Document:

exv4w12

 

Exhibit 4.12
 

CREDIT AGREEMENT

Dated as of August 13, 2004

Among

OTTER TAIL CORPORATION,

THE BANKS,

As defined herein,

UBS SECURITIES LLC,

as Arranger,

and

UBS AG, STAMFORD BRANCH,

as Agent

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page

	ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS
	 	 	 	 
	Section 1.1
	 	Defined Terms	 	 	1	 
	Section 1.2
	 	Accounting Terms and Calculations	 	 	8	 
	Section 1.3
	 	Computation of Time Periods	 	 	8	 
	Section 1.4
	 	Other Definitional Terms	 	 	8	 
	ARTICLE II

TERMS OF LENDING
	 	 	 	 
	Section 2.1
	 	The Commitments	 	 	8	 
	Section 2.2
	 	Loan Options	 	 	8	 
	Section 2.3
	 	Borrowing Procedures	 	 	8	 
	Section 2.4
	 	Continuation or Conversion of Loan	 	 	9	 
	Section 2.5
	 	The Notes	 	 	9	 
	Section 2.6
	 	Funding Losses	 	 	9	 
	Section 2.7
	 	Purpose of the Loan	 	 	10	 
	ARTICLE III

INTEREST AND FEES
	 	 	 	 
	Section 3.1
	 	Interest	 	 	10	 
	Section 3.2
	 	Commitment Fees	 	 	10	 
	Section 3.3
	 	Computation	 	 	10	 
	Section 3.4
	 	Payment Dates	 	 	10	 
	ARTICLE IV

PAYMENTS, PREPAYMENTS, REDUCTION OR TERMINATION
OF THE CREDIT AND SETOFF
	 	 	 	 
	Section 4.1
	 	Repayment	 	 	10	 
	Section 4.2
	 	Optional Prepayments	 	 	10	 
	Section 4.3
	 	Optional Reduction or Termination of Commitment	 	 	11	 
	Section 4.4
	 	Mandatory Prepayments	 	 	11	 
	Section 4.5
	 	Payments	 	 	11	 
	Section 4.6
	 	Proration of Payments	 	 	11	 

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	 	 	 	 	Page

	ARTICLE V

ADDITIONAL PROVISIONS RELATING TO LOAN
	 	 	 	 
	Section 5.1
	 	Increased Costs	 	 	12	 
	Section 5.2
	 	Deposits Unavailable or Interest Rate Unascertainable or Inadequate; Impracticability	 	 	12	 
	Section 5.3
	 	Changes in Law Rendering Eurodollar Loan Unlawful	 	 	13	 
	Section 5.4
	 	Discretion of the Banks as to Manner of Funding	 	 	13	 
	ARTICLE VI

CONDITIONS PRECEDENT AND SUBSEQUENT
	 	 	 	 
	Section 6.1
	 	Conditions of the Loan	 	 	13	 
	ARTICLE VII

REPRESENTATIONS AND WARRANTIES
	 	 	 	 
	Section 7.1
	 	Organization, Standing, Etc.	 	 	14	 
	Section 7.2
	 	Authorization and Validity	 	 	14	 
	Section 7.3
	 	No Conflict; No Default	 	 	14	 
	Section 7.4
	 	Government Consent	 	 	15	 
	Section 7.5
	 	Financial Statements and Condition	 	 	15	 
	Section 7.6
	 	Litigation and Contingent Liabilities	 	 	15	 
	Section 7.7
	 	Compliance	 	 	15	 
	Section 7.8
	 	Environmental, Health and Safety Laws	 	 	15	 
	Section 7.9
	 	ERISA	 	 	16	 
	Section 7.10
	 	Regulation U	 	 	16	 
	Section 7.11
	 	Ownership of Property; Liens	 	 	16	 
	Section 7.12
	 	Taxes	 	 	16	 
	Section 7.13
	 	Trademarks, Patents	 	 	16	 
	Section 7.14
	 	Investment Company Act	 	 	16	 
	Section 7.15
	 	Public Utility Holding Company Act	 	 	16	 
	Section 7.16
	 	Subsidiaries	 	 	17	 
	Section 7.17
	 	Partnerships and Joint Ventures	 	 	17	 
	Section 7.18
	 	Senior Debt	 	 	17	 
	ARTICLE VIII

AFFIRMATIVE COVENANTS
	 	 	 	 
	Section 8.1
	 	Financial Statements and Reports Furnish to the Banks	 	 	17	 
	Section 8.2
	 	Corporate Existence	 	 	18	 
	Section 8.3
	 	Insurance	 	 	18	 
	Section 8.4
	 	Payment of Taxes and Claims	 	 	18	 
	Section 8.5
	 	Inspection	 	 	19	 
	Section 8.6
	 	Maintenance of Properties	 	 	19	 
	Section 8.7
	 	Books and Records	 	 	19	 
	Section 8.8
	 	Compliance	 	 	19	 

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	 	 	 	 	Page

	Section 8.9
	 	ERISA	 	 	19	 
	Section 8.10
	 	Environmental Matters	 	 	19	 
	Section 8.11
	 	Failure to Approve Capital Structure	 	 	19	 
	Section 8.12
	 	Senior Debt	 	 	19	 
	ARTICLE IX

NEGATIVE COVENANTS
	 	 	 	 
	Section 9.1
	 	Merger	 	 	20	 
	Section 9.2
	 	Sale of Assets	 	 	20	 
	Section 9.3
	 	Plans	 	 	20	 
	Section 9.4
	 	Ownership of Stock	 	 	20	 
	Section 9.5
	 	Other Agreements	 	 	20	 
	Section 9.6
	 	Restricted Payments	 	 	20	 
	Section 9.7
	 	Investments	 	 	20	 
	Section 9.8
	 	Liens	 	 	21	 
	Section 9.9
	 	Contingent Liabilities	 	 	22	 
	Section 9.10
	 	Unconditional Purchase Obligations	 	 	22	 
	Section 9.11
	 	Transactions with Related Parties	 	 	22	 
	Section 9.12
	 	Use of Proceeds	 	 	23	 
	Section 9.13
	 	Interest-bearing Debt to Total Capitalization	 	 	23	 
	Section 9.14
	 	Interest and Dividend Coverage Ratio	 	 	23	 
	ARTICLE X

EVENTS OF DEFAULT AND REMEDIES
	 	 	 	 
	Section 10.1
	 	Events of Default	 	 	23	 
	Section 10.2
	 	Remedies	 	 	25	 
	Section 10.3
	 	Security Agreement in Accounts and Setoff	 	 	25	 
	ARTICLE XI

THE AGENT
	 	 	 	 
	Section 11.1
	 	Appointment and Grant of Authority	 	 	25	 
	Section 11.2
	 	Non-Reliance on Agent	 	 	25	 
	Section 11.3
	 	Responsibility of the Agent and Other Matters	 	 	26	 
	Section 11.4
	 	Action on Instructions	 	 	26	 
	Section 11.5
	 	Indemnification	 	 	26	 
	Section 11.6
	 	UBS AG, Stamford Branch and Affiliates	 	 	27	 
	Section 11.7
	 	Notice to Holder of Notes	 	 	27	 
	Section 11.8
	 	Successor Agent	 	 	27	 
	ARTICLE XII

MISCELLANEOUS
	 	 	 	 
	Section 12.1
	 	No Waiver and Amendment	 	 	27	 
	Section 12.2
	 	Amendments, Etc.	 	 	27	 

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	 	 	 	 	Page

	Section 12.3
	 	Assignments and Participations	 	 	28	 
	Section 12.4
	 	Costs, Expenses and Taxes; Indemnification	 	 	29	 
	Section 12.5
	 	Notices	 	 	30	 
	Section 12.6
	 	Successors	 	 	30	 
	Section 12.7
	 	Severability	 	 	30	 
	Section 12.8
	 	Subsidiary References	 	 	31	 
	Section 12.9
	 	Captions	 	 	31	 
	Section 12.10
	 	Entire Agreement	 	 	31	 
	Section 12.11
	 	Counterparts	 	 	31	 
	Section 12.12
	 	Governing Law	 	 	31	 
	Section 12.13
	 	Consent to Jurisdiction	 	 	31	 
	Section 12.14
	 	Waiver of Jury Trial	 	 	31	 

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Index to Exhibits:

	 	 	 	Page

	A.	 	Revolving Note	 
	 
	B.	 	Compliance Certificate	 
	 
	C.	 	Guaranty	 
	 
	E.	 	Form of Legal Opinion	 
	 
	F.	 	Assignment and Assumption	 
	 
	G.	 	Administrative Questionnaire	 
	 
	Index to Schedules:
	 
	1.1(b)	 	Material Subsidiaries	 
	 
	7.6	 	Litigation / Contingent Liabilities	 
	 
	7.11	 	Existing Liens	 
	 
	7.16	 	Subsidiaries	 
	 
	7.17	 	Partnerships / Joint Ventures	 
	 
	9.7	 	Investments	 

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CREDIT AGREEMENT

          THIS CREDIT AGREEMENT, dated as of August 13, 2004, is by and between
OTTER TAIL CORPORATION, a Minnesota corporation (the “Borrower”), UBS LOAN
FINANCE LLC and the other banks or financial institutions which hereafter
become parties hereto by means of assignment and assumption as hereinafter
described (individually referred to as a “Bank” or collectively as the
“Banks”), UBS SECURITIES LLC, as Arranger, and UBS AG, STAMFORD BRANCH, as
agent for the Banks (in such capacity, the “Agent”).

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

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

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

          “Administrative Questionnaire” means an Administrative Questionnaire in
the form of Exhibit G, or such other form as may be supplied from time to time
by the Agent.

          “Agent” means UBS AG, Stamford Branch, as agent for the Banks hereunder
and each successor, as provided in Section 12.8, who shall act as Agent.

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

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

	 	 	 	 	 	 	 	 	 
	 	 	Applicable Margin

	 	 	Eurodollar	 	Base Rate
	Level:
	 	Loan
	 	Loan

	Level I:
	 	 	0.50	%	 	 	0.0	%
	Level II:
	 	 	0.60	%	 	 	0.0	%
	Level III:.
	 	 	0.70	%	 	 	0.0	%
	Level IV:
	 	 	0.90	%	 	 	0.0	%

The Applicable Margin shall be those shown for Level II as of the date of
this Agreement. The Applicable Margin shall be adjusted ten (10)
Business Days after any change in ratings that would require such
adjustment. For purposes of the foregoing, the Levels shall be defined
and determined as follows:

 

 

Level I shall apply if the Borrower’s Long Term Debt Rating
is A+ or better (S&P) or Al or better (Moody’s) but no
numerically lower Level applies.

Level II shall apply if the Borrower’s Long Term Debt Rating
is A or better (S&P) or A2 or better (Moody’s) but no
numerically lower Level applies.

Level III shall apply if the Borrower’s Long Term Debt
Rating is A- (S&P) or A3 (Moody’s) but no numerically lower
Level applies.

Level IV shall apply if the Borrower’s Long Term Debt Rating
is BBB+ or below (S&P) or Baal or below (Moody’s) or if the
Borrower shall not have a current Long Term Debt Rating from
both S&P and Moody’s.

In the event of a split rating (i.e., Long Term Debt Ratings by S&P and
Moody’s that would not be in the same Level), the Level shall be based on
the higher Long Term Debt Rating unless the ratings are more than one
Level apart, in which case the Level would be based on the Long Term Debt
Rating one Level lower than the higher of the two Long Term Debt Ratings.
At any time that the Borrower does not have a Long Term Debt Rating,
only Base Rate Loans will be permitted.

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

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

          “Borrowing Date” shall have the meaning set forth in Section 2.3.

          “Business Day” means any day (other than a Saturday, Sunday or legal
holiday in the State of New York) on which national banks are permitted to be
open in Fargo, North Dakota and New York, New York; provided, however, that
when used in connection with a Eurodollar Loan, the term “Business Day” shall
also exclude any day on which banks are not open for dealings in dollar
deposits in the London interbank market.

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

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

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

          “Commitment” means the maximum principal amount of the Loan of the Initial
Bank which may be drawn down during the period from and including the date
hereof to the Borrowing Date, which amount is initially $80.0 million.

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

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

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

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

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

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

          “Eurodollar Interbank Rate” means the offered rate for deposits in United
States Dollars for delivery of such deposits on the first day of an Interest
Period of a Eurodollar Loan, for the number of days comprised therein, quoted
by the Agent from Page 3750 of the Dow Jones Markets (Telerate) screen as of
approximately 11:00 a.m., London time, on the day that is two Banking Days
preceding the first day of the Interest Period of such Eurodollar Loan, or the
rate for such deposits determined by the Agent at such time based on such other
published service of general application as shall be selected by the Agent for
such purpose; provided, that in lieu of determining the rate in the foregoing
manner, the Agent may determine the rate based on rates offered to the Agent
for deposits in United States Dollars in the interbank eurodollar market at
such time for delivery on the first day of the Interest Period for the number
of days comprised therein.

          “Eurodollar Loan” means a Loan designated as such in a notice of borrowing
under Section 2.3 or a notice of continuation or conversion under Section 2.4.

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

	 	 	 	 	 
	ERRA

	 	=	 	Eurodollar Interbank Rate
	

	 	 
	 	

	 
	 	 	 	1.00 - ERR

In such formula, “ERR” means “Eurodollar Reserve Rate” and “ERRA” means
“Eurodollar Rate (Reserve Adjusted)”, in each instance determined by the
Agent for the applicable Interest Period.

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The Agent’s determination of all such rates for any Interest Period shall
be conclusive in the absence of manifest error.

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

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

          “Federal Funds Effective Rate” means for any day, an interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published for such day by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day which is a Business Day,
the average of the quotations for such day on such transactions received by the
Agent from three Federal funds brokers of recognized standing selected by it.
In the case of a day which is not a Business Day, the Federal Funds Effective
Rate for such day shall be the Federal Funds Effective Rate for the preceding
Business Day. Each change in the Base Rate due to a change in the Federal
Funds Effective Rate shall take effect on the effective date of such change in
the Federal Funds Effective Rate.

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

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

          “Guarantor” means Varistar Corporation, a Minnesota corporation and each
successor and assign thereof.

