Document:

EXHIBIT 10.1
                                                                    ------------

                                                                  EXECUTION COPY

                          AGREEMENT AND PLAN OF MERGER

                                  BY AND AMONG

                               MRO SOFTWARE, INC.,

                            CAPRI ACQUISITION CORP.,

                               MAINCONTROL, INC.,

                  SHAI BEILIS, AS SHAREHOLDERS' REPRESENTATIVE

                                       AND

                                  ALEX PINCHEV

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                                TABLE OF CONTENTS

                                                                            PAGE

                                    ARTICLE 1

                                   DEFINITIONS

1.1   Certain Matters of Construction..........................................2
1.2   Cross References.........................................................2
1.3   Certain Definitions......................................................4
      1.3.1   Affiliate........................................................4
      1.3.2   COBRA............................................................4
      1.3.3   Commercial Software..............................................4
      1.3.4   Company Leases...................................................4
      1.3.5   Company Material Adverse Effect..................................4
      1.3.6   Control..........................................................4
      1.3.7   End-User Licenses................................................4
      1.3.8   Environmental Claim..............................................4
      1.3.9   Environmental Laws...............................................5
      1.3.10   ERISA...........................................................5
      1.3.11   ERISA Affiliate.................................................5
      1.3.12   Exchange Act....................................................5
      1.3.13   Joint Venture...................................................5
      1.3.14   Materials of Environmental Concern..............................5
      1.3.15   Merger Consideration............................................5
      1.3.16   Parent Material Adverse Effect..................................5
      1.3.17   Permitted Encumbrances..........................................6
      1.3.18   Person..........................................................6
      1.3.19   SEC.............................................................6
      1.3.20   Securities Act..................................................6
      1.3.21   Subsidiary......................................................6

                                    ARTICLE 2

                                   THE MERGER

2.1   Procedure for the Merger.................................................6
2.2   Surviving Corporation....................................................6
      2.2.1   Corporate Existence..............................................6
      2.2.2   Certificate of Incorporation and Bylaws..........................6
      2.2.3   Officers and Directors...........................................7
      2.2.4   Effect of the Merger.............................................7
      2.2.5   Additional Actions...............................................7
2.3   Conversion of Stock......................................................8
      2.3.1   Stock of the Company.............................................8

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      2.3.2   Stock of Merger Sub..............................................8
      2.3.3  Dissenting Shares.................................................8
      2.3.4  Procedure With Respect To Dissenting Shares.......................8
2.4   Fractional Shares; Minimum Shares........................................9
2.5   Issuance of Parent Stock.................................................9
2.6   Closing..................................................................9
2.7   Escrow Fund.............................................................10
2.8   Shareholders' Representative............................................11
2.9   Transfers of Ownership..................................................13

                                    ARTICLE 3

               JOINT AND SEVERAL REPRESENTATIONS AND WARRANTIES OF
                          THE COMPANY AND THE PRINCIPAL

3.1   Corporate Status of the Company.........................................14
3.2   Capital Stock...........................................................14
      3.2.1   Authorized Stock of the Company.................................14
      3.2.2   Options and Convertible Securities of the Company...............14
      3.2.3   Waiver of Redemption Rights.....................................14
3.3   Subsidiaries............................................................15
3.4   Certificate of Incorporation, Bylaws, Directors and Officers............15
3.5   Authority for Agreement; Noncontravention...............................15
      3.5.1   Authority.......................................................15
      3.5.2   No Conflict.....................................................16
3.6   Financial Statements....................................................16
3.7   Absence of Material Adverse Changes and Undisclosed Liabilities.........17
      3.7.1   Changes.........................................................17
      3.7.2   Liabilities.....................................................18
3.8   Compliance with Applicable Law, Certificate and Bylaws..................18
3.9   Litigation and Audits...................................................18
3.10  Tax Matters.............................................................19
      3.10.1   Filing of Returns..............................................19
      3.10.2   Payment of Taxes...............................................19
      3.10.3   Withholding....................................................19
      3.10.4   Assessments....................................................19
      3.10.5   Elections and Consents.........................................19
      3.10.6   Certain Payments...............................................19
      3.10.7   Access to Returns..............................................19
      3.10.8   Definition of Taxes............................................20
3.11  Employee Benefit Plans..................................................20
      3.11.1   List of Plans..................................................20
      3.11.2   ERISA..........................................................20
      3.11.3   Plan Determinations............................................21
      3.11.4   Funding........................................................21
3.12  Employment-Related Matters..............................................22
      3.12.1   Labor Relations................................................22

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      3.12.2   Employee List..................................................22
3.13  Environmental...........................................................22
      3.13.1   Environmental Laws.............................................22
      3.13.2   Environmental Claims...........................................23
      3.13.3   No Basis for Claims............................................23
3.14  No Broker's or Finder's Fees............................................23
3.15  Assets Other Than Real Property.........................................23
      3.15.1   Title..........................................................23
      3.15.2   Condition......................................................23
3.16  Real Property...........................................................23
      3.16.1   Company Real Property..........................................23
      3.16.2   Company Leases.................................................23
3.17  Intellectual Property...................................................24
      3.17.1   Right to Intellectual Property.................................24
      3.17.2   List of Company Proprietary Rights.............................24
      3.17.3   Royalties......................................................25
      3.17.4   Licenses.......................................................25
      3.17.5   Status of Registrations........................................25
      3.17.6   No Conflict....................................................26
      3.17.7   Employee Agreements............................................26
3.18  Agreements, Contracts and Commitments...................................26
      3.18.1   Company Agreements.............................................26
      3.18.2   Validity.......................................................28
3.19  Insurance Contracts.....................................................28
3.20  Banking Relationships...................................................29
3.21  Suppliers, Distributors and Customers...................................29
3.22  Product Warranty........................................................29
3.23  Potential Conflicts of Interest.........................................29
3.24  Accounting System.......................................................30
3.25  Certain Matters.........................................................30
3.26  Full Disclosure.........................................................30

                                    ARTICLE 4

             REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

4.1   Corporate Status of Parent and Merger Sub...............................30
4.2   Capital Stock...........................................................30
      4.2.1   Authorized Stock of Parent......................................30
      4.2.2   Authorized Stock of Merger Sub..................................30
      4.2.3   Valid Issuance..................................................31
4.3   Authority for Agreement; Noncontravention...............................31
      4.3.1   Authority.......................................................31
      4.3.2   No Conflict.....................................................31
4.4   SEC Statements, Reports and Documents...................................31
4.5   No Undisclosed Liabilities..............................................32

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4.6   Absence of Changes......................................................32
4.7   Litigation and Audits...................................................32
4.8   Accounting System.........................................................
4.9   Full Disclosure.........................................................33
4.10  No Representation Regarding Tax Effects.................................33

                                    ARTICLE 5

                              ADDITIONAL AGREEMENTS

5.1   Expenses................................................................33
5.2   Non-Disclosure..........................................................33
5.3   Registration Agreement..................................................33
5.4   Employees...............................................................33
5.5   Transaction Bonus Agreements............................................34
5.6   Resignations............................................................36
5.7   Public Announcements....................................................36
5.8   Further Assurances......................................................36
5.9   Directors' and Officers' Insurance; Indemnification.....................36
5.10  Comerica Bank Line......................................................37
5.11  401 K   37
5.12  Taxable Transaction.....................................................37
5.13  Shareholder Approval....................................................37

                                    ARTICLE 6

                              CONDITIONS PRECEDENT

6.1   Conditions Precedent to the Obligations of Each Party...................37
      6.1.1   No Injunction...................................................37
      6.1.2   Illegality......................................................38
      6.1.3   Registration Agreement..........................................38
      6.1.4   Required Approvals; Recapitalization............................38
6.2   Conditions Precedent to Obligation of Parent and Merger Sub to
      Effect the Merger.......................................................38
      6.2.1   Legal Opinion...................................................38
      6.2.2   Closing Documents...............................................38
      6.2.3   Transaction Bonus Agreements....................................38
      6.2.4   Resignations....................................................38
      6.2.5   Third Party Consents............................................38
      6.2.6   Payment of Bank and Lease Line..................................38
      6.2.7   Dissenting Company Shareholders.................................39
      6.2.8   401 K...........................................................39
6.3   Conditions to Obligations of the Company and the Principal to
      Effect the Merger.......................................................39
      6.3.1   Legal Opinion...................................................39
      6.3.2   Registration Agreement..........................................39
      6.3.3   Payment of Cash Consideration...................................39

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      6.3.4   Acknowledgment of Tax Agreement.................................39
      6.3.5   Closing Documents...............................................39

                                    ARTICLE 7

                                   TERMINATION

7.1   Termination.............................................................39
7.2   Effect of Termination...................................................40

                                    ARTICLE 8

                  INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS

8.1   Agreement to Indemnify..................................................40
      8.1.1   Parent Claims...................................................40
      8.1.2   Benefit of Parent Group.........................................41
8.2   Survival................................................................41
8.3   Limitation of Shareholders' and Principal's Liability for Certain
      Parent Claims...........................................................41
8.4   Process of Indemnification for Parent Claims............................42
      8.4.1   Recovery by Parent..............................................42
      8.4.2   Third-Party Parent Claims.......................................42

                                    ARTICLE 9

                                  MISCELLANEOUS

9.1   Amendments and Supplements..............................................43
9.2   Waiver  43
9.3   Governing Law...........................................................43
9.4   Notice  43
9.5   Entire Agreement........................................................44
9.6   Binding Effect; Assignability...........................................45
9.7   Validity................................................................45
9.8   Prevailing Party........................................................45
9.9   Counterparts............................................................45

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                          AGREEMENT AND PLAN OF MERGER

            AGREEMENT AND PLAN OF MERGER, dated as of May 28, 2002 (the
"Agreement"), by and among (i) MRO SOFTWARE, INC., a Massachusetts corporation
("Parent"), (ii) CAPRI ACQUISITION CORP., a Delaware corporation and an indirect
wholly owned third-tier subsidiary of Parent ("Merger Sub"), (iii) MAINCONTROL,
INC., a Delaware corporation (the "Company"; Merger Sub and the Company being
hereinafter sometimes referred to collectively as the "Constituent
Corporations"), (iv) SHAI BEILIS, as agent for the Shareholders (the
"Shareholders' Representative") and (v) ALEX PINCHEV (the "Principal").

                               W I T N E S S E T H

            WHEREAS, the respective boards of directors of Parent, Merger Sub
and the Company have approved and adopted this Agreement, which provides for the
merger of Merger Sub with and into the Company (the "Merger") on the terms and
conditions set forth herein and in accordance with the provisions of the
Delaware General Corporation Law (the "Act");

            WHEREAS, the board of directors of the Company has recommended the
approval and adoption of this Agreement to its shareholders;

            WHEREAS, Parent, Merger Sub, the Company and the Principal desire to
make certain representations and warranties and other agreements in connection
with the Merger;

            WHEREAS, the parties intend that the Merger should constitute a
taxable transaction and should not qualify as a plan of reorganization within
the meaning of Section 368 of the Internal Revenue Code of 1986, as amended (the
"Code"); and

            WHEREAS, the Company intends to effect, prior to the Merger, a
recapitalization pursuant to which (i) all outstanding shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock of the Company will be converted into shares of Common Stock of
the Company, (ii) the outstanding subordinated convertible notes of the Company
(the "Subordinated Notes") in the aggregate principal amount plus accrued
interest of approximately $12.7 million will be exchanged or converted into
shares of Common Stock of the Company, and (iii) the Company will file a
Certificate of Amendment to Certificate of Incorporation (the "Certificate of
Amendment") to increase the number of authorized shares of Common Stock of the
Company in order to accommodate the issuance of shares of Common Stock
contemplated by (i) and (ii) above (collectively, the "Recapitalization").

            NOW, THEREFORE, Parent, Merger Sub, the Company, the Shareholders'
Representative and the Principal hereby agree as follows:
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                                    ARTICLE 1

                                   DEFINITIONS

            1.1 CERTAIN MATTERS OF CONSTRUCTION. A reference to an Article,
Section, Exhibit or Schedule shall mean an Article of, a Section in, or Exhibit
or Schedule to, this Agreement unless otherwise expressly stated. The titles and
headings herein are for reference purposes only and shall not in any manner
limit the construction of this Agreement which shall be considered as a whole.
The words "include," "includes" and "including" when used herein shall be deemed
in each case to be followed by the words "without limitation."

            1.2 CROSS REFERENCES. The following terms defined elsewhere in this
Agreement in the Sections set forth below shall have the respective meanings
therein defined:

            TERM                                       DEFINITION

            Act                                        Preamble.
            Agreement                                  Preamble.
            Certificate of Amendment                   Preamble.
            Certificate of Merger                      Section 2.1.
            Charging Party                             Section 9.8.
            Closing                                    Section 2.6.
            Closing Date                               Section 2.6.
            Code                                       Preamble.
            Comerica Bank Line                         Section 5.10.
            Company                                    Preamble.
            Company Balance Sheet                      Section 3.6.
            Company Disclosure Schedule                Article 3.
            Company Financial Statements               Section 3.6.
            Company Insurance Contracts                Section 3.19.
            Company Leases                             Section 3.16.
            Company Proprietary Rights                 Section 3.17.1.
            Company Plans                              Section 3.11.1.
            Constituent Corporations                   Preamble.
            Defending Party                            Section 9.8.
            Dissenting Shareholder                     Section 2.3.3.
            Dissenting Shares                          Section 2.3.3.
            Earn Out Acceleration Event                Section 5.5.
            Earn Out Amount                            Section 5.5.
            Earn Out Period                            Section 5.5.
            Effective Time                             Section 2.1.
            Employee List                              Section 3.12.2.
            Encumbrances                               Section 3.15.1.
            Equitable Qualifications                   Section 3.5.1.
            Escrow Agent                               Section 2.7.
            Escrow Agreement                           Section 2.7.
            Escrow Cash                                Section 2.7.

                                      -2-
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            Escrow Fund                                Section 2.7.
            Escrow Period                              Section 2.7
            Escrow Shares                              Section 2.7.
            Executives                                 Section 5.5
            Fraud Claims                               Section 8.1.1.
            GAAP                                       Section 3.6.
            General Escrow Fund                        Section 2.7.
            Governmental Entity                        Section 3.5.2.
            Indemnification Value                      Section 8.3.
            Liabilities                                Section 3.7.2.
            Management Escrow Portion                  Section 2.7
            Merger                                     Preamble
            Merger Sub                                 Preamble
            Merger Sub Stock                           Section 2.3.2.
            Non-Accredited Cash Portion                Section 2.7
            Non-Accredited Stockholder                 Section 2.4
            Parent                                     Preamble
            Parent Balance Sheet                       Section 4.4.
            Parent Claims                              Section 8.1.1.
            Parent Group                               Section 8.1.1.
            Parent Reports                             Section 4.4.
            Parent Stock                               Section 2.3.1.
            Parent Stock Value                         Section 2.4
            Permits                                    Section 3.8.
            Principal                                  Preamble
            PTO                                        Section 3.17
            Recapitalization                           Preamble
            Registration Agreement                     Section 5.3.
            Required Approvals                         Section 3.5.1
            Retained Employees                         Section 5.4
            Shareholders                               Section 2.3.1
            Shareholders' Representative               Preamble
            Section 3.25 Escrow Account                Section 2.7.
            Section 3.25 Escrow Period                 Section 2.7.
            Subordinated Notes                         Preamble
            Surviving Corporation                      Section 2.1.
            Tail Policy                                Section 5.9
            Tax Claims                                 Section 8.1.1.
            Taxes                                      Section 3.10.8.
            Termination Date                           Section 7.1.
            Transaction Bonus Agreements               Section 5.5.
            Transaction Bonus Amount                   Section 5.5.
            Transaction Bonus Plan                     Section 5.5.
            Third-Party Parent Claims                  Section 8.4.2.

                                      -3-
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            1.3 CERTAIN DEFINITIONS. As used herein, the following terms shall
have the following meanings:

                  1.3.1 AFFILIATE: with respect to any Person, any Person which,
                  directly or indirectly, Controls, is Controlled by, or is
                  under common Control with, such Person.

                  1.3.2 COBRA: the provisions of Section 4980B of the Code and
                  Part 6 of Title I of ERISA.

                  1.3.3 COMMERCIAL SOFTWARE: packaged commercial software
                  programs generally available to the public through retail
                  dealers in computer software or directly from the manufacturer
                  or the developer which have been licensed to the Company
                  pursuant to End-User Licenses and which are used in the
                  Company's business but are in no way a component of or
                  incorporated in or specifically required to develop any of the
                  Company's products and related technology and know-how.

                  1.3.4 COMPANY LEASES: each lease, sublease, license or other
                  agreement under which the Company uses, occupies or has the
                  right to occupy any real property or interest therein that (a)
                  provides for future minimum payments of $25,000 or more
                  (ignoring any right of cancellation or termination) or (b) the
                  cancellation or termination of which would have a Company
                  Material Adverse Effect.

                  1.3.5 COMPANY MATERIAL ADVERSE EFFECT: any materially adverse
                  change in or effect on the financial condition, business,
                  operations, assets, properties, results of operations or
                  prospects of the Company and its Subsidiaries considered on a
                  consolidated basis. Notwithstanding the foregoing, none of the
                  following shall, in and of itself, be deemed to constitute a
                  "material adverse change" for purposes of this paragraph: (a)
                  any change attributable to or arising out of general economic
                  conditions, or (b) any change that generally affects the
                  industries in which the Company operates and that is not
                  specifically related to, and does not have a materially
                  disproportionate effect (relative to other industry
                  participants) on, the Company.

                  1.3.6 CONTROL: (including with correlative meaning, Controlled
                  by and under common Control with) as used with respect to any
                  Person, the possession, directly or indirectly, of the power
                  to direct or cause the direction of the management and
                  policies of such Person, whether through the ownership of
                  voting securities, by contract or otherwise.

                  1.3.7 END-USER LICENSES: any object code licenses granted to
                  end-users in the ordinary course of business that permit use
                  of software products without a right to modify, distribute or
                  sublicense the same.

                  1.3.8 ENVIRONMENTAL CLAIM: any notice alleging potential
                  liability (including, without limitation, potential liability
                  for investigatory costs, cleanup costs, response or
                  remediation costs, natural resources damages, property
                  damages,

                                      -4-
<PAGE>

                  personal injuries, fines or penalties) arising out of, based
                  on or resulting from (a) the presence, or release of any
                  Material of Environmental Concern at any location, whether or
                  not owned by that party or any of its Affiliates or (b)
                  circumstances forming the basis of any violation, or alleged
                  violation, of any Environmental Law.

                  1.3.9 ENVIRONMENTAL LAWS: any and all statutes, regulations
                  and ordinances relating to the protection of public health,
                  safety or the environment.

                  1.3.10 ERISA: the Employee Retirement Income Security Act of
                  1974, as amended.

                  1.3.11 ERISA AFFILIATE: with respect to a party, any member
                  (other than that party) of a controlled group of corporations,
                  group of trades or businesses under common Control or
                  affiliated service group that includes that party (as defined
                  for purposes of Section 414(b), (c) and (m) of the Code).

                  1.3.12 EXCHANGE ACT: the Securities Exchange Act of 1934, as
                  amended.

                  1.3.13 JOINT VENTURE: Value Solution Software GmbH & Co. KG.

                  1.3.14 MATERIALS OF ENVIRONMENTAL CONCERN: petroleum and its
                  by-products and all substances or constituents that are
                  regulated by, or form the basis of liability under, any
                  Environmental Law.

                  1.3.15 MERGER CONSIDERATION: the following which is receivable
                  by a holder of capital stock of the Company (after giving
                  effect to the Recapitalization): (i) the shares of Parent
                  Common Stock (other than Escrow Shares) issuable to such
                  holder in accordance with Section 2.5 upon the surrender of
                  the certificate or certificates representing capital stock of
                  the Company held by such holder, (ii) the rights of such
                  holder with respect to the Escrow Fund held by the Escrow
                  Agent on behalf of such holder and (iii) the right, if any, of
                  such holder to receive cash, whether in lieu of fractional
                  shares of Parent Common Stock or otherwise, in accordance with
                  Section 2.4.

                  1.3.16 PARENT MATERIAL ADVERSE EFFECT: any materially adverse
                  change in or effect on the financial condition, business,
                  operations, assets, properties, results of operations or
                  prospects of Parent and its Subsidiaries considered on a
                  consolidated basis. Notwithstanding the foregoing, none of the
                  following shall, in and of itself, be deemed to constitute a
                  "material adverse change" for purposes of this paragraph: (a)
                  any change attributable to or arising out of general economic
                  conditions or the operation of the financial markets in
                  general, (b) any change that generally affects the industries
                  in which Parent operates and that is not specifically related
                  to, and does not have a materially disproportionate effect
                  (relative to other industry participants) on, Parent, (c) any
                  change in the market price or trading volume of the Parent
                  Stock not reflective of a significant underlying change in
                  Parent's business.

                                      -5-
<PAGE>

                  1.3.17 PERMITTED ENCUMBRANCES: (a) liens for current taxes and
                  other statutory liens and trusts not yet due and payable or
                  that are being contested in good faith, (b) liens on personal
                  property leased under operating leases or (c) liens, pledges
                  or deposits incurred or made in connection with workmen's
                  compensation, unemployment insurance and other social security
                  benefits, or securing the performance of bids, tenders,
                  leases, contracts (other than for the repayment of borrowed
                  money), statutory obligations, progress payments, surety and
                  appeal bonds and other obligations of like nature, in each
                  case incurred in the ordinary course of business.

                  1.3.18 PERSON: an individual, a corporation, an association, a
                  partnership, an estate, a trust and any other entity or
                  organization.

                  1.3.19 SEC: the Securities and Exchange Commission, or any
                  Governmental Entity succeeding to its functions.

                  1.3.20 SECURITIES ACT: the Securities Act of 1933, as amended.

                  1.3.21 SUBSIDIARY: any corporation, association, or other
                  business entity a majority (by number of votes on the election
                  of directors or persons holding positions with similar
                  responsibilities) of the shares of capital stock (or other
                  voting interests) of which is owned by Parent, the Company or
                  their respective Subsidiaries, as the case may be. For
                  purposes of this definition, the Joint Venture shall not be
                  deemed a Subsidiary of the Company.

                                    ARTICLE 2

                                   THE MERGER

            2.1 PROCEDURE FOR THE MERGER. At the Effective Time, Merger Sub
shall be merged, in accordance with section 251 of the Act, with and into the
Company, which shall be the surviving corporation. The Company, as such
surviving corporation, is sometimes referred to herein as the "Surviving
Corporation." At the Closing, the Merger shall be effected by filing a
certificate of merger, substantially in the form of Exhibit A attached hereto
(the "Certificate of Merger"), with the Secretary of State of the State of
Delaware in accordance with section 251 of the Act. The effective time of the
Merger (the "Effective Time") shall be the time of the filing of the Certificate
of Merger with the Secretary of State of the State of Delaware.

            2.2 SURVIVING CORPORATION.

                  2.2.1 CORPORATE EXISTENCE. The Surviving Corporation shall
continue its corporate existence under the laws of the State of Delaware. The
separate corporate existence of Merger Sub shall cease at the Effective Time.

                  2.2.2 CERTIFICATE OF INCORPORATION AND BYLAWS. The certificate
of incorporation of Merger Sub, as in effect immediately prior to the Effective
Time, shall be the certificate of incorporation of the Surviving Corporation
until the same shall be amended thereafter in accordance with the Act and such
certificate of incorporation, provided, however,

                                      -6-
<PAGE>

that the first article of the certificate of incorporation of the Surviving
Corporation shall be amended at the Effective Time to read as follows: "The name
of the corporation is MainControl, Inc." The bylaws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the bylaws of the Surviving
Corporation until the same shall be amended thereafter in accordance with the
Act, the certificate of incorporation of the Surviving Corporation and such
bylaws.

                  2.2.3 OFFICERS AND DIRECTORS. As of the Effective Time, the
following persons shall be the officers and directors of the Surviving
Corporation, each to hold office in accordance with the certificate of
incorporation and bylaws of the Surviving Corporation:

        (a) Directors: Norman E. Drapeau, Jr., Peter Rice and Craig Newfield

        (b) President: Norman E. Drapeau, Jr.

        (c) Treasurer: Peter Rice; and

        (d) Secretary: Craig Newfield.

                  2.2.4 EFFECT OF THE MERGER. As of the Effective Time, the
effect of the Merger shall be as provided in this Agreement and the applicable
provisions of the Act. Without limiting the generality of the foregoing, at the
Effective Time, (a) the title to all real estate and other property, or any
interest therein, owned by each Constituent Corporation shall be vested in the
Surviving Corporation without reversion or impairment, (b) the Surviving
Corporation shall be responsible and liable for all the liabilities and
obligations of each Constituent Corporation, (c) any claim existing or action or
proceeding pending by or against a Constituent Corporation may be continued as
if the Merger did not occur or the Surviving Corporation may be substituted in
the proceeding in the case of a proceeding by or against Merger Sub, and (d)
neither the rights of creditors nor any liens upon the property of a Constituent
Corporation shall be impaired by the Merger.

                  2.2.5 ADDITIONAL ACTIONS. If, at any time after the Effective
Time, the Surviving Corporation shall believe or be advised that any further
assignments or assurances in law or any other acts are necessary or desirable
(a) to vest, perfect or confirm in the Surviving Corporation title to or
ownership or possession of any right, privilege, power, franchise, property or
other asset of either Constituent Corporation acquired or to be acquired by
reason of, or as a result of, the Merger or (b) otherwise to carry out the
purposes of this Agreement, then (i) each Constituent Corporation and its
officers and directors shall be deemed to have granted hereby to the Surviving
Corporation an irrevocable power of attorney to execute and deliver all proper
assignments and assurances in law and to undertake all other acts necessary or
proper to vest, perfect or confirm title to or ownership or possession of such
rights, privileges, powers, franchises, properties or other assets in the
Surviving Corporation and otherwise to carry out the purposes of this Agreement
and (ii) the officers and directors of the Surviving Corporation shall be deemed
to be fully authorized to take any and all such actions in the name of either
Constituent Corporation or otherwise.

                                      -7-
<PAGE>

            2.3 CONVERSION OF STOCK.

                  2.3.1 STOCK OF THE COMPANY. Subject to Section 2.4 and Section
2.7, at the Effective Time, each share of Common Stock of the Company issued and
outstanding immediately prior to the Effective Time (excluding any Dissenting
Shares) shall, by virtue of the Merger and without any action on the part of the
holder thereof (each such holder being hereinafter referred to as a
"Shareholder" and, collectively, as the "Shareholders") be converted into and
become .00022104 shares of the Common Stock of Parent amounting in the aggregate
to 1,100,000 shares of Common Stock of Parent ("Parent Stock"). Each share of
Parent Stock issued pursuant to the Merger shall be validly issued, fully paid
and nonassessable.

                  2.3.2 STOCK OF MERGER SUB. At the Effective Time, each share
of the Common Stock, par value $.001 per share, of Merger Sub ("Merger Sub
Stock") issued and outstanding immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into and become one validly issued, fully paid and nonassessable
share of Common Stock, par value $.001 per share, of the Surviving Corporation.

                  2.3.3 DISSENTING SHARES. Notwithstanding anything in this
Agreement to the contrary and unless otherwise provided by applicable law,
shares of capital stock of the Company that are issued and outstanding
immediately prior to the Effective Time and that are owned by Shareholders who
have properly demanded payment of the fair value of their stock (the "Dissenting
Shares") within the meaning of Section 262 of the Act shall not be converted
into the right to receive shares of Parent Stock pursuant to Section 2.3.1 above
unless and until such Shareholders shall have failed to perfect or shall have
effectively withdrawn their demand, or lost their right of payment under
applicable law. If any such Shareholder shall have failed to perfect or shall
have effectively withdrawn or lost such right of payment, each share of capital
stock held by such Shareholder shall thereupon be deemed converted into the
right to receive and exchangeable for, at the Effective Time, shares of Parent
Stock pursuant to Section 2.3.1 of this Agreement. Subject to the terms and
conditions of this Agreement, at and after the Effective Time, any holder of
shares of capital stock who complies with Section 262 of the Act (a "Dissenting
Shareholder") shall be entitled to obtain payment from the Surviving Corporation
of the fair value of such Dissenting Shareholder's shares of capital stock as
determined pursuant to the Act; PROVIDED, HOWEVER, that, to the extent
permissible under the Act, no such payment shall be made unless and until such
Dissenting Shareholder has surrendered to the Parent the certificate
representing the shares of capital stock for which payment is being made.

                  2.3.4 PROCEDURE WITH RESPECT TO DISSENTING SHARES. The Company
shall give Parent (i) prompt notice of any written notice of intent to demand
payment for shares filed pursuant to Section 262 of the Act received by the
Company, withdrawals of such notices, and any other instruments served in
connection with such notices pursuant to the relevant provisions of the Act and
received by the Company and (ii) the opportunity to direct all negotiations and
proceedings with respect to such notices under the Act consistent with the
obligations of the Company thereunder. The Company shall not, except with the
prior written consent of Parent (which shall not be unreasonably withheld), (A)
make any payment with respect to any such notice, (B) offer to settle or settle
any such notices or (C) waive any failure to timely deliver a written notice in
accordance with the Act.

                                      -8-
<PAGE>

            2.4 FRACTIONAL SHARES; MINIMUM SHARES.

                  (a) No fraction of a share of Parent Stock will be issued by
virtue of the Merger, but in lieu thereof each holder of shares of Common Stock
of the Company who would otherwise be entitled to a fraction of a share of
Parent Stock (after aggregating all fractional shares of Parent Stock to be
received by such holder) shall receive from Parent an amount of cash (rounded up
to the nearest whole cent) equal to the product of:

                  (i)   such fraction, multiplied by

                  (ii)  the average closing price of a share of Parent Stock for
                        the ten most recent days that Parent Stock has traded
                        ending on the trading day immediately prior to the
                        Effective Time, as reported by the Nasdaq National
                        Market (the "Parent Stock Value").

                  (b) No number of shares of Parent Stock less than 100 shares
will be issued to any individual Shareholder by virtue of the Merger, but in
lieu thereof each Shareholder who would otherwise be entitled to receive a
number of shares of Parent Stock (after aggregating all shares of Parent Stock
or fractions thereof to be received by such holder) that is less than 100 shall
receive from Parent an amount of cash (rounded up to the nearest whole cent)
equal to the product of (i) such number of shares, multiplied by (ii) the Parent
Stock Value.

                  (c) Unless Parent otherwise elects, no shares of Parent Stock
will be issued to any Shareholder who at the Effective Time has not either (i)
executed and delivered the Registration Agreement or (ii) otherwise established
to the reasonable satisfaction of Parent that he is an "accredited investor"
within the meaning of Rule 501 promulgated under the Securities Act (each a
"Non-Accredited Stockholder"), but in lieu thereof, each such Non-Accredited
Stockholder who would otherwise be entitled to receive a number of shares of
Parent Stock shall receive from Parent an amount of cash (rounded up to the
nearest whole cent) equal to the product of (i) the number of shares of Parent
Stock that such Non-Accredited Stockholder would otherwise be entitled to
receive (after aggregating all shares of Parent Stock or fractions thereof to be
received by such holder) multiplied by (ii) the Parent Stock Value.

