Document:

EXECUTIVE EMPLOYMENT AGREEMENT

EXECUTIVE

EMPLOYMENT AGREEMENT

 

 

                This Executive

Employment Agreement (“Agreement”) is effective as of the 15th day

of July, 2001 (the “Effective Date”), between U S LIQUIDS INC., a Delaware

corporation (“Employer”), and JOHN P. MIKLICH, who resides at 4 Easy Street,

Windham, NH 03087 (“Employee”), under the following terms and conditions.

 

                WHEREAS,

Employee and Employer desire to enter into this Agreement pursuant to which

Employee will render services to Employer on the terms and conditions set forth

herein.

 

                NOW

THEREFORE, in consideration of the mutual promises, covenants and

agreements set forth below, it is hereby agreed as follows:

 

                1.             Employment.  Employer hereby employs Employee as

Executive Vice President/Chief Operating Officer.  Employee shall report directly to the Chief Executive Officer of

Employer and shall perform such duties as are commensurate with his position as

Executive Vice President and Chief Operating Officer.  Employee agrees to serve Employer faithfully, diligently and to

the best of his ability and to faithfully adhere to, execute and fulfill all

policies established by Employer. The Employee’s place of employment shall be

in the Houston, Texas metropolitan area, subject to travel necessary for the

performance of his duties hereunder. 

Employer shall provide to the Employee adequate office facilities and

staff commensurate with his positions to enable him to perform his duties

hereunder.

 

2.             Term

of Employment. The term of this Agreement shall commence on the date hereof

(the “Commencement Date”) and shall continue for a term of one (1) year from

the Commencement Date (this date of termination of this Agreement being

referred to as the “Scheduled Termination Date”).  However, as of each anniversary date of the Commencement Date, the

Scheduled Termination Date shall automatically be extended for a successive

one-year period of time, unless more than ninety (90) days prior to the

occurrence of such anniversary date, either party gives notice to the other

that such Scheduled Termination Date shall not thereafter be so extended.  If any such notice is given, then the

Scheduled Termination Date hereof shall not be automatically extended upon the

future occurrence of any such anniversary date.  Following the Scheduled Termination Date, the Employee shall not

be entitled to earn any further compensation or benefits under this Agreement,

except as otherwise provided herein. 

Notwithstanding the foregoing, Employer and Employee understand and

agree that Employee’s employment by Company is at the will of Company and the

employment relationship may be terminated either by Employee or Company at any

time, with or without cause.

 

                3.             Compensation.

 

a.                     Base Salary:  Employer

shall pay Employee an annualized salary of $200,000.00 (the “Base Salary”).  The Base Salary will be paid by Employer to

Employee in equal installments payable in accordance with the regular payroll

policies of Employer in effect during the term of this Agreement, less

 

1

 

                              applicable tax withholdings or other

deductions required by law or authorized by Employee.  The Base Salary may be increased, on an annual basis, but only in

the sole discretion of Employer.  The

aforesaid reference to the Base Salary as being “annualized” or being increased

“on an annual basis” is not intended and shall not be deemed as creating any

term of employment under this Agreement other than as specifically set forth in

Section 2, above.

 

b.                    Incentive Bonus:  Employee

shall be entitled to participate in Employer’s Incentive Bonus Plan (the “Bonus

Plan”).  The award of any such bonus

(the “Bonus”) shall be (i) pursuant to the terms of the Bonus Plan, (ii)

determined solely at the discretion of Employer and (iii) based on corporate

results and personal performance.

 

                4.             Benefits.  In addition to the compensation provided for

in Section 3 above, Employer shall provide Employee with employment benefits of

the type provided to employees of Employer generally during the Term, including

but not limited to eligibility for any vacation and sick leave benefits and

participation in any health, life and disability insurance plans, whether now

in effect or subsequently adopted, subject to Employer’s right to amend, alter

or terminate such plans.

 

                5.             Expenses.  Employer shall pay all reasonable expenses

incurred by Employee in furtherance of the business of the Employer, including

traveling and entertainment expenses, and shall reimburse Employee monthly for

all such expenses paid or incurred by Employee during the preceding month upon

delivery of an appropriate expense report and receipts to Employer.

 

                6.             Termination by Employer.  Employer may terminate this Agreement with

or without Cause, as provided herein.

 

a.               Termination by Employer with Cause: 

Employer may terminate Employee with Cause immediately and without

notice.  Upon Employee’s termination

with Cause, Employer shall be required to pay Employee compensation and

benefits (and any unpaid expenses payable under Section 5) only through the

effective date of termination.  Sums due

Employee for salary under Section 3 shall be prorated for the then current

month through the date of termination. 

Any proration of compensation or benefits paid on a weekly basis shall

be calculated based on a business week consisting of five (5) days and not

seven (7) days.  By way of example and

not of limitation, two weeks of vacation would be calculated as ten (10)

business days.

 

b.            Termination

by the Employer for other than Cause:  In the event

that Employer terminates Employee’s employment for any reason other than Cause,

Employer shall (i) pay to Employee any accrued but unpaid Base Salary for

services rendered to the date of termination plus a severance payment equal to

one times (1x) the Base Salary on the date of such termination, as well as any

accrued but unpaid expenses required to be

 

2

 

                        reimbursed under Section 5 and any

vacation accrued to the date of termination; and (ii) continue for Employee and

Employee’s spouse and dependents the group health plans, programs or

arrangements in which Employee was entitled to participate at any time during

the six (6) month period prior to the date of termination until the earlier

of  the last day of the Severance

Period, Employee’s death (provided that benefits payable to Employee’s

beneficiaries shall not terminate upon Employee’s death, to the extent provided

in such plans, programs or arrangements) or, with respect to any particular

plan, program or arrangement, the date Employee becomes covered by a comparable

benefit provided by a subsequent employer. 

For purposes of this provision, the “Severance Period” shall be

considered to be twelve (12) months.

 

c.             Full

Settlement:  The post-termination payments provided for

in this Section 6 shall be the only payments which Employer shall be obligated

to make on account of the termination of Employee’s employment, and after such

termination, Employer shall not be obligated to make any other payments as

damages or otherwise or provide any other benefits to or on behalf of

Employee.  All such post-termination

payments shall be made within the time periods required by applicable law.

 

                7.             Voluntary Termination.  Employee may terminate this Agreement prior

to the end of its term by delivering written notice to Employer.  Employer may accept the proposed termination

date or may set an earlier termination date by mailing or personally delivering

notice of such earlier date to Employee. 

In the event Employee voluntarily terminates this Agreement, he/she will

receive the salary due under Section 3 above through the effective date of

termination and no other compensation or benefits, other than any stock options

or warrants which may have theretofore vested, except as required by applicable

law.

 

8.             Change

of Control.

 

a.                                       This Section 8 shall become

effective, but not operative, immediately upon the Commencement Date and shall

remain in effect so long as the Employee remains employed hereunder by the

Corporation, but shall not be operative unless and until there has been a

Change in Control, as defined in Section 8(d) hereof.  Upon such a Change in Control, this

Section 8 shall become operative immediately.

 

b.                                      If a Change in Control occurs (i) while

the Employee is employed by the Corporation hereunder, or (ii) subsequent to

the Termination Date of the Employee’s employment hereunder other than by the

Corporation for cause, or death or disability, and prior to the later of the

first anniversary of such Termination Date or the second anniversary of the Commencement

Date, or (iii) within 180 days of the Scheduled Termination Date, the Employee

may, in his sole discretion, within twelve

 

3

 

                                                (12) months after the date of the Change

in Control, give notice to the Corporation that he intends to elect to exercise

his rights under this Section 8 (the “Notice of Intention”).  Within thirty (30) days after the

Corporation’s receipt of the Notice of Intention, the Corporation shall provide

written notice to the Employee setting forth the Corporation’s computation of

the amount that would be payable pursuant to Section 8(c), accompanied by

the written opinion of the Corporation’s independent certified public

accountants confirming the Corporation’s computation.  If the Employee takes exception to the Corporation’s computation

of such amount, the Employee may (but shall not be prejudiced in this right to

later contest the amount actually paid by failure to do so) give a further

written notice to the Corporation setting forth in reasonable detail the

Employee’s exceptions to the Corporation’s computation, accompanied by the

written opinion of the Employee’s tax advisor confirming the basis for such

exceptions.  Exercise by the Employee of

his rights pursuant to this Section 8 shall only be made by giving further

notice to the Corporation (the “Notice of Exercise”) within six (6) months from

the date of the Notice of Intention.

 

c.                                       If the Employee gives the Notice of

Exercise described in Section 8(b) to the Corporation, the Termination Date of

his employment hereunder shall then occur; all outstanding stock options which

are not then exercisable shall immediately become exercisable in full; and the

Corporation shall pay to the Employee a lump sum amount equal to one times (1x)

the Employee’s Base Salary.  The

Corporation shall, within ten (10) business days after the date of the Notice

of Exercise, deliver to the Employee its cashier’s check in the amount payable

pursuant to this Section 8(c), and payment of such amount shall terminate

the Employee’s rights to receive any and all other compensation,

reimbursements, indemnification, or benefits under this Agreement, other than

those which are payable to or have accrued to the Employee as in this 

Agreement.

 

d.                                      For the purposes of this Agreement, a

Change in Control shall mean (i) a reportable change in control under the proxy

rules of the Securities and Exchange Commission, including the acquisition of a

30% beneficial voting interest in the Corporation (other than such acquisition

by Employee or an affiliate of Employee), or (ii) a change in any calendar year

of such number of directors as constitutes a majority of the board of directors

of the Corporation, unless the election, or the nomination for election by the

Corporation’s shareholders, of each new director was approved by a vote of at

least two-thirds (2/3) of the directors then in office who were directors at

the beginning of the calendar year.

 

4

 

                9.             Other Activities.  Employee shall devote all of his/her working

time and efforts during the Employer’s normal business hours (reasonable

vacations and sick leave excluded) to the business and affairs of Employer

pursuant to this Agreement.  Employee’s

expenditure of reasonable amounts of time for personal, outside business,

charitable and professional activities shall not be a breach of this Agreement,

provided that such activities do not materially interfere with the services

required to be rendered by Employee to Employer hereunder.  The making of personal investments and the

conduct of private business affairs shall not be prohibited hereunder, subject

to Section 11 hereof.

 

                10.           Confidential Information.  During the Term, Employer will disclose to

Employee information, technical data and know-how regarding the business

affairs, services and products of Employer as well as Employer’s customers,

which constitute Confidential Information. 

“Confidential Information”, under this Agreement, shall consist of any

and all proprietary information and proprietary data related thereto, and any

derivative works thereof including but not limited to research, development,

customer information, pricing information, knowledge of Employer’s financial

condition, information and relationships with resources, suppliers and

customers of Employer, manufacturing processes, techniques, methods, systems

and trade secrets of the Employer, its employees, or other subsidiaries,

affiliates, agents or customers, whether or not specifically identified as confidential.  Employee agrees to receive, hold and treat

all Confidential Information received from Employer as confidential and secret

and Employee agrees to protect the secrecy of said Confidential Information,

whether or not specifically identified as confidential.  Such Confidential Information constitutes

valuable, special and unique assets of Employer and Employee agrees that the

Confidential Information will be disclosed by Employee only to those persons

who are required to have such knowledge in connection with their work for

Employer and that such Confidential Information will not be disclosed by

Employee to persons not in the employ of Employer without the prior written

consent of the Employer.  As used herein,

“persons who are required to have such knowledge” shall include, but not be

limited to the Board of Directors of Employer and such officers, employees and

agents of Employer or its affiliates to which such information is furnished in

the normal course of business under established policies approved by Employer

or its affiliates and such outside parties as are legally entitled to such

information (other than as a result of action by Employee not previously

approved or authorized by Employer or the Board of Directors or Employer) and

customers and banking, lending, collection and data processing institutions or

agencies in the course of maintaining ordinary business procedures of

Employer.  The provisions hereof shall

not be applicable to; (a) information which at the time of disclosure to

Employee is a matter of public knowledge or in the public domain; or (b)

information which, after disclosure to Employee, becomes public knowledge or in

the public domain other than through a breach of this Agreement.  Unless the Confidential Information shall be

of the type hereinbefore set forth in the two immediately preceding sentences,

Employee shall not use such Confidential Information for his/her own benefit or

for a third party’s or parties’ benefit at any time.  The obligations imposed upon Employee by this Section 10 shall

survive the expiration or termination of this Agreement.

