Exhibit 10.2

 

THIRD AMENDED AND RESTATED

CREDIT AGREEMENT

 

Dated to be Effective as of July 25, 2003

 

among

 

AVISTA ENERGY, INC.

and

AVISTA ENERGY CANADA LTD.,

as Co-Borrowers,

 

and

 

BNP PARIBAS,

as Administrative Agent, Collateral Agent,

an Issuing Bank, and a Bank

 

and

 

FORTIS CAPITAL CORP.

as Documentation Agent,

an Issuing Bank, and a Bank

 

and

 

NATEXIS BANQUES POPULAIRES

as a Bank

 

and

 

THE OTHER FINANCIAL INSTITUTIONS WHICH

MAY BECOME PARTIES HERETO

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TABLE OF CONTENTS

 

          Page

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ARTICLE I   

DEFINITIONS

   1

1.01

  

Certain Defined Terms

   1

1.02

  

Other Interpretive Provisions

   28

1.03

  

Accounting Principles

   29 ARTICLE II   

THE CREDITS

   29

2.01

  

Amounts and Terms of Borrowing Base Line

   29     

(a)    Revolving Loans

   29     

(b)    Daylight Overdrafts

   29     

(c)    Overdraft Advances and Swap Contracts

   29     

(d)    Overall Limitation

   30     

(e)    Termination

   31

2.02

  

Loan Accounts

   31

2.03

  

Procedure for Borrowing

   31

2.04

  

Conversion and Continuation Elections

   32

2.05

  

Optional Prepayments

   33

2.06

  

Mandatory Prepayments of Loans; Mandatory Commitment Reductions

   34

2.07

  

Repayment

   34

2.08

  

Interest

   34

2.09

  

Fees

   36     

(a)    Agent and Facility Fees

   36     

(b)    Commitment

   36

2.10

  

Computation of Fees and Interest

   36

2.11

  

Payments by the Co-Borrowers

   36

2.12

  

Payments by the Banks to the Administrative Agent

   37

2.13

  

Sharing of Payments, Etc.

   37

2.14

  

Payments from Guarantors and Liquidation of Collateral

   38 ARTICLE III   

THE LETTERS OF CREDIT

   38

3.01

  

The Letters of Credit Lines

   38

3.02

  

Issuance, Amendment and Renewal of Letters of Credit

   40

3.03

  

Risk Participations, Drawings, Reducing Letters of Credit and Reimbursements

   42

3.04

  

Repayment of Participations

   44

3.05

  

Role of the Issuing Bank

   44

3.06

  

Obligations Absolute

   45

3.07

  

Cash Collateral Pledge

   46

3.08

  

Letter of Credit Fees

   46

3.09

  

Uniform Customs and Practice

   47 ARTICLE IV   

TAXES, YIELD PROTECTION AND ILLEGALITY

   47

4.01

  

Taxes

   47

 

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4.02

  

Withholding Tax

   49

4.03

  

Illegality

   50

4.04

  

Increased Costs and Reduction of Return

   50

4.05

  

Funding Losses

   51

4.06

  

Inability to Determine Rates

   52

4.07

  

Reserves on Eurodollar Rate Loans

   52

4.08

  

Certificates of Banks

   52

4.09

  

Substitution of Banks

   53

4.10

  

Canadian Withholding Taxes

   53

4.11

  

Survival

   53 ARTICLE V   

CONDITIONS PRECEDENT

   53

5.01

  

Matters to be Satisfied Upon Execution of Agreement

   53     

(a)    Loan Documents

   53     

(b)    Resolutions; Incumbency

   53     

(c)    Organization Documents; Good Standing

   54     

(d)    Legal Opinion

   54     

(e)    Payment of Fees

   54     

(f)     Certificate

   54     

(g)    Filings

   54     

(h)    Other Documents

   54

5.02

  

Matters to be Satisfied Upon Each Credit Extension

   55 ARTICLE VI   

REPRESENTATIONS AND WARRANTIES

   55

6.01

  

Corporate Existence and Power

   55

6.02

  

Authorization; No Contravention

   55

6.03

  

Governmental Authorization

   56

6.04

  

Binding Effect

   56

6.05

  

Litigation

   56

6.06

  

No Default

   56

6.07

  

ERISA Compliance

   56

6.08

  

Use of Proceeds; Margin Regulations

   57

6.09

  

Title to Properties

   57

6.10

  

Taxes

   57

6.11

  

Financial Condition

   58

6.12

  

Environmental Matters

   58

6.13

  

Regulated Entities

   58

6.14

  

No Burdensome Restrictions

   59

6.15

  

Copyrights, Patents, Trademarks and Licenses, Etc.

   59

6.16

  

Subsidiaries

   59

6.17

  

Insurance

   59

6.18

  

Full Disclosure

   59 ARTICLE VII   

AFFIRMATIVE COVENANTS

   60

7.01

  

Financial Statements

   60

7.02

  

Certificates; Other Information

   61

7.03

  

Notices

   62

 

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7.04

  

Preservation of Corporate Existence, Etc.

   63

7.05

  

Maintenance of Property

   64

7.06

  

Insurance

   64

7.07

  

Payment of Obligations

   64

7.08

  

Compliance with Laws

   64

7.09

  

Compliance with ERISA

   65

7.10

  

Inspection of Property and Books and Records

   65

7.11

  

Environmental Laws

   65

7.12

  

Use of Proceeds

   65

7.13

  

Borrowing Base Audit

   65

7.14

  

Risk Management Procedures Audit

   65

7.15

  

Payments to Bank Blocked Accounts

   66

7.16

  

Compliance with FERC

   67

7.17

  

[Intentionally Deleted]

   67

7.18

  

Estimate of Net Working Capital

   67

7.19

  

Further Information

   67 ARTICLE VIII   

NEGATIVE COVENANTS

   67

8.01

  

Limitation on Liens

   67

8.02

  

Consolidations and Mergers

   69

8.03

  

Limitation on Indebtedness

   69

8.04

  

Transactions with Affiliates

   69

8.05

  

Use of Proceeds

   69

8.06

  

Contingent Obligations

   69

8.07

  

Restricted Payments

   70

8.08

  

ERISA

   70

8.09

  

Change in Business

   70

8.10

  

Accounting Changes

   70

8.11

  

Value at Risk of Open Positions

   70

8.12

  

Consolidated Financial Covenants

   71

8.13

  

Risk Management Policy

   71

8.14

  

Hourly and Daily Trading Expense

   71

8.15

  

Loans and Investments

   71

8.16

  

Certification

   73

8.17

  

Change of Management

   73

8.18

  

Stress Test Short Term Book/Long Term Book

   73

8.19

  

Posted Collateral Investments

   73

8.20

  

Wells Fargo FX Documents

   73 ARTICLE IX   

EVENTS OF DEFAULT

   73

9.01

  

Event of Default

   73     

(a)    Non–Payment

   73     

(b)    Representation or Warranty

   73     

(c)    Covenant Defaults

   74     

(d)    Cross–Default

   74     

(e)    Insolvency; Voluntary Proceedings

   74     

(f)     Involuntary Proceedings

   74

 

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(g)    ERISA

   74     

(h)    Monetary Judgments or Orders

   75     

(i)     Non–Monetary Judgments or Orders

   75     

(j)     Change of Control

   75     

(k)    Adverse Change

   75     

(l)     Guarantor Defaults

   75     

(m)   Guarantor Cross-Default

   75     

(n)    Downgrade of Avista Corporation

   76

9.02

  

Remedies

   76

9.03

  

Rights Not Exclusive

   76 ARTICLE X   

THE ADMINISTRATIVE AGENT

   77

10.01

  

Appointment and Authorization

   77

10.02

  

Delegation of Duties

   77

10.03

  

Liability of Agent

   77

10.04

  

Reliance by Administrative Agent

   78

10.05

  

Notice of Default

   78

10.06

  

Credit Decision

   79

10.07

  

Indemnification

   79

10.08

  

Agents in Individual Capacity

   80

10.09

  

Successor Administrative Agent

   80

10.10

  

Collateral Matters

   80

10.11

  

Monitoring Responsibility

   81 ARTICLE XI   

MISCELLANEOUS

   81

11.01

  

Amendments and Waivers

   81

11.02

  

Notices

   82     

(a)    General

   82     

(b)    Effectiveness of Facsimile Documents and Signatures

   83     

(c)    Limited Use of Electronic Mail

   83     

(d)    Reliance by Administrative Agent and Banks

   83

11.03

  

No Waiver; Cumulative Remedies

   83

11.04

  

Costs and Expenses

   84

11.05

  

Indemnity

   84

11.06

  

Payments Set Aside

   85

11.07

  

Successors and Assigns

   85

11.08

  

Assignments, Participations, Etc.

   85

11.09

  

Set–off

   87

11.10

  

Automatic Debits of Fees

   87

11.11

  

Notification of Addresses, Lending Offices, Etc.

   88

11.12

  

Bank Blocked Accounts Charges and Procedures: Paribas Investment Accounts

   88

11.13

  

Counterparts

   88

11.14

  

Severability

   89

11.15

  

No Third Parties Benefited

   89

11.16

  

Governing Law and Jurisdiction

   89

11.17

  

Waiver of Jury Trial

   89

 

iv

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11.18

  

Entire Agreement

   90

11.19

  

Fortis Capital Corp. as Documentation Agent

   90

11.20

  

Reliance of Co-Borrowers

   90

11.21

  

Nature of Obligations

   90

11.22

  

Amendment and Restatement

   90

 

 

v

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THIRD AMENDED AND RESTATED CREDIT AGREEMENT

 

This THIRD AMENDED AND RESTATED CREDIT AGREEMENT is entered into effective as of
July 25, 2003, among AVISTA ENERGY, INC., a Washington corporation (“Avista”)
and AVISTA ENERGY CANADA LTD., a corporation of the province of Alberta, Canada
(“Avista Canada”) (jointly, severally and collectively, the “Co-Borrowers,” and
each individually, a “Co-Borrower”), BNP PARIBAS (“BNP Paribas”) as
Administrative Agent, Collateral Agent, an Issuing Bank, and a Bank, FORTIS
CAPITAL CORP. (“Fortis”) as Documentation Agent, an Issuing Bank, and a Bank,
NATEXIS BANQUES POPULAIRES (“Natexis”) as a Bank, and each other financial
institution which may become a party hereto (the “Banks”).

 

WHEREAS, the Co-Borrowers and Bank of America N.A. entered into that certain
Second Amended and Restated Credit Agreement dated to be effective as of June
29, 2001 (as amended, modified and supplemented from time to time, the “Existing
Credit Agreement”); and

 

WHEREAS, the Banks and the Co-Borrowers desire again to amend and restate the
Existing Credit Agreement in its entirety.

 

NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained herein, the Existing Credit Agreement is amended and
restated in its entirety as follows:

 

ARTICLE I

 

DEFINITIONS

 

1.01 Certain Defined Terms. The following terms have the following meanings:

 

“Account” has the meaning stated in the New York Uniform Commercial Code.

 

“Account Debtor” means a Person who is obligated to a Co-Borrower under an
Account of such Co-Borrower.

 

“Acquisition” means any transaction or series of related transactions for the
purpose of or resulting, directly or indirectly, in (a) the acquisition of all
or substantially all of the assets of a Person, or of any business or division
of a Person, (b) the acquisition of in excess of 50% of the capital stock,
partnership interests or equity of any Person, or otherwise causing any Person
to become a Subsidiary, or (c) a merger or consolidation or any other
combination with another Person (other than a Person that is a Subsidiary)
provided that the relevant Co-Borrower or the Subsidiary is the surviving
entity.

 

“Activation Period” means the period following receipt by Wells Fargo of an
Activation Notice under the Override Agreement during which the Collateral
Agent, on

 

1

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behalf of the Banks, exercises control over the Accounts specified in the
Override Agreement.

 

“Administrative Agent” means BNP Paribas.

 

“Administrative Agent’s Payment Office” means the address for payments set forth
on Schedule 11.02 hereto in relation to the Administrative Agent, or such other
address as the Administrative Agent may from time to time specify.

 

“Adjusted Net Working Capital” means the sum of (i) Net Working Capital, (ii)
cash securing Letters of Credit issued under the Collateralized L/C Line, and
(iii) fifty percent (50%) of the amount of any loans made by either of the
Co-Borrowers to Avista Capital).

 

“Adjusted Pro Rata Share” means, as to any Bank at any particular time, the
percentage equivalent (expressed as a decimal, rounded to the ninth decimal
place) at such time of (a) an amount equal to such Bank’s Line Portion plus, in
the case of BNP Paribas or any of its affiliates, the amount of advances made by
way of Daylight Overdrafts which have not been reimbursed pursuant to Subsection
2.01(c) hereof or otherwise repaid, plus, in the case of each Swap Bank, the
amount of obligations (including, without limitation, liquidation obligations)
owed to the Swap Banks under Swap Contracts to the extent such obligations have
not been paid pursuant to Subsection 2.01(c) hereof, divided by (b) the total
amount of the Borrowing Base Line plus the total amount of the Collateralized
L/C Line, plus the amount of advances made by way of Daylight Overdrafts which
have not been reimbursed pursuant to Subsection 2.01(c) hereof or otherwise
repaid, plus the amount of obligations (including, without limitation,
liquidation obligations) owed to the Swap Banks under Swap Contracts to the
extent such obligations have not been paid pursuant to Subsection 2.01(c) hereof
or otherwise, if any.

 

“Advance Maturity Date” means the maturity date of advances made hereunder which
for Base Rate Loans will be the earliest to occur of (a) 90 days from the date
of the Borrowing or (b) the Expiration Date, and for Eurodollar Rate Loans will
be the end of the Interest Period for such Eurodollar Rate Loan.

 

“Affiliate” means, as to any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of the other Person, whether
through the ownership of voting securities, by contract, or otherwise.

 

“Agents” means BNP Paribas and Fortis in their capacities as agents for the
Banks hereunder, and any successor agents arising under Section 10.09.

 

2

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“Agent-Related Persons” means BNP Paribas and Fortis and any successor agent
arising under Section 10.09, together with their respective Affiliates and the
officers, directors, employees, agents and attorneys-in-fact of such Persons and
Affiliates.

 

“Aggregate Credit Exposure Percentage” means, as to any Bank in the event
repayment is made to the Banks by a Guarantor or by either Co-Borrower after a
declaration of a Default by the Required Banks or made pursuant to a liquidation
of Collateral, whether by setoff or otherwise (the date on which such Default is
declared, the “determination date”), the decimal equivalent of a fraction,

 

(A) the numerator of which is equal to (i) the highest amount of such Bank’s
outstanding Revolving Loans and Reducing L/C Borrowings following the
determination date, plus (ii) the highest amount of such Bank’s participation
interest in any L/C Obligations outstanding following the determination date not
repaid by Revolving Loans or Overdraft Advances, plus (iii) in the case of BNP
Paribas, the highest amount of outstanding advances by way of Daylight
Overdrafts which have not been reimbursed pursuant to Subsection 2.01(c) hereof
or otherwise repaid, plus (iv) in the case of each Swap Bank, the aggregate
amount of Obligations owed to such Swap Bank following the determination date in
respect of such Swap Contracts existing on the determination date (including the
amounts payable to such Swap Bank upon termination of such Swap Contracts), but
only to the extent that other Banks have not purchased participations in such
Swap Contracts or such Obligations have not otherwise been repaid (i) by either
Co-Borrower or a Guarantor, whether such payment is made utilizing operating
cash, cash collateral in an Insolvency Proceeding or otherwise, or (ii) with
proceeds of Revolving Loans or Overdraft Advances, and

 

(B) the denominator of which is the sum of (i) the highest amount of all Banks’
outstanding Revolving Loans and Reducing L/C Borrowings following the
determination date, plus (ii) the highest amount of all L/C Obligations
outstanding following the determination date not repaid by Revolving Loans or
Overdraft Advances, plus (iii) the highest amount of outstanding advances by way
of Daylight Overdrafts which have not been reimbursed pursuant to Subsection
2.01(c) hereof or otherwise repaid, plus (iv) the aggregate amount of
Obligations owed to the Swap Banks following the determination date in respect
of Swap Contracts existing on the determination date (including the amounts
payable to the Swap Banks upon termination of the Swap Contracts), but only to
the extent that other Banks have not purchased participations in such Swap
Contracts or such Obligations have not otherwise been repaid (i) by either
Co-Borrower or a Guarantor, whether such payment is made utilizing operating
cash, cash collateral in an Insolvency Proceeding or otherwise, or (ii) with
proceeds of Revolving Loans or Overdraft Advances.

 

“Agreement” means this Third Amended and Restated Credit Agreement.

 

“Applicable Margin” means:

 

(a) with respect to Base Rate Loans: 0%

 

3

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(b) with respect to Eurodollar Rate Loans: 1.50%

 

“Approved Brokerage Accounts” means brokerage accounts maintained by either
Co-Borrower with brokerage companies approved by Banks for the purpose of
allowing Co-Borrowers to engage in the purchase and sale of commodity futures,
commodity options, forward or leverage contracts and/or actual or cash
commodities, and subject to a fully perfected first priority security interest
in favor of the Collateral Agent for the benefit of the Banks (including a
tri-party control agreement, acceptable to the Banks).

 

“Assignee” has the meaning specified in Subsection 11.08(a).

 

“Attorney Costs” means and includes all reasonable fees and disbursements of any
law firm or other external counsel, the allocated cost of internal legal
services and all disbursements of internal counsel.

 

“Avista Blocked Account” has the meaning specified in Section 7.15.

 

“Avista Capital” means Avista Capital, Inc., a Washington corporation, the
parent company of Avista.

 

“Avista Corporation” means Avista Corporation, a Washington corporation, the
parent company of Avista Capital.

 

“Bank Blocked Accounts” means (i) account maintained by Avista with Wells Fargo,
(ii) multicurrency account maintained by Avista with Wells Fargo and (iii)
multicurrency account maintained by Avista Canada with Wells Fargo.

 

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

 

“Banks” shall mean BNP Paribas, Fortis, Natexis and the other lending
institutions which have been added to this Agreement pursuant to the amendments
to this Agreement. At such time as additional lending institutions are added to
this Agreement, either through an amendment to this Agreement or through an
Assignment and Acceptance in accordance with Subsection 11.08(a) hereof, the
term “Banks” shall include such additional lending institutions.

 

“Base Rate” means, for any day, the higher of: (a) 0.50% per annum above the
latest Federal Funds Rate; or (b) the rate of interest in effect for such day as
publicly announced from time to time by BNP Paribas in New York, New York, as
its “Prime Rate.” (The “Prime Rate” is a rate based upon various factors,
including 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

 

4

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rate.) Any change in the “Prime Rate” shall take effect at the opening of
business on the day specified in the public announcement of such change.

 

“Base Rate Loan” means any Loan bearing interest based upon the Base Rate.

 

“Benefit Plan” means an employee benefit plan (as defined in Section 3(3) of
ERISA) which a Co-Borrower sponsors or maintains or to which a Co-Borrower
makes, is making, or is obligated to make contributions, excluding any Plans.

 

“BNP Paribas” means BNP Paribas, a bank organized under the laws of France.

 

“Borrowing” means a borrowing hereunder consisting of Revolving Loans made to
the Co-Borrowers on the same day by the Banks under Article II.

 

“Borrowing Base Cap” means at any time an amount equal to the lesser of:

 

  (a) $110,000,000.00 less L/C Obligations under the Collateralized L/C Line;

 

  (b) the Elected Line Cap; or

 

  (c) the sum of:

 

(i) (x) 100% of Cash Collateral and other liquid investments having a tenor
under 90 days and (y) 95% of Cash Collateral and other liquid investments with
tenors beyond 90 days but less than 360 days, which Cash Collateral and other
liquid investments listed in (x) and (y) shall be acceptable to the Banks in
their sole discretion and which are subject to a first perfected security
interest in favor of the Collateral Agent, as collateral agent for the Banks,
and which have not been used in determining availability for any other advance
or Letter of Credit Issuance or for instruments to hedge Canadian dollar
exposure related to purchases and sales of Product; provided that no more than
75% of Cash Collateral and other such liquid investments shall have a tenor
between 90 – 180 days; provided, further, that no more than 25% of Cash
Collateral and other such liquid investments shall have a tenor between 181 –
360 days; plus

 

(ii) 90% of Eligible Accounts which are not being used in determining
availability for any other Loan or Letter of Credit Issuance net of any
Out-of-the-Money Positions by counterparty, not to exceed related amounts
included in Eligible Accounts; plus

 

(iii) 90% of equity (i.e. amounts in excess of margin requirements) in Approved
Brokerage Accounts; plus

 

5

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(iv) 80% of Eligible Exchange Receivables which are not being used in
determining availability for any other Loan or Letter of Credit Issuance net of
any remaining Out-of-the-Money Positions by counterparty, not to exceed related
amounts included in Eligible Exchange Receivables; plus

 

(v) 80% of Eligible Inventory consisting of natural gas which is not being used
in determining availability for any other advance or Letter of Credit Issuance;
plus

 

(vi) 85% of Unbilled Eligible Accounts which are not being used in determining
availability for any other Loan or Letter of Credit Issuance net of any
remaining Out-of-the-Money Positions by counterparty, not to exceed related
amounts included in Unbilled Eligible Accounts; plus

 

(vii) 80% of Undelivered Product Value; less

 

(viii) 50% of Posted Collateral; less

 

(ix) the net amounts due to the Swap Banks under Swap Contracts unless and to
the extent such amounts are secured by cash pledges of cash not otherwise
included in the Borrowing Base Cap or by a Letter of Credit, less

 

(x) the US Dollar Equivalent of an amount equal to CDN $650,000, which amount
represents potential amounts which may be or become due to Wells Fargo under
Canadian dollar checking account services; such amount to be subtracted herein
whether or not such amount is due to Wells Fargo under such checking account
services, less

 

(xi) the amounts that would be subject to a so-called “First Purchaser Lien” as
defined in Texas Bus. & Com. Code Section 9.343, comparable laws of the states
of Oklahoma, Kansas, Wyoming or New Mexico, or any other comparable law, unless
a Letter of Credit secures payment of all amounts subject to such First
Purchaser Lien.

 

In no event shall any amounts described in (c)(i) through (c)(vii) above which
may fall into more than one of such categories be counted more than once when
making the calculation under subsection (c) of this definition.

 

NOTWITHSTANDING THE FOREGOING, AT NO TIME WILL THE BORROWING BASE CAP BE IN AN
AMOUNT IN EXCESS OF THE TOTAL LINE PORTION AMOUNTS AS SET FORTH ON SCHEDULE 2.01
FROM TIME TO TIME.

 

6

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“Borrowing Base Line” means that certain line of credit in an amount of up to
the lesser of (i) $110,000,000.00 or (ii) the amount that at the time of
determination is as set forth on Schedule 2.01, which amount is initially
$110,000,000.00. The line is for the purpose of (a) providing working capital
related to the purchase and resale of Product; (b) providing for Letters of
Credit to secure suppliers of Product; (c) to purchase Swap Contracts from time
to time; (d) making Daylight Overdrafts and funding payments due to BNP Paribas
for unreimbursed Daylight Overdrafts; (e) funding payments due to any Swap Bank
or any of its Affiliates under any Swap Contract; and (f) providing for Letters
of Credit to support payments owed to counterparties under swap contracts and to
support performance obligations to counterparties. Amounts outstanding under the
Borrowing Base Line may not exceed the Borrowing Base Cap.

 

“Borrowing Base Report” means a report detailing all Collateral which has been
or is being used in determining availability for an advance or letter of credit
issuance under the Borrowing Base Line, such report to be in the form attached
hereto as Exhibit E.

 

“Borrowing Date” means any date on which a Borrowing occurs under Section 2.03.

 

“Business Day” (a) with respect to all matters other than those related to
Eurodollar Rate Loans, means any day other than a Saturday, Sunday or other day
on which commercial banks in, New York City and Dallas, Texas are authorized, or
in New York City or Dallas, Texas are required, by law to close and (b) means,
for purposes of determining business days in connection with Eurodollar Rate
Loans, any day on which transactions are made in the applicable offshore dollar
interbank market other than a Saturday, Sunday or other day on which commercial
banks in New York City and London, England are authorized or required, by law to
close.

 

“California Receivables” mean accounts receivables due from California Power
Exchange, Automated Power Exchange and California Independent System Operators,
net of specific bad debt reserves established for these receivables.

 

“Canadian Dollar Equivalent” means, with respect to any Dollars, the amount of
such Dollars converted to Canadian dollars computed at BNP Paribas’ selling rate
for Dollars most recently in effect on or prior to the date of determination.

 

“Canadian Investment Accounts” means those certain investment accounts
maintained by Avista and Avista Canada with Wells Fargo, as such term is defined
in the Security Agreements executed by Avista and Avista Canada.

 

“Capital Adequacy Regulation” means any guideline, request or directive of any
central bank or other Governmental Authority, or any other law, rule or
regulation, whether or not having the force of law, in each case, regarding
capital adequacy of any Bank or of any corporation controlling a Bank.

 

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“Capital Stock” means capital stock, equity interest or other obligations or
securities of, or any interest in, any Person.

 

“Cash Collateral” means currency issued by the United States and Marketable
Securities both of which have been Cash Collateralized for the benefit of the
Banks.

 

“Cash Collateralize” means to pledge and deposit with or deliver to the
Collateral Agent, for the benefit of the Banks, Cash Collateral as collateral
for the Obligations pursuant to documentation in form and substance satisfactory
to the Collateral Agent (which documents are hereby consented to by the Banks).
The Co-Borrowers hereby grant the Collateral Agent, for the benefit of the
Banks, a security interest in all such Cash Collateral. Cash Collateral shall be
maintained in the Bank Blocked Accounts, the Paribas Investment Accounts, the
Wells Fargo Investment Accounts, or the Canadian Investment Accounts.

 

“Change of Control” means (i) with respect to Avista, the failure of Avista
Capital to own 80% of the Capital Stock and other ownership rights in Avista or
the sale, pledge, hypothecation, assignment or other transfer by Avista Capital
of any of such ownership rights, in either case, without the prior written
consent of the Banks, (ii) with respect to Avista Canada, the failure of Avista
to own 100% of the Capital Stock or other ownership rights in Avista Canada or
the sale, pledge, hypothecation, assignment or other transfer by Avista of any
of such ownership rights, in either case, without the prior written consent of
the Banks, and (iii) with respect to Avista Capital, the failure of Avista
Corporation to own 100% of the Capital Stock or other ownership rights in Avista
Capital or the sale, pledge, hypothecation, assignment or other transfer by
Avista Corporation of any of such ownership rights, in either case, without the
prior written consent of the Required Banks.

 

“Closing Date” means the date on which all conditions precedent set forth in
Section 5.01 are satisfied or waived by all Banks.

 

“Co-Borrower” means any individual Co-Borrower.

 

“Co-Borrowers” means jointly, severally, and collectively, Avista and Avista
Canada.

 

“Co-Borrowers’ Sub-limit” means the individual lines under the Credit Lines for
each of the Co-Borrowers as set forth on Schedule 2.01. Amounts utilized under
the Dollar Advance Sub-limit, the Overdraft Advance Sub-limit and the Daylight
Overdraft Sub-limit reduce the amounts available under the Borrowing Base Line.
Further, the aggregate amounts utilized under the Credit Lines may not exceed
the Facility Amount.

 

“Co-Borrowers Sub-limit Portion” means each Bank’s portion of the Co-Borrowers
Sub-limits as is set forth on Schedule 2.01 from time to time.

 

8

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“Code” means the Internal Revenue Code of 1986, and regulations promulgated
thereunder.

 

“Collateral” means all personal property and assets of each of the Co-Borrowers
including, without limitation, all accounts, chattel paper, contract rights,
deposit accounts, documents, equipment, investment accounts, investment
property, instruments, inventory, letter-of-credit rights, natural gas in
transit, supporting obligations, the Bank Blocked Accounts, the Wells Fargo
Investment Accounts, the Canadian Investment Accounts, stock, partnership
interests, and general intangibles, including without limitation payment
intangibles, whether presently existing or hereafter acquired or created and the
proceeds thereof.

 

“Collateral Agent” means BNP Paribas.

 

“Collateralized L/C Line” means that certain line of credit in an amount of up
to the lesser of (i) $50,000,000.00 or (ii) the amount that at the time of
determination is set forth on Schedule 2.01, which amount is initially
$50,000,000.00. The line is for the purpose of providing Cash Collateralized
Letters of Credit to (a) support payments owed to counterparties under swap
contracts and (b) support purchases of Product under contracts which require
letters of credit with tenors of up to two years but with expiration dates not
to extend beyond the Maturity Date.

 

“Compliance Certificate” means a certificate, in form attached hereto as Exhibit
C, whereby the Co-Borrowers certify that they are in compliance with this
Agreement.

 

“Contingent Obligation” means, as to any Person, any direct or indirect
liability of that Person, whether or not contingent, with or without recourse,
(a) with respect to any Indebtedness, lease, dividend, letter of credit or other
obligation (the “primary obligations”) of another Person (which obligations and
Person are referred to herein as the “primary obligation” and the “primary
obligor,” respectively), including any obligation of that Person (i) to
purchase, repurchase or otherwise acquire such primary obligations or any
security therefor, (ii) to advance or provide funds for the payment or discharge
of any such primary obligation, or to maintain working capital or equity capital
of the primary obligor or otherwise to maintain the net worth or solvency or any
balance sheet item, level of income or financial condition of the primary
obligor, (iii) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the ability of
the primary obligor to make payment of such primary obligation, or (iv)
otherwise to assure or hold harmless the holder of any such primary obligation
against loss in respect thereof (each, a “Guaranty Obligation”); (b) with
respect to any Surety Instrument (other than any Letter of Credit) issued for
the account of that Person or as to which that Person is otherwise liable for
reimbursement of drawings or payments; (c) to purchase any materials, supplies
or other property from, or to obtain the services of, another Person if the
relevant contract or other related document or obligation requires that payment
for such materials, supplies or other property, or for such services, shall be
made regardless of whether delivery of such materials, supplies or

 

9

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other property is ever made or tendered, or such services are ever performed or
tendered; or (d) in respect of any agreement, whether or not in writing,
relating to any transaction that is a rate swap, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap or
option, bond, note or bill option, interest rate option, forward foreign
exchange transaction, cap, collar or floor transaction, currency swap,
cross-currency rate swap, currency option or any other similar transaction
(including any option to enter into any of the foregoing) or any combination of
the foregoing and any master agreement relating to or governing any or all of
the foregoing.

