
Administrator to conduct, at the Seller’s expense, a review of the Seller’s books and records with
respect to such Receivables, provided, that at any time when no Termination Event exists and is
continuing, the Seller shall be required to reimburse the Administrator for only one (1) such audit
per year.

     (i) Change in Lock-Box Banks, Lock-Box Accounts and Payment Instructions to Obligors.
The Seller shall not, and shall not permit the Servicer or any Originator to, add or terminate any
bank as a Lock-Box Bank or any account as a Lock-Box Account from those listed in Schedule
II to the Agreement, or make any change in its instructions to Obligors regarding payments to
be made to the Seller, any Originator, the Servicer or any Lock-Box Account (or related post office
box), unless the Administrator shall have received ten (10) days prior written notice of assignment
to a Permitted Lock-Box Bank and the Administrator shall have received copies of all agreements
and documents (including Lock-Box Agreements) that it may request in connection therewith.

     (j) Deposits to Lock-Box Accounts. The Seller shall (or shall cause the Servicer to):
(i) instruct all Obligors to make payments of all Receivables to one or more Lock-Box Accounts or
to post office boxes to which only Lock-Box Banks have access (and shall instruct the Lock-Box
Banks to cause all items and amounts relating to such Receivables received in such post office
boxes to be removed and deposited into a Lock-Box Account on a daily basis), and (ii) deposit, or
cause to be deposited, any Collections received by it, the Servicer or any Originator into Lock-Box
Accounts not later than two (2) Business Days after receipt thereof. Each Lock-Box Account shall
at all times be subject to a Lock-Box Agreement. The Seller will not (and will not permit the
Servicer to) deposit or otherwise credit, or cause or permit to be so deposited or credited, to any
Lock-Box Account cash or cash proceeds other than Collections.

     (k) Marking of Records. At its expense, the Seller shall: (i) mark (or cause the
Servicer to mark) its master data processing records relating to Pool Receivables and related
Contracts, including with a legend evidencing that the Receivables and related Contracts included
in the Purchased Assets have been sold in accordance with the Agreement, and (ii) cause each
Originator so to mark its master data processing records pursuant to the Sale Agreement.

     (l) Reporting Requirements. The Seller will provide to the Administrator (in multiple
copies, if requested by the Administrator) the following:

     (i) as soon as available and in any event within 120 days after the end of each fiscal
year of the Seller, a copy of the financial statements for such year for the Seller,
certified as to accuracy by the chief financial officer or treasurer of the Seller;

     (ii) as soon as possible and in any event within five days after the occurrence of each
Termination Event or Unmatured Termination Event, a statement of the chief

IV-3

 

financial officer of the Seller setting forth details of such Termination Event or
Unmatured Termination Event and the action that the Seller has taken and proposes to take
with respect thereto;

     (iii) promptly after the filing or receiving thereof, copies of all reports and notices
that the Seller or any Affiliate files under ERISA with the Internal Revenue Service, the
Pension Benefit Guaranty Corporation or the U.S. Department of Labor or that the Seller or
any Affiliate receives from any of the foregoing or from any multiemployer plan (within the
meaning of Section 400l(a)(3) of ERISA) to which the Seller or any of its Affiliates is or
was, within the preceding five years, a contributing employer, in each case in respect of
the assessment of withdrawal liability or an event or condition that could, in the
aggregate, result in the imposition of liability on the Seller and/or any such Affiliate;

     (iv) at least thirty days before any change in the Seller’s name or any other change
requiring the amendment of UCC financing statements, a notice setting forth such changes and
the effective date thereof;

     (v) promptly after any Responsible Officer of the Seller obtains knowledge thereof,
notice of any: (A) material litigation, investigation or proceeding that may exist at any
time between the Seller and any Person or (B) material litigation or proceeding relating to
any Transaction Document;

     (vi) promptly after the occurrence thereof, notice of a material adverse change in the
business, operations, property or financial or other condition of the Seller, the Servicer
or the Originator; and

     (vii) such other information respecting the Receivables or the condition or operations,
financial or otherwise, of the Seller or any of its Affiliates as the Administrator may from
time to time reasonably request.

     (m) Certain Agreements. Without the prior written consent of the Administrator, the
Seller will not (and will not permit the Originators to) amend, modify, waive, revoke or terminate
any Transaction Document to which it is a party or any provision of Seller’s certificate of
incorporation or other organizational document of the Seller.

     (n) Restricted Payments. (i) Except pursuant to clause (ii) below, the Seller
will not: (A) purchase or redeem any shares of its capital stock, (B) declare or pay any dividend
or set aside any funds for any such purpose, (C) prepay, purchase or redeem any Debt, (D) lend or
advance any funds or (E) repay any loans or advances to, for or from any of its Affiliates (the
amounts described in clauses (A) through (E) being referred to as “Restricted
Payments”).

     (ii) Subject to the limitations set forth in clause (iii) below, the Seller may
make Restricted Payments so long as such Restricted Payments are made only in the following
way: the Seller may declare and pay distributions and make loans and advances to Peabody
(provided that any such loans and advances shall be treated as a dividend within no less
than 30 days following the making thereof).

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     (iii) The Seller may make Restricted Payments only out of the funds it receives
pursuant to Sections 1.6(b)(ii) and (iv) and 1.6(d) of the
Agreement. Furthermore, the Seller shall not pay, make or declare: (A) any distributions,
loans or advances if, after giving effect thereto, the Seller’s tangible net worth would be
less than $10,000,000, or (B) any Restricted Payment (including any dividend) if, after
giving effect thereto, any Termination Event or Unmatured Termination Event shall have
occurred and be continuing.

