Document:

Exhibit
10.3

APPLICATION
SERVICES AGREEMENT

dated as of
February 5, 2007,

between

HAWAIIAN TELCOM

and

ACCENTURE

TABLE OF
CONTENTS

	
   

  	
   

  	
  Page

  
	
   

  	
   

  
	
  ARTICLE
  I DEFINITIONS AND CONSTRUCTION

  	
  2

  
	
  1.1

  	
  Definitions

  	
  2

  
	
  1.2

  	
  General Construction

  	
  2

  
	
  1.3

  	
  Statements of Background and Objectives

  	
  2

  
	
  1.4

  	
  Agreement Structure

  	
  2

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  II AGREEMENT TERM; RENEWAL

  	
  2

  
	
  2.1

  	
  Agreement Term

  	
  2

  
	
  2.2

  	
  Renewal

  	
  3

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  III SERVICES

  	
  3

  
	
  3.1

  	
  Recovery Services

  	
  3

  
	
  3.2

  	
  Enhancement Services

  	
  3

  
	
  3.3

  	
  AM Services

  	
  3

  
	
  3.4

  	
  Acceptance

  	
  3

  
	
  3.5

  	
  Exclusivity

  	
  3

  
	
  3.6

  	
  Reliance on Instructions

  	
  4

  
	
  3.7

  	
  Hawaiian Telcom Service Responsibilities

  	
  5

  
	
  3.8

  	
  Savings Clause

  	
  5

  
	
  3.9

  	
  Third Party Products

  	
  7

  
	
  3.10

  	
  Accenture’s Cooperation with Hawaiian
  Telcom and Third Parties

  	
  7

  
	
  3.11

  	
  Authorized Users; Hawaiian Telcom
  Affiliates

  	
  7

  
	
  3.12

  	
  Security Services

  	
  8

  
	
  3.13

  	
  Knowledge Sharing

  	
  8

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  IV CHANGES TO THE SERVICES

  	
  9

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  System Change Management Process

  	
  9

  
	
  4.2

  	
  Contract Change Control Process

  	
  9

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  V PERFORMANCE METRICS

  	
  11

  
	
  5.1

  	
  AM Service Levels

  	
  11

  
	
  5.2

  	
  Recovery Services Balanced Scorecard

  	
  11

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  VI RESOURCES

  	
  12

  
	
  6.1

  	
  Hawaiian Telcom Facilities

  	
  12

  
	
  6.2

  	
  Hawaiian Telcom-Provided Equipment

  	
  14

  
	
  6.3

  	
  Hawaiian Telcom Technical Elements

  	
  14

  
	
  6.4

  	
  General Terms; Hawaiian Telcom Warranty Disclaimer

  	
  15

  
	
  6.5

  	
  Accenture-Provided Technical Elements.

  	
  16

  
	
  6.6

  	
  Consents

  	
  18

  
	
  6.7

  	
  Asset Obligations

  	
  18

  
	
  6.8

  	
  Risk of Loss

  	
  18

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  VII SERVICE LOCATIONS

  	
  19

  
	
  7.1

  	
  Service Locations

  	
  19

  
	
  7.2

  	
  Relocation of Service Locations

  	
  19

  
	
  7.3

  	
  Relocation Resulting from Changes in Laws
  and Regulations

  	
  19

  

 

 

	
  ARTICLE
  VIII RELATIONSHIP GOVERNANCE

  	
  20

  
	
  8.1

  	
  Accenture Account Representative

  	
  20

  
	
  8.2

  	
  Hawaiian Telcom Account Representative

  	
  20

  
	
  8.3

  	
  Establishment of Service Management
  Steering Committee

  	
  20

  
	
  8.4

  	
  Accenture Personnel

  	
  21

  
	
  8.5

  	
  Accenture Personnel

  	
  22

  
	
  8.6

  	
  Background Checks

  	
  23

  
	
  8.7

  	
  Reports

  	
  23

  
	
  8.8

  	
  Meetings and Conference Calls

  	
  23

  
	
  8.9

  	
  Accenture Subcontractors

  	
  23

  
	
  8.10

  	
  No Solicitation

  	
  24

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  IX PRICE & PAYMENT

  	
  24

  
	
  9.1

  	
  Service Charges

  	
  24

  
	
  9.2

  	
  Reimbursement of Expenses

  	
  25

  
	
  9.3

  	
  Pass-Through Expenses

  	
  25

  
	
  9.4

  	
  Invoices; Method of Payment; Finance
  Charges

  	
  25

  
	
  9.5

  	
  Proration

  	
  25

  
	
  9.6

  	
  Unused Credits

  	
  25

  
	
  9.7

  	
  Disputed Charges

  	
  26

  
	
  9.8

  	
  Taxes

  	
  26

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  X REPRESENTATIONS, WARRANTIES AND COVENANTS

  	
  29

  
	
  10.1

  	
  Representations and Warranties

  	
  29

  
	
  10.2

  	
  Covenants

  	
  31

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XI CONFIDENTIALITY; SAFEGUARDING OF DATA

  	
  32

  
	
  11.1

  	
  Confidentiality

  	
  32

  
	
  11.2

  	
  Hawaiian Telcom Data

  	
  34

  
	
  11.3

  	
  Unauthorized Acts

  	
  35

  
	
  11.4

  	
  Employees and Contracts

  	
  35

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XII PROPRIETARY RIGHTS

  	
  36

  
	
  12.1

  	
  Ownership of Deliverables

  	
  36

  
	
  12.2

  	
  Residuals Clause

  	
  36

  
	
  12.3

  	
  Hawaiian Telcom IP Rights

  	
  37

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XIII AUDIT RIGHTS

  	
  37

  
	
  13.1

  	
  Operational Audits

  	
  37

  
	
  13.2

  	
  Financial Audits

  	
  38

  
	
  13.3

  	
  General Principles Regarding Audits

  	
  38

  
	
  13.4

  	
  Remedial Action

  	
  39

  
	
  13.5

  	
  Accenture Audits

  	
  39

  
	
  13.6

  	
  Survival of Audit Rights

  	
  39

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XIV INDEMNIFICATION

  	
  40

  
	
  14.1

  	
  Bodily Injury and Property Damage

  	
  40

  
	
  14.2

  	
  Indemnification by Accenture

  	
  40

  
	
  14.3

  	
  Indemnification by Hawaiian Telcom

  	
  40

  
	
  14.4

  	
  Accenture’s Infringement Indemnity

  	
  41

  
	
  14.5

  	
  Hawaiian Telcom Infringement Indemnity

  	
  42

  
	
  14.6

  	
  Indemnification Procedures

  	
  43

  
	
  14.7

  	
  Subrogation

  	
  44

  

 

 

	
  ARTICLE
  XV LIMITATION OF LIABILITY AND RISK ALLOCATION

  	
  44

  
	
  15.1

  	
  Liability Cap

  	
  44

  
	
  15.2

  	
  Limitation on Category of Liability

  	
  46

  
	
  15.3

  	
  Contractual Statute of Limitation

  	
  46

  
	
  15.4

  	
  Replenishment of Liability Cap

  	
  46

  
	
  15.5

  	
  Recourse

  	
  46

  
	
  15.6

  	
  Reasonable Allocations

  	
  46

  
	
  15.7

  	
  Insurance Coverage

  	
  46

  
	
  15.8

  	
  Insurance Terms

  	
  47

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XVI TERMINATION

  	
  48

  
	
  16.1

  	
  Termination for Cause by Hawaii Telcom

  	
  48

  
	
  16.2

  	
  Termination for Cause by Accenture

  	
  49

  
	
  16.3

  	
  Termination Upon Change of Control

  	
  50

  
	
  16.4

  	
  Termination Assistance Services

  	
  50

  
	
  16.5

  	
  Change in Laws

  	
  50

  
	
  16.6

  	
  Survival of Provisions

  	
  50

  
	
  16.7

  	
  Equitable Remedies.

  	
  51

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XVII DISPUTES

  	
  51

  
	
  17.1

  	
  Informal Dispute Resolution

  	
  51

  
	
  17.2

  	
  Alternative Dispute Resolution

  	
  52

  
	
  17.3

  	
  Exceptions to Dispute Resolution
  Procedure

  	
  52

  
	
  17.4

  	
  Continued Performance

  	
  52

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XVIII FORCE MAJEURE

  	
  52

  
	
  18.1

  	
  Force Majeure Events

  	
  52

  
	
  18.2

  	
  Force Majeure Notice

  	
  52

  
	
  18.3

  	
  Strike, Lockout

  	
  53

  
	
  18.4

  	
  Critical Services

  	
  53

  
	
  18.5

  	
  Force Majeure and Charges

  	
  53

  
	
  18.6

  	
  Disaster Recovery and Business Continuity
  Plan

  	
  53

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XIX COMPLIANCE WITH LAWS AND REGULATIONS

  	
  53

  
	
  19.1

  	
  Compliance with Laws

  	
  53

  
	
  19.2

  	
  US Sarbanes-Oxley

  	
  53

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XX MISCELLANEOUS

  	
  54

  
	
  20.1

  	
  Hawaiian Telcom Affiliates

  	
  54

  
	
  20.2

  	
  Injunctive Relief

  	
  54

  
	
  20.3

  	
  Binding Nature and Assignment

  	
  54

  
	
  20.4

  	
  Cooperation; Consents

  	
  54

  
	
  20.5

  	
  Relationship of Parties

  	
  55

  
	
  20.6

  	
  Notice

  	
  55

  
	
  20.7

  	
  Severability

  	
  56

  
	
  20.8

  	
  No Third-Party Beneficiaries

  	
  56

  
	
  20.9

  	
  Publicity

  	
  56

  
	
  20.10

  	
  Service Marks

  	
  56

  
	
  20.11

  	
  Amendment

  	
  56

  
	
  20.12

  	
  Entire Agreement

  	
  56

  
	
  20.13

  	
  Governing Law

  	
  57

  
	
  20.14

  	
  Inconsistencies

  	
  57

  
	
  20.15

  	
  Counterparts

  	
  57

  

 

Exhibits

	
  Exhibit
  A

  	
  Definitions

  
	
  Exhibit
  B-1

  	
  Recovery
  Services Statement of Work

  
	
   

  	
  Attachment
  B-1.1 – Reserved

  
	
   

  	
  Attachment
  B-1.2 – Balanced Scorecard

  
	
  Exhibit
  B-2

  	
  Enhancement
  Services Statement of Work

  
	
   

  	
  Attachment
  B-2.1 – Form of Enhancement Capacity Work Order

  
	
  Exhibit
  B-3

  	
  AM
  Services Statement of Work

  
	
   

  	
  Attachment
  B-3.1 – Service Level Methodology

  
	
   

  	
  Attachment
  B-3.2 – Service Level Definitions and Metrics

  
	
   

  	
  Attachment
  B-3.3 – Transition Plan

  
	
   

  	
  Attachment
  B-3.4 – Reserved

  
	
   

  	
  Attachment
  B-3.5 – System and Process Queues

  
	
  Exhibit
  B-4

  	
  Cross
  Functional Services Statement of Work

  
	
  Exhibit
  B-5

  	
  Termination
  Assistance Services

  
	
  Exhibit
  C

  	
  Acceptance

  
	
  Exhibit
  D

  	
  Charges

  
	
   

  	
  Attachment
  D-1 – Recovery Services Charges

  
	
   

  	
  Attachment
  D-2 – Enhancement Services Rates

  
	
   

  	
  Attachment
  D-3 – Non-Discretionary Services Charges

  
	
   

  	
  Attachment
  D-4 – Discretionary AM Services Rates

  
	
  Exhibit
  E

  	
  Service
  Locations

  
	
  Exhibit
  F

  	
  Resources

  
	
  Exhibit
  G

  	
  Hawaiian
  Telcom Policies

  
	
   

  	
  Attachment
  G-1.1- Computer and Enterprise Network Security

  
	
   

  	
  Attachment
  G-1.2 – Accenture Security Access Principles

  
	
   

  	
  Attachment
  G-1.3 – Application of Security Policy and Principles

  
	
   

  	
  Attachment
  G-2- Hawaiian Telcom Facilities Policies

  
	
  Exhibit
  H

  	
  Hawaiian
  Telcom Facilities

  
	
  Exhibit
  I

  	
  In-Scope
  Applications

  
	
  Exhibit
  J

  	
  Accenture
  Background Investigations and Examinations Policies & Standards

  
	
  Exhibit
  K

  	
  Form
  of Invoice

  
	
  Exhibit
  L

  	
  Verizon
  Sublicense

  
	
  Exhibit
  M

  	
  Accenture
  Competitors

  
	
  Exhibit
  N

  	
  Approved
  Accenture Subcontractors

  
	
  Exhibit
  O

  	
  Reporting

  
	
  Exhibit
  P

  	
  Application
  Architecture

  
	
  Exhibit
  Q

  	
  Other
  Terms

  

 

APPLICATION SERVICES AGREEMENT

THIS APPLICATION SERVICES
AGREEMENT (the “Agreement”), effective as of February 5, 2007 (the “Effective
Date”), is between Hawaiian Telcom Communications, Inc., a Delaware
Corporation (“Hawaiian Telcom”), and Accenture LLP, an Illinois limited
liability partnership (“Accenture”). 
Accenture and Hawaiian Telcom may be referred to in this Agreement
individually as a “Party” and together as the “Parties.”

Background Statement and Objectives

This Agreement provides
the terms and conditions under which Accenture shall provide, and Hawaiian
Telcom shall purchase, certain specified application-related services.  Hawaiian Telcom and Accenture have agreed
upon the following goals and objectives for this Agreement:

(a)               providing for the orderly transfer of certain
applications responsibilities from Hawaiian Telcom’s current supplier to
Accenture;

(b)              the Parties establishing a flexible contractual
relationship and Hawaiian Telcom having a reasonably flexible cost pricing
structure with centralized management of the Services to facilitate achievement
of Hawaiian Telcom’s goal of creating effective and efficient business
processes and back-office infrastructure;

(c)               establishing a Service delivery process that provides
value to, and is highly responsive to, the demands of Hawaiian Telcom’s
business, including being responsive to changes in the business environment, in
technology and in methods for providing technology services;

(d)              establishing a process for identifying certain
opportunities for savings and Service improvements through judicious and timely
implementation of mutually agreed upon new technology initiatives, including
emerging technologies that can be implemented at Hawaiian Telcom to support
Hawaiian Telcom initiatives;

(e)               performing the Services in a manner that is flexible,
cost effective and efficient with predictable pricing for the Services;

(f)                 the Parties establishing and maintaining high levels
of communication so as to facilitate the delivery of Services in an efficient
and cost effective manner;

(g)              providing for the orderly transfer of Services to
Hawaiian Telcom (or Hawaiian Telcom’s third party designee(s)) upon Removal
from Scope or the expiration or termination of this Agreement; and

(h)              the Parties developing a relationship, intended to
include permitting Accenture to have an opportunity to be considered for new
services that Hawaiian Telcom may require from time to time.

 1
 

Terms and Conditions

In consideration of the
mutual covenants set forth below, the Parties, intending to be bound, agree as
follows:

ARTICLE I

DEFINITIONS AND CONSTRUCTION

1.1                               Definitions.  As
used in this Agreement, the terms set forth in Exhibit A (Definitions)
shall have the respective meanings set forth therein.  Other terms used in this Agreement are
defined in the context in which they are used and shall have the meanings
therein indicated.

1.2                               General Construction.  The article and section headings and the table of
contents contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.  As used in this Agreement, unless otherwise
provided to the contrary, (a) all references to days, months or quarters shall
be deemed references to calendar days, months or quarters and (b) any reference
to a “Section,” “Article,” “Exhibit” or “Attachment” shall be deemed to refer
to a section or article of this Agreement or an exhibit or attachment to this
Agreement.  Unless the context otherwise
requires, as used in this Agreement, all terms used in the singular shall be
deemed to refer to the plural as well, and vice versa.  The words “hereof,” “herein” and “hereunder”
and words of similar import referring to this Agreement refer to this Agreement
as a whole and not to any particular provision of this Agreement.  Whenever the words “include,” “includes” or
“including” are used in this Agreement, they shall be deemed to be followed by
the words “without limitation.” 
References in this Agreement to “$” shall be
deemed a reference to United States dollars
unless otherwise specified.

1.3                               Statements of Background
and Objectives.  The statements of background and
objectives set forth in the Background Statement and Objectives of this
Agreement are intended to be a general introduction to this Agreement and are
not intended to expand the scope of the Parties’ obligations under this
Agreement or to alter the plain meaning of the provisions of this
Agreement.  To the extent any provisions
of this Agreement do not address a particular circumstance or are otherwise
unclear or ambiguous, such provision(s) are to be interpreted and construed in
light of the statements of background and objectives set forth in the
Background Statement and Objectives section of this Agreement.

1.4                               Agreement
Structure.  This Agreement consists of:  (a) Terms and Conditions and Exhibits (other
than the Statements of Work) which apply generally to all Services provided
under this Agreement; (b) one or more statement(s) of work attached as Exhibits
B (Statements of Work) that describe(s) the Services and contain(s) terms and
conditions applicable to the Services described thereunder (each, a “Statement
of Work” or “SOW”); (c) one or more work order(s) issued under this
Agreement or any such Statement of Work and signed by both Parties (each, a “Work
Order”) further defining specific quantities and types of Services
purchased under this Agreement or any such Statement of Work, and (d) any other
documents incorporated from time to time by reference into clauses (a), (b) or
(c) above.

ARTICLE II

AGREEMENT TERM; RENEWAL

2.1                               Agreement Term.  The term of this Agreement shall commence on the
Effective Date and end seventeen (17) months following the Effective Date,
unless earlier terminated in accordance with the terms of this Agreement (the “Term”).  The term of each of the initial Statements of
Work is set forth in the respective Statement of Work.  Any additional Statement of Work shall
specify its term.  If any Statement of
Work has a stated term which extends beyond the Term, the Term shall continue
until the expiration of any such Statement of Work for the purpose of
completing such Statement of Work, provided that it will not extend the term of
any other Statement of Work.

 2
 

2.2                               Renewal.  Four (4) months prior to the expiration of the
Agreement, the Parties shall meet to discuss extending Accenture’s provision of
the AM Services to a five (5) year term. 
The Parties may mutually agree to extend the Term; provided that such
written agreement is reached at least ninety (90) days prior to the
then-current expiration date.

ARTICLE III

SERVICES

During
the term of each applicable SOW, Accenture shall perform for
Hawaiian Telcom the services, functions and activities of Accenture as
described in this Agreement and such Statement of Work (collectively, the “Services”).  The initial Services consist of (i) Recovery
Services; (ii) Enhancement Services; and (iii) AM Services, each as
further described in the applicable SOW. 
  The Services shall include the services,
functions, and activities not specifically described in this Agreement but
that are inherent in the Services (which will be deemed to be implied by and
included within the scope of the Services as if specifically described in this
Agreement).  Subject to the foregoing, the Services shall
not include any other services not identified in an SOW.  Without limiting the generality of the
immediately preceding sentence, the following activities shall be solely the
responsibility of Hawaiian Telcom and are not included in the Services: (a) IT
strategic planning; (b) demand management, including the prioritization of user
requests (provided that although Hawaiian Telcom will be responsible for the
ultimate decisions regarding demand management, Accenture will consult with and
provide reasonable input to Hawaiian Telcom with respect thereto); (c) business
liaison; (d) user acceptance testing; (e) user training; and (f) infrastructure
services, including Level 1 Help desk services.

3.1                               Recovery Services.  Accenture shall provide the Recovery Services, as
further described in Exhibit B-1 (Recovery Services SOW), for the fixed
price therefor set forth in Exhibit D (Charges).

3.2                               Enhancement Services.  Accenture shall provide the Enhancement Services, as
further described in Exhibit B-2 (Enhancement Services SOW) and Exhibit
D (Charges).

3.3                               AM Services.  Accenture shall provide the AM
Services, as further described in Exhibit B-3 (AM Services SOW), for the
fixed price therefor set forth in Exhibit D (Charges).  The AM Services consist of Transition
Services and Steady State Services, which comprise the Non-Discretionary
Services and Discretionary Services.  Commencing on the Effective Date,
Accenture shall provide the Transition Services as described in Exhibit B-3
(AM Services SOW).  Upon completion of
the Transition Services or as otherwise provided for in the Transition Plan (as
defined in Exhibit B-3 (AM Services SOW)), Accenture shall provide the Steady
State Services described in Exhibit B-3 (AM Services SOW).

3.4                               Acceptance.  The process, rights and obligations associated with
the acceptance ofDeliverables shall be as set
forth in Exhibit C (Acceptance).

3.5                               Exclusivity.  All references to AM Services in this Section 3.5
shall mean the Non-Discretionary AM Services only.

(a)                                  Commitment.  Hawaiian
Telcom agrees that it may not: (a) terminate any AM Services for convenience,
or (b) remove any AM Services from the scope of the Services for Hawaiian
Telcom’s convenience (collectively, “Remove From Scope”), except as
specified in Section 3.5(b).  The
foregoing does not limit any other rights Hawaiian Telcom may have to terminate
(or otherwise reduce the consumption of) any other Services in accordance with
the terms of this Agreement.

 3
 

(b)                                 Permitted Removal of Scope. 
Hawaiian Telcom may Remove From Scope portions of the AM Services to the
extent the result of such Removal From Scope would be that the total of the
amount of Charges for the AM Services that Hawaiian Telcom had previously
Removed From Scope, plus the Charges for the AM Services that are then proposed
to be Removed From Scope, as a percentage of the total Charges for AM Services
(on an annualized basis as if no Services had ever been Removed From Scope)
(the “Presumptive Annual Charges”) (as determined in accordance with Section 3.5(d)) would not
exceed twenty percent (20%) during the Term; provided,
however, that any AM Services performed
on a Retired Application shall not be deemed to be Removed From Scope.  The removal of a Retired Application from the
scope of Services shall be managed through the Contract Change Control
Process.  The Parties acknowledge that
Accenture shall have no obligations with respect to any Retired Applications.

(c)                                  Notice.  Hawaiian Telcom will give
Accenture prior written notice of each Removal From Scope of any Services (a “Removal
From Scope Notice”).  The Removal
From Scope Notice will specify the effective date of the Removal From Scope,
which may not be less than forty-five (45) calendar days following Accenture’s
receipt of such notice.  Notwithstanding
the foregoing, if Accenture reasonably believes that it will not be able,
through the use of Reasonable Efforts, to redeploy the personnel who are at the
time of Accenture’s receipt of the Removal From Scope Notice performing
Services that Hawaiian Telcom has indicated will be Removed From Scope, then
Accenture may delay the effectiveness of the Removal From Scope until a date
that is no more than ninety (90) days after Accenture’s receipt of the Removal
From Scope Notice, provided that Accenture gives notice of such delay as soon
as it becomes apparent Accenture will not be able to redeploy the applicable
personnel, provided such notice may not be provided later than fifteen (15)
days prior to the expiration of the forty-five (45) day period.  The permitted Removal From Scope shall be
managed through the Contract Change Control Process and System Change
Management Process.  So long as Hawaiian
Telcom does not Remove From Scope more AM Services than permitted in Section
3.5(b), there will be no restriction on which particular AM Services
Hawaiian Telcom may Remove From Scope. 
Accenture will provide Termination Assistance Services with respect to
any AM Services Removed From Scope.

(d)                                 For the purposes of Section 3.5(b),
Charges for particular Services on an annualized basis shall be calculated by
summing the prior twelve (12) months of those Charges or, if those Services
have not been provided for all of the prior twelve (12) months, then the
calculation would be as follows: 
(average monthly Charge for such Services (based on the most current,
available monthly charge data)) x (12). 
The Presumptive Annual Charges will be based on the Charges as of the
Effective Date (e.g., they will not include
additional Charges which are added pursuant to the Contract Change Control
Process), adjusted downward to reflect any reduction in the scope of AM
Services resulting from the removal of Retired Applications.

3.6                               Reliance on
Instructions.  In performing its obligations under this
Agreement, Accenture shall be entitled to reasonably rely upon information
provided to Accenture by the Hawaiian Telcom Account Representative or, as to
areas of competency specifically identified in writing by the Hawaiian Telcom
Account Representative, by any other Hawaiian Telcom personnel identified in
writing by the Hawaiian Telcom Account Representative, from time to time, as
having authority to provide the same on behalf of

 4
 

Hawaiian Telcom in
such person’s area of competency, provided in each case that such information
relates primarily to Hawaiian Telcom’s business requirements as opposed to
means of performing the Services, and provided further that in no event will
any such instructions be deemed to modify or supplement any aspect of this
Agreement (which includes all Exhibits) unless the Parties have also complied
with the requirements of Article IV and/or Section 20.11, as applicable.

3.7                               Hawaiian Telcom Service
Responsibilities.  In addition to the obligations specified
elsewhere in this Agreement, during the Term and in connection with Accenture’s
performance of its obligations hereunder, Hawaiian Telcom shall, at its own
cost and expense, perform the obligations, and retain the responsibilities,
identified as customer responsibilities in the applicable Statement of Work
(collectively, the “Hawaiian Telcom Service Responsibilities”).

3.8                               Savings Clause.

(a)                                  No Termination. 
Except as provided in Section 16.2, no failure by Hawaiian
Telcom and any of its Affiliates to perform any of their obligations under this
Agreement shall be deemed to be grounds for any termination of the Agreement by
Accenture.

(b)                                 Hawaiian Telcom Knowledge and Skill.  Hawaiian
Telcom acknowledges that it has knowledge and skill particular to certain
business practices and information involved in the Services and Deliverables
and shall provide Accenture, at Accenture’s reasonable request, with reasonable
input from such Hawaiian Telcom’s subject matter resources to the extent
necessary for Accenture’s performance of Services and creation of Deliverables.  Hawaiian Telcom shall be responsible for
ensuring that the scope of Services and Deliverables meet Hawaiian Telcom’s
requirements.  Notwithstanding the
foregoing, the fact that Hawaiian Telcom has such knowledge and skill shall not
operate to shift to Hawaiian Telcom any responsibilities of Accenture that
would otherwise by responsibilities of Accenture under this Agreement unless a
written amendment to this Agreement is executed by the Parties to effect such a
shift.  Likewise, the fact that Accenture
has knowledge and skill in an area that is outside of the scope of the Services
shall not operate to shift to Accenture any responsibilities of Hawaiian Telcom
under this Agreement, unless a written amendment to this Agreement is executed
by the Parties to effect such a shift.

(c)                                  Excused Performance. 
Accenture’s failure or delay in performing any of its obligations under
this Agreement shall be excused if and to the extent that one of the events
specified in Section 3.8(c)(i) (a “Possible Excuse”) occurs and
the relevant conditions specified in this Section 3.8(c) are satisfied:

(i)                                     Such Accenture failure or delay results from,
and only to the extent such Accenture failure or delay would not have occurred
but for, the following:

(1)                                  Hawaiian Telcom’s failure to perform any
responsibilities set forth in this Agreement (including the failure to perform
within the specified time period, or if no time period is specified, within a
reasonable time);

(2)                                  Hawaiian Telcom’s direction to Accenture to
take or refrain from taking certain actions, subject to Section 3.6, or
to reallocate or reprioritize Accenture resources;

 5
 

(3)                                  acts or omissions of Hawaiian Telcom third
party vendors (which the Parties agree includes the failure of a Hawaiian
Telcom third party vendor to cooperate with Accenture), except to the extent
such acts or omissions are directed by Accenture;

(4)                                  Hawaiian Telcom’s failure to obtain Required
Consents which Hawaiian Telcom is obligated to secure;

(5)                                  any matter constituting a Force Majeure
Event; or

(6)                                  the applicability of any other provision of
this Agreement that expressly provides for relief from nonperformance or
service levels in accordance with such provision;

(ii)                                  Accenture provides Hawaiian Telcom with
reasonable written notice promptly upon becoming aware of the adverse impact
the Possible Excuse has or is likely to have on Accenture’s ability to perform
its obligations under this Agreement and the specific obligations which are at
risk; provided that a delay in providing Hawaiian Telcom with such notice shall
not operate to deny Accenture the excuse provided by this Section 3.8(c)
except to the extent such delay prejudices Hawaiian Telcom’s ability to cure
the Possible Excuse; and

(iii)                               Accenture uses Reasonable Efforts to perform notwithstanding (except to
the extent that Hawaiian Telcom directs Accenture otherwise in writing), in
which case Hawaiian Telcom shall compensate Accenture for its reasonable
incremental Out-of-Pocket Expenses incurred in making the efforts under Section 3.8(c)(iii),
if such failure to perform is a one-time or non-recurring event.  However, if such failure to perform occurs on
a recurring basis or where the total costs and expenses incurred under this
provision exceed $100,000.00, Accenture’s performance of such activities shall be
deemed to constitute new services for which Accenture shall be equitably
compensated pursuant to Article IV of this Agreement, provided that,
with respect to Accenture’s performance of Hawaiian Telcom’s obligations,
Accenture so notifies Hawaiian Telcom in writing in advance of incurring such
costs (e.g., Hawaiian Telcom will not be
responsible for payment for any Charges with respect to Accenture’s performance
of Hawaiian Telcom’s obligations, other than the Out-of-Pocket Expenses
referred to above, and Accenture is not obligated to perform any such
obligation, unless and until the Parties enter into a formal Contract Change).

Accenture acknowledges
that Hawaiian Telcom may rectify (or cause to be rectified) a Possible Excuse,
in which case Accenture will not be entitled to any further excuse beyond that
to which it became previously entitled under this Section 3.8(c).  Hawaiian Telcom acknowledges that its
rectifying (or causing to be rectified) such a Possible Excuse shall not
necessarily mean that Accenture shall be able to resume full performance
simultaneously, it being agreed that Accenture shall resume full performance as
soon as reasonably possible and shall use Reasonable Efforts to minimize any
resulting delay.  After Accenture resumes
full performance, Accenture shall not be entitled to any further excuse beyond
that to which it became previously entitled under this Section 3.8(c).

 6
 

Notwithstanding any
provision of this Agreement to the contrary, under no circumstances shall
Accenture be obligated to perform any of Hawaiian Telcom’s responsibilities set
forth in this Agreement.

3.9                               Third Party Products.  Infurtherance of
performing the Services, Accenture (directly or through an Affiliate, including
Proquire LLC) may acquire products from third party vendors.  As part of its relationship with such
vendors, Accenture may be entitled to receive from such vendors certain
compensation, fees or other financial interest. 
Hawaiian Telcom acknowledges that Accenture’s vendor relationships and
such compensation may be beneficial to Accenture in the performance of its
Services hereunder.

3.10                        Accenture’s Cooperation
with Hawaiian Telcom and Third Parties.  Accenture will provide reasonable
cooperation to Hawaiian Telcom or Hawaiian Telcom’s contractors in connection
with services provided by Hawaiian Telcom contractors to Hawaiian Telcom
(including by providing to Hawaiian Telcom and its contractors information
pertaining to the Actual Services, In-Scope Applications and configurations
thereof, in Accenture’s possession), provided that such cooperation will be
provided in a way that does not adversely effect Accenture’s performance of the
Services or increase Accenture’s cost to perform the Services, provided that if
there is an increase in costs, Accenture shall so notify Hawaiian Telcom and if
Hawaiian Telcom still requires such cooperation, the Charges will be equitably
adjusted if and to the extent provided for in Section 4.2(d).