            2.5 ISSUANCE OF PARENT STOCK. Subject to Section 2.7, at and after
the Effective Time, upon surrender to Parent by each Shareholder of certificates
for the number of shares of Common Stock representing all of the shares of
Common Stock owned by such Shareholder, Parent shall issue and deliver to each
such Shareholder a certificate which shall be registered in the name of such
Shareholder and shall bear appropriate legends, and which together shall
represent the total number of shares of Parent Stock into which such
Shareholder's Common Stock has been converted.

            2.6 CLOSING. The closing of the Merger (the "Closing") shall take
place at the offices of Parent in Bedford, Massachusetts as soon as practicable
(but in any case shall not later two (2) business days) after the latest to
occur of (or, if permissible, the waiver of) the conditions set forth in Article
VI hereof (the "Closing Date").

                                      -9-
<PAGE>

            2.7 ESCROW FUND.

                  (a) When making the issuances of Parent Common Stock pursuant
to Section 2.5 above, Parent shall withhold from the Shareholders a number of
shares of Parent Common Stock equal to twenty percent (20%) of the number of
Shares (rounded down to the nearest Share) included in the Merger Consideration
(the "Escrow Shares"). At the Closing, Parent shall deliver the Escrow Shares to
a bank or trust company selected by Parent and the Shareholders' Representative
(the "Escrow Agent"), to be held by the Escrow Agent or its nominee pursuant to
the provisions of an escrow agreement substantially in the form of Exhibit B
(the "Escrow Agreement"). The Escrow Shares will be represented by a certificate
or certificates issued in the name of the Escrow Agent.

                  (b) When making the cash payments pursuant to Section 2.4(c)
above, Parent shall withhold from such payments an amount equal to twenty
percent (20%) of the aggregate amont of such payments (the "Non-Accredited Cash
Portion"). When paying the Transaction Bonuses or Earn-Out Amount to certain
employees of the Company, as more fully described in Section 5.5 below, Parent
shall withhold from such payments an amount equal to twenty percent (20%) of the
aggregate amount of such payments (the "Management Escrow Portion"; the
Management Escrow Portion together with the Non-Accredited Cash Portion shall be
referred to as the "Escrow Cash"; the Escrow Cash together with the Escrow
Shares shall be referred to collectively as the "Escrow Fund"). At the Closing,
Parent shall deliver the Escrow Cash to the Escrow Agent to be held by the
Escrow Agent pursuant to the provisions of the Escrow Agreement.

                  (c) Twenty-five percent (25%) of the total Escrow Fund shall
be segregated from the rest of the Escrow Fund and shall be deposited in and
held as a separate escrow account that will be held solely to satisfy
indemnification claims for inaccuracies of the representations set forth in
Section 3.25 and Schedule 3.25 hereof in accordance with Article 8 and the
Escrow Agreement (the "Section 3.25 Escrow Account"). Subject to the next
sentence, the Section 3.25 Escrow Account shall be released and delivered to the
Shareholders and the Executives as their interests therein may appear on
September 30, 2003 (the "Section 3.25 Escrow Period"). In the event any member
of the Parent Group has made a claim pursuant to Article 8 against the Section
3.25 Escrow Account prior to the end of the Section 3.25 Escrow Period, then the
Escrow Agent will continue to retain in escrow a portion of the Section 3.25
Escrow Account sufficient to cover the amount of such claim until such claim is
fully and finally resolved (and shall release the remainder of the Section 3.25
Escrow Account at the end of the Section 3.25 Escrow Period) in accordance with
the Escrow Agreement. The Parent Group may recover against the entire Escrow
Fund with respect to such indemnification claims, and is not limited to the
Section 3.25 Escrow Account.

                  (d) Subject to Section 2.7(e), the Escrow Fund other than the
Section 3.25 Escrow Account (the "General Escrow Fund") shall be held by the
Escrow Agent until the second anniversary of the Closing Date (the "Escrow
Period"); provided that on the first anniversary of the Closing Date, the
excess, if any, of the General Escrow Fund over two-thirds (2/3) of the
aggregate amount initially deposited in the General Escrow Fund (including any
additional amounts contributed pursuant to Section 5.5) shall be released to the
Shareholders and

                                      -10-
<PAGE>

the Executives in accordance with their respective interests therein, with the
remainder being held until the second anniversary of the Closing.

                  (e) In the event any member of the Parent Group has made a
claim under Article 8 prior to the end of the Escrow Period, then the Escrow
Agent will continue to retain in escrow a portion of the General Escrow Fund
sufficient to cover the amount of such claim until such claim is fully and
finally resolved (and shall release the remainder of the General Escrow Fund at
the end of the Escrow Period) in accordance with the Escrow Agreement.

                  (f) Any payments made out of the Escrow Fund for Parent Claims
shall be paid first with the Management Escrow Portion in accordance with the
Escrow Agreement. After the Management Escrow Portion has been paid out in full,
further payments out of the Escrow Fund for Parent Claims shall be made using
the Escrow Shares (including the cash proceeds from the sale of any Escrow
Shares) and the Non-Accredited Cash Portion in accordance with the Escrow
Agreement.

                  (g) In the event that this Agreement is approved by the
Shareholders of the Company pursuant to Section 251 of the Act, then each
Shareholder shall, at the Effective Time, by virtue of the Merger and his
receipt of any Merger Consideration, and without any further act of such
Shareholder, be deemed to have consented to and approved the use of the Escrow
Fund to satisfy any Parent Claims by members of the Parent Group in the manner
set forth herein and in the Escrow Agreement.

            2.8 SHAREHOLDERS' REPRESENTATIVE.

                  (a) In order to administer efficiently the registration of the
Parent Stock pursuant to the Registration Agreement and the defense and/or
settlement of any Parent Claims for which members of the Parent Group may be
entitled to indemnification pursuant to Article 8 hereof, each Shareholder at
the Effective Time, by virtue of the Merger and his receipt of any Merger
Consideration and without any further act of such Shareholder, and each
Executive by executing and delivering the Transaction Bonus Agreements and in
accordance with the terms thereof and without any further act of such Executive,
hereby irrevocably appoint the Shareholders' Representative as their agent and
attorney-in-fact for purposes of Article 8, the Escrow Agreement and the
Registration Agreement , and the Shareholders' Representative hereby accepts
such appointment.

                  (b) The Shareholders and the Executives hereby authorize the
Shareholders' Representative (i) to take any action permitted or required to be
taken by any Shareholder pursuant to the Registration Agreement; (ii) consent to
the taking by the Shareholders' Representative of any and all actions and the
making of any decisions required or permitted to be taken by him under the
Escrow Agreement (including, without limitation, the exercise of the power to
authorize delivery to the Parent Group of the Escrow Shares and Escrow Cash out
of the Escrow Fund in satisfaction of claims by the Parent Group); (iii) to take
all action necessary in connection with the defense and/or settlement of any
Parent Claims for which the Shareholders may be required to indemnify members of
the Parent Group pursuant to Article 8 hereof (but only with respect to Parent
Claims payable solely out of the Escrow Fund); and (iv)

                                      -11-
<PAGE>

during the time that property remains in the Escrow Fund, to give and receive
all notices required to be given under this Agreement, the Escrow Agreement and
the Registration Agreement.

                  (c) In the event that the Shareholder's Representative dies,
is unable or becomes unable to perform his responsibilities hereunder or resigns
from such position, the remaining Shareholders shall, by election of the
Shareholders (or, if applicable, their respective heirs, legal representatives,
successors and assigns) who held a majority of the shares of Common Stock issued
and outstanding immediately prior to the Effective Time, select another
representative to fill such vacancy and such substituted representative shall be
deemed to be the Shareholders' Representative for all purposes of this
Agreement.

                  (d) All decisions and actions by the Shareholders'
Representative, including actions under the Registration Agreement, the Escrow
Agreement and the defense or settlement of any Parent Claims for which the
Shareholders may be required to indemnify members of the Parent Group pursuant
to Article 8 hereof (but only with respect to Parent Claims payable solely out
of the Escrow Fund), shall be binding upon all of the Shareholders, and no
Shareholder shall have the right to object, dissent, protest or otherwise
contest the same.

                  (e) Each Shareholder, by virtue of the Merger and his receipt
of any Merger Consideration, and each Executive, by executing and delivering the
Transaction Bonus Agreements, shall be deemed to have agreed, that:

                        (i) Parent shall be able to rely conclusively on the
instructions and decisions of the Shareholders' Representative relating to the
registration of the Parent Stock or to the settlement of any Parent Claims for
indemnification by members of the Parent Group pursuant to Article 8 hereof and
the Escrow Agreement or any other actions permitted or required to be taken by
the Shareholders' Representative hereunder, and no party hereunder shall have
any cause of action against any member of the Parent Group for any action taken
by any member of the Parent Group in reliance upon the instructions or decisions
of the Shareholders' Representative;

                        (ii) all actions, decisions and instructions of the
Shareholders' Representative shall be conclusive and binding upon all of the
Shareholders and the Executives and no Shareholder or Executive shall have any
cause of action against the Shareholders' Representative for any action taken or
not taken, decision made or instruction given by the Shareholders'
Representative under this Agreement or the Escrow Agreement, except for fraud or
willful breach of this Agreement or the Escrow Agreement by the Shareholders'
Representative;

                        (iii) the provisions of this Section 2.8 are independent
and severable, are irrevocable and coupled with an interest and shall be
enforceable notwithstanding any rights or remedies that any Shareholder or
Executive may have in connection with the transactions contemplated by this
Agreement; and

                        (iv) the provisions of this Section 2.8 shall be binding
upon the heirs, legal representatives, successors and assigns of each
Shareholder and Executive, and any references in this Agreement to a Shareholder
or the Shareholders shall mean and include the successors to the Shareholders'
rights hereunder, whether pursuant to testamentary disposition, the laws of
descent and distribution or otherwise, and any references in this Agreement to
an Executive or the Executives shall mean and include the

                                      -12-
<PAGE>

successors to the Executives' rights hereunder, whether pursuant to testamentary
disposition, the laws of descent and distribution or otherwise.

                  (f) Parent shall have no liability for any fees or expenses of
the Shareholders' Representative. The reasonable expenses incurred by the
Shareholders' Representative while acting on behalf of the Shareholders under
the authorization granted in this Section 2.8 shall be borne by the Shareholders
pro rata and shall be payable out of the Escrow Fund; PROVIDED, HOWEVER, that
the aggregate amount of any payments to the Shareholders' Representative out of
the Escrow Fund pursuant to this Section 2.8(f) shall not exceed $10,000. Parent
shall be entitled, without making any inquiry as to the validity or amount of
the fees or expenses to be reimbursed, to rely on the written instructions of
the Shareholders' Representative regarding payments in respect of the
Shareholders' Representative's fees and expenses as conclusive evidence of the
Shareholders' Representative right to receive such amounts.

            2.9 TRANSFERS OF OWNERSHIP. If any certificate for shares of Parent
Stock is to be issued in a name other than that in which the certificate
surrendered in exchange therefor is registered, it will be a condition of the
issuance thereof that (a) the certificate so surrendered will be properly
endorsed and otherwise in proper form for transfer and that the Shareholder
requesting such exchange will have paid to Parent or any agent designated by it
any transfer or other taxes required by reason of issuance of a certificate for
shares of Parent Stock in any name other than that of the registered holder of
the certificate surrendered, or established to the reasonable satisfaction of
Parent or any agent designated by it that such tax has been paid or is not
payable, (b) Parent will have received an opinion, in form and substance
reasonably satisfactory to Parent and its counsel, of counsel which (to Parent's
reasonable satisfaction) is knowledgeable in securities laws matters, to the
effect that such issuance of a certificate for shares of Parent Stock in any
name other than that of the registered holder of the certificate surrendered may
be effected without registration under the Securities Act and qualification
under any applicable state securities laws and (c) the party in whose name the
certificate will be issued has signed the Registration Agreement and any other
necessary ancillary agreements.

                                    ARTICLE 3

               JOINT AND SEVERAL REPRESENTATIONS AND WARRANTIES OF
                          THE COMPANY AND THE PRINCIPAL

            Except as specifically set forth in the Disclosure Letter delivered
by the Company to Parent prior to the execution and delivery of this Agreement
(the "Company Disclosure Schedule") and referenced in the Company Disclosure
Schedule to the Section(s) of this Article 3 to which such disclosure applies,
each of the Company and the Principal, jointly and severally, hereby represents
and warrants, to and for the benefit of the Parent Group, as follows. For
purposes of this Article 3, except as otherwise explicitly stated or where the
context does not allow, representations and warranties with respect to the
Company shall be deemed to refer to the Company on a consolidated basis,
including its Subsidiaries.

                                      -13-
<PAGE>

            3.1 CORPORATE STATUS OF THE COMPANY. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, with the requisite corporate power to own, operate and lease
its properties and to carry on its business as now being conducted. The Company
is duly qualified or licensed to do business and is in good standing in all
jurisdictions in which the character of the properties owned or held under lease
by it or the nature of the business transacted by it makes qualification
necessary except where failure to so qualify would not or could not reasonably
be expected to have a Company Material Adverse Effect. All jurisdictions in
which the Company is qualified to do business as a foreign corporation are set
forth on Section 3.1 of the Company Disclosure Schedule.

            3.2 CAPITAL STOCK

                  3.2.1 AUTHORIZED STOCK OF THE COMPANY. Before giving effect to
the Recapitalization, the authorized capital stock of the Company consists of
30,000,000 shares of Common Stock of the Company, of which 7,990,264 shares are
issued and outstanding, and 20,000,000 shares of Preferred Stock, of which
6,300,000 shares have been designated Series A Preferred Stock, 2,688,172 shares
have been designated Series B Preferred Stock, 3,689,065 have been designated
Series C Preferred Stock and 3,527,770 have been designated Series D Preferred
Stock. 6,300,000 shares of Series A Preferred Stock are issued and outstanding,
2,688,171 shares of Series B Preferred Stock are issued and outstanding,
3,689,065 shares of Series C Preferred Stock are issued and outstanding
3,505,481 shares of Series D Preferred Stock are issued and outstanding. The
outstanding shares of Company Common Stock and Preferred Stock are held of
record by the persons and in the amounts set forth opposite their respective
names as set forth on Schedule 3.2. After giving effect to the Recapitalization,
the authorized capital stock of the Company will consist of 5,030,000,000 shares
of Common Stock, of which 4,976,572,783 shares will be issued and outstanding.
All of the outstanding shares of Company Common Stock and Preferred Stock have
been duly authorized and validly issued, were not issued in violation of any
person's preemptive rights, and are fully paid and nonassessable.

                  3.2.2 OPTIONS AND CONVERTIBLE SECURITIES OF THE COMPANY.
Except as set forth in Schedule 3.2.2, there are no outstanding subscriptions,
options, warrants, conversion rights or other rights, securities, agreements or
commitments obligating the Company to issue, sell or otherwise dispose of shares
of its capital stock, or any securities or obligations convertible into, or
exercisable or exchangeable for, any shares of its capital stock. There are no
voting trusts or other agreements or understandings to which the Company or any
other person is a party with respect to the voting of the shares of capital
stock of the Company, and the Company is not a party to or bound by any
outstanding restrictions, options or other obligations, agreements or
commitments to sell, repurchase, redeem or acquire any outstanding shares of
capital stock or other equity securities of the Company.

                  3.2.3 WAIVER OF REDEMPTION RIGHTS. Holders of more than 34% of
the outstanding shares of the Series A Preferred Stock of the Company have
irrevocably waived in writing their rights pursuant to Section 3 of Article IV
of the Company's Certificate of Incorporation to request or require redemption
of their shares of Series A Preferred Stock during the period beginning January
1, 2002 and ending June 30, 2003 and true and correct copies of such waivers
have been delivered by the Company to Parent.

                                      -14-
<PAGE>

            3.3 SUBSIDIARIES. Section 3.3 of the Company Disclosure Schedule
contains a complete and accurate list of all Subsidiaries (including the Joint
Venture)of the Company including the jurisdiction of formation of each
Subsidiary, indicating the percentage ownership of such Subsidiary held by the
Company and identifying each other shareholder and the percentage ownership
held. Each Subsidiary is duly organized and in good standing in its jurisdiction
of formation. Other than as reflected in Section 3.3 of the Company Disclosure
Schedule, each Subsidiary is wholly owned by the Company. Other than as
reflected in the Company Balance Sheet, or on Section 3.3 of the Company
Disclosure Schedule, the Company does not own, directly or indirectly, any
shares or other equity interest or securities in any business organization,
entity or enterprise, except for investments by the Company in short term liquid
investments or other cash equivalents made in the ordinary course of business
consistent with the Company's past practice.

            3.4 CERTIFICATE OF INCORPORATION, BYLAWS, DIRECTORS AND OFFICERS.
The Company has delivered to Parent true and correct copies of the certificate
of incorporation and bylaws of the Company and the equivalent constituent
documents for each Subsidiary (including the Joint Venture), including all
amendments thereto, as in effect on the date hereof. The minute book of the
Company and of each Subsidiary contains accurate records of all meetings and
consents in lieu of meetings of the board of directors of the Company or each
Subsidiary, as the case may be, (and any committees thereof, whether permanent
or temporary) and of its shareholders, and such records accurately reflect all
transactions referred to in such minutes and consents. The stock book of the
Company accurately reflects the record ownership of the Company's capital stock.
Parent has been provided with a copy of or access to such minutes or consents
and stock book. Section 3.4 of the Company Disclosure Schedule hereto sets forth
a list of the directors and officers of the Company and of each Subsidiary.

            3.5 AUTHORITY FOR AGREEMENT; NONCONTRAVENTION.

                  3.5.1 AUTHORITY. The Company has the corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by the board of directors and shareholders of the Company and no
other corporate proceedings on the part of the Company are necessary to
authorize the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby, other than (i) the approval by the
Shareholders of this Agreement, the Merger and the Recapitalization (including
the adoption of the Certificate of Amendment) in accordance with the Act and the
Company's Certificate of Incorporation, and (ii) the approval of the holders of
the Subordinated Notes (collectively, the "Required Approvals"). This Agreement
and the other agreements contemplated hereby to be signed by the Company at or
before the Effective Time have been duly executed and delivered by the Company
and constitute valid and binding obligations of the Company (assuming the
Agreement has been duly executed and delivered by Parent and Merger Sub and
constitutes a legal, valid and binding obligation of Parent and Merger Sub),
enforceable against the Company in accordance with their respective terms,
subject to the qualifications that enforcement of the rights and remedies
created hereby and thereby are subject to (a) bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium and other laws of general
application affecting the rights and remedies of creditors

                                      -15-
<PAGE>

and (b) general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law) (the "Equitable
Qualifications").

                  3.5.2 NO CONFLICT. Neither the execution and delivery of this
Agreement by the Company, nor the performance by the Company of its obligations
hereunder, nor the consummation by the Company of the transactions contemplated
hereby will (a) conflict with or result in a violation of any provision of the
certificate of incorporation or bylaws of the Company or the Joint Venture, (b)
except as set forth on Section 3.5.2 of the Company Disclosure Schedule, with or
without the giving of notice or the lapse of time, or both, conflict with, or
result in any violation or breach of, or constitute a default under, or result
in any right to accelerate or result in the creation of any Encumbrance pursuant
to, or right of termination under, any provision of any note, mortgage,
indenture, lease, instrument or other agreement, Permit, concession, grant,
franchise, license, judgment, order, decree, statute, ordinance, rule or
regulation to which the Company or the Joint Venture is a party or by which it
or any of its assets or properties is bound or which is applicable to it or any
of its assets or properties; provided that in the case of clause (b), any
omission from the Company Disclosure Schedule shall be deemed to constitute a
breach or inaccuracy of this representation only to the extent that the omitted
conflict, violation, breach, default or right of acceleration would reasonably
be expected to have a Company Material Adverse Effect. No authorization, consent
or approval of, or filing with or notice to, any United States or foreign
governmental or public body or authority (each a "Governmental Entity") is
necessary for the execution and delivery of this Agreement by the Company or the
Shareholders or the consummation by the Company and the Shareholders of the
transactions contemplated hereby, except for the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware.

            3.6 FINANCIAL STATEMENTS. The Company has previously furnished
Parent with an accurate and complete copy of (a) the unaudited consolidated
balance sheet of the Company as of March 31, 2002 and the statements of
operations, cash flows and changes in shareholders' equity of the Company for
the six months then ended and (b) the consolidated balance sheets of the Company
as of September 30, 2001 and 2000 and the statements of operations, cash flows
and changes in shareholders' equity of the Company for the respective years then
ended, as audited by PricewaterhouseCoopers LLP. Collectively, the financial
statements referred to in the immediately preceding sentence are sometimes
referred to herein as the "Company Financial Statements" and the balance sheet
of the Company as of March 31, 2002 is sometimes referred to herein as the
"Company Balance Sheet." Each of the balance sheets included in the Company
Financial Statements (including any related notes) fairly presents in all
material respects the financial position of the Company as of its date, and the
other statements included in the Company Financial Statements (including any
related notes) fairly present in all material respects the results of
operations, cash flows and shareholders' equity, as the case may be, of the
Company for the periods therein set forth, in each case in accordance with
generally accepted accounting principles ("GAAP") consistently applied (except
as otherwise stated therein and subject, in the case of any unaudited interim
financial statements to the addition of footnotes and to normal year end
adjustments that are not expected to be material individually or in the
aggregate).

                                      -16-
<PAGE>

            3.7 ABSENCE OF MATERIAL ADVERSE CHANGES AND UNDISCLOSED LIABILITIES.

                  3.7.1 CHANGES. Since the date of the Company Balance Sheet,
the Company has not suffered any Company Material Adverse Effect, nor has there
occurred or arisen any event, condition or state of facts of any character that
could reasonably be expected to result in a Company Material Adverse Effect.
Without limiting the generality of the foregoing and without intending to
establish any standard for determination of a Company Material Adverse Effect,
since the date of the Company Balance Sheet, the Company has not, except as
expressly contemplated by this Agreement:

                        (a) sold, leased, transferred or assigned any of its
assets, tangible or intangible, other than in the ordinary course of business;

                        (b) accelerated, terminated, modified, or canceled any
contract, lease, sublease, license, or sublicense (or series of related
contracts, leases, subleases, licenses, and sublicenses) involving more than
$25,000 to which the Company is a party;

                        (c) canceled, compromised, waived, or released any right
or claim (or series of related rights and claims) involving more than $25,000;

                        (d) granted any license or sublicense of any rights
under or with respect to any Company Proprietary Rights other than (i) pursuant
to End-User Licenses granted by the Company and (ii) to the Company's
distributors, resellers and other licensees under agreements disclosed on the
Company Disclosure Schedule;

                        (e) experienced material damage, destruction, or loss
(whether or not covered by insurance) to its property (other than ordinary wear
and tear not caused by neglect);

                        (f) created or suffered to exist any Encumbrance (other
than Permitted Encumbrances) upon any of its assets, tangible or intangible;

                        (g) issued, sold, otherwise disposed of or reacquired
any of its capital stock, or granted or reacquired any options, warrants, or
other rights to purchase or obtain (including upon conversion or exercise) any
of its capital stock, or any securities convertible or exchangeable into any of
its capital stock or otherwise changed its capital structure or stock ownership
in any way;

                        (h) declared, set aside, or paid any dividend or
distribution with respect to its capital stock (whether in cash or in kind) or
redeemed, purchased, or otherwise acquired any of its capital stock;

                        (i) entered into financial arrangements for the benefit
of any of the Shareholders except in the ordinary course of business consistent
with past practice;

                        (j) made or committed to make any capital expenditures
or entered into any other material transaction outside the ordinary course of
business or involving an expenditure in excess of $25,000;

                                      -17-
<PAGE>

                        (k) except as contemplated by the Transaction Bonus
Agreements, amended or modified in any respect any employment contract or
arrangement or any profit sharing, bonus, incentive compensation, severance,
employee benefit or multiemployer plans;

                        (l) entered into any employment agreement or collective
bargaining agreement or increased the compensation of any other of its
employees; or

                        (m) committed (orally or in writing) to any of the
foregoing.

                  3.7.2 LIABILITIES. The Company has no material liabilities or
obligations, fixed, accrued, contingent or otherwise (collectively,
"Liabilities"), other than (i) Liabilities that are fully reflected or provided
for on, or disclosed in the notes to, the Company Balance Sheet, (ii)
obligations of the Company under this Agreement, (iii) Liabilities incurred in
the ordinary course of business since the date of the Company Balance Sheet,
none of which individually or in the aggregate has had or could reasonably be
expected to result in a Company Material Adverse Effect and (iv) Liabilities
expressly disclosed on the Company Disclosure Schedule.

            3.8 COMPLIANCE WITH APPLICABLE LAW, CERTIFICATE AND BYLAWS. The
Company (including the Joint Venture) has all requisite licenses, permits and
certificates from all United States Governmental Entities and from all foreign
Governmental Entities (collectively, "Permits"), necessary to conduct its
business as currently conducted, and to own, lease and operate its properties in
the manner currently held and operated, which the failure to obtain and hold
would have or could reasonably expected to have a Company Material Adverse
Effect. The Company (including the Joint Venture) is in compliance in all
material respects with all the terms and conditions related to such Permits the
failure to comply with which, in each case, or in the aggregate would not and
could not reasonably be expected to have a Company Material Adverse Effect.
There are no proceedings in progress, pending or, to the knowledge of the
Company or the Principal, threatened, which may result in revocation,
cancellation, suspension, or any material adverse modification of any of such
Permits. The business of the Company is not being conducted in violation of any
applicable law, statute, ordinance, regulation, rule, judgment, decree, order,
Permit, concession, grant or other authorization of any United States
Governmental Entity or, to the knowledge of the Company or the Principal, any
foreign Governmental Entity except for any violations that, either individually
or in the aggregate, do not and could not reasonably be expected to have a
Company Material Adverse Effect or prevent or materially delay the consummation
of the transactions contemplated hereby. The Company is not in default or
violation of any provision of its certificate of incorporation or its bylaws.

            3.9 LITIGATION AND AUDITS. There (a) is no investigation by any
Governmental Entity with respect to the Company (or the Joint Venture) pending
or, to the knowledge of the Company or Principal, threatened, nor, to the
knowledge of the Company or the Principal, has any Governmental Entity indicated
to the Company (or the Joint Venture) an intention to conduct the same; (b)
there is no claim, action, suit, arbitration or proceeding pending or, to the
knowledge of the Company or the Principal, threatened against or involving the
Company (or the Joint Venture), or any of its assets or properties, at law or in
equity, or before any arbitrator or Governmental Entity; and (c) there are no
judgments, decrees, injunctions or orders of any Governmental Entity or
arbitrator outstanding against the Company (or the Joint Venture).

                                      -18-
<PAGE>

            3.10 TAX MATTERS. As used in this Section 3.10, the term "Company"
shall refer to and include without limitation the Joint Venture.

                  3.10.1 FILING OF RETURNS. The Company has prepared and filed
on a timely basis with all appropriate governmental authorities all material
returns in respect of Taxes that it is required to file prior to the Closing,
and all such returns are correct and complete.

                  3.10.2 PAYMENT OF TAXES. The Company has paid in full all
Taxes due on or before the Closing and, in the case of Taxes accruing on or
before the Closing that are not due on or before the Closing, the Company has
made adequate provision in its books and records and financial statements for
such payment.

                  3.10.3 WITHHOLDING. The Company has withheld from each payment
made to any of its present or former employees, officers and directors all
amounts required by law to be withheld and has, where required, remitted such
amounts within the applicable periods to the appropriate governmental
authorities.

                  3.10.4 ASSESSMENTS. There are no assessments of the Company
with respect to Taxes that have been issued and are outstanding. Except as set
forth on Schedule 3.10, no Governmental Entity has examined or audited the
Company in respect of Taxes. The Company has not received any indication in
writing from any Governmental Entity that an assessment in respect of the
Company is proposed. The Company has not executed or filed any agreement
extending the period of assessment or collection of any Taxes.

                  3.10.5 ELECTIONS AND CONSENTS. No federal tax elections under
the Code, including any election under Section 1362 of the Code relating to
taxation as an S corporation, are in effect with respect to the Company. The
Company has not filed a consent pursuant to Section 341(f) of the Code relating
to collapsible corporations, nor has it agreed to have Section 341(f)(2) of the
Code apply to any disposition of a subsection (f) asset (as such term is defined
in Section 341(f)(4) of the Code).

                  3.10.6 CERTAIN PAYMENTS. Except as set forth in Schedule 3.10,
there is no contract, agreement, plan or arrangement to which the Company or any
of its Subsidiaries is a party, including but not limited to the provisions of
this Agreement, covering any employee or former employee of the Company or any
of its Subsidiaries that, individually or collectively, would reasonably be
expected to give rise to the payment of any amount that would not be deductible
pursuant to Sections 280G, 404 or 162(m) of the Code. There is no contract,
agreement, plan or arrangement to which the Company or any of its Subsidiaries
is a party or by which it is bound to compensate any individual for excise taxes
paid pursuant to Section 4999 of the Code

                  3.10.7 ACCESS TO RETURNS. Parent has been provided with a copy
of or access to all federal, state, local and foreign income Tax returns filed
by the Company since January 1, 1997. Parent has been provided with a copy of or
access to all assessments, extensions and waivers resulting from any audits of
the Company by a Governmental Entity in respect of Taxes, and all such
assessments and related penalties and interest have been paid in full unless
being contested in good faith by the Company and described on Schedule 3.10.

                                      -19-
<PAGE>

                  3.10.8 DEFINITION OF TAXES. As used herein, "Taxes" means all
taxes, levies and other assessments, including all income, sales, use, goods and
services, value added, capital, capital gains, net worth, transfer, profits,
withholding, payroll, employer health, excise, real property and personal
property taxes, and any other taxes, assessments or similar charges in the
nature of a tax including unemployment insurance payments and workers
compensation premiums, together with any installments with respect thereto, and
any interest, fines and penalties, imposed by any Governmental Entity (including
federal, state, municipal and foreign Governmental Entities), and whether
disputed or not.

            3.11 EMPLOYEE BENEFIT PLANS.

                  3.11.1 LIST OF PLANS. Section 3.11 of the Company Disclosure
Schedule contains a correct and complete list of all pension, profit sharing,
retirement, deferred compensation, welfare, legal services, medical, dental or
other employee benefit or health insurance plans, life insurance or other death
benefit plans, disability, stock option, stock purchase, stock compensation,
bonus, vacation pay, severance pay and other similar plans, programs or
agreements, and every material personnel policy, relating to any persons
employed by the Company or in which any person employed by the Company is
eligible to participate and which is currently maintained or that was maintained
at any time in the last five calendar years by the Company (collectively, the
"Company Plans"). The Company has provided or made available to Parent complete
copies, as of the date hereof, of all of the Company Plans that have been
reduced to writing, together with all documents establishing or constituting any
related trust, annuity contract, insurance contract or other funding instrument,
and summaries of those that have not been reduced to writing. The Company has
provided or made available to Parent complete copies of current plan summaries,
employee booklets, personnel manuals and other material documents or written
materials concerning the Company Plans, as well as copies of the most recent
annual reports (Form 5500 series, including all schedules thereto), if
applicable, for the Company Plans. The Company does not have any "defined
benefit plans" as defined in Section 3(35) of ERISA.