     (o) Other Business. The Seller will not: (i) engage in any business other than the
transactions contemplated by the Transaction Documents; (ii) create, incur or permit to exist any
Debt of any kind (or cause or permit to be issued for its account any letters of credit or bankers’
acceptances) other than pursuant to this Agreement or any Company Note; or (iii) form any
Subsidiary or make any investments in any other Person; provided, however, that the
Seller shall be permitted to incur minimal obligations to the extent necessary for the day-to-day
operations of the Seller (such as expenses for stationery, audits, maintenance of legal status,
etc.).

     (p) Use of Collections. The Seller shall apply the Collections that are available to
the Seller in accordance with the Agreement to make payments in the following order of priority:
(i) the payment of its expenses (including all obligations payable to the Issuer and the
Administrator under the Agreement and under the Fee Letter); (ii) the payment of accrued and unpaid
interest on any Company Note; and (iii) other legal and valid organizational purposes.

     (q) Tangible Net Worth. The Seller will not permit its tangible net worth, at any
time, to be less than $10,000,000.

     2. Covenants of the Servicer and Peabody. Until the Final Payout Date:

     (a) Compliance with Laws, Etc. The Servicer and, to the extent that it ceases to be
the Servicer, Peabody shall comply (and shall cause the Originators to comply) in all material
respects with all applicable laws, rules, regulations and orders, and preserve and maintain its
organizational existence, rights, franchises, qualifications and privileges, except to the extent
that the failure so to comply with such laws, rules and regulations or the failure so to preserve
and maintain such existence, rights, franchises, qualifications and privileges would not have a
Material Adverse Effect.

     (b) Offices, Records and Books of Account, Etc. The Servicer and, to the extent that
it ceases to be the Servicer, Peabody, (i) shall keep its principal place of business, chief
executive office and state of formation (as such terms or similar terms are used in the applicable
UCC) and the office where it keeps its records concerning the Receivables at the address of the
Servicer set forth on Schedule IV and (ii) shall cause Peabody Holding Company, LLC and
each Originator to keep its state of formation (as such term is defined in the applicable UCC) and
the office where it keeps its records concerning the Receivables at the applicable address set
forth on Schedule IV, in the case of Peabody Holding Company, LLC, and Exhibit E to
the Sale Agreement, in the case of any Originator or, in the case of either sub-clause (i)
or (ii) of this clause (b), upon at least 30 days’ prior written notice of a
proposed change to the Administrator, at any other locations in jurisdictions where all actions
reasonably requested by the

IV-5

 

Administrator to protect and perfect the interest of the Administrator in the Receivables and
related items (including the Pool Assets) have been taken and completed. The Servicer and, to the
extent that it ceases to be the Servicer, Peabody, also will (and will cause the Originators to)
maintain and implement administrative and operating procedures (including an ability to recreate
records evidencing Receivables and related Contracts in the event of the destruction of the
originals thereof), and keep and maintain all documents, books, records, computer tapes and disks
and other information reasonably necessary or advisable for the collection of all Receivables
(including records adequate to permit the daily identification of each Receivable and all
Collections of and adjustments to each existing Receivable).

     (c) Performance and Compliance with Contracts and Credit and Collection Policy. 
The Servicer and, to the extent that it ceases to be the Servicer, Peabody, shall (and shall
cause the Originators to), at its expense, timely and fully perform and comply with all material
provisions, covenants and other promises required to be observed by it under the Contracts related
to the Receivables, and timely and fully comply in all material respects with the Credit and
Collection Policy with regard to each Receivable and the related Contract.

     (d) Extension or Amendment of Receivables. Except as provided in the Agreement, the
Servicer and, to the extent that it ceases to be the Servicer, Peabody, shall not alter the
delinquency status or adjust the Outstanding Balance or otherwise modify the terms of any Pool
Receivable in any material respect, or amend, modify or waive, in any material respect, any term or
condition of any related Contract (which term or condition relates to payments under, or the
enforcement of, such Contract).

     (e) Change in Business or Credit and Collection Policy. The Servicer and, to the
extent that it ceases to be the Servicer, Peabody, shall not make (and shall not permit the
Originators to make) any material change in the character of its business, other than Similar
Businesses, or any change in any Credit and Collection Policy that would have a Material Adverse
Effect. The Servicer and, to the extent that it ceases to be the Servicer, Peabody, shall not make
(and shall not permit the Originators to make) any other change in any Credit and Collection Policy
without giving prior written notice thereof to the Administrator.

     (f) Audits. The Servicer and, to the extent that it ceases to be the Servicer,
Peabody, shall (and shall cause the Originators to), from time to time during regular business
hours as reasonably requested in advance (unless a Termination Event or Unmatured Termination Event
exists) by the Administrator, permit the Administrator, or its agents or representatives: (i) to
examine and make copies of and abstracts from all books, records and documents (including computer
tapes and disks) in its possession or under its control relating to Receivables and the Related
Security, including the related Contracts; (ii) to visit its offices and properties for the purpose
of examining such materials described in clause (i) above, and to discuss matters relating
to Receivables and the Related Security or its performance hereunder or under the Contracts with
any of its officers, employees, agents or contractors having knowledge of such matters and (iii),
without limiting the clauses (i) and (ii) above, to engage certified public
accountants or other auditors acceptable to the Servicer and the Administrator to conduct, at the
Servicer’s expense, a review of the Servicer’s books and records with respect to such

IV-6

 

Receivables, provided, that at any time when no Termination Event exists and is continuing,
the Servicer shall be required to reimburse the Administrator for only one (1) such audit per year.