3.11                        Authorized Users; Hawaiian
Telcom Affiliates.

(a)                                  Authorized Users.  Accenture
acknowledges that although the Services are being provided to Hawaiian Telcom,
certain vendors, other suppliers, customers and business partners of Hawaiian
Telcom (e.g., CLEC customers who rely on Hawaiian Telcom services that rely on
the Services) (including then current and certain former Hawaiian Telcom
Affiliates pursuant to Section 3.11(b)) (collectively, the “Authorized
Users”) will be authorized to use the Services, and the foregoing will not
be deemed to violate any provision of this Agreement.  If and to the extent directed by Hawaiian
Telcom,  Accenture shall interface with
employees of such Authorized Users in connection with performing its
obligations hereunder as though they were employees of Hawaiian Telcom.  This section shall be without prejudice toSection 20.8.

(b)                                 Hawaiian Telcom Affiliates.

(i)                                     Actual Services will be provided to or for
the benefit of Hawaiian Telcom Affiliates. 
Such Services delivered to Hawaiian Telcom Affiliates are “Services”
under this Agreement.  For purposes of
this Agreement, “Actual Services” shall mean the Services identified in
one or more Statements of Work as well as the obligations of Accenture in
Sections 3.10, 3.12, 3.13, 4.1, 6.4(a), 6.5(b), 6.7, 8, 10.1(a), 10.1(b),
10.1(c), 10.2, 11.2(b), 11.2(c), 16.4, all Exhibits B (and all Attachments to
any Exhibit B), and Exhibit C.

(ii)                                  If a Hawaiian Telcom Affiliate that is
receiving Services at any time during the Term either (i) ceases to be a
Hawaiian Telcom Affiliate, or (ii) transfers all or part of its business
operations that receive the Services to a third party that is not a Hawaiian
Telcom Affiliate, then Hawaiian Telcom may require that Accenture provide
Termination Assistance Services to such former Hawaiian Telcom Affiliate or to
the applicable third party, in accordance with Section 16.4.  Any increased costs to Accenture of providing
such Termination Assistance Services

 7
 

will be reimbursed by Hawaiian Telcom. 
In the case of such a disposition, Accenture’s obligation to continue
performing Services for such former Hawaiian Telcom Affiliate or business
operations will not exceed six (6) months after the closing of such
disposition; provided that in no event shall Accenture be obligated to perform
such Services following end of the Termination Assistance Period.  The Services provided to such former Hawaiian
Telcom Affiliate will be “Services” under this Agreement.

(iii)                               With respect to Hawaiian Telcom Affiliates, only Hawaiian Telcom will
be the Party to this Agreement and only Hawaiian Telcom will be liable under
this Agreement as if all Services provided under this Agreement were provided
to Hawaiian Telcom (including being liable to pay Accenture the Charges for the
Services provided to Hawaiian Telcom Affiliates under this Agreement).  Only Hawaiian Telcom may enforce its rights
under this Agreement against Accenture, on its own behalf or on behalf of any
Hawaiian Telcom Affiliates.  Hawaiian
Telcom may exercise any right under this Agreement (including the right to
terminate or vary this Agreement) without the consent of any of its
Affiliates.  In all matters relating to
the Services provided to a Hawaiian Telcom Affiliate, Accenture may communicate
and deal solely with Hawaiian Telcom and will not be obliged to communicate or
deal directly with such Hawaiian Telcom Affiliate.

(c)                                  Accenture Affiliates.  With
respect to Accenture Affiliates, only Accenture will be the Party to this
Agreement and only Accenture will be liable under this Agreement as if all
Services provided under this Agreement were provided by Accenture.  Only Accenture may enforce its rights under
this Agreement against Hawaiian Telcom, on its own behalf or on behalf of any
Accenture Affiliates.  Accenture may
exercise any right under this Agreement (including the right to terminate or
vary this Agreement) without the consent of any of its Affiliates.  In all matters relating to the Services
provided by an Accenture Affiliate, Hawaiian Telcom may communicate and deal
solely with Accenture and will not be obliged to communicate or deal directly
with such Accenture Affiliate.

3.12                        Security Services.  As part of the Services and to the extent relevant to
the Services, Accenture will implement security and security practices with
respect to the In-Scope Applications and any Hawaiian Telcom Confidential
Information and Hawaiian Telcom Technical Elements in Accenture’s possession,
which are consistent with Hawaiian Telcom’s security standards as set forth in Attachments
G-1.1 through G-1.3 (covering Security Policies and Principles) and as such
standards may be upgraded or enhanced by Hawaiian Telcom from time to time,
provided that any such changes will be subject to the fee adjustments provided
for in Section 4.2(d).

3.13                        Knowledge Sharing.  Accenture acknowledges that although Hawaiian Telcom
is outsourcing major critical business operations of Hawaiian Telcom to
Accenture under this Agreement, because such operations are critical to
Hawaiian Telcom, it is Hawaiian Telcom’s intent and desire to remain intimately
familiar with such operations and with the Actual Services performed by
Accenture hereunder, the manner in which Accenture performs them, and how they
relate to such business operations.  As
such, Accenture agrees that, on a quarterly basis, Accenture will meet with
Hawaiian Telcom to (i) explain how the In-Scope Applications work; (ii) explain
how the Actual Services are provided; and (iii) provide such information as is
reasonably required for Hawaiian Telcom to understand and operate such In-Scope
Applications and to understand and provide the Actual
Services after the expiration or termination of this Agreement.  For the avoidance of doubt, in the event of a
disagreement between Accenture and Hawaiian Telcom as to the level of
information or detail which Accenture is obligated to provide to Hawaiian
Telcom under this Section 3.13, to the extent Hawaiian Telcom (or its
Contractors) made similar

 8
 

information or detail available to Accenture in connection with the
transition of the Actual Services to Accenture, Accenture shall make such level
of information and detail available to Hawaiian Telcom. 
In addition to the quarterly meetings, Accenture will provide such
knowledge sharing at other times upon Hawaiian Telcom’s request, provided the
Charges will be equitably adjusted if and to the extent provided for in Section
4.2(d).

ARTICLE IV

CHANGES TO THE SERVICES

4.1                               System Change Management
Process.  Accenture shall comply with the following process in
connection with implementing any System Changes (the “System Change
Management Process”):

(a)                                  Accenture shall schedule its implementation
of System Changes only during Maintenance Windows, except for emergency System
Changes, provided that any failure to achieve a Service Level which failure is
due to implementation of any emergency System Change shall not be excused
except to the extent provided in Attachment B-3.1 (Service Level Methodology).

(b)                                 Accenture shall make no System Changes
without first obtaining Hawaiian Telcom’s written approval; provided, however,
Accenture may make emergency System Changes at any time and without Hawaiian
Telcom approval, to the extent no reasonable alternative action is available
and such System Changes are necessary, in Accenture’s good faith judgment, (A)
to maintain the continuity of the Services, or (B) to correct an event or
occurrence that would substantially prevent, hinder or delay the operation of
Hawaiian Telcom’s critical business functions. 
Accenture shall promptly notify Hawaiian Telcom of all such temporary
System Changes.  Emergency System Changes
will not excuse Accenture from the failure to achieve Service Levels except to
the extent expressly provided for elsewhere in the Agreement.

(c)                                  The Parties will hold a weekly meeting to
address scheduled System Changes to be made during the Maintenance Window that
falls two (2) weeks after the date of such meeting, and Accenture shall provide
Hawaiian Telcom with a weekly report which summarizes the changes made each
week.

4.2                               Contract Change Control
Process.  The Parties shall comply with the following
Contract Change Control Process to revise, amend, alter or otherwise change the
Services being provided under this Agreement, including such changes in the
performance of the Services as may be entailed in connection with a decision by
Hawaiian Telcom to have Accenture begin providing Services to a given Hawaiian
Telcom Affiliate or cease providing Services to such affiliate (each a “Contract
Change”).  These procedures do not
apply to changes that result in Minor Enhancements covered by the Discretionary
AM Services, General Enhancement Work Orders or Enhancement Capacity Work
Orders, or System Changes.

(a)                                  To request or effect a Contract Change,
Accenture or Hawaiian Telcom, as applicable, shall deliver a written request
(the “Change Request”) to the Accenture Account Representative or the
Hawaiian Telcom Account Representative, as the case may be, specifying in
reasonable detail to the extent known: (i) the proposed Contract Change, (ii)
the objective or purpose of such Contract Change, (iii) the particular
Agreement and/or Exhibit provisions that are affected by the Contract Change
and (iv) the requested prioritization and schedule for such Contract Change.

 9
 

(b)                                 The Parties shall cooperate with each other
in good faith in discussing the scope and nature of the Change Request.  As soon as practicable and to the extent
applicable, Accenture shall prepare and deliver to the Hawaiian Telcom Account
Representative a written statement (the “Change Response”) describing
any changes in methodology, procedures, prioritization, products, and services
that Accenture believes would be required to effect the Contract Change.  In addition, such Change Response shall
include, as appropriate or applicable, (i) an estimation of the net increase or
decrease in the pricing that would be required, including Pass-Through
Expenses, (ii) the categories of costs increased or avoided as a result of such
Contract Change, including retained costs, (iii) a description of how the
proposed Contract Change would be implemented, (iv) a description of the
effect, if any, such Contract Change would have on this Agreement, including,
without limitation, on service levels, (v) an estimation of all resources
required to implement such Contract Change, and (vi) such other information as
may be relevant to the proposed Contract Change, which may include a back-out
plan or other risk mitigation plan.  The
Accenture Account Representative and the Hawaiian Telcom Account Representative
shall meet to determine whether they desire for Accenture to proceed with the
implementation of the proposed Contract Change in accordance with the Change
Response.

(c)                                  Subject to agreement on any incremental
Charges, if any, Accenture may not withhold its approval of any Contract Change
which Hawaiian Telcom determines, in its sole discretion, (x) is necessary for
Hawaiian Telcom to comply any Hawaiian Telcom Laws, or (y) is the result of the
addition or removal of a Hawaiian Telcom Affiliate, unless in each case such
Contract Change:  (i) would result in
Accenture violating any Accenture Law; or (ii) involves the provision of
services other than application design, development, deployment and maintenance
services of the In-Scope Applications.

(d)                                 Subject to Section 3.5(b), for any
Contract Change, the Charges will be equitably adjusted, upward or downward, to
reflect the value of any Accenture resources (e.g.,
equipment, software, facilities or personnel, etc.) which can be removed as a
result of the applicable Contract Change, or to reflect the value of any
additional Accenture resources (e.g.,
equipment, software, facilities or personnel, etc.) which are necessary to
implement the Contract Change, in each case where the value of such resources
will be determined in a manner consistent with the Charges as of the Effective
Date.  Any increase in Charges will take
into account resources and expenses of Accenture for then-existing Services
that would no longer be required if the additional service were performed by
Accenture.  The adjustment provisions of
this Section 4.2(d) shall also apply to any other change provided for in this
Agreement which expressly calls for an equitable adjustment to the Charges
pursuant to this Section 4.2(d), and references in this Section to the
applicable Contract Change shall be deemed to refer to the applicable change.

(e)                                  Subject to Section 4.2(c), Contract
Changes must be agreed in writing in the form of a Work Order (or, if
applicable, an amendment to this Agreement) and signed by the Hawaiian Telcom
and Accenture Account Representatives (or other duly authorized
representatives) in order to be effective. 
Notwithstanding the foregoing, Accenture will proceed with performing
changes resulting from a change in Laws, or a change in Hawaiian Telcom Policies
generally applicable to Hawaiian Telcom, for up to fifteen (15) days if
Accenture receives a written instruction from the Hawaiian Telcom Account
Representative to do so.  If the
corresponding Work Order is executed Accenture will be compensated for performing
such Services as provided in the Work Order. 
If such Work Order is not finalized within such fifteen (15) day period,
Accenture will be compensated for its incremental effort in performing such
Services on a time and materials basis.

 10
 

(f)                                    Except as otherwise provided in this Section
4.2, Hawaiian Telcom will not be obligated to pay for any changes not
authorized in advance and in writing by the Hawaiian Telcom Account
Representative (or other duly authorized representative); and Accenture will
not be obligated to perform any change to the Services that are not authorized
in advance and in writing by the Accenture Account Representative (or other
duly authorized representative).

ARTICLE V

PERFORMANCE METRICS

5.1                               AM Service Levels.

(a)                                  General.  Attachment B-3.1
(Service Level Methodology) and Attachment B-3.2 (Service Level
Definitions and Metrics) set forth the Service Level Agreement (SLA), including
service levels that shall be used to measure Accenture’s performance of the
Steady State Services under this Agreement. 
Accenture agrees that, from and after the SLA commencement date
specified in Attachment B-3.1 (Service Level Methodology), its
performance of the Steady State Services shall meet or exceed each of the
Minimum Service Levels for each Critical Service Level, subject to the limitations
and in accordance with the provisions set forth in this Agreement (including
the Service Level Agreement).

(b)                                 Critical Service Level Failure.  If
Accenture fails to meet the Minimum Service Level for any Critical Service
Level, then Accenture shall (i) promptly perform a root-cause analysis to
identify the cause of such failure; (ii) use Reasonable Efforts to correct such
failure and to begin meeting the Service Levels as promptly
as practicable; and (iii) provide Hawaiian Telcom with a report detailing the
cause of, and procedure for correcting, such failure.

(c)                                  Service Level Credits.  Attachment
B-3.1 (Service Level Methodology) describes the conditions under which
Hawaiian Telcom may be entitled to Service Level Credits arising from Accenture’s
failure to meet a Minimum Service Level for a Critical Service Level.

5.2                               Recovery Services Balanced
Scorecard.  Attachment B-1.1 (Recovery Services Balanced Scorecard)
identifies certain metrics that the Parties believe will measure the success of
the Recovery Services.  Within thirty
(30) days following the end of the expiration of the Recovery Services SOW,
Accenture shall provide to Hawaiian Telcom a completed accurate Balanced
Scorecard, and a calculation of the resulting credit or bonus, as applicable,
calculated in accordance with Attachment B-1.1 (Recovery Services
Balanced Scorecard).  If the Recovery
Services SOW is terminated prior to the expiration of the Recovery Services
Term, the Balanced Scorecard shall not apply. 
To the extent that any portion of the Recovery Services are terminated
or cancelled prior to the expiration of the Recovery Services Term, other than
pursuant to Section 3 of Exhibit C (Acceptance) or termination of the
Recovery Services SOW in part under Section 16.1, the Balanced Scorecard
shall be equitably adjusted to reflect the reduction in Services.

 11
 

ARTICLE VI

RESOURCES

6.1                               Hawaiian Telcom
Facilities.

(a)                                  Provision ofHawaiian Telcom Facilities. 
Subject to the provisions of this Section 6.1, Hawaiian Telcom
shall provide to Accenture access to the Hawaiian Telcom Facilities, at no charge to Accenture.  Hawaiian Telcom shall also provide Accenture,
at no charge, with offices and working space in Hawaiian Telcom Facilities as
specified in Exhibit H (Hawaiian Telcom Facilities).  Hawaiian Telcom shall provide to the
Accenture Personnel working in such space standard office furnishings and
equipment, as well as high-speed internet access and domestic local and long
distance telephone service and Internet access (for general office use, and not
for purposes of accessing the System), to the extent that Hawaiian Telcom
provides such resources for the use of its other contractors.  Hawaiian Telcom shall manage and maintain at
historical levels the building and property: 
electrical systems; water; sewer; lights; heating, ventilation and air
conditioning; physical security services and general custodial/landscape
services (including monitoring and maintaining the uninterruptible power supply
system).  The use of Hawaiian Telcom
Facilities by Accenture shall not (i) constitute a leasehold or other property
interest in favor of Accenture or any exclusive right to occupy or use Hawaiian
Telcom Facilities, nor (ii) transfer any title in Hawaiian Telcom Facilities to
Accenture.  The Hawaiian Telcom
Facilities shall be deemed to be in the care, custody and control of Hawaiian
Telcom.

(b)                                 Relocating Hawaiian Telcom Facilities.  Hawaiian Telcom shall inform Accenture of any
plans or determination to relocate Hawaiian Telcom Facilities so that Accenture
shall have a reasonable amount of time to prepare for and implement such change
or relocation as it impacts Accenture. 
Hawaiian Telcom shall reimburse Accenture for Accenture’s reasonable
Out-of-Pocket Expenses incurred in packing, moving to the new site of the
Hawaiian Telcom Facilities, and unpacking all Accenture-provided equipment and
furnishings that are located at the Hawaiian Telcom Facilities and used by
Accenture to provide the Services to Hawaiian Telcom, as well as any net
additional taxes or Out-of-Pocket Expenses that Accenture reasonably
demonstrates Accenture is required to incur as a result of operating out of
such new facilities in comparison to the prior facilities.  Hawaiian Telcom retains the right to alter
any of Hawaiian Telcom Facilities at any time, and Hawaiian Telcom shall use
Reasonable Efforts to give Accenture reasonable notice of such alterations to
the extent they affect Accenture. 
Additionally, Hawaiian Telcom shall reimburse Accenture for any net
additional Out-of-Pocket Expenses that Accenture reasonably demonstrates
Accenture is required to incur as a result of any such alterations, including
the Out-of-Pocket Expenses incurred by Accenture, if any, of relocating its
operations in order to accommodate such alterations.  To the extent any such relocation or
alteration adversely impacts Accenture’s ability to perform its obligations,
such relocation or alteration shall be deemed a Possible Excuse for purposes of
Section 3.8.

(c)                                  Hawaiian Telcom Facilities Maintenance. 
Hawaiian Telcom shall be entitled to schedule and undertake emergency
and pre-planned maintenance, repairs, shutdowns and alterations at any time in
respect of Hawaiian Telcom Facilities. 
Other than in the case of emergencies, Hawaiian Telcom shall give
Accenture reasonable notice of any such activities.  Additionally, Hawaiian Telcom shall reimburse
Accenture for any net additional Out-of-Pocket Expenses that Accenture
reasonably demonstrates Accenture is required to incur as a result of any such
maintenance, repairs, shutdowns and alterations.  To the extent any such activities adversely
impact Accenture’s ability to perform its obligations, such activities shall be
deemed a Possible Excuse for purposes of Section 3.8.

 12
 

(d)                                 Use of Hawaiian Telcom Facilities. 
Accenture shall comply with the following terms and conditions with
respect to its use of the Hawaiian Telcom Facilities.

(i)                                     Accenture shall use Hawaiian Telcom
Facilities solely for the purpose of providing the Services.  Accenture shall not permit any third party
(other than an Accenture subcontractor) to use Hawaiian Telcom Facilities
without Hawaiian Telcom’s prior written approval, which approval Hawaiian
Telcom shall give if necessary for Accenture to comply with its obligations
related to audits under this Agreement, provided such third party complies with
the other requirements pertaining to access to Hawaiian Telcom Facilities.

(ii)                                  Accenture shall obtain Hawaiian Telcom’s
approval for, and coordinate, the installation of Accenture-provided equipment
at Hawaiian Telcom Facilities with Hawaiian Telcom, provided that approval will
be deemed granted for the installation of laptops, printers and other equipment
identified as Accenture-provided equipment in Exhibit F
(Resources).  Any installation of
equipment that increases the power, cooling or weight requirements for a
Hawaiian Telcom Facility shall be subject to Hawaiian Telcom’s prior written
approval (in Hawaiian Telcom’s sole discretion) and reimbursement to Hawaiian
Telcom of any incremental costs.

(iii)                               Accenture will be responsible for any damage to the Hawaiian Telcom
Facilities caused by Accenture or any third parties Accenture permits to use
such facilities, in either case, except for ordinary wear and tear.  When all or a portion of Hawaiian Telcom
Facilities are no longer required for performance of the Services, Accenture
shall return such Hawaiian Telcom Facilities to Hawaiian Telcom in
substantially the same condition as when Accenture began use of such Hawaiian
Telcom Facilities, subject to reasonable wear and tear and any improvements or
changes to the structural, mechanical or electrical elements therein that were
approved in advance by Hawaiian Telcom.

(iv)                              Accenture will comply with the applicable Hawaiian Telcom rules,
regulations, policies or procedures for the relevant Hawaiian Telcom Facilities
regarding access to and use of Hawaiian Telcom Facilities, as set forth in Attachments
G-2.1 through G-2.14 (Hawaiian Telcom Facilities Policies), including
concerning such matters as operating procedures, security requirements, working
conditions, working hours and days on which Hawaiian Telcom Facilities are
closed for regular business. 
Notwithstanding anything to the contrary in this Agreement, such
Hawaiian Telcom Facilities Policies shall not be applicable to the extent they
require that individual Accenture Personnel sign any document as an individual
or address (i) conflicts of interest, including restrictions on performing
services, supporting or contracting with third parties or restrictions on
investments by Accenture Personnel; (ii) the treatment of confidential or
proprietary information; (iii) ownership of intellectual property; (iv)
restrictions on privacy with respect to an Accenture Personnel’s personal
belongings; or (v) drug testing. 
Hawaiian Telcom may update such rules, regulations, policies and
procedures from time to time, and Accenture will comply with any such updates,
provided that any such changes shall be subject to Section 4.2(d).  Accenture Personnel performing Services at
Hawaiian Telcom Facilities will wear or otherwise exhibit or display
identification sufficient to make such individuals recognizable as Accenture
Personnel.

 13
 

6.2                               Hawaiian Telcom-Provided
Equipment.

Hawaiian Telcom shall provide Accenture with
access to and use of the equipment identified as Hawaiian Telcom’s
responsibility in Exhibit F (Resources), at no cost to Accenture.
Hawaiian Telcom shall retain financial, administrative, operational and
maintenance responsibility for such Hawaiian Telcom-Provided Equipment.  Hawaiian Telcom shall be responsible for
obtaining any Required Consents with respect to Accenture’s use of such
Hawaiian Telcom-Provided Equipment.  Hawaiian
Telcom may change, upgrade or otherwise modify the Hawaiian Telcom-Provided
Equipment without Accenture’s prior approval, provided that Accenture is
provided reasonable advance written notice detailing the nature of the change,
upgrade, or modification, and further provided that (a) if such changes,
upgrades or modifications, in the aggregate, increase Accenture’s cost and
expenses, the Charges will be equitably adjusted, if and to the extent provided
for in Section 4.2(d), and (b) if Hawaiian Telcom makes any change, upgrade or
modification that is not based on sound information technology principles, such
change, upgrade or modification will be deemed a Possible Excuse.  As between Hawaiian Telcom and Accenture,
Hawaiian Telcom shall retain all right, title and interest in and to the Hawaiian
Telcom-Provided Equipment, and such equipment shall be deemed to be in the
care, custody and control of Hawaiian Telcom.

6.3                               Hawaiian Telcom Technical
Elements.

(a)                                  Definition.  Any Technical Elements that
are (i) owned by Hawaiian Telcom or Hawaiian Telcom Affiliates before the
Effective Date, (ii) developed by Hawaiian Telcom or Hawaiian Telcom Affiliates
during the Term of this Agreement, or (iii) licensed by Hawaiian Telcom or
Hawaiian Telcom Affiliates from a third party, including any such items used by
Hawaiian Telcom or Hawaiian Telcom Affiliates in connection with the Services,
are collectively referred to herein as the “Hawaiian Telcom Technical
Elements.”  Hawaiian Telcom Technical
Elements include Hawaiian Telcom-Owned Technical Elements and Hawaiian Telcom
Third Party Technical Elements.  As
between the Parties, Hawaiian Telcom shall be the sole and exclusive owner of the Hawaiian
Telcom Technical Elements and Hawaiian Telcom Technical Elements shall be
deemed Hawaiian Telcom Confidential Information.

(b)                                 Hawaiian Telcom-Third Party Technical
Elements.  “Hawaiian Telcom-Third Party Technical
Elements” consist of Hawaiian Telcom Technical Elements that are licensed
by Hawaiian Telcom or a Hawaiian Telcom Affiliate from a third party and that
Hawaiian Telcom makes available, or is required to make available, to Accenture
for use in connection with the Services. 
Hawaiian Telcom shall make available to Accenture the Hawaiian
Telcom-Third Party Technical Elements identified in Exhibit F
(Resources), as well as any documentation which Hawaiian Telcom possesses
related thereto.  Hawaiian Telcom shall
retain financial, administrative, operational and maintenance responsibility
for the Hawaiian Telcom-Third Party Technical Elements, including responsibility
for obtaining any Required Consents with respect to Accenture’s use of such
Hawaiian Telcom-Third Party Technical Elements; provided, however, during the
term of the AM Services SOW, Accenture shall have operational responsibility
for the In-Scope Applications.  Subject
to Hawaiian Telcom having obtained any Required Consents, Hawaiian Telcom
grants Accenture (and its subcontractors) a fully paid-up, royalty free,
limited, nonexclusive right during the Term and the Termination Assistance
Period to

 14
 

use, copy, modify, and create derivative works of the Hawaiian
Telcom-Third Party Technical Elements for the sole purpose of providing the
Services to Hawaiian Telcom and its Affiliates; provided that with respect to
Technical Elements that are software, Accenture’s right to modify and create derivative
works shall apply only if (i) Hawaiian Telcom provides Accenture with access to
source code to such Technical Elements and (ii) the applicable Work Order or
Statement of Work does not expressly prohibit Accenture from making
modifications and derivative works, despite having access to such source
code.  The rights granted under this
Section are also subject to Accenture (including its subcontractors) complying
with the restrictions and nondisclosure obligations that are imposed on
Hawaiian Telcom by licenses for such Hawaiian Telcom-Third Party Technical
Elements; provided that Hawaiian Telcom gives Accenture prior written notice of
such restrictions and obligations. 
Without limiting the generality of the foregoing, Accenture agrees to
abide by the terms and conditions of Exhibit L (Verizon Sublicense) in
connection with the use of intellectual property licensed thereunder (all of
which shall be deemed Hawaiian Telcom Technical Elements).

(c)                                  Hawaiian Telcom-Owned Technical Elements.  “Hawaiian
Telcom-Owned Technical Elements” consist of Hawaiian Telcom Technical
Elements owned by Hawaiian Telcom or a Hawaiian Telcom Affiliate that Hawaiian
Telcom makes available, or is required to make available, to Accenture for use
in connection with the Services, together with any enhancements, upgrades or
modifications thereto.  Hawaiian Telcom
shall make available to Accenture Hawaiian Telcom-Owned Technical Elements
identified in Exhibit F (Resources). Hawaiian Telcom grants Accenture
(and its subcontractors) a fully paid-up, royalty free, limited, nonexclusive
right during the Term and the Termination Assistance Period to use, copy, modify, and
create derivative works of, the
Hawaiian Telcom-Owned Technical Elements for the sole purpose of providing the
Services to Hawaiian Telcom and its Affiliates.

(d)                                 Media.  The Hawaiian Telcom-Provided
Technical Elements shall be made available to Accenture in such form and on
such media as they exist at the relevant time (together with, in the case of
Hawaiian Telcom-provided software, the available then-current related
Documentation).

(e)                                  Ownership.  As between Hawaiian Telcom and
Accenture, Hawaiian Telcom shall retain all right, title and interest in and to
the Hawaiian Telcom Technical Elements and such Technical Elements shall be
deemed to be in the possession, care, custody and control of Hawaiian Telcom.

(f)                                    Deliverables. 
Ownership of Deliverables will be as set forth in Section 12.1.

6.4                               General Terms; Hawaiian
Telcom Warranty Disclaimer.

(a)                                  Resource Responsibility. 
Except for the Hawaiian Telcom Facilities, Hawaiian Telcom-Provided
Equipment, Hawaiian Telcom-Provided Technical Elements and any other resources
which Hawaiian Telcom is obligated hereunder to make available to Accenture for
use in connection with the Services (collectively, “Hawaiian Telcom
Resources”), Accenture will be responsible for providing any and all other
resources necessary for Accenture to perform its obligations under this
Agreement, including equipment, software, personnel, facilities, telecommunications
assets and other such resources (“Accenture Resources”).  For the avoidance of doubt, Accenture is not
obligated to provide any infrastructure elements under this Agreement.

 15
 

(b)                                 Ceasing Use of Hawaiian Telcom Resources. 
Accenture will cease using any particular Hawaiian Telcom Resources upon
the earlier of (i) Hawaiian Telcom’s notice to do so, or (ii) Accenture’s no
longer needing to use such Hawaiian Telcom Resource in order to provide the
Services, but in no event later than the end of the Term or the relevant time
during the Termination Assistance Period (if such use is needed in order to
provide the Termination Assistance), as applicable.  To the extent Accenture is required to cease
using any Hawaiian Telcom Resource under clause (i) of this Section 6.4(b)
without being provided at the same time with a functionally equivalent resource
by Hawaiian Telcom ready for Accenture’s use and such withdrawal is reasonably
likely to adversely affect Accenture’s ability to perform its obligations,
Accenture will be excused from performance failures to the extent provided for
in, and subject to Accenture’s compliance with the process set forth in, Section
3.8.

(c)                                  DISCLAIMER.  THE HAWAIIAN TELCOM RESOURCES
SHALL BE PROVIDED ON AN “AS IS, WHERE IS” BASIS.  EXCEPT FOR SECTION 10.1, HAWAIIAN
TELCOM MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR OTHERWISE, WITH
RESPECT TO SUCH RESOURCES, INCLUDING WITH RESPECT TO (A) THE CONDITION, STATE
OF REPAIR, QUALITY, FITNESS FOR PARTICULAR PURPOSE, OR MERCHANTABILITY OF SUCH
RESOURCES, (B) THE ACCURACY, COMPLETENESS, CURRENCY, SUITABILITY, OR EFFICACY
OF ANY HAWAIIAN TELCOM MATERIALS, OR (C) THE NONINFRINGEMENT BY ANY HAWAIIAN
TELCOM THIRD PARTY SOFTWARE OR ANY HAWAIIAN TELCOM THIRD PARTY MATERIALS OF A
THIRD PARTY’S INTELLECTUAL PROPERTY RIGHTS. 
This provision shall not be construed to limit Section 3.8.

6.5                               Accenture-Provided
Technical Elements.

(a)                                  Definition.  Any Technical Elements that are (i) owned by
Accenture or Accenture Affiliates before the Effective Date, (ii) developed by
Accenture or Accenture Affiliates other than as a Deliverable under this
Agreement, (iii) licensed by Accenture or Accenture Affiliates from a third
party, including any such items used by Accenture or Accenture Affiliates to provide
the Services to Hawaiian Telcom, and (iv) any modifications, enhancements and
improvements to, or derivatives of, any of (i), (ii) or (iii) are collectively
referred to herein as the “Accenture Technical Elements.”   Accenture Technical Elements include
Accenture-Owned Technical Elements, Accenture-Provided User Tools, and
Accenture Third Party Technical Elements. 
As between the Parties, Accenture shall be the sole and exclusive owner
of the Accenture Technical Elements and Accenture Technical Elements shall be
deemed Accenture Confidential Information.

