Document:

Exhibit

Loan Agreement
between
City of Forsyth, Rosebud County, Montana
and
NorthWestern Corporation
Dated as of August 1, 2016

Relating to
$144,660,000
Pollution Control Revenue Refunding Bonds
(NorthWestern Corporation Colstrip Project)
Series 2016

The amounts payable to the City of Forsyth, Rosebud County, Montana (the “Issuer”), and certain other rights of the Issuer under this Loan Agreement and in the first mortgage bonds of NorthWestern Corporation (the “Company”) that shall be delivered by the Company in accordance with Section 5.01 hereof (except for amounts payable to, and certain rights and privileges of, the Issuer under Sections 5.03, 5.04, 5.05, 6.03, 6.04, 8.05 and 8.07 hereof and any rights of the Issuer to receive notices, certificates, requests, requisitions, directions and other communications hereunder) have been pledged and assigned to U.S. Bank National Association, as Trustee under the Indenture of Trust, dated as of August 1, 2016, between the Issuer and said Trustee.  For the purpose of perfecting the security interest of such Trustee in such amounts payable and such rights assigned to such Trustee, under the Montana Uniform Commercial Code-Secured Transactions or otherwise, the counterpart of this Loan Agreement and the first mortgage bonds delivered, pledged and assigned to such Trustee shall be deemed the original thereof.

Table of Contents
		
	Article I
	Definitions    2

		
	Section 1.01.
	Definitions    2

		
	Article II
	Representations and Warranties    2

		
	Section 2.01.
	Representations and Warranties of the Issuer    2

		
	Section 2.02.
	Representations and Warranties of the Company    3

		
	Article III
	The Facilities    4

		
	Section 3.01.
	Maintenance of Facilities    4

		
	Section 3.02.
	Facilities Insurance    4

		
	Section 3.03.
	Condemnation    5

		
	Section 3.04.
	Termination of Operation    5

		
	Article IV
	Issuance of the Bonds; the Loan; Disposition of Proceeds of the Bonds; Loan Payments    5

		
	Section 4.01.
	Issuance of the Bonds    5

		
	Section 4.02.
	Issuance of Other Obligations    5

		
	Section 4.03.
	The Loan; Disposition of Bond Proceeds; Refunding Prior Bonds    5

		
	Section 4.04.
	Loan Repayments    6

		
	Section 4.05.
	Compliance with Prior Agreements    6

		
	Article V
	The First Mortgage Bonds; Other Obligations    6

		
	Section 5.01.
	Issuance, Delivery and Surrender of First Mortgage Bonds    6

		
	Section 5.02.
	Payments Assigned; Obligation Absolute    7

		
	Section 5.03.
	Payment of Expenses    7

		
	Section 5.04.
	Indemnification    7

		
	Section 5.05.
	Payment of Taxes; Discharge of Liens    8

		
	Article VI
	Special Covenants    9

		
	Section 6.01.
	Maintenance of Existence    9

		
	Section 6.02.
	Permits or Licenses    9

		
	Section 6.03.
	Issuer’s Access to Facilities    9

		
	Section 6.04.
	Arbitrage and Tax Exemption Certifications and Covenants    9

		
	Section 6.05.
	Use of Facilities    10

		
	Section 6.06.
	Financing Statements    10

		
	Section 6.07.
	Company Changes    10

		
	Section 6.08.
	Indenture Covenants    10

		
	Article VII
	Assignment    10

		
	Section 7.01.
	Conditions    10

		
	Section 7.02.
	Instruments Furnished to Trustee    11

		
	Section 7.03.
	Limitation    11

		
	Article VIII
	Events of Default and Remedies    11

		
	Section 8.01.
	Events of Default    11

		
	Section 8.02.
	Force Majeure    12

		
	Section 8.03.
	Remedies    12

		
	Section 8.04.
	No Remedy Exclusive    12

		
	Section 8.05.
	Reimbursement of Attorneys’ Fees    13

		
	Section 8.06.
	Waiver of Breach    13

		
	Section 8.07.
	No Liability of Issuer    13

		
	Article IX
	Redemption of Bonds    13

		
	Section 9.01.
	Redemption of Bonds    13

		
	Section 9.02.
	Compliance with the Indenture    14

		
	Article X
	Miscellaneous    14

		
	Section 10.01.
	Term of Loan Agreement    14

		
	Section 10.02.
	Notices    14

		
	Section 10.03.
	Parties in Interest    14

		
	Section 10.04.
	Amendments    15

		
	Section 10.05.
	Counterparts    15

		
	Section 10.06.
	Severability    15

		
	Section 10.07.
	Governing Law    15

Exhibit A  -  Colstrip Units Pollution Control Facilities
    

Loan Agreement
This Loan Agreement, dated as of August 1, 2016, between the City of Forsyth, Rosebud County, Montana, a municipal corporation and political subdivision organized and existing under the Constitution and laws of the State of Montana (the “Issuer”), and NorthWestern Corporation, a corporation organized and existing under the laws of the State of Delaware (the “Company”),
Witnesseth
Whereas, the Issuer is authorized by the provisions of the Act (as hereinafter defined) to issue one or more series of its revenue bonds and to loan the proceeds to others for the purpose of defraying the cost of acquiring or improving projects consisting of land, any building or other improvement, and any other real and personal properties deemed necessary in connection therewith, whether or not now in existence, whether located within or without the boundaries of the Issuer, which shall be suitable for, among other things, Electric Energy Generation Facilities (as defined in the Act), including, but not limited to, air and water pollution control facilities and sewage and solid waste disposal facilities;
Whereas, the Issuer is authorized by the provisions of the Act to issue one or more series of its revenue refunding bonds to refund revenue bonds issued under the provisions of the Act;
Whereas, the Act provides that payment of principal of and interest on revenue bonds issued thereunder shall be secured by a pledge of the revenues out of which such revenue bonds shall be payable and may be secured by a pledge of an agreement relating to a project and such other security device as may be deemed most advantageous by the Issuer;
Whereas, the Issuer has heretofore issued and sold the Prior Bonds (as hereinafter defined), all of which will be outstanding on the date of the authentication and delivery of the Bonds (as hereinafter defined), for the purpose of refinancing the cost to The Montana Power Company (the predecessor in interest of the Company) of acquiring and improving the Facilities (as hereinafter defined) (additional pollution control facilities were refinanced with the Prior Bonds, but are not being refinanced with proceeds of the Bonds and such portion of the Prior Bonds is instead being paid off by the Company);
Whereas, the Issuer, by resolution adopted pursuant to and in accordance with the Act, has authorized and undertaken to issue the Bonds for the purpose of refunding the Prior Bonds;
Whereas, the Issuer has agreed under this Loan Agreement to lend to the Company the proceeds (other than accrued interest, if any) from the sale of the Bonds for the purpose of refunding the Prior Bonds;

Whereas, the Company has agreed under this Loan Agreement to make payments sufficient to pay when due (whether at stated maturity, by acceleration or otherwise) the principal of, and premium, if any, and interest, on the Bonds; and
Whereas, the Company has issued and delivered the Company’s First Mortgage Bonds (as hereinafter defined) to the Trustee (as hereinafter defined) to secure the payment of certain of its obligations hereunder;
Now, Therefore, the parties hereto, intending to be legally bound hereby and in consideration of the premises, do hereby agree as follows:
Article I
Definitions
Section 1.01.    Definitions.  The terms defined in Article I of the Indenture of Trust between the City of Forsyth, Rosebud County, Montana, and U.S. Bank National Association, a national banking association, as Trustee, dated as of August 1, 2016, shall, for all purposes of this Loan Agreement, have the meanings specified therein, unless the context clearly requires otherwise.
Article II
Representations and Warranties
Section 2.01.    Representations and Warranties of the Issuer.  The Issuer represents, warrants and agrees that:
(a)    The Issuer is a municipal corporation and political subdivision duly organized and existing under the Constitution and laws of the State of Montana.
(b)    The Issuer has the power to enter into this Loan Agreement and the Indenture and to perform and observe the agreements and covenants on its part contained herein and therein, including without limitation the power to issue and sell the Bonds as contemplated herein and in the Indenture, and by proper corporate action has duly authorized the execution and delivery hereof and thereof.
(c)    The execution and delivery of this Loan Agreement and the Indenture by the Issuer do not, and consummation of the transactions contemplated hereby and thereby and fulfillment of the terms hereof and thereof by the Issuer will not, result in a breach of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust or other agreement or instrument to which the Issuer is now a party or by which it is now bound, or any order, rule or regulation applicable to the Issuer of any court or of any regulatory body or administrative agency or other governmental body having 

jurisdiction over the Issuer or over any of its properties, or any statute of any jurisdiction applicable to the Issuer.
(d)    The Issuer has not assigned and will not assign its interest in this Loan Agreement other than to secure the Bonds.
(e)    The public hearing and approval requirements of Section 90-5-104 of the Act relating to the Project have been satisfied.
Section 2.02.    Representations and Warranties of the Company.  The Company represents, warrants and agrees that:
(a)    The Company is a corporation duly organized and existing in good standing under the laws of the State of Delaware.
(b)    The Company has the power to enter into this Loan Agreement and to perform and observe the agreements and covenants on its part contained herein, including without limitation the power to issue and deliver the First Mortgage Bonds as contemplated herein, in the Mortgage and in the Bond Delivery Agreement, and by proper corporate action has duly authorized the execution and delivery hereof.
(c)    The execution and delivery of this Loan Agreement by the Company do not, and consummation of the transactions contemplated hereby and fulfillment of the terms hereof by the Company, including, without limitation, the issuance and delivery of the First Mortgage Bonds and the execution and delivery of the Bond Delivery Agreement, will not, result in a material breach of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust or other agreement or instrument to which the Company is a party or by which it is now bound, or the Amended and Restated Certificate of Incorporation, as amended, or the Bylaws of the Company, or any order, rule or regulation applicable to the Company of any court or of any regulatory body or administrative agency or other governmental body having jurisdiction over the Company or over any of its properties, or any statute of any jurisdiction applicable to the Company.
(d)    The Montana Public Service Commission and the Federal Energy Regulatory Commission have approved all of the transactions contemplated by this Loan Agreement which require their approval, and no other consent, approval, authorization or other order of any governmental body is required for the Company’s participation therein, except such as may have been obtained or may be required under the securities laws of any jurisdiction.
(e)    The information relating to the Facilities (other than estimates) furnished by the Company or The Montana Power Company, as its predecessor in interest, in writing to Chapman and Cutler LLP, as Bond Counsel, in connection with the issuance by the Issuer of the Original Bonds, the Prior Bonds, the Series 1993 Bonds, the Series 2006 Bonds and the Bonds, was, at the time furnished, and remains, to the Company’s knowledge, true and correct.