                  3.11.2 ERISA. Neither the Company nor any ERISA Affiliate of
the Company has incurred any "withdrawal liability" calculated under Section
4211 of ERISA and there has been no event or circumstance which would cause them
to incur any such liability. Neither the Company nor any ERISA Affiliate of the
Company has ever maintained a Company Plan providing health or life insurance
benefits to former employees, other than as required pursuant to Section 4980B
of the Code or state law. No pension plan previously maintained by the Company
or its ERISA Affiliates which was subject to ERISA has been terminated; no
proceedings to terminate any such plan have been instituted within the meaning
of Subtitle C of Title IV of ERISA; and no reportable event within the meaning
of Section 4043 of said Subtitle C of Title IV of ERISA with respect to which
the requirement to file a notice with the Pension Benefit Guaranty Corporation
has not been waived has occurred with respect to any such Company Plan, and no
liability to the Pension Benefit Guaranty Corporation has been incurred by the
Company or its ERISA Affiliates. With respect to all the Company Plans, the
Company and every ERISA Affiliate of the Company are in material compliance with
all requirements prescribed by all statutes, regulations, orders or rules
currently in effect, and have in all material respects performed all obligations
required to be performed by them. Neither the Company nor any ERISA Affiliate of
the Company, nor any of their directors, officers, employees or agents,

                                      -20-
<PAGE>

nor any trustee or administrator of any trust created under the Company Plans,
has engaged in or been a party to any "prohibited transaction" as defined in
Section 4975 of the Code and Section 406 of ERISA which could subject the
Company or its Affiliates, directors or employees or the Company Plans or the
trusts relating thereto or any party dealing with any of the Company Plans or
trusts to any material tax or material penalty on "prohibited transactions"
imposed by Section 4975 of the Code. Neither the Company Plans nor the trusts
created thereunder have incurred any "accumulated funding deficiency," as such
term is defined in Section 412 of the Code and regulations issued thereunder,
whether or not waived.

                  3.11.3 PLAN DETERMINATIONS. Each Company Plan intended to
qualify under Section 401(a) of the Code has been determined by the Internal
Revenue Service to so qualify, and the trusts created thereunder have been
determined to be exempt from tax under Section 501(a) of the Code; copies of all
determination letters have been delivered to the Company; and nothing has
occurred since the date of such determination letters which might cause the loss
of such qualification or exemption. With respect to each Company Plan which is a
qualified profit sharing plan, all employer contributions accrued for plan years
ending prior to the Closing under the Company Plan terms and applicable law have
been made.

                  3.11.4 FUNDING. Except as set forth on Schedule 3.11 hereto:

                        (a) all contributions, premiums or other payments due or
required to be made to the Company Plans as of the Effective Time have been made
as of the Effective Time or are properly reflected on the Company Balance Sheet;

                        (b) there are no actions, liens, suits or claims pending
or, to the knowledge of the Company or the Principal, threatened (other than
routine claims for benefits) with respect to any Company Plan;

                        (c) no event has occurred, and there exists no condition
or set of circumstances, which presents a material risk of a partial termination
(within the meaning of Section 411(d)(3) of the Code) of any Company Plan;

                        (d) each Company Plan that is a "group health plan" (as
defined in Section 607(1) of ERISA) has been operated at all times in
substantial compliance with the provisions of COBRA and any applicable, similar
state law;

                        (e) the consummation of the Merger and the other
transactions contemplated by this Agreement will not: (1) entitle any current or
former employee of the Company to severance pay, unemployment compensation or
any similar payment, (2) accelerate the time of payment or vesting, or increase
the amount of any compensation due to, any current or former employee of the
Company, (3) constitute or involve a "prohibited transaction" as defined in
Section 4975 of the Code and Section 406 of ERISA, constitute or involve a
breach of fiduciary responsibility within the meaning of Section 502(1) of ERISA
or otherwise violate Part 4 of Title I of ERISA or (4) result in the payment of
compensation that would, in combination with any other payment, result in an
"excess parachute payment" within the meaning of Section 280G(b) of the Code;
and

                                      -21-
<PAGE>

                        (f) with respect to any Company Plan that is qualified
under Section 401(k) of the Code, individually and in the aggregate, no event
has occurred, and to the knowledge of the Company or the Principal, there exists
no condition or set of circumstances in connection with which the Company could
be subject to any liability that is reasonably likely to have a Company Material
Adverse Effect (except liability for benefits claims and funding obligations
payable in the ordinary course) under ERISA, the Code or any other applicable
law.

            3.12  EMPLOYMENT-RELATED MATTERS.

                  3.12.1 LABOR RELATIONS. The Company is not a party to any
collective bargaining agreement or other contract or agreement with any labor
organization or other representative of any of the employees of the Company.
There is no labor strike, dispute, slowdown, work stoppage or lockout that is
pending or, to the knowledge of the Company or the Principal, threatened against
or otherwise affecting the Company, and the Company has not experienced the same
since its inception. The Company has not closed any plant or facility,
effectuated any layoffs of employees or implemented any early retirement or
separation program at any time since its inception, nor has the Company planned
or announced any such action or program for the future with respect to which the
Company has any liability. All salaries, wages, vacation pay, bonuses,
commissions and other compensation payable by the Company to the employees of
the Company before the date hereof have been paid or accrued in all material
respects as of the date hereof.

                  3.12.2 EMPLOYEE LIST. The Company has heretofore delivered to
Parent a schedule (the "Employee List") dated as of April 11, 2002 containing
the name of each employee of the Company and each such employee's position,
starting employment date, annual salary, accrued vacation and entitlement to
severance, if any. The Employee List is correct and complete as of the date of
the Employee List, and is correct and complete as of the date hereof, except for
changes since that date that are not material in the aggregate or individually.
No third party has asserted any claim, or, to the knowledge of the Company or
the Principal, has any reasonable basis to assert any valid claim, against the
Company that either the continued employment by, or association with, the
Company of any of the present officers or employees of, or consultants to, the
Company contravenes any agreements or laws applicable to unfair competition,
trade secrets or proprietary information.

            3.13  ENVIRONMENTAL.

                  3.13.1 ENVIRONMENTAL LAWS. The Company is in compliance in all
material respects with all applicable Environmental Laws. The Company has not
received any communication that alleges that the Company is not in compliance in
all respects with all applicable Environmental Laws in effect on the date
hereof. All Permits and other governmental authorizations currently held by the
Company pursuant to the Environmental Laws are in full force and effect, the
Company is in compliance in all material respects with all of the terms of such
Permits and authorizations, and no other Permits or authorizations are required
by the Company for the conduct of its business as of the date hereof, which the
failure to obtain and hold would have or could reasonably expected to have a
Company Material Adverse Effect. The management, handling, storage,
transportation, treatment, and disposal by the Company of all

                                      -22-
<PAGE>

Materials of Environmental Concern has been in compliance in all material
respects with all applicable Environmental Laws.

                  3.13.2 ENVIRONMENTAL CLAIMS. There is no Environmental Claim
pending or, to the knowledge of the Company or the Principal, threatened against
or involving the Company or against any person or entity whose liability for any
Environmental Claim the Company has or may have retained or assumed either
contractually or by operation of law.

                  3.13.3 NO BASIS FOR CLAIMS. To the knowledge of the Company or
the Principal, there are no past or present actions or activities by the
Company, or any circumstances, conditions, events or incidents, including the
storage, treatment, release, emission, discharge, disposal or arrangement for
disposal of any Material of Environmental Concern, that could reasonably form
the basis of any Environmental Claim against the Company or against any person
or entity whose liability for any Environmental Claim the Company may have
retained or assumed either contractually or by operation of law.

            3.14 NO BROKER'S OR FINDER'S FEES. The Company has not paid or
become obligated to pay any fee or commission to any broker, finder, financial
advisor or intermediary in connection with the transactions contemplated by this
Agreement.

            3.15 ASSETS OTHER THAN REAL PROPERTY.

                  3.15.1 TITLE. The Company has good and marketable title to all
of the tangible assets shown on the Company Balance Sheet, in each case, free
and clear of any mortgage, pledge, lien, claim, charge, security interest, lease
or other encumbrance (collectively, "Encumbrances"), except for (a) assets
disposed of since the date of the Company Balance Sheet in the ordinary course
of business and in a manner consistent with past practices, (b) liabilities,
obligations and Encumbrances reflected in the Company Balance Sheet, (c)
Permitted Encumbrances, and (d) liabilities, obligations and Encumbrances set
forth on the Company Disclosure Schedule.

                  3.15.2 CONDITION. All receivables shown on the Company Balance
Sheet and all receivables accrued by the Company since the date of the Company
Balance Sheet, represent valid obligations of customers of the Company arising
from bona fide transactions entered into in the ordinary course of business. The
Company has not received any notice in writing from or regarding any account
debtor indicating their inability or unwillingness to pay. All of the material
computer equipment owned or leased by the Company and regularly used in its
business is in good operating condition and repair, ordinary wear and tear
excepted.

            3.16 REAL PROPERTY.

                  3.16.1 COMPANY REAL PROPERTY. The Company does not own any
real property.

                  3.16.2 COMPANY LEASES. Section 3.16 of the Company Disclosure
Schedule lists each real property lease under which the Company or any of its
Subsidiaries is the lessee or lessor (the "Company Leases"). Complete copies of
the Company Leases, and all material amendments thereto (which are identified on
the Company Disclosure Schedule), have

                                      -23-
<PAGE>

previously been delivered by the Company to Parent. Company and each Subsidiary
of the Company, as applicable, are the owners and holders of the leasehold
estates purported to be granted to them by the leases listed in Section 3.16 of
the Company Disclosure Schedule. The Company Leases are in full force and effect
and, to the knowledge of the Company, are binding and enforceable against each
of the parties thereto in accordance with their respective terms, subject to the
Equitable Qualifications; except as set forth on Schedule 3.16 of the Company
Disclosure Schedule, none of the Company Leases has been amended since the date
of delivery of a copy thereof to Parent. Neither the Company nor, to the
knowledge of the Company, any other party to a Company Lease, has committed a
material breach or default under any Company Lease, nor has there occurred any
event that with the passage of time or the giving of notice or both would
constitute such a breach or default, nor are there any facts or circumstances
that would reasonably indicate that the Company is likely to be in material
breach or default thereunder. Section 3.16 of the Company Disclosure Schedule
identifies each Company Lease that requires the consent of any third party in
connection with the transactions contemplated hereby and all such consents have
been obtained. No material construction, alteration or other leasehold
improvement work with respect to the real property covered by any of the Company
Leases remains to be paid for or to be performed by the Company.

            3.17 INTELLECTUAL PROPERTY. As used in this Section 3.17, the term
"Company" shall refer to and include without limitation the Joint Venture.

                  3.17.1 RIGHT TO INTELLECTUAL PROPERTY. The Company owns or has
the right to use, and at all relevant times owned or had the right to use, all
trademarks, trade names, service marks, copyrights (excluding those in
Commercial Software), and, with respect to intellectual property owned by the
Company, any applications therefor, schematics, technology, know-how, trade
secrets, algorithms, computer software programs or applications (in both source
code and object code form), and tangible or intangible proprietary information
or material, that have been used in the business of the Company or that are used
in the business of the Company as currently conducted or as currently proposed
to be conducted by the Company (the "Company Proprietary Rights"). Except as set
forth on Schedule 3.17, there is no reason why the Company will not be able to
continue to use all Company Proprietary Rights necessary for the lawful conduct
of its business as currently conducted and as currently proposed to be
conducted, without any infringement or conflict with the rights of others.
Except as set forth on Schedule 3.17, all of the Company's rights in and to the
Company Proprietary Rights are owned by the Company, free and clear of
Encumbrances, or if not so owned, are licensed to the Company and, if so
required in its business as currently conducted and as currently proposed to be
conducted, may be sublicensed by the Company and used by the Company to create
derivative works. The Company is under no obligation to obtain any further
approval or consent for use of any of the Company Proprietary Rights in its
business as currently conducted and as currently proposed to be conducted.

                  3.17.2 LIST OF COMPANY PROPRIETARY RIGHTS. Set forth on
Section 3.17 of the Company Disclosure Schedule is a complete list of all
Company owned patents, trademarks, trade names, service marks, copyrights, and
any applications therefor, included in the Company Proprietary Rights, that have
been issued or registered or for which an application for such issuance and
registration has been filed, including the respective registration or
application numbers, the applicable jurisdiction, and the names of all
registered owners. None of the

                                      -24-
<PAGE>

Company's currently marketed software products has been registered for copyright
protection with the United States Register of Copyrights or any foreign offices
nor has the Company received any written request to make any such registration.

                  3.17.3 ROYALTIES. The Company is not obligated to pay any
royalties or other compensation to any third party in respect of its ownership,
use or license of any of the Company Proprietary Rights.

                  3.17.4 LICENSES. Set forth on Section 3.17 of the Company
Disclosure Schedule is a complete list of all licenses, sublicenses and other
agreements as to which the Company is a party (excluding End-User Licenses) and
pursuant to which (a) any third party is authorized to use any Company
Proprietary Right or (b) the Company uses, distributes or sublicenses any
intellectual property of any third party (excluding Commercial Software) that is
used in the development, marketing or support of, or that is incorporated in,
the Company's products. Section 3.17 of the Company Disclosure Schedule includes
the identity of all parties to each such license, sublicense or other agreement,
a description of the nature and subject matter thereof, the applicable royalty
and the term thereof. The Company Proprietary Rights include all patents,
trademarks, trade names, service marks, trade secrets and software that are
necessary for the Company to satisfy and perform such licenses, sublicenses and
agreements. The Company is not in violation of any license, sublicense or
agreement described on such list except such violations as do not materially
impair the Company's rights under such license, sublicense or agreement. Such
licenses, sublicenses and agreements are in full force and effect and, to the
knowledge of the Company and the Principal with respect to parties other than
the Company, are binding and enforceable against each of the parties thereto in
accordance with their respective terms, subject to the Equitable Qualifications.
The execution and delivery of this Agreement by the Company, and the
consummation of the transactions contemplated hereby, will not cause the Company
to be in material violation or default under any such license, sublicense or
agreement, nor entitle any other party to any such license, sublicense or
agreement to terminate or modify such license, sublicense or agreement.

                  3.17.5 STATUS OF REGISTRATIONS. All of the Company Proprietary
Rights set forth on Schedule 3.17 as having been issued by, registered with or
filed with the United States Patent and Trademark Office ("PTO") or Register of
Copyrights or the corresponding offices of other countries listed on Section
3.17 of the Company Disclosure Schedule have been so duly issued by or
registered with (based on certificates or other written documents that the
Company has received from such office, register or other offices) or, duly filed
in, as the case may be, and have been properly maintained and renewed in
accordance with all applicable provisions of law and administrative regulations
in the United States and each such other country. The Company has taken
reasonable precautions (i) to protect its rights in the Company Proprietary
Rights and (ii) to maintain the confidentiality of its trade secrets, pending
patent applications (to the extent any such applications are considered by the
PTO to be confidential), know-how and other confidential Company Proprietary
Rights, and there have been no acts or omissions by the officers, directors and
shareholders of the Company or, to the knowledge of the Company or the
Principal, any other employee of the Company, the result of which would be to
compromise the rights of the Company to apply for or enforce appropriate legal
protection of such Company Proprietary Rights. Without limiting the generality
of the foregoing, the Company's products, packaging and documentation contain
appropriate copyright notices.

                                      -25-
<PAGE>

                  3.17.6 NO CONFLICT. No claims with respect to the Company
Proprietary Rights have been asserted, and, to the knowledge of the Company,
neither are any threatened by any Person nor are there any valid grounds for any
bona fide claims (a) to the effect that the development, sale, licensing or use
of any of the products of the Company as now developed, sold or licensed or used
or proposed for development, use, sale or licensing by the Company infringes on
any copyright, patent, trademark, service mark or trade secret, (b) against the
use by the Company of any trademarks, service marks, trade names, trade secrets,
copyrights, patents, technology, know-how or computer software programs and
applications used in the Company's business as currently conducted or as
proposed to be conducted by the Company, or (c) challenging the ownership by the
Company, validity or effectiveness of any of the Company Proprietary Rights. To
the knowledge of the Company there is no unauthorized use, infringement or
misappropriation of any of the Company Proprietary Rights by any third party,
including any employee or former employee of the Company. No Company Proprietary
Right or product of the Company is subject to any outstanding decree, order,
judgment, or stipulation known to the Company that restricts in any manner the
licensing thereof by the Company.

                  3.17.7 EMPLOYEE AGREEMENTS. Each employee and officer of the
Company has executed a confidentiality agreement in substantially the form
attached hereto as Section 3.17.7 of the Company Disclosure Schedule, providing
the Company with title and ownership to the Company Proprietary Rights developed
or used by the Company in its business and expressing agreement to maintain the
confidentiality of the Company Proprietary Rights and the Company's other
confidential information. Each consultant of the Company has executed a
confidentiality agreement providing the Company with title and ownership to the
Company Proprietary Rights developed or used by the Company in its business and
agreeing to maintain the confidentiality of the Company Proprietary Rights and
the Company's other confidential information. To the knowledge of the Company,
no employee, officer or consultant of the Company is in violation of any term of
any employment or consulting contract, proprietary information and inventions
agreement, non-competition agreement, or any other contract or agreement
relating to the relationship of any such employee, officer or consultant with
the Company or any previous employer.

            3.18 AGREEMENTS, CONTRACTS AND COMMITMENTS.

                  3.18.1 COMPANY AGREEMENTS. Except as set forth on Section 3.11
or Section 3.18 of the Company Disclosure Schedule, the Company is not a party
to any currently effective:

                        (a) bonus, deferred compensation, pension, severance,
            profit-sharing, stock option, employee stock purchase or retirement
            plan, contract or arrangement or other employee benefit plan or
            arrangement;

                        (b) employment agreement with any present employee,
            officer, director or consultant (or former employees, officers,
            directors and consultants to the extent there remain at the date
            hereof obligations to be performed by the Company);

                        (c) agreement for personal services or employment with a
            term of service or employment specified in the agreement or any
            agreement for personal services

                                      -26-
<PAGE>

            or employment in which the Company has agreed on the termination of
            such agreement to make any payments greater than those that would
            otherwise be imposed by law;

                        (d) agreement of guarantee or indemnification of the
            obligations of a third party;

                        (e) agreement or commitment containing a covenant
            limiting or purporting to limit the freedom of the Company to
            compete with any person in any geographic area or to engage in any
            line of business;

                        (f) lease, other than the Company Leases, under which
            the Company is lessee that involves payments of $75,000 or more per
            annum or is material to the conduct of the business of the Company;

                        (g) joint venture or profit-sharing agreement;

                        (h) except for trade indebtedness incurred in the
            ordinary course of business and reflected on the Company Balance
            Sheet, loan or credit agreements providing for the extension of
            credit to the Company or any instrument evidencing or related in any
            way to indebtedness incurred in the acquisition of companies or
            other entities or indebtedness for borrowed money by way of direct
            loan, sale of debt securities, purchase money obligation,
            conditional sale, lease, guarantee, or otherwise that individually
            is in the amount of $75,000 or more;

                        (i) license or royalty agreement (other than (A) those
            disclosed on Schedule 3.17, (B) with respect to Commercial Software
            or (C) End-User Licenses granted by the Company as licensor);

                        (j) distribution, VAR or OEM agreement (identifying any
            that contain exclusivity provisions);

                        (k) agreement or arrangement with any third party to
            develop any intellectual property or other asset expected to be used
            or currently used or useful in the Company's business;

                        (l) agreement or arrangement for the Company to develop
            any intellectual property or other asset for any third party;

                        (m) agreement or arrangement providing for the payment
            of any commission based on sales;

                        (n) agreement for the sale or license by or to the
            Company of materials, products, services or supplies that involves
            future payments to the Company of more than $75,000;

                        (o) agreement for the purchase by the Company of any
            materials, equipment, services, or supplies, that either (i)
            involves a binding commitment by the Company to make future payments
            in excess of $75,000 and cannot be terminated by it

                                      -27-
<PAGE>

            without penalty upon less than three months' notice or (ii) was not
            entered into in the ordinary course of business;

                        (p) agreement or commitment for the acquisition,
            construction or sale of fixed assets owned or to be owned by the
            Company that involves future payments by it of more than $75,000;

                        (q) agreement or commitment to which present or former
            directors or officers (or their Affiliates or members of their
            immediate families) or Affiliates (or directors or officers of an
            Affiliate) are also parties;

                        (r) agreement or commitment (other than customary
            product warranties included in the Company's standard end user
            license agreements, copies of which have been provided to Parent)
            whereby the Company, pursuant to the express terms of such agreement
            or commitment, could be required by a third party to return payments
            received by the Company for the sale, license or distribution of any
            of its products or services;

                        (s) agreement or commitment entitling a third party to
            the most favorable price or other terms for any product or service
            the Company offers to any other third party;

                        (t) agreement not described above (ignoring, solely for
            this purpose, any dollar amount thresholds in those descriptions)
            involving the payment or receipt by the Company of more than
            $75,000, other than the Company Leases; or

                        (u) agreement not described above that was not made in
            the ordinary course of business and that is material to the
            financial condition, business, operations, assets, results of
            operations or prospects of the Company.

                  3.18.2 VALIDITY. All contracts, leases, instruments, licenses
and other agreements or documents described on Section 3.18 of the Company
Disclosure Schedule are valid and in full force and effect and the Company has
not, nor, to the knowledge of the Company or the Principal, has any other party
thereto, breached any provision of, or defaulted under the terms of any such
contract, lease, instrument, license or other agreement or document. Section
3.18 of the Company Disclosure Schedule identifies each agreement and other
document set forth on Section 3.18 of the Company Disclosure Schedule or
disclosed by the Company on another part of the Company Disclosure Schedule that
requires the consent of a third party in connection with the transactions
contemplated hereby.

            3.19 INSURANCE CONTRACTS. Section 3.19 of the Company Disclosure
Schedule lists all contracts of insurance in force at the date hereof with
respect to the Company. Such contracts of insurance (collectively, the "Company
Insurance Contracts") insure against such risks, and are in such amounts, as are
reasonable and appropriate considering the Company and its property, business
and operations. To the best of the Company's knowledge, all of the Company
Insurance Contracts are in full force and effect. The Company has committed no
default under any such Insurance Contract which could permit the insurer to deny
payment of claims thereunder. The execution and delivery of this Agreement by
the Company, and the

                                      -28-
<PAGE>

consummation of the transactions contemplated hereby, will not cause the Company
to be in violation or default under any Company Insurance Contracts, nor entitle
any other party thereto to terminate or modify a Company Insurance Contract. The
Company has not received or given a notice of cancellation with respect to any
of the Company Insurance Contracts.

            3.20 BANKING RELATIONSHIPS. Section 3.20 of the Company Disclosure
Schedule shows the names and locations of all banks and trust companies in which
the Company has accounts, lines of credit or safety deposit boxes and, with
respect to each account, line of credit or safety deposit box, the names of all
persons authorized to draw thereon or to have access thereto.

            3.21 SUPPLIERS, DISTRIBUTORS AND CUSTOMERS. Since the date of the
Company Balance Sheet, no material supplier, distributor or customer of the
Company has cancelled or otherwise modified its relationship with the Company in
a manner that is materially adverse to the Company and, to the knowledge of the
Company or the Principal, no supplier, distributor or customer of the Company
has any intention to do so.

            3.22 PRODUCT WARRANTY. Each product sold, leased, licensed or
delivered by the Company has been in conformity in all material respects with
all contractual commitments and all express and implied warranties applicable
thereto. Since January 1, 2000, the warranty expenses incurred by the Company
have not been material to the Company in the aggregate. The Company has no
notice of any claim of failure of its products to conform to any applicable
contractual commitments or warranties that could give rise to material liability
on the part of the Company. Schedule 3.22 hereto includes copies of the standard
terms and conditions of license and sale for the Company (containing applicable
warranty and indemnity provisions). Except as set forth on Schedule 3.22, no
product sold, leased, licensed or delivered by the Company is subject to any
guaranty, warranty, or other indemnity that differs in any material respect from
the applicable standard terms and conditions of license and sale and such other
indemnities and warranties disclosed on Schedule 3.22, other than differences
that, individually or in the aggregate, could not reasonably be expected to give
rise to material liability on the part of the Company.

            3.23 POTENTIAL CONFLICTS OF INTEREST. No officer or director of the
Company: (i) owns, directly or indirectly, any interest in (excepting not more
than 5% stock holdings for investment purposes in securities of publicly held
and traded companies) or is an officer, director, employee or consultant of any
Person that is a direct competitor listed on Schedule 3.23, or a significant
lessor, lessee, customer or supplier of the Company; (ii) owns, directly or
indirectly, in whole or in part, any Company Proprietary Rights; (iii) has any
cause of action or other claim whatsoever against the Company, except for claims
in the ordinary course of business, such as for accrued vacation pay, accrued
benefits under Company Plans and similar matters and agreements existing on the
date hereof; (iv) has made, on behalf of the Company, any payment or commitment
to pay any commission, fee or other amount to, or purchase or obtain or
otherwise contract to purchase or obtain any goods or services from, any
corporation or other Person of which any officer or director of the Company, or,
to the knowledge of the Company or the Principal, a relative of any of the
foregoing, is a partner, shareholder or other securityholder (except stock
holdings solely for investment purposes in securities of publicly held and
traded companies); or (v) as of the date hereof or at any time since January 1,
2001, owes or owed any

                                      -29-
<PAGE>

money to the Company (except for normal expense reimbursements and similar
obligations for advances made by the Company to such person in the ordinary
course of business and not material in amount).

            3.24 ACCOUNTING SYSTEM. To the knowledge of the Company or the
Principal, the Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (a) transactions are executed in
accordance with management's general or specific authorizations; (b)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability; (c)
access to assets is permitted only in accordance with management's general or
specific authorization; and (d) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.

            3.25 Certain Matters. The matters set forth on Schedule 3.25 are
true and correct.

            3.26 Full Disclosure. This Agreement, including the Company
Disclosure Schedule, does not contain any untrue statement by the Company of a
material fact or omit to state a material fact necessary to be stated to make
the statements by the Company contained herein not false or misleading.

                                    ARTICLE 4

             REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

            Parent and Merger Sub hereby jointly and severally represent,
warrant to and agree with Company as follows:

            4.1 CORPORATE STATUS OF PARENT AND MERGER SUB. Each of Parent and
Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, with the
requisite corporate power to own, operate and lease its properties and to carry
on its business as now being conducted. Parent is duly qualified or licensed to
do business and is in good standing in all jurisdictions in which the character
of the properties owned or held under lease by it or the nature of the business
transacted by it makes qualification necessary except where failure to so
qualify would not or could not reasonably be expected to have a Parent Material
Adverse Effect.

            4.2 CAPITAL STOCK.

                  4.2.1 AUTHORIZED STOCK OF PARENT. The authorized capital stock
of Parent consists of (a) 50,000,000 shares of Parent Stock, of which 23,112,082
were issued and outstanding as of May 10, 2002, and (b) 1,000,000 shares of
Preferred Stock, $.01 par value per share, of which none were issued and
outstanding as of the date hereof. All of the outstanding shares of Parent Stock
have been duly authorized and validly issued, were not issued in violation of
any person's preemptive rights, and are fully paid and nonassessable.

                  4.2.2 AUTHORIZED STOCK OF MERGER SUB. The authorized capital
stock of Merger Sub consists of 10,000 shares of Merger Sub Stock, of which 10
shares are issued and outstanding. All of the outstanding shares of Merger Sub
Stock have been duly authorized and

                                      -30-
<PAGE>

validly issued, were not issued in violation of any person's preemptive rights,
and are fully paid and nonassessable.

                  4.2.3 Valid Issuance. The shares of Parent Common Stock to be
issued pursuant to Section 2.5 and 2.7 will, when issued in accordance with the
provisions of this Agreement, be validly issued, fully paid and nonassessable.

            4.3 Authority for Agreement; Noncontravention.

                  4.3.1 AUTHORITY. Each of Parent and Merger Sub has the
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by the boards of directors of Parent and Merger Sub and the
shareholder of Merger Sub and no other corporate proceedings on the part of
Parent or Merger Sub are necessary to authorize the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby.
This Agreement and the other agreements contemplated hereby to be signed by
Parent or Merger Sub at or before the Effective Time have been duly executed and
delivered by Parent and Merger Sub, as the case may be, and constitute valid and
binding obligations of Parent and Merger Sub (assuming the Agreement has been
duly executed and delivered by the Company, the Shareholders and the Principal
and constitutes a legal, valid and binding obligation of the Company, the
Shareholders and the Principal), as the case may be, enforceable against Parent
and Merger Sub in accordance with their respective terms, subject to the
Equitable Qualifications.

                  4.3.2 NO CONFLICT. Neither the execution and delivery of this
Agreement by Parent or Merger Sub, nor the performance by Parent or Merger Sub
of its obligations hereunder, nor the consummation by Parent or Merger Sub of
the transactions contemplated hereby will (a) conflict with or result in a
violation of any provision of the charter documents or bylaws of Parent or
Merger Sub, or (b) with or without the giving of notice or the lapse of time, or
both, conflict with, or result in any violation or breach of, or constitute a
default under, or result in any right to accelerate or result in the creation of
any Encumbrance pursuant to, or right of termination under, any provision of any
note, mortgage, indenture, lease, instrument or other agreement, Permit,
concession, grant, franchise, license, judgment, order, decree, statute,
ordinance, rule or regulation to which Parent or Merger Sub is a party or by
which either of them or any of their respective assets or properties is bound or
which is applicable to either of them or any of their assets or properties. No
authorization, consent or approval of, or filing with or notice to, any
Governmental Entity is necessary for the execution and delivery of this
Agreement by Parent or Merger Sub or the consummation by Parent or Merger Sub of
the transactions contemplated hereby, except for (i) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware, (ii)
any filings as may be required under the Registration Agreement, and (iii) any
filings as may be required under applicable federal or state securities laws and
the laws of any foreign country.

            4.4 SEC STATEMENTS, REPORTS AND DOCUMENTS. Parent has filed all
forms, reports, statements and other documents required to be filed with the SEC
since January 1, 2000, and has heretofore delivered to the Company true and
complete copies of (a) all registration statements (on a form other than Form
S-8) filed by it with the SEC since January 1, 2000, (b) its Annual

                                      -31-
<PAGE>

Reports on Form 10-K for the fiscal years ended September 30, 2001 and 2000,
respectively, (c) all proxy statements relating to Parent's meetings of
stockholders (whether annual or special) held since January 1, 2001, (d) all
other Forms 10-K and 10-Q filed by it with the SEC since January 1, 2001, (e)
all Forms 8-K filed by it with the SEC since January 1, 2002 and (f) all
amendments and supplements to all such reports and registration statements filed
by Parent with the SEC (the documents referred to in clauses (a), (b), (c), (d),
(e) and (f) being hereinafter referred to as the "Parent Reports"). As of their
respective dates, the Parent Reports complied in all material respects with all
applicable requirements of the Securities Act and the Exchange Act and the rules
and regulations promulgated thereunder, and did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements (including any related notes) of Parent included in the Parent
Reports (i) complied as to form in all material respects with the published
rules and regulations of the SEC applicable thereto, (ii) were prepared in
conformity with GAAP applied on a consistent basis throughout the periods
covered (except as otherwise stated in the financial statements), and present
fairly in all material respects the consolidated financial position, results of
operations and changes in financial position of Parent and its consolidated
Subsidiaries as of the dates and for the periods indicated, except, in the case
of unaudited interim consolidated financial statements, as permitted by Form
10-Q. The consolidated balance sheet of Parent and its Subsidiaries as at March
31, 2002, including the notes thereto, is hereinafter referred to as the "Parent
Balance Sheet."