(b)                                 Responsibility
for Accenture Technical Elements. 
Accenture shall be solely responsible for any Accenture Technical
Elements which Accenture requires to provide the Services, and shall have
financial, administrative, operational and maintenance responsibility for the
Accenture Technical Elements during the Term, unless otherwise agreed in a Work
Order, Statement of Work or other written agreement between the Parties.  Accenture shall not, without Hawaiian
Telcom’s prior written approval, (i) introduce any Accenture Technical Elements
into the System, or (ii) use any Accenture Technical Elements that are required
for the operation of the System or the functionality of any aspects of the
System.

 16

(c)                                  Embedded
Accenture Technical Elements.

(i)                                     Except with respect to specific projects
agreed in advance in writing by the Hawaiian Telcom and Accenture Account
Representatives (or other duly authorized representatives), all development
work performed by or on behalf of Accenture under this Agreement will be
original, including the development of Deliverables and the making of any
changes to Hawaiian Telcom Technical Elements. 
Without limiting the generality of the foregoing, Accenture shall not
incorporate into any Deliverable or any Hawaiian Telcom Technical Element any
software, documentation, or other materials that it has not created, or had
created on its behalf, under this Agreement, except with respect to specific
projects or work agreed in advance in writing by the Parties.

(ii)                                  Accenture may
embed Accenture Technical Elements into a Deliverable or a Hawaiian Telcom
Technical Element only if (A) such Accenture Technical Elements are identified
in a separate section of the SOW or Work Order clearly and conspicuously
identified as “Accenture Technical Elements Embedded in Deliverables or
Hawaiian Telcom Technical Elements,” (B) such section clearly identifies, for
each Deliverable or Hawaiian Telcom Technical Element in which Accenture
intends to embed an Accenture Technical Element, what Accenture Technical
Elements will be embedded and which are Accenture Owned Technical Elements
versus Accenture Third Party Technical Elements, and (C) for any Accenture
Third Party Technical Elements, such section clearly identifies any limitations
on the rights provided to Hawaiian Telcom in this Section 6.5 which are
applicable to each such Accenture Third Party Technical Element.  Subject only to any deviations which are
identified in accordance with Section 6.5(c)(ii)(C), Accenture hereby
grants Hawaiian Telcom a royalty-free, nonexclusive, perpetual, revocable,
transferable license to use, copy, distribute, modify and create derivative
works and otherwise use in any manner solely for Hawaiian Telcom’s internal business
purposes any such Accenture Technical Elements embedded in a Deliverable or
Hawaiian Telcom Technical Element solely as used in such Deliverable or
Hawaiian Telcom Technical Element and not as a “stand-alone” product or
separately from the Deliverable or Hawaiian Telcom Technical Element in which
it is embedded.  Hawaiian Telcom may
sublicense the rights in the preceding sentence to a third party service
provider, solely on behalf of Hawaiian Telcom for Hawaiian Telcom’s internal
business purposes; provided that such service provider is bound by a legally
binding agreement including the foregoing license restrictions and
confidentiality provisions consistent with those set forth in this
Agreement.  The rights granted under this
Section are also subject to Hawaiian Telcom and its sublicensees complying with
the restrictions and nondisclosure obligations that are applicable to Accenture
Third Party Technical Elements which are specifically identified as required by
Section 6.5(c)(ii)(C) above. 
Accenture shall be responsible for obtaining Required Consents with
respect to such Accenture Third Party Technical Elements.  Subject to the restrictions identified
pursuant to Section 6.5(c)(ii)(C), the license to Accenture Technical
Elements embedded in a Deliverable or Hawaiian Telcom Technical Element shall
become fully paid up and irrevocable when Accenture has received (except for
issuance of a Service Level Credit or Balanced Scorecard Credit, if applicable)
payment of all Charges associated with such Deliverable or Hawaiian Telcom
Technical Element (or such Service rendered with respect to the AM
Services).  For the avoidance of doubt,
references herein to “internal business purposes” include the right of Hawaiian
Telcom to use the applicable Technical Element to service its customers as a
telecommunications service provider, and not for timesharing or service bureau or other rental or sharing arrangements.

 17
 

(d)                                 Accenture-Provided
User Tools.  Accenture may use
Accenture-Provided User Tools in connection with providing the Services,
provided that such tools are solely used in connection with Accenture providing
and Hawaiian Telcom receiving the Services, and are not necessary for the
operation of the System or the functionality of any aspects of the System.  Accenture-Provided User Tools are defined in Exhibit
F (Resources).  Accenture hereby
grants Hawaiian Telcom a royalty-free, limited, nonexclusive, revocable license
to use the Accenture-Provided User Tools, during the term of the applicable
Statement of Work (and any applicable Termination Assistance Period), solely as
necessary for Hawaiian Telcom to receive the Services.  All Accenture-Provided User Tools in Hawaiian
Telcom’s possession shall be promptly returned to Accenture upon completion of
the Services under the applicable Statement of Work (or earlier expiration or
termination thereof).

(e)                                  Ownership of
Accenture Technical Elements.  As
between Accenture and Hawaiian Telcom, Accenture shall be the sole and
exclusive owner of any Accenture Technical Elements.

6.6                               Consents.  Each Party will be responsible for obtaining any
Required Consents which it is obligated to procure as provided for herein or
which it otherwise needs to comply with its obligations hereunder.

6.7                               Asset Obligations.  Unless other responsibilities are set forth in the
Exhibit identifying the applicable asset, the Parties’ respective
administrative, operational, maintenance and financial responsibilities with
respect to assets are summarized in this Section 6.7.  For purposes of this Article VI, and
except as otherwise provided in this Article VI, a Party having
administrative, operational, maintenance or financial responsibility for any
particular asset shall mean the following:

(a)                                  A Party who has administrative responsibility for an asset means that such
Party shall be responsible for managing such asset, including the tracking of
renewal dates and license compliance provisions;

(b)                                 A Party who has financial responsibility for an asset means that such Party
shall be responsible for all financial obligations with respect to such asset,
including acquisition costs, maintenance costs, refresh and upgrade and, with
respect to leased assets, any financial obligations set forth in such lease;
and

(c)                                  A Party who has operational responsibility for an asset means that such Party
shall be responsible for operational support of the asset, which, in the case
of the In-Scope Applications, will include the obligations set forth in Exhibit
B-3 (AM Services) and B-4 (Cross Functional Services);

(d)                                 A Party who has maintenance responsibility for an asset means that such Party
shall be responsible for establishing and maintaining appropriate third party
maintenance arrangements for the maintenance of the asset, including such
maintenance arrangements that a well-managed company, acting in a prudent
manner would maintain.  At a minimum, with respect to assets existing
as of the Effective Date, such maintenance arrangements shall be no less
favorable than such arrangements exist as of the Effective Date.

 18
 

6.8                               Risk of Loss.  Subject to Section 14.1, Accenture shall bear
the risk of loss for any loss, damage or casualty to all Accenture Resources,
including any Accenture Resources installed or located at Hawaiian Telcom
premises that are in the care, custody or control of Accenture (except that
Hawaiian Telcom shall be responsible for loss, damage or casualty to Accenture
Resources to the extent such loss, damage or casualty is due to the negligent
acts or omissions of Hawaiian Telcom Personnel or any Hawaiian Telcom
invitees).  Accenture shall bear the risk
of loss for, and insure against, any loss, damage or casualty to any Hawaiian
Telcom-Provided Equipment that is located at Accenture Facilities or that are
otherwise in the care, custody or control of Accenture.  Hawaiian Telcom shall continue to bear the
risk of loss for, and insure against, any loss, damage or casualty to any
Hawaiian Telcom Resources that remain at Hawaiian Telcom premises and in the
possession, care, custody or control of Hawaiian Telcom (except that Accenture
shall be responsible for loss, damage or casualty to such Hawaiian Telcom
Resources to the extent such loss, damage or casualty is due to the negligent
acts or omissions of Accenture Personnel or any Accenture Personnel invitees).

ARTICLE VII

SERVICE LOCATIONS

7.1                               Service Locations.  Initially, Accenture will perform Services identified
in one or more Statements of Work or Work Orders, in a material respect, from
the Service Locations.  Accenture
may,  without Hawaiian Telcom’s consent
(subject to the remainder of this paragraph), relocate the performance of such
Services from one Accenture Service Location to another location that is of the
same or higher quality within the same metropolitan area, provided that, except
for a change in such Service Location requested by Hawaiian Telcom, Accenture
shall be responsible for any incremental costs reasonably incurred by Hawaiian
Telcom in order to receive the Services from the new location (including any
costs necessary for Hawaiian Telcom to secure any Required Consents, which
Hawaiian Telcom will use Reasonable Efforts to minimize).  Accenture shall not perform such Services, in
a material respect, except from a metropolitan area in which a Service Location
is located, unless Accenture obtains prior written consent from Hawaiian Telcom
to perform such Services elsewhere, which consent may not be unreasonably
withheld, conditioned or delayed. 
Notwithstanding the foregoing, Accenture will provide Hawaiian Telcom
with notice of any move, and where the move is within the same metropolitan
area, Accenture will not move any Actual Services where the consent of Verizon
or of any other third party provider of any material Hawaiian Telcom Technical
Elements does not approve of such move, provided that Hawaiian Telcom agrees to
use Reasonable Efforts to obtain such approval. 
The Parties agree that the public perception or reputational ramifications of a
migration (which shall be in Hawaiian Telcom’s reasonable judgment) shall
constitute a reasonable basis for Hawaiian Telcom to withhold such
consent.  The applicable Statement of
Work identifies the Key Accenture Personnel who are to be based in Hawaii (“Key
On-Site Personnel”).  During the term
of the Agreement and subject to Section 9.8(j), Accenture shall not
re-locate Key On-Site Personnel to another location, without Hawaiian Telcom’s
prior written consent.

7.2                               Relocation of Service
Locations.  Except as provided in Section 7.3,
if either Party requests a change in the Service Locations, such change will be
addressed pursuant to the Contract Change Control Process.

7.3                               Relocation
Resulting from Changes in Laws and Regulations. 
The
Parties acknowledge and agree that a portion of the Services are being provided
from offshore Service Locations (i.e., outside
the United States) to leverage the use of lower cost offshore resources, and
that the Charges are based on the use of such lower cost resources.  In the event any Laws or regulations are
promulgated, changed,

 19
 

amended or
otherwise come into effect at any time during the Term that impose restrictions
or limitations on, or prohibit, the offshore portion of the Services, in whole
or part, Hawaiian Telcom shall either pay for the added expenses of performing
the work offshore or pay the transition expenses associated with relocating to
an onshore U.S. Accenture service delivery location and increased Charges
resulting from providing the Services from such location.  Notwithstanding anything to the contrary
herein, Hawaiian Telcom shall be responsible for, and shall reimburse Accenture
for the payment of, any new or increased taxes imposed by the State of Hawaii
or any governmental sub-division thereof (e.g., county or municipality in
Hawaii).

ARTICLE VIII

RELATIONSHIP GOVERNANCE

8.1                               Accenture Account Representative.  During the Term, Accenture shall designate a senior
level individual who shall be primarily dedicated to Hawaiian Telcom’s account
who (i) shall be the primary contact for Hawaiian Telcom in dealing with
Accenture under this Agreement, (ii) shall have overall responsibility for
managing and coordinating the delivery of the Services, (iii) shall meet
regularly with the Hawaiian Telcom Account Representative, and (iv) shall have
the authority to make decisions with respect to actions to be taken by
Accenture in the ordinary course of day-to-day management of Accenture’s
account in accordance with this Agreement (the “Accenture Account
Representative”).

8.2                               Hawaiian Telcom Account
Representative.  During the Term, Hawaiian Telcom shall
designate a senior level individual who (i) shall be the primary contact for
Accenture in dealing with Hawaiian Telcom under this Agreement, (ii) shall have
overall responsibility for managing and coordinating the receipt of the
Services, (iii) shall meet regularly with the Accenture Account Representative,
and (iv) shall have the authority to make decisions with respect to actions to
be taken by Hawaiian Telcom in the ordinary course of day-to-day management of
this Agreement (the “Hawaiian Telcom Account Representative”).

8.3                               Establishment of Service
Management Steering Committee.  Accenture and Hawaiian Telcom shall
appoint a Service Management Steering Committee (the “Service Management
Steering Committee”), made up of a number of key executives from each Party
(inclusive of the Accenture Account Representative and the Hawaiian Telcom
Account Representative), which shall meet, from time to time, and at such time
as its members or the Parties deem appropriate, to (i) review and analyze the
monthly performance reports for the preceding period and the Parties’ overall
performance under this Agreement, (ii) review progress on the resolution of
issues, (iii) provide a strategic outlook for Hawaiian Telcom’s requirements,
and (iv) attempt to resolve, or designate individuals to attempt to resolve,
any disputes or disagreements under this Agreement.  Although the Hawaiian Telcom Account
Representative and the Accenture Account Representative shall remain as members
of the Service Management Steering Committee, either Party may change its other
representatives from time to time upon written notice to the other; provided
that such replacement shall be of the same or a higher level of responsibility
within Hawaiian Telcom or Accenture, as applicable.  In addition, the Parties may mutually agree
to increase or decrease the size, purpose or composition of the Service
Management Steering Committee in an effort for Accenture to better provide, and
for Hawaiian Telcom to better utilize, the Services.  The members of the Service Management
Steering Committee shall not have separate voting rights; all actions of the
Service Management Steering Committee required under this Agreement shall
require the mutual consent of the Parties. 
As of the Effective Date, the Parties agree that the Service Management
Steering Committee shall meet at least once a month, shall include the
following persons: from Hawaiian Telcom, Michael Ruley, Matt Boyer and David
Torline, and from Accenture, Andy Zimmerman, Dan Lauderback and Tim Hale.

 20
 

8.4                               Accenture Personnel.

(a)                                  Designation of Key Personnel. 
Hawaiian Telcom may designate up to fifteen percent (15%) of those
Accenture Personnel dedicated for the entire term of the Recovery Services or
Enhancement Services to the performance of the Recovery Services or Enhancement
Services from time to time and up to fifteen percent (15%) of the dedicated
Accenture Personnel performing Non-Discretionary AM Services from time to time
as key supplier personnel (“Key Accenture Personnel”), inclusive of
those Key Accenture Personnel identified in Exhibit B-4 (Cross-Functional
Statement of Work).  The Accenture
Personnel approved as of the Effective Date to fill the Key Accenture Personnel
positions are listed in Exhibit B-4 (Cross Functional Statement of Work).  Subject to the foregoing, Hawaiian Telcom may
from time to time change Accenture positions that are designated as Key
Accenture Personnel positions by giving written notice to Accenture thirty (30)
days in advance of the effective date of the change.

(b)                                 Removal of Key Personnel. Accenture shall cause each of the Key
Accenture Personnel to be dedicated to performing the Services on essentially a
full-time basis, subject to Section 9.8(j).  Without Hawaiian Telcom’s prior written
consent (which it may withhold in its sole discretion), Accenture shall not
withdraw or re-assign any Key Accenture Personnel from his or her Key Accenture
Personnel position (i) during the duration of the Recovery Services or
Enhancement Services, with respect to Recovery Services or Enhancement Services,
respectively, or (ii) prior to the (a) the end of the AM Services Term or (b)
the first twelve (12) months after such individual began serving in such role
on a permanent basis, whichever is earlier, with respect to the AM Services.

(c)                                  Exceptions.  The obligations in Section
8.4(b) shall not apply where any Key Accenture Personnel staff member:  (i) voluntarily resigns from Accenture;
(ii) is dismissed by Accenture for misconduct (including fraud, drug
abuse, theft, or failure to comply with Accenture personnel policies (including
the business conduct guidelines)); (iii) fails to perform his or her assigned
duties and responsibilities (including refusal to undergo background
investigations and examinations by Accenture in accordance with Accenture policies,
as described in Exhibit J); (iv) dies or is unable to work due to
disability; or (v) is placed on an approved leave of absence in accordance with
applicable Laws.

(d)                                 Assignment of Key Accenture Personnel. 
Before placing a person in a Key Accenture Personnel position, Accenture
shall:  (i) notify Hawaiian Telcom of the
proposed assignment; (ii) introduce the individual to appropriate Hawaiian
Telcom representatives; (iii) provide such representatives upon request with
the opportunity to interview the individual; and (iv) provide Hawaiian Telcom
with a résumé and other information about the individual reasonably requested
by Hawaiian Telcom to the extent that the disclosure of such other information
is consistent with Accenture’s employment policies, reasonably applied.  If Hawaiian Telcom objects to the proposed
assignment, the Parties shall attempt to resolve Hawaiian Telcom’s concerns on
a mutually agreeable basis.  Unless and
until Hawaiian Telcom’s concerns are satisfied, the individual shall not be
assigned to the Key Accenture Personnel position.  If the Parties have not been able to resolve
Hawaiian Telcom’s concerns within five (5) Business Days, Accenture shall
propose to Hawaiian Telcom the assignment of another individual of suitable
ability and qualifications.  Subject to Section
8.5, Hawaiian Telcom hereby approves the Key Accenture Personnel identified
in the applicable Statement of Work as of the Effective Date.

 21
 

(e)                                  Replacement of Key Accenture Personnel. 
Subject to Section 8.4(c), Key Accenture Personnel may not be
transferred or re-assigned by Accenture until a suitable replacement has been
approved by Hawaiian Telcom in accordance with Section 8.4(d).  No transfer may occur at a time or in a
manner that would have a material adverse impact on the Services.  Where Accenture may replace a person filling
a Key Accenture Personnel role other than as a result of the circumstances in Section
8.4(c), Accenture will use Reasonable Efforts to not remove the replaced
person until he/she has worked with the replacement person for a period of
thirty (30) days to facilitate an adequate knowledge transfer.

(f)                                    Reservation of Rights. 
Except as provided in this Section 8.4, Accenture reserves the
right to determine which Accenture Personnel shall be assigned to perform
Services, and to replace or reassign such personnel during the Term.

(g)                                 Hawaii-Based Key Personnel. 
Accenture’s obligations with respect to Key On-Site Personnel shall be
as described in Section 7.1.

8.5                               Responsibility for, and
Removal of, Accenture Personnel.

(a)                                  The personnel assigned to the Hawaiian Telcom
account by Accenture (or its subcontractors) shall be and remain employees of
Accenture (or such subcontractors), and Accenture (or such subcontractors)
shall provide for and pay the compensation and other benefits of such
personnel, including salary, health, accident and workers’ compensation
benefits and all taxes and contributions that an employer is required to pay
with respect to the employment of employees, except as otherwise specified in Section
9.8(j).

(b)                                 Accenture will take Reasonable Efforts to
limit turnover that Hawaiian Telcom in good faith reasonably believes to be
excessive.

(c)                                  If Hawaiian Telcom reasonably determines,
lawfully and in good faith, that an Accenture Personnel has engaged in
misconduct, Hawaiian Telcom may request the removal of such Accenture Personnel
from the Hawaiian Telcom account, with such request to include a confidential
description of the alleged misconduct. 
Accenture shall promptly investigate the matters forming the basis of
such request.  If the alleged actions of
the Accenture Personnel would be grounds for termination of employment with
Hawaiian Telcom, Accenture shall suspend such Accenture Personnel from the
Hawaiian Telcom account pending the completion of the investigation.  If such investigation reveals actual
misconduct, Accenture will immediately remove the Accenture Personnel from the
Hawaiian Telcom account.

(d)                                 If Hawaiian Telcom reasonably determines,
lawfully and in good faith, that an Accenture Personnel is performing in an
Unacceptable Manner, Hawaiian Telcom may request the removal of such Accenture
Personnel from the Hawaiian Telcom account, with such request to include a
confidential description of the reasons why the removal is needed.  Within five (5) Business Days of receiving
such request, Accenture shall investigate the matters forming the basis of such
request.  Accenture shall, within five
(5) Business Days after the conclusion of the investigation, propose a plan to
either cure and prevent a recurrence of the performance in an Unacceptable
Manner.  If Hawaiian Telcom does not in
good faith agree that such plan is likely to either cure and prevent a
recurrence of the performance in an Unacceptable Manner, and directs Accenture
to remove such individual from the Hawaiian Telcom account, Accenture will
promptly do so.

 22
 

(e)                                  In the event of removal of an Accenture
Personnel under Section 8.5(c) or (d), Accenture shall replace him or
her with an individual meeting the requirements of Section 10.1(a).

(f)                                    Hawaiian
Telcom will not use its rights under Section 8.5(d) in bad faith or for
the purpose of preventing Accenture from meeting its obligations under this
Agreement.

8.6                               Background Checks.  Prior to assigning any Accenture Personnel to perform
the Services, all such Accenture Personnel shall be subject tothe Accenture Background Investigations and Examinations
Policies & Standards, as described in Exhibit J.

8.7                               Reports.  The Parties shall establish an appropriate set of periodic
reports regarding the provision of the Steady State Services by Accenture to be
delivered by Accenture to Hawaiian Telcom from time to time under this
Agreement, which shall include reports that are reasonably necessary to
monitor Accenture’s performance of the Services to ensure they are being
provided for in accordance with the terms of this Agreement (collectively, “Reports”).  Accenture will provide each Report in both an
electronic and, as requested by Hawaiian Telcom, hard copy version.

8.8                               Meetings and Conference
Calls.  The Parties shall determine an
appropriate set of periodic meetings or telephone conference calls to be held
between representatives of Hawaiian Telcom and Accenture.  Such meetings shall include the following:

(a)                                  a weekly meeting among the Hawaiian Telcom
Account Representative, the Accenture Account Representative and any other
appropriate operational personnel to discuss daily performance and planned or
anticipated activities that may adversely affect performance of the Services or
any changes;

(b)                                 a monthly management meeting of the Service
Management Steering Committee; and

(c)                                  a quarterly management meeting to review
relevant Service performance and other issues.

Each Party shall
communicate its objectives or publish its proposed agenda for any meeting
sufficiently in advance of the meeting to allow meeting participants a
reasonable opportunity to prepare.

8.9                               Accenture Subcontractors.

(a)                                  Except as provided in Section 8.9(b)
below, Accenture shall not subcontract all or any part of the Services
identified in one or more Statements of Work or Work Orders without Hawaiian
Telcom’s consent, which shall not be unreasonably withheld, conditioned or
delayed.

(b)                                 Hawaiian Telcom’s consent under Section
8.9(a) above is not required with respect to (i) Accenture Affiliates;
(ii) subcontractors that provide services customarily purchased from third
party vendors such as facilities maintenance, hardware and software
maintenance, security, storage and other ancillary services; (iii) subcontractors
located at an Accenture off-site solution center who provide contract labor and
not subcontracted services, provided that the use of such contract labor on the
Hawaiian Telcom account does not exceed ten percent (10%) of the total number
of Accenture Personnel located at such centers that are dedicated to Hawaiian
Telcom; and (iv) subcontractors that have been pre-approved by Hawaiian Telcom,
as set forth in Exhibit N (Approved Accenture Subcontractors).

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(c)                                  Accenture shall remain responsible for
obligations under this Agreement performed by any Accenture subcontractor to
the same extent as if such obligations were performed by Accenture’s
employees.  Accenture shall remain
Hawaiian Telcom’s sole point of contact regarding the Services.  Any reference to Accenture shall be deemed to
include Accenture’s subcontractors unless the context indicates otherwise.

(d)                                 If Hawaiian Telcom expresses any concerns to
Accenture regarding performance issues with any Accenture subcontractors,
Accenture shall cooperate with Hawaiian Telcom to resolve such concerns on a
mutually acceptable basis.

8.10                        No Solicitation.  Unless otherwise agreed by the Parties in writing,
during the Term and twelve (12) months thereafter, neither Party shall,
directly or indirectly, knowingly solicit for employment, offer employment to
or employ or retain (whether as an employee, officer, agent, consultant,
advisor or in any other capacity) any employee of the other Party who is or was
actively involved in the performance or evaluation of the Services.  Notwithstanding the foregoing, the Parties
acknowledge and agree that this Agreement shall not prohibit (i) solicitations
through general public advertising or other publications of general public
circulation or (ii) the hiring of any employee of a Party who responds to such
solicitations or who otherwise contacts the other Party without such other
Party having solicited such employee.

8.11                        Reprioritization
of Resources.  Subject to
Section 3.8(c)(i)(2), the Hawaiian Telcom Account Representative or his
or her designee may identify or reprioritize or reset the schedule for existing
work activities.

ARTICLE IX

PRICE & PAYMENT

9.1                               Service Charges.

(a)                                  In consideration for the performance of the
Services, Hawaiian Telcom shall pay to Accenture the Charges specified in Exhibit
D (Charges) plus Taxes and other amounts described in this Article IX,
together with the other charges expressly specified in or provided for in this
Agreement.

(b)                                 The Charges specified in Exhibit D
(Charges), together with the other charges expressly specified in or provided
for in this Agreement, compensate Accenture for providing all of the Services
(as a whole) in accordance with this Agreement. 
Accenture may not charge separately for any particular service, function,
responsibility or activity or for any deliverables or other services comprising
the Services beyond the Charges specified in Exhibit D (Charges) unless,
and then only to the extent, expressly provided in the applicable provision of
the Agreement.

(c)                                  For Services which are to be provided
hereunder on a time and materials basis, unless otherwise agreed in writing by
the Parties, labor will be based on the Variable Rates in Attachment D-2
(Enhancement Services Rates), and materials that have been pre-approved in
writing will be reimbursable by Hawaiian Telcom as Pass Through Expenses.

 24
 

9.2                               Reimbursement of
Expenses.  Hawaiian Telcom shall pay, or reimburse,
Accenture for Out-of-Pocket Expenses as specified in Exhibit D
(Charges).

9.3                               Pass-Through Expenses.   Exhibit D (Charges) sets forth certain expenses relating to the
Services that shall be incurred by Accenture and shall be passed through to
Hawaiian Telcom at Accenture’s actual, direct cost (i.e.,
with no handling fees, overhead or other markup by Accenture) for reimbursement
by Hawaiian Telcom (“Pass-Through Expenses”).  Except as otherwise provided in this
Agreement, Hawaiian Telcom shall not be responsible for any additional
Pass-Through Expenses without its prior written consent.

9.4                               Invoices; Method of
Payment; Finance Charges.

(a)                                  Invoicing. Invoices shall be substantially in the form described in Exhibit K
(Form of Invoice).

(i)                                     Recovery Services.  For
Recovery Services, Accenture shall render a single consolidated monthly invoice
for the payment milestones completed during the previous month.

(ii)                                  Enhancement Services.  For
Enhancement Services, Accenture shall render a single consolidated monthly
invoice (i) for the payment milestones completed under a fixed price General
Enhancement Work Order or Enhancement Capacity Work Order during the previous
month; and (ii) for the Non-Work Order Pool Charges for the previous month.

(iii)                               AM Services.  For AM Services, Accenture
shall render a single consolidated monthly invoice in advance for the AM Services.

Accenture may provide such invoices individually or
may aggregate them into one invoice.

(b)                                 Invoice Intervals.  All
invoices shall be provided as of the 25th day of each month (e.g.,
they will be measured from the 25th of one month to the 24th of the next month).  Invoices shall be due and payable thirty (30)
days after Hawaiian Telcom’s receipt of Accenture’s invoice.

(c)                                  Payments.  All amounts to be paid to
Accenture under this Agreement shall be paid in U.S. dollars by federal wire
transfer to the account or accounts designated by Accenture from time to time
or by such other method as is mutually determined by the Parties.  Any amount not paid when due shall bear
interest from the day due until paid, at a rate equal to the lesser of (i) one
percent (1%) per month or (ii) the maximum rate of interest allowed by
applicable Laws.

9.5                               Proration.  Periodic charges under this Agreement are to be
computed on a calendar month basis and shall be prorated on a per diem basis
for any partial month.

9.6                               Unused Credits.  Any unused credits against future payments owed to
either Party by the other pursuant to this Agreement shall be paid to the
applicable Party within thirty (30) days after the expiration or termination of
this Agreement.

 25
 

9.7                               Disputed Charges.

(a)                                  Hawaiian Telcom may, subject to the
notification requirement below and Section 9.7(b), withhold payment of
particular charges that Hawaiian Telcom reasonably and in good faith disputes
(or, if it has already paid such Charges, Hawaiian Telcom may withhold an
equivalent amount from payment to be made during the immediately subsequent
month).  Any amounts (or portions
thereof) not so disputed otherwise shall be paid by the applicable payment due
date, as determined pursuant to Section 9.4(b).  Hawaiian Telcom shall notify Accenture in
writing on or before the payment due date of any disputed charges for which
Hawaiian Telcom is withholding payment and describe, in reasonable detail, the
reason for such withholding.  Hawaiian
Telcom and Accenture shall diligently pursue an expedited resolution of such
dispute.

(b)                                 Notwithstanding anything to the contrary
herein,  Hawaiian Telcom may not withhold
at any point in time in the aggregate an amount greater than one (1) month’s
fees (for disputed amounts related to the first twelve (12) months following
the Effective Date) or fifty percent (50%) of one month’s fees following the
twelve (12) month anniversary of the Effective Date.  In lieu of making such payment to Accenture,
if the disputed amounts exceed such thresholds, but are less than the Disputed
Threshold Amount, Hawaiian Telcom shall have the option of placing the amount
in dispute which exceeds such threshold into an interest bearing escrow
account, at Hawaiian Telcom’s expense. 
To the extent that the disputed amount placed in escrow would exceed the
Disputed Threshold Amount, Hawaiian Telcom shall pay Accenture the amount by
which the disputed amount exceeds such threshold.

(c)                                  To the extent Hawaiian Telcom prevails in any
dispute over charges for which Hawaiian Telcom paid Accenture pursuant to Section
9.7(b), Hawaiian Telcom is entitled to the disputed payment as well as
interest on the disputed paid amount (paid by Hawaiian Telcom to Accenture) at
the rate prescribed in Section 9.4(c) from the time the disputed amount
was paid by Hawaiian Telcom until the time the refund is remitted by
Accenture.  To the extent Accenture
prevails in any dispute over charges, Accenture is entitled to the disputed
payment as well as interest on the withheld amount at the rate prescribed in Section
9.4(c) from the time the disputed amount was due until paid by Hawaiian
Telcom.

(d)                                 To the extent a dispute is resolved in favor
of Accenture, Accenture shall not be entitled to revoke the licenses granted in
Sections 6.5(c)(ii) and 12.1(a), unless Hawaiian Telcom has
failed to pay the disputed amount within thirty (30) days following resolution
of the dispute.

9.8                               Taxes.  References in this Section 9.8 to
Accenture or Hawaiian Telcom shall, as relevant, be deemed to include any
Affiliates of such Party that are paying or receiving any of the Charges or
otherwise incurring any taxes in relation to the performance or receipt of the
Services (including any charges for software or equipment, as applicable).  The Parties’ respective responsibilities for
taxes arising under or in connection with this Agreement shall be as follows:

(a)                                  Each Party shall be responsible (i) for
any real or personal property taxes on property it owns or leases,
(ii) for franchise and privilege taxes on its business, and (iii) for
taxes based on its net income or for taxes on its gross receipts.

