exv4w1



 





Exhibit 4.1




 





CREDIT AGREEMENT




Dated as of October 2, 2007




Among




VARISTAR CORPORATION,




THE BANKS,

as defined herein,




BANK OF AMERICA, N.A.,

KEYBANK NATIONAL ASSOCIATION,

and

WELLS FARGO BANK, NATIONAL ASSOCIATION

each as Co-Documentation Agents




and




U.S. BANK NATIONAL ASSOCIATION,

as Agent




 





 









 





execution copy




CREDIT AGREEMENT




     THIS CREDIT AGREEMENT, dated as of October 2, 2007, is by and between VARISTAR CORPORATION, a
Minnesota corporation (the “Borrower”), the banks or financial institutions listed on the signature
pages hereof or which hereafter become parties hereto by means of assignment and assumption as
hereinafter described (individually referred to as a “Bank” or collectively as the “Banks”), BANK
OF AMERICA, N.A., KEYBANK NATIONAL ASSOCIATION, and WELLS FARGO BANK, NATIONAL ASSOCIATION, as
Co-Documentation Agents, and U.S. BANK NATIONAL ASSOCIATION, a national banking association, as
agent for the Banks (in such capacity, the “Agent”) and as Lead Arranger.



ARTICLE I DEFINITIONS AND ACCOUNTING TERMS




     Section 1.1 Defined Terms. In addition to the terms defined elsewhere in this
Agreement, the following terms shall have the following respective meanings (and such meanings
shall be equally applicable to both the singular and plural form of the terms defined, as the
context may require):



     “Adjusted Cash Flow Leverage Ratio” means the ratio, calculated for each period of
four consecutive fiscal quarters of the Borrowers, of:




(a) the sum of (i) total consolidated Funded Debt of the Borrower and its Subsidiaries as of
the last day of such period, plus (ii) Funded Debt of the Parent that is guarantied
by the Borrower or its Subsidiaries unless the Parent is Investment Grade Rated;




to




(b) EBITDA for such period.



     “Advance” means the portion of the outstanding Revolving Loans by the Banks as to
which one of the available interest rate options and, if pertinent, an Interest Period, is
applicable. An Advance may be a “LIBOR Advance”, “Base Rate Advance” (each, a “type” of Advance).



     “Adverse Event” means the occurrence of any event that could have a material adverse
effect on the business, operations, property, assets or condition (financial or otherwise) of the
Borrower and the Subsidiaries as a consolidated enterprise or on the ability of the Borrower or the
Material Subsidiaries to perform their respective obligations under the Loan Documents.



     “Agent” means U.S. Bank National Association, as agent for the Banks hereunder and
each successor, as provided in Section 12.8, who shall act as Agent.



     “Agent’s Fee Letter” means the letter agreement, dated as of the date hereof (as
hereafter amended from time to time) between the Borrower and the Agent respecting certain fees
payable to the Agent for its own account.



 









 





     “Agreement” means this Credit Agreement, as it may be amended, modified, supplemented,
restated or replaced from time to time.



     “Applicable Commitment Fee Rate; Applicable Margin” means the percentages set forth
below, determined based on the applicable Level:



	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Applicable Margin	 	Applicable
	 	 	LIBOR	 	Base Rate	 	Commitment
	Level:	 	Advances	 	Advances	 	Fee Rate
	Level I:
	 	 	0.750	%	 	 	0.0	%	 	 	0.150	%
	 
	Level II:
	 	 	1.000	%	 	 	0.0	%	 	 	0.200	%
	 
	Level III:
	 	 	1.250	%	 	 	0.0	%	 	 	0.225	%
	 
	Level IV:
	 	 	1.500	%	 	 	0.0	%	 	 	0.250	%
	 
	Level V:
	 	 	1.750	%	 	 	0.250	%	 	 	0.275	%





The Applicable Commitment Fee Rate and Applicable Margin shall be those shown for Level III as of
the date of this Agreement. The Applicable Commitment Fee Rate and Applicable Margin shall be
adjusted ten (10) Business Days after receipt of the Compliance Certificate and quarterly
financial statements of the Borrower, commencing with the Compliance Certificate and quarterly
financial statement for the quarter ending December 31, 2007, based on calculation of the
Adjusted Cash Flow Leverage Ratio in such Compliance Certificate, and shall remain in effect
until the next-following Compliance Certificate and quarterly financial statements so delivered
to the Agent. In the event that the Borrower has not submitted quarterly financial statements or
a Compliance Certificate as required by Sections 8.1(b) and (c), from the date
such quarterly financial statements and Compliance Certificate are required until they are
delivered, the Applicable Commitment Fee Rate and the Applicable Margin shall be the highest
percentage specified above until such time as a Compliance Certificate and such financial
statements are delivered, after which time the Applicable Commitment Fee Rate and the Applicable
Margin for each type of Loan shall be readjusted to the rate applicable to the Adjusted Cash Flow
Leverage Ratio calculated on such Compliance Certificate. For purposes of the foregoing, the
Levels shall be defined and determined as follows:





Level I shall apply if the Adjusted Cash Flow Leverage Ratio is less than or
equal to 1.00 to 1.00.




Level II shall apply if the Adjusted Cash Flow Leverage Ratio is greater than 1.00
to 1.00 but less than or equal to 1.50 to 1.00.



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Level III shall apply if the Adjusted Cash Flow Leverage Ratio is greater than 1.50
to 1.00
but less than or equal to 2.00 to 1.00.




Level IV shall apply if the Adjusted Cash Flow Leverage Ratio is greater than 2.00
to 1.00
but less than or equal to 2.50 to 1.00.



     Level V shall apply if the Adjusted Cash Flow Leverage Ratio is greater than 2.50
to 1.0.



     “Base Rate” means, for any day, a fluctuating rate per annum as determined by the
Agent to equal to the greater of (i) the Prime Rate in effect on such day, or (ii) a rate per annum
equal to the Federal Funds Effective Rate in effect on such day plus 0.50% per annum. If for any
reason the Agent shall have determined (which determination shall be conclusive in the absence of
manifest error) that it is unable to ascertain the Federal Funds Effective Rate for any reason
(including, without limitation, the inability or failure of the Agent to obtain sufficient bids or
publications in accordance with the terms hereof), the Base Rate shall be a fluctuating rate per
annum equal to the Prime Rate in effect from time to time per annum until the circumstances giving
rise to such inability no longer exist.



     “Base Rate Advance” means an Advance designated as such in a notice of borrowing under
Section 2.3 or a notice of continuation or conversion under Section 2.4.



     “Business Day” means any day (other than a Saturday, Sunday or legal holiday in the
State of Minnesota) on which national banks are permitted to be open in Minneapolis, Minnesota and
New York, New York and, with respect to LIBOR Advances, a day on which dealings in Dollars may be
carried on by the Agent in the interbank LIBOR market.



     “Capital Expenditure” means any amount debited to the fixed asset account on the
consolidated balance sheet of the Borrower in respect of (a) the acquisition (including, without
limitation, acquisition by entry into a Capitalized Lease), construction, improvement, replacement
or betterment of land, buildings, machinery, equipment or of any other fixed assets or leaseholds,
and (b) to the extent related to and not included in (a) above, materials, contract labor and
direct labor (excluding expenditures properly chargeable to repairs or maintenance in accordance
with GAAP).



     “Capitalized Lease” means any lease which is or should be capitalized on the books of
the lessee in accordance with GAAP.



     “Cash Flow Leverage Ratio” means the ratio, calculated for each period of four
consecutive fiscal quarters of the Borrowers, of total consolidated Funded Debt of the Borrower and
its Subsidiaries as of the last day of such period to EBITDA for such period.



     “Code” means the Internal Revenue Code of 1986, as amended, or any successor statute,
together with regulations thereunder.



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     “Commitment” means the maximum unpaid principal amount of the Loans of all Banks which
may from time to time be outstanding hereunder, being initially $200,000,000, as the same may be
reduced from time to time pursuant to Section 4.3, or, if so indicated, the maximum unpaid
principal amount of Loans of any Bank (which amounts are set forth on Schedule 1.1(a)
hereto or in the relevant Assignment and Assumption Agreement for such Bank) and, as the context
may require, the agreement of each Bank to make Loans to the Borrower and to participate in the
Letters of Credit subject to the terms and conditions of this Agreement up to its Commitment.



     “Commitment Fees” shall have the meaning set forth in Section 3.2.



     “Compliance Certificate” means a certificate in the form of Exhibit B, duly
completed and signed by an authorized officer of the Borrower.



     “Controlled Foreign Corporation” means a Subsidiary that is a controlled foreign
corporation under Section 957 of the Code.



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



     “EBITDA” means, for any period of determination, the consolidated net income of the
Borrower and its Subsidiaries before provision for income taxes, plus, to the extent
subtracted in determining consolidated net income, Interest Expense, depreciation and amortization,
all as determined in accordance with GAAP, excluding (to the extent included): (a) non-operating
gains (including, without limitation, extraordinary or nonrecurring gains and gains from
discontinuance of operations) except for gains resulting from sale of fixed assets, during the
applicable period; and (b) similar non-operating losses, except for losses resulting from sale of
fixed assets, during such period.



     “EBITDAR” means, for any period of determination, EBITDA, plus, to the extent
subtracted in determining consolidated net income, Rental Expense.



     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and any
successor statute, together with regulations thereunder.



     “ERISA Affiliate” means any trade or business (whether or not incorporated) that is a
member of a group of which the Borrower is a member and which is treated as a single employer under
Section 414 of the Code.



     “Federal Funds Effective Rate” means, for any day, an interest rate per annum equal to
the weighted average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for such day by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day,
the average of the quotations for such day on such transactions received by the



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Agent from three Federal funds brokers of recognized standing selected by it. In the case of a day
which is not a Business Day, the Federal Funds Effective Rate for such day shall be the Federal
Funds Effective Rate for the preceding Business Day. Each change in the Base Rate due to a change
in the Federal Funds Effective Rate shall take effect on the effective date of such change in the
Federal Funds Effective Rate.



     “Federal Reserve Board” means the Board of Governors of the Federal Reserve System or
an successor thereto.



     “Fixed Charge Coverage Ratio” means the ratio, calculated for each period of four
consecutive fiscal quarters of the Borrower, of:




(a) the total for such period of (i) EBITDAR, minus (ii) Restricted Payments, and
minus (iii) income taxes paid in cash during such period;




to




(b) the sum for such period of (i) Interest Expense, plus (ii) mandatory or
scheduled principal payments of consolidated Funded Debt of the Borrower and its
Subsidiaries (including payments of Capitalized Leases), and plus (iii) Rental
Expense.



     “Funded Debt” means, without duplication, all obligations of a Person or its
Subsidiaries on a consolidated basis: (a) in respect of borrowed money, including without
limitation Loans hereunder; (b) secured by a mortgage, pledge, security interest, lien or charge on
the assets of such Person or Subsidiaries, whether the obligation secured is the obligation of the
owner or another Person (provided that non-recourse obligations will only be taken into account up
to the fair market value of the related property); (c) any obligation for the deferred purchase
price of any property or services evidenced by a note, payment contract (other than an account
payable arising in the ordinary course of business) or other instrument, (d) any obligation as
lessee under any Capitalized Lease; (e) net liabilities under any interest rate swap or hedging
agreement; and (f) undertakings or agreements to reimburse or indemnify issuers of letters of
credit other than commercial letters of credit.



     “Event of Default” means any event described in Section 10.1.



     “GAAP” means generally accepted accounting principles as applied in the preparation of
the audited consolidated financial statement of the Borrower referred to in Section 7.5.



     “Guaranty” means the Guaranty in the form of Exhibit C hereto, duly completed
and executed by each Material Subsidiary now existing or hereafter formed or acquired, except for
any Subsidiary that is a Controlled Foreign Corporation.



     “Indebtedness” means, without duplication, all obligations, contingent or otherwise,
which in accordance with GAAP should be classified upon the obligor’s balance sheet as liabilities,
but in any



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event including the following (whether or not they should be classified as liabilities upon such
balance sheet): (a) obligations secured by any mortgage, pledge, security interest, lien, charge or
other encumbrance existing on property owned or acquired subject thereto, whether or not the
obligation secured thereby shall have been assumed and whether or not the obligation secured is the
obligation of the owner or another party; (b) any obligation on account of deposits or advances;
(c) any obligation for the deferred purchase price of any property or services, except trade
accounts payable arising in the ordinary course of business, (d) any obligation as lessee under any
Capitalized Lease; (e) all guaranties, endorsements and other contingent obligations in respect to
Indebtedness of others; (f) undertakings or agreements to reimburse or indemnify issuers of letters
of credit; and (g) net liabilities under any interest rate swap, collar or other interest rate
hedging agreement. For all purposes of this Agreement, the Indebtedness of any Person shall
include the Indebtedness of any partnership or joint venture in which such Person is a general
partner or a joint venturer.



     “Interest Expense means, for any period of determination, the aggregate consolidated
amount, without duplication, of interest paid, accrued or scheduled to be paid in respect of any
Indebtedness of the Borrower and its Subsidiaries, including in all cases interest expense
determined in accordance with GAAP and (a) all but the principal component of payments in respect
of conditional sale contracts, Capitalized Leases and other title retention agreements, (b)
commissions, discounts and other fees and charges with respect to letters of credit and bankers’
acceptance financings and (c) net costs under any interest rate swap, collar or other interest rate
hedging agreements, in each case determined in accordance with GAAP.



     “Interest Period” means, for any LIBOR Advance, the period commencing on the borrowing
date of such LIBOR Advance or the date a Base Rate Advance is converted into such LIBOR Advance, or
the last day of the preceding Interest Period for such LIBOR Advance, as the case may be, and
ending on the numerically corresponding day one, two, three or six months thereafter, as selected
by the Borrower pursuant to Section 2.3 or Section 2.4; provided, that:




(a) any Interest Period which would otherwise end on a day which is not a Business Day shall
end on the next succeeding Business Day unless such next succeeding Business Day falls in
another calendar month, in which case such Interest Period shall end on the next preceding
Business Day;




(b) any Interest Period which 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 Termination Date.



     “Investment” means the acquisition, purchase, making or holding of any stock or other
security, any loan, advance, contribution to capital, extension of credit (except for trade and
customer accounts receivable for inventory sold or services rendered in the ordinary course of
business and payable in accordance with customary trade terms), any acquisitions of real or
personal



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property (other than real and personal property acquired in the ordinary course of
business) and any purchase or commitment or option to purchase stock or other debt or equity
securities of or any interest in another Person or any integral part of any business or the assets
comprising such business or part thereof.



     “Investment Grade Rated” means having a credit rating applicable to long term,
unsecured and unsubordinated indebtedness of BBB- or better by Standard & Poor’s Ratings Group and
Baa3 or better by Moody’s Investors Service, Inc.



     “Letters of Credit” shall have the meaning set forth in Section 2.8.



     “Letter of Credit Agreements” shall have the meaning set forth in Section 2.8.



     “Letter of Credit Obligations” shall mean the aggregate amount of all possible
drawings under all Letters of Credit plus all amounts drawn under any Letter of Credit and not
reimbursed by the Borrower under the applicable Letter of Credit Agreement.



     “LIBOR Advance” means an Advance designated as such in a notice of borrowing under
Section 2.3 or a notice of continuation or conversion under Section 2.4.



     “LIBOR Interbank Rate” means the offered rate for deposits in United States Dollars
for delivery of such deposits on the first day of an Interest Period of a LIBOR Advance, for the
number of days comprised therein, quoted by the Agent from Reuters Screen LIBOR01 page or any
successor thereto as of approximately 11:00 a.m., London time, on the day that is two Banking Days
preceding the first day of the Interest Period of such LIBOR Advance, or the rate for such deposits
determined by the Agent at such time based on such other published service of general application
as shall be selected by the Agent for such purpose; provided, that in lieu of determining the rate
in the foregoing manner, the Agent may determine the rate based on rates offered to the Agent for
deposits in United States Dollars in the interbank eurodollar market at such time for delivery on
the first day of the Interest Period for the number of days comprised therein.



     “LIBOR Rate (Reserve Adjusted)” means a rate per annum calculated for the Interest
Period of a LIBOR Advance in accordance with the following formula:



	 	 	 	 	 	 	 
	 

	 	   LRRA
	  =    	  LIBOR Interbank
Rate
1.00 – LRR

	 	 
	 

	 	 	 	 	 	 





In such formula, “LRR” means “LIBOR Reserve Rate” and “LRRA” means “LIBOR Rate (Reserve Adjusted)”,
in each instance determined by the Agent for the applicable Interest Period. The Agent’s
determination of all such rates for any Interest Period shall be conclusive in the absence of
manifest error.




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     “LIBOR Rate (Reserve Adjusted) Daily Floating” means the LIBOR Rate (Reserve Adjusted)
determined by the Agent on each Business Day based on Interest Periods of one month reported on
such Business Day (without taking into account the two-day future delivery convention applicable to
such reports), which rate shall remain in effect until the next following Business Day.



     “LIBOR Reserve Rate” means a percentage equal to the daily average during such
Interest Period of the aggregate maximum reserve requirements (including all basic, supplemental,
marginal and other reserves), as specified under Regulation D of the Federal Reserve Board, or any
other applicable regulation that prescribes reserve requirements applicable to Eurocurrency
liabilities (as presently defined in Regulation D) or applicable to extensions of credit by the
Agent the rate of interest on which is determined with regard to rates applicable to Eurocurrency
liabilities. Without limiting the generality of the foregoing, the Eurocurrency Reserve Rate shall
reflect any reserves required to be maintained by the Agent against (i) any category of liabilities
that includes deposits by reference to which the LIBOR Interbank Rate is to be determined, or (ii)
any category of extensions of credit or other assets that includes LIBOR Advances.



     “Lien” means any security interest, mortgage, pledge, lien, hypothecation, judgment
lien or similar legal process, charge, encumbrance, title retention agreement or analogous
instrument or device (including, without limitation, the interest of the lessors under Capitalized
Leases and the interest of a vendor under any conditional sale or other title retention agreement).



     “Loans” means the Revolving Loans and the Swing Line Loans.



     “Loan Documents” means this Agreement, the Notes, each Letter of Credit Agreement, the
Parent Negative Pledge, the Parent Subordination Agreement, each Guaranty and each other
instrument, document, guaranty, security agreement, mortgage, or other agreement executed and
delivered by the Borrower, Material Subsidiary, the Parent or any other guarantor or party granting
security interests in connection with this Agreement, the Loans or any collateral for the Loans.



     “Material Subsidiary” means (a) the Subsidiaries listed on Schedule 1.1(b)
hereto, and (b) any Subsidiary acquired or formed after the date of this Agreement if at the time
of such acquisition or formation or at any time thereafter either (i) the consolidated assets of
such Subsidiary and its Subsidiaries shall exceed 5.00% of the consolidated assets of the Borrower
and its Subsidiaries, or (ii) the consolidated gross revenues of such Subsidiary and its
Subsidiaries shall exceed 5.00% of the consolidated gross revenues of the Borrower and its
Subsidiaries. Such assets and gross revenues shall be determined on a pro forma basis at the time
of such acquisition or formation, and shall be determined thereafter at the request of the Agent,
but not less than one time per fiscal year of the Borrower thereafter.



     “Notes” means the Revolving Notes and the Swing Line Note.



     “Parent” means Otter Tail Corporation, a Minnesota corporation, and any successor
thereof.



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     “Parent Negative Pledge” means a letter agreement between the Parent and the Agent in
the form of Exhibit D hereto.



     “Parent Subordination Agreement” means a subordination agreement between the Parent
and the Agent in the form of Exhibit E hereto.



     “Payment Date” means the Termination Date, plus (a) the last day of each Interest
Period for each LIBOR Advance and, if such Interest Period is in excess of three months after the
first day of such Interest Period, and thereafter each day three months after each succeeding
Payment Date; (b) the last day of each month for any Swing Line Loan, and (c) the last day of each
March, June, September and December of each year for each Base Rate Advance and for any fees
including, without limitation, Commitment Fees and the Letter of Credit commissions payable under
Section 2.8(c)(vi).



     “PBGC” means the Pension Benefit Guaranty Corporation, established pursuant to
Subtitle A of Title IV of ERISA, and any successor thereto or to the functions thereof.



     “Percentage” means, as to any Bank, the proportion, expressed as a percentage, that
such Bank’s Commitment bears to the total Commitments of all Banks. The Percentages of the Banks
as of the date of this Agreement are set forth on Schedule 1.1(a).



     “Permitted Divestitures” means sales of stock or assets, transfers of stock or assets,
mergers resulting in divestiture of stock or assets or other divestitures of assets of the Borrower
and Subsidiaries, which, in the aggregate for all such transactions during any one fiscal year of
the Borrower, shall not result in the sale, transfer or other divestiture of stock or assets having
a value in excess of 10% of the consolidated assets of the Borrower and its Subsidiaries as of the
beginning of such fiscal year.



     “Person” means any natural person, corporation, limited liability company,
partnership, joint venture, firm, association, trust, unincorporated organization, government or
governmental agency or political subdivision or any other entity, whether acting in an individual,
fiduciary or other capacity.



     “Plan” means an employee benefit plan or other plan, maintained for employees of the
Borrower or of any ERISA Affiliate, and subject to Title IV of ERISA or Section 412 of the Code.



     “Preferred Stock” means stock of the Borrower other than common stock.



     “Prime Rate” means the rate of interest from time to time announced by the Agent as
its “prime rate.” For purposes of determining any interest rate which is based on the Prime Rate,
such interest rate shall be adjusted each time that the prime rate changes.



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     “Related Party” means any Person (other than a Subsidiary): (a) which directly or
indirectly through one or more intermediaries controls, or is controlled by, or is under common
control with, the Borrower, (b) which beneficially owns or holds 5% or more of the equity interest
of the Borrower; or (c) 5% or more of the equity interest of which is beneficially owned or held by
the Borrower or a Subsidiary. The term “control” means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.



     “Rental Expense” means, for any period of determination, the aggregate amount, without
duplication, of rent paid, accrued or scheduled to be paid under any lease of assets that is not a
Capitalized Lease.



     “Reportable Event” means a reportable event as defined in Section 4043 of ERISA and
the regulations issued under such Section, with respect to a Plan, excluding, however, such events
as to which the PBGC by regulation has waived the requirement of Section 4043(a) of ERISA that it
be notified within 30 days of the occurrence of such event, provided that a failure to meet the
minimum funding standard of Section 412 of the Code and Section 302 of ERISA shall be a reportable
event regardless of the issuance of any such waivers in accordance with Section 412(d) of the Code.



     “Required Banks” means those Banks whose total Percentage exceeds 50.00%, or if no
Commitments remain in effect, whose share of principal of the Loans exceeds 50.00% of the aggregate
outstanding principal of all Loans.



     “Restricted Payments” means any expenditure by the Borrower or any Subsidiary for
purchase, redemption or other acquisition for value of any shares of the Borrower’s or any
Subsidiary’s stock, payment of any dividend thereon (other than stock dividends and dividends
payable solely to the Borrower), any distribution on, or payment on account of the purchase,
redemption, defeasance or other acquisition or retirement for value of, any shares of the
Borrower’s or any Subsidiary’s stock, or the setting aside of any funds for any such purpose (other
than payment to, or on account of or for the benefit of, the Borrower only).



     “Revolving Loans” means the Loans described in Section 2.1(a).



     “Revolving Note” means the promissory note of the Borrower described in Section
2.5(a), substantially in the form of Exhibit A-1, as such promissory note may be
amended, modified or supplemented from time to time, and such term shall include any substitutions
for, or renewals of, such promissory note.



     “Subsidiary” means any Person of which or in which the Borrower and its other
Subsidiaries own directly or indirectly 50% or more of: (a) the combined voting power of all
classes of stock having general voting power under ordinary circumstances to elect a majority of
the board of directors of such Person, if it is a corporation, (b) the capital interest or profit
interest of such Person, if it is a partnership, joint venture or similar entity, or (c) the
beneficial interest of such Person, if it is a trust, association or other unincorporated
organization.



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     “Swing Line Commitment” means the maximum unpaid principal amount of the Swing Line
Loans which may from time to time be outstanding hereunder, being initially $10,000,000, and, as
the context may require, the agreement of the Swing Line Bank to make the Swing Line Loans to the
Borrower subject to the terms and conditions of this Agreement.



     “Swing Line Bank” means U.S. Bank.



     “Swing Line Loans” means the Loans described in Section 2.1(b).



     “Swing Line Note” means the promissory note of the Borrower described in Section
2.5(b), substantially in the form of Exhibit A-2, as such promissory note may be
amended, modified or supplemented from time to time, and such term shall include any substitutions
for, or renewals of, such promissory note.



     “Swing Line Participation Amount” is defined in Section 2.7(b).



     “Termination Date” means the earliest of (a) October 2, 2010, (b) the date on which
the Commitments are terminated pursuant to Section 10.2 hereof or (c) the date on which the
Commitments are reduced to zero pursuant to Section 4.3 hereof.



     “Unrefunded Swing Line Loans” is defined in Section 2.7(b).



     “U.S. Bank” means U.S. Bank National Association, in its individual capacity and not
as Agent hereunder.



     Section 1.2 Accounting Terms and Calculations. Except as may be expressly provided
to the contrary herein, all accounting terms used herein shall be interpreted and all accounting
determinations hereunder (including, without limitation, determination of compliance with financial
ratios and restrictions in Articles VIII and IX hereof) shall be made in accordance
with GAAP consistently applied. Any reference to “consolidated” financial terms shall be deemed to
refer to those financial terms as applied to the Borrower and its Subsidiaries in accordance with
GAAP.