 

“Contractual Obligation” means, as to any Person, any provision of any security
issued by such Person or of any agreement, undertaking, contract, indenture,
mortgage, deed of trust or other instrument, document or agreement to which such
Person is a party or by which it or any of its property is bound.

 

“Conversion/Continuation Date” means any date on which, under Section 2.04, the
Co-Borrowers (a) convert Loans of one Type to another Type, or (b) continue such
Loans as Loans of the same Type, but with a new Interest Period.

 

“Copac Management” means Copac Management Inc., a corporation of the Province of
Alberta, Canada, a wholly owned subsidiary of Avista Canada.

 

“Credit Extension” means and includes (a) the making of any Revolving Loans
hereunder; or (b) the Issuance of any Letters of Credit hereunder.

 

“Credit Lines” means the Borrowing Base Line and the Collateralized L/C Line.

 

“Daylight Overdrafts” means overdrafts extended by BNP Paribas to the
Co-Borrowers pursuant to a request by the Co-Borrowers.

 

“Daylight Overdraft Sub-limit” means that certain Daylight Overdraft Sub-limit
under the Borrowing Base Line set forth in Schedule 2.01.

 

“Default” means any event or circumstance which, with the giving of notice, the
lapse of time, or both, would constitute an Event of Default.

 

“Default Rate” has the meaning specified in Subsection 2.08(a).

 

“Documentary L/C” means a Letter of Credit which is intended at the time of
Issuance to be drawn upon and excludes standby letters of credit.

 

“Dollar Advance” means any advance under the Borrowing Base Line other than an
Overdraft Advance or a Daylight Overdraft.

 

“Dollar Advance Sub-limit” means a limitation upon Dollar Advances under the
Borrowing Base Line equal to $30,000,000.00.

 

10

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“Dollar Equivalent” of any Canadian dollars shall mean the amount of such
Canadian dollars converted to Dollars computed at BNP Paribas’ selling rate for
Canadian dollars most recently in effect on or prior to the date of
determination.

 

“Dollars”, and “$” each mean lawful money of the United States.

 

“Economic Basis” means the calculation of financial accounting terms using mark
to market of certain assets and liabilities as if the accounting standards of
the Emerging Issues Task Force (EITF) under EITF-98-10 (accounting for contracts
involved in energy trading and risk management activities) still applied.

 

“Effective Amount” means (a) with respect to any Revolving Loans on any date,
the aggregate outstanding principal amount thereof after giving effect to any
Borrowings and prepayments or repayments of Revolving Loans occurring on such
date; and (b) with respect to any outstanding L/C Obligations on any date, the
amount of such L/C Obligations on such date after giving effect to any Issuances
of Letters of Credit occurring on such date and any other changes in the
aggregate amount of the L/C Obligations as of such date, including changes as a
result of expiration or cancellation, any reimbursements of outstanding unpaid
drawings under any Letters of Credit or any reductions in the maximum amount
available for drawing under Letters of Credit taking effect on such date. In
determining the Effective Amount of any Letter of Credit that is denominated in
Canadian dollars, Administrative Agent may at any time determine the Dollar
Equivalent of such Letter of Credit and if Administrative Agent determines that
the Dollar Equivalent is in excess of the U.S. Dollar amounts shown on
Administrative Agent’s books and records at such time, Administrative Agent may
advise the Co-Borrowers. In such event, the Effective Amount of such Letter of
Credit shall be deemed to be the Dollar Equivalent amount and Administrative
Agent shall record and reflect such revised amount on its books and records.

 

“Elected Line Cap” means the amount which the Co-Borrowers may elect for
purposes of determining availability under the Borrowing Base Line from time to
time or at any time, but no more frequently than six (6) times per calendar
year, initially zero (0) which amount may be $40,000,000.00, $50,000,000.00,
$60,000,000.00, $80,000,000.00, $100,000,000.00, or $110,000,000.00. The Elected
Line Cap shall continue in effect until again changed by Co-Borrowers in
accordance with this Agreement or until automatically reduced as hereinafter set
forth. Notwithstanding the foregoing, the Co-Borrowers may not elect an Elected
Line Cap unless Co-Borrowers’ Net Working Capital and Net Worth at the time of
election are greater than, or equal to, the amounts specified below:

 

(a) If the Co-Borrowers elect $40,000,000.00, their Net Working Capital must be
at least $15,600,000.00 and their Net Worth must be at least $130,000,000.00; or

 

11

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(b) If the Co-Borrowers elect $50,000,000.00, their Net Working Capital must be
at least $17,000,000.00 and their Net Worth must be at least $130,000,000.00; or

 

(c) If the Co-Borrowers elect $60,000,000.00, their Net Working Capital must be
at least $19,000,000.00 and their Net Worth must be at least $130,000,000.00; or

 

(d) If the Co-Borrowers elect $80,000,000.00, their Net Working Capital must be
at least $23,000,000.00 and their Net Worth must be at least $130,000,000.00; or

 

(e) If the Co-Borrowers elect $100,000,000.00, their Net Working Capital must be
at least $27,000,000.00 and their Net Worth must be at least $130,000,000.00; or

 

(f) If the Co-Borrowers elect $110,000,000.00, their Net Working Capital must be
at least $29,000,000.00 and their Net Worth must be at least $130,000,000.00.

 

The Co-Borrowers shall elect which Elected Line Cap is in effect from time to
time by delivering to the Administrative Agent a written notice of such election
in the form of Exhibit G which is attached hereto. In the event that after the
Co-Borrowers make an Elected Line Cap election, the Co-Borrowers’ Net Working
Capital or Net Worth as reflected on a Compliance Certificate delivered to the
Administrative Agent are not in compliance with the requirements set forth
above, the Elected Line Cap shall be automatically reduced to the appropriate
level set forth above to cause compliance with the requirements set forth above,
provided that if the Co-Borrowers fail to qualify for (b) through (f), then the
Elected Line Cap shall be $40,000,000.00. Such reduction shall take place upon
Banks’ approval of such Compliance Certificate or notice of election. Until such
time as the Co-Borrowers elect a different Elected Line Cap, the Elected Line
Cap shall remain unchanged unless the Co-Borrowers fail to comply with the
requirements set forth above.

 

“Eligible Accounts” means, at the time of any determination thereof, each of the
Co-Borrowers’ Accounts as to which the following requirements have been
fulfilled to the satisfaction of all the Banks:

 

(a) Such Account (if for an amount in excess of $750,000.00) either (i) is the
result of a sale to an Account Debtor who has been pre-approved for such purpose
by all the Banks, in writing, in their sole discretion, or (ii) is secured by
letters of credit in form acceptable to the Banks in their sole discretion and
issued by banks approved by all the Banks in their sole discretion;

 

(b) Such Co-Borrower has lawful and absolute title to such Account;

 

12

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(c) Such Account is a valid, legally enforceable obligation of the Person who is
obligated under such Account for goods actually delivered to such Account Debtor
in the ordinary course of such Co-Borrower’s business;

 

(d) Such Account shall have excluded therefrom any portion that is subject to
any dispute, offset, counterclaim or other claim or defense on the part of the
Account Debtor or to any claim on the part of the Account Debtor denying
liability under such Account; provided, however, that in the event that the
portion that is subject to any such dispute, offset, counterclaim or other claim
or defense is secured with a Letter of Credit, such portion secured by the
Letter of Credit shall not be excluded;

 

(e) Such Account is not evidenced by any chattel paper, promissory note or other
instrument;

 

(f) Such Account (and any letter of credit securing it) is subject to a fully
perfected first priority security interest (or properly filed and acknowledged
assignment, in the case of U.S. government contracts, if any) in favor of
Administrative Agent pursuant to the Loan Documents, prior to the rights of, and
enforceable as such against, any other Person, and such Account is not subject
to any security interest or Lien in favor of any Person other than the Liens of
the Banks pursuant to the Loan Documents;

 

(g) Such Account shall have excluded therefrom (i) any portion which is not
payable in Dollars in the U.S. or Canadian dollars in Canada or the U.S., and
(ii) one percent (1%) of any portion which is so payable in Canadian dollars;

 

(h) Such Account is due and payable within 30 days or less (or 60 days or less,
if the Account Debtor is a governmental entity) from the date of the invoice and
payment thereof is not delinquent, and no extension or indulgence has been
granted extending the due date beyond a 30 day period (or 60 days, as the case
may be), except if such Account by its terms provides for a 30 day payment
period, then such Account shall be eligible for up to 45 days from the date of
invoice;

 

(i) No Account Debtor in respect of such Account is (i) an Affiliate of either
Co-Borrower, or (ii) incorporated in or primarily conducting business in any
jurisdiction outside of the U.S. or Canada, unless such Account Debtor and the
Account is approved in writing by all the Banks; and

 

(j) No Account Debtor in respect of such Account is insolvent or subject to an
Insolvency Proceeding.

 

“Eligible Assignee” means (a) a commercial bank organized under the laws of the
United States, or any state thereof, and having a combined capital and surplus
of at least $100,000,000.00; (b) a commercial bank organized under the laws of
any other country

 

13

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which is a member of the Organization for Economic Cooperation and Development
(the “OECD”), or a political subdivision of any such country, and having a
combined capital and surplus of at least $100,000,000.00, provided that such
bank is acting through a branch or agency located in the United States; and (c)
any Bank or a Person that is primarily engaged in the business of commercial
lending and that is (i) a Subsidiary of a Bank, (ii) a Subsidiary of a Person of
which a Bank is a Subsidiary, or (iii) a Person of which a Bank is a Subsidiary.

 

“Eligible Exchange Receivables” means all enforceable rights of a Co-Borrower to
receive Product in the ordinary course of business in exchange for the sale or
trade of Product previously delivered to the exchange debtor by such Co-Borrower
which (a) are evidenced by a written agreement enforceable against the exchange
debtor thereof, (b) are current pursuant to the terms of the contract or
invoice, (c) are subject to a perfected, first Lien in favor of the
Administrative Agent for the benefit of the Banks subject only to Permitted
Liens, and no other Lien, charge, offset, defense, counterclaim or claim, (d)
are not the subject of a dispute between the exchange debtor and such
Co-Borrower, (e) are valued at Platt’s spot market price or an independent
posting acceptable to all the Banks in their sole discretion, (f) if arising
pursuant to contracts involving an amount in excess of $750,000, are contracts
by exchangers pre-approved by all the Banks in their sole discretion, or
contracts secured by letters of credit in form acceptable to all the Banks in
their sole discretion and issued by banks approved by all the Banks in their
sole discretion, and (g) have not been otherwise determined by any of the Banks
in their sole discretion to be unacceptable to them. The Product and Account
relating to or creating any Eligible Exchange Receivable shall not be
simultaneously included in any other availability calculation, including,
without limitation, Undelivered Product Value, Eligible Inventory or Eligible
Accounts. No Exchange Receivable shall be considered an Eligible Exchange
Receivable if the exchange debtor in respect of such Exchange Receivable is
insolvent or subject to an Insolvency Proceeding.

 

“Eligible Inventory” means, at the time of determination thereof, all of each
Co-Borrower’s natural gas inventory stored in terminals (and provided the Banks
must have approved all terminal owners) valued at current market price (as
referenced by a published source acceptable to all the Banks in their sole
discretion), and in all instances as to which the following requirements have
been fulfilled to the satisfaction of all the Banks:

 

(i) The inventory is owned by such Co-Borrower free and clear of all Liens in
favor of third parties, except Liens in favor of the Administrative Agent for
the benefit of the Banks under the Loan Documents and except for Permitted
Liens;

 

(ii) The inventory has not been identified to deliveries with the result that a
buyer would have rights to the inventory that would be superior to the
Administrative Agent’s security interest, nor shall such inventory have become
the subject of a customer’s ownership or Lien;

 

14

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(iii) The inventory is in transit in the U.S. or Canada under the control and
ownership of such Co-Borrower or is in a pipeline or a bill of lading has been
issued to the Administrative Agent if such inventory is in the hands of a third
party carrier or is located in the U.S. at the locations described on Schedule
7.03(f), or at such other place as has been specifically agreed to in writing by
all the Banks and such Co-Borrower; and

 

(iv) The inventory is subject to a fully perfected first priority security
interest in favor of the Administrative Agent for the benefit of the Banks
pursuant to the Loan Documents.

 

“Eligible Subordinated Debt” means Subordinated Debt not to exceed 50% of (i)
the minimum Net Working Capital required under Section 8.12(a) or, if greater,
(ii) the level of Net Working Capital for the Elected Line Cap in effect at the
time the Subordinated Debt is incurred.

 

“Environmental Claims” means all claims, however asserted, by any Governmental
Authority or other Person alleging potential liability or responsibility for
violation of any Environmental Law, or for release or injury to the environment.

 

“Environmental Laws” means all federal, state or local laws, statutes, common
law duties, rules, regulations, ordinances and codes, together with all
administrative orders, directed duties, requests, licenses, authorizations and
permits of, and agreements with, any Governmental Authorities, in each case
relating to environmental, health, safety and land use matters.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, and
regulations promulgated thereunder.

 

“ERISA Affiliate” means any trade or business (whether or not incorporated)
under common control with a Co-Borrower within the meaning of Section 414(b) or
(c) of the Code (and Sections 414(m) and (o) of the Code for purposes of
provisions relating to Section 412 of the Code).

 

“ERISA Event” means (a) a Reportable Event with respect to a Plan; (b) a
withdrawal by a Co-Borrower or any ERISA Affiliate from a Plan subject to
Section 4063 of ERISA during a plan year in which it was a substantial employer
(as defined in Section 4001(a)(2) of ERISA) or a cessation of operations which
is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete
or partial withdrawal by a Co-Borrower or any ERISA Affiliate from a
Multiemployer Plan or notification that a Multiemployer Plan is in
reorganization; (d) the filing of a notice of intent to terminate, the treatment
of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or
the commencement of proceedings by the PBGC to terminate a Plan or Multiemployer
Plan; (e) the receipt of a written or oral statement by the PBGC which might
reasonably be expected to constitute or indicate grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Plan or

 

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Multiemployer Plan; or (f) the imposition of any material liability under Title
IV of ERISA, other than PBGC premiums due but not delinquent under Section 4007
of ERISA, upon a Co-Borrower or any ERISA Affiliate.

 

“Eurodollar Effective Amount” means the product of the principal amount of a
Eurodollar Rate Loan or requested Eurodollar Rate Loan and the number of days in
the applicable Interest Period for such Eurodollar Rate Loan.

 

“Eurodollar Rate” means for any Interest Period with respect to any Eurodollar
Rate Loan:

 

(a) the rate per annum equal to the rate determined by the Administrative Agent
to be the offered rate that appears on the page of the Telerate screen (or any
successor thereto) that displays an average British Bankers Association Interest
Settlement Rate for deposits in Dollars (for delivery on the first day of such
Interest Period) with a term equivalent to such Interest Period, determined as
of approximately 11:00 a.m. (London time) three (3) Business Days prior to the
first day of such Interest Period, or

 

(b) if the rate referenced in the preceding subsection (a) does not appear on
such page or service or such page or service shall cease to be available, the
rate per annum equal to the rate determined by the Administrative Agent to be
the offered rate on such other page or other service that displays an average
British Bankers Association Interest Settlement Rate for deposits in Dollars
(for delivery on the first day of such Interest Period) with a term equivalent
to such Interest Period, determined as of approximately 11:00 a.m. (London time)
three (3) Business Days prior to the first day of such Interest Period, or

 

(c) if the rates referenced in the preceding subsections (a) and (b) are not
available, the rate per annum determined by the Administrative Agent as the rate
of interest (rounded upward to the next 1/100th of 1%) at which deposits in
Dollars for delivery on the first day of such Interest Period in same day funds
in the approximate amount of the Eurodollar Rate Loan being made, continued or
converted by BNP Paribas and with a term equivalent to such Interest Period
would be offered by BNP Paribas’ London Branch as stated on Telerate News
Service Page 3750 as of 11:00 a.m. (London time) three (3) Business Days prior
to the first day of such Interest Period. If such interest rates shall cease to
be available from Telerate News Service, such interest rates shall be determined
from such financial reporting service or other information as shall be mutually
acceptable to the Administrative Agent and the Co-Borrowers.

 

“Eurodollar Rate Loan” means a Loan that bears interest at a rate based on the
Eurodollar Rate.

 

“Event of Default” means any of the events or circumstances specified in Section
9.01.

 

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“Exchange Act” means the Securities and Exchange Act of 1934, as amended, and
regulations promulgated thereunder.

 

“Existing Advances” means all Loans outstanding under the Existing Credit
Agreement on the Closing Date.

 

“Expiration Date” means the earliest to occur of:

 

(a) July 23, 2004; or

 

(b) the date an Event of Default occurs.

 

“Facility Amount” means $110,000,000.00.

 

“FDIC” means the Federal Deposit Insurance Corporation, and any Governmental
Authority succeeding to any of its principal functions.

 

“Federal Funds Rate” means, for any day, the rate set forth in the weekly
statistical release designated as H.15(519), or any successor publication,
published by the Federal Reserve Bank of New York (including any such successor,
“H.15(519)”) on the preceding Business Day opposite the caption “Federal Funds
(Effective)”; or, if for any relevant day such rate is not so published on any
such preceding Business Day, the rate for such day will be the arithmetic mean
as determined by the Administrative Agent of the rates for the last transaction
in overnight Federal Funds arranged prior to 9:00 a.m. (New York City time) on
that day by each of three leading brokers of Federal Funds transactions in New
York City selected by the Administrative Agent.

 

“Fiscal Quarter” means the quarterly periods ending March 31, June 30, September
30 and December 31.

 

“Fortis” means Fortis Capital Corp., a Connecticut corporation.

 

“FRB” means the Board of Governors of the Federal Reserve System, and any
Governmental Authority succeeding to any of its principal functions.

 

“Further Taxes” means any and all present or future taxes, levies, assessments,
imposts, duties, deductions, fees, withholding or similar charges (including,
without limitation, net income taxes and franchise taxes), and all liabilities
with respect thereto, imposed by any jurisdiction on account of amounts payable
or paid pursuant to Section 4.01.

 

“GAAP” means generally accepted accounting principles set forth from time to
time 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 agencies with
similar functions of

 

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comparable stature and authority within the U.S. accounting profession), which
are applicable to the circumstances as of the date of determination.

 

“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 entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.

 

“Guarantors” means each of Avista Capital and Copac Management.

 

“Guaranty” means a guaranty agreement in form and substance acceptable to
Administrative Agent and the Banks, which has been executed by a Guarantor and
delivered to Administrative Agent for the benefit of the Banks.

 

“Guaranty Obligation” has the meaning specified in the definition of “Contingent
Obligation.”

 

“Honor Date” has the meaning specified in Subsection 3.03(b).

 

“Indebtedness” of any Person means, without duplication, (a) all indebtedness
for borrowed money; (b) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services (other than trade payables
entered into in the ordinary course of business on ordinary terms); (c) all
non-contingent reimbursement or payment obligations with respect to Surety
Instruments; (d) all obligations evidenced by notes, bonds, debentures or
similar instruments, including obligations so evidenced incurred in connection
with the acquisition of property, assets or businesses; (e) all indebtedness
created or arising under any conditional sale or other title retention
agreement, or incurred as financing, in either case with respect to property
acquired by the Person (even though the rights and remedies of the seller or
bank under such agreement in the event of default are limited to repossession or
sale of such property); (f) all obligations with respect to capital leases; (g)
all obligations with respect to swap contracts; (h) all indebtedness referred to
in clauses (a) through (g) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon or in property (including accounts and contract rights) owned by
such Person, even though such Person has not assumed or become liable for the
payment of such indebtedness; and (i) all Guaranty Obligations in respect of
indebtedness or obligations of others of the kinds referred to in clauses (a)
through (g) above.

 

“Indemnified Liabilities” has the meaning specified in Section 11.05.

 

“Indemnified Person” has the meaning specified in Section 11.05.

 

“Independent Auditor” has the meaning specified in Subsection 7.01(a).

 

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“Insolvency Proceeding” means, with respect to any Person (a) any case, action
or proceeding with respect to such Person 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, composition, marshalling of assets for
creditors, or other, similar arrangement in respect of its creditors generally
or any substantial portion of its creditors; undertaken under U.S. Federal,
state or foreign law, including the Bankruptcy Code.

 

“Interest Payment Date” means, as to any Loan other than a Base Rate Loan, the
last day of each Interest Period applicable to such Loan and, as to any Base
Rate Loan, the fifth Business Day of each month.

 

“Interest Period” means, as to any Eurodollar Rate Loan, the period commencing
on the Borrowing Date of such Loan or on the Conversion/Continuation Date on
which the Loan is converted into or continued as an Eurodollar Rate Loan, and
ending on the date one, two or three months thereafter selected by the
Co-Borrowers as the ending date thereof in its Notice of Borrowing or Notice of
Conversion/Continuation;

 

provided that:

 

(a) if any Interest Period would otherwise end on a day that is not a Business
Day, that Interest Period shall be extended to the following Business Day unless
the result of such extension would be to carry such Interest Period into another
calendar month, in which event such Interest Period shall end on the preceding
Business Day;

 

(b) any Interest Period pertaining to an Eurodollar Rate Loan that begins on the
last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of the calendar month at the end of
such Interest Period; and

 

(c) no Interest Period shall extend beyond the Expiration Date.

 

“IRS” means the Internal Revenue Service, and any Governmental Authority
succeeding to any of its principal functions under the Code.

 

“Issue” means, with respect to any Letter of Credit, to issue or to extend the
expiry of, or to renew or increase the amount of, such Letter of Credit; and the
terms “Issued,” “Issuing” and “Issuance” have corresponding meanings.

 

“Issuing Bank” means BNP Paribas and Fortis, and in the future means any Bank
which Issues Letters of Credit hereunder, in such Bank’s capacity as an issuer
of one or more Letters of Credit hereunder.

 

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“L/C Advance” means each Bank’s participation in any L/C Borrowing in accordance
with its Pro Rata Share.

 

“L/C Amendment Application” means an application form for amendment of
outstanding standby or commercial documentary letters of credit as shall at any
time be in use at Issuing Bank, as Issuing Bank shall request.

 

“L/C Application” means an application form for Issuances of standby or
commercial documentary letters of credit as shall at any time be in use at
Issuing Bank, as Issuing Bank shall request. Each L/C Application requesting the
Issuance of a Letter of Credit to support the trading of Product shall include a
certification that the Co-Borrowers are in compliance with the applicable
sub-limit for such type of letter of credit.

 

“L/C Borrowing” means an extension of credit resulting from either a drawing
under any Letter of Credit or a Reducing L/C Borrowing, which extension of
credit shall not have been reimbursed on the date when made nor converted into a
Borrowing of Dollar Advances under Section 3.03.

 

“L/C Cap” means the maximum availability for Issuance of Letters of Credit under
the Borrowing Base Line which shall be an amount equal to the Borrowing Base Cap
less the Effective Amount of the outstanding Revolving Loans.

 

“L/C Obligations” means at any time the sum of (a) the aggregate undrawn amount
of all Letters of Credit then outstanding, plus (b) the amount of all
unreimbursed drawings under all Letters of Credit, including all outstanding L/C
Borrowings.

 

“L/C-Related Documents” means the Letters of Credit, the L/C Applications, the
L/C Amendment Applications and any other document relating to any Letter of
Credit, including, but not limited to, any of Issuing Bank’s standard form
documents for letter of credit issuances.

 

“L/C Sub-limit” means the limits upon L/C Obligations for each of the
Co-Borrowers under particular types of Letters of Credit Issued under the Credit
Lines as set forth on Schedule 2.01. Subject to the individual sub-limits
referenced in Schedule 2.01, any Letter of Credit may be issued in Canadian
Dollars, provided that the aggregate amount of all Letters of Credit issued
under the Credit Lines in Canadian Dollars shall not exceed Canadian Dollar
Equivalent of U.S. $30,000,000.00.

 

“Lending Office” means, as to any Bank, the office or offices of such Bank
specified as its “Lending Office” on Schedule 11.02, or such other office or
offices as such Bank may from time to time notify the Co-Borrowers and the
Administrative Agent.

 

“Letters of Credit” means (a) any letters of credit (whether standby letters of
credit or commercial documentary letters of credit) Issued by Issuing Bank
pursuant to Article III, and (b) any Reducing Letters of Credit.

 

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“Lien” means any security interest, mortgage, deed of trust, pledge,
hypothecation, assignment, charge, encumbrance, or lien, statutory or other in
respect of any property, including those created by, arising under or evidenced
by any conditional sale or other title retention agreement, the interest of a
lessor under a capital lease, any financing lease having substantially the same
economic effect as any of the foregoing, or the filing of any financing
statement naming the owner of the asset to which such lien relates as debtor,
under the Uniform Commercial Code or any comparable law.

 

“Line Portion” means for each Bank the portion of the Credit Lines assigned to
such Bank as set forth on Schedule 2.01.

 

“Loan” means any extension of credit by a Bank to the Co-Borrowers under Article
II or Article III in the form of (a) a Revolving Loan or (b) an L/C Advance.

 

“Loan Documents” means this Agreement, the Notes, the Guaranties, the Security
Agreements, the Override Agreement, the L/C-Related Documents, Swap Contracts,
and all other documents delivered to the Administrative Agent or any Bank or
Affiliate of any Bank in connection herewith or delivered to BNP Paribas or any
of its affiliates in connection with Daylight Overdrafts.

 

“Loan Parties” means each of the Co-Borrowers and the Guarantors.

 

“Lockbox” means the lockbox associated with the Bank Blocked Accounts maintained
by Avista Canada into which all checks and similar items sent by Account Debtors
of Avista Canada are to be received.

 

“Margin Stock” means “margin stock” as such term is defined in Regulation T, U
or X of the FRB.

 

“Mark-to-Market” means the method of accounting used to account for derivative
commodity instruments entered into for trading purposes, on an Economic Basis.

 

“Marketable Securities” means (a) certificates of deposit issued by Wells Fargo
or BNP Paribas or by any other bank, with a Fitch rating of A or better, (b)
commercial paper rated P-1, A-1 or F-1, excluding that issued by Avista
Corporation, (c) bankers acceptances rated Prime, or (d) U.S. Government
obligations, in each case with tenors of 360 days or less.

 

“Material Adverse Effect” means (a) a material adverse change in, or a material
adverse effect upon, the operations, business, properties, condition (financial
or otherwise) or prospects of either a Loan Party or a Loan Party and its
Subsidiaries taken as a whole; (b) a material impairment of the ability of any
Loan Party to perform its obligations under any Loan Document to which it is a
party; (c) a material adverse effect upon the legality, validity, binding effect
or enforceability against any Loan Party of any Loan Document to which it is a
party or (d) any Loan Party at any time asserts that any

 

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Loan Document is not legal or valid, or is not binding upon or enforceable
against such Loan Party.

 

“Maturity Date” means July 23, 2006.

 

“Multiemployer Plan” means a “multiemployer plan,” within the meaning of Section
4001(a)(3) of ERISA, to which a Co-Borrower or any ERISA Affiliate makes, is
making, or is obligated to make contributions or, during the preceding three (3)
calendar years, has made, or been obligated to make, contributions.

 

“Natexis” means Natexis Banques Populaires, a bank organized under the laws of
France.

 

“Net Working Capital” means net working capital as calculated on an Economic
Basis, less cash securing Letters of Credit issued under the Collateralized L/C
Line, less cash held in the Wells Fargo Collateral Account to secure Avista’s
obligations under the Wells Fargo FX Documents, less amounts due from Affiliates
(including any loans to Avista Capital), less California Receivables plus
Eligible Subordinated Debt that is classified as a current liability.

 

“Net Worth” means net worth as calculated on an Economic Basis, less amounts due
from employees and Affiliates (provided however that any loans to Avista Capital
or Avista Corporation debt securities purchased by the Co-Borrowers shall not be
deducted), less the amount of California Receivables and less intangible assets
of the Co-Borrowers, plus Eligible Subordinated Debt.

 

“Notes” means the promissory notes executed by the Co-Borrowers in favor of a
Bank pursuant to Subsection 2.02(b), in form approved by the Banks. Notes will
be issued by the Co-Borrowers to each entity that becomes a Bank hereunder from
time to time, but will not be issued to Participants of a Bank.

 

“Notice of Borrowing” means the applicable notice in substantially the form of
Exhibit A.

 

“Notice of Conversion/Continuation” means a notice in substantially the form of
Exhibit B.

 

“Obligations” means all advances, debts, liabilities, obligations, covenants and
duties arising under any Loan Document owing by a Co-Borrower to any Bank, or
any affiliate of any Bank, the Administrative Agent, or any Indemnified Person,
including without limitation, Revolving Loans, Daylight Overdrafts, Overdraft
Advances, L/C Obligations and obligations arising under Swap Contracts
(including foreign exchange contracts), and whether direct or indirect
(including those acquired by assignment), absolute or contingent, due or to
become due, now existing or hereafter arising.

 

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“Operating Accounts” means (i) account maintained by Avista with Wells Fargo,
(ii) account maintained by Avista with Wells Fargo, (iii) multicurrency account
maintained by Avista with Wells Fargo, and (iv) multicurrency account maintained
by Avista Canada with Wells Fargo, into which funds may be transferred pursuant
to Section 7.15.