     (g) Change in Lock-Box Banks, Lock-Box Accounts and Payment Instructions to Obligors.
The Servicer and, to the extent that it ceases to be the Servicer, Peabody, shall not (and shall
not permit the Originators to) add or terminate any bank as a Lock-Box Bank or any account as a
Lock-Box Account from those listed in Schedule II to the Agreement, or make any change in
its instructions to Obligors regarding payments to be made to the Servicer or any Lock-Box Account
(or related post office box), unless the Administrator shall have received ten (10) days advance
written notice of assignment to a Permitted Lock-Box Bank and the Administrator shall have received
copies of all agreements and documents (including Lock-Box Agreements) that it may request in
connection therewith.

     (h) Deposits to Lock-Box Accounts. The Servicer shall: (i) instruct all Obligors to
make payments of all Receivables to one or more Lock-Box Accounts or to post office boxes to which
only Lock-Box Banks have access (and shall instruct the Lock-Box Banks to cause all items and
amounts relating to such Receivables received in such post office boxes to be removed and deposited
into a Lock-Box Account on a daily basis); and (ii) deposit, or cause to be deposited, any
Collections received by it into Lock-Box Accounts not later than two (2) Business Days after
receipt thereof. Each Lock-Box Account shall at all times be subject to a Lock-Box Agreement.

     (i) Preservation of Security Interest. The Servicer shall (and shall cause the Seller
to) take any and all action as the Administrator may require to preserve and maintain the
perfection and priority of the ownership or security interest of the Administrator in the Pool
Assets pursuant to this Agreement.

     (j) Marking of Records. At its expense, the Servicer shall mark its master data
processing records relating to Pool Receivables and related Contracts with a legend evidencing that
such Receivables and related Contracts have been sold in accordance with the Agreement.

     (k) Navajo Project. Peabody shall notify the Administrator if a Responsible Officer
of Peabody obtains actual knowledge that the documents and agreements governing the Navajo Project
are amended in any manner which would cause the representations and warranties set forth in
Section 2(p) to be incorrect or untrue in any respect.

     (l) Reporting Requirements. Peabody shall provide to the Administrator (in multiple
copies, if requested by the Administrator) the following:

     (i) as soon as available and in any event within 60 days after the end of the first
three quarters of each fiscal year of Peabody balance sheets of Peabody and the consolidated
Subsidiaries of Peabody as of the end of such quarter and statements of income, retained
earnings and cash flow of Peabody and the consolidated Subsidiaries of Peabody for the
period commencing at the end of the previous fiscal year and ending with the end of such
quarter, certified by the chief financial officer of Peabody;

IV-7

 

     (ii) as soon as available and in any event within 120 days after the end of each fiscal
year of Peabody, a copy of the annual report for such year for Peabody and its consolidated
Subsidiaries, containing financial statements for such year audited by independent certified
public accountants of nationally recognized standing;

     (iii) together with the financial statements required in (i) and (ii) above, a
compliance certificate in substantially the form of Annex D signed by the senior
financial officer of the Seller or Peabody, or such other Person as may be acceptable to the
Administrator;

     (iv) as to the Servicer only, as soon as available and in any event not later than two
Business Days prior to the Monthly Settlement Date, an Information Package as of the most
recently completed calendar month or, if in the opinion of the Administrator reasonable
grounds for insecurity exist with respect to the collectibility of the Pool Receivables or
with respect to the Seller or Servicer’s performance or ability to perform its obligations
under the Agreement, within six Business Days of a request by the Administrator, an
Information Package for such periods as is specified by the Administrator (but in no event
more frequently than weekly);

     (v) as soon as possible and in any event within five days after becoming aware of the
occurrence of each Termination Event or Unmatured Termination Event, a statement of the
chief financial officer of Peabody setting forth details of such Termination Event or
Unmatured Termination Event and the action that such Person has taken and proposes to take
with respect thereto;

     (vi) promptly after the sending or filing thereof, copies of all reports that Peabody
sends to any of its security holders, and copies of all reports and registration statements
that Peabody, or any Subsidiary files with the Securities and Exchange Commission or any
national securities exchange; provided, that any filings with the Securities and
Exchange Commission that have been granted “confidential” treatment shall be provided
promptly after such filings have become publicly available;

     (vii) promptly after the filing or receiving thereof notice of and, upon the request of
the Administrator, copies of all reports and notices that Peabody or any Affiliate of
Peabody files under ERISA with the Internal Revenue Service, the Pension Benefit Guaranty
Corporation or the U.S. Department of Labor or that such Person or any of its Affiliates
receives from any of the foregoing or from any multiemployer plan (within the meaning of
Section 4001(a)(3) of ERISA) to which such Person or any Affiliate of Peabody is or was,
within the preceding five years, a contributing employer, in each case in respect of the
assessment of withdrawal liability or an event or condition that could, in the aggregate,
result in the imposition of liability on Peabody and/or any such Affiliate;

     (viii) at least thirty days before any change in Peabody or any Originator’s name or
any other change requiring the amendment of UCC financing statements, a notice setting forth
such changes and the effective date thereof;

IV-8

 

     (ix) promptly after a Responsible Officer of Peabody obtains knowledge thereof, notice
of any: (A) litigation, investigation or proceeding that may exist at any time between
Peabody or any of its Subsidiaries and any Governmental Authority that is reasonably likely
to have a Material Adverse Effect; (B) litigation or proceeding adversely affecting such
Person or any of its Subsidiaries in which the amount involved is $25,000,000 or more after
deducting (x) the amount with respect to which such Person or any such Subsidiary is insured
and with respect to which the insurer has assumed responsibility in writing, and (y) the
amount for which such Person or any such Subsidiary is otherwise indemnified if the terms of
indemnification are satisfactory to the Administrator or in which injunctive or similar
relief is sought; or (C) litigation or proceeding relating to any Transaction Document;

     (x) promptly after the occurrence thereof, notice of a material adverse change in the
business, operations, property or financial or other condition of Peabody and its
Subsidiaries taken as a whole, or any individual Material Originator;

          (xi) the occurrence of a default or any event of default under any other financing arrangement
evidencing $50,000,000 or more of indebtedness pursuant to which Peabody is a debtor or an obligor;
and

          (xii) such other information respecting the Receivables or the condition or operations,
financial or otherwise, of Peabody or any of its Affiliates as the Administrator may from time to
time reasonably request.