 

5

 

 

                11.           Covenant Not to Compete and

Non-Solicitation by Employee.

 

a.             Competitive

Activity:  Employee covenants and agrees that at all

times during the Term, and for a period of one (1) year thereafter, Employee

will not, directly or indirectly, engage in, assist, or have any active

interest or involvement, whether as an employee, agent, consultant, independent

contractor, joint venturer, associate, creditor, advisor, officer, director,

stockholder (excluding holding of less than 1% of the stock of a public company

for investment purposes only), partner, proprietor or any type of principal

whatsoever, directly or indirectly, in any person, firm, or business entity, in

any business activities or with any business that competes with or is engaged

in the same business as that conducted and carried on by Employer, without

Employer’s specific written consent to do so.

 

b.            Non-solicitation: 

Employee covenants and agrees that at all times during the Term, and for

a period of one (1) year thereafter, Employee will not directly or indirectly,

(i) induce, or attempt to induce, any customers of Employer or entities

affiliated with Employer to patronize any similar business which competes with

any material business of Employer, (ii) canvass, solicit or accept, or attempt

to canvass, solicit or accept, any similar business from any customer of

Employer or entities affiliated with Employer, (iii) request or advise any

customers of Employer or entities affiliated with Employer to withdraw, curtail

or cancel such customer’s business with Employer, (iv) disclose to any other

person or entity the names or addresses of any of the customers of Employer or

entities affiliated with Employer, or (v) individually or through any person or

entity with which Employee is now or may hereafter become associated, cause,

solicit, entice, or induce, or attempt to cause, solicit, entice or induce, any

present or future employee of Employer or any entity affiliated with Employer

to leave the employ of Employer, or such other entity to accept employment

with, or compensation from, Employee or any such person or entity without the

prior written consent of  Employer.

 

c.             Non-Disparagement: 

Employee covenants and agrees that Employee shall not engage in any

pattern of conduct that involves the making or publishing of written or oral

statements or remarks (including, without limitation, the repetition or

distribution of derogatory rumors, allegations, negative reports or comments)

which are disparaging, deleterious or damaging to the integrity, reputation or

good will of Employer, its management, or of corporations affiliated with

Employer or their management.

 

                12.           Inventions.  Any and all inventions, conceptions,

processes, discoveries, improvements, patent rights, letter patents, programs,

copyrights, trademarks, trade names and applications therefor, in the United

States and all other countries, whether patentable or not, and any and all

rights and interest in, to and under the same, that are conceived, made,

acquired, or possessed by Employee, whether alone or with other employees

during the Term shall become

 

6

 

the exclusive property of Employer and shall at all times and for all

purposes be regarded as acquired and held by Employee in a fiduciary capacity

for the sole benefit of Employer, and Employee hereby assigns and agrees to

assign the same to Employer without further compensation.  Employee agrees that, upon request, he/she

will promptly make all disclosures, execute all applications, assignments or

other instruments and perform all acts whatsoever necessary or desired by Employer

to vest and confirm in it, its successors, assigns and nominees, fully and

completely, all rights and interests created or contemplated by this Section

11.

 

                13.           Employer Property.  All products, records, designs, patents,

plans, data, manuals, “field guides”, catalogs, brochures, memoranda,

machinery, devices, lists and other property delivered to Employee by or on

behalf of Employer or by its customers (including, but not limited to,

Employer’s customers solicited by Employee), and all records compiled by

Employee which pertain to the business of Employer shall be and remain the

property of Employer and be subject at all times to its discretion and

control.  Employee shall promptly

deliver to a designated representative of Employer all such Employer property,

as well as any and all correspondence with customers and representatives,

reports, records, charts, advertising materials, and other materials, and

property in his/her possession or control which belong to Employer upon

termination of Employee’s employment.

 

                14.           Representations of Employee.

 

                                (a)           Employee represents that to the best

of his/her knowledge he/she is not the subject of any pending or threatened

claim which involves any criminal or governmental proceedings, or allegations

of misfeasance, and that he has not been charged nor threatened to be charged

by any governmental or administrative body with violation of law except for

minor traffic violations and similar charges.

 

                                (b)           Employee represents and warrants that

he/she is not prohibited from acting in any capacity for Employer by virtue of

the operation of any non-competition or similar agreement with any prior

employer, or by any applicable statutes, regulations or ordinances or any other

applicable law or by the rules and regulations of the U. S. Securities and

Exchange Commission or any national securities exchange, and that his/her

acting in any capacity for Employer, will not subject Employer to claims or

materially impair the license status of 

Employer or its affiliates or any business operated by Employer or its

affiliates.

 

                15.           Defense of Claims.  Employee agrees that during the Term, and at

all reasonable times thereafter, he/she will cooperate with Employer in the

defense of any claim that may be made against Employer or any affiliates, to

the extent that such claims may relate to services performed by Employee for

Employer or its affiliates.  In

connection with such claim, (i) if 

Employee is required to travel more than one hundred (100) miles from

his/her home, Employer agrees to reimburse Employee for all of his/her

reasonable out-of-pocket expenses associated with such travel and, to the

extent reasonably practicable, to provide Employee with notice of at least ten

(10) days prior to the date on which such travel is required, and (ii) if

Employee is no longer employed by Employer, to compensate Employee at a

reasonable rate.

 

7

 

                16.           Notification of Agreement.  Employee shall notify any future or

prospective employers, partners or persons with a similar business relationship

to Employee (“Future Employers”) about the terms of this Agreement for any

period during the Term and for one (1) year after the termination of Employee’s

employment by Employer.  Employee does

hereby authorize Employer to notify any Future Employers about the terms of

this Agreement upon discovery by Employer that Employee is being considered for

employment, partnership or similar business relationship (or has entered into

such a relationship) with a Future Employer in order to ensure Employee’s observance

and compliance herewith.

 

                17.           Injunction and Other Relief.  Both parties hereto recognize that the

services to be rendered under this Agreement by Employee are special, unique

and of extraordinary character, and that in the event of the breach by Employee

of any of the terms and conditions of this Agreement to be performed by

him/her, or in the event Employee performs services for any person, firm or

corporation in violation of Section 10, or if Employee shall breach the

provisions of this Agreement with respect to Confidential Information, then

Employer shall be entitled, if it so elects, in addition to all other remedies

available to it under this Agreement or at law or in equity, to affirmative

injunctive or other equitable relief, and Employee waives (and shall execute

such documents as may be necessary to further evidence such waiver) any

requirement that Employer secure or post any bond in connection with such

injunctive or other equitable relief.

 

                18.           Stipulation.  Employee hereby specifically acknowledges,

agrees, stipulates and represents to Employer that:

 

(i)           Employee has received adequate and sufficient

consideration for entering into this Agreement including the above-referenced

compensation and benefits;

 

(ii)        the execution and delivery of this Agreement and the

performance hereunder do not and shall not constitute a violation of any

covenants of non-competition, trade secrecy, or confidentiality to which

Employee is a party;

 

(iii)     the covenants of Employee contained in Section 9 and

Section 10 of this Agreement are in consideration of the promise of Employer to

provide Confidential Information (including trade secrets) to Employee and are

necessary to protect Employer’s interests in such Confidential Information, as

well as Employer’s business goodwill and other business interests;

 

(iv)    Employer will suffer great loss and irreparable harm

if Employee competes directly or indirectly with Employer;

 

(v)       the temporal, geographic and other restrictions

contained in this Agreement are in all respects reasonable and necessary to

protect the business goodwill, Confidential Information, trade secrets,

prospects and other business interest of Employer; and

 

8

 

(vi)    the enforcement of this Agreement will not work an

undue or unfair hardship on Employee or otherwise be oppressive to him/her.

 

                19.           Severability.  In the event that any of the provisions of

this Agreement shall be held invalid or unenforceable by any court of competent

jurisdiction, such invalidity or unenforceability shall not affect the

remainder of this Agreement and same shall be construed as if such invalid or

unenforceable provisions had never been a part hereof.  If a court of competent jurisdiction

determines that the length of time, geographical restrictions or any other

restriction, or portion thereof, set forth in this Agreement is overly

restrictive and unenforceable, the parties agree that the court shall reduce or

modify such restrictions to those which it deems reasonable and enforceable

under the circumstances, and as so reduced or modified, the parties hereto

agree that the restrictions of this Agreement shall remain in full force and

effect.  In the event there is a breach by

Employer or Employee of any other provision of this Agreement, the covenants

contained in Sections 10 and 11 shall remain in full force and effect.

 

                20.           Waiver.  The waiver by either party of a breach or

violation of any provision of this Agreement shall not operate as or be

construed to be a waiver of any subsequent or continuing breach hereof.  The failure of any party to insist upon

strict adherence to any provision of this Agreement on one or more occasions

shall not be considered a waiver.

 

                21.           Notices.  Any notices provided for in this Agreement

shall be given in writing and transmitted by personal delivery or prepaid first

class registered or certified U.S. mail addressed as follows:

 

	

  Employer:

  	

  U S Liquids Inc.

  
	

   

  	

  Attn:  Michael P. Lawlor

  
	

   

  	

  411 N. Sam Houston Pkwy. E., Suite 400

  
	

   

  	

  Houston, TX 

  77060-3534

  
	

   

  	

   

  
	

  with copy to:

  	

  U S Liquids, Inc.

  
	

   

  	

  Attn: General Counsel

  
	

   

  	

  4121 N. Sam Houston Pkwy. E, Suite 400

  
	

   

  	

  Houston, TX 77060-3534

  
	

   

  	

   

  
	

  Employee:

  	

  John P. Miklich

  
	

   

  	

  4 Easy Street

  
	

   

  	

  Windham, NH 03087

  
	

   

  	

   

  

                22.           Successors to Employer.  Except as otherwise provided herein, this

Agreement shall inure to the benefit of Employer and any successor of Employer,

including, without limitation, any entity or entities acquiring directly or

indirectly all or substantially all of the assets or business of Employer

whether by merger, consolidation, sale or otherwise (and such successor shall

thereafter be deemed “Employer” for the purposes of this Agreement), but shall

not otherwise be assignable by Employer.

 

9

 

                23.           Transfer and Assignment.  This agreement is personal as to Employee

and shall not be assigned or transferred by Employee without the prior written

consent of Employer.

 

                24.           Governing Law.  This Agreement shall be governed by and

construed in accordance with the laws of the State of Texas, without regard to

applicable conflicts of law.

 

                25.           Choice of Forum.  The parties hereto agree that in the event

that any legal suits, actions or proceedings arising out of this Agreement are

instituted by any party hereto, such suits, actions or proceedings shall be

instituted only in the state or federal courts in the County of Harris in the

State of Texas.  The parties hereto do

hereby consent to the jurisdiction of such courts and waive any objection which

they may now or hereafter have to the venue of any such suits, actions or

proceedings; provided, however, that any party hereto shall have the right to

institute proceedings in another jurisdiction if the purpose of such

proceedings is to enforce or realize upon any final court judgment arising out

of this Agreement.

 

                26.           Consent to Service.  Service of any and all process which may be

served on any party hereto in any suit, action or proceeding related to this

Agreement may be made by registered or certified mail, return receipt

requested, to Employee or Employer at their respective addresses for notice as

set forth in Section 20 and service so made shall be taken and held to be valid

personal service upon such party by any party to this Agreement on whose behalf

such service is made.

 

                27.           Entire Agreement.  This Agreement constitutes the entire

agreement between the parties, superseding all prior understandings,

arrangements and agreements, whether oral or written, and may not be amended

except by a writing signed by the parties hereto.  As used herein, unless the context otherwise indicates, the term

“this Agreement” means the Agreement executed to be effective as of the

Effective Date and any written amendments thereof.

 

                28.           Counterparts.  This Agreement may be executed in two or

more counterparts, all of which shall be deemed to be an original, but all of

which together shall constitute one and the same instrument.