     Section 1.3 Computation of Time Periods. In this Agreement, in the computation of a
period of time from a specified date to a later specified date, unless otherwise stated the word
“from” means “from and including” and the word “to” or “until” each means “to but excluding.”



     Section 1.4 Other Definitional Terms. The words “hereof”, “herein” and “hereunder”
and words of similar import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement. References to Sections, Exhibits, schedules
and like references are to this Agreement unless otherwise expressly provided.



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ARTICLE II TERMS OF LENDING AND ISSUANCE OF LETTERS OF CREDIT




     Section 2.1 The Commitments. Subject to the terms and conditions hereof and in
reliance upon the warranties of the Borrower herein:




(a) each Bank agrees, severally and not jointly, to make loans (each, a “Revolving Loan”
and, collectively, the “Revolving Loans”) to the Borrower from time to time from the date
hereof until the Termination Date, during which period the Borrower may repay and reborrow
in accordance with the provisions hereof, provided, that the aggregate unpaid
principal amount of any Bank’s Revolving Loans, its Percentage of Letter of Credit
Obligations and its Percentage of Swing Line Loans shall not exceed such Bank’s Commitment
and provided, further, that the total of all outstanding Revolving Loans,
Letter of Credit Obligations and Swing Line Loans shall not exceed the aggregate Commitments
of all Banks at any time. The Revolving Loans shall be made by the Banks on a pro rata
basis, calculated for each Bank based on its Percentage.




(b) the Swing Line Bank agrees to make loans (each a “Swing Line Loan” and, collectively,
the “Swing Line Loans”) to the Borrower from time to time from the date hereof until the
Termination Date, during which period the Borrower may repay and reborrow in accordance with
the provisions hereof, provided, that the aggregate unpaid principal amount of the Swing
Line Loans at any one time outstanding shall not exceed the Swing Line Commitment.



     Section 2.2 Advance Options. The Revolving Loans shall be constituted of LIBOR
Advances and/or Base Rate Advances, as shall be selected by the Borrower, except as otherwise
provided herein. Any combination of types of Advances may be outstanding at the same time, except
that the total number of outstanding LIBOR Advances shall not exceed eight (8) at any one time.
Each LIBOR Advance shall be in a minimum amount of $500,000. Each Base Rate Advance shall be in a
minimum amount of $100,000. Swing Line Loans may be in any amount requested by the Borrower.



     Section 2.3 Borrowing Procedures.




(a) Request by Borrower. Any request by the Borrower for a Loan shall be in
writing, or by telephone promptly confirmed in writing, and must be given so as to be
received by the Agent not later than:




(i) 1:00 p.m., Minneapolis time, one Business day prior to the date of the requested
Loan, if the Loan shall be comprised of Base Rate Advances; or




(ii) 12:00 noon, Minneapolis time, three Business days prior to the date of the
requested Revolving Loan, if the Revolving Loan shall be, or shall include, a LIBOR
Advance.



12









 






Each request for a Loan shall specify (1) the borrowing date (which shall be a Business
Day), (2) the amount of such Loan and the type or types of Advances comprising such Loan,
and (3) if such Loan shall include LIBOR Advances, the initial Interest Periods for such
Advances. The Swing Line Bank and the Borrower shall, from time to time, enter into
mutually acceptable arrangements for notices of funding, funding and repayment of the Swing
Line Loans.




(b) Funding of Agent. The Agent shall promptly notify each other Bank of the
receipt of such request, the matters specified therein, and of such Bank’s Percentage of the
requested Revolving Loans. On the date of the requested Revolving Loans, each Bank shall
provide its share of the requested Revolving Loans to the Agent in immediately available
funds not later than 11:00 a.m., Minneapolis time. On the date of any requested Swing Line
Loans, the Swing Line Bank shall provide the requested Swing Line Loan to the Agent in
immediately available funds not later than 4:00 p.m., Minneapolis time. Unless the Agent
determines that any applicable condition specified in Article VI has not been
satisfied, the Agent will make the requested Loans available to the Borrower at the Agent’s
principal office in Minneapolis, Minnesota in immediately available funds not later than
5:00 p.m. (Minneapolis time) on the lending date so requested. If the Agent has made a
Revolving Loan to the Borrower on behalf of a Bank but has not received the amount of such
Revolving Loan from such Bank by the time herein required, such Bank shall pay interest to
the Agent on the amount so advanced at the overnight Federal Funds rate from the date of
such Revolving Loan to the date funds are received by the Agent from such Bank, such
interest to be payable with such remittance from such Bank of the principal amount of such
Revolving Loan (provided, however, that the Agent shall not make any Revolving Loan on
behalf of a Bank if the Agent has received prior notice from such Bank that it will not make
such Revolving Loan). If the Agent does not receive payment from such Bank by the next
Business Day after the date of any Revolving Loan, the Agent shall be entitled to recover
such Revolving Loan, with interest thereon at the rate then applicable to the such Revolving
Loan, on demand, from the Borrower, without prejudice to the Agent’s and the Borrower’s
rights against such Bank. If such Bank pays the Agent the amount herein required with
interest at the overnight rate before the Agent has recovered from the Borrower, such Bank
shall be entitled to the interest payable by the Borrower with respect to the Revolving Loan
in question accruing from the date the Agent made such Revolving Loan.



     2.4 Continuation or Conversion of Loans. The Borrower may elect to (i) continue any
outstanding LIBOR Advance from one Interest Period into a subsequent Interest Period to begin on
the last day of the earlier Interest Period, or (ii) convert any outstanding Advance into another
type of Advance (on the last day of an Interest Period only, in the instance of a LIBOR Advance),
by giving the Agent notice in writing, or by telephone promptly confirmed in writing, given so as
to be received by the Agent not later than:



13









 






(a) 1:00 p.m., Minneapolis time, one Business day prior to the date of the requested
continuation or conversion, if the continuing or converted Advance shall be a Base Rate
Advance; or




(b) 12:00 noon, Minneapolis time, three Business days prior to the date of the requested
continuation or conversion, if the continuing or converted Advance shall be a LIBOR Advance.


Each notice of continuation or conversion of an Advance shall specify (i) the effective date of the
continuation or conversion date (which shall be a Business Day), (ii) the amount and the type or
types of Advances following such continuation or conversion (subject to the limitation on amount
set forth in Section 2.2), and (iii) for continuation as, or conversion into, LIBOR
Advances, the Interest Periods for such Advances. Absent timely notice of continuation or
conversion, following expiration of an Interest Period unless the LIBOR Advance is paid in full the
Agent may at any time thereafter convert the LIBOR Advance into a Base Rate Advance. Until such
time as such Advance is converted into a Base Rate Advance by the Agent or the Borrower or is
continued as a LIBOR Advance with a new Interest Period by notice by the Borrower as provided
above, such Advance shall continue to accrue interest at a rate equal to the interest rate
applicable during the expired Interest Period adjusted, however, to reflect changes in the
Applicable Margin. No Advance shall be continued as, or converted into, a LIBOR Advance if the
shortest Interest Period for such Advance may not transpire prior to the Termination Date or if a
Default or Event of Default shall exist.




     Section 2.5 The Notes. The Loans shall be evidenced by the following Notes:




(a) The Revolving Loans of each Bank shall be evidenced by a Revolving Note in the amount
of such Bank’s Commitment originally in effect and dated as of the date of this Agreement.
The Banks shall enter in their respective records the amount of each Revolving Loan and
Advance, the rate of interest borne by each Advance and the payments made on the Revolving
Loans, and such records shall be deemed conclusive evidence of the subject matter thereof,
absent manifest error.




(b) The Swing Line Loans shall be evidenced by the Swing Line Note in the amount of the
Swing Line Commitment. The Swing Line Bank shall enter in its records the amount of each
Swing Line Loan and the payments made on the Swing Line Loans, and such records shall be
deemed conclusive evidence of the subject matter thereof, absent manifest error.



     Section 2.6 Funding Losses. In the event of (a) any failure of the Borrower to
borrow, continue or convert a LIBOR Advance on a date specified in a notice thereof, or (b) any
payment (including, without limitation, any payment pursuant to Section 4.2, 4.3 or
10.2), prepayment or conversion of any LIBOR Advance on a date other than the last day of
the Interest Period for such Advance, the Borrower agrees to pay each Bank’s costs, expenses and
Interest Differential (as determined by such Bank) incurred as a result of such event. The term
“Interest Differential”



14









 







shall mean that sum amount, not less than $0, equal to the financial loss incurred by each Bank
resulting from such event, calculated as the difference between the amount of interest such Bank
would have earned (from like investments in the Money Markets as of the first day of the Interest
Period of the relevant Advance) had such event not occurred and the interest the Bank will actually
earn (from like investments in the Money Markets as of the date of such event) as a result of the
redeployment of funds from such event. Because of the short-term nature of this facility, the
Borrower agrees that the Interest Differential shall not be discounted to its present value. The
term “Money Markets” refers to one or more wholesale funding markets available to the Banks,
including negotiable certificates of deposit, commercial paper, LIBOR deposits, bank notes, federal
funds and others. Such determinations by each Bank of shall be conclusive in the absence of
manifest error.



     Section 2.7 Refunding of Swing Line Loans.




(a) At any time permitted hereunder, the Borrower may request the Banks to make Revolving
Loans which may be applied to repay the Swing Line Loans outstanding. Upon occurrence and
during continuance of a Default or Event of Default, the Swing Line Bank may, on behalf of
the Borrower (which hereby irrevocably directs the Swing Line Bank to act on its behalf),
upon notice given by the Swing Line Bank no later than 12:00 noon, Minneapolis time, on the
relevant refunding date, request each Bank to make, and each Bank hereby agrees to make, a
Revolving Loan (which shall be a Base Rate Advance), in an amount equal to such Bank’s
Percentage of the aggregate amount of the Swing Line Loans (the “Refunded Swing Line Loans”)
outstanding on the date of such notice, to refund such Swing Line Loans. Each Bank shall
make the amount of such Revolving Loan available to the Agent in immediately available
funds, no later than 2:00 p.m., Minneapolis time, on the date of such notice. The proceeds
of such Revolving Loans shall be distributed by the Agent to the Swing Line Bank and
immediately applied by the Swing Line Bank to repay the Refunded Swing Line Loans.




(b) If, for any reason, Revolving Loans may not be (as determined by the Agent in its sole
discretion), or are not, made pursuant to Section 2.7(a) to repay Swing Line Loans,
then, effective on the date such Revolving Loans would otherwise have been made, each Bank
severally, unconditionally and irrevocably agrees that it shall purchase a participating
interest in such Swing Line Loans (“Unrefunded Swing Line Loans”) in an amount equal to the
amount of Revolving Loans which would otherwise have been made by such Bank pursuant to
Section 2.7(a). Each Bank will immediately transfer to the Agent, in immediately
available funds, the amount of its participation (the “Swing Line Participation Amount”),
and the proceeds of such participation shall be distributed by the Agent to the Swing Line
Bank in such amount as will reduce the amount of the participating interest retained by the
Swing Line Bank in its Swing Line Loans.




(c) Whenever, at any time after the Swing Line Bank has received from any Bank such Bank’s
Swing Line Participation Amount, the Swing Line Bank receives any payment on account of the
Swing Line Loans, the Swing Line Bank will distribute to such Bank its



15









 







Swing Line Participation Amount (appropriately adjusted, in the case of interest payments,
to reflect the period of time during which such Bank’s participating interest was
outstanding and funded and, in the case of principal and interest payments, to reflect such
Bank’s pro rata portion of such payment if such payment is not sufficient to
pay the principal of and interest on all Swing Line Loans then due); provided,
however, that in the event that such payment received by the Swing Line Bank is
required to be returned, such Bank will return to the Swing Line Bank any portion thereof
previously distributed to it by the Swing Line Bank.




(d) Each Bank’s obligation to make the Loans referred to in Section 2.7(a) and to
purchase participating interests pursuant to Section 2.7(b) shall be absolute and
unconditional and shall not be affected by any circumstance, including, without limitation,
(i) any setoff, counterclaim, recoupment, defense or other right which such Bank or the
Borrower may have against the Swing Line Bank, the Borrower or any other Person for any
reason whatsoever; (ii) the occurrence or continuance of a Default or an Event of Default or
the failure to satisfy any of the other conditions precedent specified in Article
VI; (iii) any adverse change in the condition (financial or otherwise) of the Borrower;
(iv) any breach of this Agreement or any other Loan Document by the Borrower or any Bank; or
(v) any other circumstance, happening or event whatsoever, whether or not similar to any of
the foregoing.



     Section 2.8 Letters of Credit




(a) Letters of Credit. Subject to the terms and conditions of this Agreement, and
on the condition that aggregate Letter of Credit Obligations shall never exceed the lesser
of (i) $30,000,000 or (ii) the Commitments, and that the sum of Letter of Credit Obligations
plus Loans shall never exceed the aggregate Commitments of all Banks, the Borrower may, in
addition to Loans, request that the Agent issue letters of credit for the account of the
Borrower or any Subsidiary, as provided in Section 2.8(f), by making such request to
the Agent (such letters of credit as any of them may be amended, supplemented, extended or
confirmed from time to time, being herein collectively called the “Letters of Credit”). The
Agent may, at its discretion, elect to issue or decline to issue any requested Letter of
Credit. No Letter of Credit shall expire more than one year after the date of issuance
thereof (provided, that Letters of Credit may automatically extend absent notice of
termination by the issuer). Upon the date of the issuance of a Letter of Credit, the Agent
shall be deemed, without further action by any party hereto, to have sold to each Bank, and
each Bank shall be deemed without further action by any party hereto, to have purchased from
the Agent, a participation, in its Percentage, in such Letter of Credit and the related
Letter of Credit Obligations.




(b) Purchase Unconditional. Each Bank’s purchase of a participating interest in a
Letter of Credit pursuant to Section 2.8(a) shall be absolute and unconditional and
shall not be affected by any circumstance, including, without limitation, (i) any setoff,
counterclaim, recoupment, defense or other right which such Bank or the Borrower may have
against



16









 







the Agent, the Borrower or any other Person for any reason whatsoever; (ii) the occurrence
or continuance of a Default or an Event of Default or the failure to satisfy any of the
other conditions precedent in Article VI; (iii) any adverse change in the condition
(financial or otherwise) of the Borrower; (iv) any breach of this Agreement or any other
Loan Document by the Borrower or any Bank; (v) the expiry date of any Letter of Credit
occurring after such Bank’s Commitment has terminated; or (vi) any other circumstance,
happening or event whatsoever, whether or not similar or any of the foregoing.




(c) Additional Provisions. The following additional provisions shall apply to each
Letter of Credit:




(i) Upon receipt of any request for a Letter of Credit, the Agent shall notify each
Bank of the contents of such request and of such Bank’s Percentage of the amount of
such proposed Letter of Credit.




(ii) No Letter of Credit may be issued if after giving effect thereto the Letter of
Credit Obligations shall exceed $30,000,000 or if the sum of (A) the aggregate
outstanding principal amount of Loans plus (B) the aggregate Letter of
Credit Obligations would exceed the aggregate Commitments of all Banks. The
Commitment of each Bank shall be deemed to be utilized for all purposes hereof in an
amount equal to such Bank’s Percentage of the Letter of Credit Obligations.




(iii) Upon receipt from the beneficiary of any Letter of Credit of any demand for
payment thereunder, Agent shall promptly notify the Borrower and each Bank as to the
amount to be paid as a result of such demand and the payment date. If at any time
the Agent shall have made a payment to a beneficiary of such Letter of Credit in
respect of a drawing or in respect of an acceptance created in connection with a
drawing under such Letter of Credit, each Bank will pay to Agent immediately upon
demand by the Agent at any time during the period commencing after such payment
until reimbursement thereof in full by the Borrower, an amount equal to such Bank’s
Percentage of such payment, together with interest on such amount for each day from
the date of demand for such payment (or, if such demand is made after 2:00 p.m.
Minneapolis time on such date, from the next succeeding Business Day) to the date of
payment by such Bank of such amount at a rate of interest per annum equal to the
Federal Funds Effective Rate for such period.




(iv) The Borrower shall be irrevocably and unconditionally obligated forthwith to
reimburse the Agent for any amount paid by the Agent upon any drawing under any
Letter of Credit, without presentment, demand, protest or other formalities of any
kind, all of which are hereby waived. Such reimbursement may, subject to
satisfaction of the conditions in Article VI hereof and to the available
Commitment (after adjustment in the same to reflect the elimination of the
corresponding Letter of Credit Obligation), be made by the borrowing of Loans.



17









 






The Agent will pay to each Bank such Bank’s Percentage of all amounts received from
the Borrower for application in payment, in whole or in part, of a Letter of Credit
Obligation, but only to the extent such Bank has made payment to the Agent in
respect of such Letter of Credit pursuant to clause (iii) above.




(v) The Borrower’s obligation to reimburse the Agent for any amount paid by the
Agent upon any drawing under any Letter of Credit shall be performed strictly in
accordance with the terms of this Agreement and the applicable Letter of Credit
Agreement under any and all circumstances whatsoever and irrespective of (A) any
lack of validity or enforceability of any Letter of Credit, any Letter of Credit
Agreement or this Agreement, or any term or provision therein, (B) any draft or
other document presented under a Letter of Credit proving to be forged, fraudulent,
or invalid in any respect or any statement therein being untrue or inaccurate in any
respect, (C) payment by the Agent under a Letter of Credit against presentation of a
draft or other document that does not comply with the terms of such Letter of
Credit, or (D) any other event or circumstance whatsoever, whether or not similar to
any of the foregoing, that might, but for the provisions of this clause (v),
constitute a legal or equitable discharge of, or provide a right of setoff against,
the Borrower’s obligations hereunder. Neither the Agent nor the Bank shall have any
liability or responsibility by reason of or in connection with the issuance or
transfer of any Letter of Credit or any payment or failure to make any payment
thereunder (irrespective of any of the circumstances referred to in the preceding
sentence), or any error, omission, interruption, loss or delay in transmission or
delivery of any draft, notice or other communication under or relating to any Letter
of Credit (including any document required to make a drawing thereunder), any error
in interpretation of technical terms or any consequence arising from causes beyond
the control of the Agent; provided that the foregoing shall not be construed to
excuse the Agent from liability to the Borrower to the extent of any direct damages
(as opposed to consequential damages, claims in respect of which are hereby waived
by the Borrower to the extent permitted by applicable law) suffered by the Borrower
that are caused by the Agent’s failure to exercise care when determining whether
drafts and other documents presented under a Letter of Credit comply with the terms
thereof. The parties hereto expressly agree that, in the absence of gross
negligence or willful misconduct on the part of the Agent (as finally determined by
a court of competent jurisdiction), the Agent shall be deemed to have exercised care
in each such determination. In furtherance of the foregoing and without limiting
the generality thereof, the parties hereto expressly agree that, with respect to
documents presented which appear on their face to be in substantial compliance with
the terms of the Letter of Credit, the Agreement may, in its sole discretion, either
accept and make payment upon such documents without responsibility for further
investigation or refuse to accept and make payment upon such documents if such
documents are not in strict compliance with the terms of such Letter of Credit.



18









 






(vi) The Borrower will pay to Agent for the account of each Bank in accordance with
its Percentage letter of credit fee with respect to each Letter of Credit equal to
an amount, calculated on the basis of face amount of each Letter of Credit, in each
case for the period from and including the date of issuance of such Letter of Credit
to and including the date of expiration or termination thereof at a per annum rate
equal to the then-applicable Applicable Margin for LIBOR Advances, such fee to be
due and payable quarterly, in arrears on the Payment Dates. The Agent will pay to
each Bank, promptly after receiving any payment in respect of letter of credit fee
referred to in this clause (v), an amount equal to the product of such
Bank’s Percentage times the amount of such fees. The Borrower shall also pay
to Agent at the Principal Office for the account of the Agent a fronting fee of
0.125% of the face amount of the applicable Letter of Credit. At all times that the
rate of interest provided in Section 3.1(d) shall apply to the Loans, the
fee paid for the account of the Banks under this Section shall be increased by 2.00%
per annum. All fees hereunder shall be computed on the basis of a year of 360 days
and paid for the actual number of days elapsed.




(vii) The issuance by the Agent of each Letter of Credit shall, in addition to the
discretionary nature of this facility, be subject to the conditions precedent that
the Borrower shall have executed and delivered such applications and other
instruments and agreements relating to such Letter of Credit as the Agent shall have
reasonably requested and are not inconsistent with the terms of this Agreement (the
“Letter of Credit Agreements”). In the event of a conflict between the
terms of this Agreement and the terms of any Letter of Credit Agreement (including
the charging of any fees other than normal and customary reimbursable expenses), the
terms hereof shall control.




(viii) In the event that any Letter of Credit remains outstanding after the
Termination Date, the Borrower shall deliver, prior to the Termination Date, cash
collateral to be held and applied in accordance with the terms of Section
10.3.




(d) Indemnification; Release. Borrower hereby indemnifies and holds harmless the
Agent and each Bank from and against any and all claims and damages, losses, liabilities,
costs or expenses which the Agent or such Bank may incur (or which may be claimed against
the Agent or such Bank by any Person whatsoever), regardless of whether caused in whole or
in part by the negligence of any of the indemnified parties, in connection with the
execution and delivery of any Letter of Credit or transfer of or payment or failure to pay
under any Letter of Credit; provided that the Borrower shall not be required to
indemnify any party seeking indemnification for any claims, damages, losses, liabilities,
costs or expenses to the extent, but only to the extent, caused by (i) the willful
misconduct or gross negligence of the party seeking indemnification, or (ii) by the failure
by the party seeking indemnification to pay under any Letter of Credit after the
presentation to it of a request required to be paid under applicable law.



19









 






(e) Existing Letters of Credit. Certain Letters of Credit previously issued by the
Agent and listed on Schedule 2.6 shall be deemed to be “Letters of Credit” for all purposes
hereunder.




(f) Issuance of Letters of Credit for Account of Subsidiaries. Upon request of the
Borrower, Letters of Credit may be issued for the account of Subsidiaries of the Borrower.
In such event, the Borrower shall be deemed to have irrevocably guarantied payment of the
obligations of each Subsidiary in respect of Letters of Credit issued for the account of
such Subsidiary, and if requested by the Bank, the Borrower shall, together with such
Subsidiary, enter into the Letter of Credit Agreement as co-applicant or guarantor, and
shall execute and deliver such other instrument of guaranty as shall be required by the
Agent.



     Section 2.9 Purpose of the Loans. The Loans shall be used (a) to refinance certain
indebtedness of the Borrower, and (b) for purposes of funding working capital, capital
expenditures, and other corporate purposes of the Borrower and its Subsidiaries.



ARTICLE III INTEREST AND FEES




     Section 3.1 Interest.




(a) LIBOR Advances. The unpaid principal amount of each LIBOR Advance shall bear
interest prior to maturity at a rate per annum equal to the LIBOR Rate (Reserve Adjusted) in
effect for each Interest Period for such LIBOR Advance plus the Applicable Margin per annum.




(b) Base Rate Advances. The unpaid principal amount of each Base Rate Advance shall
bear interest prior to maturity at a rate per annum equal to the Base Rate plus the
Applicable Margin per annum.




(c) Swing Line Loans. The unpaid principal amount of all Swing Line Loans shall
bear interest prior to maturity at a rate per annum equal to the LIBOR Rate (Reserve
Adjusted) Daily Floating plus the Applicable Margin for LIBOR Advances per annum.




(d) Interest After Maturity. Any amount of the Loans not paid when due, whether at
the date scheduled therefor or earlier upon acceleration, shall bear interest until paid in
full at a rate per annum equal to the greater of (i) 2.00% in excess of the rate applicable
to the unpaid principal amount immediately before it became due, or (ii) 2.00% in excess of
the Base Rate in effect from time to time.



     Section 3.2 Commitment Fee. The Borrower shall pay fees (the “Commitment Fees”) to
the Agent for the account of the Banks (in according with their respective Percentages) in an



20









 







amount determined by applying the Applicable Commitment Fee Rate per annum to the average daily
unused amount of the Commitments (with the face amount of all Letters of Credit deemed usage for
such purpose, but Swing Line Loans not deemed usage) of the Banks for the period from the date
hereof to the Termination Date.



     Section 3.3 Computation. Interest and Commitment Fees shall be computed on the basis
of actual days elapsed and a year of 360 days.



     Section 3.4 Payment Dates. Accrued interest under Section 3.1(a), (b)
and (c), and Commitment Fees shall be payable on the applicable Payment Dates. Accrued
interest under Section 3.1(d) shall be payable on demand.



     Section 3.5 Agent’s Fee. The Borrower shall pay to the Agent fees described in the
Agent’s Fee Letter.



ARTICLE IV PAYMENTS, PREPAYMENTS, REDUCTION OR TERMINATION

OF THE CREDIT AND SETOFF




     Section 4.1 Repayment. Principal of the Loans, together with all accrued and unpaid
interest thereon, shall be due and payable on the Termination Date.



     Section 4.2 Optional Prepayments. The Borrower may, upon at least three (3) Business
Days’ prior written or telephonic notice received by the Bank, prepay the Loans, in whole or in
part, at any time subject to the provisions of Section 2.6, without any other premium or
penalty. Any such prepayment must be accompanied by accrued and unpaid interest on the amount
prepaid. Each partial prepayment shall be in an amount of $50,000 or an integral multiple thereof.
Any prepayment of a LIBOR Advance shall be in an amount equal to the remaining entire principal
balance of such Advance.