     3. Separate Existence. Each of the Seller and Peabody hereby acknowledges that the
Purchasers, the Issuer and the Administrator are entering into the transactions contemplated by
this Agreement and the other Transaction Documents in reliance upon the Seller’s identity as a
legal entity separate from Peabody and its Affiliates. Therefore, from and after the date hereof,
each of the Seller and Peabody shall take all steps specifically required by the Agreement or
reasonably required by the Administrator to continue the Seller’s identity as a separate legal
entity and to make it apparent to third Persons that the Seller is an entity with assets and
liabilities distinct from those of Peabody and any other Person, and is not a division of Peabody,
its Affiliates or any other Person. Without limiting the generality of the foregoing and in
addition to and consistent with the other covenants set forth herein, each of the Seller and
Peabody shall take such actions as shall be required in order that:

     (a) The Seller will be a limited purpose limited liability company whose activities are
restricted in its certificate of formation to: (i) purchasing or otherwise acquiring from the
Originators or Peabody (or their Affiliates), owning, holding, granting security interests or
selling interests in Pool Assets (or other receivables originated by the Originators or their
Affiliates, and certain related assets), (ii) entering into agreements for the selling and
servicing of the Receivables Pool (or other receivables pools originated by the Originators or
their Affiliates), and (iii) conducting such other activities as are necessary or appropriate to
carry out such activities;

IV-9

 

     (b) The Seller shall not engage in any business or activity except as set forth in this
Agreement nor incur any indebtedness or liability, other than as expressly permitted by the
Transaction Documents;

     (c) Not less than one of the Seller’s Directors (the “Independent Director”) shall be
a natural person who (A) for the five-year period prior to his or her appointment as Independent
Director has not been, and during the continuation of his or her service as Independent Director is
not: (i) an employee, director, stockholder, member, manager, partner or officer of the Seller,
Peabody or any of their respective Affiliates (other than his or her service as an Independent
Director of the Seller); (ii) a customer or supplier of the Seller, Peabody or any of their
respective Affiliates (other than his or her service as an Independent Director of Seller); or
(iii) any member of the immediate family of a person described in clause (i) or
(ii) above, and (B) has, (i) prior experience as an Independent Director for a corporation
or limited liability company whose charter documents required the unanimous consent of all
independent directors thereof before such corporation or limited liability company could consent to
the institution of bankruptcy or insolvency proceedings against it or could file a petition seeking
relief under any applicable federal or state law relating to bankruptcy and (ii) at least three
years of employment experience with one or more entities that provide, in the ordinary course of
their respective businesses, advisory, management or placement services to issuers of
securitization or structured finance instruments, agreements or securities. Such Independent
Director of the Seller shall have been appointed as such in strict compliance with the Seller’s LLC
Agreement. The Seller’s LLC Agreement shall provide that (i) the Seller’s Board of Directors shall
not approve, or take any other action to cause the filing of, or join in any filing of, a voluntary
bankruptcy or insolvency petition, dissolution, liquidation, consolidation, merger, sale of all or
substantially all of its assets, assignment for the benefit of creditors, admit in writing its
inability to pay its debts generally as they become due, or to engage in any other business or
activity with respect to the Seller unless (x) there is at least one Independent Director then
serving as a director of the Seller and appointed pursuant to and in strict compliance with the
Seller’s LLC Agreement, and (y) all such Independent Directors of the Seller shall have approved
the taking of such action in writing prior to the taking of such action and (ii) such provision
cannot be amended without the prior written consent of the Independent Director and the
Administrator;

     (d) Upon the occurrence of any event that causes the Member to cease to be a member of the
Seller (other than (i) upon an assignment by the Member of all of its limited liability company
interest in the Seller and the admission of the transferee pursuant to Sections 21 and 23 of the
LLC Agreement, or (ii) the resignation of the Member and the admission of an additional member of
the Seller pursuant to Sections 22 and 23 of the LLC Agreement), each person acting as an
Independent Director pursuant to Section 10 of the LLC Agreement shall, without any action of any
Person and simultaneously with the Member ceasing to be a member of the Seller, automatically be
admitted to the Seller as a Special Member and shall continue the Seller without dissolution. No
Special Member may resign from the Seller or transfer its rights as a Special Member unless (i) a
successor Special Member has been admitted to the Seller as Special Member by executing a
counterpart to the LLC Agreement, and (ii) such successor has also accepted its appointment as
Independent Director pursuant to Section 10 of the LLC Agreement; provided,
however, the Special Members shall automatically cease to be members of the Seller upon the
admission to the Seller of a substitute Member.