 

 

 

 

 

 

THE REMAINDER OF THIS

PAGE LEFT INTENTIONALLY BLANK

 

10

 

 

                IN WITNESS

WHEREOF, Employer has, by its appropriate officers, executed this Agreement and

Employee has executed this Agreement on the 31st day of July, 2001 to be

effective as of the Effective Date.

 

 

 

	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  U S

  LIQUIDS INC.

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  By:  

  	

  /s/ Michael P. Lawlor

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  Michael P. Lawlor, Chairman &

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  Chief Executive Officer

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  /s/ John P. Miklich

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  John P. Miklich

  

 

11Revised as of October 2, 2001

Exhibit

4(f)(1)

 

$720,000,000

 

NorthWestern

Corporation

 

$250,000,000

7 7/8% Notes due March 15, 2007

 

$470,000,000

8  3/4% Notes due March 15, 2012

 

PURCHASE AGREEMENT

 

March

8, 2002

CREDIT SUISSE FIRST

BOSTON CORPORATION

BARCLAYS CAPITAL INC.

MORGAN STANLEY & CO.

INCORPORATED

As Representatives of the Several Purchasers

c/o Credit Suisse First Boston

Corporation,

Eleven

Madison Avenue,

New

York, N.Y. 10010-3629

 

Dear Sirs:

 

1.             Introductory.  NorthWestern Corporation, a Delaware

corporation (the “Company”), proposes, subject to the terms

and conditions stated herein, to issue and sell to the several initial

purchasers named in Schedule A hereto (the “Purchasers”)

U.S.$250,000,000  aggregate principal

amount of its 7 7/8%  Notes due March

15, 2007 and U.S.$470,000,000 aggregate principal amount of its 8 3/4% Notes

due March 15, 2012 (collectively, “Offered Securities”).  The Securities Act of 1933, as amended, is

herein referred to as the “Securities Act”.

 

The holders of the Offered

Securities will be entitled to the benefits of a Registration Rights Agreement

of even date herewith among the Company and the Purchasers (the “Registration

Rights Agreement”), pursuant to which the Company agrees to file a

registration statement with the Securities Exchange Commission (the “Commission”)

registering the resale of the Offered Securities under the Securities Act.

 

The Company hereby agrees with

the several Purchasers as follows:

 

2.             Representations

and Warranties of the Company. 

The Company represents and warrants to, and agrees with, the several

Purchasers that:

 

(a)           A preliminary offering circular and

an offering circular relating to the Offered Securities to be offered by the

Purchasers have been prepared by the Company. 

Such preliminary offering circular (the “Preliminary Offering Circular”)

and offering circular (the “Offering Circular”), as supplemented as of

the date of this Agreement and any other document approved by the Company for

use in connection with the contemplated resale of the Offered Securities are hereinafter

collectively referred to as the “Offering Document”.  On the date of this Agreement, the Offering

Document does not include any untrue statement of a material fact or omit to

state any material fact necessary in order to make the statements therein, in

the light of the circumstances under which they were made, not misleading.  The preceding sentence does not apply to

statements in or omissions from the Offering Document based upon written

information 

 

 

furnished to the Company by any Purchaser through

Credit Suisse First Boston Corporation (“CSFBC”) specifically for use therein, it

being understood and agreed that the only such information is that described as

such in Section 7(b) hereof.  Except as

disclosed in the Offering Document on the date of this Agreement, the Company’s

Annual Report on Form 10-K most recently filed with the Commission and all

subsequent reports (collectively, the “Exchange Act Reports”) which are

incorporated by reference into the Offering Document and have been filed by the

Company with the Commission or sent to stockholders pursuant to the Securities

Exchange Act of 1934, as amended (the “Exchange Act”), when filed with the

Commission did not or will not include any untrue statement of a material fact

required to be stated therein or omit to state any material fact necessary to

make the statements therein, in the light of the circumstances under which they

were made, not misleading.  Such

documents, when they were filed with the Commission, conformed in all material

respects to the requirements of the Exchange Act and the rules and regulations

of the Commission thereunder.  The

preceding sentence does not apply to statements in or omissions from the

Offering Document based upon written information furnished to the Company by

any Purchaser through CSFBC specifically for use therein, it being understood

and agreed that the only such information is that described as such in Section

7(b) hereof.

 

(b)           The accountants who certified the

financial statements and supporting schedules included in the Offering Document

are independent public accountants as required by the Securities Act and the

related published rules and regulations thereunder (“Rules and Regulations”).

 

(c)           The financial statements included in

the Offering Document, together with the related schedules and notes, present

fairly in all material respects the financial position of the Company and its

consolidated subsidiaries at the dates indicated and the statement of

operations, stockholders’ equity and cash flows of the Company and its

consolidated subsidiaries for the periods specified; said financial statements

have been prepared in conformity with generally accepted accounting principles

(“GAAP”)

applied on a consistent basis (except that the unaudited financial statements

may be subject to normal year-end adjustments) throughout the periods involved;

and the assumptions used in preparing the pro forma financial statements

included in the Offering Document are reasonable, the related pro forma

adjustments give appropriate effect to those assumptions, and the pro forma

columns therein reflect the proper application of those adjustments to the

corresponding historical financial statement amounts.  The selected financial data included in the Offering Document

present fairly the information shown therein and have been compiled on a basis

consistent with that of the audited financial statements included in the

Offering Document.

 

(d)           Since the date of the latest audited

financial statements included in the Offering Document, (A) except as disclosed

in the Offering Document, there has been no material adverse change, nor any

development or event involving a prospective material adverse change, in the

condition (financial or other), business, properties or results of operations

of the Company and its subsidiaries taken as a whole, (B) except as disclosed

in the Offering Document, there have been no transactions entered into by the

Company or any of its subsidiaries, other than those in the ordinary course of

business, which are material with respect to the Company and its subsidiaries

considered as one enterprise, and (C) except as disclosed in, or contemplated

by, the Offering Document, except for dividends on the 41⁄2% Series and the 61⁄2%

Series of preferred stock and regular quarterly dividends on the Common Stock

in amounts per share that are consistent with past practice, there has been no

dividend or distribution of any kind declared, paid or made by the Company on

any class of its capital stock.

 

(e)           The Company has been duly

incorporated and is validly existing as a corporation in good standing under

the laws of the State of Delaware and has corporate power and authority and

franchises to own or lease and operate its properties and to conduct its

business as described in the Offering Document and to enter into and perform

its obligations under this Agreement; and the Company is authorized as a

domesticated foreign corporation to transact business, and is in good standing

in the State of Nebraska, and is duly qualified as a foreign 

 

2

 

corporation to transact business and is in good

standing in each other jurisdiction in which such qualification is required,

whether by reason of the ownership or leasing of property or the conduct of

business, except where the failure so to qualify or to be in good standing

would not, individually or in the aggregate, result in a material adverse

effect on the condition (financial or other), business, properties or results

of operations of the Company and its subsidiaries taken as a whole (“Material

Adverse Effect”).

 

(f)            Each “significant subsidiary” (as

such term is defined in Rule 1-02 of Regulation S-X) of the Company and each of

Expanets, Inc., Blue Dot Services, Inc., NorthWestern Growth Corporation,

CornerStone Propane Partners, L.P. and The Montana Power, L.L.C. (each, a “Subsidiary”

and, collectively, the “Subsidiaries”) has been duly organized or

formed and is validly existing as a corporation, limited liability company or a

limited partnership, as the case may be, in good standing under the laws of its

jurisdiction of incorporation or organization, has power and authority

(corporate or other) to own, lease and operate its properties and to conduct

its business as described in the Offering Document and is duly qualified as a

foreign corporation, limited liability company or limited partnership to

transact business and is in good standing in each jurisdiction in which such

qualification is required, whether by reason of the ownership or leasing of

property or the conduct of business, except where the failure so to qualify or

to be in good standing would not, individually or in the aggregate, result in a

Material Adverse Effect; except as otherwise disclosed in the Offering Document

or would not, individually or in the aggregate, result in a Material Adverse

Effect, all of the issued and outstanding shares of capital stock, limited

liability company interests or partnership interests, as the case may be, of

each such Subsidiary have been duly authorized and validly issued, are fully

paid and non-assessable and all of the capital stock, limited liability company

interests or partnership interests, as the case may be, of each Subsidiary

owned by the Company, directly or through subsidiaries, is owned free and clear

of any security interest, mortgage, pledge, lien, encumbrance, claim or equity;

and none of the outstanding shares of capital stock, limited liability company

interests or limited partnership interests of any Subsidiary was issued in

violation of the preemptive or similar rights of any security holder of such

Subsidiary.  The only subsidiaries of

the Company are the subsidiaries listed on Schedule B hereto.

 

(g)           The Indenture between the Company and

JP Morgan Chase (as successor to The Chase Manhattan Bank), as trustee (the “Trustee”),

dated as of November 1, 1998, as amended and as to be amended by a supplemental

indenture to be dated March 13, 2002 (together, the “Indenture”), has been duly

authorized by the Company and, when duly executed and delivered by the Company

and assuming the due authorization, execution and delivery of the Indenture by

the Trustee, will constitute a valid and binding agreement of the Company,

enforceable against the Company in accordance with its terms, except as

enforcement thereof may be limited by bankruptcy, insolvency (including,

without limitation, all laws relating to fraudulent transfers), reorganization,

moratorium or similar laws affecting enforcement of creditors’ rights generally

and except as enforcement thereof is subject to general principles of equity

(regardless of whether enforcement is considered in a proceeding in equity or

at law) or an implied covenant of good faith and fair dealing, and except that

rights to indemnification thereunder may be limited by federal or state

securities laws or public policy thereto.

 

(h)           The Offered Securities have been duly

authorized by the Company, and when executed, authenticated, issued and

delivered in the manner provided for in the Indenture and sold and paid for as

provided in this Agreement on the Closing Date (as defined below), the Offered

Securities will conform to the description thereof contained in the Offering

Document and constitute valid and binding obligations of the Company entitled

to the benefits of the Indenture and enforceable against the Company in

accordance with their terms, except as enforcement thereof may be limited by

bankruptcy, insolvency (including, without limitation, all laws relating to

fraudulent transfers), reorganization, moratorium or similar laws affecting

enforcement of creditors’ rights generally and except as enforcement thereof is

subject to general principles of equity (regardless of whether enforcement is

considered in a proceeding in equity or at law) or an

 

3

 

implied covenant of good faith and fair dealing, and

except that rights to indemnification thereunder may be limited by federal or

state securities laws or public policy thereto.

 

(i)            This Agreement and the Registration

Rights Agreement have been duly authorized, executed and delivered by the

Company.

 

(j)            The authorized, issued and

outstanding capital stock of the Company is as set forth in the Offering

Document in the column entitled “Actual” under the caption “Capitalization”

(except for subsequent issuances, if any, pursuant to this Agreement, pursuant

to reservations, agreements or employee benefit plans referred to in the

Offering Document or pursuant to the exercise of convertible securities or

options or the exchange of securities referred to in, or contemplated by, the

Offering Document).  The shares of

issued and outstanding capital stock of the Company have been duly authorized

and validly issued and are fully paid and non-assessable; none of the outstanding

shares of capital stock of the Company was issued in violation of the

preemptive or other similar rights of any securityholder of the Company.

 

(k)           The execution, delivery and

performance of the Indenture, this Agreement, the Registration Rights Agreement,

and the issuance and sale of the Offered Securities will not result in a breach

or violation of any of the terms and provisions of, or constitute a default

under, (i) any statute, any rule, regulation or order of any governmental

agency or body or any court, domestic or foreign, having jurisdiction over the

Company or any subsidiary of the Company or any of their properties, (ii) or

any agreement or instrument to which the Company or any such subsidiary is a

party or by which the Company or any such subsidiary is bound or to which any

of the properties of the Company or any such subsidiary is subject, or (iii)

the charter or by-laws of the Company or any such subsidiary, except, in the

case of (i) and (ii) above, for breaches or violations that would not,

individually or in the aggregate, have a Material Adverse Effect, and the

Company has full power and authority to authorize, issue and sell the Offered

Securities as contemplated by this Agreement.