 26
 

(b)                                 All amounts payable pursuant to this
Agreement in respect of the Services and all other amounts referred to and
monetary figures used in this Agreement are stated exclusive of any sales, use,
excise, value added, services, withholding taxes related to cross-border
payments (which are transaction taxes and which are not considered income taxes
in such country), consumption, privilege, and other similar taxes or duties (collectively,
“Taxes”).

(c)                                  Accenture shall be responsible for any Taxes
on the goods or services used or consumed by Accenture in providing the
Services (other than goods, including equipment or software, purchased, leased
or licensed for Hawaiian Telcom or on Hawaiian Telcom’s behalf (in respect of
which Hawaiian Telcom holds title or is the licensee, including by assignment))
where the Tax is imposed (including during the Term) on Accenture’s acquisition
or use of such goods or services and the amount of Tax is measured by
Accenture’s cost in acquiring such goods or services.

(d)                                 Hawaiian Telcom shall be responsible for, and
shall pay or reimburse Accenture for the payment of, any Taxes imposed or
assessed (including during the Term) on (i) the provision of the Services,
as a whole, or on any particular Service or on the charges under this Agreement
or (ii) on any equipment or software, purchased, leased or licensed for
Hawaiian Telcom or on Hawaiian Telcom’s behalf (in respect of which Hawaiian
Telcom holds title or is the licensee (including by assignment), if any).  Accenture shall only invoice Taxes to
Hawaiian Telcom which Hawaiian Telcom is (A) obligated to pay pursuant to
this Agreement, or (B) otherwise legally obligated to pay Accenture
pursuant to relevant tax Laws, and in no instance shall Hawaiian Telcom be
responsible for Taxes to the extent excluded pursuant to Section 9.8(f)
below.

(e)                                  If a Tax is imposed or assessed on the
provision of any of the Services as a whole, or on any particular Service, or
the charges therefor or on any equipment or software, purchased, leased or
licensed for Hawaiian Telcom or on Hawaiian Telcom’s behalf (in respect of
which Hawaiian Telcom holds title or is the licensee (including by
assignment)), the Parties shall work together to segregate the payments under
this Agreement into three (3) payment streams:

(i)                                     those for taxable Services;

(ii)                                  those for which Accenture functions merely
assist Hawaiian Telcom in obtaining or receiving goods, supplies, or services
from third parties (including leasing and licensing arrangements); and

(iii)                               those for other nontaxable Services.

In addition, Accenture’s
invoices shall separately state the Services, software and equipment (if any)
provided to Hawaiian Telcom as reasonably requested by Hawaiian Telcom,
including the geography from which Services are provided or where equipment or
software is located.  Accenture shall
otherwise reasonably cooperate with Hawaiian Telcom in invoicing Hawaiian
Telcom in the most Tax efficient manner.

(f)                                    Hawaiian Telcom shall be responsible for and
invoiced by Accenture for any new or increased Taxes, excluding Taxes based on
income, that may arise from Accenture performing or providing Services from a
location different than those specified in the Exhibit E (Service
Locations), unless such change is initiated by Accenture (except where such
Accenture initiation is the result of a change in Laws, which is addressed in Section
7.3).

 27
 

(g)                                 The Parties agree to cooperate with each
other to enable each to more accurately determine its own tax liability and to
minimize such liability to the extent legally permissible.  Accenture’s invoices shall separately state
the amounts of any taxes Accenture is collecting from Hawaiian Telcom, and
Accenture shall timely remit such taxes to the appropriate authorities.  Each Party shall provide and make available
to the other any resale, multiple points of use, or other relevant exemption
certificates, information regarding out-of-county, out-of-state or
out-of-country sales or use of equipment, materials or services, and other
exemption certificates or information reasonably requested by the other Party.

(h)                                 Accenture shall promptly notify Hawaiian Telcom of, and coordinate with
Hawaiian Telcom the response to and settlement of, any claim for taxes asserted
by applicable taxing authorities for which Hawaiian Telcom is responsible
hereunder, it being
understood that with respect to any claim arising out of a form or return
signed by a Party to this Agreement, such Party shall have the right to control
the response to and settlement of the claim. 
If, in good faith, Hawaiian Telcom timely requests Accenture to
challenge the imposition of any tax for which Hawaiian Telcom is responsible hereunder,
and Hawaiian Telcom does not have standing to challenge such tax itself,
Accenture shall do so in a timely
manner and Hawaiian Telcom shall reimburse Accenture for the reasonable legal
fees and expenses it incurs in doing so.  Notwithstanding the foregoing,
Accenture shall retain the right to refuse to challenge the imposition of such
tax and shall bear the associated tax costs.

(i)                                     Hawaiian
Telcom shall be entitled to any tax refunds or rebates granted to the extent
such refunds or rebates are of taxes that were paid by Hawaiian Telcom.  Where Hawaiian Telcom does not have standing
to submit a refund claim for any such Taxes, Accenture shall file a Tax refund claim with the relevant taxing authorities upon the good
faith request of Hawaiian
Telcom.  Any expenses
incurred with respect to filing any
such
Tax refund claims shall be solely borne by Hawaii Telcom.  Hawaiian Telcom shall have the full right to
any Taxes refunded that were borne and paid by Hawaiian Telcom, including the
refund of any associated interest or penalties. Notwithstanding the foregoing, Accenture shall retain the right to
refuse to file the Tax refund claim and shall reimburse Hawaiian Telcom for the
amount of the associated refund to which Accenture would be entitled.

(j)                                     If Accenture believes that any Key Accenture
Personnel is reasonably likely to incur “long term assignment taxes” (e.g., state or local payroll taxes, income
taxes, unemployment taxes, earning taxes, etc.) where Hawaiian Telcom has
requested such individual to be on site at a Hawaiian Telcom Facility away from
their base office on a long term basis, Accenture shall notify Hawaiian Telcom
in advance of such belief.  The Parties
shall endeavor to avoid such taxes by rotating such Key Accenture Personnel out
of such location prior to incurring long term assignment taxes while
maintaining the availability, to extent possible, of such individual at such
location.  Notwithstanding Sections
7.1 and 8.4, if Hawaiian Telcom does not agree in its sole
discretion to reimburse Accenture on an Out-of-Pocket Expense basis for the
incremental amount of such Taxes, Accenture may relocate such employee as
necessary to avoid such Taxes (but not until it is necessary to do so).  In any event, nothing in this Section 9.8(j)
shall excuse Accenture from any of its other obligations under this Agreement
(including meeting milestone dates for Deliverables and the service levels).

 28
 

(k)                                  Hawaiian Telcom agrees to reimburse and hold
Accenture harmless from any deficiency (including penalties and interest)
relating to taxes that are the responsibility of Hawaiian Telcom under Section
9.8(a), 9.8(b), 9.8(d), 9.8(e) and 9.8(f).  Accenture agrees to reimburse and hold
Hawaiian Telcom harmless from any deficiency (including penalties and interest)
relating to taxes that are the responsibility of Accenture under Section
9.8(a) and 9.8(c).

ARTICLE X

REPRESENTATIONS, WARRANTIES AND COVENANTS

10.1                        Representations and
Warranties.

(a)                                  Work Standards. 
Accenture warrants that it shall provide the Actual Services with
promptness and diligence as described in an SOW, and in a workmanlike manner,
in accordance with the practices and professional standards used in
well-managed operations for performing services similar to such Services.  With respect to Services identified in one or
more Statements of Work or Work Orders and performed on a firm fixed price
basis, Accenture also represents and warrants that it shall use adequate
numbers of qualified individuals with suitable training, education, experience
and skill to perform such Services.  With
respect to the AM Discretionary Services, capacity-based services, and
time-and-materials based services, Accenture represents and warrants that it
shall use qualified individuals with training, education, experience and skill
consistent with the service classification description applicable to such
individual, as set forth in the applicable SOW. 
Accenture shall re-perform, at no additional cost to Hawaiian Telcom,
the Services that fail to comply in all material respects with this warranty; provided that Hawaiian Telcom notifies Accenture of such
non-compliance within one-hundred-eighty (180) days after Hawaiian Telcom first
knew or reasonably should have known of the underlying facts giving rise to
such claim, provided further that the foregoing will not extend the statute of
limitations provided for in Section 15.3.  Subject to the other remedies for breaches of
other warranties provided for elsewhere in this Section 10.1, the
obligation to re-perform is Hawaiian Telcom’s sole and exclusive remedy for
breach of this warranty.

(b)                                 Support
Standards.  Subject to Hawaiian Telcom’s obligation to procure maintenance and
support for In-Scope Applications in accordance with this Agreement, and to the
extent maintenance and support activities are Services, Accenture shall perform
maintenance on any In-Scope Applications in accordance with the applicable
software supplier’s written documentation and recommendations provided in
writing to Accenture prior to execution of the applicable SOW or Work Order, or
promptly after it is made available to Hawaiian Telcom, as the case may be.

(c)                                  Deliverables.

(i)                                     Accenture warrants that its modifications to,
and development of, System Deliverables that are software shall comply with
their respective Specifications in all material respects and will not cause
Severity Level 1 or Severity Level 2 Problems, during the Application Warranty
Period.

 29
 

(ii)                                  Reserved.

(iii)                               Subject to Section 10.1(c)(iv) and (v) below, as Hawaiian
Telcom’s sole and exclusive remedy with respect to breach of the warranty in Section
10.1(c), Accenture shall promptly correct any failures to comply with the
warranty in Section 10.1(c)(i) (each a “Warranty Defect”) in a
particular System Deliverable, reported to Accenture in writing during the
Application Warranty Period for such System Deliverable, at no additional cost
to Hawaiian Telcom.

(iv)                              If, after using Reasonable Efforts, Accenture is unable to correct a
Warranty Defect under warranty within the Warranty Repair Time, Hawaiian
Telcom, as its sole and exclusive remedy, shall be entitled to terminate
Accenture’s obligation to correct such Warranty Defect and/or seek direct
damages as a result of such breach, subject to the limitations on liability set
forth in Section 10.1(c)(vi) and Article 15.

(v)                                 Notwithstanding the foregoing, Accenture will
be excused from its obligations in Section 10.1(c)(iii) and any
liability for direct damages in Section 10.1(c)(iv) to the extent a
Warranty Defect is caused by:  (A) any
Person (other than Accenture Personnel) making any revisions or modifications
to the System Deliverable after its provision to Hawaiian Telcom; (B) Hawaiian
Telcom’s misuse or operation of the System Deliverable other than in accordance
with applicable documentation or design identified in the applicable SOW; or
(C) use of the applicable System Deliverable on hardware that does not meet any
minimum hardware requirements identified in the SOW or Work Order, if any
(unless such hardware is otherwise recommended, supplied or approved by
Accenture).

(vi)                              Accenture’s liability for direct damages under Section 10.1(c)
shall be limited as provided for in Exhibit Q (Other Terms).

(d)                                 Absence of Litigation.  Each
Party represents and warrants that as of the Effective Date and to its actual
knowledge no claim, litigation, proceeding, arbitration, investigation or
material controversy is pending, has been threatened or is contemplated against
or by it which would have a material adverse effect on the such Party’s ability
to enter into this Agreement or perform its obligations under this Agreement.

(e)                                  Authorization and Other
Contracts.  Each Party represents and warrants to the
other that:

(i)                                     it has the requisite corporate power and
authority to enter into this Agreement and to fulfill all of its obligations
under this Agreement, including, in the case of Accenture, delivering the
Services; and

(ii)                                  the execution, delivery and performance of
this Agreement does not violate any judgment, order or decree; andthe execution, delivery and performance of
this Agreement does not constitute a material default under any material
contract by which such Party or its Affiliates or any of the same’s material
assets are bound, or an event that would, with notice or lapse of time or both,
constitute such a default.

 30

(f)                                    Inducements.

(i)                                     Each Party represents and warrants to the
other Party that it has not violated any applicable Laws regarding the offering
of unlawful inducements in connection with this Agreement.

(ii)                                  Accenture represents that it has not paid or
caused to be paid any amounts, or given or caused to be given any gifts, to any
government agent, official or employee in contravention of applicable
government procurement Laws for the purpose of influencing any decisions in
connection with the Services.

(g)                                 Infringement.  Each
Party represents and warrants that as of the execution of each SOW, except to
the extent expressly noted otherwise in such SOW, to its knowledge, any
Deliverables and Technical Elements provided by such Party thereunder will not
infringe upon or misappropriate any patents validly issued as of the effective
date of the SOW (but only with respect to patent rights in the countries from
which the Service is being provided), or a third party’s trademarks,
copyrights, or trade secrets.

(h)                                 Verizon
Software.  Hawaiian Telcom represents, warrants and
covenants that the “Software,” “Verizon Deliverable” and “Verizon Proprietary
Software” (each as defined in the Verizon Sublicense Agreement) delivered or
made available to Accenture is in the form and content as it was provided to
Hawaiian Telcom pursuant to the SDLA or the SLA (as defined in the Verizon
Sublicense Agreement), as modified by Hawaiian Telcom thereunder.

(i)                                     DISCLAIMER

EXCEPT AS
OTHERWISE EXPRESSLY PROVIDED IN THIS SECTION 10.1, THE PARTIES MAKE NO
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, REGARDING ANY MATTER,
INCLUDING FITNESS FOR A PARTICULAR PURPOSE,
MERCHANT­ABILITY, INFORMATIONAL CONTENT, SYSTEMS INTEGRATION, NON-INFRING­EMENT,
INTERFERENCE WITH ENJOYMENT, OR RESULTS TO BE DERIVED FROM THE USE OF
ANY SERVICE, SOFTWARE, HARDWARE, DELIVERABLES, WORK PRODUCT OR OTHER MATERIALS
PROVIDED UNDER THIS AGREEMENT.  ACCENTURE
EXPRESSLY DISCLAIMS ANY WARRANTY OF THE ACCURACY OR COMPLETENESS OF DATA,
OPERATION­AL CRITERIA OR PARAMETERS PROVIDED BY HAWAIIAN TELCOM.  ACCENTURE DOES NOT REPRESENT OR WARRANT THAT
THE OPERATION OF ANY SOFTWARE SHALL BE UNINTERRUPTED OR ERROR FREE.  ACCENTURE WILL NOT BE RESPONSIBLE FOR ERRORS
IN THE CODE FOR IN-SCOPE APPLICATIONS WHERE ACCENTURE DOES NOT HAVE ACCESS TO,
AND THE RIGHT AND OBLIGATION TO MODIFY, 
SUCH CODE.

10.2        Covenants.

(a)                                  Viruses.

(i)                                     Accenture shall use Reasonable Efforts to
protect against forms of harmful or surreptitious code (“Viruses”) being introduced by Accenture into the
System or any Accenture systems used to provide the Services identified in one
or more Statements of Work or Work Orders.

 31
 

(ii)                                  Hawaiian Telcom shall use Reasonable Efforts
to protect against Viruses being introduced into the System.

(iii)                               If either Party discovers that a Virus has
been introduced into its software, equipment or systems that interface or
otherwise interconnect with the other Party’s software, equipment or systems,
such Party shall immediately notify the other Party of the pertinent facts.

(iv)                              If Accenture discovers that a Virus has been
introduced into the System, Accenture shall: 
(i) immediately notify Hawaiian Telcom of the pertinent facts; (ii)
immediately commence efforts to contain and isolate the Virus (with Hawaiian
Telcom’s approval for any disconnections); (iii) use Reasonable Efforts to
remediate or repair (or both) the affected In-Scope Applications that are lost
or corrupted as a result of the Virus, and (iv) promptly restore the Services
to full operation in accordance with the Agreement (including the service
levels).  Accenture will do so at its own
expense where the Virus is introduced into the System by Accenture or through
Accenture’s access to the System, and in all other cases, Hawaiian Telcom shall
reimburse Accenture for its incremental costs in complying with this paragraph,
subject to Section 4.2(d).  To the
extent Hawaiian Telcom does not give its approval for a disconnection deemed by
Accenture to be necessary, such denial shall be deemed a Possible Excuse for
purposes of Section 3.8(c), and if such denial increases Accenture’s
costs in performing its obligations under this Section 10.2(a)(iv),
Hawaiian Telcom shall be responsible for the incremental costs resulting from
such denial, subject to Section 4.2(d).

(b)                                 Disabling Code. 
Accenture shall not knowingly insert into any System Deliverable or
In-Scope Application or any other Hawaiian Telcom software any code which would
have the effect of disabling or otherwise shutting down all or any portion of
the Services.  With respect to any
disabling code that may be part of any software, each Party agrees to not
invoke such disabling code at any time, including upon the expiration or
termination of this Agreement, without the other Party’s prior written consent.

(c)                                  Efficiency and Cost
Effectiveness.  To the extent that resources or services are
charged on a person hour or other non-fixed basis (including charges billed on
a time and materials basis and Pass-Through Expenses), Accenture shall use
Reasonable Efforts to use efficiently the resources or services necessary to
provide the Services, and to perform the Services in a reasonably cost
efficient manner consistent with the required level of quality and performance.

ARTICLE XI

CONFIDENTIALITY; SAFEGUARDING OF DATA

11.1        Confidentiality.

(a)                                  In connection with this Agreement, each of
the Parties has disclosed and may continue to disclose to the other Party
information that relates to the disclosing Party’s business operations,
financial condition, customers, products, services or technical knowledge.

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Except as otherwise specifically agreed in writing by the Parties,
Accenture and Hawaiian Telcom each agree that (i) all information communicated
to it by the other and identified as confidential or proprietary, (ii) all
information identified as confidential or proprietary to which it has access in
connection with the Services, (iii) all information communicated to it or to
which it has access that reasonably should be understood by the receiving
Party, because of confidentiality or similar legends, the circumstances of
disclosure or the nature of the information itself, to be proprietary and
confidential to the disclosing Party, and (iv) this Agreement (collectively,
the “Confidential Information”), shall be and shall be deemed to have been
received in confidence and shall be used only for purposes of this Agreement;
except that Hawaiian Telcom may share the following with its replacement
service provider and any third party that intends to submit a bid to Hawaiian
Telcom to perform the same or similar services as the replacement service
provider or any other services related thereto, provided that such third party
is subject to confidentiality provisions consistent with the terms of this Article
XI:  all Exhibits B and Attachments
thereto, including the Statements of Work and Work Orders, Attachment B-3.1
(Service Level Methodology) (provided that the Amount at Risk and At Risk Pool
Percentage Available for Allocation shall be redacted), Attachment B-3.2
(Service Level Definitions and Metrics), Attachments B-3.3 (Transition Plan),)
and B-3.5 (System and Process Queues), Recovery Projects and Enhancement
Projects set forth in Attachments D-1 and D-2, respectively (excluding any
charges associated therewith), Exhibits F (Resources), G (Hawaiian Telcom
Policies), H (Hawaiian Telcom Facilities), I (In-Scope Applications), K (Form
of Invoice), L (Verizon Sublicense), and O (Reporting), and any other
information that is provided by Hawaiian Telcom to Accenture.

(b)                                 Each Party’s Confidential Information shall
remain the property of that Party except as otherwise expressly provided in
this Agreement.  Each of the Parties
shall use at least the same degree of care to safeguard and to prevent
disclosing to third parties the Confidential Information of the other as it
employs to avoid unauthorized disclosure or publication of its own information
(or information of its customers) of a similar nature, and in any event, no
less than reasonable care.  Each Party
may disclose relevant aspects of the other Party’s Confidential Information to
its employees, Affiliates, subcontractors and agents to the extent such
disclosure is reasonably necessary for the performance of its obligations, or
the enforcement of its rights, under this Agreement; provided,
however, that such Party shall use
Reasonable Efforts to ensure that such employees, Affiliates, subcontractors or
agents comply with these confidentiality provisions.  Each Party shall be responsible for any
improper disclosure of Confidential Information by such Party’s employees,
Affiliates, subcontractors or agents.

(c)                                  Neither Party shall (i) make any use of the
Confidential Information of the other except as contemplated by this Agreement,
(ii) acquire any right in or assert any lien against the Confidential Information
of the other, except for the license rights as set forth in Section 6.5
and 6.3, or (iii) sell, assign, lease or otherwise commercially exploit
the Confidential Information of the other Party.  Upon expiration or any termination of this
Agreement and completion of a Party’s obligations under this Agreement, each
Party shall (except as otherwise provided in this Agreement) return or destroy,
as the owner may direct, all documentation in any medium that contains the
other Party’s Confidential Information, and retain no copies; provided,
however, either Party may retain copies of the Confidential Information of the
other Party to the extent required for (i) in the case of Accenture, compliance
with applicable professional standards or quality assurance purposes and (ii)
in the case of Hawaiian Telcom, its continuing operations or internal business
purposes.

 33
 

(d)                                 This Section 11.1 shall not apply to
any particular information that either Party can demonstrate (i) was, at the
time of disclosure to it, in the public domain; (ii) after disclosure to it, is
published or otherwise becomes part of the public domain through no fault of
the receiving Party; (iii) was in the possession of the receiving Party at the
time of disclosure to it and was not the subject of a pre-existing
confidentiality obligation; (iv) was received after disclosure to it from a
third party who had a lawful right to disclose such information (without
corresponding confidentiality obligations) to it; or (v) was independently
developed by or for the receiving Party without use of the Confidential
Information of the disclosing Party.  In
addition, a Party shall not be considered to have breached its obligations
under this Section 11.1 for disclosing Confidential Information of the
other Party to the extent required to satisfy any legal requirement of a
competent governmental authority, provided that
(1) promptly upon receiving any such request and to the extent that it may
legally do so, such Party advises the other Party prior to making such
disclosure in order that the other Party may object to such disclosure, take
action to ensure confidential treatment of the Confidential Information, or
take such other action as it considers appropriate to protect the Confidential
Information, and (2) when disclosing Confidential Information for the purpose
of satisfying such legal requirements, the Party legally required to disclose
redacts all Confidential Information which it, in good faith consultation with
the other Party, reasonably determines are not required to be disclosed to
satisfy the legal requirements.

11.2        Hawaiian Telcom Data.

(a)                                  As between the Parties, Hawaiian Telcom shall
be the sole and exclusive owner of all Hawaiian Telcom Data.  Accenture will not possess or assert, and
will contractually require that its subcontractors do not possess or assert,
any lien or other right or interest against or to any Hawaiian Telcom Data.
Accenture shall utilize the Hawaiian Telcom Data solely for purposes of this
Agreement and shall not sell, assign, lease or otherwise commercially exploit
the Hawaiian Telcom Data.  Hawaiian
Telcom Data shall be deemed Hawaiian Telcom Confidential Information for
purposes of Section 11.1. 
Accenture is hereby authorized to have access to and to make use of the
Hawaiian Telcom Data for the Term to the extent reasonably necessary or
appropriate for the performance by Accenture of its obligations hereunder.  Accenture may disclose relevant aspects of
the Hawaiian Telcom Data to its employees, Affiliates, subcontractors and
agents to the extent such disclosure is reasonably necessary for the
performance of its obligations, or the enforcement of its rights, under this
Agreement.

(b)                                 Subject to the other terms and conditions of
this Agreement (including the Contract Change Control Process) Accenture
will:  (i) comply with all applicable
Hawaiian Telcom Policies attached as Exhibit G-1 with respect to the
Hawaiian Telcom Data; and (ii) segregate all Hawaiian Telcom Data from that of
any other client.

(c)                                  Accenture will establish and maintain
procedures, systems, processes and controls intended to prevent the
unauthorized access, destruction, loss or alteration of any Hawaiian Telcom
Data in the possession or control of Accenture, or while transmitted by
Accenture to Hawaiian Telcom, that are no less rigorous than those maintained
by Accenture for its own similar data. 
Without limiting the generality of the foregoing, Accenture shall comply
with Hawaiian Telcom Policies regarding procedures and safeguards against the
destruction, loss or alteration of Hawaiian Telcom Data in Accenture’s
possession, as such Hawaiian Telcom Policies are attached as Exhibit G-1,
as such procedures may be upgraded or enhanced by Hawaiian Telcom from time to
time, provided that any such changes will be subject to the fee adjustments
provided for in Section 4.2(d).

 34
 

(d)                                 Accenture may retain archival copies of
Hawaiian Telcom Data as reasonably necessary to verify Accenture’s compliance
with this Agreement, subject to its confidentiality obligations as set forth in
this Article XI.  Accenture shall
identify such data to Hawaiian Telcom at the time such archival copies are
withheld.

(e)                                  Accenture will not attempt to access or allow
access to Hawaiian Telcom Data that is not required for the performance of the
Services or otherwise authorized hereby. 
Accenture will promptly notify Hawaiian Telcom of any discovered breach
or attempted breach of security by Accenture Personnel of Hawaiian Telcom Data
(including with respect to such information held or processed by
subcontractors) and will investigate and work to remediate the effects of such
breach and take reasonable steps to prevent the recurrence of the attempted
breach.

(f)                                    Notwithstanding the foregoing or anything
herein to the contrary, with respect to any Hawaiian Telcom Data that is
information about individuals, whether personally identifiable information or
non-personally identifiable information, Accenture will not access, retrieve,
store, view or otherwise use such data except if and to the extent necessary to
perform the Services, nor will Accenture store any such data outside of the
United States.

11.3        Unauthorized Acts.  Each Party shall:

(a)                                  notify the other Party promptly of any
material unauthorized possession, use or knowledge, or attempt thereof, of the
other Party’s Confidential Information by any Person that may become known to
such Party;

(b)                                 promptly furnish to the other Party details
of the unauthorized possession, use or knowledge, or attempt thereof, and use
reasonable efforts to assist the other Party in investigating or preventing the
recurrence of any unauthorized possession, use or knowledge, or attempt
thereof, of Confidential Information;

(c)                                  use reasonable efforts to cooperate with the
other Party in any litigation and investigation against third parties deemed
necessary by the other Party to protect its proprietary rights; and

(d)                                 promptly use reasonable efforts to prevent a
recurrence of any such unauthorized possession, use or knowledge of
Confidential Information.

The Party whose
Confidential Information is the subject of such activity shall reimburse any
Out-of-Pocket Expenses incurred by the other Party as a result of compliance
with this Section 11.3, unless the unauthorized possession, use or
knowledge, or attempt thereof is the result of the other Party’s breach of its
obligations under Sections 11.1(b) or (c).

11.4        Employees and Contracts.  Each Party shall be responsible for contractually
obligating its Personnel (i.e., Hawaiian
Telcom Personnel in the case of Hawaiian Telcom and Accenture Personnel in the
case of Accenture) to comply with terms consistent with this Article 11
and will be responsible for any failures to comply by such Personnel.

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ARTICLE XII

PROPRIETARY RIGHTS

12.1        Ownership of Deliverables.

(a)                                  As between the Parties, upon payment for the
applicable Deliverable or applicable Services rendered (e.g., the applicable
monthly Charges in the case of modifications to Hawaiian Telcom Technical
Elements made in connection with the AM Services), Hawaiian Telcom shall be the
sole and exclusive owner of the Deliverables and all Intellectual Property
Rights therein, and Accenture hereby assigns any right, title and interest it
may have in such Deliverables or any Intellectual Property Rights therein to
Hawaiian Telcom.  Without limiting the
generality of the foregoing, to the extent applicable, each Deliverable shall
be deemed a “work made for hire.” 
Accenture agrees to execute any appropriate documents and take any other
appropriate actions reasonably requested by Hawaiian Telcom to effectuate the
purposes of this Section 12.1. 
Notwithstanding the foregoing, Accenture shall not be estopped from
contesting the validity of any patent or patents filed by Hawaiian Telcom
relating to any Deliverables in any legal proceeding.  If, and to the extent that, Accenture is
prevented under applicable Laws from assigning any such Deliverables or rights
therein to Hawaiian Telcom, Accenture hereby grants to Hawaiian Telcom an
irrevocable, perpetual, sublicensable, worldwide, fully paid-up, royalty-free
and exclusive (i.e., as against all others
including Accenture) license to use, modify and otherwise exploit in any manner
any such Deliverables (excluding any Accenture Technical Elements and Accenture
Confidential Information incorporated therein) or rights upon payment for such
Deliverable or Service.  Prior to payment
for the applicable Deliverable or applicable Services rendered, Accenture
hereby grants to Hawaiian Telcom an exclusive, revocable, non-transferable,
license to use, copy, modify and prepare derivative works of the Deliverable
solely for Hawaiian Telcom’s internal business use.  Such license will be sublicensable, provided
any such sublicenses will be revocable in the event Hawaiian Telcom’s license
is revoked.

(b)                                 For purposes of Section 12.1(a), Deliverables
shall not include any Accenture Technical Elements which are embedded in a
Deliverable.  All Deliverables shall be
developed such that they can be operated without reliance on any
Accenture-Provided User Tools or any other Accenture Technical Elements except
to the extent embedded in a Deliverable in accordance with Section 6.5.

12.2        Residuals Clause.  Notwithstanding the foregoing or anything herein to
the contrary, nothing herein shall prohibit either Party from using general
ideas, skills, knowledge, experience, concepts and know-how learned in
connection with this Agreement that are retained in unaided memory of its
employees (provided they have not been intentionally memorized for the purpose
of relying on this provision), provided that such use does not infringe the
other Party’s copyrights and does not misappropriate the other Party’s trade
secrets.  Where (i) a Deliverable
embodies an invention for which Hawaiian Telcom seeks patent protection, and a
patent claiming such invention issues for which any Accenture Personnel are
inventors, or (ii) any modification to or derivative work of an Accenture
Technical Element made by or on behalf of Hawaiian Telcom embodies an invention
for which Hawaiian Telcom seeks patent protection, and a patent claiming
such invention issues, and, to
the extent that such derivative work is software or software code, the
underlying Accenture Technical Element contributes a material portion of the
derivative work,then in
each of the cases of subsections (i) and (ii),  Hawaiian Telcom agrees not sue Accenture for infringement of such
patent as a result Accenture exercising its rights under this Section 12.2.

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12.3        Hawaiian Telcom IP Rights.  Notwithstanding
any other provision of this Agreement to the contrary, under no circumstances
will Hawaiian Telcom be obligated to assign to Accenture any intellectual
property rights owned by Hawaiian Telcom or any of its subcontractors, and any
provision of this Agreement which requires such an assignment is hereby
superseded by this Section.  In the event
of a conflict between this provision and any other provision of this Agreement,
the terms of this provision will govern.