     Section 4.3 Optional Reduction or Termination of Commitment. The Borrower may, at
any time, upon no less than 2 Business Days prior written or telephonic notice received by the
Agent, reduce the Commitment, with any such reduction in a minimum amount of $500,000 or an
integral multiple thereof. Upon any reduction in the Commitment pursuant to this Section, the
Borrower shall pay to the Agent for the account of the Banks the amount, if any, by which the
aggregate unpaid principal amount of outstanding Loans plus the Letter of Credit Obligations
exceeds the Commitment as so reduced. Amounts so paid cannot be reborrowed. The Borrower may, at
any time, upon not less than 2 Business Days prior written notice to the Agent, terminate the
Commitment in its entirety. Upon termination of the Commitment pursuant to this Section, the
Borrower shall pay to the Agent for the account of the Banks the full amount of all outstanding
Loans, all accrued and unpaid interest thereon, all unpaid Commitment Fees accrued to the date of
such termination and all other unpaid obligations of the Borrower to the Banks hereunder. All
payment described in this Section is subject to the provisions of Section 2.6.
Notwithstanding the foregoing, the Commitment may not be reduced to an amount below outstanding
Letter of Credit Obligations, or terminated if Letters of Credit are outstanding



21









 





     Section 4.4 Payments. Payments and prepayments of principal of, and interest on, the
Notes and all fees, expenses and other obligations under the Loan Documents shall be made without
set-off or counterclaim in immediately available funds not later than 2:00 p.m., Minneapolis time,
on the dates due at the main office of the Agent in Minneapolis, Minnesota, provided,
however, that the Swing Line Bank and the Borrower shall enter into mutually acceptable
arrangements for payment of the Swing Line Loans which may permit payment of the Swing Line Loans
later than such time. Funds received on any day after such time shall be deemed to have been
received on the next Business Day. The Agent shall promptly distribute in like funds to each Bank
its Percentage share of each such payment of principal, interest and Commitment Fees. Subject to
the definition of the term “Interest Period”, whenever any payment to be made hereunder or on the
Notes shall be stated to be due on a day which is not a Business Day, such payment shall be made on
the next succeeding Business Day and such extension of time shall be included in the computation of
any interest or fees. The Agent is authorized to debit the operating account of the Borrower
designated by the Borrower for such purpose from time to time for all payments when due hereunder
(provided that if such account shall not have sufficient available funds to pay interest when due,
the Borrower shall pay such interest in immediately available funds).



     Section 4.5 Proration of Payments. If any Bank or other holder of a Loan shall
obtain any payment or other recovery (whether voluntary, involuntary, by application of offset,
pursuant to the guaranty hereunder, or otherwise) on account of principal of, interest on, or fees
with respect to any Loan, or payment of any Letter of Credit Obligations, in any case in excess of
the share of payments and other recoveries of other Banks or holders, such Bank or other holder
shall purchase from the other Banks or holders, in a manner to be specified by the Agent, such
participations in the Loans held by such other Banks or holders as shall be necessary to cause such
purchasing Bank or other holder to share the excess payment or other recovery ratably with each of
such other Banks or holders; provided, however, that if all or any portion of the
excess payment or other recovery is thereafter recovered from such purchasing Bank or holder, the
purchase shall be rescinded and the purchase price restored to the extent of such recovery, but
without interest.



ARTICLE V ADDITIONAL PROVISIONS RELATING TO LOANS




     Section 5.1 Increased Costs. If, as a result of any law, rule, regulation, treaty or
directive, or any change therein or in the interpretation or administration thereof, or compliance
by the Banks with any request or directive (whether or not having the force of law) from any court,
central bank, governmental authority, agency or instrumentality, or comparable agency:




(a) any tax, duty or other charge with respect to any Loan, the Notes or the Commitments is
imposed, modified or deemed applicable, or the basis of taxation of payments to any Bank of
interest or principal of the Loans or of the Commitment Fees (other than taxes imposed on
the overall net income of such Bank by the jurisdiction in which such Bank has its principal
office) is changed;



22









 






(b) any reserve, special deposit, special assessment or similar requirement against assets
of, deposits with or for the account of, or credit extended by, any Bank is imposed,
modified or deemed applicable;




(c) any increase in the amount of capital required or expected to be maintained by any Bank
or any Person controlling such Bank is imposed, modified or deemed applicable; or




(d) any other condition affecting this Agreement or the Commitments is imposed on any Bank
or the relevant funding markets;


and such Bank determines that, by reason thereof, the cost to such Bank of making or maintaining
the Loans, issuing or participating in the Letters of Credit or extending its Commitment is
increased, or the amount of any sum receivable by such Bank hereunder or under the Notes in respect
of any Loan is reduced;



then, the Borrower shall pay to such Bank upon demand such additional amount or amounts as
will compensate such Bank (or the controlling Person in the instance of (c) above) for such
additional costs or reduction (provided that the Banks have not been compensated for such
additional cost or reduction in the calculation of the LIBOR Reserve Rate). Any Bank making such
demand shall inform the Borrower of the basis for such demand, and provide a statement showing, in
reasonable detail, calculation of the amount demanded. The Borrower will promptly notify such Bank
if the Borrower does not agree to such Bank’s determination of any such amount. Any Bank’s
reasonable determination of such amount shall be presumed correct, absent its manifest error or
negligence in determining such amounts. In determining such amounts, the Banks may use any
reasonable averaging, attribution and allocation methods. Notwithstanding the foregoing, no Bank
shall charge the Borrower for additional amounts for such additional costs or reductions that
applied or accrued more than 90 days prior to the time that such Bank became aware of the event
giving rise to such additional costs or reductions.




     Section 5.2 Deposits Unavailable or Interest Rate Unascertainable or Inadequate;
Impracticability. If the Agent determines (which determination shall be conclusive and binding
on the parties hereto) that:




(a) deposits of the necessary amount for the relevant Interest Period for any LIBOR Advance
are not available in the relevant markets or that, by reason of circumstances affecting such
market, adequate and reasonable means do not exist for ascertaining the LIBOR Interbank Rate
for such Interest Period;




(b) the LIBOR Rate (Reserve Adjusted) will not adequately and fairly reflect the cost to the
Banks of making or funding the LIBOR Advance for a relevant Interest Period; or




(c) the making or funding of LIBOR Advances has become impracticable as a result of any
event occurring after the date of this Agreement which, in the opinion of the Agent,



23









 







materially and adversely affects such Advances or any Bank’s Commitment or the relevant
market;


the Agent shall promptly give notice of such determination to the Borrower, and (i) any notice of a
new LIBOR Advance previously given by the Borrower and not yet borrowed or converted shall be
deemed to be a notice to make a Base Rate Advance, and (ii) the Borrower shall be obligated to
either prepay in full any outstanding LIBOR Advances, without premium or penalty on the last day of
the current Interest Period with respect thereto or convert any such LIBOR Advance to a Base Rate
Advance on such last day.




     Section 5.3 Changes in Law Rendering LIBOR Advances Unlawful. If at any time due to
the adoption of any law, rule, regulation, treaty or directive, or any change therein or in the
interpretation or administration thereof by any court, central bank, governmental authority, agency
or instrumentality, or comparable agency charged with the interpretation or administration thereof,
or for any other reason arising subsequent to the date of this Agreement, it shall become unlawful
or impossible for any Bank to make or fund any LIBOR Advance, the obligation of such Bank to
provide such Advance shall, upon the happening of such event, forthwith be suspended for the
duration of such illegality or impossibility. If any such event shall make it unlawful or
impossible for the Bank to continue any LIBOR Advance previously made by it hereunder, such Bank
shall, upon the happening of such event, notify the Agent and the Borrower thereof in writing, and
the Borrower shall, at the time notified by such Bank, either convert each such unlawful Advance to
a Base Rate Advance or repay such Advance in full, together with accrued interest thereon, subject
to the provisions of Section 2.6.



     Section 5.4 Discretion of the Banks as to Manner of Funding. Notwithstanding any
provision of this Agreement to the contrary, each Bank shall be entitled to fund and maintain its
funding of all or any part of the Loans in any manner it elects; it being understood, however, that
for purposes of this Agreement, all determinations hereunder shall be made as if the Banks had
actually funded and maintained each LIBOR Advance during the Interest Period for such Advance
through the purchase of deposits having a term corresponding to such Interest Period and bearing an
interest rate equal to the LIBOR Interbank Rate for such Interest Period (whether or not any Bank
shall have granted any participations in such Advances).



ARTICLE VI CONDITIONS PRECEDENT




     Section 6.1 Conditions of Initial Loan. The obligation of the Banks to make the
initial Loan hereunder shall be subject to the satisfaction of the conditions precedent, in
addition to the applicable conditions precedent set forth in Section 6.2 below, that the
Agent shall have received all of the following, in form and substance satisfactory to the Agent,
each duly executed and certified or dated as of the date of this Agreement or such other date as is
satisfactory to the Agent and the following shall have occurred:




(a) The Notes payable to each Bank executed by a duly authorized officer (or officers) of
the Borrower.



24









 






(b) The Guaranty, duly executed by each Material Subsidiary.




(c) The Parent Negative Pledge and the Parent Subordination Agreement, each executed by the
Parent.




(d) A certificate or certificates of the Secretary or an Assistant Secretary of the
Borrower and each Material Subsidiary, attesting to and attaching (i) a copy of the
corporate resolution of the Borrower and each Material Subsidiary authorizing the execution,
delivery and performance of the Loan Documents, (ii) an incumbency certificate showing the
names and titles, and bearing the signatures of, the officers of the Borrower and each
Material Subsidiary authorized to execute the Loan Documents, (iii) a copy of the Articles
or Certificate of Incorporation of the Borrower and each Material Subsidiary with all
amendments thereto, and (iv) a copy of the By-Laws of the Borrower and each Material
Subsidiary with all amendments thereto.




(e) A Certificate of Good Standing for the Borrower and each Material Subsidiary in the
jurisdiction of its incorporation, certified by the appropriate governmental officials.




(f) An opinion of counsel to the Borrower and each Material Subsidiary, addressed to the
Bank, in substantially the form of Exhibit F.




(g) The Agent’s Fee Letter and payment of all fees and reimbursements payable hereunder and
thereunder.




(h) The Parent shall have repaid all Loans under the Credit Agreement, dated as of April
26, 2006, among the Parent, the Banks named therein and U.S. Bank National Association, as
Agent, and arrangements shall be made for all Letters of Credit issued thereunder so that
the Banks shall have no further obligation to fund drawing thereunder (whether such Letters
of Credit shall become Existing Letters of Credit under this Agreement or otherwise) and all
commitments and agreements of the Bank to extend credit thereunder shall be terminated.



     Section 6.2 Conditions Precedent to all Loans. The obligation of the Bank to make
any Loan hereunder (including the initial Loan) shall be subject to the satisfaction of the
following conditions precedent (and any request for a Loan shall be deemed a representation by the
Borrower that the following are satisfied):




(a) Before and after giving effect to such Loan, the representation and warranties
contained in Article VII shall be true and correct, as though made on the date of
such Loan; and




(b) Before and after giving effect to such Loan, no Default or Event of Default shall have
occurred and be continuing.



25









 





ARTICLE VII REPRESENTATIONS AND WARRANTIES




     To induce the Agent and the Banks to enter into this Agreement, to grant the Commitments and
to make Loans hereunder, the Borrower represents and warrants to the Agent and the Banks:



     Section 7.1 Organization, Standing, Etc. The Borrower and each of its corporate
Material Subsidiaries are corporations duly incorporated and validly existing and in good standing
under the laws of the jurisdiction of their respective incorporation and have all requisite
corporate power and authority to carry on their respective businesses as now conducted, to (in the
instance of the Borrower) enter into the Loan Documents and to perform its obligations under the
Loan Documents. The Borrower and each of the Material Subsidiaries are duly qualified and in good
standing as a foreign corporation in each jurisdiction in which the character of the properties
owned, leased or operated by it or the business conducted by it makes such qualification necessary,
and failure to so qualify or remain in good standing would constitute an Adverse Event.



     Section 7.2 Authorization and Validity. The execution, delivery and performance by
the Borrower of the Loan Documents have been duly authorized by all necessary corporate action by
the Borrower, and the Loan Documents constitute the legal, valid and binding obligations of the
Borrower, enforceable against the Borrower in accordance with their respective terms, subject to
limitations as to enforceability which might result from bankruptcy, insolvency, moratorium and
other similar laws affecting creditors’ rights generally and subject to limitations on the
availability of equitable remedies.



     Section 7.3 No Conflict; No Default. The execution, delivery and performance by the
Borrower of the Loan Documents will not (a) violate any provision of any law, statute, rule or
regulation or any order, writ, judgment, injunction, decree, determination or award of any court,
governmental agency or arbitrator presently in effect having applicability to the Borrower, (b)
violate or contravene any provisions of the Articles (or Certificate) of Incorporation or by-laws
of the Borrower, or (c) result in a breach of or constitute a default under any indenture, loan or
credit agreement or any other agreement, lease or instrument to which the Borrower is a party or by
which it or any of its properties may be bound or result in the creation of any Lien on any asset
of the Borrower or any Material Subsidiary, which in any such case under this subsection (c) would
constitute an Adverse Event. Neither the Borrower nor any Material Subsidiary is in default under
or in violation of any such law, statute, rule or regulation, order, writ, judgment, injunction,
decree, determination or award or any such indenture, loan or credit agreement or other agreement,
lease or instrument in any case in which the consequences of such default or violation could
constitute an Adverse Event. No Default or Event of Default has occurred and is continuing.



     Section 7.4 Government Consent. No order, consent, approval, license, authorization
or validation of, or filing, recording or registration with, or exemption by, any governmental or
public body or authority is required on the part of the Borrower to authorize, or is required in
connection with the execution, delivery and performance of, or the legality, validity, binding
effect or enforceability of, the Loan Documents.



26









 





     Section 7.5 Financial Statements and Condition. The Parent’s audited consolidated
financial statements as of December 31, 2006, and the Borrower’s unaudited quarterly financial
statements as at June 30, 2007, as heretofore furnished to the Banks, have been prepared in
accordance with GAAP on a consistent basis and fairly present the financial condition of the
Parent, the Borrower and the Subsidiaries as at such dates and the results of their operations for
the fiscal year then ended. As of the dates of such consolidated financial statements, neither the
Borrower nor any Material Subsidiary had any material obligation, contingent liability, liability
for taxes or long-term lease obligation which is not reflected in such consolidated financial
statements or in the notes thereto. Since December 31, 2006, no Adverse Event has occurred.



     Section 7.6 Litigation and Contingent Liabilities. Except as described in
Schedule 7.6, there are no actions, suits or proceedings pending or, to the knowledge of
the Borrower, threatened against or affecting the Borrower or any Material Subsidiary or any of
their properties before any court or arbitrator, or any governmental department, board, agency or
other instrumentality which, if determined adversely to the Borrower or such Material Subsidiary,
could constitute an Adverse Event. Except as described in Schedule 7.6, neither the
Borrower nor any Material Subsidiary has any contingent liabilities which are material to the
Borrower and the Subsidiaries as a consolidated enterprise.



     Section 7.7 Compliance. The Borrower and the Material Subsidiaries are in material
compliance with all statutes and governmental rules and regulations applicable to them.



     Section 7.8 Environmental, Health and Safety Laws. To the best of the Borrower’s
knowledge after due inquiry, there does not exist any violation by the Borrower or any Material
Subsidiary of any applicable federal, state or local law, rule or regulation or order of any
government, governmental department, board, agency or other instrumentality relating to
environmental, pollution, health or safety matters which will or threatens to impose a material
liability on the Borrower or a Material Subsidiary or which would require a material expenditure by
the Borrower or such Material Subsidiary to cure. Neither the Borrower nor any Material Subsidiary
has received any notice to the effect that any part of its operations or properties is not in
material compliance with any such law, rule, regulation or order or notice that it or its property
is the subject of any governmental investigation evaluating whether any remedial action is needed
to respond to any release of any toxic or hazardous waste or substance into the environment, the
consequences of which non-compliance or remedial action could constitute an Adverse Event.



     Section 7.9 ERISA. Each Plan complies with all material applicable requirements of
ERISA and the Code and with all material applicable rulings and regulations issued under the
provisions of ERISA and the Code setting forth those requirements. No Reportable Event, other than
a Reportable Event for which the reporting requirements have been waived by regulations of the
PBGC, has occurred and is continuing with respect to any Plan. All of the minimum funding
standards applicable to such Plans have been satisfied and there exists no event or condition which
would permit the institution of proceedings to terminate any Plan under Section 4042 of ERISA.



27









 




The current value of the Plans’ benefits guaranteed under Title IV or ERISA does not exceed the
current value of the Plans’ assets allocable to such benefits.




     Section 7.10 Regulation U. The Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying margin stock (as defined in Regulation U of the
Board of Governors of the Federal Reserve System) and no part of the proceeds of any Loan will be
used to purchase or carry margin stock or for any other purpose which would violate any of the
margin requirements of the Board of Governors of the Federal Reserve System.



     Section 7.11 Ownership of Property; Liens. Each of the Borrower and the Material
Subsidiaries has good and marketable title to its real properties and good and sufficient title to
its other properties, including all properties and assets referred to as owned by the Borrower and
the Material Subsidiaries in the audited consolidated financial statement of the Borrower referred
to in Section 7.5 (other than property disposed of since the date of such financial
statement in the ordinary course of business). None of the properties, revenues or assets of the
Borrower or any of the Material Subsidiaries is subject to a Lien, except for (a) Liens disclosed
in the consolidated financial statements referred to in Section 7.5, (b) Liens listed on
Schedule 7.11, or (c) Liens allowed under Section 9.9.



     Section 7.12 Taxes. Each of the Borrower and the Material Subsidiaries has filed all
federal, state and local tax returns required to be filed and has paid or made provision for the
payment of all taxes due and payable pursuant to such returns and pursuant to any assessments made
against it or any of its property and all other taxes, fees and other charges imposed on it or any
of its property by any governmental authority (other than taxes, fees or charges the amount or
validity of which is currently being contested in good faith by appropriate proceedings and with
respect to which reserves in accordance with GAAP have been provided on the books of the Borrower).
No tax Liens have been filed and no material claims are being asserted with respect to any such
taxes, fees or charges. The charges, accruals and reserves on the books of the Borrower in respect
of taxes and other governmental charges are adequate.



     Section 7.13 Trademarks, Patents. Each of the Borrower and the Material Subsidiaries
possesses or has the right, by way of ownership or license, to use all of the patents, trademarks,
trade names, service marks and copyrights, and applications therefor, and all technology, know-how,
processes, methods and designs used in or necessary for the conduct of its business, without known
conflict with the rights of others.



     Section 7.14 Investment Company Act. Neither the Borrower nor any Subsidiary is an
“investment company” or a company “controlled” by an investment company within the meaning of the
Investment Company Act of 1940, as amended.



     Section 7.15 Subsidiaries. Schedule 7.15 sets forth as of the date of this
Agreement a list of all Subsidiaries and the number and percentage of the shares of each class of
capital stock owned beneficially or of record by the Borrower or any Subsidiary therein, and the
jurisdiction of incorporation of each Subsidiary.



28









 





     Section 7.16 Partnerships and Joint Ventures. Schedule 7.16 sets forth as
of the date of this Agreement a list of all partnerships or joint ventures in which the Borrower or
any Subsidiary is a partner (limited or general) or joint venturer.



     Section 7.17 Senior Debt. The Loans are senior unsecured Indebtedness of the
Borrower, and are pari passu and of equal rank and seniority with all senior unsecured Indebtedness
of the Borrower.



ARTICLE VIII AFFIRMATIVE COVENANTS




     From the date of this Agreement and thereafter until the Commitments are terminated or expire
and the Loans and all other liabilities of the Borrower to the Banks hereunder and under the Note
have been paid in full, unless the Required Banks shall otherwise expressly agree in writing the
Borrower will do, and will cause each Material Subsidiary (except in the instance of Section
8.1) to do, all of the following:



     Section 8.1 Financial Statements and Reports. Furnish to the Agent for distribution
to the Banks:




(a) As soon as available and in any event within 120 days after the end of each fiscal year
of the Parent, the annual audit report of the Parent and its Subsidiaries prepared on a
consolidated basis and in conformity with GAAP, consisting of at least statements of income,
cash flow, and a consolidated balance sheet as at the end of such year, setting forth in
each case in comparative form corresponding figures from the previous annual audit,
certified without qualification by independent certified public accountants of recognized
standing selected by the Parent and acceptable to the Agent, together with any related
management letters, and including supplemental schedules detailing balance sheet and income
statement results for the Borrower and its Subsidiaries, and a statement from such
independent certified public accountants substantially similar to “the schedules have been
subjected to the auditing procedures applied in the basic consolidated financial statements
of Otter Tail Corporation, and in the opinion of the undersigned, are fairly stated in all
material respects when considered in relation to the basic consolidated statements taken as
a whole”.




(b) As soon as available and in any event within 45 days after the end of each quarter of
each fiscal year, a copy of the unaudited financial statement of the Borrower and its
subsidiaries prepared in the same manner as the audit report referred to in Section
8.1(a), signed by the Borrower’s senior financial officer, consisting of at least
consolidated statements of income and cash flow for the Borrower and the Subsidiaries for
such quarter and for the period from the beginning of such fiscal year to the end of such
quarter, and a consolidated balance sheet of the Borrower as at the end of such quarter.



29









 






(c) Together with the consolidated financial statements furnished by the Borrower under
Sections 8.1(a) and 8.1(b), a Compliance Certificate signed by the senior
financial officer of the Borrower, which shall confirm either that as at the date of each
such financial statement there did not exist any Default or Event of Default or, that a
Default or Event of Default existed, in which case it shall specify the nature and period of
existence thereof and what action the Borrower proposes to take with respect thereto.




(d) Immediately upon becoming aware of any Default or Event of Default, a notice describing
the nature thereof and what action the Borrower proposes to take with respect thereto.




(e) Immediately upon becoming aware of the occurrence, with respect to any Plan, of any
Reportable Event (other than a Reportable Event for which the reporting requirements have
been waived by PBGC regulations) or any “prohibited transaction” (as defined in Section 4975
of the Code), a notice specifying the nature thereof and what action the Borrower proposes
to take with respect thereto, and, when received, copies of any notice from PBGC of
intention to terminate or have a trustee appointed for any Plan.




(f) Promptly upon the mailing or filing thereof, copies of all financial statements, reports
and proxy statements mailed to the Borrower’s shareholders, and copies of all registration
statements, periodic reports and other documents filed with the Securities and Exchange
Commission (or any successor thereto) or any national securities exchange.




(g) Immediately upon becoming aware of the occurrence thereof, notice of the institution of
any litigation, arbitration or governmental proceeding, or the rendering of a judgment or
decision in such litigation or proceeding, which is material to the Borrower and its
Subsidiaries as a consolidated enterprise, and the steps being taken by the Person(s)
affected by such proceeding.




(h) Immediately upon becoming aware of the occurrence thereof, notice of any violation as to
any environmental matter by the Borrower or any Material Subsidiary and of the commencement
of any judicial or administrative proceeding relating to health, safety or environmental
matters (i) in which an adverse determination or result could result in the revocation of or
have a material adverse effect on any operating permits, air emission permits, water
discharge permits, hazardous waste permits or other permits held by the Borrower or any
Material Subsidiary which are material to the operations of the Borrower or such Material
Subsidiary, or (ii) which will or threatens to impose a material liability on the Borrower
or such Material Subsidiary to any Person or which will require a material expenditure by
the Borrower or such Material Subsidiary to cure any alleged problem or violation.




(i) From time to time, such other information regarding the business, operation and
financial condition of the Borrower and the Subsidiaries as any Bank may reasonably request.



30









 





     Section 8.2 Corporate Existence. Subject to Sections 9.1, 9.2 and
9.4 in the instance of a Material Subsidiary, maintain its corporate existence in good
standing under the laws of its jurisdiction of incorporation and its qualification to transact
business in each jurisdiction in which the character of the properties owned, leased or operated by
it or the business conducted by it makes such qualification necessary, provided, that the
Borrower may cause any Material Subsidiary to be dissolved that has substantially no assets,
revenues or operations.



     Section 8.3 Insurance. Maintain with financially sound and reputable insurance
companies such insurance as may be required by law and such other insurance in such amounts and
against such hazards as is customary in the case of reputable corporations engaged in the same or
similar business and similarly situated.



     Section 8.4 Payment of Taxes and Claims. File all tax returns and reports which are
required by law to be filed by it and pay before they become delinquent all taxes, assessments and
governmental charges and levies imposed upon it or its property and all claims or demands of any
kind (including, without limitation, those of suppliers, mechanics, carriers, warehouses, landlords
and other like Persons) which, if unpaid, might result in the creation of a Lien upon its property;
provided that the foregoing items need not be paid if they are being contested in good
faith by appropriate proceedings, and as long as the Borrower’s or such Material Subsidiary’s title
to its property is not materially adversely affected, its use of such property in the ordinary
course of its business is not materially interfered with and adequate reserves with respect thereto
have been set aside on the Borrower’s or such Material Subsidiary’s books in accordance with GAAP.



     Section 8.5 Inspection. Permit any Person designated by any Bank to visit and
inspect any of its properties, corporate books and financial records, to examine and to make copies
of its books of accounts and other financial records, and to discuss the affairs, finances and
accounts of the Borrower and the Subsidiaries with, and to be advised as to the same by, its
officers at such reasonable times and intervals as such Bank may designate. So long as no Event of
Default exists, the expenses of the Banks for such visits, inspections and examinations shall be at
the expense of the Banks, but any such visits, inspections, and examinations made while any Event
of Default is continuing shall be at the expense of the Borrower.