 

“Organization Documents” means (a) for any corporation, the certificate or
articles of incorporation, the bylaws, any certificate of determination or
instrument relating to the rights of preferred shareholders of such corporation,
any shareholder rights agreement, and all applicable resolutions of the board of
directors (or any committee thereof) of such corporation, and (b) for any
partnership, the partnership agreement, and all other documents or filings as
may be required by the Secretary of State (or other applicable governmental
agency) in the state of such partnership’s formation.

 

“Other Taxes” means any present or future stamp or documentary taxes or any
other excise or property taxes, charges or similar levies which arise from any
payment made hereunder or from the execution, delivery or registration of, or
otherwise with respect to, this Agreement or any other Loan Documents.

 

“Out-of-the-Money Positions” means the Co-Borrowers’ net out-of-the-money
forward positions with counter parties whose Eligible Accounts, Eligible
Exchange Receivables and Unbilled Eligible Accounts are included in calculations
of the Borrowing Base Cap.

 

“Overdraft Advance” means any advance made hereunder by the Banks to BNP Paribas
pursuant to Subsection 2.01(c) hereof under the Overdraft Advance Sub-limit.

 

“Overdraft Advance Sub-limit” means that certain Overdraft Advance Sub-limit
under the Borrowing Base Line set forth in Schedule 2.01.

 

“Override Agreement” means that Override and Control Agreement dated as of July
25, 2003, by and among Avista, Avista Capital, BNP Paribas as Collateral Agent
and Wells Fargo.

 

“Paribas Investment Accounts” means (i) Account                 , Account
                , Account                  and Account                 ,
together with any subaccounts relating thereto, maintained by Avista with BNP
Paribas, and any additional account established by either of the Co-Borrowers
with BNP Paribas, or (ii) any account established by either of the Co-Borrowers
with BNP Paribas in substitution for or in addition to such accounts listed in
(i), into which funds may be transferred from a Bank Blocked Account pursuant to
Sections 7.15 and 11.12 below.

 

“Participant” has the meaning specified in Subsection 11.08(d).

 

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“PBGC” means the Pension Benefit Guaranty Corporation, or any Governmental
Authority succeeding to any of its principal functions under ERISA.

 

“Performance L/C” means any and all standby Letters of Credit other than Trade
Related L/Cs and Swap L/Cs.

 

“Permitted Liens” has the meaning specified in Section 8.01.

 

“Person” means an individual, partnership, corporation, business trust, joint
stock company, trust, unincorporated association, joint venture or Governmental
Authority.

 

“Plan” means a pension plan (as defined in Section 3(2) of ERISA) subject to
Title IV of ERISA which a Co-Borrower sponsors, maintains, or to which it makes,
is making, or is obligated to make contributions, or in the case of a multiple
employer plan (as described in Section 4064(a) of ERISA) has made contributions
at any time during the immediately preceding five (5) plan years.

 

“Posted Collateral” means all posted collateral or cash margin received from
counterparties.

 

“Product” means natural gas and electricity.

 

“Pro Rata Share” means, as to any Bank at any time, the percentage equivalent
(expressed as a decimal, rounded to the ninth decimal place) at such time of
such Bank’s Line Portion of the Borrowing Base Line and the Collateralized L/C
Line, as the case may be, divided by the aggregate amount of such lines.

 

“RBC” means Royal Bank of Canada.

 

“Reducing Letters of Credit” means any standby letters of credit that (a) are
Issued by an Issuing Bank pursuant to Article III, and (b) specifically provide
that the amount available for drawing under such letters of credit will be
reduced, automatically and without any further amendment or endorsement to such
letters of credit, by the amount of any payment or payments made to the
beneficiary of such letter of credit by the Co-Borrowers if such payment or
payments (i) are made through such Issuing Bank and (ii) reference such letters
of credit by the letter of credit numbers thereof, notwithstanding the fact that
such payment or payments are not made pursuant to conforming and proper draws
under such letters of credit.

 

“Reducing L/C Borrowing” means any extension of credit by the Banks to the
Co-Borrowers for the purpose of funding any payment or payments made to the
beneficiary of a Reducing Letter of Credit by the Co-Borrowers if such payment
or payments (a) are made through the Issuing Bank of such Reducing Letter of
Credit, (b) reference the Reducing Letter of Credit by the letter of credit
number thereof, and (c) are

 

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not made pursuant to a conforming and proper draw under such Reducing Letter of
Credit.

 

“Replacement Bank” has the meaning specified in Section 4.08.

 

“Reportable Event” means, any of the events set forth in Section 4043(b) of
ERISA or the regulations thereunder, other than any such event for which the
30-day notice requirement under ERISA has been waived in regulations issued by
the PBGC.

 

“Required Banks” means Banks holding two thirds of all the Line Portions.

 

“Requirement of Law” means, as to any Person, any law (statutory or common),
treaty, rule or regulation or determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon the Person or
any of its property or to which the Person or any of its property is subject.

 

“Responsible Officer” means, for either Co-Borrower, any one of the Chairman of
the Board, President, any Vice President or the Controller of such Co-Borrower.

 

“Revolving Loan” has the meaning specified in Section 2.01.

 

“Security Agreements” means security agreements, in form and substance
acceptable to Administrative Agent and the Banks, duly executed by each of the
Co-Borrowers and delivered to Administrative Agent granting to the Collateral
Agent for the benefit of the Banks, a first and prior security interest in and
Lien upon the Collateral.

 

“Subordinated Debt” means Indebtedness of the Co-Borrowers which has been
reported to the Banks and which has been subordinated to the Obligations in form
and content acceptable to the Banks in their sole discretion.

 

“Subsidiary” of a Person means any corporation, association, partnership, joint
venture or other business entity of which more than 50% of the voting stock or
other equity interests (in the case of Persons other than corporations), is
owned or controlled directly or indirectly by the Person, or one or more of the
Subsidiaries of the Person, or a combination thereof. Unless the context
otherwise clearly requires, references herein to a “Subsidiary” refer to a
Subsidiary of the Co-Borrowers.

 

“Surety Instruments” means all letters of credit (including standby and
commercial), banker’s acceptances, bank guaranties, shipside bonds, surety bonds
and similar instruments.

 

“Swap Banks” means BNP Paribas and its Affiliates in their capacity as a party
to a Swap Contract.

 

“Swap Contract” means any agreement entered into with any Swap Bank or any
Affiliate of any Swap Bank, whether or not in writing, relating to any single
transaction

 

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that is a rate swap, basis swap, forward rate transaction, commodity swap,
commodity option, equity or equity index swap or option, bond, note or bill
option, interest rate option, forward foreign exchange transaction, cap, collar
or floor transaction, currency swap, cross-currency rate swap, currency option
or any other similar transaction (including any option to enter into any of the
foregoing) or any combination of the foregoing and, unless the context clearly
requires, any master agreement relating to or governing any or all of the
foregoing.

 

“Swap L/Cs” means standby Letters of Credit Issued to support payments owed to
counterparties under Swap Contracts with a tenor of 364 days or less, or 2 years
or less if issued under the Collateralized L/C Line.

 

“Taxes” means any and all present or future taxes, levies, assessments, imposts,
duties, deductions, fees, withholdings, or similar charges, and all liabilities
with respect thereto, excluding, in the case of each Bank and the Administrative
Agent, taxes imposed on or measured by each Bank’s net income or capital (with
respect to franchise taxes or similar taxes) by the jurisdiction (or any
political subdivision thereof) under the laws of which such Bank or the
Administrative Agent, as the case may be, is organized or maintains a lending
office.

 

“Trade Related L/C” means any and all standby and Documentary Letters of Credit
Issued in support of the purchase of Product by the Co-Borrowers.

 

“Type” means either a Base Rate Loan or a Eurodollar Rate Loan.

 

“Unbilled Eligible Accounts” means Accounts of the Co-Borrowers for Product
which has been delivered to an Account Debtor and which would be Eligible
Accounts but for the fact that such Accounts have not actually been invoiced at
such time, based upon the value of the underlying sales contract.

 

“Undelivered Product Value” means the lesser of the (a) cost or (b) current
market value of Product (as referenced by a published source acceptable to all
the Banks in their sole discretion) purchased by a Co-Borrower under the Letters
of Credit which has not been physically delivered to such Co-Borrower.
Undelivered Product Value cannot simultaneously be included in an Eligible
Exchange Receivable, and in no event shall the value of any Letter of Credit
Issued in favor of a pipeline company for transportation services or a Letter of
Credit Issued to support payments owed to counterparties under swap contracts be
included in this definition.

 

“United States” and “U.S.” each means the United States of America.

 

“Value at Risk of Open Positions” the Dollar value of Co-Borrowers’ 3-day risk
of loss from open positions in Product, as determined by Co-Borrowers’
utilization of the Co-Borrowers’ proprietary software program or any other
appropriate software program, with the prior written approval of the Banks.

 

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“Value at Risk Report” means a certificate of the Co-Borrowers in form attached
hereto as Exhibit F together with attached reports which detail the
Co-Borrowers’ open positions in Product and the Value at Risk of such Open
Positions, such reports to be acceptable to the Banks as to form and substance.

 

“Wells Fargo” means Wells Fargo Bank National Association.

 

“Wells Fargo Accounts” means the Bank Block Accounts, the Operating Accounts,
and the Wells Fargo Investment Accounts, all of which are maintained at Wells
Fargo pursuant to the Wells Fargo Account Documentation.

 

“Wells Fargo Account Documentation” means the Override Agreement, the Restricted
Account and Securities Account Control Agreement, the Investment Management
Agreements and related Custody Agreements (in the form of any Addendum thereto),
the Four Party Lockbox and Restricted Account Agreement, the Restricted Account
Agreement executed by Avista, the Restricted Account Agreement executed by
Avista Canada, the Royal Bank of Canada Receivable Payment Service – Automated
Lockbox Client Questionnaire and Canadian Lockbox Service Description, the
Master Agreement for Treasury Management Services and any addendum or notice
thereto, the Wire Transfer Services Security Procedure Agreement and any
addendum thereto and Wire Transfer Service Description, the Commercial Checking
Account Authorization and Agreement (Signature Card), the W-9 and Overland Sweep
Service Description, the Commercial Electronic Office Online Access Agreement
and WellsNet Service Description, the Royal Bank of Canada Checking Account
Signature Cards and Canadian Dollar Checking Account Service Description, the
Canadian Checking Account Royal Bank of Canada New Account Opening
Questionnaire, the Wells Fargo Bank, N.A. Multi-Currency Account Authorization
and Agreement (Signature Card) and Multi-Currency Account Service Description,
the Foreign Exchange Online Agreement, corporate resolutions, and any other or
additional documents, agreements or instruments related thereto which shall be
reasonably acceptable to the Administrative Agent.”

 

“Wells Fargo Collateral Account” means Account maintained by Avista at Wells
Fargo to secure its obligations under Wells Fargo FX Documents.

 

“Wells Fargo FX Documents” means (i) the Foreign Exchange Agreement with Avista
dated October 31, 2002, (ii) the Security Agreement: Rights to Payment with
Avista dated October 31, 2002, and (iii) the Account Control Agreement with
Avista and BNP Paribas dated October 31, 2002.

 

“Wells Fargo Investment Accounts” means (i) that certain Overland Mutual Fund
securities Account maintained with Wells Fargo, and (ii) Account maintained with
Wells Fargo.

 

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1.02 Other Interpretive Provisions.

 

(a) The meanings of defined terms are equally applicable to the singular and
plural forms of the defined terms.

 

(b) The words “hereof,” “herein,” “hereunder” and similar words refer to this
Agreement as a whole and not to any particular provision of this Agreement; and
Subsection, Section, Schedule and Exhibit references are to this Agreement
unless otherwise specified.

 

(c) (i) The term “documents” includes any and all instruments, documents,
agreements, certificates, indentures, notices and other writings, however
evidenced.

 

(ii) The term “including” is not limiting and means “including without
limitation.”

 

(iii) In the computation of periods of time from a specified date to a later
specified date, the word “from” means “from and including,” the words “to” and
“until” each mean “to but excluding,” and the word “through” means “to and
including.”

 

(d) Unless otherwise expressly provided herein, (i) references to agreements
(including this Agreement) and other contractual instruments shall be deemed to
include all subsequent amendments and other modifications thereto, but only to
the extent such amendments and other modifications are not prohibited by the
terms of any Loan Document, and (ii) references to any statute or regulation are
to be construed as including all statutory and regulatory provisions
consolidating, amending, replacing, supplementing or interpreting the statute or
regulation.

 

(e) The captions and headings of this Agreement are for convenience of reference
only and shall not affect the interpretation of this Agreement.

 

(f) This Agreement and other Loan Documents may use several different
limitations, tests or measurements to regulate the same or similar matters. All
such limitations, tests and measurements are cumulative and shall each be
performed in accordance with their terms.

 

(g) This Agreement and the other Loan Documents are the result of negotiations
among and have been reviewed by counsel to the Administrative Agent, the Banks,
the Co-Borrowers and the other parties, and are the products of all parties.
Accordingly, they shall not be construed against the Banks or the Administrative
Agent merely because of the Administrative Agent’s or Banks’ involvement in
their preparation.

 

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1.03 Accounting Principles.

 

(a) Unless the context otherwise clearly requires, all accounting terms not
expressly defined herein shall be construed, and all financial computations
required under this Agreement shall be made in accordance with GAAP,
consistently applied.

 

(b) References herein to “fiscal year” refer to such fiscal years of the
Co-Borrowers.

 

ARTICLE II

 

THE CREDITS

 

2.01 Amounts and Terms of Borrowing Base Line.

 

(a) Revolving Loans. Each Bank severally agrees, on the terms and conditions set
forth herein, to make Loans, from time to time, to the Co-Borrowers under the
Borrowing Base Line (each such loan, a “Revolving Loan”) on any Business Day
during the period from the Closing Date to the Expiration Date, in an aggregate
amount not to exceed at any time outstanding the lesser of (i) such Bank’s Line
Portion; or (ii) such Bank’s Co-Borrower Sub-limit Portion for any Co-Borrower;
provided, however, that, after giving effect to any Borrowing of Revolving
Loans, the Effective Amount of all outstanding Revolving Loans, plus the
Effective Amount of all L/C Obligations under the Borrowing Base Line, shall not
exceed the Borrowing Base Cap, and at no time shall any Revolving Loan exceed
the applicable Co-Borrowers’ Sub-limit under the Borrowing Base Line. A
Revolving Loan may take the form of (i) a Dollar Advance, (ii) an Overdraft
Advance, or (iii) in the case of BNP Paribas, a Daylight Overdraft.

 

(b) Daylight Overdrafts. BNP Paribas has agreed to consider, on a discretionary
basis, making Daylight Overdrafts, from time-to-time, for the benefit of the
Co-Borrowers; provided, however, that, the sum of the requested Daylight
Overdrafts, plus the Effective Amount of all other outstanding Revolving Loans,
plus the Effective Amount of all L/C Obligations then existing under the
Borrowing Base Line shall not exceed the Borrowing Base Cap.

 

(c) Overdraft Advances and Swap Contracts.

 

(i) In the event that either (1) any amounts owing to BNP Paribas for Daylight
Overdrafts or to a Swap Bank or any of its Affiliates under any Swap Contract
are not paid within two (2) Business Days after such obligation arises; or (2)
BNP Paribas has made a Daylight Overdraft in the amount of a drawing under a
Letter of Credit which has not been timely reimbursed by the Co-Borrowers in
accordance with Subsection 3.03(b) of this Agreement and such amount has not
been paid by the Co-Borrowers within one (1) Business Day after such obligation
arises, then BNP Paribas or a Swap Bank (as the case may be) shall notify the
Administrative Agent of such failure to pay and except as set forth below the
Administrative Agent (without the necessity of any

 

29

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instructions or request from the Co-Borrowers) shall make an Overdraft Advance
in accordance with the provisions of Section 2.03 of this Agreement under the
Borrowing Base Line for any amounts due by the Co-Borrowers to BNP Paribas to
reimburse it for such Daylight Overdrafts or a Dollar Advance to such Swap Bank
or any of its Affiliates under any Swap Contract, and then apply the proceeds of
such advance to pay to BNP Paribas all amounts owed to BNP Paribas for Daylight
Overdrafts or to a Swap Bank or any of its Affiliates under such Swap Contract.

 

(ii) Upon making any such Overdraft Advance, the Administrative Agent shall send
notice of such Overdraft Advance to the Co-Borrowers and the Banks (who shall
promptly disburse to Administrative Agent each Bank’s Pro Rata Share of such
Overdraft Advance), and such Overdraft Advance shall constitute a Revolving Loan
which shall initially be a Base Rate Loan.

 

(iii) Except for advances made to reimburse BNP Paribas for Daylight Overdrafts
made to fund drawings under Letters of Credit or to fund Reducing L/C
Borrowings, the principal of any advance made (1) to repay BNP Paribas for
Daylight Overdrafts or (2) to pay to any Swap Bank or its Affiliates any
obligation due under a Swap Contract shall not cause the sum of the Effective
Amounts of all other outstanding Revolving Loans, plus L/C Obligations under the
Borrowing Base Line to exceed the Borrowing Base Cap.

 

(iv) The Co-Borrowers, however, shall pay the amount of any such excess above
the proceeds of the Revolving Loan to BNP Paribas or the Swap Bank, as the case
may be, together with interest thereon, within one (1) Business Day after the
date such Revolving Loan is made. Unless the Co-Borrowers timely pay such excess
amount to BNP Paribas or such Swap Bank, as the case may be, the Pro Rata Share
of such Bank shall be adjusted to account for such excess amount as is set forth
in the definition of Adjusted Pro Rata Share. If, however, a Revolving Loan is
made to reimburse BNP Paribas for Daylight Overdrafts made to fund drawings
under Letters of Credit or to fund Reducing L/C Borrowings, the principal amount
of such Revolving Loan may exceed the availability under the Borrowing Base Cap,
and all Banks shall have the duty to fund their Pro Rata Share of such Revolving
Loan, including the excess above the availability under the Borrowing Base Cap.
In the event such Revolving Loan does cause the sum of the Effective Amounts of
all outstanding Revolving Loans, plus L/C Obligations under the Borrowing Base
Line to exceed the Borrowing Base Cap, the Co-Borrowers shall pay to
Administrative Agent, for the benefit of the Banks, the amount of such excess,
together with interest thereon, within one (1) Business Day after the date when
such Revolving Loan is made.

 

(v) In all instances, Co-Borrowers agree not to use a Daylight Overdraft to pay
a prior Daylight Overdraft, but BNP Paribas shall have no duty to the Banks to
monitor such activity.

 

(d) Overall Limitation. Outstanding Daylight Overdrafts (which have not been
paid by the Co-Borrowers or through Overdraft Advances), plus the Effective
Amount of

 

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all other outstanding Revolving Loans, plus the Effective Amount of all L/C
Obligations under the Borrowing Base Line shall not at any time exceed the
Borrowing Base Cap.

 

(e) Termination. Notwithstanding the foregoing, BNP Paribas in its sole
discretion at any time may, and upon two (2) Business Days advance notice
received from the Required Banks shall, terminate its obligation to consider
making Daylight Overdrafts. The delivery of a notice to terminate the making of
Daylight Overdrafts may be given by the Required Banks at any time in their sole
discretion, and the Required Banks shall copy the Co-Borrowers on the notice
given to BNP Paribas.

 

2.02 Loan Accounts.

 

(a) The Loans made by each Bank and the Letters of Credit Issued by an Issuing
Bank shall be evidenced by one or more accounts or records maintained by
Administrative Agent in the ordinary course of business. As of the date hereof,
the Existing Advances shall be deemed to be Loans made hereunder and shall be
entitled to all benefits of the Loan Documents and secured by the Security
Agreement. On the date hereof, the Company shall pay all accrued interest on the
Existing Advances. The accounts or records maintained by the Administrative
Agent shall be conclusive absent manifest error of the amount of the Loans made
by the Banks to the Co-Borrowers and the Letters of Credit Issued for the
account of the Co-Borrowers hereunder, and the interest and payments thereon.
Any failure so to record or any error in doing so shall not, however, limit or
otherwise affect the Obligation of the Co-Borrowers hereunder to pay any amount
owing with respect to the Loans or any Letter of Credit.

 

(b) Upon the request of any Bank made through the Administrative Agent, the
Loans made by such Bank may be evidenced by one or more Notes, instead of loan
accounts. Each such Bank may endorse on the schedules annexed to its Note(s) the
date, amount and maturity of each Loan made by it and the amount of each payment
of principal made by the Co-Borrowers with respect thereto. Each such Bank is
irrevocably authorized by the Co-Borrowers to endorse its Note(s) and each
Bank’s record shall be conclusive absent manifest error; provided, however, that
the failure of a Bank to make, or an error in making, a notation thereon with
respect to any Loan shall not limit or otherwise affect the Obligations of the
Co-Borrowers hereunder or under any such Note to such Bank.

 

2.03 Procedure for Borrowing.

 

(a) Each Borrowing of Revolving Loans consisting only of Base Rate Loans shall
be made upon a Co-Borrower’s irrevocable written notice delivered to the
Administrative Agent in the form of a Notice of Borrowing (Revolving Loan),
which notice must be received by the Administrative Agent prior to 1:00 p.m.
(New York City time) on the Borrowing Date specifying the amount of the
Borrowing and the duration of the Interest Period. Each such Notice of Borrowing
shall be by electronic transfer or facsimile, confirmed immediately in an
original writing. Each Borrowing of Revolving Loans that includes any Eurodollar
Rate Loans shall be made upon a Co-Borrower’s irrevocable written notice
delivered to the Administrative Agent in the form of a Notice of Borrowing
(which notice must be received by the Administrative Agent prior to 1:00 p.m.
(New York City time) three (3) Business Days prior to the requested

 

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Borrowing Date), specifying the amount of the Borrowing and the duration of the
Interest Period. Each such Notice of Borrowing shall be by electronic transfer
or facsimile, confirmed immediately in an original writing. Each requested
Eurodollar Rate Loan must have an Eurodollar Effective Amount of at least
$15,000,000.00.

 

(b) The Administrative Agent will promptly notify each Bank of its receipt of
any Notice of Borrowing and of the amount of such Bank’s Pro Rata Share of that
Borrowing and the duration of the Interest Period.

 

(c) If the Administrative Agent elects in its sole discretion to advance a Loan
pursuant to a Notice of Borrowing, each Bank will be deemed to have approved
such Borrowing and will make the amount of its Pro Rata Share of such Borrowing
available to the Administrative Agent for the account of the Co-Borrowers at the
Administrative Agent’s Payment Office by 3:00 p.m. (New York City time) on the
Borrowing Date requested by the Co-Borrowers in funds immediately available to
the Administrative Agent. The proceeds of all such Loans will then be made
available to the Co-Borrowers by the Administrative Agent at such office by
crediting the account of the Co-Borrowers on the books of Administrative Agent
with the aggregate of the amounts made available to the Administrative Agent by
the Banks and in like funds as received by the Administrative Agent.

 

(d) A Daylight Overdraft may be made by BNP Paribas in its sole discretion upon
written request from a Co-Borrower unless BNP Paribas has received a notice from
the Required Banks pursuant to Subsection 2.01(d) to terminate making Daylight
Overdrafts.

 

2.04 Conversion and Continuation Elections.

 

(a) A Co-Borrower may, upon irrevocable written notice to the Administrative
Agent in accordance with Subsection 2.04(b):

 

(i) elect, as of any Business Day, in the case of Base Rate Loans, or as of the
last day of the applicable Interest Period, in the case of any Eurodollar Rate
Loan, to convert any such Loans into Loans of any other Type (provided, however,
the Eurodollar Effective Amount of each Eurodollar Rate Loan must be at least
$15,000,000.00); or

 

(ii) elect as of the last day of the applicable Interest Period, to continue any
Revolving Loans having Interest Periods expiring on such day (provided, however,
the Eurodollar Effective Amount of each Eurodollar Rate Loan must be at least
$15,000,000.00);

 

provided, that if at any time the aggregate amount of Eurodollar Rate Loans in
respect of any Borrowing is reduced, by payment, prepayment, or conversion of
part thereof, to have an Eurodollar Effective Amount of less than
$15,000,000.00, such Eurodollar Rate Loans shall automatically convert into Base
Rate Loans, and on and after such date the right of such Co-Borrower to continue
such Loans as, and convert such Loans into, Eurodollar Rate Loans shall
terminate.

 

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(b) A Co-Borrower shall deliver a Notice of Conversion/Continuation to be
received by the Administrative Agent not later than 1:00 p.m. (New York City
time) on the Conversion/Continuation Date if the Loans are to be converted into
Base Rate Loans; and three (3) Business Days in advance of the
Conversion/Continuation Date, if the Loans are to be converted into or continued
as Eurodollar Rate Loans, specifying:

 

(i) the proposed Conversion/Continuation Date;

 

(ii) the aggregate amount of Loans to be converted or continued;

 

(iii) the Type of Loans resulting from the proposed conversion or continuation;
and

 

(iv) other than in the case of conversions into Base Rate Loans, the duration of
the requested Interest Period.

 

(c) If upon the expiration of any Interest Period applicable to Eurodollar Rate
Loans, a Co-Borrower has failed to timely select a new Interest Period to be
applicable to its Eurodollar Rate Loans, or if any Default or Event of Default
then exists, such Co-Borrower shall be deemed to have elected to convert such
Eurodollar Rate Loans into Base Rate Loans effective as of the expiration date
of such Interest Period.

 

(d) The Administrative Agent will promptly notify each Bank of its receipt and
the contents of a Notice of Conversion/Continuation, or, if no timely notice is
provided by a Co-Borrower, the Administrative Agent will promptly notify each
Bank of the details of any automatic conversion. All conversions and
continuations shall be made ratably according to the respective outstanding
principal amounts of the Loans, with respect to which the notice was given, held
by each Bank.

 

(e) Unless the Banks otherwise agree, during the existence of a Default or Event
of Default, the Co-Borrowers may not elect to have a Loan converted into or
continued as an Eurodollar Rate Loan.

 

(f) After giving effect to any Borrowing, conversion or continuation of Loans,
there may not be more than seven (7) Interest Periods in effect.

 

(g) The Administrative Agent will promptly notify, in writing, each Bank of the
amount of such Bank’s Pro Rata Share of that Borrowing.

 

2.05 Optional Prepayments. The Co-Borrowers may, at any time or from time to
time, upon the Co-Borrowers’ irrevocable written notice to Administrative Agent
received prior to 1:00 p.m. (New York City time) on the date of prepayment,
prepay Loans and L/C Obligations in whole or in part. The Administrative Agent
will promptly notify each Bank of its receipt of any such prepayment, and of
such Bank’s Pro Rata Share of such prepayment.

 

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2.06 Mandatory Prepayments of Loans; Mandatory Commitment Reductions.

 

(a) If on any date the Effective Amount of L/C Obligations under the Borrowing
Base Line exceeds the L/C Cap or any L/C Sub-limit, the Co-Borrowers shall Cash
Collateralize on such date the outstanding Letters of Credit in an amount equal
to the excess above any such cap or limit, and on the Expiration Date
Co-Borrowers shall Cash Collateralize all then outstanding Letters of Credit
under the Borrowing Base Line in an amount equal to the Effective Amount of all
L/C Obligations related to such Letters of Credit. If on any date after giving
effect to any Cash Collateralization made on such date pursuant to the preceding
sentence, the Effective Amount of all Revolving Loans then outstanding plus the
Effective Amount of all L/C Obligations under the Borrowing Base Line exceeds
the Borrowing Base Cap, the Co-Borrowers shall immediately, and without notice
or demand, prepay the outstanding principal amount of the Revolving Loans and
L/C Advances by an amount equal to the applicable excess.

 

(b) If pursuant to the definition of “Elected Line Cap,” such Elected Line Cap
is reduced to a level (including zero) which is less than the amounts
outstanding under the Borrowing Base Line, then the Co-Borrowers shall
immediately, and without notice or demand, prepay the amount of such excess and
Cash Collateralize any outstanding Letters of Credit under the Borrowing Base
Line.

 

2.07 Repayment. The Co-Borrowers shall repay the principal amount of each
Revolving Loan to the Administrative Agent on behalf of the Banks, on the
Advance Maturity Date for such Loan. The Co-Borrowers shall repay to BNP Paribas
the amount of each Daylight Overdraft on the next Business Day after such
Daylight Overdraft is made. Notwithstanding anything to the contrary contained
herein, except as may be provided in Section 2.13, and Section 2.14, the Banks
shall not share in any repayment made with respect to the Daylight Overdrafts
unless an Overdraft Advance has been made with respect to such Daylight
Overdraft in which case the Banks will share in such repayment by the
Co-Borrowers according to their Pro Rata Shares.

 

2.08 Interest.

 

(a) Each Revolving Loan (except for a Revolving Loan made to pay a drawing under
a Letter of Credit or a Reducing L/C Borrowing) shall bear interest on the
outstanding principal amount thereof from the applicable Borrowing Date at a
floating rate per annum equal to the Base Rate plus the Applicable Margin at all
times such Loan is a Base Rate Loan or at the Eurodollar Rate plus the
Applicable Margin at all times such Loan is an Eurodollar Rate Loan. Each
Revolving Loan made as a result of a drawing under a Letter of Credit or a
Reducing L/C Borrowing, and all amounts owing to the Banks on account of an
Overdraft Advance and all amounts owing to a Swap Bank or any Affiliate of a
Swap Bank with respect to any Swap Contract, shall bear interest on the
outstanding principal amount thereof from the date funded at a floating rate per
annum equal to the Base Rate plus the Applicable Margin until such Loan has been
outstanding for more than two (2) Business Days and, thereafter, shall bear
interest on the outstanding principal amount thereof at a floating rate per
annum equal to the Base Rate or the Eurodollar Rate, as the case may be with
respect to such

 

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Loan, plus the Applicable Margin, plus three percent (3.0%) per annum (the
“Default Rate”). Each Daylight Overdraft shall, until such time as it has been
reimbursed by the Co-Borrowers or funded through an Overdraft Advance, bear
interest at a rate to be agreed upon by the Co-Borrowers and Paribas.