 

(l)            No labor dispute with the employees

of the Company or any subsidiary exists or, to the knowledge of the Company, is

imminent, which would have a Material Adverse Effect.

 

(m)          Other than as disclosed in the

Offering Document, there is no action, suit, proceeding, inquiry or

investigation before or brought by any court or governmental agency or body,

domestic or foreign, now pending, or, to the knowledge of the Company,

threatened, against or affecting the Company or any subsidiary, that, if

determined adversely to the Company or any of its subsidiaries, would

individually or in the aggregate have a Material Adverse Effect, or would

materially and adversely affect the ability of the Company to perform its

obligations under the Indenture, this Agreement, the Registration Rights

Agreement or any other document governing the sale of the Offered Securities;

the aggregate of all pending legal or governmental proceedings to which the

Company or any subsidiary is a party or of which any of their respective

property or assets is the subject which are not described in the Offering

Document, including ordinary routine litigation incidental to the business,

would not result in a Material Adverse Effect.

 

(n)           The Company and its subsidiaries own

or possess, or can acquire on reasonable terms, adequate patents, patent rights,

licenses, inventions, copyrights, know-how (including trade secrets and other

unpatented and/or unpatentable proprietary or confidential information, systems

or procedures), trademarks, service marks, trade names or other intellectual

property (collectively, “Intellectual Property”) necessary to carry

on the business now operated by them except in cases in which the failure to

own or possess such Intellectual Property would not, individually or in the

aggregate, have a Material Adverse Effect and neither the Company nor any of

its subsidiaries has received any notice or is otherwise aware of any

infringement of or conflict with asserted rights of others with respect to any

Intellectual Property or of any facts or circumstances which would render any

Intellectual Property invalid or inadequate to protect the interest of the

Company or any of its subsidiaries therein, and which infringement, conflict,

invalidity or inadequacy, individually or in the aggregate, would have a

Material Adverse Effect.

 

4

 

(o)           No consent, approval, authorization,

or order of, or filing with, any governmental agency or body or any court is

required for the consummation of the transactions contemplated by this

Agreement and the Registration Rights Agreement in connection with the issuance

and sale of the Offered Securities by the Company except such as have been

already obtained or as may be required under state securities laws and except

for the order of the Commission declaring the Exchange Offer Registration

Statement or the Shelf Registration Statement (each as defined in the

Registration Rights Agreement) effective.

 

(p)           The Company and its subsidiaries

possess such permits, licenses, approvals, consents and other authorizations (collectively,

“Governmental

Licenses”) issued by the appropriate federal, state, local or

foreign regulatory agencies or bodies necessary to conduct the business now

operated by them as described in the Offering Document, except where the

failure to have such Governmental Licenses would not, individually or in the

aggregate, have a Material Adverse Effect; the Company and its subsidiaries are

in compliance with the terms and conditions of all such Governmental Licenses,

except where the failure so to comply would not, individually or in the

aggregate, have a Material Adverse Effect; all of the Governmental Licenses are

valid and in full force and effect, except when the invalidity of such

Governmental Licenses or the failure of such Governmental Licenses to be in

full force and effect would not, individually or in the aggregate, have a

Material Adverse Effect; and neither the Company nor any of its subsidiaries

has received any notice of proceedings relating to the revocation or

modification of any such Governmental Licenses which, individually or in the

aggregate, would result in a Material Adverse Effect.

 

(q)           The Company and its subsidiaries have

good and marketable title to all material real property owned by the Company

and its subsidiaries and good title to all other material properties owned by

them, in each case, free and clear of all mortgages, pledges, liens, security

interests, claims, restrictions or encumbrances of any kind (a) except such as

are described in the Offering Document, (b) except for mortgages, pledges,

liens, security interests, claims, restrictions or encumbrances granted under

debt agreements identified in the Offering Document and (c) except such as

would not, individually or in the aggregate, have a Material Adverse Effect;

and all of the leases and subleases material to the business of the Company and

its subsidiaries, considered as one enterprise, and under which the Company or

any of its subsidiaries holds properties described in the Offering Document,

are in full force and effect, and neither the Company nor any subsidiary has

any notice of any material claim of any sort that has been asserted by anyone

adverse to the rights of the Company or any subsidiary under any of the leases

or subleases mentioned above, or affecting or questioning the rights of the

Company or such subsidiary to the continued possession of the leased or

subleased premises under any such lease or sublease.

 

(r)            The Company is not an open-end

investment company, unit investment trust or face-amount certificate company

that is or is required to be registered under Section 8 of the United States

Investment Company Act of 1940, as amended (the “Investment Company Act”); and

the Company, after giving effect to the offering and sale of the Offered

Securities and the application of the proceeds thereof as described in the

Offering Document, will not be required to be so registered under the

Investment Company Act.

 

(s)           Except as described in the Offering

Document and except as would not, singly or in the aggregate, result in a

Material Adverse Effect, (A) neither the Company nor any of its subsidiaries is

in violation of any federal, state, local or foreign statute, law, rule,

regulation, ordinance, code, policy or rule of common law or any judicial or

administrative interpretation thereof, including any judicial or administrative

order, consent, decree or judgment, relating to pollution or protection of

human health, the environment (including, without limitation, ambient air,

surface water, groundwater, land surface or subsurface strata) or wildlife,

including, without limitation, laws and regulations relating to the release or

threatened release of chemicals, pollutants, contaminants, wastes, toxic

substances, hazardous substances, petroleum or petroleum products (collectively,

“Hazardous

Materials”) or to the manufacture, processing, distribution,

 

5

 

use, treatment, storage, disposal, transport or

handling of Hazardous Materials (collectively, “Environmental Laws”), (B) the

Company and its subsidiaries have all permits, authorizations and approvals

required under any applicable Environmental Laws and are each in compliance

with their requirements, (C) there are no pending or, to the knowledge of the

Company, threatened administrative, regulatory or judicial actions, suits,

demands, demand letters, claims, liens, notices of noncompliance or violation,

investigation or proceedings relating to any Environmental Law against the

Company or any of its subsidiaries and (D) there are no events or circumstances

that would form the basis of an order for clean-up or remediation, or an

action, suit or proceeding by any private party or governmental body or agency,

against or affecting the Company or any of its subsidiaries relating to

Hazardous Materials or any Environmental Laws.

 

(t)            The Federal Energy Regulatory

Commission (“FERC”) has issued an appropriate order or orders with respect

to the issuance and sale of the Offered Securities in accordance with this

Agreement (the “FERC Order”); the FERC Order is in full force and effect; and

the issuance of the Offered Securities are in conformity with the terms of the

FERC Order.

 

(u)           Any certificate signed by any officer

of the Company or any of its subsidiaries delivered to the Purchasers or to

counsel for the Purchasers in connection with this Agreement shall be deemed a

representation and warranty by the Company, to the Purchasers as to the matters

covered thereby.

 

(v)           No securities of the same class

(within the meaning of Rule 144A(d)(3) under the Securities Act) as the Offered

Securities are listed on any national securities exchange registered under

Section 6 of the Exchange Act or quoted in a U.S. automated inter-dealer

quotation system.

 

(w)          Subject to the accuracy of the representations

and warranties and the due performance of the agreements of the Purchasers in

Section 4 of this Agreement (including, without limitation,  the transfer restrictions referred to

therein), the offer, sale and delivery of the Offered Securities to the

Purchasers in the manner contemplated by this Agreement and the Offering

Document and the initial resale of the Offered Securities by the Purchasers in

the manner contemplated in the Offering Document and this Agreement, do not

require registration under the Securities Act, and the Indenture does not

require qualification under the United States Trust Indenture Act of 1939, as

amended (the “Trust Indenture Act”).

 

(x)            Neither the Company, nor any of its

affiliates, nor any person acting on its or their behalf (i) has, within the

six-month period prior to the date hereof, offered or sold in the United States

or to any U.S. person (as such terms are defined in Regulation S) the Offered

Securities or any security of the same class or series as the Offered Securities

or (ii) has offered or will offer or sell the 

Offered Securities (A) in the United States by means of any form of

general solicitation or general advertising within the meaning of Rule 502(c)

under the Securities Act or (B) with respect to any such securities sold in

reliance on Rule 903 of Regulation S, by means of any directed selling efforts

within the meaning of Rule 902(c) of Regulation S.  The Company, its affiliates and any person acting on its or their

behalf have complied and will comply with the offering restrictions requirement

of Regulation S in connection with the offering of the Offered Securities

outside the United States.  The Company

has not entered and will not enter into any contractual arrangement with

respect to the distribution of the 

Offered Securities except for this Agreement.

 

(y)           The Company is subject to the

reporting requirements of either Section 13 or Section 15(d) of the Securities

Exchange Act of 1934 and files reports with the Commission on the Electronic

Data Gathering, Analysis, and Retrieval (EDGAR) system.

 

(z)            The Company is entitled to exemption

from the United States Public Utility Holding Company Act of 1935, as amended,

provided by Section 3(a)(3) thereof.

 

6

 

3.             Purchase,

Sale and Delivery of Offered Securities.  On the basis of the representations, warranties and agreements

herein contained, but subject to the terms and conditions herein set forth, the

Company agrees to sell to the Purchasers, and the Purchasers agree, severally

and not jointly, to purchase from the Company, (i) at a purchase price of

99.346% of the principal amount thereof plus accrued interest from March 13,

2002 to the Closing Date (as hereinafter defined), $250,000,000 aggregate

principal amount of 7 7/8% Notes due March 15, 2007 and (ii) at a purchase

price of 99.191% of the principal amount thereof plus accrued interest from

March 13, 2002 to the Closing Date $470,000,000 aggregate principal amount of 8

3/4% Notes due March 15, 2012.

 

The Company will deliver against payment of the

purchase price the Offered Securities in the form of one or more permanent

global securities in definitive form (the “Global Securities”) deposited with the

Trustee as custodian for the Depositary Trust Company (“DTC”) and registered in the

name of Cede & Co., as nominee for DTC. 

Interests in any permanent Global Securities will be held only in

book-entry form through DTC, except in the limited circumstances described in the

Offering Document.  Payment for the Offered

Securities shall be made by the Purchasers in Federal (same day) funds by

official checks or checks or wire transfer to an account at a bank acceptable

to CSFBC drawn to the order of the Company at the office of Dewey Ballantine

LLP at 10:00 a.m. (New York time), on March 13, 2002, or at such other time not

later than seven full business days thereafter as CSFBC and the Company

determine, such time being herein referred to as the “Closing Date” against

delivery to the Trustee as custodian for DTC of the Global Securities

representing all of the Offered Securities. 

The Global Securities will be made available for checking at the above

office of Paul, Hastings, Janofsky & Walker LLP at least 24 hours prior to

the Closing Date.

 

4.             Representations

by Purchasers; Resale by Purchasers.  (a)   Each Purchaser severally represents and

warrants to the Company that it is an “accredited investor” within the meaning

of Regulation D under the Securities Act.

 

(b)           Each Purchaser severally acknowledges

that the Offered Securities have not been registered under the Securities Act

and may not be offered or sold within the United States or to, or for the

account or benefit of, U.S. persons except in accordance with Regulation S or

pursuant to an exemption from the registration requirements of the Securities

Act.  Each Purchaser severally

represents and agrees that it has offered and sold the Offered Securities, and

will offer and sell the Offered Securities only in accordance with Rule 903 or

Rule 144A under the Securities Act (“Rule 144A”).  Accordingly, neither such Purchaser nor its affiliates, nor any

persons acting on its or their behalf, have engaged or will engage in any

directed selling efforts with respect to the Offered Securities, and such

Purchaser, its affiliates and all persons acting on its or their behalf have

complied and will comply with the offering restrictions requirement of

Regulation S and Rule 144A.

 

(c)           Each Purchaser severally agrees that

it and each of its affiliates has not entered and will not enter into any

contractual arrangement with respect to the distribution of the  Offered Securities except for any such

arrangements with the other Purchasers or affiliates of the other Purchasers,

or with the prior written consent of the Company.