IV-10

 

     (e) The Independent Director shall not at any time serve as a trustee in bankruptcy for the
Seller, Peabody or any Affiliate thereof;

     (f) Any employee, consultant or agent of the Seller will be compensated from the Seller’s
funds for services provided to the Seller. The Seller will not engage any agents other than its
attorneys, auditors and other professionals, and a servicer and any other agent contemplated by the
Transaction Documents for the Receivables Pool, which servicer will be fully compensated for its
services by payment of the Servicing Fee, and a manager, which manager will be fully compensated
from the Seller’s funds;

     (g) The Seller will contract with the Servicer to perform for the Seller all operations
required on a daily basis to service the Receivables Pool. The Seller will pay the Servicer the
Servicing Fee pursuant hereto. The Seller will not incur any material indirect or overhead
expenses for items shared with Peabody (or any other Affiliate thereof) that are not reflected in
the Servicing Fee. To the extent, if any, that the Seller (or any Affiliate thereof) shares items
of expenses not reflected in the Servicing Fee or the manager’s fee, such as legal, auditing and
other professional services, such expenses will be allocated to the extent practical on the basis
of actual use or the value of services rendered, and otherwise on a basis reasonably related to the
actual use or the value of services rendered; it being understood that Peabody shall pay all
expenses relating to the preparation, negotiation, execution and delivery of the Transaction
Documents, including legal, agency and other fees;

     (h) The Seller’s operating expenses will be paid by the Seller and not by Peabody or any other
Affiliate thereof;

     (i) All of the Seller’s business correspondence and other communications shall be conducted in
the Seller’s own name and on its own separate stationery;

     (j) The Seller’s books and records will be maintained separately from those of Peabody and any
other Affiliate thereof and any other Person;

     (k) All financial statements of Peabody or any Affiliate thereof that are consolidated to
include Seller will contain detailed notes clearly stating that: (i) a special purpose limited
liability company exists as a Subsidiary of Peabody, and (ii) the Originators have sold
receivables and other related assets to the Contributor, which has contributed such receivables and
other related assets to such special purpose Subsidiary that, in turn, has sold such receivables
and other related assets to certain financial institutions and other entities;

     (l) The Seller’s assets will be maintained in a manner that facilitates their identification
and segregation from those of Peabody or any Affiliate thereof and any other Person;

     (m) The Seller will strictly observe organizational formalities in its dealings with Peabody
or any Affiliate thereof, and funds or other assets of the Seller will not be commingled with those
of Peabody or any Affiliate thereof except as permitted by the Agreement in connection with
servicing the Pool Receivables. The Seller shall not maintain joint bank accounts or other
depository accounts to which Peabody or any Affiliate thereof or any other

IV-11

 

Person has independent access, and the Seller shall use separate invoices and checks from any
other Person. The Seller is not named, and has not entered into any agreement to be named,
directly or indirectly, as a direct or contingent beneficiary or loss payee on any insurance policy
with respect to any loss relating to the property of Peabody or any Subsidiary or other Affiliate
of Peabody (other than the Seller) The Seller will pay to the appropriate Affiliate the marginal
increase or, in the absence of such increase, the market amount of its portion of the premium
payable with respect to any insurance policy that covers the Seller and such Affiliate;

     (n) The Seller will maintain arm’s-length relationships with Peabody (and any Affiliate
thereof). Any Person that renders or otherwise furnishes services to the Seller will be
compensated by the Seller at market rates for such services it renders or otherwise furnishes to
the Seller. Neither the Seller nor Peabody will be or will hold itself out to be responsible for
the debts of the other or the decisions or actions respecting the daily business and affairs of the
other. The Seller and Peabody will immediately correct any known misrepresentation with respect to
the foregoing, and they will not operate or purport to operate as an integrated single economic
unit with respect to each other or in their dealing with any other entity;

     (o) Peabody shall not pay the salaries of Seller’s employees, if any;

     (p) The Seller does not and will not hold itself responsible for the obligations of any other
Person, and shall not guarantee or become liable for the debts of any other Person;

     (q) The Seller will conduct its business in its own name and shall hold itself out as a
separate entity from any other Person;

     (r) The Seller shall maintain a sufficient number of employees and adequate capital in light
of its contemplated business activities;

     (s) The Seller shall not acquire the obligations or securities of any of its members; and

     (t) The Seller shall not pledge its assets for the benefit of any other Person or make any
loans or advances to any other Person, except pursuant to the Transaction Documents.

IV-12

 

EXHIBIT V

TERMINATION EVENTS

     Each of the following shall be a “Termination Event”:

     (a) (i) the Seller, Peabody, any Originator or the Servicer (if Peabody or any of its
Affiliates) shall fail to perform or observe any term, covenant or agreement under the Agreement
(other than those terms, covenants or agreements contained in Exhibit IV, Sections 1(a),
1(l) (except clause (iv) thereof), 2(a), and 2(l) (except clause
(viii) thereof)) or any other Transaction Document and, except as otherwise provided herein,
such failure shall continue for five consecutive Business Days after knowledge or notice thereof,
(ii) the Seller or the Servicer shall fail to make when due any payment or deposit to be made by it
under the Agreement and such failure shall continue unremedied for one Business Day, (iii) Peabody
shall resign as Servicer, and no successor Servicer reasonably satisfactory, to the Administrator
shall have been appointed, or (iv) the Seller, Peabody, any Originator or the Servicer (if Peabody
or any of its Affiliates) shall fail to perform or observe any term covenant or agreement in any of
Exhibit IV, Sections 1(a), 1(l) (except clause (iv) thereof), 2(a), or
2(l) (except clause (viii) thereof) and, except as otherwise provided herein, such
failure shall continue for thirty days after knowledge or notice thereof;