 

(b) Interest on each Revolving Loan shall be paid in arrears on each Interest
Payment Date. Interest on each Overdraft Advance shall be paid on the earlier to
occur of the date of repayment of such Advance or the date such Advance is due
and payable. All amounts owing the Banks on account of an Overdraft Advance and
all amounts owing to a Swap Bank or any Affiliate of a Swap Bank with respect to
any Swap Contract, to the extent such amounts have not been repaid from the
proceeds of a Revolving Loan on the first (1st) Business Day after the
Co-Borrowers receive notice that such amount was advanced by or becomes owing to
the Banks or such Swap Bank or any of their Affiliates.

 

(c) Notwithstanding subsection (a) of this Section, if any amount of principal
of or interest on any Loan, or any other amount payable hereunder or under any
other Loan Document is not paid in full when due (whether at stated maturity, by
acceleration, or otherwise), the Co-Borrowers agree to pay interest on such
unpaid principal or other amount, from the date such amount becomes due until
the date such amount is paid in full, and after as well as before any entry of
judgment thereon to the extent permitted by law, payable on demand, at a
fluctuating rate per annum equal to the Default Rate.

 

(d) Anything herein to the contrary notwithstanding, the Obligations of the
Co-Borrowers to any Bank hereunder shall be subject to the limitation that
payments of interest shall not be required for any period for which interest is
computed hereunder, to the extent (but only to the extent) that contracting for
or receiving such payment by such Bank would be contrary to the provisions of
any law applicable to such Bank limiting the highest rate of interest that may
be lawfully contracted for, charged or received by such Bank, and in such event
the Co-Borrowers shall pay such Bank interest at the highest rate permitted by
applicable law.

 

(e) Regardless of any provision contained in any Note or in any of the Loan
Documents, none of the Banks shall ever be deemed to have contracted for or be
entitled to receive, collect or apply as interest under any such Note or any
Loan Document, or otherwise, any amount in excess of the maximum rate of
interest permitted to be charged by applicable law, and, in the event that any
of the Banks ever receive, collect or apply as interest any such excess, such
amount which would be excessive interest shall be applied to the reduction of
the unpaid principal balance of the Note, and, if the principal balance of such
Note and the Obligations are paid in full, any remaining excess shall forthwith
be paid to Co-Borrowers. In determining whether or not the interest paid or
payable under any specific contingency exceeds the highest lawful rate, the
Co-Borrowers and such Bank shall, to the maximum extent permitted under
applicable law, (i) characterize any non-principal payment as an expense, fee,
or premium, rather than as interest, (ii) exclude voluntary prepayments and the
effect thereof, and (iii) spread the total amount of interest throughout the
entire contemplated term of such Note and the Obligations so that the interest
rate is uniform throughout such term; provided, that if all Obligations under
the Note and all Loan Documents are performed in full prior to the end of the
full contemplated term thereof, and if the interest received for the actual term
thereof exceeds the

 

35

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maximum lawful rate, such Bank shall refund to Co-Borrowers the amount of such
excess, or credit the amount of such excess against the aggregate unpaid
principal balance of such Bank’s Note or Obligations at the time in question.

 

2.09 Fees.

 

(a) Agent and Facility Fees. In addition to certain fees described in Section
3.08, the Co-Borrowers shall pay an Agent’s fee to BNP Paribas and Fortis in
accordance with separate letter agreements between BNP Paribas, Fortis and the
Co-Borrowers.

 

(b) Commitment Fee. In consideration of each Bank’s commitment to make Loans and
to issue Letters of Credit, the Co-Borrowers will pay to the Administrative
Agent for the account of each Bank a commitment fee determined on a daily basis
following the Closing Date by applying a rate equal to three-eighths of one
percent (0.375%) per annum to such Bank’s Pro Rata Share of the unused portion
of the Facility Amount on each day, determined for each such day by deducting
from the Facility Amount at the end of such day the outstanding amounts under
the Credit Lines. This commitment fee shall be due and payable in arrears on the
last day of each Fiscal Quarter (beginning September 1, 2003) and at the
Expiration Date.

 

2.10 Computation of Fees and Interest.

 

(a) All computations of fees and interest shall be made on the basis of a
360-day year and actual days elapsed (which results in more interest being paid
than if computed on the basis of a 365-day year). Interest and fees shall accrue
during each period during which interest or such fees are computed from the
first day thereof through the last day thereof.

 

(b) Each determination of an interest rate by the Administrative Agent shall be
conclusive and binding on the Co-Borrowers and the Banks in the absence of
manifest error.

 

2.11 Payments by the Co-Borrowers.

 

(a) All payments to be made by the Co-Borrowers shall be made without set-off,
recoupment or counterclaim. Except as otherwise expressly provided herein, all
payments by the Co-Borrowers shall be made to the Administrative Agent for the
account of the Banks at the Administrative Agent’s Payment Office, and shall be
made in dollars and in immediately available funds, no later than 3:00 p.m. (New
York City time) on the date specified herein. The Administrative Agent will
promptly (and in no event later than the next Business Day) distribute to each
Bank its Pro Rata Share of such payment in like funds as received. Any payment
received by the Administrative Agent later than 3:00 p.m. (New York City time)
shall be deemed to have been received on the following Business Day and any
applicable interest or fee shall continue to accrue. If and to the extent the
Co-Borrowers make any payment to the Administrative Agent no later than 3:00
p.m. (New York City time) on any Business Day and Administrative Agent does not
distribute to each Bank its Pro Rata Share of such payment in like funds as
received on the same Business Day, the Administrative Agent shall pay to each
Bank on demand interest on such amount as should have been distributed to such
Bank at the Federal Funds Rate for each day from the date such payment was
received by the Administrative Agent

 

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until the date such amount is received by such Bank and the Co-Borrowers shall
have no obligation to reimburse the Administrative Agent for any such interest
notwithstanding anything to the contrary contained herein.

 

(b) Subject to the provisions set forth in the definition of “Interest Period”
herein, whenever any payment is due on a day other than a Business Day, such
payment shall be made on the following Business Day, and such extension of time
shall in such case be included in the computation of interest or fees, as the
case may be.

 

(c) Unless the Administrative Agent receives notice from the Co-Borrowers prior
to the date on which any payment is due to the Banks that the Co-Borrowers will
not make such payment in full as and when required, the Administrative Agent may
assume that the Co-Borrowers have made such payment in full to the
Administrative Agent on such date in immediately available funds and the
Administrative Agent may (but shall not be so required), in reliance upon such
assumption, distribute to each Bank on such due date an amount equal to the
amount then due such Bank. If and to the extent the Co-Borrowers have not made
such payment in full to the Administrative Agent, each Bank shall repay to the
Administrative Agent on demand such amount distributed to such Bank, together
with interest thereon at the Federal Funds Rate for each day from the date such
amount is distributed to such Bank until the date repaid.

 

2.12 Payments by the Banks to the Administrative Agent. If and to the extent any
Bank shall not have made its full amount available to the Administrative Agent
in immediately available funds and the Administrative Agent in such
circumstances has made available to the Co-Borrowers such amount, that Bank
shall on the Business Day following such Borrowing Date make such amount
available to the Administrative Agent, together with interest at the Federal
Funds Rate for each day during such period. A notice of the Administrative Agent
submitted to any Bank with respect to amounts owing under this Section 2.12
shall be conclusive, absent manifest error. If such amount is so made available,
such payment to the Administrative Agent shall constitute such Bank’s Loan on
the date of Borrowing for all purposes of this Agreement. If such amount is not
made available to the Administrative Agent on the Business Day following the
Borrowing Date, the Administrative Agent will notify the Co-Borrowers of such
failure to fund and, upon demand by the Administrative Agent, the Co-Borrowers
shall (without prejudice to Co-Borrowers rights against such Bank) pay such
amount to the Administrative Agent for the Administrative Agent’s account,
together with interest thereon for each day elapsed since the date of such
Borrowing, at a rate per annum equal to the interest rate applicable at the time
to the Loans comprising such Borrowing.

 

2.13 Sharing of Payments, Etc. If, other than as expressly provided elsewhere
herein, any Bank or Affiliate which is a Swap Bank shall obtain on account of
the Loans made by it or obligations owed to it under a Swap Contract, any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) in excess of its Pro Rata Share or Adjusted Pro Rata
Share, as the case may be at such time (other than payments that are made to
Swap Banks and their Affiliates prior to the declaration of a Default by the
Required Banks and payments to the Banks with respect to Overdraft Advances,
which payments may be retained by the Banks such Swap Banks and their
Affiliates), such Bank shall immediately (a) notify the

 

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Administrative Agent of such fact, and (b) purchase from the other Banks such
participations in the Loans and obligations under Swap Contracts made by such
other Banks as shall be necessary to cause such purchasing Bank to share the
excess payment pro rata with each of them; provided, however, that if all or any
portion of such excess payment is thereafter recovered from the purchasing Bank,
such purchase shall to that extent be rescinded and each other Bank shall repay
to the purchasing Bank the purchase price paid therefore, together with an
amount equal to such paying Bank’s ratable share (according to the proportion of
(i) the amount of such paying Bank’s required repayment to (ii) the total amount
so recovered from the purchasing Bank) of any interest or other amount paid or
payable by the purchasing Bank in respect of the total amount so recovered. The
Co-Borrowers agree that any Bank so purchasing a participation from another Bank
may, to the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off, but subject to Section 11.09) with respect to
such participation as fully as if such Bank were the direct creditor of the
Co-Borrowers in the amount of such participation. The Administrative Agent will
keep records (which shall be conclusive and binding in the absence of manifest
error) of participations purchased under this Section and will in each case
notify the Banks following any such purchases or repayments.

 

2.14 Payments from Guarantors and Liquidation of Collateral. Notwithstanding
anything to the contrary contained herein, in the event that after a Default is
declared repayment is made to the Banks by the Guarantors or made pursuant to a
liquidation of Collateral, whether by setoff or otherwise, such repayment shall
be shared by the Banks on the basis of each Bank’s then existing Adjusted Pro
Rata Share rather than each Bank’s Pro Rata Share. If Required Banks declare a
Default or Event of Default, the Swap Banks upon vote of the Required Banks
immediately shall terminate all Swap Contracts, and no distribution shall be
made to the Banks before establishing the Adjusted Pro Rata Shares of all the
Banks taking into account the Obligations to the Swap Banks under the Swap
Contracts, including Obligations arising as a result of such termination. If the
Required Banks do not vote to cause the termination of the Swap Contracts, after
all such repayments are made to the Banks by the Guarantors or made pursuant to
such liquidation of Collateral, the total amount received by any Bank from all
such payments or repayments following such declaration of a Default exceeds such
Bank’s Aggregate Credit Exposure Percentage of all such payments or repayments,
then the Banks shall purchase participations in each other’s Obligations so that
after giving effect to such purchases of participations, each Bank shall have
received its Aggregate Credit Exposure Percentage of all such payments or
repayments.

 

ARTICLE III

 

THE LETTERS OF CREDIT

 

3.01 The Letters of Credit Lines

 

(a) On the terms and conditions set forth herein, the Issuing Banks, with the
consent of each Agent, agree, from time to time on any Business Day during the
period from the Closing Date to the Expiration Date, to Issue Letters of Credit
for the account of the Co-Borrowers under the Borrowing Base Line or the
Collateralized L/C Line, and to consider whether to amend or renew Letters of
Credit previously Issued by it, in accordance with

 

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Subsections 3.02(c) and 3.02(d). Each of the Banks will be deemed to have
approved such Issuance, amendment or renewal, and shall participate in Letters
of Credit Issued for the account of the Co-Borrowers. Subject to the terms and
conditions hereof, the Co-Borrowers’ ability to request that the Issuing Banks
Issue Letters of Credit shall be fully revolving, and, accordingly, the
Co-Borrowers may, during the foregoing period, request that the Issuing Banks
Issue Letters of Credit to replace Letters of Credit which have expired or which
have been drawn upon and reimbursed.

 

(b) An Issuing Bank is under no obligation to consider the Issuance of or to
Issue any Letter of Credit unless each Agent shall have consented to the
Issuance of such Letter of Credit. An Issuing Bank shall not Issue any Letter of
Credit unless consented to by each Agent, if:

 

(i) any order, judgment or decree of any Governmental Authority or arbitrator
shall by its terms purport to enjoin or restrain the Issuing Bank from Issuing
such Letter of Credit, or any Requirement of Law applicable to the Issuing Bank
or any request or directive (whether or not having the force of law) from any
Governmental Authority with jurisdiction over the Issuing Bank shall prohibit,
or request that the Issuing Bank refrain from, the issuance of letters of credit
generally or such Letter of Credit in particular or shall impose upon the
Issuing Bank with respect to such Letter of Credit any restriction, reserve or
capital requirement (for which the Issuing Bank is not otherwise compensated
hereunder) not in effect on the Closing Date, or shall impose upon the Issuing
Bank any unreimbursed loss, cost or expense which was not applicable on the
Closing Date and which the Issuing Bank in good faith deems material to it;

 

(ii) the Issuing Bank has received written notice from any Bank, the
Administrative Agent or the Co-Borrowers, on or prior to the Business Day prior
to the requested date of Issuance of such Letter of Credit, that one or more of
the applicable conditions contained in Article V is not then satisfied;

 

(iii) the expiry date of any requested Letter of Credit is after the earlier to
occur of (A) in the case of Letters of Credit Issued under the Borrowing Base
Line, 364 days after the date of Issuance of such Letter of Credit or in the
case of Letters of Credit Issued under the Collateralized L/C Line, two years
after the date of Issuance of the Letter of Credit, or (B) the Maturity Date,
unless all the Banks have approved such expiry date in writing, except that any
Letter of Credit with a term of 364 days may also contain a so-called evergreen
provision which provides for a 60-day notice of cancellation;

 

(iv) such requested Letter of Credit is not in form and substance acceptable to
the Issuing Bank, or the Issuance of a Letter of Credit shall violate any
applicable policies of the Issuing Bank;

 

(v) such Letter of Credit is for the purpose of supporting the Issuance of any
letter of credit by any other Person;

 

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(vi) such Letter of Credit is denominated in a currency other than Dollars or
Canadian dollars;

 

(vii) the Issuance of such requested Letter of Credit exceeds the applicable L/C
Sub-limit;

 

(viii) the Effective Amount of such requested Letter of Credit to be issued
under the Borrowing Base Line plus the Effective Amount of all of the L/C
Obligations (for Letters of Credit issued under the Borrowing Base Line), plus
the Effective Amount of all Revolving Loans, exceeds the Borrowing Base Cap; and

 

(ix) if the requested Letter of Credit is to be issued under the Collateralized
L/C Line: (a) the face amount of such Letter of Credit has not been Cash
Collateralized, (b) after taking into account the requested Letter of Credit,
the Collateralized L/C Line would be exceeded, or (c) after taking into account
the requested Letter of Credit, the aggregate outstanding amounts under the
Collateralized L/C Line and the Borrowing Base Line would exceed the Facility
Amount.

 

(c) For purposes of this Article III, in determining whether to consent to the
Issuance of a Letter of Credit, the Agents shall rely exclusively on the
criteria set forth in Subsection 3.01(b). That is, the Agents may only refuse to
consent to the Issuance of a Letter of Credit if, in their judgment, it falls
within one of the categories (i) through (x), set forth in Subsection 3.01(b).

 

3.02 Issuance, Amendment and Renewal of Letters of Credit.

 

(a) Each Letter of Credit which is Issued hereunder shall be Issued upon the
irrevocable written request of a Co-Borrower pursuant to a Notice of Borrowing
(Letter of Credit) in the applicable form attached hereto as Exhibit A received
by the Issuing Bank (with a copy sent by the Co-Borrowers to the Administrative
Agent) by no later than 1:00 p.m. (New York City time) on the proposed date of
Issuance. Each such request for Issuance of a Letter of Credit shall be by
electronic transfer or facsimile, confirmed immediately in an original writing
(delivered by facsimile without any requirement of confirmation by telephone) in
the applicable form attached hereto as Exhibit A, and shall specify in form and
detail satisfactory to the Issuing Bank: (i) the identity of the Issuing Bank
and the proposed date of Issuance of the Letter of Credit (which shall be a
Business Day); (ii) the face amount and currency of the Letter of Credit; (iii)
the expiry date of the Letter of Credit; (iv) the name and address of the
beneficiary thereof; (v) the documents to be presented by the beneficiary of the
Letter of Credit in case of any drawing thereunder; (vi) the full text of any
certificate to be presented by the beneficiary in case of any drawing
thereunder; (vii) whether the Letter of Credit is to be issued under the
Borrowing Base Line or the Collateralized L/C Line; and (viii) such other
matters as the Issuing Bank may require.

 

(b) From time to time while a Letter of Credit is outstanding and prior to the
Expiration Date, the Issuing Bank, but solely with the consent of each Agent
will, upon the

 

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written request of a Co-Borrower received by Issuing Bank (with a copy sent by
the Co-Borrowers to Administrative Agent) prior to 1:00 p.m. (New York City
time) on the proposed date of amendment, consider the amendment of any Letter of
Credit issued by it. Each such request for amendment of a Letter of Credit shall
be made by electronic transfer or facsimile, confirmed immediately in an
original writing or by electronic transfer, made in the form of an L/C Amendment
Application and shall specify in form and detail satisfactory to the Issuing
Bank: (i) the Letter of Credit to be amended; (ii) the proposed date of
amendment of the Letter of Credit (which shall be a Business Day); (iii) the
nature of the proposed amendment; and (iv) such other matters as the Issuing
Bank may require. The Administrative Agent will promptly notify the Banks of the
receipt by it of any L/C Application or L/C Amendment Application.

 

(c) The Issuing Banks and the Banks agree that, while a Letter of Credit is
outstanding and prior to the Expiration Date, at the option of the Co-Borrowers
and upon the written request of the Co-Borrowers received by the Issuing Bank
(with a copy sent to the Administrative Agent) at least one Business Day (or
such shorter time as the Banks and the Issuing Bank may agree in a particular
instance in their sole discretion) prior to the proposed date of notification of
renewal. Each such request for renewal of a Letter of Credit made by a
Co-Borrower shall be made by electronic transfer or facsimile, confirmed
immediately in an original writing or by electronic transfer, in the form of an
L/C Amendment Application, and shall specify in form and detail satisfactory to
the Issuing Bank: (i) the Letter of Credit to be renewed; (ii) the proposed date
of renewal of the Letter of Credit (which shall be a Business Day); (iii) the
revised expiry date of the Letter of Credit; and (iv) such other matters as the
Issuing Bank may require. If any outstanding Letter of Credit shall provide that
it shall be automatically renewed unless the beneficiary thereof receives notice
from the Issuing Bank that such Letter of Credit shall not be renewed, and if at
the time of renewal the Issuing Bank would be entitled to authorize the
automatic renewal of such Letter of Credit in accordance with this Subsection
3.02(c) upon the request of the Co-Borrowers, then the Issuing Bank shall
nonetheless be permitted to allow such Letter of Credit to renew, and the
Co-Borrowers and the Banks hereby authorize such renewal, and, accordingly, the
Issuing Bank shall be deemed to have received an L/C Amendment Application from
the Co-Borrowers requesting such renewal.

 

(d) An Issuing Bank may not agree to any request to Issue, amend, renew or
extend a Letter of Credit without the prior consent of each Agent.

 

(e) An Issuing Bank may, at its election, deliver any notices of termination or
other communications to any Letter of Credit beneficiary or transferee, and take
any other action as necessary or appropriate, at any time and from time to time,
in order to cause the expiry date of such Letter of Credit to be a date not
later than the Maturity Date.

 

(f) This Agreement shall control in the event of any conflict with any
L/C-Related Document (other than any Letter of Credit).

 

(g) The Issuing Bank will also deliver to the Administrative Agent a true and
complete copy of each Letter of Credit or amendment to or renewal of a Letter of
Credit. The Administrative Agent shall provide a report to each Bank of each
Issuance, amendment, renewal,

 

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extension or cancellation of a Letter of Credit, such report to be provided
promptly after each such action.

 

3.03 Risk Participations, Drawings, Reducing Letters of Credit and
Reimbursements.

 

(a) Immediately upon the Issuance of each Letter of Credit, each Bank shall be
deemed to, and hereby irrevocably and unconditionally agrees to, purchase from
the Issuing Bank a participation in such Letter of Credit and each drawing or
Reducing L/C Borrowing thereunder in an amount equal to the product of (i) the
Pro Rata Share of such Bank, times (ii) the maximum amount available to be drawn
under such Letter of Credit and the amount of such drawing or Reducing Letter of
Credit Borrowing, respectively. For purposes of Section 2.01, each Issuance of a
Letter of Credit shall be deemed to utilize the Line Portion of each Bank by an
amount equal to the amount of such participation.

 

(b) In the event of any request for a drawing under a Letter of Credit by the
beneficiary or transferee thereof, the Issuing Bank will promptly notify the
Co-Borrowers. Any notice given by an Issuing Bank or the Administrative Agent
pursuant to this Subsection 3.03(b) may be oral if immediately confirmed in
writing (including by facsimile); provided that the lack of such an immediate
confirmation shall not affect the conclusiveness or binding effect of such
notice. The Co-Borrowers shall reimburse the Issuing Bank in the relevant
currency prior to 5:00 p.m. (New York City time), on each date that any amount
is paid by the Issuing Bank under any Letter of Credit or to the beneficiary of
a Reducing Letter of Credit in the form of a Reducing L/C Borrowing (each such
date, an “Honor Date”), in an amount equal to the amount so paid by the Issuing
Bank. In the event the Co-Borrowers fail to reimburse the Issuing Bank for the
full amount of any drawing under any Letter of Credit or of any Reducing L/C
Borrowing, as the case may be, by 5:00 p.m. (New York City time) on the Honor
Date, the Issuing Bank will promptly notify the Administrative Agent and the
Administrative Agent will promptly notify each Bank thereof, and the Banks shall
reimburse the Issuing Bank for the amount of the drawing under the Letter of
Credit or Reducing L/C Borrowing, as the case may be. Under such circumstances,
the Co-Borrowers shall be deemed to have requested that Dollar Advances be made
by the Banks to be disbursed to the Issuing Bank not later than one (1) Business
Day after the Honor Date under such Letter of Credit.

 

(c) In the event of any request for a Reducing L/C Borrowing by the Co-Borrowers
in association with any Reducing Letter of Credit, the amount available for
drawing under such Reducing Letter of Credit will be reduced automatically, and
without any further amendment or endorsement to such Reducing Letter of Credit,
by the amount actually paid to such beneficiary, notwithstanding the fact that
the payment creating such Reducing L/C Borrowing is not made pursuant to a
conforming and proper draw under the corresponding Reducing Letter of Credit.

 

(d) Each Bank shall upon any notice pursuant to Subsection 3.03(b) make
available to the Administrative Agent for the account of the Issuing Bank an
amount in Dollars and in immediately available funds equal to its Pro Rata Share
of the Dollar Equivalent amount of the drawing or of the Reducing L/C Borrowing,
as the case may be, whereupon the Banks shall (subject to Subsection 3.03(e))
each be deemed to have made a Dollar Advance to the

 

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Co-Borrowers in that amount. If any Bank so notified fails to make available to
the Administrative Agent for the account of the Issuing Bank the amount of such
Bank’s Pro Rata Share of the amount of the drawing or of the Reducing L/C
Borrowing, as the case may be, by no later than 3:00 p.m. (New York City time)
on the Business Day following the Honor Date, then interest shall accrue on such
Bank’s obligation to make such payment, from the Honor Date to the date such
Bank makes such payment, at a rate per annum equal to (i) the Federal Funds Rate
in effect from time to time during such period for the first two Business Days
and (ii) thereafter, the Federal Funds Rate in effect from time to time during
such period, plus two percent (2.00%). The Administrative Agent will promptly
give notice of the occurrence of the Honor Date, but failure of the
Administrative Agent to give any such notice on the Honor Date or in sufficient
time to enable any Bank to effect such payment on such date shall not relieve
such Bank from its obligations under this Section 3.03.

 

(e) With respect to any unreimbursed drawing or Reducing L/C Borrowing, as the
case may be, that is not converted into Dollar Advances in whole or in part for
any reason, the Co-Borrowers shall be deemed to have incurred from the relevant
Issuing Bank an L/C Borrowing in the amount of such drawing or Reducing L/C
Borrowing, as the case may be, which L/C Borrowing shall be due and payable on
demand (together with interest) and shall bear interest at a rate per annum
equal to the Default Rate, and each Bank’s payment to such Issuing Bank pursuant
to Subsection 3.03(e) shall be deemed payment in respect of its participation in
such L/C Borrowing and shall constitute an L/C Advance from such Bank in
satisfaction of its participation obligation under this Section 3.03.

 

(f) In the event that payment under any Letter of Credit is drawn or purported
to be drawn in a currency other than United States Dollars, the amount of
reimbursement to the Issuing Bank therefor shall be calculated on the basis of
the Issuing Bank’s selling rate of exchange in effect (for the date on which the
Issuing Bank pays such draft or reimburses any of its correspondents which paid
such draft) for cable transfers to the place where and in the currency in which
such draft is payable. The Co-Borrowers shall comply with any and all
governmental exchange regulations now or hereafter applicable to any foreign
exchange, and shall indemnify and hold the Banks harmless from any failure of
the Co-Borrowers so to comply. If for any cause whatsoever, there exists at the
time in question no rate of exchange generally current at Issuing Bank for
effective cable transfer of the sort above provided for, the Co-Borrowers agree
to pay the Banks on demand an amount in United States Dollars equivalent to the
actual cost of settlement of the Issuing Bank’s obligation to the payor of the
draft or acceptance or any holder thereof, as the case may be, and however and
whenever such settlement may be made by the Issuing Bank.

 

(g) Each Bank’s obligation in accordance with this Agreement to make the
Revolving Loans or L/C Advances, as contemplated by this Section 3.03, as a
result of a drawing under a Letter of Credit or Reducing L/C Borrowing, shall be
absolute and unconditional and without recourse to the relevant Issuing Bank and
shall not be affected by any circumstance, including (i) any set-off,
counterclaim, recoupment, defense or other right which such Bank may have
against such Issuing Bank, the Co-Borrowers or any other Person for any reason
whatsoever; (ii) the occurrence or continuance of a Default, an Event of Default
or a Material

 

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Adverse Effect; or (iii) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing.

 

3.04 Repayment of Participations.

 

(a) Upon (and only upon) receipt by the Administrative Agent for the account of
the Issuing Bank of immediately available funds from the Co-Borrowers (i) in
reimbursement of any payment made by Issuing Bank under the Letter of Credit or
in connection with a Reducing L/C Borrowing with respect to which any Bank has
paid the Administrative Agent for the account of the Issuing Bank for such
Bank’s participation in the Letter of Credit or funded a Dollar Advance pursuant
to Section 3.03 or (ii) in payment of interest thereon, the Administrative Agent
will pay to each Bank, in the same funds as those received by the Administrative
Agent for the account of the Issuing Bank, the amount of such Bank’s Pro Rata
Share of such funds, and the Issuing Bank shall receive the amount of the Pro
Rata Share of such funds of any Bank that did not so pay the Administrative
Agent for the account of the Issuing Bank.

 

(b) If the Administrative Agent or an Issuing Bank is required at any time to
return to the Co-Borrowers, or to a trustee, receiver, liquidator, custodian, or
any official in any Insolvency Proceeding, any portion of the payments made by
the Co-Borrowers to the Administrative Agent for the account of the Issuing Bank
which shall have been paid to the Banks pursuant to Subsection 3.04(a), each
Bank shall, on demand of the Issuing Bank, forthwith return to the
Administrative Agent or the Issuing Bank the amount of its Pro Rata Share of any
amounts so returned by the Administrative Agent or the Issuing Bank plus
interest thereon from the date such demand is made to the date such amounts are
returned by such Bank to the Administrative Agent or the Issuing Bank, at a rate
per annum equal to (i) the Federal Funds Rate in effect from time to time during
such period for the first two Business Days and (ii) thereafter, the Federal
Funds Rate in effect from time to time during such period, plus two percent
(2.00%).

 

3.05 Role of the Issuing Bank.

 

(a) Each Bank and the Co-Borrowers agree that, in paying any drawing under a
Letter of Credit or funding any Reducing L/C Borrowing, Issuing Bank shall not
have any responsibility to obtain any document (other than any sight draft or
certificates expressly required by the Letter of Credit, but with respect to
Reducing Letter of Credit Borrowings, no document of any kind need be obtained)
or to ascertain or inquire as to the validity or accuracy of any such document
or the authority of the Person executing or delivering any such document.

 

(b) No Agent-Related Person nor any of the respective correspondents,
participants or assignees of Issuing Bank shall be liable to any Bank for: (i)
any action taken or omitted in connection herewith at the request or with the
approval or deemed approval of the Banks; (ii) any action taken or omitted in
the absence of gross negligence or willful misconduct; or (iii) the due
execution, effectiveness, validity or enforceability of any L/C-Related
Document.

 

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(c) The Co-Borrowers hereby assume all risks of the acts or omissions of any
beneficiary or transferee with respect to its use of any Letter of Credit;
provided, however, that this assumption is not intended to, and shall not,
preclude a Co-Borrower from pursuing such rights and remedies as it may have
against the beneficiary or transferee at law or under any other agreement. No
Agent-Related Person, nor any of the respective correspondents, participants or
assignees of Issuing Bank shall be liable or responsible for any of the matters
described in clauses (a) through (g) of Section 3.06; provided, however,
anything in such clauses or elsewhere herein to the contrary notwithstanding,
that the Co-Borrowers may have a claim against Issuing Bank, and Issuing Bank
may be liable to the Co-Borrowers, to the extent, but only to the extent, of any
direct, as opposed to consequential or exemplary, damages suffered by the
Co-Borrowers which the Co-Borrowers prove were caused by Issuing Bank’s willful
misconduct or gross negligence or Issuing Bank’s willful failure to pay under
any Letter of Credit after the presentation to it by the beneficiary of a sight
draft and certificate(s) strictly complying with the terms and conditions of a
Letter of Credit. In furtherance and not in limitation of the foregoing: (i)
Issuing Bank may accept documents that appear on their face to be in order,
without responsibility for further investigation, regardless of any notice or
information to the contrary; and (ii) Issuing Bank shall not be responsible for
the validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign a 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.