(f)    The Facilities consist of those facilities described in Exhibit A hereto and are (i) designed to meet applicable federal, state and local requirements for the control of pollution or the disposal of solid waste, (ii) to be used solely for purposes contemplated by the Act, and (iii) located within Rosebud County, Montana.
(g)    The Montana Department of Health and Environmental Sciences has certified that the pollution control facilities constituting part of the Facilities, as designed, are in furtherance of the purpose of abating or controlling atmospheric pollutants or contaminants, and water pollution, as the case may be.
(h)    The Company has received an executed counterpart of the Indenture and consents to and approves each and every provision thereof.
(i)    To the Company’s knowledge, (i) the Indenture of Trust, dated as of April 1, 2006 (the “Prior Indenture”), between the Issuer and U.S. Bank National Association, as trustee (the “Prior Trustee”) and (ii) the Loan Agreement, dated as of April 1, 2006, between the Issuer and the Company (the “Prior Loan Agreement”), pursuant to each of which the Prior Bonds were issued and sold and are outstanding, are in full force and effect, without amendment (except as described above), and no event has occurred and is continuing under the provisions of any of such instruments which event now constitutes, or with the lapse of time or the giving of notice, or both, would constitute, an event of default thereunder.
Article III
The Facilities
Section 3.01.    Maintenance of Facilities.  The Company shall at all times exercise all of its rights, powers, elections and options under the Inter‐Company Agreements to cause the Facilities, and every element and unit thereof, to be maintained in good repair, working order and condition; provided, however, that the Company may cause the discontinuance of the operation or a reduction in the capacity of the Facilities, or any element or unit thereof, if, in the judgment of the Company, it is no longer economic to operate the same or to operate the same at its former capacity, or if the Company intends to sell and dispose of its interest in the same and within a reasonable time shall endeavor to effectuate such sale or disposition.
The Company may, at its own expense, exercise any of its rights, powers, elections and options under the Inter‐Company Agreements to cause the Facilities to be remodeled or cause such substitutions, modifications and improvements to be made to the Facilities from time to time as it, in its discretion, may deem to be desirable for its uses and purposes, which remodeling, substitutions, modifications and improvements shall be included under the terms of this Loan Agreement as part of the Facilities; provided, however, that the Company shall not exercise any such right, power, election or option if the proposed remodeling, substitution, modification or improvement would adversely affect the exclusion of interest on the Bonds from the gross income of Owners thereof for federal income tax purposes.

Section 3.02.    Facilities Insurance.  The Company shall exercise all its rights and powers and will perform all of its duties under the Inter‐Company Agreements to cause insurance to be taken out and continuously maintained in effect with respect to the Facilities against such risks and to such extent as is required by the Inter‐Company Agreements.  All proceeds of such insurance shall be for the account of the Company to the extent of the interest of the Company in the Facilities.
Section 3.03.    Condemnation.  The Company shall be entitled to the proceeds of any condemnation award or portion thereof made for damage to or taking of the Facilities or other property of the Company, to the extent of the interest of the Company in the Facilities or such other property, as the case may be.
Section 3.04.    Termination of Operation.  Anything in this Loan Agreement to the contrary notwithstanding, the Company shall have the right at any time to cause the operation of the Facilities to be terminated if the Company shall have determined that the continued operation of the Project or the Facilities is uneconomical for any reason.
Article IV
Issuance of the Bonds; the Loan; Disposition
of Proceeds of the Bonds; Loan Payments
Section 4.01.    Issuance of the Bonds.  The Issuer shall issue and sell the Bonds under and in accordance with the Indenture and the bond purchase agreement between the Issuer and the initial purchasers of the Bonds.  The Company hereby approves the issuance and sale of the Bonds as aforesaid.
Section 4.02.    Issuance of Other Obligations.  The Issuer and the Company expressly reserve the right to enter into, to the extent permitted by law, an agreement or agreements other than this Loan Agreement with respect to the issuance by the Issuer, under an indenture or indentures other than the Indenture, of obligations to provide funds to defray any additional costs of construction of the Facilities or to refund any or all of the Bonds.
Section 4.03.    The Loan; Disposition of Bond Proceeds; Refunding Prior BondsSection 4.03.    The Loan; Disposition of Bond Proceeds; Refunding Prior Bonds.  (a) The Issuer shall lend to the Company the proceeds of the issuance and sale of the Bonds, other than accrued interest, if any, paid by the initial purchasers thereof, for the purposes specified in this Loan Agreement, such proceeds to be applied as provided hereinafter and in the Indenture.
(b)    The Issuer and the Company shall cause the proceeds of the Bonds, other than accrued interest, if any, paid by the initial purchasers thereof, to be deposited with the Prior Trustee under the Prior Indenture pursuant to which the Prior Bonds have been issued in order to effect the redemption of the Prior Bonds.  Because such Bond proceeds will not be sufficient to effect the redemption of the Prior Bonds, the Company, simultaneously with the transfer of such 

proceeds referred to in the preceding sentence and at its own expense and without any right of reimbursement in respect thereof, shall pay to such trustee for deposit into the bond fund under such Prior Indenture, all amounts necessary to effect the redemption of the Prior Bonds within 90 days of the date of issuance of the Bonds.
The Issuer shall establish the Bond Fund with the Trustee in accordance with Section 4.01 of the Indenture.  The proceeds of the issuance and sale of the Bonds constituting accrued interest, if any, paid by the initial purchasers thereof shall be deposited into the Bond Fund.
Section 4.04.    Loan Repayments.  (a) As and for repayment of the loan made to the Company by the Issuer pursuant to Section 4.03 hereof, the Company shall pay to the Trustee for the account of the Issuer an amount equal to the aggregate principal amount of, and the premium, if any, on the Bonds from time to time Outstanding and, as interest on its obligation to pay such amount, an amount equal to interest on the Bonds, such amounts to be paid in installments of immediately available funds due on the dates, in the amounts and in the manner provided in the Indenture for the payment of the principal of, and premium, if any, and interest on, the Bonds whether at maturity, upon redemption or otherwise; provided, however, that the obligation of the Company to make any such payment hereunder shall be reduced by the amount on deposit in the Bond Fund pursuant to Section 2.10 of the Indenture.
(b)    In the event the Company shall fail to make any payment required by Section 4.04(a) with respect to the principal of, or premium, if any, or interest on, any Bond, the payment so in default shall continue as an obligation of the Company until the amount in default shall have been fully paid and the Company will pay interest on any overdue amount with respect to principal of such Bond and, to the extent permitted by law, on any overdue amount with respect to premium, if any, and interest on such Bond, at the interest rate borne by such Bond until paid.
Section 4.05.    Compliance with Prior Agreements.  The Company hereby confirms its obligations under the Prior Agreement to furnish any moneys required to be deposited with the Prior Trustee under the Prior Indenture in order to redeem the Prior Bonds on the date such bonds have been called for redemption (the “Redemption Date”), to the extent that the proceeds of the Bonds on deposit in the bond fund established for the Prior Bonds, together with any investment earnings thereon, is less than the amount required to pay the principal of and applicable redemption premium and interest on the Prior Bonds upon their redemption on the Redemption Date, in accordance with the terms and conditions of the Prior Indenture.
Article V
The First Mortgage
Bonds; Other Obligations
Section 5.01.    Issuance, Delivery and Surrender of First Mortgage Bonds.  The obligation of the Company pursuant to Section 4.04 hereof to repay the loan made to it by the Issuer pursuant to Section 4.03 hereof shall be secured by the First Mortgage Bonds.  Concurrently with 

the issuance and delivery by the Issuer of the Bonds, the Company shall issue and deliver or caused to be delivered to the Trustee a series of First Mortgage Bonds as provided in the Bond Delivery Agreement (i) maturing on the same date and in the same principal amount as the Bonds, (ii) bearing interest at the same rate, payable at the same times, as the Bonds, (iii) containing redemption provisions correlative to the provisions of Section 3.01 of the Indenture, and (iv) requiring payments of the principal thereof and premium, if any, and interest thereon to be made when due to the Trustee for the account of the Issuer.  The First Mortgage Bonds shall be delivered to and registered in the name of the Trustee for the account of the Issuer and the benefit of the Owners from time to time of the Bonds and shall be held, voted, transferred and surrendered by the Trustee subject to and in accordance with the respective provisions of this Loan Agreement, the Indenture and the Bond Delivery Agreement.
Section 5.02.    Payments Assigned; Obligation Absolute.  It is understood and agreed that all payments to be made by the Company hereunder (except for payments made to the Issuer pursuant to Sections 5.03, 5.04, 5.05, 6.04 and 8.05 hereof) and on the First Mortgage Bonds are, by the Indenture, pledged and assigned by the Issuer to the Trustee, and that all rights and interest of the Issuer hereunder (except for the Issuer’s rights under Sections 5.03, 5.04, 5.05, 6.03, 6.04, 8.05 and 8.07 hereof and any rights of the Issuer to receive notices, certificates, requests, requisitions, directions and other communications hereunder), including rights under the Bond Delivery Agreement with respect to the First Mortgage Bonds, are, by the Indenture, pledged and assigned to the Trustee.  The Company assents to such pledge and assignment.  The obligation of the Company to make the payments hereunder and on the First Mortgage Bonds, shall be absolute, irrevocable and unconditional and shall not be subject to cancellation, termination or abatement, or to any defense other than payment or to any right of set‐off, counterclaim or recoupment arising out of any breach under this Loan Agreement, the Indenture or otherwise by the Issuer or the Trustee or any other party, or out of any obligation or liability at any time owing to the Company by the Issuer, the Trustee or any other party, and, further, the payments hereunder and on the First Mortgage Bonds shall continue to be payable at the times and in the amounts herein specified, whether or not the Facilities or the Project, or any portion thereof, shall have been destroyed by fire or other casualty, or title thereto, or the use thereof, shall have been taken by the exercise of the power of eminent domain, and, further, there shall be no abatement of or diminution in any such payments by reason thereof, whether or not the Facilities or the Project shall be used or useful, whether or not any applicable laws, regulations or standards shall prevent or prohibit the use of the Facilities or the Project, or for any other reason.
Section 5.03.    Payment of Expenses.  The Company shall pay (a) all of the reasonable expenses incurred by the Issuer with respect to this Loan Agreement, the Indenture and any transaction or event contemplated by this Loan Agreement or the Indenture, including without limitation the out‐of‐pocket expenses of the Issuer and counsel for the Issuer incurred in connection with the authorization, issuance and sale of the Bonds and (b) the compensation and reimbursement of expenses and advances payable to the Trustee, the Paying Agent and the Registrar under any provision of this Loan Agreement or the Indenture.  Such payments shall be made directly to each such entity.
Section 5.04.    Indemnification.  The Company agrees that the Issuer and its elected or appointed officials, officers, agents, legal counsel, servants and employees, and the Trustee and 