            4.5 No Undisclosed Liabilities. Parent has no Liabilities, other
than (i) Liabilities that are fully reflected or provided for on, or disclosed
in the notes to, the Parent Balance Sheet, (ii) obligations of parent under this
Agreement, (iii) Liabilities incurred in the ordinary course of business since
the date of the Parent Balance Sheet, none of which individually or in the
aggregate has had or could reasonably be expected to result in a Parent Material
Adverse Effect and (iv) Liabilities expressly disclosed on the Parent Disclosure
Schedule.

            4.6 ABSENCE OF CHANGES. Except as disclosed in the Parent Reports,
since the date of the Parent Balance Sheet, Parent has not suffered any Parent
Material Adverse Effect, nor has there occurred or arisen any event, condition
or state of facts of any character that could reasonably be expected to result
in a Parent Material Adverse Effect. Without limiting the generality of the
foregoing and without intending to establish any standard for determination of a
Parent Material Adverse Effect, since the date of the Parent Balance Sheet,
Parent has not, except for the transactions expressly contemplated by this
Agreement: (a) made any declaration, setting aside or payment of any dividend or
distribution in respect of the shares of its capital stock or any redemption,
purchase or other acquisition of any of its securities, or (b) entered into any
agreement to take any of the actions described in this Section 4.6.

            4.7 LITIGATION AND AUDITS. Except as disclosed in the Parent
Reports, there (a) is no investigation by any Governmental Entity with respect
to Parent pending or, to the knowledge of the Parent, threatened, nor, to the
knowledge of Parent, has any Governmental Entity indicated to Parent an
intention to conduct the same; (b) is no claim, action, suit, arbitration or
proceeding pending or, to the knowledge of Parent, threatened against or
involving Parent, or any of its assets or properties, at law or in equity, or
before any arbitrator or Governmental Entity; and (c) are no judgments, decrees,
injunctions or orders of any Governmental Entity or arbitrator

                                      -32-
<PAGE>

outstanding against Parent; except in the case of each of (a), (b) and (c)
above, that, alone or in the aggregate, would not or could not be reasonably be
expected to have a Parent Material Adverse Effect.

            4.8 ACCOUNTING SYSTEM. Parent maintains a system of internal
accounting controls sufficient to provide reasonable assurance that (a)
transactions are executed in accordance with management's general or specific
authorizations; (b) transactions are recorded as necessary to permit preparation
of financial statements in conformity with GAAP and to maintain asset
accountability; (c) access to assets is permitted only in accordance with
management's general or specific authorization; and (d) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.

            4.9 Full Disclosure. This Agreement does not contain any untrue
statement by the Parent of a material fact or omit to state a material fact
necessary to be stated to make the statements by the Parent contained herein not
false or misleading.

            4.10 NO REPRESENTATION REGARDING TAX EFFECTS. Each Shareholder is
responsible for examining the Tax effects of the Merger and the transactions
contemplated hereby, and is advised to retain a competent tax professional to
advise him with respect to such Tax effects in his individual case. Parent makes
no representation or warranty whatsoever with respect to such Tax effects on any
Person.

                                    ARTICLE 5

                              ADDITIONAL AGREEMENTS

            5.1 EXPENSES. Except as otherwise expressly set forth herein, all
expenses, costs and fees incurred in connection with the negotiation,
preparation or performance of this Agreement and the consummation of the
transactions contemplated hereby (including all expenses, costs, fees and
disbursements attorneys, consultants, investment bankers and other financial
advisors, brokers and finders, and accountants) shall be paid by the party
incurring such expenses, whether or not the Merger shall be consummated.

            5.2 NON-DISCLOSURE. All information delivered to or obtained by or
on behalf of any party to this Agreement shall be held pursuant to the Letter
Agreement by and between the Parent and the Company dated January 3, 2002.

            5.3 REGISTRATION AGREEMENT. At the Closing, Parent, the
Shareholders, acting through the Shareholders' Representative, and the
Shareholders' Representative shall enter into a Registration Rights Agreement
(the "Registration Agreement") substantially in the form of Exhibit C.

            5.4 EMPLOYEES.

                  (a) Prior to the Closing, the Company shall use commercially
reasonable efforts to cooperate with Parent in granting access to employees of
the Company for employment interviews at such time and in such manner as Parent
and the Company shall reasonably

                                      -33-
<PAGE>

determine. At least five (5) business days before the expected Closing, Parent
shall deliver written notice to the Company identifying the employees of the
Company Parent proposes to retain as employees of the Surviving Corporation from
and after the Effective Time. The employees of the Company who are offered
continued employment by the Surviving Corporation and who agree to continue
their employment with the Surviving Corporation after the Closing shall be
referred to as the "Retained Employees."

                  (b) Unless otherwise required by applicable law to provide
greater compensation and benefits, the Retained Employees shall for a period of
one year following the Effective Time be entitled to receive compensation and
benefits equivalent in the aggregate with those received by employees of Parent
having similar responsibilities, payable in a manner consistent with Parent's
normal business practices. The Retained Employees will be required to execute
Parent's standard paperwork, including, without limitation, Parent's current
form of intellectual property, non-competition and non-solicitation agreement;
provided, however, that Retained Employees based in the United Kingdom will not
be required to execute such paperwork as a condition of employment with Parent
if such a condition is prohibited by United Kingdom law.

                  (c) For purposes of any employee benefit plans, programs and
policies of Parent in which they become participants, the Retained Employees
shall be given credit for all service with the Company or its subsidiaries (and
service credited by Company or such subsidiary), substantially to the same
extent as if such service had been rendered as employees of Parent. To the
extent permitted by the terms of the applicable Parent plans and applicable
laws, Parent shall (i) waive limitations as to preexisting conditions,
exclusions and waiting periods with respect to participation and coverage, and
(ii) provide credit for any co-payments and deductibles paid prior to the
Effective Time in satisfying any applicable deductible or out-of-pocket
requirements under any benefit plans of Parent.

                  (d) Except as otherwise required by applicable law, the terms
of this Section shall not obligate the Parent to offer continued employment to
any employee of the Company before or after the Closing or entitle any employee
of the Company to remain in the employment of the Company or become employed by
the Parent, affect the right of the Company to terminate any employee at any
time, or affect the right of the Parent to establish, modify or terminate any
employee benefit plan or any benefit under any such plan at any time.

            5.5 TRANSACTION BONUS AGREEMENTS.

                  The Company has adopted a Transaction Bonus Plan (the
"Transaction Bonus Plan") which amends and restates the Company's Management
Retention Bonus Plan previously established by the Company to retain key
management personnel during the search and negotiation and after the
consummation of a change of control transaction, and each employee (each an
Executive and collectively the "Executives") who is a participant in the
Transaction Bonus Plan will enter into a Transaction Bonus Agreement in
substantially the form of Exhibit D (collectively, the "Transaction Bonus
Agreements"). Subject to Section 2.7 and the remainder of this paragraph, Parent
will provide for the payment by the Company to such Executives transaction
bonuses in the aggregate amount of $3,500,000 (the "Transaction Bonus Amount").
Two Million Two Hundred Forty Thousand Dollars ($2,240,000) of the Transaction
Bonus

                                      -34-
<PAGE>
Amount will be paid at the Closing to the Executives in the amounts set forth on
Schedule 5.5 and Five Hundred Sixty Thousand Dollars ($560,000) of the
Transaction Bonus will be placed in escrow in accordance with Section 2.7(b).
Payment of the remaining Seven Hundred Thousand ($700,000) of the Transaction
Bonus Amount (the "Earn Out Amount"), will be contingent upon Revenues (as
defined below) reaching certain thresholds during the following periods (each an
"Earn Out Period"), as follows:

            (i) if $5,000,000 or more in Revenues is achieved between the date
of Closing and September 30, 2002, 100% of the Earn Out Amount will be paid, and
clauses (ii) through (iv) below will be inapplicable;

            (ii) if $3,000,000 or more but less than $5,000,000 in Revenues is
achieved between the date of Closing and September 30, 2002, 60% of the Earn Out
Amount will be paid;

            (iii) if the sum of Revenues achieved between October 1, 2002 and
December 31, 2002 plus Revenues achieved between the date of Closing and
September 30, 2002 in excess of $3,000,000 equals at least $1,000,000 but less
than $2,000,000, 20% of the Earn Out Amount will be paid; and

            (iv) if the sum of Revenues achieved between October 1, 2002 and
December 31, 2002 plus Revenues achieved between the date of Closing and
September 30, 2002 in excess of $3,000,000 equals or exceeds $2,000,000, an
additional 20% of the Earn Out Amount will be paid.

            Payments of the Earn Out Amount, if any, in respect of any Earn Out
Period shall be made within five business days following the date that Parent's
independent public accountants complete its quarterly review or audit, as the
case may be, and such audit or review shows that such Earn Out Amount is
achieved. In connection with payments of the Earn Out Amount, 80% of each such
payment shall be paid to the Executives in the proportions set forth on Schedule
5.5, and 20% of each such payment will be placed in escrow in accordance with
Section 2.7(b).

            For purposes of this Section, "Revenue" means revenue of the Company
determined in accordance with GAAP and recognized by the Parent attributable to
sales of new software licenses of the Company's products, plus the amount of the
first year's maintenance fees attributable to such new licenses. If Parent
shall, prior to December 31, 2002, (1) cease to offer for sale or announce that
it will no longer provide support for the products of the Company, (2) reduce
the number of full-time direct sales representatives employed by the Company or
the Parent who devote all or substantially all of their activities as an
employee to selling the Company's products to fewer than four (4) persons, (3)
cease to provide support at an executive level for the marketing and sale of the
Company's products, (4) cease to position the Company's products as part of the
Parent's strategic portfolio of products, (5) cease to provide or announce that
it will no longer provide support for any current platform for the products of
the Company, (6) fire without cause any of the Principal, John deWit, Werner
Knoblich, Rachel Cassidy or Hector Nevarez that are employed by Parent after the
Merger (other than as agreed with such person prior to or contemporaneously with
the Closing), (7) refuse to honor the terms of any existing proposals made on
commercially reasonable terms by the Company to potential

                                      -35-
<PAGE>
customers, (8) act unreasonably in the negotiation of the final terms with
potential customers with the purpose of frustrating the closing of new license
transactions or (9) otherwise act in bad faith in order to avoid paying the all
or part of the Earn Out Amount pursuant to this Section 5.5 (each an "Earn Out
Acceleration Event"), then, notwithstanding the failure of the Company to
achieve the minimum Revenues specified for any such period, within ten business
days of the occurrence of such Earn Out Acceleration Event, and only if and to
the extent that such Earn Out Acceleration Event(s) demonstrably contributed to
the failure to achieve the applicable Revenue threshold, Parent will pay 100% of
the Earn Out Amount; provided, that if the Earn Out Acceleration Event occurs
after September 30, 2002, only 40% of the Earn Out Amount will be paid pursuant
to this clause.

            5.6   RESIGNATIONS. Each member of the board of directors of the
Company shall resign as a director of the Company, effective as of the Effective
Time. Each officer of the Company shall resign as an officer, effective as of
the Effective Time.

            5.7   PUBLIC ANNOUNCEMENTS. No party to this Agreement shall issue
any press release or make any public announcement relating to the terms of this
Agreement prior to the Effective Time without the prior approval of the other
parties hereto (which approval shall not be unreasonably withheld); PROVIDED,
HOWEVER, that any party to this Agreement may make any public disclosure it
believes in good faith is required by applicable law or any listing agreement
concerning its publicly-traded securities (in which case the disclosing party
will use its reasonable best efforts to advise the other parties prior to making
the disclosure).

            5.8   FURTHER ASSURANCES. Subject to terms and conditions herein
provided, each of the parties, severally and not jointly, agree to use all
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the Merger and the other
transactions contemplated by this Agreement. Without limiting the generality of
the foregoing, Parent and the Company each, severally and not jointly, will use
all reasonable efforts to obtain all approvals, authorizations, consents and
waivers from, and give all notices to, any public or private third parties that
are necessary on its, his or her part in order to effect the transactions
contemplated hereby.

            5.9   Directors' and Officers' Insurance; Indemnification.

                  (a) Parent agrees to maintain in effect in accordance with
their terms all rights to indemnification in respect of acts or omissions
occurring prior to the Effective Time that now exist in favor of current or
former officers or directors of the Company as provided in the certificate of
incorporation or bylaws of the Company as in effect on the date of this
Agreement.

                  (b) For a period of three years after the Effective Time, the
Surviving Corporation shall maintain in effect, if available, directors' and
officers' liability insurance (the "Tail Policy") covering those persons who are
currently covered by the Company's directors' and officers' liability insurance
policy (a copy of which has been made available to Parent) on terms comparable
to those now applicable to directors and officers of the Company with respect to
any occurrence prior to the closing; provided, however, that in no event shall
the Surviving Corporation be required to expend in excess of $100,000 for such
coverage, and that if the

                                      -36-
<PAGE>
premium for such coverage exceeds such amount, the Surviving Corporation shall
purchase a policy with the largest policy limit available for $100,000.

            5.10  COMERICA BANK LINE. Prior to the Closing, the Company shall
pay in full all outstanding amounts owed under its Loan and Security Agreement
between Comerica Bank - California, successor in interest to Imperial Bank, and
the Company as amended to April 20, 2001 (the "Comerica Bank Line"). The Company
and the Parent shall cooperate in good faith and use their commercially
reasonable efforts to have the letter of credit issued by Comerica Bank on
behalf of the Company to secure the obligations of the Company under the
Washington Real Estate Investment Trust Office Building Lease by and between
WRIT Limited Partnership and the Company terminated and released as security for
such obligations. Parent will assume the obligations of the Company under that
certain Warrant to Purchase Stock dated April 20, 2001 issued to Comerica Bank -
California, successor in interest to Imperial Bank, by the Company, to the
extent that it is still outstanding at the Effective Time.

            5.11  401 K. The Company shall terminate its 401 K Plan prior to the
Closing.

            5.12  TAXABLE TRANSACTION. It is intended by the parties hereto that
the Merger shall constitute a taxable transaction and shall not constitute a
tax-free reorganization within the meaning of Section 368 of the Code. Each
party hereto agrees not to take any position contrary to such intention with any
Government Entity, including, without limitation, on any Tax returns or other
filings. In connection therewith, for a period of two years, Parent agrees to
take (or refrain from taking) such actions as may be requested by the
Shareholders' Representative and that as confirmed by the Parent's tax advisors
are reasonably necessary to cause the Merger not to constitute a taxable
transaction. In particular, Parent hereby agrees to maintain the Company as a
third tier (or lower) subsidiary in Parent's corporate organizational structure
for such two-year period. For purposes of this Agreement, a "third tier"
subsidiary means a subsidiary that is held by a corporation through two
intermediate holding corporations above such subsidiary and below the parent
corporation.

            5.13 SHAREHOLDER APPROVAL. The Company agrees to use reasonable
efforts to obtain the approval of the holders of a majority of the shares of
Company Common Stock (after giving effect to the Recapitalization), excluding
shares held by any holder of Common Stock who prior to the Recapitalization was
a holder of a Subordinated Note.

                                    ARTICLE 6

                              CONDITIONS PRECEDENT

            6.1   CONDITIONS PRECEDENT TO THE OBLIGATIONS OF EACH PARTY. The
obligations of the parties hereto to effect the Merger shall be subject to the
fulfillment at or prior to the Closing of the following conditions:

                  6.1.1 NO INJUNCTION. No injunction or restraining or other
order issued by a court of competent jurisdiction that prohibits or materially
restricts the consummation of the Merger or the other transactions contemplated
hereby shall be in effect (each party agreeing to use all reasonable efforts to
have any injunction or other order immediately lifted), and no action or
proceeding shall have been commenced or threatened in writing seeking any
injunction or
                                      -37-
<PAGE>
restraining or other order that seeks to prohibit, restrain, invalidate or set
aside consummation of the Merger or any of the other transactions contemplated
hereby.

                  6.1.2 ILLEGALITY. There shall not have been any action taken,
and no statute, rule or regulation shall have been enacted, by any state or
federal government agency that would prohibit or materially restrict the
consummation of the Merger or the other transactions contemplated hereby.

                  6.1.3 REGISTRATION AGREEMENT. Parent, the Shareholders and the
Shareholders' Representative shall have entered into the Registration Agreement
as contemplated by Section 5.3 hereof.

                  6.1.4 REQUIRED APPROVALS; RECAPITALIZATION. The Required
Approvals shall have been obtained, the Certificate of Amendment shall have been
filed and accepted by the Delaware Secretary of State, and the Recapitalization
shall have been completed.

            6.2   CONDITIONS PRECEDENT TO OBLIGATION OF PARENT AND MERGER SUB TO
EFFECT THE MERGER. The obligation of Parent and Merger Sub to effect the Merger
shall be subject to the fulfillment at or prior to the Closing of the following
additional conditions:

                  6.2.1 LEGAL OPINION. Parent and Merger Sub shall have received
opinions of counsel to the Company reasonably satisfactory to Parent with
respect to matters customarily addressed by legal counsel in connection with
transactions of the type contemplated by this Agreement.

                  6.2.2 CLOSING DOCUMENTS. The Company and the Shareholders
shall have delivered to Parent and Merger Sub such closing documents as Parent
shall reasonably request (other than additional opinions of counsel), including
without limitation copies of consent actions or other documentation reasonably
satisfactory to Parent evidencing the requisite approval of this Agreement and
the transactions contemplated hereunder by the Company's board of directors and
its shareholders.

                  6.2.3 TRANSACTION BONUS AGREEMENTS. The Company and each of
the Executives shall have entered into the Transaction Bonus Agreement as
contemplated by Section 5.5 hereof.

                  6.2.4 RESIGNATIONS. Parent shall have received the written
resignations of the officers and directors of the Company as contemplated by
Section 5.6 hereof.

                  6.2.5 THIRD PARTY CONSENTS. All third party consents or
approvals listed in Section 3.18 of the Company Disclosure Schedule shall have
been obtained by the Company and shall be effective and shall not have been
suspended, revoked, or stayed by action of any such third party.

                  6.2.6 PAYMENT OF BANK AND LEASE LINE. The Company shall have
satisfied and paid in full all of its obligations under the Comerica Bank Line.

                                      -38-
<PAGE>
                  6.2.7 Dissenting Company Shareholders. The aggregate number of
shares of Common Stock held by Dissenting Shareholders, if any, shall not exceed
5% of the total number of shares of Common Stock outstanding immediately prior
to the Effective Time.

                  6.2.8 401 K. The Company shall have teminated its 401 K Plan.

            6.3   Conditions to Obligations of the Company and the Principal to
Effect the Merger. The obligation of the Company and the Principal to effect the
Merger shall be subject to the fulfillment at or prior to the Closing of the
following additional conditions:

                  6.3.1 LEGAL OPINION. The Company shall have received opinions
from counsel to Parent and Merger Sub reasonably satisfactory to Parent with
respect to matters customarily addressed by legal counsel in connection with
transactions of the type contemplated by this Agreement.

                  6.3.2 REGISTRATION AGREEMENT. Parent shall have executed and
delivered the Registration Agreement to the Shareholders' Representative and
each Shareholders that will receive shares of Parent Stock in the Merger.

                  6.3.3 PAYMENT OF CASH CONSIDERATION. Company shall have
received a wire transfer of immediately available funds from Parent in an amount
equal to Two Million Two Hundred Forty Thousand Dollars ($2,240,000) which is to
be paid at Closing by the Company to the Executives pursuant to Section 5.5.

                  6.3.4 ACKNOWLEDGMENT OF TAX AGREEMENT. Parent shall have
acknowledged the MainControl, Inc. Agreement Regarding Taxes to be entered into
between the Company and the Principal in the form agreed by Parent, the Company
and the Principal.

                  6.3.5 CLOSING DOCUMENTS. Parent and Merger Sub shall have
delivered to the Company such closing documents as the Company shall reasonably
request (other than additional opinions of counsel).

                                    ARTICLE 7

                                   TERMINATION

            7.1   TERMINATION.

                  This Agreement may be terminated prior to the Effective Time:

                        (a) by mutual written consent of Parent and the Company;

                        (b) by either Parent or the Company if the Merger shall
                  not have been consummated by the date which is 180 days after
                  the date of this Agreement (the "Termination Date") (unless
                  the failure to consummate the Merger is attributable to a
                  failure on the part of the party seeking to terminate this
                  Agreement to perform any material obligation required to be
                  performed by such party at or prior to the Termination Date);
                  or
                                      -39-
<PAGE>
                        (c) by either Parent or the Company if a court of
                  competent jurisdiction or other Government Entity shall have
                  issued a final and nonappealable order, decree or ruling, or
                  shall have taken any other action, having the effect of
                  permanently restraining, enjoining or otherwise prohibiting
                  the Merger.

            7.2   Effect of Termination. Neither party shall have any liability
to the other in the event this Agreement is terminated under Section 7.1, and
each party shall be solely responsible for its or his own costs and expenses
incurred in connection with the negotiation and preparation of this Agreement
and the transactions contemplated hereunder. If this Agreement is terminated
under Section 7.1, the provisions of this Section 7.2 and Sections 5.1, 5.2,
9.3, 9.4 and 9.5 shall remain in full force and effect and survive the
termination of this Agreement.

                                    ARTICLE 8

                  INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS

            8.1   AGREEMENT TO INDEMNIFY.

                  8.1.1 PARENT CLAIMS. Subject to the terms and conditions of
this Article 8, each Shareholder, by virtue of the Merger and his receipt of any
Merger Consideration, and the Principal, hereby jointly and severally agree
(without any right of contribution from the Company or the Surviving Corporation
or any right of indemnification against the Company or the Surviving
Corporation) to indemnify, defend and hold harmless Parent and each of its
Subsidiaries and each of their respective directors, officers, agents and
Affiliates (collectively, the "Parent Group") from and against any out-of-pocket
loss, liability, damage, cost or expense (including reasonable attorneys' fees
and disbursements and including amounts paid as deductibles under the Tail
Policy) suffered, incurred or paid by any member of the Parent Group
(collectively, all such amounts are hereinafter referred to as "Parent Claims")
which arise out of or are attributable to any of the following:

                        (a) failure of any of the representations, warranties,
                  covenants and agreements of the Company and the Principal
                  contained in this Agreement including the Company Disclosure
                  Schedule or in any other agreement, certificate or other
                  document among or between the parties contemplated by or
                  referred to herein (with respect to representations and
                  warranties) to be true, complete and correct in all material
                  respects or (with respect to covenants and agreements) fully
                  performed and fulfilled in all material respects;

                        (b) the Company's failure to pay Taxes in any
                  jurisdiction prior to the date hereof (regardless of any
                  disclosure thereof herein) ("Tax Claims");

                        (c) the assertion by any stockholder of the Company of
                  any claim, or institution by any such stockholder of any
                  action or proceeding, which arises out of the issuance and
                  sale of the Subordinated Notes, the Recapitalization or the
                  merger or the transactions contemplated hereby (excluding any
                  proceeding for appraisal of such stockholder's shares pursuant
                  to Section 262 of the Act); or

                                      -40-
<PAGE>
                        (d) any fraud or any fraudulent misrepresentation
                  committed by the Company, a Shareholder or the Principal in
                  connection with the transactions contemplated by this
                  Agreement ("Fraud Claims").

                  8.1.2 BENEFIT OF PARENT GROUP. With respect to any member of
the Parent Group other than Parent, the Shareholders, the Shareholders'
Representative and the Principal acknowledge and agree that Parent is
contracting on its own behalf and for such member and Parent shall obtain and
hold the rights and benefits provided for in this Section 8.1 in trust for and
on behalf of such member.

            8.2   SURVIVAL. All representations, warranties, covenants and
agreements made by any party in this Agreement or any certificate or other
writing delivered pursuant hereto or in connection herewith shall survive the
Closing and any investigation at any time made by or on behalf of any other
party for a period of one year from the Closing Date, provided, however, that
the representations and warranties set forth in Sections 3.10, 3.17 and 3.25
shall survive the Closing and any investigation at any time made by or on behalf
of any other party for a period of two years from the Closing;

            8.3   LIMITATION OF SHAREHOLDERS' AND PRINCIPAL'S LIABILITY FOR
CERTAIN PARENT CLAIMS.  The obligations and liabilities of the Shareholders and
the Principal hereunder with respect to indemnification for Parent Claims shall
be subject to the following limitations:

                        (a) All Parent Claims against any Shareholder or the
                  Principal shall be made exclusively against the Escrow Fund
                  except with respect to Fraud Claims. None of the Shareholders
                  or the Principal shall have any liability under or arising out
                  of the terms of this Agreement except as set forth in the
                  immediately preceding sentence. No Parent claims may be
                  brought against the Section 3.25 Escrow Account except for
                  Parent Claims pursuant to Article 8 solely relating to or
                  arising out of any inaccuracy in the representations in
                  Section 3.25 or Schedule 3.25.

                        (b) No indemnification shall be required to be made by
                  the Shareholders or the Principal hereunder and no Parent
                  Claims may be brought against the Escrow Fund unless the
                  amount of Parent Claims exceeds $100,000 in the aggregate, in
                  which case the Shareholders' and the Principal's
                  indemnification obligations shall apply to all Parent Claims
                  without regard to such threshold.

                        (c) For purposes of determining the amount of property
                  recoverable from the Escrow Fund sufficient to satisfy a
                  Parent Claim subject to indemnification hereunder, the value
                  of a share of Parent Stock shall be equal to the
                  Indemnification Value. For purposes hereof, "Indemnification
                  Value" means (i) with respect to any recovery hereunder
                  determined by arbitration proceeding, the average of the
                  prices at which the Parent Stock last traded on each of the
                  twenty trading days immediately preceding the date of the
                  award from such proceeding, as such prices are reported on the
                  Nasdaq National Market, (ii) in the case of a recovery
                  hereunder determined by written agreement between Parent and
                  the Shareholders' Representative, the average of the prices at
                  which the Parent Stock last traded on each of the twenty
                  trading days immediately preceding the date of such agreement,
                  as such prices are reported on the Nasdaq National

                                      -41-
<PAGE>
                  Market, and (iii) in the case of a recovery hereunder where
                  the Shareholders' Representative is deemed not to dispute the
                  Parent Claim or the amount of the recovery because the
                  Shareholders' Representative has not responded as provided in
                  Section 8.4.2, the average of the prices at which the Parent
                  Stock last traded on each of the twenty trading days
                  immediately preceding the date that is 45 days after the
                  Shareholders' Representative and the Escrow Agent were given
                  notice of such Parent Claim pursuant to Section 8.4.1 and the
                  Escrow Agreement, as such prices are reported on the Nasdaq
                  National Market.

                        (d) With respect to Parent Claims arising out of or
                  relating to Fraud Claims, only those Shareholders or
                  Principals who are responsible for such Fraud Claims shall be
                  liable for indemnification hereunder in excess of the Escrow
                  Fund.

                        (e) No Parent Claims may be brought against the Escrow
                  Fund for any Tax imposed on or incurred by the Company as a
                  result of an election made under Section 338(g) of the Code by
                  Parent or its Affiliates with respect to the Merger. None of
                  the Shareholders or the Principal shall have any liability
                  arising out of or as a result of any Tax imposed on or
                  incurred by the Company as a result of an election made under
                  Section 338(g) of the Code by Parent or its Affiliates with
                  respect to the Merger.

            8.4   PROCESS OF INDEMNIFICATION FOR PARENT CLAIMS.

                  8.4.1 RECOVERY BY PARENT. In seeking to collect the amount of
any Parent Claim that a member of the Parent Group has established and is
entitled to indemnification for hereunder, Parent shall first give the
Shareholders' Representative and the Escrow Agent written notice of such Parent
Claim. Such notice shall contain a brief summary of the basis for the Parent
Claim. If the Shareholders' Representative does not dispute the basis or amount
of any Parent Claim within 45 days of receiving written notice thereof, Parent
shall have the right promptly to recover indemnity as and to the extent provided
herein. If the Shareholders' Representative disagrees with the basis of the
Parent Claim or the amount of damages caused thereby, then within 45 days of
receiving written notice thereof, the Shareholders' Representative shall give
notice to Parent of such disagreement and, in that case, Parent shall have no
right to recover indemnity hereunder until such time, if at all, as (a) an
arbitrator has issued a decision from an arbitration proceeding completed
pursuant to the Escrow Agreement (subject to the limitations contained in
Article 8) or (b) Parent and the Shareholders' Representative agree in writing
to the amount of Parent's recovery, in which case Parent shall have the right
promptly to recover the amount so agreed.

                  8.4.2 THIRD-PARTY PARENT CLAIMS. Parent agrees to notify the
Shareholders' Representative promptly of any Parent Claims asserted by third
parties that, in the opinion of Parent, are reasonably likely to give rise to
indemnification hereunder ("Third-Party Parent Claims"). Parent shall permit the
indemnifying party or parties to assume the defense of any such Third-Party
Parent Claim, provided that counsel for the indemnifying parties, who shall
conduct the defense of such Third-Party Parent Claim, shall be subject to the
approval of Parent (whose approval shall not be unreasonably withheld). Parent
may participate in such defense at its own expense; provided, however, that the
indemnifying parties shall pay such expense if Parent shall have reasonably
concluded that there is a substantial probability of a conflict

                                      -42-
<PAGE>
between the positions of the indemnifying parties and Parent in conducting the
defense of any such Third-Party Parent Claim or that there may be legal defenses
available to it that are different from or additional to those available to the
indemnifying parties. Parent agrees that it will not settle any Third-Party
Parent Claims without the consent of the Shareholders' Representative, which
consent shall not be unreasonably withheld or delayed. Parent further agrees
that if the Shareholders' Representative wishes to enter into a settlement with
respect to a Third-Party Parent Claim on terms reasonably acceptable to Parent,
Parent will cooperate in such settlement, provided that such settlement
includes, as an unconditional term thereof, the giving by the third party to
Parent of a release from all liability in respect of such Third-Party Parent
Claim.

                                    ARTICLE 9

                                  MISCELLANEOUS

            9.1   AMENDMENTS AND SUPPLEMENTS. This Agreement may not be amended,
modified or supplemented by the parties hereto in any manner, except by an
instrument in writing signed by Parent, the Company, the Principal and the
Shareholders' Representative.

            9.2   WAIVER. The terms and conditions of this Agreement may be
waived only by a written instrument signed by the party waiving compliance. The
failure of any party hereto to enforce at any time any of the provisions of this
Agreement shall in no way be construed to be a waiver of any such provision, nor
in any way to affect the validity of this Agreement or any part hereof or the
right of such party thereafter to enforce each and every such provision. No
waiver of any breach of or non-compliance with this Agreement shall be held to
be a waiver of any other or subsequent breach or non-compliance. The rights and
remedies herein provided are cumulative and are not exclusive of any rights or
remedies that any party may otherwise have at law or in equity.