 

(d)           Each Purchaser severally agrees that

it and each of its affiliates will not offer or sell the  Offered Securities in the United States by

means of any form of general solicitation or general advertising within the

meaning of Rule 502(c) under the Securities Act, including, but not limited to

(i) any advertisement, article, notice or other communication published in any

newspaper, magazine or similar media or broadcast over television or radio, or

(ii) any seminar or meeting whose attendees have been invited by any general

solicitation or general advertising. Each Purchaser severally agrees, with

respect to resales made in reliance on Rule 144A of any of the Offered

Securities, to deliver either with the confirmation of such resale or otherwise

prior to settlement of such resale a notice to the effect that the resale of

such Offered Securities has been made in reliance upon the exemption from the

registration requirements of the Securities Act provided by Rule 144A.

 

7

 

(e)           Each Purchaser severally represents

and agrees that (i) it has not offered or sold and prior to the date six months

after the date of the issue of the Offered Securities will not offer or sell

any Offered Securities to persons in the United Kingdom except to persons whose

ordinary activities involve them in acquiring, holding, managing or disposing

of investments (as principal or agent) for the purposes of their businesses or

otherwise in circumstances which have not resulted and will not result in an

offer to the public in the United Kingdom within the meaning of the Public

Offers of Securities Regulations 1995; (ii) it has complied and will comply

with all applicable provisions of the Financial Services Act 1986 with respect

to anything done by it in relation to the Offered Securities in, from or

otherwise involving the United Kingdom; and (iii) it has only issued or passed

on and will only issue or pass on in the United Kingdom any document received

by it in connection with the issue of the Offered Securities to a person who is

of a kind described in Article 11(3) of the Financial Services Act 1986

(Investment Advertisements) (Exemptions) Order 1996 or is a person to whom such

document may otherwise lawfully be issued or passed on.

 

5.             Certain Agreements

of the Company.  The Company

agrees with the several Purchasers that:

 

(a)           The Company will advise CSFBC

promptly of any proposal to amend or supplement the Offering Document and will

not effect such amendment or supplementation without CSFBC’s consent, which

consent shall not be unreasonably withheld or delayed.  If, at any time prior to the completion of

the resale of the Offered Securities by the Purchasers, any event occurs as a

result of which the Offering Document as then amended or supplemented would

include an untrue statement of a material fact or omit to state any material

fact necessary in order to make the statements therein, in the light of the

circumstances under which they were made, not misleading, the Company promptly

will notify CSFBC of such event and promptly will prepare, at its own expense,

an amendment or supplement which will correct such statement or omission.  Neither CSFBC’s consent to, nor the

Purchasers’ delivery to offerees or investors of, any such amendment or

supplement shall constitute a waiver of any of the conditions set forth in

Section 6.

 

(b)           The Company will furnish to CSFBC

copies of any preliminary offering circular, the Offering Document and all

amendments and supplements to such documents, in each case as soon as available

and in such quantities as CSFBC reasonably requests, and the Company will

furnish to CSFBC on or prior to the Closing Date, one copy of the Offering

Document acknowledged by a duly authorized officer of the Company, one of which

will include a photocopy of the independent accountants’ reports therein

manually signed by such independent accountants.  At any time when the Company is not subject to Section 13 or

15(d) of the Exchange Act, the Company will promptly furnish or cause to be

furnished to CSFBC (and, upon request, to each of the other Purchasers) and,

upon request of holders and prospective purchasers of the Offered Securities,

to such holders and purchasers, copies of the information required to be

delivered to holders and prospective purchasers of the Offered Securities

pursuant to Rule 144A(d)(4) under the Securities Act (or any successor

provision thereto) in order to permit compliance with Rule 144A in connection

with resales by such holders of the Offered Securities.  The Company will pay the expenses of

printing and distributing to the Purchasers all such documents.

 

(c)           The Company will arrange for the

qualification of the Offered Securities for sale and the determination of their

eligibility for investment under the laws of such jurisdictions in the United

States and Canada as CSFBC reasonably designates and will continue such

qualifications in effect so long as required for the resale of the Offered

Securities by the Purchasers, provided that the Company will not be required to

qualify as a foreign corporation or to file a general consent to service of

process in any such state or subject itself to taxation in respect of doing

business.

 

(d)           During the period of two years after

the Closing Date, the Company will, upon request, furnish to CSFBC, each of the

other Purchasers and any holder of Offered Securities a copy of the

restrictions on transfer applicable to the Offered Securities.

 

8

 

(e)           During the period of two years after

the Closing Date, the Company will not, and will not permit any of its

affiliates (as defined in Rule 144 under the Securities Act) to, resell any of

the  Offered Securities  that have been reacquired by any of them.

 

(f)            During the period of two years after

the Closing Date, the Company will not be or become, an open-end investment

company, unit investment trust or face-amount certificate company that is or is

required to be registered under Section 8 of the Investment Company Act.

 

(g)           The Company will pay all expenses

incidental to the performance of its obligations under this Agreement, the

Indenture, and the Registration Rights Agreement, including (i) the fees and

expenses of the Trustee and its professional advisers; (ii) all expenses in

connection with the execution, issue, authentication, packaging and initial

delivery of the Offered Securities and, as applicable, the Exchange Securities

(as defined in the Registration Rights Agreement), the preparation and printing

of this Agreement, the Registration Rights Agreement, the Offered Securities,

the Indenture, the Offering Document and amendments and supplements thereto,

and any other document relating to the issuance, offer, sale and delivery of

the Offered Securities and as applicable, the Exchange Securities; (iii) the

cost of any advertising approved by the Company in connection with the issue of

the Offered Securities; (iv) for any expenses (including reasonable fees and

disbursements of counsel for the Purchasers) incurred in connection with

qualification of the Offered Securities or the Exchange Securities for sale

under the laws of such jurisdictions in the United States and Canada as CSFBC

reasonably designates and the printing of memoranda relating thereto; (v) for

any fees charged by investment rating agencies for the rating of the Offered

Securities or the Exchange Securities; and (vi) for expenses incurred in

distributing preliminary offering circulars and the Offering Document

(including any amendments and supplements thereto) to the Purchasers.  The Company will also pay or reimburse the

Purchasers (to the extent incurred by them) for all travel expenses of the

Purchasers and the Company’s officers and employees and any other expenses of

the Purchasers and the Company in connection with attending or hosting meetings

with prospective purchasers of the Offered Securities from the Purchasers.

 

(h)           In connection with the offering,

until CSFBC shall have notified the Company and the other Purchasers of the

completion of the resale of the Offered Securities, neither the Company nor any

of its affiliates has or will, either alone or with one or more other persons,

bid for or purchase for any account in which it or any of its affiliates has a

beneficial interest any Offered Securities or attempt to induce any person to

purchase any Offered Securities; and neither it nor any of its affiliates will

make bids or purchases for the purpose of creating actual, or apparent, active

trading in, or of raising the price of, the 

Offered Securities.

 

(i)            The Company will not offer, sell,

contract to sell, pledge or otherwise dispose of, directly or indirectly, or

file with the Commission a registration statement under the Act relating to

debt securities issued or guaranteed by the Company and having a maturity of

more than one year from the date of issue, or publicly disclose the intention

to make any such offer, sale, pledge, disposition or filing, without the prior

written consent of CSFBC for a period beginning at the date of this Agreement

and ending on the Closing Date.

 

6.             Conditions

of the Obligation of the Purchasers.  The obligation of the several Purchasers to purchase and pay for

the Offered Securities will be subject to the accuracy of the representations

and warranties on the part of the Company herein, to the accuracy of the

statements of officers of the Company made in certificates pursuant to the

provisions hereof, to the performance by the Company of its obligations

hereunder and to the following additional conditions precedent:

 

(a)           The Purchasers shall have received a

letter, dated the date of this Agreement, of Arthur Andersen LLP confirming

that they are independent public accountants within the meaning of the

Securities Act and the related published rules and regulations thereunder (“Rules and

Regulations”) and to the effect that:

 

9

 

(i)            in their opinion the financial

statements examined by them and included in the Offering Document and in the

Exchange Act Reports comply as to form in all material respects with the

applicable accounting requirements of the Securities Act and the related

published Rules and Regulations;

 

(ii)           they have performed the procedures

specified by the American Institute of Certified Public Accountants for a

review of interim financial information as described in Statement of Auditing

Standards No. 71, Interim Financial Information, on the unaudited financial

statements included in the Offering Document and in the Exchange Act Reports;

 

(iii)          on the basis of the review referred to

in clause (ii) above, a reading of the latest available interim financial

statements of the Company, inquiries of officials of the Company who have

responsibility for financial and accounting matters and other specified

procedures, nothing came to their attention that caused them to believe that:

 

(A)          the unaudited financial statements

included in the Offering Document or in the Exchange Act Reports do not comply

as to form in all material respects with the applicable accounting requirements

of the Securities Act and the related published Rules and Regulations or any

material modifications should be made to such unaudited financial statements

for them to be in conformity with generally accepted accounting principles;

 

(B)           at the date of the latest available

balance sheet read by such accountants, or at a subsequent specified date not

more than three business days prior to the date of this Agreement, there was

any change in the capital stock or any increase in short-term indebtedness or

long-term debt of the Company and its consolidated subsidiaries or, at the date

of the latest available balance sheet read by such accountants, there was any

decrease in consolidated net current assets or net assets, as compared with

amounts shown on the latest balance sheet included in the Offering Document or

the Exchange Act Reports; or

 

(C)           for the period from the closing date

of the latest income statement included in the in the Offering Document or the

Exchange Act Reports to the closing date of the latest available income statement

read by such accountants there were any decreases, as compared with the

corresponding period of the previous year in consolidated operating revenues,

net operating income, consolidated net income or in the ratio of earnings to

fixed charges;

 

except in all cases set forth in

clauses (B) and (C) above for changes, increases or decreases which the in the

Offering Document or the Exchange Act Reports disclose have occurred or may

occur or which are described in such letter;

 

(iv)          (A)          they

have read the pro forma financial statements and other pro forma financial

information included in the Offering Document and the Exchange Act Reports

(collectively, the “Pro Forma Information”);

 

(B)            they have made inquiries of certain

officials of the Company who have responsibility for financial and accounting

matters about the basis for the pro forma adjustments;

 

(C)           they have proved the arithmetic

accuracy of the application of the pro forma adjustments to the historical

amounts in the Pro Forma Information and whether the Pro Forma Information

complies as to form in all material respects with the accounting requirements

of the Securities Act and the related published Rules and Regulations; and

 

10

 

(D)          on the basis of such procedures, and

such other inquiries and procedures as may be specified in such letter, nothing

came to their attention that caused them to believe that the Pro Forma

Information included in the Offering Document does not comply as to form in all

material respects with the accounting requirements of the Securities Act and

the related published Rules and Regulations or has not been properly compiled

and that the pro forma adjustments have not been properly applied to the

historical amounts in the compilation of those statements; and

 

(v)           they have compared specified dollar

amounts (or percentages derived from such dollar amounts) and other financial

information contained in the Offering Document and the Exchange Act Reports (in

each case to the extent that such dollar amounts, percentages and other

financial information are derived from the general accounting records of the

Company and its subsidiaries subject to the internal controls of the Company’s

accounting system or are derived directly from such records by analysis or

computation) with the results obtained from inquiries, a reading of such

general accounting records and other procedures specified in such letter and

have found such dollar amounts, percentages and other financial information to

be in agreement with such results, except as otherwise specified in such

letter.