ARTICLE XIII

AUDIT RIGHTS

13.1        Operational Audits.

(a)                                  Subject to the provisions of Section 13.3,
Accenture shall provide to such auditors (including third-party auditors,
Sarbanes-Oxley 404 consultants and Hawaiian Telcom’s internal audit staff) as
Hawaiian Telcom may designate in writing, access to any Accenture Facility at
which the Actual Services are being performed, and to such Accenture Personnel,
systems, data and records maintained or used by Accenture in connection with
the Services as may be requested by such auditor for the purpose of performing
audits, reviews and inspections of Hawaiian Telcom and its businesses as
necessary to enable Hawaiian Telcom to (i) meet its applicable regulatory
requirements or to verify it is otherwise in compliance with any Hawaiian
Telcom Laws, including verifying the integrity of Hawaiian Telcom Data
(including reasonable access as necessary to document processes and controls as
part of its Sarbanes-Oxley 404 readiness efforts), and (ii) confirm that the
Services are being provided in accordance with this Agreement, including the
service levels and verifying the integrity of Hawaiian Telcom Data.  To the extent applicable to the Services
performed by Accenture, the scope of such audits or reviews may include,
without limitation, (x) Accenture’s practices and procedures, and (y) the
adequacy of general controls (e.g.,
organizational controls, input/output controls, system modification controls,
processing controls, system design controls, and access controls), change
management controls (acquisition, implementation and monitoring), and security
practices and procedures.  Hawaiian
Telcom shall be responsible for its costs and expenses (including the costs and
expenses of its auditors and consultants) in connection with performing any
such audits or reviews.  Accenture shall
provide such support for audits conducted pursuant to Section 13(a)(i) at no
charge.  Audits conducted pursuant to
Section 13(a)(ii) herein may be conducted at no charge no more frequently than
annually, unless material issues are discovered, in which case Hawaiian Telcom
may perform additional audits at no charge to monitor and verify the resolution
of such issues.  If Hawaiian Telcom
elects to perform additional audits under Section 13(a)(ii), any assistance
required by Accenture (which Accenture is not otherwise obligated to provide)
shall be subject to Section 4.2(d) (e.g., the Charges will be equitably
adjusted if and to the extent provided for in Section 4.2(d)), provided,
however, that there will be no charge if any such audit identifies a failure of
Accenture to perform any of its obligations hereunder in a material respect.

(b)                                 Accenture shall provide an annual type 2
Statement on Auditing Standards (“SAS”) 70 to Hawaiian Telcom for the
Accenture Service Locations from where Services identified in one or more
Statements of Work or Work Orders are provided, at no cost to Hawaiian
Telcom.  The scope of these reports shall
be the common controls that support multiple clients served from Accenture
delivery centers.  The control objectives
are based upon guidance from the Information Technology Governance
Institute.  The reporting period for such
annual SAS 70 shall be from April 1 to October 1 of each calendar year, with an

 37
 

estimated delivery date of approximately November 1, but no later than
November 15.  Hawaiian Telcom and its
external auditor will be provided copies of relevant reports upon
issuance.  Hawaiian Telcom agrees that
its data may be used as a sample client for the purposes of testing.  In addition to such annual SAS 70 report,
Hawaiian Telcom, at its own expense, may further audit Accenture (either the
Hawaiian Telcom stand-alone facility or the common Accenture delivery center
located in Manila) in accordance with the terms of this Article XIII.  To the extent Hawaiian Telcom requests a
client-specific SAS 70 report, Accenture will contract with a Big 4 accounting
firm to perform a client-specific SAS 70 audit, and Hawaiian Telcom will pay
the accounting firm’s fees and expenses. 
For such client-specific SAS 70 audit, Hawaiian Telcom may establish the
scope, control objectives, frequency and reporting periods.

13.2        Financial Audits.

(a)                                  In order to document the Services and the
Charges paid or payable by Hawaiian Telcom under this Agreement, Accenture
shall retain its standard records and supporting documentation for at least
three (3) years.

(b)                                 Subject to the provisions of Section 13.3,
Accenture shall provide to such auditors as Hawaiian Telcom may designate in
writing, access to such records and supporting documentation as are necessary
to audit the Charges paid or payable by Hawaiian Telcom under this
Agreement.  Hawaiian Telcom may audit the
Charges charged to Hawaiian Telcom to determine that such Charges are accurate
and were calculated in accordance with this Agreement.

(c)                                  Any such audits shall be conducted at
Hawaiian Telcom’s expense; provided, however, that if, as a result of such
audit, Hawaiian Telcom determines that Accenture has overcharged Hawaiian
Telcom, Hawaiian Telcom shall notify Accenture of the amount of such overcharge
and Accenture shall promptly pay to Hawaiian Telcom the amount of the
overcharge, with interest at the rate set forth in Section 9.4.  If the audit reveals an undercharge, Hawaiian
Telcom shall promptly pay to Accenture the amount of the undercharge, minus the
out-of-pocket costs and expenses incurred for such audit.

13.3        General Principles Regarding
Audits.

(a)                                  Hawaiian Telcom and its auditors shall use
Reasonable Efforts to conduct such audits in a manner that shall result in a
minimum of inconvenience and disruption to Accenture’s business
operations.  Audits may be conducted only
during normal business hours.  Hawaiian
Telcom and its auditors shall not be entitled to audit (i) data or information
of other customers or clients of Accenture; (ii) any Accenture proprietary data
including cost information unless such is the basis of a reimbursable or
Pass-Through Expense; or (iii) any other Confidential Information of Accenture
that is not directly relevant for the purposes of the audit.  Hawaiian Telcom shall provide Accenture with
at least ten (10) days’ prior written notice of an audit.  Accenture shall use Reasonable Efforts to
cooperate in the audit, shall make available on a timely basis the information
reasonably required to conduct the audit and shall assist the designated employees
of Hawaiian Telcom or its auditors as reasonably necessary.  To the maximum extent possible, audits shall
be designed and conducted (in such manner and with such frequency) so as not to
interfere with the provision of the Services. 
All information learned or exchanged in connection
with the conduct of an audit, as well as the results of any audit, constitutes
Confidential Information of Accenture and Hawaiian Telcom.

 38
 

(b)                                 Prior to conducting an audit, the auditors
and other representatives of Hawaiian Telcom shall be subject to
confidentiality and non-disclosure requirements consistent with requirements of
Section 11.1.  Hawaiian
Telcom will not use any Accenture Competitor to conduct such audits.  For purposes of the immediately preceding
sentence, an Accenture Competitor shall not include the accounting/auditing
division of any Accenture Competitor.

13.4        Remedial Action.  Promptly following an audit or inspection by or on
behalf of Hawaiian Telcom or Accenture, Hawaiian Telcom and Accenture shall meet
to discuss the findings of the auditors or inspectors, whichever the case may
be, and to develop and agree upon an appropriate and effective manner in which
to respond to the deficiencies identified in and changes suggested by the audit
report.  If Hawaiian Telcom reasonably
determines that any matter identified in an audit would:

(a)                                  be considered a deficiency in Hawaiian
Telcom’s internal control structure and procedures for financial reporting (as
such deficiency is characterized under the Standards) or in Accenture’s
processes;

(b)                                 require Hawaiian Telcom to disclose a risk of
non-compliance;

(c)                                  prevent Hawaiian Telcom’s management from
evaluating or affirming the effectiveness of its internal control for financial
reporting pursuant to the Sarbanes-Oxley Act; or

(d)                                 prevent Hawaiian Telcom’s independent
auditors from providing an attestation opinion;

then Accenture shall
resolve such deficiency or risk, and shall use Reasonable Efforts to do so as
promptly as practicable, taking into consideration the nature of the deficiency
and the risks it poses to Hawaiian Telcom, in such a manner that Hawaiian
Telcom can complete management assessments and attestations required by the
Sarbanes-Oxley Act.  To the extent a matter
described in this Section is the result of Accenture not following the written
policies and procedures relating to Services then Accenture will bear the cost
of the remediation.  To the extent
Accenture is following the written policies and procedures relating to Services
then the cost or any change or enhancement will be borne by Hawaiian Telcom.

13.5        Accenture Audits.  If an Audit undertaken or commissioned by Accenture
(including its Affiliates, their subcontractors, agents or representatives and
whether performed by internal or external auditors) relating to Accenture’s
operating practices and procedures reveals a material adverse impact on, or
other issue with, the Services or Hawaiian Telcom, Accenture will promptly
notify Hawaiian Telcom of such impact or issue.

13.6        Survival of Audit Rights.  The audit rights in Section 13.2 shall extend
for a period of twelve (12) months following the expiration of the Termination
Assistance Period, provided that any audit with respect to Taxes shall be
deemed subject to Section 13.1, not Section 13.2.  The audit rights in Section 13.1 shall
survive until the later of:  (a) seven
(7) years after the termination of the whole of the Agreement; provided that
the right to audit Accenture’s facilities shall terminate one (1) year after
the termination of the whole of the Agreement (including the Termination
Assistance Period); (b) the date upon which all pending matters relating to
this Agreement are closed; or (c) the date on which such information is no
longer required in order to meet Hawaiian Telcom Laws or Hawaiian Telcom’s then
current record retention policies. 
Before destroying or otherwise disposing of any particular items or
information to be retained under this Section 13.6, Accenture will
provide Hawaiian Telcom with ninety (90) days prior written notice.  Accenture will offer Hawaiian Telcom the
opportunity to recover such items or information by other means or request that
Accenture deliver such items or information to Hawaiian Telcom.  Hawaiian Telcom will pay Accenture’s Out of
Pocket Expenses to make such delivery.

 39
 

ARTICLE XIV

INDEMNIFICATION

14.1        Bodily Injury and Property Damage.  Each Party shall indemnify,
defend and hold harmless the other and its Affiliates, and their respective
employees, directors, officers, principals (partners, shareholders or holders
of an ownership interest, as the case may be) and agents, from and against any
Losses arising from claims by third parties relating to bodily injury or death
of any person or damage to real and/or tangible personal property to the extent
caused by the negligence or willful misconduct of the indemnifying party, its
personnel or agents.

14.2        Indemnification by
Accenture.  Accenture shall indemnify, defend and
hold harmless Hawaiian Telcom, Hawaiian Telcom Affiliates and their respective employees,
principals (partners, shareholders or other holders of an ownership interest,
as the case may be) and agents (the “Hawaiian Telcom Indemnitees”) from
and against any and all Losses arising from claims by third parties, whether
based in whole or in part in contract, tort, negligence, statute or otherwise,
to the extent caused by any of the following:

(a)                                  the failure of Accenture to perform any
obligations under any license, lease or other agreement between Accenture and a
third party;

(b)                                 the failure of Accenture to perform any
obligations under any third-party license, lease or other agreement assigned by
Accenture and assumed by Hawaiian Telcom in connection with the expiration or
termination of this Agreement, provided that
this Section 14.2(b) shall apply only to claims by such third party that
are based on acts or omissions occurring during the period preceding the date
of such assumption;

(c)                                  The failure of Accenture to comply with
Accenture Laws;

(d)                                 Accenture’s failure to obtain any Required
Consents; provided, however, if the failure to obtain a Required Consent is an
infringement or alleged infringement of intellectual property, this Section
14.2 shall not apply and Section 14.4 shall constitute Accenture’s
sole and exclusive obligations and liability with respect to the failure to
obtain such Required Consent;

(e)                                  To the extent not related to any wrongful
acts or omissions committed or alleged to have been committed by Hawaiian
Telcom or any Hawaiian Telcom Affiliate or any Authorized Users, any claims
brought by any supplier or subcontractor of Accenture arising under or in
connection with an agreement between Accenture and such supplier or
subcontractor; or

(f)                                    Accenture’s breach of any of its
representations and warranties set forth in Sections 10.1(d), (e)
and (f).

14.3        Indemnification by Hawaiian
Telcom.  Hawaiian Telcom shall indemnify, defend
and hold harmless Accenture, Accenture Affiliates and their respective
employees, principals (partners, shareholders or other holders of an ownership
interest, as the case may be) and agents (the “Accenture Indemnitees”)
from and against any and all Losses arising from claims by third parties,
whether based in

 40
 

whole or in part
in contract, tort, negligence, statute or otherwise, to the extent caused by
any of the following:

(a)                                  the failure of Hawaiian Telcom to perform any
obligations under any license, lease or other agreement between Hawaiian Telcom
and a third party;

(b)                                 the failure of Hawaiian Telcom to perform any
obligations under any third-party license, lease or other agreement assigned by
Accenture and assumed by Hawaiian Telcom in connection with the expiration or
termination of this Agreement, provided that
this Section 14.3(c) shall apply only to claims by such third party
that are based on acts or omissions occurring during the period from and after
the date of such assumption;

(c)                                  Hawaiian Telcom’s failure to obtain any
Required Consents; provided, however, if the failure to obtain a Required
Consent is an infringement or alleged infringement of intellectual property,
this Section 14.3 shall not apply and Section 14.5 and 3.8(c)
shall constitute Hawaiian Telcom’s sole and exclusive obligations and liability
with respect to the failure to obtain such Required Consent;

(d)                                 any third-party claim which arises in
connection with the use by Hawaiian Telcom of any Deliverable or Services
provided by Accenture to Hawaiian Telcom under this Agreement, except to the
extent covered by Accenture’s indemnity obligations under this Agreement;

(e)                                  The failure of Hawaiian Telcom to comply with
Hawaiian Telcom Laws;

(f)                                    Hawaiian Telcom’s breach of any of its
representations and warranties set forth in Sections 10.1(d), (e), (f) and
(h) of this Agreement and Sections 9.2 and 9.3 of the Verizon Sublicense Agreement;
or

(g)                                 any Additional Third Party Claims set forth
in Exhibit Q (Other Terms).

14.4        Accenture’s Infringement
Indemnity.

(a)                                  Accenture shall indemnify, defend and hold
harmless Hawaiian Telcom Indemnitees from and against any and all Losses that
result or are claimed to result in whole or in part from the contention that
any Accenture Technical Elements and Deliverables provided by Accenture to Hawaiian Telcom pursuant to this Agreement or
otherwise provided and used by Accenture in connection with this Agreement,
constitute infringement or misappropriation of any patents validly issued as of
the effective date of the later of the Statement of Work or Work Order (but
only with respect to patent rights in the countries from which the Service is
being provided), or a third party’s trademarks, copyrights, or trade secrets.

(b)                                 Accenture shall not
indemnify Hawaiian Telcom, however, to the
extent the claim of infringement is caused by:

(i)                                     Hawaiian Telcom’s
misuse or modification of the Deliverable;

(ii)                                  Hawaiian Telcom’s
failure to use corrections or enhancements made available by Accenture;

 41
 

(iii)                               Hawaiian Telcom’s use of the Deliverable in
combination with any product or information not owned, developed or approved by
Accenture;

(iv)                              Hawaiian Telcom’s distribution, marketing or use
for the benefit of third parties of the Deliverables;

(v)                                 Accenture’s compliance
in developing the Deliverable with information, direction, specification or
materials provided by Hawaiian Telcom in connection with this Agreement, and
the infringement cannot be remedied by modifying the Deliverable while
maintaining compliance with the specification; or

(vi)                              the infringing material was furnished to
Accenture by Hawaiian Telcom or by Hawaiian Telcom’s previous or current
service provider working on the services to be transitioned to Accenture.

(c)                                  If any Deliverable is,
or in Accenture’s opinion is likely to be, held to be infringing, Accenture
shall at its expense and option, except to the extent the cause of such
infringement is set forth in Section 14.4(b), either:

(i)                                     procure the right for
Hawaiian Telcom to continue using it;

(ii)                                  replace it with a
noninfringing item of equivalent or better performance, functionality and
compatibility;

(iii)                               modify it to make it noninfringing but of
equivalent or better performance, functionality and compatibility; or

(iv)                              if (i) — (iii) are not commercially reasonable,
Accenture may direct the return of the Deliverable and refund to Hawaiian
Telcom the fees paid for such Deliverable less a reasonable amount for Hawaiian
Telcom’s use of the Deliverable up to the time of return.

(d)                                 The foregoing remedies
constitute Hawaiian Telcom’s sole and exclusive remedies and Accenture’s entire
liability with respect to infringement.

14.5        Hawaiian Telcom Infringement
Indemnity.

(a)                                  Hawaiian Telcom shall indemnify, defend and
hold harmless Accenture Indemnitees from and against any and all Losses that
result or are claimed to result in whole or in part from the contention that any Technical Elements provided by Hawaiian
Telcom to Accenture pursuant to this Agreement (including the Technical
Elements made available to Accenture in connection with the Verizon Sublicense
Agreement) or otherwise provided and used by Hawaiian Telcom in connection with
this Agreement constitute infringement or misappropriation of any
patents validly issued as of the effective date of the later of the Statement
of Work or Work Order (but only with respect to patent rights in the countries
from which the Service is being provided), or a third party’s trademarks,
copyrights, or trade secrets.

(b)                                 Hawaiian Telcom shall
not indemnify Accenture, however, if the claim of infringement is caused by:

 42
 

(i)                                     Accenture’s misuse or
modification of the Hawaiian Telcom resource or item;

(ii)                                  Accenture’s failure to
use corrections or enhancements made available by Hawaiian Telcom; or

(iii)                               Accenture’s use of the
Hawaiian Telcom resource or item in combination with any product or information
not owned, developed or approved by Hawaiian Telcom.

For the avoidance of doubt, Accenture’s use,
reproduction, modification and creation of derivative works of any Unknown
Third Party Software and Third Party Modules (each as defined in the Verizon
Sublicense Agreement) made available to Accenture by Hawaiian Telcom shall not
be considered misuse, provided that such activity is undertaken during the Term
or the Termination Assistance Period and for the sole purpose of providing the
Services to Hawaiian Telcom and its Affiliates; and further provided that
Hawaiian Telcom has not provided Accenture with notice under last paragraph of
Section 8 of the Verizon Sublicense Agreement to cease all use or certain uses
of the Unknown Third Party Software for Third Party Module.

(c)                                  If any Hawaiian Telcom
resource or item is, or in Hawaiian Telcom’s opinion is likely to be, held to
be infringing, Hawaiian Telcom shall at its expense and option, except to the
extent the cause of such infringement is set forth in Section 14.5(b), either
(i) procure the right for Accenture to continue using it; (ii) replace it with
a noninfringing equivalent; (iii) modify it to make it noninfringing, or (iv)
direct its return to Accenture if it was provided to Accenture and or otherwise
discontinue its use, provided that the removal of such resource or item shall
be deemed a Possible Excuse for purposes of Section 3.8.

(d)                                 The foregoing remedies
and Accenture’s rights under Section 3.8 constitute Accenture’s sole and
exclusive remedies and Hawaiian Telcom’s entire liability with respect to
infringement.

14.6        Indemnification Procedures.  With respect to each Party’s defense and
indemnification obligations under this Agreement, the following procedures
shall apply:

(a)                                  Notice. 
Promptly after receipt by any entity entitled to indemnification under Section 14.1
through Section 14.5 (each, an “Indemnitee”) of notice of the assertion or the
commencement of any action, proceeding or other claim by a third party in
respect of which the Indemnitee elects to seek indemnification pursuant to any
such Section, the Indemnitee shall promptly notify the indemnifying party
(each, an “Indemnitor”) of such
claim in writing.  No failure to so
notify an Indemnitor shall relieve Indemnitor of its obligations under this
Agreement except to the extent that Indemnitor can demonstrate it has been
damaged or prejudiced by such failure. 
Within fifteen (15) days following receipt of written notice from the
Indemnitee relating to any such claim, but no later than ten (10) days before
the date on which any response to a complaint or summons is due, the Indemnitor
shall notify the Indemnitee in writing if the Indemnitor acknowledges its
indemnification obligation and elects to assume control of the defense and
settlement of that claim (a “Notice of Election”).

(b)                                 Procedure
Following Notice of Election.  If the Indemnitor delivers a
Notice of Election relating to any claim within the required notice period, the
Indemnitor shall be entitled to have sole control over the defense and
settlement of such claim, provided that:

 43
 

(i)                                     the Indemnitee may observe such proceedings
at its own cost;

(ii)                                  except as otherwise provided in Section
14.6(b)(iii) below, the Indemnitor shall obtain the prior written approval
of the Indemnitee before entering into any settlement of such claim or ceasing
to defend against such claim; and

(iii)                               the Indemnitor may not enter into an agreement under which (1)
Indemnitee admits fault or (2) Indemnitee is required to take (or is prohibited
from taking) any actions, without Indemnitee’s prior written consent which consent
may be granted or withheld in Indemnitee’s sole discretion.

After the Indemnitor has
delivered a Notice of Election relating to any claim in accordance with Section
14.6(a), the Indemnitor shall not be liable to the Indemnitee for any legal
expenses incurred by the Indemnitee in connection with the defense of that
claim.  In addition, the Indemnitor shall
not be required to indemnify the Indemnitee for any amount paid or payable by
the Indemnitee in the settlement of any claim for which the Indemnitor has
delivered a timely Notice of Election if such amount was agreed to without the
written consent of the Indemnitor.

(c)                                  Procedure Where
No Notice of Election Is Delivered.  If the Indemnitor does not
deliver a Notice of Election relating to a claim, or otherwise fails to
acknowledge its indemnification obligation or to assume the defense of a claim,
within the required notice period in accordance with Section 14.6(a),
the Indemnitee shall have the right to defend the claim in such manner as it
may deem appropriate.  If it is later
determined that the Indemnitor was obligated to defend, indemnify and hold
harmless the Indemnitee from the applicable claim, the Indemnitor shall be
responsible for reimbursing the Indemnitee for its reasonable costs and
expenses in defending such claim, including payment of any judgment or award
and the costs of settlement or compromise of the claim.  In such event, the Indemnitor shall promptly
reimburse the Indemnitee for all such costs and expenses, including payment of
any judgment or award and the costs of settlement or compromise of the claim.

14.7        Subrogation.  If an Indemnitor is obligated to
indemnify an Indemnitee pursuant to this Article XIV, the
Indemnitor shall, upon fulfillment of its obligations with respect to indemnification,
including payment in full of all amounts due pursuant to its indemnification
obligations, be subrogated to the rights of the Indemnitee with respect to the
claims to which such indemnification relates.

ARTICLE XV

LIMITATION OF LIABILITY AND RISK ALLOCATION

15.1        Liability Cap.

(a)                                  THE LIMIT OF EACH PARTY’S LIABILITY (WHETHER
IN CONTRACT, TORT, NEGLIGENCE, STRICT LIABILITY, BY STATUTE OR OTHERWISE) TO
THE OTHER PARTY IN ANY MATTER RELATED TO THIS AGREEMENT UNDER EACH SOW, SHALL
NOT IN THE AGGREGATE EXCEED AN AMOUNT EQUAL TO THE GREATER OF THE MINIMUM
LIABILITY CAP, OR:

(i)                                     SUBJECT TO EXHIBIT Q (OTHER TERMS)
WITH RESPECT TO LIABILITY FOR BREACH OF SECTION 10.1(c), FOR LIABILITY
ARISING FROM THE RECOVERY SERVICES AND SERVICES PERFORMED UNDER THE INTERIM
ARRANGEMENT, CHARGES PAID TO ACCENTURE UNDER THE RECOVERY SERVICES SOW AND
INTERIM ARRANGEMENT DURING THE LIABILITY CAP CALCULATION PERIOD;

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(ii)                                  FOR LIABILITY ARISING FROM THE ENHANCEMENT
SERVICES, CHARGES FOR ENHANCEMENT SERVICES PAID TO ACCENTURE UNDER THE
ENHANCEMENTS SOW DURING LIABILITY CAP CALCULATION PERIOD; OR

(iii)                               FOR LIABILITY ARISING FROM THE AM SERVICES, CHARGES FOR AM SERVICES
PAID TO ACCENTURE UNDER THE AM SERVICES SOW DURING THE LIABILITY CAP
CALCULATION PERIOD.

(b)                                 The limitation set forth in Section
15.1(a) above and Section 15.2 below shall not apply to the
liability of the applicable Party to the extent such liability results from (i)
such Party’s obligation to indemnify (Article XIV); or (ii) such Party’s
breach of its obligations with respect to confidentiality (Article XI).  In addition, Hawaiian Telcom’s obligation to
pay amounts due shall not be subject to the cap set forth in Section 15.1.

(c)                                  Mitigation.  Each
Party has a duty to mitigate the damages that would otherwise be recoverable
from the other Party pursuant to this Agreement by taking appropriate and
commercially reasonable actions to reduce or limit the amount of such damages.

(d)                                 Service Level
Credits.  In addition to Hawaiian Telcom’s right to
terminate for default under Section 16.1, the provision of Service Level
Credits shall constitute Hawaiian Telcom’s sole and exclusive remedy for the
failure of Accenture to meet a service level. 
As of the Effective Date, there are no service levels other than as set
forth in Exhibit B-3 (AM Services Statement of Work).  Any such Service Level Credits paid by
Accenture shall apply to the liability cap specified in Section 15.1(a).

(e)                                  Any amount recovered by Hawaiian Telcom or
Licensor from Accenture in connection with the Verizon Sublicense Agreement or
incurred by Accenture in connection with its indemnification obligation therein
shall apply toward the aggregate of all liability caps specified in Section
15.1(a), except to the extent such liability is excluded from the cap pursuant
to Section 15.1(b) or results from (i) Accenture’s breach of its obligations
with respect to confidentiality or (ii) an act or omission for which Accenture
would be obligated to indemnify Hawaiian Telcom under this Agreement, had the
act or omission occurred under this Agreement. 
Hawaiian Telcom shall reimburse Accenture to the extent the application
of any such amount which is subject to such liability caps to the applicable
liability cap in Section 15.1(a) causes the liability cap to be exceeded.

To
the extent that Licensor or its indemnitees recover any amounts from Accenture
as an indemnitee or third party beneficiary under the Verizon Sublicense
Agreement,  Hawaiian Telcom covenants not
to seek any damages (including direct damages) from Accenture under this
Agreement or the Verizon Sublicense Agreement for the same breach or
indemnification obligation.

Hawaiian
Telcom covenants not to seek any consequential, incidental, indirect, special
or punitive damage, loss or expenses
(including but not limited to business interruption, lost business, lost profits, or lost savings)
in connection with the Verizon Sublicense Agreement, even if it has been
advised of their possible existence, except to the extent Hawaiian Telcom would
be entitled to seek such damages pursuant to Section 15.1(b) of this Agreement.

 45

15.2        Limitation on Category of
Liability.

IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY
CONSEQUENTIAL, INCIDENTAL, INDIRECT, SPECIAL OR PUNITIVE DAMAGE, LOSS OR
EXPENSES (INCLUDING BUT NOT LIMITED TO BUSINESS INTERRUPTION, LOST BUSINESS, LOST PROFITS, OR LOST SAVINGS) EVEN IF IT HAS BEEN
ADVISED OF THEIR POSSIBLE EXISTENCE.

15.3        Contractual Statute of
Limitation.  Neither Party may assert against the
other Party any claim through mediation, arbitration or litigation for breach
or nonperformance in connection with this Agreement unless the asserting Party
has given the other Party written notice of the claim within four (4) years
after the cause of action accrues.

15.4        Replenishment of
Liability Cap.  If, at any time, the total aggregate
liability of Accenture for claims asserted by Hawaiian Telcom, in good faith,
under or in connection with this Agreement exceeds ninety percent (90%) of the
liability cap specified for a Statement of Work in Section 15.1(a) and,
upon the request of Hawaiian Telcom, if Accenture refuses to replenish the
available cap to an amount at least equal to fifty percent (50%) of the
original liability cap, then Hawaiian Telcom may terminate this Agreement
without payment of Wind-Down Costs (or other termination liability).

15.5        Recourse. The Parties agree that they shall look
only to the corporate or firm assets of the other Party in connection with any
liabilities hereunder and in no event shall they have any claim against any
shareholder, partner or holder of an ownership interest in the other Party in
connection with this Agreement.

15.6        Reasonable Allocations.  The allocations of liability in this Section 15
represent the agreed and bargained-for understanding of the Parties and
Accenture’s compensation for the Services reflects such allocations.

15.7        Insurance Coverage.

(a)                                  To the extent such coverage remains
commercially available on reasonable terms, Accenture shall, during the Term,
maintain in full force and effect at least the following insurance coverages on
the terms described below in Section 15.8, on behalf of itself:

(i)                                     Workers’ Compensation and Employers’
Liability, including coverage for occupational injury, illness and disease, or
other similar social insurance in accordance with Laws (including the Laws of
any location in which any Accenture employee provides Services to the extent
such location exercise jurisdiction over the Accenture employee) with Workers’
Compensation coverage as required by Laws and, with respect to Employers’
Liability coverage, minimum limits of one million dollars ($1,000,000) each
accident,  of one million ($1,000,000)
disease policy limit, and one million ($1,000,000) per disease each employee or
the minimum limits required by Laws.

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(ii)                                  Commercial General Liability Insurance,
including Products and Completed Operations, Premises and Operations liability,
Personal and Advertising Injury, Contractual Liability and Broad Form Property
Damage Liability coverages, on an occurrence basis, with a minimum limit per
occurrence of five million dollars ($5,000,000) and an minimum annual aggregate
limit of five million dollars ($5,000,000). 
This coverage shall name Hawaiian Telcom and its Affiliates, and their respective employees, directors, officers,
principals (partners, shareholders or holders of an ownership interest, as the
case may be), agents, successors and assigns as additional insured for
covered claims to the extent Accenture owes Hawaiian Telcom an indemnity under
this Agreement.

(iii)                               Property Insurance, including Extra Expense and Business Income
coverage, for “All Risks” of physical loss of or damage to Accenture’s business
property and equipment used in connection with the Services.  Such insurance shall have a minimum limit
adequate to cover risks on a replacement costs basis and time element insurance
on an actual loss sustained basis.

(iv)                              Automobile Liability and No-fault (if required by Laws) Insurance,
including coverage for Accenture’s owned, non-owned and hired automobiles for
bodily injury and property damage, with a combined single limit of two million
dollars ($2,000,000) for any one accident or loss.  No-fault to include statutory minimum
benefits as required in the jurisdiction in which the work is to be performed.  This coverage shall be endorsed to name
Hawaiian Telcom and its Affiliates, and
their respective employees, directors, officers, principals (partners,
shareholders or holders of an ownership interest, as the case may be), agents,
successors and assigns as additional insured for covered claims to the
extent Accenture owes Hawaiian Telcom an indemnity under this Agreement.

(v)                                 Errors and Omissions Insurance with a limit
per claim and in the aggregate of thirty dollars ($30,000,000).

(vi)                              Crime Insurance with a minimum limit per loss and in the aggregate of
five million dollars ($5,000,000).

(b)                                 The limits specified above may be satisfied
by Accenture using a single policy or a combination of primary and umbrella
and/or excess policies.

15.8        Insurance Terms.

(a)                                  To the extent required for Accenture to meet
its obligations under this Agreement, the insurance coverages under Section 15.7(a)(i)
through Section 15.7(a)(iv) shall be primary, (excluding, however,
the coverage under Section 15.7(a)(ii) (i.e., Commercial General Liability Insurance) as it relates
to any Accenture performance on Hawaiian Telcom premises where Accenture is not
in control of the premises), and all coverage shall be non-contributing with
respect to any other insurance or self insurance which may be maintained by
Hawaiian Telcom.  All coverage required
by Sections 15.7(a)(ii) and 15.7(a)(iv) shall be endorsed for
cross-liability coverage or contain a severability of interests clause.  To the extent any coverage is written on a
claims-made basis, it shall have a retroactive date prior to the Effective Date
and shall be maintained for at least one (1) year after the Term to the
extent such coverage is commercially available on reasonable terms.

 47
 

(b)                                 Accenture shall cause its insurers to issue
certificates of insurance or other similar forms evidencing that the coverages
and policy endorsements required under this Agreement are maintained in force
within thirty (30) days after the Effective Date and thereafter on an
annual basis.  The insurers selected by
Accenture shall have (unless Hawaiian Telcom, acting reasonably, agrees
otherwise) an A.M. Best rating of A-VII or better, or, if such ratings are no
longer available, with a comparable rating from a recognized insurance rating
agency.  Accenture shall ensure that its
subcontractors, if any, maintain insurance coverages appropriate to the scope
of their participation in the work.