          “Guaranty” means the Guaranty by the Guarantor in the form of Exhibit C
hereto, duly completed and executed by the Guarantor.

          “Indebtedness” means, without duplication, all obligations, contingent or
otherwise, which in accordance with GAAP should be classified upon the
obligor’s balance sheet as liabilities, but in any event including the
following (whether or not they should be classified as liabilities upon such
balance sheet): (a) obligations secured by any mortgage, pledge, security
interest, lien, charge or other encumbrance existing on property owned or
acquired subject thereto, whether or not the obligation secured thereby shall
have been assumed and whether or not the obligation secured is the obligation
of the owner or another party; (b) any obligation on account of deposits or
advances; (c) any obligation for the deferred purchase price of any property or
services, except trade accounts payable arising in the ordinary course of
business, (d) any obligation as lessee under any Capitalized Lease; (e) all
guaranties, endorsements and other contingent obligations in respect to
Indebtedness of others; (f) undertakings or agreements to reimburse or
indemnify issuers of letters of credit; and (g) net liabilities under any
interest rate swap, collar or other interest rate hedging agreement. For all
purposes of this Agreement, the Indebtedness of any Person

-4-

 

shall include the Indebtedness of any partnership or joint venture in
which such Person is a general partner or a joint venturer.

          “Initial Bank” means UBS Loan Finance LLC.

          “Interest and Dividend Coverage Ratio” means the ratio, calculated for
each period of four consecutive fiscal quarters of the Borrower, of: (a) EBIT
for such period; to (b) the sum for such period of (i) Interest Expense, plus
(ii) dividends or interest on Preferred Stock.

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

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

          “Interest Period” means, for any Eurodollar Loan, the period commencing on
the borrowing date of such Eurodollar Loan or the date a Base Rate Loan is
converted into such Eurodollar Loan, or the last day of the preceding Interest
Period for such Eurodollar Loan, as the case may be, and ending on the
numerically corresponding day one month thereafter; provided, that:

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

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

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

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

-5-

 

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

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

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

          “Loan Documents” means this Agreement, the Notes, the Guaranty, and each
other instrument, document, guaranty, security agreement, mortgage, or other
agreement executed and delivered by the Borrower or any guarantor or party
granting security interests in connection with this Agreement, the Loan or any
collateral for the Loan.

          “Long Term Debt Rating” means the rating assigned by S&P and Moody’s to
the long term, unsecured and unsubordinated indebtedness of the Borrower.

          “Material Subsidiary” means (a) the Subsidiaries listed on Schedule 1.1(b)
hereto, and (b) any Subsidiary acquired after the date of this Agreement if the
acquisition of such Subsidiary has required consent of the Required Banks under
Section 9.7(j) to be deemed permitted under this Agreement.

          “Moody’s” means Moody’s Investors Service, Inc.

          “Net Cash Proceeds” means in any case of any equity issuance or debt
issuance the aggregate amount of all cash received by the Borrower or
Subsidiary effecting such transaction in respect thereof net of all investment
banking fees, legal fees, consulting fees, accountants’ fees, underwriting
discounts and commissions and other customary fees and expenses, actually
incurred or satisfactorily documented in connection therewith.

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

          “Payment Date” means the Termination Date, plus (a) the last day of each
Interest Period for each Eurodollar Loan and, if such Interest Period is in
excess of three months after the first day of such Interest Period, and
thereafter each day three months after each succeeding Payment Date and (b) the
last day of each March, June, September and December of each year for each Base
Rate Loan and for any fees including, without limitation, Commitment Fees.

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

          “Percentage” means, as to any Bank, the proportion, expressed as a
percentage, that such Bank’s outstanding Loan bears to the total outstanding
Loan.

          “Permitted Divestitures” means sales of stock or assets, transfers of
stock or assets, mergers resulting in divestiture of stock or assets or other
divestitures of assets of the Borrower and Subsidiaries, which, in the
aggregate for all such transactions after December 31, 2001, shall not result
in the

-6-

 

sale, transfer or other divestiture of stock or assets having a value in
excess of 15% of the consolidated assets of the Borrower and its Subsidiaries
at the time of determination.

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

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

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

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

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

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

          “Required Banks” means (a) during the period from and including the date
hereof to and including the Borrowing Date, the Initial Bank and (b)
thereafter, the Banks whose share of principal of the Loan equals at least 66
2/3% of the aggregate outstanding principal of the Loan.

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

          “S&P” means Standard & Poor’s Ratings Group.

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

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          “Termination Date” means the earliest of (a) August 12, 2005, (b) the date
on which the Commitments are terminated pursuant to Section 10.2 hereof or (c)
the date on which the Commitments are reduced to zero pursuant to Section 4.3
hereof.

          “Total Capitalization” means as of any date of determination, the sum of
(a) the amounts set forth on the consolidated balance sheet of the Borrower as
the sum of the common stocks, preferred stock, additional paid-in capital and
retained earnings of the Borrower (excluding treasury stock); plus (b) the
principal amount of Interest-bearing Debt of the Borrower and the Subsidiaries.

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

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

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

ARTICLE II

TERMS OF LENDING

          Section 2.1 The Commitments. Subject to the terms and conditions hereof
and in reliance upon the warranties of the Borrower herein, the Initial Bank
agrees to make a single loan to the Borrower at any time from and including the
date of this Agreement to and including the 35th day after the date of this
Agreement, in the amount of up to $80.0 million (the “Loan”). The Borrower may
borrow the Loan only in a single drawing and the Commitment with respect to any
unborrowed amount will expire concurrently with such borrowing.

          Section 2.2 Loan Options. The Loan shall be constituted of a Eurodollar
Loan and/or a Base Rate Loan, as shall be selected by the Borrower, except as
otherwise provided herein. At any time, all Loans shall be of the same type.

          Section 2.3 Borrowing Procedures. Any request by the Borrower for the Loan shall be in writing, or by
telephone promptly confirmed in writing, and must be given so as to be received
by the Agent not later than:

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

          (b) 12:00 noon, Stamford, Connecticut time, three Business days
prior to the date of the requested Loan, if the Loan shall be a
Eurodollar Loan.

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          The request for a Loan shall specify (1) the borrowing date (which shall
be a Business Day) (the “Borrowing Date”) and (2) the amount of such Loan and
the type of such Loan.

          Section 2.4 Continuation or Conversion of Loan. The Loan will continue as
a Eurodollar Loan from one Interest Period into a subsequent Interest Period to
begin on the last day of the earlier Interest Period unless the Borrower elects
to convert the outstanding Loan into another type of Loan (on the last day of
an Interest Period only, in the instance of a Eurodollar Loan), by giving the
Agent notice in writing, or by telephone promptly confirmed in writing, given
so as to be received by the Agent not later than:

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

          (b) 12:00 noon, Stamford, Connecticut time, three Business days
prior to the date of the requested continuation or conversion, if the
continuing or converted Loan shall be Eurodollar Loan.

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

          Section 2.5 The Notes. Upon request by a Bank, the Loan of such Bank
shall be evidenced by a promissory note of the Borrower (the “Notes”),
substantially in the form of Exhibit A-1 hereto, in the amount of such Bank’s
Loan as then in effect and dated as of the date of such request. The Banks
shall enter in their respective records the amount of each Loan, the rate of
interest borne by each Loan and the payments made on the Loan, and such records
shall be deemed conclusive evidence of the subject matter thereof, absent
manifest error.

          Section 2.6 Funding Losses. In the event of (a) any failure of the Borrower to borrow, continue or
convert a Eurodollar Loan on a date specified in a notice thereof, or (b) any
payment (including, without limitation, any payment pursuant to Section 4.2,
4.3, 4.4 or 10.2), prepayment or conversion of any Eurodollar Loan on a date
other than the last day of the Interest Period for such Loan, the Borrower
agrees to pay each Bank’s costs, expenses and Interest Differential (as
determined by such Bank) incurred as a result of such event. The term
“Interest Differential” shall mean that sum equal to the greater of 0 or the
financial loss incurred by each Bank resulting from such event, calculated as
the difference between the amount of interest such Bank would have earned (from
like investments in the Money Markets as of the first day of the Interest
Period of the relevant Loan) had such event not occurred and the interest the
Bank will actually earn (from like investments in the Money Markets as of the
date of such event) as a result of the redeployment of funds from such event.
Because of the short-term nature of this facility, the Borrower agrees that the
Interest Differential shall not be discounted to its present value. The term
“Money Markets” refers to one or more wholesale funding markets available to
the Banks, including

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negotiable certificates of deposit, commercial paper,
eurodollar deposits, bank notes, federal funds and others. Such determinations
by each Bank of shall be conclusive in the absence of manifest error.

          Section 2.7 Purpose of the Loan. The Loan shall be used solely to finance
the acquisition by the Borrower of Idaho Pacific Holdings and to pay fees and
expenses incurred by the Borrower in connection therewith.

ARTICLE III

INTEREST AND FEES

          Section 3.1 Interest.

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

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

          (c) Interest During an Event of Default. Upon and during the
continuance of any Event of Default, the Loan shall bear interest at a
rate per annum equal to 2.00% in excess of the rate then otherwise
applicable to the Loan.

          Section 3.2 Commitment Fees. The Borrower shall pay fees (the “Commitment
Fees”) to the Agent for the account of the Initial Bank in an amount equal to
0.15% of the Commitment for the period from the date hereof to the Borrowing
Date (or, if earlier, the permanent termination of the Commitment).

          Section 3.3 Computation. Interest and Commitment Fees shall be computed on the basis of actual
days elapsed and a year of 360 days, except that interest that is based on the
Base Rate shall be computed on the basis of actual days elapsed and a year of
365 or 366 days.

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

ARTICLE IV

PAYMENTS, PREPAYMENTS, REDUCTION OR TERMINATION

OF THE CREDIT AND SETOFF

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

          Section 4.2 Optional Prepayments. The Borrower may, upon at least three
(3) Business Days’ prior written or telephonic notice (promptly confirmed in
writing) received by the Banks, prepay the Loan, in whole or in part, at any
time subject to the provisions of Section 2.6, without any other premium or
penalty. Any such prepayment must be accompanied by accrued and unpaid
interest on the

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amount prepaid. Each partial prepayment shall be in an amount
of $50,000 or an integral multiple thereof.

          Section 4.3 Optional Reduction or Termination of Commitment. The Borrower
may, at any time prior to the Borrowing Date, upon no less than 2 Business Days
prior written or telephonic notice received by the Agent, reduce the
Commitment, with any such reduction in a minimum amount of $500,000 or an
integral multiple thereof. The Borrower may, at any time prior to the
Borrowing Date, upon not less than 2 Business Days prior written notice to the
Agent, terminate the Commitment in its entirety. Upon termination of the
Commitment pursuant to this Section, the Borrower shall pay to the Agent for
the account of the Initial Bank the full amount of all unpaid Commitment Fees
accrued to the date of such termination and all other unpaid obligations of the
Borrower to the Agent and Initial Bank hereunder. All payment described in
this Section is subject to the provisions of Section 2.6.

          Section 4.4 Mandatory Prepayments. Upon the receipt by the Borrower or
any of its Subsidiaries of the Net Cash Proceeds from (i) any public or private
issuance or incurrence of any Indebtedness after the date hereof (other than
pursuant to the Borrower’s existing Credit Agreement dated as of April 30, 2002
among the Borrower, the banks party thereto and U.S. Bank, National
Association, as a bank and agent) or (ii) any capital contribution or the sale
or issuance of any capital stock or any securities convertible into or
exchangeable for capital stock or any warrants, rights or options to acquire
Capital Stock (any transactions or event referred to in the foregoing clauses
(i) and (ii), a “Prepayment Event”), the Borrower will permanently prepay the
Loan in an amount equal to 100% of such Net Cash Proceeds, in each case
together with accrued interest thereon, each such prepayment or reduction to
occur within two Business Days of receipt thereof.

          Section 4.5 Payments. Payments and prepayments of principal of, and
interest on, the Notes and all fees, expenses and other obligations under the
Loan Documents shall be made without set-off or counterclaim in immediately
available funds not later than 2:00 p.m., Stamford, Connecticut time, on the
dates due at the main office of the Agent in Stamford, Connecticut. Funds
received on any day after such time shall be deemed to have been received on
the next Business Day. The Agent shall promptly distribute in like funds to
each Bank its Percentage share of each such payment of principal, interest and
Commitment Fees. Subject to the definition of the term “Interest Period”,
whenever any payment to be made hereunder or on the Notes shall be stated to be
due on a day which is not a Business Day, such payment shall be made on the
next succeeding Business Day and such extension of time shall be included in
the computation of any interest or fees. The Agent is authorized to debit the
operating account of the Borrower designated by the Borrower for such purpose
from time to time for all payments when due hereunder (provided that if such
account shall not have sufficient available funds to pay interest when due, the
Borrower shall pay such interest in immediately available funds).

          Section 4.6 Proration of Payments. If any Bank or other holder of a Loan
shall obtain any payment or other recovery (whether voluntary, involuntary, by
application of offset, pursuant to the guaranty hereunder, or otherwise) on
account of principal of, interest on, or fees with respect to any Loan, in any
case in excess of the share of payments and other recoveries of other Banks or
holders, such Bank or other holder shall purchase from the other Banks or
holders, in a manner to be specified by the Agent, such participations in the
Loan held by such other Banks or holders as shall be necessary to cause such
purchasing Bank or other holder to share the excess payment or other recovery
ratably with each of such other Banks or holders; provided, however, that if
all or any portion of the excess payment or other recovery is thereafter
recovered from such purchasing Bank or holder, the purchase shall be rescinded
and the purchase price restored to the extent of such recovery, but without
interest.

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ARTICLE V

ADDITIONAL PROVISIONS RELATING TO LOAN

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

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

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

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

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

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

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

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

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

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

          (c) the making or funding of a Eurodollar Loan has become
impracticable as a result of any event occurring after the date of this
Agreement which, in the opinion of the Agent, materially and adversely
affects such Loan or any Bank’s Commitment or the relevant market;

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

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

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

ARTICLE VI

CONDITIONS PRECEDENT AND SUBSEQUENT

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

          (a) A copy of this Agreement duly executed and delivered by the
Borrower and the Initial Bank.