 

(b)           The Purchasers shall have received a

letter, dated the date of this Agreement, of PricewaterhouseCoopers LLP,

accountants to The Montana Power Company Utility, confirming that they are

independent public accountants within the meaning of the Securities Act and the

related published Rules and Regulations and to the effect that:

 

(i)            in their opinion the financial

statements examined by them and included in the Offering Document and in the

Exchange Act Reports comply as to form in all material respects with the

applicable accounting requirements of the Securities Act and the related

published Rules and Regulations;

 

(ii)           they have performed the procedures

specified by the American Institute of Certified Public Accountants for a

review of interim financial information as described in Statement of Auditing

Standards No. 71, Interim Financial Information, on the unaudited financial

statements included in the Offering Document and in the Exchange Act Reports;

 

(iii)          on the basis of the review referred to

in clause (ii) above, a reading of the latest available interim financial

statements of The Montana Power Company Utility, inquiries of officials of The

Montana Power Company Utility who have responsibility for financial and

accounting matters and other specified procedures, nothing came to their

attention that caused them to believe that:

 

(A)          the financial statements included in

the Offering Document or in the Exchange Act Reports do not comply as to form

in all material respects with the applicable accounting requirements of the

Securities Act and the related published Rules and Regulations or any material

modifications should be made to such unaudited financial statements for them to

be in conformity with generally accepted accounting principles;

 

(B)           at the date of the latest available

balance sheet read by such accountants, or at a subsequent specified date not

more than three business days prior to the date of this Agreement, there was

any change in the capital stock or any increase in short-term indebtedness or

long-term debt of The Montana Power Company Utility and its consolidated

subsidiaries or, at the date of the latest available balance sheet read by such

accountants, there was any decrease in consolidated net current assets or net

assets, as compared with amounts

 

11

 

shown on the latest balance

sheet included in the Offering Document or the Exchange Act Reports; or

 

(C)           for the period from the closing date

of the latest income statement included in the in the Offering Document or the

Exchange Act Reports to the closing date of the latest available income

statement read by such accountants there were any decreases, as compared with

the corresponding period of the previous year in consolidated operating

revenues, net operating income consolidated net income or in the ratio of

earnings to fixed charges;

 

except in all cases set forth in

clauses (B) and (C) above for changes, increases or decreases which in the

Offering Document or the Exchange Act Reports disclose have occurred or may

occur or which are described in such letter; and

 

(iv)           they have compared specified dollar

amounts (or percentages derived from such dollar amounts) and other financial

information contained in the Offering Document and the Exchange Act Reports (in

each case to the extent that such dollar amounts, percentages and other

financial information are derived from the general accounting records of the

Company and its subsidiaries subject to the internal controls of the Company’s

accounting system or are derived directly from such records by analysis or

computation) with the results obtained from inquiries, a reading of such

general accounting records and other procedures specified in such letter and

have found such dollar amounts, percentages and other financial information to

be in agreement with such results, except as otherwise specified in such

letter.

 

(c)           Subsequent to the execution and

delivery of this Agreement, there shall not have occurred (i) any change, or

any development or event involving a prospective change, in the condition

(financial or other), business, properties or results of operations of the

Company and its subsidiaries taken as one enterprise which, in the judgment of

a majority in interest of the Purchasers including CSFBC, is material and

adverse and makes it impractical or inadvisable to proceed with completion of

the offering or the sale of and payment for the Offered Securities; (ii) any

downgrading in the rating of any debt securities of the Company by any

“nationally recognized statistical rating organization” (as defined for

purposes of Rule 436(g) under the Securities Act), or any public announcement

that any such organization has under surveillance or review its rating of any

debt securities of the Company (other than an announcement with positive

implications of a possible upgrading, and no implication of a possible

downgrading, of such rating); (iii) any change in U.S. or international

financial, political or economic conditions or currency exchange rates or

exchange controls as would, in the judgment of a majority in interest of the

Purchasers including CSFBC, be likely to prejudice materially the success of

the proposed issue, sale or distribution of the Offered Securities, whether in

the primary market or in respect of dealings in the secondary market; (iv) any

material suspension or material limitation of trading in securities generally

on the New York Stock Exchange, or any setting of minimum prices for trading on

such exchange, or any suspension of trading of any securities of the Company on

any exchange or in the over-the-counter market; (v) any banking moratorium

declared by U.S. Federal or New York authorities; (vi) any major disruption of

settlements of securities or clearance services in the United States; or (vii)

any attack on, outbreak or escalation of hostilities or act of terrorism

involving the United States, any declaration of war by Congress or any other

national or international calamity or emergency if, in the judgment of a

majority in interest of the Purchasers including CSFBC, the effect of any such

attack, outbreak, escalation, act, declaration, calamity or emergency makes it

impractical or inadvisable to proceed with completion of the offering or sale

of and payment for the Offered Securities.

 

(d)           As of the Closing Date, the

Purchasers shall have received an opinion, dated the Closing Date, of Paul,

Hastings, Janofsky & Walker LLP, special counsel for the Company (subject

to customary qualifications and exceptions) that:

 

12

 

(i)             Each of this Agreement and the

Registration Rights Agreement has been duly authorized, executed and delivered

by the Company.

 

(ii)           The Indenture has been duly

authorized, executed and delivered by the Company and constitutes a valid and

binding obligation of the Company, enforceable against the Company in

accordance with its terms.

 

(iii)          The Notes have been duly authorized

and executed by the Company and, when the Notes have been duly authenticated by

the Trustee in accordance with the Indenture and delivered against payment of

the purchase price in accordance with the Indenture and the Purchase Agreement,

the Notes will constitute valid and binding obligations of the Company entitled

to the benefits of the Indenture and enforceable against the Company in

accordance with their terms.

 

(iv)          The statements set forth in the final

Offering Document under the captions “Description of Notes” and “Certain United

States Federal Income Tax Considerations” insofar as they purport to constitute

a summary of matters of law and legal matters or the documents referred to

therein, are correct summaries in all material respects.

 

(v)           The execution, delivery and

performance of this Agreement, the Registration Rights Agreement and the

Indenture and compliance by the Company with its obligations hereunder and

thereunder do not and will not, whether with or without the giving of notice or

lapse of time or both, (a) violate or result in the violation of the

Certificate of Incorporation or By-Laws of the Company existing on the Closing

Date or (b) violate or result in the violation of any applicable law, statute,

rule, regulation, judgment, writ, order or decree known to it of either the

federal or New York government or any government instrumentality thereof

existing on the Closing Date and having jurisdiction over the Company or any of

its properties or assets of which it is aware (other than state securities or

blue sky laws (as to which it expresses no opinion) and other than federal

securities laws (as to which it expresses no opinion in this paragraph).

 

(vi)          The FERC has issued appropriate

authorization with respect to the issuance of the Offered Securities in

accordance with the Indenture; to its knowledge, after due inquiry, such

authorizations are in full force and effect and the issuance of the Offered

Securities are in conformity with the terms of such authorizations and no other

authorization, order, approval or consent or other action by or filing with any

New York or federal governmental authority or agency or, to its knowledge, any

New York or federal court, not already obtained, is legally required for the

issuance and sale of the Notes as contemplated by this Agreement, except as may

be required under state securities or blue sky laws (as to which it expresses

no opinion) and other than federal securities laws (as to which it expresses no

opinion in this paragraph).

 

(vii)         The Company is not, and upon the

issuance and sale of the Notes as herein contemplated and the application of

the net proceeds therefrom as described in the Offering Document will not be,

required to be registered under the Investment Company Act of 1940, as amended.

 

(viii)        Assuming that the respective

representations and warranties of the Company and the Purchasers contained

herein are true and correct, and assuming compliance by the Company and the

Purchasers with their respective covenants set forth herein it is not necessary

in connection with (i) the offer, sale and delivery of the Notes by the Company

to the several Purchasers pursuant to this Agreement or (ii) the resales of the

Notes by the several purchasers in the manner contemplated by this Agreement to

register the Notes under the Securities Act or to qualify the Indenture under

the Trust Indenture Act; it being understood that no opinion is expressed as to

any subsequent resale of any of the Notes.

 

13

 

Such counsel shall also state that it has participated

in conferences with directors, officers and other representatives of the

Company, representatives of the independent public accountants for the Company,

representatives of the Purchasers and representatives of counsel for the

Purchasers, at which conferences the contents of the Offering Document and

related matters were discussed and, although it has reviewed the documents

incorporated by reference in the Offering Document, it did not participate in

their preparation and, although it did not undertake to determine or verify

independently and, therefore, is not passing upon and does not assume any

responsibility, explicitly or implicitly, for the accuracy, completeness or

fairness of the statements contained in the Offering Document (except to the

extent specified in paragraph (iv) above), no facts have come to its attention

that have caused it to believe that, the final Offering Document, including the

documents incorporated by reference therein, as of the date of this Agreement

and as of the Closing Date, contained or contains an untrue statement of a

material fact or omitted or omits to state a material fact required to be

stated therein or necessary to make the statements contained therein, in light

of the circumstances under which they were made, not misleading (it being

understood that it expresses no view with respect to the financial statements,

notes and schedules thereto or the other financial, accounting and statistical

data derived from the internal financial records of the Company included or

incorporated by reference therein or omitted therefrom).

 

(e)           As of the Closing Date, the

Purchasers shall have received an opinion, dated the Closing Date, of Alan D.

Dietrich, Esq., Vice President Legal Administration of the Company (subject to

customary qualifications and exceptions) that:

 

(i)            The Company has been duly

incorporated and is validly existing as a corporation in good standing under

the laws of the state of Delaware.

 

(ii)           The Company has all requisite

corporate power and authority to own, lease and operate its properties and to

conduct its business as described in the final Offering Document and to enter

into and perform its obligations under this Agreement, the Registration Rights

Agreement and the Indenture.

 

(iii)          The Company is authorized as a

domesticated foreign corporation to transact business, and is in good standing,

in the State of Nebraska and is duly qualified as a foreign corporation to

transact business and is in good standing in each jurisdiction in which such

qualification is required, whether by reason of the ownership or leasing of

property or the conduct of business, except where the failure so to qualify or

to be in good standing would not, individually or in the aggregate, result in a

Material Adverse Effect.

 

(iv)          The authorized, issued and outstanding

capital stock of the Company is as set forth in the final Offering Document in

the column entitled “Actual” under the caption “Capitalization” (except for

subsequent issuances, if any, pursuant to this Agreement, pursuant to

reservations, agreements or employee benefit plans referred to in the final

Offering Document or pursuant to the exercise of convertible securities or

options or the exchange of securities referred to in, or contemplated by, the

final Offering Document).

 

(v)           Each Subsidiary has been duly

organized or formed and is validly existing as a corporation, limited liability

company or a limited partnership, as the case may be, in good standing under

the laws of its jurisdiction of incorporation or organization, has power and

authority (corporate or other) to own, lease and operate its properties and to

conduct its business as described in the final Offering Document and is duly

qualified as a foreign corporation, limited liability company or limited

partnership to transact business and is in good standing in each jurisdiction

in which such qualification is required, whether by reason of the ownership or

leasing of property or the conduct of business, 

 

14

 

except where the failure so to qualify or to be in

good standing would not, individually or in the aggregate, result in a Material

Adverse Effect.

 

(vi)          Except as otherwise disclosed in the

final Offering Document or would not result in a Material Adverse Effect, all

of the issued and outstanding shares of capital stock, limited liability

company interests or partnership interests, as the case may be, of each

Subsidiary, have been duly authorized and validly issued, are fully paid and non-assessable

and, based solely on a review of the limited liability company agreement of The

Montana Power, L.L.C., limited partnership agreement of CornerStone, the stock

ledger of each of the other Subsidiaries and the officers certificates of the

Company, to his knowledge, all of the capital stock, limited liability company

interests or limited partnership interests, as the case may be, of each

Subsidiary owned by the Company, directly or through subsidiaries, is owned

free and clear of any security interest, mortgage, pledge, lien, encumbrance,

claim or equity.  None of the

outstanding shares of capital stock, limited liability company interests or

partnership interests of any Subsidiary was issued in violation of the

preemptive or similar rights of any security holder of such Subsidiary.

 

(vii)         The execution, delivery and performance

of this Agreement, the Registration Rights Agreement and the Indenture and

compliance by the Company with its obligations hereunder and thereunder do not

and will not, whether with or without the giving of notice or lapse of time or

both, (i) violate or result in the violation of the Certificate of

Incorporation or By-Laws of any subsidiary of the Company existing on the date

hereof or (ii) result in a breach or violation of, or constitute a default

under, (i) any material agreement or instrument, known to him, to which the

Company or any Subsidiary is a party or by which the Company or any such

Subsidiary is bound or to which any of the properties of the Company or any such

Subsidiary is subject (except for such violations, breaches or defaults that

would not have a Material Adverse Effect).