     (b) Peabody (or any Affiliate thereof) shall fail to transfer to any successor Servicer when
required any rights pursuant to the Agreement that Peabody (or such Affiliate) then has as
Servicer;

     (c) any representation or warranty made or deemed made by the Seller, Peabody or any
Originator (or any of their respective officers) under or in connection with the Agreement or any
other Transaction Document, or any information or report delivered by the Seller, Peabody or any
Originator or the Servicer pursuant to the Agreement or any other Transaction Document, shall prove
to have been incorrect or untrue in any material respect when made or deemed made or delivered, and
shall remain incorrect or untrue for 10 Business Days after notice to the Seller or the Servicer of
such inaccuracy;

     (d) the Seller or the Servicer shall fail to deliver the Information Package pursuant to the
Agreement, and such failure shall remain unremedied for two Business Days;

     (e) the Agreement or any Investment or Reinvestment pursuant to the Agreement shall for any
reason: (i) cease to create a valid and enforceable perfected ownership or security interest in
each Pool Receivable, the Related Security and Collections with respect thereto, free and clear of
any Adverse Claim, or (ii) cease to create with respect to the Pool Assets, or the interest of the
Administrator with respect to such Pool Assets shall cease to be, a valid and enforceable first
priority perfected ownership or security interest, free and clear of any Adverse Claim;

     (f) the Seller, Peabody or any Originator shall generally not pay its debts as such debts
become due, or shall admit in writing its inability to pay its debts generally, or shall make a
general assignment for the benefit of creditors; or any proceeding shall be instituted by or
against the Seller, Peabody or any Originator seeking to adjudicate it as bankrupt or insolvent, or
seeking

V-1

 

liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or
composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization
or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver,
trustee, custodian or other similar official for it or for any substantial part of its property
and, in the case of any such proceeding instituted against it (but not instituted by it), either
such proceeding shall remain undismissed or unstayed for a period of 60 days, or any of the actions
sought in such proceeding (including the entry of an order for relief against, or the appointment
of a receiver, trustee, custodian or other similar official for, it or for any substantial part of
its property) shall occur; or the Seller, Peabody or any Originator shall take any corporate or
organizational action to authorize any of the actions set forth above in this paragraph;

     (g) (i) the (A) Default Ratio shall exceed 2.25% or (B) the Delinquency Ratio shall exceed
4.50% or (ii) the average for three consecutive calendar months of: (A) the Default Ratio shall
exceed 1.75%, (B) the Delinquency Ratio shall exceed 3.50% or (C) the Dilution Ratio shall exceed
2.50%;

     (h) a Change in Control shall occur;

     (i) at any time the Purchased Assets Coverage Percentage exceeds 100%, and such circumstance
shall not have been cured within two Business Days;

     (j) (i) the occurrence of any Event of Default under and as defined in the Credit Agreement,
provided that if the Credit Agreement is terminated but not replaced, the covenants in effect in
the Credit Agreement immediately prior to termination of the Credit Agreement shall be deemed to be
effective for the purposes of the Agreement; (ii) any other event shall occur or condition shall
exist under the Credit Agreement and shall continue after the applicable grace period, if any,
specified in such Credit Agreement if, in either case: (a) the effect of such non-payment, event
or condition is to give the applicable debtholders the right (whether acted upon or not) to
accelerate the maturity of such Debt, or (b) any such Debt shall be declared to be due and payable,
or required to be prepaid (other than by a regularly scheduled required prepayment), redeemed,
purchased or defeased, or an offer to repay, redeem, purchase or defease such Debt shall be
required to be made, in each case before the stated maturity thereof; (iii) in the event that the
Credit Agreement shall have terminated, and there exists any other financing arrangement evidencing
$25,000,000 or more of indebtedness pursuant to which Peabody is a debtor or an obligor (an
“Other Material Financing Agreement”); either (A) the occurrence of any event of default
under such Other Material Financing Agreement, or (B) any other event shall occur or condition
shall exist under and shall continue after the applicable grace period, if any, specified in such
Other Material Financing Agreement, if, in either case of (A) or (B): (i) the effect of such
non-payment, event or condition is to give the applicable debtholders the right (whether acted upon
or not) to accelerate the maturity of such Other Material Financing Agreement, or (b) any such
Other Material Financing Agreement shall be declared to be due and payable, or required to be
prepaid (other than by a regularly scheduled required prepayment), redeemed, purchased or defeased,
or an offer to repay, redeem, purchase or defease such Debt shall be required to be made, in each
case before the stated maturity thereof;

     (k) except as could not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect, either: (i) a contribution failure shall occur with respect to any

V-2

 

Benefit Plan sufficient to give rise to a lien on any of the assets of Seller, any Originator,
Peabody or any ERISA Affiliate under Section 302(f) of ERISA, (ii) the Internal Revenue Service
shall file a notice of lien asserting a claim or claims pursuant to the Internal Revenue Code with
regard to any of the assets of Seller, any Originator, Peabody or any ERISA Affiliate and such lien
shall have been filed and not released within 10 days, or (iii) the Pension Benefit Guaranty
Corporation shall, or shall indicate its intention in writing to the Seller, any Originator,
Peabody or any ERISA Affiliate to, either file a notice of lien asserting a claim pursuant to ERISA
with regard to any assets of the Seller, any Originator, Peabody or any ERISA Affiliate or
terminate any Benefit Plan that has unfunded benefit liabilities, or any steps shall have been
taken to terminate any Benefit Plan subject to Title IV of ERISA so as to result in any liability
and such lien shall have been filed and not released within 10 days;

     (l) the Days’ Sales Outstanding exceed 40.0 days;

     (m) a default shall occur under the Intercreditor Agreement, or any Person shall attempt to
terminate or assert the invalidity or unenforceability of the Intercreditor Agreement or any
provision thereof; or

     (n) Any Letter of Credit is drawn upon and, unless as a result of the LC Bank’s failure to
provide the notice required by Section 1.16(b), not fully reimbursed pursuant to
Section 1.16 (including, if applicable, with the proceeds of any funding by the Issuer)
within two Business Days from the date of such draw.