          (b) Upon request of the Initial Bank, the Note payable to the
Initial Bank executed by a duly authorized officer (or officers) of the
Borrower.

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          (c) The Guaranty, duly executed by the Guarantor.

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

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

          (f) An opinion of counsel to the Borrower and the Guarantor,
addressed to the Initial Bank, in substantially the form of Exhibit E.

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

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

ARTICLE VII

REPRESENTATIONS AND WARRANTIES

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

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

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

          Section 7.3 No Conflict; No Default. The execution, delivery and
performance by the Borrower of the Loan Documents will not (a) violate any
provision of any law, statute, rule or regulation or any order, writ, judgment,
injunction, decree, determination or award of any court, governmental agency or
arbitrator presently in effect having applicability to the Borrower, (b)
violate or contravene any

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provisions of the Articles (or Certificate) of
Incorporation or by-laws of the Borrower, or (c) result in a breach of or
constitute a default under any indenture, loan or credit agreement or any other
agreement, lease or instrument to which the Borrower is a party or by which it
or any of its properties may be bound or result in the creation of any Lien on
any asset of the Borrower or any Material Subsidiary, which in any such case
under this subsection (c) would constitute an Adverse Event. The Borrower has
not delivered and will not deliver a letter pursuant to Section 10.7 of the
Note Purchase Agreement dated as of December 1, 2001 by and among the Borrower
and the purchasers identified therein. Neither the Borrower nor any Material
Subsidiary is in default under or in violation of any such law, statute, rule
or regulation, order, writ, judgment, injunction, decree, determination or
award or any such indenture, loan or credit agreement or other agreement, lease
or instrument in any case in which the consequences of such default or
violation could constitute an Adverse Event. No Default or Event of Default
has occurred and is continuing.

          Section 7.4 Government Consent. No order, consent, approval, license,
authorization or validation of, or filing, recording or registration with, or
exemption by, any governmental or public body or authority is required on the
part of the Borrower to authorize, or is required in connection with the
execution, delivery and performance of, or the legality, validity, binding
effect or enforceability of, the Loan Documents, provided, however, the
Borrower is required to make an annual filing of its Capital Structure with the
Minnesota Public Utilities Commission, and such Commission may thereafter issue
orders approving or disapproving of the Borrower’s capital structure.

          Section 7.5 Financial Statements and Condition. The Borrower’s audited
consolidated financial statements as at December 31, 2003, as heretofore
furnished to the Banks, have been prepared in accordance with GAAP on a
consistent basis and fairly present the financial condition of the Borrower and
the Subsidiaries as at such dates and the results of their operations for the
fiscal year then ended. As of the dates of such consolidated financial
statements, neither the Borrower nor any Material Subsidiary had any material
obligation, contingent liability, liability for taxes or long-term lease
obligation which is not reflected in such consolidated financial statements or
in the notes thereto. Since December 31, 2003, no Adverse Event has occurred.

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

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

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

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environment, the consequences of which
non-compliance or remedial action could constitute an Adverse Event.

          Section 7.9 ERISA. Each Plan complies with all material applicable
requirements of ERISA and the Code and with all material applicable rulings and
regulations issued under the provisions of ERISA and the Code setting forth
those requirements. No Reportable Event, other than a Reportable Event for
which the reporting requirements have been waived by regulations of the PBGC,
has occurred and is continuing with respect to any Plan. All of the minimum
funding standards applicable to such Plans have been satisfied and there exists
no event or condition which would permit the institution of proceedings to
terminate any Plan under Section 4042 of ERISA. The current value of the
Plans’ benefits guaranteed under Title IV or ERISA does not exceed the current
value of the Plans’ assets allocable to such benefits.

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

          Section 7.11 Ownership of Property; Liens. Each of the Borrower and the
Material Subsidiaries has good and marketable title to its real properties and
good and sufficient title to its other properties, including all properties and
assets referred to as owned by the Borrower and the Material Subsidiaries in
the audited consolidated financial statement of the Borrower referred to in
Section 7.5 (other than property disposed of since the date of such financial
statement in the ordinary course of business). None of the properties,
revenues or assets of the Borrower or any of the Material Subsidiaries is
subject to a Lien, except for (a) Liens disclosed in the consolidated financial
statements referred to in Section 7.5, (b) Liens listed on Schedule 7.11, or
(c) Liens allowed under Section 9.8.

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

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

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

          Section 7.15 Public Utility Holding Company Act. Neither the Borrower nor
any Subsidiary is a “holding company” or a “subsidiary company” of a holding
company or an “affiliate” of a

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holding company or of a subsidiary company of a
holding company within the meaning of the Public Utility Holding Company Act of
1935, as amended.

          Section 7.16 Subsidiaries. Schedule 7.16 sets forth as of the date of
this Agreement a list of all Subsidiaries and the number and percentage of the
shares of each class of capital stock owned beneficially or of record by the
Borrower or any Subsidiary therein, and the jurisdiction of incorporation of
each Subsidiary.

          Section 7.17 Partnerships and Joint Ventures. Schedule 7.17 sets forth as
of the date of this Agreement a list of all partnerships or joint ventures in
which the Borrower or any Subsidiary is a partner (limited or general) or joint
venturer.

          Section 7.18 Senior Debt. The Loan is senior unsecured Indebtedness of
the Borrower, and is pari passu and of equal rank and seniority with all senior
unsecured Indebtedness of the Borrower.

ARTICLE VIII

AFFIRMATIVE COVENANTS

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

          Section 8.1 Financial Statements and Reports Furnish to the Banks:

          (a) As soon as available and in any event within 120 days after the end of
each fiscal year of the Borrower, the annual audit report of the Borrower and
its Subsidiaries prepared on a consolidated basis and in conformity with GAAP,
consisting of at least statements of income, cash flow, and a consolidated
balance sheet as at the end of such year, setting forth in each case in
comparative form corresponding figures from the previous annual audit,
certified without qualification by independent certified public accountants of
recognized standing selected by the Borrower and acceptable to the Bank,
together with any related management letters.

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

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

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

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

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

     (g) Copies of any order issued by the Minnesota Public Utilities
Commission regarding the Borrower’s capital structure.

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

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

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

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

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

     Section 8.4 Payment of Taxes and Claims. File all tax returns and reports
which are required by law to be filed by it and pay before they become
delinquent all taxes, assessments and governmental charges and levies imposed
upon it or its property and all claims or demands of any kind (in-

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cluding,
without limitation, those of suppliers, mechanics, carriers, warehouses,
landlords and other like Persons) which, if unpaid, might result in the
creation of a Lien upon its property; provided that the foregoing items need
not be paid if they are being contested in good faith by appropriate
proceedings, and as long as the Borrower’s or such material Subsidiary’s title
to its property is not materially adversely affected, its use of such property
in the ordinary course of its business is not materially interfered with and
adequate reserves with respect thereto have been set aside on the Borrower’s or
such Material Subsidiary’s books in accordance with GAAP.

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

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

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

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

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

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

     Section 8.11 Failure to Approve Capital Structure. If the Minnesota
Public Utilities Commission or any other governmental authority of appropriate
jurisdiction shall issue an order finally determining not to approve, or
finally disapproving of, this Agreement, the Borrower will terminate the
Commitments and repay the Loan within thirty (30) days after such order
becoming final (or within such shorter period as such order shall provide for
such termination and repayment).

     Section 8.12 Senior Debt. Take all actions necessary to assure that the
Loan is senior unsecured Indebtedness of the Borrower, and is and remains pari
passu and of equal rank and seniority with all senior unsecured Indebtedness of
the Borrower (without limiting the obligation of the Borrower to deliver
collateral under certain circumstances, as specifically provided herein).

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ARTICLE IX

NEGATIVE COVENANTS

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

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

     Section 9.2 Sale of Assets. Sell, transfer, lease or otherwise convey all
or any substantial part of its assets except for (a) sales and leases of
inventory in the ordinary course of business, (b) sales or other transfers by a
wholly-owned Subsidiary to the Borrower or another wholly-owned Subsidiary; and
(c) Permitted Divestitures.

     Section 9.3 Plans. Permit any condition to exist in connection with any Plan which might
constitute grounds for the PBGC to institute proceedings to have such Plan
terminated or a trustee appointed to administer such Plan, permit any Plan to
terminate under any circumstances which would cause the lien provided for in
Section 4068 of ERISA to attach to any property, revenue or asset of the
Borrower or any Subsidiary or permit the underfunded amount of Plan benefits
guaranteed under Title IV of ERISA to exceed $500,000.

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

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

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

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

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

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

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

     (d) Certificates of deposit or bankers’ acceptances, each maturing within
one year from the date of acquisition, issued by any commercial bank organized
under the laws of the United States or any State thereof which has (i) combined
capital, surplus and undivided profits of at least $100,000,000, and (ii) a
credit rating with respect to its unsecured indebtedness from a nationally
recognized rating service that is satisfactory to the Bank;

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

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

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

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

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

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

     (k) Any Material Subsidiary may make Investments constituting loans to the
Borrower and provided that no Default or Event of Default shall have occurred
and continued, the Borrower and any Material Subsidiary may make Investments
constituting loans to (i) any Material Subsidiaries, or (ii) any Subsidiaries
that are not Material Subsidiaries, provided, that such loans to any one
Subsidiary shall not exceed $15,000,000 in aggregate principal amounts
outstanding at any time.

     Section 9.8 Liens. Create, incur, assume or suffer to exist any Lien with
respect to any property, revenues or assets now owned or hereafter arising or
acquired, except:

     (a) Liens in connection with the acquisition of property after the date
hereof by way of purchase money mortgage and security interests, conditional
sale or other title retention agreement, Capitalized Lease or other deferred
payment contract, and attaching only to the property being acquired;

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     (b) Liens existing on assets of Material Subsidiaries acquired after March
31, 2002, which existed at the time of such acquisition and attach only to the
assets of such Material Subsidiaries;

     (c) Liens existing on the date of this Agreement and disclosed on Schedule
7.11 hereto;

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

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

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

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

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

In no case shall Liens permitted hereunder apply to the stock of the Guarantor.

     Section 9.9 Contingent Liabilities. Either: (a) endorse, guarantee,
contingently agree to purchase or to provide funds for the payment of, or
otherwise become contingently liable upon, any obligation of any other Person,
except by the endorsement of negotiable instruments for deposit or collection
(or similar transactions) in the ordinary course of business, or (b) agree to
maintain the net worth or working capital of, or provide funds to satisfy any
other financial test applicable to, any other Person, except (in the case of
(a) or (b) above) for (i) guaranty by the Borrower of loans to leveraged
Employee Stock Ownership Plans; (ii) a performance guaranty by the Borrower of
performance by DMI Industries, Inc. under a certain contract involving
aggregate payments of approximately $20,000,000; (iii) guaranties by the
Borrower or any Material Subsidiary of obligations of any Material Subsidiary
as lessee under any lease that is not a Capitalized Lease; (iv) other
guaranties limited as to principal of recovery to not more than $10,000,000 in
the aggregate; (v) guaranties by the Guarantor of the obligations of the
Borrower under that certain Note Purchase Agreement, dated as of December 1,
2001, among the Borrower and the various purchasers which are parties thereto
and (vi) guaranty by the Guarantor of the obligations of the Borrower in
respect of up to $40,000,000 of Insured Senior Notes due October 1, 2017, as
described in a Prospectus dated September 11, 2002 and a prospectus supplement
dated on or about September 19, 2002.

     Section 9.10 Unconditional Purchase Obligations. Enter into or be a party
to any contract for the purchase or lease of materials, supplies or other
property or services if such contract requires that payment be made by it
regardless of whether or not delivery is ever made of such materials, supplies
or other property or services.

     Section 9.11 Transactions with Related Parties. Enter into or be a party
to any transaction or arrangement, including, without limitation, the purchase,
sale lease or exchange of property or the rendering of any service, with any
Related Party, except in the ordinary course of and pursuant to the

-22-

 

reasonable
requirements of the Borrower’s or the applicable Material Subsidiary’s business
and upon fair and reasonable terms no less favorable to the Borrower or such
Material Subsidiary than would obtain in a comparable arm’s-length transaction
with a Person not a Related Party.

     Section 9.12 Use of Proceeds. Permit any proceeds of the Loan to be used for purposes other than
general corporate purposes (including acquisitions, to the extent permitted
hereunder) or permit any proceeds of the Loan to be used, either directly or
indirectly, for the purpose, whether immediate, incidental or ultimate, of
“purchasing or carrying any margin stock” within the meaning of Regulation U of
the Federal Reserve Board, as amended from time to time, and furnish to any
Bank, upon its request, a statement in conformity with the requirements of
Federal Reserve Form U-1 referred to in Regulation U.

     Section 9.13 Interest-bearing Debt to Total Capitalization. Permit the
ratio, as of the last day of any fiscal quarter of the Borrower, of (a)
Interest-bearing Debt, to (b) Total Capitalization to be greater than 0.60 to
1.00.

     Section 9.14 Interest and Dividend Coverage Ratio. Permit the Interest
and Dividend Coverage Ratio for any period of four consecutive fiscal quarters
to be less than 1.50 to 1.00.

ARTICLE X

EVENTS OF DEFAULT AND REMEDIES

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

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

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

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

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

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

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

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

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

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

     (j) The maturity of any Indebtedness of the Borrower (other than
Indebtedness under this Agreement) or a Material Subsidiary in the aggregate in
excess of $5,000,000 shall be accelerated, or the Borrower or a Material
Subsidiary shall fail to pay any such Indebtedness (in excess of such amount)
when due or, in the case of such Indebtedness payable on demand, when demanded,
or any event shall occur or condition shall exist and shall continue for more
than the period of grace, if any, applicable thereto and shall have the effect
of causing, or permitting (any required notice having been given and grace
period having expired) the holder of any such Indebtedness (in excess of such
amount) or any trustee or other Person acting on behalf of such holder to
cause, such Indebtedness to become due prior to its stated maturity or to
realize upon any collateral given as security therefor;

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

     (l) The Long Term Debt Rating of the Borrower shall be lower than BBB S&P)
or Baa3 (Moody’s), or the Borrower shall cease to have a Long Term Debt Rating;
provided, however, that the Event of Default set forth in this clause (l) will
no longer be an Event of Default in the event that the Borrower provides the
Agent with an officer’s certificate satisfactory to the Agent certifying that
all of the Borrower’s other credit agreements have been amended or modified
such that they do not contain any Event of Default substantially similar to
this clause (l); or

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     (m) Any Person, or group of Persons acting in concert, that owned less
than 5% of the shares of any voting class of stock of the Borrower shall have
acquired more than 25% of the shares of such voting stock.