 

(viii)        The FERC has issued appropriate

authorizations with respect to the issuance of the Offered Securities in

accordance with the Indenture; to his knowledge, after due inquiry, such

authorizations are in full force and effect and the issuance of the Offered

Securities are in conformity with the terms of such authorizations; and no

other authorization, order, approval or consent, or other action by or filing

with any South Dakota, Nebraska or federal governmental authority or agency or,

to his knowledge, any South Dakota, Nebraska or federal court, not already

obtained, is legally required for the issuance and sale of the Offered Securities

as contemplated by this Agreement, except such as may be required under the

Securities Act, the Exchange Act or the Trust Indenture Act and the rules and

regulations thereunder and state securities or blue sky laws (as to which he

expresses no opinion).

 

(ix)           Except as disclosed in the final

Offering Document, to his knowledge, there is not pending or threatened any

action, suit, proceeding, inquiry or investigation to which the Company or any

Subsidiary is a party, or to which the property of the Company or any

Subsidiary is subject, before or brought by any court or governmental agency or

body, domestic or foreign, which would result in a Material Adverse Effect, or

which would materially and adversely affect the ability of the Company to

consummate the transactions contemplated by this Agreement, the Registration

Rights Agreement, the Indenture or any other document governing the sale of the

Offered Securities.

 

(x)            The documents incorporated by

reference in the final Offering Document (except for the financial statements,

notes and schedules thereto and the other financial, accounting and statistical

data derived from the internal financial records of the Company included or

incorporated by reference therein or omitted therefrom, as to which it is understood

he expresses no opinion), when they were filed with the Commission,

 

15

 

complied as to form in all material respects with the

requirements of the 1933 Act or the 1934 Act, as applicable, and the rules and

regulations of the Commission thereunder.

 

Such counsel shall also state that he has participated

in conferences with directors, officers and other representatives of the

Company, representatives of the independent public accountants for the Company,

representatives of the Purchasers and representatives of counsel for the

Purchasers, at which conferences the contents of the Offering Document and

related matters were discussed and, although he did not undertake to determine

or verify independently and, therefore, is not passing upon and does not assume

any responsibility, explicitly or implicitly, for the accuracy, completeness or

fairness of the statements contained in the Offering Document (except to the

extent specified in paragraph (xii) above), no facts have come to his attention

that has caused him to believe that the final Offering Document (including the

documents incorporated by reference therein), or any amendment or supplement

thereto, or any Exchange Act Report, as of the date of this Agreement and as of

the Closing Date, contained or contains an untrue statement of a material fact

or omitted or omits to state a material fact required to be stated therein or

necessary to make the statements contained therein, in light of the

circumstances under which they were made, not misleading (it being understood

that he expresses no view with respect to the financial statements, notes and

schedules thereto and the other financial, accounting and statistical data

derived from the internal financial records of the Company included or

incorporated by reference therein or omitted therefrom).

 

(f)            The Purchasers shall have received

from Dewey Ballantine LLP, special counsel for the Purchasers, such opinion,

dated the Closing Date, with respect to the incorporation of the Company, the

validity of the Offered Securities, the final Offering Document and other

related matters as CSFBC may require, and the Company shall have furnished to

such counsel such documents as they reasonably request for the purpose of enabling

them to pass on such matters.

 

(g)           The Purchasers shall have received a

certificate, dated as of the Closing Date, of the President or any Vice

President and a principal financial or accounting officer of the Company in

which such officers, to the best of their knowledge after reasonable

investigation, shall state that the representations and warranties of the

Company in this Agreement are true and correct, that the Company has complied

with all agreements and satisfied all conditions on its part to be performed or

satisfied hereunder at or prior to the Closing Date, and that, subsequent to

the date of the most recent financial statements included in the Offering Document or the Exchange Act

Reports there has been no material adverse change, nor any development

or event involving a prospective material adverse change, in the condition

(financial or other), business, properties or results of operations of the

Company and its subsidiaries taken as a whole except as set forth in or

contemplated by the in the Offering

Document or as described in such certificate.

 

(h)           The Purchasers shall have received a

letter, dated as of the Closing Date, of Arthur Andersen LLP which meets the

requirements of subsection (a) of this Section, except that the specified date

referred to in such subsection will be a date not more than three days prior to

the Closing Date for the purposes of this subsection.

 

(i)            The Purchasers shall have received a

letter, dated as of the Closing Date, of PricewaterhouseCoopers LLP,

accountants to The Montana Power Company Utility, which meets the requirements

of subsection (b) of this Section, except that the specified date referred to

in such subsection will be a date not more than three days prior to the Closing

Date for the purposes of this subsection.

 

The Company will furnish the

Purchasers with such conformed copies of such opinions, certificates, letters

and documents as the Purchasers reasonably request.  CSFBC may in its sole discretion waive on behalf of the

Purchasers compliance with any conditions to the obligations of the Purchasers

hereunder, whether in respect of the Closing Date or otherwise.

 

16

 

7.             Indemnification

and Contribution.  (a) 

The Company will indemnify and hold harmless each Purchaser, its partners, directors and

officers and each person, if any, who controls such Purchaser within the

meaning of Section 15 of the Securities Act, against any losses, claims,

damages or liabilities, joint or several, to which such Purchaser may become

subject, under the Securities Act or the Exchange Act or otherwise, insofar as

such losses, claims, damages or liabilities (or actions in respect thereof)

arise out of or are based upon any untrue statement or alleged untrue statement

of any material fact contained in the Offering Document, or any amendment or

supplement thereto, or any related preliminary offering circular or the

Exchange Act Reports, or arise out of or are based upon the omission or alleged

omission to state therein a material fact necessary in order to make the

statements therein, in the light of the circumstances under which they were

made, not misleading, including any losses, claims, damages or liabilities

arising out of or based upon the Company’s failure to perform its obligations

under Section 5(a) of this Agreement, and will reimburse each Purchaser for any

legal or other expenses reasonably incurred by such Purchaser in connection

with investigating or defending any such loss, claim, damage, liability or

action as such expenses are incurred; provided, however, that the Company will

not be liable in any such case to the extent that any such loss, claim, damage

or liability arises out of or is based upon an untrue statement or alleged

untrue statement in or omission or alleged omission from any of such documents

in reliance upon and in conformity with written information furnished to the

Company by any Purchaser through CSFBC specifically for use therein, it being

understood and agreed that the only such information consists of the

information described as such in subsection (b) below; and provided, further,

that with respect to any untrue statement or alleged untrue statement in or

omission or alleged omission from any preliminary offering circular the

indemnity agreement contained in this subsection (a) shall not inure to the

benefit of any Purchaser that sold the Securities concerned to the person

asserting any such losses, claims, damages or liabilities, to the extent that

such sale was an initial resale by such Purchaser and any such loss, claim,

damage or liability of such Purchaser results from the fact that there was not

sent or given to such person, at or prior to the written confirmation of the

sale of such Securities to such person, a copy of the Offering Document (exclusive

of any material included therein but not attached thereto) if the Company had

previously furnished copies thereof to such Purchaser in accordance with its

obligations set forth herein.

 

(b)           Each Purchaser will severally and not

jointly indemnify and hold harmless the Company, its directors and officers and

each person, if any, who controls the Company within the meaning of Section 15

of the Securities Act, against any losses, claims, damages or liabilities to

which the Company may become subject, under the Securities Act or the Exchange

Act or otherwise, insofar as such losses, claims, damages or liabilities (or

actions in respect thereof) arise out of or are based upon any untrue statement

or alleged untrue statement of any material fact contained in the Offering

Document, or any amendment or supplement thereto, or any related preliminary

offering circular, or arise out of or are based upon the omission or the

alleged omission to state therein a material fact necessary in order to make

the statements therein, in the light of the circumstances under which they were

made, not misleading, in each case to the extent, but only to the extent, that

such untrue statement or alleged untrue statement or omission or alleged

omission was made in reliance upon and in conformity with written information

furnished to the Company by such Purchaser through CSFBC specifically for use

therein, and will reimburse any legal or other expenses reasonably incurred by

the Company in connection with investigating or defending any such loss, claim,

damage, liability or action as such expenses are incurred, it being understood

and agreed that the only such information furnished by any Purchaser consists

of the following information in the Offering Document furnished on behalf of each

Purchaser: the third paragraph, the fifth paragraph, the second and third

sentences in the eighth paragraph, and the tenth paragraph under the caption

“Plan of Distribution” in the Offering Document; provided, however, that the

Purchasers shall not be liable for any losses, claims, damages or liabilities

arising out of or based upon the Company’s failure to perform its obligations

under Section 5(a) of this Agreement.

 

(c)           Promptly after receipt by an

indemnified party under this Section of notice of the commencement of any

action, such indemnified party will, if a claim in respect thereof is to be

made against the indemnifying party under subsection (a) or (b) above, notify

the indemnifying party of the commencement thereof; but the omission so to notify

the indemnifying party will not relieve it from any liability which it may have

to any indemnified party otherwise than under 

 

17

 

subsection (a) or (b) above to the extent it is not

materially prejudiced as a result thereof. 

In case any such action is brought against any indemnified party and it

notifies the indemnifying party of the commencement thereof, the indemnifying

party will be entitled to participate therein and, to the extent that it may

wish, jointly with any other indemnifying party similarly notified, to assume

the defense thereof, with counsel reasonably satisfactory to such indemnified

party (who shall not, except with the consent of the indemnified party, be

counsel to the indemnifying party), and after notice from the indemnifying

party to such indemnified party of its election so to assume the defense

thereof, the indemnifying party will not be liable to such indemnified party

under this Section for any legal or other expenses subsequently incurred by

such indemnified party in connection with the defense thereof other than

reasonable costs of investigation.  No

indemnifying party shall, without the prior written consent of the indemnified

party, effect any settlement of any pending or threatened action in respect of

which any indemnified party is or could have been a party and indemnity could

have been sought hereunder by such indemnified party unless such settlement (i)

includes an unconditional release of such indemnified party from all liability

on any claims that are the subject matter of such action and (ii) does not

include a statement as to or an admission of fault, culpability or failure to

act by or on behalf of any indemnified party.

 

(d)           If the indemnification provided for

in this Section is unavailable or insufficient to hold harmless an indemnified

party under subsection (a) or (b) above, then each indemnifying party shall

contribute to the amount paid or payable by such indemnified party as a result

of the losses, claims, damages or liabilities referred to in subsection (a) or

(b) above (i) in such proportion as is appropriate to reflect the relative

benefits received by the Company on the one hand and the Purchasers on the

other from the offering of the  Offered

Securities or (ii) if the allocation provided by clause (i) above is not

permitted by applicable law, in such proportion as is appropriate to reflect

not only the relative benefits referred to in clause (i) above but also the

relative fault of the Company on the one hand and the Purchasers on the other

in connection with the statements or omissions which resulted in such losses,

claims, damages or liabilities as well as any other relevant equitable

considerations.  The relative benefits

received by the Company on the one hand and the Purchasers on the other shall

be deemed to be in the same proportion as the total net proceeds from the

offering (before deducting expenses) received by the Company bear on the total

discounts and commissions received by the Purchasers from the Company under

this Agreement.  The relative fault

shall be determined by reference to, among other things, whether the untrue or

alleged untrue statement of a material fact or the omission or alleged omission

to state a material fact relates to information supplied by the Company or the

Purchasers and the parties’ relative intent, knowledge, access to information

and opportunity to correct or prevent such untrue statement or omission.  The amount paid by an indemnified party as a

result of the losses, claims, damages or liabilities referred to in the first

sentence of this subsection (d) shall be deemed to include any legal or other

expenses reasonably incurred by such indemnified party in connection with

investigating or defending any action or claim which is the subject of this

subsection (d).  Notwithstanding the

provisions of this subsection (d), no Purchaser shall be required to contribute

any amount in excess of the amount by which the total price at which the Offered

Securities purchased by it were resold exceeds the amount of any damages which

such Purchaser has otherwise been required to pay by reason of such untrue or

alleged untrue statement or omission or alleged omission.  The Purchasers’ obligations in this

subsection (d) to contribute are several in proportion to their respective

purchase obligations and not joint.