its directors, officers, employees and agents (collectively, the “Indemnified Parties”), shall not be liable for, and that the Company will at all times indemnify and hold harmless, the Indemnified Parties from and against any loss or liability, and pay all expenses of the Indemnified Parties relating to any lawsuit, proceeding or claim arising out of, or in any way relating to, the execution, delivery or performance of this Loan Agreement or the Bond Delivery Agreement or the Indenture or any action taken or omitted to be taken hereunder or thereunder, the acceptance or administration by the Trustee of its trusts under the Indenture, the issuance or sale of the Bonds, or any cause whatsoever relating to the Facilities, except, in any case, as a result of the negligence or willful misconduct of the Indemnified Party seeking indemnification.  In case any action shall be brought against any Indemnified Party in respect of which indemnity may be sought hereunder against the Company, such Indemnified Party shall promptly notify the Company in writing and the Company shall assume the defense thereof, including the employment of counsel reasonably acceptable to the Indemnified Party and the payment of all expenses.  Failure by such Indemnified Party to notify the Company shall not relieve the Company from any liability which it may have to such Indemnified Party otherwise than under this Section 5.04.  Such Indemnified Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be paid by such Indemnified Party unless the employment of such counsel has been authorized by the Company.  The Company shall not be liable for any settlement of any such action without its consent, but if any such action is settled with the consent of the Company or if there be final judgment for the plaintiff in any such action, the Company shall indemnify and hold harmless such Indemnified Party from and against any loss or liability by reason of such settlement or judgment.
Section 5.05.    Payment of Taxes; Discharge of Liens.  The Company shall:  (a) pay, or make provision for payment of, all lawful taxes and assessments, including income, profits, property or excise taxes, if any, or other municipal or governmental charges, levied or assessed by any federal, state or municipal government or political body upon its interest in the Facilities or any part thereof or upon any amounts payable hereunder or on the First Mortgage Bonds when the same shall become due; and (b) pay or cause to be satisfied and discharged or make adequate provision to satisfy and discharge, within sixty (60) days after the same shall accrue, any lien or charge upon any amounts payable hereunder or on the First Mortgage Bonds, and all lawful claims or demands for labor, materials, supplies or other charges which, if unpaid, might be or become a lien thereon; provided, that, the Company may, at its expense, and in its own name and behalf or in the name and behalf of the Issuer, in good faith contest any such taxes, assessments and other charges, and in such event may permit the taxes, assessments and other charges so contested to remain unpaid during the period of such contest and any appeal therefrom, provided during such period enforcement of such contested item is effectively stayed unless by nonpayment of any such items the lien of the Indenture as to the amounts payable hereunder or on the First Mortgage Bonds will be materially endangered, in which event the Company shall promptly pay and cause to be satisfied and discharged all such unpaid items.  The Issuer shall cooperate fully with the Company in any such contest.  In the event that the Company shall fail to pay any of the foregoing items required by this Section to be paid by the Company, either the Issuer or the Trustee, in its discretion and without notice to the Owners of the Bonds, may make advances to effect payment of such items on behalf of the Company, but neither the Issuer nor the Trustee shall have any obligation to do so.  Any and all such advances may bear interest at a 

rate per annum equal to the prime lending rate of the Trustee.  No such advance shall operate to relieve the Company from any default hereunder.
Article VI
Special Covenants
Section 6.01.    Maintenance of Existence.  Except as permitted in this Section 6.01, the Company shall maintain its corporate existence, will not dissolve or otherwise dispose of all or substantially all of its assets and will not consolidate with or merge with or into another corporation.  The Company may consolidate with or merge with or into another corporation incorporated under the laws of the United States of America, any state thereof or the District of Columbia, or sell, transfer or otherwise dispose of all or substantially all of its assets to any other entity if (a) no Event of Default under this Loan Agreement shall have occurred and be continuing, (b) the surviving, resulting or transferee corporation (if other than the Company), as the case may be, prior to or simultaneously with such merger, consolidation, sale, transfer or disposition, assumes, by delivery to the Trustee of an instrument in writing satisfactory in form to the Trustee, all the obligations of the Company hereunder and the obligations of the Company on the First Mortgage Bonds, and (c) in the case of a merger or consolidation in which the Company is not the surviving or resulting entity or in the case of such a sale, transfer or disposition, the Company shall deliver to the Trustee an opinion of counsel to the Company that such consolidation, merger, sale, transfer or disposition complies with the provisions of this Section 6.01.
If a consolidation, merger, sale or other transfer is made as permitted by this Section 6.01, the provisions of this Section 6.01 shall continue in full force and effect and no further consolidation, merger, sale or other transfer shall be made except in compliance with the provisions of this Section 6.01.
Section 6.02.    Permits or Licenses.  In the event that it may be necessary for the proper performance of this Loan Agreement on the part of the Company or the Issuer that any application or applications for any permit or license to do or to perform certain things be made to any governmental or other agency by the Company or the Issuer, the Company and the Issuer each, upon the request of the other, shall execute such application or applications.
Section 6.03.    Issuer’s Access to Facilities.  The Issuer shall have the right, subject to such limitations, restrictions and requirements as the Company may reasonably prescribe and upon appropriate prior notice to the Company, to have reasonable access to the Facilities during normal business hours for the purpose of making examinations and inspections of the same.
Section 6.04.    Arbitrage and Tax Exemption Certifications and Covenants.  The Company covenants for the benefit of the Issuer and the Owners from time to time of the Bonds that, so long as any of the Bonds remain Outstanding, it will not take or omit to take any action, or permit to be taken any action, and that moneys on deposit in any fund or account in connection with the Bonds, whether or not such moneys were derived from the proceeds of the sale of the Bonds or 

from any other sources, will not be used or invested in a manner, which will cause the Bonds to be “arbitrage bonds” within the meaning of Section 148 of the Code or which will otherwise cause interest on the Bonds to be includable in the gross income of the Owners thereof for purposes of federal income taxation.  To such end, the Company has entered into the Tax Certificate.  The Company covenants and agrees that it will comply with the Tax Certificate, as the same may be amended from time to time, in accordance with its terms.  Pursuant to such covenant, the Company obligates itself to comply with the requirements of Section 148 of the Code, so long as any of the Bonds are Outstanding.  The Company shall not be deemed to have violated this covenant by virtue of the fact that interest on any of the Bonds becomes includable in gross income of a Person who is a “substantial user” of the Facilities or a “related person” within the meaning of Section 103(b) of the 1954 Code.
Section 6.05.    Use of Facilities.  The Company shall exercise all of its rights, powers, elections and options under the Inter‐Company Agreements to cause the Facilities to be used for purposes contemplated by the Act.
Nothing contained in this Loan Agreement shall be construed to require or authorize the Issuer to operate the Facilities or conduct any business enterprise therewith.
Section 6.06.    Financing Statements.  (a) The Company shall, to the extent required by law, file, record, refile and re‐record, or cause to be filed, recorded, refiled and re‐recorded, all documents or notices, including financing statements and continuation statements, required by law in order to perfect, or maintain the perfection of, the lien of the Indenture.  The Issuer shall cooperate fully with the Company in taking any such action.  Concurrently with the execution and delivery of the Bonds, the Company shall cause to be delivered to the Trustee an opinion of counsel (a) stating that in the opinion of such counsel, either (i) such action has been taken, as set forth therein, with respect to the recording and filing of such documents, notices and financing statements as is necessary to perfect the lien of the Indenture under the Uniform Commercial Code of the State of Montana, or (ii) no such action is necessary to so perfect such lien, and (b) stating the requirements for the filing of continuation statements or other documentation or notices in order to maintain the perfection of the lien of the Indenture.
(b)    The Company shall be responsible for and shall pay any reasonable expenses of the Trustee, including legal fees, incurred pursuant to Section 6.10(b) of the Indenture.
Section 6.07.    Company Changes.  The Company will not voluntarily or involuntarily change its place of business, the state of its incorporation or formation or legal name without at least 30 days prior written notice to the Trustee, except in the event of a change in the principal place of business necessitated by fire, flood or other calamity, in which case such notice shall be provided as soon as practicable.
Section 6.08.    Indenture Covenants.  The Company agrees to observe and perform all requirements imposed upon it pursuant to the Indenture.

Article VII
Assignment
Section 7.01.    Conditions.  The Company’s interest in this Loan Agreement may be assigned as a whole or in part by the Company to another entity, subject, however, to the condition that no assignment shall cause the interest payable on the Bonds (other than Bonds held by a “substantial user” or “related person” within the meaning of Section 103(b)(13) of the 1954 Code) to be subject to federal income taxation or (other than as described in Section 6.01 hereof) relieve the Company from primary liability for its obligations on the First Mortgage Bonds or to make payments to the Trustee under Section 4.04 hereof or for any other of its obligations hereunder; and subject further to the condition that the Company shall have delivered to the Trustee (a) an opinion of counsel to the Company that such assignment complies with the provisions of this Section 7.01, and (b) an opinion of Bond Counsel to the effect that the proposed assignment will not impair the validity under the Act of the Bonds or the exemption from federal income taxation of the interest thereon.
Section 7.02.    Instruments Furnished to Trustee.  The Company shall, within fifteen (15) days after the delivery thereof, furnish to the Issuer and the Trustee a true and complete copy of the agreements or other documents effectuating any such assignment.
Section 7.03.    Limitation.  This Loan Agreement shall not be assigned nor shall the Facilities be leased or sold, in whole or in part, except as provided in this Article VII or in Sections 3.01 or 6.01.
Article VIII
Events of Default and Remedies
Section 8.01.    Events of Default.  Each of the following events shall constitute and is referred to in this Loan Agreement as an “Event of Default”:
(a)    a failure by the Company to pay when due any amounts required to be paid under Section 4.04(a) hereof or otherwise on the First Mortgage Bonds, which failure results in an Event of Default under Sections 8.01(a) or 8.01(b) of the Indenture;
(b)    a failure by the Company to pay when due any amount required to be paid under this Loan Agreement or to observe and perform any covenant, condition or agreement on its part to be observed or performed (other than a failure referred to in subsection (a) above), which failure shall continue for a period of ninety (90) days after written notice, specifying such failure and requesting that it be remedied, shall have been given to the Company by the Issuer or the Trustee, unless the Issuer and the Trustee shall agree in writing to an extension of such period prior to its expiration; provided, however, that the Issuer and the Trustee will be deemed to have agreed to an extension of such 

period if corrective action is initiated by the Company within such period and is being diligently pursued;
(c)    an occurrence of a “Default” as such term is defined in Section 65 of the Mortgage; or
(d)    an “Event of Default” under the Indenture.
Section 8.02.    Force Majeure.  The provisions of Section 8.01(b) hereof are subject to the following limitations:  if by reason of acts of God; strikes, lockouts or other industrial disturbances; acts of public enemies; orders of any kind of the government of the United States or of the State of Montana or any department, agency, political subdivision, court or official of any of them, or any civil or military authority; insurrections; riots or other untoward conduct; epidemics; landslides; lightning; earthquakes; volcanoes; fires; hurricanes; tornadoes; storms; floods; washouts; droughts; arrests; restraint of government and people; civil disturbances; explosions; breakage or accident to machinery; partial or entire failure of utilities; or any cause or event not reasonably within the control of the Company, the Company is unable in whole or in part to carry out any one or more of its agreements or obligations contained herein, other than its obligations under Sections 4.04, 5.01, 5.03, 5.04, 5.05 and 6.01 hereof and on the First Mortgage Bonds, the Company shall not be deemed in default by reason of not carrying out said agreement or agreements or performing said obligation or obligations during the continuance of such inability.  The Company shall make reasonable efforts to remedy with all reasonable dispatch the cause or causes preventing it from carrying out its agreements and obligations; provided, that the settlement of strikes, lockouts and other industrial disturbances shall be entirely within the discretion of the Company, and the Company shall not be required to make settlement of strikes, lockouts and other industrial disturbances by acceding to the demands of the opposing party or parties when such course is in the judgment of the Company unfavorable to the Company.
Section 8.03.    Remedies.  (a) Upon the occurrence and continuance of any Event of Default described in clause (c) of Section 8.01 hereof, the Trustee, as the holder of the First Mortgage Bonds, shall, subject to the provisions of the Indenture, have the rights provided in the Mortgage.
(b)    Upon the occurrence and continuance of any Event of Default, the Trustee, as assignee of the Issuer may take, or cause to be taken, any action at law or in equity as may appear necessary or desirable to collect any payments then due and thereafter to become due, or to enforce performance and observance of any obligation, agreement or covenant of the Company hereunder and under the Bond Delivery Agreement and the First Mortgage Bonds.
(c)    Any waiver of any “Event of Default” under the Indenture and a rescission and annulment of its consequences shall constitute a waiver of any corresponding Event of Default under this Loan Agreement and a rescission and annulment of the consequences thereof.
(d)    Any amounts collected from the Company pursuant to this Section 8.03 shall be applied in accordance with the Indenture.  No action taken pursuant to this Section 8.03 shall relieve the Company from the Company’s obligations pursuant to Section 4.04 hereof.