 

3.06 Obligations Absolute. The Obligations of the Co-Borrowers under this
Agreement and any L/C-Related Document to reimburse Issuing Bank for a drawing
under a Letter of Credit or for a Reducing L/C Borrowing, and to repay any L/C
Borrowing and any drawing under a Letter of Credit or Reducing L/C Borrowing
converted into Revolving Loans, shall be unconditional and irrevocable, and
shall be paid strictly in accordance with the terms of this Agreement and each
such other L/C-Related Document under all circumstances, including the
following:

 

(a) any lack of validity or enforceability of this Agreement or any L/C-Related
Document;

 

(b) any change in the time, manner or place of payment of, or in any other term
of, all or any of the Obligations of the Co-Borrowers in respect of any Letter
of Credit or any other amendment or waiver of or any consent to departure from
all or any of the L/C-Related Documents;

 

(c) the existence of any claim, set-off, defense or other right that the
Co-Borrowers may have at any time against any beneficiary or any transferee of
any Letter of Credit (or any Person for whom any such beneficiary or any such
transferee may be acting), the Issuing Bank or any other Person, whether in
connection with this Agreement, the transactions contemplated hereby or by the
L/C-Related Documents or any unrelated transaction;

 

(d) any draft, demand, certificate or other document presented under any Letter
of Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect; or
any loss or delay in the

 

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transmission or otherwise of any document required in order to make a drawing
under any Letter of Credit;

 

(e) any payment by the Issuing Bank under any Letter of Credit against
presentation of a draft or certificate that does not strictly comply with the
terms of any Letter of Credit; or any payment made by the Issuing Bank under any
Letter of Credit to any Person purporting to be a trustee in bankruptcy,
debtor-in-possession, assignee for the benefit of creditors, liquidator,
receiver or other representative of or successor to any beneficiary or any
transferee of any Letter of Credit, including any arising in connection with any
Insolvency Proceeding;

 

(f) any exchange, release or non-perfection of any collateral, or any release or
amendment or waiver of or consent to departure from any other guarantee, for all
or any of the Obligations of the Co-Borrowers in respect of any Letter of
Credit; or

 

(g) any other circumstance or happening whatsoever, whether or not similar to
any of the foregoing, including any other circumstance that might otherwise
constitute a defense available to, or a discharge of, the Co-Borrowers or
Guarantor.

 

3.07 Cash Collateral Pledge. Upon the request of the Administrative Agent, (i)
if Issuing Bank has honored any full or partial drawing request on any Letter of
Credit and such drawing has resulted in an L/C Borrowing hereunder, or (ii) if,
as of the Expiration Date, any Letters of Credit may for any reason remain
outstanding and partially or wholly undrawn, the Co-Borrowers shall immediately
Cash Collateralize the L/C Obligations in an amount equal to such L/C
Obligations. Upon the occurrence of the circumstances described in Section 2.06
requiring the Co-Borrowers to Cash Collateralize Letters of Credit, then, the
Co-Borrowers shall immediately Cash Collateralize the L/C Obligations in an
amount equal to the applicable excess. In addition, the Co-Borrowers shall Cash
Collateralize any Letter of Credit to be Issued under the Collateralized L/C
Line on or before such Letter of Credit is actually Issued in an amount equal to
such Letter of Credit.

 

3.08 Letter of Credit Fees.

 

(a) The Co-Borrowers shall pay to the Administrative Agent for the account of
each of the Banks in accordance with their Pro Rata Shares a letter of credit
fee with respect to each of the Letters of Credit Issued hereunder as follows:

 

(i) Trade Related L/Cs, Swap L/Cs and Performance L/Cs - the greater of (A)
$250.00 or (B) the amount set forth in the following grid;

 

Type of LC

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

  

Margin

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

Trade Related L/Cs with a tenor of three months or less    1.50% per annum Trade
Related L/Cs with a tenor of longer than three months but less than 365 days   
1.75% per annum Performance L/Cs and Swap L/Cs    2.00% per annum

 

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(ii) Cash Collateralized Letters of Credit - the greater of (A) .50 % per annum
or (B) $250.00.

 

Such letter of credit fee for each Letter of Credit shall be due and payable
monthly in arrears for the preceding month during which Letters of Credit are
outstanding, based on the maximum Dollar amount of each L/C outstanding during
such month, commencing on the first such monthly date to occur after the Closing
Date.

 

(b) The Co-Borrowers shall pay to the Agents and the Issuing Banks, such other
Letter of Credit Fees as may be provided for by separate letter agreement
between the Agents, the Issuing Banks and the Co-Borrowers.

 

(c) With reference to Letter of Credit fees for all Letters of Credit
denominated in Canadian dollars, Administrative Agent shall calculate their
Dollar Equivalents for each month in advance based upon the Canadian dollar/US
Dollar exchange rate in effect, as determined by Administrative Agent as of the
first calendar day of such month (without limiting Administrative Agent’s right
to determine the Dollar Equivalent at any time as provided in the definition of
“Effective Amount”). Such Dollar Equivalents shall be used for calculating the
amount of such fees. New Letters of Credit denominated in Canadian dollars shall
be assigned Dollar Equivalents by Administrative Agent and such Dollar
Equivalents shall apply until the next succeeding Dollar Equivalents are
calculated by Administrative Agent.

 

3.09 Uniform Customs and Practice. The Uniform Customs and Practice for
Documentary Credits as published by the International Chamber of Commerce most
recently at the time of Issuance of any Letter of Credit shall (unless otherwise
expressly provided in the Letters of Credit) apply to the Letters of Credit.

 

ARTICLE IV

 

TAXES, YIELD PROTECTION AND ILLEGALITY

 

4.01 Taxes.

 

(a) Any and all payments by the Co-Borrowers to each Bank or the Administrative
Agent under this Agreement and any other Loan Document shall be made free and
clear of, and without deduction or withholding for, any Taxes. In addition, the
Co-Borrowers shall pay all Other Taxes.

 

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(b) If the Co-Borrowers shall be required by law to deduct or withhold any
Taxes, Other Taxes or Further Taxes from or in respect of any sum payable
hereunder to any Bank or the Administrative Agent, then:

 

(i) the sum payable shall be increased as necessary so that after making all
required deductions and withholdings (including deductions and withholdings
applicable to additional sums payable under this Section) such Bank or the
Administrative Agent, as the case may be, receives and retains an amount equal
to the sum it would have received and retained had no such deductions or
withholdings been made;

 

(ii) the Co-Borrowers shall make such deductions and withholdings;

 

(iii) the Co-Borrowers shall pay the full amount deducted or withheld to the
relevant taxing authority or other authority in accordance with applicable law;
and

 

(iv) the Co-Borrowers shall also pay to each Bank or the Administrative Agent
for the account of such Bank, at the time interest is paid, Further Taxes in the
amount that Bank specifies as necessary to preserve the after-tax yield the Bank
would have received if such Taxes, Other Taxes or Further Taxes had not been
imposed.

 

(c) The Co-Borrowers agree to indemnify and hold harmless each Bank and the
Administrative Agent for the full amount of (i) Taxes, (ii) Other Taxes, and
(iii) Further Taxes in the amount that Administrative Agent or such Bank
specifies as necessary to preserve the after-tax yield Administrative Agent or
such Bank would have received if such Taxes, Other Taxes or Further Taxes had
not been imposed, and any liability (including penalties, interest, additions to
tax and expenses) arising therefrom or with respect thereto, whether or not such
Taxes, Other Taxes or Further Taxes were correctly or legally asserted,
provided, however, that the Co-Borrowers shall not be required to indemnify or
hold harmless any Bank to the extent (but only to the extent) of such Bank’s
gross negligence or willful misconduct. Payment under this indemnification shall
be made within 30 days after the date the Bank or the Administrative Agent makes
written demand therefor.

 

(d) Within 30 days after the date of any payment by the Co-Borrowers of Taxes,
Other Taxes or Further Taxes, the Co-Borrowers shall furnish the Administrative
Agent the original or a certified copy of a receipt evidencing payment thereof,
or other evidence of payment satisfactory to the Administrative Agent.

 

(e) If the Co-Borrowers are required to pay any amount to Administrative Agent
or any Bank pursuant to subsection (b) or (c) of this Section, then such Bank
shall use reasonable efforts (consistent with legal and regulatory restrictions)
to change the jurisdiction of its Lending Office so as to eliminate any such
additional payment by the Co-Borrowers which may thereafter accrue, if such
change in the judgment of such Bank is not otherwise disadvantageous to such
Bank.

 

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4.02 Withholding Tax.

 

(a) If any Bank is a “foreign corporation, partnership or trust” within the
meaning of the Code and such Bank claims exemption from, or a reduction of, U.S.
withholding tax under Sections 1441 or 1442 of the Code, such Bank agrees with
and in favor of the Administrative Agent, to deliver to the Administrative
Agent:

 

(i) if such Bank claims an exemption from, or a reduction of, withholding tax
under a United States tax treaty, properly completed and executed copies of IRS
Form W-8BEN before the payment of any interest in the first calendar year and
before the payment of any interest in each third succeeding calendar year during
which interest may be paid under this Agreement;

 

(ii) if such Bank claims that interest paid under this Agreement is exempt from
United States withholding tax because it is effectively connected with a United
States trade or business of such Bank, two properly completed and executed
copies of IRS Form W-8ECI before the payment of any interest is due in the first
taxable year of such Bank and in each succeeding taxable year of such Bank
during which interest may be paid under this Agreement; and

 

(iii) such other form or forms as may be required under the Code or other laws
of the United States as a condition to exemption from, or reduction of, United
States withholding tax.

 

Such Bank agrees to promptly notify the Administrative Agent of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction.

 

(b) If any Bank claims exemption from, or reduction of, withholding tax under a
United States tax treaty by providing IRS Form W-8BEN and such Bank sells,
assigns, grants a participation in, or otherwise transfers all or part of the
Obligations of the Co-Borrowers to such Bank, such Bank agrees to notify the
Administrative Agent of the percentage amount in which it is no longer the
beneficial owner of Obligations of the Co-Borrowers to such Bank. To the extent
of such percentage amount, the Administrative Agent will treat such Bank’s IRS
Form W-8BEN as no longer valid.

 

(c) If any Bank claiming exemption from United States withholding tax by filing
IRS Form W-8ECI with the Administrative Agent sells, assigns, grants a
participation in, or otherwise transfers all or part of the Obligations of the
Co-Borrowers to such Bank, such Bank agrees to undertake sole responsibility for
complying with the withholding tax requirements imposed by Sections 1441 and
1442 of the Code.

 

(d) If any Bank is entitled to a reduction in the applicable withholding tax,
the Administrative Agent may withhold from any interest payment to such Bank an
amount equivalent to the applicable withholding tax after taking into account
such reduction. However, if the forms or other documentation required by
subsection (a) of this Section are not delivered to the Administrative Agent,
then the Administrative Agent may withhold from any interest

 

49

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payment to such Bank not providing such forms or other documentation an amount
equivalent to the applicable withholding tax imposed by Sections 1441 and 1442
of the Code, without reduction.

 

(e) If the IRS or any other Governmental Authority of the United States or other
jurisdiction asserts a claim that the Administrative Agent did not properly
withhold tax from amounts paid to or for the account of any Bank (because the
appropriate form was not delivered, was not properly executed, or because such
Bank failed to notify the Administrative Agent of a change in circumstances
which rendered the exemption from, or reduction of, withholding tax ineffective,
or for any other reason) such Bank shall indemnify the Administrative Agent
fully for all amounts paid, directly or indirectly, by the Administrative Agent
as tax or otherwise, including penalties and interest, and including any taxes
imposed by any jurisdiction on the amounts payable to the Administrative Agent
under this Section, together with all costs and expenses (including Attorney
Costs), except to the extent caused solely by the gross negligence or willful
misconduct of Administrative Agent. The obligation of the Banks under this
Subsection shall survive the payment of all Obligations and the resignation or
replacement of the Administrative Agent.

 

4.03 Illegality.

 

(a) If any Bank determines that the introduction of any Requirement of Law, or
any change in any Requirement of Law, or in the interpretation or administration
of any Requirement of Law, has made it unlawful, or that any central bank or
other Governmental Authority has asserted that it is unlawful, for any Bank or
its applicable Lending Office to make Eurodollar Rate Loans, then, on notice
thereof by the Bank to the Co-Borrowers through the Administrative Agent, any
obligation of that Bank to make Eurodollar Rate Loans shall be suspended until
the Bank notifies the Administrative Agent and the Co-Borrowers that the
circumstances giving rise to such determination no longer exist.

 

(b) If a Bank determines that it is unlawful to maintain any Eurodollar Rate
Loan, the Co-Borrowers shall, upon receipt of notice of such fact and demand
from such Bank (with a copy to the Administrative Agent), prepay in full,
without premium or penalty, such Eurodollar Rate Loans of that Bank then
outstanding, together with interest accrued thereon either on the last day of
the Interest Period thereof, if the Bank may lawfully continue to maintain such
Eurodollar Rate Loans to such day, or immediately, if the Bank may not lawfully
continue to maintain such Eurodollar Rate Loan. If the Co-Borrowers are required
to so prepay any Eurodollar Rate Loan, then concurrently with such prepayment,
the Co-Borrowers shall borrow from the affected Bank, in the amount of such
repayment, a Base Rate Loan.

 

4.04 Increased Costs and Reduction of Return.

 

(a) If any Bank determines that, due to either (i) the introduction of or any
change (other than any change by way of imposition of or increase in reserve
requirements included in the calculation of the Eurodollar Rate or in respect of
the assessment rate payable by any Bank to the FDIC for insuring U.S. deposits)
in or in the interpretation of any law or regulation or (ii) the compliance by
that Bank with any guideline or request from any central

 

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bank or other Governmental Authority (whether or not having the force of law),
there shall be any increase in the cost to such Bank of agreeing to make or
making, funding or maintaining any Eurodollar Rate Loans or participating in
Letters of Credit, or, in the case of Issuing Bank, any increase in the cost to
Issuing Bank of agreeing to issue, issuing or maintaining any Letter of Credit
or of agreeing to make or making, funding or maintaining any unpaid drawing
under any Letter of Credit, then the Co-Borrowers shall be liable for, and shall
from time to time, within 30 days of demand (with a copy of such demand to be
sent to the Administrative Agent), pay to the Administrative Agent for the
account of such Bank, additional amounts as are sufficient to compensate such
Bank for such increased costs, provided that the Co-Borrowers shall not be
required to pay any such amount to the extent that such amount is reflected in
changes in the Base Rate, the Eurodollar Rate or other fees or charges of such
Bank.

 

(b) If any Bank shall have determined that (i) the introduction of any Capital
Adequacy Regulation, (ii) any change in any Capital Adequacy Regulation, (iii)
any change in the interpretation or administration of any Capital Adequacy
Regulation by any central bank or other Governmental Authority charged with the
interpretation or administration thereof, or (iv) compliance by the Bank (or its
Lending Office) or any corporation controlling the Bank with any Capital
Adequacy Regulation, affects or would affect the amount of capital required or
expected to be maintained by the Bank or any corporation controlling the Bank
and (taking into consideration such Bank’s or such corporation’s policies with
respect to capital adequacy and such Bank’s desired return on capital)
determines that the amount of such capital is increased as a consequence of its
loans, credits or obligations under this Agreement, then, within 30 days of
demand of such Bank to the Co-Borrowers through the Administrative Agent, the
Co-Borrowers shall pay to the Bank, from time to time as specified by the Bank,
additional amounts sufficient to compensate the Bank for such increase, provided
that the Co-Borrowers shall not be required to pay any such amount with respect
to Base Rate Loans to the extent that such amount is reflected in changes in the
Base Rate.

 

4.05 Funding Losses. The Co-Borrowers shall reimburse each Bank and hold each
Bank harmless from any loss or expense which the Bank may sustain or incur as a
consequence of:

 

(a) the failure of the Co-Borrowers to make on a timely basis any payment of
principal of any Eurodollar Rate Loan;

 

(b) the failure of the Co-Borrowers to borrow, continue or convert a Loan after
the Co-Borrowers have given (or is deemed to have given) a Notice of Borrowing
or a Notice of Conversion/ Continuation;

 

(c) the failure of the Co-Borrowers to make any prepayment in accordance with
any notice delivered under Section 2.06;

 

(d) the prepayment (including prepayments made pursuant to Article II but
excluding prepayments made pursuant to Section 4.03) or other payment (including
after acceleration thereof) of an Eurodollar Rate Loan on a day that is not the
last day of the relevant Interest Period; or

 

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(e) the automatic conversion under Section 2.04 of any Eurodollar Rate Loan to a
Base Rate Loan on a day that is not the last day of the relevant Interest Period
except any such automatic conversion resulting from prepayments required by
Section 4.03;

 

including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its Eurodollar Rate Loans or from fees
payable to terminate the deposits from which such funds were obtained. For
purposes of calculating amounts payable by the Co-Borrowers to the Banks under
this Section and under Section 4.04, each Eurodollar Rate Loan made by a Bank
(and each related reserve, special deposit or similar requirement) shall be
conclusively deemed to have been funded at the rate used in determining the
Eurodollar Rate for such Eurodollar Rate Loan by a matching deposit or other
borrowing in the interbank eurodollar market for a comparable amount and for a
comparable period, whether or not such Eurodollar Rate Loan is in fact so
funded.

 

4.06 Inability to Determine Rates. If the Administrative Agent and the Banks
determine that for any reason adequate and reasonable means do not exist for
determining the Eurodollar Rate for any requested Interest Period with respect
to a proposed Eurodollar Rate Loan, or that the Eurodollar Rate applicable
pursuant to Subsection 2.08(a) for any requested Interest Period with respect to
a proposed Eurodollar Rate Loan does not adequately and fairly reflect the cost
to the Banks of funding such Loan, the Administrative Agent will promptly so
notify the Co-Borrowers and each Bank. Thereafter, the obligation of the Banks
to make or maintain Eurodollar Rate Loans, as the case may be, hereunder shall
be suspended until the Administrative Agent upon the instruction of the Banks
revokes such notice in writing. Upon receipt of such notice, the Co-Borrowers
may revoke any Notice of Borrowing or Notice of Conversion/Continuation then
submitted by them. If the Co-Borrowers does not revoke such Notice, the Banks
shall make, convert or continue the Loans, as proposed by the Co-Borrowers, in
the amount specified in the applicable notice submitted by the Co-Borrowers, but
such Loans shall be made, converted or continued as Base Rate Loans instead of
Eurodollar Rate Loans.

 

4.07 Reserves on Eurodollar Rate Loans. The Co-Borrowers shall pay to each Bank,
as long as such Bank shall be required under regulations of the FRB to maintain
reserves with respect to liabilities or assets consisting of or including
Eurocurrency funds or deposits (currently known as “Eurocurrency liabilities”),
additional costs on the unpaid principal amount of each Eurodollar Rate Loan
equal to the actual costs of such reserves allocated to such Loan by the Bank
(as determined by the Bank in good faith, which determination shall be
conclusive), payable on each date on which interest is payable on such Loan,
provided the Co-Borrowers shall have received at least 15 days’ prior written
notice (with a copy to the Administrative Agent) of such additional interest
from the Bank. If a Bank fails to give notice 15 days prior to the relevant
Interest Payment Date, such additional interest shall be payable 15 days from
receipt of such notice.

 

4.08 Certificates of Banks. Together with any demand by a Bank for reimbursement
or compensation pursuant to this Article IV, such Bank shall provide to the
Co-Borrowers (with a copy to the Administrative Agent) a certificate signed by
an authorized officer of the Bank (a) describing the event giving rise to such
demand, and (b) showing the method and detailed

 

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calculations (which may include any reasonable averaging, attribution or
allocation procedures) used by the Bank to determine the amount demanded by the
Bank. In calculating the amount of costs, expenses, capital requirements or rate
of reduction allocable to the Co-Borrowers, such Bank shall use such reasonable
methods as such Bank shall determine. Such calculation and certification shall
be conclusive and binding on the Co-Borrowers in the absence of manifest error.

 

4.09 Substitution of Banks. Upon the receipt by the Co-Borrowers from any Bank
(an “Affected Bank”) of a claim for compensation under Section 4.04, the
Co-Borrowers may: (a) request the Affected Bank to use its best efforts to
obtain a replacement bank or financial institution satisfactory to the
Co-Borrowers to acquire and assume all or a ratable part of all of such Affected
Bank’s Loans and Line Portion (a “Replacement Bank”); (b) request one or more of
the other Banks to acquire and assume all or part of such Affected Bank’s Loans
and Line Portion; or (c) designate a Replacement Bank. Any such designation of a
Replacement Bank under clause (a) or (c) shall be subject to the prior written
consent of the Administrative Agent (which consent shall not be unreasonably
withheld).

 

4.10 Canadian Withholding Taxes. The Co-Borrowers acknowledge that as a result
of the transactions contemplated by this Agreement, the Banks may become liable
for Canadian withholding taxes. In the event that any Bank becomes liable for
such taxes, the Co-Borrowers shall properly reimburse such Bank upon Bank’s
demand. The Bank’s demand shall be accompanied by a certificate in the form
described in Section 4.08, and the calculations accompanying the certificate of
any Bank shall be conclusive and binding on the Co-Borrowers in the absence of
manifest error.

 

4.11 Survival. The agreements and Obligations of the Co-Borrowers in this
Article IV shall survive the payment of all other Obligations.

 

ARTICLE V

 

CONDITIONS PRECEDENT

 

5.01 Conditions to be Satisfied Upon Execution of Agreement. At the time the
Banks execute this Agreement, unless otherwise waived by the Banks, the
Administrative Agent shall have received all of the following, in form and
substance satisfactory to the Administrative Agent and each Bank, and in
sufficient copies for each Bank:

 

(a) Loan Documents. The Loan Documents set forth on Schedule 5.01 and each other
document or certificate required to be executed in connection with this
Agreement, executed by each party thereto.

 

(b) Resolutions; Incumbency. Copies of the resolutions of the board of directors
of Avista and Avista Capital and the Canadian equivalent thereof for Avista
Canada and Copac Management, authorizing the transactions contemplated hereby,
certified as of the Closing Date by the Secretary of each such corporation, and
certifying the names and true

 

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signatures of the officers of each such corporation authorized to execute,
deliver and perform, as applicable, this Agreement, and all other Loan Documents
to be delivered by it hereunder;

 

(c) Organization Documents; Good Standing. The articles or certificate of
incorporation and the bylaws of Avista and Avista Capital and the Canadian
equivalent thereof for Avista Canada and Copac Management, as in effect on the
Closing Date, certified by the Secretary of each such corporation as of the
Closing Date, together with a good standing certificate for the Co-Borrowers and
the Guarantors from the Secretary of State (or similar, applicable Governmental
Authority) of its state or province of incorporation and each state or province
where such Co-Borrower or Guarantor is qualified to do business as a foreign
corporation, certified as of, or reasonably close to, the Closing Date;

 

(d) Legal Opinion. Opinions of U.S. and Canadian counsel to the Co-Borrowers and
the Guarantors and addressed to the Administrative Agent and the Banks in form
and substance acceptable to the Administrative Agent and the Banks;

 

(e) Payment of Fees. Evidence of payment by the Co-Borrowers of all accrued and
unpaid fees (including fees payable to the Agents and the Banks under separate
fee letters), costs and expenses to the extent then due and payable on the
Closing Date, together with Attorney Costs of the Administrative Agent and
Documentation Agent to the extent invoiced prior to or on the Closing Date, plus
such additional amounts of Attorney Costs as shall constitute the Administrative
Agent’s reasonable estimate of Attorney Costs incurred or to be incurred by it
through the closing proceedings (provided that such estimate shall not
thereafter preclude final settling of accounts between the Co-Borrowers and the
Administrative Agent); including any such costs, fees and expenses arising under
or referenced in Sections 2.09 and 11.04(a) and all costs of the auditors and
consultants retained by the Banks in connection with the Obligations of the
Co-Borrowers to the Administrative Agent;

 

(f) Certificate. A certificate signed by a Responsible Officer of each
Co-Borrower, dated as of the Closing Date, stating to the best of such officer’s
knowledge that:

 

(i) The representations and warranties contained in Article VI are true and
correct on and as of such date, as though made on and as of such date;

 

(ii) No Default or Event of Default exists; and

 

(iii) There has not occurred since April 30, 2003, an event or circumstance that
has resulted or could reasonably be expected to result in a Material Adverse
Effect.

 

(g) Filings. Evidence that all filings needed to perfect the security interests
granted by the Security Agreement have been completed or due provision has been
made therefor; and

 

(h) Other Documents. Such other approvals, opinions, documents or materials as
the Administrative Agent or any Bank may request.

 

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5.02 Conditions to be Satisfied Upon Each Credit Extension. Prior to any Credit
Extension under this Agreement, the following conditions precedent must be
satisfied:

 

(a) The Administrative Agent shall have received a Notice of Borrowing under
Subsection 2.03(a) or 3.02(a) as the case may be;

 

(b) The representations and warranties contained in Article VI are true and
correct on and as of such date, as though made on and as of such date, except to
the extent such representations and warranties expressly relate to an earlier
date;

 

(c) No Default or Event of Default exists or would result from the Credit
Extension; and

 

(d) There has not occurred since the last Credit Extension, an event or
circumstance that has resulted or could reasonably be expected to result in a
Material Adverse Effect.

 

ARTICLE VI

 

REPRESENTATIONS AND WARRANTIES

 

The Co-Borrowers represent and warrant to the Administrative Agent and each Bank
that:

 

6.01 Corporate Existence and Power. Each Co-Borrower and each of its
Subsidiaries:

 

(a) is a corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, which in the case of Avista
is the State of Washington and in the case of Avista Canada is the Province of
Alberta, Canada;

 

(b) has the power and authority and all governmental licenses, authorizations,
consents and approvals to own its assets, carry on its business and to execute,
deliver, and perform its Obligations under the Loan Documents;

 

(c) is duly qualified as a foreign corporation, and is licensed and in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such qualification
or license; and

 

(d) to the best knowledge of the Co-Borrowers, is in compliance with all
Requirements of Law.

 

6.02 Authorization; No Contravention. The execution, delivery and performance by
the Co-Borrowers of this Agreement and each other Loan Document to which either
Co-Borrower is party, have been duly authorized by all necessary corporate or
partnership action, and do not and will not:

 

(a) contravene the terms of either Co-Borrower’s Organization Documents;

 

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(b) to the best knowledge of the Co-Borrowers after reasonable due diligence,
conflict with or result in any breach or contravention of, or the creation of
any Lien under, any document evidencing any Contractual Obligation to which such
Co-Borrower is a party or any order, injunction, writ or decree of any
Governmental Authority to which such Person or its property is subject; or

 

(c) to the best knowledge of the Co-Borrowers, violate any Requirement of Law.

 

6.03 Governmental Authorization. No approval, consent, exemption, authorization,
or other action by, or notice to, or filing with, any Governmental Authority is
necessary or required in connection with the execution, delivery or performance
by, or enforcement against, either Co-Borrower or any of its Subsidiaries of the
Agreement or any other Loan Document.

 

6.04 Binding Effect. This Agreement and each other Loan Document to which any
Co-Borrower or any of its Subsidiaries is a party constitute the legal, valid
and binding obligations of such Person to the extent it is a party thereto,
enforceable against such Person in accordance with their respective terms,
except as enforceability may be limited by applicable bankruptcy, insolvency, or
similar laws affecting the enforcement of creditors’ rights generally or by
general principles of equity.

 

6.05 Litigation. Except as specifically disclosed in Schedule 6.05, there are no
actions, suits or proceedings, pending, or to the knowledge of the Co-Borrowers,
threatened at law, in equity, in arbitration or before any Governmental
Authority, against either Co-Borrower, or any of its Subsidiaries or any of
their respective properties which (a) purport to affect or pertain to this
Agreement or any other Loan Document, or any of the transactions contemplated
hereby or thereby; and no injunction, writ, temporary restraining order or any
order of any nature has been issued by any court or other Governmental Authority
purporting to enjoin or restrain the execution, delivery or performance of this
Agreement or any other Loan Document, or directing that the transactions
provided for herein or therein not be consummated as herein or therein provided
or (b) if determined adversely, could reasonably be expected to have a Material
Adverse Effect.

 

6.06 No Default. No Default or Event of Default exists or would result from the
incurring of any Obligations by the Co-Borrowers. As of the Closing Date,
neither of the Co-Borrowers nor any of their Subsidiaries are in default under
or with respect to any Contractual Obligation in any respect which, individually
or together with all such defaults, could reasonably be expected to have a
Material Adverse Effect.

 

6.07 ERISA Compliance. Except as specifically disclosed in Schedule 6.07:

 

(a) Each Plan is in compliance in all material respects with the applicable
provisions of ERISA, the Code and other federal or state law. Each Plan which is
intended to

 

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qualify under Section 401(a) of the Code has received a favorable determination
letter from the IRS and to the best knowledge of the Co-Borrowers, nothing has
occurred which would cause the loss of such qualification. The Co-Borrowers and
each ERISA Affiliate has made all required contributions to any Plan subject to
Section 412 of the Code, and no application for a funding waiver or an extension
of any amortization period pursuant to Section 412 of the Code has been made
with respect to any Plan.

 

(b) There are no pending or, to the best knowledge of the Co-Borrowers,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any Plan which has resulted or could reasonably be expected to
result in a Material Adverse Effect. There has been no prohibited transaction or
violation of the fiduciary responsibility rules with respect to any Plan which
has resulted or could reasonably be expected to result in a Material Adverse
Effect.