 

(e)           The obligations of the Company under

this Section shall be in addition to any liability which the Company may

otherwise have and shall extend, upon the same terms and conditions, to each

person, if any, who controls any Purchaser within the meaning of the Securities

Act or the Exchange Act; and the obligations of the Purchasers under this

Section shall be in addition to any liability which the respective Purchasers

may otherwise have and shall extend, upon the same terms and conditions, to

each person, if any, who controls the Company within the meaning of the

Securities Act or the Exchange Act.

 

8.             Default of

Purchasers.  If any Purchaser

or Purchasers default in their obligations to purchase Offered Securities

hereunder and the aggregate principal amount of Offered Securities that such

defaulting 

 

18

 

Purchaser or Purchasers agreed but failed to purchase does not exceed

10% of the total principal amount of Offered Securities, CSFBC may make

arrangements satisfactory to the Company for the purchase of such Offered

Securities by other persons, including any of the Purchasers, but if no such

arrangements are made by the Closing Date, the non-defaulting Purchasers shall

be obligated severally, in proportion to their respective commitments

hereunder, to purchase the Offered Securities that such defaulting Purchasers

agreed but failed to purchase.  If any

Purchaser or Purchasers so default and the aggregate principal amount of

Offered Securities with respect to which such default or defaults occur exceeds

10% of the total principal amount of Offered Securities and arrangements

satisfactory to CSFBC and the Company for the purchase of such Offered

Securities by other persons are not made within 36 hours after such default,

this Agreement will terminate without liability on the part of any

non-defaulting Purchaser or the Company, except as provided in Section 9.  As used in this Agreement, the term

“Purchaser” includes any person substituted for a Purchaser under this

Section.  Nothing herein will relieve a

defaulting Purchaser from liability for its default.

 

9.             Survival of

Certain Representations and Obligations.  The respective indemnities, agreements, representations,

warranties and other statements of the Company or its officers and of the

several Purchasers set forth in or made pursuant to this Agreement will remain

in full force and effect, regardless of any investigation, or statement as to

the results thereof, made by or on behalf of any Purchaser, the Company or any

of their respective representatives, officers or directors or any controlling

person, and will survive delivery of and payment for the Offered Securities.  If this Agreement is terminated pursuant to

Section 8 or if for any reason the purchase of the Offered Securities by the

Purchasers is not consummated, the Company shall remain responsible for the

expenses to be paid or reimbursed by it pursuant to Section 5 and the respective

obligations of the Company and the Purchasers pursuant to Section 7 shall

remain in effect.  If the purchase of

the Offered Securities by the Purchasers is not consummated for any reason

other than solely because of the termination of this Agreement pursuant to

Section 8 or the occurrence of any event specified in clause (iii), (iv), (v),

(vi) or (vii) of Section 6(c), the Company will reimburse the Purchasers for

all out-of-pocket expenses (including fees and disbursements of counsel)

reasonably incurred by them in connection with the offering of the Offered

Securities.

 

10.           Notices.  All communications hereunder will be in

writing and, if sent to the Purchasers will be mailed, delivered or faxed and

confirmed to the Purchasers c/o Credit Suisse First Boston Corporation, 11

Madison Avenue, New York, N.Y. 10010-3629, Attention:  Transactions Advisory Group (fax:  212-325-4296), or, if sent to the Company, will be mailed, delivered

or faxed and confirmed to it at 125 S. Dakota Avenue, Suite 1100, Sioux Falls,

South Dakota, 57104, Attention:  Eric R.

Jacobsen (fax:  605-978-2910), with a

copy to Paul, Hastings, Janofsky & Walker LLP, 55 Second Street, 24th

Floor, San Francisco, CA 94105-3441, Attention:  Thomas R. Pollock (fax: 

415-856-7100); provided, however, that any notice to a Purchaser

pursuant to Section 7 will be mailed, delivered or faxed and confirmed to such

Purchaser.

 

11.           Successors.  This Agreement will inure to the benefit of

and be binding upon the parties hereto and their respective successors and the

controlling persons referred to in Section 7, and no other person will have any

right or obligation hereunder, except that holders of Offered Securities shall

be entitled to enforce the agreements for their benefit contained in the second

and third sentences of Section 5(b) hereof against the Company as if such

holders were parties thereto.

 

12.           Representation

of Purchasers.  CSFBC will

act for the several Purchasers in connection with this purchase, and any action

under this Agreement taken by CSFBC will be binding upon all the Purchasers.

 

13.           Counterparts.  This Agreement may be executed in any number

of counterparts, each of which shall be deemed to be an original, but all such

counterparts shall together constitute one and the same Agreement.

 

14.           Applicable Law.  This Agreement shall be governed by, and

construed in accordance with, the laws of the State of New York without regard

to principles of conflicts of laws.

 

19

 

The Company hereby submits to

the non-exclusive jurisdiction of the federal and state courts in the Borough

of Manhattan in The City of New York in any suit or proceeding arising out of

or relating to this Agreement or the transactions contemplated hereby.

 

20

 

If the foregoing is in

accordance with the Purchasers’ understanding of our agreement, kindly sign and

return to us one of the counterparts hereof, whereupon it will become a binding

agreement between the Company and the several Purchasers in accordance with its

terms.

 

	

   

  	

  Very truly yours,

  
	

   

  	

   

  
	

   

  	

  Northwestern

  Corporation

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  By

  	

   

  	

  /s/ Kipp D. Orme

  	

   

  
	

   

  	

  Kipp D. Orme

  
	

   

  	

  VP — Finance and CFO

  
	

   

  	

   

  
	

  The

  foregoing Purchase Agreement

  is hereby confirmed and accepted

  as of the date first above written.

  	

   

  
	

   

  	

   

  
	

  Credit

  Suisse First Boston Corporation

  	

   

  
	

  Barclays

  Inc.

  	

   

  
	

  Morgan

  Stanley & Co. Incorporated

  	

   

  
	

   

  	

   

  
	

   

  	

  Acting on behalf of themselves

  and as the Representatives of

  the several Purchasers

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

  By Credit Suisse First Boston Corporation

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  By

  	

   

  	

  /s/ Jamie Welch

  	

   

  	

   

  
	

   

  	

   Jamie Welch

  	

   

  
	

   

  	

   Managing Director

  	

   

  
											

 

21

 

SCHEDULE A

 

	

   

  	

   

  	

   

  	

   

  
	

  Manager

  	

   

  	

  Principal Amount of 

  Offered Securities

  	

   

  
	

   

  	

   

  	

  7 7/8% Notes 

  Principal Amount

  	

   

  	

  8 3/4% Notes 

  Principal Amount

  	

   

  
	

  Credit Suisse First Boston Corporation

  	

   

  	

  $

  	

  62,500,000

  	

   

  	

  $

  	

  117,500,000

  	

   

  
	

  Barclays Capital, Inc.

  	

   

  	

  62,500,000

  	

   

  	

  117,500,000

  	

   

  
	

  Morgan Stanley & Co. Incorporated

  	

   

  	

  62,500,000

  	

   

  	

  117,500,000

  	

   

  
	

  Merrill Lynch, Pierce, Fenner & Smith Incorporated

  	

   

  	

  25,000,000

  	

   

  	

  47,000,000

  	

   

  
	

  ABN AMRO Incorporated

  	

   

  	

  12,500,000

  	

   

  	

  23,500,000

  	

   

  
	

  Bear, Stearns & Co. Inc.

  	

   

  	

  12,500,000

  	

   

  	

  23,500,000

  	

   

  
	

  CIBC World Markets Corp.

  	

   

  	

  12,500,000

  	

   

  	

  23,500,000

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Total

  	

   

  	

  $

  	

  250,000,000

  	

   

  	

  $

  	

  470,000,000

  	

   

  

 

A-1

 

SCHEDULE B

List of subsidiaries

 

NorthWestern Growth Corporation

NorthWestern Capital Corporation

NorthWestern Services Group, Inc.

NorthWestern Energy Corporation

NorthWestern Services Corporation

NorthWestern Networks, Inc.

NorthWestern Systems, Inc.

NorCom Advanced Technologies, Inc.

Nekota Resources, Inc.

Grant, Inc.

LNSI, Inc.

Coast Energy Capital Corporation

Cornerstone Propane GP, Inc.

SYN INC.

Claremont Gas Corporation

Expanets, Inc.

Expanets of North America LLC

Expanets of Hawaii, Inc.

Expanets of Indiana, Inc.

Expanets of Indiana, LLC

Expanets of Arizona, Inc.

Expanets of Atlanta, Inc.

Expanets of California, Inc.

Expanets of Lancaster, Inc.

Expanets of Mississippi, Inc.

Expanets of Nebraska, Inc.

Expanets of New York, Inc.

Eagle, An Expanets Company, Inc.

Expanets of Oklahoma, Inc.

Expanets of Pacific Northwest, Inc.

Expanets of San Antonio, Inc.

Expanets of Tennessee, Inc.

Blue Dot Services Inc.

A.J. Perri, Inc.

A.S.I. Hastings, Inc.

Air Assurance Co.

Air Conditioning by Luquire, Inc.

Air Design, Inc.

Air Specialist Heating and Air Conditioning Company, Inc.

Anytime Plumbing, Inc.

ATM Acquisition Corp.

Blue Dot Plumbing Services of New Jersey, LLC

Blue Dot Capital Corporation

Blue Dot Capital Partners LLC

Blue Dot Licensing, Inc.

Blue Dot of Florida, Inc.

Blue Dot Properties, Inc.

Blue Dot Services Company of Florida

Blue Dot Services Company of Georgia

Blue Dot Services Company of Illinois

Blue Dot Services Company of Kansas

Blue Dot Services Company of Michigan

 

B-1

 

Blue Dot Services Company of Ohio

Blue Dot Services Company of Washington

Blue Dot Services of West Trenton (NJ), Inc.

Brody Heating, Air Conditioning & Electrical Contractors, Inc.

Burton Plumbing Services, Inc.

Calvert-Jones Co., Inc.

CECS Acquisition Corp.

Columbus/Worthington Heating and Air Conditioning Company, Inc.

Comfort Air Systems, Inc.

Conditioned Air Associates, Inc.

Controlling Systems, Inc.

Dauenhauer & Son Plumbing and Piping Co., Inc.

Dependable Graham Air Conditioning, Inc.

Donahue Heating & Air Conditioning, Inc.

Enviro-Air, Inc.

Environmental Conditioning, Inc.

Environmental Services of Charlotte, Inc.

Environmental Systems and Controls, Inc.

Environmental Techniques Corporation

Fast Water Heater Company

AHAC Acquisition Corp.

Haslett Heating & Cooling, Inc.

Hill Heating & Air Conditioning, Inc.

Horizon Home Services, Inc.

Huck Heating and Air Conditioning, Inc.

Ideal Service Company, Inc.

John’s Sewer & Pipe Cleaning, Inc.

Lindstrom Air Conditioning, Inc.

Master Controls & Service Company, Inc.

Metro-Tech Service Co.

NRS Acquisition Corp.

PAL Acquisition Corp.

Poudre Valley Air, Inc.

Residential Services of Indiana, Inc.

Ridge Heating, Air Conditioning & Plumbing, Inc.

Standard Heating & Air Conditioning Co.

Tri-County Associates, Inc.

Wagner Mechanical Inc.

WSI Acquisition Corp.

STO Acquisition Corp.

Steve Stone Air Conditioning, Heating & Plumbing, Inc.

NorthWestern Energy Development, LLC

NorthWestern Generation I, LLC

NorthWestern Montana First Megawatts, LLC

NorthWestern Energy Marketing, LLC

Montana Megawatts I, LLC

NorthWestern Capital Partners, LLC

NorthWestern Capital Ventures, LLC

Cornerstone Propane Partners, LP

Cornerstone Propane, LP

Cornerstone Sales & Service Corporation

Cornerstone Holding Corporation

Coast Energy Global Services, Inc.

Propane Continental, Inc.

Flame, Inc.

Coast Energy Canada, Inc.

 

B-2

 

NSJV, LLC

TankSat Solutions, Inc.

The Montana Power, LLC

Discovery Energy Solutions, Inc.

One Call Locators, Ltd.

Montana Power Services Company

Colstrip Community Services Company

Canadian-Montana Pipe Line Company

Risk Partners Assurance, Ltd.

 

B-3

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00037-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00037-of-00352.parquet"}]]