     Section 8.6 Maintenance of Properties. Maintain its properties used or useful in the
conduct of its business in good condition, repair and working order, and supplied with all
necessary equipment, and make all necessary repairs, renewals, replacements, betterments and
improvements thereto, all as may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times.



     Section 8.7 Books and Records. Keep adequate and proper records and books of account
in which full and correct entries will be made of its dealings, business and affairs.



     Section 8.8 Compliance. Comply in all material respects with all laws, rules,
regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject.



31









 





     Section 8.9 ERISA. Maintain each Plan in compliance with all material applicable
requirements of ERISA and of the Code and with all material applicable rulings and regulations
issued under the provisions of ERISA and of the Code.



     Section 8.10 Environmental Matters. Observe and comply with all laws, rules,
regulations and orders of any government or government agency relating to health, safety,
pollution, hazardous materials or other environmental matters to the extent non-compliance could
result in a material liability or otherwise constitute or result in an Adverse Event.



     Section 8.11 Senior Debt. Take all actions necessary to assure that the Loans are
senior unsecured Indebtedness of the Borrower, and are and remain pari passu and of equal rank and
seniority with all senior unsecured Indebtedness of the Borrower (without limiting the obligation
of the Borrower to deliver collateral under certain circumstances, as specifically provided
herein).



     Section 8.12 Subsidiaries. Upon the formation or acquisition of any Subsidiary that
is a Material Subsidiary, unless such Material Subsidiary is a Controlled Foreign Corporation, the
Borrower will cause such Material Subsidiary to become a Guarantor and to, concurrent with such
formation or acquisition, execute and deliver a Guaranty to the Agent for the benefit of the Banks,
and provide a secretary’s certificate and copies of all documents consistent with Section
6.1(c), (d) and (e) for such Subsidiary.



ARTICLE IX NEGATIVE COVENANTS




     From the date of this Agreement and thereafter until the Commitments are terminated or expire
and the Loans and all other liabilities of the Borrower to the Banks hereunder and under the Note
have been paid in full, unless the Required Banks shall otherwise expressly agree in writing the
Borrower will not, and will not permit any Material Subsidiary to, do any of the following:



     Section 9.1 Merger. Merge or consolidate or enter into any analogous reorganization
or transaction with any Person; provided, however, any wholly-owned Subsidiary may
be merged with or liquidated into the Borrower (if the Borrower is the surviving corporation) or
any other wholly-owned Subsidiary, and the Borrower and Material Subsidiaries may enter Permitted
Divestitures.



     Section 9.2 Sale of Assets. Sell, transfer, lease or otherwise convey all or any
substantial part of its assets except for (a) sales and leases of inventory in the ordinary course
of business, (b) sales or other transfers by a wholly-owned Subsidiary to the Borrower or another
wholly-owned Subsidiary; (c) sales of accounts receivable related to DMI Industries or ShoreMaster,
Inc., which sale shall be without recourse to the Borrower or any Subsidiary (other than usual and
traditional recourse for representations and warranties not addressing credit quality); and (d)
Permitted Divestitures.



     Section 9.3 Plans. Permit any condition to exist in connection with any Plan which
might constitute grounds for the PBGC to institute proceedings to have such Plan terminated or a
trustee appointed to administer such Plan, permit any Plan to terminate under any circumstances
which



32









 







would cause the lien provided for in Section 4068 of ERISA to attach to any property, revenue or
asset of the Borrower or any Subsidiary or permit the underfunded amount of Plan benefits
guaranteed under Title IV of ERISA to exceed $500,000.



     Section 9.4 Ownership of Stock. Take any action, or permit any Material Subsidiary
to take any action, which would result in a decrease in the Borrower’s or any Material Subsidiary’s
ownership interest in any Subsidiary (including, without limitation, decrease in the percentage of
the shares of any class of stock owned), other than Permitted Divestitures.



     Section 9.5 Other Agreements. Enter into any agreement, bond, note or other
instrument with or for the benefit of any Person other than the Banks which would: (a) prohibit the
Borrower or such Material Subsidiary from granting, or otherwise limit the ability of the Borrower
or such Material Subsidiary to grant, to the Banks any Lien on any assets or properties of the
Borrower or such Material Subsidiary; (b) be violated or breached by the Borrower’s performance of
its obligations under the Loan Documents, or (c) prohibit any Subsidiary of the Borrower from
paying dividends or distributions on, or redeeming, acquiring or retiring for value, any shares of
stock or other ownership interest that the Borrower holds in such Subsidiary.



     Section 9.6 Restricted Payments. Either: (a) make any Restricted Payment if any
Default or Event of Default shall exist or shall result from the making of such Restricted Payment;
or (b) directly or indirectly make any payment on, or redeem, repurchase, defease, or make any
sinking fund payment on account of, or any other provision for, or otherwise pay, acquire or retire
for value (i) the Indebtedness of the Borrower to the Parent under the Parent Subordination
Agreement, or (ii) any other Indebtedness of the Borrower or any Subsidiary that is subordinated in
right of payment to the Loans (whether pursuant to its terms or by operation of law), except for
regularly-scheduled payments of interest and principal (which shall not include payments
contingently required upon occurrence of a change of control or other event) that are not otherwise
prohibited by the Parent Subordination Agreement, or by any other document or agreement stating the
terms of subordination of such other Indebtedness.



     Section 9.7 Investments. Acquire for value, make, have or hold any Investments,
except:




(a) Investments outstanding on the date hereof and listed on Schedule 9.7, and any
increases or decreases in the value thereof or write-ups, write-downs or write-offs with
respect to such Investments;




(b) Travel advances to officers and employees in the ordinary course of business;




(c) Investments in readily marketable direct obligations of the United States of America
having maturities of one year or less from the date of acquisition;




(d) Certificates of deposit or bankers’ acceptances, each maturing within one year from the
date of acquisition, issued by any commercial bank organized under the laws of the United
States or any State thereof which has (i) combined capital, surplus and undivided profits of



33









 







at least $100,000,000, and (ii) a credit rating with respect to its unsecured indebtedness
from a nationally recognized rating service that is satisfactory to the Bank;




(e) Commercial paper maturing within 270 days from the date of issuance and given the
highest rating by a nationally recognized rating service;




(f) Repurchase agreements relating to securities issued or guaranteed as to principal and
interest by the United States of America;




(g) Extensions of credit in the nature of accounts receivable or notes receivable arising
from the sale of goods and services in the ordinary course of business;




(h) Share of stock, obligations or other securities received in settlement of claims arising
in the ordinary course of business;




(i) Investments outstanding on the date hereof in Subsidiaries by the Borrower and other
Subsidiaries, Investments by the Borrower or other Subsidiaries in Persons that will be
Subsidiaries upon completion of such Investments;




(j) Investments not otherwise permitted hereunder which shall not exceed (based on total
consideration paid by the Borrower or a Material Subsidiary): (i) $10,000,000 for any single
Investment or series of related Investments in any Person not engaged in one or more of the
Borrower’s and Subsidiaries’ present lines of business, or (ii) $20,000,000 for any single
Investment or series of related Investments in any Person that is engaged in one or more of
the Borrower’s and Subsidiaries’ present lines of business, provided that consent of
the Required Banks to such Investments in excess of such limit shall not be unreasonably
withheld;




(k) Any Material Subsidiary may make Investments constituting loans to the Borrower; and




(l) provided that no Default or Event of Default shall have occurred and continued, the
Borrower and any Material Subsidiary may make Investments constituting loans to (i) any
Material Subsidiaries, or (ii) any Subsidiaries that are not Material Subsidiaries,
provided, that such loans in the aggregate to any one Subsidiary that is not a
Material Subsidiary shall not exceed $5,000,000 in aggregate principal amounts outstanding
at any time.



     Section 9.8 Indebtedness. Incur, create, issue, assume or suffer to exist any
Indebtedness, except:




(a) Indebtedness under this Agreement;




(b) Current liabilities, other than for borrowed money, incurred in the ordinary course of
business;



34









 






(c) Indebtedness existing on the date of this Agreement and disclosed on Schedule
9.8 hereto;




(d) Indebtedness secured by Liens permitted under Section 9.9 hereof;




(e) Indebtedness consisting of endorsements for collection, deposit or negotiation and
warranties of products or services, in each case incurred in the ordinary course of
business;




(f) Indebtedness of the Borrower to the Parent that is subject to the Parent Subordination
Agreement;




(g) Indebtedness in respect of issuance of unsecured ten year notes in principal amounts of
up to $30,000,000 under a credit document to be entered by the Borrower; and




(h) Indebtedness not otherwise permitted by this Section not to exceed $20,000,000 in the
aggregate principal amount at any time outstanding provided that consent of the
Required Banks to such Indebtedness in excess of such limit shall not be unreasonably
withheld.



     Section 9.9 Liens. Create, incur, assume or suffer to exist any Lien with respect to
any property, revenues or assets now owned or hereafter arising or acquired, except:




(a) Liens in connection with the acquisition of property by way of purchase money mortgage
and security interests, conditional sale or other title retention agreement, Capitalized
Lease or other deferred payment contract, and attaching only to the property being acquired
if the Indebtedness secured thereby does not exceed 100% of the fair market value of such
property at the time of acquisition thereof nor $5,000,000 in the aggregate for the Borrower
and all Material Subsidiaries at any one time outstanding;




(b) Liens existing on assets of Material Subsidiaries acquired after December 31, 2006,
which existed at the time of such acquisition and attach only to the assets of such Material
Subsidiaries;




(c) Liens existing on the date of this Agreement and disclosed on Schedule 7.11
hereto and Liens securing any extension, renewal, restatement or replacement of the credit
facilities described on Schedule 7.11, provided, that Liens securing such
extensions, renewals, restatements or replacement credit facilities shall not attach to
materially different assets than the Liens disclosed on such Schedule 7.11 and shall
not secure indebtedness exceeding the amount of credit facilities described on Schedule
7.11;




(d) Deposits or pledges to secure payment of workers’ compensation, unemployment insurance,
old age pensions or other social security obligations, in the ordinary course of business of
the Borrower or a Subsidiary;



35









 






(e) Liens for taxes, fees, assessments and governmental charges not delinquent or to the
extent that payments therefor shall not at the time be required to be made in accordance
with the provisions of Section 8.4;




(f) Liens of carriers, warehousemen, mechanics and materialmen, and other like Liens arising
in the ordinary course of business, for sums not due or to the extent that payment therefor
shall not at the time be required to be made in accordance with the provisions of
Section 8.4;




(g) Deposits to secure the performance of bids, trade contracts, leases, statutory
obligations and other obligations of a like nature incurred in the ordinary course of
business;




(h) Liens granted to secure obligations to any other holder of senior Indebtedness of the
Borrower (including without limitation obligations to insurers of bond obligations of the
Borrower), provided, that (i) such Liens were required to be granted pursuant to agreement
and instruments entered into by the Borrower prior to the date of this Agreement, and (ii)
the Agent is granted a pari passu Lien, not subordinate in priority (whether due to time of
filing or otherwise) to such Lien attaching to either (x) the same assets and rights as the
Lien in favor of such other holder of senior Indebtedness (in which case if the Agent shall
so notify the Borrower, the holder of such senior Indebtedness shall enter into an
inter-creditor agreement satisfactory to the Agent confirming such respective priorities of
such Liens), or (y) other assets that are acceptable to the Required Banks in their sole
discretion to secure all Indebtedness and obligations of the Borrower hereunder, whether
then existing or thereafter arising; and




(i) Liens not otherwise permitted by this Section securing Indebtedness not to exceed
$2,000,000 in the aggregate principal amount at any time outstanding.


In no case shall Liens permitted hereunder apply to the stock of any Material Subsidiary and in no
case shall Liens under (d), (f) or (g) secure any Indebtedness for borrowed money or Indebtedness
constituting obligations to issuers of letters of credit.




     Section 9.10 Contingent Liabilities. Either: (a) endorse, guarantee, contingently
agree to purchase or to provide funds for the payment of, or otherwise become contingently liable
upon, any obligation of any other Person, except by the endorsement of negotiable instruments for
deposit or collection (or similar transactions) in the ordinary course of business, or (b) agree to
maintain the net worth or working capital of, or provide funds to satisfy any other financial test
applicable to, any other Person, except (in the case of (a) or (b) above) for (i) a performance
guaranty by the Borrower of performance by DMI Industries, Inc. under a certain contract involving
aggregate payments of approximately $20,000,000; (ii) guaranties by the Borrower or any Material
Subsidiary of obligations of any Material Subsidiary as lessee under any lease that is not a
Capitalized Lease, (iii) guaranties by Subsidiaries of the Borrower of obligations of the Borrower
in respect of Indebtedness permitted by Section 9.8, (iv) other guaranties limited as to
principal of recovery to not more than $5,000,000 in the aggregate; (v) guaranties by the Borrower
of the obligations of the
Parent under



36









 







that certain Note Purchase Agreement, dated as of December 1, 2001, among the Parent
and the various purchasers which are parties thereto in respect of up to $90,000,000 of 6.63%
notes, (vi) guaranty by the Borrower of the obligations of the Parent in respect of up to
$40,000,000 of Insured Senior Notes due October 1, 2017, and (vii) guaranty by the Borrower of the
obligations of the Parent in respect of up to $50,000,000 of 5.778% senior notes due November 30,
2017, which will replace and finance 6.375% senior debentures due December 1, 2007, upon repayment
or retirement of such senior debentures.



     Section 9.11 Unconditional Purchase Obligations. Enter into or be a party to any
contract for the purchase or lease of materials, supplies or other property or services if such
contract requires that payment be made by it regardless of whether or not delivery is ever made of
such materials, supplies or other property or services.



     Section 9.12 Transactions with Related Parties. Enter into or be a party to any
transaction or arrangement, including, without limitation, the purchase, sale lease or exchange of
property or the rendering of any service, with any Related Party, except in the ordinary course of
and pursuant to the reasonable requirements of the Borrower’s or the applicable Material
Subsidiary’s business and upon fair and reasonable terms no less favorable to the Borrower or such
Material Subsidiary than would obtain in a comparable arm’s-length transaction with a Person not a
Related Party.



     Section 9.13 Use of Proceeds. Permit any proceeds of the Loans to be used for
purposes other than general corporate purposes (including acquisitions, to the extent permitted
hereunder) or permit any proceeds of the Loans to be used, either directly or indirectly, for the
purpose, whether immediate, incidental or ultimate, of “purchasing or carrying any margin stock”
within the meaning of Regulation U of the Federal Reserve Board, as amended from time to time, and
furnish to any Bank, upon its request, a statement in conformity with the requirements of Federal
Reserve Form U-1 referred to in Regulation U.



     Section 9.14 Fixed Charge Coverage Ratio. Permit the Fixed Charge Coverage Ratio,
calculated for each period of four consecutive fiscal quarters as provided in the definition
thereof, to be less than 1.25 to 1.00.



     Section 9.15 Cash Flow Leverage Ratio. Permit the Cash Flow Leverage Ratio,
calculated for each period of four consecutive fiscal quarters as provided in the definition
thereof, to be greater than 3.00 to 1.00.



ARTICLE X EVENTS OF DEFAULT AND REMEDIES




     Section 10.1 Events of Default. The occurrence of any one or more of the following
events shall constitute an Event of Default:




(a) The Borrower shall fail to make when due, whether by acceleration or otherwise, any
payment of principal of or interest on the Note or any fee or other amount required to be
made to the Banks pursuant to the Loan Documents;



37









 






(b) Any representation or warranty made or deemed to have been made by or on behalf of the
Borrower or any Material Subsidiary by any of the Loan Documents or by or on behalf of the
Borrower or any Material Subsidiary in any certificate, statement, report or other writing
furnished by or on behalf of the Borrower to the Banks pursuant to the Loan Documents shall
prove to have been false or misleading in any material respect on the date as of which the
facts set forth are stated or certified or deemed to have been stated or certified;




(c) The Borrower shall fail to comply with Section 8.2 hereof or any Section of
Article IX hereof;




(d) The Borrower shall fail to comply with any agreement, covenant, condition, provision or
term contained in the Loan Documents (and such failure shall not constitute an Event of
Default under any of the other provisions of this Section 10.1) and such failure to
comply shall continue for thirty (30) calendar days after notice thereof to the Borrower by
the Bank;




(e) The Borrower or any Material Subsidiary shall become insolvent or shall generally not
pay its debts as they mature or shall apply for, shall consent to, or shall acquiesce in the
appointment of a custodian, trustee or receiver of the Borrower or such Material Subsidiary
or for a substantial part of the property thereof or, in the absence of such application,
consent or acquiescence, a custodian, trustee or receiver shall be appointed for the
Borrower or a Material Subsidiary or for a substantial part of the property thereof and
shall not be discharged within 30 days;




(f) Any bankruptcy, reorganization, debt arrangement or other proceedings under any
bankruptcy or insolvency law shall be instituted by or against the Borrower or a Material
Subsidiary, and, if instituted against the Borrower or a Material Subsidiary, shall have
been consented to or acquiesced in by the Borrower or such Material Subsidiary, or shall
remain undismissed for 30 days, or an order for relief shall have been entered against the
Borrower or such Material Subsidiary, or the Borrower or any Material Subsidiary shall take
any corporate action to approve institution of, or acquiescence in, such a proceeding;




(g) Any dissolution or liquidation proceeding shall be instituted by or against the Borrower
or a Material Subsidiary and, if instituted against the Borrower or such Material
Subsidiary, shall be consented to or acquiesced in by the Borrower or such Material
Subsidiary or shall remain for 30 days undismissed, or the Borrower or any Material
Subsidiary shall take any corporate action to approve institution of, or acquiescence in,
such a proceeding;




(h) A judgment or judgments for the payment of money in excess of the sum of $1,000,000 in
the aggregate shall be rendered against the Borrower or a Material Subsidiary and the
Borrower or such Material Subsidiary shall not discharge the same or provide for its
discharge in accordance with its terms, or procure a stay of execution thereof, prior to any
execution on such judgments by such judgment creditor, within 30 days from the date of



38









 







entry thereof, and within said period of 30 days, or such longer period during which
execution of such judgment shall be stayed, appeal therefrom and cause the execution thereof
to be stayed during such appeal;




(i) The institution by the Borrower or any ERISA Affiliate of steps to terminate any Plan if
in order to effectuate such termination, the Borrower or any ERISA Affiliate would be
required to make a contribution to such Plan, or would incur a liability or obligation to
such Plan, in excess of $1,000,000, or the institution by the PBGC of steps to terminate any
Plan;




(j) The maturity of any Indebtedness of the Borrower (other than Indebtedness under this
Agreement) or a Material Subsidiary in the aggregate in excess of $2,500,000 shall be
accelerated, or the Borrower or a Material Subsidiary shall fail to pay any such
Indebtedness (in excess of such amount) when due or, in the case of such Indebtedness
payable on demand, when demanded, or any event shall occur or condition shall exist and
shall continue for more than the period of grace, if any, applicable thereto and shall have
the effect of causing, or permitting (any required notice having been given and grace period
having expired) the holder of any such Indebtedness (in excess of such amount) or any
trustee or other Person acting on behalf of such holder to cause, such Indebtedness to
become due prior to its stated maturity or to realize upon any collateral given as security
therefor;




(k) Any Loan Document shall not be, or shall cease to be, enforceable and binding in
accordance with its terms, or the Borrower, any Material Subsidiary, or any other obligor
thereunder (except for the Agent or the Banks) shall disavow or contest, or attempt to
disavow or contest, its obligations under such Loan Document; or




(l) The Parent shall cease to own all of the voting stock of the Borrower or any Person, or
group of Persons acting in concert, that owned less than 5% of the shares of any voting
class of stock of the Parent shall have acquired more than 25% of the shares of such voting
stock.



     Section 10.2 Remedies. If (a) any Event of Default described in Sections
10.1(e), (f) or (g) shall occur with respect to the Borrower, the Commitments
shall automatically terminate and the outstanding unpaid principal balance of the Notes, the
accrued interest thereon and all other obligations of the Borrower to the Banks and the Agent under
the Loan Documents shall automatically become immediately due and payable; or (b) any other Event
of Default shall occur and be continuing, then the Agent may take any or all of the following
actions (and shall take any or all of the following actions on direction of the Required Banks):
(i) declare the Commitments terminated, whereupon the Commitments shall terminate, (ii) declare
that the outstanding unpaid principal balance of the Notes, the accrued and unpaid interest thereon
and all other obligations of the Borrower to the Banks and the Agent under the Loan Documents to be
forthwith due and payable, whereupon the Notes, all accrued and unpaid interest thereon and all
such obligations shall immediately become due and payable, in each case without demand or notice of
any kind, all of which are hereby expressly waived, anything in this Agreement or in the Notes to
the contrary notwithstanding, (iii) exercise all rights and remedies under any other



39









 







instrument,
document or agreement between the Borrower and the Agent or the Banks, and (iv) enforce all rights
and remedies under any applicable law.



     Section 10.3 Letters of Credit. In addition to the foregoing remedies, if any Event
of Default described in Section 10.1(e), (f) or (g) shall have occurred, or
if any other Event of Default shall have occurred and the Agent shall have declared that the
principal balance of the Notes is due and payable, the Borrower shall pay to the Agent an amount
equal to all Letter of Credit Obligations. Such payment shall be in immediately available funds or
in similar cash collateral acceptable to the Agent and shall be pledged to the Agent for the
ratable benefit of the Banks. Such amount shall be held by the Agent in a cash collateral account
until the outstanding Letters of Credit are terminated without payment or are paid and Letter of
Credit Obligations with respect thereto are payable. In the event the Borrower defaults in the
payment of any Letter of Credit Obligations, the proceeds of the cash collateral account shall be
applied to the payment thereof. The Borrower acknowledges and agrees that the Banks would not have
an adequate remedy at law for failure by the Borrower to pay immediately to the Agent the amount
provided under this Section, and that the Agent shall, on behalf of the Banks, have the right to
require the Borrower to perform specifically such undertaking whether or not any of the Letter of
Credit Obligations are due and payable. Upon the failure of the Borrower to make any payment
required under this Section, the Agent, on behalf of the Banks, may proceed to use all remedies
available at law or equity to enforce the obligation of the Borrower to pay or reimburse the Agent.
The balance of any payment due under this Section shall bear interest payable on demand until paid
in full at a per annum rate equal to the Base Rate plus 2.00%.



     Section 10.4 Security Agreement in Accounts and Setoff. As additional security for
the payment of all of the Obligations, the Borrower grants to the Agent, each Bank and each holder
of a Note a security interest in, a lien on, and an express contractual right to set off against,
each deposit account and all deposit account balances, cash and any other property of the Borrower
now or hereafter maintained with, or in the possession of, the Agent, such Bank or such other
holder of a Note. Upon the occurrence of any Event of Default, upon written direction by the Agent
to such effect, the Agent, each such Bank and each such holder of a Note may: (a) refuse to allow
withdrawals from any such deposit account; (b) apply the amount of such deposit account balances
and the other assets of the Borrower described above to the Obligations; and (c) offset any other
obligation of the Agent, such Bank or such holder of a Note against the Obligations; all whether or
not the Obligations are then due or have been accelerated and all without any advance or
contemporaneous notice or demand of any kind to the Borrower, such notice and demand being
expressly waived.



ARTICLE XI THE AGENT




     Section 11.1 Appointment and Grant of Authority. Each Bank hereby appoints the
Agent, and the Agent hereby agrees to act, as agent under this Agreement and under the Guaranty.
The Agent shall have and may exercise such powers under this Agreement and the Guaranty as are
specifically delegated to the Agent by the terms hereof and thereof, together with such other
powers as are reasonably incidental thereto. Each Bank hereby authorizes, consents to, and directs



40









 







the
Borrower to deal with the Agent as the true and lawful agent of such Bank to the extent set forth
herein and under the Guaranty.



     Section 11.2 Non-Reliance on Agent. Each Bank agrees that it has, independently and
without reliance on the Agent or any other Bank, and based on such documents and information as it
has deemed appropriate, made its own credit analysis of the Borrower and decision to enter into
this Agreement and that it will, independently and without reliance upon the Agent, and based on
such documents and information as it shall deem appropriate at the time, continue to make its own
analysis and decisions in taking or not taking action under this Agreement. The Agent shall not be
required to keep informed as to the performance or observance by the Borrower of this Agreement and
the Loan Documents or to inspect the properties or books of the Borrower. Except for notices,
reports and other documents and information expressly required to be furnished to the Banks by the
Agent hereunder, the Agent shall not have any duty or responsibility to provide any Bank with any
credit or other information concerning the affairs, financial condition or business of the Borrower
(or any of its related companies) which may come into the Agent’s possession.



     Section 11.3 Responsibility of the Agent and Other Matters.




(a) The Agent shall have no duties or responsibilities except those expressly set forth in
this Agreement and those duties and liabilities shall be subject to the limitations and
qualifications set forth in this Section. The duties of the Agent shall be mechanical and
administrative in nature.




(b) Neither the Agent nor any of its directors, officers or employees shall be liable for
any action taken or omitted (whether or not such action taken or omitted is within or
without the Agent’s responsibilities and duties expressly set forth in this Agreement) under
or in connection with this Agreement, or any other instrument or document in connection
herewith, except for gross negligence or willful misconduct. Without limiting the
foregoing, neither the Agent nor any of its directors, officers or employees shall be
responsible for, or have any duty to examine: (i) the genuineness, execution, validity,
effectiveness, enforceability, value or sufficiency of the Loan Agreements; (ii) the
collectibility of any amounts owed by the Borrower; (iii) any recitals or statements or
representations or warranties in connection with this Agreement or the Notes; (iv) any
failure of any party to this Agreement to receive any communication sent; or (v) the
assets, liabilities, financial condition, results of operations, business or
creditworthiness of the Borrower.