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

     Section 10.3 Security Agreement in Accounts and Setoff. As additional
security for the payment of all of the Obligations, the Borrower grants to the
Agent, each Bank and each holder of a Note a security interest in, a lien on,
and an express contractual right to set off against, each deposit account and
all deposit account balances, cash and any other property of the Borrower now
or hereafter maintained with, or in the possession of, the Agent, such Bank or
such other holder of a Note. Upon the occurrence of any Event of Default, upon
written direction by the Agent to such effect, the Agent, each such Bank and
each such holder of a Note may: (a) refuse to allow withdrawals from any such
deposit account; (b) apply the amount of such deposit account balances and the
other assets of the Borrower described above to the Obligations; and (c) offset
any other obligation of the Agent, such Bank or such holder of a Note against
the Obligations; all whether or not the Obligations are then due or have been
accelerated and all without any advance or contemporaneous notice or demand of
any kind to the Borrower, such notice and demand being expressly waived.

ARTICLE XI

THE AGENT

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

     Section 11.2 Non-Reliance on Agent. Each Bank agrees that it has, independently and without reliance on the
Agent or any other Bank, and based on such documents and information as it has
deemed appropriate, made its own credit analysis of the Borrower and decision
to enter into this Agreement and that it will, independently and without
reliance upon the Agent, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own analysis and
decisions in taking or not taking action under this Agreement. The Agent shall
not be required to keep informed as

-25-

 

to the performance or observance by the
Borrower of this Agreement and the Loan Documents or to inspect the properties
or books of the Borrower. Except for notices, reports and other documents and
information expressly required to be furnished to the Banks by the Agent
hereunder, the Agent shall not have any duty or responsibility to provide any
Bank with any credit or other information concerning the affairs, financial
condition or business of the Borrower (or any of its related companies) which
may come into the Agent’s possession.

     Section 11.3 Responsibility of the Agent and Other Matters.

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

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

     (c) The Agent shall be entitled to act, and shall be fully protected in
acting upon, any communication in whatever form believed by the Agent in good
faith to be genuine and correct and to have been signed or sent or made by a
proper person or persons or entity. The Agent may consult counsel and shall be
entitled to act, and shall be fully protected in any action taken in good
faith, in accordance with advice given by counsel. The Agent may employ agents
and attorneys-in-fact and shall not be liable for the default or misconduct of
any such agents or attorneys-in-fact selected by the Agent with reasonable
care. The Agent shall not be bound to ascertain or inquire as to the
performance or observance of any of the terms, provisions or conditions of this
Agreement or the Notes on the Borrower’s part.

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

     Section 11.5 Indemnification. To the extent the Borrower does not reimburse and save the Agent
harmless according to the terms hereof for and from all costs, expenses and
disbursements in connection herewith or with the other Loan Documents, such
costs, expenses and disbursements to the extent reasonable shall be borne by
the Banks ratably in accordance with their Percentages and the Banks hereby
agree on such basis (a) to reimburse the Agent for all such reasonable costs,
expenses and disbursements on request and (b) to indemnify and save harmless
the Agent against and from any and all losses, obligations, penalties, actions,
judgments and suits and other reasonable costs, expenses and disbursements of
any kind or nature whatsoever which may be imposed on, incurred by or asserted
against the Agent, other than as a consequence of actual gross negligence or
willful misconduct on the part of the Agent, arising out of or in connection
with this Agreement or the Notes or any instrument or document in

-26-

 

connection
herewith or therewith, or any request of the Banks, including without
limitation the reasonable costs, expenses and disbursements in connection with
defending itself against any claim or liability, or answering any subpoena,
related to the exercise or performance of any of its powers or duties under
this Agreement or the other Loan Documents or the taking of any action under or
in connection with this Agreement or the Notes.

     Section 11.6 UBS AG, Stamford Branch and Affiliates. With respect to the
Loan by UBS Loan Finance LLC under this Agreement and any Note and any interest
of UBS Loan Finance LLC in any Note, UBS Loan Finance LLC shall have the same
rights, powers and duties under this Agreement and such Note as any other Bank
and may exercise the same as though UBS AG, Stamford Branch were not the Agent.
UBS AG, Stamford Branch and its affiliates may accept deposits from, lend
money to, and generally engage, and continue to engage, in any kind of business
with the Borrower as if UBS AG, Stamford Branch were not the Agent.

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

     Section 11.8 Successor Agent. The Agent may resign at any time by giving
at least 30 days written notice thereof to the Banks and the Borrower. Upon
any such resignation, the Required Banks shall have the right to appoint a
successor Agent. If no successor Agent shall have been appointed by the
Required Banks and shall have accepted such appointment within 30 days after
the retiring Agent’s giving notice of resignation, then the retiring Agent may,
but shall not be required to, on behalf of the Banks, appoint a successor
Agent.

ARTICLE XII

MISCELLANEOUS

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

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

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

-27-

 

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

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

     (d) release the Guaranty; or

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

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

     Section 12.3 Assignments and Participations.

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

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

     (c) Participations. Each Bank shall have the right, subject to the
further provisions of this Section 12.3, to grant or sell a participation in
all or any part of its Loan and Notes (a “Participation”) to any commercial
lender, other financial institution or other entity (a “Participant”) without
the consent of the Borrower, the Agent of any other party hereto. The Borrower
agrees that if amounts outstanding under this agreement and the Notes are due
and unpaid, or shall have been declared or shall have become due and payable
upon the occurrence of an Event of Default, each Participant shall be deemed to
have the right of setoff in respect of its Participation in amounts owing under
this Agreement and any

-28-

 

Note to the same extent as if the amount of its
Participation were owing directly to it as a Bank under this agreement or any
note; provided, that such right of setoff shall be subject to the obligation of
such Participant to share with the Banks, and the Banks agree to share with
such Participant, as provided in Section 4.6 hereof. The Borrower also agrees
that each Participant shall be entitled to the benefits of Article V with
respect to its Participation, provided that no Participant shall be entitled to
receive any greater amount pursuant to such Sections than the transferor Bank
would have been entitled to receive in respect of the amount of the
Participation transferred by such transferor Bank to such Participant had no
such transfer occurred.

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

     (e) Tax Matters. No Bank shall be permitted to enter into any Assignment
or Participation with any Assignee or Participant who is not a United States
Person unless such Assignee or Participant represents and warrants to such Bank
that, as at the date of such Assignment or Participation, it is entitled to
receive interest payments without withholding or deduction of any taxes and
such Assignee or Participant executes and delivers to such Bank on or before
the date of execution and delivery of documentation of such Participation or
Assignment, a United States Internal Revenue Service Form W8BEN or W8ECI, or
any successor to either of such forms, as appropriate, properly completed an
claiming complete exemption from withholding and deduction of all Federal
Income Taxes. A “United States Person”
means any citizen, national or resident of the United States, any
corporation or other entity created or organized in or under the laws of the
United States or any political subdivision hereof or any estate or trust, in
each case that is not subject to withholding of United States Federal income
taxes or other taxes on payment of interest, principal of fees hereunder.

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

     (g) Federal Reserve Bank. Any Bank may at any time pledge or assign a
security interest in all or any portion of its rights under this Agreement to
secure obligations of such Bank, including any pledge or assignment to secure
obligations to a Federal Reserve Bank, and this Section shall not apply to any
such pledge or assignment of a security interest.

     Section 12.4 Costs, Expenses and Taxes; Indemnification.

     (a) The Borrower agrees, whether or not any Loan is made hereunder, to pay
on demand: (i) all costs and expenses of the Agent (including the reasonable
fees and expenses of counsel and

-29-

 

paralegals for such persons who may be
employees of such persons) incurred in connection with the preparation,
negotiation and execution of any and all amendments to any of the Loan
Documents, and (ii) all costs and expenses of the Agent and each of the Banks
incurred after the occurrence of an Event of Default in connection with the
enforcement of the Loan Documents. The Borrower agrees to pay, and save the
Banks harmless from all liability for, any stamp or other taxes which may be
payable with respect to the execution or delivery of the Loan Documents. The
Borrower agrees to indemnify and hold the Banks harmless from any loss or
expense which may arise or be created by the acceptance in good faith by the
Agent of telephonic or other instructions for making Loan or disbursing the
proceeds thereof.

     (b) The Borrower agrees to defend, protect, indemnify, and hold harmless
the Agent and each and all of the Banks, each of their respective Affiliates
and each of the respective officers, directors, employees and agents of each of
the foregoing (each an “Indemnified Person” and, collectively, the “Indemnified
Persons”) from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, expenses and
disbursements of any kind or nature whatsoever (including, without limitation,
the fees and disbursements of counsel to such Indemnified Persons in connection
with any investigative, administrative or judicial proceeding, whether direct,
indirect or consequential and whether based on any federal or state laws or
other statutory regulations, including, without limitation, securities and
commercial laws and regulations, under common law or at equitable cause, or on
contract or otherwise, the capitalization of the Borrower, the Commitments, the
making of, management of and participation in the Loan or the use or intended
use of the proceeds of the Loan, provided that the Borrower shall have no
obligation under this Section 12.4(b) to an Indemnified Person with respect to
any of the foregoing to the extent resulting from the gross negligence or
willful misconduct of such Indemnified Person or arising solely from claims
between one such Indemnified Person and another such Indemnified Person. The
indemnity set forth herein shall be in addition to any other obligations or
liabilities of the Borrower to each Indemnified Person under the Loan Documents
or at common law or otherwise

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

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

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

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

-30-

 

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

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

     Section 12.10 Entire Agreement. The Loan Documents embody the entire
agreement and understanding between the Borrower, the Banks and the Agent with
respect to the subject matter hereof and thereof. This Agreement supersedes
all prior agreements and understandings relating to the subject matter hereof.

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

     Section 12.12 Governing Law. THE VALIDITY, CONSTRUCTION AND
ENFORCEABILITY OF THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY THE
INTERNAL LAWS OF THE
STATE OF NEW YORK, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES
THEREOF.

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

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

(signature pages follow)

-31-

 

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

	 	 	 	 	 
	 	OTTER TAIL CORPORATION

 	 
	 	By:  	/s/ Kevin G. Moung
 	 
	 	 	Name:  	Kevin G. Moug 	 
	 	 	Title:  	CFO & Treasurer 	 
	 

	 	 	 	 	 
	 	P.O. Box 496

Fergus Falls, MN 56538-0496

Attention: Mr. Kevin G. Moug	 
	 	 	 	Chief Financial Officer	 
	 	Telephone: (701) 451-3562

Fax: (701) 232-4108	 

 

 

	 	 	 	 	 

	 	 	 	 	 
	 	UBS SECURITIES LLC,

as Arranger

 	 
	 	By:  	/s/ David A. Juge
 	 
	 	 	Name:  	David A. Juge 	 
	 	 	Title:  	Managing Director 	 
	 

	 	 	 	 	 
	 	 	 
	 	By:  	                                /s/ Oliver O. Trumbo
 	 
	 	 	Name:  	Oliver O. Trumbo 	 
	 	 	Title:  	Director 	 

 

 

	 	 	 	 	 
	 	UBS AG, STAMFORD BRANCH,

as Agent

 	 
	 	By:  	/s/
Patricia O’ Kicki
 	 
	 	 	Name:  	Patricia O’ Kicki 	 
	 	 	Title:  	Director 	 

	 	 	 	 	 
	 	By:  	                                 /s/ Wilfred V. Saint
 	 
	 	 	Name:  	Wilfred V. Saint 	 
	 	 	Title:  	Director, Banking Products Services US 	 

 

 

	 	 	 	 	 

	 	 	 	 	 
	 	UBS LOAN FINANCE LLC, as Initial Bank

 	 
	 	By:  	/s/
Patricia O’ Kicki
 	 
	 	 	Name:  	Patricia O’ Kicki 	 
	 	 	Title:  	Director 	 

	 	 	 	 	 
	 	By:  	                               /s/ Wilfred V. Saint
 	 
	 	 	Name:  	Wilfred V. Saint 	 
	 	 	Title:  	Director, Banking Products Services US 	 
	 

 

 

EXHIBITS

	 	 	 
	Exhibit	 	Contents

	 

	 	 
	A

	 	Note
	 

	 	 
	B

	 	Compliance Certificate
	 

	 	 
	C

	 	Guaranty
	 

	 	 
	E

	 	Form of Legal Opinion
	 

	 	 
	F

	 	Assignment and Assumption
	 

	 	 
	G

	 	Administrative Questionnaire

	 	 	 
	Schedules	 	 
	 

	 	 
	1.1(b)

	 	Material Subsidiaries
	 

	 	 
	7.6

	 	Litigation (Section 7.6)
Contingent Liabilities (Section 7.6)
	 

	 	 
	7.11

	 	Existing Liens (Sections 7.11 and 9.8)
	 

	 	 
	7.16

	 	Subsidiaries (Section 7.16)
	 

	 	 
	7.17

	 	Partnerships/Joint Ventures (Section 7.17)
	 

	 	 
	9.7

	 	Investments (Section 9.7)

 

 

EXHIBIT A

PROMISSORY NOTE

	 	 	 
	$[           ]

	 	Minneapolis, Minnesota: August [ ], 2004

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

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

     All payments of principal and interest under this Note shall be made in
lawful money of the United States of America in immediately available funds at
the office of UBS AG, Stamford Branch, at 677 Washington Blvd., Stamford, CT
06901, or at such other place as may be designated by the Agent to the Borrower
in writing.