(c)                                  In the case of loss or damage or other event
that requires notice or other action under the terms of any insurance coverage
specified in this Article XV, Accenture shall be responsible to take
such action.

(d)                                 Accenture shall promptly inform Hawaiian
Telcom during the Term each time the required limit in one or more of the
coverages in Section 15.7(a)(i) through Section 15.7(a)(iv)
is reduced.

(e)                                  None of the Accenture obligations specified
in this Article XV as to types, limits and approval of insurance
coverage to be maintained by Accenture are intended to, and shall not in any
manner, limit or expand the liabilities and obligations assumed by Accenture
under this Agreement.

ARTICLE XVI

TERMINATION

16.1        Termination for Cause by Hawaii
Telcom.  Hawaiian Telcom may terminate this
Agreement, in whole, or the affected part, upon written notice to Accenture if
Accenture:

(a)                                  materially breaches any of its duties or
obligations under this Agreement and fails to cure such breach within thirty
(30) days after written notice from Hawaiian Telcom to Accenture of its intent
to terminate for cause; provided, that if Accenture works diligently and in
good faith to cure such breach and such breach is not capable of being cured
within thirty (30) days, Accenture may request a reasonable amount of
additional time to cure such breach if it demonstrates that it is capable of
curing such breach within the additional period, which request may be granted or
denied in Hawaiian Telcom’s sole discretion;

(b)                                 materially breaches any of its duties or
obligations under this Agreement which is not capable of being cured within
thirty (30) days, provided that, for breaches of confidentiality, provided
Accenture has otherwise complied in all material respects with its obligations
hereunder, Accenture will be deemed to have cured the breach if, within thirty
(30) days after receipt of notice of Hawaiian Telcom’s intent to terminate,
Accenture takes reasonable actions to prevent the recurrence of such breach;

(c)                                  commits numerous breaches of its duties or
obligations under this Agreement which in the aggregate are material and fails
to cure such breaches within thirty (30) days after receiving written notice of
Hawaiian Telcom’s intent to terminate for cause;

(d)                                 fails to achieve either Interim Deliverable
Acceptance or Final Acceptance for a System Deliverable under the Recovery
Services SOW, to the degree that would entitle Hawaiian Telcom the right to
cancel the applicable Recovery Project under Exhibit C (Acceptance),

 48
 

for ten percent (10%) or more distinct Recovery Projects existing as of
the Effective Date, provided that Hawaiian Telcom notifies Accenture of its
election to terminate under this Section 16.1(d) within one hundred
twenty (120) days after the event giving rise to such termination right, and
that Hawaiian Telcom’s right to terminate pursuant to this sentence is Hawaiian
Telcom’s sole and exclusive remedy;

(e)                                  fails to meet the timeline targets under Section
5 of Exhibit B-1 (Recovery Services) for achieving Final Acceptance
by more than one release cycle each for fifteen percent (15%) or more distinct
Recovery Projects existing as of the Effective Date, provided that Hawaiian
Telcom notifies Accenture of its election to terminate under this Section
16.1(e) within one hundred twenty (120) days after the event giving rise to
such termination right, and that Hawaiian Telcom’s right to terminate pursuant
to this sentence is Hawaiian Telcom’s sole and exclusive remedy.  By way of example, if the release cycle for
the Recovery Project is bi-weekly, the release cycle for purposes of this
Section shall be bi-weekly; if the release cycle for the Recovery Project is
monthly, the release cycle for purposes of this Section shall be monthly; or

(f)                                    becomes liable for or incurs Service Level
Credits under this Agreement that, in the aggregate, exceed sixty percent (60%)
of the cumulative At Risk Amount during any rolling six (6) month period.

16.2        Termination for Cause by
Accenture.

(a)                                  Accenture may terminate this Agreement if,
and only if:

(i)                                     Hawaiian Telcom fails to pay undisputed
charges together with any disputed charges for which Hawaiian Telcom is
obligated to pay Accenture pursuant to Section 9.7, that in total are
equal to or greater than $2,000,000 (the “Minimum Amounts”).  If Accenture desires to terminate this
Agreement pursuant to this Section 16.2(a), Accenture shall first
provide written notice of the amounts claimed to be past due and an express
statement that Accenture intends to terminate this Agreement citing this
Section of the Agreement if the payment failure is not cured.  If Hawaiian Telcom does not cure the payment
failure within thirty (30) days after receipt of such notice and Accenture
wishes to proceed toward exercising its right to terminate this Agreement under
this Section 16.2(a), Accenture shall send a second notice containing
the same information as the first notice. 
Accenture may terminate this Agreement if any Minimum Amounts remain
unpaid after ten (10) days following Hawaiian Telcom’s receipt of the second
notice;

(ii)                                  Hawaiian Telcom breaches, in a material
respect, its obligations to maintain the confidentiality of Accenture
Confidential Information, with the intent to breach
such obligations, and fails to
correct the underlying systemic cause of the breach within thirty (30) days
after written notice from Accenture of its intent to terminate for cause; or

(iii)                               Hawaiian Telcom breaches, in a material respect, restrictions
associated with its license to Accenture-Owned Technical Elements, with the intent to breach such obligations, and fails to correct such breach within thirty (30) days after written
notice from Accenture of its intent to terminate for cause.

 49
 

(b)                                 Pursuant to Section 3.8(a), no other
failure by Hawaiian Telcom to perform any of its responsibilities set forth in
this Agreement shall be deemed to be grounds for termination by Accenture.

16.3        Termination Upon Change of
Control.

(a)                                  Accenture Change
of Control.  If a Change of Control of Accenture occurs,
Hawaiian Telcom may, within ninety (90) days after the Change of Control event,
give written notice terminating this Agreement (effective as of the date
specified in such notice) if the new owner or the successor in interest is a
Hawaiian Telcom Competitor or otherwise an undesirable presence in the
marketplace.  The Parties agree that an
‘undesirable presence’ is a vendor that would, by virtue of reputation or past
experience known to Hawaiian Telcom, be undesirable to have in a position of
control or influence over Accenture. 
Hawaiian Telcom shall pay to Accenture on the effective date of such the
termination Accenture’s Wind-Down Costs.

(b)                                 Upon any termination by Hawaiian Telcom
pursuant to this Section 16.3, Hawaiian Telcom shall pay to Accenture
(pursuant to the terms and conditions of the Agreement regarding invoicing and
payment) all monies then due and owing to Accenture under this Agreement for
Services rendered prior to the effective date of termination, less any monies
or credits then due and owing to Hawaiian Telcom under this Agreement.

16.4        Termination Assistance
Services.  Commencing at the later of (i) six (6)
months prior to the scheduled expiration date of the applicable SOW, or (ii)
the delivery of any notice of termination of this Agreement or any part thereof
(or such other date as mutually agreed by the Parties), and continuing through
up to six (6) months after the effective date of expiration or termination of
the applicable Statement of Work or part thereof, Hawaiian Telcom may elect to
receive Termination Assistance Services; provided that (i) in the case of the
expiration of the Agreement, Hawaiian Telcom gives Accenture written notice of
its election to receive Termination Assistance Services within thirty (30) days
following Accenture’s provision of a reminder notice that Hawaiian Telcom must
advise Accenture as to whether and the extent to which it desires to receive
Termination Assistance Services (which notice Accenture will provide at least
120 days prior to the expiration of the Agreement) or (ii) in the case of the
earlier termination of the Agreement, Hawaiian Telcom gives Accenture written
notice of its election to receive Termination Assistance Services as soon as
reasonably possible in the event of an earlier termination.  The period during which Hawaiian Telcom
elects to receive the Termination Assistance Services pursuant to the preceding
sentence is the “Termination Assistance Period.”

16.5        Change in Laws.  If a Law arises or there is a change in any Laws,
which in either case, materially increase Hawaiian Telcom’s costs for the
Services or otherwise adversely affects the Services, in each case in a
material manner, Hawaiian Telcom may terminate this Agreement, in whole or in
part, subject to the payment of Wind Down Costs.

16.6        Survival of Provisions.  Upon the expiration or termination of this Agreement
for any reason, the provisions of Article VI (solely with respect to
licenses that are perpetual or that otherwise state that they survive expiration
or termination of this Agreement), Section 10.1 (but solely until the
expiration of the applicable Application Warranty Period), Article XI, Article
XII, Article XIII (to the extent expressly provided for therein), Article
XIV, Article XV, Article XVII, and Article XX shall
survive indefinitely.

 50
 

16.7        Equitable
Remedies.

(a)                                  Accenture recognizes that any breach by
Accenture of Section 16.4 is likely to cause irreparable injury to
Hawaiian Telcom and that, in the event of a violation or threatened or
attempted violation of any of these obligations, Hawaiian Telcom will have no
adequate remedy at law.

(b)                                 The Parties acknowledge that any breach of
the provisions of this Agreement relating to the non-disclosure and protection
of Confidential Information and license restrictions applicable to Technical
Elements is likely to cause irreparable injury to the other Party and that, in
the event of a violation or threatened or attempted violation of any of these
obligations, the injured Party will have no adequate remedy at law.

ARTICLE XVII

DISPUTES

17.1        Informal Dispute Resolution.

(a)                                  Prior to the initiation of formal dispute
resolution procedures, the Parties shall first attempt to resolve any dispute,
controversy or claim arising under or in connection with this Agreement (a “Dispute”)
informally, as follows:

(i)                                     A Dispute will be deemed initiated upon
either Party’s receipt of a written notice of Dispute from the other Party
(such notice, the “Dispute Notice”, and such date, the “Dispute Start
Date”).  First, the Hawaiian Telcom
Account Representative and the Accenture Account Representative shall meet as
often, for a duration and as promptly as the Parties deem necessary to discuss
the Dispute and negotiate in good faith in an effort to resolve the Dispute.

(ii)                                  If the Hawaiian Telcom Account Representative
and the Accenture Account Representative are unable to resolve the Dispute
within fifteen (15) days after the Dispute Start Date, the Dispute shall be
referred to the Service Management Steering Committee.  The Service Management Steering Committee
shall use reasonable efforts to resolve such Dispute or, if appropriate, to
negotiate a modification or amendment to this Agreement.  The Service Management Steering Committee
shall meet as often, for a duration and as promptly as the Parties reasonably
deem necessary to discuss the Dispute and negotiate in good faith in an effort
to resolve the Dispute.

(iii)                               If the Service Management Steering Committee is unable to resolve the
Dispute within thirty (30) days after the Dispute Start Date, then each of
Accenture and Hawaiian Telcom shall appoint one senior executive who is not
involved on a day-to-day basis with the subject matter of this Agreement.  Such senior executives shall meet as often,
for a duration, and as promptly as the Parties reasonably deem necessary to
discuss the Dispute and negotiate in good faith in an effort to resolve the
Dispute.

(iv)                              During the course of such discussions, all reasonable requests made by
one Party to another for non-privileged information, reasonably related to the
Dispute, shall be honored in order that each of the Parties may be fully
apprised of the other’s position.  The
specific format for such discussions shall be left to the discretion of the
Parties, but may include the preparation of agreed-upon statements of fact or
written statements of position.

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(b)                                 Formal proceedings for the resolution of a
Dispute may not be commenced until the earlier of:

(i)                                     the good faith determination by the appointed
senior executives that amicable resolution through continued negotiation of the
matter does not appear likely; or

(ii)                                  forty-five (45) days following the Dispute
Start Date.

17.2        Alternative Dispute Resolution. 
If a
Dispute cannot be resolved as provided in Section 17.1, each Party will
be free to exercise any other rights available to it, including litigation.

17.3        Exceptions to Dispute Resolution
Procedure.  The provisions of Sections 17.1
and 17.2 shall not be construed to prevent a Party from:

(a)          seeking a temporary
restraining order or injunctive or other equitable relief with respect to a
breach (or attempted breach) of this Agreement by the other Party; or

(b)         instituting litigation or
other formal proceedings to the extent necessary (i) to avoid the expiration of
any applicable limitations period or (ii) to preserve a superior position with
respect to other creditors.

17.4        Continued Performance.  Except for Hawaiian Telcom’s right to withhold amounts
it disputes in good faith as provided for in, and in compliance with, Section
9.7, each Party agrees to continue performing its obligations under this
Agreement while any Dispute is being resolved.

ARTICLE XVIII

FORCE MAJEURE

18.1        Force Majeure Events.  Neither Party shall be liable to the other Party for
any default or delay in the performance of its obligations under this Agreement
(except for payment obligations):

(a)                                  if and to the extent that the default or
delay is caused, directly or indirectly, by fire, flood, earthquake, elements
of nature, epidemics, pandemics, quarantines, acts of God, acts of war,
terrorism or civil unrest or any other cause beyond the reasonable control of
the Party, and

(b)                                 provided the non-performing Party is without
fault in causing the default or delay and the default or delay could not have
been prevented by reasonable precautions (each such event, a “Force Majeure
Event”).  In such event, the
non-performing Party is excused from further performance for as long as such
circumstances prevail and the Party continues to use Reasonable Efforts to recommence
performance.

18.2        Force Majeure Notice.  The non-performing Party shall notify the other Party
by telephone or, if telephone is unavailable, by the most immediate available
alternate means, (to be confirmed in writing within three (3) days after the
onset of the Force Majeure Event) and, upon having been able to gather
sufficient facts and details regarding the Force Majeure Event, shall describe
at a reasonable level of detail the circumstances causing such delay.  Accenture shall not delay such notification
in an effort to gather details regarding a Force Majeure Event.

 52
 

18.3        Strike, Lockout.  The Parties agree that a strike, lockout or similar
labor dispute by any Accenture Personnel (including any employees of a
subcontractor of Accenture) shall not be a Force Majeure Event.  A failure of a subcontractor of Accenture in
performing services used by Accenture in performing the Services shall not be
considered a Force Majeure Event unless the subcontractor’s performance failure
was caused by a Force Majeure Event.

18.4        Critical Services.  If a Force Majeure Event substantially prevents or
delays performance of any Services, Hawaiian Telcom, at its sole discretion,
may procure the Services from an alternate source at Hawaiian Telcom’s
expense.  If Accenture is unable to
resume performing any affected Critical Services within ten (10) consecutive
calendar days after the Force Majeure Event commenced, Hawaiian Telcom, in its
sole discretion, may (i) terminate any portion of this Agreement (or the Services)
that is materially affected by the nonperformance and the Charges for the
remaining Services shall be equitably adjusted; or (ii) terminate the
applicable SOW, in each case with the payment of Accenture’s Wind-Down Costs
and as of the date specified in Hawaiian Telcom’s notice.  For purposes of this Agreement, a “Critical
Service” shall mean a function or service that is identified in an SOW as a
Critical Service, or for which a Critical Service Level applies, or which, if
not available, would adversely affect Hawaiian Telcom’s business in a material
respect.

18.5        Force Majeure and Charges.  Accenture shall not have the right to any additional
payments from Hawaiian Telcom as a result of any Force Majeure Event and
Accenture may not charge Hawaiian Telcom for any Services that are not provided
during the pendency of the Force Majeure Event. 
If Charges have been prepaid for Services that are not provided during a
Force Majeure Event, Accenture shall credit the amounts attributable to the
time during which the relevant Services were affected by the Force Majeure Even
on the next invoice rendered to Hawaiian Telcom.  If Accenture is able to perform part but not
all of an affected Service during a Force Majeure Event, the Charges for such
Service shall be equitably reduced to reflect the diminution in the value of
the remaining Services that actually are provided during such time.

18.6        Disaster Recovery and Business
Continuity Plan.  Force Majeure Events shall not relieve
Accenture of its obligation to execute the Disaster Recovery Services included
in Exhibit B-4 (Cross-Functional SOW) for Hawaiian Telcom to the extent
that Accenture is obligated to do so under this Agreement, except to the extent
that execution of the Disaster Recovery Services is itself prevented by a Force
Majeure Event at the relevant disaster recovery facilities.

ARTICLE XIX

COMPLIANCE WITH LAWS AND REGULATIONS

19.1        Compliance with Laws.  Accenture shall be responsible for complying with
Accenture Laws.  Hawaiian Telcom shall be
responsible for complying with Hawaiian Telcom Laws.  Hawaiian Telcom acknowledges that Accenture
is not obligated or expected to determine whether its Services, Deliverables,
suggestions, analyses or recommendations, if implemented, would comply with
Hawaiian Telcom Laws.

19.2        US Sarbanes-Oxley.  Accenture shall maintain processes and procedures
relating to the Services in accordance with the reasonable written requirements
delineated in advance by Hawaiian Telcom to meet Hawaiian Telcom’s internal
control requirements.  Hawaiian Telcom
retains responsibility for compliance with regulatory requirements that pertain
to its business including the Sarbanes-Oxley Act.  In the event that Hawaiian Telcom wishes to
make changes to the internal control requirements, they shall be submitted in
accordance with the Contract Change Control Process.

 53
 

ARTICLE XX

MISCELLANEOUS

20.1        Hawaiian Telcom Affiliates.  With respect to any Hawaiian Telcom Affiliates that
receive Services from Accenture for their internal use under this Agreement,
Hawaiian Telcom shall (i) retain responsibility for payment of such Services;
and (ii) cause such Affiliates to comply with the applicable terms and
conditions of this Agreement.

20.2        Injunctive Relief.  Each Party shall have the right to seek injunctive or
other equitable relief to address breaches (or attempted breaches) of the
obligations of the other Party under this Agreement.

20.3        Binding Nature and
Assignment.  Neither Party may assign this Agreement
without the prior written consent of the other, except that:

(a)                                  Hawaiian Telcom may assign its rights and
obligations under this Agreement without the approval of Accenture to (i) an
entity which acquires all or substantially all of the assets of Hawaiian Telcom
and which is not a Accenture Competitor; (ii) any Affiliate in connection with
a reorganization or consolidation; or (iii) any subsidiary or Affiliate or
successor in a merger or acquisition involving Hawaiian Telcom which is not a
Accenture Competitor; provided that in each case such successor assumes in
writing all of the covenants and obligations of Hawaiian Telcom in this
Agreement; and

(b)                                 Accenture may assign its rights and
obligations under this Agreement without the approval of the Hawaiian Telcom to
(i) an entity which acquires all or substantially all of the assets of
Accenture and which is not a Hawaiian Telcom Competitor; (ii) any Affiliate in
connection with a reorganization or consolidation; or (iii) any subsidiary or
Affiliate or successor in a merger or acquisition involving Accenture which is
not a Hawaiian Telcom Competitor; provided that in each case such successor
assumes in writing all of the covenants and obligations of Accenture in this
Agreement.    Notwithstanding the
foregoing or anything herein to the contrary, if Accenture assigns this
Agreement to an undesirable presence in the market place (e.g., a vendor that
would, by virtue of reputation or past experience known to Hawaiian Telcom, be
undesirable to have in a position of control or influence over Accenture), Hawaiian
Telcom shall have the right to terminate this Agreement subject to the payment
of any Wind Down Costs.

(c)                                  Each Party shall notify the other Party as
promptly as reasonably possible as to occurrence, or likely occurrence, of any
assignment under this Section 20.3.

Neither Party shall be
relieved of its obligations under this Agreement as a result of any such
assignment.

20.4        Cooperation; Consents.  Each Party shall cooperate with the other Party in
good faith in the performance of its respective activities contemplated by this
Agreement through, among other things, making available, as reasonably
requested by the other Party, such management decisions, information, approvals
and acceptances in order that the provision of the Services under this Agreement
may be accomplished in a proper, timely and efficient manner.  Where agreement, approval, acceptance or
consent of either Party is required by any provision of this Agreement, such
action shall not be unreasonably withheld, conditioned or delayed unless such
action is expressly identified as being at the sole discretion of such Party.

 54
 

20.5        Relationship of Parties.  In connection with this Agreement, each Party is an
independent contractor.  Except as
expressly provided in this Agreement, Accenture does not undertake to perform
any obligation of Hawaiian Telcom, whether regulatory or contractual, or to
assume any responsibility for Hawaiian Telcom’s business or operations.  This Agreement establishes and shall only be construed
as establishing a contract between unrelated business entities for the
provision and purchase of certain services and does not and shall not be deemed
to create a joint venture, partnership, fiduciary or agency relationship
between the Parties for any purpose.  In
no event shall Accenture be deemed to be acting in a fiduciary capacity for
Hawaiian Telcom.  With respect to its own
personnel, each Party is independently responsible for all obligations
incumbent upon an employer.

20.6        Notice.  Wherever under this Agreement one Party is required or
permitted to give notice to the other Party, such notice shall be in writing
and shall be delivered personally, sent by facsimile transmission, sent by
nationally recognized express courier or sent by certified mail (return receipt
requested).  All notices will be
accompanied by an email to the email address set forth below with a conspicuous
notice in the subject line (e.g., “Official
Notice Under Accenture ASA”).  Any
such notice shall be deemed given when actually received and shall be addressed
as follows:

In the case of Hawaiian
Telcom:

Hawaiian Telcom, Inc.

1177 Bishop Street 

Honolulu, Hawaii 96813 

Attention:  Chief Information Officer
(David Torline)

Facsimile Number: (808) 546-8956

Email:  David.Torline@hawaiiantel.com

with a copy (which shall
not constitute effective notice) to:

Hawaiian Telcom, Inc.

1177 Bishop Street 

Honolulu, Hawaii 96813 

Attention:  General Counsel (Alan Oshima)

Facsimile Number: (808) 546-8956

Email:  Alan.Oshima@hawaiiantel.com

In the case of Accenture:

Accenture 

11951 Freedom Drive

Reston, Virginia  20190

Attention:  Timothy A. Hale

Facsimile Number:  678-657-1752

Email:  timothy.a.hale@accenture.com

with a copy (which shall
not constitute effective notice) to:

Accenture 

Attn:  C&HT Legal Counsel (Steve
Olson)

161 N. Clark Street

Chicago, IL  60601

USA

Facsimile Number:  312.652.5787

Email:  Steve.Olson@accenture.com

 55
 

Either Party may change its address for notices upon
giving ten days written notice of the change to the other Party in the manner
provided above.

20.7        Severability.  If any provision of this Agreement or the application
of any such provision to any person or circumstance, will be declared
judicially to be invalid, unenforceable or void, such decision will not have
the effect of invalidating or voiding the remainder of this Agreement, and it
is the intent and agreement of the Parties that this Agreement will be deemed
amended by modifying such provision to the extent necessary to render it valid,
legal and enforceable while preserving its intent or, if such modification is
not possible, by substituting another provision that is legal and enforceable
and that achieves the same objective.

20.8        No Third-Party
Beneficiaries.  Nothing contained in this Agreement is
intended or shall be construed to confer upon any person (other than the
Parties hereto and the Indemnitees specifically identified in Article XIV)
any rights, benefits or remedies of any kind or character whatsoever, and no
Person shall be deemed a third-party beneficiary under or by reason of this
Agreement.

20.9        Publicity.  No public disclosures by either Party relating to this
Agreement, except for (i) internal announcements or (ii) disclosures required
to meet legal or regulatory requirements beyond the reasonable control of the
disclosing Party, shall be made without the prior written approval of
authorized representatives of the other Party. 
During the Term of the Agreement and so long as Hawaiian Telcom has not
terminated this Agreement, Accenture may identify Hawaiian Telcom as a client
of Accenture and generally describe the nature of the Services in Accenture’s
promotional materials, case studies, qualification statements, and proposals to
current and prospective clients, provided that such listing is factual only (e.g., Hawaiian Telcom is listed with at least 10 other
customers, in alphabetical order, without the use of any Hawaiian Telcom
trademark or logo, etc.).  The Parties
agree to negotiate in good faith a joint press release approved by both Parties
announcing the existence of this Agreement and the general nature of the
Services, within thirty (30) days after the Effective Date.

20.10      Service Marks.  Neither Party shall, without the other’s prior written
consent, use the name, service marks or trademarks of the other; except that a Party
may use the other Party’s name to the extent provided in Section 20.9.

20.11      Amendment.  This Agreement may not be modified or amended except
by a written instrument executed by an authorized representative of each Party.

20.12      Entire Agreement.  This Agreement (including Exhibits hereto and any
Statements of Work entered into hereunder, each of which is incorporated herein
by reference) constitutes the entire agreement between the Parties with respect
to the subject matter hereof and supersedes all prior and contemporaneous
agreements and understandings, other than the Interim Arrangement, whether
written or oral, between the Parties with respect to the subject matter
hereof.  This Agreement does not
supersede the Interim Arrangement, and the terms and conditions of the Interim
Arrangement shall continue to govern services performed thereunder, except that
the terms and conditions of this Agreement relating to (i) intellectual
property ownership, (ii) Recovery Services fees, and (iii) limitations on liability
for the Recovery Services shall supersede such terms and conditions of the
Interim Arrangement. In addition, Section 14.3(f) of this Agreement shall apply
in lieu of Section 20(a) of Attachment B to the Interim Arrangement, which is
hereby deleted.  There are no
representations, understandings or agreements relating to this Agreement that
are not fully expressed in this Agreement.

 56
 

20.13      Governing Law.  This Agreement shall be governed
by and construed in accordance with the laws of State of New York, without giving
effect to such State’s conflict of Laws rules. 
The Parties expressly agree to exclude the application of the U.N.
Convention on Contracts for the International Sale of Goods (1980) to this
Agreement and the performance of the Parties contemplated under this Agreement,
to the extent that such convention might otherwise be applicable.

20.14      Inconsistencies.  To the extent that the provisions of the Terms and
Conditions of this Agreement and of any other Exhibit of this Agreement hereto
are in any respect inconsistent, the Terms and Conditions shall govern and
control, provided that with respect to the description of the Services, the
Exhibits hereto shall govern and control.

20.15      Counterparts.  This Agreement may be executed in several counterparts,
all of which taken together shall constitute one single agreement between the
Parties.

*  * 
*  *  *  *

[Balance
of page intentionally left blank; signature page follows.]

 57
 

IN WITNESS
WHEREOF, this Agreement has been duly executed by and on behalf of the Parties
hereto as of the Effective Date.

	
  HAWAIIAN TELCOM

  	
  ACCENTURE

  
	
   

  
	
   

  
	
  By:

  	
          /s/
  Michael S. Ruley

  	
   

  	
  By:

  	
   

  	
  /s/ Timothy A. Hale

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
    Michael S. Ruley

  	
   

  	
  Name:

  	
   

  	
  Timothy A. Hale

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
     Chief Executive Officer

  	
   

  	
  Title:

  	
   

  	
  Partner

  	
   

  
													

 

 58Exhibit 10.20

 

 

STOCK
PURCHASE AGREEMENT

dated as
of January 22, 2007

between

Northwest
Airlines, Inc.

and

MAIR
Holdings, Inc.

 

TABLE OF CONTENTS

	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
   

  	
  PURCHASE AND SALE OF SHARES

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.1

  	
   

  	
  Purchase and Sale

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.2

  	
   

  	
  Closing

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.3

  	
   

  	
  Deliveries

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.4

  	
   

  	
  Assignment of Bankruptcy Claim

  	
   

  	
  4

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.5

  	
   

  	
  Cure Amounts

  	
   

  	
  4

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
   

  	
  REPRESENTATIONS AND WARRANTIES OF BUYER

  	
   

  	
  4

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.1

  	
   

  	
  Organization and Good Standing

  	
   

  	
  4

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.2

  	
   

  	
  Capitalization

  	
   

  	
  4

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.3

  	
   

  	
  Authority, Approvals, Enforceability and Consents

  	
   

  	
  4

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.4

  	
   

  	
  Financial Capability

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.5

  	
   

  	
  Brokers

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
   

  	
  REPRESENTATIONS AND WARRANTIES OF SELLER

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.1

  	
   

  	
  Organization and Good Standing

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.2

  	
   

  	
  Authority, Approvals, Enforceability and Consents

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.3

  	
   

  	
  Title

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.4

  	
   

  	
  Brokers

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
   

  	
  COVENANTS

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.1

  	
   

  	
  Announcements

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.2

  	
   

  	
  Cash

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.3

  	
   

  	
  Further Assurances

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.4

  	
   

  	
  Additional Agreements; Notification of Certain
  Matters

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.5

  	
   

  	
  SPRA Consent

  	
   

  	
  9

  

 

 i
 

 

	
  4.6

  	
   

  	
  Seller Approval Order

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
   

  	
  CONDITIONS TO THE OBLIGATIONS OF SELLER TO EFFECT
  THE CLOSING

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.1

  	
   

  	
  Seller Obligations

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
   

  	
  CONDITIONS TO THE OBLIGATIONS OF BUYER TO EFFECT THE
  CLOSING

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.1

  	
   

  	
  Buyer Obligations

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
   

  	
  TERMINATION

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.1

  	
   

  	
  Termination

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.2

  	
   

  	
  Effect of Termination

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
   

  	
  MISCELLANEOUS

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.1

  	
   

  	
  Expenses

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.2

  	
   

  	
  Survival

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.3

  	
   

  	
  Certain Interpretative Matters

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.4

  	
   

  	
  Notices

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.5

  	
   

  	
  Assignment

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.6

  	
   

  	
  Entire Agreement

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.7

  	
   

  	
  Modifications, Amendments and Waivers

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.8

  	
   

  	
  Counterparts

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.9

  	
   

  	
  Governing Law

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.10

  	
   

  	
  Severability

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.11

  	
   

  	
  Submission to Jurisdiction; Waivers

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.12

  	
   

  	
  Specific Performance

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.13

  	
   

  	
  No Presumption

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.14

  	
   

  	
  No Third Party Beneficiary

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.15

  	
   

  	
  Representations

  	
   

  	
  17

  

 

 ii
 

 

	
  Exhibit A

  	
   

  	
  Certain Defined Terms

  	
   

  	
   

  
	
  Exhibit B

  	
   

  	
  Stock Purchase and Reorganization Agreement

  	
   

  	
   

  
	
  Exhibit C

  	
   

  	
  Form of General Release

  	
   

  	
   

  
	
  Exhibit D

  	
   

  	
  Form of Company Plan

  	
   

  	
   

  
	
  Exhibit E

  	
   

  	
  Form of Seller Approval Order

  	
   

  	
   

  

 

 iii

STOCK PURCHASE AGREEMENT

This Stock Purchase Agreement, dated as of January 22,
2007 (this “Agreement”), is
between Northwest Airlines, Inc., a Minnesota corporation (“Seller”), and MAIR Holdings, Inc., a
Minnesota corporation (“Buyer”).  Capitalized terms used but not defined herein
have the meanings assigned to them on Exhibit A.