(c) The Agent shall be entitled to act, and shall be fully protected in acting upon, any
communication in whatever form believed by the Agent in good faith to be genuine and correct
and to have been signed or sent or made by a proper person or persons or entity. The Agent
may consult counsel and shall be entitled to act, and shall be fully protected in-any
action taken in good faith, in accordance with advice given by counsel. The Agent may
employ agents and attorneys-in-fact and shall not be liable for the default or misconduct of
any such agents or attorneys-in-fact selected by the Agent with reasonable care. The Agent



41









 







shall not be bound to ascertain or inquire as to the performance or observance of any of the
terms, provisions or conditions of this Agreement or the Notes on the Borrower’s part.



     Section 11.4 Action on Instructions. The Agent shall be entitled to act or refrain
from acting, and in all cases shall be fully protected in acting or refraining from acting under
this Agreement or the Notes or any other instrument or document in connection herewith or therewith
in accordance with instructions in writing from (i) the Required Banks except for instructions
which under the express provisions hereof must be received by the Agent from all the Banks, and
(ii) in the case of such instructions, from all the Banks.



     Section 11.5 Indemnification. To the extent the Borrower does not reimburse and save
the Agent harmless according to the terms hereof for and from all costs, expenses and disbursements
in connection herewith or with the other Loan Documents, such costs, expenses and disbursements to
the extent reasonable shall be borne by the Banks ratably in accordance with their Percentages and
the Banks hereby agree on such basis (a) to reimburse the Agent for all such reasonable costs,
expenses and disbursements on request and (b) to indemnify and save harmless the Agent against and
from any and all losses, obligations, penalties, actions, judgments and suits and other reasonable
costs, expenses and disbursements of any kind or nature whatsoever which may be imposed on,
incurred by or asserted against the Agent, other than as a consequence of actual gross negligence
or willful misconduct on the part of the Agent, arising out of or in connection with this Agreement
or the Notes or any instrument or document in connection herewith or therewith, or any request of
the Banks, including without limitation the reasonable costs, expenses and disbursements in
connection with defending itself against any claim or liability, or answering any subpoena, related
to the exercise or performance of any of its powers or duties under this Agreement or the other
Loan Documents or the taking of any action under or in connection with this Agreement or the Notes.



     Section 11.6 U.S. Bank National Association and Affiliates. With respect to U.S. Bank
National Association’s Commitment and any Loans by U.S. Bank National Association under this
Agreement and any Note and any interest of U.S. Bank National Association in any Note, U.S. Bank
National Association shall have the same rights, powers and duties under this Agreement and such
Note as any other Bank and may exercise the same as though it were not the Agent. U.S. Bank
National Association and its affiliates may accept deposits from, lend money to, and generally
engage, and continue to engage, in any kind of business with the Borrower as if U.S. Bank National
Association were not the Agent.



     Section 11.7 Notice to Holder of Notes. The Agent may deem and treat the payees of
the Notes as the owners thereof for all purposes unless a written notice of assignment, negotiation
or transfer thereof has been filed with the Agent. Any request, authority or consent of any holder
of any Note shall be conclusive and binding on any subsequent holder, transferee or assignee of
such Note.



     Section 11.8 Successor Agent. The Agent may resign at any time by giving at least 30
days written notice thereof to the Banks and the Borrower. Upon any such resignation, the



42









 







Required Banks shall have the right to appoint a successor Agent. If no successor Agent shall have
been appointed by the Required Banks and shall have accepted such appointment within 30 days after
the retiring Agent’s giving notice of resignation, then the retiring Agent may, but shall not be
required to, on behalf of the Banks, appoint a successor Agent.



     Section 11.9 Co-Documentation Agents and Lead Arranger. None of the Co-
Documentation Agents or Lead Arranger shall have any duties, responsibilities or liabilities in
such capacities.



     Section 11.10 Agent’s Counsel. In connection with the negotiation, drafting and
execution of this Agreement and the other Loan Document, perfecting any security interest,
completing any filings or registrations and in connection with future legal representation relating
to loan administration, amendments, modifications, waivers, forbearance or enforcement of remedies,
Briggs and Morgan, Professional Association (“Briggs”) has only represented and shall only
represent U.S. Bank National Association, in its capacity as Agent and as a Bank.



ARTICLE XII MISCELLANEOUS




     Section 12.1 No Waiver and Amendment. No failure on the part of the Banks or the
holder of the Notes to exercise and no delay in exercising any power or right hereunder or under
any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise
of any power or right preclude any other or further exercise thereof or the exercise of any other
power or right. The remedies herein and in any other instrument, document or agreement delivered
or to be delivered to the Banks hereunder or in connection herewith are cumulative and not
exclusive of any remedies provided by law. No notice to or demand on the Borrower not required
hereunder or under the Notes shall in any event entitle the Borrower to any other or further notice
or demand in similar or other circumstances or constitute a waiver of the right of the Banks or the
holder of the Notes to any other or further action in any circumstances without notice or demand.



     Section 12.2 Amendments, Etc. No amendment or waiver of any provision of this
Agreement, nor consent to any departure by the Borrower therefrom, shall in any event be effective
unless the same shall be in writing and signed by the Borrower and the Agent upon direction of the
Required Banks and then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given; provided, however, that no amendment,
waiver or consent shall, unless agreed to by the Agent and all of the Banks:




(a) increase the amounts of or extend the terms of the Commitments or subject the Banks to
any additional obligations;




(b) change the principal of, or interest on, the Notes or any fees or other amounts payable
hereunder;



43









 






(c) postpone any date fixed for any payment of principal of, or interest on, the Notes or
any fees or other amounts payable hereunder;




(d) release the Guaranty or release any collateral held subject to Section 10.3, except as
contemplated by such Section; or




(e) change the definition of Required Banks or amend this Section 12.2


provided, further that amendments, waivers or consents affecting the rights of the
Agent shall also require the consent of the Agent.




     Section 12.3 Assignments and Participations.




(a) Assignments. Each Bank shall have the right, subject to the further provisions
of this Sections 12.3, to sell or assign all or any part of its Commitments, Loans,
Notes, and other rights and obligations under this Agreement and related documents (such
transfer, and “Assignment”) to any commercial lender, other financial institution or other
entity (an “Assignee”). Upon such Assignment becoming effective as provided in Section
12.3(b), the assigning Bank shall be relieved from the portion of its Commitment,
obligations to indemnify the Agent and other obligations hereunder to the extent assumed and
undertaken by the Assignee, and to such extent the Assignee shall have the rights and
obligations of a “Bank” hereunder. Notwithstanding the foregoing, unless otherwise
consented to by the Borrower and the Agent, each Assignment shall be in the initial
principal amount of not less than $5,000,000 in the aggregate for all Loans and Commitments
assigned, or an integral multiple of $1,000,000 if above such amount Each Assignment shall
be documented by an agreement between the assigning Bank and the Assignee (an “Assignment
and Assumption Agreement”) substantially in the form of Exhibit G attached hereto.




(b) Effectiveness of Assignments. An Assignment shall become effective hereunder
when all of the following shall have occurred: (i) the Agent and the Borrower (or, following
occurrence and during continuance of an Event of Default, the Agent only and not the
Borrower) shall consent to such Assignment (which consent shall not be unreasonably
withheld), by either notice of such consent or by executing and delivering such
Assignments, (ii) either the assigning Bank or the Assignee shall have paid a processing fee
of $3,500 to the Agent for its own account, (iii) the Assignee shall have submitted the
Assignment and Assumption Agreement to the Agent with a copy for the Borrower, and shall
have provided to the Agent information the Agent shall have reasonably requested to make
payments to the Assignee, and (iv) the assigning Bank and the Agent shall have agreed upon a
date upon which the Assignment shall become effective. Upon the Assignment becoming
effective, (x) if requested by the assigning Bank, the Agent and the Borrower shall make
appropriate arrangements so that new Notes are issued to the assigning Bank and the
Assignee; and (y) the Agent shall forward all payments of interest, principal, fees and
other amounts that would have been made to



44









 







the assigning Bank, in proportion to the percentage of the assigning Bank’s rights
transferred, to the Assignee.




(c) Participations. Each Bank shall have the right, subject to the further
provisions of this Section 12.3, to grant or sell a participation in all or any part
of its Loans, Notes and Commitments (a “Participation”) to any commercial lender, other
financial institution or other entity (a “Participant”) without the consent of the Borrower,
the Agent of any other party hereto. The Borrower agrees that if amounts outstanding under
this agreement and the Notes 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 setoff in respect of its Participation in amounts owing under
this Agreement and any Note to the same extent as if the amount of its Participation were
owing directly to it as a Bank under this agreement or any note; provided, that such right
of setoff shall be subject to the obligation of such Participant to share with the Banks,
and the Banks agree to share with such Participant, as provided in Section 4.5
hereof. The Borrower also agrees that each Participant shall be entitled to the benefits of
Article V with respect to its Participation, provided, that no Participant shall be
entitled to receive any greater amount pursuant to such Sections than the transferor Bank
would have been entitled to receive in respect of the amount of the Participation
transferred by such transferor Bank to such Participant had no such transfer occurred.




(d) Limitation of Rights of any Assignee or Participant. Notwithstanding anything
in the foregoing to the contrary, except in the instance of an Assignment that has become
effective as provided in Section 12.3(b), (i) no Assignee or Participant shall have
any direct rights hereunder, (ii) the Borrower, the Agent and the Banks other than the
assigning or selling Bank shall deal solely with the assigning or selling Bank and shall not
be obligated to extend any rights or make any payment to, or seek any consent of, the
Assignee or Participant, (iii) no Assignment or Participation shall relieve the assigning or
selling Bank from its Commitment to make Loans hereunder or any of its other obligations
hereunder and such Bank shall remain solely responsible for the performance hereof, the (iv)
no Assignee or Participant, other than an affiliate of the assigning or selling Bank, shall
be entitled to require such Bank to take or omit to take any action hereunder, except that
such Bank may agree with such Assignee or Participant that such Bank will not, without such
Assignee’s or Participant’s consent, take any action which would, in the case of any
principal, interest or fee in which the Assignee or Participant has an ownership or
beneficial interest: (w) extend the final maturity of any Loans or extend the Termination
Date, (x) reduce the interest rate on the Loans or the rate of the Commitment Fees, (y)
forgive any principal of, or interest on, the Loans or any fees, or (z) release all or
substantially all of the Collateral for the Loans.




(e) Tax Matters. No Bank shall be permitted to enter into any Assignment or
Participation with any Assignee or Participant who is not a United States Person unless such
Assignee or Participant represents and warrants to such Bank that, as at the date of such
Assignment or Participation, it is entitled to receive interest payments without



45









 







withholding or deduction of any taxes and such Assignee or Participant executes and delivers
to such Bank on or before the date of execution and delivery of documentation of such
Participation or Assignment, a United States Internal Revenue Service Form W8BEN or W8ECI,
or any successor to either of such forms, as appropriate, properly completed an claiming
complete exemption from withholding and deduction of all Federal Income Taxes. A “United
States Person” means any citizen, national or resident of the United States, any corporation
or other entity created or organized in or under the laws of the United States or any
political subdivision hereof or any estate or trust, in each case that is not subject to
withholding of United States Federal income taxes or other taxes on payment of interest,
principal of fees hereunder.




(f) Information. Each Bank may furnish any information concerning the Borrower in
the possession of such Bank from time to time to Assignees and Participants and potential
Assignees and Participants.




(g) Federal Reserve Bank. Nothing herein stated shall limit the right of any Bank
to assign any interest herein and in any Note to a Federal Reserve Bank.



     Section 12.4 Costs, Expenses and Taxes; Indemnification.




(a) The Borrower agrees, whether or not any Advance is made hereunder, to pay on demand:
(i) all costs and expenses of the Agent (including the reasonable fees and expenses of
counsel and paralegals for such persons who may be employees of such persons) incurred in
connection with the preparation, execution and delivery of the Loan Documents and the
preparation, negotiation and execution of any and all amendments to each thereof, and (ii)
all costs and expenses of the Agent and each of the Banks incurred after the occurrence of
an Event of Default in connection with the enforcement of the Loan Documents. The Borrower
agrees to pay, and save the Banks harmless from all liability for, any stamp or other taxes
which may be payable with respect to the execution or delivery of the Loan Documents. The
Borrower agrees to indemnify and hold the Banks harmless from any loss or expense which may
arise or be created by the acceptance in good faith by the Agent of telephonic or other
instructions for making Advances or disbursing the proceeds thereof.




(b) The Borrower agrees to defend, protect, indemnify, and hold harmless the Agent and each
and all of the Banks, each of their respective Affiliates and each of the respective
officers, directors, employees and agents of each of the foregoing (each an “Indemnified
Person” and, collectively, the “Indemnified Persons”) from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses and disbursements of any kind or nature whatsoever (including, without
limitation, the fees and disbursements of counsel to such Indemnified Persons in connection
with any investigative, administrative or judicial proceeding, whether direct, indirect or
consequential and whether based on any federal or state laws or other statutory regulations,
including, without limitation, securities and commercial laws and
regulations, under common law or at equitable cause, or on contract or otherwise, the



46









 







capitalization of the Borrower, the Commitments, the making of, management of and
participation in the Advances or the use or intended use of the proceeds of the Advances,
provided that the Borrower shall have no obligation under this Section 12.4(b) to an
Indemnified Person with respect to any of the foregoing to the extent resulting from the
gross negligence or willful misconduct of such Indemnified Person or arising solely from
claims between one such Indemnified Person and another such Indemnified Person. The
indemnity set forth herein shall be in addition to any other obligations or liabilities of
the Borrower to each Indemnified Person under the Loan Documents or at common law or
otherwise.




(c) The obligations of the Borrower under this Section 12.4 shall survive any
termination of this Agreement.



     Section 12.5 Notices. Except when telephonic notice is expressly authorized by this
Agreement, any notice or other communication to any party in connection with this Agreement shall
be in writing and shall be sent by manual delivery, telegram, telex, facsimile transmission,
overnight courier or United States mail (postage prepaid) addressed to such party at the address
specified on the signature page hereof, or at such other address as such party shall have specified
to the other party hereto in writing. All periods of notice shall be measured from the date of
delivery thereof if manually delivered, from the date of sending thereof if sent by telegram, telex
or facsimile transmission, from the first Business Day after the date of sending if sent by
overnight courier, or from four days after the date of mailing if mailed; provided,
however, that any notice to the Agent under Article II hereof shall be deemed to
have been given only when received by the Agent.



     Section 12.6 Successors. This Agreement shall be binding upon the Borrower, the
Banks and the Agent and their respective successors and assigns, and shall inure to the benefit of
the Borrower, the Banks and the Agent and the successors and assigns of the Banks. The Borrower
shall not assign its rights or duties hereunder without the written consent of the Banks.



     Section 12.7 Severability. Any provision of the Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other jurisdiction.



     Section 12.8 Subsidiary References. The provisions of this Agreement relating to
Subsidiaries shall apply only during such times as the Borrower has one or more Subsidiaries.



     Section 12.9 Captions. The captions or headings herein and any table of contents
hereto are for convenience only and in no way define, limit or describe the scope or intent of any
provision of this Agreement.



     Section 12.10 Entire Agreement. The Loan Documents embody the entire agreement and
understanding between the Borrower, the Banks and the Agent with respect to the subject



47









 







matter
hereof and thereof. This Agreement supersedes all prior agreements and understandings relating to
the subject matter hereof.



     Section 12.11 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same instrument, and either
of the parties hereto may execute this Agreement by signing any such counterpart.



     Section 12.12 Governing Law. THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS
AGREEMENT AND THE NOTES SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUT
GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS OF THE
UNITED STATES APPLICABLE TO NATIONAL BANKS.



     Section 12.13 Consent to Jurisdiction. AT THE OPTION OF THE BANKS, THIS AGREEMENT
AND THE NOTES MAY BE ENFORCED IN ANY FEDERAL COURT SITTING IN MINNEAPOLIS OR ST. PAUL, MINNESOTA;
AND THE BORROWER CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT
THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT THE BORROWER COMMENCES ANY ACTION IN
ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM
THE RELATIONSHIP CREATED BY THIS AGREEMENT, THE BANKS AT ITS OPTION SHALL BE ENTITLED TO HAVE THE
CASE TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT
BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT PREJUDICE.



     Section 12.14 Waiver of Jury Trial. THE BORROWER, THE BANKS AND THE AGENT EACH WAIVE
ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS (a) UNDER
THIS AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN
THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR (b) ARISING FROM ANY BANKING RELATIONSHIP
EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY.



(signature pages follow)




48









 





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



VARISTAR CORPORATION




By:/s/ Kevin G. Moug                              

Title: Chief Financial Officer




4334 18th Avenue South

Suite 200

Fargo, North Dakota 58103

Attention: Mr. Kevin G. Moug

               Chief Financial Officer

Telephone: (701) 451-3562

Fax: (701) 232-4108




Signature Page 1

to Credit Agreement




 









 





U.S. BANK NATIONAL ASSOCIATION,

as Agent, Lead Arranger and a Bank




By: /s/ Delton Steele                              

Title: Vice President/Senior Lender




505 Second Avenue North

Mail Code EP-ND-0630

Fargo, ND 58102

Attention: Mr. Delton Steele

               Vice President

Telephone: (701) 280-3553

Fax: (701) 280-3580





Signature Page 2

to Credit Agreement




 









 





BANK OF AMERICA, N.A., as Co-Documentation

Agent and as a Bank




By: /s/ Daniel R. Petrik                               

Title: Senior Vice President




231 S. LaSalle Street

Chicago, IL 60697

Attention: Daniel R. Petrik

Telephone: (312) 828-8160

Fax: (312) 828-7393





Signature Page 3

to Credit Agreement




 









 





KEYBANK NATIONAL ASSOCIATION, as

Co-Documentation Agent and as a Bank




By: /s/ Kevin D. Smith                               

Title: Senior Vice President




601 108TH Avenue N.E.

Mail Code: WA-31-18-0512

Bellevue, WA 98004

Attention: Keven D. Smith

Telephone: (425) 709-4579

Fax: (425)709-4565





Signature Page 4

to Credit Agreement




 









 





WELLS FARGO BANK, NATIONAL

ASSOCIATION. as Co-Documentation Agent

and as a Bank




By: /s/ Patrick Mccue                              

Title: Vice President




Sixth & Marquette, 3rd Floor

MAC: N9305-031

Minneapolis, MN 55479

Attention: Patrick Mccue

Vice President

Tel: 612-667-0700

Fax: 612-667-2276





Signature Page 5

to Credit Agreement




 









 





JPMORGAN CHASE BANK, N.A., as a Bank




By:
/s/ Helen D. Davis                               

Title: Vice President




10 South Dearborn, 9th Floor, IL1-0090

Chicago, IL 60603

Attention: Helen Davis

Telephone: (312) 732-1759

Fax: (312) 732-1762





Signature Page 6

to Credit Agreement




 









 





BANK OF THE WEST, as a Bank




By: /s/ Andrew Gaspard                               

Title: Vice President




250 Marquette Ave., Suite 575

Minneapolis, MN 55401

Attention: Andrew Gaspard

Telephone: (612) 339-0670

Fax: (612) 339-6362





Signature Page 7

to Credit Agreement




 









 





UNION BANK OF CALIFORNIA, N.A., as a Bank




By:
/s/ Dennis G. Blank                              

Title: Vice President




Energy Capital Services

445 S. Figueroa Street, 15th Floor

Los Angeles, CA 90071

Attention: Dennis Blank

Telephone: (213) 236-6564

Fax: (213) 236-4096




Signature Page 8

to Credit Agreement





 











 





EXHIBITS




	 	 	 
	Exhibit	 	Contents
	 
	 	 
	A-1

	 	Revolving Note
	 
	 	 
	A-2

	 	Swing Line Note
	 
	 	 
	B

	 	Compliance Certificate
	 
	 	 
	C

	 	Guaranty
	 
	 	 
	D

	 	Parent Negative Pledge
	 
	 	 
	E

	 	Parent Subordination Agreement
	 
	 	 
	F

	 	Form of Legal Opinion
	 
	 	 
	G

	 	Assignment and Assumption
	 
	 	 
	Schedules
	 	 
	 
	 	 
	1.1(a)

	 	Commitments and Percentages
	 
	 	 
	1.1(b)

	 	Material Subsidiaries
	 
	 	 
	2.6

	 	Existing Letters of Credit (Section 2.6)
	 
	 	 
	7.6

	 	Litigation (Section 7.6)
	 
	 	 
	 

	 	Contingent Liabilities (Section 7.6)
	 
	 	 
	7.11

	 	Existing Liens (Sections 7.11 and 9.9)
	 
	 	 
	7.15

	 	Subsidiaries (Section 7.15)
	 
	 	 
	7.16

	 	Partnerships/Joint Ventures (Section 7.16)
	 
	 	 
	9.7

	 	Investments (Section 9.7)
	 
	 	 
	9,8

	 	Indebtedness (Section 9.8)






 









 





EXHIBIT A-1

PROMISSORY NOTE




			
	 	 	 
	$39,000,000
	 	Minneapolis, Minnesota: October 2, 2007






     FOR VALUE RECEIVED, the undersigned VARISTAR CORPORATION, a Minnesota corporation (the
“Borrower”), promises to pay to the order of U.S. BANK NATIONAL ASSOCIATION (the “Bank”), on the
Termination Date, or other due date or dates determined under the Credit Agreement hereinafter
referred to, the principal sum of THIRTY NINE MILLION DOLLARS ($39,000,000), or if less, the then
aggregate unpaid principal amount of the Revolving Loans (as such terms are defined in the Credit
Agreement) as may be borrowed by the Borrower from the Bank under the Credit Agreement. All
Revolving Loans and all payments of principal shall be recorded by the holder in its records which
records shall be conclusive evidence of the subject matter thereof, absent manifest error.



     The Borrower further promises to pay to the order of the Bank interest on the aggregate unpaid
principal amount hereof from time to time outstanding from the date hereof until paid in full at
the rates per annum which shall be determined in accordance with the provisions of the Credit
Agreement. Accrued interest shall be payable on the dates specified in the Credit Agreement.



     All payments of principal and interest under this Note shall be made in lawful money of the
United States of America in immediately available funds at the office of U.S. Bank National
Association, at 800 Nicollet Mall, Minneapolis, Minnesota 55402, or at such other place as may be
designated by the Agent to the Borrower in writing.



     This Note is the Note referred to in, and evidences indebtedness incurred under, a Credit
Agreement dated as of October 2, 2007 (herein, as it may be amended, modified or supplemented from
time to time, called the “Credit Agreement”) among the Borrower, the Banks, as defined therein
(including the Bank) and U.S. Bank National Association, as Agent, to which Credit Agreement
reference is made for a statement of the terms and provisions thereof, including those under which
the Borrower is permitted and required to make prepayments and repayments of principal of such
indebtedness and under which such indebtedness may be declared to be immediately due and payable.



     All parties hereto, whether as makers, endorsers or otherwise, severally waive presentment,
demand, protest and notice of dishonor in connection with this Note.



     This Note is made under and governed by the internal laws of the State of Minnesota.



	 	 	 	 	 
	 	VARISTAR CORPORATION

 	 
	 	By:  	 	 
	 	 	Kevin G. Moug 	 
	 	 	Chief Financial Officer 	 
	 




2









 





PROMISSORY NOTE




			
	 	 	 
	$34,000,000
	 	Minneapolis, Minnesota: October 2, 2007






     FOR VALUE RECEIVED, the undersigned VARISTAR CORPORATION, a Minnesota corporation (the
“Borrower”), promises to pay to the order of BANK OF AMERICA, N.A. (the “Bank”), on the Termination
Date, or other due date or dates determined under the Credit Agreement hereinafter referred to, the
principal sum of THIRTY FOUR MILLION DOLLARS ($34,000,000), or if less, the then aggregate unpaid
principal amount of the Revolving Loans (as such terms are defined in the Credit Agreement) as may
be borrowed by the Borrower from the Bank under the Credit Agreement. All Revolving Loans and all
payments of principal shall be recorded by the holder in its records which records shall be
conclusive evidence of the subject matter thereof, absent manifest error.



     The Borrower further promises to pay to the order of the Bank interest on the aggregate unpaid
principal amount hereof from time to time outstanding from the date hereof until paid in full at
the rates per annum which shall be determined in accordance with the provisions of the Credit
Agreement. Accrued interest shall be payable on the dates specified in the Credit Agreement.



     All payments of principal and interest under this Note shall be made in lawful money of the
United States of America in immediately available funds at the office of U.S. Bank National
Association, at 800 Nicollet Mall, Minneapolis, Minnesota 55402, or at such other place as may be
designated by the Agent to the Borrower in writing.



     This Note is the Note referred to in, and evidences indebtedness incurred under, a Credit
Agreement dated as of October 2, 2007 (herein, as it may be amended, modified or supplemented from
time to time, called the “Credit Agreement”) among the Borrower, the Banks, as defined therein
(including the Bank) and U.S. Bank National Association, as Agent, to which Credit Agreement
reference is made for a statement of the terms and provisions thereof, including those under which
the Borrower is permitted and required to make prepayments and repayments of principal of such
indebtedness and under which such indebtedness may be declared to be immediately due and payable.