V-3

 

SCHEDULE I

CREDIT AND COLLECTION POLICY

(Attached)

Schedule I-1

 

SCHEDULE II

LOCK-BOX BANKS AND LOCK-BOX ACCOUNTS

	 	 	 
	BANK:

	 	PNC BANK

PITTSBURGH, PA

	 	 	 	 	 
	NAME OF ORIGINATOR	 	ACCOUNT NUMBER	 	LOCK-BOX NUMBER
	Powder River Coal, LLC
	 	1008971367
	 	642396
	 	 	 	 	 
	COALSALES II, LLC
	 	1008971287
	 	642381
	 	 	 	 	 
	COALTRADE, LLC
	 	1008971359
	 	642406
	 	 	 	 	 
	Peabody Western Coal Company
	 	1008971308
	 	N/A
	 	 	 	 	 
	Arclar Company, LLC
	 	1017292948
	 	643445
	 	 	 	 	 
	Peabody Midwest Mining, LLC1
	 	1017293238
	 	643461
	 	 	 	 	 
	Twentymile Coal, LLC
	 	1017307281
	 	643625
	 	 	 	 	 
	COALSALES, LLC
	 	1019275295
	 	643772
	 	 	 	 	 
	Peabody COALTRADE International
(CTI),
LLC
	 	1019270195
	 	643694

 

			
	1	 	The parties acknowledge and agree that on the Closing
Date this account will be in the name of Black Beauty Coal Company, LLC, and
that Seller and the Servicer shall cause such account to be in the name of
Peabody Midwest Mining, LLC not later than thirty (30) days after the Closing
Date.

Schedule II-1

 

SCHEDULE III

TRADE NAMES

None.

Schedule III-1

 

SCHEDULE IV

OFFICE LOCATIONS

The Principal Place of Business, Chief Executive Office and state of formation of the Seller is:

     701 Market Street, St. Louis, Missouri 63101; Seller is a Delaware limited liability company

The Seller maintains its master books and records relating to Receivables at:

     701 Market Street, St. Louis, Missouri 63101

The Principal Place of Business, Chief Executive Office and state of formation of Peabody is:

     701 Market Street, St. Louis, Missouri 63101; Peabody is a Delaware corporation

Peabody maintains its master books and records relating to the Receivables at:

     701 Market Street, St. Louis, Missouri 63101

The Principal Place of Business, Chief Executive Office and state of formation of Peabody Holding
Company, LLC is:

     701 Market Street, St. Louis, Missouri 63101; Peabody Holding Company, LLC is a Delaware
limited liability company

Peabody Holding Company, LLC maintains its master books and records relating to the Receivables at:

     701 Market Street, St. Louis, Missouri 63101

Schedule IV-1

 

ANNEX A

to Receivables Purchase Agreement

FORM OF INFORMATION PACKAGE

(Attached)

Annex A-1

 

ANNEX B

to Receivables Purchase Agreement

FORM OF INVESTMENT NOTICE

                                        , [20            ]

PNC Bank, National Association

One PNC Plaza, 26th Floor

249 Fifth Avenue

Pittsburgh, PA 15222-2707

Ladies and Gentlemen:

     Reference is hereby made to the Second Amended and Restated Receivables Purchase Agreement,
dated as of December 15, 2009 (as heretofore amended or supplemented, the “Receivables Purchase
Agreement”), among P&L Receivables Company, LLC, (“Seller”), Peabody Energy
Corporation, as Servicer, the Persons from time to time party thereto as Sub-Servicers, Market
Street Funding LLC (“Issuer”), PNC Bank National Association, as administrator (in such
capacity, the “Administrator”) and as the issuer of letters of credit thereunder (in such
capacity, the “LC Bank”) and the LC Participants from time to time party thereto.
Capitalized terms used in this Investment Notice and not otherwise defined herein shall have the
meanings assigned thereto in the Receivables Purchase Agreement.

     [This letter constitutes an Investment Notice pursuant to Section 1.2(a) of the
Receivables Purchase Agreement. Seller requests that the Issuer make an Investment in a pool of
receivables on                                         , [20             ], in the amount of $
             
                     
      . Subsequent
to this Investment, the aggregate outstanding Capital will be $           
                     
        .]2

     [This letter constitutes a notice pursuant to Section 1.14(a) of the Receivables
Purchase Agreement. Seller desires that LC Bank issue a Letter of Credit with a face amount of
$                    . Subsequent to this issuance, the LC Participation Amount will be $                     and the aggregate
outstanding Capital will be $                    .]3

     Seller hereby represents and warrants as of the date hereof, and as of the date of such
[Investment] [issuance], as follows:

	(i)	 	the representations and warranties contained in Exhibit III to the
Receivables Purchase Agreement are true and correct in all material respects (except to
the extent that such representations and warranties expressly relate to an earlier
date, and in which case such representations and warranties are true and correct in all
material respects as of such earlier date);

 

			
	2	 	In the case of a Borrowing Request.
	 
	3	 	In the case of a request for an issuance of a Letter of
Credit. In the event of a request for the issuance of a Letter of Credit, a
Letter of Credit Application in the form of Annex E to the Receivables
Purchase Agreement must also be delivered by the Seller.