Section 8.04.    No Remedy Exclusive.  No remedy conferred upon or reserved to the Issuer hereby is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute.  No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right or power may be exercised from time to time and as often as may be deemed expedient.  In order to entitle the Issuer to exercise any remedy reserved to it in this Article VIII, it shall not be necessary to give any notice, other than such notice as may be, herein expressly required.  Such rights and remedies as are given the Issuer hereunder shall also extend to the Trustee.  The Trustee and the Owners, subject to the provisions of the Indenture, shall be entitled to the benefit of all covenants and agreements herein contained.
Section 8.05.    Reimbursement of Attorneys’ Fees.  If the Company shall default under any of the provisions hereof and the Issuer or the Trustee shall employ attorneys or incur other reasonable and proper expenses for the collection of payments due hereunder or on the First Mortgage Bonds or for the enforcement of performance or observance of any obligation or agreement on the part of the Company contained herein, the Company will on demand therefor reimburse the Issuer or the Trustee, as the case may be, for the reasonable fees of such attorneys and such other reasonable expenses so incurred.
Section 8.06.    Waiver of Breach.  In the event any obligation created hereby shall be breached by either of the parties hereto and such breach shall thereafter be waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder.  In view of the assignment of certain of the Issuer’s rights and interests hereunder to the Trustee, the Issuer shall have no power to waive any default hereunder by the Company in respect of such rights and interests without the consent of the Trustee and the Trustee may exercise any of the rights of the Issuer hereunder.
Section 8.07.    No Liability of Issuer.  The Bonds are issued under and pursuant to the Act and shall be limited obligations of the Issuer payable solely out of the Receipts and Revenues of the Issuer from the Loan Agreement or other moneys pledged to secure the Bonds.  No holder of any Bond has the right to compel any exercise of the taxing power of the Issuer to pay the Bonds or the interest or premium, if any, thereon, and the Bonds shall not constitute an indebtedness of the Issuer or a loan of credit thereof within the meaning of any constitutional or statutory provisions.
Article IX
Redemption of Bonds
Section 9.01.    Redemption of Bonds.  The Issuer shall take, or cause to be taken, the actions required by the Indenture to discharge the lien thereof through the redemption, or provision for payment or redemption, of all Bonds then Outstanding, or to effect the redemption, or provision for payment or redemption, of less than all the Bonds then Outstanding, upon receipt by the Issuer and the Trustee from the Company of a notice designating the principal amount and 

maturity of the Bonds to be redeemed, or for the payment or redemption of which provision is to be made, and, in the case of redemption of Bonds, or provision therefor, specifying the date of redemption, which shall not be less than forty‐five (45) days from the date such notice is given, the applicable provision of the Indenture and that all conditions precedent to the Company’s right or obligation to direct the redemption or the provision for payment or redemption of the Bonds contained in the Indenture have been complied with.  Except in the case of a redemption pursuant to Section 3.01(b) of the Indenture, such notice (unless otherwise stated therein) shall be revocable by the Company at any time prior to the time at which the Bonds to be redeemed, or for the payment or redemption of which provision is to be made, are first deemed to be paid in accordance with Article VII of the Indenture.  The Company shall furnish any moneys required by the Indenture to be deposited with the Trustee or otherwise paid by the Issuer in connection with any of the foregoing purposes including moneys for payment of any premium on the Bonds which is not otherwise provided for.
Section 9.02.    Compliance with the Indenture.  Anything in this Loan Agreement to the contrary notwithstanding, the Issuer and the Company shall take all actions required by this Loan Agreement and the Indenture in order to comply with Section 3.01 of the Indenture.
Article X
Miscellaneous
Section 10.01.    Term of Loan Agreement.  This Loan Agreement shall remain in full force and effect from the date hereof until the right, title and interest of the Trustee in and to the Trust Estate shall have ceased, terminated and become void in accordance with Article VII of the Indenture and until all payments required under this Loan Agreement shall have been made.  Any moneys remaining in the Bond Fund after the right, title and interest of the Trustee in and to the Trust Estate shall have ceased, terminated and become void shall be paid to the Company.
Section 10.02.    Notices.  Except as otherwise provided in this Loan Agreement, all notices, certificates, requests, requisitions and other communications hereunder shall be in writing and shall be sufficiently given and shall be deemed given when, subject to Section 12.09 of the Indenture, given by Electronic Means or when mailed by first‐class mail, postage prepaid, addressed as follows:  if to the Issuer, at City Hall, Forsyth, Montana 59327, Attention:  Mayor; if to the Company, at 3010 West 69th Street, Sioux Falls, South Dakota  57108, Attention:  Treasurer; and if to the Trustee at such address as shall be designated in the Indenture.  A copy of each notice, certificate, request or other communication given hereunder to the Issuer, the Company or the Trustee shall also be given to the others.  Any of the foregoing may, by notice given hereunder, designate any further or different addresses to which subsequent notices, certificates, requests or other communications shall be sent.  To the extent permitted by Section 12.09 of the Indenture, all communications required hereunder may be given and delivered by Electronic Means.
Section 10.03.    Parties in Interest.  This Loan Agreement shall inure to the benefit of and shall be binding upon the Issuer, the Company and their respective successors and assigns, and 

no other person, firm or corporation (other than the Trustee and its successors under the Indenture) shall have any right, remedy or claim under or by reason of this Loan Agreement; provided, however, that neither the Issuer, the State of Montana, or any political subdivision thereof shall in any event be liable for the payment of the principal of, or premium, if any, or interest on, the Bonds or for the performance of any pledge, mortgage, obligation or agreement created by or arising out of the Loan Agreement or the issuance of the Bonds; and provided, further, that neither the Bonds nor any obligation of the Issuer created by or arising under this Loan Agreement shall constitute an indebtedness or loan of credit of the Issuer, the State of Montana or any political subdivision thereof within the meaning of any constitutional or statutory provisions whatsoever, but shall be limited obligations of the Issuer payable solely out of the revenues derived from the First Mortgage Bonds or this Loan Agreement, or from the sale of the Bonds, or income earned on invested funds as provided herein and in the Indenture.
Section 10.04.    Amendments.  This Loan Agreement may be amended only by written agreement of the parties hereto, subject to the limitations set forth herein and in the Indenture; provided, however, that no amendment of this Loan Agreement which affects the Trustee’s rights, duties or immunities hereunder, under the Indenture or under the Bond Delivery Agreement or otherwise shall be made without the prior written consent of the Trustee.
Section 10.05.    Counterparts.  This Loan Agreement may be executed in any number of counterparts, each of which, when so executed and delivered, shall be an original; but such counterparts shall together constitute but one and the same Loan Agreement.
Section 10.06.    Severability.  In case any one or more provisions of this Loan Agreement shall, for any reason, be held to be illegal or invalid, such illegality or invalidity shall not affect any other provisions hereof, and this Loan Agreement shall be construed and enforced as if such illegal or invalid provisions had not been contained herein.
Section 10.07.    Governing Law.  The laws of the State of Montana shall govern the construction and enforcement of this Loan Agreement.

(Signature page follows.)

In Witness Whereof, the parties hereto have caused this Loan Agreement to be duly executed as of the day and year first above written.
City of Forsyth, Rosebud County, Montana
		
	By
	        /s/ Dennis Kopetzke                                   

  Mayor
Attest:         /s/ Lois Pemberton                                  
    
 City Clerk
NorthWestern Corporation
		
	By
	        /s/ Daniel L. Rausch                                   

  Treasurer

Exhibit A

Colstrip Units Nos. 3 and 4 Pollution Control Facilities
		
	1.
	Pollution Control Equipment

Scrubber System
The air pollution control facilities employed on Units #3 and #4 consist of a complete scrubber system, including duct work, plenums, scrubber vessels, reheaters and induced draft fans, together with infrastructures, monitoring and electrical controls and instrumentation therefore, for the purpose of removing the sulfur dioxide (SO2) and particulate matter from the flue gas.  The scrubber system also includes a scrubber maintenance facility, including a machine shop and laboratory dedicated to the scrubber system and an environment monitoring laboratory for the pollution control facilities.  The scrubber system utilizes the Wet Venturi Principle and consists of eight modules for each unit through which the steam generator gases from the burned coal must pass.
The gases in the scrubber are contacted with finely atomized scrubber slurry.  Within the stated performance of the system, fly ash particulates are removed by the slurry droplets.  The sulfur dioxide reacts with the alkali contained in the slurry which results from the mixing of water, fly ash particulates, hydrated high calcium lime and hydrated dolomitic lime.  A major portion of the sulfur dioxide is converted to solid sulfate compounds which are retained in the scrubber liquid and can, therefore, be piped to and deposited in an ash pond together with the particulate.
After the flue gas passes through the venturi section, absorption sprays and wash trays, it is processed through a demister which removes any entrained slurry and is then reheated and discharged through the stack.
The slurry system in the Units #3 and #4 scrubber system consists of recycle tanks, regenerators, agitators, pumps and pipelines.  The slurry from the Units #3 and #4 scrubber system is transported to an effluent holding pond and involves the use of effluent holding tanks agitators, pumps and pipelines.
Lime Storage
The sole purpose of the lime system is to supply the lime slurry requirements of the scrubber regeneration system.  There is one lime system that serves the sixteen scrubbers for Units #3 and #4.  Major components of the system include four slakers, in which calcined high calcium lime is reacted with water to produce a hydrated lime slurry, slurry transfer tanks, where the slurry is diluted with water, slurry feed storage tanks, where the slurry will be held for use by the regenerators as needed, and agitators.