     All parties hereto, whether as makers, endorsers or otherwise, severally waive presentment,
demand, protest and notice of dishonor in connection with this Note.



     This Note is made under and governed by the internal laws of the State of Minnesota.



	 	 	 	 	 
	 	VARISTAR CORPORATION

 	 
	 	By:  	 	 
	 	 	Kevin G. Moug 	 
	 	 	Chief Financial Officer 	 
	 




3









 





PROMISSORY NOTE




			
	 	 	 
	$34,000,000
	 	Minneapolis, Minnesota: October 2, 2007






     FOR VALUE RECEIVED, the undersigned VARISTAR CORPORATION, a Minnesota corporation (the
“Borrower”), promises to pay to the order of KEYBANK NATIONAL ASSOCIATION (the “Bank”), on the
Termination Date, or other due date or dates determined under the Credit Agreement hereinafter
referred to, the principal sum of THIRTY FOUR MILLION DOLLARS ($34,000,000), or if less, the then
aggregate unpaid principal amount of the Revolving Loans (as such terms are defined in the Credit
Agreement) as may be borrowed by the Borrower from the Bank under the Credit Agreement. All
Revolving Loans and all payments of principal shall be recorded by the holder in its records which
records shall be conclusive evidence of the subject matter thereof, absent manifest error.



     The Borrower further promises to pay to the order of the Bank interest on the aggregate unpaid
principal amount hereof from time to time outstanding from the date hereof until paid in full at
the rates per annum which shall be determined in accordance with the provisions of the Credit
Agreement. Accrued interest shall be payable on the dates specified in the Credit Agreement.



     All payments of principal and interest under this Note shall be made in lawful money of the
United States of America in immediately available funds at the office of U.S. Bank National
Association, at 800 Nicollet Mall, Minneapolis, Minnesota 55402, or at such other place as may be
designated by the Agent to the Borrower in writing.



     This Note is the Note referred to in, and evidences indebtedness incurred under, a Credit
Agreement dated as of October 2, 2007 (herein, as it may be amended, modified or supplemented from
time to time, called the “Credit Agreement”) among the Borrower, the Banks, as defined therein
(including the Bank) and U.S. Bank National Association, as Agent, to which Credit Agreement
reference is made for a statement of the terms and provisions thereof, including those under which
the Borrower is permitted and required to make prepayments and repayments of principal of such
indebtedness and under which such indebtedness may be declared to be immediately due and payable.



     All parties hereto, whether as makers, endorsers or otherwise, severally waive presentment,
demand, protest and notice of dishonor in connection with this Note.



     This Note is made under and governed by the internal laws of the State of Minnesota.



	 	 	 	 	 
	 	VARISTAR CORPORATION

 	 
	 	By:  	 	 
	 	 	Kevin G. Moug 	 
	 	 	Chief Financial Officer 	 
	 




4









 





PROMISSORY NOTE




			
	 	 	 
	$34,000,000
	 	Minneapolis, Minnesota: October 2, 2007






     FOR VALUE RECEIVED, the undersigned VARISTAR CORPORATION, a Minnesota corporation (the
“Borrower”), promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION (the “Bank”),
on the Termination Date, or other due date or dates determined under the Credit Agreement
hereinafter referred to, the principal sum of THIRTY FOUR MILLION DOLLARS ($34,000,000), or if
less, the then aggregate unpaid principal amount of the Revolving Loans (as such terms are defined
in the Credit Agreement) as may be borrowed by the Borrower from the Bank under the Credit
Agreement. All Revolving Loans and all payments of principal shall be recorded by the holder in
its records which records shall be conclusive evidence of the subject matter thereof, absent
manifest error.



     The Borrower further promises to pay to the order of the Bank interest on the aggregate unpaid
principal amount hereof from time to time outstanding from the date hereof until paid in full at
the rates per annum which shall be determined in accordance with the provisions of the Credit
Agreement. Accrued interest shall be payable on the dates specified in the Credit Agreement.



     All payments of principal and interest under this Note shall be made in lawful money of the
United States of America in immediately available funds at the office of U.S. Bank National
Association, at 800 Nicollet Mall, Minneapolis, Minnesota 55402, or at such other place as may be
designated by the Agent to the Borrower in writing.



     This Note is the Note referred to in, and evidences indebtedness incurred under, a Credit
Agreement dated as of October 2, 2007 (herein, as it may be amended, modified or supplemented from
time to time, called the “Credit Agreement”) among the Borrower, the Banks, as defined therein
(including the Bank) and U.S. Bank National Association, as Agent, to which Credit Agreement
reference is made for a statement of the terms and provisions thereof, including those under which
the Borrower is permitted and required to make prepayments and repayments of principal of such
indebtedness and under which such indebtedness may be declared to be immediately due and payable.



     All parties hereto, whether as makers, endorsers or otherwise, severally waive presentment,
demand, protest and notice of dishonor in connection with this Note.



     This Note is made under and governed by the internal laws of the State of Minnesota.



	 	 	 	 	 
	 	VARISTAR CORPORATION

 	 
	 	By:  	 	 
	 	 	Kevin G. Moug 	 
	 	 	Chief Financial Officer 	 
	 




5









 





PROMISSORY NOTE




			
	 	 	 
	$29,000,000
	 	Minneapolis, Minnesota: October 2, 2007






     FOR VALUE RECEIVED, the undersigned VARISTAR CORPORATION, a Minnesota corporation (the
“Borrower”), promises to pay to the order of JPMORGAN CHASE BANK, N.A. (the “Bank”), on the
Termination Date, or other due date or dates determined under the Credit Agreement hereinafter
referred to, the principal sum of TWENTY NINE MILLION DOLLARS ($29,000,000), or if less, the then
aggregate unpaid principal amount of the Revolving Loans (as such terms are defined in the Credit
Agreement) as may be borrowed by the Borrower from the Bank under the Credit Agreement. All
Revolving Loans and all payments of principal shall be recorded by the holder in its records which
records shall be conclusive evidence of the subject matter thereof, absent manifest error.



     The Borrower further promises to pay to the order of the Bank interest on the aggregate unpaid
principal amount hereof from time to time outstanding from the date hereof until paid in full at
the rates per annum which shall be determined in accordance with the provisions of the Credit
Agreement. Accrued interest shall be payable on the dates specified in the Credit Agreement.



     All payments of principal and interest under this Note shall be made in lawful money of the
United States of America in immediately available funds at the office of U.S. Bank National
Association, at 800 Nicollet Mall, Minneapolis, Minnesota 55402, or at such other place as may be
designated by the Agent to the Borrower in writing.



     This Note is the Note referred to in, and evidences indebtedness incurred under, a Credit
Agreement dated as of October 2, 2007 (herein, as it may be amended, modified or supplemented from
time to time, called the “Credit Agreement”) among the Borrower, the Banks, as defined therein
(including the Bank) and U.S. Bank National Association, as Agent, to which Credit Agreement
reference is made for a statement of the terms and provisions thereof, including those under which
the Borrower is permitted and required to make prepayments and repayments of principal of such
indebtedness and under which such indebtedness may be declared to be immediately due and payable.



     All parties hereto, whether as makers, endorsers or otherwise, severally waive presentment,
demand, protest and notice of dishonor in connection with this Note.



     This Note is made under and governed by the internal laws of the State of Minnesota.



	 	 	 	 	 
	 	VARISTAR CORPORATION

 	 
	 	By:  	 	 
	 	 	Kevin G. Moug 	 
	 	 	Chief Financial Officer 	 
	 




6









 





PROMISSORY NOTE




			
	 	 	 
	$20,000,000
	 	Minneapolis, Minnesota: October 2, 2007






     FOR VALUE RECEIVED, the undersigned VARISTAR CORPORATION, a Minnesota corporation (the
“Borrower”), promises to pay to the order of BANK OF THE WEST (the “Bank”), on the Termination
Date, or other due date or dates determined under the Credit Agreement hereinafter referred to, the
principal sum of TWENTY MILLION DOLLARS ($20,000,000), or if less, the then aggregate unpaid
principal amount of the Revolving Loans (as such terms are defined in the Credit Agreement) as may
be borrowed by the Borrower from the Bank under the Credit Agreement. All Revolving Loans and all
payments of principal shall be recorded by the holder in its records which records shall be
conclusive evidence of the subject matter thereof, absent manifest error.



     The Borrower further promises to pay to the order of the Bank interest on the aggregate unpaid
principal amount hereof from time to time outstanding from the date hereof until paid in full at
the rates per annum which shall be determined in accordance with the provisions of the Credit
Agreement. Accrued interest shall be payable on the dates specified in the Credit Agreement.



     All payments of principal and interest under this Note shall be made in lawful money of the
United States of America in immediately available funds at the office of U.S. Bank National
Association, at 800 Nicollet Mall, Minneapolis, Minnesota 55402, or at such other place as may be
designated by the Agent to the Borrower in writing.



     This Note is the Note referred to in, and evidences indebtedness incurred under, a Credit
Agreement dated as of October 2, 2007 (herein, as it may be amended, modified or supplemented from
time to time, called the “Credit Agreement”) among the Borrower, the Banks, as defined therein
(including the Bank) and U.S. Bank National Association, as Agent, to which Credit Agreement
reference is made for a statement of the terms and provisions thereof, including those under which
the Borrower is permitted and required to make prepayments and repayments of principal of such
indebtedness and under which such indebtedness may be declared to be immediately due and payable.



     All parties hereto, whether as makers, endorsers or otherwise, severally waive presentment,
demand, protest and notice of dishonor in connection with this Note.



     This Note is made under and governed by the internal laws of the State of Minnesota.



	 	 	 	 	 
	 	VARISTAR CORPORATION

 	 
	 	By:  	 	 
	 	 	Kevin G. Moug 	 
	 	 	Chief Financial Officer 	 
	 




7









 





PROMISSORY NOTE




			
	 	 	 
	$10,000,000
	 	Minneapolis, Minnesota: October 2, 2007






     FOR VALUE RECEIVED, the undersigned VARISTAR CORPORATION, a Minnesota corporation (the
“Borrower”), promises to pay to the order of UNION BANK OF CALIFORNIA, N.A. (the “Bank”), on the
Termination Date, or other due date or dates determined under the Credit Agreement hereinafter
referred to, the principal sum of TEN MILLION DOLLARS ($10,000,000), or if less, the then aggregate
unpaid principal amount of the Revolving Loans (as such terms are defined in the Credit Agreement)
as may be borrowed by the Borrower from the Bank under the Credit Agreement. All Revolving Loans
and all payments of principal shall be recorded by the holder in its records which records shall be
conclusive evidence of the subject matter thereof, absent manifest error.



     The Borrower further promises to pay to the order of the Bank interest on the aggregate unpaid
principal amount hereof from time to time outstanding from the date hereof until paid in full at
the rates per annum which shall be determined in accordance with the provisions of the Credit
Agreement. Accrued interest shall be payable on the dates specified in the Credit Agreement.



     All payments of principal and interest under this Note shall be made in lawful money of the
United States of America in immediately available funds at the office of U.S. Bank National
Association, at 800 Nicollet Mall, Minneapolis, Minnesota 55402, or at such other place as may be
designated by the Agent to the Borrower in writing.



     This Note is the Note referred to in, and evidences indebtedness incurred under, a Credit
Agreement dated as of October 2, 2007 (herein, as it may be amended, modified or supplemented from
time to time, called the “Credit Agreement”) among the Borrower, the Banks, as defined therein
(including the Bank) and U.S. Bank National Association, as Agent, to which Credit Agreement
reference is made for a statement of the terms and provisions thereof, including those under which
the Borrower is permitted and required to make prepayments and repayments of principal of such
indebtedness and under which such indebtedness may be declared to be immediately due and payable.



     All parties hereto, whether as makers, endorsers or otherwise, severally waive presentment,
demand, protest and notice of dishonor in connection with this Note.



     This Note is made under and governed by the internal laws of the State of Minnesota.



	 	 	 	 	 
	 	VARISTAR CORPORATION

 	 
	 	By:  	 	 
	 	 	Kevin G. Moug 	 
	 	 	Chief Financial Officer 	 
	 




8









 





EXHIBIT A-2

PROMISSORY NOTE




			
	 	 	 
	$10,000,000
	 	Minneapolis, Minnesota: October 2, 2007






     FOR VALUE RECEIVED, the undersigned VARISTAR CORPORATION, a Minnesota corporation (the
“Borrower”), promises to pay to the order of U.S. BANK NATIONAL ASSOCIATION (the “Bank”), on the
Termination Date, or other due date or dates determined under the Credit Agreement hereinafter
referred to, the principal sum of TEN MILLION DOLLARS ($10,000,000), or if less, the then aggregate
unpaid principal amount of the Swing Line Loans (as such terms are defined in the Credit Agreement)
as may be borrowed by the Borrower from the Bank under the Credit Agreement. All Swing Line Loans
and all payments of principal shall be recorded by the holder in its records which records shall be
conclusive evidence of the subject matter thereof, absent manifest error.



     The Borrower further promises to pay to the order of the Bank interest on the aggregate unpaid
principal amount hereof from time to time outstanding from the date hereof until paid in full at
the rates per annum which shall be determined in accordance with the provisions of the Credit
Agreement. Accrued interest shall be payable on the dates specified in the Credit Agreement.



     All payments of principal and interest under this Note shall be made in lawful money of the
United States of America in immediately available funds at the office of U.S. Bank National
Association, at 800 Nicollet Mall, Minneapolis, Minnesota 55402, or at such other place as may be
designated by the Agent to the Borrower in writing.



     This Note is the Note referred to in, and evidences indebtedness incurred under, a Credit
Agreement dated as of October 2, 2007 (herein, as it may be amended, modified or supplemented from
time to time, called the “Credit Agreement”) among the Borrower, the Banks, as defined therein
(including the Bank) and U.S. Bank National Association, as Agent, to which Credit Agreement
reference is made for a statement of the terms and provisions thereof, including those under which
the Borrower is permitted and required to make prepayments and repayments of principal of such
indebtedness and under which such indebtedness may be declared to be immediately due and payable.



     All parties hereto, whether as makers, endorsers or otherwise, severally waive presentment,
demand, protest and notice of dishonor in connection with this Note.



     This Note is made under and governed by the internal laws of the State of Minnesota.



	 	 	 	 	 
	 	VARISTAR CORPORATION

 	 
	 	By:  	 	 
	 	 	Kevin G. Moug 	 
	 	 	Chief Financial Officer 	 
	 




9









 





Exhibit B

Compliance Certificate




                    , 20___




U.S. Bank National Association

505 Second Avenue North

EP-ND-0630

Fargo, ND 58102

Attention: Delton Steele

          Vice President




Ladies/Gentlemen:




     Reference is made to that certain Credit Agreement, dated as of October 2, 2007 (as amended
from time to time, the “Credit Agreement”), among VARISTAR CORPORATION (the “Borrower”), the Banks
named therein and U.S. BANK NATIONAL ASSOCIATION, as Agent (the “Agent”). Terms not otherwise
expressly defined herein shall have the meanings set forth in the Credit Agreement.



     As required pursuant to Section 8.1(d) of the Credit Agreement, the Borrower hereby certifies
that as of                     , 20___, the following is true, correct and accurate in all respects:



     1. The consolidated financial statements submitted herewith are fairly presented in all
material respects.



     2. No Default and no Event of Default, has occurred and continued.



     3. All representations and warranties of the Borrower contained in Article VII of the
Credit Agreement are true and correct, as though made on such date;



     4. Covenant compliance is demonstrated as follows:



     Section 9.14 Fixed Charge Coverage Ratio. . For the four-quarter period ending on
the date of the enclosed consolidated financial statements:



	 	 	 	 	 	 	 	 	 
	EBITDAR:
	 	$	                    	 	 	 	 	 
	minus Restricted Payments:
	 	$	                    	 	 	 	 	 
	minus income taxes:
	 	$	                    	 	 	 	 	 
	Total:
	 	 	 	 	 	$	                    	 
	 
	 	 	 	 	 	 	 	 
	to
	 	 	 	 	 	 	 	 
	Interest Expense:
	 	$	                    	 	 	 	 	 
	plus Mandatory and scheduled payments
	 	 	 	 	 	 	 	 






10









 





	 	 	 	 	 	 	 	 	 
	of Funded Debt including payments
	 	 	 	 	 	 	 	 
	of Capitalized Leases:
	 	$	                    	 	 	 	 	 
	plus Rental Expense:
	 	$	                    	 	 	 	 	 
	Total:
	 	 	 	 	 	$	                    	 
	 
	 	 	 	 	 	 	 	 
	Ratio:
	 	                     to 1.00.	 	 	 






     (Required: not less than 1.25 to 1.00)



     Section 9.15 Cash Flow Leverage Ratio. For the four-quarter period ending on the
date of the enclosed consolidated financial statements:



	 	 	 	 	 	 	 	 	 
	Funded Debt as of the last
day of period:
	 	 	 	 	 	$	                    	 
	 
	 	 	 	 	 	 	 	 
	to
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	EBITDA:
	 	 	 	 	 	$	                    	 
	 
	 	 	 	 	 	 	 	 
	Ratio:
	 	                     to 1.00.	 	 	 






     (Required: not greater than 3.00 to 1.00)



     5. For purposes of calculating the Applicable Commitment Fee Rate and Applicable Margin, the
Adjusted Cash Flow Leverage is calculated as follows:



	 	 	 	 	 	 	 	 	 
	Funded Debt as of the last
day of period:
	 	 	 	 	 	$	                    	 
	plus guarantied Funded Debt
that is not obligation of Investment
	 	 	 	 	 	 	 	 
	Grade Rated obligor:
	 	 	 	 	 	$	                    	 
	 
	 	 	 	 	 	 	 	 
	Total:
	 	 	 	 	 	$	                    	 
	 
	 	 	 	 	 	 	 	 
	to
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	EBITDA:
	 	 	 	 	 	$	                    	 
	 
	 	 	 	 	 	 	 	 
	Ratio:
	 	                     to 1.00.	 	 	 






11









 





6. EBITDA and EBITDAR are calculated as follows:




EBITDA:




	 	 	 	 	 
	Net income:
	 	$	                    	 
	plus
	 	 	 	 
	Interest expense
	 	$	                    	 
	Depreciation:
	 	$	                    	 
	Amortization:
	 	$	                    	 
	 
	 	 	 	 
	minus (if a gain) or plus
(if a loss) non-operating
gains or losses except
for gains or losses on
sales of fixed assets*:
	 	$	                    	 
	 
	 	 	 	 
	Total:
	 	$	                    	 








 




			
	*	 	describe non-operating gains or losses:





EBITDAR:




	 	 	 	 	 
	EBITDA:
	 	$	                    	 
	plus Rental Expense:
	 	$	                    	 
	 
	Total:
	 	$	                    	 






	 	 	 	 	 	 	 
	 	 	VARISTAR CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 
	 	 	[chief financial officer]	 	 






12









 





Exhibit C

Guaranty

GUARANTY

(Joint and Several)




     FOR VALUE RECEIVED and in consideration of entry by the Banks (as defined in the Credit
Agreement) and U.S. BANK NATIONAL ASSOCIATION, as agent for the Banks (in such capacity, together
with it successors and assigns, called the “Agent”) into that certain Credit Agreement, dated as of
October 2, 2007 (as thereafter amended, modified, extended, renewed, restated or replaced from time
to time called the “Credit Agreement”) among the Banks, the Agent and VARISTAR CORPORATION, a
Minnesota corporation (hereinafter called the “Debtor”), the undersigned corporation (the
“Guarantors”) hereby JOINTLY AND SEVERALLY unconditionally guarantee the full and prompt payment
when due, whether by acceleration or otherwise, and at all times thereafter, of all obligations of
the Debtor to the Banks or the Agent under the Credit Agreement, each Note issued thereunder, and
each other Loan Document (as defined therein), including without limitation all future advances,
and all obligations to reimburse the Agent for drawings under all Letters of Credit, and all of
such obligations that arise after the filing of a petition by or against the Debtor under the
Bankruptcy Code, even if the obligations do not accrue because of the automatic stay under
Bankruptcy Code Section 362 or otherwise (all such obligations being hereinafter collectively
called the “Liabilities”), and the Guarantors further jointly and severally agree to pay all
expenses (including attorneys’ fees and legal expenses) paid or incurred by the Banks or Agent in
endeavoring to collect the Liabilities, or any part thereof, and in enforcing this guaranty.



     The Guarantors agree that, in the event of the dissolution or insolvency of the Debtor or any
Guarantor, or the inability of the Debtor or any Guarantor to pay debts as they mature, or an
assignment by the Debtor or any Guarantor for the benefit of creditors, or the institution of any
proceeding by or against the Debtor or the Guarantor alleging that the Debtor or any Guarantor is
insolvent or unable to pay debts as they mature, and if such event shall occur at a time when any
of the Liabilities may not then be due and payable, the Guarantors will pay to the Agent forthwith
the full amount which would be payable hereunder by the Guarantors if all Liabilities were then due
and payable.



     As additional security for the payment of all of the Liabilities and all obligations of the
Guarantors hereunder (collectively, the “Guaranty Obligations”), each Guarantor grants to the Agent
for the benefit of itself and the Banks a security interest in, a lien on, and an express
contractual right to set off against, each deposit account and all deposit account balances, cash
and any other property of such Guarantor now or hereafter maintained with, or in the possession of,
the Agent. Upon the occurrence of any default hereunder (as described in the immediately preceding
paragraph), the Agent may: (a) refuse to allow withdrawals from any such deposit account; (b) apply
the amount of such deposit account balances and the other assets of the Guarantors described above
to the Guaranty Obligations; and (c) offset any other obligation of the Agent against the Guaranty
Obligations; all whether or not the Guaranty Obligations are then due or have been accelerated and



13









 







all without any advance or contemporaneous notice or demand of any kind to the Guarantor, such
notice and demand being expressly waived.



     This guaranty shall in all respects be a continuing, absolute and unconditional guaranty, and
shall remain in full force and effect (notwithstanding, without limitation, the dissolution of any
Guarantor or that at any time or from time to time all Liabilities may have been paid in full).



     The Guarantors further agree that, if at any time all or any part of any payment theretofore
applied by the Agent or the Banks to any of the Liabilities is or must be rescinded or returned by
the Agent or the Banks for any reason whatsoever (including, without limitation, the insolvency,
bankruptcy or reorganization of the Debtor), such Liabilities shall, for the purposes of this
guaranty, to the extent that such payment is or must be rescinded or returned, be deemed to have
continued in existence, notwithstanding such application by the Agent or the Banks, and this
guaranty shall continue to be effective or be reinstated, as the case may be, as to such
Liabilities, all as though such application by the Agent or the Banks had not been made.



     The Agent and the Banks may, from time to time, at their sole discretion and without notice to
any Guarantor, take any or all of the following actions: (a) be granted a security interest in any
property to secure any of the Liabilities or the Guaranty Obligations, (b) retain or obtain the
primary or secondary obligation of any obligor or obligors, in addition to the Guarantors, with
respect to any of the Liabilities, (c) extend or renew for one or more periods (whether or not
longer than the original period), alter or exchange any of the Liabilities, or release or
compromise any obligation of any nature of any other obligor with respect to any of the
Liabilities, (d) release its security interest in, or surrender, release or permit any substitution
or exchange for, all or any part of any property securing any of the Liabilities or any obligation
hereunder, or extend or renew for one or more periods (whether or not longer than the original
period) or release, compromise, alter or exchange any obligations of any nature of any obligor with
respect to any such property, and (e) resort to any Guarantor for payment of any of the
Liabilities, whether or not the Agent and the Banks (i) shall have resorted to any property
securing any of the Liabilities or (ii) shall have proceeded against any other obligor primarily or
secondarily obligated with respect to any of the Liabilities including without limitation any other
Guarantor (all of the actions referred to in preceding clauses (i) and (ii) being hereby expressly
waived by each Guarantor).



     Any amounts received by the Agent and the Banks from whatsoever source on account of the
Liabilities may be applied by it toward the payment of such of the Liabilities, and in such order
of application, as the Agent may from time to time elect.



     Until such time as this guaranty shall have been discontinued and the Agent and the Banks
shall have received payment of the full amount of all Liabilities and of all obligations of the
Guarantors hereunder, no payment made by or for the account of the Guarantors pursuant to this
guaranty shall entitle the Guarantors by subrogation or otherwise to any payment by the Debtor or
from or out of any property of the Debtor and the Guarantors shall not exercise any right or remedy
against the Debtor or any property of the Debtor by reason of any performance by the Guarantors of
this guaranty.



14









 





     The Guarantors hereby expressly waive: (a) notice of the acceptance by the Agent or the Banks
of this guaranty, (b) notice of the existence or creation or non-payment of all or any of the
Liabilities,
(c) presentment, demand, notice of dishonor, protest, and all other notices whatsoever, and (d) all
diligence in collection or protection of or realization upon the Liabilities or any part thereof,
any obligation hereunder, or any security for, or guaranty of, any of the foregoing.



     Each Bank may from time to time without notice to the Guarantors, assign or transfer its
Percentage (as defined in the Credit Agreement) or any or all of the Liabilities or any interest
therein; and, notwithstanding any such assignment or transfer or any subsequent assignment or
transfer thereof, such Liabilities shall be and remain Liabilities for the purposes of this
guaranty, and each and every immediate and successive assignee or transferee of any of the
Liabilities or of any interest therein shall, to the extent of the interest of such assignee or
transferee in the Liabilities, be entitled to the benefits of this guaranty to the same extent as
if such assignee or transferee were such Bank.