Annex B-1

 

	(ii)	 	no event has occurred and is continuing, or would result from the Investment or
issuance requested hereby that constitutes a Termination Event;
	 
	(iii)	 	no Unmatured Termination Event exists and is continuing;
	 
	(iv)	 	the sum of the Capital plus the LC Participation Amount, after giving effect to
the Investment or issuance requested hereby will not exceed the Purchase Limit;
	 
	(v)	 	after giving effect to the Investment or issuance requested hereby, the
Purchased Assets Coverage Percentage shall not exceed 100%; and
	 
	(vi)	 	the Facility Termination Date has not occurred.

Annex B-2

 

     IN WITNESS WHEREOF, the undersigned has caused this Investment Notice to be executed by its
duly authorized officer as of the date first above written.

	 	 	 	 	 
	 	P&L RECEIVABLES COMPANY, LLC

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

Annex B-3

 

	 	 	 	 	 

ANNEX C

to Receivables Purchase Agreement

FORM OF PAYDOWN NOTICE

                                        , 20            

PNC Bank, National Association

One PNC Plaza, 26th Floor

249 Fifth Avenue

Pittsburgh, Pennsylvania 15222-2707

Ladies and Gentlemen:

     Reference is hereby made to the Second Amended and Restated Receivables Purchase Agreement,
dated as of December 15, 2009 (as amended, supplemented or otherwise modified, the “Receivables
Purchase Agreement”), among P&L Receivables Company, LLC, as Seller, Peabody Energy
Corporation, as Servicer, the Persons from time to time party thereto as Sub-Servicers, Market
Street Funding LLC, as Issuer, PNC Bank, National Association, as Administrator and as the LC Bank
and the various LC Participants from time to time party thereto. Capitalized terms used in this
paydown notice and not otherwise defined herein shall have the meanings assigned thereto in the
Receivables Purchase Agreement.

     This letter constitutes a paydown notice pursuant to Section 1.6(f)(i) of the
Receivables Purchase Agreement. The Seller desires to reduce the Capital on
                                        ,                     4 by the application of $    
                     
                in cash to
pay Capital and Discount to accrue (until such cash can be used to pay commercial paper notes) with
respect to such Capital, together with all costs related to such reduction of Capital. Subsequent
to this Paydown, the Capital will be $               
                    
     .

     IN WITNESS WHEREOF, the undersigned has caused this paydown notice to be executed by its duly
authorized officer as of the date first above written.

	 	 	 	 	 
	 	P&L RECEIVABLES COMPANY, LLC

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

 

			
	4	 	Notice must be given at least five Business Days’ prior
to the requested paydown date, in the case of reductions in excess of
$20,000,000, or at least two Business Days’ prior to the requested paydown
date, in the case of reductions of $20,000,000 or less.

Annex C-1

 

ANNEX D

to Receivables Purchase Agreement

FORM OF COMPLIANCE CERTIFICATE

To: PNC Bank, National Association, as Administrator

          This Compliance Certificate is furnished pursuant to that certain Second Amended and Restated
Receivables Purchase Agreement, dated as of December 15, 2009, by and among P&L Receivables
Company, LLC (“Seller”), Peabody Energy Corporation (the “Servicer”), the Persons
from time to time party thereto as Sub-Servicers, Market Street Funding LLC (the “Issuer”),
PNC Bank, National Association (the “Administrator”) and as the LC Bank and the various LC
Participants from time to time party thereto (the “Agreement”). Capitalized terms used
herein and not otherwise defined herein shall have the meanings assigned to them in the Agreement.

          THE UNDERSIGNED HEREBY CERTIFIES THAT:

          1.
I am the duly elected                                          of Seller.

          2. I have reviewed the terms of the Agreement and I have made, or have caused to be made under
my supervision, a detailed review of the transactions and condition of Seller during the accounting
period covered by the attached financial statements.

          3. The examinations described in paragraph 2 did not disclose, and I have no knowledge of, the
existence of any condition or event which constitutes a Termination Event or an Unmatured
Termination Event, as each such term is defined under the Agreement, during or at the end of the
accounting period covered by the attached financial statements or as of the date of this
Certificate, except as set forth in paragraph 5 below.

          4. Schedule I attached hereto sets forth financial data and computations evidencing the
compliance with certain covenants of the Agreement (and the Credit Agreement), all of which data
and computations are true, complete and correct.

          5. Described below are the exceptions, if any, to paragraph 3 by listing, in detail, the
nature of the condition or event, the period during which it has existed and the action which
Seller has taken, is taking, or proposes to take with respect to each such condition or event:

Annex D-1

 

     The foregoing certifications, together with the computations set forth in Schedule I hereto and the
financial statements delivered with this Certificate in support hereof, are made and delivered this
                     day of
                            
            ,
 20              .

	 	 	 	 	 
	P&L RECEIVABLES COMPANY, LLC

 	 
	By:  	 	 
	 	Name:  	 	 
	 	Title:  	 	 

Annex D-1

 

	 	 	 	 	 

SCHEDULE I TO COMPLIANCE CERTIFICATE

     A. Schedule of Compliance as of 
                        
                ,
20            
with Section(s)                   
   of the
Agreement. Unless otherwise defined herein, the terms used in this Compliance Certificate have the
meanings ascribed thereto in the Agreement.

     This schedule relates to the month ended:                                        

Annex D-1

 

ANNEX E

to Receivables Purchase Agreement

FORM OF LETTER OF CREDIT APPLICATION

(Attached)

Annex E-1

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