 

(c) (i) To the Co-Borrowers’ best knowledge, no ERISA Event has occurred or is
reasonably expected to occur; (ii) the present value of all benefit liabilities
under each Plan (based on those assumptions used to fund such Plan) did not, as
of the last annual valuation date applicable thereto, exceed by more than
$25,000,000.00 the value of the assets of such Plan; (iii) neither of the
Co-Borrowers nor any ERISA Affiliate has incurred, or reasonably expects to
incur, any liability under Title IV of ERISA with respect to any Plan (other
than premiums due and not delinquent under Section 4007 of ERISA); (iv) neither
of the Co-Borrowers nor any ERISA Affiliate has incurred, or reasonably expects
to incur, any liability (and no event has occurred which, with the giving of
notice under Section 4219 of ERISA, would result in such liability) under
Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; (v) neither
of the Co-Borrowers nor any ERISA Affiliate has engaged in a transaction that
could be subject to Section 4069 or 4212(c) of ERISA; and (vi) each Benefit Plan
is in compliance in all material respects with the applicable provisions of the
Code and other federal or state law.

 

6.08 Use of Proceeds; Margin Regulations. The proceeds of the Loans are to be
used solely for the purposes set forth in and permitted by Section 7.12. Neither
of the Co-Borrowers nor any Subsidiary is generally engaged in the business of
purchasing or selling Margin Stock or extending credit for the purpose of
purchasing or carrying Margin Stock. In no event shall the Co-Borrowers use any
portion of the Loan proceeds or any Letter of Credit to invest in one of the
Wells Fargo Investment Accounts.

 

6.09 Title to Properties. Each of the Co-Borrowers and each of their
Subsidiaries have good record and marketable title in fee simple to, or valid
leasehold interests in, all real property necessary or used in the ordinary
conduct of their respective businesses, except for such defects in title as
could not, individually or in the aggregate, have a Material Adverse Effect. As
of the Closing Date, the property of the Co-Borrowers and their Subsidiaries is
subject to no Liens, other than Permitted Liens.

 

6.10 Taxes. Except as specifically disclosed in Schedule 6.10, each Co-Borrower
and its Subsidiaries have filed all Federal and other material tax returns and
reports required to be filed, and have paid all Federal and other material
taxes, assessments, fees and other governmental charges shown thereon to be due
and payable, and have paid all material taxes,

 

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assessments, fees and other governmental charges levied or imposed upon them or
their properties, income or assets as due and payable, except those which are
being contested in good faith by appropriate proceedings and for which adequate
reserves have been provided in accordance with GAAP. There is no proposed tax
assessment against either Co-Borrower or any of its Subsidiaries that would, if
made, have a Material Adverse Effect.

 

6.11 Financial Condition.

 

(a) The unaudited consolidated and consolidating financial statements of
Co-Borrowers dated April 30, 2003, and the related consolidated statements of
income or operations, shareholders’ or partners’ equity and cash flows for the
fiscal month ended on that date:

 

(i) were prepared in accordance with GAAP consistently applied throughout the
period covered thereby, except that as otherwise expressly noted therein;

 

(ii) fairly present the financial condition of the Co-Borrowers and their
Subsidiaries as of the date thereof and results of operations for the period
covered thereby; and

 

(iii) show all material indebtedness and other liabilities, direct or
contingent, of the Co-Borrowers and their consolidated Subsidiaries as of the
date thereof, including liabilities for taxes, material commitments and
Contingent Obligations.

 

(b) Since April 30, 2003, there has been no Material Adverse Effect.

 

6.12 Environmental Matters. The Co-Borrowers conduct in the ordinary course of
business a review of the effect of existing Environmental Laws and existing
Environmental Claims on their business, operations and properties, and as a
result thereof the Co-Borrowers have reasonably concluded that, except as
previously specifically disclosed in Schedule 6.12, such Environmental Laws and
Environmental Claims could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

 

6.13 Regulated Entities. Neither of the Co-Borrowers, nor any Person controlling
a Co-Borrower, or any of its Subsidiaries, is an “Investment Company” within the
meaning of the Investment Company Act of 1940. Except with respect to the
regulation of Avista under the Federal Power Act, 16 U.S.C. §§ 791a et seq.,
neither of the Co-Borrowers is subject to regulation under any Federal or state
statute or regulation limiting Co-Borrowers’ ability to incur Indebtedness.
Neither of the Co-Borrowers is now regulated as a “natural gas company” under
the Natural Gas Act, 15 U.S.C. §§ 717 et seq, or as a “public-utility company”
under the Public Utility Holding Company Act of 1935, 15 U.S.C. §§ 79 et seq.
Avista is subject to the jurisdiction of the Federal Energy Regulatory
Commission (“FERC”) as a public utility under the Federal Power Act. Pursuant to
such jurisdiction Avista is required by FERC to (a) have a rate schedule on file
with FERC, which rate schedule states that sales under the rate schedule shall
be made at rates established by agreement between purchasers and Avista, and (b)
file quarterly reports with FERC concerning sales of power pursuant to the rate
schedule. Avista is authorized by FERC, pursuant to Section 204 of the Federal
Power Act, 16 U.S.C. § 824c, to issue securities

 

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and assume obligations, including the Obligations under this Agreement, provided
that such issue is for some lawful object, within the corporate purposes of
Avista, compatible with the public interests, and reasonably necessary or
appropriate for such purposes. FERC has waived compliance by Avista with, or
granted Avista authority under, other Federal Power Act regulations pertaining
to public utilities.

 

6.14 No Burdensome Restrictions. Neither of the Co-Borrowers nor any of their
Subsidiaries is a party to or bound by any Contractual Obligation, or subject to
any restriction in any Organization Document, or any Requirement of Law, which
could reasonably be expected to have a Material Adverse Effect.

 

6.15 Copyrights, Patents, Trademarks and Licenses, Etc. To the Co-Borrowers’
best knowledge, the Co-Borrowers or their Subsidiaries own or are licensed or
otherwise have the right to use all of the patents, trademarks, service marks,
trade names, copyrights, contractual franchises, authorizations and other rights
that are reasonably necessary for the operation of their respective businesses,
without conflict with the rights of any other Person. To the knowledge of the
Co-Borrowers, no slogan or other advertising device, product, process, method,
substance, part or other material now employed, or now contemplated to be
employed, by any Co-Borrower or any Subsidiary infringes upon any rights held by
any other Person. Except as specifically disclosed in Schedule 6.05, no claim or
litigation regarding any of the foregoing is pending or threatened, and no
patent, invention, device, application, principle or any statute, law, rule,
regulation, standard or code is pending or, to the knowledge of the
Co-Borrowers, proposed.

 

6.16 Subsidiaries. The Co-Borrowers have no Subsidiaries other than those
specifically disclosed in part (a) of Schedule 6.16 hereto and have no equity
investments in any other corporation or entity other than those specifically
disclosed in part (b) of Schedule 6.16.

 

6.17 Insurance. Except as specifically disclosed in Schedule 6.17, the
properties of each Co-Borrower and its Subsidiaries are insured with financially
sound and reputable insurance companies not Affiliates of any Co-Borrower, in
such amounts, with such deductibles and covering such risks as are customarily
carried by companies engaged in similar businesses and owning similar properties
in localities where such Co-Borrower or such Subsidiary operates.

 

6.18 Full Disclosure. To the Co-Borrowers’ best knowledge, none of the
representations or warranties made by the Co-Borrowers or any of their
Subsidiaries in the Loan Documents as of the date such representations and
warranties are made or deemed made, and none of the statements contained in any
exhibit, report, statement or certificate furnished by or on behalf of the
Co-Borrowers or any of their Subsidiaries in connection with the Loan Documents
(including the offering and disclosure materials delivered by or on behalf of
the Co-Borrowers to the Banks prior to the Closing Date), contains any untrue
statement of a material fact or omits any material fact required to be stated
therein or necessary to make the statements made therein, in light of the
circumstances under which they are made, not misleading as of the time when made
or delivered.

 

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ARTICLE VII

 

AFFIRMATIVE COVENANTS

 

So long as any Bank shall be continuing to consider making Revolving Loans or
Issuing Letters of Credit hereunder, or any Loan or other Obligation shall
remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding:

 

7.01 Financial Statements. The Co-Borrowers shall deliver to the Banks, in form
and detail satisfactory to the Banks:

 

(a) as soon as available, but not later than 120 days after the end of each
fiscal year, a copy of the audited financial statements to include a balance
sheet as at the end of such year on a consolidated basis for the Co-Borrowers
and their Affiliates and Subsidiaries, with consolidating schedules and the
related statements of income or operations, shareholders’ equity and cash flows
for such year on a consolidated basis for the Co-Borrowers and their Affiliates
and Subsidiaries, setting forth in each case in comparative form the figures for
the previous fiscal year, and accompanied by the opinion of a
nationally-recognized independent public accounting firm (“Independent Auditor”)
which report shall state that such financial statements present fairly the
financial position for the periods indicated in conformity with GAAP applied on
a basis consistent with prior years. Such financial statements and opinion shall
(i) be accompanied by a “negative assurance letter” with respect to such
financial statement stating that “in connection with its audit, nothing came to
its attention that caused the Independent Auditor to believe that the
Co-Borrowers were not in compliance with the covenants of this Agreement insofar
as they related to financial and accounting matters,” and (ii) not contain a
going concern or scope of audit qualification and such opinion in all respects
must otherwise be acceptable to the Banks in their discretion. At such time, the
Co-Borrowers shall also deliver a report prepared by the Co-Borrowers and
certified by a Responsible Officer of each Co-Borrower reconciling the
calculations made on an Economic Basis with GAAP;

 

(b) as soon as available, but not later than forty-five (45) days after the end
of each month, consolidated and consolidating Co-Borrowers-prepared financial
statements for the Co-Borrowers in form acceptable to Banks, to be accompanied
by a report prepared by the Co-Borrowers reconciling the calculations made on an
Economic Basis with GAAP.

 

(c) as soon as available, but not later than sixty (60) days after the end of
each calendar quarter and calendar year end, unaudited financial statements for
Avista Capital in a form acceptable to Banks; and

 

(d) as soon as available, but not later than one hundred twenty (120) days after
the end of each calendar year, audited financial statements for Avista Capital
in a form acceptable to Banks, and accompanied by the opinion of the Independent
Auditor referred to in Subsection 7.01(a) above, in form acceptable to Banks.

 

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7.02 Certificates; Other Information. The Co-Borrowers shall furnish to the
Administrative Agent and the Banks:

 

(a) concurrently with the delivery of the financial statements referred to in
Subsections 7.01(a) and (b), a Compliance Certificate executed by a Responsible
Officer of the Co-Borrowers;

 

(b) as of the last day of each month and the fifteenth day of each month (or, if
such day is a weekend or a holiday, the Business Day immediately following such
day), delivered within three Business Days of the reporting date, and upon each
request for utilization of the Borrowing Base Line if there are no outstanding
amounts under the Borrowing Base Line on the date of such request, a Borrowing
Base Report, in each case executed by a Responsible Officer of the Co-Borrowers,
provided, that upon the occurrence of the amount of the difference between (i)
the sum of the amounts listed in subsection (b) of the definition of “Borrowing
Base Cap” and (ii) total outstandings under the Borrowing Base Line being less
than $25,000,000, a Borrowing Base Report shall be required weekly, on Wednesday
of each week as of Friday of the preceding week and on the 6th calendar day of
each month as of the last calendar day of the preceding month, in each case
executed by a Responsible Officer of the Co-Borrowers (provided the Co-Borrowers
shall have no duty to deliver two Borrowing Base Reports in the same calendar
week and if as a result of month end two such reports would be due during the
same calendar week, the Co-Borrowers shall not be required to deliver a weekly
report for the last Friday of such month, provided further that the Co-Borrower
shall have no duty to deliver a Borrowing Base Report if on the reporting date
under this subsection (b) there has been no utilization of the Borrowing Base
Line).

 

(c) as of the last day of each month, delivered within three Business Days of
the reporting date, a Value at Risk Report, certified by a Responsible Officer
of the Co-Borrowers in the form attached hereto as Exhibit F, except that if
there has been utilization of the Borrowing Base Line within the first fifteen
days of such month, a Value at Risk Report as of such fifteenth day shall be
furnished to the Administrative Agent within three Business Days of such day;

 

(d) on Wednesday of each week, a Volumetric Position Report in form acceptable
to the Banks, as of Friday of the preceding week, executed by a Responsible
Officer of the Co-Borrowers;

 

(e) on Wednesday of each week, a Mark-to-Market profit and loss statement on a
consolidated basis for the Co-Borrowers, in form acceptable to Banks, as of the
preceding Friday, certified by a Responsible Officer of the Co-Borrowers;
provided, however, Co-Borrowers shall provide such statements more frequently
upon request of Banks (The Mark-to-Market profit and loss statement delivered to
the Banks on Wednesday of each week, as of Friday of the preceding week, shall
include an estimate of Net Working Capital (as reported on the most recent
Compliance Certificate) adjusted for (i) Mark-to-Market gains and losses related
to positions with a term of less than one year, (ii) material capital
expenditures, and (iii) material capital contributions and distributions);

 

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(f) promptly when available, such additional information regarding the business,
financial or corporate affairs of the Co-Borrowers or any Subsidiary as the
Administrative Agent, at the request of any Bank, may from time to time
reasonably request;

 

(g) within five (5) days after the end of each calendar quarter, a quarterly
report of natural gas inventory storage locations at each quarter end;

 

(h) on or before the tenth (10th) Business Day of each month, a Stress Test
Report as of the end of the immediately preceding calendar month, in form and
substance satisfactory to Banks, setting forth the potential calculated losses
evidenced by a stress test of the Co-Borrowers’ (i) short-term book, plus (ii)
the long-term book using the greatest daily price percentage upward and/or
downward movement derived from the historical daily price fluctuations for the
period ending on the date of such calculation, multiplied by 1.5 and then
applied to the Co-Borrower’s short-term and long-term books; Co-Borrowers may
request that the Banks agree to substitute a different Stress Test in lieu of
the forgoing test, but the Banks may accept or reject such substitute test in
their sole discretion; and

 

(i) concurrently with the delivery of the Borrowing Base Report referred to in
Subsection 7.02(a), a report, in form and substance satisfactory to the Banks,
of the potential offsets from out-of-the-money forward positions with
counterparties whose Accounts or Exchange Receivables are included in the
calculation of the Borrowing Base Cap.

 

7.03 Notices. The Co-Borrowers shall promptly notify the Administrative Agent
and each Bank:

 

(a) of the occurrence of any Default or Event of Default, and of the occurrence
or existence of any event or circumstance that could reasonably be expected to
become a Default or Event of Default;

 

(b) of the occurrence of any event which could reasonably be expected to cause a
material impairment of the Collateral used to calculate the Borrowing Base Cap;

 

(c) of the occurrence of any event which could reasonably be expected to cause a
Material Adverse Effect, including (i) breach or non-performance of, or any
default under, a material Contractual Obligation of either Co-Borrower or any
Subsidiary; (ii) any material dispute, litigation, investigation, proceeding or
suspension between a Co-Borrower or any Subsidiary and any Governmental
Authority; or (iii) the commencement of, or any material development in, any
litigation or proceeding affecting a Co-Borrower or any Subsidiary, including
pursuant to any applicable Environmental Laws;

 

(d) of the occurrence of any of the following events affecting a Co-Borrower or
any ERISA Affiliate (but in no event more than 10 days after such Co-Borrower
receives notice or becomes aware of such event), and deliver to the
Administrative Agent and each Bank a copy of any notice with respect to such
event that is filed with a Governmental Authority and any notice delivered by a
Governmental Authority to such Co-Borrower or any ERISA Affiliate with respect
to such event:

 

(i) an ERISA Event;

 

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(ii) the present value of all benefit liabilities under each Plan (based on
those assumptions used to fund such Plan), as of the last annual valuation date
applicable thereto, exceeds by more than $5,000,000.00 the value of the assets
of such Plan;

 

(iii) the adoption of, or the commencement of contributions to, any Plan subject
to Section 412 of the Code by the Co-Borrowers or any ERISA Affiliate, other
than Plans in existence on the date of this Agreement;

 

(iv) the adoption of any amendment to a Plan subject to Section 412 of the Code,
if such amendment results in (a) a material increase in contributions or (b) the
present value of all benefit liabilities under each Plan (based on those
assumptions used to fund such Plan), as of the last annual valuation date
applicable thereto, exceeding by more than $5,000,000.00 the value of the assets
of such Plan, other than amendments required to maintain a Plan’s tax qualified
status under Section 401(a) of the Code;

 

(e) of any material change in accounting policies or financial reporting
practices by either Co-Borrower;

 

(f) of any intended relocation of natural gas inventory or any intended new
location of natural gas inventory owned by a Co-Borrower, at least ten (10)
Business Days prior to the date such inventory is to be stored at such location;
and

 

(g) of any amounts deposited in the Wells Fargo Collateral Account pursuant to
the Wells Fargo FX Documents.

 

Each notice under this Section shall be accompanied by a written statement by a
Responsible Officer of the Co-Borrowers setting forth details of the occurrence
referred to therein, and stating what action the Co-Borrowers or any affected
Subsidiary proposes to take with respect thereto and at what time. Each notice
under Subsection 7.03(a) shall describe with particularity any and all clauses
or provisions of this Agreement or other Loan Document that have been (or
reasonably could be expected to be) breached or violated as therein provided.

 

7.04 Preservation of Corporate Existence, Etc. The Co-Borrowers shall, and shall
cause each of their Subsidiaries to:

 

(a) preserve and maintain in full force and effect its corporate or partnership
existence and good standing under the laws of its state or jurisdiction of
incorporation or organization;

 

(b) preserve and maintain in full force and effect all governmental rights,
privileges, qualifications, permits, licenses and franchises necessary or
desirable in the normal conduct of its business;

 

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(c) use reasonable efforts, in the ordinary course of business, to preserve its
business organization and goodwill; and

 

(d) preserve or renew all of its registered patents, trademarks, trade names and
service marks, the non-preservation of which could reasonably be expected to
have a Material Adverse Effect.

 

7.05 Maintenance of Property. Each of the Co-Borrowers shall maintain, and shall
cause each of its Subsidiaries to maintain, and preserve all its property which
is used or useful in its business in good working order and condition, ordinary
wear and tear excepted and make all necessary repairs thereto and renewals and
replacements thereof except in any case where the failure to do so could not
reasonably be expected to have a Material Adverse Effect.

 

7.06 Insurance. Each of the Co-Borrowers shall maintain, and shall cause each of
its Subsidiaries to maintain, with financially sound and reputable independent
insurers, insurance with respect to its properties and business against loss or
damage of the kinds customarily insured against by Persons engaged in the same
or similar business, of such types and in such amounts as are customarily
carried under similar circumstances by such other Persons, including, without
limitation, marine cargo insurance, if appropriate. Administrative Agent, for
the benefit of the Banks, shall be named as an additional insured and loss payee
under all such polices, without liability for premiums or club calls.

 

7.07 Payment of Obligations. Each of the Co-Borrowers shall, and shall cause
each of its Subsidiaries and Affiliates to, pay and discharge as the same shall
become due and payable, all their respective obligations and liabilities,
including:

 

(a) all tax liabilities, assessments and governmental charges or levies upon it
or its properties or assets, unless the same are being contested in good faith
by appropriate proceedings and adequate reserves in accordance with GAAP are
being maintained by such Co-Borrower or such Subsidiary;

 

(b) all lawful claims which, if unpaid, would by law become a Lien upon its
property unless the same are being contested in good faith by appropriate
proceedings and adequate reserves in accordance with GAAP are being maintained
by such Co-Borrower or Subsidiary, and provided that at such time the claim
becomes a Lien (other than a lis pendens notice), it shall be promptly paid; and

 

(c) all indebtedness, as and when due and payable, but subject to any
subordination provisions contained in any instrument or agreement evidencing
such Indebtedness.

 

7.08 Compliance with Laws. Each of the Co-Borrowers shall comply, and shall
cause each of its Subsidiaries and Affiliates to comply, with all Requirements
of Law of any Governmental Authority having jurisdiction over it or its business
(including the Federal Fair Labor Standards Act).

 

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7.09 Compliance with ERISA. Each of the Co-Borrowers shall, and shall cause each
of its ERISA Affiliates to: (a) maintain each Plan in material compliance with
the applicable provisions of ERISA, the Code and other applicable federal or
state law; (b) cause each Plan which is qualified under Section 401(a) of the
Code to maintain such qualification; and (c) make all required contributions to
any Plan subject to Section 412 of the Code.

 

7.10 Inspection of Property and Books and Records. Each of the Co-Borrowers
shall maintain and shall cause each of its Subsidiaries to maintain proper books
of record and account, in which full, true and correct entries in conformity
with GAAP consistently applied shall be made of all financial transactions and
matters involving the assets and business of such Co-Borrower and Subsidiary.
Each Co-Borrower shall permit, and shall cause each of its Subsidiaries to
permit representatives and independent contractors of the Administrative Agent
or any Bank to visit and inspect any of their respective properties, to examine
their respective corporate, financial and operating records, and make copies
thereof or abstracts therefrom, and to discuss their respective affairs,
finances and accounts with their respective directors, officers, and independent
public accountants, all at the expense of the Administrative Agent or Bank
causing such inspection and at such reasonable times during normal business
hours and as often as may be reasonably desired, upon reasonable advance notice
to the Co-Borrowers; provided, however, when an Event of Default exists the
Administrative Agent or any Bank may do any of the foregoing at the expense of
the Co-Borrowers at any time during normal business hours and without advance
notice.

 

7.11 Environmental Laws. Each of the Co-Borrowers shall, and shall cause each of
its Subsidiaries to, conduct its operations and keep and maintain its property
in compliance in all material respects with all Environmental Laws.

 

7.12 Use of Proceeds. Each of the Co-Borrowers shall use the proceeds of the
Loans for the uses described in this Agreement and not in contravention of any
Requirement of Law or of any Loan Document restrictions on use of loan proceeds.
The Co-Borrowers shall not use the proceeds of the Loan or any Letter of Credit
to acquire, directly or indirectly, any Margin Stock.

 

7.13 Borrowing Base Audit. At such times as Administrative Agent deems
advisable, the Co-Borrowers will allow Administrative Agent or an entity
satisfactory to Administrative Agent to conduct a thorough examination of the
Collateral used to calculate the Borrowing Base Cap, and the Co-Borrowers will
fully cooperate in such examination. The Co-Borrowers shall pay the reasonable
costs and expenses related to the examinations.

 

7.14 Risk Management Procedures Audit. At such times as Administrative Agent
deems advisable, the Co-Borrowers will allow Administrative Agent or an entity
satisfactory to Administrative Agent to conduct a thorough examination of the
Co-Borrowers’ risk management procedures, and the Co-Borrowers will fully
cooperate in such examination. Such examinations shall not exceed two (2) per
calendar year; provided, however, at any time the Administrative Agent or any
Bank deems it necessary, at its option, the Administrative Agent, any Bank or a
third party designated by the Administrative Agent may conduct additional
examinations. The Co-Borrowers shall pay the reasonable costs and expenses
related to the examinations.

 

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7.15 Payments to Bank Blocked Accounts.

 

(a) The Co-Borrowers promptly, and from time to time, shall notify all Account
Debtors under all of its Accounts to make all payments under such Accounts to
the Bank Blocked Accounts or the Lockbox and shall provide Banks with reasonable
evidence of such notification. In the event that any Account Debtor does not
make any payment directly to a Bank Blocked Account or the Lockbox, such
Co-Borrower shall promptly deposit such amounts into its Bank Blocked Account or
Lockbox.

 

(b) Co-Borrowers may transfer funds from the Bank Blocked Accounts into an
Operating Account, a Wells Fargo Investment Account, or a Paribas Investment
Account, until such time as Wells Fargo receives an Activation Notice pursuant
to the Override Agreement. Prior to the receipt by Wells Fargo of such an
Activation Notice, Co-Borrowers may transfer funds among such Accounts and may
make disbursements from the Operating Accounts unless such disbursement is
otherwise restricted by the provision of this Agreement.

 

(c) The Collateral Agent may, in its sole discretion or shall at the discretion
of any Bank, deliver an Activation Notice to Wells Fargo with a copy to the
Co-Borrowers. During an Activation Period, in order to request a transfer from
the Bank Blocked Accounts, Co-Borrowers shall utilize the form attached hereto
as Exhibit I, which may be sent by facsimile to the Collateral Agent. During an
Activation Period the Collateral Agent may from time to time approve a request
of the Co-Borrowers to transfer proceeds from the Bank Blocked Accounts into an
Operating Account, a Wells Fargo Investment Account, or a Paribas Investment
Account, and may from time to time approve a request of the Co-Borrowers to wire
transfer funds from the Operating Accounts and to pay checks presented to the
Operating Accounts (including any such approvals conducted by electronic means
satisfactory to the Collateral Agent). However, during an Activation Period, the
Collateral Agent has absolutely no duty to approve any such request to transfer
funds into any Operating Account, Wells Fargo Investment Account or Paribas
Investment Account or any such wire transfer or payment of any such check, and
at any time may refuse to approve any such request to transfer funds into any
Operating Account, Wells Fargo Investment Account or Paribas Investment Account
or to wire transfer funds out of any Operating Account or to pay any such check
presented against any Operating Account, in each case until all Obligations have
been satisfied.

 

(d) During an Activation Period, and provided there exists an Event of Default
at such time, the Collateral Agent at any time may apply amounts contained in
the Bank Blocked Accounts, the Operating Accounts, the Wells Fargo Investment
Accounts or the Paribas Investment Accounts toward satisfaction of the
Obligations in accordance with the requirements of this Agreement. The
Co-Borrowers and each other Bank other than BNP Paribas acknowledge and agree
that during an Activation Period the Bank Blocked Accounts, the Operating
Accounts, the Paribas Investment Accounts and the Lockbox are under the
exclusive dominion and control of the Collateral Agent. The Co-Borrowers further
acknowledge and agree that although the Collateral Agent may from time to time
during an Activation Period approve a request to transfer funds into one of the
Wells Fargo Investment Accounts, the Collateral Agent has no duty to approve any
such request and to the extent of any transfer, all amounts in the Wells Fargo

 

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Investment Accounts are and shall remain during an Activation Period in the
exclusive dominion and control of the Collateral Agent.

 

7.16 Compliance with FERC. Each Co-Borrower agrees to comply with all
requirements of the FERC applicable to such Co-Borrower. Each Co-Borrower
further agrees to (a) promptly notify the Banks of any request received from
FERC for information regarding Avista’s business operations or any other
material development involving Avista’s relationship with FERC, (b) keep the
Banks informed as to such matters between such Co-Borrower and FERC as the Banks
may request and (c) to make available to the Banks for inspection copies of all
material correspondence between such Co-Borrower and FERC.

 

7.17 [Intentionally Deleted].

 

7.18 Estimate of Net Working Capital. The Co-Borrowers shall maintain on a
bi-weekly basis an estimate of Net Working Capital and such estimate shall not
be less than the minimum amount set forth on Subsection 8.12(a). Such estimate
shall be calculated based upon the Net Working Capital (as reported on the most
recent Compliance Certificate) adjusted for (a) Mark-to-Market gains and losses
related to positions with a term of less than one year, (b) material capital
expenditures, and (c) material capital contributions and distributions.

 

7.19 Further Information. Co-Borrowers shall deliver to Administrative Agent,
promptly upon sending or receipt, copies of any and all management letters and
correspondence relating to management letters, sent or received by Co-Borrowers
to or from the Independent Auditor.

 

ARTICLE VIII

 

NEGATIVE COVENANTS

 

So long as any Loan or other Obligation shall remain unpaid or unsatisfied, or
any Letter of Credit shall remain outstanding, unless the Banks waive compliance
in writing:

 

8.01 Limitation on Liens. The Co-Borrowers shall not, and shall not suffer or
permit any Subsidiary to, directly or indirectly, make, create, incur, assume or
suffer to exist any Lien upon or with respect to any part of its property,
whether now owned or hereafter acquired, other than the following (“Permitted
Liens”):

 

(a) any Lien existing on property of a Co-Borrower or any of its Subsidiaries on
the Closing Date and set forth in Schedule 8.01 securing Indebtedness
outstanding on such date;

 

(b) any Lien created under any Loan Document;

 

(c) Liens for taxes, fees, assessments or other governmental charges which are
not delinquent or remain payable without penalty, or to the extent that
non-payment thereof is

 

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permitted by Section 7.07, provided that no notice of lien has been filed or
recorded under the Code;

 

(d) carriers’, warehousemen’s, mechanics’, landlords’, materialmen’s,
repairmen’s or other similar Liens arising in the ordinary course of business
which are not delinquent or remain payable without penalty and, with respect to
any such warehousemen’s or landlord’s lien, such liens only secure accrued
rental charges;

 

(e) Liens (other than any Lien imposed by ERISA) consisting of pledges or
deposits required in the ordinary course of business in connection with workers’
compensation, unemployment insurance and other social security legislation;

 

(f) Liens on the property of the Co-Borrowers or their Subsidiaries securing (i)
the non-delinquent performance of bids, trade contracts (other than for borrowed
money), leases, statutory obligations, (ii) contingent obligations on surety and
appeal bonds, and (iii) other non-delinquent obligations of a like nature; in
each case, incurred in the ordinary course of business, provided all such Liens
in the aggregate would not (even if enforced) cause a Material Adverse Effect;

 

(g) Liens consisting of judgment or judicial attachment liens, provided that the
enforcement of such Liens is effectively stayed and all such unstayed liens in
the aggregate at any time outstanding for the Co-Borrowers and their
Subsidiaries do not exceed $100,000.00;

 

(h) easements, rights-of-way, restrictions and other similar encumbrances
incurred in the ordinary course of business which, in the aggregate, are not
substantial in amount, and which do not in any case materially interfere with
the ordinary conduct of the business of the Co-Borrowers and their Subsidiaries;

 

(i) purchase money security interests (other than capital leases) on any
property acquired or held by a Co-Borrower or its Subsidiaries in the ordinary
course of business, securing Indebtedness incurred or assumed for the purpose of
financing all or any part of the cost of acquiring such property; provided that
(i) any such Lien attaches to such property concurrently with or within 20 days
after the acquisition thereof, (ii) such Lien attaches solely to the property so
acquired in such transaction, (iii) the principal amount of the debt secured
thereby does not exceed 100% of the cost of such property, and (iv) the
principal amount of the Indebtedness secured by any and all such purchase money
security interests shall not at any time exceed $100,000.00;

 

(j) Liens of interest owners, including without limitation, Liens arising as
would be defined in Texas Bus. & Com. Code Section 9.319, comparable laws of the
states of Oklahoma, Kansas, Wyoming or New Mexico, or other comparable law; and

 

(k) The Lien permitted pursuant to that certain Security Agreement: Rights to
Payment dated as of October 31, 2002 of Avista in favor of Wells Fargo.