     This Note is the Note referred to in, and evidences indebtedness incurred
under, a Credit Agreement dated as of August 13, 2004 (herein, as it may be
amended, modified or supplemented from time to time, called the “Credit
Agreement”) among the Borrower, the Banks, as defined therein (including the
Bank) and UBS AG, Stamford Branch, as Agent, to which Credit Agreement
reference is made for a statement of the terms and provisions thereof,
including those under which the Borrower is permitted and required to make
prepayments and repayments of principal of such indebtedness and under which
such indebtedness may be declared to be immediately due and payable.

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

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

	 	 	 	 	 
	 	 	OTTER TAIL CORPORATION
	 
	 	 	 	 
	

	 	By:
	 	

	 
	 	 	 	 
	

	 	Title:
	 	 

 

 

Exhibit B

Compliance Certificate

                                       , 20

UBS AG, Stamford Branch

677 Washington Blvd.

Stamford, CT 06901

Attention: [         ]

                 [         ]

Ladies/Gentlemen:

     Reference is made to that certain Credit Agreement, dated as of August 13,
2004 (as amended from time to time, the “Credit Agreement”), among OTTER TAIL
CORPORATION (the “Borrower”), the Banks named therein and UBS AG, Stamford
Branch, as Agent (the “Agent”). Terms not otherwise expressly defined herein
shall have the meanings set forth in the Credit Agreement.

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

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

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

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

     4. The Borrower’s Long Term Debt Rating is:

	 	 	 
	Standard & Poor’s:

	 	 
	Moody’s:

	 	 .

     5. Covenant compliance is demonstrated as follows:

     (a) Section 9.13 Interest-bearing Debt to Total Capitalization.

	 	 	 
	Interest-bearing Debt:

	 	$
	 
	 	 
	to:
	 	 
	 
	 	 
	Total Capitalization:

	 	$

 

 

(Required: not greater than 0.60 to 1.00).

     (b) Section 9.14 Interest and Dividend Coverage Ratio. For the
four-quarter period ending on the date of the enclosed consolidated financial
statements:

	 	 	 
	EBIT:

	 	$
	 
	 	 
	to:
	 	 
	 
	 	 
	sum of
	 	 
	 
	 	 
	Interest Expense:

	 	$
	 
	 	 
	Dividends on Preferred Stock:

	 	$
	 
	 	 
	

	 	$
	 
	 	 
	Ratio:             to 1.00
	 	 

(Required: not less than 1.50 to 1.00).

	 	 	 	 	 
	 	 	OTTER TAIL CORPORATION
	 
	 	 	 	 
	

	 	By:
	 	

	

	 	Title:
	 	 

	 	 	[chief financial officer]

-2-

 

Exhibit C

Guaranty

     FOR VALUE RECEIVED and in consideration of entry by the Banks (as defined
in the Credit Agreement) and UBS AG, Stamford Branch, as agent for the Banks
(in such capacity, together with it successors and assigns, called the “Agent”)
into that certain Credit Agreement, dated as of August 13, 2004 (as thereafter
amended, modified, extended, renewed, restated or replaced from time to time
called the “Credit Agreement”) among the Banks, the Agent and OTTER TAIL
CORPORATION, a Minnesota corporation (hereinafter called the “Debtor”),
VARISTAR CORPORATION, a Minnesota corporation (the “Guarantor”) hereby
unconditionally guarantees the full and prompt payment when due, whether by
acceleration or otherwise, and at all times thereafter, of all obligations of
the Debtor to the Banks or the Agent under the Credit Agreement, each Note
issued thereunder, and each other Loan Document (as defined therein), including
without limitation all future advances, and all of such obligations that arise
after the filing of a petition by or against the Debtor under the Bankruptcy
Code, even if the obligations do not accrue because of the automatic stay under
Bankruptcy Code Section 362 or otherwise (all such obligations being
hereinafter collectively called the “Liabilities”), and the Guarantor further
agrees to pay all expenses (including attorneys’ fees and legal expenses) paid
or incurred by the Banks or Agent in endeavoring to collect the Liabilities, or
any part thereof, and in enforcing this guaranty.

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

     As additional security for the payment of all of the Liabilities and all
obligations of the Guarantor hereunder (collectively, the “Guaranty
Obligations”), the Guarantor grants to the Agent for the benefit of itself and
the Banks a security interest in, a lien on, and an express contractual right
to set off against, each deposit account and all deposit account balances, cash
and any other property of the Guarantor now or hereafter maintained with, or in
the possession of, the Agent. Upon the occurrence of any default hereunder (as
described in the immediately preceding paragraph), the Agent may: (a) refuse to
allow withdrawals from any such deposit account; (b) apply the amount of such
deposit account balances and the other assets of the Guarantor described above
to the Guaranty Obligations; and (c) offset any other obligation of the Agent
against the Guaranty Obligations; all whether or not the Guaranty Obligations
are then due or have been accelerated and all without any advance or
contemporaneous notice or demand of any kind to the Guarantor, such notice and
demand being expressly waived.

     This guaranty shall in all respects be a continuing, absolute and
unconditional guaranty, and shall remain in full force and effect
(notwithstanding, without limitation, the disso-

 

 

lution of the Guarantor or that at any time or from time to time all
Liabilities may have been paid in full).

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

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

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

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

     The Guarantor hereby expressly waives: (a) notice of the acceptance by the
Agent or the Banks of this guaranty, (b) notice of the existence or creation or
non-payment of all or any of the Liabilities, (c) presentment, demand, notice
of dishonor, protest, and all other notices

-2-

 

whatsoever, and (d) all diligence in collection or protection of or
realization upon the Liabilities or any part thereof, any obligation hereunder,
or any security for, or guaranty of, any of the foregoing.

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

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

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

     No delay on the part of the Agent or any Bank in the exercise of any right
or remedy shall operate as a waiver thereof, and no single or partial exercise
by the Agent or any Bank of any right or remedy shall preclude other or further
exercise thereof or the exercise of any other right or remedy; nor shall any
modification or waiver of any of the provisions of this guaranty be binding
upon the Agent or any Bank except as expressly set forth in a writing duly
signed and delivered on behalf of the Agent and the Required Banks (as defined
in the Credit Agreement). No action of the Agent or the Banks permitted
hereunder shall in any way affect or impair the rights of the Agent or the
Banks and the obligations of the Guarantor under this guaranty. For the
purposes of this guaranty, Liabilities shall include all obligations of the
Debtor to the Agent or the Banks specified as Liabilities, notwithstanding any
right or power of the Debtor or anyone else to assert any claim or defense as
to the invalidity or unenforceability of any such obligation, and no such claim
or defense shall affect or impair the obligations of the Guarantor hereunder.
The obligations of the Guarantor under this guaranty shall be absolute and
unconditional irrespective of any circumstance whatsoever which might
constitute a legal or equitable discharge or defense of the Guarantor. The
Guarantor hereby acknowledge that there are no conditions to the effectiveness
of this guaranty.

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

-3-

 

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

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

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

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

     SIGNED AND DELIVERED as of August 13, 2004.

	 	 	 	 	 
	 	 	VARISTAR CORPORATION
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	

	 
	 	 	 	 
	

	 	Title:	 	 
	

	 	 	 	

-4-

 

EXHIBIT E

Opinion of Counsel

August    , 2004

To: The Banks party to the

Credit Agreement described herein

[address to each bank]

Ladies and Gentlemen:

     I have acted as counsel to Otter Tail Corporation, a Minnesota corporation
(the “Company”), in connection with the transactions contemplated by that
certain Credit Agreement, dated as of August 13, 2004, entered into among the
Company, the Banks, as defined therein, and UBS AG, Stamford Branch, as Agent
(the “Credit Agreement”), and to Varistar Corporation (the “Guarantor”) in
connection with that certain Guaranty dated as of August 13, 2004, entered into
by the Guarantor (the “Guaranty”). This opinion is being delivered to you
pursuant to Section 6.1(f) of the Credit Agreement. Capitalized terms used
herein, except as otherwise specifically defined herein, are used with the same
meaning as defined in the Credit Agreement.

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

     (a) The Articles or Certificate of Incorporation of the Company and
the Guarantor;

     (b) The Bylaws of the Company and the Guarantor;

     (c) Resolutions of the Board of Directors of the Guarantor;

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

     (e) An executed copy of the Note.

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

     In rendering my opinions set forth below, I have assumed the authenticity
of all documents submitted to me as originals, the genuineness of all
signatures (other than the signatures of officers of the Company and the
Guarantor) and the conformity to authentic originals of all documents submitted
to me as copies. I also have assumed the legal capacity for all purposes
relevant hereto of all natural persons (other than officers of the Company and
the Guarantor) and, with respect to all parties to agreements or instruments
relevant hereto other than the Company and the Guarantor, that such parties had
the requisite power and authority (corporate or otherwise) to execute, deliver
and perform such agreements or instruments, that such agreements or instruments
have been duly authorized by all requisite action (corporate or oth-

 

 

erwise), executed and delivered by such parties and that such agreements
or instruments are the valid, binding and enforceable obligations of such
parties. As to questions of fact material to my opinion, I have relied upon
representations and certificates of officers and other employees of the Company
and the Guarantor (known by me to have authority to make such representations
and certifications on behalf of the Company and the Guarantor) and certificates
of public officials.

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

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

     (ii) The Company and the Guarantor each has full corporate power and
authority to (a) own and operate its properties and assets and carry on its
business as presently conducted, as described in the Company’s Annual Report or
Form 10-K for the year ended December 31, 2003, and (b) enter into and perform
its obligations under the Loan Documents to which it is a party.

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

     (iv) There is no provision in (a) the Company’s or the Guarantor’s
Articles or Certificate of Incorporation or Bylaws, (b) any indenture,
mortgage, contract or agreement to which the Company or the Guarantor is a
party or by which the Company or the Guarantor or its respective properties are
bound, (c) any law, statute, rule or regulation or (c) any writ, order or
decision of any court or governmental instrumentality binding on the Company or
the Guarantor which would be contravened by the execution, delivery or
performance by the Company or the Guarantor of the Loan Documents to which it
is a party, except in the case of clauses (b) and (d) for any such
contravention which would not constitute an Adverse Event.

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

-2-

 

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

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

	 	 	 
	

	 	Very truly yours,
	 
	 	 
	

	 	George A. Koeck
	

	 	General Counsel and Corporate Secretary

-3-

 

Exhibit F

Assignment and Assumption

ASSIGNMENT AND ASSUMPTION AGREEMENT

(Otter Tail Corporation)

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

WITNESSETH

     The Assignor has entered into a Credit Agreement dated as of August 13,
2004, as amended thereafter (the “Credit Agreement”) among OTTER TAIL
CORPORATION (the “Borrower”), certain lenders including the Assignor
(collectively, the “Bank Group”) and UBS AG, Stamford Branch, as Agent, under
which the Assignor has agreed to make the Loan in amounts up to those set forth
in Item IV (such amount equals the original commitment of the Assignor and may
have been, or may be, reduced or increased by other assignments by, or to, the
Assignor, and will be reduced by the assignment under this Agreement) and the
Bank Group has agreed to make the Loan in amounts up to those set forth in Item
V. Unless the context clearly indicates otherwise, all other terms used in
this Agreement shall have the meanings given them by, and shall be construed as
set forth in the Credit Agreement.

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

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

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

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

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

 

 

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

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

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

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

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

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

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

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

-2-

 

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

     6. Promissory Note. The Notes of the Assignor shall be delivered to the
Agent or Borrower at such time and by such means as the Assignor and the Agent
or Borrower shall agree, with the request by the Assignor that the Borrower

issue new notes payable to the Assignor and to the Assignee to reflect the
assignment of the Assigned Share hereunder.

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

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

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

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

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

-3-

 

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

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

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

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

-4-

 

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

	 	 	 
	Address:

	 	[Assignor]
	 
	 	 
	

	 	By:                                                         
	

	 	                                      (print name)
	

	 	Title:
	 
	 	 
	Address:

	 	[Assignor]
	 
	 	 
	

	 	By:                                                         
	

	 	                                      (print name)
	

	 	Title:

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

Consented to this    day

of    , 20   .

UBS AG, Stamford Branch, as Agent

By:                                                         

                                      (print name)

Title:

Consented to this    day

of    , 20   .

OTTER TAIL CORPORATION, as Borrower

By:                                                         

                                      (print name)

Title:

-5-

 

Schedule I

to

Assignment and Assumption

		
	Item I: 	Date of Assignment:

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

		
	Item III: 	Assignee (the “Assignee”):

		
	Item IV: 	Initial Total Commitment of the Assignor:

		
	Item V: 	Payment to the Assignor on Funding Date:

		
	Item VI: 	Percentage Assigned:
          %

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

		
	Item VII: 	Revised Percentage of the Assignor:           %

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

 

 

EXHIBIT G

UBS AG, STAMFORD BRANCH

FORM OF

ADMINISTRATIVE QUESTIONNAIRE—OTTER TAIL CORPORATION

Lending Institution: UBS LOAN FINANCE LLC

Name for Signature Pages:UBS LOAN FINANCE LLC

Will sign Credit Agreement: o

Will come via Assignment: o Number of Days post Closing:                   

Name for Signature Blocks: UBS LOAN FINANCE LLC

	 	 	 
	Name for Publicity:
	 	 
	 
	 	 
	

	 	

	 
	 	 
	Address:

	 	677 WASHINGTON BLVD 6th FLOOR SOUTH
	 
	 	 
	Main Telephone:

	 	203-719-6391

Telex No./Answer back: 203-719-4176

	 	 	 	 	 
	CONTACT-Credit

	 	Name:
	 	DEBORAH PORTER
	

	 	Address:
	 	677 WASHINGTON BLVD 6th FLOOR SOUTH
	 
	 	 	 	 
	

	 	 	 	

	

	 	Telephone:
	 	203-719-6391
	

	 	 	 	Fax: 203-719-4176
	 
	 	 	 	 
	CONTACT-Operations

	 	Name:
	 	DEBORAH PORTER
	

	 	Address:
	 	677 WASHINGTON BLVD 6th FLOOR SOUTH
	 
	 	 	 	 
	

	 	 	 	

	

	 	Telephone:
	 	203 719-6391
	

	 	Fax:
	 	203 719-4176

PAYMENT INSTRUCTIONS

	 	 	 	 	 
	Bank Name:

	 	UBS
	 	

	ABA/Routing No.