            9.3   GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced in accordance with, the substantive laws of The
Commonwealth of Massachusetts, without regard to its principles of conflicts of
laws. The parties agree to submit to the exclusive jurisdiction of any state or
federal court located in The Commonwealth of Massachusetts with respect to any
dispute that arises under this Agreement or in connection with the transactions
contemplated hereby.

            9.4   NOTICE. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered by hand, sent by facsimile
transmission with confirmation of receipt, sent via a reputable overnight
courier service with confirmation of receipt requested, or mailed by registered
or certified mail (postage prepaid and return receipt requested) to the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice), and shall be deemed given on the date on which
delivered by hand or otherwise on the date of receipt as confirmed:

            TO PARENT OR MERGER SUB:

                  MRO Software, Inc.
                  100 Crosby Drive
                  Bedford, Massachusetts  01730
                  Facsimile:  (781) 280-2206
                  Attn:  Craig Newfield, Esq.

                                      -43-
<PAGE>
            With a copy to:

                  Robert W. Sweet, Jr., Esq.
                  Foley, Hoag & Eliot LLP
                  One Post Office Square
                  Boston, Massachusetts 02109
                  Facsimile:  (617) 832-7000

            TO THE COMPANY:

                  MainControl, Inc.
                  7900 Westpark Drive, Suite T500
                  McLean, Virginia 22102
                  Facsimile:  (703) 749-7980
                  Attn:  Alex Pinchev

            If the notice is prior to the Closing, with a copy to:

                  Steven M. Kaufman, Esq.
                  Hogan & Hartson L.L.P.
                  555 13th Street, N.W.
                  Washington, D.C. 20008
                  Facsimile: (202) 637-5910

            TO THE PRINCIPAL:

                  Mr. Alex Pinchev
                  1119 Waverly Way
                  McLean, Virginia  22101
                  Facsimile: (703) 790-9781

            TO THE SHAREHOLDERS' REPRESENTATIVE:

                  Mr. Shai Beilis
                  Chairman
                  Formula Ventures
                  11 Galgalei Haplada
                  P.O. 2072
                  Herzliya 46120 Israel
                  Facsimile: 011-972-9-960-1818

            9.5   ENTIRE AGREEMENT. This Agreement and the letter agreement
referenced in Section 5.2 and the documents and instruments and other agreements
among the parties hereto as contemplated by or referred to herein constitute the
entire agreement among the parties with respect to the subject matter hereof and
supersede all other prior agreements and understandings,

                                      -44-
<PAGE>
both written and oral, between the parties with respect to the subject matter
hereof. Each party hereto acknowledges that, in entering into this Agreement and
completing the transactions contemplated hereby, such party is not relying on
any representation, warranty, covenant or agreement not expressly stated in this
Agreement or in the agreements, certificates and other documents among or
between the parties contemplated by or referred to herein.

            9.6   BINDING EFFECT; ASSIGNABILITY. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. This Agreement is not intended to confer upon any person
other than the parties hereto and members of the Parent Group (and such parties'
and members' respective successors and assigns) any rights or remedies
hereunder, except as otherwise expressly provided herein. Neither this Agreement
nor any of the rights and obligations of the parties hereunder shall be assigned
or delegated, whether by operation of law or otherwise, without the written
consent of all parties hereto, except that certain rights and obligations of
Merger Sub and the Company may be assigned and delegated to the Surviving
Corporation as a result of the Merger without any further consent hereunder.

            9.7   VALIDITY. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, each of which shall remain in full force and
effect.

            9.8   PREVAILING PARTY. In the event a party hereto (a "Charging
Party") brings a claim in litigation against another party hereto (a "Defending
Party") relating to or arising out of this Agreement, and a court of competent
jurisdiction issues a final, non-appealable order specifying that the Charging
Party has not prevailed on any part of such claim, then the Charging Party shall
pay to the Defending Party the reasonable costs and expenses (including
reasonable attorneys' fees and disbursements) of the Defending Party in
defending such claim.

            9.9   COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which together shall constitute one and the same agreement.

                                    * * * * *

                                      -45-
<PAGE>

            IN WITNESS WHEREOF, the parties have caused this Agreement and Plan
of Merger to be executed as an agreement under seal as of the date first above
written.

                                       MRO SOFTWARE, INC.

                                       By: _____________________________________
                                           Title:

                                       CAPRI ACQUISITION CORP.

                                       By: _____________________________________
                                           Title:

                                       MAINCONTROL, INC.

                                       By: _____________________________________
                                           Alex Pinchev, Chief Executive Officer

                                           _____________________________________
                                           Alex Pinchev

The undersigned hereby acknowledge their appointment as the Shareholders'
Representative hereunder and their willingness to fulfill the duties of the
Shareholders' Representatives as contemplated by this Agreement.

                                           _____________________________________
                                           Shai Beilis

                                      -46-
<PAGE>

                                LIST OF EXHIBITS

EXHIBIT                 DESCRIPTION
-------                 -----------

  A                     Form of Certificate of Merger
  B                     Form of Escrow Agreement
  C                     Form of Registration Agreement
  D                     Form of Transaction Bonus Agreement

                                      -47-MLA No

Exhibit

10.27

 

MLA No. Z269

 

MASTER LOAN AGREEMENT

 

THIS MASTER LOAN AGREEMENT is entered into as of March 31, 2000,

between CoBANK, ACB  (“CoBank”, successor by merger to the St.

Paul Bank for Cooperatives) and AMERICAN CRYSTAL SUGAR COMPANY, Moorhead,

Minnesota  (the “Company”).

 

BACKGROUND

 

On March 5, 1999,

the St. Paul Bank for Cooperatives (“SPB”) entered into a Seasonal Loan

Agreement (the “Seasonal Loan Agreement”) and a Term Loan Agreement (the “Term

Loan Agreement”) (collectively, the “Existing Loan Agreements”) with the

Company.  Under the Seasonal Loan

Agreement, SPB made various seasonal loans to the Company, each of which was

evidenced by a promissory note.  Under the

Term Loan Agreement, SPB made various term loans, each of which was also evidenced

by a promissory note.  Subsequently, SPB

merged with and into CoBank.  CoBank and

the Company now desire to amend and restate the Existing Loan Agreements and

consolidate the Existing Loan Agreements into this Master Loan Agreement.  CoBank and the Company also desire to amend

and restate the promissory notes evidencing the seasonal loans and term loans

made pursuant to the Existing Loan Agreements by entering into various

Supplements in place of the promissory notes. 

Each Supplement will set forth the amount of the loan, the purpose of

the loan, the interest rate or rate options applicable to that loan, the

repayment terms of the loan, and any other terms and conditions applicable to

that particular loan.  Each loan will be

governed by the terms and conditions contained in this Master Loan Agreement

and in the Supplement relating to the loan. 

Collateral securing loans made pursuant to the Existing Loan Agreements

shall continue to secure those same loans, all as now evidenced by various

Supplements, to the same extent as provided for in the Existing Loan Agreements

and any security agreements (including, without limitation, mortgages and deeds

of trust) entered into in connection therewith.

 

SECTION 1.   Supplements.  In addition to those Supplements entered

into to amend and restate the promissory notes executed in connection with the

Existing Loan Agreements, the parties may enter into other Supplements in order

to evidence new loans that CoBank may make to the Company.  Each Supplement will set forth the amount of

the loan, the purpose of the loan, the interest rate or rate options applicable

to that loan, the repayment terms of the loan, and any other terms and

conditions applicable to that particular loan. 

Each loan will be governed by the terms and conditions contained in this

Master Loan Agreement and in the Supplement relating to the loan.

 

SECTION 2.   Availability.  Loans will be made available on any day

on which CoBank and the Federal Reserve Banks are open for business upon the

telephonic or written request of the Company. 

Requests for loans must be received no later than 12:00 noon Company’s

local time on the date the loan is desired. 

Loans will be made available by wire transfer of immediately available

funds to such account or accounts as may be authorized by the Company. The

Company shall furnish to CoBank a duly completed and executed copy of a CoBank

Delegation and Wire and Electronic Transfer Authorization Form, and CoBank

shall be entitled to rely on (and shall incur no liability to the Company in

acting on) any request or direction furnished in accordance with the terms

thereof.

 

SECTION 3.   Repayment.  The

Company’s obligation to repay each loan shall be evidenced by the promissory

note set forth in the Supplement relating to that loan or by such replacement

note as CoBank shall require.  CoBank

shall maintain a record of all loans, the interest accrued thereon, and all

payments made with respect thereto, and such record shall, absent proof of

manifest error, be conclusive evidence of the outstanding principal and

interest on the loans.  All payments

shall be made by wire transfer of

 

 

immediately available funds or by check.  Wire transfers shall be made to ABA No. 307088754 for advice

to and credit of CoBANK (or to such other account as CoBank may direct by

notice).  The Company shall give CoBank

telephonic notice no later than 12:00 noon Company’s local time of its intent

to pay by wire and funds received after 3:00 p.m. Company’s local time shall be

credited on the next business day. 

Checks shall be mailed to CoBank, Department 167, Denver, Colorado,

80291–0167 (or to such other place as CoBank may direct by notice).  Credit for payment by check will not be

given until the latter of: (a) the day on which CoBank receives immediately

available funds; or (b) the next business day after receipt of the check.

 

SECTION 4.   Capitalization.  The

Company agrees to purchase such equity in CoBank as CoBank may from time to

time require in accordance with its Bylaws. 

However, the maximum amount of equity which the Company shall be

obligated to purchase in connection with any loan may not exceed the maximum

amount permitted by the Bylaws at the time the Supplement relating to that loan

is entered into or such loan is renewed or refinanced by CoBank.

 

SECTION 5.   Security. The Company’s obligations under this

agreement, all Supplements (whenever executed), and all instruments and

documents contemplated hereby or thereby, shall be secured by a statutory first

lien on all equity which the Company may now own or hereafter acquire in

CoBank.  This security shall be in

addition to any other security that may otherwise be required or provided.

 

SECTION 6.   Conditions Precedent.

 

(A)    Conditions

to Initial Supplement.  CoBank’s

obligation to extend credit under the initial Supplement hereto is subject to

the conditions precedent that CoBank receive, in form and substance

satisfactory to CoBank, each of the following:

 

(i)      This

Agreement, Etc.  A

duly executed copy of this agreement and all instruments and documents

contemplated hereby.

 

(ii)     Opinion

of Counsel.  A

favorable opinion from the Company’s counsel addressed to CoBank covering each

matter as CoBank may reasonably require.

 

(iii)    Evidence

of Authority.  Such

certified board resolutions, evidence of incumbency, and other evidence that

CoBank may require that the Supplement, all instruments and documents executed

in connection therewith, and, in the case of initial Supplement hereto, this

agreement and all instruments and documents executed in connection herewith,

have been duly authorized and executed.

 

(B)    Conditions

to Each Supplement.  CoBank’s

obligation to extend credit under each Supplement, including the initial

Supplement, is subject to the conditions precedent that CoBank receive, in form

and content satisfactory to CoBank, each of the following:

 

(i)      Supplement.  A duly executed copy of

the Supplement and all instruments and documents contemplated thereby.

 

(ii)     Fees

and Other Charges.  All fees and other charges specifically permitted by this Master

Loan Agreement or the Supplements, as well as reasonable expenses for outside

counsel.

 

2

 

(iii)    Evidence

of Perfection, Etc.  Such

evidence as CoBank may require that CoBank has a duly perfected first priority

lien on all security for the Company’s obligations, and that the Company is in

compliance with Section 8(D) hereof.

 

(C)    Conditions

to Each Loan.  CoBank’s

obligation under each Supplement to make any loan to the Company thereunder is

subject to the condition that no “Event of Default” (as defined in Section 11

hereof) or event which with the giving of notice and/or the passage of time

would become an Event of Default hereunder (a “Potential Default”), shall have

occurred and be continuing.

 

SECTION 7.   Representations and Warranties.

 

(A)    This

Agreement.  The

Company represents and warrants to CoBank that as of the date of this

Agreement:

 

(i)      Compliance.  The Company is in compliance with all of the terms of

this agreement, and no Event of Default or Potential Default exists hereunder.

 

(B)    Each

Supplement.  The

execution by the Company of each Supplement hereto shall constitute a

representation and warranty to CoBank that:

 

(i)      Applications.  Each representation and warranty and all information

set forth in any application or other documents submitted in connection with,

or to induce CoBank to enter into, such Supplement, is correct in all material

respects as of the date of the Supplement.

 

(ii)     Conflicting

Agreements, Etc.  This

agreement, the Supplements, and all security and other instruments and

documents relating hereto and thereto (collectively, at any time, the “Loan

Documents”),  do not conflict with, or

require the consent of any party to, any other agreement to which the Company

is a party or by which it or its property may be bound or affected, and do not

conflict with any provision of the Company’s bylaws, articles of incorporation,

or other organizational documents.

 

(iii)    Compliance. 

The Company is in compliance with all of the terms of the

Loan Documents (including, without limitation, Section 8(A) of this agreement

on eligibility to borrow from CoBank).

 

(iv)     Binding

Agreement.  The Loan

Documents create legal, valid, and binding obligations of the Company which are

enforceable in accordance with their terms, except to the extent that

enforcement may be limited by applicable bankruptcy, insolvency, or similar

laws affecting creditors’ rights generally.

 

SECTION 8.   Affirmative Covenants.  Unless

otherwise agreed to in writing by CoBank, while this agreement is in effect,

the Company agrees to:

 

(A)      Eligibility.  Maintain its status as an

entity eligible to borrow from CoBank.

 

(B)      Corporate

Existence, Licenses. Etc.  (i)

Preserve and keep in full force and effect its existence and good standing in

the jurisdiction of its incorporation or formation; (ii) qualify and remain

qualified to transact business in all jurisdictions where such qualification is

required; and (iii) obtain and maintain all licenses, certificates, permits,

authorizations, approvals, and the like which are material to the conduct of

its business or required by law, rule, regulation, ordinance, code, order, and

the like (collectively, “Laws”).

 

3

 

(C)    Compliance

with Laws.  Comply in

all material respects with all applicable Laws, including, without limitation,

all Laws relating to environmental protection and any patron or member

investment program that it may have.  In

addition, the Company agrees to cause all persons occupying or present on any

of its properties to comply in all material respects with all environmental

protection Laws.

 

(D)    Insurance.  Maintain insurance with

insurance companies or associations acceptable to CoBank in such amounts and

covering such risks as are usually carried by companies engaged in the same or

similar business and similarly situated, and make such increases in the type or

amount of coverage as CoBank may request. 

All such policies insuring any collateral for the Company’s obligations

to CoBank shall have mortgagee or lender loss payable clauses or endorsements

in form and content acceptable to CoBank. 

At CoBank’s request, all policies (or such other proof of compliance

with this Subsection as may be satisfactory to CoBank) shall be delivered to

CoBank.

 

(E)     Property

Maintenance.  Maintain

all of its property that is necessary to or useful in the proper conduct of its

business in good working condition, ordinary wear and tear excepted.

 

(F)     Books

and Records.  Keep

adequate records and books of account in which complete entries will be made in

accordance with generally accepted accounting principles (“GAAP”) consistently

applied.

 

(G)    Inspection.  Permit CoBank or its

agents, upon reasonable notice and during normal business hours or at such

other times as the parties may agree, to examine its properties, books, and

records, and to discuss its affairs, finances, and accounts, with its

respective officers, directors, employees, and independent certified public

accountants.

 

(H)    Reports

and Notices.  Furnish

to CoBank:

 

(i)      Annual

Financial Statements.  As

soon as available, but in no event more than 120 days after the end of each

fiscal year of the Company occurring during the term hereof, annual financial

statements of the Company prepared in accordance with GAAP consistently

applied.  Such financial statements

shall:  (a) be audited by independent

certified public accountants selected by the Company and acceptable to CoBank;

(b) be accompanied by a report of such accountants containing an opinion

thereon acceptable to CoBank; (c) be prepared in reasonable detail and in

comparative form; and (d) include a balance sheet, a statement of income,

a statement of retained earnings, a statement of cash flows, and all notes and

schedules relating thereto.

 

(ii)     Interim

Financial Statements. As soon as available, but in no event

more than 5 days after the filing with the Securities Exchange Commission,

after the end of each quarter, a balance sheet of the Company as of the end of

such fiscal quarter, a statement of income for the Company for such period and

for the period year to date, and such other interim statements as CoBank may

specifically request, all prepared in reasonable detail and in comparative form

in accordance with GAAP consistently applied.

 

(iii)    Annual

Budgets. As soon as available, but in no event more than  60 days after the end of any fiscal year of

the Company occurring during the term hereof, copies of the Company’s annual

budgets and forecasts of operations.

 

(iv)     Capital

Expenditures Budget:  The

Company will furnish an annual capital expenditure budget, within 60 days after

the end of each fiscal year.  The

Company will also furnish a revised budget if increases over the original

capital expenditure budget are approved by the board of directors.

 

4

 

(v)      Notice

of Default.  Promptly

after becoming aware thereof, notice of the occurrence of an Event of Default

or a Potential Default.

 

(vi)     Notice

of Non-Environmental Litigation.  Promptly

after the commencement thereof, notice of the commencement of all actions,

suits, or proceedings before any court, arbitrator, or governmental department,

commission, board, bureau, agency, or instrumentality affecting the Company

which, if determined adversely to the Company, could have a material adverse

effect on the financial condition, properties, profits, or operations of the

Company.

 

(vii)   Notice

of Environmental Litigation, Etc.  Promptly

after receipt thereof, notice of the receipt of all pleadings, orders,

complaints, indictments, or any other communication alleging a condition that

may require the Company to undertake or to contribute to a cleanup or other

response under environmental Laws, or which seek penalties, damages, injunctive

relief, or criminal sanctions related to alleged violations of such Laws, or

which claim personal injury or property damage to any person as a result of

environmental factors or conditions.

 

(viii)  Bylaws and Articles.  Promptly after any change in the Company’s bylaws or articles of

incorporation (or like documents), copies of all such changes, certified by the

Company’s Secretary.

 

(ix)    Other

Information.  Such

other information regarding the condition or operations, financial or

otherwise, of the Company as CoBank may from time to time reasonably request,

including but not limited to copies of all pleadings, notices, and

communications referred to in Subsections 8(H)(vi) and (vii) above.

 

(x)      Officer Certificate.  A

quarterly officers certificate within 45 days of each fiscal quarter end, in a

form acceptable to CoBank, certified by an officer of the Company, that

measures compliance with Minimum Net Working Capital; Long Term Debt Coverage

and Long Term Debt to Capitalization. 

(Section 10 (A) & (B) & (C)).

 

(I)      Grower

Agreements.  The Company shall

abide by the terms and conditions of its member grower agreements; make no

material amendments or changes to the agreements without the written consent of

the Bank; and extend the agreements for an additional five years when the

current contracts expire.

 

(J)     Crystech,

L.L.C. (“Crystech”).  Cause to be furnished to CoBank:

 

(i)      Annual

Financial Statements.  As

soon as available, but in no event more than 120 days after the end of each

fiscal year of Crystech occurring during the term hereof, annual financial

statements of Crystech prepared in accordance with GAAP consistently

applied.  Such financial statements

shall:  (a) be audited by independent

certified public accountants selected by Crystech and acceptable to CoBank; (b)

be accompanied by a report of such accountants containing an opinion thereon

acceptable to CoBank; (c) be prepared in reasonable detail and in comparative

form; and (d) include a balance sheet, a statement of income, a statement

of retained earnings, a statement of cash flows, and all notes and schedules

relating thereto.

 

(ii)     Interim

Financial Statements.  As

soon as available, but in no event more than 60 days after the end of each

quarter, a balance sheet of Crystech as of the end of such fiscal quarter, a

statement of income for Crystech for such period and for the period year to

date, and such other interim statements

 

5

 

as CoBank may specifically request, all prepared in reasonable detail

and in comparative form in accordance with GAAP consistently applied.

 

(iii)    Examinations.

 Such examination of Crystech’s

books and records as CoBank may reasonably request.

 

(K)    Annual

Paydown.  The Company

will paydown all short term loans to $80,000,000 or less for a period of 30

consecutive days during the calendar year. 

Total short term loans includes the seasonal loans, Commodity Credit

Corporation loans, commercial paper, overdraft loans with original maturity

dates of one year or less.  Total short

term loans excludes current maturities of long term debt.

 

SECTION 9.   Negative Covenants.  Unless

otherwise agreed to in writing by CoBank, while this agreement is in effect the

Company will not:

 

(A)    Borrowings.

 Create, incur,

assume, or allow to exist, directly or indirectly, any indebtedness or

liability for borrowed money (including trade or bankers’ acceptances), letters

of credit, or the deferred purchase price of property or services (including

capitalized leases), except for:  (i) debt

to CoBank; (ii) accounts payable to trade creditors incurred in the

ordinary course of business; (iii) current operating liabilities (other than

for borrowed money) incurred in the ordinary course of business; and (iv)

permitted borrowings identified on Attachment A.

 

(B)    Liens.  Create, incur, assume, or

allow to exist any mortgage, deed of trust, pledge, lien (including the lien of

an attachment, judgment, or execution), security interest, or other encumbrance

of any kind upon any of its property, real or personal (collectively,

“Liens”).  The foregoing restrictions

shall not apply to:  (i) Liens in favor

of CoBank; (ii) Liens for taxes, assessments, or governmental charges that are

not past due; (iii) Liens and deposits under workers’ compensation, unemployment

insurance, and social security Laws; (iv) Liens and deposits to secure the

performance of bids, tenders, contracts (other than contracts for the payment

of money), and like obligations arising in the ordinary course of business as

conducted on the date hereof; (v) Liens imposed by Law in favor of mechanics,

materialmen, warehousemen, and like persons that secure obligations that are

not past due or that are being contested in good faith by the Company; and

(vi) easements, rights-of-way, restrictions, and other similar

encumbrances which, in the aggregate, do not materially interfere with the

occupation, use, and enjoyment of the property or assets encumbered thereby in

the normal course of its business or materially impair the value of the property

subject thereto except for the permitted liens identified on Attachment B,

without the prior written consent of the Bank. 

In addition, the Company agrees that it will not agree to a negative

pledge with any other lender or third party.

 

(C)    Mergers,

Acquisitions, Etc.  Merge

or consolidate with any other entity or acquire all or a material part of the

assets of any person or entity, or form or create any new subsidiary or

affiliate, or commence operations under any other name, organization, or

entity, including any joint venture.

 

(D)    Transfer

of Assets.  Sell,

transfer, lease, or otherwise dispose of any of its assets, except in the

ordinary course of business.

 

(E)     Loans.  Lend or advance money,

credit, or property to any person or entity, except for trade credit extended

in the ordinary course of business and certain inter-company loans made

pursuant to Intercompany Loan/Security Agreement dated August 31, 1997 and

successor agreements.

 

(F)     Contingent

Liabilities.  Assume,

guarantee, become liable as a surety, endorse, contingently agree to purchase,

or otherwise be or become liable, directly or indirectly (including, but not

 

6

 

limited to, by means of a maintenance agreement, an asset or stock

purchase agreement, or any other agreement designed to ensure any creditor

against loss), for or on account of the obligation of any person or entity,

except by the endorsement of negotiable instruments for deposit or collection

or similar transactions in the ordinary course of the Company’s business and

except for any liability on account of a guaranty of indebtedness of Midwest

Agri Commodities.

 

(G)    Change

in Business.  Engage

in any business activities or operations substantially different from or

unrelated to the Company’s present business activities or operations.

 

SECTION 10.  Financial Covenants.  Unless

otherwise agreed to in writing, while this agreement is in effect:

 

(A)    Minimum Net Working Capital. The Company shall maintain minimum at all times

and measured as of the end of each Fiscal Quarter a ratio of Current Assets

less Current Liabilities of not less than $35,000,000.

 

(B)    Long

Term Debt to Capitalization.   The Company shall maintain at all times and

measured as of the end of each Fiscal Quarter a ratio of Long Term Debt divided

by the sum of Long Term Debt plus Equity of no greater than fifty-five percent

(55%).

 

(C)    Long Term Debt Coverage. The Company shall maintain at all times and

measured as of the end of each Fiscal Quarter a ratio of Long Term Debt to

Average Net Funds Generated during the most recent three Fiscal Years of not

greater than six (6) times.

 

(D)    Definitions.  For purposes of this

Section 10 and this Master Loan Agreement, the following terms shall be defined

as follows:

 

(i)      Average

Net Funds Generated. Average Net Funds Generated is the sum

of the following for the most recent three fiscal years divided by three (3).

 

Add: Unit Retains;

Depreciation and amortization; Net income from non-member business and member

business tax timing differences; Decrease in investments in other cooperatives

(excluding subsidiaries); and Net revenue from sale of stock.

 

Minus: Increase in

investments in other cooperatives (excluding subsidiaries); Net loss from

non-member business and member business tax timing differences; Provision for

income tax; and Members’ investment retirements.

 

(ii)     Borrowing

Base. A maximum dollar amount available to the Borrower under

the terms of the Commitment (as set forth in a Supplement) as determined on the

basis of the most recent Borrowing Base Certificate.

 

(iii)    Borrowing

Base Certificate. A certification of the value of specified

assets of the Borrower used in computing the Borrowing Base.

 

(iv)     Capitalization.

The sum of long term debt plus equity as determined in

accordance with GAAP.

 

7

 

(v)      Current

Assets. The current assets of the Borrower as measured in

accordance with GAAP.

 

(vi)     Current

Liability. The current liabilities of the Borrower as

measured in accordance with GAAP.

 

(vii)   Depreciation.

Total depreciation of the Borrower as measured in accordance

with GAAP.

 

(viii)  Debt. Debt means as to any Person: (a)

indebtedness or liability of such Person for borrowed money, or for the

deferred purchase price of property or services; (b) obligations of such Person

as lessee under capital leases; (c) obligations of such Person arising under

bankers’ or trade acceptance facilities; (d) all guarantees, endorsements

(other than for collection or deposit in the ordinary course of business), and

other contingent obligations of such Person to purchase any of the items

included in this definition, to provide funds for payment, to supply funds to

invest in any other Person, or otherwise to assure a creditor of another Person

against loss; (e) all obligations secured by a lien on property owned by such

Person, whether or not the obligations have been assumed; and (f) all

obligations of such Person under any agreement providing for an interest rate

swap, cap, cap and floor, contingent participation or other hedging mechanisms

with respect to interest payable on any of the items described in this

definition.

 

(ix)    Equity.

Total equity of the Borrower as measured in accordance with

GAAP.

 

(x)      Fiscal

Quarter. Each three (3) month period beginning on the first

day of each of the following months: September, December, March and June.

 

(xi)    Fiscal

Year. A year commencing on September 1 and ending on August

31.

 

(xii)   GAAP.

Generally accepted accounting principles in effect from time

to time.

 

(xiii)  Interest Expense. Current cost of borrowing funds

that is shown as a financial expense in the income statement and as measured in

accordance with GAAP.

 

(xiv)   Long

Term Debt. The long term debt (excluding current maturities)

as determined in accordance with GAAP.

 

(xv)    Net

Realizable Value. The expected selling price of an inventory

item less expected costs to complete and dispose, as determined in accordance

with GAAP.

 

(xvi)   Net

Working Capital. Shall mean the Total Current Assets minus the

Total Current Liabilities of the Borrower as determined in accordance with GAAP

accounting principles, consistently applied.

 

(xvii) Person. Person shall mean any individual, sole

proprietorship, partnership, joint venture, trust, unincorporated organization,

association, corporation, limited liability company, cooperative association,

institution, entity, party or government (whether national, federal, state,

provincial, country, city, municipal or otherwise, including without

limitation, and instrumentality, division, agency, body or department thereof).

 

8

 

(xviii) Subsidiary. Subsidiary shall mean

with respect to any Person: (a) any corporation in which such Person, directly

or indirectly, (i) owns more than fifty percent (50%) of the outstanding stock

thereof, or (ii) has the power under ordinary circumstances to elect at least a

majority of the directors thereof, or (b) any partnership, association, joint

venture, limited liability company, or other unincorporated organization or

entity with respect to which such Person, directly or indirectly, owns an

equity interest in an amount sufficient to control the management thereof.

 

SECTION 11.  Events of Default.  Each

of the following shall constitute an “Event of Default” under this agreement:

 

(A)    Payment

Default.  The Company

should fail to make any payment to, or to purchase any equity in, CoBank when

due.  Any payment received by CoBank

after its due date shall not be subject to an increase in the interest rate, as

provided for in Section 12 below, if the Company is not responsible for the

payment delay.

 

(B)    Representations

and Warranties.  Any

representation or warranty made or deemed made by the Company herein or in any

Supplement, application, agreement, certificate, or other document related to

or furnished in connection with this agreement or any Supplement, shall prove

to have been false or misleading in any material respect on or as of the date

made or deemed made.

 

(C)    Certain

Affirmative Covenants.  The

Company should fail to perform or comply with Sections 8(A) through 8(H)(ii),

8(H)(viii), or any reporting covenant set forth in any Supplement hereto, and

such failure continues for 15 days after written notice thereof shall have been

delivered by CoBank to the Company.

 

(D)    Other

Covenants and Agreements.  The

Company should fail to perform or comply with any other covenant or agreement

contained herein or in any other Loan Document or shall use the proceeds of any

loan for an unauthorized purpose.

 

(E)     Cross-Default.  The Company should, after

any applicable grace period, breach or be in default under the terms of any

other agreement between the Company and CoBank.

 

(F)     Other

Indebtedness.  The

Company should fail to pay when due any indebtedness to any other person or

entity for borrowed money or any long-term obligation for the deferred purchase

price of property (including any capitalized lease), or any other event occurs

which, under any agreement or instrument relating to such indebtedness or obligation,

has the effect of accelerating or permitting the acceleration of such

indebtedness or obligation, whether or not such indebtedness or obligation is

actually accelerated or the right to accelerate is conditioned on the giving of

notice, the passage of time, or otherwise.

 

(G)    Judgments.

 A judgment, decree,

or order for the payment of money shall be rendered against the Company in an

amount which, if enforced, would have a material adverse effect on the

financial condition, profits or operations of the Compay, or a Lien prohibited

under Section 9(B) hereof shall have been obtained and shall continue in effect

for a period of 20 consecutive days without being discharged, satisfied, or

stayed pending appeal.

 

(H)    Insolvency,

Etc.  The Company

shall:  (i) become insolvent or shall

generally not, or shall be unable to, or shall admit in writing its inability

to, pay its debts as they come due; or (ii) suspend its business

operations or a material part thereof or make an assignment for the benefit of

creditors; or (iii) apply for, consent to, or acquiesce in the appointment

of a trustee, receiver, or other custodian for it

 

9

 

or any of its property or, in the absence of such application, consent,

or acquiescence, a trustee, receiver, or other custodian is so appointed; or

(iv) commence or have commenced against it any proceeding under any bankruptcy,

reorganization, arrangement, readjustment of debt, dissolution, or liquidation

Law of any jurisdiction.

 

(I)      Material

Adverse Change.  Any

material adverse change occurs, as reasonably determined by CoBank, in the

Company’s financial condition, results of operation, or ability to perform its

obligations hereunder or under any instrument or document contemplated hereby.

 

(J)     Guaranties. The Company’s agreement to guaranty, assume, or

provide surety of other entities’ financial obligations shall not exceed an

aggregate amount greater than 10% of the Company’s net worth, without the

Bank’s prior written consent.