     Unless the Agent shall otherwise consent in writing, the Agent shall have the sole right to
enforce this Guaranty, as Agent as provided in the Credit Agreement, for the benefit of the Agent
and the Banks (including any transferee, as provided in the prior paragraph).



     Each Guarantor hereby warrants to the Agent and the Banks that such Guarantor now has, and
will continue to have independent means of obtaining information concerning the affairs, financial
condition and business of the Debtor. Neither the Agent nor the Bank shall have any duty or
responsibility to provide the Guarantors with any credit or other information concerning the
affairs, financial condition or business of the Debtor which may come into the Agent’s or the
Bank’s possession.



     No delay on the part of the Agent or any Bank in the exercise of any right or remedy shall
operate as a waiver thereof, and no single or partial exercise by the Agent or any Bank of any
right or remedy shall preclude other or further exercise thereof or the exercise of any other right
or remedy; nor shall any modification or waiver of any of the provisions of this guaranty be
binding upon the Agent or any Bank except as expressly set forth in a writing duly signed and
delivered on behalf of the Agent and the Required Banks (as defined in the Credit Agreement). No
action of the Agent or the Banks permitted hereunder shall in any way affect or impair the rights
of the Agent or the Banks and the obligations of the Guarantors under this guaranty. For the
purposes of this guaranty, Liabilities shall include all obligations of the Debtor to the Agent or
the Banks specified as Liabilities, notwithstanding any right or power of the Debtor or anyone else
to assert any claim or defense as to the invalidity or unenforceability of any such obligation, and
no such claim or defense shall affect or impair the obligations of the Guarantors hereunder, and
shall specifically include, without limitation, any and all interest, fees or commissions included
in the Liabilities and accruing or payable after the commencement of any bankruptcy or insolvency
proceedings, notwithstanding any provision or rule of law which might restrict the rights of the
Bank to collect such obligations from the Debtor. The obligations of the Guarantors under this
guaranty shall be absolute and unconditional irrespective of any circumstance whatsoever which
might constitute a legal or



15









 







equitable discharge or defense of any Guarantor. The Guarantors hereby
acknowledge that there are no conditions to the effectiveness of this guaranty.



     This guaranty shall be binding upon each Guarantor, and upon the successors and assigns of
each Guarantor.



     Wherever possible, each provision of this guaranty shall be interpreted in such a manner as to
be effective and valid under applicable law, but if any provision of this guaranty shall be
prohibited by or invalid under such law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision or the remaining
provisions of this guaranty.



     THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS GUARANTY SHALL BE GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES
THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS OF THE UNITED STATES APPLICABLE TO NATIONAL BANKS.



     THE AGENT AND THE BANKS (BY ACCEPTING THIS GUARANTY) AND THE GUARANTORS HEREBY EXPRESSLY WAIVE
ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS
GUARANTY OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY.



     AT THE OPTION OF THE AGENT, THIS GUARANTY MAY BE ENFORCED IN ANY FEDERAL COURT OR MINNESOTA
STATE COURT SITTING IN MINNEAPOLIS OR ST. PAUL, MINNESOTA; AND THE GUARANTORS CONSENT TO THE
JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVE ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT
CONVENIENT. IN THE EVENT ANY GUARANTOR COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER
ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS
GUARANTY, THE AGENT, AT ITS OPTION, SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF THE
JURISDICTIONS AND VENUES ABOVE DESCRIBED, OR IF SUCH TRANSFER CANNOT BE ACCOMPLISHED UNDER
APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT PREJUDICE.



(signature page follows)




16









 








     SIGNED AND DELIVERED as of October 2, 2007.



	 	 	 	 	 	 	 
	 	 	BTD Manufacturing, Inc.

DMI Industries, Inc.

DMS Health Technologies, Inc.

DMS Imaging, Inc.

Foley Company

Idaho Pacific Holdings, Inc.

Midwest Construction Services, Inc.

Northern Pipe Products, Inc.

ShoreMaster, Inc.

Vinyltech Corporation

Idaho Pacific Corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	George Koeck	 	 
	 

	 	Title:
	 	Secretary	 	 






17









 





Exhibit D

Parent Negative Pledge




October 2, 2007




Otter Tail Corporation

4334 18th Avenue South

Suite 200

Fargo, North Dakota 58103

Attention: Mr. Kevin G. Moug

          Chief Financial Officer



Re: Pledge of Stock




Dear Mr. Moug:




     Reference is made to that certain Credit Agreement, dated as of October 2, 2007 (as thereafter
amended, the “Credit Agreement”) among Varistar Corporation (the “Borrower”), the Banks named
therein, and between U.S. Bank National Association, as agent for the Banks (the “Agent”).
Capitalized terms used in the Credit Agreement and not otherwise defined shall have the meanings
set forth therein.



     It is the understanding of the Agent and the Banks that Otter Tail Corporation (the “Company”)
owns all of the capital stock of the Borrower and that for this reason the Company gains benefit
from the extensions of credit by the Banks under the Credit Agreement. It is a term and condition
of the Credit Agreement that the Company enter into this letter agreement to induce the Banks and
the Agent to extend credit to the Borrower under the Credit Agreement.



     The Company has agreed with the Banks and the Agent that until such time as the Credit
Agreement and all Letters of Credit issued thereunder shall have terminated, and all obligations of
the Borrower under the Credit Agreement and each Loan Document shall have been paid and satisfied
in full, the Company will not grant, create, incur, assume or suffer to exist any Lien on the stock
of the Borrower.



18









 





Otter Tail Corporation

October 2, 2007

Page 2




     Please execute and return a copy of this letter, whereupon it shall become a binding agreement
between the Company, the Agent and the Banks as of the date first above written.



	 	 	 	 	 
	 	U.S. BANK NATIONAL ASSOCIATION, as 
Agent and as a Bank

 	 
	 	By:  	 	 
	 	 	Delton Steele 	 
	 	 	Vice President 	 
	 



	 	 	 	 	 
	 	Agreed as of the date above:


OTTER TAIL CORPORATION

 	 
	 	By:  	 	 
	 	 	Kevin G. Moug 	 
	 	 	Chief Financial Officer 	 
	 




19









 





Exhibit E

Parent Subordination Agreement




SUBORDINATION AGREEMENT




     THIS AGREEMENT, dated as of October 2, 2007, is between OTTER TAIL CORPORATION, a Minnesota
corporation (the “Subordinated Creditor”), and U.S. BANK NATIONAL ASSOCIATION, a national banking
association (the “Agent”), for itself and as agent for the Banks (as hereinafter defined).



Preliminary Statement




     The Subordinated Creditor has made loans, and may hereafter make loans, to Varistar
Corporation, a Minnesota corporation (together with its successors and assigns called the
“Borrower”). Pursuant to a Credit Agreement, dated as of October 2, 2007 (as hereafter amended,
modified, renewed or replaced from time to time, the “Credit Agreement”) among the Borrower, the
Banks (as defined therein) and the Agent, such loan shall be permitted under the covenants thereof
and this Agreement (as hereafter amended, modified, renewed or replaced from time to time) shall be
the “Parent Subordination Agreement” as defined therein.



     It is a condition to extension of credit by the Agent or the Banks to the Borrower that the
Subordinated Creditor enter into and deliver this Agreement to the Agent, for the benefit of the
Agent and the Banks.



     The Subordinated Creditor Agrees as follows:



     1. As used in this Agreement, the following terms shall have the following meanings:




     “Senior Credit Document” shall mean the following, whether now existing or
hereafter arising, made or entered by the Borrower: (a) the Credit Agreement and any
promissory note or notes, and any other agreement, evidence of indebtedness, guaranty,
application, instrument or document issued under or in connection with the Credit Agreement,
including each Note and each Letter of Credit Agreement, as defined therein; (b) each swap,
cap, collar and other interest rate agreement between the Borrower and the Agent or any
Bank, including any ISDA Master Agreement and confirmations thereunder; and (c) any
amendment, modification, extension, renewal or replacement of the foregoing, including
without limitation any document entered into by the Borrower and other lenders that would
provide for loans and extensions of credit to refinance, in full, the loans and extensions
of credit made by the Agent and the Banks under the Credit Agreement and documents described
in (b) above (called a “Refinancing Lender”) and upon entry into such documents with
the Refinancing Lender, upon written confirmation by the Agent to the Borrower, references
to the Agent and the Banks in this Agreement shall be deemed to refer to the Refinancing
Lender.



20









 






     “Senior Default” shall mean: (a) the occurrence of any “Event of Default” or
similar occurrence under any Senior Credit Document, including the occurrence of any Event
of Default as defined in the Credit Agreement; or (b) the failure of the Subordinated
Creditor to perform any agreement made by it hereunder and such failure shall continue
beyond any grace period expressly applicable thereto.




     “Senior Liabilities” shall mean all obligations of the Borrower under any
Senior Credit Document (including this Agreement) to the Agent, the Banks, their successors
and assigns or to a Refinancing Lender, howsoever created, arising or evidenced, whether
direct or indirect, absolute or contingent, or now or hereafter existing, or due or to
become due, including without limitation any such obligations that arise after the filing of
a petition by or against the Borrower under the Bankruptcy Code, even if the obligations do
not accrue because of the automatic stay under Bankruptcy Code Section 362 or otherwise.




     “Subordinated Liabilities” shall mean all obligations of the Borrower to the
Subordinated Creditor, howsoever created, arising or evidenced, whether direct or indirect,
absolute or contingent or now or hereafter existing, or due or to become due.



     2. The payment of all Subordinated Liabilities shall be postponed and subordinated to the
payment in full of all Senior Liabilities, and no payments or other distributions whatsoever in
respect of any Subordinated Liabilities shall be made, nor shall any property or assets of the
Borrower be applied to the purchase or other acquisition or retirement of any Subordinated
Liabilities; provided, however, that, until such time as a Senior Default shall have occurred and
be continuing, there are excepted from the terms of this Section payments to the Subordinated
Creditor by the Borrower that are listed as exceptions on Schedule A attached hereto.



     3. In the event of any dissolution, winding up, liquidation, readjustment, reorganization or
other similar proceedings relating to the Borrower or to its property (whether voluntary or
involuntary, partial or complete, and whether in bankruptcy, insolvency or receivership, or upon an
assignment for the benefit of creditors, or any other marshaling of the assets and liabilities of
the Borrower, or any sale of all or substantially all of the assets of the Borrower, or otherwise),
the Senior Liabilities shall first be paid in full before the Subordinated Creditor shall be
entitled to receive and to retain any payment or distribution in respect of the Subordinated
Liabilities, and, in order to implement the foregoing, (a) all payments and distributions of any
kind or character in respect of the Subordinated Liabilities to which the Subordinated Creditor
would otherwise be entitled shall be made directly to the Agent for application to the Senior
Liabilities, (b) the Subordinated Creditor shall promptly file a claim or claims, in the form
required in such proceedings, for the full outstanding amount of the Subordinated Liabilities, and
shall cause said claim or claims to be approved and all payments and other distributions in respect
thereof to be made directly to the Agent for application to the Senior Liabilities, and (c) the
Subordinated Creditor hereby irrevocably agrees that the Agent may, at its sole discretion, in the
name of the Subordinated Creditor or otherwise, demand, sue for, collect, receive and receipt for
any and all such payments or



21









 







distributions, and file, prove, and vote or consent in any such
proceedings with respect to, any and all claims of the Subordinated Creditor relating to the
Subordinated Liabilities.



     4. In the event that the Subordinated Creditor receives any payment or other distribution of
any kind or character from the Borrower or from any other source whatsoever in respect of any of
the Subordinated Liabilities, other than as expressly permitted by the terms of this Agreement,
such payment or other distribution shall be received in trust for the Agent and promptly turned
over by the Subordinated Creditor to the Agent. The Subordinated Creditor will mark its books and
records to clearly indicate that the Subordinated Liabilities are subordinated in accordance with
the terms of this Agreement, and will cause to be clearly inserted in any promissory note or other
instrument which at any time evidences any of the Subordinated Liabilities a statement to the
effect that the payment thereof is subordinated in accordance with the terms of this Agreement.



     5. All payments and distributions received by the Agent in respect of the Subordinated
Liabilities, to the extent received in or converted into cash, may be applied by the Agent first to
the payment of any and all expenses (including attorneys, fees and legal expenses) paid or incurred
by the Agent in enforcing this Agreement or in endeavoring to collect or realize upon any of the
Subordinated Liabilities or any security therefor, and any balance thereof shall, solely as between
the Subordinated Creditor and the Agent, be applied by the Agent, in such order of application as
the Agent may from time to time elect, toward the payment of the Senior Liabilities remaining
unpaid; but, as between the Borrower and its creditors, no such payments or distributions of any
kind or character shall be deemed to be payments or distributions in respect of the Senior
Liabilities; and, notwithstanding any such payments or distributions received by the Agent in
respect of the Subordinated Liabilities and so applied by the Agent toward the payment of the
Senior Liabilities, the Subordinated Creditor shall not be subrogated to the then existing rights
of the Agent, if any, in respect of the Senior Liabilities until such time as the Agent shall have
indefeasably received payment of the full amount of the Senior Liabilities.



     6. The Subordinated Creditor will not without the prior written consent of the Agent: (a)
enforce or attempt to enforce any rights to collection of the Subordinated Liabilities or exercise
any rights against assets of the Borrower in connection with the Subordinated Liabilities, (b)
transfer, assign, or subordinate to any liabilities other than the Senior Liabilities, the
Subordinated Liabilities or any rights in respect thereof, provided, that the Subordinated
Liabilities may be transferred to a Subsidiary (as defined in the Credit Agreement) of the
Subordinated Creditor, subject to receipt by the Agent of an acknowledgement by such Subsidiary of
this Agreement in form and substance reasonably acceptable to the Agent; (c) take any collateral
security for the Subordinated Liabilities; (c) convert the Subordinated Liabilities into any other
form of debt of the Borrower, whether or not the Subordinated Creditor shall have the right to do
so under the documents governing the Subordinated Liabilities, (d) amend any provisions of the
documents governing the Subordinated Liabilities, or (e) commence, or join with any other creditor
in commencing, any bankruptcy, reorganization or insolvency proceedings with respect to the
Borrower.



22









 





     7. The Subordinated Creditor hereby waives: (a) notice of acceptance by the Agent or the Banks
of this Agreement; (b) notice of the existence or creation or non-payment of all or any of the
Senior Liabilities; and (c) all diligence in collection or protection of or realization upon the
Senior Liabilities or any thereof or any security therefor.



     8. This Agreement shall in all respects be a continuing agreement and shall remain in full
force and effect (notwithstanding, without limitation, the death, incompetence or dissolution of
the Subordinated Creditor or that at any time or from time to time all Senior Liabilities may have
been paid in full).



     9. The Agent and the Banks have taken no action to induce the Subordinated Creditor to accept
the Subordinated Liabilities, or extend credit constituting the Subordinated Liabilities, and the
Subordinated Creditor has not relied, in any way, on the Agent or the Banks in its extension of the
Subordinated Liabilities. The Subordinated Creditor has independent means of obtaining information
concerning the affairs, financial condition and business of the Borrower and the Agent and the
Banks shall have no duty or responsibility to provide the Subordinated Creditor with any credit or
other information concerning the Borrower.



     10. The Agent and the Banks may, from time to time, at its sole discretion and without notice
to the Subordinated Creditor, take any or all of the following actions: (a) retain or obtain a
security interest in any property of the Borrower, or any other party granting such security
interest to the Agent, to secure any of the Senior Liabilities, (b) retain or obtain the primary or
secondary obligation of any other obligor or obligors with respect to any of the Senior
Liabilities, (c) extend or renew for one or more periods (whether or not longer than the original
period), alter or exchange any of the Senior Liabilities, increase the amount of the Senior
Liabilities, amend or modify in any regard the Senior Credit Documents, or release or compromise
any obligation of any nature of any obligor with respect to any of the Senior Liabilities, and (d)
release any security interest in, or surrender, release or permit any substitution or exchange for,
all or any part of any property securing any of the Senior Liabilities or release, compromise,
alter or exchange any obligations of any nature of any obligor with respect to any such property.



     11. The Agent and the Banks may, from time to time, without notice to the Subordinated
Creditor, assign or transfer any or all of the Senior Liabilities or any interest therein; and,
notwithstanding any such assignment or transfer or any subsequent assignment or transfer thereof,
such Senior Liabilities shall be and remain Senior Liabilities for the purposes of this Agreement,
and every immediate and successive assignee or transferee of any of the Senior Liabilities or of
any interest therein shall, to the extent of the interest of such assignee or transferee in the
Senior Liabilities, be entitled to the benefits of this Agreement to the same extent as if such
assignee or transferee were the Agent or a Bank.



     12. The Agent and the Banks shall not be prejudiced in their rights under this Agreement by
any act or failure to act of the Borrower or the Subordinated Creditor, or any noncompliance of the
Borrower or the Subordinated Creditor with any agreement or obligation, regardless of any knowledge
thereof which the Agent or any Bank may have or with which the Agent or any Bank may be charged;
and no action of the



23









 







Agent or any Bank permitted hereunder shall in any way affect or impair the
rights of the Agent and the Banks and the obligations of the Subordinated Creditor under this
Agreement.



     13. No delay on the part of the Agent or the Banks in the exercise of any right or remedy
shall operate as a waiver thereof, and no single or partial exercise by the Agent or the Banks of
any right or remedy shall preclude other or further exercise thereof or the exercise of any other
right or remedy; nor shall any modification or waiver of any of the provisions of this Agreement be
binding upon the Bank except as expressly set forth in a writing duly signed and delivered on
behalf of the Agent. For the purposes of this Agreement, Senior Liabilities shall include all
obligations of the Borrower to the Agent and the Banks specified in the definition thereof,
notwithstanding any right or power of the Borrower or anyone else to assert any claim or defense as
to the invalidity or unenforceability of any such obligation, and no such claim or defense shall
affect or impair the agreements and obligations of the Subordinated Creditor hereunder.



     14. This Agreement shall be binding upon the Subordinated Creditor and upon the heirs, legal
representatives, successors and assigns of the Subordinated Creditor; and, to the extent that the
Borrower or the Subordinated Creditor is either a partnership or a corporation, all references
herein to the Borrower and to the Subordinated Creditor, respectively, shall be deemed to include
any successor or successors, whether immediate or remote, to such partnership or corporation. If
more than one party shall execute this Agreement, the term “Subordinated Creditor” as used herein
shall mean all parties executing this Agreement and each of them, and all such parties shall be
jointly and severally obligated hereunder.



     15. This Agreement shall be construed in accordance with and governed by the laws of the State
of Minnesota. Wherever possible each provision of this Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision of this Agreement
shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.



     16. THE SUBORDINATED CREDITOR AND THE AGENT EACH HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN
ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR UNDER ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN
CONNECTION HEREWITH, AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND
NOT BEFORE A JURY.



     17. AT THE OPTION OF THE AGENT, THIS AGREEMENT MAY BE ENFORCED IN ANY FEDERAL COURT OR
MINNESOTA STATE COURT SITTING IN MINNEAPOLIS OR ST. PAUL, MINNESOTA; AND THE SUBORDINATED CREDITOR
CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE IN SUCH
FORUMS IS NOT CONVENIENT. IN THE



24









 







EVENT THE SUBORDINATED CREDITOR COMMENCES ANY ACTION IN ANOTHER
JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE
RELATIONSHIP CREATED BY THIS NOTE THE AGENT, AT ITS OPTION, SHALL BE ENTITLED TO HAVE THE CASE
TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES ABOVE DESCRIBED, OR IF SUCH TRANSFER CANNOT
BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT PREJUDICE.



(signature page follows)




25









 





     IN WITNESS WHEREOF, this Agreement has been made and delivered at Minneapolis, Minnesota as of
the date first above written.



	 	 	 	 	 
	 	OTTER TAIL CORPORATION

 	 
	 	By:  	 	 
	 	 	Kevin G. Moug 	 
	 	 	Chief Financial Officer 	 
	 



	 	 	 	 	 
	 	Agreed and Accepted


U.S. BANK NATIONAL ASSOCIATION

 	 
	 	By:  	 	 
	 	 	Delton Steele 	 
	 	 	Vice President 	 
	 



(signature page to Subordination Agreement)




 









 








ACKNOWLEDGMENT BY THE BORROWER





     Varistar Corporation (the “Borrower”) hereby acknowledges receipt of a copy of the foregoing
Subordination Agreement (the “Agreement”), waives notice of acceptance thereof by the Agent and
agree to be bound by the terms and provisions thereof, to make no payments or distributions
contrary to the terms and provisions thereof, and to do every other act and thing necessary or
appropriate to carry out such terms and provisions. In the event of any violation of any of the
terms and provisions of the Agreement, then, at the election of the Agent, any and all of the
Senior Liabilities shall forthwith become due and payable and any and all agreements of the Banks
to make loans, advances or other financial accommodations to the Borrower shall forthwith
terminate, notwithstanding any provisions thereof to the contrary.



Dated as of: October 2, 2007




	 	 	 	 	 
	 	VARISTAR CORPORATION

 	 
	 	By:  	 	 
	 	 	Kevin G. Moug 	 
	 	 	Chief Financial Officer 	 
	 




 









 





Schedule A




     Until occurrence and continuance of a Senior Default, the Borrower may pay (a) interest on the
Subordinated Liabilities, and (b) principal on the Subordinated Liabilities as follows:




(i) Concurrently with the closing of the Credit Agreement and the making of the first Loans
thereunder, the Borrower may pay principal to the Subordinated Creditor in an amount up to
the outstanding principal, interest and other amounts payable by the Subordinated Creditor
under that certain Credit Agreement, dated as of April 26, 2006, among the Subordinated
Creditor, the Banks named therein and U.S. Bank National Association, as Agent; and




(ii) thereafter the Borrower may make to the Subordinated Creditor principal payments on the
Subordinated Liabilities to the extent that such principal payments are included in the
calculation of Fixed Charge Coverage Ratio under the Credit Agreement.



 









 





Exhibit F

Opinion of Counsel




			
	 	 	 
	October 2, 2007
	 	Reply to Fargo office
	 
	 	Direct: 701-451-3567






To: The Banks party to the

Credit Agreement described herein




Bank of America, N.A.




Keybank National Association




Wells Fargo Bank, National Association




U.S. Bank, National Association




Ladies and Gentlemen:




     I have acted as counsel to Varistar Corporation, a Minnesota corporation (the “Company”), in
connection with the transactions contemplated by that certain Credit Agreement, dated as of
October 2, 2007, entered into among the Company, the Banks, as defined therein, and U.S.
Bank National Association, as Agent (the “Credit Agreement”), and to the Material Subsidiaries as
defined in the Credit Agreement (the “Material Subsidiaries”) in connection with that certain
Guaranty dated as of October 2, 2007, entered into by each Material Subsidiary (the
“Guaranty”). This opinion is being delivered to you pursuant to Section 6.1(e) of the Credit
Agreement. Capitalized terms used herein, except as otherwise specifically defined herein, are
used with the same meaning as defined in the Credit Agreement.



     In connection with this opinion, I have examined the following documents:




     (a) The Articles or Certificate of Incorporation of the Company and each Material
Subsidiary;




     (b) The Bylaws of the Company and each Material Subsidiary;




     (c) Resolutions of the Board of Directors of each Material Subsidiary;




     (d) An executed copy of the Credit Agreement and the Guaranty; and




     (e) An executed copy of the Notes.



 









 





     I also have examined such other documents and reviewed such questions of law as I have
considered necessary and appropriate for the purposes of this opinion.



     In rendering my opinions set forth below, I have assumed the authenticity of all documents
submitted to me as originals, the genuineness of all signatures (other than the signatures of
officers of the Company and each Material Subsidiary) and the conformity to authentic originals of
all documents submitted to me as copies. I also have assumed the legal capacity for all purposes
relevant hereto of all natural persons (other than officers of the Company and each Material
Subsidiary) and, with respect to all parties to agreements or instruments relevant hereto other
than the Company and each Material Subsidiary, that such parties had the requisite power and
authority (corporate or otherwise) to execute, deliver and perform such agreements or instruments,
that such agreements or instruments have been duly authorized by all requisite action (corporate or
otherwise), executed and delivered by such parties and that such agreements or instruments are the
valid, binding and enforceable obligations of such parties. As to questions of fact material to my
opinion, I have relied upon representations and certificates of officers and other employees of the
Company and each Material Subsidiary (known by me to have authority to make such representations
and certifications on behalf of the Company and each Material Subsidiary) and certificates of
public officials.



     Based on the foregoing, I am of the opinion that:



     (i) The Company and each Material Subsidiary are each a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation, and each is duly
qualified and in good standing as a foreign corporation in all other jurisdictions in which its
respective present operations or properties require such qualification, except where failure so to
qualify or to be in good standing would not constitute an Adverse Event.



     (ii) The Company and each Material Subsidiary each has full corporate power and authority to
(a) own and operate its properties and assets and carry on its business as presently conducted, as
described in the Company’s Annual Report or Form 10-K for the year ended December 31, 2006, and (b)
enter into and perform its obligations under the Loan Documents to which it is a party.



     (iii) The execution and delivery of the Loan Documents, the borrowing by the Company under the
Credit Agreement and the performance by the Company and Guarantor of their respective obligations
under the Loan Documents to which it is a party have been duly authorized by all necessary
corporate action, and the Loan Documents have been duly executed and delivered on behalf of the
Company and each Material Subsidiary and the Loan Documents have been duly executed and delivered
on behalf of the Company and each Material Subsidiary, as applicable and constitute valid and
binding obligations of the Company and each Material Subsidiary, enforceable in accordance with
their respective terms.