Scrubber Sludge Disposal
Effluent slurry is pumped from the plant to the sludge disposal pond located approximately three miles southeast of the plant.  The suspended solids settle to the pond bottom and the clear water is pumped back to the plant.
There are two phases in the development of this pond.  The first phase requires the construction of one dam 108 feet high and 1,100 feet in length.  A saddle dam must also be added.  The saddle dam will vary in height with a maximum height for this phase of 36 feet and be approximately 2,800 feet in length.  The capacity of Phase 1 will be 6,650 acre‐feet and it will last approximately 10 years.
The development of the second phase will require that the original dam be raised to 138 feet in height and increased to a length of 2,500 feet.  The saddle dam will be raised to a maximum height of 66 feet and a total length of 3,500 feet.  The capacity of the second phase will be an additional 7,000 acre‐feet and it will last approximately 12 years, for a total life of 22 years.  The construction of the second phase is not included in cost reported at this time.
The sludge disposal pond design takes into account a permit requirement for minimum seepage, by providing low permeability plastic concrete filled trenches around the periphery of the pond constructed during the course of Phase 1 work.
Coal Dust Control System
The coal dust control system is designed to collect, store and treat coal dust resulting from mining, crushing, handling and storing coal in the course of normal Units #3 and #4 operations.  To control coal dust air pollution the points where coal is transferred between conveyors or placed in coal piles have been enclosed.  The coal transfer stations between conveyors are enclosed with steel framed structures with metal siding.  The structures are equipped with vacuum filtration systems, consisting of ducts, blowers, dust removal filters and associated equipment, to remove coal dust from exhaust air from the structures, and are also equipped with mechanical dust collectors.  The mainline 45,000 ton coal storage pile is enclosed with a 340' long A‐frame precast panel concrete structure designed to contain coal dust, thereby allowing its removal and treatment.
Cooling Tower Drift Containment Control Facility
Operation of the cooling towers produces exhaust air emissions containing circulating water, particulates and other pollutants generally known as cooling tower drift.  To control release of these air pollutants, the cooling towers are provided with high efficiency drift eliminators, located at the top of the cooling tower structures, which remove drift from the cooling tower exhaust air.

		
	2.
	Solid Waste Disposal

Bottom Ash Disposal
The function of the bottom ash disposal system is to remove accumulations of furnace bottom ash, pulverizer pyrites, economizer ash, and air preheater fly ash by means of a water‐ash slurry to a disposal pond located approximately 2,000 feet southeast of the plant site.  The system consists generally of three sets of fly ash hoppers (economizer, air heater, and flue gas duct hoppers), pyrite hoppers, the bottom ash hopper, an 18,000 gallon transfer tank, a settling pond, a clear water pond and various pumps, and pipelines.
Clinker grinders are used to grind the bottom ash which is then mixed with water and sluiced to the ash transfer tank.
The economizer ash collected in economizer hoppers falls by gravity to the ash transfer tank.
The pyrites are collected in local tanks and sluiced to the ash transfer tank.
Ash collected in the flue gas duct hoppers and air preheater hoppers is sluiced to the ash transfer tank.
These ashes are pumped from the ash transfer tank to the bottom ash pond.  Reclaimed water is returned from the bottom ash disposal pond and redistributed to the various sections of the bottom ash disposal system.
The solid waste disposal facilities for purposes of the issuance of the Notes include only so much of the bottom ash disposal system as is external to the plant building and include piping from the building to the settling pond, the pond itself, return water pumps and lines, a clear water pond and piping back to the plant building.
		
	3.
	Water Pollution Control

North Plant Sediment Pond
The north plant sediment pond is designed to collect and store the storm runoff from the general north plant area.  These waters are retrained in the pond, allowing natural evaporation to desiccate the pond.  This prevents high quantities of suspended solids from being discharged to Armells Creek or other state surface waters.
North Plant Area Drainage System
The north plant area drainage system is designed to collect and store storm runoff from the water treatment building, fuel oil handling area and the cooling tower area in the north plant area drain pond.  The pond also serves as a storage facility for one cooling tower basin drain, cooling tower overflow, water treatment filter backwash, and for the cooling tower blowdown 

water not used in the flue gas scrubbing process.  These waters are potentially contaminated with oil and high suspended and dissolved solids, and this system stores these discharges preventing any discharge to Armells Creek or other state surface waters.  The north plant area drainage system consists of collection basins, piping, concrete culverts, yard drains, manholes and special yard gradings (berms) which route these discharges to the north plant area sump and north plant area drain pond.  The north plant area drain pond incorporates a hypalon liner to comply with a permit requirement for minimum seepage.  The oil separator section of the sump receives oily surface collection drains.  The oil and water are separated.  The oil from the sump is then trucked away for disposal.
The water discharges are either pumped to the scrubber effluent holding pond via a 6" diameter pipeline, 19,000 feet in length for evaporation, to the circulating water system, or to the plant oily waste sump as appropriate.  Each discharge arrangement has its own set of sump pumps.  The pumps and piping system which discharge to the plant oily waste sump are not included in the costs covered by this Report, nor is the circulating water system.  The waters recovered are excess to any plant requirements and recovery of the waters does not provide any economic benefit to the plant.
Chemical and Oily Waste System
The chemical and oily waste system is designed to collect, store, treat and dispose of chemical and oily wastes resulting from the normal operation of Units #3 and #4.  This system consists of drains and pipes, oil separators, chemical waste sumps, chemical waste neutralizing tanks, neutralizing chemical storage tanks, chemical inspection equipment, and associated mechanical and electrical control equipment.
The chemical waste drainage system includes drains and neutralization tanks for collection and treatment of chemical waste.  Chemical waste drains are located throughout Units #3 and #4 and are used to collect and transfer chemical waste to holding sumps and neutralization tanks.  The neutralization equipment includes chemical storage and injection equipment as well as controls and instrumentation.
The oily waste drainage system is made up of a network of drains which collect oily waste from throughout Units #3 and #4, and dispose of the wastes in the Units #3 and #4 main water‐oil sump.  Oil separation chambers in the sump allow for oil removal.  The treated water is monitored for trace oil levels and released.  After separation, the waste oil is removed by a contractor to an offsite disposal area.
Cooling Tower Blowdown System
The cooling tower blowdown system consists of a 6" pipeline from the cooling tower to the waste disposal pond where the blowdown is treated by settlement and evaporation in accordance with water pollution control requirements.

Groundwater Monitoring Wells
Groundwater monitoring wells have been installed around the various ponds associated with the plant operation.  These ponds include the scrubber effluent holding pond, the scrubber drain pond, the scrubber wash tray pond, the bottom ash pond, and the north plant area effluent pond.  These groundwater monitoring wells provide the ability through sampling to detect and quantify accidental discharges from the above mentioned plant storage and waste ponds.  This is necessary to show compliance with State Groundwater Standards and with permit requirements for minimum seepage.Exhibit

BOND DELIVERY AGREEMENT

BETWEEN

NORTHWESTERN CORPORATION

AND

U.S. BANK NATIONAL ASSOCIATION,

As TRUSTEE

Dated as of August 1, 2016

City of Forsyth, Rosebud County, Montana,
Pollution Control Revenue Refunding Bonds (Northwestern Corporation Colstrip Project) 
Series 2016

THIS AGREEMENT, made and entered into as of August 1, 2016 (the “Agreement”), by and between NorthWestern Corporation, a corporation organized and existing under the laws of the State of Delaware (the “Company”), and U.S. Bank National Association, a national banking association, as trustee (the “Trustee”) under the Indenture of Trust, dated as of August 1, 2016 (the “Indenture”), from the City of Forsyth, Rosebud County, Montana, a municipal corporation and political subdivision organized and existing under the constitution and laws of the State of Montana (the “Issuer”), to the Trustee, under which the Issuer’s Pollution Control Revenue Refunding Bonds (Northwestern Corporation Colstrip Project) Series 2016 (the “Bonds”) are authorized for issuance;

WITNESSETH:

WHEREAS, the Issuer intends to issue the Bonds in an aggregate principal amount of $144,660,000; and

WHEREAS, the Bonds are to be issued under and pursuant to the Indenture; and

WHEREAS, pursuant to a Loan Agreement, dated as of August 1, 2016 (the “Loan Agreement”), between the Company and the Issuer, the proceeds to be derived from the issuance of the Bonds are to be loaned to the Company to be applied to refund a portion of the outstanding bonds of the Issuer, which were issued to refinance The Montana Power Company’s (predecessor in interest to the Company) share of the cost of the construction of certain pollution control facilities for the benefit of The Montana Power Company, and the Company is obligated to make certain payments to repay such loan; and

WHEREAS, the Company is desirous that the Issuer issue the Bonds and apply the proceeds as aforesaid;

 NOW, THEREFORE, in consideration of these premises and to evidence and to provide for the payment of certain obligations of the Company under the Loan Agreement, the Company does hereby covenant and agree with the Trustee as follows:

ARTICLE 1
DEFINITIONS
The terms defined in Article I of the Indenture shall, for all purposes of this Agreement, have the meanings specified therein, unless the context clearly requires otherwise.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 1.1.     The Company hereby represents and warrants that:
(a)    it is a corporation organized and existing under the laws of the State of Delaware, is not in violation of any provision of its articles of incorporation, as amended, 

or its by-laws, has the power to enter into this Agreement and has duly authorized the execution and delivery of this Agreement by proper corporate action; and neither this Agreement nor the obligations on its part herein contained contravene or constitute a default under any agreement, instrument or indenture or any provision of its articles of incorporation, as amended, or its by-laws or any requirement of law; and
(b)    the First Mortgage Bonds are duly and validly authorized, authenticated, issued and delivered; constitute valid and binding obligations of the Company, entitled to the benefits as provided by the Mortgage; and conform to the requirements set forth in clauses (i) through (iv) of Section 3.1(a) hereof.
ARTICLE 3
DELIVERY OF THE FIRST MORTGAGE BONDS;
RIGHTS AND DUTIES OF THE TRUSTEE
SECTION 3.1.     
(a)    Delivery and Receipt. Concurrently with the issuance and delivery by the Issuer of the Bonds, the Company has issued and delivered, or caused to be delivered, to the Trustee to hold in trust for the benefit of the Owners of the Bonds, but subject to the terms and conditions of this Agreement, $144,660,000 in principal amount of the First Mortgage Bonds, (i) maturing on the same date as the Bonds, (ii) bearing interest at the same rate and payable at the same times as the Bonds, (iii) containing redemption provisions correlative to Section 3.01 of the Indenture, and (iv) registered in the name of the Trustee or, subject to Section 6.11 of the Indenture, its nominee. The Trustee, for the benefit of the Owners from time to time of the Bonds, hereby acknowledges receipt of the First Mortgage Bonds and accepts the trusts imposed upon it by this Agreement.
(b)    Circumstances under which the Company’s Obligation to Pay Discharged. To provide for the payment of the obligations of the Company under Section 4.04 and 9.01 of the Loan Agreement, the Company has delivered the First Mortgage Bonds to the Trustee. The obligation of the Company to make payments with respect to the principal of and interest on the First Mortgage Bonds shall be fully or partially, as the case may be, satisfied and discharged to the extent that, at the time that any such payment shall be due, there shall be in the Bond Fund sufficient available funds to fully or partially pay the then due principal of and interest on the Bonds.
(c)    Surrender by Trustee. At the time any of the Bonds cease to be outstanding (other than by reason of the applicability of clause (c) in the definition of Outstanding contained in the Indenture), the Trustee shall surrender to the Mortgage Trustee for cancellation a corresponding principal amount of First Mortgage Bonds.
(d)    Non-Payment; Redemption. In the event that, after giving effect to the provisions of Section 3.1(b) hereof, a payment on the First Mortgage Bonds shall have become due and payable and shall not have been fully paid, the Trustee shall forthwith give notice thereof to the Mortgage Trustee specifying the amount of such payment and the amount not paid. In the event that any Bonds are to be redeemed pursuant to Section 