 

SECTION 12.  Remedies.  Upon

the occurrence and during the continuance of an Event of Default or any

Potential Default, CoBank shall have no obligation to continue to extend credit

to the Company and may discontinue doing so at any time without prior notice.  CoBank shall promptly notify the Company

subsequent to any action to discontinue extending credit to the Company.  In addition, upon the occurrence and during

the continuance of any Event of Default, CoBank may, upon notice to the

Company, terminate any commitment and declare the entire unpaid principal

balance of the loans, all accrued interest thereon, and all other amounts

payable under this agreement, all Supplements, and the other Loan Documents to

be immediately due and payable.  Upon

such a declaration, the unpaid principal balance of the loans and all such

other amounts shall become immediately due and payable, without protest,

presentment, demand, or further notice of any kind, all of which are hereby

expressly waived by the Company.  In

addition, upon such an acceleration:

 

(A)    Enforcement.  CoBank may proceed to

protect, exercise, and enforce such rights and remedies as may be provided by

this agreement, any other Loan Document or under Law.  Each and every one of such rights and remedies shall be

cumulative and may be exercised from time to time, and no failure on the part

of CoBank to exercise, and no delay in exercising, any right or remedy shall

operate as a waiver thereof, and no single or partial exercise of any right or

remedy shall preclude any other or future exercise thereof, or the exercise of

any other right.  Without limiting the

foregoing, CoBank may hold and/or set off and apply against the Company’s

obligations to CoBank the proceeds of any equity in CoBank, any cash collateral

held by CoBank, or any balances held by CoBank for the Company’s account

(whether or not such balances are then due).

 

(B)    Application

of Funds.  CoBank may

apply all payments received by it to the Company’s obligations to CoBank in

such order and manner as CoBank may elect in its sole discretion.

 

In addition to the

rights and remedies set forth above: 

(i) if the Company fails to purchase any equity in CoBank when

required or fails to make any payment to CoBank when due, then at CoBank’s

option in each instance, such payment shall bear interest from the date due to

the date paid at 4% per annum in excess of the rate(s) of interest that would

otherwise be in effect on that loan; and (ii) after the maturity of any

loan (whether as a result of acceleration or otherwise), the unpaid principal

balance of such loan (including without limitation, principal, interest, fees

and expenses) shall automatically bear interest at 4% per annum in excess of

the rate(s) of interest that would otherwise be in effect on that loan.  All interest provided for herein shall be

payable on demand and shall be calculated on the basis of a year consisting of

360 days.

 

10

 

SECTION 13.  Broken Funding Surcharge. 

Notwithstanding any provision contained in any

Supplement giving the Company the right to repay any loan prior to the date it

would otherwise be due and payable, the Company agrees that in the event it

repays any fixed rate balance prior to its scheduled due date or prior to the

last day of the fixed rate period applicable thereto (whether such payment is

made voluntarily, as a result of an acceleration, or otherwise), the Company

will pay to CoBank a surcharge in an amount which would result in CoBank being

made whole (on a present value basis) for the actual or imputed funding losses

incurred by CoBank as a result thereof. 

Notwithstanding the foregoing, in the event any fixed rate balance is

repaid as a result of the Company refinancing the loan with another lender or

by other means, then in lieu of the foregoing, the Company shall pay to CoBank

a surcharge in an amount sufficient (on a present value basis) to enable CoBank

to maintain the yield it would have earned during the fixed rate period on the

amount repaid.  Such surcharges will be

calculated in accordance with methodology established by CoBank (a copy of

which will be made available to the Company upon request).

 

SECTION 14.  Complete Agreement, Amendments. 

This agreement, all Supplements, and all other

instruments and documents contemplated hereby and thereby, are intended by the

parties to be a complete and final expression of their agreement.  No amendment, modification, or waiver of any

provision hereof or thereof, and no consent to any departure by the Company

herefrom or therefrom, shall be effective unless approved by CoBank and

contained in a writing signed by or on behalf of CoBank, and then such waiver

or consent shall be effective only in the specific instance and for the

specific purpose for which given.  In

the event this agreement is amended or restated, each such amendment or

restatement shall be applicable to all Supplements hereto.

 

SECTION 15.  Other Types of Credit.  From time to time, CoBank may issue letters

of credit or extend other types of credit to or for the account of the

Company.  In the event the parties

desire to do so under the terms of this agreement, such extensions of credit

may be set forth in any Supplement hereto and this agreement shall be

applicable thereto.

 

SECTION 16.  Applicable Law.  Except

to the extent governed by applicable federal law, this agreement and each

Supplement shall be governed by and construed in accordance with the laws of

the State of Colorado, without reference to choice of law doctrine.

 

SECTION 17.  Notices.  All

notices hereunder shall be in writing and shall be deemed to be duly given upon

delivery if personally delivered or sent by telegram or facsimile transmission,

or 3 days after mailing if sent by express, certified or registered mail, to

the parties at the following addresses (or such other address for a party as

shall be specified by like notice):

 

	

  If to CoBank, as follows:

  CoBank, ACB

  Corporate Finance

  P.O. Box 5110

  Denver, Colorado 80217 — Fax # (303) 694-5830

  	

   

  	

  If to the Company, as follows:

  American Crystal Sugar Company

  ATTN: Treasurer

  101 North 3rd Street, Moorhead, Minnesota

  56560

  FAX#:  (218)

  236-4702

  

 

SECTION 18.  Taxes and Expenses.  To

the extent allowed by law, the Company agrees to pay all reasonable

out-of-pocket costs and expenses (including the fees and expenses of counsel

retained by CoBank) incurred by CoBank in connection with the origination,

administration, collection, and enforcement of this agreement and the other

Loan Documents, including, without limitation, all costs and expenses incurred

in perfecting, maintaining, determining the priority of, and releasing any

security for the Company’s obligations to CoBank, and any stamp, intangible,

transfer, or like tax payable in connection with this agreement or any other

Loan Document.

 

11

 

SECTION 19.  Effectiveness and Severability. 

This agreement shall continue in effect until:  (i) all indebtedness and obligations of

the Company under this agreement, all Supplements, and all other Loan Documents

shall have been paid or satisfied; (ii) CoBank has no commitment to extend

credit to or for the account of the Company under any Supplement; and (iii)

either party sends written notice to the other terminating this agreement.  Any provision of this agreement or any other

Loan Document 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 thereof.

 

SECTION 20.  Successors and Assigns.  This

agreement, each Supplement, and the other Loan Documents shall be binding upon

and inure to the benefit of the Company and CoBank and their respective

successors and assigns, except that the Company may not assign or transfer its

rights or obligations under this agreement, any Supplement or any other Loan

Document without the prior written consent of CoBank.

 

SECTION 21.  Participations.   From time to time, CoBank may sell to one or more banks or other

financial institutions a participation in one or more of the loans or other

extensions of credit made pursuant to this agreement.  However, no such participation shall relieve CoBank of any

commitment made to the Company under any Supplement hereto.  In connection with the foregoing, CoBank may

disclose information concerning the Company 

to any participant or prospective participant, provided that such

participant or prospective participant agrees to keep such information confidential.

 

 

IN WITNESS WHEREOF,

the parties have caused this agreement to be executed by their duly authorized

officers as of the date shown above.

 

 

	

  CoBANK,

  ACB

  	

  AMERICAN

  CRYSTAL SUGAR COMPANY

  
	

   

  	

   

  
	

  By

  	

  /s/ Casey Garten

  	

   

  	

  By:

  	

  /s/ Sam Wai

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  Title

  	

  Vice President

  	

   

  	

  Title:

  	

  Treasurer

  	

   

  

 

12

 

No. Z269A

 

AMENDMENT

 

THIS AMENDMENT is entered into as of March

28, 2001,

between CoBANK,

ACB (“CoBank”) and AMERICAN CRYSTAL SUGAR COMPANY, Moorhead,

Minnesota (the “Company”).

 

BACKGROUND

 

CoBank and the Company are parties to a Master Loan

Agreement dated March 31, 2000, (such agreement, as previously amended,

is hereinafter referred to as the “MLA”). 

CoBank and the Company now desire to amend the MLA.  For that reason, and for valuable consideration

(the receipt and sufficiency of which are hereby acknowledged), CoBank and the

Company agree as follows:

 

1.             Section 10(A) of

the MLA is hereby amended and restated to read as follows:

 

(A) 

Minimum

Net Working Capital. (1) have at the end of each fiscal quarter, other than

fiscal year end, an excess of current assets over current liabilities (both as

determined in accordance with GAAP consistently applied) of not less than

$15,000,000.00 and (2) have at then end of each fiscal year, an excess of

current assets over current liabilities (both as determined in accordance with

GAAP consistently applied) of not less than $35,000,000.00.

 

2.             Except as set forth

in this amendment, the MLA shall continue in full force and effect as written.

 

IN WITNESS WHEREOF, the parties have caused

this amendment to be executed by their duly authorized officers as of the date

shown above.

 

	

  CoBANK,

  ACB

  	

  AMERICAN

  CRYSTAL SUGAR COMPANY

  
	

   

  
	

  By:

  	

  /s/ Casey Garten

  	

   

  	

  By:

  	

  /s/ Sam Wai

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Title:

  	

  Vice President

  	

   

  	

  Title:

  	

  Treasurer

  	

   

  

 

13

 

Loan No. Z269T01B

 

REVOLVING

TERM LOAN SUPPLEMENT

 

THIS SUPPLEMENT to the

Master Loan Agreement dated March 31, 2000 (the “MLA”), is entered into as of

March 27, 2002, between CoBANK, ACB (“CoBank”)

and AMERICAN CRYSTAL SUGAR COMPANY, Moorhead, Minnesota (the

“Company”), and amends and restates the Supplement dated March 28, 2001 and numbered Z269T01 A.

 

SECTION

1. The Revolving Term Loan Commitment. On the terms

and conditions set forth in the MLA and this Supplement,

CoBank agrees to make loans to the Company during the period set forth below in an aggregate principal amount not to exceed

$66,024,319.00 at any one time outstanding (the “Commitment”).

Within the limits of the Commitment, the Company may borrow, repay and reborrow.

 

SECTION

2. Purpose and Transfer. The purpose

of the Commitment is to finance the operating

needs of the Company.

 

SECTION 3. Term. The term of the

Commitment shall be from the date hereof, up to but not including March 30,

2003, or such later date as CoBank may, in its sole discretion, authorize in

writing.

 

SECTION

4. Interest. The Company agrees to pay interest on

the unpaid balance of the loans in accordance with one or more of

the following interest rate options, as selected by the Company:

 

(A)          Variable Rate Option.  

At a rate per annum equal at all times

to the rate of interest established by CoBank from time to

time as its National Variable Rate, which Rate is intended by CoBank to be a

reference rate and not its lowest rate. The National Variable Rate will change

on the date established by CoBank as the

effective date of any change therein and CoBank agrees to notify the Company

promptly after any such change.

 

(B)          Quoted Rate Option.   

At a fixed rate per annum to be quoted

by CoBank in its sole discretion in each instance.  Under this option, rates may be fixed on

such balances and for such periods as may be agreeable to CoBank in

its sole discretion in each instance.

 

(C)          LIBOR Option.   At a fixed rate equal to “LIBOR” (as hereinafter defined) plus the Applicable LIBOR Margin per annum (as described in terms of basis points

(“bps”) in the chart immediately set forth below).   Under this option:    (a) rates may be fixed for “Interest

Periods” (as hereinafter defined) of 1, 2, 3, or 6 months, or 1 year, as

selected by the Company; (b) the minimum amount that

may be fixed at any one time shall be $2,000,000.00; and (c) rates may only be

fixed on a “Banking Day” (as hereinafter defined)

or, at the option of the Company, on 2 Banking Days’ prior notice.  For purposes hereof: (i)

“LIBOR” shall mean the rate indicated by Telerate (rounded upward to the

nearest thousandth) as having been quoted by the British Bankers Association at

11:00 a.m. London time on the date the Company elects to

fix a rate under this option for the offering of U.S. dollar deposits in the London interbank market for the Interest Period designated by the

Company; (ii) “Banking Day” shall mean a day on which CoBank

is open for business, dealings in U.S. dollar deposits are being carried out in the London interbank market, and banks are

open for business in New York City and London, England; and (iii)

“Interest Period” shall mean a period commencing on the day the Company elects

to fix a rate under this option (or, at the option

of the Company, two Banking Days later) and ending on the numerically corresponding day in the next calendar

month or the month that is 2, 3 or 6 months or 1 year thereafter, as the

case may be; provided, however, that: 

(x) in the event such ending day is not a Banking Day, such period shall be extended to the next

Banking Day unless such next Banking Day falls in the

 

14

 

next calendar month, in which case it

shall end on the preceding Banking Day; and (y) if there is no numerically

corresponding day in the month, then such period shall end on the last Banking

Day in the relevant month.

 

LIBOR

MARGINS

 

	

  FIXED RATE 

  PRODUCT

  	

   

  	

  INDEX

  	

   

  	

  SPREAD OVER INDEX IN BASIS 

  POINTS (Applicable LIBOR Margin)

  	

   

  
	

  One Month

  	

   

  	

  LIBOR

  	

   

  	

  90bps

  	

   

  
	

  Two Months

  	

   

  	

  LIBOR

  	

   

  	

  90bps

  	

   

  
	

  Three Months

  	

   

  	

  LIBOR

  	

   

  	

  90bps

  	

   

  
	

  Six Months

  	

   

  	

  LIBOR

  	

   

  	

  90bps

  	

   

  
	

  One Year

  	

   

  	

  LIBOR

  	

   

  	

  90bps

  	

   

  

 

(D)

Treasury Option. At a fixed rate equal to Applicable

Treasury Margin per annum (as described in terms of basis points (“bps”) in the

chart immediately set forth below) above the “U.S. Treasury Rate” (as hereinafter defined). Under this option, balances of

$2,000,000.00 or more may be fixed on or before for periods

ranging from two years to the final maturity date of the loan, as selected by the Company. However, rates may not be fixed in

such a manner as to require the Company to have to repay any fixed rate

balance prior to the last day of its fixed rate period in order to pay any

installment of principal. For purposes

hereof, the “U.S. Treasury Rate” shall mean the yield to maturity on U.S.

Treasury instruments having the same

maturity date as the last day of the fixed rate period selected by the Company,

as calculated from the bid price indicated by Telerate (page 5) at the time the

rate is fixed. If, however, no instrument is indicated for the maturity

selected, then the rate shall be interpolated based on the bid prices quoted

for the next longest and shortest maturities so indicated. In the event

Telerate ceases to provide such quotations or

materially changes the form or substance of page 5 (as determined by CoBank), then CoBank will notify the Company and

the parties hereto will agree upon a substitute basis for obtaining such

quotations

 

TREASURY

MARGINS

	

  FIXED RATE 

  PRODUCT

  	

   

  	

  INDEX

  	

   

  	

  SPREAD OVER INDEX IN BASIS 

  POINTS (Applicable Treasury Margin)

  	

   

  
	

  Two Years

  	

   

  	

  U.S.$ Constant Maturity
 Treasury Rate (“US$CMT”)

  	

   

  	

  125 bps

  	

   

  
	

  Three Years

  	

   

  	

  US$CMT

  	

   

  	

  125 bps

  	

   

  
	

  Four Years

  	

   

  	

  US$CMT

  	

   

  	

  125 bps

  	

   

  
	

  Five Years

  	

   

  	

  US$CMT

  	

   

  	

  125 bps

  	

   

  
	

  Seven Years

  	

   

  	

  USSCMT

  	

   

  	

  140 bps

  	

   

  
	

  Ten Years

  	

   

  	

  US$CMT

  	

   

  	

  140 bps

  	

   

  
	

  Floor

  (Minimum) Rate (For Two to Ten Year Fixed

  Rate Products Only)

  	

   

  	

  CoBank’s cost of funds (as reasonablydeterminedby CoBank in its sole

  discretion)

  	

   

  	

  105 bps

  	

   

  

 

15

 

The spread over all of the above

indices, including the Floor (Minimum) Rate, may increase or decrease for future fixed amounts based on the Company’s previous fiscal

quarter’s leverage ratio, as follows:

 

 

	

  LEVERAGE RATIO (as defined below)

  	

   

  	

  INCREASE / DECREASE 

  TO SPREAD

  	

   

  	

  CHANGE TO LIBOR and
 TREASURY MARGINS 

  (IN BASIS POINTS)

  	

   

  
	

  A. Equal to or

  greater than 1.35:1.00

  	

   

  	

  Increase

  	

   

  	

  20

  	

   

  
	

  B. Equal to or greater than 1.20:1.00, but less than 1.35:1.00

  	

   

  	

  None

  	

   

  	

  0

  	

   

  
	

  C. Less than 1.20:1.00, but greater than or equal to 1.00:1.00

  	

   

  	

  Decrease

  	

   

  	

  10

  	

   

  
	

  D. Less than

  1.00:1.00

  	

   

  	

  Decrease

  	

   

  	

  20

  	

   

  

 

Leverage Ratio: The Company will maintain a leverage ratio of not more than 1.50:1.0, and

attain a leverage ratio of not more than 1.40:1.0 on

November 30, 2002. Leverage ratio is long term debt (excluding

current maturities) calculated in accordance with GAAP plus or minus the

difference between actual working capital and minimum net working capital (as

defined in the MLA No. Z269, Section 10), divided by total members investments

plus the estimated unit retains.

 

The spread shall be adjusted quarterly

on the latter of either: (a) five business days after the Bank’s receipt of the Company’s certification of compliance with the leverage ratio, or

(b) 30 days after the end of each calendar

quarter.

 

The Company shall select the applicable

rate option at the time it requests a loan hereunder and may, subject to the

limitations set forth above, elect to convert balances bearing interest at the

variable rate option to one of the fixed rate options. Upon the expiration of

any fixed rate period, interest shall automatically

accrue at the variable rate option unless the amount fixed is repaid or fixed

for an additional period in accordance with the terms

hereof. Notwithstanding the foregoing, unless CoBank otherwise consents in its sole discretion in each instance, rates may not be fixed

for periods expiring after the maturity date

of the loans. In the event CoBank so consents and the Commitment is not

renewed, then each balance so fixed shall be due and payable on the last

day of its fixed rate period, and the promissory note set forth below shall be deemed amended accordingly. All elections

provided for herein shall be made telephonically or in writing and must be

received by 12:00 noon Company’s local time. Interest shall be

calculated on the actual number of days each loan is outstanding on the basis

of a year consisting of 360 days and shall be payable quarterly in arrears by

the 20th day of the following month.

 

SECTION 5. Promissory Note. The Company promises to repay the outstanding

in annual principal payments of $9,396,579.17 each due on or before December 3 year through

December 31, 2008, and a final principal payment due on or before December 31,

2009. All outstanding balances shall be

repaid by December 31, 2009. If any installment due date is not a day on which CoBank is open for business, then such

payment shall be made on the next day on which CoBank is open for business. In addition to the above, the

Company promises to pay interest on the unpaid principal balance hereof at the times and in accordance with the

provisions set forth in Section 4 hereof.

 

16

 

This note replaces and supersedes, but

does not constitute payment of the indebtedness evidenced by, the promissory

note set forth in the Supplement being amended and restated hereby.

 

The Company shall be permitted to make

special payments, in a minimum amount of $388,500.00, on the variable rate portion of this loan, when all short term financing,

including the Company’s seasonal loans, Commodity Credit Corporation loans and

other short term loans have been zeroed out. These special payments may be readvanced through the expiration date of the Commitment.

Reinstatement may be denied and canceled at any time at the

option, of CoBank. The reinstatable commitments arising from such special payments shall be subject to the Commitment Fee as described in

Section 8 below.

 

SECTION

6. Prepayment. The loans may be prepaid in whole or

in part on one CoBank business day’s prior written notice.

During the term of the Commitment, prepayments shall be applied to such

balances, fixed or variable, as the Company shall specify. After the expiration

of the term of the Commitment, prepayments shall, unless

CoBank otherwise agrees, be applied to principal installments in the inverse

order of their maturity and to such balances, fixed or variable, as CoBank

shall specify.

 

SECTION

7. Commitment Fee. In consideration of the Commitment,

the Company agrees to pay to CoBank a commitment fee on the

average daily unused portion of the Commitment at the rate of 20 basis points per annum (calculated on a 360 day basis), payable

quarterly in arrears by the 20th day following each calendar quarter. Such fee

shall be payable for each calendar quarter (or portion thereof) occurring during the original or any extended term of the Commitment.

 

SECTION

8. Commitments Arising From Special Payments. Commitments arising as a result of

special payments described in Section 5 above

shall be subject to a commitment fee of 25 basis points (0.25%) on an annualized basis, on the average daily commitment.

Any such fees incurred shall be payable on the last day of the calendar

quarter, in arrears, computed on the basis of a year of 360 days for the actual number of days elapsed in which such reinstatable commitments

were outstanding.

 

SECTION

9. Security. In addition to any other security that

may otherwise be required or provided, the

Company’s obligations under this Supplement are secured by that Restated

Mortgage and Security Agreement dated September 15,

1998, from American Crystal Sugar Company to St. Paul Bank for Cooperatives

(now known as CoBank as a result of merger), as Collateral Agent.

 

SECTION

10. Extension

Fee. In consideration of extending the Commitment, the Company

agrees to pay to CoBank on the execution hereof, an extension fee in the amount

of $9,397.00, (10bp based on 12/31/01 principal payment of

$9,396,579.00).

 

IN

WITNESS WHEREOF, the parties have caused this Supplement

to be executed by their duly authorized

officers as of the date shown above.

 

	

  CoBANK, ACB

  	

   

  	

  AMERICAN CRYSTAL SUGAR COMPANY

  
	

   

  	

   

  	

   

  
	

  By:

  	

   

  	

   

  	

  By:

  	

  /s/ Sam Wai

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Title:

  	

   

  	

   

  	

  Title:

  	

  Treasurer

  

 

 

17

 

Loan No. Z269T01BNP

 

REVOLVING TERM LOAN

SUPPLEMENT

 

THIS SUPPLEMENT to the Master Loan Agreement dated March 31, 2000 (the “MLA”), is

entered into as of March 27, 2002, between CoBANK,

ACB (“CoBank”) and AMERICAN

CRYSTAL SUGAR C1OMPANY, Moorhead,

Minnesota (the “Company”), and amends and restates the Supplement dated March

28, 2001 and number0ed Z269T01ANP.

 

SECTION 1. The

Revolving Term Loan Commitment. On the terms

and conditions set forth in the MLA and this Supplement,

CoBank agrees to make loans to the Company during the period set forth below in an aggregate principal amount not to exceed

$52,275,680.83 at any one time outstanding

(the “Commitment”). Within the limits of the Commitment, the Company may

borrow, repay and reborrow.

 

SECTION 2. Purpose and

Transfer. The purpose of the Commitment is to finance the operating needs of the Company.

 

SECTION 3. Term. The term of the Commitment shall be from the date hereof, up to but not including March

30, 2003, or such later date as CoBank may, in its sole discretion, authorize in writing.

 

SECTION 4. Interest. The Company agrees to pay interest on the unpaid balance of the loans in accordance

with one or more of the following interest rate options, as selected by the

Company:

 

(A)           Variable Rate Option.  

At a rate per annum equal at all times

to the rate of interest established by CoBank from time to

time as its National Variable Rate, which Rate is intended by CoBank to be a

reference rate and not its lowest rate. The National Variable Rate will change

on the date established by CoBank as the

effective date of any change therein and CoBank agrees to notify the Company

promptly after any such change.

 

(B)           Quoted Rate Option.   

At a fixed rate per annum to be quoted by CoBank in its sole discretion in each instance. 

Under this option, rates may be fixed on such balances and for such

periods as may be agreeable to CoBank in its sole discretion in each

instance.

 

(C)           LIBOR Option.   At a fixed rate equal to “LIBOR” (as hereinafter defined) plus the Applicable LIBOR Margin per annum (as described in terms of basis points

(“bps”) in the

chart immediately set forth below).  Under this option:  (a) rates may be fixed for “Interest Periods” (as hereinafter

defined) of 1, 2, 3 or 6 months, or 1 year, as selected by the Company; (b) the

minimum amount that may be fixed at any one time

shall be $2,000,000.00; and (c) rates may only be fixed on a “Banking Day” (as hereinafter defined) or, at the option of the Company,

on 2 Banking Days’ prior notice.  For purposes hereof: (i) “LIBOR” shall mean

the rate indicated by Telerate (rounded upward to the nearest thousandth) as

having been quoted by the British Bankers Association at 11:00 a.m. London time on the date the Company elects to fix a rate under this option for

the offering of U.S. dollar deposits in the London

interbank market for the Interest Period designated by the Company; (ii)

“Banking Day” shall mean a day on which CoBank is open for business,

dealings in U.S. dollar deposits are being carried out in the London interbank market, and banks are open for business in

New York City and London, England; and (iii) “Interest Period” shall

mean a period commencing on the day the Company elects to fix a rate under this option (or, at the option of the

Company, two Banking Days later) and ending on the numerically corresponding day in the next calendar

month or the month that is 2, 3 or 6 months or 1 year thereafter, as the

case may be; provided, however, that: 

(x) in the event such ending day is not a Banking Day, such period shall be extended to the next

Banking Day unless such next Banking Day falls in the

 

18

 

next calendar month, in which case it shall

end on the preceding Banking Day; and (y) if there is no numerically

corresponding day in the month, then such period shall end on the last Banking

Day in the relevant month.

 

LIBOR MARGINS

 

	

  FIXED RATE PRODUCT

  	

   

  	

  INDEX

  	

   

  	

  SPREAD OVER INDEX IN

  BASIS

  POINTS (Applicable LIBOR Margin)

  
	

  One Month

  	

   

  	

  LIBOR

  	

   

  	

  90bps

  
	

  Two Months

  	

   

  	

  LIBOR

  	

   

  	

  90bps

  
	

  Three Months

  	

   

  	

  LIBOR

  	

   

  	

  90bps

  
	

  Six Months

  	

   

  	

  LIBOR

  	

   

  	

  90bps

  
	

  One Year

  	

   

  	

  LIBOR

  	

   

  	

  90bps

  

 

(D) Treasury Option. At a fixed rate

equal to the Applicable Treasury Margin per annum (as described in terms of basis points (“bps”) in the chart immediately set

forth below) above the “U.S. Treasury

Rate” (as hereinafter defined). Under this option, balances of $2,000,000.00 or

more may be fixed on or before for periods ranging from two years to the

final maturity date of the loan, as selected by the Company. However, rates may not be fixed in such a manner as to

require the Company to have to repay any fixed rate balance prior to the

last day of its fixed rate period in order to pay any installment of principal. For purposes hereof, the “U.S. Treasury

Rate” shall mean the yield to maturity on U.S. Treasury instruments

having the same maturity date as the last day of the fixed rate period selected

by the Company, as calculated from the bid price indicated by Telerate (page 5)

at the time the rate is fixed. If, however, no instrument is indicated for the maturity selected, then the rate shall be

interpolated based on the bid prices quoted for the next longest and shortest

maturities so indicated. In the event Telerate ceases to provide such quotations or materially changes the form or substance of

page 5 (as determined by CoBank),

then CoBank will notify the Company and the parties hereto will agree upon a

substitute basis for obtaining such quotations.

 

TREASURY

MARGINS

 

	

  FIXED RATE PRODUCT

  	

   

  	

  INDEX

  	

   

  	

  SPREAD OVER INDEX

  IN BASIS

  POINTS

  (Applicable Treasury Margin)

  
	

  Two Years

  	

   

  	

  U.S. $ Constant Maturity

  Treasury (“US$CMT”)

  	

   

  	

  125 bps

  
	

  Three Years

  	

   

  	

  USSCMT

  	

   

  	

  125 bps

  
	

  Four Years

  	

   

  	

  US$CMT

  	

   

  	

  125 bps

  
	

  Five Years

  	

   

  	

  USSCMT

  	

   

  	

  125 bps

  
	

  Seven Years

  	

   

  	

  US$CMT

  	

   

  	

  140 bps

  
	

  Ten Years

  	

   

  	

  US$CMT

  	

   

  	

  140 bps

  
	

  Floor (Minimum) Rate (For Two to Ten Year Fixed Rate Products Only)

  	

   

  	

  CoBank‘s cost of

  funds (as reasonably determined by

  CoBank in its sole discretion)

  	

   

  	

  105 bps

  

 

19

 

The spread over all of the above indices,

including the Floor (Minimum) Rate, may increase or decrease for future fixed amounts based on the Company’s previous fiscal

quarter’s leverage ratio, as follows:

 

	

  LEVERAGE RATIO (as

  defined

  below)

  	

   

  	

  INCREASE / DECREASE

  TO

  SPREAD

  	

   

  	

  CHANGE TO LIBOR and

  TREASURY MARGINS

  (IN

  BASIS POINTS)

  
	

  A.  Equal to or greater than 1.35:1.00

  	

   

  	

  Increase

  	

   

  	

  20

  
	

  B.  Equal to or

  greater  than 1 .20: 1 .00, but less than 1 .35 : 1 .00

  	

   

  	

  None

  	

   

  	

  0

  
	

  C.  Less than

  1.20:1.00, but greater than or equal to 1

  .00: 1 .00

  	

   

  	

  Decrease

  	

   

  	

  10

  
	

  D.  Less than 1.00:1.00

  	

   

  	

  Decrease

  	

   

  	

  20

  

 

Leverage Ratio: The Company will maintain a leverage ratio of not more than 1.50:1.0, and

attain a leverage ratio of not more than 1.40:1.0 on

November 30, 2002. Leverage ratio is long term debt (excluding current

maturities) calculated in accordance with GAAP plus or minus the difference

between actual working capital and minimum net working capital (as defined in

the MLA No. Z269, Section 10), divided by total members investments plus the

estimated unit retains.

 

The spread shall be adjusted quarterly on the latter of either: (a) five business days

after the Bank’s receipt of the

Company’s certification of compliance with the leverage ratio, or (b) 30 days

after the end of each calendar

quarter.

 

The Company shall select the applicable rate

option at the time it requests a loan hereunder and may, subject to the

limitations set forth above, elect to convert balances bearing interest at the variable rate option to one of the fixed rate

options. Upon the expiration of any fixed rate period, interest shall automatically accrue at the variable rate option

unless the amount fixed is repaid or fixed for an additional period in accordance with the terms hereof.

Notwithstanding the foregoing, unless CoBank otherwise consents in its sole discretion in each instance,

rates may not be fixed for periods expiring after the maturity date of the loans. In the event CoBank so

consents and the Commitment is not renewed, then each balance so fixed

shall be due and payable on the last day of its fixed rate period, and the

promissory note set forth below shall be

deemed amended accordingly. All elections provided for herein shall be made

telephonically or in writing and must be received by 12:00 noon Company’s local

time. Interest shall be calculated on the actual number of days each

loan is outstanding on the basis of a year consisting of 360 days and shall be

payable quarterly in arrears by the 20th day of the following month.