	 	026007993
	 	

	Account Name

	 	BPS
	 	

	Account No.

	 	101-WD-897400-001
	 	

	For further credit:	 	

	Account No.	 	

	Attention:

	 	DEBORAH PORTER
	 	

	Reference:

	 	OTTER TAIL
	 	

UBS AG, STAMFORD BRANCH, ADMINISTRATIVE DETAILS

 

 

	 	 	 	 	 
	UBS AG, Stamford Branch

	 	Account Administrator
	 	Secondary Contact
	677 Washington Boulevard

	 	DEBORAH PORTER
	 	BARBARA EZELL
	Stamford, Connecticut 06901

	 	Tel: (203) 719-6391
	 	Tel: (203) 719-0473
	Main Telephone: (203) 719-3000

	 	Fax: (203) 719-4176
	 	Fax: (203) 719-4176
	

	 	E-MAIL:
	 	E-MAIL:
	

	 	Deborah.Porter@ubs.com
	 	Barbara.Ezell@ubs.com
	 
	 	 	 	 
	Wire Instructions:	 	The Agent’s wire instructions will be disclosed at the time of closing.

-2-

 

Schedule 1.1(b)

Material Subsidiaries

(as of date of this Credit Agreement)

	 	 	 	 	 
	1.

	 	Varistar Corporation
	 	corp.
	 
	2.

	 	BTD Manufacturing, Inc.
	 	corp.
	 
	3.

	 	DMI Industries, Inc.
	 	corp.
	 
	4.

	 	DMS Health Technologies
	 	   
	 
	5.

	 	DMS Imaging, Inc.
	 	corp.
	 
	6.

	 	E.W. Wylie Corporation
	 	corp.
	 
	7.

	 	Northern Pipe Products, Inc.
	 	corp.
	 
	8.

	 	Vinyltech Corporation
	 	corp.

 

 

Schedule 7.6

Litigation (Section 7.6)

Contingent Liabilities (Section 7.6)

None.

 

 

Schedule 7.11

Existing Liens (Sections 7.11 and 9.8)

Varistar guaranty of the $40,000,000 Insured Senior Notes due October 1, 2017.

Grant County, South Dakota Pollution Control Refunding Revenue Bonds, due
September 1, 2017*

Mercer County, North Dakota Pollution Control Refunding Revenue Bonds, due
September 1, 2022*

*These bonds require Otter Tail Corporation to grant AMBAC Assurance
Corporation, under a financial guaranty insurance policy, a security interest
in the assets of the electric utility if Otter Tail’s senior unsecured debt is
downgraded to Baa2 or below (Moody’s) or BBB or below (Standard & Poors).

 

 

Schedule 7.16

	 	 	 	 	 	 	 
	 
	 	 	 	Number and Class of	 	 
	 
	 	 	 	Shares Issued and Owned	 	 
	 
	 	State of	 	by Otter Tail Corporation	 	 
	Company Ref.
	 	Organization
	 	or its Subsidiaries
	 	Footnote

	Minnesota-Dakota Generating
	 	Minnesota	 	98 Shares Common	 	 
	Company
	 	 	 	 	 	 
	Otter Tail Realty Company
	 	Minnesota	 	300 Shares Common	 	(1)
	Otter Tail Energy Services
	 	Minnesota	 	1,000 Shares Common	 	(1)
	Company, Inc.
	 	 	 	 	 	 
	Otter Tail Energy Management
	 	Minnesota	 	1,000 Shares Common	 	(7)
	Company
	 	 	 	 	 	 
	Otter Tail Management
	 	Minnesota	 	3,560 Shares Common	 	(1)
	Corporation*
	 	 	 	 	 	 
	ORD Corporation*
	 	Minnesota	 	13,287 Shares Common	 	(1)
	Quadrant Co.*
	 	Minnesota	 	500 Shares Common	 	(1)
	Varistar Corporation
	 	Minnesota	 	100 Shares Common	 	 
	Northern Pipe Products, Inc.
	 	North Dakota	 	10,000 Shares Common	 	(2)
	Vinyltech Corporation
	 	Arizona	 	100 Shares Common	 	(2)
	T.O. Plastics, Inc.
	 	Minnesota	 	5,000 Shares Common	 	(2)
	St. George
Steel Fabrication, Inc.
	 	Utah	 	100 Shares Common	 	(2)
	Precision Machine, Inc.
	 	North Dakota	 	23,210 Shares Common	 	(2)
	DMI Industries, Inc.
	 	North Dakota	 	980 Shares Common	 	(2)
	Dakota Engineering, Inc.*
	 	North Dakota	 	5,000 Share Common	 	(3)
	BTD Manufacturing, Inc.
	 	Minnesota	 	200 Shares Common	 	(2)
	Mid-States Testing Company*
	 	Minnesota	 	100 Shares Common	 	(2)
	DMS Health Technologies
	 	North Dakota	 	8,500 Shares Class A	 	(2)
	 
	 	 	 	5,100 Shares Class B	 	 
	DMS Imaging, Inc.
	 	North Dakota	 	1,606 Shares Common Voting	 	(4)
	Nuclear Consultants, Inc.
	 	South Dakota	 	200 Shares Common	 	(9)

	 	(1)	 	Stock owned by Minnesota-Dakota Generating Company
	 
	 	(2)	 	Subsidiary of Varistar Corporation
	 
	 	(3)	 	Subsidiary of DMI Industries, Inc.
	 
	 	(4)	 	Subsidiary of DMS Health Technologies, inc.
	 
	 	(5)	 	Subsidiary of Midwest Information Systems, Inc.
	 
	 	(6)	 	Subsidiary of Midwest Telephone Company
	 
	 	(7)	 	Subsidiary of Otter Tail Energy Services Company
	 
	 	(8)	 	Subsidiary of Chassis Liner Corporation
	 
	 	(9)	 	Subsidiary of DMS Imaging, Inc.
	 
	 	(10)	 	Partially-owned subsidiary of Nuclear Consultants, Inc.

 

 

	 	 	 	 	 	 	 
	 
	 	 	 	Number and Class of	 	 
	 
	 	 	 	Shares Issued and Owned	 	 
	 
	 	State of	 	by Otter Tail Corporation	 	 
	Company Ref.
	 	Organization
	 	or its Subsidiaries
	 	Footnote

	Midwest Imaging L.L.C.
	 	Kansas	 	100 Units	 	(10)
	Nuclear Imaging of Kansas,
	 	Kansas	 	50 Units	 	(10)
	L.L.C.
	 	 	 	 	 	 
	Nuclear Imaging, Ltd.
	 	South Dakota	 	98,039 Shares Common	 	(9)
	DMS Leasing Corporation
	 	North Dakota	 	2,500 Shares Common	 	(4)
	Aerial Contractors, Inc.
	 	North Dakota	 	10 Shares Common	 	(2)
	Moorhead Electric, Inc.
	 	Minnesota	 	80 Shares Common	 	(2)
	Chassis Liner Corporation
	 	Minnesota	 	10,000 Shares Common	 	(2)
	Chassis Liner Credit Corp.*
	 	Minnesota	 	1,000 Shares Common	 	(2)
	Chart Automotive LLC
	 	Minnesota	 	 	 	(8)
	Chart Liner U.L.C.
	 	Nova Scotia	 	 	 	(8)
	E. W. Wylie Corporation
	 	North Dakota	 	100 Shares Common	 	(2)
	Midwest Information Systems,
	 	Minnesota	 	1,000 Shares Common	 	(2)
	Inc.
	 	 	 	 	 	 
	Midwest Telephone Company
	 	Minnesota	 	479 Shares Common	 	(5)
	Osakis Telephone Company
	 	Minnesota	 	250 Shares Common	 	(6)
	The Peoples Telephone
	 	Minnesota	 	1,000 Shares Common	 	(5)
	Company of Bigfork
	 	 	 	 	 	 
	Data Video Systems, Inc.
	 	Minnesota	 	100,000 Shares Common	 	(5)
	MIS Investments, Inc.
	 	Minnesota	 	1,000 Shares Common	 	(5)
	Otter Tail Communications SD,
	 	South Dakota	 	1,000 Shares Common	 	(5)
	Inc.*
	 	 	 	 	 	 
	Fargo Baseball, LLC
	 	Minnesota	 	181 Units	 	(2)
	Fargo Sports Concession LLC
	 	Minnesota	 	181 Units	 	(2)
	KFGO, Inc.*
	 	North Dakota	 	37,855 Shares Common	 	(2)

*Inactive

	 	(1)	 	Stock owned by Minnesota-Dakota Generating Company
	 
	 	(2)	 	Subsidiary of Varistar Corporation
	 
	 	(3)	 	Subsidiary of DMI Industries, Inc.
	 
	 	(4)	 	Subsidiary of DMS Health Technologies, inc.
	 
	 	(5)	 	Subsidiary of Midwest Information Systems, Inc.
	 
	 	(6)	 	Subsidiary of Midwest Telephone Company
	 
	 	(7)	 	Subsidiary of Otter Tail Energy Services Company
	 
	 	(8)	 	Subsidiary of Chassis Liner Corporation
	 
	 	(9)	 	Subsidiary of DMS Imaging, Inc.
	 
	 	(10)	 	Partially-owned subsidiary of Nuclear Consultants, Inc.

-2-

 

Schedule 7.17

None.

 

 

Schedule 9.7

Investments (Section 9.7)

	 	 	 	 	 	 	 	 	 
	 	 	6/30/2004
	 	12/31/2003

	Investment in Affordable Housing (OTC)
	 	$	4,243,127	 	 	$	4,616,275	 
	Investment in Loan Pools (OTP)
	 	 	734,624	 	 	 	837,023	 
	Investment in FM Redhawks
	 	 	—	 	 	 	1,652,688	 
	Investment - Moorhead State Lighting (OTESCO)
	 	 	1,250,440	 	 	 	1,455,955	 
	Investment - Bank of Butterfield Bond Fund (OTAL)
	 	 	1,665,079	 	 	 	—	 
	Investment - Bank of Butterfield Reserve Fund (OTAL)
	 	 	300,184	 	 	 	 	 
	Note
Receivable - SMI - Aviva
	 	 	100,000	 	 	 	 	 
	Note
Receivable - DMS
	 	 	349,281	 	 	 	 	 
	Telecommunication Investments (MIS)
	 	 	 	 	 	 	 	 
	CoBank (St Paul Bank for Coop’s)
	 	 	796,460	 	 	 	881,878	 
	ONVOY
	 	 	708,300	 	 	 	708,300	 
	Central MN Network Systems
	 	 	164,994	 	 	 	232,994	 
	West Central Transport Group, LLC
	 	 	163,166	 	 	 	169,666	 
	Central Transport Group, LLC
	 	 	237,265	 	 	 	213,765	 
	Northwest Minnesota Special Access, LLC
	 	 	46,724	 	 	 	46,724	 
	Independent Pinnacle Services, LLC
	 	 	80,000	 	 	 	80,000	 
	Northern Transport Group, LLC
	 	 	50,500	 	 	 	50,500	 
	Northern Fiber, Inc.
	 	 	2,687	 	 	 	2,687	 
	Notes Receivable
	 	 	146,886	 	 	 	149,073	 
	Other Miscellaneous (DMS, OTESCO)
	 	 	59,284	 	 	 	45,184	 
	 
	 	 	
 	 	 	 	
 	 
	 
	 	$	11,099,001	 	 	$	11,142,712exv10w1

 

Exhibit 10.1

07/28/2004

AGREEMENT

     
This agreement (the “Agreement”) is entered into
effective as of July 1, 2004 (the “Effective
Date”), between: (i) KLA-TENCOR CORPORATION, a
Delaware corporation (“KLA-Tencor”) and
(ii) THERMA-WAVE, INC., a Delaware corporation
(“Therma-Wave”). KLA-Tencor and Therma-Wave are
sometimes referred to individually as a “Party” or
collectively as the “Parties”.

RECITALS

     
This agreement is made with reference to the following facts:

     
KLA-Tencor is the owner of various patents and patent
applications related to Scatterometry Technology;

     
Therma-Wave is the owner of US Patents Nos. 6,608,689,
6,567,213, 5,973,787, and 6,704,661 (the “TW Patents”)
and 6,707,056 (the “Edge Patent”); and is also the
owner of US Patents Nos. 5,619,548, 6,453,006,
6,507,634, 6,643,354, 6,754,305, 6,408,048, 6,512,815, and
6,678,349 and the owner of US Patent Application
Nos. 10/053,373, and 09/969,561 (the “XRR
Patents”);

     
Effective as of January 25, 2001, KLA-Tencor and
Therma-Wave entered into a Settlement and License Agreement (the
“2001 Settlement Agreement”);

     
Effective as of October 1, 2002, KLA-Tencor, Sensys
Instruments and Therma-Wave entered into a Settlement Agreement
(the “2002 Settlement Agreement”).

NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL PROMISES AND
COVENANTS CONTAINED IN THIS AGREEMENT, THE PARTIES HEREBY AGREE
AS FOLLOWS:

     
1 — DEFINITIONS. As used in this Agreement, the
following capitalized terms shall have the following respective
definitions:

     
1.1 “Scatterometry Technology” shall mean
technology for measuring a lateral dimension of a measurement
target on a substrate by detecting light scattered by such
measurement target.

     
1.2 “Scatterometry Product” shall mean an optical
metrology device that:

		
	 	
    i) includes Scatterometry Technology;
	 
	 	
    ii) is so configured (by Therma-Wave or a third party) as
    to enable its connection to a third party provided component
    which thereafter enables the optical metrology device to perform
    Scatterometry Technology measurements; or
	 
	 	
    iii) does not include Scatterometry Technology when shipped
    but is subsequently upgraded (by Therma-Wave or a third party):
    a) to perform Scatterometry Technology measurements or,
    b) by the addition of components enabling connection of
    said optical metrology device to third party hardware or
    software for performing Scatterometry Technology measurements.

     
1.3 “Film Measurement Technology” shall mean any
technology capable of measuring the thickness and/or dispersion
characteristics of a film on a substrate.

     
1.4 “TW XRR Patents” shall mean all patents,
patent applications, utility models or applications for
intellectual property rights in any country currently owned or
controlled by Therma-Wave as of the Effective Date and relating
to methods or apparatus for measuring x-ray reflectance. The TW
XRR Patents shall include the XRR Patents and the Patent
Families thereof but shall not include any of the TW Patents.