 

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8.02 Consolidations and Mergers. The Co-Borrowers shall not, nor suffer or
permit any of their Subsidiaries to, merge, consolidate with or into, or convey,
transfer, lease or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to or in favor of any Person.

 

8.03 Limitation on Indebtedness. The Co-Borrowers shall not, nor suffer or
permit any of their Subsidiaries to, create, incur, assume, suffer to exist, or
otherwise become or remain directly or indirectly liable with respect to, any
Indebtedness, except:

 

(a) Indebtedness incurred pursuant to or in accordance with, this Agreement;

 

(b) Indebtedness consisting of trade payables in the ordinary course of
business;

 

(c) Indebtedness existing on the Closing Date, and described on Schedule 8.01;

 

(d) Indebtedness in respect of purchase money security interests permitted by
Section 8.01 hereof;

 

(e) Indebtedness in respect of Contingent Obligations permitted by Section 8.06
hereof; and

 

(f) the Eligible Subordinated Debt.

 

8.04 Transactions with Affiliates. The Co-Borrowers shall not, nor suffer or
permit any of their Subsidiaries to, enter into any transaction with any
Affiliate of a Co-Borrower, except upon fair and reasonable terms no less
favorable to such Co-Borrower or such Subsidiary than would obtain in a
comparable arm’s-length transaction with a Person not an Affiliate of a
Co-Borrower or such Subsidiary.

 

8.05 Use of Proceeds. The Co-Borrowers shall not, nor suffer or permit any of
their Subsidiaries to, use any portion of the Loan proceeds or any Letter of
Credit, directly or indirectly, (a) to purchase or carry Margin Stock, (b) to
repay or otherwise refinance indebtedness of a Co-Borrower or others incurred to
purchase or carry Margin Stock, (c) to extend credit for the purpose of
purchasing or carrying any Margin Stock, (d) to acquire any security in any
transaction that is subject to Section 13 or 14 of the Exchange Act; or (e) to
invest in the Wells Fargo Investment Accounts.

 

8.06 Contingent Obligations. The Co-Borrowers shall not, nor suffer or permit
any of their Subsidiaries to, create, incur, assume or suffer to exist any
Contingent Obligations except:

 

(a) endorsements for collection or deposit in the ordinary course of business;

 

(b) swap contracts entered into in the ordinary course of business as bona fide
hedging transactions; and

 

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(c) Contingent Obligations of the Co-Borrowers and their Subsidiaries existing
as of the Closing Date and described on Schedule 8.06.

 

8.07 Restricted Payments. The Co-Borrowers shall not, nor suffer or permit any
of their Subsidiaries to, declare or make any dividend payment or other
distribution of assets, properties, cash, rights, obligations or securities on
account of any shares of any class of its capital stock, or purchase, redeem or
otherwise acquire for value any shares of its capital stock or any warrants,
rights or options to acquire such shares, now or hereafter outstanding; except
that the Co-Borrowers may:

 

(a) declare and make dividend payments or other distributions payable solely in
their common stock;

 

(b) purchase, redeem or otherwise acquire shares of their common stock or
warrants or options to acquire any such shares with the proceeds received from
the substantially concurrent issue of new shares of their common stock; and

 

(c) declare and make dividend payments to Avista Capital provided, that no such
dividend shall be declared or paid unless, immediately after giving effect to
such proposed action, no Default or Event of Default would exist, provided,
further, that upon each payment of a dividend, the Co-Borrowers execute and
deliver to the Banks a Notification of Dividend Payment, substantially in the
form attached hereto as Schedule 8.07(c).

 

8.08 ERISA. The Co-Borrowers shall not, nor suffer or permit any of their ERISA
Affiliates to: (a) engage in a prohibited transaction or violation of the
fiduciary responsibility rules with respect to any Plan; or (b) engage in a
transaction that could be subject to Section 4069 or 4212(c) of ERISA.

 

8.09 Change in Business. The Co-Borrowers shall not, nor suffer or permit any of
their Subsidiaries to, engage in any line of business or trading strategies,
policies and procedures other than those outlined on Schedule 8.09.

 

8.10 Accounting Changes. The Co-Borrowers shall not, nor suffer or permit any of
their Subsidiaries to, make any significant change in accounting treatment or
reporting practices, except as required by GAAP, or change the fiscal year of
such Co-Borrower or of any Subsidiary without the prior written consent of the
Banks.

 

8.11 Value at Risk of Open Positions.

 

(a) At no time will the Co-Borrowers allow the total Value at Risk of their Open
Positions to exceed $5,200,000.00.

 

(b) At no time will the Co-Borrowers allow the Value at Risk of their Open
Positions in electricity only to exceed $4,500,000.00.

 

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(c) At no time will the Co-Borrowers allow the Value at Risk of their Open
Positions in natural gas only to exceed $3,600,000.00.

 

8.12 Consolidated Financial Covenants. The Co-Borrowers will, at all times,
observe the following financial covenants, on a consolidated basis:

 

(a) Minimum Net Working Capital in an amount not less than $15,600,000.00,
provided however if there are no amounts outstanding under the Borrowing Base
Line, for purposes of this Subsection 8.12(a) “Net Working Capital” shall be
defined to include any cash securing Letters of Credit issued under the
Collateralized L/C Line;

 

(b) Net Working Capital in an amount required to support the Elected Line Cap
elected by the Co-Borrowers;

 

(c) Maximum ratio of total liabilities, including without limitation, energy
commodity liabilities, (adjusted by netting Mark-to-Market assets and
liabilities from the same counter parties), plus Letters of Credit not
supporting balance sheet liabilities to Net Worth of 6:1; and

 

(d) Minimum Net Worth in an amount not less than $130,000,000.00,

 

provided that, in no event will the Co-Borrowers’ Net Working Capital or Net
Worth calculated in accordance with GAAP be less than zero.

 

8.13 Risk Management Policy. The Co-Borrowers (a) will not materially change
their revised risk management policies or the volumetric limits reflected on
Exhibit H attached hereto, without the prior written consent of Administrative
Agent and the Banks, and (b) will comply with such risk management policies in
all material respects and with the volumetric limits reflected on Exhibit H
attached hereto in all instances.

 

8.14 Hourly and Daily Trading Expense. The Co-Borrowers will not permit, at any
time, the exposure related to hourly and daily trading of electricity to exceed
the lesser of (i) 3 1/2% of Co-Borrowers’ last reported estimated Net Working
Capital, or (ii) $1,750,000.00.

 

8.15 Loans and Investments. Neither Co-Borrower shall purchase or acquire, or
suffer or permit any Subsidiary to purchase or acquire, or make any commitment
therefor, any capital stock, equity interest, or any obligations or other
securities of, or any interest in, any Person, or make or commit to make any
Acquisitions, or make or commit to make any advance, loan, extension of credit
or capital contribution to or any other investment in, any Person including
Avista Corporation, Avista Capital or any other Affiliate of either Co-Borrower,
except for:

 

(a) investments in cash equivalents held directly by the Co-Borrowers and
Marketable Securities;

 

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(b) extensions of credit in the nature of accounts receivable or notes
receivable arising from the sale or lease of goods or services in the ordinary
course of business;

 

(c) advances, loans or extensions of credit to Avista Capital provided the
following conditions are satisfied at the time such advance, loan or extension
of credit is made:

 

(i) The tenor of such advance, loan or extension of credit is 90 days or less;

 

(ii) Avista Capital certifies to the Co-Borrowers and the Administrative Agent
that it has liquidity sufficient to repay the loan immediately upon demand by
the Co-Borrowers;

 

(iii) The aggregate advances, loans or extensions of credit do not exceed 30% of
the Co-Borrowers’ Net Worth;

 

(iv) No Default or Event of Default exists;

 

(v) The instrument or other evidence of Avista Capital’s indebtedness to the
Co-Borrowers provides that if there is a Default or Event of Default hereunder,
such indebtedness shall become immediately due and payable; and

 

(vi) The aggregate advances, loans and extensions of credit together with the
purchases of Avista Corporation’s debt securities permitted under Subsection (d)
below do not exceed 50% of the Co-Borrowers’ Net Worth; and

 

(d) purchases of debt securities of Avista Corporation provided the following
conditions are satisfied at the time such purchase is made:

 

(i) the debt security being purchased will be treated as a long-term asset on
the books of the Co-Borrowers;

 

(ii) The aggregate purchased debt securities do not exceed 30% of the
Co-Borrowers’ Net Worth;

 

(iii) No Default or Event of Default exists;

 

(iv) The aggregate purchased debt securities together with the advances, loans
and extensions of credit permitted under Subsection (c) above do not exceed 50%
of the Co-Borrowers’ Net Worth; and

 

(v) Upon delivery to the Collateral Agent of the debt securities being purchased
(which delivery shall occur within five (5) Business Days of the purchase), or
other appropriate arrangements, the Collateral Agent will have a first priority
perfected security interest in such debt securities.

 

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Provided that if there is a Default or Event of Default hereunder, the
Administrative Agent may demand that the Co-Borrowers sell the purchased debt
securities.

 

8.16 Certification. Upon the making of any advance, loan or extension of credit
to Avista Capital under Subsection 8.15(c) or the purchase of debt securities of
Avista Corporation under Subsection 8.15(d), the Co-Borrowers shall promptly
furnish a certification to the Administrative Agent certifying that the
conditions of Subsection 8.15(c) or 8.15(d), as the case may be, have been
satisfied.

 

8.17 Change of Management. Co-Borrowers shall not permit any Change of
Management. For purposes of this Section 8.17, “Change of Management” shall mean
that any of Dennis Vermillion, Gary Ely, Michael D’Arienzo or David Dickson
cease to occupy their present positions with the Co-Borrowers, and the
Co-Borrowers shall have failed to replace such individuals with persons
possessing similar expertise (reasonably satisfactory to the Banks) within
ninety (90) days of such event.

 

8.18 Stress Test Short Term Book/Long Term Book. At no time will either
Co-Borrower allow the results of the stress test, using the method described in
Subsection 7.02(h) and evidenced by the stress test report applied to its
short-term book, plus the dollar amount of the long-term stress test result that
is over and above the long-term book value recorded on the balance sheet, to
exceed, for two consecutive calendar months, the lesser of (i) 90% of the
Adjusted Net Working Capital required under Section 8.12 hereof, or (ii)
$50,000,000.00.

 

8.19 Posted Collateral Investments. At no time will either Co-Borrower invest
any Posted Collateral in any Marketable Securities with tenors beyond 90 days.

 

8.20 Wells Fargo FX Documents. Co-Borrower shall not permit any material
amendment of the Wells Fargo FX Documents.

 

ARTICLE IX

 

EVENTS OF DEFAULT

 

9.01 Event of Default. Any of the following shall constitute an “Event of
Default”:

 

(a) Non-Payment. Either Co-Borrower fails to pay any amount payable hereunder or
under any other Loan Document when due; or

 

(b) Representation or Warranty. Any representation or warranty made or deemed
made herein, in any other Loan Document, or which is contained in any
certificate, document or financial or other statement by a Co-Borrower or
Guarantor, or any Responsible Officer thereof furnished at any time under this
Agreement, or in or under any other Loan Document, is incorrect or incomplete in
any respect on or as of the date made or deemed made; or

 

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(c) Covenant Defaults. Either Co-Borrower fails to perform or observe any other
term, covenant or agreement contained in any of the Loan Documents; or

 

(d) Cross-Default. Either Co-Borrower or any Subsidiary of a Co-Borrower (i)
fails to make any payment in respect of any Indebtedness or Contingent
Obligation having an aggregate principal amount (including undrawn committed or
available amounts and including amounts owing to all creditors under any
combined or syndicated credit arrangement) of more than $100,000.00 when due
(whether by scheduled maturity, required prepayment, acceleration, demand, or
otherwise); or (ii) fails to perform or observe any other material condition or
covenant, or any other event shall occur or condition exist, under any agreement
or instrument relating to any such Indebtedness or Contingent Obligation, if,
after expiration of any grace or cure period therein provided, the effect of
such failure, event or condition is to cause, or to permit the holder or holders
of such Indebtedness or beneficiary or beneficiaries of such Indebtedness (or a
trustee or agent on behalf of such holder or holders or beneficiary or
beneficiaries) to cause such Indebtedness to be declared to be due and payable
prior to its stated maturity, or such Contingent Obligation to become payable or
cash collateral in respect thereof to be demanded; or

 

(e) Insolvency; Voluntary Proceedings. Either Co-Borrower or any Subsidiary of a
Co-Borrower (i) ceases or fails to be solvent, or generally fails to pay, or
admits in writing its inability to pay, its debts as they become due, whether at
stated maturity or otherwise; (ii) commences any Insolvency Proceeding with
respect to itself; or (iii) takes any action to effectuate or authorize any of
the foregoing; or

 

(f) Involuntary Proceedings. (i) Any involuntary Insolvency Proceeding is
commenced or filed against either Co-Borrower or any Subsidiary of a
Co-Borrower, or any writ, judgment, warrant of attachment, execution or similar
process, is issued or levied against a substantial part of a Co-Borrower or any
Subsidiary or any of either Co-Borrower’s properties, and any such proceeding or
petition shall not be dismissed, or such writ, judgment, warrant of attachment,
execution or similar process shall not be released, vacated or fully bonded in
each case within 60 days after commencement, filing or levy; (ii) either
Co-Borrower or any Subsidiary of a Co-Borrower admits the material allegations
of a petition against it in any Insolvency Proceeding, or an order for relief
(or similar order under non-U.S. law) is ordered in any Insolvency Proceeding;
or (iii) either Co-Borrower or any Subsidiary of a Co-Borrower acquiesces in the
appointment of a receiver, trustee, custodian, conservator, liquidator,
mortgagee in possession (or agent therefor), or other similar Person for itself
or a substantial portion of its property or business; or

 

(g) ERISA. (i) An ERISA Event shall occur with respect to a Plan or
Multiemployer Plan which has resulted or could reasonably be expected to result
in liability of either Co-Borrower under Title IV of ERISA to the Plan,
Multiemployer Plan or the PBGC in an aggregate amount in excess of
$10,000,000.00; (ii) the present value of all benefit liabilities under each
Plan (based on the assumptions used to fund such Plan), as of the last annual
valuation date applicable thereto, exceeds by more than $25,000,000.00 the value
of the assets of such Plan; or (iii) either Co-Borrower or any ERISA Affiliate
shall fail to pay when due, any

 

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installment payment with respect to its withdrawal liability under Section 4201
of ERISA under a Multiemployer Plan in an aggregate amount in excess of
$100,000.00; or

 

(h) Monetary Judgments or Orders. One or more non-interlocutory judgments,
non-interlocutory orders, decrees, arbitration awards or administrative orders
is entered against either Co-Borrower or any Subsidiary of a Co-Borrower, which
such judgment, order, decree or award is not effectively stayed pending appeal
thereof, involving in the aggregate a liability as to any single or related
series of transactions, incidents or conditions, to pay an amount of $100,000.00
or more unless such Co-Borrower has demonstrated to the satisfaction of the
Administrative Agent that such Co-Borrower has established adequate reserves for
such liability; or

 

(i) Non-Monetary Judgments or Orders. Any non-monetary judgment, order or decree
is entered against either Co-Borrower or any Subsidiary of a Co-Borrower which
does or would reasonably be expected to have a Material Adverse Effect; or

 

(j) Change of Control. There occurs any Change of Control not previously
approved by the Banks, including without limitation any Change of Control
arising as a result of any pledge, hypothecation assignment or other transfer
not previously approved by the Banks; or

 

(k) Adverse Change. There occurs a Material Adverse Effect; or

 

(l) Guarantor Defaults. Either Guarantor fails to perform or observe any term,
covenant or agreement in the Guaranty executed by such Guarantor; including
without limitation the failure of Avista Capital to maintain minimum Net Worth
at least equal to $160,000,000.00, or Avista Capital fails to perform under any
subordination agreement issued for the benefit of the Banks or such Guaranty or
any subordination agreement issued for the benefit of the Banks is for any
reason (other than satisfaction in full of all Obligations and the termination
of the Loans) partially (including with respect to future advances) or wholly
revoked or invalidated, or otherwise ceases to be in full force and effect, or
such Guarantor or any other Person contests in any manner the validity or
enforceability thereof or denies that it has any further liability or obligation
thereunder, or any event described at subsections (e), (f), (g), (h), (i) or (k)
of this Section occurs with respect to such Guarantor; or

 

(m) Guarantor Cross-Default. Either Guarantor or any of their subsidiaries (i)
fail to make any payment in respect of (A) any Indebtedness or Contingent
Obligation owing to either Agent or an Affiliate of either Agent or (B) in
respect of any Indebtedness or Contingent Obligation having an aggregate
principal amount of more than $1,000,000.00, when due (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise); or (ii) fail
to perform or observe any other material condition or covenant, or any other
event shall occur or condition exist, under any agreement or instrument relating
to any such Indebtedness or Contingent Obligation, if, after expiration of any
grace or cure period therein provided, the effect of such failure, event or
condition is to cause, or to permit the holder or holders of such Indebtedness
or beneficiary or beneficiaries of such Indebtedness (or a trustee or agent on
behalf of such holder or holders or beneficiary or beneficiaries) to cause such

 

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Indebtedness to be declared to be due and payable prior to its stated maturity,
or such Contingent Obligation to become payable or cash collateral in respect
thereof to be demanded; or

 

(n) Downgrade of Avista Corporation The long-term indebtedness of Avista
Corporation is rated below BB+ or the equivalent thereof by Standard & Poor’s
Ratings Group, a division of McGraw-Hill, Inc., or Ba1 or the equivalent thereof
by Moody’s Investors Services, Inc.

 

9.02 Remedies. If any Event of Default occurs, the Administrative Agent may and
shall, at the request of the Required Banks:

 

(a) declare an amount equal to the maximum aggregate amount that is or at any
time thereafter may become available for drawing by the beneficiary under any
outstanding Letters of Credit (whether or not any beneficiary shall have
presented, or shall be entitled at such time to present, the drafts or other
documents required to draw under such Letters of Credit) to be immediately due
and payable, and declare the unpaid principal amount of all outstanding Loans,
all interest accrued and unpaid thereon, and all other amounts owing or payable
hereunder or under any other Loan Document to be immediately due and payable,
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived by the Co-Borrowers; and

 

(b) exercise on behalf of itself and the Banks all rights and remedies available
to it and the Banks under the Loan Documents or applicable law including,
without limitation, seeking to lift the stay in effect under the Insolvency
Proceeding;

 

provided, however, that upon the occurrence of any event specified in subsection
(e) or (f) of Section 9.01, an amount equal to the maximum aggregate amount that
is or at any time thereafter may become available for drawing by the beneficiary
under any outstanding Letters of Credit (whether or not any beneficiary shall
have presented, or shall be entitled at such time to present, the drafts or
other documents required to draw under such Letters of Credit) together with the
unpaid principal amount of all outstanding Loans and all interest and other
amounts as aforesaid shall automatically become due and payable without further
act of the Administrative Agent, the Issuing Bank or any Bank.

 

9.03 Rights Not Exclusive. The rights provided for in this Agreement and the
other Loan Documents are cumulative and are not exclusive of any other rights,
powers, privileges or remedies provided by law or in equity, or under any other
instrument, document or agreement now existing or hereafter arising.

 

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ARTICLE X

 

THE ADMINISTRATIVE AGENT

 

10.01 Appointment and Authorization.

 

(a) Each Bank hereby irrevocably (subject to Section 10.09) appoints, designates
and authorizes the Administrative Agent to take such action on its behalf under
the provisions of this Agreement and each other Loan Document and to exercise
such powers and perform such duties as are expressly delegated to it by the
terms of this Agreement or any other Loan Document, together with such powers as
are reasonably incidental thereto. Notwithstanding any provision to the contrary
contained elsewhere in this Agreement or in any other Loan Document, the
Administrative Agent shall not have any duties or responsibilities, except those
expressly set forth herein, nor shall the Administrative Agent have or be deemed
to have any fiduciary relationship with any Bank, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this Agreement or any other Loan Document or otherwise exist against the
Administrative Agent. Without limiting the generality of the foregoing sentence,
the use of the term “agent” in this Agreement with reference to the
Administrative Agent is not intended to connote any fiduciary or other implied
(or express) obligations arising under agency doctrine of any applicable law.
Instead, such term is used merely as a matter of market custom and is intended
to create or reflect only an administrative relationship between independent
contracting parties.

 

(b) The Issuing Bank shall act on behalf of the Banks with respect to any
Letters of Credit Issued by it and the documents associated therewith until such
time and except for so long as the Administrative Agent may agree at the request
of the Required Banks to act for such Issuing Bank with respect thereto;
provided, however, that the Issuing Bank shall have all of the benefits and
immunities (i) provided to the Administrative Agent in this Article X with
respect to any acts taken or omissions suffered by the Issuing Bank in
connection with Letters of Credit Issued by it or proposed to be Issued by it
and the application and agreements for letters of credit pertaining to the
Letters of Credit as fully as if the term “Agent”, as used in this Article X,
included the Issuing Bank with respect to such acts or omissions, and (ii) as
additionally provided in this Agreement with respect to the Issuing Bank.

 

10.02 Delegation of Duties. The Administrative Agent may execute any of its
duties under this Agreement or any other Loan Document by or through agents,
employees or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent shall
not be responsible for the negligence or misconduct of any agent or
attorney-in-fact that it selects with reasonable care.

 

10.03 Liability of Agent. None of the Agent-Related Persons shall (a) be liable
for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (b) be responsible in any manner to any of the Banks for any recital,
statement, representation or warranty made by the Co-Borrowers or any Subsidiary
or Affiliate of the Co-Borrowers, or any officer thereof, contained in this
Agreement or in any

 

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other Loan Document, or in any certificate, report, statement or other document
referred to or provided for in, or received by the Agent-Related Persons under
or in connection with, this Agreement or any other Loan Document, or for the
value of or title to any Collateral, or the validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document, or for any failure of the Co-Borrowers or any other party to any Loan
Document to perform its obligations hereunder or thereunder. No Agent-Related
Person shall be under any obligation to any Bank to ascertain or to inquire as
to the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Loan Document, or to inspect the
properties, books or records of the Co-Borrowers or any of the Co-Borrowers’
Subsidiaries or Affiliates.

 

10.04 Reliance by Administrative Agent.

 

(a) The Administrative Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to the
Co-Borrowers), independent accountants and other experts selected by the
Administrative Agent. The Administrative Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other Loan
Document unless it shall first receive such advice or concurrence of the Banks
as it deems appropriate and, if it so requests, it shall first be indemnified to
its satisfaction by the Banks against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such action.
The Administrative Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement or any other Loan Document in
accordance with a request or consent of the Banks and such request and any
action taken or failure to act pursuant thereto shall be binding upon all of the
Banks.

 

(b) For purposes of determining compliance with the conditions specified in
Section 5.01, each Bank that has executed this Agreement shall be deemed to have
consented to, approved or accepted or to be satisfied with, each document or
other matter either sent by the Administrative Agent to such Bank for consent,
approval, acceptance or satisfaction, or required thereunder to be consented to
or approved by or acceptable or satisfactory to the Bank.

 

10.05 Notice of Default. The Administrative Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default, except
with respect to defaults in the payment of principal, interest and fees required
to be paid to the Administrative Agent for the account of the Banks, unless the
Administrative Agent shall have received written notice from a Bank or the
Co-Borrowers referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a “notice of default”. The
Administrative Agent will notify the Banks of its receipt of any such notice.
The Administrative Agent shall take such action with respect to such Default or
Event of Default as may be requested by the Required Banks in accordance with
Article IX; provided, however, that unless and until the Administrative Agent
has received any such request, the Administrative Agent may (but shall not be
obligated

 

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to) take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable or in the best interest
of the Banks.

 

10.06 Credit Decision. Each Bank acknowledges that none of the Agent-Related
Persons has made any representation or warranty to it, and that no act by the
Agents hereinafter taken, including any review of the affairs of the
Co-Borrowers and their Subsidiaries, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Bank. Each Bank
represents to the Administrative Agent that it has, independently and without
reliance upon any Agent-Related Person and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial and
other condition and creditworthiness of the Co-Borrowers and their Subsidiaries,
the value of and title to any Collateral, and all applicable bank regulatory
laws relating to the transactions contemplated hereby, and made its own decision
to enter into this Agreement and to extend credit to the Co-Borrowers hereunder.
Each Bank also represents that it will, independently and without reliance upon
any Agent-Related Person and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigations as it deems necessary
to inform itself as to the business, prospects, operations, property, financial
and other condition and creditworthiness of the Co-Borrowers. Except for
notices, reports and other documents expressly herein required to be furnished
to the Banks by the Administrative Agent, the Administrative Agent shall not
have any duty or responsibility to provide any Bank with any credit or other
information concerning the business, prospects, operations, property, financial
and other condition or creditworthiness of the Co-Borrowers which may come into
the possession of any of the Agent-Related Persons.

 

10.07 Indemnification. Whether or not the transactions contemplated hereby are
consummated, the Banks shall indemnify upon demand the Agent-Related Persons (to
the extent not reimbursed by or on behalf of the Co-Borrowers and without
limiting the obligation of the Co-Borrowers to do so), pro rata in accordance
with each Bank’s Adjusted Pro Rata Share, from and against any and all
Indemnified Liabilities; provided, however, that no Bank shall be liable for the
payment to the Agent-Related Persons of any portion of such Indemnified
Liabilities resulting from such Person’s gross negligence or willful misconduct.
Without limitation of the foregoing, each Bank shall reimburse the
Administrative Agent, the Collateral Agent and the Documentation Agent upon
demand for its ratable share of any costs or out-of-pocket expenses (including
Attorney Costs) incurred by the Administrative Agent, the Collateral Agent or
the Documentation Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement, any other Loan Document, or
any document contemplated by or referred to herein, to the extent that the
Administrative Agent, the Collateral Agent or the Documentation Agent is not
reimbursed for such expenses by or on behalf of the Co-Borrowers. The
undertaking in this Section shall survive the payment of all Obligations
hereunder and the resignation or replacement of the Administrative Agent or the
Documentation Agent.

 

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10.08 Agents in Individual Capacity. The Agents may make loans to, issue letters
of credit for the account of, accept deposits from, acquire equity interests in
and generally engage in any kind of banking, trust, financial advisory,
underwriting or other business with the Co-Borrowers and their Subsidiaries and
Affiliates as though they were not the Administrative Agent, the Collateral
Agent or the Documentation Agent or an Issuing Bank hereunder and without notice
to or consent of the Banks. The Banks acknowledge that, pursuant to such
activities, the Administrative Agent, the Collateral Agent and the Documentation
Agent may receive information regarding the Co-Borrowers or their Affiliates
(including information that may be subject to confidentiality obligations in
favor of the Co-Borrowers or such Subsidiary) and acknowledge that the
Administrative Agent, the Collateral Agent and Documentation Agent shall be
under no obligation to provide such information to them. With respect to its
Loans, the Administrative Agent, the Collateral Agent and the Documentation
Agent shall have the same rights and powers under this Agreement as any other
Bank and may exercise the same as though it were not the Administrative Agent,
the Collateral Agent or the Documentation Agent or an Issuing Bank, and the
terms “Bank” and “Banks” include the Agents in their individual capacity.

 

10.09 Successor Administrative Agent. The Administrative Agent may resign as
Administrative Agent upon thirty (30) days’ notice to the Banks. If the
Administrative Agent resigns under this Agreement, the Banks shall appoint, from
among the Banks, a successor agent for the Banks. If no successor agent is
appointed prior to the effective date of the resignation of the Administrative
Agent, the Administrative Agent may appoint, after consulting with the Banks, a
successor agent from among the Banks. Upon the acceptance of its appointment as
successor agent hereunder, such successor agent shall succeed to all the rights,
powers and duties of the retiring Administrative Agent and the term “Agent”
shall mean such successor agent and the retiring Administrative Agent’s
appointment, powers and duties as Administrative Agent shall be terminated.
After any retiring Administrative Agent’s resignation hereunder as
Administrative Agent, the provisions of this Article X and Sections 11.04 and
11.05 shall inure to its benefit as to any actions taken or omitted to be taken
by it while it was Administrative Agent under this Agreement. If no successor
agent has accepted appointment as Administrative Agent by the date which is
thirty (30) days following a retiring Administrative Agent’s notice of
resignation, the retiring Administrative Agent’s resignation shall nevertheless
thereupon become effective and the Banks shall perform all of the duties of the
Administrative Agent hereunder until such time, if any, as the Banks appoint a
successor agent as provided for above.

 

10.10 Collateral Matters. (a) The Collateral Agent is authorized on behalf of
all the Banks, without the necessity of any notice to or further consent from
the Banks, from time to time to take any action with respect to any Collateral
or the Loan Documents which may be necessary to perfect and maintain perfected
the security interest in and Liens upon the Collateral granted pursuant to the
Loan Documents.