 

SECTION 5. Promissory

Note. The Company promises to repay the loans that

are outstanding in annual principal payments of

$7,603,420.83 each due on or before December 31” of each year through

December 31, 2007, and a final principal payment due on or before December 31,

2008. All outstanding balances shall be

repaid by December 31, 2008. If any installment due date is not a day on which CoBank is open for business, then such payment

shall be made on the next day on which CoBank is open for business. In addition to the above, the Company promises to

pay interest on the unpaid principal

balance hereof at the times and in accordance with the provisions set forth in

Section 4 hereof. This note replaces and supersedes, but does not

constitute payment of the indebtedness evidenced by, the promissory note set

forth in the Supplement being amended and restated hereby.

 

20

 

The Company shall be permitted to make

special payments, in a minimum amount of $111,500.00, on the variable rate

portion of this loan, when all short term financing, including the Company’s

seasonal loans, Commodity Credit Corporation

loans and other short term loans have been zeroed out. These special payments may be readvanced through the expiration

date of the Commitment. Reinstatement may be denied and canceled at any time at the option of CoBank. The

reinstatable commitments arising from such special payments shall be

subject to the Commitment Fee as described in Section 8 below.

 

SECTION 6.

Prepayment. The loans may be prepaid in whole or

in part on one CoBank business day’s prior written notice.

During the term of the Commitment, prepayments shall be applied to such

balances, fixed or variable, as the Company shall specify. After the expiration

of the term of the Commitment, prepayments shall, unless CoBank otherwise

agrees, be applied to principal installments in the inverse order of their maturity and to such balances, fixed or

variable, as CoBank shall specify.

 

SECTION 7. Commitment

Fee. In consideration of the Commitment, the

Company agrees to pay to CoBank a commitment fee on the average daily unused portion of the Commitment at

the rate of 20 basis points per annum (calculated

on a 360 day basis), payable quarterly in arrears by the 20th day following

each calendar quarter. Such fee shall be payable for each calendar quarter (or

portion thereof) occurring during the original or any extended term of the

Commitment.

 

SECTION 8.

Commitments Arising From Special Payments. Commitments

arising as a result of special payments described

in Section 5 above shall be subject to a commitment fee of 25 basis points (0.25%)

on an annualized basis, on the average daily commitment. Any such fees incurred

shall be payable on the last day of the calendar quarter, in arrears, computed

on the basis of a year of 360 days for the actual

number of days elapsed in which such reinstatable commitments were outstanding.

 

SECTION 9. Security. In addition to any other security that may otherwise be required or provided, the Company’s obligations under this Supplement are secured by

that Restated Mortgage and Security Agreement dated

September 15, 1998, from American Crystal Sugar Company to St. Paul Bank for Cooperatives (now known as CoBank as

a result of merger), as Collateral Agent.

 

SECTION 10. Extension

Fee. In consideration of extending the Commitment,

the Company agrees to pay to CoBank on the

execution hereof, an extension fee in the amount of $7,603.00, (10bp based on the

12/31/01 principal payment of $7,603,421.00).

 

IN WITNESS WHEREOF, the parties

have caused this Supplement to be executed by their duly authorized officers as

of the date shown above.

 

	

  CoBANK, ACB

  	

  AMERICAN CRYSTAL SUGAR COMPANY

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

  By:

  	

   

  	

   

  	

  By:

  	

    /s/ Sam Wai

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Title:

  	

   

  	

   

  	

  Title:

  	

    Treasurer

  

 

21

 

Loan No. Z269T02BNP

 

REVOLVING TERM LOAN SUPPLEMENT

 

THIS

SUPPLEMENT to the Master Loan Agreement dated March 31, 2000

(the “MLA”), is entered into as of March 27, 2002, between CoBANK, ACB (“CoBank”) and AMERICAN CRYSTAL SUGAR COMPANY, Moorhead,

Minnesota (the “Company”), and amends and restates the Supplement dated March

28, 2001 and numbered Z269T02ANP.

 

SECTION 1. The Revolving Term Loan Commitment. On the

terms and conditions set forth in the MLA and this Supplement, CoBank agrees to

make loans to the Company during the period set forth below in an aggregate principal amount

not to exceed

$14,068,836.00 at any one time outstanding

(the “Commitment”). Within the limits of the Commitment, the Company may

borrow, repay and reborrow, provided, however, no advances shall be made on

this Term Loan, until Term Loan No. Z269T01 (as it may be amended), has been

fully advanced.

 

SECTION 2. Purpose and Transfer.  The purpose of the Commitment is to finance

the operating needs of the

Company.

 

SECTION 3. Term. 

The term of the Commitment shall be from the date hereof, up to but not including March 30, 2003, or such later date

as CoBank may, in its sole discretion, authorize in writing.

 

SECTION 4. Interest. 

The Company agrees to pay interest on the unpaid balance of the loans in accordance with one or more of the

following interest rate options, as selected by the Company:

 

(A)           Variable Rate Option.  At a rate per annum equal at all times to

the rate of interest established by CoBank from time to time as its National Variable Rate,

which Rate is intended by CoBank

to be a reference rate and not its lowest rate. The National Variable Rate will

change on the date established by CoBank as

the effective date of any change therein and CoBank agrees to notify the Company

promptly after any such change.

 

(B)                  Quoted Rate Option.  At a fixed rate per annum to be quoted by

CoBank in its sole discretion in each instance. Under this option, rates may be fixed on

such balances and for such periods as

may be agreeable to CoBank in its sole discretion in each instance.

 

(C)           LIBOR Option.  At a fixed rate equal to “LIBOR” (as

hereinafter defined) plus the Applicable LIBOR Margin per annum (as described in terms

of basis points (“bps”) in the chart immediately set forth below).   Under this option:    (a) rates may be fixed for “Interest

Periods” (as hereinafter defined) of 1, 2, 3, or 6 months, or 1 year, as

selected by the Company; (b) the minimum amount that may be fixed at any one time shall be

$2,000,000.00; and (c) rates may only be fixed on a “Banking Day” (as

hereinafter defined) or, at the option of the Company, on 2 Banking Days’ prior

notice.  For purposes hereof: (i) “LIBOR” shall mean

the rate indicated by Telerate (rounded upward to the nearest thousandth) as

having been quoted by the British Bankers Association at 11:00 a.m. London time on the date the

Company elects to fix a rate under this option for the offering of U.S. dollar

deposits in

the London interbank market for the Interest Period designated by the Company;

(ii) “Banking Day” shall mean a

day on which CoBank is open for business, dealings in U.S. dollar deposits are

being carried out in the London interbank

market, and banks are open for business in New York City and London, England;

and (iii) “Interest Period” shall mean a period commencing on the day the

Company elects to fix a rate under this

option (or, at the option of the Company, two Banking Days later) and ending on

the numerically corresponding day in

the next calendar month or the month that is 2, 3 or 6 months or 1 year

thereafter, as the case may be; provided, however, that: (x) in the event such

ending day is not a Banking

 

22

 

 

Day,

such period shall be extended to the next Banking Day unless such next Banking

Day falls in the next calendar month, in which case it shall end on the

preceding Banking Day; and (y) if there is no numerically corresponding day in the month, then such period shall end

on the last Banking Day in the relevant

month.

 

LIBOR MARGINS

 

	

  FIXED RATE PRODUCT

  	

   

  	

  INDEX

  	

   

  	

  SPREAD OVER INDEX IN BASIS

  POINTS (Applicable LIBOR Margin)

  	

   

  
	

  One Month

  	

   

  	

  LIBOR

  	

   

  	

  90bps

  	

   

  
	

  Two Months

  	

   

  	

  LIBOR

  	

   

  	

  90bps

  	

   

  
	

  Three Months

  	

   

  	

  LIBOR

  	

   

  	

  90bps

  	

   

  
	

  Six Months

  	

   

  	

  LIBOR

  	

   

  	

  90bps

  	

   

  
	

  One Year

  	

   

  	

  LIBOR

  	

   

  	

  90bps

  	

   

  

 

(D)          Treasury Option.  At a fixed rate equal to Applicable

“Treasury” Margin per annum (as described in terms of basis points (“bps”) in the chart

immediately set forth below) above the “U.S. Treasury Rate” (as hereinafter defined). Under this

option, balances of $2,000,000.00 or more may be fixed on or before for periods ranging from two years to the final

maturity date of the loan, as selected by the

Company. However, rates may not be fixed in such a manner as to require the

Company to have to repay any fixed rate balance prior to the last day of

its fixed rate period in order to pay any installment of principal. For purposes hereof, the “U.S.

Treasury Rate” shall mean the yield to maturity on U.S. Treasury instruments having the same maturity date as the

last day of the fixed rate period selected by the Company, as calculated

from the bid price indicated by Telerate (page 5) at the time the rate is

fixed. If, however, no instrument is indicated for the maturity selected, then

the rate shall be interpolated based on the bid prices quoted for the next

longest and shortest maturities so indicated. In the event Telerate ceases to provide such quotations or materially changes

the form or substance of page 5 (as determined by CoBank), then CoBank will notify the Company and

the parties hereto will agree upon a substitute basis for obtaining such

quotations.

 

TREASURY MARGINS

 

	

  FIXED RATE PRODUCT

  	

   

  	

  INDEX

  	

   

  	

  SPREAD OVER INDEX IN BASIS

  POINTS (Applicable Treasury Margin)

  	

   

  
	

  Two Years

  	

   

  	

  U.S.$ Constant Maturity

  Treasury (“US$CMT”)

  	

   

  	

  125 bps

  	

   

  
	

  Three Years

  	

   

  	

  US$CMT

  	

   

  	

  125 bps

  	

   

  
	

  Four Years

  	

   

  	

  USSCMT

  	

   

  	

  125 bps

  	

   

  
	

  Five Years

  	

   

  	

  USSCMT

  	

   

  	

  125 bps

  	

   

  
	

  Seven Years

  	

   

  	

  US$CMT

  	

   

  	

  140 bps

  	

   

  
	

  Ten Years

  	

   

  	

  USSCMT

  	

   

  	

  140 bps

  	

   

  
	

  Floor (Minimum) Rate (For Two to Ten Year Fixed Rate Products Only)

  	

   

  	

  CoBank’s cost of funds (as reasonably

  determined by CoBank in its sole discretion)

  	

   

  	

  105 bps

  	

   

  

 

 

23

 

The

spread over all of the above indices, including the Floor (Minimum) Rate, may

increase or decrease for future fixed amounts based on the Borrower’s

previous fiscal quarter’s leverage ratio, as follows:

 

	

  LEVERAGE RATIO (as defined below)

  	

   

  	

  INCREASE/DECREASE TO SPREAD

  	

   

  	

  CHANGE TO LIBOR and TREASURY MARGINS (IN BASIS

  POINTS)

  	

   

  
	

  A. Equal to or greater than 1.35:1.00

  	

   

  	

  Increase

  	

   

  	

  20

  	

   

  
	

  B. Equal to or greater than 1.20:1.00, but less

  than 1.35:1.00

  	

   

  	

  None

  	

   

  	

  0

  	

   

  
	

  C. Less than 1.20:1.00, but greater than or equal

  to 1.00:1.00

  	

   

  	

  Decrease

  	

   

  	

  10

  	

   

  
	

  D. Less than 1.00:1.00

  	

   

  	

  Decrease

  	

   

  	

  20

  	

   

  

 

Leverage Ratio:  The Borrower will maintain a leverage ratio

of not more than 1.50:1.0, and attain a leverage ratio of not more than 1.40:1.0 on

November 30, 2002. Leverage ratio is long term debt (excluding current maturities) calculated in

accordance with GAAP plus or minus the difference between actual working

capital and minimum net working capital (as defined in the MLA No. Z269,

Section 10), divided by total members investments plus the estimated unit

retains.

 

The

spread shall be adjusted quarterly on the latter of either: (a) five business

days after the Bank’s receipt of the Borrower’s certification of compliance with

the leverage ratio, or (b) 30 days after the end of each calendar quarter.

 

The

Company shall select the applicable rate option at the time it requests a loan

hereunder and may, subject to the limitations set forth above, elect to convert

balances bearing interest at the variable rate option to one of the

fixed rate options. Upon the expiration of any fixed rate period, interest

shall automatically

accrue at the variable rate option unless the amount fixed is repaid or fixed

for an additional period in accordance with the terms hereof. Notwithstanding the

foregoing, unless CoBank otherwise consents in its sole discretion in each instance, rates

may not be fixed for periods expiring after the maturity date of the loans. In the event CoBank so

consents and the Commitment is not renewed, then each balance so fixed shall be due and payable on the last day of its

fixed rate period, and the promissory note

set forth below shall be deemed amended accordingly. All elections provided for

herein shall be made telephonically or in writing and must be received by 12:00

noon Company’s local time. Interest shall be calculated on the actual

number of days each loan is outstanding on the basis of a year consisting of

360 days and shall be payable quarterly in arrears by the 20th day of the

following month.

 

SECTION 5. Promissory Note. The Company promises to

repay the loans that are outstanding in annual principal payments of $2,000,000.00 each

due on or before December 31st of each year commencing in 2002. All

outstanding balances shall be repaid by December 31, 2009. If any installment

 

24

 

due

date is not a day on which CoBank is open for business, then such payment shall

be made on the next day on which CoBank is open for business. In addition to

the above, the Company promises to pay interest on the unpaid principal balance hereof at the times and in

accordance with the provisions set forth in

Section 4 hereof. This note replaces and supersedes, but does not constitute

payment of the indebtedness evidenced by, the promissory note set forth

in the Supplement being amended and restated hereby.

 

SECTION 6.  Prepayment. The loans may be prepaid in whole or in part on

one CoBank business

day’s prior written notice. During the term of the Commitment, prepayments

shall be applied to such balances, fixed or variable, as the Company shall

specify. After the expiration of the term of the Commitment, prepayments shall, unless CoBank otherwise

agrees, be applied to principal installments in the inverse order of their

maturity and to such balances, fixed or variable, as CoBank shall specify.

 

SECTION 7.  Commitment Fee. In consideration of the Commitment, the Company

agrees to pay to CoBank a commitment fee on the average daily unused portion of

the Commitment at the rate of 20 basis points per annum (calculated on a 360 day

basis), payable quarterly in arrears by the 20th day following each calendar quarter. Such fee

shall be payable for each calendar quarter (or portion thereof) occurring during the original or any extended

term of the Commitment.

 

SECTION 8.  Letters of Credit. In addition to loans, and if agreeable to CoBank

in its sole discretion in each

instance, the Company may utilize the Commitment to open irrevocable letters of

credit for its account. Each letter of

credit shall reduce the amount available under the Commitment by the maximum amount capable

of being drawn thereunder. The rights and obligations of the parties with respect to each letter of

credit will be governed by the Reimbursement Agreement attached hereto as Exhibit A (which rights

and obligations shall be in addition to the rights and obligations of the

parties hereunder and under the

MLA). The fee for issuing each letter of credit shall be determined at the time

of application.

 

SECTION 9.  Security. In addition to any other security that may otherwise be

required or provided, the Company’s obligations under this Supplement are secured by that Restated

Mortgage and Security Agreement

dated September 15, 1998, from American Crystal Sugar Company to St. Paul Bank

for Cooperatives (now known as CoBank as a result of merger), as Collateral

Agent.

SECTION 10.  Extension Fee. In consideration of extending

the Commitment, the Company agrees to pay to CoBank on the execution hereof, an

extension fee in the amount of $14,069.00 (10bp based on the current balance of $14,068,836.00).

 

IN WITNESS WHEREOF, the parties have caused this Supplement to be executed by their duly authorized officers as of the date shown above.

 

	

  CoBANK, ACB

  	

   

  	

  AMERICAN CRYSTAL SUGAR COMPANY

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

  By:

  	

   

  	

   

  	

  By:

  	

  /s/ Sam Wai

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Title:

  	

   

  	

   

  	

  Title:

  	

  Treasurer

  

 

25

 

Exhibit A

 

LETTER OF CREDIT REIMBURSEMENT

AGREEMENT

 

In

consideration of CoBank issuing one or more letters of credit (each a “Credit”)

for the Company’s account under the Supplement to which this agreement is attached (the “Supplement”), the

Company agrees as follows:

 

1.         The Company will pay to

CoBank in United States currency and in immediately available funds the amount

of each draft drawn or instrument

paid under a Credit.   In addition, the

Company agrees to pay to CoBank such fee for issuing each Credit as CoBank shall prescribe, as well as all customary

charges associated with the issuance of a Credit.   If a Credit is payable in a foreign currency, the Company will pay to CoBank an amount in United

States currency equivalent to CoBank’s selling rate of exchange for that currency.   In addition to the amounts set forth above,

the Company shall pay to CoBank such amounts as CoBank shall determine

are necessary to compensate CoBank for any cost attributable to CoBank issuing

or having outstanding any Credit resulting

from the application of any law or regulation concerning any reserve,

assessment, capital adequacy or similar requirement relating to letters of

credit, reimbursement agreements with respect thereto, or to similar

liabilities or assets of banks, whether

existing at the time of the issuance of a Credit or adopted thereafter.   Each payment hereunder shall be payable on demand

at the place and manner set forth in the Master Loan Agreement between the

parties (the “MLA”) and with interest from

the date of demand to the date paid at CoBank’s National Variable Rate.  The Company hereby authorizes CoBank to

create a loan under the Supplement bearing interest at the variable rate

set forth therein for any sums owing hereunder.

 

2.         Neither CoBank nor any of its correspondents

shall in any way be responsible for the performance by any beneficiary of its obligations to the Company nor for the form,

sufficiency, correctness, genuineness, authority of the person signing,

falsification or legal effect of any

documents called for under a Credit if such documents on their face appear to

be in order.   In addition, CoBank

and its correspondents may receive and accept or pay as complying with the

terms of a Credit any drafts, documents, or certificates, otherwise in order,

signed by any person purporting to be an administrator, executor, trustee in

bankruptcy, debtor in possession, assignee for the benefit of creditors,

liquidator, receiver, or other legal representative of the party authorized

under a Credit to draw or issue such instruments or other documents.

 

3.         In the event the Credit

is a commercial Credit, then, in addition to the other provisions hereof, the

Company:   (i) agrees to obtain or cause to be in

existence insurance on any merchandise described in the Credit against fire and

other usual risks and against any additional risks which CoBank may request;

and (ii) authorizes and empowers CoBank to collect the amount due under any

such insurance and apply the same against any of the Company’s obligations to

CoBank arising under the Credit or otherwise.   In

addition, whether the Credit is a commercial or a standby Credit, the Company

represents and warrants that any required

import, export or foreign exchange licenses or other governmental approvals

relevant to the Credit and the merchandise described

therein have been obtained and that the transactions contemplated thereby are

not prohibited under any law, rule, regulation, order or the like,

including the Foreign Assets Control Regulations of the U.S. Department of

Treasury.

 

4.     All directions and correspondence relating to

a Credit are to be sent at the Company’s risk and CoBank does not assume any responsibility for any inaccuracy, interruption,

error, or delay in transmission or delivery by post, telegraph, cable or other electronic

means, or for any inaccuracy of translation.

 

5.         CoBank shall not be responsible for any act,

error, neglect, default, omission, insolvency or failure in business of any of

its correspondents, and any action taken or

omitted by CoBank or its correspondents under or in connection with a Credit

shall, if taken or omitted with

honesty in fact, be binding on the Company and shall not put CoBank or its

correspondents under any resulting

liability to the Company. In no event shall CoBank be liable for special,

consequential or punitive damages.

 

6.         The Company will

indemnify CoBank against and hold it harmless from all loss, damage, cost, and

expense (including attorneys’ fees and expenses) arising out of (i) its issuance of or any

other action taken by CoBank in connection with a Credit, other than loss or

damage resulting from its gross negligence or willful misconduct, and (ii)

claims or legal proceedings incident to the collection of amounts owed by the Company hereunder, or the

enforcement of CoBank’s rights or the rights of others under a Credit, including, without limitation, legal

proceedings relating to any court order, injunction or other process or decree restraining

or seeking to restrain CoBank from paying any amount under a Credit.

 

7.         In the event:   (i) the Company fails to make any payment

owing hereunder when the same shall become due and payable; (ii) any covenant or

representation or warranty set forth herein 

is breached; (iii)

the “Commitment” (as defined in the Supplement) expires prior to the expiration date of

any Credit; or (iv) an “Event of Default” (as defined in the MLA) occurs 

 

26

 

under

the MLA, then, in any such event, the amount of each Credit, together with any

amounts payable by us in connection therewith, shall, at CoBank’s option, become immediately due and

payable. To the extent that any amount paid by the Company pursuant to this Section 7 shall not then be due

under the terms of a Credit, such payment shall serve as security for the Company’s obligation to indemnify CoBank for any

amounts subsequently disbursed by CoBank pursuant to a Credit. Furthermore,

upon the institution of any legal proceeding described in Section 6(ii) hereof,

the Company will, on demand, assign and

deliver to CoBank, as security for the Company’s obligation to indemnify

CoBank, cash collateral in an amount satisfactory to CoBank.

 

8.          CoBank shall be fully

protected in, and shall incur no liability to the Company for acting upon, any

oral, telephonic, facsimile, cable or other electronic instructions which CoBank in good

faith believes to have been given by any authorized person.  CoBank may, at its option, use any means of

verifying any instructions received by it and may also, at its option, refuse to act on any oral, telephonic,

facsimile, cable or other electronic instructions or any part thereof, without

incurring any responsibility for

any loss, liability or expenses arising out of such refusal.

 

9.          The Uniform Customs and Practice as most

recently published by the International Chamber of Commerce (hereafter called the “UCP”) shall in all respects be deemed a part

hereof as fully as if incorporated herein, and shall apply to the Credits. To

the extent the UCP is inconsistent with the governing law set forth in

the MLA, the UCP shall control.

 

27

 

Loan No. Z269T03A NP

 

SINGLE ADVANCE TERM LOAN SUPPLEMENT

 

THIS SUPPLEMENT to the Master Loan

Agreement dated as of March 31, 2000 (the “MLA”), is entered into as of April

21, 2000, between CoBANK, ACB (“CoBank”) and AMERICAN

CRYSTAL SUGAR COMPANY, Moorhead, Minnesota (the “Company”), and

amends and restates the Supplement dated March 31, 2000 and numbered Z269T03NP.

 

SECTION 1.         The

Term Loan.  This

Supplement is to evidence a term loan to the Company in the original principal

commitment amount of $12,000,000.00 (the “Loan”).  The Loan is currently evidenced by Note No. 30800NP (the “Note”)

and is subject to the terms of that certain Note Agreement dated December 5,

1994 by and among the Company, CoBank’s predecessor (the St. Paul Bank for

Cooperatives), and Bank of North Dakota (the “Note Agreement”).  The outstanding principal balance of the

Loan as of the date hereof is $7,200,000.00.

 

SECTION 2.         Purpose

and Transfer.  The

purpose of this Supplement is to replace the Note and transfer the indebtedness

evidenced thereby to this Supplement. 

As of the date of this Supplement, the Note shall be deemed replaced and

superseded, but the indebtedness evidenced by such Note shall not be deemed to

have been paid off, by this Supplement and the MLA.  The Note Agreement shall remain in full force and effect except

that any reference to the “Loan” shall be deemed to mean the indebtedness

evidenced by this Supplement, and any reference to “Loan Agreement” shall be

deemed a reference to the MLA.  To the

extent that the Note Agreement may be inconsistent with the terms of this

Supplement or the MLA, the terms of the Note Agreement shall control.  All security given to secure the Note shall

secure this Supplement.

 

SECTION 3.         Availability.  The date  for

permitting advances under the Note has expired.  There

is no further availability.

 

SECTION 4.         Interest.

The Company agrees to pay interest on the unpaid balance of the Loan at such

rate or rates as determined in accordance with the terms of the Note

Agreement.  As of the date hereof the

interest rate is fixed at 6.34% per annum and shall remain fixed at such rate

for the period as provided for in the Note Agreement.  All other matters regarding the calculation and payment of

interest shall be in accordance with the terms of the Note Agreement

(including, without limitation, the terms applicable to prepayment of fixed

rate loans prior to pricing maturity dates).

 

SECTION 5.         Promissory

Note.  The Company

promises to repay the Loan in accordance with the repayment terms of the Note

Agreement.  If any installment due date

is not a day on which CoBank is open for business, then such payment shall be

made on the next day on which CoBank is open for business.  In addition to the above, the Company

promises to pay interest on the unpaid principal balance hereof at the times

and in accordance with the terms of the Note Agreement.  This note replaces and supersedes, but does

not constitute payment of the indebtedness evidenced by, the promissory note

set forth in the Supplement being amended and restated hereby.

 

SECTION 6.         Prepayment.  Subject to the terms of

the Note Agreement,  the Loan may be prepaid in whole or in

part on one CoBank business day’s prior written notice.

 

28

 

SECTION 7.         Security.  In addition to any other

security that may otherwise be required or provided, the Company’s obligations

under this Supplement are secured by that Restated Mortgage and Security

Agreement dated September 15, 1998, from American Crystal Sugar Company to St.

Paul Bank for Cooperatives (now known as CoBank as a result of merger), as

Collateral Agent.

 

IN WITNESS WHEREOF, the parties have caused

this Supplement to be executed by their duly authorized officers as of the date

shown above.

 

	

  CoBANK,

  ACB

  	

  AMERICAN

  CRYSTAL SUGAR COMPANY

  
	

   

  
	

  By:

  	

  /s/ Casey Garten

  	

   

  	

  By:

  	

  /s/ Sam Wai

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Title:

  	

  Vice President

  	

   

  	

  Title:

  	

  Treasurer

  	

   

  

 

29

 

Loan No.  Z269S01C

 

STATUSED  REVOLVING CREDIT SUPPLEMENT

 

 

THIS SUPPLEMENT to the Master Loan

Agreement dated March 31, 2000 (the “MLA”), is entered into as of March 27,

2002, between CoBANK, ACB (“CoBank”) and AMERICAN CRYSTAL SUGAR COMPANY,

Moorhead, Minnesota (the “Company”), and amends and restates the Supplement

dated March 28, 2001 and numbered Z269S01B.

 

SECTION 1.         The

Revolving Credit Facility.  On

the terms and conditions set forth in the MLA and this Supplement, CoBank

agrees to make loans to the Company during the period set forth below in an

aggregate principal amount not to exceed, at any one time outstanding, the

lesser of the “Borrowing Base” (as calculated pursuant to the Borrowing Base

Certificate, the form of which is attached hereto as Exhibit A) or

$180,000,000.00 (the “Commitment”). Within the limits of the Commitment, but

subject to the Borrowing Base, the Company may borrow, repay and reborrow.

 

SECTION 2.         Purpose

and Transfer.  The

purpose of the Commitment is to finance the Company’s general corporate

purposes, fund working capital requirements, back the Company’s commercial

paper program, and issue short-term commercial and standby letters of credit.

 

SECTION 3.         Term.  The term of the Commitment

shall be from the date hereof, up to but not including March 30, 2003, or such

later date as CoBank may, in its sole discretion, authorize in writing.

 

SECTION 4.         Interest.  The Company agrees to pay

interest on the unpaid balance of the loans in accordance with one or more of

the following interest rate options, as selected by the Company:

 

(A)          Base Rate

Option.  At a rate per

annum at all times equal to the Base Rate. 

For the purposes hereof, Base Rate means that rate in effect from day to

day defined as the “prime rate” as published from time to time in the Eastern

Edition of The Wall Street Journal as the average prime lending rate for

seventy-five percent (75%) of the United States; thirty (30) largest commercial

banks, or if The Wall Street Journal shall cease publication or cease publishing

the “prime rate” on a regular basis, such other regularly published average

prime rate applicable to such commercial banks as is acceptable to the Lender

in its reasonable discretion.  Loans for

which the Base Rate option is selected are referred to herein as “Base Rate

Loans”.

 

Base Rate Loans shall be:  (a)

in minimum amounts of $5,000,000 and incremental multiples of $1,000,000; and

(b) made available on any Banking Day. 

Interest on Base Rate Loans shall be calculated on the actual number of

days each loan is outstanding on the basis of a year consisting of 360 days and

shall be payable monthly in arrears on the twentieth Banking Day of the

following month.

 

(B)          Quoted Rate Option. 

At a fixed rate per annum at all times equal to the Quoted Rate.  For the purposes hereof, Quoted Rate means a

fixed rate of interest to apply to a loan (referred to herein as a “Quoted Rate

Loan”) for a specified period of time not to exceed thirty (30) days quoted by

CoBank in its sole discretion.

 

Quoted Rate Loans shall be

(i) in minimum amounts of $1,000,000 and incremental multiples of $1,000,000;

and (ii) made available on any Banking Day. 

The Quoted Rate may not necessarily be the lowest rate at which CoBank

funds at that time.

 

30

 

Interest on Quoted Rate

Loans shall be calculated on the actual number of days each loan is outstanding

on the basis of a year consisting of 360 days and shall be payable monthly in

arrears on the twentieth Banking Day of the following month.

 

(C)          LIBOR Option. 

At a fixed rate equal to LIBOR plus the Applicable Margin (as defined

below).  For the purposes hereof, LIBOR

means the rate for deposits in U.S. Dollars, with maturities comparable to the

selected LIBOR Interest Period, that appears on the display designed as page

“3750” of the Telerate Service (or such other page as may replace the 3750 page

of that service of if the Telerate Service shall cease displaying such rates,

such other service or services as may be nominated by the British Bankers’

Association for the purpose of displaying London Interbank Offered Rates for

U.S. Dollar deposits), determined as of 11:00 a.m. London time two Banking Days

prior to the commencement of such LIBOR Interest Period.  “LIBOR Interest Period” means a period of

one, two, three or six months.  LIBOR

pricing will be adjusted for Regulation D reserve requirements.  The Applicable Margin is 70 basis points.  Loans for which the LIBOR option is selected

are referred to herein as “LIBOR Loans”.

 

LIBOR Loans shall

be:  (a) in a minimum amount of

$5,000,000 and incremental multiples of $1,000,000;  (b) made available on three Banking Days prior notice; and (c) be

for periods of one, two, three, or six months. 

Interest on LIBOR Loans shall be calculated on the actual number of days

each loan is outstanding on the basis of a year consisting of 360 days and

shall be payable in arrears upon maturity of the applicable LIBOR Interest

Period, but no less frequently than quarterly. 

The LIBOR option shall be subject to the following limitations:

 

(1)           Notwithstanding anything herein to the contrary, if, on or

prior to the determination of the LIBOR rate for any LIBOR Interest Period,

CoBank determines (which determination shall be conclusive) that quotations of

interest rates in accordance with the definition of LIBOR rate are not being

provided in the relevant amounts or for the relevant maturities for purposes of

determining rates of interest for LIBOR rate advances as provided in this

Supplement, then CoBank shall give the Company prompt notice thereof, and so

long as such condition remains in effect, CoBank shall be under no obligation

to make LIBOR rate loans, convert Base Rate loans into LIBOR rate loans, or

continue LIBOR rate loans, and the Company shall, on the last day(s) of the

then current applicable LIBOR Interest Period(s) for the outstanding LIBOR rate

loans, either prepay such LIBOR rate loans or such LIBOR rate loans shall

automatically be converted into a Base Rate loan in accordance with this

Section 4.