WHEREAS, Seller owns 5,657,113 shares of Buyer’s
common stock, par value $0.01 per share (the “Common
Stock”, and such 5,657,113
shares of Common Stock are herein collectively referred to as the “Shares”) and a Warrant to purchase
4,112,500 shares of Common Stock at a current exercise price of $8.74 per share
(the “Warrant”);

WHEREAS, concurrently with entering into this
Agreement, Seller and Mesaba Aviation, Inc., a Minnesota corporation and wholly
owned Subsidiary of Buyer (the “Company”), are
entering into a Stock Purchase and Reorganization Agreement (the “SPRA”), which is attached hereto as Exhibit B, it
being understood and agreed that the consummation of the Closing is not conditioned
upon the consummation of the closing of the transactions contemplated by the
SPRA;

WHEREAS, Seller desires to sell to Buyer the Shares
and Buyer desires to purchase from Seller the Shares as set forth herein; and

WHEREAS, Buyer desires to consent to and fully support
the transactions contemplated by the SPRA, vote in favor of the Company Plan
and withdraw any Claims that it has or may have against Seller in the Seller
Case.

NOW, THEREFORE, in consideration of the premises and
the mutual representations, warranties, covenants and agreements contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties, intending to be
legally bound, agree as follows:

ARTICLE I

PURCHASE AND SALE
OF SHARES

1.1                                 Purchase
and Sale.

(a)                                  Upon
the terms and subject to the conditions set forth in this Agreement, upon the
consummation of the Closing, Seller shall sell to Buyer and Buyer shall
purchase from Seller the Shares.  The
aggregate purchase price for the Shares shall be $35,356,956.25 (the “Purchase Price”) and shall be paid by Buyer to Seller as
follows: (i) upon the consummation of the Closing, Buyer shall wire transfer
$24,042,730.25 (the “Closing Purchase Price”)
in immediately available funds to the bank account designated by Seller to
Buyer in writing at least one Business Day prior to the Closing and (ii) on the
date that is the earlier of (A) nine months following the date of this
Agreement and (B) the making of at least $25,000,000 of cash distributions to
Buyer in the Company Case (together with any prior distributions) on account of
Buyer’s equity interest in the Company (the earlier of the dates referred to in
the foregoing clauses (A) and (B) is herein referred to as the “Deferred Purchase Price Date”), Buyer shall

wire transfer $11,314,226.00 (the “Deferred Purchase Price”) in immediately available funds to
the bank account designated by Seller to Buyer in writing at least one Business
Day prior to the Deferred Purchase Price Date.  Notwithstanding the foregoing provisions of
this Section 1.1(a), the parties agree that if the Deferred Purchase Price Date
shall occur prior to the consummation of the Closing, then the Deferred
Purchase Price Date shall be deemed to occur upon the consummation of the
Closing. If Buyer shall not have paid to Seller the Deferred Purchase Price in
accordance with the terms of this Agreement, then, in addition to the Deferred
Purchase Price, Buyer shall pay to Seller interest on the Deferred Purchase
Price from the Closing Date through the date of payment of the Deferred
Purchase Price at the Default Interest Rate.

(b)                                 Notwithstanding
Section 1.1(a), if prior to the consummation of the Closing (i) Buyer shall
have breached in any material respect its obligations set forth in Section 4.5
or (ii) Buyer shall have consummated any Acceleration Transaction, then, upon
consummation of the Closing, Buyer shall pay to Seller the entire Purchase
Price in immediately available funds to the bank account designated by Seller
to Buyer in writing at least one Business Day prior to the Closing.

(c)                                  Notwithstanding
Sections 1.1(a), unless the entire Purchase Price was paid by Buyer to Seller
upon consummation of the Closing, if following the consummation of the Closing
and prior to the Deferred Purchase Price Date (i) Buyer shall have breached in
any material respect its obligations set forth in Section 4.5 or (ii) Buyer
shall have consummated any Acceleration Transaction, then, upon the date that
is one Business Day following the consummation of such Acceleration
Transaction, Buyer shall pay to Seller the Deferred Purchase Price in
immediately available funds to the bank account that was previously designated
by Seller to Buyer pursuant to Section 1.1(a).

(d)                                 Each
of the parties understands and agrees that unless the Closing is consummated,
nothing contained in this Agreement shall constitute an admission by Buyer,
Seller or any of their Affiliates as to the amount, if any, of any Claim by
Buyer against Seller or the Seller Bankruptcy Estate nor of any Claim by Seller
against the Company.

(e)                                  In
the event that Buyer changes the number of shares of Common Stock or securities
convertible or exchangeable into or exercisable for shares of Common Stock
issued and outstanding prior to the Closing as a result of a reclassification,
stock split or reverse stock split, the Purchase Price, the Closing Purchase
Price and the Deferred Purchase Price shall remain the same, and the number of
shares of Common Stock or securities convertible or exchangeable into or
exercisable for shares of Common Stock as a result of any such
reclassification, stock split or reverse stock split shall be the Shares
covered by this Agreement.

(f)                                    Notwithstanding
the entry into this Agreement or any provision contained herein, it is
acknowledged and agreed that, unless and until the consummation of the Closing
shall have occurred, Seller shall retain all of its rights, including any
voting rights, as a shareholder of Buyer with respect to the Shares.

1.2                                 Closing.  On the terms and subject to the conditions
set forth in this Agreement, the closing of the transactions contemplated by
Section 1.1(a) of this Agreement (the “Closing”)
shall take place:  (a) at the offices of
Hughes Hubbard & Reed LLP, One Battery Park Plaza, 

 2
 

New York, New York, at 10:00 a.m., local time, on the third Business
Day after the Satisfaction Date (the “Scheduled
Closing Date and Time” ) or (b) at such other time, on such other
date and at such other place as may be mutually agreed upon by the parties.  The date on which the Closing is to occur is
herein referred to as the “Closing Date.”  Notwithstanding the foregoing, the parties acknowledge and agree that Seller
shall have the right, at any time and from time to time following the
Satisfaction Date and prior to any Scheduled Closing Date and Time, to
determine that the Scheduled Closing Date and Time shall be 10:00 a.m., New
York time, on any date subsequent to the previously set Scheduled Closing Date
and Time (10:00 a.m., New York time, on such date determined by Seller shall be
deemed to be the Scheduled Closing Date and Time) by providing to Buyer a
written notice to such effect; provided that any such Scheduled Closing Date
and Time determined by Seller shall be on a date that is at least three
Business Day prior to the earlier of the closing of the transactions
contemplated by the SPRA and the Termination Date, it being understood and
agreed that any such notice by Seller to Buyer shall not be deemed a waiver of
the satisfaction of any conditions to the Closing set forth in this Agreement
and that such conditions (other than those conditions that by their terms are
to be satisfied at the Closing, but subject to the satisfaction or waiver of
those conditions) shall be satisfied or waived at the Closing.

1.3                                 Deliveries.  In
addition to the other requirements set forth herein:

(a)                                  Seller
shall deliver to Buyer:

(i)                                     at
the Closing, one or more certificates representing the Shares, and any other
documents that are necessary to sell and transfer to Buyer title to the Shares
free and clear of all Liens other than Permitted Liens;

(ii)                                  at
the Closing, the certificate called for by Section 6.1(a);

(iii)                               at
the later of the Closing and the date on which the Buyer Approval Order (as
defined in the SPRA) has been entered by the Seller Bankruptcy Court and is a
Final Order, a release in substantially the form attached hereto as Exhibit
C, duly executed by Seller as the Releasing Party (as defined in Exhibit
C);

(iv)                              at
the Closing, the Warrant for cancellation by Buyer; and

(v)                                 at
the Closing, all other instruments and documents reasonably requested by Buyer.

(b)                                 Buyer
shall deliver to Seller:

(i)                                     at
the Closing, the certificate called for by Section 5.1(a);

(ii)                                  at
the Closing, the Closing Purchase Price and, if applicable, the Deferred
Purchase Price;

(iii)                               on
the Deferred Purchase Price Date or the date contemplated by Section 1.1(c),
the Deferred Purchase Price;

 3
 

(iv)                              at
the later of the Closing and the date on which the Buyer Approval Order (as
defined in the SPRA) has been entered by the Seller Bankruptcy Court and is a
Final Order, a release in substantially the form attached hereto as Exhibit
C, duly executed by Buyer as the Releasing Party (as defined in Exhibit
C); and

(v)                                 at
the Closing, all other instruments and documents reasonably requested by
Seller.

1.4                                 Assignment
of Bankruptcy Claim.  Unless Buyer
shall have breached in any material respect its obligations set forth in
Section 4.5, if the closing of the transactions contemplated hereby shall have
been consummated, upon consummation of the closing of the SPRA, Seller shall
assign the Buyer Claim (as defined in Section 1.7 of the SPRA) to Buyer.

1.5                                 Cure
Amounts.  Unless Buyer shall have
breached in any material respect its obligations set forth in Section 4.5, if
the closing of the transactions contemplated hereby shall have been
consummated, Seller shall provide to the Company, immediately prior to the
consummation of the closing of the SPRA, the notice contemplated by Section
4.10 of the SPRA.

ARTICLE II

REPRESENTATIONS
AND WARRANTIES

OF BUYER

Buyer hereby represents and warrants to Seller as
follows:

2.1                                 Organization
and Good Standing.  Buyer is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Minnesota.

2.2                                 Capitalization.  As of the date of this Agreement, the
authorized capital stock of Buyer consists of 60,000,000 shares of Common
Stock.  As of the date of this Agreement,
there are 20,591,840 shares of Common Stock issued and outstanding.  Buyer owns all the issued and outstanding
shares of common stock, par value $0.01 per share, of the Company.

2.3                                 Authority,
Approvals, Enforceability and Consents.

(a)                                  Buyer
has the corporate power and authority to enter into this Agreement and the
other Transaction Documents to be executed and delivered by it and to perform
its obligations hereunder and thereunder.

(b)                                 The
execution, delivery and performance by Buyer of this Agreement and the other
Transaction Documents to be executed and delivered by it and the consummation
by Buyer of the transactions contemplated hereby and thereby have been duly
authorized and approved by the Board of Directors of Buyer and no other
corporate proceedings or other approvals on the part of Buyer or its
shareholders are necessary to authorize and approve, and for Buyer to perform,
its obligations under, and to consummate the transactions contemplated by, this
Agreement and the other Transaction Documents to be executed and delivered by
it and the transactions contemplated hereby and thereby.

 4
 

(c)                                  The
execution, delivery and performance by the Company of the SPRA and the other
Transaction Documents to be executed and delivered by the Company and the
consummation by the Company of the transactions contemplated thereby have been
duly authorized and approved by Buyer, including any necessary approval or vote
by Buyer as the sole shareholder of the Company (including under Article II of
the bylaws of the Company) (and Buyer shall have provided to Seller, as of the
date of this Agreement, a true and complete copy of any such authorization or
approval, and no such authorization or approval shall have been revoked,
amended or modified), and no other corporate proceedings or other approvals on
the part of Buyer or its shareholders are necessary to authorize and approve,
and for the Company to perform, the Company’s obligations under, and to
consummate the transactions contemplated by, 
the SPRA and the other Transaction Documents to be executed and
delivered by the Company and the transactions contemplated thereby.

(d)                                 This
Agreement has been, and the other Transaction Documents to be executed and
delivered by Buyer at the Closing will, at the Closing, have been, duly
executed and delivered by Buyer and constitutes (or will constitute at the
Closing, as applicable) the legal, valid and binding obligations of Buyer
enforceable against Buyer in accordance with their respective terms.

(e)                                  (1)
The execution, delivery and performance by Buyer of this Agreement and the
other Transaction Documents to be executed and delivered by Buyer and the
consummation of the transactions contemplated hereby and thereby and (2) the
execution, delivery and performance by the Company of the SPRA and the other
Transaction Documents to be executed and delivered by the Company and the
consummation of the transactions contemplated thereby, in each case, do not and
will not:

(i)                                     contravene
any provision of the articles of incorporation or bylaws (or comparable
organizational documents), of Buyer or the Company;

(ii)                                  after
notice or lapse of time or both, result in a material violation, material
conflict with, or material breach of any provision of, constitute a material
default under, result in or permit the material modification, revocation,
cancellation, termination or acceleration of, any Contract to which Buyer is a
party or by which any of its properties or assets are bound or otherwise
subject or, require any consent or waiver of any party to any such Contract;

(iii)                               violate
or conflict with any Law applicable to Buyer or its business or properties; or

(iv)                              except
as contemplated by the SPRA and except for any filing required under the
Securities Exchange Act, require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification with, any
Government Authority.

2.4                                 Financial
Capability.  Buyer has and, at the Closing and on the Deferred
Purchase Price Date will have, sufficient funds available to pay any amount due
to Seller under Sections 1.1(a), 1.1(b) and 1.1(c).

 5
 

2.5                                 Brokers.  Neither
Buyer nor its directors, officers or employees, has employed any broker or
finder or has incurred or will incur any broker’s, finder’s or similar fees,
commissions or expenses, in each case, in connection with the transactions
contemplated by this Agreement or any other Transaction Document that would be
payable by Seller or its Affiliates (other than Buyer).

ARTICLE III

REPRESENTATIONS
AND WARRANTIES

OF SELLER

Seller hereby represents and warrants to Buyer as
follows:

3.1                                 Organization
and Good Standing.  Seller is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Minnesota.

3.2                                 Authority,
Approvals, Enforceability and Consents.

(a)                                  Seller
has the corporate power and authority to enter into this Agreement and the
other Transaction Documents to be executed and delivered by Seller pursuant to
this Agreement and, subject to entry of the Seller Approval Order, to perform
its obligations hereunder and thereunder.

(b)                                 The
execution, delivery and performance by Seller of this Agreement and the other
Transaction Documents to be executed and delivered by Seller pursuant to this
Agreement and the consummation by Seller of the transactions contemplated
hereby and thereby have been duly authorized and approved by the Board of
Directors of Seller and, subject to entry of the Seller Approval Order, no
other corporate proceedings on the part of Seller or its shareholders are
necessary to authorize and approve, and for Seller to perform, its obligations
under, and to consummate the transactions contemplated by, this Agreement and
the other Transaction Documents to be executed and delivered by Seller pursuant
to this Agreement and the transactions contemplated hereby and thereby.

(c)                                  This
Agreement has been and the other Transaction Documents to be executed and
delivered by Seller pursuant to this Agreement at the Closing will, at the
Closing, have been duly executed and delivered by Seller, and, subject to entry
of the Seller Approval Order, constitutes (or will constitute at the Closing,
as applicable) the legal, valid and binding obligations of Seller enforceable
against Seller in accordance with their respective terms, subject to the
discretion of the Seller Bankruptcy Court for so long as the Seller Bankruptcy
Court retains jurisdiction over the Seller Case.

(d)                                 The
execution, delivery and performance by Seller of this Agreement and the other
Transaction Documents to be executed and delivered by it pursuant to this
Agreement and the consummation by Seller of the transactions contemplated
hereby and thereby do not and will not:

(i)                                     contravene
any provisions of the certificate of incorporation or bylaws of Seller;

 6
 

(ii)                                  after
notice or lapse of time or both, result in a material violation, material
conflict with, or material breach of any provision of, constitute a material
default under, result in or permit the material modification, revocation,
cancellation, termination or acceleration of, any Contract to which Seller is a
party or by which any of its properties or assets are bound or otherwise
subject or require any consent or waiver of any party to any such Contract;

(iii)                               subject
to entry of the Seller Approval Order, violate or conflict with any Law
applicable to Seller or its business or its properties; and

(iv)                              
except for the Seller Approval Order and any filing required under the
Securities Exchange Act, require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification with, any
Government Authority.

3.3                                 Title.  Subject
to any effects resulting from the Seller Case, Seller has title of the Shares,
free and clear of all Liens other than Permitted Liens.

3.4                                 Brokers.  Neither
Seller nor its directors, officer or employees, has employed any broker or finder
or has incurred or will incur any broker’s, finder’s or similar fees,
commissions or expenses, in each case, in connection with the transactions
contemplated by this Agreement or any other Transaction Document that would be
payable by Buyer or its Affiliates (other than Seller).

ARTICLE IV

COVENANTS

4.1                                 Announcements.  Between the date hereof and until the
earliest date on which the entire Purchase Price has been paid pursuant to this
Agreement, the parties agree to use their reasonable best efforts to cause the
substance of all public releases or public announcements by either party with
respect to this Agreement or the transactions contemplated hereby to be
mutually agreeable, except as and to the extent that a party determines in good
faith that it is obligated by Law to make a public release or public
announcement, in which case such party shall give notice to the other party, to
the extent practicable, in advance of such party’s intent to make such release
or announcement.  Each party acknowledges
to the other party that such party has determined that it will be required to
announce and report both the execution and the consummation of the closing of
this Agreement.

4.2                                 Cash.  Unless Buyer has paid to Seller the entire
Purchase Price upon the consummation of the Closing, during the period
commencing immediately following the consummation of the Closing and ending
upon payment by Buyer to Seller of the Deferred Purchase Price, Buyer shall
maintain a minimum of $11.5 million of unrestricted Cash on hand.

4.3                                 Further
Assurances.  Each party hereto
covenants from the date of this Agreement until the earliest date on which the
entire Purchase Price is paid pursuant to this Agreement (and subject to the
other terms and conditions of this Agreement):

 7
 

(a)                                  to
cooperate with the other party and to take such actions as may be necessary, in
each case, as promptly as possible in (i) determining whether notices,
declarations, registrations and filings are required to be made with or
consents required to be obtained from any Third Party or Government Authority
in connection with the consummation of the transactions contemplated by this
Agreement and the other Transaction Documents between Buyer and Seller and in
making or causing to be made any such notices, declarations, registrations and
filings promptly; (ii) obtaining, in a timely manner, any such consents; and
(iii) furnishing the other party and to the other party’s counsel all such
information as may be reasonably required in order to effectuate the foregoing
actions;

(b)                                 to
keep the other party hereto informed in all material respects of any material
communications received by such party from, or given by such party to, any
Government Authority with respect to the transactions contemplated by this
Agreement and to consult with the other party hereto in advance of any meeting
or conference with any Government Authority with respect to the transactions
contemplated by this Agreement;

(c)                                  to
use reasonable best efforts and cooperate with the other party hereto to obtain
all consents required from Third Parties, whose consent or approval is required
pursuant to any Contract to consummate the transactions contemplated by this
Agreement and the other Transaction Documents between Buyer and Seller; and

(d)                                 without
limiting the specific obligations of any party under any covenant or agreement
under this Agreement, to use reasonable best efforts to take all action and do
all things necessary in order to promptly consummate the transactions
contemplated hereby and the other Transaction Documents between Buyer and
Seller, including satisfaction, but not waiver, of the conditions precedent set
forth in Articles V and VI.

4.4                                 Additional
Agreements; Notification of Certain Matters.

(a)                                  Without
limiting the foregoing, between the date hereof and until the earliest date on
which the entire Purchase Price has been paid pursuant to this Agreement, each
party will give prompt notice in writing to the other party of:  (i) any information that indicates that
any of its representations and warranties contained in this Agreement was not
true and correct in all material respects (without giving effect to any
limitation as to “materiality” or another similar materiality qualification set
forth therein) as of the date of this Agreement or will not be true and correct
in all material respects (without giving effect to any limitation as to “materiality”
or another similar materiality qualification set forth therein) as of the
Closing, (ii) the occurrence of any event or the existence of any circumstance
which will result, or is reasonably likely to result, in the failure to satisfy
a condition specified in Article V (in the case of Buyer) or VI (in the case of
Seller), (iii) any notice or other communication from any third Person
alleging that the consent of such third Person is or may be required in
connection with the transactions contemplated by this Agreement, and
(iv) any complaints, investigations or hearings (or communications
indicating that the same may be contemplated) by or of any Government Authority
or adjudicatory proceedings involving the transaction contemplated by this
Agreement, and, in the case of any event contemplated by clauses (i) through
(iv) will keep the other party fully informed of such event and permit the
other party and its Representatives access to all materials prepared in
connection therewith.  Without limiting
the foregoing, between the 

 8
 

date hereof and until the earliest date on which the entire Purchase
Price has been paid pursuant to this Agreement, Buyer shall promptly (but in
any event within one Business Day) notify Seller in writing of the entry into
or consummation of an Acceleration Transaction.

(b)                                 If
any Claim against Buyer shall have been instituted before any arbitrator, court
or other Government Authority to restrain or prohibit, or to obtain damages in
respect of, the consummation of the transactions contemplated hereby or by the
other Transaction Documents, then Buyer shall (i) promptly notify Seller of
such Claim, (ii) in good faith, and using its reasonable best efforts to,
defend against any such Claim, (iii) promptly provide Seller and its counsel
with copies of all documents in its possession relating to such Claim, (iv)
prior to filing or providing any document to, or having discussions with, a Third
Party relating to such Claim, provide Seller with a reasonable opportunity to
review, comment on and approve such documents and allow Seller to participate
in any such discussions, and (v) not settle any such Claim or waive or release
any rights with respect to such Claim without Seller’s prior written consent
unless such settlement (A) includes an unconditional release of Seller, the
Company and their respective Affiliates (other than Buyer) from all liability
arising out of or in connection with such matter, (B) does not include any
admission of fault, culpability or a failure to act by, or on behalf of,
Seller, the Company or their respective Affiliates (other than Buyer) or
payment of any money or imposition of any other obligation against Seller, the
Company or their respective Affiliates (other than Buyer) and (C) does not
result in the imposition against Seller, the Company or their respective
Affiliates (other than Buyer) of injunctive or other equitable relief.

4.5                                 SPRA
Consent.  Buyer hereby acknowledges
and agrees that, unless Seller shall have breached in any material respect its
obligations set forth in Sections 1.1(a), 1.4, 1.5 and 4.6, Buyer has
irrevocably authorized and approved, and that Buyer shall fully support, the
transactions contemplated by the SPRA, and that Buyer shall cooperate with
Seller and the Company in connection with the transactions contemplated by the
SPRA; provided, however, that any amendments, modifications or waivers of the
SPRA (including all schedules thereto) that materially and adversely affect the
interests of Buyer are subject to the consent of Buyer, which shall not be
unreasonably withheld or delayed. 
Without limiting the generality of the foregoing, Buyer hereby acknowledges
and agrees that, unless Seller shall have breached in any material respect its
obligations set forth in Sections 1.1(a), 1.4, 1.5 and 4.6, Buyer is
irrevocably consenting to the filing by the Company or the Company Committee of
any of the documents contemplated to be filed pursuant to Section 4.6(a) of the
SPRA, that Buyer shall use reasonable best efforts, and cooperate, assist and
consult with Seller and the Company, as promptly as practicable, to secure
approval of the Disclosure Statement, confirmation of the Company Plan and
approval of the transactions contemplated by the Company Plan and the SPRA and
that Buyer shall promptly and irrevocably vote in favor of the Company Plan (it
being understood and agreed that all aspects of the Company Plan, any and all
exhibits or attachments to the Company Plan, the Disclosure Statement and the
orders approving the same (including the Confirmation Order) and the other
documents contemplated to be filed pursuant to Section 4.6(a) of the SPRA, all
to the extent that they are not related to the SPRA or the transactions
contemplated thereby, shall be reasonably acceptable, in form and substance, to
Buyer and shall not be amended, modified, supplemented, withdrawn or revoked
without the consent of Buyer; provided, however, that such consent shall not be
unreasonably withheld or delayed; provided further that Buyer acknowledges that
it agrees with the form and substance of the form of Company Plan attached
hereto as Exhibit D).  Provided
that Buyer shall not have breached in 

 9
 

any material respect its obligations set forth in this Section 4.5, the
Company Plan shall provide, among other things, for a full release of all
claims by the Company against Buyer and the dismissal of the Company’s
adversary proceeding against Buyer in the Company Case, effective upon the
consummation of the closing of the SPRA. 
Buyer acknowledges and agrees that it shall not make any Claim
challenging the transaction contemplated by the SPRA, the Company Plan or the
filings made pursuant to Section 4.6(a) of the SPRA.

4.6                                 Seller
Approval Order.  Seller shall, as
soon as reasonably practicable after the date hereof, but not later than 10
days hereafter, file with the Seller Bankruptcy Court a motion to approve the
transactions contemplated hereby.  The
proposed Seller Approval Order to be submitted with the motion shall be
substantially in the form attached hereto as Exhibit E.

ARTICLE V

CONDITIONS TO THE
OBLIGATIONS

OF SELLER TO EFFECT THE CLOSING

5.1                                 Seller
Obligations.  The obligations of
Seller required to be performed by it at the Closing shall be subject to the
satisfaction, at or prior to the Closing, of each of the following conditions,
each of which may be waived in whole or in part by Seller as provided herein
except as otherwise required by applicable Law:

(a)                                  Representations
and Warranties; Agreements; Covenants. 
Each of the representations and warranties of Buyer contained in this
Agreement that are qualified as to materiality or by reference to another
similar materiality qualification shall be true and correct as of the date of
this Agreement and as of the Closing, as if made at and as of such time (except
to the extent expressly made as of an earlier date, in which case as of such
date), and such representations and warranties of Buyer that are not so
qualified shall be true and correct in all material respects as of the date of
this Agreement and as of the Closing, as if made at and as of such time (except
to the extent expressly made as of an earlier date, in which case as of such
date).  Each of the obligations of Buyer
required by this Agreement to be performed by it at or prior to the Closing
shall have been duly performed and complied with by it in all material respects
as of the Closing.  At the Closing,
Seller shall have received a certificate, dated the Closing Date and duly
executed by the chief executive officer and the chief financial officer of
Buyer on behalf of Buyer, to the effect that the conditions set forth in the
two preceding sentences have been satisfied.

(b)                                 Injunction;
Litigation; Legislation.  (i) No
party hereto or any of their Affiliates shall be subject to any order or
injunction (whether preliminary or permanent) restraining or prohibiting the
consummation of the transactions contemplated hereby or by the other
Transaction Documents between Buyer and Seller and (ii) no action shall
have been taken, or no statute, rule, regulation or order shall have been
promulgated or enacted by any Government Authority, which would prevent or make
illegal the consummation of the transactions contemplated hereby.

(c)                                  Bankruptcy.  The Seller Approval Order shall have been
entered by the Seller Bankruptcy Court, shall be a Final Order and shall be in
full force and effect.

 10
 

(d)                                 Delivery
of Transaction Documents.  Seller
shall have received each of the documents listed in Section 1.3(b) and the
Closing Purchase Price or the entire Purchase Price, as applicable.

ARTICLE VI

CONDITIONS TO THE
OBLIGATIONS OF 

BUYER TO EFFECT THE CLOSING

6.1                                 Buyer
Obligations.  The obligations of
Buyer required to be performed by it at the Closing shall be subject to the
satisfaction, at or prior to the Closing, of each of the following conditions,
each of which may be waived in whole or in part by Buyer as provided herein
except as otherwise required by applicable Law:

(a)                                  Representations
and Warranties; Agreements; Covenants. 
Each of the representations and warranties of Seller contained in this
Agreement that are qualified as to materiality or by reference to another
similar materiality qualification shall be true and correct as of the date of
this Agreement and as of the Closing, as if made at and as of such time (except
to the extent expressly made as of an earlier date, in which case as of such
date), and such representations and warranties of Seller that are not so
qualified shall be true and correct in all material respects as of the date of
this Agreement and as of the Closing, as if made at and as of such time (except
to the extent expressly made as of an earlier date, in which case as of such
date).  Each of the obligations of Seller
required by this Agreement to be performed by it at or prior to the Closing
shall have been duly performed and complied with by it in all material respects
as of the Closing.  At the Closing, Buyer
shall have received a certificate, dated the Closing Date and duly executed by
an authorized officer of Seller on behalf of Seller, to the effect that the
conditions set forth in the two preceding sentences have been satisfied.

(b)                                 Injunction.  (i) No party hereto or any of their
Affiliates shall be subject to any order or injunction (whether preliminary or
permanent) restraining or prohibiting the consummation of the transactions
contemplated hereby or by the other Transaction Documents between Buyer and
Seller and (ii) no action shall have been taken, or no statute, rule,
regulation or order shall have been promulgated or enacted by any Government
Authority, which would prevent or make illegal the consummation of the
transactions contemplated hereby.

(c)                                  Bankruptcy.  The Seller Approval Order shall have been entered
by the Seller Bankruptcy Court, shall be a Final Order and shall be in full
force and effect.

(d)                                 Delivery
of Transaction Documents.  Buyer
shall have received each of the documents listed in Section 1.3(a).

ARTICLE VII

TERMINATION

7.1                                 Termination.

(a)                                  This
Agreement may be terminated at any time prior to the Closing:

 11
 

(i)                                     by
mutual consent of Buyer and Seller;

(ii)                                  by
Buyer or Seller, if the Closing shall not have taken place on or prior to April
30, 2007 (the “Termination Date”); provided,
however, that the right to terminate this Agreement under this Section
7.1(a)(ii) shall not be available to a party if such party’s failure to perform
any covenant or obligation under this Agreement or breach of a representation
or warranty contained in this Agreement has been the cause of or resulted in
the failure of the Closing to occur on or before such date;

(iii)                               by
Buyer, if there has been any violation or breach by Seller of any
representation, warranty, covenant or obligation of or by Seller contained in
this Agreement that has rendered the satisfaction of any condition to the
obligations of Buyer contained in Section 6.1 impossible and such violation or
breach has not been waived by Buyer; or

(iv)                              by
Seller, if there has been a violation or breach by Buyer of any representation,
warranty, covenant or obligation of or by Buyer contained in this Agreement
that has rendered the satisfaction of any condition to the obligations of
Seller contained in Section 5.1 impossible and such violation or breach has not
been waived by Seller.

(b)                                 If
Buyer or Seller shall terminate this Agreement pursuant to the provisions
hereof, such termination shall be effected by notice to the other party
specifying the provision hereof pursuant to which such termination is made.

7.2                                 Effect
of Termination.  In the event of the
termination hereof pursuant to the provisions of this Article VII, this
Agreement shall become void and have no effect, and each party shall pay all of
its own expenses incurred in connection herewith, without any Liability on the
part of any party or its directors, officers or shareholders; provided, however,
that if this Agreement is terminated because either party has defaulted under
or breached this Agreement, then the party so electing to terminate this
Agreement shall be entitled to pursue, exercise and enforce any and all other
remedies, rights, powers and privileges available to it at law or in equity
against the other party with respect to such breach or default.

ARTICLE VIII

MISCELLANEOUS

8.1                                 Expenses.  Each of the parties hereto shall pay its own
fees and expenses (including the fees of any attorneys, accountants, investment
bankers or others engaged by such party) in connection with this Agreement and
the other Transaction Documents between Buyer and Seller and the transactions
contemplated hereby and thereby whether or not the transactions contemplated
hereby are consummated.

8.2                                 Survival.  The representations, warranties, covenants
and agreements contained in this Agreement or in any other Transaction Document
between Buyer and Seller, shall survive (and not be affected in any respect by)
the Closing, any investigation conducted by or on behalf of any party hereto
and any information which any party may receive.