     (iv) There is no provision in (a) the Company’s or any Material Subsidiary’s Articles or
Certificate of Incorporation or Bylaws, (b) any indenture, mortgage, contract or agreement to



 









 







which the Company or any Material Subsidiary is a party or by which the Company or any Material
Subsidiary or its respective properties are bound, (c) any law, statute, rule or regulation or (d)
any writ, order or decision of any court or governmental instrumentality binding on the Company or
any Material Subsidiary which would be contravened by the execution, delivery or performance by the
Company or any Material Subsidiary of the Loan Documents to which it is a party, except in the
case of clauses (b) and (d) for any such contravention which would not constitute an Adverse Event.



     (v) There are no actions, suits or proceedings pending or, to the best of my knowledge,
threatened against the Company or any Material Subsidiary before any court or arbitrator or by or
before any administrative agency or government authority, which, if adversely determined, could
reasonably be expected to constitute an Adverse Event.



     The opinions expressed above are limited to the laws of the States of Minnesota and the
federal laws of the United States and I express no opinion as to the laws of any other
jurisdiction.



     The foregoing opinions are being furnished to you solely for your benefit and may not be
relied upon by, nor may copies be delivered to, any other person without my prior written consent.



Very truly yours,




George A. Koeck

General Counsel and Corporate Secretary




 









 





Exhibit G

Assignment and Assumption

ASSIGNMENT AND ASSUMPTION AGREEMENT

(VARISTAR Corporation)




     This Agreement, dated as of the date set forth in Item I (each reference to an
“Item” herein shall be deemed to refer to such Item on Schedule I hereto),
is made by the party named in Item II, (the “Assignor”) to the entity named in Item
III (the “Assignee”).



WITNESSETH




     The Assignor has entered into a Credit Agreement dated as of October 2, 2007, as amended
thereafter (the “Credit Agreement”) among VARISTAR CORPORATION (the “Borrower”), certain lenders
including the Assignor (collectively, the “Bank Group”) and U.S. BANK NATIONAL ASSOCIATION, as
Agent, under which the Assignor has agreed to make Revolving Loans and Term Loans, and to issue or
participate in the risk of issuance of Letters of Credit, in each instance in amounts of up to
those set forth in Item IV (such amount equals the original commitment of the Assignor and
may have been, or may be, reduced or increased by other assignments by, or to, the Assignor, and
will be reduced by the assignment under this Agreement) and the Bank Group has agreed to make
Revolving Loans and Term Loans, and to issue or participate in the risk of issuance of Letters of
Credit, in each instance in amounts of up to those set forth in Item V. Such Revolving
Loans and Term Loans are sometimes called the “Loans” hereinafter; such Letters of Credit are
sometimes called the “Letters of Credit” hereinafter; the Loans, the Bank’s participation in the
Letters of Credit, and the Bank’s participation in any unreimbursed drawing under any Letter of
Credit or any advance or loans made in connection with drawings under any Letter of Credit are
sometimes called the “Advances” or each “Advance,, hereinafter. Unless the context clearly
indicates otherwise, all other terms used in this Agreement shall have the meanings given them by,
and shall be construed as set forth in the Credit Agreement.



     In consideration of the premises and the mutual covenants contained herein, the Assignor and
the Assignee hereby covenant and agree as follows:



     1. Assignment and Assumption. Subject to the terms and conditions of this Agreement,
the Assignor and the Assignee agree that:




(a) the Assignor hereby sells, transfers, assigns and delegates to the Assignee, in
consideration of entry by the Assignee into this Agreement [and of Payment by the
Assignee to the Assignor of the amount set forth in Item VI]; and




(b) the Assignee hereby purchases, assumes and undertakes from the Assignor, without
recourse and without representation or warranty (except as expressly provided in this
Agreement)



 









 




a share equal to the percentage set forth in Item VII (expressed as a percentage of the
aggregate Advances and Commitments of the Bank Group) of the Assignor’s commitments, loans,
participations, rights, benefits, obligations, liabilities and indemnities under and in connection
with the Credit Agreement and all of the Advances, including without limitation the right to
receive payment of principal, and interest on such percentage of the Assignor’s Advances, and the
obligation to fund all future Advances and drawings under the Letters of Credit in respect of such
assignment, and to indemnify the Agent or any other party under the Credit Agreement and to pay all
other amounts payable by a Bank (in such percentage of the aggregate obligations of the Bank Group)
under or in connection with the Credit Agreement.




     The interest of the Assignor under the Credit Agreement (including the portion of the
Assignor’s Advances and all such commitments, loans, participations, rights, benefits, obligations,
liabilities and indemnities) which the Assignee purchases and assumes hereunder is hereinafter
referred to as its “Assigned Share”. The day upon which the Assignee shall make the payment
described in the prior paragraph is hereinafter referred to as the “Funding Date”. Upon completion
of the assignment hereunder, the Assignor will have the revised share of the total Loans and
Commitments of the Bank Group set fort in Item VIII.



     2. Future Payments. The Assignor shall notify the Agent to make all payments with
respect to the Assigned Share after the Funding Date directly to the Assignee. The Assignor and
Assignee agree and acknowledge that all payment of interest, commitment fees, letter of credit
commissions and other fees accrued up to, but not including, the Funding Date are the property of
the Assignor, and not the Assignee. The Assignee shall, upon payment of any interest, commitment
fees, letter of credit commissions or other fees, remit to the Assignor all of such interest,
commitment fees, letter of credit commissions an other fees accrued u to, but not including, the
Funding Date.



     3. No Warranty or Recourse. The sale, transfer, assignment and delegation of the
Assigned Share is made without warranty or recourse against the Assignor of any kind, except that
the Assignor warrants that it has not sold or otherwise transferred any other interest in the
Assigned Share to any other party. The Assignor may, however, have sold and may hereafter sell
Participations in, or may have assigned or may hereafter assign, portions of its interest in the
Advances and the Credit Agreement that in the aggregate (together with the portion assigned
hereby), do not exceed 100% of the Assignor’s interest in the Advances and the Credit Agreement.



     4. Covenants and Warranties. To induce the other to enter into this Agreement, each
of the Assignee and the Assignor warrants and covenants with respect to itself that:




(a) Existence. It is, in the case of the Assignee, a                      organized
under the laws of                      and it is, in the case of the Assignor, a                     
duly existing under the laws of                     ;




(b) Authority. It is duly authorized to execute, deliver and perform this
Agreement;



 









 






(c) No Conflict. The execution, delivery and performance of this Agreement do not
conflict with any provision of law or of the charter or by-laws (or equivalent constituent
documents) of such party, or of any agreement binding upon it; and




(d) Valid and Binding. All acts, conditions and things required to be done and
performed and to have occurred prior to the execution, delivery and performance of this
Agreement, and to constitute the same the legal, valid and binding obligation of such party
enforceable against such party in accordance with its terms, have been done and performed
and have occurred in due and strict compliance with all applicable laws.



     5. Covenants and Warranties by the Assignee. To induce the Assignor to enter into
this Agreement, the Assignee warrants and covenants that (a) it is purchasing and assuming the
Assigned Share in the course of making loans in the ordinary course of its commercial lending
business, and (b) it has, independently and without reliance upon the Assignor, and based upon such
financial statements and other documents and information as it has deemed appropriate, made its own
credit analysis an decision to engage in this purchase and transfer of the Assigned Share. The
Assignee acknowledges that the Assignor has not made and does not make any representations or
warranties or assume any responsibility with respect to the validity, genuineness, enforceability
or collectibility of the Advances, the Credit Agreement or any related instrument, document or
agreement.



     6. Promissory Note. The Notes of the Assignor shall be delivered to the Agent or
Borrower at such time and by such means as the Assignor and the Agent or Borrower shall agree, with
the request by the Assignor that the Borrower issue new notes payable to the Assignor and to the
Assignee to reflect the assignment of the Assigned Share hereunder.



     7. Payments to the Assignor. All amounts payable to the Assignor in U.S. Dollars
shall be paid by transfer of federal funds to the Assignor, ABA No.           ,
Account No.           Attention:           Reference: [Borrower].



     8. Other Transactions. The Assignee shall have no interest in any property in the
Assignor’s possession or control, or in any deposit held or other indebtedness owing by the
Assignor, which may be or become collateral for or otherwise available for payment of the Advances
by reason of the general description of secured obligations contained in any security agreement or
other agreement or instrument held by the Assignor or by reason of the right of set-off,
counterclaim or otherwise, except that if such interest is provided for in provisions of the Credit
Agreement regarding sharing of set-off, the Assignee shall have the same rights as any other lender
that is a party to the Credit Agreement. The Assignor and its affiliates may accept deposits from,
lend money to, act as trustee under indentures for an generally engage in any kind of business with
the Borrower, and any person who may do business with or own securities of the Borrower, or any of
the Borrower’s subsidiaries. The Assignee shall have no interest in any property taken as security
for any other loans or any other credits extended to the Borrower or any of its subsidiaries by the
Assignor to the Borrower.



 









 





     9. Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the successors and assigns of the Assignor and the Assignee.



     10. Expenses. In the event of any action to enforce the provisions of this Agreement
against a party hereto, the prevailing party shall be entitled to recover all costs and expenses
incurred in connection therewith including, without limitation, attorneys’ fees and expenses,
including allocable cost of in-house legal counsel and staff.



     11. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE 0F MINNESOTA.



     12. Amendments, Changes and Modifications. This Agreement may not be amended,
changed, modified, altered, or terminated except by an agreement in writing signed by the Assignor
and the Assignee or their permitted successors or assigns).



     13. Withholding Taxes. The Assignee (a) represents and warrants to the Assignor, the
Agent and the Borrower that under applicable law and treaties no tax will be required to be
withheld by the Assignor with respect to any payments to be made to the Assignee hereunder, (b)
agrees to furnish (if it is organized under the laws of any jurisdiction other than the United
States or any State thereof) to the Assignor, the Agent and the Borrower prior to the time that the
Agent or Borrower is required to make any payment of principal, interest or fees hereunder either
U.S. Internal Revenue Service Form W8ECI or W8BEN and agrees to provide new Forms upon the
expiration of any previously delivered form or comparable statements in accordance with applicable
U.S. law and regulations and amendments thereto, duly executed and completed by the Assignee, and
(c) agrees to comply with all applicable U.S. laws and regulations with regard to such withholding
tax exemption.



     14. Entire Agreement. This Agreement sets forth the entire understanding of the
parties except for the consents contemplated hereby, and supersedes any and all prior agreements,
arrangements, and understandings relating to the subject matter hereof. No representation,
promise, inducement or statement of intent has been made by any party which is not embodied in this
Agreement, and no party shall be bound by or liable for any alleged representation, promise,
inducement or statement of intention not expressly set forth herein.



     15. Counterparts. This Agreement may be executed by the Assignor and the Assignee in
separate counterparts, each of which when so executed and delivered shall be deemed to be an
original and all of which taken together shall constitute one and the same Agreement.



 









 





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



	 	 	 	 	 	 	 	 	 
	Address:	 	[Assignor]	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	 	 	(print name)	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Address:	 	[Assignee]	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	 	 	(print name)	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 	 	 
	 	 	 	 	 	 	 




[Consents required to become effective as provided in Section 12.3 of the Credit Agreement:




Consented to this ___day

of                     , 20___.




U.S. Bank National Association, as Agent




	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	 	 	(print name)	 	 
	 

	 	 	 	 	 	 
	Title:
	 	 	 	 	 	 
	 	 	 	 	 





Consented to this ___day

of                     , 20___.




VARISTAR CORPORATION, as Borrower




	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	 	 	(print name)	 	 
	 

	 	 	 	 	 	 
	Title:
	 	 	 	 	]	 
	 	 	 	 	 





 









 





Schedule I

to

Assignment and Assumption




	 	 	 
	Item I:

	 	Date of Assignment:
	 
	 	 
	Item II:

	 	Assigning Bank (the “Assignor”):
	 
	 	 
	Item III:

	 	Assignee (the “Assignee”):
	 
	 	 
	Item IV:

	 	Initial Total Commitment of the Assignor:
	 
	 	 
	 

	 	Revolving Loans:
	 
	 	 
	 

	 	Term Loans:
	 
	 	 
	 

	 	Letters of Credit:
	 
	 	 
	Item V:

	 	Bank Group’s Initial Total Commitment:
	 
	 	 
	 

	 	Revolving Loans:
	 
	 	 
	 

	 	Term Loans:
	 
	 	 
	 

	 	Letters of Credit:
	 
	 	 
	Item VI:

	 	Payment to the Assignor on Funding Date:

	 
	 	 
	Item VII:

	 	Percentage Assigned:                     %
	 
	 	 
	 

	 	(Expressed as a percentage of the total aggregate Commitments of the Bank Group,
carry out to 10 decimal places; upon effectiveness of the Assignment as provide in
the Credit Agreement, this will constitute the Assignee’s “Pro Rata Share”
	 
	 	 
	Item VIII:

	 	Revised Percentage of the Assignor:                     %
	 
	 	 
	 

	 	(carry out to 10 decimal places; upon effectiveness of the Assignment as provided in
the Credit Agreement, this will constitute the Assignor’s “Pro Rata Share”)






 









 





Schedule 1.1(a)




Commitments and Percentages




	 	 	 	 	 	 	 	 	 
	Bank:	 	Initial Commitment:	 	Percentage:
	U.S. Bank
	 	$	39,000,000	 	 	 	19.500000000	%
	 
	 	 	 	 	 	 	 	 
	Bank of America
	 	$	34,000,000	 	 	 	17.000000000	%
	 
	 	 	 	 	 	 	 	 
	Key Bank
	 	$	34,000,000	 	 	 	17.000000000	%
	 
	 	 	 	 	 	 	 	 
	Wells Fargo
	 	$	34,000,000	 	 	 	17.000000000	%
	 
	 	 	 	 	 	 	 	 
	JPMorgan Chase
	 	$	29,000,000	 	 	 	14.500000000	%
	 
	 	 	 	 	 	 	 	 
	Bank of the West
	 	$	20,000,000	 	 	 	10.000000000	%
	 
	 	 	 	 	 	 	 	 
	Union Bank of California
	 	$	10,000,000	 	 	 	5.000000000	%
	 
	 	 	 	 	 	 	 	 
	 	 	 
	Total:
	 	$	200,000,000	 	 	 	100.000000000	%






 









 






Schedule 1.1(b)




Material Subsidiaries

(as of date of this Credit Agreement)



BTD Manufacturing, Inc.

DMI Industries, Inc.

DMS Health Technologies, Inc.

DMS Imaging, Inc.

Foley Company

Idaho Pacific Holdings, Inc.

Midwest Construction Services, Inc.

Northern Pipe Products, Inc.

ShoreMaster, Inc.

Vinyltech Corporation

Idaho Pacific Corporation




 









 








Schedule 2.6




Existing Letters of Credit (Section 2.6)




Amount: $195,000

Beneficiary: Columbia Casualty

Expiry Date: 12/31/07

Applicant: DMS Imaging, Inc.




Amount: $1,470,000

Beneficiary: RLI Transportation

Expiry Date: 9/5/08

Applicant: E.W. Wylie Corporation




Amount: $600,000

Beneficiary: Great West Casualty Insurance Co.

Expiry Date: 8/31/08

Applicant: E. W. Wylie Corporation




Amount: $450,000

Beneficiary: Franklin REC

Expiry Date: 12/31/07

Applicant: Northern Pipe Products, Inc.




Amount: $650,000

Beneficiary: St. Paul Fire & Marine Insurance Company

Expiry Date: 6/30/08

Applicant: Varistar Corporation




Amount: $12,000,000

Beneficiary: SAFECO Insurance Company

Expiry Date: 9/1/08

Applicant: Varistar Corporation




Amount: $36,170

Beneficiary: Burns and McDonnell

Expiry Date: 10/27/07

Applicant: Foley Company




 









 





Schedule 7.6




Litigation and Contingent Liabilities (Section 7.6)



None




 









 








Schedule 7.11

Existing Liens (Sections 7.11 and 9.9)




     1. Varistar Corporation (“Varistar”) and its Subsidiaries have pledged their respective
shares or membership interests in the following subsidiaries to U.S. Bank National Association:


1. BTD MANUFACTURING, INC.

2. DMI INDUSTRIES, INC.

3. NORTHERN PIPE PRODUCTS, INC.

4. AERIAL CONTRACTORS, INC.

5. MOORHEAD ELECTRIC, INC.

6. E.W. WYLIE CORPORATION

7. T.O. PLASTICS, INC.

8. DMS HEALTH TECHNOLOGIES, INC.

9. DMS IMAGING, INC.

10. DMS LEASING, INC.

11. VINYLTECH CORPORATION





2. Pledges of such shares and membership interests secure the following indebtedness:




(a) $799,278 Term Note issued by the Borrower to U.S Bank National Association (not as Agent
under the Credit Agreement, but individually, called “USB”);




(b) $1,470,000 Facility for issuance of letters of credit by USB for the account of the
Borrower or its Subsidiaries;




(c) $450,000 Facility for issuance of letters of credit by USB for the account of the
Borrower or its Subsidiaries;




3. The following debt is also secured by collateral:




(a) $2,975 term loan by USB to DMI Industries, Inc. secured by certain real property and
related assets; and



 









 





Schedule 7.15

Subsidiaries (Section 7.15)




	 	 	 	 	 	 	 	 	 
	 	 	 	 	Number and Class of Shares Issued	 	 
	 	 	State of	 	and Owned by Varistar Corporation	 	Footnote
	Company	 	Organization	 	or its Subsidiaries	 	Ref.
	AC Equipment, Inc.

	 	Minnesota
	 	100 Shares Common
	 	 	(3	)
	AWI Acquisition Company Limited

	 	Prince Edward
	 	1 Share Common
	 	 	(6	)
	 

	 	Island	 	 	 	 	 	 
	 

	 	Canada	 	 	 	 	 	 
	Aerial Contractors, Inc.

	 	North Dakota
	 	10 Shares Common
	 	 	(3	)
	AgraWest Investments Limited

	 	Prince Edward
	 	5,000,000 Shares Common
	 	 	(7	)
	 

	 	Island
	 	1,500,000 Shares Class A Preferred	 	 	 	 
	 

	 	Canada
	 	1,500,000 Shares Class B Preferred	 	 	 	 
	 

	 	 	 	1,500 Shares Class C Preferred	 	 	 	 
	Aviva Sports, Inc.

	 	Minnesota
	 	100 Shares Common
	 	 	(5	)
	BTD Manufacturing, Inc.

	 	Minnesota
	 	200 Shares Common
	 	 	(1	)
	Chassis Liner Corporation**

	 	Minnesota
	 	100 Shares Common
	 	 	(1	)
	DMI Industries, Inc.

	 	North Dakota
	 	980 Shares Common
	 	 	(1	)
	DMI Canada, Inc.

	 	Canada
	 	1 Share Common
	 	 	(4	)
	DMS Health Technologies, Inc.

	 	North Dakota
	 	8,500 Shares Class A
	 	 	(1	)
	 

	 	 	 	5,100 Shares Class B	 	 	 	 
	DMS Imaging, Inc.

	 	North Dakota
	 	1,606 Shares Common Voting
	 	 	(2	)
	DMS – Imaging Partners, LLC**

	 	Delaware
	 	 	 	 	(8	)
	DMS – Imaging Partners II, LLC**

	 	Delaware
	 	 	 	 	(8	)
	DMS Leasing Corporation**

	 	North Dakota
	 	2,500 Shares Common
	 	 	(2	)
	E. W. Wylie Corporation

	 	North Dakota
	 	100 Shares Common
	 	 	(1	)
	Foley Company

	 	Missouri
	 	50,000 Shares Common
	 	 	(1	)
	Galva Foam Marine Industries, Inc.

	 	Missouri
	 	100,000 Shares Common
	 	 	(5	)
	Idaho Pacific Holdings, Inc.

	 	Delaware
	 	10,002 Shares Class A Common (voting)
	 	 	(1	)
	Idaho-Pacific Corporation

	 	Idaho
	 	400 Shares Common
	 	 	(6	)
	Idaho-Pacific Colorado Corporation

	 	Delaware
	 	100 Shares Common
	 	 	(6	)
	Lynk3 Technologies, Inc.

	 	Minnesota
	 	100 Shares Common
	 	 	(3	)
	Midwest Construction Services, Inc.

	 	Minnesota
	 	100 Shares Common
	 	 	(1	)
	Moorhead Electric, Inc.

	 	Minnesota
	 	80 Shares Common
	 	 	(3	)
	Northern Pipe Products, Inc.

	 	North Dakota
	 	10,000 Shares Common
	 	 	(1	)
	Shoreline Industries, Inc.

	 	Minnesota
	 	1,000 Shares Common
	 	 	(5	)
	ShoreMaster, Inc.

	 	Minnesota
	 	100 Shares Common
	 	 	(1	)
	ShoreMaster Costa Rica SRL

	 	Costa Rica
	 	50 quotas
	 	 	(5	)
	St. George Steel Fabrication, Inc.**

	 	Utah
	 	1,000 Shares Common
	 	 	(1	)
	T.O. Plastics, Inc.

	 	Minnesota
	 	100 Shares Common
	 	 	(1	)
	Ventus Energy Systems, Inc.

	 	Minnesota
	 	100 Shares Common
	 	 	(3	)
	Vinyltech Corporation

	 	Arizona
	 	100 Shares Common
	 	 	(1	)








 




			
	(1)	 	Subsidiary of Varistar Corporation
	 
	(2)	 	Subsidiary of DMS Health Technologies, Inc.
	 
	(3)	 	Subsidiary of Midwest Construction Services, Inc.
	 
	(4)	 	Subsidiary of DMI Industries, Inc.
	 
	(5)	 	Subsidiary of ShoreMaster, Inc.
	 
	(6)	 	Subsidiary of Idaho Pacific Holdings, Inc.
	 
	(7)	 	Subsidiary of AWI Acquisition Company Limited
	 
	(8)	 	Subsidiary of DMS Imaging, Inc.
	 
	**	 	Inactive




 









 










Schedule 7.16




Partnerships/Joint Ventures (Section 7.16)



None




 









 








Schedule 9.7




Investments (Section 9.7)




	 	 	 	 	 
	 	 	08/31/2007	 
	Canadian Bond — CLC (VSC)
	 	 	4,387	 
	CoBank (St Paul Bank for Coop’s) (VSC)
	 	 	296,562	 
	Other Miscellaneous (DMS)
	 	 	26,502	 
	 
	 	 	 	 
	 
	 	 	 
	Total Investments of Varistar and subsidiaries
	 	$	327,391	 
	 
	 	 	 






 









 





Schedule 9.8




Indebtedness (Section 9.8)




	 	 	 	 	 
	August 31	 	2007	 
	Long-term debt
	 	 	 	 
	Varistar to U.S. Bank, due January 1, 2010
	 	$	799,278	 
	Varistar to Growth Initiative Fund, due July 1, 2010
	 	 	110,088	 
	IPH conditional note to former shareholders
	 	 	1,759,610	 
	BTD to Alter Moneta Corp (Performance Tool acquisition) due
April 19, 2009
	 	 	166,898	 
	DMI to U. S. Bank (PACE Loans)
	 	 	56,204	 
	NPP to City of Hampton, Iowa, Equipment Development Loan,
due December 1, 2008
	 	 	12,500	 
	NPP to Franklin REC, Equipment Development Loan, due
December 17, 2013
	 	 	312,500	 
	MCS to State Bank of Fargo, various vehicle loans (GMAC),
various due dates
	 	 	383,945	 
	MCS to Ford Credit, vehicle loans, due August 30, 2008
	 	 	8,001	 
	IPH Capital lease (AgraWest Plant), due July 1, 2015
	 	 	496,963	 
	SMI Building Capital Lease, due December 31, 2029
	 	 	3,419,255	 
	DMI Kinetic Leasing (equipment lease), due June 30, 2011
	 	 	54,800	 
	 
	 	 	 
	 
	 	 	 	 
	Total long-term debt
	 	$	7,580,042	 
	 
	 	 	 






 









 






CERTIFICATE




     I,                     , do hereby certify that I am the duly elected and qualified
Secretary and the keeper of the records and corporate seal of VARISTAR CORPORATION, a corporation
organized and existing under the laws of the State of Minnesota and that the following is a true
and correct excerpt from certain resolutions duly adopted at a meeting of the Board of Directors
thereof, convened and held in accordance with law and the by-laws of said corporation, and that
such resolutions are now in full force and effect, unamended, unaltered and unrepealed:




[Insert resolution provision permitting the Corporation to arrange $200,000,000 financing]



     I FURTHER CERTIFY THAT the following persons have been appointed or elected and are now acting
as officers or employees of said corporation in the capacity set before their respective names, and
are authorized to enter into that certain Credit Agreement, to be dated as of October 2, 2007,
among this Corporation, the Banks and Agents named therein, and U.S. Bank National Association, as
Agent and Lead Arranger:



     NAME          TITLE          SIGNATURE



 





 





 





     I FURTHER CERTIFY THAT the Articles of Incorporation attached hereto as Exhibit A and
the Bylaws attached hereto as Exhibit B are, respectively, true, complete and correct
copies of this Corporation’s Articles of Incorporation, duly filed with the Secretary of State of
the state of Minnesota, and the Bylaws of this Corporation, which Articles and Bylaws have been
duly adopted by this Corporation and are presently in full force and effect.



     IN WITNESS WHEREOF, I have subscribed my name as Secretary as of October 2, 2007.



	 	 	 	 	 
	 

	 	 	 	 
	 

	 	Secretary
	 	 
	 

	 	VARISTAR CORPORATION