     
1.5 “KLA-Tencor Products” shall mean any product
made and sold by KLA-Tencor at any time prior to the termination
of this Agreement, where such product relies upon either Film
Measurement Technology or Scatterometry Technology to make a
measurement.

     
1.6 “Patent Family” shall mean any patent, patent
application, utility model, or application for

 

intellectual property rights in any country claiming, in whole
or in part, the benefit of a common filing date with a specific
granted patent or patent application referenced herein.

     
1.7 “KT Scatterometry Patent Claims” shall mean a
claim of any patent owned or controlled by KLA-Tencor and having
a priority date prior to the date of execution hereof, which
claim is directed to a method, or apparatus or component thereof
for performing Scatterometry Technology. The recitation of a
method apparatus or component thereof involving Film Measurement
Technology shall not be deemed to be directed to a method
apparatus or component for performing Scatterometry Technology,
unless additional steps or elements for performing scatterometry
analysis regarding Scatterometry Technology are recited or
unless such claimed method, apparatus or component has no
substantial commercial use other than for performing
scatterometry measurements.

     
1.8 “TW Scatterometry Patent Claims” shall mean a
claim of any patent owned or controlled by Therma-Wave and
having a priority date prior to the date of execution hereof,
which claim is directed to a method, apparatus or component
thereof for performing Scatterometry Technology. The recitation
of a method apparatus or component thereof involving Film
Measurement Technology shall not be deemed to be directed to a
method apparatus or component thereof for Scatterometry
Technology, unless additional steps or elements for performing
scatterometry analysis regarding Scatterometry Technology are
recited or unless such claimed method, apparatus or component
has no substantial commercial use other than for performing
scatterometry measurements.

     
1.9 The terms “Integrated Machine” means an
optical metrology unit meeting all of the following criteria:
a) integrated (when in use) to perform scatterometry
measurements in conjunction with a Tokyo Electron Ltd.
semiconductor process tool; b) using a common wafer handler
with such process tool; and c) where the gross revenue
derived by Therma-Wave from the sale or other transfer of such
unit, including all associated software and services and any
bundled hardware and other consideration (where such other
consideration is directly tied to the sale or transfer of such
unit), is less than $250,000 per unit (as adjusted on an annual
basis based on CPI).

2. COVENANTS

     
2.1 KLA-Tencor agrees not to assert any of the KT
Scatterometry Patent Claims against Therma-Wave (and end-user
customers of Therma-Wave for claims based on the sale and/or use
by said customers of Scatterometry Products purchased from
Therma-Wave) for making, using, selling, offering for sale or
importing Scatterometry Products for which a royalty has been
paid as provided in Section 3.1 hereof. Therma-Wave hereby
covenants and agrees not to directly or indirectly aid, assist
or participate in any action or proceeding contesting or
challenging the validity, patentability or enforceability of any
of the KT Scatterometry Patents, including but not limited to
any action or proceeding before any federal or state court, any
patent office, and any other governmental agency, except that
this covenant shall not apply to any patent which is asserted
against Therma-Wave by KLA-Tencor in any type of legal
proceeding. Therma-Wave shall mark (but only to the extent
proposed by KLA-Tencor) all Scatterometry Products made or sold
by Therma-Wave to identify such products as made under an
agreement involving the patents including the KT Scatterometry
Patent Claims, in a manner compliant with 35 USC
section 287, to the extent required by such section for
KLA-Tencor to benefit from the provisions of section 287.

     
2.2 Therma-Wave agrees not to assert any claim of patent
infringement under the TW Scatterometry Patents against
KLA-Tencor (and end-user customers of KLA-Tencor for claims
based on the sale and use of such KLA-Tencor Products purchased
from KLA-Tencor) for making, using, selling, offering for sale
or importing KLA-Tencor Products. Therma-Wave further agrees not
to assert any claim of patent infringement under the TW Patents
and any member of the Patent Families thereof against KLA-Tencor
(and end-user customers of KLA-Tencor for claims based on the
sale and use of such KLA-Tencor Products purchased from
KLA-Tencor) for making, using, selling, offering for sale or
importing KLA-Tencor Products. KLA-Tencor hereby covenants and
agrees not to directly or indirectly aid, assist or participate
in any action or proceeding contesting or challenging the
validity, patentability or enforceability of any of the TW
Scatterometry Patents or the TW Patents, including but not
limited to any action or proceeding before any federal or state
court, any patent office, and any other governmental agency
except that this covenant shall not apply to any patent which

 

is asserted against KLA-Tencor by Therma-Wave in any type of
legal proceeding, KLA-Tencor shall mark (but only to the extent
proposed by Therma-Wave) all KLA-Tencor Products made or sold by
KLA-Tencor to identify such products as made under an agreement
involving the patents including the TW Patents or the TW
Scatterometry Patent Claims, in a manner compliant with
35 USC section 287, to the extent required by such
section for Therma-Wave to benefit from the provisions of
section 287.

     
2.3 Therma-Wave agrees to assign, and hereby does assign
all right, title and interest in the TW XRR Patents to
KLA-Tencor. Therma-Wave hereby covenants and agrees not to
directly or indirectly aid, assist or participate in any action
or proceeding contesting or challenging the validity,
patentability or enforceability of any of the TW XRR Patents,
including but not limited to any action or proceeding before any
federal or state court, any patent office, and any other
governmental agency. Therma-Wave agrees to assist KLA-Tencor,
upon request by KLA-Tencor, in the procurement and enforcement
of the TW XRR Patents. KLA-Tencor shall reimburse Therma-Wave
for any costs reasonably incurred by Therma-Wave in fulfilling
such requests; provided, however, that any reimbursed cost in
excess of $1000 shall first be approved in writing by
KLA-Tencor. However, Therma-Wave shall not be obligated to
render any assistance to KLA-Tencor, as above provided, unless
KLA-Tencor shall first approve in writing to reimburse
Therma-Wave for its anticipated expenses. KLA-Tencor agrees not
to assert any claim of infringement against Therma-Wave under
the TW XRR Patents for those products shipped by Therma-Wave
prior to the Effective Date.

     
2.4 Therma-Wave hereby exclusively licenses KLA-Tencor
under the Edge Patent and all members of the Patent Family of
the Edge Patent the right, with right of sublicense, to make,
use, sell, offer for sale and import only products for x-ray
reflectance. Such exclusive license shall include the right to
sue any entity for activity within the scope of the exclusive
license grant, as well as the right to collect damages
(including, without limitation, past damages for causes of
action arising before the Effective Date). Therma-Wave agrees to
assist KLA-Tencor, upon request by KLA-Tencor, in the
procurement and enforcement of the Edge Patent and all members
of the Patent Family of the Edge Patent. KLA-Tencor shall
reimburse Therma-Wave for any costs reasonably incurred by
Therma-Wave in fulfilling such requests; provided, however, that
any reimbursed cost in excess of $1000 shall first be approved
in writing by KLA-Tencor. However, Therma-Wave shall not be
obligated to render any assistance to KLA-Tencor, as above
provided, unless KLA-Tencor shall first approve in writing to
reimburse Therma-Wave for its anticipated expenses KLA-Tencor
agrees not to assert any claim of infringement against
Therma-Wave under the Edge Patent and all members of the Patent
Family of the Edge Patent for those products shipped by
Therma-Wave prior to the Effective Date.

3 — PAYMENTS

     
3.1 Therma-Wave shall pay KLA-Tencor the Payment Amount, as
hereinafter defined, for each Scatterometry Product shipped by
or on behalf of Therma-Wave during the term of this Agreement.
Payments shall be made on a quarterly basis within 30 days
of the end of each calendar quarter. No payment shall be
required under this Agreement for any such apparatus made and
sold entirely after the expiration of the last to expire of the
patents which include KT Scatterometry Patent Claims. If a
product shipped by or on behalf of Therma-Wave to an end-user is
returned to Therma-Wave, and all payments made by the end-user
in respect of said Scatterometry Product are returned to the
end-user, then Therma-Wave may apply the payment made to
KLA-Tencor under this paragraph as a credit against a future
payment due hereunder. Payments made under this Agreement,
except for those provided for in Paragraph 5.3, are not
refundable.

     
3.2 All payments to KLA-Tencor under this Agreement are to
reference this Agreement, be made in the form of a check payable
to KLA-Tencor Corporation, and be sent by overnight courier to
the following address: General Counsel, KLA-Tencor Corporation,
160 Rio Robles, San Jose CA 95134. All amounts payable
to KLA-Tencor under this Agreement shall be paid in
U.S. dollars without any deduction for any government
withholding and any amounts payable for any applicable sales
taxes, use taxes, or similar taxes. In the event that any amount
payable to KLA-Tencor under this Agreement is not paid when due,
then Therma-Wave shall thereafter pay to KLA-Tencor interest on
any and all overdue payments required to be made to KLA-Tencor
under this Agreement, commencing on the date such overdue
payment becomes due, at an annual rate of five
(5) percentage points higher than the prime interest rate
quoted by the head office of Citibank N.A., New York, at
the close of banking on such date, or on the first business day
thereafter if such date falls on a non business day. If such
interest rate exceeds the maximum legal rate in the jurisdiction
where a claim

 

therefore is being asserted, then the interest
rate shall be reduced to such maximum legal rate.

    
3.3 Therma-Wave agrees to maintain adequate
documentation and accounting records to demonstrate compliance
with the provisions of this Section for at least as long as its
normal document retention policy, but in no event less than two
(2) years. At any time during the term of this Agreement on an
annual basis upon KLA-Tencor’s request, and upon thirty
(30) days written notice to Therma-Wave, Therma-Wave shall
permit an independent third party to review all such
documentation and accounting records. KLA-Tencor shall only be
entitled to learn the amount of royalty owing pursuant to any
examination performed under this paragraph, along with the
reasoning asserted by the independent third party as to the
amount due. The fees charged by such third party shall be paid
by KLA-Tencor unless the third party finds an underpayment by
Therma-Wave. In the event of an underpayment not cured prior to
initiation of the review, the fees of the independent third
party shall be paid by Therma-Wave. Any underpayments discovered
during such an audit will not be considered a breach of this
agreement so long as Therma-Wave pays to KLA-Tencor the amounts
finally determined to be owed to KLA-Tencor.

    
3.3.1 To ensure compliance with the
provisions of Paragraph 3, Therma-Wave hereby agrees that
KLA-Tencor is permitted to make annual inspections of all models
of Therma-Wave’s products (including software), that both
(i) are capable of performing measurements useful for
Scatterometry Technology; and (ii) effective as of the date
of any such inspection, are then advertised or promoted by
Therma-Wave or otherwise offered for sale, lease, loan or
consignment. These inspections shall be of a scope sufficient to
determine Therma-Wave’s compliance with Paragraph 3.
Such inspections shall be performed by an independent third
party to be agreed upon by the Parties and the details of such
inspection and the products and technology disclosed during such
inspection shall be kept confidential and not disclosed to
KLA-Tencor; provided, however, that the details of the
inspection may be used to assist the independent third party of
paragraph 3.3 in determining the royalty owed. Any
reporting to KLA-Tencor by such third party regarding the
inspection shall be limited to whether Therma-Wave has complied
with paragraph 3.

    
3.4 Until the expiration of this Agreement,
on or around July 1 of each year, Therma-Wave shall deliver
to KLA-Tencor a certificate signed by the Chief Executive
Officer of Therma-Wave certifying that Therma-Wave has made all
payments due under this Agreement.

    
3.5 In respect of any Scatterometry Product
other than the Integrated Machines provided for in
Paragraph 3.6, below, the Payment Amount shall be $50,000
(but with adjustment for CPI, as set forth herein) for each
Scatterometry Product shipped by Therma-Wave during the term of
this Agreement for the first 500 such apparatus shipped by or on
behalf of Therma-Wave. The $50,000 Payment Amount set forth in
this section shall be revised annually beginning on
June 30, 2005, based on the Consumer Price Index (CPI) for
the first 500 apparatus. For any apparatus shipped in excess of
the first 500, the Payment Amount shall continue at the same
rate paid for the 500th apparatus, with the payments thereafter
continuing to rise annually based on the CPI unless the payment
for the 500th apparatus is less than $75,000. If the Payment
Amount for the 500th apparatus is less than $75,000, then the
Payment Amount for the 501st apparatus and all apparatus shipped
thereafter shall be $75,000, without further increases for the
CPI.

    
3.6 In respect of any Integrated Machine,
the Payment Amount shall be twenty-five percent (25%) of the
amount payable as provided for in Paragraph 3.5, above on
behalf of a Scatterometry Product sold during the same annual
period. Integrated Machines shall be considered as an apparatus
for the purpose of counting when the sale of 500 apparatuses has
occurred.

4.     REPRESENTATIONS AND WARRANTIES

    
4.1 Therma-Wave represents and warrants to
KLA-Tencor that a) except with respect to Patent
No. 5,619,548 Therma-Wave owns all right, title and
interest in the TW Patents and the TW XRR Patents and
that Therma-Wave has the right to enter into the assignments set
forth in paragraph 2.3, b) with respect to Patent
No. 5,619,548 Therma-Wave, to its knowledge after
reasonable inquiry, owns all right, title and interest in such
patent, has disclosed to KLA-Tencor all material information
known to Therma-Wave regarding such ownership, and that
Therma-Wave has the right to enter into the assignments set
forth in paragraph 2.3, c) the TW XRR Patents are
free from liens, d) except as set forth in Exhibit A,
the TW XRR Patents are not licensed to any entity or
subject to any nonassertion covenant, immunity from suit, or
similar encumbrance, and e) the TW Patents and Patent
Families thereof include all patents and patent applications
owned or controlled by Therma-Wave, as of the date of execution
of this Agreement, claiming methods or apparatus regarding: i)

 

combinations of single wavelength ellipsometry
with other measurement devices relying on polychromatic sources
for measurements; ii) combinations of stress and film
measurement; and/or iii) rotating compensator spectroscopic
ellipsometers.