 

(b) The Banks irrevocably authorize the Collateral Agent, at its option and in
its discretion, to release any Lien granted to or held by the Collateral Agent
upon any Collateral (i) upon payment in full of all Loans and all other
Obligations known to the Collateral Agent and payable under this Agreement or
any other Loan Document; (ii) constituting property sold or to be sold or
disposed of as part of or in connection with any disposition permitted
hereunder; (iii) constituting property in which the Co-Borrowers or any
Subsidiary owned no interest at the time

 

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the Lien was granted or at any time thereafter; (iv) constituting property
leased to a Co-Borrower or any Subsidiary under a lease which has expired or
been terminated in a transaction permitted under this Agreement or is about to
expire and which has not been, and is not intended by the Co-Borrower or such
Subsidiary to be, renewed or extended; (v) consisting of an instrument
evidencing Indebtedness or other debt instrument, if the indebtedness evidenced
thereby has been paid in full; or (vi) if approved, authorized or ratified in
writing by the Banks. Upon request by the Collateral Agent at any time, the
Banks will confirm in writing the Collateral Agent’s authority to release
particular types or items of Collateral pursuant to this subsection 10.10(b),
provided that the absence of any such confirmation for whatever reason shall not
affect the Collateral Agent’s rights under this Section 10.10.

 

(c) Each Bank agrees with and in favor of each other (which agreement shall not
be for the benefit of the Co-Borrowers or any Subsidiary) that the Co-Borrowers’
obligations to such Bank under this Agreement and the other Loan Documents is
not and shall not be secured by any real property collateral now or hereafter
acquired by such Bank.

 

10.11 Monitoring Responsibility. Each Bank will make its own credit decisions
hereunder. Neither the Administrative Agent, the Collateral Agent or the
Documentation Agent shall have any duty to monitor the Collateral used to
calculate the Borrowing Base Cap, the amounts outstanding under sub-lines or the
reporting requirements or the contents of reports delivered by the Co-Borrowers.
Each Bank assumes the responsibility of keeping itself informed at all times.

 

ARTICLE XI

 

MISCELLANEOUS

 

11.01 Amendments and Waivers. No amendment or waiver of any provision of this
Agreement or any other Loan Document, and no consent to any departure by the
Co-Borrowers or any other Loan Party therefrom, shall be effective unless in
writing signed by the Required Banks and the Co-Borrowers or the applicable Loan
Party, as the case may be, and acknowledged by the Administrative Agent, and
each such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given; provided, however, that no such
amendment, waiver or consent shall, unless in writing and signed by each of the
Banks directly affected thereby and by the Co-Borrowers, and acknowledged by the
Administrative Agent, do any of the following:

 

(a) extend the Advance Maturity Date, the Maturity Date or the Expiration Date ;

 

(b) increase the Line Portion of any Bank;

 

(c) amend the definition of Borrowing Base Cap;

 

(d) reduce or delay the payment of the principal of, or the rate of interest
specified herein on any Loan or L/C Borrowing or (subject to clause (iv) of the
proviso

 

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below) any fees or other amounts payable hereunder or under any other Loan
Document; provided, however, that only the consent of the Required Banks shall
be necessary to amend the definition of “Default Rate” or to waive any
obligation of the Co-Borrowers to pay interest at the Default Rate;

 

(e) change the definition of Required Banks;

 

(f) change the Pro Rata Share or Adjusted Pro Rata Share of any Bank;

 

(g) amend this Section 11.01, Subsection 2.08 (b), Section 2.13 or Section 2.14
or any provision herein expressly providing for consent or other action by all
the Banks;

 

(h) release any Guarantor from the liability under such Guarantor’s Guaranty; or

 

(i) release any part of the Collateral except for the release of cash, including
without limitation, releases of cash from the Bank Blocked Account and the
Co-Borrowers’ operating accounts.

 

and, provided further, that (i) no amendment, waiver or consent shall, unless in
writing and signed by the relevant Issuing Bank in addition to the Required
Banks or all the Banks, as the case may be, affect the rights or duties of the
Issuing Bank under this Agreement relating to any Letter of Credit issued or to
be issued by it; (ii) no amendment, waiver or consent shall, unless in writing
and signed by the Administrative Agent in addition to the Required Banks or all
the Banks, as the case may be, affect the rights or duties of the Administrative
Agent under this Agreement or any other Loan Document; and (iv) the Agent Fee
may be amended, or rights or privileges thereunder waived, in a writing executed
only by the parties thereto. Notwithstanding anything to the contrary herein,
any Bank that has failed to fund any portion of any Loans, or participations in
L/C Obligations required to be funded by it hereunder shall not have any right
to approve or disapprove any amendment, waiver or consent hereunder; provided,
however, except as a result of the implementation of Section 2.14, the Pro Rata
Share or Adjusted Pro Rata Share of such Bank may not be increased without the
consent of such Bank, no payment to such Bank shall be decreased or postponed
without the consent of such Bank, and the Applicable Margin may not be decreased
without the consent of such Bank.

 

11.02 Notices.

 

(a) General. Unless otherwise expressly provided herein, all notices and other
communications provided for hereunder shall be in writing (including by
facsimile transmission) and mailed, faxed or delivered, to the address,
facsimile number or (subject to subsection (c) below) electronic mail address
specified for notices on Schedule 11.02; or, in the case of the Co-Borrowers,
the Administrative Agent, or the Issuing Bank, to such other address as shall be
designated by such party in a notice to the other parties, and in the case of
any other party, to such other address as shall be designated by such party in a
notice to the Co-Borrowers, the Administrative Agent and the Issuing Bank. All
such notices and other communications shall be

 

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deemed to be given or made upon the earlier to occur of (i) actual receipt by
the intended recipient and (ii) (A) if delivered by hand or by courier, when
signed for by the intended recipient; (B) if delivered by mail, four Business
Days after deposit in the mails, postage prepaid; and (C) if delivered by
facsimile, when sent and receipt has been confirmed by telephone; provided,
however, that notices and other communications to the Administrative Agent and
the Issuing Bank pursuant to Article II shall not be effective until actually
received by such Person. Any notice or other communication permitted to be
given, made or confirmed by telephone hereunder shall be given, made or
confirmed by means of a telephone call to the intended recipient at the number
specified on Schedule 11.02, it being understood and agreed that a voicemail
message shall in no event be effective as a notice, communication or
confirmation hereunder.

 

(b) Effectiveness of Facsimile Documents and Signatures. Loan Documents may be
transmitted and/or signed by facsimile. The effectiveness of any such documents
and signatures shall, subject to applicable Law, have the same force and effect
as manually-signed originals and shall be binding on all Loan Parties, the
Administrative Agent and the Banks. The Administrative Agent may also require
that any such documents and signatures be confirmed by a manually-signed
original thereof; provided, however, that the failure to request or deliver the
same shall not limit the effectiveness of any facsimile document or signature.

 

(c) Limited Use of Electronic Mail. Except in connection with or pursuant to the
Wells Fargo Accounts, including the WellsNet Service, electronic mail and
internet and intranet websites may be used only to distribute routine
communications, such as financial statements and other information, and to
distribute Loan Documents for execution by the parties thereto, and may not be
used to deliver any notice hereunder.

 

(d) Reliance by Administrative Agent and Banks. The Administrative Agent and the
Banks shall be entitled to rely and act upon any notices (including telephonic
notices) purportedly given by or on behalf of the Co-Borrowers even if (i) such
notices were not made in a manner specified herein, were incomplete or were not
preceded or followed by any other form of notice specified herein, or (ii) the
terms thereof, as understood by the recipient, varied from any confirmation
thereof. The Co-Borrowers jointly and severally shall indemnify each
Agent-Related Person and each Bank from all losses, costs, expenses and
liabilities resulting from the reliance by such Person on each notice
purportedly given by or on behalf of the Co-Borrowers. All telephonic notices to
and other communications with the Administrative Agent may be recorded by the
Administrative Agent, and each of the parties hereto hereby consents to such
recording.

 

11.03 No Waiver; Cumulative Remedies. No failure by any Bank or the Agent to
exercise, and no delay by any such Person in exercising, any right, remedy,
power or privilege hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and privileges
herein or therein provided are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.

 

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11.04 Costs and Expenses. The Co-Borrowers agree (a) to pay or reimburse the
Agents for all reasonable costs and expenses incurred in connection with the
development, preparation, negotiation and execution of this Agreement and the
other Loan Documents and any amendment, waiver, consent or other modification of
the provisions hereof and thereof (whether or not the transactions contemplated
hereby or thereby are consummated), and the consummation and administration of
the transactions contemplated hereby and thereby, including all Attorney Costs,
and (b) to pay or reimburse the Administrative Agent and each Bank for all costs
and expenses incurred in connection with the enforcement, attempted enforcement,
or preservation of any rights or remedies under this Agreement or the other Loan
Documents (including all such costs and expenses incurred during any “workout”
or restructuring in respect of the Obligations and during any legal proceeding,
including any proceeding under any Debtor Relief Law), including all Attorney
Costs. The foregoing costs and expenses shall include all search, filing,
recording, title insurance and appraisal charges and fees and taxes related
thereto, and other out-of-pocket expenses incurred by the Administrative Agent
and the cost of independent public accountants and other outside experts
retained by the Administrative Agent or any Bank. The agreements in this Section
shall survive the termination of this Agreement and repayment of all the other
Obligations.

 

11.05 Indemnity. Whether or not the transactions contemplated hereby are
consummated, the Co-Borrowers jointly and severally agree to indemnify, save and
hold harmless each Agent-Related Person, each Bank and their respective
Affiliates, directors, officers, employees, counsel, agents and
attorneys-in-fact (collectively the “Indemnitees”) from and against: (a) any and
all claims, demands, actions or causes of action that are asserted against any
Indemnitee by any Person (other than the Administrative Agent or any Bank)
relating directly or indirectly to a claim, demand, action or cause of action
that such Person asserts or may assert against any Loan Party, any Affiliate of
any Loan Party or any of their respective officers or directors; (b) any and all
claims, demands, actions or causes of action that may at any time (including at
any time following repayment of the Obligations and the resignation or removal
of the Administrative Agent or the replacement of any Bank) be asserted or
imposed against any Indemnitee, arising out of or relating to, the Loan
Documents, any predecessor loan documents, the use or contemplated use of the
proceeds of any Credit Extension, or the relationship of any Loan Party, the
Administrative Agent and the Banks under this Agreement or any other Loan
Document; (c) any administrative or investigative proceeding by any Governmental
Authority arising out of or related to a claim, demand, action or cause of
action described in subsection (a) or (b) above; and (d) any and all liabilities
(including liabilities under indemnities), losses, costs or expenses (including
Attorney Costs) that any Indemnitee suffers or incurs as a result of the
assertion of any foregoing claim, demand, action, cause of action or proceeding,
or as a result of the preparation of any defense in connection with any
foregoing claim, demand, action, cause of action or proceeding, in all cases,
WHETHER OR NOT ARISING OUT OF THE NEGLIGENCE OF AN INDEMNITEE, and whether or
not an Indemnitee is a party to such claim, demand, action, cause of action or
proceeding (all the foregoing, collectively, the “Indemnified Liabilities”);
provided that no Indemnitee shall be entitled to indemnification for any claim
caused by its own gross negligence or willful misconduct or for any loss
asserted against it by another Indemnitee. The agreements in this Section shall
survive the termination of this Agreement and repayment of all the other
Obligations.

 

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11.06 Payments Set Aside. To the extent that the Co-Borrowers make a payment to
the Administrative Agent or the Banks, or the Administrative Agent or the Banks
exercise their right of set-off, and such payment or the proceeds of such
set-off or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required (including pursuant to any
settlement entered into by the Administrative Agent or such Bank in its
discretion) to be repaid to a trustee, receiver or any other party, in
connection with any Insolvency Proceeding or otherwise, then (a) to the extent
of such recovery the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such set-off had not occurred, and (b) each Bank
severally agrees to pay to the Administrative Agent upon demand its pro rata
share of any amount so recovered from or repaid by the Administrative Agent.

 

11.07 Successors and Assigns. The provisions of this Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Co-Borrowers may not assign or transfer
any of their rights or Obligations under this Agreement without the prior
written consent of the Administrative Agent and each Bank.

 

11.08 Assignments, Participations, Etc.

 

(a) Any Bank, at any time may assign and delegate to one or more Eligible
Assignees (each an “Assignee”) all, or any ratable part of all, of the Loans,
the Borrowing Base Line, the Collateralized L/C Line, the L/C Obligations and
the other rights and obligations of such Bank hereunder, in a minimum amount of
$1,000,000.00; provided, however, that the Co-Borrowers and the Administrative
Agent may continue to deal solely and directly with such Bank in connection with
the interest so assigned to an Assignee until (i) written notice of such
assignment, together with payment instructions, addresses and related
information with respect to the Assignee, shall have been given to the
Co-Borrowers and the Administrative Agent by such Bank and the Assignee; (ii)
such Bank and its Assignee shall have delivered to the Co-Borrowers and the
Administrative Agent an Assignment and Acceptance (“Assignment and Acceptance”)
in form attached hereto as Exhibit D, together with any Note or Notes subject to
such assignment; and (iii) the assignor Bank or Assignee has paid to the
Administrative Agent a processing fee in the amount of $2,500.00.

 

(b) From and after the date that the Administrative Agent notifies the assignor
Bank that it has received an executed Assignment and Acceptance and payment of
the above-referenced processing fee, (i) the Assignee thereunder shall be a
party hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, shall have the rights
and obligations of a Bank under the Loan Documents, and (ii) the assignor Bank
shall, to the extent that rights and obligations hereunder and under the other
Loan Documents have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights and be released from its obligations under the
Loan Documents.

 

(c) The Co-Borrowers shall execute and deliver to the Administrative Agent, new
Notes evidencing such Assignee’s assigned Loans and Line Portion and, if the
assignor Bank has retained a portion of its Loans and its Line Portion,
replacement Notes in the principal

 

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amount of the Loans retained by the assignor Bank (such Notes to be in exchange
for, but not in payment of, the Notes held by such Bank). Immediately upon each
Assignee’s making its processing fee payment under the Assignment and
Acceptance, this Agreement shall be deemed to be amended to the extent, but only
to the extent, necessary to reflect the addition of the Assignee and the
resulting adjustment of the Line Portion arising therefrom. The Line Portion
allocated to each Assignee shall reduce such Line Portion of the assigning Bank
pro tanto. Upon such Assignment, Administrative Agent is authorized to revise
Schedule 2.01 and Schedule 11.02 to reflect the adjusted status of the Banks.

 

(d) Any Bank may at any time sell to one or more commercial banks or other
Persons not Affiliates of the Co-Borrowers (a “Participant”) participating
interests in any Loans, the Line Portion of that Bank and the other interests of
that Bank (the “originating Bank”) hereunder and under the other Loan Documents;
provided, however, that (i) the originating Bank’s obligations under this
Agreement shall remain unchanged, (ii) the originating Bank shall remain solely
responsible for the performance of such obligations, (iii) the Co-Borrowers, the
Issuing Bank and the Administrative Agent shall continue to deal solely and
directly with the originating Bank in connection with the originating Bank’s
rights and obligations under this Agreement and the other Loan Documents, and
(iv) no Bank shall transfer or grant any participating interest under which the
Participant has rights to approve any amendment to, or any consent or waiver
with respect to, this Agreement or any other Loan Document, except to the extent
such amendment, consent or waiver would require unanimous consent of the Banks
as described in the first proviso to Section 11.01. In the case of any such
participation, the Participant shall not have any rights under this Agreement,
or any of the other Loan Documents, and all amounts payable by the Co-Borrowers
hereunder shall be determined as if such Bank had not sold such participation;
except that, if amounts outstanding under this Agreement are due and unpaid, or
shall have been declared or shall have become due and payable upon the
occurrence of an Event of Default, each Participant shall be deemed to have the
right of set-off in respect of its participating interest in amounts owing under
this Agreement to the same extent as if the amount of its participating interest
were owing directly to it as a Bank under this Agreement.

 

(e) Each Bank agrees to take normal and reasonable precautions and exercise due
care to maintain the confidentiality of all information identified as
“confidential” or “secret” by the Co-Borrowers and provided to it by the
Co-Borrowers or any Subsidiary, or by the Administrative Agent on a
Co-Borrower’s or Subsidiary’s behalf, under this Agreement or any other Loan
Document, and neither it nor any of its Affiliates shall use any such
information other than in connection with or in enforcement of this Agreement
and the other Loan Documents; except to the extent such information (i) was or
becomes generally available to the public other than as a result of disclosure
by the Bank, or (ii) was or becomes available on a non-confidential basis from a
source other than the Co-Borrowers, provided that such source is not bound by a
confidentiality agreement with, or under obligation of confidentiality, the
Co-Borrowers known to the Bank; provided, however, that any Bank may disclose
such information (A) at the request or pursuant to any requirement of any
Governmental Authority to which the Bank is subject or in connection with an
examination of such Bank by any such authority; (B) pursuant to subpoena or
other court process; (C) when required to do so in accordance with the
provisions of any applicable Requirement of Law; (D) to the extent reasonably
required in connection with any litigation or proceeding to which the
Administrative Agent, any Bank or their respective

 

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Affiliates may be party; (E) to the extent reasonably required in connection
with the exercise of any remedy hereunder or under any other Loan Document; (F)
to such Bank’s independent auditors and other professional advisors; (G) to any
Affiliate of such Bank, or to any Participant or Assignee, actual or potential,
provided that such Affiliate, Participant or Assignee agrees to keep such
information confidential to the same extent required of the Banks hereunder, and
(H) as to any Bank, as expressly permitted under the terms of any other document
or agreement regarding confidentiality to which a Co-Borrower is party or is
deemed party with such Bank.

 

(f) Notwithstanding any other provision in this Agreement, any Bank may at any
time create a security interest in, or pledge, all or any portion of its rights
under and interest in this Agreement and the Note held by it in favor of any
Federal Reserve Bank in accordance with Regulation A of the FRB or U.S. Treasury
Regulation 31 C.F.R. § 203.14, and such Federal Reserve Bank may enforce such
pledge or security interest in any manner permitted under applicable law.

 

(g) Notwithstanding anything to the contrary contained herein, if at any time
the Administrative Agent assigns all of its Line Portion and Loans pursuant to
subsection (b) above, the Administrative Agent shall, (i) upon 30 days’ notice
to the Co-Borrowers and the Banks, resign as Issuing Bank. In the event of any
such resignation as Issuing Bank, the Co-Borrowers shall be entitled to appoint
from among the Banks a successor Issuing Bank hereunder; provided, however, that
no failure by the Co-Borrowers to appoint any such successor shall affect the
resignation of the Administrative Agent as Issuing Bank. Administrative Agent
shall retain all the rights and obligations of the Issuing Bank hereunder with
respect to all Letters of Credit outstanding as of the effective date of its
resignation as Issuing Bank and all L/C Obligations with respect thereto
(including the right to require the Banks to make Loans or fund participations
in L/C Obligations pursuant to Section 3.03).

 

11.09 Set-off. In addition to any rights and remedies of the Banks provided by
law, if an Event of Default exists or the Loans have been accelerated, each Bank
is authorized at any time and from time to time, without prior notice to the
Co-Borrowers, any such notice being waived by the Co-Borrowers to the fullest
extent permitted by law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held by, and other
indebtedness at any time owing by, such Bank to or for the credit or the account
of the Co-Borrowers against any and all Obligations owing to such Bank, now or
hereafter existing, irrespective of whether or not the Administrative Agent or
such Bank shall have made demand under this Agreement or any Loan Document and
although such Obligations may be contingent or unmatured. Each Bank agrees
promptly to notify the Co-Borrowers and the Administrative Agent after any such
set-off and application made by such Bank; provided, however, that the failure
to give such notice shall not affect the validity of such set-off and
application.

 

11.10 Automatic Debits of Fees. With respect to any commitment fee, arrangement
fee, letter of credit fee or other fee, or any other cost or expense (including
Attorney Costs) due and payable to the Administrative Agent, the Issuing Bank or
any Bank under the Loan Documents, the Co-Borrowers hereby irrevocably authorize
the Administrative Agent to debit any deposit accounts of the Co-Borrowers with
Wells Fargo in an amount such that the aggregate amount debited from all such
deposit accounts does not exceed such fee or other cost or expense. If

 

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there are insufficient funds in such deposit accounts to cover the amount of the
fee or other cost or expense then due, such debits will be reversed (in whole or
in part, in the Administrative Agent’s sole discretion) and such amount not
debited shall be deemed to be unpaid. No such debit under this Section shall be
deemed a set-off.

 

11.11 Notification of Addresses, Lending Offices, Etc. Each Bank shall notify
the Administrative Agent in writing of any changes in the address to which
notices to the Bank should be directed, of addresses of any Lending Office, of
payment instructions in respect of all payments to be made to it hereunder and
of such other administrative information as the Administrative Agent shall
reasonably request.

 

11.12 Bank Blocked Accounts Charges and Procedures: Paribas Investment Accounts.

 

(a) During an Activation Period, Collateral Agent may approve a request to
transfer, at Collateral Agent’s sole discretion, of any collected and available
balances in the Bank Blocked Accounts each day by wire transfer to the Operating
Accounts, the Wells Fargo Investment Accounts, or the Paribas Investment
Accounts. Funds are not available if, in the reasonable determination of
Collateral Agent, they are subject to a hold, dispute or legal process
preventing their withdrawal. The Co-Borrowers agree that during an Activation
Period, they cannot, and will not, withdraw any monies from the Bank Blocked
Accounts until such time as Collateral Agent no longer claims any interest in
the Bank Blocked Accounts. The Co-Borrowers will not permit the Bank Blocked
Accounts, the Operating Accounts, the Wells Fargo Investment Accounts or the
Paribas Investment Accounts to become subject to any other pledge, assignment,
lien, charge or encumbrance of any kind, nature or description. Co-Borrowers
acknowledge that the Collateral Agent and the Banks have a security interest in
all cash, bank accounts and other accounts of Co-Borrowers, and thus to better
enable the Collateral Agent to have access to and a right of set off against all
such cash, bank accounts and other accounts, Co-Borrowers agree and covenant to
maintain no deposit accounts except (x) with Collateral Agent, (y) the Bank
Blocked Accounts, the Operating Accounts and the Wells Fargo Investment
Accounts, the Wells Fargo Collateral Account or with Wells Fargo as otherwise
permitted by the Collateral Agent, on behalf of the Banks, and (z) with other
institutions approved by the Collateral Agent, on behalf of the Banks, provided
that the Collateral Agent shall retain a perfected security interest in such
accounts.

 

(b) During an Activation Period and provided there exists an Event of Default
hereunder, the Collateral Agent shall have the right, in accordance with the
terms and conditions of this Agreement and the Override Agreement, to cause the
transfer to the Collateral Agent of amounts contained in the Bank Blocked
Accounts, the Operating Accounts, the Wells Fargo Investment Accounts, or the
Paribas Investment Accounts, so long as such instruction to transfer is either
in accordance with a request from the Co-Borrowers or pursuant to the Collateral
Agent’s rights hereunder.

 

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

 

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11.14 Severability. The illegality or unenforceability of any provision of this
Agreement or any instrument or agreement required hereunder shall not in any way
affect or impair the legality or enforceability of the remaining provisions of
this Agreement or any instrument or agreement required hereunder.

 

11.15 No Third Parties Benefited. This Agreement is made and entered into for
the sole protection and legal benefit of the Co-Borrowers, the Banks, the
Administrative Agent and the Agent-Related Persons, and their permitted
successors and assigns, and no other Person shall be a direct or indirect legal
beneficiary of, or have any direct or indirect cause of action or claim in
connection with, this Agreement or any of the other Loan Documents.

 

11.16 Governing Law and Jurisdiction.

 

(a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW (WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAWS)
OF THE STATE OF NEW YORK, PROVIDED THAT THE ADMINISTRATIVE AGENT AND THE BANKS
SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.

 

(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE
UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH OF THE CO-BORROWERS, THE ADMINISTRATIVE AGENT
AND THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE CO-BORROWERS, THE
ADMINISTRATIVE AGENT AND THE BANKS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING
ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH 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. THE CO-BORROWERS HEREBY WAIVE PERSONAL SERVICE OF ANY AND ALL
PROCESS UPON THE CO-BORROWERS AND APPOINT CT CORPORATION SYSTEM AT 111 EIGHTH
AVENUE, NEW YORK, NY 10011, AS REGISTERED AGENT FOR THE PURPOSE OF RECEIVING AND
FORWARDING SERVICE OF PROCESS WITHIN THE STATE OF NEW YORK AND AGREE TO OBTAIN A
LETTER FROM CT CORPORATION, ACKNOWLEDGING SAME. CO-BORROWERS AGREE TO MAINTAIN A
REGISTERED AGENT FOR SERVICE OF PROCESS DURING THE TERM OF THIS AGREEMENT AND TO
PROVIDE THE ADMINISTRATIVE AGENT WITH THIRTY (30) DAYS ADVANCE NOTICE PRIOR TO
ANY RESIGNATION OF ANY SUCH REGISTERED AGENT.

 

11.17 Waiver of Jury Trial. EACH OF THE CO-BORROWERS, THE BANKS AND THE
ADMINISTRATIVE AGENT WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR

 

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ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR
ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO
CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. EACH OF THE CO-BORROWERS, THE BANKS
AND THE ADMINISTRATIVE AGENT AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL
BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE
PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED
BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF
THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF.
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.

 

11.18 Entire Agreement. THIS AGREEMENT, TOGETHER WITH THE OTHER LOAN DOCUMENTS,
EMBODIES THE ENTIRE AGREEMENT AND UNDERSTANDING AMONG THE CO-BORROWERS, THE
BANKS AND THE ADMINISTRATIVE AGENT, AND SUPERSEDES ALL PRIOR OR CONTEMPORANEOUS
AGREEMENTS AND UNDERSTANDINGS OF SUCH PERSONS, VERBAL OR WRITTEN, RELATING TO
THE SUBJECT MATTER HEREOF AND THEREOF.

 

11.19 Fortis Capital Corp. as Documentation Agent. Fortis Capital Corp., in its
capacity as Documentation Agent, shall have no duties, rights or obligations
under the Credit Agreement or any other Loan Document, including, but not
limited to, Article X of the Credit Agreement other than the preparation of this
Agreement and the other Loan Documents relating thereto. Fortis Capital Corp.’s
duties, rights, and obligations under the Loan Documents shall be only those of
a Bank.

 

11.20 Reliance by Co-Borrowers. Co-Borrowers shall be entitled to rely on any
consent, approval or decision of BNP Paribas in writing, as Administrative
Agent.

 

11.21 Nature of Obligations. The obligations of the Co-Borrowers hereunder and
under each other Loan Document are joint and several in nature.

 

11.22 Amendment and Restatement. This Agreement is in amendment and restatement
of the Existing Credit Agreement in its entirety. The Co-Borrowers hereby agree
that (i) the Loans outstanding under the Existing Credit Agreement shall be
deemed to be outstanding under this Agreement; (ii) all Letters of Credit issued
and outstanding under the Existing Credit Agreement shall be deemed to be
outstanding under this Agreement; (iii) all accrued and unpaid interest and fees
under the Existing Credit Agreement shall be deemed to be outstanding under this
Agreement; and (iv) this Agreement is not intended to be an extinguishment or
novation of

 

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the Co-Borrowers’ Obligations under the Existing Credit Agreement, but rather in
renewal and extension of such Obligations.

 

[Remainder of page intentionally left blank]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first above written.

 

AVISTA ENERGY, INC., a Washington corporation By:   /s/ Dennis Vermillion Name:
  Dennis Vermillion Title:   President & C.O.O. AVISTA ENERGY CANADA LTD., a
corporation of the province of Alberta, Canada By:   /s/ Dennis Vermillion Name:
  Dennis Vermillion Title:   President & C.O.O. Co-Borrowers’ Address:

201 W. North River Drive

Suite 610

Spokane, Washington 99201

Attention:       Dennis Vermillion

Telephone:     (509) 688-6000

Facsimile:      (509) 688-6154

E-mail: dennis.vermillion@avistaenergy.com

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

BNP PARIBAS,

as Administrative Agent, Collateral Agent,

and an Issuing Bank,

By:   /s/ A-C. Mathiot Name:   A-C. Mathiot Title:   Director By:   /s/ Keith
Cox Name:   Keith Cox Title:   Director

787 Seventh Avenue

New York, NY 10019

Attention: Anne-Catherine Mathiot

Phone: 212-841-2575

Fax: 212-841-2536

E-mail: anne-catherine.mathiot@americas.bnpparibas.com

BNP PARIBAS,

as a Bank

By:   /s/ A-C. Mathiot Name:   A-C. Mathiot Title:   Director By:   /s/ Keith
Cox Name:   Keith Cox Title:   Director

787 Seventh Avenue

New York, NY 10019

Attention: Anne-Catherine Mathiot

Phone: 212-841-2575

Fax: 212-841-2536

E-mail: anne-catherine.mathiot@americas.bnpparibas.com

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

FORTIS CAPITAL CORP.,

Documentation Agent and an Issuing Bank

By:   /s/ Irene C. Rummel Name:   Irene C. Rummel Title:   Senior Vice President
By:   /s/ Chad Clark Name:   Chad Clark Title:   Vice President

15455 North Central Parkway

Suite 1400

Addison, TX 75001

Attention: Irene Rummel

Phone: 214-953-9313

Fax: 214-969-9332

E-mail: irene.rummel@fortiscapitalusa.com

FORTIS CAPITAL CORP.,

as a Bank

By:   /s/ Irene C. Rummel Name:   Irene C. Rummel Title:   Senior Vice President
By:   /s/ Chad Clark Name:   Chad Clark Title:   Vice President

15455 North Central Parkway

Suite 1400

Addison, TX 75001

Attention: Irene Rummel

Phone: 214-953-9313

Fax: 214-969-9332

E-mail: irene.rummel@fortiscapitalusa.com

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NATEXIS BANQUES POPULAIRES

as a Bank

By:   /s/ David Pershad Name:   David Pershad Title:   Vice President By:   /s/
Guillaume de Parscau Name:   Guillaume de Parscau Title:   First Vice President
& Manager Commodities Finance Group

1251 Avenue of the Americas

34th Floor

New York, NY 10020

Attention: David Pershad

Phone: 212-872-5015

Fax: 212-354-9095

E-mail: david.pershad@nyc.nxbp.com