3.01 of the Indenture, the Trustee shall, forthwith upon being given notice of such redemption, give notice thereof to the Mortgage Trustee stating that (i) Bonds are to be redeemed pursuant to Section 3.01 of the Indenture and the principal and amount to be redeemed and the redemption date therefor, (ii) First Mortgage Bonds of like principal amount are to be redeemed on the same date, and (iii) the Trustee, as holder of the First Mortgage Bonds, waives notice of such redemption of the First Mortgage Bonds. Any such notice given by the Trustee shall be signed by its President, a Vice President or a Trust Officer thereof. The Trustee shall incur no liability for failure to give any such notice and such failure shall have no effect on the obligations of the Company, on the Bonds or on the rights of the Trustee or of the Owners of the Bonds.
SECTION 3.2.     Rights and Duties of Trustee.  The First Mortgage Bonds have been delivered by the Company, and accepted by the Trustee, for the benefit of the Owners from time to time of the Bonds, upon and subject to the following terms and conditions:
(a)    Trustee to Exercise Rights of First Mortgage Bondholders.  The Trustee shall, in the manner and upon the terms and conditions provided in the Indenture, including, without limitation, Section 6.11 thereof, and in the manner provided herein, be entitled to exercise all of the rights and enforce all of the remedies of an owner of the Company’s first mortgage bonds, including, without limitation, the right to receive payments of the principal of and interest on the First Mortgage Bonds.
(b)    Voting of First Mortgage Bonds.  The Trustee shall, as the holder of the First Mortgage Bonds, attend such meeting or meetings of bondholders under the Mortgage or, at its option, deliver its proxy in connection therewith, as related to matters with respect to which it is entitled to vote or consent. So long as no Event of Default under the Indenture shall have occurred and be continuing, either at any such meeting or meetings, or otherwise when the consent of the holders of the Company’s First Mortgage Bonds is sought without a meeting, the Trustee shall vote as the holder of the First Mortgage Bonds, or shall consent with respect thereto (a) in favor of any amendment or modification of the Mortgage proposed by the Company of substantially the same tenor as those set forth in Exhibit A hereto, (b) in favor of any amendments to or modifications of the Mortgage of substantially the same tenor as those set forth in Section 11.02 of the Indenture for amendments to the Indenture as if Section 11.02 of the Indenture were incorporated, mutatis mutandis, in this Agreement; provided, however, that, for purposes of this Agreement, all references in Section 11.02 to the Issuer shall be deemed to refer to the Company and with other correlative changes, and (c) with respect to any other amendments to, modifications of, or other matters relating to, the Mortgage, proportionately with the vote or consent of the holders of all other first mortgage bonds of the Company then outstanding under the Mortgage the holders of which are eligible to vote or consent, as indicated in a Bondholder’s Certificate (as hereinafter defined) delivered to the Trustee; provided, however, that the Trustee shall not vote as such holder in favor of, or give its consent to, any amendment or modification of the Mortgage which, if it were an amendment or modification of the Indenture, would require the approval of the Owners of the Bonds, without the prior consent and approval, obtained in the manner prescribed in Section 11.03 of the Indenture, of Owners of Bonds which would be required under Section 11.03 of the Indenture for such an amendment or modification of 

the Indenture as well as such other approvals and conditions as are stated in Section 11.03 of the Indenture. “Bondholder’s Certificate” means a certificate signed by the temporary chairman, the temporary secretary, the permanent chairman, the permanent secretary, or an inspector of votes at any meeting or meetings of bondholders under the Mortgage, or by the Mortgage Trustee in the case of consents of such bondholders which are sought without a meeting, which states what the signer thereof reasonably believes will be the proportionate votes or consents of the holders of all first mortgage bonds (other than the First Mortgage Bonds) outstanding under the Mortgage and counted for the purposes of determining whether such bondholders have approved or consented to the matter put before them. Any action taken by the Trustee in accordance with the provisions of this Section 3.2(b) shall be binding upon the Issuer and the Owners of Bonds.
(c)    No Transfer of First Mortgage Bonds; Exception. Except as required to effect an assignment to a successor trustee, the Trustee shall not sell, assign or transfer First Mortgage Bonds held by it. In order to carry out the requirements of this Section 3.2 (c), the Company may take such actions as it shall deem to be desirable, including the placing of a legend on each First Mortgage Bond in substantially the following form:
“This Bond is not transferable except as required to effect transfer to any successor trustee under the Indenture of Trust, dated as of August 1, 2016, as it may be amended and supplemented, between the City of Forsyth, Rosebud County, Montana, and U.S. Bank National Association, as Trustee.”,
and the issuance of stop transfer instructions to the Mortgage Trustee and any transfer agent under the Mortgage.
(d)    First Mortgage Bonds in Temporary Form. The First Mortgage Bonds have been delivered hereunder in temporary form. Any transfer or exchange of First Mortgage Bonds will be made with bonds in temporary form.
(e)    Disposition of Proceeds Derived from First Mortgage Bonds. The Trustee, upon receiving or collecting moneys on the First Mortgage Bonds, whether upon the payment of interest on, or upon the redemption or maturity of, the First Mortgage Bonds or otherwise, shall deposit such moneys in the Bond Fund of the Indenture.
ARTICLE 4
MISCELLANEOUS
SECTION 4.1.     Term.  This Agreement shall remain in full force and effect until the entire principal of and interest on the Bonds shall have been paid or provided for.
SECTION 4.2.     Further Company Acts.  The Company shall do such further lawful acts and things, and execute and deliver such additional conveyances, assignments, assurances, agreements, financing statements and instruments, as the Trustee may at any time reasonably request in connection with the administration and enforcement of this Agreement or relative to the First Mortgage Bonds or any part thereof, or in order to better 

assign, assure and confirm to the Trustee the rights, remedies, powers and privileges of the Trustee hereunder, or for carrying out the intentions and facilitating the performance of the terms of this Agreement.
SECTION 4.3.     Parties in Interest. This Agreement is entered into by the Company for the benefit of the Trustee and any successor trustee or successor trustees and their respective successors and assigns under the Indenture and the Owners from time to time of the Bonds outstanding, all of whom shall be entitled to enforce performance and observance of this Agreement to the same extent as if they were parties signatory hereto.
SECTION 4.4.     Company to Pay Costs and Expenses.  The Company shall pay all reasonable fees, costs and expenses of the Trustee in connection with the performance and enforcement of this Agreement for which the Trustee has not otherwise received reimbursement.
SECTION 4.5.     Amendments.  This Agreement may be amended or supplemented in the same manner and upon the same conditions as set forth in Section 11.03 of the Indenture for amendments to the Indenture as if Section 11.03 of the Indenture were incorporated, mutatis mutandis, in this Agreement; provided, however, that, for purposes of this Agreement, all references in Section 11.03 of the Indenture to the Issuer shall be deemed to refer to the Company and all references to the Company shall be deemed to refer to the Issuer.
SECTION 4.6.     Notices.  All notices and other communications hereunder shall be in writing and shall be sufficiently given and shall be deemed given when mailed by registered mail, postage prepaid, addressed as follows: if to the Company, 3010 West 69th Street, Sioux Falls, South Dakota 57108; if to the Trustee, at such address as shall be designated by it in the Indenture. Any of the foregoing may, by notice given hereunder, designate any further or different addresses to which subsequent notices, certificates, requests or other communications shall be sent.
SECTION 4.7.     Counterparts. This Agreement may be executed in any number of counterparts, each of which, when so executed and delivered, shall be an original; but such counterparts shall together constitute but one and the same Agreement.
SECTION 4.8.     Severability.  In case any one or more provisions of this Agreement shall, for any reason, be held illegal or invalid, such illegality or invalidity shall not affect any other provisions hereof, and this Agreement shall be construed and enforced as if such illegal or invalid provisions had not been contained herein.  
SECTION 4.9.     Governing Law.  The laws of the State of Montana shall govern the construction and enforcement of this Agreement.
    
[signatures on next page]

IN WITNESS WHEREOF, the Company and the Trustee have caused this Agreement to be executed in their respective corporate names, all as of the date first above written.

NORTHWESTERN CORPORATION

By         /s/ Brian B. Bird                                                       
Brian B. Bird 
Vice President and Chief Financial Officer

U.S. BANK NATIONAL ASSOCIATION,
as Trustee

By         /s/ Gretchen L. Middents                                   
                        
Gretchen L. Middents
Vice President

        

EXHIBIT A

MODIFICATIONS TO NORTHWESTERN CORPORATION’S MORTGAGE

1.    The modification of the last paragraph of Section 2 of the Company’s Mortgage to read as follows:

“The term ‘Daily Newspaper’ shall mean a newspaper usually published at least five days a week”

2.    The modification of the first paragraph of Section 3 of the Company’s Mortgage to read as follows:

“The term ‘Resolution’ shall mean a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors of the Company, or by any duly authorized committee consisting of one or more persons, who need not be members of the Board of Directors, and to be in full force and effect on the date certified.”

3.    The modification of the third paragraph of Section 3 of the Company’s Mortgage to read as follows:

“The term “Officer’s Certificate” shall mean a certificate signed by the Chief Executive Officer, the President, a Vice-President, the Treasurer, an Assistant Treasurer of the Company or any other duly authorized person.”

4.    The modification of the Company’s Mortgage to replace the phrase “Officers’ Certificate” with the phrase “Officer’s Certificate” wherever the phrase “Officers’ Certificate” appears in the Mortgage.

5.    The modification of the fourth paragraph of Section 3 of the Company’s Mortgage to delete the phrase “appointed by the Board of Directors of the Company” from the third and fourth lines thereof; to add in its place the phrase, “whose appointment shall be evidenced by a Resolution”; and to add the following phrase in the eighth line thereof immediately after the word “hereof”:

“or clause (b) of subdivision (2) of Section 60 (II) hereof”

6.    The modification of the sixth paragraph of Section 3 of the Company’s Mortgage to delete the phrase “appointed by the Board of Directors of the Company” from the third and fourth lines thereof and to add in its place the phrase, “whose appointment shall be evidenced by a Resolution”.

7.    The modification of the seventh paragraph of Section 3 of the Company’s Mortgage to delete the phrase “appointed by the Board of Directors of the Company” from the third line thereof and to add in its place the phrase, “whose appointment shall be evidenced by a Resolution”.