    
4.2 Therma-Wave releases and forever discharges KLA-Tencor,
from any and all claims of patent infringement based on the
TW Patents, the TW Scatterometry Patent Claims and/or
the TW XRR Patents to the extent such claims seek
judicial relief for activities by KLA-Tencor occurring prior to
the Effective Date of this Agreement. The Parties acknowledge
that this release does not encompass claims pertaining to future
activity of KLA-Tencor. Nothing in this paragraph shall be
construed as affecting the scope of the covenants set forth in
paragraph 2 of this Agreement.

     
4.3 KLA-Tencor releases and forever discharges Therma-Wave,
from any and all claims of patent infringement based on the
KT Scatterometry Patent Claims to the extent such claims
seek judicial relief for activities by Therma-Wave occurring
prior to the Effective Date of this Agreement. The Parties
acknowledge that this release does not encompass claims
pertaining to future activity of Therma-Wave. Nothing in this
paragraph shall be construed as affecting the scope of the
covenants set forth in paragraph 2 of this Agreement.

5. TERM AND TERMINATION

     
5.1 This Agreement shall begin on the Effective Date and
continue in full force and effect until the expiration of the
last to expire of the patents and patent applications containing
the KT Scatterometry Patent Claims, the TW Patents and
the TW Scatterometry Patent Claims.

     
5.2 In the event that either Party commits any material
breach of this Agreement, and if such breach remains uncured
30 days after receipt by the breaching Party of written
notice of such breach, the nonbreaching Party shall have the
right to terminate this Agreement upon written notice of such
termination. The releases granted to the breaching Party under
Section 4.2 or 4.3 hereof shall likewise terminate. The
rights of the nonbreaching Party under this Agreement shall
survive such termination.

     
5.3 If a dispute arises as to whether a product sold by
Therma-Wave is a Scatterometry Product, KLA-Tencor will first
notify Therma-Wave in writing and the Parties will meet in good
faith to resolve the dispute. The entire basis for such dispute
shall be disclosed by both Parties, and all supporting
documentation shall be disclosed to each Party’s outside
counsel and independent expert so that the basis of the dispute
may be fully understood and discussed between the Parties. If
such a meeting fails to resolve the dispute, then the
determination will made by the American Arbitration Association
(AAA) under its Patent Arbitration Rules, in San Jose,
California by three arbitrators and judgment on the award
rendered by the arbitrator may be entered by any court having
jurisdiction thereof. Confidential technical information related
to the accused product disclosed to the Arbitrators shall be
kept confidential and not disclosed to either Party (except that
such information shall be disclosed to each Party’s outside
attorneys, consultants and experts as part of a normal discovery
process and consistent with the rules of the AAA) and the
decision of the arbitrators given to either Party shall be
limited to their conclusion as to whether the accused product is
a Scatterometry Product and the amount, if any, that is owed.
The Parties’ outside lawyers shall receive an explanation
of the arbitrator’s reasoning.

     
During the pendency of the arbitration Therma-Wave shall pay to
KLA-Tencor the royalties provided for in Paragraph 3.1 in
respect of a disputed product. If the arbitrators determine that
a disputed product is a Scatterometry Product, then Therma-Wave
shall pay for the cost of the arbitration. If the arbitrators
determine that a disputed product is not a Scatterometry
Product, then KLA-Tencor shall pay for the cost of the
arbitration and, in addition, shall refund to Therma-Wave all
royalties paid by Therma-Wave in respect of the disputed product
plus interest on such payments at the rate provided in
Paragraph 3.2.

     
5.4 KLA-Tencor’s covenant not to sue Therma-Wave
specified in paragraph 2.1 shall survive any termination of
this Agreement with respect to any Scatterometry Product in
respect of which Therma-Wave has made the royalty payments
provided for in paragraphs 3.1 or 5.3.

 

6. GENERAL PROVISIONS

     
6.1 All questions concerning: (i) the validity,
interpretation, or performance of the terms of this Agreement or
of any rights or obligations of the Parties hereto; and
(ii) the legal relationship between the Parties; shall be
governed by and construed according to the laws of the State of
California, excluding its conflict of laws rules to the extent
such rules would apply the law of another jurisdiction.

     
6.2 This Agreement (including the Exhibits hereto which are
incorporated herein by this reference) constitutes the entire
agreement between the Parties with respect to the subject matter
hereof. This Agreement supersedes all prior written or oral
agreements, communications, and understandings between the
Parties with respect to such subject matter.

     
6.3 This Agreement may not be amended, modified, or
supplemented orally. This Agreement may only be amended,
modified, or supplemented by an instrument in writing
specifically mentioning this Agreement and signed by the Party
against whom such amendment, modification, or supplement is
sought to be enforced.

     
6.4 No waiver of any provision of this Agreement shall be
effective unless in writing and signed by the Party against whom
such waiver is sought to be enforced. No failure or delay by any
Party in exercising any right, power, or remedy under this
Agreement shall operate as a waiver of any such right, power, or
remedy. The express waiver of any right or default hereunder
shall be effective only in the instance given and shall not
operate as or imply a waiver of any similar right or default on
any subsequent occasion.

     
6.5 Any notice, demand, or request required or permitted to
be given under this Agreement: (1) shall be made in
writing; (2) Shall be addressed to a Party at the address
of such Party set forth below or such other notice address as
such Party may request by notifying the other Party in writing;
and (3) shall be deemed given when: (i) delivered
personally; (ii) sent via registered or certified mail,
return receipt requested; or (iii) sent via overnight
courier.

Until further notice, the address for KLA-Tencor shall be as
follows:

		
	 	
    Sergio Edelstein
	 	
    KLA-Tencor Corporation
	 	
    160 Rio Robles
	 	
    San Jose CA 95134
	 	
    Facsimile: (408) 875-1525
	 
	 	
    With a copy to:
	 
	 	
    General Counsel
	 	
    KLA-Tencor Corporation
	 	
    160 Rio Robles
	 	
    San Jose, CA 95134
	 	
    Facsimile: (408) 857-2002

Until further notice, the address for Therma-Wave shall be as
follows:

		
	 	
    Therma-Wave, Inc.
	 	
    1250 Reliance Way
	 	
    Fremont, CA 94539
	 	
    Attn: Chief Financial Officer
	 	
    Fax: 510 226 6834
	 
	 	
    With a copy to:
	 
	 	
    Patent Counsel
	 	
    Therma-Wave, Inc.
	 	
    1250 Reliance Way
	 	
    Fremont, CA 94539

 

     
6.6 If any provision of this Agreement is for any reason
held to be invalid, illegal, or unenforceable under applicable
law in any respect then: (i) such invalidity, illegality,
or unenforceability shall not affect the other provisions of
this Agreement; (ii) this Agreement shall be construed as
if such invalid, illegal or unenforceable provision were
excluded from this Agreement; and (iii) the court in its
discretion may substitute for the excluded provision an
enforceable provision which in economic substance reasonably
approximates the excluded provision. If any provision of this
Agreement is for any reason held to be excessively broad as to
duration, geographical scope, activity, or subject, then such
provision shall be construed by limiting and reducing it so as
to be enforceable to the extent compatible with the
then-applicable law.

     
6.7 This Agreement shall be binding on and inure to the
benefit of the Parties hereto and their respective successors
and assigns (including successors and assigns though merger,
sale of all or substantially all assets, sale of a majority
interest, or similar transaction); provided, however, that no
assignment (including by operation of law) of the covenants not
to sue contained in Section 2.1 of this Agreement shall
expand the scope of such covenants beyond the scope existing on
the Effective Date. This Agreement may not be assigned by
Therma-Wave without the express written consent of KLA-Tencor
except as part of the sale (though merger, sale of all or
substantially all assets, sale of a majority interest, or
similar transaction) of Therma-Wave.

     
6.8 The Parties agree that each Party will bear its own
costs and attorneys fees incurred in connection with the
negotiation and execution of this Agreement.

     
6.9 The Parties agree to execute and deliver any and all
documents reasonably required to effectuate the terms and
conditions, purposes, and aim of this Agreement. Therma-Wave
agrees to execute the assignments set forth in Exhibit B
for each of the TW XRR Patents.

     
6.10 Each Party warrants that: (i) no other person or
entity not a Party hereto has claimed or now claims any interest
in the subject of this Agreement; (ii) such Party has the
sole right and exclusive authority to execute this Agreement and
to receive the consideration provided herein; and
(iii) such Party has not sold, assigned or otherwise set
over to any other person or entity, any claim, lien, demand,
contract, debt, expense, cause of action, obligation, damage or
liability covered hereby. Except as expressly stated in this
Agreement, nothing in this Agreement is intended to confer upon
any person or entity, other than the Parties to this Agreement,
any rights, remedies, obligations, or liabilities under or by
reason of this Agreement.

     
6.11 KLA-Tencor has not made, and does not make, any
representations or warranties regard validity of the KLA
Scatterometry Patent Claims and the obligations undertaken in
Paragraph 2, and nothing in this Agreement shall be
construed as making any representations or warranties regarding
the validity of such patent or impose any obligation on
KLA-Tencor to maintain the validity and/or enforceability of any
patent, including without limitation the payment of any
maintenance fees or taking any other action to keep such patent
in full force and effect. Except as provided otherwise in this
Agreement, in the event that one or more of the patents
containing the KLA Scatterometry Patent Claims expires,
terminates, lapses and/or is subsequently determined to be
invalid and/or unenforceable, then the terms of this Agreement
shall nevertheless survive such expiration, termination, lapse,
and/or determination of invalidity and/or unenforceability, and
such expiration, termination, lapse, and/or determination of
invalidity and/or unenforceability shall not be a basis for
setting aside, invalidating, voiding, or otherwise undoing, this
Agreement or any of the other terms hereof.

     
6.12 Therma-Wave has not made, and does not make, any
representations or warranties regard validity of the
TW Patents, TW Scatterometry Patents or the
TW XRR Patents other than the representations set forth in
paragraph 4.1 and the obligations undertaken in
Paragraph 2, and nothing in this Agreement shall be
construed as making any representations or warranties regarding
the validity of any such patent or impose any obligation on
Therma-Wave to maintain the validity and/or enforceability of
any patent, including without limitation the payment of any
maintenance fees or taking any other action to keep such patent
in full force and effect. Except as provided otherwise in this
Agreement, in the event that one or more of the TW Patents or
the patents containing the TW Scatterometry Patent Claims
expires, terminates, lapses and/or is subsequently determined to
be invalid and/or unenforceable, then the terms of this
Agreement shall nevertheless survive such expiration,
termination, lapse, and/or determination of invalidity and/or
unenforceability, and such expiration, termination, lapse,
and/or determination of invalidity and/or unenforceability shall
not be a basis for

 

setting aside, invalidating, voiding, or otherwise undoing, this
Agreement or any of the other terms hereof.

     
6.13 This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and all
of which together shall constitute one instrument.

     
6.14 The scope of this Agreement shall be worldwide.

     
6.15 This Agreement shall not be deemed to alter or in any
way affect the terms of the 2001 Settlement Agreement or the
2002 Settlement Agreement. Both the 2001 Settlement Agreement
(including, without limitation, Section 4a. thereof) and
the 2002 Settlement Agreement (including, without limitation,
Section 2.5.1 thereof) remain in full force and effect.

     
6.16 This Agreement is entered into by the undersigned
Parties freely and voluntarily. Each person signing below
warrants that such person is authorized to sign this Agreement
in the capacity indicated and to bind the Party on behalf of
which such person signed to the terms of this Agreement.

Executed effective as of the date first set forth above.

	 	 	 
	
	
	
	

	
    
    KLA-TENCOR:
    

    	 	
    KLA-TENCOR CORPORATION, a Delaware corporation

    By: /s/ STUART J. NICHOLS

    Name: Stuart J. Nichols

    Title: Vice President, General Counsel
	 
	
	
	
	

	
    
    THERMA-WAVE:
    

    	 	
    THERMA-WAVE, INC., a Delaware, corporation

    By: /s/ PAPKEN S. DER TOROSSIAN

    Name: Papken S. Der Torossian

    Title: Chairman of the Board
    

 

PATENTS

ASSIGNMENT

     WHEREAS, Therma-Wave, Inc. (referred to herein as “Assignor”), a
corporation of the State of Delaware, is the owner of all right, title and
interest in and to the patents and patent applications listed in the attached
Appendix A, together with all reissues, continuations, divisions,
continuations-in-part, and foreign counterparts thereto (collectively referred
to herein as the Patent Rights), and

     WHEREAS, KLA-Tencor Corporation (referred to herein as “Assignee”), a
corporation of the State of Delaware, is desirous of acquiring the entire
right, title and interest an and to said Patent Rights, thereof;

     NOW, THEREFORE, in consideration of the sum of one dollar and other good
and valuable consideration, receipt and sufficiency of which is hereby
acknowledged, Assignor, by these presents, does hereby sell, assign, and
transfer unto Assignee the entire right, title and interest in and to the
Patent Rights, as well as the right to collect past damages, to be held and
enjoyed by said Assignee, its successors, legal representatives and assigns.

	 	 	 	 	 
	 	 	 
	Dated: August 12, 2004 	By:  	/s/ PAPKEN S. DER TORROSSIAN
 	 
	 	 	Papken S. Der Torossian 	 
	 	 	Title:  	Chairman of the Board

Therma-Wave 	 
	 

	 	 	 	 	 	 	 
	State of California

	 	 	)	 	 	 
	

	 	 	)	 	 	ss.
	County of Santa Clara

	 	 	)	 	 	 

     On this 12th day of August, in the year 2004, before me, Kerry Robinson,
Notary Public, personally appeared Papken S. Der Torossian (or proved to me on
the basis of satisfactory evidence) to be the person whose name is subscribed
to the within instrument, and acknowledged to me that he executed the same in
his authorized capacity, and that by his signature the instrument the person, or
entity upon behalf of which the person acted, executed the instrument.

WITNESS my hand and official seal.

Notary Signature: /s/ Kerry Robinson

 

APPENDIX A

	1.	 	US Patents Nos. 5,619,548, 6,453,006, 6,507,634,
6,643,354, 6,754,305, 6,408,048, 6,512,815, and 6,678,349
	 
	2.	 	US Patent Application Serial Nos. 10/053,373, and 09/969,561

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