 12

8.3                                 Certain
Interpretative Matters.  The captions
of Articles and Sections of this Agreement are for convenience only and shall
not control or affect the meaning or construction of any of the provisions of
this Agreement.  As used herein,
(a) words in the singular shall be held to include the plural and vice
versa and words of one gender shall be held to include the other gender as the
context requires, (b) the terms “hereof,” “herein,” “hereby,” and “herewith”
and words of similar import shall, unless otherwise stated, be construed to
refer to this Agreement as a whole (including all of the Exhibits) and not to
any particular provision of this Agreement, (c) Article, Section, paragraph and
Exhibit references are to the Articles, Sections, paragraphs and Exhibits to
this Agreement unless otherwise specified, and (d) unless the context otherwise
requires, the word “or” is not exclusive. 
Whenever the words “included”, “includes” or “including” are used in
this Agreement, they shall be deemed to be followed by the words “without
limitation”.  The parties intend that
each representation, warranty and covenant herein shall have independent
significance.  If any party has breached
any representation, warranty or covenant contained herein, the fact that there
exists another representation, warranty or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
party has not breached shall not detract from or mitigate the fact that the
party is in breach of the first representation, warranty or covenant, as the
case may be.

8.4                                 Notices.  All notices or other communications required
or permitted hereunder shall be given in writing and given by certified or
registered mail, return receipt requested, nationally recognized overnight
delivery service, such as Federal Express, facsimile or e-mail (or like
transmission) with confirmation of transmission by the transmitting equipment
or personal delivery against receipt to the party to whom it is given, in each
case, at such party’s address, facsimile number or e-mail address set
forth below or such other address, facsimile number or e-mail address as
such party may hereafter specify by notice to the other parties hereto given in
accordance herewith.  Any such notice or
other communication shall be deemed to have been given as of the date so
personally delivered or transmitted by facsimile (or, if delivered or
transmitted after normal business hours, on the next Business Day) or e-mail or
like transmission, on the next Business Day when sent by overnight delivery
services or five days after the date so mailed if by certified or registered
mail:

If to Buyer:

MAIR Holdings, Inc.

Fifth Street Towers, Suite 1360

150 South Fifth Street

Minneapolis, MN  55402

Fax No.:  (612) 333-0590

E-mail Address:  pfoley@mairholdings.com

Attention:  Paul Foley

with copies to each of:

Haynes and Boone, LLP

1221 McKinney, Suite 2100

Houston, Texas 77010

Fax No.:  (713)
236-5408

E-mail Address: 
kattnerk@haynesboone.com

Attention:  Kenric D. Kattner

 13
 

MAIR Holdings, Inc.

Fifth Street Towers, Suite 1360

150 South Fifth Street

Minneapolis, MN  55402

Fax No.:  (612) 333-0590

E-mail Address:  rtimm@mairholdings.com

Attention:  Ruth Timm

If to Seller:

Northwest Airlines, Inc.

2700 Lone Oak Parkway

Eagan, MN 55121

Fax No.:  (612) 726-3416

E-mail Address:  dave.davis@nwa.com

Attention: David Davis, Senior Vice President – Finance

with copies to each of:

Northwest Airlines, Inc.

2700 Lone Oak Parkway

Eagan, MN 55121

Fax No.:  (612)
726-7123

E-mail Address:  michael.miller@nwa.com

Attention:  Michael L. Miller, Vice
President – Law and Secretary

Hughes Hubbard & Reed
LLP

One Battery Park Plaza

New York, NY  10004

Fax No.:  (212) 422-4726

E-mail Address: 
lefkowit@hugheshubbard.com

Attention:  Kenneth A. Lefkowitz

8.5                                 Assignment.  This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns; provided, however,
that neither this Agreement nor any of the rights, interests or obligations
hereunder may be assigned by any of the parties hereto without the prior
written consent of the other party.  Any
purported assignment or delegation in violation of this Agreement shall be null
and void ab initio.

8.6                                 Entire
Agreement.  This Agreement and the
other Transaction Documents (including the Exhibits hereto and thereto)
embodies the entire agreement and understanding of 

 14
 

the parties with respect to the transactions contemplated hereby and
merges in, supersedes and cancels all prior written or oral commitments,
arrangements or understandings with respect thereto, including the Summary of
Terms, dated January 9, 2007, and any prior drafts thereof, between Buyer and
Seller.  There are no restrictions,
agreements, promises, warranties, covenants or undertakings with respect to the
transactions contemplated hereby other than those expressly set forth in this
Agreement and the other Transaction Documents.

8.7                                 Modifications,
Amendments and Waivers.  This
Agreement may not be modified or amended except by an instrument or instruments
in writing signed by each party hereto. 
Any party hereto may, only by an instrument in writing, waive compliance
by any other party hereto with any term or provision hereof on the part of such
other party hereto to be performed or complied with.  No failure or delay of any party in
exercising any right or remedy hereunder shall operate as a waiver thereof, nor
will any single or partial exercise of any right or power, or any abandonment
or discontinuance of steps to enforce such right or power, preclude any other
or further exercise thereof or the exercise of any other right or power.  The waiver by any party hereto of a breach of
any term or provision hereof shall not be construed as a waiver of any subsequent
breach.  The rights and remedies of the
parties hereunder are cumulative and are not exclusive of any rights or
remedies that they would otherwise have hereunder.  Seller hereby agrees that it shall not agree
to modify, amend or waive any provision of the SPRA in a manner that materially
and adversely affects the economic interests of Buyer without Buyer’s consent,
which shall not be unreasonably withheld or delayed.

8.8                                 Counterparts.  This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original, and will become effective when one
or more counterparts have been signed by a party and delivered to the other
party.  Copies of executed counterparts
transmitted by telecopy, telefax or other electronic transmission service shall
be considered original executed counterparts for purposes of this Section 8.8,
provided that receipt of copies of such counterparts is confirmed.

8.9                                 Governing
Law.  THIS AGREEMENT SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF MINNESOTA THAT APPLY TO CONTRACTS MADE AND
PERFORMED ENTIRELY IN SUCH STATE.

8.10                           Severability.  To the fullest extent that they may
effectively do so under applicable Law, the parties hereto hereby waive any provision
of Law which renders any provision of this Agreement invalid, illegal or
unenforceable in any respect.  Such
parties further agree that any provision of this Agreement which,
notwithstanding the preceding sentence, is rendered or held invalid, illegal or
unenforceable in any respect in any jurisdiction shall be ineffective, but such
ineffectiveness shall be limited as follows: 
(a) if such provision is rendered or held invalid, illegal or
unenforceable in such jurisdiction only as to a particular Person or Persons or
under any particular circumstance or circumstances, such provision shall be
ineffective, but only in such jurisdiction and only with respect to such
particular Person or Persons or under such particular circumstance or
circumstances, as the case may be; (b) without limitation of clause (a), such
provision shall in any event be ineffective only as to such jurisdiction and
only to the extent of such invalidity, illegality or unenforceability, and such
invalidity, illegality or unenforceability in such jurisdiction shall not
render invalid, illegal or unenforceable such provision in any other
jurisdiction; and (c) without limitation of clause (a) or 

 15
 

(b), such ineffectiveness shall not render invalid, illegal or
unenforceable this Agreement or any of the remaining provisions hereof.

8.11                           Submission
to Jurisdiction; Waivers.  Each party
to this Agreement hereby irrevocably and unconditionally:

(a)                                  (i)
agrees that any suit, action or proceeding instituted against it by any other
party with respect to this Agreement or any other Transaction Document between
Buyer and Seller may be instituted, and that any suit, action or proceeding by
it against any other party with respect to this Agreement or any other
Transaction Document between Buyer and Seller shall be instituted, only in any
of the following: (A) the Seller Bankruptcy Court, so long as the Seller Case
remains open and (B) the state courts of Minnesota (and appellate courts from
any of the foregoing) as the party instituting such suit, action or proceeding
may in its sole discretion elect, (ii) consents and submits, for itself and its
property, to the jurisdiction of such courts for the purpose of any such suit,
action or proceeding instituted against it by the other and (iii) agrees that a
final judgment in any such suit, action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by Law;

(b)                                 agrees
that service of all writs, process and summonses in any suit, action or
proceeding pursuant to Section 8.11(a) may be effected by the mailing of copies
thereof by registered or certified mail, postage prepaid, to Seller or Buyer,
as the case may be, at the addresses for notices pursuant to Section 8.4 hereof
(with copies to such other Persons as specified therein); provided, however,
that nothing contained in this Section 8.11 shall affect the right of Seller or
Buyer or, as the case may be, to serve process in any other manner permitted by
Law;

(c)                                  (i)
waives any objection which it may now or hereafter have to the laying of venue
of any suit, action or proceeding arising out of or relating to this Agreement
or any other Transaction Document between Buyer and Seller brought in any court
specified in Section 8.11(a), (ii) waives any claim that any such suit, action
or proceeding brought in any such court has been brought in an inconvenient
forum and (iii) agrees not to plead or claim either of the foregoing;

(d)                                 WAIVES
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY OF ANY DISPUTE ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT BETWEEN BUYER AND
SELLER AND AGREES THAT ANY SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING
WITHOUT A JURY; and

(e)                                  to
the extent it has or hereafter may acquire any immunity from jurisdiction of
any court or from any legal process (whether through service or notice,
attachment prior to judgment, attachment in aid of execution, execution or
otherwise) with respect to itself, or its property, hereby irrevocably waives
such immunity in respect of its obligations with respect to this Agreement and
the other Transaction Documents between Buyer and Seller.

 16
 

8.12                           Specific
Performance.  Each of the parties
hereto acknowledges that it would not have an adequate remedy at law for money
damages in the event that any of the covenants or agreements of the other party
set forth in this Agreement were not performed in accordance with their terms
and therefore, each party agrees that the other party shall be entitled to
specific performance, injunctive and other equitable relief in addition to any
other remedy to which it may be entitled at law or in equity (without the
necessity of proving the inadequacy as a remedy of money damages or the posting
of a bond).

8.13                           No
Presumption.  With regard to each and
every term and condition of this Agreement and the other Transaction Documents
between Buyer and Seller, the parties hereto understand and agree that the same
have or has been mutually negotiated, prepared and drafted, and if at any time
the parties hereto desire or are required to interpret or construe any such
term or condition or any agreement or instrument subject hereto, no
consideration shall be given to the issue of which party hereto actually
prepared, drafted or requested any term or condition of this Agreement or any
agreement or instrument subject hereto.

8.14                           No
Third Party Beneficiary.  This
Agreement is for the sole benefit of the parties hereto and their respective
successors and permitted assigns and nothing herein, express or implied, is
intended to or shall confer upon any other Person any legal or equitable right,
benefit or remedy of any nature whatsoever under or by reason of this
Agreement.

8.15                           Representations.  Notwithstanding anything contained in this
Agreement to the contrary, each party acknowledges and agrees that the other
party is not making any representations or warranties whatsoever, express or
implied, beyond those expressly given by the other party in this
Agreement.  Except as expressly set forth
in this Agreement, each party further acknowledges and agrees that neither the
other party nor any of its Representatives has made any representation or
warranty, express or implied, as to the accuracy or completeness of any
information regarding the other party, its business or the transactions
contemplated by this Agreement provided by the other party or its
Representatives to the party or its Representatives, and none of the other
party nor any of its Representatives will have or be subject to any Liability
to the party or its Representatives resulting from the distribution to the
party or its Representatives, or the party’s use, of any such information, or
any other document or information in any form provided by the other party or
its Representatives to the party or its Representatives in connection with the
transactions contemplated hereby.

[The next page is the
signature page]

 17

The parties hereto have
caused this Agreement to be executed as of the date first written above.

	
  

  	
  Northwest Airlines, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David M. Davis

  	
   

  
	
   

  	
  Name: David M. Davis

  
	
   

  	
  Title: Senior Vice President, Finance and

  Controller

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MAIR Holdings, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert E. Weil

  	
   

  
	
   

  	
  Name: Robert E. Weil

  
	
   

  	
  Title: Vice President, Chief Financial Officer

  
					

 

 S-1

EXHIBIT A

CERTAIN DEFINED
TERMS

1.                                       For
purposes of the Agreement to which this Exhibit A is attached, the following
terms shall have the respective meanings specified below.

“Acceleration
Transaction” means any of the following, except as otherwise provided
herein: (i) any consolidation, reorganization, merger or share exchange
involving Buyer, other than a consolidation, reorganization, merger or share
exchange involving Buyer in which the holders of the Common Stock immediately
prior to such transaction have at least 60% of the voting power of the
surviving corporation immediately after such transaction; (ii) any acquisition,
sale, lease, exchange or other transfer (excluding transfer by way of pledge or
hypothecation) in one transaction or a series of related transactions, of
assets representing 40% or more of the consolidated assets of Buyer as of the
date of this Agreement (other than the transactions contemplated by the SPRA);
(iii) the shareholders of Buyer approve any plan or proposal for the liquidation
or dissolution of Buyer; or (iv) the acquisition of beneficial ownership
(within the meaning of Rule 13d-3 under the Securities Exchange Act) of an
aggregate of 40% or more of the voting power of Buyer’s outstanding voting
securities by any person or group (as such term is used in Rule 13d-5 under the
Securities Exchange Act).

“Affiliate” means, with respect to
any Person, any other Person that directly, or through one or more
intermediaries, controls or is controlled by or is under common control with such
first Person.

“Assumed Contract” means
each of the Contracts set forth on Schedule A-1 to the SPRA, as such
schedule may from time to time be amended in accordance with the SPRA.

“Bankruptcy Code” means
Title 11 of the United States Code, 11 U.S.C. Sections 101 et seq.

“Business Day” means a day other
than Saturday, Sunday or any other day which commercial banks in New York, New
York are authorized or required by Law to close.

“Cash” means all cash and cash
equivalents of a Person.

“Claim” means any claim, action, suit,
litigation, investigation, inquiry, review, demand, request for information or
proceeding.

“Company Bankruptcy Court”
means the United States Bankruptcy Court for the District of Minnesota.

“Company Case” means the
voluntary petition filed by the Company on October 13, 2005, for relief under
chapter 11 of the Bankruptcy Code in the Company Bankruptcy Court.

 A-1
 

“Company Committee” means
the Official Committee of Unsecured Creditors of the Company.

“Company Plan” means the
restructuring of the Company pursuant to the plan of reorganization
contemplated by the SPRA.

“Confirmation Order” means
an order of the Company Bankruptcy Court intended to be sought by the Company
and Buyer pursuant to the SPRA to approve Plan.

“Contract” means any mortgage, indenture, note,
agreement, contract, lease, permit, license, franchise, obligation, instrument
or other commitment, arrangement, undertaking or understanding of any kind,
whether written or oral, binding or nonbinding.

“Cure
Amounts” means the monetary amounts, as determined by the Company
Bankruptcy Court, if any, necessary to cure all defaults, if any, and to pay
all actual or pecuniary losses that have resulted from such defaults under the
Assumed Contracts as and to the extent required under Section 365(b) of the
Bankruptcy Code.

“Default
Interest Rate” means the annual yield rate plus 3%, on the date to
which the Default Interest Rate relates, of actively traded U.S. Treasury
securities having a remaining term to maturity of two months, as such rate is
published under “Treasury Constant Maturities” in Federal Reserve Statistical
Release H.15(519).

“Disclosure Statement”
means a disclosure statement with respect to the Company Plan meeting the
requirements of Section 1125(b) of the Bankruptcy Code filed pursuant to the
SPRA.

“Final Order” means an
order or judgment of the Seller Bankruptcy Court or other court of competent
jurisdiction with respect to the subject matter, (i) which has not been
reversed, stayed, modified, amended, enjoined, set aside, annulled or
suspended, (ii) with respect to which no request for a stay, motion or
application for reconsideration or rehearing, notice of appeal or certiorari is
filed within the deadline provided by applicable statute or regulation or as to
which any appeal that has been taken or any petition for certiorari that has
been or may be filed has been resolved by the highest court to which the order
or judgment was appealed or from which certiorari was sought and (iii) as to
which the deadlines for filing such request, motion, petition application,
appeal or notice referred to in clause (ii) above have expired.

“Government Authority” means any
foreign, United States or international, federal, state or local (or any
subdivision thereof), agency, authority, bureau, commission, department or
similar body or instrumentality thereof, or any governmental court or tribunal,
including the FAA and the DOT.

 “Law” or “Laws”
means all statutes, codes, ordinances, decrees, rules, regulations, standards,
municipal by-laws, judicial or arbitral or administrative or ministerial or
departmental or regulatory judgments, orders, injunctions, decisions, rulings
or awards, policies or other requirement of any Government Authority, or any
provisions or interpretations of the foregoing, including general principles of
common and civil law and equity, binding on or affecting the Person referred to
in the context in which such word is used.

 A-2
 

“Liability” means any liability,
obligation, debt, claim, charge, demand, assessment, settlement, judgment, loss
and damage of any kind or nature, whether known or unknown, fixed, accrued,
absolute or contingent, liquidated or unliquidated, legal or contractual,
matured or unmatured, disputed or undisputed, secured or unsecured, joint or
several, due or to become due, vested or unvested, or determined or
determinable.

“Lien” means any lien, charge,
claim, pledge, security interest, conditional sale agreement or other title
retention agreement, lease, mortgage, security agreement, right of first
refusal, option, restriction, obligation, tenancy, license, covenant,
right-of-way, easement or other encumbrance (including the filing of, or
agreement to give, any financing statement under the UCC or any other Law of
any jurisdiction).

“Permitted Liens”
means all:

(a)                                  liens
for taxes, assessments and other governmental charges which are not due and
payable and which may thereafter be paid without penalty;

(b)                                 such
minor imperfections in title as do not detract in any material respect from the
value or utility of the subject property; and

(c)                                  restrictions
imposed by United States federal or state securities Laws.

“Person” means any individual,
corporation, partnership, joint venture, trust, unincorporated organization,
limited liability company, estate, association, joint stock company, company
other form of business or legal entity or Governmental Authority.

“Representatives” of any Person
mean such Person’s directors, officers, employees, agents, counsel,
accountants, financial advisors, consultants, and other representatives.

“Satisfaction Date” means
the day on which the last to be satisfied or waived of the conditions to the
Closing set forth in this Agreement (other than those conditions that by their
terms are to be satisfied at the Closing, but subject to the satisfaction or
waiver of those conditions) are satisfied or waived.

“Securities Exchange Act” means the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder by the Securities and Exchange Commission from time to
time.

“Seller Approval Order”
means the entry of an order of the Seller Bankruptcy Court to approve this
Agreement and the authorization of Seller to consummate the transactions
contemplated hereby.

“Seller Bankruptcy Court”
the United States Bankruptcy Court for the Southern District of New York.

“Seller Bankruptcy Estate”
means the estate created by the commencement of the Seller Case.

 A-3
 

“Seller Case” means the
voluntary petition filed by Seller and certain of its Affiliates on September
14, 2005, for relief under chapter 11 of the Bankruptcy Code in the Seller
Bankruptcy Court.

“Subsidiary” as it relates to any
Person, means any Person more than 50% of the outstanding Voting Securities of
which are owned or controlled, directly or indirectly, by such Person.

“Third Party” means any
Person other than Seller, Buyer and any Subsidiary of Buyer.

“Transaction Document” means this
Agreement and the other agreements, instruments, certificates and documents
contemplated hereby and thereby, including each exhibit and schedule hereto and
thereto and the SPRA and the other agreements, instruments, certificates and
documents contemplated thereby, including each exhibit and schedule thereto.

“UCC” means the Uniform Commercial
Code, as amended, and any successor thereto.

“Voting Securities” means any class
or classes of stock of a Person pursuant to which the holders thereof have the
general power under ordinary circumstances to vote with respect to the election
of the Board of Directors (or similar body), irrespective of whether or not, at
the time, stock of any other class or classes shall have, or might have, voting
power by reason of the happening of any contingency.

2.                                       The
following terms are defined on the Sections indicated below.

	
  Term

  	
   

  	
  Section

  
	
  Agreement

  	
  Preamble

  
	
  Buyer

  	
  Preamble

  
	
  Closing

  	
  1.2

  
	
  Closing Date

  	
  1.2

  
	
  Closing Purchase Price

  	
  1.1(a)

  
	
  Common Stock

  	
  Recitals

  
	
  Company

  	
  Recitals

  
	
  Deferred
  Purchase Price

  	
  1.1(a)

  
	
  Deferred
  Purchase Price Date

  	
  1.1(a)

  
	
  Purchase Price

  	
  1.1(a)

  
	
  Scheduled
  Closing Date and Time

  	
  1.2

  
	
  Seller

  	
  Preamble

  
	
  Shares

  	
  Recitals

  
	
  SPRA

  	
  Recitals

  
	
  Termination Date

  	
  7.1(a)(ii)

  
	
  Warrant

  	
  Recitals

  

 

 A-4

EXHIBIT B

STOCK PURCHASE AND REORGANIZATION AGREEMENT

 B-1

EXHIBIT C

FORM OF GENERAL RELEASE

This General Release, dated as of [  ] (this “General
Release”), is given by [MAIR Holdings, Inc.] [Northwest Airlines,
Inc.], a Minnesota corporation (the “Releasing
Party”).  Capitalized terms
used but not defined herein have the meanings assigned to them in the Stock
Purchase Agreement dated as of January 22, 2007 (the “Purchase Agreement”) between [Northwest Airlines, Inc.] and
[MAIR Holdings, Inc.], a Minnesota corporation (the “Other Party”) and the Releasing Party.

As a condition and inducement to the willingness of
the Other Party to enter into the Purchase Agreement, the Releasing Party has
agreed to the matters set forth herein.

1.                                       For
good and valuable consideration, the receipt and legal sufficiency of which is
acknowledged by the Releasing Party, the Releasing Party knowingly and
voluntarily releases and forever discharges and releases the Other Party, the
Other Party’s Affiliates (other than the Company and Big Sky Transportation
Co.), the Other Party’s current and former Representatives and the Other Party’s
insurers (with respect to matters relating to the Other Party, the Other Party’s
Affiliates (other than the Company and Big Sky Transportation Co.) and the
Other Party’s current and former Representatives) and the successors and
assigns of the foregoing (collectively, the “Released
Parties”) from any and all claims, controversies, actions, causes of
action, cross-claims, counter-claims, rights, demands, debts, compensatory
damages, liquidated damages, punitive or exemplary damages, other damages,
claims for costs and attorneys’ fees, obligations under any Contract or
liabilities of any nature whatsoever in law and in equity, both past and
present (through the date of this General Release) and whether known or unknown,
suspected, or claimed against any of the Released Parties that the Releasing
Party or any of its successors or assigns have or may have, relating in any way
to or in connection with any matter or thing from the beginning of the world to
the date hereof, [including with respect to any proof of claim of the Releasing
Party against the Released Parties in the Seller Case, including claims number
11194, 11195, 11267 and 11292 (and the Releasing Party agrees that it shall
file on the date hereof with the Seller Bankruptcy Court a withdrawal with
prejudice of any such proof of claim)][Note: to be included only in release by
Buyer of Seller] (collectively, “Claims”),
and the Releasing Party knowingly and voluntarily waives the performance and
terminates any and all obligations, in each case without any liability, owed to
the Releasing Party under any Contract between the Releasing Party and any
Released Party; provided, however, that no discharge, release,
waiver or termination is given hereunder in respect of the Purchase Agreement
or any Transaction Document between the Other Party and the Releasing Party.

2.                                       The
Releasing Party represents that it has made no assignment or transfer of any of
the Claims herein above mentioned or implied [and that it has irrevocably
withdrawn its proof of claim against the Released Parties in the Seller Case]
[Note: to be included only in release by Buyer of Seller].

3.                                       In
signing this General Release, the Releasing Party acknowledges and intends that
this General Release shall be effective as a bar to each and every one of the
Claims herein 

 C-1
 

above mentioned or implied.  The Releasing Party expressly consents that
this General Release shall be given full force and effect according to each and
all of its express terms and provisions, including those relating to unknown
and unsuspected Claims (notwithstanding any state statute that expressly limits
the effectiveness of a general release of unknown, unsuspected or unanticipated
Claims), if any, as well as those relating to any other Claims herein above
mentioned or implied.  The Releasing
Party acknowledges and agrees that this waiver is an essential and material
term of this General Release and that without such waiver, the Other Party would
not have agreed to enter into or consummate the transactions contemplated by
the Purchase Agreement.  The Releasing
Party further agrees that in the event it should assert any Claim seeking
damages against any of the Released Parties, this General Release shall serve
as a complete defense to any such Claim.

4.                                       The
Releasing Party agrees that neither this General Release, nor the furnishing of
the consideration for this General Release, shall be deemed or construed at any
time to be an admission by the Releasing Party or any Released Party of any
improper or unlawful conduct.

5.                                       The
Releasing Party also agrees that if it violates this General Release by
bringing any action or claim against any Released Parties relating to any
matter discharged or released pursuant to Paragraph 1 hereof, the Releasing
Party will indemnify such Released Party for all costs and expenses of
defending against such action or claim incurred by the Released Party,
including all reasonable attorneys’ fees.

6.                                       The
Releasing Party acknowledges and agrees that it may hereafter discover facts
different from or in addition to those now known, or believed to be true,
regarding the subject matter of this General Release and further acknowledges
and agrees that this General Release shall remain in full force and effect,
notwithstanding the existence of any different or additional facts.

7.                                       To
the fullest extent that it may effectively do so under applicable Law, the
Releasing Party hereby waives any provision of Law which renders any provision
of this General Release invalid, illegal or unenforceable in any respect.  The Releasing Party further agrees that any
provision of this General Release which, notwithstanding the preceding
sentence, is rendered or held invalid, illegal or unenforceable in any respect
in any jurisdiction shall be ineffective, but such ineffectiveness shall be
limited as follows:  (a) if such
provision is rendered or held invalid, illegal or unenforceable in such
jurisdiction only as to a particular Person or Persons or under any particular
circumstance or circumstances, such provision shall be ineffective, but only in
such jurisdiction and only with respect to such particular Person or Persons or
under such particular circumstance or circumstances, as the case may be; (b)
without limitation of clause (a), such provision shall in any event be
ineffective only as to such jurisdiction and only to the extent of such
invalidity, illegality or unenforceability, and such invalidity, illegality or
unenforceability in such jurisdiction shall not render invalid, illegal or unenforceable
such provision in any other jurisdiction; and (c) without limitation of clause
(a) or (b), such ineffectiveness shall not render invalid, illegal or
unenforceable this General Release or any of the remaining provisions hereof.

8.                                       This
General Release shall be governed by the laws of the state of Minnesota that
apply to contracts made and performed entirely in such state.

 C-2
 

9.                                       EACH
RELEASING PARTY HEREBY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY OF ANY
DISPUTE ARISING OUT OF OR RELATING TO THIS GENERAL RELEASE AND AGREES THAT ANY
SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.

10.                                 BY
SIGNING THIS GENERAL RELEASE, THE RELEASING PARTY REPRESENTS AND AGREES THAT
IT:

(a)                                  HAS
READ THIS GENERAL RELEASE CAREFULLY;

(b)                                 UNDERSTANDS
ALL OF ITS TERMS AND KNOWS THAT IT IS GIVING UP IMPORTANT RIGHTS;

(c)                                  VOLUNTARILY
CONSENTS TO EVERYTHING IN IT;

(d)                                 HAS
BEEN ADVISED TO CONSULT WITH AN ATTORNEY BEFORE EXECUTING THIS GENERAL RELEASE
AND HAS DONE SO;

(e)                                  HAS
SIGNED THIS GENERAL RELEASE KNOWINGLY AND VOLUNTARILY AND WITH THE ADVICE OF
ANY ATTORNEY RETAINED TO ADVISE THE UNDERSIGNED WITH RESPECT TO IT; AND

(f)                                    AGREES
THAT THE PROVISIONS OF THIS GENERAL RELEASE MAY NOT BE AMENDED, WAIVED, CHANGED
OR MODIFIED EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY THE RELEASING PARTY
AND THE OTHER PARTY.

11.                                 Each
Released Party that is not a party to this General Release is an intended third
party beneficiary hereunder and may enforce its rights hereunder.

[The next page is the signature page]

 C-3
 

The Releasing
Party has caused this General Release to be executed and delivered as of the
date first written above.

	
  

  	
  [Northwest
  Airlines, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  [MAIR Holdings,
  Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Accepted and
  agreed:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   [MAIR Holdings, Inc.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:]

  	
   

  
	
   

  	
   

  
	
  [Northwest
  Airlines, Inc.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:]

  	
   

  

 

 C-4

EXHIBIT D

FORM OF COMPANY PLAN

 D-1

EXHIBIT E

FORM OF SELLER APPROVAL ORDER

UNITED
STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF NEW YORK

	
  

  	
  x

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  In re: 

  	
  x

  	
   

  	
  Chapter 11

  
	
   

  	
   

  	
   

  	
   

  
	
  NORTHWEST
  AIRLINES CORPORATION, et  al., 

  	
   

  	
   

  	
  Case No. 05-17930 (ALG)

  
	
   

  	
   

  	
   

  	
   

  
	
  Debtors.

  	
   

  	
   

  	
  Jointly Administered

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  

 

ORDER PURSUANT TO
SECTION 363 OF THE BANKRUPTCY CODE AND BANKRUPTCY RULE 9019 APPROVING
SETTLEMENT AND COMPROMISE BETWEEN NORTHWEST AIRLINES, INC. AND MAIR HOLDINGS,
INC. AND AUTHORIZING NORTHWEST AIRLINES, INC. TO ENTER INTO STOCK PURCHASE
AGREEMENT

Upon consideration
of the motion (the “Motion”)(1) of Northwest Airlines, Inc., as debtor and
debtor in possession (“Northwest”), seeking entry of an order pursuant to
section 363 of title 11, United States Code, (the “Bankruptcy Code”) and Rule
9019 of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”)
approving a settlement and compromise between Northwest and MAIR Holdings, Inc.
(“MAIR”) and authorizing Northwest to enter into and perform the Stock Purchase
Agreement (the “Agreement”); and due notice of the Motion having been provided
as set forth in the affidavit of service filed by Northwest, and no other or
further notice of the Motion need be provided; and the Court having determined
that the relief sought in the Motion is in the best interests of Northwest, its
estate and all parties in interest; and 

(1) Capitalized
terms not defined herein shall have the meaning ascribed to them in the Motion.

 E-1
 

upon the Motion; and all
of the proceedings had before the Court; and after due deliberation and
sufficient cause appearing therefor, it is hereby

ORDERED that the
Motion is granted.  To the extent any
objections to the Motion have not been withdrawn or resolved, they are hereby
overruled; and it is further

ORDERED that the
Agreement is approved, and Northwest is authorized to enter into and perform
such Agreement, and to execute and deliver (without the need for further Court
order) such other documents, agreements and instruments as shall be necessary
and appropriate to implement the Agreement, consistent with the terms thereof;
and it is further

ORDERED that the
Court shall retain jurisdiction with respect to any matters, claims, rights or
disputes arising from or related to the implementation of this Order; and it is
further

ORDERED that
notwithstanding the possible applicability of Bankruptcy Rules 6004, 7062,
9014, any other provision of the Bankruptcy Rules, Bankruptcy Code or
otherwise, this Order shall take effect immediately upon signature by this
Court; and it is further

ORDERED that the
requirement under Rule 9013-1(b) of the Local Bankruptcy Rules for the Southern
District of New York for the filing of a memorandum of law is waived.

	
  Dated:

  	
  New York, New York

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
            ,
  2007

  	
   

  
	
   

  	
   

  
	
   

  	
  UNITED STATES
  BANKRUPTCY JUDGE

  

 

 E-2

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