8.    The modification of Section 4(I) of the Company’s Mortgage to read as follows:

Section 4.    (I)    The term “Property Additions” shall mean plants, lines, pipes, mains, cables, machinery, boilers, transmission lines, Space Satellites (as hereinafter defined), pipe lines, distribution systems, service systems and supply systems, Fuel Transportation Facilities (as hereinafter defined), and other property, real or personal, and improvements, extensions, additions, renewals or replacements, acquired by the Company by purchase, consolidation, merger, donation, construction, erection or in any other way whatsoever, subsequent to July 31, 1945, or in the process of construction or erection insofar as actually constructed or erected subsequent to July 31, 1945, and used or useful or to be used in or in connection with the business of generating, manufacturing, developing, extracting, producing, transmitting, transporting, distributing, storing or supplying energy or fuel in any form, including, without limitation, electricity or gas for light, heat, power, refrigeration or other purposes, or of generating, manufacturing, producing, transmitting, transporting, distributing or supplying water for domestic or public use or consumption for drinking, power, heat or other purposes or steam for power, heat or other purposes. The term “Property Additions” shall not, however, include (1) any shares of stock, bonds, notes or other obligations or other securities or contracts, leases, or operating agreements, bills, notes, accounts receivable or choses in action, or (2) except as herein otherwise specifically provided, going value, good will, franchises or governmental permits or licenses granted to or acquired by the Company, as such, separate and distinct from the property operated thereunder or in connection therewith or incident thereto, or (3) any merchandise, equipment, apparatus, materials or supplies held for the purposes of sale or other disposition in the usual course of business; fuel, oil or similar materials or supplies consumable in the operation of any of the properties of the Company; or aircraft, tractors, rolling stock, trolley coaches, buses, motor coaches, automobiles, motor trucks or other vehicles (other than Fuel Transportation Facilities and Space Satellites), or materials and supplies held for the purposes of repairing or replacing (in whole or part) any of the same; or timber, minerals, mineral rights or royalties or Gas and oil Production Property, or (4) any property (other than “Space Satellites”) which is located outside the limits of the United States of America or its coastal waters or outside the limits of the Dominion of Canada or its coastal waters as the same may be now or hereafter constituted, unless such property shall be connected by transmission, distribution, pipe or other line owned by the Company with a system, line, plant or power house owned or operated by the company which is located within such limits or shall be auxiliary to property so located or connected, or (5) any property, the cost of acquiring, making or constructing 

which is chargeable under accepted principles of accounting to operating expenses.

The term “Fuel Transportation Facilities” shall mean railroad cars, and other railroad transportation equipment, tankers, tow boats, barges and all other kinds and types of cargo carrying vessels, used or to be used primarily for the transportation of coal, oil or other fuel.

The term “Space Satellites” shall mean any form of space satellites, space stations and other analogous facilities whether or not in the earth’s atmosphere.

The term “Gas and oil Production Property” shall mean all leases, consolidated leases and operating agreements, fee lands and other mineral interests, gas and oil rights, wells, field compressors, equipment, extraction and absorption plants and other properties and rights whether producing or non-producing, used or useful primarily and principally for the production and gathering of natural gas up to the point of connection with any gas transmission or distribution system or used or useful primarily and principally for the production, gathering or storage of oil or condensate.

9.    The modification of Section 6(e) of the Company’s Mortgage to read as follows:

“(e)    easements, ground leases, restrictions, exceptions or reservations in any property and/or rights of way of the Company for the purpose of roads, pipe lines, transmission lines, transportation lines, distribution lines, communication lines, railways, removal of coal or other minerals or timber, and other like purposes, or for the joint or common use of real property, rights of way, facilities and/or equipment, and defects, irregularities and deficiencies in titles of any property and/or rights of way which do not materially impair the use of such property and/or rights of way for the purposes for which such property and/or rights of way are held by the Company;”

10.    The modification of Section 7(A) of the Company’s Mortgage to read as follows:

“(A) the Adjusted Net Earnings of the Company for a period of twelve (12) consecutive calendar months within the eighteen (18) calendar months immediately preceding the first day of the month in which the application for the authentication and delivery under this Indenture of Bonds then applied for is made, specifying:”

11.    The modification of Section 7(A)(10) of the Company’s Mortgage to replace the phrase “fifteen per centum (15%)” with the phrase “twenty per centum (20%)” in the ninth line thereof.

12.    The modification of subdivisions (i) through (iii) of Section 7(B) of the Company’s Mortgage to read as follows:

“(i)    all bonds outstanding hereunder at the date of such certificate, except any for the payment of which the bonds applied for are to be issued; provided that, if any such series of outstanding bonds bears interest at varying rates, then the interest on such series of bonds shall be computed at the average annual rate in effect for such series during the period of twelve (12) consecutive calendar months (or any portion thereof in which bonds of such series are Outstanding) being used for the calculation of Adjusted Net Earnings; and if such outstanding bonds have been issued after the end of such twelve (12) consecutive calendar months, then computed at the initial rate upon issuance;

(ii)    all bonds then applied for in pending applications, including the application in connection with which such certificate is made, computed at the initial rate upon issuance;

(iii)    all Qualified Lien Bonds which will be outstanding immediately after the authentication of the bonds then applied for in pending applications, including the application in connection with which such certificate is made; provided that, if any Qualified Lien Bonds bear interest at varying rates, then the interest on such Qualified Lien Bonds shall be computed at the average annual rate in effect for such Qualified Lien Bonds during the period of twelve (12) consecutive calendar months (or any portion thereof in which such Qualified Lien Bonds are Outstanding) being used for the calculation of Adjusted Net Earnings; and if such Qualified Lien Bonds have been issued after the end of such last month, then computed at the initial rate upon issuance;”

13.    The addition of a new subdivision (e) to Section 8 of the Company’s Mortgage and the redesignation of former subdivision (e) so that subdivisions (e) and (f) should read as follows:

“(e)    reserving to the Company the right to create fully registered bonds that may be registered as to the payment of principal to one holder and to the payment of interest to another holder; and/or

(f)    in any other respect expressing or referring to the terms and conditions upon which such bonds are to be issued and/or secured under this Indenture.”

14.    The modification of the first and the second sentence of Section 15 of the Company’s Mortgage to read as follows:

“SECTION 15. There may be authenticated and delivered and issued from time to time in lieu of (or in exchange for) any definitive bond or bonds issued or issuable under this Indenture one or more temporary typewritten, printed, lithographed or engraved bonds substantially of the tenor of the bonds hereinbefore described, with or without one or more coupons, and with or without the privilege of registration as to principal only, or as to both principal and interest, and such temporary bond or bonds may be in such denomination or denominations as the Company may determine, as evidenced by a Resolution. Definitive bonds may be in the form of typewritten bonds, fully engraved bonds, lithographed bonds or printed bonds.”

15.    The modification of Section 25 of the Company’s Mortgage to read as follows:

“Section 25. Bonds of any one or more series may be authenticated and delivered under the provisions of this Article V upon the basis of Property Additions for a principal amount not exceeding seventy per centum (70%) of the balance of the Cost or of the fair value thereof to the Company (whichever shall be less) after making any deductions and any additions pursuant to Section 4 hereof.”

16.    The modification of Section 26 of the Company’s Mortgage to replace the phrase “ten sixths (l0/6ths)” with the phrase “ten sevenths (10/7ths)” in the eleventh line thereof.

17.    The modification of the Company’s Mortgage to replace the phrase “sixty per centum (60%)” with the phrase “seventy per centum (70%)” whenever the phrase “sixty per centum (60%)” appears in the Mortgage.

18.    The modification of Section 28(7)(b) of the Company’s Mortgage to read as follows:

“(b)    that the Company has corporate authority to operate the Property Additions in respect of which such application is made.”

19.    The modification of Section 29 of the Company’s Mortgage to delete the paragraph appearing immediately after Section 29(5).

20.    The modification in Section 37 of the Company’s Mortgage to read as follows:

“Section 37.    That it will keep or cause to be kept all the property subject to the Lien hereof insured against fire to the extent that property of similar character is usually so insured by companies similarly situated and operating like properties, to a reasonable amount, by reputable insurance 

companies, any loss, except as to materials and supplies and except as to any particular loss less than the greater of Four Million Dollars ($4,000,000) or two per centum (2%) of the bonds Outstanding hereunder on the date of such particular loss, to be made payable to the Corporate Trustee as the interest of the Corporate Trustee may appear, or to the trustee or other holder of any mortgage or other lien constituting a Qualified Lien or any other lien prior hereto upon property subject to the Lien hereof, if the terms thereof require losses so to be made payable; or that it will, in lieu of or supplementing such insurance in whole or in part, adopt some other method or plan of protection against loss by fire at least equal in protection to the method or plan of protection against loss by fire of companies similarly situated and operating properties subject to similar fire hazards or on which properties an equal primary fire insurance rate has been set by reputable insurance companies, and that if it shall adopt such other method or plan, it will, except as to materials and supplies and except as to any particular loss less than the greater of Four Million Dollars ($4,000,000) or two per centum (2%) of the bonds Outstanding hereunder on the date of such particular loss, pay to the Corporate Trustee on account of any loss sustained by reason of the destruction or damage of such property by fire, an amount of cash equal to such loss less any amounts otherwise paid to the Corporate Trustee, or to the trustee or other holder of any mortgage or other lien constituting a Qualified Lien or any other lien prior hereto upon property subject to the Lien hereof, if the terms thereof require losses so to be paid. Any amounts of cash so required to be paid by the Company pursuant to any such method or plan shall for the purposes of this Indenture be deemed to be proceeds of insurance. In case of the adoption of such other method or plan of protection, the Company shall also furnish to the Corporate Trustee a certificate of an actuary or other qualified person appointed by the Company with respect to the adequacy of such method or plan. There shall be delivered to the Corporate Trustee, on or before October 1 of each year and also whenever the Corporate Trustee shall make request therefor a detailed statement, signed by the Treasurer or an Assistant Treasurer of the Company, of any fire insurance policies then outstanding and in force upon the aforesaid property, or any part thereof, including, or by reference to former statements including, the names of the insurance companies which have issued the policies and the amounts and expiration dates thereof, together with a detailed statement, signed by the Treasurer or an Assistant Treasurer    of the Company, of such other method or plan, if any.

All moneys paid to the Corporate Trustee by the company in accordance with this Section or received by the Corporate Trustee as proceeds of any insurance against loss by fire shall, subject to the requirements of any mortgage constituting a Qualified Lien or any other lien prior hereto upon property subject to the Lien hereof, be held by the Corporate Trustee and, subject as aforesaid, shall be paid by it to the 

Company to reimburse the Company for an equal amount spent in the rebuilding or renewal of the property destroyed or damaged, upon receipt by the Corporate Trustee of (1) an officer’s certificate requesting such reimbursement, (2) an Engineer’s Certificate stating the amounts so expended and the nature of such rebuilding or renewal and the fair value to the Company of the property rebuilt or renewed and if 

(A)    within six months prior to the date of acquisition thereof by the Company, such property has been used or operated, by a person or persons other than the Company, in a business similar to that in which it has been or is to be used or operated by the Company, and

(B)    the fair value to the Company of such property as set forth in such Engineer’s Certificate is not less than Twenty-five Thousand Dollars ($25,000) and not less than one per centum (1%) of the aggregate principal amount of the bonds at the time outstanding under this Indenture,

the Engineer making such certificate shall be an independent Engineer, and (3) and opinion of Counsel that the property so rebuilt or renewed is subject to the Lien hereof to the same extent as was the property so destroyed or damaged, provided, however, that to the extent that moneys paid by the Corporate Trustee to the Company for reimbursement, as aforesaid, shall represent the proceeds of property that was not Funded Property destroyed or damaged by fire, the property so rebuilt or renewed (for which reimbursement is so made), shall not be deemed to be Funded Property.