 

(2)           If any law, treaty, rule, regulation or determination of a

court or governmental authority or any change therein or in the interpretation

or application thereof subsequent to the date hereof (each, a “Change in Law”)

shall make it unlawful for CoBank to (a) advance any LIBOR rate loan or (b)

maintain all or any portion of a LIBOR rate loan, then CoBank shall promptly

notify the Company thereof.  In the

former event, any obligation of CoBank to make available any future LIBOR rate

loan shall immediately be canceled (and, in lieu thereof shall be made as a

Base Rate loan or Quoted Rate loan at the option of the Company), and in the

latter event, any such unlawful LIBOR rate loan or portions thereof then

outstanding shall be converted, at the option of the Company, to either a Base

Rate loan or a Quoted Rate loan; provided, however, that if any such Change in

Law shall permit the LIBOR rate to remain in effect until the expiration of the

LIBOR rate period applicable to any such unlawful LIBOR rate loan, then such

LIBOR rate loan shall continue in effect until the expiration of such LIBOR

rate period.  Upon the occurrence of any

of the foregoing events on account of any Change in Law, the Company shall pay

to CoBank immediately upon demand such amounts as may be necessary to

compensate CoBank for any fees, charges, or other costs incurred or payable by

CoBank as a result thereof and which are attributable to any LIBOR rate loans

made available to the Company hereunder.

 

31

 

(3)           If CoBank shall determine that, after the date hereof, the

adoption of any applicable Law, rule or regulation regarding capital adequacy,

or any change therein, or any change in the interpretation or administration

thereof by any governmental authority, central bank or comparable agency

charged with the interpretation or administration thereof, or any request or

directive regarding capital adequacy (whether or not having the force of law)

of any such governmental authority, central bank or comparable agency, has or

would have the effect of reducing the rate of return on capital of CoBank as a

consequence of CoBank’s obligations hereunder to a level below that which

CoBank could have achieved but for such adoption, change, request or directive

(taking into consideration its policies with respect to capital adequacy

existing on the date of this Supplement) by an amount deemed by CoBank to be

material, then from time to time, within fifteen (15) days after demand by

CoBank, the Company shall pay to CoBank such additional amount or amounts as

will compensate CoBank for such reduction. 

CoBank agrees to take reasonable steps to reduce the amount of such

increase, provided, however, that CoBank shall not be required to take any such

step, if in CoBank’s sole opinion, CoBank would suffer an economic loss or any

negative legal or regulatory consequences as a result thereof.  If CoBank is to require the Company to make

payments under this Section then CoBank must make a demand on the Company to make

such payment within ninety (90) days of the later of (1) the date on which such

capital costs are actually incurred by CoBank, or (2) the date on which CoBank

knows, or should have known, that such capital costs have been incurred by

CoBank.

 

The Company shall select the applicable rate option at the time it

requests a loan hereunder and may, subject to the limitations set forth above,

elect to convert balances bearing interest at the variable rate option to one

of the fixed rate options. Upon the expiration of any fixed rate period,

interest shall automatically accrue at the Base Rate unless the amount fixed is

repaid or fixed for an additional period in accordance with the terms hereof.

Notwithstanding the foregoing, unless CoBank otherwise consents in its sole

discretion in each instance, rates may not be fixed for periods expiring after

the maturity date of the loan. In the event CoBank so consents and the

Commitment is not renewed, then each balance so fixed shall be due and payable

on the last day of its fixed rate period, and the promissory note set forth

below shall be deemed amended accordingly. All elections provided for herein

shall be made telephonically or in writing and must be received by 12:00 noon

Company’s local time.  As used in this

Section 4, “Banking Day” means a day on which CoBank is open for business,

dealings in U.S. dollar deposits are being carried out in the London interbank

market, and banks are open for business in New York City and London, England.

 

SECTION 5.         Promissory

Note. The Company promises to repay the unpaid principal

balance of the loans on the first CoBank business day following the last day of

the term of the Commitment.  In addition

to the above, the Company promises to pay interest on the unpaid principal

balance of the loans at the times and in accordance with the provisions set

forth in Section 4 hereof.  This note

replaces and supersedes, but does not constitute payment of the indebtedness

evidenced by, the promissory note set forth in the Supplement being amended and

restated hereby.

 

SECTION 6.         Borrowing

Base Certificate, Etc.  The

Company agrees to furnish a Borrowing Base Certificate to CoBank at such times

or intervals as CoBank may from time to time request.  Until receipt of such a request, the Company agrees to furnish a

Borrowing Base Certificate to CoBank within 30 days after each month end

calculating the Borrowing Base as of the last day of the month for which the

Certificate is being furnished. 

However, if no balance is outstanding hereunder on the last day of such

period, no Report need be furnished. 

Regardless of the frequency of the reporting, if at any time the amount

outstanding under the Commitment exceeds the Borrowing Base, the Company shall

immediately

 

32

 

notify CoBank and repay so much of the loans as is necessary to reduce

the amount outstanding under the Commitment to the limits of the Borrowing

Base.

 

SECTION 7.         Commitment

Fee.  In consideration

of the Commitment, the Company agrees to pay to CoBank a commitment fee on the

average daily unused portion of the Commitment at the rate of 20 basis points

per annum (calculated on a 360 day basis), payable quarterly in arrears by the

20th day following each calendar quarter. The unused amount of the

364-Day facility will be the difference between the 364-Day Commitment and the

sum of the outstanding 364-Day Facility Loans and the undrawn face amount of

all outstanding Letters of Credit.

 

SECTION 8.         Utilization

Fee.  For any day on

which the outstanding principal amount of loans shall be greater than 25% of

the Commitment (but no greater than 50% of the Commitment), the Company shall

pay to CoBank a utilization fee equal to 0.125% per annum (calculated on a 360

day basis) on the aggregate amount outstanding on such day.  For any day on which the outstanding

principal amount of loans shall be greater than 50% of the Commitment, the

Company shall pay to CoBank a utilization fee equal to 0.25% per annum

(calculated on a 360 day basis) on the aggregate amount outstanding on such

day.  Accrued and unpaid utilization

fees, if any, shall be payable quarterly in arrears by the 20th day

following each calendar quarter.

 

SECTION 9.         Letters

of Credit.  In

addition to loans, and if agreeable to CoBank in its sole discretion in each

instance, the Company may utilize the Commitment to open irrevocable letters of

credit for its account.  Each letter of

credit shall reduce the amount available under the Commitment by the maximum

amount capable of being drawn thereunder. 

The rights and obligations of the parties with respect to each letter of

credit will be governed by the Reimbursement Agreement attached hereto as

Exhibit B (which rights and obligations shall be in addition to the rights and

obligations of the parties hereunder and under the MLA).  This Commitment shall expire on March 30,

2003. The fee for issuing each letter of credit shall be 70 basis points of the

face amount of each letter of credit, along with an issuance fee to CoBank, for

its own account, equal to the greater of (a) 1/8% of the face amount of the

letter of credit, or (b) $2,000. The Company promises to repay the outstanding

balance on the Commitment in full on demand, or if no demand is made, then any

time on or before the commitment expiration date of March 30, 2003.

 

IN WITNESS WHEREOF, the parties have caused

this Supplement to be executed by their duly authorized officers as of the date

shown above.

 

	

  CoBANK,

  ACB

  	

  AMERICAN

  CRYSTAL SUGAR COMPANY

  
	

   

  	

   

  
	

  By:

  	

   

  	

   

  	

  By:

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Title:

  	

   

  	

   

  	

  Title:

  	

   

  	

   

  

 

33

 

EXHIBIT “A”

 

[Form of Borrowing Base]

American Crystal Sugar

Company

Monthly Borrowing Base

For the month ended

_______________

 

	

  Trade Accounts Receivables

  	

  $

  	

   

  	

  @ 80%

  	

  $

  	

   

  	

   

  

(a)

Trade Accounts

Receivables are defined as those of the Borrower and all Guarantors which:  (1) arise from the sale and delivery of

inventory on ordinary trade terms; (2) are evidenced by an invoice; (3) are net

of any credit, trade or other allowance given to the account debtor; (4) are not

owing by an account debtor who has become insolvent or is the subject of any

bankruptcy, reorganization, liquidation or like proceeding; (5) are not subject

to any offset or deduction; (6) are not owing by an affiliate of Borrower; (7)

are not owing by an obligor located outside of the U.S. unless the receivable

is supported by a letter of credit issued by a bank acceptable to the Lender;

and (8) are not government receivables. 

The above provisions notwithstanding, Trade Receivables shall also

exclude (i) any accounts that are past due more than 90 days, and (ii) any

contra account regardless of the date;

 

	

  Inventory

  	

  $

  	

   

  	

  (b)

  	

   

  	

   

  

 

Inventory as determined

on the basis of Net Realizable Value, defined as the expected selling price of

an inventory item less expected costs to complete and dispose, as determined in

accordance with GAAP.

 

	

  Crop Payments due Non-members

  and members

  	

  $

  	

   

  	

  (c)

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Net Inventory Value (b-c)

  (d)

  	

  $

  	

   

  	

  @ 75%

  	

  $

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Borrowing Base (a+d)

  	

   

  	

   

  	

   

  	

  $

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Commercial Paper

  (e)

  	

   

  	

   

  	

   

  	

  $

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Seasonal Loan

  (f)

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  CCC

  (g)

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Total Short-term Loans (e+f+g)

  	

  $

  	

   

  	

   

  	

   

  	

   

  
								

 

 

34

 

Exhibit B

 

LETTER OF CREDIT REIMBURSEMENT

AGREEMENT

 

In consideration of CoBank issuing one or more letters

of credit (each a “Credit”) for the Company’s account under the Supplement to

which this agreement is attached (the “Supplement”), the Company agrees as

follows:

 

1.     The Company will pay to CoBank in United

States currency and in immediately available funds the amount of each draft

drawn or instrument paid under a Credit. 

In addition, the Company agrees to pay to CoBank such fee for issuing

each Credit as prescribed in Section 9 of Supplement number Z269S01C, as well

as all customary charges associated with the issuance of a Credit.  If a Credit is payable in a foreign

currency, the Company will pay to CoBank an amount in United States currency

equivalent to CoBank’s selling rate of exchange for that currency.  In addition to the amounts set forth above,

the Company shall pay to CoBank such amounts as CoBank shall determine are

necessary to compensate CoBank for any cost attributable to CoBank issuing or

having outstanding any Credit resulting from the application of any law or

regulation concerning any reserve, assessment, capital adequacy or similar

requirement relating to letters of credit, reimbursement agreements with

respect thereto, or to similar liabilities or assets of banks, whether existing

at the time of the issuance of a Credit or adopted thereafter.  Each payment hereunder shall be payable on

demand at the place and manner set forth in the Master Loan Agreement between

the parties (the “MLA”) and with interest from the date of demand to the date

paid at CoBank’s National Variable Rate. 

The Company hereby authorizes CoBank to create a loan under the

Supplement bearing interest at the variable rate set forth therein for any sums

owing hereunder.

 

2.     Neither

CoBank nor any of its correspondents shall in any way be responsible for the

performance by any beneficiary of its obligations to the Company nor for the

form, sufficiency, correctness, genuineness, authority of the person signing,

falsification or legal effect of any documents called for under a Credit if

such documents on their face appear to be in order.  In addition, CoBank and its correspondents may receive and accept

or pay as complying with the terms of a Credit any drafts, documents, or

certificates, otherwise in order, signed by any person purporting to be an

administrator, executor, trustee in bankruptcy, debtor in possession, assignee

for the benefit of creditors, liquidator, receiver, or other legal

representative of the party authorized under a Credit to draw or issue such

instruments or other documents.

 

3.     In the

event the Credit is a commercial Credit, then, in addition to the other

provisions hereof, the Company:  (i)

agrees to obtain or cause to be in existence insurance on any merchandise

described in the Credit against fire and other usual risks and against any

additional risks which CoBank may request; and (ii) authorizes and empowers

CoBank to collect the amount due under any such insurance and apply the same

against any of the Company’s 

obligations to CoBank arising under the Credit or otherwise.  In addition, whether the Credit is a

commercial or a standby Credit, the Company represents and warrants that any

required import, export or foreign exchange licenses or other governmental

approvals relevant to the Credit and the merchandise described therein have

been obtained and that the transactions contemplated thereby are not prohibited

under any  law, rule, regulation, order

or the like, including the Foreign Assets Control Regulations of the

U.S. Department of Treasury.

 

4.     All

directions and correspondence relating to a Credit are to be sent at the

Company’s risk and CoBank does not assume any responsibility for any

inaccuracy, interruption, error, or delay in transmission or delivery by post,

telegraph, cable or other electronic means, or for any inaccuracy of translation.

 

5.     CoBank

shall not be responsible for any act, error, neglect, default, omission,

insolvency or failure in business of any of its correspondents, and any action

taken or omitted by CoBank or its correspondents under or in connection with a

Credit shall, if taken or omitted with honesty in fact, be binding on the

Company and shall not put CoBank or its correspondents under any resulting

liability to the Company.  In no event

shall  CoBank be liable for special,

consequential or punitive damages.

 

6.     The

Company will indemnify CoBank against and hold it harmless from all loss,

damage, cost, and expense (including attorneys’ fees and expenses) arising out

of (i) its issuance of or any other action taken by CoBank in connection with a

Credit, other than loss or damage resulting from its gross negligence or

willful misconduct, and (ii) claims or legal proceedings incident to the

collection of amounts owed by the Company hereunder, or the enforcement of

CoBank’s rights or the rights of others under a Credit, including, without

limitation, legal proceedings relating to any court order, injunction or other

process or decree restraining or seeking to restrain CoBank from paying any

amount under a Credit.

 

7.     In the

event:  (i) the Company fails to make

any payment owing hereunder when the same shall become due and payable; (ii)

any covenant or representation or warranty set forth herein is breached; (iii)

the “Commitment” (as defined in the Supplement) expires prior to the expiration

date of any Credit; or (iv) an “Event of Default” (as defined in the MLA)

occurs

 

35

 

under the MLA, then, in any such event, the amount of

each Credit, together with any amounts payable by us in connection therewith,

shall, at CoBank’s option, become immediately due and payable. To the extent

that any amount paid by the Company pursuant to this Section 7 shall not then

be due under the terms of a Credit, such payment shall serve as security for

the Company’s obligation to indemnify CoBank for any amounts subsequently

disbursed by CoBank pursuant to a Credit. 

Furthermore, upon the institution of any legal proceeding described in

Section 6(ii) hereof, the Company will, on demand, assign and deliver to

CoBank, as security for the Company’s obligation to indemnify CoBank, cash

collateral in an amount satisfactory to CoBank.

 

8.     CoBank

shall be fully protected in, and shall incur no liability to the Company for

acting upon, any oral, telephonic, facsimile, cable or other electronic instructions

which CoBank in good faith believes to have been given by any authorized

person.  CoBank may, at its option, use

any means of verifying any instructions received by it and may also, at its

option, refuse to act on any oral, telephonic, facsimile, cable or other

electronic instructions or any part thereof, without incurring any

responsibility for any loss, liability or expenses arising out of such refusal.

 

9.     The

Uniform Customs and Practice as most recently published by the International

Chamber of Commerce (hereafter called the “UCP”) shall in all respects be

deemed a part hereof as fully as if incorporated herein, and shall apply to the

Credits.  To the extent the UCP is

inconsistent with the governing law set forth in the MLA, the UCP shall control.

 

36

 

[Form of Borrowing Base]

 

American Crystal Sugar

Company

Monthly Borrowing Base

For the month ended

__________________

 

	

  Trade Accounts Receivables

  	

  $

  	

   

  	

  @ 80%

  	

  $

  	

   

  	

  (a)

  	

   

  

 

Trade Accounts Receivables

are defined as those of the Borrower and all Guarantors which:  (1) arise from the sale and delivery of

inventory on ordinary trade terms; (2) are evidenced by an invoice; (3) are net

of any credit, trade or other allowance given to the account debtor; (4) are

not owing by an account debtor who has become insolvent or is the subject of

any bankruptcy, reorganization, liquidation or like proceeding; (5) are not

subject to any offset or deduction; (6) are not owing by an affiliate of

Borrower; (7) are not owing by an obligor located outside of the U.S. unless

the receivable is supported by a letter of credit issued by a bank acceptable

to the Lender; and (8) are not government receivables.  The above provisions notwithstanding, Trade

Receivables shall also exclude (i) any accounts that are past due more than 90

days, and (ii) any contra account regardless of the date;

 

	

  Inventory

  	

  $

  	

   

  	

  (b)

  	

   

  	

   

  

 

Inventory as determined

on the basis of Net Realizable Value, defined as the expected selling price of

an inventory item less expected costs to complete and dispose, as determined in

accordance with GAAP.

 

	

  Crop Payments due Non-members

  and members

  	

  $

  	

   

  	

  (c)

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Net Inventory Value (b-c)

  	

  $

  	

   

  	

  @ 75%

  	

  $

  	

   

  	

  (d)

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Borrowing Base (a+d)

  	

   

  	

   

  	

   

  	

  $

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Commercial Paper

  	

   

  	

   

  	

   

  	

  $

  	

   

  	

  (e)

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Seasonal Loan

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  (f)

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  CCC

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  (g)

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Total Short-term Loans (e+f+g)

  	

   

  	

   

  	

   

  	

  $

  	

   

  	

   

  	

   

  
										

 

 

37

 

Loan No. Z269T04

 

LETTER OF CREDIT COMMITMENT SUPPLEMENT.

 

THIS SUPPLEMENT to the Master Loan

Agreement dated March 31, 2000  (the

“MLA”), is entered into as of March 31, 2000, between CoBANK, ACB (“CoBank”) and

AMERICAN

CRYSTAL SUGAR COMPANY, Moorhead, Minnesota   (the “Company”).

 

SECTION 1.         The

Letter of Credit.  On

the terms and conditions set forth in the MLA, CoBank agrees to establish a

loan commitment to the Company in an amount not to exceed $31,000,000.00 (the

“Commitment”).  The Commitment shall

expire at 12:00 noon (Company’s local time) on April 30, 2013 or on such later

date as CoBank may, in its sole discretion, authorize in writing.

 

SECTION 2.         Purpose.  The purpose of the

Commitment is to reimburse CoBank in the event of draws on letters of credit

issued by CoBank (or its predecessor)  for the benefit of the Company,  and

to renew, extend and refinance the Company’s obligations to CoBank under the

Company’s existing Letter of Credit Commitment (“Existing Letter of Credit

Commitment”) as currently evidenced by Note No. 30343  (the “Note”) and the Loan Agreement dated March 5, 1999. (the

“Existing Agreement”).  The Company

agrees that on the date when all conditions precedent to CoBank’s obligation to

extend credit hereunder have been satisfied: 

(a) the principal balance outstanding (or any obligations

outstanding as a result of any letters of credit currently in effect) under the

Existing Letter of Credit Commitment shall be transferred to and charged

against this Commitment; (b) all accrued obligations of the Company under the

Existing Letter of Credit Commitment for the payment of interest or other

charges shall be transferred to and become part of the Company’s obligations

under this Supplement as if fully set forth herein; and, (c) the Note and the

Existing Agreement (to the extent applicable to the Note) shall be deemed

replaced and superseded, but the indebtedness evidenced by such Note shall not

be deemed to have been paid off, by this Supplement and the MLA.

 

SECTION

3.         Promissory Note. 

The Company promises to repay all outstanding balances for advances made

in support of outstanding letters of credit, upon demand

 

SECTION 4.         Interest.

The Company agrees to pay interest on the unpaid principal

balance of each loan, from the date of draw to actual repayment on a daily

basis for the actual number of days any portion of the principal is

outstanding.  The unpaid principal

balance shall bear interest at a rate per annum equal at all times to the rate

of interest established by CoBank from time to time as its National Variable

Rate, which Rate is intended by CoBank to be a reference rate and not its

lowest rate.  The National Variable Rate

will change on the date established by CoBank as the effective date of any

change therein and CoBank agrees to notify the Company promptly after any such

change. Interest shall be calculated on the actual number of days each loan is

outstanding on the basis of a year consisting of 360 days and shall be

payable monthly in arrears by the 20th day of the following month.

 

SECTION 5.         Issuance

of Letters of Credit. 

Each letter of credit issued shall reduce the amount available under the

Commitment by the maximum amount capable of being drawn thereunder.  The rights and obligations of the parties

with respect to each letter of credit will be governed by the Reimbursement

Agreement attached hereto as Exhibit A (which rights and obligations shall be

in addition to the rights and obligations of the parties hereunder and under

the MLA).  The fee for issuing each  letter of credit shall be determined CoBank

at the time of issuance.  The Company

promises to repay the outstanding balance on the Commitment in full on demand,

or if no demand is made, then any time on or before the Commitment expiration

date.

 

38

 

SECTION 6.          Security.  In addition to any other

security that may otherwise be required or provided, the Company’s obligations

under this Supplement are secured by that Restated Mortgage and Security

Agreement dated September 15, 1998, from American Crystal Sugar Company to St.

Paul Bank for Cooperatives (now known as CoBank as a result of merger), as

Collateral Agent.

 

IN WITNESS WHEREOF, the parties have caused

this Supplement to be executed by their duly authorized officers as of the date

shown above.

 

	

  CoBANK,

  ACB

  	

  AMERICAN

  CRYSTAL SUGAR COMPANY

  
	

   

  	

   

  
	

  By:

  	

  /s/ Casey Garten

  	

   

  	

  By:

  	

  /s/ Sam Wai

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Title:

  	

  Vice President

  	

   

  	

  Title:

  	

  Treasurer

  	

   

  

 

39

 

Exhibit A

 

LETTER OF CREDIT REIMBURSEMENT

AGREEMENT

 

In consideration of CoBank issuing one or more letters

of credit (each a “Credit”) for the Company’s account under the Supplement to

which this agreement is attached (the “Supplement”), the Company agrees as

follows:

 

1.     The

Company will pay to CoBank in United States currency and in immediately

available funds the amount of each draft drawn or instrument paid under a

Credit.  In addition, the Company agrees

to pay to CoBank such fee for issuing each Credit as CoBank shall prescribe, as

well as all customary charges associated with the issuance of a Credit.  If a Credit is payable in a foreign

currency, the Company will pay to CoBank an amount in United States currency

equivalent to CoBank’s selling rate of exchange for that currency.  In addition to the amounts set forth above,

the Company shall pay to CoBank such amounts as CoBank shall determine are

necessary to compensate CoBank for any cost attributable to CoBank issuing or

having outstanding any Credit resulting from the application of any law or

regulation concerning any reserve, assessment, capital adequacy or similar

requirement relating to letters of credit, reimbursement agreements with

respect thereto, or to similar liabilities or assets of banks, whether existing

at the time of the issuance of a Credit or adopted thereafter.  Each payment hereunder shall be payable on

demand at the place and manner set forth in the Master Loan Agreement between

the parties (the “MLA”) and with interest from the date of demand to the date

paid at CoBank’s National Variable Rate. 

The Company hereby authorizes CoBank to create a loan under the

Supplement bearing interest at the variable rate set forth therein for any sums

owing hereunder.

 

2.     Neither

CoBank nor any of its correspondents shall in any way be responsible for the

performance by any beneficiary of its obligations to the Company nor for the

form, sufficiency, correctness, genuineness, authority of the person signing,

falsification or legal effect of any documents called for under a Credit if

such documents on their face appear to be in order.  In addition, CoBank and its correspondents may receive and accept

or pay as complying with the terms of a Credit any drafts, documents, or

certificates, otherwise in order, signed by any person purporting to be an

administrator, executor, trustee in bankruptcy, debtor in possession, assignee

for the benefit of creditors, liquidator, receiver, or other legal

representative of the party authorized under a Credit to draw or issue such

instruments or other documents.

 

3.     In the

event the Credit is a commercial Credit, then, in addition to the other

provisions hereof, the Company:  (i)

agrees to obtain or cause to be in existence insurance on any merchandise

described in the Credit against fire and other usual risks and against any

additional risks which CoBank may request; and (ii) authorizes and empowers

CoBank to collect the amount due under any such insurance and apply the same

against any of the Company’s 

obligations to CoBank arising under the Credit or otherwise.  In addition, whether the Credit is a

commercial or a standby Credit, the Company represents and warrants that any

required import, export or foreign exchange licenses or other governmental

approvals relevant to the Credit and the merchandise described therein have

been obtained and that the transactions contemplated thereby are not prohibited

under any  law, rule, regulation, order

or the like, including the Foreign Assets Control Regulations of the

U.S. Department of Treasury.

 

4.     All

directions and correspondence relating to a Credit are to be sent at the

Company’s risk and CoBank does not assume any responsibility for any

inaccuracy, interruption, error, or delay in transmission or delivery by post,

telegraph, cable or other electronic means, or for any inaccuracy of

translation.

 

5.     CoBank

shall not be responsible for any act, error, neglect, default, omission,

insolvency or failure in business of any of its correspondents, and any action

taken or omitted by CoBank or its correspondents under or in connection with a

Credit shall, if taken or omitted with honesty in fact, be binding on the

Company and shall not put CoBank or its correspondents under any resulting

liability to the Company.  In no event

shall  CoBank be liable for special,

consequential or punitive damages.

 

6.     The

Company will indemnify CoBank against and hold it harmless from all loss,

damage, cost, and expense (including attorneys’ fees and expenses) arising out

of (i) its issuance of or any other action taken by CoBank in connection with a

Credit, other than loss or damage resulting from its gross negligence or

willful misconduct, and (ii) claims or legal proceedings incident to the

collection of amounts owed by the Company hereunder, or the enforcement of

CoBank’s rights or the rights of others under a Credit, including, without

limitation, legal proceedings relating to any court order, injunction or other

process or decree restraining or seeking to restrain CoBank from paying any

amount under a Credit.

 

7.     In the

event:  (i) the Company fails to make

any payment owing hereunder when the same shall become due and payable; (ii)

any covenant or representation or warranty set forth herein is breached; (iii)

the “Commitment” (as defined in the Supplement) expires prior to the expiration

date of any Credit; or (iv) an “Event of Default” (as defined in the MLA) occurs

under the MLA, then, in any such event, the amount of each Credit, together

with any amounts payable by us in connection therewith, shall, at CoBank’s

option, become immediately due and payable. To the extent that any amount paid

by the Company pursuant to this Section 7 shall not then be due under the terms

of a Credit, such payment shall serve as security for the Company’s obligation

to indemnify CoBank for any amounts subsequently disbursed by CoBank pursuant

to a Credit.  Furthermore, upon the

institution of any legal proceeding described in Section 6(ii) hereof, the

Company will, on demand, assign and deliver to CoBank, as security for the

Company’s obligation to indemnify CoBank, cash collateral in an amount

satisfactory to CoBank.

 

8.     CoBank

shall be fully protected in, and shall incur no liability to the Company for

acting upon, any oral, telephonic, facsimile, cable or other electronic

instructions which CoBank in good faith believes to have been given by any

authorized person.  CoBank may, at its

option, use any means of verifying any instructions received by it and may

also, at its option, refuse to act on any oral, telephonic, facsimile, cable or

other electronic instructions or any part thereof, without incurring any

responsibility for any loss, liability or expenses arising out of such refusal.

 

9.     The

Uniform Customs and Practice as most recently published by the International

Chamber of Commerce (hereafter called the “UCP”) shall in all respects be

deemed a part hereof as fully as if incorporated herein, and shall apply to the

Credits.  To the extent the UCP is

inconsistent with the governing law set forth in the MLA, the UCP shall

control.

 

40

 

(to be placed on Company

letterhead)

 

AMERICAN CRYSTAL SUGAR

COMPANY

 

COMPLIANCE CERTIFICATE

 

To induce CoBank to make

and continue making advances to the Company and to comply with and demonstrate

compliance with the terms, covenants, and conditions of the Loan Agreement and

all Supplements thereto, this financial statement is furnished to the

Bank.  The undersigned certifies that,

(i) this statement was prepared from the books and records of the Association,

is in agreement with them, and is correct to the best of the undersigned’s

knowledge and belief, and (ii) no event has occurred which, with notice or

lapse of time, or both, might become an Event of Default under the Loan

Agreement.

 

 

AMERICAN CRYSTAL SUGAR

 

	

   

  	

   

  	

   

  
	

  Date

  	

   

  	

  (Name/Title)

  

 

 

41

 

[Form of Compliance

Certificate]

 

American Crystal Sugar Company

Quarterly

Compliance Certificate

Term and Seasonal Loans

 

	

  Net Working

  Capital:

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  a) Current

  Assets as measured in accordance with GAAP

  	

   

  	

  $

  	

   

  
	

  b) Current

  Liabilities as measured in accordance with GAAP

  	

   

  	

  $

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  Net Working

  Capital (a-b)

  	

   

  	

  $

  	

   

  

 

Minimum Net Working Capital Required for fiscal quarters

other than fiscal year end = $15,000000.

Minimum Net Working Capital Required for fiscal year end =

$35,000,000.

 

Long-Term Debt Coverage:

 

     Net

Funds

 

	

   

  	

   

  	

   

  	

  Year 1

  	

   

  	

  Year 2

  	

   

  	

  Year 3

  	

   

  
	

  a) 

  	

  Unit retains

  	

   

  	

  +

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  b)

  	

  Depreciation and amortization

  	

   

  	

  +

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  c)

  	

  Net income from non-member business and member

  business tax timing differences

  	

   

  	

  +

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  d)

  	

  Decrease in investments in other cooperatives

  (excluding subsidiaries)

  	

   

  	

  +

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  e)

  	

  Net revenue from the sale of stock

  	

   

  	

  +

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  f)

  	

  Increase in investments in other cooperatives

  (excluding subsidiaries)

  	

   

  	

  (

  	

  )

  	

  (

  	

  )

  	

  (

  	

  )

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  g)

  	

  Net loss from non-member business and member

  business tax timing differences

  	

   

  	

  (

  	

  )

  	

  (

  	

  )

  	

  (

  	

  )

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  h)

  	

  Provision for income tax

  	

   

  	

  (

  	

  )

  	

  (

  	

  )

  	

  (

  	

  )

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  i)

  	

  Members’ investment retirements

  	

   

  	

  (

  	

  )

  	

  (

  	

  )

  	

  (

  	

  )

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

  Sum (a through i)

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

  Average Net Funds

  	

  $

  	

   

  	

  j

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

  Long-term Debt

  	

  $

  	

   

  	

  k

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

  Ratio (k / j)

  	

   

  	

   

  	

  :l

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  

 

42

 

Long-Term Debt to Capitalization:

 

	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  a)    Long-term debt (excluding current

  maturities)

  as determined in accordance with GAAP

  	

  $

  	

   

  
	

   

  	

   

  	

   

  
	

  b)   Total equity as measured in accordance with

  GAAP

  	

  $

  	

   

  
	

   

  	

   

  	

   

  
	

  c)    Capitalization (a + b)

  	

  $

  	

   

  
	

   

  	

   

  	

   

  
	

  Long-Term Debt

  to Capitalization (a / c)

  	

   

  	

  :1.0

  
					

 

Leverage Ratio (Term Pricing Only)

	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  a)    Long-term Debt

  	

  $

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  b)   Actual Less Minimum Net Working Capital

  	

  $

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  c)    Adjusted Long-term Debt (a — b)

  	

  $

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  d)   Total Member Investment

  	

  $

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  e)    Estimated Unit Retains

  	

  $

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  f)    Adjusted Members Investment (d + e)

  	

  $

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  g)   Adjusted Leverage Ratio (c / f)

  	

   

  	

  :1.0

  

 

Pricing Grid (Term Only)

 

A.    

>     1.35:1___________B.     1.20:1___________ C.     < 1.20:1___________ D.     < 1.0:1___________

 

43

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