Any such money not so applied within eighteen (18) months after its receipt by the Corporate Trustee, or in respect of which notice in writing of intention to apply the same to the work of rebuilding or renewal then in progress and uncompleted shall not have been given to the Corporate Trustee by the Company within such eighteen (18) months, or which the Company shall at any time notify the Corporate Trustee is not to be so applied, shall thereafter be withdrawn, used or applied in the manner, to the extent and for the purposes and subject to the conditions provided in Section 61 hereof.”

21.    The elimination of Section 39 of the Company’s Mortgage and any references to said Section 39 wherever they appear in the Mortgage or any indenture supplemental thereto.

22.    The elimination of Section 40 of the Company’s Mortgage and any references to said Section 40 wherever they appear in the Mortgage or in any indenture supplemental thereto.

23.    Modification of Section 58 of the Company’s Mortgage by deleting the word “and” at the end of subdivision (2), replacing the period at the end of subdivision (3) with a semicolon, and adding the following subdivision (4) at the end of Section 58 to read as follows:  

“and (4) grant, free from the Lien of this Indenture, and effect the subordination of the Lien of this Indenture to, easements, ground leases or rights of way in, upon, over and across the property or rights of way of the Company for the purpose of roads, pipe lines, transmission lines, transportation lines, distribution lines, communication lines, railways, removal of coal or other minerals or timber, and other like purposes, or for the joint or common use of real property, rights of way, facilities and/or equipment; provided that such grant does not materially impair the use of the property or rights of way for the purposes for which such property or rights of way are held by the Company.”

24.    Modification of Section 59 of the Company’s Mortgage as follows:

Amending subdivision (1) of Section 59 of the Company’s Mortgage to read as follows:

“Officer’s Certificate describing in reasonable detail the property to be released and requesting such release;”

Amending subdivision(3)(b) and (c) of Section 59 of the Company’s Mortgage to read as follows:

“(b) (i) the fair value and (ii) the Cost (or as to Property Additions constituting Funded Property of which the fair value to the Company at the time the same became Funded Property was less than the cost as determined pursuant to Section 4 hereof, then such fair value in lieu of Cost), in the opinion of the signers, of the property (or securities) to be released; (c) the Cost (or as to Property Additions constituting Funded Property of which the fair value to the Company at the time the same became Funded Property was less than the Cost as determined pursuant to Section 4 hereof, then such fair value in lieu of Cost), in the opinion of the signers, of any portion thereof that is Funded Property;”

Amending the first six lines of subdivision (4) of Section 59 of the Mortgage to read as follows:

“(4)    an amount in cash, to be held by the Corporate Trustee as part of the Mortgaged and Pledged Property, equivalent to the amount, if any, by which the Cost (or as to Property Additions constituting Funded 

Property of which the fair value to the Company at the time the same became Funded Property was less than the Cost as determined pursuant to Section 4 hereof, then such fair value in lieu of cost) of the property to be released, as specified in the Engineer’s Certificate provided for in subdivision (3) above, exceeds the aggregate of the following items:”

Amending Subdivision 4(b) of Section 59 of the Mortgage to delete the following provision:

“provided, however, that no such application for release may be based in whole or in part upon Property Additions acquired, made or constructed more than five years prior to the last day of the calendar month immediately preceding the date of such application, and”

and to replace the phrase “provided, further” immediately following the above provision with the phrase “provided, however”.

Amending Subdivision 4(c) of Section 59 of the Company’s Mortgage to add the phrase “ten-sevenths (10/7ths) of” before the phrase “the principal amount” in the first line thereof.

25.    Modification of Section 60 of the Company’s Mortgage as follows:

Amending the sixteenth line of the first sentence of Section 60 of the Mortgage to replace the phrase “Fifty Thousand Dollars ($50,000).” with the phrase “Four Million Dollars ($4,000,000) or one per centum (1%) in principal amount of the bonds then outstanding hereunder, whichever shall be greater.”

Amending Section 60 of the Mortgage by inserting “(I)” before the word “Unless” in the first line thereof, and by adding the following Subsection(II) at the end of Section 60:

“(II)    Unless the Company is in default in the payment of the interest on any bonds then Outstanding hereunder or one or more of the Defaults defined in Section 65 hereof shall have occurred and be continuing, the Company may obtain the release of any of the Mortgaged and Pledged Property that is not Funded Property, except cash then held by the Corporate Trustee (provided, however, that Qualified Lien Bonds deposited with the Corporate Trustee shall not be released or surrendered except as provided in Article IX hereof and obligations secured by purchase money mortgage deposited with the Corporate Trustee shall not be released except as provided in section 61 hereof), and the Corporate Trustee shall release all its right, title and interest in and to the same from the Lien hereof upon application of the Company and receipt by the Corporate Trustee of the following (in lieu of complying with the requirements of Section 59 hereof):

(1)    an Officer’s Certificate complying with the requirements of Section 121 hereof and describing in reasonable detail the property to be released and requesting such release, and stating:

(a)    that the Company is not default in the payment of interest on any bonds then outstanding hereunder and that no Default has occurred and is continuing;

(b)    that the Company has sold, leased, granted an interest in, exchanged, dedicated or disposed of, or intends or has agreed to sell, lease, grant an interest in, exchange, dedicate or dispose of or that a governmental body or agency has exercised a right to order the Company to divest itself of, the property to be released;

(c)    that the property to be released is not Funded Property;

(d)    that (except in any case where a governmental body or agency has exercised a right to order the Company to divest itself of such property) such release is in the opinion of the signers desirable in the conduct of the business of the Company; and

(e)    the amount of cash and/or principal amount of obligations secured by purchase money mortgage received or to be received for any portion of said property sold to any Federal, State, County, Municipal or other governmental bodies or agencies or public or semi-public corporations, districts, or authorities;

(2)    an Engineer’s Certificate made and dated not more than ninety (90) days prior to the date of such application, stating:

(a)    the fair value, in the opinion of the signers, of the property (or securities) to be released;

(b)    that in the opinion of the signers such release will not impair the security under this Indenture in contravention of the provisions hereof; and 

(c)    that the Company has Property Additions constituting property that is not Funded Property (not including the Property Additions then being released) of a Cost or fair value to the Company (whichever is less) of not 

less than one dollar ($1) (after making any deductions and any additions pursuant to the provisions of Section 4 hereof);

(3)    an Opinion of Counsel complying with the requirements of Section 121 hereof and stating that all conditions precedent provided for in this Indenture relating to the release of the property in question have been complied with; and

(4)    in case the Corporate Trustee is requested to release any franchise, an Opinion of Counsel complying with the requirements of Section 121 hereof and stating that in his or their opinion such release will not impair to any material extent the right of the Company to operate any of its remaining properties.”

26.    Modification of Section 61 of the Company’s Mortgage to delete the following provision from subsection (1):

“provided, however, that no such withdrawal of cash representing the proceeds of insurance on or the release of property or securities or payment of or on account of obligations secured by purchase money mortgages may be based in whole or in part upon Property Additions acquired, made or constructed more than five years prior to the last day of the calendar month immediately preceding the receipt by the Corporate Trustee of such cash, and”

and to replace the phrase “provided further” immediately following the above provision with the phrase “;provided, however,”

27.    Modification of Section 61 of the Company’s Mortgage as follows:

To add the phrase “ten-sevenths (10/7ths) of” after the phrase “equal to” in the second line of subdivision (2).

To add the following language after the phrase “provided, however, that” in the eighth line of subdivision (2):

“cash deposited with the Corporate Trustee pursuant to Section 30 hereof may be withdrawn on the basis of this subdivision (2) only in an amount equal to the principal amount of each such bond or fraction thereof; and provided, further, that”

28.    Modification of Section 112 of the Company’s Mortgage to read as follows:

“The holders of

(a)    a majority in principal amount of the bonds outstanding hereunder when such meeting is held, or

(b)    if the action proposed adversely affects the rights of one or more, but less than all, series of bonds then outstanding, then at least a majority in principal amount of only those bonds so to be adversely affected and outstanding hereunder

must be present at such meeting in person or by proxy in order to constitute a quorum for the transaction of business, less than a quorum, however, having power to adjourn.”

29.    Modification of Section 113 of the Company’s Mortgage to amend lines six through thirteen thereof by replacing the phrase

“but only by resolution duly adopted by the affirmative vote of the holders of sixty-six and two-thirds per centum (66 2/3%) or more in principal amount of the bonds Outstanding hereunder, and, if the rights of one or more but less than all, series of bonds then Outstanding are to be affected by action taken at such meeting, then also by affirmative vote of the holders of at least sixty-six and two-thirds per centum (66 2/3%) in principal amount of each series of bonds so to be affected and Outstanding hereunder,”

with the phrase

“but only by resolution duly adopted by the affirmative vote of the holders of a majority in principal amount of the bonds outstanding hereunder, but, if the rights of one or more, but less than all, series of bonds then Outstanding are to be adversely affected by action taken at such meeting, then by affirmative vote of the holders of a majority in principal amount of only those bonds so to be adversely affected and outstanding hereunder,”

30.    Modification of Section 116(A) of the Company’s Mortgage to read as follows:

“Section 116. (A)Anything in this Article contained to the contrary notwithstanding, the Corporate Trustee shall receive the written consent (in any number of instruments of similar tenor executed by bondholders or by their attorneys appointed in writing) of the holders of a majority in principal amount of the bonds Outstanding hereunder, but, if the rights of one or more, but less than all, series of bonds then Outstanding are to be adversely affected by action taken pursuant to such consent, then by consent of the holders of a majority in principal amount of only those bonds so to be adversely affected and outstanding hereunder (at the time the last such needed consent is delivered to the Corporate Trust) in lieu of the holding of a meeting pursuant to this Article and in lieu of all action at 

such a meeting and with the same force and effect as a resolution duly adopted in accordance with the provisions of Section 113 hereof.”

31.    Modification of Section 118 of the Company’s Mortgage to replace the phrase “Resolution”  with the phrase “Officer’s Certificate” in the seventh line of the first sentence thereof.  

32.    Modification of Section 119 of the Company’s Mortgage to replace the phrase “six (6) years” with the phrase “two (2) years” in the thirteenth line thereof.

33.     Modifications necessary in order to cause there to be excluded from the Mortgaged and Pledged Property and the Lien of the Company's Mortgage at all times, including, without limitation, in the event and following the date that either or both of the Trustees or a receiver or trustee shall enter upon and take possession of the Mortgaged and Pledged Property in the manner provided in Article XIII of the Company's Mortgage by reason of the occurrence of a Default as defined in Section 65 thereof, all of the Company’s right, title and interest, whenever arising or acquired, in, to and under all accounts (as defined in the Uniform Commercial Code as in effect from time to time in the State of New York), all accounts receivable, all payments for goods sold or leased or for services rendered (whether or not they have been earned by performance), all rights in any merchandise or goods which any of the foregoing may represent, all rights, title, security and guaranties with respect to any or all of the foregoing, and all proceeds (as defined in the Uniform Commercial Code as in effect from time to time in the State of New York) of, and all collections from or with respect to, any or all of the foregoing.

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